<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 8, 1997.
1933 ACT REGISTRATION NO. 333-16617
1940 ACT REGISTRATION NO. 811-07747
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 1 [X]
(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 (Zip Code)
Office)
Registrant's Telephone Number, including Area Code: (312) 917-7700
Gifford R. Zimmerman, Esq.--Vice With a copy to:
President and Assistant Secretary
333 West Wacker Drive Thomas S. Harman
Fried, Frank, Harris, Shriver &
Chicago, Illinois 60606 Jacobson
(Name and Address of Agent for 1001 Pennsylvania Ave., NW
Service) Suite 800
Washington, D.C. 20004
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursu- [_] on (date) pursuant to paragraph
ant to paragraph (b) (a)(1)
[X] on September 12, 1997 pursuant [_] 75 days after filing pursuant to
to paragraph (b) paragraph (a)(2)
[_] 60 days after filing pursuant [_] on (date) pursuant to paragraph
to paragraph (a)(1) (a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
PURSUANT TO RULE 24F-2 OF THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT HAS
REGISTERED AN INDEFINITE NUMBER OF SHARES (DESIGNATED AS CLASS A SHARES, CLASS
B SHARES, CLASS C SHARES AND CLASS R SHARES) OF THE FOLLOWING SERIES: NUVEEN
FLAGSHIP ARIZONA MUNICIPAL BOND FUND; NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND
FUND; NUVEEN FLAGSHIP FLORIDA 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; AND AN INDEFINITE NUMBER OF SHARES (DESIGNATED AS CLASS A SHARES, CLASS
C SHARES AND CLASS R SHARES) OF THE FOLLOWING SERIES: NUVEEN FLAGSHIP FLORIDA
INTERMEDIATE MUNICIPAL BOND FUND. A RULE 24F-2 NOTICE FOR THE REGISTRANT'S
FISCAL YEAR ENDED MAY 31, 1997 WAS FILED ON OR ABOUT JULY 30, 1997.
CALCULATION OF REGISTRATION FEE FOR SHARES OF
COLORADO MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest, $.01 par value............ 240,309 $10.95 $0 $0
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*Registrant has elected to calculate its filing fee in the manner described in
Rule 24e-2 under the Investment Company Act of 1940. The total amount of secu-
rities redeemed during the previous fiscal year was $8,789,634. The total
amount of redeemed securities used for reduction pursuant to Rule 24f-2(c) was
$6,158,251. The amount of redeemed securities being used for reduction of the
registration fee in this Amendment is $2,631,383.
CALCULATION OF REGISTRATION FEE FOR SHARES OF
NEW MEXICO MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest, $.01 par value............ 96,248 $10.75 $0 $0
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*Registrant has elected to calculate its filing fee in the manner described in
Rule 24e-2 under the Investment Company Act of 1940. The total amount of secu-
rities redeemed during the previous fiscal year was $9,396,878. The total
amount of redeemed securities used for reduction pursuant to Rule 24f-2(c) was
$8,362,216. The amount of redeemed securities being used for reduction of the
registration fee in this Amendment is $1,034,662.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
NUVEEN
Municipal
Bond Funds
September 12, 1997
Prospectus
Dependable, tax-free income [PHOTO APPEARS HERE]
to help you keep more of
what you earn.
Arizona
Colorado
New Mexico
<PAGE>
Investing in Nuveen Mutual Funds
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a range of equity
and fixed-income mutual funds designed to suit the unique circumstances and
financial planning needs of mature investors. More than 1.3 million investors
have entrusted Nuveen to help them maintain the lifestyle they currently enjoy.
Value-investing -- purchasing quality securities that represent good relative
value -- is the cornerstone of Nuveen's investment philosophy. It is a
disciplined, long-term strategy that offers the potential for above average
returns over time with moderated risk. Successful value investing begins with
in-depth research and a discerning eye for marketplace opportunity. Our team of
investment professionals is backed by the discipline, resources and expertise of
Nuveen's almost a century of investment experience, including one of the most
recognized research departments in the industry.
This prospectus describes in detail the investment objectives, policies and
risks of certain Nuveen municipal bond funds. We invite you to discuss the
contents with your financial adviser, or you may call us at 800-621-7227 for
additional information.
<PAGE>
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
SEPTEMBER 12, 1997
PROSPECTUS
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 in-
vestments in diversified portfolios of quality munici-
pal 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 pro-
spectus 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, INCLUD-
ING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVEST-
ED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EX-
CHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPEC-
TUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
CONTENTS
1 OVERVIEW DIVIDENDS AND TAXES
2 FUND SUMMARIES AND FINANCIAL HIGHLIGHTS
13 How the Funds Pay Divi-
dends
FUND STRATEGIES
13 Taxes and Tax Reporting
8 Investment Objective
14 Taxable Equivalent Yields
8 How the Funds Select Investments
GENERAL INFORMATION
9 Risk Reduction Strategies
15 How to Contact Nuveen
INVESTING IN THE FUNDS
15 Fund Service Providers
9 How to Buy Fund Shares
16 How the Funds Report Per-
formance
10 How to Select a Purchase Option
11 How to Sell Fund Shares 16 How Fund Shares are Priced
12 Exchanging Shares 16 Organization
APPENDIX
12 Optional Features and Services
17 Special State Considera-
tions
---
1
<PAGE>
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION: October 29, 1986
NET ASSETS: $105.1 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS A
(OFFER PRICE) (NAV) CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 3.32% 7.85% 7.20% 7.28% 7.93%
5 Years 6.48% 7.40% 6.80% 6.81% 7.41%
10 Years 7.86% 8.32% 7.85% 7.73% 8.33%
Inception 7.25% 7.68% 7.24% 7.09% 7.69%
</TABLE>
Class A total returns reflect actual performance for all periods; Classes B, C
and R total returns reflect actual performance for periods since class incep-
tion (see "Financial Highlights" for dates), and Class A performance for peri-
ods prior to class inception, adjusted for the differences in sales
charges and (in the case of Classes B and C) fees between the
classes. Class B total returns assume an ongoing investment and do not reflect
the imposition of the CDSC; your returns for the 1 year and 5 year periods
would be lower if you redeemed at the end of those periods. 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 for further information.
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 15.3
Average Modified Duration 8.1
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR (11%)
A (10%)
AA (7%)
AAA/Pre-refunded (72%)
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Other (23%)
General Obligations (29%)
Hospitals (11%)
Escrowed Bonds (25%)
Water & Sewer (7%)
Housing Facilities (5%)
EXPENSE INFORMATION AS OF 5/31/97
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>
---
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual re-
port which has been audited by Deloitte & Touche LLP, the fund's independent
auditors. You may find more information about the fund's performance in its
annual report. For a free copy of the fund's latest annual and/or semi-annual
reports, write to Nuveen or call (800) 621-7227. Information for the years be-
ginning prior to February 1, 1997 reflects the financial highlights of the
Flagship Arizona Double Tax-Exempt Fund.
<TABLE>
<CAPTION>
CLASS
(INCEPTION OPERATING PERFORMANCE LESS DISTRIBUTIONS
DATE) ---------------------- ------------------------
NET
REALIZED
NET AND DIVIDENDS NET TOTAL
ARIZONA++ ASSET UNREALIZED FROM TAX ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME(b) INVESTMENTS INCOME GAINS PERIOD VALUE(a)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (10/86)
1997 $10.73 $.56 $.27 $(.56) $(.06) $10.94 7.85%
1996 10.85 .57 (.12) (.57) - 10.73 4.21
1995 10.43 .58 .42 (.58) - 10.85 10.03
1994 10.81 .60 (.38) (.60) - 10.43 1.92
1993 10.13 .63 .69 (.64) - 10.81 13.37
1992 9.81 .65 .32 (.65) - 10.13 10.25
1991 9.60 .64 .21 (.64) - 9.81 9.19
1990 9.72 .64 (.12) (.64) - 9.60 5.53
1989 9.12 .64 .60 (.64) - 9.72 14.04
1988 9.12 .64 - (.64) - 9.12 7.45
CLASS B (2/97)
1997(C) 10.92 .16 .02 (.16) - 10.94 1.64
CLASS C (2/94)
1997 10.73 .50 .27 (.50) (.06) 10.94 7.28
1996 10.84 .51 (.11) (.51) - 10.73 3.75
1995 10.43 .52 .41 (.52) - 10.84 9.32
1994(c) 11.22 .14 (.79) (.14) - 10.43 (16.61)+
CLASS R (2/97)
1997(c) 10.92 .19 .02 (.19) - 10.94 1.96
<CAPTION>
CLASS
(INCEPTION RATIOS/SUPPLEMENTAL DATA
DATE) ------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
TO AVERAGE AVERAGE
ARIZONA++ NET ASSETS NET ASSETS NET ASSETS
END OF PERIOD AFTER AFTER PORTFOLIO
YEAR ENDING (IN REIMBURSE- REIMBURSE- TURNOVER
MAY 31, THOUSANDS) MENT(b) MENT(b) RATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (10/86)
1997 $82,567 .83% 5.13% 25%
1996 80,094 .69 5.20 38
1995 80,406 .82 5.59 27
1994 82,676 .64 5.48 21
1993 72,778 .44 6.03 20
1992 51,123 .44 6.55 34
1991 38,933 .78 6.62 18
1990 32,066 .85 6.63 37
1989 29,433 .92 6.85 37
1988 33,696 .86 6.96 68
CLASS B (2/97)
1997(C) 347 1.62+ 4.43+ 25
CLASS C (2/94)
1997 3,189 1.38+ 4.58+ 25
1996 1,970 1.23 4.64 38
1995 1,621 1.36 5.01 27
1994(c) 1,122 1.20+ 4.36+ 21
CLASS R (2/97)
1997(c) 19,031 .67+ 5.38+ 25
</TABLE>
- -------------------------------------------------------------------------------
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Arizona.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
NOTES:
(1) The Class A 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. See "How to Select a Purchase Option."
(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%. Long-term holders of Class B and C shares may pay more in
distribution fees and CDSCs than the maximum initial sales charge permit-
ted 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 general dividend-setting practices.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. Class B shares convert to Class A shares after eight
years. If instead you redeemed your shares immediately prior to the end of
each holding period, your expenses would be higher. If you did not redeem
Class B shares at the end of each holding period, your expenses would have
been $17 for the one year period, $51 for the three year period, $89 for
the five year period, and $173 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
3
<PAGE>
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION: May 4, 1987
NET ASSETS: $32.2 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS A
(OFFER PRICE) (NAV) CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 4.63% 9.22% 8.67% 8.77% 9.38%
5 Years 6.48% 7.40% 6.82% 7.01% 7.43%
10 Years 7.11% 7.57% 7.10% 7.20% 7.59%
Inception 6.76% 7.22% 6.75% 6.84% 7.24%
</TABLE>
Class A total returns reflect actual performance for all periods; Classes B, C
and R total returns reflect actual performance for periods since class incep-
tion (see "Financial Highlights" for dates), and Class A performance for peri-
ods prior to class inception, adjusted for the differences in sales charges
and (in the case of Classes B and C) fees between the classes. Class B total
returns assume an ongoing investment and do not reflect the imposition of the
CDSC; your returns for the 1 and 5 year periods would be lower if you redeemed
at the end of those periods. 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 for further information.
MATURITY (YEARS)
[BAR GRAPH APPEARS HERE]
Average Maturity 17.1
Average Modified Duration 9.7
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR (25%)
A (5%)
AA (12%)
AAA/Pre-refunded (58%)
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Transportation (11%)
General Obligations (8%)
Other (17%)
Escrowed Bonds (44%)
Housing Facilities (16%)
Hospitals (4%)
EXPENSE INFORMATION AS OF 5/31/97
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 0.27% 0.27% 0.27% 0.27%
- -------------------------------------------------------------------------------------------
Total Expenses (Gross) 1.02% 1.77% 1.57% 0.82%
Waivers/
Reimbursements - - - -
- -------------------------------------------------------------------------------------------
Total Expenses (Net) 1.02% 1.77% 1.57% 0.82%
</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 $52 $57 $16 $8
3 Years $73 $87 $50 $26
5 Years $96 $107 $86 $46
10 Years $162 $189 $187 $101
</TABLE>
---
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual re-
port which has been audited by Deloitte & Touche LLP, the fund's independent
auditors. You may find more information about the fund's performance in its
annual report. For a free copy of the fund's latest annual and/or semi-annual
reports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
CLASS
(INCEPTION OPERATING PERFORMANCE LESS DISTRIBUTIONS
DATE) ---------------------- ------------------------
NET
REALIZED
NET AND DIVIDENDS NET TOTAL
COLORADO++ ASSET UNREALIZED FROM TAX ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
APRIL 30, OF PERIOD INCOME(B) INVESTMENTS INCOME GAINS PERIOD VALUE(A)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (5/87)
1997 $ 9.79 $.53 $ .35 $(.52) $ - $10.15 9.22%
1996 9.93 .54 (.13) (.55) - 9.79 4.14
1995 9.62 .57 .30 (.56) - 9.93 9.54
1994 10.04 .58 (.37) (.58) (.05) 9.62 2.03
1993 9.56 .60 .55 (.60) (.07) 10.04 12.41
1992 9.29 .61 .27 (.61) - 9.56 9.80
1991 9.13 .60 .17 (.61) - 9.29 8.75
1990 9.24 .62 (.12) (.61) - 9.13 5.59
1989 8.78 .63 .46 (.63) - 9.24 12.83
1988 9.27 .62 (.46) (.65) - 8.78 2.13
CLASS B (2/97)
1997(c) 10.21 .12 (.06) (.11) - 10.16 .61
CLASS C (2/97)
1997(c) 10.13 .16 .02 (.16) - 10.15 1.75
CLASS R (2/97)
1997(c) 10.21 .15 (.06) (.14) - 10.16 .85
<CAPTION>
CLASS
(INCEPTION RATIOS/SUPPLEMENTAL DATA
DATE) -------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
TO AVERAGE AVERAGE
COLORADO++ NET ASSETS NET ASSETS
NET ASSETS AFTER AFTER PORTFOLIO
YEAR ENDING END OF PERIOD REIMBURSE- REIMBURSE- TURNOVER
APRIL 30, (IN THOUSANDS) MENT(B) MENT(B) RATE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (5/87)
1997 $31,229 .74% 5.31% 27%
1996 33,637 .55 5.41 70
1995 34,982 .50 5.99 38
1994 35,796 .37 5.71 42
1993 26,656 .41 6.05 30
1992 15,699 .49 6.42 39
1991 9,108 .84 6.62 29
1990 7,386 .87 6.70 16
1989 7,545 .67 7.04 19
1988 7,561 .55 7.03 138
CLASS B (2/97)
1997(c) 444 1.53+ 4.60+ 27
CLASS C (2/97)
1997(c) 103 1.31+ 4.94+ 27
CLASS R (2/97)
1997(c) 413 .58+ 5.60+ 27
</TABLE>
- -------------------------------------------------------------------------------
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Colorado.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory, or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
NOTES:
(1) The Class A 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. See "How to Select a Purchase Option."
(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%. Long-term holders of Class B and C shares may pay more in
distribution fees and CDSCs than the maximum initial sales charge permit-
ted 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 general dividend-setting practices.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. Class B shares convert to Class A shares after eight
years. If instead you redeemed your shares immediately prior to the end of
each holding period, your expenses would be higher. If you did not redeem
Class B shares at the end of each holding period, your expenses would have
been $18 for the one year period, $56 for the three year period, $96 for
the five year period, and $189 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
5
<PAGE>
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION: September 16, 1992
NET ASSETS: $52.0 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS A
(OFFER PRICE) (NAV) CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 4.33% 8.90% 8.14% 8.47% 9.06%
Inception 5.71% 6.67% 6.05% 6.28% 6.71%
</TABLE>
Class A total returns reflect actual performance for all periods; Classes B, C
and R total returns reflect actual performance for periods since class incep-
tion (see "Financial Highlights" for dates), and Class A performance for peri-
ods prior to class inception, adjusted for the differences in sales charges
and (in the case of Classes B and C) fees between the classes. Class B total
returns assume an ongoing investment and do not reflect the imposition of the
CDSC; your returns for the 1 year and 5 year periods would be lower
if you redeemed at the end of those periods. 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 for further information.
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 19.6
Average Modified Duration 9.1
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR (15%)
A (16%)
AA (13%)
AAA/Pre-refunded (56%)
INDUSTRY DIVERSIFICATION
[PIE CHART APPEARS HERE]
Hospitals (8%)
Tax Revenue (23%)
Housing Facilities (14%)
Education (17%)
Utility (9%)
Other (29%)
EXPENSE INFORMATION AS OF 5/31/97
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 (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 0.19% 0.19% 0.19% 0.19%
- --------------------------------------------------------------------------------------
Total Expense (Gross) 0.94% 1.69% 1.49% 0.74%
Waivers/
Reimbursements (0.14%) (0.14%) (0.14%) (0.14%)
- --------------------------------------------------------------------------------------
Total Expenses (Net) 0.80% 1.55% 1.35% 0.60%
</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 $50 $55 $14 $6
3 Years $66 $81 $43 $19
5 Years $85 $96 $74 $33
10 Years $137 $164 $162 $75
</TABLE>
---
6
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual re-
port which has been audited by Deloitte & Touche LLP, the fund's independent
auditors. You may find more information about the fund's performance in its
annual report. For a free copy of the fund's latest annual and/or semi-annual
reports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
CLASS
(INCEPTION OPERATING PERFORMANCE LESS DISTRIBUTIONS
DATE) --------------------- -------------------------
NET
REALIZED
NEW MEXICO++ NET AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME(b) INVESTMENTS INCOME GAINS PERIOD VALUE(a)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (9/92)
1997 $ 9.81 $.51 $ .35 $(.51) $ - $10.16 8.90%
1996 10.01 .51 (.19) (.52) - 9.81 3.18
1995 9.68 .52 .33 (.52) - 10.01 9.25
1994 10.04 .53 (.33) (.53) (.03) 9.68 1.92
1993(c) 9.58 .37 .46 (.37) - 10.04 11.72+
CLASS B (2/97)
1997(c) 10.24 .12 (.10) (.11) - 10.15 .18
CLASS C (2/97)
1997(c) 10.23 .12 (.08) (.11) - 10.16 .43
CLASS R (2/97)
1997(c) 10.23 .14 (.07) (.13) - 10.17 .71
- ---------------------------------------------------------------------------------------------
<CAPTION>
CLASS
(INCEPTION RATIOS/SUPPLEMENTAL DATA
DATE) -------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
NEW MEXICO++ TO AVERAGE AVERAGE
NET ASSETS NET ASSETS
NET ASSETS AFTER AFTER PORTFOLIO
YEAR ENDING END OF PERIOD REIMBURSE- REIMBURSE- TURNOVER
MAY 31, (IN THOUSANDS) MENT(b) MENT(b) RATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (9/92)
1997 $50,807 .77% 5.07% 43%
1996 51,173 .68 5.10 57
1995 52,150 .67 5.48 38
1994 51,167 .40 5.24 39
1993(c) 31,499 .14+ 5.28+ 36
CLASS B (2/97)
1997(c) 657 1.54+ 4.19+ 43
CLASS C (2/97)
1997(c) 155 1.34+ 4.40+ 43
CLASS R (2/97)
1997(c) 362 .59+ 5.18+ 43
- ---------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship New Mexico.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
NOTES:
(1) The Class A 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. See "How to Select a Purchase Option."
(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%. Long-term holders of Class C shares may pay more in dis-
tribution 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 general dividend-setting practices.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. Class B shares convert to Class A shares after eight
years. If instead you redeemed your shares immediately prior to the end of
each holding period, your expenses would be higher. If you did not redeem
Class B shares at the end of each holding period, your expenses would have
been $16 for the one year period, $49 for the three year period, $84 for
the five year period, and $164 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
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 substantially all of their assets (at least 80%) in municipal
bonds from a specific state that pay interest that is exempt from regular fed-
eral, 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 re-
paid from any revenue source; revenue bonds may be repaid only from the reve-
nues of a specific facility or source.
FOCUS ON QUALITY MUNICIPAL BONDS
The funds purchase only quality municipal bonds that are either rated invest-
ment 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' in-
vestment 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 in-
vest 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 re-
duce 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 rat-
ings 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 mu-
nicipal 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 ad-
viser then monitors each fund's portfolio to assure that municipal bonds pur-
chased continue to represent over time, in its opinion, the best values avail-
able.
PORTFOLIO MATURITY
Each fund purchases municipal bonds with different maturities in pursuit of
its investment objective, but maintains under normal market conditions an in-
vestment 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.
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 rela-
tively 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 or 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
---
8
<PAGE>
and, since securities 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 obliga-
tion to make interest and principal payments. In general, lower rated munici-
pal 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 (durations) or lower ratings generally provide higher current in-
come, 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 the economic, political or regula-
tory changes that could adversely affect municipal bond issuers in that state
and therefore the value of the fund's investment portfolio. These risks may be
greater for the Colorado and New Mexico Funds, which as "non-diversified"
funds may concentrate their investments in municipal bonds of certain issuers
to a greater extent than the Arizona Fund described in this prospectus, 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 as-
sets) designed to limit your investment risk and maintain portfolio diversifi-
cation. 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 con-
ditions. 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 strate-
gies 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.
INVESTING IN THE FUNDS
HOW TO BUY FUND SHARES
You may open an account with $3,000 per fund share class and make additional
investments at any time with as little as $50. Reinvestment of Nuveen unit
trust distributions have no purchase minimums. Purchases through sponsors of
fee-based programs meeting certain criteria, as described in the statement of
additional information, may be eligible for lower 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 re-
ceive 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 ad-
visers 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 con-
tinue 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.
---
9
<PAGE>
If you do not have a financial adviser, call (800) 621-7227 and Nuveen can re-
fer you to one in your area.
BUYING SHARES BY MAIL
You may also open an account and purchase shares by mail by completing the en-
closed 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 in-
crease 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 in-
vestment 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 pur-
chase. 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 pro-
viding you with ongoing service.
The following Class A sales charges and commissions apply to all funds de-
scribed 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.
Nuveen periodically undertakes sales promotion programs with authorized deal-
ers and may pay them the full applicable sales charge as a commission. In ad-
dition, 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 cir-
cumstances, Nuveen may also make ongoing payments to authorized dealers to fa-
cilitate the marketing and administration of new and existing shareholders ac-
counts, including payments for advertising. The statement of additional infor-
mation 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
. Group Purchase
Sales Charge Waivers
. Nuveen 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
---
10
<PAGE>
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 pur-
chase. 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 compensates
your financial adviser for providing you with ongoing service, and a 0.75% an-
nual distribution fee which compensates Nuveen for paying your financial ad-
viser a 4% commission at the time of purchase.
Class B shares convert automatically to Class A shares eight years after pur-
chase. Class B shares will convert only if the fund is assured that the con-
version does not generate tax consequences for investors, based upon the opin-
ion 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 as-
sessed 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 pro-
ceeds.
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of pur-
chase. The price you pay will equal the Class C NAV. There is no initial sales
charge, but 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% an-
nual distribution fee which compensates Nuveen for paying your financial ad-
viser 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 as-
sessed 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, under certain of
the programs described under "Other Sales Charge Discounts" above. See the
statement of additional information for more details. 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 rec-
ord. If you have established electronic funds transfer privileges on your ac-
count, you may have redemption proceeds transferred electronically to your
bank account; if you are redeeming $1,000 or more, you may expedite your re-
quest by having your redemption proceeds wired directly into your bank ac-
count. See "Fund Direct--Electronic Funds Transfer" below.
Nuveen, the transfer agent or the fund 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 immedi-
ately 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.
---
11
<PAGE>
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 rep-
resent an increase in the value of your fund account due to capital apprecia-
tion, 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 de-
scribed 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 no-
tice 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 an-
other 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 ex-
changing. 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 determin-
ing 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 ex-
tent 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 Di-
rect--Electronic Funds Transfer" below), simply complete the appropriate sec-
tion of the account application. To invest regularly from your paycheck, call
Nuveen for a Payroll Direct Deposit Enrollment form. If you need additional
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." Be-
cause 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 averaging does not assure profits or protect against losses in a
steadily declining market. Since dollar cost averaging involves continuous in-
vestment regardless of fluctuating price levels, you should consider your fi-
nancial 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
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12
<PAGE>
monthly investments of $100 over 20 years. The example assumes you earn a re-
turn 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 perfor-
mance.
THE POWER OF SYSTEMATIC INVESTING
[LINE GRAPH APPEARS HERE]
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 re-
ceive payments monthly, quarterly, semi-annually or annually and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Fund Direct--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 or Account
Update Form 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, you may reinvest all or part of your redemption
proceeds in shares of the same class up to one year later without incurring
any applicable sales charges, and your prior holding period will be reinstat-
ed. 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 ex-
ercising 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 or the Account Update Form. If your need additional copies of these
forms, or would like assistance completing them, contact your financial ad-
viser 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.
In addition, if you have established electronic funds transfer privileges on
your account, you may request that redemption proceeds of $1,000 or more be
sent by Federal Reserve wire directly into your bank account. While you will
generally receive your redemption proceeds more quickly than a regular tele-
phone redemption via Fund Direct, the fund may charge you a fee for this expe-
dited 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 of the same share class 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 the same share class of another Nuveen mu-
tual fund. If you wish to do so, complete the appropriate section of the ac-
count 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 gen-
eral tax information related to an investment in fund shares. Because tax laws
are complex and often
----
13
<PAGE>
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 mu-
nicipal 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 por-
tion of the dividend effectively represents a return of your purchase price.
This is commonly known as "buying a dividend." Similarly, if you sell or ex-
change 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.
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 tax-
able 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 in-
come 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.
If you are subject to the alternative minimum tax, a portion of your regular
monthly dividends may be taxable.
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
Tax-Free Yield
<TABLE>
<CAPTION>
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.
---
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 con-
duct 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
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 open-
ing a new account; if you are adding to an existing account, Nuveen will as-
sume 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 funds' Board of Trustees
oversees the activities of Nuveen Advisory, which also include managing the
funds' business affairs and providing certain clerical, bookkeeping and other
administrative services. Established in 1976, Nuveen Advisory is a wholly-
owned subsidiary of John Nuveen & Co. Incorporated, which itself is approxi-
mately 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>
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 portfo-
lio managers of Nuveen Advisory and meets regularly to review economic condi-
tions, 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 ex-
ecution 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 a Vice President of Nuveen Advisory upon the ac-
quisition 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 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.
---
15
<PAGE>
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 ac-
counts. 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 in-
vestment objectives. Comparative performance information may include data from
Lipper Analytical Services, Inc., Morningstar, Inc. and other industry publi-
cations. See the statement of additional information for a more detailed dis-
cussion.
You may find more information about each fund's performance in its annual re-
port. Call Nuveen at (800) 621-7227 for a free copy.
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, sub-
tracting 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 mu-
nicipal 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 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 portfo-
lio of investments and the shares of each class have equal rights as to vot-
ing, redemption, dividends and liquidation. However, each class bears differ-
ent sales charges and service fees.
Class C shares of the former Nuveen Arizona Fund purchased before February 1,
1997 convert to Class A shares six years after purchase, but only if you re-
quest conversion. You must submit your request to the transfer agent 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.
---
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 in-
vestment 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 in-
formation.
ARIZONA
Arizona's economy is primarily based on services, tourism and high-tech manu-
facturing. However, the military, agriculture, and mining of primary metals
still play a role. The State has experienced phenomenal economic and popula-
tion growth in the recent past due to an influx of businesses attracted by the
State's high quality of life, educated workforce, and friendly business envi-
ronment. Over the last five years, the State has ranked second in the nation
in job growth with more than a 30 percent increase and some 380,000 jobs cre-
ated. The State's leading economic indicators hit an all-time high in April,
suggesting that the State's economic growth may continue in the near term.
However, signs of slowing job growth have surfaced.
The statewide unemployment rate was 4.7 percent, slightly below the U.S. rate
of 4.8 percent, at the end of May 1997. Per capita income grew at a rate of
7.5 percent in 1996 to approximately $21,953.
Arizona maintained a healthy general fund balance for fiscal 1996 of 11.2 per-
cent of general fund revenues despite the previous income tax cuts. In fact,
in 1996 income tax revenues rose 1.5 percent from fiscal 1995. The State 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 Ari-
zona 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 distrib-
utes 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 State's economic activity tends to
mimic that of the nation as a whole.
Colorado's unemployment rate was a very low 3.9% in June 1997, below the na-
tional average of 5.0%. Monthly job growth averaged 2.67% from January to June
of 1997. Per capita income grew 4.7% to $25,084 in 1996.
1996 general fund revenues were $4.3 billion against expenditures of $4.4 bil-
lion. 1997 projected revenues are $4.6 billion. There is no outstanding gen-
eral obligation debt, but outstanding lease obligations are rated A1 by
Moody's and A+ 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 Col-
orado municipal bonds or U.S. government securities. You will be subject to
Colorado personal income taxes, however, to the extent the Colorado fund dis-
tributes 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. 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 should
continue given the large number of state and federal park lands in the State.
Finally, crop and livestock production remains diverse and will also remain a
major part of the economy.
New Mexico's unemployment rate fell from 7.2% in August of 1996 to 6.5% in
June of 1997, surpassing the national averages of 5.1% and 5.0%. At the same
time, per capital income rose 3.4% in 1996 to reach $18,770.
1996 audited general fund revenues were $4.3 billion against expenditures of
$4.2 billion. As of February 3, 1997, Moody's gives the State's general obli-
gation debt an Aa1 rating while Standard & Poor's gives it an AA+.
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 Mex-
ico 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.
---
17
<PAGE>
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
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
MUNICIPAL BOND FUNDS
National Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Funds
<TABLE>
<S> <C> <C>
Alabama Kentucky/3/ New York/1/
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan South Carolina
Florida/2/ Missouri Tennessee
Georgia New Jersey/2/ Virginia
Kansas New Mexico Wisconsin
</TABLE>
1. Long-term and insured limited-term portfolios.
2. Long-term and intermediate-term portfolios.
3. Long-term and limited-term portfolios.
Nuveen Family of Municipal Bond Funds
[MAP APPEARS HERE]
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
September 12, 1997
Prospectus
Dependable, tax-free income [PHOTO APPEARS HERE]
to help you keep more of
what you earn.
Florida
<PAGE>
Investing in Nuveen Mutual Funds
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a range of equity
and fixed-income mutual funds designed to suit the unique circumstances and
financial planning needs of mature investors. More than 1.3 million investors
have entrusted Nuveen to help them maintain the lifestyle they currently enjoy.
Value investing -- purchasing quality securities that represent good relative
value -- is the cornerstone of Nuveen's investment philosophy. It is a
disciplined, long-term strategy that offers the potential for above average
returns over time with moderated risk. Successful value investing begins with
in-depth research and a discerning eye for marketplace opportunity. Our team of
investment professionals is backed by the discipline, resources and expertise of
Nuveen's almost a century of investment experience, including one of the most
recognized research departments in the industry.
This prospectus describes in detail the investment objectives, policies and
risks of certain Nuveen municipal bond funds. We invite you to discuss the
contents with your financial adviser, or you may call us at 800-621-7227 for
additional information.
<PAGE>
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
SEPTEMBER 12, 1997
PROSPECTUS
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 in-
vestments in diversified portfolios of quality munici-
pal bonds whose income is exempt from regular federal,
state and, in some cases, local income or intangibles
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 pro-
spectus 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, INCLUD-
ING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVEST-
ED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EX-
CHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPEC-
TUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
CONTENTS
1 OVERVIEW DIVIDENDS AND TAXES
2 FUND SUMMARIES AND FINANCIAL HIGHLIGHTS
11 How the Funds Pay Divi-
dends
FUND STRATEGIES
12 Taxes and Tax Reporting
6 Investment Objective
12 Taxable Equivalent Yields
6 How the Funds Select Investments
7 Risk Reduction Strategies
GENERAL INFORMATION
INVESTING IN THE FUNDS
13 How to Contact Nuveen
7 How to Buy Fund Shares
13 Fund Service Providers
8 How to Select a Purchase Option
14 How the Funds Report Per-
formance
9 How to Sell Fund Shares
10 Exchanging Shares
14 How Fund Shares are Priced
10 Optional Features and Services
14 Organization
APPENDIX
15 Special State Considera-
tions
---
1
<PAGE>
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION:June 15, 1990
NET ASSETS: $357.1 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS A
(OFFER PRICE) (NAV) CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 3.07% 7.59% 7.02% 7.00% 7.66%
5 Years 5.75% 6.66% 6.08% 6.08% 6.67%
Inception 6.97% 7.63% 7.04% 7.04% 7.64%
</TABLE>
Class A total returns reflect actual performance for all periods; Classes B, C
and R total returns reflect actual performance for periods since class incep-
tion (see "Financial Highlights" for dates), and Class A performance for peri-
ods prior to class inception, adjusted for the differences in sales charges
and (in the case of Classes B and C) fees between the classes. Class B total
returns assume an ongoing investment and do not reflect the imposition of the
CDSC; your returns for the 1 year and 5 year periods would be lower if you re-
deemed at the end of those periods. 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 for further information.
MATURITY (YEARS)
[BAR GRAPH APPEARS HERE]
Average Maturity 21.2
Average Modified Duration 8.2
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR (15%)
A (10%)
AA (10%)
AAA/Pre-refunded (65%)
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Escrowed Bonds (10%)
General Obligations (9%)
Pollution Control (11%)
Housing Facilities (15%)
Hospitals (23%)
Other (32%)
EXPENSE INFORMATION AS OF 5/31/97
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 0.54% 0.54% 0.54% 0.54%
12b-1 Fees 0.20% 0.95% 0.75% -
Other 0.10% 0.10% 0.10% 0.10%
- -------------------------------------------------------------------------------------------------
Total (Gross) 0.84% 1.59% 1.39% 0.64%
Waivers/
Reimbursements - - - -
- -------------------------------------------------------------------------------------------------
Total (Net) 0.84% 1.59% 1.39% 0.64%
</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 $20
5 Years $87 $98 $76 $36
10 Years $141 $169 $167 $80
</TABLE>
---
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual re-
port which has been audited by Deloitte & Touche LLP, the fund's independent
auditors. You may find more information about the fund's performance in its
annual report. For a free copy of the fund's latest annual and/or semi-annual
reports, write to Nuveen or call (800) 621-7227. Information for the years be-
ginning prior to February 1, 1997 reflects the financial highlights of the
Flagship Florida Double Tax Exempt Fund.
<TABLE>
<CAPTION>
CLASS
(INCEPTION OPERATING PERFORMANCE LESS DISTRIBUTIONS
DATE) ---------------------- -------------------------
NET
REALIZED
NET AND DIVIDENDS NET TOTAL
FLORIDA++ ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME(B) INVESTMENTS INCOME GAINS PERIOD VALUE(A)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (6/90)
1997 $10.39 $ 56 $ .21 $ (.56) $ - $10.60 7.59%
1996 10.63 .57 (.24) (.57) - 10.39 3.14
1995 10.38 .58 .26 (.59) - 10.63 8.43
1994 10.76 .60 (.38) (.60) - 10.38 2.00
1993 10.18 .63 .61 (.64) (.02) 10.76 12.49
1992 9.87 .66 .33 (.67) (.01) 10.18 10.32
1991(c) 9.58 .64 .29 (.64) - 9.87 9.81+
CLASS B (2/97)
1997(C) 10.59 .16 .02 (.16) - 10.61 1.70
CLASS C (9/95)
1997 10.39 .50 .21 (.50) - 10.60 7.00
1996(c) 10.65 .35 (.26) (.35) - 10.39 1.30+
CLASS R (2/97)
1997(C) 10.59 .19 .01 (.19) - 10.60 1.93
- --------------------------------------------------------------------------------------------
<CAPTION>
CLASS
(INCEPTION RATIOS/SUPPLEMENTAL DATA
DATE) ------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
TO AVERAGE AVERAGE
FLORIDA++ NET ASSETS NET ASSETS NET ASSETS
END OF PERIOD AFTER AFTER PORTFOLIO
YEAR ENDING (IN REIMBURSE- REIMBURSE- TURNOVER
MAY 31, THOUSANDS) MENT(B) MENT(B) RATE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (6/90)
1997 $296,970 .82% 5.34% 54%
1996 318,456 .83 5.36 94
1995 341,374 .73 5.71 53
1994 372,082 .58 5.51 32
1993 369,123 .45 6.01 23
1992 276,811 .26 6.59 50
1991(c) 136,509 .19+ 6.86+ 152
CLASS B (2/97)
1997(C) 785 1.58+ 4.52+ 54
CLASS C (9/95)
1997 5,130 1.35 4.75 54
1996(c) 1,175 1.38+ 4.59+ 94
CLASS R (2/97)
1997(C) 54,247 .64+ 5.55+ 54
- --------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Florida.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
NOTES:
(1) The Class A 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. See "How to Select a Purchase Option."
(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 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%. 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 Ad-
viser," to continue Flagship's general dividend-setting practices.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. Class B shares convert to Class A shares after eight
years. If instead you redeemed your shares prior to the end of each stated
period, your expenses might be higher. If you did not redeem Class B
shares at the end of each holding period, your expenses would have been
$16 for the one year period, $50 for the three year period, $87 for the
five year period, and $169 for the ten year period. This example does not
represent past or future expenses; actual expenses may be higher or lower.
---
3
<PAGE>
NUVEEN FLAGSHIP FLORIDA INTERMEDIATE MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION: February 1, 1994
NET ASSETS: $16.2 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- -------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS A
(OFFER PRICE) (NAV) CLASS C CLASS R
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year 3.94% 7.16% 6.47% 7.42%
Inception 4.89% 5.85% 5.25% 5.93%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C and
R 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
(in the case of Class C) fees between the classes. See Overview of Fund Oper-
ating 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 for further information.
MATURITY (YEARS)
[BAR GRAPH APPEARS HERE]
Average Maturity 8.9
Average Modified Duration 6.7
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR (14%)
A (9%)
AA (9%)
AAA/Pre-refunded (68%)
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Escrowed Bonds (13%)
General Obligations (20%)
Tax Revenue (19%)
Transportation (11%)
Water & Sewer (10%)
Other (27%)
EXPENSE INFORMATION AS OF 5/31/97
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 0.66% 0.66% 0.66%
- --------------------------------------------------------------------------------------------------
Total (Gross) 1.41% 1.96% 1.21%
Waivers/
Reimbursements (0.61%) (0.61%) (0.61%)
- --------------------------------------------------------------------------------------------------
Total (Net) 0.80% 1.35% 0.60%
</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 $38 $14 $6
3 Years $55 $43 $19
5 Years $73 $74 $33
10 Years $126 $162 $75
</TABLE>
---
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual re-
port which has been audited by Deloitte & Touche LLP, the fund's independent
auditors. You may find more information about the fund's performance in its
annual report. For a free copy of the fund's latest annual and/or semi-annual
reports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
CLASS
(INCEPTION OPERATING PERFORMANCE LESS DISTRIBUTIONS
DATE) ---------------------- -------------------------
NET
FLORIDA REALIZED
INTERMEDIATE++ NET AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME(b) INVESTMENTS INCOME GAINS PERIOD VALUE(a)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (2/94)
1997 $ 9.88 $.45 $ .25 $ (.47) $(.02) $10.09 7.16%
1996 10.05 .46 (.12) (.46) (.05) 9.88 3.41
1995 9.66 .46 .33 (.40) - 10.05 8.42
1994(c) 9.70 .12 (.04) (.12) - 9.66 1.75+
CLASS C (2/94)
1997 9.88 .40 .23 (.41) (.02) 10.08 6.47
1996 10.05 .40 (.11) (.41) (.05) 9.88 2.88
1995 9.66 .40 .33 (.34) - 10.05 7.80
1994(c) 9.70 .11 (.06) (.09) - 9.66 1.33+
CLASS R (2/97)
1997(C) 10.20 .12 (.09) (.12) - 10.11 .32
- ---------------------------------------------------------------------------------------------
<CAPTION>
CLASS
(INCEPTION RATIOS/SUPPLEMENTAL DATA
DATE) -------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
FLORIDA EXPENSES INCOME TO
INTERMEDIATE++ TO AVERAGE AVERAGE
NET ASSETS NET ASSETS
NET ASSETS AFTER AFTER PORTFOLIO
YEAR ENDING END OF PERIOD REIMBURSE- REIMBURSE- TURNOVER
MAY 31, (IN THOUSANDS) MENT(b) MENT(b) RATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (2/94)
1997 $13,089 .73% 4.49% 35%
1996 4,995 .76 4.48 66
1995 3,898 .67 4.74 105
1994(c) 964 .29+ 3.79+ 28
CLASS C (2/94)
1997 3,008 1.28 3.99 35
1996 3,079 1.34 3.88 66
1995 1,765 1.19 4.19 105
1994(c) 1,058 .68+ 3.42+ 28
CLASS R (2/97)
1997(C) 101 .56+ 4.47+ 35
- ---------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Florida Intermediate.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
NOTES:
(1) The Class A 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. See "How to Select a Purchase Option."
(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%. Long-term holders of Class C shares may pay more in dis-
tribution 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 general dividend-setting practices.
(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 exam-
ple does not represent past or future expenses; actual expenses may be
higher or lower.
---
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 income taxes as is con-
sistent with preservation of capital. The shares of each fund also will be ex-
empt from the Florida intangible personal property tax. 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 substantially all of their assets (at least 80%) in municipal
bonds that pay interest that is exempt from regular federal income taxes and
which enable fund shares to be exempt from the Florida intangibles tax. 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 re-
paid from any revenue source; revenue bonds may be repaid only from the reve-
nues of a specific facility or source.
FOCUS ON QUALITY MUNICIPAL BONDS
The funds purchase only quality municipal bonds that are either rated invest-
ment 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' in-
vestment adviser. If suitable municipal bonds are not available at reasonable
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 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 re-
duce 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 rat-
ings 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 mu-
nicipal 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 ad-
viser then monitors each fund's portfolio to assure that municipal bonds pur-
chased continue to represent over time, in its opinion, the best values avail-
able.
PORTFOLIO MATURITY
Each fund purchases municipal bonds with different maturities in pursuit of
its investment objective, but maintains under normal market conditions an in-
vestment 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 known as the fund's
portfolio turnover rate. The funds intend to keep portfolio turnover rela-
tively 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 or 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 be-
---
6
<PAGE>
cause 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 de-
livery 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 obliga-
tion to make interest and principal payments. In general, lower rated munici-
pal 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 (durations) or lower ratings generally provide higher current in-
come, 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 Florida, each fund
also bears investment risk from the economic, political or regulatory changes
that could adversely affect municipal bond issuers in the state and therefore
the value of the fund's investment portfolio. These risks may be greater for
the Florida Intermediate Fund, which as a "non-diversified" fund may concen-
trate its investments in municipal bonds of certain issuers to a greater ex-
tent than the Florida Fund described in this prospectus, which is a diversi-
fied 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 as-
sets) designed to limit your investment risk and maintain portfolio diversifi-
cation. 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 con-
ditions. 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 strate-
gies 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.
INVESTING IN THE FUNDS
HOW TO BUY FUND SHARES
You may open an account with $3,000 per fund share class and make additional
investments at any time with as little as $50. Reinvestment of Nuveen unit
trust distributions have no purchase minimums. Purchases through sponsors of
fee-based programs meeting certain criteria, as described in the statement of
additional information, may be eligible for lower 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 re-
ceive 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 ad-
visers 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 con-
tinue to meet your needs as circumstances change.
---
7
<PAGE>
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 re-
fer you to one in your area.
BUYING SHARES BY MAIL
You may also open an account and purchase shares by mail by completing the en-
closed 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 in-
crease 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 in-
vestment 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 pur-
chase. 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 pro-
viding you with ongoing service.
The following Class A sales charges and commissions apply to the Florida 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>
The following Class A sales charges and commissions apply to the Florida In-
termediate 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 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.
Nuveen periodically undertakes sales promotion programs with authorized deal-
ers and may pay them the full applicable sales charge as a commission. In ad-
dition, 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 cir-
cumstances, Nuveen may also make ongoing payments to authorized dealers to fa-
cilitate the marketing and administration of new and existing shareholder ac-
counts, including payments for advertising. The statement of additional infor-
mation contains further information about these programs.
---
8
<PAGE>
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
. Group Purchase
Sales Charge Waivers
. Nuveen 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 pur-
chase. 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 compensates
your financial adviser for providing you with ongoing service, and a 0.75% an-
nual distribution fee which compensates Nuveen for paying your financial ad-
viser a 4% commission at the time of purchase. The Florida Intermediate Munic-
ipal Bond Fund does not currently offer Class B shares.
Class B shares convert automatically to Class A shares eight years after pur-
chase. Class B shares will convert only if the fund is assured that the con-
version does not generate tax consequences for investors, based upon the opin-
ion 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 as-
sessed 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 pro-
ceeds.
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of pur-
chase. The price you pay will equal the Class C NAV. There is no initial sales
charge, but 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% an-
nual distribution fee which compensates Nuveen for paying your financial ad-
viser 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 as-
sessed 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, under certain of
the programs described under "Other Sales Charge Discounts" above. See the
statement of additional information for more details. 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 rec-
ord. If you have established electronic funds transfer privileges on your ac-
count, you may have redemption proceeds transferred electronically to your
bank account; if you are redeeming $1,000 or more, you may expedite your re-
quest by having your redemption proceeds wired directly into your bank ac-
count. See "Fund Direct--Electronic Funds Transfer" below.
Nuveen, the transfer agent or the fund will be liable for losses resulting
from unauthorized telephone redemptions
---
9
<PAGE>
only if they do not follow reasonable procedures designed to verify the iden-
tity 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 rep-
resent an increase in the value of your fund account due to capital apprecia-
tion, 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 de-
scribed 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 no-
tice 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 an-
other 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 ex-
changing. 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 determin-
ing 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 ex-
tent 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 sec-
tion of the account application.
---
10
<PAGE>
To invest regularly from your paycheck, call Nuveen for a Payroll Direct De-
posit Enrollment form. If you need additional 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." Be-
cause 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 averaging does not assure profits or protect against losses in a
steadily declining market. Since dollar cost averaging involves continuous in-
vestment regardless of fluctuating price levels, you should consider your fi-
nancial 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").
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.
THE POWER OF SYSTEMATIC INVESTING
LOGO
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 re-
ceive payments monthly, quarterly, semi-annually or annually and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Fund Direct--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 or Account Update
Form 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, you may reinvest all or part of your redemption
proceeds in shares of the same class up to one year later without incurring
any applicable sales charges, and your prior holding period will be reinstat-
ed. 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 ex-
ercising 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 or the Account Update Form. If you need additional copies of these
forms, or would like assistance completing them, contact your financial ad-
viser 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.
In addition, if you have established electronic funds transfer privileges on
your account, you may request that redemption proceeds of $1,000 or more be
sent by Federal Reserve wire directly into your bank account. While you will
generally receive your redemption proceeds more quickly than a regular tele-
phone redemption via Fund Direct, the fund may charge you a fee for this expe-
dited 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 of the same share class 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 the same share class of another Nuveen mu-
tual fund. If you wish to do so, complete the appropriate section of the ac-
count application, contact your financial adviser or call Nuveen at (800) 621-
7227.
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11
<PAGE>
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 gen-
eral 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 Florida municipal bonds or in municipal bonds
whose income is otherwise exempt from regular federal income taxes and which
enable fund shares to be exempt from the Florida intangibles tax. Consequent-
ly, the regular monthly dividends you receive will be exempt from regular fed-
eral income taxes. All or a portion of these dividends, however, may be sub-
ject to the federal alternative minimum tax (AMT). More specific state tax in-
formation can be found below in the Appendix.
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 por-
tion of the dividend effectively represents a return of your purchase price.
This is commonly known as "buying a dividend." Similarly, if you sell or ex-
change 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.
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 tax-
able 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 in-
come 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.
If you are subject to the alternative minimum tax, a portion of your regular
monthly dividends may be taxable.
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
---
12
<PAGE>
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
Tax-Free Yield
<TABLE>
<CAPTION>
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 con-
duct 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
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 open-
ing a new account; if you are adding to an existing account, Nuveen will as-
sume 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 funds' Board of Trustees
oversees the activities of Nuveen Advisory, which also include managing the
funds' business affairs and providing certain clerical, bookkeeping and other
administrative services. Established in 1976, Nuveen Advisory is a wholly-
owned subsidiary of John Nuveen & Co. Incorporated, which itself is approxi-
mately 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>
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 portfo-
lio managers of Nuveen Advisory and meets regularly to review economic condi-
tions, 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 ex-
ecution 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 a Vice President of Nuveen Advisory upon the acquisition of Flagship
Resources by The John Nuveen Company in January 1997. Paul Brennan has managed
or co-managed the Florida Intermediate Fund since 1995, and since 1991 had
been an employee of Flagship Financial Inc. until becoming an Assistant Vice
President 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.
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13
<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 ac-
counts. 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 in-
vestment objectives. Comparative performance information may include data from
Lipper Analytical Services, Inc., Morningstar, Inc. and other industry publi-
cations. See the statement of additional information for a more detailed dis-
cussion. You may find more information about each fund's performance in its
annual report. Call Nuveen at (800) 621-7227 for a free copy.
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, sub-
tracting 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 mu-
nicipal 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 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 portfo-
lio of investments and the shares of each class have equal rights as to vot-
ing, redemption, dividends and liquidation. However, each class bears differ-
ent sales charges and service fees.
Class C shares of the former Nuveen Florida Fund purchased before February 1,
1997 convert to Class A shares six years after purchase, but only if you re-
quest conversion. You must submit your request to the transfer agent 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.
---
14
<PAGE>
APPENDIX
SPECIAL STATE CONSIDERATIONS
Because the funds primarily purchase Florida municipal bonds, 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 discussion 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 has a diverse economy with substantial insurance, banking, healthcare,
construction and trade sectors, yet it remains heavily dependent on the agri-
culture and tourism industries. Employment and personal income growth have
outpaced the nation since 1991 and recent economic reports indicate that the
State continues to experience job growth, although at a more moderate pace.
Economists are also predicting another record tourism year for the State. This
economic growth as well as the State's healthy financial position were recog-
nized in the State's recent rating upgrade from AA to AA+ by Standard &
Poor's.
Florida's unemployment rate of 4.9% in June, 1997, is slightly better than the
comparable national average of 5.0%. Florida's 1996 per capita income of
$24,104 is on a par with national averages and slightly above regional levels.
The State's population growth continues to exceed growth in the national popu-
lation.
Florida voters approved a Constitutional amendment in 1995 which limits the
rate of growth of state revenues to the growth rate of personal income. The
State's fiscal 1996 results were better than expected due to sales tax revenue
growth of 7.4% versus a 4% budgeted growth rate. The State's goal is to reach
a 5% Budget Stabilization Fund by fiscal 1999. As of July 31, 1997, Florida's
general obligation debt carries ratings of AA+ by Standard & Poor's, Aa2 by
Moody's, and AA by Fitch.
Tax treatment.
Shares of the Florida funds will not be subject to the Florida intangible per-
sonal property tax if on January 1 of the taxable year, the funds hold only
Florida municipal bonds and U.S. securities. If the 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 U.S. securities) will
be subject to such tax. Corporate shareholders of the Florida Fund also may be
subject to the Florida corporate income tax. Corporate shareholders should re-
fer to the statement of additional information for more detailed information.
---
15
<PAGE>
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your
financial 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
MUNICIPAL BOND FUNDS
National Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
Nuveen Family of Municipal Bond Funds
[Map Appears Here]
State Funds
Alabama Kentucky/3/ New York/1/
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan South Carolina
Florida/2/ Missouri Tennessee
Georgia New Jersey/2/ Virginia
Kansas New Mexico Wisconsin
1. Long-term and insured long-term portfolios.
2. Long-term and intermediate-term portfolios.
3. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
September 12, 1997
Prospectus
Dependable, tax-free income [PHOTO APPEARS HERE]
to help you keep more of
what you earn.
Maryland
Pennsylvania
Virginia
<PAGE>
Investing in Nuveen Mutual Funds
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a range of equity
and fixed-income mutual funds designed to suit the unique circumstances and
financial planning needs of mature investors. More than 1.3 million investors
have entrusted Nuveen to help them maintain the lifestyle they currently enjoy.
Value investing -- purchasing quality securities that represent good relative
value -- is the cornerstone of Nuveen's investment philosophy. It is a
disciplined, long-term strategy that offers the potential for above average
returns over time with moderated risk. Successful value investing begins with
in-depth research and a discerning eye for marketplace opportunity. Our team of
investment professionals is backed by the discipline, resources and expertise of
Nuveen's almost a century of investment experience, including one of the most
recognized research departments in the industry.
This prospectus describes in detail the investment objectives, policies and
risks of certain Nuveen municipal bond funds. We invite you to discuss the
contents with your financial adviser, or you may call us at 800-621-7227 for
additional information.
<PAGE>
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
SEPTEMBER 12, 1997
PROSPECTUS
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 in-
vestments in diversified portfolios of quality munici-
pal 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 pro-
spectus 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, INCLUD-
ING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVEST-
ED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EX-
CHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPEC-
TUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
CONTENTS
1 OVERVIEW DIVIDENDS AND TAXES
2 FUND SUMMARIES AND FINANCIAL HIGHLIGHTS
13 How the Funds Pay Divi-
dends
FUND STRATEGIES
13 Taxes and Tax Reporting
8 Investment Objective
14 Taxable Equivalent Yields
8 How the Funds Select Investments
9 Risk Reduction Strategies
GENERAL INFORMATION
INVESTING IN THE FUNDS
15 How to Contact Nuveen
9 How to Buy Fund Shares
15 Fund Service Providers
10 How to Select a Purchase Option
11 How to Sell Fund Shares
16 How the Funds Report Per-
formance
12 Exchanging Shares
16 How Fund Shares are Priced
12 Optional Features and Services
16 Organization
APPENDIX
16 Special State
Consderations
---
1
<PAGE>
NUVEEN MARYLAND MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION: December 13, 1991
NET ASSETS: $58.5 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS A
(OFFER PRICE) (NAV) CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 2.18% 6.66% 5.99% 5.92% 6.88%
5 Years 5.52% 6.43% 5.71% 5.68% 6.70%
Inception 5.57% 6.44% 5.72% 5.69% 6.71%
</TABLE>
Class R total returns reflect actual performance for all periods; Classes A, B
and C total returns reflect actual performance for periods since class incep-
tion (see "Financial Highlights" for dates), and Class R performance for peri-
ods prior to class inception, adjusted for the differences in sales charges
and fees between the classes. Class B total returns assume an ongoing invest-
ment and do not reflect the imposition of the CDSC; your returns for the 1
year and 5 year periods would be lower if you redeemed at the end of those pe-
riods. See Overview of Fund Operating Expenses and Shareholder Transaction Ex-
penses.
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 for further information.
MATURITY (YEARS)
[BAR GRAPH APPEARS HERE]
Average Maturity 19.2
Average Modified Duration 6.2
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR (9%)
A (10%)
AA (20%)
AAA/Pre-refunded (61%)
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Hospitals (14%)
General Obligations (19%)
Other (21%)
Escrowed Bonds (12%)
Housing Facilities (22%)
Transportation (12%)
EXPENSE INFORMATION AS OF 5/31/97
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 0.24% 0.24% 0.24% 0.24%
- -------------------------------------------------------------------------------------------------
Total (Gross) 0.99% 1.74% 1.54% 0.79%
Waivers/
Reimbursements (0.06%) (0.06%) (0.06%) (0.06%)
- -------------------------------------------------------------------------------------------------
Total (Net) 0.93% 1.68% 1.48% 0.73%
</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 $57 $15 $7
3 Years $70 $85 $47 $23
5 Years $91 $103 $81 $41
10 Years $152 $179 $177 $91
</TABLE>
---
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual re-
port which has been audited by Deloitte & Touche LLP, the fund's independent
auditors and for the periods prior to January 31, 1997, by Arthur Andersen
LLP, the fund's former independent auditors. You may find more information
about the fund's performance in its annual report. For a free copy of the
fund's latest annual and/or semi-annual reports, write to Nuveen or call (800)
621-7227.
<TABLE>
<CAPTION>
CLASS
(INCEPTION OPERATING PERFORMANCE LESS DISTRIBUTIONS
DATE) ---------------------- ------------------------
NET
REALIZED
NET AND DIVIDENDS NET TOTAL
MARYLAND ASSET UNREALIZED FROM TAX ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME(b) INVESTMENTS INCOME GAINS PERIOD VALUE(a)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997(F) $10.25 $.16 $ .01 $(.17) $ - $10.25 1.63%
1997(e) 10.43 .46 (.15) (.49) - 10.25 3.06
1996(e) 9.60 .48 .85 (.50) - 10.43 14.07
1995(c) 9.84 .20 (.23) (.21) - 9.60 (.26)
CLASS B (3/97)
1997(D) 10.29 .10 (.04) (.10) - 10.25 .83
CLASS C (9/94)
1997(F) 10.24 .15 - (.15) - 10.24 1.43
1997(e) 10.42 .39 (.16) (.41) - 10.24 2.28
1996(e) 9.59 .41 .84 (.42) - 10.42 13.24
1995(c) 9.75 .16 (.15) (.17) - 9.59 .12
CLASS R (12/91)
1997(F) 10.26 .17 - (.17) - 10.26 1.68
1997(e) 10.44 .47 (.14) (.51) - 10.26 3.29
1996(e) 9.61 .51 .84 (.52) - 10.44 14.33
1995(e) 10.62 .51 (1.01) (.51) - 9.61 (4.58)
1994(e) 9.91 .51 .72 (.50) (.02) 10.62 12.71
1993(e) 9.53 .44 .39 (.44) (.01) 9.91 8.96
1992(c) 9.53 - - - - 9.53 -
- --------------------------------------------------------------------------------------------
<CAPTION>
CLASS
(INCEPTION RATIOS/SUPPLEMENTAL DATA
DATE) ---------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
TO AVERAGE AVERAGE
MARYLAND NET ASSETS NET ASSETS
NET ASSETS AFTER AFTER PORTFOLIO
YEAR ENDING END OF PERIOD REIMBURSE- REIMBURSE- TURNOVER
MAY 31, (IN THOUSANDS) MENT(b) MENT(b) RATE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (9/94)
1997(F) $12,977 .95%+ 4.90%+ 3%
1997(e) 11,788 1.00 4.79 4
1996(e) 6,860 1.00 4.74 17
1995(c) 1,605 1.00+ 5.26+ 35
CLASS B (3/97)
1997(D) 150 1.70+ 4.00+ 3
CLASS C (9/94)
1997(F) 2,103 1.50+ 4.35+ 3
1997(e) 1,985 1.75 4.05 4
1996(e) 1,438 1.75 4.04 17
1995(c) 860 1.75+ 4.55+ 35
CLASS R (12/91)
1997(F) 43,306 .75+ 5.10+ 3
1997(e) 43,738 .75 5.06 4
1996(e) 47,389 .75 5.07 17
1995(e) 42,741 .75 5.28 35
1994(e) 47,822 .75 4.85 4
1993(e) 28,283 .75+ 4.96+ 20
1992(c) 15 - - -
- --------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After the waiver of certain management fees or reimbursement of expenses,
if applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted through January 31.
(d) From commencement of class operations as noted through May 31.
(e) For year ending January 31.
(f) Four months ending May 31.
NOTES:
(1) The Class A 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. See "How to Select a Purchase Option."
(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%. 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, 1998 to waive fees or reimburse expenses so that the total oper-
ating 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. Class B shares convert to Class A shares after eight
years. If instead you redeemed your shares immediately prior to the end of
each holding period, your expenses would be higher. If you did not redeem
Class B shares at the end of each holding period, your expenses would have
been $17 for the one year period, $53 for the three year period, $91 for
the five year period, and $179 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
3
<PAGE>
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION:October 29, 1986
NET ASSETS: $119.6 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS A
(OFFER PRICE) (NAV) CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 3.81% 8.37% 7.91% 7.88% 8.44%
5 Years 5.87% 6.78% 6.22% 6.20% 6.80%
10 Years 7.65% 8.11% 7.64% 7.53% 8.12%
Inception 6.74% 7.18% 6.74% 6.59% 7.18%
</TABLE>
Class A total returns reflect actual performance for all periods; Classes B, C
and R total returns reflect actual performance for periods since class incep-
tion (see "Financial Highlights" for dates), and Class A performance for peri-
ods prior to class inception, adjusted for the differences in sales charges
and (in the case of Classes B and C) fees between the classes. Class B total
returns assume an ongoing investment and do not reflect the imposition of the
CDSC; your returns for the 1 year and 5 year periods would be lower if you re-
deemed at the end of those periods. 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 for further information.
MATURITY (YEARS)
[BAR GRAPH APPEARS HERE]
Average Maturity 21.1
Average Modified Duration 8.2
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR (23%)
A (22%)
AA (9%)
AAA/Pre-refunded (46%)
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Tax Revenue (9%)
Housing Facilities (12%)
General Obligations (11%)
Pollution Control (14%)
Other (31%)
Hospitals (23%)
EXPENSE INFORMATION AS OF 5/31/97
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 0.21% 0.21% 0.21% 0.21%
- ----------------------------------------------------------------------------------------------
Total (Gross) 0.96% 1.71% 1.51% 0.76%
Waivers/
Reimbursements (0.34%) (0.34%) (0.34%) (0.34%)
- ----------------------------------------------------------------------------------------------
Total (Net) 0.62% 1.37% 1.17% 0.42%
</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 $4
3 Years $61 $75 $37 $13
5 Years $75 $87 $64 $24
10 Years $116 $144 $142 $53
</TABLE>
---
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual re-
port which has been audited by Deloitte & Touche LLP, the fund's independent
auditors. You may find more information about the fund's performance in its
annual report. For a free copy of the fund's latest annual and/or semi-annual
reports, write to Nuveen or call (800) 621-7227. Information for the years be-
ginning prior to February 1, 1997 reflects the financial highlights of the
Flagship Pennsylvania Triple Tax Exempt Fund.
<TABLE>
<CAPTION>
CLASS
(INCEPTION OPERATING PERFORMANCE LESS DISTRIBUTIONS
DATE) ---------------------- -------------------------
NET
REALIZED
NET AND DIVIDENDS NET TOTAL
PENNSYLVANIA ++ ASSET UNREALIZED FROM TAX ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME(b) INVESTMENTS INCOME GAINS PERIOD VALUE(a)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (10/86)
1997 $10.00 $.57 $ .25 $(.57) $ - $10.25 8.37%
1996 10.21 .59 (.20) (.60) - 10.00 3.83
1995 10.06 .60 .16 (.61) - 10.21 7.90
1994 10.38 .61 (.32) (.61) - 10.06 2.70
1993 9.90 .62 .47 (.61) - 10.38 11.34
1992 9.60 .63 .30 (.63) - 9.90 9.98
1991 9.39 .62 .22 (.63) - 9.60 9.26
1990 9.49 .63 (.10) (.63) - 9.39 5.70
1989 9.01 .64 .48 (.64) - 9.49 12.79
1988 8.83 .65 .18 (.65) - 9.01 9.70
CLASS B (2/97)
1997(C) 10.21 .16 .06 (.16) - 10.27 2.18
CLASS C (2/94)
1997 9.99 .51 .26 (.51) - 10.25 7.88
1996 10.21 .53 (.21) (.54) - 9.99 3.16
1995 10.06 .54 .16 (.55) - 10.21 7.31
1994(c) 10.71 .16 (.64) (.17) - 10.06 (13.46)
CLASS R (2/97)
1997(C) 10.21 .20 .03 (.19) - 10.25 2.31
- ---------------------------------------------------------------------------------------------
<CAPTION>
CLASS
(INCEPTION RATIOS/SUPPLEMENTAL DATA
DATE) -------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
TO AVERAGE AVERAGE
PENNSYLVANIA ++ NET ASSETS NET ASSETS
NET ASSETS AFTER AFTER PORTFOLIO
YEAR ENDING END OF PERIOD REIMBURSE- REIMBURSE- TURNOVER
MAY 31, (IN THOUSANDS) MENT(b) MENT(b) RATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (10/86)
1997 $55,667 .70% 5.61% 46%
1996 44,392 .79 5.76 65
1995 42,600 .89 6.08 50
1994 42,226 .91 5.80 21
1993 40,705 .92 6.07 23
1992 36,917 .83 6.47 41
1991 35,408 .91 6.63 23
1990 35,632 .92 6.65 30
1989 33,476 .98 6.84 23
1988 33,838 .72 7.28 52
CLASS B (2/97)
1997(C) 229 1.35+ 4.84+ 46
CLASS C (2/94)
1997 6,320 1.25 5.06 46
1996 4,442 1.68 4.85 65
1995 3,118 1.84 5.05 50
1994(c) 1,697 1.68+ 4.64+ 21
CLASS R (2/97)
1997(C) 57,383 .39+ 5.83+ 46
- ---------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Pennsylvania.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After the waiver of certain management fees or reimbursement of expenses,
if applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
NOTES:
(1) The Class A 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. See "How to Select a Purchase Option."
(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%. Long-term holders of Class B and C shares may pay more in
distribution fees and CDSCs than the maximum initial sales charge permit-
ted 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 general dividend-setting practices.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. Class B shares convert to Class A shares after eight
years. If instead you redeemed your shares immediately prior to the end of
each holding period, your expenses would be higher. If you did not redeem
Class B shares at the end of each holding period, your expenses would have
been $14 for the one year period, $43 for the three year period, $75 for
the five year period, and $144 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
5
<PAGE>
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION:
March 27, 1986
NET ASSETS:
$191.3 million
TOTAL RETURN (ANNUALIZED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS A
(OFFER PRICE) (NAV) CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 3.66% 8.20% 7.54% 7.61% 8.28%
5 Years 6.08% 6.99% 6.39% 6.38% 7.01%
10 Years 7.72% 8.19% 7.71% 7.59% 8.19%
Inception 7.11% 7.52% 7.10% 6.92% 7.53%
</TABLE>
Class A total returns reflect actual performance for all periods; Classes B, C
and R total returns reflect actual performance for periods since class incep-
tion (see "Financial Highlights" for dates), and Class A performance for peri-
ods prior to class inception, adjusted for the differences in sales charges
and (in the case of Classes B and C) fees between the classes. Class B total
returns assume an ongoing investment and do not reflect the imposition of the
CDSC; your returns for the 1 year and 5 year periods would be lower if you re-
deemed at the end of those periods. 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 for further information.
MATURITY (YEARS)
[BAR GRAPH APPEARS HERE]
Average Maturity 21.2
Average Modified Duration 7.5
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR (15%)
A (29%)
AA (31%)
AAA/Pre-refunded (25%)
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Housing Facilities (12%)
Education (12%)
Pollution Control (12%)
Municipal Appropriations (12%)
Other (32%)
Hospitals (20%)
EXPENSE INFORMATION AS OF 5/31/97
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 0.15% 0.15% 0.15% 0.15%
- ---------------------------------------------------------------------------------------------
Total (Gross) 0.90% 1.65% 1.45% 0.70%
Waivers/
Reimbursements (0.21%) (0.21%) (0.21%) (0.21%)
- ---------------------------------------------------------------------------------------------
Total (Net) 0.69% 1.44% 1.24% 0.49%
</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 $49 $54 $13 $5
3 Years $63 $78 $39 $16
5 Years $79 $90 $68 $27
10 Years $124 $152 $150 $62
</TABLE>
---
6
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual re-
port which has been audited by Deloitte & Touche LLP, the fund's independent
auditors. You may find more information about the Fund's performance in its
annual report. For a free copy of the fund's latest annual and/or semi-annual
reports, write to Nuveen or call (800) 621-7227. Information for the years be-
ginning prior to February 1, 1997 reflects the financial highlights of the
Flagship Virginia Double Tax Exempt Fund.
<TABLE>
<CAPTION>
CLASS OPERATING PERFORMANCE LESS DISTRIBUTIONS
(INCEPTION DATE) ---------------------- -------------------------
NET
REALIZED
NET AND DIVIDENDS NET TOTAL
VIRGINIA++ ASSET UNREALIZED FROM TAX ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME(b) INVESTMENTS INCOME GAINS PERIOD VALUE(a)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (3/86)
1997 $10.40 $.58 $ .25 $(.57) $ - $10.66 8.20%
1996 10.56 .57 (.15) (.58) - 10.40 4.03
1995 10.36 .59 .20 (.59) - 10.56 7.99
1994 10.82 .60 (.31) (.60) (.15) 10.36 2.62
1993 10.24 .62 .62 (.62) (.04) 10.82 12.41
1992 9.97 .63 .27 (.63) - 10.24 9.37
1991 9.70 .63 .28 (.64) - 9.97 9.72
1990 9.76 .64 (.06) (.64) - 9.70 6.14
1989 9.29 .64 .46 (.63) - 9.76 12.25
1988 9.09 .64 .19 (.63) - 9.29 9.73
CLASS B (2/97)
1997(c) 10.62 .16 .04 (.16) - 10.66 1.94
CLASS C (10/93)
1997 10.39 .52 .26 (.52) - 10.65 7.61
1996 10.56 .51 (.16) (.52) - 10.39 3.37
1995 10.36 .53 .20 (.53) - 10.56 7.40
1994(c) 11.24 .34 (.78) (.34) (.10) 10.36 (7.13)+
CLASS R (2/97)
1997(c) 10.62 .20 .04 (.20) - 10.66 2.26
- -----------------------------------------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA
(INCEPTION DATE) -------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
TO AVERAGE AVERAGE
VIRGINIA++ NET ASSETS NET ASSETS
NET ASSETS END AFTER AFTER PORTFOLIO
YEAR ENDING OF PERIOD REIMBURSE- REIMBURSE- TURNOVER
MAY 31, (IN THOUSANDS) MENT(b) MENT(b) RATE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (3/86)
1997 $122,252 .74% 5.45% 23%
1996 117,677 .83 5.41 17
1995 112,643 .79 5.81 50
1994 107,502 .64 5.53 17
1993 96,105 .68 5.82 30
1992 64,628 .75 6.28 27
1991 48,062 .91 6.48 22
1990 41,596 .91 6.54 35
1989 37,151 .97 6.69 18
1988 31,748 .88 6.95 75
CLASS B (2/97)
1997(c) 381 1.47+ 4.68+ 23
CLASS C (10/93)
1997 11,700 1.29 4.89 23
1996 10,978 1.38 4.84 17
1995 6,537 1.34 5.24 50
1994(c) 4,759 1.14+ 4.85+ 17
CLASS R (2/97)
1997(c) 57,002 .52+ 5.69+ 23
- -----------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Virginia.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees a reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
NOTES:
(1) The Class A 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. See "How to Select a Purchase Option."
(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%. Long-term holders of Class C shares may pay more in dis-
tribution 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 general dividend-setting practices.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. Class B shares convert to Class A shares after eight
years. If instead you redeemed your shares immediately prior to the end of
each holding period, your expenses would be higher. If you did not redeem
Class B shares at the end of each holding period, your expenses would have
been $15 for the one year period, $46 for the three year period, $79 for
the five year period, and $152 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
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 substantially all of their assets (at least 80%) in municipal
bonds from a specific state that pay interest that is exempt from regular fed-
eral, 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 re-
paid from any revenue source; revenue bonds may be repaid only from the reve-
nues of a specific facility or source.
FOCUS ON QUALITY MUNICIPAL BONDS
The funds purchase only quality municipal bonds that are either rated invest-
ment 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' in-
vestment 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 re-
duce 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 rat-
ings 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 mu-
nicipal 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 ad-
viser then monitors each fund's portfolio to assure that municipal bonds pur-
chased continue to represent over time, in its opinion, the best values avail-
able.
PORTFOLIO MATURITY
Each fund purchases municipal bonds with different maturities in pursuit of
its investment objective, but maintains under normal market conditions an in-
vestment 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.
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 rela-
tively 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 or 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
---
8
<PAGE>
and, since securities 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 obliga-
tion to make interest and principal payments. In general, lower rated munici-
pal 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 (durations) or lower ratings generally provide higher current in-
come, 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 the economic, political or regula-
tory changes that could adversely affect municipal bond issuers in that state
and therefore the value of the fund's investment portfolio. These risks may be
greater for the funds because they are "non-diversified" funds which autho-
rizes them to concentrate their investments in municipal bonds of certain is-
suers to a greater extent 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 as-
sets) designed to limit your investment risk and maintain portfolio diversifi-
cation. 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 con-
ditions. 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 strate-
gies 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.
INVESTING IN THE FUNDS
HOW TO BUY FUND SHARES
You may open an account with $3,000 per fund share class and make additional
investments at any time with as little as $50. Reinvestment of Nuveen unit
trust distributions have no purchase minimums. Purchases through sponsors of
fee-based programs meeting certain criteria, as described in the statement of
additional information, may be eligible for lower 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 re-
ceive 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 ad-
visers 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 con-
tinue 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 re-
fer you to one in your area.
---
9
<PAGE>
BUYING SHARES BY MAIL
You may also open an account and purchase shares by mail by completing the en-
closed 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 in-
crease 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 in-
vestment 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 pur-
chase. 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 pro-
viding you with ongoing service.
The following Class A sales charges and commissions apply to all funds de-
scribed 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.
Nuveen periodically undertakes sales promotion programs with authorized deal-
ers and may pay them the full applicable sales charge as a commission. In ad-
dition, 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 cir-
cumstances, Nuveen may also make ongoing payments to authorized dealers to fa-
cilitate the marketing and administration of new and existing shareholder ac-
counts, including payments for advertising. The statement of additional infor-
mation 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
. Group Purchase
Sales Charge Waivers
. Nuveen 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
---
10
<PAGE>
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 pur-
chase. 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 compensates
your financial adviser for providing you with ongoing service, and a 0.75% an-
nual distribution fee which compensates Nuveen for paying your financial ad-
viser a 4% commission at the time of purchase.
Class B shares convert automatically to Class A shares eight years after pur-
chase. Class B shares will convert only if the fund is assured that the con-
version does not generate tax consequences for investors, based upon the opin-
ion 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 as-
sessed 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 pro-
ceeds.
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of pur-
chase. The price you pay will equal the Class C NAV. There is no initial sales
charge but 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% an-
nual distribution fee which compensates Nuveen for paying your financial ad-
viser 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 as-
sessed 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, under certain of
the programs described under "Other Sales Charge Discounts" above. See the
statement of additional information for more details. 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 rec-
ord. If you have established electronic funds transfer privileges on your ac-
count, you may have redemption proceeds transferred electronically to your
bank account; if you are redeeming $1,000 or more, you may expedite your re-
quest by having your redemption proceeds wired directly into your bank ac-
count. See "Fund Direct--Electronic Funds Transfer" below.
Nuveen, the transfer agent or the fund 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 immedi-
ately 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
---
11
<PAGE>
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 in-
termediary 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 rep-
resent an increase in the value of your fund account due to capital apprecia-
tion, 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 de-
scribed 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 no-
tice 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 an-
other 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 ex-
changing. 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 determin-
ing 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 ex-
tent 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 sec-
tion of the account application. To invest regularly from your paycheck, call
Nuveen for a Payroll Direct Deposit Enrollment form. If you need additional
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." Be-
cause 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 averaging does not assure profits or protect against losses in a
steadily declining market. Since dollar cost averaging involves continuous in-
vestment regardless of fluctuating price levels, you should consider your fi-
nancial 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
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12
<PAGE>
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
THE POWER OF SYSTEMATIC INVESTING
[LINE GRAPH APPEARS HERE]
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 re-
ceive payments monthly, quarterly, semi-annually or annually and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Fund Direct--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 or Account Update
Form 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, you may reinvest all or part of your redemption
proceeds in shares of the same class up to one year later without incurring
any applicable sales charges, and your prior holding period will be reinstat-
ed. 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 ex-
ercising 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 or the Account Update Form. If you need additional copies of these
forms, or would like assistance completing them, contact your financial ad-
viser 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.
In addition, if you have established electronic funds transfer privileges on
your account, you may request that redemption proceeds of $1,000 or more be
sent by Federal Reserve wire directly into your bank account. While you will
generally receive your redemption proceeds more quickly than a regular tele-
phone redemption via Fund Direct, the fund may charge you a fee for this expe-
dited 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 of the same share class 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 the same share class of another Nuveen mu-
tual fund. If you wish to do so, complete the appropriate section of the ac-
count 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 gen-
eral tax information related to an investment in fund shares. Because tax laws
are complex and often
---
13
<PAGE>
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 mu-
nicipal 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 por-
tion of the dividend effectively represents a return of your purchase price.
This is commonly known as "buying a dividend." Similarly, if you sell or ex-
change 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.
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 tax-
able 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 in-
come 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.
If you are subject to the alternative minimum tax, a portion of your regular
monthly dividends may be taxable.
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
Tax-Free Yield
<TABLE>
<CAPTION>
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.
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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 con-
duct 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
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 open-
ing a new account; if you are adding to an existing account, Nuveen will as-
sume 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 funds' Board of Trustees
oversees the activities of Nuveen Advisory, which also include managing the
funds' business affairs and providing certain clerical, bookkeeping and other
administrative services. Established in 1976, Nuveen Advisory is a wholly-
owned subsidiary of John Nuveen & Co. Incorporated, which itself is approxi-
mately 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>
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 portfo-
lio managers of Nuveen Advisory and meets regularly to review economic condi-
tions, 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 ex-
ecution of its specific investment strategies is the responsibility of the
designated portfolio manager described below.
John W. Gambla is an Assistant Portfolio Manager of Nuveen Advisory and the
portfolio manager of the Maryland Fund. Mr. Gambla has managed the fund since
April 1997 and joined Nuveen Advisory in July 1992. Richard Huber is the port-
folio 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 invest-
ment adviser, until becoming a Vice President of Nuveen Advisory upon the ac-
quisition 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
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15
<PAGE>
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 ac-
counts. Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330, cur-
rently 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.
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 in-
vestment objectives. Comparative performance information may include data from
Lipper Analytical Services, Inc., Morningstar, Inc. and other industry publi-
cations. See the statement of additional information for a more detailed dis-
cussion. You may find more information about each fund's performance in its
annual report. Call Nuveen at (800) 621-7227 for a free copy.
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, sub-
tracting 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 mu-
nicipal 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 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 portfo-
lio of investments and the shares of each class have equal rights as to vot-
ing, redemption, dividends and liquidation. However, each class bears differ-
ent sales charges and service fees.
Class C shares of the Maryland Fund, the former Nuveen Pennsylvania Fund, and
the former Nuveen Virginia Fund purchased before February 1, 1997 convert to
Class 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 in-
vestment 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 in-
formation.
MARYLAND
Maryland's recovery from the recession of the early 1990's has been slow be-
cause of reductions in defense industry and federal government employment.
Services, wholesale and retail trade, and government account for most of the
State's employment. Unlike in most states, government employment surpasses
manufacturing employment in Maryland.
The State's unemployment rate, which fell to 4.7% in June 1997 from 4.9% in
1996, remains below the national average. Per capita income, which was $27,221
in 1996, ranks sixth in the nation.
The State ended fiscal 1996 with a $760.4 million total fund balance, or 7.4%
of operating expenditures. During its 1997 term, the Maryland legislature
passed a 10% reduction to the State's income tax, which will be phased in from
1998 through 2002. Maryland's general obligation debt, which is constitution-
ally limited to a maximum term of 15 years, remains moderate. Moody's, Stan-
dard & Poor's, and Fitch confirmed their respective triple-A ratings for the
State in July and August, 1997.
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16
<PAGE>
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 income taxes, however, to the extent the Maryland Fund dis-
tributes 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
Pennsylvania's economy, which is one of the weaker economies in the Northeast,
is expected to continue to lag national economic trends in the near future.
The sluggish economy is due in part to continued mergers and acquisitions, ex-
penditure reductions, and layoffs in the healthcare, defense, and telecommuni-
cations industries, which are the most important to the Commonwealth's econo-
my.
Pennsylvania's unemployment rate exceeded national levels, rising from 4.9% at
the end of 1996 to 5.4% in June, 1997. Pennsylvania ranks 19th among the
states in per capita income, which was $23,558 in 1996. Personal income growth
has lagged national levels.
For the fiscal year 1996, the general fund balance was drawn down $53.1 mil-
lion to $635 million (or 2.5% of general fund revenues) to fund business tax
cuts. Total revenues and other sources in fiscal year 1996 increased 8.7%. As
of July 31, 1997, Pennsylvania's general obligation debt carries ratings of
AA- by Standard & Poor's, Al by Moody's, and AA- by Fitch.
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
Like the U.S. economy, the Virginia economy is broad-based and composed of
several distinct regions. In terms of employment composition, the Common-
wealth's economy nearly mirrors the U.S. economy with the services, trade,
government, and manufacturing sectors supplying a significant portion of em-
ployment. Recent employment losses in the federal government, manufacturing,
and mining sectors have been offset by employment growth in other sectors, in-
cluding high-technology. The federal government remains an important employer
and has a greater impact on the Commonwealth than it has on most other states.
Virginia's unemployment rate was a low 4.3% in June 1997, down slightly from
the 1996 rate of 4.4% and below the national average. At $24,925 in 1996, per
capita income remains above the U.S. average, although growth in per capita
income has lagged the national rate.
The Commonwealth has historically operated on a fiscally conservative basis
but had a deficit in fiscal year 1995, largely because of a court decision
that required the Commonwealth to refund certain taxes. A large operating sur-
plus in fiscal year 1996 allowed the Commonwealth to reduce this deficit sig-
nificantly. In May 1997, Moody's, S&P, and Fitch confirmed their respective
triple-A ratings for the Commonwealth.
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 Vir-
ginia municipal bonds or U.S. government securities. You will be subject to
Virginia personal income taxes, however, to the extent the Virginia Fund dis-
tributes 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.
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17
<PAGE>
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your
financial 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
MUNICIPAL BOND FUNDS
National Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
Nuveen Family of Municipal Bond Funds
[Map Appears Here]
State Funds
Alabama Kentucky/3/ New York/1/
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan South Carolina
Florida/2/ Missouri Tennessee
Georgia New Jersey/2/ Virginia
Kansas New Mexico Wisconsin
1. Long-term and insured long-term
portfolios.
2. Long-term and intermediate-term portfolios.
3. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
<PAGE>
SEPTEMBER 12, 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 September 12, 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) 621-7227.
TABLE OF CONTENTS
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PAGE
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Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-13
Investment Adviser and Investment Management Agreement..................... S-27
Portfolio Transactions..................................................... S-28
Net Asset Value............................................................ S-29
Tax Matters................................................................ S-30
Performance Information.................................................... S-39
Additional Information on the Purchase and Redemption of Fund Shares....... S-49
Distribution and Service Plan.............................................. S-55
Independent Public Accountants and Custodian............................... S-57
Financial Statements....................................................... S-57
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Description of Hedging Techniques.............................. B-1
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The audited financial statements for each Fund's most recent fiscal year
appear in the Funds' Annual Reports; each is included herein by reference. The
Annual Reports accompany this Statement of Additional Information.
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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 short-term
securities, as described in the Prospectus. Municipal Obligations are
municipal bonds that pay interest that is exempt from regular federal,
state and, in some cases, local income taxes.
(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.
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(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 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
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
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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 New 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; 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 also been organized as a series of the Trust,
but 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 Fund affected by such matter.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of a trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Trust and requires that
notice of this disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Declaration of Trust
further provides for indemnification out of the assets and property of the
Trust for all loss and expense of any shareholder personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself were unable to meet its
obligations. The Trust believes the likelihood of these circumstances is
remote.
PORTFOLIO SECURITIES
As described in the Prospectus, each of the Funds invests substantially all
of its assets (at least 80%) in a portfolio of Municipal Obligations free from
regular federal, state and, in some cases, local 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
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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-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.
PORTFOLIO 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 their 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.
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The portfolio turnover rates for the Funds, for the 1996 fiscal year-end of the
Fund as a series of its predecessor entity (described above), and for the 1997
fiscal year-end, as indicated, were:
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FISCAL
YEAR
1996 1997
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Arizona Municipal Bond Fund ................................... 38% 25%
Colorado Municipal Bond Fund .................................. 70% 27%
Florida Municipal Bond Fund ................................... 94% 54%
Florida Intermediate Municipal Bond Fund ...................... 66% 35%
Maryland Municipal Bond Fund .................................. 17% 4%*
New Mexico Municipal Bond Fund ................................ 57% 43%
Pennsylvania Municipal Bond Fund .............................. 65% 46%
Virginia Municipal Bond Fund .................................. 17% 23%
</TABLE>
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*For the year ending January 31. For the four months ending May 31, 1997,
the portfolio turnover rate was 3%.
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 Funds reserve 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.
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 substantially all of its assets (at
least 80%) 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.
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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. However, the military, agriculture, and mining of primary metals
still play a role. The State has experienced phenomenal economic and population
growth in the recent past due to an influx of businesses attracted by the
State's high quality of life, educated workforce, and friendly business
environment. Major employers include Intel Corp., Microchip Technology and
Charles Schwab. Over the last five years, the State has ranked second in the
nation in job growth with more than a 30 percent increase and some 380,000 jobs
created. The State's leading economic indicators hit an all-time high in April,
suggesting that the State's economic growth may continue in the near term.
However, signs of slowing job growth have surfaced.
The statewide unemployment rate was 4.7 percent, slightly below the U.S. rate
of 4.8 percent, at the end of May 1997. Additionally, unemployment rates in the
State's two largest metropolitan areas, Phoenix-Mesa and Tucson, were a very
low 3.2 percent and 3.3 percent, respectively. Statewide personal income grew
at a rate of 7.5 percent in 1996 to approximately $21,953. Retail sales in
Arizona during May 1997 were up 5.6 percent from May 1996, and for the calendar
year 1996, retail sales grew by 5.5 percent.
The Arizona Constitution restricts the legislature's power to raise revenues
by increasing property taxes. The State has also enacted limits on annual
spending. The legislature recently approved a record high $5.2 billion budget
for the fiscal year 1998. The budget calls for a total of $316 million in
additional spending over fiscal 1997, a 6.4 percent increase. The two largest
budget items are an additional $236 million in education spending and $110
million in income tax cuts. This year's tax cuts are not dramatic but represent
a continuing downward trend in State income tax rates that began in 1993.
Arizona maintained a healthy general fund balance for fiscal 1996 of 11.2
percent of general fund revenues despite the previous income tax cuts. In fact,
in 1996 income tax revenues rose 1.5 percent from fiscal 1995. The State 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 contraction 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 June 1997, below the
national average of 5.0%. Monthly job growth averaged 2.67% from January to
June of 1997. Meanwhile, per capita income grew 4.7% to $25,084 in 1996. 1996
general fund revenues were $4.3 billion against expenditures of $4.4 billion.
1997 projected revenues are $4.6 billion. There is no outstanding general
obligation debt, but outstanding lease obligations are rated A1 by Moody's and
A+ by Standard & Poor's.
FACTORS PERTAINING TO FLORIDA
Florida has a diverse economy with substantial insurance, banking,
healthcare, construction and trade sectors, yet it remains heavily dependent on
the agriculture and tourism industries. Employment and personal
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income growth have outpaced the nation since 1991 and recent economic reports
indicate that the State continues to experience job growth, albeit at a more
moderate pace. Economists are also predicting another record tourism year for
the State. This economic growth as well as the State's healthy financial
position were recognized in the State's recent rating upgrade from AA to AA+ by
S&P.
Florida's unemployment rate of 4.9% in June, 1997, is slightly better than
the comparable national average of 5.0%. Florida's 1996 per capita income of
$24,104 is on par with national averages and slightly above regional levels.
The State's population growth continues to exceed growth in the national
population.
Florida voters approved a Constitutional amendment in 1995 which limits the
rate of growth of state revenues to the growth rate of personal income. The
State's fiscal 1996 results were better than expected due to sales tax revenue
growth of 7.4% versus a 4% budgeted growth rate. Fiscal 1996 unencumbered
reserves of $697.8 million in the General, Working Capital and Budget
Stabilization Funds totaled 4.7% of expenditures. For fiscal 1997, the Budget
Stabilization Fund and the Working Capital Fund are expected to reach $409
million and $219.4 million, respectively, which when combined would total the
highest reserve level the State has recorded in over 10 years. The State's goal
is to reach a 5% Budget Stabilization Fund by fiscal 1999. As of July 31, 1997,
Florida's general obligation debt carries ratings of AA+ by S&P, Aa2 by
Moody's, and AA by Fitch.
FACTORS PERTAINING TO MARYLAND
Maryland's recovery from the recession of the early 1990's has been slow as
the State has weathered reductions in defense industry and federal government
employment. Services, wholesale and retail trade, and government account for
most of the State's employment. Unlike in most states, government employment
surpasses manufacturing employment in Maryland.
The State's unemployment rate, which fell to 4.7% in June 1997 from 4.9% the
prior year, remains below the national average. Maryland residents' per capita
income, which was $27,221 in 1996, ranks sixth in the nation.
The State Constitution mandates a balanced budget. In fiscal 1996, state
expenditures totaled $12.4 billion while revenues reached $12.7 billion. The
State ended fiscal 1996 with a $760.4 million total fund balance, or 7.4% of
operating expenditures. During its 1997 term, the Maryland legislature passed a
10% reduction to the state's income tax, which will be phased in from 1998
through 2002. The legislature is now considering reforms to its pension system.
Maryland's general obligation debt, which is constitutionally limited to a
maximum term of 15 years, remains moderate. Moody's, S&P, and Fitch confirmed
their respective triple-A ratings for the State in July and August, 1997.
FACTORS PERTAINING TO NEW MEXICO
New Mexico's major industries include energy resources, tourism, services,
crafts, agribusiness, manufacturing and mining. Energy resource production,
including gas and oil sales, was approximately $5.2 billion in 1997. 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 climatic conditions and
will also remain a major part of the economy.
New Mexico's unemployment rate fell from 7.2% in August of 1996 to 6.5% in
June of 1997, surpassing the national averages of 5.1% and 5.0%. At the same
time, per capita income rose 3.4% in 1996 to reach $18,770.
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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. 1996 audited general fund revenues
were $4.3 billion against expenditures of $4.2 billion. As of February 3, 1997,
Moody's gives the State's general obligation debt an Aa1 rating while Standard
& Poor's gives it an AA+.
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
Pennsylvania's economy, which is one of the weaker economies in the
Northeast, is expected to continue to lag national economic trends in the near
future. The sluggish economy is in part the result of continued mergers and
acquisitions, expenditure reductions, and layoffs in the industries most
important to the Commonwealth's economy--healthcare, defense, and
telecommunications. The State's healthcare environment continues to be
difficult, particularly in the Philadelphia and Pittsburgh metro areas.
Pennsylvania's unemployment rate outpaced national levels, rising from 4.9%
at the end of 1996 to 5.4% in June, 1997. Personal income growth has lagged
national levels, growing 5.5% in 1995, or 89% of the national gain.
Pennsylvania ranks 19th among the states in 1996 per capita income ($23,558).
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. For fiscal 1996, the
general fund balance was drawn down $53.1 million to $635 million (or 2.5% of
general fund revenues) to fund business tax cuts. Total revenues and other
sources in fiscal 1996 increased 8.7%. As of July 31, 1997, Pennsylvania's
general obligation debt carries ratings of AA- by S&P, A1 by Moody's, and AA-
by Fitch.
FACTORS PERTAINING TO VIRGINIA
Like the U.S. economy, the Virginia economy is broad-based and composed of
several distinct regions. In terms of employment composition, the
Commonwealth's economy nearly mirrors the U.S. economy with the services,
trade, government, and manufacturing sectors supplying a significant portion of
employment. Recent employment losses in the federal government, manufacturing,
and mining sectors has been offset by employment growth in other sectors,
including high-technology. The federal government, however, remains an
important employer and has a greater impact on the Commonwealth than it has on
most other states.
Virginia's unemployment rate was a low 4.3% in June 1997, having declined
slightly from the previous year's rate of 4.4%. The Commonwealth's unemployment
rate remains below the U.S. average. At $24,925 in 1996, per capita income
remains above the U.S. average, although growth in per capita income has lagged
the national rate.
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Virginia's Constitution requires a balanced biennial budget. The Commonwealth
has historically operated on a fiscally conservative basis but did realize a
fund balance deficit in fiscal year 1995, largely as the result of a court
decision that required the Commonwealth to refund certain taxes. A large
operating surplus in fiscal year 1996 allowed the Commonwealth to reduce the
fund balance deficit significantly. In May 1997, Moody's, S&P, and Fitch
confirmed their respective triple-A ratings for the Commonwealth.
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.
SHORT-TERM SECURITIES
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable short-term securities
("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.
S-10
<PAGE>
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 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.
S-11
<PAGE>
--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 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-12
<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. 48 Chairman and Chairman since July 1, 1996 of The John
Schwertfeger* Trustee Nuveen Company, John Nuveen & Co.
333 West Wacker Drive Incorporated, Nuveen Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional Advisory Corp.; prior
thereto Executive Vice President and
Director of The John Nuveen Company, John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. (since October 1992) and Nuveen
Institutional Advisory Corp. (since October
1992).
Anthony T. Dean* 52 President and President since July 1, 1996 of The John
333 West Wacker Drive Trustee Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.; prior
thereto, Executive Vice President and
Director of The John Nuveen Company, John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. (since October 1992) and Nuveen
Institutional Advisory Corp. (since October
1992).
Robert P. Bremner 57 Trustee Private Investor and Management Consultant.
3725 Huntington
Street, N.W.
Washington, D.C. 20015
Lawrence H. Brown 63 Trustee Retired (August 1989) as Senior Vice
201 Michigan Avenue President of The Northern Trust Company.
Highwood, IL 60040
Anne E. Impellizzeri 64 Trustee President and Chief Executive Officer of
3 West 29th Street Blanton-Peale Institute of Religion and
New York, NY 10001 Health.
Peter R. Sawers 64 Trustee Adjunct Professor of Business and Economics,
22 The Landmark University of Dubuque, Iowa; Adjunct
Northfield, IL 60093 Professor, Lake Forest Graduate School of
Management, Lake Forest, Illinois;
Chartered Financial Analyst; Certified
Management Consultant.
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
William J. 52 Trustee Senior Partner, Miller-Valentine Partners,
Schneider Vice president, Miller-Valentine Group.
4000
Miller-
Valentine
Ct.
P.O. Box
744
Dayton, OH
45401
Judith M. 49 Trustee Executive Director, Gaylord and Dorothy
Stockdale Donnelley Foundation (since 1994); prior
1913 North thereto, Executive Director, Great Lakes
Mohawk St. Protection Fund (from 1990 to 1994).
Chicago, IL
60614
Bruce P. 57 Executive Executive Vice President of John Nuveen &
Bedford Vice President Co. Incorporated, Nuveen Advisory Corp. and
333 West Nuveen Institutional Advisory Corp. (since
Wacker January 1997); prior thereto, Chairman and
Drive CEO of Flagship Resources Inc. and Flagship
Chicago, IL Financial Inc. and the Flagship funds
60606 (since January 1986).
Michael S. 40 Vice President Vice President of Nuveen Advisory Corp.
Davern (since January 1997); prior thereto, Vice
One South President and Portfolio Manager of Flagship
Main Street Financial.
Dayton, OH
45402
William M. 33 Vice President Vice President of Nuveen Advisory Corp.
Fitzgerald (since December 1995); Assistant Vice
333 West President of Nuveen Advisory Corp. (from
Wacker September 1992 to December 1995), prior
Drive thereto Assistant Portfolio Manager of
Chicago, IL Nuveen Advisory Corp. (from June 1988 to
60606 September 1992).
Kathleen M. 50 Vice President Vice President of John Nuveen & Co.
Flanagan Incorporated, Vice President of Nuveen
333 West Advisory Corp. and Nuveen Institutional
Wacker Advisory Corp. (since June 1996).
Drive
Chicago, IL
60606
J. Thomas 42 Vice President Vice President of Nuveen Advisory Corp.
Futrell
333 West
Wacker
Drive
Chicago, IL
60606
Richard A. 34 Vice President Vice President of Nuveen Advisory Corp.
Huber (since January 1997); prior thereto, Vice
One South President and Portfolio Manager of Flagship
Main Street Financial.
Dayton, OH
45402
Steven J. 40 Vice President Vice President of Nuveen Advisory Corp.
Krupa
333 West
Wacker
Drive
Chicago, IL
60606
Anna R. 51 Vice President Vice President of John Nuveen & Co.
Kucinskis Incorporated.
333 West
Wacker
Drive
Chicago, IL
60606
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Larry W. 46 Vice President Vice President (since September 1992), and
Martin and Assistant Assistant Secretary and Assistant General
333 West Secretary Counsel of John Nuveen & Co. Incorporated;
Wacker Drive Vice President (since May 1993) and
Chicago, IL Assistant Secretary of Nuveen Advisory
60606 Corp.; Vice President (since May 1993) and
Assistant Secretary of Nuveen Institutional
Advisory Corp.; Assistant Secretary of The
John Nuveen Company (since February 1993).
Edward F. 32 Vice President Vice President (since September 1996),
Neild, IV previously Assistant Vice President (since
One South December 1993) of Nuveen Advisory Corp.,
Main Street portfolio manager prior thereto; Vice
Dayton, OH President (since September 1996),
45402 previously Assistant Vice President (since
May 1995) of Nuveen Institutional Advisory
Corp., portfolio manager prior thereto.
Walter K. 48 Vice President Vice President of Nuveen Advisory Corp.
Parker (since January 1997); prior thereto, Vice
One South President and Portfolio Manager (since July
Main Street 1994) of Flagship Financial; Portfolio
Dayton, OH Manager and CIO Trust Investor (between
45402 1983 and June 1994) for PNC Bank.
O. Walter 58 Vice President Vice President and Controller of The John
Renfftlen and Controller Nuveen Company, John Nuveen & Co.
333 West Incorporated, Nuveen Advisory Corp. and
Wacker Drive Nuveen Institutional Advisory Corp.
Chicago, IL
60606
Thomas C. 45 Vice President Vice President of Nuveen Advisory Corp. and
Spalding, Jr. Nuveen Institutional Advisory Corp.;
333 West Chartered Financial Analyst.
Wacker Drive
Chicago, IL
60606
H. William 63 Vice President Vice President and Treasurer of The John
Stabenow and Treasurer Nuveen Company, John Nuveen & Co.
333 West Incorporated, Nuveen Advisory Corp. and
Wacker Drive Nuveen Institutional Advisory Corp.
Chicago, IL
60606
Jan E. 41 Vice President Vice President of Nuveen Advisory Corp.
Terbrueggen (since January 1997); prior thereto, Vice
One South President and Portfolio Manager of Flagship
Main Street Financial.
Dayton, OH
45402
Gifford R. 41 Vice President Vice President (since September 1992),
Zimmerman and Assistant Assistant Secretary and Assistant General
333 West Secretary Counsel of John Nuveen & Co. Incorporated;
Wacker Drive Vice President (since May 1993) and
Chicago, IL Assistant Secretary of Nuveen Advisory
60606 Corp.; Vice President (since May 1993) and
Assistant Secretary of Nuveen Institutional
Advisory Corp.
</TABLE>
S-15
<PAGE>
Anthony Dean, Peter Sawers 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 42 Nuveen open-end funds and 52 Nuveen closed-end funds advised by Nuveen
Advisory Corp.
The following table sets forth compensation paid by the Trust to each of the
trustees of the Trust and the total compensation paid to each trustee during
the fiscal year ended May 31, 1997. 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........................ $2,859(1) $25,333(1)
Lawrence H. Brown........................ $2,054 $74,750
Anne E. Impellizzeri..................... $2,054 $74,750
Margaret K. Rosenheim*................... $2,246 $82,750(2)
Peter R. Sawers.......................... $2,054 $74,750
William J. Schneider..................... $3,023(1) $26,333(1)
Judith M. Stockdale...................... $ 0(3) $ 0(3)
</TABLE>
- --------
*Former trustee; retired July 1997.
(1) Includes compensation received as a trustee of the Flagship Funds, for the
period June 1, 1996 to January 1, 1997.
(2) Includes $1,964 in interest accrued on deferred compensation from prior
years.
(3) Elected to the Board in July 1997.
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 August 21, 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 Merrill Lynch, Pierce, Fenner & Smith 23.12%
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 Arizona
Municipal Bond Fund NFSC FEBO OXS-294926 45.92
Class B Shares............ James L. Emmons
Esther Robinson
145 W. Glendale
Phoenix, AZ 85021-8722
</TABLE>
S-16
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Arizona Southwest Securities Inc FBO 27.31
Municipal Bond Fund Henry W. Drexel &
Class B Shares............ Marjory M. Drexel
Acct 25416875
PO Box 509002
Dallas, TX 75250-9002
Donaldson Lufkin Jenrette 17.28
Securities Corporation Inc
PO Box 2052
Jersey City, NJ 07303-2052
Prudential Securities Inc FBO 5.18
Francis L. Veith
805 S. Revolta Cir
Mesa, AZ 85208-2629
Nuveen Flagship Arizona
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 38.98
Class C Shares............ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Colorado
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 24.44
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 Colorado
Municipal Bond Fund Marcella C. Kruse 23.60
Class B Shares............ 1275 S. Birch St. Apt 509
Denver, CO 80246-7834
Helen May Ferrell 21.80
230 S. Monaco Pkwy #10
Denver, CO 80224-1116
Merrill Lynch, Pierce, Fenner & Smith 18.65
for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Olde Discount FBO 02606256 12.72
751 Griswold St.
Detroit, MI 48226-3224
</TABLE>
S-17
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Bertha O. Smith 10.95
Allen J. Ferrell Trs
Bertha O. Smith Trust DTD 10-18-93
111 Emerson St. #322
Denver, CO 80218-3779
Olde Discount FBO 02606320 7.85
751 Griswold St.
Detroit, MI 48226-3224
Nuveen Flagship Colorado
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 48.71
Class C Shares............ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
PaineWebber 41.03
for the benefit of
Michael L. Fordyce and
Theresa A. Fordyce JT/Wros
5700 Southmoor Lane
Englewood, CO 80111-1046
PaineWebber 7.88
for the benefit of
Bret Fulton and
Lisa Rogers JT Wros
507 Front St.
Louisville, CO 80027-2015
Nuveen Flagship Colorado
Municipal Bond Fund Raymond & Lisa Ann Munyon & 43.24
Class R Shares............ Renee L. Miller TRS
UA AUG 28 92
Munyon Family Irrevocable Trust
7650 Kline Dr.
Arvada, CO 80005-3776
Homer U. Van Hooser 25.69
250 Bennington Dr.
Colorado Springs, CO 80906-3355
Joseph N. Emmons 16.31
2428 Virgo Dr.
Colorado Springs, CO 80906-1048
Harold M. Gott 14.75
Darlene A. Gott JT WROS
P.O. Box. 1929
Montrose, CO 81402-1929
</TABLE>
S-18
<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 Merrill Lynch, Pierce, Fenner & Smith 53.50
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 Florida
Municipal Bond Fund Prudential Securities Inc. FBO 22.75
Class B Shares............ Mr. Roy D. Keuling Sr.
Mrs. Peggy B. Keuling Co TTEES
Roy and Peggy Keuling JT LV TR
UA DTD 02/03/97
Kings Park, NY 11754
Prudential Securities Inc. FBO 13.62
Katherine O. Harrington
3101 NE 57th Ct.
Ft. Lauderdale, FL 33308-2815
PaineWebber 7.01
for the benefit of
Ruth S. Coleman TTEE U/A DTD
071291 FBO Ruth S. Coleman
7383 Orangewood Lane
Apt. #402
Boca Raton, FL 33433-7470
NFSC FEBO OCG-078425 6.84
Joan Sievers Clifton TTEE
Joan Sievers Clifton Trust
U/A 6/13/96
632 Iroquois St.
Merritt Island, FL 32952-5213
Merrill Lynch, Pierce, Fenner & Smith 6.28
for the sole benefit of
its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Lewco Securities Corp. 6.26
FBO A/C W63-220628-0-01
34 Exchange Pl 4th Floor
Jersey City, NJ 07302-3901
Smith Barney Inc. 5.48
00138518445
388 Greenwich Street
New York, NY 10013-2375
</TABLE>
S-19
<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 Merrill Lynch, Pierce, Fenner & Smith 72.69
Class C Shares............. for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Rolland Eaton TR 6.95
Rolland Eaton Trust
U/A DTD 04/06/93
15520 Gullane Court SE
Fort Myers, FL 33912-3908
Nuveen Flagship Florida
Intermediate Municipal Bond Merrill Lynch, Pierce, Fenner & Smith 61.99
Fund Class A Shares........ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
NFSC FEBO #OCD-075582 14.94
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 71.19
Fund Class C Shares........ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Florida
Intermediate Municipal Bond Prudential Securities FBO 99.90
Fund Class R Shares........ Christine E. Reilly
6542 Las Flores Dr.
Boca Raton, FL 33433-2365
Nuveen Maryland Municipal
Bond Fund NFSC FEBO # A1F-375349 15.19
Class A Shares............. Imelda J. Hall
4610 Col. Fenwick Place
Upper Marlboro, MD 20772
Merrill Lynch, Pierce, Fenner & Smith 7.36
for the sole benefit of its customers
Attn: Fund Administration #97E83
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-20
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Evelyn A. Thomas TTEE 5.47
UA April 10, 1991
Evelyn A. Thomas Trust
7215 Delfield St.
Chevy Chase, MD 20815-4045
Nuveen Maryland Municipal Bond
Fund Nathan Schofer & Reuben 22.33
Class B Shares................ Ambaruch & Phyllis Silvermann TRS
UA Jun 10 88
Nathan Schofer Revoc Trust
3330 W. Leisure World Blvd. #921
Silver Spring, Md 20906-5654
Dorothy K Lundin & 15.97
Priscilla Lundin
JT Ten WROS Not TC
9707 Old Georgetown Rd. Apt. 2619
Bethesda, MD 20814-1763
NFSC FEBO # APF-326054 14.72
Martha Maria Hohl
11606 Bucknell Dr.
Wheaton, MD 20902
Stephen Carrick & 14.39
Linda Carrick
JT Ten WROS Not TC
112 Governors Way N
Queenstown, MD 21658-1620
Jerrold G. Bress 7.83
116 Southway Dr.
Havre De Grace, MD 21078-1615
Jack P. Webb & 6.42
Dolores J. Webb
JT Ten WROS Not TC
273 Autumn Chase Dr.
Annapolis, MD 21401-7257
Olde Discount FBO 03103004 5.81
751 Griswold Street
Detroit, MI 48226
Marye R. Zomano 5.41
Courtney I. Newhorter
JT Ten WROS Not TC
1026 Potomac Ave.
Hagerstown, MD 21742-3970
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Maryland Municipal
Bond Fund NFSC FEBO # OC8-463639 34.63
Class C Shares............ Arnold P. Litman
15100 Carrolton Rd.
Rockville, MD 20853
Sylvia M. Pechman 5.70
& Ellen M. Pechman TRS
V/A 3/27/97
Sylvia M. Pechman Rev Trust
7112 Wilson Lane
Bethesda, MD 20817-4928
Donaldson, Lufkin & Jenrette 5.70
Securities Corporation, Inc.
PO Box 2052
Jersey City, NJ 07303-9998
Catherine Small & Robert N. Small 5.56
JT Ten WROS Not TC
1039 Bay Front Ave.
North Beach, MD 20714-9751
Jessie L. & John L. Daniels & 5.10
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 6.48
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 36.03
Class A Shares............ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship New Mexico
Municipal Bond Fund Class B Merrill Lynch, Pierce, Fenner & Smith 28.03
Shares..................... for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. 3 FL 3
Jacksonville, FL 32246-6484
Smith Barney Inc. 12.89
00123229912
388 Greenwich Street
New York NY 10013-2375
Jack Grevey Tr. 9.39
The Helen Grevey Trust
U/A DTD 12-29-76
2015 Wyoming Blvd NE STE G
Albuquerque NM 87112-2647
Olde Discount F80 02606011 8.52
751 Griswold St.
Detroit MI 48226-3224
Jack Grevey Tr. 7.51
The Marianne Fischer Trust
U/A DTD 12-29-76
2015 Wyoming Blvd NE STE G
Albuquerque NM 87112-2647
Marion R. Rick TTEE 6.73
UA DTD 11-20-92
Marion Rita Rick Rev. Trust
4926 Quail Ridge Dr. NW
Albuquerque NM 87114-4350
Smith Barney Inc. 6.13
00189011320
386 Greenwich Street
New York NY 10013-2375
Smith Barney Inc. 6.02
00148128710
388 Greenwich Street
New York NY 10013-2375
Nuveen Flagship New Mexico
Municipal Bond Fund Class C Jack Grevey Tr. 40.47
Shares..................... The Helen Grevey Trust
U/A DTD 12-29-76
2015 Wyoming Blvd NE STE G
Albuquerque NM 87112-2647
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Jack Grevey Tr. 32.37
The Marianne Fischer Trust
U/A DTD 12-29-76
2015 Wyoming Blvd NE STE G
Albuquerque NM 87112-2647
Smith Barney Inc. 13.17
00148123273
388 Greenwich Street
New York NY 10013-2375
Smith Barney Inc. 6.58
00148100931
388 Greenwich Street
New York NY 10013-2375
George Sunderland 5.30
Loretta V. Sunderland JT WROS
2431 San Pedro Dr. NE
Albuquerque NM 87110-4101
Nuveen Flagship New
Mexico Municipal Bond Mary Swickard 87.71
Fund Class R Shares... 84 Barcelona Ave.
Los Alamos NM 87544-3428
Herschel W. Rogers & Rosemary E. Rogers Tr. 12.26
UA 12/05/96
H.W. & R.E. Rogers Rev. Trust
4509 Acapulco Dr. NE
Albuquerque NM 87111-2813
Nuveen Flagship
Pennsylvania Municipal Merrill Lynch, Pierce, Fenner & Smith 46.60
Bond Fund Class A for the sole benefit of its customers
Shares................ Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship
Pennsylvania Municipal Merrill Lynch, Pierce, Fenner & Smith for 41.75
Bond Fund Class B the sole benefit of its customers
Shares................ Attn: Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Eugene L. Mariani, Jr. & 8.70
Cynthia Mariani JT-TEN
4 Marian Road
Phoenixville PA 19460-2911
</TABLE>
S-24
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Ray P. Froehling 8.44
Crosslands Apt. #54
Kennett Square, PA 193482006
Janney Montgomery Scott, Inc. 6.63
A/C 5967-2226
Ilean Molish JT-TEN
1801 Market Street
Philadelphia, PA 19103-1628
Martin A. Stough 6.43
Beatrice M. Stough JT WROS
263 Martin Dr.
York New Salem, PA 17371
Smith Barney Inc. 5.34
00170503885
388 Greenwich Street
New York, NY 10013-2375
Nuveen Flagship Pennsylvania
Municipal Bond Fund Class C Merrill Lynch, Pierce, Fenner & Smith 68.78
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 29.87
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 33.54
Class B Shares............. for the sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Dr E. Fl 3
Jacksonville, FL 32246-6484
FUBS & CO. FEBO 20.23
C. Douglas Holloman
Norma R. Phillips
1077 Saw Pen Point Tr.
Virginia Beach, VA 23455
FUBS & CO. FEBO 15.29
John G. Reiners and
Emily A. Reiners
5805 Williamsburg Landing Dr.
Williamsburg, VA 23185-3778
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
PaineWebber FBO 12.26
Kenneth Y. Tomlinson &
Rebecca M. Tomlinson JT Ten
Springbrook Farm
PO Box 1508
Middleburg VA 20118-1508
A Morine Upton TTEE Upton 5.19
Family Management Trust U/A
Dtd Jan. 16, 1992
c/o Jim Upton
4015 Gypsum Hill Rd.
Haymarket VA 20169-2403
Nuveen Flagship Virginia
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 57.25
Class C 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 6.56
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-26
<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 continue Flagship's general dividend-setting
practices. For the Maryland Fund, Nuveen Advisory has voluntarily agreed
through July 31, 1998 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.
For the last three fiscal years, the Maryland Municipal Bond Fund paid net
management fees to Nuveen Advisory as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF
EXPENSE REIMBURSEMENT FEE WAIVERS AND EXPENSE
PAID TO NUVEEN ADVISORY REIMBURSEMENTS
FOR THE YEAR ENDED FOR THE YEAR ENDED
------------------------- ------------------------
1/31/95 1/31/96 5/31/97* 1/31/95 1/31/96 5/31/97*
-------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Maryland Municipal Bond
Fund....................... $189,022 131,476 332,471 65,460 148,537 81,437
</TABLE>
- --------
*For the sixteen month period ended May 31, 1997
S-27
<PAGE>
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
Pennsylvania Municipal Bond Fund, and the Virginia Municipal Bond Fund paid net
management fees to Flagship Financial, predecessor to Nuveen Advisory, and
beginning on 2/1/97, 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
------------------------- -------------------------
5/31/95 5/31/96 5/31/97 5/31/95 5/31/96 5/31/97
------- ------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Arizona Municipal Bond
Fund...................... 122,032 82,113 277,387 277,079 337,926 190,556
Colorado Municipal Bond
Fund...................... -- -- 24,740 169,048 257,637 142,072
Florida Municipal Bond
Fund...................... 633,336 980,751 1,238,874 1,093,473 685,218 448,690
Florida Intermediate
Municipal Bond Fund....... -- -- -- 19,498 75,798 110,883
New Mexico Municipal Bond
Fund...................... 17,972 32,291 109,772 226,715 226,537 155,889
Pennsylvania Municipal Bond
Fund...................... 58,095 65,517 101,030 164,423 167,757 277,221
Virginia Municipal Bond
Fund...................... 211,367 310,198 404,706 351,513 312,111 374,624
</TABLE>
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. 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 approximately $36 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. Founded in 1898,
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
S-28
<PAGE>
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.
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.
S-29
<PAGE>
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. 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,
for taxable years beginning on or before August 5, 1997 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"). The short-short test will not be a requirement for qualification
as a regulated investment company for taxable years beginning after August 5,
1997. 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
S-30
<PAGE>
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 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.
S-31
<PAGE>
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 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
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<PAGE>
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.
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.
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
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<PAGE>
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.
S-34
<PAGE>
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.
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 Colorado 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
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<PAGE>
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.
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
S-36
<PAGE>
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
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<PAGE>
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.
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 or
gain from the sale or exchange of obligations of Virginia and its political
subdivisions and instrumentalities ("Virginia Obligations") or 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. 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.
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<PAGE>
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.
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<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.
<TABLE>
<CAPTION>
AS OF MAY 31, 1997
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
Arizona Municipal Bond Fund
Class A Shares............. 4.36% 42.50% 7.58%
Class B Shares ............ 3.80% 42.50% 6.61%
Class C Shares............. 4.01% 42.50% 6.97%
Class R Shares............. 4.76% 42.50% 8.28%
Colorado Municipal Bond Fund
Class A Shares............. 4.72% 42.50% 8.21%
Class B Shares ............ 4.17% 42.50% 7.25%
Class C Shares............. 4.37% 42.50% 7.60%
Class R Shares............. 5.12% 42.50% 8.90%
Florida Municipal Bond Fund
Class A Shares............. 4.62% 39.60% 7.65%
Class B Shares ............ 4.07% 39.60% 6.74%
Class C Shares............. 4.27% 39.60% 7.07%
Class R Shares............. 5.02% 39.60% 8.31%
Florida Intermediate
Municipal Bond Fund
Class A Shares............. 4.08% 39.60% 6.75%
Class C Shares............. 3.80% 39.60% 6.29%
Class R Shares............. 4.50% 39.60% 7.45%
Maryland Municipal Bond Fund
Class A Shares............. 4.33% 42.50% 7.53%
Class B Shares ............ 3.77% 42.50% 6.56%
Class C Shares............. 3.97% 42.50% 6.90%
Class R Shares............. 4.72% 42.50% 8.21%
New Mexico Municipal Bond
Fund
Class A Shares............. 4.70% 44.50% 8.47%
Class B Shares ............ 4.16% 44.50% 7.50%
Class C Shares............. 4.36% 44.50% 7.86%
Class R Shares............. 5.11% 44.50% 9.21%
Pennsylvania Municipal Bond
Fund
Class A Shares............. 4.96% 41.50% 8.48%
Class B Shares ............ 4.42% 41.50% 7.56%
Class C Shares............. 4.63% 41.50% 7.91%
Class R Shares............. 5.38% 41.50% 9.20%
</TABLE>
S-40
<PAGE>
<TABLE>
<CAPTION>
AS OF MAY 31, 1997
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
Virginia Municipal Bond Fund
Class A Shares.............. 4.94% 43.00% 8.67%
Class B Shares ............. 4.41% 43.00% 7.74%
Class C Shares.............. 4.61% 43.00% 8.09%
Class R Shares.............. 5.36% 43.00% 9.40%
</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.
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>
MAY 31, 1997
-----------------------------
DISTRIBUTION RATES
-----------------------------
CLASS
CLASS A B CLASS C CLASS R
------- ----- ------- -------
<S> <C> <C> <C> <C>
Arizona Municipal Bond Fund................. 4.85% 4.32% 4.52% 5.27%
Colorado Municipal Bond Fund................ 4.93% 4.39% 4.60% 5.34%
Florida Municipal Bond Fund ................ 5.00% 4.47% 4.68% 5.42%
Florida Intermediate Municipal Bond Fund.... 4.48% N/A 4.07% 4.81%
Maryland Municipal Bond Fund................ 4.65% 4.10% 4.28% 5.03%
New Mexico Municipal Bond Fund.............. 4.75% 4.22% 4.42% 5.16%
Pennsylvania Municipal Bond Fund............ 5.23% 4.70% 4.91% 5.65%
Virginia Municipal Bond Fund................ 5.13% 4.62% 4.81% 5.56%
</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
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<PAGE>
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, 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.
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<PAGE>
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
INCEPTION DATES
------------------
<S> <C>
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
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
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>
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<PAGE>
The annual total return figures for the Funds, including the effect of the
maximum sales charge for Class A shares, and applicable CDSC for Class B
Shares, for the one-year, five-year, and ten-year periods (as applicable) ended
May 31, 1997 and for the period from inception through May 31, 1997,
respectively, using the performance of the oldest class for periods prior to
the inception of the newer classes, as described above, were:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
---------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
MAY 31, MAY 31, MAY 31, MAY 31,
1997 1997 1997 1997
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Arizona Municipal Bond Fund
Class A Shares................. 3.32% 6.48% 7.86% 7.25%
Class B Shares................. 3.20% 6.65% 7.85% 7.24%
Class C Shares................. 7.28% 6.81% 7.73% 7.09%
Class R Shares................. 7.93% 7.41% 8.33% 7.69%
Colorado Municipal Bond Fund
Class A Shares................. 4.63% 6.48% 7.11% 6.76%
Class B Shares................. 4.67% 6.67% 7.10% 6.75%
Class C Shares................. 8.77% 7.01% 7.20% 6.84%
Class R Shares................. 9.38% 7.43% 7.59% 7.24%
Florida Municipal Bond Fund
Class A Shares................. 3.07% 5.75% N/A 6.97%
Class B Shares................. 3.02% 5.92% N/A 7.04%
Class C Shares................. 7.00% 6.08% N/A 7.04%
Class R Shares................. 7.66% 6.67% N/A 7.64%
Florida Intermediate Bond Fund
Class A Shares................. 3.94% N/A N/A 4.89%
Class C Shares................. 6.47% N/A N/A 5.25%
Class R Shares................. 7.42% N/A N/A 5.93%
Maryland Municipal Bond Fund
Class A Shares................. 2.18% 5.52% N/A 5.57%
Class B Shares................. 1.99% 5.55% N/A 5.57%
Class C Shares................. 5.92% 5.68% N/A 5.69%
Class R Shares................. 6.88% 6.70% N/A 6.71%
New Mexico Municipal Bond Fund
Class A Shares................. 4.33% N/A N/A 5.71%
Class B Shares................. 4.14% N/A N/A 5.71%
Class C Shares................. 8.47% N/A N/A 6.28%
Class R Shares................. 9.06% N/A N/A 6.71%
Pennsylvania Municipal Bond Fund
Class A Shares................. 3.81% 5.87% 7.65% 6.74%
Class B Shares................. 3.91% 6.07% 7.64% 6.74%
Class C Shares................. 7.88% 6.20% 7.53% 6.59%
Class R Shares................. 8.44% 6.80% 8.12% 7.18%
</TABLE>
S-44
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
---------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
MAY 31, MAY 31, MAY 31, MAY 31,
1997 1997 1997 1997
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Virginia Municipal Bond Fund
Class A Shares................ 3.66% 6.08% 7.72% 7.11%
Class B Shares................ 3.54% 6.24% 7.71% 7.10%
Class C Shares................ 7.61% 6.38% 7.59% 6.92%
Class R Shares................ 8.28% 7.01% 8.19% 7.53%
</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.
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<PAGE>
The cumulative total return figures for the Funds, including the effect of
the maximum sales charge for the Class A Shares, and applicable CDSC for Class
B Shares, for the one-year, five-year and ten-year periods (as applicable)
ended May 31, 1997, and for the period since inception through May 31, 1997,
respectively, using the performance of the oldest class for periods prior to
the inception of the newer classes, as described above, were:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------
FROM
ONE YEAR TEN YEARS INCEPTION
ENDED FIVE YEARS ENDED THROUGH
MAY 31, ENDED MAY MAY 31, MAY 31,
1997 31, 1997 1997 1997
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Arizona Municipal Bond Fund
Class A Shares................ 3.32% 36.89% 113.07% 109.74%
Class B Shares................ 3.20% 37.95% 112.94% 109.59%
Class C Shares................ 7.28% 39.02% 110.58% 106.53%
Class R Shares................ 7.93% 42.98% 122.56% 119.08%
Colorado Municipal Bond Fund
Class A Shares................ 4.63% 36.87% 98.81% 92.38%
Class B Shares................ 4.67% 38.08% 98.60% 92.16%
Class C Shares................ 8.77% 40.33% 100.33% 93.79%
Class R Shares................ 9.38% 43.08% 107.83% 101.11%
Florida Municipal Bond Fund
Class A Shares................ 3.07% 32.24% N/A 59.79%
Class B Shares................ 3.02% 33.34% N/A 60.55%
Class C Shares................ 7.00% 34.33% N/A 60.53%
Class R Shares................ 7.66% 38.13% N/A 66.91%
Florida Intermediate Municipal
Bond Fund
Class A Shares................ 3.94% N/A N/A 17.21%
Class C Shares................ 6.47% N/A N/A 18.54%
Class R Shares................ 7.42% N/A N/A 21.13%
Maryland Municipal Bond Fund
Class A Shares................ 2.18% 30.81% N/A 32.97%
Class B Shares................ 1.99% 31.02% N/A 32.97%
Class C Shares................ 5.92% 31.80% N/A 33.72%
Class R Shares................ 6.88% 38.28% N/A 40.65%
New Mexico Municipal Bond Fund
Class A Shares................ 4.33% N/A N/A 29.82%
Class B Shares................ 4.14% N/A N/A 29.82%
Class C Shares................ 8.47% N/A N/A 33.19%
Class R Shares................ 9.06% N/A N/A 35.71%
Pennsylvania Municipal Bond Fund
Class A Shares ............... 3.81% 33.00% 109.02% 99.55%
Class B Shares................ 3.91% 34.24% 108.88% 99.41%
Class C Shares................ 7.88% 35.07% 106.59% 96.50%
Class R Shares................ 8.44% 38.92% 118.33% 108.43%
</TABLE>
S-46
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------
FROM
ONE YEAR TEN YEARS INCEPTION
ENDED FIVE YEARS ENDED THROUGH
MAY 31, ENDED MAY MAY 31, MAY 31,
1997 31, 1997 1997 1997
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Virginia Municipal Bond Fund
Class A Shares ............... 3.66% 34.31% 110.44% 115.46%
Class B Shares................ 3.54% 35.32% 110.25% 115.28%
Class C Shares................ 7.61% 36.26% 107.73% 111.24%
Class R Shares................ 8.28% 40.30% 119.81% 125.06%
</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 combined marginal federal and state tax rate for
1997, the annual taxable equivalent total return for the Maryland Municipal
Bond Fund's shares for the five-year period ended May 31, 1997 with respect to
the Class R Shares was 10.59%.
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
S-47
<PAGE>
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 calculates municipal bond fund averages based
on average maturity and credit quality. Morningstar rates mutual funds by
overall risk-adjusted performance, investment objectives, and assets. 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 the effect of any
sales charges. The market prices and yields of taxable and tax-exempt bonds
will fluctuate. The Funds primarily invest 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.
S-48
<PAGE>
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 share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include
distribution and service fees.
The minimum initial investment is $3,000 per fund share class, and may be
lower for accounts opened through fee-based programs for which the program
sponsor has established a single master account with the fund's transfer agent
and performs all sub-accounting services related to that account.
REDUCTION OR ELIMINATION OF UP-FRONT SALES CHARGE ON CLASS A SHARES AND CLASS R
SHARE PURCHASE ELIGIBILITY
Rights of Accumulation. 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 Mutual Fund, or units of a Nuveen unit trust, on
which an up-front sales charge or ongoing distribution fee is imposed, or is
normally 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 Mutual Fund
that you already own on which you paid an up-front sales charge or an ongoing
distribution fee and any Class B or C Shares of a Nuveen Mutual Fund that you
purchase over the next 13 months towards completion of your investment program,
but you will receive a reduced sales charge only on new Class A Shares you
purchase with a sales charge over the 13 months. You cannot count towards
completion of your investment program Class A Shares that you purchase without
a sales charge through investment of distributions from a Nuveen Mutual Fund or
a Nuveen Unit Trust or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of a Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending
S-49
<PAGE>
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 Mutual Fund at the
reduced sales charge applicable to the group's purchases taken as a whole. A
"qualified group" is one which has previously been in existence, has a purpose
other than investment, has ten 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 initial investment in Class A
shares of any particular Fund or portfolio for each participant in the program
is $3,000 and the minimum monthly investment in Class A shares of any
particular Fund or portfolio by each participant is $50. 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 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 one year 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.
S-50
<PAGE>
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 or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
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 must submit their request to the transfer agent no later than the last
business day of the 71st month following the month in which they purchased
their shares. 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, parents, children, grandparents,
grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a
sibling's spouse, and a spouse's siblings); or (3) all purchases made through a
group purchase program as described above.
Class R Share Purchase Eligibility. Class R Shares are available for
purchases of $1 million or more and for purchases using dividends and capital
gains distributions on Class R Shares. Class R Shares also are available for
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;
S-51
<PAGE>
. 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, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
In addition, purchasers of Nuveen unit investment trusts may reinvest their
distributions from such unit investment trusts in Class R Shares, if, before
September 6, 1994, such purchasers had elected to reinvest distributions in
Nuveen Fund shares (before June 13, 1995 for Nuveen Municipal Bond Fund
shares). Shareholders may exchange their Class R Shares of any Nuveen Fund into
Class R Shares of any other Nuveen Fund.
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, or that represent an increase in the value of a Fund
account due to capital appreciation, and then will redeem shares held for the
longest period, unless the shareholder specifies another order. No CDSC is
charged on shares purchased as a result of automatic reinvestment of dividends
or capital gains paid. In addition, no CDSC will be charged on exchanges of
shares into another Nuveen Mutual Fund or Nuveen money market fund. You may not
exchange Class B Shares for shares of a Nuveen 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
S-52
<PAGE>
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 12% of the original investment amount. 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.
To help advisers and investors better understand and most efficiently use the
Funds 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, electronic information sites, 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.
In addition, you may exchange Class R Shares of any Fund for Class A Shares
of the same Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of that
Fund.
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.
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<PAGE>
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 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
MAY 31, 1997* JANUARY 31, 1996 JANUARY 31, 1995
------------------------ ------------------------ ------------------------
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........... 191 25 160 26 216 38
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
COMMISSIONS NUVEEN COMMISSIONS FLAGSHIP COMMISSIONS FLAGSHIP
FUND ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Arizona Fund............ 145 20 194 26 227 31
Colorado Fund........... 78 10 98 13 95 13
Florida Fund............ 443 61 609 83 882 112
Florida Intermediate
Fund................... 12 3 23 4 23 3
New Mexico Fund......... 113 15 132 18 191 28
Pennsylvania Fund....... 110 14 107 14 119 15
Virginia Fund........... 279 38 311 26 381 50
</TABLE>
- --------
*For the sixteen month period ended May 31, 1997.
S-54
<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 May 31, 1997, 100% of service fees and distribution
fees were paid out as compensation to Authorized Dealers. Prior to February 1,
1997, 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 (.55% for the Florida Intermediate Fund). Thereafter, the service fee
for the Class A and Class C Shares was .20% and the distribution fee for the
Class C Shares was .55%.
S-55
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1997
----------------------
<S> <C>
Arizona Municipal Bond Fund
Class A................................................ $ 270,038
Class B................................................ $ 617
Class C................................................ $ 22,346
Colorado Municipal Bond Fund
Class A................................................ $ 107,814
Class B................................................ $ 414
Class C................................................ $ 211
Florida Municipal Bond Fund
Class A................................................ $1,032,039
Class B................................................ $ 1,449
Class C................................................ $ 24,848
Florida Intermediate Municipal Bond Fund
Class A................................................ $ 21,227
Class C................................................ $ 26,833
Maryland Municipal Bond Fund*
Class A................................................ $ 31,680
Class B................................................ $ 185
Class C................................................ $ 22,810
New Mexico Municipal Bond Fund
Class A................................................ $ 171,788
Class B................................................ $ 776
Class C................................................ $ 228
Pennsylvania Municipal Bond Fund
Class A................................................ $ 149,056
Class B................................................ $ 418
Class C................................................ $ 45,521
Virginia Municipal Bond Fund
Class A................................................ $ 397,031
Class B................................................ $ 576
Class C................................................ $ 106,304
</TABLE>
- --------
*For the sixteen month period ended May 31, 1997.
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
S-56
<PAGE>
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
Deloitte & Touche LLP, independent auditors, 1700 Courthouse Plaza N.E.,
Dayton, Ohio 45402 has been selected as auditors for all of the Funds. Arthur
Andersen LLP, independent auditors, 33 West Monroe Street, Chicago, Illinois
60603, was selected as the auditor for the Nuveen Maryland Municipal Bond Fund
for the periods prior to January 31, 1997. In addition to audit services, the
auditors 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 auditors as indicated in their reports with respect
thereto, and are included in reliance upon the authority of those firms in
giving their reports.
The custodian of the assets of the Funds is The Chase Manhattan Bank, 4 New
York Plaza, New York, New York 10004. 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 are incorporated herein by reference.
The Annual Reports accompany this Statement of Additional Information.
S-57
<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.
A-1
<PAGE>
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-2
<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.
B-1
<PAGE>
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 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
Municipal
Bond Funds
May 31, 1997
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
Arizona
[PHOTO APPEARS HERE]
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Arizona Overview
9 Financial Section
33 Shareholder Meeting Report
34 Shareholder Information
35 Fund Information
<PAGE>
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Dear Shareholder
It's a pleasure to report to you on the performance of the Nuveen Flagship
Arizona Municipal Bond Fund. Over the past year, the fund posted sizable gains.
For the fiscal year ended May 31, 1997, the value of your investment rose 7.85%
for Class A shares, if you chose to reinvest your tax-free income dividends.
Over this 12-month period, the total return performance for the fund (with
income reinvested) kept close pace with the 8.28% increase produced by the
Lehman Brothers Municipal Bond Index, which is used to represent the broad
municipal bond market on an unmanaged basis.
In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds, which
provide excellent income for investors. As of May 31, 1997, shareholders were
receiving tax-free yields on net asset value of 4.58% for Class A shares. To
match this yield, investors in the 34.5% combined federal and state income tax
bracket would have had to earn at least 6.99% on taxable alternatives.
These results were produced against a backdrop of continued economic expansion
and the lowest unemployment rates in almost two decades, a combination that in
the past has foreshadowed an increase in inflation. In March, the Federal
Reserve made a pre-emptive strike by raising short-term interest rates by 0.25%,
but then maintained the status quo at its May and July meetings. Overall market
returns continue to be good, but fear of inflation has hampered the performance
of municipals and led to increased volatility in both the equity and bond
markets.
1
<PAGE>
"In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds."
During this time, bonds have often been the bellwether for the direction of
stocks. Whenever inflation talk is at its most rampant, the stock market has
kept an eye on the bond market for its response before reacting.
In the first six months of the year, the markets also focused on fiscal issues,
including the federal budget accord and discussion of plans to reduce taxes and
eliminate the deficit. The economy appeared to be moderating, corporate earnings
reports continued to exhibit strength, and interest rates fell in the second
quarter. All of this was positive news. The net effect is that the markets are
better off now than at the beginning of the year, but the volatility experienced
in getting there has been significant.
Recently, the need for diversification and a renewed emphasis on asset
allocation--as well as attractive yields--have sparked increased interest in
tax-free investments. The current level of the stock market reminds investors to
re-allocate profits to other segments of the market in order to limit risk.
Nuveen municipal bond funds provide an excellent lower-risk alternative, and
their current yields make them very attractive.
On behalf of everyone at Nuveen, I thank you for your confidence in us and our
family of investments. You can continue to depend on us for high-quality
investments that withstand the test of time. We look forward to reporting to you
again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1997
2
<PAGE>
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, head of Nuveen's Dayton-based portfolio management team, talks about
the municipal bond market and offers insights into factors that affected fund
performance over the past year.
Answering Your Questions
What are the investment objectives of the fund?
The fund aims to provide investors with a high level of tax-free income while
preserving capital by investing in a diversified portfolio of high-quality
municipal bonds. To that end, we attempt to maximize the fund's after-tax total
return by generating high tax-free income and minimizing the distribution of
taxable capital gains when possible.
What is your strategy for meeting these objectives?
To meet this fund's objectives of income and enhanced value, our portfolio
management strategy relies on conservative value investing principles, sound
research and credit surveillance activities, and senior management involvement.
At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates. This approach focuses on the characteristics of
individual bonds, such as sector, geographic region, structure and intrinsic
credit quality, rather than on the general economic environment. The idea behind
this philosophy is that we, as investment managers, can control the selection
process, but not the direction of the economy as a whole.
What key economic factors affected
the fund's performance during the year?
The U.S. economy continued to grow, exhibiting low unemployment, increased
manufacturing and construction activity, and lack of price pressure at the
consumer and producer levels. The fund had the added advantage of operating in a
healthy supply environment, where securities were available as needed.
3
<PAGE>
"At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates."
Given this market environment, how did the fund perform?
The Arizona Municipal Bond Fund performed well over the past year, rewarding
investors with a total return on net asset value for the year of 7.85% for Class
A shares, including price changes and reinvested dividends. Additionally, the
fund was ranked among the top third of 33 Arizona municipal bond funds for the
one-year period by Lipper Analytical Services, a nationally recognized
performance measurement service.
What strategies did you employ to add value?
As the spread between yields on higher and lower quality bonds continued to
narrow during the year, we were able to enhance the credit quality of the fund
without sacrificing yield. As always, we also focused on finding value in the
marketplace with attractively priced high-quality bonds. One example of our
success in value investing is the recent purchase of a number of zero-coupon
Arizona school bonds. Because the market did not favor zero-coupon bonds at the
time, we were able to purchase high-quality bonds at a good value for the fund.
What is the current status of Arizona's municipal market?
Arizona has experienced phenomenal economic and population growth over the last
several years. This growth has strained the infrastructure and prompted
increased bond financing by cities, counties and school districts. The volume of
new issues for the state was up 25% in the first quarter of 1997, and additional
volume growth is expected. Overall, strong demand has welcomed the recent supply
of higher education and school district bonds. Based on the projected strong
economic growth of the state, especially in the Mesa-Phoenix metro area, the
overall supply of bonds should increase to help meet the demand of hungry
Arizona municipal investors.
4
<PAGE>
What is the current outlook for the municipal market
as a whole?
As we make our way through the seventh year of the current economic expansion,
some observers believe that a fundamental shift may have occurred in our
economy. Based on past experience and months of reports of economic growth,
especially employment statistics, the markets have long been anticipating an
increase in inflation. However, even with almost full employment, we have not
seen the expected rise in hourly wages that would be considered inflationary.
This change in the traditional economic cause-and-effect relationship has been
variously attributed to the globalization of the economy and consequent
competitive pressures, to increased use of technology, and to corporations'
recent ability to downsize as necessary. Although structural changes in the
economy appear to have suspended the relationship between faster growth and
higher inflation, the risk remains that inflation may reassert itself if
capacity constraints are reached and resources are stretched too thin.
Talk of Fed tightening will continue. If the Fed does act to increase rates, it
will be perceived as a move against inflation. If the Fed does not tighten, it
will be seen as an indication that the economy is doing well.
Nonetheless, for the remainder of 1997, the municipal market should continue to
offer the attractive yields and tax advantages that make it a good alternative
if and when a correction in the stock market occurs. While money continues to
flow into equity mutual funds, investors are also beginning to evaluate the
effect of the huge run-up in stock prices on their asset allocation, and many
are rebalancing their portfolios by shifting some assets into bonds.
5
<PAGE>
Arizona
Overview
Credit Quality
[PIE CHART APPEARS HERE]
BBB/NR 11%
A 10%
AA 7%
AAA/
Pre-refunded 72%
Diversification
[PIE CHART APPEARS HERE]
Housing Facilities 5%
Municipal Appropriations 3%
Other 13%
Pollution Control 4%
General Obligations 29%
Educational Facilities 3%
Hospitals 11%
Excrowed Bonds 25%
Water & Sewer 7%
<TABLE>
<CAPTION>
Fund Highlights
==================================================================================
<S> <C> <C> <C> <C> <C>
Share Class A B C R
Inception Date 10/86 2/97 2/94 2/97
- ----------------------------------------------------------------------------------
Net Asset Value (NAV) $10.94 $10.94 $10.94 $ 10.94
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Total Net Assets ($000) $105,135
- ----------------------------------------------------------------------------------
Average Weighted Maturity (years) 15.27
- ----------------------------------------------------------------------------------
Duration (years) 8.06
- ----------------------------------------------------------------------------------
Annualized Total Return/1/
==================================================================================
Share Class A(NAV) A(Offer) B C R
1-Year 7.85% 3.32% 7.20% 7.28% 7.93%
- ----------------------------------------------------------------------------------
5-Year 7.40% 6.48% 6.80% 6.81% 7.41%
- ----------------------------------------------------------------------------------
10-Year 8.32% 7.86% 7.85% 7.73% 8.33%
- ----------------------------------------------------------------------------------
Tax-Free Yields
==================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.07% 4.85% 4.32% 4.52% 5.27%
- ----------------------------------------------------------------------------------
SEC 30-Day Yld 4.58% 4.38% 3.83% 4.03% 4.78%
- ----------------------------------------------------------------------------------
Taxable Equiv Yld/2/ 6.99% 6.69% 5.85% 6.15% 7.30%
- ----------------------------------------------------------------------------------
</TABLE>
1 Returns of the oldest share class of a fund are actual. Returns for other
classes are actual for the period since inception and prior to class
inception are the returns for the fund's oldest class, adjusted for
differences in sales charges and expenses. Class A shares have an initial
sales charge, while Class B, C and R shares have no initial sales charge.
Class B shares have a CDSC that declines from 5% to 0% after 6 years. Class C
shares have a 1% CDSC for redemptions within one year. Returns do not reflect
imposition of the CDSC. Giving effect to the CDSC applicable to Class B
shares, the 1-year, 5-year, and 10-year total returns above would be 3.20%,
6.65%, and 7.85%, respectively.
2 Based on SEC yield and a combined federal and state income tax rate of 34.5%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
6
<PAGE>
Nuveen Flagship Arizona Municipal Bond Fund
May 31, 1997 Annual Report
* The Index Comparison shows change in value of a $10,000 investment in the A
Shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares (4.20%) and all ongoing fund
expenses.
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Arizona Nuveen Flagship Arizona
Lehman Brothers Municipal Bond Fund Municipal Bond Fund
Municipal Bond Index (NAV) (Offer)
<S> <C> <C>
May 1987 10000 10000 9580
May 1988 10898.1 10744.8 10132.3
May 1989 12150.6 12253.3 11554.9
May 1990 13039.7 12930.6 12193.6
May 1991 14353.9 14118.8 13314
May 1992 15764.1 15565.7 14678.4
May 1993 17650 17645.1 16639.3
May 1994 18085.8 17983.7 16958.6
May 1995 19732.8 19788 18660.1
May 1996 20634.7 20621.8 19446.3
May 1997 22534.8 22241.5 20973.7
</TABLE>
- -- Lehman Brothers Municipal Bond Index $22,535
- -- Nuveen Flagship Arizona Municipal Bond Fund (NAV) $22,241
- -- Nuveen Flagship Arizona Municipal Bond Fund (Offer) $21,307
Past performance is not predicitive of turure performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Dividend History Capital
(A Shares) Gains
<S> <C> <C>
1996
June 0.04541
July 0.04692
August 0.04692
September 0.04541
October 0.04692
November 0.04541
December 0.04692 0.0457
1997
January 0.04926 0.01135
February 0.0462
March 0.0462
April 0.0462
May 0.0462
</TABLE>
- -- Capital Gains
7
<PAGE>
Financial Section
Contents
10 Portfolio of Investments
20 Statement of Net Assets
21 Statement of Operations
22 Statement of Changes in Net Assets
23 Notes to Financial Statements
30 Financial Highlights
32 Independent Auditors' Report
9
<PAGE>
<TABLE>
Portfolio of Investments
Nuveen Flagship Arizona
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 2.9%
$ 500,000 Arizona State University, Resh Park Development, 7/06 at 100 AAA $ 465,250
Revenue Refunding, 5.000%, 7/01/21
500,000 Glendale Arizona, Industrial Development Authority, 5/06 at 102 AAA 511,470
Midwestern University, Series A, 6.000%, 5/15/16
1,370,000 University of Arizona, Foundation Lease Revenue, 7/97 at 102 AAA 1,401,894
7.750%, 7/01/07
300,000 University of Arizona, University Revenue Refunding 6/02 at 102 AA 319,935
System, 6.250%, 6/01/11
335,000 Yavapai County, Arizona, Community College District 7/03 at 101 A- 345,687
Revenue, 6.000%, 7/01/12
- --------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity -- 10.7%
380,000 Maricopa County, Arizona, Hospital Revenue, No Opt. Call AAA 464,694
St. Lukes Hospital Medical Center Project,
8.750%, 2/01/10
17,300,000 Maricopa County, Arizona, Industrial Development No Opt. Call AAA 5,906,393
Authority, Single Family Mortgage Revenue,
Capital Appreciation and Accrual,
0.000%, 2/01/16
500,000 Phoenix, Arizona, Street and Highway User Revenue, 7/02 at 102 AA 541,520
Senior Lien, 6.250%, 7/01/11
11,570,000 Tucson and Pima County, Arizona, Industrial No Opt. Call AAA 4,296,982
Development Authorities, Single Family Mortgage
Revenue, Series 1983A, 0.000%, 12/01/14
- --------------------------------------------------------------------------------------------------------------------
Health Care -- 1.7%
1,670,000 Cochise County, Arizona, Industrial Development 5/04 at 102 AAA 1,817,027
Authority, Mortgage Revenue Refunding, Sierra
Vista Care Center, Series A, 6.750%, 11/20/19
- --------------------------------------------------------------------------------------------------------------------
Hospitals -- 8.8%
1,250,000 Arizona, Health Facilities Authority, Arizona 10/99 at 101 AAA 1,329,850
Volunteer Hospital, Series B, 7.250%, 10/01/13
2,775,000 Maricopa County, Arizona, Industrial Development No Opt. Call AAA 3,278,385
Authority, Hospital Facility Revenue Refunding,
Samaritan Health Services, Series A,
7.000%, 12/01/16
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hospitals -- continued
$ 375,000 Maricopa County, Arizona, Industrial Development 12/00 at 102 AAA $ 411,281
Authority, Hospital Facility Revenue,
7.500%, 12/01/13
600,000 Maricopa County, Arizona, Industrial Development 9/05 at 101 AAA 587,052
Authority, Revenue Refunding, Baptist Hospital
System, 5.500%, 9/01/16
Phoenix, Arizona, Industrial Development Authority,
Hospital Revenue, John C. Lincoln Hospital and
Health:
500,000 6.000%, 12/01/10 12/03 at 102 BBB+ 504,575
500,000 6.000%, 12/01/14 12/03 at 102 BBB+ 498,285
Pima County, Arizona, Industrial Development
Authority, Health Care Corporation Revenue Refunding,
Carondelet Health Care Corporation:
500,000 5.250%, 7/01/12 No Opt. Call AAA 495,610
640,000 5.250%, 7/01/13 No Opt. Call AAA 630,746
1,500,000 Scottsdale, Arizona, Industrial Development No Opt. Call AAA 1,523,910
Authority, Hospital Revenue, Scottsdale Memorial
Hospitals, 5.500%, 9/01/12
- --------------------------------------------------------------------------------------------------------------------
Housing/Multi Family -- 2.9%
1,000,000 Maricopa County, Arizona, Industrial Development 1/07 at 102 AAA 1,008,180
Authority, Multi-Family Mortgage Revenue,
Tempe Grove Apartments Project,
Series A, 6.150%, 7/20/28
295,000 Phoenix, Arizona, Housing Finance Corporation, 7/02 at 101 AAA 304,529
Mortgage Revenue, Project A,
6.500%, 7/01/24
Phoenix, Arizona, Industrial Development Authority,
Mortgage Revenue Refunding, Chris Ridge
Village Project:
200,000 6.750%, 11/01/12 11/02 at 101 AAA 210,850
425,000 6.800%, 11/01/25 11/02 at 101 AAA 442,791
500,000 Phoenix, Arizona, Industrial Development Authority, 2/03 at 102 Aaa 498,515
Multi-family Housing, Revenue Refunding, Meadow
Glen Apartments, Series A, 5.800%, 8/20/28
500,000 Tempe, Arizona, Industrial Development Authority, 6/03 at 102 AAA 509,760
Multi-family Mortgage Revenue Refunding,
Quadrangles Village Apartments,
Series A, 6.250%, 6/01/26
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona-continued
<TABLE>
<CAPTION>
Prinicpal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family -- 1.8%
$ 485,000 Phoenix, Arizona, Industrial Development Authority, 6/05 at 102 AAA $ 493,512
Single Family Mortgage Revenue,
6.150%, 12/01/08
420,000 Pima County, Arizona, Industrial Development 8/05 at 102 A 436,094
Authority, Single Family Mortgage Revenue
Refunding, Series A, 6.500%, 2/01/17
1,000,000 Pima County, Arizona, Industrial Development 5/07 at 102 AAA 1,011,670
Authority, Single Family Mortgage Revenue,
Series A, 6.250%, 11/01/30
- --------------------------------------------------------------------------------------------------------------------
Industrial Development and Pollution Control -- 4.4%
250,000 Casa Grande, Arizona, Industrial Development 12/02 at 103 A1 270,013
Authority, Industrial Development Revenue,
Frito-Lay/Pepsico, 6.650%, 12/01/14
2,000,000 Coconino County, Arizona, Pollution Control 10/06 at 102 BBB- 2,013,740
Corporation Revenue, Pollution Control, Nevada
Power Company Project, 6.375%, 10/01/36
1,000,000 Mesa, Arizona, Industrial Development Authority, No Opt. Call N/R 1,057,550
Industrial Revenue, TRW Vehicle Safety
System Inc. Project, 7.250%, 10/15/04
500,000 Mohave County, Arizona, Industrial Development 2/00 at 101 AA+ 523,800
Authority, Industrial Development Revenue,
Citizens Utilities Company Projects,
Series B, 7.150%, 2/01/26
500,000 Mohave County, Arizona, Industrial Development 11/03 at 101 A-1+ 522,740
Authority, Industrial Development Revenue,
Citizens Utilities Company Project,
6.600%, 5/01/29
240,000 Pima County, Arizona, Industrial Development 1/02 at 103 AAA 265,601
Authority, Industrial Revenue Refunding, Lease
Obligation, Series A, Irvington Project Tucson
Electric Power Company, 7.250%, 7/15/10
- --------------------------------------------------------------------------------------------------------------------
Municipal Appropriation Obligations -- 3.1%
700,000 Apache County, Arizona, Public Finance Corporation, 5/00 at 102 A 707,385
Certificates of Participation, 5.500%, 5/01/10
250,000 Arizona State, Certificates of Participation, 9/02 at 102 AAA 266,975
Series B, 6.250%, 9/01/10
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Appropriation Obligations -- continued
$ 225,000 Arizona State Municipal Financing Program, No Opt. Call AAA $ 296,822
Certificates of Participation, Series 11,
8.000%, 8/01/17
280,000 Eloy, Arizona, Municipal Property Corporation, 7/02 at 101 BBB 300,714
Municipal Facilities, Revenue Refunding,
7.000%, 7/01/11
Pinal County, Arizona, Certificates of Participation:
300,000 6.375%, 6/01/06 6/02 at 100 AA 320,334
200,000 6.500%, 6/01/09 6/02 at 100 AA 214,650
850,000 Tucson, Arizona, Certificates of Participation, 7/04 at 100 AA 905,930
6.375%, 7/01/09
250,000 Tucson, Arizona, Local Development, Business 7/02 at 102 AAA 265,303
Development Finance Corporation, Lease Revenue
Refunding, 6.250%, 7/01/12
- -------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Transportation -- 1.8%
500,000 Phoenix, Arizona, Airport Revenue, 7/04 at 102 AAA 537,920
Series D, 6.400%, 7/01/12
250,000 Phoenix, Arizona, Civic Improvement Corporation, 7/97 at 102 AA+ 255,763
Airport Terminal Excise Tax Revenue,
7.800%, 7/01/11
500,000 Tucson, Arizona, Airport Authority Inc., Series B, 6/00 at 102 AAA 538,855
7.125%, 6/01/15
575,000 Tucson, Arizona, Airport Authority Inc., Revenue 6/03 at 102 AAA 584,183
Refunding, 5.700%, 6/01/13
- -------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Utility -- 3.8%
500,000 Central Arizona Water Conservation District, Contract No Opt. Call AA- 509,250
Revenue Refunding, Central Arizona Project,
Series A, 5.500%, 11/01/10
5,000 Central Arizona Water Conservation District Contract 5/01 at 102 AA- 5,375
Revenue, Central Arizona Project, Series B,
6.500%, 11/01/11
3,000,000 Guam Power Authority Revenue, Series A, 10/03 at 102 BBB 2,665,800
5.250%, 10/01/23
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Revenue/Utility - continued
$ 280,000 Salt River Project, Arizona Agricultural Improvement 8/97 at 100 AA $ 279,986
and Power District, Electric System Revenue,
Series C, 5.750%, 1/01/20
500,000 Salt River Project, Arizona Agricultural Improvement No Opt. Call AA 524,435
and Power District, Electric System Revenue,
Series A, 5.750%, 1/01/10
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Water and Sewer 7.0%
175,000 Arizona State Wastewater Management Authority, 7/02 at 102 AAA 181,419
Wastewater Treatment Financial Assistance
Revenue, Series A, 5.950%, 7/01/12
250,000 Arizona State Wastewater Management Authority, 7/05 at 102 AAA 255,845
Wastewater Treatment Financial Assistance,
Revenue Refunding, 5.750%, 7/01/15
1,750,000 Chandler, Arizona, Water and Sewer Revenue 7/01 at 101 AAA 1,893,973
Refunding, 6.750%, 7/01/06
Cottonwood, Arizona, Sewer Revenue Refunding:
500,000 6.900%, 7/01/03 7/02 at 101 BBB- 542,080
100,000 7.000%, 7/01/06 7/02 at 101 BBB- 108,137
100,000 7.000%, 7/01/07 7/02 at 101 BBB- 107,674
1,000,000 Phoenix, Arizona, Civic Improvement Corporation, 7/04 at 102 Aa3 916,410
Wastewater System, Lease Revenue Refunding,
5.000%, 7/01/18
1,000,000 Phoenix, Arizona, Civic Improvement Corporation, 7/06 at 100 Aa 996,880
Water System Revenue, Junior Lien,
5.600%, 7/01/18
540,000 Pima County, Arizona, Sewer Revenue Refunding, 7/01 at 101 AAA 580,262
6.750%, 7/01/15
800,000 Sedona, Arizona, Sewer Revenue Refunding, 7/04 at 101 BBB 863,560
7.000%, 7/01/12
500,000 Tucson, Arizona, Water Revenue Refunding, 7/01 at 102 A+ 541,235
6.700%, 7/01/12
390,000 Tucson, Arizona, Water Revenue, Series 1994, 7/06 at 101 AAA 406,169
Series A, 6.000%, 7/01/21
- --------------------------------------------------------------------------------------------------------------------
Non-State General Obligations -- 28.5%
800,000 Chandler, Arizona, Refunding, 7.000%, 7/01/12 7/01 at 101 AAA 866,968
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-State General Obligations -- continued
Cochise County, Arizona, Unit School District
Number 68, Sierra Vista Formerly Cochise County,
Arizona:
$ 250,000 7.500%, 7/01/09 No Opt. Call AAA $ 301,855
300,000 7.500%, 7/01/10 No Opt. Call AAA 362,658
Coconino and Yavapai Counties, Arizona, Joint Unit
School District Number 9, Sedona Oak Creek,
Series A:
250,000 6.700%, 7/01/06 7/01 at 101 A- 268,280
250,000 6.750%, 7/01/07 7/01 at 101 A- 268,738
375,000 Maricopa County, Arizona, Rural Road Improvement 7/99 at 101 N/R 390,383
District, 6.900%, 7/01/05
300,000 Maricopa County, Arizona, Hospital District Number 1, 6/04 at 101 AAA 318,663
Series B, 6.250%, 6/01/10
1,000,000 Maricopa County, Arizona, Hospital District Number 1, 6/06 at 101 A 1,043,310
6.500%, 6/01/17
750,000 Maricopa County, Arizona, School District 7/01 at 101 AAA 796,890
Number 11 Peoria Unit, 6.400%, 7/01/10
675,000 Maricopa County, Arizona, School District No Opt. Call AAA 426,769
Number 11 Peoria Unit, Second Series,
0.000%, 7/01/06
4,000,000 Maricopa County, Arizona, School District No Opt. Call AAA 2,392,760
Number 28, Kyrene Elementary, Series C,
0.000%, 7/01/07
Maricopa County, Arizona, School District
Number 28, Kyrene Elementary:
1,870,000 0.000%, 1/01/09 No Opt. Call AAA 1,013,185
3,805,000 0.000%, 1/01/10 No Opt. Call AAA 1,936,288
6,000,000 0.000%, 1/01/11 No Opt. Call AAA 2,874,660
50,000 Maricopa County, Arizona, School District 7/02 at 100 AAA 51,506
Number 28, Kyrene Elementary, Series E,
6.000%, 7/01/12
Maricopa County, Arizona, School District
Number 40, Glendale Improvement:
500,000 6.200%, 7/01/09 7/05 at 101 AAA 538,170
2,500,000 6.250%, 7/01/10 7/05 at 101 AAA 2,683,575
1,750,000 6.300%, 7/01/11 7/05 at 101 AAA 1,874,653
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Non-State General Obligations - continued
Maricopa County, Arizona, Unit School District
Number 41, Gilbert, Refunding:
$2,000,000 0.000%, 1/01/06 No Opt. Call AAA $1,296,820
500,000 6.250%, 7/01/15 7/08 at 100 AAA 532,285
515,000 Maricopa County, Arizona, Elementary School 7/04 at 102 AAA 567,808
District 68, Alhambra, Series A, 6.750%, 7/01/14
500,000 Maricopa County, Arizona, Chandler Unit School No Opt. Call AAA 550,100
District Number 80, 6.250%, 7/01/11
1,275,000 Maricopa County, Arizona, School District Number 98, No Opt. Call AAA 806,119
Fountain Hills Unit, 0.000%, 7/01/06
Navajo County, Arizona, Unit School District
Number 2 Joseph City, Formerly Navajo County
Arizona School, Series A:
125,000 6.800%, 7/01/01 No Opt. Call N/R 133,016
375,000 6.800%, 7/01/02 No Opt. Call N/R 401,629
635,000 Navajo County, Arizona, Unit School District 7/06 at 101 AAA 653,872
District Number 32, Blue Ridge, Formerly
Navajo County, Arizona, Projects Of 1994,
School Improvement, 5.800%, 7/01/14
1,000,000 Pima County, Arizona, Unit School District No Opt. Call AAA 1,208,860
Number 1, Tucson, 7.500%, 7/01/10
300,000 Pima County, Arizona, Unit School District Number 1, 7/02 at 102 AAA 313,737
Tucson, School Improvement Series D.
6.100%, 7/01/12
500,000 Pima County, Arizona, Unit School District Number 13, 7/04 at 102 AAA 553,575
Tanque Verde, Refunding and Improvement,
6.700%, 7/01/10
315,000 Scottsdale Mountain Community, Facilities 7/03 at 102 A 329,115
District, Series A, 6.200%, 7/01/17
1,925,000 Tatum Ranch, Arizona, Community Facilities 7/02 at 102 A 2,086,662
District, Series A, 6.875%, 7/01/16
225,000 Tempe, Arizona, Series B, 6.000%, 7/01/08 7/02 at 101 AA+ 236,610
600,000 Tempe, Arizona, Unit High School District Number 213, 7/04 at 101 AAA 628,110
Refunding and Improvement, 6.000%, 7/01/12
500,000 Tucson, Arizona, Series 1984, Series G, 7/04 at 101 AAA 527,395
6.250%, 7/01/18
675,000 Yuma County, Arizona, Unit High School District 7/02 at 101 AAA 705,692
Number 70, Yuma, 5.700%, 7/01/06
</TABLE>
16
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
Pre-refunded -- 13.8%***
<S> <C> <C> <C> <C>
$ 300,000 Arizona Health Facilities Authority, Hospital System 9/03 at 100 AAA $ 320,403
Revenue Refunding, Phoenix Baptist Hospital and
Medical, 6.250%, 9/01/11
200,000 Arizona State Municipal Financing Program, Certificates Opt. No Call AAA 242,108
of Participation, Series 20, 7.700%, 8/01/10
500,000 Arizona State Transportation Board, Highway Revenue, 7/00 at 101 AAA 541,405
7.000%, 7/01/09
300,000 Arizona State University Revenue System, 7/02 at 101 Aaa 334,902
7.000%, 7/01/15
1,195,000 Central Arizona Water Conservation District, Contract 5/01 at 102 AA- 1,298,451
Revenue, Central Arizona Project, Series B,
6.500%, 11/01/11
375,000 Maricopa County, Arizona, Industrial Development 12/00 at 102 AAA 418,343
Authority, Hospital Facility Revenue,
7.500%, 12/01/13
1,250,000 Maricopa County, Arizona, Industrial Development 12/00 at 102 AAA 1,344,250
Authority, Mercy Health System Revenue, Series B,
7.150%, 7/01/12
265,000 Maricopa County, Arizona, School District Number 28, 7/02 at 100 AAA 281,828
Kyrene Elementary, Series E, 6.000%, 7/01/12
Maricopa County, Arizona, School District Number 214,
Tolleson Unit High, Series B:
575,000 6.500%, 7/01/09 7/00 at 100 AAA 616,469
300,000 6.500%, 7/01/10 7/00 at 101 AAA 321,636
1,250,000 Northern Arizona University Revenue, 6/99 at 100 Aaa 1,328,325
7.500%, 6/01/08
700,000 Peoria, Arizona, Municipal Development Authority Inc., 7/99 at 102 AAA 751,051
Municipal Facilities Revenue, 7.000%, 7/01/10
400,000 Phoenix, Arizona, Civic Improvement Corporation, 7/03 at 102 AAA 436,436
Wastewater System Lease Revenue, 6.125%, 7/01/23
650,000 Pima County, Arizona, Unit School District Number 1, 7/00 at 101 A 706,947
Tucson, Series B, 7.200%, 7/01/09
460,000 Pima County, Arizona, Sewer Revenue Refunding, 7/01 at 101 AAA 501,961
6.750%, 7/01/15
1,500,000 Price, Elliott Resh Park Inc., Arizona Revenue Refunding, 7/01 at 102 AAA 1,663,185
Arizona State University, Resh Park,
7.000%, 7/01/21
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
Pre-refunded -- continued
Salt River Project, Arizona Agricultural Improvement
and Power District, Electric System Revenue,
Series E:
<S> <C> <C> <C> <C>
$ 100,000 8.250%, 1/01/13 1/98 at 100 AAA $ 102,616
100,000 8.250%, 1/01/28 1/98 at 100 AAA 102,616
1,000,000 Scottsdale, Arizona, Industrial Development Authority, 9/97 at 102 AAA 1,031,610
Hospital Revenue Refunding, Scottsdale Memorial
Hospital, Series A, 8.500%, 9/01/17
2,085,000 University of Arizona, Medical Center Corporation, 7/97 at 102 N/R 2,134,081
Hospital Revenue, 8.100%, 7/01/16
- --------------------------------------------------------------------------------------------------------------------
Special Tax Revenue -- 5.0%
965,000 Bullhead City, Arizona, Special Assessment, Bullhead 1/03 at 103 Baa 981,695
Parkway Improvement District, 6.100%, 1/01/13
550,000 Douglas, Arizona, Municipal Property Corporation, 7/05 at 101 AAA 561,869
Municipal Facilities, Excise Tax Revenue,
5.750%, 7/01/15
385,000 Flagstaff, Arizona, Street and Highway User Revenue, No Opt. Call AAA 409,994
Junior Lien, 5.900%, 7/01/10
Peoria, Arizona, Improvement District, Special
Assessment, North Valley Power Center No. 8801:
425,000 7.300%, 1/01/12 1/03 at 101 BBB 459,901
460,000 7.300%, 1/01/13 1/03 at 101 BBB 497,545
300,000 Phoenix, Arizona, Street and Highway User Revenue 7/02 at 102 A+ 319,149
Refunding, Junior Lien, 6.250%, 7/01/11
2,050,000 Puerto Rico, Commonwealth Highway and 7/16 at 100 A 1,993,769
Transportation Authority, Highway Revenue, Series Y,
5.500%, 7/01/36
- --------------------------------------------------------------------------------------------------------------------
State/Territorial General Obligations -- 0.2%
250,000 Guam Government, Series A, 5.400%, 11/15/18 11/03 at 102 BBB 230,466
- --------------------------------------------------------------------------------------------------------------------
Student Loan Revenue Bonds -- 2.2%
570,000 Arizona Educational Loan Marketing Corporation, 3/02 at 101 A 606,110
Educational Loan Revenue, Series B,
7.000%, 3/01/05
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------
Student Loan Revenue Bonds -- continued
<S> <C> <C> <C> <C>
$ 100,000 Arizona Educational Loan Marketing Corporation, 9/02 at 101 Aa $ 105,185
Educational Loan Revenue, Senior Series B,
6.375%, 9/01/05
1,500,000 Arizona Student Loan Acquisition Authority, Student 5/04 at 102 Aa 1,595,982
Loan Revenue, Senior Series B, 6.600%, 5/01/10
- ----------------------------------------------------------------------------------------------------------------------
$127,100,000 Total Investments (cost $97,173,044) -- 98.6% 103,654,219
- ----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.4% 1,480,454
---------------------------------------------------------------------------------------------
Net Assets -- 100% $105,134,673
---------------------------------------------------------------------------------------------
* Optional Call Provisions (not covered by the report of independent auditors): 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 auditors): Using the higher of Standard
and Poor's or Moody's rating.
*** Pre-refunded securities are backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities, which ensures the timely payment of
principal and interest. Pre-refunded securities are normally considered to be
equivalent to AAA rated securities.
N/R -- Investment is not rated.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Nuveen Municipal Bond Fund
May 31, 1997 May 31, 1997 Annual Report
Nuveen Flagship
Arizona
- -----------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $103,654,219
Cash 216,942
Receivables:
Interest 1,880,054
Shares sold 98,742
Other assets 4,417
- -----------------------------------------------------------------------------------------------
Total assets 105,854,374
- -----------------------------------------------------------------------------------------------
Liabilities
Payable for Shares redeemed 138,255
Accrued expenses:
Management fees (note 6) 28,296
12b-1 distribution and service fees (notes 1 and 6) 16,255
Other 90,565
Dividends payable 446,330
- -----------------------------------------------------------------------------------------------
Total liabilities 719,701
- -----------------------------------------------------------------------------------------------
Net assets (note 7) $105,134,673
===============================================================================================
Class A Shares (note 1)
Net assets $ 82,566,717
Shares outstanding 7,545,943
Net asset value and redemption price per share $ 10.94
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.42
===============================================================================================
Class B Shares (note 1)
Net assets $ 347,407
Shares outstanding 31,764
Net asset value, offering and redemption price per share $ 10.94
===============================================================================================
Class C Shares (note 1)
Net assets $ 3,189,083
Shares outstanding 291,451
Net asset value, offering and redemption price per share $ 10.94
===============================================================================================
Class R Shares (note 1)
Net assets $ 19,031,466
Shares outstanding 1,739,156
Net asset value, offering and redemption price per share $ 10.94
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
Year ended May 31, 1997
Nuveen Flagship
Arizona*
- ----------------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $5,379,767
- ----------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 467,943
12b-1 service fees -- Class A (notes 1 and 6) 270,038
12b-1 distribution and service fees -- Class B (notes 1 and 6) 617
12b-1 distribution and service fees -- Class C (notes 1 and 6) 22,346
Shareholders' servicing agent fees and expenses 73,738
Custodian's fees and expenses 66,064
Trustees' fees and expenses (note 6) 2,389
Professional fees 15,901
Shareholders' reports -- printing and mailing expenses 14,920
Federal and state registration fees 6,062
Other expenses 3,805
- ----------------------------------------------------------------------------------------
Total expenses before reimbursement 943,823
Expense reimbursement (note 6) (190,556)
- ----------------------------------------------------------------------------------------
Net expenses 753,267
- ----------------------------------------------------------------------------------------
Net investment income 4,626,500
- ----------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 344,913
Net change in unrealized appreciation or depreciation of investments 1,724,243
- ----------------------------------------------------------------------------------------
Net gain from investments 2,069,156
- ----------------------------------------------------------------------------------------
Net increase in net assets from operations $6,695,656
========================================================================================
</TABLE>
* Information represents eight months of Flagship Arizona and four months of
Nuveen Flagship Arizona (see note 1 of the Notes to Financial Statements).
See accompanying notes to financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Nuveen Flagship Flagship
Arizona* Arizona
--------------------------------------------
Year ended 5/31/97 Year ended 5/31/96
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $4,626,500 $ 4,362,788
Net realized gain from investment transactions
(notes 1 and 4) 344,913 317,259
Net change in unrealized appreciation or depreciation
of investments 1,724,243 (1,200,471)
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 6,695,656 3,479,576
- ---------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (4,163,497) (4,301,398)
Class B (2,842) N/A
Class C (117,169) (82,198)
Class R (335,301) N/A
From accumulated net realized gains from
investment transactions:
Class A (414,050) --
Class B -- N/A
Class C (12,740) --
Class R -- N/A
- ---------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,045,599) (4,383,596)
- ---------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the
reorganization of Nuveen Arizona (note 1) 25,221,663 --
Net proceeds from shares issued as a capital contribution 33,360 --
Net proceeds from sale of shares 9,311,968 11,832,617
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 2,094,732 1,939,151
- ---------------------------------------------------------------------------------------------------------------
36,661,723 13,771,768
- ---------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (15,241,517) (12,829,723)
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 21,420,206 942,045
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets 23,070,263 38,025
Net assets at the beginning of year 82,064,410 82,026,385
- ---------------------------------------------------------------------------------------------------------------
Net assets at the end of year $105,134,673 $82,064,410
- ---------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of year $ 7,691 $ --
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Arizona and four months of
Nuveen Flagship Arizona (see note 1 of the Notes to Financial Statements).
N/A--Flagship Arizona was not authorized to issue Class B or Class R Shares.
22 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Arizona Municipal Bond Fund (the "Fund"), among
others. The Trust was organized as a Massachusetts business trust on July 1,
1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and Nuveen
Advisory Corp., respectively, the distributor ("Distributor") and investment
advisor ("Adviser") of the Fund, entered into an agreement under which Nuveen
acquired Flagship Resources Inc. and after the close of business on January 31,
1997, consolidated their respective mutual fund businesses. This agreement was
approved at a meeting by the shareholders of the Flagship Funds in December
1996.
After the close of business on January 31, 1997, Flagship Arizona Double Tax
Exempt Fund ("Flagship Arizona") and Nuveen Arizona Tax-Free Value Fund ("Nuveen
Arizona") reorganized into Nuveen Flagship Arizona Municipal Bond Fund ("Nuveen
Flagship Arizona"). Prior to the reorganization, Flagship Arizona was a sub-
trust of the Flagship Tax Exempt Funds Trust, while Nuveen Arizona was a series
of the Nuveen Multistate Tax Free Trust. Nuveen Arizona had a fiscal year end of
January 31 prior to being reorganized into Nuveen Flagship Arizona which has
retained the fiscal year end of Flagship Arizona.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved 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. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
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 have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1997, the Fund had no such purchase commitments.
23
<PAGE>
Notes to Financial Statements--continued
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
as 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 on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryovers. Prior to the
reorganization, tax-exempt net investment income for Flagship Arizona was
declared as a dividend daily and payment was made on the last business day of
each month.
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 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 net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Arizona state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. All
income dividends paid during the fiscal year ended May 31, 1997, have been
designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
Effective February 1, 1997, the Fund offers Class A, B, C and R Shares. Class A
Shares are sold with a sales charge and incur an annual 12b-1 service fee. Class
B Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class B Shares agrees to pay a contingent
deferred sales charge ("CDSC") of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class 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 CDSC of 1% if Class C Shares are redeemed within 18 months of purchase.
Class R Shares are not subject to any sales charge or 12b-1 distribution or
service fees. Class R Shares are available for purchases of over $1 million and
in other limited circumstances.
24
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the fiscal year ended May 31, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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.
25
<PAGE>
Notes to Financial Statements--continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Flagship
Arizona* Arizona
--------------------------------------------------
Year ended 5/31/97 Year ended 5/31/96
--------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization
of Nuveen Arizona:
Class A 491,617 $ 5,367,690 - $ -
Class B - - - -
Class C 48,608 530,721 - -
Class R 1,769,783 19,323,252 - -
Shares issued as a
capital contribution:
Class A 764 8,340 - -
Class B 764 8,340 - -
Class C 764 8,340 - -
Class R 764 8,340 - -
Shares sold:
Class A 712,114 7,768,419 987,074 10,720,918
Class B 30,949 339,939 N/A N/A
Class C 86,515 940,835 101,591 1,111,699
Class R 23,885 262,775 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 172,561 1,878,199 174,172 1,897,941
Class B 51 556 N/A N/A
Class C 6,676 72,706 3,779 41,210
Class R 13,166 143,271 N/A N/A
- -----------------------------------------------------------------------------------------------------
3,358,981 36,661,723 1,266,616 13,771,768
- -----------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,294,344) (14,116,042) (1,111,337) (12,066,428)
Class B - - N/A N/A
Class C (34,699) (378,684) (71,245) (763,295)
Class R (68,442) (746,791) N/A N/A
- -----------------------------------------------------------------------------------------------------
(1,397,485) (15,241,517) (1,182,582) (12,829,723)
- -----------------------------------------------------------------------------------------------------
Net increase 1,961,496 $ 21,420,206 84,034 $ 942,045
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Arizona and four months
of Nuveen Flagship Arizona (see note 1).
N/A -- Flagship Arizona was not authorized to issue Class B or Class R Shares.
26
<PAGE>
3. Distributions to Shareholders
On June 9, 1997, the Fund declared a dividend distribution from its tax-exempt
net investment income which was paid on July 1, 1997, to shareholders of record
on June 9, 1997, as follows:
Nuveen Flagship
Arizona
- --------------------------------------------------------------------------------
Dividend per share:
Class A $.0460
Class B .0395
Class C .0410
Class R .0480
- --------------------------------------------------------------------------------
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1997, were as follows:
Nuveen Flagship
Arizona*
- --------------------------------------------------------------------------------
Purchases
Investments in municipal securities $21,768,865
Investments in municipal securities
in the reorganization of Nuveen Arizona 23,499,139
Temporary municipal investments 1,100,000
Sales
Investments in municipal securities 27,766,685
Temporary municipal investments 1,100,000
- --------------------------------------------------------------------------------
* Information represents eight months of Flagship Arizona and four months of
Nuveen Flagship Arizona (see note 1).
At May 31, 1997, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for the Fund.
At May 31, 1997, the Fund had unused capital loss carryforwards of $36,219
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, $18,529 of the carryover will expire in the year
2002 and $17,690 will expire in the year 2003.
5. Unrealized Appreciation (Depreciation)
At May 31, 1997, net unrealized appreciation aggregated $6,481,175 of which
$6,530,057 related to appreciated securities and $48,882 related to depreciated
securities.
27
<PAGE>
Notes to Financial Statements -- continued
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the Fund as follows:
Average daily net asset value Management fee
- --------------------------------------------------------------------------------
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 net assets over $2 billion .4750 of 1
- --------------------------------------------------------------------------------
Prior to the reorganization (see note 1) Flagship Arizona paid a management fee
of .5 of 1%. 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
(Flagship Funds Inc., a wholly-owned subsidiary of Flagship Resources Inc.)
collected gross sales charges on purchases of Class A Shares of approximately
$144,600 of which approximately $125,000 were paid out as concessions to
authorized dealers. The Distributor and its predecessor also received 12b-1
service fees on Class A Shares, approximately one-half of which was paid to
compensate authorized dealers for providing services to shareholders relating to
their investments.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
compensated authorized dealers directly with approximately $51,000 in commission
advances at the time of purchase. To compensate for commissions advanced to
authorized dealers, all 12b-1 service fees collected on Class B Shares during
the first year following a purchase, all 12b-1 distribution fees collected on
Class B Shares, and all 12b-1 service and distribution fees on Class C Shares
during the first year following a purchase are retained by the Distributor. The
remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor and its predecessor also collected and retained approximately
$400 of CDSC on share redemptions during the fiscal year ended May 31, 1997.
28
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
7. Composition of Net Assets
At May 31, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
Nuveen Flagship
Arizona
- --------------------------------------------------------------------------------
Capital paid in $ 98,682,026
Balance of undistributed net investment income 7,691
Accumulated net realized gain (loss) from investment transactions (36,219)
Net unrealized appreciation of investments 6,481,175
- --------------------------------------------------------------------------------
Net assets $105,134,673
================================================================================
29
<PAGE>
Financial Highlights
Selected data for a common share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------- ------------------
NUVEEN FLAGSHIP ARIZONA ++ Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value(a)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
1997 $10.73 $.56 $ .27 $(.56) $(.06) $10.94 7.85%
1996 10.85 .57 (.12) (.57) - 10.73 4.21
1995 10.43 .58 .42 (.58) - 10.85 10.03
1994 10.81 .60 (.38) (.60) - 10.43 1.92
1993 10.13 .63 .69 (.64) - 10.81 13.37
1992 9.81 .65 .32 (.65) - 10.13 10.25
1991 9.60 .64 .21 (.64) - 9.81 9.19
1990 9.72 .64 (.12) (.64) - 9.60 5.53
1989 9.12 .64 .60 (.64) - 9.72 14.04
1988 9.12 .64 - (.64) - 9.12 7.45
Class B (2/97)
1997 (c) 10.92 .16 .02 (.16) - 10.94 1.64
Class C (2/94)
1997 10.73 .50 .27 (.50) (.06) 10.94 7.28
1996 10.84 .51 (.11) (.51) - 10.73 3.75
1995 10.43 .52 .41 (.52) - 10.84 9.32
1994 (c) 11.22 .14 (.79) (.14) - 10.43 (16.61)+
Class R (2/97)
1997 (c) 10.92 .19 .02 (.19) - 10.94 1.96
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Arizona.
(a) Total returns are calculated on net asset value without any
sales charge.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
30
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Ratios/Supplemental data
- --------------------------------------------------------------------------------
Ratio of net Ratio of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment (b) ment (b) rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$82,567 1.05% 4.91% .83% 5.13% 25%
80,094 1.07 4.82 .69 5.20 38
80,406 1.20 5.21 .82 5.59 27
82,676 1.09 5.03 .64 5.48 21
72,778 1.11 5.36 .44 6.03 20
51,123 1.20 5.79 .44 6.55 34
38,933 1.25 6.15 .78 6.62 18
32,066 1.25 6.23 .85 6.63 37
29,433 1.27 6.50 .92 6.85 37
33,696 1.17 6.65 .86 6.96 68
347 1.67+ 4.38+ 1.62+ 4.43+ 25
3,189 1.59+ 4.37 1.38+ 4.58+ 25
1,970 1.63 4.24 1.23 4.64 38
1,621 1.75 4.62 1.36 5.01 27
1,122 1.62+ 3.94+ 1.20+ 4.36+ 21
19,031 .73+ 5.32+ .67+ 5.38+ 25
- --------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
Nuveen Flagship Arizona Municipal Bond Fund:
We have audited the accompanying statement of net assets of Nuveen Flagship
Arizona Municipal Bond Fund, including the portfolio of investments, as of May
31, 1997, the related statement of operations for the period then ended and the
statement 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, 1997, by correspondence with the Fund's custodian. 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 Nuveen Flagship
Arizona Municipal Bond Fund at May 31, 1997, 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 11, 1997
32
<PAGE>
Shareholder Meeting Report
Flagship Arizona
<TABLE>
<CAPTION>
Directors A Shares C Shares
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Bremner For 6,044,382 184,410
Withhold 209,656 906
-----------------------------------------------
Total 6,254,038 185,316
- -------------------------------------------------------------------------------
Brown For 6,044,382 184,410
Withhold 209,656 906
-----------------------------------------------
Total 6,254,038 185,316
- -------------------------------------------------------------------------------
Dean For 6,044,382 184,410
Withhold 209,656 906
-----------------------------------------------
Total 6,254,038 185,316
- -------------------------------------------------------------------------------
Impellizzeri For 6,044,382 183,637
Withhold 209,656 1,679
-----------------------------------------------
Total 6,254,038 185,316
- -------------------------------------------------------------------------------
Rosenheim For 6,044,381 183,637
Withhold 209,657 1,679
-----------------------------------------------
Total 6,254,038 185,316
- -------------------------------------------------------------------------------
Sawers For 6,044,382 184,410
Withhold 209,656 906
-----------------------------------------------
Total 6,254,038 185,316
- -------------------------------------------------------------------------------
Schneider For 6,044,382 184,410
Withhold 209,656 906
-----------------------------------------------
Total 6,254,038 185,316
- -------------------------------------------------------------------------------
Schwertfeger For 6,044,382 184,410
Withhold 209,656 906
-----------------------------------------------
Total 6,254,038 185,316
- -------------------------------------------------------------------------------
Advisory Agreement For 5,171,787 123,810
Against 198,843 19,796
Abstain 301,693 6,523
-----------------------------------------------
Total 5,672,323 150,129
- -------------------------------------------------------------------------------
Broker Non Votes 581,715 35,187
- -------------------------------------------------------------------------------
12b-1 Plan For 5,114,018 127,093
Against 228,157 16,511
Abstain 330,151 6,523
-----------------------------------------------
Total 5,672,326 150,127
- -------------------------------------------------------------------------------
Broker Non Votes 581,712 35,189
- -------------------------------------------------------------------------------
Reorganization For 4,040,072 81,823
Against 144,276 13,880
Abstain 285,684 6,523
-----------------------------------------------
Total 4,470,032 102,226
- -------------------------------------------------------------------------------
Broker Non Votes 1,784,006 83,090
-----------------------------------------------
</TABLE>
33
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Municipal Bond Fund, contact your
financial adviser. If you would like to add to your current investment on a
monthly or semi-annual basis, you can sign up for Nuveen's systematic investing
program, which allows you to invest a fixed dollar amount every month
automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you gain the added growth potential of
long-term compounding.
For more information on any of these service options call your adviser, or
Nuveen at (800) 621-7227.
34
<PAGE>
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Boston Financial
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris, Shriver
& Jacobson
Washington, D.C.
Independent Auditors
Deloitte & Touche LLP
Dayton, Ohio
35
<PAGE>
Serving Investors
for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
[NUVEEN LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
<PAGE>
NUVEEN
Municipal
Bond Funds
May 31, 1997
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
Colorado
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Colorado Overview
9 Financial Section
29 Shareholder Meeting Report
32 Shareholder Information
33 Fund Information
<PAGE>
Dear Shareholder
It's a pleasure to report to you on the performance of the Nuveen Flagship
Colorado Municipal Bond Fund. Over the past year, the fund posted sizable gains.
For the fiscal year ended May 31, 1997, the value of your investment rose 9.22%
for Class A shares if you chose to reinvest your tax-free income dividends.
Over this 12-month period, the total return performance for the fund (with
income reinvested) outpaced the 8.28% increase produced by the Lehman Brothers
Municipal Bond Index, which is used to represent the broad municipal bond market
on an unmanaged basis.
In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds, which
provide excellent income for investors. As of May 31, 1997, shareholders were
receiving tax-free yields on net asset value of 4.95% for Class A shares. To
match this yield, investors in the 34.5% combined federal and state income tax
bracket would have had to earn at least 7.56% on taxable alternatives.
These results were produced against a backdrop of continued economic expansion
and the lowest unemployment rates in almost two decades, a combination that in
the past has foreshadowed an increase in inflation. In March, the Federal
Reserve made a pre-emptive strike by raising short-term interest rates by 0.25%,
but then maintained the status quo at its May and July meetings. Overall market
returns continue to be good, but fear of inflation has hampered the performance
of municipals and led to
[PHOTO OF Timothy R. Schwertfeger APPEARS HERE]
1
<PAGE>
"In addition to substantial total returns, shareholders
continue to enjoy very attractive current yields generated by a portfolio
of quality bonds."
increased volatility in both the equity and bond markets. During this time,
bonds have often been the bellwether for the direction of stocks. Whenever
inflation talk is at its most rampant, the stock market has kept an eye on the
bond market for its response before reacting.
In the first six months of the year, the markets also focused on fiscal issues,
including the federal budget accord and discussion of plans to reduce taxes and
eliminate the deficit. The economy appeared to be moderating, corporate earnings
reports continued to exhibit strength, and interest rates fell in the second
quarter. All of this was positive news. The net effect is that the markets are
better off now than at the beginning of the year, but the volatility experienced
in getting there has been significant.
Recently, the need for diversification and a renewed emphasis on asset
allocation--as well as attractive yields--have sparked increased interest in
tax-free investments. The current level of the stock market reminds investors
to re-allocate profits to other segments of the market in order to limit risk.
Nuveen municipal bond funds provide an excellent lower-risk alternative, and
their current yields make them very attractive.
On behalf of everyone at Nuveen, I thank you for your confidence in us and our
family of investments. You can continue to depend on us for high-quality
investments that withstand the test of time. We look forward to reporting to you
again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1997
2
<PAGE>
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, head of Nuveen's Dayton-based
portfolio management team, talks about the
municipal bond market and offers insights
into factors that affected fund performance
over the past year.
Answering Your Questions
What are the investment objectives of the fund?
The fund aims to provide investors with a high level of tax-free income while
preserving capital by investing in a diversified portfolio of high-quality
municipal bonds. To that end, we attempt to maximize the fundOs after-tax total
return by generating high tax-free income and minimizing the distribution of
taxable capital gains when possible.
What is your strategy for meeting these objectives?
To meet this fund's objectives of income and enhanced value, our portfolio
management strategy relies on conservative value investing principles, sound
research and credit surveillance activities, and senior management involvement.
At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates. This approach focuses on the characteristics of
individual bonds, such as sector, geographic region, structure and intrinsic
credit quality, rather than on the general economic environment. The idea behind
this philosophy is that we, as investment managers, can control the selection
process, but not the direction of the economy as a whole.
What key economic factors affected
the fund's performance during the year?
The U.S. economy continued to grow, exhibiting low unemployment, increased
manufacturing and construction activity, and lack of price pressure at the
consumer and producer levels. The fund had the added advantage of operating in a
healthy supply environment, where securities were available as needed.
3
<PAGE>
"At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates."
Given this market environment, how did the fund perform?
The Colorado Municipal Bond Fund performed well over the past year, rewarding
investors with a total return on net asset value for the year of 9.22% for Class
A shares, including price changes and reinvested dividends. Additionally, the
fund was ranked number one among 20 Colorado municipal bond funds for the one-
year period by Lipper Analytical Services, a nationally recognized performance
measurement service.
What strategies did you employ to add value?
As the spread between yields on higher and lower quality bonds continued to
narrow during the year, the fund was able to enhance credit quality without
sacrificing yield. As always, we focused on finding value in the marketplace
with attractively priced high-quality bonds. For example, we purchased a number
of zero-coupon bonds at a time when the market as a whole did not respond
favorably to zero-coupon issues. The fund has since been rewarded with solid
gains from these bonds, which proved to be a good value for the fund.
What is the current status of Colorado's
municipal market?
Strong demand for tax-exempt investments continues in Colorado. The state has
continued its economic recovery from the recession in the mid 1980s. As the
growth rates decline to a manageable level, the state will have the ability to
balance the level of infrastructure with the demands resulting from the
significant growth in population. The growth is also diversifying the economy,
primarily by increasing jobs in the services, trade, construction and high
technology sectors, which more than offset the jobs lost due to the closure of
some military bases. The improved economy is providing additional revenue to the
state that will fund capital improvements and maintenance, as well as additional
resources for education.
4
<PAGE>
What is the current outlook for the municipal market as a whole?
As we make our way through the seventh year of the current economic expansion,
some observers believe that a fundamental shift may have occurred in our
economy. Based on past experience and months of reports of economic growth,
especially employment statistics, the markets have long been anticipating an
increase in inflation. However, even with almost full employment, we have not
seen the expected rise in hourly wages that would be considered inflationary.
This change in the traditional economic cause-and-effect relationship has been
variously attributed to the globalization of the economy and consequent
competitive pressures, to increased use of technology, and to corporations'
recent ability to downsize as necessary. Whatever the cause, inflation has not
ignited. Although structural changes in the economy appear to have suspended the
relationship between faster growth and higher inflation, the risk remains that
inflation may reassert itself if capacity constraints are reached and resources
are stretched too thin.
Talk of Fed tightening will continue. If the Fed does act to increase rates, it
will be perceived as a move against inflation. If the Fed does not tighten, it
will be seen as an indication that the economy is doing well.
Nonetheless, for the remainder of 1997, the municipal market should continue to
offer the attractive yields and tax advantages that make it a good alternative
if and when a correction in the stock market occurs. While money continues to
flow into equity mutual funds, investors are also beginning to evaluate the
effect of the huge run-up in stock prices on their asset allocation, and many
are rebalancing their portfolios by shifting some assets into bonds.
5
<PAGE>
Colorado
Overview
CREDIT QUALITY
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 58%
AA 12%
A 5%
BBB/NR 26%
DIVERSIFICATION
[PIE CHART APPEARS HERE]
Hospitals 4%
Housing Facilities 16%
Escrowed Bonds 44%
Tax Revenue 3%
Transportation 11%
General Obligations 8%
Other 14%
<TABLE>
<CAPTION>
Fund Highlights
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share Class A B C R
Inception Date 5/87 2/97 2/97 2/97
- ------------------------------------------------------------------------------------------
Net Asset Value (NAV) $10.15 $10.16 $10.15 $ 10.16
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Total Net Assets ($000) $32,188
- ------------------------------------------------------------------------------------------
Average Weighted Maturity (years) 17.07
- ------------------------------------------------------------------------------------------
Average Weighted Duration (years) 9.68
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Share Class A(NAV) A(Offer) B C R
1-Year 9.22% 4.63% 8.67% 8.77% 9.38%
- ------------------------------------------------------------------------------------------
5-Year 7.40% 6.48% 6.82% 7.01% 7.43%
- ------------------------------------------------------------------------------------------
10-Year 7.57% 7.11% 7.10% 7.20% 7.59%
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.14% 4.93% 4.39% 4.60% 5.34%
- ------------------------------------------------------------------------------------------
SEC 30-Day Yld 4.95% 4.74% 4.20% 4.40% 5.15%
- ------------------------------------------------------------------------------------------
Taxable Equiv Yld/2/ 7.56% 7.24% 6.41% 6.72% 7.86%
- ------------------------------------------------------------------------------------------
</TABLE>
/1/ Return of the oldest share class of a fund are actual. Returns for other
classes are actual for the period since inception and prior to class
inception are the returns for the fund's oldest class, adjusted for
differences in sales charges and expenses. Class A shares have an initial
sales charge, while Class B, C and R shares have no initial sales charge.
Class B shares have a CDSC that declines from 5% to 0% after 6 years. Class
C shares have a 1% CDSC for redemptions within one year. Returns above do
not reflect imposition of the CDSC. Giving effect to the CDSC applicable to
Class B shares, the 1-year, 5-year, and 10-year total returns above would
be 4.67%, 6.67%, and 7.10%, respectively.
/2/ Based on SEC yield and a combined federal and state income tax rate of
34.5%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
6
<PAGE>
Nuveen Flagship Colorado Municipal Bond Fund
May 31, 1997 Annual Report
* The Index Comparison shows change in value of a $10,000 investment in the A
Shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares (4.20%) and all ongoing
fund expenses.
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers Nuveen Flagship Nuveen Flagship
Municipal Bond Colorado Municipal Colorado Municipal
Index Bond Fund (NAV) Bond Fund (Offer)
<S> <C> <C> <C>
May 1987 10000 10000 9580
May 1988 10898.1 10212.8 9783.85
May 1989 12150.6 11522.8 11038.8
May 1990 13039.7 12167.2 11656.2
May 1991 14353.9 13231.8 12676.1
May 1992 15764.1 14525.3 13915.2
May 1993 17650 16325.7 15640.1
May 1994 18085.8 16656.8 15957.2
May 1995 19732.8 18246.4 17480.1
May 1996 20634.7 19001.4 18203.4
May 1997 22534.8 20752.7 19881.1
<C>
-- Lehman Brothers Municipal Bond Index $22,535
-- Nuveen Flagship Colorado Municipal Bond Fund (NAV) $20,752
-- Nuveen Flagship Colorado Municipal Bond Fund (Offer) $19,881
</TABLE>
Past performance is not predictive of future performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
June 1996 0.04279
July 1996 0.04421
Aug. 1996 0.04421
Sept. 1996 0.04279
Oct. 1996 0.04421
Nov. 1996 0.04279
Dec. 1996 0.04421
Jan. 1997 0.04433
Feb. 1997 0.0435
Mar. 1997 0.0435
Apr. 1997 0.0435
May 1997 0.0435
</TABLE>
7
<PAGE>
Financial Section
Contents
10 Portfolio of Investments
15 Statement of Net Assets
16 Statement of Operations
17 Statement of Changes in Net Assets
18 Notes to Financial Statements
25 Financial Highlights
28 Independent Auditors' Report
9
<PAGE>
Portfolio of Investments
Nuveen Flagship Colorado
<TABLE>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed to Maturity -- 31.3%
$1,000,000 Adams County, Colorado, Multi County, Single Family No Opt. Call Aaa $ 341,160
Mortgage Revenue, Series 1985 A,
0.000%, 6/01/16
6,500,000 Arapahoe County, Colorado, Single Family Mortgage No Opt. Call AAA 3,191,500
Revenue, 1984 Series A, 0.000%, 9/01/10
7,500,000 Colorado, Health Facilities Authority, Retirement No Opt. Call AAA 1,157,175
Facilities Revenue, Liberty Heights, Series B,
0.000%, 7/15/24
900,000 Colorado Springs, Colorado, Utilities Revenue, No Opt. Call AAA 973,899
Utility Improvement, Series B, 6.600%, 11/15/18
3,000,000 El Paso County, Colorado, Single Family Mortgage No Opt. Call AAA 1,078,770
Revenue, Series A 1985, 0.000%, 5/01/15
4,300,000 El Paso County, Colorado, Single Family Mortgage No Opt. Call AAA 1,517,083
Revenue, Series 1984 A, 0.000%, 9/01/15
4,000,000 Mesa County, Colorado, Residual Revenue Refunding, No Opt. Call Aaa 1,823,640
0.000%, 12/01/11
- --------------------------------------------------------------------------------------------------------------------
Health Care -- 3.1%
1,000,000 Colorado, Health Facilities Authority, Revenue 1/07 at 101 N/R 1,003,840
Refunding, First Mortgage, Christian Living,
Series A, 7.050%, 1/01/19
- --------------------------------------------------------------------------------------------------------------------
Hospitals -- 0.8%
250,000 Pueblo County, Colorado, Hospital Facility Revenue, 9/01 at 101 AAA 270,095
Refunding, Series A, Parkview Episcopal,
7.000%, 9/01/09
- --------------------------------------------------------------------------------------------------------------------
Housing/Multi Family -- 9.9%
100,000 Aurora, Colorado, Multifamily Revenue, Dayton 7/98 at 103 AAA 105,109
Project, Series A, 8.250%, 1/20/29
1,500,000 Colorado, Housing Finance Authority, 10/06 at 102 AA 1,534,080
Multifamily Housing Insured Mortgage, Series C,
Issue 3, 6.250%, 10/01/38
500,000 Colorado, Housing Finance Authority, 4/05 at 102 AA 523,075
Multifamily Housing, Insured Mortgage, Series A,
6.650%, 10/01/28
1,000,000 Lakewood, Colorado, Multifamily Housing Revenue, 10/05 at 102 AAA 1,040,050
Mortgage, FHA Insured Mortgage Loan,
6.650%, 10/01/25
</TABLE>
10
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family--5.2%
$ 120,000 Colorado, Housing Finance Authority, Single Family 9/97 at 102 Aa1 $ 123,068
Residential Housing Revenue, Series A,
8.125%, 9/01/17
300,000 Colorado, Housing Finance Authority, Single Family 8/01 at 102 AA 314,679
Senior, Series C, Issue 2, 7.375%, 8/01/23
850,000 Colorado Housing Finance Authority, Single Family 8/01 at 102 Aa1 475,405
Housing, Series A, 0.000%, 11/01/06
170,000 Commerce City, Colorado, Single Family Mortgage, 3/02 at101 A 176,273
Revenue Refunding, Series A, 6.875%, 3/01/12
130,000 Pueblo County, Colorado, Single Family Mortgage 6/02 at 102 AA- 134,667
Revenue, Series A, 6.850%, 12/01/25
440,000 Pueblo County, Colorado, Single Family Mortgage, 11/04 at 102 AAA 463,144
Revenue Refunding, Mortgage-Backed Securities,
Series A, 7.050%,11/01/27
- --------------------------------------------------------------------------------------------------------------------
Industrial Development and Pollution Control--1.6%
500,000 Denver, Colorado,City and County Special Facilities, 10/02 at 102 Baa3 524,395
Airport Revenue, United Air Lines Project, Series A,
6.875%, 10/01/32
- --------------------------------------------------------------------------------------------------------------------
Municipal Appropriation Obligations--2.3%
500,000 El Paso County, Colorado, School District 12/01 at 101 AAA 543,250
Number 38, Certificates of Participation, Colorado
Association of School Boards Finance, Series 1992A,
6.900%, 12/01/13
175,000 Jefferson County, Colorado, Certificates of 12/02 at 102 AAA 192,967
Participation, Refunding, 6.650%, 12/01/08
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Other--4.9%
1,500,000 Hyland Hills, Metropolitan Park and Recreation 12/06 at 101 N/R 1,573,815
District, Colorado Special Revenue, Refunding and
Improvement, Series A, 6.750%, 12/15/15
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Transportation--11.2%
4,300,000 Arapahoe County, Colorado, Capital Improvement, 8/05 at 95 Baa 2,542,977
Tollroad Fund, Highway Revenue, Issue E,
470 Series C, 0.000%, 8/31/06
1,000,000 Eagle County, Colorado, Air Terminal Corporation 5/06 at 101 N/R 1,038,070
Revenue, Airport Terminal Project, 7.500%, 5/01/21
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Colorado -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Utility--1.4%
<C> <S> <C> <C> <C>
$ 500,000 Puerto Rico, Electric Power Authority, Power Revenue, 7/05 at 100 BBB+ $ 465,440
Formerly Puerto Rico Commonwealth Water
Resource Authority Power, Refunding, Series Z,
5.250%, 7/01/21
- -------------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Water and Sewer--0.4%
120,000 Colorado Water Resource and Power Development 11/02 at 100 AAA 130,018
Authority, Small Water Resource Revenue,
Series A, 6.700%, 11/01/12
- -------------------------------------------------------------------------------------------------------------------------
Non-State General Obligations--8.2%
450,000 Cherry Creek, Vista Park and Recreation District, 10/02 at 100 N/R 478,130
Colorado, Refunding and Improvement,
Series B, 6.875%, 10/01/11
500,000 El Paso and Elbert Counties, Colorado, School District 12/05 at 100 A 551,950
Number RJ, 1 Elpaso, 6.800%, 12/01/14
El Paso County, Colorado, School District Number 3
Widefield, Series A:
1,025,000 0.000%, 12/15/07 12/05 at 92 AAA 592,952
1,020,000 0.000%, 12/15/08 12/05 at 86 AAA 553,952
250,000 Pitkin County, Colorado, Refunding and Improvement, 12/04 at 102 A 277,410
6.875%, 12/01/24
190,000 Valley Metropolitan District, Colorado, Jefferson 12/00 at 101 Baa 199,838
County Refunding, 7.000%, 12/15/06
- -------------------------------------------------------------------------------------------------------------------------
Pre-refunded--12.2%***
175,000 Aspen, Colorado, Certificates of Participation, 9/98 at 105 1/2 AAA 182,165
7.000%, 9/01/09
200,000 Boulder, Colorado, Municipal Property Authority, Lease 12/97 at 101 AAA 205,642
Purchase Revenue, Series B, 7.400%, 12/01/02
100,000 Colorado, Association Of School Boards, Certificates 12/99 at 101 AAA 107,816
of Participation, Pueblo School District Number 60
Project, Series A, 7.250%, 12/01/09
300,000 Colorado, Health Facilities Authority, Revenue, Rose 8/01 at 102 AAA 332,250
Medical Center, 7.000%, 8/15/21
350,000 Colorado, Health Facilities Authority, Revenue, 9/97 at 101 N/R 358,047
Bethesda Psychealth Project, 9.125%, 9/01/17
100,000 Colorado, State Board, Agricultural Revenue, Colorado 4/98 at 102 AAA 105,140
State University, Sports Recreation Facilities,
7.700%, 4/01/09
</TABLE>
12
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
Pre-refunded--continued
<C> <S> <C> <C> <C>
$ 300,000 Colorado, Water Resource Power Development 11/99 at 100 N/R $ 324,336
Authority, Water Power Revenue, Stagecoach
Project, 8.000%, 11/01/17
250,000 Denver, Colorado, City and County Industrial 3/01 at 102 AAA 279,515
Development, Revenue, University Of Denver
Project, 7.500%, 3/01/16
350,000 Denver, Colorado, City and County Revenue, Mercy 5/98 at 102 AAA 368,851
Medical Center Project, 7.700%, 5/01/07
100,000 El Paso County, Colorado, Revenue Refunding, 5/98 at 102 AAA 105,429
St.Francis Hospital System, 7.750%, 5/01/14
250,000 Fountain Valley Authority, Colorado, Water Treatment 6/01 at 100 AA 269,948
Revenue, 6.800%, 12/01/19
250,000 Logan County, Colorado, HealthCare Facilities, 1/99 at 102 AAA 267,373
Revenue, Western Health Network, Series A,
Issue 7, 7.625%, 1/01/19
300,000 Parker, Colorado, Sales and Use Tax, Revenue 11/00 at 100 N/R 330,402
Improvement, Series B, 7.600%, 11/01/10
100,000 Regional Transportation District, Colorado, Sales Tax 11/00 at 101 AAA 109,126
Revenue, 7.100%, 11/01/10
175,000 Thornton, Colorado, Sales and Use Tax, Revenue, 9/97 at 100 AAA 176,855
Series D, 8.000%, 9/01/07
100,000 University of Colorado, Certificates of Participation, 12/98 at 102 A2 106,550
Series D, Colorado Association of School Boards,
Lease Purchase Finance Program,
7.400%, 12/01/05
250,000 University of Colorado, University Revenues, Auxiliary 6/00 at 101 A1 269,723
Facilities System, Boulder Projects,
7.050%, 6/01/15
- -----------------------------------------------------------------------------------------------------------------------
Special Tax Revenue--3.2%
200,000 Mesa County, Colorado, Sales Tax, Revenue Refunding, 12/98 at 100 AAA 210,012
7.750%, 12/01/13
750,000 Woodland Park, Colorado, Limited Sales Tax, Revenue 12/03 at 101 AA 799,155
Refunding, Series B, 6.400%, 12/01/12
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Colorado -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Student Loan Revenue Bonds--2.2%
$ 400,000 Colorado, Student Obligation Bond Authority, Student 9/00 at 100 A $ 416,740
Loan, Revenue, Series A, Issue 3, 7.250%, 9/01/05
250,000 Colorado, Student Obligation Bond Authority, Student 9/02 at 102 A 264,943
Loan, Revenue, Series C, 7.150%, 9/01/06
- ----------------------------------------------------------------------------------------------------------------------
$ 50,840,000 Total Investments--(cost $29,444,945)--97.9% 31,501,894
- ----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--2.1% 686,086
- ----------------------------------------------------------------------------------------------------------------------
Net Assets--100% $ 32,187,980
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions (not covered by the report of independent
auditors): 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 auditors): Using the
higher of Standard and Poor's or MoodyOs rating.
***Pre-refunded securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency securities, which
ensures the timely payment of principal and interest. Pre-refunded
securities are normally considered to be equivalent to AAA rated
securities.
N/R--Investment is not rated.
14 See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Nuveen Municipal Bond Fund
May 31, 1997 May 31, 1997 Annual Report
Nuveen Flagship
Colorado
- -----------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $ 31,501,894
Cash 293,380
Receivables:
Interest 329,455
Shares sold 10,541
Investments sold 260,102
Other assets 1,399
- -----------------------------------------------------------------------------------------
Total assets 32,396,771
- -----------------------------------------------------------------------------------------
Liabilities
Payable for shares redeemed 20,750
Accrued expenses:
Management fees (note 6) 4,161
12b-1 distribution and service fees (notes 1 and 6) 5,281
Other 41,126
Dividends payable 137,473
- -----------------------------------------------------------------------------------------
Total liabilities 208,791
- -----------------------------------------------------------------------------------------
Net assets (note 7) $ 32,187,980
- -----------------------------------------------------------------------------------------
Class A Shares (note 1)
Net assets $ 31,228,876
Shares outstanding 3,077,488
Net asset value and redemption price per share $ 10.15
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.59
- -----------------------------------------------------------------------------------------
Class B Shares (note 1)
Net assets $ 443,523
Shares outstanding 43,643
Net asset value, offering and redemption price per share $ 10.16
- -----------------------------------------------------------------------------------------
Class C Shares (note 1)
Net assets $ 102,955
Shares outstanding 10,147
Net asset value, offering and redemption price per share $ 10.15
- -----------------------------------------------------------------------------------------
Class R Shares (note 1)
Net assets $ 412,626
Shares outstanding 40,627
Net asset value, offering and redemption price per share $ 10.16
- -----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
Year ended May 31, 1997
Nuveen Flagship
Colorado*
- -----------------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $ 1,955,618
- -----------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 166,812
12b-1 service fees--Class A (notes 1 and 6) 107,814
12b-1 distribution and service fees--Class B (notes 1 and 6) 414
12b-1 distribution and service fees--Class C (notes 1 and 6) 211
Shareholders' servicing agent fees and expenses 18,693
Custodian's fees and expenses 50,804
Trustees' fees and expenses (note 6) 940
Professional fees 12,532
Shareholders' reports--printing and mailing expenses 3,793
Federal and state registration fees 1,407
Organizational expenses (note 1) 16,717
Other expenses 1,797
- -----------------------------------------------------------------------------------------
Total expenses before reimbursement 381,934
Expense reimbursement from investment adviser (note 6) (142,072)
- -----------------------------------------------------------------------------------------
Net expenses 239,862
- -----------------------------------------------------------------------------------------
Net investment income 1,715,756
- -----------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 64,238
Net change in unrealized appreciation or depreciation of investments 1,095,182
- -----------------------------------------------------------------------------------------
Net gain from investments 1,159,420
- -----------------------------------------------------------------------------------------
Net increase in net assets from operations $ 2,875,176
- -----------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Colorado and four months of
Nuveen Flagship Colorado (see note 1 of the Notes to Financial Statements).
16
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Nuveen Flagship Flagship
Colorado* Colorado
----------------------------------------------
Year ended 5/31/97 Year ended 5/31/96
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,715,756 $ 1,875,792
Net realized gain from investment transactions
(notes 1 and 4) 64,238 86,320
Net change in unrealized appreciation or depreciation
of investments 1,095,182 (554,501)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,875,176 1,407,611
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,687,245) (1,893,445)
Class B (1,292) N/A
Class C (1,256) --
Class R (2,521) N/A
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (1,692,314) (1,893,445)
- ---------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 5,390,547 4,177,017
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 767,704 901,092
- ---------------------------------------------------------------------------------------------------------------------------
6,158,251 5,078,109
- ---------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (8,789,634) (5,847,745)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (2,631,383) (769,636)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (1,448,521) (1,255,470)
Net assets at the beginning of year 33,636,501 34,891,971
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 32,187,980 $ 33,636,501
- ---------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of year $ 23,442 $ --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Colorado and four months of
Nuveen Flagship Colorado (see note 1 of the Notes to Financial Statements).
N/A--Flagship Colorado was not authorized to issue Class B or Class R Shares.
17 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Colorado Municipal Bond Fund (the "Fund"), among
others. The Trust was organized as a Massachusetts business trust on July 1,
1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and Nuveen
Advisory Corp., respectively, the distributor ("Distributor") and investment
advisor ("Adviser") of the Fund, entered into an agreement under which Nuveen
acquired Flagship Resources Inc. and after the close of business on January 31,
1997, consolidated their respective mutual fund businesses. This agreement was
approved at a meeting by the shareholders of the Flagship Funds in December
1996.
After the close of business on January 31, 1997, Flagship Colorado Double Tax
Exempt Fund ("Flagship Colorado") was reorganized into the Trust and renamed
Nuveen Flagship Colorado Municipal Bond Fund ("Nuveen Flagship Colorado").
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved 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. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
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 have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1997, the Fund had no such purchase commitments.
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.
18
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
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 on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryovers. Prior to the
reorganization, tax-exempt net investment income for Flagship Colorado was
declared as a dividend daily and payment was made on the last business day of
each month.
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 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 net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Colorado state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. All
income dividends paid during the fiscal year ended May 31, 1997, have been
designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class B, C and R Shares were first
offered for sale on February 1, 1997. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class B Shares are sold without a
sales charge but incur annual 12b-1 distribution and service fees. An investor
purchasing Class B Shares agrees to pay a contingent deferred sales charge
("CDSC") of up to 5% depending upon the length of time the shares are held by
the investor (CDSC is reduced to 0% at the end of six years). Class 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 CDSC of 1% if
Class C Shares are redeemed within 18 months of purchase. Class R Shares are not
subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
19
<PAGE>
Notes to Financial Statements--continued
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the fiscal year ended May 31, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
include 12b-1 distribution and service fees, are recorded to the specific class.
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.
Organizational Expenses
The organizational expenses incurred on behalf of the Fund (approximately
$83,600) are being reimbursed to the Adviser on a straight-line basis over a
period of five years. As of May 31, 1997 $66,914 has been reimbursed. In the
event that the Adviser'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.
20
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Colorado* Flagship Colorado
----------------------------------------------------
Year ended Year ended
5/31/97 5/31/96
----------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 442,011 $ 4,440,932 416,678 $ 4,177,017
Class B 43,588 440,150 N/A N/A
Class C 10,094 102,708 -- --
Class R 40,559 406,757 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 76,620 765,931 90,419 901,092
Class B 55 553 N/A N/A
Class C 53 536 -- --
Class R 68 684 N/A N/A
- ---------------------------------------------------------------------------------------------
613,048 6,158,251 507,097 5,078,109
- ---------------------------------------------------------------------------------------------
Shares redeemed:
Class A (877,171) (8,789,634) (586,370) (5,847,745)
Class B -- -- N/A N/A
Class C -- -- -- --
Class R -- -- N/A N/A
- ---------------------------------------------------------------------------------------------
(877,171) (8,789,634) (586,370) (5,847,745)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) (264,123) $(2,631,383) (79,273) $ (769,636)
- ----------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Colorado and four months of
Nuveen Flagship Colorado (see note 1).
N/A--Flagship Colorado was not authorized to issue Class B or Class R shares.
21
<PAGE>
Notes to Financial Statements--continued
3. Distributions to Shareholders
On June 9, 1997, the Fund declared a dividend distribution from its tax-exempt
net investment income which was paid on July 1, 1997, to shareholders of record
on June 9, 1997, as follows:
<TABLE>
<CAPTION>
Nuveen Flagship
Colorado
- ------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $ .0435
Class B .0370
Class C .0390
Class R .0450
- ------------------------------------------------------------------
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship
Colorado*
- ------------------------------------------------------------------
<S> <C>
Purchases
Investments in municipal securities $ 8,525,203
Temporary municipal investments 1,500,000
Sales
Investments in municipal securities 12,494,924
Temporary municipal investments 1,500,000
- ------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Colorado and four months of
Nuveen Flagship Colorado (see note 1).
At May 31, 1997, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund had an unused capital loss carryforward of $495,637
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, the carryover will expire in the year 2003.
5. Unrealized Appreciation (Depreciation)
At May 31, 1997, unrealized appreciation aggregated $2,056,949,
all of which related to appreciated securities.
22
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the Fund as follows:
<TABLE>
<CAPTION>
Average daily net asset value 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 net assets over $2 billion .4750 of 1
- --------------------------------------------------------------
</TABLE>
Prior to the reorganization (see note 1) Flagship Colorado paid a management fee
of .5 of 1%. 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
(Flagship Funds Inc., a wholly-owned subsidiary of Flagship Resources Inc.)
collected gross sales charges on purchases of Class A Shares of approximately
$78,300, of which approximately $67,900 were paid out as concessions to
authorized dealers. The Distributor and its predecessor also received 12b-1
service fees on Class A Shares, approximately one-half of which was paid to
compensate authorized dealers for providing services to shareholders relating to
their investments.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
compensated authorized dealers directly with approximately $20,200 in commission
advances at the time of purchase. To compensate for commissions advanced to
authorized dealers, all 12b-1 service fees collected on Class B Shares during
the first year following a purchase, all 12b-1 distribution fees on Class B
Shares, and all 12b-1 service and distribution fees on Class C Shares during the
first year following a purchase are retained by the Distributor. The remaining
12b-1 fees charged to the Fund were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
23
<PAGE>
Notes to Financial Statements -- continued
7. Composition of Net Assets
At May 31, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Nuveen Flagship
Colorado
- ----------------------------------------------------------------------------------
<S> <C>
Capital paid-in $ 30,609,685
Balance of undistributed net investment income 23,442
Accumulated net realized gain (loss) from investment transactions (502,096)
Net unrealized appreciation of investments 2,056,949
- ----------------------------------------------------------------------------------
Net assets $ 32,187,980
- ----------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
Financial Highlights
25
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
------------------------ --------------------------
Net
NUVEEN FLAGSHIP COLORADO++ Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value or net
Year ending beginning investment from investment from capital end of asset
May 31, of period income(b) investments income gains period value (a)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (5/87)
1997 $ 9.79 $.53 $ .35 $(.52) $ -- $10.15 9.22%
1996 9.93 .54 (.13) (.55) -- 9.79 4.14
1995 9.62 .57 .30 (.56) -- 9.93 9.54
1994 10.04 .58 (.37) (.58) (.05) 9.62 2.03
1993 9.56 .60 .55 (.60) (.07) 10.04 12.41
1992 9.29 .61 .27 (.61) -- 9.56 9.80
1991 9.13 .60 .17 (.61) -- 9.29 8.75
1990 9.24 .62 (.12) (.61) -- 9.13 5.59
1989 8.78 .63 .46 (.63) -- 9.24 12.83
1988 9.27 .62 (.46) (.65) -- 8.78 2.13
Class B (2/97)
1997(c) 10.21 .12 (.06) (.11) -- 10.16 .61
Class C (2/97)
1997(c) 10.13 .16 .02 (.16) -- 10.15 1.75
Class R (2/97)
1997(c) 10.21 .15 (.06) (.14) -- 10.16 .85
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Colorado.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory, or its predecessor, Flagship Financial.
(c) From commencement of class operations as noted.
26
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Ratios/Supplemental data
- ---------------------------------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment(b) ment(b) rate
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$31,229 1.18% 4.87% .74% 5.31% 27%
33,637 1.27 4.69 .55 5.41 70
34,982 1.27 5.22 .50 5.99 38
35,796 1.27 4.81 .37 5.71 42
26,656 1.35 5.11 .41 6.05 30
15,699 1.51 5.40 .49 6.42 39
9,108 1.80 5.66 .84 6.62 29
7,386 1.87 5.70 .87 6.70 16
7,545 2.10 5.61 .67 7.04 19
7,561 1.54 6.04 .55 7.03 138
444 1.78+ 4.35+ 1.53+ 4.60+ 27
103 1.58+ 4.67+ 1.31+ 4.94+ 27
413 .83+ 5.35+ .58+ 5.60+ 27
- ---------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
Nuveen Flagship Colorado Municipal Bond Fund:
We have audited the accompanying statement of net assets of Nuveen Flagship
Colorado Municipal Bond Fund, including the portfolio of investments, as of May
31, 1997, the related statement of operations for the period then ended and the
statement 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, 1997, by correspondence with the Fund's custodian. 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 Nuveen Flagship
Colorado Municipal Bond Fund at May 31, 1997, 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 11, 1997
28
<PAGE>
Shareholder Meeting Report
Flagship Colorado
<TABLE>
<CAPTION>
A Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Agreement For 2,479,861
Against 54,425
Abstain 27,327
-----------------------------------------------
Total 2,561,613
- --------------------------------------------------------------------------------
Broker Non Votes 115,259
- --------------------------------------------------------------------------------
Reorganization For 1,706,353
Against 55,094
Abstain 33,626
-----------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
- --------------------------------------------------------------------------------
Investment Objective For 1,697,265
Against 88,206
Abstain 9,602
-----------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
- --------------------------------------------------------------------------------
Investment Assets For 1,694,195
Against 91,277
Abstain 9,602
-----------------------------------------------
Total 1,795,074
- --------------------------------------------------------------------------------
Broker Non Votes 881,798
- --------------------------------------------------------------------------------
Type of Securities For 1,703,702
Against 81,769
Abstain 9,602
-----------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
- --------------------------------------------------------------------------------
Borrowing For 1,692,732
Against 92,739
Abstain 9,602
-----------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
- --------------------------------------------------------------------------------
Pledges For 1,703,702
Against 81,769
Abstain 9,602
-----------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
- --------------------------------------------------------------------------------
Senior Securities For 1,703,702
Against 81,769
Abstain 9,602
-----------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
- --------------------------------------------------------------------------------
Underwriting For 1,697,396
Against 88,075
Abstain 9,602
-----------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
-----------------------------------------------
</TABLE>
29
<PAGE>
Shareholder Meeting Report
Flagship Colorado--continued
<TABLE>
<S> <C> <C>
A Shares
- --------------------------------------------------------------------------------
Real Estate For 1,688,018
Against 92,589
Abstain 14,466
------------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
- --------------------------------------------------------------------------------
Commodities For 1,689,407
Against 91,201
Abstain 14,466
------------------------------------------------
Total 1,795,074
- --------------------------------------------------------------------------------
Broker Non Votes 881,798
- --------------------------------------------------------------------------------
Loans For 1,688,018
Against 92,589
Abstain 14,466
------------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
- --------------------------------------------------------------------------------
Short Sales/Margin Purchases For 1,673,991
Against 106,617
Abstain 14,466
------------------------------------------------
Total 1,795,074
- --------------------------------------------------------------------------------
Broker Non Votes 881,798
- --------------------------------------------------------------------------------
Put and Call Options For 1,679,290
Against 96,184
Abstain 19,600
------------------------------------------------
Total 1,795,074
- --------------------------------------------------------------------------------
Broker Non Votes 881,798
- --------------------------------------------------------------------------------
Industry Concentration For 1,684,764
Against 96,795
Abstain 13,515
------------------------------------------------
Total 1,795,074
- --------------------------------------------------------------------------------
Broker Non Votes 881,798
- --------------------------------------------------------------------------------
Affiliate Purchases For 1,689,797
Against 90,811
Abstain 14,466
------------------------------------------------
Total 1,795,074
- --------------------------------------------------------------------------------
Broker Non Votes 881,798
- --------------------------------------------------------------------------------
Investment Companies For 1,681,384
Against 94,474
Abstain 19,215
------------------------------------------------
Total 1,795,073
- --------------------------------------------------------------------------------
Broker Non Votes 881,799
- --------------------------------------------------------------------------------
Div vs. Non-Div For 1,636,902
Against 106,617
Abstain 49,123
------------------------------------------------
Total 1,792,642
- --------------------------------------------------------------------------------
Broker Non Votes 884,230
- --------------------------------------------------------------------------------
12b-1 Fees For 2,371,127
Against 100,740
Abstain 59,746
------------------------------------------------
Total 2,531,613
- --------------------------------------------------------------------------------
Broker Non Votes 145,259
------------------------------------------------
</TABLE>
30
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
A Shares
- -----------------------------------------
Directors
- -----------------------------------------
<S> <C> <C>
(A) Bremner For 2,576,466
Withhold 100,406
--------------------
Total 2,676,872
- -----------------------------------------
(B) Brown For 2,576,466
Withhold 100,406
--------------------
Total 2,676,872
- -----------------------------------------
(C) Dean For 2,576,466
Withhold 100,406
--------------------
Total 2,676,872
- -----------------------------------------
(D) Impellizzeri For 2,576,466
Withhold 100,406
--------------------
Total 2,676,872
- -----------------------------------------
(E) Rosenheim For 2,576,466
Withhold 100,406
--------------------
Total 2,676,872
- -----------------------------------------
(F) Sawers For 2,576,466
Withhold 100,406
--------------------
Total 2,676,872
- -----------------------------------------
(G) Schneider For 2,576,466
Withhold 100,406
--------------------
Total 2,676,872
- -----------------------------------------
(H) Schwertfeger For 2,576,466
Withhold 100,406
--------------------
Total 2,676,872
--------------------
</TABLE>
31
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Municipal Bond Fund, contact your
financial adviser. If you would like to add to your current investment on a
monthly or semi-annual basis, you can sign up for Nuveen's systematic investing
program, which allows you to invest a fixed dollar amount every month
automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you gain the added growth potential of
long-term compounding.
For more information on any of these service options call your adviser, or
Nuveen at (800) 621-7227.
32
<PAGE>
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Boston Financial
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris, Shriver
& Jacobson
Washington, D.C.
Independent Auditors
Deloitte & Touche LLP
Dayton, Ohio
33
<PAGE>
Serving Investors
for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
[ARTWORK OF JOHN NUVEEN, SR.]
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
VAN-CO 5-97
<PAGE>
NUVEEN
Municipal
Bond Funds
May 31, 1997
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
New Mexico
[PHOTO APPEARS HERE]
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 New Mexico Overview
9 Financial Section
27 Shareholder Meeting Report
31 Shareholder Information
32 Fund Information
<PAGE>
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Dear Shareholder
It's a pleasure to report to you on the performance of the Nuveen Flagship New
Mexico Municipal Bond Fund. Over the past year, the fund posted sizable gains.
For the fiscal year ended May 31, 1997, the value of your investment rose 8.90%
for Class A shares, if you chose to reinvest your tax-free income dividends.
Over this 12-month period, the total return performance for the fund (with
income reinvested) outpaced the 8.28% increase produced by the Lehman Brothers
Municipal Bond Index, which is used to represent the broad municipal bond market
on an unmanaged basis.
In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds, which
provide excellent income for investors. As of May 31, 1997, shareholders were
receiving tax-free yields on net asset value of 4.93% for Class A shares. To
match this yield, investors in the 37% combined federal and state income tax
bracket would have had to earn at least 7.83% on taxable alternatives.
These results were produced against a backdrop of continued economic expansion
and the lowest unemployment rates in almost two decades, a combination that in
the past has foreshadowed an increase in inflation. In March, the Federal
Reserve made a pre-emptive strike by raising short-term interest rates by 0.25%,
but then maintained the status quo at its May and July meetings. Overall market
returns continue to be good, but fear of inflation has
1
<PAGE>
"In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds."
hampered the performance of municipals and led to increased volatility in both
the equity and bond markets. During this time, bonds have often been the
bellwether for the direction of stocks. Whenever inflation talk is at its most
rampant, the stock market has kept an eye on the bond market for its response
before reacting.
In the first six months of the year, the markets also focused on fiscal issues,
including the federal budget accord and discussion of plans to reduce taxes and
eliminate the deficit. The economy appeared to be moderating, corporate earnings
reports continued to exhibit strength, and interest rates fell in the second
quarter. All of this was positive news. The net effect is that the markets are
better off now than at the beginning of the year, but the volatility experienced
in getting there has been significant.
Recently, the need for diversification and a renewed emphasis on asset
allocation--as well as attractive yields--have sparked increased interest in
tax-free investments. The level current of the stock market reminds investors to
re-allocate profits to other segments of the market in order to limit risk.
Nuveen municipal bond funds provide an excellent lower-risk alternative, and
their current yields make them very attractive.
On behalf of everyone at Nuveen, I thank you for your confidence in us and our
family of investments. You can continue to depend on us for high-quality
investments that withstand the test of time. We look forward to reporting to you
again in six months.
Sincerely,
/s/Timothy R. Schwertfeger
Chairman of the Board
July 15, 1997
2
<PAGE>
Answering Your Questions
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, head of Nuveen's Dayton-based portfolio management team, talks about
the municipal bond market and offers insights into factors that affected fund
performance over the past year.
What are the investment objectives of the fund?
The fund aims to provide investors with a high level of tax-free income while
preserving capital by investing in a diversified portfolio of high-quality
municipal bonds. To that end, we attempt to maximize the fund's after-tax total
return by generating high tax-free income and minimizing the distribution of
taxable capital gains when possible.
What is your strategy for meeting these objectives?
To meet this fund's objectives of income and enhanced value, our portfolio
management strategy relies on conservative value investing principles, sound
research and credit surveillance activities, and senior management involvement.
At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates. This approach focuses on the characteristics of
individual bonds, such as sector, geographic region, structure and intrinsic
credit quality, rather than on the general economic environment. The idea behind
this philosophy is that we, as investment managers, can control the selection
process, but not the direction of the economy as a whole.
What key economic factors affected
the fund's performance during the year?
The U.S. economy continued to grow, exhibiting low unemployment, increased
manufacturing and construction activity, and lack of price pressure at the
consumer and producer levels.
3
<PAGE>
"At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates."
Given this market environment, how did the fund perform?
The New Mexico Municipal Bond Fund performed well over the past year, rewarding
investors with a total return on net asset value for the year of 8.90% for Class
A shares, including price changes and reinvested dividends. Additionally, the
fund was ranked third among 62 state municipal bond funds for the one-year
period by Lipper Analytical Services, a nationally recognized performance
measurement service.
What strategies did you employ to add value?
As the spread between yields on higher and lower quality bonds continued to
narrow during the year, we were able to enhance the credit quality of the fund
without sacrificing yield. In addition, we focused on finding bonds with strong
call protection, such as the recent purchase of bonds from the University of New
Mexico that are not callable until the year 2021. We also took advantage of
high-quality limited issues that, in our view, had been overlooked by the market
as a whole.
What is the current status of New Mexico's
municipal market?
New Mexico continues to benefit from a stable economy and low housing and labor
costs. The services, manufacturing and construction sectors are continuing to
fuel a statewide economic expansion that began in the early 1980s. However, the
economic expansion has not translated into a relative increase in income levels.
The governor has proposed a plan to support long-term economic growth within the
state by improving local infrastructure and lowering taxes. While these
proposals should help continue the economic expansion, the relative trading
levels of New Mexico municipal bonds could be lowered as a result. The state's
municipal bond market is currently strong because of the limited supply of new
bonds.
4
<PAGE>
What is the current outlook for the municipal market as a whole?
As we make our way through the seventh year of the current economic expansion,
some observers believe that a fundamental shift may have occurred in our
economy. Based on past experience and months of reports of economic growth,
especially employment statistics, the markets have long been anticipating an
increase in inflation. However, even with almost full employment, we have not
seen the expected rise in hourly wages that would be considered inflationary.
This change in the traditional economic cause-and-effect relationship has been
variously attributed to the globalization of the economy and consequent
competitive pressures, to increased use of technology, and to corporations'
recent ability to downsize as necessary. Although structural changes in the
economy appear to have suspended the relationship between faster growth and
higher inflation, the risk remains that inflation may reassert itself if
capacity constraints are reached and resources are stretched too thin.
Talk of Fed tightening will continue. If the Fed does act to increase rates, it
will be perceived as a move against inflation. If the Fed does not tighten, it
will be seen as an indication that the economy is doing well.
Nonetheless, for the remainder of 1997, the municipal market should continue to
offer the attractive yields and tax advantages that make it a good alternative
if and when a correction in the stock market occurs. While money continues to
flow into equity mutual funds, investors are also beginning to evaluate the
effect of the huge run-up in stock prices on their asset allocation, and many
are rebalancing their portfolios by shifting some assets into bonds.
5
<PAGE>
New Mexico
Overview
Credit Quality
[PIE CHART APPEARS HERE]
BBB/NR 15%
A 16%
AA 13%
AAA/Prerefunded 56%
- -----------------------
Diversification
[PIE CHART APPEARS HERE]
Hospitals 8%
Tax Revenue 23%
General Obligations 8%
Housing Facilities 14%
Pollution control 4%
Education 17%
Utility 9%
Other 14%
Escrowed Bonds 3%
- -----------------------
Fund Highlights
<TABLE>
<CAPTION>
=======================================================================================================
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 9/92 2/97 2/97 2/97
.......................................................................................................
Net Asset Value (NAV) $10.16 $10.15 $10.16 $ 10.17
- -------------------------------------------------------------------------------------------------------
Total Net Assets ($000) $51,981
.......................................................................................................
Average Weighted Maturity (years) 19.61
.......................................................................................................
Duration (years) 9.08
- -------------------------------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/1/
<TABLE>
<CAPTION>
========================================================================================================
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 8.90% 4.33% 8.14% 8.47% 9.06%
........................................................................................................
Since Inception 6.67% 5.71% 6.05% 6.28% 6.71%
- --------------------------------------------------------------------------------------------------------
Tax-Free Yields
========================================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 4.96% 4.75% 4.22% 4.42% 5.16%
........................................................................................................
SEC 30-Day Yld 4.93% 4.72% 4.18% 4.38% 5.13%
........................................................................................................
Taxable Equiv Yld/2/ 7.83% 7.49% 6.63% 6.95% 8.14%
- --------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Returns of the oldest share class of a fund are actual. Returns for other
classes are actual for the period since inception and prior to class
inception are the returns for the fund's oldest class, adjusted for
differences in sales charges and expenses. Class A shares have an initial
sales charge, while Class B, C and R shares have no initial sales charge.
Class B shares have a CDSC that declines from 5% to 0% after 6 years. Class
C shares have a 1% CDSC for redemptions within one year. Returns do not
reflect imposition of the CDSC. Giving effect to the CDSC applicable to
Class B shares, the 1-year and since inception total returns above would be
4.14% and 5.71%, respectively.
/2/ Based on SEC yield and a combined federal and state income tax rate of 37%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
6
<PAGE>
Nuveen Flagship New Mexico Municipal Bond Fund
May 31, 1997 Annual Report
* The Index Comparison shows change in value of a $10,000 investment in the A
Shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares (4.20%) and all ongoing fund
expenses.
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship
Lehman Brothers Nuveen Flagship New Mexico
Municipal Bond New Mexico Municipal Municipal Bond
Index Bond Fund (NAV) Fund (Offer)
--------------- -------------------- ---------------
<S> <C> <C> <C>
September 1992 10,000 10,000 9,580
10,065.4 9,958.25 9,540
9,966.46 9,749.48 9,340
10,145 10,037.5 9,615.9
10,248.5 10,192.1 9,764.04
10,367.7 10,401.7 9,964.81
10,742.7 10,733.2 10,282.4
10,628.9 10,602.9 10,157.6
10,736.2 10,737.6 10,286.7
10,796.3 10,831.7 10,376.7
10,976.6 11,043.1 10,579.3
10,990.9 11,018.8 10,556
11,219.5 11,321 10,845.6
11,347.4 11,500.3 11,017.3
11,369 11,528.2 11,044
11,268.9 11,355.9 10,879
11,506.7 11,612.9 11,125.2
11,637.9 11,752.8 11,259.1
11,336.5 11,417.7 10,938.2
10,875.1 10,849.1 10,393.4
10,967.5 10,875.2 10,418.4
11,062.9 11,039.2 10,575.6
10,995.4 10,917.3 10,458.7
11,196.6 11,197.4 10,727.1
11,235.8 11,191 10,721
11,070.7 10,963.4 10,502.9
10,873.6 10,701.5 10,252
10,676.8 10,460 10,020.7
10,911.7 10,805.3 10,351.5
11,223.8 11,175.9 10,706.5
11,550.4 11,566.8 11,081
11,683.2 11,631.6 11,143.1
11,697.2 11,623.4 11,135.2
12,070.4 12,060.6 11,554
11,965.4 11,847.4 11,349.8
12,079 11,949.7 11,447.8
12,232.4 12,088.9 11,581.1
12,309.5 12,153.7 11,643.2
12,488 12,367.7 11,848.2
12,695.3 12,593.2 12,064.3
12,817.2 12,732.7 12,198
12,914.6 12,810.6 12,272.6
12,826.7 12,723.2 12,188.8
12,662.6 12,476.1 11,952.1
12,627.1 12,389.7 11,869.4
12,622.1 12,443.6 11,921
12,759.6 12,584.8 12,056.3
12,875.7 12,715.6 12,181.6
12,873.2 12,693.5 12,160.4
13,053.4 12,913.6 12,371.2
13,200.9 13,059 12,510.5
13,442.5 13,319.8 12,760.3
13,498.9 13,245.2 12,688.9
13,524.6 13,235.7 12,679.8
13,649 13,395.8 12,833.2
13,467.5 13,200.9 12,646.5
13,580.6 13,322.6 12,763.1
May 1997 13,784.3 13,551.1 12,981.9
</TABLE>
. Lehman Brothers Municipal Bond Index $13,784
. Nuveen Flagship New Mexico Municipal Bond Fund (NAV) $13,551
. Nuveen Flagship Mew Mexico Municipal Bond Fund (Offer) $12,982
Past performance is not predictive of future performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
June 1996 0.04131
0.04269
0.04269
0.04131
0.04269
0.04131
0.04269
0.04281
0.042
0.042
0.042
0.042
7
<PAGE>
Financial Section
Contents
10 Portfolio of Investments
15 Statement of Net Assets
16 Statement of Operations
17 Statement of Changes in Net Assets
18 Notes to Financial Statements
24 Financial Highlights
26 Independent Auditors' Report
9
<PAGE>
Portfolio of Investments
Nuveen Flagship New Mexico
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 8.0%
$ 435,000 Puerto Rico Industrial Medical and Environmental No Opt. Call BBB- $ 429,571
Pollution Control Facilities Financing Authority,
Revenue Refunding, Formerly Puerto Rico,
Higher Education, Catholic University, Series A,
5.600%, 12/01/07
Santa Fe, New Mexico, Educational Facilities
Revenue Refunding and Improvement, College of
Santa Fe Project:
500,000 6.000%, 10/01/13 10/07 at 100 BBB- 501,480
500,000 5.875%, 10/01/21 10/07 at 100 BBB- 483,020
University of New Mexico, University Revenue
Refunding, Series A:
60,000 5.900%, 6/01/04 No Opt. Call AA 63,611
2,500,000 6.000%, 6/01/21 No Opt. Call AA 2,660,275
- --------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity -- 0.8%
327,000 Santa Fe County, New Mexico, Office and Training No Opt. Call Aaa 407,972
Facilities Project Revenue, 9.000%, 7/01/07
- --------------------------------------------------------------------------------------------------------------------
Health Care -- 2.9%
1,000,000 Hobbs New Mexico Health Facilities Revenue, 5/06 at 102 AAA 969,700
Evangelical Lutheran Project, 5.500%, 5/01/26
500,000 Las Cruces, New Mexico, Health Facilities Revenue 12/03 at 102 AAA 533,770
Refunding, Evangelical Lutheran Project,
6.450%, 12/01/17
- --------------------------------------------------------------------------------------------------------------------
Hospitals -- 4.6%
450,000 Albuquerque, New Mexico, Hospital Revenue, 8/02 at 102 AAA 487,710
Crossover Refunding, Series A, Presbyterian
Healthcare Services, 6.375%, 8/01/07
1,500,000 Albuquerque, New Mexico, Revenue Refunding, 6/03 at 102 AAA 1,543,020
The Evangelical Lutheran, 5.900%, 6/01/13
350,000 Socorro, New Mexico, Health Facility Revenue 5/04 at 102 AAA 371,431
Refunding, Evangelical Lutheran Good Samaritan,
6.000%, 5/01/08
- --------------------------------------------------------------------------------------------------------------------
Housing/Multi Family -- 1.9%
1,000,000 Las Cruces, New Mexico, Housing Development 4/03 at 102 A 1,013,120
Corporation, Multifamily Revenue Refunding,
Series A, 6.400%, 10/01/19
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family -- 11.1%
$2,000,000 New Mexico Mortgage Finance Authority, Single 7/06 at 102 AAA $2,048,060
Family Mortgage, Series D-1, 6.250%, 7/01/22
1,445,000 New Mexico Mortgage Finance Authority, Single 7/07 at 102 AAA 1,457,138
Family, Series G, 6.200%, 7/01/28
1,245,000 New Mexico Mortgage Finance Authority, Single 7/05 at 102 AAA 1,289,297
Family Mortgage Program, Series A, Class D,
6.650%, 7/01/26
165,000 New Mexico Mortgage Finance Authority, Single 7/02 at 102 Aa1 171,849
Family Mortgage Purchase, Refunding, Senior
Series A1, 6.850%, 7/01/10
780,000 New Mexico Mortgage Finance Authority, Single 7/02 at 102 Aa1 812,230
Family Mortgage Purchase, Refunding, Senior
Series A2, 6.900%, 7/01/24
- ---------------------------------------------------------------------------------------------------------------------
Industrial Development and Pollution Control -- 4.1%
985,000 Farmington, New Mexico, Pollution Control Revenue, 12/02 at 102 AAA 1,045,390
Refunding, Public Service Company of New Mexico,
Series A, 6.375%, 12/15/22
1,000,000 Lordsburg, New Mexico, Pollution Control Revenue, 4/03 at 102 A 1,059,940
Refunding, Phelps Dodge Corporation Project,
6.500%, 4/01/13
- ---------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Other -- 8.3%
4,000,000 Santa Fe County, New Mexico, Correctional System No Opt. Call AAA 4,287,520
Revenue, 6.000%, 2/01/27
- ---------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Transportation -- 2.1%
1,000,000 Albuquerque, New Mexico, Airport Revenue, 7/00 at 105 AAA 1,069,960
Series A, 6.600%, 7/01/16
- ---------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Utility -- 9.0%
1,300,000 Guam Power Authority Revenue, Series A, 10/03 at 102 BBB 1,155,180
5.250%, 10/01/23
90,000 Las Cruces, New Mexico, Joint Utility Refunding and 7/02 at 102 A1 97,046
Improvement Revenue, 6.250%, 7/01/12
Los Alamos County, New Mexico, Inc. Utility System
Revenue Refunding, Series A:
1,000,000 5.700%, 7/01/05 7/04 at 102 AAA 1,051,130
1,000,000 6.000%, 7/01/15 7/04 at 102 AAA 1,036,410
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship New Mexico -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Revenue/Utility -- Continued
$ 250,000 Puerto Rico Electric Power Authority Power 7/05 at 100 BBB+ $ 232,720
Revenue, Formerly Puerto Rico Commonwealth Water
Resource Authority Power, Refunding, Series Z,
5.250%, 7/01/21
Rio Grande, New Mexico, Natural Gas Association,
Natural Gas System Revenue Refunding and
Improvement:
100,000 6.000%, 7/01/07 7/03 at 100 BBB+ 99,508
1,000,000 6.125%, 7/01/13 7/03 at 100 BBB+ 990,860
- ----------------------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Water and Sewer -- 1.3%
1,000,000 Albuquerque, New Mexico, Joint Water and Sewer No Opt. Call AAA 595,260
System Revenue, Series A, 0.000%, 7/01/07
100,000 Grants, New Mexico, Water and Sewer Revenue 1/02 at 100 Baa 100,997
Refunding and Improvement, 5.600%, 1/01/08
- ----------------------------------------------------------------------------------------------------------------------------------
Non-State General Obligations -- 2.6%
25,000 Albuquerque, New Mexico, Municipal School District No Opt. Call AA 25,425
No. 012, 5.000%, 8/01/02
80,000 Bernalillo County, New Mexico, 5.750%, 10/01/05 10/04 at 100 Aa1 84,521
Grants/Cibola County, New Mexico,
School District No 1:
480,000 6.250%, 5/01/08 5/04 at 100 Baa 501,019
510,000 6.250%, 5/01/09 5/04 at 100 Baa 529,365
200,000 Torrance County, New Mexico, 5.500%, 7/01/04 7/00 at 100 N/R 202,418
- ----------------------------------------------------------------------------------------------------------------------------------
Pre-refunded -- 2.0%***
250,000 Albuquerque, New Mexico, Joint Water and Sewer 7/00 at 100 AAA 261,010
System Revenue, Series A, 6.000%, 7/01/15
160,000 Las Cruces, New Mexico, Joint Utility Refunding 7/02 at 102 A1 173,661
and Improvement Revenue, 6.250%, 7/01/12
30,000 New Mexico Finance Authority Revenue, Public 6/05 at 100 AAA 31,352
Project, Revolving Fund, Series A, 5.500%, 6/01/07
500,000 Sandoval County, New Mexico, Gross Receipts Tax 11/05 at 101 N/R 583,355
Revenue, 7.150%, 11/01/10
- ----------------------------------------------------------------------------------------------------------------------------------
Resource Recovery -- 1.9%
1,000,000 Las Cruces, New Mexico, South Central Solid Waste 6/05 at 100 A 1,003,210
Authority, Environmental Services Gross Receipts
Tax, 6.000%, 6/01/16
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Special Tax Revenue -- 21.6%
$4,250,000 Albuquerque, New Mexico, Gross Receipts Lodgers No Opt. Call AAA $1,968,303
Tax Revenue Refunding, Series B, 0.000%, 7/01/11
1,000,000 Bernalillo County, New Mexico, Gross Receipts Tax 4/06 at 100 AA 995,410
Revenue, Series A, 5.750%, 4/01/21
1,550,000 Dona Ana County, New Mexico, Gross Receipts 6/03 at 102 AA 1,569,127
Tax Revenue, Refunding and Improvement,
6.000%, 6/01/19
250,000 Las Cruces, New Mexico, Gross Receipts Tax Revenue 12/02 at 101 A 264,368
Refunding, 6.250%, 12/01/05
1,000,000 Las Cruces, New Mexico, Revenue, 5.450%, 12/01/08 No Opt. Call AAA 1,017,100
35,000 New Mexico Finance Authority Revenue, Special AAA 35,407
Cigarette Tax, University of New Mexico,
5.000%, 6/01/03
70,000 New Mexico Finance Authority Revenue, Public No Opt. Call AAA 72,402
Project, Series A, 5.500%, 6/01/07
Puerto Rico Commonwealth Highway and
Transportation Authority, Highway Revenue,
Series Y:
3,550,000 5.500%, 7/01/36 7/16 at 100 A 3,452,624
1,000,000 5.000%, 7/01/36 7/16 at 100 A 895,790
Sandoval County, New Mexico, Gross Receipts Tax,
Fire District Revenue:
225,000 6.600%, 12/01/04 12/99 at 100 N/R 230,607
200,000 6.900%, 12/01/07 12/99 at 100 N/R 206,582
375,000 Sandoval County, New Mexico, Gross Receipts Tax 11/02 at 102 Baa1 399,698
Revenue Refunding, 6.900%, 11/01/12
130,000 Sandoval County, New Mexico, Gross Receipts Tax 12/02 at 102 Baa1 137,210
Revenue Refunding, Series A, 6.500%, 12/01/06
- ---------------------------------------------------------------------------------------------------------------------------------
State/Territorial General Obligations -- 4.7%
1,500,000 Guam Government, Series A, 5.375%, 11/15/13 11/03 at 102 BBB 1,403,505
1,000,000 Puerto Rico Commonwealth, Public Improvement, No Opt. Call AAA 1,030,970
Series B, 5.500%, 7/01/00
- ---------------------------------------------------------------------------------------------------------------------------------
Student Loan Revenue Bonds -- 8.5%
1,600,000 New Mexico Educational Assistance Foundation, 4/02 at 102 AAA 1,704,896
Student Loan Revenue, Series A, 6.850%, 4/01/05
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship New Mexico -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Student Loan Revenue Bonds -- continued
$ 400,000 New Mexico Educational Assistance Foundation, 12/02 at 101 Aaa $ 414,304
Student Loan Revenue, Senior, Series 1A,
6.550%, 12/01/05
275,000 New Mexico Educational Assistance Foundation, 12/02 at 101 A 289,850
Student Loan Revenue, Sub, Series 1B,
6.850%, 12/01/05
900,000 New Mexico Educational Assistance Foundation, 6/04 at 102 Aaa 910,826
Student Loan Revenue, Senior, Series A,
5.500%, 12/01/07
1,040,000 New Mexico Educational Assistance Foundation, No Opt. Call Aaa 1,114,222
Student Loan Revenue, Purchase, Senior,
Series A1, 6.500%, 3/01/04
- ---------------------------------------------------------------------------------------------------------------------
$51,167,000 Total Investments (Cost -- $47,539,553) -- 95.4% 49,573,712
============---------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -- 1.7%
$ 900,000 Farmington Pollution Control Revenue, Arizona Public Service 900,000
============ Company (Four Corners Project), Variable Rate Demand
Bonds, 4.000%, 5/01/24+
-----------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 2.9% 1,507,536
-----------------------------------------------------------------------------------------------------
Net Assets -- 100% $51,981,248
=====================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent auditors): 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 auditors):
Using the higher of Standard & Poor's or Moody's rating.
*** Pre-refunded securities are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government
agency securities, which ensures the timely payment of
principal and interest. Pre-refunded securities are normally
considered to be equivalent to AAA-rated securities.
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.
14 See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Nuveen Municipal Bond Fund
May 31, 1997 May 31, 1997 Annual Report
<CAPTION>
Nuveen Flagship
New Mexico
- -------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $49,573,712
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 900,000
Cash 181,313
Receivables:
Interest 982,985
Shares sold 380,027
Investments sold 265,000
Other assets 1,920
- -------------------------------------------------------------------------------------------
Total assets 52,284,957
- -------------------------------------------------------------------------------------------
Liabilities
Payable for Shares redeemed 26,557
Accrued expenses:
Management fees (note 6) 9,037
12b-1 distribution and service fees (notes 1 and 6) 9,225
Other 44,275
Dividends payable 214,615
- -------------------------------------------------------------------------------------------
Total liabilities 303,709
- -------------------------------------------------------------------------------------------
Net assets (note 7) $51,981,248
===========================================================================================
Class A Shares (note 1)
Net assets $50,807,085
Shares outstanding 5,002,787
Net asset value and redemption price per share $ 10.16
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 10.61
===========================================================================================
Class B Shares (note 1)
Net assets $ 657,166
Shares outstanding 64,730
Net asset value, offering and redemption price per share $ 10.15
===========================================================================================
Class C Shares (note 1)
Net assets $ 155,277
Shares outstanding 15,283
Net asset value, offering and redemption price per share $ 10.16
===========================================================================================
Class R Shares (note 1)
Net assets $ 361,720
Shares outstanding 35,568
Net asset value, offering and redemption price per share $ 10.17
===========================================================================================
</TABLE>
15 See accompanying notes to financial statements.
<PAGE>
Statement of Operations
Year ended May 31, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
New Mexico*
<S> <C>
- -----------------------------------------------------------------------------------
Investment income
Tax-exempt interest income (note 1) $3,005,592
- -----------------------------------------------------------------------------------
Expenses
Management fees (note 6) 265,661
12b-1 service fees -- Class A (notes 1 and 6) 171,788
12b-1 distribution and service fees -- Class B (notes 1 and 6) 776
12b-1 distribution and service fees -- Class C (notes 1 and 6) 228
Shareholders' servicing agent fees and expenses 26,703
Custodian's fees and expenses 53,428
Trustees' fees and expenses (note 6) 1,304
Professional fees 13,446
Shareholders' reports -- printing and mailing expenses 5,226
Federal and state registration fees 3,524
Organizational expenses (note 1) 10,330
Other expenses 2,480
- -----------------------------------------------------------------------------------
Total expenses before reimbursement 554,894
Expense reimbursement (note 6) (155,889)
- -----------------------------------------------------------------------------------
Net expenses 399,005
- -----------------------------------------------------------------------------------
Net investment income 2,606,587
- -----------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 92,293
Net change in unrealized appreciation or depreciation of investments 1,740,188
- -----------------------------------------------------------------------------------
Net gain from investments 1,832,481
- -----------------------------------------------------------------------------------
Net increase in net assets from operations $4,439,068
===================================================================================
</TABLE>
* Information represents eight months of Flagship New Mexico and four months of
Nuveen Flagship New Mexico (see note 1 of the Notes to Financial Statements).
16 See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Nuveen Flagship Flagship
New Mexico* New Mexico
--------------------------------------------
Year ended Year ended
5/31/97 5/31/96
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 2,606,587 $ 2,646,917
Net realized gain (loss) from investment transactions
(notes 1 and 4) 92,293 (189,794)
Net change in unrealized appreciation or depreciation
of investments 1,740,188 (845,219)
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 4,439,068 1,611,904
- ---------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (2,592,045) (2,660,344)
Class B (2,872) N/A
Class C (1,113) --
Class R (309) N/A
- ---------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,596,339) (2,660,344)
- ---------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 7,206,729 6,925,871
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 1,155,487 1,333,109
- ---------------------------------------------------------------------------------------------------------
8,362,216 8,258,980
- ---------------------------------------------------------------------------------------------------------
Cost of shares redeemed (9,396,878) (8,187,762)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions (1,034,662) 71,218
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 808,067 (977,222)
Net assets at the beginning of year 51,173,181 52,150,403
- ---------------------------------------------------------------------------------------------------------
Net assets at the end of year $51,981,248 $51,173,181
=========================================================================================================
Balance of undistributed net investment income at end of year $ 10,248 $ --
=========================================================================================================
</TABLE>
* Information represents eight months of Flagship New Mexico and four months of
Nuveen Flagship New Mexico (see note 1 of the Notes to Financial Statements).
N/A - Flagship New Mexico was not authorized to issue Class B or Class R Shares.
17 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship New Mexico Municipal Bond Fund (the "Fund"),
among others. The Trust was organized as a Massachusetts business trust on July
1, 1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and Nuveen
Advisory Corp., respectively, the distributor ("Distributor") and investment
advisor ("Adviser") of the Fund, entered into an agreement under which Nuveen
acquired Flagship Resources Inc. and after the close of business on January 31,
1997, consolidated their respective mutual fund businesses. This agreement was
approved at a meeting by the shareholders of the Flagship Funds in December
1996.
After the close of business on January 31, 1997, Flagship New Mexico Double Tax
Exempt Fund ("Flagship New Mexico") was reorganized into the Trust and renamed
Nuveen Flagship New Mexico Municipal Bond Fund ("Nuveen Flagship New Mexico").
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved 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. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
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 have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1997, the Fund had no such purchase commitments.
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.
18
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
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 on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryovers. Prior to the
reorganization, tax-exempt net investment income for Flagship New Mexico was
declared as a dividend daily and payment was made on the last business day of
each month.
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 distributions are determined in accordance with federal
income tax regulations, which 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 net ordinary taxable income from investment transactions, where
applicable.
Income Taxes
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and New Mexico state income taxes, to
retain such tax-exempt status when distributed to the shareholders of the Fund.
All income dividends paid during the fiscal year ended May 31, 1997, have been
designated Exempt Interest Dividends. Net realized capital gains and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class B, C and R Shares were first
offered for sale on February 1, 1997. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class B Shares are sold without a
sales charge but incur annual 12b-1 distribution and service fees. An investor
purchasing Class B Shares agrees to pay a contingent deferred sales charge
("CDSC") of up to 5% depending upon the length of time the shares are held by
the investor (CDSC is reduced to 0% at the end of six years). Class 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 CDSC of 1% if Class
C Shares are redeemed within 18 months of purchase. Class R Shares are not
subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
19
<PAGE>
Notes to Financial Statements -- continued
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the fiscal year ended May 31, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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.
Organizational Expenses
The organizational expenses incurred on behalf of the Fund (approximately
$51,700), are being reimbursed to the Adviser on a straight-line basis over a
period of five years. As of May 31, 1997, $41,348 has been reimbursed. In the
event that the Adviser'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.
20
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Flagship
New Mexico* New Mexico
----------------------------------------------------
Year ended 5/31/97 Year ended 5/31/96
----------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 604,874 $ 6,044,381 691,631 $ 6,925,871
Class B 64,688 647,809 N/A N/A
Class C 15,271 153,600 -- --
Class R 35,553 360,939 N/A N/A
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 115,338 1,154,792 133,282 1,333,109
Class B 42 418 N/A N/A
Class C 12 123 -- --
Class R 15 154 N/A N/A
- ----------------------------------------------------------------------------------------------------------
835,793 8,362,216 824,913 8,258,980
- ----------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (936,465) (9,396,878) (817,071) (8,187,762)
Class B -- -- N/A N/A
Class C -- -- -- --
Class R -- -- N/A N/A
- ----------------------------------------------------------------------------------------------------------
(936,465) (9,396,878) (817,071) (8,187,762)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) (100,672) $(1,034,662) 7,842 $ 71,218
==========================================================================================================
</TABLE>
* Information represents eight months of Flagship New Mexico and four months of
Nuveen Flagship New Mexico (see note 1).
N/A -- Flagship New Mexico was not authorized to issue Class B or Class R
Shares.
3. Distributions to Shareholders
On June 9, 1997, the Fund declared a dividend distribution from its tax-exempt
net investment income which was paid on July 1, 1997, to shareholders of record
on June 9, 1997 as follows:
<TABLE>
<CAPTION>
Nuveen Flagship
New Mexico
- -------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0420
Class B .0355
Class C .0375
Class R .0435
- -------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Notes to Financial Statements -- continued
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship
New Mexico*
- --------------------------------------------------------------------
<S> <C>
Purchases
Investments in municipal securities $22,082,776
Temporary municipal investments 5,500,000
Sales
Investments in municipal securities 25,727,639
Temporary municipal investments 4,600,000
- --------------------------------------------------------------------
</TABLE>
*Information represents eight months of Flagship New Mexico and
four months of Nuveen Flagship New Mexico (see note 1).
At May 31, 1997, the identified cost of investments owned for federal income tax
purposes may differ from the cost used for financial reporting purposes.
At May 31, 1997, the Fund had unused capital loss carryforwards of $1,287,752
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, $997,166 of the carryover will expire in the year
2003 and $290,586 will expire in the year 2004.
5. Unrealized Appreciation (Depreciation)
At May 31, 1997, unrealized appreciation aggregated $2,034,159 of which
$2,039,341 related to appreciated securities and $5,182 related to depreciated
securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the Fund as follows:
<TABLE>
<CAPTION>
Average daily net asset value 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 net assets over $2 billion .4750 of 1
- -------------------------------------------------------------
</TABLE>
Prior to the reorganization (see note 1) Flagship New Mexico paid a management
fee of .5 of 1%. 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.
22
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
(Flagship Funds Inc., a wholly-owned subsidiary of Flagship Resources Inc.)
collected sales charges on purchases of Class A Shares of approximately $113,000
of which approximately $98,100 were paid out as concessions to authorized
dealers. The Distributor and it predecessor also received 12b-1 service fees on
Class AShares, approximately one-half of which was paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
compensated authorized dealers directly with approximately $29,100 in commission
advances at the time of purchase. To compensate for commissions advanced to
authorized dealers, all 12b-1 service fees collected on Class B Shares during
the first year following a purchase, all 12b-1 distribution fees on Class B
Shares, and all 12b-1 service and distribution fees on Class C Shares during the
first year following a purchase are retained by the Distributor. The remaining
12b-1 fees charged to the Fund were paid to compensate authorized dealers for
providing services to shareholders relating to their investments. The
Distributor and its predecessor also collected and retained approximately $100
of CDSC on share redemptions during the fiscal year ended May 31, 1997.
7. Composition of Net Assets
At May 31, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Nuveen Flagship
New Mexico
- ------------------------------------------------------------------------------
<S> <C>
Capital paid-in $51,227,877
Balance of undistributed net investment income 10,248
Accumulated net realized gain (loss) from investment income (1,291,036)
Net unrealized appreciation of investments 2,034,159
- ------------------------------------------------------------------------------
Net assets $51,981,248
==============================================================================
</TABLE>
23
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------------- ----------------------------
Net
NUVEEN FLAGSHIP NEW MEXICO++ Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income(b) investments income gains period value(a)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
1997 $ 9.81 $.51 $ .35 $(.51) $ -- $ 10.16 8.90%
1996 10.01 .51 (.19) (.52) -- 9.81 3.18
1995 9.68 .52 .33 (.52) -- 10.01 9.25
1994 10.04 .53 (.33) (.53) (.03) 9.68 1.92
1993(c) 9.58 .37 .46 (.37) 10.04 11.72+
Class B (2/97)
1997(c) 10.24 .12 (.10) (.11) -- 10.15 .18
Class C (2/97)
1997(c) 10.23 .12 (.08) (.11) -- 10.16 .43
Class R (2/97)
1997(c) 10.23 .14 (.07) (.13) -- 10.17 .71
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship New Mexico.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by the Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
24
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Ratios/Supplemental data
- ---------------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment (b) ment (b) rate
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$50,807 1.08% 4.76% .77% 5.07% 43%
51,173 1.09 4.69 .68 5.10 57
52,150 1.17 4.98 .67 5.48 38
51,167 1.14 4.50 .40 5.24 39
31,499 1.37+ 4.05+ .14+ 5.28+ 36
657 1.68+ 4.05+ 1.54+ 4.19+ 43
155 1.48+ 4.26+ 1.34+ 4.40+ 43
362 .73+ 5.04+ .59+ 5.18+ 43
- ---------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
Nuveen Flagship New Mexico Municipal Bond Fund:
We have audited the accompanying statements of net assets of the Nuveen Flagship
New Mexico Municipal Bond Fund including the portfolio of investments, as of May
31, 1997, the related statement of operations for the period then ended and the
statement 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, 1997, by correspondence with the Funds' custodian. 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 Nuveen Flagship
New Mexico Municipal Bond Fund at May 31, 1997, 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 11, 1997
26
<PAGE>
Shareholder Meeting Report
Flagship New Mexico
<TABLE>
<CAPTION>
A Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Agreement For 4,224,972
Against 80,529
Abstain 64,757
---------------------------
Total 4,370,258
================================================================================
Broker Non Votes 172,922
================================================================================
Reorganization For 2,673,749
Against 41,725
Abstain 81,833
---------------------------
Total 2,797,307
================================================================================
Broker Non Votes 1,745,873
================================================================================
Investment Objective For 2,763,204
Against 99,462
Abstain 37,340
---------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Investment Assets For 2,751,738
Against 99,462
Abstain 48,806
---------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Type of Securities For 2,767,359
Against 101,057
Abstain 31,590
---------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Borrowing For 2,766,499
Against 99,462
Abstain 34,045
---------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Pledges For 2,761,243
Against 99,462
Abstain 39,301
---------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
---------------------------
</TABLE>
27
<PAGE>
Shareholder Meeting Report
Flagship New Mexico -- continued
<TABLE>
<CAPTION>
A Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Senior Securities For 2,767,654
Against 99,462
Abstain 32,890
------------------------------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Underwriting For 2,758,617
Against 101,057
Abstain 40,332
------------------------------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Real Estate For 2,758,348
Against 101,057
Abstain 40,601
------------------------------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Commodities For 2,757,488
Against 108,473
Abstain 34,045
------------------------------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Loans For 2,764,838
Against 99,462
Abstain 35,706
------------------------------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Short Sales/Margin Purchases For 2,752,969
Against 114,055
Abstain 32,982
------------------------------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
================================================================================
Put and Call Options For 2,751,833
Against 111,797
Abstain 36,376
------------------------------------------------
Total 2,900,006
================================================================================
Broker Non Votes 1,643,174
------------------------------------------------
</TABLE>
28
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
A Shares
- -------------------------------------------------------------------------
<S> <C> <C>
Industry Concentration For 2,766,821
Against 101,595
Abstain 31,590
-----------------------------------------
Total 2,900,006
=========================================================================
Broker Non Votes 1,643,174
=========================================================================
Affiliate Purchases For 2,760,398
Against 106,987
Abstain 32,621
-----------------------------------------
Total 2,900,006
=========================================================================
Broker Non Votes 1,643,174
=========================================================================
Investment Companies For 2,758,192
Against 108,924
Abstain 32,890
-----------------------------------------
Total 2,900,006
=========================================================================
Broker Non Votes 1,643,174
=========================================================================
12b-1 Fees For 4,141,433
Against 96,932
Abstain 131,891
-----------------------------------------
Total 4,370,256
=========================================================================
Broker Non Votes 172,924
-----------------------------------------
</TABLE>
29
<PAGE>
Shareholder Meeting Report
Flagship New Mexico--continued
<TABLE>
<CAPTION>
A Shares
- ------------------------------------------------------------------------
Directors
========================================================================
<S> <C> <C>
Bremner For 4,448,907
Withhold 94,273
------------------------------------------------
Total 4,543,180
========================================================================
Brown For 4,448,907
Withhold 94,273
------------------------------------------------
Total 4,543,180
========================================================================
Dean For 4,448,907
Withhold 94,273
------------------------------------------------
Total 4,543,180
========================================================================
Impellizzeri For 4,448,907
Withhold 94,273
------------------------------------------------
Total 4,543,180
========================================================================
Rosenheim For 4,448,907
Withhold 94,273
------------------------------------------------
Total 4,543,180
========================================================================
Sawers For 4,448,907
Withhold 94,273
------------------------------------------------
Total 4,543,180
- ------------------------------------------------------------------------
Schneider For 4,448,907
Withhold 94,273
------------------------------------------------
Total 4,543,180
========================================================================
Schwertfeger For 4,448,907
Withhold 94,273
------------------------------------------------
Total 4,543,180
------------------------------------------------
</TABLE>
30
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Municipal Bond Fund, contact your
financial adviser. If you would like to add to your current investment on a
monthly or semi-annual basis, you can sign up for Nuveen's systematic investing
program, which allows you to invest a fixed dollar amount every month
automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you gain the added growth potential of
long-term compounding.
For more information on any of these service options call your adviser, or
Nuveen at (800) 621-7227.
31
<PAGE>
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Boston Financial
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris, Shriver
& Jacobson
Washington, D.C.
Independent Auditors
Deloitte & Touche LLP
Dayton, Ohio
32
<PAGE>
Serving Investors
for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
VAN-NM 5-97
<PAGE>
NUVEEN
Municipal
Bond Funds
May 31, 1997
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
Florida
Florida Intermediate
[PHOTO APPEARS HERE]
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Florida Overview
8 Florida Intermediate
Overview
11 Financial Section
52 Shareholder Information
53 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF
Timothy R. Schwertfeger
appears here]
Timothy R. Schwertfeger
It's a pleasure to report to you on the performance of the Nuveen Flagship
Florida and Florida Intermediate Municipal Bond Funds. Over the past year, the
funds posted sizable gains. For the fiscal year ended May 31, 1997, the value of
Class A shares rose 7.59% for the Florida Fund and 7.16% for the Florida
Intermediate Fund, if you chose to reinvest your tax-free income dividends.
Over this 12-month period, the total return performance for the Florida Fund
(with income reinvested) kept close pace with the 8.28% increase produced by the
Lehman Brothers Municipal Bond Index, which is used to represent the broad
municipal bond market on an unmanaged basis. The Florida Intermediate Fund also
kept close pace with the 8.17% increase generated by its comparable market
measure, the Lehman Brothers 10-Year Municipal Bond Index.
In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds, which
provide excellent income for investors. As of May 31, 1997, Class A shareholders
were receiving tax-free yields on net asset value of 4.84% for the Florida Fund
and 4.34% for the Florida Intermediate Fund. To match this yield, investors in
the 31% federal income tax bracket would have had to earn at least 7.01% for the
Florida Fund and 6.29% for the Florida Intermediate Fund on taxable
alternatives.
These results were produced against a backdrop of continued economic expansion
and the lowest unemployment rates in almost two decades, a combination that in
the past has foreshadowed an increase in inflation. In March, the Federal
Reserve made a pre-emptive strike by raising
1
<PAGE>
"In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds."
short-term interest rates by 0.25%, but then maintained the status quo at its
May and July meetings. Overall market returns continue to be good, but fear of
inflation has hampered the performance of municipals and led to increased
volatility in both the equity and bond markets.
During this time, bonds have often been the bellwether for the direction of
stocks. Whenever inflation talk is at its most rampant, the stock market has
kept an eye on the bond market for its response before reacting.
In the first six months of the year, the markets also focused on fiscal issues,
including the federal budget accord and discussion of plans to reduce taxes and
eliminate the deficit. The economy appeared to be moderating, corporate earnings
reports continued to exhibit strength, and interest rates fell in the second
quarter. All of this was positive news. The net effect is that the markets are
better off now than at the beginning of the year, but the volatility experienced
in getting there has been significant.
Recently, the need for diversification and a renewed emphasis on asset
allocation -- as well as attractive yields -- have sparked increased interest in
tax-free investments. The current level of the stock market reminds investors to
re-allocate profits to other segments of the market in order to limit risk.
Nuveen municipal bond funds provide an excellent lower-risk alternative, and
their current yields make them very attractive.
On behalf of everyone at Nuveen, I thank you for your confidence in us and our
family of investments. You can continue to depend on us for high-quality
investments that withstand the test of time. We look forward to reporting to you
again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1997
2
<PAGE>
Answering Your Questions
[PHOTO OF TED NEILD
APPEARS HERE]
Ted Neild, head of Nuveen's Dayton-based portfolio management team, talks about
the municipal bond market and offers insights into factors that affected fund
performance over the past year.
What are the investment objectives of the funds?
The funds aim to provide investors with a high level of tax-free income while
preserving capital by investing in a diversified portfolio of high-quality
municipal bonds. To that end, we attempt to maximize the funds' after-tax total
return by generating high tax-free income and minimizing the distribution of
taxable capital gains when possible.
What is your strategy for meeting these objectives?
To meet the funds' objectives of income and enhanced value, our portfolio
management strategy relies on conservative value investing principles, sound
research and credit surveillance activities, and senior management involvement.
At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates. This approach focuses on the characteristics of
individual bonds, such as sector, geographic region, structure and intrinsic
credit quality, rather than on the general economic environment. The idea behind
this philosophy is that we, as investment managers, can control the selection
process, but not the direction of the economy as a whole.
What key economic factors affected the funds' performance during the year?
The U.S. economy continued to grow exhibiting low unemployment, increased
manufacturing and construction activity, and lack of price pressure at the
consumer and producer levels. The funds had the added advantage of
3
<PAGE>
"At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates."
operating in a healthy supply environment, where securities were available as
needed.
Given this market environment, how did
the funds perform?
The Florida and Florida Intermediate Municipal Bond Funds performed well over
the past year, rewarding Class A shareholders with total returns on net asset
value for the year of 7.59% and 7.16%, respectively, including price changes and
reinvested dividends. Both funds performed well compared with their peer groups.
In fact, the Florida Intermediate Fund was ranked number one among 18 Florida
intermediate municipal bond funds for the one-year period by Lipper Analytical
Services, a nationally recognized performance measurement service.
What strategies did you employ to add value?
We focused on strengthening the funds' long-term income level by purchasing
higher-yielding bonds and maintaining long-term call protection. We also took
advantage of the market's recent volatility to purchase attractively priced
bonds. In particular, purchases in housing, healthcare and transportation
sectors added to the overall strength of the funds.
What is the current status of Florida's municipal market?
Employment and personal income growth in Florida have outpaced the nation since
1991 and recent economic reports note that the state continues to experience job
growth, albeit at a more moderate pace. Economists are also predicting another
record tourism year for the state. Healthy demand has absorbed Florida's $4.9
billion in municipal issuance through the first half of 1997 and caused a slight
tightening in credit spreads.
Florida is facing ongoing challenges relating to financing growth, particularly
in its schools. In addition, deregulation of the electric utility industry could
adversely affect the Southeast unless certain provisions are included in federal
legislation. On the positive side, Miami's financial position has stabilized and
its recent five-year recovery plan projects balanced operations for the 1997
fiscal year.
4
<PAGE>
What is the current outlook for the municipal market as a whole?
As we make our way through the seventh year of the current economic expansion,
some observers believe that a fundamental shift may have occurred in our
economy. Based on past experience and months of reports of economic growth,
especially employment statistics, the markets have long been anticipating an
increase in inflation. However, even with almost full employment, we have not
seen the expected rise in hourly wages that would be considered inflationary.
This change in the traditional economic cause-and-effect relationship has been
variously attributed to the globalization of the economy and consequent
competitive pressures, to increased use of technology, and to corporations'
recent ability to downsize as necessary. Although structural changes in the
economy appear to have suspended the relationship between faster growth and
higher inflation, the risk remains that inflation may reassert itself if
capacity constraints are reached and resources are stretched too thin.
Talk of Fed tightening will continue. If the Fed does act to increase rates, it
will be perceived as a move against inflation. If the Fed does not tighten, it
will be seen as an indication that the economy is doing well.
Nonetheless, for the remainder of 1997, the municipal market should continue to
offer the attractive yields and tax advantages that make it a good alternative
if and when a correction in the stock market occurs. While money continues to
flow into equity mutual funds, investors are also beginning to evaluate the
effect of the huge run-up in stock prices on their asset allocation and many are
rebalancing their portfolios by shifting some assets into bonds.
5
<PAGE>
Florida
Overview
- ------------------------------
Credit Quality
- ------------------------------
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 65%
BBB/NR 15%
A 10%
AA 10%
- ------------------------------
- ------------------------------
Diversification
- ------------------------------
[PIE CHART APPEARS HERE]
Escrowed Bonds 10%
Municipal
Appropriations 4%
Other 14%
Utility 4%
Hospitals 23%
General Obligations 9%
Water & Sewer 7%
Pollution
Control 11%
Housing
Facilities 15%
Transportation 3%
- ------------------------------
<TABLE>
<CAPTION>
Fund Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 6/90 2/97 9/95 2/97
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) $10.60 $10.61 $10.60 $ 10.60
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets ($000) $357,132
- -----------------------------------------------------------------------------------------------------------------------------------
Average Weighted Maturity (years) 21.22
- -----------------------------------------------------------------------------------------------------------------------------------
Duration (years) 8.17
- -----------------------------------------------------------------------------------------------------------------------------------
Annualized Total Return/1/
- -----------------------------------------------------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- -----------------------------------------------------------------------------------------------------------------------------------
1-Year 7.59% 3.07% 7.02% 7.00% 7.66%
- -----------------------------------------------------------------------------------------------------------------------------------
5-Year 6.66% 5.75% 6.08% 6.08% 6.67%
- -----------------------------------------------------------------------------------------------------------------------------------
Since Inception 7.63% 6.97% 7.04% 7.04% 7.64%
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Free Yields
- -----------------------------------------------------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.22% 5.00% 4.47% 4.68% 5.42%
- -----------------------------------------------------------------------------------------------------------------------------------
SEC 30-Day Yld 4.84% 4.64% 4.09% 4.29% 5.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Taxable Equiv Yld/2/ 7.01% 6.72% 5.93% 6.22% 7.30%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Returns of the oldest share class of a fund are actual. Returns for other
classes are actual for the period since inception and prior to class
inception are the returns for the fund's oldest class, adjusted for
differences in sales charges and expenses. Class A shares have an initial
sales charge, while Class B, C and R shares have no initial sales charge.
Class B shares have a CDSC that declines from 5% to 0% after 6 years. Class C
shares have a 1% CDSC for redemptions within one year. Returns do not reflect
imposition of the CDSC. Giving effect to the CDSC applicable to Class B
shares, the 1-year, 5-year, and 10-year total returns above would be 3.02%,
5.92%, and 7.04%, respectively.
2 Based on SEC yield and a federal income tax rate of 31%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
6
<PAGE>
Nuveen Flagship Florida Municipal Bond Fund
May 31, 1997 Annual Report
*The Index Comparison shows change in value of a $10,000 investment in the A
Shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares (4.20%) and all ongoing fund
expenses.
Index Comparison*
[LINE CHART APPEARS HERE]
Lehman
Brothers Nuveen Flagship Nuveen Flagship
Municipal Florida Municipal Florida Municipal Bond
Bond Index Bond Fund (NAV) Fund (offer)
June-90 $ 10,000.00 $ 10,000.00 $ 9,580.00
May-91 10,911.83 10,940.82 10,481.30
May-92 11,983.85 12,083.06 11,575.58
May-93 13,417.55 13,591.01 13,020.18
May-94 13,748.86 13,862.73 13,280.50
May-95 15,000.90 15,031.88 14,400.55
May-96 15,686.54 15,503.43 14,852.29
May-97 17,130.98 16,679.66 15,979.12
Lehman Brothers Municipal Bond Index $17,131
Nuveen Flagship Florida Municipal Bond Fund (NAV) $16,680
Nuveen Flagship Florida Municipal Bond Fund (Offer) $15,979
Past performance is not predictive of future performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
1996 1997 Capital Gain
<S> <C> <C> <C> <C>
JUNE 0.04639 JANUARY 0.04857 0.00097
JULY 0.04794 FEBRUARY 0.0461
AUGUST 0.04794 MARCH 0.0461
SEPTEMBER 0.04598 APRIL 0.0461
OCTOBER 0.04717 MAY 0.0461
NOVEMBER 0.04533
DECEMBER 0.04684
</TABLE>
Capital Gain
7
<PAGE>
Florida Intermediate
Overview
Credit Quality
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 68%
BBB/NR 14%
A 9%
AA 9%
- --------------------------------
Diversification
[PIE CHART APPEARS HERE]
General Obligations 20%
Utilities 3%
Hospitals 8%
Tax Revenue 19%
Municipal Appropriations 3%
Transportation 11%
Water & Sewer 10%
Other 5%
Escrowed Bonds 13%
- --------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fund Highlights
========================================================================
Share Class A C R
Inception Date 2/94 2/94 2/97
- ------------------------------------------------------------------------
Net Asset Value (NAV) $10.09 $10.08 $ 10.11
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Total Net Assets ($000) $16,198
- ------------------------------------------------------------------------
Average Weighted Maturity (years) 8.92
- ------------------------------------------------------------------------
Duration (years) 6.7
- ------------------------------------------------------------------------
Annualized Total Return/1/
========================================================================
Share Class A(NAV) A(Offer) C R
1-Year 7.16% 2.66% 6.47% 7.42%
- ------------------------------------------------------------------------
Since Inception 5.85% 4.50% 5.25% 5.93%
- ------------------------------------------------------------------------
Tax-Free Yields
========================================================================
Share Class A(NAV) A(Offer) C R
Dist Rate 4.61% 4.48% 4.07% 4.81%
- ------------------------------------------------------------------------
SEC 30-Day Yld 4.34% 4.21% 3.90% 4.61%
- ------------------------------------------------------------------------
Taxable Equiv Yld/2/ 6.29% 6.10% 5.65% 6.68%
- ------------------------------------------------------------------------
</TABLE>
1 Returns of the oldest share class of a fund are actual. Returns for other
classes are actual for the period since inception and prior to class
inception are the returns for the fund's oldest class, adjusted for
differences in sales charges and expenses. Class A shares have an initial
sales charge, while Class C and R shares have no initial sales charge. Class
C shares have a 1% CDSC for redemptions within one year. Returns do not
reflect imposition of the CDSC.
2 Based on SEC yield and a federal income tax rate of 31%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
8
<PAGE>
Nuveen Flagship Florida Intermediate Municipal Bond Fund
May 31, 1997 Annual Report
*The Index Comparison shows change in value of a $10,000 investment in the A
Shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares (3.0%) and all ongoing fund
expenses.
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship
Lehman Florida Nuveen Flagship
Brothers Intermediate Florida Intermediate
Municipal Municipal Bond Municipal Bond Fund
Date Bond Index Fund(NAV) (offer)
<S> <C> <C> <C>
2/94 $ 10,000.00 $ 10,000.00 $ 9,700.00
4/94 $ 9,674.54 $ 9,962.11 $ 9,663.24
4/95 $ 10,318.24 $ 10,572.70 $ 10,255.52
4/96 $ 11,138.50 $ 11,299.82 $ 10,960.82
4/97 $ 11,912,00 $ 12,084.00 $ 11,576.00
</TABLE>
Lehman Brothers 10-Year Municipal Bond Index $11,912
Nuveen Flagship Florida Intermediate Municipal Bond Fund (NAV) $12,084
Nuveen Flagship Florida Intermediate Municipal Bond Fund (Offer) $11,576
Past performance is not predictive of future performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
1996 Capital Gain 1997
<S> <C> <C> <C> <C>
JUNE 0.03811 JANUARY 0.03949
JULY 0.03939 FEBRUARY 0.0388
AUGUST 0.03939 MARCH 0.0388
SEPTEMBER 0.03811 APRIL 0.0388
OCTOBER 0.03939 MAY 0.0388
NOVEMBER 0.03811
DECEMBER 0.03939 0.0174
</TABLE>
Capital Gain
9
<PAGE>
Financial Section
Contents
12 Portfolio of Investments
29 Statement of Net Assets
30 Statement of Operations
31 Statement of Changes in Net Assets
33 Notes to Financial Statements
41 Financial Highlights
46 Independent Auditors' Report
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
Education -- 0.1%
<S> <C> <C> <C> <C>
$ 300,000 Brevard County, Florida, Educational Facilities Authority 11/02 at 102 BBB $ 315,240
Revenue, Refunding and Improvement, Florida
Institute of Technology, 6.875%, 11/01/22
- --------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity -- 0.9%
1,500,000 Dade County, Florida, Health Facilities Authority, No Opt. Call AAA 1,525,395
Hospital Revenue, Baptist Hospital Of Miami
Project, Series A, 5.750%, 5/01/21
1,160,000 Florida State Board Education, Capital Outlay, No Opt. Call AAA 1,189,441
Series C, 7.100%, 6/01/07
335,000 Florida State Board Education, Capital Outlay, No Opt. Call AAA 466,360
9.125%, 6/01/14
- --------------------------------------------------------------------------------------------------------------------
Health Care -- 4.8%
Jacksonville, Florida, Health Facilities Authority,
Industrial Development Revenue, National Benevolent,
Cypress Village, Series A:
345,000 6.125%, 12/01/16 12/06 at 102 Baa1 348,488
1,000,000 6.250%, 12/01/26 12/06 at 102 Baa1 1,013,750
8,000,000 Palm Beach County, Florida, Health Facilities, 11/06 at 102 A- 7,816,480
Authority Revenue, Retirement Community, Adult
Communities Total Services Inc., 5.625%, 11/15/20
4,000,000 Palm Beach County, Florida, Industrial Development 12/06 at 102 A+ 4,182,560
Revenue, Lourdes, Noreen McKeen Residence,
Geriatric Care Inc., 6.625%, 12/01/26
Sarasota County, Florida, Health Facility Authority
Revenue Refunding, Health Facilities, Sunnyside
Properties:
855,000 5.500%, 5/15/01 No Opt. Call N/R 856,479
540,000 5.500%, 5/15/02 No Opt. Call N/R 538,137
570,000 5.500%, 5/15/03 No Opt. Call N/R 564,009
600,000 5.500%, 5/15/04 No Opt. Call N/R 590,130
170,000 5.500%, 5/15/05 No Opt. Call N/R 168,485
1,000,000 6.000%, 5/15/10 5/06 at 102 N/R 997,560
- --------------------------------------------------------------------------------------------------------------------
Hospitals -- 18.2%
2,480,000 Dade County, Florida, Public Facilities Revenue 6/03 at 102 AAA 2,267,191
Refunding, Jackson Memorial Hospital, Series A,
4.875%, 6/01/15
2,735,000 Dade County, Florida, Health Facilities Authority 8/00 at 102 A1 2,918,491
Revenue Refunding, Catholic Health and
Rehabilitation Inc., Series P, 7.125%, 8/15/09
</TABLE>
12
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
Hospitals -- continued
<S> <C> <C> <C> <C>
Escambia County, Florida, Health Facilities, Authority
Health Facility Revenue Refunding, Azalea Trace Inc.:
$ 1,000,000 6.000%, 1/01/15 1/07 at 102 N/R $ 990,300
1,595,000 6.100%, 1/01/19 1/07 at 102 N/R 1,578,492
1,750,000 Jacksonville, Florida, Health Facilities Authority, 6/01 at 102 AAA 1,898,628
Hospital Revenue, New Childrens Hospital At
Baptist, 7.000%, 6/01/21
3,000,000 Jacksonville, Florida, Health Facilities Authority, 11/01 at 102 AA+ 3,284,220
Hospital Revenue Refunding, Facilities, St. Lukes
Hospital Association Project, 7.125%, 11/15/20
6,000,000 Lakeland, Florida, Hospital System Revenue, Lakeland 11/06 at 102 AAA 5,666,100
Regional Medical Center, Series A,
5.250%, 11/15/25
2,100,000 Lee County, Florida, Hospital Board Directors, Hospital 4/07 at 102 AAA 2,098,614
Revenue, Lee Memorial Health System, Series A,
5.625%, 4/01/16
2,320,000 Martin County, Florida, Health Facilities Authority, 11/00 at 102 AAA 2,539,054
Hospital Revenue Refunding, Martin Memorial
Hospital, Series A, 7.125%, 11/15/04
1,000,000 Martin County, Florida, Health Facilities Authority, 11/00 at 102 AAA 1,083,270
Hospital Revenue, Martin Memorial Hospital
South Project, Series B, 7.100%, 11/15/20
North Broward Florida Hospital District, Revenue
Refunding and Improvement:
1,000,000 5.250%, 1/15/17 1/07 at 101 AAA 959,150
3,000,000 5.375%, 1/15/24 1/07 at 101 AAA 2,892,900
1,295,000 North Miami, Florida, Health Facilities Authority, 9/00 at 102 A+ 1,413,428
Health Facility Revenue, Villa Maria Housing,
Series B, Bon Secours, 7.500%, 9/01/12
2,500,000 Orange County, Florida, Health Facilities Authority 11/01 at 102 AAA 2,716,400
Revenue, Hospital, Adventist Health/Sunbelt,
Series A, 6.875%, 11/15/15
2,500,000 Orange County, Florida, Health Facilities Authority 11/01 at 102 AAA 2,704,075
Revenue, Hospital, Adventist Health/Sunbelt,
Series B, 6.750%, 11/15/21
11,895,000 Orange County, Florida, Health Facilities Authority 11/05 at 102 AAA 11,243,511
Revenue Refunding, Hospital, Adventist Health System,
5.250%, 11/15/20
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida--continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
Hospitals -- continued
<S> <C> <C> <C> <C>
$2,070,000 Orange County, Florida, Health Facilities Authority No Opt. Call AAA $2,270,273
Revenue, Orlando Regional Healthcare,
Series A, 6.250%, 10/01/18
5,455,000 Orange County, Florida, Health Facilities Authority No Opt. Call AAA 6,003,609
Revenue Refunding, Orlando Regional
Healthcare, Series C, 6.250%, 10/01/21
1,550,000 Osceola County, Florida, Industrial Development 5/01 at 102 AAA 1,666,049
Authority Revenue, Evangelical Lutheran Soc
Project, 6.750%, 5/01/16
1,000,000 St. Johns County, Florida, Industrial Development 8/02 at 102 A2 1,000,650
Authority, Hospital Revenue, Flagler Hospital
Project, 6.000%, 8/01/22
630,000 St. Petersburg, Florida, Health Facilities Authority 12/01 at 102 AAA 688,061
Revenue, Allegany Health, Series A,
7.000%, 12/01/15
2,000,000 St. Petersburg, Florida, Health Facilities Authority 12/01 at 102 AAA 2,164,420
Revenue, Allegany Health System, St. Anthonys,
6.750%, 12/01/21
1,610,000 St. Petersburg, Florida, Health Facilities Authority 12/01 at 102 AAA 1,758,378
Revenue, Allegany Health System, St. Marys,
7.000%, 12/01/21
Tampa Florida Revenue, Allegany Health System,
St. Joseph:
1,000,000 6.750%, 12/01/17 12/01 at 102 AAA 1,082,210
2,000,000 6.500%, 12/01/23 12/04 at 102 AAA 2,160,420
- --------------------------------------------------------------------------------------------------------------------
Housing/Multi Family -- 7.2%
600,000 Broward County, Florida, Housing Finance Authority, 2/05 at 102 AAA 643,926
Multifamily Housing Revenue Refunding, Lakeside
Apartments Project, 7.000%, 2/01/25
250,000 Broward County, Florida, Housing Finance Authority, 8/06 at 102 AAA 258,113
Multifamily Housing Revenue Refunding,
Boardwalk Apartments Project, 6.200%, 8/01/16
2,700,000 Duval County, Florida, Housing Finance Authority, 4/05 at 102 BBB+ 2,786,346
Multifamily Housing Revenue Refunding,
Greentree Place Project, 6.750%, 4/01/25
750,000 Florida Housing Finance Agency, Refunding, General 6/02 at 103 AAA 771,720
Mortgage, Series A, 6.400%, 6/01/24
</TABLE>
14
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
Housing/Multi Family -- continued
<S> <C> <C> <C> <C>
Florida Housing Finance Agency, Antigua Club
Apartments, Series A:
$1,000,000 6.750%, 8/01/14 2/05 at 102 AAA $1,064,120
5,000,000 6.875%, 8/01/26 2/05 at 102 AAA 5,290,600
1,115,000 Florida Housing Finance Agency, Brittany Rosemont 2/05 at 102 AAA 1,179,804
Apartments, Series C, 6.875%, 8/01/26
Florida Housing Finance Agency, Refunding,
Vinyards Project, Series H:
1,260,000 6.400%, 11/01/15 11/05 at 102 BBB+ 1,277,123
1,660,000 6.500%, 11/01/25 11/05 at 102 BBB+ 1,686,245
2,000,000 Florida Housing Finance Agency, Refunding, 8/06 at 102 AAA 2,064,900
Multifamily Housing, Series C, 6.200%, 8/01/16
3,500,000 Florida Housing Finance Agency, Housing, Villas of 10/06 at 102 AAA 3,571,435
Capri Project, Series H, 6.100%, 4/01/17
1,000,000 Florida Housing Finance Agency, Leigh Meadows 9/06 at 102 AAA 1,018,440
Apartments, Series N, 6.300%, 9/01/36
1,000,000 Florida Housing Finance Agency, Housing, Stoddert 9/06 at 102 AAA 1,018,440
Arms Apartments, Series O, 6.300%, 9/01/36
700,000 Florida Housing Finance Agency, Housing Revenue, 12/06 at 102 AAA 700,000
The Landing At the Sea Apartment Project, Series Q,
6.050%, 12/01/36
1,440,000 Florida Housing Finance Agency, Multifamily Housing, 6/99 at 103 AAA 1,522,915
Driftwood Terrace, Series I, 7.650%, 12/20/31
1,000,000 Orange County, Florida, Housing Finance Authority, 10/01 at 101 BBB+ 1,027,470
Housing Revenue, Multifamily, Ashley Point
Apartments, Series A, 7.100%, 10/01/24
- --------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 7.3%
Broward County Florida Housing Finance Authority
Revenue, Home Mortgage Series A:
4,885,000 0.000%, 4/01/16 No Opt. Call AAA 728,793
1,780,000 7.900%, 3/01/23 3/00 at 102 AAA 1,868,715
1,890,000 Clay County, Florida, Housing Finance Authority 3/05 at 102 Aaa 1,944,602
Revenue, Single Family Mortgage,
6.550%, 3/01/28
Dade County, Florida, Housing Finance Authority,
Single Family Mortgage Revenue, Series B:
265,000 7.750%, 3/01/17 9/00 at 102 Aaa 279,795
745,000 7.250%, 9/01/23 3/01 at 102 Aaa 779,702
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- continued
<S> <C> <C> <C> <C>
$1,005,000 Dade County, Florida, Housing Finance Authority, 12/01 at 102 AAA $1,062,667
Single Family Mortgage Revenue Refunding,
Series D, 6.950%, 12/15/12
40,000 Dade County, Florida, Housing Finance Authority, 3/01 at 102 Aaa 42,016
Single Family Mortgage Revenue Refunding,
Series E, 7.000%, 3/01/24
1,000,000 Dade County, Florida, Housing Finance Authority, 4/05 at 102 AAA 1,036,300
Single Family Mortgage Revenue,
6.700%, 4/01/28
400,000 Duval County, Florida, Housing Finance Authority, 6/00 at 102 Aaa 421,496
Single Family Mortgage Revenue Refunding,
Series B, 7.500%, 6/01/15
200,000 Duval County, Florida, Housing Finance Authority, 6/00 at 102 Aaa 210,952
Single Family Mortgage Revenue, Series A,
7.850%, 12/01/22
465,000 Duval County, Florida, Housing Finance Authority, 9/00 at 103 AAA 494,820
Single Family Mortgage Revenue, Series C,
7.650%, 9/01/10
725,000 Duval County, Florida, Housing Finance Authority, 10/04 at 102 Aaa 750,491
Single Family Mortgage Revenue, GNMA
Mortgage Backed Security Program,
6.550%, 10/01/15
1,690,000 Escambia County, Florida, Housing Finance Authority, 4/01 at 102 Aaa 1,776,883
Single Family Mortgage Revenue, Series A,
7.400%, 10/01/23
325,000 Escambia County, Florida, Housing Finance Authority, 10/02 at 102 Aaa 338,767
Single Family Mortgage Revenue, Multi-County
Program, Series A, 6.900%, 4/01/20
630,000 Escambia County, Florida, Housing Finance Authority, 4/05 at 102 AAA 658,205
Single Family Mortgage Revenue Refunding,
Multi County Program, 6.950%, 10/01/27
Florida Housing Finance Agency, Refunding, Single
Family Mortgage, Series A:
1,380,000 6.250%, 7/01/11 7/04 at 102 AAA 1,432,178
715,000 6.550%, 7/01/14 1/05 at 102 AAA 740,669
715,000 6.650%, 1/01/24 1/05 at 102 AAA 741,598
390,000 Leon County, Florida, Housing Finance Authority, 4/01 at 102 Aaa 408,174
Single Family Mortgage Revenue, Multi County
Program, Series A, 7.300%, 4/01/21
</TABLE>
16
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- continued
<S> <C> <C> <C> <C>
$ 3,000,000 Leon County, Florida, Housing Finance Authority, No Opt. Call AAA $3,306,060
Single Family Mortgage Revenue, Multi County
Program, Series B, 7.300%, 1/01/28
845,000 Manatee County, Florida, Housing Finance 11/05 at 105 Aaa 925,545
Authority, Mortgage Revenue, Single
Family, Sub Series 3, 7.600%, 11/01/26
1,185,000 Orange County, Florida, Housing Finance 5/99 at 103 Aaa 1,256,242
Authority, Mortgage Revenue, Series B,
8.100%, 11/01/21
280,000 Orange County, Florida, Housing Finance 7/00 at 103 AAA 297,142
Authority, Mortgage Revenue Refunding,
Series A, 7.600%, 1/01/24
1,055,000 Palm Beach County, Florida, Housing 9/00 at 103 Aaa 1,117,920
Finance Authority, Single Family Mortgage
Purchase Revenue, Series B,
7.600%, 3/01/23
2,000,000 Pinellas County, Florida, Housing Finance 2/05 at 102 AAA 2,076,280
Authority, Single Family Mortgage
Revenue, Multi County Program, Series A,
6.650%, 8/01/21
1,160,000 Polk County, Florida, Housing Finance 3/01 at 102 Aaa 1,219,346
Authority, Refunding, Series A,
7.150%, 9/01/23
- ----------------------------------------------------------------------------------------------------------------------
Industrial Development and Pollution Control -- 10.9%
6,000,000 Citrus County, Florida, Pollution Control 1/02 at 102 A+ 6,448,020
Revenue Refunding, Florida Power
Corporation Crystal River, Series A,
6.625%, 1/01/27
750,000 Clay County, Florida, Development Authority, 7/02 at 102 AA- 800,415
Industrial Development Revenue Refunding,
Cargill Inc. Project, 6.400%, 3/01/11
Escambia County, Florida, Pollution Control
Control Revenue, Champion International
Corporation Project:
5,500,000 6.900%, 8/01/22 8/04 at 102 Baa1 5,876,585
8,350,000 6.400%, 9/01/30 9/06 at 102 Baa1 8,647,093
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida--continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Development and Pollution Control -- continued
$ 2,500,000 Hillsborough County, Florida, Industrial Development 8/01 at 103 AA $ 2,851,750
Authority Pollution Control Revenue Refunding,
Tampa Electric Company Project, Series 91,
7.875%, 8/01/21
600,000 Jacksonville, Florida, Industrial Development 3/02 at 102 AA- 635,076
Revenue Refunding, Cargill Inc. Project,
6.400%, 3/01/11
375,000 Jacksonville, Florida, Water and Sewer Development 6/02 at 102 A 400,448
Revenue, Jacksonville Suburban Utilities
Corporation Project, 6.750%, 6/01/22
2,000,000 Martin County, Florida, Pollution Control Revenue 7/00 at 102 AAA 2,168,760
Refunding, Florida Power and Light Company
Project, 7.300%, 7/01/20
1,500,000 Nassau County, Florida, Pollution Control Revenue 7/03 at 102 BBB+ 1,526,580
Refunding, Itt Rayonier Inc. Project,
6.200%, 7/01/15
4,000,000 Pinellas County, Florida, Pollution Control Revenue 6/01 at 102 AA- 4,318,480
Refunding, Florida Power Corporation Anclote and
Bartow, 7.200%, 12/01/14
St. Lucie County, Florida, Solid Waste Disposal
Revenue, Florida Power and Light Company Project:
3,000,000 7,150%, 2/01/23 2/01 at 102 AA- 3,217,530
2,000,000 6.700%, 5/01/27 5/02 at 102 AA- 2,140,520
- --------------------------------------------------------------------------------------------------------------------
Municipal Appropriation Obligations -- 4.5%
Brevard County, Florida, School Board Certificates
of Participation, Series A, Refunding:
500,000 5.400%, 7/01/11 No Opt. Call AAA 506,830
500,000 5.400%, 7/01/12 No Opt. Call AAA 504,555
3,100,000 Brevard County, Florida, School Board Certificates 7/06 at 102 AAA 3,041,038
of Participation, Series B, Refunding,
5.500%, 7/01/21
5,425,000 Dade County, Florida, School Board Certificates of 5/06 at 101 AAA 5,314,818
Participation, Series A, 5.500%, 5/01/25
190,000 Escambia County, Florida, School Board Certificates 2/02 at 100 AAA 200,138
of Participation, 6.375%, 2/01/12
1,500,000 Florida State Department of Corrections, Certificates 3/04 at 102 A+ 1,550,880
of Participation, Gadsen County Correctional
Facility, 6.000%, 3/01/14
</TABLE>
18
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Appropriation Obligations -- continued
$ 4,115,000 Orange County, Florida, School Board Certificates 8/07 at 101 Aaa $3,960,976
of Participation, Refunding, Series A,
5.375%, 8/01/22
1,000,000 Palm Beach County, Florida, School Board Certificates 8/04 at 101 AAA 1,067,370
of Participation, Series A, 6.375%, 8/01/15
Municipal Revenue/Other -- 3.0%
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Other - 3.0%
3,105,000 Gulf Breeze, Florida, Revenue, Local Government, 12/99 at 102 AAA 3,395,752
Series E, 7.750%, 12/01/15
1,000,000 Gulf Breeze, Florida, Revenue, Local Government 12/11 at 100 AAA 1,030,530
Loan, Series B, 5.900%, 12/01/15
5,000,000 Hernando County, Florida, Revenue, Criminal No Opt. Call AAA 6,312,050
Justice Complex Financing Program,
7.650%, 7/01/16
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Transportation -- 3.1%
1,000,000 Dade County, Florida, Aviation Revenue, Series B, 10/02 at 102 AAA 1,073,690
6.550%, 10/01/13
1,000,000 Hillsborough County, Florida, Aviation Authority 10/06 at 102 AAA 1,017,300
Revenue, Tampa International Airport, Series B,
5.875%, 10/01/23
2,335,000 Palm Beach County, Florida Airport System No Opt. Call AAA 2,537,865
Revenue Refunding, 7.500%, 10/01/00
Sanford, Florida, Airport Authority, Industrial
Development Revenue, Central Florida Terminals
Inc. Project, Series A:
3,000,000 7.500%, 5/01/15 5/06 at 102 N/R 3,025,290
3,270,000 7.750%, 5/01/21 5/06 at 102 N/R 3,311,693
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Utility -- 4.1%
2,000,000 Escambia County, Florida, Utilities Authority, No Opt. Call AAA 745,620
Utility System Revenue, Series B,
0.000%, 1/01/15
1,500,000 Gainesville, Florida, Utilities System Revenue, 10/06 at 102 AA 1,424,040
Refunding, Series A, 5.200%, 10/01/22
470,000 Jacksonville, Florida, Electric Authority Revenue, 10/97 at 101 1/2 Aa1 482,432
Series A, 7.500%, 10/01/02
1,000,000 Lakeland, Florida, Electric and Water Revenue No Opt. Call AAA 1,074,410
Refunding and Improvement, Junior Sub Lien,
Series B, 6.000%, 10/01/12
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida--continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Revenue/Utility -- continued
Manatee County, Florida, Public Utilities Revenue
Refunding and Improvement, Series C:
$1,850,000 0.000%, 10/01/08 No Opt. Call AAA $1,021,311
2,800,000 0.000%, 10/01/09 No Opt. Call AAA 1,449,336
1,000,000 Orlando, Florida, Utilities Commission, Water and No Opt. Call Aa 1,167,350
Electric Revenue Refunding, Sub Series D,
6.750%, 10/01/17
1,250,000 Orlando, Florida, Utilities Commission, Water and 10/02 at 102 Aa 1,269,500
Electric Revenue, Sub, Series A, 6.000%, 10/01/20
6,000,000 Polk County, Florida, Industrial Development 12/06 at 102 A-1+ 6,012,420
Authority, Solid Waste Disposal Facility Revenue,
Tampa Electric Company Project, 5.850%, 12/01/30
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Water and Sewer -- 6.8%
3,750,000 Auburndale, Florida, Water and Sewer Revenue, 12/05 at 102 AAA 3,556,500
Refunding, 5.250%, 12/01/25
1,000,000 Callaway/Bay County, Florida, Wastewater System 9/99 at 100 AAA 1,037,610
Revenue, Series A, 6.000%, 9/01/26
1,000,000 Charlotte County, Florida, Utility Revenue, 10/97 at 100 AAA 1,002,510
Refunding, Series A, 6.200%, 10/01/23
Dade County, Florida, Water and Sewer System
Revenue:
3,000,000 5.250%, 10/01/21 10/07 at 101 AAA 2,878,470
7,500,000 5.250%, 10/01/26 10/07 at 101 AAA 7,138,950
1,000,000 Davie, Florida, Water and Sewer Revenue, Refunding 10/02 at 102 AAA 1,056,100
and Improvement, 6.250%, 10/01/17
600,000 Daytona Beach, Florida, Water and Sewer Revenue, 11/02 at 102 AAA 621,288
Refunding, 6.000%, 11/15/14
2,250,000 Hillsborough County, Florida, Utility Refunding 8/01 at 102 AAA 2,430,158
Revenue, Series A, FSA, CRS, 6.500%, 8/01/16
3,500,000 Hillsborough County, Florida, Utility Refunding 8/01 at 102 AAA 3,780,245
Revenue, Series B, 6.500%, 8/01/16
250,000 Jupiter, Florida, Water Revenue, Series B, 10/01 at 102 AAA 262,688
6.250%, 10/01/18
</TABLE>
20
<PAGE>
<TABLE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Revenue/Water and Sewer -- continued
$ 500,000 Orange County, Florida, Water and Wastewater 4/02 at 102 AAA $ 525,875
Revenue Refunding, 6.250%, 10/01/17
165,000 Tampa, Florida, Water and Sewer Revenue, 10/02 at 101 AAA 170,061
Series A, 6.000%, 10/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Non-State General Obligations -- 4.6%
2,990,000 Hillsborough County, Florida, Refunding, 7/02 at 102 A 3,155,825
Environmentally Sensitive LDS
Acquisition and Protection, 6.250%, 7/01/08
7,000,000 New York City, Series G, 5.750%, 2/01/20 2/06 at 101 1/2 BBB+ 6,779,850
1,000,000 New York, New York, Refunding Series F, 8/06 at 101 1/2 BBB+ 982,590
5.875%, 8/01/24
5,000,000 Sunrise Lakes, Florida, Phase 4 Recreation 8/05 at 102 BBB- 5,406,450
District, Series A, 6.750%, 8/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Pre-refunded -- 9.4%***
1,925,000 Boynton Beach, Florida, Water and Sewer 11/00 at 102 AAA 2,137,289
Revenue, Utility, 7.400%, 11/01/15
1,500,000 Broward County, Florida, School Board 7/00 at 102 AAA 1,641,315
Certificates of Participation, Series A,
7.125%, 7/01/10
250,000 Dade County, Florida, Health Facilities 10/99 at 102 AAA 269,270
Authority Hospital Revenue Refunding,
South Miami Hospital, 7.000%, 10/01/18
300,000 Dade County, Florida, Health Facilities 8/02 at 102 AAA 330,180
Authority, Hospital Revenue Refunding,
North Shore Medical Center Project,
6.500%, 8/15/15
310,000 Escambia County, Florida, School Board Certificates 2/02 at 100 AAA 332,661
of Participation, 6.375%, 2/01/12
5,000,000 Florida State Board Education Capital Outlay, 6/01 at 101 AAA 5,434,000
Public Education, Series B, 6.700%, 6/01/22
2,000,000 Florida State Board Education Capital Outlay, 6/02 at 101 Aaa 2,193,680
Public Education Capital Outlay, Series 91C,
6.625%, 6/01/17
1,000,000 Hillsborough County, Florida, Port District Revenue, 12/00 at 102 Baa1 1,135,300
Tampa Port Authority, 8.250%, 6/01/09
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida--continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pre-refunded--continued
$ 250,000 Hillsborough County, Florida, Capital Improvement 12/00 at 102 A $ 266,140
Revenue, Museum of Science and Industry,
6.400%, 1/01/12
1,635,000 Hillsborough County, Florida, Utility Refunding 8/01 at 102 BBB+ 1,806,953
Revenue, Refunding, Series A, 7.000%, 8/01/14
250,000 Hollywood, Florida, Water and Sewer Revenue, 10/01 at 102 AAA 276,890
6.875%, 10/01/21
1,810,000 Jacksonville, Florida, Electric Authority Revenue, 10/00 at 101 1/2 Aaa 1,975,814
Bulk Power Supply (Scherer 4 Project),
Series 1991A, 7.000%, 10/01/12
1,500,000 Lady Lake, Florida, Industrial Development Revenue, 7/00 at 102 N/R 1,741,140
Sunbelt Utilities Inc. Project, 9.625%, 7/01/15
1,050,000 Naples, Florida, Hospital Revenue, Naples Community 10/00 at 102 AAA 1,156,134
Hospital Inc. Project, Refunding, 7.200%, 10/01/19
250,000 North Broward, Florida, Hospital District Hospital 1/02 at 102 AAA 270,443
Revenue Refunding, 6.250%, 1/01/12
3,400,000 North Springs Improvement District, Florida Water 10/01 at 102 N/R 3,923,430
and Sewer Revenue, 8.000%, 10/01/16
145,000 Orange County, Florida, Sales Tax Revenue, 1/00 at 102 AAA 153,617
6.125%, 1/01/19
1,750,000 Orange County, Florida, Tourist Development Tax 10/00 at 102 AAA 1,931,300
Revenue, 7.250%, 10/01/10
1,750,000 Palm Beach County, Florida, Criminal Justice 6/00 at 102 AAA 1,917,755
Facilities Revenue, 7.250%, 6/01/11
1,425,000 Puerto Rico Electric Power Authority, Formerly 7/01 at 102 Aaa 1,584,557
Puerto Rico Commonwealth, Water Resource
Authority Power, Series P, 7.000%, 7/01/21
2,500,000 Seminole County, Florida, School Board Certificates 7/04 at 101 AAA 2,813,250
of Participation, Series B, 6.750%, 7/01/14
335,000 Tampa, Florida, Water and Sewer Revenue, Series A, 10/02 at 101 AAA 359,324
6.000%, 10/01/17
- ----------------------------------------------------------------------------------------------------------------------------
Resource Recovery -- 2.0%
4,395,000 Broward County, Florida, Resouce Recovery Revenue, 12/99 at 103 A 4,789,539
Broward Company LP South Project,
7.950%, 12/01/08
2,125,000 Lee County, Florida, Solid Waste System Revenue, 10/01 at 102 AAA 2,319,905
Series A, 7.000%, 10/01/11
</TABLE>
22
<PAGE>
<TABLE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Special Tax Revenue -- 7.4%
$10,730,000 Dade County, Florida, Professional Sports 10/05 at 102 AAA $10,126,330
Franchise Facilities Tax Revenue,
5.250%, 10/01/30
255,000 Dade County, Florida, Special Obligation, 4/04 at 102 A3 272,506
Courthouse Center Project,
6.300%, 4/01/14
4,585,000 Dade County, Florida, Special Obligation, 10/06 at 102 AAA 4,155,844
Refunding, Series B, 5.000%, 10/01/35
5,835,000 Dade County, Florida, Special Obligation, No Opt. Call AAA 3,428,938
Refunding, Series B, 0.000%, 10/01/07
250,000 Jacksonville, Florida, Excise Tax Revenue, 10/02 at 102 AAA 271,993
Refunding, 6.500%, 10/01/13
1,010,000 Martin County, Florida, Special Assessment 11/05 at 100 A2 1,035,855
Revenue, Tropical Farms Water,
5.900%, 11/01/11
1,000,000 Miami Beach, Florida, Redevelopment Agency, 12/04 at 102 BBB 970,450
Tax Increment Revenue, City Center, Historic
Convention Village, 5.875%, 12/01/22
1,000,000 Palm Beach County, Florida, Criminal Justice No Opt. Call AAA 1,018,760
Facilities Revenue, Refunding, 5.375%, 6/01/10
1,000,000 Palm Beach Gardens, Florida, Special Obligation 7/99 at 102 AAA 1,072,040
Revenue, 7.250%, 7/01/15
2,000,000 Puerto Rico Commonwealth Highway and 7/16 at 100 A 1,945,140
Transportation Authority, Highway Revenue,
Series Y, 5.500%, 7/01/36
3,300,000 Tampa, Florida, Utility Tax, 0.000%, 4/01/17 No Opt. Call AAA 1,073,984
1,000,000 Turtle Run, Florida, Community Development 5/03 at 100 A1 1,061,200
District Revenue, Refunding, Water
Management Benefit Tax, 6.400%, 5/01/11
- -------------------------------------------------------------------------------------------------------------
State/Territorial General Obligations -- 4.4%
Florida State, Broward County Expressway
Authority:
4,000,000 9.875%, 7/01/09 No Opt. Call AA+ 5,624,240
1,000,000 10.000%, 7/01/14 No Opt. Call AA+ 1,481,980
300,000 Florida State, Double Barrell, Pollution 7/02 at 101 AA+ 323,850
Control, Series Y, 6.600%, 7/01/17
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida--continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
State/Territorial General Obligations -- continued
<S> <C> <C> <C> <C>
$ 2,165,000 Florida State Board Education Capital No Opt. Call AA+ $ 3,023,205
Outlay, 9.125%, 6/01/14
2,250,000 Florida State Board Education Capital Outlay, Public 6/05 at 101 AA+ 2,276,640
Education, Series B, 5.875%, 6/01/20
Puerto Rico Commonwealth, Public Improvement:
2,000,000 6.500%, 7/01/15 No Opt. Call AAA 2,260,580
700,000 5.375%, 7/01/25 7/07 at 101 1/2 A 667,813
- ------------------------------------------------------------------------------------------------------------------------------------
$349,830,000 Total Investments -- (cost $332,750,987) 98.7% $352,582,218
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.3% 4,549,764
-------------------------------------------------------------------------------------------------------
Net Assets -- 100% $357,131,982
=======================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the
report of independent auditors): 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 auditors): Using the higher of
Standard & Poor's or Moody's rating.
*** Pre-refunded securities are backed by an
escrow or trust containing sufficient U.S.
Government or U.S.Government agency
securities, which ensures the timely payment
of principal and interest. Pre-refunded
securities are normally considered to be
equivalent to AAA rated securities.
N/R -- Investment is not rated.
See accompanying notes to financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Municipal Bond Funds
Nuveen Flagship Florida Intermediate May 31, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care -- 2.3%
$165,000 Jacksonville, Florida, Health Facilities Authority, No Opt. Call Baa1 $168,863
Industrial Development, Revenue, National
Benevolent, Cypress Village, Series A,
5.850%, 12/01/06
200,000 Sarasota County, Florida, Health Facility No Opt. Call N/R 198,218
Authority, Revenue Refunding, Health Facilities,
Sunnyside Properties, 5.500%, 5/15/05
- -------------------------------------------------------------------------------------------------------------------
Hospitals -- 4.1%
200,000 Alachua County, Florida, Health Facilities 12/06 at 102 AAA 204,234
Authority, Health Facilities Revenue, Shands
Teaching Hospital, Series A, 5.300%, 12/01/08
250,000 Lee County, Florida, Hospital Board of Directors, 4/07 at 102 AAA 252,333
Hospital Revenue, Lee Memorial Health System,
Series A, 5.400%, 4/01/09
200,000 Leesburg, Florida, Hospital Revenue Refunding, 7/06 at 102 A-- 204,130
Leesburg Regional Medical Center Project,
Series A, 5.600%, 7/01/08
- -------------------------------------------------------------------------------------------------------------------
Housing/Multi Family -- 3.6%
300,000 Brevard County, Florida, Housing Finance 2/06 at 101 AAA 330,933
Authority, Multifamily Housing, Revenue
Refunding, Windover Oaks, Series A,
6.900%, 2/01/27
250,000 Indianapolis, Indiana, Economic Development, 6/97 at 100 N/R 250,003
Multifamily Housing, Mortgage Revenue Castle
Dore Project, Series A, 5.125%, 4/01/37
(Mandatory put 4/01/98)
- -------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 2.7%
250,000 Escambia County, Florida, Housing Finance 4/07 at 102 Aaa 252,010
Authority, Single Family Mortgage Revenue,
Multi County Program, Series A,
5.500%, 4/01/08
180,000 Florida, Housing Finance Agency, No Opt. Call AAA 183,217
Single Family Mortgage, Series A,
6.000%, 1/01/04
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Flagship Florida Intermediate-- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Development and Pollution Control -- 1.3%
$ 200,000 Escambia County, Florida, Pollution Control, Revenue 11/02 at 102 Baa1 $ 217,994
Refunding, Champion International Corporation
Project, 6.950%, 11/01/07
- --------------------------------------------------------------------------------------------------------------------
Municipal Appropriation Obligations -- 2.5%
100,000 Dade County, Florida, School Board, Certificates of No Opt. Call AAA 103,021
Participation, Series A, 5.375%, 5/01/04
290,000 Levy County, Florida, School Board, Certificates of 7/05 at 102 AA 299,402
Participation, 5.500%, 7/01/06
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Other -- 2.6%
405,000 Gulf Breeze, Florida, Revenue, Local Government Loan 12/06 at 101 AAA 415,016
Program, Series B, 5.600%, 12/01/15
(Mandatory put 12/01/07)
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/ Transportation -- 9.1%
350,000 Dade County, Florida, Aviation Revenue Refunding, No Opt. Call AAA 374,633
Series A, 6.250%, 10/01/02
325,000 Florida, Ports Financing Commission, Revenue, State No Opt. Call AAA 323,482
Transportation Tollroad Fund, 5.000%, 6/01/07
100,000 Palm Beach County, Florida, Airport System, Revenue 10/01 at 102 AAA 113,254
Refunding, 7.625%, 10/01/04
200,000 Pensacola, Florida, Airport Revenue, Series B, No Opt. Call AAA 204,760
5.400%, 10/01/07
250,000 Sanford, Florida, Airport Authority, Industrial No Opt. Call N/R 250,893
Development Revenue, Central Florida Terminals
Inc. Project, Series C, 6.750%, 5/01/05
200,000 Sarasota, Manatee Airport Authority, Florida Airport 8/06 at 102 AAA 203,282
Revenue Refunding, 5.250%, 8/01/08
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Utility -- 2.3%
120,000 Jacksonville, Florida, Electric Authority, Revenue 4/06 at 101 Aa1 117,830
Refunding, St. Johns River Power Park System,
Issue 2, 15, 4.750%, 10/01/07
250,000 Plant City, Florida, Utility System Revenue Refunding 10/04 at 101 AAA 259,405
and Improvement, 5.400%, 10/01/06
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
Principal Optional Call Market
Amount Description Provision* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Revenue/Water and Sewer -- 7.8%
$ 485,000 Auburndale, Florida, Water and Sewer, Revenue 12/05 at 102 AAA $ 498,323
Refunding, 5.375%, 12/01/08
250,000 Lee County, Florida, Industrial Development 11/06 at 101 AAA 259,143
Authority, Utilities Revenue Refunding,
Bonita Springs Utilities Project,
5.450%, 11/01/07
Ocoee, Florida, Water and Sewer System, Revenue:
100,000 4.900%, 10/01/06 No Opt. Call AAA 100,209
150,000 5.000%, 10/01/07 10/06 at 102 AAA 151,014
155,000 5.100%, 10/01/08 10/06 at 102 AAA 155,984
100,000 Port St. Lucie, Florida, Utility Revenue, No Opt. Call AAA 104,580
5.500%, 9/01/04
- --------------------------------------------------------------------------------------------------------------------
Non-State General Obligations -- 6.3%
200,000 Dade County, Florida, School District, 7/06 at 101 AAA 188,034
4.500%, 7/15/08
500,000 Duval County, Florida, School District, 8/02 at 102 AAA 536,400
6.300%, 8/01/08
275,000 New York City, Refunding, Series A, 8/06 at 101 1/2 BBB+ 290,840
6.250%, 8/01/08
- --------------------------------------------------------------------------------------------------------------------
Pre-refunded -- 10.6%
1,000,000 Florida State Municipal Power Agency, Revenue, 10/02 at 102 AAA 1,092,160
All Requirements Power Supply Project,
6.250%, 10/01/21
570,000 Florida State Turnpike Authority, Turnpike 7/02 at 101 AAA 618,872
Revenue, Series A, 6.350%, 7/01/22
- --------------------------------------------------------------------------------------------------------------------
Special Tax Revenue -- 15.0%
200,000 Broward County, Florida, Professional Sports 9/06 at 101 AAA 203,886
Facilities, Tax Revenue, Civic Arena
Project, Series A, 5.200%, 9/01/07
335,000 Dade County, Florida, Special Obligation, 10/08 at 98 7/32 AAA 171,332
Refunding Bond, Series B, 0.000%, 10/01/09
250,000 Florida, State Division of Bond Finance, 7/05 at 101 AAA 260,975
Department of General Services, Revenue,
Department of Environmental Preservation
2000, Series A, 5.500%, 7/01/06
27
</TABLE>
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Intermediate - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Special Tax Revenue -- continued
$ 100,000 Gulf County, Florida, Gas Tax, Revenue Refunding and 10/05 at 102 AAA $ 100,676
Improvement, 5.000%, 10/01/07
200,000 Hillsborough County, Florida, Capital Improvement 8/06 at 102 AAA 194,742
Program, Revenue Refunding, 4.800%, 8/01/08
150,000 Indian Trace Community Development District, Florida, 5/05 at 102 AAA 156,710
Water Management, Special Benefit,
Series A, 5.500%, 5/01/06
100,000 Jacksonville, Florida, Excise Taxes Revenue, Series B, 10/01 at 101 AAA 101,318
5.050%, 10/01/03
125,000 Lynn Haven, Florida, Special Project Revenue, No Opt. Call AAA 126,166
5.250%, 10/01/05
250,000 Martin County, Florida, Special Assessment Revenue, No Opt. Call A2 258,285
Tropical Farms Water, 5.600%, 11/01/05
500,000 Palm Beach County, Florida, Criminal Justice Facilities, No Opt. Call AAA 518,300
Revenue Refunding, 5.300%, 6/01/05
125,000 Pembroke Pines, Florida, Special Assessment, No Opt. Call Baa1 127,668
Number 94, Series 1, 5.750%, 11/01/05
200,000 Puerto Rico Commonwealth, Highway and No Opt. Call A 202,692
Transportation Authority, Highway Revenue,
Series X, 5.200%, 7/01/03
- ------------------------------------------------------------------------------------------------------------------
State/Territorial General Obligations -- 9.1%
225,000 Florida, Broward County, Expressway Authority, No Opt. Call AA+ 316,364
9.875%, 7/01/09
Florida State Board of Education, Capital Outlay,
Refunding, Public Education, Series A:
100,000 6.000%, 6/01/07 6/02 at 101 AA+ 105,545
250,000 5.000%, 6/01/08 AA+ 250,105
325,000 Guam Government, Series A, 4.900%, 11/15/04 11/03 at 102 BBB 310,931
500,000 Puerto Rico Commonwealth, Refunding Improvement, A 509,990
5.375%, 7/01/05
- ------------------------------------------------------------------------------------------------------------------
$ 12,505,000 Total Investments -- (cost $12,522,887) -- 79.3% 12,838,157
============------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 20.7% 3,359,551
--------------------------------------------------------------------------------------------------
Net Assets -- 100% $16,197,708
==================================================================================================
</TABLE>
* Optional Call Provisions (Not covered by the report of independent auditors):
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 auditors): Using the higher
of Standard & Poor's or Moody's rating.
N/R -- Investment is not rated.
See accompanying notes to financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
May 31, 1997
Nuveen Flagship Nuveen Flagship
Florida Florida Intermediate
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $352,582,218 $ 12,838,157
Cash 193,832 --
Receivables:
Interest 6,021,276 200,662
Shares sold 189,085 6,999,999
Investments sold 3,298,993 --
Other assets 17,037 1,693
- ------------------------------------------------------------------------------------------------------------------------
Total assets 362,302,441 20,040,511
- ------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 24,381
Payables:
Investments purchased 2,928,008 1,611,884
Shares redeemed 339,831 2,122,214
Accrued expenses:
Management fees (note 6) 72,439 633
12b-1 distribution and service fees (notes 1 and 6) 54,147 3,444
Other 211,284 34,447
Dividends payable 1,564,750 45,800
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,170,459 3,842,803
- ------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $357,131,982 $16,197,708
========================================================================================================================
Class A Shares (note 1)
Net assets $296,970,141 $13,088,902
Shares outstanding 28,017,793 1,297,607
Net asset value and redemption price per share $ 10.60 $ 10.09
Offering price per share (net asset value per
share plus maximum sales charge of 4.20%
and 3.00%, respectively, of offering price) $ 11.06 $ 10.40
========================================================================================================================
Class B Shares (note 1)
Net assets $ 785,020 $ N/A
Shares outstanding 73,979 N/A
Net asset value, offering and redemption price per share $10.61 $ N/A
========================================================================================================================
Class C Shares (note 1)
Net assets $ 5,130,109 $ 3,007,561
Shares outstanding 483,771 298,256
Net asset value, offering and redemption price per share $ 10.60 $ 10.08
========================================================================================================================
Class R Shares (note 1)
Net assets $ 54,246,712 $ 101,245
Shares outstanding 5,117,482 10,011
Net asset value, offering and redemption price per share $ 10.60 $ 10.11
========================================================================================================================
N/A - Nuveen Flagship Florida Intermediate is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
29
</TABLE>
<PAGE>
Statement of Operations
Year ended May 31, 1997
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Florida* Florida Intermediate**
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $ 20,229,707 $ 512,118
- ------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 1,687,564 50,874
12b-1 service fees -- Class A (notes 1 and 6) 1,032,039 21,227
12b-1 distribution and service fees -- Class B (notes 1 and 6) 1,449 N/A
12b-1 distribution and service fees -- Class C (notes 1 and 6) 24,848 26,833
Shareholders' servicing agent fees and expenses 169,380 27,935
Custodian's fees and expenses 114,653 47,450
Trustees' fees and expenses (note 6) 8,643 199
Professional fees 24,196 11,923
Shareholders' reports -- printing and mailing expenses 35,840 1,301
Federal and state registration fees 7,532 803
Organizational expenses (note 1) - 9,121
Other expenses 11,606 1,203
- ------------------------------------------------------------------------------------------------------------------
Total expenses before reimbursement 3,117,750 198,869
Expense reimbursement from investment adviser (note 6) (448,690) (110,883)
- ------------------------------------------------------------------------------------------------------------------
Net expenses 2,669,060 87,986
- ------------------------------------------------------------------------------------------------------------------
Net investment income 17,560,647 424,132
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions
(notes 1 and 4) 1,079,346 (26,511)
Net change in unrealized appreciation or depreciation
of investments 5,172,708 223,395
- ------------------------------------------------------------------------------------------------------------------
Net gain from investments 6,252,054 196,884
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 23,812,701 $ 621,016
==================================================================================================================
</TABLE>
* Information represents eight months of Flagship Florida and four months of
Nuveen Flagship Florida (see note 1 of the Notes to Financial Statements).
** Information represents eight months of Flagship Florida Intermediate and
four months of Nuveen Flagship Intermediate (see note 1 of the Notes to
Financial Statements).
N/A - Nuveen Flagship Florida Intermediate is not authorized to issue Class B
Shares.
See accompanying notes to financial statements.
30
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
Nuveen Flagship Flagship
Florida Florida
- --------------------------------------------------------------------------------------------------------------------
Year ended 5/31/97* Year ended 5/31/96
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 17,560,647 $ 17,831,203
Net realized gain from investment transactions
(notes 1 and 4) 1,079,346 4,828,780
Net change in unrealized appreciation or depreciation
of investments 5,172,708 (12,275,838)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 23,812,701 10,384,145
- ---------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (16,417,162) (17,864,777)
Class B (6,544) N/A
Class C (136,909) (15,706)
Class R (978,903) N/A
From accumulated net realized gains from
investment transactions:
Class A (27,453) --
Class B -- N/A
Class C (288) --
Class R -- N/A
- ---------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (17,567,259) (17,880,483)
- ---------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization
of Nuveen Florida (note 1) 65,696,034 --
Net proceeds from shares issued as a capital contribution 33,360 --
Net proceeds from sale of shares 30,465,913 36,866,299
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 5,587,408 6,774,286
101,782,715 43,640,585
- ---------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (70,527,219) (57,887,168)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions 31,255,496 (14,246,583)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 37,500,938 (21,742,921)
Net assets at the beginning of year 319,631,044 341,373,965
- --------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 357,131,982 $ 319,631,044
====================================================================================================================
Balance of undistributed net investment income at end of year $ 21,129 $ --
====================================================================================================================
</TABLE>
* Information represents eight months of Flagship Florida and four months of
Nuveen Flagship Florida (see note 1 of the Notes to Financial Statements).
N/A - Flagship Florida was not authorized to issue Class B or Class R Shares.
31 See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets -- continued
Nuveen Flagship Flagship Florida
Florida Intermediate Intermediate
- --------------------------------------------------------------------------------------------------------------------
Year ended 5/31/97* Year ended 5/31/96
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 424,132 $ 331,742
Net realized gain (loss) from investment transactions
(notes 1 and 4) (26,511) 38,343
Net change in unrealized appreciation or depreciation
of investments 223,395 (149,369)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 621,016 220,716
- ---------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (312,115) (235,102)
Class C (123,497) (100,151)
Class R (406) N/A
From accumulated net realized gains from
investment transactions:
Class A (11,177) (22,352)
Class C (5,494) (11,661)
Class R -- N/A
- ---------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (452,689) (369,266)
- ---------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 13,641,821 5,685,452
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 160,751 185,193
- ---------------------------------------------------------------------------------------------------------------------
13,802,572 5,870,645
- ---------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,846,919) (3,310,832)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 7,955,653 2,559,813
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets 8,123,980 2,411,263
Net assets at the beginning of year 8,073,728 5,662,465
- ---------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 16,197,708 $ 8,073,728
=====================================================================================================================
Balance of undistributed net investment income at end of year $ 10,894 $ 22,780
=====================================================================================================================
</TABLE>
* Information represents eight months of Flagship Florida Intermediate and
four months of Nuveen Flagship Florida Intermediate (see note 1 of the
Notes to Financial Statements).
N/A - Flagship Florida Intermediate was not authorized to issue Class R Shares.
32 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Florida Municipal Bond Fund and Nuveen Flagship
Florida Intermediate Municipal Bond Fund (the "Funds"), among others. The Trust
was organized as a Massachusetts business trust on July 1, 1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and Nuveen
Advisory Corp., respectively, the distributor ("Distributor") and investment
advisor ("Adviser") of the Funds, entered into an agreement under which Nuveen
acquired Flagship Resources Inc. and after the close of business on January 31,
1997, consolidated their respective mutual fund businesses. This agreement was
approved at a meeting by the shareholders of the Flagship Funds in December
1996.
After the close of business on January 31, 1997, Flagship Florida Double Tax
Exempt Fund ("Flagship Florida") and Nuveen Florida Tax-Free Value Fund ("Nuveen
Florida") reorganized into Nuveen Flagship Florida Municipal Bond Fund ("Nuveen
Flagship Florida"). Flagship Florida Intermediate Tax Exempt Fund ("Flagship
Florida Intermediate") was reorganized into the Trust and renamed Nuveen
Flagship Florida Intermediate Municipal Bond Fund ("Nuveen Flagship Florida
Intermediate"). Prior to these reorganizations, Flagship Florida and Flagship
Florida Intermediate were each a sub-trust of Flagship Tax Exempt Funds Trust,
while Nuveen Florida was a series of the Nuveen Multistate Tax-Free Trust.
Nuveen Florida had a fiscal year end of January 31 prior to being reorganized
into Nuveen Flagship Florida which has a May 31 fiscal year end.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
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
The prices of municipal bonds in the Funds' investment portfolio are provided by
a pricing service approved by the Funds' 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. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
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 have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1997, the Funds had no such commitments.
33
<PAGE>
Notes to Financial Statements--continued
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 on the first business day after month-end. Net realized
capital gains and/or market discount from investment transactions,
if any, are distributed to shareholders not less frequently than
annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryovers. Prior to the
reorganization, tax-exempt net investment income for Flagship
Florida and Flagship Florida Intermediate was declared as a
dividend daily and payment was made on the last business day of
each month.
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 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 net
ordinary taxable income from investment transactions, where
applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes.
Each Fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute 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, the
Funds intend to satisfy conditions which will enable interest from
municipal securities, which is exempt from regular federal income
taxes, to retain such tax-exempt status when distributed to the
shareholders of the Funds. All income dividends paid during the
fiscal year ended May 31, 1997, for each fund have been designated
Exempt Interest Dividends. Net realized capital gains and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
Effective February 1, 1997, each Fund offers Class A, C and R
Shares. Also effective February 1, 1997, Nuveen Flagship Florida
began offering Class B Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class B Shares are
sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class B Shares agrees to pay a
contingent deferred sales charge ("CDSC") of up to 5% depending
upon the length of time the shares are held by the investor (CDSC
is reduced to 0% at the end of six years). Class 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
CDSC of 1% if Class C Shares are redeemed within 18 months of
purchase. Class R Shares, are not subject to any sales
34
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
charge or 12b-1 distribution or service fees. Class R Shares are
available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest 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 fiscal year ended May 31, 1997.
Expense Allocation
Expenses of the Funds that are not directly attributable to a
specific class of shares are prorated among the classes based on
the relative net assets of each class. Expenses directly
attributable to a class of shares, which presently only includes
12b-1 distribution and service fees, are recorded to the specific
class.
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.
Organizational Expenses
The organizational expenses incurred on behalf of Nuveen Flagship
Florida Intermediate (approximately $27,400) will be reimbursed to
the Adviser on a straight-line basis over a period of three years
beginning June 1, 1996. As of May 31, 1997, $9,121 has been
reimbursed. In the event that the Adviser'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.
35
<PAGE>
Notes to Financial Statements--continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Florida* Flagship Florida
------------------------------------------------------
Year ended 5/31/97 Year ended 5/31/96
------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the
reorganization of Nuveen Florida:
Class A 1,049,952 $ 11,119,107 - $ -
Class B - - N/A N/A
Class C 33,855 358,702 - -
Class R 5,119,701 54,218,225 N/A N/A
Shares issued as a
capital contribution:
Class A 788 8,340 - -
Class B 788 8,340 N/A N/A
Class C 787 8,340 - -
Class R 788 8,340 N/A N/A
Shares sold:
Class A 2,325,105 24,486,690 3,341,801 35,642,289
Class B 72,980 773,584 N/A N/A
Class C 363,870 3,832,018 114,811 1,224,010
Class R 129,989 1,373,621 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 488,917 5,143,242 635,528 6,768,677
Class B 211 2,219 N/A N/A
Class C 3,197 33,754 526 5,609
Class R 38,779 408,193 N/A N/A
- ---------------------------------------------------------------------------------------------------
9,629,707 101,782,715 4,092,666 43,640,585
- ---------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (6,499,240) (68,393,215) (5,453,566) (57,862,882)
Class B - - N/A N/A
Class C (30,973) (324,954) (2,302) (24,286)
Class R (171,775) (1,809,050) N/A N/A
- ---------------------------------------------------------------------------------------------------
(6,701,988) (70,527,219) (5,455,868) (57,887,168)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) 2,927,719 $ 31,255,496 (1,363,202) $(14,246,583)
===================================================================================================
</TABLE>
* Information represents eight months of Flagship Florida and four months of
Nuveen Flagship Florida (see note 1).
N/A--Flagship Florida was not authorized to issue Class B or Class R Shares.
- ------
36
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
Nuveen Flagship Flagship
Florida Intermediate* Florida Intermediate
------------------------------------------------------------------
Year ended 5/31/97 Year ended 5/31/96
------------------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,278,167 $12,883,393 366,520 $ 3,698,170
Class C 65,754 657,819 195,954 1,987,282
Class R 10,011 100,609 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 11,064 110,935 12,299 124,575
Class C 4,973 49,816 5,977 60,618
Class R - - N/A N/A
- ----------------------------------------------------------------------------------------------------------
1,369,969 13,802,572 580,750 5,870,645
- ----------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (496,941) (5,002,329) (261,357) (2,643,760)
Class C (83,942) (844,590) (66,052) (667,072)
Class R - - N/A N/A
- ----------------------------------------------------------------------------------------------------------
(580,883) (5,846,919) (327,409) (3,310,832)
- ----------------------------------------------------------------------------------------------------------
Net increase 789,086 $ 7,955,653 253,341 $ 2,559,813
==========================================================================================================
* Information represents eight months of Flagship Florida Intermediate and four months of Nuveen
Flagship Florida Intermediate (see note 1).
N/A -- Flagship Florida Intermediate was not authorized to issue Class R Shares.
</TABLE>
37
<PAGE>
Notes to Financial Statements--continued
3. Distributions to Shareholders On June 9, 1997, the Funds declared dividend
distributions from their tax-exempt net investment income which were paid on
July 1, 1997, to shareholders of record on June 9, 1997, as follows:
Nuveen Flagship Nuveen Flagship
Florida Florida Intermediate
- -------------------------------------------------------------------------------
Dividend per share:
Class A $.0460 $.0390
Class B .0395 N/A
Class C .0415 .0345
Class R .0480 .0405
- -------------------------------------------------------------------------------
N/A - Nuveen Flagship Florida Intermediate is not authorized to issue Class B
Shares.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1997, were as follows:
Nuveen
Nuveen Flagship Flagship Florida
Florida* Intermediate**
- -------------------------------------------------------------------------------
Purchases
Investments in municipal securities $176,585,969 $7,996,047
Investments in municipal securities in the
reorganization of Nuveen Florida 61,479,704 ---
Temporary municipal investments 7,000,000 600,000
Sales
Investments in municipal securities 214,958,922 3,372,192
Temporary municipal investments 7,000,000 600,000
- -------------------------------------------------------------------------------
* Information represents eight months of Flagship Florida and four months of
Nuveen Flagship Florida (see note 1).
** Information represents eight months of Flagship Florida Intermediate and four
months of Nuveen Flagship Florida Intermediate (see note 1).
At May 31, 1997, the identified cost of investments owned for federal income tax
purposes may differ from the cost for financial reporting purposes.
At May 31, 1997, Nuveen Flagship Florida had unused capital loss carryforwards
of $541,818 available for federal income tax purposes to be applied against
future capital gains, if any. If not applied, $187,294 of the carryover will
expire in the year 2002, $141,494 in the year 2003 and $213,030 in the year
2004.
At May 31, 1997, Nuveen Flagship Florida Intermediate had an unused capital loss
carryforward of $4,069 available for federal income tax purposes to be applied
against future capital gains, if any. If not applied, the carryover will expire
in the year 2005.
38
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Florida Florida Intermediate
- --------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $19,966,773 $315,378
depreciation (135,542) (108)
- --------------------------------------------------------------------------------
Net unrealized appreciation $19,831,231 $315,270
- --------------------------------------------------------------------------------
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Funds
pay 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 as follows:
<TABLE>
<CAPTION>
Average daily net asset value 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 net assets over $2 billion .4750 of 1
- --------------------------------------------------------------------------------
</TABLE>
Prior to the reorganization (see note 1) the Funds paid a management fee of .5
of 1%. 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
39
<PAGE>
Notes to Financial Statements--continued
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
(Flagship Funds Inc., a wholly-owned subsidiary of Flagship Resources Inc.)
collected gross sales charges on purchases of Class A Shares, the majority of
which were paid out as concessions to authorized dealers as follows:
Nuveen Flagship Nuveen Flagship
Florida Florida Intermediate
- -----------------------------------------------------------------------------
Gross sales charges collected $ 442,500 $ 12,200
Paid to authorized dealers 381,300 9,600
- -----------------------------------------------------------------------------
The Distributor and its predecessor also received 12b-1 service fees on Class A
Shares, approximately one-half of which was paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
compensated authorized dealers directly with approximately $66,200 for Nuveen
Flagship Florida and approximately $12,700 for Nuveen Flagship Florida
Intermediate in commission advances at the time of purchase. To compensate for
commissions advanced to authorized dealers, all 12b-1 service fees collected on
Class B Shares during the fiscal year following a purchase, all 12b-1
distribution fees on Class B Shares, and all 12b-1 service and distribution fees
on Class C Shares during the first year following a purchase are retained by the
Distributor. The remaining 12b-1 fees charged to the Fund were paid to
compensate authorized dealers for providing services to shareholders relating to
their investments. The Distributor and its predecessor also collected and
retained CDSC on share redemptions of approximately $1,600 for Nuveen Flagship
Florida and approximately $300 for Nuveen Flagship Florida Intermediate during
the fiscal year ended May 31, 1997.
7. Composition of Net Assets
At May 31, 1997, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Florida Florida Intermediate
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in.................................................................. $337,891,838 $15,898,055
Balance of undistributed net investment income................................... 21,129 10,894
Accumulated net realized gain (loss) from investment transactions................ (612,216) (26,511)
Net unrealized appreciation of investments....................................... 19,831,231 315,270
- -------------------------------------------------------------------------------------------------------------------------
Net assets $357,131,982 $16,197,708
=========================================================================================================================
</TABLE>
40
<PAGE>
Financial Highlights
41
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------------- -----------------------------
Net
NUVEEN FLAGSHIP FLORIDA++ Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income(b) investments income gains period value(a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (6/90)
1997 $10.39 $.56 $ .21 $(.56) $ -- $10.60 7.59%
1996 10.63 .57 (.24) (.57) -- 10.39 3.14
1995 10.38 .58 .26 (.59) -- 10.63 8.43
1994 10.76 .60 (.38) (.60) -- 10.38 2.00
1993 10.18 .63 .61 (.64) (.02) 10.76 12.49
1992 9.87 .66 .33 (.67) (.01) 10.18 10.32
1991(c) 9.58 .64 .29 (.64) -- 9.87 9.81+
Class B (2/97)
1997(c) 10.59 .16 .02 (.16) -- 10.61 1.70
Class C (9/95)
1997 10.39 .50 .21 (.50) -- 10.60 7.00
1996(c) 10.65 .35 (.26) (.35) -- 10.39 1.30+
Class R (2/97)
1997(c) 10.59 .19 .01 (.19) -- 10.60 1.93
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Florida.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After the waiver of certain management fees or reimbursement of expenses,
if applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
42
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
Ratios/Supplemental data
- --------------------------------------------------------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment(b) ment(b) rate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$296,970 .96% 5.20% .82% 5.34% 54%
318,456 1.02 5.17 .83 5.36 94
341,374 1.04 5.40 .73 5.71 53
372,082 1.00 5.09 .58 5.51 32
369,123 .99 5.47 .45 6.01 23
276,811 1.03 5.82 .26 6.59 50
136,509 1.05 6.00 .19+ 6.86+ 152
785 1.58+ 4.52+ 1.58+ 4.52+ 54
5,130 1.46 4.64 1.35 4.75 54
1,175 1.55+ 4.42+ 1.38+ 4.59+ 94
54,247 .64+ 5.55+ .64+ 5.55+ 54
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
Class (Inception date) Operating performance Less distributions
------------------------- -------------------------
NUVEEN FLAGSHIP Net
FLORIDA INTERMEDIATE++ Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value (a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (2/94)
1997 $ 9.88 $.45 $ .25 $(.47) $(.02) $10.09 7.16%
1996 10.05 .46 (.12) (.46) (.05) 9.88 3.41
1995 9.66 .46 .33 (.40) - 10.05 8.42
1994(c) 9.70 .12 (.04) (.12) - 9.66 1.75+
Class C (2/94)
1997 9.88 .40 .23 (.41) (.02) 10.08 6.47
1996 10.05 .40 (.11) (.41) (.05) 9.88 2.88
1995 9.66 .40 .33 (.34) - 10.05 7.80
1994(c) 9.70 .11 (.06) (.09) - 9.66 1.33+
Class R (2/97)
1997(c) 10.20 .12 (.09) (.12) - 10.11 .32
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Florida
Intermediate.
(a) Total returns are calculated on net asset value without any sales
charge.
(b) After the waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
44
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
Ratios/Supplemental data
- ----------------------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment (b) ment (b) rate
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$13,089 1.80% 3.42% .73% 4.49% 35%
4,995 1.67 3.57 .76 4.48 66
3,898 3.54 1.87 .67 4.74 105
964 6.70+ (2.62)+ .29+ 3.79+ 28
3,008 2.56 2.71 1.28 3.99 35
3,079 2.25 2.97 1.34 3.88 66
1,765 4.53 .85 1.19 4.19 105
1,058 7.38+ (3.28)+ .68+ 3.42+ 28
101 1.21+ 3.82+ .56+ 4.47+ 35
- ----------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
Nuveen Flagship Florida Municipal Bond Funds:
We have audited the accompanying statements of net assets of the
Nuveen Flagship Florida Municipal Bond Fund and the Nuveen Flagship
Florida Intermediate Municipal Bond Fund, including the portfolios
of investments, as of May 31, 1997, the related statements of
operations for the period 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 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 May 31, 1997, 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 Nuveen Flagship Florida Municipal Bond Fund and the Nuveen
Flagship Florida Intermediate Municipal Bond Fund at May 31, 1997,
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 11, 1997
46
<PAGE>
Shareholder Meeting Report
Flagship Florida
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Directors A Shares C Shares
==============================================================================
Bremner For 25,319,015 215,850
Withhold 460,122 4,763
-------------------------------------------------------
Total 25,779,137 220,613
==============================================================================
Brown For 25,307,588 215,850
Withhold 471,549 4,763
-------------------------------------------------------
Total 25,779,137 220,613
==============================================================================
Dean For 25,319,015 215,850
Withhold 460,122 4,763
-------------------------------------------------------
Total 25,779,137 220,613
==============================================================================
Impellizzeri For 25,319,015 215,850
Withhold 460,122 4,763
-------------------------------------------------------
Total 25,779,137 220,613
==============================================================================
Rosenheim For 25,307,588 215,850
Withhold 471,549 4,763
-------------------------------------------------------
Total 25,779,137 220,613
==============================================================================
Sawers For 25,319,015 215,850
Withhold 460,122 4,763
-------------------------------------------------------
Total 25,779,137 220,613
==============================================================================
Schneider For 25,319,015 215,850
Withhold 460,122 4,763
-------------------------------------------------------
Total 25,779,137 220,613
==============================================================================
Schwertfeger For 25,319,015 215,850
Withhold 460,122 4,763
-------------------------------------------------------
Total 25,779,137 220,613
==============================================================================
Advisory Agreement For 23,225,428 198,503
Against 316,166 4,763
Abstain 711,093 -
-------------------------------------------------------
Total 24,252,687 203,266
==============================================================================
Broker Non Votes 1,526,450 17,347
==============================================================================
12b-1 Plan For 22,669,951 198,503
Against 633,915 4,763
Abstain 948,822 -
-------------------------------------------------------
Total 24,252,688 203,266
==============================================================================
Broker Non Votes 1,526,449 17,347
==============================================================================
Reorganization For 14,929,829 125,301
Against 362,121 1,430
Abstain 486,518 -
-------------------------------------------------------
Total 15,778,468 126,731
==============================================================================
Broker Non Votes 10,000,669 93,882
-------------------------------------------------------
</TABLE>
47
<PAGE>
Shareholder Meeting Report
Flagship Florida Intermediate
<TABLE>
<CAPTION>
A Shares C Shares
========================================================================
<S> <C> <C> <C>
Advisory Agreement For 441,974 253,873
Against 14,754 -
Abstain 12,791 1,687
------------------------------------------------
Total 469,519 255,560
========================================================================
Broker Non Votes 3,514 7,548
========================================================================
Reorganization For 279,336 155,364
Against 5,607 -
Abstain 9,716 686
------------------------------------------------
Total 294,659 156,050
========================================================================
Broker Non Votes 178,374 107,058
========================================================================
Investment Objective For 278,156 143,507
Against 16,503 12,543
Abstain --- ---
------------------------------------------------
Total 294,659 156,050
========================================================================
Broker Non Votes 178,374 107,358
========================================================================
Investment Assets For 278,156 143,507
Against 16,503 12,543
Abstain --- ---
------------------------------------------------
Total 294,659 156,050
========================================================================
Broker Non Votes 178,374 107,058
========================================================================
Type of Securities For 278,156 143,507
Against 16,503 12,543
Abstain --- ---
------------------------------------------------
Total 294,659 156,050
========================================================================
Broker Non Votes 178,374 107,058
========================================================================
Borrowing For 278,156 143,507
Against 16,503 12,543
Abstain --- ---
------------------------------------------------
Total 294,659 156,050
========================================================================
Broker Non Votes 178,374 107,058
========================================================================
Pledges For 278,156 143,507
Against 16,503 12,543
Abstain --- ---
------------------------------------------------
Total 294,659 156,050
========================================================================
Broker Non Votes 178,374 107,058
------------------------------------------------
</TABLE>
48
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
A Shares C Shares
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Senior Securities For 278,156 143,507
Against 16,503 12,543
Abstain -- --
--------------------------------------
Total 294,659 156,050
======================================================================
Broker Non Votes 178,374 107,058
======================================================================
Underwriting For 278,156 143,507
Against 16,503 12,543
Abstain -- --
--------------------------------------
Total 294,659 156,050
======================================================================
Broker Non Votes 178,374 107,058
======================================================================
Real Estate For 278,156 143,507
Against 16,503 12,543
Abstain -- --
--------------------------------------
Total 294,659 156,050
======================================================================
Broker Non Votes 178,374 107,058
======================================================================
Commodities For 278,156 143,507
Against 16,503 12,543
Abstain -- --
--------------------------------------
Total 294,659 156,050
======================================================================
Broker Non Votes 178,374 107,058
======================================================================
Loans For 278,156 143,507
Against 16,503 12,543
Abstain -- --
--------------------------------------
Total 294,659 156,050
======================================================================
Broker Non Votes 178,374 107,058
======================================================================
Short Sales/Margin Purchases For 278,156 143,507
Against 16,503 12,543
Abstain -- --
--------------------------------------
Total 294,659 156,050
======================================================================
Broker Non Votes 178,374 107,058
======================================================================
Put and Call Options For 278,156 143,507
Against 16,503 12,543
Abstain -- --
--------------------------------------
Total 294,659 156,050
======================================================================
Broker Non Votes 178,374 107,058
--------------------------------------
</TABLE>
49
<PAGE>
Shareholder Meeting Report
Flagship Florida Intermediate--continued
<TABLE>
<CAPTION>
A Shares C Shares
- ---------------------------------------------------------------
<S> <C> <C> <C>
Industry Concentration For 278,156 143,507
Against 16,503 12,543
Abstain -- --
-------------------------------------
Total 294,659 156,050
===============================================================
Broker Non Votes 178,374 107,058
===============================================================
Affiliate Purchases For 278,156 143,507
Against 16,503 12,543
Abstain -- --
-------------------------------------
Total 294,659 156,050
===============================================================
Broker Non Votes 178,374 107,058
===============================================================
Investment Companies For 278,156 143,507
Against 16,503 12,543
Abstain -- --
-------------------------------------
Total 294,659 156,050
===============================================================
Broker Non Votes 178,374 107,058
===============================================================
12b-1 Fees For 406,364 246,021
Against 19,758 --
Abstain 43,403 9,545
-------------------------------------
Total 469,525 255,566
===============================================================
Broker Non Votes 3,508 7,542
-------------------------------------
</TABLE>
50
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Directors A Shares C Shares
========================================================================
<S> <C> <C> <C>
Bremner For 473,033 263,108
Withhold --- ---
------------------------------------------------
Total 473,033 263,108
========================================================================
Brown For 473,033 263,108
Withhold --- ---
------------------------------------------------
Total 473,033 263,108
========================================================================
Dean For 473,033 263,108
Withhold --- ---
------------------------------------------------
Total 473,033 263,108
========================================================================
Impellizzeri For 473,033 263,108
Withhold --- ---
------------------------------------------------
Total 473,033 263,108
========================================================================
Rosenheim For 473,033 263,108
Withhold --- ---
------------------------------------------------
Total 473,033 263,108
========================================================================
Sawers For 473,033 263,108
Withhold --- ---
------------------------------------------------
Total 473,033 263,108
========================================================================
Schneider For 473,033 263,108
Withhold --- ---
------------------------------------------------
Total 473,033 263,108
========================================================================
Schwertfeger For 473,033 263,108
Withhold --- ---
------------------------------------------------
Total 473,033 263,108
------------------------------------------------
</TABLE>
51
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed
to help you reach your financial goals.
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Municipal Bond Fund, contact your
financial adviser. If you would like to add to your current investment on a
monthly or semi-annual basis, you can sign up for Nuveen's systematic investing
program, which allows you to invest a fixed dollar amount every month
automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you gain the added growth potential of
long-term compounding.
For more information on any of these service options call your adviser, or
Nuveen at (800) 621-7227.
52
<PAGE>
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Boston Financial
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris, Shriver
& Jacobson
Washington, D.C.
Independent Auditors
Deloitte & Touche LLP
Dayton, Ohio
53
<PAGE>
Serving Investors
for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
John Nuveen, Sr.
[PHOTO OF JOHN NUVEEN, SR.
APPEARS HERE]
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
May 31, 1997
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
Maryland
[PHOTO APPEARS HERE]
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Maryland Overview
9 Financial Section
27 Shareholder Information
28 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
It's a pleasure to report to you on the performance of the Nuveen Maryland
Municipal Bond Fund. Over the past year, the fund posted sizable gains. For the
12 months ended May 31, 1997, the value of your investment rose 6.66% for Class
A shares, if you chose to reinvest your tax-free income dividends.
Over this 12-month period, the total return performance for the fund (with
income reinvested) trailed the 8.28% increase produced by the Lehman Brothers
Municipal Bond Index, which is used to represent the broad municipal bond market
on an unmanaged basis. Although the fund trailed the index, shareholders have
enjoyed low volatility and superior credit quality, since 61% of the fund's
portfolio is comprised of AAA rated securities.
Shareholders have continued to enjoy steady dividends and attractive current
yields generated by a portfolio of quality bonds, which provide tax-exempt
income for investors. As of May 31, 1997, shareholders were receiving tax-free
yields on net asset value of 4.53% for Class A shares. To match this yield,
investors in the 34.5% combined federal and state income tax bracket would have
had to earn at least 6.92% on taxable alternatives.
These results were produced against a backdrop of continued economic expansion
and the lowest unemployment rates in almost two decades, a combination that in
the past has foreshadowed an increase in inflation. In March, the Federal
Reserve made a pre-emptive strike by raising short-term interest rates by 0.25%,
but then maintained the status quo at its May and July meetings. Overall market
returns continue to be good, but fear of inflation has
1
<PAGE>
"Shareholders have continued to enjoy steady dividends and attractive current
yields generated by a portfolio of quality bonds."
hampered the performance of municipals and led to increased volatility in both
the equity and bond markets. During this time, bonds have often been the
bellwether for the direction of stocks. Whenever inflation talk is at its most
rampant, the stock market has kept an eye on the bond market for its response
before reacting.
In the first six months of the year, the markets also focused on fiscal issues,
including the federal budget accord and discussion of plans to reduce taxes and
eliminate the deficit. The economy appeared to be moderating, corporate earnings
reports continued to exhibit strength, and interest rates fell in the second
quarter. All of this was positive news. The net effect is that the markets are
better off now than at the beginning of the year, but the volatility experienced
in getting there has been significant.
Recently, the need for diversification and a renewed emphasis on asset
allocation--as well as attractive yields--have sparked increased interest in
tax-free investments. The current level of the stock market reminds investors to
re-allocate profits to other segments of the market in order to limit risk.
Nuveen municipal bond funds provide an excellent lower-risk alternative, and
their current yields make them very attractive.
On behalf of everyone at Nuveen, I thank you for your confidence in us and our
family of investments. You can continue to depend on us for high-quality
investments that withstand the test of time. We look forward to reporting to you
again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1997
2
<PAGE>
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, head of Nuveen's Dayton-based portfolio management team, talks about
the municipal bond market and offers insights into factors that affected fund
performance over the past year.
Answering Your Questions
What are the investment objectives of the fund?
The fund aims to provide investors with a high level of tax-free income while
preserving capital by investing in a diversified portfolio of high-quality
municipal bonds. To that end, we attempt to maximize the fund's after-tax total
return by generating high tax-free income and minimizing the distribution of
taxable capital gains when possible.
What is your strategy for meeting these objectives?
To meet this fund's objectives of income and enhanced value, our portfolio
management strategy relies on conservative value investing principles, sound
research and credit surveillance activities, and senior management involvement.
At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates. This approach focuses on the characteristics of
individual bonds, such as sector, geographic region, structure and intrinsic
credit quality, rather than on the general economic environment. The idea behind
this philosophy is that we, as investment managers, can control the selection
process, but not the direction of the economy as a whole.
What key economic factors affected the fund's performance during the year?
The U.S. economy continued to grow, exhibiting low unemployment, increased
manufacturing and construction activity, and lack of price pressure at the
consumer and producer levels. The fund had the added advantage of operating in a
healthy supply environment, where securities were available as needed.
3
<PAGE>
"At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates."
Given this market environment, how did the fund perform?
The Maryland Municipal Bond Fund rewarded investors with a total return on net
asset value for the year of 6.66% for Class A shares, including price changes
and reinvested dividends. The fund lagged the market index, but is managed
conservatively to protect investors in down markets. With an average duration of
6.21 years, the fund is less volatile than many more aggressively managed funds.
In addition, the fund invests in high-quality bonds, which helps sustain its
dividend during periods of fluctuating interest rates.
What strategies did you employ to add value?
We focused on purchasing higher-quality bonds as the difference between yields
on lower-rated bonds and higher-quality bonds continued to narrow. This allowed
us to increase the credit quality of the portfolio without sacrificing yield. We
also looked for bonds with attractive structural features, most specifically
call protection, and we sold bonds with shorter call protection. Finally, we
found value in a variety of sectors, including housing, general obligation, and
transportation issues.
What is the current status of Maryland's municipal market?
In most sectors, the Maryland municipal market remains relatively stable.
Somewhat limited supply has been matched by limited demand, keeping prices
stable. The recently approved 10% personal income tax reduction will impact
state and county finances, likely leading to tighter budgets. Also, Maryland's
recent program to enroll Medicaid recipients in managed care plans should reduce
the state's healthcare expenditures, but reduced reimbursement may have a
negative impact on the state's healthcare providers. Nevertheless, the state's
economy has experienced moderate growth and the financial condition of most
Maryland municipalities remains solid.
4
<PAGE>
What is the current outlook for the municipal market as a whole?
As we make our way through the seventh year of the current economic expansion,
some observers believe that a fundamental shift may have occurred in our
economy. Based on past experience and months of reports of economic growth,
especially employment statistics, the markets have long been anticipating an
increase in inflation. However, even with almost full employment, we have not
seen the expected rise in hourly wages that would be considered inflationary.
This change in the traditional economic cause-and-effect relationship has been
variously attributed to the globalization of the economy and consequent
competitive pressures, to increased use of technology, and to corporations'
recent ability to downsize as necessary. Although structural changes in the
economy appear to have suspended the relationship between faster growth and
higher inflation, the risk remains that inflation may reassert itself if
capacity constraints are reached and resources are stretched too thin.
Talk of Fed tightening will continue. If the Fed does act to increase rates, it
will be perceived as a move against inflation. If the Fed does not tighten, it
will be seen as an indication that the economy is doing well.
Nonetheless, for the remainder of 1997, the municipal market should continue to
offer the attractive yields and tax advantages that make it a good alternative
if and when a correction in the stock market occurs. While money continues to
flow into equity mutual funds, investors are also beginning to evaluate the
effect of the huge run-up in stock prices on their asset allocation, and many
are rebalancing their portfolios by shifting some assets into bonds.
5
<PAGE>
Maryland
Overview
Credit Quality
[PIE CHART APPEARS HERE]
BBB/NR 9%
A 10%
AA 20%
AAA/Prerefunded 61%
Diversification
[PIE CHART APPEARS HERE]
Educational Facilities 4%
Hospitals 14%
General Obligations 19%
Other 7%
Escrowed Bonds 12%
Pollution Control 5%
Housing Facilities 22%
Transportation 12%
Municipal Appropriations 5%
Morningstar Rating/3/
****
<TABLE>
<CAPTION>
Fund Highlights
===============================================================================
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 9/94 3/97 9/94 12/91
- -------------------------------------------------------------------------------
Net Asset Value (NAV) $10.25 $10.25 $10.24 $10.26
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Net Assets ($000) $58,536
- -------------------------------------------------------------------------------
Average Weighted Maturity (years) 19.23
- -------------------------------------------------------------------------------
Duration (years) 6.21
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
===============================================================================
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 6.66% 2.18% 5.99% 5.92% 6.88%
- -------------------------------------------------------------------------------
5-Year 6.43% 5.52% 5.71% 5.68% 6.70%
- -------------------------------------------------------------------------------
Since Inception 6.44% 5.57% 5.72% 5.69% 6.71%
- -------------------------------------------------------------------------------
Tax-Free Yields
===============================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 4.86% 4.65% 4.10% 4.28% 5.03%
- -------------------------------------------------------------------------------
SEC 30-Day Yld 4.53% 4.34% 3.78% 3.98% 4.73%
- -------------------------------------------------------------------------------
Taxable Equiv Yld/2/ 6.92% 6.63% 5.77% 6.08% 7.22%
- -------------------------------------------------------------------------------
</TABLE>
/1/ Returns of the oldest share class of a fund are actual. Returns for other
classes are actual for the period since inception and prior to class
inception are the returns for the fund's oldest class, adjusted for
differences in sales charges and expenses. Class A shares have an initial
sales charge, while Class B, C and R shares have no initial sales charge.
Class B shares have a CDSC that declines from 5% to 0% after 6 years. Class
C shares have a 1% CDSC for redemptions within one year. Returns do not
reflect imposition of the CDSC. Giving effect to the CDSC applicable to
Class B shares, the 1-year, 5-year and since inception total returns above
would be 1.99%, 5.55%, and 5.57%, respectively.
/2/ Based on SEC yield and a combined federal and state income tax rate of
34.5%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
/3/ Overall rating for Class A shares for the period ended May 31, 1997, among
1,299 municipal bond funds for the three-year period, 631 funds for the
five-year period, and 290 funds for the 10-year period.
6
<PAGE>
Nuveen Maryland Municipal Bond Fund
May 31, 1997 Annual Report
* The Index Comparison shows change in value of a $10,000 investment in the A
Shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares (4.20%) and all ongoing fund
expenses.
Index Comparison*
[LINE CHART APPEARS HERE]
Lehman Brothers Nuveen Maryland Nuveen Maryland
Municipal Bond Municipal Bond Municipal Bond
Index Fund (NAV) Fund (Offer)
February 1992 10000 10000 9580
May 1992 10211.5 10165 9738.1
May 1993 11433.2 11373.6 10895.9
May 1994 11715.5 11505.6 11022.4
May 1995 12782.4 12540.5 12013.8
May 1996 13366.6 13013 12466.5
May 1997 14597.4 13879.7 13296.8
. Lehman Brothers Municipal Bond Index $14,597
. Nuveen Maryland Municipal Bond Fund (NAV) $13,880
. Nuveen Maryland Municipal Bond Fund (Offer) $13,297
Past performance is not predictive of future performance.
Dividends History (A Shares)
[BAR CHART APPEARS HERE]
1996
June 0.0405
July 0.0405
August 0.0405
September 0.0405
October 0.0405
November 0.0405
December 0.0405
1997
January 0.0405
February 0.041
March 0.041
April 0.0415
May 0.0415
7
<PAGE>
Financial Section
<TABLE>
<CAPTION>
<S> <C>
Contents
10 Portfolio of Investments
15 Statement of Net Assets
16 Statement of Operations
17 Statement of Changes in Net Assets
18 Notes to Financial Statements
24 Financial Highlights
26 Independent Auditors' Report
</TABLE>
9
<PAGE>
Portfolio of Investments
Maryland
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$2,500,000 Washington Metropolitan Area Transit Authority 1/04 at 102 Aaa $2,432,550
(District of Columbia), Gross Revenue Transit
Refunding Bonds, Series 1993, 5.250%, 7/01/14
500,000 Community Development Administration, Department 4/00 at 100 Aa 515,420
of Economic and Community Development, State
of Maryland, Single Family Program Bonds,
1987 First Series, 7.000%, 4/01/14
1,390,000 Community Development Administration, Department 4/01 at 102 Aa 1,457,915
of Housing and Community Development, State of
Maryland, Single Family Program Bonds,
1991 Fourth Series, 7.450%, 4/01/32
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 5/02 at 102 Aa 723,898
500,000 6.750%, 5/15/33 5/02 at 102 Aa 518,475
1,845,000 Maryland Economic Development Corporation (Health 4/11 at 102 N/R 1,794,650
and Mental Hygiene Providers Facilities Acquisition
Program), Revenue Bonds, Series 1996A,
7.625%, 4/01/21
500,000 Maryland Health and Higher Educational Facilities 7/00 at 102 Aaa 545,625
Authority, Revenue Bonds, Sinai Hospital of
Baltimore Issue, Series 1990, 7.000%, 7/01/19
(Pre-refunded to 7/01/00)
500,000 Maryland Health and Higher Educational Facilities 7/00 at 102 Aaa 542,055
Authority, Revenue Bonds, Francis Scott Key
Medical Center Issue, Series 1990,
6.750%, 7/01/23 (Pre-refunded to 7/01/00)
1,005,000 Maryland Health and Higher Educational Facilities 7/00 at 102 Aaa 1,145,821
Authority, Doctors' Community Hospital Issue,
Series 1990, 8.750%, 7/01/22
(Pre-refunded to 7/01/00)
1,000,000 Maryland Health and Higher Educational Facilities 7/03 at 102 Aaa 953,700
Authority, Refunding Revenue Bonds,
Francis Scott Key Medical Center Issue,
Series 1993, 5.000%, 7/01/13
1,000,000 Maryland Health and Higher Educational Facilities 7/03 at 102 Baa2 971,360
Authority, Project and Refunding Revenue Bonds,
Doctors Community Hospital Issue,
Series 1993, 5.750%, 7/01/13
</TABLE>
10
<PAGE>
<TABLE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,760,000 Maryland Stadium Authority, Convention Center 12/04 at 102 Aaa $1,822,973
Expansion Lease Revenue Bonds, Series 1994,
5.875%, 12/15/12
Maryland Stadium Authority, Sports Facilities
Lease Revenue Bonds, Series 1989D:
500,000 7.375%, 12/15/04 (Alternative Minimum Tax) 12/99 at 102 Aa 543,835
500,000 7.500%, 12/15/10 (Alternative Minimum Tax) 12/99 at 102 Aa 543,365
3,010,000 Maryland Transportation Authority, Special 7/04 at102 Aaa 3,110,654
Obligation Revenue Bonds, Baltimore/
Washington International Airport Projects,
Series 1994-A (Qualified Airport Bonds),
6.400%, 7/01/15
1,000,000 Maryland Transportation Authority, Transportation 7/02 at 100 A1 1,005,840
Facilities Projects, Revenue Bonds,
Series 1992, 5.750%, 7/01/15
2,000,000 State of Maryland, General Obligation Bonds, 7/03 at 101 Aaa 1,952,580
State and Local Facilities Loan of 1993, Third
Series (Capital Improvement and Refunding
Bonds), 4.600%, 7/15/06
700,000 The Maryland National Capital Park and Planning 7/02 at 102 AA 757,505
Commission, Maryland (Prince George's County,
Maryland), General Obligation Bonds, Prince
George's County Park Acquisition and Development
Bonds, Series L--2, 6.125%, 7/01/10
(Pre-refunded to 7/01/02)***
2,000,000 Baltimore County, Maryland, General Obligation 7/98 at 102 Aaa 2,091,020
Bonds, Baltimore County Pension Funding Bonds,
1991 Refunding Series, 6.700%, 7/01/11
600,000 City of Baltimore, Maryland (Mayor and City Council 10/02 at 100 Aaa 653,256
of Baltimore), General Obligation Consolidated
Public Improvement Bonds of 1992, Series A,
6.500%, 10/15/12 (Pre-refunded to 10/15/02)
2,295,000 Mayor and City Council of Baltimore (City of Baltimore, No Opt. Call Aaa 2,614,189
Maryland), General Obligation Consolidated Public
Improvement Refunding Bonds of 1995, Series A,
7.375%, 10/15/03
1,000,000 Baltimore City, Maryland, Mortgage Revenue Refunding 12/02 at 102 AAA 1,043,830
Bonds, Series 1992 (GNMA Collateralized-Tindeco
Wharf Apartments Project), 6.700%, 12/20/28
</TABLE>
11
<PAGE>
<TABLE>
Portfolio of Investments
Maryland -- continued
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,500,000 Mayor and City Council of Baltimore, Maryland, Port 4/02 at 103 AA- $1,616,880
Facilities Revenue Bonds (Consolidation Coal Sales
Company Project), Series 1984B, 6.500%, 10/01/11
1,500,000 City of Baltimore, Maryland, Mayor and City 7/06 at 101 Aaa 1,475,340
Council of Baltimore, Project and Refunding
Revenue Bonds (Water Projects), Series 1996-A,
5.500%, 7/01/26
625,000 Mayor and City Council of Baltimore, Maryland, Project 7/00 at 100 Aaa 662,181
and Refunding Revenue Bonds (Water Projects),
1990-A, 6.500%, 7/01/20 (Pre-refunded to 7/01/00)
2,165,000 City of Gaithersburg, Maryland, Nursing Home Revenue No Opt. Call Aaa 2,416,118
Refunding Bonds (Shady Grove Adventist Nursing
and Rehabilitation Center Project), Series 1992A,
6.500%, 9/01/12
1,000,000 Howard County, Maryland, Mortgage Revenue Refunding 7/02 at 102 Aaa 1,038,270
Bonds, Series 1992 (Howard Hills Townhouses
Project-FHA Insured Mortgage Loan), 6.400%, 7/01/24
2,000,000 Howard County, Maryland Multifamily Housing 7/02 at 104 Baa2 2,167,880
Revenue Refunding Bonds, Series 1994 (Chase
Glen Project), 7.000%, 7/01/24
1,000,000 Housing Opportunities Commission of Montgomery 7/05 at 102 Aa 1,012,000
County (Montgomery County, Maryland),
Multifamily Housing Revenue Bonds, 1995
Series A, 6.000%, 7/01/20
450,000 Housing Opportunities Commission of Montgomery 7/99 at 100 Aa 464,234
County (Montgomery County, Maryland), Single
Family Mortgage Revenue Bonds, 1986 Series C,
7.250%, 7/01/13
1,615,000 Housing Opportunities Commission of Montgomery 7/04 at 102 Aa2 1,685,446
County (Montgomery County, Maryland), Single
Family Mortgage Revenue Bonds, 1994 Series A,
6.600%, 7/01/14
1,000,000 Montgomery County, Maryland, Solid Waste System 6/03 at 102 Aaa 1,024,990
Revenue Bonds (1993 Series A), 5.875%, 6/01/13
(Alternative Minimum Tax)
1,500,000 Morgan State University, Maryland, Academic Fees No Opt. Call Aaa 1,624,005
and Auxiliary Facilities Fees, Revenue Refunding
Bonds, 1993 Series, 6.100%, 7/01/20
-----
12
</TABLE>
<PAGE>
<TABLE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,000,000 Northeast Maryland Waste Disposal Authority, No Opt. Call Aaa $1,056,020
Resource Recovery Revenue Refunding Bonds
(Southwest Resource Recovery Facility),
Series 1993, 6.900%, 1/01/00
600,000 Prince George's County, Maryland, Hospital No Opt. Call A 601,422
Revenue Bonds, Dimensions Health
Corporation, Series 1992, 6.700%, 7/01/97
1,550,000 Housing Authority of Prince George's County, 1/02 at 102 Aaa 1,613,984
Maryland, Mortgage Revenue Refunding Bonds,
Series 1992A (New Keystone Apartments
Project-FHA Insured Mortgage Loan),
6.800%, 7/01/25
1,500,000 Prince George's County, Maryland, Pollution 1/03 at 102 A1 1,569,810
Control Revenue Bonds (Potomac Electric
Project), 1993 Series, 6.375%, 1/15/23
1,000,000 University of Maryland System, Auxiliary Facility 10/03 at 101 AA+ 972,510
and Tuition Revenue Bonds, 1993 Refunding
Series C, 5.000%, 10/01/11
1,170,000 Washington Suburban Sanitary District, Maryland, No Opt. Call Aa1 1,329,366
(Montgomery and Prince George's Counties,
Maryland), General Construction Bonds of 1991
(Second Series), 8.000%, 1/01/02
2,500,000 Commonwealth of Puerto Rico, Public Improvement 7/07 at 101 1/2 A 2,561,425
Bonds of 1997, 6.000%, 7/01/26
500,000 Commonwealth of Puerto Rico, Public Improvement 7/02 at 101 1/2 Aaa 553,095
Bonds of 1992 (General Obligation Bonds),
6.600%, 7/01/13 (Pre-refunded to 7/01/02)
1,750,000 Puerto Rico Aqueduct and Sewer Authority, Revenue 7/98 at 102 AAA 1,859,270
Bonds, Series 1988A, 7.875%, 7/01/17
(Pre-refunded to 7/01/98)
185,000 Puerto Rico Electric Power Authority, Power 7/99 at 101 1/2 Baa1 197,870
Revenue Refunding Bonds, Series 1989-N,
7.125%, 7/01/14
315,000 Puerto Rico Electric Power Authority, Power 7/99 at 101 1/2 AAA 337,831
Revenue Refunding Bonds, Series 1989-O,
7.125%, 7/01/14 (Pre-refunded to 7/01/99)
-----
13
</TABLE>
<PAGE>
<TABLE>
Portfolio of Investments
Maryland--continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,000,000 Puerto Rico Industrial, Tourist, Educational, 1/05 at 102 Aaa $ 1,057,911
Medical and Environmental Control Facilities
Financing Authority, Hospital Revenue Bonds,
1995 Series A, (Hospital Auxilio Mutuo
Obligated Group Project), 6.250%, 7/01/16
- --------------------------------------------------------------------------------------------------------------------
$54,230,000 Total Investments -- (cost $54,463,107) -- 96.8% 56,638,374
=====================-----------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal
Securities -- 1.2%
200,000 Baltimore County (Spring Hill Apartments) GNMA A-1 200,000
Collateralized Housing Variable Rate
Demand Bonds, 3.850%, 9/20/28+
500,000 Maryland Health and Higher Educational VMIG-1 500,000
Facilities Authority, Kaiser Permanente Revenue
Bonds, 1995 Series A, Variable Rate Demand
Bonds, 3.850%, 7/01/15+
- --------------------------------------------------------------------------------------------------------------------
$ 700,000 Total Temporary Investments -- 1.2% 700,000
=====================-----------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 2.0% 1,197,924
-------------------------------------------------------------------------------------------
Net Assets -- 100% $58,536,198
===========================================================================================
</TABLE>
* Optional Call Provisions (not covered by the
report of independent auditors): 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
auditors): Using the higher of Standard & Poor's
or Moody's rating.
*** Pre-refunded securities are backed by an escrow
or trust containing sufficient U.S. Government or
U.S. Government agency securities, which ensures
the timely payment of principal and interest.
Pre-refunded securities are normally considered
to be equivalent to AAA rated securities.
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.
14
<PAGE>
Statement of Net Assets Nuveen Municipal Bond Fund
May 31, 1997 May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Maryland
- ---------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $56,638,374
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 700,000
Cash 205,862
Receivables:
Interest 1,235,959
Shares sold 7,554
Other assets 4,007
- ----------------------------------------------------------------------------------------
Total assets 58,791,756
- ----------------------------------------------------------------------------------------
Liabilities
Payable for shares redeemed 37,270
Accrued Expenses:
Management fees (note 6) 27,210
12b-1 distribution and service fees (notes 1 and 6) 3,450
Other 31,714
Dividends payable 155,914
- ----------------------------------------------------------------------------------------
Total liabilities 255,558
- ----------------------------------------------------------------------------------------
Net assets (note 7) $58,536,198
========================================================================================
Class A Shares (note 1)
Net assets $12,977,091
Shares outstanding 1,266,556
Net asset value and redemption price per share $10.25
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $10.70
========================================================================================
Class B Shares (note 1)
Net assets $ 49,924
Shares outstanding 14,633
Net asset value, offering and redemption price per share $10.25
========================================================================================
Class C Shares (note 1)
Net assets $ 2,103,007
Shares outstanding 205,383
Net asset value, offering and redemption price per share $10.24
========================================================================================
Class R Shares (note 1)
Net assets $43,306,176
Shares outstanding 4,221,685
Net asset value, offering and redemption price per share $ 10.26
========================================================================================
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
Maryland
-------------------------------------------
4 months ended 5/31/97 Year ended 1/31/97
- --------------------------------------------------------------------------------------------------------------
Investment Income
<S> <C> <C>
Tax-exempt interest income (note 1) $1,118,308 $ 3,259,374
- --------------------------------------------------------------------------------------------------------------
Expenses:
Management fees (note 6) 105,154 308,754
12b-1 service fees -- Class A (notes 1 and 6) 8,278 23,402
12b-1 distribution and service fees -- Class B (notes 1 and 6) 185 N/A
12b-1 distribution and service fees -- Class C (notes 1 and 6) 4,984 17,826
Shareholders' servicing agent fees and expenses 20,561 63,195
Custodian's fees and expenses 13,087 54,862
Trustees' fees and expenses (note 6) 395 881
Professional fees 4,939 15,074
Shareholders' reports -- printing and mailing expenses 9,498 26,663
Federal and state registration fees 1,895 8,086
Amortization of deferred organization cost -- 7,828
Other expenses 1,513 3,472
- --------------------------------------------------------------------------------------------------------------
Total expenses before reimbursement 170,489 530,043
Expense reimbursement (note 6) (13,650) (67,787)
- --------------------------------------------------------------------------------------------------------------
Net expenses 156,839 462,256
- --------------------------------------------------------------------------------------------------------------
Net investment income 961,469 2,797,118
- --------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) From Investments
Net realized gain (loss) from investment transactions
(notes 1 and 2) (122,456) 68,885
Net change in unrealized appreciation or depreciation
of investments 116,827 (1,067,755)
- --------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (5,629) (998,870)
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 955,840 $ 1,798,248
- --------------------------------------------------------------------------------------------------------------
</TABLE>
N/A -- The Fund was not authorized to issue Class B Shares prior to February 1,
1997 (see note 1 of Notes to Financial Statements).
16 See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Maryland
------------------------------------------
4 months ended Year ended Year ended
5/31/97 1/31/97 1/31/96
- ---------------------------------------------------------------------------------------------------------------------
Operations
<S> <C> <C> <C>
Net investment income $ 961,469 $ 2,797,118 $ 2,553,861
Net realized gain (loss) from investment transactions
(notes 1 and 4) (122,456) 68,885 138,640
Net change in unrealized appreciation
or depreciation of investments 116,827 (1,067,755) 3,998,568
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 955,840 1,798,248 6,691,069
- ---------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (202,348) (444,620) (198,145)
Class B (690) N/A N/A
Class C (28,646) (71,252) (47,180)
Class R (726,336) (2,248,162) (2,335,847)
- ---------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to
shareholders (958,020) (2,764,034) (2,581,172)
- ---------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 3,009,545 9,011,948 9,951,670
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 626,481 1,781,550 1,613,664
- ---------------------------------------------------------------------------------------------------------------------
3,636,026 10,793,498 11,565,334
- ---------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (2,607,528) (8,005,106) (5,193,733)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund
share transactions 1,028,498 2,788,392 6,371,601
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets 1,026,318 1,822,606 10,481,498
Net assets at the beginning of period 57,509,880 55,687,274 45,205,776
- ---------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $58,536,198 $57,509,880 $55,687,274
=====================================================================================================================
Balance of undistributed net investment income
at end of period $ 37,469 $ 34,020 $ 936
=====================================================================================================================
</TABLE>
N/A - The Fund was not authorized to issue Class B Shares, prior to February 1,
1997
(see note 1 of Notes to Financial Statements).
17 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Maryland Municipal Bond Fund (the "Fund"), among others.
The Trust was organized as a Massachusetts business trust on July 1, 1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and Nuveen
Advisory Corp., respectively, the distributor ("Distributor") and investment
advisor ("Adviser") of the Fund, entered into an agreement under which Nuveen
acquired Flagship Resources Inc. and after the close of business on January 31,
1997, consolidated their respective mutual fund businesses. This agreement was
approved at a meeting by the shareholders of the Flagship Funds in December
1996.
After the close of business on January 31, 1997, Nuveen Maryland Tax-Free Value
Fund was reorganized into the Trust and renamed Nuveen Maryland Municipal Bond
Fund. Nuveen Maryland Tax-Free Value Fund had a January 31 fiscal year end prior
to being reorganized into the Trust and now has a May 31 fiscal year end.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved 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. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
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 have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1997, the Fund had no such purchase commitments.
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.
18
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
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 on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, 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 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 net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Maryland state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. All
income dividends paid during the four months ended May 31, 1997, have been
designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class B shares were first offered
for sale on February 1, 1997. Class A Shares are sold with a sales charge and
incur an annual 12b-1 service fee. Class B Shares are sold without a sales
charge but incur annual 12b-1 distribution and service fees. An investor
purchasing Class B Shares agrees to pay a contingent deferred sales charge
("CDSC") of up to 5% depending upon the length of time the shares are held by
the investor (CDSC is reduced to 0% at the end of six years). Class 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 CDSC of 1% if Class
C Shares are redeemed within 18 months of purchase. Class R Shares are not
subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
19
<PAGE>
Notes to Financial Statements
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the four months ended May 31, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
include 12b-1 distribution and service fees, are recorded to the specific class.
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.
20
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Maryland
---------------------------------------------------------------------------------
4 months ended 5/31/97 Year ended 1/31/97 Year ended 1/31/96
---------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------
Shares sold:
<S> <C> <C> <C> <C> <C> <C>
Class A 173,922 $ 1,782,262 599,512 $ 6,107,242 514,083 $ 5,206,011
Class B 14,619 149,109 N/A N/A N/A N/A
Class C 19,110 194,556 82,446 841,446 63,846 645,990
Class R 86,096 883,618 201,418 2,063,260 406,673 4,099,669
Shares issued to shareholders due to
reinvestment of distributions:
Class A 14,385 146,945 30,226 308,915 11,066 112,734
Class B 14 147 N/A N/A N/A N/A
Class C 2,157 22,020 5,415 55,286 3,894 39,318
Class R 44,709 457,369 138,494 1,417,349 144,632 1,461,612
- -----------------------------------------------------------------------------------------------------------------------
355,012 3,636,026 1,057,511 10,793,498 1,144,194 11,565,334
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (72,253) (733,516) (137,185) (1,394,119) (34,362) (350,679)
Class B -- -- N/A N/A N/A N/A
Class C (9,738) (99,104) (32,039) (327,651) (19,328) (195,323)
Class R (173,454) (1,774,908) (615,881) (6,283,336) (459,618) (4,647,731)
- -----------------------------------------------------------------------------------------------------------------------
(255,445) (2,607,528) (785,105) (8,005,106) (513,308) (5,193,733)
- -----------------------------------------------------------------------------------------------------------------------
Net increase 99,567 $ 1,028,498 272,406 $ 2,788,392 630,886 $ 6,371,601
=======================================================================================================================
</TABLE>
N/A -- The Fund was not authorized to issue Class B Shares prior to February
1, 1997.
3. Distributions to Shareholders
On June 9, 1997, the Fund declared a dividend distribution from its tax-exempt
net investment income which was paid on July 1, 1997, to shareholders of record
on June 9, 1997, as follows:
<TABLE>
<CAPTION>
Maryland
- --------------------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $.0415
Class B .0350
Class C .0365
Class R .0430
================================================================================
</TABLE>
21
<PAGE>
Notes to Financial Statements
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the four months ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
Maryland
- --------------------------------------------------------------------------------
Purchases
<S> <C>
Investments in municipal securities $3,140,925
Temporary municipal investments 2,950,000
Sales:
Investments in municipal securities 1,855,220
Temporary municipal investments 3,850,000
================================================================================
</TABLE>
At May 31, 1997, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for the Fund.
At May 31, 1997, the Fund had unused capital loss carryforwards of $634,930
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, $135,110 of the carryover will expire in the year
2002, $377,963 in the year 2003 and $121,857 in the year 2005.
5. Unrealized Appreciation (Depreciation)
At May 31, 1997, unrealized appreciation aggregated $2,175,267 of which
$2,185,636 related to appreciated securities and $10,369 related to depreciated
securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the Fund as follows:
<TABLE>
<CAPTION>
Average daily net asset value 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 net assets over $2 billion .4750 of 1
- --------------------------------------------------------------------------------
</TABLE>
The Adviser waived part of its management fees or reimbursed certain expenses of
the Fund in order to limit total expenses to .75 of 1% of the average daily net
assets, excluding any applicable 12b-1 fees. In addition, the Adviser may also
voluntarily reimburse additional expenses from time to time, which may be
terminated at any time at its discretion.
During the four months ended May 31, 1997, the Distributor collected gross sales
charges on purchases of Class A Shares of approximately $11,600, of which
$11,200 were paid out as concessions to authorized dealers. The Distributor also
received 12b-1
22
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
service fees on Class A Shares, all of which were paid to compensate dealers for
providing services to shareholders relating to their investments.
During the four months ended May 31, 1997, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase. To
compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. The Distributor and its predecessor also
collected and retained CDSC on share redemptions during the fiscal year ended
May 31, 1997.
7. Composition of Net Assets
At May 31, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Maryland
- --------------------------------------------------------------------------------
<S> <C>
Capital paid-in $56,958,392
Balance of undistributed net investment income 37,469
Accumulated net realized gain (loss) from investment transactions (634,930)
Net unrealized appreciation of investments 2,175,267
- --------------------------------------------------------------------------------
Net assets $58,536,198
- --------------------------------------------------------------------------------
</TABLE>
8. Investment Composition
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At May 31, 1997, the revenue sources by municipal
purpose for these investments, expressed as a percent of total investments, were
as follows:
<TABLE>
<CAPTION>
Maryland
- -------------------------------------------------------------------------------
Revenue Bonds:
<S> <C>
Housing Facilities 22%
Health Care Facilities 14
Transportation 12
Pollution Control 5
Lease Rental Facilities 5
Educational Facilities 4
Water/Sewer Facilities 2
Electric Utilities 1
Other 4
General Obligation Bonds 19
Escrowed Bonds 12
- -------------------------------------------------------------------------------
100%
===============================================================================
</TABLE>
23
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
-------------------------- ----------------------------
Net
MARYLAND Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income(b) investments income gains period value(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1997(f) $10.25 $.16 $ .01 $(.17) $ -- $10.25 1.63%
1997(e) 10.43 .46 (.15) (.49) -- 10.25 3.06
1996(e) 9.60 .48 .85 (.50) -- 10.43 14.07
1995(c) 9.84 .20 (.23) (.21) -- 9.60 (.26)
Class B (3/97)
1997(d) 10.29 .10 (.04) (.10) -- 10.25 .83
Class C (9/94)
1997(f) 10.24 .15 -- (.15) -- 10.24 1.43
1997(e) 10.42 .39 (.16) (.41) -- 10.24 2.28
1996(e) 9.59 .41 .84 (.42) -- 10.42 13.24
1995(c) 9.75 .16 (.15) (.17) -- 9.59 .12
Class R (12/91)
1997(f) 10.26 .17 -- (.17) -- 10.26 1.68
1997(e) 10.44 .47 (.14) (.51) -- 10.26 3.29
1996(e) 9.61 .51 .84 (.52) -- 10.44 14.33
1995(e) 10.62 .51 (1.01) (.51) -- 9.61 (4.58)
1994(e) 9.91 .51 .72 (.50) (.02) 10.62 12.71
1993(e) 9.53 .44 .39 (.44) (.01) 9.91 8.96
1992(c) 9.53 -- -- -- -- 9.53 --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Total returns are calculated on net asset value without any sales
charge.
(b) After the waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted through January 31.
(d) From commencement of class operations as noted through May 31.
(e) For year ending January 31.
(f) Four months ending May 31.
24
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
Ratios/Supplemental data
- -------------------------------------------------------------------------------------------
<CAPTION>
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment(b) ment(b) rate
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$12,977 1.02%+ 4.83%+ .95%+ 4.90%+ 3%
11,788 1.12 4.67 1.00 4.79 4
6,860 1.33 4.41 1.00 4.74 17
1,605 1.59+ 4.67+ 1.00+ 5.26+ 35
150 1.76+ 3.94+ 1.70+ 4.00+ 3
2,103 1.57+ 4.28+ 1.50+ 4.35+ 3
1,985 1.87 3.93 1.75 4.05 4
1,438 2.06 3.73 1.75 4.04 17
860 1.86+ 4.44+ 1.75+ 4.55+ 35
43,306 .82+ 5.03+ .75+ 5.10+ 3
43,738 .87 4.94 .75 5.06 4
47,389 1.04 4.78 .75 5.07 17
42,741 .89 5.14 .75 5.28 35
47,822 .86 4.74 .75 4.85 4
28,283 1.02+ 4.69+ .75+ 4.96+ 20
15 -- -- -- -- --
- --------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
Nuveen Maryland Municipal Bond Fund:
We have audited the accompanying statement of net assets of Nuveen Maryland
Municipal Bond Fund, including the portfolio of investments, as of May 31, 1997,
the related statement of operations, the statement of changes in net assets, and
the financial highlights for the period then ended. 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 audit. The statement of operations, statement
of changes in net assets and financial highlights for the other years presented
were audited by other auditors whose report, dated March 7, 1997, expressed an
unqualified opinion on those statements.
We conducted our audit 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, 1997, by
correspondence with the Fund's custodian. 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 Nuveen Maryland
Municipal Bond Fund at May 31, 1997, the results of its operations, the changes
in its net assets and the financial highlights for the period then ended, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
July 11, 1997
26
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Municipal Bond Fund, contact your
financial adviser. If you would like to add to your current investment on a
monthly or semi-annual basis, you can sign up for Nuveen's systematic investing
program, which allows you to invest a fixed dollar amount every month
automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you gain the added growth potential of
long-term compounding.
For more information on any of these service options call your adviser, or
Nuveen at (800) 621-7227.
27
<PAGE>
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Shareholder Services, Inc.
Nuveen Investor Services
P.O.Box 5330
Denver, Co 80217-5330
(800) 621-7227
Legal Counsel
Fried, Frank, Harris, Shriver
& Jacobson
Washington, D.C.
Independent Auditors
Deloitte & Touche LLP
Dayton, Ohio
28
<PAGE>
Serving Investors
for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
<PAGE>
NUVEEN
Municipal
Bond Funds
May 31, 1997
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
Pennsylvania
[Photo Appears Here]
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Pennsylvania Overview
9 Financial Section
31 Shareholder Meeting Report
32 Shareholder Information
33 Fund Information
<PAGE>
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Dear Shareholder
It's a pleasure to report to you on the performance of the Nuveen Flagship
Pennsylvania Municipal Bond Fund. Over the past year, the fund posted sizable
gains. For the fiscal year ended May 31, 1997, the value of your investment rose
8.37% for Class A shares, if you chose to reinvest your tax-free income
dividends.
Over this 12-month period, the total return performance for the fund (with
income reinvested) outpaced the 8.28% increase produced by the Lehman Brothers
Municipal Bond Index, which is used to represent the broad municipal bond market
on an unmanaged basis.
In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds, which
provide excellent income for investors. As of May 31, 1997, shareholders were
receiving tax-free yields on net asset value of 5.19% for Class A shares. To
match this yield, investors in the 33% combined federal and state income tax
bracket would have had to earn at least 7.75% on taxable alternatives.
These results were produced against a backdrop of continued economic expansion
and the lowest unemployment rates in almost two decades, a combination that in
the past has foreshadowed an increase in inflation. In March, the Federal
Reserve made a pre-emptive strike by raising short-term interest rates by 0.25%,
but then maintained the status quo at its May and July meetings. Overall market
returns continue to be good, but fear of inflation has hampered the performance
of municipals and led to
1
<PAGE>
"In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds."
increased volatility in both the equity and bond markets. During this time,
bonds have often been the bellwether for the direction of stocks. Whenever
inflation talk is at its most rampant, the stock market has kept an eye on the
bond market for its response before reacting.
In the first six months of the year, the markets also focused on fiscal issues,
including the federal budget accord and discussion of plans to reduce taxes and
eliminate the deficit. The economy appeared to be moderating, corporate earnings
reports continued to exhibit strength, and interest rates fell in the second
quarter. All of this was positive news. The net effect is that the markets are
better off now than at the beginning of the year, but the volatility experienced
in getting there has been significant.
Recently, the need for diversification and a renewed emphasis on asset
allocation -- as well as attractive yields -- have sparked increased interest in
tax-free investments. The current level of the stock market reminds investors to
re-allocate profits to other segments of the market in order to limit risk.
Nuveen municipal bond funds provide an excellent lower-risk alternative, and
their current yields make them very attractive.
On behalf of everyone at Nuveen, I thank you for your confidence in us and our
family of investments. You can continue to depend on us for high-quality
investments that withstand the test of time. We look forward to reporting to you
again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1997
2
<PAGE>
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, head of Nuveen's Dayton-based portfolio management team, talks about
the municipal bond market and offers insights into factors that affected fund
performance over the past year.
Answering Your Questions
What are the investment objectives of the fund?
The fund aims to provide investors with a high level of tax-free income while
preserving capital by investing in a diversified portfolio of high-quality
municipal bonds. To that end, we attempt to maximize the fund's after-tax total
return by generating high tax-free income and minimizing the distribution of
taxable capital gains when possible.
What is your strategy for meeting these objectives?
To meet this fund's objectives of income and enhanced value, our portfolio
management strategy relies on conservative value investing principles, sound
research and credit surveillance activities, and senior management involvement.
At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates. This approach focuses on the characteristics of
individual bonds, such as sector, geographic region, structure and intrinsic
credit quality, rather than on the general economic environment. The idea behind
this philosophy is that we, as investment managers, can control the selection
process, but not the direction of the economy as a whole.
What key economic factors affected the fund's performance during the year?
The U.S. economy continued to grow, exhibiting low unemployment, increased
manufacturing and construction activity, and lack of price pressure at the
consumer and producer levels. The fund had the added advantage of operating in a
healthy supply environment, where securities were available as needed.
3
<PAGE>
"At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates."
Given this market environment, how did the fund perform?
The Pennsylvania Municipal Bond Fund performed well over the past year,
rewarding investors with a total return on net asset value for the year of 8.37%
for Class A shares, including price changes and reinvested dividends. The fund
was ranked ninth among 61 Pennsylvania municipal bond funds for the one-year
period by Lipper Analytical Services, a nationally recognized performance
measurement service.
What strategies did you employ to add value?
As the spread between yields on higher and lower quality bonds continued to
narrow during the year, we were able to enhance the credit quality of the fund
without sacrificing yield. We also focused on purchasing bonds with strong call
protection, which resulted in healthy appreciation for the fund as interest
rates generally fell over the period.
What is the current status of Pennsylvania's
municipal market?
Pennsylvania's economy is expected to continue to lag national economic trends
in the near future. The sluggish economy is, in part, the result of continued
mergers and acquisitions, expenditure reductions, and layoffs in the industries
most important to the commonwealth's economy: healthcare, defense and
telecommunications. Nevertheless, credit ratings and the market overall have
remained fairly stable. As the result of healthy retail demand, the $4.6 billion
in municipal bonds issued during the first half of the year have been absorbed
and credit spreads have tightened slightly. If the commonwealth's Supreme Court
rules unconstitutional a personal property tax on investments in out-of-state
companies, 32 counties may be required to refund $231 million in prior personal
property tax receipts. It is not yet clear
4
<PAGE>
how the counties would fund the paybacks, but some may issue bonds.
What is the current outlook for the municipal market as a whole?
As we make our way through the seventh year of the current economic expansion,
some observers believe that a fundamental shift may have occurred in our
economy. Based on past experience and months of reports of economic growth,
especially employment statistics, the markets have long been anticipating an
increase in inflation. However, even with almost full employment, we have not
seen the expected rise in hourly wages that would be considered inflationary.
This change in the traditional economic cause-and-effect relationship has been
variously attributed to the globalization of the economy and consequent
competitive pressures, to increased use of technology, and to corporations'
recent ability to downsize as necessary. Although structural changes in the
economy appear to have suspended the relationship between faster growth and
higher inflation, the risk remains that inflation may reassert itself if
capacity constraints are reached and resources are stretched too thin.
Talk of Fed tightening will continue. If the Fed does act to increase rates, it
will be perceived as a move against inflation. If the Fed does not tighten, it
will be seen as an indication that the economy is doing well.
Nonetheless, for the remainder of 1997, the municipal market should continue to
offer the attractive yields and tax advantages that make it a good alternative
if and when a correction in the stock market occurs. While money continues to
flow into equity mutual funds, investors are also beginning to evaluate the
effect of the huge run-up in stock prices on their asset allocation, and many
are rebalancing their portfolios by shifting some assets into bonds.
5
<PAGE>
Pennsylvania
Overview
Credit Quality
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 46%
BBB/NR 23%
A 22%
AA 9%
Diversification
[PIE CHART APPEARS HERE]
Hospitals 23%
Resource Recovery 5%
Tax Revenue 9%
Housing Facilities 12%
General Obligations 11%
Escrowed Bonds 7%
Pollution Control 14%
Education 4%
Other 10%
Health Care 5%
Morningstar Rating/3/
****
<TABLE>
<CAPTION>
Fund Highlights
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share Class A B C R
Inception Date 10/86 2/97 2/94 2/97
Net Asset Value (NAV) $10.25 $10.27 $10.25 $10.25
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Total Net Assets ($000) $119,599
Average Weighted Maturity (years) 21.13
Duration (years) 8.24
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Share Class A(NAV) A(Offer) B C R
1-Year 8.37% 3.81% 7.91% 7.88% 8.44%
5-Year 6.78% 5.87% 6.22% 6.20% 6.80%
10-Year 8.11% 7.65% 7.64% 7.53% 8.12%
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.46% 5.23% 4.70% 4.91% 5.65%
SEC 30-Day Yld 5.19% 4.97% 4.44% 4.64% 5.40%
Taxable Equiv Yld/2/ 7.75% 7.42% 6.63% 6.93% 8.06%
- ----------------------------------------------------------------------------------
</TABLE>
1 Returns of the oldest share class of a fund are actual. Returns for other
classes are actual for the period since inception and prior to class
inception are the returns for the fund's oldest class, adjusted for
differences in sales charges and expenses. Class A shares have an initial
sales charge, while Class B, C and R shares have no initial sales charge.
Class B shares have a CDSC that declines from 5% to 0% after 6 years. Class C
shares have a 1% CDSC for redemptions within one year. Returns do not reflect
imposition of the CDSC. Giving effect to the CDSC applicable to Class B
shares, the 1-year, 5-year, and 10-year total returns above would be 3.91%,
6.07%, and 7.64%, respectively.
2 Based on SEC yield and a combined federal and state income tax rate of 33%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
3 Overall rating for Class A shares for the period ended May 31, 1997, among
1,299 municipal bond funds for the three-year period, 631 funds for the five-
year period, and 290 funds for the 10-year period.
6
<PAGE>
Nuveen Flagship Pennsylvania Municipal Bond Fund
May 31, 1997 Annual Report
* The Index Comparison shows change in value of a $10,000 investment in the A
Shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares (4.20%) and all ongoing fund
expenses.
Index Comparison*
[LINE CHART APPEARS HERE]
Lehman Brothers Nuveen Flagship Nuveen Flagship
Municipal Bond Pennsylvania Municipal Pennsylvania Municipal
Index Bond Fund (NAV) Bond Fund (Offer)
1987 10,000.0 10,000.0 9,580.0
1988 10,898.1 10,995.3 10,533.5
1989 12,150.6 12,354.0 11,835.2
1990 13,039.7 13,077.8 12,528.6
1991 14,353.9 14,321.0 13,719.5
1992 15,764.1 15,720.7 15,060.5
1993 17,650.0 17,480.7 16,746.5
1994 18,085.8 17,867.6 17,117.1
1995 19,732.8 19,294.8 18,484.4
1996 20,634.7 19,986.6 19,147.2
1997 22,534.8 21,462.1 20,560.7
. Lehman Brothers Municipal Bond Index $22,535
. Nuveen Flagship Pennsylvania Municipal Bond Fund (NAV) $21,818
. Nuveen Flagship Pennsylvania Municipal Bond Fund (Offer) $20,902
Past performance is not predictive of future performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
June 1996 0.0473
July 0.04887
August 0.04887
September 0.04648
October 0.04767
November 0.04582
December 0.04735
January 1997 0.04904
February 0.0466
March 0.0466
April 0.0466
May 0.0466
7
<PAGE>
Financial Section
Contents
10 Portfolio of Investments
18 Statement of Net Assets
19 Statement of Operations
20 Statement of Changes in Net Assets
21 Notes to Financial Statements
28 Financial Highlights
30 Independent Auditors' Report
9
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 4.3%
$ 3,000,000 Allegheny County, Pennsylvania, Higher Education 2/06 at 102 Baa2 $ 2,885,700
Building Authority Revenue, Robert Morris College,
Series A, 6.250%, 2/15/26
750,000 Northeastern Pennsylvania, Hospital and Education 2/05 at 100 AAA 813,375
Authority, College Revenue, Guaranteed, Luzerne
County Community College, 6.625%, 8/15/15
865,000 Union County, Pennsylvania, Higher Educational 4/06 at 101 AAA 855,433
Facilities, Financing Authority, University
Revenue, Bucknell University, 5.500%, 4/01/16
600,000 Wilkes-Barre, Pennsylvania, General Municipal 12/00 at 100 N/R 642,528
Authority, College Revenue, Misericordia College,
Series A, 7.750%, 12/01/12
- --------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity -- 0.6%
650,000 Philadelphia, Pennsylvania, Gas Works Revenue, No Opt. Call AAA 758,719
Twelfth Series, Issue B, 7.000%, 5/15/20
- --------------------------------------------------------------------------------------------------------------------
Health Care -- 5.1%
3,000,000 Allegheny County, Pennsylvania, Residential 10/05 at 100 AAA 3,108,570
Finance Authority, Mortgage Revenue, Ladies
Grand Army Republic Health Facility Project,
Series G, 6.350%, 10/01/36
1,000,000 Butler County, Pennsylvania, Industrial Development 6/03 at 102 A- 988,050
Authority, Health Center Revenue, Crossover
Refunding, Sherwood Oaks Project, 5.750%, 6/01/16
2,000,000 Montgomery County, Pennsylvania, Higher Education 1/06 at 101 BBB 2,015,780
and Health Authority, Mortgage Revenue, Waverly
Heights Project, 6.375%, 1/01/26
- --------------------------------------------------------------------------------------------------------------------
Hospitals -- 22.8%
1,525,000 Allegheny County, Pennsylvania, Hospital No Opt. Call A- 1,720,383
Development Authority Revenue, Allegheny Valley
Hospital, Series Q, 7.000%, 8/01/15
2,000,000 Armstrong County, Pennsylvania, Hospital Authority, 12/01 at 100 AAA 2,107,700
Health Center, Revenue Refunding, Canterbury
Place Project, 6.500%, 12/01/21
500,000 Clarion County, Pennsylvania, Hospital Authority, 7/99 at 102 BBB- 528,415
Hospital, Revenue Refunding, Clarion Hospital
Project, 8.100%, 7/01/12
</TABLE>
10
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------
Hospitals-- continued
<S> <C> <C> <C> <C>
$ 500,000 Dauphin County, Pennsylvania, Hospital Authority, 7/97 at 102 AAA $ 511,845
Revenue Refunding, Harrisburg Hospital,
8.250%, 7/01/14
1,320,000 Delaware County, Pennsylvania, Authority 12/06 at 102 BBB+ 1,297,190
Health Facilities Revenue, Mercy Health
Corporation Project, 6.000%, 12/15/26
1,300,000 Doylestown, Pennsylvania, Hospital Authority, 7/04 at 102 AAA 1,161,771
Hospital Revenue Refunding, Series A,
5.000%, 7/01/23
1,585,000 Jeannette, Pennsylvania, Health Service Authority, 11/06 at 102 BBB+ 1,590,500
Hospital Revenue Refunding, Jeannette District
Memorial Hospital, Series A, 6.000%, 11/01/18
2,000,000 Monroeville, Pennsylvania, Hospital Authority, 10/05 at 102 A3 2,042,540
Hospital Revenue Refunding, Forbes Health System,
6.250%, 10/01/15
500,000 Montgomery County, Pennsylvania, Higher Education 2/00 at 100 AAA 532,560
and Health Authority, Holy Redeemer Hospital,
Series A, 7.625%, 2/01/20
2,000,000 Philadelphia, Pennsylvania, Authority For Industrial 7/03 at 102 AA 1,891,920
Development, Revenue Refunding, PGH
Development Corporation, 5.250%, 7/01/17
1,985,000 Philadelphia, Pennsylvania, Hospitals and Higher 11/02 at 102 A- 2,046,912
Education Facilities Authority, Hospital Revenue
Refunding, Chestnut Hill Hospital, 6.500%, 11/15/22
4,000,000 Philadelphia, Pennsylvania, Hospitals and Higher 11/03 at 102 A- 4,194,880
Education Facilities Authority, Hospital Revenue
Refunding, Temple University Hospital, Series A,
6.625%, 11/15/23
2,000,000 Philadelphia, Pennsylvania, Hospitals and Higher No Opt. Call BBB+ 2,088,580
Education Facilities Authority, Hospital Revenue
Refunding, Pennsylvania Hospital,
6.250%, 7/01/06
2,500,000 Philadelphia, Pennsylvania, Hospitals and Higher 7/07 at 102 BBB 2,455,075
Education Facilities Authority, Hospital Revenue
Refunding, Jeanes Hospital, 5.875%, 7/01/17
500,000 Saint Mary Hospital Authority, Bucks County, 7/02 at 102 AAA 539,545
Pennsylvania, Revenue, Franciscan Health,
St. Mary, Series A, 6.500%, 7/01/12
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Hospitals -- continued
$ 230,000 Sayre, Pennsylvania, Health Care Facilities 3/01 at 102 AAA $ 249,437
Authority Revenue, Guthrie Healthcare System,
Series A, 7.100%, 3/01/17
350,000 Washington County, Pennsylvania, Hospital 4/02 at 102 A3 371,417
Authority, Revenue, Monogahela Valley Hospital
Project, 6.750%, 12/01/08
1,750,000 Westmoreland County, Pennsylvania, Industrial, 7/97 at 102 Baa2 1,788,255
Development Authority, Revenue Refunding,
Citizen's General Hospital Project, Series A,
8.250%, 7/01/13
- -------------------------------------------------------------------------------------------------------------------
Housing/Multi Family -- 0.4%
500,000 Bucks County, Pennsylvania, Redevelopment Authority, 2/02 at 100 AAA 516,505
Mortgage Revenue Refunding, Warminster Heights,
Series A, 6.875%, 8/01/23
- -------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 11.7%
1,770,000 Allegheny County, Pennsylvania, Residential Finance No Opt. Call Aaa 224,613
Authority, Mortgage Revenue, Single Family,
Series Z, 0.000%, 5/01/27
300,000 Pennsylvania, Housing Finance Agency, Single Family 10/99 at 102 AA+ 319,290
Mortgage, Series S, 7.600%, 4/01/16
150,000 Pennsylvania, Housing Finance Agency, Single Family 4/01 at 102 AA+ 158,969
Mortgage, Series 30, 7.300%, 10/01/17
520,000 Pennsylvania, Housing Finance Agency, Refunding, 10/01 at 102 AA+ 550,524
Series 1991 - 32, 7.150%, 4/01/15
2,500,000 Pennsylvania, Housing Finance Agency, Refunding, 10/06 at 102 AA+ 2,549,650
Single Family Mortgage, Series 50A,
6.000%, 10/01/13
2,000,000 Pennsylvania, Housing Finance Agency, Single Family 4/06 at 102 AA+ 2,050,900
Mortgage, Series 51, 6.375%, 4/01/28
1,000,000 Pennsylvania, Housing Finance Agency, Single Family 10/06 at 102 AA+ 1,008,060
Mortgage, Series 53A, 6.050%, 4/01/18
3,000,000 Pittsburgh, Pennsylvania, Urban Redevelopment 8/05 at 102 A 3,050,160
Authority, Home Improvement Loan,
Series A, 6.375%, 8/01/18
1,000,000 Pittsburgh, Pennsylvania, Urban Redevelopment 4/06 at 102 AAA 993,890
Authority, Mortgage Revenue, Series A,
6.000%, 4/01/19
</TABLE>
12
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family -- continued
$1,000,000 Pittsburgh, Pennsylvania, Urban Redevelopment 4/06 at 102 AAA $1,026,820
Authority, Mortgage Revenue, Series D,
6.250%, 10/01/17
1,000,000 Pittsburgh, Pennsylvania, Urban Redevelopment 10/07 at 102 AAA 1,012,450
Authority, Mortgage Revenue Refunding, Series A,
6.200%, 10/01/21
1,060,000 Pittsburgh, Pennsylvania, Urban Redevelopment 4/04 at 102 AAA 1,093,814
Authority, Mortgage Revenue, Series A,
6.625%, 4/01/22
- -------------------------------------------------------------------------------------------------------------------
Industrial Development and Pollution Control -- 13.5%
153,000 Allegheny County, Pennsylvania, Industrial No Opt. Call N/R 157,405
Development Authority, Solid Waste Disposal
Revenue, Conversion System Inc. Project,
8.000%, 3/01/98
2,000,000 Cambria County, Pennsylvania, Industrial 11/05 at 102 AAA 2,014,660
Development Authority, Pollution Control, Revenue
Refunding, Pennsylvania Electric Company Project,
Series A, 5.800%, 11/01/20
1,500,000 Lawrence County, Pennsylvania, Industrial 9/01 at 102 Baa2 1,582,695
Development Authority, Pollution Control, Revenue
Refunding, Pennsylvania Power Company
New Castle Project, Series A, 7.150%, 3/01/17
Lehigh County, Pennsylvania, Industrial Development
Authority, Pollution Control, Revenue Refunding,
Pennsylvania Power & Light Company Project,
Series A:
1,610,000 6.400%, 11/01/21 11/02 at 102 AAA 1,704,749
550,000 6.150%, 8/01/29 8/05 at 102 AAA 573,381
950,000 Luzerne County, Pennsylvania, Industrial Development 12/02 at 102 A3 1,008,805
Authority, Exempt Facilities Revenue, Pennsylvania
Gas and Water Company Project, Series B,
7.125%, 12/01/22
1,500,000 Luzerne County, Pennsylvania, Industrial Development 12/04 at 102 AAA 1,663,125
Authority, Exempt Facilities, Revenue Refunding,
Pennsylvania Gas and Water Project,
Series A, 7.000%, 12/01/17
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Industrial Development Revenue and
Pollution Control -- continued
$ 1,000,000 Northampton County, Pennsylvania, Industrial 7/05 at 102 AAA $ 1,039,340
Development Authority, Revenue Refunding,
Pollution Control, Metropolitan Edison, Series A,
6.100%, 7/15/21
2,000,000 Pennsylvania, Economic Development Financing 12/05 at 102 Baa2 2,240,160
Authority, Exempt Facilities Revenue, MacMillan
Limited Partnership Project, 7.600%, 12/01/20
3,500,000 Pennsylvania, Economic Development Financing 12/04 at 102 BBB 3,914,225
Authority, Wastewater Treatment Revenue,
Sun Company Inc., R and M Project, Series A,
7.600%, 12/01/24
250,000 Philadelphia, Pennsylvania, Authority For Industrial 5/02 at 102 A+ 271,013
Development Revenues, National Board of
Medical Examiners Project, 6.750%, 5/01/12
- ---------------------------------------------------------------------------------------------------------------------------
Medical Revenue/Other -- 2.6%
1,500,000 Allegheny County, Pennsylvania, Hospital 6/02 at 102 BBB 1,573,230
Development Authority Revenue, Health and
Education, Rehabilitation Institute of Pittsburgh,
7.000%, 6/01/22
1,500,000 Harrisburg, Pennsylvania, Authority Revenue, Pooled 4/06 at 102 AAA 1,492,410
Bond Program, Series I, 5.625%, 4/01/19
- ---------------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Transportation -- 1.9%
2,300,000 Pennsylvania, State Turnpike Commission, Turnpike 12/02 at 102 AAA 2,248,871
Revenue Refunding, Series O, 5.500%, 12/01/17
- ---------------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Utility -- 1.2%
1,400,000 Philadelphia, Pennsylvania, Gas Works, Revenue 7/03 at 102 Baa1 1,433,600
Refunding, Fourteenth Series A, 6.375%, 7/01/26
- ---------------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Water and Sewer -- 1.8%
1,185,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, 9/05 at 100 AAA 1,187,583
Water and Sewer System, Revenue, Series B,
5.750%, 9/01/25
890,000 South Wayne County, Water and Sewer Authority, 4/02 at 102 N/R 946,052
Pennsylvania, Sewer Revenue Refunding,
8.200%, 4/15/13
</TABLE>
14
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Natural Gas/Pipeline -- 1.8%
$ 2,000,000 Philadelphia, Pennsylvania, Gas Works Revenue 7/03 at 102 AAA $ 2,132,360
Refunding, Fourteenth Series A, FSA, CRS,
6.375%, 7/01/14
- ---------------------------------------------------------------------------------------------------------------------------
Non-State General Obligations -- 6.6%
2,850,000 Deer Lakes School District, Pennsylvania, 1/04 at 100 AAA 2,988,396
6.350%, 1/15/14
2,000,000 McKeesport, Pennsylvania, Area School District, 10/06 at 100 AAA 2,058,100
Series A, 6.000%, 10/01/25
2,195,000 Montour, Pennsylvania, School District, Series B, No Opt. Call AAA 869,747
New School, 0.000%, 1/01/14
2,000,000 Philadelphia, Pennsylvania, Refunding, No Opt. Call AAA 2,030,700
Series A, 5.125%, 5/15/03
- ---------------------------------------------------------------------------------------------------------------------------
Pre-refunded -- 6.3%***
200,000 Allegheny County, Pennsylvania, Hospital 10/01 at 100 BBB+ 219,178
Development Authority Revenue, St. Margaret
Memorial Hospital, 7.125%, 10/01/21
1,000,000 Bucks County, Pennsylvania, Community College 6/02 at 100 AA 1,070,450
Authority, College Building, Revenue Refunding,
6.250%, 6/15/14
200,000 Butler County, Pennsylvania, Hospital Authority, 6/01 at 102 AAA 220,816
Hospital Revenue, North Hills Passavant Hospital,
Series A, 7.000%, 6/01/22
1,500,000 Pennsylvania, Intergovernmental Coop Authority, 6/05 at 100 AAA 1,714,215
Special Tax Revenue, Philadelphia Funding Program,
7.000%, 6/15/14
500,000 Pennsylvania, State Higher Educational Facilities 10/98 at 102 N/R 536,270
Authority, College and University Revenues,
Lycoming College, 8.375%, 10/01/18
700,000 Pennsylvania, State Higher Educational Facilities 1/98 at 102 AAA 730,800
Authority, Hospital Revenue, Thomas Jefferson
University, 8.000%, 1/01/18
Philadelphia, Pennsylvania, Municipal Authority,
Revenue Refunding:
150,000 7.800%, 4/01/18 4/98 at 102 AAA 157,827
1,450,000 7.800%, 4/01/18 4/00 at 100 AAA 1,578,804
935,000 West View, Pennsylvania, Municipal Authority, No Opt. Call AAA 1,317,172
Special Obligation, Refunding, Series A,
9.500%, 11/15/14
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Flagship Pennsylvania -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Resource Recovery -- 5.0%
$ 1,650,000 Cambria County, Pennsylvania, Industrial Development 9/98 at 100 A1 $ 1,693,280
Authority, Resource Recovery, Cambria Cogen
Project, Series F-2, 7.750%, 9/01/19
3,000,000 Delaware County, Pennsylvania, Industrial 1/08 at 102 A 3,053,340
Development Authority, Revenue Refunding,
Resource Recovery Facility, Series A,
6.200%, 7/01/19
800,000 Greater Lebanon Refuse Authority, Pennsylvania, 11/02 at 100 A- 854,344
Solid Waste, Revenue Refunding,
7.000%, 11/15/04
400,000 York County, Pennsylvania, Solid Waste and Refuse 12/97 at 103 AA- 417,548
Authority, Industrial Development, Revenue,
Resource Recovery Project, Series C,
8.200%, 12/01/14
- -------------------------------------------------------------------------------------------------------------
Special Tax Revenue -- 8.6%
4,000,000 Pennsylvania, Intergovernmental Coop Authority, 6/03 at 100 AAA 3,798,760
Special Tax, Revenue Refunding, Series A,
5.000%, 6/15/13
1,390,000 Pennsylvania, Intergovernmental Coop Authority, No Opt. Call AAA 1,588,503
Special Tax, Revenue, Philadelphia Funding
Program, 7.000%, 6/15/05
Puerto Rico Commonwealth, Highway and
Transportation Authority, Highway Revenue, Series Y:
1,000,000 5.500%, 7/01/26 7/06 at 101 1/2 A 966,880
1,000,000 5.500%, 7/01/36 7/16 at 100 A 972,570
3,000,000 Southeastern Pennsylvania, Transportation 3/07 at 102 AAA 2,919,690
Authority, Pennsylvania, Special Revenue,
5.375%, 3/01/22
- -------------------------------------------------------------------------------------------------------------
State/Territorial General Obligations -- 4.6%
2,000,000 Pennsylvania, Third Series, 5.000%, 9/01/12 9/03 at 102 AA- 1,899,460
1,000,000 Pennsylvania, First Series, 5.375%, 5/15/16 5/06 at 101 1/2 AAA 982,480
1,250,000 Puerto Rico Commonwealth, 5.400%, 7/01/25 7/06 at 101 1/2 A 1,191,838
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State/Territorial General Obligations -- continued
$ 1,500,000 Puerto Rico Commonwealth, Public Improvement, 7/07 at 101 1/2 A $ 1,431,030
5.375%, 7/01/25
- -------------------------------------------------------------------------------------------------------------
$117,668,000 Total Investments -- (cost $112,893,652) -- 98.8% 118,188,587
============-------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.2% 1,409,963
-----------------------------------------------------------------------------------------------
Net Assets -- 100% $119,598,550
===============================================================================================
</TABLE>
* Ratings (not covered by the report of independent
auditors): Using the higher of Standard & Poor's or
Moody's rating.
** Optional Call Provisions (not covered by the report of
independent auditors): 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.
*** Pre-refunded securities are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government
agency securities, which ensures the timely payment of
principal and interest. Pre-refunded securities are
normally considered to be equivalent to AAA rated
securities.
N/R -- Investment is not rated.
See accompanying notes to financial statements.
17
<PAGE>
Statement of Net Assets
May 31, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Pennsylvania
- --------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at
market value (note 1) $118,188,587
Cash 112,752
Receivables:
Interest 2,072,126
Shares sold 101,061
Other assets 16,780
- -------------------------------------------------------------------------------
Total assets 120,491,306
- -------------------------------------------------------------------------------
Liabilities
Payable for Shares redeemed 202,731
Accrued expenses:
Management fees (note 6) 34,478
12b-1 distribution and service fees
(notes 1 and 6) 13,290
Other 95,495
Dividends payable 546,762
- -------------------------------------------------------------------------------
Total liabilities 892,756
- -------------------------------------------------------------------------------
Net assets (note 7) $119,598,550
===============================================================================
Class A Shares (note 1)
Net assets $ 55,667,073
Shares outstanding 5,428,988
Net asset value and redemption price per share $ 10.25
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.70
===============================================================================
Class B Shares (note 1)
Net assets $ 228,509
Shares outstanding 22,246
Net asset value, offering and redemption price per share $ 10.27
===============================================================================
Class C Shares (note 1)
Net assets $ 6,320,336
Shares outstanding 616,643
Net asset value, offering and redemption price per share $ 10.25
===============================================================================
Class R Shares (note 1)
Net assets $ 57,382,632
Shares outstanding 5,596,368
Net asset value, offering and redemption price per share $ 10.25
===============================================================================
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
Statement of Operations Nuveen Flagship Municipal Bond Fund
Year ended May 31, 1997 May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Nuveen Flagship
Pennsylvania*
- -------------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $ 4,514,882
- -------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 378,251
12b-1 service fees -- Class A (notes 1 and 6) 149,056
12b-1 distribution and service fees -- Class B (notes 1 and 6) 418
12b-1 distribution and service fees -- Class C (notes 1 and 6) 45,521
Shareholders' servicing agent fees and expenses 77,143
Custodian's fees and expenses 52,401
Trustees' fees and expenses (note 6) 1,159
Professional fees 14,260
Shareholders' reports -- printing and mailing expenses 17,176
Federal and state registration fees 3,456
Other expenses 11,932
- -------------------------------------------------------------------------------------
Total expenses before reimbursement 750,773
Expense reimbursement (note 6) (277,221)
- -------------------------------------------------------------------------------------
Net expenses 473,552
- -------------------------------------------------------------------------------------
Net investment income 4,041,330
- -------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 46,769
Net change in unrealized appreciation or depreciation of investments 1,490,845
- -------------------------------------------------------------------------------------
Net gain from investments 1,537,614
- -------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,578,944
- -------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Pennsylvania and
four months of Nuveen Flagship Pennsylvania (see note 1 of the
Notes to Financial Statements).
See accompanying notes to financial statements.
19
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Nuveen Flagship Flagship
Pennsylvania* Pennsylvania
------------------------------------------------
Year ended 5/31/97 Year ended 5/31/96
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 4,041,330 $ 2,669,292
Net realized gain from investment transactions
(notes 1 and 4) 46,769 714,271
Net change in unrealized appreciation or depreciation
of investments 1,490,845 (1,775,459)
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 5,578,944 1,608,104
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (2,665,076) (2,497,316)
Class B (1,816) N/A
Class C (264,780) (199,438)
Class R (1,082,438) N/A
- -------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (4,014,110) (2,696,754)
- -------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization of
Nuveen Pennsylvania (note 1) 68,634,295 -
Net proceeds from shares issued as a capital contribution 33,360 -
Net proceeds from sale of shares 7,311,629 8,804,404
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 1,622,041 1,323,945
- -------------------------------------------------------------------------------------------------------------------
77,601,325 10,128,349
- -------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (8,401,239) (5,923,636)
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 69,200,086 4,204,713
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets 70,764,920 3,116,063
Net assets at the beginning of year 48,833,630 45,717,567
- -------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $119,598,550 $48,833,630
===================================================================================================================
Balance of undistributed net investment income at end of year $ 27,220 $ -
===================================================================================================================
</TABLE>
* Information represents eight months of Flagship Pennsylvania and four
months of Nuveen Flagship Pennsylvania (see note 1 of the Notes to
Financial Statements).
N/A -- Flagship Pennsylvania was not authorized to issue Class B or Class R
Shares.
See accompanying notes to financial statements.
20
<PAGE>
Notes to Financial Statements
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Pennsylvania Municipal Bond Fund (the "Fund"),
among others. The Trust was organized as a Massachusetts business trust on July
1, 1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and Nuveen
Advisory Corp., respectively, the distributor ("Distributor") and investment
advisor ("Adviser") of the Fund, entered into an agreement under which Nuveen
acquired Flagship Resources Inc. and after the close of business on January 31,
1997, consolidated their respective mutual fund businesses. This agreement was
approved at a meeting by the shareholders of the Flagship Funds in December
1996.
After the close of business on January 31, 1997, Flagship Pennsylvania Triple
Tax Exempt Fund ("Flagship Pennsylvania") and Nuveen Pennsylvania Tax-Free Value
Fund ("Nuveen Pennsylvania") reorganized into Nuveen Flagship Pennsylvania
Municipal Bond Fund ("Nuveen Flagship Pennsylvania"). Prior to the
reorganization, Flagship Pennsylvania was a sub-trust of the Flagship Tax Exempt
Funds Trust, while Nuveen Pennsylvania was a series of the Nuveen Multistate Tax
Free Trust. Nuveen Pennsylvania had a fiscal year end of January 31 prior to
being reorganized into Nuveen Flagship Pennsylvania which has retained the
fiscal year end of Flagship Pennsylvania.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved 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. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
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 have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1997, the Fund had no such purchase commitments.
21
<PAGE>
Notes to Financial Statements -- continued
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 on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryovers. Prior to the
reorganization, tax-exempt net investment income for Flagship Pennsylvania was
declared as a dividend daily and payment was made on the last business day of
each month.
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 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 net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Pennsylvania state income taxes, to
retain such tax-exempt status when distributed to the shareholders of the Fund.
All income dividends paid during the fiscal year ended May 31, 1997, have been
designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
Effective February 1, 1997, the Fund offers Class A, B, C and R Shares. Class A
Shares are sold with a sales charge and an by the investor annual 12b-1 service
fee. Class B Shares are sold without a sales charge but incur annual 12b-1
distribution and service fees. An investor purchasing Class B Shares agrees to
pay a contingent deferred sales charge ("CDSC") of up to 5% depending upon the
length of time the shares are held by the investor (CDSC is reduced to 0% at the
end of six years). Class 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 CDSC of 1% if Class C Shares are redeemed within 18
months of purchase. Class R Shares are not subject to any sales charge or 12b-1
distribution or service fees. Class R Shares are available for purchases of over
$1 million and in other limited circumstances.
22
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the fiscal year ended May 31, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
include 12b-1 distribution and service fees, are recorded to the specific class.
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.
23
<PAGE>
Notes to Financial Statements -- continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Flagship
Pennsylvania* Pennsylvania
-------------------------------------------------------------------------
Year ended 5/31/97 Year ended 5/31/96
-------------------------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization
of Nuveen Pennsylvania:
Class A 1,011,604 $10,326,580 - $ -
Class B - - N/A N/A
Class C 101,246 1,033,183 - -
Class R 5,610,682 57,274,532 N/A N/A
Shares issued as a
capital contribution:
Class A 817 8,340 - -
Class B 817 8,340 N/A N/A
Class C 817 8,340 - -
Class R 817 8,340 N/A N/A
Shares sold:
Class A 390,922 3,976,377 715,960 7,326,760
Class B 21,356 217,925 N/A N/A
Class C 168,084 1,709,951 144,791 1,477,644
Class R 137,689 1,407,376 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 96,590 980,201 117,434 1,199,201
Class B 73 740 N/A N/A
Class C 13,846 140,564 12,212 124,744
Class R 49,269 500,536 N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
7,604,629 77,601,325 990,397 10,128,349
- ----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (512,221) (5,199,195) (562,674) (5,744,061)
Class B - - N/A N/A
Class C (111,867) (1,144,394) (17,822) (179,575)
Class R (202,089) (2,057,650) N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
(826,177) (8,401,239) (580,496) (5,923,636)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 6,778,452 $69,200,086 409,901 $ 4,204,713
======================================================================================================================
</TABLE>
* Information represents eight months of Flagship Pennsylvania and four
months of Nuveen Flagship Pennsylvania (see note 1).
N/A-Flagship Pennsylvania was not authorized to issue Class B or Class R Shares.
24
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
3. Distributions to Shareholders
On June 9, 1997, the Fund declared a dividend distribution from its tax-
exempt net investment income which was paid on July 1, 1997, to shareholders
of record on June 9, 1997, as follows:
<TABLE>
<CAPTION>
Nuveen Flagship
Pennsylvania
- -----------------------------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $ .0465
Class B .0400
Class C .0420
Class R .0485
- -----------------------------------------------------------------------------------------
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities for the fiscal year ended May 31, 1997, were as follows:.
<TABLE>
<CAPTION>
Nuveen Flagship
Pennsylvania*
- -----------------------------------------------------------------------------------------
<S> <C>
Purchases
Investments in municipal securities $33,567,039
Investments in municipal securities in the reorganization
of Nuveen Pennsylvania 64,549,638
Sales
Investments in municipal securities 32,469,028
- -----------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Pennsylvania and four
months of Nuveen Flagship Pennsylvania (see note 1).
N/A --Flagship Pennsylvania was not authorized to issue Class B or Class R
Shares.
At May 31, 1997, the identified cost of investments owned for federal income tax
purposes may differ from the cost used for financial reporting purposes.
At May 31, 1997, the Fund had unused capital loss carryforwards of $142,820
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, $46,943 of the carryover will expire in the year
2003 and $95,877 will expire in the year 2004.
5. Unrealized Appreciation (Depreciation)
At May 31, 1997, net unrealized appreciation aggregated $5,294,935, of which
$5,334,150 related to appreciated securities and $39,215 related to depreciation
securities.
25
<PAGE>
Notes to Financial Statements -- continued
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the Fund as follows:
Average daily net asset value Management fee
- --------------------------------------------------------------------------------
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 net assets over $2 billion .4750 of 1
- --------------------------------------------------------------------------------
Prior to the reorganization (see note 1) Flagship Pennsylvania paid a management
fee of .5 of 1%. 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
(Flagship Funds Inc., a wholly-owned subsidiary of Flagship Resources Inc.)
collected sales charges on purchases of Class A Shares of approximately $110,200
of which approximately $96,400 were paid out as concessions to authorized
dealers. The Distributor and its predecessor also received 12b-1 service fees on
Class A Shares, approximately one-half of which was paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
compensated authorized dealers directly with approximately $25,900 in commission
advances at the time of purchase. To compensate for commissions advanced to
authorized dealers, all 12b-1 service fees collected on Class B Shares during
the first year following a purchase, all 12b-1 distribution fees on Class B
Shares, and all 12b-1 service and distribution fees on Class C Shares during the
first year following a purchase are retained by the Distributor. The remaining
12b-1 fees charged to the Fund were paid to compensate authorized dealers for
providing services to shareholders relating to their investments. The
Distributor and its predecessor also collected and retained approximately $1,000
of CDSC on share redemptions during the fiscal year ended May 31, 1997.
26
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
7. Composition of Net Assets
At May 31, 1997, the Fund had an unlimited number of $.01 per value shares
authorized net assets consisted of:
<TABLE>
<CAPTION>
Nuveen Flagship
Pennsylvania
- -------------------------------------------------------------------------------------
<S> <C>
Capital paid-in $114,425,115
Balance of undistributed net investment income 27,220
Accumulated net realized gain (loss) from investment transactions (148,720)
Net unrealized appreciation of investments 5,294,935
- -------------------------------------------------------------------------------------
Net assets $119,598,550
=====================================================================================
</TABLE>
27
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------- ------------------
NUVEEN FLAGSHIP PENNSYLVANIA++ Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income(b) investments income gains period value(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
1997 $10.00 $.57 $ .25 $(.57) $ - $10.25 8.37%
1996 10.21 .59 (.20) (.60) - 10.00 3.83
1995 10.06 .60 .16 (.61) - 10.21 7.90
1994 10.38 .61 (.32) (.61) - 10.06 2.70
1993 9.90 .62 .47 (.61) - 10.38 11.34
1992 9.60 .63 .30 (.63) - 9.90 9.98
1991 9.39 .62 .22 (.63) - 9.60 9.26
1990 9.49 .63 (.10) (.63) - 9.39 5.70
1989 9.01 .64 .48 (.64) - 9.49 12.79
1988 8.83 .65 .18 (.65) - 9.01 9.70
Class B (2/97)
1997(c) 10.21 .16 .06 (.16) - 10.27 2.18
Class C (2/94)
1997 9.99 .51 .26 (.51) - 10.25 7.88
1996 10.21 .53 (.21) (.54) - 9.99 3.16
1995 10.06 .54 .16 (.55) - 10.21 7.31
1994(c) 10.71 .16 (.64) (.17) - 10.06 (13.46)
Class R (2/97)
1997(c) 10.21 .20 .03 (.19) - 10.25 2.31
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Pennsylvania.
(a) Total returns are calculated on net asset value without any sales
charge.
(b) After the waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
28
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Ratios/Supplemental data
- --------------------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment(b) ment(b) rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$55,667 1.09% 5.22% .70% 5.61% 46%
44,392 1.13 5.42 .79 5.76 65
42,600 1.29 5.68 .89 6.08 50
42,226 1.17 5.55 .91 5.80 21
40,705 1.32 5.67 .92 6.07 23
36,917 1.31 5.99 .83 6.47 41
35,408 1.29 6.25 .91 6.63 23
35,632 1.29 6.28 .92 6.65 30
33,476 1.35 6.47 .98 6.84 23
33,838 1.22 6.78 .72 7.28 52
229 1.72+ 4.47+ 1.35+ 4.84+ 46
6,320 1.63 4.68 1.25 5.06 46
4,442 1.34 5.19 1.68 4.85 65
3,118 1.39 5.50 1.84 5.05 50
1,697 1.41+ 4.91+ 1.68+ 4.64+ 21
57,383 .77+ 5.45+ .39+ 5.83+ 46
- --------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
Nuveen Flagship Pennsylvania Municipal Bond Fund:
We have audited the accompanying statement of net assets of Nuveen Flagship
Pennsylvania Municipal Bond Fund, including the portfolio of investments, as of
May 31, 1997, the related statement of operations for the period then ended and
the statement 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, 1997, 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 Nuveen Flagship
Pennsylvania Municipal Bond Fund at May 31, 1997, 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 11, 1997
30
<PAGE>
Shareholder Meeting Report
Flagship Pennsylvania
<TABLE>
<CAPTION>
A Shares C Shares
<S> <C> <C> <C>
- -------------------------------------------------------------------
Advisory Agreement For 3,676,004 432,465
Against 50,191 9,824
Abstain 28,166 --
-------------------------------------------
Total 3,754,361 442,289
- -------------------------------------------------------------------
Broker Non Votes 118,524 23,814
- -------------------------------------------------------------------
12b-1 Plan For 3,494,530 419,485
Against 122,457 18,501
Abstain 137,375 4,303
-------------------------------------------
Total 3,754,362 442,289
- -------------------------------------------------------------------
Broker Non Votes 118,523 23,814
- -------------------------------------------------------------------
Reorganization For 2,679,921 179,592
Against 43,337 9,960
Abstain 46,396 --
-------------------------------------------
Total 2,769,654 189,552
- -------------------------------------------------------------------
Broker Non Votes 1,103,231 276,551
- -------------------------------------------------------------------
Directors
- -------------------------------------------------------------------
(A) Bremner For 3,837,394 451,778
Withhold 35,491 14,325
-------------------------------------------
Total 3,872,885 466,103
- -------------------------------------------------------------------
(B) Brown For 3,837,394 451,778
Withhold 35,491 14,325
-------------------------------------------
Total 3,872,885 466,103
- -------------------------------------------------------------------
(C) Dean For 3,837,394 451,778
Withhold 35,491 14,325
-------------------------------------------
Total 3,872,885 466,103
- -------------------------------------------------------------------
(D) Impellizzeri For 3,837,394 451,778
Withhold 35,491 14,325
-------------------------------------------
Total 3,872,885 466,103
- -------------------------------------------------------------------
(E) Rosenheim For 3,837,394 451,778
Withhold 35,491 14,325
-------------------------------------------
Total 3,872,885 466,103
- -------------------------------------------------------------------
(F) Sawers For 3,837,394 451,778
Withhold 35,491 14,325
-------------------------------------------
Total 3,872,885 466,103
- -------------------------------------------------------------------
(G) Schneider For 3,837,394 451,778
Withhold 35,491 14,325
-------------------------------------------
Total 3,872,885 466,103
- -------------------------------------------------------------------
(H) Schwertfeger For 3,837,394 451,778
Withhold 35,491 14,325
- -------------------------------------------------------------------
Total 3,872,885 466,103
-------------------------------------------
</TABLE>
31
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Municipal Bond Fund, contact your
financial adviser. If you would like to add to your current investment on a
monthly or semi-annual basis, you can sign up for Nuveen's systematic investing
program, which allows you to invest a fixed dollar amount every month
automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you gain the added growth potential of
long-term compounding.
For more information on any of these service options call your adviser, or
Nuveen at (800) 621-7227.
32
<PAGE>
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Boston Financial
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris, Shriver
& Jacobson
Washington, D.C.
Independent Auditors
Deloitte & Touche LLP
Dayton, Ohio
33
<PAGE>
Serving Investors
for Generations
[Photo of John Nuveen, Sr. Appears Here]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
<PAGE>
NUVEEN
MUNICIPAL
BONDS FUNDS
MAY 31, 1997
- -----------------------------------
ANNUAL REPORT
- -----------------------------------
DEPENDABLE, TAX-FREE INCOME
TO HELP YOU KEEP MORE OF
WHAT YOU EARN.
VIRGINIA
[PHOTO APPEARS HERE]
<PAGE>
CONTENTS
1 Dear Shareholder
3 Answering Your Questions
6 Virginia Overview
9 Financial Section
33 Shareholder Meeting Report
35 Shareholder Information
36 Fund Information
<PAGE>
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
TIMOTHY R. SCHWERTFEGER
DEAR SHAREHOLDER
It's a pleasure to report to you on the performance of the Nuveen Flagship
Virginia Municipal Bond Fund. Over the past year, the fund posted sizable gains.
For the fiscal year ended May 31, 1997, the value of your investment rose 8.20%
for Class A shares, if you chose to reinvest your tax-free income dividends.
Over this 12-month period, the total return performance for the fund (with
income reinvested) kept close pace with the 8.28% increase produced by the
Lehman Brothers Municipal Bond Index, which is used to represent the broad
municipal bond market on an unmanaged basis.
In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds, which
provide excellent income for investors. As of May 31, 1997, shareholders were
receiving tax-free yields on net asset value of 5.18% for Class A shares. To
match this yield, investors in the 35% combined federal and state income tax
bracket would have had to earn at least 7.97% on taxable alternatives.
These results were produced against a backdrop of continued economic expansion
and the lowest unemployment rates in almost two decades, a combination that in
the past has foreshadowed an increase in inflation. In March, the Federal
Reserve made a pre-emptive strike by raising short-term interest rates by 0.25%,
but then maintained the status quo at its May and July meetings. Overall market
returns continue to be good, but fear of inflation has hampered the performance
of municipals and led to
____
1
<PAGE>
"In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds."
increased volatility in both the equity and bond markets. During this time,
bonds have often been the bellwether for the direction of stocks. Whenever
inflation talk is at its most rampant, the stock market has kept an eye on the
bond market for its response before reacting.
In the first six months of the year, the markets also focused on fiscal issues,
including the federal budget accord and discussion of plans to reduce taxes and
eliminate the deficit. The economy appeared to be moderating, corporate earnings
reports continued to exhibit strength, and interest rates fell in the second
quarter. All of this was positive news. The net effect is that the markets are
better off now than at the beginning of the year, but the volatility experienced
in getting there has been significant.
Recently, the need for diversification and a renewed emphasis on asset
allocation-as well as attractive yields-have sparked increased interest in
tax-free investments. The current level of the stock market reminds investors to
re-allocate profits to other segments of the market in order to limit risk.
Nuveen municipal bond funds provide an excellent lower-risk alternative, and
their current yields make them very attractive.
On behalf of everyone at Nuveen, I thank you for your confidence in us and our
family of investments. You can continue to depend on us for high-quality
investments that withstand the test of time. We look forward to reporting to you
again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
- ---------------------------
TIMOTHY R. RCHWERTFEGER
Chairman of the Board
July 15, 1997
____
2
<PAGE>
[PHOTO OF TED NEILD APPEARS HERE]
TED NEILD, HEAD OF NUVEEN'S DAYTON-BASED PORTFOLIO MANAGEMENT TEAM, TALKS ABOUT
THE MUNICIPAL BOND MARKET AND OFFERS INSIGHT INTO FACTORS THAT AFFECTED FUND
PERFORMANCE OVER THE PAST YEAR.
ANSWERING YOUR QUESTIONS
WHAT ARE THE INVESTMENT OBJECTIVES OF THE FUND?
The fund aims to provide investors with a high level of tax-free income while
preserving capital by investing in a diversified portfolio of high-quality
municipal bonds. To that end, we attempt to maximize the fund's after-tax total
return by generating high tax-free income and minimizing the distribution of
taxable capital gains when possible.
WHAT IS YOUR STRATEGY FOR MEETING THESE OBJECTIVES?
To meet this fund's objectives of income and enhanced value, our portfolio
management strategy relies on conservative value investing principles, sound
research and credit surveillance activities, and senior management involvement.
At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of high potential return with low risk regardless of
the direction of interest rates. This approach focuses on the characteristics of
individual bonds, such as sector, geographic region, structure and intrinsic
credit quality, rather than on the general economic environment. The idea behind
this philosophy is that we, as investment managers, can control the selection
process, but not the direction of the economy as a whole.
WHAT KEY ECONOMIC FACTORS AFFECTED THE FUND'S PERFORMANCE DURING THE YEAR?
The U.S. economy continued to grow, exhibiting low unemployment, increased
manufacturing and construction activity, and lack of price pressure at the
consumer and producer levels. The fund had the added advantage of operating in a
healthy supply environment, where securities were available as needed.
____
3
<PAGE>
"At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer best balance of high potential return with low risk regardless of the
direction of interest rates."
GIVEN THIS MARKET ENVIRONMENT, HOW DID THE FUND PERFORM?
The Virginia Municipal Bond Fund performed well over the past year, rewarding
investors with a total return on net asset value for the year of 8.20% for Class
A shares, including price changes and reinvested dividends. The fund was ranked
among the top third of 31 Virginia municipal bond funds for the one-year period
by Lipper Analytical Services, a nationally recognized performance measurement
service.
WHAT STRATEGIES DID YOU EMPLOY TO ADD VALUE?
As the spread between yields on higher and lower quality bonds continued to
narrow during the year, we were able to enhance the credit quality of the fund
without sacrificing yield. We also focused on purchasing bonds with strong call
protection, which resulted in healthy appreciation for the fund as interest
rates generally fell over the period.
WHAT IS THE CURRENT STATUS OF VIRGINIA'S MUNICIPAL MARKET?
Virginia's municipal market continues to perform well. In most sectors, credit
quality has remained fairly stable, reflecting good economic growth and solid
financial positions. Ample supply-more than $1.8 billion of municipal debt has
been issued in the commonwealth during the first half of 1997-and consistent
demand have held bond prices at comfortable levels.
Recent economic growth can be attributed in part to Virginia's competitive
business advantages, which include a favorable tax structure, highly educated
workforce, and diverse economy. The commonwealth and its municipalities have
also contributed to the recent growth by proactively pursuing economic
development opportunities. For the most part, their economic development efforts
have been rewarded. Modest tax base growth has enabled most Virginia
municipalities to improve or at least maintain their solid financial positions.
____
4
<PAGE>
WHAT IS THE CURRENT OUTLOOK FOR THE MUNICIPAL MARKET AS A WHOLE?
As we make our way through the seventh year of the current economic expansion,
some observers believe that a fundamental shift may have occurred in our
economy. Based on past experience and months of reports of economic growth,
especially employment statistics, the markets have long been anticipating an
increase in inflation. However, even with almost full employment, we have not
seen the expected rise in hourly wages that would be considered inflationary.
This change in the traditional economic cause-and-effect relationship has been
variously attributed to the globalization of the economy and consequent
competitive pressures, to increased use of technology, and to corporations'
recent ability to downsize as necessary. Although structural changes in the
economy appear to have suspended the relationship between faster growth and
higher inflation, the risk remains that inflation may reassert itself if
capacity constraints are reached and resources are stretched too thin.
Talk of Fed tightening will continue. If the Fed does act to increase rates, it
will be perceived as a move against inflation. If the Fed does not tighten, it
will be seen as an indication that the economy is doing well.
Nonetheless, for the remainder of 1997, the municipal market will continue to
offer the attractive yields and tax advantages that make it a good alternative
if and when a correction in the stock market occurs. While money continues to
flow into equity mutual funds, investors are also beginning to evaluate the
effect of the huge run-up in stock prices on their asset allocation, and many
are rebalancing their portfolios by shifting some assets into bonds.
____
5
<PAGE>
VIRGINIA
OVERVIEW
Credit Quality
[PIE CHART APPEARS HERE]
BBB/NR 15%
A 29%
AA 31%
AAA/Pre-refunded 25%
Diversification
[PIE CHART APPEARS HERE]
Escrowed Bonds 3%
Hospitals 20%
Housing Facilities 12%
Education 12%
Pollution Control 12%
Transportation 5%
Municipal Appropriations 12%
Other 6%
Water & Sewer 11%
General Obligations 7%
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
=================================================================================
SHARE CLASS A B C R
<S> <C> <C> <C> <C>
Inception Date 3/86 2/97 10/93 2/97
- ---------------------------------------------------------------------------------
Net Asset Value (NAV) $10.66 $10.66 $10.65 $ 10.66
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Total Net Assets ($000) $191,336
- ---------------------------------------------------------------------------------
Average Weighted Maturity (years) 21.27
- ---------------------------------------------------------------------------------
Duration (years) 7.47
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN/1/
==================================================================================
SHARE CLASS A(NAV) A(OFFER) B C R
<S> <C> <C> <C> <C> <C>
1-Year 8.20% 3.66% 7.54% 7.61% 8.28%
- ----------------------------------------------------------------------------------
5-Year 6.99% 6.08% 6.39% 6.38% 7.01%
- ----------------------------------------------------------------------------------
10-Year 8.19% 7.72% 7.71% 7.59% 8.19%
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TAX-FREE YIELDS
==================================================================================
SHARE CLASS A(NAV) A(OFFER) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 5.36% 5.13% 4.62% 4.81% 5.56%
- ----------------------------------------------------------------------------------
SEC 30-Day Yld 5.18% 4.96% 4.44% 4.64% 5.39%
- ----------------------------------------------------------------------------------
Taxable Equiv Yld/2/ 7.97% 7.63% 6.83% 7.14% 8.29%
- ----------------------------------------------------------------------------------
</TABLE>
1 Returns of the oldest share class of a fund are actual. Returns for other
classes are actual for the period since inception and prior to class
inception are the returns for the fund's oldest class, adjusted for
differences in sales charges and expenses. Class A shares have an initial
sales charge, while Class B, C and R shares have no initial sales charge.
Class B shares have a CDSC that declines from 5% to 0% after 6 years. Class C
shares have a 1% CDSC for redemptions within one year. Returns do not reflect
imposition of the CDSC. Giving effect to the CDSC applicable to Class B
shares, the 1-year, 5-year, and 10-year total returns above would be 3.54%,
6.24%, and 7.71%, respectively.
2 Based on SEC yield and a combined federal and state income tax rate of 35%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
6
<PAGE>
Nuveen Flagship Virginia Municipal Bond Fund
May 31, 1997 Annual Report
*The Index Comparison shows change in value of a $10,000 investment in the A
Shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares (4.20%) and all ongoing
fund expenses.
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Lehman
Brothers Nuveen Flagship Nuveen Flagship
Municipal Virginia Municipal Virginia Municipal
Date Bond Index Bond Fund (NAV) Bond Fund (offer)
- ---- ---------- ------------------ ------------------
<S> <C> <C> <C>
May-87 $10,000.00 $10,000.00 $ 9,580.00
May-88 $10,898.10 $10,958.31 $10,498.06
May-89 $12,150.65 $12,300.61 $11,783.98
May-90 $13,039.68 $13,055.98 $12,507.63
May-91 $14,353.88 $14,324.95 $13,723.30
May-92 $15,764.07 $15,667.46 $15,009.43
May-93 $17,650.01 $17,608.87 $16,869.30
May-94 $18,085.83 $18,070.09 $17,311.15
May-95 $19,732.83 $19,513.71 $18,694.13
May-96 $20,634.74 $20,300.68 $19,448.06
May-97 $22,534.82 $21,966.24 $21,043.66
</TABLE>
Lehman Brothers Municipal Bond Index $22,535
Nuveen Flagship Virginia Municipal Bond Fund (NAV) $21,966
Nuveen Flagship Virginia Municipal Bond Fund (Offer) $21,044
Past performance is not predictive of future performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C> <C>
JUNE 0.0468 JANUARY 0.05005
JULY 0.04836 FEBRUARY 0.0476
AUGUST 0.04836 MARCH 0.0476
SEPTEMBER 0.0468 APRIL 0.0476
OCTOBER 0.04836 MAY 0.0476
NOVEMBER 0.0468
DECEMBER 0.04836
</TABLE>
7
<PAGE>
FINANCIAL SECTION
CONTENTS
10 Portfolio of Investments
19 Statement of Net Assets
20 Statement of Operations
21 Statement of Changes in Net Assets
22 Notes to Financial Statements
29 Financial Highlights
32 Independent Auditors' Report
____
9
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP VIRGINIA
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 11.3%
$500,000 Hampton Roads, Virginia, Medical College, General 11/01 at 102 A- $ 534,385
Revenue Refunding, Series A, 6.875%, 11/15/16
Loudoun County, Virginia, Industrial Development
Authority, University Facilities, Revenue Refunding,
George Washington University:
500,000 6.250%, 5/15/12 5/02 at 102 A1 515,455
2,225,000 6.250%, 5/15/22 5/02 at 102 A1 2,286,072
1,250,000 Rockingham County, Virginia, Industrial Development 10/03 at 102 Baa3 1,234,400
Authority, Revenue Refunding, Bridgewater
College, 6.000%, 10/01/23
Staunton, Virginia, Industrial Development Authority,
Educational Facilities, Revenue Refunding, Mary
Baldwin College:
350,000 5.900%, 11/01/03 No Opt. Call N/R 350,536
370,000 6.000%, 11/01/04 No Opt. Call N/R 370,636
2,000,000 University of Virginia, University General Revenues, 6/03 at 102 AA+ 1,935,920
Series B, 5.375%, 6/01/20
Virginia College, Building Authority, Educational
Facilities, Revenue Refunding, Washington and Lee
University Project:
750,000 6.400%, 1/01/12 1/02 at 102 AA 795,428
1,000,000 5.750%, 1/01/14 1/04 at 102 AA 1,002,960
1,000,000 5.800%, 1/01/24 1/04 at 102 AA 1,004,970
800,000 Virginia College, Building Authority, Educational 5/02 at 102 A- 853,216
Facilities, Revenue, Randolph-Macon College
Project, 6.625%, 5/01/13
Virginia College, Building Authority, Educational
Facilities, Revenue, Marymount University Project:
1,000,000 7.000%, 7/01/12 7/02 at 102 BBB- 1,060,810
1,400,000 7.000%, 7/01/22 7/02 at 102 BBB- 1,477,686
2,000,000 Virginia College, Building Authority, Educational 10/02 at 102 BBB+ 2,069,220
Facilities, Revenue Refunding, Roanoke College
Project, 6.625%, 10/15/12
3,250,000 Virginia College, Building Authority, Educational 4/03 at 102 A+ 3,256,825
Facilities, Revenue Refunding, Hampton
University Project, 5.750%, 4/01/14
</TABLE>
____
10
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION- CONTINUED
Winchester, Virginia, Industrial Development Authority,
Educational Facilities, Revenue Refunding, 1st
Mortgage, Shenandoah University Project:
$ 1,800,000 6.700%, 10/01/14 10/04 at 102 AA $ 1,972,998
775,000 6.750%, 10/01/19 10/04 at 102 AA 846,858
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 4.2%
715,000 Albemarle County, Virginia, Industrial Development 1/01 at 103 N/R 791,848
Authority, First Mortgage, Revenue Refunding,
Series A (H.C.M.F XV), 8.900%, 7/15/26
1,000,000 Chesterfield County, Virginia, Health Center 12/06 at 102 AAA 1,006,650
Commission, Mortgage Revenue, Lucy Corr
Nursing Home Project, 5.875%, 12/01/21
500,000 Fairfax County, Virginia, Redevelopment and Housing 12/06 at 103 AAA 502,620
Authority, Multi Family Housing, Revenue Refunding,
Paul Spring Center, Series A, 6.000%, 12/15/28
500,000 Front Royal and Warren County, Virginia, Industrial 1/06 at 100 A 545,200
Development Authority, Mortgage Revenue
Refunding, Heritage Hall XIII, 9.450%, 7/15/24
1,190,000 Henrico County, Virginia, Industrial Development 7/03 at 102 AAA 1,196,010
Authority, Revenue Refunding, Nursing Facility,
Insured, Mortgage, Cambridge Manor,
5.875%, 7/01/19
3,500,000 Norfolk, Virginia, Industrial Development Authority, 10/99 at 100 N/R 3,593,695
Industrial Development, Revenue, James Barry,
Robinson Institute Project, 7.700%, 10/01/06
400,000 Richmond, Virginia, Industrial Development Authority, 2/98 at 102 AA- 413,648
Revenue, Medical Facility, Richmond Metropolitan
Blood Service, 7.125%, 2/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
HOSPITALS - 15.8%
1,125,000 Albemarle County, Virginia, Industrial Development 10/02 at 102 A+ 1,175,839
Authority, Health Services, Revenue, University
Virginia Health Services Foundation,
6.500%, 10/01/22
2,060,000 Albemarle County, Virginia Industrial Development 10/03 at 102 A2 2,078,705
Authority, Hospital Revenue Refunding, Martha
Jefferson Hospital, 5.875%, 10/01/13
1,165,000 Buena Vista, Virginia, Industrial Development Authority, 11/97 at 102 N/R 1,199,344
Hospital Facility, Revenue Refunding, Stonewall
Jackson, 8.375%, 11/01/14
</TABLE>
____
11
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP VIRGINIA - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - CONTINUED
$ 2,000,000 Fairfax County, Virginia, Industrial Development 8/06 at 102 AA $ 2,041,520
Authority, Revenue, Health Care, Inova Health
System Project, 6.000%, 8/15/26
2,000,000 Fredericksburg, Virginia, Industrial Development 6/07 at 102 AAA 1,895,440
Authority, Hospital Facilities, Revenue Refunding,
Medicorp Health System Obligation,
5.250%, 6/15/23
500,000 Hampton, Virginia, Industrial Development Authority, 11/04 at 102 Aa2 533,885
Hospital Revenue, Sentara General Hospital,
Series A, 6.500%, 11/01/12
2,000,000 Hanover County, Virginia, Industrial Development No Opt. Call AAA 2,202,660
Authority, Hospital Revenue, Memorial Regional
Medical Center Project, 6.375%, 8/15/18
2,000,000 Hanover County, Virginia, Industrial Development 8/05 at 102 AAA 1,926,380
Authority, Hospital Revenue, Bon Secours Health
System Projects, 5.500%, 8/15/25
1,250,000 Henry County, Virginia, Industrial Development 1/07 at 101 A+ 1,265,225
Authority, Hospital Revenue Refunding, Memorial
Hospital Martinsville and Henry, 6.000%, 1/01/27
1,700,000 Loudoun County, Virginia, Industrial Development 6/05 at 102 AAA 1,704,471
Authority, Hospital Revenue, Loudoun Hospital
Center, 5.800%, 6/01/20
2,000,000 Peninsula Ports Authority, Virginia, Health Care 8/04 at 102 BBB+ 2,155,680
Facilities, Revenue Refunding, Mary Immaculate
Project, 7.000%, 8/01/17
2,080,000 Peninsula Ports Authority, Virginia, Health System, 7/02 at 102 Aa2 2,205,029
Revenue Refunding, Riverside Health System Project,
Series A, 6.250%, 7/01/18
5,250,000 Prince William County, Virginia, Industrial Development 10/05 at 102 A2 5,612,408
Authority, Hospital Revenue Refunding, Potomac
Hospital Corporation, 6.850%, 10/01/25
2,000,000 Roanoke, Virginia, Industrial Development Authority, 7/03 at 102 AAA 1,786,420
Hospital Revenue Refunding, Roanoke Memorial
Hospitals Project, Series A, 5.000%, 7/01/24
2,260,000 Virginia Beach, Virginia, Development Authority, 11/01 at 102 AA 2,360,886
Hospital Facility, Revenue, Sentara Bayside
Hospital, 6.300%, 11/01/21
</TABLE>
____
12
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROOVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/MULTI FAMILY - 5.1%
$ 1,200,000 Fairfax County, Virginia, Redevelopment and Housing 9/06 at 102 AAA $ 1,214,484
Authority, Mortgage Revenue Refunding, Housing
For the Elderly, Little River Glen, Series A,
6.100%, 9/01/26
Harrisonburg, Virginia, Redevelopment & Housing
Authority Multi Family Housing Revenue Refunding,
United Dominion Projects:
1,415,000 7.000%, 12/01/08 12/02 at 102 BBB+ 1,492,500
2,040,000 7.100%, 12/01/15 12/02 at 102 BBB+ 2,131,433
2,000,000 Newport News, Virginia, Redevelopment and Housing 1/02 at 102 AAA 2,058,100
Authority, Mortgage Revenue Refunding, West
Apartments, Series A, 6.550%, 7/01/24
1,500,000 Richmond, Virginia, Redevelopment and Housing 3/05 at 102 AAA 1,597,710
Authority, Project Revenue, Old Manchester
Project, 6.800%, 3/01/15
480,000 Suffolk, Virginia, Redevelopment and Housing 7/02 at 104 N/R 516,221
Authority, Multi Family Housing, Revenue Refunding,
Chase Heritage Dulles, 7.000%, 7/01/24
700,000 Virginia, State Housing Development Authority, Multi 5/01 at 102 AA+ 747,075
Family, Series F, 7.000%, 5/01/04
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 6.5%
425,000 Puerto Rico, Housing Finance Corporation, Single 9/00 at 102 AAA 446,297
Family, Mortgage Revenue, Portfolio 1, Series B,
Remarketed 9/27/90, 7.650%, 10/15/22
650,000 Virginia, State Housing Development Authority, 1/00 at 102 AA+ 673,134
Commonwealth Mortgage, Series B, Subseries B-4,
6.850%, 7/01/17
Virginia, State Housing Development Authority,
Commonwealth Mortgage, Series A:
3,000,000 7.100%, 1/01/17 1/02 at 102 AA+ 3,125,220
1,000,000 7.100%, 1/01/22 1/02 at 102 AA+ 1,040,870
4,000,000 7.150%, 1/01/33 1/02 at 102 AA+ 4,157,560
1,000,000 Virginia State Housing Development Authority, 7/05 at 102 AA+ 1,017,400
Commonwealth Mortgage, Series C, Subseries C-1,
6.300%, 7/01/25
2,000,000 Virginia State Housing Development Authority, 7/05 at 102 AA+ 2,018,580
Commonwealth Mortgage, Series C, Subseries C-3,
6.125%, 7/01/22
</TABLE>
____
13
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP VIRGINIA -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL -- 12.1%
$ 2,000,000 Covington-Alleghany County, Virginia, Industrial 9/04 at 102 A1 $ 2,172,200
Development Authority, Pollution Control, Revenue
Refunding, Westvaco Corporation Project,
6.650%, 9/01/18
1,110,000 Giles County, Virginia, Industrial Development 12/05 at 102 A+ 1,120,090
Authority, Revenue, Exempt Facility, Hoechst
Celanese Project, 5.950%, 12/01/25
2,000,000 Henrico County, Virginia, Industrial Development No Opt. Call A 1,958,660
Authority, Revenue, Solid Waste, Browning Ferris,
Series A, 5.450%, 1/01/14
3,545,000 Isle Wight County, Virginia, Industrial Development 4/04 at 102 A1 3,750,787
Authority, Solid Waste Disposal Facilities, Revenue,
Union Camp Corporation Project, 6.550%, 4/01/24
3,000,000 Isle Wight County, Virginia, Industrial Development 5/07 at 102 A- 3,036,570
Authority, Solid Waste Disposal Facilities, Revenue,
Union Camp Corporation Project, 6.100%, 5/01/27
1,500,000 James City County, Virginia, Industrial Development 4/07 at 101 A+ 1,523,145
Authority, Sewer and Solid Waste Disposal Facilities,
Revenue, Anheuser Busch Project, 6.000%, 4/01/32
Loudoun County, Virginia, Industrial Development
Authority, Air Cargo Facility, Revenue, Washington
Dulles Air Cargo:
300,000 6.625%, 1/01/00 No Opt. Call N/R 306,897
3,000,000 7.000%, 1/01/09 1/01 at 102 N/R 3,086,160
600,000 6.500%, 1/01/09 1/06 at 102 N/R 605,022
2,500,000 Mecklenburg County, Virginia, Industrial Development 5/01 at 102 A1 2,653,200
Authority, Revenue, Exempt Facility, Mecklenburg
Cogen, Series A, 7.350%, 5/01/08
1,900,000 Puerto Rico, Ports Authority, Revenue, Special Facilities, 6/06 at 102 BBB- 1,940,926
American Airlines, Series A, 6.250%, 6/01/26
1,000,000 Russell County, Virginia, Industrial Development 11/00 at 102 Baa1 1,089,670
Authority, Pollution Control, Revenue, Appalachian
Power Company Project, Series G, 7.700%, 11/01/07
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL APPROPRIATION OBLIGATIONS -- 11.7%
2,300,000 Big Stone Gap, Virginia, Redevelopment and Housing 9/05 at 102 AA 2,295,837
Authority, Correctional Facility, Lease Revenue,
Wallens Ridge Development Project, 5.500%, 9/01/15
</TABLE>
____
14
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL APPROPRIATION OBLIGATIONS - CONTINUED
$ 3,000,000 Brunswick County, Virginia, Industrial Development 7/06 at 102 AAA $ 2,962,140
Authority, Correctional Facility, Lease Revenue,
5.500%, 7/01/17
1,410,000 Fairfax County, Virginia, Redevelopment and Housing 6/02 at 102 N/R 1,477,017
Authority, Revenue, FCRHA Office Building, Series A,
7.500%, 6/15/18
5,000,000 Hampton Roads, Virginia, Regional Jail Authority, 7/06 at 102 AAA 4,892,950
Regional Jail Facility, Revenue, Series A,
5.500%, 7/01/24
2,000,000 Henrico County, Virginia, Industrial Development 8/05 at 102 AA 2,252,540
Authority, Public Facility, Lease Revenue, Henrico
County Regional Jail Project, 7.000%, 8/01/13
750,000 Loudoun County, Virginia, Certificates of Participation, No Opt. Call AAA 882,975
Series E, 7.200%, 10/01/10
2,500,000 Prince William County, Virginia, Industrial Development
Authority, Lease Revenue, ATCC Project:
2,000,000 6.000%, 2/01/14 2/06 at 102 A2 2,038,000
1,000,000 6.000%, 2/01/18 2/06 at 102 A2 1,018,840
2,500,000 Prince William County, Virginia, Park Authority, 10/04 at 102 A- 2,702,175
Revenue, 6.875%, 10/15/16
2,000,000 Virginia, State Transportation Board, Transportation 5/03 at 102 AA 1,966,980
Contract, Revenue, U.S. Route 58 Corridor
Development, 5.500%, 5/15/18
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/OTHER - 1.7%
1,000,000 Virginia, State Public School Authority, Series A, 8/04 at 102 AA 1,055,910
6.200%, 8/01/13
Virginia State Public School Authority, Series B:
1,000,000 5.750%, 8/01/15 8/05 at 102 AA 1,019,580
1,210,000 5.625%, 8/01/16 8/05 at 102 AA 1,219,220
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/TRANSPORTATION - 4.6%
2,250,000 Capital Region Airport Commission, Virginia, Airport 7/05 at 102 AAA 2,227,928
Revenue, Richmond International Airport Projects,
Series A, 5.625%, 7/01/25
750,000 Charlottesville-Albemarle, Virginia, Airport Authority, 12/05 at 102 BBB 737,783
Airport Revenue Refunding, 6.125%, 12/01/13
</TABLE>
____
15
<PAGE>
PORTFOLIO OF INVESTMENT
NUVEEN FLAGSHIP VIRGINIA -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OPTIONAL CALL RATINGS** MARKET
AMOUNT PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL REVENUE/TRANSPORTATION -- CONTINUED
Metropolitan Washington, D.C. Apartments Authority
Virginia General Airport Revenue, Series A:
$1,500,000 6.625%, 10/01/19 10/02 at 102 AAA $1,589,010
1,000,000 5.750%, 10/01/20 10/04 at 102 AAA 999,270
1,500,000 6.250%, 10/01/21 10/02 at 102 AAA 1,547,400
1,500,000 Peninsula Airport Commission, Virginia, Revenue, 7/01 at 102 Aa 1,636,530
Airport Improvement, 7.300%, 7/15/21
- ------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/UTILITY -- 1.7%
2,110,000 Halifax County, Virginia, Industrial Development 12/02 at 102 A+ 2,230,987
Authority, Exempt Facility, Revenue, Old Dominion
Electric Coop Project, 6.500%, 12/01/12
1,000,000 Puerto Rico, Electric Power Authority, Power Revenue 7/02 at 101 1/2 BBB+ 1,044,360
(Formerly Puerto Rico Commonwealth Water
Resource Authority Power), Series R,
6.250%, 7/01/17
- ------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/WATER AND SEWER -- 11.3%
1,000,000 Blacksburg, Virginia, Polytechnic Institute, Sanitation 11/02 at 102 A 1,027,070
Authority, Sewer System Revenue, 6.250%, 11/01/12
Fairfax County, Virginia, Water Authority, Water
Revenue Refunding:
1,000,000 6.000%, 4/01/22 4/07 at 102 Aa 1,035,500
3,250,000 5.750%, 4/01/29 4/02 at 100 Aa 3,268,070
1,000,000 Frederick-Winchester Service Authority, Virginia, 10/03 at 102 AAA 1,013,450
Regional Sewer System, Revenue Refunding,
5.750%, 10/01/15
2,500,000 Henrico County, Virginia, Water and Sewer, Revenue 5/02 at 100 AA- 2,603,500
Refunding, 6.250%, 5/01/13
1,000,000 Loudoun County, Virginia, Sanitation Authority, Water 1/03 at 102 AAA 1,050,060
and Sewer, Revenue Refunding, 6.250%, 1/01/16
1,000,000 Prince William County, Virginia, Service Authority, 7/01 at 100 AAA 1,014,920
Water and Sewer System, Revenue, 6.000%, 7/01/29
4,000,000 Upper Occoquan Sewer Authority, Virginia, Regional 1/04 at 102 AAA 3,628,160
Sewer, Revenue Refunding, 5.000%, 7/01/21
2,215,000 Upper Occoquan Sewer Authority, Virginia, Regional 7/16 at 100 AAA 2,090,739
Sewer, Revenue, Series A, 5.150%, 7/01/20
1,000,000 Virginia, State Resource Authority, Sewer System, 10/05 at 102 AA 1,015,680
Revenue, Hopewell Regional Wastewater Facility,
Series A, 6.000%, 10/01/25
</TABLE>
_____
16
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OPTIONAL CALL RATINGS** MARKET
AMOUNT PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL REVENUE/WATER AND SEWER - CONTINUED
$1,000,000 Virginia, State Resource Authority, Water and Sewer 10/05 at 102 AA $ 975,650
System, Revenue, Series A, 5.600%, 10/01/25
500,000 Virginia, State Resource Authority, Water and Sewer 10/98 at 103 AA 529,815
System, Revenue, Lot 7, Rapidan Service Authority,
7.125%, 10/01/16
Virginia, State Resource Authority, Water System,
Revenue Refunding, Series A:
800,000 6.450%, 4/01/13 4/02 at 102 AA 838,800
1,500,000 6.125%, 4/01/19 4/02 at 100 AA 1,511,685
- ------------------------------------------------------------------------------------------------------------------------------
NON-STATE GENERAL OBLIGATIONS - 3.3%
1,000,000 Abingdon, Virginia, Capital Improvement, 8/02 at 102 A 1,048,980
6.250%, 8/01/12
730,000 Danville, Virginia, 6.500%, 5/01/12 5/02 at 102 A3 770,771
1,500,000 Portsmouth, Virginia, Refunding, Public Utility, 8/03 at 102 AA- 1,478,145
5.500%, 8/01/19
3,005,000 Richmond, Virginia, Public Improvement, Series B, 7/03 at 102 AA 2,921,641
5.500%, 7/15/23
- ------------------------------------------------------------------------------------------------------------------------------
PRE-REFUNDED - 3.3%***
750,000 Chesapeake Bay, Bridge and Tunnel Commission, 7/01 at 102 AAA 813,398
Virginia District, Revenue Refunding, General
Resolution, 6.375%, 7/01/22
1,000,000 Covington-Alleghany County, Virginia, Industrial 4/02 at 102 A- 1,097,620
Development Authority, Hospital Facility, Revenue,
Alleghany Regional Hospital, 6.625%, 4/01/12
500,000 Fairfax County, Virginia, Redevelopment and Housing 11/99 at 102 N/R 544,000
Authority, Revenue, Vinson Pavilion, Series A,
7.500%, 11/01/19
250,000 Martinsville, Virginia, Industrial Development Authority, 1/01 at 100 A2 269,573
Hospital Facility, Revenue, Martinsville & Henry
Memorial Hospital, 7.000%, 1/01/11
800,000 Puerto Rico Commonwealth, Highway and 7/02 at 101 1/2 AAA 885,856
Transportation Authority, Highway Revenue,
Series T, 6.625%, 7/01/18
1,000,000 Virginia College Building Authority, Educational 4/99 at 102 N/R 1,078,050
Facilities, Revenue, Hampton University Project,
Series A, 7.750%, 4/01/14
</TABLE>
____
17
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP VIRGINIA - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRE-REFUNDED - CONTINUED
Virginia, State Resource Authority, Water and Sewer
System, Revenue, Pooled Loan Program, Series A:
$ 105,000 8.125%, 11/01/16 11/97 at 102 AA $ 108,974
110,000 8.125%, 11/01/16 11/98 at 101 AA 117,047
120,000 8.125%, 11/01/16 11/99 at 100 AA 130,356
130,000 8.125%, 11/01/16 11/00 at 100 AA 144,830
140,000 8.125%, 11/01/16 11/01 at 100 AA 159,537
305,000 7.600%, 11/01/16 5/98 at 102 AA 321,223
275,000 7.600%, 11/01/16 6/98 at 102 AA 289,627
410,000 7.650%, 11/01/16 11/98 at 101 1/2 AA 446,720
- ------------------------------------------------------------------------------------------------------------------------------
RESOURCE RECOVERY - 2.4%
1,500,000 Southeastern Public Service Authority, Virginia, 7/03 at 102 A- 1,511,835
Senior Revenue, Regional Solid Waste System,
6.000%, 7/01/13
1,000,000 Virginia, State Resource Authority, Solid Waste 4/05 at 102 AA 1,075,910
Disposal System, Revenue, Series B,
6.750%, 11/01/12
1,960,000 Virginia, State Resource Authority, Solid Waste 4/05 at 102 AA 1,923,818
Disposal System, Revenue Refunding, Series A,
5.500%, 4/01/15
- ------------------------------------------------------------------------------------------------------------------------------
STATE/TERRITORIAL GENERAL OBLIGATIONS - 3.8%
1,500,000 Puerto Rico Commonwealth, Public Improvement, 7/07 at 101 1/2 A 1,431,030
5.375%, 7/01/25
Puerto Rico Commonwealth:
2,575,000 6.450%, 7/01/17 7/04 at 102 A 2,747,010
2,500,000 6.500%, 7/01/23 7/04 at 101 1/2 A 2,663,625
500,000 5.400%, 7/01/25 7/06 at 101 1/2 A 476,735
- ------------------------------------------------------------------------------------------------------------------------------
$ 184,240,000 Total Investments - (cost $179,998,986) - 98.8% 189,098,691
- ------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 2,237,190
---------------------------------------------------------------------------------------------------------
Net Assets - 100% $191,335,881
=========================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent auditors): 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
auditors): Using the higher of Standard & Poor's or Moody's
rating.
*** Pre-refunded securities are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government
agency securities, which ensures the timely payment of
principal and interest. Pre-refunded securities are
normally considered to be equivalent to AAA rated
securities.
N/R - Investment is not rated.
____
18
<PAGE>
STATEMENT OF NET ASSETS Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
MAY 31, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
VIRGINIA
- --------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $189,098,691
Receivables:
Interest 3,363,404
Shares sold 339,075
Other assets 6,009
- --------------------------------------------------------------------------------
Total assets 192,807,179
- --------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 172,227
Payable for Shares redeemed 205,981
Accrued expenses:
Management fees (note 6) 33,667
12b-1 distribution and service fees (notes 1 and 6) 54,989
Other 148,163
Dividends payable 856,271
- --------------------------------------------------------------------------------
Total liabilities 1,471,298
- --------------------------------------------------------------------------------
Net assets (note 7) $191,335,881
================================================================================
CLASS A SHARES (NOTE 1)
Net assets $122,252,479
Shares outstanding 11,471,371
Net asset value and redemption price per share $ 10.66
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.13
================================================================================
CLASS B SHARES (NOTE 1)
Net assets $ 381,310
Shares outstanding 35,779
Net asset value, offering and redemption price per share $ 10.66
================================================================================
CLASS C SHARES (NOTE 1)
Net assets $ 11,700,038
Shares outstanding 1,098,486
Net asset value, offering and redemption price per share $ 10.65
================================================================================
Class R Shares (note 1)
Net assets $ 57,002,054
Shares outstanding 5,348,758
Net asset value, offering and redemption price per share $ 10.66
================================================================================
</TABLE>
See accompanying notes to financial statements.
____
19
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED May 31, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
VIRGINIA*
- --------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 9,291,914
- --------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 779,330
12b-1 service fees - Class A (notes 1 and 6) 397,031
12b-1 distribution and service fees - Class B (notes 1 and 6) 576
12b-1 distribution and service fees - Class C (notes 1 and 6) 106,304
Shareholders' servicing agent fees and expenses 115,841
Custodian's fees and expenses 54,203
Trustees' fees and expenses (note 6) 3,787
Professional fees 15,303
Shareholders' reports - printing and mailing expenses 25,382
Federal and state registration fees 6,006
Other expenses 5,801
- --------------------------------------------------------------------------------------
Total expenses before reimbursement 1,509,564
Expense reimbursement (note 6) (374,624)
- --------------------------------------------------------------------------------------
Net expenses 1,134,940
- --------------------------------------------------------------------------------------
Net investment income 8,156,974
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 772,114
Net change in unrealized appreciation or depreciation of investment 2,690,836
- --------------------------------------------------------------------------------------
Net gain from investments 3,462,950
- --------------------------------------------------------------------------------------
Net increase in net assets from operations $ 11,619,924
======================================================================================
</TABLE>
* Information represents eight months of Flagship Virginia and four months of
Nuveen Flagship Virginia (see note 1 of the Notes to Financial Statements).
See accompanying notes to financial statements.
____
20
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLAGSHIP
VIRGINIA* VIRGINIA
---------------------------------------------
YEAR ENDED 1/31/97 YEAR ENDED 1/31/97
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 8,156,974 $ 6,709,724
Net realized gain from investment transactions
(notes 1 and 4) 772,114 1,352,908
Net change in unrealized appreciation or depreciation
of investments 2,690,836 (3,368,259)
- --------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 11,619,924 4,694,373
- --------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (6,499,935) (6,371,930)
Class B (2,778) N/A
Class C (588,320) (393,250)
Class R (1,059,930) N/A
- --------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (8,150,963) (6,765,180)
- --------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from shares issued in the reorganization 67,765,255 --
of Nuveen Virginia (note 1)
Net proceeds from shares issued as a capital contribution 33,360 --
Net proceeds from sale of shares 14,267,420 19,415,807
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 3,941,869 3,681,025
- --------------------------------------------------------------------------------------------------------
86,007,904 23,096,832
- --------------------------------------------------------------------------------------------------------
Cost of shares redeemed (26,796,317) (11,550,452)
- --------------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 59,211,587 11,546,380
- --------------------------------------------------------------------------------------------------------
Net increase in net assets 62,680,548 9,475,573
Net assets at the beginning of year 128,655,333 119,179,760
- --------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 191,335,881 $ 128,655,333
========================================================================================================
Balance of undistributed net investment income at end of year $ 6,011 $ --
========================================================================================================
</TABLE>
* Information represents eight months of Flagship Virginia and four months of
Nuveen Flagship Virginia (see note 1 of the Notes to Financial Statements).
N/A - Flagship Virginia was not authorized to issue Class B or Class R Shares.
See accompanying notes to financial statements.
____
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Virginia Municipal Bond Fund (the "Fund"), among
others. The Trust was organized as a Massachusetts business trust on July 1,
1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and Nuveen
Advisory Corp., respectively, the distributor ("Distributor") and investment
advisor ("Adviser") of the Fund, entered into an agreement under which Nuveen
acquired Flagship Resources Inc. and after the close of business on January 31,
1997, consolidated their respective mutual fund businesses. This agreement was
approved at a meeting by the shareholders of the Flagship Funds in December
1996.
After the close of business on January 31, 1997, Flagship Virginia Double Tax
Exempt Fund ("Flagship Virginia") and Nuveen Virginia Tax-Free Value Fund
("Nuveen Virginia") reorganized into Nuveen Flagship Virginia Municipal Bond
Fund ("Nuveen Flagship Virginia"). Prior to the reorganization, Flagship
Virginia was a sub-trust of the Flagship Tax Exempt Funds Trust while Nuveen
Virginia was a series of the Nuveen Multistate Tax Free Trust. Nuveen Virginia
had a fiscal year end of January 31 prior to being reorganized into Nuveen
Flagship Virginia which has retained the fiscal year end of Flagship Virginia.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved 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. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
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 have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1997, the Fund had no such purchase commitments.
____
22
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
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 on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryovers. Prior to the
reorganization, tax-exempt net investment income for Flagship Virginia was
declared as a dividend daily and payment was made on the last business day of
each month.
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 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 net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Virginia state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. All
income dividends paid during the fiscal year ended May 31, 1997, have been
designated Exempt Interest Dividends. Net realized capital gains and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
Effective February 1, 1997, the Fund offers Class A, B, C and R Shares. Class A
Shares are sold with a sales charge and incur an annual 12b-1 service fee. Class
B Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class B Shares agrees to pay a contingent
deferred sales charge ("CDSC") of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class 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 CDSC of 1% if Class C Shares are redeemed within 18 months of purchase.
Class R Shares are not subject to any sales charge or
____
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
12b-1 distribution or service fees. Class R Shares are available for purchases
of over $1 million and in other limited circumstances.
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the fiscal year ended May 31, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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.
____
24
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLAGSHIP
VIRGINIA* VIRGINIA
---------------------------------------------------------
YEAR ENDED 5/31/97 YEAR ENDED 5/31/96
--------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization
on Nuveen Virginia:
Class A 873,399 $ 9,273,783 -- $ --
Class B -- -- N/A N/A
Class C 109,201 1,158,978 -- --
Class R 5,399,536 57,332,494 N/A N/A
Shares issued as a capital
contribution:
Class A 785 8,340 -- --
Class B 785 8,340 N/A N/A
Class C 786 8,340 -- --
Class R 785 8,340 N/A N/A
Shares sold:
Class A 938,620 9,896,915 1,315,390 13,890,308
Class B 36,862 391,987 N/A N/A
Class C 307,161 3,231,156 521,385 5,525,499
Class R 70,304 747,362 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 304,589 3,213,145 328,665 3,474,566
Class B 9 98 N/A N/A
Class C 23,878 251,837 19,541 206,459
Class R 45,124 476,789 N/A N/A
- -----------------------------------------------------------------------------------------------
8,111,824 86,007,904 2,184,981 23,096,832
- -----------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,966,406) (20,767,054) (989,759) (10,468,801)
Class B (1,877) (19,915) N/A N/A
Class C (399,175) (4,241,028) (103,572) (1,081,651)
Class R (166,991) (1,768,320) N/A N/A
- -----------------------------------------------------------------------------------------------
(2,534,449) (26,796,317) (1,093,331) (11,550,452)
- -----------------------------------------------------------------------------------------------
Net increase 5,577,375 $ 59,211,587 1,091,650 $ 11,546,380
===============================================================================================
</TABLE>
* Information represents eight months of Flagship Virginia and four months of
Nuveen Flagship Virginia (see note 1).
N/A - Flagship Virginia was not authorized to issue Class B or Class R Shares.
____
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. DISTRIBUTIONS TO SHAREHOLDERS
On June 9, 1997, the Fund declared a dividend distribution from its tax-exempt
net investment income which was paid on July 1, 1997, to shareholders of record
on June 9, 1997, as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
VIRGINIA
- --------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0475
Class B .0410
Class C .0425
Class R .0495
- --------------------------------------------------------------------------------
</TABLE>
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
VIRGINIA*
- --------------------------------------------------------------------------------
<S> <C>
PURCHASES
Investments in municipal securities $33,217,400
Investments in municipal securities in the reorganization
of Nuveen Virginia 63,784,516
Temporary municipal investments 900,000
SALES
Investments in municipal securities 41,255,047
Temporary municipal investments 900,000
================================================================================
</TABLE>
* Information represents eight months of Flagship Virginia and four months of
Nuveen Flagship Virginia (see note 1).
At May 31, 1997, the identified cost of investments owned for federal income tax
purposes may differ from the cost used for financial reporting purposes.
At May 31, 1997, the Fund had unused capital loss carryfowards of $409,795
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, $257,096 of the carryover will expire in the year
2002 and $152,699 will expire in the year 2004.
5. UNREALIZED APPRECIATION (DEPRECIATION)
At May 31, 1997, net unrealized appreciation aggregated $9,099,705 of which
$9,178,732 related to appreciated securities and $79,027 related to depreciated
securities.
____
26
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE 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 net assets over $2 billion .4750 of 1
- --------------------------------------------------------------------------------
</TABLE>
Prior to the reorganization (see note 1) Flagship Virginia paid a management fee
of .5 of 1%. 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
(Flagship Funds Inc., a wholly-owned subsidiary of Flagship Resources Inc.)
collected gross sales charges on purchases of Class A Shares of approximately
$279,300 of which approximately $241,500 were paid out as concessions to
authorized dealers. The Distributor and its predecessor also received 12b-1
service fees on Class A Shares, approximately one-half of which was paid to
compensate authorized dealers for providing services relating to their
investments.
During the fiscal year ended May 31, 1997, the Distributor and its predecessor
compensated authorized dealers directly with approximately $44,200 in commission
advances at the time of purchase. To compensate for commissions advanced to
authorized dealers, all 12b-1 service fees collected on Class B Shares during
the first year following a purchase, all 12b-1 distribution fees collected on
Class B Shares, and all 12b-1 service and distribution fees on Class C Shares
during the first year following a purchase are retained by the Distributor. The
remaining 12b-1 fee charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor and its predecessor also collected and retained approximately
$8,200 of CDSC on share redemptions during the fiscal year ended May 31, 1997.
____
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. COMPOSITION OF NET ASSETS
At May 31, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
VIRGINIA
- --------------------------------------------------------------------------------
<S> <C>
Capital paid-in $ 182,662,390
Balance of undistributed net investment income 6,011
Accumulated net realized gain (loss) from investment transactions (432,225)
Net unrealized appreciation of investments 9,099,705
- --------------------------------------------------------------------------------
Net assets $ 191,335,881
================================================================================
</TABLE>
____
28
<PAGE>
FINANCIAL HIGHLIGHTS
____
29
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
CLASS (INCEPTION DATE) OPERATING PERFORMANCE LESS DISTRIBUTIONS
------------------------ ----------------------
NET
NUVEEN FLAGSHIP VIRGINIA++ NET REALIZED AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME(B) INVESTMENTS INCOME GAINS PERIOD VALUE(A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (3/86)
1997 $10.40 $.58 $ .25 $(.57) $ -- $10.66 8.20%
1996 10.56 .57 (.15) (.58) -- 10.40 4.03
1995 10.36 .59 .20 (.59) -- 10.56 7.99
1994 10.82 .60 (.31) (.60) (.15) 10.36 2.62
1993 10.24 .62 .62 (.62) (.04) 10.82 12.41
1992 9.97 .63 .27 (.63) -- 10.24 9.37
1991 9.70 .63 .28 (.64) -- 9.97 9.72
1990 9.76 .64 (.06) (.64) -- 9.70 6.14
1989 9.29 .64 .46 (.63) -- 9.76 12.25
1988 9.09 .64 .19 (.63) -- 9.29 9.73
CLASS B (2/97)
1997(C) 10.62 .16 .04 (.16) -- 10.66 1.94
CLASS C (10/93)
1997 10.39 .52 .26 (.52) -- 10.65 7.61
1996 10.56 .51 (.16) (.52) -- 10.39 3.37
1995 10.36 .53 .20 (.53) -- 10.56 7.40
1994(C) 11.24 .34 (.78) (.34) (.10) 10.36 (7.13)+
CLASS R (2/97)
1997(C) 10.62 .20 .04 (.20) -- 10.66 2.26
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Virginia.
(a) Total returns are calculated on net asset value without any
sales charge.
(b) After waiver of certain management fees a reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
____
30
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
RATIO RATIO
OF NET OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
TO AVERAGE AVERAGE TO AVERAGE AVERAGE
NET ASSETS NET ASSETS NET ASSETS NET ASSETS
NET ASSETS BEFORE BEFORE AFTER AFTER PORTFOLIO
END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
(IN THOUSANDS) MENT MENT MENT(B) MENT(B) RATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$122,252 1.00% 5.19% .74% 5.45% 23%
117,677 1.06 5.18 .83 5.41 17
112,643 1.10 5.50 .79 5.81 50
107,502 1.06 5.11 .64 5.53 17
96,105 1.07 5.43 .68 5.82 30
64,628 1.14 5.89 .75 6.28 27
48,062 1.18 6.21 .91 6.48 22
41,596 1.18 6.27 .91 6.54 35
37,151 1.25 6.41 .97 6.69 18
31,748 1.18 6.65 .88 6.95 75
381 1.66+ 4.49+ 1.47+ 4.68+ 23
11,700 1.55 4.63 1.29 4.89 23
10,978 1.60 4.62 1.38 4.84 17
6,537 1.65 4.93 1.34 5.24 50
4,759 1.79+ 4.20+ 1.14+ 4.85+ 17
57,002 .71+ 5.50+ .52+ 5.69+ 23
- ---------------------------------------------------------------------------------------------
</TABLE>
____
31
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND:
We have audited the accompanying statement of net assets of Nuveen Flagship
Virginia Municipal Bond Fund, including the portfolio of investments, as of May
31, 1997, the related statement of operations for the period then ended and the
statement 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, 1997, by correspondence with the Fund's custodian. 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 Nuveen Flagship
Virginia Municipal Bond Fund at May 31, 1997, 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 11, 1997
____
32
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP VIRGINIA
<TABLE>
<CAPTION>
A SHARES C SHARES
- -------------------------------------------------------------------------------
DIRECTORS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Bremner For 9,508,843 1,081,603
Withhold 163,653 2,213
------------------------------------------------------
Total 9,672,496 1,083,816
- -------------------------------------------------------------------------------
Brown For 9,509,171 1,081,603
Withhold 163,325 2,213
------------------------------------------------------
Total 9,672,496 1,083,816
- -------------------------------------------------------------------------------
Dean For 9,502,423 1,081,603
Withhold 170,073 2,213
------------------------------------------------------
Total 9,672,496 1,083,816
- -------------------------------------------------------------------------------
Impellizzeri For 9,495,806 1,081,603
Withhold 176,690 2,213
------------------------------------------------------
Total 9,672,496 1,083,816
- -------------------------------------------------------------------------------
Rosenheim For 9,509,171 1,081,603
Withhold 163,325 2,213
------------------------------------------------------
Total 9,672,496 1,083,816
- -------------------------------------------------------------------------------
Sawers For 9,509,171 1,081,603
Withhold 163,325 2,213
------------------------------------------------------
Total 9,672,496 1,083,816
- -------------------------------------------------------------------------------
Schneider For 9,509,171 1,081,603
Withhold 163,325 2,213
------------------------------------------------------
Total 9,672,496 1,083,816
- -------------------------------------------------------------------------------
Schwertfeger For 9,502,751 1,081,603
Withhold 169,745 2,213
- -------------------------------------------------------------------------------
Total 9,672,496 1,083,816
------------------------------------------------------
</TABLE>
____
33
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP VIRGINIA -
CONTINUED
<TABLE>
<CAPTION>
A SHARES C SHARES
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
ADVISORY AGREEMENT For 8,703,496 955,492
Against 343,747 20,099
Abstain 170,228 4,700
-----------------------------------------------------
Total 9,217,471 980,291
- ------------------------------------------------------------------------------
Broker Non Votes 455,025 103,525
- ------------------------------------------------------------------------------
12B-1 FEES For 8,443,492 952,983
Against 440,975 22,607
Abstain 333,005 4,700
-----------------------------------------------------
Total 9,217,472 980,290
- ------------------------------------------------------------------------------
Broker Non Votes 455,024 103,526
- ------------------------------------------------------------------------------
REORGANIZATION For 5,855,643 566,105
Against 269,610 8,954
Abstain 138,703 1,960
-----------------------------------------------------
Total 6,263,956 577,019
- ------------------------------------------------------------------------------
Broker Non Votes 3,408,540 506,797
-----------------------------------------------------
</TABLE>
____
34
<PAGE>
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
MUNICIPAL BOND FUNDS
NATIONAL FUNDS
Long-Term
Insured
Intermediate-Term
Limited-Term
STATE FUNDS
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
SHAREHOLDER INFORMATION
To purchase additional shares of your Nuveen Municipal Bond Fund, contact your
financial adviser. If you would like to add to your current investment on a
monthly or semi-annual basis, you can sign up for Nuveen's systematic investing
program, which allows you to invest a fixed dollar amount every month
automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you gain the added growth potential of
long-term compounding.
For more information on any of these service options call your adviser, or
Nuveen at (800) 621-7227.
____
35
<PAGE>
FUND INFORMATION
BOARD OF DIRECTORS
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
TRANSFER AGENT,
SHAREHOLDER SERVICES AND
DIVIDEND DISBURSING AGENT
Boston Financial
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
LEGAL COUNSEL
Fried, Frank, Harris, Shriver
& Jacobson
Washington, D.C.
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Dayton, Ohio
____
36
<PAGE>
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
[LETTERHEAD OF NUVEEN APPEARS HERE]
SERVING INVESTORS
FOR GENERATIONS
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach - purchasing securities of strong companies and
communities that represent good long-term value - is the cornerstone of Nuveen's
investment philosophy. It is a careful, long-term strategy that offers the
potential for attractive returns with moderated risk. Successful value investing
begins with in-depth research and a discerning eye for marketplace opportunity.
Nuveen's team of investment professionals is backed by the discipline, resources
and expertise of almost a century of investment experience, including one of the
most recognized research departments in the industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
<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 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. Filed as Exhibit 1(a) to
Registrant's Registration Statement on Form N-1A (File No.
333-16617) and incorporated herein by reference thereto.
1(b). Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest dated October 11, 1996. Filed
as Exhibit 1(b) to Registrant's Registration Statement on Form
N-1A (File No. 333-16617) and incorporated herein by reference
thereto.
1(c). Certificate for the Establishment and Designation of Classes
dated July 10, 1996. Filed as Exhibit 1(c) to Registrant's
Registration Statement on Form N-1A (File No. 333-16617) and
incorporated herein by reference thereto.
1(d). Incumbency Certificate.
2. By-Laws of Registrant. Filed as Exhibit 2 to Registrant's Reg-
istration Statement on Form N-1A (File No. 333-16617) and in-
corporated herein by reference thereto.
3. Not applicable.
4. Specimen certificates of Shares of each Fund. Filed as Exhibit
4 to Registrant's Registration Statement on Form N-1A (File
No. 333-16617) and incorporated herein by reference thereto.
5. Investment Management Agreement between Registrant and Nuveen
Advisory Corp.
5(a). Renewal of Investment Management Agreement dated May 20, 1997.
6. Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated.
7. Not applicable.
8. Custodian Agreement between Registrant and Chase Manhattan
Bank.
9(a). Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company.
9(b). 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, 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. Filed as Exhibit 15 to Registrant's Registration State-
ment on Form N-1A (File No. 333-16617) and incorporated herein
by reference thereto.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
18. Multi-Class Plan Adopted Pursuant to Rule 18f-3. Filed as Ex-
hibit 18 to Registrant's Registration Statement on Form N-1A
(File No. 333-16617) and incorporated herein by reference
thereto.
99(a). Original Powers of Attorney for the Trustees authorizing,
among others, Gifford R. Zimmerman and Larry W. Martin to exe-
cute 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.
99(c). Code of Ethics and Reporting Requirements.
</TABLE>
C-1
<PAGE>
ITEM 25: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26: NUMBER OF HOLDERS OF SECURITIES
At August 21, 1997:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SERIES RECORD HOLDERS
--------------- --------------
Nuveen Flagship Arizona Municipal Bond Fund
<S> <C>
Class A Shares.......................................... 1,865
Class B Shares.......................................... 12
Class C Shares.......................................... 92
Class R Shares.......................................... 733
Nuveen Flagship Colorado Municipal Bond Fund
Class A Shares.......................................... 980
Class B Shares.......................................... 14
Class C Shares.......................................... 9
Class R Shares.......................................... 11
Nuveen Flagship Florida Municipal Bond Fund
Class A Shares.......................................... 3,997
Class B Shares.......................................... 35
Class C Shares.......................................... 56
Class R Shares.......................................... 1,957
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Class A Shares.......................................... 110
Class C Shares.......................................... 33
Class R Shares.......................................... 9
Nuveen Maryland Municipal Bond Fund
Class A Shares.......................................... 709
Class B Shares.......................................... 15
Class C Shares.......................................... 75
Class R Shares.......................................... 1,705
Nuveen Flagship New Mexico Municipal Bond Fund
Class A Shares.......................................... 1,110
Class B Shares.......................................... 24
Class C Shares.......................................... 15
Class R Shares.......................................... 10
Nuveen Flagship Pennsylvania Municipal Bond Fund
Class A Shares.......................................... 1,537
Class B Shares.......................................... 20
Class C Shares.......................................... 149
Class R Shares.......................................... 2,824
Nuveen Flagship Virginia Municipal Bond Fund
Class A Shares.......................................... 2,701
Class B Shares.......................................... 22
Class C Shares.......................................... 195
Class R Shares.......................................... 2,626
</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
Multistate Trust III, Nuveen Flagship Multistate Trust IV, 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-Free
Unit Trust and the Nuveen Unit Trust, registered unit investment trusts. Nuveen
has also served or is serving as co-managing underwriter to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen
Municipal Market Opportunity Fund, Inc., Nuveen California Municipal Market
Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen
California Investment Quality Municipal Fund, Inc., Nuveen New York Investment
Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen 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, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select
Tax-Free Income Portfolio, Nuveen Select Tax-Free Income Portfolio 2, Nuveen
Insured California Select Tax-Free Income Portfolio, Nuveen Insured New York
Select Tax-Free Income Portfolio 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
John P. Amboian Executive Vice President None
333 West Wacker Drive and Chief Financial Officer
Chicago, IL 60606
Bruce P. Bedford Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
Richard P. Davis Vice President None
One South Main Street
Dayton, OH 45402
</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, 4 New York Plaza, 770 Broadway, New York, New York
10004 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 5TH DAY OF
SEPTEMBER, 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>
/s/ O. Walter Renfftlen
-------------------------------
O. Walter Renfftlen Vice President and September 5, 1997
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board )
and Trustee (Principal )
Executive Officer) )
)
Anthony T. Dean President and Trustee )
)
Robert P. Bremner Trustee )
) /s/ Gifford R. Zimmerman
Lawrence H. Brown Trustee } By____________________________
) Gifford R. Zimmerman
Anne E. Impellizzeri Trustee ) Attorney-in-Fact
)
Peter R. Sawers Trustee ) September 5, 1997
)
William J. Schneider Trustee )
)
Judith M. Stockdale Trustee )
</TABLE>
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, GIFFORD R. ZIMMERMAN
AND LARRY W. MARTIN 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(d). Incumbency Certificate.
5. Investment Management Agreement between Registrant
and Nuveen Advisory Corp.
5(a). Renewal of Investment Management Agreement dated May
20, 1997.
6. Distribution Agreement between Registrant and John
Nuveen & Co. Incorporated.
8. Custodian Agreement between Registrant and Chase Man-
hattan Bank.
9(a). Transfer Agency and Service Agreement between Regis-
trant and State Street Bank and Trust
Company.
9(b). 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.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
99(a). Original Powers of Attorney for the Trustees autho-
rizing, among others, Gifford R. Zimmerman and Larry
W. Martin 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.
99(c). Code of Ethics and Reporting Requirements.
</TABLE>
<PAGE>
EXHIBIT 1(d)
INCUMBENCY CERTIFICATE
NUVEEN FLAGSHIP MULTISTATE TRUST I
On May 20, 1997, the Board of Trustees of the above-named Massachusetts business
trust adopted resolutions that increased the size of the Board to nine (9)
members effective July 1, 1997, and appointed the following individual as a
trustee to fill the newly created vacancy:
Judith M. Stockdale
Gaylord and Dorothy Donnelley Foundation
35 East Wacker Drive
Suite 2600
Chicago, Illinois 60601
Mrs. Margaret K. Rosenheim, a trustee of the Fund since its inception, will be
retiring from the Board of Trustees effective July 30, 1997 and, as of that
date, eight (8) trustees shall constitute the Fund's full Board of Trustees.
Effective July 30, 1997, the following individuals shall constitute all of the
Trustees of the Fund:
Timothy R. Schwertfeger
333 West Wacker Drive
Chicago, Illinois 60606
Anthony T. Dean
333 West Wacker Drive
Chicago, Illinois 60606
Peter R. Sawers
22 The Landmark
Northfield, Illinois 60093
Lawrence H. Brown
201 Michigan Avenue
Highwood, Illinois 60040
Anne E. Impellizzeri
3 West 29th Street
New York, New York 10001
<PAGE>
Robert P. Bremner
3725 Huntington Street
Washington, D.C. 20015
William J. Schneider
Senior Partner
Miller-Valentine Group
P.O. Box 744
Dayton, Ohio 45401
Judith M. Stockdale
Gaylord and Dorothy Donnelley Foundation
35 East Wacker Drive
Suite 2600
Chicago, Illinois 60601
NUVEEN FLAGSHIP MULTISTATE TRUST I
/s/ Gifford R. Zimmerman
-------------------------------
By: Gifford R. Zimmerman
Vice President
and Assistant Secretary
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
In accordance with Article V, Section 2 of the Declaration of Trust of
Nuveen Flagship Municipal Trust (the "Trust"), effective January 1, 1997, the
size of the Trust's Board of Trustees has been changed to eight (8) in number,
and the following persons constitute all of the Trustees of the Trust:
Robert P. Bremner
3725 Huntington Street, N.W.
Washington, D.C. 20015
Lawrence H. Brown
201 Michigan Avenue
Highwood, Illinois 60040
Anthony T. Dean
333 West Wacker Dr.
Chicago, Illinois 60606
Margaret K. Rosenheim
969 East 60th Street
Chicago, Illinois 60637
Peter R. Sawers
22 The Landmark
Northfield, Illinois 60093
Anne E. Impellizzeri
3 West 29th Street
New York, New York 10001
Timothy R. Schwertfeger
333 West Wacker Drive
Chicago, Illinois 60606
William J. Schneider
4000 Miller-Valentine Court
P.O. Box 744
Dayton, Ohio 45401
NUVEEN FLAGSHIP MULTISTATE TRUST I
/s/ Gifford R. Zimmerman
-------------------------------
By: Gifford R. Zimmerman
Vice President and Assistant
Secretary
<PAGE>
EXHIBIT 5
INVESTMENT MANAGEMENT AGREEMENT
-------------------------------
AGREEMENT made as of the 1st day of February, 1997, by and between NUVEEN
FLAGSHIP MULTISTATE TRUST I, 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 1940 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 of 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 1, 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
---- ----------
.5000% For the first $125 million
.4875% For the next $125 million
.4750% For the next $250 million
.4625% For the next $500 million
.4500% For the next $1 billion
.4250% 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.
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 1940.
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: /s/ Gifford R. Zimmerman
---------------------------
Vice President
Attest: /s/ Karen L. Healy
---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ J. Thomas Futrell
---------------------------
Vice President
Attest: /s/ Larry Martin
---------------------------
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
<PAGE>
EXHIBIT 5(a)
NUVEEN FLAGSHIP MULTISTATE TRUST I
----------------------------------
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 20th day of May, 1997 by and between Nuveen Flagship
Multistate Trust I, a Massachusetts business trust ( the "Fund"), and Nuveen
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1997 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Trustees, at a meeting called for the purpose of reviewing
the Agreement, have approved the Agreement and its continuance until August 1,
1998 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1998 and ratify and confirm the Agreement in all respects.
NUVEEN FLAGSHIP MULTISTATE TRUST I
By: /s/ Gifford R. Zimmerman
---------------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- ---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ J. Thomas Futrell
---------------------------------
Vice President
ATTEST:
/s/ Larry Martin
- ---------------------------
Assistant Secretary
<PAGE>
EXHIBIT 6
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made as of the 1st day of February, 1997 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").
WITNESSETH
----------
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 $.01 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 1933 ("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>
10. 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.
11. 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.
12. 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 1940, 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.
13. 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.
14. 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.
15. This agreement shall continue in effect until August 1, 1997, 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 1940. 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.
16. This agreement shall automatically terminate in the event of its
assignment.
17. 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: /s/ Gifford R. Zimmerman
-------------------------------
Vice President
Attest: /s/ Karen L. Healy
-------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By: /s/ Larry Martin
---------------------
Vice President
Attest: /s/ Morrison C. Warren
----------------------
Assistant Secretary
5
<PAGE>
Exhibit 1 NUVEEN
John Nuveen & Co. Incorporated
Investment Bankers
333 West Wacker Drive
Chicago, Illinois 60606-1286
Telephone: 312 917 7700
NUVEEN MUTUAL FUNDS
Dealer Distribution and
Shareholder Servicing Agreement
As principal underwriter of shares of the various Nuveen non-money market open-
end mutual funds, and of the shares of any future such funds (collectively, the
"Funds"), we invite you to join a selling group for the distribution of shares
of common stock of the Funds (the "Shares"). As exclusive agent of the Funds, we
offer to sell you Shares on the following terms:
1. In all sales of Shares to the public you shall act as dealer for your own
account, and in no transaction shall you have any authority to act as agent
for any Fund, for us or for any other member of the Selling Group.
2. Orders received from you shall be accepted by us only at the public offering
price applicable to each order, as established by the then current
Prospectus of the appropriate Fund, subject to the discounts provided in
such Prospectus. Upon receipt from you of any order to purchase Shares, we
shall confirm to you in writing or by wire to be followed by a confirmation
in writing. Additional instructions may be forwarded to you from time to
time. All orders are subject to acceptance or rejection by us in our sole
discretion.
3. You may offer and sell Shares to your customers only at the public offering
price determined in the manner described in the current Prospectus of the
appropriate Fund. Shares will be offered at a public offering price based
upon the net asset value of such Shares plus, with respect to certain
class(es) of Shares, a sales charge from which you shall receive a discount
equal to a percentage of the applicable offering price as provided in the
Prospectus. You may receive a distribution fee and/or a service fee with
respect to certain class(es) of Shares for which such fees are applicable,
as provided in the applicable Prospectus, which distribution fee and/or
service fee shall be payable for such periods and at such intervals as are
from time to time specified by us. Your placement of an order for Shares
after the date of any notice of such amendment shall conclusively evidence
your agreement to be bound thereby.
Reduced sales charges may also be available as a result of a cumulative
discount or pursuant to a letter of intent. Further information as to such
reduced sales charges, if any, is set forth in the appropriate Fund
Prospectus. You agree to advise us promptly as to the amounts of any sales
made by you to the public qualifying for reduced sales charges.
4. By accepting this Agreement, you agree:
a) That you will purchase Shares only from us;
b) That you will purchase Shares from us only to cover purchase orders
already received from your customers, or for your own bona fide
investment; and
c) That you will not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholding.
d) That, with respect to the sale of Shares of Funds that offer multiple
classes of Shares, you will comply with the terms of the Policies and
Procedures with Respect to Sales of Multiple Classes of Shares, attached
hereto as Exhibit A.
5. We will not accept from you any conditional orders for Shares.
6. Payment for Shares ordered from us shall be in New York clearing house funds
and must be received by the Funds' agent, Shareholder Services, Inc.,
P.O.Box 5330, Denver, Colorado 80217-5330, within three business days after
our acceptance of your order. If such payment is not received, we reserve
the right, without notice, forthwith to cancel the sale or, at our option,
to cause the Fund to redeem the Shares ordered, in which case we may hold
you responsible for any loss, including loss of profit, suffered by us as a
result of your failure to make such payment. If any Shares confirmed to you
under the terms of this agreement are repurchased by the issuing Fund or by
us as agent for the Fund, or are tendered for repurchase, within seven
business days after the date of
6
<PAGE>
our confirmation of the original purchase order, you shall promptly refund
to us the full discount, commission, or other concession, if any, allowed or
paid to you on such Shares.
7. Shares sold hereunder shall be available in book-entry form on the books of
Shareholder Services, Inc. unless other instructions have been given.
8. No person is authorized to make any representations concerning Shares or any
Fund except those contained in the applicable current Prospectus and printed
information subsequently issued by the appropriate Fund or by us as
information supplemental to such Prospectus. You agree that you will not
offer or sell any Shares except under circumstances that will result in
compliance with the applicable Federal and state securities laws and that in
connection with sales and offers to sell Shares you will furnish to each
person to whom any such sale or offer is made a copy of the then current
Prospectus for the appropriate Fund (as then amended or supplemented) and
will not furnish to any persons any information relating to Shares which is
inconsistent in any respect with the information contained in the then
current Prospectus or cause any advertisement to be published in any
newspaper or posted in any public place without our consent and the consent
of the appropriate Fund. You shall be responsible for any required filing of
such advertising.
9. All sales will be made subject to our receipt of Shares from the appropriate
Fund. We reserve the right, in our discretion, without notice, to modify,
suspend or withdraw entirely the offering of any Shares, and upon notice to
change the price, sales charge, or dealer discount or to modify, cancel or
change the terms of this agreement.
10. Your acceptance of this agreement constitutes a representation that you are
a registered securities dealer and a member in good standing of the National
Association of Securities Dealers, Inc. and agree to comply with all
applicable state and Federal laws, rules and regulations applicable to
transactions hereunder and to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., including specifically Section 26,
Article III thereof. You likewise agree that you will not offer to sell
Shares in any state or other jurisdiction in which they may not lawfully be
offered for sale.
11. You shall provide such office space and equipment, telephone facilities,
personnel and literature distribution as is necessary or appropriate for
providing information and services to your customers. Such services and
assistance may include, but not be limited to, establishment and maintenance
of shareholder accounts and records, processing purchase and redemption
transactions, answering routine inquiries regarding the Funds, and such
other services as may be agreed upon from time to time and as may be
permitted by applicable statute, rule, or regulation. You shall perform
these services in good faith and with reasonable care. You shall immediately
inform the Funds or us of all written complaints received by you from Fund
shareholders relating to the maintenance of their accounts and shall
promptly answer all such complaints.
12. All communications to us should be sent to 333 W. Wacker Drive, Chicago,
Illinois 60606. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
13. This Agreement shall be construed in accordance with the laws of the State
of Illinois. This Agreement is subject to the Prospectuses of the Funds from
time to time in effect, and, in the event of a conflict, the terms of the
Prospectuses shall control. References herein to the "Prospectus" of a Fund
shall mean the prospectus and statement of additional information of such
Fund as from time to time in effect. Any changes, modifications or additions
reflected in any such Prospectus shall be effective on the date of such
Prospectus (or supplement thereto) unless specified otherwise. This
Agreement shall supersede any prior dealer distribution agreement with
respect to the Funds.
John Nuveen & Co. Incorporated
John Nuveen
Authorized Signature
- -------------------------------------------------------------------------------
<PAGE>
We have read the foregoing agreement and accept and agree to the terms and
conditions therein.
<TABLE>
<CAPTION>
<S> <C>
Firm___________________|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Month Day Year
Authorized Signature___|_________________________________________________________________________________________|__|__|__|__|__|__|
Print Name of__________|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
Address________________|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|
City___________________|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|__Zip__|___|___|___|___|___|
Tax ID Number__________|___|___|___|___|___|___|___|___|___|___|___|____NASD___|___|___|___|___|___|___|___|___|___|___|___|___|___|
</TABLE>
The above agreement shall be executed in duplicate and both copies returned to
us for signature. We will return a fully executed copy to you for your files.
Please return the completed agreement to:
John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, Illinois 60606-
1286
<PAGE>
Exhibit A to Nuveen Mutual Funds
Dealer Distribution and
Shareholder Servicing Agreement
Policies and Procedures With Respect to
Sales of Multiple Classes of Funds
The Nuveen non-money market open-end mutual funds (the "Funds") have one or more
of the following classes of shares generally available to the public: Class A
Shares, which are normally subject to an up-front sales charge and a service
fee; Class B Shares, which are subject to an asset-based sales charge, a service
fee, and a declining contingent deferred sales charge ("CDSC"); and Class C
Shares, which are subject to an asset-based sales charge, a service fee, and a
12-month CDSC, it is important for an investor to choose the method of
purchasing shares which best suits his or her particular circumstances. To
assist investors in these decisions, John Nuveen & Co. Incorporated, underwriter
for the Nuveen Mutual Funds, has instituted the following policies with respect
to orders for Fund shares. These policies apply to each Authorized Dealer which
distributes Fund shares.
1. Purchase orders for a single purchaser equal to or exceeding $1,000,000
should be placed only for Class A shares, unless such purchase for Class B
or Class C Shares has been reviewed and approved by the Authorized Dealer's
appropriate supervisor.
2. Any purchase order for less than $1,000,000 may be for Class A, Class B or
Class C Shares in light of the relevant facts and circumstances, including:
a) the specific purchase order dollar amount;
b) the length of time the investor expects to hold his or her Shares;
c) whether the investor expects to reinvest dividends; and
d) any other relevant circumstances such as the availability of purchases
under a letter of intent, a combined discount or a cumulative discount,
as described in the Prospectus for the Fund, and any anticipated changes
in the funds net asset value per share.
There are instances when one method of purchasing Shares may be more appropriate
than the other. For example, investors who would qualify for a significant
discount from the maximum sales load on Class A Shares might determine that
payment of such a reduced up-front sales charge is preferable to the payment of
a higher ongoing distribution fee on Class B or Class C Shares. On the other
hand, investors who prefer not to pay an up-front sales charge may wish to defer
the sales charge by purchasing Class B or Class C Shares. Those who plan to
redeem their shares within 5 years might consider Class C Shares, particularly
if they do not expect to reinvest dividends in additional shares. Note that, if
an investor anticipates redeeming Class B Shares within a short period of time
such as one year, that investor may bear higher distribution expenses than if
Class A Shares had been purchased. In addition, investors who intend to hold
their shares for a significantly long time may not wish to bear the higher
ongoing-asset-based sales charges of Class B or Class C Shares, irrespective of
the fact that the CDSC that would apply to a redemption of Class B Shares is
reduced over time and is ultimately eliminated, and that the CDSC that would
apply to a redemption of Class C Shares is relatively short in duration and
small in amount.
Appropriate supervisory personnel within your organization must ensure that all
employees receiving investor inquiries about the purchase of shares of the Funds
advise the investor of the available pricing structures offered by the Funds and
the impact of choosing one method over another, including breakpoints and the
availability of letters of intent, combined purchases and cumulative discounts.
In some instances it may be appropriate for a supervisory person to discuss a
purchase with the investor.
These policies are effective immediately with respect to any order for the
purchase of shares of the Funds.
October 4, 1996
<PAGE>
<TABLE>
<CAPTION>
Exhibit A (Page 2)
- ------------------------------------------------
Nuveen Mutual Funds
----------------------
CUSIP QUOTRON
Number Symbol
- -----------------------------------------------------------------------
<S> <C> <C>
Nuveen Tax-Free Money Market Funds
Nuveen Tax-Exempt Money Market Fund, Inc. 670634104 NUVXX
Nuveen Tax-Free Reserves, Inc. 670639103 NRFXX
Nuveen CA Tax-Free Money Market Fund-
Service Portfolio 67062D303 NCTXX
Distribution Portfolio 67062D402 NCTXX
Institutional Portfolio 67062D501 NCTXX
Nuveen MA Tax-Free Money Market Fund-
Service Portfolio 670637107 NMAXX
Distribution Portfolio 670637206 NMAXX
Institutional Portfolio 670637305 NMAXX
Nuveen NY Tax-Free Money Market Fund-
Service Portfolio 670637404 NTFXX
Distribution Portfolio 670637503 NTFXX
Institutional Portfolio 670637602 NTFXX
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
A SHARE B SHARE C SHARE R SHARE
--------------------------------------------------------------------------------------
CUSIP Quotron CUSIP Quotron CUSIP Quotron CUSIP Quotron
Number Symbol Number Symbol Number Symbol Number Symbol
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Mutual Funds
Nuveen Growth and Income Stock Fund 67064Y503 # 67064Y602 # 67064Y701 # 67064Y800 #
Nuveen Balanced Stock and Bond Fund 67064Y107 # 67064Y206 # 67064Y305 # 67064Y404 #
Nuveen Balanced Municipal and Stock Fund 67064Y883 # 67064Y875 # 67064Y867 # 67064Y859 #
Nuveen Flagship Utility Fund 33841G108 FUIAX - - 33841G306 FLUCX - -
Golden Rainbow Fund 33841G207 GLRBX - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Municipal Mutual Funds
Nuveen Municipal Bond Fund, Inc. 67065Q202 NMBAX 67065Q103 # 67065Q301 # 67065Q400 NUVBX
Nuveen Insured Municipal Bond Fund 67065Q509 NMBIX 67065Q608 # 67065Q707 # 67065Q806 NITNX
Nuveen Flagship All-American Tax
Exempt Fund 67065Q889 FLAAX 67065Q871 # 67065Q863 FAACX 67065Q855 #
Nuveen Flagship Limited Term Tax
Exempt Fund 67065Q848 FLTDX - - 67065Q830 FLTCX 67065Q822 #
Nuveen Flagship Intermediate Tax
Exempt Fund 67065Q814 FINTX - - 67065Q798 FINCX 67065Q780 #
Nuveen Flagship AL Municipal Bond Fund 67065P105 FABTX 67065P204 # 67065P303 # 67065P402 #
Nuveen Flagship AZ Municipal Bond Fund 67065L104 FAZTX 67065L203 # 67065L302 FAZCX 67065L401 NMARX
Nuveen CA Municipal Bond Fund 67065N100 NACCX* 67065N209 # 67065N308 # 67065N407 NCSPX
Nuveen CA Insured Municipal Bond Fund 67065N506 NCAIX* 67065N605 # 67065N704 # 67065N803 NCIBX
Nuveen Flagship CO Municipal Bond Fund 67065L609 FCOTX 67065L500 # 67065L807 # 67065L880 #
Nuveen Flagship CT Municipal Bond Fund 67065N886 FCTTX 67065N878 # 67065N860 FCTCX 67065N852 #
Nuveen Flagship FL Municipal Bond Fund 67065L708 FLOTX 67065L658 # 67065L641 NFLCX 67065L872 NMFLX
Nuveen Flagship FL Intermediate Municipal
Bond Fund 67065L864 FIFAX - - 67065L856 FIFCX 67065L849 #
Nuveen Flagship GA Municipal Bond Fund 67065P501 FGATX 67065P600 # 67065P709 FGACX 67065P808 #
Nuveen Flagship KS Municipal Bond Fund 67065R101 FKSTX 67065R200 # 67065R309 # 67065R408 #
Nuveen Flagship KY Municipal Bond Fund 67065R507 FKYTX 67065R606 # 67065R705 FKYCX 67065R804 #
Nuveen Flagship KY Limited Term
Municipal Bond Fund 67065R887 FLKAX - - 67065R879 FLKCX 67065R861 #
Nuveen Flagship LA Municipal Bond Fund 67065P881 FTLAX 67065P873 # 67065P865 FTLCX 67065P857 #
Nuveen MD Municipal Bond Fund 67065L831 NMDAX* 67065L823 # 67065L815 # 67065L799 NMMDX
Nuveen MA Municipal Bond Fund 67065N845 NMAAX* 67065N837 # 67065N829 # 67065N811 NBMAX
Nuveen MA Insured Municipal Bond Fund 67065N795 NMAIX* 67065N787 # 67065N779 # 67065N761 NIMAX
Nuveen Flagship MI Municipal Bond Fund 67065R853 FMITX 67065R846 # 67065R838 FLMCX 67065R820 NMMIX
Nuveen Flagship MO Municipal Bond Fund 67065R812 FMOTX 67065R796 # 67065R788 FMOCX 67065R770 #
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Effective February 1, 1997
<PAGE>
<TABLE>
<CAPTION>
Exhibit A (Page 3)
- ------------------------------------------------
Nuveen Mutual Funds
A SHARE B SHARE C SHARE R SHARE
--------------------------------------------------------------------------------------
CUSIP Quotron CUSIP Quotron CUSIP Quotron CUSIP Quotron
Number Symbol Number Symbol Number Symbol Number Symbol
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Mutual Funds (cont.)
Nuveen Flagship NJ Municipal Bond Fund 67065N753 NNJAX 67065N746 # 67065N738 NNJCX 67065N720 NMNJX
Nuveen Flagship NJ Intermediate
Municipal Bond Fund 67065N712 FNJIX - - 67065N696 # 67065N688 #
Nuveen Flagship NM Municipal Bond Fund 67065L781 FNMTX 67065L773 # 67065L765 # 67065L757 #
Nuveen Flagship NY Municipal Bond Fund 67065N670 NNYAX* 67065N662 # 67065N654 NNYCX 67065N647 NTNYX
Nuveen NY Insured Municipal Bond Fund 67065N639 NNYIX* 67065N621 # 67065N613 # 67065N597 NINYX
Nuveen Flagship NC Municipal Bond Fund 67065P840 FLNCX 67065P832 # 67065P824 FCNCX 67065P816 #
Nuveen Flagship OH Municipal Bond Fund 67065R762 FOHTX 67065R754 # 67065R747 FOHCX 67065R739 NXOHX
Nuveen Flagship PA Municipal Bond Fund 67065L740 FPNTX 67065L732 # 67065L724 FPNCX 67065L716 NBPAX
Nuveen Flagship SC Municipal Bond Fund 67065P790 FLSCX 67065P782 # 67065P774 # 67065P766 #
Nuveen Flagship TN Municipal Bond Fund 67065P758 FTNTX 67065P741 # 67065P733 FTNCX 67065P725 #
Nuveen Flagship VA Municipal Bond Fund 67065L690 FVATX 67065L682 # 67065L674 FVACX 67065L666 NMVAX
Nuveen Flagship WI Municipal Bond Fund 67065R721 FWIAX 67065R713 # 67065R697 # 67065R689 #
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
# Will receive a supplemental listing when the number of class shareholder
accounts is 300 or when the class asset base reaches $1 million.
NOTE: A Quotron Symbol requires 1,000 shareholder accounts or $25 million in
assets.
*Denotes supplemental listing only
Effective February 1, 1997
<PAGE>
Exhibit 2 [LOGO OF NUVEEN]
John Nuveen & Co. Incorporated
Investment Bankers
333 West Wacker Drive
Chicago, Illinois 60606-1286
Telephone 312 917 7700
NUVEEN MUTUAL FUNDS
Distribution and Shareholder
Servicing Agreement
(Version for Bank-Affiliated Broker-Dealers)
As principal underwriter of shares of common stock (the "Shares") of the various
Nuveen non-money market open-end mutual funds and any future such funds
(collectively, the "Funds"), we offer to make available Shares for purchase by
your customers on the following terms:
1. In all sales of Shares to the public you shall act as agent for your
customers, and in no transaction shall you have any authority to act as
agent for any Fund or for us. The customers in question are for all purposes
your customers and not customers of John Nuveen & Co. Incorporated. We shall
execute transactions for each of your customers only upon your
authorization, it being understood in all cases that (a) you are acting as
agent for the customer; (b) the transactions are without recourse against
you by the customer; (c) as between you and the customer, the customer will
have full beneficial ownership of the securities; (d) each transaction is
initiated solely upon the order of the customer; and (e) each transaction is
for the account of the customer and not for your account.
2. Orders received from you shall be accepted by us only at the public offering
price applicable to each order, as established by the then current
Prospectus of the appropriate Fund, subject to the discounts provided in
such Prospectus. Upon receipt from you of any order to purchase Shares we
shall confirm to you in writing or by wire to be followed by a confirmation
in writing, and we shall concurrently send to your customer a letter
confirming such order, together with a copy of the appropriate Fund's
current Prospectus. Additional instructions may be forwarded to you from
time to time. All orders are subject to acceptance or rejection by us in our
sole discretion.
3. Members of the general public, including your customers, may purchase Shares
only at the public offering price determined in the manner described in the
current Prospectus of the appropriate Fund. Shares will be offered at a
public offering price based upon the net asset value of such Shares plus,
with respect to certain class(es) of Shares, a sales charge which, together
with the amount of that sales charge to be retained by banks or bank-
affiliated broker-dealers acting as agent for their customers, is set forth
in the Prospectus. You may receive a distribution fee and/or a service fee
with respect to certain class(es) of Shares for which such fees are
applicable, as provided in the applicable Prospectus, which distribution fee
and/or service fee shall be payable for such periods and at such intervals
as are from time to time specified by us. Your placement of an order for
Shares after the date of any notice of such amendment shall conclusively
evidence your agreement to be bound thereby. Reduced sales charges may also
be available as a result of a cumulative discount or pursuant to a letter of
intent. Further information as to such reduced sales charges, if any, is set
forth in the appropriate Fund Prospectus. You agree to advise us promptly as
to the amounts of any sales made by or through you to the public qualifying
for reduced sales charges.
4. By accepting this Agreement, you agree:
a) That you will purchase Shares only from us, and only to cover purchase
orders already received from your customers;
b) That you will not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholding; and
c) That, with respect to the sale of Shares of Funds that offer multiple
classes of Shares, you will comply with the terms of the Policies and
Procedures with Respect to Sales of Multiple Classes of Shares, attached
hereto as Exhibit A.
5. We will not accept from you any conditional orders for Shares.
<PAGE>
6. Payment for Shares ordered from us shall be in New York clearing house
funds and must be received by the Funds' agent, Shareholder Services, Inc.,
P.O. Box 5330, Denver, Colorado 80217-5330, within three business days
after our acceptance of your order. If such payment is not received, we
reserve the right, without notice, forthwith to cancel the sale or, at our
option, to cause the Fund to redeem the Shares ordered, in which case we
may hold you responsible for any loss, including loss of profit, suffered
by us as result of your or your customer's failure to make such payment. If
any Shares confirmed to you or your customer under the terms of this
agreement are repurchased by the issuing Fund or by us as agent for the
Fund, or are tendered for repurchase, within seven business days after the
date of our confirmation of the original purchase order, you shall promptly
refund to us the full discount, commission, or other concession, if any,
allowed or paid to you on such Shares.
7. Shares sold hereunder shall be available in book-entry form on the books of
Shareholder Services, Inc. unless other instructions have been given.
8. No person is authorized to make any representations concerning Shares or
any Fund except those contained in the applicable current Prospectus and
printed information issued by the appropriate Fund or by us as information
supplemental to such Prospectus. You agree that you will not offer or sell
any Shares except under circumstances that will result in compliance with
the applicable Federal and state securities laws and that in connection
with sales and offers to sell Shares you will furnish to each person to
whom any such sale or offer is made a copy of the then current Prospectus
for the appropriate Fund (as amended or supplemented) and will not furnish
to any persons any information relating to Shares which is inconsistent in
any respect with the information contained in the then current Prospectus
or cause any advertisement to be published in any newspaper or posted in
any public place without our consent and the consent of the appropriate
Fund. You shall be responsible for any required filing of such advertising.
9. All sales will be made subject to our receipt of Shares from the
appropriate Fund. We reserve the right, in our discretion, without notice,
to modify, suspend or withdraw entirely the offering of any Shares, and
upon notice to change the price, sales charge, or dealer discount or to
modify, cancel or change the terms of this agreement.
10. Your acceptance of this agreement constitutes a representation that you are
a registered securities broker-dealer and a member in good standing of the
National Association of Securities Dealers, Inc. and agree to comply with
all state and Federal laws, rules and regulations applicable to
transactions hereunder and with the Rules of Fair Practice of the NASD,
including specifically Section 26 of Article III thereof. You likewise
agree that you will not offer to sell Shares in any state or other
jurisdiction in which they may not lawfully be offered for sale. We agree
to advise you currently of the identity of those states and jurisdictions
in which the Shares may lawfully be offered for sale.
11. You shall provide such office space and equipment, telephone facilities,
personnel and literature distribution as is necessary or appropriate for
providing information and services to your customers. Such services and
assistance may include, but not be limited to, establishment and
maintenance of shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Funds,
and such other services as may be agreed upon from time to time and as may
be permitted by applicable statute, rule, or regulation. You shall perform
these services in good faith and with reasonable care. You shall
immediately inform the Funds or us of all written complaints received by
you from Fund shareholders relating to the maintenance of their accounts
and shall promptly answer all such complaints.
12. All communications to us should be sent to 333 W. Wacker Drive, Chicago,
Illinois 60606. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
13. This Agreement shall be construed in accordance with the laws of the State
of Illinois. This Agreement is subject to the Prospectuses of the Funds
from time to time in effect, and, in the event of a conflict, the terms of
the Prospectuses shall control. References herein to the "Prospectus" of a
Fund shall mean the prospectus and statement of additional information of
such Fund as from time to time in effect. Any changes, modifications or
additions reflected in any such Prospectus shall be effective on the date
of such Prospectus (or supplement thereto) unless specified otherwise. This
Agreement shall supersede any prior distribution agreement with respect to
the Funds.
John Nuveen & Co. Incorporated
| |
John Nuveen | |
Authorized Signature | |
_______________________________________________________________________________
<PAGE>
We have read the foregoing agreement and accept and agree to the terms and
conditions therein.
Firm | | | | | | | | | | | | | | | |
- --------------------------------------------------------------------------------
Month Day Year
Authorized Signature | | | | | | | | | | | | | | | |
- --------------------------------------------------------------------------------
Print Name of | | | | | | | | | | | | | | | |
- --------------------------------------------------------------------------------
Address | | | | | | | | | | | | | | | |
- --------------------------------------------------------------------------------
City | | | | | | | | | | |Zip | | | | |
- --------------------------------------------------------------------------------
Tax ID Number | | | | | | | | | | NASD | | | | |
- --------------------------------------------------------------------------------
The above agreement should be executed in duplicate and both copies returned to
us for signature. We will return a fully executed copy to you for your files.
Please return the completed agreement to :
John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, Illinois
60606-1286
<PAGE>
Exhibit A to Nuveen Mutual Funds
Dealer Distribution and
Shareholder Servicing Agreement
Policies and Procedures With Respect to
Sales of Multiple Classes of Funds
The Nuveen non-money market open-end mutual funds (the "Funds") have one or more
of the following classes of shares generally available to the public: Class A
Shares, which are normally subject to an up-front sales charge and a service
fee; Class B Shares, which are subject to an asset-based sales charge, a service
fee, and a declining contingent deferred sales charge ("CDSC"); and Class C
Shares, which are subject to an asset-based sales charge, a service fee, and a
12-month CDSC, it is important for an investor to choose the method of
purchasing shares which best suits his or her particular circumstances. To
assist investors in these decisions, John Nuveen & Co. Incorporated, underwriter
for the Nuveen Mutual Funds, has instituted the following policies with respect
to orders for Fund shares. These policies apply to each Authorized Dealer which
distributes Fund shares.
1. Purchase orders for a single purchaser equal to or exceeding $1,000,000
should be placed only for Class A shares, unless such purchase for Class B
or Class C Shares has been reviewed and approved by the Authorized Dealer's
appropriate supervisor.
2. Any purchase order for less than $1,000,000 may be for Class A, Class B or
Class C Shares in light of the relevant facts and circumstances, including:
a) the specific purchase order dollar amount;
b) the length of time the investor expects to hold his or her Shares;
c) whether the investor expects to reinvest dividends; and
d) any other relevant circumstances such as the availability of purchases
under a letter of intent, a combined discount or a cumulative discount,
as described in the Prospectus for the Fund, and any anticipated changes
in the Funds net asset value per share.
There are instances when one method of purchasing Shares may be more appropriate
than the other. For example, investors who would qualify for a significant
discount from the maximum sales load on Class A Shares might determine that
payment of such a reduced up-front sales charge is preferable to the payment of
a higher ongoing distribution fee on Class B or Class C Shares. On the other
hand, investors who prefer not to pay an up-front sales charge may wish to defer
the sales charge by purchasing Class B or Class C Shares. Those who plan to
redeem their shares within 5 years might consider Class C Shares, particularly
if they do not expect to reinvest dividends in additional shares. Note that, if
an investor anticipates redeeming Class B Shares within a short period of time
such as one year, that investor may bear higher distribution expenses than if
Class A Shares had been purchased. In addition, investors who intend to hold
their shares for a significantly long time may not wish to bear the higher
ongoing-asset-based sales charges of Class B or Class C Shares, irrespective of
the fact that the CDSC that would apply to a redemption of Class B shares is
reduced over time and is ultimately eliminated, and that the CDSC that would
apply to a redemption of Class C Shares is relatively short in duration and
small in amount.
Appropriate supervisory personnel within your organization must ensure that all
employees receiving investor inquiries about the purchase of shares of the Funds
advise the investor of the available pricing structures offered by the Funds and
the impact of choosing one method over another, including breakpoints and the
availability of letters of intent, combined purchases and cumulative discounts.
In some instances it may be appropriate for a supervisory person to discuss a
purchase with the investor.
These policies are effective immediately with respect to any order for the
purchase of shares of the Funds.
October 4, 1996
<PAGE>
<TABLE>
<CAPTION>
Exhibit A (Page 2)
- ----------------------------------------------
Nuveen Mutual Funds
--------------------
CUSIP Quotron
Number Symbol
- ------------------------------------------------------------------
Nuveen Tax-Free Money Market Funds
<S> <C> <C>
Nuveen Tax-Exempt Money Market Fund, Inc. 670634104 NUVXX
Nuveen Tax-Free Reserves, Inc. 670639103 NRFXX
Nuveen CA Tax-Free Money Market Fund-
Service Portfolio 67062D303 NCTXX
Distribution Portfolio 67062D402 NCTXX
Institutional Portfolio 67062D501 NCTXX
Nuveen MA Tax-Free Money Market Fund-
Service Portfolio 670637107 NMAXX
Distribution Portfolio 670637206 NMAXX
Institutional Portfolio 670637305 NMAXX
Nuveen NY Tax-Free Money Market Fund-
Service Portfolio 670637404 NTFXX
Distribution Portfolio 670637503 NTFXX
Institutional Portfolio 670637602 NTFXX
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
A SHARE B SHARE C SHARE R SHARE
------------------------------------------------------------------------------
CUSIP Quotron CUSIP Quotron CUSIP Quotron CUSIP Quotron
Number Symbol Number Symbol Number Symbol Number Symbol
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Mutual Funds
Nuveen Growth and Income Stock Fund 67064Y403 # 67064Y602 # 67064Y701 # 67064Y800 #
Nuveen Balanced Stock and Bond Fund 67064Y107 # 67064Y206 # 67064Y305 # 67064Y404 #
Nuveen Balanced Municipal and Stock Fund 67064Y883 # 67064Y875 # 67064Y867 # 67064Y859 #
Nuveen Flagship Utility Fund 33841G108 FUIAX - - 33841G306 FLUCX - -
Golden Rainbow Fund 33841G207 GLRBX - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Municipal Mutual Funds
Nuveen Municipal Bond Fund, Inc. 67065Q202 NMBAX 67065Q103 # 67065Q301 # 67065Q400 NUVBX
Nuveen Insured Municipal Bond Fund 67065Q509 NMBIX 67065Q608 # 67065Q707 # 67065Q806 NITNX
Nuveen Flagship All-American Tax-Exempt Fund 67065Q889 FLAAX 67065Q871 # 67065Q863 FAACX 67065Q855 #
Nuveen Flagship Limited Term Tax-Exempt Fund 67065Q848 FLTDX - - 67065Q830 FLTCX 67065Q822 #
Nuveen Flagship Intermediate Tax-Exempt Fund 67065Q814 FINTX - - 67065Q798 FINCX 67065Q780 #
Nuveen Flagship AL Municipal Bond Fund 67065P105 FABTX 67065P204 # 67065P303 # 67065P402 #
Nuveen Flagship AZ Municipal Bond Fund 67065L104 FAZTX 67065L203 # 67065L302 FAZCX 67065L401 NMARX
Nuveen CA Municipal Bond Fund 67065N100 NCAAX* 67065N209 # 67065N308 # 67065N407 NCSPX
Nuveen CA Insured Municipal Bond Fund 67065N506 NCAIX* 67065N605 # 67065N704 # 67065N803 NCIBX
Nuveen Flagship CO Municipal Bond Fund 67065L609 FCOTX 67065L500 # 67065L807 # 67065L880 #
Nuveen Flagship CT Municipal Bond Fund 67065N886 FCTTX 67065N878 # 67065N860 FTCTX 67065N852 #
Nuveen Flagship FL Municipal Bond Fund 67065L708 FLOTX 67065L658 # 67065L641 NFLCX 67065L872 NMFLX
Nuveen Flagship FL Intermediate Municipal Bond Fund 67065L864 FIFAX - - 67065L856 FIFCX 67065L849 #
Nuveen Flagship GA Municipal Bond Fund 67065P501 FGATX 67065P600 # 67065P709 FGACX 67065P808 #
Nuveen Flagship KS Municipal Bond Fund 67065R101 FKSTX 67065R200 # 67065R309 # 67065R408 #
Nuveen Flagship KY Municipal Bond Fund 67065R507 FKYTX 67065R606 # 67065R705 FKYCX 67065R804 #
Nuveen Flagship KY Limited Term Municipal Bond Fund 67065R887 FLKAX - - 67065R879 FLKCX 67065R861 #
Nuveen Flagship LA Municipal Bond Fund 67065P881 FTLAX 67065P873 # 67065P865 FTLCX 67065P857 #
Nuveen MD Municipal Bond Fund 67065L831 NMDAX* 67065L823 # 67065L815 # 67065L799 NMMDX
Nuveen MA Municipal Bond Fund 67065N845 NMAAX* 67065N837 # 67065N829 # 67065N811 NBMAX
Nuveen MA Insured Municipal Bond Fund 67065N795 NMAIX* 67065N787 # 67065N779 # 67065N761 NIMAX
Nuveen Flagship MI Municipal Bond Fund 67065R853 FMITX 67065R846 # 67065R838 FLMCX 67065R820 NMMIX
Nuveen Flagship MO Municipal Bond Fund 67065R812 FMOTX 67065R796 # 67065R788 FMOCX 67065R770 #
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Effective February 1, 1997
<PAGE>
<TABLE>
<CAPTION>
Exhibit A (Page 3)
- -----------------------------
Nuveen Mutual Funds
A SHARE B SHARE C SHARE R SHARE
-------------------------------------------------------------------------------
CUSIP Quotron CUSIP Quotron CUSIP Quotron CUSIP Quotron
Number Symbol Number Symbol Number Symbol Number Symbol
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Mutual Funds (cont.)
Nuveen Flagship NJ Municipal Bond Fund 67065N753 NNJAX 67065N746 # 67065N738 NNJCX 67065N720 NMNJX
Nuveen Flagship NJ Intermediate Municipal Bond Fund 67056N712 FNJIX - - 67065N696 # 67065N688 #
Nuveen Flagship NM Municipal Bond Fund 67065L781 FNMTX 67065L773 # 67065L765 # 67065L757 #
Nuveen Flagship NY Municipal Bond Fund 67065N670 NNYAX* 67065N662 # 67065N654 NNYCX 67065N647 NTNYX
Nuveen Flagship NY Insured Municipal Bond Fund 67065N639 NNYIX* 67065N621 # 67065N613 # 67065N597 NINYX
Nuveen Flagship NC Municipal Bond Fund 67065P840 FLNCX 67065P832 # 67065P824 FCNCX 67065P816 #
Nuveen flagship OH Municipal Bond Fund 67065R762 FOHTX 67065R754 # 67065R747 FOHCX 67065R739 NXOHX
Nuveen Flagship PA Municipal Bond Fund 67065L740 FPNTX 67065L732 # 67065L724 FPNCX 67065L716 NBPAX
Nuveen Flagship SC Municipal Bond Fund 67065P790 FLSCX 67065P782 # 67065P774 # 67065P766 #
Nuveen Flagship TN Municipal Bond Fund 67065P758 FTNTX 67065P741 # 67065P733 FTNCX 67065P725 #
Nuveen Flagship VA Municipal Bond Fund 67065L690 FVATX 67065L682 # 67065L674 FVACX 67065L666 NMVAX
Nuveen Flagship WI Municipal Bond Fund 67065R721 FWIAX 67065R713 # 67065R697 # 67065R689 #
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
# Will receive a supplemental listing when the number of class shareholder
accounts is 300 or when the class asset base reaches $1 million.
NOTE: A Quotron Symbol requires 1,000 shareholder accounts or $25 million in
assets.
*Denotes supplemental listing only
<PAGE>
Exhibit 3
NUVEEN
John Nuveen & Co. Incorporated
Investment Bankers
333 West Wacker Drive
Chicago, Illinois 60606-1286
Telephone 312 917-7700
NUVEEN MUTUAL FUNDS
Distribution and Shareholder
Servicing Agreement
(Bank Version)
As principal underwriter of shares of common stock (the "Shares") of the various
Nuveen non-money marker open-end mutual funds and any future such funds
(collectively, the "Funds"), we offer to make available Shares for purchase by
your customers on the following terms:
1. In all sales of Shares to the public you shall act as agent for your
customers, and in no transaction shall you have any authority to act as
agent for any Fund or for us. The customers in question are for all
purposes your customers and not customers of John Nuveen & Co.
Incorporated. We shall execute transactions for each of your customers only
upon your authorization, it being understood in all cases that (a) you are
acting as agent for the customer; (b) the transactions are without recourse
against you by the customer; (c) as between you and the customer, the
customer will have full beneficial ownership of the securities; (d) each
transaction is initiated solely upon the order of the customer; and (e)
each transaction is for the account of the customer and not for your
account.
2. Orders received from you shall be accepted by us only at the public
offering price applicable to each order, as established by the then current
Prospectus of the appropriate Fund, subject to the discounts provided in
such Prospectus. Upon receipt from you of any order to purchase Shares we
shall confirm to you in writing or by wire to be followed by a confirmation
in writing, and we shall concurrently send to your customer a letter
confirming such order, together with a copy of the appropriate Fund's
current Prospectus. Additional instructions may be forwarded to you from
time to time. All orders are subject to acceptance or rejection by us in
our sole discretion.
3. Members of the general public, including your customers, may purchase
Shares only at the public offering price determined in the manner described
in the current Prospectus of the appropriate Fund. Shares will be offered
at a public offering price based upon the net asset value of such Shares
plus, with respect to certain class(es) of Shares, a sales charge which,
together with the amount of that sales charge to be retained by banks
acting as agent for their customers, is set forth in the Prospectus. You
may receive a distribution fee and/or a service fee with respect to
certain class(es) for Shares for which such fees are applicable, as
provided in the applicable Prospectus, which distribution fee and/or
service fee shall be payable for such periods and at such intervals as are
from time to time specified by us. Your placement of an order for Shares
after the date of any notice of such amendment shall conclusively evidence
your agreement to be bound thereby. Reduced sales charges may also be
available as a result of a cumulative discount or pursuant to a letter of
intent. Further information as to such reduced sales charges, if any, is
set forth in the appropriate Fund Prospectus. You agree to advise us
promptly as to the amounts of any sales made by or through you to the
public qualifying for reduced sales charges.
4. By accepting this Agreement, you agree:
(a) That you will purchase Shares only from us, and only to cover purchase
orders already received from your customers;
(b) That you will not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholding;
and
(c) That, with respect to the sale of Shares of Funds that offer multiple
classes of Shares, you will comply with the terms of the Policies and
Procedures with Respect to Sales of Multiple Classes of Shares,
attached hereto as Exhibit A.
5. We will not accept from you any conditional orders for Shares.
<PAGE>
6. Payment for Shares ordered from us shall be in New York clearing house
funds and must be received by the Funds' agent, Shareholder Services, Inc.,
P.O. Box 5330, Denver, Colorado 80217-5330, within three business days
after our acceptance of your order. If such payment is not received, we
reserve the right, without notice, forthwith to cancel the sale or, at our
option, to cause the Fund to redeem the Shares ordered, in which case we
may hold you responsible for any loss, including loss of profit, suffered
by us as result of your or your customer's failure to make such payment. If
any Shares confirmed to you or your customer under the terms of this
agreement are repurchased by the issuing Fund or by us as agent for the
Fund, or are tendered for repurchase, within seven business days after the
date of our confirmation of the original purchase order, you shall promptly
refund to us the full discount, commission, or other concession, if any,
allowed or paid to you on such Shares.
7. Shares sold hereunder shall be available in book-entry form on the books of
Shareholder Services, Inc. unless other instructions have been given.
8. No person is authorized to make any representations concerning Shares or
any Fund except those contained in the applicable current Prospectus and
printed information issued by the appropriate Fund or by us as information
supplemental to such Prospectus. You agree that you will not offer or sell
any Shares except under circumstances that will result in compliance with
the applicable Federal and state securities laws and that in connection
with sales and offers to sell Shares you will furnish to each person to
whom any such sale or offer is made a copy of the then current Prospectus
for the appropriate Fund (as amended or supplemented) and will not furnish
to any persons any information relating to Shares which is inconsistent in
any respect with the information contained in the then current Prospectus
or cause any advertisement to be published in any newspaper or posted in
any public place without our consent and the consent of the appropriate
Fund. You shall be responsible for any required filing of such advertising.
9. All sales will be made subject to our receipt of Shares from the
appropriate Fund. We reserve the right, in our discretion, without notice,
to modify, suspend or withdraw entirely the offering of any Shares, and
upon notice to change the price, sales charge, or dealer discount or to
modify, cancel or change the terms of this agreement.
10. Your acceptance of this agreement constitutes a representation that you are
a bank as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, as amended, and are duly authorized to engage in the transactions to
be performed hereunder. You hereby agree to comply with all applicable
state and Federal laws, rules and regulations applicable to transactions
hereunder. You likewise agree that you will not make Shares available in
any state or other jurisdiction in which they may not lawfully be offered
for sale.
11. You shall provide such office space and equipment, telephone facilities,
personnel and literature distribution as is necessary or appropriate for
providing information and services to your customers. Such services and
assistance may include, but not be limited to, establishment and
maintenance of shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Funds,
and such other services as may be agreed upon from time to time and as may
be permitted by applicable statute, rule, or regulation. You shall perform
these services in good faith and with reasonable care. You shall
immediately inform the Funds or us of all written complaints received by
you from Fund shareholders relating to the maintenance of their accounts
and shall promptly answer all such complaints.
12. All communications to us should be sent to 333 W. Wacker Drive, Chicago,
Illinois 60606. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
13. This Agreement shall be construed in accordance with the laws of the State
of Illinois. This Agreement is subject to the Prospectuses of the Funds
from time to time in effect, and, in the event of a conflict, the terms of
the Prospectuses shall control. References herein to the "Prospectus" of a
Fund shall mean the prospectus and statement of additional information of
such Fund as from time to time in effect. Any changes, modifications or
additions reflected in any such Prospectus shall be effective on the date
of such Prospectus (or supplement thereto) unless specified otherwise. This
Agreement shall supersede any prior dealer distribution agreement with
respect to the Funds.
John Nuveen & Co. Incorporated
John Nuveen
Authorized Signature
<PAGE>
We have read the foregoing agreement and accept and agree to the terms and
conditions therein.
Firm_____|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|_____|
Month Day Year
Authorized Signature ____________________________________|___|_______|_________|
Print Name of _|___|___|___|___|___|___|___|___|_____|___|___|___|___|___|_____|
Address _|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|___|_____|
City_|___|___|___|___|___|___|___|___|___|___|___|___|ZIP |__|___|___|___|_____|
Tax ID Number _|___|___|___|___|___|___|___| NASD _|___|___|___|___|___|___|___|
The above agreement should be executed in duplicate and both copies returned to
us for signature. We will return a fully executed copy to you for your files.
Please turn the completed agreement to:
John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, Illinois
60606-1286
<PAGE>
Exhibit A to Nuveen Mutual Funds
Dealer Distribution and
Shareholder Servicing Agreement
Policies and Procedures With Respect to
Sales of Multiple Classes of Funds
The Nuveen non-money market open-end mutual funds (the "Funds") have one or more
of the following classes of shares generally available to the public: Class A
Shares, which are normally subject to an up-front sales charge and a service
fee: Class B Shares, which are subject to an asset-based sales charge, a
service fee, and a declining contingent deferred sales charge ("CDSC"); and
Class C Shares, which are subject to an asset-based sales charge, a service fee,
and a 12-month CDSC, it is important for an investor to choose the method of
purchasing shares which best suits his or her particular circumstances. To
assist investors in these decisions, John Nuveen & Co. Incorporated, underwriter
for the Nuveen Mutual Funds, has instituted the following policies with respect
to orders for Fund shares. These policies apply to each Authorized Dealer which
distributes Fund shares.
1. Purchase orders for a single purchaser equal to or exceeding $1,000,000
should be placed only for Class A shares, unless such purchase for Class B
or Class C Shares has been reviewed and approved by the Authorized Dealer's
appropriate supervisor.
2. Any purchase order for less than $1,000,000 may be for Class A, Class B or
Class C Shares in light of the relevant facts and circumstances, including:
a) the specific purchase order dollar amount;
b) the length of time the investor expects to hold his or her Shares;
c) whether the investor expects to reinvest dividends; and
d) any other relevant circumstances such as the availability of purchases
under a letter of intent, a combined discount or a cumulative discount,
as described in the Prospectus for the Fund, and any anticipated changes
in the funds net asset value per share.
There are instances when one method of purchasing Shares may be more appropriate
than the other. For example, investors who would qualify for a significant
discount from the maximum sales load on Class A Shares might determine that
payment of such a reduced up-front sales charge is preferable to the payment of
a higher ongoing distribution fee on Class B or Class C Shares. On the other
hand, investors who prefer not to pay an up-front sales charge may wish to defer
the sales charge by purchasing Class B or Class C Shares. Those who plan to
redeem their shares within 5 years might consider Class C Shares, particularly
if they do not expect to reinvest dividends in additional shares. Note that, if
an investor anticipates redeeming Class B Shares within a short period of time
such as one year, that investor may bear higher distribution expenses than if
Class A Shares had been purchased. In addition, investors who intend to hold
their shares for a significantly long time may not wish to bear the higher
ongoing-asset-based sales charges of Class B or Class C Shares, irrespective of
the fact that the CDSC that would apply to a redemption of Class B Shares is
reduced over time and is ultimately eliminated, and that the CDSC that would
apply to a redemption of Class C Shares is relatively short in duration and
small in amount.
Appropriate supervisory personnel within your organization must ensure that all
employees receiving investor inquiries about the purchase of shares of the Funds
advise the investor of the available pricing structures offered by the Funds and
the impact of choosing one method over another, including breakpoints and the
availability of letters of intent, combined purchases and cumulative discounts.
In some instances it may be appropriate for a supervisory person to discuss a
purchase with the investor.
These policies are effective immediately with respect to any order for the
purchase of shares of the Funds.
October 4, 1996
<PAGE>
Exhibit A (Page 2)
- ------------------
Nuveen Mutual Funds
<TABLE>
<CAPTION>
-------------------
CUSIP Quotron
Number Symbol
- ---------------------------------------------------------------
<S> <C> <C>
Nuveen Tax-Free Money Market Funds
Nuveen Tax-Exempt Money Market Fund, Inc. 670634104 NUVXX
Nuveen Tax-Free Reserves, Inc. 670639103 NRFXX
Nuveen CA Tax-Free Money Market Fund-
Service Portfolio 67062D303 NCTXX
Distribution Portfolio 67062D402 NCTXX
Institutional Portfolio 67062D501 NCTXX
Nuveen MA Tax-Free Money Market Fund-
Service Portfolio 670637107 NMAXX
Distribution Portfolio 670637206 NMAXX
Institutional Portfolio 670637305 NMAXX
Nuveen NY Tax-Free Money Market Fund-
Service Portfolio 670637404 NTFXX
Distribution Portfolio 670637503 NTFXX
Institutional Portfoflio 670637602 NTFXX
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
A SHARE B SHARE C SHARE R SHARE
-------------------------------------------------------------------------
CUSIP Quotron CUSIP Quotron CUSIP Quotron CUSIP Quotron
Number Symbol Number Symbol Number Symbol Number Symbol
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Mutual Funds
Nuveen Growth and Income Stock Fund 67064Y503 # 67064Y602 # 67064Y701 # 67064Y800 #
Nuveen Balanced Stock and Bond Fund 67064Y107 # 67064Y206 # 67064Y305 # 67064Y404 #
Nuveen Balanced Municipal and Stock Fund 67064Y883 # 67064Y875 # 67064Y867 # 67064Y859 #
Nuveen Flagship Utility Fund 33841G108 FUIAX - - 33841G306 FLUCX - -
Golden Rainbow Fund 33841G207 GLRBX - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Municipal Mutual Funds
Nuveen Municipal Bond Fund, Inc. 67065Q202 NMBAX 67065Q103 # 67065Q301 # 67065Q400 NUVBX
Nuveen Insured Municipal Bond Fund 67065Q509 NMBIX 67065Q608 # 67065Q707 # 67065Q806 NITNX
Nuveen Flagship All-American Tax Exempt Fund 67065Q889 FLAAX 67065Q871 # 67065Q863 FAACX 67065Q855 #
Nuveen Flagship Limited Term Tax Exempt Fund 67065Q848 FLTDX - - 67065Q830 FLTCX 67065Q822 #
Nuveen Flagship Intermediate Tax Exempt Fund 67065Q814 FINTX - - 67065Q798 FINCX 67065Q780 #
Nuveen Flagship AL Municipal Bond Fund 67065P105 FABTX 67065P204 # 67065P303 # 67065P402 #
Nuveen Flagship AZ Municipal Bond Fund 67065L104 FAZTX 67065L203 # 67065L302 FAZCX 67065L401 NMARX
Nuveen CA Municipal Bond Fund 67065N100 NCAAX* 67065N209 # 67065N308 # 67065N407 NCSPX
Nuveen CA Insured Municipal Bond Fund 67065N506 NCAIX* 67065N605 # 67065N704 # 67065N803 NCIBX
Nuveen Flagship CO Municipal Bond Fund 67065L609 FCOTX 67065L500 # 67065L807 # 67065L880 #
Nuveen Flagship CT Municipal Bond Fund 67065N886 FCTTX 67065N878 # 67065N860 FCTCX 67065N852 #
Nuveen Flagship FL Municipal Bond Fund 67065L708 FLOTX 67065L858 # 67065L641 NFLCX 67065L872 NMFLX
Nuveen Flagship FL Intermediate Municipal Bond Fund 67065L864 FIFAX - # 67065L856 FIFCX 67065L849 #
Nuveen Flagship GA Municipal Bond Fund 67065P501 FGATX 67065P600 # 67065P709 FGACX 67065P808 #
Nuveen Flagship KS Municipal Bond Fund 67065R101 FKSTX 67065R200 # 67065R309 # 67065R408 #
Nuveen Flagship KY Municipal Bond Fund 67065R507 FKYTX 67065R606 # 67065R705 FKYCX 67065R804 #
Nuveen Flagship KY Limited Term Municipal Bond Fund 67065R887 FLKAX - # 67065R879 FLKCX 67065R861 #
Nuveen Flagship LA Municipal Bond Fund 67065P881 FTLAX 67065P873 # 67065P865 FTLCX 67065P857 #
Nuveen MO Municipal Bond Fund 67065L831 NMDAX* 67065L823 # 67065L815 # 67065L799 NMMDX
Nuveen MA Municipal Bond Fund 67065N845 NMAAX* 67065N837 # 67065N829 # 67065N811 NBMAX
Nuveen MA Insured Municipal Bond Fund 67065N795 NMAIX* 67065N787 # 67065N779 # 67065N761 NIMAX
Nuveen Flagship MI Municipal Bond Fund 67065R853 FMITX 67065R846 # 67065R838 FLMCX 67065R820 NMMIX
Nuveen Flagship MO Municipal Bond Fund 67065R812 FMOTX 67065R796 # 67065R788 FMOCX 67065R770 #
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Effective February 1, 1997
<PAGE>
<TABLE>
<CAPTION>
Exhibit A (Page 3)
- ------------------------------------------------
Nuveen Mutual Funds
A SHARE B SHARE C SHARE R SHARE
--------------------------------------------------------------------------------------
CUSIP Quotron CUSIP Quotron CUSIP Quotron CUSIP Quotron
Number Symbol Number Symbol Number Symbol Number Symbol
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Mutual Funds (cont.)
Nuveen Flagship NJ Municipal Bond Fund 67065N753 NNJAX 67065N746 # 67065N738 NNJCX 67065N720 NMNJX
Nuveen Flagship NJ Intermediate
Municipal Bond Fund 67065N712 FNJIX - - 67065N696 # 67065N688 #
Nuveen Flagship NM Municipal Bond Fund 67065L781 FNMTX 67065L773 # 67065L765 # 67065L757 #
Nuveen Flagship NY Municipal Bond Fund 67065N670 NNYAX* 67065N662 # 67065N654 NNYCX 67065N647 NTNYX
Nuveen NY Insured Municipal Bond Fund 67065N639 NNYIX* 67065N621 # 67065N613 # 67065N597 NINYX
Nuveen Flagship NC Municipal Bond Fund 67065P840 FLNCX 67065P832 # 67065P824 FCNCX 67065P816 #
Nuveen Flagship OH Municipal Bond Fund 67065R762 FOHTX 67065R754 # 67065R747 FOHCX 67065R739 NXOHX
Nuveen Flagship PA Municipal Bond Fund 67065L740 FPNTX 67065L732 # 67065L724 FPNCX 67065L716 NBPAX
Nuveen Flagship SC Municipal Bond Fund 67065P790 FLSCX 67065P782 # 67065P774 # 67065P766 #
Nuveen Flagship TN Municipal Bond Fund 67065P758 FTNTX 67065P741 # 67065P733 FTNCX 67065P725 #
Nuveen Flagship VA Municipal Bond Fund 67065L690 FVATX 67065L682 # 67065L674 FVACX 67065L666 NMVAX
Nuveen Flagship WI Municipal Bond Fund 67065R721 FWIAX 67065R713 # 67065R697 # 67065R689 #
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
# Will receive a supplemental listing when the number of class shareholder
accounts is 300 or when the class asset base reaches $1 million.
NOTE: A Quotron Symbol requires 1,000 shareholder accounts or $25 million in
assets.
*Denotes supplemental listing only
Effective February 1, 1997
<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.
WITNESSETH
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 intends to initially offer shares in the eight series,
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, and Nuveen Flagship Virginia Municipal Bond Fund (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 property 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;
1
<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
properties; 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
4
<PAGE>
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,
5
<PAGE>
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 conformation 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
6
<PAGE>
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.
7
<PAGE>
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
8
<PAGE>
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
9
<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 as 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;
10
<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
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
11
<PAGE>
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
12
<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 owned 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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<PAGE>
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.
14
<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:
16
<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
issues 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 the 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
17
<PAGE>
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;
18
<PAGE>
(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 other 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
<PAGE>
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 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
20
<PAGE>
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.
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<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
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 Nuveen Municipal Bond Fund, Nuveen Insured
Municipal Bond Fund, Nuveen Flagship All-American Municipal Bond Fund, Nuveen
Flagship Limited Term Municipal Bond Fund and Nuveen Flagship Intermediate
Municipal Bond Fund, with respect to which
29
<PAGE>
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: /s/ Thomas V. DiBella By: /s/ Peter C. Arrighetti
---------------------------- ----------------------------
THOMAS V. DIBELLA PETER C. ARRIGHETTI
VICE PRESIDENT SENIOR VICE PRESIDENT
NUVEEN FLAGSHIP MULTISTATE
TRUST I
Attest: /s/ Gifford R. Zimmerman By: /s/ O. Walter Renfftlen
---------------------------- ----------------------------
GIFFORD R. ZIMMERMAN O. WALTER RENFFTLEN
ASSISTANT GENERAL COUNSEL VICE PRESIDENT &
CONTROLLER
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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.
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 becomes
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.
32
<PAGE>
EXHIBIT 8
TABLE OF CONTENTS
Page
----
1. Appointment 1
2. Delivery of Documents 1
3. Definitions 3
4. Delivery and Registrations 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. Transactions Not Requiring Instructions, 15
Collections 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>
EXHIBIT 9(a)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
NUVEEN FLAGSHIP MULTISTATE TRUST I
and
STATE STREET BANK AND TRUST COMPANY
1C-Domestic Trust/Series
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
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. Wire Transfer Operating Guidelines............................ 5
6. Data Access and Proprietary Information....................... 6
7. Indemnification............................................... 8
8. Standard of Care.............................................. 9
9. Covenants of the Fund and the Bank............................ 9
10. Termination of Agreement...................................... 10
11. Additional Funds.............................................. 10
12. Assignment.................................................... 10
13. Amendment..................................................... 11
14. Massachusetts Law to Apply.................................... 11
15. Force Majeure................................................. 11
16. Consequential Damages......................................... 11
17. Merger of Agreement........................................... 11
18. Limitations of Liability of the Trustees
or Shareholders............................................... 11
19. Counterparts.................................................. 11
20. Reproduction of Documents..................................... 12
</TABLE>
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of February, 1997, by and between NUVEEN
FLAGSHIP MULTISTATE TRUST I, a Massachusetts business trust, having its
principal office and place of business at, 333 Wacker Drive, Chicago,
Illinois 60606 (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 eight series, the
following of which will be covered by this Agreement, 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,
and Nuveen Flagship Virginia Municipal Bond Fund (each such series, together
with all other series subsequently established by the Fund and made subject to
this Agreement in accordance with Article 11, 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 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 shares of its beneficial interest, $.01 par value,
("Shares"), dividend disbursing agent 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
1
<PAGE>
deliver payment and appropriate documentation thereof to the
Custodian of the Fund authorized pursuant to the Declaration of
Trust of the Fund (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) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with broker-
dealers authorized by the Fund who shall thereby be deemed to be
acting on behalf of the Fund;
(v) 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;
(vi) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(viii) Issue replacement certificates for those certificates alleged to
have been lost, stolen or destroyed upon receipt by the Bank of
indemnification satisfactory to the Bank and protecting the Bank
and the Fund, and the Bank at its option, may issue replacement
certificates in place of mutilated stock certificates upon
presentation thereof and without such indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain pursuant
to SEC Rule 17Ad-10(e) a record of the total number of shares of
the Fund which are authorized, based upon data provided to it by
the Fund, and issued and outstanding. The Bank shall also provide
the Fund on a regular basis with the total number of shares which
are authorized and issued and outstanding and shall have no
obligation, when recording the issuance of shares, to monitor the
issuance of such shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which functions
shall be the sole responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the
2
<PAGE>
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,
receiving and tabulating 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 reporting of such
transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only a
portion of these services and the Fund or its agent may perform these
services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing
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.
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, including but not limited
3
<PAGE>
to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, 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.
4.3 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 and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4
<PAGE>
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective 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. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial
Code
5.1 The Bank is authorized to promptly debit the appropriate Fund account(s)
upon the receipt of a payment order in compliance with the selected
security procedure (the "Security Procedure") chosen for funds transfer and
in the amount of money that the Bank has been instructed to transfer. The
Bank shall execute payment orders in compliance with the Security Procedure
and with the Fund instructions on the execution date provided that such
payment order is received by the customary deadline for processing such a
request, unless the payment order specifies a later time. All payment
orders and communications received after this the customary deadline will
be deemed to have been received the next business day.
5.2 The Fund acknowledges that the Security Procedure it has designated on the
Fund Selection Form was selected by the Fund from security procedures
offered by the Bank. The Fund shall restrict access to confidential
information relating to the Security Procedure to authorized persons as
communicated to the Bank in writing. The Fund must notify the Bank
immediately if it has reason to believe unauthorized persons may have
obtained access to such information or of any change in the Fund's
authorized personnel. The Bank shall verify the authenticity of all Fund
instructions according to the Security Procedure.
5.3 The Bank shall process all payment order on the basis of the account number
contained in the payment order. In the event of a discrepancy between any
name indicated on the payment order and the account number, the account
number shall take precedence and govern.
5.4 The Bank reserves the right to decline to process or delay the processing
of a payment order which (a) is in excess of the collected balance in the
account to be charged at the time of the Bank's receipt of such payment
order; (b) if initiating such payment order would cause the Bank, in the
Bank's sole judgement, to exceed any volume, aggregate dollar, network,
time, credit or similar limits which are applicable to the Bank; or (c) if
the Bank, in good faith, is unable to satisfy itself that the transaction
has been properly authorized.
5.5 The Bank shall use reasonable efforts to act on all authorized requests to
cancel or amend payment orders received in compliance with the Security
Procedure provided that such requests are received in a timely manner
affording the Bank reasonable opportunity to act. However, the Bank assumes
no liability if the request for amendment or cancellation cannot be
satisfied.
5
<PAGE>
5.6 The Bank shall assume no responsibility for failure to detect any erroneous
payment order provided that the Bank complies with the payment order
instructions as received and the Bank complies with the Security Procedure.
The Security Procedure is established for the purpose of authenticating
payment orders only and not for the detection of errors in payment orders.
5.7 The Bank shall assume no responsibility for lost interest with respect to
the refundable amount of any unauthorized payment order, unless the Bank
is notified of the unauthorized payment order within thirty (30) days or
notification by the Bank of the acceptance of such payment order. In no
event (including failure to execute a payment order) shall the Bank be
liable for special, indirect or consequential damages, even if advised of
the possibility of such damages.
5.8 When the Fund initiates or receives Automated Clearing House credit and
debit entries pursuant to these guidelines and the rules of the National
Automated Clearing House Association and the New England Clearing House
Association, the Bank will act as an Originating Depository Financial
Institution and/or receiving depository Financial Institution, as the case
may be, with respect to such entries. Credits given by the Bank with
respect to an ACH credit entry are provisional until the Bank receives
final settlement for such entry from the Federal Reserve Bank. If the Bank
does not receive such final settlement, the Fund agrees that the Bank shall
receive a refund of the amount credited to the Fund in connection with such
entry, and the party making payment to the Fund via such entry shall not be
deemed to have paid the amount of the entry.
5.9 Confirmation of Bank's execution of payment orders shall ordinarily be
provided within twenty four (24) hours notice of which may be delivered
through the Bank's proprietary information systems, or by facsimile or
call-back. Fund must report any objections to the execution of an order
within thirty (30) days.
6. Data Access and Proprietary Information
6.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank
on data bases under the control and ownership of the Bank or other third
party ("Data Access Services") constitute copyrighted, trade secret, or
other proprietary information (collectively, "Proprietary Information") of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees to treat
all Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated in
writing by the Bank and solely in accordance with the Bank's
applicable user documentation;
<PAGE>
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform in a timely manner of such fact and dispose of such
information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder from
being retransmitted to any other computer facility or other location,
except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized transactions
agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under other
federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 6. The obligations of this Section shall
survive any earlier termination of this Agreement.
6.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible
for the contents of such data and the Fund agrees to make no claim against
the Bank arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL
COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS
ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
6.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, then in such event the Bank shall be entitled to rely on
the validity and authenticity of such instruction without undertaking any
further inquiry as long as such instruction is undertaken in conformity
with security procedures established by the Bank from time to time.
7. Indemnification
7.1 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,
<PAGE>
damages, costs, charges, counsel fees, payments, expenses and liability
arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misconduct.
(b) 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, documents or services which (i) are received by
the Bank or its agents or subcontractors, and (ii) have been prepared,
maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer
agent or registrar.
(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.
(f) The negotiations and processing of checks made payable to prospective
or existing Shareholders tendered to the Bank for the purchase of
Shares, such checks are commonly known as "third party checks."
7.2 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, 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.
<PAGE>
7.3 In order that the indemnification provisions contained in this Section 7
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 make any compromise in any case in which the Fund
may be required to indemnify the Bank except with the Fund's prior written
consent.
8. Standard of Care
8.1 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 shall be liable for loss or damage due
to errors only if said errors are caused by its negligence, bad faith, or
willful misconduct or that of its employees and otherwise shall not be held
responsible or liable.
8.2 If the Fund suffers a loss for which the Bank is liable under section 8.1
hereunder the Bank's obligation to the Fund shall include the Fund's
counsel fees and expenses directly arising out of or attributable to such
liability.
9. Covenants of the Fund and the Bank
9.1 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.
9.2 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.
9.3 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 Fund 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.
9
<PAGE>
9.4 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.
9.5 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, 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.
10. Termination of Agreement
10.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
10.2 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.
11. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to the Portfolio 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.
12. Assignment
12.1 Except as provided in Section 12.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
12.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
12.3 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)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(2) or (iii) a
BFDS affiliate; 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.
10
<PAGE>
13. 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.
14. 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.
15. Force Majeure
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.
16. Consequential Damages
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
17. 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.
18. Limitations of Liability of the Trustees and Shareholders
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or Shareholders individually but
are binding only upon the assets and property of the Fund.
19. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
11
<PAGE>
20. Reproduction of Documents
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties
hereto each agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of business,
and that any enlargement, facsimile or further reproduction shall likewise
be admissible in evidence
12
<PAGE>
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: /s/ Anna Kucinskis
--------------------
ATTEST:
/s/ Gifford R. Zimmerman
- ------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
--------------------------
Executive Vice President
ATTEST:
/s/ Steven Cesso
- ------------------------
13
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
<TABLE>
<CAPTION>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
<S> <C> <C>
1. Receives orders for the purchase of Shares. X X
2. Issue Shares and hold Shares in Shareholders X
accounts.
3. Receive redemption requests. X X
4. Effect transactions 1-3 above directly with X X
broker-dealers.
5. Pay over monies to redeeming Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends and distributions. X
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and accurate control X
book for each issue of securities.
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current Shareholders. X X
15. Withhold taxes on U.S. resident and non-resident X
alien accounts.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
<S> <C> <C>
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation X
statements for Shareholders.
18. Provide Shareholder account information. X
19. Blue sky reporting. X
* Such services are more fully described in Section 1.2 (a), (b) and (c) of
the Agreement.
</TABLE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
BY: /s/ Anna Kucinskis
_______________________________
ATTEST:
/s/ Gifford R. Zimmerman
___________________________________
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
_______________________________
Executive Vice President
ATTEST:
/s/ Steven Cesso
____________________________________
15
<PAGE>
STATE STREET BANK AND TRUST COMPANY
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
NUVEEN FLAGSHIP MUNICIPAL TRUST
NUVEEN FLAGSHIP MULTISTATE TRUST I
NUVEEN FLAGSHIP MULTISTATE TRUST II
NUVEEN FLAGSHIP MULTISTATE TRUST III
NUVEEN FLAGSHIP MULTISTATE TRUST IV
General - Fees are based on annual per shareholder account charges for account
maintenance plus out-of-pocket expenses. Annual maintenance charges for various
kinds of mutual funds are given below. There is a minimum charge of $1,000.00
per fund or class of shares. This minimum will be waived for the six-month
period, February 1, 1997 through July 31, 1997.
Annual Maintenance Charges - Fees are billable on a monthly basis at the rate of
1/12 of the annual fee. A charge is made for an account in the month that an
account opens or closes.
Type (A) Fund 0-$75 million in assets $13.50
Type (B) Fund $75-$150 million in assets $15.50
Type (C) Fund Over $150 million in assets $16.50
The per account maintenance fee will be adjusted annually based on each fund's
assets as of the first day of June. Multiple classes of shares will be billed as
a separate Fund.
Other Fees - The following features will each be assessed an additional charge
as an add-on to the annual per account rate if they are present:
12B-1 $ 5.50 per account*
Manually entered share and maintenance transactions $ 1.00 each
Closed Accounts per account, per month $ 0.10
Disaster Recovery/Emergency backup per account
serviced, per year $ 0.25
* This fee will be reduced to $4.50 for the six-month period, February 1, 1997
through July 31, 1997.
Out-of-Pocket Expenses - Out-of-pocket expenses include but are not limited to:
Confirmation statements, postage, forms, ACH, telephone, microfilm, microfiche,
proxy tabulation, checkwriting and other expenses incurred at the specific
direction of the Fund.
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST STATE STREET BANK AND TRUST CO.
By: By:
------------------------------- ----------------------------------
Title: Title:
---------------------------- -------------------------------
Date: Date:
----------------------------- --------------------------------
NUVEEN FLAGSHIP MULTISTATE TRUST I STATE STREET BANK AND TRUST CO.
By: /s/ Anna Kucinskis By: /s/ Ronald E. Logue
------------------------------- ----------------------------------
Title: Vice President Title: Executive Vice President
---------------------------- -------------------------------
Date: 3/24/97 Date: March 20, 1997
----------------------------- --------------------------------
NUVEEN FLAGSHIP MULTISTATE TRUST II STATE STREET BANK AND TRUST CO.
By: By:
------------------------------- ----------------------------------
Title: Title:
---------------------------- -------------------------------
Date: Date:
----------------------------- --------------------------------
NUVEEN FLAGSHIP MULTISTATE TRUST III STATE STREET BANK AND TRUST CO.
By: By:
------------------------------- ----------------------------------
Title: Title:
---------------------------- -------------------------------
Date: Date:
----------------------------- --------------------------------
NUVEEN FLAGSHIP MULTISTATE TRUST IV STATE STREET BANK AND TRUST CO.
By: By:
------------------------------- ----------------------------------
Title: Title:
---------------------------- -------------------------------
Date: Date:
----------------------------- --------------------------------
<PAGE>
EXHIBIT 9(b)
NUVEEN FLAGSHIP MULTISTATE TRUST I
TRANSFER AGENCY AGREEMENT
This agreement is made as of the 31st day of January, 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,
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
1
<PAGE>
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.
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 January 31, 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 or 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
<PAGE>
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.
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.
3
<PAGE>
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 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 reasonable
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;
4
<PAGE>
(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's to monitor the total number of Shares of the Fund sold in each
state and shall provide the Fund reports as to such sales as specified in
Appendix B to this Agreement.
5
<PAGE>
(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 amount of cash
necessary to be wired to the Custodian, representing purchased 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.
6
<PAGE>
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.
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
7
<PAGE>
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.
5.10. The Transfer Agent shall not be responsible for any 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.
8
<PAGE>
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 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 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 payment of any transfer taxes, and
shall be fully protected in acting in accordance with the applicable provisions
of this Agreement.
9
<PAGE>
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 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 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
10
<PAGE>
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.
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.
11
<PAGE>
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.
(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
12
<PAGE>
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 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.
13
<PAGE>
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.
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
14
<PAGE>
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, employee 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.
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. Therefore, 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.
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<PAGE>
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:
(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.
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<PAGE>
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
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
17
<PAGE>
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, 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 Oppenheimer Funds, 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.
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.
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<PAGE>
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
/s/ Gifford R. Zimmerman,
VP and Assistant Secretary By: /s/ Anna Kucinskis, VP
- ---------------------------------- -----------------------------------
Name Title Name Title
Attest: SHAREHOLDER SERVICES, INC.
/s/ Kathryn L. Kluck, AVP By: /s/ Virginia A. Klein
- ---------------------------------- -----------------------------------
Name Title Virginia A. Klein, Senior Vice
President
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<PAGE>
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.
<TABLE>
<CAPTION>
Name Title Signature
- ---- ----- ---------
<S> <C> <C>
- ------------------------ Chairman ------------------------------
- ------------------------ President ------------------------------
- ------------------------ Secretary ------------------------------
- ------------------------ Trustee ------------------------------
- ------------------------ Vice President ------------------------------
- ------------------------ --------------- ------------------------------
- ------------------------ --------------- ------------------------------
- ------------------------ --------------- ------------------------------
- ------------------------ --------------- ------------------------------
- ------------------------ --------------- ------------------------------
- ------------------------ --------------- ------------------------------
- ------------------------ --------------- ------------------------------
</TABLE>
------------------------------, Secretary
Name
20
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
TRANSFER AGENCY AGREEMENT
Appendix B
Transfer Agent Services
<TABLE>
<CAPTION>
Service: SSI Will:
- ------- ---------
<S> <C>
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 maintenance. For address
(Address Changes, Dividend Option changes, prepare and mail a notice of the address change to
Changes, Name Changes, Broker or the former address.
Dealer Changes, etc.)
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.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Service: SSI Will:
- ------- --------
<S> <C>
Correspondence with Shareholders Respond to all shareholder and broker/
and Broker/Dealers dealer written inquiries. Document all
correspondence affecting shareholder
accounts on the Shareholder Accounting
System.
Shareholder Confirms Prepare and mail confirmations of daily
(Daily/Monthly/Quarterly/Annual) account activity. 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
Number Solicitation and Backup taxpayer identification numbers;
Withholding institute backup withholding as required
by IRS regulations, and timely send all
notices.
Regulatory Reporting Compute, prepare, and mail all necessary
reports to shareholders, federal, and/or
state authorities (Forms 1099-DIV,
1099-B, and 1042S).
</TABLE>
2
<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>
3
<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:
Annual Transfer Agent Fees:
Annual-Per-Account Fees*
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
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 until June 30, 1997, after which they are subject to
change, from time to time.
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.
4
<PAGE>
Exhibit 10
September 5, 1997
Nuveen Flagship Multistate Trust I
333 West Wacker Drive
Chicago, Illinois 60606
RE: Registration Statement on Form N-1A
Under the Securities Act of 1933
(File No. 333-16617)
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel for Nuveen Flagship Multistate Trust I, a
Massachusetts voluntary association (commonly known as a business trust) (the
"Trust"), in connection with the above-referenced Registration Statement on Form
N-1A (as amended, the "Registration Statement") which relates to the Class A
Shares, Class B Shares, Class C Shares and Class R Shares of the Nuveen Flagship
Arizona Municipal Bond Fund, the Nuveen Flagship Colorado Municipal Bond Fund,
the Nuveen Flagship Florida Municipal Bond Fund, the Nuveen Maryland Municipal
Bond Fund, the Nuveen Flagship New Mexico Municipal Bond Fund, the Nuveen
Flagship Pennsylvania Municipal Bond Fund, and the Nuveen Flagship Virginia
Municipal Bond Fund, and the Class A Shares, Class C Shares and Class R Shares
of the Nuveen Flagship Florida Intermediate Municipal Bond Fund (collectively,
the "Series"). This opinion is being delivered to you in connection with the
Trust's filing of Post-Effective Amendment No. 1 to the Registration Statement
(the "Amendment") to be filed with the Securities and Exchange Commission on or
about September 8, 1997 pursuant to Rule 485(b) of the Securities Act of 1933
(the "1933 Act"). With your permission, all assumptions and statements of
reliance herein have been made without any independent investigation or
verification on our part except to the extent otherwise expressly stated, and we
express no opinion with respect to the subject matter or accuracy of such
assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Trust;
<PAGE>
Nuveen Flagship Multistate Trust I
September 5, 1997
Page 2
(b) copies, certified by the Secretary of State of the Commonwealth of
Massachusetts, of the Trust's Declaration of Trust and of all
amendments thereto on file with the office of the Secretary of State
(the "Charter");
(c) a certificate executed by Karen L. Healy, an Assistant Secretary of
the Trust, certifying as to, and attaching copies of, the Charter and
the By-Laws (the "By-Laws"), and certain resolutions adopted by the
Board of Trustees of the Trust authorizing the issuance of the Shares;
and
(d) a printer's proof, dated September 5, 1997, of the Amendment.
In our capacity as counsel to the Trust, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinions hereinafter expressed. In all such examinations, we have
assumed the legal capacity of all natural persons executing documents, the
genuineness of all signatures, the authenticity of all original or certified
copies, and the conformity to original or certified copies of all copies
submitted to us as conformed or reproduced copies. As to various questions of
fact relevant to such opinion, we have relied upon, and assume the accuracy of,
certificates and oral or written statements of public officials and officers or
representatives of the Trust. We have assumed that the Registration Statement,
as filed with the Securities and Exchange Commission, will be in substantially
the form of the printer's proof referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Trust's
Charter and By-Laws, and for the consideration described in the Registration
Statement, will be legally issued, fully paid and non-assessable, except that,
as set forth in the Registration Statement, shareholders of the Trust may, under
certain circumstances, be held personally liable for its obligations.
The opinion expressed herein is limited to the laws of the Commonwealth of
Massachusetts.
<PAGE>
Exhibit 11(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 7, 1997, and to all references to our Firm included in or made a
part of this registration statement of Nuveen Flagship Multistate Trust I
(comprising the Nuveen Maryland Municipal Bond Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 4, 1997
<PAGE>
EXHIBIT 11(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement under the Securities Act of 1933, filed under Registration Statement
No. 333-16617, of our reports dated July 11, 1997, relating to the Nuveen
Flagship Multistate Trust I, including 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, and Nuveen Flagship
Virginia Municipal Bond Fund included in the Statement of Additional
Information, and to the references to us under the headings "Financial
Highlights" and "Independent Public Accountants and Custodians" in such
Registration Statement.
DELOITTE & TOUCHE LLP
Dayton, Ohio
September 4, 1997
<PAGE>
EXHIBIT 16
SCHEDULE OF COMPUTATION OF PERFORMANCE FIGURES*
I. YIELD
A. Yield Formula
Yield is computed according the following formula:
A - B 6
YIELD = 2 [(----- + 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 May 31, 1997, for the Class A Shares
of the Fund:
[$ 371,064.64 - $59,672.83] 6
Yield = 2[ (---------------------------- +1) -1]
[$7,569,701.98 X $ 11.42]
= 4.36%
The following is a 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
[$ 1,362.27 - $405.77] 6
Yield = 2[ (----------------------- +1) -1]
[$27,792.37 X $10.94]
= 3.80%
The following is a 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
6
[$14,294.89 - $ 3,735.59] + 1) - 1
Yield = 2[ (---------------------------
[$291,591.78 X $ 10.94]
=4.01%
The following is a 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
[$ 85,394.15 - $10,611.61] 6
Yield = 2 [ (--------------------------- +1) - 1
[$1,741,909.17 X $ 10.94]
=4.76%
2. Colorado Municipal Bond Fund
The following is a 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
[$ 147,830.38 - $20,289.41] 6
Yield = 2[ (---------------------------- +1) -1]
[$3,093,844.68 X$ 10.59]
=4.72%
The following is a 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
[$ 1,614.29 - $432.20] 6
Yield = 2[ (---------------------------- +1) -1]
[$ 33,745.00 X $ 10.16]
=4.17%
The following is a 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
[$ 467.73 - $ 108.89] 6
Yield = 2[ (---------------------------- +1) -1]
[$9,789.41 X $ 10.15]
=4.37%
The following is a 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
[$ 1,941.51 - $199.001 ] 6
Yield = 2[ (---------------------------- +1) -1]
[$40,598.50 X $ 10.16]
=5.12%
2
<PAGE>
3. Florida Municipal Bond Fund
The following is a 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
[$ 1,390,153.60 - $203,582.03] 6
Yield = 2[ ( ------------------------------ +1) -1]
[$28,142,093.65 X $ 11.06]
=4.62%
The following is a 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
[$ 3,217.16 - $ 894.73] 6
Yield = 2[ ( --------------------------- +1) -1]
[$ 65,071.76 X $ 10.61]
=4.07%
The following is a 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
[$ 23,536.94 - $5,719.56] 6
Yield = 2[ ( ------------------------- +1) -1]
[$476,199.11 X $ 10.60]
=4.27%
The following is a 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
[$253,045.45 - $28,173.35] 6
Yield = 2[ ( -------------------------- +1) -1]
[$5,122,406.80 x $ 10.60]
=5.02%
4. Florida Intermediate Municipal Bond Fund
The following is a 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
[$ 36,940.83 - $5,604.13] 6
Yield = 2[ ( ------------------------- +1) -1]
[$893,597.93 X $ 10.40]
=4.08%
The following is a 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
[$ 12,781.26 - $3,250.86] 6
Yield = 2[ ( ------------------------- +1) -1]
[$300,830.47 X $ 10.08]
=3.80%
The following is a 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
[$ 324.25 - $ 35.60] 6
Yield = 2[ ( ------------------------- +1) -1]
[$7,677.23 X $ 10.11]
=4.50%
5. Maryland Municipal Bond Fund
The following is a 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
[$ 58,186.70 - $10,034.83] 6
Yield = 2[ ( ---------------------------- +1) -1]
[$1,258,934.01 x $ 10.70]
=4.33%
The following is a 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
[$ 525.24 - $ 162.15] 6
Yield = 2[ ( ------------------------- +1) -1]
[$ 11,367.71 X $ 10.25]
=3.77%
3
<PAGE>
The following is a 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
[$ 9,488.77 - $2,583.82] 6
Yield = 2[ ( ------------------------- + 1) - 1]
[$205,417.96 X $ 10.24]
= 3.97%
The following is a 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
[$ 195,600.72 - $26,630.86] 6
Yield = 2[ ( ---------------------------- + 1) - 1]
[$4,227,173.03 x $ 10.26]
= 4.72%
6. New Mexico Municipal Bond Fund
The following is the 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
[$ 240,206.54 - $33,020.93] 6
Yield = 2[ ( ---------------------------- + 1) - 1]
[$5,037,967.54 x $ 10.61]
= 4.70%
The following is a 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
[$ 2,879.66 - $ 771.75] 6
Yield = 2[ ( ---------------------------- + 1) - 1]
[$ 60,424.34 x $ 10.15]
= 4.16%
The following is the 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
[$ 729.06 - $ 170.01] 6
Yield = 2[ ( ---------------------------- + 1) - 1]
[$ 15,282.58 x $ 10.61]
= 4.36%
The following is the 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
[$ 168.88 - $ 17.38] 6
Yield = 2[ ( ---------------------------- + 1) - 1]
[$ 3,537.71 x $ 10.17]
= 5.11%
7. Pennsylvania Municipal Bond Fund
The following is the 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
[$ 265,783.29 - $29,013.25] 6
Yield = 2[ ( ---------------------------- + 1) - 1]
[$5,410,427.20 x $ 10.70]
= 4.96%
The following is the 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
[$ 846.94 - $ 200.86] 6
Yield = 2[ ( ---------------------------- + 1) - 1]
[$ 17,225.53 x $ 10.27]
= 4.42%
The following is the 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
[$ 29,559.63 - $ 6,000.10] 6
Yield = 2[ ( ---------------------------- + 1) - 1]
[$ 601,932,30 x $ 10.25]
= 4.63%
4
<PAGE>
The following is the 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
[$ 274,981.60 - $20,636.73] 6
Yield = 2 [ (----------------------------- + 1) -1]
[$ 5,597,823.55 X $ 10.25]
=5.38%
8. Virginia Municipal Bond Fund
The following is the 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
[$ 591,256.41 - $71,848.53] 6
Yield = 2 [ (----------------------------- + 1) -1]
[$11,449,649.60 X $ 11.13]
=4.94%
The following is the 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
[$ 1,529.30 - $ 379.52] 6
Yield = 2 [ (----------------------------- + 1) -1]
[$ 29,613.98 X $ 10.66]
=4.41%
The following is the 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
[$ 56,288.74 - $12,065.38] 6
Yield = 2 [ (----------------------------- + 1) -1]
[$ 1,090,588.38 X $ 10.65]
=4.61%
The following is the 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
[$ 276,163.48 - $24,237.05] 6
Yield = 2 [ (----------------------------- + 1) -1]
[$ 5,348,096.37 X $ 10.66]
=5.36%
5
<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 42.5% for Arizona, Col-
orado and Maryland, 43.0% for Virginia, 39.6% for Florida and Florida Interme-
diate, 44.5% for New Mexico, and 41.5% for Pennsylvania, the Taxable Equivalent
Yields for the Class A Shares, Class B Shares, Class C Shares and Class R
Shares, where applicable, for the 30-day period ended May 31, 1997, where ap-
plicable, are as follows:
Class A Shares Class B Shares Class C Shares Class R Shares
--------------- --------------- --------------- ---------------
Arizona Munic-
ipal Bond
Fund: 4.36% 3.80% 4.01% 4.76%
------- = 7.58% ------- = 6.61% ------- = 6.97% ------- = 8.28%
1 - .425 1 - .425 1 - .425 1 - .425
Colorado Mu-
nicipal Bond 4.72% 4.17% 4.37% 5.12%
Fund: ------- = 8.21% ------- = 7.25% ------- = 7.60% ------- = 8.90%
1 - .425 1 - .425 1 - .425 1 - .425
Florida Munic-
ipal Bond 4.62% 4.07% 4.27% 5.02%
Fund: ------- = 7.65% ------- = 6.74% ------- = 7.07% ------- = 8.31%
1 - .396 1 - .396 1 - .396 1 - .396
Florida Inter-
mediate Mu-
nicipal Bond
Fund: 4.08% n/a 3.80% 4.50%
------- = 6.75% ------- = n/a ------- = 6.29% ------- = 7.45%
1 - .396 n/a 1 - .396 1 - .396
Maryland Mu-
nicipal Bond
Fund: 4.33% 3.77% 3.97% 4.72%
------- = 7.53% ------- = 6.56% ------- = 6.90% ------- = 8.21%
1 - .425 1 - .425 1 - .425 1 - .425
New Mexico
Municipal
Bond Fund: 4.70% 4.16% 4.36% 5.11%
------- = 8.47% ------- = 7.50% ------- = 7.86% ------- = 9.21%
1 - .445 1 - .445 1 - .445 1 - .445
Pennsylvania
Municipal
Bond Fund: 4.96% 4.42% 4.63% 5.38%
------- = 8.48% ------- = 7.56% ------- = 7.91% ------- = 9.20%
1 - .415 1 - .415 1 - .415 1 - .415
Virginia
Municipal
Bond Fund: 4.94% 4.41% 4.61% 5.36%
------- = 8.67% ------- = 7.74% ------- = 8.09% ------- = 9.40%
1 - .430 1 - .430 1 - .430 1 - .430
6
<PAGE>
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
B. Distribution Rate Calculations
1. Arizona Municipal Bond Fund
The following is the distribution rate as of May 31, 1997, based on the maxi-
mum public offering price for the Arizona Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0462
-----------
$11.42
= 4.85%
Class B Distribution Rate = 12 X $.0394
-----------
$10.94
= 4.32%
Class C Distribution Rate = 12 X $.0412
-----------
$10.94
= 4.52%
Class R Distribution Rate = 12 X $.0480
-----------
$10.94
= 5.27%
2. Colorado Municipal Bond Fund
The following is the distribution rate as of May 31, 1997, based on the maxi-
mum public offering price for the Colorado Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0435
-----------
$10.59
= 4.93%
Class B Distribution Rate = 12 X $.0372
-----------
$10.16
= 4.39%
Class C Distribution Rate = 12 X $.0389
-----------
$10.15
= 4.60%
Class R Distribution Rate = 12 X $.0452
-----------
$10.16
= 5.34%
7
<PAGE>
3. Florida Municipal Bond Fund
The following is the distribution rate as of May 31, 1997, based on the maxi-
mum public offering price for the Florida Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0461
-----------
$11.06
= 5.00%
Class B Distribution Rate = 12 X $.0395
-----------
$10.61
= 4.47%
Class C Distribution Rate = 12 X $.0413
-----------
$10.60
= 4.68%
Class R Distribution Rate = 12 X $.0479
-----------
$10.60
= 5.42%
4. Florida Intermediate Municipal Bond Fund
The following is the distribution rate as of May 31, 1997, based on the maxi-
mum public offering price for the Florida Intermediate Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0388
-----------
$10.40
= 4.48%
Class C Distribution Rate = 12 X $.0342
-----------
$10.08
= 4.07%
Class R Distribution Rate = 12 X $.0405
-----------
$10.11
= 4.81%
8
<PAGE>
5. Maryland Municipal Bond Fund
The following is the distribution rate as of May 31, 1997, based on the maxi-
mum public offering price for the Maryland Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0415
-----------
$10.70
= 4.65%
Class B Distribution Rate = 12 X $.0350
-----------
$10.25
= 4.10%
Class C Distribution Rate = 12 X $.0365
-----------
$10.24
= 4.28%
Class R Distribution Rate = 12 X $.0430
-----------
$10.26
= 5.03%
6. New Mexico Municipal Bond Fund
The following is the distribution rate as of May 31, 1997, based on the maxi-
mum public offering price for the New Mexico Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0420
-----------
$10.61
= 4.75%
Class B Distribution Rate = 12 X $.0357
-----------
$10.15
= 4.22%
Class C Distribution Rate = 12 X $.0374
-----------
$10.16
= 4.42%
Class R Distribution Rate = 12 X $.0437
-----------
$10.17
= 5.16%
9
<PAGE>
7. Pennsylvania Municipal Bond Fund
The following is the distribution rate as of May 31, 1997, based on the maxi-
mum public offering price for the Pennsylvania Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0466
-----------
$10.70
= 5.23%
Class B Distribution Rate = 12 X $.0402
-----------
$10.27
= 4.70%
Class C Distribution Rate = 12 X $.0419
-----------
$10.25
= 4.91%
Class R Distribution Rate = 12 X $.0483
-----------
$10.25
= 5.65%
8. Virginia Municipal Bond Fund
The following is the distribution rate as of May 31, 1997, based on the maxi-
mum public offering price for the Virginia Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0476
-----------
$11.13
= 5.13%
Class B Distribution Rate = 12 X $.0410
-----------
$10.66
= 4.62%
Class C Distribution Rate = 12 X $.0427
-----------
$10.65
= 4.81%
Class R Distribution Rate = 12 X $.0494
-----------
$10.66
= 5.56%
10
<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 Shares of the Funds
for the period from inception and the 1, 5 and 10-year periods ended May 31,
1997, whichever applicable, including the current maximum sales charge. For the
Maryland Municipal Bond Fund, Class A, B and C performance reflects actual per-
formance since inception, and Class R performance for periods prior to incep-
tion, adjusted for the differences in sales charges and (in the case of Classes
B and C) fees between the classes. For the Florida Intermediate Municipal Bond
Fund, Class C and R performance reflects actual performance since inception,
and Class A performance for periods prior to inception, adjusted for the dif-
ferences in sales charges and (in the case of Class C) fees between the clas-
ses. For the other Funds, Class B, C and R performance reflects actual perfor-
mance since inception, and Class A performance for periods prior to inception,
adjusted for the differences in sales charges and (in the case of Classes B and
C) fees between the classes.
ANNUAL CLASS A TOTAL RETURNS including the current maximum sales charge:
1. Arizona Municipal Bond Fund:
/1/1/
$1,033
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.32%
$1,000 -----
-----
/1/5/
$1,369
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.48%
$1,000 -----
-----
/1/10/
$2,131
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.86%
$1,000 -----
-----
/1/10.587/
$2,097
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.25%
$1,000 -----
-----
2. Colorado Municipal Bond Fund:
/1/1/
$1,046
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 4.63%
$1,000 -----
-----
/1/5/
$1,369
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.48%
$1,000 -----
-----
/1/10/
$1,988
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.11%
$1,000 -----
-----
/1/10.004/
$1,924
D. Inception through May 31, 1997 = ( ------- ) -1 = 6.76%
$1,000 -----
-----
11
<PAGE>
3. Florida Municipal Bond Fund:
/1/1/
$1,031
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.07%
$1,000 -----
-----
/1/5/
$1,322
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 5.75%
$1,000 -----
-----
/1/6.960/
$1,598
C. Inception through May 31, 1997 = ( ------- ) -1 = 6.97%
$1,000 -----
-----
4. Florida Intermediate Municipal Bond Fund:
/1/1/
A. 1 year ended May 31, 1997 = $1,039
( ------- ) -1 = 3.94%
$1,000 -----
-----
/1/3.326/
$1,172
B. Inception through May 31, 1997 = ( ------- ) -1 = 4.89%
$1,000 -----
-----
5. Maryland Municipal Bond Fund:
/1/1/
$1,022
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 2.18%
$1,000 -----
-----
/1/5/
$1,308
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 5.52%
$1,000 -----
-----
/1/5.254/
$1,330
C. Inception through May 31, 1997 = ( ------- ) -1 = 5.57%
$1,000 -----
-----
6. New Mexico Municipal Bond Fund:
/1/1/
$1,043
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 4.33%
$1,000 -----
-----
/1/4.695/
$1,298
B. Inception through May 31, 1997 = ( ------- ) -1 = 5.71%
$1,000 -----
-----
7. Pennsylvania Municipal Bond Fund:
/1/1/
$1,038
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.81%
$1,000 -----
-----
/1/5/
$1,330
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 5.87%
$1,000 -----
-----
/1/10/
$2,090
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.65%
$1,000 -----
-----
/1/10.587/
$1,996
D. Inception through May 31, 1997 = ( ------- ) -1 = 6.74%
$1,000 -----
-----
12
<PAGE>
8. Virginia Municipal Bond Fund:
/1/1/
$1,037
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.66%
$1,000 -----
-----
/1/5/
$1,343
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.08%
$1,000 -----
-----
/1/10/
$2,104
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.72%
$1,000 -----
-----
/1/11.179/
$2,155
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.11%
$1,000 -----
-----
ANNUAL CLASS B TOTAL RETURNS:
1. Arizona Municipal Bond Fund:
/1/1/
$1,032
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.20%
$1,000 -----
-----
/1/5/
$1,379
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.65%
$1,000 -----
-----
/1/10/
$2,129
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.85%
$1,000 -----
-----
/1/10.587/
$2,096
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.24%
$1,000 -----
-----
2. Colorado Municipal Bond Fund:
/1/1/
$1,047
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 4.67%
$1,000 -----
-----
/1/5/
$1,381
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.67%
$1,000 -----
-----
/1/10/
$1,986
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.10%
$1,000 -----
-----
/1/10.004/
$1,922
D. Inception through May 31, 1997 = ( ------- ) -1 = 6.75%
$1,000 -----
-----
3. Florida Municipal Bond Fund:
/1/1/
$1,030
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.02%
$1,000 -----
-----
/1/5/
$1,333
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 5.92%
$1,000 -----
-----
/1/6.960/
$1,605
C. Inception through May 31, 1997 = ( ------- ) -1 = 7.04%
$1,000 -----
-----
13
<PAGE>
4. Maryland Municipal Bond Fund:
/1/1/
$1,020
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 1.99%
$1,000 -----
-----
/1/5/
$1,310
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 5.55%
$1,000 -----
-----
/1/5.254/
$1,330
C. Inception through May 31, 1997 = ( ------- ) -1 = 5.57%
$1,000 -----
-----
5. New Mexico Municipal Bond Fund:
/1/1/
$1,041
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 4.14%
$1,000 -----
-----
/1/4.695/
$1,298
B. Inception through May 31, 1997 = ( ------- ) -1 = 5.71%
$1,000 -----
-----
6. Pennsylvania Municipal Bond Fund:
/1/1/
$1,039
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.91%
$1,000 -----
-----
/1/5/
$1,342
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.07%
$1,000 -----
-----
/1/10/
$2,089
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.64%
$1,000 -----
-----
/1/10.587/
$1,994
D. Inception through May 31, 1997 = ( ------- ) -1 = 6.74%
$1,000 -----
-----
7. Virginia Municipal Bond Fund:
/1/1/
$1,035
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.54%
$1,000 -----
-----
/1/5/
$1,353
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.24%
$1,000 -----
-----
/1/10/
$2,103
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.71%
$1,000 -----
-----
/1/11.179/
$2,153
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.10%
$1,000 -----
-----
ANNUAL CLASS C TOTAL RETURNS:
1. Arizona Municipal Bond Fund:
/1/1/
$1,073
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 7.28%
$1,000 -----
-----
/1/5/
$1,390
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.81%
$1,000 -----
-----
/1/10/
$2,106
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.73%
$1,000 -----
-----
/1/10.587/
$2,065
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.09%
$1,000 -----
-----
14
<PAGE>
2. Colorado Municipal Bond Fund:
/1/1/
$1,088
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 8.77%
$1,000 -----
-----
/1/5/
$1,403
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 7.01%
$1,000 -----
-----
/1/10/
$2,003
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.20%
$1,000 -----
-----
/1/10.004/
$1,938
D. Inception through May 31, 1997 = ( ------- ) -1 = 6.84%
$1,000 -----
-----
3. Florida Municipal Bond Fund:
/1/1/
$1,070
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 7.00%
$1,000 -----
-----
/1/5/
$1,343
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.08%
$1,000 -----
-----
/1/6.960/
$1,605
C. Inception through May 31, 1997 = ( ------- ) -1 = 7.04%
$1,000 -----
-----
4. Florida Intermediate Municipal Bond Fund:
/1/1/
$1,065
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 6.47%
$1,000 -----
-----
/1/3.326/
$1,185
B. Inception through May 31, 1997 = ( ------- ) -1 = 5.25%
$1,000 -----
-----
5. Maryland Municipal Bond Fund:
/1/1/
$1,059
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 5.92%
$1,000 -----
-----
/1/5/
$1,318
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 5.68%
$1,000 -----
-----
/1/5.254/
$1,337
C. Inception through May 31, 1997 = ( ------- ) -1 = 5.69%
$1,000 -----
-----
6. New Mexico Municipal Bond Fund:
/1/1/
$1,085
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 8.47%
$1,000 -----
-----
/1/4.695/
$1,332
B. Inception through May 31, 1997 = ( ------- ) -1 = 6.28%
$1,000 -----
-----
7. Pennsylvania Municipal Bond Fund:
/1/1/
$1,079
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 7.88%
$1,000 -----
-----
/1/5/
$1,351
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.20%
$1,000 -----
-----
/1/10/
$2,066
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.53%
$1,000 -----
-----
/1/10.587/
$1,965
D. Inception through May 31, 1997 = ( ------- ) -1 = 6.59%
$1,000 -----
-----
15
<PAGE>
8. Virginia Municipal Bond Fund:
/1/1/
$1,076
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 7.61%
$1,000 -----
-----
/1/5/
$1,363
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.38%
$1,000 -----
-----
/1/10/
$2,077
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.59%
$1,000 -----
-----
/1/11.179/
$2,112
D. Inception through May 31, 1997 = ( ------- ) -1 = 6.92%
$1,000 -----
-----
ANNUALIZED CLASS R TOTAL RETURNS:
1. Arizona Municipal Bond Fund:
/1/1/
$1,079
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 7.93%
$1,000 -----
-----
/1/5/
$1,430
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 7.41%
$1,000 -----
-----
/1/10/
$2,226
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 8.33%
$1,000 -----
-----
/1/10.587/
$2,191
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.69%
$1,000 -----
-----
2. Colorado Municipal Bond Fund:
/1/1/
$1,094
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 9.38%
$1,000 -----
-----
/1/5/
$1,431
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 7.43%
$1,000 -----
-----
/1/10/
$2,078
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.59%
$1,000 -----
-----
/1/10.004/
$2,011
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.24%
$1,000 -----
-----
3. Florida Municipal Bond Fund:
/1/1/
$1,077
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 7.66%
$1,000 -----
-----
/1/5/
$1,381
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.67%
$1,000 -----
-----
/1/6.960/
$1,669
C. Inception through May 31, 1997 = ( ------- ) -1 = 7.64%
$1,000 -----
-----
4. Florida Intermediate Municipal Bond Fund:
/1/1/
$1,074
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 7.42%
$1,000 -----
-----
/1/3.326/
$1,211
B. Inception through May 31, 1997 = ( ------- ) -1 = 5.93%
$1,000 -----
-----
16
<PAGE>
5. Maryland Municipal Bond Fund:
/1/1/
$1,069
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 6.88%
$1,000 -----
-----
/1/5/
$1,383
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.70%
$1,000 -----
-----
/1/5.254/
$1,406
C. Inception through May 31, 1997 = ( ------- ) -1 = 6.71%
$1,000 -----
-----
6. New Mexico Municipal Bond Fund:
/1/1/
$1,091
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 9.06%
$1,000 -----
-----
/1/4.695/
$1,357
B. Inception through May 31, 1997 = ( ------- ) -1 = 6.71%
$1,000 -----
-----
7. Pennsylvania Municipal Bond Fund:
/1/1/
$1,084
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 8.44%
$1,000 -----
-----
/1/5/
$1,389
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.80%
$1,000 -----
-----
/1/10/
$2,183
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 8.12%
$1,000 -----
-----
/1/10.587/
$2,084
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.18%
$1,000 -----
-----
8. Virginia Municipal Bond Fund:
/1/1/
$1,083
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 8.28%
$1,000 -----
-----
/1/5/
$1,403
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 7.01%
$1,000 -----
-----
/1/10/
$2,198
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 8.19%
$1,000 -----
-----
/1/11.179/
$2,251
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.53%
$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 Shares of the Funds for
the periods from inception and for the one, five and 10-year periods ended May
31, 1997 whichever applicable, assuming no imposition of sales charges. For the
Maryland Municipal Bond Fund, Class A, B and C 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 (in the case of Classes B and C) fees between the classes. For the Florida
Intermediate Municipal Bond Fund, Class C and R performance reflects actual
performance since inception, and Class A performance for periods prior to
inception, adjusted for the differences in sales charges and (in the case of
Class C) fees between the classes. For the other Funds, Class B, C and R
performance reflects actual performance since inception, and Class A
performance for periods prior to inception, adjusted for the differences in
sales charges and (in the case of Classes B and C) fees between the classes.
17
<PAGE>
CUMULATIVE CLASS A TOTAL RETURNS including the current maximum sales charge:
1. Arizona Municipal Bond Fund:
$1,033 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 3.32%
$1,000 -----
-----
$1,369 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 36.89%
$1,000 ------
------
$2,131 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 113.07%
$1,000 -------
-------
$2,097 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 109.74%
$1,000 -------
-------
2. Colorado Municipal Bond Fund:
$1,046 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 4.63%
$1,000 -----
-----
$1,369 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 36.87%
$1,000 ------
------
$1,988 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 98.81%
$1,000 ------
------
$1,924 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 92.38%
$1,000 ------
------
3. Florida Municipal Bond Fund:
$1,031 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 3.07%
$1,000 -----
-----
$1,322 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 32.24%
$1,000 ------
------
$1,598 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 59.79%
$1,000 ------
------
4. Florida Intermediate Municipal Bond Fund:
$1,039 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 3.94%
$1,000 -----
-----
$1,172 - $1,000
B. Inception through May 31, 1997 = ( ---------------- ) = 17.21%
$1,000 ------
------
5. Maryland Municipal Bond Fund:
$1,022 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 2.18%
$1,000 -----
-----
$1,308 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 30.81%
$1,000 ------
------
$1,330 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 32.97%
$1,000 ------
------
6. New Mexico Municipal Bond Fund:
$1,043 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 4.33%
$1,000 -----
-----
$1,298 - $1,000
B. Inception through May 31, 1997 = ( ---------------- ) = 29.82%
$1,000 ------
------
18
<PAGE>
7. Pennsylvania Municipal Bond Fund:
$1,038 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 3.81%
$1,000 -----
-----
$1,330 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 33.00%
$1,000 ------
------
$2,090 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 109.02%
$1,000 -------
-------
$1,996 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 99.55%
$1,000 ------
------
8. Virginia Municipal Bond Fund:
$1,037 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 3.66%
$1,000 -----
-----
$1,343 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 34.31%
$1,000 ------
------
$2,104 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 110.44%
$1,000 -------
-------
$2,155 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 115.46%
$1,000 -------
-------
CUMULATIVE CLASS B TOTAL RETURNS:
1. Arizona Municipal Bond Fund:
$1,032 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 3.20%
$1,000 -----
-----
$1,379 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 37.95%
$1,000 ------
------
$2,129 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 112.94%
$1,000 -------
-------
$2,096 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 109.59%
$1,000 -------
-------
2. Colorado Municipal Bond Fund:
$1,047 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 4.67%
$1,000 -----
-----
$1,381 - $1,000
B. Inception through May 31, 1997 = ( ---------------- ) = 38.08%
$1,000 ------
------
$1,986 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 98.60%
$1,000 ------
------
$1,922 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 92.16%
$1,000 ------
------
3. Florida Municipal Bond Fund:
$1,030 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 3.02%
$1,000 -----
-----
$1,333 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 33.34%
$1,000 ------
------
$1,605 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 60.55%
$1,000 ------
------
19
<PAGE>
4. Maryland Municipal Bond Fund:
$1,020 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 1.99%
$1,000 -----
-----
$1,310 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 31.02%
$1,000 ------
------
$1,330 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 32.97%
$1,000 ------
------
5. New Mexico Municipal Bond Fund:
$1,041 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 4.14%
$1,000 -----
-----
$1,298 - $1,000
B. Inception through May 31, 1997 = ( ---------------- ) = 29.82%
$1,000 ------
------
6. Pennsylvania Municipal Bond Fund:
$1,039 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 3.91%
$1,000 -----
-----
$1,342 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 34.24%
$1,000 ------
------
$2,089 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 108.88%
$1,000 -------
-------
$1,994 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 99.41%
$1,000 ------
------
7. Virginia Municipal Bond Fund:
$1,035 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 3.54%
$1,000 -----
-----
$1,353 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 35.32%
$1,000 ------
------
$2,103 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 110.25%
$1,000 -------
-------
$2,153 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 115.28%
$1,000 -------
-------
CUMULATIVE CLASS C TOTAL RETURNS:
1. Arizona Municipal Bond Fund:
$1,073 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.28%
$1,000 -----
-----
$1,390 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 39.02%
$1,000 ------
------
$2,106 - $1,000
C. 10 years through May 31, 1997 = ( ---------------- ) = 110.58%
$1,000 -------
-------
$2,065 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 106.53%
$1,000 -------
-------
20
<PAGE>
2. Colorado Municipal Bond Fund:
$1,088 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 8.77%
$1,000 -----
-----
$1,403 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 40.33%
$1,000 ------
------
$2,003 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 100.33%
$1,000 -------
-------
$1,938 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 93.79%
$1,000 ------
------
3. Florida Municipal Bond Fund:
$1,070 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.00%
$1,000 -----
-----
$1,343 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 34.33%
$1,000 ------
------
$1,605 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 60.53%
$1,000 ------
------
4. Florida Intermediate Municipal Bond Fund:
$1,065 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 6.47%
$1,000 -----
-----
$1,185 - $1,000
B. Inception through May 31, 1997 = ( ---------------- ) = 18.54%
$1,000 ------
------
5. Maryland Municipal Bond Fund:
$1,059 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 5.92%
$1,000 -----
-----
$1,318 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 31.80%
$1,000 ------
------
$1,337 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 33.72%
$1,000 ------
------
6. New Mexico Municipal Bond Fund:
$1,085 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 8.47%
$1,000 -----
-----
$1,332 - $1,000
B. Inception through May 31, 1997 = ( ---------------- ) = 33.19%
$1,000 ------
------
7. Pennsylvania Municipal Bond Fund:
$1,079 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.88%
$1,000 -----
-----
$1,351 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 35.07%
$1,000 ------
------
$2,066 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 106.59%
$1,000 -------
-------
$1,965 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 96.50%
$1,000 ------
------
21
<PAGE>
8. Virginia Municipal Bond Fund:
$1,076 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.61%
$1,000 -----
-----
$1,363 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 36.26%
$1,000 ------
------
$2,077 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 107.73%
$1,000 -------
-------
$2,112 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 111.24%
$1,000 -------
-------
CUMULATIVE CLASS R TOTAL RETURNS:
1. Arizona Municipal Bond Fund:
$1,079 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.93%
$1,000 -----
-----
$1,430 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 42.98%
$1,000 ------
------
$2,226 - $1,000
C. 10 years through May 31, 1997 = ( ---------------- ) = 122.56%
$1,000 -------
-------
$2,191 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 119.08%
$1,000 -------
-------
2. Colorado Municipal Bond Fund:
$1,094 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 9.38%
$1,000 -----
-----
$1,431 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 43.08%
$1,000 ------
------
$2,078 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 107.83%
$1,000 -------
-------
$2,011 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 101.11%
$1,000 -------
-------
3. Florida Municipal Bond Fund:
$1,077 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.66%
$1,000 -----
-----
$1,381 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 38.13%
$1,000 ------
------
$1,669 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 66.91%
$1,000 ------
------
4. Florida Intermediate Municipal Bond Fund:
$1,074 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.42%
$1,000 -----
-----
$1,211 - $1,000
B. Inception through May 31, 1997 = ( ---------------- ) = 21.13%
$1,000 ------
------
22
<PAGE>
5. Maryland Municipal Bond Fund:
$1,069 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 6.88%
$1,000 -----
-----
$1,383 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 38.28%
$1,000 ------
------
$1,406 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 40.65%
$1,000 ------
------
6. New Mexico Municipal Bond Fund:
$1,091 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 9.06%
$1,000 -----
-----
$1,357 - $1,000
B. Inception through May 31, 1997 = ( ---------------- ) = 35.71%
$1,000 ------
------
7. Pennsylvania Municipal Bond Fund:
$1,084 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 8.44%
$1,000 -----
-----
$1,389 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 38.92%
$1,000 ------
------
$2,183 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 118.33%
$1,000 -------
-------
$2,084 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 108.43%
$1,000 -------
-------
8. Virginia Municipal Bond Fund:
$1,083 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 8.28%
$1,000 -----
-----
$1,403 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 40.30%
$1,000 ------
------
$2,198 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 119.81%
$1,000 -------
-------
$2,251 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 125.06%
$1,000 -------
-------
23
<PAGE>
VI. TAXABLE EQUIVALENT TOTAL RETURN
A. Taxable Equivalent Total Return Formula
Each Fund's taxable equivalent total return for a specific period is calcu-
lated 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 re-
turn for each such fiscal year by the amount of additional income that a tax-
able 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 pro-
vides a taxable equivalent total return expressed as a percentage.
B. Taxable Equivalent Total Return Calculations
The taxable equivalent total return calculations for the Class R Shares of
the Maryland Fund for the five-year period ended May 31, 1997 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 Municipal Bond Fund Class R
Since 05/31/92
<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>
05/31/92 9.60 1,042 $10,000.00
06/30/92 9.72 0.0467 $48.646 $ -- $48.646 $ 48.646 1,047 $10,173.55 9.74
07/31/92 9.98 0.0467 $48.879 $ -- $48.879 $ 97.525 1,052 $10,494.66 9.96
08/31/92 9.77 0.0425 $44.692 $ -- $44,692 $142.217 1,056 $10,318.47 9.78
09/30/92 9.81 0.0425 $44.886 $ -- $44.886 $187.102 1,061 $10,405.51 9.83
10/31/92 9.58 0.0425 $45.080 $ -- $45.080 $232.182 1,065 $10,206.63 9.58
11/30/92 9.77 0.0425 $45.280 $ -- $45.280 $277.462 1,070 $10,454.29 9.78
12/31/92 9.85 0.0425 0.0102 $45.477 $10.914 $56.391 $322.939 1,076 $10,596.29 9.85
01/31/93 9.91 0.0425 $45.720 $ -- $45.720 $368.659 1,080 $10,706.55 9.91
02/28/93 10.25 0.0425 $45.916 $ -- $45.916 $414.575 1,085 $11,119.75 10.26
03/31/93 10.10 0.0425 $46.106 $ -- $46.106 $460.681 1,089 $11,003.13 10.10
04/03/93 10.19 0.0425 $46.300 $ -- $46.300 $506.982 1,094 $11,147.43 10.20
05/31/93 10.21 0.0425 $46.493 $ -- $46.493 $553.475 $409.1 1,139 $11,624.89 10.21
06/30/93 10.37 0.0425 $48.390 $ -- $48.390 $ 48.390 1,143 $11,855.46 10.37
07/31/93 10.34 0.0425 $48.588 $ -- $48.588 $ 96.978 1,148 $11,869.70 10.35
08/31/93 10.53 0.0425 $48.787 $ -- $48.787 $145.765 1,153 $12,136.60 10.53
09/30/93 10.61 0.0410 $47.256 $ -- $47.256 $193.021 1,157 $12,276.01 10.62
10/31/93 10.58 0.0410 $47.438 $ -- $47.438 $240.458 1,162 $12,288.79 10.57
11/30/93 10.40 0.0410 $47.622 $ -- $47.622 $288.080 1,166 $12,127.24 10.42
12/31/93 10.52 0.0410 0.0233 $47.809 $27.170 $74.979 $335.890 1,173 $12,342.15 10.52
01/31/94 10.62 0.0410 $48.102 $ -- $48.102 $383.991 1,178 $12,507.67 10.60
02/28/94 10.30 0.0410 $48.288 $ -- $48.288 $432.279 1,182 $12,179.12 10.29
03/31/94 9.80 0.0420 $49.662 $ -- $49.662 $481.941 1,188 $11,638.49 9.62
04/30/94 9.77 0.0420 $49.879 $ -- $49.879 $531.821 1,193 $11,652.90 9.74
05/31/94 9.84 0.0425 $50.691 $ -- $50.691 $582.511 $430.6 1,242 $12,218.61 9.82
06/30/94 9.75 0.0425 $52.773 $ -- $52.773 $ 52.773 1,247 $12,159.63 9.75
07/31/94 9.86 0.0425 $53.004 $ -- $53.004 $105.577 1,253 $12,349.71 9.88
08/31/94 9.84 0.0425 $53.232 $ -- $53.232 $159.009 1,258 $12,377.84 9.85
09/30/94 9.64 0.0425 $53.461 $ -- $53.461 $212.470 1,263 $12,179,72 9.64
10/31/94 9.43 0.0435 $54.960 $ -- $54.960 $267.430 1,269 $11,969.59 9.39
11/30/94 9.13 0.0435 $55.215 $ -- $55.215 $322.645 1,275 $11,643.77 9.17
12/31/94 9.37 0.0440 0.0000 $56.115 $ -- $56.115 $378.760 1,281 $12,005.96 9.37
01/31/95 9.61 0.0440 $56.378 $ -- $56.378 $435.138 1,287 $12,369.57 9.66
02/28/95 9.86 0.0440 $56.635 $ -- $56.635 $491.772 1,293 $12,747.70 9.91
03/31/95 9.93 0.0440 $56.886 $ -- $56.886 $548.659 1,299 $12,894.98 9.95
04/30/95 9.93 0.0440 $57.138 $ -- $57.138 $605.797 1,304 $12,952.11 9.93
05/31/95 10.19 0.0440 $57.391 $ -- $57.391 $663.188 $490.2 1,358 $13,838.82 10.19
</TABLE>
24
<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>
06/30/95 10.08 0.0440 $59.755 $ -- $59.755 $ 59.755 1,364 $13,749.18 10.08
07/31/95 10.11 0.0430 $58.652 $ -- $58.652 $118.408 1,370 $13,848.81 10.10
08/31/95 10.16 0.0430 $58.902 $ -- $58.902 $177.310 1,376 $13,975.97 10.20
09/30/95 10.17 0.0430 $59.150 $ -- $59.150 $236.460 1,381 $14,048.71 10.20
10/31/95 10.26 0.0430 $59.400 $ -- $59.400 $295.860 1,387 $14,232.26 10.29
11/30/95 10.37 0.0430 $59.648 $ -- $59.648 $355.507 1,393 $14,444.32 10.40
12/31/95 10.43 0.0430 0.0000 $59.894 $ -- $59.894 $415.402 1,399 $14,587.79 10.43
01/31/96 10.44 0.0425 $59.442 $ -- $59.442 $474.844 1,404 $14,661.22 10.44
02/29/96 10.34 0.0425 $59.684 $ -- $59.684 $534.528 1,410 $14,580.30 10.37
03/31/96 10.18 0.0425 $59.929 $ -- $59.929 $594.457 1,416 $14,414.49 10.20
04/30/96 10.13 0.0425 $60.178 $ -- $60.178 $654.635 1.422 $14,403.93 10.12
05/31/96 10.09 0.0425 $60.431 $ -- $60.431 $715.066 $528.5 1,480 $14,936.60 10.08
06/30/96 10.12 0.0425 $62.914 $ -- $62.914 $ 62.914 1,487 $15,043.92 10.12
07/31/96 10.17 0.0425 $63.179 $ -- $63.179 $126.093 1,493 $15,181.25 10.20
08/31/96 10.13 0.0425 $63.442 $ -- $63.442 $189.535 1,499 $15,184.98 10.13
09/30/96 10.21 0.0425 $63.708 $ -- $63.708 $253.243 1,505 $15,368.54 10.22
10/31/96 10.26 0.0425 $63.973 $ -- $63.973 $317.215 1,511 $15,507.65 10.28
11/30/96 10.37 0.0425 $64.237 $ -- $64.237 $381.453 1,518 $15,738.21 10.36
12/31/96 10.30 0.0425 0.0000 $64.501 $ -- $64.501 $445.954 1,524 $15,696.48 10.30
01/31/97 10.26 0.0425 $64.767 $ -- $64.767 $510.721 1,530 $15,700.16 10.28
02/28/97 10.30 0.0425 $65.035 $ -- $65.035 $575.756 1,537 $15,826.53 10.28
03/31/97 10.17 0.0425 $65.304 $ -- $65.304 $641.059 1,543 $15,692.08 10.17
04/30/97 10.18 0.0430 $66.348 $ -- $66.348 $707.407 1,550 $15,775.21 10.19
05/31/97 10.26 0.0430 $66.634 $ -- $66.634 $774.041 $572.1 1,612 $16,537.93 10.26
Tax Rate: 42.50%
Load: 0.00%
Past Year: Total Return 10.71%
5.0021 Years: Total Return 65.38%
Annualized: 10.59%
</TABLE>
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> NUVEEN FLAGSHIP ARIZONA MUNICIPAL FUND- CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 97173
<INVESTMENTS-AT-VALUE> 103654
<RECEIVABLES> 1979
<ASSETS-OTHER> 221
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 105854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 720
<TOTAL-LIABILITIES> 720
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98682
<SHARES-COMMON-STOCK> 7546
<SHARES-COMMON-PRIOR> 7244
<ACCUMULATED-NII-CURRENT> 8
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (36)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6481
<NET-ASSETS> 82567
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2102
<OTHER-INCOME> 0
<EXPENSES-NET> 296
<NET-INVESTMENT-INCOME> 1806
<REALIZED-GAINS-CURRENT> 38
<APPREC-INCREASE-CURRENT> 176
<NET-CHANGE-FROM-OPS> 2020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1414
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 246
<NUMBER-OF-SHARES-REDEEMED> 471
<SHARES-REINVESTED> 35
<NET-CHANGE-IN-ASSETS> (1654)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 191
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 315
<AVERAGE-NET-ASSETS> 83342
<PER-SHARE-NAV-BEGIN> 10.92
<PER-SHARE-NII> .186
<PER-SHARE-GAIN-APPREC> 0.019
<PER-SHARE-DIVIDEND> (0.185)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.94
<EXPENSE-RATIO> .869
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> NUVEEN FLAGSHIP ARIZONA MUNICIPAL FUND- CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 97173
<INVESTMENTS-AT-VALUE> 103654
<RECEIVABLES> 1979
<ASSETS-OTHER> 221
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 105854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 720
<TOTAL-LIABILITIES> 720
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98682
<SHARES-COMMON-STOCK> 32
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (36)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6481
<NET-ASSETS> 347
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2102
<OTHER-INCOME> 0
<EXPENSES-NET> 296
<NET-INVESTMENT-INCOME> 1806
<REALIZED-GAINS-CURRENT> 38
<APPREC-INCREASE-CURRENT> 176
<NET-CHANGE-FROM-OPS> 2020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1654)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 191
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 315
<AVERAGE-NET-ASSETS> 197
<PER-SHARE-NAV-BEGIN> 10.92
<PER-SHARE-NII> .158
<PER-SHARE-GAIN-APPREC> 0.02
<PER-SHARE-DIVIDEND> (0.158)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.94
<EXPENSE-RATIO> 1.622
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> NUVEEN FLAGSHIP ARIZONA MUNICIPAL FUND- CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 97173
<INVESTMENTS-AT-VALUE> 103654
<RECEIVABLES> 1979
<ASSETS-OTHER> 221
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 105854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 720
<TOTAL-LIABILITIES> 720
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98682
<SHARES-COMMON-STOCK> 291
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<ACCUM-APPREC-OR-DEPREC> 6481
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2102
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<REALIZED-GAINS-CURRENT> 38
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<NET-CHANGE-FROM-OPS> 2020
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<NUMBER-OF-SHARES-SOLD> 35
<NUMBER-OF-SHARES-REDEEMED> 21
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> (1654)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 191
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<GROSS-EXPENSE> 315
<AVERAGE-NET-ASSETS> 3145
<PER-SHARE-NAV-BEGIN> 10.92
<PER-SHARE-NII> .166
<PER-SHARE-GAIN-APPREC> 0.019
<PER-SHARE-DIVIDEND> (0.165)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.94
<EXPENSE-RATIO> 1.419
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 014
<NAME> NUVEEN FLAGSHIP ARIZONA MUNICIPAL FUND- CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 97173
<INVESTMENTS-AT-VALUE> 103654
<RECEIVABLES> 1979
<ASSETS-OTHER> 221
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 105854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 720
<TOTAL-LIABILITIES> 720
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98682
<SHARES-COMMON-STOCK> 1739
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (36)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6481
<NET-ASSETS> 19031
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2102
<OTHER-INCOME> 0
<EXPENSES-NET> 296
<NET-INVESTMENT-INCOME> 1806
<REALIZED-GAINS-CURRENT> 38
<APPREC-INCREASE-CURRENT> 176
<NET-CHANGE-FROM-OPS> 2020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 335
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24
<NUMBER-OF-SHARES-REDEEMED> 68
<SHARES-REINVESTED> 13
<NET-CHANGE-IN-ASSETS> (1654)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 191
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 315
<AVERAGE-NET-ASSETS> 19064
<PER-SHARE-NAV-BEGIN> 10.92
<PER-SHARE-NII> .193
<PER-SHARE-GAIN-APPREC> .019
<PER-SHARE-DIVIDEND> (0.192)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.94
<EXPENSE-RATIO> .669
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> NUVEEN FLAGSHIP COLORADO MUNICIPAL FUND- CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 29445
<INVESTMENTS-AT-VALUE> 31502
<RECEIVABLES> 600
<ASSETS-OTHER> 295
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<TOTAL-ASSETS> 32397
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30610
<SHARES-COMMON-STOCK> 3077
<SHARES-COMMON-PRIOR> 3174
<ACCUMULATED-NII-CURRENT> 23
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (502)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2057
<NET-ASSETS> 31229
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 661
<OTHER-INCOME> 0
<EXPENSES-NET> 81
<NET-INVESTMENT-INCOME> 580
<REALIZED-GAINS-CURRENT> (25)
<APPREC-INCREASE-CURRENT> 98
<NET-CHANGE-FROM-OPS> 653
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 550
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 189
<NUMBER-OF-SHARES-REDEEMED> 306
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 80
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (466)
<OVERDISTRIB-NII-PRIOR> 2
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 58
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 109
<AVERAGE-NET-ASSETS> 31771
<PER-SHARE-NAV-BEGIN> 10.11
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> .03
<PER-SHARE-DIVIDEND> (.17)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> .76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> NUVEEN FLAGSHIP COLORADO MUNICIPAL FUND- CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 29445
<INVESTMENTS-AT-VALUE> 31502
<RECEIVABLES> 600
<ASSETS-OTHER> 295
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32397
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 209
<TOTAL-LIABILITIES> 209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30610
<SHARES-COMMON-STOCK> 44
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 23
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (502)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2057
<NET-ASSETS> 444
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 661
<OTHER-INCOME> 0
<EXPENSES-NET> 81
<NET-INVESTMENT-INCOME> 580
<REALIZED-GAINS-CURRENT> (25)
<APPREC-INCREASE-CURRENT> 98
<NET-CHANGE-FROM-OPS> 653
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 44
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 80
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (466)
<OVERDISTRIB-NII-PRIOR> 2
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 58
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 109
<AVERAGE-NET-ASSETS> 166
<PER-SHARE-NAV-BEGIN> 10.21
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> (.06)
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 023
<NAME> NUVEEN FLAGSHIP COLORADO MUNICIPAL FUND- CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 29445
<INVESTMENTS-AT-VALUE> 31502
<RECEIVABLES> 600
<ASSETS-OTHER> 295
<OTHER-ITEMS-ASSETS> 0
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 209
<TOTAL-LIABILITIES> 209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30610
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 23
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (502)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2057
<NET-ASSETS> 103
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 661
<OTHER-INCOME> 0
<EXPENSES-NET> 81
<NET-INVESTMENT-INCOME> 580
<REALIZED-GAINS-CURRENT> (25)
<APPREC-INCREASE-CURRENT> 98
<NET-CHANGE-FROM-OPS> 653
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 80
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (466)
<OVERDISTRIB-NII-PRIOR> 2
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 58
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 109
<AVERAGE-NET-ASSETS> 88
<PER-SHARE-NAV-BEGIN> 10.13
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> .02
<PER-SHARE-DIVIDEND> (.16)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 024
<NAME> NUVEEN FLAGSHIP COLORADO MUNICIPAL FUND- CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 29445
<INVESTMENTS-AT-VALUE> 31502
<RECEIVABLES> 600
<ASSETS-OTHER> 295
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32397
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 209
<TOTAL-LIABILITIES> 209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30610
<SHARES-COMMON-STOCK> 41
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 23
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (502)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2057
<NET-ASSETS> 413
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 661
<OTHER-INCOME> 0
<EXPENSES-NET> 81
<NET-INVESTMENT-INCOME> 580
<REALIZED-GAINS-CURRENT> (25)
<APPREC-INCREASE-CURRENT> 98
<NET-CHANGE-FROM-OPS> 653
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 80
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (466)
<OVERDISTRIB-NII-PRIOR> 2
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 58
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 109
<AVERAGE-NET-ASSETS> 227
<PER-SHARE-NAV-BEGIN> 10.21
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> (.06)
<PER-SHARE-DIVIDEND> (.14)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> .58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND- CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 332751
<INVESTMENTS-AT-VALUE> 352582
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<TOTAL-ASSETS> 362302
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<SENIOR-LONG-TERM-DEBT> 0
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 337892
<SHARES-COMMON-STOCK> 28018
<SHARES-COMMON-PRIOR> 28269
<ACCUMULATED-NII-CURRENT> 21
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (612)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19831
<NET-ASSETS> 296970
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7349
<OTHER-INCOME> 0
<EXPENSES-NET> 966
<NET-INVESTMENT-INCOME> 6383
<REALIZED-GAINS-CURRENT> 438
<APPREC-INCREASE-CURRENT> (229)
<NET-CHANGE-FROM-OPS> 6592
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5310
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 655
<NUMBER-OF-SHARES-REDEEMED> 2027
<SHARES-REINVESTED> 70
<NET-CHANGE-IN-ASSETS> (11203)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (703)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 639
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 966
<AVERAGE-NET-ASSETS> 302710
<PER-SHARE-NAV-BEGIN> 10.59
<PER-SHARE-NII> .185
<PER-SHARE-GAIN-APPREC> 0.009
<PER-SHARE-DIVIDEND> (0.184)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.60
<EXPENSE-RATIO> 0.835
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 032
<NAME> NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND- CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 332751
<INVESTMENTS-AT-VALUE> 352582
<RECEIVABLES> 9509
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<TOTAL-ASSETS> 362302
<PAYABLE-FOR-SECURITIES> 2928
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 5170
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 337892
<SHARES-COMMON-STOCK> 74
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 21
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (612)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19831
<NET-ASSETS> 785
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7349
<OTHER-INCOME> 0
<EXPENSES-NET> 966
<NET-INVESTMENT-INCOME> 6383
<REALIZED-GAINS-CURRENT> 438
<APPREC-INCREASE-CURRENT> (229)
<NET-CHANGE-FROM-OPS> 6592
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (11203)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (703)
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 966
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<PER-SHARE-NAV-BEGIN> 10.59
<PER-SHARE-NII> .156
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<PER-SHARE-DIVIDEND> (0.158)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.61
<EXPENSE-RATIO> 1.585
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 033
<NAME> NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND- CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 332751
<INVESTMENTS-AT-VALUE> 352582
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<TOTAL-ASSETS> 362302
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 5170
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 337892
<SHARES-COMMON-STOCK> 484
<SHARES-COMMON-PRIOR> 307
<ACCUMULATED-NII-CURRENT> 21
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (612)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19831
<NET-ASSETS> 5130
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7349
<OTHER-INCOME> 0
<EXPENSES-NET> 966
<NET-INVESTMENT-INCOME> 6383
<REALIZED-GAINS-CURRENT> 438
<APPREC-INCREASE-CURRENT> (229)
<NET-CHANGE-FROM-OPS> 6592
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 159
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<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 11203
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (703)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 639
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 966
<AVERAGE-NET-ASSETS> 4358
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> .166
<PER-SHARE-GAIN-APPREC> (0.001)
<PER-SHARE-DIVIDEND> (0.165)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.60
<EXPENSE-RATIO> 1.385
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 034
<NAME> NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND- CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 332751
<INVESTMENTS-AT-VALUE> 352582
<RECEIVABLES> 9509
<ASSETS-OTHER> 211
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 362302
<PAYABLE-FOR-SECURITIES> 2928
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2242
<TOTAL-LIABILITIES> 5170
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 337892
<SHARES-COMMON-STOCK> 5117
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 21
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (612)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19831
<NET-ASSETS> 54247
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7349
<OTHER-INCOME> 0
<EXPENSES-NET> 966
<NET-INVESTMENT-INCOME> 6383
<REALIZED-GAINS-CURRENT> 438
<APPREC-INCREASE-CURRENT> (229)
<NET-CHANGE-FROM-OPS> 6592
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 979
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 130
<NUMBER-OF-SHARES-REDEEMED> 172
<SHARES-REINVESTED> 39
<NET-CHANGE-IN-ASSETS> (11203)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (703)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 639
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 966
<AVERAGE-NET-ASSETS> 53882
<PER-SHARE-NAV-BEGIN> 10.59
<PER-SHARE-NII> .192
<PER-SHARE-GAIN-APPREC> 0.010
<PER-SHARE-DIVIDEND> (0.192)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.60
<EXPENSE-RATIO> 0.635
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 041
<NAME> FLORIDA INTERMEDIATE CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 12523
<INVESTMENTS-AT-VALUE> 12838
<RECEIVABLES> 7201
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20041
<PAYABLE-FOR-SECURITIES> 1612
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2231
<TOTAL-LIABILITIES> 3843
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15898
<SHARES-COMMON-STOCK> 1298
<SHARES-COMMON-PRIOR> 875
<ACCUMULATED-NII-CURRENT> 11
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (27)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315
<NET-ASSETS> 13089
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 205
<OTHER-INCOME> 0
<EXPENSES-NET> 32
<NET-INVESTMENT-INCOME> 173
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 26
<NET-CHANGE-FROM-OPS> 172
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 133
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 718
<NUMBER-OF-SHARES-REDEEMED> 297
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 6558
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62
<AVERAGE-NET-ASSETS> 8769
<PER-SHARE-NAV-BEGIN> 10.10
<PER-SHARE-NII> .153
<PER-SHARE-GAIN-APPREC> (.008)
<PER-SHARE-DIVIDEND> (.155)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.09
<EXPENSE-RATIO> .687
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 043
<NAME> FLORIDA INTERMEDIATE CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 12523
<INVESTMENTS-AT-VALUE> 12838
<RECEIVABLES> 7201
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20041
<PAYABLE-FOR-SECURITIES> 1612
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2231
<TOTAL-LIABILITIES> 3843
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15898
<SHARES-COMMON-STOCK> 298
<SHARES-COMMON-PRIOR> 288
<ACCUMULATED-NII-CURRENT> 11
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (27)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315
<NET-ASSETS> 3008
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 205
<OTHER-INCOME> 0
<EXPENSES-NET> 32
<NET-INVESTMENT-INCOME> 173
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 26
<NET-CHANGE-FROM-OPS> 172
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 39
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40
<NUMBER-OF-SHARES-REDEEMED> 30
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 6558
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62
<AVERAGE-NET-ASSETS> 2900
<PER-SHARE-NAV-BEGIN> 10.10
<PER-SHARE-NII> .137
<PER-SHARE-GAIN-APPREC> .020
<PER-SHARE-DIVIDEND> (.137)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> 1.239
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 044
<NAME> FLORIDA INTERMEDIATE CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 12523
<INVESTMENTS-AT-VALUE> 12838
<RECEIVABLES> 7201
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20041
<PAYABLE-FOR-SECURITIES> 1612
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2231
<TOTAL-LIABILITIES> 3843
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15898
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 11
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (27)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315
<NET-ASSETS> 101
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 205
<OTHER-INCOME> 0
<EXPENSES-NET> 32
<NET-INVESTMENT-INCOME> 173
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 26
<NET-CHANGE-FROM-OPS> 172
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6558
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62
<AVERAGE-NET-ASSETS> 24
<PER-SHARE-NAV-BEGIN> 10.20
<PER-SHARE-NII> .119
<PER-SHARE-GAIN-APPREC> (.087)
<PER-SHARE-DIVIDEND> (.122)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.11
<EXPENSE-RATIO> .559
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 051
<NAME> MARYLAND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 55163
<INVESTMENTS-AT-VALUE> 57338
<RECEIVABLES> 1244
<ASSETS-OTHER> 210
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58792
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 256
<TOTAL-LIABILITIES> 256
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56958
<SHARES-COMMON-STOCK> 1267
<SHARES-COMMON-PRIOR> 1151
<ACCUMULATED-NII-CURRENT> 37
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (635)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2175
<NET-ASSETS> 12977
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1118
<OTHER-INCOME> 0
<EXPENSES-NET> 157
<NET-INVESTMENT-INCOME> 961
<REALIZED-GAINS-CURRENT> (122)
<APPREC-INCREASE-CURRENT> 117
<NET-CHANGE-FROM-OPS> 956
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 202
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 174
<NUMBER-OF-SHARES-REDEEMED> 72
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 1028
<ACCUMULATED-NII-PRIOR> 34
<ACCUMULATED-GAINS-PRIOR> (513)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 105
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 170
<AVERAGE-NET-ASSETS> 12590
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (.17)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 052
<NAME> MARYLAND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 55163
<INVESTMENTS-AT-VALUE> 57338
<RECEIVABLES> 1244
<ASSETS-OTHER> 210
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58792
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 256
<TOTAL-LIABILITIES> 256
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56958
<SHARES-COMMON-STOCK> 15
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 37
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (635)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2175
<NET-ASSETS> 150
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1118
<OTHER-INCOME> 0
<EXPENSES-NET> 157
<NET-INVESTMENT-INCOME> 961
<REALIZED-GAINS-CURRENT> (122)
<APPREC-INCREASE-CURRENT> 117
<NET-CHANGE-FROM-OPS> 956
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1028
<ACCUMULATED-NII-PRIOR> 34
<ACCUMULATED-GAINS-PRIOR> (513)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 105
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 170
<AVERAGE-NET-ASSETS> 83
<PER-SHARE-NAV-BEGIN> 10.29
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 1.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 053
<NAME> MARYLAND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 55163
<INVESTMENTS-AT-VALUE> 57338
<RECEIVABLES> 1244
<ASSETS-OTHER> 210
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58792
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 256
<TOTAL-LIABILITIES> 256
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56958
<SHARES-COMMON-STOCK> 205
<SHARES-COMMON-PRIOR> 194
<ACCUMULATED-NII-CURRENT> 37
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (635)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2175
<NET-ASSETS> 2103
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1118
<OTHER-INCOME> 0
<EXPENSES-NET> 157
<NET-INVESTMENT-INCOME> 961
<REALIZED-GAINS-CURRENT> (122)
<APPREC-INCREASE-CURRENT> 117
<NET-CHANGE-FROM-OPS> 956
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 29
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19
<NUMBER-OF-SHARES-REDEEMED> 10
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 1028
<ACCUMULATED-NII-PRIOR> 34
<ACCUMULATED-GAINS-PRIOR> (513)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 105
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 170
<AVERAGE-NET-ASSETS> 2021
<PER-SHARE-NAV-BEGIN> 10.24
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.15)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.24
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 054
<NAME> MARYLAND CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 55163
<INVESTMENTS-AT-VALUE> 57338
<RECEIVABLES> 1244
<ASSETS-OTHER> 210
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58792
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 256
<TOTAL-LIABILITIES> 256
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56958
<SHARES-COMMON-STOCK> 4222
<SHARES-COMMON-PRIOR> 4264
<ACCUMULATED-NII-CURRENT> 37
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (635)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2175
<NET-ASSETS> 43306
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1118
<OTHER-INCOME> 0
<EXPENSES-NET> 157
<NET-INVESTMENT-INCOME> 961
<REALIZED-GAINS-CURRENT> (122)
<APPREC-INCREASE-CURRENT> 117
<NET-CHANGE-FROM-OPS> 956
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 726
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 86
<NUMBER-OF-SHARES-REDEEMED> 173
<SHARES-REINVESTED> 45
<NET-CHANGE-IN-ASSETS> 1028
<ACCUMULATED-NII-PRIOR> 34
<ACCUMULATED-GAINS-PRIOR> (513)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 105
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 170
<AVERAGE-NET-ASSETS> 43483
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.17)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.26
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 061
<NAME> NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL- CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 48440
<INVESTMENTS-AT-VALUE> 50474
<RECEIVABLES> 1628
<ASSETS-OTHER> 183
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52285
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 304
<TOTAL-LIABILITIES> 304
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51228
<SHARES-COMMON-STOCK> 5003
<SHARES-COMMON-PRIOR> 5048
<ACCUMULATED-NII-CURRENT> 10
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1291)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2034
<NET-ASSETS> 50807
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 992
<OTHER-INCOME> 0
<EXPENSES-NET> 134
<NET-INVESTMENT-INCOME> 858
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> 313
<NET-CHANGE-FROM-OPS> 1181
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 851
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 208
<NUMBER-OF-SHARES-REDEEMED> 279
<SHARES-REINVESTED> 27
<NET-CHANGE-IN-ASSETS> 717
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (1301)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 93
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 158
<AVERAGE-NET-ASSETS> 50966
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> .07
<PER-SHARE-DIVIDEND> (.17)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> .79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 062
<NAME> NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL- CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 48440
<INVESTMENTS-AT-VALUE> 50474
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<TOTAL-ASSETS> 52285
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 304
<TOTAL-LIABILITIES> 304
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51228
<SHARES-COMMON-STOCK> 65
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 10
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1291)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2034
<NET-ASSETS> 657
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 992
<OTHER-INCOME> 0
<EXPENSES-NET> 134
<NET-INVESTMENT-INCOME> 858
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> 313
<NET-CHANGE-FROM-OPS> 1181
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 65
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 717
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (1301)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 93
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 158
<AVERAGE-NET-ASSETS> 292
<PER-SHARE-NAV-BEGIN> 10.24
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> (.10)
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 063
<NAME> NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL- CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 48440
<INVESTMENTS-AT-VALUE> 50474
<RECEIVABLES> 1628
<ASSETS-OTHER> 183
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52285
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 304
<TOTAL-LIABILITIES> 304
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51228
<SHARES-COMMON-STOCK> 15
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 10
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1291)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2034
<NET-ASSETS> 155
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 992
<OTHER-INCOME> 0
<EXPENSES-NET> 134
<NET-INVESTMENT-INCOME> 858
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> 313
<NET-CHANGE-FROM-OPS> 1181
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 717
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (1301)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 93
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 158
<AVERAGE-NET-ASSETS> 116
<PER-SHARE-NAV-BEGIN> 10.23
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> (.08)
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 1.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 064
<NAME> NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL- CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 48440
<INVESTMENTS-AT-VALUE> 50474
<RECEIVABLES> 1628
<ASSETS-OTHER> 183
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52285
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 304
<TOTAL-LIABILITIES> 304
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51228
<SHARES-COMMON-STOCK> 36
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 10
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1291)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2034
<NET-ASSETS> 362
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 992
<OTHER-INCOME> 0
<EXPENSES-NET> 134
<NET-INVESTMENT-INCOME> 858
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> 313
<NET-CHANGE-FROM-OPS> 1181
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 717
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (1301)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 93
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 158
<AVERAGE-NET-ASSETS> 23
<PER-SHARE-NAV-BEGIN> 10.23
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> (.13)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.17
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 071
<NAME> PENNSYLVANIA CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 112894
<INVESTMENTS-AT-VALUE> 118189
<RECEIVABLES> 2173
<ASSETS-OTHER> 129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120491
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 893
<TOTAL-LIABILITIES> 893
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114425
<SHARES-COMMON-STOCK> 5429
<SHARES-COMMON-PRIOR> 4331
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (149)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5295
<NET-ASSETS> 55667
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2411
<OTHER-INCOME> 0
<EXPENSES-NET> 202
<NET-INVESTMENT-INCOME> 2209
<REALIZED-GAINS-CURRENT> 143
<APPREC-INCREASE-CURRENT> 365
<NET-CHANGE-FROM-OPS> 2717
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 999
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 224
<NUMBER-OF-SHARES-REDEEMED> 159
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 1522
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> (199)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 213
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 351
<AVERAGE-NET-ASSETS> 54591
<PER-SHARE-NAV-BEGIN> 10.21
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> (.19)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 072
<NAME> PENNSYLVANIA CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 112894
<INVESTMENTS-AT-VALUE> 118189
<RECEIVABLES> 2173
<ASSETS-OTHER> 129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120491
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 893
<TOTAL-LIABILITIES> 893
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114425
<SHARES-COMMON-STOCK> 22
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (149)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5295
<NET-ASSETS> 229
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2411
<OTHER-INCOME> 0
<EXPENSES-NET> 202
<NET-INVESTMENT-INCOME> 2209
<REALIZED-GAINS-CURRENT> 143
<APPREC-INCREASE-CURRENT> 365
<NET-CHANGE-FROM-OPS> 2717
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1522
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> (199)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 213
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 351
<AVERAGE-NET-ASSETS> 134
<PER-SHARE-NAV-BEGIN> 10.21
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> .06
<PER-SHARE-DIVIDEND> (.16)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 073
<NAME> PENNSYLVANIA CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 112894
<INVESTMENTS-AT-VALUE> 118189
<RECEIVABLES> 2173
<ASSETS-OTHER> 129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120491
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 893
<TOTAL-LIABILITIES> 893
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114425
<SHARES-COMMON-STOCK> 617
<SHARES-COMMON-PRIOR> 509
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (149)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5295
<NET-ASSETS> 6320
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2411
<OTHER-INCOME> 0
<EXPENSES-NET> 202
<NET-INVESTMENT-INCOME> 2209
<REALIZED-GAINS-CURRENT> 143
<APPREC-INCREASE-CURRENT> 365
<NET-CHANGE-FROM-OPS> 2717
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 98
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 87
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<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 1522
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> (199)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 213
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 351
<AVERAGE-NET-ASSETS> 6015
<PER-SHARE-NAV-BEGIN> 10.20
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> .05
<PER-SHARE-DIVIDEND> (.17)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 074
<NAME> PENNSYLVANIA CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 112894
<INVESTMENTS-AT-VALUE> 118189
<RECEIVABLES> 2173
<ASSETS-OTHER> 129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120491
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 893
<TOTAL-LIABILITIES> 893
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114425
<SHARES-COMMON-STOCK> 5596
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (149)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5295
<NET-ASSETS> 57383
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2411
<OTHER-INCOME> 0
<EXPENSES-NET> 202
<NET-INVESTMENT-INCOME> 2209
<REALIZED-GAINS-CURRENT> 143
<APPREC-INCREASE-CURRENT> 365
<NET-CHANGE-FROM-OPS> 2717
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1082
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 138
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<SHARES-REINVESTED> 49
<NET-CHANGE-IN-ASSETS> 1522
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> (199)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 213
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 351
<AVERAGE-NET-ASSETS> 57075
<PER-SHARE-NAV-BEGIN> 10.21
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> .03
<PER-SHARE-DIVIDEND> (.19)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> .39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 081
<NAME> NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 179999
<INVESTMENTS-AT-VALUE> 189099
<RECEIVABLES> 3702
<ASSETS-OTHER> 6
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<TOTAL-LIABILITIES> 1471
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 182662
<SHARES-COMMON-STOCK> 11471
<SHARES-COMMON-PRIOR> 10882
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (432)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9100
<NET-ASSETS> 122252
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3907
<OTHER-INCOME> 0
<EXPENSES-NET> 438
<NET-INVESTMENT-INCOME> 3469
<REALIZED-GAINS-CURRENT> 260
<APPREC-INCREASE-CURRENT> 421
<NET-CHANGE-FROM-OPS> 4150
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2206
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 368
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<SHARES-REINVESTED> 63
<NET-CHANGE-IN-ASSETS> (4372)
<ACCUMULATED-NII-PRIOR> (1)
<ACCUMULATED-GAINS-PRIOR> (540)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 343
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 555
<AVERAGE-NET-ASSETS> 122413
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> .191
<PER-SHARE-GAIN-APPREC> .039
<PER-SHARE-DIVIDEND> (.190)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.66
<EXPENSE-RATIO> .72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 082
<NAME> NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 179999
<INVESTMENTS-AT-VALUE> 189099
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<TOTAL-LIABILITIES> 1471
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 182662
<SHARES-COMMON-STOCK> 36
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (432)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9100
<NET-ASSETS> 381
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3907
<OTHER-INCOME> 0
<EXPENSES-NET> 438
<NET-INVESTMENT-INCOME> 3469
<REALIZED-GAINS-CURRENT> 260
<APPREC-INCREASE-CURRENT> 421
<NET-CHANGE-FROM-OPS> 4150
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 37
<NUMBER-OF-SHARES-REDEEMED> 2
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (4372)
<ACCUMULATED-NII-PRIOR> (1)
<ACCUMULATED-GAINS-PRIOR> (540)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 343
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 555
<AVERAGE-NET-ASSETS> 184
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> .163
<PER-SHARE-GAIN-APPREC> .041
<PER-SHARE-DIVIDEND> (.164)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.66
<EXPENSE-RATIO> 1.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 083
<NAME> NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 179999
<INVESTMENTS-AT-VALUE> 189099
<RECEIVABLES> 3702
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 192807
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1471
<TOTAL-LIABILITIES> 1471
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 182662
<SHARES-COMMON-STOCK> 1098
<SHARES-COMMON-PRIOR> 1161
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (432)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9100
<NET-ASSETS> 11700
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3907
<OTHER-INCOME> 0
<EXPENSES-NET> 438
<NET-INVESTMENT-INCOME> 3469
<REALIZED-GAINS-CURRENT> 260
<APPREC-INCREASE-CURRENT> 421
<NET-CHANGE-FROM-OPS> 4150
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 195
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 103
<NUMBER-OF-SHARES-REDEEMED> 279
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> (4372)
<ACCUMULATED-NII-PRIOR> (1)
<ACCUMULATED-GAINS-PRIOR> (540)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 343
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 555
<AVERAGE-NET-ASSETS> 11950
<PER-SHARE-NAV-BEGIN> 10.61
<PER-SHARE-NII> .172
<PER-SHARE-GAIN-APPREC> .039
<PER-SHARE-DIVIDEND> (.171)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.65
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 084
<NAME> NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 179999
<INVESTMENTS-AT-VALUE> 189099
<RECEIVABLES> 3702
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 192807
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1471
<TOTAL-LIABILITIES> 1471
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 182662
<SHARES-COMMON-STOCK> 5349
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (432)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9100
<NET-ASSETS> 57002
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3907
<OTHER-INCOME> 0
<EXPENSES-NET> 438
<NET-INVESTMENT-INCOME> 3469
<REALIZED-GAINS-CURRENT> 260
<APPREC-INCREASE-CURRENT> 421
<NET-CHANGE-FROM-OPS> 4150
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1060
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 70
<NUMBER-OF-SHARES-REDEEMED> 167
<SHARES-REINVESTED> 45
<NET-CHANGE-IN-ASSETS> (4372)
<ACCUMULATED-NII-PRIOR> (1)
<ACCUMULATED-GAINS-PRIOR> (540)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 343
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 555
<AVERAGE-NET-ASSETS> 56775
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> .198
<PER-SHARE-GAIN-APPREC> .040
<PER-SHARE-DIVIDEND> (.198)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.66
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99(a)
NUVEEN FLAGSHIP MULTISTATE TRUST I
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Timothy R. Schwertfeger
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Anthony T. Dean
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Lawrence H. Brown
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) her true and lawful attorney-in-fact and agent, for her on her
behalf and in her name, place and stead, in any and all capacities, to sign,
execute and affix her seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as she might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set her hand this 30th day of January, 1997.
/s/ Anne E. Impellizzeri
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be her voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Peter R. Sawers
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Robert P. Bremner
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ William J. Schneider
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
---------------
POWER OF ATTORNEY
---------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his behalf
and in his name, place and stead, in any and all capacities, to sign, execute
and affix his seal thereto and file one or more Registration Statements on Form
N-1A, under the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in order to effectuate
the same as fully to all intents and purposes as he might or could do if
personally present, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 1st day of July, 1997.
/s/ Judith M. Stockdale
------------------------------
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 1st day of July, 1997, personally appeared before me, a Notary Public in
and for said County and State, the person named above who is known to me to be
the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
------------------------------
My Commission Expires: 10/26/97
<PAGE>
EXHIBIT 99(b)
Certified Resolution
The undersigned, Gifford R. Zimmerman, hereby certifies, on behalf of Nuveen
Flagship Multistate Trust I (the "Fund"), (1) that he is the duly elected,
qualified and acting Assistant Secretary of the Fund, and that as such Assistant
Secretary he has custody of its corporate books and records, (2) that attached
to this Certificate is a true and correct copy of a resolution duly adopted by
the Board of Trustees of the Fund at a meeting held on January 30, 1997, and (3)
that said resolution has not been amended or rescinded and remains in full force
and effect.
July 15, 1997
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Assistant Secretary
<PAGE>
FURTHER RESOLVED, that each member of the Board and officer of the Fund who may
be required to execute the registration statement on Form N-1A, or any amendment
or amendments thereto, be, and each of them hereby is, authorized to execute a
power of attorney appointing Timothy R. Schwertfeger, Anthony T. Dean, Bruce P.
Bedford, Larry W. Martin, Gifford R. Zimmerman, and Thomas S. Harman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the registration statement, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done, as fully to all intents and purposes as he might or could
do in person, and ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
<PAGE>
EXHIBIT 99(c)
NUVEEN UNIT TRUSTS
NUVEEN MUTUAL FUNDS
NUVEEN EXCHANGE-TRADED FUNDS
NUVEEN ADVISORY CORP.
NUVEEN INSTITUTIONAL ADVISORY CORP.
NUVEEN ASSET MANAGEMENT INC.
JOHN NUVEEN & CO. INCORPORATED
----------------------------
Standards and Procedures
Regarding
Conflicts of Interest
----------------------------
Code of Ethics
And
Reporting Requirements
The Securities and Exchange Commission, in Investment Company Act Release No.
11421, has adopted Rule 17j-1 "to provide guidance to investment companies as to
the minimum standards of conduct appropriate for persons who have access to
information regarding the purchase and sale of portfolio securities by
investment companies." The Rule requires registered investment companies, their
investment advisers and their principal underwriters to adopt codes of ethics
and reporting requirements to guard against violations of the standards set
forth in the Rule and the principles provided below and to establish guidelines
for the conduct of persons who (1) may obtain material non-public information
concerning securities held by or considered for purchase or sale by any series
of the Nuveen Unit Trusts (the "Trusts") or by any of the Nuveen-sponsored
registered management investment companies (the "Funds") or non-management
investment company clients ("Clients") to which Nuveen Advisory Corp., Nuveen
Asset Management Inc. or Nuveen Institutional Advisory Corp. act as investment
advisers or (2) may make any recommendation or participate in the determination
of which recommendation shall be made concerning the purchase or sale of any
securities by a Trust, Fund or Client. The equity Funds advised pursuant to
subadvisory agreements with non-controlled advisers ("Subadvised Funds")
acknowledge that, in lieu of being subject to this Code of Ethics, all employees
and other persons affiliated with such subadvisers shall be subject to the
subadviser's Code of Ethics. In addition, due to limited access to information
regarding the subadvisers' portfolio activities concerning equity securities,
Nuveen personnel who are access persons of the Subadvised Funds shall not be
required to preclear any transactions solely for being access persons of such
Funds. This Code of Ethics (the "Code") consists of six sections--1. Statement
of General Principles; 2. Definitions; 3. Exempted Transactions; 4.
Prohibitions; 5. Reporting Requirements; and 6. Sanctions.
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I. Statement of General Principles
The Code is based upon the principle that the officers, directors and
employees of a Fund, Nuveen Advisory Corp., Nuveen Institutional Advisory
Corp., Nuveen Asset Management Inc. and John Nuveen & Co. Incorporated owe
a fiduciary duty to, among others, the unitholders and shareholders of the
Trusts and Funds and the Clients, to conduct their personal securities
transactions in a manner which does not interfere with Trust, Fund or
Client portfolio transactions or otherwise take unfair advantage of their
relationship to the Trusts, Funds or Clients. In accordance with this
general principle, persons covered by the Code must: (1) place the
interests of unitholders and shareholders of the Trusts and Funds and the
Clients first; (2) execute personal securities transactions in compliance
with the Code; (3) avoid any actual or potential conflict of interest and
any abuse of their positions of trust and responsibility; and (4) not take
inappropriate advantage of their positions. It bears emphasis that
technical compliance with the Code's procedures will not automatically
insulate from scrutiny trades which show a pattern of abuse of the
individual's fiduciary duties to the Trust, Fund or Client. In addition, a
violation of the general principles of the Code may constitute a punishable
violation.
II. Definitions
As used herein:
(1) "Access person" shall mean:
(a) Any director, officer or advisory person of any Fund or Trust or
of Nuveen Advisory Corp., Nuveen Institutional Advisory Corp. or
Nuveen Asset Management Inc.
(b) Any director or officer of John Nuveen & Co. Incorporated who in
the ordinary course of his business makes, participates in or
obtains information regarding the purchase or sale of securities
for the Funds, Trusts or Clients or whose functions or duties as
part of the ordinary course of his business relate to the making
of any recommendation to such Fund, Trust or Client regarding the
purchase or sale of securities.
A list of access persons of all entities other than the Flagship
Utility Income Fund ("Utility Fund") is attached as Exhibit A. A list
of persons deemed to be access persons of the Utility Fund is attached
as Exhibit B ("Utility Fund Access Persons").
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For purposes of this section "advisory person" shall mean:
(a) Any employee of a Fund, of Nuveen Advisory Corp., of Nuveen
Institutional Advisory Corp., of Nuveen Asset Management Inc. or of
John Nuveen & Co. Incorporated who, in connection with his or her
regular functions or duties, makes, participates in, or obtains
information, regarding the purchase or sale of a security by a Trust,
Fund or Client or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
(b) Any director or officer of John Nuveen & Co. Incorporated who obtains
information concerning recommendations made to such Trust, Fund or
Client with respect to the purchase or sale of a security.
(2) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the recommendation,
when such person considers making such recommendation.
(3) Beneficial ownership shall be interpreted in accordance with the definition
set forth in Rule 16a-1(a)(2) under the Securities Exchange Act of 1934.
Section 16a-1(a)(2) specifies that a person will be deemed to be the
"beneficial owner" of securities that such individual, directly or
indirectly, through any contract, arrangement, understanding, relationship
or otherwise has or shares in the opportunity to profit or share in any
profit derived from a transaction in the subject security. In addition, a
person will be deemed to be the beneficial owner of securities:
(a) held by members of such person's immediate family sharing the same
household;
(b) held by a general or limited partnership for which such person is a
general partner;
(c) held in a trust:
(i) of which such person is trustee and the trustee or members of
his or her immediate family have a pecuniary interest in the
trust;
(ii) in which such person has a vested beneficial interest or shares
in investment control with the trustee;
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4
(iii) of which such person is settlor and which the settlor has
the power to revoke the trust without consent of the
beneficiaries; or
(iv) certain other trusts as set forth in Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934.
A person will not be deemed to be the beneficial owner of
securities held in the portfolio of a registered investment
company solely by reason of his or her ownership of shares or
units of such registered investment company.
(4) "Security" shall mean any stock, bond, debenture, evidence of
indebtedness or in general any other instrument defined to be a
security in Section 2(a)(36) of the Investment Company Act of 1940
except that it shall not include securities issued by the Government
of the United States, short term debt securities which are "government
securities" within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940, bankers' acceptances, bank certificates of
deposit, commercial paper and shares of registered open-end
investment companies.
(5) "Purchase of sale of a security" shall include any transaction in
which a beneficial interest in a security is acquired or disposed of,
including but not limited to the writing of an option to purchase or
sell a security or the cancellation of a good-until-canceled order.
(6) "Control" shall have the same meaning as set forth in Section 2(a) (9)
of the Investment Company Act of 1940.
(7) "Investment personnel" shall mean any employee of Nuveen Advisory
Corp., Nuveen Institutional Advisory Corp., Nuveen Asset Management
Inc. or John Nuveen and Co. Incorporated who acts as a portfolio
manager or as an analyst or trader who provides information or advice
to the portfolio manager or who helps execute the portfolio manager's
decisions. A list of investment personnel of all entities other than
the Utility Fund is included in Exhibit A. A list of persons deemed to
be investment personnel of the Utility Fund is included in Exhibit B.
Investment personnel are also access persons by definition.
(8) "Portfolio manager" shall mean any employee of Nuveen Advisory Corp.,
Nuveen Institutional Advisory Corp., Nuveen Asset Management Inc. or
John Nuveen & Co. Incorporated who is entrusted with the direct
responsibility and authority to make investment decisions affecting a
Trust, Fund or Client. A list of portfolio managers of all entities
other than the Utility Fund is included in Exhibit A. A list
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5
of persons deemed to be portfolio managers of the Utility Fund is
included in Exhibit B. Portfolio managers are also investment
personnel and access persons by definition.
(9) "Utility Fund Eligible Securities" shall include preferred and common
stock of companies in the public utilities industry, such as companies
principally engaged in the production, transmission or distribution of
electric energy, gas, water, or communications services or in solid
waste disposal.
III. Exempted Transactions
The prohibitions of Section IV of this Code shall not apply to:
(1) Purchases or sales affecting any account over which the party involved
has no direct or indirect influence or control;
(2) Purchases or sales which are non-volitional on the part of either the
party involved or a Trust, Fund or Client;
(3) Purchases which are part of an automatic dividend reinvestment plan.
(4) Purchases effected upon the exercise or rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
IV. Prohibitions
(1) Unless such transaction is exempted above or is previously cleared in
the manner described in paragraph (9) below, no access person shall
purchase or sell the following securities for his or her own account
or for any account in which he or she has any beneficial ownership:
(a) securities offered in a private placement;
(b) shares of The John Nuveen Company;
(c) municipal securities (other than variable rate securities with
reset periods of 6 months or less);
(d) shares of a Nuveen-sponsored exchange-traded fund (excluding
preferred shares of those funds); or
(e) Utility fund Eligible Securities (for Utility Fund Access Persons
only).
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6
The purchase of securities identified in paragraph (1)(a) by
investment personnel must also comply with paragraph (4) below.
Directors of the Funds who are not "interested persons" of the Funds
are not subject to the prohibition of subparagraph (a) above and are
only subject to subparagraphs (c) and (e) to the extent such
director purchases or sells a security that he knows, or reasonably
should have known, is being considered for purchase or sale by a
Trust, Fund or Client. Individuals who are only non-interested
directors of the Nuveen open-end Funds shall not be subject to the
prohibition of subparagraph (d) above.
(2) No portfolio manager shall execute a securities transaction on a day
during which a Trust, Fund or Client that is managed or surveyed by
the company he is employed by has a pending "buy" or "sell" order in
that same security until that order is executed or withdrawn.
However, this prohibition shall not apply to securities transactions
involving a security held by a Fund and invested and managed under a
subadvisory agreement unless the portfolio manager knows, or
reasonably should have known, that the Fund has a pending "buy" or
"sell" order involving such security. No other access person shall
execute a securities transaction on a day during which a Trust, Fund
or Client has a pending "buy" or "sell" order in that same security
until that order is executed or withdrawn if that person knows, or
reasonably should have known, an order is pending. In addition, only
Utility Fund Access Persons shall be subject to the restrictions
imposed by this paragraph for securities held or considered for
purchase by Utility Fund. Trades made in violation of this
prohibition shall be unwound or, if that is impractical, any profits
realized must be disgorged to a charitable organization.
(3) Investment personnel shall not purchase any securities in an initial
public offering other than an offering of securities issued by
municipal or United States government entities.
(4) Unless such transaction is previously approved in the manner
described in paragraph (10) below and the criteria set forth in that
paragraph are followed, investment personnel shall not purchase any
security in a private placement.
(5) Investment personnel shall not profit in the purchase and sale, or
sale and purchase, of the same (or equivalent) security within 60
calendar days if such security is a municipal security or shares
issued by a Nuveen-sponsored exchange-traded fund. In addition,
Utility Fund investment personnel shall not profit in such purchases
or sales or sales and purchases of the same (or equivalent) security
within 60 calendar days is such security is a Utility Fund Eligible
Security. Trades made in violation of this prohibition shall be
unwound or, if that is impractical, any profits realized must be
disgorged to a charitable organization.
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7
(6) Investment personnel shall not accept any gift or other thing of
material value from any person or entity that does business with or
on behalf of a Trust, Fund or Client. For purposes of this
prohibition the term "material value" shall have the same meaning
expressed in Rule 2830 of the National Association of Securities
Dealers, Inc.'s Conduct Rules.
(7) Unless such service is previously cleared in the manner described in
paragraph (11) below and the criteria set forth in that paragraph are
followed, investment personnel shall not serve as board members or
other decision-makers for entities that issue municipal securities.
In addition, Utility Fund investment personnel shall not serve as a
board member or decision-maker for a company that issues Utility Fund
Eligible Securities without preclearance.
(8) No portfolio manager of a Trust, Fund or Client shall purchase or
sell any security within seven calendar days before or after the
Trust, Fund or Client he surveys or manages trades or considers to
purchase or sell such security. This prohibition shall not apply to
securities invested and managed under a subadvisory agreement. Trades
made in violation of this prohibition should be unwound or, if that
is impractical, any profits realized must be disgorged to a
charitable organization.
(9) An access person may request clearance of a transaction otherwise
prohibited by paragraph (1) above prior to the placement of any order
in connection therewith by submitting a written or oral request for
clearance to the General Counsel of John Nuveen & Co. Incorporated or
his designee. Unless specifically exempted herein, no such
transaction may be effected without the prior clearance of the
transaction. Clearance may be reflected in a written or an electronic
report. Clearance shall be valid for three business days. Clearance
shall not be granted for municipal security limit orders.
(10) Investment personnel may request approval of a transaction otherwise
prohibited by paragraph (4) above prior to the placement of any order
in connection therewith by submitting a written request for approval
to the General Counsel of John Nuveen & Co. Incorporated or his
designee. Unless specifically exempted herein, no such transaction
may be effected without the prior clearance of the transaction.
Clearance may be reflected in a written or an electronic report. Any
approval shall be valid for three business days. Transactions may be
approved only if the party clearing the transaction takes into
account, among other factors, whether the investment opportunity
should be reserved for a Trust, Fund or Client and whether the
opportunity is being offered to an individual by virtue of his or her
position. In addition, investment personnel who receive authorization
to purchase securities in
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8
a private placement have an affirmative duty to disclose that
position to the General Counsel or his designee if he or she plays
a role in a Trust's, Fund's or Client's subsequent investment
decision regarding the same issuer. Once such disclosure is made,
the General Counsel or his designee shall assemble a commission of
investment personnel with no personal interest in the issuer
involved to independently review the Trust's, Fund's or Client's
investment decision.
(11) Investment personnel may request clearance of service otherwise
prohibited by paragraph (7) above, prior to acceptance of any such
position, by submitting a written request for clearance to the
General Counsel of John Nuveen & Co. Incorporated or his designee.
Such request shall state the position sought, the reason service is
desired and any possible conflicts of interest known at the time of
the request. No such position may be accepted without prior
clearance. Clearance may be reflected in a written or an electronic
report. Service may be cleared only if the party clearing the
transaction determines that service in that capacity would not be
inconsistent with the interests of the Trusts, Funds or Clients.
In addition, investment personnel who receive authorization to
serve in such a capacity must be isolated through "Chinese Wall"
procedures from those making investment decisions regarding
securities issued by the entity involved.
V. Reporting Requirements
(1) Every access person (other than directors of a Fund who are not
"interested persons" of such Fund) shall report to the Legal
Department of John Nuveen & Co. Incorporated details of each
transaction by reason of which he or she acquires any direct or
indirect beneficial ownership of any security (as defined in
Section II herein). Notwithstanding the foregoing, an access person
need not make a report pursuant hereto where such report would
duplicate information recorded pursuant to Rules 204-2(a)(12) or
204-2(a)(13) under the Investment Advisers Act of 1940. In addition
to the reporting requirement expressed above, access persons (other
than directors who are not "interested persons") shall authorize
the Legal Department to direct their broker or brokers to supply to
the Legal Department, on a timely basis, duplicate copies of
confirmations of all securities transactions and copies of periodic
statements for all securities accounts involving securities in
which such access person acquires or disposes of direct or indirect
beneficial ownership. Such duplicate confirmations and periodic
statements received during the prescribed period shall satisfy the
reporting requirements set forth in this paragraph. Also, trades
executed through Nuveen or in an account in which Nuveen is the
broker of record shall be deemed to have been reported for purposes
of this paragraph. Notwithstanding the provisions of this
paragraph, a report shall
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9
not be required for purchases and sales in any account over which
the party involved does not have direct or indirect influence or
control.
(2) Every director of a Fund who is not an "interested person" of such
Fund shall be required to report the details of each transaction
with respect to which such director knew or, in the ordinary course
of fulfilling his or her official duties as a director of the Fund,
should have known that during the 15 day period immediately
preceding or after the date of the transaction in a security by the
director such security is or was purchased or sold by the Fund or
such purchase or sale by the Fund is or was considered by the Fund
or its investment adviser.
(3) Every report required to be made pursuant to paragraphs 1 and 2 of
this Section (other than duplicate copies of confirmations and
periodic statements) shall be made not later than 10 days after the
end of the calendar quarter in which the transaction to which the
report relates was effected, and shall contain the following
information:
(a) the date of the transaction, the title and the number of
shares, or principal amount of each security involved;
(b) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through whom
the transaction was effected.
Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he
or she has or disposed of any direct or indirect beneficial
ownership in the security to which the report relates.
(4) The reporting requirements established pursuant to paragraphs 1 and
2 of this Section (other than duplicate copies of confirmations and
periodic statements) shall apply only to transactions by an access
person in securities in which such access person has, or by reason
of such transaction acquires or disposes of, any direct or indirect
beneficial ownership in the security.
(5) Investment personnel shall disclose to the General Counsel of John
Nuveen & Co. Incorporated all personal securities holdings within 10
days of commencement of employment as an investment person and shall
continue to disclose such holdings on an annual basis.
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10
VI. Sanctions
Upon discovery of a violation of this Code, including either
violations of the enumerated provisions or the general principles
provided, any Fund, Nuveen Advisory Corp., Nuveen Institutional
Advisory Corp., Nuveen Asset Management Inc. or John Nuveen & Co.
Incorporated may impose such sanctions as it deems appropriate,
including, inter alia, a letter of censure or suspension or
termination of the employment of the violator. All material violations
of this Code and any sanctions imposed with respect thereto shall be
reported periodically to the board of directors of the management
investment company with respect to securities of which the violation
occurred, or to the Executive Committee of John Nuveen & Co.
Incorporated if the violation was with respect to securities of any
series of the Nuveen Unit Trusts, or to the board of directors of
Nuveen Institutional Advisory Corp., Nuveen Asset Management Inc. or
Nuveen Advisory Corp. with respect to securities of non-management
investment company clients advised by these entities.
Revised December 31, 1996
