<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1997.
1933 ACT REGISTRATION NO. 333-16617
1940 ACT REGISTRATION NO. 811-07747
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
<TABLE>
<CAPTION>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
<S> <C>
Pre-Effective Amendment No. 2 [X]
Post-Effective Amendment No. [_]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 2 [X]
</TABLE>
(Check appropriate box or boxes)
----------------
NUVEEN FLAGSHIP MULTISTATE TRUST I
(Exact name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, 60606
Illinois
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 917-7700
James J. Wesolowski, Esq.--Vice With a copy to:
President and Secretary Thomas A. Harman
333 West Wacker Drive Fried, Frank, Harris, Shriver &
Chicago, Illinois 60606 Jacobson
(Name and Address of Agent for Service) 1001 Pennsylvania Ave., NW
Suite 800
Washington, D.C. 20004
APPROXIMATE DATE OF PROPOSED OFFERING: As soon as practicable after the
effective date of this Registration Statement.
Pursuant to Reg. (S) 270.24f-2 under the Investment Company Act of 1940,
Registrant hereby declares that an indefinite number or amount of shares are
being registered under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CONTENTS
OF
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO.
AND
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO.
This Registration Statement comprises the following papers and contents:
The Facing Sheet
Cross-Reference Sheet
Part A-The Prospectus
Part B-The Statement of Additional Information
Copy of Annual Reports and Semi-Annual Reports to
Shareholders (the financial statements from which are
incorporated by reference into the Statement of Additional
Information)
Part C-Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
----------------
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
ITEM IN
PART A
OF FORM N-
1A PROSPECTUS LOCATION
---------- -------------------
<S> <C>
1 Cover Page Cover Page
2 Synopsis Expense Information
3 Condensed Financial Information Financial Highlights
4 General Description of Registrant Fund Strategies
5 Management of the Fund General Information
5A Management's Discussion of Fund Incorporated by Reference to Annual and
Performance Semi-Annual Reports to Shareholders; Taxes
and Tax Reporting
6 Capital Stock and Other How to Select a Purchase Option; Taxes and
Securities Tax Reporting
7 Purchase of Securities Being Investing in the Funds
Offered
8 Redemption or Repurchase How to Sell Fund Shares
9 Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM IN
PART B
OF FORM N- LOCATION IN STATEMENT
1A OF ADDITIONAL INFORMATION
---------- -------------------------
<S> <C>
10 Cover Page Cover Page
11 Table of Contents Cover Page
12 General Information and History Not Applicable
13 Investment Objectives and Investment Policies and Investment
Policies Portfolio
14 Management of the Fund Management
15 Control Persons and Principal Management
Holders of Securities
16 Investment Advisory and Other Investment Adviser and Investment
Services Management Agreement; Portfolio
Transactions Distribution and Service Plan;
Independent Public Accountants and
Custodian
17 Brokerage Allocation and Other Portfolio Transactions
Practices
18 Capital Stock and Other See "How to Select a Purchase Option" and
Securities "Taxes and Tax Reporting" in the Prospectus
19 Purchase, Redemption and Pricing Additional Information on the Purchase and
of Securities Redemption of Fund Shares; Net Asset Value
20 Tax Status Tax Matters
21 Underwriters Additional Information on the Purchase and
Redemption of Fund Shares; See "Investing
in the Funds" and "Fund Service Providers"
in the Prospectus
22 Calculation of Performance Data Performance Information
23 Financial Statements Incorporated by Reference to Annual and
Semi-Annual Reports to Shareholders
</TABLE>
<PAGE>
PART A--PROSPECTUS
NUVEEN FLAGSHIP MULTISTATE TRUST I
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
================================================================================
PROSPECTUS
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
================================================================================
OVERVIEW
The funds listed above are part of the Nuveen Flagship Multistate Trust I, an
open-end investment company. Each fund seeks to provide high double or triple
tax-free income and preservation of capital through investments in diversified
portfolios of quality municipal bonds whose income is exempt from regular
federal, state and, in some cases, local income taxes.
Each fund offers a set of flexible purchase options which permit you to purchase
fund shares in the way that is best suited to your individual circumstances and
investment needs. For detailed information about these flexible purchase
options, please refer to "How to Select a Purchase Option" later in this
prospectus.
This prospectus contains important information you should know before
investing. Please read it carefully and keep it for future reference. You can
find more detailed information about each fund in the statement of additional
information which is part of this prospectus by reference. For a free copy,
write to Nuveen or call (800) 621-7227.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER U.S. GOVERNMENT AGENCY. SHARES OF THE FUNDS
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
================================================================================
CONTENTS
<TABLE>
<S> <C>
OVERVIEW 1
FUND SUMMARIES AND FINANCIAL HIGHLIGHTS 2
FUND STRATEGIES
Investment Objective 8
How the Funds Select Investments 8
Risk Reduction Strategies 9
INVESTING IN THE FUNDS
How to Buy Fund Shares 10
How to Select a Purchase Option 10
How to Sell Fund Shares 11
Exchanging Shares 12
Optional Features and Services 13
DIVIDENDS AND TAXES
How the Funds Pay Dividends 14
Taxes and Tax Reporting 14
Taxable Equivalent Yields 16
GENERAL INFORMATION
How to Contact Nuveen 16
Fund Service Providers 16
How the Funds Report Performance 17
How Fund Shares are Priced 17
Organization 18
APPENDIX
Special State Considerations 18
</TABLE>
FEBRUARY 1, 1997
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Maryland Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: December 13, 1991
NET ASSETS: $55.8 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 1.07% 5.50% 4.74% 4.71% 5.74%
INCEPTION 5.49% 6.53% 5.78% 5.78% 6.80%
- -----------------------------------------------------------------------------------------------
</TABLE>
Class R total returns reflect actual performance for all periods; Class A and C
total returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class R performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B total returns reflect Class R performance for all periods,
adjusted for the differences in sales charges and fees between the classes. See
Overview of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE:
Average Maturity 19.9
Average Modified Duration 6.8]
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE:
AAA (59%)
AA (22%)
A (10%)
BBB (2%)
NR (7%)]
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE:
Housing Facilities (22%)
General Obligation (15%)
Health Care Facilities (14%)
Escrowed Bonds (13%)
Transportation (10%)
Other (26%)]
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 5%(2) 1%(3) --
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
CLASS A CLASS B CLASS C CLASS R
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER 0.32% 0.32% 0.32% 0.32%
- -------------------------------------------------------------------------------------------------
TOTAL (GROSS) 1.07% 1.82% 1.62% 0.87%
WAIVERS/
REIMBURSEMENTS (0.12%) (0.12%) (0.12%) (0.12%)
- -------------------------------------------------------------------------------------------------
TOTAL (NET) 0.95% 1.70% 1.50% 0.75%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 51 $ 57 $ 15 $ 8
3 YEARS $ 71 $ 85 $ 47 $24
5 YEARS $ 92 $104 $ 82 $42
10 YEARS $154 $181 $179 $93
</TABLE>
- --------------------------------------------------------------------------------
Information as of 7/31/96 See Notes on Next Page
PAGE 2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Arthur Andersen LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
January 31, Value Income(c) Investments(a) Income Gains Value
---------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997(e) $10.430 $.254 $ (.281) $(.243) $ -- $10.160
- -------------------------------------------------------------------------------------
1996 9.600 .483 .844 (.497) -- 10.430
- -------------------------------------------------------------------------------------
1995(d) 9.840 .198 (.229) (.207) (.002) 9.600
- -------------------------------------------------------------------------------------
CLASS C (9/94)
1997(e) 10.420 .211 (.277) (.204) -- 10.150
- -------------------------------------------------------------------------------------
1996 9.590 .409 .842 (.421) -- 10.420
- -------------------------------------------------------------------------------------
1995(d) 9.750 .160 (.153) (.167) -- 9.590
- -------------------------------------------------------------------------------------
CLASS R (12/91)
1997(e) 10.440 .258 (.273) (.255) -- 10.170
- -------------------------------------------------------------------------------------
1996 9.610 .513 .838 (.521) -- 10.440
- -------------------------------------------------------------------------------------
1995 10.620 .513 (1.008) (.513) (.002) 9.610
- -------------------------------------------------------------------------------------
1994 9.910 .509 .727 (.503) (.023) 10.620
- -------------------------------------------------------------------------------------
1993(d) 9.525 .442 .395 (.442) (.010) 9.910
- -------------------------------------------------------------------------------------
1992 9.525 -- -- -- -- 9.525
- -------------------------------------------------------------------------------------
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
January 31, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ------------------ --------- ---------- ----------- ------------- ---------
CLASS A (9/94)
1997(e) (.24)% $ 9.3 1.00%+ 4.86%+ 4%
- ---------------------------------------------------------------------------
1996 14.07 6.9 1.00 4.74 17
- ---------------------------------------------------------------------------
1995(d) (.26) 1.6 1.00+ 5.26+ 35
- ---------------------------------------------------------------------------
CLASS C (9/94)
1997(e) (.62) 1.7 1.75+ 4.11+ 4
- ---------------------------------------------------------------------------
1996 13.24 1.4 1.75 4.04 17
- ---------------------------------------------------------------------------
1995(d) .12 .9 1.75+ 4.55+ 35
- ---------------------------------------------------------------------------
CLASS R (12/91)
1997(e) (.12) 44.7 .75+ 5.12+ 4
- ---------------------------------------------------------------------------
1996 14.33 47.4 .75 5.07 17
- ---------------------------------------------------------------------------
1995 (4.58) 42.7 .75 5.28 35
- ---------------------------------------------------------------------------
1994 12.71 47.8 .75 4.85 4
- ---------------------------------------------------------------------------
1993(d) 8.96 28.3 .75+ 4.96+ 20
- ---------------------------------------------------------------------------
1992 -- 15 -- -- --
- ---------------------------------------------------------------------------
</TABLE>
+Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the six months ending July 31, 1996.
- --------------------------------------------------------------------------------
NOTES:
(1) Reflects sales charge in effect February 1, 1997. The sales charge may be
reduced or waived based on the amount of purchase or for certain eligible
categories of investors. A CDSC of 1% is imposed on redemptions of certain
purchases of $1 million or more within 18 months of purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the funds reduced the service fee on Class A and
C shares from 0.25% to 0.20% and reduced the distribution fee on Class C
shares from 0.75% to 0.55%. These lower expenses are reflected in the table
and are expected to reduce total operating expenses on Class A from 1.00% to
0.95% and on Class C from 1.75% to 1.50%, as reflected in the table. Long-
term holders of Class B and C shares may pay more in distribution fees and
CDSCs than the maximum initial sales charge permitted under National
Association of Securities Dealers (NASD) Rules of Fair Practice. Nuveen
Advisory has voluntarily agreed through July 31, 1997 to waive fees or
reimburse expenses so that the total operating expenses (not counting
distribution and service fees) for the fund do not exceed 0.75% of average
daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
- --------------------------------------------------------------------------------
PAGE 3
<PAGE>
- -------------------------------------------------------------------------------
Nuveen Flagship Pennsylvania Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: October 29, 1996
NET ASSETS: $50.1 million
- -------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 0.88% 5.30% 4.73% 4.73% 5.30%
5 YEARS 6.51% 7.43% 6.85% 6.89% 7.43%
10 YEARS 6.79% 7.24% 6.78% 6.68% 7.24%
INCEPTION 6.88% 7.33% 6.87% 6.76% 7.33%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C
total returns reflect actual performance for periods since class inception
(see "Financial Highlights" for dates), and Class A performance for periods
prior to class inception, adjusted for the differences in sales charges and
fees between the classes. Class B and R total returns reflect Class A perfor-
mance for all periods, adjusted for the differences in sales charges (and for
Class B, fees) between the classes. See Overview of Fund Operating Expenses
and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits
this risk by purchasing only certain types and maturities of municipal bonds
and by diversifying its investment portfolio geographically and by industry.
See Risk Reduction Strategies in the prospectus for further information.
- -------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE:
Average Maturity 20.5
Averaged Modified Duration 7.3]
- -------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE:
AA (6%)
A (21%)
BBB (29%)
NR (4%)
AAA (40%)]
- -------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE:
Housing/Single Family (10%)
Pre-refunded (9%)
Education (9%)
Other (29%)
Hospitals (25%)
Industrial Development & Pollution Control (18%)]
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 5%(2) 1%(3) --
</TABLE>
- -------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER 0.16% 0.16% 0.16% 0.16%
- ---------------------------------------------------------------------------------------------
TOTAL (GROSS) 0.91% 1.66% 1.46% 0.71%
- ---------------------------------------------------------------------------------------------
WAIVERS/
REIMBURSEMENTS (0.25%) (0.25%) (0.25%) (0.25%)
- ---------------------------------------------------------------------------------------------
TOTAL (NET) 0.66% 1.41% 1.21% 0.46%
- ---------------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in
the fund based on the Total Expenses shown at left, an assumed annual total
return of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 48 $ 54 $ 12 $ 5
3 YEARS $ 62 $ 77 $ 38 $15
5 YEARS $ 77 $ 89 $ 67 $26
10 YEARS $121 $149 $147 $58
</TABLE>
Information as of 11/30/96 See Notes on Next Page
- ------------------------------------------------------------------------------
PAGE 4
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Deloitte & Touche LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
- -------------------------------------------- ---------------------------------
<TABLE>
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
<S> <C> <C> <C> <C> <C> <C>
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
May 31, Value Income(c) Investments(a) Income Gains Value
---------------- --------- ---------- -------------- ---------- --------- ---------
CLASS A (10/86)
1997(d) $10.00 $.28 $.34 $(.29) $ -- $10.33
- -------------------------------------------------------------------------------------
1996 10.21 .59 (.20) (.60) -- 10.00
- -------------------------------------------------------------------------------------
1995 10.06 .60 .16 (.61) -- 10.21
- -------------------------------------------------------------------------------------
1994 10.38 .61 (.32) (.61) -- 10.06
- -------------------------------------------------------------------------------------
1993 9.90 .62 .47 (.61) -- 10.38
- -------------------------------------------------------------------------------------
1992 9.60 .63 .30 (.63) -- 9.90
- -------------------------------------------------------------------------------------
1991 9.39 .62 .22 (.63) -- 9.60
- -------------------------------------------------------------------------------------
1990 9.49 .63 (.10) (.63) -- 9.39
- -------------------------------------------------------------------------------------
1989 9.01 .64 .48 (.64) -- 9.49
- -------------------------------------------------------------------------------------
1988 8.83 .65 .18 (.65) -- 9.01
- -------------------------------------------------------------------------------------
1987(e) 9.58 .35 (.75) (.35) -- 8.83
- -------------------------------------------------------------------------------------
CLASS C (2/94)
1997(d) 9.99 .25 .35 (.26) -- 10.33
- -------------------------------------------------------------------------------------
1996 10.21 .53 (.21) (.54) -- 9.99
- -------------------------------------------------------------------------------------
1995 10.06 .54 .16 (.55) -- 10.21
- -------------------------------------------------------------------------------------
1994(e) 10.71 .16 (.64) (.17) -- 10.06
- -------------------------------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
<S> <C> <C> <C> <C> <C>
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
May 31, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ------------------ --------- ---------- ----------- ------------- ---------
CLASS A (10/86)
1997(d) 12.47%+ $44.8 .84%+ 5.57%+ 21%
- -------------------------------------------------------------------------------------
1996 3.83 44.4 .79 5.76 65
- -------------------------------------------------------------------------------------
1995 7.90 42.6 .89 6.08 50
- -------------------------------------------------------------------------------------
1994 2.70 42.2 .91 5.80 21
- -------------------------------------------------------------------------------------
1993 11.34 40.7 .92 6.07 23
- -------------------------------------------------------------------------------------
1992 9.98 36.9 .83 6.47 41
- -------------------------------------------------------------------------------------
1991 9.26 35.4 .91 6.63 23
- -------------------------------------------------------------------------------------
1990 5.70 35.6 .92 6.65 30
- -------------------------------------------------------------------------------------
1989 12.79 33.5 .98 6.84 23
- -------------------------------------------------------------------------------------
1988 9.70 33.8 .72 7.28 52
- -------------------------------------------------------------------------------------
1987(e) (7.77) 29.0 .69+ 6.29+ 63
- -------------------------------------------------------------------------------------
CLASS C (2/94)
1997(d) 12.11+ 5.4 1.38+ 5.00+ 21
- -------------------------------------------------------------------------------------
1996 3.16 4.4 1.34 5.19 65
- -------------------------------------------------------------------------------------
1995 7.31 3.1 1.39 5.50 50
- -------------------------------------------------------------------------------------
1994(e) (13.46) 1.7 1.41+ 4.91+ 21
- -------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Flagship Financial, predecessor to Nuveen Advisory.
(d) For the six months ending November 30, 1996.
(e) From commencement of class operations as noted.
- --------------------------------------------------------------------------------
Notes:
(1) The sales charge may be reduced or waived based on the amount of purchase
or for certain eligible categories of investors. A CDSC of 1% is imposed on
redemptions of certain purchases of $1 million or more within 18 months of
purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the fund eliminated the 0.20% distribution fee
on Class A shares and reduced the distribution fee on Class C shares from
0.75% to 0.55%. These lower expenses are reflected in the table and are
expected to reduce total operating expenses on Class A from 0.86% to 0.66%
and on Class C from 1.41% to 1.21%, as reflected in the table. Long-term
holders of Class B and C shares may pay more in distribution fees and CDSCs
than the maximum initial sales charge permitted under National Association
of Securities Dealers (NASD) Rules of Fair Practice. The
waiver/reimbursement levels shown reflect Nuveen's current undertaking,
made in connection with its acquisition of Flagship Resources as described
in "Fund Service Providers--Investment Adviser," to continue Flagship's
dividend-setting practices. Nuveen also has voluntarily agreed through July
31, 1997 to waive fees or reimburse expenses so that the total operating
expenses (not counting distribution and service fees) for the fund do not
exceed 0.75% of average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
- --------------------------------------------------------------------------------
PAGE 5
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship Virginia Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: March 27, 1986
NET ASSETS: $131.0 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 0.92% 5.34% 4.76% 4.86% 5.34%
5 Years 6.59% 7.51% 6.92% 6.90% 7.51%
10 Years 6.96% 7.42% 6.95% 6.82% 7.42%
Inception 7.24% 7.68% 7.24% 7.07% 7.68%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C total
returns reflect actual performance for periods since class incep-tion (see
"Financial Highlights" for dates), and Class A performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B and R total returns reflect Class A performance for all
periods, adjusted for the differences in sales charges (and for Class B, fees)
between the classes. See Overview of Fund Operating Expenses and Shareholder
Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 20.4
Average Modified Duration 7.4
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
AAA (23%)
AA (26%)
A (30%)
BBB (30%)
NR (8%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Hospitals (15%)
Industrial Development and Pollution Control (14%)
Municipal Appropriation Obligations (13%)
Education (13%)
State/Territorial General Obligations (8%)
Other (37%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 5%(2) 1%(3) --
- -------------------------------------------------------------------------------------------
</TABLE>
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12b-1 FEES 0.20% 0.95% 0.75% --
OTHER 0.12% 0.12% 0.12% 0.12%
- ---------------------------------------------------------------------------------------------
TOTAL (GROSS) 0.87% 1.62% 1.42% 0.67%
WAIVERS/
REIMBURSEMENTS (0.10%) (0.10%) (0.10%) (0.10%)
- ---------------------------------------------------------------------------------------------
TOTAL (NET) 0.77% 1.52% 1.32% 0.57%
- ---------------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 50 $ 55 $ 13 $ 6
3 YEARS $ 66 $ 80 $ 42 $18
5 YEARS $ 83 $ 94 $ 72 $32
10 YEARS $133 $161 $159 $71
</TABLE>
Information as of 11/30/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 6
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Deloitte & Touche LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
<CAPTION>
- ------------------ --------------------------------------------------------
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
May 31, Value Income(c) Investments(a) Income Gains Value
---------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (3/86)
1997(e) $10.40 $.29 $.33 $(.29) $ -- $10.73
- -------------------------------------------------------------------------------------
1996 10.56 .57 (.15) (.58) -- 10.40
- -------------------------------------------------------------------------------------
1995 10.36 .59 .20 (.59) -- 10.56
- -------------------------------------------------------------------------------------
1994 10.82 .60 (.31) (.60) (.15) 10.36
- -------------------------------------------------------------------------------------
1993 10.24 .62 .62 (.62) (.04) 10.82
- -------------------------------------------------------------------------------------
1992 9.97 .63 .27 (.63) -- 10.24
- -------------------------------------------------------------------------------------
1991 9.70 .63 .28 (.64) -- 9.97
- -------------------------------------------------------------------------------------
1990 9.76 .64 (.06) (.64) -- 9.70
- -------------------------------------------------------------------------------------
1989 9.29 .64 .46 (.63) -- 9.76
- -------------------------------------------------------------------------------------
1988 9.09 .64 .19 (.63) -- 9.29
- -------------------------------------------------------------------------------------
1987 9.25 .63 (.16) (.63) -- 9.09
- -------------------------------------------------------------------------------------
1986(d) 9.58 .09 (.33) (.09) -- 9.25
- -------------------------------------------------------------------------------------
CLASS C (10/93)
1997(e) 10.39 .26 .34 (.26) -- 10.73
- -------------------------------------------------------------------------------------
1996 10.56 .51 (.16) (.52) -- 10.39
- -------------------------------------------------------------------------------------
1995 10.36 .53 .20 (.53) -- 10.56
- -------------------------------------------------------------------------------------
1994(d) 11.24 .34 (.78) (.34) (.10) 10.36
- -------------------------------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
May 31, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ------------------ --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (3/86)
1997(e) 11.99%+ $118.5 .80%+ 5.41%+ 12%
- -------------------------------------------------------------------------------------
1996 4.03 117.7 .83 5.41 17
- -------------------------------------------------------------------------------------
1995 7.99 112.6 .79 5.81 50
- -------------------------------------------------------------------------------------
1994 2.62 107.5 .64 5.53 17
- -------------------------------------------------------------------------------------
1993 12.41 96.1 .68 5.82 30
- -------------------------------------------------------------------------------------
1992 9.37 64.6 .75 6.28 27
- -------------------------------------------------------------------------------------
1991 9.72 48.1 .91 6.48 22
- -------------------------------------------------------------------------------------
1990 6.14 41.6 .91 6.54 35
- -------------------------------------------------------------------------------------
1989 12.25 37.2 .97 6.69 18
- -------------------------------------------------------------------------------------
1988 9.73 31.7 .88 6.95 75
- -------------------------------------------------------------------------------------
1987 5.03 32.7 .68 6.54 75
- -------------------------------------------------------------------------------------
1986(d) (33.49) 12.6 .70+ 5.25+ 9
- -------------------------------------------------------------------------------------
CLASS C (10/93)
1997(e) 11.61+ 12.5 1.35+ 4.84+ 12
- -------------------------------------------------------------------------------------
1996 3.37 11.0 1.38 4.84 17
- -------------------------------------------------------------------------------------
1995 7.40 6.5 1.34 5.24 50
- -------------------------------------------------------------------------------------
1994(d) (7.13) 4.8 1.14+ 4.85+ 17
- -------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses by
Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the six months ending November 30, 1996.
- --------------------------------------------------------------------------------
NOTES:
(1) The sales charge may be reduced or waived based on the amount of purchase
or for certain eligible categories of investors. A CDSC of 1% is imposed on
redemptions of certain purchases of $1 million or more within 18 months of
purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the fund eliminated the 0.20% distribution fee
on Class A shares and reduced the distribution fee on Class C shares from
0.75% to 0.55%. These lower expenses are reflected in the table and are
expected to reduce total operating expenses on Class A from 0.97% to 0.77%
and on Class C from 1.52% to 1.32%, as reflected in the table. Long-term
holders of Class C shares may pay more in distribution fees and CDSCs than
the maximum initial sales charge permitted under National Association of
Securities Dealers (NASD) Rules of Fair Practice. The waiver/reimbursement
levels shown reflect Nuveen's current undertaking, made in connection with
its acquisition of Flagship Resources as described in "Fund Service Provid-
ers--Investment Adviser," to continue Flagship's dividend-setting prac-
tices. Nuveen also has voluntarily agreed through July 31, 1997 to waive
fees or reimburse expenses so that the total operating expenses (not
counting distribution and service fees) for the fund do not exceed 0.75% of
average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
--------------
PAGE 7
<PAGE>
FUND STRATEGIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of each fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital. There is no
assurance that the funds will achieve their investment objective.
INVESTOR SUITABILITY
The funds are a suitable investment for tax-conscious investors seeking to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or college
funding.
The funds are not a suitable investment for individuals seeking to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401k plan;
. Avoid fluctuations in share price.
- --------------------------------------------------------------------------------
HOW THE FUNDS SELECT
INVESTMENTS
TAX-FREE MUNICIPAL BONDS
The funds invest primarily in municipal bonds from a specific state that pay
interest that is exempt from regular federal, state and, in some cases, local
income taxes. Income from these bonds may be subject to the federal alternative
minimum tax.
Municipal bonds are either general obligation or revenue bonds and typically
are issued to finance public projects (such as roads or public buildings), to
pay general operating expenses, or to refinance outstanding debt. Municipal
bonds may also be issued for private activities, such as housing, medical and
educational facility construction, or for privately owned industrial develop-
ment and pollution control projects. General obligation bonds are backed by the
full faith and credit, or taxing authority, of the issuer and may be repaid
from any revenue source; revenue bonds may be repaid only from the revenues of
a specific facility or source.
FOCUS ON QUALITY MUNICIPAL BONDS
The funds focus on quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent ratings agencies at the time of
purchase or are non-rated but judged to be investment grade by the funds'
investment adviser. If suitable municipal bonds from a specific state are not
available at attractive prices and yields, a fund may invest in municipal bonds
of U.S. territories (such as Puerto Rico and Guam) which are exempt from
regular federal, state, and local income taxes. The funds may not invest more
than 20% of their net assets in these territorial municipal bonds.
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the funds will only purchase leases where the issuer has a strong
incentive to continue making appropriations until maturity.
Bond ratings are furnished by Standard & Poor's Corporation, Fitch Investors
Services, and Moody's Investors Services. The ratings BBB and Baa are not iden-
tical--S&P and Fitch consider bonds rated BBB to have adequate capacity to pay
principal and interest; Moody's considers bonds rated Baa to have some specula-
tive characteristics. Bond ratings represent the opinions of the ratings agen-
cies; they are not absolute standards of quality.
VALUE INVESTING STRATEGY
The funds' investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer above-average total
return potential. The adviser emphasizes fundamental research and selects
municipal bonds on the basis of its evaluation of each bond's relative value in
terms of current yield, price, credit quality and future prospects. The adviser
then monitors each fund's portfolio to assure that municipal bonds purchased
continue to represent over time, in its opinion, the best values available.
PORTFOLIO MATURITY
Each fund purchases municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an invest-
ment portfolio with an overall weighted average maturity within a defined
range. All of the funds described in this prospectus are long-term funds and
normally maintain a weighted average portfolio maturity of 15 to 30 years. See
"Defensive Investment Strategies" below for further information.
- --------------------------------------------------------------------------------
PAGE 8
<PAGE>
PORTFOLIO TURNOVER
A fund buys and sells portfolio securities in the normal course of its invest-
ment activities. The proportion of the fund's investment portfolio that is sold
and replaced with new securities during a year is known as the fund's portfolio
turnover rate. The funds intend to keep portfolio turnover relatively low
in order to reduce trading costs and the realization of taxable capital gains.
Each fund, however, may make limited short-term trades to take advantage of
market opportunities and reduce market risk.
DELAYED DELIVERY TRANSACTIONS
Each fund may buy or sell bonds on a when-issued or delayed delivery basis,
making payment or taking delivery at a later date, normally within 15 to 45
days of the trade date. This type of transaction may involve an element of risk
because no interest accrues on the bonds prior to settlement and, since securi-
ties are subject to market fluctuation, the value of the bonds at time of
delivery may be less (or more) than cost.
- --------------------------------------------------------------------------------
RISK REDUCTION STRATEGIES
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. Interest rate risk is the
risk that changes in market interest rates will affect the value of a fund's
investment portfolio. In general, the value of a municipal bond falls when
interest rates rise, and increases when interest rates fall. Credit risk is the
risk that an issuer of a municipal bond is unable to meet its obligation to
make interest and principal payments. In general, lower rated municipal bonds
are perceived to carry a greater degree of risk in the issuer's ability to make
interest and principal payments. Municipal bonds with longer maturities (dura-
tions) or lower ratings generally provide higher current income, but are
subject to greater price fluctuation due to changes in market conditions than
bonds with shorter maturities or higher ratings, respectively.
Because the funds primarily purchase municipal bonds from a specific state,
each fund also bears investment risk from economic, political or regulatory
changes that could adversely affect municipal bond issuers in that state and
therefore the value of the fund's investment portfolio. As non-diversified
funds, the funds generally are subject to greater share price fluctuations due
to these changes than diversified funds.
The funds limit your investment risk generally by restricting the types and
maturities of municipal bonds they purchase, and by diversifying their invest-
ment portfolios across different industry sectors. The funds should be consid-
ered long-term investments and may not be suitable for investors with short-
term investment horizons.
INVESTMENT LIMITATIONS
The funds have adopted certain investment limitations (based on total fund
assets) designed to limit your investment risk and maintain portfolio diversi-
fication. Each fund may not have more than:
. 25% in any one industry sector, such as electric utilities or health care;
. 10% in borrowings (33% if used to meet redemptions).
DEFENSIVE INVESTMENT STRATEGIES
Each fund may invest in high quality short-term municipal securities in order
to reduce risk and preserve capital. Under normal market conditions, each fund
may invest only up to 20% of net assets in short-term municipal securities that
are exempt from regular federal income tax, although the funds may invest up to
100% as a temporary defensive measure in response to adverse market conditions.
During temporary defensive periods, the weighted average maturity of a fund's
investment portfolio may fall below the defined range described above under
"Portfolio Maturity."
If suitable short-term municipal investments are not reasonably available, the
funds may invest in short-term taxable securities that are rated Aaa or AAA, by
Moody's or S&P, respectively, or issued by the U.S. government, and that have a
maturity of one year or less or have a variable interest rate.
Each fund may also use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have
no present intent to use these strategies.
FUNDAMENTAL INVESTMENT POLICIES
Each fund's investment objective as well as the policies described above in
"Focus on Quality Municipal Bonds" and "Risk Reduction Strategies" are funda-
mental and may not be changed without the approval of a majority of the share-
holders of each fund.
- --------------------------------------------------------------------------------
PAGE 9
<PAGE>
INVESTING IN THE FUNDS
- -------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
You may open an account with $3,000 and make additional investments at any
time with as little as $50. Reinvestment of Nuveen unit trust distributions
have no purchase minimums. The share price you pay will depend on when Nuveen
receives your order: orders received before the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) will receive
that day's share price; otherwise you will receive the next business day's
share price.
BUYING SHARES THROUGH A FINANCIAL ADVISER
You may buy fund shares through your financial adviser, who can handle all the
details for you, including establishing an account with Nuveen. Financial
advisers can also help you review your financial needs and formulate long-term
investment goals and objectives. In addition, financial advisers generally can
help you develop a customized financial plan, select investments, and monitor
and review your portfolio on an ongoing basis to assure your investments
continue to meet your needs as circumstances change.
Financial advisers are usually paid either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge for ongoing invest-
ment advice and services.
If you do not have a financial adviser, call (800) 621-7227 and Nuveen can
refer you to one in your area.
BUYING SHARES BY MAIL
You may also open an account and purchase shares by mail by completing the
enclosed Nuveen application and mailing it along with your check (payable to
the appropriate fund) to the address listed under "How to Contact Nuveen."
Sales charges are not waived when you buy shares by mail.
Each fund reserves the right to reject any purchase order and waive or
increase minimum investment requirements. The funds also reserve the right to
suspend the issuance of shares at any time; any suspension, however, will not
affect your ability to redeem shares.
- -------------------------------------------------------------------------------
HOW TO SELECT A PURCHASE
OPTION
The funds offer you a variety of flexible options when buying shares. Whether
you typically work with a financial adviser on a commission or a fee basis or
prefer to work on a more self-directed basis, you can purchase shares in the
way that is most suited to your individual circumstances and investment needs.
Each of the four available ways to purchase fund shares is called a class of
shares: Class A, Class B, Class C and Class R. While each of these classes
features different sales charges, on-going fees and eligibility requirements,
each entitles you to a share of the same portfolio of municipal bonds.
Selecting the class of shares which is most appropriate for you will depend on
a variety of factors. You should weigh carefully whether you and your finan-
cial adviser work on a commission or fee basis, the types of services that you
will receive, the amount you intend to buy, how long you plan to own your
investment and whether or not you will reinvest dividends. If you compensate
your financial adviser directly, you should consider the fees your financial
adviser charges for investment advice or handling your trades in addition to
any sales charges and fees imposed by the funds. Please refer to your finan-
cial adviser's sales material for further information. Each class of shares is
described in more detail below and under "Fund Service Providers--The Distrib-
utor." Your financial adviser can explain each option and help you determine
which is most appropriate for you, or you can call (800) 621-7227.
BUYING CLASS A SHARES
You may buy Class A shares at their public offering price on the day of
purchase. The price you pay will equal the Class A NAV (net asset value) plus
a sales charge based upon the amount of your purchase. Class A shares also
bear a 0.20% annual service fee which compensates your financial adviser for
providing you with ongoing service.
The following Class A sales charges and commissions apply to all funds
described in this prospectus:
- -------------------------------------------------------------------------------
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
------------ ----------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 4.20% 4.38% 3.70%
$50,000-100,000 4.00 4.18 3.50
$100,000-250,000 3.50 3.63 3.00
$250,000-500,000 2.50 2.56 2.00
$500,000-1,000,000 2.00 2.04 1.50
$1,000,000 and over --(1) -- --(1)
</TABLE>
(1) Nuveen pays authorized dealers a commission equal to the sum of 1% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of any
amount over $5 million. Unless the authorized dealer waived the commis-
sion, you may be assessed a contingent deferred sales charge (CDSC) of 1%
if you redeem any of your shares within 18 months of purchase. The CDSC is
calculated on the lower of your purchase price or redemption proceeds.
- -------------------------------------------------------------------------------
PAGE 10
<PAGE>
Nuveen periodically undertakes sales promotion programs with authorized
dealers and may pay them the full applicable sales charge as a commission. In
addition, Nuveen may provide support at its own expense to authorized dealers
in connection with sales meetings, seminars, prospecting seminars and other
events at which Nuveen presents its products and services. Under certain
circumstances, Nuveen also will share with authorized dealers up to half the
costs of advertising that features the products and services of both parties.
The statement of additional information contains further information about
these programs.
- -------------------------------------------------------------------------------
OTHER SALES CHARGE DISCOUNTS
Nuveen offers a number of programs that enable you to reduce or eliminate the
sales charge on Class A shares:
SALES CHARGE REDUCTIONS
.Rights of Accumulation
.Letter of Intent (LOI)
.Group Purchase
SALES CHARGE WAIVERS
. Unit Trust Reinvestment
. Purchases using Redemptions from Unrelated Funds
. Fee-Based Programs
. Bank Trust Departments
. Certain Employees of Nuveen or Authorized Dealers
Please refer to the statement of additional information for detailed descrip-
tions of these programs. Further information on these programs is also avail-
able through your financial adviser or by calling (800) 621-7227. Your finan-
cial adviser can also provide and help you prepare the necessary application
forms. You or your financial adviser are responsible for notifying Nuveen
about your eligibility for any sales charge reduction or waiver at the time of
each purchase.
The funds may modify or discontinue these programs at any time upon written
notice to shareholders.
BUYING CLASS B SHARES
You may buy Class B shares at their public offering price on the day of
purchase. The price you pay will equal the Class B NAV. There is no initial
sales charge, but Class B shares bear a 0.20% annual service fee which compen-
sates your financial adviser for providing you with ongoing service, and a
0.75% annual distribution fee which compensates Nuveen for paying your finan-
cial adviser a 4% commission at the time of purchase.
Class B shares convert automatically to Class A shares eight years after
purchase. Class B shares will convert only if the fund is assured that the
conversion does not generate tax consequences for investors, based upon the
opinion of outside counsel or the written assurance of the IRS.
- -------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGE
If you redeem Class B shares within six years of purchase, you will be
assessed a contingent deferred sales charge (CDSC) based upon the following
schedule:
<TABLE>
<CAPTION>
DURING YEAR
---------------------------
1 2 3 4 5 6 7+
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1% 0%
</TABLE>
The CDSC is calculated on the lower of your purchase price or redemption
proceeds.
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of
purchase. The price you pay will equal the Class C NAV. There is no initial
sales charge, Class C shares bear a 0.20% annual service fee which compensates
your financial adviser for providing you with ongoing service, and a 0.55%
annual distribution fee which compensates Nuveen for paying your financial
adviser for the sale, including a 1% commission at the time of sale.
If you redeem your Class C shares within one year of purchase, you may be
assessed a CDSC of 1%. The CDSC is calculated on the lower of your purchase
price or redemption proceeds.
BUYING CLASS R SHARES
You may purchase Class R shares at their public offering price on the day of
purchase. The price you pay will equal the Class R NAV. You may purchase Class
R shares only if you are investing at least $1 million or would otherwise
qualify to purchase Class A shares without a sales charge as described under
"Other Sales Charge Discounts" above. There are no sales charges or ongoing
fees. Class R Shares have lower ongoing expenses than Class A Shares.
- -------------------------------------------------------------------------------
HOW TO SELL FUND SHARES
You may use one of the methods described below to redeem your shares on any
day the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your redemption request in good order.
Your redemption request must be received before the close of trading of the
New York Stock Exchange (normally 4 p.m. Eastern time) for you to receive that
day's price. The funds do not charge any redemption fees, although you will be
assessed a CDSC where applicable.
SELLING SHARES THROUGH YOUR FINANCIAL ADVISER
You may sell fund shares by contacting your financial adviser who can provide
and help you prepare all the
- -------------------------------------------------------------------------------
PAGE 11
<PAGE>
necessary documentation. Your financial adviser may charge you for this serv-
ice.
SELLING SHARES BY TELEPHONE
Unless you have declined telephone redemption privileges, you may sell fund
shares by calling (800) 621-7227. Your redemption must not exceed $50,000 and
you may not redeem by telephone shares held in certificate form. Checks will
be issued only to the shareholder on record and mailed to the address on
record. If you have established electronic funds transfer privileges on your
account, you may have redemption proceeds transferred electronically to your
bank account; if you are redeeming $1,000 or more, you may expedite your
request by having your redemption proceeds wired directly into your bank
account.
Nuveen, Shareholder Services, Inc. ("SSI"), and Boston Financial Data Services
("Boston Financial") will be liable for losses resulting from unauthorized
telephone redemptions only if they do not follow reasonable procedures
designed to verify the identity of the caller. You should immediately verify
your trade confirmations when you receive them.
SELLING SHARES BY MAIL
You may sell fund shares by mail by sending a written request to Nuveen at the
address listed below under "How to Contact Nuveen." Your request must include
the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person you want your redemption proceeds paid to, if other
than to the shareholder of record;
. The address you want your redemption proceeds sent to, if other than to the
address of record;
. Any certificates you have for the shares; and
. Any required signature guarantees.
Signatures must be guaranteed if you are redeeming more than $50,000, you want
the check payable to someone other than the shareholder on record, or you want
the check sent to another address (or the address on record has been changed
within the last 60 days). Signature guarantees must be obtained from a bank,
brokerage firm or other financial intermediary that is a member of an approved
Medallion Guarantee Program or that is otherwise approved by the fund. A
notary public cannot provide a signature guarantee.
Unless other arrangements are made, checks will be sent to your address on
record. Checks will normally be mailed within one business day, but in no
event more than seven days from receipt of your redemption request. If any
shares were purchased less than
15 days prior to your request, the fund will not mail your redemption proceeds
until the check for your purchase has cleared, which may take up to 15 days.
Each fund may suspend redemptions or delay payment on redemptions for more
than seven days (three days for street name accounts) in certain extraordinary
circumstances as described in the statement of additional information.
OPERATION OF THE CDSC
When you redeem Class A, Class B, or Class C shares subject to a CDSC, the
fund will first redeem any shares that are not subject to a CDSC or that
represent an increase in the value of your fund account due to capital appre-
ciation, and then redeem the shares you have owned for the longest period of
time, unless you ask the fund to redeem your shares in a different order. No
CDSC is imposed on shares you buy through the reinvestment of dividends and
capital gains. The holding period is calculated on a monthly basis and begins
on the first day of the month in which you buy shares. When you redeem shares
subject to a CDSC, the CDSC is calculated on the lower of your purchase price
or redemption proceeds, deducted from your redemption proceeds, and paid to
Nuveen. The CDSC may be waived under certain special circumstances as
described in the statement of additional information.
ACCOUNT MINIMUMS
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
unit trust reinvestment account. You will not be assessed a CDSC on an invol-
untary redemption.
- -------------------------------------------------------------------------------
EXCHANGING SHARES
You may exchange fund shares at any time for the same class of shares in
another Nuveen mutual fund that is available within your state. You may
exchange fund shares by calling (800) 621-7227 or by mailing your written
request to Nuveen at the address listed under "How to Contact Nuveen."
You must have owned your fund shares for at least 15 days and your exchange
must meet the minimum purchase requirements of the fund into which you are
exchanging. No CDSC will be assessed on an exchange, and the holding period of
your investment will be carried over to the new fund for purposes of deter-
mining any future CDSC. You may not
- -------------------------------------------------------------------------------
PAGE 12
<PAGE>
exchange Class B shares for shares of a Nuveen money market fund.
Because an exchange is treated for tax purposes as the concurrent sale and
purchase of fund shares, you should consult your tax adviser about the tax
consequences of any contemplated exchange. Each fund reserves the right to
limit or terminate exchange privileges if it believes doing so is in the best
interests of fund shareholders.
RESTRICTIONS ON MARKET TIMING
The exchange privilege is not intended to permit you to use a fund for short-
term trading. Excessive exchange activity may interfere with portfolio manage-
ment, raise fund operating expenses or otherwise have an adverse effect on fund
shareholders. In order to limit excessive exchange activity and in other
circumstances where the funds' investment adviser believes doing so would be in
the best interests of the fund, each fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of exchanges, or
reject any exchange. You will be notified in the event this happens to the
extent required by law.
- --------------------------------------------------------------------------------
OPTIONAL FEATURES AND SERVICES
SYSTEMATIC INVESTMENT
Once you have opened an account, you may make regular investments of $50 or
more a month through automatic deductions from your bank account (see "Fund
Direct--Electronic Funds Transfer" below), or directly from your paycheck. To
invest regularly from your bank account, simply complete the appropriate
section of the account application. To invest regularly from your paycheck,
call Nuveen for a Payroll Direct Deposit Enrollment form. If you need addi-
tional copies of these forms, or would like assistance completing them, contact
your financial adviser or call Nuveen toll-free at (800) 621-7227.
One of the benefits of systematic investing is "dollar cost averaging." Because
you are making fixed payments, you buy fewer shares when the price is high, and
more when the price is low. As a result, the average price you pay will be less
than the average share price of fund shares over this period. Dollar cost aver-
aging does not assure profits or protect against losses in a steadily declining
market. Since dollar cost averaging involves continuous investment regardless
of fluctuating price levels, you should consider your financial ability to
continue investing in declining as well as rising markets before deciding to
invest in this way.
Systematic investing may also make you eligible for reduced sales charges on
shares of the fund as well as other Nuveen mutual funds (see "Other Sales
Charge Discounts").
THE POWER OF SYSTEMATIC INVESTING
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
(CHART APPEARS HERE)
<TABLE>
<CAPTION>
ACCOUNT VALUES FOR TOTAL RETURNS OF
AMOUNT -----------------------------------
YEAR INVESTED 4.00% 5.00% 6.00%
---- -------- ------- ------- -------
<S> <C> <C> <C> <C>
0 $ 2,874 $ 2,874 $ 2,874 $ 2,874
5 8,622 9,861 10,203 10,561
10 14,370 18,391 19,610 20,929
15 20,118 28,807 31,681 34,913
20 25,866 41,525 47,173 53,779
</TABLE>
SYSTEMATIC WITHDRAWALS
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly or semi-annually, and may choose to receive a
check, have the monies transferred directly into your bank account (see "Fund
Direct--Electronic Funds Transfer" below), paid to a third party or sent
payable to you at an address other than your address of record. You must
complete the appropriate section of the account application to participate in
the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concur-
rent purchases of Class A, B or C shares because you may unnecessarily pay a
sales charge or CDSC on these purchases.
REINSTATEMENT PRIVILEGE
If you redeem fund shares on which you paid an initial sales charge or contin-
gent deferred sales charge (CDSC), you may reinvest all or part of your redemp-
tion proceeds up to one year later without incurring any additional charge. You
may only reinvest into the
same class of shares you redeemed and will receive the share price next deter-
mined after Nuveen receives your reinvestment request. You may exercise this
privilege only once per redemption request.
--------------
PAGE 13
<PAGE>
If you paid a CDSC, your CDSC will be refunded and your holding period rein-
stated. You should consult your tax adviser about the tax consequences of
exercising your reinstatement privilege.
FUND DIRECT--ELECTRONIC FUNDS TRANSFER
You may arrange to transfer funds electronically between your bank account and
your fund account by completing the appropriate section of the account appli-
cation. If you need additional copies of this form, or would like assistance
completing it, contact your financial adviser or call Nuveen at (800) 621-
7227. You may use Fund Direct to quickly and conveniently purchase or sell
shares by telephone, systematically invest or withdraw funds, or send dividend
payments directly to your bank account.
If you have established electronic funds transfer privileges on your account,
you may request that redemption proceeds of $1,000 or more be wired directly
into your bank account. While you will generally receive your redemption
proceeds more quickly than a regular telephone redemption, the fund may charge
you a fee for this expedited service.
DIVIDENDS AND TAXES
- -------------------------------------------------------------------------------
HOW THE FUNDS PAY DIVIDENDS
The funds pay tax-free dividends monthly and any taxable capital gains or
other distributions once a year in December. The funds declare dividends or
about on the ninth of each month and generally pay dividends on the first
business day of the following month.
PAYMENT AND REINVESTMENT OPTIONS
The funds automatically reinvest your dividends each month in additional fund
shares unless you request otherwise. You may request to have your dividends
paid to you by check, deposited directly into your bank account, paid to a
third party, sent to an address other than your address of record or rein-
vested in shares of another Nuveen mutual fund. If you wish to do so, complete
the appropriate section of the account application, contact your financial
adviser or call Nuveen at (800) 621-7227.
CALCULATION OF FUND DIVIDENDS
Each fund pays dividends based upon its past and projected net income in order
to distribute substantially all of its net income each fiscal year.
In order to maintain a more stable monthly dividend, each fund may sometimes
distribute less or more than the amount of net income earned in a particular
period as a result of fluctuations in a fund's net income. Undistributed net
income is included in the fund's share price; similarly, distributions from
previously undistributed net income reduce the fund's share price. This divi-
dend policy is not expected to affect the management of a fund's portfolio.
Dividends for Class A, B, C and R shares are determined in the same manner and
at the same time. Dividends per share will vary based on which class of fund
shares you own, reflecting the different ongoing fees and other expenses of
each class.
- -------------------------------------------------------------------------------
TAXES AND TAX REPORTING
The discussion below and the statement of additional information provides
general tax information related to an investment in fund shares. Because tax
laws are complex and often change, you should consult your tax adviser about
the tax consequences of a specific fund investment.
Each fund primarily invests in municipal bonds from a specific state or in
municipal bonds whose income is otherwise exempt from regular federal, state
and local income taxes. Consequently, the regular
- -------------------------------------------------------------------------------
PAGE 14
<PAGE>
monthly dividends you receive will be exempt from regular federal, state and,
in some cases, local income taxes. All or a portion of these dividends,
however, may be subject to the federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how
long you have owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Each year, you will receive a year-end statement that describes the tax status
of dividends paid to you during the preceding year, including the source of its
investment income by state and the portion of its income that is subject to
AMT. You will receive this statement from the firm where you purchased your
fund shares if you hold your investment in street name; Nuveen will send you
this statement if you hold your shares in registered form.
The tax status of your dividends is not affected by whether you reinvest your
dividends or receive them in cash.
BUYING OR SELLING SHARES CLOSE TO A RECORD DATE
If you purchase fund shares shortly before the record date for a taxable divi-
dend, the entire dividend you receive may be taxable to you even though a
portion of the dividend effectively represents a return of your purchase price.
This is commonly known as "buying a dividend." Similarly, if you sell or
exchange fund shares shortly before the record date for a tax-exempt dividend,
a portion of the price you receive may be treated as a taxable capital gain
even though it reflects tax-free income earned but not yet distributed by the
fund.
TAX CONSEQUENCES OF PRIVATE ACTIVITY BONDS
Because each fund may invest in private activity bonds, the portion of your
regular monthly dividends derived from the income earned on these bonds that
would otherwise be tax-exempt will be treated as taxable income if:
. you are subject to the AMT (including corporate shareholders);
. you are a "substantial user" of a facility financed by these bonds; or
. you are a "related person" of a substantial user.
REDEEMING SHARES HELD LESS THAN SIX MONTHS
If you sell or exchange shares that you have owned for less than six months and
you recognized a short-term capital loss when you redeemed your shares, the
loss you can claim will be reduced by the amount of tax-free dividends paid to
you on those shares. Any remaining short-term capital loss will be treated as
long-term capital loss to the extent you also received capital gain dividends
on those shares. You should consult your tax adviser for complete information
about these rules. Please consider the tax consequences carefully when contem-
plating a redemption.
OTHER IMPORTANT TAX INFORMATION
In order to avoid corporate taxation of its earnings and to pay tax-free divi-
dends, each fund must meet certain I.R.S. requirements that govern the fund's
sources of income, diversification of assets and distribution of earnings to
shareholders. Each fund has met these requirements in the past and intends to
do so in the future. If a fund failed to do so, the fund would be required to
pay corporate taxes on its earnings and all your distributions would be taxable
as ordinary income.
A fund may be required to withhold 31% of certain of your dividends if you have
not provided the fund with your correct taxpayer identification number (nor-
mally your social security number), or if you are otherwise subject to back-up
withholding.
If you receive social security benefits, you should be aware that tax-free
income is taken into account in calculating the amount of these benefits that
may be subject to federal income tax.
If you borrow money to buy fund shares, you may not deduct the interest on that
loan. Under I.R.S. rules, fund shares may be treated as having been bought with
borrowed money even if the purchase cannot be traced directly to borrowed
money.
- --------------------------------------------------------------------------------
PAGE 15
<PAGE>
- -------------------------------------------------------------------------------
TAXABLE EQUIVALENT YIELDS
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like
the funds with taxable alternative investments, the table below presents the
taxable equivalent yields for a range of hypothetical tax-free yields and tax
rates:
- -------------------------------------------------------------------------------
TAXABLE EQUIVALENT OF TAX-FREE YIELDS
<TABLE>
<CAPTION>
TAX-FREE YIELD
TAX RATE 4.00% 4.50% 5.00% 5.50% 6.00%
- -------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
statement of additional information or consult your tax adviser.
GENERAL INFORMATION
- -------------------------------------------------------------------------------
HOW TO CONTACT NUVEEN
GENERAL INFORMATION
If you would like general information about Nuveen Mutual Funds or any other
Nuveen product, call (800) 621-7227 between 7:30 a.m. and 7:00 p.m. Central
time.
PURCHASES, REDEMPTIONS AND OTHER TRANSACTIONS
If you are calling to purchase or redeem shares, request an exchange or
conduct other account transactions, call (800) 621-7227 between 7:30 a.m. and
7:00 p.m. Central time. If you are sending a written request to Nuveen, you
should mail your request to the following address:
Nuveen Mutual Funds
c/o Shareholder Services Inc.
P.O. Box 5330
Denver, CO 80217-5330
When purchasing fund shares by mail, please be sure to include a check made
out to the name of the Fund and mark clearly on your check which class of
shares you are purchasing. If you do not specify which class of shares you are
purchasing, Nuveen will assume you are buying Class A shares if you are
opening a new account; if you are adding to an existing account, Nuveen will
assume you wish to buy more shares of the class you already own.
- -------------------------------------------------------------------------------
FUND SERVICE PROVIDERS
INVESTMENT ADVISER
Nuveen Advisory Corp. ("Nuveen Advisory") serves as the investment adviser to
the funds and in this capacity is responsible for the selection and on-going
monitoring of the municipal bonds in each fund's investment portfolio. Nuveen
Advisory serves as investment adviser to investment portfolios with more than
$35 billion in municipal assets under management. The activities of Nuveen
Advisory, which also include managing the funds' business affairs and
providing certain clerical, bookkeeping and other administrative services, are
overseen by the funds' Board of Trustees. Established in 1976, Nuveen Advisory
is a wholly-owned subsidiary of John Nuveen & Co. Incorporated, which itself
is approximately 78% owned by the St. Paul Companies, Inc. Effective January
1, 1997, The John Nuveen Company acquired Flagship Resources Inc., and as part
of that acquisition, Flagship Financial, the adviser to the Flagship Funds,
was merged with Nuveen Advisory.
- -------------------------------------------------------------------------------
PAGE 16
<PAGE>
For providing these services, Nuveen Advisory is paid an annual management fee
according to the following schedule:
- -------------------------------------------------------------------------------
MANAGEMENT FEES
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET
VALUE MANAGEMENT FEE
- ------------------------------------------
<S> <C>
For the first $125 million 0.5500%
For the next $125 million 0.5375%
For the next $250 million 0.5250%
For the next $500 million 0.5125%
For the next $1 billion 0.5000%
For assets over $2 billion 0.4750%
</TABLE>
Nuveen will waive some or all of its fees or reimburse expenses so that the
total operating expenses (not counting distribution and service fees) for the
funds (through July 31, 1997) do not exceed 0.75% of average daily net assets.
For more information about fees and expenses, see the fund operating expense
tables in the Fund Summaries.
PORTFOLIO MANAGERS
Overall investment management strategy and operating policies for the funds
are set by the Investment Policy Committee of Nuveen Advisory. The Investment
Policy Committee is comprised of the principal executive officers and port-
folio managers of Nuveen Advisory and meets regularly to review economic
conditions, the outlook for the financial markets in general and the status of
the municipal markets in particular. Day-to-day operation of each fund and the
execution of its specific investment strategies is the responsibility of the
designated portfolio manager described below.
Edward F. Neild IV is an Assistant Vice President of Nuveen Advisory and the
portfolio manager of the Maryland Fund. Mr. Neild has managed the fund since
February 1992 and joined Nuveen Advisory in February 1992. Richard Huber is
the portfolio manager for the Pennsylvania Fund. Mr. Huber has managed the
fund since 1995 as a Vice President of Flagship Financial Inc., the fund's
prior investment adviser, until becoming an employee of Nuveen Advisory upon
the acquisition of Flagship Resources Inc. by The John Nuveen Company in
January 1997. Richard Huber also is the portfolio manager for the Virginia
Fund. Mr. Huber has managed the fund since 1992.
THE DISTRIBUTOR
John Nuveen and Co. Incorporated serves as the selling agent and distributor
of the funds' shares. In this capacity, Nuveen manages the offering of the
funds' shares and is responsible for all sales and promotional activities. In
order to reimburse Nuveen for its costs in connection with these activities,
including compensation paid to authorized dealers, each fund has adopted a
distribution and service plan under Rule 12b-1 of the Investment Company Act
of 1940.
The plan authorizes each fund to pay Nuveen an annual 0.20% service fee on the
average daily net assets of Class A, B and C shares outstanding and annual
distribution fees of 0.75% and 0.55%, respectively, on the average daily net
assets of Class B and C shares outstanding. In order to help compensate Nuveen
for the sales commission paid to financial advisers at the time of sale on
sales of Class B and Class C shares, Nuveen retains the first year's service
fee on sales of Class B shares and all Class B distribution fees; and retains
the first year's service and distribution fees on sales of Class C shares.
Otherwise, Nuveen pays these fees to the broker of record. The statement of
additional information contains a detailed description of the plan and its
provisions.
TRANSFER AGENT
Each fund has appointed a transfer agent which is responsible for distributing
dividend payments and providing certain bookkeeping, data processing and other
administrative services in connection with the maintenance of shareholder
accounts. Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330,
currently serves as transfer agent for the Maryland Fund. Boston Financial,
P.O. Box 8509, Boston, MA 02266-8509, currently serves as transfer agent for
the Pennsylvania and Virginia Funds. The funds intend to consolidate transfer
agent activities with a single firm in the future.
- -------------------------------------------------------------------------------
HOW THE FUNDS REPORT
PERFORMANCE
Each fund may quote its yield and total return in reports to shareholders,
sales literature and advertisements. The funds may also compare their invest-
ment results to various passive indices or other mutual funds with similar
investment objectives. Comparative performance information may include data
from Lipper Analytical Services, Inc., Morningstar, Inc. and other industry
publications. See the statement of additional information for a more detailed
discussion.
- -------------------------------------------------------------------------------
HOW FUND SHARES ARE PRICED
The share price for each class of fund shares, also called its net asset value
(NAV), is calculated every business day as of the close of regular trading on
the New York Stock Exchange (normally 4 p.m. Eastern time). The net asset
value for a class of fund shares is computed by calculating the total value of
the class' portion of the fund's portfolio investments and other assets,
subtracting any liabilities or other debts, and dividing by the total number
of its shares outstanding.
- -------------------------------------------------------------------------------
PAGE 17
<PAGE>
The prices of municipal bonds in each fund's investment portfolio are provided
by a pricing service approved and supervised by the fund's Board of Trustees.
When price quotes are not readily available (which is usually the case for
municipal securities), the pricing service establishes fair market value based
on yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating, indications of value from securities dealers and
general market conditions.
- -------------------------------------------------------------------------------
ORGANIZATION
The Trust is an open-end diversified investment company under the Investment
Company Act of 1940, consisting of multiple funds. The shares of each fund are
divided into classes. Each class of shares represents an interest in the same
portfolio of investments and the shares of each class have equal rights as to
voting, redemption, dividends and liquidation. However, each class bears
different sales charges and service fees. B shares convert to A shares after 8
years. C shares purchased before February 1, 1997 convert to A shares six
years after purchase, but only if you request conversion. You must submit your
request to SSI no later than the last business day of the 71st month following
the month in which you purchased your shares.
The funds are not required to and do not intend to hold annual meetings.
Shareholders owning ten percent or more of a fund's outstanding shares may
call a special meeting for any purpose, including to elect or remove trustees
or to change fundamental policies.
The Pennsylvania and Virginia Funds were formed as a result of mergers between
existing Nuveen and Flagship funds. The performance and the financial informa-
tion of each fund reflects that of the predecessor Flagship fund.
APPENDIX
- -------------------------------------------------------------------------------
SPECIAL STATE CONSIDERATIONS
Because the funds primarily purchase municipal bonds from a specific state,
each fund also bears investment risk from economic, political or regulatory
changes that could adversely affect municipal bond issuers in that state and
therefore the value of the fund's investment portfolio. The following discus-
sion of special state considerations was obtained from official offering
statements of these issuers and has not been independently verified by the
funds. The discussion includes general state tax information related to an
investment in fund shares. Because tax laws are complex and often change, you
should consult your tax adviser about the state tax consequences of a specific
fund investment. See the statement of additional information for further
information.
MARYLAND
Maryland's rate of economic growth has slowed in the 1990's after a period of
rapid expansion in the decade before. Indicators such as income growth, unem-
ployment and retail sales levels have trailed the national average. Services,
wholesale and retail trade, government and manufacturing account for most of
the State's employment. Unlike in most states, government employment surpasses
manufacturing employment in Maryland. The manufacturing sector consists
chiefly of printing and publishing, food products, industrial machinery, elec-
tronics and chemicals.
The State's unemployment rate fell to 4.7% by August 1996 from 5.0% a year
earlier. Both times, it ranked below the national average. Maryland residents'
personal income per capita ranks fifth in the nation. Per capita income rose
4.3% in 1995 to reach $25,927.
The State Constitution mandates a balanced budget forcing the Governor to
reduce 1993 appropriations to offset a 1992 deficit. State expenditures
totaled $11.8 billion and $12.4 billion in 1993 and 1994. The State estimated
1995 expenditures at $13.4 billion leaving a $49.5 million surplus. Reserves
totaled some $223.6 million at the end of fiscal 1995. As of February 9, 1996,
Moody's gives the State's general obligation debt an Aaa rating while S&P
gives it an AAA rating.
Tax Treatment.
The Maryland Fund's regular monthly dividends will not be subject to Maryland
personal income taxes to the extent they are paid out of income earned on
Maryland municipal bonds or U.S. government securities. You will be subject to
Maryland personal
- -------------------------------------------------------------------------------
PAGE 18
<PAGE>
income taxes, however, to the extent the Maryland Fund distributes any taxable
income, or if you sell or exchange Maryland Fund shares and realize a capital
gain on the transaction.
The treatment of corporate shareholders is similar to that described above.
PENNSYLVANIA
Both Pennsylvania and its largest city, Philadelphia, have experienced diffi-
cult budget shortfalls in recent years. The industrial composition of the
Commonwealth has diversified from its peak as heavy-industry cluster for coal
and steel production, especially with
the advent of foreign competition in the last decade. Manufacturing employment
has fallen behind that of the service and trade sectors. New growth emanates
from the service sectors, especially trade, medical and health services,
educational and financial institutions. Agriculture remains an important
component of the economic structure while food-related industries support even
more activity.
Pennsylvania's unemployment rate has approximated the national average in the
past year, falling to 5.0% in August 1996 from 5.6% in August 1995. Per capita
income rose 4.9% in 1995 to reach $23,279.
The Governor must submit a balanced operating budget by law and while the
General Assembly may change items, the Governor retains a line-item veto
power. Total appropriations cannot exceed estimated revenues, also taking into
account any deficit or surplus remaining from the previous year. The govern-
ment was forced to enact significant cuts and tax increases to deal with
severe shortfalls in 1990-2. The financial situation improved in 1993 and 1994
leading to surpluses. The 1995 budget also projected surplus of some $4
million. As of February 9, 1996, Moody's gives the State's general obligation
debt an A1 rating while S&P gives it an AA- rating.
Tax Treatment.
The Pennsylvania Fund's regular monthly dividends will not be subject to the
Pennsylvania individual income tax to the extent they are paid out of income
earned on Pennsylvania municipal bonds or U.S. government securities. You will
be subject to Pennsylvania personal income tax, however, to the extent the
Pennsylvania Fund distributes any taxable income or realized capital gains, or
if you sell or exchange Pennsylvania Fund shares and realize a capital gain on
the transaction.
The treatment of corporate shareholders of the Pennsylvania Fund is similar to
that described above.
VIRGINIA
The Virginia economy is broad-based and includes manufacturing, tourism, agri-
culture, ports, mining and fisheries. Export diversification is an encouraging
sign of growth. Manufacturing, while significant, ranks behind services, trade
and government in share of employment. The federal government is a major
employer given the proximity of Washington, D.C. and the large numbers of
workers employed at Hampton Roads, the nation's largest concentration of mili-
tary installations. Civilian defense employment has dropped and further cuts
are likely in wake of reductions in defense spending. Still, Virginia's
economy has recovered gradually from the nationwide recession. Non-agricul-
tural employment also tends to mirror that of the nation.
Virginia's unemployment rate was a low 4.1% in August 1996 having dropped
further from the previous year's rate of 4.6%. Per capita income rose 4.9% in
1995 to reach $23,597.
Virginia's Constitution requires a balanced biennial budget. Beyond that, the
Commonwealth historically operates on a fiscally conservative basis and
produced undesignated surpluses in 1992, 1993 and 1994. As of February 9,
1996, Moody's gives the State's general obligation debt an Aaa rating while
S&P gives it an AAA rating.
Tax Treatment.
The Virginia Fund's regular monthly dividends will not be subject to Virginia
personal income taxes to the extent they are paid out of income earned on
Virginia municipal bonds or U.S. government securities. You will be subject to
Virginia personal income taxes, however, to the extent the Virginia Fund
distributes any taxable income, or if you sell or exchange Virginia Fund
shares and realize a capital gain on the transaction.
The treatment of corporate shareholders is similar to that described above.
- -------------------------------------------------------------------------------
PAGE 19
<PAGE>
Nuveen Family of Mutual Funds
Nuveen's family of funds is designed to help you reach your finan-
cial goals. The funds below are grouped by investment objectives.
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME FUNDS
National Funds/1/
State Funds
Alabama Michigan
Arizona Missouri
California/2/ New Jersey/3/
Colorado New Mexico
Connecticut New York/2/
Florida/3/ North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky/4/ South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts/2/ Wisconsin
Notes
1. Long-term, long-term insured, intermediate-term and limited-term
portfolios.
2. Long-term and long-term insured portfolios.
3. Long-term and intermediate-term portfolios.
4. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
- --------------------------------------------------------------------------------
OVERVIEW
The funds listed above are part of the Nuveen Flagship Multistate Trust I, an
open-end investment company. Each fund seeks to provide high double or triple
tax-free income and preservation of capital through investments in diversified
portfolios of quality municipal bonds whose income is exempt from regular
federal, state and, in some cases, local income taxes.
Each fund offers a set of flexible purchase options which permit you to
purchase fund shares in the way that is best suited to your individual circum-
stances and investment needs. For detailed information about these flexible
purchase options, please refer to "How to Select a Purchase Option" later in
this prospectus.
This prospectus contains important information you should know before invest-
ing. Please read it carefully and keep it for future reference. You can find
more detailed information about each fund in the statement of additional infor-
mation which is part of this prospectus by reference. For a free copy, write to
Nuveen or call (800) 621-7227.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER U.S. GOVERNMENT AGENCY. SHARES OF THE FUNDS
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<S> <C>
OVERVIEW 1
FUND SUMMARIES AND FINANCIAL HIGHLIGHTS 2
FUND STRATEGIES
Investment Objective 6
How the Funds Select Investments 6
Risk Reduction Strategies 7
INVESTING IN THE FUNDS
How to Buy Fund Shares 8
How to Select a Purchase Option 8
How to Sell Fund Shares 10
Exchanging Shares 11
Optional Features and Services 11
DIVIDENDS AND TAXES
How the Funds Pay Dividends 13
Taxes and Tax Reporting 13
Taxable Equivalent Yields 14
GENERAL INFORMATION
How to Contact Nuveen 15
Fund Service Providers 15
How the Funds Report Performance 16
How Fund Shares are Priced 16
Organization 16
APPENDIX
Special State Considerations 17
</TABLE>
FEBRUARY 1, 1997
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship Florida Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: June 15, 1990
NET ASSETS: $314.7 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 0.00% 4.38% 3.81% 3.92% 4.38%
5 YEARS 6.56% 7.48% 6.89% 6.65% 7.48%
INCEPTION 7.30% 8.02% 7.42% 7.24% 8.02%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C total
returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class A performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B and R total returns reflect Class A performance for all
periods, adjusted for the differences in sales charges (and for Class B, fees)
between the classes. See Overview of Fund Operating Expenses and Shareholder
Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 21.4
Average Modified Duration 8.3
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
AAA (65%)
AA (11%)
A (11%)
BBB (11%)
NR (2%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Hospitals (17%)
Industrial Development
and Polution Control (12%)
Pre-refunded (10%)
Special Tax Revenue (9%)
Housing/Single Family (8%)
Other (44%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
TRANSACTION EXPENSE CLASS A CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 5%(2) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
FUND EXPENSE CLASS A CLASS B CLASS C CLASS R
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.54% 0.54% 0.54% 0.54%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER 0.11% 0.11% 0.11% 0.11%
- -------------------------------------------------------------------------------------------------
TOTAL (GROSS) 0.85% 1.60% 1.40% 0.65%
WAIVERS/
REIMBURSEMENTS -- -- -- --
- -------------------------------------------------------------------------------------------------
TOTAL (NET) 0.85% 1.60% 1.40% 0.65%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 50 $ 56 $ 14 $ 7
3 YEARS $ 68 $ 82 $ 44 $21
5 YEARS $ 87 $ 99 $ 77 $36
10 YEARS $142 $170 $168 $81
</TABLE>
See Notes on Next Page 2
Information as of 11/30/96
- --------------------------------------------------------------------------------
PAGE 2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Deloitte & Touche LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
<CAPTION>
---------------- ------------------------------------------------------------------
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
May 31, Value Income(c) Investments(a) Income Gains Value
- ----------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (6/90)
1997(e) $10.39 $.28 $ .35 $(.28) $ -- $10.74
- -------------------------------------------------------------------------------------
1996 10.63 .57 (.24) (.57) -- 10.39
- -------------------------------------------------------------------------------------
1995 10.38 .58 .26 (.59) -- 10.63
- -------------------------------------------------------------------------------------
1994 10.76 .60 (.38) (.60) -- 10.38
- -------------------------------------------------------------------------------------
1993 10.18 .63 .61 (.64) (.02) 10.76
- -------------------------------------------------------------------------------------
1992 9.87 .66 .33 (.67) (.01) 10.18
- -------------------------------------------------------------------------------------
1991(d) 9.58 .64 .29 (.64) -- 9.87
- -------------------------------------------------------------------------------------
CLASS C (9/95)
1997(e) 10.39 .25 .36 (.25) -- 10.75
- -------------------------------------------------------------------------------------
1996(d) 10.65 .35 (.26) (.35) -- 10.39
- -------------------------------------------------------------------------------------
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
May 31, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ------------------ --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (6/90)
1997(e) 12.31%+ $312.0 .87%+ 5.32%+ 31%
- -------------------------------------------------------------------------------------
1996 3.14 318.5 .83 5.36 94
- -------------------------------------------------------------------------------------
1995 8.43 341.4 .73 5.71 53
- -------------------------------------------------------------------------------------
1994 2.00 372.1 .58 5.51 32
- -------------------------------------------------------------------------------------
1993 12.49 369.1 .45 6.01 23
- -------------------------------------------------------------------------------------
1992 10.32 276.8 .26 6.59 50
- -------------------------------------------------------------------------------------
1991(d) 9.81 136.5 .19+ 6.86+ 152
- -------------------------------------------------------------------------------------
CLASS C (9/95)
1997(e) 11.93+ 2.6 1.40+ 4.69+ 31
- -------------------------------------------------------------------------------------
1996(d) 1.30 1.2 1.38+ 4.59+ 94
- -------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Flagship Financial, predecessor to Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the six months ending November 30, 1996.
- --------------------------------------------------------------------------------
NOTES:
(1) The sales charge may be reduced or waived based on the amount of purchase
or for certain eligible categories of investors. A CDSC of 1% is imposed on
redemptions of certain purchases of $1 million or more within 18 months of
purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the fund eliminated the 0.20% distribution fee
on Class A shares and reduced the distribution fee on Class C shares from
0.75% to 0.55%. These lower expenses are reflected in the table and are
expected to reduce total operating expenses on Class A from 1.05% to 0.85%
and on Class C from 1.60% to 1.40%, as reflected in the table. Long-term
holders of Class B and C shares may pay more in distribution fees and CDSCs
than the maximum initial sales charge permitted under National Association
of Securities Dealers (NASD) Rules of Fair Practice. The waiver/
reimbursement levels shown reflect Nuveen's current undertaking, made in
connection with its acquisition of Flagship Resources as described in "Fund
Service Providers - Investment Adviser," to continue Flagship's dividend-
setting practices. Nuveen also has voluntarily agreed through July 31, 1997
to waive fees or reimburse expenses so that the total operating edxpenses
(not counting distribution and service fees) for the fund do not exceed
0.75% of average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
- --------------------------------------------------------------------------------
PAGE 3
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship Florida Intermediate Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: February 1, 1994
NET ASSETS: $8.8 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS C CLASS R
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR 1.68% 4.82% 4.25% 4.82%
INCEPTION 5.32% 6.46% 5.90% 6.46%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C total
returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class A performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class R total returns reflect Class A performance for all periods,
adjusted for the differences in sales charges between the classes. See Overview
of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 9.6
Average Modified Duration 6.6
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB (8%)
A (14%)
AA (11)
AAA (67%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Special Tax Revenue (23%)
Non-State General Obligations (11%)
State/Territorial General Obligations (11%)
Municipal Revenue/Water & Sewer (10%)
Municipal Revenue/Transportation (10%)
Other (35%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS R
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES CHARGE ON PURCHASES 3.00%(1) -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 1%(2) --
- ---------------------------------------------------------------------------------
</TABLE>
OVERVIEW OF FUND OPERATING EXPENSES (3)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS R
- ------------------------------------------
<S> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55%
12B-1 FEES 0.20% 0.75% --
OTHER 1.03% 1.03% 1.03%
- ------------------------------------------
TOTAL (GROSS) 1.78% 2.33% 1.58%
WAIVERS/
REIMBURSEMENTS (1.08%) (1.08%) (1.08%)
- ------------------------------------------
TOTAL (NET) 0.70% 1.25% 0.50%
</TABLE>
SUMMARY OF SHAREHOLDER EXPENSES (4)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS C CLASS R
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 YEAR $ 37 $ 13 $ 5
3 YEARS $ 52 $ 40 $16
5 YEARS $ 68 $ 69 $28
10 YEARS $114 $151 $63
</TABLE>
Information as of 11/30/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 4
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Deloitte & Touche LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
<CAPTION>
--------------- ------------------------------------------------------------------
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION
DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
May 31, Value Income(c) Investments(a) Income Gains Value
--------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (2/94)
1997(e) $ 9.88 $.23 $ .34 $(.23) $ -- $10.22
- ------------------------------------------------------------------------------------
1996 10.05 .46 (.12) (.46) (.05) 9.88
- ------------------------------------------------------------------------------------
1995 9.66 .46 .33 (.40) -- 10.05
- ------------------------------------------------------------------------------------
1994(d) 9.70 .12 (.04) (.12) -- 9.66
- ------------------------------------------------------------------------------------
CLASS C (2/94)
1997(e) 9.88 .21 .33 (.20) -- 10.22
- ------------------------------------------------------------------------------------
1996 10.05 .40 (.11) (.41) (.05) 9.88
- ------------------------------------------------------------------------------------
1995 9.66 .40 .33 (.34) -- 10.05
- ------------------------------------------------------------------------------------
1994(d) 9.70 .11 (.06) (.09) -- 9.66
- ------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION
DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
May 31, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ----------------- --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (2/94)
1997(e) 11.73%+ $5.5 .75+ 4.64%+ 18%
- ------------------------------------------------------------------------------------
1996 3.41 5.0 .76 4.48 66
- ------------------------------------------------------------------------------------
1995 8.42 3.9 .67 4.74 105
- ------------------------------------------------------------------------------------
1994(d) 1.75 1.0 .29+ 3.79+ 28
- ------------------------------------------------------------------------------------
CLASS C (2/94)
1997(e) 11.15+ 3.2 1.30+ 4.09+ 18
- ------------------------------------------------------------------------------------
1996 2.88 3.1 1.34 3.88 66
- ------------------------------------------------------------------------------------
1995 7.80 1.8 1.19 4.19 105
- ------------------------------------------------------------------------------------
1994(d) 1.33 1.1 .68+ 3.42+ 28
- ------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Flagship Financial, predecessor to Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the six months ending November 30, 1996.
- --------------------------------------------------------------------------------
NOTES:
(1) The sales charge may be reduced or waived based on the amount of purchase
or for certain eligible categories of investors. A CDSC of 1% is imposed on
redemptions of certain purchases of $1 million or more within 18 months of
purchase.
(2) Imposed only on redemptions within 12 months of purchase.
(3) Effective February 1, 1997, the fund eliminated the 0.20% distribution fee
on Class A shares and reduced the distribution fee on Class C shares from
0.75% to 0.55%. These lower expenses are reflected in the table and are
expected to reduce total operating expenses on Class A from 0.90% to 0.70%
and on Class C from 1.45% to 1.25%, as reflected in the table. Long-term
holders of Class C shares may pay more in distribution fees and CDSCs than
the maximum initial sales charge permitted under National Association of
Securities Dealers (NASD) Rules of Fair Practice. The waiver/reimbursement
levels shown reflect Nuveen's current undertaking, made in connection with
its acquisition of Flagship Resources as described in "Fund Service Provid-
ers--Investment Adviser," to continue Flagship's dividend-setting practices.
Nuveen also has voluntarily agreed through July 31, 1997 to waive fees or
reimburse expenses so that the total operating expenses (not counting
distribution and service fees) for the fund do not exceed 0.75% of average
daily net assets.
(4) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
--------------
PAGE 5
<PAGE>
FUND STRATEGIES
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of each fund is to provide you with as high a level
of current interest income exempt from regular federal, state (including the
Florida intangible personal property tax) and, in some cases, local income
taxes as is consistent with preservation of capital. There is no assurance
that the funds will achieve their investment objective.
INVESTOR SUITABILITY
The funds are a suitable investment for tax-conscious investors seeking to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or college
funding.
The funds are not a suitable investment for individuals seeking to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401k plan;
. Avoid fluctuations in share price.
- -------------------------------------------------------------------------------
HOW THE FUNDS SELECT
INVESTMENTS
TAX-FREE MUNICIPAL BONDS
The funds invest primarily in municipal bonds from a specific state that pay
interest that is exempt from regular federal, state and, in some cases, local
income taxes. Income from these bonds may be subject to the federal alterna-
tive minimum tax.
Municipal bonds are either general obligation or revenue bonds and typically
are issued to finance public projects (such as roads or public buildings), to
pay general operating expenses, or to refinance outstanding debt. Municipal
bonds may also be issued for private activities, such as housing, medical and
educational facility construction, or for privately owned industrial develop-
ment and pollution control projects. General obligation bonds are backed by
the full faith and credit, or taxing authority, of the issuer and may be
repaid from any revenue source; revenue bonds may be repaid only from the
revenues of a specific facility or source.
FOCUS ON QUALITY MUNICIPAL BONDS
The funds focus on quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent ratings agencies at the time of
purchase or are non-rated but judged to be investment grade by the funds'
investment adviser. If suitable municipal bonds are not available at reason-
able prices and yields, a fund may invest in municipal bonds of U.S. territo-
ries (such as Puerto Rico and Guam) which are exempt from regular federal,
state, and local income taxes. The Florida Fund may not invest more than 20%
of its net assets in these territorial municipal bonds.
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to
reduce this risk, the funds will only purchase leases where the issuer has a
strong incentive to continue making appropriations until maturity.
Bond ratings are furnished by Standard & Poor's Corporation, Fitch Investors
Services, and Moody's Investors Services. The ratings BBB and Baa are not
identical--S&P and Fitch consider bonds rated BBB to have adequate capacity to
pay principal and interest; Moody's considers bonds rated Baa to have some
speculative characteristics. Bond ratings represent the opinions of the
ratings agencies; they are not absolute standards of quality.
VALUE INVESTING STRATEGY
The funds' investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer above-average total
return potential. The adviser emphasizes fundamental research and selects
municipal bonds on the basis of its evaluation of each bond's relative value
in terms of current yield, price, credit quality and future prospects. The
adviser then monitors each fund's portfolio to assure that municipal bonds
purchased continue to represent over time, in its opinion, the best values
available.
PORTFOLIO MATURITY
Each fund purchases municipal bonds with different maturities in pursuit of
its investment objective, but maintains under normal market conditions an
investment portfolio with an overall weighted average maturity within a
defined range. The Florida Intermediate Fund normally maintains a weighted
average portfolio maturity of 5 to 10 years. The Florida Fund is a long-term
fund and normally maintains a weighted average portfolio maturity of 15 to 30
years. See "Defensive Investment Strategies" below for further information.
PORTFOLIO TURNOVER
A fund buys and sells portfolio securities in the normal course of its invest-
ment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is
- -------------------------------------------------------------------------------
PAGE 6
<PAGE>
known as the fund's portfolio turnover rate. The funds intend to keep portfolio
turnover relatively low in order to reduce trading costs and the realization of
taxable capital gains. Each fund, however, may make limited short-term trades
to take advantage of market opportunities and reduce market risk.
DELAYED DELIVERY TRANSACTIONS
Each fund may buy or sell bonds on a when-issued or delayed delivery basis,
making payment or taking delivery at a later date, normally within 15 to 45
days of the trade date. This type of transaction may involve an element of risk
because no interest accrues on the bonds prior to settlement and, since securi-
ties are subject to market fluctuation, the value of the bonds at time of
delivery may be less (or more) than cost.
- --------------------------------------------------------------------------------
RISK REDUCTION STRATEGIES
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. Interest rate risk is the
risk that changes in market interest rates will affect the value of a fund's
investment portfolio. In general, the value of a municipal bond falls when
interest rates rise, and increases when interest rates fall. Credit risk is the
risk that an issuer of a municipal bond is unable to meet its obligation to
make interest and principal payments. In general, lower rated municipal bonds
are perceived to carry a greater degree of risk in the issuer's ability to make
interest and principal payments. Municipal bonds with longer maturities (dura-
tions) or lower ratings generally provide higher current income, but are
subject to greater price fluctuation due to changes in market conditions than
bonds with shorter maturities or higher ratings, respectively.
Because the funds primarily purchase municipal bonds from a specific state,
each fund also bears investment risk from economic, political or regulatory
changes that could adversely affect municipal bond issuers in that state and
therefore the value of the fund's investment portfolio. As a non-diversified
fund, the Florida Intermediate Fund generally is subject to greater share price
fluctuations due to these changes than the Florida Fund, which is a diversified
fund.
The funds limit your investment risk generally by restricting the types and
maturities of municipal bonds they purchase, and by diversifying their invest-
ment portfolios across different industry sectors. The funds should be consid-
ered long-term investments and may not be suitable for investors with short-
term investment horizons.
INVESTMENT LIMITATIONS
The funds have adopted certain investment limitations (based on total fund
assets) designed to limit your investment risk and maintain portfolio diversi-
fication. Each fund may not have more than:
. 25% in any one industry sector, such as electric utilities or health care;
. 10% in borrowings (33% if used to meet redemptions).
As a diversified fund, the Florida Fund also may not have more than:
. 5% in securities of any one issuer (except U.S. government securities or for
25% of the fund's assets).
DEFENSIVE INVESTMENT STRATEGIES
Each fund may invest in high quality short-term municipal securities in order
to reduce risk and preserve capital. Under normal market conditions, each fund
may invest only up to 20% of net assets in short-term municipal securities that
are exempt from regular federal income tax, although the funds may invest up to
100% as a temporary defensive measure in response to adverse market conditions.
During temporary defensive periods, the weighted average maturity of a fund's
investment portfolio may fall below the defined range described above under
"Portfolio Maturity."
If suitable short-term municipal investments are not reasonably available, the
funds may invest in short-term taxable securities that are rated Aaa or AAA, by
Moody's or S&P, respectively, or issued by the U.S. government, and that have a
maturity of one year or less or have a variable interest rate.
Each fund may also use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have
no present intent to use these strategies.
FUNDAMENTAL INVESTMENT POLICIES
Each fund's investment objective as well as the policies described above in
"Focus on Quality Municipal Bonds" and "Risk Reduction Strategies" are funda-
mental and may not be changed without the approval of a majority of the share-
holders of each fund.
- --------------------------------------------------------------------------------
PAGE 7
<PAGE>
INVESTING IN THE FUNDS
- -------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
You may open an account with $3,000 and make additional investments at any
time with as little as $50. Reinvestment of Nuveen unit trust distributions
have no purchase minimums. The share price you pay will depend on when Nuveen
receives your order: orders received before the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) will receive
that day's share price; otherwise you will receive the next business day's
share price.
BUYING SHARES THROUGH A FINANCIAL ADVISER
You may buy fund shares through your financial adviser, who can handle all the
details for you, including establishing an account with Nuveen. Financial
advisers can also help you review your financial needs and formulate long-term
investment goals and objectives. In addition, financial advisers generally can
help you develop a customized financial plan, select investments, and monitor
and review your portfolio on an ongoing basis to assure your investments
continue to meet your needs as circumstances change.
Financial advisers are usually paid either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge for ongoing invest-
ment advice and services.
If you do not have a financial adviser, call (800) 621-7227 and Nuveen can
refer you to one in your area.
BUYING SHARES BY MAIL
You may also open an account and purchase shares by mail by completing the
enclosed Nuveen application and mailing it along with your check (payable to
the appropriate fund) to the address listed under "How to Contact Nuveen."
Sales charges are not waived when you buy shares by mail.
Each fund reserves the right to reject any purchase order and waive or
increase minimum investment requirements. The funds also reserve the right to
suspend the issuance of shares at any time; any suspension, however, will not
affect your ability to redeem shares.
- -------------------------------------------------------------------------------
HOW TO SELECT A
PURCHASE OPTION
The funds offer you a variety of flexible options when buying shares. Whether
you typically work with a financial adviser on a commission or a fee basis or
prefer to work on a more self-directed basis, you can purchase shares in the
way that is most suited to your individual circumstances and investment needs.
Each of the four available ways to purchase fund shares is called a class of
shares: Class A, Class B, Class C and Class R. While each of these classes
features different sales charges, on-going fees and eligibility requirements,
each entitles you to a share of the same portfolio of municipal bonds.
Selecting the class of shares which is most appropriate for you will depend on
a variety of factors. You should weigh carefully whether you and your finan-
cial adviser work on a commission or fee basis, the types of services that you
will receive, the amount you intend to buy, how long you plan to own your
investment and whether or not you will reinvest dividends. If you compensate
your financial adviser directly, you should consider the fees your financial
adviser charges for investment advice or handling your trades in addition to
any sales charges and fees imposed by the funds. Please refer to your finan-
cial adviser's sales material for further information. Each class of shares is
described in more detail below and under "Fund Service Providers--The Distrib-
utor." Your financial adviser can explain each option and help you determine
which is most appropriate for you, or you can call (800) 621-7227.
BUYING CLASS A SHARES
You may buy Class A shares at their public offering price on the day of
purchase. The price you pay will equal the Class A NAV (net asset value) plus
a sales charge based upon the amount of your purchase. Class A shares also
bear a 0.20% annual service fee which compensates your financial adviser for
providing you with ongoing service.
The following Class A sales charges and commissions apply to the Florida
Municipal Bond Fund:
- -------------------------------------------------------------------------------
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
------------ ----------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 4.20% 4.38% 3.70%
$50,000-100,000 4.00 4.18 3.50
$100,000-250,000 3.50 3.63 3.00
$250,000-500,000 2.50 2.56 2.00
$500,000-1,000,000 2.00 2.04 1.50
$1,000,000 and over --(1) -- --(1)
</TABLE>
- -------------------------------------------------------------------------------
PAGE 8
<PAGE>
The following Class A sales charges and commissions apply to the Florida Inter-
mediate Municipal Bond Fund:
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
------------ ----------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 3.00% 3.09% 2.50%
$50,000-100,000 2.50 2.56 2.00
$100,000-250,000 2.00 2.04 1.50
$250,000-500,000 1.50 1.52 1.25
$500,000-1,000,000 1.25 1.27 1.00
$1,000,000 and over --(1) -- --(1)
</TABLE>
(1) Nuveen pays authorized dealers a commission equal to the sum of 1% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of any
amount over $5 million. Unless the authorized dealer waived the commission,
you may be assessed a contingent deferred sales charge (CDSC) of 1% if you
redeem any of your shares within 18 months of purchase. The CDSC is calcu-
lated on the lower of your purchase price or redemption proceeds.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in connec-
tion with sales meetings, seminars, prospecting seminars and other events at
which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of adver-
tising that features the products and services of both parties. The statement
of additional information contains further information about these programs.
- --------------------------------------------------------------------------------
OTHER SALES CHARGE DISCOUNTS
Nuveen offers a number of programs that enable you to reduce or eliminate the
sales charge on Class A shares:
SALES CHARGE REDUCTIONS
. Rights of Accumulation
. Letter of Intent (LOI)
. Group Purchase
SALES CHARGE WAIVERS
. Unit Trust Reinvestment
. Purchases using Redemptions from Unrelated Funds
. Fee-Based Programs
. Bank Trust Departments
. Certain Employees of Nuveen or Authorized Dealers
Please refer to the statement of additional information for detailed descrip-
tions of these programs. Further information on these programs is also avail-
able through your financial adviser or by calling (800) 621-7227. Your finan-
cial adviser can also provide and help you prepare the necessary application
forms. You or your financial adviser are responsible for notifying Nuveen about
your eligibility for any sales charge reduction or waiver at the time of each
purchase.
The funds may modify or discontinue these programs at any time upon written
notice to shareholders.
BUYING CLASS B SHARES
You may buy Class B shares at their public offering price on the day of
purchase. The price you pay will equal the Class B NAV. There is no initial
sales charge, but Class B shares bear a 0.20% annual service fee which compen-
sates your financial adviser for providing you with ongoing service, and a
0.75% annual distribution fee which compensates Nuveen for paying your finan-
cial adviser a 4% commission at the time of purchase. The Florida Intermediate
Municipal Bond Fund does not currently offer Class B shares.
Class B shares convert automatically to Class A shares eight years after
purchase. Class B shares will convert only if the fund is assured that the
conversion does not generate tax consequences for investors, based upon the
opinion of outside counsel or the written assurance of the IRS.
- --------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGE
If you redeem Class B shares within six years of purchase, you will be assessed
a contingent deferred sales charge (CDSC) based upon the following schedule:
<TABLE>
<CAPTION>
DURING YEAR
---------------------------
1 2 3 4 5 6 7+
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1% 0%
</TABLE>
The CDSC is calculated on the lower of your purchase price or redemption
proceeds.
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of
purchase. The price you pay will equal the Class C NAV. There is no initial
sales charge, Class C shares bear a 0.20% annual service fee which compensates
your financial adviser for providing you with ongoing service, and a 0.55%
annual distribution fee which compensates Nuveen for paying your financial
adviser for the sale, including a 1% commission at the time of sale.
If you redeem your Class C shares within one year of purchase, you may be
assessed a CDSC of 1%. The CDSC is calculated on the lower of your purchase
price or redemption proceeds.
- --------------------------------------------------------------------------------
PAGE 9
<PAGE>
BUYING CLASS R SHARES
You may purchase Class R shares at their public offering price on the day of
purchase. The price you pay will equal the Class R NAV. You may purchase Class
R shares only if you are investing at least $1 million or would otherwise
qualify to purchase Class A shares without a sales charge as described under
"Other Sales Charge Discounts" above. There are no sales charges or ongoing
fees. Class R Shares have lower ongoing expenses than Class A Shares.
- -------------------------------------------------------------------------------
HOW TO SELL FUND SHARES
You may use one of the methods described below to redeem your shares on any
day the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your redemption request in good order.
Your redemption request must be received before the close of trading of the
New York Stock Exchange (normally 4 p.m. Eastern time) for you to receive that
day's price. The funds do not charge any redemption fees, although you will be
assessed a CDSC where applicable.
SELLING SHARES THROUGH YOUR FINANCIAL ADVISER
You may sell fund shares by contacting your financial adviser who can provide
and help you prepare all the necessary documentation. Your financial adviser
may charge you for this service.
SELLING SHARES BY TELEPHONE
Unless you have declined telephone redemption privileges, you may sell fund
shares by calling (800) 621-7227. Your redemption must not exceed $50,000 and
you may not redeem by telephone shares held in certificate form. Checks will
be issued only to the shareholder on record and mailed to the address on
record. If you have established electronic funds transfer privileges on your
account, you may have redemption proceeds transferred electronically to your
bank account; if you are redeeming $1,000 or more, you may expedite your
request by having your redemption proceeds wired directly into your bank
account.
Nuveen and Boston Financial Data Services ("Boston Financial") will be liable
for losses resulting from unauthorized telephone redemptions only if they do
not follow reasonable procedures designed to verify the identity of the
caller. You should immediately verify your trade confirmations when you
receive them.
SELLING SHARES BY MAIL
You may sell fund shares by mail by sending a written request to Nuveen at the
address listed below under "How to Contact Nuveen." Your request must include
the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person you want your redemption proceeds paid to, if other
than to the shareholder of record;
. The address you want your redemption proceeds sent to, if other than to the
address of record;
. Any certificates you have for the shares; and
. Any required signature guarantees.
Signatures must be guaranteed if you are redeeming more than $50,000, you want
the check payable to someone other than the shareholder on record, or you want
the check sent to another address (or the address on record has been changed
within the last 60 days). Signature guarantees must be obtained from a bank,
brokerage firm or other financial intermediary that is a member of an approved
Medallion Guarantee Program or that is otherwise approved by the fund. A
notary public cannot provide a signature guarantee.
Unless other arrangements are made, checks will be sent to your address on
record. Checks will normally be mailed within one business day, but in no
event more than seven days from receipt of your redemption request. If any
shares were purchased less than 15 days prior to your request, the fund will
not mail your redemption proceeds until the check for your purchase has
cleared, which may take up to 15 days.
Each fund may suspend redemptions or delay payment on redemptions for more
than seven days (three days for street name accounts) in certain extraordinary
circumstances as described in the statement of additional information.
OPERATION OF THE CDSC
When you redeem Class A, Class B, or Class C shares subject to a CDSC, the
fund will first redeem any shares that are not subject to a CDSC or that
represent an increase in the value of your fund account due to capital appre-
ciation, and then redeem the shares you have owned for the longest period of
time, unless you ask the fund to redeem your shares in a different order. No
CDSC is imposed on shares you buy through the reinvestment of dividends and
capital gains. The holding period is calculated on a monthly basis and begins
on the first day of the month in which you buy shares. When you redeem shares
subject to a CDSC, the CDSC is calculated on the lower of your purchase price
or redemption proceeds, deducted from your redemption proceeds, and paid to
Nuveen. The CDSC may be waived
- -------------------------------------------------------------------------------
PAGE 10
<PAGE>
ACCOUNT MINIMUMS
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
unit trust reinvestment account. You will not be assessed a CDSC on an involun-
tary redemption.
- --------------------------------------------------------------------------------
EXCHANGING SHARES
You may exchange fund shares at any time for the same class of shares in
another Nuveen mutual fund that is available within your state. You may
exchange fund shares by calling (800) 621-7227 or by mailing your written
request to Nuveen at the address listed under "How to Contact Nuveen."
You must have owned your fund shares for at least 15 days and your exchange
must meet the minimum purchase requirements of the fund into which you are
exchanging. No CDSC will be assessed on an exchange, and the holding period of
your investment will be carried over to the new fund for purposes of deter-
mining any future CDSC. You may not exchange Class B shares for shares of a
Nuveen money market fund.
Because an exchange is treated for tax purposes as the concurrent sale and
purchase of fund shares, you should consult your tax adviser about the tax
consequences of any contemplated exchange. Each fund reserves the right to
limit or terminate exchange privileges if it believes doing so is in the best
interests of fund shareholders.
RESTRICTIONS ON MARKET TIMING
The exchange privilege is not intended to permit you to use a fund for short-
term trading. Excessive exchange activity may interfere with portfolio manage-
ment, raise fund operating expenses or otherwise have an adverse effect on fund
shareholders. In order to limit excessive exchange activity and in other
circumstances where the funds' investment adviser believes doing so would be in
the best interests of the fund, each fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of exchanges, or
reject any exchange. You will be notified in the event this happens to the
extent required by law.
- --------------------------------------------------------------------------------
OPTIONAL FEATURES AND SERVICES
SYSTEMATIC INVESTMENT
Once you have opened an account, you may make regular investments of $50 or
more a month through automatic deductions from your bank account (see "Fund
Direct--Electronic Funds Transfer" below), or directly from your paycheck. To
invest regularly from your bank account, simply complete the appropriate
section of the account application. To invest regularly from your paycheck,
call Nuveen for a Payroll Direct Deposit Enrollment form. If you need addi-
tional copies of these forms, or would like assistance completing them, contact
your financial adviser or call Nuveen toll-free at (800) 621-7227.
One of the benefits of systematic investing is "dollar cost averaging." Because
you are making fixed payments, you buy fewer shares when the price is high, and
more when the price is low. As a result, the average price you pay will be less
than the average share price of fund shares over this period. Dollar cost aver-
aging does not assure profits or protect against losses in a steadily declining
market. Since dollar cost averaging involves continuous investment regardless
of fluctuating price levels, you should consider your financial ability to
continue investing in declining as well as rising markets before deciding to
invest in this way.
Systematic investing may also make you eligible for reduced sales charges on
shares of the fund as well as other Nuveen mutual funds (see "Other Sales
Charge Discounts").
- --------------------------------------------------------------------------------
PAGE 11
<PAGE>
SYSTEMATIC INVESTING
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
(CHART APPEARS HERE)
<TABLE>
<CAPTION>
ACCOUNT VALUES FOR TOTAL RETURNS OF
AMOUNT -----------------------------------
YEAR INVESTED 4.00% 5.00% 6.00%
---- -------- ------- ------- -------
<S> <C> <C> <C> <C>
0 $ 2,874 $ 2,874 $ 2,874 $ 2,874
5 8,622 9,861 10,203 10,561
10 14,370 18,391 19,610 20,929
15 20,118 28,807 31,681 34,913
20 25,866 41,525 47,173 53,779
</TABLE>
SYSTEMATIC WITHDRAWALS
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to
receive payments monthly, quarterly or semi-annually, and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Fund Direct--Electronic Funds Transfer" below), paid to a third party or
sent payable to you at an address other than your address of record. You must
complete the appropriate section of the account application to participate in
the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concur-
rent purchases of Class A, B or C shares because you may unnecessarily pay a
sales charge or CDSC on these purchases.
REINSTATEMENT PRIVILEGE
If you redeem fund shares on which you paid an initial sales charge or contin-
gent deferred sales charge (CDSC), you may reinvest all or part of your
redemption proceeds up to one year later without incurring any additional
charge. You may only reinvest into the same class of shares you redeemed and
will receive the share price next determined after Nuveen receives your rein-
vestment request. You may exercise this privilege only once per redemption
request.
If you paid a CDSC, your CDSC will be refunded and your holding period rein-
stated. You should consult your tax adviser about the tax consequences of
exercising your reinstatement privilege.
FUND DIRECT-ELECTRONIC FUNDS TRANSFER
You may arrange to transfer funds electronically between your bank account and
your fund account by completing the appropriate section of the account appli-
cation. If you need additional copies of this form, or would like assistance
completing it, contact your financial adviser or call Nuveen at (800) 621-
7227. You may use Fund Direct to quickly and conveniently purchase or sell
shares by telephone, systematically invest or withdraw funds, or send dividend
payments directly to your bank account.
If you have established electronic funds transfer privileges on your account,
you may request that redemption proceeds of $1,000 or more be wired directly
into your bank account. While you will generally receive your redemption
proceeds more quickly than a regular telephone redemption, the fund may charge
you a fee for this expedited service.
- --------------
PAGE 12
<PAGE>
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
HOW THE FUNDS PAY DIVIDENDS
The funds pay tax-free dividends monthly and any taxable capital gains or other
distributions once a year in December. The funds declare dividends on or about
the ninth of each month and generally pay dividends on the first business day
of the following month.
PAYMENT AND REINVESTMENT OPTIONS
The funds automatically reinvest your dividends each month in additional fund
shares unless you request otherwise. You may request to have your dividends
paid to you by check, deposited directly into your bank account, paid to a
third party, sent to an address other than your address of record or reinvested
in shares of another Nuveen mutual fund. If you wish to do so, complete the
appropriate section of the account application, contact your financial adviser
or call Nuveen at (800) 621-7227.
CALCULATION OF FUND DIVIDENDS
Each fund pays dividends based upon its past and projected net income in order
to distribute substantially all of its net income each fiscal year.
In order to maintain a more stable monthly dividend, each fund may sometimes
distribute less or more than the amount of net income earned in a particular
period as a result of fluctuations in a fund's net income. Undistributed net
income is included in the fund's share price; similarly, distributions from
previously undistributed net income reduce the fund's share price. This divi-
dend policy is not expected to affect the management of a fund's portfolio.
Dividends for Class A, B, C and R shares are determined in the same manner and
at the same time. Dividends per share will vary based on which class of fund
shares you own, reflecting the different ongoing fees and other expenses of
each class.
- --------------------------------------------------------------------------------
TAXES AND TAX REPORTING
The discussion below and the statement of additional information provides
general tax information related to an investment in fund shares. Because tax
laws are complex and often change, you should consult your tax adviser about
the tax consequences of a specific fund investment.
Each fund primarily invests in municipal bonds from a specific state or in
municipal bonds whose income is otherwise exempt from regular federal, state
and local income taxes. Consequently, the regular monthly dividends you receive
will be exempt from regular federal, state and, in some cases, local income
taxes. All or a portion of these dividends, however, may be subject to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how
long you have owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Each year, you will receive a year-end statement that describes the tax status
of dividends paid to you during the preceding year, including the source of its
investment income by state and the portion of its income that is subject to
AMT. You will receive this statement from the firm where you purchased your
fund shares if you hold your investment in street name; Nuveen will send you
this statement if you hold your shares in registered form.
The tax status of your dividends is not affected by whether you reinvest your
dividends or receive them in cash.
BUYING OR SELLING SHARES CLOSE TO A RECORD DATE
If you purchase fund shares shortly before the record date for a taxable divi-
dend, the entire dividend you receive may be taxable to you even though a
portion of the dividend effectively represents a return of your purchase price.
This is commonly known as "buying a dividend." Similarly, if you sell or
exchange fund shares shortly before the record date for a tax-exempt dividend,
a portion of the price you receive may be treated as a taxable capital gain
even though it reflects tax-free income earned but not yet distributed by the
fund.
TAX CONSEQUENCES OF PRIVATE ACTIVITY BONDS
Because each fund may invest in private activity bonds, the portion of your
regular monthly dividends derived from the income earned on these bonds that
would otherwise be tax-exempt will be treated as taxable income if:
. you are subject to the AMT (including corporate shareholders);
. you are a "substantial user" of a facility financed by these bonds; or
. you are a "related person" of a substantial user.
- --------------------------------------------------------------------------------
PAGE 13
<PAGE>
REDEEMING SHARES HELD LESS THAN SIX MONTHS
If you sell or exchange shares that you have owned for less than six months
and you recognized a short-term capital loss when you redeemed your shares,
the loss you can claim will be reduced by the amount of tax-free dividends
paid to you on those shares. Any remaining short-term capital loss will be
treated as long-term capital loss to the extent you also received capital gain
dividends on those shares. You should consult your tax adviser for complete
information about these rules. Please consider the tax consequences carefully
when contemplating a redemption.
OTHER IMPORTANT TAX INFORMATION
In order to avoid corporate taxation of its earnings and to pay tax-free divi-
dends, each fund must meet certain I.R.S. requirements that govern the fund's
sources of income, diversification of assets and distribution of earnings to
shareholders. Each fund has met these requirements in the past and intends to
do so in the future. If a fund failed to do so, the fund would be required to
pay corporate taxes on its earnings and all your distributions would be
taxable as ordinary income.
A fund may be required to withhold 31% of certain of your dividends if you
have not provided the fund with your correct taxpayer identification number
(normally your social security number), or if you are otherwise subject to
back-up withholding.
If you receive social security benefits, you should be aware that tax-free
income is taken into account in calculating the amount of these benefits that
may be subject to federal income tax.
If you borrow money to buy fund shares, you may not deduct the interest on
that loan. Under I.R.S. rules, fund shares may be treated as having been
bought with borrowed money even if the purchase cannot be traced directly to
borrowed money.
- -------------------------------------------------------------------------------
TAXABLE EQUIVALENT YIELDS
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like
the funds with taxable alternative investments, the table below presents the
taxable equivalent yields for a range of hypothetical tax-free yields and tax
rates:
- -------------------------------------------------------------------------------
TAXABLE EQUIVALENT OF TAX-FREE YIELDS
<TABLE>
<CAPTION>
TAX-FREE YIELD
TAX RATE 4.00% 4.50% 5.00% 5.50% 6.00%
-------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
statement of additional information or consult your tax adviser.
- -------------------------------------------------------------------------------
PAGE 14
<PAGE>
GENERAL INFORMATION
- -------------------------------------------------------------------------------
HOW TO CONTACT NUVEEN
GENERAL INFORMATION
If you would like general information about Nuveen Mutual Funds or any other
Nuveen product, call (800) 621-7227 between 7:30 a.m. and 7:00 p.m. Central
time.
PURCHASES, REDEMPTIONS AND OTHER TRANSACTIONS
If you are calling to purchase or redeem shares, request an exchange or
conduct other account transactions, call (800) 621-7227 between 7:30 a.m. and
7:00 p.m. Central time. If you are sending a written request to Nuveen, you
should mail your request to the following address:
Nuveen Mutual Funds
c/o Shareholder Services Inc.
P.O. Box 5330
Denver, CO 80217-5330
When purchasing fund shares by mail, please be sure to include a check made
out to the name of the Fund and mark clearly on your check which class of
shares you are purchasing. If you do not specify which class of shares you are
purchasing, Nuveen will assume you are buying Class A shares if you are
opening a new account; if you are adding to an existing account, Nuveen will
assume you wish to buy more shares of the class you already own.
- -------------------------------------------------------------------------------
FUND SERVICE PROVIDERS
INVESTMENT ADVISER
Nuveen Advisory Corp. ("Nuveen Advisory") serves as the investment adviser to
the funds and in this capacity is responsible for the selection and on-going
monitoring of the municipal bonds in each fund's investment portfolio. Nuveen
Advisory serves as investment adviser to investment portfolios with more than
$35 billion in municipal assets under management. The activities of Nuveen
Advisory, which also include managing the funds' business affairs and
providing certain clerical, bookkeeping and other administrative services, are
overseen by the funds' Board of Trustees. Established in 1976, Nuveen Advisory
is a wholly-owned subsidiary of John Nuveen & Co. Incorporated, which itself
is approximately 78% owned by the St. Paul Companies, Inc. Effective January
1, 1997, The John Nuveen Company acquired Flagship Resources, Inc., and as
part of that acquisition, Flagship Financial, the adviser to the Flagship
Funds, was merged with Nuveen Advisory.
For providing these services, Nuveen Advisory is paid an annual management fee
according to the following schedule:
- -------------------------------------------------------------------------------
MANAGEMENT FEES
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET
VALUE MANAGEMENT FEE
- ------------------------------------------
<S> <C>
For the first $125 million 0.5500%
For the next $125 million 0.5375%
For the next $250 million 0.5250%
For the next $500 million 0.5125%
For the next $1 billion 0.5000%
For assets over $2 billion 0.4750%
</TABLE>
Nuveen will waive some or all of its fees or reimburse expenses so that the
total operating expenses (not counting distribution and service fees) for the
Florida Fund (through July 31, 1997) do not exceed 0.75% of average daily net
assets. For more information about fees and expenses, see the fund operating
expense tables in the Fund Summaries.
PORTFOLIO MANAGERS
Overall investment management strategy and operating policies for the funds
are set by the Investment Policy Committee of Nuveen Advisory. The Investment
Policy Committee is comprised of the principal executive officers and port-
folio managers of Nuveen Advisory and meets regularly to review economic
conditions, the outlook for the financial markets in general and the status of
the municipal markets in particular. Day-to-day operation of each fund and the
execution of its specific investment strategies is the responsibility of the
designated portfolio manager described below.
Michael S. Davern is the portfolio manager for the Florida Fund. Mr. Davern
has managed the Florida Fund since 1995, and since 1991 had been a Vice Presi-
dent of Flagship Financial Inc., the funds' prior investment adviser, until
becoming an employee of Nuveen Advisory upon the acquisition of Flagship
Resources by The John Nuveen Company in January 1997. Paul Brennan has managed
the Florida Intermediate Fund either jointly or on his own since 1995, and
since 1991 had been an employee of Flagship Financial Inc. until becoming an
employee of Nuveen Advisory in January 1997.
THE DISTRIBUTOR
John Nuveen and Co. Incorporated serves as the selling agent and distributor
of the funds' shares. In this capacity, Nuveen manages the offering of the
funds' shares and is responsible for all sales and promotional activities. In
order to reimburse Nuveen for its costs in connection with these activities,
including compensation paid to authorized dealers, each fund has adopted a
distribution and service plan under Rule 12b-1 of the Investment Company Act
of 1940.
- -------------------------------------------------------------------------------
PAGE 15
<PAGE>
The plan authorizes each fund to pay Nuveen an annual 0.20% service fee on the
average daily net assets of Class A, B and C shares outstanding and annual
distribution fees of 0.75% and 0.55%, respectively, on the average daily net
assets of Class B and C shares outstanding. In order to help compensate Nuveen
for the sales commission paid to financial advisers at the time of sale on
sales of Class B and Class C shares, Nuveen retains the first year's service
fee on sales of Class B shares and all Class B distribution fees; and retains
the first year's service and distribution fees on sales of Class C shares.
Otherwise, Nuveen pays these fees to the broker of record. The statement of
additional information contains a detailed description of the plan and its
provisions.
TRANSFER AGENT
Each fund has appointed a transfer agent which is responsible for distributing
dividend payments and providing certain bookkeeping, data processing and other
administrative services in connection with the maintenance of shareholder
accounts. Boston Financial, P.O. Box 8509, Boston, MA 02266-8509, currently
serves as transfer agent for each fund.
- -------------------------------------------------------------------------------
HOW THE FUNDS REPORT
PERFORMANCE
Each fund may quote its yield and total return in reports to shareholders,
sales literature and advertisements. The funds may also compare their invest-
ment results to various passive indices or other mutual funds with similar
investment objectives. Comparative performance information may include data
from Lipper Analytical Services, Inc., Morningstar, Inc. and other industry
publications. See the statement of additional information for a more detailed
discussion.
- -------------------------------------------------------------------------------
HOW FUND SHARES ARE PRICED
The share price for each class of fund shares, also called its net asset value
(NAV), is calculated every business day as of the close of regular trading on
the New York Stock Exchange (normally 4 p.m. Eastern time). The net asset
value for a class of fund shares is computed by calculating the total value of
the class' portion of the fund's portfolio investments and other assets,
subtracting any liabilities or other debts, and dividing by the total number
of its shares
outstanding.
The prices of municipal bonds in each fund's investment portfolio are provided
by a pricing service approved and supervised by the fund's Board of Trustees.
When price quotes are not readily available (which is usually the case for
municipal securities), the pricing service establishes fair market value based
on yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating, indications of value from securities dealers and
general market conditions. When price quotes are readily available for a
municipal bond, the price used is the average of the quoted bid and asked
prices (or their yield equivalent).
- -------------------------------------------------------------------------------
ORGANIZATION
The Trust is an open-end diversified investment company under the Investment
Company Act of 1940, consisting of two or more funds. The shares of each fund
are divided into classes. Each class of shares represents an interest in the
same portfolio of investments and the shares of each class have equal rights
as to voting, redemption, dividends and liquidation. However, each class bears
different sales charges and service fees. B shares convert to A shares after 8
years. C shares purchased before February 1, 1997 convert to A share six years
after purchase, but only if you request conversion. You must submit your
request to SSI no later than the last business day of the 71st month following
the month in which you purchased your shares.
The funds are not required to and do not intend to hold annual meetings.
Shareholders owning ten percent or more of a fund's outstanding shares may
call a special meeting for any purpose, including to elect or remove trustees
or to change fundamental policies.
The Florida Fund was formed as a result of a merger between existing Nuveen
and Flagship funds. The performance and the financial information of the fund
reflects that of the predecessor Flagship fund.
- -------------------------------------------------------------------------------
PAGE 16
<PAGE>
APPENDIX
- -------------------------------------------------------------------------------
SPECIAL STATE CONSIDERATIONS
Because the funds primarily purchase municipal bonds from a specific state,
each fund also bears investment risk from economic, political or regulatory
changes that could adversely affect municipal bond issuers in that state and
therefore the value of the fund's investment portfolio. The following discus-
sion of special state considerations was obtained from official offering
statements of these issuers and has not been independently verified by the
funds. The discussion includes general state tax information related to an
investment in fund shares. Because tax laws are complex and often change, you
should consult your tax adviser about the state tax consequences of a specific
fund investment. See the statement of additional information for further
information.
FLORIDA
Florida's trade and service sectors have driven the State's economic growth in
recent years and account for half of non-agricultural employment. In general,
the State's economy tracked the national economy through the recent recession
and subsequent recovery. Florida historically enjoys a strong job growth rate,
but it slowed to a projected 3.3% in 1995-6. The crucial tourism sector did
not expand in 1995 in part due to crime concerns, product maturity, higher
prices and competition from other resort areas. In the past, the State's
economy depended heavily on construction activity and the sector remains
important despite decreased dependence on it for overall growth.
Florida's unemployment rate of 5.4% stood slightly above the national average
of 5.1% in August 1996. Per capita income rose 5.8% in 1995 to reach $22,916.
Florida voters approved a Constitutional amendment in 1995 which limits the
rate of growth of state revenues to the growth rate of personal income in the
State. The State's 1995 general fund revenues were $13.89 billion against
expenditures of $11.87 billion. The State estimates that 1966 revenues will
rise by 2.7% and expenditures 3.5% over 1995 levels. As of February 9, 1996,
Moody's gives the State's general obligation debt an Aa rating while S&P gives
it an AA rating.
Tax treatment.
Shares of the Florida funds will not be subject to the Florida intangible
personal property tax if on January 1 of the taxable year, the Florida funds
holds only Florida municipal bonds and U.S. securities. Your shares will be
subject to the Florida intangible personal property tax, however, to the
extent that the Florida funds hold other taxable securities on that date. The
portion of the value of your shares which is attributable to the Florida
funds' investments in U.S. securities will not be subject to the tax.
Corporate shareholders of the Florida Fund also may be subject to the Florida
corporate income tax. Corporate shareholders should refer to the statement of
additional information for more detailed information.
- -------------------------------------------------------------------------------
PAGE 17
<PAGE>
Nuveen Family of Mutual Funds
Nuveen's family of funds is designed to help you reach your finan-
cial goals. The funds below are grouped by investment objectives.
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME FUNDS
National Funds/1/
State Funds
Alabama Michigan
Arizona Missouri
California/2/ New Jersey/3/
Colorado New Mexico
Connecticut New York/2/
Florida/3/ North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky/4/ South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts/2/ Wisconsin
Notes
1. Long-term, long-term insured, intermediate-term and limited-term
portfolios.
2. Long-term and long-term insured portfolios.
3. Long-term and intermediate-term portfolios.
4. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
- --------------------------------------------------------------------------------
OVERVIEW
The funds listed above are part of the Nuveen Flagship Multistate Trust I, an
open-end investment company. Each fund seeks to provide high double or triple
tax-free income and preservation of capital through investments in diversified
portfolios of quality municipal bonds whose income is exempt from regular
federal, state and, in some cases, local income taxes.
Each fund offers a set of flexible purchase options which permit you to
purchase fund shares in the way that is best suited to your individual circum-
stances and investment needs. For detailed information about these flexible
purchase options, please refer to "How to Select a Purchase Option" later in
this prospectus.
This prospectus contains important information you should know before invest-
ing. Please read it carefully and keep it for future reference. You can find
more detailed information about each fund in the statement of additional infor-
mation which is part of this prospectus by reference. For a free copy, write to
Nuveen or call (800) 621-7227.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER U.S. GOVERNMENT AGENCY. SHARES OF THE FUNDS
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<S> <C>
OVERVIEW 1
FUND SUMMARIES AND FINANCIAL HIGHLIGHTS 2
FUND STRATEGIES
Investment Objective 8
How the Funds Select Investments 8
Risk Reduction Strategies 9
INVESTING IN THE FUNDS
How to Buy Fund Shares 10
How to Select a Purchase Option 10
How to Sell Fund Shares 11
Exchanging Shares 12
Optional Features and Services 13
DIVIDENDS AND TAXES
How the Funds Pay Dividends 14
Taxes and Tax Reporting 14
Taxable Equivalent Yields 15
GENERAL INFORMATION
How to Contact Nuveen 16
Fund Service Providers 16
How the Funds Report Performance 17
How Fund Shares are Priced 17
Organization 17
APPENDIX
Special State Considerations 18
</TABLE>
FEBRUARY 1, 1997
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship Arizona Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: October 29, 1986
NET ASSETS: $83.5 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 0.53% 4.94% 4.37% 4.38% 4.94%
5 YEARS 7.36% 8.29% 7.70% 7.91% 8.29%
10 YEARS 7.29% 7.75% 7.28% 7.26% 7.75%
INCEPTION 7.47% 7.93% 7.46% 7.44% 7.93%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C total
returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class A performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B and R total returns reflect Class A performance for all
periods, adjusted for the differences in sales charges (and for Class B, fees)
between the classes. See Overview of Fund Operating Expenses and Shareholder
Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE:]
Average Maturity 15.0
Average Modified Duration 8.2
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE:]
AAA (74%)
AA (4%)
A (12%)
BBB (8%)
NR (2%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE:]
Non-State General Obligations (31%)
Pre-refunded (16%)
Escrowed to Maturity (12%)
Hospitals (8%)
Special Tax Revenue (8%)
Other (25%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS -- (1) 5%(2) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12b-1 FEES 0.20% 0.95% 0.75% --
OTHER EXPENSES 0.17% 0.17% 0.17% 0.17%
- ---------------------------------------------------------------------------------------
TOTAL EXPENSES (GROSS) 0.92% 1.67% 1.47% 0.72%
WAIVERS/
REIMBURSEMENTS (0.04%) (0.04%) (0.04%) (0.04%)
- ---------------------------------------------------------------------------------------
TOTAL EXPENSES (NET) 0.88% 1.63% 1.43% 0.68%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 51 $ 56 $ 15 $ 7
3 YEARS $ 69 $ 83 $ 45 $22
5 YEARS $ 89 $100 $ 78 $38
10 YEARS $146 $173 $171 $85
</TABLE>
- -------------- Information as of 11/30/96 See Notes on Next Page
PAGE 2
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Deloitte & Touche LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
------------- ------------------------------------------------------------------
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
May 31, Value Income(c) Investments(a) Income Gains Value
------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
(10/86)
1997(e) $10.73 $.28 $.40 $(.28) $ -- $11.13
- -------------------------------------------------------------------------------------
1996 10.85 .57 (.12) (.57) -- 10.73
- -------------------------------------------------------------------------------------
1995 10.43 .58 .42 (.58) -- 10.85
- -------------------------------------------------------------------------------------
1994 10.81 .60 (.38) (.60) -- 10.43
- -------------------------------------------------------------------------------------
1993 10.13 .63 .69 (.64) -- 10.81
- -------------------------------------------------------------------------------------
1992 9.81 .65 .32 (.65) -- 10.13
- -------------------------------------------------------------------------------------
1991 9.60 .64 .21 (.64) -- 9.81
- -------------------------------------------------------------------------------------
1990 9.72 .64 (.12) (.64) -- 9.60
- -------------------------------------------------------------------------------------
1989 9.12 .64 .60 (.64) -- 9.72
- -------------------------------------------------------------------------------------
1988 9.12 .64 -- (.64) -- 9.12
- -------------------------------------------------------------------------------------
1987(d) 9.58 .35 (.47) (.34) -- 9.12
- -------------------------------------------------------------------------------------
CLASS C
(2/94)
1997(e) 10.73 .25 .40 (.25) -- 11.13
- -------------------------------------------------------------------------------------
1996 10.84 .51 (.11) (.51) -- 10.73
- -------------------------------------------------------------------------------------
1995 10.43 .52 .41 (.52) -- 10.84
- -------------------------------------------------------------------------------------
1994(d) 11.22 .14 (.79) (.14) -- 10.43
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------ --------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
May 31, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ------------------ --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A
(10/86)
1997(e) 12.78%+ $81.1 .83%+ 5.11%+ 19%
- -------------------------------------------------------------------------------------
1996 4.21 80.1 .69 5.20 38
- -------------------------------------------------------------------------------------
1995 10.03 80.4 .82 5.59 27
- -------------------------------------------------------------------------------------
1994 1.92 82.7 .64 5.48 21
- -------------------------------------------------------------------------------------
1993 13.37 72.8 .44 6.03 20
- -------------------------------------------------------------------------------------
1992 10.25 51.1 .44 6.55 34
- -------------------------------------------------------------------------------------
1991 9.19 38.9 .78 6.62 18
- -------------------------------------------------------------------------------------
1990 5.53 32.1 .85 6.63 37
- -------------------------------------------------------------------------------------
1989 14.04 29.4 .92 6.85 37
- -------------------------------------------------------------------------------------
1988 7.45 33.7 .86 6.96 68
- -------------------------------------------------------------------------------------
1987(d) (2.67) 31.7 .84+ 6.17+ 40
- -------------------------------------------------------------------------------------
CLASS C
(2/94)
1997(e) 12.23+ 2.5 1.38+ 4.55+ 19
- -------------------------------------------------------------------------------------
1996 3.75 2.0 1.23 4.64 38
- -------------------------------------------------------------------------------------
1995 9.32 1.6 1.36 5.01 27
- -------------------------------------------------------------------------------------
1994(d) (16.61) 1.1 1.20+ 4.36+ 21
- -------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Flagship Financial, predecessor to Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the six months ending November 30, 1996.
- --------------------------------------------------------------------------------
NOTES:
(1) The sales charge may be reduced or waived based on the amount of purchase
or for certain eligible categories of investors. A CDSC of 1% is imposed
on redemptions of certain purchases of $1 million or more within 18 months
of purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the fund eliminated the 0.20% distribution fee
on Class A shares and reduced the distribution fee on Class C shares from
0.75% to 0.55%. These lower expenses are reflected in the table and are
expected to reduce total operating expenses on Class A from 1.08% to 0.88%
and on Class C from 1.63% to 1.43%, as reflected in the table. Long-term
holders of Class B and C shares may pay more in distribution fees and
CDSCs than the maximum initial sales charge permitted under National
Association of Securities Dealers (NASD) Rules of Fair Practice. The
waiver/reimbursement levels shown reflect Nuveen's current undertaking, made
in connection with its acquisi-tion of Flagship Resources as described in
"Fund Service Providers - Invest-ment Adviser," to continue Flagship's
dividend-setting practices. Nuveen also has voluntarily agreed through July
31, 1997 to waive fees or reimburse expenses so that the total operating
expenses (not counting distribution and service fees) for the fund do not
exceed 0.75% of average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This
example does not represent past or future expenses; actual expenses may be
higher or lower.
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship Colorado Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: May 4, 1987
NET ASSETS: $32.7 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 1.77% 6.24% 5.66% 5.87% 6.24%
5 YEARS 7.13% 8.06% 6.80% 7.68% 8.06%
INCEPTION 6.88% 7.36% 6.87% 6.99% 7.36%
</TABLE>
Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect Class A performance for all periods, adjusted for
the differences in sales charges (and for Class B and C, fees) between the
classes. See Overview of Fund Operating Expenses and Shareholder Transaction
Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BARCHART APPEARS HERE:]
Average Maturity 17.1
Average Modified 9.9
Duration
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE:]
AAA (59%)
AA (7%)
A (15%)
BBB (10%)
NR (9%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE:
Escrowed to
Maturity (31%)
Pre-refunded (12%)
Municipal Revenue/
Transportation (11%)
Special Tax
Revenue (9%)
Non-State General
Obligations (8%)
Other (29%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS -- (1) 5%(2 ) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES(4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER EXPENSES 0.28% 0.28% 0.28% 0.28%
- ---------------------------------------------------------------------------------------
TOTAL EXPENSES (GROSS) 1.03% 1.78% 1.58% 0.83%
WAIVERS/
REIMBURSEMENTS (0.45%) (0.45%) (0.45%) (0.45%)
- ---------------------------------------------------------------------------------------
TOTAL EXPENSES (NET) 0.58% 1.33% 1.13% 0.38%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES(5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 48 $ 53 $ 12 $ 4
3 YEARS $ 60 $ 74 $ 36 $12
5 YEARS $ 73 $ 85 $ 62 $21
10 YEARS $112 $140 $137 $48
</TABLE>
- -------------- Information as of 11/30/96 See Notes on Next Page
PAGE 4
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Deloitte & Touche LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
- -------------------------------------------------------------------------------------
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
May 31, Value Income(c) Investments(a) Income Gains Value
---------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (5/87)
1997(d) $ 9.79 $.26 $ .45 $(.26) $ -- $10.24
- -------------------------------------------------------------------------------------
1996 9.93 .54 (.13) (.55) -- 9.79
- -------------------------------------------------------------------------------------
1995 9.62 .57 .30 (.56) -- 9.93
- -------------------------------------------------------------------------------------
1994 10.04 .58 (.37) (.58) (.05) 9.62
- -------------------------------------------------------------------------------------
1993 9.56 .60 .55 (.60) (.07) 10.04
- -------------------------------------------------------------------------------------
1992 9.29 .61 .27 (.61) -- 9.56
- -------------------------------------------------------------------------------------
1991 9.13 .60 .17 (.61) -- 9.29
- -------------------------------------------------------------------------------------
1990 9.24 .62 (.12) (.61) -- 9.13
- -------------------------------------------------------------------------------------
1989 8.78 .63 .46 (.63) -- 9.24
- -------------------------------------------------------------------------------------
1988 9.27 .62 (.46) (.65) -- 8.78
- -------------------------------------------------------------------------------------
1987(e) 9.58 .10 (.41) -- -- 9.27
- -------------------------------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
May 31, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ------------------ ---------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (5/87)
1997(d) 14.73%+ $32.7 .70%+ 5.30%+ 12%
- -------------------------------------------------------------------------------------
1996 4.14 33.6 .55 5.41 70
- -------------------------------------------------------------------------------------
1995 9.54 34.9 .50 5.99 38
- -------------------------------------------------------------------------------------
1994 2.03 35.8 .37 5.71 42
- -------------------------------------------------------------------------------------
1993 12.41 26.7 .41 6.05 30
- -------------------------------------------------------------------------------------
1992 9.80 15.7 .49 6.42 39
- -------------------------------------------------------------------------------------
1991 8.75 9.1 .84 6.62 29
- -------------------------------------------------------------------------------------
1990 5.59 7.4 .87 6.70 16
- -------------------------------------------------------------------------------------
1989 12.83 7.5 .67 7.04 19
- -------------------------------------------------------------------------------------
1988 2.13 7.6 .55 7.03 138
- -------------------------------------------------------------------------------------
1987(e) (43.74) 1.6 .03+ 13.96+ 114
- -------------------------------------------------------------------------------------
</TABLE>
+Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Flagship Financial, predecessor to Nuveen Advisory.
(d) For the six months ending November 30, 1996.
(e) From commencement of class operations as noted.
- --------------------------------------------------------------------------------
NOTES:
(1) The sales charge may be reduced or waived based on the amount of purchase
or for certain eligible categories of investors. A CDSC of 1% is imposed on
redemptions of certain purchases of $1 million or more within 18 months of
purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the fund eliminated the 0.20% distribution fee
on Class A shares and reduced the distribution fee on Class C shares from
0.75% to 0.55%. These lower expenses are reflected in the table and are
expected to reduce total operating expenses on Class A from 0.78% to 0.58%
and on Class C from 1.33% to 1.13%, as reflected in the table. Long-term
holders of Class B and C shares may pay more in distribution fees and CDSCs
than the maximum initial sales charge permitted under National Association
of Securities Dealers (NASD) Rules of Fair Practice. The
waiver/reimbursement levels shown reflect Nuveen's current undertaking,
made in connection with its acquisition of Flagship Resources as described
in "Fund Service Providers--Investment Adviser," to continue Flagship's
dividend-setting practices. Nuveen also has voluntarily agreed through July
31, 1997 to waive fees or reimburse expenses so that the total operating
expenses (not counting distribution and service fees) for the fund do not
exceed 0.75% of average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
- --------------------------------------------------------------------------------
PAGE 5
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship New Mexico Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: September 16, 1992
NET ASSETS: $52.0 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 1.33% 5.77% 5.19% 5.40% 5.77%
INCEPTION 5.97% 7.05% 6.46% 6.68% 7.05%
</TABLE>
Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect Class A performance for all periods, adjusted for
the differences in sales charges (and for Class B and C, fees) between the
classes. See Overview of Fund Operating Expenses and Shareholder Transaction
Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHARTS APPEARS HERE:
Average Maturity 20.0
Average Modified Duration 8.9]
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE:
AAA (50%)
AA (15%)
A (17%)
BBB (17%)
NR (1%)]
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
[PIE CHART APPEARS HERE:
Housing/Single Family (8%)
Special Tax Revenue (29%)
Other (29%)
Municipal Revenue/Utility (13%)
Student Loan Revenue Bonds (10%)
Education (11%)]
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
TRANSACTION EXPENSE CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS -- (1) 5%(2) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (3)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12b-1 FEES 0.20% 0.95% 0.75% --
OTHER EXPENSES 0.24% 0.24% 0.24% 0.24%
- --------------------------------------------------------------------------------------
TOTAL EXPENSE (GROSS) 0.99% 1.74% 1.54% 0.79%
WAIVERS/
REIMBURSEMENTS (0.10%) (0.10%) (0.10%) (0.10%)
- --------------------------------------------------------------------------------------
TOTAL EXPENSES (NET) 0.89% 1.64% 1.44% 0.69%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (4)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 51 $ 56 $ 15 $ 7
3 YEARS $ 69 $ 84 $ 46 $22
5 YEARS $ 89 $101 $ 79 $38
10 YEARS $147 $174 $172 $86
</TABLE>
- -------------- Information as of 11/30/96 See Notes on Next Page
PAGE 6
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Deloitte & Touche LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
- ----------------- ------------------------------------------------------------------
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
May 31, Value Income(c) Investments(a) Income Gains Value
- ---------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (9/92)
1997(e) $ 9.81 $.25 $ .43 $(.25) $-- $10.24
- ------------------------------------------------------------------------------------
1996 10.01 .51 (.19) (.52) -- 9.81
- ------------------------------------------------------------------------------------
1995 9.68 .52 .33 (.52) -- 10.01
- ------------------------------------------------------------------------------------
1994 10.04 .53 (.33) (.53) (.03) 9.68
- ------------------------------------------------------------------------------------
1993(d) 9.58 .37 .46 (.37) -- 10.04
- ------------------------------------------------------------------------------------
- ----------------- -----------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Ratio of Net
Expenses Investment
to Income to
Ending Average Average Portfolio
Year Ending Total Net Assets Net Net Turnover
May 31, Return(b) (millions) Assets(c) Assets(c) Rate
- ----------------- --------- ---------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
CLASS A (9/92)
1997(e) 14.08%+ $52.0 .77%+ 5.09%+ 20%
- --------------------------------------------------------------------------------
1996 3.18 51.2 .68 5.10 57
- --------------------------------------------------------------------------------
1995 9.25 52.2 .67 5.48 38
- --------------------------------------------------------------------------------
1994 1.92 51.2 .40 5.24 39
- --------------------------------------------------------------------------------
1993(d) 11.72 31.5 .14+ 5.28+ 36
- --------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Flagship Financial, predecessor to Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the six months ending November 30, 1996.
- --------------------------------------------------------------------------------
NOTES:
(1) The sales charge may be reduced or waived based on the amount of purchase
or for certain eligible categories of investors. A CDSC of 1% is imposed on
redemptions of certain purchases of $1 million or more within 18 months of
purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the fund eliminated the 0.20% distribution fee
on Class A shares and reduced the distribution fee on Class C shares from
0.75% to 0.55%. These lower expenses are reflected in the table and are
expected to reduce total operating expenses on Class A from 1.09% to 0.89%
and on Class C from 1.64% to 1.44%, as reflected in the table. Long-term
holders of Class C shares may pay more in distribution fees and CDSCs than
the maximum initial sales charge permitted under National Association of
Securities Dealers (NASD) Rules of Fair Practice. The waiver/reimbursement
levels shown reflect Nuveen's current undertaking, made in connection with
its acquisition of Flagship Resources as described in "Fund Service
Providers--Investment Adviser," to continue Flagship's dividend-setting
practices. Nuveen also has voluntarily agreed through July 31, 1997 to waive
fees or reimburse expenses so that the total operating expenses (not
counting distribution and service fees) for the fund do not exceed 0.75% of
average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
--------------
PAGE 7
<PAGE>
FUND STRATEGIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of each fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital. There is no
assurance that the funds will achieve their investment objective.
INVESTOR SUITABILITY
The funds are a suitable investment for tax-conscious investors seeking to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or college
funding.
The funds are not a suitable investment for individuals seeking to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401k plan;
. Avoid fluctuations in share price.
- --------------------------------------------------------------------------------
HOW THE FUNDS SELECT
INVESTMENTS
TAX-FREE MUNICIPAL BONDS
The funds invest primarily in municipal bonds from a specific state that pay
interest that is exempt from regular federal, state and, in some cases, local
income taxes. Income from these bonds, however, may be subject to the federal
alternative minimum tax.
Municipal bonds are either general obligation or revenue bonds and typically
are issued to finance public projects (such as roads or public buildings), to
pay general operating expenses, or to refinance outstanding debt. Municipal
bonds may also be issued for private activities, such as housing, medical and
educational facility construction, or for privately owned industrial develop-
ment and pollution control projects. General obligation bonds are backed by the
full faith and credit, or taxing authority, of the issuer and may be repaid
from any revenue source; revenue bonds may be repaid only from the revenues of
a specific facility or source.
FOCUS ON QUALITY MUNICIPAL BONDS
The funds focus on quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent ratings agencies at the time of
purchase or are non-rated but judged to be investment grade by the funds'
investment adviser. If suitable municipal bonds from a specific state are not
available at attractive prices and yields, a fund may invest in municipal bonds
of U.S. territories (such as Puerto Rico and Guam) which are exempt from
regular federal, state, and local income taxes. The Arizona Fund may not invest
more than 20% of its net assets in these territorial municipal bonds.
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the funds will only purchase leases where the issuer has a strong
incentive to continue making appropriations until maturity.
Bond ratings are furnished by Standard & Poor's Corporation, Fitch Investors
Services, and Moody's Investors Services. The ratings BBB and Baa are not iden-
tical--S&P and Fitch consider bonds rated BBB to have adequate capacity to pay
principal and interest; Moody's considers bonds rated Baa to have some specula-
tive characteristics. Bond ratings represent the opinions of the ratings agen-
cies; they are not absolute standards of quality.
VALUE INVESTING STRATEGY
The funds' investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer above-average total
return potential. The adviser emphasizes fundamental research and selects
municipal bonds on the basis of its evaluation of each bond's relative value in
terms of current yield, price, credit quality and future prospects. The adviser
then monitors each fund's portfolio to assure that municipal bonds purchased
continue to represent over time, in its opinion, the best values available.
PORTFOLIO MATURITY
Each fund purchases municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an invest-
ment portfolio with an overall weighted average maturity within a defined
range. All of the funds described in this prospectus are long-term funds and
normally maintain a weighted average portfolio maturity of 15 to 30 years. See
"Defensive Investment Strategies" below for further information.
- --------------------------------------------------------------------------------
PAGE 8
<PAGE>
PORTFOLIO TURNOVER
A fund buys and sells portfolio securities in the normal course of its invest-
ment activities. The proportion of the fund's investment portfolio that is sold
and replaced with new securities during a year is known as the fund's portfolio
turnover rate. The funds intend to keep portfolio turnover relatively low in
order to reduce trading costs and the realization of taxable capital gains.
Each fund, however, may make limited short-term trades to take advantage of
market opportunities and reduce market risk.
DELAYED DELIVERY TRANSACTIONS
Each fund may buy or sell bonds on a when-issued or delayed delivery basis,
making payment or taking delivery at a later date, normally within 15 to 45
days of the trade date. This type of transaction may involve an element of risk
because no interest accrues on the bonds prior to settlement and, since securi-
ties are subject to market fluctuation, the value of the bonds at time of
delivery may be less (or more) than cost.
- --------------------------------------------------------------------------------
RISK REDUCTION STRATEGIES
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. Interest rate risk is the
risk that changes in market interest rates will affect the value of a fund's
investment portfolio. In general, the value of a municipal bond falls when
interest rates rise, and increases when interest rates fall. Credit risk is the
risk that an issuer of a municipal bond is unable to meet its obligation to
make interest and principal payments. In general, lower rated municipal bonds
are perceived to carry a greater degree of risk in the issuer's ability to make
interest and principal payments. Municipal bonds with longer maturities (dura-
tions) or lower ratings generally provide higher current income, but are
subject to greater price fluctuation due to changes in market conditions than
bonds with shorter maturities or higher ratings,
respectively.
Because the funds primarily purchase municipal bonds from a specific state,
each fund also bears investment risk from economic, political or regulatory
changes that could adversely affect municipal bond issuers in that state and
therefore the value of the fund's investment portfolio. As non-diversified
funds, the Colorado and New Mexico Funds generally are subject to greater share
price fluctuations due to these changes than the Arizona Fund, which is a
diversified fund.
The funds limit your investment risk generally by restricting the types and
maturities of municipal bonds they purchase, and by diversifying their invest-
ment portfolios across different industry sectors. The funds should be consid-
ered long-term investments and may not be suitable for investors with short-
term investment horizons.
INVESTMENT LIMITATIONS
The funds have adopted certain investment limitations (based on total fund
assets) designed to limit your investment risk and maintain portfolio diversi-
fication. Each fund may not have more than:
. 25% in any one industry sector, such as electric utilities or health care;
. 10% in borrowings (33% if used to meet redemptions).
As a diversified fund, the Arizona Fund also may not have more than:
. 5% in securities of any one issuer (except U.S. government securities or for
25% of the fund's assets).
DEFENSIVE INVESTMENT STRATEGIES
Each fund may invest in high quality short-term municipal securities in order
to reduce risk and preserve capital. Under normal market conditions, each fund
may invest only up to 20% of net assets in short-term municipal securities that
are exempt from regular federal income tax, although the funds may invest up to
100% as a temporary defensive measure in response to adverse market conditions.
During temporary defensive periods, the weighted average maturity of a fund's
investment portfolio may fall below the defined range described above under
"Portfolio Maturity."
If suitable short-term municipal investments are not reasonably available, the
funds may invest in short-term taxable securities that are rated Aaa or AAA, by
Moody's or S&P, respectively, or issued by the U.S. government, and that have a
maturity of one year or less or have a variable interest rate.
Each fund may also use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have
no present intent to use these strategies.
FUNDAMENTAL INVESTMENT POLICIES
Each fund's investment objective as well as the policies described above in
"Focus on Quality Municipal Bonds" and "Risk Reduction Strategies" are funda-
mental and may not be changed without the approval of a majority of the share-
holders of each fund.
- --------------------------------------------------------------------------------
PAGE 9
<PAGE>
INVESTING IN THE FUNDS
- -------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
You may open an account with $3,000 and make additional investments at any
time with as little as $50. Reinvestment of Nuveen unit trust distributions
have no purchase minimums. The share price you pay will depend on when Nuveen
receives your order: orders received before the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) will receive
that day's share price; otherwise you will receive the next business day's
share price.
BUYING SHARES THROUGH A FINANCIAL ADVISER
You may buy fund shares through your financial adviser, who can handle all the
details for you, including establishing an account with Nuveen. Financial
advisers can also help you review your financial needs and formulate long-term
investment goals and objectives. In addition, financial advisers generally can
help you develop a customized financial plan, select investments, and monitor
and review your portfolio on an ongoing basis to assure your investments
continue to meet your needs as circumstances change.
Financial advisers are usually paid either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge for ongoing invest-
ment advice and services.
If you do not have a financial adviser, call (800) 621-7227 and Nuveen can
refer you to one in your area.
BUYING SHARES BY MAIL
You may also open an account and purchase shares by mail by completing the
enclosed Nuveen application and mailing it along with your check (payable to
the appropriate fund) to the address listed under "How to Contact Nuveen."
Sales charges are not waived when you buy shares by mail.
Each fund reserves the right to reject any purchase order and waive or
increase minimum investment requirements. The funds also reserve the right to
suspend the issuance of shares at any time; any suspension, however, will not
affect your ability to redeem shares.
- -------------------------------------------------------------------------------
HOW TO SELECT A
PURCHASE OPTION
The funds offer you a variety of flexible options when buying shares. Whether
you typically work with a financial adviser on a commission or a fee basis or
prefer to work on a more self-directed basis, you can purchase shares in the
way that is most suited to your individual circumstances and investment needs.
Each of the four available ways to purchase fund shares is called a class of
shares: Class A, Class B, Class C and Class R. While each of these classes
features different sales charges, on-going fees and eligibility requirements,
each entitles you to a share of the same portfolio of municipal bonds.
Selecting the class of shares which is most appropriate for you will depend on
a variety of factors. You should weigh carefully whether you and your finan-
cial adviser work on a commission or fee basis, the types of services that you
will receive, the amount you intend to buy, how long you plan to own your
investment and whether or not you will reinvest dividends. If you compensate
your financial adviser directly, you should consider the fees your financial
adviser charges for investment advice or handling your trades in addition to
any sales charges and fees imposed by the funds. Please refer to your finan-
cial adviser's sales material for further information. Each class of shares is
described in more detail below and under "Fund Service Providers--The Distrib-
utor." Your financial adviser can explain each option and help you determine
which is most appropriate for you, or you can call (800) 621-7227.
BUYING CLASS A SHARES
You may buy Class A shares at their public offering price on the day of
purchase. The price you pay will equal the Class A NAV (net asset value) plus
a sales charge based upon the amount of your purchase. Class A shares also
bear a 0.20% annual service fee which compensates your financial adviser for
providing you with ongoing service.
The following Class A sales charges and commissions apply to all funds
described in this prospectus:
- -------------------------------------------------------------------------------
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
------------------------------------------- ----------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 4.20% 4.38% 3.70%
$50,000-100,000 4.00 4.18 3.50
$100,000-250,000 3.50 3.63 3.00
$250,000-500,000 2.50 2.56 2.00
$500,000-1,000,000 2.00 2.04 1.50
$1,000,000 and over --(1) -- --(1)
</TABLE>
(1) Nuveen pays authorized dealers a commission equal to the sum of 1% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of any
amount over $5 million. Unless the authorized dealer waived the commis-
sion, you may be assessed a contingent deferred sales charge (CDSC) of 1%
if you redeem any of your shares within 18 months of purchase. The CDSC is
calculated on the lower of your purchase price or redemption proceeds.
- -------------------------------------------------------------------------------
PAGE 10
<PAGE>
Nuveen periodically undertakes sales promotion programs with authorized
dealers and may pay them the full applicable sales charge as a commission. In
addition, Nuveen may provide support at its own expense to authorized dealers
in connection with sales meetings, seminars, prospecting seminars and other
events at which Nuveen presents its products and services. Under certain
circumstances, Nuveen also will share with authorized dealers up to half the
costs of advertising that features the products and services of both parties.
The statement of additional information contains further information about
these programs.
- -------------------------------------------------------------------------------
OTHER SALES CHARGE DISCOUNTS
Nuveen offers a number of programs that enable you to reduce or eliminate the
sales charge on Class A shares:
SALES CHARGE REDUCTIONS
. Rights of Accumulation
. Letter of Intent (LOI)
. Group Purchase
SALES CHARGE WAIVERS
. Unit Trust Reinvestment
. Purchases using Redemptions from Unrelated Funds
. Fee-Based Programs
. Bank Trust Departments
. Certain Employees of Nuveen or Authorized Dealers
Please refer to the statement of additional information for detailed descrip-
tions of these programs. Further information on these programs is also avail-
able through your financial adviser or by calling (800) 621-7227. Your finan-
cial adviser can also provide and help you prepare the necessary application
forms. You or your financial adviser are responsible for notifying Nuveen
about your eligibility for any sales charge reduction or waiver at the time of
each purchase.
The funds may modify or discontinue these programs at any time upon written
notice to shareholders.
BUYING CLASS B SHARES
You may buy Class B shares at their public offering price on the day of
purchase. The price you pay will equal the Class B NAV. There is no initial
sales charge, but Class B shares bear a 0.20% annual service fee which compen-
sates your financial adviser for providing you with ongoing service, and a
0.75% annual distribution fee which compensates Nuveen for paying your finan-
cial adviser a 4% commission at the time of purchase.
Class B shares convert automatically to Class A shares eight years after
purchase. Class B shares will convert only if the fund is assured that the
conversion does not generate tax consequences for investors, based upon the
opinion of outside counsel or the written assurance of the IRS.
- -------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGE
If you redeem Class B shares within six years of purchase, you will be
assessed a contingent deferred sales charge (CDSC) based upon the following
schedule:
<TABLE>
<CAPTION>
DURING YEAR
---------------------------
1 2 3 4 5 6 7+
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1% 0%
</TABLE>
The CDSC is calculated on the lower of your purchase price or redemption
proceeds.
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of
purchase. The price you pay will equal the Class C NAV. There is no initial
sales charge, Class C shares bear a 0.20% annual service fee which compensates
your financial adviser for providing you with ongoing service, and a 0.55%
annual distribution fee which compensates Nuveen for paying your financial
adviser for the sale, including a 1% commission at the time of sale.
If you redeem your Class C shares within one year of purchase, you may be
assessed a CDSC of 1%. The CDSC is calculated on the lower of your purchase
price or redemption proceeds.
BUYING CLASS R SHARES
You may purchase Class R shares at their public offering price on the day of
purchase. The price you pay will equal the Class R NAV. You may purchase Class
R shares only if you are investing at least $1 million or would otherwise
qualify to purchase Class A shares without a sales charge as described under
"Other Sales Charge Discounts" above. There are no sales charges or ongoing
fees. Class R Shares have lower ongoing expenses than Class A Shares.
- -------------------------------------------------------------------------------
HOW TO SELL FUND SHARES
You may use one of the methods described below to redeem your shares on any
day the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your redemption request in good order.
Your redemption request must be received before the close of trading of the
New York Stock Exchange (normally 4 p.m. Eastern time) for you to receive that
day's price. The funds do not charge any redemption fees, although you will be
assessed a CDSC where applicable.
SELLING SHARES THROUGH YOUR FINANCIAL ADVISER
You may sell fund shares by contacting your financial adviser who can provide
and help you prepare all the
- -------------------------------------------------------------------------------
PAGE 11
<PAGE>
necessary documentation. Your financial adviser may charge you for this serv-
ice.
SELLING SHARES BY TELEPHONE
Unless you have declined telephone redemption privileges, you may sell fund
shares by calling (800) 621-7227. Your redemption must not exceed $50,000 and
you may not redeem by telephone shares held in certificate form. Checks will
be issued only to the shareholder on record and mailed to the address on
record. If you have established electronic funds transfer privileges on your
account, you may have redemption proceeds transferred electronically to your
bank account; if you are redeeming $1,000 or more, you may expedite your
request by having your redemption proceeds wired directly into your bank
account.
Nuveen and Boston Financial Data Services ("Boston Financial") will be liable
for losses resulting from unauthorized telephone redemptions only if they do
not follow reasonable procedures designed to verify the identity of the
caller. You should immediately verify your trade confirmations when you
receive them.
SELLING SHARES BY MAIL
You may sell fund shares by mail by sending a written request to Nuveen at the
address listed below under "How to Contact Nuveen." Your request must include
the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person you want your redemption proceeds paid to, if other
than to the shareholder of record;
. The address you want your redemption proceeds sent to, if other than to the
address of record;
. Any certificates you have for the shares; and
. Any required signature guarantees.
Signatures must be guaranteed if you are redeeming more than $50,000, you want
the check payable to someone other than the shareholder on record, or you want
the check sent to another address (or the address on record has been changed
within the last 60 days). Signature guarantees must be obtained from a bank,
brokerage firm or other financial intermediary that is a member of an approved
Medallion Guarantee Program or that is otherwise approved by the fund. A
notary public cannot provide a signature guarantee.
Unless other arrangements are made, checks will be sent to your address on
record. Checks will normally be mailed within one business day, but in no
event more than seven days from receipt of your redemption request. If any
shares were purchased less than 15 days prior to your request, the fund will
not mail your redemption proceeds until the check for your purchase has
cleared, which may take up to 15 days.
Each fund may suspend redemptions or delay payment on redemptions for more
than seven days (three days for street name accounts) in certain extraordinary
circumstances as described in the statement of additional information.
OPERATION OF THE CDSC
When you redeem Class A, Class B, or Class C shares subject to a CDSC, the
fund will first redeem any shares that are not subject to a CDSC or that
represent an increase in the value of your fund account due to capital appre-
ciation, and then redeem the shares you have owned for the longest period of
time, unless you ask the fund to redeem your shares in a different order. No
CDSC is imposed on shares you buy through the reinvestment of dividends and
capital gains. The holding period is calculated on a monthly basis and begins
on the first day of the month in which you buy shares. When you redeem shares
subject to a CDSC, the CDSC is calculated on the lower of your purchase price
or redemption proceeds, deducted from your redemption proceeds, and paid to
Nuveen. The CDSC may be waived under certain special circumstances as
described in the statement of additional information.
ACCOUNT MINIMUMS
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
unit trust reinvestment account. You will not be assessed a CDSC on an invol-
untary redemption.
- -------------------------------------------------------------------------------
EXCHANGING SHARES
You may exchange fund shares at any time for the same class of shares in
another Nuveen mutual fund that is available within your state. You may
exchange fund shares by calling (800) 621-7227 or by mailing your written
request to Nuveen at the address listed under "How to Contact Nuveen."
You must have owned your fund shares for at least 15 days and your exchange
must meet the minimum purchase requirements of the fund into which you are
exchanging. No CDSC will be assessed on an exchange, and the holding period of
your investment will be carried over to the new fund for purposes of deter-
mining any future CDSC. You may not exchange Class B shares for shares of a
Nuveen money market fund.
- -------------------------------------------------------------------------------
PAGE 12
<PAGE>
Because an exchange is treated for tax purposes as the concurrent sale and
purchase of fund shares, you should consult your tax adviser about the tax
consequences of any contemplated exchange. Each fund reserves the right to
limit or terminate exchange privileges if it believes doing so is in the best
interests of fund shareholders.
RESTRICTIONS ON MARKET TIMING
The exchange privilege is not intended to permit you to use a fund for short-
term trading. Excessive exchange activity may interfere with portfolio manage-
ment, raise fund operating expenses or otherwise have an adverse effect on fund
shareholders. In order to limit excessive exchange activity and in other
circumstances where the funds' investment adviser believes doing so would be in
the best interests of the fund, each fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of exchanges, or
reject any exchange. You will be notified in the event this happens to the
extent required by law.
- --------------------------------------------------------------------------------
OPTIONAL FEATURES AND SERVICES
SYSTEMATIC INVESTMENT
Once you have opened an account, you may make regular investments of $50 or
more a month through automatic deductions from your bank account, or directly
from your paycheck. To invest regularly from your bank account, (see "Fund
Direct--Electronic Funds Transfer") below), simply complete the appropriate
section of the account application. To invest regularly from your paycheck,
call Nuveen for a Payroll Direct Deposit Enrollment form. If you need addi-
tional copies of these forms, or would like assistance completing them, contact
your financial adviser or call Nuveen toll-free at (800) 621-7227.
One of the benefits of systematic investing is "dollar cost averaging." Because
you are making fixed payments, you buy fewer shares when the price is high, and
more when the price is low. As a result, the average price you pay will be less
than the average share price of fund shares over this period. Dollar cost aver-
aging does not assure profits or protect against losses in a steadily declining
market. Since dollar cost averaging involves continuous investment regardless
of fluctuating price levels, you should consider your financial ability to
continue investing in declining as well as rising markets before deciding to
invest in this way.
Systematic investing may also make you eligible for reduced sales charges on
shares of the fund as well as other Nuveen mutual funds (see "Other Sales
Charge Discounts").
THE POWER OF SYSTEMATIC INVESTING
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
(CHART APPEARS HERE)
<TABLE>
<CAPTION>
ACCOUNT VALUES FOR TOTAL RETURNS OF
AMOUNT -----------------------------------
YEAR INVESTED 4.00% 5.00% 6.00%
---- -------- ------- ------- -------
<S> <C> <C> <C> <C>
0 $ 2,874 $ 2,874 $ 2,874 $ 2,874
5 8,622 9,861 10,203 10,561
10 14,370 18,391 19,610 20,929
15 20,118 28,807 31,681 34,913
20 25,866 41,525 47,173 53,779
</TABLE>
SYSTEMATIC WITHDRAWALS
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly or semi-annually, and may choose to receive a
check, have the monies transferred directly into your bank account (see "Fund
Direct--Electronic Funds Transfer") below), paid to a third party or sent
payable to you at an address other than your address of record. You must
complete the appropriate section of the account application to participate in
the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concur-
rent purchases of Class A, B or C shares because you may unnecessarily pay a
sales charge or CDSC on these purchases.
REINSTATEMENT PRIVILEGE
If you redeem fund shares on which you paid an initial sales charge or contin-
gent deferred sales charge (CDSC), you may reinvest all or part of your redemp-
tion proceeds up to one year later without incurring any additional charge. You
may only reinvest into the same class of shares you redeemed and will receive
the share price next determined after Nuveen receives your reinvestment
request. You may exercise this privilege only once per redemption request.
--------------
PAGE 13
<PAGE>
If you paid a CDSC, your CDSC will be refunded and your holding period rein-
stated. You should consult your tax adviser about the tax consequences of
exercising your reinstatement privilege.
FUND DIRECT--ELECTRONIC FUNDS TRANSFER
You may arrange to transfer funds electronically between your bank account and
your fund account by completing the appropriate section of the account appli-
cation. If your need additional copies of this form, or would like assistance
completing it, contact your financial adviser or call Nuveen at (800) 621-
7227. You may use Fund Direct to quickly and conveniently purchase or sell
shares by telephone, systematically invest or withdraw funds, or send dividend
payments directly to your bank account.
If you have established electronic funds transfer privileges on your account,
you may request that redemption proceeds of $1,000 or more be wired directly
into your bank account. While you will generally receive your redemption
proceeds more quickly than a regular telephone redemption, the fund may charge
you a fee for this expedited service.
DIVIDENDS AND TAXES
- -------------------------------------------------------------------------------
HOW THE FUNDS PAY DIVIDENDS
The funds pay tax-free dividends monthly and any taxable capital gains or
other distributions once a year in December. The funds declare dividends on or
about the ninth of each month and generally pay dividends on the first busi-
ness day of the following month.
PAYMENT AND REINVESTMENT OPTIONS
The funds automatically reinvest your dividends each month in additional fund
shares unless you request otherwise. You may request to have your dividends
paid to you by check, deposited directly into your bank account, paid to a
third party, sent to an address other than your address of record or rein-
vested in shares of another Nuveen mutual fund. If you wish to do so, complete
the appropriate section of the account application, contact your financial
adviser or call Nuveen at (800) 621-7227.
CALCULATION OF FUND DIVIDENDS
Each fund pays dividends based upon its past and projected net income in order
to distribute substantially all of its net income each fiscal year.
In order to maintain a more
stable monthly dividend, each
fund may sometimes distribute
less or more than the amount of
net income earned in a partic-
ular period as a result of fluc-
tuations in a fund's net income.
Undistributed net income is
included in the fund's share
price; similarly, distributions
from previously undistributed
net income reduce the fund's
share price. This dividend
policy is not expected to affect
the management of a fund's port-
folio.
Dividends for Class A, B, C and R shares are determined in the same manner and
at the same time. Dividends per share will vary based on which class of fund
shares you own, reflecting the different ongoing fees and other expenses of
each class.
- -------------------------------------------------------------------------------
TAXES AND TAX REPORTING
The discussion below and the statement of additional information provides
general tax information related to an investment in fund shares. Because tax
laws are complex and often change, you should consult your tax adviser about
the tax consequences of a specific fund investment.
Each fund primarily invests in municipal bonds from a specific state or in
municipal bonds whose income is otherwise exempt from regular federal, state
and local income taxes. Consequently, the regular monthly dividends you
receive will be exempt from regular federal, state and, in some cases, local
income
- -------------------------------------------------------------------------------
PAGE 14
<PAGE>
taxes. All or a portion of these dividends, however, may be subject to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how
long you have owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Each year, you will receive a year-end statement that describes the tax status
of dividends paid to you during the preceding year, including the source of its
investment income by state and the portion of its income that is subject to
AMT. You will receive this statement from the firm where you purchased your
fund shares if you hold your investment in street name; Nuveen will send you
this statement if you hold your shares in registered form.
The tax status of your dividends is not affected by whether you reinvest your
dividends or receive them in cash.
BUYING OR SELLING SHARES CLOSE TO A RECORD DATE
If you purchase fund shares shortly before the record date for a taxable divi-
dend, the entire dividend you receive may be taxable to you even though a
portion of the dividend effectively represents a return of your purchase price.
This is commonly known as "buying a dividend." Similarly, if you sell or
exchange fund shares shortly before the record date for a tax-exempt dividend,
a portion of the price you receive may be treated as a taxable capital gain
even though it reflects tax-free income earned but not yet distributed by the
fund.
TAX CONSEQUENCES OF PRIVATE ACTIVITY BONDS
Because each fund may invest in private activity bonds, the portion of your
regular monthly dividends derived from the income earned on these bonds that
would otherwise be tax-exempt will be treated as taxable income if:
. you are subject to the AMT (including corporate shareholders);
. you are a "substantial user" of a facility financed by these bonds; or
. you are a "related person" of a substantial user.
REDEEMING SHARES HELD LESS THAN SIX MONTHS
If you sell or exchange shares that you have owned for less than six months and
you recognized a short-term capital loss when you redeemed your shares, the
loss you can claim will be reduced by the amount of tax-free dividends paid to
you on those shares. Any remaining short-term capital loss will be treated as
long-term capital loss to the extent you also received capital gain dividends
on those shares. You should consult your tax adviser for complete information
about these rules. Please consider the tax consequences carefully when contem-
plating a redemption.
OTHER IMPORTANT TAX INFORMATION
In order to avoid corporate taxation of its earnings and to pay tax-free divi-
dends, each fund must meet certain I.R.S. requirements that govern the fund's
sources of income, diversification of assets and distribution of earnings to
shareholders. Each fund has met these requirements in the past and intends to
do so in the future. If a fund failed to do so, the fund would be required to
pay corporate taxes on its earnings and all your distributions would be taxable
as ordinary income.
A fund may be required to withhold 31% of certain of your dividends if you have
not provided the fund with your correct taxpayer identification number (nor-
mally your social security number), or if you are otherwise subject to back-up
withholding.
If you receive social security benefits, you should be aware that tax-free
income is taken into account in calculating the amount of these benefits that
may be subject to federal income tax.
If you borrow money to buy fund shares, you may not deduct the interest on that
loan. Under I.R.S. rules, fund shares may be treated as having been bought with
borrowed money even if the purchase cannot be traced directly to borrowed
money.
- --------------------------------------------------------------------------------
TAXABLE EQUIVALENT YIELDS
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
funds with taxable alternative investments, the table below presents the
taxable equivalent yields for a range of hypothetical tax-free yields and tax
rates:
- --------------------------------------------------------------------------------
TAXABLE EQUIVALENT OF TAX-FREE YIELDS
<TABLE>
<CAPTION>
TAX-FREE YIELD
TAX RATE 4.00% 4.50% 5.00% 5.50% 6.00%
- -------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
statement of additional information or consult your tax adviser.
- --------------------------------------------------------------------------------
PAGE 15
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
HOW TO CONTACT NUVEEN
GENERAL INFORMATION
If you would like general information about Nuveen Mutual Funds or any other
Nuveen product, call (800) 621-7227 between 7:30 a.m. and 7:00 p.m. Central
time.
PURCHASES, REDEMPTIONS AND OTHER TRANSACTIONS
If you are calling to purchase or redeem shares, request an exchange or conduct
other account transactions, call (800) 621-7227 between 7:30 a.m. and 7:00 p.m.
Central time. If you are sending a written request to Nuveen, you should mail
your request to the following address:
Nuveen Mutual Funds
c/o Shareholder Services Inc.
P.O. Box 5330
Denver, CO 80217-5330
When purchasing fund shares by mail, please be sure to include a check made out
to the name of the Fund and mark clearly on your check which class of shares
you are purchasing. If you do not specify which class of shares you are
purchasing, Nuveen will assume you are buying Class A shares if you are opening
a new account; if you are adding to an existing account, Nuveen will assume you
wish to buy more shares of the class you already own.
- --------------------------------------------------------------------------------
FUND SERVICE PROVIDERS
INVESTMENT ADVISER
Nuveen Advisory Corp. ("Nuveen Advisory") serves as the investment adviser to
the funds and in this capacity is responsible for the selection and on-going
monitoring of the municipal bonds in each fund's investment portfolio. Nuveen
Advisory serves as investment adviser to investment portfolios with more than
$35 billion in municipal assets under management. The activities of Nuveen
Advisory, which also include managing the funds' business affairs and providing
certain clerical, bookkeeping and other administrative services, are overseen
by the funds' Board of Trustees. Established in 1976, Nuveen Advisory is a
wholly-owned subsidiary of John Nuveen & Co. Incorporated, which itself is
approximately 78% owned by the St. Paul Companies, Inc. Effective December 31,
1996, The John Nuveen Company acquired Flagship Resources, Inc., and as part of
that acquisition, Flagship Financial, the adviser to the Flagship Funds, was
merged with Nuveen Advisory.
For providing these services, Nuveen Advisory is paid an annual management fee
according to the following schedule:
- --------------------------------------------------------------------------------
MANAGEMENT FEES
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- ---------------------------------------------
<S> <C>
For the first $125 million 0.5500%
For the next $125 million 0.5375%
For the next $250 million 0.5250%
For the next $500 million 0.5125%
For the next $1 billion 0.5000%
For assets over $2 billion 0.4750%
</TABLE>
Nuveen will waive some or all of its fees or reimburse expenses so that the
total operating expenses (not counting distribution and service fees) for the
Arizona Fund (through July 31, 1997) do not exceed 0.75% of average daily net
assets. For more information about fees and expenses, see the fund operating
expense tables in the Fund Summaries.
PORTFOLIO MANAGERS
Overall investment management strategy and operating policies for the funds are
set by the Investment Policy Committee of Nuveen Advisory. The Investment
Policy Committee is comprised of the principal executive officers and portfolio
managers of Nuveen Advisory and meets regularly to review economic conditions,
the outlook for the financial markets in general and the status of the munic-
ipal markets in particular. Day-to-day operation of each fund and the execution
of its specific investment strategies is the responsibility of the designated
portfolio manager described below.
Jan Terbruggen is the portfolio manager for the Arizona, Colorado, and New
Mexico Funds. Mr. Terbruggen has managed the funds since 1992 and since 1992
had been a Vice President of Flagship Financial Inc., the funds' prior invest-
ment adviser, until becoming an employee of Nuveen Advisory upon the acquisi-
tion of Flagship Resources Inc. by The John Nuveen Company in January 1997.
THE DISTRIBUTOR
John Nuveen and Co. Incorporated serves as the selling agent and distributor of
the funds' shares. In this capacity, Nuveen manages the offering of the funds'
shares and is responsible for all sales and promotional activities. In order to
reimburse Nuveen for its costs in connection with these activities, including
compensation paid to authorized dealers, each fund has adopted a distribution
and service plan under Rule 12b-1 of the Investment Company Act of 1940.
The plan authorizes each fund to pay Nuveen an annual 0.20% service fee on the
average daily net assets of Class A, B and C shares outstanding and annual
distribution fees of 0.75% and 0.55%, respectively, on the average daily net
assets of Class B and
- --------------------------------------------------------------------------------
PAGE 16
<PAGE>
C shares outstanding. In order to help compensate Nuveen for the sales commis-
sion paid to financial advisers at the time of sale on sales of Class B and
Class C shares, Nuveen retains the first year's service fee on sales of Class
B shares and all Class B distribution fees; and retains the first year's
service and distribution fees on sales of Class C shares. Otherwise, Nuveen
pays these fees to the broker of record. The statement of additional informa-
tion contains a detailed description of the plan and its provisions.
TRANSFER AGENT
Each fund has appointed a transfer agent which is responsible for distributing
dividend payments and providing certain bookkeeping, data processing and other
administrative services in connection with the maintenance of shareholder
accounts. Boston Financial, P.O. Box 8509, Boston, MA 02266-8509, currently
serves as transfer agent for each fund.
- -------------------------------------------------------------------------------
HOW THE FUNDS REPORT
PERFORMANCE
Each fund may quote its yield and total return in reports to shareholders,
sales literature and advertisements. The funds may also compare their invest-
ment results to various passive indices or other mutual funds with similar
investment objectives. Comparative performance information may include data
from Lipper Analytical Services, Inc., Morningstar, Inc. and other industry
publications. See the statement of additional information for a more detailed
discussion.
- -------------------------------------------------------------------------------
HOW FUND SHARES ARE PRICED
The share price for each class of fund shares, also called its net asset value
(NAV), is calculated every business day as of the close of regular trading on
the New York Stock Exchange (normally 4 p.m. Eastern time). The net asset
value for a class of fund shares is computed by calculating the total value of
the class' portion of the fund's portfolio investments and other assets,
subtracting any liabilities or other debts, and dividing by the total number
of its shares outstanding.
The prices of municipal bonds in each fund's investment portfolio are provided
by a pricing service approved and supervised by the fund's Board of Trustees.
When price quotes are not readily available (which is usually the case for
municipal securities), the pricing service establishes fair market value based
on yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating, indications of value from securities dealers and
general market conditions.
- -------------------------------------------------------------------------------
ORGANIZATION
The Trust is an open-end diversified investment company under the Investment
Company Act of 1940, consisting of multiple funds. The shares of each fund are
divided into classes. Each class of shares represents an interest in the same
portfolio of investments and the shares of each class have equal rights as to
voting, redemption, dividends and liquidation. However, each class bears
different sales charges and service fees. B shares convert to A shares after 8
years. C shares purchased before February 1, 1997 convert to A shares six
years after purchase, but only if you request conversion. You must submit your
request to SSI no later than the last business day of the 71st month following
the month in which you purchased your shares.
The funds are not required to and do not intend to hold annual meetings.
Shareholders owning ten percent or more of a fund's outstanding shares may
call a special meeting for any purpose, including to elect or remove trustees
or to change fundamental policies.
The Arizona Fund was formed as a result of a merger between existing Nuveen
and Flagship funds. The performance and the financial information of the fund
reflects that of the predecessor Flagship fund.
- -------------------------------------------------------------------------------
PAGE 17
<PAGE>
APPENDIX
- -------------------------------------------------------------------------------
SPECIAL STATE CONSIDERATIONS
Because the funds primarily purchase municipal bonds from a specific state,
each fund also bears investment risk from economic, political or regulatory
changes that could adversely affect municipal bond issuers in that state and
therefore the value of the fund's investment portfolio. The following discus-
sion of special state considerations was obtained from official offering
statements of these issuers and has not been independently verified by the
funds. The discussion includes general state tax information related to an
investment in fund shares. Because tax laws are complex and often change, you
should consult your tax adviser about the state tax consequences of a specific
fund investment. See the statement of additional information for further
information.
ARIZONA
Arizona's economy is primarily based on services, tourism and high-tech manu-
facturing as well as the military. Agriculture and mining of primary metals
still play a role. The state experienced rapid population growth and a
construction boom in the 1980's which has slowed somewhat in the first half of
this decade. The service and trade sectors account for over half of employ-
ment.
Statewide the unemployment rate was 5.8% at the end of August 1996 while unem-
ployment in the State's two largest metropolitan areas, Phoenix-Mesa and
Tucson, were a very low 3.8% and 3.6%. Personal income growth in Arizona
ranked 2nd in the nation in 1995, rising to $20,421 per capita from $19,153 in
1994.
The Arizona Constitution restricts the legislature's power to raise revenues
by increasing property taxes. The State has also enacted limits on annual
spending. 1995 general fund revenues were $4.23 billion against expenditures
of $4.43 billion. Arizona does not issue general obligation bonds but relies
on capital outlays, revenue bonds and other methods to finance projects. Each
project is individually rated for its independent creditworthiness.
Tax Treatment.
The Arizona Fund's regular monthly dividends will not be subject to the
Arizona individual income tax to the extent they are paid out of income earned
on Arizona municipal bonds or U.S. government securities. You will be subject
to Arizona personal income tax, however, to the extent the Arizona Fund
distributes any taxable income or realized capital gains, or if you sell or
exchange Arizona Fund shares and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Arizona Fund is similar to that
described above.
COLORADO
Colorado's trade and service sectors represent over half of non-agricultural
employment in the State's economy and have expanded in the past years. Manu-
facturing employment is comparatively small and continues to shrink due to the
concentration in defense production. The trade and services sectors, led by a
healthy tourist industry, helped pull the State out of a recession in the late
1980's which had been caused by contractions in the energy, high technology
and construction industries. The State's economic activity tends to mimic that
of the nation as a whole albeit less severely according to Colorado's Office
of State Planning and Budgeting.
Colorado's unemployment rate was a very low 3.9% in August 1996, below the
national average of 5.1%. Job growth increased 2.3% in the year ending August
1995. Meanwhile, per capita personal income grew to $23,449 in 1995.
1995 general fund revenues were $5.96 billion against expenditures of $5.17
billion. There is no outstanding general obligation debt, but outstanding
lease obligations are rated A by Moody's and AAA by Standard & Poor's.
Tax Treatment.
The Colorado Fund's regular monthly dividends will not be subject to Colorado
personal income taxes to the extent they are paid out of income earned on
Colorado municipal bonds or U.S. government securities. You will be subject to
Colorado personal income taxes, however, to the extent the Colorado fund
distributes any taxable income, or if you sell or exchange Colorado Fund
shares and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Colorado Fund is similar to
that described above.
NEW MEXICO
New Mexico's major industries include energy resources, tourism, services,
crafts, agribusiness, manufacturing and mining. Energy resource production,
including crude petroleum, natural gas, uranium and coal, was approximately
$4.28 billion in 1993. Nonfuel mineral production represented $914 million in
1994. The economy also benefits from the employment and technology base
supplied by federal government scientific research facilities at Los Alamos,
Albuquerque and White Sands. Tourism generated about $2.3 billion for the
state according to a 1991 estimate, a trend that should continue given the
large number of state and federal park lands in the State.
- -------------------------------------------------------------------------------
PAGE 18
<PAGE>
Finally, crop and livestock production remains diverse given the State's
variety of climactic conditions and will also remain a major part of the econ-
omy.
New Mexico's unemployment rate rose from 6.4% in August 1995 to 7.2% in August
1996, surpassing the respective national averages of 5.6% and 5.1%. At the
same time, per capita income rose 6.1% in 1995 to reach $18,055, the ninth
largest increase in the country.
A state Board consisting of the Governor, Lt.-Governor, Treasurer and four
appointees maintains general supervisory authority over the fiscal affairs of
the state as the Constitution limits meetings of the Legislature to 90
calendar days every two years. The executive branch's Department of Finance
and Administration holds the annual budget hearings. The Governor may exercise
a line-item veto over appropriations measures. 1995 unaudited general fund
revenues were $2.75 billion against expenditures of $2.78 billion.
1996 projected revenues are $2.824 billion. As of February 9, 1996, Moody's
gives the State's general obligation debt an Aa rating while S&P gives it an
AA+ rating.
Tax Treatment.
The New Mexico Fund's regular monthly dividends will not be subject to the New
Mexico personal income tax to the extent they are paid out of income earned on
New Mexico municipal obligations or U.S. government securities. You will be
subject to New Mexico personal income tax, however, to the extent the New
Mexico Fund distributes any taxable income or realized capital gains, or if
you sell or exchange New Mexico Fund shares and realize a capital gain on the
transaction.
The treatment of corporate shareholders of the New Mexico Fund is similar to
that described above.
- -------------------------------------------------------------------------------
PAGE 19
<PAGE>
Nuveen Family of Mutual Funds
Nuveen's family of funds is designed to help you reach your finan-
cial goals. The funds below are grouped by investment objectives.
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME FUNDS
National Funds/1/
State Funds
Alabama Michigan
Arizona Missouri
California/2/ New Jersey/3/
Colorado New Mexico
Connecticut New York/2/
Florida/3/ North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky/4/ South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts/2/ Wisconsin
Notes
1. Long-term, long-term insured, intermediate-term and limited-term
portfolios.
2. Long-term and long-term insured portfolios.
3. Long-term and intermediate-term portfolios.
4. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
<PAGE>
FEBRUARY 1, 1997
NUVEEN FLAGSHIP MULTISTATE TRUST I
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
NUVEEN FLAGSHIP FLORIDA INTERMEDIATE MUNICIPAL BOND FUND
NUVEEN MARYLAND MUNICIPAL BOND FUND
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
NUVEEN OKLAHOMA MUNICIPAL BOND FUND
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus of
the Nuveen Flagship Multistate Trust I dated February 1, 1997. The Prospectus
may be obtained without charge from certain securities representatives, banks,
and other financial institutions that have entered into sales agreements with
John Nuveen & Co. Incorporated, or from the Funds, by mailing a written request
to the Funds, c/o John Nuveen & Co. Incorporated, 333 West Wacker Drive,
Chicago, Illinois 60606 or by calling (800) 414-7447.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-10
Investment Adviser and Investment Management Agreement..................... S-16
Portfolio Transactions..................................................... S-17
Net Asset Value............................................................ S-18
Tax Matters................................................................ S-18
Performance Information.................................................... S-24
Additional Information on the Purchase and Redemption of Fund Shares....... S-32
Distribution and Service Plans............................................. S-36
Independent Public Accountants and Custodians.............................. S-37
Financial Statements....................................................... S-37
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Description of Hedging Techniques.............................. B-1
</TABLE>
The audited financial statements for each Fund's most recent fiscal year
appear in the Funds' Annual Reports and the unaudited financial statements for
the most recent semi-annual period for each Fund appear in the Funds' Semi-
Annual Reports; each is included herein by reference. The Semi-Annual Reports
accompany this Statement of Additional Information.
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
INVESTMENT POLICIES
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of that Fund:
(1) Invest in securities other than Municipal Obligations and temporary
investments, as those terms are defined in the Prospectus.
(2) Invest more than 5% of its total assets in securities of any one
issuer, except this limitation shall not apply to securities of the United
States Government, and to the investment of 25% of such Fund's assets. This
limitation shall apply only to the Arizona Municipal Bond Fund and the
Florida Municipal Bond Fund.
(3) Borrow money, except from banks for temporary or emergency purposes
and not for investment purposes and then only in an amount not exceeding
(a) 10% of the value of its total assets at the time of borrowing or (b)
one-third of the value of the Fund's total assets including the amount
borrowed, in order to meet redemption requests which might otherwise
require the untimely disposition of securities. While any such borrowings
exceed 5% of such Fund's total assets, no additional purchases of
investment securities will be made by such Fund. If due to market
fluctuations or other reasons, the value of the Fund's assets falls below
300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so.
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (2) above, it may pledge securities
having a market value at the time of pledge not exceeding 10% of the value
of the Fund's total assets.
(5) Issue senior securities as defined in the Investment Company Act of
1940, except to the extent such issuance might be involved with respect to
borrowings described under item (3) above or with respect to transactions
involving futures contracts or the writing of options within the limits
described in the Prospectus and this Statement of Additional Information.
(6) Underwrite any issue of securities, except to the extent that the
purchase or sale of Municipal Obligations in accordance with its investment
objective, policies and limitations, may be deemed to be an underwriting.
(7) Purchase or sell real estate, but this shall not prevent any Fund
from investing in Municipal Obligations secured by real estate or interests
therein or foreclosing upon and selling such security.
(8) Purchase or sell commodities or commodities contracts or oil, gas or
other mineral exploration or development programs, except for transactions
involving futures contracts within the limits described in the Prospectus
and this Statement of Additional Information.
(9) Make loans, other than by entering into repurchase agreements and
through the purchase of Municipal Obligations or temporary investments in
accordance with its investment objective, policies and limitations.
(10) Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions.
(11) Write or purchase put or call options, except to the extent that the
purchase of a stand-by commitment may be considered the purchase of a put,
and except for transactions involving options within the limits described
in the Prospectus and this Statement of Additional Information.
(12) Invest more than 25% of its total assets in securities of issuers in
any one industry; provided, however, that such limitations shall not be
applicable to Municipal Obligations issued by governments or political
subdivisions of governments, and obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(13) Purchase or retain the securities of any issuer other than the
securities of the Fund if, to the Fund's knowledge, those trustees of the
Trust, or those officers and directors of Nuveen Advisory Corp. ("Nuveen
Advisory"), who individually own beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities.
In addition, each Fund, as a non-fundamental policy, may not invest more than
15% of its net assets in "illiquid" securities, including repurchase agreements
maturing in more than seven days.
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed the sole issuer of a security when its assets and
revenues are separate from other governmental entities and its securities are
backed only by its assets and revenues. Similarly, in the case of a non-
governmental user, such as an industrial corporation or a
privately owned or operated hospital, if the security is backed only by the
assets and revenues of the non-governmental user, then such non-governmental
user would be deemed to be the sole issuer. Where a security is also backed by
the
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enforceable obligation of a superior or unrelated governmental entity or other
entity (other than a bond insurer), it shall also be included in the
computation of securities owned that are issued by such governmental or other
entity.
Where a security is guaranteed by a governmental entity or some other
facility, such as a bank guarantee or letter of credit, such a guarantee or
letter of credit would be considered a separate security and would be treated
as an issue of such government, other entity or bank. Where a security is
insured by bond insurance, it shall not be considered a security issued or
guaranteed by the insurer; instead the issuer of such security will be
determined in accordance with the principles set forth above. The foregoing
restrictions do not limit the percentage of the Fund's assets that may be
invested in securities insured by any single insurer.
The foregoing restrictions and limitations, as well as a Fund's policies as
to ratings of portfolio investments, will apply only at the time of purchase of
securities, and the percentage limitations will not be considered violated
unless an excess or deficiency occurs or exists immediately after and as a
result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of each Fund, cannot be changed without approval by holders of a
"majority of the Fund's outstanding voting shares." As defined in the
Investment Company Act of 1940, this means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if the holders of more than 50% of the
Fund's shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end
diversified management series investment company organized as a Massachusetts
business trust on July 1, 1996. Each of the Funds is an open-end management
investment company organized as a series of the Nuveen Flagship Multistate
Trust I. The Trust is an open-end management series company under SEC Rule 18f-
2. Each Fund is a separate series issuing its own shares. The Trust currently
has nine series: the Nuveen Flagship Arizona Municipal Bond Fund (formerly the
Flagship Arizona Double Tax Exempt Fund, a series of the Flagship Tax Exempt
Funds Trust); the Nuveen Flagship Colorado Municipal Bond Fund (formerly the
Flagship Colorado Double Tax Exempt Fund, a series of the Flagship Tax Exempt
Funds Trust); the Nuveen Flagship Florida Municipal Bond Fund (formerly the
Flagship Florida Double Tax Exempt Fund, a series of the Flagship Tax Exempt
Funds Trust); the Nuveen Flagship Florida Intermediate Municipal Bond Fund
(formerly the Flagship Florida Intermediate Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust); the Nuveen Maryland Municipal Bond Fund
(formerly the Nuveen Maryland Tax-Free Value Fund, a series of the Nuveen
Multistate Tax-Free Trust); the Nuveen Flagship Mexico Municipal Bond Fund
(formerly the Flagship New Mexico Double Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust); the Nuveen Oklahoma Municipal Bond Fund
(formerly the Flagship Oklahoma Double Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust); the Nuveen Flagship Pennsylvania Municipal
Bond Fund (formerly the Flagship Pennsylvania Triple Tax Exempt Fund, a series
of the Flagship Tax Exempt Funds Trust); and the Nuveen Flagship Virginia
Municipal Bond Fund (formerly the Flagship Virginia Double Tax Exempt Fund, a
series of the Flagship Tax Exempt Funds Trust). The Nuveen Oklahoma Municipal
Bond Fund has issued no shares to date. Certain matters under the Investment
Company Act of 1940 which must be submitted to a vote of the holders of the
outstanding voting securities of a series company shall not be deemed to have
been effectively acted upon unless approved by the holders of a majority of the
outstanding voting securities of each series affected by such matter.
PORTFOLIO SECURITIES
As described in the Prospectus, each of the Funds invests primarily in a
portfolio of Municipal Obligations free from regular federal and state income
tax in each Fund's respective state, which generally will be Municipal
Obligations issued within the Fund's respective state. In general, Municipal
Obligations include debt obligations issued by states, cities and local
authorities to obtain funds for various public purposes, including construction
of a wide range of public facilities such as airports, bridges, highways,
hospitals, housing, mass transportation, schools, streets and water and sewer
works. Industrial development bonds and pollution control bonds that are issued
by or on behalf of public authorities to finance various privately-rated
facilities are included within the term Municipal Obligations if the interest
paid thereon is exempt from federal income tax.
The investment assets of each Fund will consist of (1) Municipal Obligations
which are rated at the time of purchase within the four highest grades (Baa or
BBB or better) by Moody's Investors Service, Inc. ("Moody's"), by Standard and
Poor's Corporation ("S&P") or by Fitch Investors Service, Inc. ("Fitch"), (2)
unrated Municipal Obligations which, in the opinion of Nuveen Advisory, have
credit characteristics equivalent to bonds rated within the four highest grades
by Moody's, S&P or Fitch, except that the Fund may not invest more than 20% of
its net assets in unrated bonds and (3) temporary investments as described
below, the income from which may be subject to state income tax or to both
federal and state income taxes. See Appendix A for more information about
ratings by Moody's, S&P, and Fitch.
As described in the Prospectus, each Fund may invest in Municipal Obligations
that constitute participations in a lease obligation or installment purchase
contract obligation (hereafter collectively called "lease obligations") of a
municipal authority or entity. Although lease obligations do not constitute
general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-
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appropriation" clauses which provide that the municipality has no obligation to
make lease or installment purchase payments in future years unless money is
appropriated for such purpose on a yearly basis. Although nonappropriation
lease obligations are secured by the leased property, disposition of the
property in the event of foreclosure might prove difficult. A Fund will seek to
minimize the special risks associated with such securities by only investing in
those nonappropriation leases where Nuveen Advisory has determined that the
issuer has a strong incentive to continue making appropriations and timely
payment until the security's maturity. Some lease obligations may be illiquid
under certain circumstances. Lease obligations normally provide a premium
interest rate which along with regular amortization of the principal may make
them attractive for a portion of the assets of the Funds.
Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
the laws enacted in the future by Congress, state legislatures or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its Municipal Obligations may be materially affected.
PORFOLIO TRADING AND TURNOVER
The Funds will make changes in their investment portfolio from time to time
in order to take advantage of opportunities in the municipal market and to
limit exposure to market risk. The Funds may also engage to a limited extent in
short-term trading consistent with its investment objective. Securities may be
sold in anticipation of market decline or purchased in anticipation of market
rise and later sold. In addition, a security may be sold and another of
comparable quality purchased at approximately the same time to take advantage
of what Nuveen Advisory believes to be a temporary disparity in the normal
yield relationship between the two securities. Each Fund may make changes in
its investment portfolio in order to limit its exposure to changing market
conditions. Changes in a Fund's investments are known as "portfolio turnover."
While it is impossible to predict future portfolio turnover rates, the annual
portfolio turnover rate for each of the Funds is generally not expected to
exceed 75%. However, each Fund reserves the right to make changes in its
investments whenever it deems such action advisable and, therefore, a Fund's
annual portfolio turnover rate may exceed 75% in particular years depending
upon market conditions.
The portfolio turnover rates for the Funds, for the fiscal year-end of the Fund
as a series of its predecessor entity (described above), as indicated, were:
<TABLE>
<CAPTION>
FISCAL
YEAR
1995 1996
---- ----
<S> <C> <C>
Arizona Municipal Bond Fund (5/31)............................. 27% 38%
Colorado Municipal Bond Fund (5/31)............................ 38% 70%
Florida Municipal Bond Fund (5/31)............................. 53% 94%
Florida Intermediate Municipal Bond Fund (5/31)................ 105% 66%
Maryland Municipal Bond Fund (1/31)............................ 35% 17%
New Mexico Municipal Bond Fund (5/31).......................... 38% 57%
Pennsylvania Municipal Bond Fund (5/31)........................ 50% 65%
Virginia Municipal Bond Fund (5/31)............................ 50% 17%
</TABLE>
WHEN-ISSUED SECURITIES
Each Fund may purchase and sell Municipal Obligations on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the
regular settlement date. (When-issued transactions normally settle within 15-45
days.) On such transactions the payment obligation and the interest rate are
fixed at the time the buyer enters into the commitment. The commitment to
purchase securities on a when-issued or delayed delivery basis may involve an
element of risk because the value of the securities is subject to market
fluctuation, no interest accrues to the purchaser prior to settlement of the
transaction, and at the time of delivery the market value may be less than
cost. At the time a Fund makes the commitment to purchase a Municipal
Obligation on a when-issued or delayed delivery basis, it will record the
transaction and reflect the amount due and the value of the security in
determining its net asset value. Likewise, at the time a Fund makes the
commitment to sell a Municipal Obligation on a delayed delivery basis, it will
record the transaction and include the proceeds to be received in determining
its net asset value; accordingly, any fluctuations in the value of the
Municipal Obligation sold pursuant to a delayed delivery commitment are ignored
in calculating net asset value so long as the commitment remains in effect. The
Funds will maintain designated readily marketable assets at least equal in
value to commitments to purchase when-issued or delayed delivery securities,
such assets to be segregated by the Custodian specifically for the settlement
of such commitments. The Funds will only make commitments to purchase Municipal
Obligations on a when-issued or delayed delivery basis with the intention of
actually acquiring the securities, but the Fund reserves the right to sell
these securities before the settlement date if it is deemed advisable. If a
when-issued security is sold before delivery any gain or loss would not be tax-
exempt. The Funds commonly engage in when-issued transactions in order to
purchase or sell newly-issued Municipal Obligations, and may engage in delayed
delivery transactions in order to manage its operations more effectively.
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SPECIAL CONSIDERATIONS RELATING TO MUNICIPAL OBLIGATIONS OF DESIGNATED STATES
As described in the Prospectus, except for investments in temporary
investments, each of the Funds will invest primarily all of its net assets in
municipal bonds that are exempt from federal and state tax in that state
("Municipal Obligations"), generally Municipal Obligations issued in its
respective state. Each Fund is therefore more susceptible to political,
economic or regulatory factors adversely affecting issuers of Municipal
Obligations in its state. Brief summaries of these factors are contained in the
Prospectus. Set forth below is additional information that bears upon the risk
of investing in Municipal Obligations issued by public authorities in the
states of currently offered Funds. This information was obtained from official
statements of issuers located in the respective states as well as from other
publicly available official documents and statements. The Funds have not
independently verified any of the information contained in such statements and
documents. The information below is intended only as a general summary, and is
not intended as a discussion of any specific factor that may affect any
particular obligation or issuer.
FACTORS PERTAINING TO ARIZONA
Arizona's economy is primarily based on services, tourism and high-tech
manufacturing as well as the military. Agriculture and mining of primary metals
still play a role. The state experienced rapid population growth and a
construction boom in the 1980's which has slowed somewhat in the first half of
this decade. The service and trade sectors account for over half of employment.
Statewide the unemployment rate was 5.8% at the end of August 1996 while
unemployment in the State's two largest metropolitan areas, Phoenix-Mesa and
Tucson, were a very low 3.8% and 3.6%. Personal income growth in Arizona ranked
2nd in the nation in 1995, rising to $20,421 per capita from $19,153 in 1994.
The Arizona Constitution restricts the legislature's power to raise revenues
by increasing property taxes. The State has also enacted limits on annual
spending. 1995 general fund revenues were $4.23 billion against expenditures of
$4.43 billion. Arizona does not issue general obligation bonds but relies on
capital outlays, revenue bonds and other methods to finance projects. Each
project is individually rated for its independent creditworthiness.
FACTORS PERTAINING TO COLORADO
Colorado's trade and service sectors represent over half of non-agricultural
employment in the State's economy and have expanded in the past years.
Manufacturing employment is comparatively small and continues to shrink due to
the concentration in defense production. The trade and services sectors, led by
a healthy tourist industry, helped pull the State out of a recession in the
late 1980's which had been caused by contractions in the energy, high
technology and construction industries. The State's economic activity tends to
mimic that of the nation as a whole albeit less severely according to
Colorado's Office of State Planning and Budgeting.
Colorado's unemployment rate was a very low 3.9% in August 1996, below the
national average of 5.1%. Job growth increased 2.3% in the year ending August
1995. Meanwhile, per capita personal income grew to $23,449 in 1995.
1995 general fund revenues were $5.96 billion against expenditures of $5.17
billion. There is no outstanding general obligation debt, but outstanding base
obligations are rated A by Moody's and AAA by Standard & Poor's.
FACTORS PERTAINING TO FLORIDA
Florida's trade and service sectors have driven the state's economic growth
in recent years and account for half of non-agricultural employment. In
general, the state's economy tracked the national economy through the recent
recession and subsequent recovery. Florida historically enjoys a strong job
growth rate, but it is slowed to a projected 3.3% in 1995-6. The crucial
tourism sector did not expand in 1995 in part due to crime concerns, product
maturity, higher prices and competition from other resort areas. In the past,
the state's economy depended heavily on construction activity and the sector
remains important despite decreased dependence on it for overall growth.
Florida's unemployment rate of 5.4% stood slightly above the national average
of 5.1% in August 1996. Per capita income rose 5.8% in 1995 to reach $22,916.
Florida voters approved a Constitutional amendment in 1995 which limits the
rate of growth of state revenues to the growth rate of personal income in the
state. 1995 general fund revenues were $13.89 billion against expenditures of
$11.87 billion. The state estimates that 1996 revenues will rise by 2.7% and
expenditures 3.5% over 1995 levels. As of February 9, 1996, Moody's gives the
state's general obligation debt an Aa rating while S&P gives it an AA rating.
FACTORS PERTAINING TO MARYLAND
Maryland's rate of economic growth has slowed in the 1990's after a period of
rapid expansion in the decade before. Indicators such as income growth,
unemployment and retail sales levels have trailed the national average.
Services, wholesale and retail trade, government and manufacturing account for
most of the state's employment. Unlike in most states, government employment
surpasses manufacturing employment in Maryland. The manufacturing sector
consists chiefly of printing and publishing, food products, industrial
machinery, electronics and chemicals.
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The state's unemployment rate fell to 4.7% by August 1996 from 5.0% a year
earlier. Both times, it ranked below the national average. Maryland residents'
personal income per capita ranks fifth in the nation. Per capita income rose
4.3% in 1995 to reach $25,927.
The state constitution mandates a balanced budget forcing the Governor to
reduce 1993 appropriations to offset a 1992 deficit. State expenditures totaled
$11.8 billion and $12.4 billion in 1993 and 1994. The state estimated 1995
expenditures at $13.4 billion leaving a $49.5 million surplus. Reserves totaled
some 223.6 million at the end of fiscal 1995. As of February 9, 1996, Moody's
gives the state's general obligation debt an Aaa rating while S&P gives it an
AAA rating.
FACTORS PERTAINING TO NEW MEXICO
New Mexico's major industries include energy resources, tourism, services,
crafts, agribusiness, manufacturing and mining. Energy resource production,
including crude petroleum, natural gas, uranium and coal, was approximately
$4.28 million in 1993. Nonfuel mineral production represented $914 million in
1994. The economy also benefits from the employment and technology base
supplied by federal government scientific research facilities at Los Alamos,
Albuquerque and White Sands. Tourism generated about $2.3 billion for the state
according to a 1991 estimate, a trend that should continue given the large
number of state and federal park lands in the state. Finally, crop and
livestock production remains diverse given the state's variety of climactic
conditions and will also remain a major part of the economy.
New Mexico's unemployment rate rose from 6.4% in August 1995 to 7.2% in
August 1996, surpassing the respective national averages of 5.6% and 5.1%. At
the same time, per capita income rose 6.1% in 1995 to reach $18,055, the ninth
largest increase in the country.
A state Board consisting of the Governor, Lt.-Governor, Treasurer and four
appointees maintains general supervisory authority over the fiscal affairs of
the state as the Constitution limits meetings of the Legislature to 90 calendar
days every two years. The executive branch's Department of Finance and
Administration holds the annual budget hearings. The Governor may exercise a
line-item veto over appropriations measures. The 1994 Legislature cut taxes
after the state's economic strength produced significant surpluses. 1995
unaudited general fund revenues were $2.75 billion against expenditures of
$2.78 billion. 1996 projected revenues are $2.824 billion. As of February 9,
1996, Moody's gives the state's general obligation debt an Aa1 rating while S&P
gives it an AA+ rating.
FACTORS PERTAINING TO OKLAHOMA
Oklahoma's principal industries include trade, manufacturing, mineral and
energy exploration and production and agriculture. Oklahoma is vulnerable to
cyclical fluctuations in oil and gas prices just like any other energy driven
economy. Nonfuel mineral represented $338 million in activity in 1994 while
tourists spent some $3 billion in the state during the same year.
Oklahoma's unemployment rate is low compared to the national average. It
stood at 3.9% in August 1996 and 4.2% in August 1995 compared to national
averages of 5.1% and 5.6%. Per capita income rose 3.1% in 1995 to reach
$18,152.
As of February 9, 1996, Moody's gives the state's general obligation debt an
Aa rating while S&P gives it an AA rating.
FACTORS PERTAINING TO PENNSYLVANIA
Both Pennsylvania and its largest city, Philadelphia, have experienced
difficult budget shortfalls in recent years. The industrial composition of the
Commonwealth has diversified from its peak as heavy-industry cluster for coal
and steel production, especially with the advent of foreign competition in the
last decade. Manufacturing employment has fallen behind that of the service and
trade sectors. New growth emanates from the service sectors especially trade,
medical and health services, educational and financial institutions.
Agriculture remains an important component of the economic structure while food
related industries support even more activity.
Pennsylvania's unemployment rate has approximated the national average in the
past year, falling to 5.0% in August 1996 from 5.6% in August 1995. Per capita
income rose 4.9% in 1995 to reach $23,279.
The Governor must submit a balanced operating budget by law and while the
General assembly may change items, the Governor retains a line-item veto power.
Total appropriations cannot exceed estimated revenues, also taking into account
any deficit or surplus remaining from the previous year. The government was
forced to enact significant cuts and tax increases to deal with severe
shortfalls in 1990-2. The financial situation improved in 1993 and 1994 leading
to surpluses. The 1995 budget also projected surplus of some $4 million. As of
February 9, 1996, Moody's gives the state's general obligation debt an A1
rating while S&P gives it an AA- rating.
FACTORS PERTAINING TO VIRGINIA
The Virginia economy is broad-based and includes manufacturing, tourism,
agriculture, ports, mining and fisheries. Export diversification is an
encouraging sign of growth. Manufacturing, while significant, ranks behind
services, trade and government in share of employment. The federal government
is a major employer given the proximity of Washington, D.C. and the large
numbers of workers employed at Hampton Roads, the nation's largest
concentration of military
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installations. Civilian defense employment has dropped and further cuts are
likely in wake of reductions in defense spending. Still, Virginia's economy has
recovered gradually from the nationwide recession. Non-agricultural employment
also tends to mirror that of the nation.
Virginia's unemployment rate was low 4.1% in August 1996 having dropped
further from the previous year's rate of 4.6%. Per capita income rose 4.9% in
1995 to reach $23,597.
Virginia's Constitution requires a balanced biennial budget. Beyond that, the
Commonwealth historically operates on a fiscally conservative basis and
produced undesignated surpluses in 1992, 1993 and 1994. [1995 and 96 budget] As
of February 9, 1996, Moody's gives the state's general obligation debt an Aaa
rating while S&P gives it an AAA rating.
HEDGING AND OTHER DEFENSIVE ACTIONS
Each Fund may periodically engage in hedging transactions. Hedging is a term
used for various methods of seeking to preserve portfolio capital value of
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in financial futures and index futures as well as related put and
call options on such instruments. Both parties entering into an index or
financial futures contract are required to post an initial deposit of 1% to 5%
of the total contract price. Typically, option holders enter into offsetting
closing transactions to enable settlement in cash rather than take delivery of
the position in the future of the underlying security. Each Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series, portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit. Finally, the potential daily deposit requirements in
futures contracts create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost of the initial
premium. Losses due to hedging transactions will reduce yield. Net gains, if
any, from hedging and other portfolio transactions will be distributed as
taxable distributions to shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and
deposits would exceed 5% of such series' net assets. Each series will invest in
these instruments only in markets believed by the investment adviser to be
active and sufficiently liquid. For further information regarding these
investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, including up to 5% in adequately collateralized
repurchase agreements relating thereto. Interest on each instrument is taxable
for Federal income tax purposes and would reduce the amount of tax-free
interest payable to shareholders.
TEMPORARY INVESTMENTS
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable "temporary investments."
Temporary investments will not exceed 20% of a Fund's assets except when made
for defensive purposes. The Funds will invest only in taxable temporary
investments that are either U.S. Government securities or are rated within the
highest grade by Moody's, S&P, or Fitch and mature within one year from the
date of purchase or carry a variable or floating rate of interest. See Appendix
A for more information about ratings by Moody's, S&P, and Fitch.
The Funds may invest in the following federally tax-exempt temporary
investments:
Bond Anticipation Notes (BANs) are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing
for projects that will eventually be funded through the sale of long-term
debt obligations or bonds. The ability of an issuer to meet its obligations
on its BANs is primarily dependent on the issuer's access to the long-term
municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments
to finance the current operations of such governments. Repayment is
generally to be derived from specific future tax revenues. Tax anticipation
notes are usually general obligations of the issuer. A weakness in an
issuer's capacity to raise taxes due to, among other things, a decline in
its tax base or a rise in delinquencies, could adversely affect the
issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or
governmental bodies with the expectation that future revenues from a
designated source will be used to repay the notes. In general, they also
constitute general
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obligations of the issuer. A decline in the receipt of projected revenues,
such as anticipated revenues from another level of government, could
adversely affect an issuer's ability to meet its obligations on outstanding
RANs. In addition, the possibility that the revenues would, when received,
be used to meet other obligations could affect the ability of the issuer to
pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained
from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as
those described above to commercial banks as evidence of borrowings. The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These
notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities
and their agencies. Payment of principal and interest on issues of
municipal paper may be made from various sources, to the extent the funds
are available therefrom. Maturities of municipal paper generally will be
shorter than the maturities of TANs, BANs or RANs. There is a limited
secondary market for issues of municipal paper.
Certain Municipal Obligations may carry variable or floating rates of
interest whereby the rate of interest is not fixed, but varies with changes in
specified market rates or indices, such as a bank prime rate or a tax-exempt
money market index.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the
extent permitted under its investment objective, policies and limitations. Such
notes may be issued for different purposes and may be secured differently from
those mentioned above.
The Funds may also invest in the following taxable temporary investments:
U.S. Government Direct Obligations are issued by the United States
Treasury and include bills, notes and bonds.
--Treasury bills are issued with maturities of up to one year. They are
issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
--Treasury notes are longer-term interest bearing obligations with
original maturities of one to seven years.
--Treasury bonds are longer-term interest-bearing obligations with
original maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been
established as instrumentalities of the United States Government to supervise
and finance certain types of activities. These agencies include, but are not
limited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States, and Tennessee Valley Authority. Issues of these agencies, while not
direct obligations of the United States Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury or
supported by the issuing agencies' right to borrow from the Treasury. There can
be no assurance that the United States Government itself will pay interest and
principal on securities as to which it is not legally so obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable
interest bearing instrument with a specific maturity. CDs are issued by banks
in exchange for the deposit of funds and normally can be traded in the
secondary market, prior to maturity. The Fund will only invest in U.S. dollar
denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few days to nine months. Commercial paper may be purchased from
U.S. corporations.
Other Corporate Obligations--The Funds may purchase notes, bonds and
debentures issued by corporations if at the time of purchase there is less than
one year remaining until maturity or if they carry a variable or floating rate
of interest.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. Government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during a Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Funds will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the
opinion of Nuveen Advisory present minimal credit risk. The risk to the Funds
is limited to the ability of the issuer to pay the agreed-upon repurchase price
on the delivery date; however, although the value of the underlying collateral
at the time the transaction is entered into always equals or exceeds the
agreed-upon repurchase price, if the value of the collateral declines there is
a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but a Fund might incur a loss if the value of the
collateral declines, and might incur disposition
S-8
<PAGE>
costs or experience delays in connection with liquidating the collateral. In
addition, if bankruptcy proceedings are commenced with respect to the seller of
the security, realization upon the collateral by a Fund may be delayed or
limited. Nuveen Advisory will monitor the value of collateral at the time the
transaction is entered into and at all times subsequent during the term of the
repurchase agreement in an effort to determine that the value always equals or
exceeds the agreed upon price. In the event the value of the collateral
declined below the repurchase price, Nuveen Advisory will demand additional
collateral from the issuer to increase the value of the collateral to at least
that of the repurchase price. Each of the Funds will not invest more than 10%
of its assets in repurchase agreements maturing in more than seven days.
S-9
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Funds under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has eight
trustees, two of whom are "interested persons" (as the term "interested
persons" is defined in the Investment Company Act of 1940) and six of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Timothy R. Schwertfeger* 47 Chairman and Chairman since July 1, 1996 of The John Nuveen
333 West Wacker Drive Trustee Company, John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory
Corp.; prior thereto Executive Vice President and
Director of The John Nuveen Company (since March
1992), John Nuveen & Co. Incorporated, Nuveen
Advisory Corp. (since October 1992) and Nuveen
Institutional Advisory Corp. (since October 1992).
Anthony T. Dean* 51 President and President since July 1, 1996 of The John Nuveen
333 West Wacker Drive Trustee Company, John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory
Corp.; prior thereto, Executive Vice President and
Director of The John Nuveen Company (since March
1992), John Nuveen & Co. Incorporated, Nuveen
Advisory Corp. (since October 1992) and Nuveen
Institutional Advisory Corp. (since October 1992).
Lawrence H. Brown 62 Trustee Retired (August 1989) as Senior Vice President of
201 Michigan Avenue The Northern Trust Company.
Highwood, IL 60040
Robert P. Bremner 56 Trustee Private Investor and Management Consultant.
3725 Huntington
Street, N.W.
Washington, D.C. 20015
Anne E. Impellizzeri 64 Trustee President and Chief Executive Officer of Blanton-
3 West 29th Street Peale Institute (since December 1990); prior
New York, NY 10001 thereto, Vice President of New York City
Partnership (from 1987 to 1990).
Margaret K. Rosenheim 70 Trustee Helen Ross Professor of Social Welfare Policy,
969 East 60th Street School of Social Service Administration,
Chicago, IL 60637 University of Chicago.
Peter R. Sawers 63 Trustee Adjunct Professor of Business and Economics,
22 The Landmark University of Dubuque, Iowa; Adjunct Professor,
Northfield, IL 60093 Lake Forest Graduate School of Management, Lake
Forest, Illinois (since January 1992); prior
thereto, Executive Director, Towers Perrin
Australia (management consultant); Chartered
Financial Analyst; Certified Management
Consultant.
William J. Schneider 52 Trustee Senior Partner, Miller-Valentine Partners, Vice
4000 Miller-Valentine Ct. president, Miller-Valentine Realty, Inc.
P.O. Box 744
Dayton, OH 45401
William M. Fitzgerald 32 Vice President Vice President of Nuveen Advisory Corp. (since
333 West Wacker Drive December 1995); Assistant Vice President of Nuveen
Chicago, IL 60606 Advisory Corp. (from September 1992 to December
1995), prior thereto Assistant Portfolio Manager
of Nuveen Advisory Corp. (from June 1988 to
September 1992).
Kathleen M. Flanagan 49 Vice President Vice President of John Nuveen & Co. Incorporated.
333 West Wacker Drive
Chicago, IL 60606
J. Thomas Futrell 41 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
S-10
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Steven J. Krupa 39 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis 50 Vice President Vice President of John Nuveen & Co. Incorporated.
333 West Wacker Drive
Chicago, IL 60606
Larry W. Martin 45 Vice President Vice President (since September 1992), and
333 West Wacker Drive Assistant Secretary and Assistant General Counsel
Chicago, IL 60606 of John Nuveen & Co. Incorporated; Vice President
(since May 1993) and Assistant Secretary of Nuveen
Advisory Corp.; Vice President (since May 1993)
and Assistant Secretary (since January 1992) of
Nuveen Institutional Advisory Corp.; Assistant
Secretary of The John Nuveen Company (since
February 1993).
Edward F. Neild, IV 31 Vice President Vice President (since September 1996), previously
One South Main Street Assistant Vice President (since December 1993) of
Dayton, OH 45402 Nuveen Advisory Corp., portfolio manager prior
thereto (since January 1992); Vice President
(since September 1996), previously Assistant Vice
President (since May 1995) of Nuveen Institutional
Advisory Corp., portfolio manager prior thereto
(since January 1992).
O. Walter Renfftlen 57 Vice President Vice President and Controller of The John Nuveen
333 West Wacker Drive Company (since March 1992), John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.
Thomas C. Spalding, Jr. 45 Vice President Vice President of Nuveen Advisory Corp. and Nuveen
333 West Wacker Drive Institutional Advisory Corp.; Chartered Financial
Chicago, IL 60606 Analyst.
H. William Stabenow 62 Vice President Vice President and Treasurer of The John Nuveen
333 West Wacker Drive Company (since March 1992), John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. (since January 1992).
Gifford R. Zimmerman 40 Vice President Vice President (since September 1992), Assistant
333 West Wacker Drive and Assistant Secretary and Assistant General Counsel of John
Chicago, IL 60606 Secretary Nuveen & Co. Incorporated; Vice President (since
May 1993) and Assistant Secretary of Nuveen
Advisory Corp.; Vice President (since May 1993)
and Assistant Secretary (since January 1992) of
Nuveen Institutional Advisory Corp.
</TABLE>
Anthony Dean, Margaret Rosenheim and Timothy Schwertfeger serve as members of
the Executive Committee of the Board of Trustees. The Executive Committee,
which meets between regular meetings of the Board of Trustees, is authorized to
exercise all of the powers of the Board of Trustees.
The trustees of the Trust are also directors or trustees, as the case may be,
of 9 other Nuveen open-end funds and 52 Nuveen closed-end funds.
The following table sets forth estimated compensation paid or accrued by the
Trust to each of the trustees of the Trust for the first full fiscal year and
the total compensation that all Nuveen Funds paid to each trustee during the
calendar year 1996. The Trust has no retirement or pension plans. The officers
and trustees affiliated with Nuveen serve without any compensation from the
Trust.
<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM TRUST AND
FROM THE SERIES FUND COMPLEX
NAME OF TRUSTEE OF THIS TRUST PAID TO TRUSTEES
--------------- --------------- ----------------
<S> <C> <C>
Robert P. Bremner........................ $3,477(3) $20,500(3)
Lawrence H. Brown........................ $3,237 $58,500
Anne E. Impellizzeri..................... $3,237 $58,500
Margaret K. Rosenheim.................... $3,579(2) $66,315(1)
Peter R. Sawers.......................... $3,237 $58,500
William J. Schneider..................... $3,700(3) $21,500(3)
</TABLE>
- --------
(1) Includes $1,565 in interest accrued on deferred compensation from prior
years.
(2) Includes $324 in interest accrued on deferred compensation from prior
years.
(3) As a trustee of the Flagship Funds, for the 12 months ended May 31, 1996.
S-11
<PAGE>
Each trustee who is not affiliated with Nuveen or Nuveen Advisory receives a
fee. The Trust requires no employees other than its officers, all of whom are
compensated by Nuveen.
The officers and directors of each Fund, in the aggregate, own less than 1%
of the shares of the Fund.
The following table sets forth the percentage ownership of each person, who,
as of January 3, 1997, owns of record, or is known by Registrant to own of
record or beneficially 5% or more of any class of a Fund's shares.
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Arizona
Municipal Bond Fund
Class A Shares........... Merrill Lynch, Pierce, Fenner & Smith 22.33%
for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Arizona
Municipal Bond Fund
Class C Shares........... Merrill Lynch, Pierce, Fenner & Smith 30.11
for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Arizona
Municipal Bond Fund
Class R Shares...........
Nuveen Flagship Colorado
Municipal Bond Fund
Class A Shares........... Merrill Lynch, Pierce, Fenner & Smith 26.16
for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Florida
Municipal Bond Fund
Class A Shares........... Merrill Lynch, Pierce, Fenner & Smith 54.51
for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Florida
Municipal Bond Fund
Class C Shares........... Merrill Lynch, Pierce, Fenner & Smith 73.95
for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
PaineWebber for the benefit of 5.09
Robert L. Brumm TTEE
UAD 8-8-80
FBO Robert L. Brumm
14300 Passage Way
Seminole, FL 33776-1003
Clark E. McDonald 5.07
Sylvia K. McDonald JT Wros
Cypress Village #422A
4600 Middleton Park Cir. E.
Jacksonville, FL 32224-6623
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Florida
Municipal Bond Fund
Class R Shares.............
Nuveen Flagship Florida
Intermediate Municipal Bond Merrill Lynch, Pierce, Fenner & Smith 49.28
Fund for the sole benefit of its customers
Class A Shares............. Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
NFSC FEBO #OCF-075582 19.16
Big Fork Holding Co.
A partnership
Mac A. Greco
600 Madison Street
Tampa, FL 33602-4017
Nuveen Flagship Florida
Intermediate Municipal Bond Merrill Lynch, Pierce, Fenner & Smith 82.43
Fund for the sole benefit of its customers
Class C Shares............. Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Maryland Municipal
Bond Fund NFSC FEBO # A1F-375349 16.48
Class A Shares............. Imelda J. Hall
4610 Col. Fenwick Place
Upper Marlboro, MD 20772
Merrill Lynch, Pierce, Fenner & Smith 7.55
for the sole benefit of its customers
Attn: Fund Administration #97E83
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Evelyn A. Thomas TR 5.12
UA April 10, 1991
Evelyn A. Thomas Trust
7215 Delfield St.
Chevy Chase, MD 20815-4045
Nuveen Maryland Municipal
Bond Fund NFSC FEBO # OC8-463639 42.27
Class C Shares............. Arnold P. Litman
15100 Carrolton Rd.
Rockville, MD 20853
Donaldson, Lufkin & Jenrette 5.64
Securities Corporation, Inc.
PO Box 2052
Jersey City, NJ 07303-9998
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Catherine Small & Robert N. Small 5.45%
JT Ten WROS Not TC
1039 Bay Front Ave.
North Beach, MD 20714-9751
Jessie L. & John L. Daniels & 5.12
Diane D. Cole & Lynne D. Mella TRS
UA Dec 21, 1992
Jessie L. Daniels Trust
9039 Rouen Ln.
Potomac, ND 20854-3135
Nuveen Maryland Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 6.24
Class R Shares............. for the sole benefit of its customers
Attn: Fund Admn/#979D5
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship New Mexico
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 38.18
Class A Shares............. for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Pennsylvania
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 48.95
Class A Shares............. for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Pennsylvania
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 61.87
Class C Shares............. for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Key Clearing Corp. 8.44
A/C 6028-2544
PO Box 93971
Cleveland, OH 44101-5971
Nuveen Flagship Pennsylvania
Municipal Bond Fund
Class R Shares.............
Nuveen Flagship Virginia
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 30.20
Class A Shares............. for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Virginia
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 53.79
Class C Shares............. for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Charles Schwab & Co. Inc. 10.97%
Attn: Mutual Funds Dept.
101 Montgomery St.
San Francisco, CA 94104-4122
Nuveen Flagship Virginia
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 6.80
Class R Shares............ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-15
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the
investment and reinvestment of the assets of each of the Funds. Nuveen Advisory
also administers the Trust's business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. See "Fund
Service Providers" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and
the Trust, each of the Funds has agreed to pay an annual management fee at the
rates set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE FEE MANAGEMENT FEE
- --------------------------------- --------------
<S> <C>
For the first $125 million....................................... .5500 of 1%
For the next $125 million........................................ .5375 of 1%
For the next $250 million........................................ .5250 of 1%
For the next $500 million........................................ .5125 of 1%
For the next $1 billion.......................................... .5000 of 1%
For assets over $2 billion....................................... .4750 of 1%
</TABLE>
For all Funds, except the Maryland Fund, Nuveen Advisory has committed
through at least 1998 to waive fees or reimburse expenses to the extent
necessary to maintain a dividend level competitive with that of similar funds,
and has for all Funds, including the Maryland Fund, voluntarily agreed through
July 31, 1997 to waive fees or reimburse expenses so that the total operating
expenses (not counting distribution and service fees, interest, taxes, fees
incurred in acquiring and disposing of portfolio securities and, to the extent
permitted, extraordinary expenses) for the fund do not exceed 0.75% of average
daily net assets.
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF EXPENSE FEE WAIVERS AND EXPENSE
REIMBURSEMENT PAID TO NUVEEN REIMBURSEMENTS
ADVISORY FOR THE YEAR ENDED FOR THE YEAR ENDED
------------------------------------------------------
1/31/94 1/31/95 1/31/96 1/31/94 1/31/95 1/31/96
---------- --------------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Maryland Municipal Bond
Fund................... $ 172,693 189,022 131,476 42,288 65,460 148,537
</TABLE>
For the last three fiscal years, the Arizona Municipal Bond Fund, the
Colorado Municipal Bond Fund, the Florida Municipal Bond Fund, the Florida
Intermediate Municipal Bond Fund, the New Mexico Municipal Bond Fund, the
Oklahoma Municipal Bond Fund, the Pennsylvania Municipal Bond Fund, and the
Virginia Municipal Bond Fund paid net management fees to Flagship Financial,
predecessor to Nuveen Advisory, as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF
EXPENSE REIMBURSEMENT
PAID TO FLAGSHIP FEE WAIVERS AND EXPENSE
FINANCIAL FOR THE YEAR REIMBURSEMENTS
ENDED FOR THE YEAR ENDED
------------------------ ---------------------------
5/31/94 5/31/95 5/31/96 5/31/94 5/31/95 5/31/96
-------- ------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Arizona Municipal Bond
Fund..................... $ 43,162 122,032 82,113 377,569 277,079 337,926
Colorado Municipal Bond
Fund..................... $ -- -- -- 162,901 169,048 257,637
Florida Municipal Bond
Fund..................... $314,749 633,336 980,751 1,676,047 1,093,473 685,218
Florida Intermediate
Municipal Bond Fund...... $ -- -- -- 2,503 19,498 75,798
New Mexico Municipal Bond
Fund..................... $ -- 17,972 32,291 225,840 226,715 226,537
Oklahoma Municipal Bond
Fund..................... $ -- -- -- -- -- --
Pennsylvania Municipal
Bond Fund................ $104,513 58,095 65,517 111,454 164,423 167,757
Virginia Municipal Bond
Fund..................... $133,981 211,367 310,198 404,880 351,513 312,111
</TABLE>
As discussed in the Prospectus, in addition to the management fee of Nuveen
Advisory, each Fund pays all other costs and expenses of its operations and a
portion of the Trust's general administrative expenses allocated in proportion
to the net assets of each Fund.
Nuveen Advisory is a wholly owned subsidiary of John Nuveen & Co.
Incorporated ("Nuveen"), the Funds' principal underwriter. Founded in 1898,
Nuveen is the oldest and largest investment banking firm specializing in the
underwriting and distribution of tax-exempt securities and maintains the
largest research department in the investment banking community devoted
exclusively to the analysis of municipal securities. In 1961, Nuveen began
sponsoring the Nuveen Tax-Exempt Unit Trust and since that time has issued more
than $36 billion in tax-exempt unit trusts, including over $12 billion in tax-
exempt insured unit trusts. In addition, Nuveen open-end and closed-end funds
held
S-16
<PAGE>
approximately $35 billion in tax-exempt securities under management as of the
date of this Statement. Over 1,000,000 individuals have invested to date in
Nuveen's tax-exempt funds and trusts. Nuveen is a subsidiary of The John Nuveen
Company which, in turn, is approximately 78% owned by The St. Paul Companies,
Inc. ("St. Paul"). St. Paul is located in St. Paul, Minnesota and is
principally engaged in providing property-liability insurance through
subsidiaries. Effective January 1, 1997, The John Nuveen Company acquired
Flagship Resources Inc., and as part of that acquisition, Flagship Financial,
the adviser to the Flagship Funds, was merged with Nuveen Advisory.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's
Research Department. The Nuveen Research Department reviews more than $100
billion in municipal bonds every year.
The Funds, the other Nuveen funds, Nuveen Advisory, and other related
entities have adopted a code of ethics which essentially prohibits all Nuveen
fund management personnel, including Nuveen fund portfolio managers, from
engaging in personal investments which compete or interfere with, or attempt to
take advantage of, a Fund's anticipated or actual portfolio transactions, and
is designed to assure that the interests of Fund shareholders are placed before
the interests of Nuveen personnel in connection with personal investment
transactions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of each Fund, will place orders in such manner as, in the opinion
of management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be
obtained elsewhere. Portfolio securities will not be purchased from Nuveen or
its affiliates except in compliance with the Investment Company Act of 1940.
The Funds expect that all portfolio transactions will be effected on a
principal (as opposed to an agency) basis and, accordingly, do not expect to
pay any brokerage commissions. Purchases from underwriters will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include the spread between the bid and asked price. Given the
best price and execution obtainable, it will be the practice of the Funds to
select dealers which, in addition, furnish research information (primarily
credit analyses of issuers and general economic reports) and statistical and
other services to Nuveen Advisory. It is not possible to place a dollar value
on information and statistical and other services received from dealers. Since
it is only supplementary to Nuveen Advisory's own research efforts, the receipt
of research information is not expected to reduce significantly Nuveen
Advisory's expenses. While Nuveen Advisory will be primarily responsible for
the placement of the business of the Funds, the policies and practices of
Nuveen Advisory in this regard must be consistent with the foregoing and will,
at all times, be subject to review by the Board of Trustees.
Nuveen Advisory reserves the right to, and does, manage other investment
accounts and investment companies for other clients, which may have investment
objectives similar to the Funds. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Funds and the portfolios of its other clients purchasing or selling
securities whenever decisions are made to purchase or sell securities by a Fund
and one or more of such other clients simultaneously. In making such
allocations the main factors to be considered will be the respective investment
objectives of the Fund and such other clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other clients, the size of investment
commitments generally held by the Fund and such other clients and opinions of
the persons responsible for recommending investments to the Fund and such other
clients. While this procedure could have a detrimental effect on the price or
amount of the securities available to a Fund from time to time, it is the
opinion of the Board of Trustees that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
Under the Investment Company Act of 1940, the Funds may not purchase
portfolio securities from any underwriting syndicate of which Nuveen is a
member except under certain limited conditions set forth in Rule 10f-3. The
Rule sets forth requirements relating to, among other things, the terms of an
issue of Municipal Obligations purchased by a Fund, the amount of Municipal
Obligations which may be purchased in any one issue and the assets of a Fund
which may be invested in a particular issue. In addition, purchases of
securities made pursuant to the terms of the Rule must be approved at least
quarterly by the Board of Trustees, including a majority of the trustees who
are not interested persons of the Trust.
S-17
<PAGE>
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Funds
will be determined separately for each class of the Fund's shares by The Chase
Manhattan Bank, the Funds' custodian, as of the close of trading (normally 4:00
p.m. Eastern Time) on each day on which the New York Stock Exchange (the
"Exchange") is normally open for trading. The Exchange is not open for trading
on New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of a class of shares of a Fund will be computed by dividing the
value of the Fund's assets attributable to the class, less the liabilities
attributable to the class, by the number of shares of the class outstanding.
In determining net asset value for the Funds, each Fund's custodian utilizes
the valuations of portfolio securities furnished by a pricing service approved
by the trustees. The pricing service values portfolio securities at the mean
between the quoted bid and asked price or the yield equivalent when quotations
are readily available. Securities for which quotations are not readily
available (which constitute a majority of the securities held by the Funds) are
valued at fair value as determined by the pricing service using methods which
include consideration of the following: yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. The pricing service may
employ electronic data processing techniques and/or a matrix system to
determine valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Trust under the general supervision of the
Board of Trustees.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based upon the
advice of Fried, Frank, Harris, Shriver & Jacobson, counsel to the Trust.
Each Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, a Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, a Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second, a
Fund must derive less than 30% of its annual gross income from the sale or
other disposition of any of the following which was held for less than three
months: (i) stock or securities and (ii) certain options, futures, or forward
contracts (the "short-short test"). Third, a Fund must diversify its holdings
so that, at the close of each quarter of its taxable year, (i) at least 50% of
the value of its total assets is comprised of cash, cash items, United States
Government securities, securities of other regulated investment companies and
other securities limited in respect of any one issuer to an amount not greater
in value than 5% of the value of a Fund's total assets and to not more than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of the total assets is invested in the securities of any one
issuer (other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by a Fund and
engaged in the same, similar or related trades or businesses.
As a regulated investment company, a Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (which includes dividends,
taxable interest, taxable original issue discount and market discount income,
income from securities lending, net short-term capital gain in excess of long-
term capital loss, and any other taxable income other than "net capital gain"
(as defined below) and is reduced by deductible expenses) and (ii) its net tax-
exempt interest (the excess of its gross tax-exempt interest income over
certain disallowed deductions). A Fund may retain for investment its net
capital gain (which consists of the excess of its net long-term capital gain
over its short-term capital loss). However, if a Fund retains any net capital
gain or any investment company taxable income, it will be subject to tax at
regular corporate rates on the amount retained. If a Fund retains any capital
gain, such Fund may designate the retained amount as undistributed capital
gains in a notice to its shareholders who, if subject to federal income tax on
long-term capital gains, (i) will be required to include in income for federal
income tax purposes, as long-term capital gain, their shares of such
undistributed amount, and (ii) will be entitled to credit their proportionate
shares of the tax paid by such Fund against their federal income tax
liabilities if any, and to claim refunds to the extent the credit exceeds such
liabilities. For federal income tax purposes, the tax basis of shares owned by
a shareholder of the Fund will be increased by an amount equal under current
law to 65% of the amount of undistributed capital gains included in the
shareholder's gross income. Each Fund intends to distribute at
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least annually to its shareholders all or substantially all of its net tax-
exempt interest and any investment company taxable income and net capital gain.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if they had been incurred in the succeeding year.
Each Fund also intends to satisfy conditions (including requirements as to
the proportion of its assets invested in Municipal Obligations) that will
enable it to designate distributions from the interest income generated by
investments in Municipal Obligations, which is exempt from regular federal
income tax when received by such Fund, as exempt-interest dividends.
Shareholders receiving exempt-interest dividends will not be subject to regular
federal income tax on the amount of such dividends. Insurance proceeds received
by a Fund under any insurance policies in respect of scheduled interest
payments on defaulted Municipal Obligations will be excludable from federal
gross income under Section 103(a) of the Code. In the case of non-appropriation
by a political subdivision, however, there can be no assurance that payments
made by the insurer representing interest on "non-appropriation" lease
obligations will be excludable from gross income for federal income tax
purposes. See "Investment Policies and Investment Portfolio; Portfolio
Securities."
Distributions by a Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by a Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If a Fund purchases a Municipal Obligation at a market discount, any gain
realized by the Fund upon sale or redemption of the Municipal Obligation will
be treated as taxable interest income to the extent such gain does not exceed
the market discount, and any gain realized in excess of the market discount
will be treated as capital gains. Any net long-term capital gains realized by a
Fund and distributed to shareholders in cash or additional shares, will be
taxable to shareholders as long-term capital gains regardless of the length of
time investors have owned shares of a Fund. Distributions by a Fund that do not
constitute ordinary income dividends, exempt-interest dividends, or capital
gain dividends will be treated as a return of capital to the extent of (and in
reduction of) the shareholder's tax basis in his or her shares. Any excess will
be treated as gain from the sale of his or her shares, as discussed below.
If a Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of
income designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income that was tax-
exempt during the period covered by the distribution.
If a Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to a Fund, defer a Fund's losses, cause
adjustments in the holding periods of a Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Because the taxable portion of a Fund's investment income consists primarily
of interest, none of its dividends, whether or not treated as exempt-interest
dividends, is expected to qualify under the Internal Revenue Code for the
dividends received deductions for corporations.
Prior to purchasing shares in a Fund, the impact of dividends or
distributions which are expected to be or have been declared, but not paid,
should be carefully considered. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect
of reducing the per share net asset value by the per share amount of the
dividend or distribution.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by a Fund (and received by
the shareholders) on December 31.
The redemption or exchange of the shares of a Fund normally will result in
capital gain or loss to the shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, net capital gains (i.e., the excess of net long-term
capital gain over net short-term capital loss) will be taxed at a maximum
marginal rate of 28%, while short-term capital gains and other ordinary income
will be taxed at a maximum marginal rate of 39.6%. Because of the limitations
on itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective tax rate may be higher in certain
circumstances.
All or a portion of a sales charge paid in purchasing shares of a Fund cannot
be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent
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shares of a Fund or another fund are subsequently acquired without payment of a
sales charge pursuant to the reinvestment or exchange privilege. Any
disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Moreover, losses
recognized by a shareholder on the redemption or exchange of shares of a Fund
held for six months or less are disallowed to the extent of any distribution of
exempt-interest dividends received with respect to such shares and, if not
disallowed, such losses are treated as long-term capital losses to the extent
of any distributions of long-term capital gains made with respect to such
shares. In addition, no loss will be allowed on the redemption or exchange of
shares of a Fund if the shareholder purchases other shares of such Fund
(whether through reinvestment of distributions or otherwise) or the shareholder
acquires or enters into a contract or option to acquire securities that are
substantially identical to shares of a Fund within a period of 61 days
beginning 30 days before and ending 30 days after such redemption or exchange.
If disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.
It may not be advantageous from a tax perspective for shareholders to redeem
or exchange shares after tax-exempt income has accrued but before the record
date for the exempt-interest dividend representing the distribution of such
income. Because such accrued tax-exempt income is included in the net asset
value per share (which equals the redemption or exchange value), such a
redemption could result in treatment of the portion of the sales or redemption
proceeds equal to the accrued tax-exempt interest as taxable gain (to the
extent the redemption or exchange price exceeds the shareholder's tax basis in
the shares disposed of) rather than tax-exempt interest.
In order to avoid a 4% federal excise tax, a Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which such Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Funds intend to make timely distributions in
compliance with these requirements and consequently it is anticipated that they
generally will not be required to pay the excise tax.
If in any year a Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from Municipal Obligations), and distributions to its shareholders would
be taxable to shareholders as ordinary dividend income for federal income tax
purposes to the extent of the Fund's available earnings and profits.
Among the requirements that a Fund must meet in order to qualify under
Subchapter M in any year is that less than 30% of its gross income must be
derived from the sale or other disposition of securities and certain other
assets held for less than three months.
Because the Funds may invest in private activity bonds, the interest on which
is not federally tax-exempt to persons who are "substantial users" of the
facilities financed by such bonds or "related persons" of such "substantial
users," the Funds may not be an appropriate investment for shareholders who are
considered either a "substantial user" or a "related person" within the meaning
of the Code. For additional information, investors should consult their tax
advisers before investing in a Fund.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals. Interest on certain Municipal Obligations, such
as bonds issued to make loans for housing purposes or to private entities (but
not for certain tax-exempt organizations such as universities and non-profit
hospitals), is included as an item of tax preference in determining the amount
of a taxpayer's alternative minimum taxable income. To the extent that a Fund
receives income from Municipal Obligations subject to the alternative minimum
tax, a portion of the dividends paid by it, although otherwise exempt from
federal income tax, will be taxable to shareholders to the extent that their
tax liability is determined under the alternative minimum tax regime. The Funds
will annually supply shareholders with a report indicating the percentage of
Fund income attributable to Municipal Obligations subject to the federal
alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is
increased by 75% of the difference between an alternative measure of income
("adjusted current earnings") and the amount otherwise determined to be the
alternative minimum taxable income. Interest on all Municipal Obligations, and
therefore all distributions by the Funds that would otherwise be tax-exempt, is
included in calculating a corporation's adjusted current earnings.
Tax-exempt income, including exempt-interest dividends paid by a Fund, will
be added to the taxable income of individuals receiving social security or
railroad retirement benefits in determining whether a portion of that benefit
will be subject to federal income tax.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of a Fund may
be considered to have been made with borrowed funds even though such funds are
not directly traceable to the purchase of shares.
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The Funds are required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Funds their correct taxpayer identification
number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or
administrative action, and any such change may be retroactive with respect to
Fund transactions. Shareholders are advised to consult their own tax advisers
for more detailed information concerning the federal taxation of the Funds and
the income tax consequences to their shareholders.
STATE TAX MATTERS
The discussion of tax treatment is based on the assumptions that the Funds
will qualify under Subchapter M of the Code as regulated investment companies
and as qualified investment funds under applicable state law, that they will
satisfy the conditions which will cause distributions to qualify as exempt-
interest dividends to shareholders when distributed as intended, and that each
Fund will distribute all interest and dividends it receives to its
shareholders. Unless otherwise noted, shareholders in each Fund will not be
subject to state income taxation on distributions that are attributable to
interest earned on the municipal obligations issued by that state or its
subdivisions, or on obligations of the United States. Shareholders generally
will be required to include capital gain distributions in their income for
state tax purposes. The tax discussion summarizes general state tax laws which
are currently in effect and are subject to change by legislative or
administrative action; any such changes may be retroactive with respect to the
applicable Fund's transactions. Investors should consult a tax adviser for more
detailed information about state taxes to which they may be subject.
MARYLAND
The following is a general, abbreviated summary of certain provisions of the
applicable Maryland tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Maryland
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Maryland Fund transactions.
The following is based on the assumptions that the Maryland Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Maryland Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Maryland Fund's shareholders.
The Maryland Fund will be subject to the Maryland corporate income tax only
if it has a sufficient nexus with Maryland. If it is subject to the Maryland
corporate income tax, it does not expect to pay a material amount of such tax.
Distributions by the Maryland Fund that are attributable to interest on or
gain from the sale or exchange of any obligation of Maryland or its political
subdivisions or to interest on obligations of the United States, its
territories, possessions, or instrumentalities that are exempt from state
taxation under federal law will not be subject to the Maryland individual
income tax or the Maryland corporate income tax. All remaining distributions to
shareholders will be subject to the Maryland individual and corporate income
taxes.
Gain on the sale, exchange, or other disposition of shares of the Maryland
Fund will be subject to the Maryland individual and corporate income taxes.
Shares of the Maryland Fund may be subject to the Maryland estate tax if
owned by a Maryland decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Maryland state and local tax matters.
ARIZONA
The following is a general, abbreviated summary of certain provisions of the
applicable Arizona tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Arizona Fund.
This summary does not address the taxation of other shareholders nor does it
discuss any local taxes that may be applicable. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive with respect to Arizona Fund transactions.
The following is based on the assumptions that the Arizona Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
be registered as a diversified management company under (S)5 of the Federal
Investment Company Act of 1940, that it will satisfy the conditions which will
cause Arizona Fund distributions to qualify as exempt-interest dividends to
shareholders, and that it will distribute all interest and dividends it
receives to the Arizona Fund's shareholders.
The Arizona Fund is not subject to the Arizona corporate income tax.
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Distributions by the Arizona Funds that are attributable to interest on any
obligation of Arizona and its political subdivision or to interest on
obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Arizona individual and corporate income taxes. All
remaining distributions, including distributions attributable to capital gains,
will be subject to the Arizona individual and corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Arizona
fund will be subject to the Arizona individual and corporate income taxes.
Shares of the Arizona Fund may be subject to the Arizona estate tax if owned
by an Arizona decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Arizona state and local tax matters.
COLORADO
The following is a general, abbreviated summary of certain provisions of the
applicable Colorado tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Colorado
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Arizona Fund transactions.
The following is based on the assumptions that the Colorado Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Colorado Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Colorado Fund's shareholders.
The Colorado Fund will be subject to the Colorado corporate income tax only
if it has a sufficient nexus with Colorado. If it is subject to the Colorado
corporate income tax, it does not expect to pay a material amount of such tax.
Distributions by the Colorado Fund that are attributable to interest earned
on any obligation of Colorado and its political subdivisions issued on or after
May 1, 1980 and certain such obligations issued before May 1, 1980 or to
interest on obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Colorado corporate income tax. All other distributions,
including distributions attributable to capital gains, will be subject to the
Colorado individual and corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Colorado
Fund will be subject to the Colorado individual and corporate income taxes.
Shares of the Colorado Fund may be subject to the Colorado estate tax if
owned by an Colorado decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Colorado state and local tax matters.
FLORIDA
The following is a general, abbreviated summary of certain provisions of the
applicable Florida tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Florida
Funds. This summary does not address the taxation of other shareholders nor
does it discuss any local taxes that may be applicable. These provisions are
subject to change by legislative or administrative action, and any such change
may be retroactive with respect to transactions of the Florida Funds.
The following is based on the assumptions that the Florida Funds will qualify
under Subchapter M of the Code as regulated investment companies, that they
will satisfy the conditions which will cause distributions of Florida Funds to
qualify as exempt-interest dividends to shareholders, and that they will
distribute all interest and dividends they receive to the Florida Funds'
shareholders.
The Florida Funds will be subject to the Florida corporate income tax only if
they have a sufficient nexus with Florida. If the Florida Funds are subject to
the Florida corporate income tax, they do not expect to pay a material amount
of such tax. The Florida Funds will not be subject to the Florida intangible
personal property tax.
Shares of the Florida Funds will not be subject to the Florida intangible
personal property tax if on January 1 of the taxable year, the Funds hold only
tax-exempt obligations of Florida and its political subdivisions or of the
United States, its territories, possessions or instrumentalities that are
exempt from state taxation under federal law ("Federal Obligations"). If the
Florida Funds hold any other types of assets on that date, then the entire
value of the Funds' shares (except for the portion of the value of the shares
attributable to Federal Obligations) will be subject to the Florida intangible
personal property tax.
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All distributions by the Florida Funds to corporate shareholders, regardless
of source, will be subject to the Florida corporate income tax. Gain on the
sale, exchange, or other dispositions of shares of the Florida Funds will be
subject to the Florida corporate income tax.
Shares of the Florida Funds may be subject to the Florida estate tax if owned
by a Florida decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Florida state and local tax matters.
NEW MEXICO
The following is a general, abbreviated summary of certain provisions of the
applicable New Mexico tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the New Mexico
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to New Mexico Fund transactions.
The following is based on the assumptions that the New Mexico Fund will
qualify under Subchapter M of the Code as a regulated investment company, that
it will satisfy the conditions which will cause New Mexico Fund distributions
to qualify as exempt-interest dividends to shareholders, and that it will
distribute all interest and dividends it receives to the New Mexico Fund's
shareholders.
The New Mexico Fund will be subject to the New Mexico corporate franchise tax
and the New Mexico corporate income tax only if it has a sufficient nexus with
New Mexico. If the New Mexico Fund is subject to such taxes, it does not expect
to pay a material amount of either tax.
Distributions by the New Mexico Fund that are attributable to interest on any
obligation of New Mexico and its political subdivisions or to interest on
obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the New Mexico personal income tax or the New Mexico
corporate income tax. All other distributions, including distributions
attributable to capital gains, will be subject to the New Mexico personal and
corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the New Mexico
Fund will be subject to the New Mexico personal and corporate income taxes.
Shares of the New Mexico Fund may be subject to the New Mexico estate tax if
owned by a New Mexico decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning New Mexico and local tax matters.
PENNSYLVANIA
The following is a general, abbreviated summary of certain provisions of the
applicable Pennsylvania tax law as presently in effect as it directly governs
the taxation of resident individual and corporate shareholders of the
Pennsylvania Fund. This summary does not address the taxation of other
shareholders not does it discuss any local taxes that may be applicable. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Pennsylvania Fund
transactions.
The following is based on the assumptions that the Pennsylvania Fund will
qualify under Subchapter M of the Code and under the Investment Company Act of
1940 as a regulated investment company, that it will satisfy the conditions
which will cause Pennsylvania Fund distributions to qualify as exempt-interest
dividends to shareholders, and that it will distribute all interest and
dividends it receives to the Pennsylvania Fund's shareholders.
The Pennsylvania Fund will not be subject to the Pennsylvania corporate net
income tax. The Pennsylvania Fund will be subject to the Pennsylvania franchise
tax only if it has a sufficient nexus with Pennsylvania. If it is subject to
the Pennsylvania franchise tax, it does not expect to pay a material amount of
such tax.
Distributions from the Pennsylvania Fund that are attributable to interest on
any obligation of Pennsylvania or its political subdivisions or to interest on
obligations of the United States, its territories, possessions, or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Pennsylvania personal income tax or the Pennsylvania
corporate net income tax. Distributions by the Pennsylvania Fund that are
attributable to interest on the obligations of states other than Pennsylvania
will not be subject to the Pennsylvania corporate net income tax unless they
are subject to federal income tax. All other distributions, including those
attributable to capital gains, will be subject to the Pennsylvania personal and
corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the
Pennsylvania Fund will be subject to the Pennsylvania personal and corporate
income taxes.
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Shares of the Pennsylvania Fund may be subject to the Pennsylvania
inheritance tax and the Pennsylvania estate tax if held by a Pennsylvania
decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Pennsylvania and local tax matters.
VIRGINIA
The following is a general, abbreviated summary of certain provisions of the
applicable Virginia tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Virginia
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Virginia Fund transactions.
The following is based on the assumptions that the Virginia Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Virginia Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Virginia Fund's shareholders.
The Virginia Fund will be subject to the Virginia corporate income tax only
if it has a sufficient nexus with Virginia. If it is subject to the Virginia
corporate income tax, it does not expect to pay a material amount of such tax.
Distributions by the Virginia Fund that are attributable to interest on any
obligation of Virginia and its political subdivisions and instrumentalities
("Virginia Obligations") or to interest on obligations of the United States and
its territories, possessions or instrumentalities that are exempt from state
taxation under federal law will not be subject to the Virginia personal income
tax or the Virginia corporate income tax. Distributions attributable to gain on
the sale or exchange of certain Virginia Obligations will be exempt from the
Virginia personal and corporate income taxes if the enabling statute
authorizing the particular obligation expressly exempts such gain from
taxation. All remaining distributions will be subject to the Virginia personal
and corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Virginia
Fund will be subject to the Virginia personal and corporate income taxes.
If a shareholder receives a distribution consisting in part of taxable
income, then the entire distribution will be taxed unless the shareholder
substantiates the portion which is exempt from taxation.
Shares of the Virginia Fund may be subject to the Virginia estate tax if
owned by a Virginia decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Virginia state and local tax matters.
PERFORMANCE INFORMATION
The historical investment performance of the Funds may be shown in the form
of "yield," "taxable equivalent yield," "average annual total return,"
"cumulative total return" and "taxable equivalent total return" figures, each
of which will be calculated separately for each class of shares.
In accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission ("SEC"), yield is computed by dividing the
net investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 4.20% (3% for the
Florida Intermediate Fund).
In computing yield, the Funds follow certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Funds use to prepare their annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in a Fund's financial statements.
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by the remainder of (1 minus the stated combined federal
and state income tax rate, taking into account the deductibility of state taxes
for federal income tax purposes) and adding the product to that portion, if
any, of the yield that is not tax exempt.
S-24
<PAGE>
The taxable equivalent yields quoted below are based upon (1) the stated
combined federal and state income tax rates and (2) the yields for the 30-day
period quoted in the left-hand column. None of the Funds had Class B Shares
outstanding as of the date of this Statement of Additional Information.
<TABLE>
<CAPTION>
AS OF JULY 31, 1996
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
Maryland Municipal Bond Fund
Class A Shares............. 4.35% 42.50% 7.57%
Class C Shares............. 3.80% 42.50% 6.61%
Class R Shares............. 4.80% 42.50% 8.35%
<CAPTION>
AS OF NOVEMBER 30, 1996
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
Arizona Municipal Bond Fund
Class A Shares............. 4.27% 43.00% 7.49%
Class C Shares............. 3.92% 43.00% 6.88%
Class R Shares............. N/A N/A N/A
Colorado Municipal Bond Fund
Class A Shares............. 4.94% 42.50% 8.59%
Class C Shares............. N/A N/A N/A
Class R Shares............. N/A N/A N/A
Florida Municipal Bond Fund
Class A Shares............. 4.71% 39.60% 7.80%
Class C Shares............. 4.36% 39.60% 7.22%
Class R Shares............. N/A N/A N/A
Florida Intermediate
Municipal Bond Fund
Class A Shares............. 4.10% 39.60% 6.79%
Class C Shares............. 3.68% 39.60% 6.09%
Class R Shares............. N/A N/A N/A
New Mexico Municipal Bond
Fund
Class A Shares............. 4.73% 44.50% 8.52%
Class C Shares............. N/A N/A N/A
Class R Shares............. N/A N/A N/A
Oklahoma Municipal Bond Fund
Class A Shares............. N/A N/A N/A
Class C Shares............. N/A N/A N/A
Class R Shares............. N/A N/A N/A
Pennsylvania Municipal Bond
Fund
Class A Shares............. 4.78% 41.50% 8.17%
Class C Shares............. 4.44% 41.50% 7.59%
Class R Shares............. N/A N/A N/A
Virginia Municipal Bond Fund
Class A Shares............. 4.76% 43.00% 8.35%
Class C Shares............. 4.42% 43.00% 7.75%
Class R Shares............. N/A N/A N/A
</TABLE>
- --------
* The combined tax rates used in these tables represent the highest or one
of the highest combined tax rates applicable to state taxpayers, rounded
to the nearest .5%; these rates do not reflect the current federal tax
limitations on itemized deductions and personal exemptions, which may
raise the effective tax rate and taxable equivalent yield for taxpayers
above certain income levels.
For additional information concerning taxable equivalent yields, see the
Taxable Equivalent Yields tables in the Prospectus.
S- 25
<PAGE>
The Funds may from time to time in their advertising and sales materials
report a quotation of their current distribution rate. The distribution rate
represents a measure of dividends distributed for a specified period.
Distribution rate is computed by taking the most recent monthly tax-free income
dividend per share, multiplying it by 12 to annualize it, and dividing by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen UITs, or the maximum public
offering price). The distribution rate differs from yield and total return and
therefore is not intended to be a complete measure of performance. Distribution
rate may sometimes differ from yield because a Fund may be paying out more than
it is earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
The distribution rates as of the period quoted, based on the maximum public
offering price then in effect for the Funds, and assuming the imposition of the
maximum sales charge for Class A Shares of 4.20% (3% for the Florida
Intermediate Fund), were as follows:
<TABLE>
<CAPTION>
JULY 31, 1996
-----------------------
DISTRIBUTION RATES
-----------------------
CLASS A CLASS C CLASS R
------- ------- -------
<S> <C> <C> <C>
Maryland Municipal Bond Fund...................... 4.58% 4.02% 5.01%
<CAPTION>
NOVEMBER 30, 1996
-----------------------
DISTRIBUTION RATES
-----------------------
CLASS A CLASS C CLASS R
------- ------- -------
<S> <C> <C> <C>
Arizona Municipal Bond Fund....................... 4.69% 4.37% N/A
Colorado Municipal Bond Fund...................... 4.80% N/A N/A
Florida Municipal Bond Fund ...................... 4.85% 4.54% N/A
Florida Intermediate Municipal Bond Fund.......... 4.34% 3.97% N/A
New Mexico Municipal Bond Fund.................... 4.64% N/A N/A
Oklahoma Municipal Bond Fund...................... N/A N/A N/A
Pennsylvania Municipal Bond Fund.................. 5.10% 4.79% N/A
Virginia Municipal Bond Fund...................... 5.01% 4.69% N/A
</TABLE>
Average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation
assumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Total returns for the oldest class of each fund reflect actual performance
for all periods. For other classes existing prior to February 1, 1997, total
returns reflect actual performance for periods since class inception, and the
oldest class's performance for periods prior to inception, adjusted for the
differences in sales charges and fees between the classes. For classes created
on February 1, 1997, total returns reflect the oldest class's performance for
all periods, adjusted for the differences in sales charges and fees between the
classes.
S-26
<PAGE>
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
INCEPTION DATES
------------------
<S> <C>
Maryland Municipal Bond fund
Class A Shares............................................. September 6, 1994
Class B Shares............................................. February 1, 1997
Class C Shares............................................. September 6, 1994
Class R Shares............................................. July 26, 1991
Arizona Municipal Bond fund
Class A Shares............................................. October 29, 1986
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 7, 1994
Class R Shares............................................. February 1, 1997
Colorado Municipal Bond fund
Class A Shares............................................. May 4, 1987
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 1, 1997
Class R Shares............................................. February 1, 1997
Florida Municipal Bond fund
Class A Shares............................................. June 15, 1990
Class B Shares............................................. February 1, 1997
Class C Shares............................................. September 14, 1995
Class R Shares............................................. February 1, 1997
Florida Intermediate Municipal Bond fund
Class A Shares............................................. February 1, 1994
Class C Shares............................................. February 2, 1994
Class R Shares............................................. February 1, 1997
New Mexico Municipal Bond fund
Class A Shares............................................. September 16, 1992
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 1, 1997
Class R Shares............................................. February 1, 1997
Pennsylvania Municipal Bond fund
Class A Shares............................................. October 29, 1986
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 2, 1994
Class R Shares............................................. February 1, 1997
Virginia Municipal Bond fund
Class A Shares............................................. March 27, 1986
Class B Shares............................................. February 1, 1997
Class C Shares............................................. October 4, 1993
Class R Shares............................................. February 1, 1997
</TABLE>
The annual total return figures for the Maryland Municipal Bond Fund,
including the effect of the maximum sales charge for Class A shares, for the
one-year and five-year periods ended July 31, 1996 and for the period from
inception through July 30, 1996, were:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
------------------------------------------
ONE YEAR FIVE YEARS FROM INCEPTION
ENDED ENDED THROUGH
JULY 31, 1996 JULY 31, 1996 JULY 31, 1996
------------- ------------- --------------
<S> <C> <C> <C> <C>
Maryland Municipal Bond
Fund
Class A Shares........ 1.07% N/A 5.49%
Class B Shares........ 4.74% N/A 5.78%
Class C Shares........ 4.71% N/A 5.78%
Class R Shares........ 5.74% N/A 6.80%
</TABLE>
S-27
<PAGE>
The annual total return figures for the Arizona Municipal Bond Fund, Colorado
Municipal Bond Fund, Florida Municipal Bond Fund, New Mexico Municipal Bond
Fund, Oklahoma Municipal Bond Fund, Pennsylvania Municipal Bond Fund, and
Virginia Municipal Bond Fund including the effect of the maximum sales charge
for Class A shares, for the one-year and five-year periods (as applicable)
ended August 31, 1996 and for the period from inception through November 30,
1996, were:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-----------------------------------
TEN
YEARS
ONE YEAR FIVE YEARS ENDED FROM INCEPTION
ENDED ENDED NOVEMBER THROUGH
NOVEMBER 30, 1996 NOVEMBER 30, 1996 30, 1996 NOVEMBER 30, 1996
----------------- ----------------- -------- -----------------
<S> <C> <C> <C> <C>
Arizona Municipal Bond
Fund
Class A Shares........ 0.53% 7.36% 7.29% 7.47%
Class B Shares........ 4.37% 7.70% 7.28% 7.46%
Class C Shares........ 4.38% 7.91% 7.26% 7.44%
Class R Shares........ 4.94% 8.29% 7.75% 7.93%
Colorado Municipal Bond
Fund
Class A Shares........ 1.77% 7.13% N/A 6.88%
Class B Shares........ 5.66% 6.80% N/A 6.87%
Class C Shares........ 5.87% 7.68% N/A 6.99%
Class R Shares........ 6.24% 8.06% N/A 7.36%
Florida Municipal Bond
Fund
Class A Shares........ 0.00% 6.56% N/A 7.30%
Class B Shares........ 3.81% 6.89% N/A 7.42%
Class C Shares........ 3.92% 6.65% N/A 7.24%
Class R Shares........ 4.38% 7.48% N/A 8.02%
New Mexico Municipal
Bond Fund
Class A Shares........ 1.33% N/A N/A 5.97%
Class B Shares........ 5.19% N/A N/A 6.46%
Class C Shares........ 5.40% N/A N/A 6.68%
Class R Shares........ 5.77% N/A N/A 7.05%
Pennsylvania Municipal
Bond Fund
Class A Shares........ 0.88% 6.51% 6.79% 6.88%
Class B Shares........ 4.73% 6.85% 6.78% 6.87%
Class C Shares........ 4.73% 6.89% 6.68% 6.76%
Class R Shares........ 5.30% 7.43% 7.24% 7.33%
Virginia Municipal Bond
Fund
Class A Shares........ 0.92% 6.59% 6.96% 7.24%
Class B Shares........ 4.76% 6.92% 6.95% 7.24%
Class C Shares........ 4.86% 6.90% 6.82% 7.07%
Class R Shares........ 5.34% 7.51% 7.42% 7.68%
</TABLE>
S-28
<PAGE>
The annual total return figures for the Florida Intermediate Bond Fund,
including the effect of the maximum sales charge for Class A shares, for the
one-year and five-year periods ended November 30, 1996 and for the period from
inception through November 30, 1996, were:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-----------------------------------------------------
ONE YEAR FIVE YEARS FROM INCEPTION
ENDED ENDED THROUGH
NOVEMBER 30, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Florida Intermediate
Bond Fund
Class A Shares........ 1.68% N/A 5.32%
Class B Shares........ N/A N/A N/A
Class C Shares........ 4.25% N/A 5.90%
Class R Shares........ 4.82% N/A 6.46%
</TABLE>
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Cumulative total return calculations
that do not include the effect of the sales charge would be reduced if such
charge were included.
The cumulative total return figures for the Maryland Municipal Bond Fund,
including the effect of the maximum sales charge for the Class A Shares, for
the one-year and five-year periods ended July 31, 1996, and for the period
since inception through July 31, 1996, using the performance of the oldest
class for periods prior to the inception of the newer classes, as described
above, were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------------
FROM
ONE YEAR INCEPTION
ENDED FIVE YEARS THROUGH
JULY 31, ENDED JULY 31,
1996 JULY 31, 1996 1996
-------- ------------- ---------
<S> <C> <C> <C>
Maryland Municipal Bond Fund
Class A Shares.............. 1.07% N/A 26.68%
Class B Shares.............. 4.74% N/A 28.23%
Class C Shares.............. 4.71% N/A 28.21%
Class R Shares.............. 5.74% N/A 33.76%
</TABLE>
S-29
<PAGE>
The cumulative total return figures for the Arizona Municipal Bond Fund,
Colorado Municipal Bond Fund, Florida Municipal Bond Fund, New Mexico Municipal
Bond Fund, Oklahoma Municipal Bond Fund, Pennsylvania Municipal Bond Fund, and
Virginia Municipal Bond Fund, including the effect of the maximum sales charge
for the Class A Shares, for the one-year and five-year periods (as applicable)
ended August 31, 1996, and for the period since inception through November 30,
1996, using the performance of the oldest class for periods prior to the
inception of the newer classes, as described above, were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS FROM
ENDED ENDED ENDED INCEPTION
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1996 1996 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Arizona Municipal Bond
Fund
Class A Shares........ 0.53% 42.63% 102.04% 106.89%
Class B Shares........ 4.37% 44.87% 101.86% 106.72%
Class C Shares........ 4.38% 46.29% 101.63% 106.28%
Class R Shares........ 4.94% 48.89% 110.90% 115.96%
Colorado Municipal Bond
Fund
Class A Shares........ 1.77% 41.13% N/A 89.12%
Class B Shares........ 5.66% 38.97% N/A 88.95%
Class C Shares........ 5.87% 44.78% N/A 90.93%
Class R Shares........ 6.24% 47.32% N/A 97.41%
Florida Municipal Bond
Fund
Class A Shares........ 0.00% 37.40% N/A 57.67%
Class B Shares........ 3.81% 39.56% N/A 58.83%
Class C Shares........ 3.92% 37.99% N/A 57.05%
Class R Shares........ 4.38% 43.42% N/A 64.58%
New Mexico Municipal
Bond Fund
Class A Shares........ 1.33% N/A N/A 27.60%
Class B Shares........ 5.19% N/A N/A 30.14%
Class C Shares........ 5.40% N/A N/A 31.24%
Class R Shares........ 5.77% N/A N/A 33.20%
Pennsylvania Municipal
Bond Fund
Class A Shares ....... 0.88% 37.10% 92.80% 95.62%
Class B Shares........ 4.73% 39.25% 92.63% 95.45%
Class C Shares........ 4.73% 39.50% 90.90% 93.51%
Class R Shares........ 5.30% 43.11% 101.26% 104.20%
Virginia Municipal Bond
Fund
Class A Shares ....... 0.92% 37.59% 95.93% 111.07%
Class B Shares........ 4.76% 39.75% 95.75% 110.89%
Class C Shares........ 4.86% 39.60% 93.42% 107.52%
Class R Shares........ 5.34% 43.62% 104.52% 120.32%
</TABLE>
S-30
<PAGE>
The cumulative total return figures for the Florida Intermediate Municipal
Bond Fund, including the effect of the maximum sales charge for the Class A
Shares, for the one-year period ended November 30, 1996, and for the period
since inception, through November 30, 1996, respectively, were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
--------------------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Florida Intermediate Municipal
Bond Fund
Class A Shares................ 1.68% N/A 15.80%
Class C Shares................ 4.25% N/A 17.60%
Class R Shares................ 4.82% N/A 19.38%
</TABLE>
Calculation of taxable equivalent total return is also not subject to a
prescribed formula. Taxable equivalent total return for a specific period is
calculated by first taking a hypothetical initial investment in Fund shares on
the first day of the period, computing the total return for each calendar year
in the period in the manner described above, and increasing the total return
for each such calendar year by the amount of additional income that a taxable
fund would need to have generated to equal the income on an after-tax basis, at
a specified income tax rate (usually the highest marginal federal tax rate),
calculated as described above under the discussion of "taxable equivalent
yield." The resulting amount for the calendar year is then divided by the
initial investment amount to arrive at a "taxable equivalent total return
factor" for the calendar year. The taxable equivalent total return factors for
all the calendar years are then multiplied together and the result is then
annualized by taking its Nth root (N representing the number of years in the
period) and subtracting 1, which provides a taxable equivalent total return
expressed as a percentage.
Using the 42.5% maximum marginal federal tax rate for 1997, the annual
taxable equivalent total return for the Maryland Municipal Bond Fund's shares
for the one-year period ended July 31, 1996 with respect to the Class R Shares
was 9.57%.
Class A Shares of the Funds are sold at net asset value plus a current
maximum sales charge of 4.20% of the offering price. This current maximum sales
charge will typically be used for purposes of calculating performance figures.
Yield, returns and net asset value of each class of shares of the Funds will
fluctuate. Factors affecting the performance of the Funds include general
market conditions, operating expenses and investment management. Any additional
fees charged by a securities representative or other financial services firm
would reduce returns described in this section. Shares of the Funds are
redeemable at net asset value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Funds may also compare their performance with that of:
(1) the Consumer Price Index or various unmanaged bond indexes such as the
Lehman Brothers Municipal Bond Index and the Salomon Brothers High Grade
Corporate Bond Index and (2) other fixed income or municipal bond mutual funds
or mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. ("Morningstar"), Wiesenberger Investment
Companies Service ("Wiesenberger") and CDA Investment Technologies, Inc.
("CDA") or similar independent services which monitor the performance of mutual
funds, or other industry or financial publications such as Barron's, Changing
Times, Forbes and Money Magazine. Performance comparisons by these indexes,
services or publications may rank mutual funds over different periods of time
by means of aggregate, average, year-by-year, or other types of total return
and performance figures. Any given performance quotation or performance
comparison should not be considered as representative of the performance of the
Funds for any future period.
Each Fund may from time to time in its advertising and sales materials
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds. These taxable investments
have investment characteristics that differ from those of the Funds. U.S.
Government bonds, for example, are long-term investments backed by the full
faith and credit of the U.S. Government, and bank CDs are generally short-term,
FDIC-insured investments, which pay fixed principal and interest but are
subject to fluctuating rollover rates. Money market funds are short-term
investments with stable net asset values, fluctuating yields and special
features enhancing liquidity.
There are differences and similarities between the investments which the
Funds may purchase and the investments measured by the indexes and reporting
services which are described herein. The Consumer Price Index is generally
considered to be a measure of inflation. The CDA Mutual Fund-Municipal Bond
Index is a weighted performance average of other mutual funds with a federally
tax-exempt income objective. The Salomon Brothers High Grade Corporate Bond
Index is an unmanaged index that generally represents the performance of high
grade long-term taxable bonds during various market conditions. The Lehman
Brothers Municipal Bond Index is an unmanaged index that generally represents
the performance of high grade intermediate and long-term municipal bonds during
various market conditions. Lipper, Morningstar, Wiesenberger and CDA are widely
recognized mutual fund reporting services whose performance calculations are
based upon changes in net asset value with all dividends reinvested and which
do not include
S-31
<PAGE>
the effect of any sales charges. The market prices and yields of taxable and
tax-exempt bonds will fluctuate. The Fund primarily invests in investment grade
Municipal Obligations in pursuing their objective of as high a level of current
interest income which is exempt from federal and state income tax as is
consistent, in the view of the Funds' management, with preservation of capital.
The Funds may also compare their taxable equivalent total return performance
to the total return performance of taxable income funds such as treasury
securities funds, corporate bond funds (either investment grade or high yield),
or Ginnie Mae funds. These types of funds, because of the character of their
underlying securities, differ from municipal bond funds in several respects.
The susceptibility of the price of treasury bonds to credit risk is far less
than that of municipal bonds, but the price of treasury bonds tends to be
slightly more susceptible to change resulting from changes in market interest
rates. The susceptibility of the price of investment grade corporate bonds and
municipal bonds to market interest rate changes and general credit changes is
similar. High yield bonds are subject to a greater degree of price volatility
than municipal bonds resulting from changes in market interest rates and are
particularly susceptible to volatility from credit changes. Ginnie Mae bonds
are generally subject to less price volatility than municipal bonds from credit
concerns, due primarily to the fact that the timely payment of monthly
installments of principal and interest are backed by the full faith and credit
of the U.S. Government, but Ginnie Mae bonds of equivalent coupon and maturity
are generally more susceptible to price volatility resulting from market
interest rate changes. In addition, the volatility of Ginnie Mae bonds due to
changes in market interest rates may differ from municipal bonds of comparable
coupon and maturity because bonds of the sensitivity of Ginnie Mae prepayment
experience to change in interest rates.
ADDITIONAL INFORMATION ON THE PURCHASE AND
REDEMPTION OF FUND SHARES
As described in the Prospectus, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of a Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with
respect to any distribution or service plan applicable to its shares. As a
result of the differences in the expenses borne by each class of shares, net
income per share, dividends per share and net asset value per share will vary
among a Fund's classes of shares.
Shareholders of each class will shares expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include
distribution and service fees.
REDUCTION OR ELIMINATION OF UP-FRONT SALES CHARGE ON CLASS A SHARES
Cumulative Discount. You may qualify for a reduced sales charge on a purchase
of Class A Shares of any Fund if the amount of your purchase, when added to the
value that day of all of your prior purchases of shares of any Fund or of
another Nuveen Municipal Mutual Fund, or units of a Nuveen unit trust, on which
an up-front sales charge or ongoing distribution fee is imposed, falls within
the amounts stated in the Class A Sales Charges and Commissions table in "How
to Select a Purchase Option" in the Prospectus. You or your financial adviser
must notify Nuveen or the Fund's transfer agent of any cumulative discount
whenever you plan to purchase Class A Shares of a Fund that you wish to qualify
for a reduced sales charge.
Letter of Intent. You may qualify for a reduced sales charge on a purchase of
Class A Shares of any Fund if you plan to purchase Class A Shares of Nuveen
Mutual Funds over the next 13 months and the total amount of your purchases
would, if purchased at one time, qualify you for one of the reduced sales
charges shown in the Class A Sales Charges and Commissions table in "How to
Select a Purchase Option" in the Prospectus. In order to take advantage of this
option, you must complete the applicable section of the Application Form or
sign and deliver either to an Authorized Dealer or to the Fund's transfer agent
a written Letter of Intent in a form acceptable to Nuveen. A Letter of Intent
states that you intend, but are not obligated, to purchase over the next 13
months a stated total amount of Class A Shares that would qualify you for a
reduced sales charge shown above. You may count shares of a Nuveen Municipal
Mutual Fund that you already own on which you paid an up-front sales charge or
an ongoing distribution fee and any Class C Shares of a Nuveen Mutual Fund that
you purchase over the next 13 months towards completion of your investment
program, but you will receive a reduced sales charge only on new Class A Shares
you purchase with a sales charge over the 13 months. You cannot count towards
completion of your investment program Class A Shares that you purchase without
a sales charge through investment of distributions from a Nuveen Municipal
Mutual Fund or a Nuveen Unit Trust or otherwise.
S-32
<PAGE>
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of a Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required
payment. By establishing a Letter of Intent, you irrevocably appoint Nuveen as
attorney to give instructions to redeem any or all of your escrowed shares,
with full power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Unit Trust Distributions. You may purchase Class A
Shares without an up-front sales charge by reinvestment of distributions from
any of the various unit trusts sponsored by Nuveen. There is no initial or
subsequent minimum investment requirement for such reinvestment purchases.
Group Purchase Programs. If you are a member of a qualified group, you may
purchase Class A Shares of any Fund or of another Nuveen Municipal Mutual Fund
at the reduced sales charge applicable to the group's purchases taken as a
whole. A "qualified group" is one which has been in existence for more than six
months, has a purpose other than investment, has five or more participating
members, has agreed to include Fund sales publications in mailings to members
and has agreed to comply with certain administrative requirements relating to
its group purchases.
Under any group purchase program, the minimum monthly investment in Class A
Shares of any particular Fund or portfolio by each participant is $25, and the
minimum monthly investment in Class A Shares of any particular Fund or
portfolio for all participants in the program combined is $1,000. No
certificates will be issued for any participant's account. All dividends and
other distributions by a Fund will be reinvested in additional Class A Shares
of the same Fund. No participant may utilize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each
participant must fill out special application materials, which the group
administrator may obtain from the group's financial adviser, by checking the
applicable box on the enclosed Application Form or by calling Nuveen toll-free
(800) 621-7227.
Reinvestment of Redemption Proceeds from Unaffiliated Funds. You may also
purchase Class A Shares at net asset value without a sales charge if the
purchase takes place through a broker-dealer and represents the reinvestment of
the proceeds of the redemption of shares of one or more registered investment
companies not affiliated with Nuveen. You must provide appropriate
documentation that the redemption occurred not more than 60 days prior to the
reinvestment of the proceeds in Class A Shares, and that you either paid an up-
front sales charge or were subject to a contingent deferred sales charge in
respect of the redemption of such shares of such other investment company.
Special Sales Charge Waivers. Class A Shares of a Fund may be purchased at
net asset value without a sales charge, and Class R Shares may be purchased, by
the following categories of investors:
. officers, trustees and former trustees of the Nuveen and Flagship Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
S-33
<PAGE>
Holders of Class C Shares acquired on or before January 31, 1997 can convert
those shares to Class A Shares of the same fund at the shareholder's
affirmative request six years after the date of purchase. Holders of Class C
Shares purchased after that date will not have the option to convert those
shares to Class A Shares.
Any Class A Shares purchased pursuant to a special sales charge waiver must
be acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Funds. You or your
financial adviser must notify Nuveen or the Fund's transfer agent whenever you
make a purchase of Class A Shares of any Fund that you wish to be covered under
these special sales charge waivers.
Class A Shares of any Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment
company. All purchases under the special sales charge waivers will be subject
to minimum purchase requirements as established by the Funds.
In determining the amount of your purchases of Class A Shares of any Fund
that may qualify for a reduced sales charge, the following purchases may be
combined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their
immediate family members (i.e., their spouses and their children under 21 years
of age); or (3) all purchases made through a group purchase program as
described above.
The reduced sales charge programs may be modified or discontinued by the
Funds at any time upon prior written notice to shareholders of the Funds.
For more information about the purchase of Class A Shares or reduced sales
charge programs, or to obtain the required application forms, call Nuveen toll-
free at (800) 621-7227.
REDUCTION OR ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
Class A Shares are normally redeemed at net asset value, without any
Contingent Deferred Sales Charge ("CDSC"). However, in the case of Class A
Shares purchased at net asset value on or after July 1, 1996 because the
purchase amount exceeded $1 million, where the Authorized Dealer did not waive
the sales commission, a CDSC of 1% is imposed on any redemption within 18
months of purchase. In the case of Class B Shares redeemed within six years of
purchase, a CDSC is imposed, beginning at 5% for redemptions within the first
year, declining to 4% for redemptions within years two and three, and declining
by 1% each year thereafter until disappearing after the sixth year. Class C
Shares are redeemed at net asset value, without any CDSC, except that a CDSC of
1% is imposed upon redemption of Class C Shares that are redeemed within 12
months of purchase.
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge, and then in the reverse order in which shares were
purchased, unless the shareholder specifies another order. No CDSC is charged
on shares purchased as a result of automatic reinvestment of dividends or
capital gains paid. In addition, no CDSC will be charged on exchanges of shares
into another Nuveen Mutual Fund or money market Fund. The holding period is
calculated on a monthly basis and begins the first day of the month in which
the order for investment is received. The CDSC is calculated based on the lower
of the redeemed shares' cost or net asset value at the time of the redemption
and is deducted from the redemption proceeds. Nuveen receives the amount of any
CDSC shareholders pay. If Class A or Class C shares subject to a CDSC are
exchanged for shares of a Nuveen money market fund, the CDSC would be imposed
on the subsequent redemption of those money market shares, and the period
during which the shareholder holds the money market fund shares would be
counted in determining the remaining duration of the CDSC. The Fund may elect
not to so count the period during which the shareholder held the money market
fund shares, in which event the amount of any applicable CDSC would be reduced
in accordance with applicable SEC rules by the amount of any 12b-1 plan
payments to which those money market funds shares may be subject.
The CDSC may be waived or reduced under the following six special
circumstances: 1) redemptions within one year following the death or
disability, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended, of a shareholder; 2) in whole or in part for redemptions of
shares by shareholders with accounts in excess of specified breakpoints that
correspond to the breakpoints under which the up-front sales charge on Class A
Shares is reduced pursuant to Rule 22d-1 under the Act; 3) redemptions of
shares purchased under circumstances or by a category of investors for which
Class A Shares could be purchased at net asset value without a sales charge; 4)
in connection with the exercise of a reinstatement privilege whereby the
proceeds of a redemption of a Fund's shares subject to a sales charge are
reinvested in shares of certain Funds within a specified number of days; 5) in
connection with the exercise of a Fund's right to redeem all shares in an
account that does not maintain a certain minimum balance or that the applicable
board has determined may have material adverse consequences to the shareholders
of such Fund; and 6) redemptions made pursuant to a Fund's automatic withdrawal
plan, up to specified amounts. If a Fund waives or reduces the CDSC, such
waiver or reduction would be uniformly applied to all Fund shares in the
particular category. In waiving or reducing a CDSC, the Funds will comply with
the requirements of Rule 22d-1 of the Investment Company Act of 1940, as
amended.
GENERAL MATTERS
The Funds may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
tax-free, fixed income securities.
S-34
<PAGE>
To help advisers and investors better understand and most efficiently use the
Fund to reach their investment goals, the Funds may advertise and create
specific investment programs and systems. For example, this may include
information on how to use the Funds to accumulate assets for future education
needs or periodic payments such as insurance premiums. The Funds may produce
software or additional sales literature to promote the advantages of using the
Funds to meet these and other specific investor needs.
Exchanges of shares of a Fund for shares of a Nuveen money market fund may be
made on days when both funds calculate a net asset value and make shares
available for public purchase. Shares of the Nuveen money market funds may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
for business. In addition to the holidays observed by the Fund, the Nuveen
money market funds observe and will not make fund shares available for purchase
on the following holidays: Martin Luther King's Birthday, Columbus Day and
Veterans Day.
Each Fund may suspend the right of redemption, or delay payment to redeeming
shareholders for more than seven days, when the New York Stock Exchange is
closed (not including customary weekend and holiday closings); when trading in
the markets a Fund normally uses is restricted, or the SEC determines that an
emergency exists so that trading of a Fund's portfolio securities or
determination of a Fund's net asset value is not reasonably practical; or the
SEC by order permits the suspension of the right of redemption or the delay in
payment to redeeming shareholders for more than seven days.
Shares will be registered in the name of the investor or the investor's
financial adviser. A change in registration or transfer of shares held in the
name of a financial adviser may only be made by an order in good form from the
financial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to Shareholder Services, Inc., the Funds'
transfer agent. No share certificates will be issued for fractional shares.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy Fund
Shares" in the Prospectus.
Nuveen serves as the principal underwriter of the shares of the Funds
pursuant to a "best efforts" arrangement as provided by a distribution
agreement with the Nuveen Flagship Multistate Trust I, dated February 1, 1997
("Distribution Agreement"). Pursuant to the Distribution Agreement, the Trust
appointed Nuveen to be its agent for the distribution of the Funds' shares on a
continuous offering basis. Nuveen sells shares to or through brokers, dealers,
banks or other qualified financial intermediaries (collectively referred to as
"Dealers"), or others, in a manner consistent with the then effective
registration statement of the Trust. Pursuant to the Distribution Agreement,
Nuveen, at its own expense, finances certain activities incident to the sale
and distribution of the Funds' shares, including printing and distributing of
prospectuses and statements of additional information to other than existing
shareholders, the printing and distributing of sales literature, advertising
and payment of compensation and giving of concessions to Dealers. Nuveen
receives for its services the excess, if any, of the sales price of the Funds'
shares less the net asset value of those shares, and reallows a majority or all
of such amounts to the Dealers who sold the shares; Nuveen may act as such a
Dealer. Nuveen also receives compensation pursuant to a distribution plan
adopted by the Trust pursuant to Rule 12b-1 and described herein under
"Distribution and Service Plan." Nuveen receives any CDSCs imposed on
redemptions of Shares.
The following table sets forth the aggregate amount of underwriting
commissions with respect to the sale of Fund shares and the amount thereof
retained by Nuveen (or Flagship Financial, Inc., which Nuveen acquired on
January 1, 1997) for each of the Funds for the last three fiscal years. All
figures are to the nearest thousand.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, 1996 JANUARY 31, 1995 JANUARY 31, 1994
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
COMMISSIONS NUVEEN COMMISSIONS NUVEEN COMMISSIONS NUVEEN
FUND ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Maryland Fund........... 160 26 216 38 474 61
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
COMMISSIONS FLAGSHIP COMMISSIONS FLAGSHIP COMMISSIONS FLAGSHIP
FUND ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Arizona Fund............ 194 26 227 31 744 85
Colorado Fund........... 98 13 95 13 327 44
Florida Fund............ 609 83 882 112 2,136 297
Florida Intermediate
Fund................... 23 4 23 3 24 0
New Mexico Fund......... 132 18 191 28 647 86
Oklahoma Fund........... 0 0 0 0 0 0
Pennsylvania Fund....... 107 14 119 15 174 20
Virginia Fund........... 311 26 381 50 678 89
</TABLE>
S-35
<PAGE>
DISTRIBUTION AND SERVICE PLAN
The Funds have adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B and Class C Shares under each
Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of Class B and Class C Shares,
respectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of
preparing, printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of Class B and Class C
Shares, certain other expenses associated with the distribution of Class B and
Class C Shares, and any distribution-related expenses that may be authorized
from time to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C
Shares under each Fund's Plan will be payable to Authorized Dealers in
connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to
shareholders.
Each Fund may spend up to .20 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .20 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. Each Fund may spend up to .55 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
.20 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
For the fiscal year ended January 31, 1996 with respect to the Maryland
Municipal Bond Fund and the fiscal year ended May 31, 1996 with respect to the
other Funds 100% of service fees and distribution fees were paid out as
compensation to Authorized Dealers. For such periods, the service fee for the
Maryland Municipal Bond Fund was .25% for both Class A and Class C Shares and
the distribution fee was .75% for Class C Shares. For such periods, the service
fee for the other Funds was .20% and the distribution fee was .40% for the
Class A Shares and .75% for the Class C Shares.
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1996
----------------------
<S> <C>
Arizona Municipal Bond Fund (5/31/96)
Class A................................................ $ 328,091
Class C................................................ $ 16,707
Colorado Municipal Bond Fund (5/31/96)
Class A................................................ $ 138,113
Class C................................................ N/A
Florida Municipal Bond Fund (5/31/96)
Class A................................................ $1,328,070
Class C................................................ $ 3,169
Florida Intermediate Municipal Bond Fund (5/31/96)
Class A................................................ $ 20,419
Class C................................................ 23,475
Maryland Municipal Bond Fund (1/31/96)
Class A................................................ $ 10,477
Class C................................................ $ 11,541
New Mexico Municipal Bond Fund (5/31/96)
Class A................................................ $ 206,501
Class C................................................ N/A
Oklahoma Municipal Bond Fund (5/31/96)
Class A................................................ N/A
Class C................................................ N/A
Pennsylvania Municipal Bond Fund (5/31/96)
Class A................................................ $ 170,972
Class C................................................ $ 35,903
Virginia Municipal Bond Fund (5/31/96)
Class A................................................ $ 464,378
Class C................................................ $ 75,853
</TABLE>
S-36
<PAGE>
Under each Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest in the Plan cast in
person at a meeting called for the purpose of voting on the Plan. The Plan may
be continued only if the trustees who vote to approve such continuance
conclude, in the exercise of reasonable business judgment and in light of their
fiduciary duties under applicable law, that there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders. The Plan may not be
amended to increase materially the cost which a class of shares may bear under
the Plan without the approval of the shareholders of the affected class, and
any other material amendments of the Plan must be approved by the non-
interested trustees by a vote cast in person at a meeting called for the
purpose of considering such amendments. During the continuance of the Plan, the
selection and nomination of the non-interested trustees of the Trust will be
committed to the discretion of the non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago Illinois 60603 has been selected as auditors for the Maryland Municipal
Bond Fund Deloitte & Touche LLP, independent public accountants, 1700
Courthouse Plaza N.E., Dayton, Ohio 45402 has been selected as auditors for the
Arizona Municipal Bond Fund, the Colorado Municipal Bond Fund, the Florida
Municipal Bond Fund, the Florida Intermediate Municipal Bond Fund, the New
Mexico Municipal Bond Fund, the Pennsylvania Municipal Bond Fund, and the
Virginia Municipal Bond Fund. In addition to audit services, the auditors will
provide consultation and assistance on accounting, internal control, tax and
related matters. The financial statements incorporated by reference elsewhere
in this Statement of Additional Information and the information for prior
periods set forth under "Financial Highlights" in the Prospectus have been
audited by the respective auditors as indicated in their respective reports
with respect thereto, and are included in reliance upon the authority of that
firm in giving that report.
The custodian of the assets of the Funds is The Chase Manhattan Bank, 770
Broadway, New York, New York 10003. The custodian performs custodial, fund
accounting, portfolio accounting, shareholder, and transfer agency services.
FINANCIAL STATEMENTS
The audited financial statements for each Fund's most recent fiscal year
appear in the Fund's Annual Reports and the unaudited financial statements for
the most recent semi-annual period for each fund appear in the Fund's Semi-
Annual Reports, each is included herein by reference. The Annual Reports and
the Semi-annual Reports accompany this Statement of Additional Information.
S-37
<PAGE>
APPENDIX A
RATINGS OF INVESTMENTS
The four highest ratings of Moody's for Municipal Obligations are Aaa, Aa, A
and Baa. Municipal Obligations rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to Municipal Obligations which are of
"high quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat greater than in Aaa rated
Municipal Obligations. The Aaa and Aa rated Municipal Obligations comprise what
are generally known as "high grade bonds." Municipal Obligations that are rated
A by Moody's possess many favorable investment attributes and are considered
upper medium grade obligations. Factors giving security to principal and
interest of A rated Municipal Obligations are considered adequate, but elements
may be present, which suggest a susceptibility to impairment sometime in the
future. Municipal Obligations rated Baa by Moody's are considered medium grade
obligations (i.e., they are neither highly protected nor poorly secured). Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's bond rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1 indicates that the
bond ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its general rating category.
The four highest ratings of S&P for Municipal Obligations are AAA, AA, A and
BBB. Municipal Obligations rated AAA have a strong capacity to pay principal
and interest. The rating of AA indicates that capacity to pay principal and
interest is very strong and such bonds differ from AAA issues only in small
degree. The category of A describes bonds which have a strong capacity to pay
principal and interest, although such bonds are somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions. The
BBB rating is the lowest "investment grade" security rating by S&P. Municipal
Obligations rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas such bonds normally exhibit adequate protection
parameters, adverse economic conditions are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for
bonds in the A category.
The four highest ratings of Fitch for Municipal Obligations are AAA, AA, A
and BBB. Municipal Obligations rated AAA are considered to be investment grade
and of the highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events. Municipal Obligations rated AA are considered
to be investment grade and of very high quality. The obligor's ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated "AAA." Because Municipal Obligations rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+." Municipal
Obligations rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Municipal
Obligations rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
The "Other Corporate Obligations" category of temporary investments are
corporate (as opposed to municipal) debt obligations rated AAA by S&P or Aaa by
Moody's. Corporate debt obligations rated AAA by S&P have an extremely strong
capacity to pay principal and interest. The Moody's corporate debt rating of
Aaa is comparable to that set forth above for Municipal Obligations.
Subsequent to its purchase by a Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by such Fund.
Neither event requires the elimination of such obligation from a Fund's
portfolio, but Nuveen Advisory will consider such an event in its determination
of whether the Fund should continue to hold such obligation.
A-1
<PAGE>
APPENDIX B
DESCRIPTION OF HEDGING TECHNIQUES
Set forth below is additional information regarding the various Fund's
defensive hedging techniques and use of repurchase agreements.
FUTURES AND INDEX TRANSACTIONS
Financial Futures. A financial future is an agreement between two parties to
buy and sell a security for a set price on a future date. They have been
designed by boards of trade which have been designated "contracts markets" by
the Commodity Futures Trading Commission ("CFTC").
The purchase of financial futures is for the purpose of hedging a Fund's
existing or anticipated holdings of long-term debt securities. When a Fund
purchases a financial future, it deposits in cash or securities an "initial
margin" of between 1% and 5% of the contract amount. Thereafter, the Fund's
account is either credited or debited on a daily basis in correlation with the
fluctuation in price of the underlying future or other requirements imposed by
the exchange in order to maintain an orderly market. The Fund must make
additional payments to cover debits to its account and has the right to
withdraw credits in excess of the liquidity, the Fund may close out its
position at any time prior to expiration of the financial future by taking an
opposite position. At closing a final determination of debits and credits is
made, additional cash is paid by or to the Fund to settle the final
determination and the Fund realizes a loss or gain depending on whether on a
net basis it made or received such payments.
The sale of financial futures is for the purpose of hedging a Fund's existing
or anticipated holdings of long-term debt securities. For example, if a Fund
owns long-term bonds and interest rates were expected to increase, it might
sell financial futures. If interest rates did increase, the value of long-term
bonds in the Fund's portfolio would decline, but the value of the Fund's
financial futures would be expected to increase at approximately the same rate
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have.
Among the risks associated with the use of financial futures by the Funds as
a hedging device, perhaps the most significant is the imperfect correlation
between movements in the price of the financial futures and movements in the
price of the debt securities which are the subject of the hedge.
Thus, if the price of the financial future moves less or more than the price
of the securities which are the subject of the hedge, the hedge will not be
fully effective. To compensate for this imperfect correlation, the Fund may
enter into financial futures in a greater dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the prices of
such securities has been greater than the historical volatility of the
financial futures. Conversely, the Fund may enter into fewer financial futures
if the historical volatility of the price of the securities being hedged is
less than the historical volatility of the financial futures.
The market prices of financial futures may also be affected by factors other
than interest rates. One of these factors is the possibility that rapid changes
in the volume of closing transactions, whether due to volatile markets or
movements by speculators, would temporarily distort the normal relationship
between the markets in the financial future and the chosen debt securities. In
these circumstances as well as in periods of rapid and large price movements.
The Fund might find it difficult or impossible to close out a particular
transaction.
Options on Financial Futures. The Funds may also purchase put or call options
on financial futures which are traded on a U.S. Exchange or board of trade and
enter into closing transactions with respect to such options to terminate an
existing position. Currently, options can be purchased with respect to
financial futures on U.S. Treasury Bonds on The Chicago Board of Trade. The
purchase of put options on financial futures is analogous to the purchase of
put options by a Fund on its portfolio securities to hedge against the risk of
rising interest rates. As with options on debt securities, the holder of an
option may terminate his position by selling an option of the same Fund. There
is no guarantee that such closing transactions can be effected.
INDEX CONTRACTS
Index Futures. A tax-exempt bond index which assigns relative values to the
tax-exempt bonds included in the index is traded on the Chicago Board of Trade.
The index fluctuates with changes in the market values of all tax-exempt bonds
included rather than a single bond. An index future is a bilateral agreement
pursuant to
B-1
<PAGE>
which two parties agree to take or make delivery of an amount of cash--rather
than any security--equal to specified dollar amount times the difference
between the index value at the close of the last trading day of the contract
and the price at which the index future was originally written. Thus, an index
future is similar to traditional financial futures except that settlement is
made in cash.
Index Options. The Funds may also purchase put or call options on U.S.
Government or tax-exempt bond index futures and enter into closing transactions
with respect to such options to terminate an existing position. Options on
index futures are similar to options on debt instruments except that an option
on an index future gives the purchaser the right, in return for the premium
paid, to assume a position in an index contract rather than an underlying
security at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance of the writer's futures margin account
which represents the amount by which the market price of the index futures
contract, at exercise, is less than the exercise price of the option on the
index future.
Bond index futures and options transactions would be subject to risks similar
to transactions in financial futures and options thereon as described above. No
series will enter into transactions in index or financial futures or related
options unless and until, in the Adviser's opinion, the market for such
instruments has developed sufficiently.
REPURCHASE AGREEMENTS
A Fund may invest temporarily up to 5% of its assets in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Fund from a third party with the understanding that they will be
repurchased by the seller at a fixed price on an agreed date. These agreements
may be made with respect to any of the portfolio securities in which the Fund
is authorized to invest. Repurchase agreements may be characterized as loans
secured by the underlying securities. The Fund may enter into repurchase
agreements with (i) member banks of the Federal Reserve System having total
assets in excess of $500 million and (ii) securities dealers, provided that
such banks or dealers meet the creditworthiness standards established by the
Fund's board of trustees ("Qualified Institutions"). The Adviser will monitor
the continued creditworthiness of Qualified Institutions, subject to the
oversight of the Fund's board of trustees.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the custodian at all times
in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the securities, the Fund may suffer
a loss to the extent proceeds from the sale of the underlying securities are
less than the repurchase price.
The resale price reflects the purchase price plus an agreed upon market rate
of interest which is unrelated to the coupon rate or date of maturity of the
purchased security. The collateral is marked to market daily. Such agreements
permit the Fund to keep all its assets earning interest while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature.
B-2
<PAGE>
Nuveen Tax-Free
Mutual Funds
Dependable tax-free
income for generations
ARIZONA
FLORIDA
MARYLAND
MICHIGAN
NEW JERSEY
PENNSYLVANIA
VIRGINIA
[PHOTO OF COUPLE APPEARS HERE]
SEMIANNUAL REPORT/JULY 31, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
8 Fund performance
12 Portfolio of investments
41 Statement of net assets
43 Statement of operations
45 Statement of changes in net assets
49 Notes to financial statements
60 Financial highlights
<PAGE>
Dear
shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER]
"Over time, municipal bonds have proven to be a valuable and dependable
component of successful investment programs."
As I begin my duties as the new chairman and chief executive officer of John
Nuveen & Co. Incorporated and chairman of the board of the Nuveen mutual funds,
I am pleased to have this opportunity to report to you on the performance of
your funds. My experience at Nuveen over the past 19 years has shaped my
commitment to maintaining Nuveen's tradition of value investing and prudent
management. We strive to help our shareholders meet their need for tax-free
investment income with a full range of investment choices. Our focus will
continue to be on building shareholder value, providing research-oriented
management, and delivering dependable performance. We believe this focus will
contribute to many more years of investment success for our fund shareholders.
Municipal bonds continue to play an important role in meeting the investment
goals of conservative investors. The performance of the mutual funds covered in
this report demonstrates the ability of quality investments to provide
attractive tax-free income. As of July 31, 1996, the current annual yields on
offering prices for R shares for these funds ranged from 4.80% to 5.27%. To
match these yields, an investor in the 36% federal income tax bracket would have
had to earn at least 7.50% on taxable alternatives. And when state taxes are
taken into account, the power of tax-free investing is even
3
<PAGE>
more apparent. Without question, taxable yields at this level on investments of
comparable quality can be difficult to achieve in today's markets.
With the strength of the bond market last year, all of these funds saw an
increase in net asset value per share, further improving investors' overall
experience for the 12-month period ending July 31, 1996, while producing returns
that continue to be very attractive. Total returns for R Shares, representing
changes in net asset value and reinvestment of all dividends and capital gains,
if any, ranged from 5.74% to 7.42%, equivalent to taxable investments with total
returns of 9.06% to 10.94%.
The years ahead present opportunities as well as challenges for all of us. I
want to thank you for your continued confidence in Nuveen mutual funds, and I
look forward to sharing reports of continued progress with you.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
September 15, 1996
4
<PAGE>
Answering your questions
Tom Spalding, head of Nuveen's portfolio management team, discusses the
investment environment and recent factors affecting the municipal market.
How did the municipal market perform over the last year?
Following the outstanding performance of 1995, the beginning of 1996 saw a
slight price decline in the overall bond market. Municipal bonds, however,
maintained an edge over Treasuries and finished the first half of this year on a
positive note with a rally in bond prices. Over the past 12 months, the
municipal market continued to reward investors with solid returns and
opportunities to purchase bonds with strong credit quality.
What has been Nuveen's investment approach over the past year?
Nuveen continues to pursue its value investing strategy, a disciplined approach
to security selection and portfolio construction designed to deliver above-
market performance by identifying individual bonds with current yields, prices,
credit quality, and future prospects that are exceptionally attractive relative
to other bonds in the market. This approach was rewarded over the past year, as
many of our portfolio
5
<PAGE>
[Photo of Tom Spalding]
Tom Spalding, head of Nuveen's portfolio management team, answers investors'
questions on developments in the municipal market.
holdings were upgraded by the national rating agencies, indicating that our
Research Department's judgments about credit quality were on target.
As opportunity allowed, we purchased bonds at discounts from their par value.
These bonds, which have coupon rates slightly below market levels, are less
likely to be called from our portfolios, assuring more stable yields for our
investors.
What is your outlook for the municipal market?
A look at the current economy shows that inflation continues along at the same
modest pace that it has demonstrated over the past five years. Generally level
producer prices, low wage pressure, and a stable money supply are supportive of
a moderately expanding economy. Despite this ideal combination of slow expansion
and low inflation, investors continue to maintain a watchful eye for any
indication of acceleration or the reappearance of inflation. Some economists
believe that the Federal Reserve Open Market Committee will likely increase
short-term interest rates, which could cause long-term rates to rise and bond
prices to fall.
6
<PAGE>
What are some of the factors affecting dividend stability and changes?
All Nuveen funds are structured to provide an attractive stream of tax-free
income. For many investors, stability of income is another important objective.
To help investors satisfy this objective, we set dividends on Nuveen funds
conservatively, seeking a level that we expect will be sustainable for at least
several months. For many of the funds that have seen dividend reductions over
the past year, the changes were relatively small. Still, dividends ultimately
depend on the overall earnings of each fund, which can be reduced by bond calls,
fluctuations in interest rates, and other portfolio changes.
When the Federal Reserve Board cut rates between July 1995 and January 1996,
long-term municipal bond yields reacted by declining almost 130 basis points
from their levels at the beginning of 1995. Current long-term rates are well
below those at the start of the decade. As older, higher-yielding bonds are
called from some portfolios, they are replaced with the bonds available in the
market today, reducing fund earnings. To reduce the effect of bond calls and
protect investors' current income, Nuveen has taken advantage of opportunities
to invest in non-callable bonds as well as bonds priced at a discount from their
par value.
7
<PAGE>
NUVEEN ARIZONA TAX-FREE VALUE FUND
Arizona
Shareholders enjoyed a year of relatively steady monthly dividends, with a
slight decrease in December.
12 MONTH DIVIDEND HISTORY-R SHARES
[BAR CHART APPEARS HERE]
8/95 .0450 2/96 .0435
9/95 .0450 3/96 .0435
10/95 .0450 4/96 .0435
11/95 .0450 5/96 .0435
12/95 .0435 6/96 .0435
1/96 .0435 7/96 .0435
- --------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- --------------------------------------------------------
Current SEC yield on R Shares* 5.00%
Taxable-equivalent yield on R Shares** 8.26%
12-mo. total return on R Shares* 6.20%
Taxable-equivalent total return on R Shares** 9.63%
Combined state and federal tax rate 39.5%
- --------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
NUVEEN FLORIDA TAX-FREE VALUE FUND
Florida
Nuveen funds set dividends with stability in mind, seeking a level that can be
sustained over time. The Fund adjusted the monthly dividend in January to a
level in line with the portfolio's earnings rate.
12 MONTH DIVIDEND HISTORY-R SHARES
[BAR CHART APPEARS HERE]
8/95 .0440 2/96 .0430
9/95 .0440 3/96 .0430
10/95 .0440 4/96 .0430
11/95 .0440 5/96 .0430
12/95 .0440 6/96 .0430
1/96 .0430 7/96 .0430
- --------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- --------------------------------------------------------
Current SEC yield on R Shares* 4.95%
Taxable-equivalent yield on R Shares** 7.73%
12-mo. total return on R Shares* 6.71%
Taxable-equivalent total return on R Shares** 9.68%
Federal tax rate 36.0%
- --------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
8
<PAGE>
NUVEEN MARYLAND TAX-FREE VALUE FUND
Maryland
Nuveen funds set dividends with stability in mind, seeking a level that can be
sustained over time. The Fund adjusted the monthly dividend in January to a
level in line with the portfolio's earnings rate.
12 MONTH DIVIDEND HISTORY--R SHARES
(BAR CHART APPEARS HERE)
<TABLE>
<S> <C> <C> <C>
8/95 .0430 2/96 .0425
9/95 .0430 3/96 .0425
10/95 .0430 4/96 .0425
11/95 .0430 5/96 .0425
12/95 .0430 6/96 .0425
1/96 .0425 7/96 .0425
</TABLE>
<TABLE>
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
<S> <C>
Current SEC yield on R Shares* 4.80%
Taxable-equivalent yield on R Shares** 7.87%
12-mo. total return on R Shares* 5.74%
Taxable-equivalent total return on R Shares** 9.06%
Combined state and federal tax rate 39.0%
- -------------------------------------------------------
</TABLE>
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
NUVEEN MICHIGAN TAX-FREE VALUE FUND
Michigan
Shareholders enjoyed a year of relatively steady monthly dividends with a slight
decrease in January. In addition, shareholders received a capital gains
distribution in November.
12 MONTH DIVIDEND HISTORY--R SHARES
(BAR CHART APPEARS HERE)
<TABLE>
<S> <C> <C> <C> <C>
8/95 .0455 2/96 .0445
9/95 .0455 3/96 .0445
10/95 .0455 of which 4/96 .0445
11/95 .0776 (.0321 is Capital Gains) 5/96 .0445
12/95 .0455 6/96 .0445
1/96 .0455 7/96 .0445
</TABLE>
<TABLE>
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
<S> <C>
Current SEC yield on R Shares* 5.08%
Taxable-equivalent yield on R Shares** 8.47%
12-mo. total return on R Shares* 6.78%
Taxable-equivalent total return on R Shares** 10.35%
Combined state and federal tax rate 40.0%
- -------------------------------------------------------
</TABLE>
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
9
<PAGE>
NUVEEN NEW JERSEY TAX-FREE VALUE FUND
New Jersey
Nuveen funds set dividends with stability in mind, seeking a level that can be
sustained over time. The Fund adjusted its monthly dividend in December and
March to a level in line with the portfolio's earnings rate.
12 MONTH DIVIDEND HISTORY-R SHARES
[BAR CHART APPEARS HERE]
8/95 .0475 2/96 .0460
9/95 .0475 3/96 .0440
10/95 .0475 4/96 .0440
11/95 .0475 5/96 .0440
12/95 .0460 6/96 .0440
1/96 .0460 7/96 .0440
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
Current SEC yield on R Shares* 5.24%
Taxable-equivalent yield on R Shares** 8.73%
12-mo. total return on R Shares* 6.01%
Taxable-equivalent total return on R Shares** 9.73%
Combined state and federal tax rate 40.0%
- -------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
NUVEEN PENNSYLVANIA TAX-FREE VALUE FUND
Pennsylvania
Shareholders enjoyed a year of relatively steady monthly dividends, with a
dividend decrease in January to bring the dividend in line with current
earnings.
12 MONTH DIVIDEND HISTORY-R SHARES
[BAR CHART APPEARS HERE]
8/95 .0440 2/96 .0430
9/95 .0440 3/96 .0430
10/95 .0440 4/96 .0430
11/95 .0440 5/96 .0430
12/95 .0440 6/96 .0430
1/96 .0430 7/96 .0430
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
Current SEC yield on R Shares* 5.27%
Taxable-equivalent yield on R Shares** 8.50%
12-mo. total return on R Shares* 6.69%
Taxable-equivalent total return on R Shares** 9.90%
Combined state and federal tax rate 38.0%
- -------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
10
<PAGE>
NUVEEN VIRGINIA TAX-FREE
VALUE FUND
Virginia
Shareholders enjoyed a dividend increase during the past 12 months in addition
to a capital gains distribution in November.
12 MONTH DIVIDEND HISTORY--R SHARES
[BAR CHART APPEARS HERE]
8/95 .0440
9/95 .0440
10/95 .0440
11/95 .0822 (of which .0382 is Capital Gains)
12/95 .0440
1/96 .0450
2/96 .0450
3/96 .0450
4/96 .0450
5/96 .0450
6/96 .0450
7/96 .0450
Capital Gains
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
Current SEC yield on R Shares* 5.12%
Taxable-equivalent yield on R Shares** 8.46%
Total return on R Shares* 7.42%
Taxable-equivalent total return on R Shares** 10.94%
Combined state and federal tax rate 39.5%
- -------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on this page.
* All shares issued prior to September 6, 1994, have been designated as Class R
Shares, which are currently available only for dividend reinvestment and certain
other restricted situations. Please see Financial Highlights beginning on page
60 for additional data on Class A and C Shares.
**An investor subject to the indicated state and federal income tax rate would
have to receive this return from a fully taxable investment to equal the stated
yield and total return on an after-tax basis.
11
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
ARIZONA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Arizona Board of Regents, Arizona State University, System
Revenue Refunding Bonds, Series 1992-A
$ 500,000 5.750%, 7/01/12 AA 7/02 at 101 $ 503,800
500,000 5.500%, 7/01/19 AA 7/02 at 101 478,950
100,000 Arizona Educational Loan Marketing Corporation, Educational
Loan Revenue Bonds, 6.375%, 9/01/05
(Alternative Minimum Tax) Aa 9/02 at 101 104,149
200,000 Arizona Educational Loan Marketing Corporation, 1992
Educational Loan Revenue Bonds, Series B, 7.000%, 3/01/05
(Alternative Minimum Tax) A 3/02 at 101 213,486
300,000 Arizona Health Facilities Authority, Hospital System Revenue
Refunding Bonds (Phoenix Baptist Hospital and Medical
Center, Inc. and Medical Environments, Inc.),
Series 1992, 6.250%, 9/01/11 Aaa 9/03 at 100 314,199
200,000 Arizona Municipal Financing Program, Certificates of
Participation, Series 20, 7.700%, 8/01/10 Aaa No Opt. Call 234,782
500,000 Arizona State University Research Park, Development Refunding
Bonds, Series 1995, 5.000%, 7/01/21 Aaa 7/06 at 100 455,875
250,000 State of Arizona Refunding, Certificates of Participation, Series
1992B, 6.250%, 9/01/10 Aaa 9/02 at 102 263,338
500,000 Student Loan Acquisition Authority of Arizona (A nonprofit
corporation organized pursuant to the laws of the State of
Arizona) Student Loan Revenue Bonds, Series 1994,
6.600%, 5/01/10 (Alternative Minimum Tax) Aa 5/04 at 102 528,460
175,000 Wastewater Management Authority of Arizona, Wastewater
Treatment Financial Assistance Revenue Bonds
Series 1992A, 5.950%, 7/01/12 Aaa 7/02 at 102 180,250
250,000 Wastewater Management Authority of Arizona, Wastewater
Treatment Financial Assistance Revenue Bonds,
Series 1995, 5.750%, 7/01/15 Aaa 7/05 at 102 250,488
700,000 Apache County (Arizona) Public Finance Corporation,
Certificates of Participation, Series 1994,
Arizona Department of Corrections, 5.500%, 5/01/10 A 5/00 at 102 708,519
195,000 Central Arizona Water Conservation District (Central Arizona
Project), Contract Revenue Bonds, Series B 1991,
6.500%, 11/01/11 (Pre-refunded to 5/01/01) AA- 5/01 at 102 213,642
300,000 Sierra Vista Unified School District No. 68 of Cochise County,
Arizona, General Obligation Refunding Bonds,
Series 1992, 7.500%, 7/01/10 Aaa No Opt. Call 362,055
250,000 Sedona-Oak Creek Joint Unified School District No. 9 of
Coconino and Yavapai Counties, Arizona, School Improvement
Bonds, Project of 1992, Series A (1992), 6.750%, 7/01/07 A- 7/01 at 101 269,733
550,000 City of Douglas (Arizona), Municipal Property Corporation,
Municipal Facilities Excise Tax Revenue Bonds,
Series 1995, 5.750%, 7/01/15 Aaa 7/05 at 101 551,001
280,000 Eloy Municipal Property Corporation, Municipal Facilities
Revenue Bonds, Series 1992, 7.000%, 7/01/11 BBB 7/02 at 101 297,665
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 The Industrial Development Authority of The City of Glendale,
Arizona, Revenue Bonds, Midwestern University, Series
1996A, 6.000%, 5/15/16 (WI) AAA 5/06 at 102 $ 503,095
375,000 Maricopa Rural Road Improvement District of Pinal County,
Arizona, Refunding Bonds, Series 1994, 6.900%, 7/01/05 N/R 7/99 at 101 392,404
300,000 Hospital District No. One, Maricopa County, Arizona, Hospital
Facilities Refunding Bonds, Series B (1992), 6.250%, 6/01/10 Aaa 6/04 at 101 315,024
500,000 The Industrial Development Authority of the County of Maricopa
(Arizona), Insured Health Facility Revenue Bonds (Catholic
Healthcare West), 1993 Series A, 5.625%, 7/01/23 Aaa 7/03 at 102 481,215
500,000 The Industrial Development Authority of the County of
Maricopa (Arizona), Samaritan Health Services, Hospital
System Revenue Refunding Bonds, Series 1990A, 7.000%, 12/01/16 Aaa No Opt. Call 582,605
600,000 The Industrial Development Authority of the County of Maricopa,
Arizona, Baptist Hospital System Revenue Refunding Bonds,
Series 1995, 5.500%, 9/01/16 Aaa 9/05 at 101 579,120
Kyrene Elementary School; District No. 28 of Maricopa County,
Arizona, School Improvement Bonds, Project of 1990,
Series E (1993):
265,000 6.000%, 7/01/12 (Pre-refunded to 7/01/02) Aaa 7/02 at 100 282,532
50,000 6.000%, 7/01/12 Aaa 7/02 at 100 51,334
500,000 The Industrial Development Authority of the County of Mohave
(Arizona) Industrial Development Revenue Bonds, 1994 Series
(Citizens Utilities Company Projects), 6.600%, 5/01/29
(Alternative Minimum Tax) AAA 11/03 at 101 515,370
1,000,000 Navajo County, Arizona, Pollution Control Corporation,
Pollution Control Revenue Refunding Bonds (Arizona
Public Service Company), 1993 Series A, 5.875%,
8/15/28 Baa1 8/03 at 102 968,050
1,000,000 Navajo County, Arizona, Pollution Control Corporation,
Pollution Control Revenue Refunding Bonds (Arizona
Public Service Company), 1993 Series A, 5.500%, 8/15/28 Aaa 8/03 at 102 961,450
425,000 City of Peoria, Arizona Improvement District No. 8801 (North
Valley Power Center) Improvement Bonds, 7.300%, 1/01/12 BBB 1/03 at 101 449,166
250,000 City of Phoenix Civic Improvement Corporation, Airport
Terminal Excise Tax Revenue Bonds, Series 1989, 7.800%,
7/01/11 (Alternative Minimum Tax) AA+ 7/97 at 102 262,148
295,000 Phoenix Housing Finance Corporation, Mortgage Revenue
Refunding Bonds, Series 1992A (FHA Insured Mortgage
Loans-Section 8 Assisted Projects), 6.500%, 7/01/24 Aaa 7/02 at 101 301,558
400,000 City of Phoenix (Arizona), Civic Improvement Corporation,
Wastewater System Lease Revenue Bonds, Series 1993,
6.125% 7/01/23 (Pre-refunded to 7/01/03) AAA 7/03 at 102 437,244
1,000,000 City of Phoenix Civic Improvement Corporation (Arizona),
Wastewater System Lease Revenue Refunding Bonds,
Series 1993, 5.000% 7/01/18 A1 7/04 at 102 900,840
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
ARIZONA.....CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 530,000 City of Phoenix Civic Improvement Corporation, Junior Lien
Water System Revenue Bonds, Series 1996, 6.000%, 7/01/19 Aa 7/06 at 100 $ 538,077
200,000 Phoenix Industrial Development Authority (FHA Insured Chris
Ridge Village Project), 6.750%, 11/01/12 AAA 11/02 at 101 209,506
300,000 City of Phoenix, Arizona, Junior Lien Street and Highway User
Revenue Refunding Bonds, Series 1992, 6.250%, 7/01/11 A+ 7/02 at 102 314,955
500,000 The Industrial Development Authority of the City of Phoenix,
Arizona, Multi-family Housing Revenue Refunding Bonds,
Series 1993 (GNMA Collateralized - Meadow Glen Apartments
Project), 5.800%, 8/20/28 Aaa 2/03 at 102 481,010
485,000 The Industrial Development Authority of the City of Phoenix,
Arizona, Statewide Single Family Mortgage Revenue Bonds,
Series 1995, 6.150%, 12/01/08 (Alternative Minimum Tax) AAA 6/05 at 102 487,808
The Industrial Development Authority of the City of Phoenix,
Arizona, Hospital Revenue Bonds (John C. Lincoln Hospital
and Health Center) Series 1994:
500,000 6.000% 12/01/10 BBB+ 12/03 at 102 496,160
500,000 6.000% 12/01/14 BBB+ 12/03 at 102 484,830
240,000 The Industrial Development Authority of the County of Pima
(Arizona) Industrial Development Lease Obligation Refunding
Revenue Bonds, 1988 Series A (Irvington Project),
7.250%, 7/15/10 Aaa 1/02 at 103 262,106
300,000 Tucson Unified School District No. 1 of Pima County, Arizona,
School Improvement Bonds, Project of 1989, Series D (1992),
6.100%, 7/01/12 Aaa 7/02 at 102 312,093
640,000 The Industrial Development Authority of the County of Pima,
Arizona, Health Care System Revenue Bonds, Carondelet
Health Care Corporation of Arizona Issue, Series 1993,
5.250%, 7/01/13 Aaa No Opt. Call 618,733
455,000 The Industrial Development Authority of the County of Pima
(Arizona) Single Family Mortgage Revenue Refunding Bonds,
Series 1995A, 6.500%, 2/01/17 A 8/05 at 102 464,678
Pinal County, Arizona, Certificates of Participation,
Series 1994:
300,000 6.375%, 6/01/06 AA 6/02 at 100 318,960
200,000 6.500%, 6/01/09 AA 6/02 at 100 212,588
280,000 Salt River Project Agricultural Improvement and Power District,
Arizona, Salt River Project Electric System Revenue Bonds,
1986 Series C, 5.750%, 1/01/20 Aa 8/96 at 100 274,168
300,000 Salt River Project Agricultural Improvement and Power District,
Arizona, Salt River Project Electric System Revenue Bonds,
1992 Series D, 5.750%, 1/01/19 Aa 1/02 at 100 296,079
225,000 City of Tempe, General Obligation Bonds Series 1992B,
6.000%, 7/01/08 AA+ 7/02 at 101 235,001
500,000 The Industrial Development Authority of the City of Tempe,
Arizona, Multi-Family Mortgage Refunding Bonds, Series
1993A (FHA Insured Mortgage Loan -- Quadrangles Village
Apartments), 6.250%, 6/01/26 AAA 6/03 at 102 503,655
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600,000 Tempe Union High School District No. 213 of Maricopa County,
Arizona, School Improvement and Refunding Bonds,
Series 1994, 6.000%, 7/01/12 Aaa 7/04 at 101 $ 624,288
500,000 City of Tucson, Arizona, General Obligation Bonds,
Series 1984-G (1994), 6.250%, 7/01/18 Aaa 7/04 at 101 520,340
575,000 Tucson Airport Authority, Inc. (Arizona), Airport Revenue
Bonds, Refunding Series 1993, 5.700%, 6/01/13 Aaa 6/03 at 102 576,415
250,000 Business Development Finance Corporation, Tucson (Arizona),
Local Development Lease Revenue Refunding Bonds,
Series 1992, 6.250%, 7/01/12 Aaa 7/02 at 102 262,135
390,000 City of Tucson, Arizona, Water System Revenue Bonds,
Series 1994-A (1996), 6.000%, 7/01/21 Aaa 7/06 at 101 399,149
300,000 Arizona Board of Regents, University of Arizona, System
Revenue Refunding Bonds, Series 1992, 6.250%, 6/01/11 AA 6/02 at 102 314,427
335,000 Yavapai County Community College District of Yavapai County
Arizona, Revenue Bonds Series 1993, 6.000%, 7/01/12 A- 7/03 at 101 340,175
675,000 Yuma Union High School District No. 70 of Yuma County,
Arizona, School Improvement Bonds, Series 1994,
5.700%, 7/01/06 Aaa 7/02 at 101 701,317
- ------------------------------------------------------------------------------------------------------------------------
$ 23,790,000 Total Investments -- (Cost $23,536,931) -- 100.7% 24,162,200
================--------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 0.4%
$ 100,000 Maricopa County, Arizona Pollution Control Corporation,
================ Pollution Control Revenue Refunding Bonds, (Arizona Public
Service Company Palo Verde Project), 1994 Series B, Variable
Rate Demand Bonds, 3.600%, 5/01/29+ A-1+ 100,000
- ------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (1.1)% (267,249)
- ------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 23,994,951
========================================================================================================================
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
ARIZONA--CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 32 $13,581,090 56%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 13 4,280,449 18
PORTFOLIO OF A+ A1 2 1,215,795 5
INVESTMENTS A, A-- A, A2, A3 5 1,996,591 8
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 5 2,695,871 11
TEMPORARY Non-rated Non-rated 1 392,404 2
INVESTMENTS):
- ----------------------------------------------------------------------------------------------------------
TOTAL 58 $24,162,200 100%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R -- Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
16
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
FLORIDA
<TABLE>
<CAPTION>
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
<S> <C> <C> <C> <C>
$2,500,000 Florida Housing Finance Agency, Housing Revenue Bonds,
(Antigua Club Apartments Project), 1995 Series A1, 6.875%,
8/01/26 (Alternative Minimum Tax) Aaa 2/05 at 102 $2,642,650
1,000,000 Florida Housing Finance Agency, Multi-Family Housing
Revenue Refunding Bonds, 1991 Series C, 6.200%,
8/01/16 AAA 8/06 at 102 1,008,510
750,000 Florida Housing Finance Agency, General Mortgage Revenue
Refunding Bonds, 1992 Series A, 6.400%, 6/01/24 AAA 6/02 at 103 762,045
1,440,000 Florida Housing Finance Agency, Multi-Family Housing
Revenue Bond, 1989 Series I, (GNMA Collateralized-
Driftwood Terrace Apartments Project), 7.650%, 12/20/31
(Alternative Minimum Tax) AAA 6/99 at 103 1,522,627
1,000,000 Florida Municipal Power Agency, All-Requirements Power
Supply Project Revenue Bonds, Series 1992, 6.250%, 10/01/21
(Pre-refunded to 10/01/02) Aaa 10/02 at 102 1,101,900
1,145,000 Florida Municipal Power Agency, Stanton II Project Revenue
Bonds, Series 1992, 6.000%, 10/01/27
(Pre-refunded to 10/01/02) Aaa 10/02 at 102 1,245,176
1,650,000 State of Florida Department of Transportation, Turnpike
Revenue Bonds, Series 1992A, 6.350%, 7/01/22
(Pre-refunded to 7/01/02) Aaa 7/02 at 101 1,809,275
1,160,000 State of Florida, Faith and Credit, State Board of Education,
Public Education Capital Outlay Bonds, Series 1986-C,
7.100%, 6/01/07 Aaa No Opt. Call 1,207,618
300,000 State of Florida, Full Faith and Credit, Pollution Control Bonds,
Series Y, Division of Bond Finance of the Department of
General Services, 6.600%, 7/01/17 Aa 7/02 at 101 321,849
2,680,000 State of Florida, Full Faith and Credit State Board of Education,
Public Education Capital Outlay Bonds, Series 1989-A
(Refunding Bonds), 7.250%, 6/01/23 Aa 6/00 at 102 2,946,392
460,000 State of Florida, Full Faith and Credit, State Board of Education,
Public Education Capital Outlay Bonds, Series 1989-A
(Refunding Bonds), 7.250%, 6/01/23
(Pre-refunded to 6/01/00) Aaa 6/00 at 102 512,408
2,250,000 State of Florida, Full Faith and Credit, State Board of Education,
Public Education Capital Outlay Bonds, 1994 Series B,
5.875%, 6/01/20 Aa 6/05 at 101 2,254,793
300,000 Brevard County Educational Facilities Authority (Florida),
Educational Facilities Refunding And Improvement Revenue
Bonds, Series 1992, 6.875%, 11/01/22 BBB 11/02 at 102 308,694
600,000 Housing Finance Authority of Broward County, Florida,
Multifamily Housing Revenue Refunding Bonds, (Lakeside
Apartments Project), Series 1995, 7.000%, 2/01/25 AAA 2/05 at 102 637,596
190,000 City of Cape Coral Health Facilities Authority, Hospital
Refunding and Improvement Revenue Bonds, Series A, (The
Cape Coral Medical Center, Inc. Project), 8.125%, 11/01/08 Aaa No Opt. Call 208,873
1,000,000 Charlotte County, Florida, Utility System Refunding
Revenue Bonds, Series 1996A, 6.200%, 10/01/23 (WI) Aaa 10/97 at 100 1,004,410
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
FLORIDA--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 Dade County, Florida, Aviation Facilities Revenue Bonds,
1992 Series B, 6.550%, 10/01/13 (Alternative Minimum Tax) Aaa 10/02 at 102 $ 1,067,900
115,000 Housing Finance Authority of Dade County (Florida), Single
Family Mortgage Revenue Bonds, Series B, 7.250%, 9/01/23
(Alternative Minimum Tax) Aaa 3/01 at 102 119,614
2,480,000 Dade County, Florida, Public Facilities Revenue Refunding Bonds
(Jackson Memorial Hospital), Series 1993A, 4.875%, 6/01/15 Aaa 6/03 at 102 2,191,799
465,000 Dade County, Florida, Special Housing Revenue Bonds
(City of Miami Developments--Indenture VIII),
Series A, 12.000%, 7/01/12 A 1/97 at 102 477,197
255,000 Dade County, Florida, Special Obligation Bonds,
(Courthouse Center Project), Series 1994, 6.300%, 4/01/14 A 4/04 at 102 268,064
250,000 Dade County Health Facilities Authority, Hospital Revenue
Refunding Bonds, Series 1989, (South Miami Hospital Project),
7.000%, 10/01/18 (Pre-refunded to 10/01/99) Aaa 10/99 at 102 274,253
300,000 Dade County Health Facilities Authority, Hospital Revenue
Refunding Bonds, Series 1992, (North Shore Medical Center
Project), 6.500%, 8/15/15 Aaa 8/02 at 102 317,973
1,000,000 Town of Davie, Florida, Water and Sewer Improvement and Refunding,
Revenue Bonds, Series 1992, 6.250%, 10/01/17 Aaa 10/02 at 102 1,036,410
600,000 The City of Daytona Beach, Florida, Water and Sewer Revenue Bonds,
Series 1992, 6.000%, 11/15/14 Aaa 11/02 at 102 613,884
1,600,000 City of Dunedin (Florida), Hospital Revenue Refunding Bonds,
Series 1993, (Mease Health Care), 5.375%, 11/15/13 Aaa 11/03 at 101 1,553,408
325,000 Escambia County Housing Finance Authority (Florida), Single
Family Mortgage Revenue Bonds, Series 1992A, (Multi-County
Program), 6.900%, 4/01/20 (Alternative Minimum Tax) Aaa 10/02 at 102 336,476
2,000,000 Escambia County Housing Finance Authority (Florida), Single Family
Mortgage Revenue Bonds, (Multi-County Program), Series
1995, 6.950%, 10/01/27 (Alternative Minimum Tax) Aaa 4/05 at 102 2,054,300
500,000 Certificates of Participation, Series 1992, The School Board of
Escambia County, Florida, 6.375%, 2/01/12 Aaa 2/02 at 100 522,810
500,000 City of Gainesville, Florida, Utilities System Revenue Bonds,
1992 Series A, 6.500%, 10/01/22 Aa 10/02 at 102 556,165
1,000,000 Hillsborough County Aviation Authority, Florida, Tampa
International Airport Revenue Bonds, Series 1996B, 5.875%,
10/01/23 Aaa 10/06 at 102 1,004,220
1,200,000 Hillsborough County Industrial Development Authority, Pollution
Control Revenue Refunding Bonds (Tampa Electric Company
Project) Series 1992, 8.000%, 5/01/22 Aa2 5/02 at 103 1,388,544
250,000 Hillsborough County, Florida, Capital Improvement, Non-Ad Valorem
Revenue Bonds, (Museum of Science and Industry Project),
Series 1992, 6.400%, 1/01/12 (Pre-refunded to 1/01/00) A 1/00 at 102 269,625
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 250,000 City of Hollywood, Florida, Water and Sewer
Revenue Bonds, Series 1991, 6.875%, 10/01/21
(Pre-refunded to 10/01/01) Aaa 10/01 at 102 $ 280,500
470,000 Jacksonville Electric Authority, (Jacksonville,
Florida), Electric System Revenue Bonds, Series
Two 1987A-1, 7.500%, 10/01/02 Aa1 10/97 at 101 1/2 491,512
500,000 Jacksonville Electric Authority, (Jacksonville,
Florida), St. Johns River Power Park System
Refunding Revenue Bonds, Issue Two, Series Seven,
5.500%, 10/01/14 Aa1 10/02 at 101 487,355
250,000 City of Jacksonville, Florida, Excise Taxes Revenue
Refunding Bonds, Series 1992, 6.500%, 10/01/13 Aaa 10/02 at 102 267,633
605,000 Jacksonville Health Facilities Authority, Health
Facilities Revenue Refunding Bonds, Daughters of
Charity National Health System, Inc, St. Vincent's
Medical Center Issue, Series 1990, 7.500%, 11/01/15
(Pre-refunded to 11/01/00) Aaa 11/00 at 102 684,830
1,750,000 Jacksonville Health Facilities Authority, Hospital
Revenue Bonds, (New Children's Hospital at Baptist
Medical Center Project), Series 1991, 7.000%,
6/01/21 Aaa 6/01 at 102 1,917,720
375,000 City of Jacksonville, Florida, Water and Sewer
Development Revenue Bonds, Series 1992, (Jacksonville
Suburban Utilities Corporation Project), 6.750%,
6/01/22 (Alternative Minimum Tax) A 6/02 at 102 394,223
250,000 Town of Jupiter, Florida, Water Revenue Bonds,
Series 1992B, 6.250%, 10/01/18 Aaa 10/01 at 102 258,195
1,300,000 Kissimmee Utility Authority (Florida), Electric System
Improvement and Refunding Revenue Bonds, Series
1993, 5.375%, 10/01/12 Aaa 10/03 at 102 1,273,103
845,000 Housing Finance Authority of Manatee County, Florida,
Single Family Mortgage Revenue Bonds, Series 1994-Sub
Series 3, 7.600%, 11/01/26 (Alternative Minimum Tax) Aaa 11/05 at 105 924,531
2,550,000 City of Miami Beach, Florida, Water and Sewer Revenue
Bonds, Series 1995, 5.375%, 9/01/15 Aaa 9/05 at 102 2,467,176
250,000 North Broward Hospital District (Florida), Hospital
Revenue Refunding Bonds, Series 1992A, 6.250%,
1/01/12 Aaa 1/02 at 102 261,203
1,500,000 Orange County, Florida, Sales Tax Revenue Bonds,
Series 1993B, 5.375%, 1/01/24 Aaa 1/03 at 102 1,419,810
145,000 Orange County, Florida, Sales Tax Revenue Bonds,
Series 1989, 6.125%, 1/01/19 Aaa No Opt. Call 155,324
500,000 Orange County, Florida, Water Utilities System Revenue
Bonds, Series 1992, 6.250%, 10/01/17 Aaa 4/02 at 102 517,310
1,000,000 Orange County Housing Finance Authority, Multifamily
Housing Revenue Bonds, (Ashley Point Apartments
Project), 1994 Series A, 7.100%, 10/01/24 (Alternative
Minimum Tax) BBB+ 10/01 at 101 1,024,870
1,250,000 Orlando (Florida) Utilities Commission, Water and
Electric Subordinated Revenue Bonds, Series 1992A,
6.000%, 10/01/20 Aa 10/02 at 102 1,261,513
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
FLORIDA--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 State of Florida, Orlando-Orange County Expressway Authority,
Senior Lien Revenue Refunding Bonds, Series of 1993,
5.500%, 7/01/18 Aaa 7/03 at 102 $ 980,610
1,000,000 State of Florida, Orlando-Orange County Expressway Authority,
Junior Lien Revenue Refunding Bonds, Series of 1993A,
5.125%, 7/01/20 Aaa 7/03 at 102 917,450
Palm Beach County, Florida, Criminal Justice Facilities, Revenue
Refunding Bonds, Series 1993:
1,000,000 5.300%, 6/01/05 Aaa No Opt. Call 1,025,090
1,000,000 5.375%, 6/01/10 Aaa No Opt. Call 1,001,860
2,000,000 City of Pensacola Health Facilities Authority, Health Facilities
Revenue Bonds, (Daughters of Charity National Health
System-Sacred Heart Hospital of Pensacola), Series 1993,
5.250%, 1/01/11 Aa 1/03 at 102 1,913,180
2,000,000 Pinellas County (Florida), Health Facilities Authority, Hospital
Revenue Bonds, Series 1993 (Morton Plant Health System
Project), 5.500%, 11/15/18 Aaa 11/03 at 102 1,926,500
565,000 St. Lucie County, Florida, Solid Waste System Revenue Bonds,
Series 1990, 6.000%, 9/01/15 (Pre-refunded to 9/01/99) Aaa 9/99 at 100 593,182
630,000 City of St. Petersburg Health Facilities Authority (Florida),
Revenue Bonds, Series 1985A (Allegany Health System Loan
Program), 7.000%, 12/01/15 Aaa 12/01 at 102 694,701
1,000,000 City of Sarasota, Florida, Water and Sewer System Revenue
Bonds, Series 1988-A 7.625%, 10/01/08
(Pre-refunded to 10/01/96) Aaa 10/96 at 102 1,026,160
165,000 City of Tampa, Florida, Water and Sewer Systems Revenue
Bonds, Series 1992, 6.000%, 10/01/17 Aaa 10/02 at 101 167,370
335,000 City of Tampa, Florida, Water and Sewer Systems Revenue
Bonds, Series 1992, 6.000%, 10/01/17
(Pre-refunded to 10/01/02) Aaa 10/02 at 101 361,783
1,000,000 Turtle Run Community Development District, (Coral Springs,
Florida), Water Management Benefit Tax Refunding Bonds,
Series 1993, 6.400%, 5/01/11 A1 5/03 at 100 1,045,770
2,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of
1996, (General Obligation Bonds), 5.400%, 7/01/25 A 7/06 at 101 1/2 2,312,800
- -------------------------------------------------------------------------------------------------------------------------------
$60,250,000 Total Investments -- (cost $59,719,592) -- 98.5% 61,600,722
==============-----------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 1.9%
$ 1,200,000 Jacksonville Health Facilities Authority, Hospital Revenue
==============
Bonds, (Baptist Medical Center Project), Series 1993, Variable
Rate Demand Bonds, 3.650%, 6/01/08+ A-1 1,200,000
- -------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.4)% (228,063)
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $62,572,659
===============================================================================================================================
</TABLE>
20
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 46 $43,878,176 71%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 9 11,621,303 19
PORTFOLIO OF A+ A1 1 1,045,770 2
INVESTMENTS A, A- A, A2, A3 5 3,721,909 6
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 1,333,564 2
TEMPORARY
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL 63 $61,600,722 100%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at
varying prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
(WI) Security purchased on a when-issued basis (note 1).
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
21
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
MARYLAND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,500,000 Washington Metropolitan Area Transit Authority (District of
Columbia), Gross Revenue Transit Refunding Bonds, Series
1993, 5.250%, 7/01/14 Aaa 1/04 at 102 $1,435,305
500,000 Community Development Administration, Department of
Housing and Community Development, State of Maryland,
Single Family Program Bonds, 1987 First Series,
7.000%, 4/01/14 Aa 4/97 at 103 518,320
1,440,000 Community Development Administration, Department of
Housing and Community Development, State of Maryland,
Single Family Program Bonds, 1991 Fourth Series,
7.450%, 4/01/32 (Alternative Minimum Tax) Aa 4/01 at 102 1,504,181
Community Development Administration, Department of
Housing and Community Development, State of Maryland,
Multi-Family Housing Revenue Bonds (Insured Mortgage
Loans), 1992 Series D:
700,000 6.700%, 5/15/27 Aa 5/02 at 102 728,287
500,000 6.750%, 5/15/33 Aa 5/02 at 102 520,165
1,855,000 Maryland Economic Development Corporation (Health and
Mental Hygiene Providers Facilities Acquisition Program)
Revenue Bonds, Series 1996A, 7.625%, 4/01/21 N/R 4/11 at 102 1,747,169
500,000 Maryland Health and Higher Educational Facilities Authority,
Revenue Bonds, Sinai Hospital of Baltimore Issue, Series 1990,
7.000%, 7/01/19 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 551,380
500,000 Maryland Health and Higher Educational Facilities Authority,
Revenue Bonds, Francis Scott Key Medical Center Issue, Series
1990, 6.750%, 7/01/23 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 546,945
1,005,000 Maryland Health and Higher Educational Facilities Authority,
Doctors' Community Hospital Issue, Series 1990, 8.750%,
7/01/22 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 1,169,890
1,000,000 Maryland Health and Higher Educational Facilities Authority,
Refunding Revenue Bonds, Francis Scott Key Medical Center
Issue, Series 1993, 5.000%, 7/01/13 Aaa 7/03 at 102 928,190
1,000,000 Maryland Health and Higher Educational Facilities Authority,
Project and Refunding Revenue Bonds, Doctors Community
Hospital Issue, Series 1993, 5.750%, 7/01/13 Baa 7/03 at 102 919,810
1,760,000 Maryland Stadium Authority, Convention Center Expansion
Lease Revenue Bonds, Series 1994, 5.875%, 12/15/12 Aaa 12/04 at 102 1,797,558
Maryland Stadium Authority, Sports Facilities Lease Revenue
Bonds, Series 1989D:
500,000 7.375%, 12/15/04 (Alternative Minimum Tax) Aa 12/99 at 102 549,940
500,000 7.500%, 12/15/10 (Alternative Minimum Tax) Aa 12/99 at 102 547,185
3,010,000 Maryland Transportation Authority, Special Obligation Revenue
Bonds, Baltimore/Washington International Airport Projects,
Series 1994-A (Qualified Airport Bonds), 6.400%, 7/01/19
(Alternative Minimum Tax) Aa 7/04 at 102 3,092,926
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,000,000 Maryland Transportation Authority, Transportation Facilities
Projects, Revenue Bonds, Series 1992, 5.750%, 7/01/15 A1 7/02 at 100 $1,000,690
2,000,000 State of Maryland, General Obligation Bonds, State and Local
Facilities Loan of 1993, Third Series (Capital Improvement
and Refunding Bonds), 4.600%, 7/15/06 Aaa 7/03 at 101 1,912,860
2,000,000 Baltimore County, Maryland, General Obligation Bonds,
Baltimore County Pension Funding Bonds, 1991 Refunding
Series, 6.700%, 7/01/11 Aaa 7/98 at 102 2,114,860
600,000 City of Baltimore, Maryland (Mayor and City Council of
Baltimore), General Obligation Consolidated Public
Improvement Refunding Bonds of 1992--Series A,
6.500%, 10/15/12 (Pre-refunded to 10/15/02) Aaa 10/02 at 100 657,330
2,295,000 Mayor and City Council of Baltimore (City of Baltimore,
Maryland), General Obligation Consolidated Public
Improvement Refunding Bonds of 1995--Series A,
7.375%, 10/15/03 Aaa No Opt. Call 2,645,883
1,000,000 Baltimore City, Maryland, Mortgage Revenue Refunding Bonds,
Series 1992 (Gnma Collateralized-Tindeco Wharf Apartments
Project), 6.700%, 12/20/28 AAA 12/02 at 102 1,038,180
1,500,000 Mayor and City Council of Baltimore (Maryland), Port Facilities
Revenue Bonds (Consolidation Coal Sales Company Project),
1984B, 6.500%, 10/01/11 AA- 4/02 at 103 1,628,160
1,500,000 City of Baltimore, Maryland (Mayor and City Council of
Baltimore), Project and Refunding Revenue Bonds (Water
Projects), Series 1996-A, 5.500%, 7/01/26 Aaa 7/06 at 101 1,445,625
625,000 Mayor and City Council of Baltimore (Maryland), Project and
Refunding Revenue Bonds (Water Projects), Series 1990-A,
6.500%, 7/01/20 (Pre-refunded to 7/01/00) Aaa 7/00 at 100 669,050
2,165,000 City of Gaithersburg, Maryland, Nursing Home Revenue
Refunding Bonds, (Shady Grove Adventist Nursing and
Rehabilitation Center Project), Series 1992A, 6.500%, 9/01/12 Aaa No Opt. Call 2,368,467
1,000,000 Howard County, Maryland, Mortgage Revenue Refunding
Bonds, Series 1992 (Howard Hills Townhouses Project--FHA
Insured Mortgage Loan), 6.400%, 7/01/24 Aaa 7/02 at 102 1,026,500
2,000,000 Howard County, Maryland, Multifamily Housing Revenue
Refunding Bonds, Series 1994, (Chase Glen Project), 7.000%,
7/01/24 (Mandatory put 7/01/04) N/R 7/02 at 104 2,128,320
700,000 The Maryland National Capital Park and Planning Commission,
Maryland, (Prince George's County, Maryland), General
Obligation Bonds, Prince George's County Park Acquisition
and Development Bonds, Series L-2, 6.125%, 7/01/02
(Pre-refunded to 7/01/02) Aa 7/02 at 102 761,040
1,000,000 Housing Opportunities Commission of Montgomery County,
(Montgomery County, Maryland), Multifamily Housing
Revenue Bonds, 1995 Series A, 6.000%, 7/01/20 Aa 7/05 at 102 996,160
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
MARYLAND--CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 450,000 Housing Opportunities Commission of Montgomery County,
(Montgomery County, Maryland), Single Family Mortgage
Revenue Bonds, 1986 Series C, 7.250%, 7/01/13 Aa 7/99 at 100 $ 464,184
1,615,000 Housing Opportunities Commission of Montgomery County,
(Montgomery County, Maryland), Single Family Mortgage
Revenue Bonds, 1994 Series A, 6.600%, 7/01/14 Aa 7/04 at 102 1,673,108
1,000,000 Montgomery County, Maryland, Solid Waste System Revenue
Bonds, (1993 Series A), 5.875%, 6/01/13 (Alternative
Minimum Tax) Aaa 6/03 at 102 1,009,160
1,500,000 Morgan State University, Maryland, Academic Fees and
Auxiliary Facilities Fees, Revenue Refunding Bonds,
1993 Series, 6.100%, 7/01/20 Aaa No Opt. Call 1,580,760
1,000,000 Northeast Maryland Waste Disposal Authority, Resource
Recovery Revenue Refunding Bonds, (Southwest Resource
Recovery Facility), Series 1992, 6.900%, 1/01/00 Aaa No Opt. Call 1,067,990
600,000 Prince George's County, Maryland, Hospital Revenue Bonds,
Dimensions Health Corporation, Series 1992, 6.700%, 7/01/97 A No Opt. Call 614,580
1,550,000 Housing Authority of Prince George's County, Maryland,
Mortgage Revenue Refunding Bonds, Series 1992A (New
Keystone Apartments Project-FHA Insured Mortgage Loan),
6.800%, 7/01/25 Aaa 1/02 at 102 1,616,480
1,500,000 Prince George's County, Maryland, Pollution Control Revenue
Refunding Bonds (Potomac Electric Project), 1993 Series,
6.375%, 1/15/23 A+ 1/03 at 102 1,564,275
1,000,000 University of Maryland System, Auxiliary Facility and Tuition
Revenue Bonds, 1993 Refunding Series C, 5.000%, 10/01/11 AA+ 10/03 at 101 955,380
1,170,000 Washington Suburban Sanitary District, Maryland,
(Montgomery and Prince George's Counties, Maryland),
General Construction Bonds of 1991 (Second Series),
8.000%, 1/01/02 Aa1 No Opt. Call 1,352,380
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of
1992 (General Obligation Bonds), 6.600%, 7/01/13
(Pre-refunded to 7/01/02) Aaa 7/02 at 101 1/2 556,910
1,750,000 Puerto Rico Aqueduct and Sewer Authority, Revenue Bonds,
Series 1988A, 7.875%, 7/01/17 (Pre-refunded to 7/01/98) AAA 7/98 at 102 1,908,148
2,000,000 Puerto Rico Highway and Transportation Authority, Highway
Revenue Bonds, (Series X), 5.250%, 07/01/14 A- 7/03 at 101 1/2 1,810,780
185,000 Puerto Rico Electric Power Authority, Power Revenue
Refunding Bonds, Series 1989-N, 7.125%, 7/01/14 A- 7/99 at 101 1/2 199,638
315,000 Puerto Rico Electric Power Authority, Power Revenue
Refunding Bonds, Series 1989-0, 7.125%, 7/01/14
(Pre-refunded to 7/01/99) AAA 7/99 at 101 1/2 344,442
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority,
Hospital Revenue Bonds, 1995 Series A, (Hospital Auxilio
Mutuo Obligated Group Project), 6.250%, 7/01/16 Aaa 1/05 at 102 $ 1,043,900
- ----------------------------------------------------------------------------------------------------------------------------------
$ 52,790,000 Total Investments -- (cost $53,138,209) -- 98.1% 54,712,491
================------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 1.3%
$ 700,000 Maryland Health and Higher Educational Facilities Authority,
================ Kaiser Permanente Revenue Bonds, 1995 Series A, Variable
Rate Demand Bonds, 3.500%, 7/01/15+ VMIG-1 700,000
- ----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.6% 364,906
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 55,777,397
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 24 $32,528,739 59%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 12,198,490 22
PORTFOLIO OF A+ A1 2 2,564,965 5
INVESTMENTS A, A- A, A2, A3 3 2,624,998 5
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 1 919,810 2
TEMPORARY Non-rated Non-rated 2 3,875,489 7
INVESTMENTS):
- --------------------------------------------------------------------------------------------------------------------------
TOTAL 45 $54,712,491 100%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R -- Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
25
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
MICHIGAN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,145,000 Board of Trustees of Michigan State University, General Revenue
Bonds, Series 1992 A, 6.250%, 8/15/15 AA- 8/02 at 101 $ 1,171,427
Michigan Municipal Bond Authority, State Revolving Fund
Reserve Bond, Series 1992A:
1,000,000 4.750%, 12/01/09 Aaa 12/01 at 100 923,030
555,000 6.600%, 10/01/18 Aa 10/02 at 102 585,902
950,000 Michigan Municipal Bond Authority, State Revolving Fund
Revenue Bonds, Series 1994, 7.000%, 10/01/04 Aa No Opt. Call 1,073,652
1,000,000 Michigan Public Power Agency, Belle River Project Refunding
Revenue Bonds, 1993 Series A, 5.250%, 1/01/18 AA- 1/03 at 102 918,650
Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds, (The Detroit Medical Center Obligated
Group), Series 1988B:
460,000 8.125%, 8/15/08 (Pre-refunded to 8/15/98) Aaa 8/98 at 102 502,798
40,000 8.125%, 8/15/08 A 8/98 at 102 43,056
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue
Bonds, (Daughters of Charity National Health System-
Providence Hospital), Series 1991, 7.000%, 11/01/21 Aa 11/01 at 102 1,076,110
500,000 Michigan State Hospital Finance Authority, Hospital Revenue
Bonds, (Mid-Michigan Obligated Group), Series 1992,
6.900%, 12/01/24 A 12/02 at 102 523,615
860,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds (The Detroit Medical Center Obligated
Group) Series 1993B, 5.000%, 8/15/02 A No Opt. Call 857,325
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds, (Otsego Memorial Hospital Gaylord,
Michigan), Series 1995, 6.125%, 1/01/15 AA 1/05 at 102 1,017,650
1,190,000 Michigan State Housing Development Authority, Limited
Obligation Multi-Family Revenue Refunding Bonds, Series
1995A, (GNMA Collateralized Program-Parc Pointe
Apartments), 6.500%, 10/01/15 Aaa 10/05 at 102 1,237,207
1,000,000 Michigan State Housing Development Authority, Single Family
Mortgage Revenue Bonds, 1995 Series A, 6.800%, 12/01/16 AA+ 6/05 at 102 1,039,510
1,740,000 Michigan State Housing Finance Authority, Hospital Revenue
and Refunding Bonds, (Daughters of Charity National Health
System-St. Mary's Medical Center of Saginaw, Inc.) Series
1995, 5.500%, 11/01/05 Aa No Opt. Call 1,777,793
Michigan State Housing Development Authority, Rental
Housing Revenue Bonds, 1992 Series A:
500,000 6.400%, 4/01/05 A+ 10/02 at 102 524,215
500,000 6.650%, 4/01/23 A+ 10/02 at 102 514,840
1,000,000 Michigan State Housing Development Authority, Rental
Housing Revenue Bonds, 1994 Series B, 5.700%, 4/01/12 A+ 4/04 at 102 972,670
1,055,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds,
(WMX Technologies, Inc. Project), Series 1993, 6.000%,
12/01/13 (Alternative Minimum Tax) A1 12/03 at 102 1,060,834
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,000,000 State Building Authority, State of Michigan,
1991 Revenue Bonds, Series II, 6.250%,
10/01/20 AA- 10/01 at 102 $1,011,680
400,000 County of Bay, Michigan, Bay County West
Side Regional Sewage Disposal System
Bonds, 6.400%, 5/01/02 A 11/96 at 102 408,000
250,000 Capital Region Airport Authority, (Lansing,
Michigan), Airport Revenue Bonds, Series
1992, 6.700%, 7/01/21 (Alternative Minimum
Tax) Aaa 7/02 at 102 265,653
1,000,000 School District of the City of Dearborn,
County of Wayne, State of Michigan, 1992
School Building and Site Bonds, (General
Obligation Unlimited Tax), 6.000%, 5/01/14 AA 5/01 at 102 1,014,420
1,500,000 City of Detroit, Michigan, Convention Facility
Limited Tax Revenue Refunding Bonds, (Cobo
Hall Expansion Project), Series 1993, 5.250%,
9/30/12 Aaa 9/03 at 102 1,424,640
1,000,000 City of Detroit, Michigan, Water Supply System
Revenue and Revenue Refunding Bonds, Series
1993, 4.750%, 7/01/19 Aaa 7/04 at 102 855,900
1,000,000 Dexter Community Schools, Counties of Washtenaw
and Livingston, State of Michigan, 1993 School
Building and Site and Refunding Bonds, (General
Obligation Unlimited Tax), 5.000%, 5/01/17 AA 5/03 at 102 895,760
445,000 Grand Rapids Housing Corporation, Multi-Family
Revenue Refunding Bonds, Series 1992 (FHA
Insured Mortgage Loan-Section 8 Assisted
Elderly Project), 7.375%, 7/15/41 AAA 1/04 at 104 483,337
500,000 County of Grand Traverse (Michigan), Hospital
Finance Authority, Hospital Revenue Refunding
Bonds (Munson Healthcare Obligated Group),
Series 1992A, 6.250%, 7/01/22 Aaa 7/02 at 102 510,435
950,000 Huron Valley School District, Counties of
Oakland and Livingston, State of Michigan,
1996 Refunding Bonds (General Obligation
-Unlimited Tax), 5.750%, 5/01/22 (WI) Aaa 5/07 at 100 946,742
1,000,000 Lake Orion Community School District,County
of Oakland, State of Michigan, 1995
Refunding Bonds, (General Obligation
-Unlimited Tax), 5.500%, 5/01/20 Aaa 5/05 at 101 964,600
1,250,000 City of Lansing, Sewage Disposal System
Revenue and Revenue Refunding Bonds, 1994
Series, 5.850%, 5/01/14 Aaa 5/04 at 102 1,255,125
1,000,000 County of Monroe, Michigan, Pollution Control
Revenue Bonds, (The Detroit Edison Company
Project), Series A-1994, 6.350%, 12/01/04
(Alternative Minimum Tax) Aaa No Opt. Call 1,088,870
City of Muskegon, County of Muskegon, State of
Michigan, Water Supply System Revenue Bonds,
Series 1993:
450,000 4.500%, 5/01/12 Baa1 5/01 at 101 375,534
450,000 4.500%, 5/01/13 Baa1 5/01 at 101 372,794
180,000 Saginaw-Midland Municipal Water Supply
Corporation, State of Michigan, Water Supply
Revenue Bonds (Limited Tax General Obligation),
Series 1992, 6.875%, 9/01/16 A 9/04 at 102 196,864
200,000 Hospital Finance Authority of the City of
St. Joseph, Michigan, Hospital Revenue
Refunding and Improvement Bonds, (Mercy
Memorial Medical Center, Inc.), Series 1986A,
7.300%, 10/01/00 (Pre-refunded to 10/01/96) AAA 10/96 at 102 205,174
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
MICHIGAN--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,000,000 Regents of the University of Michigan, Hospital
Revenue Bonds, Series 1990, 6.375%, 12/01/24 Aa 12/00 at 100 $ 1,017,260
250,000 The Economic Development Corporation of the City
of Warren, Nursing Home Revenue Refunding Bonds,
(GNMA Mortgage-Backed Security-Autumn Woods
Project), Series 1992, 6.900%, 12/20/22 Aaa 3/02 at 101 261,175
1,000,000 Charter County of Wayne, Michigan, Airport Revenue
Refunding Bonds (Detroit Metropolitan Wayne County
Airport), Subordinate Lien, Series 1993C, 5.250%,
12/01/13 Aaa 12/03 at 102 946,560
1,000,000 Western Townships Utilities Authority, Sewage
Disposal System Refunding Bonds, Series
1991, 6.500%, 1/01/10 AAA 1/02 at 100 1,059,420
500,000 Puerto Rico Aqueduct and Sewer Authority,
Revenue Bonds, Series 1988A, 7.875%,
7/01/17 (Pre-refunded to 7/01/98) AAA 7/98 at 102 545,185
250,000 Puerto Rico Public Buildings Authority, Public
Education and Health Facilities Bonds,
Series L, 6.875%, 7/01/21 (Pre-refunded to
7/01/02) Aaa 7/02 at 101 1/2 281,812
- ---------------------------------------------------------------------------------------------------------------------
$32,070,000 Total Investments -- (cost $31,212,932) -- 98.3% 32,207,224
================-----------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 2.1%
$ 700,000 Regents of the University of Michigan, Hospital
================ Revenue Bonds, Series 1995A, (Adjustable Rate
Demand), Variable Rate Demand Bonds, 3.750%,
12/01/27+ VMIG-1 700,000
- ---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.4%) (154,672)
- ---------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $32,752,552
=====================================================================================================================
</TABLE>
28
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 18 $13,757,663 43%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 12 12,599,814 39
PORTFOLIO OF A+ A1 4 3,072,559 10
INVESTMENTS A, A-- A, A2, A3 5 2,028,860 6
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 2 748,328 2
TEMPORARY
INVESTMENTS):
- -----------------------------------------------------------------------------------------------------------
TOTAL 41 $32,207,224 100%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
(WI) Security purchased on a when-issued basis (note 1).
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
29
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NEW JERSEY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,415,000 The Delaware River and Bay Authority, Revenue Bonds, Series
1993, 5.000%, 1/01/17 Aaa 1/04 at 102 $1,292,334
1,000,000 New Jersey Economic Development Authority, Gas Facilities
Revenue Bonds, 1991 Series A, (Elizabethtown Gas Company
Project), 6.750%, 10/01/21 (Alternative Minimum Tax) A3 10/96 at 102 1,022,300
200,000 New Jersey Economic Development Authority, Lease Rental
Bonds, 1992 Series, (Liberty State Park Project), 6.800%,
3/15/22 (Pre-refunded to 3/15/02) A1 3/02 at 102 222,922
1,000,000 New Jersey Economic Development Authority, Economic
Development Bonds, (Yeshiva K'Tana of Passaic-1992 Project),
8.000%, 9/15/18 N/R No Opt. Call 1,148,500
2,965,000 New Jersey Economic Development Authority, Economic
Development Bonds, (Bridgewater Resources Inc. Project),
1994 Series A, 8.375%, 11/01/04 (Alternative Minimum Tax) N/R No Opt. Call 3,082,770
250,000 New Jersey Economic Development Authority, Solid Waste
Disposal Facility Revenue Bonds, (Garden State Paper
Company, Inc. Project), Series 1992, 7.125%, 4/01/22
(Alternative Minimum Tax) Aa1 4/02 at 102 267,253
1,285,000 New Jersey Economic Development Authority, Economic
Growth Bond, Composite Issue-1992 Second Series H,
5.300%, 12/01/07 (Alternative Minimum Tax) Aa3 12/03 at 102 1,266,727
650,000 New Jersey Economic Development Authority, Market
Transition Facility Senior Lien Revenue Bonds, Series 1994A,
5.875%, 7/01/11 Aaa 7/04 at 102 663,923
975,000 New Jersey Educational Facilities Authority, Trenton State
College Issue, Revenue Bonds, Series 1976 D,
6.750%, 7/01/08 A+ 1/97 at 100 977,077
835,000 New Jersey Educational Facilities Authority, Princeton
University Revenue Bonds, 1994 Series A, 5.875%, 7/01/11 Aaa 7/04 at 100 859,148
1,930,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Hackensack Hospital Issue, Series A, 8.750%, 7/01/09 Aaa No Opt. Call 2,235,056
2,065,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Series 1990-E, (Kennedy Memorial Hospital),
8.375%, 7/01/10 A1 7/01 at 102 2,381,585
700,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Community Medical Center/Kensington Manor Care
Center Issue, Series E, 7.000%, 7/01/20 Aaa 7/00 at 102 757,484
480,000 New Jersey Health Care Facilities Financing Authority Revenue
Bonds, Community Memorial Hospital Association Issue,
Series C, 8.000%, 7/01/14 A 7/98 at 102 513,571
3,000,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Newton Memorial Hospital Issue,
Series A, 7.500%, 7/01/19 A- 7/99 at 102 3,201,870
400,000 New Jersey Health Care Facilities Financing Authority,
Refunding Revenue Bonds, Atlantic City Medical Center
Issue, Series C, 6.800%, 7/01/05 A 7/02 at 102 432,268
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 800,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Palisades Medical Center, Obligated Group Issue,
Series 1992, 7.500%, 7/01/06 Ba1 7/02 at 102 $ 809,608
1,750,000 New Jersey Housing Finance Agency, Special Pledge Revenue
Obligations, 1975 Series One, 9.000%, 11/01/18 A1 11/96 at 104 1,827,123
2,000,000 New Jersey Housing and Mortgage Finance Agency, Multi-Family
Housing Revenue Bonds, 1995 Series A, 6.000%, 11/01/14 Aaa 5/05 at 102 2,018,700
700,000 New Jersey Housing and Mortgage Finance Agency, Housing
Revenue Bonds, 1992 Series A, 6.950%, 11/01/13 A+ 5/02 at 102 741,090
375,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
1984 Series, 10.375%, 1/01/03 AAA No Opt. Call 449,434
1,750,000 New Jersey Turnpike Authority, Turnpike Revenue Refunding
Bonds, Series 1991-C, 6.500%, 1/01/08 A No Opt. Call 1,899,905
1,000,000 State of New Jersey, General Obligation Bonds, Series D,
5.800%, 2/15/07 Aa1 No Opt. Call 1,052,420
1,000,000 Pollution Control Financing Authority of Camden County,
(Camden County, New Jersey), Solid Waste Disposal and
Resource Recovery System Revenue Bonds, Series 1991 C,
7.125%, 12/01/01 (Alternative Minimum Tax) BBB+ No Opt. Call 1,017,330
2,645,000 Pollution Control Financing Authority of Camden County,
(Camden County, New Jersey), Solid Waste Disposal and
Resource Recovery System Revenue Bonds, Series 1991 D,
7.250%, 12/01/10 BBB+ 12/01 at 102 2,721,864
500,000 The Essex County Improvement Authority, (Essex County,
New Jersey), County Guaranteed Pooled Revenue Bonds,
Series 1992A, 6.500%, 12/01/12 Baa1 12/02 at 102 518,640
500,000 The Board of Education of The Township of Hillsborough, in
the County of Somerset, State of New Jersey, General
Obligation School Purpose Bonds, Series 1992, 5.875%,
8/01/11 AA No Opt. Call 519,245
400,000 The Hudson County Improvement Authority, Multi-Family
Housing Revenue Bonds, Series 1992 A, (Conduit Financing-
Observer Park Project), 6.900%, 6/01/22 (Alternative
Minimum Tax) AAA 6/04 at 100 416,116
1,605,000 The Board of Education of the Borough of Little Ferry,
Bergen County, New Jersey, Certificates of Participation,
6.300%, 1/15/08 N/R No Opt. Call 1,622,559
The Board of Education of the Township of Monroe, In the
county of Gloucester, New Jersey, School Bonds, Series 1993:
725,000 5.200%, 8/01/11 Aaa No Opt. Call 707,680
825,000 5.200%, 8/01/14 Aaa No Opt. Call 792,124
500,000 North Bergen Housing Development Corporation (North Bergen,
New Jersey), Mortgage Revenue Bonds, Series 1978, (FHA-Insured
Mortgage Loan-Section 8 Assisted Project), 7.400%, 9/01/20 N/R 8/96 at 102 1/2 510,265
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NEW JERSEY--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 300,000 The Township of North Bergen, (Hudson County, New Jersey), Fiscal
Year Adjustment General Obligation Bonds, Series 1992,
6.500%, 8/15/12 Aaa 8/02 at 102 $ 320,754
2,350,000 The Ocean County Utilities Authority (New Jersey), Wastewater
Revenue Bonds, Refunding Series 1987, 5.000%, 1/01/14 Aaa 1/97 at 100 2,153,940
2,215,000 County of Passaic, State of New Jersey, General Obligation Refunding
Bonds, Series 1993, 5.125%, 9/01/12 Aaa No Opt. Call 2,135,216
270,000 The Union County Utilities Authority, (New Jersey), Solid Waste
System Revenue Bonds, Series D, 6.850%, 6/15/14
(Alternative Minimum Tax) Aaa 6/02 at 102 284,726
The Union County Utilities Authority, (New Jersey), Solid Waste
System Revenue Bonds, 1991 Series A:
195,000 7.100%, 6/15/06 (Alternative Minimum Tax) A- 6/02 at 102 200,349
1,100,000 7.200%, 6/15/14 (Alternative Minimum Tax) A- 6/02 at 102 1,110,043
100,000 University of Medicine and Dentistry of New Jersey Bonds, Series E,
6.500%, 12/01/18 (Pre-refunded to 12/01/01) AA 12/01 at 102 110,382
300,000 The Wanaque Borough Sewage Authority, (Passaic County, New Jersey),
Sewer Revenue Bonds, (Series 1992), (Bank Qualified),
7.000%, 12/01/21 Baa1 12/02 at 102 317,703
Delaware River Port Authority, Revenue Bonds, Series of 1995:
550,000 5.400%, 1/01/15 Aaa 1/06 at 102 532,829
1,000,000 5.500%, 1/01/26 Aaa 1/06 at 102 961,250
1,175,000 Virgin Islands Housing Finance Authority, Single Family Mortgage
Revenue Refunding Bonds, (GNMA Mortgage-Backed Securities
Program), 1995 Series A, 6.450%, 3/01/16
(Alternative Minimum Tax) AAA 3/05 at 102 1,192,002
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1995
(General Obligation Bonds), 5.750%, 7/01/24 Aaa 7/05 at 101 1/2 2,002,300
1,000,000 Puerto Rico Aqueduct and Sewer Authority, Revenue Bonds, Series
1988A, 7.875%, 7/01/17 (Pre-refunded to 7/01/98) AAA 7/98 at 102 1,090,369
60,000 Puerto Rico Highway and Transportation Authority, Highway Revenue
Bonds, (Series T), 6.625%, 7/01/18 (Pre-refunded to 7/01/02) A 7/02 at 101 1/2 66,899
Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P:
790,000 7.000%, 7/01/07 A- No Opt. Call 896,333
1,875,000 7.000%, 7/01/21 (Pre-refunded to 7/01/01) Aaa 7/01 at 102 2,107,518
1,500,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds,
Series Z, 5.250%, 7/01/21 A- 7/05 at 100 1,361,685
1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority, Hospital
Revenue Bonds, 1995 Series A, (Hospital Auxilio Mutuo Obligated
Group Project), 6.250%, 7/01/16 Aaa 1/05 at 102 1,043,900
- ------------------------------------------------------------------------------------------------------------------------------------
$ 54,005,000 Total Investments -- (Cost $54,837,515) -- 95.8% 55,837,089
==============----------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENT IN SHORT-TERM
MUNICIPAL SECURITIES -- 3.1%
$ 500,000 New Jersey Economic Development Authority, Dock Facility
Revenue Refunding Bonds, (Bayonne/IMTT-Bayonne Project),
Series 1993A, Variable Rate Demand Bonds,
3.400%, 12/01/27+ VMIG-1 $ 500,000
1,300,000 The Port Authority of New York and New Jersey, Versatile
Structure Obligations, Series 2, Variable Rate Demand Bonds,
3.600%, 5/01/19+ A-1+ 1,300,000
- -----------------------------------------------------------------------------------------------------------------------
$ 1,800,000 Total Temporary Investments -- 3.1% 1,800,000
- -----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.1% 636,205
- -----------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $58,273,294
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 21 $24,016,803 43%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 5 3,216,027 6
PORTFOLIO OF A+ A1 5 6,149,797 11
INVESTMENTS: A, A- A, A2, A3 10 10,705,223 19
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 4,575,537 8
TEMPORARY BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 809,608 2
INVESTMENTS): Non-rated Non-rated 4 6,364,094 11
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL 50 $55,837,089 100%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard &Poor's or Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
33
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
PENNSYLVANIA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Pennsylvania Economic Development Financing Authority
(Sun Company, Inc. (R&M) Project) Series 1994A,
7.600%, 12/01/24 (Alternative Minimum Tax) Baa1 12/04 at 102 $ 2,754,875
750,000 Pennsylvania Higher Educational Facilities Authority, Revenue
Bonds (Thomas Jefferson University--Life Sciences Building
Project), 1989 Series A, 6.000%, 7/01/19 Aa 7/99 at 102 755,183
600,000 Pennsylvania Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1991-32, 7.150%, 4/01/15 AA+ 10/01 at 102 637,938
1,250,000 Pennsylvania Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1996-50A, 6.000%, 10/01/13 AA+ 4/06 at 102 1,254,038
2,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1996-51, 6.375%, 4/01/28
(Alternative Minimum Tax) AA+ 4/06 at 102 2,020,280
1,390,000 Pennsylvania Intergovernmental Cooperative Authority
(City of Philadelphia Funding Program) Series of 1994,
7.000%, 6/15/05 Aaa No Opt. Call 1,594,122
1,500,000 Pennsylvania Intergovernmental Cooperative Authority Special
Tax Revenue Refunding Bonds (City of Philadelphia Funding
Program) Series of 1996, 5.500%, 6/15/20 Aaa 6/06 at 100 1,446,810
2,300,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike
Revenue Bonds, Series O of 1992, 5.500%, 12/01/17 Aaa 12/02 at 102 2,201,054
1,475,000 Allegheny County Hospital Development Authority (Allegheny
County, Pennsylvania), Hospital Revenue Bonds, Series Q
(Allegheny Valley Hospital, Sublessee), 7.000%, 8/01/15 A No Opt. Call 1,638,209
1,500,000 Allegheny County Hospital Development Authority, (Allegheny
County, Pennsylvania) Health and Education Revenue Bonds,
Series 1992 (The Rehabilitation Institute of Pittsburgh
Project), 7.000%, 6/01/22 BBB 6/02 at 102 1,521,420
3,000,000 Allegheny County Residential Finance Authority Mortgage
Revenue Bonds (FHA Insured Mortgage, Ladies Grand Army
of the Republic Health Facility Project) 1995 Series G,
6.350%, 10/01/36 AAA 10/05 at 100 3,015,180
2,000,000 Allegheny County Residential Finance Authority, Single Family
Mortgage Revenue Bonds, 1994 Series Y, 0.000%, 5/01/27
(Alternative Minimum Tax) Aaa No Opt. Call 231,280
2,000,000 Armstrong County Hospital Authority (Armstrong County,
Pennsylvania), Health Center Revenue Refunding Bonds,
Series 1991 (Canterbury Place Project), 6.500%, 12/01/21 Aaa 12/01 at 100 2,111,480
1,000,000 Bucks County Community College Authority, Bucks County,
Pennsylvania, College Building Revenue and Refunding
Bonds, Series of 1992, 6.250%, 6/15/14 Aa 6/02 at 100 1,020,300
2,850,000 Deer Lakes School District (Allegheny County, Pennsylvania),
General Obligation Bonds, Series of 1995, 6.350%, 1/15/14 Aaa 1/04 at 100 2,970,812
800,000 Greater Lebanon Refuse Authority, Lebanon County,
Pennsylvania Solid Waste Revenue Bonds, Series of 1992,
7.000%, 11/15/04 A- 11/02 at 100 846,440
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,500,000 Indiana County Industrial Development Authority Pollution
Control Refunding Revenue Bonds (New York State Electric
and Gas Corporation Project), 1994 Series A,
6.000%, 6/01/06 Aaa No Opt. Call $ 3,728,375
3,000,000 Indiana County Industrial Development Authority Pollution
Control Refunding Revenue Bonds, Series 1995 (Pennsylvania
Electric Company Project), 5.350%, 11/01/10 Aaa No Opt. Call 2,972,310
950,000 Luzerne County Industrial Development Authority Exempt
Facilities Revenue Bonds, 1992 Series B (Pennsylvania Gas and
Water Company Project), 7.125%, 12/01/22 (Alternative
Minimum Tax) Baa1 12/02 at 102 995,087
1,500,000 Luzerne County Industrial Development Authority Exempt
Facilities Revenue Refunding Bonds, 1994 Series A
(Pennsylvania Gas and Water Company Project), 7.000%,
12/01/17 (Alternative Minimum Tax) Aaa 12/04 at 102 1,655,520
2,000,000 McKeesport Area School District (Allegheny County,
Pennsylvania) General Obligation Bonds, Series of 1996A,
6.000%, 10/01/25 (WI) Aaa 10/06 at 100 2,005,080
3,000,000 County of Montgomery, Pennsylvania, General Obligation
Bonds, Series A of 1995, 6.100%, 10/15/25 Aaa 10/00 at 100 3,060,270
3,000,000 Montgomery County Higher Education and Health Authority
Mortgage Revenue Bonds, Series of 1996 (Waverly Heights
Project), 6.375%, 1/01/26 BBB 1/06 at 101 2,935,500
1,800,000 Northampton County Higher Education Authority, University
Revenue Bonds, Series of 1991 (Lehigh University),
6.900%, 10/15/06 Aaa 10/01 at 102 1,982,268
1,000,000 Northumberland County Industrial Development Authority
Exempt Facilities Revenue Bonds, 1993 Series (Roaring Creek
Water Company Project), 6.375%, 10/15/23 (Alternative
Minimum Tax) N/R 10/03 at 102 929,230
2,000,000 Philadelphia Authority for Industrial Development Project
Revenue Refunding Bonds (PGH Development Corporation),
Series of 1993, 5.250%, 7/01/17 AA 7/03 at 102 1,833,620
2,000,000 City of Philadelphia, Pennsylvania Gas Works Revenue Bonds,
Fourteenth Series, 6.375%, 7/01/14 Aaa 7/03 at 102 2,091,100
2,750,000 The Hospitals and Higher Education Facilities Authority of
Philadelphia Hospital Revenue Bonds, Series A of 1993
(Temple University Hospital), 6.625%, 11/15/23 A- 11/03 at 102 2,789,600
1,275,000 The Hospitals and Higher Education Facilities Authority of
Philadelphia Hospital Revenue Refunding Bonds, Series A of
1996 (St. Agnes Medical Center/Franciscan Health System
Project), 5.250%, 7/01/10 Aaa 7/98 at 100 1,225,058
3,000,000 Urban Redevelopment Authority of Pittsburgh Home
Improvement Loan Bonds, 1995 Series A, 6.375%, 8/01/18
(Alternative Minimum Tax) A 8/05 at 102 3,005,880
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
PENNSYLVANIA--CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,100,000 Urban Redevelopment Authority of Pittsburgh Mortgage
Revenue Bonds, 1994 Series A, 6.625%, 4/01/22 (Alternative
Minimum Tax) A1 4/04 at 102 $1,115,136
500,000 Saint Mary Hospital Authority Hospital Revenue Bonds, Series
1992A, (Franciscan Health System/Saint Mary Hospital of
Langhorne, Inc.), 6.500%, 7/01/12 Aaa 7/02 at 102 533,200
230,000 Health Care Facilities Authority of Sayre (Pennsylvania),
Series 1991A Revenue Bonds, Guthrie Healthcare System,
7.100%, 3/01/17 Aaa 3/01 at 102 251,586
350,000 Washington County Hospital Authority, Hospital Revenue
Bonds, Series 1992 (Monongahela Valley Hospital, Inc.
Project), 6.750%, 12/01/08 A 4/02 at 102 366,162
935,000 The Municipal Authority of the Borough of West View
(Allegheny County, Pennsylvania), Special Obligation Bonds,
Series of 1985A, 9.500%, 11/15/14 Aaa No Opt. Call 1,293,824
600,000 The General Municipal Authority of the City of Wilkes-Barre,
College Misericordia Revenue Bonds, Refunding Series A of
1992, 7.750%, 12/01/12 N/R 12/00 at 100 642,317
- --------------------------------------------------------------------------------------------------------------
$61,405,000 Total Investments -- (cost $59,398,291) -- 95.5% 61,430,544
===========---------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 4.5% 2,868,345
- --------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $64,298,889
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 18 $34,369,329 56%
RATINGS** AA-, AA, AA- Aa1, Aa, Aa2, Aa3 6 7,521,359 12
PORTFOLIO OF A+ A1 1 1,115,136 2
INVESTMENTS: A, A- A, A2, A3 5 8,646,291 14
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 8,206,882 13
Non-rated Non-rated 2 1,571,547 3
- --------------------------------------------------------------------------------------------------------------
TOTAL 36 $61,430,544 100%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R -- Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
36
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
VIRGINIA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Metropolitan Washington Airports Authority, Airport System
Revenue Bonds, Series 1992A:
$1,500,000 6.625%, 10/01/19 (Alternative Minimum Tax) Aaa 10/02 at 102 $1,579,935
1,500,000 6.250%, 10/01/21 (Alternative Minimum Tax) Aaa 10/02 at 102 1,526,205
1,000,000 Metropolitan Washington Airports Authority, Airport System
Revenue Bonds, Series 1994A, 5.750%, 10/01/20
(Alternative Minimum Tax) Aaa 10/04 at 102 985,150
2,260,000 City of Virginia Beach Development Authority (Virginia),
Hospital Revenue Bonds (Sentara Bayside Hospital),
Series 1991, 6.300%, 11/01/21 Aa 11/01 at 102 2,283,933
800,000 Virginia College Building Authority, Educational Facilities
Revenue Bonds (Randolph-Macon College Project), Series of
1992, 6.625%, 5/01/13 A- 5/02 at 102 838,352
Virginia College Building Authority, Educational Facilities
Revenue Bonds (The Washington and Lee University Project),
Series of 1994:
1,250,000 5.750%, 1/01/14 Aa 1/04 at 102 1,247,888
1,000,000 5.800%, 1/01/24 Aa 1/04 at 102 991,130
650,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1990 Series B, Subseries B-4,
6.850%, 7/01/17 Aa1 1/00 at 102 672,458
4,000,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1992 Series A, 7.150%, 1/01/33 Aa1 1/02 at 102 4,249,760
800,000 Virginia Housing Development Authority, Multi-Family
Housing Bonds, 1992 Series D, 6.800%, 11/01/09 AA+ 5/02 at 102 845,696
1,090,000 Virginia Public Building Authority, State Building Revenue
Bonds, Series 1991A, 6.500%, 8/01/11 Aa 8/01 at 102 1,196,624
1,000,000 Virginia Resources Authority, Sewer System Revenue Bonds,
1995 Series A, (Hopewell Regional Wastewater Treatment
Facility Project), 6.000%, 10/01/25
(Alternative Minimum Tax) AA 10/05 at 102 980,340
1,960,000 Virginia Resources Authority, Solid Waste Disposal System
Revenue Bonds, (County of Prince William, Virginia-
Refunding), 1995 Series A, 5.500%, 4/01/15 AA 4/05 at 102 1,883,599
1,500,000 Virginia Resources Authority, Water and Sewer System Revenue
Bonds, 1995 Series A (Sussex County Project),
5.600%, 10/01/25 AA 10/05 at 102 1,426,590
800,000 Virginia Resources Authority, Water System Refunding Revenue
Bonds, 1992 Series A, 6.450%, 4/01/13 AA 4/02 at 102 842,096
1,000,000 Town of Abingdon, Virginia, General Obligation Capital
Improvement Bonds, Series 1992, 6.250%, 8/01/12 A 8/02 at 102 1,036,570
2,060,000 Industrial Development Authority of Albemarle County,
Virginia, Hospital Refunding Revenue Bonds (Martha Jefferson
Hospital), Series 1993, 5.875%, 10/01/13 A 10/03 at 102 2,018,409
2,250,000 Capital Region Airport Commission, Richmond (Virginia),
International Airport Projects, Airport Revenue Bonds,
Series 1995A, 5.625%, 7/01/25 A aa 7/05 at 102 2,202,705
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
VIRGINIA--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 750,000 Charlottesville-Albemarle Airport Authority, (Virginia), Airport
Revenue Refunding Bonds, Series 1995, 6.125%, 12/01/13
(Alternative Minimum Tax) BBB 12/05 at 102 731,955
2,500,000 Chesapeake Bay Bridge and Tunnel District, General Resolution
Revenue Bonds, Refunding Series 1991, 6.375%, 7/01/22
(Pre-refunded to 7/01/01) Aaa 7/01 at 102 2,732,575
1,000,000 Industrial Development Authority of Covington-Alleghany
County, Virginia, Hospital Facility Revenue Bonds,
(Alleghany Regional Hospital) Series 1992, 6.625%, 4/01/12
(Pre-refunded to 4/01/02) A- 4/02 at 102 1,105,070
1,700,000 County of Cumberland, Virginia, Certificates of Participation,
Series 1994, 5.480%, 7/15/97 N/R No Opt. Call 1,702,023
1,460,000 Industrial Development Authority of Fairfax County, Virginia,
Hospital Revenue Refunding Bonds, (Inova Health System
Hospitals Project) Series 1993A, 5.000%, 8/15/13 Aaa No Opt. Call 1,372,969
3,250,000 Fairfax County (Virginia) Water Authority, Water Refunding
Revenue Bonds, Series 1992, 5.750%, 4/01/29 Aa 4/02 at 100 3,127,183
3,000,000 Hampton Roads Regional Jail Authority, Regional Jail Facility
Revenue Bonds, Series 1996A, 5.500%, 7/01/24 Aaa 7/06 at 102 2,890,140
500,000 Industrial Development Authority of the City of Hampton,
Virginia, Hospital Revenue and Refunding Bonds (Sentara
Hampton General Hospital), Series 1994A, 6.500%, 11/01/12 A 11/04 at 102 514,055
2,500,000 Henrico County, Virginia, Water and Sewer System Refunding
Revenue Bonds, Series 1992, 6.250%, 5/01/13 AA- 5/02 at 100 2,554,675
1,000,000 Loudoun County Sanitation Authority (Virginia), Water and
Sewer System Revenue Bonds, Refunding Series 1992,
6.250%, 1/01/16 Aaa 1/03 at 102 1,035,970
1,000,000 Industrial Development Authority of Loudoun County, Virginia,
University Facilities Revenue Refunding Bonds (The George
Washington University), Series of 1992, 6.250%, 5/15/22 A1 5/02 at 102 1,021,810
1,500,000 Industrial Development Authority of the City of Lynchburg,
Virginia, Educational Facilities Revenue Bonds, (Randolph-
Macon Women's College), Series 1993, 5.875%, 9/01/13 A 9/03 at 102 1,490,325
2,080,000 Peninsula Ports Authority of Virginia, Health System Revenue
and Refunding Bonds (Riverside Health System Project),
Series 1992A, 6.625%, 7/01/18 Aa 7/02 at 102 2,173,496
2,500,000 Prince William County Park Authority, (Virginia), Revenue
Bonds, Series 1994, 6.875%, 10/15/16 A- 10/04 at 102 2,669,775
1,000,000 Prince William County Service Authority (Virginia), Water and
Sewer System Revenue Bonds, Series 1991, 6.000%, 7/01/29 Aaa 7/01 at 100 1,003,940
3,005,000 City of Richmond, Virginia, General Obligation Public
Improvement Bonds, Series 1993B, 5.500%, 7/15/23 AA 7/03 at 102 2,877,226
1,000,000 Industrial Development Authority of the City of Roanoke,
Virginia, Hospital Revenue Bonds (Roanoke Memorial Hospitals,
Community Hospital of Roanoke Valley and Franklin Memorial Hospital
Project), Series 1990, 6.500%, 7/01/25 (Pre-refunded to 7/01/00) Aaa 7/00 at 100 1,069,740
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Development Authority of Rockingham County,
Virginia, Educational Facilities Revenue Bonds, (Bridgewater
College), Series 1993:
$ 400,000 5.600%, 10/01/06 Baa1 10/03 at 102 $ 399,320
400,000 5.700%, 10/01/07 Baa1 10/03 at 102 399,472
2,750,000 Southeastern Public Service Authority of Virginia, Senior
Revenue Bonds, Series 1993, (Regional Solid Waste System),
6.000%, 7/01/13 (Alternative Minimum Tax) A- 7/03 at 102 2,702,590
480,000 Suffolk Redevelopment Authority Multifamily Housing (Chase
Heritage Project), 7.000%, 7/01/24 (Mandatory Put 7/01/04) Baa3 7/02 at 104 503,093
4,000,000 Upper Occoquan Sewerage Authority (Virginia), Regional
Sewerage System Revenue Refunding Bonds, Series of 1993,
5.000%, 7/01/21 Aaa 1/04 at 102 3,597,800
800,000 Puerto Rico Highway and Transportation Authority,
Highway Revenue Bonds, (Series T), 6.625%, 7/01/18
(Pre-refunded to 7/01/02) A 7/02 at 101 1/2 891,992
- ------------------------------------------------------------------------------------------------------------------------------------
$ 64,995,000 Total Investments -- (Cost $62,627,296) -- 98.7% 65,374,634
================--------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES -- 0.3%
$ 200,000 Peninsula Ports Authority of Virginia Refunding Bonds
================ (Dominion Terminal Associates Project -- Series 1987C),
Variable Rate Demand Bonds, 3.550%, 7/01/16+ P-1 200,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.0% 645,636
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 66,220,270
====================================================================================================================================
</TABLE>
39
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
VIRGINIA--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 11 $19,997,129 31%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 15 27,352,694 42
PORTFOLIO OF A+ A1 1 1,021,810 2
INVESTMENTS A, A- A, A2, A3 9 13,267,138 20
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 2,033,840 3
TEMPORARY Non-rated Non-rated 1 1,702,023 2
INVESTMENTS):
- -------------------------------------------------------------------------------------------------------
TOTAL 41 $65,374,634 100%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security.
The rate disclosed is that currently in effect. This rate changes periodically
based on market conditions or a specified market index.
See accompanying notes to financial statements.
40
<PAGE>
STATEMENT OF NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
(Unaudited) JULY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $24,162,200 $61,600,722 $54,712,491 $32,207,224
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 100,000 1,200,000 700,000 700,000
Cash 47,075 120,935 - 236,738
Receivables:
Interest 271,118 891,455 521,768 448,885
Shares sold - - 35,401 226,206
Investments sold 10,000 - 61,664 -
Deferred organization costs (note 1) 3,554 3,414 4,027 4,506
Other assets 4,939 4,090 6,368 5,662
----------- ----------- ----------- -----------
Total assets 24,598,886 63,820,616 56,041,719 33,829,221
----------- ----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased 503,583 1,006,372 - 921,086
Shares reacquired - 14,486 293 -
Accrued expenses:
Management fees (note 6) 11,083 28,771 25,890 15,061
Other 33,839 60,844 92,806 50,584
Dividends payable 55,430 137,484 145,333 89,938
----------- ----------- ----------- -----------
Total liabilities 603,935 1,247,957 264,322 1,076,669
----------- ----------- ----------- -----------
Net assets (note 7) $23,994,951 $62,572,659 $55,777,397 $32,752,552
=========== =========== =========== ===========
Class A Shares (note 1)
Net assets $ 4,683,638 $ 8,927,494 $ 9,335,001 $ 4,923,363
=========== =========== =========== ===========
Shares outstanding 448,735 870,440 919,190 471,362
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.44 $ 10.26 $ 10.16 $ 10.44
=========== =========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 10.93 $ 10.74 $ 10.64 $ 10.93
=========== =========== =========== ===========
Class C Shares (note 1)
Net assets $ 482,826 $ 245,949 $ 1,712,343 $ 265,308
=========== =========== =========== ===========
Shares outstanding 46,633 24,076 168,755 25,435
=========== =========== =========== ===========
Net asset value, offering and redemption price per share $ 10.35 $ 10.22 $ 10.15 $ 10.43
=========== =========== =========== ===========
Class R Shares (note 1)
Net assets $18,828,487 $53,399,216 $44,730,053 $27,563,881
=========== =========== =========== ===========
Shares outstanding 1,815,543 5,201,347 4,400,123 2,637,250
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.37 $ 10.27 $ 10.17 $ 10.45
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
STATEMENT OF NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NJ PA VA
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1)............. $55,837,089 $61,430,544 $65,374,634
Temporary investments in short-term municipal securities,
at amortized cost (note 1).............................................. 1,800,000 - 200,000
Cash...................................................................... 233,336 4,204,181 105,065
Receivables:
Interest................................................................ 638,899 854,021 816,351
Shares sold............................................................. 18,136 48,228 42,060
Investments sold........................................................ - - -
Deferred organization costs (note 1)...................................... 3,794 4,108 2,825
Other assets.............................................................. 8,023 8,961 8,221
----------- ----------- -----------
Total assets......................................................... 58,539,277 66,550,043 66,549,156
----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased................................................... - 1,971,027 -
Shares reacquired....................................................... 38 3,608 39,907
Accrued expenses:
Management fees (note 6)................................................ 26,961 29,682 30,575
Other................................................................... 72,264 77,731 88,182
Dividends payable......................................................... 166,720 169,106 170,222
----------- ----------- -----------
Total liabilities.................................................... 265,983 2,251,154 328,886
----------- ----------- -----------
Net assets (note 7)....................................................... $58,273,294 $64,298,889 $66,220,270
=========== =========== ===========
Class A Shares (note 1)
Net assets................................................................ $13,889,997 $ 7,907,452 $ 7,893,642
=========== =========== ===========
Shares outstanding........................................................ 1,372,220 762,543 762,402
=========== =========== ===========
Net asset value and redemption price per share............................ $ 10.12 $ 10.37 $ 10.35
=========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price)........................ $ 10.60 $ 10.86 $ 10.84
=========== =========== ===========
Class C Shares (note 1)
Net assets................................................................ $ 1,938,675 $ 1,104,338 $ 975,023
=========== =========== ===========
Shares outstanding........................................................ 191,871 107,704 94,435
=========== =========== ===========
Net asset value, offering and redemption price per share.................. $ 10.10 $ 10.25 $ 10.32
=========== =========== ===========
Class R Shares (note 1)
Net assets................................................................ $42,444,622 $55,287,099 $57,351,605
=========== =========== ===========
Shares outstanding........................................................ 4,188,504 5,345,160 5,540,577
=========== =========== ===========
Net asset value and redemption price per share............................ $ 10.13 $ 10.34 $ 10.35
=========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
STATEMENT OF OPERATIONS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
Six months ended July 31, 1996 JULY 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 690,043 $ 1,746,592 $ 1,615,835 $ 978,358
Expenses:
Management fees (note 6) 64,478 166,678 151,547 90,983
12b-1 service fees--Class A (note 1) 5,208 8,957 10,223 5,395
12b-1 distribution and service fees--Class C (note 1) 1,880 919 8,069 1,284
Shareholders' servicing agent fees and expenses 11,541 29,177 32,487 17,117
Custodian's fees and expenses 18,523 21,281 28,495 17,569
Trustees' fees and expenses (note 6) 462 1,115 269 698
Professional fees 6,859 6,362 5,973 5,989
Shareholders' reports--printing and mailing expenses 4,730 11,625 11,006 10,697
Federal and state registration fees 3,267 2,332 3,601 5,184
Amortization of deferred organization costs (note 1) 3,444 3,584 3,801 3,918
Other expenses 1,492 2,912 2,719 2,150
---------- ----------- ----------- ---------
Total expenses before expense reimbursement 121,884 254,942 258,190 160,984
Expense reimbursement from investment adviser (note 6) (26,872) (17,779) (33,243) (30,237)
---------- ----------- ----------- ---------
Net expenses 95,012 237,163 224,947 130,747
---------- ----------- ----------- ---------
Net investment income 595,031 1,509,429 1,390,888 847,611
---------- ----------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) 80,171 (191,644) 69,944 (132,211)
Net change in unrealized appreciation or depreciation
of investments (755,735) (1,542,928) (1,551,912) (850,846)
---------- ----------- ----------- ---------
Net gain (loss) from investments (675,564) (1,734,572) (1,481,968) (983,057)
---------- ----------- ----------- ---------
Net increase (decrease) in net assets from operations $ (80,533) $ (225,143) $ (91,080) $(135,446)
========== =========== =========== =========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
STATEMENT OF OPERATIONS
Six months ended July 31, 1996
(Unaudited
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
NJ PA VA
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 1,705,372 $ 1,885,494 $ 1,945,718
----------- ----------- -----------
Expenses:
Management fees (note 6) 155,884 173,278 178,477
12b-1 service fees--Class A (note 1) 15,688 8,413 8,521
12b-1 distribution and service fees--Class C (note 1) 8,295 5,358 4,312
Shareholders' servicing agent fees and expenses 43,468 46,174 38,918
Custodian's fees and expenses 24,121 24,759 21,265
Trustees' fees and expenses (note 6) 372 1,130 509
Professional fees 7,398 7,350 9,960
Shareholders' reports--printing and mailing expenses 16,013 16,930 27,466
Federal and state registration fees 3,878 1,827 4,719
Amortization of deferred organization costs (note 1) 3,596 3,876 2,998
Other expenses 2,630 3,503 4,436
----------- ----------- -----------
Total expenses before expense reimbursement 281,343 292,598 301,581
Expense reimbursement from investment adviser (note 6) (44,790) (42,539) (45,370)
----------- ----------- -----------
Net expenses 236,553 250,059 256,211
----------- ----------- -----------
Net investment income 1,468,819 1,635,435 1,689,507
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (87,605) 336,310 (152,534)
Net change in unrealized appreciation or depreciation of
investments (1,453,280) (1,793,427) (1,407,357)
----------- ----------- -----------
Net gain (loss) from investments (1,540,885) (1,457,117) (1,559,891)
----------- ----------- -----------
Net increase (decrease) in net assets from operations $ (72,066) $ 178,318 $ 129,616
=========== =========== ===========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited) NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
AZ FL
- ----------------------------------------------------------------------------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 595,031 $ 1,030,283 $ 1,509,429 $ 2,868,644
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) 80,171 (27,336) (191,644) (140,189)
Net change in unrealized appreciation or depreciation
of investments (755,735) 1,629,699 (1,542,928) 4,780,693
------------- ----------- ----------- ------------
Net increase (decrease) in net assets from operations (80,533) 2,632,646 (225,143) 7,509,148
------------- ----------- ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (100,351) (101,157) (169,243) (148,024)
Class C (7,445) (6,237) (3,692) (5,956)
Clas R (478,991) (937,616) (1,347,434) (2,730,462)
From accumulated net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
------------- ----------- ----------- ------------
Decrease in net assets from distributions to
shareholders (586,787) (1,045,010) (1,520,369) (2,884,442)
------------- ----------- ----------- ------------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 995,578 2,882,755 3,769,515 4,315,210
Class C 175,003 273,019 98,276 77,334
Class R 821,396 2,473,853 2,896,310 8,465,473
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 48,032 38,250 76,281 52,678
Class C 6,801 5,264 1,890 3,575
Class R 284,351 529,462 735,720 1,500,287
------------- ----------- ----------- ------------
2,331,161 6,202,603 7,577,992 14,414,557
------------- ----------- ----------- ------------
Cost of shares redeemed:
Class A (147,063) (303,388) (577,968) (173,983)
Class C (20,312) (3,168) (17,677) -
Class R (1,257,396) (1,449,215) (3,972,806) (11,564,633)
------------- ----------- ----------- ------------
(1,424,771) (1,755,771) (4,568,451) (11,738,616)
------------- ----------- ----------- ------------
Net increase (decrease) in net assets derived from
Fund share transactions 906,390 4,446,832 3,009,541 2,675,941
------------- ----------- ----------- ------------
Net increase (decrease) in net assets 239,070 6,034,468 1,264,029 7,300,647
Net assets at the beginning of period 23,755,881 17,721,413 61,308,630 54,007,983
------------- ----------- ----------- ------------
Net assets at the end of period $ 23,994,951 $23,755,881 $62,572,659 $ 61,308,630
============= =========== =========== ============
Balance of undistributed net investment income at
end of period $ 10,053 $ 1,809 $ 9,856 $ 20,796
============= =========== =========== ============
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
MD MI
- -----------------------------------------------------------------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 1,390,888 $ 2,553,861 $ 847,611 $ 1,588,746
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) 69,944 138,640 (132,211) 414,083
Net change in unrealized appreciation or depreciation
of investments (1,551,912) 3,998,568 (850,846) 2,255,770
------------ ----------- ------------ -----------
Net increase (decrease) in net assets from operations (91,080) 6,691,069 (135,446) 4,258,599
------------ ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (195,799) (198,145) (104,973) (110,174)
Class C (32,415) (47,180) (5,262) (5,812)
Class R (1,142,660) (2,335,847) (734,750) (1,479,047)
From accumulated net realized gains from investment
transactions:
Class A - - - (9,042)
Class C - - - (536)
Class R - - - (88,511)
------------ ----------- ------------ -----------
Decrease in net assets from distributions to
shareholders (1,370,874) (2,581,172) (844,985) (1,693,122)
------------ ----------- ------------ -----------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 3,456,516 5,206,011 1,159,300 3,071,799
Class C 409,217 645,990 105,803 146,180
Class R 1,005,910 4,099,669 839,280 3,061,856
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 128,488 112,734 57,826 58,075
Class C 24,087 39,318 4,221 5,428
Class R 719,216 1,461,612 491,142 1,044,771
------------ ----------- ------------ -----------
5,743,434 11,565,334 2,657,572 7,388,109
------------ ----------- ------------ -----------
Cost of shares redeemed:
Class A (929,050) (350,679) (206,614) (171,433)
Class C (119,567) (195,323) (68,959) (4,206)
Class R (3,142,740) (4,647,731) (3,033,446) (3,009,162)
------------ ----------- ------------ -----------
(4,191,357) (5,193,733) (3,309,019) (3,184,801)
------------ ----------- ------------ -----------
Net increase (decrease) in net assets derived from
Fund share transactions 1,552,077 6,371,601 (651,447) 4,203,308
------------ ----------- ------------ -----------
Net increase (decrease) in net assets 90,123 10,481,498 (1,631,878) 6,768,785
Net assets at the beginning of period 55,687,274 45,205,776 34,384,430 27,615,645
------------ ----------- ------------ -----------
Net assets at the end of period $55,777,397 $55,687,274 $32,752,552 $ 34,384,430
============ =========== ============ ============
Balance of undistributed net investment income at
end of period $ 20,950 $ 936 $ 13,519 $ 10,893
============ =========== ============ ============
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NJ PA
- ----------------------------------------------------------------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 1,468,819 $ 2,617,653 $ 1,635,435 $ 3,007,154
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (87,605) (30,019) 336,310 (36,684)
Net change in unrealized appreciation or depreciation
of investments (1,453,280) 3,249,789 (1,793,427) 4,855,692
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations (72,066) 5,837,423 178,318 7,826,162
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (313,893) (329,633) (160,008) (173,805)
Class C (35,567) (32,025) (21,440) (28,974)
Class R (1,121,588) (2,282,656) (1,392,116) (2,830,558)
From accumulated net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
----------- ----------- ----------- -----------
Decrease in net assets from distributions to
shareholders (1,471,048) (2,644,314) (1,573,564) (3,033,337)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 3,959,032 7,757,684 2,521,674 4,222,635
Class C 1,069,271 573,759 171,876 633,225
Class R 2,408,112 4,461,592 1,558,285 6,005,478
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 193,747 181,529 119,325 126,885
Class C 16,206 16,615 16,723 24,758
Class R 788,782 1,567,807 870,401 1,786,453
----------- ----------- ----------- -----------
8,435,150 14,558,986 5,258,284 12,799,434
----------- ----------- ----------- -----------
Cost of shares redeemed:
Class A (610,784) (406,168) (435,904) (281,318)
Class C (170,835) (32,865) (162,915) (105,804)
Class R (2,867,023) (5,070,204) (3,228,000) (6,418,284)
----------- ----------- ----------- -----------
(3,648,642) (5,509,237) (3,826,819) (6,805,406)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets derived from
Fund share transactions 4,786,508 9,049,749 1,431,465 5,994,028
----------- ----------- ----------- -----------
Net increase (decrease) in net assets 3,243,394 12,242,858 36,219 10,786,853
Net assets at the beginning of period 55,029,900 42,787,042 64,262,670 53,475,817
----------- ----------- ----------- -----------
Net assets at the end of period $58,273,294 $55,029,900 $64,298,889 $64,262,670
=========== =========== =========== ===========
Balance of undistributed net investment income at
end of period $ 5,899 $ 8,128 $ 67,522 $ 5,651
=========== =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
VA
- -----------------------------------------------------------------------------------------
6 months ended Year ended
7/31/96 1/31/96
- -----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 1,689,507 $ 3,221,308
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (152,534) 334,528
Net change in unrealized appreciation or depreciation
of investments (1,407,357) 4,882,314
----------- -----------
Net increase (decrease) in net assets from operations 129,616 8,438,150
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (170,312) (191,806)
Class C (18,258) (23,926)
Class R (1,506,322) (2,997,681)
From accumulated net realized gains from investment
transactions:
Class A - (15,706)
Class C - (2,511)
Class R - (193,671)
------------ -----------
Decrease in net assets from distributions to
shareholders (1,694,892) (3,425,301)
------------ -----------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 2,309,281 3,799,529
Class C 190,331 402,084
Class R 1,695,463 3,456,619
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 94,767 109,800
Class C 13,477 21,313
Class R 916,279 1,928,344
------------ -----------
5,219,598 9,717,689
------------ -----------
Cost of shares redeemed:
Class A (249,945) (543,599)
Class C (505) (54,845)
Class R (3,251,629) (5,446,943)
----------- -----------
(3,502,079) (6,045,387)
----------- -----------
Net increase (decrease) in net assets derived from
Fund share transactions 1,717,519 3,672,302
------------- -----------
Net increase (decrease) in net assets 152,243 8,685,151
Net assets at the beginning of period 66,068,027 57,382,876
------------ -----------
Net assets at the end of period $66,220,270 $66,068,027
=========== ===========
Balance of undistributed net investment income at
end of period $ 24,321 $ 29,706
=========== ===========
- -----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
(Unaudited) JULY 31, 1996
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Multistate Tax-Free Trust (the "Trust") is an open-end diversified
management series investment company registered under the Investment Company Act
of 1940. The Trust comprises seven single-state tax-free mutual funds (the
Nuveen Tax-Free Value Funds--the "Funds"). Each Fund constitutes a separate
series of the Trust and is itself an open-end diversified management investment
company, commonly referred to as a mutual fund. The Trust was organized as a
Massachusetts Business Trust on July 26, 1991.
The Trust currently has seven authorized state tax-free Funds: the Nuveen
Arizona Tax-Free Value Fund, the Nuveen Florida Tax-Free Value Fund, the Nuveen
Maryland Tax-Free Value Fund, the Nuveen Michigan Tax-Free Value Fund, the
Nuveen New Jersey Tax-Free Value Fund, the Nuveen Pennsylvania Tax-Free Value
Fund and the Nuveen Virginia Tax-Free Value Fund. Additional state Funds may be
established in the future. Sale of Fund shares first commenced on February 28,
1992. Each Fund invests primarily in municipal obligations issued within its
respective state.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board of Trustees. Temporary investments in
securities that have variable rate and demand features qualifying them as short-
term securities are traded and valued at amortized cost.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the transaction date. Any securities so
purchased are subject to market fluctuation during this period. The Trust has
instructed the custodian to segregate assets in a separate account with a
current value at least equal to the amount of its purchase commitments. At July
31, 1996, the Nuveen Arizona Tax-Free Value Fund, the Nuveen Florida Tax-Free
Value Fund, the Nuveen Michigan Tax-Free Value Fund and the Nuveen Pennsylvania
Tax-Free Value Fund had purchase commitments of $503,583, $1,006,372, $921,086
and $1,971,027, respectively. There were no such purchase commitments in any of
the other Funds.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts after month-end. Net
realized capital gains and/or market discount from investment transactions are
distributed to shareholders not less frequently than annually. Furthermore,
capital gains are distributed only to the extent they exceed available capital
loss carryovers.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of such distributions are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. Accordingly, temporary over-distributions as a result of
these differences may occur and will be classified as either distributions in
excess of net investment income, distributions in excess of net realized gains
and/or distributions in excess of ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes and intends to
comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies by distributing to shareholders all of its tax-
exempt net investment income, in addition to any significant amounts of net
realized capital gains and/or market discount from investment transactions. The
Funds currently consider significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, each Fund intends
to satisfy conditions which will
50
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
enable interest from municipal securities, which is exempt from regular federal
and designated state income taxes, to retain such tax-exempt status when
distributed to the shareholders of the respective Funds.
Deferred Organization Costs
Costs incurred by the Trust in connection with its organization and initial
registration of shares were deferred and are being amortized over a 60-month
period beginning February 28, 1992. If any of the initial shares of each Fund
are redeemed during this period, the proceeds of the redemption will be reduced
by the pro-rata share of the unamortized organization costs as of the date of
redemption.
Flexible Sales Charge Program
Effective September 6, 1994, each Fund commenced offering Class "A" Shares and
Class "C" Shares. Class "A" Shares incur a front-end sales charge and an annual
12b-1 service fee. Class "C" Shares are sold without a sales charge but incur
annual 12b-1 distribution and service fees. An investor purchasing Class "C"
Shares agrees to pay a contingent deferred sales charge ("CDSC") of 1% if Class
"C" Shares are redeemed within 12 months of purchase.
Prior to the offering of Class "A" and Class "C" shares, the shares outstanding
were renamed Class "R" and are not subject to any 12b-1 distribution or service
fees. Effective with the offering of the new classes, Class "R" Shares are
generally available only for reinvestment of dividends by current "R"
shareholders and for already established Nuveen Unit Investment Trust
reinvestment accounts.
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 are recorded to the
specific class.
Derivative Financial Instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including futures, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Funds are
authorized to invest in such financial instruments, and may do so in the future,
they did not make any such investments during the six months ended July 31,
1996.
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
AZ FL
-------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A........................................ 95,720 274,843 368,010 420,409
Class C........................................ 17,173 26,227 9,680 7,638
Class R........................................ 79,301 239,176 281,558 824,725
Shares issued to shareholders due to
reinvestment of distributions:
Class A........................................ 4,594 3,655 7,421 5,125
Class C........................................ 656 505 184 350
Class R........................................ 27,344 51,292 71,339 147,052
-------- -------- -------- ----------
224,788 595,698 738,192 1,405,299
-------- -------- -------- ----------
Shares redeemed:
Class A........................................ (14,203) (29,122) (56,672) (16,925)
Class C........................................ (1,971) (313) (1,759) -
Class R........................................ (121,856) (139,521) (387,156) (1,126,197)
-------- -------- -------- ----------
(138,030) (168,956) (445,587) (1,143,122)
-------- -------- -------- ----------
Net increase (decrease)......................... 86,758 426,742 292,605 262,177
======== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
MD MI
-------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A........................................ 340,366 514,083 110,746 294,831
Class C........................................ 40,084 63,846 10,100 13,867
Class R........................................ 98,219 406,673 79,818 293,923
Shares issued to shareholders due to
reinvestment of distributions:
Class A........................................ 12,609 11,066 5,514 5,538
Class C........................................ 2,365 3,894 403 521
Class R........................................ 70,366 144,632 46,749 99,905
-------- -------- -------- ----------
564,009 1,144,194 253,330 708,585
-------- -------- -------- ----------
Shares redeemed:
Class A........................................ (91,734) (34,362) (19,757) (16,428)
Class C........................................ (11,726) (19,328) (6,631) (401)
Class R........................................ (308,765) (459,618) (292,035) (288,460)
-------- -------- -------- ----------
(412,225) (513,308) (318,423) (305,289)
-------- -------- -------- ----------
Net increase (decrease)......................... 151,784 630,886 (65,093) 403,296
======== ======== ======== ==========
</TABLE>
52
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
NJ PA
- -------------------------------------------------------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 389,135 765,342 244,231 411,858
Class C 104,875 56,488 17,037 62,079
Class R 236,000 440,121 151,468 585,804
Shares issued to shareholders due to
reinvestment of distributions:
Class A 19,066 17,820 11,521 12,297
Class C 1,597 1,638 1,632 2,439
Class R 77,435 154,754 84,205 174,784
-------- --------- ------- ---------
828,108 1,436,163 510,094 1,249,261
-------- --------- ------- ---------
Shares redeemed:
Class A (60,708) (40,094) (41,975) (27,436)
Class C (17,170) (3,290) (16,079) (10,542)
Class R (283,077) (500,152) (314,520) (628,872)
-------- --------- ------- ---------
(360,955) (543,536) (372,574) (666,850)
-------- --------- ------- ---------
Net increase (decrease) 467,153 892,627 137,520 582,411
======== ========= ======= =========
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VA
- ------------------------------------------------------------------------------
6 months ended Year ended
7/31/96 1/31/96
- ------------------------------------------------------------------------------
<S> <C> <C>
Shares sold:
Class A 223,468 369,049
Class C 18,561 39,142
Class R 165,250 336,826
Shares issued to shareholders due to
reinvestment of distributions:
Class A 9,169 10,624
Class C 1,307 2,074
Class R 88,523 186,098
-------- ---------
506,278 943,813
-------- ---------
Shares redeemed:
Class A (24,243) (52,547)
Class C (50) (5,359)
Class R (317,156) (529,723)
-------- ---------
(341,449) (587,629)
-------- ---------
Net increase (decrease) 164,829 356,184
======== =========
- ------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. DISTRIBUTIONS TO SHAREHOLDERS
On August 9, 1996, the Funds declared dividend
distributions from their tax-exempt net investment income
which were paid on September 3, 1996, to shareholders of
record on August 9, 1996, as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
AZ FL MD MI
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $ .0420 $ .0410 $ .0405 $ .0425
Class C .0350 .0345 .0340 .0355
Class R .0435 .0430 .0425 .0445
=========== =========== =========== ==========
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
NJ PA VA
- ----------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $ .0420 $ .0435 $ .0430
Class C .0355 .0365 .0365
Class R .0440 .0455 .0450
=========== =========== ===========
- ----------------------------------------------------------------
</TABLE>
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments
in municipal securities and temporary municipal
investments for the six months ended July 31, 1996, were
as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
AZ FL MD MI
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
Investments in municipal securities $ 3,291,056 $ 10,262,905 $ 3,186,028 $ 5,199,868
Temporary municipal investments 4,700,000 7,300,000 4,600,000 2,000,000
SALES
Investments in municipal securities 1,716,359 7,083,827 1,920,358 5,262,625
Temporary municipal investments 4,600,000 6,100,000 3,900,000 1,900,000
=========== ============ =========== ===========
- -----------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NJ PA VA
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASES
Investments in municipal securities $8,436,379 $19,485,655 $15,963,730
Temporary municipal investments 9,700,000 8,200,000 5,805,000
SALES
Investments in municipal securities 4,218,392 21,327,024 14,212,239
Temporary municipal investments 7,900,000 10,200,000 5,605,000
========== =========== ===========
- --------------------------------------------------------------------------------
</TABLE>
At July 31, 1996, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting
purposes for each Fund.
At January 31, 1996, the Funds' last fiscal year end, the following
Funds had unused capital loss carryforwards available for federal
income tax purposes to be applied against future capital gains, if
any. If not applied, the carryovers will expire as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
AZ FL MD
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Expiration year:
2003 $127,444 $ 87,166 $203,995
2004 17,690 141,494 377,963
-------- -------- --------
Total $145,134 $228,660 $581,958
======== ======== ========
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
NJ PA
- --------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2003 $ 35,921 $377,256
2004 419,632 468,676
-------- --------
Total $455,553 $845,932
======== ========
- --------------------------------------------------------------------
</TABLE>
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of
investments at July 31, 1996, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
AZ FL MD MI
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
Appreciation $ 795,624 $2,136,894 $1,851,506 $1,071,352
Depreciation (170,355) (255,764) (277,224) (77,060)
---------- ---------- ---------- ----------
Net unrealized appreciation $ 625,269 $1,881,130 $1,574,282 $ 994,292
========== ========== ========== ==========
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
NJ PA VA
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
Appreciation $1,492,929 $2,208,247 $2,964,213
Depreciation (493,355) (175,994) (216,875)
---------- ---------- ----------
Net unrealized appreciation $ 999,574 $2,032,253 $2,747,338
========== ========== ==========
- ---------------------------------------------------------------------
</TABLE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with Nuveen Advisory
Corp. (the "Adviser"), a wholly owned subsidiary of The John Nuveen
Company, each Fund pays to the Adviser an annual management fee,
payable monthly, at the rates set forth below which are based upon the
average daily net asset value of each Fund:
<TABLE>
<CAPTION>
- ------------------------------------------------------
Average daily net asset value Management fee
- ------------------------------------------------------
<S> <C>
For the first $125,000,000 .55 of 1%
For the next $125,000,000 .5375 of 1
For the next $250,000,000 .525 of 1
For the next $500,000,000 .5125 of 1
For the next $1,000,000,000 .5 of 1
For net assets over $2,000,000,000 .475 of 1
- ------------------------------------------------------
</TABLE>
From inception of the Trusts on December 13, 1991 through July 31,
1996, the Adviser waived part of its management fees or reimbursed
certain expenses of each Fund in order to limit total expenses to .75
of 1% of the average daily net asset value of each Fund, excluding any
12b-1 fees applicable to Class A and Class C. The Adviser has
currently agreed to continue its fee waivers and expense
reimbursements through July 31, 1997.
56
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
The management fee compensates the Adviser for overall investment
advisory and administrative services, and general office facilities.
The Trust pays no compensation directly to 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.
7. COMPOSITION OF NET ASSETS
At July 31, 1996, there were an unlimited number of $.01 par value
shares authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $23,434,238 $61,101,976 $54,694,178 $31,699,688
Balance of undistributed net investment income 10,053 9,856 20,950 13,519
Accumulated net realized gain (loss) from investment
transactions (74,609) (420,303) (512,013) 45,053
Net unrealized appreciation of investments 625,269 1,881,130 1,574,282 994,292
----------- ----------- ----------- -----------
Net assets $23,994,951 $62,572,659 $55,777,397 $32,752,552
=========== =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
NJ PA VA
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $57,838,337 $62,734,553 $63,590,890
Balance of undistributed net investment income 5,899 67,522 24,321
Accumulated net realized gain (loss) from investment
transactions (570,516) (535,439) (142,279)
Net unrealized appreciation of investments 999,574 2,032,253 2,747,338
----------- ----------- -----------
Net assets $58,273,294 $64,298,889 $66,220,270
=========== =========== ===========
- -------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general
obligation, escrowed and revenue bonds. At July 31, 1996, the revenue
sources by municipal purpose for these investments, expressed as a
percent of total investments, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
AZ FL MD MI
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Bonds:
Health Care Facilities 15% 17% 14% 21%
Housing Facilities 10 19 22 16
Water/Sewer Facilities 10 10 3 14
Pollution Control 11 2 6 7
Educational Facilities 14 1 4 4
Transportation 2 6 10 4
Lease Rental Facilities 7 1 5 3
Electric Utilities 2 7 1 3
Other 8 8 7 7
General Obligation Bonds 16 13 15 16
Escrowed Bonds 5 16 13 5
--- --- --- ---
100% 100% 100% 100%
=== === === ===
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
NJ PA VA
- ---------------------------------------------------------------
<S> <C> <C> <C>
Revenue Bonds:
Health Care Facilities 16% 27% 13%
Housing Facilities 12 14 10
Water/Sewer Facilities 5 - 22
Pollution Control 10 21 -
Educational Facilities 5 5 10
Transportation 8 4 11
Lease Rental Facilities 3 - 4
Electric Utilities 4 3 -
Other 11 9 11
General Obligation Bonds 15 15 10
Escrowed Bonds 11 2 9
--- --- ---
100% 100% 100%
=== === ===
- ---------------------------------------------------------------
</TABLE>
58
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
Certain long-term and intermediate-term investments owned by the Funds
are covered by insurance issued by several private insurers or are
backed by an escrow or trust containing U.S. Government or U.S.
Government agency securities, either of which ensure the timely
payment of principal and interest in the event of default (50% for
Arizona, 60% for Florida, 52% for Maryland, 37% for Michigan, 40% for
New Jersey, 46% for Pennsylvania and 32% for Virginia). Such insurance
or escrow, however, does not guarantee the market value of the
municipal securities or the value of the Funds' shares.
Certain temporary investments in short-term municipal securities have
credit enhancements (letters of credit, guarantees or insurance)
issued by third party domestic or foreign banks or other institutions
(100% for Arizona, 100% for Florida, 0% for Maryland, 0% for Michigan,
100% for New Jersey, N/A for Pennsylvania and 100% for Virginia).
For additional information regarding each investment security, refer
to the Portfolio of Investments of each Fund.
59
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------ ----------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ------------------------------------------------------------------------------------------------------------------------------------
ARIZONA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 $10.740 $.258 $ (.306) $(.252) $ --- $10.440
Year ended 1/31,
1996 9.930 .503 .829 (.522) --- 10.740
9/6/94 to
1/31/95 10.030 .203 (.086) (.217) --- 9.930
CLASS C
Six months ended
7/31/96 10.650 .217 (.307) (.210) --- 10.350
Year ended 1/31,
1996 9.840 .419 .830 (.439) --- 10.650
9/9/94 to
1/31/95 9.940 .169 (.052) (.217) --- 9.840
CLASS R
Six months ended
7/31/96 10.670 .265 (.304) (.261) --- 10.370
Year ended 1/31,
1996 9.850 .529 .831 (.540) --- 10.670
1995 10.880 .536 (1.026) (.540) --- 9.850
1994 10.050 .531 .853 (.522) (.032) 10.880
1993 9.525 .438 .563 (.435) (.041) 10.050
12/13/91 to
1/31/92 9.525 --- --- --- --- 9.525
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
60
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(.42)% $ 4,684 1.23%* 4.65%* 1.00%* 4.88%* 7%
13.68 3,895 1.31 4.49 1.00 4.80 5
1.24 1,124 1.60* 4.68* 1.00* 5.28* 29
(.82) 483 1.98* 3.90* 1.75* 4.13* 7
12.90 328 2.11 3.66 1.75 4.02 5
1.25 43 3.51* 2.79* 1.75* 4.55* 29
(.34) 18,828 .98* 4.91* .75* 5.14* 7
14.09 19,533 1.15 4.72 .75 5.12 5
(4.39) 16,554 1.06 5.12 .75 5.43 29
14.07 16,140 1.25 4.48 .75 4.98 11
10.71 8,026 1.75* 3.94* .75* 4.94* 43
- 15 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
--------------------------------------------------------------------
Net realized Dividends from
Net asset Net and unrealized tax-exempt net Distributions Net asset
value beginning investment gain (loss) from investment from capital value end
of period income++ investments** income gains of period
- --------------------------------------------------------------------------------------------------------------------------
FLORIDA
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 $10.560 $.252 $(.306) $(.246) $ - $10.260
Year ended 1/31,
1996 9.730 .488 .840 (.498) - 10.560
9/6/94 to
1/31/95 9.890 .193 (.148) (.202) (.003) 9.730
CLASS C
Six months ended
7/31/96 10.510 .207 (.290) (.207) - 10.220
Year ended 1/31,
1996 9.730 .413 .789 (.422) - 10.510
9/16/94 to
1/31/95 9.720 .152 .021 (.163) - 9.730
CLASS R
Six months ended
7/31/96 10.570 .256 (.298) (.258) - 10.270
Year ended 1/31,
1996 9.750 .518 .824 (.522) - 10.570
1995 10.740 .508 (.985) (.510) (.003) 9.750
1994 9.960 .511 .779 (.510) - 10.740
1993 9.525 .440 .431 (.436) - 9.960
12/13/91 to
1/31/92 9.525 - - - - 9.525
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
62
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
------------------------------------------------------------------------------------------------
Ratio of Ratio of
Ratio of net investment Ratio of net investment
Total Net assets expenses to income to expenses income to
return on end of average net average net to average net average net Portfolio
net asset period (in assets before assets before assets after assets after turnover
value+ thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ---------------------------------------------------------------------------------------------------------------------------------
FLORIDA
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 (.49)% $ 8,927 1.06%* 4.70%* 1.00%* 4.76%* 12%
Year ended 1/31,
1996 13.92 5,823 1.21 4.53 1.00 4.74 21
9/6/94 to
1/31/95 .52 1,392 1.56* 4.52* 1.00* 5.08* 4
CLASS C
Six months ended
7/31/96 (.77) 246 1.81* 3.95* 1.75* 4.01* 12
Year ended 1/31,
1996 12.54 168 2.16 3.62 1.75 4.03 21
9/16/94 to
1/31/95 1.84 78 2.84* 3.26* 1.75* 4.35* 4
CLASS R
Six months ended
7/31/96 (.37) 53,399 .81* 4.95* .75* 5.01* 12
Year ended 1/31,
1996 14.05 55,318 .88 4.93 .75 5.06 21
1995 (4.33) 52,538 .84 5.12 .75 5.21 4
1994 13.22 48,254 .89 4.69 .75 4.83 3
1993 9.33 23,727 1.24* 4.35* .75* 4.84* 1
12/13/91 to
1/31/92 - 15 - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
--------------------------------------------------------------------
Net realized Dividends from
Net asset Net and unrealized tax-exempt net Distributions Net asset
value beginning investment gain (loss) from investment from capital value end
of period income++ investments** income gains of period
- --------------------------------------------------------------------------------------------------------------------------
MARYLAND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 $10.430 $.254 $ (.281) $(.243) $ - $10.160
Year ended 1/31,
1996 9.600 .483 .844 (.497) - 10.430
9/6/94 to
1/31/95 9.840 .198 (.229) (.207) (.002) 9.600
CLASS C
Six months ended
7/31/96 10.420 .211 (.277) (.204) - 10.150
Year ended 1/31,
1996 9.590 .409 .842 (.421) - 10.420
9/15/94 to
1/31/95 9.750 .160 (.153) (.167) - 9.590
CLASS R
Six months ended
7/31/96 10.440 .258 (.273) (.255) - 10.170
Year ended 1/31,
1996 9.610 .513 .838 (.521) - 10.440
1995 10.620 .513 (1.008) (.513) (.002) 9.610
1994 9.910 .509 .727 (.503) (.023) 10.620
1993 9.525 .442 .395 (.442) (.010) 9.910
12/13/91 to
1/31/92 9.525 - - - - 9.525
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
64
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
------------------------------------------------------------------------------------------------
Ratio of Ratio of
Ratio of net investment Ratio of net investment
Total Net assets expenses to income to expenses income to
return on end of average net average net to average net average net Portfolio
net asset period (in assets before assets before assets after assets after turnover
value+ thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ---------------------------------------------------------------------------------------------------------------------------------
MARYLAND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 (.24)% $ 9,335 1.12%* 4.74%* 1.00%* 4.86%* 4%
Year ended 1/31,
1996 14.07 6,860 1.33 4.41 1.00 4.74 17
9/6/94 to
1/31/95 (.26) 1,605 1.59* 4.67* 1.00* 5.26* 35
CLASS C
Six months ended
7/31/96 (.62) 1,712 1.87* 3.99* 1.75* 4.11* 4
Year ended 1/31,
1996 13.24 1,438 2.06 3.73 1.75 4.04 17
9/15/94 to
1/31/95 .12 860 1.86* 4.44* 1.75* 4.55* 35
CLASS R
Six months ended
7/31/96 (.12) 44,730 .87* 5.00* .75* 5.12* 4
Year ended 1/31,
1996 14.33 47,389 1.04 4.78 .75 5.07 17
1995 (4.58) 42,741 .89 5.14 .75 5.28 35
1994 12.71 47,822 .86 4.74 .75 4.85 4
1993 8.96 28,283 1.02* 4.69* .75* 4.96* 20
12/13/91 to
1/31/92 - 15 - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------ ----------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MICHIGAN
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
Six months ended
7/31/96 $10.740 $.262 $(.307) $(.255) $ - $10.440
Year ended 1/31,
1996 9.870 .510 .911 (.519) (.032) 10.740
9/6/94 to
1/31/95 10.090 .204 (.209) (.212) (.003) 9.870
CLASS C
Six months ended
7/31/96 10.730 .216 (.303) (.213) - 10.430
Year ended 1/31,
1996 9.850 .430 .922 (.440) (.032) 10.730
9/16/94 to
1/31/95 9.910 .161 (.050) (.171) - 9.850
CLASS R
Six months ended
7/31/96 10.750 .267 (.300) (.267) - 10.450
Year ended 1/31,
1996 9.880 .539 .906 (.543) (.032) 10.750
1995 10.860 .529 (.972) (.534) (.003) 9.880
1994 10.060 .531 .808 (.528) (.011) 10.860
1993 9.525 .456 .554 (.449) (.026) 10.060
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
66
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(.40)% $ 4,923 1.18%* 4.73%* 1.00%* 4.91%* 16%
14.68 4,027 1.35 4.52 1.00 4.87 33
.02 897 2.62* 3.68* 1.00* 5.30* 35
(.79) 265 1.93* 3.98* 1.75* 4.16* 16
13.96 231 2.08 3.79 1.75 4.12 33
1.18 75 3.52* 2.76* 1.75* 4.53* 35
(.28) 27,564 .93* 4.98* .75* 5.16* 16
14.93 30,126 1.05 4.87 .75 5.17 33
(3.98) 26,644 .96 5.12 .75 5.33 35
13.58 25,085 1.07 4.67 .75 4.99 3
10.80 14,684 1.62* 4.19* .75* 5.06* 32
- 15 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- ----------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
----------------------------------------------------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NEW JERSEY
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
Six months ended
7/31/96 $10.400 $.261 $(.287) $(.254) $ -- $10.120
Year ended 1/31,
1996 9.730 .519 .685 (.534) -- 10.400
9/6/94 to
1/31/95 10.030 .205 (.209) (.210) (.086) 9.730
CLASS C
Six months ended
7/31/96 10.380 .227 (.292) (.215) -- 10.100
Year ended 1/31,
1996 9.710 .443 .683 (.456) -- 10.380
9/21/94 to
1/31/95 9.770 .159 (.050) (.169) -- 9.710
CLASS R
Six months ended
7/31/96 10.410 .266 (.280) (.266) -- 10.130
Year ended 1/31,
1996 9.740 .551 .677 (.558) -- 10.410
1995 10.710 .524 (.886) (.522) (.086) 9.740
1994 9.960 .513 .810 (.513) (.060) 10.710
1993 9.525 .445 .431 (.441) -- 9.960
12/13/91 to
1/31/92 9.525 -- -- -- -- 9.525
- ----------------------------------------------------------------------------------------------------------------------------
See notes on page 72.
</TABLE>
68
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
(.23)% $13,890 1.16%* 4.86%* 1.00%* 5.02%* 8%
12.63 10,661 1.25 4.85 1.00 5.10 39
.02 2,741 1.31* 5.03* 1.00* 5.34* 32
(.61) 1,939 1.91* 4.11* 1.75* 4.27* 8
11.80 1,065 1.96 4.16 1.75 4.37 39
1.16 464 2.00* 4.37* 1.75* 4.62* 32
(.11) 42,445 .91* 5.11* .75* 5.27* 8
12.88 43,304 .98 5.20 .75 5.43 39
(3.27) 39,582 .89 5.18 .75 5.32 32
13.60 36,462 .98 4.61 .75 4.84 52
9.36 16,208 1.43* 4.28* .75* 4.96* 9
-- 15 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------------------------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ----------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 $10.600 $.263 $(.247) $(.246) $ ---- $10.370
Year ended 1/31,
1996 9.750 .498 .862 (.510) ---- 10.600
9/6/94 to
1/31/95 9.920 .206 (.164) (.212) ---- 9.750
CLASS C
Six months ended
7/31/96 10.480 .216 (.242) (.204) ---- 10.250
Year ended 1/31,
1996 9.650 .417 .843 (.430) ---- 10.480
9/6/94 to
1/31/95 9.920 .176 (.235) (.211) ---- 9.650
CLASS R
Six months ended
7/31/96 10.570 .267 (.239) (.258) ---- 10.340
Year ended 1/31,
1996 9.730 .527 .846 (.533) ---- 10.570
1995 10.810 .531 (1.077) (.534) ---- 9.730
1994 10.010 .533 .807 (.534) (.006) 10.810
1993 9.525 .451 .481 (.443) (.004) 10.010
12/13/91 to
1/31/92 9.525 --- --- --- --- 9.525
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
70
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
----------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
.18% $ 7,907 1.14%* 4.85%* 1.00%* 4.99%* 31%
14.22 5,817 1.30 4.52 1.00 4.82 52
.49 1,483 1.87* 4.56* 1.00* 5.43* 74
(.22) 1,104 1.89* 4.09* 1.75* 4.23* 31
13.27 1,101 2.14 3.70 1.75 4.09 52
(.53) 494 2.52* 3.90* 1.75* 4.67* 74
30 55,287 .88* 5.10* .75* 5.23* 31
14.40 57,345 .96 4.93 .75 5.14 52
(4.94) 51,499 .91 5.27 .75 5.43 74
13.67 48,720 .94 4.82 .75 5.01 5
9.97 23,680 1.25* 4.53* .75* 5.03* 15
--- 15 --- --- --- --- ---
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------ ----------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VIRGINIA
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
Six months ended
7/31/96 $10.600 $.263 $(.255) $(.258) $ - $10.350
Year ended 1/31,
1996 9.760 .509 .878 (.509) (.038) 10.600
9/6/94 to
1/31/95 9.980 .201 (.207) (.214) - 9.760
CLASS C
Six months ended
7/31/96 10.570 .221 (.252) (.219) - 10.320
Year ended 1/31,
1996 9.740 .432 .868 (.432) (.038) 10.570
9/8/94 to
1/31/95 9.950 .171 (.167) (.214) - 9.740
CLASS R
Six months ended
7/31/96 10.600 .268 (.248) (.270) - 10.350
Year ended 1/31,
1996 9.770 .537 .864 (.533) (.038) 10.600
1995 10.740 .531 (.964) (.537) - 9.770
1994 10.030 .529 .726 (.527) (.018) 10.740
1993 9.525 .439 .499 (.433) - 10.030
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Net of taxes, if applicable (note 1).
+ Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gains distributions, if any, and changes in net
asset value per share. The total returns shown for Class A Shares do not
include the effect of applicable front-end sales charges. The total returns
shown for Class C Shares do not include the effect of applicable contingent
deferred sales charges. Class R Shares are not subject to any front-end or
contingent deferred sales charges.
++ Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser (note 6).
72
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
.11% $ 7,894 1.14%* 4.86%* 1.00%* 5.00%* 22%
14.50 5,874 1.20 4.73 1.00 4.93 42
.01 2,215 1.57* 4.70* 1.00* 5.27* 40
(.27) 975 1.89* 4.11* 1.75* 4.25* 22
13.58 789 1.92 4.04 1.75 4.21 42
.10 378 2.20* 4.12* 1.75* 4.57* 40
.23 57,352 .89* 5.11* .75* 5.25* 22
14.65 59,405 .94 5.04 .75 5.23 42
(3.92) 54,791 .82 5.33 .75 5.40 40
12.78 55,773 .84 4.94 .75 5.03 7
10.04 37,196 .96* 4.71* .75* 4.92* 12
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
Your
investment
partners
Since 1898, John Nuveen & Co. Incorporated has worked to bring together the
various participants in the municipal bond industry and build strong
partnerships that benefit all concerned. Investors, financial advisers,
municipal officials, investment bankers-Nuveen believes that forging
relationships within these groups based on trust and value is the key to
successful investing.
As the oldest and largest municipal bond specialist in the United States,
Nuveen's investment bankers work with issuers to understand and meet their needs
in structuring and selling their bond issues.
Nuveen also works closely with financial advisers around the country,
including brokerage firms, banks, insurance companies, and independent financial
planners, to bring the benefits of tax-free investing to you. These advisers are
experts at identifying your needs and recommending the best solutions for your
situation. Together we make a powerful team, helping you create a successful
investment plan that meets your needs today and in the future.
[JOHN NUVEEN PHOTO APPEARS HERE]
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
[RECYCLED LOGO APPEARS HERE]
[LOGO OF NUVEEN]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
OEFI-SEP96
<PAGE>
Nuveen Tax-Free
Mutual Funds
Dependable tax-free
income for generations
ARIZONA
FLORIDA
MARYLAND
MICHIGAN
NEW JERSEY
PENNSYLVANIA
VIRGINIA
[PHOTO OF COUPLE APPEARS HERE]
ANNUAL REPORT/JANUARY 31, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
9 Fund performance
16 Portfolio of investments
39 Statement of net assets
41 Statement of operations
43 Statement of changes in net assets
47 Notes to financial statements
62 Financial highlights
<PAGE>
Dear
shareholder
[PHOTO OF RICHARD J. FRANKE APPEARS HERE]
"Over time,
municipal bonds
have proven to
be a valuable
and dependable
component of
successful invest-
ment programs."
During 1995, we enjoyed a welcome rebound in the bond markets--a sharp contrast
to 1994, which was one of the most volatile periods in bond market history. In
fact, 1995 unfolded as one of the best years for bonds in a decade, as the bond
market responded to a climate of slowing economic growth and diminished
inflationary pressure.
The changing profile of the bond market over the past two years serves to
remind us that weathering the ups and downs of the markets is a normal part of
the investment process. By maintaining a long-term perspective on your
investments, you can minimize the impact of short-term fluctuations and keep the
focus on achieving your goals. Municipal bond funds continue to play an integral
role in helping investors reach those goals, offering the attractive tax-free
income and solid total returns that they seek.
Throughout the past year, we have kept our sights focused on successfully
meeting your fund's objectives. As of January 31, 1996, the current annual SEC
yield on offering price for R Shares for the mutual funds covered in this report
ranged from 4.44% to 4.96%. To match these yields, an investor in the 36%
federal income tax bracket would have had to earn at least 6.94% on taxable
alternatives. The effect of state taxes further enhances the after-tax yield
advantage provided by municipal bonds.
3
<PAGE>
Reflecting the rebound in the bond market, each of these funds reported gains
in portfolio value since January 31, 1995. The 12-month total returns on net
asset value, reflecting portfolio gains plus reinvested dividend income, ranged
from 12.88% to 14.93%, which translate to 16.80% to 18.68% on a taxable-
equivalent basis. This strong performance rewarded investors who had weathered
the volatility of 1994, and reminds us again of the importance of municipal
bonds to a well-rounded, long-term investment plan.
As some of you may know, on June 30, 1996, I will be retiring as the chairman
and chief executive officer of John Nuveen & Co. Incorporated, and as chairman
of the board of the Nuveen Funds. As I look back over the 41 years I have spent
at Nuveen, I'm proud to have been associated with a firm that holds integrity,
honesty, and value as the cornerstones of its business. I'm confident that these
traditions will continue to be the hallmarks of Nuveen.
Over the past few years, I have been working closely with other Nuveen
managers to ensure that the company and the funds continue to be guided by
strong and talented management following my retirement. Timothy Schwertfeger has
been named as my successor as Chief Executive Officer and Chairman of Nuveen,
and Chairman of the Funds. He is currently Executive Vice President of Nuveen
and President of the Nuveen Funds. I am very confident in his abilities and the
abilities of the entire Nuveen management team.
The transition in management has been well planned and it will have no effect
on portfolio management, or the way dividends are set. Our management team is
committed to continuing Nuveen's successful tradition of value investing and
prudent management, helping our shareholders meet their needs for tax-free
investment income with a full range of investment choices.
Our focus will continue to be on building shareholder value, providing
research-oriented management, and maintaining our leadership role in the
municipal bond market. With this focus, we anticipate many more years of
progress and accomplishment for our shareholders and our firm.
I'd like to take this occasion to thank you for selecting Nuveen mutual fund
investments.
Sincerely,
/s/ Richard J. Franke
Richard J. Franke
Chairman of the Board
March 15, 1996
4
<PAGE>
Answering your questions
Tom Spalding, head of Nuveen's portfolio management team, discusses factors
affecting the municipal market and efforts made to provide value for
shareholders.
How did the investment climate over the past year affect municipal bonds?
In 1995, the combination of slow economic growth and low inflation created the
ideal environment for bond markets, which responded with a sustained rally.
Citing the lack of significant inflation, the Federal Reserve Board moved to cut
interest rates in July and December 1995 and again at the end of January 1996.
This succession of rate cuts helped to bring down long-term municipal bond
yields by almost 150 basis points over the year and increase net asset values.
The municipal bond rebound was somewhat less than that of taxable bonds due to
the high-profile discussion of major tax reform legislation--and concern about
the potential impact of this legislation on tax-free investments. Yet in 1995,
most Nuveen mutual funds enjoyed taxable-equivalent total returns of 17% or
better.
5
<PAGE>
[PHOTO OF TOM SPALDING APPEARS HERE]
Tom Spalding, head of Nuveen's portfolio management team, answers investors'
questions on developments in the municipal market.
What was Nuveen's approach to investing during this period?
During 1995, we continued to pursue our philosophy of value investing, a
disciplined approach designed to deliver above-market performance by emphasizing
securities that offer good intrinsic value but that are underpriced or
undervalued by the market. This approach was rewarded over the past year, as we
saw many of our portfolio holdings upgraded by the rating agencies, confirming
that our Research Department's judgments about credit quality were on target. We
also moved to protect current income by investing more of our portfolio in non-
callable bonds when possible. These bonds are cannot be redeemed before maturity
so that their yield is assured for the long term in the event of falling
interest rates. As is our policy, we continue to invest only in investment-grade
quality securities.
Has Nuveen made any major investment changes over the past year?
No. In the search for income and total return, our value investing approach
continues to concentrate on individual bonds with current yields, prices, credit
quality, and future prospects that are exceptionally attractive relative to
other bonds in the market. Because attractive issues may appear any time over
the course of the year, we are constantly vigilant for new opportunities, with
the goal of ensuring that the funds are always positioned to meet their
objectives: as high a level of current tax-free income as is consistent with
preservation of capital. This means
6
<PAGE>
that our analysts continuously assess investment possibilities across the entire
spectrum of geographical and sector opportunities nationwide. Currently, we
favor revenue bonds for essential services (such as those issued by water and
sewer facilities and utilities, especially public power authorities providing
electricity at competitive rates). We have reduced our positions in general
obligation bonds issued by counties and cities, which have suffered strained
financial backing as the result of spending cuts at the state and federal
levels.
What does Nuveen see as the impact of the flat tax proposals on the municipal
market?
Because of the implications for tax-free investments such as municipal bonds and
bond funds, we have been closely monitoring the various flat tax proposals
currently being debated in Congress. While election-year politics have focused a
spotlight on the debate, it is important to note that none of the proposals
currently under discussion has gained a strong consensus. In addition,
implementation of any measure that manages to pass both houses is almost
certainly two years--or more--away.
Given the uncertainty surrounding this issue, Nuveen has taken the position
that it is inadvisable to manage our funds toward one specific outcome. Instead,
we continue to believe that pursuing our value investing philosophy is the
optimal way to meet our investors' objectives. We believe that this
7
<PAGE>
approach offers investors greater price stability during volatile markets. Once
the tax issue is resolved, we're confident that municipal bonds--because of
their high credit quality and attractive yields--will continue to hold a
strategic place in the prudent investor's portfolio. We will continue to monitor
developments in the tax debate as well as changes in other economic and
political conditions while keeping our focus on achieving the objectives of your
fund.
What is Nuveen's market outlook for 1996?
Although inflation currently remains low and economic growth is moderating, we
continue to watch these factors for potential changes and impact on the bond
market. During this election year, we're also closely monitoring any changes in
economic and tax policy that may impact the municipal market. The fundamentals
in the long term are sound with the supply of municipal bonds down from past
years, and a growing number of individual investors seeking to diversify their
portfolios, and to increase their tax-free income.
8
<PAGE>
NUVEEN ARIZONA TAX-FREE
VALUE FUND
Arizona
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Arizona Tax-Free
Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Tax-Adjusted
Lehman Brothers Lehman Brothers Nuveen AZ Tax-Free
Municipal Bond Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,321
1.93 10,983 10,959 10,545
7.93 11,643 11,618 11,222
1.94 12,328 12,277 12,029
7.94 11,861 11,811 11,400
1.95 11,890 11,815 11,502
7.95 12,796 12,716 12,316
1.96 13,681 13,574 13,123
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,574
___ Nuveen AZ Tax-Free Value Fund - Total $13,123
($13,777 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.09% 7.57% 8.51%
A Shares on NAV 13.68% N/A 10.55%+
A Shares on offering price** 8.56% N/A 6.97%+
C Shares on NAV 12.90% N/A 10.07%+
The fund's current dividend of 4.35 cents per share for Class R Shares
translated into a distribution yield of 4.89% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 39.5% combined state
and federal income tax bracket would have to earn 8.08% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.32% from a year ago. The average annual total return on NAV for
this class was 14.09%, which translates into a taxable-equivalent total return
of 17.76%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
9
<PAGE>
NUVEEN FLORIDA TAX-FREE
VALUE FUND
Florida
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Florida Tax-Free
Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers
Municipal Bond Nuveen FL Tax-Free
Index Value Fund
1.92 10,000 9,525
7.92 10,698 10,167
1.93 10,983 10,414
7.93 11,643 11,064
1.94 12,328 11,791
7.94 11,861 11,162
1.95 11,890 11,281
7.95 12,796 12,012
1.96 13,681 12,867
___ Lehman Brothers Municipal Bond Index - Total $13,681
___ Nuveen FL Tax-Free Value Fund - Total $12,867
($13,509 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.05% 7.31% 7.97%
A Shares on NAV 13.92% N/A 10.15%+
A Shares on offering price** 8.79% N/A 6.59%+
C Shares on NAV 12.54% N/A 10.43%+
- -------------------------------------------------------------------
The fund's current dividend of 4.30 cents per share for Class R Shares
translated into a distribution yield of 4.88% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 36% federal income
tax bracket would have to earn 7.63% on a taxable investment to match this tax-
free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.41% from a year ago. The average annual total return on NAV for
this class was 14.05%, which translates into a taxable-equivalent total return
of 17.13%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
10
<PAGE>
NUVEEN MARYLAND TAX-FREE
VALUE FUND
Maryland
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Maryland Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers Tax-Adjusted
Municipal Bond Lehman Brothers Nuveen MD Tax-Free
Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,173
1.93 10,983 10,960 10,379
7.93 11,643 11,619 11,101
1.94 12,328 12,279 11,698
7.94 11,861 11,814 11,142
1.95 11,890 11,818 11,163
7.95 12,796 12,718 12,055
1.96 13,681 13,573 12,762
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,573
___ Nuveen MD Tax-Free Value Fund - Total $12,762
($13,398 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.33% 7.14% 7.74%
A Shares on NAV 14.07% N/A 9.64%+
A Shares on offering price** 8.94% N/A 6.10%+
C Shares on NAV 13.24% N/A 9.55%+
- -------------------------------------------------------------------
The fund's current dividend of 4.25 cents per share for Class R Shares
translated into a distribution yield of 4.89% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 39% combined state
and federal income tax bracket would have to earn 8.02% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.64% from a year ago. The average annual total return on NAV for
this class was 14.33%, which translates into a taxable-equivalent total return
of 17.87%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
11
<PAGE>
NUVEEN MICHIGAN TAX-FREE
VALUE FUND
Michigan
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Michigan Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Tax-Adjusted
Lehman Brothers Lehman Brothers Nuveen MI
Municipal Municipal Tax-Free
Bond Index Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,346
1.93 10,983 10,946 10,554
7.93 11,643 11,604 11,297
1.94 12,328 12,249 11,987
7.94 11,861 11,785 11,479
1.95 11,890 11,778 11,511
7.95 12,796 12,676 12,355
1.96 13,681 13,517 13,230
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,517
___ Nuveen MI Tax-Free Value Fund - Total $13,230
($13,890 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.93% 7.83% 8.74%
A Shares on NAV 14.68% N/A 10.28%+
A Shares on offering price** 9.52% N/A 6.72%+
C Shares on NAV 13.96% N/A 10.92%+
- -------------------------------------------------------------------
The fund's current dividend of 4.45 cents per share for Class R Shares
translated into a distribution yield of 4.97% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 40% combined state
and federal income tax bracket would have to earn 8.28% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.81% from a year ago. The average annual total return on NAV for
this class was 14.93%, which translates into a taxable-equivalent total return
of 18.68%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
12
<PAGE>
NUVEEN NEW JERSEY TAX-FREE
VALUE FUND
New Jersey
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen New Jersey Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers Tax-Adjusted
Municipal Bond Lehman Brothers Nuveen NJ Tax-Free
Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,234
1.93 10,983 10,953 10,416
7.93 11,643 11,612 11,064
1.94 12,328 12,265 11,833
7.94 11,861 11,800 11,370
1.95 11,890 11,798 11,447
7.95 12,796 12,697 12,175
1.96 13,681 13,545 12,922
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,545
___ Nuveen NJ Tax-Free Value Fund - Total $12,922
($13,566 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 12.88% 7.45% 8.08%
A Shares on NAV 12.63% N/A 8.87%+
A Shares on offering price** 7.56% N/A 5.35%+
C Shares on NAV 11.80% N/A 9.46%+
- -------------------------------------------------------------------
The fund's current dividend of 4.60 cents per share for Class R Shares
translated into a distribution yield of 5.30% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 40% combined state
and federal income tax bracket would have to earn 8.83% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 6.88% from a year ago. The average annual total return on NAV for
this class was 12.88%, which translates into a taxable-equivalent total return
of 16.80%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
13
<PAGE>
NUVEEN PENNSYLVANIA TAX-FREE
VALUE FUND
Pennsylvania
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Pennsylvania
Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers Tax-Adjusted
Municipal Bond Lehman Brothers Nuveen PA Tax-Free
Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,255
1.93 10,983 10,969 10,475
7.93 11,643 11,629 11,199
1.94 12,328 12,300 11,906
7.94 11,861 11,834 11,246
1.95 11,890 11,849 11,319
7.95 12,796 12,752 12,173
1.96 13,681 13,620 12,949
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,620
___ Nuveen PA Tax-Free Value Fund - Total $12,949
($13,595 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares 14.40% 7.33% 8.14%
A Shares 14.22% N/A 10.33%+
A Shares on offering price** 9.08% N/A 6.76%+
C Shares 13.27% N/A 8.88%+
- -------------------------------------------------------------------
The fund's current dividend of 4.30 cents per share for Class R Shares
translated into a distribution yield of 4.88% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 38% combined state
and federal income tax bracket would have to earn 7.87% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.63% from a year ago. The average annual total return on NAV for
this class was 14.40%, which translates into a taxable-equivalent total return
of 17.84%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued on or after
September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
14
<PAGE>
NUVEEN VIRGINIA TAX-FREE VALUE FUND
Virginia
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Virginia Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers Tax-Adjusted Nuveen VA
Municipal Bond Lehman Brothers Tax-Free
Index Municipal Bond Index Value Fund
--------------- -------------------- ----------
<S> <C> <C> <C>
1/92 10,000 10,000 9,525
7/92 10,698 10,698 10,264
1/93 10,983 10,957 10,481
7/93 11,643 11,615 11,157
1/94 12,328 12,272 11,820
7/94 11,861 11,807 11,281
1/95 11,890 11,807 11,357
7/95 12,796 12,707 12,149
1/96 13,681 13,557 13,021
</TABLE>
Lehman Brothers Municipal Bond Index -- Total $13,681
Tax-Adjusted Lehman Brothers Municipal Bond Index (reduced by state tax
effects)-- Total $13,557
Nuveen VA Tax-Free Value Fund -- Total $13,021 ($13,670 if purchased at
NAV)
Past performance is not predictive of future performance
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN
1 year 3 years Since inception
<S> <C> <C> <C>
R Shares on NAV 14.65% 7.51% 8.29%
A Shares on NAV 14.50% N/A 10.14%+
A Shares on offering price** 9.35% N/A 6.58%+
C Shares on NAV 13.58% N/A 9.63%+
</TABLE>
The fund's current dividend of 4.50 cents per share for Class R Shares
translated into a distribution yield of 5.09% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 39.5% combined state
and federal income tax bracket would have to earn 8.41% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.50% from a year ago. The average annual total return on NAV for
this class was 14.65%, which translates into a taxable-equivalent total return
of 18.30%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
15
<PAGE>
PORTFOLIO OF INVESTMENTS
ARIZONA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 250,000 Arizona Certificates of Participation,
6.250%, 9/01/10 9/02 at 102 Aaa $ 272,493
Arizona Educational Loan Marketing Corporation,
Alternative Minimum Tax:
200,000 7.000%, 3/01/05 3/02 at 101 A 210,860
100,000 6.375%, 9/01/05 9/02 at 101 Aa 105,202
300,000 Arizona Health Facilities Authority (Phoenix Baptist
Hospital and Medical Center), 6.250%, 9/01/11 9/03 at 100 Aaa 324,888
200,000 Arizona Municipal Financing Program, Certificates
of Participation, 7.700%, 8/01/10 No Opt. Call Aaa 248,448
200,000 Arizona State Transportation Board,
6.500%, 7/01/11 (Pre-refunded to 7/01/02) 7/02 at 101 1/2 Aaa 228,050
700,000 Arizona State University Research Park,
5.000%, 7/01/21 7/06 at 100 Aaa 673,190
Arizona State University:
500,000 5.750%, 7/01/12 7/02 at 101 AA 514,705
500,000 5.500%, 7/01/19 7/02 at 101 AA 500,730
500,000 Arizona Student Loan Acquisition Authority,
Alternative Minimum Tax, 6.600%, 5/01/10 5/04 at 102 Aa 518,205
Arizona Wastewater Management Authority:
175,000 5.950%, 7/01/12 7/02 at 102 Aaa 185,719
250,000 5.750%, 7/01/15 7/05 at 102 Aaa 261,385
700,000 Apache County Public Finance Corporation,
Certificates of Participation, 5.500%, 5/01/10 5/00 at 102 A 714,119
195,000 Central Arizona Water Conservation District,
6.500%, 11/01/11 (Pre-refunded to 5/01/01) 5/01 at 102 AA- 219,646
300,000 Cochise County Unified School District No. 68,
General Obligation, 7.500%, 7/01/10 No Opt. Call Aaa 382,296
250,000 Coconino and Yavapai Counties, Joint Unified School
District No. 9, 6.750%, 7/01/07 7/01 at 101 A- 273,245
550,000 Douglas Municipal Property Corporation,
5.750%, 7/01/15 7/05 at 101 Aaa 574,294
280,000 Eloy Municipal Property Corporation,
7.000%, 7/01/11 7/02 at 101 BBB 301,034
375,000 Maricopa Rural Road Improvement District,
6.900%, 7/01/05 7/99 at 101 N/R 396,461
300,000 Maricopa County Hospital District No. 1,
6.250%, 6/01/10 6/04 at 101 Aaa 328,662
500,000 Maricopa County Industrial Development Authority
(Samaritan Health Services), 7.000%, 12/01/16 No Opt. Call Aaa 622,100
600,000 Maricopa County Industrial Development Authority
(Baptist Hospital), 5.500%, 9/01/16 9/05 at 101 Aaa 603,804
Maricopa County School District No. 28,
General Obligation:
265,000 6.000%, 7/01/12 (Pre-refunded to 7/01/02) 7/02 at 100 Aaa 291,733
50,000 6.000%, 7/01/12 7/02 at 100 Aaa 52,784
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 Maricopa County Unified School District No. 41,
6.500%, 7/01/08 (Pre-refunded to 7/01/02) 7/02 at 100 Aaa $ 225,750
250,000 Maricopa County Unified School District No. 69
(Paradise Valley), 6.500%, 7/01/09
(Pre-refunded to 7/01/01) 7/01 at 100 Aaa 278,998
500,000 Mohave County Industrial Development Authority
(Citizens Utilities Company), Alternative
Minimum Tax, 6.600%, 5/01/29 11/03 at 101 AAA 528,845
Navajo County Pollution Control Corporation
(Arizona Public Service Company):
1,000,000 5.875%, 8/15/28 8/03 at 102 Baa1 993,510
750,000 5.500%, 8/15/28 8/03 at 102 Aaa 747,165
425,000 Peoria Improvement District (North Valley Power
Center), 7.300%, 1/01/12 1/03 at 101 BBB 461,835
200,000 Phoenix General Obligation, 6.500%, 7/01/11
(Pre-refunded to 7/01/99) 7/99 at 102 AA+ 220,116
250,000 Phoenix Civic Improvement Corporation, Airport
Terminal Excise Tax, Alternative Minimum Tax,
7.800%, 7/01/11 7/97 at 102 AA+ 266,505
295,000 Phoenix Housing Finance Corporation FHA-Insured,
6.500%, 7/01/24 7/02 at 101 Aaa 305,310
Phoenix Civic Improvement Corporation, Wastewater
System:
1,000,000 5.000%, 7/01/18 7/04 at 102 A1 950,180
400,000 6.125%, 7/01/23 (Pre-refunded to 7/01/03) 7/03 at 102 AAA 452,028
200,000 Phoenix Industrial Development Authority,
FHA-Insured (Chris Ridge Village Project),
6.750%, 11/01/12 11/02 at 101 AAA 212,054
300,000 Phoenix Junior Lien Street and Highway,
6.250%, 7/01/11 7/02 at 102 A+ 320,919
500,000 Phoenix Industrial Development Authority, GNMA
(Meadow Glen Apartments), 5.800%, 8/20/28 2/03 at 102 Aaa 498,530
485,000 Phoenix Industrial Development Authority, Single
Family Mortgage, Alternative Minimum Tax,
6.150%, 12/01/08 6/05 at 102 AAA 489,641
Phoenix Industrial Development Authority
(John C. Lincoln Hospital and Health Center):
500,000 6.000%, 12/01/10 12/03 at 102 BBB+ 517,530
500,000 6.000%, 12/01/14 12/03 at 102 BBB+ 497,495
290,000 Pima County Industrial Development Authority
(Tucson Electric), 7.250%, 7/15/10 1/02 at 103 Aaa 328,999
300,000 Pima County Unified School District No. 1,
General Obligation, 6.100%, 7/01/12 7/02 at 102 Aaa 321,852
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS
ARIZONA-CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 500,000 Pima County, Single Family Mortgage,
6.500%, 2/01/17 8/05 at 102 A $ 515,525
Pinal County, Certificates of Participation:
300,000 6.375%, 6/01/06 6/02 at 100 AA 329,895
200,000 6.500%, 6/01/09 6/02 at 100 AA 215,810
Salt River Project Agricultural Improvement and
Power District:
300,000 5.750%, 1/01/19 1/02 at 100 Aa 302,748
280,000 5.750%, 1/01/20 3/96 at 100 Aa 279,997
225,000 Tempe General Obligation, 6.000%, 7/01/08 7/02 at 101 AA+ 242,118
500,000 Tempe Industrial Development Authority,
Multi-Family Housing, FHA-Insured
(Quadrangles Village Apartments),
6.250%, 6/01/26 6/03 at 102 AAA 513,815
600,000 Tempe Union High School District No. 213,
General Obligation, 6.000%, 7/01/12 7/04 at 101 Aaa 643,674
500,000 Tucson General Obligation, 6.250%, 7/01/18 7/04 at 101 Aaa 544,885
575,000 Tucson Airport Authority, 5.700%, 6/01/13 6/03 at 102 Aaa 591,376
250,000 Tucson Local Business Development Finance
Corporation, 6.250%, 7/01/12 7/02 at 102 Aaa 272,115
300,000 University of Arizona, 6.250%, 6/01/11 6/02 at 102 AA 323,064
335,000 Yavapai County Community College,
6.000%, 7/01/12 7/03 at 101 A- 349,076
675,000 Yuma County Union High School District No. 70,
General Obligation, 5.700%, 7/01/06 7/02 at 101 Aaa 720,285
- -----------------------------------------------------------------------------------------------------------------------------------
$22,125,000 Total Investments--(Cost $21,884,694)--97.9% 23,265,698
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--2.1% 490,183
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $23,755,881
===================================================================================================================================
</TABLE>
18
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 31 $12,725,168 55%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 4,038,741 17
PORTFOLIO OF A+ A1 2 1,271,099 5
INVESTMENTS: A, A- A, A2, A3 5 2,062,825 9
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 5 2,771,404 12
Non-rated Non-rated 1 396,461 2
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 57 $23,265,698 100%
===================================================================================================================================
</TABLE>
* Optional call provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
See accompanying notes to financial statements.
19
<PAGE>
PORTFOLIO OF INVESTMENTS
FLORIDA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 300,000 Florida Department of General Services, General
Obligation, 6.600%, 7/01/17 7/02 at 101 Aa $ 332,154
2,500,000 Florida Housing Finance Agency, Alternative
Minimum Tax, 6.875%, 8/01/26 2/05 at 102 Aaa 2,672,225
750,000 Florida Housing Finance Agency, 6.400%, 6/01/24 6/02 at 103 AAA 776,003
30,000 Florida Housing Finance Agency, Home Ownership
(GNMA), Alternative Minimum Tax,
8.595%, 11/01/18 No Opt. Call AAA 31,802
Florida Municipal Power Agency:
1,000,000 6.250%, 10/01/21 (Pre-refunded to 10/01/02) 10/02 at 102 Aaa 1,135,100
1,145,000 6.000%, 10/01/27 (Pre-refunded to 10/01/02) 10/02 at 102 Aaa 1,283,179
1,000,000 Florida Municipal Power Agency, St. Lucie Project,
5.500%, 10/01/12 10/02 at 102 Aaa 1,022,390
Florida State Board of Education:
1,160,000 7.100%, 6/01/07 No Opt. Call Aaa 1,276,766
2,250,000 5.875%, 6/01/20 6/05 at 101 Aa 2,338,110
460,000 7.250%, 6/01/23 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 527,450
2,680,000 7.250%, 6/01/23 6/00 at 102 Aa 3,007,255
1,650,000 Florida Turnpike Authority,
6.350%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 101 Aaa 1,863,279
300,000 Brevard County Educational Facilities Authority
(Florida Institute of Technology),
6.875%, 11/01/22 11/02 at 102 BBB 308,484
600,000 Broward County Housing Finance Authority
(Lakeside Apartments), 7.000%, 2/01/25 2/05 at 102 AAA 647,310
190,000 Cape Coral Health Facilities Authority
(Cape Coral Medical Center), 8.125%, 11/01/08 No Opt. Call Aaa 212,589
1,000,000 Dade County (Miami International Airport),
Alternative Minimum Tax, 6.550%, 10/01/13 10/02 at 102 Aaa 1,096,780
115,000 Dade County Housing Finance Authority, Single
Family Mortgage,
Alternative Minimum Tax, 7.250%, 9/01/23 3/01 at 102 Aaa 121,089
2,480,000 Dade County (Jackson Memorial Hospital),
4.875%, 6/01/15 6/03 at 102 Aaa 2,348,982
470,000 Dade County Special Housing (City of Miami
Developments), 12.000%, 7/01/12 3/96 at 102 A 482,220
255,000 Dade County (Courthouse Center), 6.300%, 4/01/14 4/04 at 102 A 274,717
250,000 Dade County Health Facilities Authority
(South Miami Hospital),
7.000%, 10/01/18 (Pre-refunded to 10/01/99) 10/99 at 102 Aaa 281,388
300,000 Dade County Health Facilities Authority (North
Shore Medical Center), 6.500%, 8/15/15 8/02 at 102 Aaa 326,976
1,000,000 Davie Water and Sewer System, 6.250%, 10/01/17 10/02 at 102 Aaa 1,073,510
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600,000 Daytona Beach Water and Sewer System,
6.000%, 11/15/14 11/02 at 102 Aaa $ 636,288
1,600,000 Dunedin (Mease Health Care), 5.375%, 11/15/13 11/03 at 101 Aaa 1,615,632
Escambia County Housing Finance Authority,
Single Family Mortgage,
Alternative Minimum Tax:
325,000 6.900%, 4/01/20 10/02 at 102 Aaa 340,727
2,000,000 6.950%, 10/01/27 4/05 at 102 Aaa 2,098,140
500,000 Escambia County School Board, Certificates of
Participation, 6.375%, 2/01/12 2/02 at 100 Aaa 536,735
500,000 Gainesville Utility System, 6.500%, 10/01/22 10/02 at 102 Aa 549,080
1,200,000 Hillsborough County Industrial Development
Authority, Pollution
Control (Tampa Electric), 8.000%, 5/01/22 5/02 at 103 Aa2 1,439,112
250,000 Hillsborough County, Capital Improvement (Museum
of Science and Industry),
6.400%, 1/01/12 (Pre-refunded to 1/01/00) 1/00 at 102 A 275,633
250,000 Hollywood Water and Sewer System,
6.875%, 10/01/21 (Pre-refunded to 10/01/01) 10/01 at 102 Aaa 288,305
Jacksonville Electric Authority:
470,000 7.500%, 10/01/02 10/97 at 101-1/2 Aa1 503,224
500,000 5.500%, 10/01/14 10/02 at 101 Aa1 501,975
790,000 5.250%, 10/01/21 10/02 at 101 Aa1 766,648
1,000,000 5.250%, 10/01/28 10/02 at 101 Aa1 967,340
250,000 Jacksonville Excise Taxes, 6.500%, 10/01/13 10/02 at 102 Aaa 276,795
605,000 Jacksonville Health Facilities Authority
(Daughters of Charity Health System--St. Vincent),
7.500%, 11/01/15 (Pre-refunded to 11/01/00) 11/00 at 102 Aaa 706,900
375,000 Jacksonville Water and Sewer (Jacksonville Suburban
Utilities Corporation), Alternative Minimum Tax,
6.750%, 6/01/22 6/02 at 102 A2 409,174
250,000 Jupiter Water System, 6.250%, 10/01/18 10/01 at 102 Aaa 266,320
1,300,000 Kissimmee Utility Authority, Electric System,
5.375%, 10/01/12 10/03 at 102 Aaa 1,322,451
1,000,000 Manatee County Housing Finance Authority,
Single Family Mortgage, Alternative Minimum Tax,
7.600%, 11/01/26 11/05 at 105 Aaa 1,104,650
2,550,000 Miami Beach Water and Sewer System,
5.375%, 9/01/15 9/05 at 102 Aaa 2,549,873
250,000 North Broward Hospital District, 6.250%, 1/01/12 1/02 at 102 Aaa 268,555
Orange County Sales Tax:
145,000 6.125%, 1/01/19 No Opt. Call Aaa 158,768
1,500,000 5.375%, 1/01/24 1/03 at 102 Aaa 1,489,200
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS
FLORIDA--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 Orange County Water Utilities System,
6.250%, 10/01/17 4/02 at 102 Aaa $ 535,045
1,000,000 Orange County Housing Finance Authority
(Ashley Point Apartments), Alternative Minimum
Tax, 7.100%, 10/01/24 10/01 at 101 BBB+ 1,037,930
Orlando Utilities Commission:
1,250,000 6.000%, 10/01/20 10/02 at 102 Aa 1,291,213
1,000,000 5.500%, 10/01/20 10/99 at 100 Aa 999,250
Orlando and Orange County Expressway Authority:
1,000,000 5.500%, 7/01/18 7/03 at 102 Aaa 1,007,620
1,000,000 5.125%, 7/01/20 7/03 at 102 Aaa 968,820
Palm Beach County Criminal Justice Facilities:
1,000,000 5.300%, 6/01/05 No Opt. Call Aaa 1,063,100
1,000,000 5.375%, 6/01/10 No Opt. Call Aaa 1,045,810
2,000,000 Pensacola Health Facilities Authority (Daughters of
Charity-Sacred Heart), 5.250%, 1/01/11 1/03 at 102 Aa 1,966,420
2,000,000 Pinellas County Health Facilities Authority
(Morton Plant Health System), 5.500%, 11/15/18 11/03 at 102 Aaa 2,005,080
565,000 St. Lucie County Solid Waste System,
6.000%, 9/01/15 (Pre-refunded to 9/01/99) 9/99 at 100 Aaa 606,059
500,000 St. Petersburg Health Facilities Authority
(St. Joseph's Hospital Inc.), 7.000%, 12/01/15 12/01 at 102 Aaa 567,450
1,000,000 Sarasota Water and Sewer System,
7.625%, 10/01/08 (Pre-refunded to 10/01/96) 10/96 at 102 Aaa 1,045,910
500,000 Tampa Water and Sewer System,
6.000%, 10/01/17 (Pre-refunded to 10/01/02) 10/02 at 101 Aaa 554,690
1,000,000 Turtle Run Community Development District,
6.400%, 5/01/11 5/03 at 100 A1 1,061,390
2,000,000 West Palm Beach Utility System, 5.400%, 10/01/23 10/02 at 101 Aaa 1,978,580
- -----------------------------------------------------------------------------------------------------------------------------------
$57,410,000 Total Investments--(Cost $56,821,593)--98.3% 60,245,650
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.7% 1,062,980
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $61,308,630
===================================================================================================================================
</TABLE>
22
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 43 $41,734,321 69%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 12 14,661,781 24
PORTFOLIO OF A+ A1 1 1,061,390 2
INVESTMENTS: A, A- A, A2, A3 4 1,441,744 3
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 1,346,414 2
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 62 $60,245,650 100%
===================================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
See accompanying notes to financial statements.
23
<PAGE>
PORTFOLIO OF INVESTMENTS
MARYLAND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 Maryland Community Development Administration,
Single Family Mortgage, 7.000%, 4/01/14 4/97 at 103 Aa $ 521,810
1,500,000 Maryland Community Development Administration,
Department of Housing and Community
Development, Alternative Minimum Tax,
7.450%, 4/01/32 4/01 at 102 Aa 1,577,790
Maryland Community Development Administration,
Multi-Family Housing:
700,000 6.700%, 5/15/27 5/02 at 102 Aa 732,018
500,000 6.750%, 5/15/33 5/02 at 102 Aa 524,485
2,000,000 Maryland General Obligation, 4.600%, 7/15/06 7/03 at 101 Aaa 2,011,080
500,000 Maryland Health and Higher Educational Facilities
Authority (Sinai Hospital of Baltimore),
7.000%, 7/01/19 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 568,115
Maryland Health and Higher Educational Facilities
Authority (Doctor's Community Hospital):
1,000,000 5.750%, 7/01/13 7/03 at 102 Baa 942,270
1,005,000 8.750%, 7/01/22 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,212,422
Maryland Health and Higher Educational Facilities
Authority (Francis Scott Key Medical Center):
1,800,000 5.000%, 7/01/13 7/03 at 102 Aaa 1,741,986
500,000 6.750%, 7/01/23 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 563,100
700,000 Maryland National Capital Park and Planning
Commission, 6.125%, 7/01/10
(Pre-refunded to 7/01/02) 7/02 at 102 Aa 784,539
1,760,000 Maryland Stadium Authority, 5.875%, 12/15/12 12/04 at 102 Aaa 1,859,845
Maryland Stadium Authority, Sports Facility,
Alternative Minimum Tax:
500,000 7.375%, 12/15/04 12/99 at 102 Aa 561,605
500,000 7.500%, 12/15/10 12/99 at 102 Aa 556,130
3,415,000 Maryland Transportation Authority (Baltimore/
Washington International Airport),
Alternative Minimum Tax, 6.400%, 7/01/19 7/04 at 102 Aaa 3,600,639
1,000,000 Maryland Transportation Authority, 5.750%, 7/01/15 7/02 at 100 A1 1,014,660
2,000,000 Baltimore County General Obligation,
6.700%, 7/01/11 7/98 at 102 Aaa 2,143,380
Baltimore General Obligation:
2,295,000 7.375%, 10/15/03 No Opt. Call Aaa 2,751,177
600,000 6.500%, 10/15/12 (Pre-refunded to 10/15/02) 10/02 at 100 Aaa 678,750
1,000,000 Baltimore, GMNA (Tindeco Wharf Apartments
Project), 6.700%, 12/20/28 12/02 at 102 AAA 1,048,290
1,500,000 Baltimore Port Facilities (Consolidated Coal Sales
Company), 6.500%, 10/01/11 4/02 at 103 Aa3 1,654,575
625,000 Baltimore Water System, 6.500%, 7/01/20
(Pre-refunded to 7/01/00) 7/00 at 100 Aaa 687,131
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,165,000 Gaithersburg (Shady Grove Adventist Nursing and
Rehabilitation Center), 6.500%, 9/01/12 No Opt. Call Aaa $ 2,489,490
1,000,000 Howard County (Howard Hills Townhouse Project-
FHA Insured) 6.400%, 7/01/24 7/02 at 102 Aaa 1,045,020
2,000,000 Howard County Multi-Family Mortgage (Chase
Glen Project), 7.000%, 7/01/24 (Mandatory
put 7/01/04) 7/02 at 104 N/R 2,206,920
1,000,000 Montgomery County Housing Opportunities
Commission, Multi-Family Housing,
6.000%, 7/01/20 7/05 at 102 Aa 1,016,470
Montgomery County Housing Opportunities
Commission, Single Family Housing:
450,000 7.250%, 7/01/13 7/96 at 103 Aa 467,474
1,615,000 6.600%, 7/01/14 7/04 at 102 Aa 1,695,524
1,000,000 Montgomery County Solid Waste Resource
Recovery Project, 5.875%, 6/01/13 6/03 at 102 Aaa 1,045,190
1,500,000 Morgan State University, 6.100%, 7/01/20 No Opt. Call Aaa 1,688,775
1,000,000 Northeast Maryland Waste Disposal Authority,
Resource Recovery, 6.900%, 1/01/00 No Opt. Call Aaa 1,098,040
600,000 Prince George's County (Dimensions Health
Corporation), 6.700%, 7/01/97 No Opt. Call A 622,992
1,550,000 Prince George's County Housing Authority,
(New Keystone Apartments-FHA Insured),
6.800%, 7/01/25 1/02 at 102 Aaa 1,638,118
1,500,000 Prince George's County Pollution Control
(Potomac Electric Project), 6.375%, 1/15/23 1/03 at 102 A+ 1,601,625
1,000,000 University of Maryland, 5.000%, 10/01/11 10/03 at 101 AA+ 995,100
1,500,000 Washington D.C. Metro Area Transit Authority,
Transit Refunding Bonds, 5.250%, 7/01/14 1/04 at 102 Aaa 1,485,090
1,170,000 Washington Suburban Sanitary District,
8.000%, 1/01/02 No Opt. Call Aa1 1,399,706
500,000 Commonwealth of Puerto Rico, General Obligation,
6.600%, 7/01/13 (Pre-refunded to 7/01/02) 7/02 at 101-1/2 Aaa 574,435
1,750,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 A 1,952,405
2,000,000 Puerto Rico Highway and Transportation Authority,
5.250%, 7/01/21 7/03 at 101-1/2 A 1,906,900
Puerto Rico Electric Power Authority:
630,000 7.000%, 7/01/07 (Pre-refunded to 7/01/99) 7/99 at 101-1/2 A- 701,448
315,000 7.125%, 7/01/14 (Pre-refunded to 7/01/99) 7/99 at 101-1/2 AAA 352,620
185,000 7.125%, 7/01/14 7/99 at 101-1/2 A- 201,704
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
PORTFOLIO OF INVESTMENTS
MARYLAND-CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Puerto Rico Industrial Medical and
Environmental Authority, 6.250%, 7/01/16 1/05 at 102 Aaa $ 1,089,390
- ------------------------------------------------------------------------------------------------------------------------------------
$51,330,000 Total Investments--(cost $51,884,039)-98.8% 55,010,233
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.2% 677,041
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $ 55,687,274
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 22 $31,372,083 57%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 12,487,226 22
PORTFOLIO OF A+ A1 2 2,616,285 5
INVESTMENTS: A, A- A, A2, A3 5 5,385,449 10
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 1 942,270 2
Non-rated Non-rated 1 2,206,920 4
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 44 $55,010,233 100%
===================================================================================================================================
</TABLE>
* Optional call provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R-Investment is not rated.
See accompanying notes to financial statements.
26
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
MICHIGAN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Michigan Building Authority, 6.250%, 10/01/20 10/01 at 102 AA- $ 1,060,740
1,740,000 Michigan Hospital Finance Authority (Daughters of
Charity), 5.500%,11/01/05 No Opt. Call Aa 1,839,371
1,000,000 Michigan Hospital Finance Authority (Otsego
Memorial Hospital Gaylord), 6.125%, 1/01/15 1/05 at 102 AA 1,041,980
1,190,000 Michigan Housing Development Authority
(Parc Pointe Apartments), 6.500%, 10/01/15 10/05 at 102 Aaa 1,248,667
1,000,000 Michigan Housing Development Authority, Single
Family Mortgage, 6.800%, 12/01/16 6/05 at 102 AA+ 1,048,130
Michigan Housing Development Authority,
Rental Housing:
500,000 6.400%, 4/01/05 10/02 at 102 A+ 531,000
500,000 6.650%, 4/01/23 10/02 at 102 A+ 517,225
Michigan Municipal Bond Authority:
250,000 4.750%, 12/01/09 12/01 at 100 Aaa 244,650
555,000 6.600%, 10/01/18 10/02 at 102 Aa 600,738
950,000 Michigan Municipal Bond Authority, State
Revolving Fund, 7.000%,10/01/04 No Opt. Call Aa 1,116,944
1,000,000 Michigan Public Power Agency (Belle River Project),
5.250% 1/01/18 1/03 at 102 AA- 968,950
Michigan State Hospital Finance Authority
(Detroit Medical Center):
860,000 5.000%, 8/15/02 No Opt. Call A 851,959
460,000 8.125%, 8/15/08 (Pre-refunded to 8/15/98) 8/98 at 102 Aaa 515,232
40,000 8.125%, 8/15/08 8/98 at 102 A 43,786
1,000,000 Michigan State Hospital Finance Authority
(Daughters of Charity Health System),
7.000%, 11/01/21 11/01 at 102 Aa 1,091,500
500,000 Michigan State Hospital Finance Authority
(Mid-Michigan Obligated
Group), 6.900%, 12/01/24 12/02 at 102 A 532,390
1,145,000 Michigan State University, 6.250%, 8/15/15 8/02 at 101 AA- 1,206,394
1,055,000 Michigan Strategic Fund (WMX Technologies),
Alternative Minimum Tax, 6.000%, 12/01/13 12/03 at 102 A1 1,080,689
400,000 Bay County General Obligation, West Side Regional
Sewage Disposal System, 6.400%, 5/01/02 5/96 at 102 A 408,000
250,000 Capital Region Airport Authority, Alternative
Minimum Tax, 6.700%, 7/01/21 7/02 at 102 Aaa 273,175
1,000,000 Dearborn School District, General Obligation,
6.000%, 5/01/14 5/01 at 102 AA 1,043,140
1,500,000 Detroit Convention Facility (Cobo Hall),
5.250%, 9/30/12 9/03 at 102 A 1,452,945
1,000,000 Detroit Water Supply System, 4.750%, 7/01/19 7/04 at 102 Aaa 926,040
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
MICHIGAN-CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Dexter Community Schools, General Obligation,
5.000%, 5/01/17 5/03 at 102 AA $ 945,490
445,000 Grand Rapids Housing Corporation, Multi-Family
Mortgage, 7.375%, 7/15/41 1/04 at 104 AAA 492,050
500,000 Grand Traverse County Hospital Finance Authority
(Munson Healthcare), 6.250%, 7/01/22 7/02 at 102 Aaa 531,715
1,150,000 Greenville Public Schools, General Obligation,
5.750%, 5/01/19 (DD) 5/04 at 101 Aaa 1,178,980
1,250,000 Lansing Sewage Disposal System, 5.850%, 5/01/14 5/04 at 102 Aaa 1,309,263
1,000,000 Monroe County Pollution Control (Detroit Edison
Company), Alternative Minimum Tax,
6.350%, 12/01/04 No Opt. Call Aaa 1,127,330
Muskegon Water Supply System:
450,000 4.500%, 5/01/12 5/01 at 101 Baa1 399,587
450,000 4.500%, 5/01/13 5/01 at 101 Baa1 394,533
1,000,000 Reeths-Puffer Schools, General Obligation,
5.750%, 5/01/15 5/05 at 101 Aaa 1,029,550
180,000 Saginaw-Midland Municipal Water Supply
Corporation, 6.875%, 9/01/06 9/04 at 102 A 199,723
200,000 St. Joseph Hospital Finance Authority (Mercy
Memorial Medical Center), 7.300%, 10/01/00
(Pre-refunded to 10/01/96) 10/96 at 102 AAA 209,174
1,000,000 University of Michigan Hospital, 6.375%, 12/01/24 12/00 at 100 Aa 1,031,690
1,000,000 University of Michigan Student Fee, 5.500%, 4/01/12 4/03 at 102 AA+ 1,023,410
250,000 Warren Economic Development Corporation, GNMA
(Autumn Woods Project), 6.900%, 12/20/22 3/02 at 101 Aaa 264,705
1,000,000 Wayne County (Detroit Metropolitan Wayne County
Airport), 5.250%, 12/01/13 12/03 at 102 Aaa 984,010
1,000,000 Western Township Utilities Authority, Sewage
Disposal System, 6.500%, 1/01/10 1/02 at 100 AAA 1,083,670
1,000,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 A 1,115,660
250,000 Puerto Rico Public Buildings Authority,
6.875%, 7/01/21 (Pre-refunded to 7/01/02) 7/02 at 101-1/2 Aaa 291,057
- ------------------------------------------------------------------------------------------------------------------------------------
$32,020,000 Total Investments-(cost $31,410,104)--96.7% 33,255,242
===========-------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES--1.8%
$ 600,000 University of Michigan Hospital, Adjustable Rate
=========== Demand Bonds, 3.500%, 12/01/27+ VMIG-1 600,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.5% 529,188
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $ 34,384,430
====================================================================================================================================
</TABLE>
28
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 16 $11,709,268 35%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 14,018,477 42
PORTFOLIO OF A+ A1 3 2,128,914 7
INVESTMENTS A, A- A, A2, A3 7 4,604,463 14
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 794,120 2
TEMPORARY
INVESTMENTS):
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 41 $33,255,242 100%
===================================================================================================================================
</TABLE>
* Optional call provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
(DD) Security purchased on a delayed delivery basis (note 1).
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
29
<PAGE>
PORTFOLIO OF INVESTMENTS
NEW JERSEY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 New Jersey Economic Development Authority
(Elizabethtown Gas Company), Alternative
Minimum Tax, 6.750%, 10/01/21 10/96 at 102 A3 $ 1,031,330
200,000 New Jersey Economic Development Authority
(Liberty State Park Project), 6.800%, 3/15/22 3/02 at 102 A1 218,124
1,000,000 New Jersey Economic Development Authority
(Yeshiva K'tana of Passaic), 8.000%, 9/15/18 No Opt. Call N/R 1,191,120
2,965,000 New Jersey Economic Development Authority
(Bridgewater Resources, Inc.), Alternative
Minimum Tax, 8.375%, 11/01/04 No Opt. Call N/R 3,148,237
250,000 New Jersey Economic Development Authority, Solid
Waste Disposal Facility (Garden State Paper
Company), 7.125%, 4/01/22 4/02 at 102 Aa1 274,143
1,285,000 New Jersey Economic Development Authority,
Alternative Minimum Tax, 5.300%, 12/01/07 12/03 at 102 Aa1 1,291,849
1,025,000 New Jersey Economic Development Authority
(Educational Testing Service), 6.500%, 5/15/05 No Opt. Call Aaa 1,138,601
650,000 New Jersey Economic Development Authority,
5.875%, 7/01/11 7/04 at 102 Aaa 690,554
975,000 New Jersey Educational Facilities Authority
(Trenton State College), 6.750%, 7/01/08 7/96 at 100 A+ 981,962
835,000 New Jersey Educational Facilities Authority
(Princeton University), 5.875%, 7/01/11 7/04 at 100 Aaa 889,375
1,500,000 New Jersey Educational Facilities Authority
(Higher Education Facilities Trust Fund),
5.125%, 9/01/02 No Opt. Call Aaa 1,576,830
1,000,000 New Jersey General Obligation, 5.800%, 2/15/07 No Opt. Call Aa1 1,108,150
1,215,000 New Jersey Health Care Facilities Financing
Authority (Hackensack Hospital),
8.750%, 7/01/09 No Opt. Call Aaa 1,479,323
700,000 New Jersey Health Care Facilities Financing
Authority (Community Medical Center/Kensington
Manor Care Center), 7.000%, 7/01/20 7/00 at 102 Aaa 777,427
480,000 New Jersey Health Care Facilities Authority
(Community Memorial Hospital), 8.000%, 7/01/14 7/98 at 102 A 523,474
400,000 New Jersey Health Care Facilities Financing
Authority (Atlantic City Medical Center),
6.800%, 7/01/05 7/02 at 102 A 436,828
850,000 New Jersey Health Care Facilities Financing
Authority (Palisades Medical Center),
7.500%, 7/01/06 7/02 at 102 Ba 879,011
1,750,000 New Jersey Housing Finance Agency,
9.000%, 11/01/18 11/99 at 100 A1 1,827,245
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000,000 New Jersey Housing and Mortgage Finance Agency,
Multi-Family Housing, 6.000%, 11/01/14 5/05 at 102 Aaa $ 2,059,160
700,000 New Jersey Housing and Mortgage Finance Agency,
6.950%, 11/01/13 5/02 at 102 A+ 745,500
New Jersey Turnpike Authority:
375,000 10.375%, 1/01/03 No Opt. Call AAA 466,973
1,750,000 6.500%, 1/01/08 No Opt. Call A 2,025,293
1,415,000 Delaware River and Bay Authority, 5.000%, 1/01/17 1/04 at 102 Aaa 1,372,975
1,000,000 Delaware River Port Authority, 5.500%, 1/01/26 1/06 at 102 Aaa 1,004,720
1,000,000 Camden County Pollution Control Finance Authority,
Solid Waste Disposal and Resource
Recovery, Alternative Minimum Tax,
7.125%, 12/01/01 No Opt. Call BBB+ 1,034,220
2,645,000 Camden County Pollution Control Finance Authority,
Solid Waste Disposal and Resource Recovery
System, 7.250%, 12/01/10 12/01 at 102 BBB+ 2,803,197
500,000 Essex County Improvement Authority,
6.500%, 12/01/12 12/02 at 102 Baa1 536,010
500,000 Hillsborough Township School District,
5.875%, 8/01/11 No Opt. Call AA 545,105
400,000 Hudson County Improvement Authority
Multi-Family Housing (Observer Park Project),
Alternative Minimum Tax, 6.900%, 6/01/22 6/04 at 100 AAA 421,688
1,605,000 Little Ferry Board of Education, Certificates of
Participation, 6.300%, 1/15/08 No Opt. Call N/R 1,664,337
Monroe Township Board of Education, General
Obligation:
725,000 5.200%, 8/01/11 No Opt. Call Aaa 738,550
825,000 5.200%, 8/01/14 No Opt. Call Aaa 840,263
600,000 Morris County General Obligation, 5.000%, 7/15/09 7/05 at 100 Aaa 606,972
500,000 North Bergen Housing Development Corporation,
FHA-Insured, 7.400%, 9/01/20 8/96 at 102/1/\\2\\ N/R 512,850
300,000 North Bergen Township General Obligation,
6.500%, 8/15/12 8/02 at 102 Aaa 332,100
2,350,000 Ocean County Utilities Authority, 5.000%, 1/01/14 1/97 at 100 Aaa 2,210,692
2,215,000 Passaic County General Obligation, 5.125%, 9/01/12 No Opt. Call Aaa 2,234,647
775,000 Rutgers State University, 8.000%, 5/01/18
(Pre-refunded to 5/01/98) 5/98 at 102 Aaa 860,514
Union County Utilities Authority, Solid Waste
System, Alternative Minimum Tax:
195,000 7.100%, 6/15/06 6/02 at 102 A- 209,307
1,100,000 7.200%, 6/15/14 6/02 at 102 A- 1,176,076
270,000 6.850%, 6/15/14 6/02 at 102 Aaa 289,697
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
NEW JERSEY--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100,000 University of Medicine and Dentistry of New Jersey,
6.500%, 12/01/18 (Pre-refunded to 12/01/01) 12/01 at 102 AA $ 113,743
300,000 Wanaque Borough Sewerage Authority,
7.000%, 12/01/21 12/02 at 102 Baa1 323,658
1,175,000 Virgin Islands Housing Finance Authority,
Alternative Minimum Tax, 6.450%, 3/01/16 3/05 at 102 AAA 1,211,519
2,000,000 Puerto Rico Commonwealth General Obligation,
5.750%, 7/01/24 7/05 at 101 1/2 Aaa 2,075,380
1,000,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 A 1,115,660
60,000 Puerto Rico Highway Transportation Authority,
6.625%, 7/01/18 (Pre-refunded to 7/01/02) 7/02 at 101 1/2 A 69,015
Puerto Rico Electric Power Authority:
790,000 7.000%, 7/01/07 No Opt. Call A- 928,778
1,875,000 7.000%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 A- 2,172,693
1,000,000 Puerto Rico Industrial Medical and Environmental
Authority, 6.250%, 7/01/16 1/05 at 102 Aaa 1,089,389
- -----------------------------------------------------------------------------------------------------------------------------------
$50,125,000 Total Investments--(Cost $50,801,410)--96.8% 53,254,264
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--3.2% 1,775,636
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $55,029,900
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 22 $24,367,349 46%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 5 3,332,990 6
PORTFOLIO OF A+ A1 4 3,772,831 7
INVESTMENTS: A, A- A, A2, A3 10 9,688,454 18
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 4,697,085 9
BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 879,011 2
Non-rated Non-rated 4 6,516,544 12
- -----------------------------------------------------------------------------------------------------------------------------------
Total 50 $53,254,264 100%
===================================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent accountants): Using the
higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
See accompanying notes to financial statements.
32
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
PENNSYLVANIA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Pennsylvania Economic Development Financing
Authority (Sun Co--R&M Project), Alternative
Minimum Tax, 7.600%, 12/01/24 12/04 at 102 Baa1 $ 2,822,650
Pennsylvania General Obligation:
2,000,000 6.400%, 1/01/99 No Opt. Call AA- 2,136,220
1,290,000 5.000%, 5/01/03 No Opt. Call AA- 1,338,736
2,000,000 5.300%, 5/01/05 No Opt. Call AA 2,106,680
2,500,000 Pennsylvania Higher Education Assistance Agency,
Student Loan, 4.625%, 12/01/00 No Opt. Call AAA 2,508,975
750,000 Pennsylvania Higher Educational Facilities Authority
(Thomas Jefferson University), 6.000%, 7/01/19 7/99 at 102 Aa 768,555
600,000 Pennsylvania Housing Finance Agency, Single
Family Mortgage, 7.150%, 4/01/15 10/01 at 102 Aa 646,956
1,795,000 Pennsylvania Industrial Development Authority,
7.000%, 1/01/06 No Opt. Call Aaa 2,127,775
1,390,000 Pennsylvania Intergovernmental Cooperative
Authority (City of Philadelphia Funding
Program), 7.000%, 6/15/05 No Opt. Call Aaa 1,640,992
2,300,000 Pennsylvania Turnpike Commission,
5.500%, 12/01/17 12/02 at 102 Aaa 2,305,382
1,000,000 Allegheny County (Greater Pittsburgh International
Airport), Alternative Minimum Tax,
7.000%, 1/01/18 1/00 at 102 Aaa 1,061,710
1,375,000 Allegheny County Hospital Development Authority
(Allegheny Valley Hospital), 7.000%, 8/01/15 No Opt. Call A 1,597,709
1,500,000 Allegheny County Hospital Development Authority
(Rehabilitation Institute of Pittsburgh),
7.000%, 6/01/22 6/02 at 102 BBB 1,548,465
3,000,000 Allegheny County Residential Financing Authority
(Ladies Grand Army of the Republic Health),
6.350%, 10/01/36 10/05 at 100 AAA 3,052,770
2,000,000 Allegheny County Residential Finance Authority,
Single Family Mortgage, (GNMA), Alternative
Minimum Tax, 0.000%, 5/01/27 No Opt. Call Aaa 232,940
2,000,000 Armstrong County Hospital Authority (Canterbury
Place Project), 6.500%, 12/01/21 12/01 at 100 Aaa 2,140,100
1,000,000 Bucks County Community College Authority,
6.250%, 6/15/14 6/02 at 100 Aa 1,045,510
2,850,000 Deer Lakes School District, General Obligation,
6.350%, 1/15/14 1/04 at 100 Aaa 3,067,968
800,000 Greater Lebanon Refuse Authority, Solid Waste,
7.000%, 11/15/04 11/02 at 100 A- 860,104
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
PENNSYLVANIA--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,500,000 Indiana County Industrial Development Authority,
Pollution Control (New York State Electric and
Gas Corporation), 6.000%, 6/01/06 No Opt. Call Aaa $ 3,873,345
3,000,000 Indiana County Industrial Development Authority,
Pollution Control (Pennsylvania Electric
Company), 5.350%, 11/01/10 No Opt. Call Aaa 3,121,440
Luzerne County Industrial Development Authority
(Pennsylvania Gas and Water Company),
Alternative Minimum Tax:
1,500,000 7.000%, 12/01/17 12/04 at 102 Aaa 1,706,490
950,000 7.125%, 12/01/22 12/02 at 102 Baa1 1,018,315
3,000,000 Montgomery County Higher Educational and Health
Authority (Waverly Heights), 6.375%,
1/01/26 (DD) 1/06 at 101 BBB 2,999,790
1,800,000 Northampton County Higher Education Authority
(Lehigh University), 6.900%, 10/15/06 10/01 at 102 Aaa 2,041,560
1,000,000 Northumberland County Industrial Development
Authority (Roaring Creek Water Company),
Alternative Minimum Tax, 6.375%, 10/15/23 10/03 at 102 N/R 965,270
2,000,000 Philadelphia Gas Works, 6.375%, 7/01/14 7/03 at 102 Aaa 2,177,420
1,000,000 Philadelphia Municipal Authority, 5.625%, 11/15/14 11/03 at 102 Aaa 1,005,890
Pittsburgh Urban Redevelopment Authority,
Alternative Minimum Tax:
3,280,000 6.375%, 8/01/18 8/05 at 102 A 3,318,638
1,100,000 6.625%, 4/01/22 4/04 at 102 A1 1,132,241
500,000 St. Mary's Hospital Authority (Franciscan Health
System/St. Mary of Langhorne), 6.500%, 7/01/12 7/02 at 102 Aaa 543,820
230,000 Sayre Health Care Facilities Authority (Guthrie
Healthcare System), 7.100%, 3/01/17 3/01 at 102 Aaa 258,713
Southeastern Pennsylvania Transportation
Authority:
1,500,000 6.500%, 3/01/04 No Opt. Call Aaa 1,702,980
1,000,000 6.500%, 3/01/05 No Opt. Call Aaa 1,140,920
2,250,000 University of Pittsburgh, 6.125%, 6/01/21 6/02 at 102 Aaa 2,375,865
350,000 Washington County Hospital Authority
(Monongahela Valley Hospital), 6.750%, 12/01/08 4/02 at 102 A 370,832
935,000 West View Municipal Authority, 9.500%, 11/15/14 No Opt. Call Aaa 1,324,718
600,000 Wilkes-Barre General Municipal Authority
(College Misericordia), Alternative Minimum
Tax, 7.750%, 12/01/12 12/00 at 100 N/R 661,650
- ------------------------------------------------------------------------------------------------------------------------------------
$62,145,000 Total Investments-(cost $60,924,413)-100.8% 64,750,094
===========-------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES-3.1%
$ 2,000,000 Geisinger Authority (Montaur Co.), Variable Rate
Demand Bonds, 3.600%, 7/01/22+ A-1+ $ 2,000,000
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities-(3.9)% (2,487,424)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets-100% 64,262,670
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 21 $39,411,773 61%
RATINGS** AA+,AA,AA- Aa1,Aa,Aa2,Aa3 6 8,042,657 12
PORTFOLIO OF A+ A1 1 1,132,241 2
INVESTMENTS A,A- A,A2,A3 4 6,147,283 9
(EXCLUDING BBB+,BBB,BBB- Baa1,Baa,Baa2,Baa3 4 8,389,220 13
TEMPORARY Non-rated Non-rated 2 1,626,920 3
INVESTMENTS):
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 38 $64,750,094 100%
====================================================================================================================================
</TABLE>
* Optional call provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
(DD) Security purchased on a delayed delivery basis (note 1).
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based on
market conditions or a specified market index.
See accompanying notes to financial statements.
35
<PAGE>
PORTFOLIO OF INVESTMENTS
VIRGINIA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 800,000 Virginia College Building Authority
(Randolph-Macon College), 6.625%, 5/01/13 5/02 at 102 A- $ 856,392
Virginia College Building Authority
(The Washington and Lee University):
1,250,000 5.750% 1/01/14 1/04 at 102 Aa 1,287,538
1,000,000 5.800%, 1/01/24 1/04 at 102 Aa 1,027,640
Virginia Housing Development Authority:
800,000 6.800%, 11/01/09 5/02 at 102 AA+ 854,472
650,000 6.850%, 7/01/17 1/00 at 102 AA+ 675,168
4,000,000 7.150%, 1/01/33 1/02 at 102 AA+ 4,242,320
Virginia Public Building Authority:
1,090,000 6.500%, 8/01/11 8/01 at 102 Aa 1,229,040
750,000 6.250%, 8/01/14 8/04 at 101 Aa 814,050
800,000 Virginia Resource Authority, Water System,
6.450%, 4/01/13 4/02 at 102 AA 853,448
1,000,000 Virginia Resource Authority, Sewer System,
Alternative Minimum Tax, 6.000%, 10/01/25 10/05 at 102 AA 1,033,400
4,425,000 Virginia Transportation Board, 6.000%, 5/15/19 5/98 at 102 Aa 4,542,041
1,000,000 Abingdon General Obligation, 6.250%, 8/01/12 8/02 at 102 A 1,071,050
1,410,000 Albemarle County Industrial Development Authority
(Martha Jefferson Hospital), 5.800%, 10/01/09 10/03 at 102 A 1,449,790
1,500,000 Capital Region Airport Commission (Richmond
International Airport), 5.625%, 7/01/20 7/05 at 102 Aaa 1,518,840
750,000 Charlottesville-Albemarle Airport Authority,
Alternative Minimum Tax, 6.125%, 12/01/13 12/05 at 102 BBB 765,285
2,500,000 Chesapeake Bay Bridge and Tunnel Commission,
6.375%, 7/01/22 7/01 at 102 Aaa 2,671,800
1,000,000 Covington-Alleghany County Industrial Development
Authority (Alleghany Regional Hospital),
6.625%, 4/01/12 (Pre-refunded to 4/01/02) 4/02 at 102 A- 1,138,330
1,700,000 Cumberland County Certificate of Participation,
5.480%, 7/15/97 No Opt. Call N/R 1,700,000
2,500,000 Fairfax County Economic Development Authority
(Ogden Martin Systems Project), Alternative
Minimum Tax, 7.750%, 2/01/11 2/99 at 103 A1 2,747,375
1,460,000 Fairfax County Industrial Development Authority
(Inova Health System) 5.000%, 8/15/13 No Opt. Call Aaa 1,439,020
1,500,000 Giles County Industrial Development Authority
(Hoechst Celanese Corporation), Alternative
Minimum Tax, 6.625%, 12/01/22 12/02 at 102 AA- 1,571,775
500,000 Hampton Industrial Development Authority
(Sentara Hampton General Hospital),
6.500%, 11/01/12 11/04 at 102 A 533,215
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Henrico County Water and Sewer System,
6.250%, 5/01/13 5/02 at 100 A1 $ 2,615,925
1,000,000 Loudoun County Sanitation Authority, Water and
Sewer System, 6.250%, 1/01/16 1/03 at 102 Aaa 1,073,740
2,000,000 Loudoun County Industrial Development Authority
(The George Washington University),
6.250%, 5/15/22 5/02 at 102 A1 2,104,700
1,500,000 Lynchburg Industrial Development Authority
(Randolph-Macon Women's College),
5.875%, 9/01/13 9/03 at 102 A 1,531,860
750,000 Nelson County Service Authority, Water and Sewer
System, 5.500%, 7/01/18 7/03 at 102 Aaa 748,523
1,580,000 Peninsula Ports Authority of Virginia (Riverside
Health System), 6.625%, 7/01/18 7/02 at 102 Aa 1,697,678
2,500,000 Prince William County Park Authority,
6.875%, 10/15/16 10/04 at 102 A- 2,767,100
1,000,000 Prince William County Service Authority, Water and
Sewer System, 6.000%, 7/01/29 7/01 at 100 Aaa 1,033,250
3,005,000 Richmond General Obligation, 5.500%, 7/15/23 7/03 at 102 AA 3,012,603
1,155,000 Roanoke Industrial Development Authority
(Roanoke Memorial Hospitals), 6.500%, 7/01/25
(Pre-refunded to 7/01/00) 7/00 at 100 Aaa 1,269,818
Rockingham County Industrial Development
Authority (Bridgewater College):
400,000 5.600%, 10/01/06 10/03 at 102 Baa1 433,244
400,000 5.700%, 10/01/07 10/03 at 102 Baa1 425,168
2,750,000 Southeastern Public Service Authority (Regional Solid
Waste System), Alternative Minimum Tax,
6.000%, 7/01/13 7/03 at 102 A- 2,782,368
4,000,000 Upper Occoquan Sewer Authority, 5.000%, 7/01/21 1/04 at 102 Aaa 3,836,000
2,260,000 Virginia Beach Development Authority (Sentara
Bayside Hospital), 6.300%, 11/01/21 11/01 at 102 Aa 2,368,977
Metropolitan Washington D. C. Airports Authority,
Alternative Minimum Tax:
1,000,000 5.750%, 10/1/20 10/04 at 102 AAA 1,017,060
1,500,000 6.250%, 10/1/21 10/02 at 102 AAA 1,587,720
800,000 Puerto Rico Highway Transportation Authority,
6.625%, 7/01/18 7/02 at 101 1/2 A 863,064
- ------------------------------------------------------------------------------------------------------------------------------------
$62,485,000 Total Investments-(cost $61,036,092)--98.7% 65,190,787
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.3% 877,240
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $66,068,027
====================================================================================================================================
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS
VIRGINIA-CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 10 $16,195,771 25%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 14 25,210,150 39
PORTFOLIO A+ A1 3 7,468,000 11
INVESTMENTS: A, A- A, A2, A3 9 12,993,169 20
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 3 1,623,697 2
Non-rated Non-rated 1 1,700,000 3
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 40 $65,190,787 100%
===================================================================================================================================
</TABLE>
* Optional call provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
See accompanying notes to financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
AZ FL MD MI
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $23,265,698 $60,245,650 $55,010,233 $33,255,242
Temporary investments in short-term municipal securities,
at amortized cost (note 1) - - - 600,000
Cash 242,662 280,875 293,584 76,087
Receivables:
Interest 262,440 935,255 472,689 475,195
Shares sold 86,335 51,425 132,184 350,928
Investments sold - 5,000 - 938,132
Deferred organization costs (note 1) 6,998 6,998 7,828 8,424
Other assets 501 4,519 1,029 15,413
----------- ----------- ----------- -----------
Total assets 23,864,634 61,529,722 55,917,547 35,719,421
----------- ----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased - - - 1,184,207
Shares reacquired - 13,223 - -
Cash overdraft - - - -
Accrued expenses:
Management fees (note 7) 10,895 28,402 25,779 15,849
Other 46,078 47,287 67,118 44,646
Dividends payable 51,780 132,180 137,376 90,289
----------- ----------- ----------- -----------
Total liabilities 108,753 221,092 230,273 1,334,991
----------- ----------- ----------- -----------
Net assets (note 8) $23,755,881 $61,308,630 $55,687,274 $34,384,430
=========== =========== =========== ===========
Class A Shares (note 1)
Net assets $ 3,894,689 $ 5,823,021 $ 6,860,436 $ 4,027,268
=========== =========== =========== ===========
Shares outstanding 362,624 551,681 657,949 374,859
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.74 $ 10.56 $ 10.43 $ 10.74
=========== =========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 11.25 $ 11.06 $ 10.92 $ 11.25
=========== =========== =========== ===========
Class C Shares (note 1)
Net assets $ 327,826 $ 167,925 $ 1,437,861 $ 231,328
=========== =========== =========== ===========
Shares outstanding 30,775 15,971 138,032 21,564
=========== =========== =========== ===========
Net asset value, offering and redemption price per share $ 10.65 $ 10.51 $ 10.42 $ 10.73
=========== =========== =========== ===========
Class R Shares (note 1)
Net assets $19,533,366 $55,317,684 $47,388,977 $30,125,834
=========== =========== =========== ===========
Shares outstanding 1,830,754 5,235,606 4,540,303 2,802,718
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.67 $ 10.57 $ 10.44 $ 10.75
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NJ PA VA
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $53,254,264 $64,750,094 $65,190,787
Temporary investments in short-term municipal securities,
at amortized cost (note 1) - 2,000,000 -
Cash 1,227,903 - 270,963
Receivables:
Interest 664,668 761,603 837,425
Shares sold 103,874 28,669 -
Investments sold - - -
Deferred organization costs (note 1) 7,390 7,984 5,824
Other assets 14,133 35,893 13,090
----------- ----------- -----------
Total assets 55,272,232 67,584,243 66,318,089
----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased - 3,015,938 -
Shares reacquired 12,384 55,248 -
Cash overdraft - 1,615 -
Accrued expenses:
Management fees (note 7) 25,346 29,831 30,744
Other 43,227 54,749 54,585
Dividends payable 161,375 164,192 164,733
----------- ----------- -----------
Total liabilities 242,332 3,321,573 250,062
----------- ----------- -----------
Net assets (note 8) $55,029,900 $64,262,670 $66,068,027
=========== =========== ===========
Class A Shares (note 1)
Net assets $10,660,701 $ 5,816,905 $ 5,874,288
=========== =========== ===========
Shares outstanding 1,024,727 548,766 554,008
=========== =========== ===========
Net asset value and redemption price per share $ 10.40 $ 10.60 $ 10.60
=========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 10.89 $ 11.10 $ 11.10
=========== =========== ===========
Class C Shares (note 1)
Net assets $ 1,065,019 $ 1,101,179 $ 788,903
=========== =========== ===========
Shares outstanding 102,569 105,115 74,618
=========== =========== ===========
Net asset value, offering and redemption price per share $ 10.38 $ 10.48 $ 10.57
=========== =========== ===========
Class R Shares (note 1)
Net assets $43,304,180 $57,344,586 $59,404,836
=========== =========== ===========
Shares outstanding 4,158,146 5,424,007 5,603,960
=========== =========== ===========
Net asset value and redemption price per share $ 10.41 $ 10.57 $ 10.60
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
STATEMENT OF OPERATIONS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
Year Ended January 31, 1996 JANUARY 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 1,189,234 $ 3,304,797 $ 2,957,714 $ 1,827,408
------------ ------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 111,599 313,075 280,013 169,780
12b-1 distribution and service fees (note 1) 6,771 9,232 22,018 7,144
Shareholders' servicing agent fees and expenses 22,979 47,824 69,638 43,765
Custodian's fees and expenses 40,994 50,179 72,294 47,593
Trustees' fees and expenses (note 7) 506 617 1,976 1,006
Professional fees 20,251 23,172 32,726 16,969
Shareholders' reports--printing and mailing expenses 21,551 51,528 54,329 29,592
Federal and state registration fees 3,910 5,074 7,109 6,098
Amortization of deferred organization costs (note 1) 6,785 7,610 6,077 5,585
Other expenses 2,534 6,349 6,210 4,266
------------ ------------ ------------ ------------
Total expenses before expense reimbursement 237,880 514,660 552,390 331,798
Expense reimbursement from investment adviser (note 7) (78,929) (78,507) (148,537) (93,136)
------------ ------------ ------------ ------------
Net expenses 158,951 436,153 403,853 238,662
------------ ------------ ------------ ------------
Net investment income 1,030,283 2,868,644 2,553,861 1,588,746
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 5) (27,336) (140,189) 138,640 414,083
Net change in unrealized appreciation or depreciation
of investments 1,629,699 4,780,693 3,998,568 2,255,770
------------ ------------ ------------ ------------
Net gain from investments 1,602,363 4,640,504 4,137,208 2,669,853
------------ ------------ ------------ ------------
Net increase in net assets from operations $ 2,632,646 $ 7,509,148 $ 6,691,069 $ 4,258,599
============ ============ ============ ============
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
STATEMENT OF OPERATIONS
Year Ended January 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NJ PA VA
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 3,006,443 $ 3,464,924 $ 3,701,411
------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 268,050 323,825 340,698
12b-1 distribution and service fees (note 1) 23,280 16,190 15,510
Shareholders' servicing agent fees and expenses 61,463 82,103 78,664
Custodian's fees and expenses 43,166 45,385 51,430
Trustees' fees and expenses (note 7) 1,276 1,268 1,628
Professional fees 23,290 21,640 19,516
Shareholders' reports--printing and mailing expenses 66,799 73,091 72,151
Federal and state registration fees 2,991 7,801 3,614
Amortization of deferred organization costs (note 1) 6,895 7,391 7,375
Other expenses 6,701 7,087 7,190
------------ ------------ ------------
Total expenses before expense reimbursement 503,911 585,781 597,776
Expense reimbursement from investment adviser (note 7) (115,121) (128,011) (117,673)
------------ ------------ ------------
Net expenses 388,790 457,770 480,103
------------ ------------ ------------
Net investment income 2,617,653 3,007,154 3,221,308
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 5) (30,019) (36,684) 334,528
Net change in unrealized appreciation or depreciation
of investments 3,249,789 4,855,692 4,882,314
------------ ------------ ------------
Net gain from investments 3,219,770 4,819,008 5,216,842
------------ ------------ ------------
Net increase in net assets from operations $ 5,837,423 $ 7,826,162 $ 8,438,150
============ ============ ============
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
AZ FL
- ------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 1,030,283 $ 874,402 $ 2,868,644 $ 2,567,258
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (27,336) (127,639) (140,189) (88,470)
Net change in unrealized appreciation or depreciation
of investments 1,629,699 (1,415,009) 4,780,693 (4,454,622)
----------- ----------- ------------ -----------
Net increase (decrease) in net assets from operations 2,632,646 (668,246) 7,509,148 (1,975,834)
----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (101,157) (11,579) (148,024) (12,861)
Class C (6,237) (786) (5,956) (807)
Class R (937,616) (863,461) (2,730,462) (2,538,376)
From accumulated net realized gains from investment
transactions:
Class A - - - (11)
Class C - - - -
Class R - - - (13,228)
----------- ----------- ------------ -----------
Decrease in net assets from distributions to
shareholders (1,045,010) (875,826) (2,884,442) (2,565,283)
----------- ----------- ------------ -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 2,882,755 1,124,442 4,315,210 1,665,651
Class C 273,019 51,694 77,334 73,100
Class R 2,473,853 4,004,198 8,465,473 13,751,923
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 38,250 2,269 52,678 4,072
Class C 5,264 509 3,575 230
Class R 529,462 464,469 1,500,287 1,376,114
----------- ----------- ------------ -----------
6,202,603 5,647,581 14,414,557 16,871,090
----------- ----------- ------------ -----------
Cost of shares redeemed:
Class A (303,388) (30,002) (173,983) (314,814)
Class C (3,168) (9,346) - -
Class R (1,449,215) (2,482,522) (11,564,633) (6,261,459)
----------- ----------- ------------ -----------
(1,755,771) (2,521,870) (11,738,616) (6,576,273)
----------- ----------- ------------ -----------
Net increase in net assets derived from Fund shares
transactions 4,446,832 3,125,711 2,675,941 10,294,817
----------- ----------- ------------ -----------
Net increase (decrease) in net assets 6,034,468 1,581,639 7,300,647 5,753,700
Net assets at the beginning of year 17,721,413 16,139,774 54,007,983 48,254,283
----------- ----------- ------------ -----------
Net assets at the end of year $23,755,881 $17,721,413 $ 61,308,630 $54,007,983
=========== =========== ============ ===========
Balance of undistributed net investment income at
end of year $ 1,809 $ 16,536 $ 20,796 $ 36,594
=========== =========== ============ ===========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MD MI
- ------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,553,861 $ 2,439,904 $ 1,588,746 $ 1,402,059
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 138,640 (720,598) 414,083 (138,495)
Net change in unrealized appreciation or depreciation
of investments 3,998,568 (4,017,204) 2,255,770 (2,255,350)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 6,691,069 (2,297,898) 4,258,599 (991,786)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (198,145) (14,257) (110,174) (7,070)
Class C (47,180) (9,717) (5,812) (582)
Class R (2,335,847) (2,417,246) (1,479,047) (1,399,025)
From accumulated net realized gains from investment
transactions:
Class A - (5) (9,042) (1)
Class C - - (536) -
Class R - (10,234) (88,511) (7,967)
----------- ----------- ----------- -----------
Decrease in net assets from distributions to
shareholders (2,581,172) (2,451,459) (1,693,122) (1,414,645)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 5,206,011 1,562,186 3,071,799 881,646
Class C 645,990 818,595 146,180 73,345
Class R 4,099,669 9,116,010 3,061,856 6,369,706
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 112,734 5,306 58,075 2,560
Class C 39,318 5,892 5,428 338
Class R 1,461,612 1,385,256 1,044,771 872,246
----------- ----------- ----------- -----------
11,565,334 12,893,245 7,388,109 8,199,841
----------- ----------- ----------- -----------
Cost of shares redeemed:
Class A (350,679) (2,267) (171,433) (9,411)
Class C (195,323) (226) (4,206) -
Class R (4,647,731) (10,757,200) (3,009,162) (3,253,109)
----------- ----------- ----------- -----------
(5,193,733) (10,759,693) (3,184,801) (3,262,520)
----------- ----------- ----------- -----------
Net increase in net assets derived from Fund share
transactions 6,371,601 2,133,552 4,203,308 4,937,321
----------- ----------- ----------- -----------
Net increase (decrease) in net assets 10,481,498 (2,615,805) 6,768,785 2,530,890
Net assets at the beginning of year 45,205,776 47,821,581 27,615,645 25,084,755
----------- ----------- ----------- -----------
Net assets at the end of year $55,687,274 $45,205,776 $34,384,430 $27,615,645
=========== =========== =========== ===========
Balance of undistributed net investment income at
end of year $ 936 $ 28,247 $ 10,893 $ 17,180
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NJ PA
- ------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,617,653 $ 2,037,788 $ 3,007,154 $ 2,714,124
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (30,019) (452,878) (36,684) (835,288)
Net change in unrealized appreciation or depreciation
of investments 3,249,789 (2,665,300) 4,855,692 (4,232,526)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 5,837,423 (1,080,390) 7,826,162 (2,353,690)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (329,633) (35,663) (173,805) (17,517)
Class C (32,025) (5,043) (28,974) (5,177)
Class R (2,282,656) (1,973,703) (2,830,558) (2,690,297)
From accumulated net realized gains from investment
transactions:
Class A - (773) - -
Class C - - - -
Class R - (341,737) - -
----------- ----------- ----------- -----------
Decrease in net assets from distributions to
shareholders (2,644,314) (2,356,919) (3,033,337) (2,712,991)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 7,757,684 2,826,031 4,222,635 1,465,445
Class C 573,759 458,588 633,225 480,657
Class R 4,461,592 10,783,764 6,005,478 12,882,787
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 181,529 18,788 126,885 9,834
Class C 16,615 2,567 24,758 3,155
Class R 1,567,807 1,592,197 1,786,453 1,624,542
----------- ----------- ----------- -----------
14,558,986 15,681,935 12,799,434 16,466,420
----------- ----------- ----------- -----------
Cost of shares redeemed:
Class A (406,168) (122,722) (281,318) (27,047)
Class C (32,865) (1,205) (105,804) -
Class R (5,070,204) (5,795,917) (6,418,284) (6,616,545)
----------- ----------- ----------- -----------
(5,509,237) (5,919,844) (6,805,406) (6,643,592)
----------- ----------- ----------- -----------
Net increase in net assets derived from Fund share
transactions 9,049,749 9,762,091 5,994,028 9,822,828
----------- ----------- ----------- -----------
Net increase (decrease) in net assets 12,242,858 6,324,782 10,786,853 4,756,147
Net assets at the beginning of year 42,787,042 36,462,260 53,475,817 48,719,670
----------- ----------- ----------- -----------
Net assets at the end of year $55,029,900 $42,787,042 $64,262,670 $53,475,817
=========== =========== =========== ===========
Balance of undistributed net investment income at
end of year $ 8,128 $ 34,789 $ 5,651 $ 31,834
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
VA
- ----------------------------------------------------------------------------------
Year ended Year ended
1/31/96 1/31/95
- ----------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 3,221,308 $ 2,965,312
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 334,528 (110,113)
Net change in unrealized appreciation or depreciation
of investments 4,882,314 (5,022,831)
----------- -----------
Net increase (decrease) in net assets from operations 8,438,150 (2,167,632)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (191,806) (20,902)
Class C (23,926) (4,516)
Class R (2,997,681) (2,960,225)
From accumulated net realized gains from investment
transactions:
Class A (15,706) -
Class C (2,511) -
Class R (193,671) -
----------- -----------
Decrease in net assets from distributions to
shareholders (3,425,301) (2,985,643)
----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 3,799,529 2,169,078
Class C 402,084 359,962
Class R 3,456,619 9,464,055
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 109,800 6,496
Class C 21,313 2,776
Class R 1,928,344 1,626,894
----------- -----------
9,717,689 13,629,261
----------- -----------
Cost of shares redeemed:
Class A (543,599) (10,247)
Class C (54,845) -
Class R (5,446,943) (6,855,537)
----------- -----------
(6,045,387) (6,865,784)
----------- -----------
Net increase in net assets derived from Fund share
transactions 3,672,302 6,763,477
----------- -----------
Net increase (decrease) in net assets 8,685,151 1,610,202
Net assets at the beginning of year 57,382,876 55,772,674
----------- -----------
Net assets at the end of year $66,068,027 $57,382,876
=========== ===========
Balance of undistributed net investment income at
end of year $ 29,706 $ 21,811
=========== ===========
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
1. GENERAL INFORMATION AND SIGNIFICANT
ACCOUNTING POLICIES
The Nuveen Multistate Tax-Free Trust (the "Trust") is an open-end diversified
management series investment company registered under the Investment Company Act
of 1940. The Trust comprises seven single-state tax-free mutual funds (the
Nuveen Tax-Free Value Funds--the "Funds"). Each Fund constitutes a separate
series of the Trust and is itself an open-end diversified management investment
company, commonly referred to as a mutual fund. The Trust was organized as a
Massachusetts Business Trust on July 26, 1991.
The Trust currently has seven authorized state tax-free Funds: the Nuveen
Arizona Tax-Free Value Fund, the Nuveen Florida Tax-Free Value Fund, the Nuveen
Maryland Tax-Free Value Fund, the Nuveen Michigan Tax-Free Value Fund, the
Nuveen New Jersey Tax-Free Value Fund, the Nuveen Pennsylvania Tax-Free Value
Fund and the Nuveen Virginia Tax-Free Value Fund. Additional state Funds may be
established in the future. Sale of Fund shares first commenced on February 28,
1992. Each Fund invests primarily in municipal obligations issued within its
respective state.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board of Trustees. Temporary investments in
securities that have variable rate and demand features qualifying them as short-
term securities are traded and valued at amortized cost.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the transaction date. Any securities so
purchased are subject to market fluctuation during this period. The Trust has
instructed the custodian to segregate assets in a separate account with a
current value at least equal to the amount of its purchase commitments. At
January 31, 1996, the Nuveen Michigan Tax-Free Value Fund and the Nuveen
Pennsylvania Tax-Free Value Fund had purchase commitments of $1,184,207 and
$3,015,938, respectively. There were no such purchase commitments in any of the
other Funds.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and
Distributions to
Shareholders
Net investment income is declared as a dividend monthly and payment is made or
reinvestment is credited to shareholder accounts after month-end. Net realized
gains from securities transactions are distributed to shareholders not less
frequently than annually only to the extent they exceed available capital loss
carryovers.
Distributions to shareholders of net investment income and net realized gains
from investment transactions are recorded on the ex-dividend date. The amount
and timing of such distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may result and will be classified as either distributions in excess
of net investment income or distributions in excess of net realized gains from
investment transactions, if applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes and intends to
comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies by distributing all of its net investment income,
in addition to any significant amounts of net realized gains from investments,
to shareholders. The Funds currently consider significant net realized gains as
amounts in excess of $.001 per share. Furthermore, each Fund intends to satisfy
conditions which will enable interest from municipal securities, which is exempt
from regular federal and designated state income taxes, to retain such tax-
exempt status when distributed to the shareholders of the respective Funds. All
income dividends paid during the year ended January 31, 1996, have been
designated Exempt Interest Dividends.
48
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
Deferred
Organization Costs
Costs incurred by the Trust in connection with its organization and initial
registration of shares were deferred and are being amortized over a 60-month
period beginning February 28, 1992. If any of the initial shares of each Fund
are redeemed during this period, the proceeds of the redemption will be reduced
by the pro-rata share of the unamortized organization costs as of the date of
redemption.
Flexible Sales Charge
Program
Effective September 6, 1994, each Fund commenced offering Class "A" Shares and
Class "C" Shares. Class "A" Shares incur a front-end sales charge and an annual
12b-1 service fee. Class "C" Shares are sold without a sales charge but incur
annual 12b-1 distribution and service fees. Effective June 13, 1995, an investor
purchasing Class "C" Shares agrees to pay a contingent deferred sales charge
("CDSC") of 1% if Class "C" Shares are redeemed within 12 months of purchase.
Prior to the offering of Class "A" and Class "C" shares, the shares outstanding
were renamed Class "R" and are not subject to any 12b-1 distribution or service
fees. Effective with the offering of the new classes, Class "R" Shares are
generally available only for reinvestment of dividends by current "R"
shareholders and for already established Nuveen Unit Investment Trust
reinvestment accounts.
Derivative Financial
Instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including future, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Funds are
authorized to invest in such financial instruments, and may do so in the future,
they did not make any such investments during the year ended January 31, 1996.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. EXPENSE ALLOCATION
Expenses of the Funds that are not directly attributable to any 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 are recorded to the specific
class. Effective August 1, 1995, the Funds adopted a multiple class plan
pursuant to Rule 18f-3 under the Investment Company Act of 1940 and now
designate class specific expenses to include Rule 12b-1 distribution and service
fees, and other expenses incurred for services received by a class that differ
in either amount or kind. A breakdown of the class specific expenses is as
follows:
<TABLE>
<CAPTION>
AZ FL MD MI
<S> <C> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
January 31, 1996):
Class A $ 5,232 $ 7,876 $10,477 $ 5,692
Class C 1,539 1,356 11,541 1,452
Shareholders' servicing agent fees and expenses (for the
six month period ended July 31, 1995):
Class A 1,219 2,388 2,357 1,704
Class C 103 57 401 90
Class R 9,209 17,836 29,394 18,320
Shareholders' reports-printing and mailing expenses
(for the six month period ended July 31, 1995):
Class A 574 1,437 1,691 757
Class C 88 57 324 51
Class R 17,565 32,346 26,895 11,718
Federal and state registration fees (for the six month
period ended July 31, 1995):
Class A 237 786 1,101 199
Class C 9 379 734 13
Class R 1,870 715 756 2,324
</TABLE>
50
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
NJ PA VA
<S> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
January 31, 1996):
Class A $16,159 $ 9,108 $ 9,870
Class C 7,121 7,082 5,640
Shareholders' servicing agent fees and expenses (for the
six month period ended July 31, 1995):
Class A 3,208 2,563 2,427
Class C 185 360 265
Class R 15,598 32,785 36,716
Shareholders' reports-printing and mailing expenses
(for the six month period ended July 31, 1995):
Class A 1,760 1,336 1,588
Class C 205 76 220
Class R 36,338 31,233 40,281
Federal and state registration fees (for the six month
period ended July 31, 1995):
Class A 886 1,858 744
Class C 69 1,378 40
Class R 749 1,519 1,185
</TABLE>
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. FUND SHARES
Transactions in shares were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AZ FL
- ---------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 274,843 116,098 420,409 175,913
Class C 26,227 5,260 7,638 7,959
Class R 239,176 401,984 824,725 1,397,272
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 3,655 237 5,125 435
Class C 505 54 350 24
Class R 51,292 48,864 147,052 139,011
-------- --------- ---------- ----------
595,698 572,497 1,405,299 1,720,614
-------- --------- ---------- ----------
Shares redeemed:
Class A (29,122) (3,087) (16,925) (33,276)
Class C (313) (958) - -
Class R (139,521) (254,213) (1,126,197) (639,360)
-------- --------- ---------- ----------
(168,956) (258,258) (1,143,122) (672,636)
-------- --------- ---------- ----------
Net increase 426,742 314,239 262,177 1,047,978
======== ========= ========== ==========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
MD MI
- -----------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 514,083 166,832 294,831 91,636
Class C 63,846 89,009 13,867 7,542
Class R 406,673 921,445 293,923 631,960
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 11,066 570 5,538 269
Class C 3,894 635 521 35
Class R 144,632 142,445 99,905 87,694
--------- ---------- -------- --------
1,144,194 1,320,936 708,585 819,136
--------- ---------- -------- --------
Shares redeemed:
Class A (34,362) (240) (16,428) (987)
Class C (19,328) (24) (401) -
Class R (459,618) (1,119,703) (288,460) (332,766)
--------- ---------- -------- --------
(513,308) (1,119,967) (305,289) (333,753)
--------- ---------- -------- --------
Net increase 630,886 200,969 403,296 485,383
========= ========== ======== ========
- -----------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NJ PA
- -----------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 765,342 292,386 411,858 153,866
Class C 56,488 47,588 62,079 50,810
Class R 440,121 1,077,289 585,804 1,297,150
Shares issued to shareholders due to reinvestment of
distributions from net investment income and
from net realized gains from investment transactions:
Class A 17,820 1,978 12,297 1,047
Class C 1,638 270 2,439 329
Class R 154,754 161,549 174,784 165,879
---------- --------- --------- ---------
1,436,163 1,581,060 1,249,261 1,669,081
---------- --------- --------- ---------
Shares redeemed:
Class A (40,094) (12,705) (27,436) (2,866)
Class C (3,290) (125) (10,542) --
Class R (500,152) (581,386) (628,872) (676,175)
---------- --------- --------- ---------
(543,536) (594,216) (666,850) (679,041)
---------- --------- --------- ---------
Net increase 892,627 986,844 582,411 990,040
========== ========= ========= ========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
VA
- ------------------------------------------------------------------------------------
Year ended Year ended
1/31/96 1/31/95
- ------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold:
Class A 369,049 227,287
Class C 39,142 38,465
Class R 336,826 931,986
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 10,624 690
Class C 2,074 296
Class R 186,098 165,173
-------- ---------
943,813 1,363,897
-------- ---------
Shares redeemed:
Class A (52,547) (1,095)
Class C (5,359) --
Class R (529,723) (680,380)
-------- ---------
(587,629) (681,475)
-------- ---------
Net increase 356,184 682,422
======== =========
- ------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. DISTRIBUTIONS TO SHAREHOLDERS
On February 9, 1996, the Funds declared dividend distributions from their
ordinary income which were paid on March 1, 1996, to shareholders of record on
February 9, 1996, as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AZ FL MD MI
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $ .0420 $ .0410 $ .0405 $ .0425
Class C .0350 .0345 .0340 .0355
Class R .0435 .0430 .0425 .0445
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
NJ PA VA
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $ .0440 $ .0410 $ .0430
Class C .0375 .0340 .0365
Class R .0460 .0430 .0450
=========== =========== ===========
- --------------------------------------------------------------------------------------
</TABLE>
5. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the year ended January 31,
1996, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
Investments in municipal securities $ 5,373,232 $14,977,473 $15,605,953 $13,336,382
Temporary municipal investments 7,000,000 11,900,000 9,500,000 7,900,000
SALES
Investments in municipal securities 938,787 11,397,779 8,399,990 9,860,816
Temporary municipal investments 7,200,000 11,900,000 10,500,000 7,900,000
=========== =========== =========== ===========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
NJ PA VA
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASES
Investments in municipal securities $27,941,714 $41,972,985 $29,255,837
Temporary municipal investments 19,400,000 20,880,000 13,000,000
SALES
Investments in municipal securities 17,713,121 29,645,304 25,325,007
Temporary municipal investments 21,000,000 19,880,000 14,300,000
=========== =========== ===========
- -----------------------------------------------------------------------------------------------------
</TABLE>
At January 31, 1996, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
At January 31, 1996, the following Funds had unused capital loss carryforwards
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, the carryovers will expire as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
AZ FL MD
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expiration year:
2003 $127,444 $ 87,166 $ 65,355
2004 17,690 141,494 516,603
-------- -------- --------
Total $145,134 $228,660 $581,958
======== ======== ========
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
NJ PA
- ------------------------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2003 $ 35,921 $377,256
2004 419,632 468,676
-------- --------
Total $455,553 $845,932
======== ========
- ------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
6. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at January 31, 1996, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AZ FL MD MI
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
Appreciation $1,382,474 $3,438,260 $3,207,733 $1,847,996
Depreciation (1,470) (14,203) (81,539) (2,858)
---------- ---------- ---------- ----------
Net unrealized appreciation $1,381,004 $3,424,057 $3,126,194 $1,845,138
========== ========== ========== ==========
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NJ PA VA
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
Appreciation $2,520,888 $3,860,621 $4,243,525
Depreciation (68,034) (34,940) (88,830)
---------- ---------- ----------
Net unrealized appreciation $2,452,854 $3,825,681 $4,154,695
========== ========== ==========
</TABLE>
7. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays to the Adviser an annual management fee, payable monthly, at the rates set
forth below which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
- -------------------------------------------------------
Average daily net asset value Management fee
- -------------------------------------------------------
<S> <C>
For the first $125,000,000 .55 of 1%
For the next $125,000,000 .5375 of 1
For the next $250,000,000 .525 of 1
For the next $500,000,000 .5125 of 1
For the next $1,000,000,000 .5 of 1
For net assets over $2,000,000,000 .475 of 1
- -------------------------------------------------------
</TABLE>
From inception of the Trusts on December 13, 1991 through January 31, 1996, the
Adviser waived part of its management fees or reimbursed certain expenses of
each Fund in order to limit total expenses to .75 of 1% of the average daily net
asset value of each Fund, excluding any 12b-1 fees applicable to Class A and
Class C. The Adviser has currently agreed to continue its fee waivers and
expense reimbursements through July 31, 1996.
58
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to 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.
8. COMPOSITION OF NET ASSETS
At January 31, 1996, there were an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $22,527,848 $58,092,437 $53,142,102 $32,351,135
Balance of undistributed net investment income 1,809 20,796 936 10,893
Accumulated net realized gain (loss) from investment
transactions (154,780) (228,660) (581,958) 177,264
Net unrealized appreciation of investments 1,381,004 3,424,057 3,126,194 1,845,138
----------- ----------- ----------- -----------
Net assets $23,755,881 $61,308,630 $55,687,274 $34,384,430
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
NJ PA VA
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $53,051,830 $61,303,237 $61,873,371
Balance of undistributed net investment income 8,128 5,651 29,706
Accumulated net realized gain (loss) from investment
transactions (482,912) (871,899) 10,255
Net unrealized appreciation of investments 2,452,854 3,825,681 4,154,695
----------- ----------- -----------
Net assets $55,029,900 $64,262,670 $66,068,027
=========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
9. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At January 31, 1996, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
AZ FL MD MI
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Bonds:
Pollution Control 11% 2% 6% 7%
Housing Facilities 11 16 23 12
Health Care Facilities 11 15 12 21
Water/Sewer Facilities 6 9 -- 15
Electric Utilities 2 16 1 3
Educational Facilities 14 1 5 7
Transportation 3 5 11 4
Lease Rental Facilities 8 1 5 3
Other 8 9 7 5
General Obligation Bonds 17 9 15 17
Escrowed Bonds 9 17 15 6
-- -- -- --
100% 100% 100% 100%
=== === === ===
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
NJ PA VA
- -------------------------------------------------------------
<S> <C> <C> <C>
Revenue Bonds:
Pollution Control 13% 24% --%
Housing Facilities 10 8 9
Health Care Facilities 7 17 11
Water/Sewer Facilities 5 -- 17
Electric Utilities 2 3 --
Educational Facilities 9 13 12
Transportation 8 5 12
Lease Rental Facilities 3 2 6
Other 12 11 23
General Obligation Bonds 19 15 6
Escrowed Bonds 12 2 4
-- -- --
100% 100% 100%
=== === ===
- -------------------------------------------------------------
</TABLE>
60
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
Certain long-term and intermediate-term investments owned by the Funds are
covered by insurance issued by several private insurers or are backed by an
escrow or trust containing U.S. Government or U.S. Government agency securities,
either of which ensure the timely payment of principal and interest in the event
of default (51% for Arizona, 61% for Florida, 54% for Maryland, 30% for
Michigan, 47% for New Jersey, 47% for Pennsylvania, and 24% for Virginia). Such
insurance or escrow, however, does not guarantee the market value of the
municipal securities or the value of the Funds' shares.
All of the temporary investments in short-term municipal securities have credit
enhancements (letters of credit, guarantees or insurance) issued by third party
domestic or foreign banks or other institutions.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
61
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Income from investment
operations Less distributions
------------------------------------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ARIZONA
- ------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 $ 9.930 $.503 $ .829 $(.522) $ - $10.740
9/6/94 to
1/31/95 10.030 .203 (.086) (.217) - 9.930
CLASS C
Year ended 1/31,
1996 9.840 .419 .830 (.439) - 10.650
9/9/94 to
1/31/95 9.940 .169 (.052) (.217) - 9.840
CLASS R
Year ended 1/31,
1996 9.850 .529 .831 (.540) - 10.670
1995 10.880 .536 (1.026) (.540) - 9.850
1994 10.050 .531 .853 (.522) (.032) 10.880
1993 9.525 .438 .563 (.435) (.041) 10.050
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ------------------------------------------------------------------------------------------------------------------
FLORIDA
- ------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 9.730 .488 .840 (.498) - 10.560
9/6/94 to
1/31/95 9.890 .193 (.148) (.202) (.003) 9.730
CLASS C
Year ended 1/31,
1996 9.730 .413 .789 (.422) - 10.510
9/16/94 to
1/31/95 9.720 .152 .021 (.163) - 9.730
CLASS R
Year ended 1/31,
1996 9.750 .518 .824 (.522) - 10.570
1995 10.740 .508 (.985) (.510) (.003) 9.750
1994 9.960 .511 .779 (.510) - 10.740
1993 9.525 .440 .431 (.436) - 9.960
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 68.
62
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
13.68% $ 3,895 1.31% 4.49% 1.00% 4.80% 5%
1.24 1,124 1.60* 4.68* 1.00* 5.28* 29
12.90 328 2.11 3.66 1.75 4.02 5
1.25 43 3.51* 2.79* 1.75* 4.55* 29
14.09 19,533 1.15 4.72 .75 5.12 5
(4.39) 16,554 1.06 5.12 .75 5.43 29
14.07 16,140 1.25 4.48 .75 4.98 11
10.71 8,026 1.75* 3.94* .75* 4.94* 43
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
13.92 5,823 1.21 4.53 1.00 4.74 21
.52 1,392 1.56* 4.52* 1.00* 5.08* 4
12.54 168 2.16 3.62 1.75 4.03 21
1.84 78 2.84* 3.26* 1.75* 4.35* 4
14.05 55,318 .88 4.93 .75 5.06 21
(4.33) 52,538 .84 5.12 .75 5.21 4
13.22 48,254 .89 4.69 .75 4.83 3
9.33 23,727 1.24* 4.35* .75* 4.84* 1
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- ------------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- -----------------------------------------------------------------------------------------------------------------------------------
MARYLAND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Year ended 1/31,
1996 $ 9.600 $.483 $ .844 $(.497) $ - $10.430
9/6/94 to
1/31/95 9.840 .198 (.229) (.207) (.002) 9.600
CLASS C
Year ended 1/31,
1996 9.590 .409 .842 (.421) - 10.420
9/15/94 to
1/31/95 9.750 .160 (.153) (.167) - 9.590
CLASS R
Year ended 1/31,
1996 9.610 .513 .838 (.521) - 10.440
1995 10.620 .513 (1.008) (.513) (.002) 9.610
1994 9.910 .509 .727 (.503) (.023) 10.620
1993 9.525 .442 .395 (.442) (.010) 9.910
12/13/91 to
1/31/92 9.525 - - - - 9.525
- -----------------------------------------------------------------------------------------------------------------------------------
MICHIGAN
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 9.870 .510 .911 (.519) (.032) 10.740
9/6/94 to
1/31/95 10.090 .204 (.209) (.212) (.003) 9.870
CLASS C
Year ended 1/31,
1996 9.850 .430 .922 (.440) (.032) 10.730
9/16/94 to
1/31/95 9.910 .161 (.050) (.171) - 9.850
CLASS R
Year ended 1/31,
1996 9.880 .539 .906 (.543) (.032) 10.750
1995 10.860 .529 (.972) (.534) (.003) 9.880
1994 10.060 .531 .808 (.528) (.011) 10.860
1993 9.525 .456 .554 (.449) (.026) 10.060
12/13/91 to
1/31/92 9.525 - - - - 9.525
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 68.
64
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
14.07% $ 6,860 1.33% 4.41% 1.00% 4.74% 17%
(.26) 1,605 1.59* 4.67* 1.00* 5.26* 35
13.24 1,438 2.06 3.73 1.75 4.04 17
.12 860 1.86* 4.44* 1.75* 4.55* 35
14.33 47,389 1.04 4.78 .75 5.07 17
(4.58) 42,741 .89 5.14 .75 5.28 35
12.71 47,822 .86 4.74 .75 4.85 4
8.96 28,283 1.02* 4.69* .75* 4.96* 20
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
14.68 4,027 1.35 4.52 1.00 4.87 33
.02 897 2.62* 3.68* 1.00* 5.30* 35
13.96 231 2.08 3.79 1.75 4.12 33
1.18 75 3.52* 2.76* 1.75* 4.53* 35
14.93 30,126 1.05 4.87 .75 5.17 33
(3.98) 26,644 .96 5.12 .75 5.33 35
13.58 25,085 1.07 4.67 .75 4.99 3
10.80 14,684 1.62* 4.19* .75* 5.06* 32
- 15 - - - - -
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- ------------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 $ 9.730 $.519 $ .685 $(.534) $ - $10.400
9/6/94 to
1/31/95 10.030 .205 (.209) (.210) (.086) 9.730
CLASS C
Year ended 1/31,
1996 9.710 .443 .683 (.456) - 10.380
9/21/94 to
1/31/95 9.770 .159 (.050) (.169) - 9.710
CLASS R
Year ended 1/31,
1996 9.740 .551 .677 (.558) - 10.410
1995 10.710 .524 (.886) (.522) (.086) 9.740
1994 9.960 .513 .810 (.513) (.060) 10.710
1993 9.525 .445 .431 (.441) - 9.960
12/13/91 to
1/31/92 9.525 - - - - 9.525
PENNSYLVANIA
CLASS A
Year ended 1/31,
1996 9.750 .498 .862 (.510) - 10.600
9/6/94 to
1/31/95 9.920 .206 (.164) (.212) - 9.750
CLASS C
Year ended 1/31,
1996 9.650 .417 .843 (.430) - 10.480
9/6/94 to
1/31/95 9.920 .176 (.235) (.211) - 9.650
CLASS R
Year ended 1/31,
1996 9.730 .527 .846 (.533) - 10.570
1995 10.810 .531 (1.077) (.534) - 9.730
1994 10.010 .533 .807 (.534) (.006) 10.810
1993 9.525 .451 .481 (.443) (.004) 10.010
12/13/91 to
1/31/92 9.525 - - - - 9.525
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 68.
66
<PAGE>
NUVEEN TAX-FREE MUTUAL ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
-------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12.63% $10,661 1.25% 4.85% 1.00% 5.10% 39%
.02 2,741 1.31* 5.03* 1.00* 5.34* 32
11.80 1,065 1.96 4.16 1.75 4.37 39
1.16 464 2.00* 4.37* 1.75* 4.62* 32
12.88 43,304 .98 5.20 .75 5.43 39
(3.27) 39,582 .89 5.18 .75 5.32 32
13.60 36,462 .98 4.61 .75 4.84 52
9.36 16,208 1.43* 4.28* .75* 4.96* 9
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
14.22 5,817 1.30 4.52 1.00 4.82 52
.49 1,483 1.87* 4.56* 1.00* 5.43* 74
13.27 1,101 2.14 3.70 1.75 4.09 52
(.53) 494 2.52* 3.90* 1.75* 4.67* 74
14.40 57,345 .96 4.93 .75 5.14 52
(4.94) 51,499 .91 5.27 .75 5.43 74
13.67 48,720 .94 4.82 .75 5.01 5
9.97 23,680 1.25* 4.53* .75* 5.03* 15
- 15 - - - - -
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Income from investment
operations Less distributions
--------------------------- -------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VIRGINIA
- -------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 $ 9.760 $.509 $ .878 $(.509) $(.038) $10.600
9/6/94 to
1/31/95 9.980 .201 (.207) (.214) - 9.760
CLASS C
Year ended 1/31,
1996 9.740 .432 .868 (.432) (.038) 10.570
9/8/94 to
1/31/95 9.950 .171 (.167) (.214) - 9.740
CLASS R
Year ended 1/31,
1996 9.770 .537 .864 (.533) (.038) 10.600
1995 10.740 .531 (.964) (.537) - 9.770
1994 10.030 .529 .726 (.527) (.018) 10.740
1993 9.525 .439 .499 (.433) - 10.030
12/13/91 to
1/31/92 9.525 - - - - 9.525
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized. For the year ended 1/31/93, the information is based on the period
beginning 2/28/92, commencement of operations.
** Net of taxes, if applicable (note 1).
+ Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gains distributions, if any, and changes in stock
price per share.
++ Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser (note 7).
68
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses to net investment
Total return Net assets average income to average average net assets income to average Portfolio
on net asset end of period net assets before net assets before after reimburse- net assets after turnover
value+ (in thousands) reimbursement reimbursement ment++ reimbursement++ rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
14.50% $ 5,874 1.20% 4.73% 1.00% 4.93% 42%
.01 2,215 1.57* 4.70* 1.00* 5.27* 40
13.58 789 1.92 4.04 1.75 4.21 42
.10 378 2.20* 4.12* 1.75* 4.57* 40
14.65 59,405 .94 5.04 .75 5.23 42
(3.92) 54,791 .82 5.33 .75 5.40 40
12.78 55,773 .84 4.94 .75 5.03 7
10.04 37,196 .96* 4.71* .75* 4.92* 12
- 15 - - - - -
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Nuveen Multistate Tax-Free Trust:
We have audited the accompanying statements of net assets of Nuveen Multistate
Tax-Free Trust (a Massachusetts business trust comprising the Arizona, Florida,
Maryland, Michigan, New Jersey, Pennsylvania and Virginia Nuveen Tax-Free Value
Funds), including the portfolios of investments, as of January 31, 1996, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of each of the
respective funds constituting the Nuveen Multistate Tax-Free Trust as of January
31, 1996, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and the
financial highlights for the periods indicated in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 1, 1996
70
<PAGE>
[PHOTO APPEARS HERE]
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
Your
investment
partners
Since 1898, John Nuveen & Co. Incorporated has worked to bring together the
various participants in the municipal bond industry and build strong
partnerships that benefit all concerned. Investors, financial advisers,
municipal officials, investment bankers--Nuveen believes that forging
relationships within these groups based on trust and value is the key to
successful investing.
As the oldest and largest municipal bond specialist in the United States,
Nuveen's investment bankers work with issuers to understand and meet their needs
in structuring and selling their bond issues.
Nuveen also works closely with financial advisers around the country,
including brokerage firms, banks, insurance companies, and independent financial
planners, to bring the benefits of tax-free investing to you. These advisers are
experts at identifying your needs and recommending the best solutions for your
situation. Together we make a powerful team, helping you create a successful
investment plan that meets your needs today and in the future.
[LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
OEFI-MAR96 [RECYCLE LOGO]
<PAGE>
[LOGO OF SHIP ART]
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds
<TABLE>
<CAPTION>
Face Face Market
Amount Rate Maturity Value
(000) Description
Education
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$3,000 Allegheny County, PA Higher Education Building Authority Revenue -
Robert Morris College - Series 1996 A 6.250% 02/15/26 $2,793,870
750 Northeastern Pennsylvania Hospital and Education Authority Revenue -
Luzerne County Community College - Series 1994 6.625 08/15/15 790,170
865 Union County, PA Higher Educational Facilities Financing Authority Revenue -
Bucknell University - Series 1996 5.500 04/01/16 818,991
Health Care
--------------------------------------------------------------------------------------------------------------------------
1,000 Butler County, PA Industrial Development Authority - Health Center Revenue -
Sherwood Oaks Project - Series 1993 5.750 06/01/16 922,280
400 Columbia County, PA Industrial Development Authority - Orangeville Nursing Center 9.000 12/01/12 398,980
Hospitals
--------------------------------------------------------------------------------------------------------------------------
200 Allegheny County, PA Hospital Development Authority - St. Margaret Memorial
Hospital - Series 1991A 7.125 10/01/21 205,624
200 Butler County, PA Hospital Authority Revenue - North Hills Passavant Hospital 7.000 06/01/22 216,466
500 Clarion County, PA Hospital Authority Revenue - Clarion Hospital 8.100 07/01/12 516,260
500 Dauphin County, PA Hospital Authority Revenue - Harrisburg Hospital 8.250 07/01/14 529,000
2,300 Doylestown, PA Hospital Authority Revenue - Series 1993 A 5.000 07/01/23 1,980,162
1,000 Lancaster County, PA Hospital Authority Revenue - Health Care Center
Masonic Homes - Series 1994 5.000 11/15/20 864,530
1,200 Lehigh County, PA General Purpose Authority Hospital Revenue -
Lehigh Valley Hospital - Series 1995 B 5.625 07/01/25 1,128,972
1,000 Monroeville, PA Hospital Authority Revenue - Forbes Health System -
Series 1995 6.250 10/01/15 959,860
500 Montgomery County, PA Higher Education and Health Authority Revenue -
Holy Redeemer Hospital 7.625 02/01/20 539,260
2,000 Philadelphia, PA Hospitals and Higher Education Facilities Revenue -
Temple University Hospital - Series 1993 A 6.625 11/15/23 1,996,140
1,750 Westmoreland County, PA Industrial Development Authority Revenue -
Citizens General Hospital - Series 1987 A 8.250 07/01/13 1,814,592
Housing/Multifamily
--------------------------------------------------------------------------------------------------------------------------
500 Bucks County, PA Redevelopment Authority Mortgage Revenue -
Westminster Heights - Series 1992 A 6.875 08/01/23 513,705
Housing/Single Family
--------------------------------------------------------------------------------------------------------------------------
300 Pennsylvania Housing Finance Agency - Single Family - Series 1989 S 7.600 04/01/16 322,584
250 Pennsylvania Housing Finance Agency - Single Family - Series 1991-30 7.300 10/01/17 268,870
1,000 Pittsburgh, PA Urban Redevelopment Authority - Mortgage Revenue -
Series 1996 A 6.000 04/01/19 960,330
</TABLE>
4 F-264 Pennsylvania
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face Face Market
Amount Rate Maturity Value
(000) Description
Industrial Development and Pollution Control
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 296 Allegheny County, PA Industrial Development Authority - Solid Waste Disposal -
Conversion Systems, Inc. - Series 1991 8.000% 03/01/98 $ 313,523
1,000 Bradford County, PA Industrial Development Authority - Solid Waste Disposal
Revenue - International Paper Company - Series 1995 B 5.900 12/01/19 952,230
2,000 Cambria County, PA Industrial Development Authority Pollution Control Revenue -
Pennsylvania Electric Company - Series 1995 A and B 5.800 11/01/20 1,936,520
1,500 Lawrence County, PA Industrial Development Authority Pollution Control Revenue -
Pennsylvania Power Company 7.150 03/01/17 1,559,130
550 Lehigh County, PA Industrial Development Authority Pollution Control Revenue -
Pennsylvania Power and Light Company - Series 1995 A 6.150 08/01/29 554,362
1,000 Northampton County, PA Industrial Development Authority Pollution Control
Revenue - Metropolitan Edison - Series 1995 A 6.100 07/15/21 1,001,520
2,000 Pennsylvania Economic Development Financing Authority Revenue -
MacMillan Bloedel Clarion - Series 1995 7.600 12/01/20 2,181,880
1,000 Pennsylvania Economic Development Finance Authority Revenue -
Wastewater Treatment - Sun Company, Incorporated R & M - Series 1994 A 7.600 12/01/24 1,093,450
250 Philadelphia, PA Industrial Development Authority - National Board of Medical
Examiners - Series 1992 6.750 05/01/12 267,222
Municipal Revenue/Other
--------------------------------------------------------------------------------------------------------------------------
2,545 Reading, PA General Obligation - Parking Authority - Series 1993 0.000 11/15/15 808,750
Municipal Revenue/Utility
--------------------------------------------------------------------------------------------------------------------------
1,400 Philadelphia, PA Gas Works Revenue - Fourteenth Series - Series 1993 6.375 07/01/26 1,382,374
750 Philadelphia, PA Gas Works Revenue - Fourteenth Series - Series 1993 6.375 07/01/26 772,605
750 Commonwealth of Puerto Rico Electric Power Authority - Series 1994 T 6.375 07/01/24 768,150
650 Philadelphia, PA Gas Works Revenue - Twelfth Series 7.000 05/15/20 751,108
Municipal Revenue/Water & Sewer
--------------------------------------------------------------------------------------------------------------------------
1,000 Philadelphia, PA Water and Wastewater Revenue - Series 1993 5.250 06/15/23 897,790
1,185 Pittsburgh, PA Water and Sewer Authority - Water and Sewer System Revenue -
Series 1995 B 5.750 09/01/25 1,142,684
920 South Wayne County, PA Water and Sewer Authority Revenue 8.200 04/15/13 969,579
Non-State General Obligations
--------------------------------------------------------------------------------------------------------------------------
750 Central Greene County, PA School District - General Obligation - Series 1996 5.250 02/15/24 673,478
2,195 Montour, Pa School District - General Obligation - Allegheny County -
Series 1993 B 0.000 01/01/14 780,213
Pre-refunded or Escrowed
--------------------------------------------------------------------------------------------------------------------------
1,000 Montgomery County, PA Industrial Development Authority Pollution Control
Revenue - Philadelphia Electric - Series A 8.875 06/01/16 1,020,000
500 Pennsylvania State Higher Educational Facilities Authority Revenue -
Lycoming College 8.375 10/01/18 553,890
700 Pennsylvania State Higher Educational Facilities Authority Revenue -
Thomas Jefferson University 8.000 01/01/18 756,259
</TABLE>
Pennsylvania F-265 5
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
<TABLE>
<CAPTION>
Municipal Bonds (continued)
Face
Amount Face Market
(000) Description Rate Maturity Value
<C> <S> <C> <C> <C>
$ 150 Philadelphia, PA Municipal Authority Revenue 7.800% 04/01/18 $ 160,382
1,450 Philadelphia, PA Municipal Authority Revenue 7.800 04/01/18 1,595,667
Resource Recovery
-------------------------------------------------------------------------------------------------------------------------
1,650 Cambria County, PA Industrial Development Authority Resource
Recovery Revenue - Cambria CoGen Project 7.750 09/01/19 1,729,414
400 York County, PA Solid Waste and Refuse Authority Industrial Development
Revenue - Resource Recovery - Series C 8.200 12/01/14 426,039
Special Tax Revenue
-------------------------------------------------------------------------------------------------------------------------
1,500 Pennsylvania Intergovernmental Cooperation Authority - Special Tax Revenue -
Series 1994 7.000 06/15/14 1,704,300
State/Territorial General Obligations
-------------------------------------------------------------------------------------------------------------------------
1,000 * Pennsylvania State General Obligation - Series 1996 5.375 05/15/16 944,470
2,100 Commonwealth of Puerto Rico Public Improvement - General Obligation -
Series 1996 A 5.400 07/01/25 1,893,003
Total Investments in Securities - Municipal Bonds (cost $47,130,386) - 98.6% 48,130,638
Excess of Other Assets over Liabilities - 1.4% 702,992
Total Net Assets - 100.0% $48,833,630
</TABLE>
*Securities purchased on a "when-issued" basis.
See notes to financial statements.
6 F-266 Pennsylvania
<PAGE>
[LOGO OF SHIP ART]
Statement of Assets and Liabilities May 31, 1996
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $47,130,386) $48,130,638
Receivable for investments sold 2,292,793
Receivable for Fund shares sold 128,413
Interest receivable 976,009
Other 3,314
Total assets 51,531,167
LIABILITIES:
Bank borrowings (Note G) 526,230
Payable for investments purchased 1,886,776
Payable for Fund shares reacquired 476
Distributions payable 236,454
Accrued expenses 47,601
Total liabilities 2,697,537
NET ASSETS: 48,833,630
Class A:
Applicable to 4,441,276 shares of beneficial interest issued and outstanding $44,392,043
Net asset value per share $ 10.00
Class C:
Applicable to 444,517 shares of beneficial interest issued and outstanding $ 4,441,587
Net asset value per share $ 9.99
</TABLE>
[LOGO]
Statement of Operations For the year ended May 31, 1996
................................................................................
<TABLE>
<S> <C>
INVESTMENT INCOME - INTEREST $ 3,049,939
EXPENSES:
Distribution fees - Class A (Note E) 170,972
Distribution fees - Class C (Note E) 35,903
Investment advisory fees (Note E) 233,274
Custody and accounting fees 50,937
Transfer agents fees 40,720
Registration fees 1,098
Legal fees 61
Audit fees 14,640
Reimbursement of organizational expenses (Note F) 5,244
Trustees' fees 1,316
Shareholder services fees (Note E) 3,566
Other 1,685
Advisory fees waived (Note E) (156,472)
Expense subsidy (Note E) (11,285)
Total expenses before credits 391,659
Custodian fee credit (Note B) (11,012)
Net expenses 380,647
Net investment income 2,669,292
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions 714,271
Change in unrealized appreciation (depreciation) of investments (1,775,459)
Net loss on investments (1,061,188)
Net increase in net assets resulting from operations $ 1,608,104
</TABLE>
See notes to financial statements.
PENNSYLVANIA F-267 7
<PAGE>
[LOGO OF SHIP ART]
Statement of Changes in Net Assets
................................................................................
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS Year Ended Year Ended
Operations: May 31, 1996 May 31, 1995
<S> <C> <C>
Net investment income $ 2,669,292 $ 2,691,538
Net realized gain (loss) on security transactions 714,271 (78,262)
Change in unrealized appreciation (depreciation) of investments (1,775,459) 623,383
Net increase in net assets resulting from operations 1,608,104 3,236,659
Distributions to Class A shareholders:
From net investment income (2,497,316) (2,597,708)
Distributions to Class C shareholders:
From net investment income (199,438) (121,479)
Net decrease in net assets from distributions to shareholders (2,696,754) (2,719,187)
Fund share transactions (Note C):
Proceeds from shares sold 8,804,404 10,848,092
Net asset value of shares issued in reinvestment of distributions 1,323,945 1,278,709
Cost of shares reacquired (5,923,636) (10,849,240)
Net increase in net assets from Fund share transactions 4,204,713 1,277,561
Total increase in net assets 3,116,063 1,795,033
NET ASSETS:
Beginning of year 45,717,567 43,922,534
End of year $48,833,630 $45,717,567
NET ASSETS CONSIST OF:
Paid-in surplus $47,936,238 $43,754,125
Undistributed net investment income 4,862
Accumulated net realized gain (loss) on security transactions (102,860) (817,131)
Unrealized appreciation (depreciation) of investments 1,000,252 2,775,711
$48,833,630 $45,717,567
</TABLE>
See notes to financial statements.
8 F-268 Pennsylvania
<PAGE>
[LOGO OF SHIP ART]
Notes to Financial Statements
................................................................................
A. Description of Business
The Flagship Pennsylvania Triple Tax Exempt Fund (Fund), is a sub-trust of
the Flagship Tax Exempt Funds Trust (Trust), a Massachusetts business trust
organized on March 8, 1985. The Fund is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund commenced investment operations on October 29,
1986. On February 2, 1994, the Fund began to offer Class C shares to the
investing public. Class A shares are sold with a front-end sales charge.
Class C shares are sold with no front-end sales charge but are assessed a
contingent deferred sales charge if redeemed within one year from the time of
purchase. Both classes of shares have identical rights and privileges except
with respect to the effect of sales charges, the distribution and/or service
fees borne by each class, expenses specific to each class, voting rights on
matters affecting a single class and the exchange privilege of each class.
Shares of beneficial interest in the Fund, which are registered under the
Securities Act of 1933, as amended, are offered to the public on a continuous
basis.
B. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund.
Estimates: The preparation of financial statements and daily calculation of
net asset value in conformity with generally accepted accounting principles
requires management to fairly value, at market, investment securities and
make estimates and assumptions regarding the reported amounts of assets and
liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. The financial
statements reflect these inherent valuations, estimates and assumptions, and
actual results could differ.
Security Valuations: Portfolio securities for which market quotations are
readily available are valued on the basis of prices provided by a pricing
service which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities
and various relationships between securities in determining the values. If
market quotations are not readily available from such pricing service,
securities are valued at fair value as determined under procedures
established by the Trustees. Short-term securities are stated at amortized
cost, which is equivalent to fair value.
The Fund must maintain a diversified investment portfolio as a registered
investment company, however, the Fund's investments are primarily in the
securities of its state. Such concentration subjects the Fund to the effects
of economic changes occurring within that state.
Federal Income Taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute to its shareholders all of its tax exempt net
investment income and net realized gains on security transactions. Therefore,
no federal income tax provision is required.
Distributions from net realized capital gains may differ for financial
statement and tax purposes primarily due to the treatment of wash sales and
post-October capital losses. The effect on dividend distributions of certain
book-to-tax timing differences is presented as excess distributions in the
statement of changes in net assets.
Security Transactions: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses
on security transactions are determined on the identified cost basis.
Interest income is recorded on the accrual basis. The Fund amortizes original
issue discounts and premiums paid on purchases of portfolio securities on the
same basis for both financial reporting and tax purposes. Market discounts,
if applicable, are recognized as ordinary income upon disposition or
maturity.
Investment Income, Expenses and Distributions: Interest income and estimated
expenses are accrued daily. Daily dividends are declared from net investment
income and paid monthly. Net realized gains from security transactions, to
the extent they exceed available capital loss carryforwards, are distributed
to shareholders at least annually.
Pennsylvania F-269 9
<PAGE>
Notes to Financial Statements
................................................................................
Expense Allocation: Shared expenses incurred by the Trust are allocated among
the sub-trusts based on each sub-trust's ratio of net assets to the combined
net assets. Specifically identified direct expenses are charged to each sub-
trust as incurred. Fund expenses not specific to any class of shares are
prorated among the classes based upon the eligible net assets of each class.
Specifically identified direct expenses of each class are charged to that
class as incurred.
The Fund has entered into an agreement with the custodian, whereby it
earns custodian fee credits for temporary cash balances. These credits, which
offset custodian fees that may be charged to the Fund, are based on 80% of
the daily effective federal funds rate.
Securities Purchased on a "When-issued" Basis: The Fund may, upon adequate
segregation of securities as collateral, purchase and sell portfolio
securities on a "when-issued" basis. These securities are registered by a
municipality or government agency, but have not been issued to the public.
Delivery and payment take place after the date of the transaction and such
securities are subject to market fluctuations during this period. The current
market value of these securities is determined in the same manner as other
portfolio securities. There were $950,110 "when-issued" purchase commitments
included in the statement of investments at May 31, 1996.
C. Fund Shares
At May 31, 1996, there were an indefinite number of shares of beneficial
interest with no par value authorized for each class. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
------------------------- -------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Class A:
Shares sold 715,960 $ 7,326,760 948,108 $ 9,405,651
Shares issued on reinvestment 117,434 1,199,201 120,686 1,191,490
Shares reacquired (562,674) (5,744,061) (1,093,815) (10,689,804)
Net increase (decrease) 270,720 $ 2,781,900 (25,021) $ (92,663)
Class C:
Shares sold 144,791 $ 1,477,644 144,307 $ 1,442,441
Shares issued on reinvestment 12,212 124,744 8,840 87,219
Shares reacquired (17,822) (179,575) (16,468) (159,436)
Net increase 139,181 $ 1,422,813 136,679 $ 1,370,224
</TABLE>
D. Purchases and Sales of Municipal Bonds
Purchases and sales of municipal bonds for the year ended May 31, 1996,
aggregated $33,868,512 and $29,642,173, respectively. At May 31, 1996, cost
for federal income tax purposes is $47,081,602 and net unrealized
appreciation aggregated $1,049,036, of which $1,645,841 related to
appreciated securities and $596,805 related to depreciated securities.
At May 31, 1996, the Fund has available capital loss carryforwards of
approximately $102,100 to offset future net capital gains in the amounts of
$12,400 through May 31, 1999, $60,900 through May 31, 2002, and $28,800
through May 31, 2003.
10 F-270 Pennsylvania
<PAGE>
Notes to Financial Statements
................................................................................
E. Transactions with Investment Advisor and Distributor
Flagship Financial Inc. (Advisor), under the terms of an agreement which
provides for furnishing of investment advice, office space and facilities to
the Fund, receives fees computed monthly on the average daily net assets of
the Fund at an annualized rate of 1/2 of 1%. During the year ended May 31,
1996, the Advisor, at its discretion, permanently waived $156,472 of its
advisory fees. Also, under an agreement with the Fund, the Advisor may
subsidize certain expenses excluding advisory and distribution fees.
The Fund has a Distribution Agreement with Flagship Funds Inc.
(Distributor). The Distributor serves as the exclusive selling agent and
distributor of the Fund's Class A and Class C shares and in that capacity is
responsible for all sales and promotional efforts including printing of
prospectuses and reports used for sales purposes. Pursuant to Rule 12b-1
under the Investment Company Act of 1940, the Fund has adopted a plan to
reimburse the Distributor for its actual expenses incurred in the
distribution and promotion of all classes of the Fund's shares. The maximum
amount payable for these expenses on an annual basis is .40% and .95% of the
Fund's average daily net assets for Class A and Class C shares,
respectively. Included in accrued expenses at May 31, 1996 are accrued
distribution fees of $15,105 and $3,492 for Class A and Class C shares,
respectively. Certain non-promotional expenses directly attributable to
current shareholders are aggregated by the Distributor and passed through to
the Fund as shareholder services fees.
In its capacity as national wholesale underwriter for the shares of the
Fund, the Distributor received commissions on sales of the Fund's Class A
shares of approximately $107,100 for the year ended May 31, 1996, of which
approximately $92,900 was paid to other dealers. For the year ended May 31,
1996, the Distributor received approximately $900 of contingent deferred
sales charges on redemptions of shares. Certain officers and trustees of the
Trust are also officers and/or directors of the Distributor and/or Advisor.
F. Organizational Expenses
The organizational expenses incurred on behalf of the reorganization
(approximately $63,000) are being reimbursed to the Advisor on a straight-
line basis over a period of five years. As of May 31, 1996, $5,244 has been
reimbursed. In the event that the Advisor's current investment in the Trust
falls below $100,000 prior to the full reimbursement of the organizational
expenses, then it will forego any further reimbursement.
G. Line of Credit
The Trust participates in a line of credit in which a maximum amount of $30
million is provided by State Street Bank & Trust Co. The Fund may temporarily
borrow up to $2 million under the line of credit. Borrowings are
collateralized with pledged securities and are due on demand with interest at
1% above the federal funds rate. The average daily amount of borrowings under
the line of credit during the year ended May 31, 1996 was approximately
$61,700, at a weighted average annualized interest rate of 6.75%. At May 31,
1996, the Fund had $526,230 outstanding under the line of credit.
Pennsylvania F-271 11
<PAGE>
[LOGO OF SHIP ART] Selected data for each share of beneficial
Financial Highlights interest outstanding throughout the year.
................................................................................
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A May 31, 1996 May 31, 1995 May 31, 1994 May 31, 1993 May 31, 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.21 $ 10.06 $ 10.38 $ 9.90 $ 9.60
Income from investment operations:
Net investment income 0.59 0.60 0.61 0.62 0.63
Net realized and unrealized gain (loss) on
securities (0.20) 0.16 (0.32) 0.47 0.30
Total from investment operations 0.39 0.76 0.29 1.09 0.93
Less distributions:
From net investment income (0.60) (0.61) (0.61) (0.61) (0.63)
Total distributions (0.60) (0.61) (0.61) (0.61) (0.63)
Net asset value, end of year $ 10.00 $ 10.21 $ 10.06 $ 10.38 $ 9.90
Total return(a) 3.83% 7.90% 2.70% 11.34% 9.98%
Ratios to average net assets:
Actual net of waivers and reimbursements:
Expenses(b) 0.79% 0.89% 0.91% 0.92% 0.83%
Net investment income 5.76% 6.08% 5.80% 6.07% 6.47%
Assuming credits and no waivers or
reimbursements:
Expenses 1.13% 1.29% 1.17% 1.32% 1.31%
Net investment income 5.42% 5.68% 5.55% 5.67% 5.99%
Net assets at end of year (000's) $44,392 $42,600 $42,226 $40,705 $36,917
Portfolio turnover rate 64.54% 49.86% 20.70% 22.69% 41.33%
</TABLE>
(a) The total returns shown do not include the effect of applicable front-end
sales charge.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 0.77%; prior year numbers have not
been restated to reflect these credits.
12 F-272 Pennsylvania
<PAGE>
[LOGO OF SHIP ART] Selected data for each share of beneficial
Financial Highlights interest outstanding throughout the period.
................................................................................
<TABLE>
<CAPTION>
Period From
Year Ended Year Ended February 2, 1994 to
Class C May 31, 1996 May 31, 1995 May 31, 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.21 $10.06 $ 10.71
Income from investment operations:
Net investment income 0.53 0.54 0.16
Net realized and unrealized gain
(loss) on securities (0.21) 0.16 (0.64)
Total from investment operations 0.32 0.70 (0.48)
Less distributions:
From net investment income (0.54) (0.55) (0.17)
Total distributions (0.54) (0.55) (0.17)
Net asset value, end of period $ 9.99 $10.21 $ 10.06
Total return/(a)/ 3.16% 7.31% (13.46%)
Ratios to average net assets
(annualized where appropriate):
Actual net of waivers and reimbursements:
Expenses/(b)/ 1.34% 1.39% 1.41%
Net investment income 5.19% 5.50% 4.91%
Assuming credits and no
waivers or reimbursements:
Expenses 1.68% 1.84% 1.68%
Net investment income 4.85% 5.05% 4.64%
Net assets at end of period (000's) $4,442 $3,118 $ 1,697
Portfolio turnover rate 64.54% 49.86% 20.70%
</TABLE>
(a) The total returns shown do not include the effect of applicable contingent
deferred sales charge and are annualized where appropriate.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 1.32%; prior period numbers have not
been restated to reflect these credits.
Pennsylvania F-273 13
<PAGE>
[LOGO OF SHIP ART]
Independent Auditors' Report
...............................................................................
TO THE SHAREHOLDERS AND TRUSTEES
FLAGSHIP PENNSYLVANIA
TRIPLE TAX EXEMPT FUND
We have audited the accompanying statement of assets and liabilities, including
the statement of investments in securities and net assets, of the Flagship
Pennsylvania Triple Tax Exempt Fund as of May 31, 1996, the related statement of
operations for the year then ended, and the statements of changes in net assets
and the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the Fund's custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Flagship
Pennsylvania Triple Tax Exempt Fund at May 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
July 3, 1996
14 F-274 Pennsylvania
<PAGE>
LOGO OF SHIP ART
Statement of Investments in Securities and Net Assets May 31, 1996
- --------------------------------------------------------------------------------
Municipal Bonds
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
--------------------------------------------------------------------------------------------------------------------------
Education
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500 Hampton Roads, VA Medical College Revenue - Series 1991A 6.875% 11/15/16 $ 531,830
500 Loudoun County, VA Industrial Development Authority -
George Washington University 6.250 05/15/12 506,535
1,225 Loudoun County, VA Industrial Development Authority -
George Washington University 6.250 05/15/22 1,234,102
1,250 Rockingham County, VA Industrial Development Authority Revenue -
Bridgewater College - Series 1993 6.000 10/01/23 1,143,738
2,000 University of Virginia - Rector and Visitors General Pledge - Series 1993B 5.375 06/01/20 1,866,120
750 Virginia College Building Authority Educational Facilities Revenue -
Washington and Lee University - Series 1992 6.400 01/01/12 779,108
2,000 Virginia College Building Authority Educational Facilities Revenue -
Roanoke College - Series 1992 6.625 10/15/12 2,026,040
3,250 Virginia College Building Authority Educational Facilities Revenue -
Hampton University - Series 1993 5.750 04/01/14 3,089,840
775 Winchester, VA Industrial Development Authority Educational Facilities
Revenue - Shenandoah University - Series 1994 6.750 10/01/19 819,198
1,800 Winchester, VA Industrial Development Authority Educational Facilities
Revenue - Shenandoah University - Series 1994 6.700 10/01/14 1,894,373
Health Care
--------------------------------------------------------------------------------------------------------------------------
715 Albemarle County, VA Industrial Development Authority - First Mortgage
Revenue 8.900 07/15/26 792,370
500 Front Royal & Warren County, VA Industrial Development Authority Revenue -
Heritage Hall 9.450 07/15/24 555,500
1,195 Henrico County, VA Industrial Development Authority - Nursing Facility -
Cambridge Manor Nursing Home - Series 1993 5.875 07/01/19 1,125,272
3,500 Norfolk, VA Industrial Development Authority Revenue - James Barry-
Robinson Institute Project 7.700 10/01/06 3,623,375
400 Richmond, VA Industrial Development Authority Revenue -
Richmond Metropolitan Blood Service 7.125 02/01/11 418,004
Hospitals
--------------------------------------------------------------------------------------------------------------------------
1,125 Albemarle County, VA Industrial Development Authority Revenue -
University of Virginia Health Services Foundation - Series 1992 6.500 10/01/22 1,143,664
1,000 Alexandria, VA Industrial Development Authority - Alexandria Community
Healthcare - Series 1993B 5.500 07/01/14 948,390
1,185 Buena Vista, VA Industrial Development Authority - Stonewall Jackson Hospital 8.375 11/01/14 1,241,738
2,000 Fairfax County, VA Industrial Development Authority - Health Care Revenue -
Inova Health System Project - Series 1996 6.000 08/15/26 1,951,320
2,000 Hanover County, VA Industrial Development Authority Hospital Revenue -
Memorial Regional Medical Center - Series 1995 6.375 08/15/18 2,150,180
2,000 Hanover County, VA Industrial Development Authority Hospital Revenue -
Bon Secours Health System - Series 1995 5.500 08/15/25 1,862,780
1,000 Harrisonburg, VA Industrial Development Authority Hospital Revenue -
Rockingham Memorial Hospital - Series 1993 5.250 12/01/22 885,430
2,000 Loudoun County, VA Industrial Development Authority Revenue -
Loudoun Hospital Center - Series 1995 5.800 06/01/20 1,946,980
</TABLE>
4 F-297 Virginia
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
-------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 250 Martinsville, VA Industrial Development Authority Hospital Facility Revenue -
Memorial Hospital Martinsville and Henry 7.000% 01/01/11 $ 261,090
1,150 Norfolk, VA Industrial Development Authority Revenue - Children's Hospital
of The King's Daughters - Series 1991 6.500 06/01/21 1,187,110
2,000 Peninsula Ports Authority Revenue-Virginia Hospital Facility -
Mary Immaculate Hospital - Series 1994 7.000 08/01/17 2,050,880
2,000 Prince William County, VA Industrial Development Authority Revenue -
Hospital Facility - Potomac Hospital - Series 1995 6.850 10/01/25 2,096,180
2,000 Roanoke, VA Industrial Development Authority Hospital Revenue -
Roanoke Memorial Hospital - Community Hospital of Roanoke Valley Franklin
Memorial Hospital - Saint Albans Psychiatric Hospital - Series 5.000 07/01/24 1,725,100
Housing/Multifamily
--------------------------------------------------------------------------------------------------------------------------
1,750 Alexandria, VA Redevelopment and Housing Authority - Arha Apartments 8.600 07/20/29 1,824,235
2,475 Harrisonburg, VA Redevelopment and Housing Authority - Multifamily
Housing Revenue - United Dominion - Series 1992 7.100 12/01/15 2,562,664
1,750 Harrisonburg, VA Redevelopment and Housing Authority - Multifamily
Housing Revenue - United Dominion - Series 1992 7.000 12/01/08 1,828,505
2,000 Newport News, VA Redevelopment and Housing Authority - Mortgage Revenue -
Berkley West Apartments - Series 1992A 6.550 07/01/24 2,035,080
1,500 Richmond, VA Redevelopment and Housing Authority Revenue - Old Manchester -
Series 1994 6.800 03/01/15 1,567,275
700 Virginia State Housing Development Authority Revenue - Multifamily -
Series 1991 F 7.000 05/01/04 745,703
Housing/Single Family
--------------------------------------------------------------------------------------------------------------------------
490 Commonwealth of Puerto Rico Housing Authority - Single Family - Series B 7.650 10/15/22 512,476
200 Virginia State Housing Development Authority - Commonwealth Mortgage -
Series 1989 D 7.500 07/01/17 208,230
1,000 Virginia State Housing Development Authority - Commonwealth Mortgage -
Series 1992 A 7.100 01/01/22 1,051,870
3,000 Virginia State Housing Development Authority - Commonwealth Mortgage -
Series 1992 A 7.100 01/01/17 3,161,160
Industrial Development and Pollution Control
--------------------------------------------------------------------------------------------------------------------------
2,000 Covington-Alleghany County, VA Industrial Development Authority Revenue -
Pollution Control Facilities - Westvaco Corporation - Series 1994 6.650 09/01/18 2,095,100
2,000 Henrico County, VA Industrial Development Authority - Solid Waste Disposal
Revenue - Browning-Ferris Industries of South Atlantic, Incorporated -
Series 1996 A 5.450 01/01/14 1,893,440
3,545 Isle of Wight County, VA Industrial Development Authority - Solid Waste
Disposal Facilities - Union Camp - Series 1994 6.550 04/01/24 3,650,180
300 Loudoun County, VA Industrial Development Authority - Air Cargo Facility
Revenue - Washington Dulles - Series 1992 6.625 01/01/00 305,655
3,000 Loudoun County, VA Industrial Development Authority - Air Cargo Facility
Revenue - Washington Dulles - Series 1992 7.000 01/01/09 3,038,310
2,500 Mecklenburg County, VA Industrial Development Authority Revenue -
Mecklenburg Cogeneration 7.350 05/01/08 2,645,600
</TABLE>
Virginia F-298 5
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$2,000 Puerto Rico Ports Authority - Special Facilities Revenue -
American Airlines, Incorporated Project - Series 1996 A 6.250% 06/01/26 $1,957,600
1,000 Russell County, VA Industrial Development Authority Pollution Control Revenue -
Appalachian Power Company 7.700 11/01/07 1,087,260
Municipal Appropriation Obligations
----------------------------------------------------------------------------------------------------------------------------
2,300 Big Stone Gap, VA Redevelopment and Housing Authority -
Correctional Facility Lease Revenue - Wallens Ridge Development - Series 1995 5.500 09/01/15 2,172,028
1,435 Fairfax County, VA Redevelopment and Housing Authority Revenue -
Office Building - Series 1992 A 7.500 06/15/18 1,483,101
2,000 Henrico County, VA Industrial Development Authority Revenue -
Henrico County Regional Jail - Series 1994 7.000 08/01/13 2,228,640
750 Loudoun County, VA Certificates of Participation 7.200 10/01/10 869,535
2,000 Virginia State Transportation Board - U.S. Route 58 Corridor Development
Program - Series 1993B 5.500 05/15/18 1,892,760
Municipal Revenue/Transportation
----------------------------------------------------------------------------------------------------------------------------
1,500 Peninsula Airport Commission - Virginia Airport Improvement Revenue -
Series 1991 7.300 07/15/21 1,627,680
Municipal Revenue/Utility
----------------------------------------------------------------------------------------------------------------------------
2,110 Halifax County, VA Industrial Development
Revenue - Old Dominion Electric Cooperative - Series 1992 6.500 12/01/12 2,170,684
1,865 Commonwealth of Puerto Rico Electric Power Authority - Series O 0.000 07/01/17 525,072
1,000 Commonwealth of Puerto Rico Electric Power Authority - Series 1992 R 6.250 07/01/17 1,007,490
2,000 Commonwealth of Puerto Rico Electric Power Authority Revenue - Series 1995 Z 5.500 07/01/16 1,864,200
Municipal Revenue/Water & Sewer
----------------------------------------------------------------------------------------------------------------------------
1,000 Blacksburg, VA Polytechnic Institute Sanitation Authority - Sewer System
Revenue - Series 1992 6.250 11/01/12 1,007,730
1,000 Fairfax County, VA Water Authority Revenue - Series 1992 6.000 04/01/22 990,830
1,000 Frederick-Winchester Service Authority, VA Regional Sewer System Revenue -
Series 1993 5.750 10/01/15 972,640
750 Henry County, VA Public Service Authority Water and Sewer Revenue 6.250 11/15/19 763,095
2,215 Upper Occoquan, VA Sewage Authority Revenue - Regional Sewerage System -
Series 1995 A and B 5.150 07/01/20 2,005,350
1,000 Virginia State Resource Authority - Sewer System Revenue - Harrisonburg-
Rockingham - Series 1992 A 6.000 05/01/22 965,570
1,000 Virginia Resources Authority - Water and Sewer System Revenue -
Sussex County Project - Series 1995 A 5.600 10/01/25 926,880
500 Virginia Resources Authority - Water and Sewer System Revenue - Lot 7 7.125 10/01/16 534,955
1,500 Virginia State Resource Authority - Water and Sewer System Revenue - Lot 9 -
Frederick County Sanitation 6.000 10/01/12 1,473,840
1,500 Virginia Resources Authority - Water and Sewer System Revenue - Series 1992A 6.125 04/01/19 1,482,585
</TABLE>
6 F-299 Virginia
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Non-State General Obligations
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 730 Danville, VA General Improvement Revenue 6.500% 05/01/12 $ 764,901
1,500 Portsmouth, VA Public Utility General Obligation - Series 1993 5.500 08/01/19 1,419,180
1,000 Richmond, VA General Obligation - Public Improvement Revenue - Series 1995 B 5.000 01/15/21 874,460
1,000 Virginia Public School Authority - School Financing - Series 1994 A 6.200 08/01/13 1,034,180
1,000 Virginia Public School Authority - School Financing - Series 1995 B 5.750 08/01/15 986,210
1,210 Virginia Public School Authority - School Financing - Series 1995 B 5.625 08/01/16 1,175,116
Pre-refunded or Escrowed
--------------------------------------------------------------------------------------------------------------------------
500 Fairfax County, VA Redevelopment and Housing Authority Revenue -
Vinson Pravalion - Series A 7.500 11/01/19 555,070
100 Commonwealth of Puerto Rico Public Building Authority Guaranteed Public
Education and Health Facilities - Series G 7.875 07/01/16 106,367
200 Commonwealth of Puerto Rico Electric Power Authority - Series K 9.375 07/01/17 215,806
500 Strasburg, VA General Obligation 7.875 03/01/19 519,650
1,000 Virginia College Building Authority Educational Facilities Revenue -
Hampton University - Series A 7.750 04/01/14 1,100,840
3,000 Virginia State Public Building Authority Revenue - Series 1994 A 6.250 08/01/15 3,251,910
105 Virginia Resources Authority - Water and Sewer System Revenue -
Pooled Loan Program - Series A 8.125 11/01/16 112,955
110 Virginia Resources Authority - Water and Sewer System Revenue -
Pooled Loan Program - Series A 8.125 11/01/16 120,534
120 Virginia Resources Authority - Water and Sewer System Revenue -
Pooled Loan Program - Series A 8.125 11/01/16 133,307
130 Virginia Resources Authority - Water and Sewer System Revenue -
Pooled Loan Program - Series A 8.125 11/01/16 147,399
140 Virginia Resources Authority - Water and Sewer System Revenue -
Pooled Loan Program - Series A 8.125 11/01/16 161,748
275 Virginia Resources Authority - Water and Sewer System Revenue -
Pooled Loan Program - Series 1986 A 7.600 11/01/16 296,994
305 Virginia Resources Authority - Water and Sewer System Revenue -
Pooled Loan Program - Series 1986 A 7.600 11/01/16 329,394
410 Virginia Resources Authority - Water and Sewer System Revenue -
Pooled Loan Program - Series 1986 A 7.650 11/01/16 454,665
Resource Recovery
--------------------------------------------------------------------------------------------------------------------------
2,000 Roanoke, VA Valley Resource Authority - Solid Waste System Revenue -
Series 1992 5.750 09/01/12 1,932,240
1,000 Virginia State Resource Authority Solid Waste Disposal System Revenue -
Series 1992 B 6.750 11/01/12 1,055,210
</TABLE>
Virginia F-300 7
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
State/Territorial General Obligations
---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 4,250 Commonwealth of Puerto Rico Public Improvement - General Obligation -
Series 1996 A 5.400% 07/01/25 $ 3,831,078
2,575 Commonwealth of Puerto Rico - General Obligation - Series 1994 6.450 07/01/17 2,651,735
2,500 Commonwealth of Puerto Rico - General Obligation - Series 1994 6.500 07/01/23 2,583,825
2,000 Commonwealth of Puerto Rico Aqueduct and Sewer Authority Revenue -
Series 1995 5.000 07/01/15 1,757,920
Total Investments in Securities - Municipal Bonds (cost $123,450,281) - 98.4% 126,563,949
Excess of Other Assets over Liabilities - 1.6% 2,091,384
Total Net Assets - 100.0% $128,655,333
</TABLE>
See notes to financial statements.
8 F-301 Virginia
<PAGE>
[LOGO OF SHIP ART]
Statement of Assets and Liabilities May 31, 1996
...............................................................................
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $123,450,281) $126,563,949
Cash 484,558
Receivable for Fund shares sold 329,136
Interest receivable 2,338,380
Other 7,259
Total assets 129,723,282
LIABILITIES:
Payable for Fund shares reacquired 354,710
Distributions payable 590,897
Accrued expenses 122,342
Total liabilities 1,067,949
NET ASSETS 128,655,333
Class A:
Applicable to 11,320,384 shares of beneficial interest
issued and outstanding $117,677,212
Net asset value per share $ 10.40
Class C:
Applicable to 1,056,634 shares of beneficial interest issued and
outstanding $ 10,978,121
Net asset value per share $ 10.39
</TABLE>
[LOGO OF SHIP ART]
Statement of Operations For the year ended May 31, 1996
................................................................................
<TABLE>
<S> <C>
INVESTMENT INCOME - INTEREST $ 7,751,940
EXPENSES:
Distribution fees - Class A (Note E) 464,378
Distribution fees - Class C (Note E) 75,853
Investment advisory fees (Note E) 622,309
Custody and accounting fees 99,226
Transfer agent's fees 83,650
Registration fees 4,628
Legal fees 3,313
Audit fees 15,738
Trustees' fees 3,415
Shareholder services fees (Note E) 12,078
Other 3,910
Advisory fees waived (Note E) (312,111)
Total expenses before credits 1,076,387
Custodian fee credit (Note B) (34,171)
Net expenses 1,042,216
Net investment income 6,709,724
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security transactions 1,352,908
Change in unrealized appreciation (depreciation) of
investments (3,368,259)
Net loss on investments (2,015,351)
Net increase in net assets resulting from operations $ 4,694,373
</TABLE>
See notes to financial statements.
Virginia F-302 9
<PAGE>
[LOGO OF SHIP ART]
Statements of Changes in Net Assets
................................................................................
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
INCREASE (DECREASE) IN NET ASSETS
Operations:
<S> <C> <C>
Net investment income $ 6,709,724 $ 6,511,077
Net realized gain (loss) on security transactions 1,352,908 (2,300,229)
Change in unrealized appreciation (depreciation) of investments (3,368,259) 4,479,267
Net increase in net assets resulting from operations 4,694,373 8,690,115
Distributions to Class A shareholders:
From net investment income (6,371,930) (6,193,219)
Distributions to Class C shareholders:
From net investment income (393,250) (290,174)
Net decrease in net assets from distributions to shareholders (6,765,180) (6,483,393)
Fund share transactions (Note C):
Proceeds from shares sold 19,415,807 15,736,060
Net asset value of shares issued in reinvestment of distributions 3,681,025 3,679,719
Cost of shares reacquired (11,550,452) (14,703,916)
Net increase in net assets from Fund share transactions 11,546,380 4,711,863
Total increase in net assets 9,475,573 6,918,585
NET ASSETS:
Beginning of year 119,179,760 112,261,175
End of year $128,655,333 $119,179,760
NET ASSETS CONSIST OF:
Paid-in surplus $126,593,242 $115,074,634
Undistributed net investment income 27,684
Accumulated net realized gain (loss) on security transactions (1,051,577) (2,404,485)
Unrealized appreciation (depreciation) of investments 3,113,668 6,481,927
$128,655,333 $119,179,760
</TABLE>
See notes to financial statements.
10 F-303 Virginia
<PAGE>
[LOGO OF SHIP ART]
Notes to Financial Statements
................................................................................
A. Description of Business
The Flagship Virginia Double Tax Exempt Fund (Fund) is a sub-trust of the
Flagship Tax Exempt Funds Trust (Trust), a Massachusetts business trust
organized on March 8, 1985. The Fund is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund commenced investment operations on March 27, 1986. On
October 4, 1993, the Fund began to offer Class C shares to the investing
public. Class A shares are sold with a front-end sales charge. Class C shares
are sold with no front-end sales charge but are assessed a contingent
deferred sales charge if redeemed within one year from the time of purchase.
Both classes of shares have identical rights and privileges except with
respect to the effect of sales charges, the distribution and/or service fees
borne by each class, expenses specific to each class, voting rights on
matters affecting a single class and the exchange privilege of each class.
Shares of beneficial interest in the Fund, which are registered under the
Securities Act of 1933, as amended, are offered to the public on a continuous
basis.
B. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund.
Estimates: The preparation of financial statements and daily calculation of
net asset value in conformity with generally accepted accounting principles
requires management to fairly value, at market, investment securities and
make estimates and assumptions regarding the reported amounts of assets and
liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. The financial
statements reflect these inherent valuations, estimates and assumptions, and
actual results could differ.
Security Valuations: Portfolio securities for which market quotations are
readily available are valued on the basis of prices provided by a pricing
service which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities
and various relationships between securities in determining the values. If
market quotations are not readily available from such pricing service,
securities are valued at fair value as determined under procedures
established by the Trustees. Short-term securities are stated at amortized
cost, which is equivalent to fair value.
The Fund must maintain a diversified investment portfolio as a registered
investment company, however, the Fund's investments are primarily in the
securities of its state. Such concentration subjects the Fund to the effects
of economic changes occurring within that state.
Federal Income Taxes: It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute to its shareholders all of its tax exempt net investment income
and net realized gains on security transactions. Therefore, no federal income
tax provision is required.
Distributions from net realized capital gains may differ for financial
statement and tax purposes primarily due to the treatment of wash sales and
post-October capital losses. The effect on dividend distributions of certain
book-to-tax timing differences is presented as excess distributions in the
statement of changes in net assets.
Security Transactions: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses
on security transactions are determined on the identified cost basis.
Interest income is recorded on the accrual basis. The Fund amortizes original
issue discounts and premiums paid on purchases of portfolio securities on the
same basis for both financial reporting and tax purposes. Market discounts,
if applicable, are recognized as ordinary income upon disposition or
maturity.
Investment Income, Expenses and Distributions: Interest income and estimated
expenses are accrued daily. Daily dividends are declared from net investment
income and paid monthly. Net realized gains from security transactions, to
the extent they exceed available capital loss carryforwards, are distributed
to shareholders at least annually.
Virginia F-304 11
<PAGE>
Notes to Financial Statements
................................................................................
Expense Allocation: Shared expenses incurred by the Trust are allocated among
the sub-trusts based on each sub-trust's ratio of net assets to the combined
net assets. Specifically identified direct expenses are charged to each sub-
trust as incurred. Fund expenses not specific to any class of shares are
prorated among the classes based upon the eligible net assets of each class.
Specifically identified direct expenses of each class are charged to that
class as incurred.
The Fund has entered into an agreement with the custodian, whereby it earns
custodian fee credits for temporary cash balances. These credits, which
offset custodian fees that may be charged to the Fund, are based on 80% of
the daily effective federal funds rate.
Securities Purchased on a "When-issued" Basis: The Fund may, upon adequate
segregation of securities as collateral, purchase and sell portfolio
securities on a "when-issued" basis. These securities are registered by a
municipality or government agency, but have not been issued to the public.
Delivery and payment take place after the date of the transaction and such
securities are subject to market fluctuations during this period. The current
market value of these securities is determined in the same manner as other
portfolio securities. There were no "when-issued" purchase commitments
included in the statement of investments at May 31, 1996.
C. Fund Shares
At May 31, 1996, there were an indefinite number of shares of beneficial
interest with no par value authorized for each class. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
---------------------- ----------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Class A:
Shares sold 1,315,390 $ 13,890,308 1,189,750 $ 12,128,107
Shares issued on reinvestment 328,665 3,474,566 344,907 3,497,701
Shares reacquired (989,759) (10,468,801) (1,243,117) (12,549,022)
Net increase 654,296 $ 6,896,073 291,540 $ 3,076,786
Class C:
Shares sold 521,385 $ 5,525,499 355,128 $ 3,607,953
Shares issued on reinvestment 19,541 206,459 17,948 182,018
Shares reacquired (103,572) (1,081,651) (213,209) (2,154,894)
Net increase 437,354 $ 4,650,307 159,867 $ 1,635,077
</TABLE>
D. Purchases and Sales of Municipal Bonds
Purchases and sales of municipal bonds for the year ended May 31, 1996,
aggregated $33,221,244 and $21,355,355, respectively. At May 31, 1996, cost
for federal income tax purposes is $123,506,356 and net unrealized
appreciation aggregated $3,057,593, of which $4,252,146 related to
appreciated securities and $1,194,553 related to depreciated securities.
At May 31, 1996, the Fund has available a capital loss carryforward of
approximately $995,600 to offset future net capital gains expiring on May 31,
2003.
12 F-305 Virginia
<PAGE>
Notes to Financial Statements
................................................................................
E. Transactions with Investment Advisor and Distributor
Flagship Financial Inc. (Advisor), under the terms of an agreement which
provides for furnishing of investment advice, office space and facilities to
the Fund, receives fees computed monthly on the average daily net assets of
the Fund at an annualized rate of 1/2 of 1%. During the year ended May 31,
1996, the Advisor, at its discretion, permanently waived $312,111 of its
advisory fees. Included in accrued expenses at May 31, 1996 are accrued
advisory fees of $27,204. Also, under an agreement with the Fund, the Advisor
may subsidize certain expenses excluding advisory and distribution fees.
The Fund has a Distribution Agreement with Flagship Funds Inc.
(Distributor). The Distributor serves as the exclusive selling agent and
distributor of the Fund's Class A and Class C shares and in that capacity is
responsible for all sales and promotional efforts including printing of
prospectuses and reports used for sales purposes. Pursuant to Rule 12b-1
under the Investment Company Act of 1940, the Fund has adopted a plan to
reimburse the Distributor for its actual expenses incurred in the
distribution and promotion of all classes of the Fund's shares. The maximum
amount payable for these expenses on an annual basis is .40% and .95% of the
Fund's average daily net assets for Class A and Class C shares,
respectively. Included in accrued expenses at May 31, 1996 are accrued
distribution fees of $39,897 and $8,620 for Class A and Class C shares,
respectively. Certain non-promotional expenses directly attributable to
current shareholders are aggregated by the Distributor and passed through to
the Fund as shareholder services fees.
In its capacity as national wholesale underwriter for the shares of the
Fund, the Distributor received commissions on sales of the Fund's Class A
shares of approximately $311,100 for the year ended May 31, 1996, of which
approximately $285,200 was paid to other dealers. For the year ended May 31,
1996, the Distributor received approximately $1,700 of contingent deferred
sales charges on redemptions of shares. Certain officers and trustees of the
Trust are also officers and/or directors of the Distributor and/or Advisor.
F. Line of Credit
The Trust participates in a line of credit in which a maximum amount of $30
million is provided by State Street Bank & Trust Co. The Fund may temporarily
borrow up to $6 million under the line of credit. Borrowings are
collateralized with pledged securities and are due on demand with interest at
1% above the federal funds rate. The average daily amount of borrowings under
the line of credit during the year ended May 31, 1996 was approximately
$98,900, at a weighted average annualized interest rate of 6.65%. At May 31,
1996, the Fund had no borrowings outstanding under the line of credit.
Virginia F-306 13
<PAGE>
[LOGO OF SHIP ART]
Financial Highlights Selected data for each share of beneficial
interest outstanding throughout the year.
................................................................................
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A May 31, 1996 May 31, 1995 May 31, 1994 May 31, 1993 May 31, 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.56 $ 10.36 $ 10.82 $ 10.24 $ 9.97
Income from investment operations:
Net investment income 0.57 0.59 0.60 0.62 0.63
Net realized and unrealized gain (loss) on
securities (0.15) 0.20 (0.31) 0.62 0.27
Total from investment operations 0.42 0.79 0.29 1.24 0.90
Less distributions:
From net investment income (0.58) (0.59) (0.60) (0.62) (0.63)
From net realized capital gains (0.11) (0.04)
In excess of net realized capital gains (0.04)
Total distributions (0.58) (0.59) (0.75) (0.66) (0.63)
Net asset value, end of year $ 10.40 $ 10.56 $ 10.36 $ 10.82 $ 10.24
Total return/(a)/ 4.03% 7.99% 2.62% 12.41% 9.37%
Ratios to average net assets:
Actual net of waivers and reimbursements:
Expenses/(b)/ 0.83% 0.79% 0.64% 0.68% 0.75%
Net investment income 5.41% 5.81% 5.53% 5.82% 6.28%
Assuming credits and no waivers or
reimbursements:
Expenses 1.06% 1.10% 1.06% 1.07% 1.14%
Net investment income 5.18% 5.50% 5.11% 5.43% 5.89%
Net assets at end of year (000's) $117,677 $112,643 $107,502 $96,105 $64,628
Portfolio turnover rate 17.47% 50.17% 17.37% 30.33% 26.59%
</TABLE>
(a) The total returns shown do not include the effect of applicable front-end
sales charge.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 0.80%; prior year numbers have not
been restated to reflect these credits.
14 F-307 Virginia
<PAGE>
[LOGO OF SHIP ART]
Financial Highlights Selected data for each share of beneficial
interest outstanding throughout the period.
................................................................................
<TABLE>
<CAPTION>
Period From
Year Ended Year Ended October 4, 1993 to
Class C May 31, 1996 May 31, 1995 May 31, 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.56 $10.36 $11.24
Income from investment operations:
Net investment income 0.51 0.53 0.34
Net realized and unrealized gain
(loss) on securities (0.16) 0.20 (0.78)
Total from investment operations 0.35 0.73 (0.44)
Less distributions:
From net investment income (0.52) (0.53) (0.34)
From net realized capital gains (0.07)
In excess of net realized capital gains (0.03)
Total distributions (0.52) (0.53) (0.44)
Net asset value, end of period $10.39 $10.56 $10.36
Total return/(a)/ 3.37% 7.40% (7.13%)
Ratios to average net assets
(annualized where appropriate):
Actual net of waivers and
reimbursements:
Expenses/(b)/ 1.38% 1.34% 1.14%
Net investment income 4.84% 5.24% 4.85%
Assuming credits and no
waivers or reimbursements:
Expenses 1.60% 1.65% 1.79%
Net investment income 4.62% 4.93% 4.20%
Net assets at end of period (000's) $10,978 $6,537 $4,759
Portfolio turnover rate 17.47% 50.17% 17.37%
</TABLE>
(a) The total returns shown do not include the effect of applicable contingent
deferred sales charge and are annualized where appropriate.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 1.35%; prior period numbers have not
been restated to reflect these credits.
Virginia F-308 15
<PAGE>
[LOGO OF SHIP ART] Independent Auditors' Report
................................................................................
TO THE SHAREHOLDERS AND TRUSTEES
FLAGSHIP VIRGINIA
DOUBLE TAX EXEMPT FUND
We have audited the accompanying statement of assets and liabilities,
including the statement of investments in securities and net assets, of the
Flagship Virginia Double Tax Exempt Fund as of May 31, 1996, the related
statement of operations for the year then ended, and the statements of changes
in net assets and the financial highlights for each of the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the Fund's custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the Flagship
Virginia Double Tax Exempt Fund at May 31, 1996, the results of its operations,
the changes in its net assets and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
July 3, 1996
16 F-309 Virginia
<PAGE>
[LOGO] Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds--Florida Intermediate
<TABLE>
<CAPTION>
FACE
AMOUNT FACE MARKET
(000) DESCRIPTION RATE MATURITY VALUE
<C> <S> <C> <C> <C>
Health Care
--------------------------------------------------------------------------------------------------------------------------
$ 200 Sarasota County, FL Health Facilities Authority Revenue - Sunnyside
Properties Project - Series 1995 5.500% 05/15/05 $ 187,736
Hospitals
--------------------------------------------------------------------------------------------------------------------------
200 Alachua County, FL Health Facilities Authority Revenue - Shands Teaching
Hospital and Clinics, Incorporated Project - Series 1996 A 5.300 12/01/08 197,234
200 Leesburg, FL Hospital Revenue - Leesburg Regional Medical Center
Project - Series 1996 A 5.600 07/01/08 195,126
500 Orange County, FL Health Facilities Authority Revenue - Adventist Health
System/Sunbelt - Series 1995 5.750 11/15/04 523,480
Housing/Single Family
--------------------------------------------------------------------------------------------------------------------------
180 Florida Housing Finance Agency - Single Family Mortgage Revenue -
Series 1995 A 6.000 01/01/04 182,614
Industrial Developement and Pollution Control
--------------------------------------------------------------------------------------------------------------------------
200 Escambia County, FL Pollution Control Revenue - Champion International
Corporation - Series 1992 6.950 11/01/07 210,578
Municipal Appropriation Obligations
--------------------------------------------------------------------------------------------------------------------------
100 Dade County, FL School Board - Certificates of Participation - Series 1994 A 5.375 05/01/04 101,703
290 Levy County, FL School Board - Certificates of Participation - Series 1995 5.500 07/01/06 290,429
Municipal Revenue/Other
--------------------------------------------------------------------------------------------------------------------------
225 * Gulf Breeze, FL Local Government Loan Program Floating Rate Demand
Revenue - Series 1985 B 5.600 12/01/07 227,282
250 Miami Beach, FL Parking Revenue - Series 1996 A 4.800 09/01/08 231,500
Municipal Revenue/Transportation
--------------------------------------------------------------------------------------------------------------------------
350 Dade County, FL Aviation Facilities Revenue - Series 1994 A 6.250 10/01/02 375,235
100 Palm Beach County, FL Airport System Revenue 7.625 10/01/04 113,331
200 Sarasota Manatee, FL Airport Authority - Airport System Revenue - Series 1996 5.250 08/01/08 196,634
Municipal Revenue/Utility
--------------------------------------------------------------------------------------------------------------------------
250 Plant City, FL Utility System Revenue - Series 1995 5.400 10/01/06 253,992
Municipal Revenue/Water & Sewer
--------------------------------------------------------------------------------------------------------------------------
140 Auburndale, FL Water and Sewer Revenue - Series 1995 5.100 12/01/05 139,791
485 Auburndale, FL Water and Sewer Revenue - Series 1995 5.375 12/01/08 482,604
250 Lee County, FL Industrial Development Authority - Utility System Revenue -
Bonita Springs Utilities Project - Series 1996 5.450 11/01/07 250,302
100 Port Saint Lucie, FL Utility System Revenue - Series 1994 5.500 09/01/04 103,201
</TABLE>
Florida F-59 5
<PAGE>
[LOGO] Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
MUNICIPAL BONDS--FLORIDA INTERMEDIATE (CONTINUED)
<TABLE>
<CAPTION>
FACE
AMOUNT FACE MARKET
(000) DESCRIPTION RATE MATURITY VALUE
Non-State General Obligations
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 125 Dade County, FL School District - General Obligation - Series 1995 5.100% 08/01/06 $ 123,819
500 Duval County, FL School District Revenue - General Obligation - Series 1992 6.300 08/01/08 531,050
200 New York City, NY General Obligation - Series 1996 H and I 6.500 03/15/06 205,956
85 Palm Beach County, FL General Obligation - Series 1994 A and B 4.600 07/01/07 79,044
Pre-refunded or Escrowed
--------------------------------------------------------------------------------------------------------------------------
570 Florida State Department of Transportation - Turnpike Revenue - Series 1992 A 6.350 07/01/22 620,063
Special Tax Revenue
--------------------------------------------------------------------------------------------------------------------------
185 Dade County, FL Guaranteed Entitlement Revenue - Series 1995 0.000 02/01/03 131,983
250 Florida State Division Board Finance Department - General Services Revenue - 5.500 07/01/06 255,422
Department of Environmental - Series 1995
100 Gulf County, FL Gas Tax Revenue - Series 1995 5.000 10/01/07 96,553
150 Indian Trace, FL Community Development District - Water Management
Special Benefit - Series 1995 A 5.500 05/01/06 152,979
125 Lynn Haven, FL Special Project Revenue - Series 1996 5.250 10/01/05 122,732
250 Martin County, FL Tropical Farms Water and Sewer Special Assessment District - 5.600 11/01/05 252,720
Series 1995
125 Pembroke Pines, FL Special Assessment Number 94-1 - Series 1995 5.750 11/01/05 123,299
200 Commonwealth of Puerto Rico Highway and Transportation Authority Revenue - 5.200 07/01/03 200,014
Series 1993 X
State/Territorial General Obligations
--------------------------------------------------------------------------------------------------------------------------
225 Florida State Broward County Expressway Authority - Series 1984 9.875 07/01/09 315,691
200 Florida State Board of Education Capital Outlay - Series 1995 5.625 06/01/05 206,920
100 Florida State Board of Education Capital Outlay - Series 1992 A 6.000 06/01/07 103,813
250 Florida State Board of Education Capital Outlay - Series 1993 5.000 06/01/08 240,398
TOTAL INVESTMENTS IN SECURITIES - MUNICIPAL BONDS (COST $7,933,353) - 99.4% 8,025,228
EXCESS OF OTHER ASSETS OVER LIABILITIES - 0.6% 48,500
TOTAL NET ASSETS - 100.0% $8,073,728
*Securities purchased on a "when-issued" basis.
See notes to financial statements.
</TABLE>
6 F-60 Florida
<PAGE>
[LOGO OF SHIP ART] Florida Intermediate
Statement of Assets and Liabilities May 31, 1996
................................................................................
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at market value (cost $7,933,353) $ 8,025,228
Cash 207,258
Receivable for Fund shares sold 11,007
Interest receivable 121,360
Other 188
Total assets 8,365,041
LIABILITIES:
Payable for investments purchased 225,000
Payable for Fund shares reacquired 14,281
Distributions payable 30,967
Accrued expenses 21,065
Total liabilities 291,313
NET ASSETS 8,073,728
Class A:
Applicable to 505,317 shares of beneficial interest issued and outstanding $ 4,994,849
Net asset value per share $ 9.88
Class C:
Applicable to 311,471 shares of beneficial interest issued and outstanding $ 3,078,879
Net asset value per share $ 9.88
</TABLE>
[LOGO of ship art] Florida Intermediate
Statement of Operations For the year ended May 31, 1996
..............................................................................
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME - INTEREST $ 396,965
EXPENSES:
Distribution fees - Class A (Note E) 20,419
Distribution fees - Class C (Note E) 23,475
Investment advisory fees (Note E) 38,041
Custody and accounting fees 33,088
Transfer agent's fees 21,965
Registration fees 106
Legal fees 77
Audit fees 9,045
Trustees' fees 107
Shareholder services fees (Note E) 1,098
Other 338
Advisory fees waived (Note E) (38,041)
Expense subsidy (Note E) (37,757)
Total expenses before credits 71,961
Custodian fee credit (Note B) (6,738)
Net Expenses 65,223
Net investment income 331,742
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions 38,343
Change in unrealized appreciation (depreciation) of investments (149,369)
Net loss on investments (111,026)
Net increase in net assets resulting from operations $ 220,716
</TABLE>
See notes to financial statements.
Florida F-61 7
<PAGE>
[LOGO] Florida Intermediate
Statements of Changes in Net Assets
................................................................................
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS Year Ended Year Ended
Operations: May 31, 1996 May 31, 1995
<S> <C> <C>
Net investment income $ 331,742 $ 177,223
Net realized gain (loss) on security transactions 38,343 12,629
Change in unrealized appreciation (depreciation) of investments (149,369) 251,709
Net increase in net assets resulting from operations 220,716 441,561
Distributions to Class A shareholders:
From net investment income (235,102) (102,108)
From net realized capital gains (22,352)
Distributions to Class C shareholders:
From net investment income (100,151) (50,079)
From net realized capital gains (11,661)
Net decrease in net assets from distributions to shareholders (369,266) (152,187)
Fund share transactions (Note C):
Proceeds from shares sold 5,685,452 4,945,153
Net asset value of shares issued in reinvestment of distributions 185,193 78,950
Cost of shares reacquired (3,310,832) (1,673,701)
Net increase in net assets from Fund share transactions 2,559,813 3,350,402
Total increase in net assets 2,411,263 3,639,776
NET ASSETS:
Beginning of year 5,662,465 2,022,689
End of year $ 8,073,728 $ 5,662,465
NET ASSETS CONSIST OF:
Paid-in surplus $ 7,942,376 $ 5,382,563
Undistributed net investment income 22,780 26,291
Accumulated net realized gain (loss) on security transactions 16,697 12,367
Unrealized appreciation (depreciation) of investments 91,875 241,244
$ 8,073,728 $ 5,662,465
</TABLE>
See notes to financial statements.
8 F-62 Florida
<PAGE>
[LOGO OF SHIP ART]
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds--Florida Double Tax Exempt
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Health Care
-------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$5,500 Cape Coral, FL Health Facilities Authority - First Mortgage Revenue -
Gulf Care, Incorporated - Series 1995 A 6.000% 10/01/25 $5,373,390
540 Sarasota County, FL Health Facilities Authority Revenue - Sunnyside
Properties Project - Series 1995 5.500 05/15/02 525,053
570 Sarasota County, FL Health Facilities Authority Revenue - Sunnyside
Properties Project - Series 1995 5.500 05/15/03 548,021
855 Sarasota County, FL Health Facilities Authority Revenue - Sunnyside
Properties Project - Series 1995 5.500 05/15/01 840,456
600 Sarasota County, FL Health Facilities Authority Revenue - Sunnyside
Properties Project - Series 1995 5.500 05/15/04 569,946
1,000 Sarasota County, FL Health Facilities Authority Revenue - Sunnyside
Properties Project - Series 1995 6.000 05/15/10 930,280
170 Sarasota County, FL Health Facilities Authority Revenue - Sunnyside
Properties Project - Series 1995 5.500 05/15/05 159,576
Hospitals
-------------------------------------------------------------------------------------------------------------------------
2,735 Dade County, FL Health Facilities Authority Revenue - Catholic Health and
Rehabilitation Inc. 7.125 08/15/09 2,901,507
3,000 Jacksonville, FL Health Facilities Authority Hospital Revenue - St. Luke's
Hospital 7.125 11/15/20 3,236,220
6,000 Lakeland, FL Hospital Revenue - Lakeland Regional Medical Center Project -
Series 1996 5.250 11/15/25 5,427,120
2,320 Martin County, FL Health Facilities Authority Hospital Revenue -
Martin Memorial Hospital - Series A 7.125 11/15/04 2,545,063
1,000 Martin County, FL Health Facilities Authority Hospital Revenue -
Martin Memorial Hospital - Series B 7.100 11/15/20 1,086,830
1,330 North Miami, FL Health Facilities Authority Revenue - Bon Secours Health
System - Villa Maria Nursing Center 7.500 09/01/12 1,442,186
2,500 Orange County, FL Health Facilities Authority Revenue - Adventist Health/
Sunbelt - Series 1991 6.875 11/15/15 2,692,325
2,500 Orange County, FL Health Facilities Authority Revenue - Adventist Health/
Sunbelt - Series 1991 6.750 11/15/21 2,665,600
8,895 Orange County, FL Health Facilities Authority Revenue - Adventist Health
System/Sunbelt - Series 1995 5.250 11/15/20 8,023,735
1,000 Orange County, FL Health Facilities Authority Revenue - Adventist Health
System/Sunbelt - Series 1995 5.750 11/15/25 964,270
1,550 Osceola County, FL Industrial Development Authority Revenue -
Evangelical Lutheran Society Project 6.750 05/01/16 1,653,354
1,650 Polk County, FL Industrial Development Authority Revenue - Winter Haven
Hospital - Series 1985-2 6.250 09/01/15 1,688,164
1,000 Saint Johns County, FL Industrial Development Authority - Hospital Revenue -
Flagler Hospital - Series 1992 6.000 08/01/22 929,120
2,000 St. Petersburg, FL Health Facilities Authority Revenue - Allegheny Health
System - St. Anthony's Health Care Center 6.750 12/01/21 2,137,120
1,610 St. Petersburg, FL Health Facilities Authority Revenue - Allegheny Health
System - St. Mary's Hospital 7.000 12/01/21 1,757,621
</TABLE>
Florida F-63 9
<PAGE>
[LOGO OF SHIP ART]
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds--Florida Double Tax Exempt (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
<C> <S> <C> <C> <C>
$ 1,000 Tampa, FL Allegany Health System Revenue - St. Joseph's Hospital, Incorporated -
Series 1991 6.750% 12/01/17 $1,071,510
2,000 Tampa, FL Allegany Health System Revenue - St. Joseph's Hospital - Series 1994 6.500 12/01/23 2,084,980
Housing/Multifamily
--------------------------------------------------------------------------------------------------------------------------
2,700 Duval County, FL Housing Finance Authority - Multifamily Housing Revenue -
Greentree Place - Series 1995 6.750 04/01/25 2,725,056
1,000 Florida Housing Finance Agency - Multifamily Housing Revenue - Antigua Club
Apartments - Series 1995 A1 6.750 08/01/14 1,053,520
1,115 Florida Housing Finance Agency - Multifamily Housing Revenue - Brittany of
Rosemont Apartments - Series 1995 C1 6.875 08/01/26 1,176,537
1,260 Florida Housing Finance Agency Revenue - Vinyards Project - Series 1995 H 6.400 11/01/15 1,246,127
1,660 Florida Housing Finance Agency Revenue - Vinyards Project - Series 1995 H 6.500 11/01/25 1,649,110
Housing/Single Family
--------------------------------------------------------------------------------------------------------------------------
5,425 Broward County, FL Housing Finance Authority Revenue - Single Family -
Series 1985 0.000 04/01/16 686,371
1,995 Broward County, FL Housing Finance Authority Revenue - Single Family -
Series 1990 A 7.900 03/01/23 2,100,675
2,500 Clay County, FL Housing Finance Authority Revenue - Single Family Mortgage -
Series 1995 6.550 03/01/28 2,520,775
290 Dade County, FL Housing Finance Authority - Single Family - Series B 7.750 03/01/17 305,298
630 Dade County, FL Housing Finance Authority - Single Family - Series B 7.250 09/01/23 651,578
1,355 Dade County, FL Housing Finance Authority - Single Family - Series D 6.950 12/15/12 1,422,059
40 Dade County, FL Housing Finance Authority - Single Family - Series E 7.000 03/01/24 41,537
1,000 Dade County, FL Housing Finance Authority - Single Family Mortgage Revenue -
Series 1995 6.700 04/01/28 1,007,460
425 Duval County, FL Housing Finance Authority - Single Family - Series B 7.500 06/01/15 448,447
215 Duval County, FL Housing Finance Authority - Single Family - Series A 7.850 12/01/22 226,468
520 Duval County, FL Housing Finance Authority - Single Family - Series C 7.650 09/01/10 549,453
735 Duval County, FL Housing Finance Authority Revenue - Single Family -
Series 1994 6.550 10/01/15 743,048
1,690 Escambia County, FL Housing Finance Authority - Single Family 7.400 10/01/23 1,761,301
1,425 Florida Housing Finance Agency - Single Family Revenue - Series 1994 6.250 07/01/11 1,443,183
715 Florida Housing Finance Agency - Single Family Mortgage Revenue -
Series 1995 A 6.550 07/01/14 724,910
715 Florida Housing Finance Agency - Single Family Mortgage Revenue -
Series 1995 A 6.650 01/01/24 723,609
1,000 Florida Housing Finance Agency - Homeowner Mortgage Revenue -
Series 1995 2B 5.950 07/01/14 998,840
435 Leon County, FL Housing Finance Authority Revenue - Single Family 7.300 04/01/21 450,751
3,000 Leon County, FL Housing Finance Authority Revenue - Single Family -
Series 1995 7.300 01/01/28 3,229,890
1,330 Orange County, FL Housing Finance Authority Revenue - Series B 8.100 11/01/21 1,408,124
280 Orange County, FL Housing Finance Authority Revenue - Series A 7.600 01/01/24 295,778
1,055 Palm Beach County, FL Housing Finance Authority - Single Family Mortgage
Revenue 7.600 03/01/23 1,111,759
</TABLE>
10 F-64 Florida
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds--Florida Double Tax Exempt (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
<C> <S> <C> <C> <C>
$2,000 Pinellas County, FL Housing Finance Authority Revenue - Single Family -
Series 1995 A 6.650% 08/01/21 $2,019,840
1,160 Polk County, FL Housing Finance Authority - Single Family Revenue - Series A 7.150 09/01/23 1,208,210
Industrial Development and Pollution Control
-----------------------------------------------------------------------------------------------------------------------
3,000 Alliance Airport Authority, Incorporated, TX - Special Facilities Revenue -
Federal Express Corporation Project - Series 1996 6.375 04/01/21 2,911,380
6,000 Citrus County, FL Pollution Control Revenue - Florida Power Corporation -
Crystal River Power Plant - Series 1992A 6.625 01/01/27 6,255,060
750 Clay County, FL Industrial Development Authority Revenue - Cargill Project -
Series 1992 6.400 03/01/11 780,038
5,500 Escambia County, FL Pollution Control Revenue - Champion International
Corporation - Series 1994 6.900 08/01/22 5,704,655
2,500 Hillsborough County, FL Industrial Development Authority Pollution Control
Revenue - Tampa Electric Company 7.875 08/01/21 2,871,400
600 Jacksonville, FL Industrial Development Revenue - Cargill Project - Series 1992 6.400 03/01/11 623,592
2,000 Martin County, FL Pollution Control Revenue - Florida Power and Light Company -
Series 1990 7.300 07/01/20 2,197,460
1,500 Nassau County, FL Pollution Control Revenue - ITT Rayonier Project -
Series 1993 6.200 07/01/15 1,457,475
4,000 Pinellas County, FL Pollution Control Revenue - Florida Power Corporation -
Anclote and Bartow Power Plants 7.200 12/01/14 4,269,240
3,000 St. Lucie County, FL Solid Waste Disposal Revenue - Florida Power and Light
Company 7.150 02/01/23 3,235,740
2,000 St. Lucie County, FL Solid Waste Disposal Revenue - Florida Power and Light
Company - Series 1992 6.700 05/01/27 2,090,920
3,400 Tulsa, OK Municipal Airport Trustees Trust Revenue - AMR Corporation -
Series 1995 6.250 06/01/20 3,320,780
Municipal Appropriation Obligations
-----------------------------------------------------------------------------------------------------------------------
500 Brevard County, FL School Board - Certificates of Participation - Series 1996 A
and B 5.400 07/01/11 489,085
500 Brevard County, FL School Board - Certificates of Participation - Series 1996 A
and B 5.400 07/01/12 486,055
1,100 Brevard County, FL School Board - Certificates of Participation - Series 1996 A
and B 5.500 07/01/21 1,034,495
3,500 Florida State Department of Correctional Privatization Commission - Certificates
of Participation - 350 Bed Youth - Series 1995 5.000 08/01/17 3,106,285
1,500 Florida State Department of Corrections - Certificates of Participation -
Series 1994 6.000 03/01/14 1,514,160
1,000 Palm Beach County, FL School Board - Certificates of Participation - Series 1994A 6.375 08/01/15 1,033,880
5,050 Palm Beach County, FL School Board - Certificates of Participation - Series 1995 A 5.375 08/01/15 4,742,10
Municipal Revenue/Other
-----------------------------------------------------------------------------------------------------------------------
3,105 Gulf Breeze, FL Local Government Loan Program Floating Rate Demand Revenue -
Series 1985 A through E 7.750 12/01/15 3,439,967
1,000 Gulf Breeze, FL Local Government Loan Program Floating Rate Demand Revenue -
Series 1985 B 5.900 12/01/11 1,017,310
5,000 Hernando County, FL Revenue Criminal Justice Complex 7.650 07/01/16 6,143,150
85 Orange County, FL Capital Improvement Revenue - Series A 7.700 10/01/18 92,189
</TABLE>
Florida F-65 11
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds--Florida Double Tax Exempt (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Municipal Revenue/Transportation
-----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$1,000 Dade County, FL Seaport General Obligation - Series 1996 5.125% 10/01/26 $ 878,350
7,585 Dade County, FL Aviation Revenue - Series 1996 A and B 5.600 10/01/26 7,182,995
4,000 Dade County, FL Aviation Revenue - Series 1995 A, B and C 5.750 10/01/25 3,873,080
530 Florida State Department of Transportation - Turnpike Revenue - Series 1992 A 6.350 07/01/22 543,303
4,000* Jacksonville, FL Port Authority - Port Facilities Revenue - Series 1996 5.625 11/01/18 3,770,160
2,475 Palm Beach County, FL Airport System Revenue 7.500 10/01/00 2,729,356
3,000 Sanford Airport Authority, Florida - Industrial Development Revenue Bonds -
(Central Florida Terminals, Inc. Project) - Series 1995 A and B 7.500 05/01/15 2,765,940
3,270 Sanford Airport Authority, Florida - Industrial Development Revenue Bonds -
(Central Florida Terminals, Inc. Project) - Series 1995 A and B 7.750 05/01/21 2,993,848
Municipal Revenue/Utility
-----------------------------------------------------------------------------------------------------------------------
2,000 Escambia County, FL Utilities Authority - System Revenue - Series 1992 B 0.000 01/01/15 666,680
3,000 Jacksonville, FL Electric Authority - St. Johns River Power System Revenue -
Issue 2 - Series 11 5.250 10/01/20 2,671,620
2,000 Key West, FL Utility Board Electric System Revenue - Series 1991 0.000 10/01/14 676,600
2,500 Key West, FL Utility Board Electric System Revenue - Series 1991 0.000 10/01/17 707,425
1,850 Manatee County, FL Public Utilities Revenue - Series 1991 C 0.000 10/01/08 935,027
2,800 Manatee County, FL Public Utilities Revenue - Series 1991 C 0.000 10/01/09 1,320,032
1,000 Orlando, FL Utilities Commission - Water and Electric Revenue - Series 1989 D 6.750 10/01/17 1,116,630
375 Orlando, FL Utilities Commission - Water and Electric Revenue - Series 1989 D 5.000 10/01/23 317,801
6,500 Southern Minnesota Municipal Power Agency - Power Supply System Revenue -
Series 1994 A 0.000 01/01/21 1,477,840
2,570 Sunrise, FL Utility System Revenue - Capital Appreciation - Series 1992 B 0.000 10/01/13 930,186
Municipal Revenue/Water & Sewer
-----------------------------------------------------------------------------------------------------------------------
3,750 Auburndale, FL Water and Sewer Revenue - Series 1995 5.250 12/01/25 3,396,675
2,500 Dade County, FL Water and Sewer System Revenue - Series 1995 5.500 10/01/25 2,341,275
2,250 Hillsborough County, FL Utility Revenue - Series A 6.500 08/01/16 2,334,398
3,500 Hillsborough County, FL Utility Revenue - Series B 6.500 08/01/16 3,631,285
500 Jacksonville, FL District Water and Sewer Revenue - Series 1996 5.000 10/01/20 436,400
3,500 Miami Beach, FL Water and Sewer Revenue - Series 1995 5.375 09/01/15 3,297,560
2,000 Florida Village Center Community Development District - Water and Sewer
Utility Revenue - Series 1993 5.000 11/01/13 1,785,620
Non-State General Obligations
-----------------------------------------------------------------------------------------------------------------------
2,990 Hillsborough County, FL Environmentally Sensitive Lands Acquisition and
Protection Program - Series 1992 6.250 07/01/08 3,085,381
3,000 Mobile, AL General Obligation Warrants - Series 1996 5.000 02/15/16 2,700,540
5,500 New York City, NY General Obligation - Series 1996 F and G 5.750 02/01/19 4,941,750
3,000 New York City, NY General Obligation - Series 1996 H and I 5.875 03/15/18 2,743,710
5,000 Sunrise Lakes, FL Phase 4 Recreation District - General Obligation and Revenue -
Series 1995 A and B 6.750 08/01/24 5,202,300
</TABLE>
12 F-66 Florida
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds -- Florida Double Tax Exempt (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Pre-refunded or Escrowed
------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,925 Boynton Beach, FL Water and Sewer System Utility Revenue - Series 1990 7.400% 11/01/15 $2,167,627
1,500 Broward County, FL School Board - Certificates of Participation 7.125 07/01/10 1,662,600
15,000 Colquitt County, GA Development Authority Revenue - Southern Care Corporation -
Series 1991 A 0.000 12/01/21 2,476,350
1,500 Dade County, FL Health Facilities Authority Revenue - Baptist Hospital of
Miami Project 5.750 05/01/21 1,494,990
2,600 Dade County, FL Health Facilities Authority Revenue - South Miami Hospital -
Series 1991 A 6.750 10/01/20 2,886,624
550 Florida State Jacksonville Transportation Authority - Senior Lien - General
Obligation Unlimited Tax - Series 1990 7.375 07/01/20 614,790
335 Florida State Board of Education Capital Outlay 9.125 06/01/14 458,380
5,000 Florida State Board of Education Capital Outlay - Series 1991 B 6.700 06/01/22 5,475,050
3,000 Florida State Board of Education Capital Outlay - Series 1992 C 6.625 06/01/17 3,305,070
2,500 Florida State Department of Transportation - Turnpike Revenue - Series 1989 A 7.500 07/01/19 2,757,900
55 Greater Orlando Aviation Authority - Airport Facilities Revenue - City of
Orlando, FL 8.000 10/01/18 60,488
1,000 Hillsborough County, FL Port District Revenue - Tampa Port Authority - Series 1990 8.250 06/01/09 1,151,670
1,020 Hillsborough County, FL Capital Improvement Program Revenue - Series 1994 6.400 08/01/09 1,121,510
1,635 Hillsborough County, FL Utility Revenue - Series A 7.000 08/01/14 1,812,986
1,810 Jacksonville, FL Electric Authority - Bulk Power Supply System Revenue - Scherer 4
Project - Series 1991 A 7.000 10/01/12 1,995,036
1,500 Lady Lake, FL Industrial Development Revenue - Sunbelt Utilities 9.625 07/01/15 1,791,585
1,050 Naples, FL Hospital Revenue - Naples Community Hospital 7.200 10/01/19 1,171,989
3,400 North Springs, FL Improvement District Water and Sewer Revenue - Broward County -
Series 1991 8.000 10/01/16 3,971,336
15 Orange County, FL Capital Improvement Revenue - Series A 7.700 10/01/18 16,439
1,750 Orange County, FL Tourist Development Tax Revenue 7.250 10/01/10 1,956,710
420 Orlando-Orange County, FL Expressway Authority Revenue - Series 1990 6.500 07/01/20 455,574
1,750 Palm Beach County, FL Criminal Justice Facilities Revenue 7.250 06/01/11 1,944,828
1,900 Commonwealth of Puerto Rico Electric Power Authority - Series P 7.000 07/01/21 2,125,473
1,000 Sarasota County, FL Utility System Revenue - Series 1994 6.500 10/01/22 1,114,380
2,500 Seminole County, FL School Board - Certificates of Participation - Series
1994 B 6.750 07/01/14 2,808,175
Resource Recovery
-------------------------------------------------------------------------------------------------------------------------
4,565 Broward County, FL Resource Recovery Revenue - SES Broward Company, L.P. South
Project - Series 1984 7.950 12/01/08 5,026,887
2,125 Lee County, FL Solid Waste System Revenue - Series A 7.000 10/01/11 2,294,022
2,700 Palm Beach County, FL Solid Waste Industrial Development Revenue - Okeelanta
Power - Series 1993 A 6.375 02/15/07 2,671,056
2,000 Palm Beach County, FL Solid Waste Industrial Development Revenue - Okeelanta
Power - Series 1993 A 6.700 02/15/15 1,960,100
7,500 Palm Beach County, FL Solid Waste Industrial Development Revenue - Okeelanta
Power - Series 1993 A 6.850 02/15/21 7,358,925
2,000 Sarasota County, FL Solid Waste System Revenue - Series 1996 5.500 10/01/21 1,887,800
</TABLE>
Florida F-67 13
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds -- Florida Double Tax Exempt (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Special Tax Revenue
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 7,600 Dade County, FL Professional Sports Franchise Facilities Tax Revenue - Series 1995 0.000% 10/01/27 $ 1,178,152
6,730 Dade County, FL Professional Sports Franchise Facilities Tax Revenue - Series 1995 5.250 10/01/30 6,052,424
700 Detroit, MI Downtown Development Authority- Tax Increment - Development Area Number
1 Projects - Series 1996 B, C-1, C-2 and D 6.250 07/01/25 683,466
500 Jacksonville, FL Excise Taxes Revenue - Series 1996 A 5.000 10/01/16 447,070
1,010 Martin County, FL Tropical Farms Water and Sewer Special Assessment District -
Series 1995 5.900 11/01/11 1,023,039
1,000 Metropolitan Atlanta Rapid Transit Authority - Georgia Sales Tax Revenue -
Series 1992 P 6.250 07/01/20 1,049,930
1,000 Palm Beach Gardens, FL Special Obligation Revenue 7.250 07/01/15 1,083,960
4,580 Pembroke Pines, FL Special Assessment Number 94-1 - Series 1995 5.750 11/01/05 4,517,666
10,500 Puerto Rico Highway and Transportation Authority Revenue - Series 1996 Y and Z 5.500 07/01/36 9,530,640
1,000 Puerto Rico Highway and Transportation Authority Revenue - Series 1996 Y and Z 5.000 07/01/36 833,270
400 Wisconsin Center District - Junior Dedicated Tax Revenue - Series 1996 B 5.700 12/15/20 386,320
State/Territorial General Obligations
--------------------------------------------------------------------------------------------------------------------------
4,000 Florida State Broward County Expressway Authority - Series 1984 9.875 07/01/09 5,612,280
1,000 Florida State Broward County Expressway Authority - Series 1984 10.000 07/01/14 1,465,060
2,165 Florida State Board of Education Capital Outlay - Series 1985 9.125 06/01/14 2,959,663
Total Investments in Securities - Municipal Bonds (cost $307,972,351) - 100.2% 320,272,636
Excess of Liabilities over Other Assets - (0.2)% (641,592)
Total Net Assets - 100.0% $319,631,044
</TABLE>
*Securities purchased on a "when-issued" basis.
See notes to financial statements.
14 F-68 Florida
<PAGE>
[LOGO OF SHIP ART]
Florida Double Tax Exempt
Statement of Assets and Liabilities May 31, 1996
................................................................................
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at market value (cost $307,972,351) $320,272,636
Cash 97,112
Receivable for investments sold 145,000
Receivable for Fund shares sold 177,243
Interest receivable 5,534,307
Other 21,231
Total assets 326,247,529
LIABILITIES:
Payable for investments purchased 4,431,235
Payable for Fund shares reacquired 450,685
Distributions payable 1,475,578
Accrued expenses 258,987
Total liabilities 6,616,485
NET ASSETS 319,631,044
Class A:
Applicable to 30,652,271 shares of beneficial interest issued and outstanding $318,456,444
Net asset value per share $ 10.39
Class C:
Applicable to 113,035 shares of beneficial interest issued and outstanding $ 1,174,600
Net asset value per share $ 10.39
</TABLE>
[LOGO OF SHIP ART]
Florida Double Tax Exempt
Statement of Operations For the year ended May 31, 1996
................................................................................
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME - INTEREST $ 20,541,373
EXPENSES:
Distribution fees - Class A (Note E) 1,328,070
Distribution fees - Class C (Note E) 3,169
Investment advisory fees (Note E) 1,665,969
Custody and accounting fees 169,744
Transfer agent's fees 144,895
Registration fees 12,994
Legal fees 637
Audit fees 20,862
Reimbursement of organizational expenses (Note F) 56,723
Trustee's fees 8,817
Shareholder services fees (Note E) 21,560
Other 10,642
Advisory fees waived (Note E) (685,218)
Total expenses before credits 2,758,864
Custodian fee credit (Note B) (48,694)
Net expenses 2,710,170
Net investment income 17,831,203
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions 4,828,780
Change in unrealized appreciation (depreciation) of investments (12,275,838)
Net loss on investments (7,447,058)
Net increase in net assets resulting from operations $ 10,384,145
</TABLE>
See notes to financial statements.
Florida F-69 15
<PAGE>
[LOGO OF SHIP ART]
Florida Double Tax Exempt
Statements of Changes in Net Assets
................................................................................
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS Year Ended Year Ended
Operations: May 31, 1996 May 31, 1995
<S> <C> <C>
Net investment income $ 17,831,203 $ 19,719,394
Net realized gain (loss) on security transactions 4,828,780 (2,273,532)
Change in unrealized appreciation (depreciation) of investments (12,275,838) 8,667,382
Net increase in net assets resulting from operations 10,384,145 26,113,244
Distributions to Class A shareholders:
From net investment income (17,864,777) (19,846,500)
Distributions to Class C shareholders:
From net investment income (15,706)
Net decrease in net assets from distributions to shareholders (17,880,483) (19,846,500)
Fund share transactions (Note C):
Proceeds from shares sold 6,866,299 45,355,080
Net asset value of shares issued in reinvestment of distributions 6,774,286 7,682,266
Cost of shares reacquired (57,887,168) (90,012,143)
Net decrease in net assets from Fund share transactions (14,246,583) (36,974,797)
Total decrease in net assets (21,742,921) (30,708,053)
NET ASSETS:
Beginning of year 341,373,965 372,082,018
End of year $319,631,044 $341,373,965
NET ASSETS CONSIST OF:
Paid-in surplus $308,648,791 $322,944,654
Accumulated net realized gain (loss) on security transactions (1,318,032) (6,146,812)
Unrealized appreciation (depreciation) of investments 12,300,285 24,576,123
$319,631,044 $341,373,965
</TABLE>
See notes to financial statements.
16 F-70 Florida
<PAGE>
[LOGO OF SHIP ART]
Notes to Financial Statements
................................................................................
A. DESCRIPTION OF BUSINESS
Flagship's Florida Intermediate Tax Exempt Fund (Florida Intermediate) and
Florida Double Tax Exempt Fund (Florida Double Tax Exempt) are sub-trusts of
the Flagship Tax Exempt Funds Trust (Trust), a Massachusetts business trust
organized on March 8, 1985. The non-diversified Florida Intermediate Fund and
diversified Florida Double Tax Exempt Fund are open-end management investment
companies registered under the Investment Company Act of 1940, as amended.
The Funds commenced investment operations on February 1, 1994 and June 15,
1990, respectively. The Funds began to offer Class C shares to the investing
public on February 2, 1994, and September 14, 1995, respectively. Class A
shares are sold with a front-end sales charge. Class C shares are sold with
no front-end sales charge but are assessed a contingent deferred sales charge
if redeemed within one year from the time of purchase. Both classes of shares
have identical rights and privileges except with respect to the effect of
sales charges, the distribution and/or service fees borne by each class,
expenses specific to each class, voting rights on matters affecting a single
class and the exchange privilege of each class. Shares of beneficial interest
in each Fund, which are registered under the Securities Act of 1933, as
amended, are offered to the public on a continuous basis.
B. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Funds.
Estimates: The preparation of financial statements and daily calculation of
net asset value in conformity with generally accepted accounting principles
requires management to fairly value, at market, investment securities and
make estimates and assumptions regarding the reported amounts of assets and
liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. The financial
statements reflect these inherent valuations, estimates and assumptions, and
actual results could differ.
Security Valuations: Portfolio securities for which market quotations are
readily available are valued on the basis of prices provided by a pricing
service which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities
and various relationships between securities in determining the values. If
market quotations are not readily available from such pricing service,
securities are valued at fair value as determined under procedures
established by the Trustees. Short-term securities are stated at amortized
cost, which is equivalent to fair value.
The Funds must maintain a diversified investment portfolio as a registered
investment company, however, the Funds' investments are primarily in the
securities of their state. Such concentration subjects the Funds to the
effects of economic changes occurring within that state.
Federal Income Taxes: It is the Funds' policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute to their shareholders all of their tax exempt net
investment income and net realized gains on security transactions. Therefore,
no federal income tax provision is required.
Distributions from net realized capital gains may differ for financial
statement and tax purposes primarily due to the treatment of wash sales and
post-October capital losses. The effect on dividend distributions of certain
book-to-tax timing differences is presented as excess distributions in the
statement of changes in net assets.
Security Transactions: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses
on security transactions are determined on the identified cost basis.
Interest income is recorded on the accrual basis. The Funds amortize original
issue discounts and premiums paid on purchases of portfolio securities on the
same basis for both financial reporting and tax purposes. Market discounts,
if applicable, are recognized as ordinary income upon disposition or
maturity.
Investment Income, Expenses and Distributions: Interest income and estimated
expenses are accrued daily. Daily dividends are declared from net investment
income and paid monthly. Net realized gains from security transactions, to
the extent they exceed available capital loss carryforwards, are distributed
to shareholders at least annually.
Florida F-71 17
<PAGE>
Notes to Financial Statements
................................................................................
Expense Allocation: Shared expenses incurred by the Trust are allocated among
the sub-trusts based on each sub-trust's ratio of net assets to the combined
net assets. Specifically identified direct expenses are charged to each sub-
trust as incurred. Fund expenses not specific to any class of shares are
prorated among the classes based upon the eligible net assets of each class.
Specifically identified direct expenses of each class are charged to that class
as incurred.
The Funds have entered into an agreement with the custodian, whereby they earn
custodian fee credits for temporary cash balances. These credits, which offset
custodian fees that may be charged to the Funds, are based on 80% of the daily
effective federal funds rate.
Securities Purchased on a "When-issued" Basis: The Funds may, upon adequate
segregation of securities as collateral, purchase and sell portfolio securities
on a "when-issued" basis. These securities are registered by a municipality or
government agency, but have not been issued to the public. Delivery and payment
take place after the date of the transaction and such securities are subject to
market fluctuations during this period. The current market value of these
securities is determined in the same manner as other portfolio securities. At
May 31, 1996, there were $225,000 and $3,730,000 of "when-issued" purchase
commitments included in the Florida Intermediate and the Florida Double Tax
Exempt Fund's statements of investments, respectively.
C. FUND SHARES
At May 31, 1996, there were an indefinite number of shares of beneficial
interest with no par value authorized for each class. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
----------------------- --------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
FLORIDA INTERMEDIATE
CLASS A:
Shares sold 366,520 $ 3,698,170 390,286 $ 3,690,600
Shares issued on reinvestment 12,299 124,575 5,350 51,575
Shares reacquired (261,357) (2,643,760) (107,593) (1,037,158)
Net increase 117,462 $ 1,178,985 288,043 $ 2,705,017
CLASS C:
Shares sold 195,954 $ 1,987,282 131,121 $ 1,254,553
Shares issued on reinvestment 5,977 60,618 2,844 27,375
Shares reacquired (66,052) (667,072) (67,911) (636,543)
Net increase 135,879 $ 1,380,828 66,054 $ 645,385
FLORIDA DOUBLE TAX EXEMPT
CLASS A:
Shares sold 3,341,801 $ 35,642,289 4,468,523 $ 45,355,080
Shares issued on reinvestment 635,529 6,768,677 753,914 7,682,266
Shares reacquired (5,453,566) (57,862,882) (8,942,409) (90,012,143)
Net decrease (1,476,236) $(15,451,916) (3,719,972) $(36,974,797)
</TABLE>
18 F-72 Florida
<PAGE>
Notes to Financial Statements
................................................................................
<TABLE>
<CAPTION>
Period From
September 14, 1995 to May 31, 1996
----------------------------------
Shares Amount
<S> <C> <C>
Class C:
Shares sold 114,811 $ 1,224,010
Shares issued on reinvestment 526 5,609
Shares reacquired (2,302) (24,286)
Net increase 113,035 $ 1,205,333
</TABLE>
D. Purchases and Sales of Municipal Bonds
Purchases and sales of municipal bonds for the year ended May 31, 1996,
aggregated:
<TABLE>
<CAPTION>
Fund Purchases Sales
<S> <C> <C>
Florida Intermediate $ 7,325,012 $ 4,856,435
Florida Double Tax Exempt $312,473,071 $311,159,076
</TABLE>
At May 31, 1996, cost for federal income tax purposes is $7,933,353 and
$308,060,449 for the Florida Intermediate and Florida Double Tax Exempt
Funds, respectively, and net unrealized appreciation aggregated $91,875 and
$12,212,187, respectively, which includes:
<TABLE>
<CAPTION>
Fund Unrealized Appreciation Unrealized Depreciation
<S> <C> <C>
Florida Intermediate $ 131,687 $ 39,812
Florida Double Tax Exempt $14,230,200 $2,018,013
</TABLE>
At May 31, 1996, Florida Double Tax Exempt has available a capital loss
carryforward of approximately $1,130,500 to offset future net capital gains
through May 31, 2003.
E. TRANSACTIONS WITH INVESTMENT ADVISOR AND DISTRIBUTOR
Flagship Financial Inc. (Advisor), under the terms of agreements which
provide for furnishing of investment advice, office space and facilities to
the Funds, receives fees computed monthly on the daily net assets of the
Funds at an annualized rate of 1/2 of 1%. During the year ended May 31, 1996,
the Advisor, at its discretion, permanently waived advisory fees for the
Florida Intermediate and Florida Double Tax Exempt Funds amounting to $38,041
and $685,218, respectively. Included in accrued expenses at May 31, 1996 are
accrued advisory fees of $92,745 for Florida Double Tax Exempt. Also, under
an agreement with the Funds, the Advisor may subsidize certain expenses
excluding advisory and distribution fees.
The Funds have Distribution Agreements with Flagship Funds Inc.
(Distributor). The Distributor serves as the exclusive selling agent and
distributor of the Funds' Class A and Class C shares and in that capacity is
responsible for all sales and promotional efforts including printing of
prospectuses and reports used for sales purposes. Pursuant to Rule 12b-1
under the Investment Company Act of 1940, the Funds have adopted a plan to
reimburse the Distributor for its actual expenses incurred in the
distribution and promotion of all classes of the Funds' shares. The maximum
amount payable for these expenses on an annual basis is .40% and .95% of the
Funds' average daily net assets for Class A and Class C shares,
respectively. Included in accrued expenses at May 31, 1996 are accrued
distribution fees of $1,735, $2,465, $108,740 and $882 for Florida
Intermediate Class A shares and Class C shares, and Florida Double Tax Exempt
Class A shares and Class C shares, respectively. Certain non-promotional
expenses directly attributable to current shareholders are aggregated by the
Distributor and passed through to the Funds as shareholder services fees.
Florida F-73 19
<PAGE>
Notes to Financial Statements
...............................................................................
In its capacity as national wholesale underwriter for the shares of the
Funds, the Distributor received commissions on sales of the Funds' shares for
the year ended May 31, 1996, are approximately as follows:
<TABLE>
<CAPTION>
Fund Gross Commissions Paid to Other Dealers
<S> <C> <C>
Florida Intermediate $ 22,700 $ 18,500
Florida Double Tax Exempt $608,800 $525,800
</TABLE>
For the year ended May 31, 1996, the Distributor received approximately
$3,600 and $200 of contingent deferred sales charges on redemptions of shares
in Florida Intermediate and Florida Double Tax Exempt, respectively. Certain
officers and trustees of the Trust are also officers and/or directors of the
Distributor and/or Advisor.
F. ORGANIZATIONAL EXPENSES
The organizational expenses incurred on behalf of the Florida Intermediate
Fund (approximately $27,400) will be reimbursed to the Advisor on a straight-
line basis over a period of three years beginning June 1, 1996. In the event
that the Advisor's current investment in the Trust falls below $100,000 prior
to the full reimbursement of the organizational expenses, then it will forego
any further reimbursement. The organizational expenses incurred on behalf of
the Florida Double Tax Exempt Fund (approximately $284,600) have been
reimbursed to the Advisor as of May 31, 1996.
G. Line of Credit
The Trust participates in a line of credit in which a maximum amount of $30
million is provided by State Street Bank & Trust Co. Florida Double Tax
Exempt may temporarily borrow up to $17 million under the line of credit.
Borrowings are collateralized with pledged securities and are due on demand
with interest at 1% above the federal funds rate. The average daily amount of
borrowings under the line of credit during the year ended May 31, 1996 was
approximately $906,300, at a weighted average annualized interest rate of
6.63%. At May 31, 1996, the Fund had no borrowings outstanding under the line
of credit.
20 F-74 Florida
<PAGE>
[LOGO OF SHIP ART] Selected data for each share of beneficial
Florida Intermediate Tax Exempt Fund
Financial Highlights interest outstanding throughout the period.
................................................................................
<TABLE>
<CAPTION>
Period From
Year Ended Year Ended February 1, 1994 to
Class A May 31, 1996 May 31, 1995 May 31, 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.05 $ 9.66 $ 9.70
Income from investment operations:
Net investment income 0.46 0.46 0.12
Net realized and unrealized gain (loss)
on securities (0.12) 0.33 (0.04)
Total from investment operations 0.34 0.79 0.08
Less distributions:
From net investment income (0.46) (0.40) (0.12)
From net realized capital gains (0.05)
Total distributions (0.51) (0.40) (0.12)
Net asset value, end of period $ 9.88 $ 10.05 $ 9.66
Total return/(a)/ 3.41% 8.42% 1.75%
Ratios to average net assets
(annualized where appropriate):
Actual net of waivers and reimbursements:
Expenses/(b)/ 0.76% 0.67% 0.29%
Net investment income 4.48% 4.74% 3.79%
Assuming credits and no
waivers or reimbursements:
Expenses 1.67% 3.54% 6.70%
Net investment income 3.57% 1.87% (2.62%)
Net assets at end of period (000's) $4,995 $ 3,898 $ 964
Portfolio turnover rate 66.18% 105.01% 28.15%
</TABLE>
(a) The total returns shown do not include the effect of applicable front-end
sales charge.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 0.67%; prior year numbers have not
been restated to reflect these credits.
Florida F-75 21
<PAGE>
[LOGO OF SHIP ART]
Florida Intermediate Tax Exempt Fund Selected data for each share of
Financial Highlights beneficial interest outstanding
throughout the period.
................................................................................
<TABLE>
<CAPTION>
Period From
Year Ended Year Ended February 2, 1994 to
Class C May 31, 1996 May 31, 1995 May 31, 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.05 $ 9.66 $ 9.70
Income from investment operations:
Net investment income 0.40 0.40 0.11
Net realized and unrealized gain
(loss) on securities (0.11) 0.33 (0.06)
Total from investment operations 0.29 0.73 0.05
Less distributions:
From net investment income (0.41) (0.34) (0.09)
From net realized capital gains (0.05)
Total distributions (0.46) (0.34) (0.09)
Net asset value, end of period $ 9.88 $ 10.05 $ 9.66
Total return/(a)/ 2.88% 7.80% 1.33%
Ratios to average net assets
(annualized where appropriate):
Actual net of waivers and
reimbursements:
Expenses/(b)/ 1.34% 1.19% 0.68%
Net investment income 3.88% 4.19% 3.42%
Assuming credits and no waivers
or reimbursements:
Expenses 2.25% 4.53% 7.38%
Net investment income 2.97% 0.85% (3.28%)
Net assets at end of period (000's) $3,079 $ 1,765 $1,058
Portfolio turnover rate 66.18% 105.01% 28.15%
</TABLE>
(a) The total returns shown do not include the effect of applicable contingent
deferred sales charge and are annualized where appropriate.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 1.25%; prior period numbers have not
been restated to reflect these credits.
22 F-76 Florida
<PAGE>
[LOGO OF SHIP ART]
Florida Double Tax Exempt Selected data for each share of beneficial
Financial Highlights interest outstanding throughout the year.
................................................................................
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A May 31, 1996 May 31, 1995 May 31, 1994 May 31, 1993 May 31, 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.63 $10.38 $10.76 $10.18 $ 9.87
Income from investment operations:
Net investment income 0.57 0.58 0.60 0.63 0.66
Net realized and unrealized gain (loss) on
securities (0.24) 0.26 (0.38) 0.61 0.33
Total from investment operations 0.33 0.84 0.22 1.24 0.99
Less distributions:
From net investment income (0.57) (0.59) (0.60) (0.64) (0.67)
From net realized capital gains (0.02) (0.01)
Total distributions (0.57) (0.59) (0.60) (0.66) (0.68)
Net asset value, end of year $10.39 $10.63 $10.38 $10.76 $10.18
Total return(a) 3.14% 8.43% 2.00% 12.49% 10.32%
Ratios to average net assets:
Actual net of waivers and reimbursements:
Expenses(b) 0.83% 0.73% 0.58% 0.45% 0.26%
Net investment income 5.36% 5.71% 5.51% 6.01% 6.59%
Assuming credits and no waivers or
reimbursements:
Expenses 1.02% 1.04% 1.00% 0.99% 1.03%
Net investment income 5.17% 5.40% 5.09% 5.47% 5.82%
Net assets at end of year (000's) $318,456 $341,374 $372,082 $369,123 $276,811
Portfolio turnover rate 93.93% 52.67% 31.92% 22.60% 49.72%
</TABLE>
(a) The total returns shown do not include the effect of applicable front-end
sales charge.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 0.82%; prior year numbers have not
been restated to reflect these credits.
Florida F-77 23
<PAGE>
[LOGO OF SHIP ART]
Florida Double Tax Exempt Selected data for each share of beneficial
Financial Highlights interest outstanding throughout the period.
................................................................................
<TABLE>
<CAPTION>
Period From
September 14, 1995 to
Class C May 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.65
Income from investment operations:
Net investment income 0.35
Net realized and unrealized gain
(loss) on securities (0.26)
Total from investment operations 0.09
Less distributions:
From net investment income (0.35)
Total distributions (0.35)
Net asset value, end of period $10.39
Total return(a) 1.30%
Ratios to average net assets
(annualized where appropriate):
Actual net of waivers and
reimbursements:
Expenses(b) 1.38%
Net investment income 4.59%
Assuming credits and no
waivers or reimbursements:
Expenses 1.55%
Net investment income 4.42%
Net assets at end of year (000's) $1,175
Portfolio turnover rate 93.93%
</TABLE>
(a) The total return shown does not include the effect of applicable contingent
deferred sales charge and is annualized.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 1.37%.
24 F-78 Florida
<PAGE>
[LOGO OF SHIP ART]
Independent Auditors' Report
................................................................................
TO THE SHAREHOLDERS AND TRUSTEES
FLAGSHIP FLORIDA TAX EXEMPT FUNDS
We have audited the accompanying statements of assets and liabilities, including
the statements of investments in securities and net assets, of the Flagship
Florida Intermediate Tax Exempt Fund and the Flagship Florida Double Tax Exempt
Fund as of May 31, 1996, the related statements of operations for the year then
ended, and the statements of changes in net assets and the financial highlights
for each of the periods presented. These financial statements and financial
highlights are the responsibility of the FundsAE management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the Funds' custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Flagship Florida
Intermediate Tax Exempt Fund and the Flagship Florida Double Tax Exempt Fund at
May 31, 1996, the results of their operations, the changes in their net assets
and the financial highlights for the respective stated periods, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
July 3, 1996
Florida F-79 25
<PAGE>
[LOGO OF SHIP ART]
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Education
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$1,370 University of Arizona Foundation Lease Revenue 7.750% 07/01/07 $1,442,898
Health Care
--------------------------------------------------------------------------------------------------------------------------
1,670 Cochise County, AZ Industrial Development Authority Revenue - Sierra Vista
Care Center - Series 1994A 6.750 11/20/19 1,753,483
Hospitals
--------------------------------------------------------------------------------------------------------------------------
1,250 Arizona Health Facilities Authority Revenue - Arizona Voluntary Hospital
Federation Pooled Loan Program - Series 1985B 7.250 10/01/13 1,345,062
2,275 Maricopa County, AZ Industrial Development Authority Hospital Facility
Revenue - Samaritan Health Services - Series 1990A 7.000 12/01/16 2,657,359
750 Maricopa County, AZ Industrial Development Authority Hospital Facility
Revenue - John C. Lincoln Hospital 7.500 12/01/13 828,420
500 Pima County, AZ Industrial Development Authority Revenue - Carondelet
Health Care Corporation - Series 1993 5.250 07/01/12 475,980
1,000 Scottsdale, AZ Industrial Development Authority Hospital Revenue -
Scottsdale Memorial Hospital - 1987A 8.500 09/01/17 1,066,770
1,500 Scottsdale, AZ Industrial Development Authority Hospital Revenue -
Scottsdale Memorial Hospital - Series 1993 5.500 09/01/12 1,473,015
Housing/Multifamily
--------------------------------------------------------------------------------------------------------------------------
425 Phoenix, AZ Industrial Development Authority Revenue - Chris Ridge Village -
Series 1992 6.800 11/01/25 437,572
Housing/Single Family
--------------------------------------------------------------------------------------------------------------------------
255 Maricopa County, AZ Industrial Development Authority - Single Family
Mortgage Revenue - Series 1991A 7.500 08/01/12 266,279
Industrial Development and Pollution Control
--------------------------------------------------------------------------------------------------------------------------
250 Casa Grande, AZ Industrial Development Authority Revenue -
Frito-Lay/PepsiCo Pollution Control Project - Series 1984A 6.650 12/01/14 263,118
1,000 Mesa, AZ Industrial Development Authority - TRW Vehicle Safety Systems, Inc. 7.250 10/15/04 1,026,330
500 Mohave County, AZ Industrial Development Authority Revenue - Citizens
Utility Company Project 7.150 02/01/26 528,770
195 Navajo County, AZ Pollution Control Revenue - Arizona Public Service Company -
Series 1993 5.875 08/15/28 181,535
Municipal Appropriation Obligations
--------------------------------------------------------------------------------------------------------------------------
225 Arizona State Municipal Financing Program - Certificates of Participation -
Series 11 8.000 08/01/17 292,784
850 Tucson, AZ Certificates of Participation - Series 1994 6.375 07/01/09 900,804
Municipal Revenue/Other
--------------------------------------------------------------------------------------------------------------------------
375 Salt River Pima-Maricopa Indian Community - Arizona Special Obligation
Revenue - Phoenix Cement Company 7.750 02/15/97 383,749
</TABLE>
4 F-24 Arizona
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Municipal Revenue/Transportation
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500 Phoenix, AZ Airport Revenue - Series 1994 D 6.400% 07/01/12 $ 517,610
500 Tucson, AZ Airport Authority Revenue - Series B 7.125 06/01/15 537,245
Municipal Revenue/Utility
--------------------------------------------------------------------------------------------------------------------------
500 Central Arizona Water Conservation District Revenue - Central Arizona Project -
Contract Revenue - Series 1993A 5.500 11/01/10 497,515
5 Central Arizona Water Conservation District Revenue - Series 1991 B 6.500 11/01/11 5,334
500 Salt River Project - Arizona Agricultural Improvement and Power District -
Electric System Refunding Revenue - Series 1993 A 5.750 01/01/10 508,470
Municipal Revenue/Water & Sewer
--------------------------------------------------------------------------------------------------------------------------
1,750 Chandler, AZ Water and Sewer Revenue 6.750 07/01/06 1,875,895
500 Cottonwood, AZ Sewer Revenue - Series 1992 6.900 07/01/03 541,495
100 Cottonwood, AZ Sewer Revenue - Series 1992 7.000 07/01/06 107,255
100 Cottonwood, AZ Sewer Revenue - Series 1992 7.000 07/01/07 106,671
540 Pima County, AZ Sewer Revenue - Series 1991 6.750 07/01/15 572,659
800 Sedona, AZ Sewer Revenue - Series 1992 7.000 07/01/12 838,280
500 Tucson, AZ Water System Revenue - Series 1991 6.700 07/01/12 538,240
1,000 Tucson, AZ Water System Revenue - Series 1993 5.500 07/01/10 991,250
Non-State General Obligations
--------------------------------------------------------------------------------------------------------------------------
800 Chandler, AZ General Obligation 7.000 07/01/12 868,968
250 Cochise County, AZ Sierra Unified School District Number 68 - General
Obligation - Series 1992 7.500 07/01/09 297,225
250 Coconino and Yavapai Counties, AZ Unified School District Number 9 -
Sedona-Oak Creek - Series 1992 A 6.700 07/01/06 266,975
750 Maricopa County, AZ School District Number 11 - Peoria - Series 1992 6.400 07/01/10 783,532
675 Maricopa County, AZ School District Number 11 - Peoria - Series 1992 0.000 07/01/06 389,806
4,000 Maricopa County, AZ School District Number 28 - Kyrene Elementary -
Series 1993 C 0.000 07/01/07 2,161,760
2,460 Maricopa County, AZ School District Number 28 - Kyrene Elementary -
Series 1993 C 0.000 07/01/08 1,242,989
1,870 Maricopa County, AZ School District Number 28 - Kyrene Elementary -
Series 1993 C 0.000 01/01/09 918,563
3,805 Maricopa County, AZ School District Number 28 - Kyrene Elementary -
Series 1993 C 0.000 01/01/10 1,743,223
6,000 Maricopa County, AZ School District Number 28 - Kyrene Elementary -
Series 1993 C 0.000 01/01/11 2,558,820
500 Maricopa County, AZ Glendale Elementary School District Number 40 -
School Improvement - Series 1995 6.200 07/01/09 505,560
3,000 Maricopa County, AZ Glendale Elementary School District Number 40 -
School Improvement - Series 1995 6.250 07/01/10 3,035,670
1,750 Maricopa County, AZ Glendale Elementary School District Number 40 -
School Improvement - Series 1995 6.300 07/01/11 1,770,755
2,000 Maricopa County, AZ Unified School District Number 41 - Gilbert - Series 1994 0.000 01/01/06 1,197,980
500 Maricopa County, AZ Unified School District Number 41 - Gilbert - Series 1995 D 6.250 07/01/15 491,770
</TABLE>
Arizona F-25 5
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets May 31, 1996
....................................................................................................................................
Municipal Bonds (continued)
Face
Amount Face Market
(000) Description Rate Maturity Value
<C> <S> <C> <C> <C>
$ 515 Maricopa County, AZ School District Number 68 - Alhambra Elementary -
Series 1994 A 6.750% 07/01/14 $ 557,189
2,000 Maricopa County, AZ Paradise Valley Unified School District Number 69 -
Series 1995 7.000 07/01/12 2,287,280
500 Maricopa County, AZ School District Number 80 - Chandler - Series 1994 6.250 07/01/11 535,415
1,275 Maricopa County, AZ School District Number 98 - Fountain Hills - Series 1992 0.000 07/01/06 736,300
125 Navajo County, AZ Unified School District Number 2 - Joseph City -
Series 1992 A 6.800 07/01/01 132,910
375 Navajo County, AZ Unified School District Number 2 - Joseph City -
Series 1992 A 6.800 07/01/02 398,302
1,000 Pima County, AZ Unified School District Number 1 - Tucson - Series 1992 7.500 07/01/10 1,190,930
500 Pima County, AZ Unified School District Number 13 - Tanque Verde -
Series 1994 6.700 07/01/10 543,440
1,100 Santa Cruz, AZ Nogales Unified School District Number 1 - General Obligation -
Series 1995 0.000 01/01/09 540,331
315 Scottsdale, AZ Mountain Community Facilities District - General Obligation -
Series 1993A 6.200 07/01/17 319,561
1,925 Tatum Ranch, AZ Community Facilities District - Phoenix, Arizona -
General Obligation - Series 1991 A 6.875 07/01/16 2,072,282
Pre-refunded or Escrowed
--------------------------------------------------------------------------------------------------------------------------
500 Arizona State Transportation Board - Highway Revenue - Series 1990 7.000 07/01/09 546,580
300 Arizona State University Revenues 7.000 07/01/15 335,685
1,995 Central Arizona Water Conservation District Revenue - Series 1991 B 6.500 11/01/11 2,171,637
35 Glendale, AZ Municipal Property Corporation 8.850 07/01/08 35,847
395 Maricopa County, AZ Hospital Revenue - St. Luke's Hospital Medical Center 8.750 02/01/10 464,619
135 Maricopa County, AZ Industrial Development Authority Hospital Facility
Revenue - Samaritan Health Services 12.000 01/01/08 144,987
1,250 Maricopa County, AZ Industrial Development Authority - Mercy Health System
Revenue 7.150 07/01/12 1,365,875
10,800 Maricopa County, AZ Industrial Development Authority - Single Family
Mortgage Revenue 0.000 02/01/16 3,262,680
13,040 Maricopa County, AZ Industrial Development Authority - Single Family
Mortgage Revenue - Series 1983 0.000 12/31/14 4,209,442
575 Maricopa County, AZ School District Number 214 - Tolleson Union High 6.500 07/01/09 617,774
300 Maricopa County, AZ School District Number 214 - Tolleson Union High 6.500 07/01/10 322,317
1,250 Northern Arizona University Revenue 7.500 06/01/08 1,355,238
700 Peoria, AZ Municipal Development Authority Facilities Revenue 7.000 07/01/10 761,817
500 Phoenix, AZ Street and Highway User Revenue - Series 1992 6.250 07/01/11 521,770
650 Pima County, AZ Unified School District Number 1 - Tucson 7.200 07/01/09 713,810
460 Pima County, AZ Sewer Revenue - Series 1991 6.750 07/01/15 504,063
1,500 Price-Elliott Research Park, Incorporated - Arizona State University Research
Park Development - Series 1991 7.000 07/01/21 1,671,510
300 Salt River Project - Arizona Agricultural Improvement and Power District -
Electric System Revenue - Series A 7.500 01/01/27 312,432
100 Salt River Project - Arizona Agricultural Improvement and Power District -
Electric System Revenue - Series E 8.250 01/01/28 106,537
</TABLE>
6 F-26 Arizona
<PAGE>
[LOGO OF SHIP ART]
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
<C> <S> <C> <C> <C>
$ 100 Salt River Project - Arizona Agricultural Improvement and Power District -
Electric System Revenue - Series E 8.250% 01/01/13 $ 106,537
450 Scottsdale, AZ Certificates of Participation - Scottsdale Municipal Property
Corporation 7.875 11/01/14 466,659
850 Tucson, AZ Water System Revenue 7.700 07/01/15 869,762
10,320 Tucson and Pima County, AZ Industrial Development Authority - Single Family
Mortgage Revenue - Series 1983 A 0.000 12/01/14 3,348,943
1,085 University of Arizona Medical Center Corporation - Tucson, Arizona -
Hospital Revenue - Series 1986 8.100 07/01/16 1,151,673
1,000 University of Arizona Medical Center Corporation - Tucson, Arizona -
Hospital Revenue - Series 1987 8.100 07/01/16 1,064,101
Special Tax Revenue
--------------------------------------------------------------------------------------------------------------------------
965 Bullhead City, AZ Parkway Improvement District 6.100 01/01/13 948,170
760 Flagstaff, AZ Junior Lien and Highway User Revenue - Series 1992 5.900 07/01/10 788,584
350 Nogales, AZ Street and Highway Users Revenue - Series 1993 5.500 07/01/11 326,522
365 Nogales, AZ Street and Highway Users Revenue - Series 1993 5.500 07/01/12 337,804
460 Peoria, AZ Improvement District Number 8801 - North Valley Power Center 7.300 01/01/13 493,787
State/Territorial General Obligations
--------------------------------------------------------------------------------------------------------------------------
1,000 Commonwealth of Puerto Rico Public Building Authority Guaranteed Public 3.750 07/01/16 894,760
Education and Health Facilities - Series M
Student Loan Revenue Bonds
--------------------------------------------------------------------------------------------------------------------------
370 Arizona Educational Loan Revenue - Series B 7.000 03/01/05 391,279
1,000 Arizona Student Loan Acquisition Authority Revenue - Series 1994 B 6.600 05/01/10 1,040,500
Total Investments in Securities - Municipal Bonds (cost $78,251,477) - 100.1% 82,163,084
Excess of Liabilities over Other Assets - (0.1)% (98,674)
Total Net Assets - 100.0% $ 82,064,410
</TABLE>
See notes to financial statements.
Arizona F-27 7
<PAGE>
[LOGO OF SHIP ART]
Statement of Assets and Liabilities May 31, 1996
...............................................................................
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at market value (cost $78,251,477) $ 82,163,084
Receivable for Fund shares sold 233,221
Interest receivable 1,421,524
Other 5,550
Total assets 83,823,379
LIABILITIES:
Bank borrowings (Note F) 830,576
Payable for investments purchased 245,558
Payable for Fund shares reacquired 264,547
Distributions payable 357,574
Accrued expenses 60,714
Total liabilities 1,758,969
NET ASSETS 82,064,410
Class A:
Applicable to 7,463,231 shares of beneficial interest issued and outstanding $ 80,094,252
Net asset value per share $ 10.73
Class C:
Applicable to 183,587 shares of beneficial interest issued and outstanding $ 1,970,158
Net asset value per share $ 10.73
</TABLE>
[LOGO OF SHIP ART]
Statement of Operations For the year ended May 31, 1996
................................................................................
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME - INTEREST $ 4,932,741
EXPENSES:
Distribution fees--Class A (Note E) 328,091
Distribution fees--Class C (Note E) 16,707
Investment advisory fees (Note E) 420,039
Custody and accounting fees 61,467
Transfer agent's fees 57,035
Registration fees 9,890
Legal fees 2,923
Audit fees 14,762
Trustees' fees 2,164
Shareholder services fees (Note E) 8,047
Other 2,746
Advisory fees waived (Note E) (279,976)
Expense subsidy (Note E) (57,950)
Total expenses before credits 585,945
Custodian fee credit (Note B) (15,992)
Net expenses 569,953
Net investment income 4,362,788
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions 317,259
Change in unrealized appreciation (depreciation) of investments (1,200,471)
Net loss on investments (883,212)
Net increase in net assets resulting from operations $ 3,479,576
</TABLE>
See notes to financial statements.
8 F-28 Arizona
<PAGE>
[LOGO OF SHIP ART]
Statements of Changes in Net Assets
................................................................................
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
INCREASE (DECREASE) IN NET ASSETS
Operations:
<S> <C> <C>
Net investment income $ 4,362,788 $ 4,453,941
Net realized gain (loss) on security transactions 317,259 155,116
Change in unrealized appreciation (depreciation) of investments (1,200,471) 2,669,143
Net increase in net assets resulting from operations 3,479,576 7,278,200
Distributions to Class A shareholders:
From net investment income (4,301,398) (4,420,414)
Distributions to Class C shareholders:
From net investment income (82,198) (72,191)
Net decrease in net assets from distributions to shareholders (4,383,596) (4,492,605)
Fund share transactions (Note C):
Proceeds from shares sold 11,832,617 9,819,607
Net asset value of shares issued in reinvestment of distributions 1,939,151 1,866,427
Cost of shares reacquired (12,829,723) (16,243,843)
Net increase (decrease) in net assets from Fund share transactions 942,045 (4,557,809)
Total increase (decrease) in net assets 38,025 (1,772,214)
NET ASSETS:
Beginning of year 82,026,385 83,798,599
End of year $ 82,064,410 $ 82,026,385
NET ASSETS CONSIST OF:
Paid-in surplus $ 78,032,113 $ 77,110,876
Accumulated net realized gain (loss) on security transactions 120,690 (196,569)
Unrealized appreciation (depreciation) of investments 3,911,607 5,112,078
$ 82,064,410 $ 82,026,285
</TABLE>
See notes to financial statements.
Arizona F-29 9
<PAGE>
[LOGO OF SHIP ARTS]
Notes of Financial Statements
...............................................................................
A. Description of Business
The Flagship Arizona Double Tax Exempt Fund (Fund) is a sub-trust of
the Flagship Tax Exempt Funds Trust (Trust), a Massachusetts business trust
organized on March 8, 1985. The Fund is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund commenced investment operations on October 29, 1986. On
February 7, 1994, the Fund began to offer Class C shares to the investing
public. Class A shares are sold with a front-end sales charge. Class C shares
are sold with no front-end sales charge but are assessed a contingent
deferred sales charge if redeemed within one year from the time of purchase.
Both classes of shares have identical rights and privileges except with
respect to the effect of sales charges, the distribution and/or service fees
borne by each class, expenses specific to each class, voting rights on
matters affecting a single class and the exchange privilege of each class.
Shares of beneficial interest in the Fund, which are registered under the
Securities Act of 1933, as amended, are offered to the public on a continuous
basis.
B. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund.
Estimates: The preparation of financial statements and daily calculation of
net asset value in conformity with generally accepted accounting principles
requires management to fairly value, at market, investment securities and
make estimates and assumptions regarding the reported amounts of assets and
liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. The financial
statements reflect these inherent valuations, estimates and assumptions, and
actual results could differ.
Security Valuations: Portfolio securities for which market quotations are
readily available are valued on the basis of prices provided by a pricing
service which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities
and various relationships between securities in determining the values. If
market quotations are not readily available from such pricing service,
securities are valued at fair value as determined under procedures
established by the Trustees. Short-term securities are stated at amortized
cost, which is equivalent to fair value.
The Fund must maintain a diversified investment portfolio as a registered
investment company, however, the Fund's investments are primarily in the
securities of its state. Such concentration subjects the Fund to the effects
of economic changes occurring within that state.
Federal Income Taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute to its shareholders all of its tax exempt net
investment income and net realized gains on security transactions. Therefore,
no federal income tax provision is required.
Distributions from net realized capital gains may differ for financial
statement and tax purposes primarily due to the treatment of wash sales and
post-October capital losses. The effect on dividend distributions of certain
book-to-tax timing differences is presented as excess distributions in the
statement of changes in net assets.
Security Transactions: Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Realized gains and
losses on security transactions are determined on the identified cost basis.
Interest income is recorded on the accrual basis. The Fund amortizes original
issue discounts and premiums paid on purchases of portfolio securities on the
same basis for both financial reporting and tax purposes. Market discounts,
if applicable, are recognized as ordinary income upon disposition or
maturity.
Investment Income, Expenses and Distributions: Interest income and
estimated expenses are accrued daily. Daily dividends are declared from net
investment income and paid monthly. Net realized gains from security
transactions, to the extent they exceed available capital loss carryforwards,
are distributed to shareholders at least annually.
10 F-30 Arizona
<PAGE>
Notes to Financial Statements
................................................................................
Expense Allocation: Shared expenses incurred by the Trust are allocated
among the sub-trusts based on each sub-trust's ratio of net assets to the
combined net assets. Specifically identified direct expenses are charged to
each sub-trust as incurred. Fund expenses not specific to any class of shares
are prorated among the classes based upon the eligible net assets of each
class. Specifically identified direct expenses of each class are charged to
that class as incurred.
The Fund has entered into an agreement with the custodian, whereby it earns
custodian fee credits for temporary cash balances. These credits, which
offset custodian fees that may be charged to the Fund, are based on 80% of
the daily effective federal funds rate.
Securities Purchased on a "When-issued" Basis: The Fund may, upon
adequate segregation of securities as collateral, purchase and sell portfolio
securities on a "when-issued" basis. These securities are registered by a
municipality or government agency, but have not been issued to the public.
Delivery and payment take place after the date of the transaction and such
securities are subject to market fluctuations during this period. The current
market value of these securities is determined in the same manner as other
portfolio securities. There were no "when-issued" purchase commitments
included in the statement of investments at May 31, 1996.
C. Fund Shares
At May 31, 1996, there were an indefinite number of shares of beneficial
interest with no par value authorized for each class. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
---------------------------- ---------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Class A:
Shares sold 987,074 $ 10,720,918 868,576 $ 9,000,803
Shares issued on reinvestment 174,172 1,897,941 178,972 1,839,048
Shares reacquired (1,111,337) (12,066,428) (1,563,719) (15,834,858)
Net increase (decrease) 49,909 $ 552,431 (516,171) $ (4,995,007)
Class C:
Shares sold 101,591 $ 1,111,699 78,796 $ 818,804
Shares issued on reinvestment 3,779 41,210 2,677 27,379
Shares reacquired (71,245) (763,295) (39,624) (408,985)
Net increase 34,125 $ 389,614 41,849 $ 437,198
</TABLE>
D. Purchases and Sales of Municipal Bonds
Purchases and sales of municipal bonds for the year ended May 31, 1996,
aggregated $33,285,040 and $31,763,502, respectively. At May 31, 1996,
cost for federal income tax purposes is $78,251,477 and net unrealized
appreciation aggregated $3,911,607, of which $4,166,528 related to
appreciated securities and $254,921 related to depreciated securities.
Arizona F-31 11
<PAGE>
Notes to Financial Statements
................................................................................
E. Transactions with Investment Advisor and Distributor
Flagship Financial Inc. (Advisor), under the terms of an agreement which
provides for furnishing of investment advice, office space and facilities
to the Fund, receives fees computed monthly on the average daily net assets
of the Fund at an annualized rate of 1/2 of 1%. During the year ended May 31,
1996, the Advisor, at its discretion, permanently waived $279,976 of its
advisory fees. Also, under an agreement with the Fund, the Advisor may
subsidize certain expenses excluding advisory and distribution fees.
The Fund has a Distribution Agreement with Flagship Funds Inc.
(Distributor). The Distributor serves as the exclusive selling agent and
distributor of the Fund's Class A and Class C shares and in that capacity is
responsible for all sales and promotional efforts including printing of
prospectuses and reports used for sales purposes. Pursuant to Rule 12b-1
under the Investment Company Act of 1940, the Fund has adopted a plan to
reimburse the Distributor for its actual expenses incurred in the
distribution and promotion of all classes of the Fund's shares. The maximum
amount payable for these expenses on an annual basis is .40% and .95% of
the Fund's average daily net assets for Class A and Class C shares,
respectively. Included in accrued expenses at May 31, 1996 are accrued
distribution fees of $27,298 and $1,587 for Class A and Class C shares,
respectively. Certain non-promotional expenses directly attributable to
current shareholders are aggregated by the Distributor and passed through
to the Fund as shareholder services fees.
In its capacity as national wholesale underwriter for the shares of the
Fund, the Distributor received commissions on sales of the Fund's Class A
shares of approximately $193,700 for the year ended May 31, 1996, of which
approximately $167,500 was paid to other dealers. For the year ended May 31,
1996, the Distributor received approximately $1,900 of contingent deferred
sales charges on redemptions of shares. Certain officers and trustees of the
Trust are also officers and/or directors of the Distributor and/or Advisor.
F. Line of Credit
The Trust participates in a line of credit in which a maximum amount of
$30 million is provided by State Street Bank & Trust Co. The Fund may
temporarily borrow up to $4 million under the line of credit. Borrowings are
collateralized with pledged securities and are due on demand with interest at
1% above the federal funds rate. The average daily amount of borrowings under
the line of credit during the year ended May 31, 1996 was approximately
$296,300, at a weighted average annualized interest rate of 6.96%. At
May 31, 1996, the Fund had $830,576 outstanding under the line of credit.
12 F-32 Arizona
<PAGE>
[LOGO OF SHIP ART]
Financial Highlights Selected data for each share of beneficial
interest outstanding throughout the year.
...............................................................................
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A May 31, 1996 May 31, 1995 May 31, 1994 May 31, 1993 May 31, 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.85 $ 10.43 $ 10.81 $ 10.13 $ 9.81
Income from investment operations:
Net investment income 0.57 0.58 0.60 0.63 0.65
Net realized and unrealized gain
(loss) on securities (0.12) 0.42 (0.38) 0.69 0.32
Total from investment operations 0.45 1.00 0.22 1.32 0.97
Less distributions:
From net investment income (0.57) (0.58) (0.60) (0.64) (0.65)
Total distributions (0.57) (0.58) (0.60) (0.64) (0.65)
Net asset value, end of year $ 10.73 $ 10.85 $ 10.43 $ 10.81 $ 10.13
Total return(a) 4.21% 10.03% 1.92% 13.37% 10.25%
Ratios to average net assets:
Actual net of waivers and reimbursements:
Expenses(b) 0.69% 0.82% 0.64% 0.44% 0.44%
Net investment income 5.20% 5.59% 5.48% 6.03% 6.55%
Assuming credits and no waivers or
reimbursements:
Expenses 1.07% 1.20% 1.09% 1.11% 1.20%
Net investment income 4.82% 5.21% 5.03% 5.36% 5.79%
Net assets at end of year (000's) $80,094 $80,406 $82,676 $72,778 $51,123
Portfolio turnover rate 38.15% 26.79% 21.08% 20.04% 33.75%
</TABLE>
(a) The total returns shown do not include the effect of applicable front-end
sales charge.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 0.67%; prior year numbers have not
been restated to reflect these credits.
Arizona F-33 13
<PAGE>
[LOGO OF SHIP ART]
Financial Highlights Selected data for each share of beneficial
interest outstanding throughout the period.
................................................................................
<TABLE>
<CAPTION>
Period From
Year Ended Year Ended February 7, 1994 to
CLASS C May 31, 1996 May 31, 1995 May 31, 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.84 $10.43 $ 11.22
Income from investment operations:
Net investment income 0.51 0.52 0.14
Net realized and unrealized gain
(loss) on securities (0.11) 0.41 (0.79)
Total from investment operations 0.40 0.93 (0.65)
Less distributions:
From net investment income (0.51) (0.52) (0.14)
Total distributions (0.51) (0.52) (0.14)
Net asset value, end of period $10.73 $10.84 $ 10.43
Total return(a) 3.75% 9.32% (16.61%)
Ratios to average net assets:
(annualized where appropriate)
Actual net of waivers and
reimbursements:
Expenses(b) 1.23% 1.36% 1.20%
Net investment income 4.64% 5.01% 4.36%
Assuming credits and no
waivers or reimbursements:
Expenses 1.63% 1.75% 1.62%
Net investment income 4.24% 4.62% 3.94%
Net assets at end of period (000's) $1,970 $1,621 $ 1,122
Portfolio turnover rate 38.15% 26.79% 21.08%
</TABLE>
(a) The total returns shown do not include the effect of applicable contingent
deferred sales charge and are annualized where appropriate.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 1.21%; prior period numbers have not
been restated to reflect these credits.
14 F-34 Arizona
<PAGE>
[LOGO OF SHIP ART] Independent Auditors' Report
................................................................................
TO THE SHAREHOLDERS AND TRUSTEES
FLAGSHIP ARIZONA
DOUBLE TAX EXEMPT FUND
We have audited the accompanying statement of assets and liabilities, including
the statement of investments in securities and net assets, of the Flagship
Arizona Double Tax Exempt Fund as of May 31, 1996, the related statement of
operations for the year then ended, and the statements of changes in net assets
and the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the Fund's custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Flagship Arizona
Double Tax Exempt Fund at May 31, 1996, the results of its operations, the
changes in its net assets and the financial highlights for the respective stated
periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
July 3, 1996
Arizona F-35 15
<PAGE>
[LOGO OF SHIP ART]
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds
<TABLE>
Face
Amount Face Market
(000) Description Rate Maturity Value
Education
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 30 Colorado State Board of Agriculture Revenue - 7.800% 03/01/11 $ 30,572
Colorado State University Auxiliary Facilities - Series 1986
175 Commonwealth of Puerto Rico Industrial, Medical and Environmental - Pollution
Control Facilities Financing Authority - Catholic University of 5.600 12/01/07 173,829
Puerto Rico Project - Series 1993
Hospitals
--------------------------------------------------------------------------------------------------------------------------
1,250 Colorado Health Facilities Authority Revenue - Sisters of Charity
Health Care Systems, Incorporated - Series 1992 6.250 05/15/11 1,310,812
1,500 Colorado Springs, CO Hospital Revenue - Series 1995 5.750 12/15/09 1,520,160
250 Pueblo County, CO Hospital Facilities Revenue - Parkview Episcopal Medical Center 7.000 09/01/09 272,445
Housing/Multifamily
--------------------------------------------------------------------------------------------------------------------------
100 Aurora, CO Multifamily Revenue - Dayton Plaza Project - Series A 8.250 01/20/29 106,456
500 Colorado Housing Finance Authority - Multifamily Housing
Mortgage Revenue - Series 1995 A 6.650 10/01/28 509,605
1,000 Lakewood, CO Multifamily Housing Mortgage Revenue -
Heights by Marston Lake - Series 1995 6.650 10/01/25 1,022,240
Housing/Single Family
--------------------------------------------------------------------------------------------------------------------------
150 Colorado Housing Finance Authority - Single Family - Series A 8.125 09/01/17 157,154
335 Colorado Housing Finance Authority - Single Family - Series 1991 C 7.375 08/01/23 348,430
850 Colorado Housing Finance Authority - Single Family - Series 1991 A 0.000 11/01/06 438,328
245 Commerce City, CO Single Family Mortgage Revenue - Series 1992 A 6.875 03/01/12 253,433
135 Pueblo County, CO Single Family Mortgage Revenue - Series 1992 A 6.850 12/01/25 138,334
500 Pueblo County, CO Single Family Mortgage Revenue - Series 1994 A 7.050 11/01/27 520,540
Industrial Development and Pollution Control
--------------------------------------------------------------------------------------------------------------------------
500 Denver, CO City and County Special Facilities Airport Revenue -
United Air Lines - Series 1992 A 6.875 10/01/32 503,395
Municipal Appropriation Obligations
--------------------------------------------------------------------------------------------------------------------------
200 Boulder, CO Property Authority Lease Purchase - Series B 7.400 12/01/02 208,888
175 Jefferson County, CO Certificates of Participation - Series 1992 6.650 12/01/08 190,946
100 University of Colorado - Certificates of Participation - Series D 7.400 12/01/05 108,253
Municipal Revenue/Other
--------------------------------------------------------------------------------------------------------------------------
1,500 Hyland Hills Park and Recreation District - Special Revenue - Series 1996 A 6.750 12/15/15 1,497,675
Municipal Revenue/Transportation
--------------------------------------------------------------------------------------------------------------------------
4,300 Arapahoe County, CO E-470 Public Highway Authority Revenue -
E-470 Project - Series 1986 0.000 08/31/06 2,214,500
500 Colorado Springs, CO Airport Revenue - Series 1992 A 6.450 01/01/01 515,925
</TABLE>
4 F-36 Colorado
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Municipal Revenue/Water & Sewer
---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 120 Colorado Water Resources and Power Development Authority Revenue -
Series 1992A 6.700% 11/01/12 $ 127,424
250 Northern Colorado Municipal Subdistrict - Water Conservancy District Revenue -
Series D 7.750 12/01/12 258,912
250 Ute, CO Water Conservancy District Revenue 7.900 06/15/06 258,552
Non-State General Obligations
---------------------------------------------------------------------------------------------------------------------------
450 Cherry Creek, CO Vista Park and Recreation District - General Obligation -
Arapahoe County - Series 1992B 6.875 10/01/11 467,806
1,000 Denver, CO City and County School District Number 1 - General Obligation -
Series 1994 A 6.500 12/01/10 1,090,640
500 Douglas County, CO School District Number RE-1 - General Obligation -
Series 1994 A 6.400 12/15/11 529,235
500 El Paso, CO School District Number RJ-1 - General Obligation - Series 1995 6.800 12/01/14 539,790
1,025 El Paso County, CO School District Number 49 - Falcon Schools - General
Obligation - Series 1996 0.000 12/15/07 518,168
1,020 El Paso County, CO School District Number 49 - Falcon Schools - General
Obligation - Series 1996 0.000 12/15/08 483,092
500 El Paso County, CO School District Number 38 - Series A 6.900 12/01/13 538,025
250 Pitkin County, CO General Obligation - Open Space Revenue - Series 1994 6.875 12/01/24 265,460
190 Valley Metropolitan District, CO General Obligation - Series 1992 7.000 12/15/06 190,880
Pre-refunded or Escrowed
---------------------------------------------------------------------------------------------------------------------------
1,000 Adams County, CO Multi-County Single Family Mortgage Revenue -
Series 1985 0.000 06/01/16 295,460
200 Adams County, CO School District Number 1 - General Obligation - Series 1992 6.500 12/01/07 219,442
4,500 Arapahoe County, CO Single Family Mortgage Revenue - Series 1984 0.000 09/01/10 1,937,970
175 Aspen, CO Certificates of Participation - Public Facilities Authority 7.000 09/01/09 186,158
100 Colorado Association of School Boards Certificates of Participation -
Pueblo School District Number 60 7.250 12/01/09 109,534
7,500 Colorado Health Facilities Authority - Retirement Facilities - Liberty Heights -
Series B 0.000 07/15/24 1,028,850
300 Colorado Health Facilities Authority Revenue - Rose Medical Center 7.000 08/15/21 334,887
350 Colorado Health Facilities Authority Revenue - Bethesda PsycHealth Project 9.125 09/01/17 374,283
2,000 Colorado Housing Finance Authority Revenue - Single Family - Series 1985 A 0.000 09/01/14 659,200
900 Colorado Springs, CO Utilities Revenue - Series B 6.600 11/15/18 961,938
180 Colorado Springs, CO Utilities Revenue - Series C 6.750 11/15/21 199,629
100 Colorado State Board of Agriculture Revenue - Colorado State University Sports
Recreation Facilities 7.700 04/01/09 108,044
220 Colorado State Board of Agriculture Revenue - Colorado State University
Auxiliary Facilities - Series 1986 7.800 03/01/11 224,433
300 Colorado Water Resources and Power Development Authority Revenue -
Stagecoach Project - Series 1986 8.000 11/01/17 332,793
250 Denver, CO City and County Industrial Development Revenue - University of
Denver 7.500 03/01/16 283,018
200 Denver, CO City and County Hospital Revenue - Children's Hospital Association 8.000 10/01/15 204,828
</TABLE>
Colorado F-37 5
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
<C> <S> <C> <C> <C>
$ 350 Denver, CO City and County Hospital Revenue - Sisters of Charity Health Care
Systems - Mercy Medical Center 7.700% 05/01/07 $ 375,924
100 El Paso County, CO Revenue - St. Francis Hospital - Series 1988 A 7.750 05/01/14 108,411
4,300 El Paso County, CO Single Family Mortgage Revenue - Series 1984 0.000 09/01/15 1,332,398
3,000 El Paso County, CO Single Family Mortgage Revenue - Series 1985 0.000 05/01/15 948,630
250 Fountain Valley, CO Water Treatment Revenue - Series 1991 6.800 12/01/19 272,202
250 Logan County, CO Health Care Facilities Revenue - Western Health Network 7.625 01/01/19 273,682
4,000 Mesa County, CO Residual Revenue - Series 1992 0.000 12/01/11 1,587,960
300 Parker, CO Sales and Use Tax Revenue 7.600 11/01/10 334,674
350 Poudre Valley, CO Hospital District Revenue - Series A 6.625 12/01/11 383,432
100 Regional Transportation District - Colorado Sales Tax Revenue 7.100 11/01/10 110,323
175 Thornton, CO Sales and Use Tax Revenue - Series D 8.000 09/01/07 183,788
250 University of Colorado - Boulder Campus Auxiliary Facilities System Revenue 7.050 06/01/15 273,178
Special Tax Revenue
---------------------------------------------------------------------------------------------------------------------------
200 Mesa County, CO Sales Tax Revenue 7.750 12/01/13 214,280
750 Woodland Park, CO Limited Sales Tax Revenue - Series 1994 6.400 12/01/12 774,777
Student Loan Revenue Bonds
---------------------------------------------------------------------------------------------------------------------------
1,000 Colorado Student Obligation Bond Authority - Student Loan Revenue -
Series 1993 I-B 5.700 12/01/06 1,002,670
400 Colorado Student Obligation Bond Authority - Student Loan Revenue 7.250 09/01/05 416,184
250 Colorado Student Obligation Bond Authority - Student Loan Revenue -
Series 1992C 7.150 09/01/06 264,462
Total Investments in Securities - Municipal Bonds (cost $32,665,579) - 99.9% 33,627,346
Excess of Other Assets over Liabilities - 0.1% 9,155
Total Net Assets - 100.0% $33,636,501
See notes to financial statements.
</TABLE>
6 F-38 Colorado
<PAGE>
[LOGO OF SHIP ART]
Statement of Assets and Liabilities May 31, 1996
................................................................................
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at market value (cost $32,665,579) $33,627,346
Receivable for investments sold 30,203
Receivable for Fund shares sold 57,991
Interest receivable 433,447
Other 2,394
Total assets 34,151,381
LIABILITIES:
Bank overdraft 241,480
Payable for Fund shares reacquired 79,547
Distributions payable 154,541
Accrued expenses 39,312
Total liabilities 514,880
NET ASSETS:
Applicable to 3,436,028 shares of beneficial interest issued
and outstanding $33,636,501
Net asset value per share $ 9.79
</TABLE>
<TABLE>
<CAPTION>
LOGO OF SHIP ART
Statement of Operations For the year ended May 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME - INTEREST $ 2,058,328
EXPENSES:
Distribution fees (Note E) 138,113
Investment advisory fees (Note E) 173,105
Custody and accounting fees 67,940
Transfer agent's fees 29,395
Registration fees 486
Legal fees 868
Audit fees 11,725
Reimbursement of organizational expenses (Note F) 16,763
Trustees' fees 1,098
Shareholder services fees (Note E) 4,730
Other 1,340
Advisory fees waived (Note E) (173,105)
Expense subsidy (Note E) (84,532)
Total expenses before credits 187,926
Custodian fee credit (Note B) (5,390)
Net expenses 182,536
Net investment income 1,875,792
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions 86,320
Change in unrealized appreciation (depreciation) of investments (554,501)
Net loss on investments (468,181)
Net increase in net assets resulting from operations $ 1,407,611
See notes to financial statements.
</TABLE>
Colorado F-39 7
<PAGE>
LOGO OF SHIP ART
Statements of Changes in Net Assets
................................................................................
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
INCREASE (DECREASE) IN NET ASSETS
Operations:
<S> <C> <C>
Net investment income $ 1,875,792 $ 2,024,845
Net realized gain (loss) on security transactions 86,320 (79,900)
Change in unrealized appreciation (depreciation) of
investments (554,501) 1,061,286
Net increase in net assets resulting from operations 1,407,611 3,006,231
Distributions to shareholders:
From net investment income (1,893,445) (2,019,448)
Net decrease in net assets from distributions to shareholders (1,893,445) (2,019,448)
Net decrease in net assets from Fund share transactions (Note C) (769,636) (1,890,578)
Total decrease in net assets (1,255,470) (903,795)
NET ASSETS:
Beginning of year 34,891,971 35,795,766
End of year $33,636,501 $34,891,971
NET ASSETS CONSIST OF:
Paid-in surplus $33,229,675 $34,011,567
Undistributed net investment income 5,397
Accumulated net realized gain (loss) on security transactions (554,941) (641,261)
Unrealized appreciation (depreciation) of investments 961,767 1,516,268
$33,636,501 $34,891,971
See notes to financial statements.
</TABLE>
8 F-40 Colorado
<PAGE>
[LOGO OF SHIP ART]
Notes to Financial Statements
................................................................................
A. Description of Business
The Flagship Colorado Double Tax Exempt Fund (Fund) is a sub-trust of the
Flagship Tax Exempt Funds Trust (Trust), a Massachusetts business trust
organized on March 8, 1985. The Fund is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund commenced investment operations on May 4, 1987. Shares of
beneficial interest in the Fund, which are registered under the Securities
Act of 1933, as amended, are offered to the public on a continuous basis.
B. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund.
Estimates: The preparation of financial statements and daily calculation of
net asset value in conformity with generally accepted accounting principles
requires management to fairly value, at market, investment securities and
make estimates and assumptions regarding the reported amounts of assets and
liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. The financial
statements reflect these inherent valuations, estimates and assumptions, and
actual results could differ.
Security Valuations: Portfolio securities for which market quotations are
readily available are valued on the basis of prices provided by a pricing
service which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities
and various relationships between securities in determining the values. If
market quotations are not readily available from such pricing service,
securities are valued at fair value as determined under procedures
established by the Trustees. Short-term securities are stated at amortized
cost, which is equivalent to fair value.
The Fund must maintain a diversified investment portfolio as a registered
investment company, however, the Fund's investments are primarily in the
securities of its state. Such concentration subjects the Fund to the effects
of economic changes occurring within that state.
Federal Income Taxes: It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute to its shareholders all of its tax exempt net investment income
and net realized gains on security transactions. Therefore, no federal income
tax provision is required.
Distributions from net realized capital gains may differ for financial
statement and tax purposes primarily due to the treatment of wash sales and
post-October capital losses. The effect on dividend distributions of certain
book-to-tax timing differences is presented as excess distributions in the
statement of changes in net assets.
Security Transactions: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses
on security transactions are determined on the identified cost basis.
Interest income is recorded on the accrual basis. The Fund amortizes original
issue discounts and premiums paid on purchases of portfolio securities on the
same basis for both financial reporting and tax purposes. Market discounts,
if applicable, are recognized as ordinary income upon disposition or
maturity.
Investment Income, Expenses and Distributions: Interest income and estimated
expenses are accrued daily. Daily dividends are declared from net investment
income and paid monthly. Net realized gains from security transactions, to
the extent they exceed available capital loss carryforwards, are distributed
to shareholders at least annually.
Expense Allocation: Shared expenses incurred by the Trust are allocated among
the sub-trusts based on each sub-trust's ratio of net assets to the combined
net assets. Specifically identified direct expenses are charged to each sub-
trust as incurred.
The Fund has entered into an agreement with the custodian, whereby it earns
custodian fee credits for temporary cash balances. These credits, which
offset custodian fees that may be charged to the Fund, are based on 80% of
the daily effective federal funds rate.
Colorado F-41 9
<PAGE>
Notes to Financial Statements
................................................................................
Securities Purchased on a "When-issued" Basis: The Fund may, upon adequate
segregation of securities as collateral, purchase and sell portfolio
securities on a "when-issued" basis. These securities are registered by a
municipality or government agency, but have not been issued to the public.
Delivery and payment take place after the date of the transaction and such
securities are subject to market fluctuations during this period. The current
market value of these securities is determined in the same manner as other
portfolio securities. There were no "when-issued" purchase commitments
included in the statement of investments at May 31, 1996.
C. Fund Shares
At May 31, 1996, there were an indefinite number of shares of beneficial
interest with no par value authorized for each class. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
----------------------- ----------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 416,678 $ 4,177,017 439,378 4,171,350
Shares issued on reinvestment 90,419 901,092 104,858 990,289
Shares reacquired (586,370) (5,847,745) (749,821) (7,052,217)
Net decrease (79,273) $ (769,636) (205,585) (1,890,578)
</TABLE>
D. Purchases and Sales of Municipal Bonds
Purchases and sales of municipal bonds for the year ended May 31, 1996,
aggregated $23,979,859 and $25,108,901, respectively. At May 31, 1996, cost
for federal income tax purposes is $32,665,579 and net unrealized
appreciation aggregated $961,767, of which $1,122,408 related to appreciated
securities and $160,641 related to depreciated securities.
At May 31, 1996, the Fund has available a capital loss carryforward of
approximately $554,900 to offset future net capital gains expiring on May 31,
2003.
E. Transactions with Investment Advisor and Distributor
Flagship Financial Inc. (Advisor), under the terms of an agreement which
provides for furnishing of investment advice, office space and facilities to
the Fund, receives fees computed monthly on the average daily net assets of
the Fund at an annualized rate of 1/2 of 1%. During the year ended May 31,
1996, the Advisor, at its discretion, permanently waived all of its advisory
fees amounting to $173,105. Also, under an agreement with the Fund, the
Advisor may subsidize certain expenses excluding advisory and distribution
fees. The Fund has a Distribution Agreement with Flagship Funds Inc.
(Distributor). The Distributor serves as the exclusive selling agent and
distributor of the Fund's shares and in that capacity is responsible for all
sales and promotional efforts including printing of prospectuses and reports
used for sales purposes. Pursuant to Rule 12b-1 under the Investment Company
Act of 1940, the Fund has adopted a plan to reimburse the Distributor for its
actual expenses incurred in the distribution and promotion of sales of the
Fund's shares. The maximum amount payable for these expenses on an annual
basis is .40% of the Fund's average daily net assets. Included in accrued
expenses at May 31, 1996 are accrued distribution fees of $11,403. Certain
non-promotional expenses directly attributable to current shareholders are
aggregated by the Distributor and passed through to the Fund as shareholder
services fees.
10 F-42 Colorado
<PAGE>
Notes to Financial Statements
................................................................................
In its capacity as national wholesale underwriter for the shares of the Fund,
the Distributor received commissions on sales of the Fund's shares of
approximately $98,000 for the year ended May 31, 1996, of which approximately
$85,100 was paid to other dealers. Certain officers and trustees of the Trust
are also officers and/or directors of the Distributor and/or Advisor.
F. ORGANIZATIONAL EXPENSES
The organizational expenses incurred on behalf of the Fund (approximately
$83,600) are being reimbursed to the Advisor on a straight-line basis over a
period of five years. As of May 31, 1996, $50,197 has been reimbursed. In the
event that the Advisor's current investment in the Trust falls below $100,000
prior to the full reimbursement of the organizational expenses, then it will
forego any further reimbursement.
G. LINE OF CREDIT
The Trust participates in a line of credit in which a maximum amount of $30
million is provided by State Street Bank & Trust Co. The Fund may temporarily
borrow up to $2 million under the line of credit. Borrowings are collateralized
with pledged securities and are due on demand with interest at 1% above the
federal funds rate. The average daily amount of borrowings under the line of
credit during the year ended May 31, 1996 was approximately $150,200, at a
weighted average annualized interest rate of 6.61%. At May 31, 1996, the Fund
had no borrowings outstanding under the line of credit.
Colorado F-43 11
<PAGE>
[LOGO OF SHIP]
Financial Highlights Selected data for each share of beneficial
interest outstanding throughout the year.
................................................................................
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
May 31, 1996 May 31, 1995 May 31, 1994 May 31, 1993 May 31, 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.93 $ 9.62 $ 10.04 $ 9.56 $ 9.29
Income from investment operations:
Net investment income 0.54 0.57 0.58 0.60 0.61
Net realized and unrealized gain (loss) on
securities (0.13) 0.30 (0.37) 0.55 0.27
Total from investment operations 0.41 0.87 0.21 1.15 0.88
Less distributions:
From net investment income (0.55) (0.56) (0.58) (0.60) (0.61)
From net realized capital gains (0.07)
In excess of net realized capital gains (0.05)
Total distributions (0.55) (0.56) (0.63) (0.67) (0.61)
Net asset value, end of year $ 9.79 $ 9.93 $ 9.62 $ 10.04 $ 9.56
Total return/(a)/ 4.14% 9.54% 2.03% 12.41% 9.80%
Ratios to average net assets:
Actual net of waivers and reimbursements:
Expenses/(b)/ 0.55% 0.50% 0.37% 0.41% 0.49%
Net investment income 5.41% 5.99% 5.71% 6.05% 6.42%
Assuming credits and no waivers or
reimbursements:
Expenses 1.27% 1.27% 1.27% 1.35% 1.51%
Net investment income 4.69% 5.22% 4.81% 5.11% 5.40%
Net assets at end of year (000's) $33,637 $34,892 $35,796 $26,656 $15,699
Portfolio turnover rate 69.76% 37.84% 41.76% 30.49% 39.07%
</TABLE>
(a) The total returns shown do not include the effect of applicable front-end
sales charge.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 0.53%; prior period numbers have not
been restated to reflect these credits.
12 F-44 Colorado
<PAGE>
[LOGO OF SHIP ART] Independent Auditor's Report
................................................................................
TO THE SHAREHOLDERS AND TRUSTEES
FLAGSHIP COLORADO
DOUBLE TAX EXEMPT FUND
We have audited the accompanying statement of assets and liabilities, including
the statement of investments in securities and net assets, of the Flagship
Colorado Double Tax Exempt Fund as of May 31, 1996, the related statement of
operations for the year then ended, and the statements of changes in net assets
and the financial highlights for each of the years presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the Fund's custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Flagship
Colorado Double Tax Exempt Fund at May 31, 1996, the results of its operations,
the changes in its net assets and the financial highlights for the respective
stated years, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
July 3, 1996
Colorado F-45 13
<PAGE>
[LOGO OF SHIP ART]
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Education
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500 Commonwealth of Puerto Rico Industrial, Medical and Environmental -
Pollution Control Facilities Financing Authority - Catholic University of
Puerto Rico Project - Series 1993 5.600% 12/01/07 $ 496,655
5,000 University of New Mexico Regents - System Revenue - Series 1992A 6.000 06/01/21 5,006,450
Health Care
--------------------------------------------------------------------------------------------------------------------------
1,000 Hobbs, NM Health Facilities Revenue - Evangelical Lutheran Good Samaritan
Society - Series 1996 5.500 05/01/26 941,380
500 Las Cruces, NM Health Facilities Revenue - Evangelical Lutheran Good
Samaritan Society - Series 1992 6.450 12/01/17 520,210
Hospitals
--------------------------------------------------------------------------------------------------------------------------
450 Albuquerque, NM Hospital System - Presbyterian Healthcare Services -
Series 1992A 6.375 08/01/07 482,872
1,500 Albuquerque, NM Evangelical Lutheran Good Samaritan Society - Series 1993 5.900 06/01/13 1,510,605
350 Socorro, NM Health Facilities Revenue - Evangelical Lutheran Good
Samaritan Society - Series 1994 6.000 05/01/08 361,868
Housing/Multifamily
--------------------------------------------------------------------------------------------------------------------------
1,000 Las Cruces, NM Housing Development Corporation - Multifamily Mortgage
Revenue - Series 1993A 6.400 10/01/19 989,140
Housing/Single Family
--------------------------------------------------------------------------------------------------------------------------
1,250 New Mexico Mortgage Finance Authority Revenue - Single Family -
Series 1995A 6.650 07/01/26 1,271,475
170 New Mexico Mortgage Finance Authority - Single Family - Series 1992A-1 6.850 07/01/10 176,406
850 New Mexico Mortgage Finance Authority - Single Family - Series 1992A-2 6.900 07/01/24 878,602
Industrial Development and Pollution Control
--------------------------------------------------------------------------------------------------------------------------
985 Farmington, NM Pollution Control Revenue - Public Service Company -
San Juan and Four Corners - Series 1992A 6.375 12/15/22 1,017,998
1,000 Lordsburg, NM Pollution Control Revenue - Phelps Dodge Corporation -
Series 1993 6.500 04/01/13 1,030,200
500 Sandoval County, NM Gross Receipts Tax Revenue - Series 1994 7.150 11/01/10 535,095
Municipal Appropriation Obligations
--------------------------------------------------------------------------------------------------------------------------
700 Commonwealth of Puerto Rico Urban Renewal and Housing - Series 1989 7.875 10/01/04 767,228
Municipal Revenue/Other
--------------------------------------------------------------------------------------------------------------------------
100 New Mexico Finance Authority Revenue - Revolving Fund Public Project -
Series 1995A 5.500 06/01/07 100,141
60 * New Mexico Finance Authority - Court Automation Fee Revenue - Series 1996 4.900 06/01/03 59,684
Municipal Revenue/Transportation
--------------------------------------------------------------------------------------------------------------------------
1,000 Albuquerque, NM Airport Revenue - Series 1995 A and B 6.600 07/01/16 1,042,900
</TABLE>
4 F-214 New Mexico
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Municipal Revenue/Utility
----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$1,200 Guam Power Authority Revenue - Series 1993A 5.250% 10/01/23 $ 999,984
500 Guam Power Authority Revenue - Series 1992A 6.375 10/01/08 529,230
250 Las Cruces, NM Utility and Improvement Revenue 6.250 07/01/12 252,190
1,000 Los Alamos County, NM Incorporated Utility System Revenue - Series 1994A 5.700 07/01/05 1,036,520
1,500 Los Alamos County, NM Incorporated Utility System Revenue - Series 1994A 6.000 07/01/15 1,505,535
2,000 Commonwealth of Puerto Rico Electric Power Authority Revenue - Series 1995Z 5.250 07/01/21 1,780,600
100 Rio Grande, NM Natural Gas Association System Revenue and Improvement -
Dona Ana County - Series 1993 6.000 07/01/07 97,161
1,000 Rio Grande, NM Natural Gas Association System Revenue and Improvement -
Dona Ana County - Series 1993 6.125 07/01/13 952,680
Municipal Revenue/Water & Sewer
----------------------------------------------------------------------------------------------------------------------------
1,000 Albuquerque, NM Joint Water and Sewer System Revenue - Series 1990A 0.000 07/01/07 540,440
100 Grants, NM Water and Sewer Improvement Revenue - Series 1993B 5.600 01/01/08 97,584
500 Grants, NM Water and Sewer Improvement Revenue - Series 1993B 5.800 01/01/13 459,535
Non-State General Obligations
----------------------------------------------------------------------------------------------------------------------------
80 Bernalillo County, NM General Obligation - Series 1994 5.750 10/01/05 83,323
480 Grants/Cibola County, NM School District Number 1 - General Obligation -
Series 1994 6.250 05/01/08 489,869
510 Grants/Cibola County, NM School District Number 1 - General Obligation -
Series 1994 6.250 05/01/09 517,268
200 Torrance County, NM General Obligation - Series 1993 5.500 07/01/04 201,150
Pre-refunded or Escrowed
----------------------------------------------------------------------------------------------------------------------------
250 Albuquerque, NM Joint Water and Sewer System Revenue - Series 1990A 6.000 07/01/15 262,030
200 Commonwealth of Puerto Rico - Public Improvement 7.300 07/01/20 222,826
327 Santa Fe County, NM Office and Training Facilities Revenue Project 9.000 07/01/07 417,236
500 Santa Fe, NM Water and Sewer Revenue - Series 1994A 6.300 06/01/24 542,085
Resource Recovery
----------------------------------------------------------------------------------------------------------------------------
1,000 Las Cruces, NM South Central Solid Waste Authority Revenue -
Environmental Services - Series 1995 6.000 06/01/16 970,570
Special Tax Revenue
----------------------------------------------------------------------------------------------------------------------------
4,250 Albuquerque, NM Gross Receipts - Lodgers Tax Revenue - Series 1991 0.000 07/01/11 1,747,430
2,550 Dona Ana County, NM Gross Receipts Tax and Improvement Revenue -
Series 1993 6.000 06/01/19 2,481,864
810 Espanola, NM Gross Receipts Tax Revenue - Series 1994 5.900 03/01/08 826,103
465 Grants, NM Gross Receipts Tax and Improvement Revenue - Series 1993B 5.800 07/01/13 426,749
250 Las Cruces, NM Gross Receipts Tax Revenue - Series 1992 6.250 12/01/05 261,710
225 Las Cruces, NM Revenue - Series 1995 5.250 12/01/06 221,085
1,400 Las Cruces, NM Revenue - Series 1995 5.450 12/01/08 1,358,546
500 Las Cruces, NM Revenue - Series 1995 5.500 12/01/15 472,040
500 Commonwealth of Puerto Rico Highway and Transportation Authority Revenue -
Series 1993W 5.500 07/01/13 476,045
</TABLE>
New Mexico F-215 5
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$2,000 Puerto Rico Highway and Transportation Authority Revenue - Series 1996 Y and Z 5.500% 07/01/36 $1,815,360
200 Rio Rancho, NM Gross Receipts - Tax Revenue - Series 1994A 5.100 12/01/07 192,064
300 Roswell, NM Sales Tax Revenue - Series 1993 6.000 06/01/12 294,561
225 Sandoval County, NM Gross Receipts Tax/Fire District Revenue - Series 1993 6.600 12/01/04 230,843
200 Sandoval County, NM Gross Receipts Tax/Fire District Revenue - Series 1993 6.900 12/01/07 205,544
375 Sandoval County, NM Gross Receipts Tax Revenue - Series 1992 6.900 11/01/12 396,518
130 Sandoval County, NM Gross Receipts Tax Revenue - Series 1992A 6.500 12/01/06 137,198
30 Santa Fe, NM Subordinate Lien Gross Receipts Tax Revenue - Series 1995 A and B 4.750 06/01/04 29,221
500 Silver City, NM Sales Tax Revenue - Series 1993 5.850 07/01/09 479,690
470 Tucumcari, NM Municipal Gross Receipts/Lodgers' Tax Improvement Revenue -
Series 1993 5.875 06/01/12 447,322
State/Territorial General Obligations
--------------------------------------------------------------------------------------------------------------------------
200 Guam Government General Obligation - Series 1993A 5.000 11/15/05 183,418
1,500 Guam Government General Obligation - Series 1993A 5.375 11/15/13 1,321,065
500 Guam Government General Obligation - Series 1993A 5.400 11/15/18 432,845
2,550 Commonwealth of Puerto Rico Aqueduct and Sewer Authority Revenue -
Series 1995 5.000 07/01/19 2,199,248
1,730 Commonwealth of Puerto Rico Public Building Authority Guaranteed Public
Education and Health Facilities - Series M 3.750 07/01/16 1,547,935
Student Loan Revenue Bonds
--------------------------------------------------------------------------------------------------------------------------
1,600 New Mexico Educational Assistance Foundation - Student Loan Revenue -
Series A 6.850 04/01/05 1,684,864
500 New Mexico Educational Assistance Foundation - Student Loan Revenue -
Series 1A 6.550 12/01/05 508,130
410 New Mexico Educational Assistance Foundation - Student Loan Revenue -
Series 1A 6.850 12/01/05 417,868
1,250 New Mexico Educational Assistance Foundation - Student Loan Revenue -
Series 1995 IV-A1 6.500 03/01/04 1,319,812
Total Investments in Securities - Municipal Bonds (cost $50,967,832) - 100.2% 51,261,803
Excess of Liabilities over Other Assets - (0.2)% (88,622)
Total Net Assets - 100.0% $51,173,181
</TABLE>
*Securities purchased on a "when-issued" basis.
See notes to financial statements.
6 F-216 New Mexico
<PAGE>
[LOGO OF SHIP ART]
Statement of Assets and Liabilities May 31, 1996
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $50,967,832) $51,261,803
Receivable for Fund shares sold 716
Interest receivable 1,100,784
Other 3,216
Total assets 52,366,519
LIABILITIES:
Bank borrowings (Note G) 802,919
Payable for investments purchased 60,196
Payable for Fund shares reacquired 66,108
Distributions payable 223,098
Accrued expenses 41,017
Total liabilities 1,193,338
NET ASSETS:
Applicable to 5,219,040 shares of beneficial interest issued and
outstanding $51,173,181
Net asset value per share $ 9.81
</TABLE>
[LOGO OF SHIP ART]
Statement of Operations For the year ended May 31, 1996
...............................................................................
<TABLE>
<S> <C>
INVESTMENT INCOME - INTEREST $ 2,981,914
EXPENSES:
Distribution fees (Note E) 206,501
Investment advisory fees (Note E) 258,828
Custody and accounting fees 51,098
Transfer agent's fees 28,205
Registration fees 976
Legal fees 1,411
Audit fees 11,725
Reimbursement of organizational expenses (Note F) 10,358
Trustees' fees 1,464
Shareholder services fees (Note E) 6,100
Other 1,786
Advisory fees waived (Note E) (226,537)
Total expenses before credits 351,915
Custodian fee credit (Note B) (16,918)
Net expenses 334,997
Net investment income 2,646,917
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions (189,794)
Change in unrealized appreciation (depreciation) of investments (845,219)
Net loss on investments (1,035,013)
Net increase in net assets resulting from operations $ 1,611,904
</TABLE>
See notes to financial statements.
New Mexico F-217 7
<PAGE>
[LOGO OF SHIP ART]
Statements of Changes in Net Assets
................................................................................
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS Year Ended Year Ended
Operations: May 31, 1996 May 31, 1995
<S> <C> <C>
Net investment income $ 2,646,917 $ 2,682,640
Net realized gain (loss) on security transactions (189,794) (878,425)
Change in unrealized appreciation (depreciation) of investments (845,219) 2,239,449
Net increase in net assets resulting from operations 1,611,904 4,043,664
Distributions to shareholders:
From net investment income (2,660,344) (2,699,610)
Net decrease in net assets from distributions to shareholders (2,660,344) (2,699,610)
Net increase (decrease) in net assets from Fund share transactions (Note C) 71,218 (360,910)
Total (decrease) increase in net assets (977,222) 983,144
NET ASSETS:
Beginning of year 52,150,403 51,167,259
End of year $51,173,181 $52,150,403
NET ASSETS CONSIST OF:
Paid-in surplus $52,262,539 $52,204,748
Accumulated net realized gain (loss) on security transactions (1,383,329) (1,193,535)
Unrealized appreciation (depreciation) of investments 293,971 1,139,190
$51,173,181 $52,150,403
</TABLE>
See notes to financial statements.
8 F-218 New Mexico
<PAGE>
[LOGO OF SHIP ART]
Notes to Financial Statements
................................................................................
A. DESCRIPTION OF BUSINESS
The Flagship New Mexico Double Tax Exempt Fund (Fund) is a sub-trust of the
Flagship Tax Exempt Funds Trust (Trust), a Massachusetts business trust
organized on March 8, 1985. The Fund is an open-end non-diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Fund commenced investment operations on September 16,
1992. Shares of beneficial interest in the Fund, which are registered under
the Securities Act of 1933, as amended, are offered to the public on a
continuous basis.
B. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund.
ESTIMATES: The preparation of financial statements and daily calculation of
net asset value in conformity with generally accepted accounting principles
requires management to fairly value, at market, investment securities and
make estimates and assumptions regarding the reported amounts of assets and
liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. The financial
statements reflect these inherent valuations, estimates and assumptions, and
actual results could differ.
SECURITY VALUATIONS: Portfolio securities for which market quotations
are readily available are valued on the basis of prices provided by a pricing
service which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities
and various relationships between securities in determining the values. If
market quotations are not readily available from such pricing service,
securities are valued at fair value as determined under procedures
established by the Trustees. Short-term securities are stated at amortized
cost, which is equivalent to fair value.
The Fund must maintain a diversified investment portfolio as a registered
investment company, however, the Fund's investments are primarily in the
securities of its state. Such concentration subjects the Fund to the effects
of economic changes occurring within that state.
FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute to its shareholders all of its tax exempt net
investment income and net realized gains on security transactions. Therefore,
no federal income tax provision is required.
Distributions from net realized capital gains may differ for financial
statement and tax purposes primarily due to the treatment of wash sales and
post-October capital losses. The effect on dividend distributions of certain
book-to-tax timing differences is presented as excess distributions in the
statement of changes in net assets.
SECURITY TRANSACTIONS: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses
on security transactions are determined on the identified cost basis.
Interest income is recorded on the accrual basis. The Fund amortizes original
issue discounts and premiums paid on purchases of portfolio securities on the
same basis for both financial reporting and tax purposes. Market discounts,
if applicable, are recognized as ordinary income upon disposition or
maturity.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: Interest income and estimated
expenses are accrued daily. Daily dividends are declared from net investment
income and paid monthly. Net realized gains from security transactions, to
the extent they exceed available capital loss carryforwards, are distributed
to shareholders at least annually.
EXPENSE ALLOCATION: Shared expenses incurred by the Trust are allocated among
the sub-trusts based on each sub-trust's ratio of net assets to the combined
net assets. Specifically identified direct expenses are charged to each sub-
trust as incurred.
The Fund has entered into an agreement with the custodian, whereby it earns
custodian fee credits for temporary cash balances. These credits, which
offset custodian fees that may be charged to the Fund, are based on 80% of
the daily effective federal funds rate.
New Mexico F-219 9
<PAGE>
Notes to Financial Statements
................................................................................
SECURITIES PURCHASED ON A "WHEN-ISSUED" BASIS: The Fund may, upon adequate
segregation of securities as collateral, purchase and sell portfolio securities
on a "when-issued" basis. These securities are registered by a municipality or
government agency, but have not been issued to the public. Delivery and payment
take place after the date of the transaction and such securities are subject to
market fluctuations during this period. The current market value of these
securities is determined in the same manner as other portfolio securities. There
were $60,000 "when-issued" purchase commitments included in the statement of
investments at May 31, 1996.
C. FUND SHARES
At May 31, 1996, there were an indefinite number of shares of beneficial
interest with no par value authorized for each class. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
--------------------- -----------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 691,631 $ 6,925,871 1,187,721 $ 11,354,468
Shares issued on reinvestment 133,282 1,333,109 143,686 1,363,952
Shares reacquired (817,071) (8,187,762) (1,406,966) (13,079,330)
Net increase (decrease) 7,842 $ 71,218 (75,559) $ (360,910)
</TABLE>
D. PURCHASES AND SALES OF MUNICIPAL BONDS
Purchases and sales of municipal bonds for the year ended May 31, 1996,
aggregated $29,517,115 and $29,945,810, respectively. At May 31, 1996, cost
for federal income tax purposes is $50,867,040 and net unrealized
appreciation aggregated $394,763, of which $915,045 related to appreciated
securities and $520,282 related to depreciated securities.
At May 31, 1996, the Fund has available capital loss carryforwards of
approximately $1,383,300 to offset future net capital gains in the amounts of
$1,092,700 through May 31, 2003 and $290,600 through May 31, 2004.
E. TRANSACTIONS WITH INVESTMENT ADVISOR AND DISTRIBUTOR
Flagship Financial Inc. (Advisor), under the terms of an agreement which
provides for furnishing of investment advice, office space and facilities to
the Fund, receives fees computed monthly, on the average daily net assets of
the Fund at an annualized rate of 1/2 of 1%. During the year ended May 31,
1996, the Advisor, at its discretion, permanently waived $226,537 of its
advisory fees. Included in accrued expenses at May 31, 1996, are accrued
advisory fees of $4,356. Also, under an agreement with the Fund, the Advisor
may subsidize certain expenses excluding advisory and distribution fees.
The Fund has a Distribution Agreement with Flagship Funds Inc.
(Distributor). The Distributor serves as the exclusive selling agent and
distributor of the Fund's shares and in that capacity is responsible for all
sales and promotional efforts including printing of prospectuses and reports
used for sales purposes. Pursuant to Rule 12b-1 under the Investment Company
Act of 1940, the Fund has adopted a plan to reimburse the Distributor for its
actual expenses incurred in the distribution and promotion of sales of the
Fund's shares. The maximum amount payable for these expenses on an annual
basis is .40% of the Fund's average daily net assets. Included in accrued
expenses at May 31, 1996 are accrued distribution fees of $17,425. Certain
non-promotional expenses directly attributable to current shareholders are
aggregated by the Distributor and passed through to the Fund as shareholder
services fees.
10 F-220 NEW MEXICO
<PAGE>
Notes to Financial Statements
................................................................................
In its capacity as national wholesale underwriter for the shares of the
Fund, the Distributor received commissions on sales of the Fund's shares of
approximately $131,800 for the year ended May 31, 1996, of which
approximately $114,300 was paid to other dealers. Certain officers and
trustees of the Trust are also officers and/or directors of the Distributor
and/or Advisor.
F. Organizational Expenses
The organizational expenses incurred on behalf of the Fund (approximately
$51,700) are being reimbursed to the Advisor on a straight-line basis over a
period of five years. As of May 31, 1996, $31,018 has been reimbursed. In the
event that the Advisor's current investment in the Trust falls below
$100,000 prior to the full reimbursement of the organizational expenses, then
it will forego any further reimbursement.
G. Line of Credit
The Trust participates in a line of credit in which a maximum amount of $30
million is provided by State Street Bank & Trust Co. The Fund may temporarily
borrow up to $2 million under the line of credit. Borrowings are
collateralized with pledged securities and are due on demand with interest at
1% above the federal funds rate. The average daily amount of borrowings under
the line of credit during the year ended May 31, 1996 was approximately
$114,500, at a weighted average annualized interest rate of 6.77%. At May 31,
1996, the Fund had $802,919 outstanding under the line of credit.
New Mexico F-221 11
<PAGE>
[LOGO OF SHIP ART] Selected data for each share of beneficial
Financial Highlights interest outstanding throughout the period.
................................................................................
<TABLE>
<CAPTION>
Period From
Year Ended Year Ended Year Ended September 16, 1992 to
May 31, 1996 May 31, 1995 May 31, 1994 May 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.01 $ 9.68 $ 10.04 $ 9.58
Income from investment operations:
Net investment income 0.51 0.52 0.53 0.37
Net realized and unrealized gain (loss) on securities (0.19) 0.33 (0.33) 0.46
Total from investment operations 0.32 0.85 0.20 0.83
Less distributions:
From net investment income (0.52) (0.52) (0.53) (0.37)
From net realized capital gains (0.01)
In excess of net realized capital gains (0.02)
Total distributions (0.52) (0.52) (0.56) (0.37)
Net asset value, end of period $ 9.81 $ 10.01 $ 9.68 $ 10.04
Total return/(a)/ 3.18% 9.25% 1.92% 11.72%
Ratios to average net assets (annualized where appropriate):
Actual net of waivers and reimbursements:
Expenses/(b)/ 0.68% 0.67% 0.40% 0.14%
Net investment income 5.10% 5.48% 5.24% 5.28%
Assuming credits and no waivers or reimbursements:
Expenses 1.09% 1.17% 1.14% 1.37%
Net investment income 4.69% 4.98% 4.50% 4.05%
Net assets at end of period (000's) $51,173 $52,150 $51,167 $31,499
Portfolio turnover rate 57.40% 38.06% 38.88% 36.11%
</TABLE>
(a) The total returns shown do not include the effect of applicable front-end
sales charge and are annualized where appropriate.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 0.65%; prior period numbers have not
been restated to reflect these credits.
12 F-222 New Mexico
<PAGE>
[LOGO OF SHIP ART]
Independent Auditors' Report
................................................................................
TO THE SHAREHOLDERS AND TRUSTEES
FLAGSHIP NEW MEXICO
DOUBLE TAX EXEMPT FUND
We have audited the accompanying statement of assets and liabilities, including
the statement of investments in securities and net assets, of the Flagship New
Mexico Double Tax Exempt Fund as of May 31, 1996, the related statement of
operations for the year then ended, and the statements of changes in net assets
and the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the Fund's custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Flagship New
Mexico Double Tax Exempt Fund at May 31, 1996, the results of its operations,
the changes in its net assets and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
July 3, 1996
NEW MEXICO F-223 13
<PAGE>
PART C--OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements:
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information through incorporation
by reference to each Fund's most recent Annual and Semi-Annual Reports:
Portfolio of Investments
Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Report of Independent Public Accountants
(b) Exhibits:
<TABLE>
<C> <S> <C>
1(a). Declaration of Trust of Registrant.
1(b). Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest dated October 11, 1996.
1(c). Certificate for the Establishment and Designation of Classes
dated July 10, 1996.
2. By-Laws of Registrant.
3. Not applicable.
4. Specimen certificates of Shares of each Fund.
5. Form of Management Agreement between Registrant and Nuveen Ad-
visory Corp.
6. Form of Distribution Agreement between Registrant and John
Nuveen & Co. Incorporated.
7. Not applicable.
8. Form of Custodian Agreement between Registrant and Chase Man-
hattan Bank.
9(a). Form of Transfer Agency and Service Agreement between Regis-
trant and State Street Bank and Trust Company.
9(b). Form of Transfer Agency Agreement between Registrant and
Shareholder Services, Inc.
10. Opinion of Fried, Frank, Harris, Shriver & Jacobson.*
11(a). Consent of Arthur Andersen LLP, Independent Public Accoun-
tants.
11(b). Consent of Deloitte & Touche LLP, Independent Public Accoun-
tants.*
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Plan of Distribution and Service Pursuant to Rule 12b-1 for
the Class A Shares, Class B Shares and Class C Shares of each
Fund.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
18. Multi-Class Plan Adopted Pursuant to Rule 18f-3.
99(a). Original Powers of Attorney for the Trustees authorizing,
among others, James J. Wesolowski and Gifford R. Zimmerman to
execute the Registration Statement.
99(b). Certified copy of Resolution of Board of Trustees authorizing
the signing of the names of trustees and officers on the Reg-
istrant's Registration Statement pursuant to power of attor-
ney.
</TABLE>
- --------
* To be filed by pre-effective amendment.
C-1
<PAGE>
ITEM 25: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26: NUMBER OF HOLDERS OF SECURITIES
At January 3, 1997:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SERIES RECORD HOLDERS
--------------- --------------
Nuveen Flagship Arizona Municipal Bond Fund
<S> <C>
Class A Shares.......................................... 2,124
Class B Shares.......................................... 0
Class C Shares.......................................... 83
Class R Shares.......................................... 619
Nuveen Flagship Colorado Municipal Bond Fund
Class A Shares.......................................... 876
Class B Shares.......................................... 0
Class C Shares.......................................... 0
Class R Shares.......................................... 0
Nuveen Flagship Florida Municipal Bond Fund
Class A Shares.......................................... 4,579
Class B Shares.......................................... 0
Class C Shares.......................................... 42
Class R Shares.......................................... 1,645
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Class A Shares.......................................... 85
Class B Shares.......................................... 0
Class C Shares.......................................... 25
Class R Shares.......................................... 0
Nuveen Maryland Municipal Bond Fund
Class A Shares.......................................... 649
Class B Shares.......................................... 0
Class C Shares.......................................... 77
Class R Shares.......................................... 1,799
Nuveen Flagship New Mexico Municipal Bond Fund
Class A Shares.......................................... 986
Class B Shares.......................................... 0
Class C Shares.......................................... 0
Class R Shares.......................................... 0
Nuveen Flagship Oklahoma Municipal Bond Fund
Class A Shares.......................................... 0
Class B Shares.......................................... 0
Class C Shares.......................................... 0
Class R Shares.......................................... 0
Nuveen Flagship Pennsylvania Municipal Bond Fund
Class A Shares.......................................... 1,433
Class B Shares.......................................... 0
Class C Shares.......................................... 129
Class R Shares.......................................... 2,551
Nuveen Flagship Virginia Municipal Bond Fund
Class A Shares.......................................... 2,933
Class B Shares.......................................... 0
Class C Shares.......................................... 168
Class R Shares.......................................... 2,135
</TABLE>
C-2
<PAGE>
ITEM 27: INDEMNIFICATION
Section 4 of Article XII of Registrant's Amended and Restated Declaration of
Trust provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being or
having been such a Trustee, director, officer, employee or agent and against
amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Covered Person may now or hereafter be entitled,
shall continue as to a person who has ceased to be such a Covered Person and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
----------------
The trustees and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith,
C-3
<PAGE>
gross negligence and willful disregard of duty (i.e., where the insured did not
act in good faith for a purpose he or she reasonably believed to be in the best
interest of Registrant or where he or she shall have had reasonable cause to
believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
ITEM 28: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Flagship
Admiral Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free
Money Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., and Nuveen
Tax-Free Reserves, Inc. It also serves as investment adviser to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen
Municipal Market Opportunity Fund, Inc., Nuveen California Municipal Market
Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen
California Investment Quality Municipal Fund, Inc., Nuveen New York Investment
Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment
Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal
Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select
Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund,
Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal
Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income
Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen
Premier Insured Municipal Income Fund, Inc. Nuveen Premium Income Municipal
Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc.,
Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income
Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, and Nuveen Insured Premium Income Municipal Fund 2. Nuveen
Advisory Corp. has no other clients or business at the present time. The
principal business address for all of these investment companies is 333 West
Wacker Drive, Chicago, Illinois 60606.
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than Timothy R.
Schwertfeger and Anthony T. Dean, of the investment adviser has engaged during
the last two years for his account or in the capacity of director, officer,
employee, partner or trustee, see the descriptions under "Management" in the
Statement of Additional Information.
Timothy R. Schwertfeger is Chairman and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Schwertfeger has, during the last two years, been
Chairman and formerly Executive Vice President and Director of the John Nuveen
Company, John Nuveen & Co. Incorporated, and Nuveen Institutional Advisory
Corp. Anthony T. Dean is President and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Dean has, during the last two years, been Executive
Vice President and Director of The John Nuveen Company and John Nuveen & Co.
Incorporated; and Director of Nuveen Institutional Advisory Corp.
C-4
<PAGE>
ITEM 29: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co., Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies:Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship,
Nuveen Flagship Multistate Trust IV, Nuveen Municipal Trust, Nuveen Flagship
Municipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free
Reserves, Inc., Flagship Admiral Funds Inc., and Nuveen Investment Trust.
Nuveen also acts as depositor and principal underwriter of the Nuveen Tax-
Exempt Unit Trust, a registered unit investment trust. Nuveen has also served
or is serving as co-managing underwriter to the following closed-end management
type investment companies: Nuveen Municipal Value Fund, Inc., Nuveen California
Municipal Value Fund, Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen
Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund, Inc., Nuveen
Performance Plus Municipal Fund, Inc., Nuveen California Performance Plus
Municipal Fund, Inc., Nuveen New York Performance Plus Municipal Fund, Inc.,
Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal Market Opportunity
Fund, Inc., Nuveen California Municipal Market Opportunity Fund, Inc., Nuveen
Investment Quality Municipal Fund, Inc., Nuveen California Investment Quality
Municipal Fund, Inc., Nuveen New York Investment Quality Municipal Fund, Inc.,
Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida Investment Quality
Municipal Fund, Nuveen New Jersey Investment Quality Municipal Fund, Inc.,
Nuveen Pennsylvania Investment Quality Municipal Fund, Nuveen Select Quality
Municipal Fund, Inc., Nuveen California Select Quality Municipal Fund, Inc.,
Nuveen New York Select Quality Municipal Fund, Inc., Nuveen Quality Income
Municipal Fund, Inc., Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen
Florida Quality Income Municipal Fund, Nuveen Michigan Quality Income Municipal
Fund, Inc., Nuveen Ohio Quality Income Municipal Fund, Inc., Nuveen Texas
Quality Income Municipal Fund, Nuveen California Quality Income Municipal Fund,
Inc., Nuveen New York Quality Income Municipal Fund, Inc., Nuveen Premier
Municipal Income Fund, Inc., Nuveen Premier Insured Municipal Income Fund,
Inc., Nuveen Select Tax-Free Income Portfolio, Nuveen Premium Income Municipal
Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc.,
Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income
Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select
Tax-Free Income Portfolio 2, Nuveen Insured California Select Tax-Free Income
Portfolio, Nuveen Insured New York Select Tax-Free Income Portfolio and Nuveen
Select Tax-Free Income Portfolio 3.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- --------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger Chairman of the Board, Chairman of the Board
333 West Wacker Drive Chief Executive Officer and Trustee
Chicago, IL 60606
Anthony T. Dean President President and Trustee
333 West Wacker Drive
Chicago, IL 60606
Bruce P. Bedford Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
John P. Amboian Executive Vice President None
333 West Wacker Drive and Chief Financial Officer
Chicago, IL 60606
Richard P. Davis Vice President None
One South Main Street
Dayton, OH 45402
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITIONS AND OFFICES OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ----------------------------------------------------------------------------------
<S> <C> <C>
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President None
333 West Wacker Drive
Chicago, IL 60606
Robert D. Freeland Vice President None
333 West Wacker Drive
Chicago, IL 60606
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Robert B. Kuppenheimer Vice President None
19900 MacArthur Blvd.
Irvine, CA 92612
Larry W. Martin Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Assistant Secretary
Chicago, IL 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
O. Walter Renfftlen Vice President Vice President and
333 West Wacker Drive and Controller Controller
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Assistant Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
ITEM 30: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
C-6
<PAGE>
The Chase Manhattan Bank, 770 Broadway, New York, New York 10003 maintains all
general and subsidiary ledgers, journals, trial balances, records of all
portfolio purchases and sales, and all other required records not maintained by
Nuveen Advisory Corp., Shareholder Services, Inc. or Boston Financial.
Shareholder Services, Inc., P.O. Box 5330, Denver, Colorado 80217-5330 and
Boston Financial Data Services, 225 Franklin Street, Boston, Massachusetts
02106 maintain all the required records in their capacity as transfer, dividend
paying, and shareholder service agents for the Funds.
ITEM 31: MANAGEMENT SERVICES
Not applicable.
ITEM 32: UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest Annual Report to Sharehold-
ers upon request and without charge.
(d) The Registrant agrees to call a meeting of shareholders for the purpose of
voting upon the question of the removal of any trustee or trustees when re-
quested to do so in writing by the record holders of at least 10% of the
Registrant's outstanding shares and to assist the shareholders in
communications with other shareholders as required by section 16(c) of the
Act.
C-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT THIS REGISTRATION STATEMENT
MEETS ALL THE REQUIREMENTS FOR EFFECTIVENESS UNDER PARAGRAPH (B) OF RULE 485
UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 10TH DAY OF
JANUARY, 1997.
NUVEEN FLAGSHIP MULTISTATE TRUST I
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
------------------------------- Vice President and January 10, 1997
O. Walter Renfftlen Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Trustee (Principal
Executive Officer)
Anthony T. Dean President and Trustee /s/ Gifford R. Zimmerman
Lawrence H. Brown Trustee By____________________________
Anne E. Impellizzeri Trusee Gifford R. Zimmerman
Margaret K. Rosenheim Trustee Attorney-in-Fact
Peter R. Sawers Trustee January 10, 1997
</TABLE>
Robert P. Bremner Trustee
William J. Schneider Trustee
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, JAMES J. WESOLOWSKI
AND GIFFORD R. ZIMMERMAN TO EXECUTE THIS REGISTRATION STATEMENT, AND
AMENDMENTS THERETO, FOR EACH OF THE OFFICERS AND TRUSTEES OF REGISTRANT ON
WHOSE BEHALF THIS REGISTRATION STATEMENT IS FILED, HAS BEEN EXECUTED AND IS
INCORPORATED BY REFERENCE TO THIS REGISTRATION STATEMENT.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
1(a). Declaration of Trust of Registrant.
1(b). Amended and Restated Establishment and Designation of
Series of Shares of Beneficial Interest dated October
11, 1996.
1(c). Certificate for the Establishment and Designation of
Classes dated July 10, 1996.
2. By-Laws of Registrant.
3. Not applicable.
4. Specimen certificates of Shares of each Fund.
5. Form of Management Agreement between Registrant and
Nuveen Advisory Corp.
6. Form of Distribution Agreement between Registrant and
John Nuveen & Co. Incorporated.
7. Not applicable.
8. Form of Custodian Agreement between Registrant and
Chase Manhattan Bank.
9(a). Form of Transfer Agency and Service Agreement between
Registrant and State Street Bank and Trust Company.
9(b). Form of Transfer Agency Agreement between Registrant
and Shareholder Services, Inc.
10. Opinion of Fried, Frank, Harris, Shriver & Jacobson.*
11(a). Consent of Arthur Andersen LLP, Independent Public
Accountants.
11(b). Consent of Deloitte & Touche LLP, Independent Public
Accountants.*
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Plan of Distribution and Service Pursuant to Rule
12b-1 for the Class A Shares, Class B Shares and
Class C Shares of each Fund.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
18. Multi-Class Plan Adopted Pursuant to Rule 18f-3.
99(a). Original Powers of Attorney for the Trustees autho-
rizing, among others, James J. Wesolowski and Gifford
R. Zimmerman to execute the Registration Statement.
99(b). Certified copy of Resolution of Board of Trustees au-
thorizing the signing of the names of trustees and
officers on the Registrant's Registration Statement
pursuant to power of attorney.
</TABLE>
- --------
* To be filed by pre-effective amendment.
<PAGE>
EXHIBIT 1(b)
NUVEEN FLAGSHIP MULTISTATE TRUST I
AMENDED AND RESTATED ESTABLISHMENT AND
DESIGNATION OF SERIES OF SHARES OF BENEFICIAL INTEREST
WHEREAS, pursuant to Section 2 of Article IV of the Declaration of Trust
dated July 1, 1996 (the "Declaration"), of Nuveen Flagship Multistate Trust I, a
Massachusetts business trust (the "Trust"), the Trustees of the Trust, on July
10, 1996, established and designated certain series of Shares (as defined in the
Declaration) of the Trust by the execution of an instrument establishing and
designating such series and setting forth the special and relative rights of
such series;
WHEREAS, the Trustees of the Trust now desire to amend and restate such
instrument in order to establish and designate additional series of Shares and
redesignate certain of the series previously designated;
NOW THEREFORE, the Trustees of the Trust, this 9th day of October, 1996,
hereby establish and designate nine series of Shares (each a "Fund") to have the
special and relative rights described below.
1. The following nine Funds are established and designated:
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Oklahoma Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other property and use investment techniques
<PAGE>
-2-
as from time to time described in the Trust's then currently effective
registration statement under the Securities Act of 1933 to the extent pertaining
to the offering of Shares of such Fund. Each Share of each Fund shall be
redeemable, shall be entitled to one vote (or fraction thereof in respect of a
fractional share) on matters on which Shareholders of that Fund may vote in
accordance with the Declaration, shall represent a pro rata beneficial interest
in the assets allocated or belonging to such Fund, and shall be entitled to
receive its pro rata share of the net assets of such Fund upon liquidation of
such Fund, all as provided in Article IV, Sections 2 and 5 of the Declaration.
The proceeds of the sale of Shares of each Fund, together with any income and
gain thereon, less any diminution or expenses thereof, shall irrevocably belong
to such Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to such Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rules, and by the Declaration.
4. The assets and liabilities of the Trust shall be allocated among each
Fund as set forth in Article IV, Section 5 of the Declaration.
5. The designation of the nine Funds hereby shall not impair the power of
the Trustees from time to time to designate additional series of Shares of the
Trust.
6. Subject to the applicable provisions of the 1940 Act and the
provisions of Article IV, Sections 2 and 5 of the Declaration, the Trustees
shall have the right at any time and from time to time to reallocate assets and
expenses or to change the designation of each Fund now or hereafter created, or
to otherwise change the special relative rights of each Fund designated hereby
without any action or consent of the Shareholders.
IN WITNESS WHEREOF, the undersigned, being a majority of the Trustees of
the Trust have executed this instrument as of this 11th day of October, 1996.
<PAGE>
-3-
/s/ Anthony T. Dean /s/ Timothy R. Schwertfeger
- ----------------------------- -------------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
- ----------------------------- -------------------------------
Lawrence H. Brown, Anne E. Impellizerri,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
- ----------------------------- -------------------------------
Margaret K. Rosenheim, Peter R. Sawers,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named person(s) who are known to me to
be Trustee(s) of the Trust whose name(s) and signature(s) are affixed to the
foregoing Designation of Series and who acknowledged the same to be his/her free
act and deed, before me this 9 day of October, 1996.
- ---------------------------------- /s/ Olivia Rubio
"OFFICIAL SEAL" -------------------------------
Olivia Rubio Notary Public
Notary Public, State of Illinois My Commission Expires: ________
My Commission Expires 2/25/97
- ----------------------------------
<PAGE>
-4-
- ----------------------------- -------------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/ Lawrence H. Brown
- ----------------------------- -------------------------------
Lawrence H. Brown, Anne E. Impellizerri,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
- ----------------------------- -------------------------------
Margaret K. Rosenheim, Peter R. Sawers,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named person(s) who are known to me to
be Trustee(s) of the Trust whose name(s) and signature(s) are affixed to the
foregoing Designation of Series and who acknowledged the same to be his/her free
act and deed, before me this 10 day of October, 1996.
- ---------------------------------- /s/ Olivia Rubio
"OFFICIAL SEAL" -------------------------------
Olivia Rubio Notary Public
Notary Public, State of Illinois My Commission Expires: ________
My Commission Expires 2/25/97
- ----------------------------------
<PAGE>
-5-
- ----------------------------- -------------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/ Anne E. Impellizerri
- ----------------------------- -------------------------------
Lawrence H. Brown, Anne E. Impellizerri,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
- ----------------------------- -------------------------------
Margaret K. Rosenheim, Peter R. Sawers,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named person(s) who are known to me to
be Trustee(s) of the Trust whose name(s) and signature(s) are affixed to the
foregoing Designation of Series and who acknowledged the same to be his/her free
act and deed, before me this 11 day of October, 1996.
- ---------------------------------- /s/ Olivia Rubio
"OFFICIAL SEAL" -------------------------------
Olivia Rubio Notary Public
Notary Public, State of Illinois My Commission Expires: ________
My Commission Expires 2/25/97
- ----------------------------------
<PAGE>
-6-
- ----------------------------- -------------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
- ----------------------------- -------------------------------
Lawrence H. Brown, Anne E. Impellizerri,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/ Margaret K. Rosenheim
- ----------------------------- -------------------------------
Margaret K. Rosenheim, Peter R. Sawers,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named person(s) who are known to me to
be Trustee(s) of the Trust whose name(s) and signature(s) are affixed to the
foregoing Designation of Series and who acknowledged the same to be his/her free
act and deed, before me this 11 day of October, 1996.
- ---------------------------------- /s/ Olivia Rubio
"OFFICIAL SEAL" -------------------------------
Olivia Rubio Notary Public
Notary Public, State of Illinois My Commission Expires: ________
My Commission Expires 2/25/97
- ----------------------------------
<PAGE>
-7-
- ----------------------------- -------------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
- ----------------------------- -------------------------------
Lawrence H. Brown, Anne E. Impellizerri,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/ Peter R. Sawers
- ----------------------------- -------------------------------
Margaret K. Rosenheim, Peter R. Sawers,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named person(s) who are known to me to
be Trustee(s) of the Trust whose name(s) and signature(s) are affixed to the
foregoing Designation of Series and who acknowledged the same to be his/her free
act and deed, before me this 11 day of October, 1996.
- ---------------------------------- /s/ Olivia Rubio
"OFFICIAL SEAL" -------------------------------
Olivia Rubio Notary Public
Notary Public, State of Illinois My Commission Expires: ________
My Commission Expires 2/25/97
- ----------------------------------
<PAGE>
EXHIBIT 4
Number Class [ ] Shares
Nuveen Flagship Multistate Trust I
[Name of Series]
Organized Under the Laws of the Commonwealth of Massachusetts
This is to certify that See Reverse for
Certain Definitions
is the owner of
CUSIP [ ]
Fully Paid and Non-Assessable Class [ ] Shares
___________________________________________________________________________
of beneficial interest, with the par value of one-cent ($.01) each, of the [Name
of Series] series of the Nuveen Flagship Multistate Trust I (herein called the
"Trust") transferable on the books of the Trust by the holder hereof in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed. The shares represented by this certificate are issued and held subject
to all of the provisions of the Declaration of Trust establishing the Trust as a
Massachusetts business trust and any amendments thereto and any designation of
classes, and the By-Laws of the Trust, and any amendments thereto, copies of
which are on file with the Transfer Agent, to all of which the holder by
acceptance hereof expressly assents. This certificate is executed on behalf of
the Trust by the officers as officers and not individually and the obligations
hereof are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of the Trust.
This certificate is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACsimile signatures of its duly authorized officers.
Dated:
Nuveen Flagship Multistate
Trust I
Assistant Secretary, Nuveen Flagship Chairman,
Multistate Trust I Nuveen Flagship Multistate
Trust I
<PAGE>
Nuveen Flagship Multistate Trust I
[Name of Series]
Nuveen Flagship Multistate Trust I (the "Trust") will furnish to any
shareholder, upon request and without charge, a full statement of the
designations, preferences, limitation as to dividends, qualifications and terms
and conditions of redemption and relative rights and preferences of the shares
of each class or series of the Trust authorized to be issued, so far as they
have been determined, and the authority of the Board of Trustees to determine
the relative rights and preferences of subsequent classes or series. Any such
request should be addressed to the Secretary of the Trust.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT - ___________ Custodian ____________ under Uniform gifts
(Cust) (Minor)
to Minors Act ____________
(State)
Additional abbreviations may also be used though not in the above list.
__________________________________________________________________________
For value received,____________ hereby sell, assign and transfer unto
_____________________________________
Please insert social security or other identifying number of assignee
___________________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
_____________________________________________________________________________
___________________________________________________________________ Shares of
the beneficial interest represented by the within certificate, and do hereby
irrevocably constitute and appoint _________________________________________
________________________________________________________________Attorney to
<PAGE>
transfer the said shares on the books of the within-named Trust with full power
of substitution in the premises.
Dated, _________________________ NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the certificate in every
particular, without alteration or
enlargement or any change whatever.
Owner___________________________ The signature(s) must be guaranteed by one
of the following entities: U.S. bank,
trust company, credit union, savings
association, or foreign bank having a U.S.
correspondent bank: a U.S. registered
securities dealer or broker, municipal
securities dealer or broker, or government
securities dealer or broker; or a national
securities exchange, registered securities
association or clearing agency.
Signature of Co-Owner, if any
_________________________________
Signature(s) guaranteed by:
________________________________________________________________________________
PLEASE NOTE: This document contains a watermark when viewed at an angle. It is
invalid without this watermark: NUVEEN
________________________________________________________________________________
This Space Must Not Be Covered In Any Way
<PAGE>
EXHIBIT 5
INVESTMENT MANAGEMENT AGREEMENT
-------------------------------
AGREEMENT made as of the 1st day of February, l997, by and between NUVEEN
FLAGSHIP MULTISTATE TRUST I, a Massachusetts business trust (the "Fund"), and
NUVEEN ADVISORY CORP., a Delaware corporation (the "Adviser").
W I T N E S S E T H
- - - - - - - - - -
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser for,
and to manage the investment and reinvestment of the assets of each of the
Fund's series as set forth on Exhibit A attached hereto (the "Portfolios") or as
may exist from time to time in accordance with the Fund's investment objective
and policies and limitations relating to such Portfolio, and to administer the
Fund's affairs to the extent requested by and subject to the supervision of the
Board of Trustees of the Fund for the period and upon the terms herein set
forth. The investment of the assets of each Portfolio shall be subject to the
Fund's policies, restrictions and limitations with respect to securities
investments as set forth in the Fund's registration statement on Form N-1A under
the Securities Act of 1933 and the Investment Company Act of l940 covering the
Fund's Portfolios' shares of beneficial interest, including the Prospectus and
Statement of Additional Information forming a part thereof, all as filed with
the Securities and Exchange Commission and as from time to time amended, and all
applicable laws and the
<PAGE>
regulations of the Securities and Exchange Commission relating to the management
of registered open-end, management investment companies.
The Adviser accepts such employment and agrees during such period to render such
services, to furnish office facilities and equipment and clerical, bookkeeping
and administrative services (other than such services, if any, provided by the
Fund's custodian, transfer agent and shareholder service agent, and the like)
for the Fund, to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions,
and to assume the obligations herein set forth for the compensation herein
provided. The Adviser shall, for all purposes herein provided, be deemed to be
an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for nor represent the Fund in any
way, nor otherwise be deemed an agent of the Fund.
2. For the services and facilities described in Section l, the Fund will pay to
the Adviser, at the end of each calendar month, an investment management fee
related to each of the Fund's Portfolios. For each Portfolio, calculated
separately, the fees shall be computed at the rate of:
RATE NET ASSETS
---- ----------
.5500% For the first $125 million
.5375% For the next $125 million
.5250% For the next $250 million
.5125% For the next $500 million
.5000% For the next $1 billion
.4750% For assets over $2 billion
2
<PAGE>
For the month and year in which this Agreement becomes effective, or terminates,
and for any month and year in which a Portfolio is added or eliminated from the
Fund, there shall be an appropriate proration on the basis of the number of days
that the Agreement shall have been in effect, or the Portfolio shall have
existed, during the month and year, respectively. The services of the Adviser
to the Fund under this Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services or other services to others so long as
its services hereunder are not impaired thereby.
3. The net asset value of each Portfolio shall be calculated as provided in the
Declaration of Trust of the Fund. On each day when net asset value is not
calculated, the net asset value of a share of beneficial interest of a Portfolio
shall be deemed to be the net asset value of such share as of the close of
business on the last day on which such calculation was made for the purpose of
the foregoing computations.
4. Regardless of any of the above provisions, the Adviser guarantees that the
total expenses of each Portfolio in any fiscal year, exclusive of taxes,
interest, brokerage commissions, and extraordinary expenses such as litigation
costs, shall not exceed, and the Adviser undertakes to pay or refund to the
Portfolio any amount up to but not greater than the aggregate fees received by
the Adviser under this Agreement for such fiscal year, the limitation imposed by
any jurisdiction in which the Fund continues to offer and sell shares of the
Portfolio after exceeding such limitation. Except as otherwise agreed to by the
Fund or the Adviser or unless otherwise required by the law or regulation of any
state, any reimbursement by the Adviser to a Portfolio
3
<PAGE>
under this section shall not exceed the management fee payable to the Adviser by
a Portfolio under this Agreement.
5. The Adviser shall arrange for officers or employees of the Adviser to serve,
without compensation from the Fund, as trustees, officers or agents of the Fund,
if duly elected or appointed to such positions, and subject to their individual
consent and to any limitations imposed by law.
6. Subject to applicable statutes and regulations, it is understood that
officers, trustees, or agents of the Fund are, or may be, interested in the
Adviser as officers, directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Adviser may be interested in
the Fund otherwise than as trustees, officers or agents.
7. The Adviser shall not be liable for any loss sustained by reason of the
purchase, sale or retention of any security, whether or not such purchase, sale
or retention shall have been based upon the investigation and research made by
any other individual, firm or corporation, if such recommendation shall have
been selected with due care and in good faith, except loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the Adviser
in the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
4
<PAGE>
8. The Adviser currently manages other investment accounts and funds, including
those with investment objectives similar to the Fund, and reserves the right to
manage other such accounts and funds in the future. Securities considered as
investments for a Portfolio of the Fund may also be appropriate for other
Portfolios or for other investment accounts and funds that may be managed by the
Adviser. Subject to applicable laws and regulations, the Adviser will attempt
to allocate equitably portfolio transactions among the Fund's Portfolios and the
portfolios of its other investment accounts and funds purchasing securities
whenever decisions are made to purchase or sell securities by a Portfolio and
another fund's portfolio or one or more of such other accounts or funds
simultaneously. In making such allocations, the main factors to be considered
by the Adviser will be the respective investment objectives of the Fund
Portfolio or Portfolios purchasing such securities and such other accounts and
funds, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment by the Fund Portfolios and
such other accounts and funds, the size of investment commitments generally held
by the Fund Portfolios and such accounts and funds, and the opinions of the
persons responsible for recommending investments to the Fund and such other
accounts and funds.
9. This Agreement shall continue in effect until August 1, 1997, unless and
until terminated by either party as hereinafter provided, and shall continue in
force from year to year thereafter, but only as long as such continuance is
specifically approved, at least annually, in the manner required by the
Investment Company Act of l940.
5
<PAGE>
This Agreement shall automatically terminate in the event of its assignment, and
may be terminated at any time without the payment of any penalty by the Fund or
by the Adviser upon sixty (60) days' written notice to the other party. The
Fund may effect termination by action of the Board of Trustees, or, with respect
to any Fund Portfolio, by vote of a majority of the outstanding voting
securities of that Portfolio , accompanied by appropriate notice.
This Agreement may be terminated, at any time, without the payment of any
penalty, by the Board of Trustees of the Fund, or, with respect to any Fund
Portfolio, by vote of a majority of the outstanding voting securities of that
Portfolio, in the event that it shall have been established by a court of
competent jurisdiction that the Adviser, or any officer or director of the
Adviser, has taken any action which results in a breach of the covenants of the
Adviser set forth herein.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation, described in Section
2, earned prior to such termination.
10. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule, or otherwise, the remainder shall not be thereby
affected.
6
<PAGE>
11. The Adviser and its affiliates reserve the right to grant, at any time, the
use of the name "Nuveen" or the name "Flagship", or any approximation or
abbreviation thereof, to any other investment company or business enterprise.
Upon termination of this Agreement by either party, or by its terms, the Fund
shall thereafter refrain from using any name of the Fund which includes "Nuveen"
or "Flagship" or any approximation or abbreviation thereof, or is sufficiently
similar to such name as to be likely to cause confusion with such name, and
shall not allude in any public statement or advertisement to the former
association.
12. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for receipt of such notice.
13. The Fund's Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts. This Agreement is executed on behalf of the Fund
by the Fund's officers as officers and not individually and the obligations
imposed upon the Fund by this Agreement are not binding upon any of the Fund's
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Fund.
7
<PAGE>
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year above written.
NUVEEN FLAGSHIP MULTISTATE TRUST I
by:
---------------------------
Vice President
Attest:
------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
by:
--------------------------
Vice President
Attest:
------------------------
Assistant Secretary
8
<PAGE>
Exhibit A
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
9
<PAGE>
EXHIBIT 6
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made as of the 1st day of February, l997 between NUVEEN
FLAGSHIP MULTISTATE TRUST I, a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Fund"), and JOHN NUVEEN & CO. INCORPORATED,
a Delaware corporation (the "Underwriter").
W I T N E S S E T H
- - - - - - - - - -
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of shares of beneficial interest, par value $.0l per share,
including such series or classes of shares as may now or hereafter be authorized
(the "Shares"), in jurisdictions wherein Shares may legally be offered for sale;
provided, however, that the Fund, in its absolute discretion, may: (a) issue or
sell Shares directly to holders of Shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of dividends or distributions, or otherwise; and (b) issue or
sell Shares at net asset value in connection with merger or consolidation with,
or acquisition of the assets of, other investment companies or similar
companies.
2. The Underwriter hereby accepts appointment as agent for the distribution of
the Shares and agrees that it will use its best efforts to sell such part of the
authorized Shares remaining unissued as from time to time shall be effectively
registered under the Securities Act of l933 ("Securities Act"), at prices
determined as hereinafter provided and on terms hereinafter set forth, all
subject to applicable Federal and State laws and regulations and to the
Declaration of Trust of the Fund.
3. The Fund agrees that it will use its best efforts to keep effectively
registered under the Securities Act for sale, as herein contemplated, such
Shares as the Underwriter shall reasonably request and as the Securities and
Exchange Commission shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Fund may terminate, suspend,
or withdraw the offering of the Shares, or Shares of any series or class,
whenever, in its sole discretion, it deems such action to be desirable.
5. The Underwriter shall sell Shares to, or through, brokers, dealers, banks or
other qualified financial intermediaries (hereinafter referred to as "dealers"),
or others, in such manner not inconsistent with the provisions hereof and the
then effective Registration Statement of the Fund under the Securities Act (and
related Prospectus and Statement of Additional Information) as the Underwriter
may determine from time to time, provided that no dealer, or other person, shall
be appointed nor authorized to act as agent of the Fund without the prior
consent of the Fund. The Underwriter shall have the right to enter into
agreements with brokers, dealers and banks (referred to herein as "dealers") of
its choice for the sale of Shares and fix therein the portion of
<PAGE>
the sales charge which may be allocated to such dealers; provided that the Fund
shall approve the form of such agreements and shall evidence such approval by
filing said form and any amendments thereto as attachments to this Agreement,
which shall be filed as an exhibit to the Fund's currently effective
registration statement under the Securities Act. Shares sold to dealers shall be
for resale by such dealers only at the public offering price(s) set forth in the
Fund's then current Prospectus. The current forms of such agreements are
attached hereto as Exhibits 1, 2 and 3.
6. Shares offered for sale, or sold by the Underwriter, shall be so offered or
sold at a price per Share determined in accordance with the then current
Prospectus relating to the sale of Shares except as departure from such prices
shall be permitted by the rules and regulations of the Securities and Exchange
Commission. Any public offering price shall be the net asset value per Share
plus a sales charge of not more than 4.75% of such public offering price.
Shares may be sold at net asset value without a sales charge to such class or
classes of investors or in such class or classes of transactions as may be
permitted under applicable rules of the Securities and Exchange Commission and
as described in the then current Prospectus of the Fund. The net asset value
per Share of each series or class shall be calculated in accordance with the
Declaration of Trust of the Fund and shall be determined in the manner, and at
the time, set forth in the then current Prospectus of the Fund relating to such
Shares.
7. The price the Fund shall receive for all Shares purchased from the Fund
shall be the net asset value used in determining the public offering price
applicable to the sale of such Shares. The excess, if any, of the sales price
over the net asset value of Shares sold by the Underwriter as agent shall be
retained by the Underwriter as a commission for its services hereunder. Out of
such commission, the Underwriter may allow commissions or concessions to dealers
in such amounts as the Underwriter shall determine from time to time. Except as
may be otherwise determined by the Underwriter and the Fund from time to time,
such commissions or concessions shall be uniform to all dealers.
8. The Underwriter shall issue and deliver, or cause to be issued and
delivered, on behalf of the Fund such confirmations of sales made by it as
agent, pursuant to this Agreement, as may be required. At, or prior to, the
time of issuance of Shares, the Underwriter will pay, or cause to be paid, to
the Fund the amount due the Fund for the sale of such Shares. Certificates
shall be issued, or Shares registered on the transfer books of the Fund, in such
names and denominations as the Underwriter may specify.
9. The Fund will execute any and all documents, and furnish any and all
information, which may be reasonably necessary in connection with the
qualification of the Shares for sale (including the qualification of the Fund as
a dealer, where necessary or advisable) in such states as the Underwriter may
reasonably request (it being understood that the Fund shall not be required,
without its consent, to comply with any requirement which, in its opinion, is
unduly burdensome).
2
<PAGE>
l0. The Fund will furnish to the Underwriter, from time to time, such
information with respect to the Fund and the Shares as the Underwriter may
reasonably request for use in connection with the sale of Shares. The
Underwriter agrees that it will not use or distribute, nor will it authorize
dealers or others to use, distribute or disseminate, in connection with the sale
of such Shares, any statements other than those contained in the Fund's current
Prospectus and Statement of Additional Information, except such supplemental
literature or advertising as shall be lawful under Federal and State securities
laws and regulations, and that it will furnish the Fund with copies of all such
material.
ll. The Underwriter shall order Shares from the Fund only to the extent that it
shall have received purchase orders therefor. The Underwriter will not make,
nor authorize any dealers or others, to make: (a) any short sale of Shares; or
(b) any sale of Shares to any officer or trustee of the Fund, nor to any officer
or trustee of the Underwriter, or of any corporation or association furnishing
investment advisory, managerial, or supervisory services to the Fund, nor to any
such corporation or association, unless such sales are made in accordance with
the then current Prospectus relating to the sale of such Shares.
l2. In selling Shares for the account of the Fund, the Underwriter will in all
respects conform to the requirements of all Federal and State laws and the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
relating to such sales, and will indemnify and save harmless the Fund from any
damage or expense on account of any wrongful act by the Underwriter or any
employee, representative, or agent of the Underwriter. The Underwriter will
observe and be bound by all the provisions of the Declaration of Trust of the
Fund (and of any fundamental policies adopted by the Fund pursuant to the
Investment Company Act of l940, notice of which shall have been given by the
Fund to the Underwriter) which at the time in any way require, limit, restrict,
prohibit or otherwise regulate any action on the part of the Underwriter.
l3. The Underwriter will require each dealer to conform to the provisions hereof
and of the Registration Statement (and related Prospectus) at the time in effect
under the Securities Act with respect to the public offering price of the
Shares, and neither the Underwriter nor any such dealer shall withhold the
placing of purchase orders so as to make a profit thereby.
l4. The Fund will pay, or cause to be paid, expenses (including the fees and
disbursements of its own counsel) of any registration of Shares under the
Securities Act, expenses of qualifying or continuing the qualification of the
Shares for sale and, in connection therewith, of qualifying or continuing the
qualification of the Fund as a dealer or broker under the laws of such states as
may be designated by the Underwriter under the conditions herein specified, and
expenses incident to the issuance of the Shares such as the cost of Share
certificates, issue taxes, and fees of the transfer and shareholder service
agent. The Underwriter will pay, or cause to be paid, all expenses (other than
expenses which any dealer may bear pursuant to any agreement with the
Underwriter) incident to the sale and distribution of the Shares issued or sold
hereunder, including, without limiting the generality of the foregoing, all:
(a) expenses of printing and distributing any Prospectus and Statement of
Additional Information and of preparing, printing
3
<PAGE>
and distributing or disseminating any other literature, advertising and selling
aids in connection with such offering of the Shares for sale (except that such
expenses need not include expenses incurred by the Fund in connection with the
preparation, printing and distribution of any report or other communication to
holders of Shares in their capacity as such), and (b) expenses of advertising in
connection with such offering. No transfer taxes, if any, which may be payable
in connection with the issue or delivery of Shares sold as herein contemplated,
or of the certificates for such Shares, shall be borne by the Fund, and the
Underwriter will indemnify and hold harmless the Fund against liability for all
such transfer taxes.
l5. This agreement shall continue in effect until August l, l997, unless and
until terminated by either party as hereinafter provided, and will continue from
year to year thereafter, but only so long as such continuance is specifically
approved, at least annually, in the manner required by the Investment Company
Act of l940. Either party hereto may terminate this agreement on any date by
giving the other party at least six months' prior written notice of such
termination, specifying the date fixed therefor. Without prejudice to any other
remedies of the Fund in any such event, the Fund may terminate this agreement at
any time immediately upon any failure of fulfillment of any of the obligations
of the Underwriter hereunder.
Without prejudice to any other remedies of the Fund in any such event, the Fund
may terminate this Agreement at any time immediately upon any failure of
fulfillment of any of the obligations of the Underwriter hereunder.
l6. This agreement shall automatically terminate in the event of its assignment.
l7. Any notice under this agreement shall be in writing, addressed, and
delivered or mailed, postage pre-paid, to the other party at such address as
such other party may designate for the receipt of such notice.
18. The Declaration of Trust of the Fund on file with the Secretary of State of
the Commonwealth of Massachusetts was executed on behalf of the Fund by the
initial trustees of the Fund and not individually, and any obligation of the
Fund shall be binding only upon the assets of the Fund (or applicable series
thereof) and shall not be binding upon any trustee, officer or shareholder of
the Fund. Neither the authorization of any action by the trustees or
shareholders of the Fund nor the execution of this agreement on behalf of the
Fund shall impose any liability upon any Trustee, officer or shareholder of the
Fund.
4
<PAGE>
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this agreement
to be executed on its behalf as of the day and year first above written.
NUVEEN FLAGSHIP MULTISTATE TRUST I
By_____________________________________
Vice President
Attest:
__________________________________________
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By____________________________________
Vice President
Attest:
______________________________
Assistant Secretary
5
<PAGE>
EXHIBIT 8
TABLE OF CONTENTS
Page
----
1. Appointment 1
2. Delivery of Documents 1
3. Definitions 3
4. Delivery and Registration of the Property 4
5. Voting Rights 5
6. Receipt and Disbursement of Money 5
6A. Advances By Custodian 7
7. Receipt and Delivery of Securities 8
8. Use of Securities Depository or the Book Entry System 9
9 Segregated Account 11
10. Instructions Consistent With The Declaration, etc. 12
11. Transaction Not Requiring Instructions, 15
Collection of Income and Other Payments 15
Miscellaneous Transactions 16
12. Transactions Requiring Instructions 16
13. Purchase of Securities 19
14. Sale of Securities 20
15. Not In Use 20
16. Records 20
17. Cooperation with Accountants 21
18. Reports to Fund Independent Public Accountants 21
19. Confidentiality 21
20. Equipment Failures 22
21. Right to Receive Advice 22
22. Compliance with Governmental Rules and Regulations 23
23. Compensation 23
24. Indemnification 23
25. Responsibility of Chase Manhattan Bank 25
26. Collection of Income 26
27. Ownership Certificates for Tax Purposes 26
28. Effective Period; Terminations and Amendment 27
29. Successor Custodian 28
30. Notices 29
31. Further Actions 29
32. Amendments 29
33. Additional Funds 29
34. Miscellaneous 30
35. Declaration of Trust 30
<PAGE>
CUSTODY AGREEMENT
=================
THIS AGREEMENT is made as of the 1st day of February, 1997 by and between
NUVEEN FLAGSHIP MULTISTATE TRUST I (the "Fund"), and THE CHASE MANHATTAN BANK.
W I T N E S S E T H
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interest in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund currently has authorized the nine series listed on
Appendix A (such series together with all other series subsequently established
by the Fund and made subject to this Contract in accordance with paragraph 33,
being herein referred to as the "Fund(s)"):
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints The Chase Manhattan Bank to act
as custodian of its portfolio securities, cash and other property on the terms
set forth in this Agreement. The Chase Manhattan Bank accepts such appointment
and agrees to furnish the services herein set forth in return for the
compensation as provided in Section 23 of this Agreement.
2. DELIVERY OF DOCUMENTS. The Fund has furnished The Chase Manhattan Bank
with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the appointment
of The Chase Manhattan Bank as Custodian of the portfolio securities, cash and
other property of the Fund and approving this Agreement;
<PAGE>
(b) Incumbency and signature certificates identifying and containing the
signatures of the Fund's officers and/or the persons authorized to sign Proper
Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Declaration of Trust filed with the State of Massachusetts
and all amendments thereto (such Declaration of Trust as currently in effect and
from time to time, be amended, are herein called the "Declaration");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
currently in effect and as they shall from time to time be amended, are herein
called the "By-Laws"),
(e) Resolutions of the Fund's Board of Trustees appointing the investment
advisor of the Fund and resolutions of the Fund's Board of Trustees and the
Fund's Shareholders approving the proposed Investment Advisory Agreement between
the Fund and the advisor (the "Advisory Agreement");
(f) The Advisory Agreement
(g) The Fund's Registration Statement on Form N-1A under the 1940 Act and
the Securities Act of 1933, as amended ("the 1933 Act") as filed with the SEC;
and
(h) The Fund's most recent prospectus and statement of additional
information including all amendments and supplements thereto (the "Prospectus").
Upon request the Fund will furnish The Chase Manhattan Bank with copies of
all amendments of or supplements to the foregoing, if any. The Fund will also
furnish The Chase Manhattan Bank upon request with a copy of the opinion of
counsel for the Fund with respect to the validity of the Shares and the status
of such Shares under the 1933 Act filed with the SEC, and any other applicable
federal law or regulation.
2
<PAGE>
3. DEFINITIONS.
(a) "Authorized Person". As used in this Agreement, the term "Authorized
Person" means the Fund's President, Treasurer and any other person, whether or
not any such person is an officer or employee of the Fund, duly authorized by
the Board of Trustees of the Fund to give Proper Instructions on behalf of the
Fund as set forth in resolutions of the Fund's Board of Trustees.
(b) "Book-Entry System". As used in this Agreement, the term "Book-Entry
System" means a book-entry system authorized by the U.S. Department of Treasury,
its successor or successors and its nominee or nominees.
(c) "Proper Instructions". Proper Instructions as used herein means a
writing signed or initialed by two or more persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if The Chase Manhattan Bank reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
such oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Fund accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and The Chase Manhattan Bank are
satisfied that such procedures afford adequate safeguards for the Fund's assets.
For purposes of this Section, Proper Instructions shall include instructions
received by The Chase Manhattan Bank pursuant to any three-party agreement which
requires a segregated asset account in accordance with Section 9.
(d) "Property". The term "Property", as used in this Agreement, means:
3
<PAGE>
(i) any and all securities and other property of the Fund which the
Fund may from time to time deposit, or cause to be deposited, with The
Chase Manhattan Bank or which The Chase Manhattan Bank may from time
to time hold for the Fund;
(ii) all income in respect of any such securities or other property;
(iii) all proceeds of the sales of any of such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by The Chase Manhattan Bank from time to time from
or on behalf of the Fund.
(e) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successors and its nominee or
nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Trustees approving deposits by The Chase
Manhattan Bank therein.
4. DELIVERY AND REGISTRATION OF THE PROPERTY. The Fund will deliver or
cause to be delivered to The Chase Manhattan Bank all securities and all moneys
owned by it, including payments of interest, principal and capital distributions
and cash received for the issuance of its Shares, at any time during the period
of this Agreement, except for securities and monies to be delivered to any
subcustodian appointed pursuant to Section 7 hereof. The Chase Manhattan Bank
will not be responsible for such securities and such monies until actually
received by it. All securities delivered to The Chase Manhattan Bank or to any
such subcustodian (other than in bearer form) shall be registered in the name of
the Fund or in the name of a nominee of the Fund or in the name of The Chase
Manhattan Bank or any nominee of The Chase Manhattan Bank (with or without
indication of fiduciary
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status) or in the name of any subcustodian or any nominee of such subcustodian
appointed pursuant to Paragraph 7 hereof or shall be properly endorsed and in
form for transfer satisfactory to The Chase Manhattan Bank.
5. VOTING RIGHTS. With respect to all securities, however registered, it
is understood that the voting and other rights and powers shall be exercised by
the Fund. The Chase Manhattan Bank's only duty shall be to mail for delivery on
the next business day to the Fund any documents received, including proxy
statements and offering circulars, with any proxies for securities registered in
a nominee name executed by such nominee. Where warrants, options, tenders or
other securities have fixed expiration dates, the Fund understands that in order
for The Chase Manhattan Bank to act, The Chase Manhattan Bank must receive the
Fund's instructions at its offices in New York, addressed as The Chase Manhattan
Bank may from time to time request, by no later than noon (NY City time) at
least one business day prior to the last scheduled date to act with respect
thereto (or such earlier date or time as The Chase Manhattan Bank may reasonably
notify the Fund). Absent The Chase Manhattan Bank's timely receipt of such
instructions, such instruments will expire without liability to The Chase
Manhattan Bank.
6. RECEIPT AND DISBURSEMENT OF MONEY.
(a) The Chase Manhattan Bank shall open and maintain a custody account for
the Fund, subject only to draft or order by The Chase Manhattan Bank acting
pursuant to the terms of this Agreement, and shall hold in such account, subject
to the provisions hereof, all cash received by it from or for the Fund other
than cash maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the 1940 Act. Funds held by The Chase
Manhattan Bank for the Fund may be deposited by it to its credit at The Chase
Manhattan Bank in the Banking Department of The Chase Manhattan Bank or in such
other banks or trust companies as it may in its discretion deem necessary or
desirable; provided,
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however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act, and that each such bank or trust company shall be
approved by vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by The Chase Manhattan Bank in its capacity as Custodian and
shall be withdrawable by The Chase Manhattan Bank only in that capacity.
(b) Upon receipt of Proper Instructions (which may be continuing
instructions as deemed appropriate by the parties) The Chase Manhattan Bank
shall make payments of cash to, or for the account of, the Fund from such cash
only (i) for the purchase of securities, options, futures contracts or options
on futures contracts for the Fund as provided in Section 13 hereof; (ii) in the
case of a purchase of securities effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set forth in Section 8
hereof; (iii) in the case of repurchase agreements entered into between the Fund
and The Chase Manhattan Bank, or another bank, or a broker-dealer which is a
member of The National Association of Securities Dealers, Inc. ("NASD"), either
(a) against delivery of the securities either in certificate form or through an
entry crediting The Chase Manhattan Bank's account at the Federal Reserve Bank
with such securities or (b) against delivery of the receipt evidencing purchase
by the Fund of securities owned by The Chase Manhattan Bank along with written
evidence of the agreement by The Chase Manhattan Bank to repurchase such
securities from the Fund; (iv) for transfer to a time deposit account of the
Fund in any bank, whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund; (v) for the payment of dividends
or other distributions on shares declared pursuant to the governing documents of
the Fund, or for the payment of interest, taxes, administration, distribution or
advisory fees or expenses which are to be borne by the Fund under the terms of
this Agreement, any Advisory Agreement, or any
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administration agreement; (vi) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Fund and held
by or to be delivered to The Chase Manhattan Bank; (vii) to a subcustodian
pursuant to Section 7 hereof; (viii) for such common expenses incurred by the
Fund in the ordinary course of its business, including but not limited to
printing and mailing expenses, legal fees, accountants fees, exchange fees; or
(ix) for any other proper purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board of Trustees
or of the Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the person or persons
to whom such payment is to be made.
(c) The Chase Manhattan Bank is hereby authorized to endorse and collect
all checks, drafts or other orders for the payment of money received as
custodian for the Fund.
6A. ADVANCES BY CUSTODIAN. The Custodian may from time to time agree to
advance cash to the Fund, without interest, for the fund's other proper
corporate purposes. If the Custodian advances cash for any purpose, the Fund
shall and hereby does grant to the Custodian a security interest in Fund
securities equal in value to the amount of the cash advance but in no event
shall the value of securities in which a security interest has been granted
exceed 20% of the value of the Fund's total assets at the time of the pledge;
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to reasonably dispose of any securities
in which it has a security interest to the extent necessary to obtain
reimbursement.
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7. RECEIPT AND DELIVERY OF SECURITIES.
(a) Except as provided by Section 8 hereof, The Chase Manhattan Bank shall
hold and physically segregate all securities and noncash Property received by it
for the Fund. All such securities and non-cash Property are to be held or
disposed of by The Chase Manhattan Bank for the Fund pursuant to the terms of
this Agreement. In the absence of Proper Instructions accompanied by a
certified resolution authorizing the specific transaction by the Fund's Board,
The Chase Manhattan Bank shall have no power or authority to withdraw, deliver,
assign, hypothecate, pledge or otherwise dispose of any such securities and
investments, except in accordance with the express terms provided for in this
Agreement. In no case may any Trustee, officer, employee or agent of the Fund
withdraw any securities. In connection with its duties under this Section 7,
The Chase Manhattan Bank may, at its own expense, enter into subcustodian
agreements with other banks or trust companies for the receipt of certain
securities and cash to be held by The Chase Manhattan Bank for the account of
the Fund pursuant to this Agreement; provided that each such bank or trust
company has an aggregate capital, surplus and undivided profits, as shown by its
last published report, of not less than twenty million dollars ($20,000,000) and
that such bank or trust company agrees with The Chase Manhattan Bank to comply
with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder. The Chase Manhattan Bank will be liable for acts or
omissions of any subcustodian. The Chase Manhattan Bank shall employ sub-
custodians upon receipt of Proper Instructions, but only in accordance with an
applicable vote by the Board of Trustees of the Fund.
(b) Promptly after the close of business on each day The Chase Manhattan
Bank shall furnish the Fund with confirmations and a summary of all transfers to
or from the account of the Fund during said day. Where securities are
transferred to the account of the Fund established at a Securities Depository or
Book Entry
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System pursuant to Section 8 hereof, The Chase Manhattan Bank shall also by
book-entry or otherwise identify as belonging to such Fund the quantity of
securities in a fungible bulk of securities registered in the name of The Chase
Manhattan Bank (or its nominee) or shown in The Chase Manhattan Bank's account
on the books of a Securities Depository or Book-Entry System. At least monthly
and from time to time, The Chase Manhattan Bank shall furnish the Fund with a
detailed statement of the Property held for the Fund under this Agreement.
8. USE OF SECURITIES DEPOSITORY OR BOOK-ENTRY SYSTEM. The Fund shall
deliver to The Chase Manhattan Bank a certified resolution of the Board of
Trustees of the Fund approving, authorizing and instructing The Chase Manhattan
Bank on a continuous and ongoing basis until instructed to the contrary by
Proper Instructions actually received by The Chase Manhattan Bank (i) to deposit
in a Securities Depository or Book-Entry System all securities of the Fund
eligible for deposit therein and (ii) to utilize a Securities Depository or
Book-Entry System to the extent possible in connection with the performance of
its duties hereunder, including without limitation settlements of purchases and
sales of securities by the Fund, and deliveries and returns of securities
collateral in connection with borrowings. Without limiting the generality of
such use, it is agreed that the following provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will at all times (1) be represented in an
account of The Chase Manhattan Bank in the Securities Depository or Book Entry
System (the "Account") and (2) be segregated from any assets and cash controlled
by The Chase Manhattan Bank in other than a fiduciary or custodian capacity but
may be commingled with other assets held in such capacities. The Chase
Manhattan Bank will effect payment for securities and receive and deliver
securities in accordance with accepted industry practices as set forth in (b)
below, unless the Fund has given
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<PAGE>
The Chase Manhattan Bank Proper Instructions to the contrary. The records of The
Chase Manhattan Bank with respect to securities of the Fund maintained in a
Securities Depository or Book Entry System shall identify by book entry those
securities belonging to the Fund.
(b) The Chase Manhattan Bank shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the Securities Depository or
Book Entry System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of The Chase Manhattan Bank to
reflect such payment and transfer for the account of the Fund. Upon receipt of
Proper Instructions, The Chase Manhattan Bank shall transfer securities sold for
the account of the Fund upon (i) receipt of advice from the Securities
Depository or Book Entry System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the records of
The Chase Manhattan Bank to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities Depository or Book Entry
System of transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by The Chase Manhattan Bank and be provided to
the Fund at its request. Upon request, The Chase Manhattan Bank shall furnish
the Fund confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in a Securities Depository
or Book Entry System for the account of the Fund.
(c) The Chase Manhattan Bank shall provide the Fund with any report
obtained by The Chase Manhattan Bank on the Securities Depository or Book Entry
System's accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities Depository or Book Entry
System;
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<PAGE>
(d) All Books and records maintained by The Chase Manhattan Bank which
relate to the Fund participation in a Securities Depository or Book-Entry System
will at all times during The Chase Manhattan Bank's regular business hours be
open to the inspection of the Fund's duly authorized employees or agents, and
the Fund will be furnished with all information in respect of the services
rendered to it as it may require.
(e) Anything to the contrary in this Agreement notwithstanding, The Chase
Manhattan Bank shall be liable to the Fund for any loss or damage to the Fund
resulting from any negligence, misfeasance or misconduct of The Chase Manhattan
Bank or any of its agents or of any of its or their employees in connection with
its or their use of the Securities Depository or Book Entry Systems or from
failure of The Chase Manhattan Bank or any such agent to enforce effectively
such rights as it may have against such Securities Depository or Book Entry
System; at the election of the Fund, it shall be entitled to be subrogated to
the rights of The Chase Manhattan Bank with respect to any claim against the
Securities Depository or Book Entry System or any other person which The Chase
Manhattan Bank may have as a consequence of any such loss or damage if and to
the extent that the Fund has not been made whole for any such loss or damage.
9. SEGREGATED ACCOUNT. The Chase Manhattan Bank shall upon receipt of
Proper Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by The
Chase Manhattan Bank pursuant to Section 8 hereof, (i) in accordance with the
provisions of any agreement among the Fund, The Chase Manhattan Bank and a
broker dealer registered under the Securities and Exchange Act of 1934 and a
member of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The Options
Clearing
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Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
10. INSTRUCTIONS CONSISTENT WITH THE DECLARATION, ETC.
(a) Unless otherwise provided in this Agreement, The Chase Manhattan Bank
shall act only upon Proper Instructions. The Chase Manhattan Bank may assume
that any Proper Instructions received hereunder are not in any way inconsistent
with any provision of the Declaration or By-Laws or any vote or resolution of
the Fund's Board of Trustees or any committee thereof. The Chase Manhattan Bank
shall be entitled to rely upon any Proper Instructions actually received by The
Chase Manhattan Bank pursuant to this Agreement. The Fund agrees that The Chase
Manhattan Bank shall incur no liability in acting in good faith upon Proper
Instructions given to The Chase Manhattan Bank, except to the extent such
liability was incurred as a result of The Chase Manhattan Bank's negligence or
willful misconduct. In accord with instructions from the Fund, as
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<PAGE>
required by accepted industry practice or as The Chase Manhattan Bank may elect
in effecting the execution of Fund instructions, advances of cash or other
Property made by The Chase Manhattan Bank, arising from the purchase, sale,
redemption, transfer or other disposition of Property of the Fund, or in
connection with the disbursement of funds to any party, or in payment of fees,
expenses, claims or liabilities owed to The Chase Manhattan Bank by the Fund, or
to any other party which has secured judgment in a court of law against the Fund
which creates an overdraft in the accounts or over-delivery of Property, shall
be deemed a loan by The Chase Manhattan Bank to the Fund, payable on demand,
bearing interest at such rate customarily charged by The Chase Manhattan Bank
for similar loans.
(b) The Fund agrees that test arrangements, authentication methods or other
security devices to be used with respect to instructions which the Fund may give
by telephone, telex, TWX, facsimile transmission, bank wire or other
teleprocess, or through an electronic instruction system, shall be processed in
accordance with terms and conditions for the use of such arrangements, methods
or devices as The Chase Manhattan Bank may put into effect and modify from time
to time. The Fund shall safeguard any test keys, identification codes or other
security devices which The Chase Manhattan Bank makes available to the Fund and
agrees that the Fund shall be responsible for any loss, liability or damage
incurred by The Chase Manhattan Bank or by the Fund as a result of The Chase
Manhattan Bank's acting in accordance with instructions from any unauthorized
person using the proper security device except to the extent such loss,
liability or damage was incurred as a result of The Chase Manhattan Bank's
negligence or willful misconduct. The Chase Manhattan Bank may electronically
record, but shall not be obligated to so record, any instructions given by
telephone and any other telephone discussions with respect to the Fund. In the
event that the Fund uses The Chase Manhattan Bank's Asset Management system or
any successor electronic
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communications or information system, the Fund agrees that The Chase Manhattan
Bank is not responsible for the consequences of the failure of that system to
perform for any reason, beyond the reasonable control of The Chase Manhattan
Bank, or the failure of any communications carrier, utility, or communications
network. In the event that system is inoperable, the Fund agrees that it will
accept the communication of transaction instructions by telephone, facsimile
transmission on equipment compatible to The Chase Manhattan Bank's facsimile
receiving equipment or by letter, at no additional charge to the Fund.
(c) The Chase Manhattan Bank shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund and the maturity
of futures contracts purchased or sold by the Fund) received by The Chase
Manhattan Bank from issuers of the securities being held for the Fund. With
respect to tender or exchange offers, The Chase Manhattan Bank shall transmit
promptly by facsimile to the Fund all written information received by The Chase
Manhattan Bank from issuers of the securities whose tender or exchange is sought
and from the party (or his agents) making the tender or exchange offer. If the
Fund desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Fund shall notify The Chase Manhattan Bank at
least three business days prior to the date on which The Chase Manhattan Bank is
to take such action or upon the date such notification is first received by the
Fund, if later. If any Property registered in the name of a nominee of The
Chase Manhattan Bank is called for partial redemption by the issuer of such
property, The Chase Manhattan Bank is authorized to allot the called portion to
the respective beneficial holders of the Property in such manner deemed to be
fair and equitable by The Chase Manhattan Bank in its sole discretion.
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<PAGE>
11. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. The Chase Manhattan Bank is
authorized to take the following action without Proper Instructions:
(a) Collection of Income and Other Payments. The Chase Manhattan Bank
shall:
(i) collect and receive on a timely basis for the account of the
Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and similar
items, included or to be included in the Property of the Fund, and
promptly advise the Fund of such receipt and shall credit such income,
as collected, to the Fund. From time to time, The Chase Manhattan
Bank may elect, but shall not be obligated, to credit the account with
interest, dividends or principal payments on payable or contractual
settlement date, in anticipation of receiving same from a payor,
central depository, broker or other agent employed by the Fund or The
Chase Manhattan Bank. Any such crediting and posting shall be at the
Fund's sole risk, and The Chase Manhattan Bank shall be authorized to
reverse any such advance posting in the event it does not receive good
funds from any such payor, central depository, broker or agent of the
Customer. The Chase Manhattan Bank agrees to promptly notify the Fund
of the reversal of any such advance posting.
(ii) endorse and deposit for collection in the name of the Fund,
checks, drafts, or other orders for the payment of money on the same
day as received;
(iii) receive and hold for the account of the Fund all securities
received by the Fund as a result of a stock dividend, share split-up
or reorganization, merger, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities issued
15
<PAGE>
with respect to any portfolio securities of the Fund held by The Chase
Manhattan Bank hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed or retired, or
otherwise become payable on the date such securities become payable;
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other
payments and the endorsement for collection of checks, drafts and
other negotiable instruments;
(vi) to effect an exchange of the securities where the par value
is changed, and to surrender securities at maturity or upon an earlier
call for redemption, or when securities otherwise become payable,
against payment therefore in accordance with accepted industry
practice. If any Property registered in the name of a nominee of The
Chase Manhattan Bank is called for partial redemption by the issuer of
such property, The Chase Manhattan Bank is authorized to allot the
called portion to the respective beneficial holders of the Property in
such manner deemed to be fair and equitable by The Chase Manhattan
Bank in its sole discretion.
(b) Miscellaneous Transactions. The Chase Manhattan Bank is authorized to
deliver or cause to be delivered Property against payment or other consideration
or written receipt therefor for examination by a dealer selling for the account
of the Fund in accordance with street delivery custom.
12. TRANSACTIONS REQUIRING INSTRUCTIONS. In addition to the actions
requiring Proper Instructions set forth herein, upon receipt of Proper
Instructions and not otherwise, The Chase Manhattan Bank, directly or through
the use of a Securities Depository or Book-Entry System, shall:
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<PAGE>
(a) Execute and deliver to such persons as may be designated in such
Proper Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) Deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
issuer of securities or corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for the Fund to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
issuer of securities or corporation, against receipt of such certificates of
deposit, interim receipts or other instruments or documents, and cash, if any,
as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said instructions to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
(e) Release securities belonging to the Fund to any bank or trust company
for the purpose of pledge or hypothecation to secure any loan incurred by the
Fund; provided, however, that securities shall be released only upon payment to
The Chase Manhattan Bank of the monies borrowed, or upon receipt of adequate
collateral as agreed upon by the Fund and The Chase Manhattan Bank which may be
in the form of cash or obligations issued by the U.S. government, its agencies
or instrumentalities, except that in cases where additional collateral is
required to secure a borrowing already made, subject to proper prior
authorization, further securities may be released for that purpose; and pay such
loan upon re-delivery to it
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of the securities pledged or hypothecated therefore and upon surrender of the
note or notes evidencing the loan; and
(f) Deliver securities in accordance with the provisions of any agreement
among the Fund, The Chase Manhattan Bank and a broker-dealer registered under
the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any agreement
among the Fund, The Chase Manhattan Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund; and
(h) Deliver securities against payment or other consideration or written
receipt therefore for transfer of securities into the name of the Fund or The
Chase Manhattan Bank or a nominee of either, or for exchange or securities for a
different number of bonds, certificates, or other evidence, representing the
same aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to The Chase Manhattan Bank;
(i) Exchange securities in temporary form for securities in definitive
form;
(j) Surrender, in connection with their exercise, warrants, rights or
similar securities, provided that in each case, the new securities and cash, if
any, are to be delivered to The Chase Manhattan Bank;
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(k) Deliver securities upon receipt of payment in connection with any
repurchase agreement related to such securities entered into by the Fund;
(l) Deliver securities pursuant to any other proper corporate purpose, but
only upon receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee signed by an
officer of the Funds and certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made.
13. PURCHASE OF SECURITIES. Promptly after each purchase of securities,
options, futures contracts or options on futures contracts by the investment
advisor, the Fund shall deliver to The Chase Manhattan Bank (as Custodian)
Proper Instructions specifying with respect to each such purchase: (a) the name
of the issuer and the title of the securities, (b) the number of shares of the
principal amount purchased and accrued interest, if any, (c) the dates of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, (f) the name of the person from whom or the broker
through whom the purchase was made and (g) the Fund name. The Chase Manhattan
Bank shall upon receipt of securities purchased by or for the Fund registered in
the name of the Fund or in the name of a nominee of The Chase Manhattan Bank or
of the Fund or in proper form for transfer or upon receipt of evidence of title
to options, futures contracts or options on futures contracts purchased by the
Fund, pay out of the moneys held for the account of the Fund the total amount
payable to the person from whom or the broker through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Proper Instructions. Except as specifically stated otherwise in this
Agreement, in any and every case where payment for purchase of securities for
the account of the Fund is made by
19
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The Chase Manhattan Bank in advance of receipt of the securities purchased in
the absence of specific written instructions from the Fund to so pay in advance,
The Chase Manhattan Bank shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by The
Chase Manhattan Bank.
14. SALE OF SECURITIES. Promptly after each sale of securities by the Fund
at the instruction of the investment advisor, the Fund shall deliver to The
Chase Manhattan Bank (as Custodian) Proper Instructions, specifying with respect
to each such sale; (a) the name of the issuer and the title of the security, (b)
the number of shares or principal amount sold, and accrued interest, if any, (c)
the date of sale, (d) the sale price per unit, (e) the total amount payable to
the Fund upon such sale, (f) the name of the broker through whom or the person
to whom the sale was made and (g) the Fund name. The Chase Manhattan Bank shall
deliver the securities upon receipt of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as set
forth in such Proper Instructions. Subject to the foregoing, The Chase
Manhattan Bank may accept payment in such form as shall be satisfactory to it,
and may deliver securities and arrange for payment in accordance with the
customs prevailing among dealers in securities.
15. NOT IN USE.
16. RECORDS. The books and records pertaining to the Fund which are in the
possession of The Chase Manhattan Bank shall be the property of the Fund. Such
books and records shall be prepared and maintained as required by the 1940 Act,
as amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representative, shall have access to such books
and records at all times during The Chase Manhattan Bank's normal business
hours, and such books and records shall be surrendered to the Fund promptly upon
request. Upon reasonable request of the Fund, copies of any such books and
records
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shall be provided by The Chase Manhattan Bank to the Fund or the Fund's
authorized representative at the Fund's expense.
17. COOPERATION WITH ACCOUNTANTS. The Chase Manhattan Bank shall cooperate
with the Fund's independent certified public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement to
assure that the necessary information is made available to such accountants for
the expression of their unqualified opinion, including but not limited to the
opinion included in the Fund's Form N-1A, Form N-SAR and other reports to the
Securities and Exchange Commission and with respect to any other requirement of
such Commission.
18. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. The Chase Manhattan
Bank shall provide the Fund, at such times as the Fund may reasonably require,
with reports by independent public accountants on the accounting system,
internal accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities deposited
and/or maintained in a Securities Depository or Book Entry System, relating to
the services provided by The Chase Manhattan Bank under this Contract; such
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
19. CONFIDENTIALITY. The Chase Manhattan Bank agrees on behalf of itself
and its employees to treat confidentially and as the proprietary information of
the Fund all records and other information relative to the Fund and its prior,
present or potential Shareholders and relative to the advisors and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after
21
<PAGE>
prior notification to and approval in writing by the Fund, which approval shall
not be unreasonably withheld and may not be withheld where The Chase Manhattan
Bank may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Fund. Nothing contained herein,
however, shall prohibit The Chase Manhattan Bank from advertising or soliciting
the public generally with respect to other products or services, regardless of
whether such advertisement or solicitation may include prior, present or
potential Shareholders of the Fund.
20. EQUIPMENT FAILURES. In the event of equipment failures beyond The
Chase Manhattan Bank's control, The Chase Manhattan Bank shall, at no additional
expense to the Fund, take reasonable steps to minimize service interruptions but
shall not have liability with respect thereto. The Chase Manhattan Bank shall
enter into and shall maintain in effect with appropriate parties one or more
agreements making reasonable provisions for back up emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
21. RIGHT TO RECEIVE ADVICE.
(a) Advice of Fund. If The Chase Manhattan Bank shall be in doubt as to
any action to be taken or omitted by it, it may request, and shall receive, from
the Fund clarification or advice.
(b) Advice of Counsel. If The Chase Manhattan Bank shall be in doubt as to
any question of law involved in any action to be taken or omitted by The Chase
Manhattan Bank, it may request advice at its own cost from counsel of its own
choosing (who may be counsel for the Fund or The Chase Manhattan Bank, at the
option of The Chase Manhattan Bank).
(c) Conflicting Advice. In case of conflict between directions or advice
received by The Chase Manhattan Bank pursuant to sub-paragraph (a) of this
22
<PAGE>
paragraph and advice received by The Chase Manhattan Bank pursuant to
subparagraph (b) of this paragraph, The Chase Manhattan Bank shall be entitled
to rely on and follow the advice received pursuant to the latter provision
alone.
(d) Protection of The Chase Manhattan Bank. The Chase Manhattan Bank shall
be protected in any action or inaction which it takes or omits to take in
reliance on any directions or advice received pursuant to subparagraphs (a) or
(b) of this section which The Chase Manhattan Bank, after receipt of any such
directions or advice, in good faith believes to be consistent with such
directions or advice. However, nothing in this paragraph shall be construed as
imposing upon The Chase Manhattan Bank any obligation (i) to seek such
directions or advice, or (ii) to act in accordance with such directions or
advice when received, unless, under the terms of another provision of this
Agreement, the same is a condition to The Chase Manhattan Bank's properly taking
or omitting to take such action. Nothing in this subsection shall excuse The
Chase Manhattan Bank when an action or omission on the part of The Chase
Manhattan Bank constitutes willful misfeasance, bad faith, negligence or
reckless disregard by The Chase Manhattan Bank of its duties under this
Agreement.
22. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. The Fund assumes
full responsibility for insuring that the contents of each Prospectus of the
Fund complies with all applicable requirements of the 1933 Act, the 1940 Act,
and any laws, rules and regulations of governmental authorities having
jurisdiction.
23. COMPENSATION. As compensation for the services rendered by The Chase
Manhattan Bank during the term of this Agreement, the Fund will pay to The Chase
Manhattan Bank, in addition to reimbursement of its out-of-pocket expenses,
monthly fees as outlined in Exhibit A.
24. INDEMNIFICATION. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless The Chase Manhattan Bank and its nominees from all
23
<PAGE>
taxes, charges, expenses, assessments, claims, and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the Securities
Exchange Act of 1934, the 1940 Act, and any state and foreign securities and
blue sky laws, all as or to be amended from time to time) and expenses,
including (without limitation) attorney's fees and disbursements (hereafter
"liabilities and expenses"), arising directly or indirectly from any action or
thing which The Chase Manhattan Bank takes or does or omits to take or do (i) at
the request or on the direction of or in reliance on the advice of the Fund, or
(ii) upon Proper Instructions, provided, that neither The Chase Manhattan Bank
nor any of its nominees or sub-custodians shall be indemnified against any
liability to the Fund or to its Shareholders (or any expenses incident to such
liability) arising out of (x) The Chase Manhattan Bank's or such nominee's or
sub-custodian's own willful misfeasance, bad faith, negligence or reckless
disregard of its duties under this Agreement or any agreement between The Chase
Manhattan Bank and any nominee or subcustodian or (y) The Chase Manhattan Bank's
own negligent failure to perform its duties under this Agreement. The Chase
Manhattan Bank similarly agrees to indemnify and hold harmless the Fund from all
liabilities and expenses arising directly or indirectly from The Chase Manhattan
Bank's or such nominee's or sub-custodian's willful misfeasance, bad faith,
negligence or reckless disregard in performing its duties under this agreement.
In the event of any advance of cash for any purpose made by The Chase Manhattan
Bank resulting from orders or Proper Instructions of the Fund, or in the event
that The Chase Manhattan Bank or its nominee or subcustodian shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's or sub-custodian's own negligent action, negligent failure
to act, willful misconduct, or reckless disregard, the Fund shall
24
<PAGE>
promptly reimburse The Chase Manhattan Bank for such advance of cash or such
taxes, charges, expenses, assessments claims or liabilities.
25. RESPONSIBILITY OF THE CHASE MANHATTAN BANK. In the performance of its
duties hereunder, The Chase Manhattan Bank shall be obligated to exercise care
and diligence and to act in good faith to insure the accuracy and completeness
of all services performed under this Agreement. The Chase Manhattan Bank shall
be responsible for its own negligent failure or that of any subcustodian it
shall appoint to perform its duties under this Agreement but to the extent that
duties, obligations and responsibilities are not expressly set forth in this
Agreement, The Chase Manhattan Bank shall not be liable for any act or omission
which does not constitute willful misfeasance, bad faith, or negligence on the
part of The Chase Manhattan Bank or such subcustodian or reckless disregard of
such duties, obligations and responsibilities. Without limiting the generality
of the foregoing or of any other provision of this Agreement, The Chase
Manhattan Bank in connection with its duties under this Agreement shall, so long
as and to the extent it is in the exercise of reasonable care, not be under any
duty or obligation to inquire into and shall not be liable for or in respect of
(a) the validity or invalidity or authority or lack thereof of any advice,
direction, notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which The Chase Manhattan Bank
believes to be genuine, (b) the validity of the issue of any securities
purchased or sold by the Fund, the legality of the purchase or sale thereof or
the propriety of the amount paid or received therefor, (c) the legality of the
issue or sale of any Shares, or the sufficiency of the amount to be received
therefore, (d) the legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor, (e) the legality of the declaration or payment
of any dividend or distribution on Shares, of (f) delays or errors or loss of
data occurring by reason of circumstances beyond The Chase Manhattan Bank's
control, including acts of civil
25
<PAGE>
or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown (except as provided in Section 20), flood or catastrophe,
acts of God, insurrection, war, riots, or failure of the mail, transportation,
communication or power supply.
26. COLLECTION OF INCOME. The Chase Manhattan Bank shall collect on a
timely basis all income and other payments with respect to registered securities
held hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by The Chase Manhattan Bank or
its agent thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing, The Chase
Manhattan Bank shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due the Fund on
securities loaned pursuant to the provisions of Section 9 shall be the
responsibility of the Fund. The Chase Manhattan Bank will have no duty or
responsibility in connection therewith, other than to provide the Fund with such
information or data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the Fund is properly
entitled.
27. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Chase Manhattan Bank
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to securities of the Fund held by it and in connection with
transfers of securities.
26
<PAGE>
28. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT.
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that The Chase Manhattan Bank shall not act under Section 8 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities Depository or Book Entry System, as
required by Rule 17f-4 under the Investment Company Act of 1940, as amended;
provided further, however, that the Fund shall not amend or terminate this
Agreement in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust, and further provided, that the Fund
may at any time by action of its Board of Trustees (i) substitute another bank
or trust company for The Chase Manhattan Bank by giving notice as described
above to The Chase Manhattan Bank, or (ii) immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for The Chase
Manhattan Bank by the Comptroller of the Currency or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to The Chase
Manhattan Bank such compensation as may be due as of the date of such
termination and shall likewise reimburse The Chase Manhattan Bank for its costs,
expenses and disbursements.
27
<PAGE>
29. SUCCESSOR CUSTODIAN
If a successor custodian shall be appointed by the Board of Trustees of the
Fund, The Chase Manhattan Bank shall, upon termination, deliver to such
successor custodian at the office of the custodian, duly endorsed and in the
form for transfer, all securities then held by it hereunder and shall transfer
to an account of the successor custodian all of the Fund's securities held in a
Securities Depository or Book Entry System.
If no such successor custodian shall be appointed, The Chase Manhattan Bank
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
The Chase Manhattan Bank on or before the date when such termination shall
become effective, then The Chase Manhattan Bank shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing
business in New York, New York, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
The Chase Manhattan Bank and all instruments held by The Chase Manhattan Bank
relative thereto and all other property held by it under this Agreement and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities Depository or Book Entry System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of The Chase Manhattan Bank after the date of termination hereof
owing to failure of the Fund to procure the certified copy of the vote referred
to or of
28
<PAGE>
the Board of Trustees to appoint a successor custodian, The Chase Manhattan Bank
shall be entitled to fair compensation for its services during such period as
The Chase Manhattan Bank retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of The Chase Manhattan Bank shall remain in full force and effect.
30. NOTICES. All notices and other communications (collectively referred
to as "Notice" or "Notices") in this section hereunder shall be in writing and
shall be first sent by telegram, cable, telex, or facsimile sending device and
thereafter by overnight mail for delivery on the next business day. Notices
shall be addressed (a) if to The Chase Manhattan Bank, at The Chase Manhattan
Bank's address, 4 New York Plaza, 3rd Floor, New York, New York, 10004,
facsimile number (212) 623-8997; (b) if to the Fund, at the address of the Fund
Attention: Controller, facsimile number (312) 917-8049; or (c) if to neither of
the foregoing, at such other address as shall have been notified to the sender
of any such Notice or other communication. Notices sent by overnight mail shall
be deemed to have been given the next business day. Notices sent by messenger
shall be deemed to have been given on the day delivered, and notices sent by
confirming telegram, cable, telex or facsimile sending device shall be deemed to
have been given immediately. All postage, cable, telegram, telex and facsimile
sending device charges arising from the sending of a Notice hereunder shall be
paid by the sender.
31. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
32. AMENDMENTS. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
33. ADDITIONAL FUNDS. In the event that the Fund establishes one or more
series of Shares in addition to the series set forth on Appendix A, with respect
to
29
<PAGE>
which it desires to have the Custodian render services as custodian under the
terms hereof, it shall so notify the Custodian in writing, and if the Custodian
agrees in writing to provide such services, such series of Shares shall become a
Fund hereunder.
34. MISCELLANEOUS. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall insure to the benefit of the parties hereto and their respective
successors.
35. DECLARATION OF TRUST. The Fund's Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts. This agreement is executed
on behalf of the Fund by the Fund's officers as officers and not individually
and the obligations imposed upon the Fund by this Agreement are not binding upon
any of the Fund's Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Fund.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
THE CHASE MANHATTAN BANK
Attest: By:
---------------------- -----------------------
THOMAS V. DIBELLA PETER C. ARRIGHETTI
VICE PRESIDENT SENIOR VICE PRESIDENT
NUVEEN FLAGSHIP MULTISTATE
TRUST I
Attest: By:
---------------------- ----------------------
GIFFORD R. ZIMMERMAN O. WALTER RENFFTLEN
ASSISTANT GENERAL COUNSEL VICE PRESIDENT &
CONTROLLER
31
<PAGE>
Appendix A
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Oklahoma Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
32
<PAGE>
EXHIBIT A
---------
CUSTODY SERVICE FEE
-------------------
ADMINISTRATION AND MAINTENANCE FEE
- ----------------------------------
.01375% (1 3/8 Basis Points) on first $10 billion
.00875% (7/8 Basis Point) on second $10 billion
.0075% (3/4 Basis Point) on third $10 billion
.005% (1/2 Basis Point) on remainder
TRANSACTION FEES
- ----------------
$15.00 Per Book Entry Transaction
$25.00 Per Physical Transaction
$35.00 Per Future Contract or Option wire
$8.00 Per outgoing Wire Transfer for ETFs
$5.00 Per incoming and outgoing Wire Transfer for Open
End and Money Market Funds
NOTES:
1. Schedule should be applied to total assets for all Exchange Traded funds,
Open End Load Funds, and Money Market Funds.
2. Add $5.00 per book entry transaction and physical transaction if Custody
inputs trades.
BALANCES
--------
1. During each month, daily net overdrafts are offset by daily net cash
balances dollar for dollar with no penalty or charge for daily net
overdrafts.
2. At the end of each month, the net overdraft for the month incurs an
overdraft charge computed as follows:
The negative net cumulative balance plus 10% reserves multiplied by
the average monthly Fed Funds rate divided by 365 days.
33
<PAGE>
3. Net credit balance at month end carries forward and is eligible for offset
with overdrafts in the next month. The carry forward net credit balance
incurs a 10% reduction. Carry forward balances expire at the end of each
portfolio's fiscal year end for "fully invested funds"; for new funds not
fully invested, the credit balance carries forward until the fund become
fully invested. Each series of the Fund will use its best efforts to keep
its cumulative balances at each calendar quarter end below $50 million.
4. Nuveen Institutional Advisory Corp. or Nuveen Advisory Corp. will be
responsible for promptly advising The Chase Manhattan Bank of the date a
new fund becomes fully invested.
5. Effective January 1, 1996, FDIC charges will be no longer applied to the
portfolios.
6. Overdrafts are permissible only as a means of compensating for positive
balances.
7. Due to FDIC capitalization requirements, overdrafts are not permissible on
June 30th and December 31st.
34
<PAGE>
Exhibit 9(a)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
(Name of Mutual Fund, Trust or Company)
and
STATE STREET BANK AND TRUST COMPANY
1C-Domestic Trust/Series
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Terms of Appointment; Duties of the Bank......................... 1
2. Fees and Expenses ............................................... 3
3. Representations and Warranties of the Bank....................... 4
4. Representations and Warranties of the Fund....................... 4
5. Indemnification.................................................. 5
6. Covenants of the Fund and the Bank............................... 8
7. Termination of Agreement......................................... 9
8. Additional Funds................................................. 9
9. Assignment....................................................... 9
10. Amendment....................................................... 10
11. Massachusetts Law to Apply...................................... 10
12. Merger of Agreement............................................. 10
13. No Liability of Shareholders, Trustees, Officers, Etc........... 10
<PAGE>
EXHIBIT 9(a)
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 199 , by and between Nuveen
Flagship Multistate Trust I, a business trust, having its principal office and
place of business at (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of business
at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in series, the
(NAME EACH PORTFOLIO) (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Article 10, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as
its transfer agent, dividend disbursing agent, custodian of certain retirement
plans and agent in connection with certain other activities, and the Bank
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Terms of Appointment; Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund, on behalf of the Portfolios, hereby employs and appoints the
Bank to act as, and the Bank agrees to act as its transfer agent for
the Fund's authorized and issued common shares, $.01 par value,
("Shares"), dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio,
including without limitation any periodic investment plan or periodic
withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios,
as applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of
<PAGE>
the Fund authorized pursuant to resolutions adopted by the
Board of Trustees (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner
such monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(vii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing.
2
<PAGE>
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank
shall: (i) perform the customary services of a transfer agent,
dividend disbursing agent, custodian of certain retirement plans
and, as relevant, agent in connection with accumulation,
open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program),
including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies,
mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident
alien accounts, preparing and filing U.S. Treasury Department
Forms 1099 and other appropriate forms required with respect to
dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements
for Shareholders, and providing Shareholder account information
and (ii) provide a system which will enable the Fund to monitor
the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt
from blue sky reporting for each State and (ii) verify the
establishment of transactions for each State on the system prior
to activation and thereafter monitor the daily activity for each
State. The responsibility of the Bank for the Fund's blue sky
State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by
the Fund and the daily reporting of such transactions to the Fund
as provided above.
(d) Procedures applicable to certain of these services may be
established from time to time by agreement between the Fund and
the Bank.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank an
annual maintenance fee for each Shareholder account as set out in the
initial fee schedule attached hereto. Such fees and out-of-pocket
expenses and advances identified under Section 2.2 below may be changed
from time to time subject to mutual written agreement between the Fund
and the Bank.
3
<PAGE>
2.2 In addition to the fee paid under Section 2.1 above, the Fund
agrees on behalf of each of the Portfolios to reimburse the Bank
for out-of-pocket expenses or advances incurred by the Bank
for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by the Bank at the request or with the
consent of the Fund, will be reimbursed by the Fund on behalf of the
applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends,
proxies, Fund reports and other mailings to all shareholder accounts
shall be advanced to the Bank by the Fund at least seven (7) days prior
to the mailing date of such materials.
3. Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
4.2 It is empowered under applicable laws and by its Declaration of Trust
and By-Laws to enter into and perform this Agreement.
4
<PAGE>
4.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.4 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended
on behalf of each of the Portfolios will be effective on or before the
effective date of this agreement and will remain effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. Idemnification
5
<PAGE>
5.1 The Bank shall not be responsible for, and the Fund shall on behalf of
the applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required
to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or
willfull misconduct.
(b) Refusal or failure to comply with the terms of this agreement,
or which arise out of the Fund's lack of good faith, negligence
or willful misconduct which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records and documents which (i)
are received by the Bank or its agents or
6
<PAGE>
furnished to it on behalf of the Fund and (ii) have been
prepared maintained or performed by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on
behalf of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in
such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
5.2 The Bank shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility
and shall not be liable for loss or damage due to errors unless said
errors are caused by its negligence, bad faith, or willful misconduct
or that of its employees.
5.3 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the
Bank under this Agreement, and the Bank and its agents or
subcontractors shall not be liable and shall be indemnified by the Fund
on behalf of the applicable Portfolio for any action taken or omitted
by it in reliance upon such instructions or upon the opinion of such
counsel. The Bank, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on
behalf of the Fund, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided the Bank or its agents
or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to
have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former
registrar, or of a co-transfer agent or co-registrar.
5.4 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment
or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be
liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
5.5 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.
5.6 In order that the indemnification provisions contained in this Section
6 shall apply, upon the assertion of a claim for which the Fund may
be required to indemnify the Bank, the Bank shall promptly notify the
Fund of such assertion, and shall keep the Fund advised with respect to
all developments concerning such claim. The Fund shall have the option
to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or
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6. Covenants of the Fund and the Bank
6.1 The Fund shall on behalf of each of the Portfolios promptly furnish to
the Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
6.2 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices,
if any; and for the preparation or use, and for keeping account of,
such certificates, forms and devices.
6.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940,
as amended, and the Rules thereunder, the Bank agrees that all such
records prepared or maintained by the Bank relating to the services to
be performed by the Bank hereunder are the property of the Fund and
will be preserved, maintained and made available in accordance with
such Section and Rules, and will be surrendered promptly to the Fund on
and in accordance with its request.
6.4 The Bank and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required by
law.
6.5 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify
the Fund and to secure instructions from an authorized officer of the
Fund as to such inspection. The Bank reserves the right,
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however, to exhibit the Shareholder records to any person whenever it
is advised by its counsel that it may be held liable for the failure to
exhibit the Shareholder records to such person.
7. Termination of Agreement
7.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
7.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material
will be borne by the Fund on behalf of the applicable Portfolio(s).
Additionally, the Bank reserves the right to charge for any other
reasonable expenses associated with such termination and/or a charge
equivalent to the average of three (3) months' fees.
8. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to (LIST FUNDS) with respect to which it desires to
have the Bank render services as transfer agent under the terms hereof,
it shall so notify the Bank in writing, and if the Bank agrees in
writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
9. Assignment
9.1 Except as provided in Section 9.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party
without the written consent of the other party.
9.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
9.3 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is
duly registered as a transfer agent pursuant to Section 17A(c)(2) of
the Securities Exchange Act of 1934, as amended ("Section 17A(c)(2)") or
(ii) a BFDS subsidiary duly registered as a transfer agent pursuant to
Section 17A(c)(2); provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor
as it is for its own acts and omissions.
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10. Amendment
This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution
of the Board of Trustees of the Fund.
11. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts.
12. Merger of Agreement
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
13. No Liability of Shareholders, Trustees, Officers, Etc.
The Trusteees have authorized the execution of this contract in their
capacity as Trustees and not individually and the bank acknowledges and
agrees that neither the shareholders, trustees, officers, employees and
other agents of the Trust and the Funds shall personally be bound by or
be liable hereunder, nor shall any resort to their personal property be
had for the satisfaction of any obligation or claim hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
NUVEEN FLAGSHIP MULTISTATE TRUST I
BY:_____________________________
ATTEST:
_____________________________
STATE STREET BANK AND TRUST COMPANY
BY:_____________________________
Executive Vice President
ATTEST:
_____________________________
<PAGE>
EXHIBIT 9(b)
NUVEEN FLAGSHIP MULTISTATE TRUST I
TRANSFER AGENCY AGREEMENT
This agreement is made as of the 1st day of February, 1997, between NUVEEN
FLAGSHIP MULTISTATE TRUST I, a Massachusetts business trust having its principal
office and place of business at 333 West Wacker Drive, Chicago, Illinois 60606,
on behalf of the series named NUVEEN MARYLAND MUNICIPAL BOND FUND (hereinafter
referred to as the "Fund"), and SHAREHOLDER SERVICES, INC., a Colorado
corporation having its place of business at 3410 South Galena Street, Denver,
Colorado 80231 (hereinafter referred to as the "Transfer Agent").
In consideration of the mutual promises hereinafter set forth, the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have
the following meanings:
1.1 "Approved Institution" shall mean a broker-dealer, broker, bank or
other entity named in a Certificate, as hereinafter defined, and having
account(s) in the Trust or the Distributor or an agent it appoints, in each case
acting on behalf of the Fund for the benefit of its clients. From time to time
the Fund may amend a previously delivered Certificate by delivering to the
Transfer Agent a Certificate naming an additional entity as an Approved
Institution or deleting any entity named as an Approved Institution in a
previously delivered Certificate.
1.2 "Business Day" shall mean each day on which the New York Stock
Exchange is open for trading.
1.3 "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the Transfer
Agent by the Fund and which is signed by any Officer, as hereinafter defined,
and actually received by the Transfer Agent. "Certificate" shall also include
any notice submitted to the Transfer Agent by electronic or telephone
transmission, reasonably believed by the Transfer Agent to be genuine and to
have been properly made, signed or authorized by an Officer.
1.4 "Computer Tape" shall mean any computer/electromagnetic tape or
transmission transmitted by an Approved Institution, via a remote terminal or
other similar link, into a data processing, storage, or collection system or
similar system (the "System"), located on the Transfer Agent's premises. For
purposes of Section 5.1, such Computer Tape shall be deemed to have been
furnished at such times as are agreed upon from time to time by the Transfer
Agent and Fund only if the information reflected thereon was input into the
system at such times as are agreed upon from time to time by the Transfer Agent
and the Fund.
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1.5 "Custodian" shall mean, with respect to the Fund, Chase Manhattan Bank
of New York as custodian under the terms and conditions of the Custody Agreement
between the Custodian and the Fund, or in any case any successor(s) to such
Custodian performing similar functions for or on behalf of the Fund.
1.6 "Direct Accounts" means accounts registered in the name(s) of
shareholders other than Approved Institutions.
1.7 "Distributor" shall mean John Nuveen & Co. Incorporated (hereinafter
referred to as "Nuveen & Co."), as distributor under the terms and conditions of
the Distributor's Contract between the Fund and Nuveen & Co., wherein Nuveen &
Co. has the exclusive right to sell shares of the Fund to investors against
orders therefor at net asset value, or any successor(s) to Nuveen & Co.
performing a similar function for or on behalf of the Fund.
1.8 "Effective Date" shall mean February 1, 1997 or the date the Fund
begins operations.
1.9 "Series" shall mean each individual portfolio of the Fund covered by
this agreement, if any, each being a separate portfolio of securities and other
assets, interests in which are represented by a separate series of the Fund's
shares, and such terms shall include any other such portfolio that may be
created for which the Transfer Agent agrees to act as transfer agent pursuant to
Article 10 of this Agreement.
1.10 "Officer" shall mean the Fund's Chairman of the Board, President, any
Vice President, Secretary, any Assistant Secretary, Treasurer, any Assistant
Treasurer and any other person duly authorized by the Board of Trustees of the
Fund to execute or give any Certificate on behalf of the Fund and named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time.
1.11 "Prospectus" shall mean the most current Fund prospectus and
statement of additional information relating to the Shares, actually received by
the Transfer Agent from the Fund and shall include to the extent applicable,
shares designated as comprising any and all classes of any series of the Fund.
1.12 "Shares" shall mean full or fractional shares comprising all or any
part of each series representing the beneficial interest in the Fund and shall
include to the extent applicable, shares designated as comprising any and all
classes of any series of the Fund.
ARTICLE 2
APPOINTMENT OF TRANSFER AGENT
2.1 The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of the Shares of the Fund and as dividend disbursing agent for
the Fund during the term of this Agreement.
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2.2 The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform the duties hereinafter set
forth.
2.3. In connection with such appointment, upon or prior to executing this
Agreement, the Fund shall deliver to the Transfer Agent such of the following as
have not already been furnished to the Transfer Agent:
(a) A copy of the Declaration of Trust of the Fund and all amendments
thereto certified by the Secretary of the Fund;
(b) A copy of the By-Laws of the Fund certified by the Secretary of the
Fund;
(c) A copy of resolutions of the Board of Trustees of the Fund, certified
by the Secretary of the Fund, authorizing the execution of this Transfer Agency
Agreement;
(d) A Certificate signed by the Secretary of the Fund specifying the names
and specimen signatures of the Officers of the Fund;
(e) Specimen Share certificates for Shares of each series of the Fund in
the form approved by the Board of Trustees of the Fund, together with a
certificate signed by the Secretary of the Fund as to such approval;
(f) Copies of the most recently filed Post-Effective Amendment to the
Fund's Registration Statement, filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, together with any applications for exemptive relief
from any of the provisions of such laws filed by the Fund and the record of any
formal action of the Securities and Exchange Commission with respect to all such
applications; and
(g) Opinion of Counsel for the Fund to the effect that (1) beneficial
interest in each Fund is divided into an unlimited number of shares of
beneficial interest, (2) the issue and sale of the Fund's authorized but
unissued Shares have been duly authorized under Massachusetts law, (3) the
outstanding Shares are fully paid and non-assessable and (4) upon the issue and
sale of any authorized and unissued Shares and upon receipt of the authorized
consideration therefor in an amount not less than either the Shares' net asset
value or par value, if any, established and in force at the time of their sale,
the Fund Shares so issued will be validly issued, fully paid and non-assessable.
2.4. The Fund shall either (a) furnish the Transfer Agent with sufficient
supplies of blank share certificates in the form approved from time to time by
the Board of Trustees of the Fund, and from time to time will renew such
supplies upon request of the Transfer Agent, or (b) authorize the Transfer Agent
to itself create laser-printed Share certificates in the form approved by the
Board of Trustees of the Fund. Any such blank Share certificates shall be
properly signed, by facsimile or otherwise, by authorized Officers and, if
required, shall bear the seal of the Fund or a facsimile thereof.
Notwithstanding the death, resignation or removal of any Officer authorized to
sign such Share certificates, the Transfer Agent may continue to countersign and
issue Share certificates bearing such Officer's signature until otherwise
directed by the Fund. The Fund agrees to indemnify and
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exonerate, save and hold the Transfer Agent harmless, from and against any and
all claims or demands that may be asserted against the Transfer Agent with
respect to the genuineness of any Share certificate supplied to the Transfer
Agent by the Fund pursuant to this Agreement.
ARTICLE 3
AUTHORIZATION AND ISSUANCE OF SHARES
3.1. The Transfer Agent shall maintain records of accounts evidencing
ownership of Shares as provided in this Agreement and in the Fund's Prospectus
and, subject to the terms and conditions of this Agreement, when requested shall
countersign, record, issue, and deliver certificates for Shares both upon
original issue and transfer. Evidence of the ownership of Shares shall be
maintained on the Transfer Agent's records in book (uncertificated) form, or, if
requested by an Approved Institution (or the Distributor or its agent acting on
behalf of such Approved Institution) or shareholder, share certificates shall be
issued, subject to the provisions of Article 5 hereof, to evidence the ownership
of Shares.
3.2. Prior to the issuance of any Shares pursuant to Share splits and
prior to any reduction in the number of Shares outstanding, the Fund shall
deliver the following documents to the Transfer Agent:
(a) A copy of the resolution(s) adopted by the Board of Trustees of the
Fund and/or the shareholders of the relevant Fund, certified by the Secretary of
the Fund, authorizing such issuance of additional Shares of such Fund or such
reduction, as the case may be;
(b) In the case of the issuance of Shares, an opinion of counsel for the
Fund with respect to matters set forth in Section 2.3(g) hereof as to such
shares; and
(c) Such additional documents as the Transfer Agent may reasonably request.
ARTICLE 4
RECAPITALIZATION OR CAPITAL ADJUSTMENT
4.1. In the case of any Share split, recapitalization or other capital
adjustment, the Transfer Agent will, in the case of accounts represented by
uncertificated Shares, cause the account records to be adjusted, as necessary,
to reflect the number of Shares held for the account of each such shareholder as
a result of such adjustment, or, in the case of Shares represented by
certificates, will, if so instructed by the Fund, issue revised Share
certificates in exchange for, or upon transfer of, outstanding Share
certificates in the old form, in either case upon receiving:
(a) A Certificate authorizing the issuance of revised Share certificates
and any other action required to be taken by the Transfer Agent in connection
with any such split, recapitalization or other capital adjustment;
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(b) A copy of any amendment to the Declaration of Trust of the Fund,
certified by the Secretary of the Fund, with respect to the adjustment;
(c) Specimen Share certificates in the revised form approved by the Board
of Trustees of the Fund;
(d) An opinion of counsel for the Fund with respect to the matters set
forth in Article 2, Section 2.3(g) hereof as to such Shares; and
(e) Such additional documents as the Transfer Agent may reasonably request.
4.2. The Fund shall either (a) furnish the Transfer Agent with a
sufficient supply of blank Share certificates in any new form authorized in
connection with any such Share split, recapitalization or other capital
adjustment, and from time to time will replenish such supply upon the request of
the Transfer Agent, or (b) authorize the Transfer Agent to itself create laser-
printed Share certificates in the form approved by the Board of Trustees of the
Fund. Any such blank Share certificates shall be properly signed by authorized
Officers and, if required, shall bear the Fund's seal or facsimile thereof.
ARTICLE 5
ISSUANCE, REDEMPTION, AND TRANSFER OF SHARES
5.1. (a) On each Business Day, the Transfer Agent shall accept, at such
time as are agreed upon from time to time by the Transfer Agent and the Fund,
(i) purchase orders received by the Transfer Agent directly from an Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) or an individual investor, (ii) redemption requests either received
from a shareholder, whether or not an Approved Institution (or the Distributor
or its agent acting on behalf of such Approved Institution), or contained in a
Certificate, and (iii) requests for exchanges of the Fund's Shares of a given
class for Shares of another fund received from a shareholder, whether or not an
Approved Institution (or the Distributor or its agent acting on behalf of such
Approved Institution), or contained in a Certificate, provided that (1) such
purchase order, exchange request or redemption request, as the case may be, is
in conformity with the Fund's purchase, exchange, and redemption procedures, as
applicable, described in the Prospectus, and (2) if such type of purchase order,
exchange request, or redemption request is not described in the Prospectus in
effect upon the commencement date of the Agreement, the Transfer Agent has
agreed to accept and act as to such order or request. Upon receipt on any
Business Day of any check drawn or endorsed to the Transfer Agent, the Fund or
the Distributor for the purchase of Shares, or any payment made by Automated
Clearing House or Federal Funds wire, the Transfer Agent shall deposit such
check or payment in the bank account established by the Fund or the Distributor
for the collection of such amounts and shall wire such amounts to the Fund's
Custodian on the next Business Day. The Transfer Agent shall have no
responsibility hereunder for the Fund's compliance with states securities
registration laws ("Blue Sky laws") relating to such purchase orders, except to
the extent that the Transfer Agent will maintain records in a manner that will
enable the Fund to monitor the total number of Shares of the Fund sold
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in each state and shall provide the Fund reports as to such sales as specified
in Appendix B to this Agreement.
(b) On each Business Day, the Transfer Agent shall also accept, at
such times as are agreed upon from time to time by the Transfer Agent and the
Fund, a Computer Tape consistent in all respects with the Transfer Agent's tape
layout package, as amended from time to time, which is believed by the Transfer
Agent to be furnished by or on behalf of any Approved Institution, setting forth
data as to purchases, redemptions and exchanges of Shares irrespective of
whether payment of the purchase price accompanies such computer tape. The
Transfer Agent may rely on the data on such Computer Tapes as accurate, and
shall not be responsible hereunder for errors in such Computer Tapes furnished
to it hereunder, unless caused by the Transfer Agent's own negligence, bad faith
or willful misconduct.
(c) On each Business Day, the Fund shall provide or cause to be
provided to the Transfer Agent, at such time as the parties hereto shall agree,
the net asset value per share for the Fund and such other information as the
Transfer Agent may reasonably request.
5.2. On the Business Day following each Business Day, at such time as the
Transfer Agent and the Fund shall agree, an authorized employee of the Transfer
Agent shall confirm the following information by summary sheet transmitted by
electronic or other electromagnetic means to an authorized employee or agent of
the Fund (or by such other form as shall be agreed upon from time to time by the
Fund and the Transfer Agent):
(a) The total dollar amount to be applied toward the purchase of
Shares of the Fund and the number of Shares of the Fund purchased on such prior
Business Day, computed by aggregating the amounts so specified in (i) the
purchase orders received by the Transfer Agent on such prior Business Day from
individual investors and (ii) all Computer Tapes described in Section 5.1(b)
timely received by the Transfer Agent with respect to such prior Business Day;
(b) The total dollar value and number of Shares of the Fund redeemed
on such prior Business Day, computed by aggregating the amounts so specified in
(i) the redemption requests received by the Transfer Agent directly on the
preceding Business Day from shareholders, and (ii) all Computer Tapes described
in Section 5.1(b) relating to such prior Business Day; and
(c) The total dollar value and number of Shares of the Fund to be
exchanged for Shares of another fund and the number of Shares of such other fund
to be issued in such exchanges on such prior Business Day, and the total dollar
value and number of shares of the Fund to be issued in exchange for shares of
another fund on such prior business day (if not included in 5.2(a) above)
computed by aggregating the amounts represented by any exchange requests
received directly by the Transfer Agent from shareholders and the amounts
specified in all Computer Tapes described in Section 5.1(b) relating to such
prior Business Day.
5.3. Following each Business Day, the Transfer Agent will (on a day on
which banks in Denver, Colorado, Chicago, Illinois and New York, New York are
open for business but in any event on or prior to the Fifth Business Day
following such Business Day) advise the Distributor of the
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amount of cash necessary to be wired to the Custodian, representing purchase
orders for appropriate Fund's Shares received by the Transfer Agent as to such
Business Day, as set forth in Section 5.1 above. As to each Business Day, the
Transfer Agent will advise the Fund of the amount of cash representing exchange
orders received by the Transfer Agent as to such Business Day, such advice to be
given on the next Business Day.
5.4. As to each Business Day, the Transfer Agent shall issue to, and
redeem from, the accounts specified in a purchase order, redemption request, or
exchange request received by the Transfer Agent in proper form in accordance
with the Prospectus and, when required by the Prospectus, properly endorsed by
the record owner thereof with the record owner's or owners' signature(s)
guaranteed by a U.S. commercial bank or U.S. trust company, a member of a
national securities exchange, a foreign bank with a U.S. correspondent bank or a
federally-chartered savings and loan association, or shall issue to, and/or
redeem from, the accounts specified in a Computer Tape received by the Transfer
Agent from an Approved Institution, the appropriate number of full and
fractional Shares based on the net asset value per Share of the relevant series
of the relevant Funds specified in an advice received as to such Business Day
from the Fund. Notwithstanding the foregoing, if a redemption specified in a
redemption request received directly by the Transfer Agent or in a Computer Tape
is for a dollar value of Shares in excess of the dollar value of uncertificated
Shares in the specified account plus the dollar value of certificated Shares in
the specified account for which the Transfer Agent has received the tender of a
Share certificate or certificates in proper form as described above, the
Transfer Agent shall not effect such redemption in whole or part. In such case
involving a Computer Tape, the Transfer Agent shall orally or by electronic or
other electromagnetic means advise both the Fund and the Approved Institution
(or the Distributor or its agent if acting on behalf of such Approved
Institution) which supplied such Computer Tape of such discrepancy. In such
case involving a direct shareholder, the Transfer Agent shall, within five (5)
business days, notify such shareholder directly, orally or in writing.
5.5. The Transfer Agent shall, as of each Business Day specified in a
Certificate described in Section 6.1, issue Shares of the Fund, based on the net
asset value per Share of the Fund specified in an advice received from the Fund
to such Business Day, in connection with a reinvestment of a dividend or
distribution on Shares of the Fund.
5.6. On each Business Day, the Transfer Agent shall advise the Fund by
computer/electromagnetic tape specifying, with respect to the immediately
preceding Business Day: the total number of Shares of the Fund (including
fractional Shares) issued and outstanding at the opening of business on such
day; the total number of Shares of the Fund sold on such day, pursuant to
Section 5.2; the total number of Shares of the Fund redeemed or exchanged on
such day; the total number of Shares of the Fund, if any, sold on such day
pursuant to preceding Section 5.4, and the total number of Shares of the Fund
issued and outstanding at the close of business on such day. Unless the Fund or
its agent shall advise the Transfer Agent of any error in the information
contained in such computer/electromagnetic tape (the "Initial Tape") prior to
the transmission of the next computer/electromagnetic tape by the Transfer
Agent, the Transfer Agent shall be deemed to have fulfilled its responsibilities
hereunder with respect to the accuracy of the data on subsequent
computer/electromagnetic tapes submitted to the Fund that are based, in whole or
in part upon any inaccurate data from the Initial Tape.
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5.7. In connection with each purchase, exchange and redemption of Shares
other than pursuant to a Computer Tape submitted by an Approved Institution (or
by the Distributor or its agent acting on behalf of such Approved Institution),
the Transfer Agent shall send to the shareholder such statements as are
described in the Prospectus or as otherwise reasonably instructed in writing by
the Funds. If the Prospectus indicates that certificates for Shares are
available, and if specifically requested in writing by any shareholder, or if
otherwise required hereunder, the Transfer Agent will countersign, issue and
mail to such shareholder, at the address set forth in the records of the
Transfer Agent, a Share certificate for any full Shares requested.
5.8. In computing the redemption proceeds to be paid to any shareholder or
to an account for an Approved Institution, the Transfer Agent shall first
compute the amount of any withholding for federal income taxes for which the
Transfer Agent has the responsibility under this Agreement to calculate such
withholding, in such manner as the Fund and the Transfer Agent shall agree from
time to time in conformity with instructions provided by the Fund to the
Transfer Agent. The Transfer Agent shall also compute any withholding for
federal income taxes for which the Transfer Agent has such responsibility at the
time of any exchange of a Fund's shares for another fund's shares. In the case
of a redemption of Shares directly by a shareholder of record and not by means
of a Computer Tape submitted by an Approved Institution (or by the Distributor
or its agent acting on behalf of such Approved Institution), upon deposit of
moneys in a redemption account by the relevant Custodian against which the
Transfer Agent is authorized by the Fund to draw checks in connection with a
redemption of Shares of the Fund, the Transfer Agent shall cancel the redeemed
Shares and after making appropriate deduction for any withholding of taxes
required of it by this Agreement or applicable law, make payment of (i) the
redemption proceeds to the order of the shareholder, and (ii) any tax withheld
to the Internal Revenue Service, in accordance with the Fund's redemption and
payment procedures described in the Prospectus or as otherwise reasonably
described in a written instruction from the Fund. In the case of an exchange of
Shares directly by a shareholder of record and not by means of a Computer Tape
submitted by an Approved Institution (or the Distributor or its agent acting on
behalf of such Approved Institution), upon deposit of moneys in an account by
the relevant Custodian against which the Transfer Agent is authorized by the
Fund to draw checks in connection with an exchange of Shares of a fund, the
Transfer Agent shall cancel the exchanged Shares, and withhold and pay taxes
required under this Agreement and applicable law. In the case of a redemption
of Shares pursuant to a Computer Tape, the Transfer Agent shall, on the next
Business Day, send the Fund a Computer Tape setting forth the amount of
redemption proceeds due each Approved Institution. If such Approved Institution
(or the Distributor or its agent acting on behalf of such Approved Institution)
has previously furnished the Transfer Agent withholding instructions with
respect to such redemption or any exchange of Shares pursuant to a Computer
Tape, the Transfer Agent shall include in the Computer Tape furnished to the
Fund information as to the amount of such withholding.
5.9. The Transfer Agent shall not be required to issue Shares of any fund
(other than with respect to the reinvestment of dividends or distributions on
shares owned by an existing shareholder if so stated in the Certificate) after
it has received a Certificate stating that the sale of Shares of that fund has
been suspended or discontinued.
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5.10. The Transfer Agent shall not be responsible for the payment of any
original issue or other taxes required to be paid by the Fund in connection with
the issuance of any Shares.
5.11. The Transfer Agent shall not be responsible for issuing or effecting
any "stop transfer" or other similar order or restrictions on any Shares held in
the name of an Approved Institution. In the case of Shares registered in the
name of a shareholder other than an Approved Institution as to which a "stop
transfer" or other similar order or restriction applies, the Transfer Agent will
adhere to the terms of such stop transfer or similar order, except that it may
rely on a Certificate to effect a redemption, exchange or transfer of such
Shares, notwithstanding such stop order or restriction.
5.12. The Transfer Agent shall accept (a) a Computer Tape which is
furnished by or on behalf of any Approved Institution (or the Distributor or its
agent acting on behalf of such Approved Institution) and represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and (b) as to Shares standing
directly in the name of a shareholder other than an Approved Institution,
transfer instructions in proper form in accordance with the Fund's Prospectus
and the Transfer Agent's rules described herein, and shall effect the transfer
specified in said Computer Tape or transfer instructions, provided that any
necessary documents or Share certificates have been tendered to the Transfer
Agent.
5.13. (a) Except as otherwise provided in sub-paragraph (b) of this
Section 5.13 and in Section 5.14, Shares will be transferred, exchanged or
redeemed other than pursuant to Computer Tapes from an Approved Institution (or
the Distributor on its agent acting on behalf of such Approved Institution) upon
presentation to the Transfer Agent of endorsed Share certificates or, in the
case of uncertificated Shares, instructions endorsed in proper form in
accordance with the Prospectus as stated in Section 5.4, accompanied by such
documents as the Transfer Agent reasonably deems necessary to evidence the
authority of the person making such transfer, exchange or redemption, and
bearing satisfactory evidence of the payment of transfer taxes. In the case of
small estates, where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate small estates affidavit under applicable law
or with a surety bond, and without further approval of the Fund, transfer or
redeem Shares registered in the name of a decedent if the current market value
of the Shares being redeemed or transferred does not exceed such amount as may
from time to time be prescribed by the applicable state statutes and
regulations. The Transfer Agent reserves the right to refuse to transfer,
exchange or redeem Shares until it is reasonably satisfied that the endorsement
on the Share certificate or instructions is valid and genuine, and for that
purpose it will require, unless otherwise instructed by an Officer, a signature
guarantee as stated in Section 5.4 of this Agreement. The Transfer Agent also
reserves the right to refuse to transfer, exchange or redeem Shares until it is
reasonably satisfied that the requested transfer, exchange or redemption is
legally authorized, or until it is reasonably satisfied that there is no basis
to any claims adverse to such transfer, exchange or redemption. The Transfer
Agent may, in effecting transfers, exchanges and redemptions of Shares, rely
upon those provisions of the Uniform Act for the Simplification of Fiduciary
Security Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, applicable to the transfer of securities.
(b) Notwithstanding the foregoing or any other provision contained in
this Agreement to the contrary, the Transfer Agent shall be fully protected by
the Fund in requiring any
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instructions, documents, assurances, endorsements or guarantees, including,
without limitation, any signature guarantees, in connection with a redemption,
exchange or transfer of Shares whenever the Transfer Agent reasonably believes
that requiring the same would be consistent with the transfer, exchange and
redemption procedures described in the Prospectus, or in any instructions or
certificates provided to the Transfer Agent by the Fund.
5.14. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be expected to require, as a condition to
any transfer, redemption or exchange of any Shares pursuant to a Computer Tape,
any documents, including, without limitation, any documents of the kind
described in Section 5.13(a) to evidence the authority of the person requesting
the transfer, exchange or redemption and/or the payment of any transfer taxes,
and shall be fully protected in acting in accordance with the applicable
provisions of this Agreement.
5.15. Nothing contained in this Agreement shall constitute any agreement
or representation by the Transfer Agent to permit, or to agree to permit, any
Approved Institution to input information into the System, although the Transfer
Agent may, with the Fund's written permission, permit access to the System by an
Approved Institution to retrieve data or information as to such Approved
Institution's accounts.
ARTICLE 6
DIVIDENDS AND DISTRIBUTIONS
6.1. The Fund shall furnish to the Transfer Agent a Certificate either (i)
setting forth with respect to each series of the Fund the date of the
declaration of a dividend or distribution, the date of accrual or payment
thereof, as the case may be, the record date as of which shareholders entitled
to payment or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution for each series of the Fund, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable by the Transfer Agent with respect to such
dividend or distribution on such payment date, or (ii) stating that the
declaration of dividends and distributions shall be on a daily or other periodic
basis and containing information of the type set forth in subsection (i) hereof.
6.2. Upon the payment date specified in the relevant Certificate, the
Transfer Agent shall, in the case of a cash dividend or distribution, advise the
Fund (by telephone or other electronic transmission) of the amount of cash
necessary to make the payment of the dividend or distribution to the
shareholders of record as of such payment date, including the amounts to be paid
to Approved Institutions. The Fund shall be responsible for having the
appropriate Custodian transfer a sufficient amount of cash to a dividend
disbursement account maintained by the Fund for the relevant Series against
which the Transfer Agent shall cause checks, ACH or federal funds wire payment
to be drawn to the order of such shareholders or Approved Institutions in
payment of the dividend. The Transfer Agent shall not be liable for any
improper payments made in accordance with a Certificate described in Section
6.1. If the Transfer Agent shall not receive from the appropriate Custodian
sufficient cash to make payments of any cash dividend or distribution to
shareholders of the Fund as of the record date, the Transfer Agent shall, upon
notifying the Fund, withhold payment to all shareholders of
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<PAGE>
record as of the record date until sufficient cash is provided to the Transfer
Agent unless otherwise instructed by the Fund by a Certificate and acceptable to
the Transfer Agent. In the case of dividends or distributions reinvested in
additional Shares of a series of the Fund, the Transfer Agent shall follow the
procedures set forth in Section 5.5.
6.3. The Transfer Agent shall in no way be responsible for the
determination of the rate or form of dividends or capital gain distributions due
shareholders.
6.4. The Transfer Agent shall, upon request of the Fund, file such
appropriate information returns concerning the payment of dividends and capital
gain distributions and redemptions with the proper Federal, state and local
authorities as are required by law to be filed by the Fund but shall in no way
be responsible for the collection or withholding of taxes due on such dividends
or distributions or on redemption proceeds due shareholders, except and only to
the extent required of it by applicable law for accounts of shareholders other
than Approved Institutions. If any amount is to be withheld from any dividend
or distribution paid to, or exchange or redemption proceeds or other cash
distribution from, the account of an Approved Institution, such Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) may advise the Transfer Agent of the amount to be withheld
therefrom, and if such advice is provided in a timely manner to the Transfer
Agent, the Transfer Agent will provide a separate check for such amount to the
Approved Institution, which shall be responsible for the proper application of
such withheld amounts.
ARTICLE 7
CONCERNING THE FUND
7.1. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign or give Share certificates or
Certificates, together with a specimen signature of each new Officer.
7.2. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent in a timely manner the Fund's currently effective Prospectus,
copies of any exemptive relief obtained by the Fund under applicable securities
laws and copies of any amendments to the Fund; Declaration of Trust, By-Laws and
any other documents to be furnished by the Fund under this Agreement to enable
the Transfer Agent to carry out its duties hereunder, and, for purposes of this
Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus, exemptive relief or other document
until it is actually received by the Transfer Agent.
7.3 The Transfer Agent has been advised by the Fund and agrees that the
Fund's Declaration of Trust is on file with the Secretary of State of the
Commonwealth of Massachusetts and that this Agreement has been executed by the
officers of the Fund, as officers and not individually. The obligations of the
Agreement are not binding upon the Trustees, officers or shareholders of the
Fund individually but are binding only upon the assets and property of the Fund
or a particular series of Shares. The Transfer Agent agrees to look only to the
assets of the Fund or a particular series of Shares for payment under such
Agreement and that the shareholders, Trustees and officers shall not be liable
therefore.
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ARTICLE 8
CONCERNING THE TRANSFER AGENT
8.1. Subject to the standard of care set forth in Section 8.4, the
Transfer Agent shall not be liable and shall be fully protected in acting upon
any Computer Tape, Certificate, oral instructions, writing or document
reasonably believed by it to be genuine and to have been signed (in the case of
written instructions or documents) or made by the proper person or persons and
shall not be held to have any notice of any change of authority of any person
until receipt of written notice thereof from the Fund or such person. Subject
to the standard of care set forth in Section 8.4, the Transfer Agent shall be
similarly protected in processing Share certificates which it reasonably
believes to bear the proper manual or facsimile signatures of the Officers of
the Fund and the proper countersignature of the Transfer Agent or any prior
transfer agent.
8.2. The Transfer Agent covenants that it shall carry out its
responsibilities under this Agreement in accordance and compliance with the
provisions of applicable laws and regulations governing its operation as a
transfer agent.
8.3. The Transfer Agent shall keep and maintain on behalf of the Fund such
records which the Fund or the Transfer Agent is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rule 31a-1 under the Investment Company Act of 1940, relating
to the maintenance of records in connection with the services to be provided
hereunder. The Transfer Agent agrees to make such records available for
inspection by the Trust at reasonable times and otherwise to keep confidential
all records and other information relative to the Fund and its shareholders,
except when the Transfer Agent reasonably believes it has been requested to
divulge such information by duly-constituted authorities or court process, or
requested by a shareholder with respect to information concerning an account as
to which such shareholder has either a legal or beneficial interest or when
requested by the Fund, the shareholder, or the dealer of record as to such
account.
8.4 (a) The Transfer Agent shall not be liable for any loss or damage,
including, without limitation, attorneys' fees, expenses and court costs,
resulting from the Transfer Agent's actions or omissions to act under or in
connection with this Agreement and its duties and responsibilities hereunder,
except for any loss or damage arising out of its own failure to act in good
faith, or its negligence or willful misfeasance.
(b) The Transfer Agent shall, provided such coverage is readily available
to the Transfer Agent at reasonable rates and upon reasonable terms and
conditions, maintain an insurance policy or surety bond, in the face amount of
$10 million per covered transaction against losses suffered by the Transfer
Agent in excess of the policy deductibles arising from errors or omission on the
part of the Transfer Agent in carrying out its responsibilities under this
Agreement and other agreements. The Transfer Agent shall upon request, furnish
promptly to the Fund copies of all insurance policies maintained pursuant to
this Section 8.4(b) that have not previously been furnished to the Fund.
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(c) Any costs or losses incurred by the Fund for the processing of any
purchase, redemption, exchange or other share transactions at a price per share
other than the price per share applicable to the effective date of the
transaction (the foregoing being generally referred to herein as "as of"
transactions) will be handled in the following manner:
1. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent, taken
in the aggregate, result in a net loss to the Fund ("net loss"),
Transfer Agent will reimburse the Fund for such net loss, except to
the extent that such net loss may be offset by application of a "net
benefit" to the Fund carried over from prior calendar years pursuant
to sub-paragraph 2 immediately below.
2. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent, taken
in the aggregate, result in a net benefit to the Fund ("net benefit"),
the Fund shall not reimburse the Transfer Agent for the amount of such
net benefit; however, any "net benefit" for any calendar year may be
used to offset, in whole or in part, any "net loss" suffered by the
Fund in any future calendar year so as to reduce the amount by which
the Transfer Agent shall be required to reimburse the Fund for such
"net loss" in such year pursuant to sub-paragraph 1 immediately above.
3. Any "net loss" for which the Transfer Agent reimburses the Fund in any
calendar year shall not be carried over into future years so as to
offset any "net benefit" in such future years.
8.5 The Fund shall indemnify and exonerate, save and hold harmless the
Transfer Agent and its officers, directors, employees and agents (hereinafter
the Transfer Agent and such persons are referred to as "Indemnitees") from and
against any and all liabilities or losses arising from claims or demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs associated with defending against such claims and demands,) of any nature
which any Indemnitee may sustain or incur or which may be asserted against any
Indemnitee by any person arising out of or in any manner related to any action
taken or omitted to be taken by the Transfer Agent in good faith and without
negligence or willful misconduct in reasonable reliance upon (i) any provision
of this Agreement; (ii) the Prospectus; (iii) any instruction or order
including, without limitation, any Computer Tape reasonably believed by the
Transfer Agent to have been received from an Approved Institution (or the
Distributor or its agent acting on behalf of such Approved Institution); (iv)
any instrument or order reasonably believed by the Transfer Agent to be genuine
and to be signed, countersigned or executed by any duly authorized Officer, (v)
any Certificate or other instructions of an Officer, (vi) any opinion of legal
counsel for the Fund; (vii) any records or data supplied by the Fund's prior
transfer agent; or (viii) any order of any court, arbitration panel or other
judicial entity.
8.6. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matters arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or
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<PAGE>
omitted by it in good faith and without negligence or willful misconduct in
accordance with such written instructions. The Transfer Agent may consult with
counsel to the Fund, at the expense of the Fund and shall be fully protected
with respect to anything done or omitted by it in good faith and without
negligence or willful misfeasance in accordance with the advice or opinion of
counsel to the Fund. Such application by the Transfer Agent for written
instructions from an Officer of the Fund may, at the option of the Transfer
Agent, set forth in writing any action proposed to be taken or omitted by the
Transfer Agent with respect to its duties or obligations under this Agreement
and the date on and/or after which such action shall be taken, and the Transfer
Agent shall not be liable (other than for its bad faith, negligence or willful
misfeasance) for any action taken or omitted in accordance with a proposal
included in any such application on or after the date specified therein unless,
prior to taking or omitting any such action, the Transfer Agent has received
written instructions in response to such application specifying the action to be
taken or omitted.
8.7. Any report, confirmation or other document furnished to the Fund or
to an Approved Institution as part of the Transfer Agent's responsibilities
under this Agreement shall be deemed final and conclusive on the 8th Business
Day after such report, confirmation or document has been furnished to the Fund
or Approved Institution, as the case may be, and the Transfer Agent shall not be
liable to the Fund or such Approved Institution under this Agreement as to any
error or omission in such report, confirmation or document that is not reported
to the Transfer Agent within such 7-day period.
8.8. The Transfer Agent shall deliver Share certificates by courier or by
certified or registered mail to the shareholder's address in the records of the
Transfer Agent. The Transfer Agent shall advise the Fund of any Share
certificates returned as undeliverable after being transmitted by courier or
mailed as herein provided for.
8.9. The Transfer Agent may issue new Share certificates in place of
Share certificates represented to have been lost, stolen, or destroyed upon
receiving instructions satisfactory to the Transfer Agent. If the Transfer
Agent receives written notification from the owner of the lost, destroyed, or
stolen Share certificate within a reasonable time after the owner has notice of
such loss, destruction or theft, the Transfer Agent shall issue a replacement
Share certificate upon receipt of an affidavit or affidavits of loss or
nonreceipt and an indemnity agreement executed by the registered owner or his
legal representative, and supported (a) in the case of a certificate having a
value at the time of replacement of less than $100, by a fixed penalty surety
bond for twice the then-current market value of Shares represented by said
certificate and (b) in the case of a certificate having a value at time of
replacement of $100 or more, by an open penalty bond, in form satisfactory to
the Transfer Agent or (c) by such other documentation or reasonable assurances
in a particular case as may be set forth in a Certificate. If the Fund receives
such written notification from the owner of the lost, destroyed or stolen Share
certificate within a reasonable time after the owner has notice of it, the Fund
shall promptly notify the Transfer Agent. The Transfer Agent may issue new
Share certificates in exchange for, and upon surrender of, mutilated Share
certificates.
8.10. The Transfer Agent will supply shareholder lists to the Fund from
time to time upon receiving a request therefor from an Officer of the Fund.
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<PAGE>
8.11. At the request of an Officer, the Transfer Agent will address and
mail such appropriate notices to shareholders as to the Fund may direct, at the
Fund's expense.
8.12. Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency
of the amount to be received therefor, or the authority of an Approved
Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer, exchange or of a redemption of any
Shares by an Approved Institution, the propriety of the amount to be paid
therefor, or the authority of an Approved Institution to request such transfer,
exchange or redemption;
(c) The legality of the declaration of any dividend or capital gains
distribution by the Fund, or the legality of the issue of any Shares in payment
of any Share dividend or distribution; or
(d) The legality of any recapitalization or readjustment of the
Shares.
8.13. The Transfer Agent shall be entitled to receive, and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Appendix B hereto, (i) its
reasonable out-of-pocket expenses (including without limitation legal expenses,
court costs, and attorney's fees associated with litigation or arbitration)
incurred in connection with this Agreement and its performance hereunder and
(ii) such compensation as is specified in Appendix C hereto as such fees may be
amended from time to time by agreement in writing by the Transfer Agent and the
Fund.
8.14. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
8.15. The Transfer Agent shall indemnify and exonerate, save and hold
harmless the Fund, and its officers, directors, employees and agents, from and
against any and all liabilities or losses arising from claims and demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs), of any nature which the Fund or any officer, director, employee or agent
may sustain or incur or which may be asserted against them by any person arising
out of or in any manner related to the Transfer Agent's failure to comply with
the terms of this Agreement or which arise out of the Transfer Agent's
negligence or willful misconduct provided, however, that the Transfer Agent
shall not indemnify and exonerate, save and hold harmless, the Fund, its
officers, directors, employees, and agents for anything arising out of or in any
manner related to the Fund's failure to comply with the terms of this Agreement
or which arises out of the Fund's, or any officer's, director's, employee's or
agent's (other than the Transfer Agent) negligence or willful misconduct or the
Transfer Agent's reliance on information or instructions received from, or
issued on behalf of, the Fund.
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ARTICLE 9
TERMINATION
9.1. The initial term of this Agreement shall commence on the Effective
Date and shall continue through June 30, 1997 (the "Initial Term") unless
earlier terminated pursuant to Section 9.2. Thereafter, unless earlier
terminated by either party at the end of the Initial Term upon at least 90 days'
prior written notice, this Agreement shall continue from day to day thereafter
(such period shall be referred to as the "Renewal Term"), until either of the
parties hereto terminates this Agreement by giving at least 6 months' prior
written notice to the other party, whereupon this Agreement shall terminate
automatically upon the expiration of the 6-month period specified in the written
notice. In the event such notice of termination is given by the Fund, it shall
be accompanied by a copy of a resolution of the Board of Trustees of the Fund,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement. In the event such notice is given by the Transfer Agent, the
Fund shall, on or before the termination date, deliver to the Transfer Agent a
copy of a resolution of its Board of Trustees certified by the Secretary or any
Assistant Secretary designating a successor transfer agent or transfer agents.
In the absence of such designation by the Fund, the Transfer Agent may designate
a successor transfer agent. If the Fund fails to designate a successor transfer
agent, the Fund shall, upon the date specified for termination of this Agreement
and delivery of the records maintained hereunder, be deemed to be its own
transfer agent and the Transfer Agent shall thereby be relieved of all duties
and responsibilities pursuant to this Agreement.
9.2 Notwithstanding Section 9.1 hereof, this Agreement may be terminated
at any time by the Fund upon not less than 60 days' written notice from the Fund
to the Transfer Agent notifying the Transfer Agent: (i) if a majority of the
Trustees who are not "interested persons" (as that term is defined in the
Investment Company Act of 1940) upon completion of the procedures set forth
below have reasonably made a specific finding that the Transfer Agent has failed
on a continuing basis to perform its duties pursuant to this Agreement in a
satisfactory manner consistent with then current industry standards and
practices or (ii) if there is instituted or pending an action or proceeding by
or before any court or governmental, administrative or regulatory agency against
or involving the parties hereto, their affiliates, the Trustees of the Fund or
any of them and challenging the making of this Agreement or alleging that any
material term of the Agreement is contrary to law or any governmental agency has
threatened in writing to commence such an action or proceeding. Prior to any
termination pursuant to clause (i), the Board of Trustees of the Fund shall
provide the Transfer Agent with a written statement of the specific aspects of
the Transfer Agent's performance of its duties that are unsatisfactory, the
specific incident or incidents giving rise to the Board of Trustees' conclusion
and any written material that the Board of Trustees' relied upon in making such
a determination. The Transfer Agent shall have 30 days to respond to such
written statement. If no response is made, or if, after reasonable
consideration of the response of the Transfer Agent, such response is
unsatisfactory to the Board of Trustees, then the Board of Trustees of the Fund
may terminate the Agreement pursuant to clause (i) thereof. For purposes of
making a finding as contemplated by clause (i) above, the Transfer Agent shall
be, absent unusual circumstances, conclusively presumed to have failed on a
continuing basis to perform its duties pursuant to this Agreement in a
satisfactory manner consistent with the industry standards and practices
prevailing on the date of this Agreement if any of the following should occur:
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(1) The Transfer Agent through its fault is unable (more than
once in a twelve-month period) to process daily activity for any two successive
Business Days and to confirm information generated by such activity by the
fourth Business Day following the later of such two Business Days. (For example,
assuming no holidays, daily activity on a Monday and Tuesday is not confirmed by
the following Monday.)
(2) The Transfer Agent through its fault is unable (more than two
times in any twelve-month period) to provide system access to personnel of an
Approved Institution for six hours between 9:00 a.m. and 5:00 p.m. Chicago time
on three successive Business Days.
(3) The Transfer Agent through its fault is unable (more than
twice in any one year) to create and mail dividend checks within four Business
Days after the Fund's payable date (assuming that the required information has
been furnished to the Transfer Agent on the record date).
(4) The Transfer Agent through its fault is unable to instruct
various financial institutions on daily money movements from and to the Funds'
Custodians for two successive Business Days by the Fourth Business Day following
the later of such two Business Days. (For this purpose, instructions based on
reasonable estimates are treated as fulfilling the Transfer Agent's obligations
hereunder.)
(5) The Transfer Agent through its fault is unable (more than
twice in any twelve-month period) to transmit dividend activity to an Approved
Institution within five Business days from the relevant Fund's payable date.
For purposes of the foregoing, an event described in any of the foregoing
clauses 1 through 5 shall be deemed not to have occurred if the Transfer Agent's
inability to perform is a result, directly or indirectly of faulty or inadequate
performance by service provider including, but not limited to, telephone
companies, pricing services, Nuveen & Co., Approved Institutions, and banks
other than the Transfer Agent and its agents and employees or a result, directly
or indirectly, of other events out of the Transfer Agent's reasonable control.
Also for the purposes of the foregoing, if the Transfer Agent processes
transactions or instructions (as the case may be) as required hereunder within
the time periods indicated but more than 10% of the transactions, checks or
instructions, as the case may be, are inaccurate in any material respect, and
are not corrected within the requisite time then the Transfer Agent shall be
deemed to have been unable to perform the relevant service within the requisite
time.
9.3. In the event of termination of this Agreement, the Transfer Agent
will facilitate transfer of the records maintained by it hereunder and cooperate
with such successor transfer agent as may be designated pursuant to the
provisions of Section 9.1 hereof with respect to delivery of such records and
assumption by such successor transfer agent of its duties. In the event the
Fund or the Transfer Agent terminates the Transfer Agency Agreement at any time,
the Fund shall be responsible for the payment of fees and expenses of the
Transfer Agent relating to the conversion to the new Transfer Agent.
ARTICLE 10
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ADDITIONAL SERIES
10.1. In the event that the Fund establishes one or more Series in
addition to the Series named herein with respect to which it desires to have the
Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing at least 60 days in advance of the
sale of Shares of such Series and shall deliver to the Transfer Agent the
documents listed in Section 2.3 with respect to such Series. Unless the
Transfer Agent declines in writing within a reasonable time to provide such
services, the Shares of such Series shall be subject to this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1. The Fund agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Transfer Agent
hereunder, it shall advise the Transfer Agent of such proposed change at least
30 days prior to the intended date of the same, and shall proceed with such
change only if it shall have received the written consent of the Transfer Agent
hereto, and shall have received and agreed to the schedule of charges, if any,
specified by the Transfer Agent necessary to effect such change.
11.2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at 333 West Wacker
Drive, Chicago, Illinois 60606, Attention: Mr. Stuart Rogers, or at such other
place as the Fund may from time to time designate in writing.
11.3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent, Attention: President, and mailed or delivered
to it at its office at 3410 South Galena Street, Denver, Colorado 80231, with a
copy to be sent to Andrew J. Donohue at OppenheimerFunds, Inc. Two World Trade
Center, New York, NY 10048 or at such other place as the Transfer Agent may from
time to time designate in writing.
11.4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties.
11.5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund or the Transfer Agent without
the written consent of the other party. A change of ownership of the Transfer
Agent as a result of an internal reorganization of the Transfer Agent, its
parent corporation or affiliates shall not be deemed to be an "assignment"
hereunder. A change in "control" (as defined under the Investment Company Act
of 1940) of the Transfer Agent's parent corporation shall not be deemed an
"assignment" hereunder. A sale of a controlling interest in the capital stock
or of all or substantially all of the assets of the Transfer Agent to a third
party unaffiliated with the Transfer Agent or its parent corporation shall be
deemed to be an "assignment" hereunder.
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11.6. This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado applicable to agreements to be wholly
performed in that state.
11.7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
11.8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
11.9. Neither the Fund nor the Transfer Agent will be liable or
responsible hereunder for delays or errors by reason of circumstances reasonably
beyond its control, including, without limitation, acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown,
flood, catastrophe, acts of God, insurrection, war, riots, or failure of
transportation, communication or power supply.
11.10. The Fund shall establish and maintain such bank accounts, with such
bank or banks as are selected by the Fund, as are necessary so that the Transfer
Agent may perform the services to be provided hereunder. To the extent that
performance of such services shall require the Transfer Agent directly to
disburse amounts for payments of dividends, redemption proceeds or other
purposes, the Fund shall provide such bank or banks with all instructions and
authorizations necessary to evidence the Transfer Agent's authority to effect
such transactions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the day
and year first above written.
Attest: NUVEEN FLAGSHIP MULTISTATE TRUST I
__________________________________ By:__________________________________
Name Title Name Title
Attest: SHAREHOLDER SERVICES, INC.
__________________________________ By:__________________________________
Name Title Barbara Hennigar, President
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NUVEEN FLAGSHIP MULTISTATE TRUST I
TRANSFER AGENCY AGREEMENT
Appendix A
Officer's Certificate
I, ____________________________, the Secretary of Nuveen Flagship
Multistate Trust I, a Massachusetts business trust (the "Fund"), do hereby
certify that:
The following individuals have been duly authorized by the Trustees of the
Fund in conformity with the Fund's Declaration of Trust and By-Laws to execute
any Certificate, instruction, notice or other instrument, including an amendment
to Appendix B to this Agreement, or to give oral instructions on behalf of the
Fund, and the signatures set forth opposite their respective names are their
true and correct signatures.
NAME TITLE SIGNATURE
- ---- ----- ---------
_________________________ Chairman __________________________
_________________________ President __________________________
_________________________ Secretary __________________________
_________________________ Trustee __________________________
_________________________ Vice President __________________________
_________________________ ___________________ __________________________
_________________________ ___________________ __________________________
_________________________ ___________________ __________________________
_________________________ ___________________ __________________________
_________________________ ___________________ __________________________
_________________________ ___________________ __________________________
_________________________ ___________________ __________________________
_______________________________, Secretary
Name
20
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
TRANSFER AGENCY AGREEMENT
Appendix B
Transfer Agent Services
SERVICE: SSI WILL:
- ------- --------
New Account Set-Ups Process new sales applications. Place
telephone calls to account
representatives as needed to clarify
instructions for new account set-ups.
Purchases - New and Subsequent Process mailed-in, lockbox, bank wire,
list billing, ACH, and telephone payments
as received. Coordinate and balance UIT
reinvestment payments.
Transfers Negotiate and process all transfer
requests.
Exchanges - Mail and Telephone Negotiate and process exchange requests.
Record telephone exchange requests.
Redemptions - Mail and Telephone Negotiate and process mailed in, ACH and
telephone redemption requests. Record
telephone redemption requests.
Wire Order Purchases and Redemptions Process wire order purchases and
redemptions for designated settlement
period accepted on recorded telephone
lines and via NSCC FUND/SERV. Process
purchases and redemptions for same day
wire settlement.
Account Maintenance Process all written and telephone
(Address Changes, Dividend Option maintenance. For address
Changes, Name Changes, Broker or changes, prepare and mail a notice of the
Dealer Changes, etc.) address change to the former address.
Certificate Issuances Issue certificates as requested by
shareholders.
Telephone Services Provide efficient handling of all
incoming shareholder and broker/dealer
telephone calls. Make outgoing
clarification calls/coordination with
Chase on UIT/ETF consolidations. Provide
timely problem resolution for all
servicing calls. Provide automated trend
reporting.
1
<PAGE>
<TABLE>
<CAPTION>
SERVICE: SSI WILL:
- ------- --------
<S> <C>
Correspondence with Shareholders Respond to all shareholder and broker/dealerwritten inquiries.
and Broker/Dealers Document all correspondence affecting shareholder accounts
on the Shareholder Accounting System.
Shareholder Confirms Prepare and mail confirmations of daily account activity.
(Daily/Monthly/Quarterly/Annual) Prepare and mail monthly, quarterly, and annual
confirmations as directed by the fund.
Dealer Confirms Prepare and mail weekly dealer confirmations listing activity
on client accounts as directed by the Fund.
Distribution Disbursements Prepare and mail cash distribution checks. Process reinvested
distributions.
Commission Statements Provide bimonthly commission statements listing each
purchase and the portion of the sales charge paid to the
broker/dealer.
Commission Checks Provide bimonthly commission checks to broker/dealers.
Daily Transmission of Reports Transmit daily transaction activity reports, balancing
reports, and sales information via telephone lines to
a printer at Nuveen.
Fund Summary Sheets Prepare daily reports that summarize by type of
transaction all capital stock activity for each fund.
Transmit/download wire/capital stock activity
information to Chase.
Sales Reporting Provide daily, weekly, monthly, quarterly, and annual
reports of sales information.
12b-1 Reporting Complete 12b-1 processing including calculating the 12b-1
payment amounts and sending checks to the broker/dealer
home offices. Provide a listing broken down by sales
representative within each branch.
Invalid Taxpayer Identification Mail Forms W-9 as required to validate taxpayer identification
Number Solicitation and numbers; institute backup withholding as required by IRS
Backup Withholding regulations, and timely send all notices.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Regulatory Reporting Compute, prepare, and mail all necessary reports to
shareholders, federal, and/or state authorities (Forms 1099
-DIV, 1099-B, and1042S).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SERVICE: SSI WILL:
- ------- --------
<S> <C>
Front-End Imaging of Documents Front-end Image all incoming documents.
Cost Basis Reporting Provide cost basis information as available to shareholders
annually for use in determining capital gains and losses.
Blue Sky Reporting Provide monthly report of purchases and redemptions by
state.
Financial Reporting Mailings Provide mail handling for 2 financial reports per fund per
year to Nuveen shareholders.
Prospectus Mailings Provide mail handling for 1 prospectus per fund per year to
Nuveen shareholders.
Proxy Solicitation and Tabulation Perform 1 proxy solicitation and tabulation per fund per year.
Networking Accounts Provide transmission and appropriate services for each
network level.
Cash Availability Transmit mutual fund activity to designated entity on a daily
basis for cash availability purposes.
Commission/12b-1 Balancing Provide balancing reports for commission and 12b-1
payments.
</TABLE>
4
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
TRANSFER AGENCY AGREEMENT
Appendix C
Fee Schedule
The Transfer Agent will provide the transfer agent services listed on
Appendix B for the Fund at the rates set forth below:
<TABLE>
<CAPTION>
Annual Transfer Agent Fees:
- --------------------------
ANNUAL-PER-ACCOUNT FEES *
-------------------------
<S> <C> <C>
First 150,000 Accounts** $ 19.25 per account
Next 100,000 Accounts** $ 18.75 per account
Next 50,000 Accounts** $ 18.25 per account
Over 300,000 Accounts** $ 17.75 per account
</TABLE>
Out-Of-Pocket Expenses:
- ----------------------
Out-of-pocket expenses may be incurred by either the Fund or the
Transfer Agent and are not included in the annual Transfer Agent Fees. Those
out-of-pocket expenses directly incurred by the Transfer Agent will be billed to
the Fund on a monthly basis. These out-of-pocket expenses include, but are not
limited to, the printing of forms, envelopes, postage and proxy solicitation
fees for the shareholder mailings, costs of abandoned property reports or
searches for missing or inactive shareholders, equipment and system access
costs, microfilm, telephone line and usage charges, overnight express mail
charges, check signature plates and stamps, and programmer/analyst and testing
technician time beyond that agreed to in writing. Bank charges and earnings
credit will be billed directly to the Fund by United Missouri Bank (or other
banks). The Transfer Agent may require the prior payment of anticipated out-of-
pocket expenses, from time to time.
_________________
* Payable on a monthly basis for each non-retirement plan account in
existence at the end of the month. Retirement Plan accounts may be subject to a
separate fee schedule to be negotiated.
** The determination of the number of accounts for purposes of determining the
per account fee shall be based on all Nuveen Funds using the same fee schedule
and shall be allocated on a Fund by Fund basis in a manner determined by the
Transfer Agent based on the number of accounts in each fund.
These fees are valid for XXX months after which they are subject to change, from
time to time.
5
<PAGE>
The Transfer Agent shall, from time to time, but no more frequently than
monthly, send an invoice to the Fund itemizing the compensation and expense
reimbursement. The Fund shall pay such invoice (except to the extent that the
amount thereof is in dispute) by wire not later than 30 days after receipt of
the invoice.
6
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 1, 1996, for the Nuveen Multistate Tax-Free Trust, comprising the
Arizona, Florida, Maryland, Pennsylvania and Virginia Tax-Free Value Funds, and
to all references to our firm included in or made a part of this registration
statement on Form N-1A of Nuveen Flagship Multistate Trust I.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 7, 1997
<PAGE>
EXHIBIT 15
Nuveen Flagship Municipal Trust
Nuveen Flagship Multistate Trust I
Nuveen Flagship Multistate Trust II
Nuveen Flagship Multistate Trust III
Nuveen Flagship Multistate Trust IV
Plan of Distribution and Service
Pursuant to Rule 12b-1
January 30, 1997
Whereas, Nuveen Flagship Municipal Trust, Nuveen Flagship Multistate Trust
I, Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III and
Nuveen Flagship Multistate Trust IV, each a Massachusetts business trust (each,
a "Fund"), engages in business as an open-end management investment company and
is registered under the Investment Company Act of 1940, as amended (the "Act");
Whereas, each Fund is authorized to and may or does issue shares of
beneficial interest in separate series, with the shares of each such series
representing the interests in a separate portfolio of securities and other
assets (each Fund's series together with all other such series subsequently
established by a Fund being referred to herein individually as a "Series" and
collectively as the "Series");
Whereas, each Fund has outstanding the Series set forth on Exhibit A;
Whereas, each Fund, on behalf of each Series, employs John Nuveen & Co.
Incorporated (the "Distributor") as distributor of the shares of each Series of
each Fund (the "Shares") pursuant to a Distribution Agreement dated as of
February 1, 1997;
Whereas, each Fund is authorized to issue Shares in four different classes
("Classes"): Class A, Class B, Class C and Class R (although not all Series will
issue all Classes of Shares).
Whereas, each Fund, on behalf of its Series, desires to adopt a Plan of
Distribution and Service pursuant to Rule 12b-1 under the Act ("Rule 12b-1"),
and the Board of Trustees of each Fund has determined that there is a reasonable
likelihood that adoption of this Plan of Distribution and Service will benefit
the Fund and its shareholders;
Whereas, each Fund, on behalf of its Series, has adopted a Multiple Class
Plan Pursuant to Rule 18f-3 (the "Rule 18f-3 Plan") to enable the various
Classes of Shares to be granted
<PAGE>
different rights and privileges and to bear different expenses, and has an
effective registration statement on file with the SEC containing a Prospectus
describing such Classes of Shares;
Whereas, as described in the Rule 18f-3 Plan, the purchase of Class A
Shares is generally subject to an up-front sales charge, as set forth in the
Fund's Prospectus and Statement of Additional Information, and the purchase of
Class B and Class C Shares will not be subject to an up-front sales charge, but
in lieu thereof the Class B Shares will be subject to an asset-based
distribution fee (and a declining contingent deferred sales charge) and Class C
Shares will be subject to an asset-based distribution fee (and a one-year
contingent deferred sales charge), as described in the Prospectus for the
Shares; and
Whereas, Shares representing an investment in Class B will automatically
convert to Class A Shares 8 years after the investment, as described in the
Prospectus for the Shares;
Now, Therefore, each Fund, on behalf of its Series, hereby adopts, and the
Distributor hereby agrees to the terms of, this Plan of Distribution and Service
(the "Plan") in accordance with Rule 12b-1, on the following terms and
conditions:
1. (a) Each Fund, on behalf of its Series, is authorized to compensate the
Distributor for services performed and expenses incurred by the
Distributor in connection with the distribution of Shares of Class A,
Class B and Class C of the Fund and the servicing of accounts holding
such Shares.
(b) The amount of such compensation paid during any one year shall consist
of:
(i) with respect to Class A Shares, a Service Fee not to exceed .20
% of average daily net assets of the Class A Shares of the
Fund;
(ii) with respect to Class B Shares, a Service Fee not to exceed
.20% of average daily net assets of the Class B Shares of the
Fund, plus a Distribution Fee not to exceed .75% of average
daily net assets of the Class B Shares of the Fund; and
(iii) (A) with respect to Class C Shares of Long-Term and
Intermediate series, a Service Fee not to exceed .20% of
average daily net assets of the Class C Shares of the Fund,
plus a Distribution Fee not to exceed .55% of average daily net
assets of the Class C Shares of the Fund; and
(B) with respect to Class C Shares of Limited-Term series, a
Service Fee not to exceed .20% of average daily net assets of
the Class C Shares of the
-2-
<PAGE>
Fund, plus a Distribution Fee not to exceed .35% of average
daily net assets of the Class C Shares of the Fund.
Such compensation shall be calculated and accrued daily and paid
monthly or at such other intervals as the Board of Trustees may
determine.
(c) With respect to Class A Shares, the Distributor shall pay any Service
Fees it receives under the Plan for which a particular underwriter,
dealer, broker, bank or selling entity having a Dealer Agreement in
effect ("Authorized Dealer", which may include the Distributor) is the
dealer of record to such Authorized Dealers to compensate such
organizations for providing services to shareholders relating to their
investment. The Distributor may retain any Service Fees not so paid.
(d) With respect to the Class B Shares, the Distributor:
(i) shall retain the Distribution Fee to compensate it for costs
associated with the distribution of the Class B Shares,
including the payment of broker commissions to Authorized
Dealers (which may include the Distributor) who were the dealer
of record with respect to the purchase of those shares; and
(ii) shall pay any Service Fees it receives under the Plan for which
a particular Authorized Dealer is the dealer of record (which
may include the Distributor) to such Authorized Dealers to
compensate such organizations for providing services to
shareholders relating to their investment; provided, however,
that the Distributor shall be entitled to retain, for the first
year after purchase of the Class B Shares, the Service Fee to
the extent that it may have pre-paid the Service Fee for that
period to the Authorized Dealer of record.
The Distributor may retain any Distribution or Service Fees not so
paid.
(e) With respect to the Class C Shares, the Distributor:
(i) shall pay the Distribution Fee it receives under the Plan with
respect to Class C Shares for which a particular Authorized
Dealer is the dealer of record (which may include the
Distributor) to such Authorized Dealers to compensate such
organizations in connection with such share sales; provided,
however, that the Distributor shall be entitled to retain, for
the
-3-
<PAGE>
first year after purchase of the Class C Shares, the
Distribution Fee to the extent that it may have pre-paid the
Distribution Fee for that period to the Authorized Dealer of
record; and
(ii) shall pay any Service Fees it receives under the Plan for which
a particular Authorized Dealer is the dealer of record (which
may include the Distributor) to such Authorized Dealers to
compensate such organizations for providing services to
shareholders relating to their investment; provided, however,
that the Distributor shall be entitled to retain, for the first
year after purchase of the Class C Shares, the Service Fee to
the extent that it may have pre-paid the Service Fee for that
period to the Authorized Dealer of record.
The Distributor may retain any Distribution or Service Fees not so
paid.
(f) Services for which such Authorized Dealers may receive Service Fee
payments include any or all of the following: maintaining account records for
shareholders who beneficially own Shares; answering inquiries relating to the
shareholders' accounts, the policies of the Fund and the performance of their
investment; providing assistance and handling transmission of funds in
connection with purchase, redemption and exchange orders for Shares; providing
assistance in connection with changing account setups and enrolling in various
optional fund services; producing and disseminating shareholder communications
or servicing materials; the ordinary or capital expenses, such as equipment,
rent, fixtures, salaries, bonuses, reporting and recordkeeping and third party
consultancy or similar expenses, relating to any activity for which payment is
authorized by the Board; and the financing of any other activity for which
payment is authorized by the Board.
(g) Payments of Distribution or Service Fees to any organization as of any
month-end (or other period-end, as appropriate) will not exceed the appropriate
amount based on the annual percentages set forth in subparagraphs (c), (d) and
(e) above, based on average net assets of accounts for which such organization
appeared on the records of the Fund and/or its transfer agent as the
organization of record during the preceding month (period).
2. This Plan shall not take effect until the Plan, together with any
related agreement(s), has been approved by votes of a majority of both (a) the
Board of Trustees of the Fund, and (b) those Trustees of the Fund who are not
"interested persons" of the Fund (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to it (the "Rule 12b-1 Trustees") cast in person at a meeting (or
meetings) called for the purpose of voting on the Plan and such related
Agreement(s).
-4-
<PAGE>
3. This Plan shall remain in effect until August 1, 1997, and shall
continue in effect thereafter so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
paragraph 2.
4. The Distributor shall provide to the Board of Trustees of the Fund
and the Board shall review, at least quarterly, a written report of
distribution- and service-related activities, Distribution Fees, Service Fees,
and the purposes for which such activities were performed and expenses incurred.
5. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority (as defined in the Act) of the
outstanding voting Shares of a Series of the Fund.
6. This Plan may not be amended to increase materially the amount of
compensation payable by a Series with respect to Class A, Class B or Class C
Shares under paragraph 1 hereof unless such amendment is approved by a vote of
at least a majority (as defined in the Act) of the outstanding voting Shares of
that Class of Shares of the Series. No material amendment to the Plan shall be
made unless approved in the manner provided in paragraph 2 hereof.
7. While this Plan is in effect, the selection and nomination of the
Trustees who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the Trustees who are not such interested
persons.
8. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 4 hereof, for a period of
not less than six years from the date of the Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
-5-
<PAGE>
EXHIBIT A
TO Plan of Distribution and Service Pursuant to Rule 12b-1
NUVEEN FLAGSHIP MUNICIPAL TRUST
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST I
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Oklahoma Municipal Bond Fund *
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST II
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen California Intermediate Municipal Bond Fund *
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST III
Nuveen Flagship Alabama Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship South Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST IV
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
* Funds not currently offered which will be described in a Trust's N-1A
registration statement but not included in the publicly-disseminated prospectus
<PAGE>
EXHIBIT 16
SCHEDULE OF COMPUTATION OF PERFORMANCE FIGURES*
I. YIELD
A. Yield Formula
Yield is computed according the following formula:
6
YIELD = 2 [ ( A - B + 1) - 1 ]
-----
CD
Where: A = dividends and interest(degrees) earned during the period.
B = expenses accrued for the period (net of reimbursements).
C = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
D = the maximum offering price per share on the last day of the period.
- --------
* The maximum sales charge in effect during the periods shown was 4.20%.
/./ Interest earned on tax-exempt obligations is determined as follows:
A. In the case of a tax-exempt obligation (1) with a current market premium
or (2) issued at a discount where the current market discount is less
than the then-remaining portion of the original issue discount, it is
necessary to first compute the yield to maturity (YTM). The YTM is then
divided by 360 and the quotient is multiplied by the market value of the
obligation (plus accrued interest).
B. In the case of a tax-exempt obligation issued at a discount where the
current market discount is in excess of the then-remaining portion of the
original issue discount, the adjusted original issue discount basis of
the obligation (plus accrued interest) is used in lieu of the market
value of the obligation (plus accrued interest) in computing the yield to
maturity (YTM). The YTM is then divided by 360 and the quotient is multi-
plied by the adjusted original issue basis of the obligation (plus ac-
crued interest).
C. In the case of a tax-exempt obligation issued without original issue
discount and having a current market discount, the coupon rate of inter-
est is used in lieu of the yield to maturity. The coupon rate is then di-
vided by 360 and the quotient is multiplied by the par value of the obli-
gation.
<PAGE>
B. Yield Calculations
1. Arizona Municipal Bond Fund
The following is a 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[$ 355,392.85 - $53,204.75]
Yield = 2 [( --------------------------- + 1)/6/ - 1]
[ 7,369,273.79 X $ 11.62]
= 4.27%
The following is a 30-day yield as of November 30, 1996, for the Class C
Shares of the Fund:
[$ 10,681.53 - $2,698.97]
Yield = 2 [( ---------------------------- + 1)/6/ - 1]
[ 221,487.69 X $ 11.13]
= 3.92%
2. Colorado Municipal Bond Fund
The following is a 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[$ 159,819.25 - $21,114.12]
Yield = 2 [( --------------------------- + 1)/6/ - 1]
[ 3,181,817.86 X $ 10.69]
= 4.94%
3. Florida Municipal Bond Fund
The following is a 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[$ 1,442,776.95 - $169,476.91]
Yield = 2 [( ------------------------------ +1)/6/ -1]
[ 29,226,595.15 X $ 11.21]
= 4.71%
The following is a 30-day yield as of November 30, 1996, for the Class C
Shares of the Fund:
[$ 12,040.13 - $ 2,593.82]
Yield = 2 [( -------------------------- + 1)/6/ - 1]
[ 243,899.02 X $ 10.75]
= 4.36%
4. Florida Intermediate Municipal Bond Fund
The following is a 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[$ 22,215.44 - $3,638.18]
Yield = 2 [( ------------------------- + 1)/6/ - 1]
[ 520,301.87 X $ 10.54]
= 4.10%
The following is a 30-day yield as of November 30, 1996, for the Class C
Shares of the Fund:
[$ 12,724.65 - $3,454.29]
Yield = 2 [( ------------------------- + 1)/6/ -1]
[ 298,020.55 X $ 10.22]
= 3.68%
2
<PAGE>
5. Maryland Municipal Bond Fund
The following is a 30-day yield as of July 31, 1996, for the Class A Shares
of the Fund:
[([$ 42,811.42 - $ 7,629.35] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [ 922,547.80 X $ 10.61]
= 4.35%
The following is a 30-day yield as of July 31, 1996, for the Class C Shares
of the Fund:
[([$ 7,918.23 - $ 2,469.42] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [ 170,753.79 X $ 10.15]
= 3.80%
The following is a 30-day yield as of July 31, 1996, for the Class R Shares
of the Fund:
[([$ 204,838.02 - $ 27,378.16] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [ 4,409,810.44 X $ 10.17]
= 4.80%
6. New Mexico Municipal Bond Fund
The following is the 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[([$ 246,240.73 - $ 33,067.73] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [ 5,113,588.30 X $ 10.69]
= 4.73%
7. Pennsylvania Municipal Bond Fund
The following is the 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[([$ 211,669.54 - $ 27,279.45] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [ 4,332,769.25 X $ 10.78]
= 4.78%
The following is the 30-day yield as of November 30, 1996, for the Class C
Shares of the Fund:
[([$ 24,395.34 - $ 5,465.19] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [ 499,360.29 X $ 10.33]
= 4.44%
8. Virginia Municipal Bond Fund
The following is the 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[([$ 571,430.54 - $ 81,894.24] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [11,121,469.78 X $ 11.20]
= 4.76%
The following is the 30-day yield as of November 30, 1996, for the Class C
Shares of the Fund:
[([$ 59,915.34 - $ 14,204.93] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [ 1,166,102.59 X $ 10.73]
= 4.42%
3
<PAGE>
II. TAXABLE EQUIVALENT YIELD
A. Taxable Equivalent Yield Formula
The Taxable Equivalent Yield Formula is as follows:
Tax Exempt Yield
Taxable Equivalent Yield = ------------------------------------------------
(1 - combined federal and state income tax rate)
B. Taxable Equivalent Yield Calculations
Based on combined federal and state income tax rates of 44.5% for Maryland,
43.0% for Arizona and Virginia, 42.5% for Colorado, 39.5% for Florida and Flor-
ida Intermediate, 0.0% for New Mexico, and 41.5% for Pennsylvania, the Taxable
Equivalent Yields for the Class A Shares, Class C Shares and Class R Shares,
where applicable, for the 30-day period ended July 31, 1996 for November 30,
1996, where applicable, are as follows:
Class A Shares Class C Shares Class R Shares
---------------- ---------------- ----------------
Arizona Municipal 4.27% 3.92% n/a
Bond Fund: -------- = 7.49% -------- = 6.88% -------- = n/a
1 - .430 1 - .430 n/a
Colorado Municipal 4.94% n/a n/a
Bond Fund: -------- = 8.59% -------- = n/a ------- = n/a
1 - .425 n/a n/a
Florida Municipal 4.71% 4.36% n/a
Bond Fund: -------- = 7.80% -------- = 7.22% -------- = n/a
1 - .396 1 - .396 n/a
Florida Intermediate
Municipal Bond 4.10% 3.68% n/a
Fund: -------- = 6.79% -------- = 6.09% -------- = n/a
1 - .396 1 - .396 n/a
Maryland Municipal 4.35% 3.80% 4.80%
Bond Fund: -------- = 7.57% -------- = 6.61% -------- = 8.35%
1 - .425 1 - .425 1 - .425
New Mexico
Municipal 4.73% n/a n/a
Bond Fund -------- = 8.52% -------- = n/a -------- = n/a
1 - .445 n/a n/a
Pennsylvania
Municipal Bond 4.78% 4.44% n/a
Fund: -------- = 8.17% -------- = 7.59% -------- = n/a
1 - .415 1 - .415 n/a
Virginia Municipal 4.76% 4.42% n/a
Bond Fund: -------- = 8.35% -------- = 7.75% -------- = n/a
1 - .430 1 - .430 n/a
III. DISTRIBUTION RATE
A. Distribution Rate Formula
The formula for calculation of distribution rate is as follows:
Distribution Rate = 12 X most recent tax-exempt income dividend per share
-----------------------------------------------------
share price
4
<PAGE>
B. Distribution Rate Calculations
1. Arizona Municipal Bond Fund
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the Arizona Municipal Bond Fund:
Class A Distribution Rate = 12 X $.04541
------------
$11.62
= 4.69%
Class C Distribution Rate = 12 X $.04049
------------
$11.13
= 4.37%
2. Colorado Municipal Bond Fund
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the Colorado Municipal Bond Fund:
Class A Distribution Rate = 12 X $.04278
------------
$10.69
= 4.80%
3. Florida Municipal Bond Fund
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the Florida Municipal Bond Fund:
Class A Distribution Rate = 12 X $.04532
------------
$11.21
= 4.85%
Class C Distribution Rate = 12 X $.04065
------------
$10.75
= 4.54%
4. Florida Intermediate Municipal Bond Fund
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the Florida Intermediate Municipal Bond Fund:
Class A Distribution Rate = 12 X $.03811
------------
$10.54
= 4.34%
Class C Distribution Rate = 12 X $.03380
------------
$10.22
= 3.97%
5
<PAGE>
5. Maryland Municipal Bond Fund
The following is the distribution rate as of July 31, 1996, based on the maxi-
mum public offering price for the Maryland Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0405
-----------
$10.61
= 4.58%
Class C Distribution Rate = 12 X $.0340
-----------
$10.15
= 4.02%
Class R Distribution Rate = 12 X $.0425
-----------
$10.17
= 5.01%
6. New Mexico Municipal Bond Fund
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the New Mexico Municipal Bond Fund:
Class A Distribution Rate = 12 X $.04131
------------
$10.69
= 4.64%
7. Pennsylvania Municipal Bond Fund
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the Pennsylvania Municipal Bond Fund:
Class A Distribution Rate = 12 X $.04582
------------
$10.78
= 5.10%
Class C Distribution Rate = 12 X $.04123
------------
$10.33
= 4.79%
8. Virginia Municipal Bond Fund
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the Virginia Municipal Bond Fund:
Class A Distribution Rate = 12 X $.04680
------------
$11.20
= 5.01%
Class C Distribution Rate = 12 X $.04196
------------
$10.73
= 4.69%
6
<PAGE>
IV. AVERAGE ANNUAL TOTAL RETURN
A. Average Annual Total Return Formula
Average Annual Total Return is computed according to the following formula:
ERV /1//N
T = --- -1
P
Where: T = average annual total return.
P = a hypothetical initial payment of $1,000.
N = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10-year (or fractional portion
thereof) pe-riods at the end of such 1, 5 or 10-year (or fractional
portion thereof) periods.
B. Average Annual Total Return Calculations
The following are the average annual total returns for Class A Shares of the
Funds for the period from inception and the 1, 5 and 10-year periods ended Au-
gust 31, 1996 or November 30, 1996, whichever applicable, including the current
maximum sales charge. Class A total returns reflect actual performance for pe-
riods since class inception and Class R performance for periods prior to class
inception, adjusted for the differences in sales charges and fees between the
classes.
ANNUAL CLASS A TOTAL RETURNS including current maximum sales charge of 4.20%:
1. Arizona Municipal Bond Fund:
$1,005 /1/1/
A. 1 year ended November 30, 1996= ( ------ ) -1 = 0.53%
$1,000 =====
$1,426 /1/5/
B. 5 years ended November 30, 1996= ( ------ ) -1 = 7.36%
$1,000 =====
$2,020 /1/10/
C. 10 years ended November 30, 1996=( ------ ) -1 = 7.29%
$1,000 =====
$2,069 /1/10.089/
D. Inception through November 30, 1996= ( ------ ) -1 = 7.47%
$1,000 =====
2. Colorado Municipal Bond Fund:
$1,018 /1/1/
A. 1 year ended November 30, 1996= ( ------ ) -1 = 1.77%
$1,000 =====
$1,411 /1/5/
B. 5 years ended November 30, 1996= ( ------ ) -1 = 7.13%
$1,000 =====
$1,891 /1/9.577/
C. Inception through November 30, 1996= ( ------ ) -1 = 6.88%
$1,000 =====
3. Florida Municipal Bond Fund:
$1,000 /1/1/
A. 1 year ended November 30, 1996= ( ------ ) -1 = 0.00%
$1,000 =====
$1,374 /1/5/
B. 5 years ended November 30, 1996= ( ------ ) -1 = 6.56%
$1,000 =====
$1,577 /1/6.4613/
C. Inception through November 30, 1996= ( ------ ) -1 = 7.30%
$1,000 =====
7
<PAGE>
4. Florida Intermediate Municipal Bond Fund:
( $1,017 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 1.68%
( $1,000 ) =====
( $1,158 )/1///2.8282/
B. Inception through November 30, 1996 = ( ------ ) -1 = 5.32%
( $1,000 ) =====
5. Maryland Municipal Bond Fund:
( $1,011 )/1///1/
A. 1 year ended July 31, 1996 = ( ------ ) -1 = 1.07%
( $1,000 ) =====
( $1,267 )/1///4.4216/
B. Inception through July 31, 1996 = ( ------ ) -1 = 5.49%
( $1,000 ) =====
6. New Mexico Municipal Bond Fund:
( $1,013 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 1.33%
( $1,000 ) =====
( $1,276 )/1///4.2053/
B. Inception through November 30, 1996 = ( ------ ) -1 = 5.97%
( $1,000 ) =====
7. Pennsylvania Municipal Bond Fund:
( $1,009 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 0.88%
( $1,000 ) =====
( $1,371 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.51%
( $1,000 ) =====
( $1,928 )/1///10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 6.79%
( $1,000 ) =====
( $1,956 )/1///10.089/
D. Inception through November 30, 1996 = ( ------ ) -1 = 6.88%
( $1,000 ) =====
8. Virginia Municipal Bond Fund:
( $1,009 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 0.92%
( $1,000 ) =====
( $1,376 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.59%
( $1,000 ) =====
( $1,959 )/1///10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 6.96%
( $1,000 ) =====
( $2,111 )/1///10.68/
D. Inception through November 30, 1996 = ( ------ ) -1 = 7.24%
( $1,000 ) =====
8
<PAGE>
ANNUAL CLASS B TOTAL RETURNS:
1. Arizona Municipal Bond Fund:
( $1,044 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.37%
( $1,000 ) =====
( $1,449 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 7.70%
( $1,000 ) =====
( $2,019 )/1///10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 7.28%
( $1,000 ) =====
( $2,067 )/1///10.089/
D. Inception through November 30, 1996 = ( ------ ) -1 = 7.46%
( $1,000 ) =====
2. Colorado Municipal Bond Fund:
( $1,057 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 5.66%
( $1,000 ) =====
( $1,390 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.80%
( $1,000 ) =====
( $1,890 )/1///9.577/
C. Inception through November 30, 1996 = ( ------ ) -1 = 6.87%
( $1,000 ) =====
3. Florida Municipal Bond Fund:
( $1,038 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 3.81%
( $1,000 ) =====
( $1,395 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.89%
( $1,000 ) =====
( $1,588 )/1///6.4613/
C. Inception through November 30, 1996 = ( ------ ) -1 = 7.42%
( $1,000 ) =====
4. Maryland Municipal Bond Fund:
( $1,047 )/1///1/
A. 1 year ended July 30, 1996 = ( ------ ) -1 = 4.74%
( $1,000 ) =====
( $1,282 )/1///4.4216/
B. Inception through July 31, 1996 = ( ------ ) -1 = 5.78%
( $1,000 ) =====
5. New Mexico Municipal Bond Fund:
( $1,052 )/1///1/
A. 1 year ended November 30, 1996 = ------ ) -1 = 5.19%
( $1,000 ) =====
( $1,301 )/1///4.2053/
B. Inception through November 30, 1996 = ( ------ ) -1 = 6.46%
( $1,000 ) =====
9
<PAGE>
6. Pennsylvania Municipal Bond Fund:
$1,047 /1/1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.73%
$1,000 =====
$1,393 /1/5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.85%
$1,000 =====
$1,926 /1/10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 6.78%
$1,000 =====
$1,955 /1/10.089/
D. Inception through November 30, 1996 = ( ------ ) -1 = 6.87%
$1,000 =====
7. Virginia Municipal Bond Fund:
$1,048 /1/1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.76%
$1,000 =====
$1,398 /1/5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.92%
$1,000 =====
$1,957 /1/10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 6.95%
$1,000 =====
$2,109 /1/10.68/
D. Inception through November 30, 1996 = ( ------ ) -1 = 7.24%
$1,000 =====
Annual Class C Total Returns:
1. Arizona Municipal Bond Fund:
$1,044 /1/1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.38%
$1,000 =====
$1,463 /1/5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 7.91%
$1,000 =====
$2,016 /1/10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 7.26%
$1,000 =====
$2,063 /1/10.089/
D. Inception through November 30, 1996 = ( ------ ) -1 = 7.44%
$1,000 =====
2. Colorado Municipal Bond Fund:
$1,059 /1/1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 5.87%
$1,000 =====
$1,448 /1/5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 7.68%
$1,000 =====
$1,909 /1/9.577
C. Inception through November 30, 1996 = ( ------ ) -1 = 6.99%
$1,000 =====
10
<PAGE>
3. Florida Municipal Bond Fund:
( $1,039 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 3.92%
( $1,000 ) =====
( $1,380 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.65%
( $1,000 ) =====
( $1,570 )/1///6.4613/
C. Inception through November 30, 1996 = ( ------ ) -1 = 7.24%
( $1,000 ) =====
4. Florida Intermediate Municipal Bond Fund:
( $1,043 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.25%
( $1,000 ) =====
( $1,176 )/1///2.8282/
B. Inception through November 30, 1996 = ( ------ ) -1 = 5.90%
( $1,000 ) =====
5. Maryland Municipal Bond Fund:
( $1,047 )/1///1/
A. 1 year ended July 31, 1996 = ( ------ ) -1 = 4.71%
( $1,000 ) =====
( $1,282 )/1///4.4216/
B. Inception through July 31, 1996 = ( ------ ) -1 = 5.78%
( $1,000 ) =====
6. New Mexico Municipal Bond Fund:
( $1,054 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 5.40%
( $1,000 ) =====
( $1,312 )/1///4.2053/
B. Inception through November 30, 1996 = ( ------ ) -1 = 6.68%
( $1,000 ) =====
7. Pennsylvania Municipal Bond Fund:
( $1,047 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.73%
( $1,000 ) =====
( $1,395 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.89%
( $1,000 ) =====
( $1,909 )/1///10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 6.68%
( $1,000 ) =====
( $1,935 )/1///10.089/
D. Inception through November 30, 1996 = ( ------ ) -1 = 6.76%
( $1,000 ) =====
8. Virginia Municipal Bond Fund:
( $1,049 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.86%
( $1,000 ) =====
( $1,396 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.90%
( $1,000 ) =====
( $1,934 )/1///10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 6.82%
( $1,000 ) =====
( $2,075 )/1///10.68/
D. Inception through November 30, 1996 = ( ------ ) -1 = 7.07%
( $1,000 ) =====
11
<PAGE>
ANNUALIZED CLASS R TOTAL RETURNS:
- ---------------------------------
1. Arizona Municipal Bond Fund:
( $1,049 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.94%
( $1,000 ) =====
( $1,489 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 8.29%
( $1,000 ) =====
( $2,109 )/1///10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 7.75%
( $1,000 ) =====
( $2,160 )/1///10.089/
D. Inception through November 30, 1996 = ( ------ ) -1 = 7.93%
( $1,000 ) =====
2. Colorado Municipal Bond Fund:
( $1,062 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 6.24%
( $1,000 ) =====
( $1,473 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 8.06%
( $1,000 ) =====
( $1,974 )/1///9.577/
C. Inception through November 30, 1996 = ( ------ ) -1 = 7.36%
( $1,000 ) =====
3. Florida Municipal Bond Fund:
( $1,044 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.38%
( $1,000 ) =====
( $1,434 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 7.48%
( $1,000 ) =====
( $1,646 )/1///6.4613/
C. Inception through November 30, 1996 = ( ------ ) -1 = 8.02%
( $1,000 ) =====
4. Florida Intermediate Municipal Bond Fund:
( $1,048 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.82%
( $1,000 ) =====
( $1,194 )/1///2.8282/
B. Inception through November 30, 1996 = ( ------ ) -1 = 6.46%
( $1,000 ) =====
5. Maryland Municipal Bond Fund:
( $1,057 )/1///1/
A. 1 year ended July 31, 1996 = ( ------ ) -1 = 5.74%
( $1,000 ) =====
( $1,338 )/1///4.4216/
B. Inception through July 31, 1996 = ( ------ ) -1 = 6.80%
( $1,000 ) =====
6. New Mexico Municipal Bond Fund:
( $1,058 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 5.77%
( $1,000 ) =====
( $1,332 )/1///4.2053/
B. Inception through November 30, 1996 = ( ------ ) -1 = 7.05%
( $1,000 ) =====
12
<PAGE>
7. Pennsylvania Municipal Bond Fund:
( $1,053 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 5.30%
( $1,000 ) =====
( $1,431 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 7.43%
( $1,000 ) =====
( $2,013 )/1///10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 7.24%
( $1,000 ) =====
( $2,042 )/1///10.089/
D. Inception through November 30, 1996 = ( ------ ) -1 = 7.33%
( $1,000 ) =====
8. Virginia Municipal Bond Fund:
( $1,053 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 5.34%
( $1,000 ) =====
( $1,436 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 7.51%
( $1,000 ) =====
( $2,045 )/1///10/
C. 10 years ended November 30, 1996 = ( ------ ) -1 = 7.42%
( $1,000 ) =====
( $2,203 )/1///10.68/
D. Inception through November 30, 1996 = ( ------ ) -1 = 7.68%
( $1,000 ) =====
V. CUMULATIVE TOTAL RETURN
A. Cumulative Total Return Formula
Cumulative Total Return is computed according to the following formula:
ERV - P
T = -------
P
Where: T = cumulative total return.
P = a hypothetical initial payment of $1,000.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the inception of the Fund or at the first day of a specified
1-year, 5-year or 10-year period.
B. Cumulative Total Return Calculation
The following are the cumulative total returns for the Class Shares of the
Funds for the periods from inception and for the one, five and 10-year periods
ended August 31, 1996 or November 30, 1996 whichever applicable, assuming no
imposition of sales charges. Class total returns reflect actual performance
for the periods since class inception and Class R performance for periods
prior to class inception, adjusted for the differences in sales charges and
fees between the classes.
13
<PAGE>
VI. TAXABLE EQUIVALENT TOTAL RETURN
A. Taxable Equivalent Total Return Formula
Each Fund's taxable equivalent total return for a specific period is
calculated by first taking a hypothetical initial investment in the Fund's
shares on the first day of the period, computing the Fund's total return for
each fiscal year in the period according to the above formula, and increasing
the total return for each such fiscal year by the amount of additional income
that a taxable fund would need to have generated to equal the income of the
Fund on an after-tax basis, at a specified tax rate (usually the highest
marginal federal or combined federal and state tax rate), calculated pursuant to
the formula presented above under "taxable equivalent yield." The resulting
amount for the fiscal year is then divided by the initial investment amount to
arrive at a "taxable equivalent total return factor" for the fiscal year. The
taxable equivalent total return factors for all the fiscal years in the period
are then multiplied together and the result is then annualized by taking its Nth
root (N representing the number of years in the period) and subtracting 1, which
provides a taxable equivalent total return expressed as a percentage.
CUMULATIVE CLASS A TOTAL RETURNS including current maximum sales charge of
4.20%:
1. Arizona Municipal Bond Fund:
( $1,005 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 0.53%
( $1,000 ) =====
( $1,426 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 42.63%
( $1,000 ) ======
( $2,020 - $1,000 )
C. 10 years ended November 30, 1996 = ( --------------- ) = 102.04%
( $1,000 ) =======
( $2,069 - $1,000 )
D. Inception through November 30, 1996 = ( --------------- ) = 106.89%
( $1,000 ) =======
2. Colorado Municipal Bond Fund:
( $1,018 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 1.77%
( $1,000 ) =====
( $1,411 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 41.13%
( $1,000 ) ======
( $1,891 - $1,000 )
C. Inception through November 30, 1996 = ( --------------- ) = 89.12%
( $1,000 ) ======
3. Florida Municipal Bond Fund:
( $1,000 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 0.00%
( $1,000 ) =====
( $1,374 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 37.40%
( $1,000 ) ======
( $1,577 - $1,000 )
C. Inception through November 30, 1996 = ( --------------- ) = 57.67%
( $1,000 ) ======
4. Florida Intermediate Municipal Bond Fund:
( $1,017 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 1.68%
( $1,000 ) =====
( $1,158 - $1,000 )
B. Inception through November 30, 1996 = ( --------------- ) = 15.80%
( $1,000 ) ======
14
<PAGE>
5. Maryland Municipal Bond Fund:
( $1,011 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 1.07%
( $1,000 ) =====
( $1,267 - $1,000 )
D. Inception through August 31, 1996 = ( --------------- ) = 26.68%
( $1,000 ) ======
6. New Mexico Municipal Bond Fund:
( $1,013 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 1.33%
( $1,000 ) =====
( $1,276 - $1,000 )
B. Inception through November 30, 1996 = ( --------------- ) = 27.60%
( $1,000 ) ======
7. Pennsylvania Municipal Bond Fund:
( $1,009 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 0.88%
( $1,000 ) =====
( $1,371 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 37.10%
( $1,000 ) ======
( $1,928 - $1,000 )
C. 10 years ended November 30, 1996 = ( --------------- ) = 92.80%
( $1,000 ) ======
( $1,956 - $1,000 )
D. Inception through November 30, 1996 = ( --------------- ) = 95.62%
( $1,000 ) ======
8. Virginia Municipal Bond Fund:
( $1,009 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 0.92%
( $1,000 ) =====
( $1,376 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 37.59%
( $1,000 ) ======
( $1,959 - $1,000 )
C. 10 years ended November 30, 1996 = ( --------------- ) = 95.93%
( $1,000 ) ======
( $2,111 - $1,000 )
D. Inception through November 30, 1996 = ( --------------- ) = 111.07%
( $1,000 ) =======
CUMULATIVE CLASS B TOTAL RETURNS:
1. Arizona Municipal Bond Fund:
( $1,044 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 4.37%
( $1,000 ) =====
( $1,449 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 44.87%
( $1,000 ) ======
( $2,019 - $1,000 )
C. 10 years ended November 30, 1996 = ( --------------- ) = 101.86%
( $1,000 ) =======
( $2,067 - $1,000 )
D. Inception through November 30, 1996 = ( --------------- ) = 106.72%
( $1,000 ) =======
15
<PAGE>
2. Colorado Municipal Bond Fund:
( $1,057 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 5.66%
( $1,000 ) =====
( $1,390 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 38.97%
( $1,000 ) ======
( $1,890 - $1,000 )
C. Inception through November 30, 1996 = ( --------------- ) = 88.95%
( $1,000 ) ======
3. Florida Municipal Bond Fund:
( $1,038 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 3.81%
( $1,000 ) =====
( $1,395 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 39.46%
( $1,000 ) ======
( $1,588 - $1,000 )
C. Inception through November 30, 1996 = ( --------------- ) = 58.83%
( $1,000 ) ======
4. Maryland Municipal Bond Fund:
( $1,047 - $1,000 )
A. 1 year ended July 31, 1996 = ( --------------- ) = 4.74%
( $1,000 ) =====
( $1,282 - $1,000 )
B. Inception through July 31, 1996 = ( --------------- ) = 28.23%
( $1,000 ) ======
5. New Mexico Municipal Bond Fund
( $1,052 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 5.19%
( $1,000 ) =====
( $1,301 - $1,000 )
B. Inception through November 30, 1996 = ( --------------- ) = 30.14%
( $1,000 ) ======
6. Pennsylvania Municipal Bond Fund:
( $1,047 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 4.73%
( $1,000 ) =====
( $1,393 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 39.25%
( $1,000 ) ======
( $1,926 - $1,000 )
C. 10 years ended November 30, 1996 = ( --------------- ) = 92.63%
( $1,000 ) ======
( $1,955 - $1,000 )
D. Inception through November 30, 1996 = ( --------------- ) = 95.45%
( $1,000 ) ======
16
<PAGE>
7. Virginia Municipal Bond Fund:
( $1,048 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 4.76%
( $1,000 ) =====
( $1,398 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 39.75%
( $1,000 ) ======
( $1,957 - $1,000 )
C. 10 years ended November 30, 1996 = ( --------------- ) = 95.75%
( $1,000 ) ======
( $2,109 - $1,000 )
D. Inception through November 30, 1996 = ( --------------- ) = 110.89%
( $1,000 ) =======
Cumulative Class C Total Returns:
1. Arizona Municipal Bond Fund:
( $1,044 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 4.38%
( $1,000 ) =====
( $1,463 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 46.29%
( $1,000 ) ======
( $2,016 - $1,000 )
C. 10 years through November 30, 1996 = ( --------------- ) = 101.63%
( $1,000 ) =======
( $2,063 - $1,000 )
D. Inception through November 30, 1996 = ( --------------- ) = 106.28%
( $1,000 ) =======
2. Colorado Municipal Bond Fund:
( $1,059 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 5.87%
( $1,000 ) =====
( $1,448 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 44.78%
( $1,000 ) ======
( $1,909 - $1,000 )
C. Inception through November 30, 1996 = ( --------------- ) = 90.93%
( $1,000 ) ======
3. Florida Municipal Bond Fund:
( $1,039 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 3.92%
( $1,000 ) =====
( $1,380 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 37.99%
( $1,000 ) ======
( $1,570 - $1,000 )
C. Inception through November 30, 1996 = ( --------------- ) = 57.05%
( $1,000 ) ======
4. Florida Intermediate Municipal Bond Fund:
( $1,043 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 4.25%
( $1,000 ) =====
( $1,176 - $1,000 )
B. Inception through November 30, 1996 = ( --------------- ) = 17.60%
( $1,000 ) ======
17
<PAGE>
5. Maryland Municipal Bond Fund:
($1,047 - $1,000)
A. 1 year ended August 31, 1996 = --------------- = 4.71%
($1,000) =====
($1,282 - $1,000)
D. Inception through August 31, 1996 = --------------- = 28.21%
($1,000) ======
6. New Mexico Municipal Bond Fund:
($1,054 - $1,000)
A. 1 year ended November 30, 1996 = --------------- = 5.40%
($1,000) =====
($1,312 - $1,000)
B. Inception through November 30, 1996 = --------------- = 31.24%
($1,000) ======
7. Pennsylvania Municipal Bond Fund:
($1,047 - $1,000)
A. 1 year ended November 30, 1996 = --------------- = 4.73%
($1,000) =====
($1,395 - $1,000)
B. 5 years ended November 30, 1996 = --------------- = 39.50%
($1,000) ======
($1,909 - $1,000)
C. 10 years ended November 30, 1996 = --------------- = 90.90%
($1,000) ======
($1,935 - $1,000)
D. Inception through November 30, 1996 = --------------- = 93.51%
($1,000) ======
8. Virginia Municipal Bond Fund:
($1,049 - $1,000)
A. 1 year ended November 30, 1996 = --------------- = 4.86%
($1,000) =====
($1,396 - $1,000)
B. 5 years ended November 30, 1996 = --------------- = 39.60%
($1,000) ======
($1,934 - $1,000)
C. 10 years ended November 30, 1996 = --------------- = 93.42%
($1,000) ======
($2,075 - $1,000)
D. Inception through November 30, 1996 = --------------- = 107.52%
($1,000) =======
18
<PAGE>
CUMULATIVE CLASS R TOTAL RETURNS:
1. Arizona Municipal Bond Fund:
($1,049 - $1,000)
A. 1 year ended November 30, 1996 = --------------- = 4.94%
($1,000) =====
($1,489 - $1,000)
B. 5 years ended November 30, 1996 = --------------- = 48.89%
($1,000) ======
($2,109 - $1,000)
C. 10 years through November 30, 1996 = --------------- = 110.90%
($1,000) =======
($2,160 - $1,000)
D. Inception through November 30, 1996 = --------------- = 115.96%
($1,000) =======
2. Colorado Municipal Bond Fund:
($1,062 - $1,000)
A. 1 year ended November 30, 1996 = --------------- = 6.24%
($1,000) =====
($1,473 - $1,000)
B. 5 years ended November 30, 1996 = --------------- = 47.32%
($1,000) ======
($1,974 - $1,000)
C. Inception through November 30, 1996 = --------------- = 97.41%
($1,000) ======
3. Florida Municipal Bond Fund:
($1,044 - $1,000)
A. 1 year ended November 30, 1996 = --------------- = 4.38%
($1,000) =====
($1,434 - $1,000)
B. 5 years ended November 30, 1996 = --------------- = 43.42%
($1,000) ======
($1,646 - $1,000)
C. Inception through November 30, 1996 = --------------- = 64.58%
($1,000) ======
4. Florida Intermediate Municipal Bond Fund:
($1,048 - $1,000)
A. 1 year ended November 30, 1996 = --------------- = 4.82%
($1,000) =====
($1,194 - $1,000)
B. Inception through November 30, 1996 = --------------- = 19.38%
($1,000) ======
19
<PAGE>
5. Maryland Municipal Bond Fund:
$1,057 - $1,000
A. 1 year ended August 31, 1996 = (-----------------) = 5.74%
$1,000 =====
$1,338 - $1,000
D. Inception through August 31, 1996 = (-----------------) = 33.76%
$1,000 ======
6. New Mexico Municipal Bond Fund:
$1,058 - $1,000
A. 1 year ended November 30, 1996 = (-----------------) = 5.77%
$1,000 =====
$1,332 - $1,000
B. Inception through November 30, 1996 = (-----------------) = 33.20%
$1,000 ======
7. Pennsylvania Municipal Bond Fund:
$1,053 - $1,000
A. 1 year ended November 30, 1996 = (-----------------) = 5.30%
$1,000 =====
$1,431 - $1,000
B. 5 years ended November 30, 1996 = (-----------------) = 43.11%
$1,000 ======
$2,013 - $1,000
C. 10 years ended November 30, 1996 = (-----------------) = 101.26%
$1,000 =======
$2,042 - $1,000
D. Inception through November 30, 1996 = (-----------------) = 104.20%
$1,000 =======
8. Virginia Municipal Bond Fund:
$1,053 - $1,000
A. 1 year ended November 30, 1996 = (-----------------) = 5.34%
$1,000 =====
$1,436 - $1,000
B. 5 years ended November 30, 1996 = (-----------------) = 43.62%
$1,000 ======
$2,045 - $1,000
C. 10 years ended November 30, 1996 = (-----------------) = 104.52%
$1,000 =======
$2,203 - $1,000
D. Inception through November 30, 1996 = (-----------------) = 120.32%
$1,000 =======
B. Taxable Equivalent Total Return Calculations
The taxable equivalent total return calculations for the Class R Shares of
the Maryland Fund for the one-year period ended July 31, 1996 is set forth on
the following pages assuming a combined federal and state income tax rate of
42.5% based on 1997 taxes.
Fund Name: Nuveen MD Tax-Free Value Class R
Since 07/31/95
<TABLE>
<CAPTION>
TOTAL PERIOD
NAV INCOME CAP FROM FROM DOLLAR TO DATE TAX ENDING ENDING REINV
PER DATE PER SHARE PER SHARE GAINS INCOME GAINS DIST. T-E INC. SAVINGS SHARES WEALTH NAV
- -------- --------- --------- ----- ------ ----- ------ -------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/95 10.11 .04300 989 10,000 10.10
08/31/95 10.16 .04300 42.532 42.532 42.532 993 10,092 10.20
09/30/95 10.17 .04300 42.711 42.711 85.244 997 10,144 10.20
10/31/95 10.26 .04300 42.892 42.892 128.135 1,002 10,277 10.29
11/30/95 10.37 .04300 43.071 43.071 171.206 1,006 10,430 10.40
12/31/95 10.43 .04300 43.249 43.249 214.455 1,010 10,534 10.43
01/31/96 10.44 .04250 42.922 42.922 257.377 1,014 10,587 10.44
02/29/96 10.34 .04250 43.097 43.097 300.474 1,018 10,528 10.37
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
TOTAL PERIOD
NAV INCOME CAP FROM FROM DOLLAR TO DATE TAX ENDING ENDING REINV
PER DATE PER SHARE PER SHARE GAINS INCOME GAINS DIST. T-E INC. SAVINGS SHARES WEALTH NAV
- -------- --------- --------- ----- ------ ----- ------ -------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03/31/96 10.18 .04250 43.274 43.274 343.747 1,022 10,408 10.20
04/30/96 10.13 .04250 43.454 43.454 387.201 1,027 10,401 10.12
05/31/96 10.09 .04250 43.636 43.636 430.837 1,031 10,403 10.08
06/30/96 10.12 .04250 43.820 43.820 474.658 1,035 10,478 10.12
07/31/96 10.17 .04250 44.004 44.004 518.662 383.3 1,077 10,957 10.20
Rax Rate: 42.50%
Load: 0.00%
Past Year: Total Return 9.57%
1.0021 Years: Total Return 9.57%
Annualized: 9.57%
</TABLE>
21
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP NEW MEXICO DOUBLE TAX EXEMPT FUND
<SERIES>
<NUMBER> 211
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 48,811,917
<INVESTMENTS-AT-VALUE> 51,308,449
<RECEIVABLES> 1,222,185
<ASSETS-OTHER> 2,327
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,532,961
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 518,217
<TOTAL-LIABILITIES> 518,217
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,834,382
<SHARES-COMMON-STOCK> 5,080,131
<SHARES-COMMON-PRIOR> 5,219,040
<ACCUMULATED-NII-CURRENT> 11,665
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,327,835)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,496,532
<NET-ASSETS> 52,014,744
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,517,577
<OTHER-INCOME> 0
<EXPENSES-NET> (197,451)
<NET-INVESTMENT-INCOME> 1,320,126
<REALIZED-GAINS-CURRENT> 55,494
<APPREC-INCREASE-CURRENT> 2,202,561
<NET-CHANGE-FROM-OPS> 3,578,181
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,308,461)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 350,838
<NUMBER-OF-SHARES-REDEEMED> (557,139)
<SHARES-REINVESTED> 67,392
<NET-CHANGE-IN-ASSETS> 841,563
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,383,329)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 129,482
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 297,687
<AVERAGE-NET-ASSETS> 51,651,302
<PER-SHARE-NAV-BEGIN> 9.81
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.43
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.24
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 52,000
<AVG-DEBT-PER-SHARE> 0.01
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP PENNSYLVANIA DOUBLE TAX EXEMPT
<SERIES>
<NUMBER> 561
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 47,228,196
<INVESTMENTS-AT-VALUE> 50,041,713
<RECEIVABLES> 883,355
<ASSETS-OTHER> 509,308
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 51,434,376
<PAYABLE-FOR-SECURITIES> 1,023,595
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 312,227
<TOTAL-LIABILITIES> 1,335,822
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,567,186
<SHARES-COMMON-STOCK> 4,333,664
<SHARES-COMMON-PRIOR> 4,441,276
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (11,142)
<ACCUMULATED-NET-GAINS> (271,007)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,813,517
<NET-ASSETS> 50,098,554
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,578,336
<OTHER-INCOME> 0
<EXPENSES-NET> (216,784)
<NET-INVESTMENT-INCOME> 1,361,552
<REALIZED-GAINS-CURRENT> (168,147)
<APPREC-INCREASE-CURRENT> 1,813,265
<NET-CHANGE-FROM-OPS> 3,006,670
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,250,158)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 117,020
<NUMBER-OF-SHARES-REDEEMED> (280,125)
<SHARES-REINVESTED> 55,493
<NET-CHANGE-IN-ASSETS> 388,022
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (102,860)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 123,267
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 301,305
<AVERAGE-NET-ASSETS> 49,172,172
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 61,700
<AVG-DEBT-PER-SHARE> 0.01
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP PENNSYLVANIA DOUBLE TAX EXEMPT
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<NUMBER> 563
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<MULTIPLIER> 1
<S> <C>
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<FISCAL-YEAR-END> MAY-31-1997
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<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 47,228,196
<INVESTMENTS-AT-VALUE> 50,041,713
<RECEIVABLES> 883,355
<ASSETS-OTHER> 509,308
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 51,434,376
<PAYABLE-FOR-SECURITIES> 1,023,595
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 312,227
<TOTAL-LIABILITIES> 1,335,822
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,567,186
<SHARES-COMMON-STOCK> 514,891
<SHARES-COMMON-PRIOR> 444,517
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<OVERDISTRIBUTION-NII> (11,142)
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<INTEREST-INCOME> 1,578,336
<OTHER-INCOME> 0
<EXPENSES-NET> (216,784)
<NET-INVESTMENT-INCOME> 1,361,552
<REALIZED-GAINS-CURRENT> (168,147)
<APPREC-INCREASE-CURRENT> 1,813,265
<NET-CHANGE-FROM-OPS> 3,006,670
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (122,536)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 75,743
<NUMBER-OF-SHARES-REDEEMED> (13,738)
<SHARES-REINVESTED> 8,369
<NET-CHANGE-IN-ASSETS> 876,902
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (102,860)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 123,267
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 301,305
<AVERAGE-NET-ASSETS> 49,172,172
<PER-SHARE-NAV-BEGIN> 9.99
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.35
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> 1.37
<AVG-DEBT-OUTSTANDING> 61,700
<AVG-DEBT-PER-SHARE> 0.01
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP VIRGINIA DOUBLE TAX EXEMPT FUND
<SERIES>
<NUMBER> 061
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 123,076,625
<INVESTMENTS-AT-VALUE> 130,005,937
<RECEIVABLES> 2,555,521
<ASSETS-OTHER> 5,125
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 132,566,583
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,723,517
<TOTAL-LIABILITIES> 1,723,517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,600,079
<SHARES-COMMON-STOCK> 11,027,767
<SHARES-COMMON-PRIOR> 11,320,384
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,988)
<ACCUMULATED-NET-GAINS> (684,337)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,929,312
<NET-ASSETS> 130,843,066
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,053,791
<OTHER-INCOME> 0
<EXPENSES-NET> (549,163)
<NET-INVESTMENT-INCOME> 3,504,628
<REALIZED-GAINS-CURRENT> 367,240
<APPREC-INCREASE-CURRENT> 3,815,644
<NET-CHANGE-FROM-OPS> 7,687,512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,215,411)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 438,338
<NUMBER-OF-SHARES-REDEEMED> (899,195)
<SHARES-REINVESTED> 168,240
<NET-CHANGE-IN-ASSETS> 675,167
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,051,577)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 326,698
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 709,158
<AVERAGE-NET-ASSETS> 130,322,105
<PER-SHARE-NAV-BEGIN> 10.40
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.73
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 12,310
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP VIRGINIA DOUBLE TAX EXEMPT FUND
<SERIES>
<NUMBER> 063
<NAME> CLASS C
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<S> <C>
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<FISCAL-YEAR-END> MAY-31-1997
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<PERIOD-END> NOV-30-1996
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<INVESTMENTS-AT-VALUE> 130,005,937
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<TOTAL-ASSETS> 132,566,583
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,723,517
<TOTAL-LIABILITIES> 1,723,517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,600,079
<SHARES-COMMON-STOCK> 1,164,418
<SHARES-COMMON-PRIOR> 1,056,634
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,988)
<ACCUMULATED-NET-GAINS> (684,337)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,929,312
<NET-ASSETS> 130,843,066
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,053,791
<OTHER-INCOME> 0
<EXPENSES-NET> (549,163)
<NET-INVESTMENT-INCOME> 3,504,628
<REALIZED-GAINS-CURRENT> 367,240
<APPREC-INCREASE-CURRENT> 3,815,644
<NET-CHANGE-FROM-OPS> 7,687,512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (291,205)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 179,014
<NUMBER-OF-SHARES-REDEEMED> (85,933)
<SHARES-REINVESTED> 14,703
<NET-CHANGE-IN-ASSETS> 1,512,566
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,051,577)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 326,698
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 709,158
<AVERAGE-NET-ASSETS> 130,322,105
<PER-SHARE-NAV-BEGIN> 10.39
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.73
<EXPENSE-RATIO> 1.34
<AVG-DEBT-OUTSTANDING> 12,310
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP FLORIDA DOUBLE TAX EXEMPT FUND
<SERIES>
<NUMBER> 143
<NAME> CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> SEP-14-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 286,411,339
<INVESTMENTS-AT-VALUE> 309,378,108
<RECEIVABLES> 10,530,464
<ASSETS-OTHER> 277,164
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 320,185,736
<PAYABLE-FOR-SECURITIES> 3,448,344
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,049,922
<TOTAL-LIABILITIES> 5,498,266
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 293,233,201
<SHARES-COMMON-STOCK> 246,537
<SHARES-COMMON-PRIOR> 113,035
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (32,423)
<ACCUMULATED-NET-GAINS> (1,480,077)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,966,769
<NET-ASSETS> 314,687,470
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,737,956
<OTHER-INCOME> 0
<EXPENSES-NET> (1,363,901)
<NET-INVESTMENT-INCOME> 8,374,055
<REALIZED-GAINS-CURRENT> (162,045)
<APPREC-INCREASE-CURRENT> 10,666,484
<NET-CHANGE-FROM-OPS> 18,878,494
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (46,959)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 143,956
<NUMBER-OF-SHARES-REDEEMED> (12,109)
<SHARES-REINVESTED> 1,655
<NET-CHANGE-IN-ASSETS> 1,475,111
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,318,032)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 786,734
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,623,111
<AVERAGE-NET-ASSETS> 313,833,634
<PER-SHARE-NAV-BEGIN> 10.39
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.36
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.75
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 906,300
<AVG-DEBT-PER-SHARE> 0.01
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP FLORIDA INTERMEDIATE DOUBLE TAX
<SERIES>
<NUMBER> 261
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 8,273,721
<INVESTMENTS-AT-VALUE> 8,641,076
<RECEIVABLES> 149,802
<ASSETS-OTHER> 472,192
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,263,070
<PAYABLE-FOR-SECURITIES> 449,595
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55,085
<TOTAL-LIABILITIES> 504,680
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,354,830
<SHARES-COMMON-STOCK> 541,809
<SHARES-COMMON-PRIOR> 505,317
<ACCUMULATED-NII-CURRENT> 23,351
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,854
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 367,355
<NET-ASSETS> 8,758,390
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 221,216
<OTHER-INCOME> 0
<EXPENSES-NET> (38,363)
<NET-INVESTMENT-INCOME> 182,853
<REALIZED-GAINS-CURRENT> (3,843)
<APPREC-INCREASE-CURRENT> 275,480
<NET-CHANGE-FROM-OPS> 454,490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (119,702)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 73,244
<NUMBER-OF-SHARES-REDEEMED> (43,214)
<SHARES-REINVESTED> 6,462
<NET-CHANGE-IN-ASSETS> 542,565
<ACCUMULATED-NII-PRIOR> 22,780
<ACCUMULATED-GAINS-PRIOR> 16,697
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20,532
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 96,170
<AVERAGE-NET-ASSETS> 8,190,538
<PER-SHARE-NAV-BEGIN> 9.88
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> (0.23)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.22
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP FLORIDA INTERMEDIATE DOUBLE TAX
<SERIES>
<NUMBER> 263
<NAME> CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 8,273,721
<INVESTMENTS-AT-VALUE> 8,641,076
<RECEIVABLES> 149,802
<ASSETS-OTHER> 472,192
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,263,070
<PAYABLE-FOR-SECURITIES> 449,595
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55,085
<TOTAL-LIABILITIES> 504,680
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,354,830
<SHARES-COMMON-STOCK> 315,154
<SHARES-COMMON-PRIOR> 311,471
<ACCUMULATED-NII-CURRENT> 23,351
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,854
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 367,355
<NET-ASSETS> 8,758,390
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 221,216
<OTHER-INCOME> 0
<EXPENSES-NET> (38,363)
<NET-INVESTMENT-INCOME> 182,853
<REALIZED-GAINS-CURRENT> (3,843)
<APPREC-INCREASE-CURRENT> 275,480
<NET-CHANGE-FROM-OPS> 454,490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (62,580)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,697
<NUMBER-OF-SHARES-REDEEMED> (23,199)
<SHARES-REINVESTED> 3,185
<NET-CHANGE-IN-ASSETS> 142,097
<ACCUMULATED-NII-PRIOR> 22,780
<ACCUMULATED-GAINS-PRIOR> 16,697
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20,532
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 96,170
<AVERAGE-NET-ASSETS> 8,190,538
<PER-SHARE-NAV-BEGIN> 9.88
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> (0.20)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.22
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP ARIZON
<SERIES>
<NUMBER> 081
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 76,390,362
<INVESTMENTS-AT-VALUE> 82,979,840
<RECEIVABLES> 1,878,634
<ASSETS-OTHER> 4,073
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,862,547
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,463,025
<TOTAL-LIABILITIES> 1,463,025
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76,366,988
<SHARES-COMMON-STOCK> 7,273,681
<SHARES-COMMON-PRIOR> 7,463,231
<ACCUMULATED-NII-CURRENT> 11,436
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 431,620
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,589,478
<NET-ASSETS> 83,399,522
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,458,732
<OTHER-INCOME> 0
<EXPENSES-NET> (345,193)
<NET-INVESTMENT-INCOME> 2,113,539
<REALIZED-GAINS-CURRENT> 310,930
<APPREC-INCREASE-CURRENT> 2,677,871
<NET-CHANGE-FROM-OPS> 5,102,340
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,051,439)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 375,009
<NUMBER-OF-SHARES-REDEEMED> (647,592)
<SHARES-REINVESTED> 83,033
<NET-CHANGE-IN-ASSETS> 846,022
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 120,690
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 207,211
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 472,540
<AVERAGE-NET-ASSETS> 82,658,298
<PER-SHARE-NAV-BEGIN> 10.73
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.40
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.13
<EXPENSE-RATIO> 0.82
<AVG-DEBT-OUTSTANDING> 82,700
<AVG-DEBT-PER-SHARE> 0.01
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP ARIZONA DOUBLE TAX EXEMPT FUND
<SERIES>
<NUMBER> 083
<NAME> CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 76,390,362
<INVESTMENTS-AT-VALUE> 82,979,840
<RECEIVABLES> 1,878,634
<ASSETS-OTHER> 4,073
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,862,547
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,463,025
<TOTAL-LIABILITIES> 1,463,025
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76,366,988
<SHARES-COMMON-STOCK> 221,002
<SHARES-COMMON-PRIOR> 183,587
<ACCUMULATED-NII-CURRENT> 11,436
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 431,620
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,589,478
<NET-ASSETS> 83,399,522
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,458,732
<OTHER-INCOME> 0
<EXPENSES-NET> (345,193)
<NET-INVESTMENT-INCOME> 2,113,539
<REALIZED-GAINS-CURRENT> 310,930
<APPREC-INCREASE-CURRENT> 2,677,871
<NET-CHANGE-FROM-OPS> 5,102,340
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (50,664)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42,440
<NUMBER-OF-SHARES-REDEEMED> (7,928)
<SHARES-REINVESTED> 2,903
<NET-CHANGE-IN-ASSETS> 489,090
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 120,690
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 207,211
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 472,540
<AVERAGE-NET-ASSETS> 82,658,298
<PER-SHARE-NAV-BEGIN> 10.73
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.40
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.13
<EXPENSE-RATIO> 1.37
<AVG-DEBT-OUTSTANDING> 82,700
<AVG-DEBT-PER-SHARE> 0.01
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP COLORADO DOUBLE TAX EXEMPT FUN
<SERIES>
<NUMBER> 091
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 30,088,778
<INVESTMENTS-AT-VALUE> 32,454,708
<RECEIVABLES> 508,886
<ASSETS-OTHER> 1,783
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,965,377
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 237,498
<TOTAL-LIABILITIES> 237,498
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,837,601
<SHARES-COMMON-STOCK> 3,196,015
<SHARES-COMMON-PRIOR> 3,436,028
<ACCUMULATED-NII-CURRENT> 8,270
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (483,922)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,365,930
<NET-ASSETS> 32,727,879
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 976,340
<OTHER-INCOME> 0
<EXPENSES-NET> (111,921)
<NET-INVESTMENT-INCOME> 864,419
<REALIZED-GAINS-CURRENT> 71,019
<APPREC-INCREASE-CURRENT> 1,404,163
<NET-CHANGE-FROM-OPS> 2,339,601
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (856,149)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 181,714
<NUMBER-OF-SHARES-REDEEMED> (465,139)
<SHARES-REINVESTED> 43,412
<NET-CHANGE-IN-ASSETS> (908,622)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (554,941)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 81,403
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 203,149
<AVERAGE-NET-ASSETS> 32,472,101
<PER-SHARE-NAV-BEGIN> 9.79
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 0.45
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.24
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 72,600
<AVG-DEBT-PER-SHARE> 0.02
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP FLORIDA DOUBLE TAX EXEMPT FUND
<SERIES>
<NUMBER> 141
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 286,411,339
<INVESTMENTS-AT-VALUE> 309,378,108
<RECEIVABLES> 10,530,464
<ASSETS-OTHER> 277,164
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 320,185,736
<PAYABLE-FOR-SECURITIES> 3,448,344
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,049,922
<TOTAL-LIABILITIES> 5,498,266
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 293,233,201
<SHARES-COMMON-STOCK> 29,047,014
<SHARES-COMMON-PRIOR> 30,652,271
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (32,423)
<ACCUMULATED-NET-GAINS> (1,480,077)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,966,769
<NET-ASSETS> 314,687,470
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,737,956
<OTHER-INCOME> 0
<EXPENSES-NET> (1,363,901)
<NET-INVESTMENT-INCOME> 8,374,055
<REALIZED-GAINS-CURRENT> (162,045)
<APPREC-INCREASE-CURRENT> 10,666,484
<NET-CHANGE-FROM-OPS> 18,878,494
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,359,519)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,071,062
<NUMBER-OF-SHARES-REDEEMED> (2,979,624)
<SHARES-REINVESTED> 303,305
<NET-CHANGE-IN-ASSETS> (6,418,685)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,318,032)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 786,734
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,623,111
<AVERAGE-NET-ASSETS> 313,833,634
<PER-SHARE-NAV-BEGIN> 10.39
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.35
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.74
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 906,300
<AVG-DEBT-PER-SHARE> 0.01
</TABLE>
<PAGE>
EXHIBIT 18
NUVEEN FLAGSHIP MUNICIPAL TRUST
NUVEEN FLAGSHIP MULTISTATE TRUST I
NUVEEN FLAGSHIP MULTISTATE TRUST II
NUVEEN FLAGSHIP MULTISTATE TRUST III
NUVEEN FLAGSHIP MULTISTATE TRUST IV
MULTIPLE CLASS PLAN
ADOPTED PURSUANT TO RULE 18f-3
WHEREAS, Nuveen Flagship Municipal Trust, Nuveen Flagship Multistate Trust
I, Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III and
Nuveen Flagship Multistate Trust IV, each a Massachusetts business trust (each a
"Fund" and collectively, the "Funds"), each engage in business as an open-end
management investment company and are each registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, each Fund is authorized to and may or does issue shares of
beneficial interest in separate series, with the shares of each such series
representing the interests in a separate portfolio of securities and other
assets (each Fund's series together with all other such series subsequently
established by a Fund being referred to herein individually as a "Series" and
collectively as the "Series");
WHEREAS, each Fund is authorized to and has divided the shares of each
Series into four classes, designated as Class A Shares, Class B Shares, Class C
Shares and Class R Shares, and may offer all or less than all of these classes
for public sale at any time; and
WHEREAS, the Board of each Fund as a whole, and the Trustees who are not
interested persons of each such Fund (as defined in the Act) (the "Non-
Interested Members"), after having been furnished and having evaluated
information reasonably necessary to evaluate this Multiple Class Plan (the
"Plan"), have determined in the exercise of their reasonable business judgment
that the Plan is in the best interests of each class of each Series
individually, and each Series and each Fund as a whole.
NOW, THEREFORE, each Fund hereby adopts this Plan, effective the date hereof, in
accordance with Rule 18f-3 under the Act:
<PAGE>
Section 1. Class Differences. Each class of shares of a Series shall
represent interests in the same portfolio of investments of that Series and,
except as otherwise set forth in this Plan, shall differ solely with respect to:
(i)distribution, service and other charges and expenses as provided for in
Sections 2 and 3 of this Plan; (ii)the exclusive right of each class of shares
to vote on matters submitted to shareholders that relate solely to that class or
for which the interests of one class differ from the interests of another class
or classes; (iii)such differences relating to eligible investors as may be set
forth in the prospectus and statement of additional information of each Series,
as the same may be amended or supplemented from time to time (each a
"Prospectus" and "SAI" and collectively, the "Prospectus" and "SAI"); (iv)the
designation of each class of shares; and (v)conversion features.
Section 2. Distribution and Service Arrangements; Conversion
Features. Class A Shares, Class B Shares, Class C Shares and Class R Shares of
each Fund shall differ in the manner in which such shares are distributed and in
the services provided to shareholders of each such class as follows:
(a) Class A Shares:
(i) Class A Shares shall be sold at net asset value
subject to a front-end sales charge set forth in the Prospectus
and SAI;
(ii) Class A Shares shall be subject to an annual service
fee("Service Fee") pursuant to a Plan of Distribution and Service
Pursuant to Rule 12b-1 (the "12b-1 Plan") not to exceed 0.20 of
1% of the average daily net assets of the Series allocable to
Class A Shares, which, as set forth in the Prospectus, SAI and
the 12b-1 Plan, may be used to compensate certain authorized
dealers for providing ongoing account services to shareholders;
and
(iii) Class A Shares shall not be subject to a
Distribution Fee (as hereinafter defined); and
(iv) As described in the Prospectus and SAI, certain Class
A shares purchased at net asset value without imposition of a
front-end sales charge that are redeemed within 18 months of
purchase shall be subject to a contingent deferred sales charge
("CDSC") of 1% of the lower of (a) the net asset value of Class A
Shares at the time of purchase or (b) the net asset value of
Class A Shares at the time of redemption, as set forth in the
Prospectus and SAI.
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(b) Class B Shares:
(i) Class B Shares shall be sold at net asset value
without a front-end sales charge;
(ii) Class B Shares shall be subject to a Service Fee
pursuant to the 12b-1 Plan not to exceed 0.20 of 1% of average
daily net assets of the Series allocable to Class B Shares,
which, as set forth in the Prospectus, SAI and the 12b-1 Plan,
may be used to compensate certain authorized dealers for
providing ongoing account services to shareholders;
(iii) Class B Shares shall be subject to an annual
distribution fee ("Distribution Fee") pursuant to the 12b-1 Plan
not to exceed 0.75 of 1% of average daily net assets of the
Series allocable to Class B Shares, which, as set forth in the
Prospectus, SAI and the 12b-1 Plan, will be used to reimburse
John Nuveen & Co. Incorporated, the Funds' distributor, for
certain expenses and for providing compensation to certain
authorized dealers;
(iv) Class B Shares redeemed within 6 years of purchase
shall be subject to a CDSC described below of the lower of (a)
the net asset value of Class B Shares at the time of purchase or
(b) the net asset value of Class B Shares at the time of
redemption, as set forth in the Prospectus and SAI; and
Years Since Purchase
of Class B Shares CDSC
0-1 5%
1-2 4%
2-3 4%
3-4 3%
4-5 2%
5-6 1%
(v) Class B Shares will automatically convert to Class A
Shares eight years after purchase, as set forth in the Prospectus
and SAI.
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(c) Class C Shares/*/:
(i) Class C Shares shall be sold at net asset value
without a front-end sales charge;
(ii) Class C Shares shall be subject to a Service Fee
pursuant to the 12b-1 Plan not to exceed 0.20 of 1% of average
daily net assets of the Series allocable to Class C Shares,
which, as set forth in the Prospectus, SAI and the 12b-1 Plan,
may be used to compensate certain authorized dealers for
providing ongoing account services to shareholders;
(iii) Class C Shares shall be subject to a Distribution
Fee pursuant to the 12b-1 Plan not to exceed 0.55 of 1% of
average daily net assets of the Series allocable to Class C
Shares, except that any Limited-Term or Short-Term Series
(together the "Limited-Term Series") shall be subject to a
Distribution Fee pursuant to the 12b-1 Plan not to exceed 0.35 of
1% of average daily net assets of the Limited-Term Series
allocable to Class C Shares; which, as set forth in the
Prospectus, SAI and the 12b-1 Plan, will be used to reimburse
John Nuveen & Co. Incorporated, the Funds' distributor, for
certain expenses and for providing compensation to certain
authorized dealers; and
(iv) Class C Shares redeemed within 12 months of purchase
shall be subject to a CDSC of 1% of the lower of (a) the net
asset value of Class C Shares at the time of purchase or (b) the
net asset value of Class C Shares at the time of redemption, as
set forth in the Prospectus and SAI.
(d) Class R Shares:
(i) Class R Shares shall be sold at net asset value
without a front-end sales charge to a limited group of investors
as described in the Prospectus and SAI;
(ii) Class R Shares shall not be subject to a Service Fee;
and
(iii) Class R Shares shall not be subject to a
Distribution Fee.
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/*/Class C shareholders who acquired their shares from a Nuveen Fund on or prior
to the reorganization of the Fund (scheduled for January 31, 1997) will retain
the option to convert their shares to Class A shares of the same Fund at the end
of their six-year holding period, as described in the prospectus and SAI for the
Nuveen Fund in effect prior to the date of that reorganization.
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Section 3. Allocation of Income, Expenses, Gains and Losses.
(a) Investment Income, and Realized and Unrealized Gains and Losses.
The daily investment income, and realized and unrealized gains and losses, of a
Series will be allocated to each class of shares based on each class' relative
percentage of the total value of shares outstanding of the Series at the
beginning of the day, after such net assets are adjusted for the prior day's
capital share transactions.
(b) Series Level Expenses. Expenses that are attributable to a
Series, but not a particular class thereof ("Series level expenses"), will be
allocated to each class of shares based on each class' relative percentage of
the total value of shares outstanding of the Series at the beginning of the day,
after such net assets are adjusted for the prior day's capital share
transactions. Series level expenses include fees for services that are received
equally by the classes under the same fee arrangement. All expenses
attributable to a Series that are not "class level expenses" (as defined below)
shall be Series level expenses, including but not limited to transfer agency
fees and expenses, share registration expenses, and shareholder reporting
expenses.
(c) Class Level Expenses. Expenses that are directly attributable to
a particular class of shares, including the expenses relating to the
distribution of a class' shares, or to services provided to the shareholders of
a class, as set forth in Section 2 of this Plan, will be incurred by that class
of shares. Class level expenses include expenses for services that are unique
to a class of shares in either form or amount. "Class level expenses" shall
include, but not be limited to, 12b-1 Service Fees, 12b-1 Distribution Fees,
expenses associated with the addition of share classes to a Fund (to the extent
that the expenses were not fully accrued prior to the issuance of the new
classes of shares), expenses of administrative personnel and services required
to support the shareholders of a specific class, litigation or other legal
expenses relating to a specific class of shares, directors' fees or expenses
incurred as a result of issues relating to a specific class of shares, and
accounting expenses relating to a specific class of shares.
(d) Fee Waivers and Expense Reimbursements. On a daily basis, if the
Series level expenses and the class level expenses (not including 12b-1 plan
payments) exceed the daily expense cap for the Series, an appropriate
waiver/reimbursement will be made to the Series. The amount of such
reimbursement to each class will be in an amount such that the expenses of the
class with the highest expense ratio (excluding Service Fees and Distribution
Fees) will be equal to the daily expense cap after reimbursement. The expense
reimbursement will be allocated to each class of shares based on each class'
relative percentage of the total value of shares outstanding of the Series at
the beginning of the day, after such net assets are adjusted for the prior day's
capital share transactions.
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Section 4. Exchange Privilege. Shares of a class of a Series may be
exchanged only for shares of the same class of another Series, except as
otherwise set forth in the Prospectus and SAI.
Section 5. Term and Termination.
(a) The Series. This Plan shall become effective with respect to each
Series on the date hereof, and shall continue in effect with respect to such
Class A, Class B, Class C and Class R Shares of each such Series until
terminated in accordance with the provisions of Section 5(c) hereof.
(b) Additional Series or Classes. This Plan shall become effective
with respect to any class of shares of a Series other than Class A, Class B,
Class C or Class R and with respect to each additional Series or class thereof
established by a Fund after the date hereof and made subject to this Plan upon
commencement of the initial public offering thereof (provided that the Plan has
previously been approved with respect to such additional Series or class by
votes of a majority of both (i) the members of the Board of a Fund, as a whole,
and (ii) the Non-Interested Members, cast at a meeting held before the initial
public offering of such additional Series or classes thereof), and shall
continue in effect with respect to each such additional Series or class until
terminated in accordance with provisions of Section 5(c) hereof. An addendum
setting forth such specific and different terms of such additional series or
classes shall be attached to or made part of this Plan.
(c) Termination. This Plan may be terminated at any time with respect
to any Fund or any Series or class thereof, as the case may be, by vote of a
majority of both the members of the Board of a Fund, as a whole, and the Non-
Interested Members. The Plan may remain in effect with respect to a particular
Fund or any Series or class thereof even if it has been terminated in accordance
with this Section 5(c) with respect to any other Fund or Series or class
thereof.
Section 6. Subsequent Funds. The parties hereto intend that any
open-end investment company established subsequent to the date set forth below
for which Nuveen Institutional Advisory Corp. acts as investment adviser (each a
"Future Fund"), will be covered by the terms and conditions of this Plan,
provided that the Board of such Future Fund as a whole, and the Non-Interested
Members of such Future Fund, after having been furnished and having evaluated
information reasonably necessary to evaluate the Plan, have determined in the
exercise of their reasonable business judgment that the Plan is in the best
interests of each class of each Series of such Future Fund individually, and
each Series of such Future Fund and such Future Fund as a whole.
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<PAGE>
Section 7. Amendments.
(a) General. Except as set forth below, any material amendment to
this Plan affecting a Fund or Series or class thereof shall require the
affirmative vote of a majority of both the members of the Board of that Fund, as
a whole, and the Non-Interested Members that the amendment is in the best
interests of each class of each Series individually and each Series as a whole.
(b) Future Funds. Any amendment to the Plan solely for the purpose of
adding a Future Fund as a party hereto in accordance with Section 6, will not
require any action by the Boards of the Funds.
Dated: July 24, 1996
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