<PAGE> 1
February 19, 1999
Dear Nuveen Fund Shareholder:
You recently received the Prospectus/Proxy Statement for the Special Meeting of
Shareholders for the Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
to be held on April 15, 1999. You are being asked to vote on the reorganization
of your Fund into the Nuveen Flagship Kentucky Municipal Bond Fund.
Unfortunately, the Prospectus for the Nuveen Flagship Kentucky Municipal Bond
Fund was inadvertently omitted from the mailing.
Enclosed please find the Prospectus along with another proxy card and
postage-paid envelope. Your vote is important. Please review these materials
and execute and return the proxy card at your earliest convenience. If you have
already mailed your proxy card and wish to change your vote, please complete
and return the enclosed card.
For more detailed information about the reorganization, please refer to the
Prospectus/Proxy Statement or call the Fund at (800) 621-7227.
Gifford R. Zimmerman
Vice President and Secretary
<PAGE> 2
Supplement Dated December 31,1998 to the
Prospectus Dated September 30,1998
- -------------------
NUVEEN FLAGSHIP MULTISTATE TRUST IV
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
- -------------------
We at John Nuveen & Co. Incorporated appreciate the level of trust you have
placed in us and are committed to providing you with the latest information
regarding your investments. That is why we want to inform you in advance of a
proposed merger of the Nuveen Flagship Kentucky Limited Term Municipal Bond
Fund (the "Fund") into the Nuveen Flagship Kentucky Municipal Bond Fund (the
"Acquired Fund"). The board of directors of the Kentucky Limited Term Fund
have determined that the merger would benefit shareholders in a number of ways,
including:
- - lower gross operating expenses as a percentage of net assets;
- - improved portfolio diversification and lower portfolio transaction costs;
- - continued exemption of dividends from Kentucky state income taxes; and
- - higher dividends per share.
The Board believes that these potential benefits, together with the potentially
higher distributions from the Kentucky Fund, should offset the risks associated
with investments in a long-term bond fund.
The Trustees of the Nuveen Flagship Multistate Trust IV have approved a
tax-free reorganization of the Fund as described below. The Fund is closed to
new investors effective December 31, 1998. Only shareholders with existing
accounts may continue to make additional purchases and to reinvest dividends
into existing accounts.
Under the terms of the reorganization, the Fund would transfer all of its
assets and liabilities to the Acquiring Fund, a series of the Nuveen Flagship
Municipal Trust IV, in a tax-free exchange for an equal value of shares of the
Acquiring Fund. The Acquiring Fund is a municipal bond fund whose investment
objective is to provide 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. As with any mutual fund, there is no assurance
that the Acquiring Fund will meet its investment objective. The reorganization
is subject to certain regulatory approvals and the approval of the Fund's
shareholders. A meeting of shareholders has been called for April 15, 1999 for
the purpose of voting on the proposed reorganization. Further information
regarding the proposed reorganization and the shareholder meeting will be
contained in a proxy statement that is scheduled to be mailed in mid February,
1999.
<PAGE> 3
NUVEEN
MUNICIPAL
BOND FUNDS
September 30, 1998
- -------------------------------
Prospectus
- -------------------------------
Dependable, tax-free income
to help you keep more of
what you earn.
KANSAS
KENTUCKY
MICHIGAN
MISSOURI [PHOTO APPEARS HERE]
OHIO
WISCONSIN
- -------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- -------------------------------
Like all mutual fund shares these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1 THE FUNDS
This section provides you with an overview of the
funds including investment objectives, portfolio
holdings and historical performance information.
Introduction................................................................. 1
Nuveen Flagship Kansas Municipal Bond Fund................................... 2
Nuveen Flagship Kentucky Municipal Bond Fund................................. 4
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund.................... 6
Nuveen Flagship Michigan Municipal Bond Fund................................. 8
Nuveen Flagship Missouri Municipal Bond Fund................................. 10
Nuveen Flagship Ohio Municipal Bond Fund..................................... 12
WE HAVE USED THE ICONS Nuveen Flagship Wisconsin Municipal Bond Fund................................ 14
BELOW THROUGHOUT THIS
PROSPECTUS TO MAKE IT SECTION 2 HOW WE MANAGE YOUR MONEY
EASY FOR YOU TO FIND THE This section gives you a detailed discussion of our investment and risk
TYPE OF INFORMATION management strategies.
YOU NEED.
Who Manages the Funds........................................................ 16
Management Fees.............................................................. 17
What Securities We Invest In................................................. 17
How We Select Investments.................................................... 18
What the Risks Are........................................................... 19
How We Manage Risk........................................................... 20
SECTION 3 HOW YOU CAN BUY AND SELL SHARES
Investment Strategy This section provides the information you need to move money into or out
of your account.
How to Choose a Share Class.................................................. 21
Risks How to Reduce Your Sales Charge.............................................. 23
How to Buy Shares............................................................ 23
Systematic Investing......................................................... 24
Fees, Charges Systematic Withdrawal........................................................ 25
and Expenses Special Services............................................................. 25
How to Sell Shares........................................................... 26
Shareholder SECTION 4 GENERAL INFORMATION
Instructions
This section summarizes the funds' distribution policies and other general
fund information.
Performance and Distributions and Taxes...................................................... 28
Current Portfolio Distribution and Service Plans............................................... 29
Information Net Asset Value.............................................................. 30
Fund Service Providers....................................................... 30
SECTION 5 FINANCIAL HIGHLIGHTS
This section provides the funds' financial performance
for the past 5 years. 31
APPENDIX ADDITIONAL STATE INFORMATION.................................. 38
</TABLE>
<PAGE> 5
September 30,1998
Section 1 The Funds
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
Prospectus
This prospectus is intended to provide important information to
help you evaluate whether one of the Nuveen Mutual Funds listed
above may be right for you. Please read it carefully before
investing and keep it for future reference.
To learn more about how Nuveen Mutual Funds can help you achieve
your financial goals, talk with your financial adviser. Or call
us at (800) 257-8787 for more information
A Century of Investment Experience
Since our founding in 1898, John Nuveen & Co. Incorporated has
been synonymous with investments that withstand the test of time.
Today we offer a broad range of quality investments designed for
individuals seeking to build and maintain wealth.
Section 1 The Funds 1
<PAGE> 6
NUVEEN FLAGSHIP KANSAS MUNICIPAL BOND FUND
FUND OVERVIEW
INVESTMENT OBJECTIVE
The investment objective of the 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.
HOW THE FUND PURSUES ITS OBJECTIVE
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Kansas bonds. The fund is
non-diversified, and may invest more of its assets in a single issuer than
a diversified fund. Greater concentration may increase risk. As with any
mutual fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
IS THIS FUND RIGHT FOR YOU?
The fund may be a suitable investment for you if you seek 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.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
HOW THE FUND HAS PERFORMED
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past five years as well as
annualized fund, peer group and market benchmark returns for the one-,
five-year and inception periods ending December 31, 1997. This information
is intended to help you assess the variability of fund returns over the
past five years (and consequently, the potential rewards and risks of a
fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1993 14.1%
1994 -8.3%
1995 17.7%
1996 3.4%
1997 9.7%
From inception in January 1992 to December 31, 1997, the highest and lowest
quarterly returns were 6.96% and -7.73%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year 5 Year Inception
- ------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 5.11% 5.98% 6.82%
Class A (NAV) 9.67% 6.90% 7.60%
Class B 4.30% 6.00% 6.76%
Class C 9.31% 6.54% 7.23%
Class R 10.47% 7.06% 7.73%
- ------------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 7.67%
Lipper
Peer Group/3/ 7.84% 6.33% 6.85%
</TABLE>
2 Section 1 The Funds
<PAGE> 7
WHAT ARE THE COSTS OF INVESTING?
SHAREHOLDER TRANSACTION EXPENSES/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
ANNUAL FUND OPERATING EXPENSES/11/
Paid From Fund Assets
Share Class A B C R
Management Fees .55% .55% .55% .55%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .15% .15% .14% .15%
Total Annual Fund Operating
Expenses-Gross+ .90% 1.65% 1.44% .70%
+ After Expense Reimbursements
Reimbursements (.19%) (.20%) (.20%) (.19%)
Total Annual Fund Operating Expenses-Net .71% 1.45% 1.24% .51%
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 508 $ 563 $ 147 $ 72 $ 508 $ 168 $ 147 $ 72
3 Years $ 695 $ 839 $ 456 $ 224 $ 695 $ 520 $ 456 $ 224
5 Years $ 898 $1,011 $ 787 $ 390 $ 898 $ 897 $ 787 $ 390
10 Years $1,481 $1,754 $1,724 $ 871 $1,481 $1,754 $1,724 $ 871
</TABLE>
HOW THE FUND IS INVESTED (AS OF 5/31/98)
PORTFOLIO STATISTICS
Weighted Average Maturity 20.6 years
Weighted Average Duration 7.6 years
Weighted Average Credit Quality AA
Number of Issues 60
CREDIT QUALITY
AAA 49%
AA 24%
A 17%
BBB/NR 10%
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Utilities (8%)
Other (27%)
Tax Obligation-Limited (20%)
Health Care (20%)
U.S. Guaranteed (13%)
Housing-Multifamily (12%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.69%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Kansas Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares.
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 3
<PAGE> 8
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
Fund Overview
Investment Objective
The investment objective of the 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.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Kentucky bonds. As with any mutual
fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek 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.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How The Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past ten years as well as
annualized fund, peer group and market benchmark returns for the one-,
five- and ten-year periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
ten years (and consequently, the potential rewards and risks of a fund
investment).
TOTAL RETURNS/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1988 13.5%
1989 10.8%
1990 6.5%
1991 12.4%
1992 9.3%
1993 12.3%
1994 -5.4%
1995 17.3%
1996 3.9%
1997 9.1%
During the ten years ending December 31, 1997, the highest and lowest
quarterly returns were 7.13% and -5.54%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
1-, 5- and 10-year average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year 5 Year 10 Year
------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 4.46% 6.21% 8.32%
Class A (NAV) 9.08% 7.12% 8.79%
Class B 4.29% 6.34% 8.31%
Class C 8.41% 6.52% 8.19%
Class R 9.11% 7.13% 8.79%
------------------------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.43% 6.80% 8.42%
</TABLE>
4 Section 1 The Funds
<PAGE> 9
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- -----------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- ----------------------------------------------------------------------------
Management Fees .54% .54% .54% .54%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .10% .10% .10% .10%
Total Annual Fund Operating
Expenses-Gross .84% 1.59% 1.39% .64%
After Expense Reimbursements
Reimbursements (.07%) (.05%) (.06%) (.06%)
Total Annual Fund Operating Expenses-Net .77% 1.54% 1.33% .58%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 502 $ 557 $ 142 $ 65 $ 502 $ 162 $ 142 $ 65
3 Years $ 677 $ 821 $ 440 $205 $ 677 $ 502 $ 440 $205
5 Years $ 866 $ 980 $ 761 $357 $ 866 $ 866 $ 761 $357
10 Years $1,414 $1,688 $1,669 $798 $1,414 $1,688 $1,669 $798
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 20.3 years
Weighted Average Duration 6.4 years
Weighted Average Credit Quality AA
Number of Issues 177
Credit Quality
AAA 52%
AA 6%
A 24%
BBB/NR 18%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Water/Sewer (6%)
Other (29%)
Tax Obligation-Limited (23%)
Health Care (23%)
Utilities (10%)
U.S.Guaranteed (9%)
1. Class A total returns reflect actual performance for all periods; Class
B, C and R total returns reflect actual performance for periods since
class inception, and Class A performance for periods prior to class
inception, adjusted for the differences in fees between the classes (see
"What are the Costs of Investing?"). The year-to-date return as of
6/30/98 was 2.44%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the
funds in the Lipper Kentucky Municipal Debt Category. Returns assume
reinvestment of dividends and do not reflect any applicable sales
charges.
4. As a percent of offering price unless otherwise noted. Authorized
Dealers and other firms may charge additional fees for shareholder
transactions or for advisory services. Please see their materials for
details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How
You Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may
be subject to a contingent deferred sales charge (CDSC) if redeemed
within 18 months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a
CDSC of 5% during the first year, 4% during the second and third years,
3% during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule
12b-1 fees and CDSCs than the economic equivalent of the maximum front-
end sales charge permitted under the National Association of Securities
Dealers Conduct Rules.
Section 1 The Funds 5
<PAGE> 10
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
Fund Overview
INVESTMENT OBJECTIVE
The investment objective of the 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.
HOW THE FUND PURSUES ITS OBJECTIVE
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Kentucky bonds. The fund is
non-diversified, and may invest more of its assets in a single issuer than
a diversified fund. Greater concentration may increase risk. As with any
mutual fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
IS THIS FUND RIGHT FOR YOU?
The fund may be a suitable investment for you if you seek 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.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
HOW THE FUND HAS PERFORMED
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past two years as well as
annualized fund, peer group and market benchmark returns for the one-year
and inception periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
two years (and consequently, the potential rewards and risks of a fund
investment).
TOTAL RETURNS/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1996 4.4%
1997 6.9%
From inception in September 1995 to December 31, 1997, the highest and
lowest quarterly returns were 2.70% and .21%, respectively for the quarters
ending 12/31/95 and 3/31/96. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year Inception
--------------------------------------------------------------------------
<S> <C> <C>
Class A (Offer) 4.28% 5.06%
Class A (NAV) 6.91% 6.24%
Class C 6.57% 5.87%
Class R 7.01% 6.29%
--------------------------------------------------------------------------
LB Market
Benchmark/2/ 6.38% 5.65%
Lipper
Peer Group/3/ 5.61% 4.96%
</TABLE>
6 Section 1 The Funds
<PAGE> 11
What are the Costs of Investing?
SHAREHOLDER TRANSACTION EXPENSES/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A C R/5/
- ------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases 2.50%/6/ None None
- ------------------------------------------------------------------
Maximum Sales Charge Imposed on
Reinvested Dividends None None None
- ------------------------------------------------------------------
Exchange Fees None None None
- ------------------------------------------------------------------
Deferred Sales Charge/7/ None/8/ 1%/9/ None
- ------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES/10/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A C R
- -------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees .45% .45% .45%
- -------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .55% --%
- -------------------------------------------------------------------
OTHER EXPENSES .69% .69% .68%
- -------------------------------------------------------------------
Total Annual Fund Operating
Expenses-Gross 1.34% 1.69% 1.13%
After Expense Reimbursements
- -------------------------------------------------------------------
Reimbursements (.68%) (.68%) (.67%)
- -------------------------------------------------------------------
Total Annual Fund Operating Expenses-Net .66% 1.01% .46%
- -------------------------------------------------------------------
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A C R A C R
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 383 $ 172 $ 115 $ 383 $ 172 $ 115
- -----------------------------------------------------------------------
3 Years $ 664 $ 533 $ 359 $ 664 $ 533 $ 359
- -----------------------------------------------------------------------
5 Years $ 966 $ 918 $ 622 $ 966 $ 918 $ 622
- -----------------------------------------------------------------------
10 Years $1,822 $1,998 $1,375 $1,822 $1,998 $1,375
- -----------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/98)
PORTFOLIO STATISTICS
Weighted Average Maturity 6.1 years
- ------------------------------------------------
Weighted Average Duration 5.0 years
- ------------------------------------------------
Weighted Average Credit Quality AA
- ------------------------------------------------
Number of Issues 33
- ------------------------------------------------
CREDIT QUALITY
AAA 45%
- ------------------------------------------------
AA 19%
- ------------------------------------------------
A 25%
- ------------------------------------------------
BBB/NR 11%
- ------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Transportation (9%)
Health Care (23%)
Tax Obligation-Limited (22%)
Other (22%)
Education and Civic
Organizations (14%)
Housing-Multifamily (10%)
1. Class A total returns reflect actual performance for all periods; Class C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was
1.78%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers 5
Year Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Other States Short-Intermediate Municipal Debt Category. Returns
assume reinvestment of dividends and do not reflect any applicable sales
charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
10. Long-term holders of Class C shares may pay more in Rule 12b-1 fees and
CDSCs than the economic equivalent of the maximum front-end sales charge
permitted under the National Association of Securities Dealers Conduct
Rules.
Section 1 The Funds 7
<PAGE> 12
NUVEEN FLAGSHIP MICHIGAN MUNICIPAL BOND FUND
Fund Overview
Investment Objective
The investment objective of the 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.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Michigan bonds. As with any mutual
fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek 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.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past ten years as well as
annualized fund, peer group and market benchmark returns for the one-,
five- and ten-year periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
ten years (and consequently, the potential rewards and risks of a fund
investment).
Total Returns(1)
[BAR CHART APPEARS HERE]
Class A Annual Returns
1988 12.5%
1989 10.2%
1990 5.3%
1991 11.6%
1992 9.6%
1993 12.0%
1994 -5.0%
1995 16.3%
1996 3.8%
1997 8.9%
During the ten years ending December 31, 1997, the highest and lowest
quarterly returns were 6.10% and -5.31%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
1-, 5- and 10-year average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year 5 Year 10 Year
-------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 4.38% 6.02% 7.89%
Class A (NAV) 8.93% 6.93% 8.36%
Class B 4.22% 6.17% 7.89%
Class C 8.34% 6.26% 7.72%
Class R 9.13% 6.97% 8.38%
-------------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.50% 6.66% 8.24%
</TABLE>
8 Section 1 The Funds
<PAGE> 13
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- --------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/1/ None
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- -------------------------------------------------------------------------
Management Fees .54% .54% .54% .54%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .10% .10% .10% .10%
Total Operating Expenses .84% 1.59% 1.39% .64%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 502 $ 557 $ 142 $ 65 $ 502 $ 162 $ 142 $ 65
3 Years $ 677 $ 821 $ 440 $205 $ 677 $ 502 $ 440 $205
5 Years $ 866 $ 980 $ 761 $357 $ 866 $ 866 $ 761 $357
10 Years $1,414 $1,688 $1,669 $798 $1,414 $1,688 $1,669 $798
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 18.1 years
Weighted Average Duration 6.5 years
Weighted Average Credit Quality AA
Number of Issues 56
Credit Quality
AAA 54%
AA 19%
A 14%
BBB/NR 13%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation-Limited (16%)
Other (21%)
Tax Obligation-General (16%)
Health Care (24%)
U.S. Guaranteed (17%)
Water/Sewer (6%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are
the Costs of Investing?"). The year-to-date return as of 6/30/98 was
2.43%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Michigan Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 9
<PAGE> 14
NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND
Fund Overview
Investment Objective
The investment objective of the 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.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Missouri bonds. The fund is
non-diversified, and may invest more of its assets in a single issuer than
a diversified fund. Greater concentration may increase risk. As with any
mutual fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek 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.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past ten years as well as
annualized fund, peer group and market benchmark returns for the one-,
five- and ten-year periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
ten years (and consequently, the potential rewards and risks of a fund
investment).
Total Returns/1/
[Bar Chart Appears Here]
Class A Annual Returns
1988 10.5%
1989 10.2%
1990 6.4%
1991 12.0%
1992 9.0%
1993 13.5%
1994 -6.1%
1995 16.3%
1996 3.9%
1997 9.4%
During the ten years ending December 31, 1997, the highest and lowest
quarterly returns were 6.61% and -5.65%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
1-, 5- and 10-year average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year 5 Year 10 Year
---------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 4.79% 6.17% 7.87%
Class A (NAV) 9.35% 7.09% 8.34%
Class B 4.47% 6.29% 7.86%
Class C 8.76% 6.48% 7.74%
Class R 9.45% 7.10% 8.35%
---------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.69% 6.75% 8.29%
</TABLE>
10 Section 1 The Funds
<PAGE> 15
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- --------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- ---------------------------------------------------------------------------
Management Fees .54% .54% .54% .54%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .13% .13% .13% .13%
Total Operating Expenses .87% 1.62% 1.42% .67%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 505 $ 560 $ 145 $ 68 $ 505 $ 165 $ 145 $ 68
3 Years $ 686 $ 830 $ 449 $214 $ 686 $ 511 $ 449 $214
5 Years $ 882 $ 996 $ 776 $373 $ 882 $ 881 $ 776 $373
10 Years $1,448 $1,721 $1,702 $835 $1,448 $1,721 $1,702 $835
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 19.5 years
Weighted Average Duration 7.2 years
Weighted Average Credit Quality AA-
Number of Issues 143
Credit Quality
AAA 61%
AA 10%
A 12%
BBB/NR 17%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation-Limited (17%)
Other (34%)
Housing-Single-Family (8%)
Health Care (17%)
U.S. Guaranteed (13%)
Housing-Multifamily (11%)
1. Class A total returns reflect actual performance for all periods; Class B,
C and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.50%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Missouri Category. Returns assume reinvestment of dividends and
do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 11
<PAGE> 16
NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND
Fund Overview
Investment Objective
The investment objective of the 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.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bond carry greater credit risk. The fund may bear additional
risk because it invests primarily in Ohio bonds. As with any mutual fund
investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek 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.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past ten years as well as
annualized fund, peer group and market benchmark returns for the one-,
five- and ten-year periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
ten years (and consequently, the potential rewards and risks of a fund
investment).
Total Returns(1)
[BAR CHART APPEARS HERE]
Class A Annual Returns
1988 13.1%
1989 9.7%
1990 6.2%
1991 11.8%
1992 8.5%
1993 11.6%
1994 -4.6%
1995 15.5%
1996 3.3%
1997 8.3%
During the ten years ending December 31, 1997, the highest and lowest
quarterly returns were 6.05% and -4.69%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
1-, 5- and 10-year average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year 5 Year 10 Year
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 3.74% 5.67% 7.72%
Class A (NAV) 8.26% 6.57% 8.18%
Class B 3.48% 5.80% 7.71%
Class C 7.69% 6.00% 7.59%
Class R 8.46% 6.61% 8.20%
-----------------------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.44% 6.85% 8.24%
</TABLE>
12 Section 1 The Funds
<PAGE> 17
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- -------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- --------------------------------------------------------------------
Management Fees .53% .53% .53% .53%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .12% .13% .12% .12%
Total Operating Expenses .85% 1.61% 1.40% .65%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you invest
$10,000 in the fund for the time period indicated and then either redeem or do
not redeem your shares at the end of a period. The example assumes that your
investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 503 $ 559 $ 143 $ 66 $ 503 $ 164 $ 143 $ 66
3 Years $ 680 $ 827 $ 443 $208 $ 680 $ 508 $ 443 $208
5 Years $ 872 $ 991 $ 766 $362 $ 872 $ 876 $ 766 $362
10 Years $1,425 $1,708 $1,680 $810 $1,425 $1,708 $1,680 $810
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 18.9 years
Weighted Average Duration 6.4 years
Weighted Average Credit Quality AA
Number of Issues 273
Credit Quality
AAA 68%
AA 7%
A 12%
BBB/NR 13%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Water/Sewer (7%)
Other (29%)
U.S. Guaranteed (20%)
Tax Obligation-General (18%)
Health Care (15%)
Utilities (11%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.53%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns reflect the performance of the Lipper Ohio Municipal Debt
Index, a managed index that represents the average annualized returns of the
30 largest funds in the Lipper Ohio Municipal Debt Category. Returns assume
reinvestment of dividends and do not reflect any applicable sales
charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 13
<PAGE> 18
NUVEEN FLAGSHIP WISCONSIN MUNICIPAL BOND FUND
Fund Overview
INVESTMENT OBJECTIVE
The investment objective of the fund is to provide you with as high a level
of current interest income exempt from regular federal income taxes as is
consistent with preservation of capital.
HOW THE FUND PURSUES ITS OBJECTIVE
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's investment
adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Wisconsin bonds. The fund is
non-diversified, and may invest more of its assets in a single issuer than a
diversified fund. Greater concentration may increase risk. As with any mutual
fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
IS THIS FUND RIGHT FOR YOU?
The fund may be a suitable investment for you if you seek 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.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How The Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp, Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past three years as well as
annualized fund, peer group and market benchmark returns for the one-year,
and inception periods ending December 31, 1997. This information is intended
to help you assess the variability of fund returns over the past three years
(and consequently, the potential rewards and risks of a fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1995 17.2%
1996 2.5%
1997 9.4%
From inception in June 1994 to December 31, 1997, the highest and lowest
quarterly returns were 6.57% and -2.64%, respectively for the quarters ending
3/31/95 and 3/31/96. The bar chart and highest/lowest quarterly returns do
not reflect sales charges, which would reduce returns, while the average
annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year Inception
-----------------------------------------------------
<S> <C> <C>
Class A (Offer) 4.81% 6.01%
Class A (NAV) 9.40% 7.32%
Class B 4.94% 6.04%
Class C 9.05% 6.95%
Class R 9.87% 7.45%
-----------------------------------------------------
LB Market
Benchmark/2/ 9.19% 8.47%
Lipper
Peer Group/3/ 8.45% 7.44%
</TABLE>
14 Section 1 The Funds
<PAGE> 19
WHAT ARE THE COSTS OF INVESTING?
SHAREHOLDER TRANSACTION EXPENSES/4/
PAID DIRECTLY FROM YOUR INVESTMENT
Share Class A B C R/5/
- -------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
ANNUAL FUND OPERATING EXPENSES/11/
PAID FROM FUND ASSETS
<TABLE>
<CAPTION>
Share Class A B C R
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .55% .55% .55% .55%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .61% .58% .59% .57%
Total Annual Fund Operating
Expenses-Gross+ 1.36% 2.08% 1.89% 1.12%
+After Expense Reimbursements
Reimbursements (.81%) (.76%) (.78%) (.80%)
Total Annual Fund Operating Expenses-Net .55% 1.32% 1.11% .32%
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 553 $ 605 $ 192 $ 114 $ 553 $ 211 $ 192 $ 114
3 Years $ 833 $ 966 $ 594 $ 356 $ 833 $ 652 $ 594 $ 356
5 Years $1,133 $1,231 $1,021 $ 617 $1,133 $1,119 $1,021 $ 617
10 Years $1,986 $2,226 $2,212 $1,363 $1,986 $2,226 $2,212 $1,363
</TABLE>
HOW THE FUND IS INVESTED (AS OF 5/31/98)
PORTFOLIO STATISTICS
Weighted Average Maturity 22.2 years
Weighted Average Duration 8.6 years
Weighted Average Credit Quality A+
Number of Issues 60
CREDIT QUALITY
AAA 41%
AA 5%
A 18%
BBB/NR 36%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Health Care (6%)
Tax Obligation-Limited (46%)
Other (19%)
Long-Term Care (10%)
Housing-Multifamily (10%)
Utilities (9%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 3.03%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Other States Municipal Debt Category. Returns assume
reinvestment of dividends and do not reflect any applicable sales
charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 15
<PAGE> 20
Section 2 How We Manage Your Money
To help you understand the funds better, this section includes a
detailed discussion of our investment and risk management
strategies. For a more complete discussion of these matters,
please consult the Statement of Additional Information.
Who Manages the Funds
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, IL 60606,
("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, managing the funds' business affairs and
providing certain clerical, bookkeeping and other administrative
services. Nuveen Advisory serves as investment adviser to
investment portfolios with more than $35 billion in municipal
assets under management.
Overall investment management strategy and operating policies for
the funds are set by the Investment Policy Committee of Nuveen
Advisory. The Investment Policy Committee is comprised of the
principal executive officers and portfolio managers of Nuveen
Advisory and meets regularly to review economic conditions, the
outlook for the financial markets in general and the status of
the municipal markets in particular. Day-to-day operation of each
fund and the execution of its specific investment strategies is
the responsibility of the designated portfolio manager described
below.
Michael S. Davern has been the portfolio manager for the Kansas
and 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 adviser
in 1991, and subsequently became a Vice President of Nuveen
Advisory upon the acquisition of Flagship Resources Inc. by The
John Nuveen Company in January 1997. Mr. Davern currently manages
investments for seventeen Nuveen-sponsored investment companies,
including the Arizona, Colorado, and Louisiana Funds. Thomas J.
O'Shaughnessy has been the portfolio manager for the Kentucky
Funds since July 1998, and has been a portfolio manager for
Nuveen Advisory since 1983. Mr. O'Shaughnessy currently manages
investments for fourteen Nuveen-sponsored investment companies,
including the Georgia, Florida, North Carolina, Pennsylvania, and
Tennessee Funds. J. Thomas Futrell has been the portfolio manager
for the Ohio Fund since July 1998. Mr. Futrell is a Chartered
Financial Analyst and has been a Vice President of Nuveen
Advisory since 1991. He currently manages investments for ten
Nuveen-sponsored investment companies, including the
Massachusetts, Massachusetts Insured, and New Jersey Funds.
16 Section 2 How We Manage Your Money
<PAGE> 21
Management Fees
For providing these services, Nuveen Advisory is paid an annual
management fee. The following schedule applies to each fund
described in this prospectus except the Kentucky Limited Term
Fund:
---------------------------------------------------------------
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
---------------------------------------------------------------
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%
The following schedule applies to the Kentucky Limited Term
Fund:
---------------------------------------------------------------
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
---------------------------------------------------------------
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%
For the most recent fiscal year, the funds paid after expense
reimbursements the following management fees to Nuveen Advisory,
as a percentage of average net assets:
Nuveen Flagship Kansas Municipal Bond Fund .36%
Nuveen Flagship Kentucky Municipal Bond Fund .47%
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund .00%
Nuveen Flagship Michigan Municipal Bond Fund .54%
Nuveen Flagship Missouri Municipal Bond Fund .54%
Nuveen Flagship Ohio Municipal Bond Fund .53%
Nuveen Flagship Wisconsin Municipal Bond Fund .00%
What Securities We Invest In
Each fund's investment objective may not be changed without
shareholder approval. The following investment policies may be
changed by the Board of Trustees without shareholder approval
unless otherwise noted in this prospectus or the Statement of
Additional Information.
Municipal Obligations
The funds invest primarily in municipal bonds that pay interest
that is exempt from regular federal, state and, in some cases,
local income tax. Income from these bonds may be subject to the
federal alternative minimum tax.
Section 2 How We Manage Your Money 17
<PAGE> 22
States, local governments and municipalities issue municipal
bonds to raise money for various public purposes such as building
public facilities, refinancing outstanding obligations and
financing general operating expenses.
The funds may purchase municipal bonds that represent lease
obligations. These carry special risks because the issuer of the
bonds may not be obligated to appropriate money annually to make
payments under the lease. In order to reduce this risk, the funds
will only purchase these bonds where the issuer has a strong
incentive to continue making appropriations until maturity.
Quality Municipal Bonds
The funds purchase only quality municipal bonds that are either
rated investment grade (AAA/Aaa to BBB/Baa) by independent rating
agencies at the time of purchase or are non-rated but judged to
be investment grade by the funds' investment adviser. Each fund
will invest at least 80% of its net assets in investment-grade
quality municipal bonds. 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
municipal bonds.
Portfolio Maturity
Each fund buys municipal bonds with different maturities in
pursuit of its investment objective, but maintains under normal
market conditions an investment portfolio with an overall
weighted average maturity within a defined range. The 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 maturity of 15 to 30 years.
Short-term Investments
Under normal market conditions, each fund may invest up to 20% of
net assets in short-term, high quality municipal bonds. See "How
We Manage Risk -- Hedging and Other Defensive Investment
Strategies." The funds may invest in short-term, high quality
taxable securities if suitable short-term municipal bonds are not
available at reasonable prices and yields. For more information
on eligible short-term investments, see the Statement of
Additional Information.
Delayed Delivery Transactions
The funds may buy or sell securities on a when-issued or delayed-
delivery basis, paying for or taking delivery of the securities
at a later date, normally within 15 to 45 days of the trade. Such
transactions involve an element of risk because the value of the
security to be purchased may decline before the settlement date.
How We Select Investments
Nuveen Advisory selects municipal obligations for the funds based
upon its assessment of a bond's relative value in terms of
current yield, price, credit quality and future prospects. Nuveen
Advisory is supported by
18 Section 2 How We Manage Your Money
<PAGE> 23
Nuveen's award-winning team of specialized research analysts who
review municipal securities available for purchase, monitor the
continued creditworthiness of each fund's municipal investments,
and analyze economic, political and demographic trends affecting
the municipal markets. We utilize these resources to identify
municipal obligations with favorable characteristics we believe
are not yet recognized by the market. We then select those
higher-yielding and undervalued municipal obligations that we
believe represent the most attractive values.
Portfolio Turnover
A fund buys and sells portfolio securities in the normal course
of its investment activities. The proportion of the fund's
investment portfolio that is sold and replaced with new
securities during a year is known as the fund's portfolio
turnover rate. The funds intend to keep portfolio turnover
relatively low in order to reduce trading costs and the
realization of taxable capital gains. Each fund, however, may
make limited short-term trades to take advantage of market
opportunities or reduce market risk.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund --
even the most conservative -- involves risk, including the risk
that you may receive little or no return on your investment or
even that you may lose part or all of your investment. Therefore,
before investing you should consider carefully the following
risks that you assume when you invest in these funds. Because of
these and other risks, you should consider an investment in any
of these funds to be a long-term investment.
Interest rate risk: the risk that the value of the fund's
portfolio will decline because of rising market interest rates
(bond prices move in the opposite direction of interest rates).
The longer the average maturity (duration) of a fund's portfolio,
the greater its interest rate risk. See "What Securities We
Invest In--Portfolio Maturity."
Income risk: the risk that the income from the fund's portfolio
will decline because of falling market interest rates. This can
result when the fund invests the proceeds from new share sales,
or from matured or called bonds, at market interest rates that
are below the portfolio's current earnings rate.
Credit risk: the risk that an issuer of a bond is unable to meet
its obligation to make interest and principal payments due to
changing market conditions. Generally, lower rated bonds provide
higher current income but are considered to carry greater credit
risk than higher rated bonds. Year 2000 issues may affect the
ability of municipal issuers to meet their payment obligations to
their bond holders, and may adversely affect their credit
ratings.
State Concentration risk: because the funds primarily purchase
municipal bonds from a specific state, each fund also bears
investment risk from the economic, political or regulatory
changes that could adversely affect municipal bond issuers in
that state and therefore the value of the funds' investment
portfolio. See "Appendix--Additional State Information." These
risks may be greater for the Kansas, Kentucky Limited, Missouri
and
Section 2 How We Manage Your Money 19
<PAGE> 24
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.
Inflation risk: the risk that the value of assets or income from
investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the funds'
assets can decline as can the value of the funds' distributions.
How We Manage Risk
In pursuit of its investment objective, each fund assumes
investment risk, chiefly in the form of interest rate and credit
risk. The funds limit this investment risk generally by
restricting the type and maturities of municipal bonds they
purchase, and by diversifying their investment portfolios
geographically as well as across different industry sectors.
Investment Limitations
The funds have adopted certain investment limitations (based on
total assets) that cannot be changed without shareholder approval
and are designed to limit your investment risk and maintain
portfolio diversification. Each fund may not have more than:
. 25% in any one industry 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 may
not have more than:
. 5% in securities in any one issuer (except for U.S.
Government securities or for 25% of the fund's total
assets).
Hedging and Other Defensive Investment Strategies
Each fund may invest up to 100% in cash equivalents and short-
term investments as a temporary defensive measure in response to
adverse market conditions, or to keep cash on hand fully
invested. During these periods, the weighted average maturity of
a fund's investment portfolio may fall below the defined range
described under "Portfolio Maturity."
Each fund may also use various investment strategies designed to
limit the risk of bond price fluctuations and to preserve
capital. These hedging strategies include using financial futures
contracts, options on financial futures, or options based on
either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of the funds' investment
adviser, correlate with the prices of the funds' investments. The
funds, however, have no present intent to use these strategies.
20 Section 2 How We Manage Your Money
<PAGE> 25
Section 3 How You Can Buy and Sell Shares
You can choose from four classes of fund shares, each with a
different combination of sales charges, fees, eligibility
requirements and other features. Your financial adviser can help
you determine which class is best for you. We offer a number of
features for your convenience. Please see the Statement of
Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or
Class R shares, you should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge (CDSC) would
apply upon redemption;
. the amount of any distribution or service fees that you may
incur while you own the shares;
. whether you will be reinvesting income or capital gain
distributions in additional shares;
. whether you qualify for a sales charge waiver or reduction.
For a summary of the charges and expenses for each class, please
see "What are the Costs of Investing?"
Class A Shares
You can buy Class A shares at the offering price, which is the
net asset value per share plus an up-front sales charge. You may
qualify for a reduced sales charge, or the sales charge may be
waived, as described in "How to Reduce Your Sales Charge." Class
A shares are also subject to an annual service fee of .20% which
compensates your financial adviser for providing ongoing service
to you. The up-front Class A sales charge for all funds described
in the prospectus except the Kentucky Limited Term Fund is as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
$50,000 but less than $100,000 4.00% 4.18% 3.50%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
$1,000,000 and over --(1) -- 1.00%(1)
</TABLE>
Section 3 How You Can Buy and Sell Shares 21
<PAGE> 26
The following Class A sales charges and commissions apply to the
Kentucky Limited Term Fund:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 2.50% 2.56% 2.00%
$50,000 but less than $100,000 2.00% 2.04% 1.60%
$100,000 but less than $250,000 1.50% 1.52% 1.20%
$250,000 but less than $500,000 1.25% 1.27% 1.00%
$500,000 but less than $1,000,000 0.75% 0.76% 0.60%
$1,000,000 and over --(1) -- 0.50%(1)
</TABLE>
(1) You can buy $1 million or more of Class A shares at net asset
value without an up-front sales charge. Nuveen pays authorized
dealers of record on these share purchases a sales commission of
1.00% (0.50% for the Kentucky Limited Term fund) of the first
$2.5 million, plus .50% of the next $2.5 million, plus .25% of
the amount over $5.0 million. If you redeem your shares within 18
months of purchase, you may have to pay a CDSC of 1% (0.50% for
the Kentucky Limited Term fund) of either your purchase price or
your redemption proceeds, whichever is lower. You do not have to
pay this CDSC if your financial adviser has made arrangements
with Nuveen and agrees to waive the commission.
Class B Shares
You can buy Class B shares at the offering price, which is the
net asset value per share without any up-front sales charge so
that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of
.95% of average daily assets. The annual .20% service fee
compensates your financial adviser for providing ongoing service
to you. The annual .75% distribution fee compensates Nuveen for
paying your financial adviser a 4% up-front sales commission,
which includes an advance of the first year's service fee. If you
sell your shares within six years of purchase, you will have to
pay a CDSC based on either your purchase price or what you sell
your shares for, whichever amount is lower, according to the
following schedule. You do not pay a CDSC on any Class B shares
you purchase by reinvesting dividends. The Kentucky Limited Term
Fund does not currently offer B shares.
Class B shares automatically convert to Class A shares eight
years after you buy them so that the distribution fees you pay
over the life of your investment are limited. You will continue
to pay an annual service fee on any converted Class B shares.
-----------------------------------------------------------------
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
-----------------------------------------------------------------
CDSC 5% 4% 4% 3% 2% 1%
Class C Shares
You can buy Class C shares at the offering price, which is the
net asset value per share without any up-front sales charge so
that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of 1%.
The annual .20% service fee compensates your financial adviser
for providing ongoing service to you. The annual .55% (0.35% for
the Kentucky Limited Term Fund) distribution fee reimburses
Nuveen for paying your financial adviser an ongoing sales
commission. Nuveen advances the first year's service and
distribution fees. If you sell your shares within 12 months of
purchase, you may have to
22 Section 3 How You Can Buy and Sell Shares
<PAGE> 27
pay a 1% CDSC based on either your purchase price or what you
sell your shares for, whichever amount is lower.
Class R Shares
Under limited circumstances, you may purchase Class R Shares at
the offering price, which is the net asset value on the day of
purchase. In order to qualify, you must be eligible under one of
the programs described in "How to Reduce Your Sales Charge"
(below) or meet certain other purchase size criteria. Class R
Shares are not subject to sales charges or ongoing service or
distribution fees. Class R shares have lower ongoing expenses
than the other classes.
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front
sales charge on Class A shares or to qualify to purchase Class R
shares.
<TABLE>
<CAPTION>
Class A Sales Charge Class A Sales Charge Class R Eligibility
Reductions Waivers
<S> <C> <C>
. Rights of accumulation . Nuveen Defined Portfolio . Certain employees and directors of
. Letter of intent reinvestment Nuveen or employees of authorized dealers
. Group purchase . Purchases using redemptions . Bank trust departments
from unrelated funds
. Retirement plans
. Certain employees and directors
of Nuveen or employees of
authorized dealers
. Bank trust departments
</TABLE>
In addition, Class A shares at net asset value and Class R shares
may be purchased through registered investment advisers,
certified financial planners and registered broker-dealers who
charge asset-based or comprehensive "wrap" fees for their
services. Please refer to the Statement of Additional Information
for detailed program descriptions and eligibility requirements.
Additional information is available from your financial adviser
or by calling (800) 257-8787. Your financial adviser can also
help you prepare any necessary application forms. You or your
financial adviser must notify Nuveen at the time of each purchase
if you are eligible for any of these programs. The funds may
modify or discontinue these programs at any time.
How to Buy 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. There
is no minimum if you are reinvesting Nuveen Defined Portfolio
distributions. The share price you pay will depend on when Nuveen
receives your order. Orders received before the close of trading
on a business day will receive that day's closing share price,
otherwise you will receive the next business day's price. A
business day is any day the New York Stock Exchange is open for
business and usually ends at 4 p.m. New York time when the
Exchange closes.
Section 3 How You Can Buy and Sell Shares 23
<PAGE> 28
Through a Financial Adviser
You may buy shares through your financial adviser, who can handle
all the details for you, including opening a new account.
Financial advisers can also help you review your financial needs
and formulate long-term investment goals and objectives. In
addition, financial advisers generally can help you develop a
customized financial plan, select investments and monitor and
review your portfolio on an ongoing basis to help assure your
investments continue to meet your needs as circumstances change.
Financial advisers are paid either from fund sales charges and
fees or by charging you a separate fee in lieu of a sales charge
for ongoing investment advice and services. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer you
to one in your area.
By Mail
You may open an account and buy shares by mail by completing the
enclosed application and mailing it along with your check to:
Nuveen Investor Services, P.O. Box 5186, Bowling Green Station,
New York, NY 10274-5186.
Systematic Investing
Once you have established a fund account, systematic investing
allows you to make regular investments through automatic
deductions from your bank account (simply complete the
appropriate section of the account application form) or directly
from your paycheck. To invest directly from your paycheck,
contact your financial adviser or call Nuveen at (800) 257-8787.
Systematic investing may also make you eligible for reduced sales
charges.
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.
[GRAPH APPEARS HERE]
24 Section 3 How You Can Buy and Sell Shares
<PAGE> 29
One of the benefits of systematic investing is dollar cost
averaging. Because you regularly invest a fixed amount of money
over a period of years regardless of the share price, you buy
more shares when the price is low and fewer shares when the price
is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same
period. To be effective, dollar cost averaging requires that you
invest over a long period of time, and does not assure that you
will profit.
Systematic Investment Plan
You can make regular investments of $50 or more per month by
authorizing us to draw preauthorized checks on your bank account.
You can stop the withdrawals at any time. There is no charge for
this plan.
Payroll Direct Deposit Plan
You can, with your employer's consent, make regular investments
of $25 or more per pay period (meeting the monthly minimum of
$50) by authorizing your employer to deduct this amount
automatically from your paycheck. You can stop the deductions at
any time. There is no charge for this plan.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may
request to have $50 or more withdrawn automatically from your
account. You may elect to receive payments monthly, quarterly,
semi-annually or annually, and may choose to receive a check,
have the monies transferred directly into your bank account (see
"Fund Direct--Electronic Funds Transfer" below), paid to a third
party or sent payable to you at an address other than your
address of record. You must complete the appropriate section of
the account application or Account Update Form to participate in
the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to
make concurrent purchases of Class A, B or C shares because you
may unnecessarily pay a sales charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer
you the following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered
account at any time for the same class of another Nuveen mutual
fund available in your state. Your exchange must meet the minimum
purchase requirements of the fund into which you are exchanging.
Because an exchange is treated for tax purposes as a concurrent
sale and purchase, and any gain may be subject to tax, you should
consult your tax adviser about the tax consequences of any
contemplated exchange.
The exchange privilege is not intended to allow you to use a fund
for short-term trading. Because excessive exchanges may interfere
with portfolio management, raise fund operating expenses or
otherwise have
Section 3 How You Can Buy and Sell Shares 25
<PAGE> 30
an adverse effect on other shareholders, each fund reserves the
right to revise or suspend the exchange privilege, limit the
amount or number of exchanges, or reject any exchange.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your
redemption proceeds up to one year later without incurring any
additional charges. You may only reinvest into the same share
class you redeemed. If you paid a CDSC, we will refund your CDSC
and reinstate your holding period. You may use this reinstatement
privilege only once for any redemption.
Fund Direct
You may link your fund account to your bank account and transfer
money electronically between these accounts and perform a variety
of account transactions, including buying shares by telephone and
systematic investment. You may also have dividends,
distributions, redemption payments or Systematic Withdrawals sent
directly to your bank account.
Your financial adviser can help you complete the forms for these
services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
How to Sell Shares
You may use one of the following ways to sell (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 properly completed redemption request. Your redemption
request must be received before the close of trading for you to
receive that day's price. While the funds do not charge a
redemption fee, you may be assessed a CDSC, if applicable. 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.
Through Your Financial Adviser
You may sell your shares through your financial adviser who can
prepare the necessary documentation. Your financial adviser may
charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can
redeem your shares by telephone up to $50,000. You may not redeem
by telephone shares held in certificate form. Checks will be
issued only to the shareholder of record and mailed to the
address of record. If you have established electronic funds
transfer privileges, you may have redemption proceeds transferred
electronically to your bank account. We will normally mail your
check the next business day. Nuveen and Chase Global Funds
Services will be liable for losses resulting from unauthorized
telephone redemptions only if they do not follow reasonable
procedures designed to
26 Section 3 How You Can Buy and Sell Shares
<PAGE> 31
verify the identity of the caller. You should immediately verify
your trade confirmations when you receive them.
By Mail
You can sell your shares at any time by sending a written request
to the appropriate fund, Nuveen Investor Services, P.O. Box 5186,
Bowling Green Station, New York, NY 10274-5186. Your request must
include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the
account;
. The name of the person to whom you want your redemption
proceeds paid (if other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if
other than the address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no
event more than seven days after we receive your request. If you
purchased your shares by check, your redemption proceeds will not
be mailed until your check has cleared. Guaranteed signatures are
required if you are redeeming more than $50,000, you want the
check payable to someone other than the shareholder of record or
you want the check sent to another address (or the address of
record has been changed within the last 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 a fund. A
notary public cannot provide a signature guarantee.
AN IMPORTANT NOTE ABOUT INVOLUNTARY REDEMPTION.
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
NUVEEN DEFINED PORTFOLIO REINVESTMENT ACCOUNT. YOU WILL NOT BE ASSESSED A CDSC
ON AN INVOLUNTARY REDEMPTION.
Section 3 How You Can Buy and Sell Shares 27
<PAGE> 32
Section 4 General Information
To help you understand the tax implications of investing in the funds,
this section includes important details about how the funds make
distributions to shareholders. We discuss some other fund policies, as
well.
Distributions and Taxes
The funds pay tax-free dividends monthly and any taxable capital gains
or other taxable distributions once a year in December. The funds
declare dividends monthly to shareholders of record as of the ninth of
each month, payable the first business day of the following
month.
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund
shares unless you request otherwise. You may request to have your
dividends paid to you by check, deposited directly into your bank
account, paid to a third party, sent to an address other than your
address of record or reinvested in shares of another Nuveen mutual
fund. For further information, contact your financial adviser or call
Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the funds invest in municipal bonds, the regular monthly
dividends you receive will be exempt from regular federal income tax.
All or a portion of these dividends, however, may be subject to state
and local taxes or 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.
Early in each year, you will receive a statement detailing the amount
and nature of all dividends and capital gains, including any
percentage of your fund dividends attributable to municipal
obligations, that you were paid during the prior year. 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. If you receive social security
benefits, you should be aware that any tax-free income is taken into
account in calculating the amount of these benefits that may be
subject to federal income tax.
28 Section 4 General Information
<PAGE> 33
Tax laws are subject to change, so we urge you to consult your tax
adviser about your particular tax situation and how it might be
affected by current tax law.
Please note that if you do not furnish us with your correct Social
Security number or employer identification number, federal law
requires us to withhold federal income tax from your distributions and
redemption proceeds at a rate of 31%.
BUYING OR SELLING SHARES CLOSE TO A RECORD DATE
Buying fund shares shortly before the record date for a taxable
dividend is commonly known as "buying the dividend." The entire
dividend may be taxable to you even though a portion of the dividend
effectively represents a return of your purchase price. Similarly, if
you sell or exchange fund shares shortly before the record date for a
tax-exempt dividend, a portion of the price you receive may be treated
as a taxable capital gain even though it reflects tax-free income
earned but not yet distributed by the fund.
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
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
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%
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.
Distribution and Service Plans
John Nuveen & 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 under the Investment Company Act of 1940. (See
"How to Choose a Share Class" for a description of the distribution
and service fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares
primarily for providing compensation to authorized dealers, including
Nuveen, in connection with the distribution of shares. Nuveen uses the
service fee for Class A, Class B, and Class C shares to compensate
authorized dealers, including Nuveen, for providing account services
to
Section 4 General Information 29
<PAGE> 34
shareholders. These services may include establishing and maintaining
shareholder accounts, answering shareholder inquiries, and providing
other personal services to shareholders. These fees also compensate
Nuveen for other expenses, including printing and distributing
prospectuses to persons other than shareholders, and preparing,
printing, and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of shares.
Because these fees are paid out of the funds' assets on an on-going
basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
Net Asset Value
The price you pay for your shares is based on the fund's net asset
value per share which is determined as of the close of trading
(normally 4:00 p.m. eastern time) on each day the New York Stock
Exchange is open for business. Net asset value is calculated for each
class by taking the fair value of the class' total assets, including
interest or dividends accrued but not yet collected, less all
liabilities, and dividing by the total number of shares outstanding.
The result, rounded to the nearest cent, is the net asset value per
share. All valuations are subject to review by the funds' Board of
Trustees or its delegate.
In determining net asset value, expenses are accrued and applied daily
and securities and other assets for which market quotations are
available are valued at market value. The prices of municipal bonds
are provided by a pricing service and based on the mean between the
bid and asked price. When price quotes are not readily available
(which is usually the case for municipal securities), the pricing
service establishes fair market value based on prices of comparable
municipal bonds.
Fund Service Providers
The custodian of the assets of the funds is The Chase Manhattan Bank,
4 New York Plaza, New York, NY 10004-2413. Chase also provides certain
accounting services to the funds. The funds' transfer, shareholder
services and dividend paying agent, Chase Global Funds Services
Company, P.O. Box 5186, New York, NY 10274-5186, performs bookkeeping,
data processing and administrative services for the maintenance of
shareholder accounts.
Nuveen Advisory and Chase Global Funds Services each rely on computer
systems to manage the funds' investments, process shareholder
transactions and provide shareholder account maintenance. Because of
the way computers historically have stored dates, some of these
systems currently may not be able to correctly process activity
occurring in the year 2000. Nuveen Advisory is working with the funds'
service providers to adapt their systems to address this "Year 2000"
issue. Nuveen advisory and the funds expect, but there can be no
absolute assurance, that the necessary work will be completed on a
timely basis.
30 Section 4 General Information
<PAGE> 35
Section 5 Financial Highlights
The following tables are intended to help you better
understand each fund's recent past performance. The
tables are excerpted from each fund's latest financial
statements audited by Arthur Andersen LLP. You may
obtain the complete statements along with the auditor's
report by requesting from Nuveen a free copy of the
fund's latest annual shareholder report.
Kansas Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
-------------------------------------- ------------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (1/92)
1998 $10.19 $.52 $ .41 $.93 $(.52) $ -- $(.52) $10.60 9.32% $102,217
1997 9.83 .53 .36 .89 (.53) -- (.53) 10.19 9.21 95,891
1996 10.01 .54 (.18) .36 (.54) -- (.54) 9.83 3.63 96,694
1995 9.83 .55 .18 .73 (.55) -- (.55) 10.01 7.80 83,683
1994 10.38 .56 (.46) .10 (.58) (.07)+ (.65) 9.83 .62 80,060
Class B (2/97)
1998 10.13 .44 .41 .85 (.44) -- (.44) 10.54 8.57 3,238
1997(c) 10.23 .13 (.12) .01 (.11) -- (.11) 10.13 .13 605
Class C (2/97)
1998 10.21 .47 .42 .89 (.47) -- (.47) 10.63 8.85 1,716
1997(c) 10.18 .15 .04 .19 (.16) -- (.16) 10.21 1.85 91
Class R (2/97)
1998 10.22 .56 .43 .99 (.55) -- (.55) 10.66 9.84 12
1997(c) 10.20 .18 (.02) .16 (.14) -- (.14) 10.22 1.55 --
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Class A (1/92)
1998 .71% 4.98% 13%
1997 .68 5.24 40
1996 .57 5.31 55
1995 .54 5.67 72
1994 .26 5.37 93
Class B (2/97)
1998 1.45 4.22 13
1997(c) 1.27* 4.62* 40
Class C (2/97)
1998 1.24 4.41 13
1997(c) 1.09* 4.85* 40
Class R (2/97)
1998 .51 5.16 13
1997(c) -- 6.61* 40
- ----------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kansas.
+ The amounts shown reflect distributions in excess of capital gains of $.05
per share.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 31
<PAGE> 36
Kentucky Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
-------------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/87)
1998 $11.05 $.59 $ .38 $ .97 $(.58) $(.05) $(.63) $11.39 9.00% $451,338
1997 10.82 .60 .24 .84 (.60) (.01) (.61) 11.05 7.87 430,803
1996 10.99 .61 (.17) .44 (.61) -- (.61) 10.82 4.04 410,808
1995 10.65 .61 .35 .96 (.62) -- (.62) 10.99 9.42 394,457
1994 11.06 .62 (.40) .22 (.63) -- (.63) 10.65 1.90 369,495
Class B (2/97)
1998 11.06 .50 .38 .88 (.50) (.05) (.55) 11.39 8.10 4,273
1997(c) 11.07 .17 (.01) .16 (.17) -- (.17) 11.06 1.47 544
Class C (10/93)
1998 11.04 .52 .39 .91 (.52) (.05) (.57) 11.38 8.43 28,630
1997 10.81 .54 .24 .78 (.54) (.01) (.55) 11.04 7.29 24,468
1996 10.99 .54 (.17) .37 (.55) -- (.55) 10.81 3.38 20,647
1995 10.65 .55 .35 .90 (.56) -- (.56) 10.99 8.82 15,831
1994(c) 11.46 .36 (.81) (.45) (.36) -- (.36) 10.65 (5.88)* 11,172
Class R (2/97)
1998 11.03 .61 .39 1.00 (.61) (.05) (.66) 11.37 9.25 675
1997(c) 11.08 .20 (.04) .16 (.21) -- (.21) 11.03 1.42 455
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Class A (5/87)
1998 .77% 5.19% 12%
1997 .75 5.44 13
1996 .71 5.50 17
1995 .68 5.85 28
1994 .58 5.60 12
Class B (2/97)
1998 1.54 4.38 12
1997(c) 1.39* 4.76* 13
Class C (10/93)
1998 1.33 4.63 12
1997 1.29 4.89 13
1996 1.27 4.93 17
1995 1.23 5.27 28
1994(c) 1.08* 4.96* 12
Class R (2/97)
1998 .58 5.37 12
1997(c) .49* 5.77* 13
- ----------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997
reflects the financial highlights of Flagship Kentucky.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
32 Section 5 Financial Highlights
<PAGE> 37
Kentucky Limited Term Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
-------------------------------------- ---------------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/95)
1998 9.92 $.44 $ .20 $.64 $(.44) $-- $(.44) $10.12 6.53% 8,989
1997 9.79 .45 .12 .57 (.44) -- (.44) 9.92 5.96 8,870
1996(c) 9.75 .31 .04 .35 (.31) -- (.31) 9.79 5.45* 8,389
Class C (9/95)
1998 9.92 .40 .20 .60 (.40) -- (.40) 10.12 6.17 2,416
1997 9.79 .41 .13 .54 (.41) -- (.41) 9.92 5.64 2,144
1997(c) 9.75 .29 .04 .33 (.29) -- (.29) 9.79 5.12* 1,767
Class R (2/97)
1998 9.92 .46 .18 .64 (.46) -- (.46) 10.10 6.58 16
1997(c) 9.98 .15 (.10) .05 (.11) -- (.11) 9.92 .56 --
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
---------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- ------------------------------------------------------------
<S> <C> <C> <C>
Class A (9/95)
1998 .66% 4.35% 36%
1997 .53 4.52 56
1996(c) .37* 4.37* 48
Class C (9/95)
1998 1.01 4.00 36
1997 .84 4.19 56
1997(c) .64* 4.12* 48
Class R (2/97)
1998 .46 4.54 36
1997(c) -- 5.73* 56
- ------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997 reflects
the financial highlights of Flagship Kentucky Limited Term.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 33
<PAGE> 38
Michigan Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------ ------------------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/85)
1998 $11.68 $.61 $ .42 $1.03 $(.61) $(.03) $(.64) $12.07 8.95% $263,632
1997 11.37 .62 .31 .93 (.61) (.01) (.62) 11.68 8.42 59,055
1996 11.59 .63 (.22) .41 (.63) -- (.63) 11.37 3.61 248,422
1995 11.31 .65 .28 .93 (.65) -- (.65) 11.59 8.57 250,380
1994 11.77 .66 (.43) .23 (.66) (.03)+ (.69) 11.31 1.87 242,993
Class B (2/97)
1998 11.70 .52 .42 .94 (.52) (.03) (.55) 12.09 8.12 3,839
1997(c) 11.66 .17 .04 .21 (.17) -- (.17) 11.70 1.86 380
Class C (6/93)
1998 11.66 .54 .43 .97 (.54) (.03) (.57) 12.06 8.45 45,690
1997 11.35 .55 .32 .87 (.55) (.01) (.56) 11.66 7.84 41,649
1996 11.58 .56 (.22) .34 (.57) -- (.57) 11.35 2.96 41,365
1995 11.30 .58 .28 .86 (.58) -- (.58) 11.58 7.98 37,122
1994(c) 11.86 .54 (.52) .02 (.55) (.03)+ (.58) 11.30 .19* 30,042
Class R (2/97)
1998 11.68 .63 .42 1.05 (.63) (.03) (.66) 12.07 9.16 26,904
1997(c) 11.66 .21 .02 .23 (.21) -- (.21) 11.68 2.01 26,211
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- -------------------------------------------------------------
<S> <C> <C> <C>
Class A (6/85)
1998 .84% 5.11% 13%
1997 .85 5.33 34
1996 .82 5.42 54
1995 .80 5.82 37
1994 .75 5.56 28
Class B (2/97)
1998 1.59 4.32 13
1997(c) 1.59* 4.52* 34
Class C (6/93)
1998 1.39 4.56 13
1997 1.40 4.77 34
1996 1.37 4.86 54
1995 1.35 5.25 37
1994(c) 1.25* 4.89* 28
Class R (2/97)
1998 .64 5.31 13
1997(c) .65* 5.57* 34
- -------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended 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) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
34 Section 5 Financial Highlights
<PAGE> 39
Missouri Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------ ----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ending Net Asset Investment Investment Investment Capital Asset
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/87)
1998 $10.80 $.56 $ .43 $ .99 $(.56) $ -- $(.56) $11.23
1997 10.51 .56 .29 .85 (.56) -- (.56) 10.80
1996 10.72 .58 (.21) .37 (.58) -- (.58) 10.51
1995 10.50 .60 .22 .82 (.60) -- (.60) 10.72
1994 10.87 .61 (.34) .27 (.61) (.03)+ (.64) 10.50
Class B (2/97)
1998 10.80 .47 .44 .91 (.48) -- (.48) 11.23
1997(c) 10.81 .16 (.01) .15 (.16) -- (.16) 10.80
Class C (2/94)
1998 10.80 .50 .43 .93 (.50) -- (.50) 11.23
1997 10.50 .51 .29 .80 (.50) -- (.50) 10.80
1996 10.72 .51 (.21) .30 (.52) -- (.52) 10.50
1995 10.50 .53 .23 .76 (.54) -- (.54) 10.72
1994(c) 11.33 .02 (.83) (.81) (.02) -- (.02) 10.50
Class R (2/97)
1998 10.80 .58 .43 1.01 (.58) -- (.58) 11.23
1997(c) 10.90 .17 (.12) .05 (.15) -- (.15) 10.80
<CAPTION>
Ratios/Supplemental Data
--------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Total Assets Net Net Turnover
May 31, Return(b) (000) Assets(a) Assets(a) Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (8/87)
1998 9.32% $233,456 .87% 5.02% 19%
1997 8.29 218,924 .86 5.27 41
1996 3.51 212,717 .80 5.37 38
1995 8.19 205,089 .67 5.78 40
1994 2.42 187,347 .62 5.52 34
Class B (2/97)
1998 8.53 1,677 1.62 4.25 19
1997(c) 1.40 454 1.45* 4.59* 41
Class C (2/94)
1998 8.74 11,253 1.42 4.47 19
1997 7.80 7,968 1.40 4.72 41
1996 2.84 6,220 1.35 4.79 38
1995 7.60 3,989 1.20 5.19 40
1994(c) (17.62)* 1,877 1.15* 4.44* 34
Class R (2/97)
1998 9.56 41 .67 5.22 19
1997(c) .43 34 .55* 5.65* 41
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Missouri.
+ The amounts shown reflect distributions in excess of capital gains of $.01
per share for Missouri.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 35
<PAGE> 40
<TABLE>
<CAPTION>
Ohio Municipal Bond Fund**
Investment Operations Less Distributions
------------------------------ ----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ending Net Asset Investment Investment Investment Capital Asset
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/85)
1998 $11.41 $.60 $ .38 $ .98 $(.60) $(.05) $(.65) $11.74
1997 11.21 .61 .20 .81 (.61) -- (.61) 11.41
1996 11.43 .62 (.21) .41 (.63) -- (.63) 11.21
1995 11.21 .64 .22 .86 (.64) -- (.64) 11.43
1994 11.59 .64 (.38) .26 (.64) -- (.64) 11.21
Class B (2/97)
1998 11.41 .51 .38 .89 (.52) (.05) (.57) 11.73
1997(c) 11.42 .17 (.01) .16 (.17) -- (.17) 11.41
Class C (8/93)
1998 11.41 .54 .37 .91 (.54) (.05) (.59) 11.73
1997 11.21 .55 .20 .75 (.55) -- (.55) 11.41
1996 11.43 .55 (.21) .34 (.56) -- (.56) 11.21
1995 11.20 .57 .23 .80 (.57) -- (.57) 11.43
1994(c) 11.69 .46 (.49) (.03) (.46) -- (.46) 11.20
Class R (2/97)
1998 11.41 .62 .37 .99 (.62) (.05) (.67) 11.73
1997(c) 11.42 .21 (.01) .20 (.21) -- (.21) 11.41
<CAPTION>
Ratios/Supplemental Data
--------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Total Assets Net Net Turnover
May 31, Return(b) (000) Assets(a) Assets(a) Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (6/85)
1998 8.76% $472,821 .85% 5.15% 15%
1997 7.38 463,253 .89 5.39 17
1996 3.59 443,077 .92 5.41 31
1995 7.99 445,566 .95 5.78 31
1994 2.24 445,272 .93 5.48 9
Class B (2/97)
1998 7.89 7,422 1.61 4.39 15
1997(c) 1.45 1,649 1.60* 4.63* 17
Class C (8/93)
1998 8.12 47,036 1.40 4.60 15
1997 6.80 40,713 1.44 4.84 17
1996 3.03 34,939 1.47 4.84 31
1995 7.50 28,461 1.50 5.21 31
1994(c) (.17)* 25,674 1.46* 4.79* 9
Class R (2/97)
1998 8.89 162,220 .65 5.35 15
1997(c) 1.77 160,312 .65* 5.65* 17
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Ohio.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
36 Section 5 Financial Highlights
<PAGE> 41
<TABLE>
<CAPTION>
Wisconsin Municipal Bond Fund**
Investment Operations Less Distributions
------------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/94)
1998 $9.80 $.49 $ .49 $ .98 $(.50) $ -- $(.50) $10.28 10.19% $24,313
1997 9.61 .51 .19 .70 (.51) -- (.51) 9.80 7.40 14,004
1996 9.79 .50 (.18) .32 (.50) -- (.50) 9.61 3.35 12,370
1995(c) 9.58 .49 .21 .70 (.49) -- (.49) 9.79 7.36* 8,278
Class B (2/97)
1998 9.82 .42 .49 .91 (.42) -- (.42) 10.31 9.46 1,877
1997(c) 9.87 .12 (.06) .06 (.11) -- (.11) 9.82 .60 20
Class C (2/97)
1998 9.82 .44 .49 .93 (.45) -- (.45) 10.30 9.59 1,366
1997(c) 9.87 .13 (.07) .06 (.11) -- (.11) 9.82 .65 76
Class R (2/97)
1998 9.82 .53 .48 1.01 (.52) -- (.52) 10.31 10.47 45
1997(c) 9.87 .15 (.07) .08 (.13) -- (.13) 9.82 .84 40
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- --------------------------------------------------------------------
<S> <C> <C> <C>
Class A (6/94)
1998 .55% 4.87% 10%
1997 .51 5.20 42
1996 .64 5.02 47
1995(c) .39* 5.25* 52
Class B (2/97)
1998 1.32 4.04 10
1997(c) .94* 4.81* 42
Class C (2/97)
1998 1.11 4.25 10
1997(c) .69* 4.91* 42
Class R (2/97)
1998 .32 5.08 10
1997(c) -- 5.67* 42
- ---------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Wisconsin.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 37
<PAGE> 42
Appendix Additional State Information
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 discussion of special state considerations
was obtained from official offering statements of these issuers and
has not been independently verified by the funds. The discussion
includes general state tax information related to an investment in
fund shares. Because tax laws are complex and often change, you should
consult your tax adviser about the state tax consequences of a
specific fund investment. See the Statement of Additional Information
for further information.
KANSAS
Growth in the State's trade, services and manufacturing sectors has
decreased the historical dominance of agriculture in the State
economy. Economic performance has been improving, due largely to gains
in aircraft manufacturing and recovery in agriculture. Personal income
grew at 5.4% in 1997 to $24,379, about 95% of the national median.
The State's unemployment rate dropped to 3.5% in June 1998 from its
peak of 5.5% in 1993.
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 provides financing for various public purpose
projects including prison construction, state offices, energy
conservation and university facilities. The KDOT bonds are rated
Aa2/AA+/AA by Moody's, Standard & Poor's, and Fitch respectively. KDFA
ratings vary 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 personal 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 municipal 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.
38 Appendix
<PAGE> 43
KENTUCKY
Growth in Kentucky's economy surpassed national growth rates in many
areas during the 1990's in part due to its lower cost of living and
aggressive business recruitment. The Commonwealth'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.
Kentucky's average unemployment rate in June 1998 was 4.4%, compared
to the national average of 4.5% in June 1998 and the Commonwealth's
5.5% average in June 1997. Per capita income in 1997 was $20,657,
approximately 81% of national average.
In the past, the Commonwealth has experienced difficulty balancing its
budget, but recent economic growth and moderate debt levels improve
the Commonwealth's financial outlook. Although Kentucky has not issued
general obligation debt since 1965, the Commonwealth actively issues
appropriation-secured debt from several agencies, including the
Kentucky Turnpike Authority, the Kentucky Infrastructure Authority,
and the Kentucky Schools Facilities Construction Commission. 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. Like the Commonwealth,
Kentucky Municipalities have not issued general obligation debt,
relying instead on appropriation-secured bonds.
TAX TREATMENT
The Kentucky Funds' regular monthly dividends will not be subject to
the Kentucky 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 exchange Kentucky
Funds' shares and realize a capital gain on the transaction. You will
not be subject to the Kentucky intangible property tax on the portion
of your Kentucky Funds' shares that is attributable to Kentucky
municipal bonds or U.S. government securities.
If you are employed in Louisville or Jefferson County, you will not be
subject to local occupational license fees on income earned from the
Kentucky Funds. If you are employed elsewhere in Kentucky, you
generally will not be subject to local occupational license fees. The
treatment of corporate shareholders is similar to that described
above, except that they may be subject to local occupational license
fees.
MICHIGAN
Michigan's economy has improved significantly since the 1980's. The
State's unemployment rate was 3.6% in June 1998, compared to national
average of 4.5%. Per capita income has increased each year over the
past decade, and was $25,560 in 1997. 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 the tax base
and job growth.
Appendix 39
<PAGE> 44
Michigan's economic and financial improvements are reflected in the
state's rating of Aa1/AA+/AA+ by Moody's, Standard & Poor's and Fitch,
respectively. All three rating agencies upgraded the State's credit
rating in 1998.
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. If you reside in a Michigan city that imposes local
income taxes, you will not be subject to these taxes on the Michigan
Fund's distributions of income attributable to interest earned on U.S.
government securities or municipal bonds, or to gains on the sale of
U.S. government securities.
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.
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 5.6% from
1990. The State's unemployment rate has steadily declined from the
high of 6.7% in 1991 and was 4.2% in June 1998, compared to the
national average of 4.5%. Per capita income increased 4.4% during 1997
to $24,001, about 94% of the national average.
Missouri retains substantial governmental balances through strategic
budget management. The State's unreserved fund balance in 1997 was
$1.2 billion, or 12.4% of General Fund revenues. Missouri's overall
creditworthiness is reflected in its longstanding Aaa/AAA/AAA rating
by Moody's Standard & Poors, 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.
40 Appendix
<PAGE> 45
OHIO
The Ohio economy has historically relied on durable goods
manufacturing, but recent growth has brought healthy diversification.
Employment growth in recent years has been concentrated among non-
manufacturing industries, with manufacturing employment tapering off
since its 1969 peak. Still, manufacturing remains an important
component of the State's economy, providing approximately 21% of total
employment in Ohio compared with 15% of national employment. General
economic activity in Ohio tends to be more cyclical than in non-
industrialized states, but during the current national expansion it
has had positive implications in Ohio.
From 1990-1998, the State's unemployment rate ranked at or below the
national average. Ohio's unemployment rate registered 4.5% in June
1998, comparable to the national average of 4.5% in June 1998, and
slightly higher than the State's 4.4% rate in June 1997. Per capita
income in 1997 was $24,661, approximately 96% 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. The State is
currently working on revamping its school funding formula, which was
deemed unconstitutional in March 1997 by the Ohio Supreme Court.
Changes to the formula likely will require the State to increase its
aid to local public schools, which could affect the State's financial
position. Moody's gives Ohio general obligation bonds an Aa1 rating,
while Standard & Poor's and Fitch each rate the State AA+.
TAX TREATMENT
The Ohio Fund's regular monthly dividends will not be subject to Ohio
personal income tax, Ohio school district income taxes and Ohio
municipal income taxes to the extent they are derived from interest on
Ohio municipal bonds or U.S. government securities or attributable to
gain made on the sale, exchange or other disposition by the Fund of
Ohio municipal bonds. You will, however, be subject to Ohio personal
income taxes, Ohio school district income taxes and Ohio municipal
income taxes 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 net 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.
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.
Appendix 41
<PAGE> 46
The State's unemployment rate was 3.0% in June 1998. Per capita
income was $24,475 in 1997, about 96% of the national average.
The State's general obligations receive Aa2/AA ratings 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 on U.S.
government securities. You will be subject to Wisconsin personal
income tax, 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 capital gains on the transaction. A certain
portion of such capital gains, however, will be exempt from Wisconsin
personal income tax.
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.
Appendix
<PAGE> 47
NUVEEN MUTUAL FUNDS
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
GROWTH
Nuveen Rittenhouse Growth Fund
GROWTH AND INCOME
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME
NATIONAL MUNICIPAL BOND FUNDS
Long-term
Insured Long-term
Intermediate-term
Limited-term
STATE MUNICIPAL BOND FUNDS
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky/2/ New York/1/
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Shareholder
reports contain management's discussion of market conditions, investment
strategies and performance results as of the fund's latest semi-annual or annual
fiscal year end. Call Nuveen at (800) 257-8787 to request a free copy of any of
these materials or other fund information.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549. The funds'
Investment Company file number is 811-07751.
1. Long-term and insured long-term portfolios.
2. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE> 48
Exhibit 17
- Please fold and detach at perforation. Return the Proxy Ballot only. -
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF THE NUVEEN
FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND TO BE HELD
ON APRIL 15, 1999
The undersigned hereby appoints Timothy R. Schwertfeger, Anthony T. Dean, Alan
G. Berkshire and Gifford R. Zimmerman and each of them, with full powers of
substitution, Proxies for the undersigned to represent and vote the shares of
the undersigned at the Special Meeting of Shareholders of Nuveen Flagship
Kentucky Limited Term Municipal Bond Fund, a series of the Nuveen Flagship
Multistate Trust IV to be held on April 15, 1999, or any adjournment or
adjournments thereof as indicated on the reverse side.
PLEASE BE SURE TO SIGN YOUR PROXY BALLOT ON THE REVERSE SIDE
<PAGE> 49
PROXY SOLICITED BY THE BOARD OF TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF THE NUVEEN FLAGSHIP
KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
TO BE HELD ON APRIL 15, 1999
At the upcoming Special Meeting, shareholders will be asked to approve
a reorganization of the Nuveen Flagship Kentucky Limited Term Municipal Bond
Fund into the Nuveen Flagship Kentucky Municipal Bond Fund and other matters in
connection with the reorganization. Please refer to the accompanying prospectus/
proxy statement and cast your vote on the proxy ballot.
Whether or not you plan to join us at the meeting, please sign, date
and vote the proxy ballot and return it to our proxy tabulator in the enclosed
post-page envelope. Please specify your choice by marking the appropriate box on
the proxy ballot. If you do not mark any boxes, your proxy will be voted in
accordance with the Board of Trustees' recommendations.
NOTE: YOUR PROXY IS NOT VALID UNLESS IT
IS SIGNED. Please sign exactly as your name(s)
appears on the Proxy Ballot. If signing for estates,
trusts or corporations, title or capacity should be stated.
If shares are held jointly, either holder should sign.
PROPOSAL:
1. To approve an Agreement and Plan of Reorganization pursuant to
which the Nuveen Flagship Kentucky Limited Term Municipal Bond
Fund (the "Kentucky Limited Term Fund") would (i) transfer all of
its assets to the Nuveen Flagship Kentucky Municipal Bond Fund
(the "Kentucky Fund") in exchange solely for Class A, C and R
shares of beneficial interest of the Kentucky Fund and the
Kentucky Fund's assumption of the liabilities of the Kentucky
Limited Term Fund, (ii) distribute such shares of the Kentucky
Fund to the holders of shares of the Kentucky Limited Term Fund
and (iii) be liquidated, dissolved and terminated as a series of
the Nuveen Flagship Multistate Trust IV (the "Trust") in
accordance with the Trust's Declaration of Trust.
2. In their discretion, the Proxies indicated on the reverse side of
the Proxy Ballot are authorized to vote upon such other matters as
may properly come before the Special Meeting.
- Please fold and detach at perforation. Return the Proxy Ballot only. -
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
PROXY BALLOT
FOR AGAINST ABSTAIN
1. Approval of Agreement and Plan of Reorganization. [ ] [ ] [ ]
2. In their discretion, the
Proxies are authorized to
vote on such other business
as may come before the
Special Meeting.
Date: , 1999
----------------
---------------------------
---------------------------
Signature(s)
