<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1997.
1933 ACT REGISTRATION NO. 333-16615
1940 ACT REGISTRATION NO. 811-07751
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM N-1A
<TABLE>
<CAPTION>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
<S> <C>
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 1 [X]
</TABLE>
(Check appropriate box or boxes)
---------------
NUVEEN FLAGSHIP MULTISTATE TRUST IV
(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:
Presidentand 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
[_]
Immediately upon filing pursuant [_]
to paragraph (b)
on (date) pursuant to paragraph
(a)(1)
[_]
[X]
on September 26, 1997 pursuant to
paragraph (b) 75 days after filing pursuant
to paragraph (a)(2)
[_]
on (date) pursuant to paragraph
(a)(2) of Rule 485.
[_]
60 days after filing pursuant to
paragraph (a)(1)
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 KANSAS MUNICIPAL BOND FUND; NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND
FUND; NUVEEN FLAGSHIP MICHIGAN MUNICIPAL BOND FUND; NUVEEN FLAGSHIP MISSOURI
MUNICIPAL BOND FUND; NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND; NUVEEN FLAGSHIP
WISCONSIN MUNICIPAL BOND FUND; AND AN INDEFINITE NUMBER OF SHARES (DESIGNATED
AS CLASS A SHARES, CLASS C SHARES AND CLASS R SHARES) OF THE FOLLOWING SERIES:
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM 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
KANSAS 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 In-
terest, $.01 par value. 335,755 $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 $16,105,371. The total
amount of redeemed securities used for reduction pursuant to Rule 24f-2(c) was
$12,496,010. The amount of redeemed securities being used for reduction of the
registration fee in this Amendment is $3,609,361.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CONTENTS
OF
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO. 333-16615
AND
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO. 811-07751
This Registration Statement comprises the following papers and contents:
The Facing Sheet
Cross-Reference Sheet
Part A-The Prospectus
Part B-The Statement of Additional Information
Copy of Annual Reports to Shareholders (the financial
statements from which are incorporated by reference into the
Statement of Additional Information)
Part C-Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST IV
----------------
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
ITEM IN PART A
OF FORM N-1A PROSPECTUS LOCATION
------------ -------------------
<S> <C>
1 Cover Page Cover Page
2 Synopsis Expense Information
3 Condensed Financial Information Financial Highlights
4 General Description of Registrant Fund Strategies
5 Management of the Fund General Information
5A Management's Discussion of Fund Incorporated by Reference to Annual and
Performance Semi-Annual Reports to Shareholders; Taxes
and Tax Reporting
6 Capital Stock and Other How to Select a Purchase Option; Taxes and
Securities Tax Reporting
7 Purchase of Securities Being Investing in the Funds
Offered
8 Redemption or Repurchase How to Sell Fund Shares
9 Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM IN PART A LOCATION IN STATEMENT
OF FORM N-1A OF ADDITIONAL INFORMATION
---------- -------------------------
<S> <C>
10 Cover Page Cover Page
11 Table of Contents Cover Page
12 General Information and History Not Applicable
13 Investment Objectives and Investment Policies and Investment
Policies Portfolio
14 Management of the Fund Management
15 Control Persons and Principal Management
Holders of Securities
16 Investment Advisory and Other Investment Adviser and Investment
Services Management Agreement; Portfolio
Transactions Distribution and Service Plan;
Independent Public Accountants and
Custodian
17 Brokerage Allocation and Other Portfolio Transactions
Practices
18 Capital Stock and Other See "How to Select a Purchase Option" and
Securities "Taxes and Tax Reporting" in the Prospectus
19 Purchase, Redemption and Pricing Additional Information on the Purchase and
of Securities Redemption of Fund Shares; Net Asset Value
20 Tax Status Tax Matters
21 Underwriters Additional Information on the Purchase and
Redemption of Fund Shares; See "Investing
in the Funds" and "Fund Service Providers"
in the Prospectus
22 Calculation of Performance Data Performance Information
23 Financial Statements Incorporated by Reference to Annual and
Semi-Annual Reports to Shareholders
</TABLE>
<PAGE>
PART A--PROSPECTUS
NUVEEN FLAGSHIP MULTISTATE TRUST IV
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
NUVEEN
Municipal
Bond Funds
September 26, 1997
Prospectus [PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Kansas
Kentucky
Michigan
Missouri
Ohio
Wisconsin
<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 Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
SEPTEMBER 26, 1997
PROSPECTUS
OVERVIEW
The funds listed above are part of the Nuveen Flagship
Multistate Trust IV, an open-end investment company.
Each fund seeks to provide high tax-free income and
preservation of capital through investments in diver-
sified portfolios of quality municipal bonds.
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.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
1 OVERVIEW DIVIDENDS AND TAXES
2 FUND SUMMARIES AND 22 How the Funds Pay Dividends
FINANCIAL HIGHLIGHTS 22 Taxes and Tax Reporting
FUND STRATEGIES 23 Taxable Equivalent Yields
16 Investment Objective GENERAL INFORMATION
16 How the Funds Select Investments 23 How to Contact Nuveen
17 Risk Reduction Strategies 23 Fund Service Providers
INVESTING IN THE FUNDS 24 How the Funds Report Performance
18 How to Buy Fund Shares 24 How Fund Shares are Priced
18 How to Select a Purchase Option 24 Organization
19 How to Sell Fund Shares APPENDIX
20 Exchanging Shares 25 Special State Considerations
21 Optional Features and Services
</TABLE>
---
1
<PAGE>
NUVEEN FLAGSHIP KANSAS MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION: January 9, 1992
NET ASSETS: $96.6 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 4.62% 9.21% 7.93% 8.98% 9.58%
5 Years 6.06% 6.98% 6.26% 6.64% 7.05%
Inception 6.06% 6.91% 6.20% 6.57% 6.98%
</TABLE>
Class A total returns reflect actual performance for all periods; Classes B, C
and R total returns reflect actual performance since class inception (see "Fi-
nancial Highlights" for dates), and Class A performance for periods prior to
class inception, adjusted for the differences in sales charges (and for Class 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 21.1
Average Modified Duration 8.8
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR 5%
A 17%
AA 23%
AAA/Pre-refunded 55%
INDUSTRY DIVERSIFICATION (TOP 6)
[PIE CHART APPEARS HERE]
Hospitals 22%
Housing Facilities 21%
Escrowed Bonds 9%
Tax Revenue 15%
Other 22%
Utilities 11%
EXPENSE INFORMATION AS OF 5/31/97
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------------------------------------------------
(Maximum, as % of Offering Price)
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 0.15% 0.15% 0.15% 0.15%
- ----------------------------------------------------------------------------------------------
Total (Gross) 0.90% 1.65% 1.45% 0.70%
Waivers/
Reimbursements (0.18%) (0.18%) (0.18%) (0.18%)
- ----------------------------------------------------------------------------------------------
Total (Net) 0.72% 1.47% 1.27% 0.52%
</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 $49 $55 $13 $5
3 Years $64 $78 $40 $17
5 Years $80 $92 $70 $29
10 Years $128 $155 $153 $65
</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. For a free copy of the fund's latest annual and/or semi-annual re-
ports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
CLASS (INCEPTION DATE) ---------------------- -------------------------
NET
REALIZED
KANSAS++ 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 (1/92)
1997 $ 9.83 $.53 $ .36 $(.53) $ - $10.19 9.21%
1996 10.01 .54 (.18) (.54) - 9.83 3.63
1995 9.83 .55 .18 (.55) - 10.01 7.80
1994 10.38 .56 (.47) (.57) (.07)+++ 9.83 .62
1993 9.65 .58 .73 (.58) - 10.38 14.15
1992(c) 9.58 .19 .07 (.19) - 9.65 5.95+
CLASS B (2/97)
1997(C) 10.23 .13 (.12) (.11) - 10.13 .13
CLASS C (2/97)
1997(C) 10.18 .15 .04 (.16) - 10.21 1.85
CLASS R (2/97)
1997(C) 10.20 .18 (.02) (.14) - 10.22 1.55
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
CLASS (INCEPTION------------------------------------------------------------------------------
DATE) RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
KANSAS++ 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 (1/92)
1997 $95,891 .68% 5.24% 40%
1996 96,694 .57 5.31 55
1995 83,683 .54 5.67 72
1994 80,060 26 5.37 93
1993 62,585 .11 5.74 56
1992(c) 9,552 .40+ 5.11+ 59
CLASS B (2/97)
1997(C) 605 1.27+ 4.62+ 40
CLASS C (2/97)
1997(C) 91 1.09+ 4.85+ 40
CLASS R (2/97)
1997(C) - - 6.61+ 40
- ----------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Kansas.
+++ The amount shown includes a distribution in excess of capital gains of
$.05 per share.
(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 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 $15 for the one year period, $46 for the three year period, $80 for
the five year period, and $155 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 KENTUCKY MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION: May 4, 1987
NET ASSETS: $456.3 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- ----------------------------------------------------------------------------------------------
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 3.34% 7.87% 7.30% 7.29% 7.75%
5 Years 6.15% 7.06% 6.48% 6.46% 7.04%
10 Years 7.86% 8.33% 7.85% 7.73% 8.31%
</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 for Class 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 re-
turns 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.
[BAR CHART APPEARS HERE]
MATURITY (YEARS)
Average Maturity 20.6
Average Modified Duration 7.8
[PIE CHART APPEARS HERE]
CREDIT QUALITY
AAA/Pre-refunded 48%
AA 10%
A 26%
BBB/NR 16%
[PIE CHART APPEARS HERE]
INDUSTRY DIVERSIFICATION (TOP 6)
Health Care Facilities 20%
Other 22%
Water & Sewer 8%
Pollution Control 21%
Escrowed Bonds 7%
Municipal Appropriations 22%
EXPENSE INFORMATION AS OF 5/31/97
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ----------------------------------------------------------------------------------------
(Maximum, as % of Offering Price)
CLASS A CLASS B CLASS C CLASS R
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales Charge on Purchases 4.20%(1) - - -
Sales Charge on Reinvested Dividends - - - -
Contingent Deferred Sales Charge (CDSC) on Redemptions - (1) 5%(2) 1%(3) -
</TABLE>
<TABLE>
<CAPTION>
OVERVIEW OF FUND OPERATING EXPENSES (4)
- ----------------------------------------------------------------------------------------
(Annual, as % of Average Net Assets)
CLASS A CLASS B CLASS C CLASS R
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.54% 0.54% 0.54% 0.54%
12b-1 Fees 0.20% 0.95% 0.75% -
Other Expenses 0.10% 0.10% 0.10% 0.10%
- ----------------------------------------------------------------------------------------------
Total (Gross) 0.84% 1.59% 1.39% 0.64%
Waivers/
Reimbursements (0.13%) (0.13%) (0.13%) (0.13%)
- ----------------------------------------------------------------------------------------------
Total (Gross) 0.71% 1.46% 1.26% 0.51%
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.
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $49 $54 $13 $5
3 Years $64 $78 $40 $16
5 Years $80 $91 $69 $29
10 Years $127 $154 $152 $64
</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. For a free copy of the fund's latest annual and/or semi-annual re-
ports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
CLASS (INCEPTION DATE) ---------------------- ------------------------
NET
REALIZED
NET AND DIVIDENDS NET TOTAL
KENTUCKY++ 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 (5/87)
1997 $10.82 $.60 $ .24 $(.60) $(.01) $11.05 7.87%
1996 10.99 .61 (.17) (.61) - 10.82 4.04
1995 10.65 .61 .35 (.62) - 10.99 9.42
1994 11.06 .62 (.40) (.63) - 10.65 1.90
1993 10.45 .64 .62 (.65) - 11.06 12.41
1992 10.19 .66 .27 (.66) (.01) 10.45 9.46
1991 9.87 .66 .32 (.66) - 10.19 10.37
1990 9.97 .66 (.05) (.66) (.05) 9.87 6.92
1989 9.38 .67 .60 (.67) (.01) 9.97 14.31
1988 9.37 .66 .02 (.67) - 9.38 7.79
CLASS B (2/97)
1997(c) 11.07 .17 (.01) (.17) - 11.06 1.47
CLASS C (10/93)
1997 10.81 .54 .24 (.54) (.01) 11.04 7.29
1996 10.99 .54 (.17) (.55) - 10.81 3.38
1995 10.65 .55 .35 (.56) - 10.99 8.82
1994(c) 11.46 .36 (.81) (.36) - 10.65 (5.88)+
CLASS R (2/97)
1997(c) 11.08 .20 (.04) (.21) - 11.03 1.42
</TABLE>
<TABLE>
<CAPTION>
CLASS (INCEPTION RATIOS/SUPPLEMENTAL DATA
DATE) --------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
KENTUCKY++ NET ASSETS EXPENSES TO INCOME TO
END OF AVERAGE NET AVERAGE NET PORTFOLIO
YEAR ENDING PERIOD (IN ASSETS AFTER ASSETS AFTER TURNOVER
MAY 31, THOUSANDS) REIMBURSEMENT(B) REIMBURSEMENT(B) RATE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (5/87)
1997 $430,803 .75% 5.44% 13%
1996 410,808 .71 5.50 17
1995 394,457 .68 5.85 28
1994 369,495 .58 5.60 12
1993 309,223 .61 5.96 15
1992 207,395 .62 6.39 5
1991 142,449 .72 6.65 23
1990 111,234 .75 6.63 57
1989 72,059 .67 6.94 32
1988 40,945 .51 7.09 36
CLASS B (2/97)
1997(c) 544 1.39+ 4.76+ 13
CLASS C (10/93)
1997 24,468 1.29 4.89 13
1996 20,647 1.27 4.93 17
1995 15,831 1.23 5.27 28
1994(c) 11,172 1.08+ 4.96+ 12
CLASS R (2/97)
1997(c) 455 .49+ 5.77+ 13
- -------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Kentucky.
(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 $15 for the one year period, $46 for the three year period, $80 for
the five year period, and $154 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 KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION:
September 14, 1995
NET ASSETS:
$11.0 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- --------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS C CLASS R
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year 3.31% 5.96% 5.64% 6.02%
Inception 4.22% 5.77% 5.45% 5.80%
</TABLE>
Classes A and C total returns reflect actual performance for all periods;
Class R total returns reflect actual performance 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 between the
classes. See Overview of Fund Operating Expenses and Shareholder Transaction
Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits
this risk by purchasing only certain types and maturities of municipal bonds
and by diversifying its investment portfolio geographically and by industry.
See Risk Reduction Strategies for further information.
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 6.0
Average Modified Duration 4.3
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR 13%
A 28%
AA 20%
AAA 39%
INDUSTRY DIVERSIFICATION (TOP 6)
[PIE CHART APPEARS HERE]
Housing Facilities 13%
Municipal Appropriations 32%
Other 18%
Pollution Control 9%
Education 10%
Hospitals 18%
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 2.50%(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 0.45% 0.45% 0.45%
12b-1 Fees 0.20% 0.55% -
Other Expenses 0.73% 0.73% 0.73%
- -------------------------------------------
Total (Gross) 1.38% 1.73% 1.18%
Waivers/
Reimbursements (0.73%) (0.73%) (0.73%)
- -------------------------------------------
Total (Net) 0.65% 1.00% 0.45%
</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 $ 31 $ 10 $ 5
3 Years $ 45 $ 32 $14
5 Years $ 60 $ 55 $25
10 Years $104 $122 $57
</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. For a free copy of the fund's latest annual and/or semi-annual re-
ports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
CLASS (INCEPTION DATE) ----------------------- -------------------------
KENTUCKY NET
LIMITED TERM++ NET REALIZED AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE OF 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 (9/95)
1997 $9.79 $.45 $ .12 $(.44) $ - $9.92 5.96%
1996(c) 9.75 .31 .04 (.31) - 9.79 5.45+
CLASS C (9/95)
1997 9.79 .41 .13 (.41) - 9.92 5.64
1996(c) 9.75 .29 .04 (.29) - 9.79 5.12+
CLASS R (2/97)
1997(c) 9.98 .15 (.10) (.11) - 9.92 .56
- -----------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
CLASS (INCEPTION DATE) -------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
KENTUCKY EXPENSES INCOME TO
LIMITED TERM++ 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 (9/95)
1997 $8,870 .53% 4.52% 56%
1996(c) 8,389 .37+ 4.37+ 48
CLASS C (9/95)
1997 2,144 .84 4.19 56
1996(c) 1,767 .64+ 4.12+ 48
CLASS R (2/97)
1997(c) - - 5.73+ 56
- -----------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Kentucky Limited Term.
(a) Total returns are calculated on net asset value and 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.
---
7
<PAGE>
NUVEEN FLAGSHIP MICHIGAN MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION: June 27, 1985
NET ASSETS: $327.3 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- ----------------------------------------------------------------------------------------------
1 Year 3.87% 8.42% 7.94% 7.84% 8.49%
5 Years 5.97% 6.88% 6.32% 6.20% 6.89%
10 Years 7.63% 8.10% 7.63% 7.46% 8.10%
- ----------------------------------------------------------------------------------------------
</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 for Class B and C, fees) between the classes. Class B total returns as-
sume 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 Share-
holder 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)
LOGO
CREDIT QUALITY
LOGO
INDUSTRY DIVERSIFICATION (TOP 6)
LOGO
EXPENSE INFORMATION AS OF 5/31/97
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------
(Maximum, as % of Offering Price)
<TABLE>
<S> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS R
- ----------------------------------------------------------------------------------------
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>
<S> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------------
Management Fees 0.54% 0.54% 0.54% 0.54%
12b-1 Fees 0.20% 0.95% 0.75% -
Other Expenses 0.11% 0.11% 0.11% 0.11%
- --------------------------------------------------------------------------------------------------
Total (Gross) 0.85% 1.60% 1.40% 0.65%
Waivers/
Reimbursements - - - -
- --------------------------------------------------------------------------------------------------
Total (Net) 0.85% 1.60% 1.40% 0.65%
</TABLE>
SUMMARY OF SHAREHOLDER EXPENSES (5)
- -------------------------------------------------------------------------------
The example illustrates the expenses on a hypothetical $1,000 investment in
the fund based on the Total Expenses shown at left, an assumed annual total
return of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $50 $56 $14 $7
3 Years $68 $82 $44 $21
5 Years $87 $99 $77 $36
10 Years $142 $170 $168 $81
</TABLE>
---
8
<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. For a free copy of the fund's latest annual and/or semi-annual re-
ports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
CLASS (INCEPTION DATE) ---------------------- -------------------------
NET
REALIZED
MICHIGAN++ NET AND DIVIDENDS TOTAL
ASSET UNREALIZED FROM TAX- RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS NET ASSET ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL VALUE END ASSET
MAY 31, OF PERIOD INCOME(B) INVESTMENTS INCOME GAINS OF PERIOD VALUE(A)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (6/85)
1997 $11.37 $.62 $ .31 $(.61) $(.01) $11.68 8.42%
1996 11.59 .63 (.22) (.63) - 11.37 3.61
1995 11.31 .65 .28 (.65) - 11.59 8.57
1994 11.77 .66 (.43) (.66) (.03)+++ 11.31 1.87
1993 11.12 .68 .65 (.68) - 11.77 12.27
1992 10.80 .69 .32 (.69) - 11.12 9.74
1991 10.61 .69 .20 (.70) - 10.80 8.73
1990 10.67 .70 (.06) (.70) - 10.61 6.21
1989 10.10 .71 .57 (.71) - 10.67 13.12
1988 9.95 .72 .15 (.72) - 10.10 8.95
CLASS B (2/97)
1997(c) 11.66 .17 .04 (.17) - 11.70 1.86
CLASS C (6/93)
1997 11.35 .55 .32 (.55) (.01) 11.66 7.84
1996 11.58 .56 (.22) (.57) - 11.35 2.96
1995 11.30 .58 .28 (.58) - 11.58 7.98
1994(c) 11.86 .54 (.52) (.55) (.03)+++ 11.30 .19+
CLASS R (2/97)
1997(c) 11.66 .21 .02 (.21) - 11.68 2.01
- ---------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
CLASS (INCEPTION DATE) -------------------------------------------------
RATIO
RATIO OF OF NET
EXPENSES INVESTMENT
TO AVERAGE INCOME TO
MICHIGAN++ NET AVERAGE
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 (6/85)
1997 $259,055 .85% 5.33% 34%
1996 248,422 .82 5.42 54
1995 250,380 .80 5.82 37
1994 242,993 .75 5.56 28
1993 227,333 .81 5.85 10
1992 176,584 .81 6.34 11
1991 134,243 .90 6.56 23
1990 102,519 .95 6.54 47
1989 84,608 .96 6.80 54
1988 73,481 .94 7.11 78
CLASS B (2/97)
1997(c) 380 1.59+ 4.52+ 34
CLASS C (6/93)
1997 41,649 1.40 4.77 34
1996 41,365 1.37 4.86 54
1995 37,122 1.35 5.25 37
1994(c) 30,042 1.25+ 4.89+ 28
CLASS R (2/97)
1997(c) 26,211 .65+ 5.57+ 34
- ---------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Michigan.
+++ The amount shown includes a distribution in excess of capital gains of
$.02 per share.
(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 $16 for the one year period, $50 for the three year period, $87 for
the five year period, and $170 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
9
<PAGE>
NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION:
August 3, 1987
NET ASSETS:
$227.4 million
TOTAL RETURN (ANNUALIZED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year 3.74% 8.29% 7.63% 7.80% 8.34%
5 years 6.01% 6.92% 6.33% 6.34% 6.93%
Inception 7.26% 7.73% 7.25% 7.14% 7.73%
</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, for Class B and C, fees) between the classes. Class B total returns as-
sume 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 Share-
holder 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 20.2
Average Modified Duration 8.2
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR 18%
A 15%
AA 8%
AAA/Pre-refunded 59%
INDUSTRY DIVERSIFICATION (TOP 6)
[PIE CHART APPEARS HERE]
Other 30%
Hospitals 19%
Education 11%
Municipal Appropriations 15%
Escrowed Bonds 10%
Housing Facilities 15%
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 Expenses 0.13% 0.13% 0.13% 0.13%
- -------------------------------------------------------------------------------------------------
Total (Gross) 0.87% 1.62% 1.42% 0.67%
Waivers/
Reimbursements - - - -
- -------------------------------------------------------------------------------------------------
Total (Net) 0.87% 1.62% 1.42% 0.67%
</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 $14 $7
3 Years $69 $83 $45 $21
5 Years $88 $100 $78 $37
10 Years $145 $172 $170 $83
</TABLE>
---
10
<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. For a free copy of the fund's latest annual and/or semi-annual re-
ports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
CLASS (INCEPTION DATE) ---------------------- -------------------------
NET
REALIZED
MISSOURI++ 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 (8/87)
1997 $10.51 $.56 $ .29 $(.56) $ - $10.80 8.29%
1996 10.72 .58 (.21) (.58) - 10.51 3.51
1995 10.50 .60 .22 (.60) - 10.72 8.19
1994 10.87 .61 (.34) (.61) (.03)+++ 10.50 2.42
1993 10.32 .64 .60 (.63) (.06) 10.87 12.54
1992 10.04 .65 .29 (.65) (.01) 10.32 9.70
1991 9.76 .65 .28 (.65) - 10.04 9.92
1990 9.86 .65 (.10) (.65) - 9.76 5.89
1989 9.30 .65 .57 (.65) (.01) 9.86 13.70
1988(c) 9.58 .49 (.26) (.51) - 9.30 2.98+
CLASS B (2/97)
1997(c) 10.81 .16 (.01) (.16) - 10.80 1.40
CLASS C (2/94)
1997 10.50 .51 .29 (.50) - 10.80 7.80
1996 10.72 .51 (.21) (.52) - 10.50 2.84
1995 10.50 .53 .23 (.54) - 10.72 7.60
1994(c) 11.33 .02 (.83) (.02) - 10.50 (17.62)+
CLASS R (2/97)
1997(c) 10.90 .17 (.12) (.15) - 10.80 .43
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
CLASS (INCEPTION DATE) -------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
MISSOURI++ 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 (8/87)
1997 $218,924 .86% 5.27% 41%
1996 212,717 .80 5.37 38
1995 205,089 .67 5.78 40
1994 187,347 .62 5.52 34
1993 144,775 .55 5.99 33
1992 76,069 .47 6.39 32
1991 43,391 .58 6.57 44
1990 19,080 .66 6.64 36
1989 13,028 .69 6.80 69
1988(c) 7,786 .50+ 6.32+ 119
CLASS B (2/97)
1997(c) 454 1.45+ 4.59+ 41
CLASS C (2/94)
1997 7,968 1.40 4.72 41
1996 6,220 1.35 4.79 38
1995 3,989 1.20 5.19 40
1994(c) 1,877 1.15+ 4.44+ 34
CLASS R (2/97)
1997(c) 34 .55+ 5.65+ 41
- ------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Missouri.
+++ The amount shown includes a distribution in excess of capital gains of
$.01 per share.
(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
for 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 $16 for the one year period, $51 for the three year period, $88 for
the five year period, and $172 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
11
<PAGE>
NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND
PERFORMANCE INFORMATION AS OF 5/31/97
INCEPTION:
June 27, 1985
NET ASSETS:
$665.9 million
TOTAL RETURN (ANNUALIZED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 2.87% 7.38% 6.73% 6.80% 7.45%
5 Years 5.52% 6.42% 5.83% 5.85% 6.44%
10 Years 7.47% 7.94% 7.47% 7.35% 7.94%
</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 for Class B and C, fees) between the classes. Class B total returns as-
sume 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 Share-
holder 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 18.0
Average Modified Duration 7.1
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB/NR 12%
A 13%
AA 10%
AAA/Pre-refunded 65%
INDUSTRY DIVERSIFICATION (TOP 6)
[PIE CHART APPEARS HERE]
General Obligations 21%
Pollution Control 9%
Water & Sewer 7%
Other 21%
Hospitals 21%
Escrowed Bonds 21%
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) nnnn-
</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 0.53% 0.53% 0.53% 0.53%
12b-1 Fees 0.20% 0.95% 0.75% -
Other Expenses 0.12% 0.12% 0.12% 0.12%
- -------------------------------------------------------------------------------------------------
Total (Gross) 0.85% 1.60% 1.40% 0.65%
Waivers/
Reimbursements - - - -
- -------------------------------------------------------------------------------------------------
Total (Net) 0.85% 1.60% 1.40% 0.65%
</TABLE>
SUMMARY OF SHAREHOLDER EXPENSES (5)
- -------------------------------------------------------------------------------
The example illustrates the expenses on a hypothetical $1,000 investment in
the fund based on the Total Expenses shown at left, an assumed annual total
return of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $50 $56 $14 $7
3 Years $68 $82 $44 $21
5 Years $87 $99 $77 $36
10 Years $142 $170 $168 $81
</TABLE>
---
12
<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. For a free copy of the fund's latest annual and/or semi-annual re-
ports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
CLASS (INCEPTION DATE) ----------------------- --------------------------
NET
NET REALIZED AND DIVIDENDS NET TOTAL
OHIO++ 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 (6/85)
1997 $11.21 $.61 $ .20 $(.61) $ - $11.41 7.38%
1996 11.43 .62 (.21) (.63) - 11.21 3.59
1995 11.21 .64 .22 (.64) - 11.43 7.99
1994 11.59 .64 (.38) (.64) - 11.21 2.24
1993 11.05 .66 .54 (.66) - 11.59 11.20
1992 10.72 .68 .33 (.68) - 11.05 9.77
1991 10.45 .68 .28 (.69) - 10.72 9.57
1990 10.54 .69 (.09) (.69) - 10.45 5.86
1989 10.04 .69 .51 (.70) - 10.54 12.36
1988 9.82 .71 .23 (.71) (.01) 10.04 10.12
CLASS B (2/97)
1997(c) 11.42 .17 (.01) (.17) - 11.41 1.45
CLASS C (8/93)
1997 11.21 .55 .20 (.55) - 11.41 6.80
1996 11.43 .55 (.21) (.56) - 11.21 3.03
1995 11.20 .57 .23 (.57) - 11.43 7.50
1994(c) 11.69 .46 (.49) (.46) - 11.20 (.17)+
CLASS R (2/97)
1997(c) 11.42 .21 (.01) (.21) - 11.41 1.77
- ------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
CLASS (INCEPTION DATE) -------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
TO AVERAGE AVERAGE
OHIO++ 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 (6/85)
1997 $463,253 .89% 5.39% 17%
1996 443,077 .92 5.41 31
1995 445,566 .95 5.78 31
1994 445,272 .93 5.48 9
1993 410,467 .96 5.81 15
1992 325,273 .95 6.24 18
1991 268,213 1.02 6.53 14
1990 231,311 .96 6.56 42
1989 195,135 .93 6.79 37
1988 157,511 .88 7.16 85
CLASS B (2/97)
1997(c) 1,649 1.60+ 4.63+ 17
CLASS C (8/93)
1997 40,713 1.44 4.84 17
1996 34,939 1.47 4.84 31
1995 28,461 1.50 5.21 31
1994(c) 25,674 1.46+ 4.79+ 9
CLASS R (2/97)
1997(c) 160,312 .65+ 5.65+ 17
- ------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Ohio.
(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. Nuveen Advisory has agreed
to waive some or all of its fees or reimburse expenses to prevent total
operating expenses (not counting distribution and service fees) from ex-
ceeding 0.75% of the fund's 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 $16 for the one year period, $50 for the three year period, $87 for
the five year period, and $170 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
13
<PAGE>
NUVEEN FLAGSHIP WISCONSIN MUNICIPAL BOND FUND
PERFORMANCE INFORMATION 5/31/97
INCEPTION: June 1, 1994
NET ASSETS: $14.1 million
TOTAL RETURN (ANNUALIZED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 2.89% 7.40% 6.98% 7.20% 7.67%
Inception 4.51% 6.02% 5.49% 5.70% 6.11%
</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 for Class B and C, fees) between the classes. Class B total returns as-
sume an ongoing investment and do not reflect the imposition of the CDSC; your
returns for the 1 year and since inception periods would be lower if you
redeemed at the end of those periods. See Overview of Fund Operating Expenses
and Share-holder 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.
[BAR CHART APPEARS HERE]
MATURITY (YEARS)
Average Maturity 20.6
Average Modified Duration 8.4
[PIE CHART APPEARS HERE]
CREDIT QUALITY
AAA 34%
AA 7%
A 22%
BBB/NR 37%
[PIE CHART APPEARS HERE]
INDUSTRY DIVERSIFICATION (TOP 6)
Pollution Control 8%
Hospital 25%
Housing Facilities 17%
Utility 7%
Other 29%
Tax Revenue 14%
EXPENSE INFORMATION 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 0.66% 0.66% 0.66% 0.66%
- ---------------------------------------------------------------------------------------
Total Expenses (Gross) 1.41% 2.16% 1.96% 1.21%
Waivers/
Reimbursements (0.91%) (0.91%) (0.91%) (0.91%)
- ---------------------------------------------------------------------------------------
Total Expenses (Net) 0.50% 1.25% 1.05% 0.30%
</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 $47 $52 $11 $3
3 Years $57 $72 $33 $10
5 Years $69 $80 $58 $17
10 Years $102 $130 $128 $38
</TABLE>
---
14
<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. For a free copy of the fund's latest annual and/or semi-annual re-
ports, write to Nuveen or call (800) 621-7227.
<TABLE>
<CAPTION>
CLASS
(INCEPTION OPERATING PERFORMANCE LESS DISTRIBUTIONS
DATE) ---------------------- ---------------------
NET
WISCONSIN++ NET REALIZED DIVIDENDS DISTRIBU- NET TOTAL
ASSET AND UNREAL- FROM TAX- TIONS ASSET RETURN
VALUE NET IZED GAIN EXEMPT NET FROM VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT (LOSS) FROM INVESTMENT 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 (6/94)
1997 $9.61 $.51 $ .19 $(.51) $ - $9.80 7.40%
1996 9.79 .50 (.18) (.50) - 9.61 3.35
1995(c) 9.58 .49 .21 (.49) - 9.79 7.36+
CLASS B (2/97)
1997(c) 9.87 .12 (.06) (.11) - 9.82 .60
CLASS C (2/97)
1997(c) 9.87 .13 (.07) (.11) - 9.82 .65
CLASS R (2/97)
1997(c) 9.87 .15 (.07) (.13) - 9.82 .84
- ----------------------------------------------------------------------------------------
<CAPTION>
CLASS
(INCEPTION RATIOS/SUPPLEMENTAL DATA
DATE) --------------------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
WISCONSIN++ AVERAGE NET AVERAGE
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 (6/94)
1997 $14,004 .51% 5.20% 42%
1996 12,370 .64 5.02 47
1995(c) 8,278 .39+ 5.25+ 52
CLASS B (2/97)
1997(c) 20 .94+ 4.81+ 42
CLASS C (2/97)
1997(c) 76 .69+ 4.91+ 42
CLASS R (2/97)
1997(c) 40 - 5.67+ 42
- ----------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Wisconsin.
(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 $13 for the one year period, $40 for the three year period, $69 for
the five year period, and $130 for the ten year period. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
---
15
<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 that pay interest that is exempt from regular federal, state and, in
some cases, local income taxes. Income from these bonds may be subject to the
federal alternative minimum tax.
Municipal bonds are either general obligation or revenue bonds and typically
are issued to finance public projects (such as roads or public buildings), to
pay general operating expenses, or to refinance outstanding debt. Municipal
bonds may also be issued for private activities, such as housing, medical and
educational facility construction, or for privately owned industrial develop-
ment and pollution control projects. General obligation bonds are backed by
the full faith and credit, or taxing authority, of the issuer and may be 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 Michigan and Ohio Funds
may not invest more than 20% of their net assets in these territorial munici-
pal 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
available.
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 Kentucky Limited Term Fund maintains a weighted average portfolio
maturity of 1 to 7 years. All of the other funds described in this prospectus
are long-term funds and normally maintain a weighted average portfolio matu-
rity of 15 to 30 years. See "Defensive Investment Strategies" below for fur-
ther 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 and, since
securities are subject to market fluctuation, the value of the bonds at time
of delivery may be less (or more) than cost.
---
16
<PAGE>
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 Kansas, Kentucky Limited, Missouri and Wisconsin Funds, which
as "non-diversified" funds may concentrate their investment in municipal bonds
of certain issuers to a greater extent than the Kentucky, Michigan and Ohio
Funds described in this prospectus, which are 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).
As diversified funds, the Kentucky, Michigan and Ohio Funds also may not have
more than:
. 5% in securities of any one issuer (except U.S. government securities or for
25% of each 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.
---
17
<PAGE>
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.
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 except the Kentucky Limited Term Fund:
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
- --------------------------------------------------------------------------------------
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
---------------------------------------- ----------
AS % OF
AS % OF PUBLIC YOUR NET AS % OF PUBLIC
PURCHASE AMOUNT OFFERING PRICE INVESTMENT OFFERING 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 Kentucky Lim-
ited Term Fund:
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
- --------------------------------------------------------------------------------------
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
---------------------------------------- ----------
AS % OF
AS % OF PUBLIC YOUR NET AS % OF PUBLIC
PURCHASE AMOUNT OFFERING PRICE INVESTMENT OFFERING PRICE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 2.50% 2.56% 2.00%
$50,000-100,000 2.00 2.04 1.60
$100,000-250,000 1.50 1.52 1.20
$250,000-500,000 1.25 1.27 1.00
$500,000-1,000,000 0.75 0.76 0.60
$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.
---
18
<PAGE>
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support to authorized dealers in connection with sales
meetings, seminars, prospecting seminars and other events at which Nuveen
presents its products and services. Under certain circumstances, Nuveen may also
make ongoing payments to authorized dealers to facilitate the marketing and
administration of new and existing shareholder accounts, including payments for
advertising. The statement of additional information contains further
information about these programs.
OTHER SALES CHARGE DISCOUNTS
Nuveen offers a number of programs that enable you to reduce or eliminate the
sales charge on Class A shares:
Sales Charge Reductions
. Rights of Accumulation
. Letter of Intent
. 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
descriptions of these programs. Further information on these programs is also
available through your financial adviser or by calling (800) 621-7227. Your
financial 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%
annual distribution fee which compensates Nuveen for paying your financial
adviser a 4% commission at the time of purchase. The Kentucky Limited Term Fund
does not currently offer B Shares.
Class B shares convert automatically to Class A shares eight years after
purchase. Class B shares will convert only if the fund is assured that the
conversion does not generate tax consequences for investors, based upon the
opinion of outside counsel or the written assurance of the IRS.
CLASS B CONTINGENT DEFERRED SALES CHARGE
If you redeem Class B shares within six years of purchase, you will be assessed
a contingent deferred sales charge (CDSC) based upon the following schedule:
<TABLE>
<CAPTION>
DURING YEAR
- ---------------------------------
1 2 3 4 5 6 7+
<S> <C> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1% 0%
- ---------------------------------
</TABLE>
The CDSC is calculated on the lower of your purchase price or redemption
proceeds.
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of
purchase. The price you pay will equal the Class C NAV. There is no initial
sales charge, 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% (0.35% for the Kentucky Limited Term Fund) annual distribution fee which
compensates Nuveen for paying your financial adviser for the sale, including a
1% commission at the time of sale.
If you redeem your Class C shares within one year of purchase, you may be
assessed a CDSC of 1%. The CDSC is calculated on the lower of your purchase
price or redemption proceeds.
BUYING CLASS R SHARES
Under limited circumstances, you may purchase Class R shares at their net asset
value on the day of purchase. In order to qualify, you must be eligible under
one of the programs described under "Other Sales Charge Discounts" above to
purchase Class A shares without a sales charge (excluding Unit Trust
reinvestment) or meet certain other purchase size criteria. Please refer to the
statement of additional information for further information. 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
---
19
<PAGE>
redemption must not exceed $50,000 and you may not redeem by telephone shares
held in certificate form. Checks will be issued only to the shareholder on
record and mailed to the address on record. If you have established electronic
funds transfer privileges on your account, you may have redemption proceeds
transferred electronically to your bank account; if you are redeeming $1,000
or more, you may expedite your request by having your redemption proceeds
wired directly into your bank account. 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 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 the
address of record;
. Any certificates you have for the shares; and
. Any required signature guarantees.
Signatures must be guaranteed if you are redeeming more than $50,000, you want
the check payable to someone other than the shareholder on record, or you want
the check sent to another address (or the address on record has been changed
within the last 60 days). Signature guarantees must be obtained from a bank,
brokerage firm or other financial intermediary that is a member of an approved
Medallion Guarantee Program or that is otherwise approved by the fund. A
notary public cannot provide a signature guarantee.
Unless other arrangements are made, checks will be sent to your address on
record. Checks will normally be mailed within one business day, but in no
event more than seven days from receipt of your redemption request. If any
shares were purchased less than 15 days prior to your request, the fund will
not mail your redemption proceeds until the check for your purchase has
cleared, which may take up to 15 days.
Each fund may suspend redemptions or delay payment on redemptions for more
than seven days (three days for street name accounts) in certain extraordinary
circumstances as described in the statement of additional information.
OPERATION OF THE CDSC
When you redeem Class A, Class B, or Class C shares subject to a CDSC, the fund
will first redeem any shares that are not subject to a CDSC or that represent an
increase in the value of your fund account due to capital appreciation, and
then redeem the shares you have owned for the longest period of time, unless you
ask the fund to redeem your shares in a different order. No CDSC is imposed on
shares you buy through the reinvestment of dividends and capital gains. The
holding period is calculated on a monthly basis and begins on the first day of
the month in which you buy shares. When you redeem shares subject to a CDSC, the
CDSC is calculated on the lower of your purchase price or redemption proceeds,
deducted from your redemption proceeds, and paid to Nuveen. The CDSC may be
waived under certain special circumstances as described in the statement of
additional information.
ACCOUNT MINIMUMS
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
unit trust reinvestment account. You will not be assessed a CDSC on an
involuntary redemption.
EXCHANGING SHARES
You may exchange fund shares at any time for the same class of shares in another
Nuveen national or state mutual fund. You may exchange fund shares by calling
(800) 621-7227 or by mailing your written request to Nuveen at the address
listed under "How to Contact Nuveen."
You must have owned your fund shares for at least 15 days and your exchange must
meet the minimum purchase requirements of the fund into which you are
exchanging. No CDSC will be assessed on an exchange, and the holding period of
your investment will be carried over to the new fund for purposes of determining
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
management, 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 ex-
---
20
<PAGE>
changes, or reject any exchange. You will be notified in the event this happens
to the extent required by law.
OPTIONAL FEATURES AND SERVICES
SYSTEMATIC INVESTMENT
Once you have opened an account, you may make regular investments of $50 or more
a month through automatic deductions from your bank account (see "Fund Direct--
Electronic Funds Transfer" below), or directly from your paycheck. To invest
regularly from your bank account, simply complete the appropriate section of the
account application. To invest regularly from your paycheck, call Nuveen for a
Payroll Direct Deposit Enrollment form. If you need additional copies of these
forms, or would like assistance completing them, contact your financial adviser
or call Nuveen at (800) 621-7227.
One of the benefits of systematic investing is "dollar cost averaging." Because
you are making fixed payments, you buy fewer shares when the price is high, and
more when the price is low. As a result, the average price you pay will be less
than the average share price of fund shares over this period. Dollar cost
averaging does not assure profits or protect against losses in a steadily
declining market. Since dollar cost averaging involves continuous investment
regardless of fluctuating price levels, you should consider your financial
ability to continue investing in declining as well as rising markets before
deciding to invest in this way.
Systematic investing may also make you eligible for reduced sales charges on
shares of the fund as well as other Nuveen mutual funds (see "Other Sales
Charge Discounts").
THE POWER OF SYSTEMATIC INVESTING
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
THE POWER OF SYSTEMATIC INVESTING
[LINE CHART APPEARS HERE]
[ ] Compounded 6%
[ ] Compounded 5%
[ ] Compounded 4%
[ ] Invested Principal
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 ac-
count (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 Ac-
count Update Form to participate in the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, 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 pro-
ceeds in shares of the same class up to one year later without incurring any
applicable sales charge, and your prior holding period will be reinstated for
the purpose of determining applicable sales charges. You may exercise this
privilege only once per redemption request.
If you paid a CDSC, your CDSC will be refunded and your holding period
reinstated. You should consult your tax adviser about the tax consequences of
exercising your reinstatement privilege.
FUND DIRECT--ELECTRONIC FUNDS TRANSFER
You may arrange to transfer funds electronically between your bank account and
your fund account by completing the appropriate section of the account
application or the Account Update Form. If you need additional copies of these
forms, or would like assistance completing them, contact your financial adviser
or call Nuveen at (800) 621-7227. You may use Fund Direct to quickly and
conveniently purchase or sell shares by telephone, systematically invest or
withdraw funds, or send dividend payments directly to your bank account.
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 telephone
redemption via Fund Direct, the fund may charge you a fee for this expedited
service.
---
21
<PAGE>
DIVIDENDS AND TAXES
HOW THE FUNDS PAY DIVIDENDS
The funds pay tax-free dividends monthly and any taxable capital gains or
other distributions once a year in December. The funds declare dividends on or
about the ninth of each month and generally pay dividends on the first 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 in the statement of additional information provides
general tax information related to an investment in fund shares. Because tax
laws are complex and often change, you should consult your tax adviser about
the tax consequences of a specific fund investment.
Each fund primarily invests in municipal bonds from a specific state or in 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 se-
---
22
<PAGE>
curity 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.
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. The following schedule applies to all funds described in this prospectus
except the Kentucky Limited Term Fund:
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>
The following schedule applies to the Kentucky Limited Term Fund:
MANAGEMENT FEES
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- ------------------------------------------------------------------------------
<S> <C>
For the first $125 million 0.4500%
For the next $125 million 0.4375%
For the next $250 million 0.4250%
For the next $500 million 0.4125%
For the next $1 billion 0.4000%
For assets over $2 billion 0.3750%
</TABLE>
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23
<PAGE>
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 Davern has been the portfolio manager for the Kansas and the Missouri
Funds since 1992, the Michigan Fund since 1993, and the Wisconsin Fund since
1994. Mr. Davern became a Vice President of Flagship Financial Inc., the
funds' prior investment advisor in 1991, and became a Vice President of Nuveen
Advisory upon the acquisition of Flagship Resources Inc. by The John Nuveen
Company in January 1997. Richard Huber has been the portfolio manager for the
Kentucky Fund since 1993 and the Kentucky Limited Term Fund since 1995. Since
1995 he has been a Vice President of Flagship Financial Inc., the funds' prior
investment adviser, until becoming a Vice President of Nuveen Advisory upon
the acquisition of Flagship Resources Inc. by The John Nuveen Company in Janu-
ary 1997. Walter Parker is the portfolio manager for the Ohio Fund. Mr. Parker
has managed the fund since 1995 as a Vice President and since 1994 had been an
employee of Flagship Financial Inc., the funds' prior investment adviser, un-
til becoming a Vice President of Nuveen Advisory upon the acquisition of Flag-
ship 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. The plan also
authorizes each fund (excluding the Kentucky Limited Term Fund which does not
currently offer Class B shares) to pay Nuveen an annual 0.75% distribution fee
on the average daily net assets of Class B shares outstanding. The plan also
authorizes each fund to pay Nuveen an annual 0.55% (0.35% for the Kentucky
Limited Term Fund) distribution fee on the average daily net assets of Class C
shares outstanding. In order to help compensate Nuveen for the sales commis-
sion paid to financial advisers at the time of sale on sales of Class B and
Class C shares, Nuveen retains the first year's service fee on sales of Class
B shares and all Class B distribution fees, and retains the first year's serv-
ice 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
The funds have appointed Boston Financial, P.O. Box 8509, Boston, MA, 02266-
8509 as the transfer agent responsible for distributing dividend payments and
providing certain bookkeeping, data processing and other administrative serv-
ices in connection with the maintenance of shareholder accounts.
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 Ohio Fund purchased before February 1,
1997 convert to Class A shares six years after purchase, but only if you re-
quest conversion. You must
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24
<PAGE>
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.
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.
KANSAS
Growth in the State's trade, services and manufacturing sectors has decreased
the historical dominance of agriculture on the State economy. Economic perfor-
mance in 1996 and into 1997 has been significantly better than 1995, due
largely to gains in aircraft manufacturing and recovery in agriculture. Per-
sonal income grew at 6.2% in 1996 to $23,281. Per capita income stands at
about 96% of the national median. Household income reflects more of the recent
strength at 110% of the U.S. average.
The State's unemployment rate dropped to 3.8% in June 1997 from its peak of
5.5% in 1993. Labor force participation is high at 67% versus 62.9% for the
U.S.
The Kansas State Treasury does not issue general obligation debt. The state
instead relies on revenue and lease financing through the Department of Trans-
portation (KDOT) and the Development Finance Authority (KDFA). KDFA provides
financing for various public purpose projects including prison construction,
state offices, energy conservation and university facilities. The KDOT bonds
are rated Aa/AA by Moody's and Standard & Poor's, respectively. KDFA ratings
vary across underlying purpose and when not insured are generally rated A or
better by the major rating agencies.
Tax Treatment.
The Kansas Fund's regular monthly dividends will not be subject to Kansas per-
sonal income taxes to the extent they are paid out of income earned on all
Kansas municipal bonds issued after December 31, 1987, on specified Kansas mu-
nicipal bonds issued before that date, or on U.S. government securities. You
will be subject to Kansas personal income taxes, however, to the extent the
Kansas Fund distributes any taxable income or realized capital gains, or if
you sell or exchange Kansas Fund shares and realize a capital gain on the
transaction.
The treatment of corporate shareholders of the Kansas Fund is similar to that
described above.
KENTUCKY
Kentucky's economy surpassed national growth rates during the 1990's in part
due to its lower cost of living and aggressive business recruitment. The
State's economic base is concentrated in manufacturing and service industries
such as industrial machinery, electronics and apparel production and insurance
and real estate. Kentucky's "Golden Triangle" bounded by Cincinnati, Lexington
and Louisville has experienced the most intense economic growth. The state
currently ranks third among the fifty states as a low cost electricity produc-
er. Its central location in the U.S. and access to low cost gas and coal put
Kentucky utilities in solid position to thrive under deregulation.
A stronger national economy and economic development initiatives at the state
and local level have kept the employment rate at or below 5.5% for the past
three years, most recently 5.1% in June 1997. Per capita income in 1996 was
$19,687, compared to $18,612 in 1995.
In the past, the State has experienced difficulty balancing its budget, but
recent economic growth and moderate debt levels improve the Commonwealth's fi-
nancial outlook. Bonds secured by Commonwealth appropriations generally re-
ceive ratings of "A" or higher from the major rating services. All of
Kentucky's general obligation debt matured in 1995.
Tax Treatment.
The Kentucky Funds' regular monthly dividends will not be subject to the Ken-
tucky individual income tax to the extent they are paid out of income earned
on Kentucky municipal bonds or U.S. government securities. You will be subject
to Kentucky personal income tax, however, to the extent the Kentucky Funds
distribute any taxable income or realized capital gains, or if you sell or ex-
change shares of the Kentucky Funds and realize a capital gain on the transac-
tion. You will not be subject to the annual Kentucky intangible property tax
on the portion of the fair cash value of your shares of the Kentucky Funds
that is attributable to Kentucky municipal bonds or U.S. government securi-
ties.
The treatment of corporate shareholders of the Kentucky Funds is similar to
that described above.
MICHIGAN
Michigan's economy has improved significantly since the 1980's. Michigan's an-
nual average unemployment rate in 1996 was 4.9%, compared to the national av-
erage of 5.4%, and was at its lowest level since 1969. Per capita income has
increased each year over the past decade, and was $24,810 in 1996. Population
has remained stable in the State, increas -
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25
<PAGE>
ing by a negligible amount annually. The manufacturing industry and the presence
of the "Big 3" automobile manufacturers are the primary influence in the
economy. Despite recent strikes and lower automobile sales and profits, the
positive economic impact of the manufacturing industry has contributed to tax
base and job growth.
As a result of strong economic growth, financial conditions have greatly
improved since budget problems in the 1980's. Revenues increased 8.4% from
fiscal year 1995 to fiscal year 1996, while expenditures increased only 7.2%.
Michigan's economic and financial improvements are reflected in the state's
rating of Aa2/AA/AA by Moody's, Standard & Poor's and Fitch, respectively.
Moody's upgraded the state from A1 to Aa in July of 1995 and revised the rating
to Aa2 in March of 1997.
Tax Treatment.
The Michigan Fund's regular monthly dividends will not be subject to the
Michigan individual income tax to the extent they are paid out of income earned
on Michigan municipal bonds or paid out of income earned on or capital gains
realized from the sale of U.S. government securities. You will be subject to
Michigan personal income tax, however, to the extent the Michigan Fund
distributes any taxable income or realized capital gains (other than capital
gains realized from the sale of U.S. government securities), or if you sell or
exchange Michigan Fund shares and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Michigan Fund differs from that
described above. Corporate shareholders should refer to the statement of
additional information for more detailed information and are urged to consult
their tax adviser.
MISSOURI
Missouri maintains a diversified economy, mirroring that of the nation. Although
recent industry growth has shifted to services and tourism, defense and
manufacturing are important elements of the state economy. Population in
Missouri has increased approximately 4.7% from 1990. The State's unemployment
rate has steadily declined since the high of 6.7% in 1991 and was 4.6% in 1996,
compared to the national average of 5.4%. Per capita income increased over 7%
during 1996 to $22,864, which is about 94% of the national average.
Missouri retains substantial governmental balances through strategic budget
management. The General Fund ending balance increased over 50% from fiscal
year 1995 to fiscal year 1996. The State's unreserved fund balance in 1996 was
$2.4 billion at fiscal year end, up 29% from fiscal year 1995. Tax revenues
increased 5% from 1995 to 1996, contributing almost 59% of total governmental
revenues.
Although Missouri general obligation debt burden is low at only 1.4% of General
Fund revenues, the state has expanded its use of lease financing. Missouri's
overall creditworthiness is reflected in its long-standing Aaa/AAA/AAA rating by
Moody's, Standard & Poor's and Fitch, respectively.
Tax Treatment.
The Missouri Fund's regular monthly dividends will not be subject to the
Missouri individual income tax to the extent they are paid out of income earned
on Missouri municipal bonds or U.S. government securities. You will be subject
to Missouri personal income tax, however, to the extent the Missouri Fund
distributes any taxable income or realized capital gains, or if you sell or
exchange Missouri Fund shares and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Missouri Fund is similar to
that described above.
OHIO
The Ohio economy has historically relied on durable goods manufacturing, but
recent growth has brought healthy diversification. Two-thirds of the new jobs
added to the Ohio economy over the period 1993 to 1996 were in services or
retail trade. While manufacturing declined relative to other sectors, over
40,000 jobs were added, notably in rubber and plastics, primary metal, and
fabricated metals. General economic activity tends to be more cyclical than in
non-industrialized states, but during the current national expansion it has had
positive implications in Ohio.
From 1990-97, the State's unemployment rate ranked below the national average.
The rate has fluctuated between 4.5 and 5.0% for the last 36 months, most
recently at 4.2% in June 1997. Per capita income is $23,537, approximately 97%
of the national average.
The State cannot by law operate with a deficit and has well-established
procedures to ensure that appropriations and expenditures are matched by
revenues from the General Revenue Fund. Moody's and Standard & Poor's improved
their ratings during the past year due to improved financial condition and the
economic outlook of the State. Moody's gives Ohio general obligation bonds an
Aa1 rating, up from Aa, while Standard & Poor's gives them an AA+ rating up from
AA.
Tax Treatment.
The Ohio Fund's regular monthly dividends will not be subject to Ohio personal
income taxes to the extent they are paid out of income earned on Ohio municipal
bonds or U.S. government securities or out of gain from Ohio municipal bonds.
You will be subject to Ohio personal income taxes, however, to the extent the
Ohio Fund distributes any taxable income or realized capital gains (other than
capital gains on Ohio municipal bonds), or if you sell or exchange Ohio Fund
shares and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Ohio Fund differs from that
described above. Corporate shareholders should refer to the statement of
additional information for more detailed information and are urged to consult
their tax adviser.
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26
<PAGE>
WISCONSIN
Wisconsin's economy is diverse and strong with non-agricultural employment
evenly spread between the manufacturing, service and trade sectors. The State
continues its efforts to attract new businesses with grants and loans for major
development projects, labor training and technology development. Manufacturing
remains a dominant sector at 24% and is currently a source of strength.
The State's unemployment rate was 3.6% in June 1997. It has been below 4.0% for
thirty consecutive months. Per capita income was $23,269 in 1996, about 96% of
the national average.
The State's general obligation's receive Aa2/AA rating from Moody's and Standard
and Poor's, respectively.
Tax Treatment.
The Wisconsin Fund's regular monthly dividends will not be subject to Wisconsin
personal income tax to the extent they are paid out of income earned on certain
Wisconsin municipal obligations or U.S. government securities. You will be
subject to Wisconsin personal income tax, however, to the extent the Wisconsin
Fund distributes any taxable income or realized capital gains, or if you sell or
exchange Wisconsin Fund shares and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Wisconsin Fund differs from that
described above. Corporate shareholders should refer to the statement of
additional information for more detailed information and are urged to consult
their tax adviser.
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27
<PAGE>
Nuveen Family of Mutual Funds
Nuveen's family of funds 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>
SEPTEMBER 26, 1997
NUVEEN FLAGSHIP MULTISTATE TRUST IV
NUVEEN FLAGSHIP KANSAS MUNICIPAL BOND FUND
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
NUVEEN FLAGSHIP MICHIGAN MUNICIPAL BOND FUND
NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND
NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND
NUVEEN FLAGSHIP WISCONSIN MUNICIPAL BOND FUND
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 IV dated September 26, 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-12
Investment Adviser and Investment Management Agreement..................... S-23
Portfolio Transactions..................................................... S-24
Net Asset Value............................................................ S-25
Tax Matters................................................................ S-26
Performance Information.................................................... S-34
Additional Information on the Purchase and Redemption of Fund Shares....... S-42
Distribution and Service Plan.............................................. S-48
Independent Public Accountants and Custodian............................... S-50
Financial Statements....................................................... S-50
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Description of Hedging Techniques.............................. B-1
</TABLE>
The audited financial statements for each Fund's most recent fiscal year
appear in the Funds' Annual Reports. The Annual Reports accompany this
Statement of Additional Information.
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
INVESTMENT POLICIES
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of that Fund:
(1) Invest in securities other than Municipal Obligations and 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 Kentucky Municipal Bond Fund, the
Michigan Municipal Bond Fund, and the Ohio 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.
S-2
<PAGE>
(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 IV (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 IV. The
Trust is
S-3
<PAGE>
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 seven series:
the Nuveen Flagship Kansas Municipal Bond Fund (formerly the Flagship Kansas
Triple Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the
Nuveen Flagship Kentucky Municipal Bond Fund (formerly the Flagship Kentucky
Triple Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund (formerly the
Flagship Kentucky Limited Term Municipal Bond Fund, a series of the Flagship
Tax Exempt Funds Trust); the Nuveen Flagship Michigan Municipal Bond Fund
(formerly the Flagship Michigan Triple Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust); the Nuveen Flagship Missouri Municipal Bond
Fund (formerly the Flagship Missouri Double Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust); the Nuveen Flagship Ohio Municipal Bond Fund
(formerly the Flagship Ohio Double Tax Exempt Fund, a series of the Flagship
Tax Exempt Funds Trust); and the Nuveen Flagship Wisconsin Municipal Bond Fund
(formerly the Flagship Wisconsin Double Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust). 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 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.
S-4
<PAGE>
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.
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:
<TABLE>
<CAPTION>
FISCAL
YEAR
1996 1997
---- ----
<S> <C> <C>
Nuveen Flagship Kansas Municipal Bond Fund..................... 55% 40%
Nuveen Flagship Kentucky Municipal Bond Fund................... 17% 13%
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund...... 48% 56%
Nuveen Flagship Michigan Municipal Bond Fund................... 54% 34%
Nuveen Flagship Missouri Municipal Bond Fund................... 38% 41%
Nuveen Flagship Ohio Municipal Bond Fund....................... 31% 17%
Nuveen Flagship Wisconsin Municipal Bond Fund.................. 47% 42%
</TABLE>
S-5
<PAGE>
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 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. 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 KANSAS
Growth in the State's trade, services and manufacturing sectors has decreased
the historical dominance of agriculture on the State economy. Economic
performance in 1996 and into 1997 has been significantly better than 1995, due
largely to gains in aircraft manufacturing and recovery in agriculture.
Personal income grew at 6.2% in 1996 to $23,281, after posting a 5.1% gain in
1995. Both years exceeded the national average growth rate. Personal per capita
income stands at about 96% of the national median. Household income reflects
more of the recent strength at 110% of the U.S. average.
The Kansas labor force posted a 2.7% increase in what has been a very low
unemployment environment. Labor force participation is high at 67% versus 62.9%
for the U.S. The State's unemployment rate dropped to 3.8% in June 1997 from
its peak of 5.5% in 1993.
S-6
<PAGE>
The Kansas State Treasury does not issue general obligation debt. The state
instead relies on revenue and lease financing through the Department of
Transportation (KDOT) and the Development Finance Authority (KDFA). KDFA is the
conduit for most state debt and provides financing for various public purpose
projects including prison construction, state offices, energy conservation and
university facilities. The KDOT bonds are rated Aa/AA from Moody's and S&P,
respectively. KDFA ratings vary across underlying purpose and when not insured
are generally rated A or better by the major rating agencies.
FACTORS PERTAINING TO KENTUCKY
Kentucky's economy surpassed national growth rates during the 1990's in part
due to its lower cost of living and aggressive business recruitment. The
State's economic base is concentrated in manufacturing and service industries
such as industrial machinery, electronics and apparel production and insurance
and real estate. Kentucky's "Golden Triangle" bounded by Cincinnati, Lexington
and Louisville has experienced the most intense economic growth. The state
currently produces 20% more electric power than it consumes and ranks third
among the fifty states as a low cost producer. Its central location in the U.S.
and access to low cost gas and coal put Kentucky utilities in solid position to
thrive under deregulation.
Unemployment has taken a number of turns in Kentucky dropping from over 10%
in the mid-80's to 5.4% in 1990 only to peak at 7.7% in 1991. A stronger
national economy and economic development initiatives at the state and local
level have kept the rate at or below 5.5% for the past three years, most
recently 5.1% in June 1997. Per capital income was $19,687 in 1996, up from
$18,612 in 1995.
In the past, the State has experienced difficulty balancing its budget, but
recent economic growth and moderate debt levels improve the Commonwealth's
financial outlook. The Turnpike Authority remains the largest debt issuer with
over $1.4 billion in bonds outstanding. The State Property and Building
Authority had approximately $1.2 billion outstanding in variable and fixed rate
leases at the end of fiscal year 1996. Higher education and student loans
represent the third largest type of debt authorized by the Commonwealth with
over $1 billion in par outstanding. Bonds secured by Commonwealth
appropriations generally receive ratings of "A" or higher from the major rating
services. All of Kentucky's general obligation debt matured in 1995.
FACTORS PERTAINING TO MICHIGAN
Michigan's economy has improved significantly since the 1980's. Michigan's
annual average unemployment rate in 1996 was 4.9%, compared to the national
average of 5.4%. In fact, Michigan's unemployment rate in 1996 was at its
lowest level since 1969. Michigan's per capita income has increased each year
over the past decade, surpassing that of the nation's in 1994 after years of
lagging the national average. 1996 per capita income was $24,810. Population
has remained stable in the State, increasing by a negligible amount annually.
The manufacturing industry and the presence of the "Big 3" automobile
manufacturers are the primary influence in the economy. Despite recent strikes
and lower automobile sales and profits, the positive economic impact of the
manufacturing industry has contributed to tax base and job growth. Durable
goods manufacturing wages and salaries have increased approximately 8.7% since
1991.
As a result of strong economic growth, financial conditions have greatly
improved since budget problems in the 1980's. Revenues increased 8.4% from
fiscal year 1995 to fiscal year 1996, while expenditures increased only 7.2%.
Michigan's financial highlight is the Counter-Cyclical Budget and Economic
Stabilization Fund which reached a high of $1.1. billion in fiscal year 1996.
Education in Michigan is a top priority. One of the state's most significant
achievements was the enactment of Proposal A in 1994. In order to promote
equality among school districts of varying wealth levels, funding for Michigan
school districts shifted from local property taxes to state sales taxes.
According to the fiscal year 1997 budget, 79% of students will enjoy per pupil
spending at or above $5,445, compared to average spending of $5,090 per pupil
prior to reform.
S-7
<PAGE>
Michigan's economic and financial improvements are reflected in the state's
rating of Aa2/AA/AA by Moody's, S&P and Fitch, respectively. Moody's upgraded
the state from A1 to Aa in July of 1995 and revised the rating to Aa2 in March
of 1997.
FACTORS PERTAINING TO MISSOURI
Missouri maintains a diversified economy, mirroring that of the nation.
Although recent industry growth has shifted to services and tourism, defense
and manufacturing are important elements of the state economy. McDonnell
Douglas Corporation, one of the largest private employers in the state, employs
approximately 25,000 people, with Chrysler and Ford each employing
approximately 10,000 people.
Population in Missouri has increased approximately 4.7% from 1990. The
state's unemployment rate has steadily declined since the high of 6.7% in 1991.
Unemployment rate for Missouri at the end of fiscal year 1996 was 4.6%,
compared to the national average of 5.4%. Personal income increased over 7%
during 1996 to $22,864, but is still at about 94% of the national average.
Missouri retains substantial governmental balances through strategic budget
management. The General Fund ending balance increased over 50% from fiscal year
1995 to fiscal year 1996. The State's unreserved fund balance in 1996 was $2.4
billion at fiscal year end, up 29% from fiscal year 1995. Tax revenues
increased 5% from 1995 to 1996, contributing almost 59% of total governmental
revenues. Primary state expenditures are divided between human services (45%)
and education (30%).
Although Missouri general obligation debt burden is low at only 1.4% of
General Fund revenues, the state has expanded its use of lease financing. The
Missouri School District Direct Deposit Program is one of the largest pooled
issuers to come to market in recent years. Missouri's overall creditworthiness
is reflected in its long-standing Aaa/AAA/AAA rating by Moody's, S&P, and
Fitch, respectively.
FACTORS PERTAINING TO OHIO
The Ohio economy has historically relied on durable goods manufacturing, but
recent growth has brought healthy diversification. Two-thirds of the new jobs
added to the Ohio economy over the period 1993 to 1996 were in services or
retail trade. While manufacturing declined relative to other sectors, over
40,000 jobs were added, notably in rubber and plastics, primary metals, and
fabricated metals. General economic activity tend to be more cyclical than in
non-industrialized states, but during the current national expansion it has had
positive implications in Ohio.
For the entire period 1990-97, the State's unemployment rate ranked below the
national average. The recession of the early 90's did not peak in Ohio until
1992 when unemployment hit 7.5%. Steady improvement since that time has put the
rate between 4.5 and 5.0% for the last 36 months, most recently at 4.2% in June
1997. Personal income is approximately 97% of the national average, and was
$23,537 in 1996.
The State cannot by law operate with a deficit and has well-established
procedures to ensure that appropriations and expenditures are matched by
revenues from the General Revenue Fund. Economic growth has resulted in tax
collections coming in well above budget providing more than $1 billion for the
State to address school reform or provide tax relief. Moody's and Standard &
Poors improved their ratings during the past year due to improved financial
condition and the economic outlook of the State. Moody's gives Ohio general
obligation bonds an Aa1 rating up from Aa, while S&P's given them an AA+ rating
up from AA.
FACTORS PERTAINING TO WISCONSIN
Wisconsin's economy is diverse and strong with non-agricultural employment
evenly spread between the manufacturing, service and trade sectors. The State
continues its efforts to attract new businesses with grants and loans for major
development projects, labor training and technology development. Evidence of
the State's
S-8
<PAGE>
economic boom is apparent as property values increased at close to 8.0%
annually in each of the last 4 years and the median household income of $48,982
is 104% of the U.S. median, up from 97% nine years prior. Manufacturing remains
a dominate sector at 24% and is currently a source of strength.
The State's unemployment rate was 3.6% in June 1997. It has been below 4.0%
for thirty consecutive months. Personal per capita income was $23,269 in 1996
about 96% of the national average.
State general obligation's receive Aa2/AA rating from Moody's and Standard
and Poors, respectively.
HEDGING AND OTHER DEFENSIVE ACTIONS
Each Fund may periodically engage in hedging transactions. Hedging is a term
used for various methods of seeking to preserve portfolio capital value of
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in financial futures and index futures as well as related put and
call options on such instruments. Both parties entering into an index or
financial futures contract are required to post an initial deposit of 1% to 5%
of the total contract price. Typically, option holders enter into offsetting
closing transactions to enable settlement in cash rather than take delivery of
the position in the future of the underlying security. Each Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series, portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit. Finally, the potential daily deposit requirements in
futures contracts create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost of the initial
premium. Losses due to hedging transactions will reduce yield. Net gains, if
any, from hedging and other portfolio transactions will be distributed as
taxable distributions to shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and
deposits would exceed 5% of such series' net assets. Each series will invest in
these instruments only in markets believed by the investment adviser to be
active and sufficiently liquid. For further information regarding these
investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, including up to 5% in adequately collateralized
repurchase agreements relating thereto. Interest on each instrument is taxable
for Federal income tax purposes and would reduce the amount of tax-free
interest payable to shareholders.
TEMPORARY INVESTMENTS
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable "temporary investments."
Temporary investments will not exceed 20% of a Fund's assets except when made
for defensive purposes. The Funds will invest only in taxable temporary
investments that are either U.S. Government securities or are rated within the
highest grade by Moody's, S&P, or Fitch and mature
S-9
<PAGE>
within one year from the date of purchase or carry a variable or floating rate
of interest. See Appendix A for more information about ratings by Moody's, S&P,
and Fitch.
The Funds may invest in the following federally tax-exempt temporary
investments:
Bond Anticipation Notes (BANs) are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing
for projects that will eventually be funded through the sale of long-term
debt obligations or bonds. The ability of an issuer to meet its obligations
on its BANs is primarily dependent on the issuer's access to the long-term
municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments
to finance the current operations of such governments. Repayment is
generally to be derived from specific future tax revenues. Tax anticipation
notes are usually general obligations of the issuer. A weakness in an
issuer's capacity to raise taxes due to, among other things, a decline in
its tax base or a rise in delinquencies, could adversely affect the
issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or
governmental bodies with the expectation that future revenues from a
designated source will be used to repay the notes. In general, they also
constitute general
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 Funds may invest in such other types of notes to the
extent permitted under their investment objective, policies and limitations.
Such notes may be issued for different purposes and may be secured differently
from those mentioned above.
The 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.
S-10
<PAGE>
--Treasury bills are issued with maturities of up to one year. They are
issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
--Treasury notes are longer-term interest bearing obligations with
original maturities of one to seven years.
--Treasury bonds are longer-term interest-bearing obligations with
original maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been
established as instrumentalities of the United States Government to supervise
and finance certain types of activities. These agencies include, but are not
limited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States, and Tennessee Valley Authority. Issues of these agencies, while not
direct obligations of the United States Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury or
supported by the issuing agencies' right to borrow from the Treasury. There can
be no assurance that the United States Government itself will pay interest and
principal on securities as to which it is not legally so obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable
interest bearing instrument with a specific maturity. CDs are issued by banks
in exchange for the deposit of funds and normally can be traded in the
secondary market, prior to maturity. The Funds will only invest in U.S. dollar
denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few days to nine months. Commercial paper may be purchased from
U.S. corporations.
Other Corporate Obligations--The Funds may purchase notes, bonds and
debentures issued by corporations if at the time of purchase there is less than
one year remaining until maturity or if they carry a variable or floating rate
of interest.
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-11
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Funds under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has eight
trustees, two of whom are "interested persons" (as the term "interested
persons" is defined in the Investment Company Act of 1940) and six of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Timothy R. Schwertfeger* 48 Chairman and Chairman 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).
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 56 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-12
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
William J. 53 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
One South thereto, Executive Director, Great Lakes
Main Protection Fund (from 1990 to 1994).
Street
Dayton, OH
45402
Bruce P. 57 Executive Executive Vice President of John Nuveen & Co.
Bedford Vice President 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, Financial Inc. and the Flagship funds.
IL 60606
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 Financial.
Street
Dayton, OH
45402
William M. 32 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, Nuveen Advisory Corp.
IL 60606
Kathleen M. 50 Vice President Vice President of John Nuveen & Co.
Flanagan Incorporated, Vice President (since June
333 West 1996) of Nuveen Advisory Corp. and Nuveen
Wacker Institutional Advisory Corp.
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 Financial.
Street
Dayton, OH
45402
Steven J. 39 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-13
<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, Assistant Secretary and
Martin Assistant General Counsel of John Nuveen &
333 West Co. Incorporated; Vice President (since May
Wacker Drive 1993) and Assistant Secretary of Nuveen
Chicago, IL Advisory Corp.; Vice President (since May
60606 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), previously
45402 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 1983
45402 and June 1994) for PNC Bank.
O. Walter 58 Vice President Vice President and Controller of The John
Renfftlen Nuveen Company, John Nuveen & Co.
333 West Incorporated, Nuveen Advisory Corp. and
Wacker Drive Nuveen Institutional Advisory Corp.
Chicago, IL
60606
Thomas C. 46 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 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, Assistant Secretary and
Zimmerman and Assistant Associate General Counsel of John Nuveen &
333 West Secretary Co. Incorporated; Vice President (since May
Wacker Drive 1993) and Assistant Secretary of Nuveen
Chicago, IL Advisory Corp.; Vice President (since May
60606 1993) and Assistant Secretary of Nuveen
Institutional Advisory Corp; Assistant
Secretary of The John Nuveen Company (since
May 1994).
</TABLE>
S-14
<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 other 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. Trustees Brown, Impellizzeri, Rosenheim and Sawers
became trustees of this Trust on February 1, 1997.
<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........................ $6,136(1) $25,333(1)
Lawrence H. Brown........................ $1,828 $59,500
Anne E. Impellizzeri..................... $1,828 $59,500
Margaret K. Rosenheim.................... $2,133(2) $67,582(3)
Peter R. Sawers.......................... $1,828 $59,500
William J. Schneider..................... $6,532(1) $26,333(1)
Judith M. Stockdale...................... $ 0(4) $ 0(4)
</TABLE>
- --------
(1) Includes compensation received as a trustee of the Flagship Funds, for the
period June 1, 1996 to January 31, 1997.
(2) Includes $60 in interest accrued on deferred compensation from prior years;
former trustee, retired July 1997.
(3) Includes $1,582 in interest accrued on deferred compensation from prior
years; former trustee, retired July 1997.
(4) 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 September 4, 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 Kansas
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 15.17%
Class A Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
PaineWebber for the benefit of 7.76
Sonya Ropfogel and Leonard
Ropfogel Ttees Leonard
Dated 8/20/81
155 N. Market, Suite 1000
Wichita KS 67202-1824
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Kansas
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 32.43%
Class B Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Prudential Securities Inc. FBO 16.25
Frank F. Castellano
Patricia J. Castellano JT TEN
14032 Hayes St.
Overland Park KS 66221-2013
Wedbush Morgan Securities 10.69
A/C 4291-5597
1000 Wilshire Blvd.
Los Angeles CA 90017-2457
Smith Barney Inc. 6.33
00138429515
388 Greenwich Street
New York NY 10013-2375
Nuveen Flagship Kansas
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 65.08
Class C Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Paul C. Hartsock TOD 9.70
Martha A. Tubbs
Paul B. Hartsock
John C. Hartsock
3200 Sommerset Dr
Prairie Village KS 66206-1139
John R. Burk TR 6.60
Arthur Burk Trust
U/A DTD 7/20/81
HC 2 Box 60
McDonald KS 67745-9729
Edward D. Jones & Co. FAO 6.37
Henry Robert Kircher
EDJ# 551-03167-1-3
PO Box 2500
Maryland Heights MD 63043-8500
</TABLE>
S-16
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Kansas
Municipal Bond Fund Boston Financial Data Services 50.78
Class R Shares............ Corp. Actions Audit Acct #2 442
Flagship Funds
2 Heritage Dr 8th Floor
N Quincy MA 02171-2144
Boston Financial Data Services 49.22%
Corp. Actions Audit Acct #1 442
Flagship Funds
2 Heritage Dr. 8th Floor
N Quincy MA 02171-2144
Nuveen Flagship Kentucky
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 10.48
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 Kentucky
Municipal Bond Fund Prudential Securities Inc. FBO 27.39
Class B Shares............ Mayne Bush Jett
13 Deepwood Dr.
Lexington KY 40505-2105
Merrill Lynch, Pierce, Fenner & Smith 17.99
for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Linda P. Harshberger 8.22
6800 Fairway View Ct.
Prospect KY 40059-9477
NFSC FEBO CNM-256315 7.21
Jeanne S. Baugher
2905 Sunnyfield Road
Louisville KY 40220-2841
Wheat First Securities, Inc. 6.73
A/C 5108-7552
Harriet F. Linn JT TEN
3051 Rio Dosa Dr. #146
Lexington KY 40509-1590
Smith Barney Inc. 5.01
00170916122
388 Greenwich Street
New York NY 10013-2375
</TABLE>
S-17
<PAGE>
<TABLE>
<S> <C> <C>
Nuveen Flagship Kentucky
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 31.71
Class C Shares............. for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Kentucky
Municipal Bond Fund Ronald G. Barlow 94.45
Class R Shares............. Nancy Barlow JT TEN
10136 Scale Rd.
Bentok KY 42025-6748
Nuveen Flagship Kentucky
Limited Term Municipal Bond
Fund Merrill Lynch, Pierce, Fenner & Smith 44.82%
Class A Shares............. for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Smith Barney Inc. 5.91
00119016144
388 Greenwich Street
New York NY 10013-2375
Nuveen Flagship Kentucky
Limited Term Municipal Bond
Fund Merrill Lynch, Pierce, Fenner & Smith 34.84
Class C Shares............. for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Terry A. Meiners and 11.05
Andrea Meiners JTWROS
11210 Bodley Dr.
Louisville KY 40223-1386
Dean Witter for the benefit of 5.56
Edwin Paul Lyon Jr and
Jo Ann Lyon Jtten
PO Box 266
Salyersville KY 41465-0266
Nuveen Flagship Kentucky
Limited Term Municipal Bond
Fund James O. Carroll 99.33
Class R Shares............. Lucille Carroll JTWROS
6621 Astral Dr.
Louisville, KY 40258-3315
</TABLE>
S-18
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Michigan
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 54.24
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 Michigan
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 13.97%
Class B Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
PaineWebber FBO 13.13%
Ann S Murray TEE
Ann S Murray Rev Liv Trust
UAD 2-8-95
745 Nightingale
Dearborn MI 48128-1530
Helen M Lardner TR 10.72
Helen M Lardner Rev Trust
U/A Dtd 08/13/92
8235 B Dr N
Battle Creek MI 49014-8502
A S Arbury Jr 10.29
Arbury Family Trust
U/A Dtd 2/23/95
3304 N Bent Oak Dr
Midland MI 48640-2379
PaineWebber FBO 9.09
Frank I Baranik TTEE
Frank I Baranik Revocable
Living Trust Dtd 5/22/97
17220 Kinross Rd
Birmingham MI 48025-4133
Pamela C Shaberly 6.46
David K Shaberly JTWROS
560 S Stoney Point Rd
Suttons Bay MI 49682-9575
Ross J Woodworth 5.49
Karen Benton TRS
Karen Benton Rev Liv Trust
U/A Dtd 01/19/90
1093 Keele Ct
Oxford MI 48371-5901
</TABLE>
S-19
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Virgina Estes 5.34%
Ian McNaught
JTWROS
3575 Eastbourne
Troy MI 48084-1107
Nuveen Flagship Michigan Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 65.95%
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 Missouri Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 24.44
Class A Shares................... for the sole benefit of of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Nuveen Flagship Missouri Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 37.66
Class B Shares................... for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Carmella A Leonard Rev Trust 21.90
Carmella A Leonard TTEE
U/A Dtd 12-28-94
13150 Olive Blvd
St. Louis MO 63141-6154
Alvin H Fahr 16.14
#3 Kennedy
Prtg De Sioux MO 63373
Rita H Stringham 6.46
John R Mouldoon
Mary B Ganahl JTWROS
#5 Roven Court Lake
St Louis MO 63367
Hal N Hunter III 5.17
545 Virginia St
New Madrid MO 63869-1753
Nuveen Flagship Missouri Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 60.17
Class C Shares................... for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6848
</TABLE>
S-20
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Missouri
Municipal Bond Fund Todd Boehner 90.56%
Class R Shares............ 832 S Sappington Rd
Saint Louis MO 63126-1003
Mary Jo Mustello 9.18
8320 NW Forest Dr
Weatherby Lake MO 64152
Nuveen Flagship Ohio
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 38.05
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 Ohio
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 22.07
Class B Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
PaineWebber FBO 11.75
Annette R Mongan
10220 Carriage Trail
Cincinnati OH 45242-4535
NFSC FEBO # MO6-022683 10.06
Patricia M Calam
4013 Newcastle Dr
Sylvania OH 43560-3450
Nuveen Flagship Ohio
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 54.23
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 Wisconsin 9.11
Municipal Bond Fund Richard Teerlink
Class A Shares............ Anna L Teerlink JTWROS
1765 Wedgewood Dr. W
Elm Grove, WI 53122-1056
Merrill Lynch, Pierce, Fenner & Smith 7.26
for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Wisconsin
Municipal Bond Fund Patrick H McNeill 27.58%
Class B Shares.................. Suzanne McNeill JTWROS
2565 School Ln
Green Bay WI 54313-8117
Dean Witter FBO 25.40
Lorraine Suminski
1121 North Waverly Pl
Church St Station PO Box 250
New York NY 10013-0250
Evelyn J Peloquin CONSV 15.76
E/O Loretta X Durch
8151 210th St
Cadott WI 54727-5517
PaineWebber FBO 13.93
Karl G. Gierhahn
3279 S Illinois Ave
Milwaukee WI 53207-3032
Frieda B John 5.70
1723 Huwboldt Ave
Sheboygan WI 53081-6616
Nuveen Flagship Wisconsin
Municipal Bond Fund Affiliated Leasing Inc 62.47
Class C Shares.................. PO Box 44509
Madison WI 53744-4509
Gerald F Tifft & Eileen F Tifft 18.04
JTWROS
2720 Jacquelyn Drive
Madison WI 53711-5245
Josephine A Schneider 15.82
215 N Westfield St Apt 719
Oshkosh WI 54901-4101
Nuveen Flagship Wisconsin
Municipal Bond Fund Elizabeth H Sohn TR 99.75
Class R Shares.................. Elizabeth H Sohn Trust
U/A Dtd 3/7/96
N14651 Wintergreen Lake Rd
Park Falls WI 54552-7069
</TABLE>
S-22
<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 except the Kentucky Limited Term Fund 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>
The Kentucky Limited Term Fund has agreed to pay an annual management fee at
the rates set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- ----------------------------- --------------
<S> <C>
For the first $125 million....................................... .4500 of 1%
For the next $125 million........................................ .4375 of 1%
For the next $250 million........................................ .4250 of 1%
For the next $500 million........................................ .4125 of 1%
For the next $1 billion.......................................... .4000 of 1%
For assets over $2 billion....................................... .3750 of 1%
</TABLE>
Nuveen Advisory has agreed to waive all or a portion of its management fee or
reimburse certain expenses of the Ohio Fund in order to prevent total operating
expenses (including Nuveen Advisory's fee, but excluding interest, taxes, fees
incurred in acquiring and disposing of portfolio securities, any asset-based
distribution or service fees and, to the extent permitted, extraordinary
expenses) in any fiscal year from exceeding .75 of 1% of average daily net
asset value of any class of shares of the Fund.
For all of the Funds, Nuveen Advisory has committed through at least 1998 to
continue Flagship's general dividend-setting practices.
S-23
<PAGE>
For the last three fiscal years, the Funds paid net management fees to
Flagship Financial, predecessor to Nuveen Advisory, and beginning on February
1, 1997, to Nuveen Advisory, as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF FEE WAIVERS AND EXPENSE
EXPENSE REIMBURSEMENT PAID REIMBURSEMENTS
FOR THE YEAR 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>
Kansas Municipal Bond
Fund................... -- 38,552 159,550 404,085 496,188 339,334
Kentucky Municipal Bond
Fund................... 559,150 799,646 1,300,570 1,357,696 1,328,971 989,872
Kentucky Limited Term
Municipal Bond Fund.... -- 2,496 -- -- 50,402 108,413
Michigan Municipal Bond
Fund................... 729,008 873,242 1,194,710 626,290 586,307 378,083
Missouri Municipal Bond
Fund................... 244,965 494,006 823,757 726,130 598,909 326,922
Ohio Municipal Bond
Fund................... 1,926,295 1,899,111 2,430,648 375,587 522,006 355,267
Wisconsin Municipal Bond
Fund................... -- -- -- 22,083 102,593 146,340
</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 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.
S-24
<PAGE>
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 Funds' 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 Exchange is normally open for
trading. The Exchange is not open for trading on New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. The net asset value per share of a class of shares of a
Fund will be computed by dividing the value of the Fund's assets attributable
to the class, less the liabilities attributable to the class, by the number of
shares of the class outstanding.
In determining net asset value for the Funds, each Fund's custodian utilizes
the valuations of portfolio securities furnished by a pricing service approved
by the trustees. 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
S-25
<PAGE>
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 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.
S-26
<PAGE>
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if they had been incurred in the succeeding year.
Each Fund also intends to satisfy conditions (including requirements as to
the proportion of its assets invested in Municipal Obligations) that will
enable it to designate distributions from the interest income generated by
investments in Municipal Obligations, which is exempt from regular federal
income tax when received by such Fund, as exempt-interest dividends.
Shareholders receiving exempt-interest dividends will not be subject to regular
federal income tax on the amount of such dividends. Insurance proceeds received
by a Fund under any insurance policies in respect of scheduled interest
payments on defaulted Municipal Obligations will be excludable from federal
gross income under Section 103(a) of the Code. In the case of non-appropriation
by a political subdivision, however, there can be no assurance that payments
made by the insurer representing interest on "non-appropriation" lease
obligations will be excludable from gross income for federal income tax
purposes. See "Investment Policies and Investment Portfolio; Portfolio
Securities."
Distributions by a Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by a Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If a Fund purchases a Municipal Obligation at a market discount, any gain
realized by the Fund upon sale or redemption of the Municipal Obligation will
be treated as taxable interest income to the extent such gain does not exceed
the market discount, and any gain realized in excess of the market discount
will be treated as capital gains. Any net long-term capital gains realized by a
Fund and distributed to shareholders in cash or additional shares, will be
taxable to shareholders as long-term capital gains regardless of the length of
time investors have owned shares of a Fund. Distributions by a Fund that do not
constitute ordinary income dividends, exempt-interest dividends, or capital
gain dividends will be treated as a return of capital to the extent of (and in
reduction of) the shareholder's tax basis in his or her shares. Any excess will
be treated as gain from the sale of his or her shares, as discussed below.
If a Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of
income designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income that was tax-
exempt during the period covered by the distribution.
If a Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to a Fund, defer a Fund's losses, cause
adjustments in the holding periods of a Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Because the taxable portion of a Fund's investment income consists primarily
of interest, none of its dividends, whether or not treated as exempt-interest
dividends, is expected to qualify under the Internal Revenue Code for the
dividends received deductions for corporations.
Prior to purchasing shares in a Fund, the impact of dividends or
distributions which are expected to be or have been declared, but not paid,
should be carefully considered. Any dividend or distribution declared shortly
S-27
<PAGE>
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. Present law taxes both long- and
short-term capital gains of corporations at the rates applicable to ordinary
income. For non-corporate taxpayers, however, (i) gain on the sale of shares
held for more than 18 months will generally be taxed at a maximum marginal rate
of 20%, (ii) gain on the sale of shares held for more than one year but not
more than 18 months will generally be taxed at a maximum marginal rate of 28%,
and (iii) gain on the sale of shares held for not more than one year and other
ordinary income will generally 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 on net income 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 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.
S-28
<PAGE>
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 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.
S-29
<PAGE>
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.
KANSAS
The following is a general, abbreviated summary of certain provisions of the
applicable Kansas tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Kansas Fund.
The foregoing 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 Kansas Fund transactions.
The following is based on the assumptions that the Kansas Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Kansas Fund distributions to qualify as
exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Kansas Fund's shareholders.
The Kansas Fund will be subject to the Kansas corporate franchise tax and the
Kansas corporate income tax only if it has a sufficient nexus with Kansas. If
it is subject to such taxes, it does not expect to pay a material amount of
either tax.
Distributions by the Kansas Fund that are attributable to interest on any
obligation of Kansas and its political subdivisions issued after December 31,
1987, and interest on certain such obligations issued before January 1, 1988,
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 Kansas personal income tax or the Kansas
corporate income tax. All other distributions, including distributions
attributable to capital gains, will be subject to the Kansas personal and
corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Kansas Fund
will be subject to the Kansas personal and corporate income taxes.
Shares of the Kansas Fund may be subject to the Kansas inheritance tax and
the Kansas estate tax if owned by a Kansas decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Kansas and local tax matters.
KENTUCKY
The following is a general, abbreviated summary of certain provisions of the
applicable Kentucky tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Kentucky
Funds. This summary does not address the taxation of other shareholders nor
does it discuss any local
S-30
<PAGE>
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 Kentucky Funds.
The following is based on the assumptions that the Kentucky Funds will
qualify under Subchapter M of the Code as regulated investment companies, that
they will satisfy the conditions which will cause Kentucky Funds distributions
to qualify as exempt-interest dividends to shareholders, and that they will
distribute all interest and dividends they receive to the Kentucky Funds'
shareholders.
The Kentucky Funds will be subject to the Kentucky corporate income tax and
the Kentucky corporation license tax only if they have a sufficient nexus with
Kentucky. If they are subject to such taxes, they do not expect to pay a
material amount of any such tax.
Distributions from the Kentucky Funds that are attributable to interest on
any obligation of Kentucky and its political subdivisions ("Kentucky
Obligations") or to interest on obligations of the United States, its
territories, possessions, or instrumentalities that are exempt from state
taxation under federal law ("Federal Obligations") will not be subject to the
Kentucky personal income tax or the Kentucky corporate income tax. All other
distributions, including distributions attributable to capital gains, will be
subject to the Kentucky personal and corporate income tax.
Gain on the sale, exchange, or other disposition of shares of the Kentucky
Funds will be subject to the Kentucky personal and corporate income taxes.
Shares of the Kentucky Funds may be subject to the Kentucky inheritance tax
and the Kentucky estate tax if owned by a Kentucky decedent at the time of
death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Kentucky and local tax matters.
MICHIGAN
The following is a general, abbreviated summary of certain provisions of the
applicable Michigan state tax law as presently in effect as it directly governs
the taxation of resident individual and corporate shareholders of the Michigan
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 Michigan Fund transactions.
The following is based on the assumptions that the Michigan Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Michigan Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Michigan Fund's shareholders.
The Michigan Fund will not be subject to the Michigan intangibles tax. The
Michigan Fund will be subject to the Michigan single business tax only if it
has a sufficient nexus with Michigan. If it is subject to the single business
tax, it does not expect to pay a material amount of such tax.
Distributions by the Michigan Fund attributable to interest on any obligation
of Michigan and its political subdivisions ("Michigan Obligations") or to
interest on obligations of the United States, its territories, possessions, or
instrumentalities that are exempt from state taxation under federal law
("Federal Obligations") will not be subject to the Michigan personal income tax
or the Michigan intangibles tax. In addition, under current administrative
practice of the Michigan Department of Revenue, dividends attributable to gains
realized from the sale or exchange of Federal Obligations will not be subject
to the Michigan personal income tax or the Michigan intangible tax. All other
distributions, including distributions attributable to capital gains (other
than gains from Federal Obligations), will be subject to the Michigan income
tax. Such other distributions also will
S-31
<PAGE>
be subject to the Michigan intangibles tax; however, under the current
administrative practice of the Michigan Department of Revenue, capital gain
dividends that are reinvested in Michigan Fund shares are not subject to such
tax.
If a shareholder subject to the Michigan single business tax receives
distributions derived from interest on Michigan Obligations or sells or
exchanges shares of the Michigan Fund, such events may affect its single
business tax base.
Gain on the sale, exchange, or other disposition of shares of the Michigan
Fund will be subject to the Michigan personal income tax.
Shares of the Michigan Fund may be subject to the Michigan estate tax if
owned by a Michigan decedent at the time of death.
Shareholders should note that the Michigan intangibles tax is repealed
effective January 1, 1998.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Michigan and local tax matters, particularly
with regard to the Michigan single business tax.
MISSOURI
The following is a general, abbreviated summary of certain provisions of the
applicable Missouri tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Missouri
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 Missouri Fund transactions.
The following is based on the assumptions that the Missouri Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Missouri Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Missouri Fund's shareholders.
The Missouri Fund will be subject to the Missouri corporate franchise tax and
the Missouri corporate income tax only if it has a sufficient nexus with
Missouri. If it is subject to such taxes, it does not expect to pay a material
amount with respect to either tax.
Distributions by the Missouri Fund that are attributable to interest on
obligations of Missouri 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 Missouri personal income tax or the Missouri corporate
income tax. All other distributions, including distributions attributable to
capital gains, will be subject to the Missouri personal and corporate income
taxes.
Gain on the sale, exchange, or other disposition of shares of the Missouri
Fund will be subject to the Missouri personal income tax and the Missouri
corporate income tax.
Shares of the Missouri Fund may be subject to the Missouri estate tax if
owned by a Missouri decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Missouri and local tax matters.
S-32
<PAGE>
OHIO
The following is a general, abbreviated summary of certain provisions of the
applicable Ohio tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Ohio 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 Ohio Fund transactions.
The following is based on the assumptions that the Ohio Fund will qualify
under Subchapter M of the Code as a regulated investment company and under Ohio
law as a qualified investment trust, that it will file any report that may be
required of it under the Ohio Revised Code, that it will satisfy the conditions
which will cause Ohio Fund distributions to qualify as exempt-interest
dividends to shareholders, and that it will distribute all interest and
dividends it receives to the Ohio Fund's shareholders.
The Ohio Fund is not subject to Ohio taxes.
Distributions by the Ohio Fund attributable to interest on or gain from the
sale of any interest-bearing obligation of Ohio and its political subdivisions
("Ohio Obligations") or to interest on obligations of the United States, its
territories, possessions, or instrumentalities that are exempt from state
taxation under federal law ("Federal Obligations") will not be subject to the
Ohio personal income tax. All other distributions, including distributions
attributable to capital gains (other than capital gains on Ohio Obligations),
will be subject to the Ohio personal income tax.
In computing their Ohio corporation franchise tax on the net income basis,
shareholders will not be subject to tax on the portion of distributions by the
Ohio Fund that is attributable to interest on or gain from the sale of Ohio
Obligations, interest on similar obligations of other states or their political
subdivisions, or interest on Federal Obligations. In computing their corporate
franchise tax on the net worth basis, shareholders must include in their tax
base their shares of the Ohio Fund.
Gain on the sale, exchange or other disposition of shares of the Ohio Fund
will be subject to the Ohio personal income tax and to the Ohio corporation
franchise tax.
Shares of the Ohio Fund may be subject to the Ohio estate tax if owned by an
Ohio decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Ohio and local tax matters.
WISCONSIN
The following is a general, abbreviated summary of certain provisions of the
applicable Wisconsin tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Wisconsin
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 Wisconsin Fund transactions.
The following is based on the assumptions that the Wisconsin Fund will
qualify under Subchapter M of the Code as a regulated investment company, that
it will satisfy the conditions which will cause Wisconsin Fund distributions to
qualify as exempt-interest dividends to shareholders, and that it will
distribute all interest and dividends it receives to the Wisconsin Fund's
shareholders.
S-33
<PAGE>
The Wisconsin Fund will be subject to the Wisconsin corporate franchise tax
or the corporate income tax only if it has a sufficient nexus with Wisconsin.
If it is subject to such taxes, it does not expect to pay a material amount of
either tax.
Distributions by the Wisconsin Fund that are attributable to interest earned
on any obligations of Wisconsin and its political subdivisions that are exempt
from the Wisconsin personal income tax under Wisconsin law 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 Wisconsin personal income tax. All other distributions,
including distributions attributable to capital gains, will be subject to the
Wisconsin personal income tax.
All Wisconsin Fund distributions to corporate shareholders, regardless of
source, will be subject to the Wisconsin corporate franchise tax.
Gain on the sale, exchange, or other disposition of shares of the Wisconsin
Fund will be subject to the Wisconsin personal income and corporate franchise
taxes.
Shares of the Wisconsin Fund may be subject to the Wisconsin estate tax if
owned by a Wisconsin decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Wisconsin state and tax maters.
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% (2.5% for the
Kentucky Limited Term Fund).
In computing yield, the Funds follow certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Funds use to prepare their annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in a Fund's financial statements.
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by the remainder of (1 minus the stated combined federal
and state income tax rate, taking into account the deductibility of state taxes
for federal income tax purposes) and adding the product to that portion, if
any, of the yield that is not tax exempt.
S-34
<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>
Kansas Municipal Bond Fund
Class A Shares.............. 5.07% 44.5% 9.14%
Class B Shares.............. 4.55% 44.5% 8.20%
Class C Shares.............. 4.74% 44.5% 8.54%
Class R Shares.............. 5.78% 44.5% 10.41%
Kentucky Municipal Bond Fund
Class A Shares.............. 4.88% 43.0% 8.56%
Class B Shares.............. 4.35% 43.0% 7.63%
Class C Shares.............. 4.54% 43.0% 7.96%
Class R Shares.............. 5.29% 43.0% 9.28%
Kentucky Limited Term
Municipal Bond Fund
Class A Shares.............. 4.69% 43.0% 8.23%
Class C Shares.............. 4.45% 43.0% 7.81%
Class R Shares.............. 5.10% 43.0% 8.95%
Michigan Municipal Bond Fund
Class A Shares.............. 4.52% 43.0% 7.93%
Class B Shares.............. 3.98% 43.0% 6.98%
Class C Shares.............. 4.18% 43.0% 7.33%
Class R Shares.............. 4.92% 43.0% 8.63%
Missouri Municipal Bond Fund
Class A Shares.............. 4.95% 43.0% 8.68%
Class B Shares.............. 4.43% 43.0% 7.77%
Class C Shares.............. 4.62% 43.0% 8.11%
Class R Shares.............. 5.37% 43.0% 9.42%
Ohio Municipal Bond Fund
Class A Shares.............. 4.40% 44.0% 7.86%
Class B Shares.............. 3.84% 44.0% 6.86%
Class C Shares.............. 4.04% 44.0% 7.21%
Class R Shares.............. 4.79% 44.0% 8.55%
Wisconsin Municipal Bond Fund
Class A Shares.............. 5.35% 44.0% 9.55%
Class B Shares.............. 4.84% 44.0% 8.64%
Class C Shares.............. 5.03% 44.0% 8.98%
Class R Shares.............. 5.79% 44.0% 10.34%
</TABLE>
S-35
<PAGE>
- --------
* 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 table 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% (2.5% for the Kentucky Limited
Term Municipal Bond Fund), were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION RATES
-------------------------------
CLASS A CLASS B CLASS C CLASS R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Kansas Municipal Bond Fund............... 4.92% 4.42% 4.58% 5.32%
Kentucky Municipal Bond Fund............. 5.15% 4.62% 4.84% 5.58%
Kentucky Limited Term Municipal Bond
Fund.................................... 4.32% N/A 4.13% 4.63%
Michigan Municipal Bond Fund ............ 5.01% 4.47% 4.69% 5.42%
Missouri Municipal Bond Fund............. 4.97% 4.44% 4.64% 5.39%
Ohio Municipal Bond Fund................. 5.11% 4.57% 4.80% 5.53%
Wisconsin Municipal Bond Fund............ 4.94% 4.40% 4.59% 5.34%
</TABLE>
Average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation
assumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Total returns for Class A Shares of each fund reflect actual performance for
all periods. For the Kansas, Kentucky, Michigan, Missouri, Ohio and Wisconsin
Funds, Classes B, C and R, total returns reflect actual performance for periods
since class inception, and Class A performance for periods prior to inception,
adjusted for the differences in sales charges (and for Classes B and C, fees)
between the classes. For the Kentucky Limited Term, Class C total returns
reflect actual performance for all periods and Class R total returns reflect
actual performance for periods since class inception, and Class A performance
for all periods prior to class inception, adjusted for the differences in sales
charges between the classes.
S-36
<PAGE>
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
INCEPTION DATES
------------------
<S> <C>
Kansas Municipal Bond Fund
Class A Shares.......................................... January 9, 1992
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... February 1, 1997
Class R Shares.......................................... February 1, 1997
Kentucky Municipal Bond Fund
Class A Shares.......................................... May 4, 1987
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... October 4, 1993
Class R Shares.......................................... February 1, 1997
Kentucky Limited Term Municipal Bond Fund
Class A Shares.......................................... September 14, 1995
Class C Shares.......................................... September 14, 1995
Class R Shares.......................................... February 1, 1997
Michigan Municipal Bond Fund
Class A Shares.......................................... June 27, 1985
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... June 22, 1993
Class R Shares.......................................... February 1, 1997
Missouri Municipal Bond Fund
Class A Shares.......................................... August 3, 1987
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... February 2, 1994
Class R Shares.......................................... February 1, 1997
Ohio Municipal Bond Fund
Class A Shares.......................................... June 27, 1985
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... August 3, 1993
Class R Shares.......................................... February 1, 1997
Wisconsin Municipal Bond Fund
Class A Shares.......................................... June 1, 1994
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... February 1, 1997
Class R Shares.......................................... February 1, 1997
</TABLE>
S-37
<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, were:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS
-----------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS FROM INCEPTION
ENDED ENDED ENDED THROUGH
MAY 31, 1997 MAY 31, 1997 MAY 31, 1997 MAY 31, 1997
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Kansas Municipal Bond
Fund
Class A Shares........ 4.62% 6.06% N/A 6.06%
Class B Shares........ 3.93% 6.10% N/A 6.05%
Class C Shares........ 8.98% 6.64% N/A 6.57%
Class R Shares........ 9.58% 7.05% N/A 6.98%
Kentucky Municipal Bond
Fund
Class A Shares........ 3.34% 6.15% 7.86% 7.62%
Class B Shares........ 3.30% 6.32% 7.85% 7.61%
Class C Shares........ 7.29% 6.46% 7.73% 7.48%
Class R Shares........ 7.75% 7.04% 8.31% 8.07%
Kentucky Limited Term
Municipal Bond Fund
Class A Shares........ 3.31% N/A N/A 4.22%
Class C Shares........ 5.64% N/A N/A 5.45%
Class R Shares........ 6.02% N/A N/A 5.80%
Michigan Municipal Bond
Fund
Class A Shares........ 3.87% 5.97% 7.63% 8.01%
Class B Shares........ 3.94% 6.16% 7.63% 8.00%
Class C Shares........ 7.84% 6.21% 7.46% 7.77%
Class R Shares........ 8.49% 6.89% 8.10% 8.40%
Missouri Municipal Bond
Fund
Class A Shares........ 3.74% 6.01% N/A 7.26%
Class B Shares........ 3.63% 6.17% N/A 7.25%
Class C Shares........ 7.80% 6.34% N/A 7.14%
Class R Shares........ 8.34% 6.93% N/A 7.73%
Ohio Municipal Bond Fund
Class A Shares........ 2.87% 5.52% 7.47% 7.77%
Class B Shares........ 2.73% 5.67% 7.47% 7.77%
Class C Shares........ 6.80% 5.85% 7.35% 7.57%
Class R Shares........ 7.45% 6.44% 7.94% 8.17%
Wisconsin Municipal Bond
Fund
Class A Shares........ 2.89% N/A N/A 4.51%
Class B Shares........ 2.98% N/A N/A 4.28%
Class C Shares........ 7.20% N/A N/A 5.70%
Class R Shares........ 7.67% N/A N/A 6.11%
</TABLE>
S-38
<PAGE>
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Cumulative total return calculations
that do not include the effect of the sales charge would be reduced if such
charge were included.
The cumulative total return figures for the 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 as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
-----------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS FROM
ENDED ENDED ENDED INCEPTION THROUGH
MAY 31, 1997 MAY 31, 1997 MAY 31, 1997 MAY 31, 1997
------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Kansas Municipal Bond
Fund
Class A Shares........ 4.62% 34.23% N/A 37.35%
Class B Shares........ 3.93% 34.45% N/A 37.28%
Class C Shares........ 8.98% 37.92% N/A 40.91%
Class R Shares........ 9.58% 40.59% N/A 43.86%
Kentucky Municipal Bond
Fund
Class A Shares........ 3.34% 34.74% 113.13% 108.46%
Class B Shares........ 3.30% 35.87% 112.96% 108.29%
Class C Shares........ 7.29% 36.73% 110.46% 105.75%
Class R Shares........ 7.75% 40.49% 122.23% 117.36%
Kentucky Limited Term
Municipal Bond Fund
Class A Shares........ 3.31% N/A N/A 7.33%
Class C Shares........ 5.64% N/A N/A 9.50%
Class R Shares........ 6.02% N/A N/A 10.14%
Michigan Municipal Bond
Fund
Class A Shares........ 3.87% 33.61% 108.69% 150.59%
Class B Shares........ 3.94% 34.84% 108.56% 150.45%
Class C Shares........ 7.84% 35.12% 105.40% 143.96%
Class R Shares........ 8.49% 39.56% 117.98% 161.75%
Missouri Municipal Bond
Fund
Class A Shares ....... 3.74% 33.89% N/A 99.09%
Class B Shares........ 3.63% 34.91% N/A 98.93%
Class C Shares........ 7.80% 35.99% N/A 96.93%
Class R Shares........ 8.34% 39.83% N/A 107.92%
</TABLE>
S-39
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
-----------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS FROM
ENDED ENDED ENDED INCEPTION THROUGH
MAY 31, 1997 MAY 31, 1997 MAY 31, 1997 MAY 31, 1997
------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Ohio Municipal Bond Fund
Class A Shares ....... 2.87% 30.79% 105.61% 144.19%
Class B Shares........ 2.73% 31.76% 105.44% 143.98%
Class C Shares........ 6.80% 32.86% 103.23% 138,74%
Class R Shares........ 7.45% 36.61% 114.76% 155.06%
Wisconsin Municipal Bond
Fund
Class A Shares ....... 2,89% N/A N/A 14.14%
Class B Shares........ 2.98% N/A N/A 13.38%
Class C Shares........ 7.20% N/A N/A 18.07%
Class R Shares........ 7.67% N/A N/A 19.44%
</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 44.5% maximum marginal federal tax rate for 1997, the annual
taxable equivalent total return for the Kansas Municipal Bond Fund, Class A
Shares, for the five-year period ended May 31, 1997 was 11.58%.
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.
S-40
<PAGE>
Each Fund may from time to time in its advertising and sales materials
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds. These taxable investments
have investment characteristics that differ from those of the Funds. U.S.
Government bonds, for example, are long-term investments backed by the full
faith and credit of the U.S. Government, and bank CDs are generally short-term,
FDIC-insured investments, which pay fixed principal and interest but are
subject to fluctuating rollover rates. Money market funds are short-term
investments with stable net asset values, fluctuating yields and special
features enhancing liquidity.
There are differences and similarities between the investments which the
Funds may purchase and the investments measured by the indexes and reporting
services which are described herein. The Consumer Price Index is generally
considered to be a measure of inflation. The CDA Mutual Fund-Municipal Bond
Index is a weighted performance average of other mutual funds with a federally
tax-exempt income objective. The Salomon Brothers High Grade Corporate Bond
Index is an unmanaged index that generally represents the performance of high
grade long-term taxable bonds during various market conditions. The Lehman
Brothers Municipal Bond Index is an unmanaged index that generally represents
the performance of high grade intermediate and long-term municipal bonds during
various market conditions. Lipper 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-41
<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 AVAILABILITY
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.
S-42
<PAGE>
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of a Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required
payment. By establishing a Letter of Intent, you irrevocably appoint Nuveen as
attorney to give instructions to redeem any or all of your escrowed shares,
with full power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Unit Trust Distributions. You may purchase Class A
Shares without an up-front sales charge by reinvestment of distributions from
any of the various unit trusts sponsored by Nuveen. There is no initial or
subsequent minimum investment requirement for such reinvestment purchases.
Group Purchase Programs. If you are a member of a qualified group, you may
purchase Class A Shares of any Fund or of another Nuveen 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-43
<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-44
<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 trusts may reinvest their distributions
from such unit 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. The holding
period is calculated on a monthly basis and begins the first day of the month
in which the order for investment is received. The CDSC is calculated based on
the lower of the redeemed shares' cost or net asset value at the time of the
redemption and is deducted from the redemption proceeds. Nuveen receives the
amount of any CDSC shareholders pay. If Class A or Class C shares subject to a
CDSC are exchanged for shares of a Nuveen money market fund, the CDSC would be
imposed on the subsequent redemption of those money market shares, and the
period during which the shareholder holds the money market fund shares would be
counted in determining the remaining duration of the CDSC. The Fund may elect
not to so count the period during which
S-45
<PAGE>
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 systematic
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.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are
expected to sell certain minimum amounts of shares of the Nuveen mutual funds
during specified time periods.
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
S-46
<PAGE>
closings); when trading in the markets a Fund normally uses is restricted, or
the SEC determines that an emergency exists so that trading of a Fund's
portfolio securities or determination of a Fund's net asset value is not
reasonably practical; or the SEC by order permits the suspension of the right
of redemption or the delay in payment to redeeming shareholders for more than
seven days.
Shares will be registered in the name of the investor or the investor's
financial adviser. A change in registration or transfer of shares held in the
name of a financial adviser may only be made by an order in good form from the
financial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to 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 IV, 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 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>
Kansas Fund............. 222 31 251 35 384 51
Kentucky Fund........... 1,046 143 1,057 145 1,304 174
Kentucky Limited Fund... 24 5 23 4 -- --
Michigan Fund........... 529 71 553 76 594 81
Missouri Fund........... 456 61 632 87 892 120
Ohio Fund............... 871 121 931 124 1,066 141
Wisconsin Fund.......... 111 14 170 21 272 24
</TABLE>
S-47
<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 Michigan Municipal Bond Fund and the Ohio
Municipal Bond Fund was .25% for both Class A and Class C Shares and the
distribution fee was .75% for Class C Shares. Prior to February 1, 1997, the
service fee for the Kansas Municipal Bond Fund, the Kentucky Municipal Bond
Fund, the Kentucky Limited Term Municipal Bond Fund, the Missouri Municipal
Bond Fund, and the Wisconsin Municipal Bond Fund was .20% for Class C Shares
and the
S-48
<PAGE>
distribution fee for Class A Shares was .40% and .75% for the Class C Shares
(.50% for the Kentucky Limited Term Fund Class C Shares). Thereafter, for all
of the Funds the service fees for Class A and Class C Shares was .20% and the
distribution fee for Class C Shares was .55% (.35% for the Kentucky Limited
Term Fund Class C Shares).
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1997
----------------------
<S> <C>
Kansas Municipal Bond Fund
Class A................................................ $ 323,831
Class B................................................ $ 820
Class C................................................ $ 151
Kentucky Municipal Bond Fund
Class A................................................ $1,412,563
Class B................................................ $ 767
Class C................................................ $ 207,708
Kentucky Limited Municipal Bond Fund
Class A................................................ $ 27,603
Class C................................................ $ 11,581
Michigan Bond Fund
Class A................................................ $ 850,624
Class B................................................ $ 586
Class C................................................ $ 374,088
Missouri Municipal Bond Fund
Class A................................................ $ 721,606
Class B................................................ $ 521
Class C................................................ $ 60,926
Ohio Municipal Bond Fund
Class A................................................ $1,505,646
Class B................................................ $ 2,523
Class C................................................ $ 341,522
Wisconsin Municipal Bond Fund
Class A................................................ $ 44,299
Class B................................................ $ 27
Class C................................................ $ 50
</TABLE>
Under each Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest in the Plan cast in
person at a meeting called for the purpose of voting on the Plan. The Plan may
be continued only if the trustees who vote to approve such continuance
conclude, in the exercise of reasonable business judgment and in light of their
fiduciary duties under applicable law, that there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders. The Plan may not be
amended to increase materially the cost which a class of shares may bear under
the Plan without the approval of the shareholders of the affected class, and
any other material amendments of the Plan must be approved by the non-
interested trustees by a vote cast
S-49
<PAGE>
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 the Funds. In addition
to audit services, the auditors will provide consultation and assistance on
accounting, internal control, tax and related matters. The financial statements
incorporated by reference elsewhere in this Statement of Additional Information
and the information for prior periods set forth under "Financial Highlights" in
the Prospectus have been audited by the auditors as indicated in their reports
with respect thereto, and are included in reliance upon the authority of those
auditors in giving their reports.
The custodian of the Funds' assets 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-50
<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.
Kansas
[PHOTO APPEARS HERE]
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Kansas Overview
9 Financial Section
27 Shareholder Meeting Report
31 Shareholder Information
32 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
Kansas 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 9.21%
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 5.30% for Class A shares. To
match this yield, investors in the 35.5% combined federal and state income tax
bracket would have had to earn at least 8.22% 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>
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
"In addition to substantial total returns, shareholders continue to enjoy very
attractive current yields generated by a portfolio of quality bonds."
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. The fund 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 fund perform?
The Kansas Municipal Bond Fund performed well over the past year, rewarding
investors with a total return on net asset value for the year of 9.21% for Class
A shares, including price changes and reinvested dividends. Additionally, the
fund was ranked number one among nine Kansas municipal bond funds for the one-
year period by Lipper Analytical Services, a nationally recognized performance
measurement service. Steady demand, coupled with tight supply, caused munis to
outperform Treasury securities over the 12-month period.
What strategies did you employ to add value?
During periods of rising interest rates -- like we experienced during the first
quarter of 1997 -- the fund swapped out of bonds held at a loss and into similar
bonds trading at discounts in the secondary market. This provided reduced
capital gains on the fund and furthered the fund's objective of providing
superior after-tax total return. We also sold high-coupon, pre-refunded
securities at a gain and reinvested the proceeds in longer maturity bonds,
allowing us to align the fund with the original maturity profile in the
prospectus. Without this recycling process, the distribution yield would be at
risk as higher coupon bonds are called away from the portfolio.
What is the current status of Kansas' municipal market?
New municipal bond issue volume over the first half of the year was 18% higher
than in 1996, but the overall amount of new bond issuance remains relatively
low. Credit quality remains very high in Kansas among municipalities and
agencies of the state due largely to a healthy economy, low debt and fiscal
control. Aircraft manufacturing, health services and retail trade have
contributed to
4
<PAGE>
job growth in the past year. While agriculture is no longer a major source of
employment, the state's farming sector remains a leading producer on a global
scale.
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>
Kansas
Overview
Credit Quality
- -----------------------------
[PIE CHART APPEARS HERE]
- -----------------------------
BBB/NR 5%
A 17%
AA 23%
AAA/Pre-refunded 55%
=============================
Diversification
- -----------------------------
[PIE CHART APPEARS HERE]
- -----------------------------
General Obligations 8%
Utilities 11%
Other 1%
Tax Revenue 15%
Pollution Control 9%
Hospitals 22%
Water & Sewer 4%
Housing Facilities 21%
Escrowed Bonds 9%
- -----------------------------
<TABLE>
<CAPTION>
Fund Highlights
==================================================================================
<S> <C> <C> <C> <C> <C>
Share Class A B C R
Inception Date 1/92 2/97 2/97 2/97
- ----------------------------------------------------------------------------------
Net Asset Value (NAV) $10.19 $10.13 $10.21 $10.22
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Total Net Assets ($000) $96,587
- ----------------------------------------------------------------------------------
Average Weighted Maturity (years) 21.13
- ----------------------------------------------------------------------------------
Duration (years) 8.75
- ----------------------------------------------------------------------------------
Annualized Total Return/1/
==================================================================================
Share Class A(NAV) A(Offer) B C R
1-Year 9.21% 4.62% 8.46% 8.98% 9.58%
- ----------------------------------------------------------------------------------
5-Year 6.98% 6.06% 6.36% 6.64% 7.05%
- ----------------------------------------------------------------------------------
Life of Fund 6.91% 6.06% 6.20% 6.57% 6.98%
- ----------------------------------------------------------------------------------
Tax-Free Yields
==================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.13% 4.92% 4.42% 4.58% 5.32%
- ----------------------------------------------------------------------------------
SEC 30-Day Yld 5.30% 5.08% 4.56% 4.76% 5.78%
- ----------------------------------------------------------------------------------
Taxable Equiv Yld/2/ 8.22% 7.88% 7.07% 7.38% 8.96%
- ----------------------------------------------------------------------------------
</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 3.93%,
6.10%, and 6.20%, respectively.
2 Based on SEC yield and a combined federal and state income tax rate for
taxpayers filing jointly of 35.5%. 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 Kansas 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 Kansas Nuveen Flagship Kansas
Municipal Bond Index Municipal Bond Fund (NAV) Municipal Bond Fund (Offer)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
January 1992 10000 10000 9580
May 1992 10119 10094.6 9670.58
May 1993 11399.1 11568.5 11082.6
May 1994 11644.7 11565.3 11079.6
May 1995 12419.4 12295.2 11778.8
May 1996 13406.7 13068.8 12519.9
May 1997 14419.1 14108.2 13515.7
June 1997 14635.4 14337.5 13735.3
</TABLE>
Lehman Brothers Municipal Bond Index $14,635
Nuveen Flagship Kansas Municipal Bond Fund (NAV) $14,337
Nuveen Flagship Kansas Municipal Bond Fund (Offer) $13,735
Past performance is not predictive of future performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
June 1996 0.0491
July 1996 0.05073
August 1996 0.05073
September 1996 0.04869
October 1996 0.05031
November 1996 0.04869
December 1996 0.05031
January 1997 0.05045
February 1997 0.0495
March 1997 0.0495
April 1997 0.0495
May 1997 0.0495
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 Kansas
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed to Maturity -- 7.2%
$12,475,000 Johnson County Kansas Residual Revenue Refunding, No Opt. Call Aaa $5,520,312
0.000%, 5/01/12
2,120,000 Reno County and Labette County Kansas, Single No Opt. Call AAA 737,357
Family Mortgage Revenue, Capital Accumulator,
Series A, 1983, 0.000%, 12/01/15
2,095,000 Reno, Sedgwick and Finney Counties, Kansas, Single No Opt. Call AAA 721,497
Family Mortgage Revenue, Multiple Originators and
Services, Series A, 0.000%, 4/01/16
- --------------------------------------------------------------------------------------------------------------------
Hospitals -- 21.5%
Kansas State Development Finance Authority, Health
Facilities Revenue Refunding, Stormont, Vail
Healthcare Inc., Series F:
2,815,000 5.800%, 11/15/16 11/06 at 100 AAA 2,871,356
3,380,000 5.800%, 11/15/21 11/06 at 100 AAA 3,430,261
Kansas State Development Finance Authority, Health
Facilities Revenue, Stormont, Vail Healthcare Inc.,
Series G:
750,000 5.800%, 11/15/16 11/06 at 100 AAA 765,015
2,150,000 5.800%, 11/15/21 11/06 at 100 AAA 2,181,971
Kansas State Development Finance Authority, Health
Facilities Revenue, Hays Medical Center Inc.,
Series B:
3,500,000 5.500%, 11/15/17 11/07 at 100 Aaa 3,472,315
2,000,000 5.500%, 11/15/22 11/07 at 100 Aaa 1,963,660
Lawrence, Kansas, Hospital Revenue, Lawrence
Memorial Hospital:
1,075,000 6.200%, 7/01/14 7/04 at 100 A3 1,113,195
400,000 6.200%, 7/01/19 7/04 at 100 A3 411,620
100,000 Puerto Rico Industrial, Tourist, Educational, Medical 7/05 at 102 AAA 105,258
and Environmental Control Facilities, Financing
Authority Hospital Revenue, Hospital Auxilio Mutuo
Obligation Group, Series A, 6.250%, 7/01/24
1,400,000 Wichita, Kansas, Hospital Revenue, Refunding and 10/02 at 102 AAA 1,477,238
Improvement, St. Francis, Series A,
6.250%, 10/01/10
2,250,000 Wichita, Kansas, CSJ Health System Revenue, Series 11/01 at 102 A+ 2,527,335
XXV, 7.200%, 10/01/15
450,000 Wichita, Kansas, CSJ Health System Revenue, Wichita 11/01 at 102 A+ 479,277
Inc., 7.000%, 11/15/18
</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/Multi Family -- 13.3%
$ 990,000 Kansas City,Kansas, Multifamily Housing Revenue 7/01 at 100 AAA $1,010,057
Refunding, Mortgage Loan Rainbows TWRS Project,
6.700%, 7/01/23
Kansas State Development Finance Authority,
Multifamily, Housing Revenue, Park Apartments
Project, Series L:
325,000 5.700%, 12/01/09 6/06 at 100 AAA 325,471
665,000 5.900%, 12/01/14 6/06 at 100 AAA 666,915
1,150,000 6.000%, 12/01/21 6/06 at 100 AAA 1,152,473
Lenexa, Kansas, Multifamily Housing Revenue
Refunding, Barrington Park Apartments Project,
Series A:
445,000 6.300%, 2/01/09 2/03 at 102 AA 461,639
475,000 6.400%, 2/01/10 2/03 at 102 AA 492,694
2,000,000 6.450%, 2/01/18 2/03 at 102 AA 2,063,140
1,000,000 6.500%, 2/01/23 2/03 at 102 AA 1,024,720
1,000,000 Olathe, Kansas,Multifamily Housing Revenue 6/04 at 102 AAA 1,033,060
Refunding, Deerfield Apartments Project, Series A,
6.450%, 6/01/19
Wichita, Kansas, Multifamily Housing Revenue
Refunding,Shores Apartments Project, Series XI,
Series A:
1,500,000 6.700%, 4/01/19 4/09 at 102 AA 1,575,960
2,000,000 6.800%, 4/01/24 4/09 at 102 AA 2,104,460
900,000 Wichita, Kansas, Multifamily Housing Revenue, 11/05 at 102 A 901,395
Brentwood Apartments, Series IX, Series A,
5.850%, 12/01/25
- --------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 7.4%
25,000 Hutchinson, Kansas, Single Family Mortgage Revenue 6/02 at 103 A 25,849
Refunding, 6.500%, 12/01/09
2,675,000 Kansas City, Kansas, Mortgage Revenue, 5/05 at 103 Aaa 2,667,350
5.900%, 11/01/27
645,000 Olathe Labette County, Kansas, Single Family 2/05 at 105 Aaa 713,544
Mortgage Revenue Refunding, Collateralized,
Series C and I, 7.800%, 2/01/25
2,075,000 Sedgwick County, Kansas, Mortgage Loan Revenue, 6/99 at 103 AAA 2,192,175
Series A, 7.875%. 12/01/21
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Kansas -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family -- continued
$1,400,000 Sedgwick County, Kansas, Single Family Mortgage 11/04 at 105 Aaa $1,542,212
Revenue Refunding, Collateralized, Series A, III,
8.125%, 5/01/24
- --------------------------------------------------------------------------------------------------------------------
Industrial Development and Pollution Control -- 8.4%
4,550,000 Clearwater, Kansas, Pollution Control Revenue 1/02 at 101 AA- 4,774,634
Refunding, Vulcan Materials Company,
6.375%, 2/01/12
1,000,000 Dodge City, Kansas, Pollution Control Revenue 5/02 at 102 Aa3 1,099,770
Refunding, Excel Corporation Project/Cargill,
6.625%, 5/01/05
1,500,000 Puerto Rico Ports Authority, Revenue, Special 6/06 at 102 BBB- 1,532,310
Facilities, American Airlines, Series A, 6.250%,
6/01/26
650,000 Wichita, Kansas, Airport Authority, Airport 3/02 at 102 AA 713,590
Facilities Revenue Refunding, Wichita Airport Hotel
Association, 7.000%, 3/01/05
- --------------------------------------------------------------------------------------------------------------------
Municipal Appropriation Obligations -- 1.5%
275,000 Cowley County, Kansas, Community College, 3/00 at 101 A 289,361
Certificates of Participation, Arts Science and
Technology Building, 7.000%, 3/01/12
1,050,000 Kansas State Development Finance Authority, Revenue, 12/00 at 102 N/R 1,124,361
Highway Patrol Central Training Facility, Series T,
6.600%, 12/01/07
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/ Utility -- 11.2%
1,500,000 Gardner, Kansas Electric Utility Revenue Refunding, 11/01 at 101 N/R 1,616,340
7.000%, 11/01/09
Kansas City, Kansas, Utility System Revenue,
Refunding and Improvement:
2,500,000 6.250%, 9/01/14 9/04 at 102 AAA 2,685,875
1,650,000 6.375%, 9/01/23 9/04 at 102 AAA 1,768,883
PuertoRico Electric Power Authority, Formerly Puerto
Rico Commonwealth Water Resource Authority,
Series T:
215,000 6.125%, 7/01/08 7/04 at 102 BBB+ 229,807
150,000 6.000%, 7/01/16 7/04 at 102 BBB+ 152,457
1,650,000 Puerto Rico Electric Power Authority, Formerly Puerto 7/07 at 101 1/2 AAA 1,609,097
Rico Commonwealth Water Resource Authority,
Series Aa, 5.375%, 7/01/27
</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>
Municipal Revenue/Utility -- continued
$5,000,000 Puerto Rico Electric Power Authority, Formerly No Opt. Call AAA $1,681,400
Puerto Rico Commonwealth Water Resource
Authority, Capital Appreciation, Series O,
0.000%, 7/01/17
1,050,000 Puerto Rico Electric Power Authority, Formerly 7/05 at 100 AAA 1,032,980
Puerto Rico Commonwealth Water Resource
Authority, Series X, 5.500%, 7/01/25
- -----------------------------------------------------------------------------------------------------------------
Municipal Revenue/Water and Sewer -- 3.6%
3,000,000 Kansas State Development Finance Authority, 11/03 at 102 AA+ 3,117,240
Revenue, Water Pollution Control, SRF Series II,
6.000%, 11/01/14
350,000 Newton, Kansas, Wastewater Treatment System 3/02 at 102 N/R 380,944
Revenue, 7.125%, 3/01/12
- -----------------------------------------------------------------------------------------------------------------
Non-State General Obligation -- 5.3%
Cowley County, Kansas, Unit School District No. 470,
Arkansas City:
1,550,000 5.500%, 12/01/16 12/06 at 100 AAA 1,547,241
850,000 5.500%, 12/01/19 12/06 at 100 AAA 841,883
440,000 Jefferson County, Kansas, Unit School District No. 340, 9/04 at 100 AAA 466,255
6.350%, 9/01/14
800,000 Miami County, Kansas, Unit School District No. 368, 6/02 at 100 AAA 862,448
6.600%, 12/01/08
1,000,000 Shawnee County, Kansas, Unit School District No. 345, 9/04 at 100 AAA 1,016,210
Seaman, 5.700%, 9/01/14
350,000 Shawnee County, Kansas, Unit School District No. 437, 3/02 at 100 AAA 375,613
(Auburn and Washburn) 6.600%, 9/01/09
- -----------------------------------------------------------------------------------------------------------------
Pre-refunded -- 1.5%***
170,000 Derby, Kansas, Series Ii, 6.500%, 12/01/12 12/00 at 100 A 181,387
325,000 Hays, Kansas, Sales Tax Revenue, 6.875%, 9/01/12 9/00 at 100 N/R 347,018
Jackson County, Kansas, Unit School District No. 336,
Denison, Holton:
355,000 6.600%, 10/01/12 1/03 at 100 N/R 391,461
380,000 6.650%, 10/01/13 7/02 at 100 1/2 N/R 420,060
80,000 Puerto Rico Commonwealth Highway and No Opt. Call AAA 88,585
Transportation Authority, Highway Revenue,
Series T, 6.625%, 7/01/18
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Kansas -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Revenue/Utility-continued
Special Tax Revenue -- 15.1%
$ 4,450,000 Kansas State Department of Transportation, Highway 9/02 at 102 AA $ 4,631,070
Revenue, Series A, 6.000%, 9/01/12
1,000,000 Puerto Rico Commonwealth Highway and No Opt. Call A 1,005,790
Transportation Authority, Highway Revenue,
Series W, 5.500%, 7/01/13
750,000 Puerto Rico Commonwealth Highway and No Opt. Call A 754,342
Transportation Authority, Highway Revenue
Refunding, Series X, 5.500%, 7/01/13
7,300,000 Puerto Rico Commonwealth Highway and 7/16 at 100 A 7,099,760
Transportation Authority, Highway Revenue,
Series Y, 5.500%, 7/01/36
1,000,000 Puerto Rico Commonwealth Highway and No Opt. Call AAA 1,011,980
Transportation Authority, Highway Revenue,
Series W, 5.500%, 7/01/15
100,000 Puerto Rico Commonwealth Infrastructure Financing 7/98 at 102 BBB+ 105,774
Authority, Series A, 7.750%, 7/01/08
- --------------------------------------------------------------------------------------------------------------------
State/Territorial General Obligations -- 2.6%
1,350,000 Puerto Rico Commonwealth, 6.450%, 7/01/17 7/04 at 102 A 1,440,180
1,000,000 Puerto Rico Commonwealth, 7/04 at 101 1/2 AAA 1,075,350
6.450%, 7/01/17
- --------------------------------------------------------------------------------------------------------------------
$105,570,000 Total Investments -- (cost $90,674,469) -- 98.6% 95,202,237
======================----------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.4% 1,384,917
-------------------------------------------------------------------------------------------
Net Assets -- 100% $96,587,154
===========================================================================================
</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 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.
14
<PAGE>
Statement of Net Assets
May 31, 1997
<TABLE>
<CAPTION>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Nuveen Flagship
Kansas
- -------------------------------------------------------------------------------------------
Assets
<S> <C>
Investments in municipal securities, at market value (note 1) $ 95,202,237
Cash 1,441,067
Receivables:
Interest 1,443,365
Shares sold 239,575
Investments sold 2,030,699
Other assets 11,507
- -------------------------------------------------------------------------------------------
Total assets 100,368,450
- -------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 3,248,229
Shares redeemed 31,398
Accrued expenses:
Management fees (note 6) 16,391
12b-1 distribution and service fees (notes 1 and 6) 16,579
Other 58,318
Dividends payable 410,381
- -------------------------------------------------------------------------------------------
Total liabilities 3,781,296
- -------------------------------------------------------------------------------------------
Net assets (note 7) $ 96,587,154
===========================================================================================
Class A Shares (note 1)
Net assets $ 95,890,652
Shares outstanding 9,413,911
Net asset value and redemption price per share $10.19
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.64
===========================================================================================
Class B Shares (note 1)
Net assets $ 605,445
Shares outstanding 59,764
Net asset value, offering and redemption price per share $ 10.13
===========================================================================================
Class C Shares (note 1)
Net assets $ 90,956
Shares outstanding 8,911
Net asset value, offering and redemption price per share $ 10.21
===========================================================================================
Class R Shares (note 1)
Net assets $ 101
Shares outstanding 10
Net asset value, offering and redemption price per share $ 10.22
===========================================================================================
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Statement of Operations
Year ended May 31, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Kansas*
- -------------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $5,720,965
- -------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 498,884
12b-1 service fees -- Class A (notes 1 and 6) 323,831
12b-1 distribution and service fees -- Class B (notes 1 and 6) 820
12b-1 distribution and service fees -- Class C (notes 1 and 6) 151
Shareholders' servicing agent fees and expenses 60,526
Custodian's fees and expenses 63,583
Trustees' fees and expenses (note 6) 2,325
Professional fees 15,729
Shareholders' reports -- printing and mailing expenses 11,080
Federal and state registration fees 6,338
Organizational expenses (note 1) 8,578
Other expenses 4,484
- -------------------------------------------------------------------------------------
Total expenses before reimbursement 996,329
Expense reimbursement (note 6) (339,334)
- -------------------------------------------------------------------------------------
Net expenses 656,995
- -------------------------------------------------------------------------------------
Net investment income 5,063,970
- -------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 220,983
Net change in unrealized appreciation or depreciation of investments 3,281,763
- -------------------------------------------------------------------------------------
Net gain from investments 3,502,746
- -------------------------------------------------------------------------------------
Net increase in net assets from operations $8,566,716
=====================================================================================
</TABLE>
* Information represents eight months of Flagship Kansas and four months of
Nuveen Flagship Kansas (see note 1 of the Notes to Financial Statements).
- ------
16
<PAGE>
Statement of Changes in Net Assets Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Nuveen Flagship Flagship
Kansas* Kansas
-----------------------------------------
Year ended 5/31/97 Year ended 5/31/96
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 5,063,970 $ 4,982,780
Net realized gain from investment transactions (notes 1 and 4) 220,983 355,041
Net change in unrealized appreciation or depreciation of investments 3,281,763 (2,413,598)
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 8,566,716 2,924,223
- ----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (5,060,117) (5,023,868)
Class B (3,064) N/A
Class C (787) -
Class R (1) N/A
- ----------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,063,969) (5,023,868)
- ----------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 10,132,032 25,844,692
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 2,363,978 2,591,397
- ----------------------------------------------------------------------------------------------------------------
12,496,010 28,436,089
- ----------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (16,105,371) (13,325,961)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (3,609,361) 15,110,128
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (106,614) 13,010,483
Net assets at the beginning of year 96,693,768 83,683,285
- ----------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 96,587,154 $ 96,693,768
================================================================================================================
Balance of undistributed net investment income at end of year $ 1 $ -
================================================================================================================
</TABLE>
* Information represents eight months of Flagship Kansas and four months of
Nuveen Flagship Kansas (see note 1 of the Notes to Financial Statements).
N/A--Flagship Kansas was not authorized to issue Class B or Class R Shares.
See accompanying notes to financial statements.
17
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust IV (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Kansas 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 Kansas Triple Tax
Exempt Fund ("Flagship Kansas") was reorganized into the Trust and renamed
Nuveen Flagship Kansas Municipal Bond Fund ("Nuveen Flagship Kansas").
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
as 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 Kansas 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 Kansas 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
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
$42,800) will be reimbursed to the Adviser on a straight-line basis over a
period of five years. As of May 31, 1997, $34,335 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
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
Nuveen Flagship Flagship
Kansas* Kansas
------------------------------------------------------
Year ended Year ended
5/31/97 5/31/96
------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 928,359 $ 9,305,649 2,552,505 $ 25,844,692
Class B 73,398 736,214 N/A N/A
Class C 8,890 90,069 - -
Class R 10 100 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 235,563 2,363,224 257,842 2,591,397
Class B 52 523 N/A N/A
Class C 23 231 - -
Class R - - N/A N/A
- ----------------------------------------------------------------------------------------------------
1,246,295 12,496,010 2,810,347 28,436,089
- ----------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,587,941) (15,969,039) (1,330,464) (13,325,961)
Class B (13,686) (136,313) N/A N/A
Class C (2) (19) - -
Class R - - N/A N/A
- ----------------------------------------------------------------------------------------------------
(1,601,629) (16,105,371) (1,330,464) (13,325,961)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) (355,334) $ (3,609,361) 1,479,883 $ 15,110,128
====================================================================================================
</TABLE>
* Information represents eight months of Flagship Kansas and four months of
Nuveen Flagship Kansas (see note 1).
N/A - Flagship Kansas 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
Kansas
- ----------------------------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0435
Class B .0370
Class C .0390
Class R .0455
- ----------------------------------------------------------------------------------------------------
</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
Kansas*
- ---------------------------------------------------------------------------------------------------
<S> <C>
Purchases
Investments in municipal securities $38,443,221
Temporary municipal investments 600,000
Sales
Investments in municipal securities 42,768,089
Temporary municipal investments 600,000
===================================================================================================
</TABLE>
* Information represents eight months of Flagship Kansas and four months of
Nuveen Flagship Kansas (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 $4,851,848
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, net unrealized appreciation aggregated $4,527,768 of which
$4,542,553 related to appreciated securities and $14,785 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>
- ------
22
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
Prior to the reorganization (see note 1) Flagship Kansas 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
$221,800 of which approximately $191,300 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 $26,000 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
$5,600 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
Kansas
- ---------------------------------------------------------------------------------
<S> <C>
Capital paid-in $96,911,233
Balance of undistributed net investment income 1
Accumulated net realized gain (loss) from investment transactions (4,851,848)
Net unrealized appreciation of investments 4,527,768
- ---------------------------------------------------------------------------------
Net assets $96,587,154
=================================================================================
</TABLE>
23
<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
------------------------- ------------------------
Net
NUVEEN FLAGSHIP KANSAS++ 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 (1/92)
1997 $ 9.83 $.53 $ .36 $(.53) $ -- $10.19 9.21%
1996 10.01 .54 (.18) (.54) -- 9.83 3.63
1995 9.83 .55 .18 (.55) -- 10.01 7.80
1994 10.38 .56 (.47) (.57) (.07)+++ 9.83 .62
1993 9.65 .58 .73 (.58) -- 10.38 14.15
1992(c) 9.58 .19 .07 (.19) -- 9.65 5.95+
Class B (2/97)
1997(c) 10.23 .13 (.12) (.11) -- 10.13 .13
Class C (2/97)
1997(c) 10.18 .15 .04 (.16) -- 10.21 1.85
Class R (2/97)
1997(c) 10.20 .18 (.02) (.14) -- 10.22 1.55
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Kansas.
+++ The amount shown includes a distribution in excess of capital gains of
$.05 per share.
(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.
24
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Ratios/Supplemental date
- ------------------------------------------------------------------------------
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>
$95,891 1.03% 4.89% .68% 5.24% 40%
96,694 1.08 4.80 .57 5.31 55
83,683 1.10 5.11 .54 5.67 72
80,060 1.06 4.57 .26 5.37 93
62,585 1.22 4.63 .11 5.74 56
9,552 2.01+ 3.50+ .40+ 5.11+ 59
605 1.65+ 4.24+ 1.27+ 4.62+ 40
91 1.45+ 4.49+ 1.09+ 4.85+ 40
-- .08+ 6.53+ -- 6.61+ 40
- ------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
Nuveen Flagship Kansas Municipal Bond Fund:
We have audited the accompanying statement of net assets of Nuveen Flagship
Kansas 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
Kansas 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 Kansas
<TABLE>
<CAPTION>
A Shares
- ----------------------------------------------------------------
<S> <C> <C>
Advisory Agreement For 6,349,518
Against 107,210
Abstain 187,848
---------------------------------------
Total 6,644,576
================================================================
Broker Non Votes 1,544,766
================================================================
Reorganization For 5,246,121
Against 95,567
Abstain 235,638
---------------------------------------
Total 5,577,326
================================================================
Broker Non Votes 2,612,016
================================================================
Investment Objective For 5,224,796
Against 333,928
Abstain 27,356
---------------------------------------
Total 5,586,080
================================================================
Broker Non Votes 2,603,262
================================================================
Investment Assets For 5,215,453
Against 346,605
Abstain 24,023
---------------------------------------
Total 5,586,081
================================================================
Broker Non Votes 2,603,261
================================================================
Type of Securities For 5,220,489
Against 341,569
Abstain 24,023
---------------------------------------
Total 5,586,081
================================================================
Broker Non Votes 2,603,261
================================================================
Borrowing For 5,177,744
Against 384,313
Abstain 24,023
---------------------------------------
Total 5,586,080
================================================================
Broker Non Votes 2,603,262
================================================================
Pledges For 5,179,417
Against 382,641
Abstain 24,023
---------------------------------------
Total 5,586,081
================================================================
Broker Non Votes 2,603,261
---------------------------------------
</TABLE>
27
<PAGE>
Shareholder Meeting Report
Flagship Kansas -- continued
<TABLE>
<CAPTION>
A Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Senior Securities For 5,221,914
Against 340,144
Abstain 24,023
------------------------------------------------
Total 5,586,081
================================================================================
Broker Non Votes 2,603,261
================================================================================
Underwriting For 5,205,433
Against 351,209
Abstain 29,438
------------------------------------------------
Total 5,586,080
================================================================================
Broker Non Votes 2,603,262
================================================================================
Real Estate For 5,196,865
Against 365,193
Abstain 24,023
------------------------------------------------
Total 5,586,081
================================================================================
Broker Non Votes 2,603,261
================================================================================
Commodities For 5,163,155
Against 398,903
Abstain 24,023
------------------------------------------------
Total 5,586,081
================================================================================
Broker Non Votes 2,603,261
================================================================================
Loans For 5,188,117
Against 373,941
Abstain 24,023
------------------------------------------------
Total 5,586,081
================================================================================
Broker Non Votes 2,603,261
================================================================================
Short Sales/Margin Purchases For 5,151,812
Against 402,532
Abstain 31,736
------------------------------------------------
Total 5,586,080
================================================================================
Broker Non Votes 2,603,262
================================================================================
Put and Call Options For 5,151,748
Against 402,500
Abstain 31,832
------------------------------------------------
Total 5,586,080
================================================================================
Broker Non Votes 2,603,262
------------------------------------------------
</TABLE>
28
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<S> <C> <C>
A Shares
- ---------------------------------------------------------
Industry Concentration For 5,203,266
Against 352,125
Abstain 30,690
-----------------------------
Total 5,586,081
- ---------------------------------------------------------
Broker Non Votes 2,603,261
- ---------------------------------------------------------
Affiliate Purchases For 5,210,493
Against 344,898
Abstain 30,690
-----------------------------
Total 5,586,081
- ---------------------------------------------------------
Broker Non Votes 2,603,261
- ---------------------------------------------------------
Investment Companies For 5,219,230
Against 335,468
Abstain 31,380
-----------------------------
Total 5,586,078
- ---------------------------------------------------------
Broker Non Votes 2,603,264
- ---------------------------------------------------------
12b-1 Fees For 6,252,662
Against 101,263
Abstain 290,603
-----------------------------
Total 6,644,528
- ---------------------------------------------------------
Broker Non Votes 1,544,814
-----------------------------
</TABLE>
29
<PAGE>
Shareholder Meeting Report
Flagship Kansas--continued
<TABLE>
<CAPTION>
Directors A Shares
- ---------------------------------------
<S> <C> <C>
Bremner For 8,067,763
Withhold 121,579
---------------------
Total 8,189,342
- ---------------------------------------
Brown For 8,067,763
Withhold 121,579
---------------------
Total 8,189,342
- ---------------------------------------
Dean For 8,067,763
Withhold 121,579
---------------------
Total 8,189,342
- ---------------------------------------
Impellizzeri For 8,067,763
Withhold 121,579
---------------------
Total 8,189,342
- ---------------------------------------
Rosenheim For 8,067,763
Withhold 121,579
---------------------
Total 8,189,342
- ---------------------------------------
Sawers For 8,066,698
Withhold 122,644
---------------------
Total 8,189,342
- ---------------------------------------
Schneider For 8,067,763
Withhold 121,579
---------------------
Total 8,189,342
- ---------------------------------------
Schwertfeger For 8,067,763
Withhold 121,579
---------------------
Total 8,189,342
</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]
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.
NUVEEN
John Nuveen & Co. Incorported
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.
KENTUCKY
KENTUCKY
LIMITED
[PHOTO APPEARS HERE]
<PAGE>
CONTENTS
1 Dear Shareholder
3 Answering Your Questions
6 Kentucky Overview
8 Kentucky Limited Term Overview
11 Financial Section
45 Shareholder Meeting Report
51 Shareholder Information
52 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 Flagship
Kentucky and Kentucky Limited Term 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 7.87% for the Kentucky Fund and 5.96% for the Kentucky
Limited Term Fund, if you chose to reinvest your tax-free income dividends.
Over this 12-month period, the total return performance for the Kentucky 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 Kentucky Limited Term Fund also
kept close pace with the 5.99% increase generated by its comparable market
measure, the Lehman Brothers Five-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 5.10% for the Kentucky Fund
and 4.85% for the Kentucky Limited Term Fund. To match this yield, investors in
the 35% combined federal and state income tax bracket would have had to earn at
least 7.85% for the Kentucky Fund and 7.46% for the Kentucky Limited Term 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
____
1
<PAGE>
"IN ADDITION TO SUBSTANTIAL TOTAL RETURNS, SHAREHOLDERS CONTINUE TO ENJOY VERY
ATTRACTIVE CURRENT YIELDS GENERATED BY A PORTFOLIO OF QUALITY BONDS."
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.
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 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 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 FUNDS PERFORM?
Both Kentucky and Kentucky Limited Term Municipal Bond Funds performed well over
the past year, rewarding investors with total returns on net asset value for the
year for Class A shares of 7.87% and 5.96%, respectively, including price
changes and reinvested dividends. The Kentucky Fund was ranked third among eight
Kentucky municipal bond funds for the one-year period by Lipper Analytical
Services, a nationally recognized performance measurement service. Lipper ranked
the Kentucky Limited Term Fund third among 38 state short/intermediate municipal
bond funds.
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 KENTUCKY'S MUNICIPAL MARKET?
While the supply of state bonds in 1997 increased almost 120% from the first six
months in the prior year, overall supply still remains relatively low in
Kentucky. In addition, high-quality, investor-owned utilities in the state have
provided favorable credit strength and value to their industrial revenue debt.
Kentucky's economy has grown faster than the nation's as a whole, in terms of
personal income and employment since 1988. The growth is attributed to economic
development initiatives supported in part by tax-exempt issuance and accumulated
fund balances in the commonwealth coffers. State tax revenues will be impacted
by a recent court ruling requiring the refund of intangibles tax collections
back to 1995. The commonwealth should be able to pay the judgment from cash
surpluses, but the projects planned for those funds will likely be part of a
$100 million bond issue.
____
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>
KENTUCKY
OVERVIEW
[PIE CHART APPEARS HERE]
- ----------------------------
Credit Quality
- ----------------------------
BBB/NR 16%
A 26%
AAA/Pre-refunded 48%
AA 10%
- ----------------------------
[PIE CHART APPEARS HERE]
- ----------------------------
Diversification
- ----------------------------
Municipal Appropriations 22%
Escrowed Bonds 7%
Pollution Control 21%
General Obligations 4%
Water & Sewer 8%
Utilities 5%
Other 8%
Health Care Facilities 20%
Housing Facilities 5%
- ----------------------------
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
========================================================================
<S> <C> <C> <C> <C>
SHARE CLASS A B C R
Inception Date 5/87 2/97 10/93 2/97
- ------------------------------------------------------------------------
Net Asset Value (NAV) $11.05 $11.06 $11.04 $11.03
========================================================================
========================================================================
Total Net Assets ($000) $456,269
- ------------------------------------------------------------------------
Average Weighted Maturity (years) 20.62
- ------------------------------------------------------------------------
Duration (years) 7.77
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN/1/
=========================================================================
SHARE CLASS A(NAV) A(OFFER) B C R
<S> <C> <C> <C> <C> <C>
1-Year 7.87% 3.34% 7.30% 7.29% 7.75%
- -------------------------------------------------------------------------
5-Year 7.06% 6.15% 6.48% 6.46% 7.04%
- -------------------------------------------------------------------------
10-Year 8.33% 7.86% 7.85% 7.73% 8.31%
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
TAX-FREE YIELDS
=========================================================================
SHARE CLASS A(NAV) A(OFFER) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 5.38% 5.15% 4.62% 4.84% 5.58%
- -------------------------------------------------------------------------
SEC 30-Day Yld 5.10% 4.88% 4.35% 4.55% 5.30%
- -------------------------------------------------------------------------
Taxable Equiv Yld/2/ 7.85% 7.51% 6.69% 7.00% 8.15%
=========================================================================
</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 3.30%, 6.32%, and 7.85%, 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 Kentucky 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 Kentucky
Municipal Kentucky Municipal Municipal Bond Fund
Bond Index Bond Fund (NAV) (Offer)
<S> <C> <C> <C>
May 1987 10000 10000 9580
May 1988 10898.1 10779.2 10326.5
May 1989 12150.6 12303.9 11787.1
May 1990 13039.7 13090.2 12540.4
May 1991 14353.9 14447.8 13841
May 1992 15764.1 15818.3 15153.9
May 1993 17650 17779.1 17032.4
May 1994 18085.8 18117.5 17356.6
May 1995 19732.8 19823.9 18991.3
May 1996 20634.7 20625 19758.7
May 1997 22534.8 22247.7 21313.3
</TABLE>
. Lehman Brothers Municipal Bond Index $22,535
. Nuveen Flagship Kentucky Municipal Bond Fund (NAV) $22,248
. Nuveen Flagship Kentucky Municipal Bond Fund (Offer) $21,313
Past Performance is not predictive of future performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
(Capital
Gains)
June 1996 0.0491
July 1996 0.05073
August 1996 0.05073
September 1996 0.04869
October 1996 0.05031
November 1996 0.04869
December 1996 0.05031 0.0059
January 1997 0.05045
February 1997 0.0495
March 1997 0.0495
April 1997 0.0495
May 1997 0.0495
. Capital Gain
7
<PAGE>
KENTUCKY LIMITED TERM
OVERVIEW
Credit Quality
[PIE CHART APPEARS HERE]
BBB/NR 13%
A 28%
AA 20%
AAA 39%
Diversification
[PIE CHART APPEARS HERE]
Pollution Control 9%
Transportation 5%
Municipal Appropriations 32%
Water & Sewer 4%
Education 10%
Housing Facilities 13%
Utility 3%
Hospitals 18%
General Obligations 6%
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
=========================================================================
SHARE CLASS A C R
<S> <C> <C> <C>
Inception Date 9/95 9/95 2/97
- -------------------------------------------------------------------------
Net Asset Value (NAV) $9.92 $9.92 $ 9.92
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Total Net Assets ($000) $11,014
- -------------------------------------------------------------------------
Average Weighted Maturity (years) 5.96
- -------------------------------------------------------------------------
Duration (years) 4.29
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN/1/
=========================================================================
SHARE CLASS A(NAV) A(OFFER) C R
<S> <C> <C> <C> <C>
1-Year 5.96% 1.51% 5.64% 6.02%
- -------------------------------------------------------------------------
Since Inception 5.77% 3.15% 5.45% 5.80%
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TAX-FREE YIELDS
=========================================================================
Share Class A(NAV) A(OFFER) C R
<S> <C> <C> <C> <C>
Dist Rate 4.43% 4.32% 4.13% 4.63%
- -------------------------------------------------------------------------
SEC 30-Day Yld 4.85% 4.72% 4.49% 5.10%
- -------------------------------------------------------------------------
Taxable Equiv Yld /2/ 7.46% 7.26% 6.91% 7.85%
- -------------------------------------------------------------------------
</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 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.
____
8
<PAGE>
Nuveen Flagship Kentucky Limited Term 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 (2.50%) and all ongoing
fund expenses.
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers Nuveen Flagship Kentucky Nuveen Flagship Kentucky
Five - Year Municipal Limited Municipal Bond Fund Limited Municipal Bond
Bond Index (NAV) Fund (offer)
<S> <C> <C> <C>
August 1995 10,000 10,000 9,750
May 1996 10,318.5 10,388.3 10,128.6
May 1997 11,268.7 11,007.9 10,732.7
</TABLE>
Lehman Brothers Five-Year Municipal Bond Index $11,269
Nuveen Flagship Kentucky Limited Municipal Bond Fund (NAV) $11,008
Nuveen Flagship Kentucky Limited Municipal Bond Fund (Offer) $10,733
Past performance is not predictive of future performance.
Dividend History (A Shares)
[PIE CHART APPEARS HERE]
June 1996 0.0368
July 1996 0.03803
August 1996 0.03803
September 1996 0.03598
October 1996 0.03718
November 1996 0.03598
December 1996 0.03718
January 1997 0.03728
February 1997 0.0366
March 1997 0.0366
April 1997 0.0366
May 1997 0.0366
____
9
<PAGE>
FINANCIAL SECTION
CONTENTS
12 Portfolio of Investments
28 Statement of Net Assets
29 Statement of Operations
30 Statement of Changes in Net Assets
31 Notes to Financial Statements
39 Financial Highlights
44 Independent Auditors' Report
____
11
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP KENTUCKY
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION -- 2.3%
Lexington, Fayette Urban County Government, Kentucky
Governmental Project, Revenue, University Kentucky
Alumni Association Inc. Project:
$3,195,000 6.750%, 11/01/17 11/04 at 102 AAA $ 3,532,839
4,320,000 6.750%, 11/01/24 11/04 at 102 AAA 4,776,797
1,410,000 Morgan County, Kentucky School District, Finance 9/04 at 102 A1 1,476,073
Corporation, School Building Revenue,
6.000%, 9/01/14
700,000 Northern Kentucky University, Revenue, Formerly 5/01 at 102 AAA 762,468
Northern Kentucky State College To 1976,
Educational Buildings, Series F, 7.000%, 5/01/10
- ------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 1.1%
Jefferson County, Kentucky, Mortgage Revenue,
1st Mortgage, Christian Church Homes:
1,240,000 6.000%, 11/15/09 11/04 at 102 BBB 1,253,144
715,000 6.125%, 11/15/13 11/04 at 102 BBB 717,159
3,210,000 6.125%, 11/15/18 11/04 at 102 BBB 3,188,300
----------------------------------------------------------------------------------------------------------------------------
HOSPITALS -- 18.6%
1,310,000 Christian County, Kentucky, Hospital, Revenue 7/06 at 102 A- 1,332,951
Refunding, Jennie Stuart Medical Center,
6.000%, 7/01/17
3,500,000 Christian County, Kentucky, Hospital, Revenue 7/06 at 102 A- 3,579,415
Refunding, Jennie Stuart Medical Center,
6.000%, 7/01/13
5,270,000 Clark County, Kentucky, Hospital, Revenue Refunding 4/07 at 102 BBB- 5,319,749
and Improvement, Regional Medical Center Project,
6.200%, 4/01/13
3,300,000 Daviess County, Kentucky, Hospital, Revenue, 8/02 at 102 AAA 3,459,621
Series A, 6.250%, 8/01/22
3,100,000 Floyd County, Kentucky, Hospital, Revenue Refunding, 2/01 at 102 AAA 3,320,255
Insured Loan, Highland Hospital Corporation
Project, 7.500%, 8/01/10
4,000,000 Hopkins County, Kentucky, Hospital, Revenue, Trover 11/01 at 102 AAA 4,323,480
Clinic Foundation Inc., 6.625%, 11/15/11
Jefferson County, Kentucky, Health Facilities Revenue,
Jewish Hospital Healthcare Services, Inc.:
1,190,000 6.500%, 5/01/15 5/02 at 102 AAA 1,277,774
12,785,000 6.550%, 5/01/22 5/02 at 102 AAA 13,755,509
</TABLE>
____
12
<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>
HOSPITALS -- CONTINUED
$7,800,000 Jefferson County, Kentucky, Hospital Revenue, 10/02 at 102 AAA $ 8,268,312
Regular Linked Aces and Inverse Floaters, Alliant
Health System Project, 6.436%, 10/23/14
900,000 Kentucky Development Finance Authority, Hospital, 2/98 at 102 A 944,154
Revenue Refunding and Improvement, Ashland
HSP, Kings Project, 9.750%, 8/01/05
3,000,000 Kentucky Development Finance Authority, Hospital, 10/99 at 102 A 3,186,810
Revenue, St. Lukes Hospital, Series A,
7.500%, 10/01/12
1,750,000 Kentucky Development Finance Authority, Hospital, 11/99 at 102 A+ 1,876,438
Revenue, Sisters Of Charity Of Nazareth Health
Company, 7.375%, 11/01/16
500,000 Kentucky Development Finance Authority, Hospital, 11/99 at 102 AAA 538,745
Revenue, Sisters Of Charity Nazareth,
7.375%, 11/01/16
Kentucky Development Finance Authority, Hospital,
Revenue, St. Luke Hospital Inc., Series A:
2,000,000 7.000%, 10/01/11 10/01 at 102 AAA 2,179,360
9,070,000 7.000%, 10/01/21 10/01 at 102 AAA 9,839,045
1,000,000 Kentucky Development Finance Authority, Hospital, 11/01 at 100 AAA 1,032,970
Revenue Refunding and Improvement, St. Elizabeth
Medical, Series A, 6.000%, 11/01/10
610,000 Kentucky Development Finance Authority, Hospital, 2/98 at 102 A 641,214
Revenue Refunding and Improvement, Ashland
Hospital Kings Project, 9.750%, 8/01/11
1,660,000 Kentucky Economic Development Finance Authority, 2/03 at 102 AAA 1,738,319
Medical Center, Revenue Refunding and Improvement,
Ashland Hospital Corporation, Series A,
6.125%, 2/01/12
5,000,000 Kentucky Economic Development Finance Authority, 12/03 at 102 AAA 5,135,200
Hospital Facilities, Revenue, St. Elizabeth Medical
Center Project, Series A, 6.000%, 12/01/22
4,000,000 Kentucky Economic Development Finance Authority, 8/04 at 102 AAA 3,612,320
Hospital Facilities, Revenue Refunding, Baptist
Healthcare System, 5.000%, 8/15/24
7,500,000 Kentucky Economic Development Finance Authority, 2/07 at 102 AAA 7,387,125
Hospital Facilities, Revenue Refunding, Pikeville
United Methodist Hospital, Kentucky Project,
5.700%, 2/01/28
</TABLE>
____
13
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP KENTUCKY -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS -- CONTINUED
$2,050,000 McCracken County, Kentucky, Hospital, Revenue 11/04 at 102 AAA $ 2,241,552
Refunding, Mercy Health System,Series A,
6.300%, 11/01/06
- ----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTI FAMILY -- 0.6%
2,500,000 Greater Kentucky Housing Assistance Corporation, 7/03 at 100 AAA 2,526,775
Mortgage, Revenue Refunding, Series A,
6.250%, 7/01/24
- ----------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY -- 4.8%
7,000,000 Kentucky Housing Corporation, Housing Revenue, 7/06 at 102 AAA 7,111,160
Series E, 6.300%, 1/01/28
530,000 Kentucky Housing Corporation, Housing Revenue, 1/99 at 102 AAA 550,331
Series A, 7.625%, 1/01/09
2,060,000 Kentucky Housing Corporation, Housing Revenue, 7/00 at 102 AAA 2,162,506
Series C, 7.900%, 1/01/21
Kentucky Housing Corporation, Housing Revenue,
Series B:
1,000,00 6.625%, 7/01/14 7/02 at 102 AAA 1,042,010
1,765,000 7.800%, 1/01/21 7/00 at 102 AAA 1,850,991
3,000,000 6.250%, 7/01/28 7/07 at 102 AAA 3,037,890
Kentucky Housing Corporation, Housing Revenue,
Guaranteed, Series C:
465,000 6.600%, 1/01/11 1/03 at 102 AAA 486,669
440,000 6.650%, 1/01/17 1/03 at 102 AAA 458,009
930,000 Kentucky Housing Corporation,Housing Revenue 1/04 at 102 AAA 967,107
Refunding, Series A, 6.500%, 7/01/17
2,275,000 Kentucky Housing Corporation, Housing Revenue, 7/04 at 102 AAA 2,368,571
Series C, 6.400%, 1/01/17
2,000,000 Kentucky Housing Corporation, Housing Revenue, 1/05 at 102 AAA 2,072,300
Series B, 6.625%, 7/01/26
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL -- 20.3%
1,675,000 Ashland Kentucky Pollution Control, Revenue 2/00 at 102 1/2 Baa1 1,787,811
Refunding, Ashland Oil, A, Acr 2/1/90,
7.375%, 7/01/09
5,000,000 Ashland Kentucky Pollution Control, Revenue 8/02 at 102 Baa1 5,317,950
Refunding, Ashland Oil Inc. Project,
6.650%, 8/01/09
</TABLE>
____
14
<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>
INDUSTRIAL DEVELOPMENT AND POLLUTION
CONTROL -- CONTINUED
$ 9,000,000 Ashland Kentucky Sewer and Solid Waste, 2/05 at 102 Baa1 $ 9,708,300
Revenue, Ashland Oil Inc. Project, 7.125% 2/01/22
4,360,000 Ashland, Kentucky, Solid Waste Revenue, Ashland 10/01 at 102 Baa1 4,642,048
Oil Inc. Project, 7.200%, 10/01/20
6,985,000 Boone County, Kentucky, Pollution Control, Revenue 11/02 at 102 AA- 7,377,697
Refunding, Collateralized, Dayton Power and Light
Company, Series A, 6.500%, 11/15/22
13,000,000 Boone County, Kentucky, Pollution Control, Revenue 1/04 at 102 AAA 12,602,330
Refunding, Collateralized, Cincinnati Gas & Electric,
Series A, 5.500%, 1/01/24
5,030,000 Carroll County, Kentucky, Collateralized, Pollution 2/02 at 102 Aa2 5,178,134
Control, Revenue, Kentucky Utilities Company
Project, Series B, 6.250%, 2/01/18
2,370,000 Hancock County, Kentucky, Solid Waste Disposal, 5/06 at 102 A- 2,469,445
Revenue, Willamette Inds Inc. Project,
6.600%, 5/01/26
9,750,000 Henderson County, Kentucky, Solid Waste Disposal, 3/05 at 102 Baa2 10,369,710
Revenue, Macmillan Bloedel Project,
7.000%, 3/01/25
1,000,000 Jefferson County, Kentucky, Pollution Control, Revenue 6/00 at 102 Aa2 1,091,600
Refunding, Louisville Gas and Electric Company
Project, Series A, 7.450%, 6/15/15
1,000,000 Jefferson County, Kentucky, Pollution Control, Revenue, 7/03 at 103 AA- 1,080,020
E I Du Pont, Series A, 6.300%,7/01/12
7,750,000 Jefferson County, Kentucky, Pollution Control, Revenue, 8/03 at 102 Aa2 7,739,538
Louisville Gas and Electric Company Project,
Series B, 5.625%, 8/15/19
1,750,000 Jefferson County, Kentucky,Pollution Control, Revenue 4/05 at 102 Aa2 1,778,000
Refunding, Louisville Gas and Electric Company,
Series A, 5.900%, 4/15/23
10,640,000 Kenton County, Kentucky, Airport Board, Airport Revenue, 2/02 at 100 Baa3 10,565,307
Delta Airlines Project, Special Facilities,
Series A, 6.125%, 2/01/22
1,500,000 Maysville, Kentucky, Industrial Development, Revenue, 2/00 at 103 N/R 1,577,715
Crystal Tissue Project, 8.000%, 2/01/09
1,250,000 Mercer County, Kentucky, Collateralized Pollution 2/02 at 102 Aa2 1,290,725
Control, Revenue, Kentucky Utilities Company
Project, Series A, 6.250%, 2/01/18
</TABLE>
____
15
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP KENTUCKY -- CONTINUED
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT AND POLLUTION
CONTROL -- CONTINUED
$ 4,795,000 Trimble County, Kentucky, Pollution Control, Revenue, 11/00 at 102 Aa2 $ 5,252,539
Louisville Gas and Electric Company, Series A,
7.625%, 11/01/20
2,820,000 Wickliffe, Kentucky, Solid Waste Disposal Facility, 4/06 at 102 A1 2,921,266
Revenue, Westvaco Corporation Project,
6.375%, 4/01/26
- ----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL APPROPRIATION OBLIGATIONS - 21.3%
430,000 Bardstown, Kentucky, Independent School District 11/02 at 102 A1 458,715
Finance Corporation, School Building, Revenue
Refunding and Improvement, 6.375%, 5/01/17
725,000 Bell County, Kentucky, School District Finance 9/01 at 102 A1 783,247
Corporation School Building, Revenue
6.875%, 9/01/11
1,000,000 Boone County, Kentucky, School District Finance 9/01 at 103 A1 1,091,120
Corporation, School Building, Revenue, Series C,
6.750%, 9/01/11
1,215,000 Boone County, Kentucky, School District Finance 12/02 at 102 A1 1,274,280
Corporation, School Building, Revenue Refunding
and Improvement, 6.125%, 12/01/17
615,000 Boone County, Kentucky, School District Finance 2/03 at 102 A1 633,419
Corporation, School Building, Revenue,
6.000%, 2/01/18
1,595,000 Bowling Green, Kentucky, Municipal Projects 12/04 at 102 A2 1,727,050
Corporation, Lease Revenue, 6.500%, 12/01/14
Christian County, Kentucky, School District Finance
Corporation, School Building Revenue:
565,000 6.750%, 6/01/10 6/01 at 102 A 605,590
600,000 6.750%, 6/01/11 6/01 at 102 A 641,976
Daviess County, Kentucky, School District Finance
Corporation, School Building, Revenue:
505,000 5.800%, 5/01/11 5/04 at 102 A1 524,912
535,000 5.800%, 5/01/12 5/04 at 102 A1 554,089
570,000 5.800%, 5/01/13 5/04 at 102 A1 588,206
600,000 5.800%, 5/01/14 5/04 at 102 A1 616,926
1,645,000 Edgewood, Kentucky, Public Properties Corporation, 12/01 at 102 Aa 1,784,578
Revenue, 1st Mortgage, Public Facilities Project,
6.700%, 12/01/21
</TABLE>
____
16
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL APPROPRIATION OBLIGATIONS -- CONTINUED
$ 3,155,000 Florence, Kentucky, Public Properties Corporation, 6/07 at 102 AAA $ 3,102,659
Revenue, 1st Mortgage, Administration Office
Complex, 5.500%, 6/01/27
Floyd County, Kentucky, Public Properties Corporation,
Revenue, 1st Mortgage, Justice Center Project, Series A:
465,000 5.500%, 9/01/17 3/06 at 102 A 463,549
1,260,000 5.550%, 9/01/23 3/06 at 102 A 1,250,411
3,550,000 Floyd County, Kentucky, Public Properties Corporation, 3/06 at 105 A 3,700,272
Revenue, 1st Mortgage, Justice Center Project,
Series B, 6.200%, 9/01/26
1,200,000 Floyd County, Kentucky, School District Finance 5/05 at 102 A1 1,177,164
Corporation, School Building, Revenue,
5.500%, 5/01/15
Hardin County, Kentucky, Buildings Commission,
Revenue, Detention Facility Project:
525,000 6.200%, 12/01/11 12/04 at 102 AAA 561,876
1,775,000 6.250%, 12/01/14 12/04 at 102 AAA 1,888,316
300,000 Hardin County, Kentucky, School District Finance 6/01 at 103 A1 326,586
Corporation, School Building, Revenue,
Second Series, 6.800%, 6/01/10
1,250,000 Jefferson County, Kentucky, Economic Development 7/01 at 100 A1 1,277,963
Corporation, Lease Revenue, 7.750%, 7/01/16
4,195,000 Jefferson County, Kentucky, School District Finance 2/06 at 102 AAA 4,014,867
Corporation, School Building, Revenue, Series A,
5.125%, 2/01/16 A1
Jefferson County Kentucky Equipment Lease Purchase
Revenue, Energy System Project:
262,465 9.500%, 6/01/03 6/97 at 102 N/R 269,515
1,429,192 9.000%, 6/01/03 6/97 at 101 N/R 1,452,502
2,500,000 Jefferson County, Kentucky, Capital Projects 2/02 at 100 A1 1,124,875
Corporation, Revenue, Lease, Series B,
0.000%, 8/15/08
1,000,000 Jeffersontown, Kentucky, Certificates of Participation, 11/06 at 102 A 1,020,510
Refunding and Improvement, Kentucky Public
Projects, 5.750% 11/01/15
</TABLE>
____
17
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP KENTUCKY - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL APPROPRIATION OBLIGATIONS - CONTINUED
Jessamine County, Kentucky, School District Finance
Corporation, School Building, Revenue:
$ 510,000 6.750%, 6/01/10 6/01 at 103 A1 $ 553,503
545,000 6.750%, 6/01/11 6/01 at 103 A1 590,453
2,500,000 6.125%, 6/01/19 6/04 at 102 A1 2,615,800
5,650,000 5.500%, 1/01/21 1/06 at 102 A1 5,579,884
Kenton County, Kentucky Public Corporation,
Mortgage Revenue:
1,290,000 7.000%, 3/01/08 3/00 at 101 A 1,389,304
1,070,000 7.100%, 3/01/10 3/00 at 101 A 1,156,563
815,000 Kenton County, Kentucky, School District Finance 12/01 at 100 A+ 878,969
Corporation, School Building, Revenue,
6.800%, 12/01/11
500,000 Kentucky, Infrastructure Authority, Revenue 6/01 at 102 A 535,205
Revolving, Fund Program, Series E, 6.500%, 6/01/11
1,000,000 Kentucky State Property and Buildings, Commission, 11/05 at 102 A+ 1,006,220
Revenues and Refunding, Project No. 59,
5.625%, 11/01/15
400,000 Kentucky State Property and Buildings Commission, 11/01 at 102 A+ 438,412
Revenues Refunding, Project No. 40, 2nd Series,
6.875%, 11/01/07
250,000 Kentucky State Property and Buildings Commission, 10/01 at 102 A 274,145
Revenues Refunding, Project No. 53,
6.625%, 10/01/07
2,075,000 Kentucky State Property and Buildings Commission, 9/04 at 102 A+ 2,145,446
Revenues, Project No. 56, 6.000%, 9/01/14
1,000,000 Kentucky State Turnpike Authority, Economic 7/05 at 102 AAA 1,009,910
Development, Road Revenue Refunding,
Revitalization Projects, 5.625%, 7/01/15
250,000 Laurel County, Kentucky, School District Finance 3/01 at 102 A 268,950
Corporation, School Building, Revenue,
7.000%, 3/01/10
1,000,000 Lawrence County, Kentucky, School District Finance 11/04 at 102 A1 1,141,620
Corporation, School Building, Revenue,
6.750%, 11/01/14
Lexington Kentucky Center Corporation Mortgage
Revenue, Refunding and Improvement, Series A:
2,600,000 0.000%, 10/01/11 No Opt. Call A 1,187,784
2,550,000 0.000%, 10/01/12 No Opt. Call A 1,094,792
</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
$ 435,000 Lincoln County, Kentucky, School District Finance 5/02 at 102 A1 $ 455,471
Corporation, School Building, Revenue,
6.200%, 5/01/12
6,165,000 Louisville, Kentucky, Airport Lease, Revenue, 2/99 at 103 A 6,657,214
Series A, 7.875% , 2/01/19
1,525,000 Mc Cracken County, Kentucky, Public Properties 9/06 at 102 AAA 1,567,090
Corporation, Revenue, Public Project, Court
Facilities Project, 5.900%, 9/01/26
2,365,000 McCreary County, Kentucky, School District Finance 8/05 at 102 A 2,360,672
Corporation, School Building, Revenue, Second
Series, 5.600%, 8/01/16
Montgomery County, Kentucky, School District Finance
Corporation, School Building, Revenue:
305,000 6.800%, 6/01/09 6/01 at 102 A1 328,766
325,000 6.800%, 6/01/10 6/01 at 102 A1 349,957
350,000 6.800%, 6/01/11 6/01 at 102 A1 376,215
13,000,000 MT Sterling, Kentucky, Lease Revenue, Kentucky 3/03 at 102 Aa 13,185,900
League Cities, A, 6.200%, 3/01/18
2,000,000 Northern Kentucky University, Certificates of 1/01 at 102 AAA 2,183,940
Participation, Student Housing Facilities,
7.250%, 1/01/12
12,960,000 Pendleton County, Kentucky, Multi County, Lease 3/03 at 102 A 13,391,957
Revenue, Kentucky Associate Counties Leasing
Tollroad PG, A, 6.500%, 3/01/19
500,000 Pendleton County, Kentucky, Multi County, Lease No Opt. Call A 537,075
Revenue, Kentucky Associate Counties Leasing
Tollroad, B, 6.400%, 3/01/19
1,230,000 Perry County, Kentucky, School District Finance 7/02 at 102 A1 1,310,221
Corporation, School Building, Revenue,
6.250%, 7/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/OTHER - 0.7%
2,790,000 Louisville, Kentucky, Parking Authority, River City First 6/01 at 103 A 3,041,546
Mortgage, Revenue, 6.875%, 12/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/TRANSPORTATION - 1.3%
1,250,000 Kenton County, Kentucky, Airport Board, Airport 3/06 at 102 AAA 1,249,875
Revenue, Cincinnati/Northern Kentucky
International, B, 5.750%, 3/01/13
</TABLE>
____
19
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP KENTUCKY - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL REVENUE TRANSPORTATION - CONTINUED
$ 5,000,000 Louisville and Jefferson County, Kentucky, Regional 7/05 at 102 AAA $ 4,889,300
Airport Authority, Airport System Revenue,
Series A, Louisville International Airport,
5.625%, 7/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/UTILITY - 5.0%
Owensboro, Kentucky, Electric Light and Power,
Revenue, Series B:
7,100,000 0.000%, 1/01/11 No Opt. Call AAA 3,401,681
6,475,000 0.000%, 1/01/12 No Opt. Call AAA 2,917,894
7,900,000 0.000%, 1/01/17 No Opt. Call AAA 2,632,596
13,300,000 0.000%, 1/01/18 No Opt. Call AAA 4,190,298
5,100,000 0.000%, 1/01/19 No Opt. Call AAA 1,519,137
4,725,000 0.000%, 1/01/20 No Opt. Call AAA 1,321,913
1,515,000 Puerto Rico Electric Power Authority, Power Revenue, 7/02 at 101 1/2 BBB+ 1,582,205
Formerly Puerto Rico Commonwealth Water
Resource Authority, Power, Series R,
6.250%, 7/01/17
5,000,000 Puerto Rico Electric Power Authority, Power Revenue, 7/04 at 102 BBB+ 5,081,900
Formerly Puerto Rico Commonwealth Water
Resource Authority, Power, Series T,
6.000%, 7/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/WATER AND SEWER - 7.6%
625,000 Danville, Kentucky, Multi City, Lease Revenue, Sewer 12/01 at 103 AAA 673,813
System Revenue Project B (City of Radcliff),
6.875%, 3/01/19 (Mandatory put 12/01/10)
1,750,000 Henderson, Kentucky, Water & Sewer, Revenue 11/04 at 103 AAA 1,858,780
Refunding, Series A, 6.100%, 11/01/14
Kenton County, Kentucky, Water District No. 001
Waterworks, Revenue, Refunding:
1,700,000 6.375%, 2/01/12 2/02 at 103 AAA 1,812,693
1,000,000 6.375%, 2/01/17 2/02 at 103 AAA 1,068,010
1,530,000 Kenton, County, Kentucky, Water District No. 001, 8/02 at 103 AAA 1,601,023
Waterworks, Revenue, Refunding, Series B,
6.000%, 2/01/17
2,040,000 Kenton County, Kentucky, Water District No. 001, 2/05 at 102 AAA 2,052,648
Waterworks, Revenue, Series B, 5.700%, 2/01/20
1,000,000 Kentucky Infrastructure Authority, Revenue Refunding, 8/03 at 102 A 1,003,460
Governmental Agencies Program, Series E,
5.750%, 8/01/18
</TABLE>
____
20
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTION CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL REVENUE/WATER AND SEWER -- CONTINUED
$ 5,000,000 Kentucky Infrastructure Authority, Revenue Refunding, 2/03 at 102 A $ 4,836,100
Governmental Agencies Program, Series F,
5.375%, 2/01/18
Kentucky Infrastructure Authority, Revenue,
Infrastructure Revolving Fund, Series J:
440,000 6.300%, 6/01/10 8/05 at 102 A 473,290
360,000 6.350%, 6/01/11 8/05 at 102 A 386,885
600,000 6.375%, 6/01/14 8/05 at 102 A 655,908
Kentucky Infrastructure Authority, Revenue,
Governmental Agencies Program, Series G:
420,000 6.300%, 8/01/10 8/05 at 102 A 450,605
445,000 6.350%, 8/01/11 8/05 at 102 A 476,987
825,000 6.375%, 8/01/14 8/05 at 102 A 898,763
405,000 Kentucky Infrastructure Authority, Revenue Refunding, 8/99 at 102 A 433,241
Governmental Agencies Program, Series A,
7.800%, 8/01/08
3,840,000 Louisville and Jefferson County Kentucky 5/03 at 102 AAA 3,723,840
Metropolitan Sewer District Revenue,
Refunding, Series B, 5.500%, 5/15/23
Louisville and Jefferson County Kentucky Metropolitan
Sewer District, Sewer and Drain System Revenue,
Refunding, Series A:
2,720,000 6.750%, 5/15/19 11/04 at 102 AAA 2,996,243
2,070,000 6.500%, 5/15/24 11/04 at 102 AAA 2,236,697
2,500,000 6.750%, 5/15/25 11/04 at 102 AAA 2,758,800
3,865,000 Louisville and Jefferson County, Kentucky, Metropolitan 2/05 at 102 AAA 3,754,036
Sewer District, Sewer and Drain System, Revenue,
Series A, 5.400%, 5/15/22
500,000 Paducah Kentucky, Waterworks, Revenue Refunding, 7/01 at 102 AAA 544,540
6.700%, 7/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
NON-STATE GENERAL OBLIGATIONS -- 1.8%
1,005,000 Casey County, Kentucky, School District Finance 3/05 at 102 A 1,027,462
Corporation, School Building, Revenue,
5.750%, 3/01/15
1,070,000 Fleming County, Kentucky, School District Finance 3/05 at 102 A 1,093,208
Corporation, School Building, Revenue,
5.875%, 3/01/15
</TABLE>
____
21
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP KENTUCKY - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTION CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NON-STATE GENERAL OBLIGATIONS - CONTINUED
$ 2,280,000 Grant County, Kentucky, School District Finance 3/07 at 102 Aaa $ 2,233,625
Corporation, School Building, Revenue,
5.375%, 3/01/17
3,465,000 Hopkins County, Kentucky, School District Finance 6/04 at 102 A1 3,638,735
Corporation, School Building, Revenue,
6.200%, 6/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-REFUNDED - 7.8%***
Rockcastle County, Kentucky, School District Finance
Corporation, School Building, Revenue:
500,000 5.700%, 4/01/16 4/03 at 102 A1 496,080
530,000 5.700%, 4/01/17 4/03 at 102 A1 525,108
560,000 5.700%, 4/01/18 4/03 at 102 A1 550,502
Campbell and Kenton Counties, Kentucky, Sanitation
District No. 1, Sanitation District, Revenue Refunding,
Series A:
965,000 7.700%, 8/15/04 8/97 at 101 11/16 Aa 989,588
500,000 7.750%, 8/15/05 8/97 at 102 Aa 514,030
500,000 Covington, Kentucky, Municipal Properties Corporation, 8/98 at 103 N/R 538,170
Revenue, First Mortgage Parking and Park,
Series A, 8.250%, 8/01/10
1,370,000 Daviess County, Kentucky, Hospital, Revenue 1/98 at 102 AAA 1,427,622
Refunding, Mercy Health Care System, A,
7.625%, 1/01/15
Florence, Kentucky, Public Properties Corporation,
Revenue, First Mortgage, Recreational Facilities
Project:
100,000 7.000%, 3/01/10 3/01 at 103 A3 110,687
320,000 7.000%, 3/01/14 3/01 at 103 A3 355,613
345,000 7.000%, 3/01/15 3/01 at 103 A3 383,395
360,000 7.000%, 3/01/16 3/01 at 103 A3 400,064
2,750,000 Hardin County, Kentucky, Hospital, Revenue Refunding, 1/98 at 103 AAA 2,961,558
Hardin Memorial Hospital, 7.875%, 10/01/14
16,750,000 Jefferson County, Kentucky, Capital Projects 2/01 at 24 11/16 AAA 3,472,778
Corporation, Revenue, Lease, Series B,
0.000%, 8/15/19
990,000 Kentucky Development Finance Authority, Hospital, 2/98 at 102 A 1,047,697
Revenue Refunding, Imprt, Ashland Hospital
Kings Project, 9.750%, 8/01/11
2,795,000 Kentucky Infrastructure Authority, Revenue, 9/98 at 102 AAA 2,978,240
Community Loan Program, Series A, 7.850%, 9/01/18
</TABLE>
____
22
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTION CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRE-REFUNDED - CONTINUED
$ 1,495,000 Kentucky Infrastructure Authority, Revenue Refunding, 8/99 at 102 A $ 1,628,459
Governmental Agencies Program, Series A,
7.800%, 8/01/08
985,000 Kentucky Local Correctional Facilities, Construction 11/97 at 102 AAA 1,017,929
Authority, Revenue Refunding, 7.000%, 11/01/14
1,800,000 Kentucky State Property and Buildings Commission, 8/98 at 102 A+ 1,916,064
Revenues, Project No. 48, 8.000%, 8/01/08
4,875,000 Kentucky State Turnpike Authority, Economic 5/00 at 101 1/2 AAA 5,315,651
Development, Road Revenue, Revitalization Project,
7.250%, 5/15/10
Lexington, Fayette Urban County Government,
Kentucky Sewer System, Revenue:
830,000 7.600%, 7/01/07 7/98 at 102 AAA 878,787
900,000 7.600%, 7/01/08 7/98 at 102 AAA 952,902
3,200,000 Lexington Fayette Urban County Government,
Kentucky Residential Facilities, Revenue
Refunding, Ushcso, Richmond Project, Series A,
7.750%, 5/15/15 5/98 at 102 AAA 3,378,368
500,000 Richmond, Kentucky, Water Gas and Sewer, Revenue 7/98 at 102 AAA 528,355
Refunding, Series B, 7.400%, 7/01/15
1,990,000 Western Kentucky University, Revenues, Formerly 12/00 at 102 AAA 2,213,616
Western Kentucky State College, Housing and
Dining System, Series L, 7.400%, 12/01/10
940,000 Western Kentucky University, Revenues, Formerly 11/00 at 102 AAA 1,043,663
Western Kentucky State College, Educational
Buildings, Series J, 7.400%, 5/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
RESOURCE RECOVERY - 2.3%
Perry County, Kentucky, Solid Waste Disposal,
Revenue, TJ International Project:
3,750,000 7.000%, 6/01/24 6/04 at 102 N/R 3,908,400
4,240,000 6.800%, 5/01/26 5/06 at 102 N/R 4,385,305
2,000,000 6.550%, 4/15/27 4/07 at 102 N/R 2,018,860
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL TAX REVENUE - 1.7%
7,250,000 Puerto Rico Commonwealth Highway and 7/16 at 100 A 7,051,132
Transportation Authority, Higthway, Revenue,
Series Y, 5.500%, 7/01/36
500,000 Puerto Rico Commonwealth Infrastructure, Financing 7/98 at 102 BBB+ 528,874
Authority, Special, Series A, 7.750%, 7/01/08
</TABLE>
____
23
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP KENTUCKY - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTION CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE/TERRITORIAL GENERAL OBLIGATIONS - 1.4%
$ 4,790,000 Puerto Rico Commonwealth, 5.400%, 7/01/25 7/06 at 101 1/2 A $ 4,567,120
2,000,000 Puerto Rico Commonwealth, Public Improvement, 7/07 at 101 1/2 A 1,908,040
5.375%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
$481,346,657 Total Investments - (cost $426,230,411) - 98.6% 450,078,557
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.4% 6,190,698
-------------------------------------------------------------------------------------------------------
Net Assets - 100% $456,269,255
=======================================================================================================
* 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.
</TABLE>
____
24
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 4.4%
$ 475,000 University of Kentucky, University Revenues, No Opt. Call AAA $ 480,434
Educational Buildings, Series O, 5.000%, 5/01/03
- -----------------------------------------------------------------------------------------------------------------------------
HOSPITALS - 18.3%
Kentucky Development Finance Authority Revenue,
Refunding, Sisters of Charity Health, Nazareth Health
Corporation:
150,000 5.750%, 11/01/98 No Opt. Call A+ 152,922
580,000 6.600%, 11/01/06 11/01 at 102 A+ 623,169
Kentucky Economic Development Finance Authority,
Medical Center Revenue, Refunding and Improvement,
Ashland Hospital Corporation, Series A:
270,000 5.100%, 2/01/99 No Opt. Call AAA 273,405
335,000 5.250%, 2/01/00 No Opt. Call AAA 341,013
200,000 Kentucky Economic Development Finance Authority, No Opt. Call Aa3 200,328
Hospital Facilities Revenue, Refunding,
5.200%, 11/01/01
385,000 McCracken County, Kentucky, Hospital Revenue, 11/04 at 102 AAA 420,974
Refunding, Mercy Health System, Series A,
6.300%, 11/01/06
- -----------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTI FAMILY - 10.0%
705,000 Louisville, Kentucky, Multifamily Revenue, Refunding, 7/99 at 100 Aa2 713,798
Station House SQ Association, LPProject, 5.125%,
7/15/19
385,000 Martin County, Kentucky, Mortgage Revenue, 7/01 at 100 Aa 391,741
Refunding, Assisted Project, 5.375%, 7/01/05
- -----------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 2.7%
100,000 Kentucky Housing Corporation, Housing Revenue, 1/04 at 102 AAA 99,143
Series B, 5.150%, 7/01/07
Kentucky Housing Corporation, Housing Revenue,
Series F:
100,000 4.650%, 1/01/02 No Opt. Call AAA 100,254
100,000 4.800%, 7/01/03 No Opt. Call AAA 100,226
- -----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL - 8.9%
325,000 Ashland, Kentucky, Pollution Control Revenue, 2/00 at 102 1/2 Baa1 346,889
Refunding, Ashland Oil, Series A, 2/1/90,
7.375%, 7/01/09
635,000 Newport, Kentucky, Industrial Building Revenue, No Opt. Call N/R 636,441
Refunding, Louis Trauth Dairy, Series A,
4.800%, 6/01/99
</TABLE>
____
25
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL APPROPRIATION OBLIGATIONS - 32.0%
$ 265,000 Hardin County, Kentucky, School District Finance 6/01 at 103 A1 $290,005
Corporation, School Building Revenue,
Second Series, 6.800%, 6/01/08
465,000 Jefferson County, Kentucky, School District Finance No Opt. Call A+ 459,541
Corporation, School Building Revenue, Series B,
4.800%, 11/01/06
300,000 Jefferson County, Kentucky, Capital Projects No Opt. Call AAA 310,944
Corporation Revenue, Lease, Series A,
5.500%, 4/01/03
Jeffersontown, Kentucky, Certificates of Participation,
Refunding and Improvement, Kentucky Public Projects:
300,000 4.650%, 11/01/02 No Opt. Call A 299,235
150,000 4.850%, 11/01/04 No Opt. Call A 150,189
100,000 5.000%, 11/01/05 No Opt. Call A 100,851
220,000 Kentucky Infrastructure Authority Revenue, Refunding, No Opt. Call A 225,390
Wastewater Revolving Fund Program, Series C,
5.300%, 6/01/03
360,000 Kentucky State Turnpike Authority, Economic No Opt. Call AAA 372,733
Development Road Revenue, Refunding,
Revitalization Projects, 5.400%, 7/01/05
125,000 Kentucky State Turnpike Authority, Resource Recovery No Opt. Call A+ 125,160
Road Revenue, Refunding, 1985, Series A,
6.000%, 7/01/09
775,000 Mt. Sterling Kentucky Lease Revenue, Kentucky No Opt. Call Aa 791,515
League Cities, Series A, 5.625%, 3/01/03
425,000 Puerto Rico Commonwealth Urban Renewal and No Opt. Call BBB 399,266
Housing Corporation, Commonwealth Appropriation
Refunding, 0.000%, 10/01/98
- -----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/TRANSPORTATION - 4.5%
300,000 Kenton County, Kentucky, Airport Board, Airport No Opt. Call AAA 302,754
Revenue, Cincinnati/Northern Kentucky
International, Series A, 5.000%, 3/01/02
200,000 Louisville and Jefferson County, Kentucky, Regional No Opt. Call AAA 203,826
Airport, Authority Airport System Revenue,
Series A, Refunding, 5.75%, 7/01/98
- -----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/UTILITY - 2.6%
400,000 Owensboro, Kentucky, Electric Light and No Opt. Call AAA 290,428
Power Revenue, Series A, 0.000%, 1/01/04
</TABLE>
____
26
<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 REVENUE/WATER AND SEWER - 4.2%
$ 100,000 Kenton County, Kentucky, Water District No. 001 No Opt. Call AAA $ 104,658
Waterworks Revenue, Series B, 5.600%, 2/01/04
350,000 Kentucky Infrastructure Authority Revenue, Refunding, No Opt. Call A 357,123
Governmental Agencies Program, Series H,
5.200%, 8/01/02
- ------------------------------------------------------------------------------------------------------------------------
NON-STATE GENERAL OBLIGATIONS - 3.6%
50,000 Kentucky Interlocal School Transportation Association No Opt. Call A1 50,965
Equipment, Lease, 5.200%, 3/01/02
Lexington, Fayette Urban County Kentucky Government
Public Facilities Corporation Mortgage Revenue:
175,000 5.000%, 11/01/02 No Opt. Call AAA 178,276
160,000 5.000%, 11/01/03 No Opt. Call AAA 162,582
- ------------------------------------------------------------------------------------------------------------------------
PRE-REFUNDED - 0.5%
250,000 Jefferson County, Kentucky, Capital Projects 2/01 at 24 11/16 AAA 51,834
Corporation Revenue, Lease, Series B,
0.000%, 8/15/19
- ------------------------------------------------------------------------------------------------------------------------
STATE/TERRITORIAL GENERAL OBLIGATIONS - 2.6%
280,000 Puerto Rico Commonwealth, Refunding, Improvement, No Opt. Call A 285,595
5.375%, 7/01/05
- ------------------------------------------------------------------------------------------------------------------------
STUDENT LOAN REVENUE BONDS - 5.6%
500,000 Kentucky Higher Education Student Loan Corporation, No Opt. Call Aaa 541,760
Insured Student Loan Revenue, Insured,
Series B, 6.800%, 6/01/03
75,000 Kentucky Higher Education Student Loan Corporation, No Opt. Call AA- 77,676
Insured Student Loan Revenue, Refunding,
Series A, 6.050%, 6/01/00
- ------------------------------------------------------------------------------------------------------------------------
$11,070,000 Total Investments -- (cost $10,896,841) -- 99.9% 11,013,043
- ------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.1% 871
------------------------------------------------------------------------------------------------------
Net Assets - 100% $11,013,914
------------------------------------------------------------------------------------------------------
</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.
____
27
<PAGE>
STATEMENT OF NET ASSETS
May 31, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Nuveen Flagship Kentucky
Kentucky Limited Term
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $450,078,557 $11,013,043
Receivables:
Interest 7,223,491 145,273
Shares sold 450,025 9,754
Investments sold 1,472,300 --
Other assets 13,654 7,955
- -----------------------------------------------------------------------------------------------------------------------------
Total assets 459,238,027 11,176,025
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 132,217 48,662
Payable for Shares redeemed 429,823 40,000
Accrued expenses:
Management fees (note 6) 110,986 2,038
12b-1 distribution and service fees (notes 1 and 6) 88,976 2,505
Other 169,638 28,342
Dividends payable 2,037,132 40,564
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,968,772 162,111
- -----------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $456,269,255 $11,013,914
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES (NOTE 1)
Net assets $430,802,836 $ 8,870,059
Shares outstanding 38,987,148 894,009
Net asset value and redemption price per share $ 11.05 $ 9.92
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% and 2.50%, respectively,
of offering price) $ 11.53 $ 10.17
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES (NOTE 1)
Net assets $ 543,588 $ N/A
Shares outstanding 49,169 N/A
Net asset value, offering and redemption price per share $ 11.06 $ N/A
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES (NOTE 1)
Net assets $ 24,468,251 $ 2,143,755
Shares outstanding 2,215,385 216,118
Net asset value, offering and redemption price per share $ 11.04 $ 9.92
- -----------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES (NOTE 1)
Net assets $ 454,580 $ 100
Shares outstanding 41,213 10
Net asset value, offering and redemption price per share $ 11.03 $ 9.92
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - Nuveen Flagship Kentucky Limited Term is not authorized to issue Class B
Shares.
See accompanying notes to financial statements.
____
28
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
NUVEEN FLAGSHIP KENTUCKY
KENTUCKY* LIMITED TERM**
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1)................................................$ 27,695,203 $ 473,169
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 2,290,442 33,012
12b-1 service fees - Class A (notes 1 and 6) 1,412,563 27,603
12b-1 distribution and service fees - Class B (notes 1 and 6) 767 N/A
12b-1 distribution and service fees - Class C (notes 1 and 6) 207,708 11,581
Shareholders' servicing agent fees and expenses 299,532 26,774
Custodian's fees and expenses 125,171 41,956
Trustees' fees and expenses (note 6) 11,836 271
Professional fees 26,824 7,290
Shareholders' reports - printing and mailing expenses 47,349 748
Federal and state registration fees 19,645 3,622
Organizational expenses (note 1) -- 9,795
Other expenses 18,121 632
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses before reimbursement 4,459,958 163,284
Expense reimbursement (note 6) (989,872) (108,413)
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses 3,470,086 54,871
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 24,225,117 418,298
===========================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investment transactions
(notes 1 and 4) 1,216,787 (70,626)
Net change in unrealized appreciation or depreciation
of investments 8,326,260 204,943
- ---------------------------------------------------------------------------------------------------------------------------
Net gain from investments 9,543,047 134,317
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 33,768,164 $ 552,615
===========================================================================================================================
</TABLE>
* Information represents eight months of Flagship Kentucky and four months of
Nuveen Flagship Kentucky (see note 1 of the Notes to Financial Statements).
** Information represents eight months of Flagship Kentucky Limited Term and
four months of Nuveen Flagship Kentucky Limited Term (see note 1 of the
Notes to Financial Statements).
N/A - Nuveen Flagship Kentucky Term is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
____
29
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLAGSHIP
NUVEEN FLAGSHIP FLAGSHIP KENTUCKY KENTUCKY
KENTUCKY* KENTUCKY LIMITED TERM** LIMITED TERM
-------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/97 5/31/96 5/31/97 5/31/96
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 24,225,117 $ 23,297,405 $ 418,298 $ 183,876
Net realized gain (loss) from investment
transactions (notes 1 and 4) 1,216,787 746,629 (70,626) (32,692)
Net change in unrealized appreciation or
depreciation of investments 8,326,260 (7,775,753) 204,943 (88,741)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 33,768,164 16,268,281 552,615 62,443
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (23,056,260) (22,405,836) (345,290) (156,882)
Class B (3,383) N/A N/A N/A
Class C (1,154,172) (950,670) (70,918) (27,984)
Class R (8,367) N/A (1) N/A
From accumulated net realized gains from
investment transactions:
Class A (227,076) -- -- --
Class B -- N/A N/A N/A
Class C (12,818) -- -- --
Class R -- N/A -- N/A
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions
to shareholders (24,462,076) (23,356,506) (416,209) (184,866)
- ---------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 45,888,380 56,317,737 5,492,681 11,638,666
Net proceeds from shares issued to
shareholders due to reinvestment
of distributions 13,715,085 13,719,431 263,078 111,313
- ---------------------------------------------------------------------------------------------------------------------------
59,603,465 70,037,168 5,755,759 11,749,979
- ---------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (44,095,674) (41,781,814) (5,035,029) (1,470,778)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 15,507,791 28,255,354 720,730 10,279,201
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 24,813,879 21,167,129 857,136 10,156,778
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at the beginning of year 431,455,376 410,288,247 10,156,778 --
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $456,269,255 $431,455,376 $11,013,914 $10,156,778
- ---------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net
investment income at end of year $ 2,935 $ -- $ 2,089 $ --
===========================================================================================================================
</TABLE>
* Information represents eight months of Flagship Kentucky and four
months of Nuveen Flagship Kentucky (see note 1 of the Notes to
Financial Statements).
** Information represents eight months of Flagship Kentucky Limited Term
and four months of Nuveen Flagship Kentucky Limited Term (see note 1
of the Notes to Financial Statements).
N/A - Flagship Kentucky and Flagship Kentucky Limited were not authorized
to issue Class B or Class R Shares. Nuveen Flagship Kentucky Limited
is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
_____
30
<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 IV (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Kentucky Municipal Bond Fund and Nuveen Flagship
Kentucky Limited Term 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 Kentucky Triple Tax
Exempt Fund ("Flagship Kentucky") and Flagship Kentucky Limited Term Municipal
Bond Fund ("Flagship Kentucky Limited Term") were reorganized into the Trust and
renamed Nuveen Flagship Kentucky Municipal Bond Fund ("Nuveen Flagship
Kentucky") and Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
("Nuveen Flagship Kentucky Limited Term"), respectively.
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
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 purchase commitments.
____
31
<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 Kentucky and
Flagship Kentucky Limited Term were 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 and Kentucky state 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 Kentucky began offering Class B
Shares. Class A Shares are sold with a sales charge on purchases 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
____
32
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
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.
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 Kentucky
Limited Term (approximately $29,400) 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, $9,795 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.
____
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLAGSHIP
KENTUCKY* KENTUCKY
---------------------------------------------------------------------------------
Year ended Year ended
5/31/97 5/31/96
---------------------------------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 3,460,838 $ 37,993,876 4,371,220 $ 48,186,156
Class B 49,144 540,802 N/A N/A
Class C 630,496 6,904,170 739,589 8,131,581
Class R 40,643 449,532 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 1,178,853 12,941,813 1,186,665 13,067,258
Class B 25 269 N/A N/A
Class C 69,875 766,751 59,216 652,173
Class R 570 6,252 N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
5,430,444 59,603,465 6,356,690 70,037,168
- --------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (3,622,758) (39,765,461) (3,468,274) (38,150,351)
Class B -- -- N/A N/A
Class C (394,142) (4,330,213) (330,172) (3,631,463)
Class R -- -- N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
(4,016,900) (44,095,674) (3,798,446) (41,781,814)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 1,413,544 $ 15,507,791 2,558,244 $ 28,255,354
================================================================================================================================
</TABLE>
* Information represents eight months of Flagship Kentucky and four months of
Nuveen Flagship Kentucky (see note 1).
N/A - Flagship Kentucky was not authorized to issue Class B or Class R Shares.
____
34
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLAGSHIP
KENTUCKY LIMITED TERM KENTUCKY LIMITED TERM
-------------------------------------------------------------
YEAR ENDED YEAR ENDED
5/31/97 5/13/96
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 410,367 $ 4,052,500 993,553 $ 9,842,618
Class C 145,916 1,440,077 180,695 1,796,048
Class R 10 104 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 22,414 221,045 9,926 98,135
Class C 4,292 42,033 1,332 13,178
Class R -- -- N/A N/A
- ---------------------------------------------------------------------------------------------------------
582,999 5,755,759 1,185,506 11,749,979
- ---------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (395,384) (3,906,315) (146,867) (1,455,747)
Class C (114,591) (1,128,714) (1,526) (15,031)
Class R -- -- N/A N/A
- ---------------------------------------------------------------------------------------------------------
(509,975) (5,035,029) (148,393) (1,470,778)
- ---------------------------------------------------------------------------------------------------------
Net increase 73,024 $ 720,730 1,037,113 $10,279,201
=========================================================================================================
</TABLE>
* Information represents eight months of Flagship Kentucky Limited Term and
four months of Nuveen Flagship Kentucky Limited Term (see note 1).
N/A - Flagship Kentucky Limited Term was not authorized to issue
Class R Shares.
____
35
<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:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
NUVEEN FLAGSHIP KENTUCKY LIMITED
KENTUCKY TERM
- --------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $.0495 $.0365
Class B .0425 N/A
Class C .0445 .0340
Class R .0515 .0385
- --------------------------------------------------------------------------------
</TABLE>
N/A - Nuveen Flagship Limited Term 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:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
NUVEEN FLAGSHIP KENTUCKY LIMITED
KENTUCKY TERM**
- --------------------------------------------------------------------------------
<S> <C> <C>
PURCHASES
Investments in municipal securities $68,275,595 $5,991,427
Temporary municipal investments 1,500,000 --
SALES
Investments in municipal securities 57,019,734 5,381,341
Temporary municipal investments 1,500,000 --
- --------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Kentucky and four months of
Nuveen Flagship Kentucky (see note 1).
** Information represents eight months of Flagship Kentucky Limited Term and
four months of Nuveen Flagship Kentucky Limited Term (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, Nuveen Flagship Kentucky Limited Term had unused capital loss
carryforwards of $97,751 available for federal income tax purposes to be applied
against future capital gains, if any. If not applied $27,151 of the carryover
will expire in the year 2004 and $70,600 in the year 2005.
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 KENTUCKY LIMITED
KENTUCKY TERM
- --------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $24,178,042 $119,078
depreciation (329,896) (2,876)
- --------------------------------------------------------------------------------
Net unrealized appreciation.. $23,848,146 $116,202
================================================================================
</TABLE>
____
36
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
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>
NUVEEN FLAGSHIP KENTUCKY
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>
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .4500 of 1%
For the next $125 million .4375 of 1
For the next $250 million .4250 of 1
For the next $500 million .4125 of 1
For the next $1 billion .4000 of 1
For net assets over $2 billion .3750 of 1
- --------------------------------------------------------------------------------
</TABLE>
Prior to the reorganization (see note 1) Flagship Kentucky paid a management fee
of .5 of 1% of the average daily net assets and Flagship Kentucky Limited Term
paid a management fee of .30 of 1% of the average daily net assets of $500
million or less and .25 of 1% of the average daily net assets in excess of $500
million. 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.
____
37
<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 sales charges on purchases of Class A Shares, the majority of which
were paid out as concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP NUVEEN FLAGSHIP
KENTUCKY KENTUCKY LIMITED TERM
- --------------------------------------------------------------------------------
<S> <C> <C>
Gross sales charges collected $1,045,600 $24,300
Paid to authorized dealers 902,900 19,300
- --------------------------------------------------------------------------------
</TABLE>
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 $144,900 for Nuveen
Flagship Kentucky and $7,700 for Nuveen Flagship Kentucky Limited Term 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 CDSC on share redemptions of approximately $11,500 for Nuveen Flagship
Kentucky and $17,900 for Nuveen Flagship Kentucky Limited Term 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 KENTUCKY LIMITED
KENTUCKY TERM
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $431,802,928 $10,998,941
Balance of undistributed net investment income 2,935 2,089
Accumulated net realized gain (loss) from investment transactions 615,246 (103,318)
Net unrealized appreciation of investments 23,848,146 116,202
- --------------------------------------------------------------------------------------------------------------
Net assets $456,269,255 $11,013,914
==============================================================================================================
</TABLE>
____
38
<PAGE>
FINANCIAL HIGHLIGHTS
____
39
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as
follows:
CLASS (INCEPTION DATE) OPERATING PERFORMANCE LESS DISTRIBUTIONS
--------------------- ------------------
<TABLE>
<CAPTION>
NET
NUVEEN FLAGSHIP KENTUCKY++ 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 (5/87)
1997 $10.82 $.60 $ .24 $(.60) $(.01) $11.05 7.87%
1996 10.99 .61 (.17) (.61) -- 10.82 4.04
1995 10.65 .61 .35 (.62) -- 10.99 9.42
1994 11.06 .62 ( .40) (.63) -- 10.65 1.90
1993 10.45 .64 .62 (.65) -- 11.06 12.41
1992 10.19 .66 .27 (.66) (.01) 10.45 9.46
1991 9.87 .66 .32 (.66) -- 10.19 10.37
1990 9.97 .66 (.05) (.66) (.05) 9.87 6.92
1989 9.38 .67 .60 (.67) (.01) 9.97 14.31
1988 9.37 .66 .02 (.67) -- 9.38 7.79
CLASS B (2/97)
1997(c) 11.07 .17 (.01) (.17) -- 11.06 1.47
CLASS C (10/93)
1997 10.81 .54 .24 (.54) (.01) 11.04 7.29
1996 10.99 .54 (.17) (.55) -- 10.81 3.38
1995 10.65 .55 .35 (.56) -- 10.99 8.82
1994(c) 11.46 .36 (.81) (.36) -- 10.65 (5.88)+
CLASS R (2/97)
1997(c) 11.08 .20 (.04) (.21) -- 11.03 1.42
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Kentucky.
(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.
____
40
<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>
$430,803 .99% 5.20% .75% 5.44% 13%
410,808 1.02 5.19 .71 5.50 17
394,457 1.04 5.49 .68 5.85 28
369,495 1.03 5.15 .58 5.60 12
309,223 1.05 5.52 .61 5.96 15
207,395 1.05 5.96 .62 6.39 5
142,449 1.06 6.31 .72 6.65 23
111,234 1.07 6.31 .75 6.63 57
72,059 1.11 6.50 .67 6.94 32
40,945 1.10 6.50 .51 7.09 36
544 1.59+ 4.56+ 1.39+ 4.76+ 13
24,468 1.54 4.64 1.29 4.89 13
20,647 1.57 4.63 1.27 4.93 17
15,831 1.58 4.92 1.23 5.27 28
11,172 1.65+ 4.39+ 1.08+ 4.96+ 12
455 .64+ 5.62+ .49+ 5.77+ 13
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
____
41
<PAGE>
FINANCIAl HIGHLIGHTS - CONTINUED
CLASS (INCEPTION DATE) OPERATING PERFORMANCE LESS DISTRIBUTIONS
--------------------- ------------------
<TABLE>
<CAPTION>
NET
NUEVEEN FLAGSHIP KENTUCKY NET REALIZED AND DIVIDENDS NET TOTAL
LIMITED TERM ++ ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM NVESTMENT 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 (9/95)
1997 $ 9.79 $ .45 $ .12 $ (.44) $ -- $ 9.92 5.96%
1996(c) 9.75 .31 .04 (.31) -- 9.79 5.45+
CLASS C (9/95)
1997 9.79 .41 .13 (.41) -- 9.92 5.64
1996(c) 9.75 .29 .04 (.29) -- 9.79 5.12+
CLASS R (2/97)
1997(c) 9.98 .15 (.10) (.11) -- 9.92 .56
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Kentucky Limited
Term.
(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.
____
42
<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>
$8,870 1.68% 3.37% .53% 4.52% 56%
8,389 1.67+ 3.07+ .37+ 4.37+ 48
2,144 2.00 3.03 .84 4.19 56
1,767 1.98+ 2.78+ .64+ 4.12+ 48
-- .86+ 4.87+ -- 5.73+ 56
- ------------------------------------------------------------------------------------------------
</TABLE>
____
43
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF NUVEEN FLAGSHIP KENTUCKY MUNICIPAL
BOND FUNDS:
We have audited the accompanying statements of net assets of the Nuveen Flagship
Kentucky Municipal Bond Fund and the Nuveen Flagship Kentucky Limited Term
Municipal Bond Fund, including the portfolios of investments, as of May 31,
1997, the related statements of operations for the period then ended, 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of the Nuveen Flagship
Kentucky Municipal Bond Fund and the Nuveen Flagship Kentucky Limited Term
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
____
44
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP KENTUCKY
<TABLE>
<CAPTION>
A SHARES C SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ADVISORY AGREEMENT For 26,511,504 1,367,473
Against 279,402 12,849
Abstain 689,371 48,871
------------------------------------------------
Total 27,480,277 1,429,193
- --------------------------------------------------------------------------------
Broken Non Votes 572,866 89,338
- --------------------------------------------------------------------------------
REORGANIZATION For 19,328,955 1,082,344
Against 355,112 10,609
Abstain 792,438 39,135
------------------------------------------------
Total 20,476,505 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,638 366,443
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE For 19,055,340 1,066,445
Against 1,290,229 59,292
Abstain 10,937 6,351
------------------------------------------------
Total 20,356,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,696,637 386,443
- --------------------------------------------------------------------------------
INVESTMENT ASSETS For 19,104,210 1,065,759
Against 1,214,193 59,978
Abstain 158,103 6,351
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,637 386,443
- --------------------------------------------------------------------------------
TYPE OF SECURITIES For 19,117,189 1,062,856
Against 1,207,360 61,152
Abstain 151,957 8,080
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,756,637 386,443
- --------------------------------------------------------------------------------
BORROWING For 19,092,977 1,061,224
Against 1,232,888 63,678
Abstain 150,641 7,186
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,637 386,443
- --------------------------------------------------------------------------------
PLEDGES For 19,104,719 1,062,230
Against 1,216,844 62,672
Abstain 154,942 7,186
------------------------------------------------
Total 20,476,505 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,638 386,443
- --------------------------------------------------------------------------------
SENIOR SECURITIES For 19,114,011 1,063,750
Against 1,195,946 61,152
Abstain 166,548 7,186
------------------------------------------------
Total 20,476,505 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,638 386,443
------------------------------------------------
</TABLE>
____
45
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP KENTUCKY - CONTINUED
<TABLE>
<CAPTION>
A SHARES C SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
UNDERWRITING For 19,127,634 1,062,805
Against 1,204,466 62,097
Abstain 144,405 7,186
------------------------------------------------
Total 20,476,505 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,638 386,443
- --------------------------------------------------------------------------------
REAL ESTATE For 18,833,681 1,063,750
Against 1,484,597 61,152
Abstain 158,228 7,186
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,637 386,443
- --------------------------------------------------------------------------------
COMMODITIES For 18,845,928 1,065,308
Against 1,479,776 63,617
Abstain 150,801 3,163
------------------------------------------------
Total 20,476,505 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,638 386,443
- --------------------------------------------------------------------------------
LOANS For 19,083,543 1,062,230
Against 1,243,491 62,672
Abstain 149,472 7,186
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,637 386,443
- --------------------------------------------------------------------------------
SHORT SALES/MARGIN PURCHASES For 18,829,402 1,066,253
Against 1,482,740 62,672
Abstain 164,364 3,163
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,637 386,443
- --------------------------------------------------------------------------------
PUT AND CALL OPTIONS For 18,835,694 1,062,230
Against 1,478,396 62,672
Abstain 162,415 7,186
------------------------------------------------
Total 20,476,505 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,638 386,443
- --------------------------------------------------------------------------------
INDUSTRY CONCENTRATION For 19,118,304 1,067,773
Against 1,201,668 61,152
Abstain 156,534 3,163
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,637 386,443
- --------------------------------------------------------------------------------
AFFILIATE PURCHASES For 18,876,434 1,067,773
Against 1,435,232 61,152
Abstain 164,840 3,163
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,637 386,443
------------------------------------------------
</TABLE>
____
46
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
A SHARES C SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
DIV VS. NON-DIV For 19,089,883 1,067,773
Against 1,203,959 61,152
Abstain 182,664 3,163
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,637 386,443
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES For 19,003,226 1,066,445
Against 1,309,149 58,457
Abstain 164,131 7,186
------------------------------------------------
Total 20,476,506 1,132,088
- --------------------------------------------------------------------------------
Broker Non Votes 7,576,637 386,443
- --------------------------------------------------------------------------------
12B-1 FEES For 26,093,842 1,319,705
Against 453,326 44,726
Abstain 933,110 64,762
------------------------------------------------
Total 27,480,278 1,429,193
- --------------------------------------------------------------------------------
Broker Non Votes 572,865 89,338
- --------------------------------------------------------------------------------
DIRECTORS
- --------------------------------------------------------------------------------
Bremner For 27,449,474 1,471,678
Withhold 603,669 46,853
Total 28,053,143 1,518,531
- --------------------------------------------------------------------------------
Brown For 27,449,474 1,471,678
Withhold 603,669 46,853
------------------------------------------------
Total 28,053,143 1,518,531
- --------------------------------------------------------------------------------
Dean For 27,447,695 1,471,678
Withhold 605,448 46,853
------------------------------------------------
Total 28,053,143 1,518,531
- --------------------------------------------------------------------------------
Impellizzeri For 27,449,474 1,471,678
Withhold 603,669 46,853
------------------------------------------------
Total 28,053,143 1,518,531
- --------------------------------------------------------------------------------
Rosenheim For 27,449,474 1,471,678
Withhold 603,669 46,853
------------------------------------------------
Total 28,053,143 1,518,531
- --------------------------------------------------------------------------------
Sawers For 27,449,474 1,471,678
Withhold 603,669 46,853
------------------------------------------------
Total 28,053,143 1,518,531
- --------------------------------------------------------------------------------
Schneider For 27,449,474 1,471,678
Withhold 603,669 46,853
------------------------------------------------
Total 28,053,143 1,518,531
- --------------------------------------------------------------------------------
Schwertfeger For 27,449,474 1,471,678
Withhold 603,669 46,853
------------------------------------------------
Total 28,053,143 1,518,531
------------------------------------------------
</TABLE>
____
47
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP KENTUCKY LIMITED TERM
<TABLE>
<CAPTION>
A SHARES C SHARES
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
ADVISORY AGREEMENT For 593,989 107,587
Against -- --
Abstain 1,503 --
-----------------------------------------------
Total 595,492 107,587
- -----------------------------------------------------------------------------
Broker Non Votes -- 8,610
- -----------------------------------------------------------------------------
REORGANIZATION For 505,309 79,762
Against 1,094 --
Abstain 1,503 1,999
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
INVESTMENT OBJECTIVE For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
INVESTMENT ASSETS For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
TYPE OF SECURITIES For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
BORROWING For 505,309 78,741
Against 2,597 3,020
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
PLEDGES For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
SENIOR SECURITIES For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
</TABLE>
____
48
<PAGE>
Nuveen Municipal Bond Funds
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
A SHARES C SHARES
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
UNDERWRITING For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
REAL ESTATE For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
COMMODITIES For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
LOANS For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
SHORT SALES/MARGIN
PURCHASES For 505,309 78,741
Against 2,597 3,020
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
PUT AND CALL OPTIONS For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
INDUSTRY CONCENTRATION For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
AFFILIATE PURCHASES For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
</TABLE>
____
49
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP KENTUCKY LIMITED TERM
--CONTINUED
<TABLE>
<CAPTION>
A SHARES C SHARES
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT COMPANIES For 505,309 79,762
Against 2,597 1,999
Abstain -- --
-----------------------------------------------
Total 507,906 81,761
- -----------------------------------------------------------------------------
Broker Non Votes 87,586 34,436
- -----------------------------------------------------------------------------
12b-1 FEES For 539,892 107,587
Against -- --
Abstain 55,600 --
-----------------------------------------------
Total 595,492 107,587
- -----------------------------------------------------------------------------
Broker Non Votes -- 8,610
- -----------------------------------------------------------------------------
DIRECTORS
- -----------------------------------------------------------------------------
Bremner For 591,255 116,197
Withhold 4,237 --
-----------------------------------------------
Total 595,492 116,197
- -----------------------------------------------------------------------------
Brown For 591,255 116,197
Withhold 4,237 --
-----------------------------------------------
Total 595,492 116,197
- -----------------------------------------------------------------------------
Dean For 591,255 116,197
Withhold 4,237 --
-----------------------------------------------
Total 595,492 116,197
- -----------------------------------------------------------------------------
Impellizzeri For 591,255 116,197
Withhold 4,237 --
-----------------------------------------------
Total 595,492 116,197
- -----------------------------------------------------------------------------
Rosenheim For 591,255 116,197
Withhold 4,237 --
-----------------------------------------------
Total 595,492 116,197
- -----------------------------------------------------------------------------
Sawers For 591,255 116,197
Withhold 4,237 --
-----------------------------------------------
Total 595,492 116,197
- -----------------------------------------------------------------------------
Schneider For 591,255 116,197
Withhold 4,237 --
-----------------------------------------------
Total 595,492 116,197
- -----------------------------------------------------------------------------
Schwertfeger For 591,255 116,197
Withhold 4,237 --
-----------------------------------------------
Total 595,492 116,197
-----------------------------------------------
</TABLE>
____
50
<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.
____
51
<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
____
52
<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>
NUVEEN
MUNICIPAL
BOND FUNDS
MAY 31, 1997
ANNUAL REPORT
DEPENDABLE, TAX-FREE INCOME TO HELP YOU KEEP MORE OF WHAT YOU EARN.
MICHIGAN
[PHOTO APPEARS HERE]
<PAGE>
CONTENTS
1 Dear Shareholder
3 Answering Your Questions
6 Michigan Overview
9 Financial Section
35 Shareholder Meeting Report
36 Shareholder Information
37 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
Michigan 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 8.42%
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 4.76% 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 7.27% 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. Schwertferger
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
____
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 FUND PERFORM?
The Michigan Municipal Bond Fund performed well over the past year, rewarding
investors with a total return on net asset value for the year of 8.42% for Class
A shares, including price changes and reinvested dividends. Additionally, the
fund was ranked seventh among 46 Michigan municipal bond funds for the one-year
period by Lipper Analytical Services, a nationally recognized performance
measurement service. Steady demand, coupled with tight supply, caused munis to
outperform Treasury securities over the 12 month period.
WHAT STRATEGIES DID YOU EMPLOY TO ADD VALUE?
We maintained the average call protection of the fund at 7.40 years and brought
the duration, a measure of the fund's volatility, down to 7.95 years from 8.40
years. The funds continued to reduce exposure to local school district bonds,
which had flooded the market due to local property tax reform. Although the
sector presented good credit characteristics, the supply of these bonds tended
to overwhelm the market, driving down prices.
WHAT IS THE CURRENT STATUS OF MICHIGAN'S MUNICIPAL MARKET?
The supply of new bond issuance in Michigan has declined by nearly one third in
the first half of 1997, compared with the same period in the previous year.
However, substantial issuance continued for school district debt as a result of
local property tax reform. Michigan's economy and financial operations have
improved significantly since the 1980s. In 1996, the state's unemployment rate
was at its lowest level in 27 years. The City of Detroit's economy has also
shown improvement, attracting $4.5 billion in private investments since
____
4
<PAGE>
1995. The state continues to fund infrastructure under the $1.5 billion Build
Michigan program.
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>
MICHIGAN
OVERVIEW
Credit Quality
- ------------------------
[PIE CHART APPEARS HERE]
BBB/NR 11%
A 18%
AA 20%
AAA/Pre-refunded 51%
Diversification
- ------------------------------
[PIE CHART APPEARS HERE]
Pollution Control 7%
Hospitals 24%
Housing Facilities 9%
Other 10%
Water & Sewer 8%
General Obligations 15%
Escrowed Bonds 17%
Tax Revenue 10%
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARE CLASS A B C R
Inception Date 6/85 2/97 6/93 2/97
- ----------------------------------------------------------------------------------
Net Asset Value (NAV) $11.68 $11.70 $11.66 $ 11.68
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Total Net Assets ($000) $327,295
- ----------------------------------------------------------------------------------
Average Weighted Maturity (years) 18.22
- ----------------------------------------------------------------------------------
Duration (years) 7.95
- ----------------------------------------------------------------------------------
<CAPTION>
ANNUALIZED TOTAL RETURN\1\
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHARE CLASS A(NAV) A(Offer) B C R
1-Year 8.42% 3.87% 7.94% 7.84% 8.49%
- ----------------------------------------------------------------------------------
5-Year 6.88% 5.97% 6.32% 6.20% 6.89%
- ----------------------------------------------------------------------------------
10-Year 8.10% 7.63% 7.63% 7.46% 8.10%
- ----------------------------------------------------------------------------------
<CAPTION>
TAX-FREE YIELDS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHARE CLASS A(NAV) A(Offer) B C R
- ----------------------------------------------------------------------------------
Dist Rate 5.23% 5.01% 4.47% 4.69% 5.42%
- ----------------------------------------------------------------------------------
SEC 30-Day Yld 4.76% 4.56% 4.02% 4.22% 4.96%
- ----------------------------------------------------------------------------------
Taxable Equiv Yld2 7.27% 6.96% 6.14% 6.44% 7.57%
- ----------------------------------------------------------------------------------
</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 return 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 3.94%,
6.16%, and 7.63%, 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 Michigan 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 Michigan Municipal Michigan 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 $10,894.58 $10,437.00
May-89 $12,150.65 $12,324.28 $11,806.66
May-90 $13,039.68 $13,089.08 $12,539.34
May-91 $14,353.88 $14,232.29 $13,634.53
May-92 $15,764.07 $15,619.08 $14,963.08
May-93 $17,650.01 $17,533.33 $16,796.93
May-94 $18,085.83 $17,860.75 $17,110.60
May-95 $19,732.83 $19,391.34 $18,576.90
May-96 $20,634.74 $20,092.07 $19,248.21
May-97 $22,534.82 $21,783.62 $20,868.71
</TABLE>
Lehman Brothers Municipal Bond Index $22,535
Nuveen Flagship Michigan Municipal Bond Fund (NAV) $21,784
Nuveen Flagship Michigan Municipal Bond Fund (Offer) $20,869
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 0.0504 JANUARY 0.0528 0.01289
JULY 0.052 FEBRUARY 0.0509
AUGUST 0.052 MARCH 0.0509
SEPTEMBER 0.05 APRIL 0.0509
OCTOBER 0.0517 MAY 0.0509
NOVEMBER 0.05
DECEMBER 0.0517
</TABLE>
Capital Gain
7
<PAGE>
FINANCIAL SECTION
CONTENTS
10 Portfolio of Investments
21 Statement of Net Assets
22 Statement of Operations
23 Statement of Changes in Net Assets
24 Notes to Financial Statements
31 Financial Highlights
34 Independent Auditors' Report
____
9
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MICHIGAN
<TABLE>
<CAPTION>
PRICIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION -- 1.3%
$1,000,000 Grand Valley, Michigan, State University Revenue, 10/98 at 102 A $1,067,120
General, 7.875%, 10/01/08
1,000,000 Michigan State University, Formerly Michigan ST 2/06 at 101 AAA 912,730
University Agricultural and Applied Science
To 1965, General, Series A, 5.000%, 2/15/26
1,000,000 Oakland County, Michigan, Economic Development 11/04 at 102 Aa2 1,108,330
Corporation, Limited Obligation, Revenue
Refunding, Cranbrook Educational Community,
Series C, 6.900%, 11/01/14
1,000,000 Western Michigan University, 6.250%, 11/15/12 11/02 at 102 AAA 1,056,300
- ---------------------------------------------------------------------------------------------------------------------------
ESCROWED TO MATURITY -- 0.1%
195,000 Michigan State Hospital Finance Authority, Henry No Opt. Call AAA 210,758
Ford Hospital, Series B, 8.875%, 5/01/00
- ---------------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 0.5%
1,200,000 Michigan State Hospital Finance Authority, 7/05 at 102 N/R 1,213,908
Michigan Obligation Group, 6.500%, 1/01/25
250,000 Warren, Michigan, Economic Development Corporation, 3/02 at 101 Aaa 263,218
Nursing Home Revenue, Autumn Woods,
6.900%, 12/20/22
- ---------------------------------------------------------------------------------------------------------------------------
HOSPITALS -- 23.2%
1,000,000 Dearborn, Michigan, Economic Development 11/05 at 102 AAA 1,018,460
Corporation, Hospital Revenue, Oakwood
Obligation Group, Series A, 5.750%,11/15/15
Farmington Hills Michigan Hospital Finance Authority,
HospitalRevenue, Botsford General Hospital,
Series A:
500,000 6.500%, 2/15/11 2/02 at 102 AAA 537,575
500,000 6.500%, 2/15/22 2/02 at 102 AAA 534,965
500,000 Grand Traverse County, Michigan, Hospital Finance 7/02 at 102 AAA 521,585
Authority, HospitalRevenue Refunding,
Munson Healthcare, Series A, 6.250%, 7/01/22
1,940,000 Kalamazoo, Michigan, Hospital Finance Authority, 5/03 at 102 A1 2,041,152
Hospital Facility, Revenue Refunding and
Improvement, Bronson Methodist, Series A,
6.375%, 5/15/17
</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>
HOSPITALS -- CONTINUED
$6,000,000 Kalamazoo, Michigan, Hospital Finance Authority, 5/06 at 102 AAA $6,057,720
Hospital Facility, Revenue Refunding and
Improvement, Bronson Methodist,
5.875%, 5/15/26
1,290,000 Kent Hospital Finance Authority, Michigan Hospital 11/01 at 102 AAA 1,386,815
Facility, Revenue Refunding, Pine Rest
Christian Hospital, 6.500%, 11/01/10
1,000,000 Michigan State Hospital Finance Authority, Revenue 3/04 at 102 A+ 955,390
Refunding, Hospital, Crittenton Hospital, Series A,
5.250%, 3/01/14
40,000 Michigan State Hospital Finance Authority, Revenue 8/98 at 102 A 42,336
Refunding, Detroit Medical Center, Series B,
8.125%, 8/15/08
3,000,000 Michigan State Hospital Finance Authority, Revenue 1/00 at 100 BBB+ 3,064,890
Refunding, Memorial Hospital, Owosso,
Michigan, Series A, 7.375%, 1/01/03
500,000 Michigan State Hospital Finance Authority, Hospital 12/02 at 102 A 539,650
Revenue, Mid-Michigan Obligation Group,
6.900%, 12/01/24
6,500,000 Michigan State Hospital Finance Authority, Revenue 8/03 at 102 A 6,869,980
Refunding, Detroit Medical Center Obligation
Group, Series A, 6.500% 8/15/18
1,000,000 Michigan State Hospital Finance Authority, Revenue 7/99 at 102 AAA 1,062,570
Refunding, Oakland General Hospital,
7.000%, 7/01/15
1,000,000 Michigan State Hospital Finance Authority, Revenue 11/01 at 102 AAA 1,059,420
Refunding, Sparrow ObligatedGroup,
6.500%, 11/15/11
1,000,000 Michigan State Hospital Finance Authority, 11/01 at 102 AA 1,089,250
Daughters Charity, 7.000%, 11/01/21
2,920,000 Michigan State Hospital Finance Authority, Hospital 8/04 at 102 A 2,777,942
Revenue Refunding, Detroit Medical Center,
Series B, 5.500%, 8/15/23
1,000,000 Michigan State Hospital Finance Authority, Revenue 1/05 at 102 AA- 1,045,650
Refunding, Otsego Memorial Hospital Gaylord,
6.125%, 1/01/15
2,000,000 Michigan State Hospital Finance Authority, Revenue 7/05 at 102 AAA 1,984,060
Refunding, Hospital, Port Huron Hospital Obligation,
5.500%, 7/01/15
</TABLE>
____
11
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MICHIGAN - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - CONTINUED
$2,200,000 Michigan State Hospital Finance Authority, Hospital 11/05 at 101 AA $2,118,226
Revenue Refunding, Daughters Charity,
5.250%, 11/01/15
1,000,000 Michigan State Hospital Finance Authority, Hospital No Opt. Call BBB 1,027,130
Revenue Refunding, Gratiot Community Hospital,
6.100%, 10/01/07
8,500,000 Michigan State Hospital Finance Authority, Revenue 5/06 at 102 AA 8,024,000
Refunding, Henry Ford Health, Series A,
5.250%, 11/15/20
1,000,000 Michigan State Hospital Finance Authority, Revenue, 10/06 at 102 BBB 998,950
Hospital, Central Michigan Community Hospital,
6.250%, 10/01/27
5,250,000 Michigan State Hospital Finance Authority, Revenue, 8/06 at 101 AAA 5,011,755
Mercy Health Services, Series Q, 5.375%, 8/15/26
2,000,000 Michigan State Hospital Finance Authority, Revenue 8/07 at 101 AA- 1,939,920
Refunding, Mercy Health Services, Series S,
5.500%, 8/15/20
Michigan State Hospital Finance Authority,
Presbyterian Michigan Obligation:
600,000 6.375%, 1/01/15 1/07 at 102 N/R 602,148
500,000 6.375%, 1/01/25 1/07 at 102 N/R 497,715
Pontiac, Michigan, Hospital Finance Authority,
Hospital Revenue Refunding,:
3,000,000 6.000%, 8/01/18 8/03 at 102 BBB- 2,884,410
5,165,000 6.000%, 8/01/23 8/03 at 102 BBB- 4,905,614
8,345,000 Royal Oak, Michigan, Hospital Finance Authority, 1/06 at 102 AA 7,886,025
Hospital, Revenue Refunding, William Beaumont
Hospital, 5.250%, 1/01/20
2,000,000 Saginaw, Michigan, Hospital Finance Authority, 10/99 at 102 BBB+ 2,120,480
Hospital, Revenue Refunding, Saginaw General
Hospital, 7.625%, 10/01/08
500,000 Saginaw, Michigan, Hospital Finance Authority, 7/01 at 102 AAA 538,485
St.Lukes Hospital, Hospital Revenue Refunding,
Series C, 6.750%, 7/01/17
1,000,000 University of Michigan, University Hospital Revenue, 12/00 at 100 AA 1,028,970
6.375%, 12/01/24
3,500,000 University of Michigan, University Medical Revenue, 12/01 at 102 Aa2 3,722,320
Service Plan, 6.500%, 12/01/21
</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/MULTI FAMILY -- 3.6%
$ 440,000 Grand Rapids, Michigan, Housing Corporation, 1/04 at 104 AAA $ 484,246
Multifamily, Revenue Refunding, Elderly Project,
7.375%, 7/15/41
750,000 Grand Rapids, Michigan, Housing Finance Authority, 9/04 at 100 AAA 816,128
Multifamily Revenue Refunding, Series A,
7.625%, 9/01/23
1,190,000 Michigan State Housing Development Authority, Multi- 10/05 at 102 Aaa 1,242,586
Family Revenue Refunding, Limited Obligation,
Series A, 6.500%, 10/01/15
6,000,000 Michigan State Housing Development Authority, No Opt. Call A+ 1,360,680
Series I, 0.000%, 4/01/14
Michigan State Housing Development Authority,
Rental Housing, Revenue Refunding, Series A:
500,000 6.400%, 4/01/05 10/02 at 102 A+ 528,360
500,000 6.650%, 4/01/23 10/02 at 102 A+ 517,210
Michigan State Housing Development Authority,
Rental Housing Revenue, Series B:
1,000,000 6. 150%, 10/01/15 6/05 at 102 AAA 1,023,990
370,000 7. 100%, 4/01/21 4/01 at 102 A+ 388,163
5,000,000 7. 550%, 4/01/23 4/01 at 102 A+ 5,350,050
- ---------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY -- 4.9%
Michigan State Housing Development Authority,
Single Family Mortgage Revenue, Series A:
2,000,000 6.450%, 12/01/14 6/04 at 102 AA+ 2,077,400
1,280,000 7.500%, 6/01/15 6/00 at 102 AA+ 1,344,115
730,000 7.700%, 12/01/16 6/99 at 102 AA+ 744,673
1,500,000 6.800%, 12/01/16 6/05 at 102 AA+ 1,569,750
1,250,000 6.050%, 12/01/27 6/07 at 102 AAA 1,257,413
3,250,000 Michigan State Housing Development Authority, 12/00 at 102 AA+ 3,425,078
Single Family Mortgage Revenue, Series C,
7.550%, 12/01/15
3,930,000 Michigan State Housing Development Authority, 12/04 at 102 AA+ 4,056,389
Single Family Mortgage, Revenue Refunding,
Series C, 6.500%, 6/01/16
1,500,000 Michigan State Housing Development Authority, 12/06 at 102 AA+ 1,509,930
Single Family Mortgage Revenue, Series D,
5.950%, 12/01/16
</TABLE>
____
13
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MICHIGAN - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL -- 6.9%
$ 7,500,000 Dickinson County, Michigan, Economic Development 10/03 at 102 Baal $7,497,525
Corporation, Pollution Control Revenue Refunding,
Champion International Corporation Project,
5.850%, 10/01/18
2,500,000 Michigan State Strategic Fund, Limited Obligation No Opt. Call A+ 2,873,050
Revenue Refunding, Ford Motor Company Project,
Series A, 7.100%, 2/01/06
5,000,000 Michigan State Strategic Fund, Pollution Control 9/05 at 102 A- 5,137,600
Revenue Refunding, General Motors Corporation,
6.200%, 9/01/20
1,055,000 Michigan State Strategic Fund, Limited Obligation 12/03 at 102 A1 1,067,301
Revenue, WMX Technologies Inc. Project,
6.000%, 12/01/13
3,500,000 Michigan State Strategic Fund, Limited Obligation 6/04 at 102 AAA 3,735,550
Revenue Refunding, Detroit Education Company,
Series B, 6.450%, 6/15/24
1,000,000 Monroe County, Michigan, Economic Development No Opt. Call AAA 1,192,670
Corporation, Limited Obligation Revenue Refunding,
Collateralized, Detroit Edison Company, Series Aa,
6.950%, 9/01/22
1,000,000 Monroe County, Michigan, Pollution Control Revenue, No Opt. Call AAA 1,084,900
Detroit Edison Company Project, Series A,
6.350%, 12/01/04
- ----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL APPROPRIATION OBLIGATIONS -- 0.6%
2,000,000 Detroit, Michigan, Building Authority, District 2/07 at 101 A 2,049,320
Court Madison Center, Series A,
6.150%, 2/01/11
- ----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/OTHER -- 6.1%
250,000 Michigan Municipal Bond Authority, Revenue, Local 11/99 at 102 AAA 270,160
Government Loan, Program C, 7.250%, 5/01/20
1,000,000 Michigan Municipal Bond Authority, Revenue 12/01 at 100 AAA 947,990
Refunding, Local Government Loan Program,
Series A, 4.750%, 12/01/09
5,500,000 Michigan Municipal Bond Authority, Revenue No Opt. Call AAA 3,204,520
Refunding, Government Loan A, 0.000%, 12/01/07
2,800,000 Michigan Municipal Bond Authority, Revenue, Local No Opt. Call AAA 1,561,392
Government Loan, Series C, 0.000%, 6/15/08
</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 REVENUE/OTHER -- CONTINUED
Michigan State Building Authority, Revenue
Refunding, Series I:
$1,000,000 6.750%, 10/01/11 10/01 at 102 AA- $1,084,950
5,000,000 6.250%, 10/01/20 10/01 at 102 AA- 5,156,100
7,585,000 Michigan State Building Authority, Revenue, Series II, 10/01 at 102 AA- 7,805,572
6.250%, 10/01/20
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/TRANSPORTATION -- 0.3%
250,000 Capital Region Airport Authority, Michigan Airport, 7/02 at 102 AAA 267,105
Revenue, 6.700%, 7/01/21
750,000 Wayne Charter County, Michigan Airport, Revenue 12/04 at 102 AAA 794,213
Refunding, Detroit Metropolitan Wayne County,
Series A, 5.875%, 12/01/08
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/UTILITY -- 2.0%
1,540,000 Michigan Public Power Agency, Revenue Refunding, 1/03 at 102 AA- 1,445,752
Belle River Project, Series A, 5.250%, 1/01/18
3,000,000 Michigan State South Central Power Agency, Power 11/04 at 102 BBB+ 3,339,270
Supply System, Revenue Refunding,
7.000%,11/01/11
300,000 Puerto Rico Electric Power Authority, Power Revenue, 7/05 at 100 BBB+ 279,264
Formerly Puerto Rico Commonwealth Water
Resource Authority, Power, Series Z,
5.250%, 7/01/21
4,000,000 Puerto Rico Electric Power Authority, Power Revenue, No Opt. Call AAA 1,345,120
Formerly Puerto Rico Commonwealth Water
Resource Authority, Power, Capital Appreciation,
Series N, 0.000%, 7/01/17
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/WATER AND SEWER -- 7.7%
2,500,000 Detroit, Michigan, Sewer Disposal, Revenue, 7/05 at 101 AAA 2,430,225
Water Supp System, 2ND Lien, Series A,
5.250%, 7/01/15
10,500,000 Detroit, Michigan, Sewer Disposal, Revenue 7/05 at 101 AAA 9,917,355
Refunding, Series B, 5.250%, 7/01/21
1,000,000 Detroit, Michigan, Water Supply System, Revenue 7/04 at 102 AAA 874,070
Refunding, 4.750%, 7/01/19
1,570,000 Detroit, Michigan, Water Supply System, Revenue, No Opt. Call AAA 1,603,943
Second Lien, Series A, 5.550%, 7/01/12
</TABLE>
____
15
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MICHIGAN - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL REVENUE/WATER AND SEWER -- CONTINUED
$ 2,230,000 Detroit, Michigan, Water Supply System, Revenue No Opt. Call AAA $ 2,278,213
Refunding, Series B, 5.550%, 7/01/12
1,000,000 Grand Rapids, Michigan, Sanitation, Sewer System, 1/00 at 102 AA- 1,076,250
Revenue Refunding and Improvement,
7.000%, 1/01/16
1,250,000 Lansing, Michigan, Sewer Disposal System, Revenue 5/04 at 102 AAA 1,276,300
Refunding, 5.850%, 5/01/14
950,000 Michigan Municipal Bond Authority, Revenue, State No Opt. Call AA+ 1,076,930
Revolving Fund, 7.000%, 10/01/04
Muskegon Michigan Water Revenue:
450,000 4.500%, 5/01/12 5/01 at 101 BBB+ 394,349
450,000 4.500%, 5/01/13 5/01 at 101 BBB+ 392,045
1,500,000 Portage Lake,Michigan, Water and Sewer Authority, 10/05 at 102 AAA 1,576,380
6.200%, 10/01/20
180,000 Saginaw, Midland Michigan, Municipal Water Supply 9/04 at 102 A 199,966
Corporation, Water Supply Revenue,
6.875%, 9/01/16
2,000,000 Western Township Michigan Utilities Authority, Sewer 1/99 at 102 BBB+ 2,144,100
Disposal System, 8.200%, 1/01/18
- ------------------------------------------------------------------------------------------------------------------------
NON-STATE GENERAL OBLIGATIONS -- 13.2%
1,000,000 Albion, Michigan, Public School District, 505 at 101 AA 933,400
5.125%, 5/01/21
400,000 Bay County, Michigan, West Side Regional Sewer 11/97 at 102 A 410,144
Disposal System, 6.400%, 5/01/02
5,000,000 Brighton, Michigan, Area School District, No Opt. Call AAA 1,357,600
Series II, 0.000%, 5/01/20
3,600,000 Detroit, Michigan City, School District, Series A, 5/06 at 102 AAA 3,597,300
5.700%, 5/01/25
1,000,000 Dexter, Michigan, Community Schools, 5/03 at 102 AA 925,080
5.000%, 5/01/17
500,000 East Lansing, Michigan, Building Authority, 10/99 at 102 AA 533,690
7.000%, 10/01/16
2,430,000 Garden City, Michigan, School District, 5/04 at 101 AAA 2,619,686
6.400%, 5/01/11
750,000 Hudsonville, Michigan, Building Authority, 10/02 at 102 AAA 818,715
6.600%, 10/01/17
</TABLE>
____
16
<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>
NON-STATE GENERAL OBLIGATIONS -- CONTINUED
$ 3,000,000 Kent County, Michigan, Refuse Disposal System, 11/97 at 102 1/2 AAA $3,123,420
8.400%, 11/01/10
1,000,000 Lake Orion, Michigan, Community School District, 5/05 at 101 AAA 976,410
5.500%, 5/01/20
2,000,000 Lansing, Michigan, Building Authority, 5.600%, 6/01/19 6/05 at 101 AA+ 1,996,240
2,700,000 Livonia, Michigan, Public Schools, School District, No Opt. Call AAA 1,515,402
Series II, 0.000%, 5/01/08
2,410,000 Mona Shores, Michigan, School District, School 5/05 at 102 AAA 2,413,013
Building and Site, 5.500%, 5/01/14
Okemos Michigan Public School District:
1,000,000 0.000%, 5/01/17 No Opt. Call AAA 320,790
1,020,000 0.000%, 5/01/18 No Opt. Call AAA 309,060
1,650,000 Saint Clair County, Michigan, Building Authority, 4/06 at 101 AAA 1,627,544
5.375%, 4/01/15
750,000 South Lyon, Michigan, Community Schools, 5/01 at 102 AA 782,858
6.250%, 5/01/14
Waterford, Michigan, School District:
2,500,000 6.250%, 6/01/13 6/04 at 101 AAA 2,634,525
2,470,000 6.375%, 6/01/14 6/04 at 101 AAA 2,641,517
5,000,000 Wayland, Michigan, Unit School District, 5/05 at 101 AAA 5,302,900
6.250%, 5/01/14
1,250,000 Wayne County, Michigan, Building Authority, Capital 6/06 at 102 AAA 1,207,013
Improvement, Series A, 5.250%, 6/01/16
3,270,000 West Ottawa, Michigan, Public School District, No Opt. Call AAA 1,048,983
0.000%, 5/01/17
1,000,000 Western Townships, Michigan, Utilities Authority, 1/02 at 100 AAA 1,065,160
Sewer Disposal System, Crossover Refunding,
6.500%, 1/01/10
5,175,000 Williamston, Michigan,Community School District, No Opt. Call AAA 5,171,067
Building and Site, 5.500%, 5/01/25
- ------------------------------------------------------------------------------------------------------------------------
PRE-REFUNDED -- 16.6%***
1,000,000 Bay City, Michigan, Electric Utility Revenue, 1/01 at 102 AAA 1,084,960
6.600%, 1/01/12
1,895,000 Buena Vista, Michigan, School District, 5/01 at 102 N/R 2,106,179
7.200%, 5/01/16
</TABLE>
____
17
<PAGE>
PORFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MICHIGAN - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRE-REFUNDED -- CONTINUED
$1,000,000 Central Michigan University, Revenue, 10/00 at 102 A+ $1,093,310
7.000%, 10/01/10
750,000 Detroit, Michigan, 8.000%, 4/01/11 4/01 at 102 AAA 852,548
300,000 Detroit, Michigan, City School District, Series XXIII, 5/00 at 102 N/R 331,170
7.750%, 5/01/10
1,650,000 Detroit, Michigan, City School District, 5/01 at 102 AA 1,827,804
7.150%, 5/01/11
1,000,000 Detroit, Michigan, Sewer Disposal Revenue, 7/99 at 101 1/2 AAA 1,069,780
7.125%, 7/01/19
2,000,000 Detroit,Michigan, Water Supply System Revenue, 7/00 at 102 AAA 2,194,320
7.250%, 7/01/20
3,000,000 Grand Rapids, Michigan, Water Supply System 1/00 at 102 AAA 3,258,360
Revenue, 7.250%, 1/01/20
2,500,000 Haslett, Michigan, Public School District, 5/00 at 101 AA 2,725,950
7.500%, 5/01/20
2,000,000 Huron Valley, Michigan, School District, 5/01 at 102 N/R 2,206,640
7.100%, 5/01/08
600,000 Ingham County, Michigan, Building Authority, 5/98 at 103 AA- 636,546
7.400%, 5/01/08
4,000,000 Lake Orion, Michigan, Community School District, 5/05 at 101 AAA 4,591,400
7.000%, 5/01/15
Marquette, Michigan, City Hospital Finance Authority,
Revenue Refunding, Marquette General Hospital,
Series C:
930,000 7.500%, 4/01/07 4/99 at 102 A+ 998,867
2,240,000 7.500%, 4/01/19 4/99 at 102 A+ 2,405,872
Mattawan,Michigan, Cons School District:
775,000 7.550%, 5/01/14 5/98 at 102 N/R 815,424
775,000 7.550%, 5/01/15 5/98 at 102 N/R 815,424
825,000 Menominee, Michigan, Area Public School District, 5/00 at 102 AA 907,442
7.400%, 5/01/20
3,000,000 Michigan Higher Education Facilities Authority, 5/01 at 103 A 3,366,210
Limited Obligation, Aquinas College
7.350%, 5/01/11
555,000 Michigan Municipal Bond Authority, State 10/02 at 102 AA+ 613,847
Revolving Fund, Series A, 6.600%, 10/01/18
</TABLE>
_____
18
<PAGE>
Nuveen Muncipial Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRE-FUNDED-CONTINUED
Michigan Municipal Bond
Authority, State
Revolving Fund:
$1,000,000 6.500%, 10/01/14 1/04 at 102 AA+ $1,117,130
1,000,000 6.500%, 10/01/17 10/04 at 102 AA+ 1,117,130
460,000 Michigan State Hospital 8/98 at 102 A 490,443
Finance Authority, Revenue
Refunding, Detroit Medical
Center, Series B,
8.125%, 8/15/08
1,000,000 Michigan State Hospital Finance 7/00 at 102 AAA 1,089,120
102 Authority, Henry Ford Health
System, Series A, 7.000%, 7/01/10
6,000,000 Michigan State Hospital Finance 7/00 at 102 AAA 6,551,820
Authority, Oakwood Hospital
Revenue, Obligated Group,
7.100%, 7/01/18
800,000 Michigan State Hospital Finance 2/01 at 102 AAA 884,912
Authority, Sisters Of Mercy Health
Corporation, Series J, 7.200%,
2/15/18
2,460,000 Oakland County, Michigan, Economic 1/00 at 102 N/R 2,800,562
Development Corporation, Limited
Obligation Revenue, Pontiac
Osteopathic Hospital Project, 9.625%,
1/01/20
1,200,000 Puerto Rico Commonwealth, 7/98 at 102 AAA 1,275,228
Aqueduct and Sewer Authority,
Series A, 7.900%, 7/01/07
1,800,000 Puerto Rico Commonwealth 7/00 at 102 AAA 2,007,774
Highway Authority, Highway Revenue,
Series Q, 7.750%, 7/01/16
250,000 Puerto Rico Public Buildings 7/02 at 101 1/2 AAA 279,643
Authority, Guaranteed Public
Education and Health Facilities,
Series L, 6.875%, 7/01/21
1,040,000 Rockford Michigan Public Schools, 5/00 at 101 N/R 1,128,390
7.375%, 5/01/19
7,000,000 Vicksburg, Michigan, Community 5/06 at 37 1/4 AAA 1,665,020
Schools, 0.000%, 5/01/20
- ----------------------------------------------------------------------------------------------------------
SPECIAL TAX REVENUE - 9.3%
1,000,000 Battle Creek, Michigan, 5/04 at 102 BBB+ 1,147,220
Downtown Development
Authority, Tax Increment
Revenue, 7.600%, 5/01/16
1,800,000 Battle Creek, Michigan, Tax 5/04 at 102 A- 2,013,155
Increment Finance Authority,
7.400%, 5/01/16
10,700,000 Detroit, Michigan, Downtown 7/06 at 102 A- 11,022,818
Development Authority, Tax
Increment Revenue, Development
Area No 1 Projects, Series C, 1,
6.250%, 7/01/25
</TABLE>
____
19
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MICHIGAN - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPECIAL TAX REVENUE -- CONTINUED
$ 5,000,000 Detroit/Wayne County Michigan Stadium Authority 2/07 at 102 AAA $4,730,550
5.250%, 2/01/27
Grand Rapids,Michigan,Downtown Development
Authority, Tax Increment Revenue:
3,985,000 0.000%, 6/01/17 No Opt. Call AAA 1,272,290
3,495,000 0.000%, 6/01/18 No Opt. Call AAA 1,053,951
1,650,000 6.875%, 6/01/24 6/04 at 102 AAA 1,829,932
510,000 Livingston County, Michigan, Genoa, Oceola 5/99 at 102 A 526,957
Sanitation Sewer No 1, 6.000%, 5/01/08
2,260,000 Puerto Rico Commonwealth Highway and 7/02 at 101 1/2 A 2,426,720
Transportation Authority, Highway Revenue
Refunding, Series V,6.625%, 7/01/12
2,300,000 Puerto Rico Commonwealth Highway and 7/16 at 100 A 2,236,910
Transportation Authority, Highway Revenue,
Series Y, 5.500%, 7/01/36
1,200,000 Puerto Rico Commonwealth Highway and No Opt. Call AAA 1,214,375
Transportation Authority, Highway Revenue,
Series W, 5.500%, 7/01/15
1,085,000 Romulus Michigan Tax Increment, Finance Authority, 11/06 at 100 N/R 1,112,634
Limited Obligation Revenue, 6.750%, 11/01/19
- ----------------------------------------------------------------------------------------------------------------------------------
STATE/TERTITORIAL GENERAL OBLIGATIONS -- 1.8%
Puerto Rico Commonwealth:
3,125,000 6.450%, 7/01/17 7/04 at 102 A 3,333,750
2,370,000 6.500%, 7/01/23 7/04 at 101 1/2 A 2,525,116
- ----------------------------------------------------------------------------------------------------------------------------------
STUDENT LOAN REVENUE BONDS -- 0.2%
750,000 Michigan Higher Education, Student Loan Authority, 6/06 at 102 AAA 750,000
Student Loan, XVII, A, 5.750%, 6/01/13 (WI)
- ----------------------------------------------------------------------------------------------------------------------------------
$342,105,000 Total Investments -- (cost $301,488,492) -- 98.3% 321,640,653
- ----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.7% 5,654,698
---------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $327,295,351
---------------------------------------------------------------------------------------------------------------
</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.
(WI) Security purchased on a when-issued basis (see note 1
of the Notes to Financial Statements).
See accompanying notes to financial statements.
____
20
<PAGE>
Nuveen Municipal Bond Fund
STATEMENT OF NET ASSETS May 31, 1997 Annual Report
MAY 31, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
MICHIGAN
- -----------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $321,640,653
Cash 26,207
Receivables:
Interest 5,202,286
Shares sold 434,118
Investments sold 2,687,700
Other assets 12,472
- -----------------------------------------------------------------------------------------
Total assets 330,003,436
- -----------------------------------------------------------------------------------------
LIABILITIES
Payables:
Investments purchased 750,000
Shares redeemed 201,281
Accrued expenses:
Management fees (note 6) 79,181
12b-1 distribution and service fees (notes 1 and 6) 70,593
Other 192,984
Dividends payable 1,414,046
- -----------------------------------------------------------------------------------------
Total liabilities 2,708,085
- -----------------------------------------------------------------------------------------
Net assets (note 7) $327,295,351
=========================================================================================
CLASS A SHARES (NOTE 1)
Net assets $259,054,768
Shares outstanding 22,186,610
Net asset value and redemption price per share $ 11.68
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 12.19
=========================================================================================
CLASS B SHARES (NOTE 1)
Net assets $ 380,194
Shares outstanding 32,503
Net asset value, offering and redemption price per share $ 11.70
=========================================================================================
CLASS C SHARES (NOTE 1)
Net assets $ 41,649,376
Shares outstanding 3,571,998
Net asset value, offering and redemption price per share $ 11.66
=========================================================================================
CLASS R SHARES (NOTE 1)
Net assets $ 26,211,013
Shares outstanding 2,244,812
Net asset value, offering and redemption price per share $ 11.68
=========================================================================================
</TABLE>
See accompanying notes to financial statements.
____
21
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
MICHIGAN*
<S> <C>
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 18,879,907
- -----------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 1,572,793
12b-1 service fees -- Class A (notes 1 and 6) 850,624
12b-1 distribution and service fees -- Class B (notes 1 and 6) 586
12b-1 distribution and service fees -- Class C (notes 1 and 6) 374,088
Shareholders' servicing agent fees and expenses 172,124
Custodian's fees and expenses 125,238
Trustees' fees and expenses (note 6) 8,369
Professional fees 25,414
Shareholders' reports -- printing and mailing expenses 33,865
Federal and state registration fees 9,315
Other expenses 10,262
- -----------------------------------------------------------------------------------------
Total expenses before reimbursement 3,182,678
Expense reimbursement (note 6) (378,083)
- -----------------------------------------------------------------------------------------
Net expenses 2,804,595
- -----------------------------------------------------------------------------------------
Net investment income 16,075,312
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 762,060
Net change in unrealized appreciation or depreciation of investments 7,545,758
- -----------------------------------------------------------------------------------------
Net gain from investments 8,307,818
- -----------------------------------------------------------------------------------------
Net increase in net assets from operations $ 24,383,130
=========================================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Nuveen Flagship Michigan (see note 1 of the Notes to Financial Statements).
See accompanying notes to financial statements.
____
22
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLAGSHIP
MICHIGAN* MICHIGAN
------------------------------------------------------
YEAR ENDED 5/31/97 YEAR ENDED 5/31/96
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income 16,075,312 $ 15,583,092
Net realized gain from investment transactions
(notes 1 and 4) 762,060 1,355,611
Net change in unrealized appreciation or depreciation
of investments 7,545,758 (7,054,615)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 24,383,130 9,884,088
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (13,549,214) (13,728,134)
Class B (2,097) N/A
Class C (2,012,105) (1,986,821)
Class D (479,101) N/A
From accumulated net realized gains from
investment transactions:
Class A (280,388) --
Class B -- N/A
Class C (46,664) --
Class R -- N/A
- -----------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (16,369,569) (15,714,955)
- -----------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from shares issued in the reorganization of
Nuveen Michigan (note 1) 32,952,082 --
Net proceeds from shares issued as a capital contribution 50,000 --
Net proceeds from sale of shares 29,696,576 33,498,805
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 7,300,800 8,757,179
- -----------------------------------------------------------------------------------------------------------------------
69,999,458 42,255,984
- -----------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (40,504,903) (34,140,336)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 29,494,555 8,115,648
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets 37,508,116 2,284,781
Net assets at the beginning of year 289,787,235 287,502,454
- -----------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 327,295,351 $ 289,787,235
=======================================================================================================================
Balance of undistributed net investment
income at end of year $ 32,795 $ --
=======================================================================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Nuveen Flagship Michigan (see note 1 of the Notes to Financial Statements).
N/A -- Flagship Michigan was not authorized to issue Class B or Class R Shares.
____
23 See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Flagship Multistate Trust IV (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Michigan 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 Michigan Triple Tax
Exempt Fund ("Flagship Michigan") and Nuveen Michigan Tax-Free Value Fund
("Nuveen Michigan") reorganized into Nuveen Flagship Michigan Municipal Bond
Fund ("Nuveen Flagship Michigan"). Prior to the reorganization, Flagship
Michigan was a sub-trust of the Flagship Tax Exempt Funds Trust, while Nuveen
Michigan was a series of the Nuveen Multistate Tax Free Trust. Nuveen Michigan
had a fiscal year end of January 31 prior to being reorganized into Nuveen
Flagship Michigan which has retained the fiscal year end of Flagship Michigan.
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 a when-issued purchase commitment of $750,000.
_____
24
<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
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 Michigan 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 Michigan 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.
_____
25
<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.
_____
26
<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
MICHIGAN* MICHIGAN
--------------------------------------------------------
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 Michigan:
Class A 473,278 $ 5,517,761 -- $ --
Class B -- -- N/A N/A
Class C 29,683 345,582 -- --
Class R 2,323,498 27,088,739 N/A N/A
Shares issued as a capital contribution:
Class A 1,072 12,500 -- --
Class B 1,072 12,500 N/A N/A
Class C 1,074 12,500 -- --
Class R 1,072 12,500 N/A N/A
Shares sold:
Class A 2,027,123 23,392,705 2,144,177 24,873,643
Class B 31,393 364,727 N/A N/A
Class C 474,635 5,492,503 745,632 8,625,162
Class R 38,458 446,641 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 520,958 6,027,568 648,404 7,527,122
Class B 38 446 N/A N/A
Class C 89,370 1,032,725 106,101 1,230,057
Class R 20,714 240,061 N/A N/A
- -------------------------------------------------------------------------------------------------------------
6,033,438 69,999,458 3,644,314 42,255,984
- -------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,692,127) (31,154,360) (2,538,104) (29,322,526)
Class B -- -- N/A N/A
Class C (667,098) (7,733,727) (414,411) (4,817,810)
Class R (138,930) (1,616,816) N/A N/A
- -------------------------------------------------------------------------------------------------------------
(3,498,155) (40,504,903) (2,952,515) (34,140,336)
- -------------------------------------------------------------------------------------------------------------
Net increase 2,535,283 $ 29,494,555 691,799 $ 8,115,648
=============================================================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Nuveen Flagship Michigan (see note 1).
N/A -- Flagship Michigan was not authorized to issue Class B or Class R Shares.
_____
27
<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
MICHIGAN
- ------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $ .0510
Class B .0435
Class C .0455
Class R .0530
==============================================================================
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:
<CAPTION>
NUVEEN FLAGSHIP
MICHIGAN*
- -------------------------------------------------------------------------------
<S> <C>
PURCHASES
Investments in municipal securities $102,165,941
Investments in municipal securities in the reorganization
of Nuveen Michigan 31,002,422
Temporary municipal investments 3,500,000
SALES
Investments in municipal securities 109,469,396
Temporary municipal investments 3,500,000
===============================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Nuveen Flagship Michigan (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 an unused capital loss carryforward of $57,342
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 2004.
5. UNREALIZED APPRECIATION (DEPRECIATION)
At May 31, 1997, net unrealized appreciation aggregated $20,152,161 of which
$20,154,564 related to appreciated securities and $2,403 related to depreciated
securities.
_____
28
<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 Michigan 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
$529,300 of which approximately $458,600 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 $116,200 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 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 $6,400 of CDSC on share redemptions during the fiscal
year ended May 31, 1997.
_____
29
<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
MICHIGAN
- -------------------------------------------------------------------------------
<S> <C>
Capital paid-in $307,448,703
Balance of undistributed net investment income 32,795
Accumulated net realized gain (loss) from investment
transactions (338,308)
Net unrealized appreciation of investments 20,152,161
- -------------------------------------------------------------------------------
Net assets $327,295,351
===============================================================================
</TABLE>
_____
30
<PAGE>
FINANCIAL HIGHLIGHTS
____
31
<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
------------------------ -------------------------
NET
NUVEEN FLAGSHIP MICHIGAN++ 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 (6/85)
1997...................... $11.37 $.62 $ .31 $(.61) $ (.01) $11.68 8.42%
1996...................... 11.59 .63 (.22) (.63) -- 11.37 3.61
1995...................... 11.31 .65 .28 (.65) -- 11.59 8.57
1994...................... 11.77 .66 (.43) (.66) (.03)+++ 11.31 1.87
1993...................... 11.12 .68 .65 (.68) -- 11.77 12.27
1992...................... 10.80 .69 .32 (.69) -- 11.12 9.74
1991...................... 10.61 .69 .20 (.70) -- 10.80 8.73
1990...................... 10.67 .70 (.06) (.70) -- 10.61 6.21
1989...................... 10.10 .71 .57 (.71) -- 10.67 13.12
1988...................... 9.95 .72 .15 (.72) -- 10.10 8.95
CLASS B (2/97)
1997(c)................... 11.66 .17 .04 (.17) -- 11.70 1.86
CLASS C (6/93)
1997...................... 11.35 .55 .32 (.55) (.01) 11.66 7.84
1996...................... 11.58 .56 (.22) (.57) -- 11.35 2.96
1995...................... 11.30 .58 .28 (.58) -- 11.58 7.98
1994(c)................... 11.86 .54 (.52) (.55) (.03)+++ 11.30 .19+
CLASS R (2/97)
1997(c)................... 11.66 .21 .02 (.21) -- 11.68 2.01
=====================================================================================================================
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Michigan.
+++ The amount shown includes a distribution in excess of capital
gains of $.02 per share.
(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.
____
32
<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>
$259,055 .97% 5.21% .85% 5.33% 34%
248,422 1.01 5.23 .82 5.42 54
250,380 1.03 5.59 .80 5.82 37
242,993 1.02 5.29 .75 5.56 28
227,333 1.02 5.64 .81 5.85 10
176,584 1.01 6.14 .81 6.34 11
134,243 1.03 6.43 .90 6.56 23
102,519 1.05 6.44 .95 6.54 47
84,608 1.06 6.70 .96 6.80 54
73,481 1.07 6.98 .94 7.11 78
380 1.59+ 4.52+ 1.59+ 4.52+ 34
41,649 1.52 4.65 1.40 4.77 34
41,365 1.56 4.67 1.37 4.86 54
37,122 1.58 5.02 1.35 5.25 37
30,042 1.61+ 4.53+ 1.25+ 4.89+ 28
26,211 .65+ 5.57+ .65+ 5.57+ 34
- --------------------------------------------------------------------------------------------------------
</TABLE>
_____
33
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Nuveen Flagship Michigan Municipal Bond Fund:
We have audited the accompanying statement of net assets of Nuveen Flagship
Michigan 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
Michigan 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
_____
34
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP MICHIGAN
<TABLE>
<CAPTION>
DIRECTORS A SHARES C SHARES
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
BREMNER For 18,645,451 3,346,070
Withhold 653,838 45,868
----------------------------------------------------
Total 19,299,289 3,391,938
- ---------------------------------------------------------------------------
BROWN For 18,647,085 3,346,070
Withhold 652,204 45,868
----------------------------------------------------
Total 19,299,289 3,391,938
- ---------------------------------------------------------------------------
DEAN For 18,646,580 3,346,070
Withhold 652,709 45,868
----------------------------------------------------
Total 19,299,289 3,391,938
- ---------------------------------------------------------------------------
IMPELLIZZERI For 18,645,462 3,346,070
Withhold 653,827 45,868
----------------------------------------------------
Total 19,299,289 3,391,938
- ---------------------------------------------------------------------------
ROSENHEIM For 18,643,945 3,346,070
Withhold 655,344 45,868
----------------------------------------------------
Total 19,299,289 3,391,938
- ---------------------------------------------------------------------------
SAWERS For 18,643,097 3,346,070
Withhold 656,192 45,868
----------------------------------------------------
Total 19,299,289 3,391,938
- ---------------------------------------------------------------------------
SCHNEIDER For 18,646,580 3,346,070
Withhold 652,709 45,868
----------------------------------------------------
Total 19,299,289 3,391,938
- ---------------------------------------------------------------------------
SCHWERTFEGER For 18,647,085 3,346,070
Withhold 652,204 45,868
----------------------------------------------------
Total 19,299,289 3,391,938
- ---------------------------------------------------------------------------
ADVISORY AGREEMENT For 17,016,356 2,789,610
Against 563,122 41,812
Abstain 746,878 92,629
----------------------------------------------------
Total 18,326,356 2,924,051
- ---------------------------------------------------------------------------
Broker Non Votes 972,933 467,887
- ---------------------------------------------------------------------------
REORGANIZATION For 11,514,704 1,340,315
Against 471,161 14,397
Abstain 677,870 51,417
----------------------------------------------------
Total 12,663,735 1,406,129
- ---------------------------------------------------------------------------
Broker Non Votes 6,635,554 1,985,809
- ---------------------------------------------------------------------------
12B-1 FEES For 16,299,431 2,636,562
Against 893,295 25,873
Abstain 1,133,632 261,616
----------------------------------------------------
Total 18,326,358 2,924,051
- ---------------------------------------------------------------------------
Broker Non Votes 972,931 467,887
----------------------------------------------------
</TABLE>
____
35
<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
Kentucky4 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.
____
36
<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
_____
37
<PAGE>
SERVING INVESTORS
FOR GENERATIONS
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
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.
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.
Missouri
[PHOTO APPEARS HERE]
<PAGE>
CONTENTS
1 Dear Shareholder
3 Answering Your Questions
6 Missouri Overview
9 Financial Section
35 Shareholder Meeting Report
39 Shareholder Information
40 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
Missouri 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 8.29%
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
dividends 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 5.17% 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 7.95% 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
____
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"
producer levels. The fund had the added advantage of operating in a healthy
supply environment, where securities were available as needed.
GIVEN THIS MARKET ENVIRONMENT, HOW DID THE FUND PERFORM?
The Missouri Municipal Bond Fund performed well over the past year, rewarding
investors with a total return on net asset value for the year of 8.29% for Class
A shares, including price changes and reinvested dividends. Additionally, the
fund was ranked fifth among 21 Missouri 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?
During periods of rising interest rates -- like we experienced during the first
quarter of 1997 -- the fund swapped out of bonds held at a loss and into similar
bonds trading at discounts in the secondary market. This provided reduced
capital gains on the fund and furthered the fund's objective of providing
superior after-tax total return. We also sold high-coupon, pre-refunded
securities at a gain and reinvested the proceeds in longer maturity bonds,
allowing us to align the fund with the original maturity profile in the
prospectus. This recycling process helps protect the distribution yield from
declines due to higher coupon bonds being called away from the portfolio.
WHAT IS THE CURRENT STATUS OF MISSOURI MUNICIPAL MARKET?
Despite the abundance of Missouri lease financing, the overall supply of
Missouri bonds has decreased over the past year. However, the improving credit
quality of the state has resulted in an increase in state leases and economic
development projects, particularly in the St. Louis area. The revitalization of
St. Louis will continue, and we can expect the issuance of $2 billion of Airport
Revenue Bonds to expand Lambert Airport.
____
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>
MISSOURI
OVERVIEW
Credit Quality
[PIE CHART APPEARS HERE]
BBB/NR 18%
A 15%
AA 8%
AAA/Pre-refunded 59%
==================================
Diversification
[PIE CHART APPEARS HERE]
Water & Sewer 5%
Hospitals 19%
Utility 8%
Education 11%
Pollution Control 3%
General Obligations 8%
Municipal Appropriations 15%
Escrowed Bonds 10%
Housing Facilities 15%
Other 6%
==================================
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
=================================================================================================
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 8/87 2/97 2/94 2/97
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) $10.80 $10.80 $10.80 $10.80
=================================================================================================
=================================================================================================
Total Net Assets ($000) $227,380
- -------------------------------------------------------------------------------------------------
Average Weighted Maturity (years) 20.24
- -------------------------------------------------------------------------------------------------
Average Weighted Duration (years) 8.21
=================================================================================================
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN/1/
=================================================================================================
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 8.29% 3.74% 7.63% 7.80% 8.34%
- -------------------------------------------------------------------------------------------------
5-Year 6.92% 6.01% 6.33% 6.34% 6.93%
- -------------------------------------------------------------------------------------------------
Inception 7.73% 7.26% 7.25% 7.14% 7.73%
=================================================================================================
</TABLE>
<TABLE>
<CAPTION>
TAX-FREE YIELDS
=================================================================================================
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 5.19% 4.97% 4.44% 4.64% 5.39%
- -------------------------------------------------------------------------------------------------
SEC 30-Day Yld 5.17% 4.96% 4.43% 4.62% 5.37%
- -------------------------------------------------------------------------------------------------
Taxable Equiv Yld/2/ 7.95% 7.63% 6.82% 7.11% 8.26%
=================================================================================================
</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 above do
not reflect imposition of the CDSC. Giving effect to the CDSC applicable to
Class B shares, the 1-year, 5-year, and life-of-fund total returns above
would be 3.63%, 6.17%, and 7.25%, 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 Missouri 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>
Aug. 1987
Lehman Brothers Nuveen Flagship Nuveen Flagship
Municipal Bond Missouri Municipal Missouri Municipal
Index Bond Fund (NAV) Bond Fund (Offer)
--------------- ------------------ ------------------
<S> <C> <C> <C>
Aug. 1987 10000 10000 9580
May 1988 10510.4 10294.2 9861.8
May 1989 11446.4 11431.1 10951
May 1990 12271.8 11985.3 11481.9
May 1991 13681.4 13426.8 12862.9
May 1994 16878.3 16589.4 15892.7
May 1995 18389.1 17972.6 17217.8
May 1996 19850.9 19104.3 18301.9
May 1997 21670.2 20781.7 19908.9
</TABLE>
. Lehman Brothers Municipal Bond Index $21,670
. Nuveem Flagship Missouri Municipal Bond Fund (NAV) $20,782
. Nuveem Flagship Missouri Municipal Bond Fund (Offer) $19,909
Past performance is not predictive of future performance.
Dividend History (A Shares)
[Bar Chart Appears Here]
Missouri Dividend History
0.04377 June 1996
0.04523 July 1996
0.04523 Aug. 1996
0.04377 Sept. 1996
0.04523 Oct. 1996
0.04377 Nov. 1996
0.04523 Dec. 1996
0.04535 Jan. 1997
0.0445 Feb. 1997
0.0445 March 1997
0.0445 April 1997
0.0445 May 1997
____
7
<PAGE>
FINANCIAL SECTION
CONTENTS
10 Portfolio of Investments
21 Statement of Net Assets
22 Statement of Operations
23 Statement of Changes in Net Assets
24 Notes to Financial Statements
31 Financial Highlights
34 Independent Auditors' Report
____
9
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MISSOURI
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 8.1%
$3,630,000 Missouri, State Health and Educational Facilities 6/04 at 102 A2 $3,745,398
Authority, Educational Facilities Revenue, University
Health Sciences Project, 6.350%, 6/01/14
1,500,000 Missouri, State Health and Educational Facilities 10/04 at 101 A2 1,545,285
Authority Educational Facilities Revenue, St. Louis
University High School, 6.350%, 10/01/14
5,000,000 Missouri, State Health and Educational Facilities 10/06 at 102 AAA 4,751,050
Authority, Educational Facilities Revenue, St. Louis
University, 5.200%, 10/01/26
795,000 Northwest Missouri State University, Revenue 12/02 at 101 AAA 848,933
Refunding and Improvement, Housing System,
6.375%, 12/01/13
University of Missouri, Health Facilities, Revenue
Refunding, University of Missouri Health System,
Series A:
5,105,000 5.500%, 11/01/16 11/06 at 102 AAA 5,059,668
1,390,000 5.600%, 11/01/26 11/06 at 102 AAA 1,382,981
1,000,000 University of Missouri, University Revenues, System 11/07 at 101 AA+ 1,008,670
Facilities, 5.800%, 11/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
ESCROWED TO MATURITY - 1.4%
4,500,000 Cape Girardeau County, Missouri, Single Family No Opt. Call Aaa 1,699,920
Mortgage Revenue, 0.000%, 12/01/14
2,070,000 Greene County, Missouri, Single Family Mortgage No Opt. Call Aaa 716,261
Revenue, Municipal Multiplier, 0.000%, 3/01/16
650,000 Missouri, State Health and Educational Facilities 6/00 at 102 AAA 738,485
Authority, Health Facilities Revenue, SSM Health
Care Projects, Series B, 7.000%, 6/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 8.6%
415,000 Dent County, Missouri, Industrial Development 6/01 at 102 N/R 445,353
Authority, Industrial Development Revenue,
Southeast Missouri Community Treatment Center,
8.500%, 6/01/12
775,000 Farmington, Missouri, Industrial Development 6/01 at 102 N/R 831,684
Authority, Industrial Development Revenue,
Southeast Missouri Community Treatment Center,
8.500%, 6/01/12
</TABLE>
____
10
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE - CONTINUED
$ 1,000,00 Lees Summit, Missouri,Industrial Development 8/05 at 102 N/R $ 1,030,600
Authority, Health Facilities Revenue, John Knox
Village Project, 6.625%, 8/15/13
3,750,000 Missouri, State Health and Educational Facilities 2/06 at 102 N/R 3,827,550
Authority, Health Facilities Revenue, Lutheran Senior
Services, Series A, 6.375%, 2/01/27
Saint Louis County, Missouri, Industrial Development
Authority, Revenue Refunding, Friendship Village
West County, Series A:
1,265,000 5.750%, 9/01/05 No Opt.Call N/R 1,273,956
1,800,000 6.250%, 9/01/10 9/06 at 102 N/R 1,834,758
St. Louis County, Missouri, Industrial Development
Authority, Health Facilities Revenue, Lutheran Health
Care Association, Series A:
4,565,000 7.375%, 2/01/14 2/02 at 102 N/R 4,906,553
2,650,000 7.625%, 2/01/22 2/02 at 102 N/R 2,860,304
2,425,000 St. Louis County, Missouri, Industrial Development 8/05 at 104 AAA 2,511,573
Authority, Health Facilities, Revenue, Mother of
Perpetual Help, 6.250%, 8/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
HOSPITALS - 10.7%
1,150,000 Hannibal, Missouri, Industrial Development Authority, 3/06 at 102 AAA 1,154,002
Health Facilities, Revenue Refunding, Hannibal
Regional Hospital,Series A, 5.750%, 3/01/22
Jackson County, Missouri, Industrial Development
Authority, Health Care Corporation, Revenue,
St. Joseph Health Center, MBIA, IBC:
2,000,000 6.500%, 7/01/12 7/02 at 102 AAA 2,146,980
6,250,000 6.500%, 7/01/19 7/02 at 102 AAA 6,683,188
250,000 Joplin, Missouri,Catholic Health Corporation, 6/97 at 102 AAA 255,663
Industrial Development Authority, Health Facilities
Revenue, St. Johns Regional Medical, MBIA, IBC,
7.125%, 6/01/14
Missouri, State Health and Educational Facilities
Authority, Health Facilities Revenue, Health
Midwest, Series B:
2,565,000 6.250%, 2/15/12 2/02 at 102 AAA 2,688,274
1,935,000 6.250%, 2/15/22 2/02 at 102 AAA 2,025,790
555,000 Missouri, State Health and Educational Facilities 11/02 at 102 BBB+ 598,529
Authority, Health Facilities Revenue, Heartland
Health System Project, 6.875%, 11/15/04
</TABLE>
____
11
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MISSOURI
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS -CONTINUED
Missouri State Health and Educational Facilities
Authority, Health Facilities Revenue, BJC Health
System, Series A:
$ 2,125,000 6.750%, 5/15/12 No Opt.Call AA $ 2,419,121
650,000 6.500%, 5/15/20 5/04 at 102 AA 687,700
1,000,000 Missouri, State Health and Educational Facilities 2/06 at 102 BBB+ 1,029,970
Authority, Health Facilities, Revenue Refunding,
Lake Of The Ozarks General Hospital,
6.500%, 2/15/21
500,000 Missouri, State Health and Educational Facilities 11/06 at 102 AAA 490,530
Authority, Health Facilities Revenue, St. Lukes/
Shawnee Mission Health System, Series B,
5.375%, 11/15/16
Missouri, State Health and Educational Facilities
Authority, Health Facilities Revenue, Lester Cox
Center, Series H:
2,650,000 0.000%, 9/01/17 No Opt. Call AAA 834,088
5,690,000 0.000%, 9/01/21 No Opt. Call AAA 1,408,673
6,300,000 0.000%, 9/01/22 No Opt. Call AAA 1,472,436
200,000 Missouri, State Health and Educational Facilities 10/99 at 102 1/2 BBB+ 219,314
Authority, Health Facilities Revenue Refunding and
Improvement, Heartland Health, 8.125%, 10/01/10
300,000 Missouri, State Health and Educational Facilities 8/97 at 100 BBB 300,624
Authority, Health Facilities Revenue Refunding and
Improvement, C E Still Osteopathic Hospital,
7.625%, 2/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTI FAMILY - 7.5%
2,000,000 Missouri, State Economic Development Export and 9/99 at 102 AA 2,105,060
Infrastructure Board, Multifamily Housing, Revenue
Refunding, Quality Hill Projects, Series A,
7.500%, 9/15/21
885,000 Missouri, State Housing Development Commission, 12/05 at 103 N/R 892,947
Multifamily, Primm Place Apartment, Series A,
6.250%, 12/01/17
2,000,000 Saint Louis County, Missouri, Housing Authority, 3/05 at 102 AAA 2,088,680
Multifamily Housing, Revenue Refunding, Kensington
Square Apartments Project, 6.650%, 3/01/20
500,000 Saint Louis County, Missouri, Industrial Development 3/99 at 102 AAA 521,055
Authority, Multifamily Housing, Revenue Refunding,
Lucas-Hunt Village Project, 7.500%, 9/20/19
</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/MULTI FAMILY - CONTINUED
$ 9,105,000 Saint Louis County, Missouri, Industrial Development 8/06 at 105 AAA $ 9,582,102
Authority, Multifamily Housing, Revenue, Covington
Manor Apartments, Series A, 6.875%, 8/20/36
1,890,000 St. Louis, Missouri, Land Clearance Redevelopment 5/03 at 102 AAA 1,925,286
Authority, Multifamily Mortgage Revenue Refunding,
St. Louis Place Apartments, 6.250%, 8/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 7.7%
2,950,000 Greene County, Missouri, Single Family, Mortgage No Opt. Call AAA 3,053,044
Revenue, Collateralized, 6.300%, 12/01/22
2,000,000 Missouri, State Housing Development Commission, 3/07 at 102 AAA 2,012,240
Mortgage Revenue, Single Family, Homeowner Loan,
Series D, 6.125%, 3/01/28
1,000,000 Missouri, State Housing Development Commission, 3/07 at 105 AAA 1,101,930
Mortgage Revenue, Single Family, Homeowner Loan,
Series A, Issue 2, 7.300%, 3/01/28
150,000 Missouri, State Housing Development Commission, 2/00 at 102 AAA 155,343
Mortgage Revenue, Single Family, Series A,
7.625%, 2/01/22
Missouri, State Housing Development Commission,
Mortgage Revenue, Single Family, Series B:
2,365,000 6.375%, 9/01/20 9/06 at 102 AAA 2,428,737
1,890,000 6.450%, 9/01/27 9/06 at 102 AAA 1,940,576
1,000,000 Missouri, State Housing Development Commission, 6/00 at 102 AAA 1,044,360
Mortgage Revenue, GNMA Mortgage, Single
Family, Series B, 7.750%, 6/01/22
Missouri, State Housing Development Commission,
Mortgage Revenue, Single Family, Series A:
520,000 6.700%, 12/01/07 12/04 at 102 AAA 539,365
2,295,000 7.125%, 12/01/14 12/04 at 102 AAA 2,395,498
1,015,000 7.200%, 12/01/17 12/04 at 102 AAA 1,061,132
1,655,000 7.375%, 8/01/23 2/01 at 102 AAA 1,749,798
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL - 3.3%
500,000 Jefferson City, Missouri, Industrial Development, 4/00 at 100 N/R 509,140
Revenue Refunding, Scholastic Inc. Project,
7.200%, 4/01/03
2,225,000 Missouri, State Economic Development Export and 12/01 at 102 N/R 2,361,815
Infrastructure Board, Industrial Development, Revenue
Refunding, Drury Inn Project, 8.250%, 12/01/12
</TABLE>
____
13
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MISSOURI - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL - CONTINUED
$ 1,000,000 Missouri, State Environmental Improvement and Energy No Opt. Call A3 $ 1,056,010
Resource Authority, Poll Control, Revenue Refunding,
American Cyanamid Company, 5.800%, 9/01/09
1,500,000 Missouri, State Environmental Improvement and Energy 5/00 at 102 AA- 1,627,455
Resource Authority, Environmental Improvement,
Revenue, Union Electric Company Project, Series A,
7.400%, 5/01/20
2,000,000 Puerto Rico, Port Authority, Revenue, Special Facilities, 6/06 at 102 BBB- 2,043,080
American Airlines, Series A, 6.250%, 6/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL APPROPRIATION OBLIGATIONS - 14.5%
2,285,000 Branson, Missouri, Public Building Corporation, 11/06 at 101 BBB 2,235,598
Leasehold Revenue, City Hall and Fire Station
Improvement, 6.250%, 11/01/12
1,500,000 Clay County, Missouri, Public Building Authority, 5/02 at 102 N/R 1,626,540
Leasehold Revenue Refunding and Improvement,
Paradise Point Golf Project, 7.625%, 5/15/14
1,435,000 Excelsior Springs, Missouri, Facilities Authority, 12/01 at 101 AAA 1,507,468
Leasehold Revenue Refunding and Improvement,
6.250%, 12/15/14
2,000,000 Jackson County, Missouri, Public Facilities Authority, 12/04 at 100 AAA 2,080,360
Insured Leasehold, Revenue Refunding and Improvement,
Capital Improvements Project, 6.125%, 12/01/15
3,510,000 Jackson County, Missouri, Public Building Corporation, 12/06 at 101 AAA 3,447,627
Leasehold Revenue, Missouri Capital Improvements
Project, 5.375%, 12/01/16
1,200,000 Kansas City, Missouri, Land Clearance Redevelopment 12/05 at 102 AAA 1,227,180
Authority, Lease Revenue, Municipal Auditorium and
Muehlebach Hotel, Series A, 5.900%, 12/01/18
Kansas City, Missouri, Municipal Assistance
Corporation, Revenue, Leasehold Improvement, Truman
Medical, Series A:
645,000 7.000%, 11/01/09 11/01 at 100 A 674,728
695,000 7.000%, 11/01/10 11/01 at 100 A 726,073
Lake St. Louis, Missouri, Certificates of Participation,
Public Facilities, Municipal Golf Course Project:
1,020,000 6.900%, 12/01/05 12/02 at 103 N/R 1,060,831
2,720,000 7.550%, 12/01/14 12/02 at 103 N/R 2,874,333
</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
$ 250,000 Missouri, School Boards Association, Lease Participation 9/98 at 100 AAA $ 255,675
Certificates, School District Valley Park, Series A,
7.375%, 3/01/10
1,500,000 Missouri, School Boards Association, Insured Lease 3/06 at 101 AAA 1,536,045
Participation Certificates, Fox School District 6,
5.625%, 3/01/11
1,120,000 Missouri, State Certificates of Participation, 11/05 at 100 AA 1,129,128
Psychiatric Rehabilitation Center Project,
Series A, 6.000%, 11/01/15
4,650,000 Saint Louis County, Missouri, Regional Convention and 8/03 at 102 A 4,586,760
Sports Complex Authority, Convention and Sports
Project and Refunding, Issue B, 5.750%, 8/15/21
1,410,000 Saint Louis, Missouri, Land Clearance Redevelopment 7/00 at 102 N/R 1,476,002
Authority, Lease Revenue, Station East
Redevelopment Project, 7.750%, 7/01/21
Saint Louis, Missouri, Regional Convention and Sports
Complex Authority, Refunding, Convention and
Sports Facility, Issue C:
2,660,000 5.300%, 8/15/17 8/07 at 100 AAA 2,581,158
4,000,000 5.300%, 8/15/20 8/07 at 100 AAA 3,852,360
45,000 Saint Louis, Missouri, Regional Convention and Sports 8/03 at 100 N/R 49,973
Complex Authority, Series C, 7.900%, 8/15/21
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/OTHER - 2.7%
Saint Louis County, Missouri, Industrial Development
Authority Industrial Revenue, Refunding, Kiel Center
Multipurpose Arena:
650,000 7.625%, 12/01/09 12/02 at 102 N/R 694,577
1,000,000 7.750%, 12/01/13 12/02 at 102 N/R 1,071,890
500,000 7.875%, 12/01/24 12/02 at 102 N/R 538,800
4,050,000 Saint Louis, Missouri, Parking Facility, Revenue 12/06 at 102 AAA 3,937,005
Refunding, 5.375%, 12/15/21
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/UTILITY - 7.8%
2,025,000 Higginsville, Missouri, Electric Light System, Revenue, 6/03 at 101 AAA 2,207,048
Series A, 6.750%, 6/01/16
1,500,000 Puerto Rico, Electric Power Authority, Power Revenue No Opt. Call AAA 504,420
(Formerly Puerto Rico Commonwealth Water
Resource Authority Power), Capital Appreciation,
Series O, MBIA, IBC, 0.000%, 7/01/17
</TABLE>
____
15
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MISSOURI-CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL REVENUE/UTILITY -- CONTINUED
$ 4,380,000 Puerto Rico, Electric Power Authority, Power Revenue 7/05 at 100 AAA $ 4,309,000
(Formerly Puerto Rico Commonwealth Water
Resources Authority Power), Capital Appreciation,
Series X, MBIA, IBC, 5.500%, 7/01/25
Sikeston Missouri Electric Revenue, Refunding:
2,000,000 6.200%, 6/01/10 No Opt. Call AAA 2,190,280
1,000,000 6.000%, 6/01/13 No Opt. Call AAA 1,068,740
1,070,000 6.000%, 6/01/14 No Opt. Call AAA 1,140,224
6,000,000 6.000%, 6/01/16 No Opt. Call AAA 6,413,340
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/WATER AND SEWER -- 4.8%
50,000 Callaway County, Missouri, Public Water Supply District 1/98 at 102 N/R 51,947
Number 1, Revenue, Series B, 8.375%, 1/01/05
50,000 Carroll County, Missouri, Public Water Supply District 3/99 at 101 N/R 52,755
Number 1, Water System, Revenue Refunding,
8.000%, 3/01/09
40,000 Clay County, Missouri, Public Water Supply District 8/97 at 101 N/R 40,525
Number 6, 8.200%, 6/01/01
400,000 East Central, Missouri, Water and Sewer Authority, 8/00 at 100 N/R 411,752
Water System, Revenue Refunding, Saint Charles
County Public Water Project, 7.000%, 8/01/08
50,000 Hamilton, Missouri, Waterworks Revenue, Junior Lien, 7/99 at 103 1/2 N/R 55,054
7.750%, 7/01/14
50,000 Johnson County, Missouri, Public Water Supply District 5/98 at 100 N/R 52,057
Number 1, Revenue Refunding and Improvement,
8.500%, 5/01/09
1,150,000 Missouri, State Environmental Improvement and 2/98 at 102 AAA 1,190,814
Energy Resource Authority, Water Facility Revenue,
Saint Louis County Water Company Project,
6.900%, 2/01/21
750,000 Missouri, State Environmental Improvement and 10/00 at 102 Aa1 806,183
Energy Resource Authority, Water Poll Control,
Revenue, Revolving Fund, Springfield Project,
Series A, 7.000%, 10/01/10
3,600,000 Missouri, State Environmental Improvement and 12/01 at 102 Aa1 3,885,156
Energy Resource Authority, Water Poll Control,
Revenue, State Revolving Fund, Multiparty,
Series A, 6.875%, 6/01/14
</TABLE>
_____
16
<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 REVENUE/WATER AND SEWER -- CONTINUED
$ 2,000,000 Missouri, State Environmental Improvement and 7/02 at 102 Aa1 $ 2,139,340
Energy Resource Authority, Water Poll Control,
Revenue, State Revolving Fund, Multiple, Series A,
6.550%, 7/01/14
600,000 Missouri, State Environmental Improvement and 7/04 at 102 Aa2 672,402
Energy Resource Authority, Water Poll Control,
Revenue, State Revolving Fund Program, Series B,
7.200%, 7/01/16
1,400,000 Missouri, State Environmental Improvement and 1/07 at 101 Aa1 1,338,148
Energy Resource Authority, Water Poll Control,
Revenue, State Revolving Fund, Multiple, Series E,
5.250%, 1/01/19
125,000 Osceola Township, Public Schools, Refunding and 11/99 at 100 N/R 132,721
Improvement, 8.000%, 11/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
NON-STATE GENERAL OBLIGATIONS -- 1.4%
1,025,000 Excelsior Springs, Missouri, School District Building No Opt. Call AAA 405,675
Corporation, Leasehold Revenue, Excelsior Springs
School District 40, 0.000%, 3/01/14
1,000,000 Jefferson City, Missouri, School District, Series A, No Opt. Call Aa 1,140,130
6.700%, 3/01/11
1,500,000 Troy, Missouri, Reorganization School District Number 3/05 at 100 AAA 1,564,200
3, Lincoln County, 6.100%, 3/01/14
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-REFUNDED -- 8.2%***
100,000 Cass County, Missouri, Public Water Supply District 1/98 at 101 N/R 105,993
Number 2, Revenue Refunding and Improvement,
8.000%, 10/01/10
50,000 Clark County, Missouri, Consolidated Public Water 12/98 at 101 N/R 53,461
Supply District Number 1, Water System, Revenue
Refunding, 8.250%, 12/01/15
50,000 Concordia Missouri, Waterworks and Sewer System 7/98 at 100 N/R 52,366
Revenue, 8.375%, 7/01/08
50,000 Cooper County, Missouri, Nursing Home District, 3/98 at 100 N/R 51,127
8.375%, 3/01/08
50,000 De Kalb County, Missouri, Public Water Supply 1/99 at 101 N/R 53,268
District Number 1 Waterworks, Revenue Refunding,
8.000%, 1/01/09
200,000 Johnson County, Missouri, Public Water Supply District 1/98 at 102 N/R 209,404
Number 2, Revenue Refunding, 8.500%, 1/01/09
</TABLE>
____
17
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP MISSOURI-CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRE-REFUNDED -- CONTINUED
$ 4,000,000 Kansas City, Missouri, Airport Revenue, General 9/04 at 101 AAA $ 4,537,840
Improvement, Series B, 6.875%, 9/01/14
2,500,000 Kirkwood, Missouri, Industrial Development Authority, 7/02 at 102 N/R 2,733,100
Health Care Corporation, Revenue, Saint Joseph
Hospital, 6.500%, 7/01/12
50,000 Knox County, Missouri, Public Water Supply District 1/99 at 101 N/R 53,372
Number 1, Water System, Revenue Refunding,
8.000%, 1/01/09
50,000 Marion County, Missouri, Public Water Supply District 1/99 at 101 1/2 N/R 53,735
Number 1, Water Revenue Refunding,
8.250%, 1/01/12
1,000,000 Missouri, State Economic Development Export and 5/02 at 100 N/R 1,104,960
Infrastructure Board, Industrial Development
Revenue, Community Water Company Inc. Project,
7.125%, 5/01/17
100,000 Missouri, State Health and Educational Facilities 4/98 at 101 Aaa 104,282
Authority, Health Facilities, Revenue, Bethesda
Health Group Inc. Project, 7.875%, 4/01/08
100,000 Missouri, State Health and Educational Facilities 2/99 at 102 N/R 107,743
Authority, Health Facilities, Revenue, Lake Of The
Ozarks Hospital, 8.000%, 2/15/11
Phelps County, Missouri, Hospital Revenue, Phelps
County, Regular Medical Center:
500,000 8.200%, 3/01/05 3/00 at 102 AAA 556,620
1,250,000 8.300%, 3/01/20 3/00 at 102 AAA 1,394,675
100,000 Pike County, Missouri, Public Water Supply District 7/99 at 101 N/R 107,963
Number 1 Water Revenue, 7.750%, 7/01/09
1,000,000 Saint Louis County, Missouri, Regional Convention 8/03 at 100 AAA 1,121,650
and Sports Complex Authority, Series B,
7.000%, 8/15/11
350,000 Saint Louis, Missouri, Municipal Finance Corporation, 2/05 at 100 AAA 381,994
Leasehold Revenue Refunding and Improvement,
6.250%, 2/15/12
3,975,000 Saint Louis, Missouri, Parking Facility Revenue, 12/02 at 102 AA- 4,144,375
6.625%, 12/15/21
955,000 Saint Louis, Missouri, Regional Convention and Sports 8/03 at 100 Aaa 1,110,713
Complex Authority, Series C, 7.900%, 8/15/21
445,000 Saint Louis, Missouri, School District, 10/01 at 102 AAA 490,515
6.750%, 4/01/11
</TABLE>
____
18
<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>
PRE-REFUNDED - CONTINUED
Vandalia, Missouri, Water and Sewer System Revenue,
Combined:
$ 50,000 7.625%, 4/01/06 4/00 at 101 N/R $ 54,700
50,000 7.625%, 4/01/07 4/00 at 101 N/R 54,700
- -------------------------------------------------------------------------------------------------------------------------------
SPECIAL TAX REVENUE - 3.0%
Branson, Missouri, Tax Increment Allocation, Revenue,
Branson Meadows Project, Series A:
1,095,000 6.700%, 11/01/07 No Opt. Call N/R 1,095,329
1,245,000 6.950%, 11/01/09 No Opt. Call N/R 1,258,110
1,500,000 Puerto Rico Commonwealth, Highway and 7/02 at 101 1/2 A 1,610,655
Transportation Authority, Highway Revenue
Refunding, Series V, 6.625%, 7/01/12
1,400,000 Puerto Rico Commonwealth, Highway and 7/16 at 100 A 1,361,598
Transportation Authority, Highway Revenue,
Series Y, 5.500%, 7/01/36
1,400,000 Puerto Rico Commonwealth, Highway and No Opt. Call AAA 1,416,772
Transportation Authority, Highway Revenue,
Series W, MBIA, IBC, 5.500%, 7/01/15
- -------------------------------------------------------------------------------------------------------------------------------
STATE/TERRITORIAL GENERAL OBLIGATIONS - 6.6%
2,200,000 Missouri, Fourth State Building, Series A, 8/06 at 100 AAA 2,208,470
5.500%, 8/01/21
2,400,000 Puerto Rico Commonwealth, Refunding Improvement, 7/03 at 100 A 2,156,664
5.000%, 7/01/21
Puerto Rico Commonwealth:
2,500,000 6.450%, 7/01/17 7/04 at 102 A 2,667,000
3,350,000 6.500%, 7/01/23 7/04 at 101 1/2 A 3,569,258
4,500,000 Puerto Rico, Public Buildings Authority, Revenue No Opt. Call A 4,437,720
Guaranteed Refunding, Series L, 5.500%, 7/01/21
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
____
19
<PAGE>
PORTIOLIO OF INVESTMENTS
Nuveen FLAGSHIP MISSOURI - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STUDENT LOAN REVENUE BONDS - 2.4
$ 1,000,000 Missouri, Higher Education Loan Authority, Student 2/02 at 102 A $ 1,041,430
Loan Revenue, Sub Lien, 6.500%, 2/15/06
4,190,000 Missouri, Higher Education Loan Authority, Student 2/04 at 102 A 4,416,208
Loan Revenue, Series F, 6.750%, 2/15/09
- -------------------------------------------------------------------------------------------------------------------------------
$233,215,000 Total Investments - (cost $214,736,044) - 98.7% 224,448,309
- -------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 2,931,507
--------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 227,379,816
==============================================================================================================
</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.
_____
20 See accompanying notes to financial statements.
<PAGE>
STATEMENT OF NET ASSETS Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
MAY 31, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
MISSOURI
- -----------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $224,448,309
Cash 37,884
Receivables:
Interest 4,573,192
Shares sold 39,379
Investments sold 240,000
Other assets 16,014
- -----------------------------------------------------------------------------------------
Total assets 229,354,778
- -----------------------------------------------------------------------------------------
LIABILITIES
Payables:
Investments purchased 494,805
Shares redeemed 273,054
Accrued expenses:
Management fees (note 6) 75,439
12b-1 distribution and service fees (notes 1 and 6) 42,321
Other 111,509
Dividends payable 977,834
- -----------------------------------------------------------------------------------------
Total liabilities 1,974,962
- -----------------------------------------------------------------------------------------
Net assets (note 7) $227,379,816
=========================================================================================
CLASS A SHARES (NOTE 1)
Net assets $218,924,131
Shares outstanding 20,268,026
Net asset value and redemption price per share $ 10.80
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.27
=========================================================================================
CLASS B SHARES (NOTE 1)
Net assets $ 453,675
Shares outstanding 42,025
Net asset value, offering and redemption price per share $ 10.80
=========================================================================================
CLASS C SHARES (NOTE 1)
Net assets $ 7,967,920
Shares outstanding 738,043
Net asset value, offering and redemption price per share $ 10.80
=========================================================================================
CLASS R SHARES (NOTE 1)
Net assets $ 34,090
Shares outstanding 3,157
Net asset value, offering and redemption price per share $ 10.80
=========================================================================================
</TABLE>
____
21 See accompanying notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
MISSOURI*
- -----------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 13,683,705
- -----------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 1,150,679
12b-1 service fees -- Class A (notes 1 and 6) 721,606
12b-1 distribution and service fees -- Class B (notes 1 and 6) 521
12b-1 distribution and service fees -- Class C (notes 1 and 6) 60,926
Shareholders' servicing agent fees and expenses 164,819
Custodian's fees and expenses 105,770
Trustees' fees and expenses (note 6) 6,177
Professional fees 18,861
Shareholders' reports -- printing and mailing expenses 24,423
Federal and state registration fees 13,266
Other expenses 9,893
- -----------------------------------------------------------------------------------------
Total expenses before reimbursement 2,276,941
Expense reimbursement (note 6) (326,922)
- -----------------------------------------------------------------------------------------
Net expenses 1,950,019
- -----------------------------------------------------------------------------------------
Net investment income 11,733,686
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 2,027,744
Net change in unrealized appreciation or depreciation of investments 4,099,492
- -----------------------------------------------------------------------------------------
Net gain from investments 6,127,236
- -----------------------------------------------------------------------------------------
Net increase in net assets from operations $ 17,860,922
=========================================================================================
</TABLE>
* Information represents eight months of Flagship Missouri and four months of
Nuveen Flagship Missouri (see note 1 of the Notes to Financial Statements).
____
22 See accompanying notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS NUVEEN MUNICIPAL BOND FUND
MAY 31, 1997 ANNUAL REPORT
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLAGSHIP
MISSOURI* MISSOURI
---------------------------------------------------
YEAR ENDED 5/31/97 YEAR ENDED 5/31/96
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 11,733,686 $ 11,710,027
Net realized gain from investment transactions
(notes 1 and 4) 2,027,744 1,089,042
Net change in unrealized appreciation or depreciation
of investments 4,099,492 (5,482,503)
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 17,860,922 7,316,566
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (11,399,739) (11,560,299)
Class B (2,345) N/A
Class C (327,591) (246,972)
Class R (457) N/A
- -------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (11,730,132) (11,807,271)
- -------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 27,511,231 31,869,368
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 5,920,821 6,602,041
- -------------------------------------------------------------------------------------------------------------------
33,432,052 38,471,409
- -------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (31,119,487) (24,122,187)
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 2,312,565 14,349,222
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets 8,443,355 9,858,517
Net assets at the beginning of year 218,936,461 209,077,944
- -------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $227,379,816 $218,936,461
===================================================================================================================
Balance of undistributed net investment income at end of year $ 3,554 $ --
==================================================================================================================
</TABLE>
* Information represents eight months of Flagship Missouri and four months of
Nuveen Flagship Missouri (see note 1 of the Notes to Financial Statements).
N/A -- Flagship Missouri was not authorized to issue Class B or Class R Shares.
____
23 See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Flagship Multistate Trust IV (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Missouri 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 Missouri Double Tax
Exempt Fund ("Flagship Missouri") was reorganized into the Trust and renamed
Nuveen Flagship Missouri Municipal Bond Fund ("Nuveen Flagship Missouri").
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.
____
24
<PAGE>
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 Missouri 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 Missouri 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 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.
____
25
<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.
____
26
<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
MISSOURI* MISSOURI
-------------------------------------------------------------
YEAR ENDED YEAR ENDED
5/31/97 5/31/96
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 2,299,753 $ 24,630,274 2,711,275 $ 29,055,443
Class B 41,987 449,235 N/A N/A
Class C 223,861 2,397,622 262,545 2,813,925
Class R 3,129 34,100 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 537,641 5,747,970 601,080 6,446,529
Class B 38 410 N/A N/A
Class C 16,119 172,138 14,502 155,512
Class R 28 303 N/A N/A
- --------------------------------------------------------------------------------------------------------
3,122,556 33,432,052 3,589,402 38,471,409
- --------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,814,290) (30,112,429) (2,194,192) (23,512,867)
Class B -- -- N/A N/A
Class C (94,304) (1,007,058) (56,931) (609,320)
Class R -- -- N/A N/A
- --------------------------------------------------------------------------------------------------------
(2,908,594) (31,119,487) (2,251,123) (24,122,187)
- --------------------------------------------------------------------------------------------------------
Net increase 213,962 $ 2,312,565 1,338,279 $ 14,349,222
========================================================================================================
</TABLE>
* Information represents eight months of Flagship Missouri and four months
of Nuveen Flagship Missouri (see note 1).
N/A - Flagship Missouri was not authorized to issue Class B or Class R Shares.
____
27
<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
MISSOURI
- --------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0465
Class B .0400
Class C .0415
Class R .0485
- --------------------------------------------------------------------------------
</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
MISSOURI*
- --------------------------------------------------------------------------------
<S> <C>
PURCHASES
Investments in municipal securities $91,192,477
Temporary municipal investments 5,000,000
SALES
Investments in municipal securities 90,091,641
Temporary municipal investments 5,000,000
- --------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Missouri and four months of
Nuveen Flagship Missouri (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 for the
Fund.
At May 31, 1997, the Fund had an unused capital loss carryforward of $2,543,690
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, net unrealized appreciation aggregated $9,712,265 of which
$9,925,489 related to appreciated securities and $213,224 related to depreciated
securities.
____
28
<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 Missouri 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
$455,700 of which approximately $394,900 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 $137,700 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 $3,400 of CDSC on share redemptions during the fiscal year ended
May 31, 1997.
____
29
<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
MISSOURI
- -------------------------------------------------------------------------------------------------
<S> <C>
Capital paid-in $220,222,646
Balance of undistributed net investment income 3,554
Accumulated net realized gain (loss) from investment transactions (2,558,649)
Net unrealized appreciation of investments 9,712,265
- -------------------------------------------------------------------------------------------------
Net assets $227,379,816
=================================================================================================
</TABLE>
____
30
<PAGE>
FINANCIAL HIGHLIGHTS
____
31
<PAGE>
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
CLASS (INCEPTION DATE) OPERATING PERFORMANCE LESS DISTRIBUTIONS
- --------------------- --------------------- ------------------
NET
NUVEEN FLAGSHIP MISSOURI 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 (8/87)
1997 $10.51 $.56 $ .29 $(.56) $ -- $10.80 8.29%
1996 10.72 .58 (.21) (.58) -- 10.51 3.51
1995 10.50 .60 .22 (.60) -- 10.72 8.19
1994 10.87 .61 (.34) (.61) (.03) 10.50 2.42
1993 10.32 .64 .60 (.63) (.06) 10.87 12.54
1992 10.04 .65 .29 (.65) (.01) 10.32 9.70
1991 9.76 .65 .28 (.65) -- 10.04 9.92
1990 9.86 .65 (.10) (.65) -- 9.76 5.89
1989 9.30 .65 .57 (.65) (.01) 9.86 13.70
1988(c) 9.58 .49 (.26) (.51) -- 9.30 2.98
Class B (2/97)
1997(c) 10.81 .16 (.01) (.16) -- 10.80 1.40
Class C (2/94)
1997 10.50 .51 .29 (.50) -- 10.80 7.80
1996 10.72 .51 (.21) (.52) -- 10.50 2.84
1995 10.50 .53 .23 (.54) -- 10.72 7.60
1994(c) 11.33 .02 (.83) (.02) -- 10.50 (17.62)
Class R (2/97)
1997(c) 10.90 .17 (.12) (.15) -- 10.80 .43
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
i Annualized.
ii Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Missouri.
iii The amount shown includes a distribution in excess of capital
gains of $.01 per share.
(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.
____
32
<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>
$218,924 1.00% 5.13% .86% 5.27% 41%
212,717 1.05 5.12 .80 5.37 38
205,089 1.08 5.37 .67 5.78 40
187,347 1.06 5.08 .62 5.52 34
144,775 1.11 5.43 .55 5.99 33
76,069 1.13 5.73 .47 6.39 32
43,391 1.23 5.92 .58 6.57 44
19,080 1.42 5.88 .66 6.64 36
13,028 1.72 5.77 .69 6.80 69
7,786 1.55+ 5.27+ .50+ 6.32+ 119
454 1.62+ 4.42+ 1.45+ 4.59+ 41
7,968 1.55 4.57 1.40 4.72 41
6,220 1.60 4.54 1.35 4.79 38
3,989 1.63 4.76 1.20 5.19 40
1,877 1.61+ 3.98+ 1.15+ 4.44+ 34
34 .67+ 5.53+ .55+ 5.65+ 41
</TABLE>
____
33
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND:
We have audited the accompanying statement of net assets of Nuveen Flagship
Missouri 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 misstatements. 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
Missouri 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
____
34
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP MISSOURI
<TABLE>
<CAPTION>
A Shares C Shares
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ADVISORY AGREEMENT For 14,418,632 469,290
Against 267,723 12,098
Abstain 355,446 15,144
-----------------------------------------------
Total 15,041,801 496,532
- --------------------------------------------------------------------------------
Broker Non Votes 559,050 4,965
- --------------------------------------------------------------------------------
REORGANIZATION For 10,750,151 329,028
Against 265,959 7,014
Abstain 341,315 10,447
-----------------------------------------------
Total 11,357,425 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,243,426 155,008
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE For 10,516,858 324,740
Against 703,013 21,749
Abstain 77,553 --
-----------------------------------------------
Total 11,297,424 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,427 155,008
- --------------------------------------------------------------------------------
INVESTMENT ASSETS For 10,501,460 324,740
Against 701,905 21,749
Abstain 94,059 --
-----------------------------------------------
Total 11,297,424 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,427 155,008
- --------------------------------------------------------------------------------
TYPE OF SECURITIES For 10,525,807 324,740
Against 693,382 21,749
Abstain 78,235 --
-----------------------------------------------
Total 11,297,424 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,427 155,008
- --------------------------------------------------------------------------------
BORROWING For 10,408,755 324,740
Against 802,786 21,749
Abstain 85,884 --
-----------------------------------------------
Total 11,297,425 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,426 155,008
- --------------------------------------------------------------------------------
PLEDGES For 10,435,739 324,216
Against 772,176 21,749
Abstain 89,509 524
-----------------------------------------------
Total 11,297,424 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,427 155,008
- --------------------------------------------------------------------------------
SENIOR SECURITIES For 10,523,875 324,216
Against 691,778 21,749
Abstain 81,771 524
-----------------------------------------------
Total 11,297,424 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,427 155,008
-----------------------------------------------
</TABLE>
____
35
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP MISSOURI--CONTINUTED
<TABLE>
<CAPTION>
A Shares C Shares
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
UNDERWRITING For 10,502,170 324,216
Against 706,338 22,273
Abstain 88,916 --
-----------------------------------------------
Total 11,297,424 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,427 155,008
- --------------------------------------------------------------------------------
REAL ESTATE For 10,469,008 324,216
Against 745,337 22,273
Abstain 83,079 --
-----------------------------------------------
Total 11,297,424 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,427 155,008
- --------------------------------------------------------------------------------
COMMODITIES For 10,376,685 324,024
Against 824,816 22,466
Abstain 95,922 --
-----------------------------------------------
Total 11,297,423 346,490
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,428 155,007
- --------------------------------------------------------------------------------
LOANS For 10,454,367 324,216
Against 763,665 22,273
Abstain 79,393 --
-----------------------------------------------
Total 11,297,425 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,426 155,008
- --------------------------------------------------------------------------------
SALES/MARGIN PURCHASES For 10,373,401 323,500
Against 832,601 22,990
Abstain 91,422 --
-----------------------------------------------
Total 11,297,424 346,490
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,427 155,007
- --------------------------------------------------------------------------------
PUT AND CALL OPTIONS For 10,390,840 323,500
Against 809,633 22,990
Abstain 96,952 --
-----------------------------------------------
Total 11,297,425 346,490
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,426 155,007
- --------------------------------------------------------------------------------
INDUSTRY CONCENTRATION For 10,481,500 324,740
Against 730,725 21,749
Abstain 85,110 --
-----------------------------------------------
Total 11,297,335 346,489
-----------------------------------------------
Broker Non Votes 4,303,516 155,008
- --------------------------------------------------------------------------------
AFFILIATE PURCHASES For 10,491,401 323,500
Against 717,719 22,466
Abstain 88,303 524
-----------------------------------------------
Total 11,297,423 346,490
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,428 155,007
-----------------------------------------------
</TABLE>
____
36
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
A Shares C Shares
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT COMPANIES For 10,468,516 323,500
Against 738,065 22,990
Abstain 90,842 --
-----------------------------------------------
Total 11,297,423 346,490
- --------------------------------------------------------------------------------
Broker Non Votes 4,303,428 155,007
- --------------------------------------------------------------------------------
DIV VS. NON-DIV For 10,134,607 324,941
Against 614,980 8,255
Abstain 437,110 13,293
-----------------------------------------------
Total 11,186,697 346,489
- --------------------------------------------------------------------------------
Broker Non Votes 4,414,154 155,008
- --------------------------------------------------------------------------------
12B-1 FEES For 14,133,856 455,373
Against 437,780 14,258
Abstain 450,011 26,902
-----------------------------------------------
Total 15,021,647 496,533
- --------------------------------------------------------------------------------
Broker Non Votes 579,204 4,964
-----------------------------------------------
</TABLE>
____
37
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP MISSOURI - CONTINUED
<TABLE>
<CAPTION>
DIRECTORS A SHARES C SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Bremner For 15,283,651 484,676
Withhold 317,200 16,821
-----------------------------------------------
Total 15,600,851 501,497
- --------------------------------------------------------------------------------
Brown For 15,283,651 484,676
Withhold 317,200 16,821
-----------------------------------------------
Total 15,600,851 501,497
- --------------------------------------------------------------------------------
Dean For 15,283,651 484,676
Withhold 317,200 16,821
-----------------------------------------------
Total 15,600,851 501,497
- --------------------------------------------------------------------------------
Impellizzeri For 15,282,798 484,676
Withhold 318,053 16,821
-----------------------------------------------
Total 15,600,851 501,497
- --------------------------------------------------------------------------------
Rosenheim For 15,283,651 484,676
Withhold 317,200 16,821
-----------------------------------------------
Total 15,600,851 501,497
- --------------------------------------------------------------------------------
Sawers For 15,283,651 484,676
Withhold 317,200 16,821
-----------------------------------------------
Total 15,600,851 501,497
- --------------------------------------------------------------------------------
Schneider For 15,283,651 484,676
Withhold 317,200 16,821
-----------------------------------------------
Total 15,600,851 501,497
- --------------------------------------------------------------------------------
Schwertfeger For 15,283,651 484,676
Withhold 317,200 16,821
-----------------------------------------------
Total 15,600,851 501,497
-----------------------------------------------
</TABLE>
____
38
<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.
____
39
<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
____
40
<PAGE>
[PHOTO OF JOHN NUVEEN,Sr. APPEARS HERE]
John Nuveen & Co. Incorporated
333 West Wacker Drive
(Chicago, IL 60606-1286)
(800)621-7227)
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>
NUVEEN
MUNICIPAL
BOND FUNDS
MAY 31, 1997
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
DEPENDABLE, TAX-FREE INCOME
TO HELP YOU KEEP MORE OF
WHAT YOU EARN.
OHIO
[PHOTO APPEARS HERE]
<PAGE>
CONTENTS
1 Dear Shareholder
3 Answering Your Questions
6 Ohio Overview
9 Financial Section
43 Shareholder Meeting Report
44 Shareholder Information
45 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 Ohio
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 7.38% 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 36% combined federal and state income tax
bracket would have had to earn at least 7.16% 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. In
addition, Ohio contin-
____
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."
ued to improve its economic health, resulting in a number of upgraded ratings on
bonds held in the fund.
GIVEN THIS MARKET ENVIRONMENT, HOW DID THE FUND PERFORM?
The Ohio Municipal Bond Fund rewarded investors with a total return on net asset
value for the year, recording price changes and reinvested dividends, of 7.38%
for Class A shares. During the same period, the Lehman Brothers Municipal Bond
Index, which does not incur operating expenses or transaction costs, reported an
8.28% total return. The high quality, high coupon bonds, combined with its
conservative maturity structure, position the fund to perform in line with its
peers in a strong market, and provide more value during a market correction.
WHAT STRATEGIES DID YOU EMPLOY TO ADD VALUE?
We've been able to purchase many securities providing superior income payout
during the year. We sold hospital bonds and bought higher-quality housing bonds.
We also increased the number of General Obligation bonds in the portfolio.
WHAT IS THE CURRENT STATUS OF OHIO'S MUNICIPAL MARKET?
Ohio's municipal market has remained very solid with some help from the Midwest
economy. New issuance for the first six months of the year was up 14% to $3.2
billion. Ohio state government has been very aggressive in attracting new
business and encouraging expansion of existing firms. While not all areas of the
state have benefited from the economic prosperity, the major cities of
Cleveland, Columbus and Cincinnati are fiscally sound and rank in the top ten
nationwide in new facilities and plant expansions.
One noteworthy event that may impact the state municipal market in the future is
an Ohio Supreme Court decision declaring the state system of funding schools
unconstitutional. The resulting school funding reform will likely mean more
spending on the state's infrastructure, and therefore more municipal bond
issuance in the long-term.
____
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>
OHIO
OVERVIEW
Credit Quality
[PIE CHART APPEARS HERE]
BBB/NR 12%
A 13%
AA 10%
AAA/Pre-refunded 65%
Diversification
[PIE CHART APPEARS HERE]
Education 5%
General Obligations 21%
Pollution Control 9%
Utility 5%
Water & Sewer 7%
Hospitals 21%
Other 6%
Excrowed Bonds 21%
Housing Facilities 5%
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
================================================================================
SHARE CLASS A B C R
<S> <C> <C> <C> <C>
Inception Date 6/85 2/97 8/93 2/97
- --------------------------------------------------------------------------------
Net Asset Value (NAV) $11.41 $11.41 $11.41 $11.41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Net Assets ($000) $665,927
- --------------------------------------------------------------------------------
Average Weighted Maturity (years) 17.97
- --------------------------------------------------------------------------------
Duration (years) 7.08
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN/1/
================================================================================
SHARE CLASS A(NAV) A(OFFER) B C R
<S> <C> <C> <C> <C> <C>
1-Year 7.38% 2.87% 6.73% 6.80% 7.45%
- --------------------------------------------------------------------------------
5-Year 6.42% 5.51% 5.83% 5.85% 6.44%
- --------------------------------------------------------------------------------
10-Year 7.94% 7.47% 7.47% 7.35% 7.94%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TAX-FREE YIELDS
================================================================================
Share Class A(NAV) A(OFFER) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 5.33% 5.11% 4.57% 4.80% 5.53%
- --------------------------------------------------------------------------------
SEC 30-Day Yld 4.58% 4.39% 3.83% 4.03% 4.78%
- --------------------------------------------------------------------------------
Taxable Equiv Yld2 7.16% 6.86% 5.98% 6.30% 7.47%
- --------------------------------------------------------------------------------
</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 2.73%,
5.67%, and 7.47%, respectively.
2 Based on SEC yield and a combined federal and state income tax rate of 36%.
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 Ohio 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*
<TABLE>
<CAPTION>
Lehman
Brothers Nuveen Flagship Nuveen Flagship Ohio
Municipal Ohio Municipal Municipal Bond Fund
Date Bond Index Bond Fund (NAV) (Offer)
- ---- ---------- --------------- --------------------
<S> <C> <C> <C>
May-87 $10,000.00 $10,000.00 $ 9,580.00
May-88 $10,898.10 $10,995.29 $10,533.49
May-89 $12,150.65 $12,354.04 $11,835.17
May-90 $13,039.68 $13,077.82 $12,528.56
May-91 $14,353.88 $14,320.99 $13,719.50
May-92 $15,764.07 $15,720.74 $15,060.47
May-93 $17,650.01 $17,480.71 $16,746.52
May-94 $18,085.83 $17,867.57 $17,117.13
May-95 $19,732.83 $19,294.81 $18,484.43
May-96 $20,634.74 $19,986.59 $19,147.16
May-97 $22,534.82 $21,462.15 $20,560.74
</TABLE>
Lehman Brothers Municipal Bond Index $22,535
Nuveen Flagship Ohio Municipal Bond Fund (NAV) $21,462
Nuveen Flagship Ohio Municipal Bond Fund (Offer) $20,561
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 0.04992 JANUARY 0.05206
JULY 0.05158 FEBRUARY 0.0507
AUGUST 0.05158 MARCH 0.0507
SEPTEMBER 0.04992 APRIL 0.0507
OCTOBER 0.05158 MAY 0.0507
NOVEMBER 0.04992
DECEMBER 0.05158
</TABLE>
7
<PAGE>
FINANCIAL SECTION
CONTENTS
10 Portfolio of Investments
29 Statement of Net Assets
30 Statement of Operations
31 Statement of Changes in Net Assets
32 Notes to Financial Statements
39 Financial Highlights
42 Independent Auditors' Report
____
9
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION --4.5%
$1,000,000 Kent State University, Ohio, University Revenue, 5/02 at 102 AAA $ 1,079,660
General Receipts, 6.500%, 5/01/22
2,050,000 Miami University, Ohio, University Revenue, 12/99 at 102 A+ 2,210,023
6.900%, 12/01/04
1,750,000 Ohio State Higher Educational Facility Commission 12/04 at 102 AAA 1,773,590
Revenue, University of Dayton Project,
5.800%, 12/01/19
2,025,000 Ohio State Higher Educational Facility Commission 12/03 at 102 AAA 2,219,927
Revenue, Mortgage, University of Dayton Project,
6.600%, 12/01/17
2,545,000 Ohio State Higher Educational Facility Commission 10/97 at 102 AA- 2,623,335
Revenue, Case Western Reserve Project,
Series A, 7.625%, 10/01/08
1,200,000 Ohio State Higher Educational Facility Commission 9/06 at 101 N/R 1,181,748
Revenue, University of Findlay Project,
6.125%, 9/01/16
3,775,000 Ohio State Higher Educational Facility Commission 11/06 at 101 AA 3,642,120
Revenue, Higher Educational, Denison University
Project, 5.300%, 11/01/21
Ohio State Higher Educational Facility Revenue,
Commission, Case Western Reserve University,
Series B:
1,870,000 7.125%, 10/01/14 10/00 at 102 Aa 2,045,556
750,000 6.500%, 10/01/20 No Opt. Call Aa 834,623
2,250,000 Ohio State Higher Educational Facility Revenue, 4/07 at 102 A2 2,264,198
John Carroll University Project, 5.750%, 4/01/19
1,000,000 University of Cincinnati, Ohio, General Receipts, 12/02 at 102 AA- 1,057,760
Series O, 6.300%, 6/01/12
4,250,000 University of Cincinnati, Ohio, General Receipts, 6/07 at 100 AAA 4,162,110
Series Ab, 5.375%, 6/01/20
4,000,000 University of Puerto Rico, University Revenue No Opt. Call AAA 2,157,520
Refunding, Series N, 0.000%, 6/01/09
1,500,000 University of Toledo, Ohio, General Receipt, 6/04 at 102 AAA 1,436,070
5.350%, 6/01/25
1,230,000 Youngstown State University, Ohio, General Receipts, 12/04 at 102 AAA 1,280,246
6.000%, 12/15/16
</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>
ESCROWED TO MATURITY -- 0.7%
$4,630,000 Ohio State Water Development Authority Revenue, No Opt. Call AAA $ 4,803,903
Pure Water, Series I, 6.000%, 12/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 3.1%
4,030,000 Cuyahoga County, Ohio, Health Care Facilities 6/00 at 100 N/R 4,377,507
Revenue, Altenheim Project, 9.280%, 6/01/15
1,500,000 Franklin County, Ohio, Health Care Facilities Revenue, 7/03 at 102 N/R 1,455,240
Ohio Presbyterian Retire Services, 6.500%, 7/01/23
3,120,000 Franklin County, Ohio, Health Care Facilities Revenue, 11/05 at 102 Aa2 3,140,030
Heinzerling Foundation, Series A, 6.200%, 11/01/20
1,350,000 Franklin County, Ohio, Hospital Revenue, Mortgage, 7/01 at 103 N/R 1,444,986
Ohio Presbyterian Retirement Services,
8.750%, 7/01/21
690,000 Franklin County, Ohio, Hospital Revenue Refunding, 8/00 at 102 N/R 715,861
Worthington Village, 7.000%, 8/01/16
Marion County, Ohio, Health Care Facility Revenue
Refunding and Improvement, United Church Homes
Project:
1,250,000 6.375%, 11/15/10 11/03 at 102 BBB- 1,278,038
750,000 6.300%, 11/15/15 11/03 at 102 BBB- 756,818
2,220,000 Napoleon, Ohio, Health Care Facility Revenue, 9/04 at 102 Aa 2,368,296
Refunding Mortgage, Lutherans Orphans Project,
6.875%, 8/01/23
4,775,000 Warren County, Ohio, Hospital Facilities Revenue, 7/01 at 102 Aa2 5,182,164
Refunding and Improvement, Otterbein Home
Project, 7.200%, 7/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
HOSPITALS -- 17.7%
500,000 Athens County, Ohio, Community Mental Health 6/01 at 102 AA 532,055
Revenue, West Center Project, Series I,
6.900%, 6/01/10
1,250,000 Butler County, Ohio, Hospital Facilities Revenue, 1/02 at 102 BBB- 1,335,175
Refunding and Improvement, Fort Hamilton, Hughes,
7.500%, 1/01/10
Cambridge, Ohio, Hospital Improvement Revenue,
Refunding, Guernsey Memorial Hospital:
500,000 8.000%, 12/01/06 12/01 at 102 BBB 552,870
1,000,000 8.000%, 12/01/11 12/01 at 102 BBB 1,101,380
</TABLE>
____
11
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS -- CONTINUED
Cuyahoga County, Ohio, Hospital Revenue,
Meridia Health System:
$ 250,000 6.250%, 8/15/14 8/05 at 102 A1 $ 259,818
5,750,000 7.250%, 8/15/19 8/00 at 102 A1 6,158,423
5,500,000 6.250%, 8/15/24 8/05 at 102 A1 5,664,560
1,500,000 Cuyahoga County, Ohio, Hospital Revenue Refunding 1/06 at 102 AAA 1,483,065
and Improvement, University Hospitals Health,
Series A, 5.625%, 1/15/26
7,000,000 Cuyahoga County, Ohio, Hospital Revenue Refunding, 12/97 at 101 1/2 AA- 7,220,080
Cleveland Clinic Foundation, Series A,
8.000%, 12/01/15
1,000,000 Cuyahoga County, Ohio, Hospital Revenue Refunding 2/07 at 102 AAA 999,910
and Improvement, Metrohealth System Project,
5.625%, 2/15/17
2,000,000 Cuyahoga County, Ohio, Industrial Development 8/01 at 103 AAA 2,188,420
Revenue Refunding, University Health Care
Project, 7.300%, 8/01/11
2,010,000 Erie County, Ohio, Hospital Improvement Revenue 1/02 at 102 A 2,164,328
Refunding, Firelands Community Hospital Project,
6.750%, 1/01/08
Franklin County, Ohio, Hospital Revenue Refunding
and Improvement, Childrens Hospital Project, Series A:
1,575,000 5.750%, 11/01/15 11/06 at 101 Aa 1,589,049
5,275,000 5.875%, 11/01/25 11/06 at 101 Aa 5,332,023
Franklin County, Ohio, Hospital Revenue Refunding,
Holy Cross Health System Corporation:
965,000 5.800%, 6/01/16 6/06 at 102 AA 977,690
2,000,000 5.875%, 6/01/21 6/06 at 102 AA 2,022,620
1,500,000 Franklin County, Ohio, Hospital Revenue Refunding, 6/00 at 102 AAA 1,635,060
Holy Cross Health System, Series A, Mount
Carmel Health, 7.625%, 6/01/09
3,000,000 Garfield Heights, Ohio, Hospital Revenue Refunding 11/02 at 102 A 3,200,190
and Improvement, Marymont Hospital Project,
Series B, 6.650%, 11/15/11
3,500,000 Garfield Heights, Ohio, Hospital Revenue Refunding 11/02 at 102 A 3,738,280
and Improvement, Marymont Hospital Project,
Series A, 6.700%, 11/15/15
</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>
HOSPITALS -- CONTINUED
$3,000,000 Hamilton County, Ohio, Hospital Facilities Revenue 1/03 at 102 A1 $ 3,119,940
Refunding, Bethesda Hospital, Series A,
6.250%, 1/01/12
1,720,000 Hamilton County, Ohio, Health System Revenue 7/02 at 102 Baa1 1,793,444
Refunding, Providence Hospital, Franciscan,
6.875%, 7/01/15
7,890,000 Lorain County, Ohio, Hospital Revenue Refunding, 11/05 at 102 AAA 7,558,778
EMH Regional Medical Center, 5.375%, 11/01/21
2,250,000 Lorain County, Ohio, Hospital Revenue Refunding, 9/07 at 102 AAA 2,186,843
Catholic Healthcare Partners, Series B,
5.500%, 9/01/27
1,500,000 Lorain County, Ohio, Hospital Improvement Revenue 11/02 at 102 A+ 1,640,985
Refunding, Lakeland Community Hospital, Inc.,
6.500%, 11/15/12
1,000,000 Lucas County, Ohio, Hospital Improvement Revenue, 8/00 at 102 AAA 1,071,950
St. Vincent Medical Center, Series A,
6.750%, 8/15/20
3,000,000 Lucas County, Ohio, Hospital Improvement Revenue, 8/02 at 102 AAA 3,238,740
St. Vincent Medical Center, 6.500%, 8/15/12
2,000,000 Mahoning County, Ohio, Hospital Facilities Revenue 6/98 at 100 A1 2,040,760
Refunding, St. Elizabeth Hospital Medical Center,
7.375%, 12/01/09
5,105,000 Mahoning County, Ohio, Hospital Facilities Revenue 10/00 at 102 AAA 5,507,019
Refunding, YHA Inc. Project, Series A,
7.000%, 10/15/14
500,000 Mansfield, Ohio, Hospital Improvement Revenue, 12/01 at 102 AAA 542,640
Mansfield General Hospital Project,
6.700%, 12/01/09
2,000,000 Marion County, Ohio, Hospital Improvement Revenue 5/06 at 102 BBB+ 2,048,720
Refunding, Community Hospital, 6.375%, 5/15/11
1,250,000 Maumee, Ohio, Hospital Revenue Refunding, 12/04 at 102 AAA 1,272,738
St. Lukes Hospital Project, 5.800%, 12/01/14
4,405,000 Miami County, Ohio, Hospital Facilities Revenue, 5/06 at 102 BBB 4,469,049
Refunding and Improvement, Upper Valley
Medical Center, Series A, 6.250%, 5/15/16
4,205,000 Miami County, Ohio, Hospital Facilities Revenue, 5/06 at 102 BBB 4,276,569
Refunding and Improvement, Upper Valley
Medical Center, Series C, 6.250%, 5/15/13
</TABLE>
____
13
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - CONTINUED
Middleburg Heights, Ohio, Hospital Revenue
Refunding, Southwest General Health Center:
$ 4,000,000 5.625%, 8/15/15 8/08 at 102 AAA $ 4,044,280
2,000,000 5.750%, 5/15/21 8/08 at 102 AAA 2,008,080
Montgomery County, Ohio, Hospital Revenue, Refunding
Facilities and Improvement, Kettering Medical Center:
1,500,000 5.625%, 4/01/16 4/06 at 102 AAA 1,501,080
7,000,000 6.250%, 4/01/20 No Opt. Call AAA 7,691,880
2,500,000 Montgomery County, Ohio, Hospital Revenue, Sisters 5/03 at 101 AAA 2 ,666,575
Charity Health Care, Series A, 6.250%, 5/15/08
2,900,000 Mount Vernon, Ohio, Hospital Revenue Refunding, 6/02 at 100 N/R 2 ,975,835
Knox Community Hospital, 7.875%, 6/01/12
1,725,000 Shelby County, Ohio, Hospital Facilities Revenue, 9/02 at 102 BBB 1 ,870,590
Refunding and Improvement, Memorial Hospital
Association, 7.700%, 9/01/18
2,750,000 Trumbull County, Ohio, Hospital Revenue, Refunding 11/01 at 102 AAA 2,990,763
and Improvement, Series B, Trumbull Memorial
Hospital, 6.900%, 11/15/12
750,000 Tuscarawas County, Ohio, Hospital Facilities Revenue, 10/03 at 102 Baa3 753,645
Union Hospital Project, Series A, 6.500%, 10/01/21
1,500,000 Washington County, Ohio, Hospital Revenue, Marietta 9/02 at 102 Baa1 1,605,000
Area Health Care Inc. Project, 7.375%, 9/01/12
- ---------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTI FAMILY - 1.2%
2,500,000 Fairlawn, Ohio, Health Care Facilities Revenue, 10/99 at 102 N/R 2,668,17
Village At St. Edward Project, 8.750%, 10/01/19
Ohio Capital, Corporation For Housing, Multifamily
Revenue Refunding Housing, Series A:
1,000,000 7.500%, 11/01/11 11/97 at 105 AAA 1 ,055,110
4,250,000 7.600%, 11/01/23 11/97 at 105 AAA 4,485,025
- --------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.4%
1,990,000 Ohio Housing Finance Agency Mortgage Revenue, 9/04 at 102 AAA 2,032,069
Residential, Series 1994 A-1, 6.100%, 9/01/14
5,255,000 Ohio Housing Finance Agency Mortgage Revenue, 9/04 at 102 AAA 5 ,457,002
Residential, Series 1994 B-1, 6.375%, 9/01/14
13,000,000 Ohio Housing Finance Agency Mortgage Revenue, 9/07 at 102 AAA 13,098,670
Residential, Series 1997 A-1, 6.150%, 3/01/29
</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>
HOUSING/SINGLE FAMILY - CONTINUED
$ 700,000 Ohio Housing Finance Agency, Single Family 3/00 at 102 AAA $ 735,602
Mortgage Revenue, Series B, 7.400%, 9/01/15
Ohio Housing Finance Agency, Single Family
Mortgage Revenue, Series D:
685,000 7.500%, 9/01/13 9/00 at 102 AAA 720,353
315,000 7.050%, 9/01/16 9/01 at 102 AAA 332,476
- --------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL - 8.1%
2,125,000 Ashtabula County, Ohio, Industrial Development 5/02 at 102 Baa1 2,248,484
Revenue Refunding, Ashland Oil Inc. Project,
Series A, 6.900%, 5/01/10
1,750,000 Ohio State Air Quality Development Authority 12/02 at 102 AAA 1,86,318
Revenue, Series A, Columbus Southern Power
Company Project, 6.375%, 12/01/20
7,000,000 Ohio State Air Quality Development Authority, 6/03 at 102 Baa2 7,085,540
Revenue Series B, Columbus Southern Power
Company Project, 6.250%, 12/01/20
750,000 Ohio State Air Quality Development Authority, 7/99 at 102 Baa3 789,593
Revenue Refunding, Pollution Control, Ohio
Edison, Series B, 7.625%, 7/01/23
5,900,000 Ohio State Air Quality Development Authority, 8/99 at 102 Baa1 6,184,380
Revenue Refunding, Ohio Power Company Project,
Series B, 7.400%, 8/01/09
2,000,000 Ohio State Air Quality Development Authority, 6/02 at 103 AAA 2,286,980
Revenue Refunding, Pollution Control, Cleveland
Company Project, 8.000%, 12/01/13
2,000,000 Ohio State Air Quality Development Authority, 3/00 at 102 AAA 2,164,360
Revenue Refunding, Pollution Control, Ohio
Edison, Series A, 7.450%, 3/01/16
1,000,000 Ohio State Air Quality Development Authority, Revenue 4/01 at 102 Baa1 1,043,970
Refunding, Ashland Oil Inc. Project, 6.850%, 4/01/10
15,000,000 Ohio State Air Quality Development Authority, Revenue 9/05 at 102 A+ 15,44,150
Refunding, Dayton Power and Light Company
Project, 6.100%, 9/01/30
1,500,000 Ohio State Water Development Authority Revenue, 3/02 at 102 N/R 1,608,660
American Waste System Inc. Project,
7.750%, 9/01/07
</TABLE>
____
15
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL - CONTINUED
$ 1,000,000 Ohio State Water Development Authority, Revenue 1/04 at 102 AAA $ 966,590
Refunding, Collateralized Water, Cincinnati Gas,
Series A, 5.450%, 1/01/24
1,750,000 Ohio State Water Development Authority, Revenue 8/02 at 102 AA- 1,835,590
Refunding, Water Development, Dayton Power,
Series A, 6.400%, 8/15/27
7,050,000 Ohio State Water Development Authority, Pollution 7/99 at 102 Baa3 7,392,348
Control Facilities Revenue Refunding Pollution
Control, Ohio Edison, Series A, 7.625%, 7/01/23
1,000,000 Summit County, Ohio, Industrial Development Revenue, 11/99 at 100 A1 1,029,570
Century Products Inc. Project, 7.750%, 11/01/05
1,650,000 Toledo Lucas County, Ohio, Port Authority, Revenue 3/02 at 102 AA- 1,832,358
Refunding Facilities, Cargill Inc. Project,
7.250%, 3/01/22
- --------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL APPROPRIATION OBLIGATIONS - 1.4%
6,000,000 Cleveland, Ohio, Certificates of Participation, 11/07 at 102 AAA 5,657,040
Cleveland Stadium Project, 5.250%, 11/15/27 (WI)
1,500,000 Ohio State Building Authority, State Facilities, 9/04 at 102 AAA 1,650,555
Juvenile Correctional Projects, Series A,
6.600%, 10/01/14
1,100,000 Ohio State Department Transportation, Certificates of 4/02 at 102 AAA 1,191,058
Participation, Panhandle Rail Line Project,
Series A, 6.500%, 4/15/12
1,000,000 Ohio State Special Obligation, Elementary and No Opt. Call AA- 1,048,750
Secondary Education Capital Facilities, Series A,
5.625%, 12/01/06
- --------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/OTHER - 0.2%
1,000,000 Franklin County, Ohio, Revenue, OCLC Online 7/01 at 100 N/R 1,060,190
Computer Library Center Inc., 7.200%, 7/15/06
- --------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/TRANSPORTATION - 0.6%
11,000,000 Ohio State Turnpike Commission, Turnpike Revenue, 2/06 at 102 AAA 10,819,600
Series A, 5.500%, 2/15/26
- --------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/UTILITY - 4.9%
Cleveland, Ohio, Public Power System Revenue, First
Mortgage, Series A:
2,250,000 0.000%, 11/15/12 No Opt. Call AAA 969,660
1,535,000 0.000%, 11/15/13 No Opt. Call AAA 621,475
</TABLE>
____
16
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** Value
- --------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/UTILITY - CONTINUED
<S> <C> <C> <C> <C>
MUNICIPAL REVENUE/UTILITY - CONTINUED
$10,685,00 Cleveland, Ohio, Public Power System, Revenue 11/01 at 102 AAA $11,729,993
Refunding and Improvement, First Mortgage, Series B,
7.000%, 11/15/17
1,900,000 Cleveland, Ohio, Public Power System, Revenue 11/01 at 102 AAA 2,085,820
Improvement, First Mortgage, Series A,
7.000%, 11/15/17
3,400,000 Cleveland, Ohio, Public Power System, Revenue 11/06 at 102 AAA 3,135,684
Refunding, First Mortgage, Series 1996-1,
5.000%, 11/15/24
1,000,000 Hamilton, Ohio, Gas System Revenue, Series A, 10/03 at 102 AAA 922,770
5.000%, 10/15/18
13,520,000 Ohio Municipal Electric Generation Agency, Joint 2/03 at 102 AAA 12,892,942
Venture 5, Certificates of Beneficial Interest,
5.375%, 2/15/24
1,545,000 Puerto Rico Electric Power Authority, Formerly Puerto No Opt. Call BBB+ 502,480
Rico Commonwealth, Water Resource Authority
Power, Series O, 0.000%, 7/01/17
- --------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/WATER AND SEWER - 6.8%
Bellefontaine, Ohio, Sewer System Revenue, First
Mortgage, Refunding and improvement
1,000,000 6.800%, 12/01/07 12/02 at 101 Baa1 1,061,830
1,000,000 6.900%, 12/01/11 12/02 at 101 Baa1 1,061,640
3,000,000 Butler County, Ohio, Sewer System Revenue, 12/06 at 101 AAA 2,882,160
5.250%, 12/01/21
2,000,000 Clermont County, Ohio, Sewer System Revenue 12/03 at 102 AAA 1,887,700
Refunding, 5.200%, 12/01/21
11,000,000 Cleveland, Ohio, Waterworks Revenue Refunding, No Opt. Call AAA 11,050,160
First Mortgage, Series G, 5.500%, 1/01/21
Cleveland, Ohio, Waterworks Revenue, Refunding and
Improvement, First Mortgage, Series H:
2,320,000 5.750%, 1/01/21 1/06 at 102 AAA 2,340,926
5,850,000 5.750%, 1/01/26 (DD) 1/06 at 102 AAA 5,879,601
990,000 Cleveland, Ohio, Waterworks Revenue, First Mortgage, 1/02 at 102 AAA 1,070,378
Series F,1992-B, 6.500%, 1/01/11
1,600,000 Greene County, Ohio, Water System Revenue, 12/07 at 102 AAA 1,688,816
Series A, 6.125%, 12/01/21
2,200,000 Greenville, Ohio, Wastewater System Revenue, First 12/02 at 102 AAA 2,347,994
Mortgage, 6.350%, 12/01/17
</TABLE>
____
17
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL REVENUE/WATER AND SEWER - CONTINUED
<S> <C> <C> <C> <C>
$1,000,000 Hamilton, Ohio, Waterworks Revenue, Mortgage, 10/01 at 102 AAA $ 1,078,440
Series A, 6.400%, 10/15/10
1,175,000 Hubbard, Ohio, Sewer System Mortgage Revenue, 5/98 at 102 N/R 1,237,569
8.800%, 11/15/17
795,000 Huber Heights, Ohio, Water System Revenue, No Opt. Call AAA 225,923
0.000%, 12/01/19
Mahoning Valley, Ohio, Sanitation District:
1,000,000 7.800%, 12/15/11 12/01 at 102 N/R 1,089,430
1,375,000 7.900%, 12/15/14 12/01 at 102 N/R 1,497,059
1,000,000 7.900%, 12/15/15 12/01 at 102 N/R 1,089,190
1,000,000 Montgomery County, Ohio, Water Revenue, Greater 11/02 at 102 AAA 1,059,450
Moraine, Beavercreek, 6.250%, 11/15/17
1,000,000 Mount Gilead, Ohio, Water System Revenue, First 12/02 at 102 N/R 1,071,680
Mortgage, 7.200%, 12/01/17
1,000,000 Ohio State Water Development Authority, Revenue, 6/05 at 102 AAA 1,021,580
Fresh Water Series, 5.900%, 12/01/21
500,000 Orrville, Ohio, Water System Revenue, Improvement, 12/04 at 102 AAA 524,210
6.125%, 12/01/18
1,000,000 Ottawa County, Ohio, Special Assessment, Mortgage, 9/01 at 102 AAA 1,094,500
Catawba Isle, 7.000%, 9/01/11
750,000 Toledo, Ohio, Sewer System Revenue, Mortgage, 11/04 at 102 AAA 803,070
6.350%, 11/15/17
500,000 Toledo, Ohio, Waterworks Revenue Refunding 11/04 at 102 AAA 536,750
Mortgage, 6.450%, 11/15/24
750,000 Warren County, Ohio, Waterworks Revenue, 12/02 at 102 AAA 821,010
6.600%, 12/01/16
1,000,000 Washington, Ohio, Water System Revenue, Mortgage, 12/03 at 101 AAA 963,370
5.375%, 12/01/19
- --------------------------------------------------------------------------------------------------------------------------------
NON-STATE GENERAL OBLIGATIONS - 19.1%
Adams County, Ohio Valley Local School District,
Improvement:
6,000,000 7.000%, 12/01/15 No Opt. Call AAA 7,071,540
9,500,000 5.250%, 12/01/21 12/05 at 102 AAA 9,102,330
3,955,000 Akron, Ohio, Variable Purpose Improvement, 12/04 at 102 AAA 4,376,524
6.750%, 12/01/14
</TABLE>
____
18
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
NON-STATE GENERAL OBLIGATIONS - CONTINUED
<S> <C> <C> <C> <C>
$3,000,000 Akron, Ohio, Variable Purpose Improvement, Series 2, 12/07 at 100 AA- $ 2,952,420
5.375%, 12/01/17
Anthony Wayne, Ohio, Local School District:
600,000 0.000%, 12/01/13 No Opt. Call AAA 242,328
2,850,000 5.750%, 12/01/24 12/05 at 101 AAA 2,871,774
1,000,000 Archbold, Ohio, Area Local School District, 12/06 at 102 AAA 1,040,900
6.000%, 12/01/21
1,000,000 Aurora, Ohio, City School District, Improvement and 12/05 at 102 AAA 1,018,500
Refunding, 5.800%, 12/01/16
2,905,000 Batavia, Ohio, Local School District, 6.300%, 12/01/22 12/05 at 102 AAA 3,089,729
1,000,000 Beavercreek, Ohio, Local School District, No Opt. Call AAA 1,139,940
6.600%, 12/01/15
2,500,000 Buckeye Valley, Ohio, Local School District Delaware No Opt. Call AAA 2,892,275
County, Series A, 6.850%, 12/01/15
1,570,000 Centerville, Ohio, Recreational Facilities, 12/04 at 102 A1 1,590,002
5.800%, 12/01/20
Chesapeake, Union Exempt Village School District Ohio:
125,000 8.500%, 12/01/04 No Opt. Call N/R 147,969
125,000 8.500%, 12/01/05 No Opt. Call N/R 149,726
125,000 8.500%, 12/01/06 No Opt. Call N/R 151,228
125,000 8.500%, 12/01/07 No Opt. Call N/R 152,375
125,000 8.500%, 12/01/08 No Opt. Call N/R 153,163
130,000 8.500%, 12/01/09 No Opt. Call N/R 160,120
500,000 Cleveland, Ohio, Series A, 6.375%, 7/01/12 7/02 at 102 AAA 540,050
4,745,000 Cleveland, Ohio, 6.625%, 11/15/14 11/04 at 102 AAA 5,234,067
2,000,000 Cleveland, Ohio, City School District,, 12/02 at 102 AAA 2,053,000
Library Improvement, Series A, 5.875%, 12/01/11
2,050,000 Columbus, Ohio, Series 1, 5.250%, 9/15/18 9/03 at 102 AAA 2,009,923
1,500,000 Columbus, Ohio, Refunding, Series B, 6.500%, 1/01/10 1/02 at 102 AAA 1,635,375
Columbus, Ohio, Sewer System Improvement:
590,000 9.375%, 4/15/06 No Opt. Call AAA 776,375
500,000 9.375%, 4/15/07 No Opt. Call AAA 669,495
1,000,000 Cuyahoga County, Ohio, Jail Facilities, No Opt.Call AA 988,590
5.250%, 10/01/13
1,345,000 Cuyahoga County, Ohio, 5.650%, 5/15/18 No Opt. Call AA 1,367,354
200,000 Dayton, Ohio, 10.500%, 10/01/99 No Opt. Call A+ 226,638
</TABLE>
____
19
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
NON-STATE GENERAL OBLIGATIONS - CONTINUED
<S> <C> <C> <C> <C>
$ 750,000 Defiance, Ohio, 6.200%, 12/01/20 12/04 at 102 AAA $ 791,010
Delaware, Ohio, City School District:
1,000,000 0.000%, 12/01/10 No Opt. Call AAA 485,730
1,000,000 0.000%, 12/01/11 No Opt. Call AAA 457,190
Dublin, Ohio, City School District:
2,655,000 0.000%, 12/01/10 No Opt. Call AAA 1,289,613
2,640,000 0.000%, 12/01/11 No Opt. Call AAA 1,206,982
250,000 East Holmes, Ohio, Local School District, 12/98 at 102 AAA 267,065
School Improvement, 7.700%, 12/01/08
850,000 Eastern Local School District, Ohio, Brown and No Opt. Call AAA 934,635
Highland Counties, 6.250%, 12/01/13
1,110,000 Fairborn, Ohio, Limited Tax, Utility, 7.000%, 10/01/11 10/02 at 102 AAA 1,227,882
4,040,000 Franklin County, Ohio, 5.375%, 12/01/20 12/08 at 102 AAA 3,981,703
1,575,000 Garaway, Ohio, Local School District, 12/00 at 102 AAA 1,725,696
7.200%, 12/01/14
1,000,000 Garfield Heights, Ohio,Refunding and Improvement, 11/06 at 102 AAA 1,002,040
5.600%, 11/01/16
Geauga County, Ohio, Bainbridge Water Project:
620,000 6.850%, 12/01/10 No Opt. Call Aa 708,679
1,000,000 5.625%, 12/01/15 12/05 at 102 Aa 1,009,470
1,000,000 Grandview Heights, Ohio, City School District, 12/05 at 101 AA 1,023,510
Construction and Improvement Bonds,
6.100%, 12/01/19
1,000,000 Highland, Ohio, Local School District, 12/07 at 102 AAA 1,023,130
5.875%, 12/01/19
1,000,000 Huron County, Ohio, Correctional Facility, Issue I, 12/07 at 102 AAA 1,027,240
5.850%, 12/01/16
1,200,000 Indian Lake, Ohio, Local School District, Construction 12/06 at 101 AAA 1,171,836
and Improvement, 5.375%, 12/01/23
1,000,000 Indian Valley, Ohio, Local School District, 12/05 at 102 AAA 1,009,020
5.750%, 12/01/19
1,200,000 Jefferson County, Ohio, Human Services Building 12/01 at 102 AAA 1,307,376
Construction, 6.625%, 12/01/14
1,885,000 Kent, Ohio, Sewer System Improvement, 12/02 at 102 Aa 2,001,738
6.500%, 12/01/10
1,070,000 Kettering, Ohio, 6.650%, 12/01/12 12/01 at 102 Aa 1,164,096
</TABLE>
____
20
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
NON-STATE GENERAL OBLIGATIONS - CONTINUED
<S> <C> <C> <C> <C>
$1,000,000 Kettering, Ohio, City School District, School 12/05 at 101 AAA $ 957,350
Improvement, 5.250%, 12/01/22
500,000 Kings, Ohio, Local School District, 5.500%, 12/01/21 12/05 at 100 AAA 492,395
500,000 Kirtland, Ohio, Local School District, 7.500%, 12/01/09 12/99 at 102 N/R 539,625
1,000,000 Lakeview, Ohio, Local School District, 12/04 at 102 AAA 1,115,790
6.900%, 12/01/14
1,440,000 Lakewood, Ohio, Series B, 5.750%, 12/01/15 12/05 at 102 Aa 1,473,624
1,000,000 Lakota, Ohio, Local School District, 6.125%, 12/01/17 12/05 at 100 AAA 1,045,790
Logan County, Ohio:
155,000 7.750%, 12/01/02 No Opt. Call A 177,125
155,000 7.750%, 12/01/03 No Opt. Call A 179,422
155,000 7.750%, 12/01/04 No Opt. Call A 181,999
155,000 7.750%, 12/01/05 No Opt. Call A 184,326
155,000 7.750%, 12/01/06 No Opt. Call A 186,370
Logan Hocking, Ohio, Local School District
Series A:
935,000 0.000%, 12/01/07 No Opt. Call AAA 548,686
590,000 0.000%, 12/01/10 No Opt. Call AAA 286,581
1,000,000 Lucas County, Ohio, 6.650%, 12/01/12 12/02 at 102 A 1,039,720
1,000,000 Lucas County, Ohio, Improvement, 5.400%, 12/01/15 12/05 at 102 AAA 995,950
1,000,000 Mahoning County, Ohio, Improvement, 12/99 at 102 AAA 1,080,760
7.200%, 12/01/09
Marysville, Ohio, Exempt Village School District,
Improvement:
735,000 0.000%, 12/01/10 No Opt. Call AAA 357,012
865,000 0.000%, 12/01/16 No Opt. Call AAA 293,477
1,000,000 North Olmstead, Ohio, 6.250%, 12/15/12 12/02 at 102 AAA 1,065,110
North Royalton, Ohio, City School District:
2,200,000 6.000%, 12/01/14 12/09 at 102 AAA 2,328,150
2,400,000 6.100%, 12/01/19 12/09 at 102 AAA 2,541,384
500,000 Olmsted Falls, Ohio, Local School District, 12/01 at 102 AAA 550,555
7.050%, 12/15/11
1,750,000 Pickerington, Ohio, Local School District, Pickerington 12/01 at 102 A 1,858,938
Public Library Project, 6.750%, 12/01/16
</TABLE>
____
21
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NON-STATE GENERAL OBLIGATIONS - CONTINUED
Pickerington, Ohio, Local School District, Refunding:
$ 885,000 0.000%, 12/01/08 No Opt. Call AAA $ 488,139
940,000 0.000%, 12/01/09 No Opt. Call AAA 486,375
650,000 0.000%, 12/01/10 No Opt. Call AAA 315,725
500,000 0.000%, 12/01/11 No Opt. Call AAA 228,595
500,000 0.000%, 12/01/13 No Opt. Call AAA 201,940
1,000,000 Revere, Ohio, Local School District, 6.000%, 12/01/16 12/03 at 102 AAA 1,037,370
3,165,000 Reynoldsburg, Ohio, City School District, 12/02 at 102 AAA 3,457,098
6.550%, 12/01/17
1,200,000 Ridgemont, Ohio, Local School District, 12/02 at 12 N/R 1,308,876
7.250%, 12/01/14
500,000 Sandusky County, Ohio, 6.200%, 12/01/13 12/04 at 102 AAA 531,145
1,200,000 Solon, Ohio, School District, Refunding, No Opt. Call AAA 704,196
0.000%, 12/01/07
2,340,000 Stow, Ohio, Safety Center Construction Refunding, 12/05 at 102 A1 2,411,932
6.200%, 12/01/20
2,870,000 Strongville, Ohio, 5.950%, 12/01/21 12/06 at 102 Aa 2,938,450
1,100,000 Summit County, Ohio, 5.250%, 12/01/15 12/06 at 102 AAA 1,076,438
1,000,000 Sylvania, Ohio, City School District, 6.600%, 6/01/16 6/02 at 102 AAA 1,088,690
540,000 Trumbull County, Ohio, 6.200%, 12/01/14 12/04 at 102 AAA 571,579
Trumbull County, Ohio, Correctional Facilities:
1,070,000 7.000%, 12/01/04 No Opt. Call AAA 1,216,494
1,300,000 0.000%, 12/01/10 No Opt. Call AAA 631,449
1,320,000 Twinsburg, Ohio, City School District, Certificates 12/01 at 102 AAA 1,442,087
Eligible, 6.700%, 12/01/11
Upper Arlington, Ohio, City School District:
1,830,000 0.000%, 12/01/11 No Opt. Call AAA 836,658
1,870,000 0.000%, 12/01/12 No Opt. Call AAA 803,950
1,000,000 5.125%, 12/01/19 12/06 at 101 AAA 950,070
1,910,000 Vandalia, Ohio, Various Purpose Improvement, 12/06 at 101 Aa 1,944,743
5.850%, 12/01/21
750,000 West Geauga, Ohio, Local School District, 11/04 at 102 AAA 780,045
5.950%, 11/01/12
800,000 Westerville, Ohio, City School District, Library 12/05 at 102 AAA 805,744
Improvement, 5.600%, 12/01/18
</TABLE>
____
22
<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>
NON-STATE GENERAL OBLIGATIONS - CONTINUED
$1,000,000 Woodridge, Ohio, Local School District, 12/04 at 102 AAA $1,036,250
6.000%, 12/01/19
1,425,000 Wooster, Ohio, City School District, 6.500%, 12/01/17 12/02 at 102 AAA 1,553,122
300,000 Youngstown, Ohio, 6.125%, 12/01/14 12/04 at 102 AAA 315,660
- -----------------------------------------------------------------------------------------------------------------------------------
PRE-REFUNDED - 19.9%***
2,000,000 Athens, Ohio, Sewer System Revenue, 12/09 at 100 A 2,161,180
7.300%, 12/01/14
3,000,000 Barberton, Ohio, Hospital Facilities Revenue, 1/02 at 102 A 3,358,650
Barberton Citizens Hospital Company Project,
7.250%, 1/01/12
2,940,000 Bedford, Ohio, Hospital Improvement Revenue 5/00 at 102 N/R 3,275,072
Refunding, Community Hospital Bedford Inc.,
8.500%, 5/15/09
1,000,000 Canal Winchester, Ohio, Local School District, 12/01 at 102 AAA 1,124,990
7.100%, 12/01/13
1,400,000 Canton, Ohio, Variable Purpose, 7.875%, 12/01/08 12/98 at 103 N/R 1,513,694
3,085,000 Carroll County, Ohio, Hospital Improvement Revenue, 12/01 at 102 AAA 3,453,534
Timken Mercy Medical Center, 7.125%, 12/01/18
4,745,000 Clermont County, Ohio, Hospital Facilities Revenue, 9/99 at 102 AAA 5,182,218
Refunding, Mercy Health System,
Series A, 7.500%, 9/01/19
Clermont County, Ohio, Sewer System Revenue:
1,000,000 7.250%, 12/01/11 12/00 at 102 AAA 1,107,550
2,000,000 7.375%, 12/01/20 12/00 at 102 AAA 2,223,140
3,700,000 7.100%, 12/01/21 12/01 at 102 AAA 4,143,112
1,000,000 Clermont County, Ohio, Waterworks Revenue, 12/97 at 102 AAA 1,041,960
Refunding and Funding, Series 1987,
8.200%, 12/01/12
1,000,000 Clermont County, Ohio Waterworks Revenue, 12/01 at 102 AAA 1,100,600
6.625%, 12/01/13
Cleveland, Ohio:
1,010,000 7.500%, 8/01/08 2/03 at 100 AAA 1,148,956
1,010,000 7.500%, 8/01/09 2/03 at 100 AAA 1,148,956
790,000 Cleveland, Ohio, City School District, 8.250%, 12/01/08 12/01 at 102 Aaa 920,002
1,000,000 Cleveland, Ohio, Public Power System Revenue, 8/97 at 102 AAA 1,027,610
Improvement First Mortgage, 8.375%, 8/01/17
</TABLE>
____
23
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRE-REFUNDED - CONTINUED
$ 10,000 Cleveland, Ohio, Waterworks Revenue, First Mortgage, 1/02 at 102 AAA $ 10,933
Series F, 1992-B, 6.500%, 1/01/11
1,000,000 Coldwater, Ohio, Exempt Village School District, 12/99 at 102 AAA 1,085,010
7.000%, 12/01/13
1,250,000 Cuyahoga County, Ohio, Hospital Revenue, Deaconess 10/00 at 103 N/R 1,392,163
Hospital, Series B, 7.450%, 10/01/18
1,000,000 Cuyahoga County, Ohio, Hospital Revenue, 1/99 at 102 AAA 1,059,490
Improvement and Refunding, University Hospitals
Health System, Series A, 6.875, 1/15/19
4,000,000 Cuyahoga County, Ohio, Hospital Revenue, Fairview 8/99 at 102 Aaa 4,325,240
General Hospital, 7.375%, 8/01/19
5,270,000 Cuyahoga County, Ohio, Improvement Revenue, 6/99 at 102 N/R 5,708,728
District System, Medical Center Company Project,
7.800%, 6/01/09
1,000,000 Delphos, Ohio, Sewer System Mortgage Revenue, 9/00 at 102 AAA 1,100,680
7.250%, 9/01/20
2,600,000 Erie County, Ohio, Franciscan Services Corporation 1/99 at 102 N/R 2,777,788
Revenue, Providence Hospital Inc., Series A,
7.625%, 1/01/19
1,500,000 Findlay, Ohio, Sewer System, 7.200%, 8/01/11 8/99 at 102 AA- 1,616,580
1,850,000 Franklin County, Ohio, Hospital Revenue, Refunding 5/00 at 102 AAA 2,023,734
and Improvement, Riverside United Hospital,
7.250%, 5/15/20
1,000,000 Franklin County, Ohio, Hospital Revenue, Refunding 5/00 at 102 AAA 1,103,500
and Improvement, Riverside United, Series B,
7.600%, 5/15/20
250,000 Fremont, Ohio, Sewer System Mortgage Revenue, 12/97 at 102 A- 260,293
8.100%, 12/01/07
1,000,000 Gahanna, Jefferson City School District Ohio, 12/00 at 102 N/R 1,101,480
Series A, School Building Construction,
7.125%, 12/01/14
250,000 Grandview Heights, Ohio, Mortgage Revenue, Library 12/97 at 102 N/R 260,500
Building, 8.250%, 12/01/07
6,750,000 Hamilton, Ohio, Electric System Mortgage Revenue, 10/98 at 102 AAA 7,227,428
Mortgage, Series B, 8.000%, 10/15/22
</TABLE>
____
24
<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>
PRE-REFUNDED - CONTINUED
$1,495,000 Hamilton County, Ohio, Mortgage Revenue, FHA 8/00 at 101 1/4 AA- $ 1,655,354
Insured, Judson Care Center, Series A,
7.800%, 8/01/19
2,325,000 Hancock County, Ohio, Hospital Revenue, 11/98 at 103 A+ 2,504,165
Blanchard Valley Hospital, 7.625%, 11/15/14
720,000 Huber Heights, Ohio, 9.250%, 12/01/08 12/97 at 102 N/R 753,754
1,000,000 Hudson, Ohio, Local School District, Series A, 12/00 at 102 A1 1,102,520
7.100%, 12/15/13
1,000,000 Hudson, Ohio, Local School District, Series A, 12/00 at 102 A1 1,104,250
School Facilities Improvement, 7.100%, 12/15/14
1,575,000 Lorain, Ohio, Sewer System Mortgage Revenue, 4/98 at 102 N/R 1,668,524
Refunding, 8.750%, 4/01/11
1,500,000 Lucas County, Ohio, Hospital Revenue, Flower 12/01 at 102 BBB+ 1,732,770
Memorial Hospital, Series A, 8.125%, 12/01/11
1,150,000 Marion County, Ohio, Health Care Facility 12/99 at 103 N/R 1,300,110
Revenue Refunding, United Church Homes Inc.,
8.875%, 12/01/12
1,000,000 Marysville, Ohio, Exempt Village School District, 12/00 at 102 AAA 1,105,950
7.200%, 12/01/10
1,250,000 Marysville, Ohio, Water System Mortgage Revenue, 12/01 at 101 AAA 1,386,963
7.050%, 12/01/21
1,850,000 Massillon, Ohio, City School District, 12/00 at 102 AAA 2,046,008
7.200%, 12/01/11
1,000,000 Mentor, Ohio, Exempt Village School District, 12/02 at 100 AAA 1,091,420
7.400%, 12/01/11
3,000,000 Middleburg Heights, Ohio, Hospital Revenue, 8/01 at 102 AAA 3,348,900
Improvement, Southwest General Hospital,
7.200%, 8/15/19
Ohio Housing Finance Agency, Single Family
Mortgage Revenue, Mandatory Redemption:
6,460,000 0.000%, 1/15/15 1/11 at 67 13/32 AAA 2,070,558
5,700,000 0.000%, 1/15/15 7/11 at 70 15/32 AAA 1,869,314
20,000 Ohio State Building Authority, Frank J. Lausch 4/03 at 100 AAA 24,163
State Office Building, Series A, Cleveland,
10.125%, 10/01/06
3,250,000 Ohio State Building Authority, Correctional 8/99 at 102 Aaa 3,514,712
Facilities, Series A, 7.350%, 8/01/06
</TABLE>
____
25
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-REFUNDED - CONTINUED
<S> <C> <C> <C> <C>
$2,660,000 Ohio State Higher Educational Facility, 10/97 at 102 AA- $ 2,743,870
Commission Revenue, Case Western
Reserve Project, Series A, 7.700%, 10/01/18
1,000,000 Ohio State Higher Educational Facility, 5/00 at 100 AAA 1,078,590
Commission Revenue, Ohio Northern
University Project, 7.300%, 5/15/10
250,000 Ohio State Higher Educational Facility, 12/97 at 102 N/R 260,780
Commission Revenue, Mortgage,
Ohio Dominican College Project, 8.500%, 12/01/07
1,400,000 Ohio State Higher Educational Facility, 10/97 at 102 Aaa 1,453,200
Commission Revenue, Mortgage, John Carroll
University Project, 9.250%, 10/01/07
1,000,000 Ohio State Higher Educational Facility, 11/97 at 102 AAA 1,037,600
Commission Revenue, Ohio Wesleyan
University Project, 7.650%, 11/15/07
25,000 Ohio State Mortgage Revenue, Odd Fellows Home, 8/97 at 103 AAA 25,927
Ohio Nurse Project, Series A, 8.150%, 8/01/02
1,900,000 Ohio State Public Facilities Commission, 5/99 at 102 AA- 2,038,414
Higher Education Facilities, Series A, 7.250%,
5/01/04
1,000,000 Parma, Ohio, 7.600%, 12/01/11 12/00 at 102 A 1,119,490
1,600,000 Pickerington, Ohio Local 12/00 at 102 AAA 1,778,703
School District, Series B, 7.250%, 12/01/13
2,000,000 Puerto Rico Commonwealth, 7/98 at 102 AAA 2,122,360
Public Improvement, Series A, 7.750%, 7/01/06
780,000 Puerto Rico Commonwealth, 7/98 at 102 A 829,428
8.000%, 7/01/07
Puerto Rico Commonwealth,
Aqueduct and Sewer Authority Revenue, Series A:
1,000,000 7.900%, 7/01/07 7/98 at 102 AAA 1,062,690
3,600,000 7.875%, 7/01/17 7/98 at 102 AAA 3,824,783
700,000 Puerto Rico Commonwealth, 7/00 at 102 AAA 780,800
Highway Authority, Highway Revenue,
Series Q, 7.750%, 7/01/10
2,000,000 Puerto Rico Electric Power Authority, Formerly 7/97 at 102 AAA 2,049,420
Puerto Rico Commonwealth, Water Resource
Authority Power, Series K, 9.375%, 7/01/17
1,500,000 Puerto Rico Electric Power Authority, Formerly
Puerto Rico Commonwealth, Water Resource Authority 7/01 at 102 Aaa 1,667,954
Power, Series P, 7.000%, 7/01/21
</TABLE>
____
26
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-REFUNDED - CONTINUED
<S> <C> <C> <C> <C>
$1,250,000 Ross County, Ohio, Hospital Revenue, Medical 12/97 at 103 N/R $ 1,309,900
Center Hospital Project, 7.500%, 12/01/14
605,000 Scioto County, Ohio, 7.150%, 8/01/11 8/01 at 101 N/R 669,940
750,000 Southwest Local School District, Ohio, Hamilton 12/99 at 103 AAA 831,997
County, 7.650%, 12/01/10
1,000,000 Springfield, Ohio, City School District Clark 12/01 at 102 AAA 1,104,770
County, 6.600%, 12/01/12
1,500,000 Stark County, Ohio, Sanitation and Sewer System 11/98 at 102 AAA 1,605,300
Revenue, 7.750%, 11/15/18
1,220,000 Trumbull County, Ohio, Hospital Revenue 11/97 at 102 AAA 1,264,346
Refunding, St. Joseph Riverside
Hospital, 7.750%, 11/01/13
2,000,000 University of Cincinnati, Ohio, General Receipts, 6/99 at 100 AA- 2,115,340
Series I, 7.300%, 6/01/09
1,750,000 University of Toledo, Ohio, General Receipt, 6/98 at 102 AAA 1,849,872
7.700%, 6/01/18
Warren, Ohio:
1,500,000 7.750%, 11/01/10 11/98 at 102 BBB+ 1,681,904
1,250,000 8.625%, 11/15/13 11/00 at 102 BBB+ 1,352,788
1,500,000 Westerville, Ohio, Minerva Park and Blendon Joint 9/01 at 102 AAA 1,671,254
Township, Hospital District Revenue, Improvement,
St. Anns Hospital, Series A, 7.100%, 9/15/21
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL TAX REVENUE - 3.7%
550,000 Columbiana County, Ohio, County Jail Facility, 12/04 at 102 AA 599,610
6.600%, 12/01/17
90,000 East Cleveland, Ohio, Revenue, Local Government No Opt. Call N/R 91,476
Fund, 7.900%, 12/01/97
24,850,000 Puerto Rico Commonwealth, Highway and 7/16 at 100 A 24,168,364
Transportation Authority, Highway
Revenue, Series Y, 5.500%, 7/01/36
- ------------------------------------------------------------------------------------------------------------------------------------
STATE/TERRITORIAL GENERAL OBLIGATIONS - 1.5%
1,000,000 Ohio State, Improvement, 6.000%, 8/01/10 No Opt. Call AA+ 1,075,020
Ohio State, Infrastructure Improvement:
750,000 6.200%, 8/01/13 8/05 at 102 AA+ 799,133
2,000,000 6.200%, 8/01/14 8/05 at 102 AA+ 2,122,960
7,640,000 Ohio State, 0.000%, 8/01/13 No Opt. Call AAA 3,142,637
</TABLE>
____
27
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
STATE/TERRITORIAL GENERAL OBLIGATIONS - CONTINUED
<S> <C> <C> <C> <C>
$220,000 Puerto Rico Commonwealth, Refunding, 7/98 at 102 A $ 233,597
8.000%, 7/01/07
2,700,000 Puerto Rico Public Buildings Authority, No Opt. Call A 2,662,631
Revenue Refunding, Guaranteed,
Series L, 5.500%, 7/01/21
- --------------------------------------------------------------------------------------------------------------------------------
$653,755,000 Total Investments - (cost $613,643,604) - 97.8% 651,306,123
- --------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES - 1.5%
$800,000 Cuyahoga County, Ohio, University Hospital of A-1 800,000
Cleveland, Series 1985 Variable Rate Demand
Bonds, 4.200%, 1/01/16
6,300,000 Ohio Air Quality Development Authority, A-1+ 6,300,000
Cincinnati Gas and Electric Company, Variable Rate
Demand Bonds, 1995 Series A, 4.050%, 9/01/30
2,900,000 Ohio State Pollution Control, Series 1995, A-1+ 2,900,000
Variable Rate Demand Bonds, 4.000%, 5/01/22
- --------------------------------------------------------------------------------------------------------------------------------
$10,000,000 Total Temporary 10,000,000
- --------------------------------------------------------------------------------------------------------------------------------
Investments - 1.5%
------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.7% 4,621,036
------------------------------------------------------------------------------------------------------
Net Assets - 100% $665,927,159
------------------------------------------------------------------------------------------------------
</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.
(WI) Security purchased on a when-issued basis (see
note 1 of the Notes to Financial Statements).
(DD) A portion of security purchased on a delayed
delivery basis (see note 1 of the Notes to
Financial Statements).
+ 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.
____
28
<PAGE>
STATEMENT OF NET ASSETS Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
MAY 31, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
OHIO
- ---------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $ 651,306,123
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 10,000,000
Cash 3,238,080
Receivables:
Investments sold 1,399,214
Interest 12,865,976
Shares sold 417,475
Other assets 23,066
- ---------------------------------------------------------------------------------------------
Total assets 679,249,934
- ---------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Investments purchased 8,513,037
Shares redeemed 1,180,952
Accrued expenses:
Management fees (note 6) 212,845
12b-1 distribution and service fees (notes 1 and 6) 105,937
Other 326,706
Dividends payable 2,983,298
- ---------------------------------------------------------------------------------------------
Total liabilities 13,322,775
- ---------------------------------------------------------------------------------------------
Net assets (note 7) $ 665,927,159
=============================================================================================
CLASS A SHARES (NOTE 1)
Net assets $ 463,253,335
Shares outstanding 40,585,561
Net asset value and redemption price per share $ 11.41
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.91
=============================================================================================
CLASS B SHARES (NOTE 1)
Net assets $ 1,649,262
Shares outstanding 144,509
Net asset value, offering and redemption price per share $ 11.41
=============================================================================================
CLASS C SHARES (NOTE 1)
Net assets $ 40,713,033
Shares outstanding 3,567,535
Net asset value, offering and redemption price per share $ 11.41
============================================================================================
CLASS R SHARES (NOTE 1)
Net assets $ 160,311,529
Shares outstanding 14,045,266
Net asset value, offering and redemption price per share $ 11.41
=============================================================================================
</TABLE>
See accompanying notes to financial statements.
____
29
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED May 31, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
Ohio*
- ---------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C>
Tax-exempt interest income (note 1) $ 34,200,227
- ---------------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 2,785,915
12b-1 service fees - Class A (notes 1 and 6) 1,505,646
12b-1 distribution and service fees - Class B (notes 1 and 6) 2,523
12b-1 distribution and service fees - Class C (notes 1 and 6) 341,522
Shareholders' servicing agent fees and expenses 356,277
Custodian's fees and expenses 143,250
Trustees' fees and expenses (note 6) 12,863
Professional fees 28,503
Shareholders' reports - printing and mailing expenses 80,441
Federal and state registration fees 11,198
Other expenses 18,769
- ---------------------------------------------------------------------------------------------
Total expenses before reimbursement 5,286,907
Expense reimbursement (note 6) (355,267)
- ---------------------------------------------------------------------------------------------
Net expenses 4,931,640
- ---------------------------------------------------------------------------------------------
Net investment income 29,268,587
- ---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 4,460,158
Net change in unrealized appreciation or depreciation of investments 4,107,165
- ---------------------------------------------------------------------------------------------
Net gain from investments 8,567,323
- ---------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 37,835,910
=============================================================================================
</TABLE>
* Information represents eight months of Flagship Ohio and four months of
Nuveen Flagship Ohio (see note 1 of the Notes to Financial Statements)
____
30
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLAGSHIP
OHIO* OHIO
-------------------------------------------
YEAR ENDED 5/31/97 YEAR ENDED 5/31/97
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 29,268,587 $ 25,967,928
Net realized gain from investment transactions
(notes 1 and 4) 4,460,158 1,077,770
Net change in unrealized appreciation or depreciation
of investments 4,107,165 (10,640,829)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 37,835,910 16,404,869
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (24,358,638) (24,658,411)
Class B (10,649) N/A
Class C (1,876,872) (1,590,477)
Class R (2,962,615) N/A
- ---------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (29,208,774) (26,248,888)
- ---------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from shares issued in the reorganization
of Nuveen Ohio (note 1) 183,170,717 --
Net proceeds from shares issued as a capital contribution 50,000 --
Net proceeds from sale of shares 53,603,783 53,249,272
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 14,753,008 15,315,498
- ---------------------------------------------------------------------------------------------------------------------
251,577,508 68,564,770
- ---------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (72,294,456) (54,731,176)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 179,283,052 13,833,594
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets 187,910,188 3,989,575
Net assets at the beginning of year 478,016,971 474,027,396
- ---------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 665,927,159 $ 478,016,971
=====================================================================================================================
Balance of undistributed net investment income at end of year $ 59,813 $ --
=====================================================================================================================
</TABLE>
* Information represents eight months of Flagship Ohio and four months of
Nuveen Flagship Ohio (see note 1 of the Notes to Financial Statements).
N/A - Flagship Ohio was not authorized to issue Class B or Class R Shares.
____
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Flagship Multistate Trust IV (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Ohio 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 Ohio Double Tax Exempt
Fund ("Flagship Ohio") and Nuveen Ohio Tax-Free Value Fund ("Nuveen Ohio")
reorganized into Nuveen Flagship Ohio Municipal Bond Fund ("Nuveen Flagship
Ohio"). Prior to the reorganization, Flagship Ohio was a sub-trust of the
Flagship Tax Exempt Funds Trust, while Nuveen Ohio was a series of the Nuveen
Multistate Tax Free Trust. Nuveen Ohio had a fiscal year end of February 28
prior to being reorganized into Nuveen Flagship Ohio which has retained the
fiscal year end of Flagship Ohio.
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 when-issued and delayed delivery purchase commitments of
$7,532,829.
____
32
<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
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 Ohio 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 Ohio 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.
____
33
<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.
____
34
<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
Ohio * Ohio
-----------------------------------------------------------------------
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 Ohio:
Class A 1,658,349 $ 18,937,973 -- $ --
Class B -- -- N/A N/A
Class C 257,097 2,935,519 -- --
Class R 14,124,377 161,297,225 N/A N/A
Shares issued as a
capital contribution:
Class A 1,095 12,500 -- --
Class B 1,095 12,500 N/A N/A
Class C 1,095 12,500 -- --
Class R 1,095 12,500 N/A N/A
Shares sold:
Class A 3,479,121 39,481,904 3,527,301 40,460,865
Class B 143,044 1,632,067 N/A N/A
Class C 777,074 8,826,593 1,114,495 12,788,407
Class R 320,322 3,663,219 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 1,078,011 12,246,653 1,246,857 14,270,782
Class B 370 4,189 N/A N/A
Class C 83,238 991,709 91,272 1,044,716
Class R 133,093 1,510,457 N/A N/A
- -------------------------------------------------------------------------------------------------------------------
22,058,476 251,577,508 5,979,925 68,564,770
- -------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (5,159,717) (58,567,125) (4,213,105) (48,146,969)
Class B -- -- N/A N/A
Class C (668,440) (7,657,334) (577,507) (6,584,207)
Class R (533,621) (6,069,997) N/A N/A
- -------------------------------------------------------------------------------------------------------------------
(6,361,778) (72,294,456) (4,790,612) (54,731,176)
- -------------------------------------------------------------------------------------------------------------------
Net increase 15,696,698 $179,283,052 1,189,313 $ 13,833,594
===================================================================================================================
</TABLE>
* Information represents eight months of Flagship Ohio and four months of
Nuveen Flagship Ohio (see note 1).
N/A - Flagship Ohio was not authorized to issue Class B or Class R Shares.
____
35
<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
OHIO
- --------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0505
Class B .0435
Class C .0455
Class R .0525
================================================================================
</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
OHIO*
- --------------------------------------------------------------------------------
<S> <C>
PURCHASES
Investments in municipal securities $ 90,069,999
Investments in municipal securities in the reorganization
of Nuveen Ohio 170,917,634
Temporary municipal investments 19,600,000
SALES
Investments in municipal securities 101,836,826
Temporary municipal investments 9,600,000
================================================================================
</TABLE>
* Information represents eight months of Flagship Ohio and four months of
Nuveen Flagship Ohio (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 $87,848
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 2002.
5. UNREALIZED APPRECIATION (DEPRECIATION)
At May 31, 1997, net unrealized appreciation aggregated $37,662,519 of which
$38,066,832 related to appreciated securities and $404,313 related to
depreciated securities.
____
36
<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 Ohio 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
$870,900 of which approximately $750,000 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 $207,500 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 $27,600 of CDSC on share redemptions during the fiscal
year ended May 31, 1997.
____
37
<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
OHIO
- --------------------------------------------------------------------------------
<S> <C>
Capital paid-in $628,292,675
Balance of undistributed net investment income 59,813
Accumulated net realized gain (loss) from investment transactions (87,848)
Net unrealized appreciation of investments 37,662,519
- --------------------------------------------------------------------------------
Net assets $665,927,159
================================================================================
</TABLE>
____
38
<PAGE>
FINANCIAL HIGHLIGHTS
____
39
<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
------------------------ ----------------------
Net
NUVEEN FLAGSHIP OHIO++ 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 (6/85)
1997 $11.21 $.61 $ .20 $(.61) $ -- $11.41 7.38%
1996 11.43 .62 (.21) (.63) -- 11.21 3.59
1995 11.21 .64 .22 (.64) -- 11.43 7.99
1994 11.59 .64 (.38) (.64) -- 11.21 2.24
1993 11.05 .66 .54 (.66) -- 11.59 11.20
1992 10.72 .68 .33 (.68) -- 11.05 9.77
1991 10.45 .68 .28 (.69) -- 10.72 9.57
1990 10.54 .69 (.09) (.69) -- 10.45 5.86
1989 10.04 .69 .51 (.70) -- 10.54 12.36
1988 9.82 .71 .23 (.71) (.01) 10.04 10.12
Class B (2/97)
1997(c) 11.42 .17 (.01) (.17) -- 11.41 1.45
Class C (8/93)
1997 11.21 .55 .20 (.55) -- 11.41 6.80
1996 11.43 .55 (.21) (.56) -- 11.21 3.03
1995 11.20 .57 .23 (.57) -- 11.43 7.50
1994(C) 11.69 .46 (.49) (.46) -- 11.20 (.17)+
Class R (2/97)
1997(C) 11.42 .21 (.01) (.21) -- 11.41 1.77
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997, reflects the
financial highlights of Flagship Ohio.
(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.
____
40
<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>
$463,253 .96% 5.32% .89% 5.39% 17%
443,077 1.02 5.31 .92 5.41 31
445,566 1.03 5.70 .95 5.78 31
445,272 1.02 5.39 .93 5.48 9
410,467 1.02 5.75 .96 5.81 15
325,273 .99 6.20 .95 6.24 18
268,213 1.02 6.53 1.02 6.53 14
231,311 1.01 6.51 .96 6.56 42
195,135 1.03 6.69 .93 6.79 37
157,511 1.01 7.03 .88 7.16 85
1,649 1.60+ 4.63+ 1.60+ 4.63+ 17
40,713 1.51 4.77 1.44 4.84 17
34,939 1.56 4.75 1.47 4.84 31
28,461 1.58 5.13 1.50 5.21 31
25,674 1.60+ 4.65+ 1.46+ 4.79+ 9
160,312 .65+ 5.65+ .65+ 5.65+ 17
- ------------------------------------------------------------------------------------------------
</TABLE>
____
41
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND:
We have audited the accompanying statement of net assets of Nuveen Flagship Ohio
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
Ohio 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
____
42
<PAGE>
SHAREHOLDER MEETING REPORT
FLAGSHIP OHIO
<TABLE>
<CAPTION>
A Shares C Shares
- --------------------------------------------------------------------------------
Directors
================================================================================
<S> <C> <C> <C>
Bremner For 33,115,271 3,091,722
Withhold 800,015 39,335
-------------------------------------------------
Total 33,915,286 3,131,057
================================================================================
Brown For 33,115,902 3,091,722
Withhold 799,384 39,335
-------------------------------------------------
Total 33,915,286 3,131,057
================================================================================
Dean For 33,113,655 3,091,722
Withhold 801,631 39,335
-------------------------------------------------
Total 33,915,286 3,131,057
================================================================================
Impellizzeri For 33,115,271 3,091,722
Withhold 800,015 39,335
-------------------------------------------------
Total 33,915,286 3,131,057
================================================================================
Rosenheim For 33,107,199 3,091,722
Withhold 808,087 39,335
-------------------------------------------------
Total 33,915,286 3,131,057
================================================================================
Sawers For 33,115,902 3,091,722
Withhold 799,384 39,335
-------------------------------------------------
Total 33,915,286 3,131,057
================================================================================
Schneider For 33,112,353 3,091,722
Withhold 802,933 39,335
-------------------------------------------------
Total 33,915,286 3,131,057
================================================================================
Schwertfeger For 33,113,655 3,091,722
Withhold 801,631 39,335
-------------------------------------------------
Total 33,915,286 3,131,057
================================================================================
ADVISORY AGREEMENT For 27,947,386 2,342,437
Against 718,977 8,303
Abstain 1,189,113 133,244
-------------------------------------------------
Total 29,855,476 2,483,984
================================================================================
Broker Non Votes 4,059,810 647,073
================================================================================
12b-1 PLAN For 27,175,009 2,291,731
Against 1,026,187 37,567
Abstain 1,654,281 154,687
-------------------------------------------------
Total 29,855,477 2,483,985
================================================================================
Broker Non Votes 4,059,809 647,072
================================================================================
REORGANIZATION For 18,984,348 1,630,686
Against 546,366 9,137
Abstain 1,098,096 63,157
-------------------------------------------------
Total 20,628,810 1,602,980
================================================================================
Broker Non Votes 13,286,476 1,528,077
================================================================================
</TABLE>
____
43
<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.
____
44
<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
____
45
<PAGE>
[PHOTO OF John Nuveen, Jr. APPEARS HERE]
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
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 board 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-trade 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.
Wisconsin
[PHOTO APPEARS HERE]
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Wisconsin Overview
9 Financial Section
27 Shareholder Meeting Report
31 Shareholder Information
32 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
Wisconsin 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
7.40% 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 5.56% for Class A shares. To
match this yield, investors in the 36% combined federal and state income tax
bracket would have had to earn at least 8.69% 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>
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 Wisconsin Municipal Bond Fund performed well over the past year, rewarding
investors with a total return on net asset value for the year of 7.40% for Class
A shares, including price changes and reinvested dividends. Because of the
difficulty in finding bonds that are exempt from state as well as federal income
taxes, the fund lagged behind the Lehman Municipal Bond Index. However, the fund
performed well compared with its peers and reflects the nature of the Wisconsin
municipal bond market at this time.
What strategies did you employ to add value?
We continue to meet the investment goals of the fund although it is difficult to
find Wisconsin bonds that meet the credit quality standards of the fund. In-
state securities now represent 62% of total assets and the fund is well-
diversified across credit sectors with just over 12% invested in each of the
healthcare, hospital and multi-family housing sectors.
What is the current status of Wisconsin's municipal market?
The municipal bond market remains healthy in Wisconsin. The strong Midwest
economy has resulted in credit upgrades around the region and has been a factor
municipal bond prices. Although new issue volume dropped 12% across the state,
municipal issuance still exceeded $1.7 billion in the first half of the year.
The difficulty in finding bonds that are exempt from both state and federal
income tax is a perennial problem. Individual income taxes represent the largest
source of state revenues, which accounts for the demand for these double-exempt
bonds. Evidence of the state's economic boom is apparent as property values
increased at close to 8.0% annually in each of the last four years, and the
median household income has surpassed that of the nation as a whole.
4
<PAGE>
What is the current outlook for the municipal market?
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>
Wisconsin
Overview
Credit Quality
[Pie Chart Appears Here]
BBB/NR 37%
A 22%
AA 7%
AAA 34%
Diversification
[Pie Chart Appears Here]
Hospitals 25%
Utility 7%
Housing Facilities 17%
Escrowed Bonds 5%
Other 18%
Pollution Control 8%
Tax Revenue 14%
General Obligations 6%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fund Highlights
================================================================================
Share Class A B C R
Inception Date 6/94 2/97 2/97 2/97
- --------------------------------------------------------------------------------
Net Asset Value (NAV) $9.80 $9.82 $9.82 $9.82
================================================================================
================================================================================
Total Net Assets ($000) $14,141
- --------------------------------------------------------------------------------
Average Weighted Maturity (years) 20.60
- --------------------------------------------------------------------------------
Duration (years) 8.37
================================================================================
Annualized Total Return/1/
================================================================================
Share Class A(NAV) A(Offer) B C R
1-Year 7.40% 2.89% 6.98% 7.20% 7.67%
- --------------------------------------------------------------------------------
Since Inception 6.02% 4.51% 5.49% 5.70% 6.11%
================================================================================
Tax-Free Yields
================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.16% 4.94% 4.40% 4.59% 5.34%
- --------------------------------------------------------------------------------
SEC 30-Day Yld 5.56% 5.32% 4.81% 5.01% 5.76%
- --------------------------------------------------------------------------------
Taxable Equiv Yld/2/ 8.69% 8.31% 7.52% 7.83% 9.00%
================================================================================
</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
2.98% and 4.28%, respectively.
/2/ Based on SEC yield and a combined federal and state income tax rate of 36%.
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 Wisconsin 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 Wisconsin Municipal Wisconsin Municipal
Bond Index Bond Fund (NAV) Bond Fund (Offer)
<S> <C> <C> <C>
June 1994 10,000 10,000 9,580
May 1995 10,573.4 10,381.2 9,945.19
May 1996 11,413.9 11,055.3 10,590.9
June 1997 12,459.9 11,914.2 11,413.8
</TABLE>
... Lehman Brothers Municipal Bond Index $12,460
... Nuveen Flagship Wisconsin Municipal Bond Fund (NAV) $11,914
... Nuveen Flagship Wisconsin Municipal Bond Fund (Offer) $11,414
Past performance is not predictive of future performance.
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
June 1996 0.04139
July 1996 0.04277
August 1996 0.04277
September 1996 0.04139
October 1996 0.04277
November 1996 0.04139
December 1996 0.04277
January 1997 0.04289
February 1997 0.0421
March 1997 0.0421
April 1997 0.0421
May 1997 0.0421
</TABLE>
7
<PAGE>
Financial Section
Contents
10 Portfolio of Investments
14 Statement of Net Assets
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Notes to Financial Statements
23 Financial Highlights
26 Independent Auditors' Report
9
<PAGE>
Portfolio of Investments
Nuveen Flagship Wisconsin
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 2.2%
$ 325,000 University of Puerto Rico, University Revenues, 6/05 at 101 1/2 AAA $ 311,448
Series M, 5.250%, 6/01/25
- ----------------------------------------------------------------------------------------------------------------------
Health Care -- 12.3%
Sheboygan County, Wisconsin, Housing
Authority, Housing Revenue Refunding,
Rocky Knoll Health Center Project:
150,000 5.300%, 12/01/17 12/04 at 100 A1 145,710
195,000 5.300%, 12/01/18 12/04 at 100 A1 188,803
395,000 5.300%, 12/01/19 12/04 at 100 A1 381,661
1,000,000 Superior, Wisconsin, Housing Authority Housing 7/04 at 102 N/R 1,018,790
Revenue Refunding, GNMA Collateralized,
St. Francis Project, 6.150%, 7/20/31
- ----------------------------------------------------------------------------------------------------------------------
Hospitals -- 12.2%
575,000 Puerto Rico Industrial Tourist Educational Medical and 7/05 at 102 AAA 605,234
Environmental Control Facilities Financing Authority,
Hospital Revenue, Hospital Auxilio Mutuo
Obligation Group, Series A, 6.250%, 7/01/24
450,000 Puerto Rico Industrial Tourist Educational Medical 8/05 at 101 1/2 AAA 463,847
and Environmental Control Facilities Financing
Authority, Hospital Revenue, Refunding, Pila
Hospital Project A, 5.875%, 8/01/12
100,000 Superior, Wisconsin, Redevelopment Authority 5/02 at 102 AA 102,703
Revenue, Superior Memorial Hospital Mortgage,
5.300%, 5/01/04
Superior, Wisconsin, Redevelopment Authority
Revenue, Superior Memorial Hospital Mortgage:
210,000 5.300%, 11/01/04 5/02 at 102 AA 215,676
150,000 5.600%, 11/01/07 5/02 at 102 AA 155,336
175,000 5.700%, 11/01/09 5/02 at 102 AA 179,869
- ----------------------------------------------------------------------------------------------------------------------
Housing/Multi Family -- 12.5%
Dane County, Wisconsin, Housing Authority
Multifamily Revenue, Forest Harbor
Apartments Project:
25,000 5.900%, 7/01/12 7/02 at 102 N/R 25,568
50,000 5.950%, 7/01/13 7/02 at 102 N/R 50,841
50,000 6.000%, 7/01/14 7/02 at 102 N/R 50,577
</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/Multi Family -- continued
$ 425,000 Madison, Wisconsin, Community Development 12/02 at 102 N/R $ 430,070
Authority, Multifamily Revenue, Nichols
Station II Project, 4.950%, 12/01/07
200,000 Milwaukee, Wisconsin, Redevelopment Authority Multifamily 8/07 at 102 N/R 199,980
Revenue, City Hall,
6.000%, 8/01/22
Waukesha, Wisconsin, Housing Authority Multifamily
Revenue Refunding, Westgrove Woods,
Series A:
350,000 5.800%, 12/01/18 12/06 at 102 AAA 350,000
650,000 6.000%, 12/01/31 12/06 at 102 AAA 653,751
- ----------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 4.3%
300,000 Puerto Rico Housing Bank and Finance Agency, 4/05 at 102 AAA 305,037
Single Family Mortgage Revenue, Afford Housing
Mortgage, Portfolio I, 6.250%, 4/01/29
300,000 Virgin Islands Housing Finance Authority, Single 3/05 at 102 AAA 307,377
Family Revenue Refunding, Series A, 6.450%, 3/01/16
- ----------------------------------------------------------------------------------------------------------------------
Industrial Development and Pollution Control -- 7.6%
Menomonee Falls, Wisconsin, Community
Development Authority Development Revenue,
Herker Industries Inc. Project:
255,000 5.200%, 3/01/07 3/01 at 103 N/R 257,688
300,000 5.250%, 3/01/08 3/01 at 103 N/R 302,130
500,000 Puerto Rico Ports Authority Revenue, Special 6/06 at 102 BBB- 510,770
Facilities American Airlines,
Series A, 6.250%, 6/01/26
- ----------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Other -- 16.3%
1,500,000 Cudahy, Wisconsin, Community Development 6/06 at 100 N/R 1,481,700
Authority Redevelopment Lease Revenue,
6.000%, 6/01/11
300,000 Madison, Wisconsin, Community Development 3/05 at 100 Aa2 319,479
Authority Revenue, Lease, Monona Terrace
Community and Convention Center Project,
6.100%, 3/01/10
500,000 Wauwatosa, Wisconsin, Redevelopment Authority 12/07 at 100 AAA 502,080
Redevelopment Lease Revenue, 5.650%, 12/01/16
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Wisconsin -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Municipal Revenue/Utility -- 6.9%
Guam Power Authority Revenue, Series A:
$ 315,000 6.300%, 10/01/22 10/02 at 102 BBB $318,556
285,000 5.250%, 10/01/23 10/03 at 102 BBB 253,251
Puerto Rico Electric Power Authority, Power Revenue
Formerly Puerto Rico Commonwealth Water
Resource Authority Power, Series T:
115,000 6.000%, 7/01/16 7/04 at 102 BBB+ 116,884
145,000 6.375%, 7/01/24 7/04 at 102 BBB+ 154,129
125,000 Puerto Rico Telephone Authority Revenue Refunding,
Series M, 5.400%, 1/01/08 1/03 at 101 1/2 A+ 127,133
- -----------------------------------------------------------------------------------------------------------------------
Pre-refunded -- 4.7%
590,000 Puerto Rico Commonwealth, Public Improvement, 7/02 at 101 1/2 AAA 657,962
6.800%, 7/01/21
- -----------------------------------------------------------------------------------------------------------------------
Special Tax Revenue -- 13.8%
320,000 Puerto Rico Commonwealth Highway and 7/02 at 101 1/2 A 343,606
Transportation Authority, Highway Revenue
Refunding, Series V, 6.625%, 7/01/12
Southeast Wisconsin Professional Baseball Park
District, Sales Tax Revenue:
225,000 5.650%, 12/15/16 3/07 at 101 AAA 226,841
400,000 5.800%, 12/15/26 3/07 at 101 AAA 402,028
1,000,000 Wisconsin Center District, Wisconsin Tax Revenue, 12/06 at 101 A 995,480
Junior Dedicated, Series B, 5.700%, 12/15/20
</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>
State/Territorial General Obligations -- 5.5%
$ 200,000 Puerto Rico Commonwealth Aqueduct and Sewer 7/06 at 101 1/2 A $ 185,060
Authority Revenue Refunding,
5.000%, 7/01/15
600,000 Puerto Rico Public Buildings Authority, 7/03 at 101 1/2 A 599,624
Guaranteed Public Education and Health
Facilities, Refunding, Series M,
5.750%, 7/01/15
- --------------------------------------------------------------------------------------------------------------------
$13,750,000 Total Investments -- (cost $13,612,891) -- 98.3% 13,896,679
=====================-----------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.7% 244,115
-------------------------------------------------------------------------------------------
Net Assets -- 100% $14,140,794
===========================================================================================
* 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.
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Statement of Net Assets
May 31, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Wisconsin
- --------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $13,896,679
Receivables:
Interest 293,446
Shares sold 110,360
Other assets 9,630
- --------------------------------------------------------------------------------
Total assets 14,310,115
- --------------------------------------------------------------------------------
Liabilities
Cash overdraft 66,918
Payable for Shares redeemed 8,440
Accrued expenses:
Management fees (note 6) 756
12b-1 distribution and service fees (notes 1 and 6) 2,406
Other 30,822
Dividends payable 59,979
- --------------------------------------------------------------------------------
Total liabilities 169,321
- --------------------------------------------------------------------------------
Net assets (note 7) $14,140,794
================================================================================
Class A Shares (note 1)
Net assets $14,004,043
Shares outstanding 1,429,209
Net asset value and redemption price per share $ 9.80
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.23
================================================================================
Class B Shares (note 1)
Net assets $ 20,426
Shares outstanding 2,080
Net asset value, offering and redemption price per share $ 9.82
================================================================================
Class C Shares (note 1)
Net assets $ 76,069
Shares outstanding 7,750
Net asset value, offering and redemption price per share $ 9.82
================================================================================
Class R Shares (note 1)
Net assets $ 40,256
Shares outstanding 4,100
Net asset value, offering and redemption price per share $ 9.82
================================================================================
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Statement of Operations Nuveen Municipal Bond Fund
Year ended May 31, 1997 May 31, 1997 Annual Report
<TABLE>
<CAPTION>
Nuveen Flagship
Wisconsin*
- --------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $ 764,472
- --------------------------------------------------------------------------------
Expenses:
Management fees (note 6) 69,139
12b-1 service fees-Class A (notes 1 and 6) 44,299
12b-1 distribution and service fees-Class B (notes 1 and 6) 27
12b-1 distribution and service fees-Class C (notes 1 and 6) 50
Shareholders' servicing agent fees and expenses 16,377
Custodian's fees and expenses 37,281
Trustees' fees and expenses (note 6) 332
Professional fees 7,061
Shareholders' reports - printing and mailing expenses 2,197
Federal and state registration fees 4,867
Organizational expenses (note 1) 32,688
Other expenses 762
- --------------------------------------------------------------------------------
Total expenses before reimbursement 215,080
- --------------------------------------------------------------------------------
Expense reimbursement (note 6) (146,340)
- --------------------------------------------------------------------------------
Net expenses 68,740
- --------------------------------------------------------------------------------
Net investment income 695,732
- --------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 56,143
Net change in unrealized appreciation or depreciation of investments 197,701
- --------------------------------------------------------------------------------
Net gain from investments 253,844
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 949,576
================================================================================
</TABLE>
* Information represents eight months of Flagship Wisconsin and four months of
Nuveen Flagship Wisconsin (see note 1 of the Notes to Financial Statements).
See accompanying notes to financial statements.
15
<PAGE>
Statement of Changes of Net Assets
<TABLE>
<CAPTION>
Nuveen Flagship Flagship
Wisconsin* Wisconsin
- -------------------------------------------------------------------------------------------------------
Year ended Year ended
5/31/97 5/31/96
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 695,732 $ 561,653
Net realized gain (loss) from investment transactions
(notes 1 and 4) 56,143 (9,379)
Net change in unrealized appreciation or depreciation
of investments 197,701 (229,560)
- -------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 949,576 322,714
- -------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (695,122) (567,424)
Class B (113) N/A
Class C (292) --
Class R (179) N/A
- -------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (695,706) (567,424)
- -------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 3,122,525 5,370,133
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 436,454 338,221
- -------------------------------------------------------------------------------------------------------
3,558,979 5,708,354
- -------------------------------------------------------------------------------------------------------
Cost of shares redeemed (2,042,200) (1,371,741)
- -------------------------------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions 1,516,779 4,336,613
- -------------------------------------------------------------------------------------------------------
Net increase in net assets 1,770,649 4,091,903
Net assets at the beginning of year 12,370,145 8,278,242
- -------------------------------------------------------------------------------------------------------
Net assets at the end of year $14,140,794 $12,370,145
=======================================================================================================
Balance of undistributed net investment income at end of year $ 26 $ --
=======================================================================================================
* Information represents eight months of Flagship Wisconsin and four months of Nuveen Flagship
Wisconsin (see note 1 of the Notes to Financial Statements).
N/A--Flagship Wisconsin was not authorized to issue Class B or Class R Shares.
</TABLE>
See accompanying notes to financial statements.
16
<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 IV (the "Trust") is an open-
end investment company registered under the Investment Company Act
of 1940, as amended. The Trust comprises Nuveen Flagship Wisconsin
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 Wisconsin
Double Tax Exempt Fund ("Flagship Wisconsin") was reorganized into
the Trust and renamed Nuveen Flagship Wisconsin Municipal Bond Fund
("Nuveen Flagship Wisconsin").
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.
17
<PAGE>
Notes to Financial Statements -- continued
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
Wisconsin 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
Wisconsin 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 on purchases or 12b-1 distribution or service fees.
Class R Shares are available for purchases of over $1 million and
in other limited circumstances.
18
<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.
Organizational Expenses
The organizational expenses incurred on behalf of the Fund
(approximately $98,000) 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, $32,688 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.
19
<PAGE>
Notes to Financial Statements -- continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Flagship
Wisconsin* Wisconsin
---------------------------------------------------
Year ended 5/31/97 Year ended 5/31/96
---------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 307,424 $ 2,987,828 548,166 $ 5,370,133
Class B 2,074 20,074 N/A N/A
Class C 7,750 75,100 -- --
Class R 4,100 39,523 N/A N/A
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 44,825 436,398 34,403 338,221
Class B 6 56 N/A N/A
Class C -- -- -- --
Class R -- -- N/A N/A
- ----------------------------------------------------------------------------------------------------
366,179 3,558,979 582,569 5,708,354
- ----------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (210,809) (2,042,200) (140,063) (1,371,741)
Class B -- -- N/A N/A
Class C -- -- -- --
Class R -- -- N/A N/A
- ----------------------------------------------------------------------------------------------------
(210,809) (2,042,200) (140,063) (1,371,741)
- ----------------------------------------------------------------------------------------------------
Net increase 155,370 $ 1,516,779 442,506 $ 4,336,613
====================================================================================================
</TABLE>
* Information represents eight months of Flagship Wisconsin and four months of
Nuveen Flagship Wisconsin (see note 1).
N/A--Flagship Wisconsin was not authorized to issue Class B or Class R Shares.
20
<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
Wisconsin
- -------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0420
Class B .0360
Class C .0375
Class R .0435
- -------------------------------------------------------------------------------
</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
Wisconsin*
- -------------------------------------------------------------------------------
<S> <C>
Purchases
Investments in municipal securities $7,247,103
Temporary municipal investments 400,000
Sales
Investments in municipal securities 5,515,347
Temporary municipal investments 400,000
===============================================================================
</TABLE>
* Information represents eight months of Flagship Wisconsin and four months of
Nuveen Flagship Wisconsin (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, Nuveen Flagship Wisconsin had an unused capital loss
carryforward of $7,162 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 2004.
5. Unrealized Appreciation (Depreciation)
At May 31, 1997, net unrealized appreciation aggregated $283,788 of which
$300,925 related to appreciated securities and $17,137 related to depreciated
securities.
21
<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:
<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 Wisconsin 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
$111,000 of which approximately $96,600 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 $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 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
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
Wisconsin
- ---------------------------------------------------------------------------------
<S> <C>
Capital paid-in $13,864,142
Balance of undistributed net investment income 26
Accumulated net realized gain (loss) from investment transactions (7,162)
Net unrealized appreciation of investments 283,788
- ---------------------------------------------------------------------------------
Net assets $14,140,794
=================================================================================
</TABLE>
22
<PAGE>
Financial Highlights
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 WISCONSIN++ 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 (6/94)
1997 $9.61 $.51 $ .19 $(.51) $-- $9.80 7.40%
1996 9.79 .50 (.18) (.50) -- 9.61 3.35
1995(c) 9.58 .49 .21 (.49) -- 9.79 7.36+
Class B (2/97)
1997(c) 9.87 .12 (.06) (.11) -- 9.82 .60
Class C (2/97)
1997(c) 9.87 .13 (.07) (.11) -- 9.82 .65
Class R (2/97)
1997(c) 9.87 .15 (.07) (.13) -- 9.82 .84
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Wisconsin.
(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.
24
<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>
$14,004 1.61% 4.10% .51% 5.20% 42%
12,370 1.51 4.15 .64 5.02 47
8,278 2.31+ 3.33+ .39+ 5.25+ 52
20 2.18+ 3.57+ .94+ 4.81+ 42
76 1.98+ 3.62+ .69+ 4.91+ 42
40 1.28+ 4.39+ - 5.67+ 42
- -------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
Flagship Wisconsin Municipal Bond Fund:
We have audited the accompanying statement of net assets of Nuveen Flagship
Wisconsin 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
Wisconsin 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 Wisconsin
<TABLE>
<CAPTION>
A Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Agreement For 992,119
Against 6,064
Abstain 21,468
---------------------------
Total 1,019,651
- --------------------------------------------------------------------------------
Broker Non Votes 152,581
- --------------------------------------------------------------------------------
Reorganization For 728,968
Against 5,070
Abstain 23,433
---------------------------
Total 757,471
- --------------------------------------------------------------------------------
Broker Non Votes 414,761
- --------------------------------------------------------------------------------
Investment Objective For 700,715
Against 42,806
Abstain 13,949
---------------------------
Total 757,470
- --------------------------------------------------------------------------------
Broker Non Votes 414,762
- --------------------------------------------------------------------------------
Investment Assets For 694,394
Against 49,127
Abstain 13,949
---------------------------
Total 757,470
- --------------------------------------------------------------------------------
Broker Non Votes 414,762
- --------------------------------------------------------------------------------
Type of Securities For 700,156
Against 43,881
Abstain 13,433
---------------------------
Total 757,470
- --------------------------------------------------------------------------------
Broker Non Votes 414,762
- --------------------------------------------------------------------------------
Borrowing For 698,930
Against 45,107
Abstain 13,433
---------------------------
Total 757,470
- --------------------------------------------------------------------------------
Broker Non Votes 414,762
- --------------------------------------------------------------------------------
Pledges For 694,294
Against 49,227
Abstain 13,949
---------------------------
Total 757,470
- --------------------------------------------------------------------------------
Broker Non Votes 414,762
---------------------------
</TABLE>
27
<PAGE>
Shareholder Meeting Report
Flagship Wisconsin -- continued
<TABLE>
<CAPTION>
A Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Senior Securities For 698,414
Against 45,623
Abstain 13,433
------------------------------------------------
Total 757,470
================================================================================
Broker Non Votes 414,762
================================================================================
Underwriting For 703,619
Against 37,187
Abstain 16,664
-----------------------------------------------
Total 757,470
================================================================================
Broker Non Votes 414,762
================================================================================
Real Estate For 696,774
Against 44,548
Abstain 16,148
------------------------------------------------
Total 757,470
================================================================================
Broker Non Votes 414,762
================================================================================
Commodities For 679,958
Against 61,364
Abstain 16,148
------------------------------------------------
Total 757,470
================================================================================
Broker Non Votes 414,762
================================================================================
Loans For 695,699
Against 45,623
Abstain 16,148
------------------------------------------------
Total 757,470
================================================================================
Broker Non Votes 414,762
================================================================================
Short Sales/Margin Purchases For 688,994
Against 54,527
Abstain 13,949
------------------------------------------------
Total 757,470
================================================================================
Broker Non Votes 414,762
================================================================================
Put and Call Options For 686,430
Against 53,301
Abstain 17,739
------------------------------------------------
Total 757,470
================================================================================
Broker Non Votes 414,762
------------------------------------------------
</TABLE>
28
<PAGE>
Nuveen Municipal Bond Fund
May 31, 1997 Annual Report
<TABLE>
<CAPTION>
A Shares
- -------------------------------------------------------------------------
<S> <C> <C>
Industry Concentration For 698,940
Against 45,097
Abstain 13,433
-----------------------------------------
Total 757,470
=========================================================================
Broker Non Votes 414,762
=========================================================================
Affiliate Purchases For 704,135
Against 37,187
Abstain 16,148
-----------------------------------------
Total 757,470
=========================================================================
Broker Non Votes 414,762
=========================================================================
Investment Companies For 700,529
Against 43,508
Abstain 13,433
-----------------------------------------
Total 757,470
=========================================================================
Broker Non Votes 414,762
=========================================================================
12b-1 Fees For 959,764
Against 30,164
Abstain 29,723
-----------------------------------------
Total 1,019,651
=========================================================================
Broker Non Votes 152,581
-----------------------------------------
</TABLE>
29
<PAGE>
Shareholder Meeting Report
Flagship Wisconsin--continued
<TABLE>
<CAPTION>
Directors A Shares
- -----------------------------------------
<S> <C> <C>
Bremner For 1,149,682
Withhold 22,550
-----------------------
Total 1,172,232
- -----------------------------------------
Brown For 1,150,587
Withhold 21,645
-----------------------
Total 1,172,232
- -----------------------------------------
Dean For 1,150,908
Withhold 21,324
-----------------------
Total 1,172,232
- -----------------------------------------
Impellizzeri For 1,150,908
Withhold 21,324
-----------------------
Total 1,172,232
- -----------------------------------------
Rosenheim For 1,149,682
Withhold 22,550
-----------------------
Total 1,172,232
- -----------------------------------------
Sawers For 1,150,908
Withhold 21,324
-----------------------
Total 1,172,232
- -----------------------------------------
Schneider For 1,149,682
Withhold 22,550
-----------------------
Total 1,172,232
- -----------------------------------------
Schwertfeger For 1,150,908
Withhold 21,324
-----------------------
Total 1,172,232
</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
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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]
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.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
<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>
1(a). Declaration of Trust of Registrant. Filed as Exhibit 1(a) to Regis-
trant's Registration Statement on Form N-1A (File No. 333-16611) 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 Ex-
hibit 1(b) to Registrant's Registration Statement on Form N-1A (File
No. 333-16611) 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. 333-16611) and incorporated herein
by reference thereto.
2. By-Laws of Registrant. Filed as Exhibit 2 to Registrant's Registra-
tion Statement on Form N-1A (File No. 333-16611) and incorporated
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. 333-16611)
and incorporated herein by reference thereto.
5. Investment Management Agreement between Registrant and Nuveen Advi-
sory Corp.
5(a). Renewal of Investment Management Agreement dated May 20, 1997.
6. Distribution Agreement between Registrant and John Nuveen & Co. In-
corporated.
6(a). Renewal of Distribution Agreement dated July 31, 1997.
7. Not applicable.
8. Custodian Agreement between Registrant and Chase Manhattan Bank.
9. Transfer Agency and Service Agreement between Registrant and State
Street Bank and Trust Company.
10. Opinion of Fried, Frank, Harris, Shriver & Jacobson.
11. Consent of Deloitte & Touche LLP, Independent Auditors.
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 Statement on Form N-1A (File
No. 333-16611) 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 Exhibit 18
to Registrant's Registration Statement on Form N-1A (File No. 333-
16611) and incorporated herein by reference thereto.
99(a). Original Powers of Attorney for the Trustees authorizing, among oth-
ers, Gifford R. Zimmerman and Larry W. Martin to execute the Regis-
tration Statement.
99(b). Certified copy of Resolution of Board of Trustees authorizing the
signing of the names of trustees and officers on the Registrant's
Registration Statement pursuant to power of attorney. Filed as Ex-
hibit 99(b) to Registrant's Registration Statement on Form N-1A (File
No. 333-16611) and incorporated herein by reference thereto.
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 September 4, 1997:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SERIES RECORD HOLDERS
--------------- --------------
Nuveen Flagship Kansas Municipal Bond Fund
<S> <C>
Class A Shares............................................ 2,776
Class B Shares............................................ 25
Class C Shares............................................ 16
Class R Shares............................................ 7
Nuveen Flagship Kentucky Municipal Bond Fund
Class A Shares............................................ 11,850
Class B Shares............................................ 33
Class C Shares............................................ 868
Class R Shares............................................ 11
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Class A Shares............................................ 141
Class C Shares............................................ 87
Class R Shares............................................ 9
Nuveen Flagship Michigan Municipal Bond Fund
Class A Shares............................................ 3,755
Class B Shares............................................ 26
Class C Shares............................................ 546
Class R Shares............................................ 1,565
Nuveen Flagship Missouri Municipal Bond Fund
Class A Shares............................................ 6,198
Class B Shares............................................ 18
Class C Shares............................................ 173
Class R Shares............................................ 9
Nuveen Flagship Ohio Municipal Bond Fund
Class A Shares............................................ 8,840
Class B Shares............................................ 61
Class C Shares............................................ 707
Class R Shares............................................ 6,106
Nuveen Flagship Wisconsin Municipal Bond Fund
Class A Shares............................................ 714
Class B Shares............................................ 16
Class C Shares............................................ 12
Class R Shares............................................ 8
</TABLE>
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;
C-2
<PAGE>
(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, 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.
C-3
<PAGE>
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 Director 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
President (since July 1996) and Director and formerly Executive Vice President
and Director of The John Nuveen Company, John Nuveen & Co. Incorporated and
Nuveen Institutional Advisory Corp.
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-
Exempt Unit Trust and Nuveen Unit Trusts, 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
C-4
<PAGE>
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
Bruce P. Bedford Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
John P. Amboian Executive Vice President None
333 West Wacker Drive and Chief Financial Officer
Chicago, IL 60606
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
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
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITIONS AND OFFICES OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ----------------------------------------------------------------------------------
<S> <C> <C>
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.
The Chase Manhattan Bank, 4 New York Plaza, 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.
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.
C-6
<PAGE>
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 Reg-
istrant'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 22ND DAY OF
SEPTEMBER, 1997.
NUVEEN FLAGSHIP MULTISTATE TRUST IV
/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 22, 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
Lawrence H. Brown Trustee
Anne E. Impellizzeri Trustee
Peter R. Sawers Trustee /s/ Gifford R.
William J. Schneider Trustee Zimmerman
Judith M. Stockdale Trustee
</TABLE>
By____________________________
Gifford R. Zimmerman
Attorney-in-Fact
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 FILED AS AN
EXHIBIT.
September 22, 1997
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
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.
6(a). Renewal of Distribution Agreement dated July 31,
1997.
8. Custodian Agreement between Registrant and Chase Man-
hattan Bank.
9. Transfer Agency and Service Agreement between Regis-
trant and State Street Bank and Trust Company.
10. Opinion of Fried, Frank, Harris, Shriver & Jacobson.
11. Consent of Deloitte & Touche LLP, Independent Audi-
tors.
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 5
INVESTMENT MANAGEMENT AGREEMENT
-------------------------------
AGREEMENT made as of the 1st day of February, 1997, by and between NUVEEN
FLAGSHIP MULTISTATE TRUST IV, 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, except the Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
the fees shall be computed at the rate of:
Rate Net Assets
---- ----------
.5000% For the first $125 million
.5375% For the next $125 million
.5250% For the next $250 million
.5125% For the next $500 million
.5000% For the next $1 billion
.4750% For assets over $2 billion
2
<PAGE>
For Nuveen Flagship Kentucky Limited Term Municipal Bond Fund, the fees shall be
computed at the rate of:
<TABLE>
<CAPTION>
Rate Net Assets
---- ----------
<S> <C>
.4500% For the first $125 million
.4375% For the next $125 million
.4250% For the next $250 million
.4125% For the next $500 million
.4000% For the next $1 billion
.3750% For assets over $2 billion
</TABLE>
For the month and year in which this Agreement becomes effective, or terminates,
and for any month and year in which a Portfolio is added or eliminated from the
Fund, there shall be an appropriate proration on the basis of the number of days
that the Agreement shall have been in effect, or the Portfolio shall have
existed, during the month and year, respectively. The services of the Adviser to
the Fund under this Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services or other services to others so long as
its services hereunder are not impaired thereby.
3. In addition to the services and facilities described in Section 1, the
Adviser shall assume and pay, but only to the extent hereinafter provided, the
following expenses related to the Nuveen Flagship Ohio Municipal Bond Fund
Portfolio only: (x) any expenses for services rendered by a custodian for the
safekeeping of the Portfolio's securities or property, for keeping its books of
account, for calculating the net asset value of the Portfolio as provided in the
Declaration of Trust of the Fund, and any other charges of the custodian; and
(y) the cost and expenses of the Portfolio's; operations, including compensation
of the trustees, transfer,
3
<PAGE>
dividend disbursing and shareholder service agent expenses, legal fees, expenses
of independent accountants, costs of share certificates, expenses of preparing,
printing and distributing reports to shareholders and governmental agencies, and
all fees payable to Federal, State, or other governmental agencies on account of
the registration of securities issued by the Portfolio, filing of corporate
documents or otherwise. Nothwithstanding the foregoing, the Adviser shall not be
obligated to assume or pay interest, taxes, fees incurred in acquiring and
disposing of portfolio securities or extraordinary expenses of the Portfolio.
The Portfolio shall not incur any obligation for management or administrative
expenses which the Portfolio intends the Adviser to assume and pay hereunder
without first obtaining the written approval of the Adviser.
The foregoing enumerated expenses for the Nuveen Flagship Ohio Municipal
Bond Fund Portfolio are hereby assumed by the Adviser to the extent they,
together with the Adviser's fee payable hereunder (but excluding interest,
taxes, fees incurred in acquiring and disposing of portfolio securities and
extraordinary expenses), exceed during any fiscal year .75 of 1% of the
Portfolio's average net assets for such year; to the extent they do not exceed
such percentages, such expenses shall be properly chargeable to that Portfolio.
If, at the end of any month, the expenses of the Portfolio properly chargeable
to the income account on a year-to-date basis shall exceed the appropriate
percentage of average net assets, the payment to the Adviser for that month
shall be reduced and, if necessary, the Adviser shall assume and pay expenses
pursuant hereto so that the total year-to-date net expense will not exceed such
percentage. As of the end of the Portfolio's fiscal year the foregoing
computation and
4
<PAGE>
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
5
<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.
6
<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.
7
<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.
8
<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.
9
<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 IV
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
10
<PAGE>
Exhibit A
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
11
<PAGE>
EXHIBIT 5(a)
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-----------------------------------
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 20th day of May, 1997 by and between Nuveen Flagship
Multistate Trust IV, 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 IV
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 IV, 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 IV
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>
Exhibit 6(a)
Renewal of Distribution Agreement
---------------------------------
This Agreement made this 31st day of July, 1997 by and between Nuveen Flagship
Multistate Trust IV, a Massachusetts business trust (the "Fund"), and John
Nuveen & Co. Incorporated, a Delaware corporation (the "Underwriter");
WHEREAS, the parties hereto are the contracting parties under that certain
Distribution Agreement (the "Agreement") pursuant to which the Underwriter acts
as agent for the distribution of shares of the Fund; and
WHEREAS, the Agreement terminates August 1, 1997 unless continued in the manner
required by the Investment Company Act of 1940;
WHEREAS, the Board of Trustees of the Fund, at a meeting called for the purpose
of reviewing the Agreement has 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 IV
By: /s/ Gifford R. Zimmerman
----------------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- --------------------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By: /s/ Anna Kucinskis
----------------------------------
Vice President
ATTEST:
/s/ Larry Martin
- --------------------------------
Assistant Secretary
<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>
CUSTODY AGREEMENT
-----------------
THIS AGREEMENT is made as of the 1st day of February, 1997 by and between
NUVEEN FLAGSHIP MULTISTATE TRUST IV (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 currently has authorized the seven series listed on
Appendix A (such series together with all other series subsequently established
by the Fund and made subject to this Contract in accordance with paragraph 33,
being herein referred to as the "Fund(s)"):
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints The Chase Manhattan Bank to act as
custodian of its portfolio securities, cash and other property on the terms set
forth in this Agreement. The Chase Manhattan Bank accepts such appointment and
agrees to furnish the services herein set forth in return for the compensation
as provided in Section 23 of this Agreement.
2. Delivery of Documents. The Fund has furnished The Chase Manhattan Bank
with copies 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
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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;
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(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
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Corporation and of any registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash
or government securities in connection with options purchased, sold or written
by the Fund or commodity futures contracts or options thereon purchased or sold
by the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
10. Instructions Consistent With The Declaration, etc.
(a) Unless otherwise provided in this Agreement, The Chase Manhattan Bank
shall act only upon Proper Instructions. The Chase Manhattan Bank may assume
that any Proper Instructions received hereunder are not in any way inconsistent
with any provision of the Declaration or By-Laws or any vote or resolution of
the Fund's Board of Trustees or any committee thereof. The Chase Manhattan Bank
shall be entitled to rely upon any Proper Instructions actually received by The
Chase Manhattan Bank pursuant to this Agreement. The Fund agrees that The Chase
Manhattan Bank shall incur no liability in acting in good faith upon Proper
Instructions given to The Chase Manhattan Bank, except to the extent such
liability was incurred as a result of The Chase Manhattan Bank's negligence or
willful misconduct. In accord with instructions from the Fund, as
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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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communications or information system, the Fund agrees that The Chase Manhattan
Bank is not responsible for the consequences of the failure of that system to
perform for any reason, beyond the reasonable control of The Chase Manhattan
Bank, or the failure of any communications carrier, utility, or communications
network. In the event that system is inoperable, the Fund agrees that it will
accept the communication of transaction instructions by telephone, facsimile
transmission on equipment compatible to The Chase Manhattan Bank's facsimile
receiving equipment or by letter, at no additional charge to the Fund.
(c) The Chase Manhattan Bank shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund and the maturity
of futures contracts purchased or sold by the Fund) received by The Chase
Manhattan Bank from issuers of the securities being held for the Fund. With
respect to tender or exchange offers, The Chase Manhattan Bank shall transmit
promptly by facsimile to the Fund all written information received by The Chase
Manhattan Bank from issuers of the securities whose tender or exchange is sought
and from the party (or his agents) making the tender or exchange offer. If the
Fund desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Fund shall notify The Chase Manhattan Bank at
least three business days prior to the date on which The Chase Manhattan Bank is
to take such action or upon the date such notification is first received by the
Fund, if later. If any Property registered in the name of a nominee of The
Chase Manhattan Bank is called for partial redemption by the issuer of such
property, The Chase Manhattan Bank is authorized to allot the called portion to
the respective beneficial holders of the Property in such manner deemed to be
fair and equitable by The Chase Manhattan Bank in its sole discretion.
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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
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<PAGE>
with respect to any portfolio securities of the Fund held by The Chase
Manhattan Bank hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed or retired, or
otherwise become payable on the date such securities become payable;
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other
payments and the endorsement for collection of checks, drafts and
other negotiable instruments;
(vi) to effect an exchange of the securities where the par value
is changed, and to surrender securities at maturity or upon an earlier
call for redemption, or when securities otherwise become payable,
against payment therefore in accordance with accepted industry
practice. If any Property registered in the name of a nominee of The
Chase Manhattan Bank is called for partial redemption by the issuer of
such property, The Chase Manhattan Bank is authorized to allot the
called portion to the respective beneficial holders of the Property in
such manner deemed to be fair and equitable by The Chase Manhattan
Bank in its sole discretion.
(b) Miscellaneous Transactions. The Chase Manhattan Bank is authorized to
deliver or cause to be delivered Property against payment or other consideration
or written receipt therefor for examination by a dealer selling for the account
of the Fund in accordance with street delivery custom.
12. Transactions Requiring Instructions. In addition to the actions
requiring Proper Instructions set forth herein, upon receipt of Proper
Instructions and not otherwise, The Chase Manhattan Bank, directly or through
the use of a Securities Depository or Book Entry System, shall:
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(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
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of the securities pledged or hypothecated therefore and upon surrender of the
note or notes evidencing the loan; and
(f) Deliver securities in accordance with the provisions of any agreement
among the Fund, The Chase Manhattan Bank and a broker-dealer registered under
the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any agreement
among the Fund, The Chase Manhattan Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund; and
(h) Deliver securities against payment or other consideration or written
receipt therefore for transfer of securities into the name of the Fund or The
Chase Manhattan Bank or a nominee of either, or for exchange or securities for a
different number of bonds, certificates, or other evidence, representing the
same aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to The Chase Manhattan Bank;
(i) Exchange securities in temporary form for securities in definitive
form;
(j) Surrender, in connection with their exercise, warrants, rights or
similar securities, provided that in each case, the new securities and cash, if
any, are to be delivered to The Chase Manhattan Bank;
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(k) Deliver securities upon receipt of payment in connection with any
repurchase agreement related to such securities entered into by the Fund;
(l) Deliver securities pursuant to any other proper corporate purpose, but
only upon receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or 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
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The Chase Manhattan Bank in advance of receipt of the securities purchased in
the absence of specific written instructions from the Fund to so pay in advance,
The Chase Manhattan Bank shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by The
Chase Manhattan Bank.
14. Sale of Securities. Promptly after each sale of securities by the Fund
at the instruction of the investment advisor, the Fund shall deliver to The
Chase Manhattan Bank (as Custodian) Proper Instructions, specifying with respect
to each such sale; (a) the name of the issuer and the title of the security, (b)
the number of shares or principal amount sold, and accrued interest, if any, (c)
the date of sale, (d) the sale price per unit, (e) the total amount payable to
the Fund upon such sale, (f) the name of the broker through whom or the person
to whom the sale was made and (g) the Fund name. The Chase Manhattan Bank shall
deliver the securities upon receipt of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as set
forth in such Proper Instructions. Subject to the foregoing. The Chase Manhattan
Bank may accept payment in such form as shall be satisfactory to it, and may
deliver securities and arrange for payment in accordance with the customs
prevailing among dealers in securities.
15. Not In Use.
16. Records. The books and records pertaining to the Fund which are in the
possession of The Chase Manhattan Bank shall be the property of the Fund. Such
books and records shall be prepared and maintained as required by the 1940 Act,
as amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representative, shall have access to such books
and records at all times during The Chase Manhattan Bank's normal business
hours, and such books and records shall be surrendered to the Fund promptly upon
request. Upon reasonable request of the fund, copies of any such books and
records at all times during The Chase Manhattan Bank's normal business hours,
and such books and records shall be surrendered to the Fund promptly upon
request. Upon reasonable request of the Fund, copies of any such books and
records
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shall be provided by The Chase Manhattan Bank to the Fund or the Fund's
authorized representative at the Fund's expense.
17. Cooperation with Accountants. The Chase Manhattan Bank shall
cooperate with the Fund's independent certified public accountants and shall
take all reasonable action in the performance of its obligations under this
Agreement to assure that the necessary information is made available to such
accountants for the expression of their unqualified opinion, including but not
limited to the opinion included in the Fund's Form N-1A, Form N-SAR and other
reports to the Securities and Exchange Commission and with respect to any other
requirement of such Commission.
18. Reports to Fund by Independent Public Accountants. The Chase
Manhattan Bank shall provide the Fund, at such times as the Fund may reasonably
require, with reports by independent public accountants on the accounting
system, internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities Depository or Book Entry System,
relating to the services provided by The Chase Manhattan Bank under this
Contract; such reports, shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund to provide reasonable assurance that
any material inadequacies would be disclosed by such examination, and, if there
are no such inadequacies, the reports shall so state.
19. Confidentiality. The Chase Manhattan Bank agrees on behalf of itself
and its employees to treat confidentially and as the proprietary information of
the Fund all records and other information relative to the Fund and its prior,
present or potential Shareholders and relative to the advisors and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after
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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
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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
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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
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<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.
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28. Effective Period; Termination and Amendment.
-------------------------------------------
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that The Chase Manhattan Bank shall not act under Section 8 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities Depository or Book Entry System, as
required by Rule 17f-4 under the Investment Company Act of 1940, as amended;
provided further, however, that the Fund shall not amend or terminate this
Agreement in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust, and further provided, that the Fund
may at any time by action of its Board of Trustees (i) substitute another bank
or trust company for The Chase Manhattan Bank by giving notice as described
above to The Chase Manhattan Bank, or (ii) immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for The Chase
Manhattan Bank by the Comptroller of the Currency or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to The Chase
Manhattan Bank such compensation as may be due as of the date of such
termination and shall likewise reimburse The Chase Manhattan Bank for its costs,
expenses and disbursements.
27
<PAGE>
29. Successor Custodian
If a successor custodian shall be appointed by the Board of Trustees of the
Fund, The Chase Manhattan Bank shall, upon termination, deliver to such
successor custodian at the office of the custodian, duly endorsed and in the
form for transfer, all securities then held by it hereunder and shall transfer
to an account of the successor custodian all of the Fund's securities held in a
Securities Depository or Book Entry System.
If no such successor custodian shall be appointed, The Chase Manhattan Bank
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
The Chase Manhattan Bank on or before the date when such termination shall
become effective, then The Chase Manhattan Bank shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing
business in New York, New York, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
The Chase Manhattan Bank and all instruments held by The Chase Manhattan
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
31
<PAGE>
Appendix A
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
32
<PAGE>
EXHIBIT A
---------
CUSTODY SERVICE FEE
-------------------
Administration and Maintenance Fee
- ----------------------------------
.01375% (1 3/8 Basis Points) on first $10 billion
.00875% (7/8 Basis Point) on second $10 billion
.0075% (3/4 Basis Point) on third $10 billion
.005% (1/2 Basis Point) on remainder
Transaction Fees
- ----------------
$15.00 Per Book Entry Transaction
$25.00 Per Physical Transaction
$35.00 Per Future Contract or Option wire
$8.00 Per outgoing Wire Transfer for ETFs
$5.00 Per incoming and outgoing Wire Transfer
for Open End and Money Market Funds
NOTES:
1. Schedule should be applied to total assets for all Exchange Traded funds,
Open End Load Funds, and Money Market Funds.
2. Add $5.00 per book entry transaction and physical transaction if Custody
inputs trades.
BALANCES
--------
1. During each month, daily net overdrafts are offset by daily net cash
balances dollar for dollar with no penalty or charge for daily net
overdrafts.
2. At the end of each month, the net overdraft for the month incurs an
overdraft charge computed as follows:
The negative net cumulative balance plus 10% reserves multiplied by
the average monthly Fed Funds rate divided by 365 days.
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.
33
<PAGE>
EXHIBIT 9
TRANSFER AGENCY AND SERVICE AGREEMENT
between
NUVEEN FLAGSHIP MULTISTATE TRUST IV
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 IV, 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 seven series, the
following of which will be covered by this Agreement, Nuveen Flagship Kansas
Municipal Bond Fund, Nuveen Flagship Kentucky Municipal Bond Fund, Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund, Nuveen Flagship Michigan
Municipal Bond Fund, Nuveen Flagship Missouri Municipal Bond Fund, Nuveen
Flagship Ohio Municipal Bond Fund, and Nuveen Flagship Wisconsin 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
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<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;
6
<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,
7
<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.
8
<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 IV
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 IV
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: By:
------------------------------- ----------------------------------
Title: Title:
---------------------------- -------------------------------
Date: Date:
----------------------------- --------------------------------
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: /s/ Anna Kucinskis By: /s/ Ronald E. Logue
------------------------------- ----------------------------------
Title: Vice President Title: Executive Vice President
---------------------------- -------------------------------
Date: 3/24/97 Date: March 20, 1997
----------------------------- --------------------------------
<PAGE>
Exhibit 10
September 22, 1997
Nuveen Flagship Multistate Trust IV
333 West Wacker Drive
Chicago, Illinois 60606
RE: Registration Statement on Form N-1A
Under the Securities Act of 1933
(File No. 333-16615)
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel for Nuveen Flagship Multistate Trust IV, 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 Kansas Municipal Bond Fund, the Nuveen Flagship Kentucky Municipal Bond
Fund, the Nuveen Flagship Michigan Municipal Bond Fund, the Nuveen Flagship
Missouri Municipal Bond Fund, the Nuveen Flagship Ohio Municipal Bond Fund, and
the Nuveen Flagship Wisconsin Municipal Bond Fund, and the Class A Shares, Class
C Shares and Class R Shares of the Nuveen Flagship Kentucky Limited Term
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 23, 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 IV
September 22, 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 19, 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>
Nuveen Flagship Multistate Trust IV
September 22, 1997
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Thomas S. Harman
-------------------------------------
Thomas S. Harman
<PAGE>
EXHIBIT 11
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. 333-16615, of our reports dated July 11, 1997, relating to the Nuveen
Flagship Multistate Trust IV, including Nuveen Flagship Kansas Municipal Bond
Fund, Nuveen Flagship Kentucky Municipal Bond Fund, Nuveen Flagship Kentucky
Limited Municipal Bond Fund, Nuveen Flagship Michigan Municipal Bond Fund,
Nuveen Flagship Missouri Municipal Bond Fund, Nuveen Flagship Ohio Municipal
Bond Fund, and Nuveen Flagship Wisconsin 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 19, 1997
<PAGE>
EXHIBIT 16
SCHEDULE OF COMPUTATION OF PERFORMANCE FIGURES*
I. YIELD
A. Yield Formula
Yield is computed according the following formula:
6
YIELD = 2 [ ( A - B
----- + 1) - 1]
CD
Where:
A = dividends and interest(degrees) earned during the period.
B = expenses accrued for the period (net of reimbursements).
C = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
D = the maximum offering price per share on the last day of the period.
- --------
*The maximum sales charge in effect during the periods shown was 4.20%.
(degrees)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.
1
<PAGE>
B. Yield Calculations
1. Kansas Municipal Bond Fund
The following is a 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
6
Yield = 2 [ ( [$ 452,207.78 - $35,216.25] + 1 ) - 1 ]
----------------------------
[ 9,382,249.38 X $ 10.64]
= 5.07%
The following is a 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
6
Yield = 2 [ ( [$ 2,242.74 - $ 463.87] + 1 ) - 1 ]
----------------------------
[ 46,782.51 X $ 10.13]
= 4.55%
The following is a 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
6
Yield = 2 [ ( [$ 430.28 - $ 74.44] + 1 ) - 1 ]
----------------------------
[ 8,907.77 X $ 10.21]
= 4.74%
The following is a 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
6
Yield = 2 [ ( [$ .48 - $ 0.00] + 1 ) - 1 ]
----------------------------
[ 9.87 X $ 10.22]
= 5.78%
2. Kentucky Municipal Bond Fund
The following is a 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
6
Yield = 2 [ ( [$ 2,018,516.18 - $207,096.90] + 1 ) - 1]
------------------------------
[ 39,038,623.14 X $ 11.53]
= 4.88%
The following is a 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
6
Yield = 2 [ ( [$ 2,167.38 - $ 503.68] + 1 ) - 1]
------------------------------
[ 41,886.25 X $ 11.06]
= 4.35%
The following is a 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
6
Yield = 2 [ ( [$ 115,886.34 - $ 23,038.36] + 1 ) - 1]
-----------------------------
[ 2,242,162.26 X $ 11.04]
= 4.54%
The following is a 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
6
Yield = 2 [ ( [$ 2,127.06 - $ 143.87] + 1 ) - 1]
-----------------------------
[ 41,213.43 X $ 11.03]
= 5.29%
2
<PAGE>
3. Kentucky Limited Term Municipal Bond Fund
The following is a 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
6
Yield = 2 [ ( [$ 37,406.50 - $ 1,976.05] + 1 ) - 1 ]
----------------------------
[ 900,930.39 X $ 10.17]
= 4.69%
The following is a 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
6
Yield = 2 [ ( [$ 8,932.70 - $ 1,083.64] + 1 ) - 1 ]
----------------------------
[ 215,141.68 X $ 9.92]
= 4.45%
The following is a 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
6
Yield = 2 [ ( [$ .42 - $ 0.00] + 1 ) - 1 ]
----------------------------
[ 10.07 X $ 9.92]
= 5.10%
4. Michigan Municipal Bond Fund
The following is a 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
6
Yield = 2 [ ( [$ 1,189,403.52 - $178,550.22] + 1 ) - 1 ]
------------------------------
[ 22,201,171.82 X $ 12.19]
= 4.52%
The following is a 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
6
Yield = 2 [ ( [$ 1,466.84 - $ 416.38] + 1 ) - 1 ]
------------------------------
[ 27,327.20 X $ 11.70]
= 3.98%
The following is a 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
6
Yield = 2 [ ( [$ 192,086.75 - $ 47,665.98] + 1 ) - 1 ]
------------------------------
[ 3,590,168.16 X $ 11.66]
= 4.18%
The following is a 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
6
Yield = 2 [ ( [$ 120,330.93 - $ 13,774.34] + 1 ) - 1 ]
------------------------------
[ 2,246,122.42 X $ 11.68]
= 4.92%
3
<PAGE>
5. Missouri Municipal Bond Fund:
The following is the 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
6
Yield = 2 [ ( [$ 1,050,542.10 - $117,827.56] + 1 ) - 1 ]
------------------------------
[ 20,264,041.22 X $ 11.27]
= 4.95%
The following is the 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
6
Yield = 2 [ ( [$ 1,969.00 - $ 469.39] + 1 ) - 1 ]
------------------------------
[ 38,000.17 X $ 10.80]
= 4.43%
The following is the 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
6
Yield = 2 [ ( [$ 37,867.08 - $ 7,788.44] + 1 ) - 1 ]
------------------------------
[ 730,740.49 X $ 10.80]
= 4.62%
The following is the 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
6
Yield = 2 [ ( [$ 163.61 - $ 12.77] + 1 ) - 1 ]
------------------------------
[ 3,156.95 X $ 10.80]
= 5.37%
6. Ohio Municipal Bond Fund:
The following is the 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
6
Yield = 2 [ ( [$ 2,087,088.71 - $323,550.91] + 1 ) - 1 ]
------------------------------
[ 40,758,591.63 X $ 11.91]
= 4.40%
The following is the 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
6
Yield = 2 [ ( [$ 5,685.21 - $ 1,659.69] + 1 ) - 1 ]
------------------------------
[ 110,991.02 X $ 11.41]
= 3.84%
The following is the 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
6
Yield = 2 [ ( [$ 186,475.78 - $ 47,618.62] + 1 ) - 1 ]
------------------------------
[ 3,642,190.08 X $ 11.41]
= 4.04%
The following is the 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
6
Yield = 2 [ ( [$ 720,513.33 - $ 85,408.44] + 1 ) - 1 ]
------------------------------
[ 14,071,558.64 X $ 11.41]
= 4.79%
4
<PAGE>
7. Wisconsin Municipal Bond Fund:
The following is the 30-day yield as of May 31, 1997, for the Class A Shares
of the Fund:
[$ 65,354.98 - $1,525.55] 6
Yield = 2[ (---------------------------- + 1 ) - 1]
[ 1,415,696.49 X $ 10.23]
= 5.35%
The following is the 30-day yield as of May 31, 1997, for the Class B Shares
of the Fund:
[$ 87.52 - $ 13.31] 6
Yield = 2[ (---------------------------- + 1 ) - 1]
[ 1891.91 X $ 9.28]
= 4.84%
The following is the 30-day yield as of May 31, 1997, for the Class C Shares
of the Fund:
[$ 358.42 - $ 46.26] 6
Yield = 2[ (---------------------------- + 1 ) - 1]
[ 7,750.14 X $ 9.82]
= 5.03%
The following is the 30-day yield as of May 31, 1997, for the Class R Shares
of the Fund:
[$ 191.25 - $ 0.00] 6
Yield = 2[ (---------------------------- + 1 ) - 1]
[ 4,087.52 X $ 9.82]
= 5.79%
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)
5
<PAGE>
B. Taxable Equivalent Yield Calculations
Based on combined federal and state income tax rates of 44.5% for Kansas, 43.0%
for Kentucky, Kentucky Limited, Michigan and Missouri, 44.0% for Ohio and
Wisconsin, 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, are as follows:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares Class R Shares
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Kansas Municipal 5.07% 4.55% 4.74% 5.78%
Bond Fund: -------- = 9.14% -------- = 8.20% -------- = 8.54% -------- = 10.41%
1 - .445 1 - .445 1 - .445 1 - .445
Kentucky Municipal 4.88% 4.35% 4.54% 5.29%
Bond Fund: -------- = 8.56% -------- = 7.63% -------- = 7.96% -------- = 9.28%
1 - .430 1 - .430 1 - .430 1 - .430
Kentucky Limited 4.69% n/a 4.45% 5.10%
Term Municipal -------- = 8.23% -------- = n/a -------- = 7.81% -------- = 8.95%
Bond Fund: 1 - .430 n/a 1 - .430 1 - .430
Michigan Municipal 4.52% 3.98% 4.18% 4.92%
Bond Fund: -------- = 7.93% -------- = 6.98% -------- = 7.33% -------- = 8.63%
1 - .430 1 - 4.30 1 - .430 1 - .430
Missouri Municipal 4.95% 4.43% 4.62% 5.37%
Bond Fund: -------- = 8.68% -------- = 7.77% -------- = 8.11% -------- = 9.42%
1 - .430 1 - 4.30 1 - .430 1 - .430
Ohio Municipal 4.40% 3.84% 4.04% 4.79%
Bond Fund: -------- = 7.86% -------- = 6.86% -------- = 7.21% -------- = 8.55%
1 - .440 1 - 4.40 1 - .440 1 - .440
Wisconsin Municipal 5.35% 4.84% 5.03% 5.79%
Bond Fund: -------- = 9.55% -------- = 8.64% -------- = 8.98% -------- = 10.34%
1 - .440 1 - 4.40 1 - .440 1 - .440
</TABLE>
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. Kansas Municipal Bond Fund:
The following is the distribution rate as of May 31, 1997, based on the
maximum public offering price for the Kansas Municipal Bond Fund.
Class A Distribution Rate = 12 X $.0436
-----------
$10.64
= 4.92%
Class B Distribution Rate = 12 X $.0373
-----------
$10.13
= 4.42%
6
<PAGE>
Class C Distribution Rate = 12 X $.0390
-----------
$10.21
= 4.58%
Class R Distribution Rate = 12 X $.0453
-----------
$10.22
= 5.32%
2. Kentucky Municipal Bond Fund:
The following is the distribution rate as of May 31, 1997, based on the
maximum public offering price for the Kentucky Municipal Bond Fund.
Class A Distribution Rate = 12 X $.0495
-----------
$11.53
= 5.15%
Class B Distribution Rate = 12 X $.0426
-----------
$11.06
= 4.62%
Class C Distribution Rate = 12 X $.0445
-----------
$11.04
= 4.84%
Class R Distribution Rate = 12 X $.0513
-----------
$11.03
= 5.58%
3. Kentucky Limited Term Municipal Bond Fund:
The following is the distribution rate as of May 31, 1997, based on maximum
public offering price for the Kentucky Intermediate Municipal Bond Fund.
Class A Distribution Rate = 12 X $.0366
-----------
$10.17
= 4.32%
Class C Distribution Rate = 12 X $.0341
-----------
$9.92
= 4.13%
Class R Distribution Rate = 12 X $.0383
-----------
$9.92
= 4.63%
7
<PAGE>
4. Michigan Municipal Bond Fund:
The following is the distribution rate as of May 31, 1997, based on maximum
public offering price for the Michigan Municipal Bond Fund.
Class A Distribution Rate = 12 X $.0509
-----------
$12.19
= 5.01%
Class B Distribution Rate = 12 X $.0436
-----------
$11.70
= 4.47%
Class C Distribution Rate = 12 X $.0456
-----------
$11.66
= 4.69%
Class R Distribution Rate = 12 X $.0528
-----------
$11.68
= 5.42%
5. Missouri Municipal Bond Fund:
The following is the distribution rate as of May 31, 1997, based on the maxi-
mum public offering price for the Missouri Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0467
-----------
$11.27
= 4.97%
Class B Distribution Rate = 12 X $.0400
-----------
$10.80
= 4.44%
Class C Distribution Rate = 12 X $.0418
-----------
$10.80
= 4.64%
Class R Distribution Rate = 12 X $.0485
-----------
$10.80
= 5.39%
8
<PAGE>
6. Ohio Municipal Bond Fund:
The following is the distribution rate as of May 31, 1997, based on the
maximum public offering price for the Ohio Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0507
-----------
$11.91
= 5.11%
Class B Distribution Rate = 12 X $.0435
-----------
$11.41
= 4.57%
Class C Distribution Rate = 12 X $.0456
-----------
$11.41
= 4.80%
Class R Distribution Rate = 12 X $.0526
-----------
$11.41
= 5.53%
7. Wisconsin Municipal Bond Fund:
The following is the distribution rate as of May 31, 1997, based on the
maximum public offering price for the Wisconsin Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0421
-----------
$10.23
= 4.94%
Class B Distribution Rate = 12 X $.0360
-----------
$9.82
= 4.40%
Class C Distribution Rate = 12 X $.0376
-----------
$9.82
= 4.59%
Class R Distribution Rate = 12 X $.0437
-----------
$9.82
= 5.34%
9
<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) peri-
ods at the end of such 1, 5 or 10-year (or fractional portion thereof)
periods.
B. Average Annual Total Return Calculations
The following are the average annual total returns for Class A, B, C and R
Shares of the Funds for the period from inception and the 1, 5 and 10-year pe-
riods ended May 31, 1997, whichever applicable, including the current maximum
sales charge. Class A total returns reflect actual performance for all periods;
Classes B, C and R total returns, where applicable, reflect actual performance
for periods since class inception and Class A performance for periods prior to
class inception, adjusted for the differences in sales charges (and for Class B
and C, fees) between the classes.
ANNUAL CLASS A TOTAL RETURNS including current maximum sales charge of 4.20%:
1. Kansas Municipal Bond Fund:
$1,046 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 4.62%
$1,000 =====
$1,342 /1/5/
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.06%
$1,000 =====
$1,374 /1/5.391/
C. Inception through May 31, 1997 = ( ------- ) -1 = 6.06%
$1,000 =====
2. Kentucky Municipal Bond Fund:
$1,033 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.34%
$1,000 =====
$1,347 /1/5/
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.15%
$1,000 =====
$2,131 /1/10/
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.86%
$1,000 =====
$2,085 /1/10.004/
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.62%
$1,000 =====
3. Kentucky Limited Term Municipal Bond Fund:
$1,033 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.31%
$1,000 =====
$1,073 /1/1.711/
B. Inception through May 31, 1997 = ( ------- ) -1 = 4.22%
$1,000 =====
10
<PAGE>
4. Michigan Municipal Bond Fund:
$1,039 /1/1/
A. 1 year ended May 31, 1997 = (---------) -1 = 3.87%
$1,000 ====
$1,336 /1/5/
B. 5 years ended May 31, 1997 = (---------) -1 = 5.97%
$1,000 ====
$2,087 /1/10/
C. 10 years ended May 31, 1997 = (---------) -1 = 7.63%
$1,000 ====
$2,506 /1/11.926/
D. Inception through May 31, 1997 = (---------) -1 = 8.01%
$1,000 ====
5. Missouri Municipal Bond Fund:
$1,037 /1/1/
A. 1 year ended May 31, 1997 = (---------) -1 = 3.74%
$1,000 ====
$1,339 /1/5/
B. 5 years ended May 31, 1997 = (---------) -1 = 6.01%
$1,000 ====
$1,991 /1/9.826/
C. Inception through May 31, 1997 = (---------) -1 = 7.26%
$1,000 ====
6. Ohio Municipal Bond Fund:
$1,029 /1/1/
A. 1 year ended May 31, 1997 = (---------) -1 = 2.87%
$1,000 ====
$1,308 /1/5/
B. 5 years ended May 31, 1997 = (---------) -1 = 5.52%
$1,000 ====
$2,056 /1/10/
C. 10 years ended May 31, 1997 = (---------) -1 = 7.47%
$1,000
$2,442 /1/11.926/
D. Inception through May 31, 1997 = (---------) -1 = 7.77%
$1,000 ====
7. Wisconsin Municipal Bond Fund:
$1,029 /1/1/
A. 1 year ended May 31, 1997 = (---------) -1 = 2.89%
$1,000 ====
$1,141 /1/2.998/
B. Inception through May 31, 1997 = (---------) -1 = 4.51%
$1,000 ====
ANNUAL CLASS B TOTAL RETURNS:
1. Kansas Municipal Bond Fund:
$1,039 /1/1/
A. 1 year ended May 31, 1997 = (---------) -1 = 3.93%
$1,000 ====
$1,345 /1/5/
B. 5 years ended May 31, 1997 = (---------) -1 = 6.10%
$1,000 ====
$1,373 /1/5.391/
C. Inception through May 31, 1997 = (---------) -1 = 6.05%
$1,000 ====
11
<PAGE>
2. Kentucky Municipal Bond Fund:
$1,033 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.30%
$1,000 =====
$1,359 /1/5/
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.32%
$1,000 =====
$2,130 /1/10/
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.85%
$1,000 =====
$2,083 /1/10.004/
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.61%
$1,000 =====
3. Michigan Municipal Bond Fund:
$1,039 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.94%
$1,000 =====
$1,348 /1/5/
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.16%
$1,000 =====
$2,086 /1/10/
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.63%
$1,000 =====
$2,504 /1/11.926/
D. Inception through May 31, 1997 = ( ------- ) -1 = 8.00%
$1,000 =====
4. Missouri Municipal Bond Fund:
$1,036 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.63%
$1,000 =====
$1,349 /1/5/
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.17%
$1,000 =====
$1,989 /1/9.826/
C. Inception through May 31, 1997 = ( ------- ) -1 = 7.25%
$1,000 =====
5. Ohio Municipal Bond Fund:
$1,027 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 2.73%
$1,000 =====
$1,318 /1/5/
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 5.67%
$1,000
$2,054 /1/10/
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.47%
$1,000
$2,440 /1/11.926/
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.77%
$1,000 =====
6. Wisconsin Municipal Bond Fund:
$1,030 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 2.98%
$1,000 =====
$1,134 /1/2.998/
B. Inception through May 31, 1997 = ( ------- ) -1 = 4.28%
$1,000 =====
12
<PAGE>
Annual Class C Total Returns:
1. Kansas Municipal Bond Fund:
$1,090 /1/1/
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 8.98%
$1,000 =====
$1,379 /1/5/
B. 5 years ended May 31, 1997 = ( ------ ) -1 = 6.64%
$1,000 =====
$1,409 /1/5.391/
C. Inception through May 31, 1997 = ( ------ ) -1 = 6.57%
$1,000 =====
2. Kentucky Municipal Bond Fund:
$1,073 /1/1/
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 7.29%
$1,000 =====
$1,367 /1/5/
B. 5 years ended May 31, 1997 = ( ------ ) -1 = 6.46%
$1,000 =====
$2,105 /1/10/
C. 10 years ended May 31, 1997 = ( ------ ) -1 = 7.73%
$1,000 =====
$2,058 /1/10.004/
D. Inception through May 31, 1997 = ( ------ ) -1 = 7.48%
$1,000 =====
3. Kentucky Limited Term Municipal
Bond Fund:
$1,056 /1/1/
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 5.64%
$1,000 =====
B. Inception through May 31, 1997 $1,095 /1/1.711/
= ( ------ ) -1 = 5.45%
$1,000 =====
4. Michigan Municipal Bond Fund:
A. 1 year ended May 31, 1997 $1,078 /1/1/
= ( ------ ) -1 = 7.84%
$1,000 =====
$1,351 /1/5/
B. 5 years ended May 31, 1997 = ( ------ ) -1 = 6.21%
$1,000 =====
$2,054 /1/10/
C. 10 years ended May 31, 1997 = ( ------ ) -1 = 7.46%
$1,000 =====
$2,440 /1/11.926/
D. Inception through May 31, 199 = ( ------ ) -1 = 7.77%
$1,000 =====
5. Missouri Municipal Bond Fund:
$1,078 /1/1/
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 7.80%
$1,000 =====
$1,360 /1/5/
B. 5 years ended May 31, 1997 = ( ------ ) -1 = 6.34%
$1,000 =====
$1,969 /1/9.826/
C. Inception through May 31, 1997 = ( ------ ) -1 = 7.14%
$1,000 =====
6. Ohio Municipal Bond Fund:
$1,068 /1/1/
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 6.80%
$1,000 =====
$1,329 /1/5/
B. 5 years ended May 31, 1997 = ( ------ ) -1 = 5.85%
$1,000 =====
$2,032 /1/10/
C. 10 years ended May 31, 1997 = ( ------ ) -1 = 7.35%
$1,000 =====
13
<PAGE>
$2,387 1/11.926
D. Inception through May 31, 1997 = ( ------ ) -1 = 7.57%
$1,000 ====
7. Wisconsin Municipal Bond Fund:
$1,072 1/1
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 7.20%
$1,000 ====
$1,181 1/2.998
B. 5 years ended May 31, 1997 = ( ------ ) -1 = 5.70%
$1,000 ====
ANNUAL CLASS R TOTAL RETURNS:
1. Kansas Municipal Fund Fund:
$1,096 1/1
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 9.58%
$1,000 ====
B. 5 years ended May 31, 1997 = $1,406 1/5
( ------ ) -1 = 7.05%
$1,000 ====
$1,439 1/5.391
C. Inception through May 31, 1997 = ( ------ ) -1 = 6.98%
$1,000 ====
2. Kentucky Municipal Bond Fund:
$1,078 1/1
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 7.75%
$1,000 ====
$1,405 1/5
B. 5 years ended May 31, 1997 = ( ------ ) -1 = 7.04%
$1,000 ====
$2,222 1/10
C. 10 years ended May 31, 1997 = ( ------ ) -1 = 8.31%
$1,000 ====
$2,174 1/10.004
D. Inception through May 31, 1997 = ( ------ )
$1,000 -1 = 8.07%
====
3. Kentucky Limited Term Municipal Bond Fund:
$1,060 1/1
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 6.02%
$1,000 ====
$1,101 1/1.711
B. Inception through May 31, 1997 = ( ------ ) -1 = 5.80%
$1,000 ====
4. Michigan Municipal Bond Fund:
$1,085 1/1
A. 1 year ended May 31, 1997 = ( ------ ) -1 = 8.49%
$1,000 ====
$1,396 1/5
B. 5 years ended May 31, 1997 = ( ------ ) -1 = 6.89%
$1,000 ====
$2,180 1/10
C. 10 years ended May 31, 1997 = ( ------ ) -1 = 8.10%
$1,000 ====
$2,618 1/11.926
D. Inception through May 31, 1997 = ( ------ ) -1 = 8.40%
$1,000 ====
14
<PAGE>
5. Missouri Municipal Bond Fund:
A. 1 year ended May 31, 1997 $1,083 /1/1/
= ( ------- ) -1 = 8.34%
$1,000 =====
$1,398 /1/5/
B. 5 years ended May 31, 1997 = ( ------- )
$1,000 -1 = 6.93%
=====
$2,079 /1/9.826/
C. Inception through May 31, 1997 = ( ------- )
$1,000 -1 = 7.73%
=====
6. Ohio Municipal Bond Fund:
$1,075 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 7.45%
$1,000 =====
$1,366/1/5/
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.44%
$1,000 =====
$2,148 /1/10/
C. 10 years ended May 31, 1997 = ( ------- ) -1 = 7.85%
$1,000 =====
$2,551 /1/11.926/
D. Inception through May 31, 1997 = ( ------- ) -1 = 7.61%
$1,000 =====
7. Wisconsin Municipal Bond Fund:
$1,077 /1/1/
A. 1 year ended May 31, 1997 = ( ------- ) -1 = 3.94%
$1,000 =====
$1,194 /1/2.998/
B. 5 years ended May 31, 1997 = ( ------- ) -1 = 6.16%
$1,000 =====
For the Kansas, Kentucky, Michigan, Missouri, Ohio and Wisconsin Funds,
Class A total returns reflect actual performance for all periods; Classes B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to inception, adjusted for
differences in sales charges (and for Class B and C, fees) between the classes.
For the Kentucky Limited Term, Classes A and C total returns reflect actual
performance for all periods and Class R total returns reflect actual performance
for periods since class inception, and Class A performance for all periods prior
to class inception, adjusted for differences in sales charges between the
classes.
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.
15
<PAGE>
B. Cumulative Total Return Calculation
The following are the cumulative total returns for Class A, B, C and R Shares
of the Funds for the periods from inception and for the one, five and 10-year
periods ended May 31, 1997, assuming no imposition of sales charges. Class B, C
and R total returns reflect actual performance for the periods since class in-
ception and Class A performance for periods prior to class inception, adjusted
for the differences in sales charges and fees between the classes.
CUMULATIVE CLASS A TOTAL RETURNS including current maximum sales charge of
4.20%:
1. Kansas Municipal Bond Fund:
$1,046 - $1,000
A. 1 year ended May 31, 1997 = (-------------------) = 4.62%
$1,000 =====
$1,342 - $1,000
B. 5 years ended May 31, 1997 = (-------------------) = 34.23%
$1,000 ======
$1,374 - $1,000
C. Inception through May 31, 1997 = (-------------------) = 37.35%
$1,000 =======
2. Kentucky Municipal Bond Fund:
$1,033 - $1,000
A. 1 year ended May 31, 1997 = (-------------------) = 3.34%
$1,000 =====
$1,347 - $1,000
B. 5 years ended May 31, 1997 = (-------------------) = 34.74%
$1,000 ======
$2,131 - $1,000
C. 10 years ended May 31, 1997 = (-------------------) = 113.13%
$1,000 =======
$2,085 - $1,000
D. Inception through May 31, 1997 = (-------------------) = 108.46%
$1,000 ========
3. Kentucky Limited Term Municipal Bond Fund:
$1,033 - $1,000
A. 1 year ended May 31, 1997 = (-------------------) = 3.31%
$1,000 =====
$1,073 - $1,000
B. Inception through May 31, 1997 = (-------------------) = 7.33%
$1,000 =====
4. Michigan Municipal Bond Fund:
$1,039 - $1,000
A. 1 year ended May 31, 1997 = (-------------------) = 3.87%
$1,000 =====
$1,336 - $1,000
B. 5 years ended May 31, 1997 = (-------------------) = 33.61%
$1,000 ======
$2,087 - $1,000
C. 10 years ended May 31, 1997 = (-------------------) = 108.69%
$1,000 =======
$2,506 - $1,000
D. Inception through May 31, 1997 = (-------------------) = 150.59%
$1,000 ========
5. Missouri Municipal Bond Fund:
$1,037 - $1,000
A. 1 year ended May 31, 1997 = (-------------------) = 3.74%
$1,000 =====
$1,339 - $1,000
B. 5 years ended May 31, 1997 = (-------------------) = 33.89%
$1,000 ======
$1,991 - $1,000
C. Inception through May 31, 1997 = (-------------------) = 99.09%
$1,000 =======
16
<PAGE>
6. Ohio Municipal Bond Fund:
$1,029 - $1,000
A. 1 year ended May 31, 1997 = ( ----------------- ) = 2.87%
$1,000 =====
$1,308 - $1,000
B. 5 years ended May 31, 1997 = ( ----------------- ) = 30.79%
$1,000 ======
$2,056 - $1,000
C. 10 years ended May 31, 1997 = ( ----------------- ) = 105.61%
$1,000 =======
$2,442 - $1,000
D. Inception through May 31, 1997 = ( ----------------- ) = 144.19%
$1,000 =======
7. Wisconsin Municipal Bond Fund:
$1,029 - $1,000
A. 1 year ended May 31, 1997 = ( ----------------- ) = 2.89%
$1,000 =====
$1,141 - $1,000
B. Inception through May 31, 1997 = ( ----------------- ) = 14.14%
$1,000 ======
CUMULATIVE CLASS B TOTAL RETURNS:
1. Kansas Municipal Bond Fund:
$1,039 - $1,000
A. 1 year ended May 31, 1997 = ( ----------------- ) = 3.93%
$1,000 =====
$1,345 - $1,000
B. 5 years ended May 31, 1997 = ( ----------------- ) = 34.45%
$1,000 ======
$1,373 - $1,000
C. Inception through May 31, 1997 = ( ----------------- ) = 37.28%
$1,000 ======
2. Kentucky Municipal Bond Fund:
$1,033 - $1,000
A. 1 year ended May 31, 1997 = ( ----------------- ) = 3.30%
$1,000 =====
$1,359 - $1,000
B. 5 years ended May 31, 1997 = ( ----------------- ) = 35.87%
$1,000 ======
$2,130 - $1,000
C. 10 years ended May 31, 1997 = ( ----------------- ) = 112.96%
$1,000 =======
$2,083 - $1,000
D. Inception through May 31, 1997 = ( ----------------- ) = 108.29%
$1,000 =======
3. Michigan Municipal Bond Fund:
$1,039 - $1,000
A. 1 year ended May 31, 1997 = ( ----------------- ) = 3.94%
$1,000 =====
$1,348 - $1,000
B. 5 years ended May 31, 1997 = ( ----------------- ) = 34.84%
$1,000 ======
$2,086 - $1,000
C. 10 years ended May 31, 1997 = ( ----------------- ) = 108.56%
$1,000 =======
$2,504 - $1,000
D. Inception through May 31, 1997 = ( ----------------- ) = 150.45%
$1,000 =======
4. Missouri Municipal Bond Fund:
$1,036 - $1,000
A. 1 year ended May 31, 1997 = ( ----------------- ) = 3.63%
$1,000 =====
17
<PAGE>
$1,349 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 34.91%
$1,000 ======
$1,989 - $1,000
C. Inception through May 31, 1997 = ( ----------------- ) = 98.93%
$1,000 ======
5. Ohio Municipal Bond Fund:
$1,027 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 2.73%
$1,000 =====
$1,318 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 31.76%
$1,000 ======
$2,054 - $1,000
C. 10 years ended May 31, 1997 = ( ----------------- ) = 105.44%
$1,000 =======
$2,440 - $1,000
D. Inception through May 31, 1997 = ( ----------------- ) = 143.98%
$1,000 =======
6. Wisconsin Municipal Bond Fund;
$1,030 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 2.98%
$1,000 =====
$1,134 - $1,000
B. Inception through May 31, 1997 = ( ----------------- ) = 13.38%
$1,000 ======
Cumulative Class C Total Returns:
1. Kansas Municipal Bond Fund:
$1,090 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 8.98%
$1,000 =====
$1,379 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 37.92%
$1,000 ======
$1,409 - $1,000
C. Inception through May 31, 1997 = ( ----------------- ) = 40.91%
$1,000 ======
2. Kentucky Municipal Bond Fund:
$1,073 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.29%
$1,000 =====
$1,367 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 36.73%
$1,000 ======
$2,105 - $1,000
C. 10 years ended May 31, 1997 = ( ----------------- ) = 110.46%
$1,000 =======
$2,058 - $1,000
D. Inception through May 31, 1997 = ( ----------------- ) = 105.75%
$1,000 =======
3. Kentucky Limited Term Municipal Bond Fund:
$1,056 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 5.64%
$1,000 =====
$1,095 - $1,000
B. Inception through May 31, 1997 = ( ----------------- ) = 9.50%
$1,000 =====
18
<PAGE>
4. Michigan Municipal Bond Fund:
$1,078 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.84%
$1,000 =====
$1,351 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 35.12%
$1,000 ======
$2,054 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 105.40%
$1,000 =======
$2,440 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 143.96%
$1,000 =======
5. Missouri Municipal Bond Fund:
$1,078 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.80%
$1,000 =====
$1,360 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 35.99%
$1,000 ======
$1,969 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 96.93%
$1,000 ======
6. Ohio Municipal Bond Fund:
$1,068 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 6.80%
$1,000 =====
$1,329 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 32.86%
$1,000 ======
$2,032 - $1,000
C. 10 years ended May 31, 1997 = ( ---------------- ) = 103.23%
$1,000 =======
$2,387 - $1,000
D. Inception through May 31, 1997 = ( ---------------- ) = 138.74%
$1,000 =======
7. Wisconsin Municipal Bond Fund:
$1,072 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 7.20%
$1,000 =====
$1,181 - $1,000
B. Inception through May 31, 1997 = ( ---------------- ) = 18.07%
$1,000 ======
Cumulative Class R Total Returns:
1. Kansas Municipal Bond Fund:
$1,096 - $1,000
A. 1 year ended May 31, 1997 = ( ---------------- ) = 9.58%
$1,000 =====
$1,406 - $1,000
B. 5 years ended May 31, 1997 = ( ---------------- ) = 40.59%
$1,000 ======
$1,439 - $1,000
C. Inception through May 31, 1997 = ( ---------------- ) = 43.86%
$1,000 ======
19
<PAGE>
2. Kentucky Municipal Bond Fund:
A. 1 year ended May 31, 1997 $1,078 - $1,000
= (---------------) = 7.75%
$1,000 =====
B. 5 years ended May 31, 1997 = $1,405 - $1,000
(---------------) = 40.49%
$1,000 ======
$2,222 - $1,000
C. 10 years ended May 31, 1997 = (---------------) = 122.23%
$1,000 =======
D. Inception through May 31, 1997 = $2,174 - $1,000
(---------------) = 117.36%
$1,000 =======
3. Kentucky Limited Term Municipal Bond Fund:
$1,060 - $1,000
A. 1 year ended May 31, 1997 = (---------------) = 6.02%
$1,000 =====
$1,101 - $1,000
B. Inception through May 31, 1997 = (---------------) = 10.14%
$1,000 ======
4. Michigan Municipal Bond Fund:
$1,085 - $1,000
A. 1 year ended May 31, 1997 = (---------------) = 8.49%
$1,000 =====
$1,396 - $1,000
B. 5 years ended May 31, 1997 = (---------------) = 39.56%
$1,000 ======
$2,180 - $1,000
C. 10 years ended May 31, 1997 = (---------------) = 117.98%
$1,000 =======
$2,618 - $1,000
D. Inception through May 31, 1997 = (---------------) = 161.75%
$1,000 =======
5. Missouri Municipal Bond Fund:
$1,083 - $1,000
A. 1 year ended May 31, 1997 = (---------------) = 8.34%
$1,000 =====
$1,398 - $1,000
B. 5 years ended May 31, 1997 = (---------------) = 39.83%
$1,000 ======
$2,079 - $1,000
C. Inception through May 31, 1997 = (---------------) = 107.92%
$1,000 =======
6. Ohio Municipal Bond Fund:
$1,075 - $1,000
A. 1 year ended May 31, 1997 = (---------------) = 7.45%
$1,000 =====
$1,366 - $1,000
B. 5 years ended May 31, 1997 = (---------------) = 36.61%
$1,000 ======
$2,148 - $1,000
C. 10 years ended May 31, 1997 = (---------------) = 114.76%
$1,000 =======
$2,551 - $1,000
D. Inception through May 31, 1997 = (---------------) = 155.06%
$1,000 =======
20
<PAGE>
7. Wisconsin Municipal Bond Fund:
A. 1 year ended May 31, 1997 $1,077 - $1,000
= ( ---------------- ) = 7.67%
$1,000 =====
B. Inception through May 31, 1997 $1,194 - $1,000
= ( ---------------- ) = 19.44%
$1,000 ======
For the Kansas, Kentucky, Michigan, Missouri, Ohio and Wisconsin Funds, Class
A total returns reflect actual performance for all periods; Classes B, C and R
total returns reflect actual performance for periods since class inception, and
Class A performance for periods prior to inception, adjusted for differences in
sales charges (and for Class B and C, fees) between the classes. For the Ken-
tucky Limited Term, Classes A and C total returns reflect actual performance
for all periods and Class R total returns reflect actual performance for peri-
ods since class inception, and Class A performance for all periods prior to
class inception, adjusted for differences in sales charges between the classes.
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 A Shares of
the Kansas Municipal Bond Fund for the five-year period ended May 31, 1997 are
set forth on the following pages assuming a combined federal and state income
tax rate of 44.5% based on 1997 rates.
21
<PAGE>
Fund Name: Kansas Municipal Bond Fund Class A
Since June 1, 1992
<TABLE>
<CAPTION>
TOTAL PERIOD DIV. CAP GAIN
NAV INCOME CAP FROM FROM DOLLAR TO DATE TAX ENDING ENDING REINV REINV
PER DAY PER SHARE PER SHARE GAINS INCOME GAINS DIST. T-E INC. SAVINGS SHARES WEALTH NAV NAV
- ------- --------- --------- ----- ------ ----- ------ -------- ------- ------ ------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/31/92 9.65 $ -- 1,036 $10,000.00
6/30/92 9.81 0.0492 $50.964 $ -- $ 50.964 $ 50.964 1,041 $10,216.77 9.81
7/31/92 10.08 0.0508 $52.927 $ -- $ 52.927 $103.891 1,047 $10,550.89 10.08
8/31/92 9.90 0.0508 $53.194 $ -- $ 53.194 $157.085 1,052 $10,415.67 9.90
9/30/92 9.90 0.0492 $51.742 $ -- $ 51.742 $208.827 1,057 $10,467.42 9.90
10/31/92 9.68 0.0508 $53.733 $ -- $ 53.733 $262.559 1,063 $10,288.54 9.68
11/30/92 9.91 0.0492 $52.272 $ $ 52.272 $314.831 1,068 $10,585.27 9.91
12/31/92 9.99 0.0508 0.0034 $54.283 $ 3.632 $ 57.915 $369.114 1,074 $10,728.64 9.99
1/31/93 10.05 0.0510 $54.728 $ -- $ 54.728 $423.842 1,079 $10,847.80 10.05
2/28/93 10.40 0.0458 $49.457 $ -- $ 49.457 $473.299 1,084 $11,275.04 10.40
3/31/93 10.20 0.0494 $53.600 $ -- $ 53.600 $526.899 1,089 $11,111.81 10.20
4/30/93 10.33 0.0479 $52.138 $ -- $ 52.138 $579.037 1,094 $11,305.57 10.33
5/31/93 10.38 0.0495 $54.120 $ -- $ 54.120 $633.158 $507.7 1,149 $11,922.08 10.38
6/30/93 10.56 0.0481 $55.223 $ -- $ 55.223 $ 55.223 1,154 $12,184.05 10.56
7/31/93 10.49 0.0497 $57.320 $ -- $ 57.320 $112.543 1,159 $12,160.60 10.49
8/31/93 10.72 0.0497 $57.592 $ -- $ 57.592 $170.135 1,165 $12,484.82 10.72
9/30/93 10.83 0.0473 $55.040 $ -- $ 55.040 $225.176 1,170 $12,667.97 10.83
10/31/93 10.81 0.0488 $57.129 $ -- $ 57.129 $282.304 1,175 $12,701.71 10.81
11/30/93 10.60 0.0473 $55.530 $ $ 55.530 $337.835 1,180 $12,510.49 10.60
12/31/93 10.72 0.0479 0.0663 $56.533 $78.250 $134.783 $394.368 1,193 $12,786.90 10.72
1/31/94 10.82 0.0479 $57.135 $ -- $ 57.135 $451.503 1,198 $12,963.32 10.82
2/28/94 10.43 0.0433 $51.841 $ -- $ 51.841 $503.345 1,203 $12,547.90 10.43
3/31/94 9.76 0.0471 $56.604 $ -- $ 56.604 $559.948 1,209 $11,798.46 9.76
4/30/94 9.72 0.0455 $55.039 $ -- $ 55.039 $614.988 1,215 $11,805.14 9.72
5/31/94 9.83 0.0471 $57.143 $ -- $ 57.143 $672.131 $538.9 1,275 $12,534.80 9.83
6/30/94 9.68 0.0455 $58.058 $ -- $ 58.058 $ 58.058 1,281 $12,401.58 9.68
7/31/94 9.86 0.0471 $60.278 $ -- $ 60.278 $118.336 1,287 $12,692.47 9.86
8/31/94 9.83 0.0471 $60.566 $ -- $ 60.566 $178.902 1,293 $12,714.42 9.83
9/30/94 9.58 0.0451 $58.360 $ -- $ 58.360 $237.262 1,300 $12,449.42 9.58
10/31/94 9.33 0.0466 $60.597 $ -- $ 60.597 $297.859 1,306 $12,185.13 9.33
11/30/94 9.06 0.0451 $58.927 $ -- $ 58.927 $356.786 1,313 $11,891.44 9.06
12/31/94 9.29 0.0466 0.0000 $61.203 $ -- $ 61.203 $417.989 1,319 $12,254.52 9.29
1/31/95 9.56 0.0466 $61.510 $ -- $ 61.510 $479.499 1,326 $12,672.19 9.56
2/28/95 9.79 0.0421 $55.832 $ -- $ 55.832 $535.331 1,331 $13,032.90 9.79
3/31/95 9.80 0.0462 $61.504 $ -- $ 61.504 $596.834 1,338 $13,107.71 9.80
4/30/95 9.76 0.0447 $59.801 $ -- $ 59.801 $656.635 1,344 $13,114.01 9.76
5/31/95 10.01 0.0462 $62.077 $ -- $ 62.077 $718.711 $576.3 1,407 $14,088.27 10.01
6/30/95 9.86 0.0447 $62.926 $ -- $ 62.926 $ 62.926 1,414 $13,940.08 9.86
7/31/95 9.88 0.0462 $65.318 $ -- $ 65.318 $128.243 1,420 $14,033.67 9.88
8/31/95 9.95 0.0462 $65.623 $ -- $ 65.623 $193.866 1,427 $14,198.72 9.95
9/30/95 9.95 0.0447 $63.802 $ -- $ 63.802 $257.668 1,433 $14,262.53 9.95
10/31/95 10.10 0.0462 $66.224 $ -- $ 66.224 $323.892 1,440 $14,543.76 10.10
11/30/95 10.26 0.0447 $64.381 $ $ 64.381 $388.273 1,446 $14,838.54 10.26
12/31/95 10.35 0.0462 0.0000 $66.817 $ -- $ 66.817 $455.090 1,453 $15,035.52 10.35
1/31/96 10.32 0.0461 $66.941 $ -- $ 66.941 $522.031 1,459 $15,058.88 10.32
2/29/96 10.15 0.0431 $62.891 $ -- $ 62.891 $584.922 1,465 $14,873.71 10.15
3/31/96 9.91 0.0447 $65.532 $ -- $ 65.532 $650.454 1,472 $14,587.55 9.91
4/30/96 9.83 0.0433 $63.708 $ -- $ 63.708 $714.163 1,478 $14,533.49 9.83
5/31/96 9.83 0.0447 $66.118 $ -- $ 66.118 $780.280 $625.6 1,549 $15,225.24 9.83
6/30/96 9.92 0.0433 $67.034 $ -- $ 67.034 $ 67.034 1,556 $15,431.67 9.92
7/31/96 9.96 0.0447 $69.567 $ -- $ 69.567 $136.601 1,563 $15,563.46 9.96
8/31/96 9.91 0.0447 $69.879 $ -- $ 69.879 $206.481 1,570 $15,555.21 9.91
9/30/96 10.04 0.0429 $67.291 $ -- $ 67.291 $273.772 1,576 $15,826.56 10.04
10/31/96 10.09 0.0443 $69.832 $ -- $ 69.832 $343.604 1,583 $15,975.21 10.09
11/30/96 10.22 0.0429 $67.875 $ -- $ 67.875 $411.479 1,590 $16,248.91 10.22
12/31/96 10.15 0.0443 0.0000 $70.433 $ -- $ 70.433 $481.912 1,597 $16,208.05 10.15
1/31/97 10.10 0.0444 $70.932 $ -- $ 70.932 $552.844 1,604 $16,199.14 10.10
2/29/97 10.15 0.0436 $69.929 $ -- $ 69.929 $622.773 1,611 $16,349.40 10.13
3/31/97 10.00 0.0436 $70.230 $ -- $ 70.230 $693.003 1,618 $16,178,01 10.00
4/30/97 10.07 0.0436 $70.536 $ -- $ 70.536 $763.539 1,625 $16,361.75 10.09
5/31/97 10.19 0.0436 $70.841 $ -- $ 70.841 $834.380 $669.0 1,625 $17,296.58
Tax Rate: 44.50%
Load: 0.00%
Past Year: Total Return 13.60%
5.0021 Years: Total Return 72.97%
Annualized: 11.58%
</TABLE>
22
<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 KANSAS MUNICIPAL BOND FUND CLASS A
<MULTIPLIER> 1000
<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> 90674
<INVESTMENTS-AT-VALUE> 95202
<RECEIVABLES> 3713
<ASSETS-OTHER> 1453
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100368
<PAYABLE-FOR-SECURITIES> 3248
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 533
<TOTAL-LIABILITIES> 3781
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 96911
<SHARES-COMMON-STOCK> 9414
<SHARES-COMMON-PRIOR> 9453
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4852)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4528
<NET-ASSETS> 95891
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1878
<OTHER-INCOME> 0
<EXPENSES-NET> 180
<NET-INVESTMENT-INCOME> 1698
<REALIZED-GAINS-CURRENT> 181
<APPREC-INCREASE-CURRENT> 577
<NET-CHANGE-FROM-OPS> 2456
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1639
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 292
<NUMBER-OF-SHARES-REDEEMED> 398
<SHARES-REINVESTED> 66
<NET-CHANGE-IN-ASSETS> 1019
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5032)
<OVERDISTRIB-NII-PRIOR> (56)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 172
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 282
<AVERAGE-NET-ASSETS> 94877
<PER-SHARE-NAV-BEGIN> 10.10
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> .08
<PER-SHARE-DIVIDEND> .17
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.19
<EXPENSE-RATIO> .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> 012
<NAME> NUVEEN FLAGSHIP KANSAS MUNICIPAL BOND FUND CLASS B
<MULTIPLIER> 1000
<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> 90674
<INVESTMENTS-AT-VALUE> 95202
<RECEIVABLES> 3713
<ASSETS-OTHER> 1453
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100368
<PAYABLE-FOR-SECURITIES> 3248
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 533
<TOTAL-LIABILITIES> 3781
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 96911
<SHARES-COMMON-STOCK> 60
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4852)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4528
<NET-ASSETS> 605
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1878
<OTHER-INCOME> 0
<EXPENSES-NET> 180
<NET-INVESTMENT-INCOME> 1698
<REALIZED-GAINS-CURRENT> 181
<APPREC-INCREASE-CURRENT> 577
<NET-CHANGE-FROM-OPS> 2456
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 73
<NUMBER-OF-SHARES-REDEEMED> 14
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1019
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5032)
<OVERDISTRIB-NII-PRIOR> (56)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 172
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 282
<AVERAGE-NET-ASSETS> 309
<PER-SHARE-NAV-BEGIN> 10.23
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> (.12)
<PER-SHARE-DIVIDEND> .11
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.13
<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> 013
<NAME>NUVEEN FLAGSHIP KANSAS MUNICIPAL BOND FUND CLASS C
<MULTIPLIER> 1000
<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> 90674
<INVESTMENTS-AT-VALUE> 95202
<RECEIVABLES> 3713
<ASSETS-OTHER> 1453
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100368
<PAYABLE-FOR-SECURITIES> 3248
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 533
<TOTAL-LIABILITIES> 3781
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 96911
<SHARES-COMMON-STOCK> 9
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4852)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4528
<NET-ASSETS> 91
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1878
<OTHER-INCOME> 0
<EXPENSES-NET> 180
<NET-INVESTMENT-INCOME> 1698
<REALIZED-GAINS-CURRENT> 181
<APPREC-INCREASE-CURRENT> 577
<NET-CHANGE-FROM-OPS> 2456
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1019
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5032)
<OVERDISTRIB-NII-PRIOR> (56)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 172
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 282
<AVERAGE-NET-ASSETS> 67
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> .16
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.21
<EXPENSE-RATIO> 1.09
<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 KANSAS MUNICIPAL BOND FUND CLASS R
<MULTIPLIER> 1000
<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> 90674
<INVESTMENTS-AT-VALUE> 95202
<RECEIVABLES> 3713
<ASSETS-OTHER> 1453
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100368
<PAYABLE-FOR-SECURITIES> 3248
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 533
<TOTAL-LIABILITIES> 3781
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 96911
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4852)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4528
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1878
<OTHER-INCOME> 0
<EXPENSES-NET> 180
<NET-INVESTMENT-INCOME> 1698
<REALIZED-GAINS-CURRENT> 181
<APPREC-INCREASE-CURRENT> 577
<NET-CHANGE-FROM-OPS> 2456
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1019
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5032)
<OVERDISTRIB-NII-PRIOR> (56)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 172
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 282
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.20
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> (.02)
<PER-SHARE-DIVIDEND> .14
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.22
<EXPENSE-RATIO> .00
<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 KENTUCKY 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> 426,230
<INVESTMENTS-AT-VALUE> 450,079
<RECEIVABLES> 9,146
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 459,238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 2,969
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 431,803
<SHARES-COMMON-STOCK> 38,987
<SHARES-COMMON-PRIOR> 38,826
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 615
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,848
<NET-ASSETS> 430,803
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,340
<OTHER-INCOME> 0
<EXPENSES-NET> 1,079
<NET-INVESTMENT-INCOME> 8,261
<REALIZED-GAINS-CURRENT> 766
<APPREC-INCREASE-CURRENT> (555)
<NET-CHANGE-FROM-OPS> 8,472
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,730
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,035
<NUMBER-OF-SHARES-REDEEMED> (1,227)
<SHARES-REINVESTED> 354
<NET-CHANGE-IN-ASSETS> 2803
<ACCUMULATED-NII-PRIOR> 116
<ACCUMULATED-GAINS-PRIOR> (156)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,304
<AVERAGE-NET-ASSETS> 428,996
<PER-SHARE-NAV-BEGIN> 11.04
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> .20
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.05
<EXPENSE-RATIO> .69
<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 KENTUCKY 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> 426,230
<INVESTMENTS-AT-VALUE> 450,079
<RECEIVABLES> 9,146
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 459,238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 2,969
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 431,803
<SHARES-COMMON-STOCK> 49
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 615
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,848
<NET-ASSETS> 544
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,340
<OTHER-INCOME> 0
<EXPENSES-NET> 1,079
<NET-INVESTMENT-INCOME> 8,261
<REALIZED-GAINS-CURRENT> 766
<APPREC-INCREASE-CURRENT> (555)
<NET-CHANGE-FROM-OPS> 8,472
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 25
<NET-CHANGE-IN-ASSETS> 2,803
<ACCUMULATED-NII-PRIOR> 116
<ACCUMULATED-GAINS-PRIOR> (156)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,304
<AVERAGE-NET-ASSETS> 254
<PER-SHARE-NAV-BEGIN> 11.07
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> .17
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.06
<EXPENSE-RATIO> 1.39
<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> 023
<NAME> NUVEEN FLAGSHIP KENTUCKY 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> 426,230
<INVESTMENTS-AT-VALUE> 450,079
<RECEIVABLES> 9,146
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 459,238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 2,969
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 431,803
<SHARES-COMMON-STOCK> 2,215
<SHARES-COMMON-PRIOR> 2,257
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 615
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,848
<NET-ASSETS> 24,468
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,340
<OTHER-INCOME> 0
<EXPENSES-NET> 1,079
<NET-INVESTMENT-INCOME> 8,261
<REALIZED-GAINS-CURRENT> 766
<APPREC-INCREASE-CURRENT> (555)
<NET-CHANGE-FROM-OPS> 8,472
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 400
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 166
<NUMBER-OF-SHARES-REDEEMED> (227)
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 2,803
<ACCUMULATED-NII-PRIOR> 116
<ACCUMULATED-GAINS-PRIOR> (156)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,304
<AVERAGE-NET-ASSETS> 24,671
<PER-SHARE-NAV-BEGIN> 11.04
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .18
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 1.24
<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 KENTUCKY 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> 426,230
<INVESTMENTS-AT-VALUE> 450,079
<RECEIVABLES> 9,146
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 459,238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 2,969
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 431,803
<SHARES-COMMON-STOCK> 41
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 615
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,848
<NET-ASSETS> 455
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,340
<OTHER-INCOME> 0
<EXPENSES-NET> 1,079
<NET-INVESTMENT-INCOME> 8,261
<REALIZED-GAINS-CURRENT> 766
<APPREC-INCREASE-CURRENT> (555)
<NET-CHANGE-FROM-OPS> 8,472
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 2,803
<ACCUMULATED-NII-PRIOR> 116
<ACCUMULATED-GAINS-PRIOR> (156)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,304
<AVERAGE-NET-ASSETS> 448
<PER-SHARE-NAV-BEGIN> 11.08
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> .21
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.03
<EXPENSE-RATIO> .49
<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> KENTUCKY LIMITED TERM MUNICIPAL BOND FUND CLASS A
<MULTIPLIER> 1000
<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> 10897
<INVESTMENTS-AT-VALUE> 11013
<RECEIVABLES> 155
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11176
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 162
<TOTAL-LIABILITIES> 162
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10999
<SHARES-COMMON-STOCK> 894
<SHARES-COMMON-PRIOR> 737
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (103)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 116
<NET-ASSETS> 8870
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 167
<OTHER-INCOME> 0
<EXPENSES-NET> 11
<NET-INVESTMENT-INCOME> 156
<REALIZED-GAINS-CURRENT> (8)
<APPREC-INCREASE-CURRENT> 11
<NET-CHANGE-FROM-OPS> 159
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 120
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 197
<NUMBER-OF-SHARES-REDEEMED> 44
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 2016
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (95)
<OVERDISTRIB-NII-PRIOR> (9)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 48
<AVERAGE-NET-ASSETS> 8068
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> .15
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> .27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<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> KENTUCKY LIMITED TERM MUNICIPAL BOND FUND CLASS C
<MULTIPLIER> 1000
<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> 10897
<INVESTMENTS-AT-VALUE> 11013
<RECEIVABLES> 155
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11176
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 162
<TOTAL-LIABILITIES> 162
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10999
<SHARES-COMMON-STOCK> 216
<SHARES-COMMON-PRIOR> 170
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (103)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 116
<NET-ASSETS> 2144
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 167
<OTHER-INCOME> 0
<EXPENSES-NET> 11
<NET-INVESTMENT-INCOME> 156
<REALIZED-GAINS-CURRENT> (8)
<APPREC-INCREASE-CURRENT> 11
<NET-CHANGE-FROM-OPS> 159
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 79
<NUMBER-OF-SHARES-REDEEMED> 34
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 2016
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (95)
<OVERDISTRIB-NII-PRIOR> (9)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 48
<AVERAGE-NET-ASSETS> 1850
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> .14
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> .62
<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> KENTUCKY LIMITED TERM MUNICIPAL BOND FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-1-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 10897
<INVESTMENTS-AT-VALUE> 11013
<RECEIVABLES> 155
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11176
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 162
<TOTAL-LIABILITIES> 162
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10999
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (103)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 116
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 167
<OTHER-INCOME> 0
<EXPENSES-NET> 11
<NET-INVESTMENT-INCOME> 156
<REALIZED-GAINS-CURRENT> (8)
<APPREC-INCREASE-CURRENT> 11
<NET-CHANGE-FROM-OPS> 159
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2016
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (95)
<OVERDISTRIB-NII-PRIOR> (9)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 48
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> (.10)
<PER-SHARE-DIVIDEND> .11
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 0
<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> NUVEEN FLAGSHIP MICHIGAN 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> 301488
<INVESTMENTS-AT-VALUE> 321641
<RECEIVABLES> 8324
<ASSETS-OTHER> 38
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 330003
<PAYABLE-FOR-SECURITIES> 750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1958
<TOTAL-LIABILITIES> 2708
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 307449
<SHARES-COMMON-STOCK> 22187
<SHARES-COMMON-PRIOR> 21779
<ACCUMULATED-NII-CURRENT> 33
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (338)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20152
<NET-ASSETS> 259055
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6676
<OTHER-INCOME> 0
<EXPENSES-NET> 967
<NET-INVESTMENT-INCOME> 5709
<REALIZED-GAINS-CURRENT> 75
<APPREC-INCREASE-CURRENT> 379
<NET-CHANGE-FROM-OPS> 6163
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4534
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 754
<NUMBER-OF-SHARES-REDEEMED> 894
<SHARES-REINVESTED> 74
<NET-CHANGE-IN-ASSETS> (1763)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (281)
<OVERDISTRIB-NII-PRIOR> (3)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 579
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 967
<AVERAGE-NET-ASSETS> 258158
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> .205
<PER-SHARE-GAIN-APPREC> .019
<PER-SHARE-DIVIDEND> .204
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.68
<EXPENSE-RATIO> .846
<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> 042
<NAME> NUVEEN FLAGSHIP MICHIGAN 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> 301488
<INVESTMENTS-AT-VALUE> 321641
<RECEIVABLES> 8324
<ASSETS-OTHER> 38
<OTHER-ITEMS-ASSETS> 0
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 2708
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 307449
<SHARES-COMMON-STOCK> 33
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 33
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (338)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20152
<NET-ASSETS> 380
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6676
<OTHER-INCOME> 0
<EXPENSES-NET> 967
<NET-INVESTMENT-INCOME> 5709
<REALIZED-GAINS-CURRENT> 75
<APPREC-INCREASE-CURRENT> 379
<NET-CHANGE-FROM-OPS> 6163
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2
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<NUMBER-OF-SHARES-SOLD> 31
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1763)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (281)
<OVERDISTRIB-NII-PRIOR> (3)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 579
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 967
<AVERAGE-NET-ASSETS> 188
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> .173
<PER-SHARE-GAIN-APPREC> .041
<PER-SHARE-DIVIDEND> .174
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.70
<EXPENSE-RATIO> 1.594
<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> NUVEEN FLAGSHIP MICHIGAN 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> 301488
<INVESTMENTS-AT-VALUE> 321641
<RECEIVABLES> 8324
<ASSETS-OTHER> 38
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 330003
<PAYABLE-FOR-SECURITIES> 750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1958
<TOTAL-LIABILITIES> 2708
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 307449
<SHARES-COMMON-STOCK> 3572
<SHARES-COMMON-PRIOR> 3630
<ACCUMULATED-NII-CURRENT> 33
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (338)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20152
<NET-ASSETS> 41649
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6676
<OTHER-INCOME> 0
<EXPENSES-NET> 967
<NET-INVESTMENT-INCOME> 5709
<REALIZED-GAINS-CURRENT> 75
<APPREC-INCREASE-CURRENT> 379
<NET-CHANGE-FROM-OPS> 6163
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 661
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 149
<NUMBER-OF-SHARES-REDEEMED> 249
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> (1763)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (281)
<OVERDISTRIB-NII-PRIOR> (3)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 579
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 967
<AVERAGE-NET-ASSETS> 41995
<PER-SHARE-NAV-BEGIN> 11.64
<PER-SHARE-NII> .184
<PER-SHARE-GAIN-APPREC> .018
<PER-SHARE-DIVIDEND> .182
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.66
<EXPENSE-RATIO> 1.396
<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> NUVEEN FLAGSHIP MICHIGAN 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> 301488
<INVESTMENTS-AT-VALUE> 321641
<RECEIVABLES> 8324
<ASSETS-OTHER> 38
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 330003
<PAYABLE-FOR-SECURITIES> 750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1958
<TOTAL-LIABILITIES> 2708
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 307449
<SHARES-COMMON-STOCK> 2245
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 33
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (338)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20152
<NET-ASSETS> 26211
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6676
<OTHER-INCOME> 0
<EXPENSES-NET> 967
<NET-INVESTMENT-INCOME> 5709
<REALIZED-GAINS-CURRENT> 75
<APPREC-INCREASE-CURRENT> 379
<NET-CHANGE-FROM-OPS> 6163
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 479
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 38
<NUMBER-OF-SHARES-REDEEMED> 139
<SHARES-REINVESTED> 21
<NET-CHANGE-IN-ASSETS> (1763)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (281)
<OVERDISTRIB-NII-PRIOR> (3)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 579
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 967
<AVERAGE-NET-ASSETS> 26313
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> .213
<PER-SHARE-GAIN-APPREC> .018
<PER-SHARE-DIVIDEND> .211
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.68
<EXPENSE-RATIO> .646
<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> NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND CLASS A
<MULTIPLIER> 1000
<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> 214736
<INVESTMENTS-AT-VALUE> 224448
<RECEIVABLES> 4853
<ASSETS-OTHER> 54
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 229355
<PAYABLE-FOR-SECURITIES> 495
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1480
<TOTAL-LIABILITIES> 1975
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 220223
<SHARES-COMMON-STOCK> 20268
<SHARES-COMMON-PRIOR> 20630
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2559)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9712
<NET-ASSETS> 218924
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4625
<OTHER-INCOME> 0
<EXPENSES-NET> 578
<NET-INVESTMENT-INCOME> 4047
<REALIZED-GAINS-CURRENT> 611
<APPREC-INCREASE-CURRENT> 197
<NET-CHANGE-FROM-OPS> 4855
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3821
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 408
<NUMBER-OF-SHARES-REDEEMED> 918
<SHARES-REINVESTED> 148
<NET-CHANGE-IN-ASSETS> 1601
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3168)
<OVERDISTRIB-NII-PRIOR> (101)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 407
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 663
<AVERAGE-NET-ASSETS> 219412
<PER-SHARE-NAV-BEGIN> 10.76
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> .03
<PER-SHARE-DIVIDEND> .19
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.80
<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> 052
<NAME> NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> FEB-1-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 214736
<INVESTMENTS-AT-VALUE> 224448
<RECEIVABLES> 4853
<ASSETS-OTHER> 54
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 229355
<PAYABLE-FOR-SECURITIES> 495
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1480
<TOTAL-LIABILITIES> 1975
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 220223
<SHARES-COMMON-STOCK> 42
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2559)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9712
<NET-ASSETS> 454
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4625
<OTHER-INCOME> 0
<EXPENSES-NET> 578
<NET-INVESTMENT-INCOME> 4047
<REALIZED-GAINS-CURRENT> 611
<APPREC-INCREASE-CURRENT> 197
<NET-CHANGE-FROM-OPS> 4855
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1601)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3168)
<OVERDISTRIB-NII-PRIOR> (101)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 407
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 663
<AVERAGE-NET-ASSETS> 174
<PER-SHARE-NAV-BEGIN> 10.81
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> .16
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.80
<EXPENSE-RATIO> 1.45
<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> NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND CLASS C
<MULTIPLIER> 1000
<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> 214736
<INVESTMENTS-AT-VALUE> 224448
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<ASSETS-OTHER> 54
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 229355
<PAYABLE-FOR-SECURITIES> 495
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1480
<TOTAL-LIABILITIES> 1975
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 220223
<SHARES-COMMON-STOCK> 738
<SHARES-COMMON-PRIOR> 665
<ACCUMULATED-NII-CURRENT> 4
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<ACCUMULATED-NET-GAINS> (2559)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9712
<NET-ASSETS> 7968
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4625
<OTHER-INCOME> 0
<EXPENSES-NET> 578
<NET-INVESTMENT-INCOME> 4047
<REALIZED-GAINS-CURRENT> 611
<APPREC-INCREASE-CURRENT> 197
<NET-CHANGE-FROM-OPS> 4855
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 119
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 121
<NUMBER-OF-SHARES-REDEEMED> 50
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> (1601)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3168)
<OVERDISTRIB-NII-PRIOR> (101)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 407
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 663
<AVERAGE-NET-ASSETS> 7570
<PER-SHARE-NAV-BEGIN> 10.75
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> .17
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.80
<EXPENSE-RATIO> 1.30
<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> NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND CLASS R
<MULTIPLIER> 1000
<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> 214736
<INVESTMENTS-AT-VALUE> 224448
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<OTHER-ITEMS-ASSETS> 0
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<PAYABLE-FOR-SECURITIES> 495
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1480
<TOTAL-LIABILITIES> 1975
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 220223
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<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4
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<ACCUMULATED-NET-GAINS> (2559)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9712
<NET-ASSETS> 34
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4625
<OTHER-INCOME> 0
<EXPENSES-NET> 578
<NET-INVESTMENT-INCOME> 4047
<REALIZED-GAINS-CURRENT> 611
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<NET-CHANGE-FROM-OPS> 4855
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1601)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3168)
<OVERDISTRIB-NII-PRIOR> (101)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 407
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 663
<AVERAGE-NET-ASSETS> 34
<PER-SHARE-NAV-BEGIN> 10.90
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> (.12)
<PER-SHARE-DIVIDEND> .15
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.80
<EXPENSE-RATIO> .55
<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 OHIO 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
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<PAID-IN-CAPITAL-COMMON> 628293
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<ACCUMULATED-NII-CURRENT> 60
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<ACCUMULATED-NET-GAINS> (88)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37663
<NET-ASSETS> 463253
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<OTHER-INCOME> 0
<EXPENSES-NET> 1841
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<APPREC-INCREASE-CURRENT> (3195)
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<NET-CHANGE-IN-ASSETS> 3658
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<OVERDISTRIB-NII-PRIOR> 0
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<AVERAGE-NET-ASSETS> 464256
<PER-SHARE-NAV-BEGIN> 11.42
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<PER-SHARE-GAIN-APPREC> (.011)
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<PER-SHARE-NAV-END> 11.41
<EXPENSE-RATIO> .852
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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 OHIO 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
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<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 60
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (88)
<OVERDISTRIBUTION-GAINS> 0
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<AVERAGE-NET-ASSETS> 808
<PER-SHARE-NAV-BEGIN> 11.42
<PER-SHARE-NII> .173
<PER-SHARE-GAIN-APPREC> (.009)
<PER-SHARE-DIVIDEND> .174
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.41
<EXPENSE-RATIO> 1.602
<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 OHIO 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> 623643
<INVESTMENTS-AT-VALUE> 661306
<RECEIVABLES> 14683
<ASSETS-OTHER> 3261
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 679250
<PAYABLE-FOR-SECURITIES> 8513
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4810
<TOTAL-LIABILITIES> 13323
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 628293
<SHARES-COMMON-STOCK> 3568
<SHARES-COMMON-PRIOR> 3432
<ACCUMULATED-NII-CURRENT> 60
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (88)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37663
<NET-ASSETS> 40713
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13827
<OTHER-INCOME> 0
<EXPENSES-NET> 1841
<NET-INVESTMENT-INCOME> 11986
<REALIZED-GAINS-CURRENT> 2750
<APPREC-INCREASE-CURRENT> (3195)
<NET-CHANGE-FROM-OPS> 11541
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 669
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 259
<NUMBER-OF-SHARES-REDEEMED> 391
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> (3658)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2630)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1841
<AVERAGE-NET-ASSETS> 41583
<PER-SHARE-NAV-BEGIN> 11.42
<PER-SHARE-NII> .183
<PER-SHARE-GAIN-APPREC> (.011)
<PER-SHARE-DIVIDEND> .182
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.41
<EXPENSE-RATIO> 1.402
<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 OHIO 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> 623644
<INVESTMENTS-AT-VALUE> 661306
<RECEIVABLES> 14683
<ASSETS-OTHER> 3261
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 679250
<PAYABLE-FOR-SECURITIES> 8513
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4810
<TOTAL-LIABILITIES> 13323
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 628293
<SHARES-COMMON-STOCK> 14045
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 60
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (88)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37663
<NET-ASSETS> 160312
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13827
<OTHER-INCOME> 0
<EXPENSES-NET> 1841
<NET-INVESTMENT-INCOME> 11986
<REALIZED-GAINS-CURRENT> 2750
<APPREC-INCREASE-CURRENT> (3195)
<NET-CHANGE-FROM-OPS> 11541
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2963
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 320
<NUMBER-OF-SHARES-REDEEMED> 534
<SHARES-REINVESTED> 133
<NET-CHANGE-IN-ASSETS> (3658)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2630)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1841
<AVERAGE-NET-ASSETS> 160223
<PER-SHARE-NAV-BEGIN> 11.42
<PER-SHARE-NII> .211
<PER-SHARE-GAIN-APPREC> (.011)
<PER-SHARE-DIVIDEND> .210
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.41
<EXPENSE-RATIO> .652
<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> NUVEEN FLAGSHIP WISCONSIN 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> 13613
<INVESTMENTS-AT-VALUE> 13897
<RECEIVABLES> 404
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14310
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169
<TOTAL-LIABILITIES> 169
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13864
<SHARES-COMMON-STOCK> 1429
<SHARES-COMMON-PRIOR> 1401
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 284
<NET-ASSETS> 14004
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 264
<OTHER-INCOME> 0
<EXPENSES-NET> 14
<NET-INVESTMENT-INCOME> 250
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> 7
<NET-CHANGE-FROM-OPS> 256
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 239
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102
<NUMBER-OF-SHARES-REDEEMED> 88
<SHARES-REINVESTED> 15
<NET-CHANGE-IN-ASSETS> 423
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7)
<OVERDISTRIB-NII-PRIOR> (11)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 65
<AVERAGE-NET-ASSETS> 13851
<PER-SHARE-NAV-BEGIN> 9.78
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> .17
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.80
<EXPENSE-RATIO> .30
<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> NUVEEN FLAGSHIP WISCONSIN 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> 13613
<INVESTMENTS-AT-VALUE> 13897
<RECEIVABLES> 404
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14310
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169
<TOTAL-LIABILITIES> 169
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13864
<SHARES-COMMON-STOCK> 2
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 284
<NET-ASSETS> 20
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 264
<OTHER-INCOME> 0
<EXPENSES-NET> 14
<NET-INVESTMENT-INCOME> 250
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> 7
<NET-CHANGE-FROM-OPS> 256
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 423
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7)
<OVERDISTRIB-NII-PRIOR> (11)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 65
<AVERAGE-NET-ASSETS> 11
<PER-SHARE-NAV-BEGIN> 9.87
<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> 9.82
<EXPENSE-RATIO> .94
<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 WISCONSIN 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> 13613
<INVESTMENTS-AT-VALUE> 13897
<RECEIVABLES> 404
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14310
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169
<TOTAL-LIABILITIES> 169
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13864
<SHARES-COMMON-STOCK> 8
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 284
<NET-ASSETS> 76
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 264
<OTHER-INCOME> 0
<EXPENSES-NET> 14
<NET-INVESTMENT-INCOME> 250
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> 7
<NET-CHANGE-FROM-OPS> 256
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 423
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7)
<OVERDISTRIB-NII-PRIOR> (11)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 65
<AVERAGE-NET-ASSETS> 25
<PER-SHARE-NAV-BEGIN> 9.87
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> .11
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.82
<EXPENSE-RATIO> .69
<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> NUVEEN FLAGSHIP WISCONSIN 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> 13613
<INVESTMENTS-AT-VALUE> 13897
<RECEIVABLES> 404
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14310
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169
<TOTAL-LIABILITIES> 169
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13864
<SHARES-COMMON-STOCK> 4
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 284
<NET-ASSETS> 40
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 264
<OTHER-INCOME> 0
<EXPENSES-NET> 14
<NET-INVESTMENT-INCOME> 250
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> 7
<NET-CHANGE-FROM-OPS> 256
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 423
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7)
<OVERDISTRIB-NII-PRIOR> (11)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 65
<AVERAGE-NET-ASSETS> 14
<PER-SHARE-NAV-BEGIN> 9.87
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> .13
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.82
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99(a)
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-------------
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 IV
-------------
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 IV
-------------
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 IV
-------------
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 IV
-------------
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 IV
-------------
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 IV
-------------
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 IV
---------------
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 IV (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.
<PAGE>
2
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").
<PAGE>
3
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;
<PAGE>
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
<PAGE>
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).
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
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Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue, N.W.
Suite 800
Washington, DC 20004-2505
September 23, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
Re: Nuveen Flagship Multistate Trust IV
(File Nos. 333-16115 and 811-07751)
Ladies and Gentlemen:
Enclosed herewith please find Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of the Nuveen (the "Fund") pursuant to Rule
485(b) of the Securities Act of 1933.
In addition, we represent that Post-Effective Amendment No. 1 does not
contain disclosures that would render it ineligible to become effective under
Rule 485(b).
Should there by any questions regarding this Post-Effective Amendment,
please do not hesitate to contact the undersigned at (202) 639-7065 or Monica L.
Parry at (202) 639-7343.
Very truly yours,
Fried, Frank, Harris, Shriver & Jacobson
By /s/ Thomas S. Harman
--------------------------------
Thomas S. Harman
Enclosure
