<PAGE>
September 29, 1999 Prospectus
NUVEEN
Mutual Funds
Nuveen Municipal Bond Funds
[PHOTO APPEARS HERE]
Dependable, tax-free income to help you keep more of what you earn.
Kansas
Kentucky
Michigan
Missouri
Ohio
Wisconsin
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges and Expenses
Shareholder Instructions
Performance and Current Portfolio Information
<TABLE>
<CAPTION>
Table of Contents
<S> <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 Michigan Municipal Bond Fund 6
Nuveen Flagship Missouri Municipal Bond Fund 8
Nuveen Flagship Ohio Municipal Bond Fund 10
Nuveen Flagship Wisconsin Municipal Bond Fund 12
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Funds 14
What Securities We Invest In 15
How We Select Investments 16
What the Risks Are 17
How We Manage Risk 18
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out of your
account.
What Share Classes We Offer 19
How to Reduce Your Sales Charge 20
How to Buy Shares 21
Systematic Investing 21
Systematic Withdrawal 22
Special Services 23
How to Sell Shares 24
Section 4 General Information
This section summarizes the funds' distribution policies and other general fund
information.
Dividends, Distributions and Taxes 26
Distribution and Service Plans 27
Net Asset Value 28
Fund Service Providers 28
Year 2000 29
Section 5 Financial Highlights
This section provides the funds' financial performance for the past five
years. 30
Appendix Additional State Information 36
</TABLE>
<PAGE>
September 29, 1999
Section 1 The Funds
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
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.
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
Section 1 The Funds 1
<PAGE>
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 rating 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.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk 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.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
six years as well as annualized fund and index returns for the one- and five-
year and inception periods ending December 31, 1998. This information is
intended to help you assess the variability of fund returns over the past six
years (and consequently, the potential rewards and risks of a fund investment).
Past performance is not necessarily an indication of future performance.
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%
1998 6.2%
From inception in January 1992 to December 31, 1998, 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.
Average Annual Total Returns for
the Periods Ending December 31, 1998
<TABLE>
<CAPTION>
Class 1 Year 5 Year Inception
- -------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 1.75% 4.47% 6.72%
Class B 1.44% 4.44% 6.67%
Class C 5.63% 4.98% 7.00%
Class R 6.39% 5.57% 7.54%
- -------------------------------------------------------
LB Market
Benchmark/2/ 6.48% 6.22% 7.49%
Lipper
Peer Group/3/ 5.39% 4.89% 6.62%
</TABLE>
2 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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
- --------------------------------------------------------------------
</TABLE>
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 .15% .15% .15% .15%
- -----------------------------------------------------------------------
Total Annual Fund Operating
Expenses-Gross+ .90% 1.65% 1.45% .70%
- -----------------------------------------------------------------------
</TABLE>
+ After Expense Reimbursements
----------------------------------------------------------------------
Expense Reimbursements (.15%) (.14%) (.13%) (.11%)
----------------------------------------------------------------------
Total Operating Expense--Net .75% 1.51% 1.32% .59%
----------------------------------------------------------------------
Reflects a voluntary expense limitation by the fund's investment
adviser that may be modified or discontinued at any time.
----------------------------------------------------------------------
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. The example 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 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 $ 148 $ 72 $ 508 $ 168 $ 148 $ 72
- -------------------------------------------------------------------------
3 Years $ 695 $ 839 $ 459 $224 $ 695 $ 520 $ 459 $224
- -------------------------------------------------------------------------
5 Years $ 898 $1,011 $ 792 $390 $ 898 $ 897 $ 792 $390
- -------------------------------------------------------------------------
10 Years $1,481 $1,754 $1,735 $871 $1,481 $1,754 $1,735 $871
- -------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/99)
Portfolio Statistics
<TABLE>
<CAPTION>
Average Effective Maturity 20.82 years
- ---------------------------------------------------------------------------
<S> <C>
Average Duration 8.56
- ---------------------------------------------------------------------------
Weighted Average Credit Quality AA-
- ---------------------------------------------------------------------------
Number of Issues 78
- ---------------------------------------------------------------------------
</TABLE>
Credit Quality
<TABLE>
<CAPTION>
AAA/U.S. Guaranteed 46%
- ---------------------------------------------------------------------------
<S> <C>
AA 15%
- ---------------------------------------------------------------------------
A 18%
- ---------------------------------------------------------------------------
BBB/NR 21%
- ---------------------------------------------------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Utilities ( 8%)
Housing-Multifamily (15%)
U.S. Guaranteed (11%)
Health Care (19%)
Tax Obligation-Limited) (23%)
Other (24%)
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 (see "Financial Highlights" for dates), 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 6/30/99 was (1.72%).
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 Class A 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>
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 rating 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.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk 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.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1998. 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). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
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%
1998 6.9%
During the ten years ended December 31, 1998, 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 average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
------------------------------------
Class 1 Year 5 Year 10 Year
- ---------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 0.87% 4.85% 7.51%
Class B 0.53% 4.94% 7.50%
Class C 4.75% 5.17% 7.38%
Class R 5.53% 5.81% 8.00%
- --------------------------------------------------------------
LB Market
Benchmark/2/ 6.48% 6.22% 8.22%
Lipper
Peer Group/3/ 5.10% 5.30% 7.82%
</TABLE>
4 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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
- ------------------------------------------------------------------------------------
</TABLE>
Annual Fund Operating Expenses/11/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .53% .53% .53% .53%
- --------------------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .95% .75% --%
- --------------------------------------------------------------------------------
Other Expenses .11% .12% .12% .11%
- --------------------------------------------------------------------------------
Total Annual Fund Operating
Expenses-Gross+ .84% 1.60% 1.40% .64%
+ After Expense Reimbursements
-------------------------------------------------------------------------------
Reimbursements (.02%) (.04%) (.03%) (.02%)
--------------------------------------------------------------------------------
Total Operating Expense-Net .82% 1.56% 1.37% .62%
--------------------------------------------------------------------------------
Reflects a voluntary expense limitation by the fund's investment adviser
that may be modified or discontinued at any time.
--------------------------------------------------------------------------------
</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. The example 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 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 $ 558 $ 143 $ 65 $ 502 $ 163 $ 143 $ 65
- ---------------------------------------------------------------------------------------------
3 Years $ 677 $ 824 $ 443 $205 $ 677 $ 505 $ 443 $205
- ---------------------------------------------------------------------------------------------
5 Years $ 866 $ 986 $ 766 $357 $ 866 $ 871 $ 766 $357
- ---------------------------------------------------------------------------------------------
10 Years $1,414 $1,696 $1,680 $798 $1,414 $1,696 $1,680 $798
- ---------------------------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/99)
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Average Effective Maturity 19.64 years
- ------------------------------------------------
Average Duration 6.92
- ------------------------------------------------
Weighted Average Credit Quality AA
- ------------------------------------------------
Number of Issues 198
- ------------------------------------------------
</TABLE>
Credit Quality
<TABLE>
<CAPTION>
<S> <C>
AAA/U.S. Guaranteed 56%
- -----------------------------------
AA 6%
- -----------------------------------
A 18%
- -----------------------------------
BBB/NR 20%
- -----------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Water/Sewer 8%
Utilities 9%
U.S. Guaranteed 13%
Healt Care 19%
Tax Obligation-Limited 21%
Other 30%
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 (see "Financial Highlights" for dates), 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 6/30/99 was (1.94%).
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 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 Class A 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>
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 rating 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.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk 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.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1998. 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). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
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%
1998 5.6%
During the ten years ending December 31, 1998, 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 average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
--------------------------------------
Class 1 Year 5 Year 10 Year
- ---------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 1.20% 4.79% 7.22%
Class B 0.86% 4.89% 7.21%
Class C 5.08% 5.11% 7.05%
Class R 5.85% 5.78% 7.72%
- ---------------------------------------------------------------
LB Market
Benchmark/2/ 6.48% 6.22% 8.22%
Lipper
Peer Group/3/ 5.23% 5.21% 7.67%
</TABLE>
6 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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 .54% .54% .54% .54%
- ----------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .95% .75% --%
- ----------------------------------------------------------------------
Other Expenses .10% .11% .10% .10%
======================================================================
Total Annual Fund Operating
Expenses .84% 1.60% 1.39% .64%
</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. The example 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 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 $ 558 $ 142 $ 65 $ 502 $ 163 $ 142 $ 65
- ------------------------------------------------------------------------------
3 Years $ 677 $ 824 $ 440 $ 205 $ 677 $ 505 $ 440 $ 205
- ------------------------------------------------------------------------------
5 Years $ 866 $ 986 $ 761 $ 357 $ 866 $ 871 $ 761 $ 357
- ------------------------------------------------------------------------------
10 Years $1,414 $1,696 $1,669 $ 798 $1,414 $1,696 $1,669 $ 798
- ------------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/99)
<TABLE>
<CAPTION>
Portfolio Statistics
<S> <C>
Average Effective Maturity 17.03 years
- ----------------------------------------------------------
Average Duration 7.45
- ----------------------------------------------------------
Weighted Average Credit Quality AA
- ----------------------------------------------------------
Number of Issues 160
- ----------------------------------------------------------
Credit Quality
AAA/U.S. Guaranteed 59%
- ----------------------------------------------------------
AA 15%
- ----------------------------------------------------------
A 8%
- ----------------------------------------------------------
BBB/NR 18%
- ----------------------------------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation-Limited (15%)
Water/Sewer (6%)
U.S. Guaranteed (22%)
Other (25%)
Tax Obligation-General (14%)
Health Care (18%)
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 (see "Financial Highlights" for dates), 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 6/30/99 was (1.47)%.
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 Class A 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 7
<PAGE>
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 rating 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.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk 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.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1998. 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). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
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%
1998 5.8%
During the ten years ended December 31, 1998, 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 average annual return table does.
Average Annual Total Returns for
the Periods Ending December 31, 1998
<TABLE>
<CAPTION>
Class 1 Year 5 Year 10 Year
- ---------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 1.35% 4.69% 7.40%
Class B 1.08% 4.77% 7.39%
Class C 5.21% 5.00% 7.27%
Class R 6.09% 5.67% 7.91%
- ---------------------------------------------------------
LB Market
Benchmark/2/ 6.48% 6.22% 8.22%
Lipper
Peer Group/3/ 5.36% 5.32% 7.62%
</TABLE>
8 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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
- -------------------------------------------------------------
</TABLE>
Annual Fund Operating Expenses/11/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .54% .54% .54% .54%
- ---------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .95% .75% --%
- ---------------------------------------------------------------------
Other Expenses .12% .12% .12% .12%
- ---------------------------------------------------------------------
Total Annual Fund Operating
Expenses--Gross+ .86% 1.61% 1.41% .66%
</TABLE>
<TABLE>
<CAPTION>
+ After Expense Reimbursements
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reimbursements --% --% --% (.01%)
--------------------------------------------------------------------
Total Operating Expense--Net .86% 1.61% 1.41% .65%
--------------------------------------------------------------------
Reflects a voluntary expense limitation by the fund's investment
adviser that may be modified or discontinued at any time.
--------------------------------------------------------------------
</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. The example 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 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 $ 504 $ 559 $ 144 $ 67 $ 504 $ 164 $ 144 $ 67
- -------------------------------------------------------------------------------
3 Years $ 683 $ 827 $ 446 $211 $ 683 $ 508 $ 446 $211
- -------------------------------------------------------------------------------
5 Years $ 877 $ 991 $ 771 $368 $ 877 $ 876 $ 771 $368
- -------------------------------------------------------------------------------
10 Years $1,436 $1,710 $1,691 $822 $1,436 $1,710 $1,691 $822
- -------------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/99)
Portfolio Statistics
<TABLE>
<CAPTION>
Average Effective Maturity 19.86 years
- -----------------------------------------------------------------------
<S> <C>
Average Duration 7.62
- -----------------------------------------------------------------------
Weighted Average Credit Quality AA
- -----------------------------------------------------------------------
Number of Issues 138
- -----------------------------------------------------------------------
</TABLE>
Credit Quality
<TABLE>
<CAPTION>
AAA/U.S. Guaranteed 56%
- -----------------------------------------------------------------------
<S> <C>
AA 13%
- -----------------------------------------------------------------------
A 9%
- -----------------------------------------------------------------------
BBB/NR 22%
- -----------------------------------------------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Tax Obligation-Limited (15%)
Housing-Multifamily (11%)
U.S. Guaranteed (12%)
Health Care (17%)
Other (37%)
Long-Term Care (8%)
</TABLE>
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 (see "Financial Highlights" for dates), 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 6/30/99 was (1.07)%.
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 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 Class A 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>
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 rating 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.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk 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 Ohio bonds. As with any mutual fund investment, loss of money is a
risk of investing.
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 long-term growth
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1998. 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). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
<TABLE>
<S> <C>
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%
1998 5.8%
</TABLE>
During the ten years ending December 31, 1998, 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 average annual return table
does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
Class 1 Year 5 Year 10 Year
- ---------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 1.34% 4.54% 7.00%
Class B 1.00% 4.63% 6.99%
Class C 5.13% 4.86% 6.87%
Class R 5.97% 5.52% 7.50%
- ---------------------------------------------------------
LB Market
Benchmark2 6.48% 6.22% 8.22%
Lipper
Peer Group3 5.58% 5.57% 7.63%
</TABLE>
10 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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
- ----------------------------------------------------------------------------
</TABLE>
Annual Fund Operating Expenses/11/
Paid From Fund Assets
<TABLE>
Share Class A B C R
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .53% .53% .53% .53%
- ----------------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .95% .75% --%
- ----------------------------------------------------------------------------
Other Expenses .12% .13% .12% .12%
- ----------------------------------------------------------------------------
Total Annual Fund Operating Expenses .85% 1.61% 1.40% .65%
- ----------------------------------------------------------------------------
</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. The example 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 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 5/31/99)
Portfolio Statistics
<TABLE>
<S> <C>
Average Effective Maturity 19.02 years
- -----------------------------------------------------
Average Duration 6.71
- -----------------------------------------------------
Weighted Average Credit Quality AA+
- -----------------------------------------------------
Number of Issues 264
- -----------------------------------------------------
Credit Quality
AAA/U.S. Guaranteed 67%
- -----------------------------------------------------
AA 7%
- -----------------------------------------------------
A 10%
- -----------------------------------------------------
BBB/NR 16%
- -----------------------------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Housing-Single Family (8%)
Utilities (13%)
Health Care (15%)
Tax Obligation-General (16%)
U.S. Guaranteed (18%)
Other (30%)
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 (see "Financial Highlights" for dates), 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 6/30/99 was (.81%).
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 Class A 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>
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, 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 rating 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.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk 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.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
four years as well as annualized fund and index returns for the one-year and
inception periods ending December 31, 1998. This information is intended to help
you assess the variability of fund returns over the past four years (and
consequently, the potential rewards and risks of a fund investment). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1995 17.2%
1995 2.5%
1997 9.4%
1998 6.6%
From inception in June 1994 to December 31, 1998, 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, 1998
-------------------------------------------
Class 1 Year Inception
- ----------------------------------------------------------------------
<S> <C> <C>
Class A (Offer) 2.06% 6.13%
Class B 1.74% 6.19%
Class C 5.99% 6.74%
Class R 6.85% 7.32%
- ----------------------------------------------------------------------
LB Market
Benchmark/2/ 6.48% 7.72%
Lipper
Peer Group/3/ 5.17% 6.64%
</TABLE>
12 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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 .42% .44% .43% .42%
================================================================================
Total Annual Fund Operating
Expenses--Gross+ 1.17% 1.94% 1.73% .97%
+ After Expense Reimbursement
- --------------------------------------------------------------------------------
Reimbursements (.49%) (.51%) (.50%) (.49%)
- --------------------------------------------------------------------------------
Total Operating Expense-Net .68% 1.43% 1.23% .48%
- --------------------------------------------------------------------------------
</TABLE>
Reflects a voluntary expense limitation by the fund's investment adviser that
may be modified or discontinued at any time.
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. The example 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 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 $ 534 $ 591 $ 176 $ 99 $ 534 $ 197 $ 176 $ 99
- --------------------------------------------------------------------------------
3 Years $ 776 $ 925 $ 545 $ 309 $ 776 $ 609 $ 545 $ 309
- --------------------------------------------------------------------------------
5 Years $1,037 $1,160 $ 939 $ 536 $1,037 $1,047 $ 939 $ 536
- --------------------------------------------------------------------------------
10 Years $1,781 $2,065 $2,041 $1,190 $1,781 $2,065 $2,041 $1,190
- --------------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/99)
Portfolio Statistics
<TABLE>
<CAPTION>
Average Effective Maturity 20.57 years
- --------------------------------------------------------------------------
<S> <C>
Average Duration 9.23
- --------------------------------------------------------------------------
Weighted Average Credit Quality A+
- --------------------------------------------------------------------------
Number of Issues 65
- --------------------------------------------------------------------------
</TABLE>
Credit Quality
<TABLE>
<CAPTION>
AAA/U.S. Guaranteed 41%
- --------------------------------------------------------------------------
<S> <C>
AA 4%
- --------------------------------------------------------------------------
A 18%
- --------------------------------------------------------------------------
BBB/NR 37%
- --------------------------------------------------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
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 (see "Financial Highlights" for dates), 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 6/30/99 was (1.79%).
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 Class A 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.
Utilities 7%
Housing - Multifamily 6%
Long-Term Care 8%
Other 23%
U.S. Guaranteed 12%
Tax Obligation - Limited 44%
Section 1 The Funds 13
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the funds' assets are managed, this section includes
a detailed discussion of the adviser's 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. ("Nuveen Advisory"), the fund's investment adviser,
together with its advisory affiliate, Nuveen Institutional Advisory Corp., offer
premier advisory and investment management services to a broad range of mutual
fund clients. In the Nuveen family, these advisers are commonly referred to as
Nuveen Investment Advisory Services or NIAS. Nuveen Advisory is responsible for
the selection and on-going monitoring of the municipal bonds in the fund's
investment portfolio, managing the fund's business affairs and providing certain
clerical, bookkeeping and other administrative services. The NIAS advisers are
located at 333 West Wacker Drive, Chicago, IL 60606.
The NIAS advisers are wholly owned subsidiaries of John Nuveen & Co.
Incorporated ("Nuveen"). Founded in 1898, Nuveen has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
investments designed for individuals seeking to build and sustain wealth. Nuveen
is the sponsor and principal underwriter of the fund's shares and has sponsored
or underwritten more than $60 billion of investment company securities. Nuveen
and its affiliates have more than $55 billion in assets under management.
Nuveen Advisory is responsible for execution of specific investment strategies
and day-to-day investment operations. Nuveen Advisory manages each fund using a
team of analysts and portfolio managers that focus on a specific group of funds.
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. 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 sixteen Nuveen-sponsored investment companies,
including the Arizona, Colorado, New Mexico, and Louisiana Funds. Thomas J.
O'Shaughnessy has been the portfolio manager for the Kentucky Fund since July
1998, a portfolio manager for Nuveen Advisory since 1983 and an Assistant Vice
President since 1998. Mr. O'Shaughnessy currently manages investments for twelve
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
14 Section 2 How We Manage Your Money
<PAGE>
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.
For providing these services, Nuveen Advisory is paid an annual management fee
according to the following schedule:
Average Daily Net Assets 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%
- --------------------------------------------------------------------------
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.
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.
These bonds include general obligation bonds, which are backed by the full faith
and credit of the issuer and may be repaid from any revenue source, and revenue
bonds, which may be repaid only from the revenue of a specific facility or
source.
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.
In evaluating municipal bonds of different credit qualities or maturities,
Nuveen Advisory takes into account the size of yield spreads. Yield spread is
the additional return the funds may earn by taking on additional credit risk or
interest rate risk. For example, yields on low quality bonds are higher than
yields on high quality bonds because investors must be compensated for incurring
the higher credit risk associated with low quality bonds. If yield spreads do
not provide adequate compensation for the additional risk associated with low
quality bonds, the funds will buy bonds of relatively higher quality. Similarly,
in evaluating bonds of different maturities, Nuveen Advisory evaluates the
comparative yield available
Section 2 How We Manage Your Money 15
<PAGE>
on these bonds. If yield spreads on long-term bonds do not compensate the funds
adequately for the additional interest rate risk the funds must assume, the
funds will buy bonds of relatively shorter maturity. In addition, municipal
bonds in a particular industry may provide higher yields relative to their risk
compared to bonds in other industries. If that occurs, a fund may buy relatively
more bonds from issuers in that industry. In that case, the fund's portfolio
composition would change from time to time.
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. 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 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. If the funds invest in taxable
securities, they may not achieve their investment objective. 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. These 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 bonds 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 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 bonds
with favorable characteristics we believe are not yet recognized by the market.
We then select those higher-yielding and undervalued municipal bonds that we
believe represent the most attractive values.
16 Section 2 How We Manage Your Money
<PAGE>
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: Because the funds invest in fixed-income securities, the
funds are subject to interest rate risk. Interest rate risk is the risk that the
value of a fund's portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term investments and higher
for longer-term investments.
Income risk: The risk that the income from a 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: Each fund is subject to credit risk. Credit risk is the risk that
an issuer of a municipal bond will be unable to meet its obligation to make
interest and principal payments due to changing financial or market conditions,
or possibly due to Year 2000 issues.
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 fund's investment
portfolio. See "Appendix--Additional State Information." These risks may be
greater for the Kansas, Missouri and Wisconsin Funds, which as "non-diversified"
funds may concentrate their investments in municipal bonds of certain issuers to
a greater extent than the Kentucky, Michigan and Ohio Funds, 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 fund's assets can decline as can the value
of the fund's distributions.
Section 2 How We Manage Your Money 17
<PAGE>
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 within a state, 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 a diversified funds, the Kentucky, Michigan and Ohio Funds also may not have
more than:
. 5% in securities of any one issuer (except U.S. government securities or for
25% of each fund's assets).
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 Nuveen Advisory's opinion, correlate with the prices
of the funds' investments. The funds, however, have no present intent to use
these strategies.
18 Section 2 How We Manage Your Money
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer 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.
What Share Classes We Offer
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 on-going service to you.
Nuveen retains the up-front sales charge and the service fee on accounts with no
authorized dealer of record. The up-front Class A sales charge for all funds
described in the prospectus 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>
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% 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% 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 on-going service to you. Nuveen
retains the up-front sales charge and the service fee on accounts with no
authorized dealer of record. 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 normally 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
Section 3 How You Can Buy and Sell Shares 19
<PAGE>
following schedule. You do not pay a CDSC on any Class B shares you purchase by
reinvesting dividends.
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 .75%. The annual .20% service fee compensates your financial
adviser for providing on-going service to you. Nuveen retains the up-front sales
charge and the service fee on accounts with no authorized dealer of record. The
annual .55% distribution fee reimburses Nuveen for paying your financial adviser
an on-going sales commission. Nuveen advances the first year's service and
distribution fees. If you sell your shares within 12 months of purchase, you
will normally have to pay a 1% CDSC based on your purchase or sale price,
whichever is lower. You do not pay a CDSC on any Class C shares you purchase by
reinvesting dividends.
Class R Shares
You may purchase Class R shares only under limited circumstances, at 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 on-going service or distribution fees. Class R shares have
lower on-going 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
. Letter of intent or Exchange-Traded directors of Nuveen or
. Group purchase Fund reinvestment employees of authorized
. Certain employees and dealers
directors of Nuveen or . Bank trust departments
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
20 Section 3 How You Can Buy and Sell Shares
<PAGE>
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
Fund shares may be purchased on any business day, which is any day the New York
Stock Exchange is open for business and normally ends at 4 p.m. New York time.
Generally, the Exchange is closed on weekends and national holidays. 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.
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 on-going basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisers are paid for on-going
investment advice and services either from fund sales charges and fees or by
charging you a separate fee in lieu of a sales charge. 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. No third party
checks will be accepted.
Investment Minimums
The minimum initial investment is $3,000 ($50 if you establish a systematic
investment plan). Subsequent investments must be in amounts of $50 or more. The
funds reserve the right to reject purchase orders and to waive or increase the
minimum investment requirements.
Systematic Investing
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.
Section 3 How You Can Buy and Sell Shares 21
<PAGE>
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.
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 "Special Services--Fund Direct" below), paid to a third party or sent
payable to you at an address other than your
22 Section 3 How You Can Buy and Sell Shares
<PAGE>
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. You may have to pay a sales charge when exchanging shares that
you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
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 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.
The funds may change or cancel their exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax adviser about
the tax consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts, and perform a
variety of account transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may have dividends,
distributions, redemption payments or systematic withdrawal plan payments 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.
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.
Section 3 How You Can Buy and Sell Shares 23
<PAGE>
How To Sell Shares
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also you
should verify your trade confirmations immediately upon receipt.
You may sell (redeem) your shares on any business day. 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. If you are selling shares purchased
recently with a check, you will not receive your redemption proceeds until your
check has cleared. This may take up to ten business days from your purchase
date. 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 calling (800) 257-8787. Telephone redemptions are not available if you
own shares in certificate form and may not exceed $50,000. Checks will only be
issued to you as the shareholder of record and mailed to your address of record.
If you have established Fund Direct privileges, you may have redemption proceeds
transferred electronically to your bank account. We will normally mail your
check the next business day.
By Mail
You can sell your shares at any time by sending a written request to the
appropriate fund, c/o 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.
24 Section 3 How You Can Buy and Sell Shares
<PAGE>
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 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.
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.
Redemptions In-Kind
The funds generally pay redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the funds may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
Section 3 How You Can Buy and Sell Shares 25
<PAGE>
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.
Dividends, Distributions and Taxes
[INSERT LOGO]
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 primarily in municipal bonds from a
particular state, the regular monthly dividends you receive will be
exempt from regular federal income tax and that state's personal
income tax. All or a portion of these dividends, however, may be
subject to the federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital
gains, the funds may realize and distribute taxable income or capital
gains from time to time as a result of each fund's normal investment
activities. Each fund will distribute in December any taxable income
or capital gains realized over the preceding year. Net short-term
gains are taxable as ordinary income. Net long-term capital gains are
taxable as long-term capital gains regardless of how long you have
owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount
and nature of all dividends and capital gains that you were paid
during the prior year. If you hold your investment at the firm where
you purchased your fund shares, you will receive the statement from
that firm. If you hold your shares directly at the fund, Nuveen will
send you the statement. The tax status of your dividends is not
affected by whether you reinvest your dividends or elect to receive
them in cash.
If you receive social security or railroad retirement benefits, you
should consult your tax adviser about how an investment in a fund may
affect the federal taxation of your benefits.
26 Section 4 General Information
<PAGE>
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires the fund to
withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax adviser for
more information about taxes.
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 federal 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 federal tax-free
yields and tax rates:
Taxable Equivalent Of Tax-Free Yields
<TABLE>
<CAPTION>
To Equal a Tax-Free Yield of:
If Your Federal 4.00% 4.50% 5.00% 5.50% 6.00%
Tax Bracket is: A Taxable Investment Would Need to Yield:
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax adviser.
Distribution and Service Plans
Nuveen 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
Section 4 General Information 27
<PAGE>
service fee for Class A, Class B, and Class C shares to compensate authorized
dealers, including Nuveen, for providing on-going account services to
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.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in
connection with sales meetings, seminars, prospecting seminars and other events
at which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of
advertising that features the products and services of both parties. The
Statement of Additional Information contains further information about these
programs.
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. New
York time) on each day the New York Stock Exchange is open for business. Net
asset value is calculated for each class by taking the market 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.
28 Section 4 General Information
<PAGE>
Year 2000
The funds' service providers rely on computer systems to manage the fund's
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 is working with the funds' service providers
to adapt their systems to address this issue. Nuveen and the funds expect that
the necessary work will be completed on a timely basis, although there can be no
assurance of this.
Year 2000 issues may affect the ability of issuers to meet their interest and
principal payment obligations to their bond holders, and may adversely affect
the bonds' credit ratings and values. Generally, higher rated fixed-income
securities carry less credit risk than lower rated fixed-income securities.
Municipal issuers may have greater Year 2000 risks than other issuers. Nuveen
Advisory is requesting information from municipal issuers so that Nuveen
Advisory can take the issuers' Year 2000 readiness, if made available, into
account in making investment decisions. There can be no assurance that issuers
will provide this information to Nuveen Advisory, or that issuers will begin or
complete the work necessary to address any Year 2000 issues on a timely basis.
Section 4 General Information 29
<PAGE>
Section 5 Financial Highlights
The financial highlights table is intended to help you understand a Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in a Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by Arthur Andersen LLP, whose report, along with the Funds'
financial statements, are included in the SAI and annual report, which is
available upon request.
Kansas 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 Total
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- ---------------------------------------------------------------------------------------------------------------------------------
Class A (1/92)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $ 10.60 $ .51 $ (.11) $ .40 $ (.51) $ -- $ (.51) $ 10.49 3.81%
1998 10.19 .52 .41 .93 (.52) -- (.52) 10.60 9.32
1997 9.83 .53 .36 .89 (.53) -- (.53) 10.19 9.21
1996 10.01 .54 (.18) .36 (.54) -- (.54) 9.83 3.63
1995 9.83 .55 .18 .73 (.55) -- (.55) 10.01 7.80
Class B (2/97)
1999 10.54 .43 (.11) .32 (.43) -- (.43) 10.43 3.07
1998 10.13 .44 .41 .85 (.44) -- (.44) 10.54 8.57
1997(c) 10.23 .13 (.12) .01 (.11) -- (.11) 10.13 .13
Class C (2/97)
1999 10.63 .45 (.11) .34 (.46) -- (.46) 10.51 3.18
1998 10.21 .47 .42 .89 (.47) -- (.47) 10.63 8.85
1997(c) 10.18 .15 .04 .19 (.16) -- (.16) 10.21 1.85
Class R (2/97)
1999 10.66 .54 (.11) .43 (.54) -- (.54) 10.55 4.06
1998 10.22 .56 .43 .99 (.55) -- (.55) 10.66 9.84
1997(c) 10.20 .18 (.02) .16 (.14) -- (.14) 10.22 1.55
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Assets Net Net Turnover
May 31, (000) Assets(a) Assets(a) Rate
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (1/92)
1999 $ 113,140 .75% 4.78% 27%
1998 102,217 .71 4.98 13
1997 95,891 .68 5.24 40
1996 96,694 .57 5.31 55
1995 83,683 .54 5.67 72
Class B (2/97)
1999 6,497 1.51 4.03 27
1998 3,238 1.45 4.22 13
1997(c) 605 1.27* 4.62* 40
Class C (2/97)
1999 6,171 1.32 4.23 27
1998 1,716 1.24 4.41 13
1997(c) 91 1.09* 4.85* 40
Class R (2/97)
1999 679 .59 4.97 27
1998 12 .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.
(a) After custodian fee credit and expense reimbursement.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
30 Section 5 Financial Highlights
<PAGE>
Kentucky 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 Total
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- ---------------------------------------------------------------------------------------------------------------------------------
Class A (5/87)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $ 11.39 $ .56 $ (.15) $ .41 $ (.56) $ (.02) $ (.58) $ 11.22 3.66%
1998 11.05 .59 .38 .97 (.58) (.05) (.63) 11.39 9.00
1997 10.82 .60 .24 .84 (.60) (.01) (.61) 11.05 7.87
1996 10.99 .61 (.17) .44 (.61) -- (.61) 10.82 4.04
1995 10.65 .61 .35 .96 (.62) -- (.62) 10.99 9.42
Class B (2/97)
1999 11.39 .48 (.15) .33 (.48) (.02) (.50) 11.22 2.90
1998 11.06 .50 .38 .88 (.50) (.05) (.55) 11.39 8.10
1997(c) 11.07 .17 (.01) .16 (.17) -- (.17) 11.06 1.47
Class C (10/93)
1999 11.38 .50 (.15) .35 (.50) (.02) (.52) 11.21 3.12
1998 11.04 .52 .39 .91 (.52) (.05) (.57) 11.38 8.43
1997 10.81 .54 .24 .78 (.54) (.01) (.55) 11.04 7.29
1996 10.99 .54 (.17) .37 (.55) -- (.55) 10.81 3.38
1995 10.65 .55 .35 .90 (.56) -- (.56) 10.99 8.82
Class R (2/97)
1999 11.37 .58 (.15) .43 (.58) (.02) (.60) 11.20 3.89
1998 11.03 .61 .39 1.00 (.61) (.05) (.66) 11.37 9.25
1997(c) 11.08 .20 (.04) .16 (.21) -- (.21) 11.03 1.42
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Assets Net Net Turnover
May 31, (000) Assets(a) Assets(a) Rate
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (5/87)
1999 $ 467,127 .82% 4.90% 10%
1998 451,338 .77 5.19 12
1997 430,803 .75 5.44 13
1996 410,808 .71 5.50 17
1995 394,457 .68 5.85 28
Class B (2/97) 9,923 1.56 4.16 10
1999 4,273 1.54 4.38 12
1998 544 1.39* 4.76* 13
1997(c)
Class C (10/93)
1999 37,246 1.37 4.36 10
1998 28,630 1.33 4.63 12
1997 24,468 1.29 4.89 13
1996 20,647 1.27 4.93 17
1995 15,831 1.23 5.27 28
Class R (2/97)
1999 839 .62 5.11 10
1998 675 .58 5.37 12
1997(c) 455 .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 custodian fee credit and expense reimbursement, where applicable.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 31
<PAGE>
Michigan 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 Total
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- ---------------------------------------------------------------------------------------------------------------------------------
Class A (6/85)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $ 12.07 $ .60 $ (.18) $ .42 $ (.60) $ (.06) $ (.66) $ 11.83 3.45%
1998 11.68 .61 .42 1.03 (.61) (.03) (.64) 12.07 8.95
1997 11.37 .62 .31 .93 (.61) (.01) (.62) 11.68 8.42
1996 11.59 .63 (.22) .41 (.63) -- (.63) 11.37 3.61
1995 11.31 .65 .28 .93 (.65) -- (.65) 11.59 8.57
Class B (2/97)
1999 12.09 .51 (.18) .33 (.51) (.06) (.57) 11.85 2.69
1998 11.70 .52 .42 .94 (.52) (.03) (.55) 12.09 8.12
1997(c) 11.66 .17 .04 .21 (.17) -- (.17) 11.70 1.86
Class C (6/93)
1999 12.06 .53 (.18) .35 (.53) (.06) (.59) 11.82 2.90
1998 11.66 .54 .43 .97 (.54) (.03) (.57) 12.06 8.45
1997 11.35 .55 .32 .87 (.55) (.01) (.56) 11.66 7.84
1996 11.58 .56 (.22) .34 (.57) -- (.57) 11.35 2.96
1995 11.30 .58 .28 .86 (.58) -- (.58) 11.58 7.98
Class R (2/97)
1999 12.07 .62 (.18) .44 (.62) (.06) (.68) 11.83 3.66
1998 11.68 .63 .42 1.05 (.63) (.03) (.66) 12.07 9.16
1997(c) 11.66 .21 .02 .23 (.21) -- (.21) 11.68 2.01
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------
Class
(Inception
Date)
Ratio of
Ratio of Net Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Assets Net Net Turnover
May 31, (000) Assets(a) Assets(a) Rate
- --------------------------------------------------------------------
Class A (6/85)
<S> <C> <C> <C> <C>
1999 $ 260,396 .84% 4.94% 18%
1998 263,632 .84 5.11 13
1997 259,055 .85 5.33 34
1996 248,422 .82 5.42 54
1995 250,380 .80 5.82 37
Class B (2/97)
1999 7,733 1.60 4.20 18
1998 3,839 1.59 4.32 13
1997(c) 380 1.59* 4.52* 34
Class C (6/93)
1999 48,946 1.39 4.39 18
1998 45,690 1.39 4.56 13
1997 41,649 1.40 4.77 34
1996 41,365 1.37 4.86 54
1995 37,122 1.35 5.25 37
Class R (2/97)
1999 26,310 .64 5.14 18
1998 26,904 .64 5.31 13
1997(c) 26,211 .65* 5.57* 34
- --------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Michigan.
(a) After custodian fee credit and expense reimbursement, where applicable.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
32 Section 5 Financial Highlights
<PAGE>
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 Total
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- ------------------------------------------------------------------------ -------------------------------------------------------
Class A (8/87)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $ 11.23 $ .55 $ (.11) $ .44 $ (.55) $ -- $ (.55) $ 11.12 3.95%
1998 10.80 .56 .43 .99 (.56) -- (.56) 11.23 9.32
1997 10.51 .56 .29 .85 (.56) -- (.56) 10.80 8.29
1996 10.72 .58 (.21) .37 (.58) -- (.58) 10.51 3.51
1995 10.50 .60 .22 .82 (.60) -- (.60) 10.72 8.19
Class B (2/97)
1999 11.23 .47 (.12) .35 (.47) -- (.47) 11.11 3.09
1998 10.80 .47 .44 .91 (.48) -- (.48) 11.23 8.35
1997(c) 10.81 .16 (.01) .15 (.16) -- (.16) 10.80 1.40
Class C (2/94)
1999 11.23 .49 (.12) .37 (.49) -- (.49) 11.11 3.31
1998 10.80 .50 .43 .93 (.50) -- (.50) 11.23 8.74
1997 10.50 .51 .29 .80 (.50) -- (.50) 10.80 7.80
1996 10.72 .51 (.21) .30 (.52) -- (.52) 10.50 2.84
1995 10.50 .53 .23 .76 (.54) -- (.54) 10.72 7.60
Class R (2/97)
1999 11.23 .58 (.12) .46 (.57) -- (.57) 11.12 4.17
1998 10.80 .58 .43 1.01 (.58) -- (.58) 11.23 9.56
1997(c) 10.90 .17 (.12) .05 (.15) -- (.15) 10.80 .43
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Assets Net Net Turnover
May 31, (000) Assets(a) Assets(a) Rate
- -------------------------------------------------------------------
Class A (8/87)
<S> <C> <C> <C> <C>
1999 $ 238,498 .86% 4.87% 12%
1998 233,456 .87 5.02 19
1997 218,924 .86 5.27 41
1996 212,717 .80 5.37 38
1995 205,089 .67 5.78 40
Class B (2/97)
1999 5,286 1.61 4.13 12
1998 1,677 1.62 4.25 19
1997(c) 454 1.45* 4.59* 41
Class C (2/94)
1999 13,444 1.41 4.32 12
1998 11,253 1.42 4.47 19
1997 7,968 1.40 4.72 41
1996 6,220 1.35 4.79 38
1995 3,989 1.20 5.19 40
Class R (2/97)
1999 393 .65 5.08 12
1998 41 .67 5.22 19
1997(c) 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.
(a) After custodian fee credit and expense reimbursement, where applicable.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 33
<PAGE>
Ohio 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 Total
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- ----------------------------------------------------------------------------------------------------------------------------------
Class A (6/85)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $11.74 $.58 $(.13) $.45 $(.58) $(.04) $(.62) $11.57 3.92%
1998 11.41 .60 .38 .98 (.60) (.05) (.65) 11.74 8.76
1997 11.21 .61 .20 .81 (.61) -- (.61) 11.41 7.38
1996 11.43 .62 (.21) .41 (.63) -- (.63) 11.21 3.59
1995 11.21 .64 .22 .86 (.64) -- (.64) 11.43 7.99
Class B (2/97)
1999 11.73 .49 (.12) .37 (.50) (.04) (.54) 11.56 3.18
1998 11.41 .51 .38 .89 (.52) (.05) (.57) 11.73 7.89
1997(c) 11.42 .17 (.01) .16 (.17) -- (.17) 11.41 1.45
Class C (8/93)
1999 11.73 .52 (.13) .39 (.52) (.04) (.56) 11.56 3.39
1998 11.41 .54 .37 .91 (.54) (.05) (.59) 11.73 8.12
1997 11.21 .55 .20 .75 (.55) -- (.55) 11.41 6.80
1996 11.43 .55 (.21) .34 (.56) -- (.56) 11.21 3.03
1995 11.20 .57 .23 .80 (.57) -- (.57) 11.43 7.50
Class R (2/97)
1999 11.73 .60 (.12) .48 (.60) (.04) (.64) 11.57 4.22
1998 11.41 .62 .37 .99 (.62) (.05) (.67) 11.73 8.89
1997(c) 11.42 .21 (.01) .20 (.21) -- (.21) 11.41 1.77
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Assets Net Net Turnover
May 31, (000) Assets(a) Assets(a) Rate
- -------------------------------------------------------------------
Class A (6/85)
<S> <C> <C> <C> <C>
1999 $471,075 .85% 4.94% 11%
1998 472,821 .85 5.15 15
1997 463,253 .89 5.39 17
1996 443,077 .92 5.41 31
1995 445,566 .95 5.78 31
Class B (2/97)
1999 14,494 1.61 4.20 11
1998 7,422 1.61 4.39 15
1997(c) 1,649 1.60* 4.63* 17
Class C (8/93)
1999 50,889 1.40 4.39 11
1998 47,036 1.40 4.60 15
1997 40,713 1.44 4.84 17
1996 34,939 1.47 4.84 31
1995 28,461 1.50 5.21 31
Class R (2/97)
1999 161,491 .65 5.14 11
1998 162,220 .65 5.35 15
1997(c) 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 custodian fee credit and expense reimbursement, where applicable.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
34 Section 5 Financial Highlights
<PAGE>
Wisconsin 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 Total
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- ---------------------------------------------------------------------------------------------------------------------------------
Class A (6/94)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $ 10.28 $ .47 $ (.08) $ .39 $ (.47) $ -- $ (.47) $ 10.20 3.83%
1998 9.80 .49 .49 .98 (.50) -- (.50) 10.28 10.19
1997 9.61 .51 .19 .70 (.51) -- (.51) 9.80 7.40
1996 9.79 .50 (.18) .32 (.50) -- (.50) 9.61 3.35
1995(c) 9.58 .49 .21 .70 (.49) -- (.49) 9.79 7.36*
Class B (2/97)
1999 10.31 .39 (.08) .31 (.39) -- (.39) 10.23 3.05
1998 9.82 .42 .49 .91 (.42) -- (.42) 10.31 9.46
1997(c) 9.87 .12 (.06) .06 (.11) -- (.11) 9.82 .60
Class C (2/97)
1999 10.30 .41 (.07) .34 (.42) -- (.42) 10.22 3.29
1998 9.82 .44 .49 .93 (.45) -- (.45) 10.30 9.59
1997(c) 9.87 .13 (.07) .06 (.11) -- (.11) 9.82 .65
Class R (2/97)
1999 10.31 .49 (.08) .41 (.49) -- (.49) 10.23 4.04
1998 9.82 .53 .48 1.01 (.52) -- (.52) 10.31 10.47
1997(c) 9.87 .15 (.07) .08 (.13) -- (.13) 9.82 .84
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Assets Net Net Turnover
May 31, (000) Assets(a) Assets(a) Rate
- --------------------------------------------------------------------
Class A (6/94)
<S> <C> <C> <C> <C>
1999 $ 29,217 .68% 4.53% 9%
1998 24,313 .55 4.87 10
1997 14,004 .51 5.20 42
1996 12,370 .64 5.02 47
1995(c) 8,278 .39* 5.25* 52
Class B (2/97)
1999 3,795 1.43 3.79 9
1998 1,877 1.32 4.04 10
1997(c) 20 .94* 4.81* 42
Class C (2/97)
1999 3,457 1.23 3.99 9
1998 1,366 1.11 4.25 10
1997(c) 76 .69* 4.91* 42
Class R (2/97)
1999 107 .48 4.74 9
1998 45 .32 5.08 10
1997(c) 40 -- 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 custodian fee credit and expense reimbursement, where applicable.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 35
<PAGE>
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 4.4% in 1998 to $25,049,
about 95% of the national median.
The State's unemployment rate was 3.4% in July 1999, down from 4.0% in July 1998
and lower than 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. These agency ratings do not indicate the
creditworthiness of other tax-exempt securities in which the fund may
invest.
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.
36 Appendix
<PAGE>
Kentucky
Kentucky's centralized location and low labor and energy costs have helped fuel
and sustain the Commonwealth's economic growth, growth that has during the
1990's surpassed national growth rates in many areas. The area of the
Commonwealth experiencing the most intense economic growth has been Kentucky's
"Golden Triangle" bounded by Cincinnati, Lexington and Louisville.
Kentucky's average unemployment rate in July 1999 was 4.1%, compared to the
national average of 4.3% in July 1999 and the Commonwealth's 4.5% average in
July 1998. Per capita income in 1998 was $21,551, approximately 81% of the
national average.
Although Kentucky has not issued general obligation debt since 1965, the
Commonwealth actively issues appropriation-secured debt from several agencies.
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. Moody's upgraded the ratings on the obligations of several
Kentucky agencies in June 1999 citing the Commonwealth's improved financial
position and economy. The agency ratings reflect the Commonwealth's credit
quality only, and do not indicate the creditworthiness of other tax-exempt
securities in which the fund may invest.
Tax Treatment
The Kentucky Fund's 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 Fund
distributes any taxable income or realized capital gains, or if you sell or
exchange Kentucky Fund 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 Fund shares that is attributable to Kentucky municipal bonds or
U.S. government securities.
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. Population has
remained stable in the State, increasing by a negligible amount annually. The
nominal increases in population accompanied by the moderate job growth have
maintained low unemployment levels. Since 1994, the State has experienced
unemployment levels below the national average. The State's unemployment rate
was 3.9% in 1998, compared to the national average of 4.6% and was 3.4% in July
1999. Per capita income has increased each year over the past decade, and was
$25,979 in 1998. The manufacturing industry and the presence of the "Big 3"
automobile manufacturers are the primary influence in the economy. In August
1998, the automobile manufacturers industry reported its highest monthly sales
level since 1986. The automobile industry's strong sales have contributed to
Michigan's growth and tight labor market.
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
Appendix 37
<PAGE>
1998. These ratings reflect the State's credit quality only, and do not indicate
the creditworthiness of other tax-exempt securities in which the fund may
invest.
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. McDonnell Douglas
Corporation, one of the largest private employers in the state, employs
approximately 25,000 people, with Chrysler and Ford each employing approximately
10,000 people.
Population in Missouri has increased approximately 5.6% from 1990. The State's
unemployment rate has steadily declined since the high of 6.7% in 1991 and was
4.2% in 1998, compared to the national average of 4.6%. July 1999 unemployment
was 3.5% compared to 4.3% in July 1998. Per capita income increased 3.5% during
1998 to $24,447, which is about 92% of the national average.
Missouri's diversified economy and history of sound financial management are
reflected in its long-standing Aaa/AAA/AAA rating by Moody's, S&P, and Fitch,
respectively. These ratings reflect the State's credit quality only, and do not
indicate the creditworthiness of other tax-exempt securities in which the fund
may invest.
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.
38 Appendix
<PAGE>
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. 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.
Ohio's unemployment rate registered 4.5% in July 1999, comparable to the
national average of 4.3% in July 1999 and lower than the State's 4.8% rate in
July 1998. Per capita income in 1998 was $25,239, approximately 95% of the
national average.
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.
As of August 31, 1999, Moody's rated Ohio general obligation bonds Aa1 while
Standard & Poor's and Fitch each rated the State AA+. These ratings reflect the
State's credit quality only, and do not indicate the creditworthiness of other
tax-exempt securities in which the fund may invest.
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 among 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. The services
sector has experienced significant growth over the past several years and
currently represents approximately 26% of the non-agricultural employment.
Appendix 39
<PAGE>
The State's unemployment rate was 3.4% in 1998. The July 1999 unemployment rate
was 3.0%, down from 3.6% in July 1998. Per capita income was $25,184 in 1998,
about 95% of the national average.
The State's general obligations receive Aa2/AA ratings from Moody's and Standard
and Poor's, respectively. These ratings reflect the State's credit quality only,
and do not indicate the creditworthiness of other tax-exempt securities in which
the fund may invest.
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.
40 Appendix
<PAGE>
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
Dividend and Growth Fund
Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
High Yield
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
<TABLE>
<S> <C> <C>
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 New York/1/
</TABLE>
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
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. Additional
information about the Funds' investments is available in the Funds' annual and
semi-annual report to shareholders. In the Funds' annual reports, you will find
a discussion of the market conditions and investment strategies that
significantly affected the Funds' performance during their last fiscal year.
Call Nuveen at (800) 257-8787 to request a free copy of any of these materials
or other fund information; or ask your financial adviser for copies.
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.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
VPR-MS6-NA 9-99
<PAGE>
September 29, 1999
NUVEEN FLAGSHIP MULTISTATE TRUST IV
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectuses
of the Nuveen Flagship Multistate Trust IV dated September 29, 1999. The
Prospectuses may be obtained without charge from certain securities
representatives, banks, and other financial institutions that have entered into
sales agreements with John Nuveen & Co. Incorporated, or from the Funds, by
mailing a written request to the Funds, c/o John Nuveen & Co. Incorporated, 333
West Wacker Drive, Chicago, Illinois 60606 or by calling (800) 257-8787.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-13
Investment Adviser and Investment Management Agreement..................... S-22
Portfolio Transactions..................................................... S-23
Net Asset Value............................................................ S-24
Tax Matters................................................................ S-24
Performance Information.................................................... S-33
Additional Information on the Purchase and Redemption of Fund Shares....... S-41
Distribution and Service Plan.............................................. S-48
Independent Public Accountants and Custodian............................... S-50
Financial Statements....................................................... S-50
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Description of Hedging Techniques.............................. B-1
</TABLE>
The audited financial statements for each Fund's most recent fiscal year
appear in the Funds' Annual Reports; each is included herein by reference.
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
Investment Policies
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of that Fund:
(1) Invest in securities other than Municipal Obligations and short-term
securities, as described in the Prospectus. Municipal Obligations are
municipal bonds that pay interest that is exempt from regular federal,
state and, in some cases, local income taxes.
(2) Invest more than 5% of its total assets in securities of any one
issuer, except this limitation shall not apply to securities of the United
States Government, and to the investment of 25% of such Fund's assets. This
limitation shall apply only to the Kentucky Municipal Bond Fund, the
Michigan Municipal Bond Fund, and the Ohio Municipal Bond Fund.
(3) Borrow money, except from banks for temporary or emergency purposes
and not for investment purposes and then only in an amount not exceeding
(a) 10% of the value of its total assets at the time of borrowing or (b)
one-third of the value of the Fund's total assets including the amount
borrowed, in order to meet redemption requests which might otherwise
require the untimely disposition of securities. While any such borrowings
exceed 5% of such Fund's total assets, no additional purchases of
investment securities will be made by such Fund. If due to market
fluctuations or other reasons, the value of the Fund's assets falls below
300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so.
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (2) above, it may pledge securities
having a market value at the time of pledge not exceeding 10% of the value
of the Fund's total assets.
(5) Issue senior securities as defined in the Investment Company Act of
1940, except to the extent such issuance might be involved with respect to
borrowings described under item (3) above or with respect to transactions
involving futures contracts or the writing of options within the limits
described in the Prospectus and this Statement of Additional Information.
(6) Underwrite any issue of securities, except to the extent that the
purchase or sale of Municipal Obligations in accordance with its investment
objective, policies and limitations, may be deemed to be an underwriting.
(7) Purchase or sell real estate, but this shall not prevent any Fund
from investing in Municipal Obligations secured by real estate or interests
therein or foreclosing upon and selling such security.
(8) Purchase or sell commodities or commodities contracts or oil, gas or
other mineral exploration or development programs, except for transactions
involving futures contracts within the limits described in the Prospectus
and this Statement of Additional Information.
(9) Make loans, other than by entering into repurchase agreements and
through the purchase of Municipal Obligations or temporary investments in
accordance with its investment objective, policies and limitations.
S-2
<PAGE>
(10) Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions.
(11) Write or purchase put or call options, except to the extent that the
purchase of a stand-by commitment may be considered the purchase of a put,
and except for transactions involving options within the limits described
in the Prospectus and this Statement of Additional Information.
(12) Invest more than 25% of its total assets in securities of issuers in
any one industry; provided, however, that such limitations shall not be
applicable to Municipal Obligations issued by governments or political
subdivisions of governments, and obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(13) Purchase or retain the securities of any issuer other than the
securities of the Fund if, to the Fund's knowledge, those trustees of the
Trust, or those officers and directors of Nuveen Advisory Corp. ("Nuveen
Advisory"), who individually own beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities.
In addition, each Fund, as a non-fundamental policy, may not invest more than
15% of its net assets in "illiquid" securities, including repurchase agreements
maturing in more than seven days.
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed the sole issuer of a security when its assets and
revenues are separate from other governmental entities and its securities are
backed only by its assets and revenues. Similarly, in the case of a non-
governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be deemed to
be the sole issuer. Where a security is also backed by the enforceable
obligation of a superior or unrelated governmental entity or other entity
(other than a bond insurer), it shall also be included in the computation of
securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other
facility, such as a bank guarantee or letter of credit, such a guarantee or
letter of credit would be considered a separate security and would be treated
as an issue of such government, other entity or bank. Where a security is
insured by bond insurance, it shall not be considered a security issued or
guaranteed by the insurer; instead the issuer of such security will be
determined in accordance with the principles set forth above. The foregoing
restrictions do not limit the percentage of the Fund's assets that may be
invested in securities insured by any single insurer.
The foregoing restrictions and limitations, as well as a Fund's policies as
to ratings of portfolio investments, will apply only at the time of purchase of
securities, and the percentage limitations will not be considered violated
unless an excess or deficiency occurs or exists immediately after and as a
result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of each Fund, cannot be changed without approval by holders of a
"majority of the Fund's outstanding voting shares." As defined in the
Investment Company Act of 1940, this means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if the holders of more than 50% of the
Fund's shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
The Nuveen Flagship Multistate Trust IV (the "Trust") is an open-end
management series investment company organized as a Massachusetts business
trust on July 1, 1996. Each of the Funds is an open-end management investment
company organized as a series of the Nuveen Flagship Multistate Trust IV. The
Trust is
S-3
<PAGE>
an open-end management series company under SEC Rule 18f-2. Each Fund is a
separate series issuing its own shares. The Trust currently has six series: the
Nuveen Flagship Kansas Municipal Bond Fund (formerly the Flagship Kansas Triple
Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the Nuveen
Flagship Kentucky Municipal Bond Fund (formerly the Flagship Kentucky Triple
Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the Nuveen
Flagship Michigan Municipal Bond Fund (formerly the Flagship Michigan Triple
Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the Nuveen
Flagship Missouri Municipal Bond Fund (formerly the Flagship Missouri Double
Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the Nuveen
Flagship Ohio Municipal Bond Fund (formerly the Flagship Ohio Double Tax Exempt
Fund, a series of the Flagship Tax Exempt Funds Trust); and the Nuveen Flagship
Wisconsin Municipal Bond Fund (formerly the Flagship Wisconsin Double Tax
Exempt Fund, a series of the Flagship Tax Exempt Funds Trust). Certain matters
under the Investment Company Act of 1940 which must be submitted to a vote of
the holders of the outstanding voting securities of a series company shall not
be deemed to have been effectively acted upon unless approved by the holders of
a majority of the outstanding voting securities of each Fund affected by such
matter.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of a trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Trust and requires that
notice of this disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Declaration of Trust
further provides for indemnification out of the assets and property of the
Trust for all loss and expense of any shareholder personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself were unable to meet its
obligations. The Trust believes the likelihood of these circumstances is
remote.
Portfolio Securities
As described in the Prospectus, each of the Funds invests substantially all
of its assets (at least 80%) in a portfolio of Municipal Obligations free from
regular federal, state and, in some cases, local income tax in each Fund's
respective state, which generally will be Municipal Obligations issued within
the Fund's respective state. In general, Municipal Obligations include debt
obligations issued by states, cities and local authorities to obtain funds for
various public purposes, including construction of a wide range of public
facilities such as airports, bridges, highways, hospitals, housing, mass
transportation, schools, streets and water and sewer works. Industrial
development bonds and pollution control bonds that are issued by or on behalf
of public authorities to finance various privately-rated facilities are
included within the term Municipal Obligations if the interest paid thereon is
exempt from federal income tax.
The investment assets of each Fund will consist of (1) Municipal Obligations
which are rated at the time of purchase within the four highest grades (Baa or
BBB or better) by Moody's Investors Service, Inc. ("Moody's"), by Standard and
Poor's Corporation ("S&P") or by Fitch Investors Service, Inc. ("Fitch"), (2)
unrated Municipal Obligations which, in the opinion of Nuveen Advisory, have
credit characteristics equivalent to bonds rated within the four highest grades
by Moody's, S&P or Fitch, and (3) temporary investments as described below, the
income from which may be subject to state income tax or to both federal and
state income taxes. See Appendix A for more information about ratings by
Moody's, S&P, and Fitch.
S-4
<PAGE>
As described in the Prospectus, each Fund may invest in Municipal Obligations
that constitute participations in a lease obligation or installment purchase
contract obligation (hereafter collectively called "lease obligations") of a
municipal authority or entity. Although lease obligations do not constitute
general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although nonappropriation lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. A Fund will seek to minimize the special
risks associated with such securities by only investing in those
nonappropriation leases where Nuveen Advisory has determined that the issuer
has a strong incentive to continue making appropriations and timely payment
until the security's maturity. Some lease obligations may be illiquid under
certain circumstances. Lease obligations normally provide a premium interest
rate which along with regular amortization of the principal may make them
attractive for a portion of the assets of the Funds.
Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
the laws enacted in the future by Congress, state legislatures or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its Municipal Obligations may be materially affected.
Year 2000 Issues
The "Year 2000" problem refers to the fact that many computer programs use
only the last two digits of a year, and do not recognize a year that begins
with "20" instead of "19." If this problem is not corrected, computers could
function improperly or not at all, which could affect the global economy. The
SEC has urged securities issuers to disclose the steps they are taking to
correct any Year 2000 problems.
The Funds invest primarily in municipal securities. If municipal issuers do
not correct any Year 2000 problems in a timely manner, they could experience
problems in conducting their operations or in making payments on their
securities, which could cause the value of these securities to decline.
Municipal issuers could experience three types of Year 2000 problems. First, if
an issuer's internal computer systems experience Year 2000 problems, this could
disrupt an issuer's operations (such as its ability to collect local taxes or
fees). Second, an issuer may rely on other parties for the payments that
support its debt service, such as servicers that collect mortgage or student
loan payments, and those third parties may have Year 2000 problems that
interfere with their ability to forward payments to the issuer. Third, an
issuer may have mechanical problems in sending payments to its securities
holders.
Nuveen Advisory is obtaining information about the Year 2000 readiness of the
issuers of its portfolio securities as part of its ongoing surveillance of the
creditworthiness of those issuers.
Portfolio Trading and Turnover
The Funds will make changes in their investment portfolio from time to time
in order to take advantage of opportunities in the municipal market and to
limit exposure to market risk. The Funds may also engage to a limited extent in
short-term trading consistent with their investment objective. Securities may
be sold in anticipation of market decline or purchased in anticipation of
market rise and later sold. In addition, a security may be sold and another of
comparable quality purchased at approximately the same time to take advantage
of what Nuveen Advisory believes to be a temporary disparity in the normal
yield relationship between the two
S-5
<PAGE>
securities. Each Fund may make changes in its investment portfolio in order to
limit its exposure to changing market conditions. Changes in a Fund's
investments are known as "portfolio turnover." While it is impossible to
predict future portfolio turnover rates, the annual portfolio turnover rate for
each of the Funds is generally not expected to exceed 75%. However, each Fund
reserves the right to make changes in its investments whenever it deems such
action advisable and, therefore, a Fund's annual portfolio turnover rate may
exceed 75% in particular years depending upon market conditions.
The portfolio turnover rates for the 1998 and 1999 fiscal years for the Funds
were:
<TABLE>
<CAPTION>
Fiscal Year
1998 1999
----- -----
<S> <C> <C>
Nuveen Flagship Kansas Municipal Bond Fund.................. 13% 27%
Nuveen Flagship Kentucky Municipal Bond Fund................ 12% 10%
Nuveen Flagship Michigan Municipal Bond Fund................ 13% 18%
Nuveen Flagship Missouri Municipal Bond Fund................ 19% 12%
Nuveen Flagship Ohio Municipal Bond Fund.................... 15% 11%
Nuveen Flagship Wisconsin Municipal Bond Fund............... 10% 9%
</TABLE>
When-issued Securities or Delayed-Delivery Securities
Each Fund may purchase and sell Municipal Obligations on a when-issued or
delayed-delivery basis. When-issued and delayed-delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the
regular settlement date. (When-issued transactions normally settle within 15-45
days.) On such transactions the payment obligation and the interest rate are
fixed at the time the buyer enters into the commitment. The commitment to
purchase securities on a when-issued or delayed-delivery basis may involve an
element of risk because the value of the securities is subject to market
fluctuation, no interest accrues to the purchaser prior to settlement of the
transaction, and at the time of delivery the market value may be less than
cost. At the time a Fund makes the commitment to purchase a Municipal
Obligation on a when-issued or delayed-delivery basis, it will record the
transaction and reflect the amount due and the value of the security in
determining its net asset value. Likewise, at the time a Fund makes the
commitment to sell a Municipal Obligation on a delayed-delivery basis, it will
record the transaction and include the proceeds to be received in determining
its net asset value; accordingly, any fluctuations in the value of the
Municipal Obligation sold pursuant to a delayed-delivery commitment are ignored
in calculating net asset value so long as the commitment remains in effect. The
Funds will maintain designated readily marketable assets at least equal in
value to commitments to purchase when-issued or delayed-delivery securities,
such assets to be segregated by the Custodian specifically for the settlement
of such commitments. The Funds will only make commitments to purchase Municipal
Obligations on a when-issued or delayed-delivery basis with the intention of
actually acquiring the securities, but the Funds reserve the right to sell
these securities before the settlement date if it is deemed advisable. If a
when-issued security is sold before delivery any gain or loss would not be tax-
exempt. The Funds commonly engage in when-issued transactions in order to
purchase or sell newly-issued Municipal Obligations, and may engage in delayed-
delivery transactions in order to manage operations more effectively.
Special Considerations Relating to Municipal Obligations of Designated States
As described in the Prospectus, except for investments in temporary
investments, each of the Funds will invest substantially all of its assets (at
least 80%) in municipal bonds that are exempt from federal and state tax in
that state ("Municipal Obligations"), generally Municipal Obligations issued in
its respective state. Each Fund is therefore more susceptible to political,
economic or regulatory factors adversely affecting issuers of Municipal
Obligations in its state. Brief summaries of these factors are contained in the
Prospectus. Set forth below is
S-6
<PAGE>
additional information that bears upon the risk of investing in Municipal
Obligations issued by public authorities in the states of currently offered
Funds. This information was obtained from official statements of issuers
located in the respective states as well as from other publicly available
official documents and statements. The Funds have not independently verified
any of the information contained in such statements and documents. The
information below is intended only as a general summary, and is not intended as
a discussion of any specific factor that may affect any particular obligation
or issuer.
Factors Pertaining to Kansas
Kansas is the 14th largest state in terms of size (82,000 square miles).
However, much of the state is rural. The State's aggressive development of its
highway transportation network has led to significant industrial and commercial
development over the years, diversifying the state's economy away from a
reliance on agribusiness. The Kansas economy has slowed recently, but continues
to grow--primarily from the construction, wholesale and retail trade and
services sectors which continues to expand. The State's unemployment rate
dropped to 3.4% in July 1999 from its peak of 5.5% in 1993 and continues to be
substantially lower than the national average of 4.3%. Personal income grew at
4.5% in 1998 to $25,049, after posting a 5.6% gain in 1997. Per capita income
stands at about 95% of the national average. Kansas' economy is expected to
moderate as the aircraft manufacturing industry continues to downsize.
The Kansas State Treasury does not issue general obligation debt because of
constitutional prohibitions. The state instead relies on revenue and lease
financing through the Department of Transportation (KDOT) and the Development
Finance Authority (KDFA). KDFA is the conduit for most state debt and provides
financing for various public purpose projects including prison construction,
state offices, energy conservation and university facilities. The KDOT bonds
are rated Aa2/AA+/AA from Moody's, Standard & Poor's, and Fitch, respectively.
KDFA ratings vary according to the underlying purpose and when not insured are
generally rated A or better by the major rating agencies.
Factors Pertaining to Kentucky
Kentucky's centralized location and low labor and energy costs have helped
fuel and sustain the Commonwealth's economic growth, growth that has during the
1990's surpassed national growth rates in many areas. The area of the State
experiencing the most intense economic growth has been Kentucky's "Golden
Triangle" bounded by Cincinnati, Lexington and Louisville. While the
Commonwealth continues to experience employment losses in sectors like coal
mining, tobacco, and apparel, these generally lower-wage jobs are being
replaced by higher-wage employment in the automobile and transportation
equipment manufacturing, health care and services sector.
Kentucky's average unemployment rate in July 1999 was 4.1%, compared to the
national average of 4.3% in July 1999 and the State's 4.5% average in July
1998. Per capita income in 1998 was $21,551, approximately 81% of the national
average.
Although Kentucky has not issued general obligation debt since 1965, the
State 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. Moody's upgraded the ratings on the obligations of
several Kentucky Agencies in June 1999 citing the Commonwealth's improved
financial position and economy. The agency ratings reflect the Commonwealth's
credit quality only, and do not indicate the creditworthiness of other tax-
exempt securities in which the Fund may invest.
S-7
<PAGE>
Factors Pertaining to Michigan
Michigan's economy has improved significantly since the 1980's. The State's
unemployment rate was 3.4% in July 1999, compared to the national average of
4.3%. Michigan's unemployment rate has remained below the national average for
the past 4 years, as opposed to the prior 15 year period where the state
experienced higher than national unemployment rates. Michigan's per capita
income was $25,979 in 1998, which is about 98% of the national average.
The manufacturing industry and the presence of the "Big 3" automobile
manufacturers are the primary influence in the economy. In August 1998, the
automobile manufacturers industry reported its highest monthly sales level
since 1986. The strong industry sales have contributed to Michigan's successive
growth and tight labor markets. The state is expected to follow the national
economy and could be detrimentally impacted in the event of an economic
slowdown that significantly reduces the demand for automobiles. However, the
state's economy continues to diversify by increases in the services and
wholesale and retail trade industries.
Education in Michigan is a top priority. One of the state's most significant
achievements was the enactment of Proposal A in 1994. To promote equality among
school districts of varying wealth levels, funding for Michigan school
districts shifted from local property taxes to state sales taxes. According to
the fiscal year 1999 budget, no district will enjoy per pupil spending below
$5,170, compared to an average spending of $5,090 per pupil prior to reform.
Also, the Governor and Legislature have proposed the Michigan Merit Award--a
$2,500 scholarship that can be used to further study at a Michigan school of
choice upon graduation from high school.
In addition to education, the state's strong economy has allowed for the
consideration of reduced income tax rates and establishing a 60% vote of the
legislature to raise income tax, sales tax or business tax rates.
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. These
ratings reflect the State's credit quality only, and do not indicate the
creditworthiness of other tax-exempt securities in which the Fund may invest.
Factors Pertaining to Missouri
Missouri maintains a diversified economy, mirroring that of the nation.
Although recent industry growth has shifted to services and tourism, defense
and manufacturing are important elements of the state economy. McDonnell
Douglas Corporation, one of the largest private employers in the state, employs
approximately 25,000 people, with Chrysler and Ford each employing
approximately 10,000 people. The state has benefited from its central location,
low cost of living and highly skilled workforce, as evidenced by the expansion
of computer, telecommunications and business related services. Recently, Ford
Motor Co. announced plans to invest $100 million in its Kansas City plant.
Population in Missouri has increased approximately 5.6% from 1990. The
State's unemployment rate has steadily declined since the high of 6.7% in 1991
and was 3.5% in July 1999, compared to the national average of 4.3%. Since
1993, the state has added over 300,000 jobs and has experienced personal income
growth in excess of 4%. Per capita income was $24,447 in 1998, which is
approximately 92% of the national average.
Even though the state has low tax rates and strong economic incentives for
development, the low levels of unemployment and slow population growth could
slow economic growth in the near term.
Missouri retains substantial governmental balances through strategic budget
management. Missouri's overall creditworthiness is reflected in its long-
standing Aaa/AAA/AAA rating by Moody's, Standard & Poor's, and Fitch,
respectively. These ratings reflect the State's credit quality only, and do not
indicate the creditworthiness of other tax-exempt securities in which the Fund
may invest.
Factors Pertaining to 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
S-8
<PAGE>
industries, with manufacturing employment tapering off since its 1969 peak.
Still manufacturing remains an important component of the State's economy,
providing approximately 20% 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 to 1999, the State's unemployment rate ranked at or below the
national average. Ohio's unemployment rate registered 4.5% in July 1999,
comparable to the national average of 4.3% in July 1999 and slightly higher
than the State's 4.8% rate in July 1998. Per capita income in 1998 was $25,239,
approximately 95% of the national average.
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 will likely require the State to increase its aid to local public
schools, which could affect the State's financial position. As of August 31,
1999, Moody's gave Ohio general obligation bonds an Aa1 rating, while Standard
& Poor's and Fitch each rate the State AA+. These ratings reflect the State's
credit quality only, and do not indicate the creditworthiness of other tax-
exempt securities in which the Fund may invest.
Factors Pertaining to Wisconsin
Wisconsin's economy is diverse and strong with non-agricultural employment
evenly spread between the manufacturing, service and trade sectors. The State
continues its efforts to attract new businesses with grants and loans for major
development projects, labor training and technology development. Manufacturing
remains a dominant sector at 24% and is currently a source of strength.
However, manufacturing is expected to slow in the near term, but services and
trade sectors are expected to maintain the growth in the economy. The State's
unemployment rate was 3.0% in July 1999. Per capita income was $25,184 in 1998,
which is about 95% of the national average.
The strong economy and sound financial management at the state level have
allowed the state to enjoy a $1 billion surplus. The improved economy and large
state surplus have increased the requests by the voters for a reduction in
income taxes and business taxes.
The State's general obligations received Aa2/AA ratings from Moody's and
Standard and Poor's, respectively. These ratings reflect the State's credit
quality only, and do not indicate the creditworthiness of other tax-exempt
securities in which the Fund may invest.
Hedging and Other Defensive Actions
Each Fund may periodically engage in hedging transactions. Hedging is a term
used for various methods of seeking to preserve portfolio capital value of
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in financial futures and index futures as well as related put and
call options on such instruments. Both parties entering into an index or
financial futures contract are required to post an initial deposit of 1% to 5%
of the total contract price. Typically, option holders enter into offsetting
closing transactions to enable settlement in cash rather than take delivery of
the position in the future of the underlying security. Each Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series, portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit.
S-9
<PAGE>
Finally, the potential daily deposit requirements in futures contracts create
an ongoing greater potential financial risk than do options transactions, where
the exposure is limited to the cost of the initial premium. Losses due to
hedging transactions will reduce yield. Net gains, if any, from hedging and
other portfolio transactions will be distributed as taxable distributions to
shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and
deposits would exceed 5% of such series' net assets. Each series will invest in
these instruments only in markets believed by the investment adviser to be
active and sufficiently liquid. For further information regarding these
investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, including up to 5% in adequately collateralized
repurchase agreements relating thereto. Interest on each instrument is taxable
for Federal income tax purposes and would reduce the amount of tax-free
interest payable to shareholders.
Temporary Investments
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable "temporary investments."
Temporary investments will not exceed 20% of a Fund's assets except when made
for defensive purposes. The Funds will invest only in taxable temporary
investments that are either U.S. Government securities or are rated within the
highest grade by Moody's, S&P, or Fitch and mature within one year from the
date of purchase or carry a variable or floating rate of interest. See Appendix
A for more information about ratings by Moody's, S&P, and Fitch.
The Funds may invest in the following federally tax-exempt temporary
investments:
Bond Anticipation Notes (BANs) are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing
for projects that will eventually be funded through the sale of long-term
debt obligations or bonds. The ability of an issuer to meet its obligations
on its BANs is primarily dependent on the issuer's access to the long-term
municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments
to finance the current operations of such governments. Repayment is
generally to be derived from specific future tax revenues. Tax anticipation
notes are usually general obligations of the issuer. A weakness in an
issuer's capacity to raise taxes due to, among other things, a decline in
its tax base or a rise in delinquencies, could adversely affect the
issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or
governmental bodies with the expectation that future revenues from a
designated source will be used to repay the notes. In general, they also
constitute general obligations of the issuer. A decline in the receipt of
projected revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its
obligations on outstanding RANs. In addition, the possibility that the
revenues would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained
from the Federal Housing Administration.
S-10
<PAGE>
Bank Notes are notes issued by local government bodies and agencies as
those described above to commercial banks as evidence of borrowings. The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These
notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities
and their agencies. Payment of principal and interest on issues of
municipal paper may be made from various sources, to the extent the funds
are available therefrom. Maturities of municipal paper generally will be
shorter than the maturities of TANs, BANs or RANs. There is a limited
secondary market for issues of municipal paper.
Certain Municipal Obligations may carry variable or floating rates of
interest whereby the rate of interest is not fixed, but varies with changes in
specified market rates or indices, such as a bank prime rate or a tax-exempt
money market index.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Funds may invest in such other types of notes to the
extent permitted under their investment objective, policies and limitations.
Such notes may be issued for different purposes and may be secured differently
from those mentioned above.
The Funds may also invest in the following taxable temporary investments:
U.S. Government Direct Obligations are issued by the United States
Treasury and include bills, notes and bonds.
--Treasury bills are issued with maturities of up to one year. They are
issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
--Treasury notes are longer-term interest bearing obligations with
original maturities of one to seven years.
--Treasury bonds are longer-term interest-bearing obligations with
original maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been
established as instrumentalities of the United States Government to supervise
and finance certain types of activities. These agencies include, but are not
limited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States, and Tennessee Valley Authority. Issues of these agencies, while not
direct obligations of the United States Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury or
supported by the issuing agencies' right to borrow from the Treasury. There can
be no assurance that the United States Government itself will pay interest and
principal on securities as to which it is not legally so obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable
interest bearing instrument with a specific maturity. CDs are issued by banks
in exchange for the deposit of funds and normally can be traded in the
secondary market, prior to maturity. The Funds will only invest in U.S. dollar
denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few days to nine months. Commercial paper may be purchased from
U.S. corporations.
S-11
<PAGE>
Other Corporate Obligations--The Funds may purchase notes, bonds and
debentures issued by corporations if at the time of purchase there is less than
one year remaining until maturity or if they carry a variable or floating rate
of interest.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. Government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during a Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Funds will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the
opinion of Nuveen Advisory present minimal credit risk. The risk to the Funds
is limited to the ability of the issuer to pay the agreed-upon repurchase price
on the delivery date; however, although the value of the underlying collateral
at the time the transaction is entered into always equals or exceeds the
agreed-upon repurchase price, if the value of the collateral declines there is
a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but a Fund might incur a loss if the value of the
collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by a Fund may be delayed or limited. Nuveen
Advisory will monitor the value of collateral at the time the transaction is
entered into and at all times subsequent during the term of the repurchase
agreement in an effort to determine that the value always equals or exceeds the
agreed upon price. In the event the value of the collateral declined below the
repurchase price, Nuveen Advisory will demand additional collateral from the
issuer to increase the value of the collateral to at least that of the
repurchase price. Each of the Funds will not invest more than 10% of its assets
in repurchase agreements maturing in more than seven days.
S-12
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Funds under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has seven
trustees, one of whom is an "interested person" (as the term "interested
person" is defined in the Investment Company Act of 1940) and six of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
<CAPTION>
Positions
Date of and Offices Principal Occupations
Name and Address Birth with Trust During Past Five Years
- ---------------- ------- ----------- ----------------------
<S> <C> <C> <C>
Timothy R. Schwertfeger* 3/28/49 Chairman of Chairman since July 1, 1996 of The John
333 West Wacker Drive the Board Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 and President Incorporated, Nuveen Advisory Corp. and
and Trustee Nuveen Institutional Advisory Corp.;
prior thereto Executive Vice President
and Director of The John Nuveen
Company, John Nuveen & Co.
Incorporated, Director of Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp.; Chairman and Director
(since January 1997) of Nuveen Asset
Management, Inc.; Director (since 1996)
of Institutional Capital Corporation;
Chairman and Director of Rittenhouse
Financial Services Inc. (since 1999).
Robert P. Bremner 8/22/40 Trustee Private Investor and Management
3725 Huntington Street, N.W. Consultant.
Washington, D.C. 20015
Lawrence H. Brown 7/29/34 Trustee Retired (August 1989) as Senior Vice
201 Michigan Avenue President of The Northern Trust
Highwood, IL 60040 Company.
Anne E. Impellizzeri 1/26/33 Trustee President and Chief Executive Officer of
5 Peter Cooper Rd. Blanton-Peale Institutes of Religion
New York, NY 10010 and Health (since December 1990).
Peter R. Sawers 4/3/33 Trustee Adjunct Professor of Business and
22 The Landmark Economics, University of Dubuque, Iowa;
Northfield, IL 60093 Adjunct Professor, Lake Forest Graduate
School of Management, Lake Forest,
Illinois.
William J. Schneider 9/24/44 Trustee Senior Partner and Chief Operating
4000 Miller-Valentine Ct. Officer, Miller-Valentine Partners;
P.O. Box 744 Vice President, Miller-Valentine Group,
Dayton, OH 45401 a development and contract company;
Member Community Advisory Board,
National City Bank, Dayton, Ohio.
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
Positions
Date of and Offices Principal Occupations
Name and Address Birth with Trust During Past Five Years
- ---------------- ------- ----------- ----------------------
<S> <C> <C> <C>
Judith M. 12/29/47 Trustee Executive Director, Gaylord and Dorothy
Stockdale Donnelley Foundation (since 1994);
35 East prior thereto, Executive Director,
Wacker Dr. Great Lakes Protection Fund (from 1990
Suite 2600 to 1994).
Chicago,
IL 60601
Alan G. 12/28/60 Vice President Senior Vice President (since May 1999,
Berkshire and Assistant formerly Vice President) and General
333 West Secretary Counsel (since September 1997) and
Wacker Secretary (since May 1998) of The John
Drive Nuveen Company, John Nuveen & Co.
Chicago, Incorporated; Vice President (since
IL 60606 September 1997) and Assistant Secretary
(since July 1999) of Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp., prior thereto, Partner in the
law firm of Kirkland & Ellis.
Peter H. 11/28/67 Vice President Vice President of John Nuveen & Co.
D'Arrigo and Treasurer Incorporated (since January 1999),
333 West prior thereto, Assistant Vice President
Wacker (from January 1997); formerly,
Drive Associate of John Nuveen & Co.
Chicago, Incorporated; Chartered Financial
IL 60606 Analyst.
Michael S. 6/26/57 Vice President Vice President of Nuveen Advisory Corp.
Davern (since January 1997); prior thereto,
333 W. Vice President and Portfolio Manager of
Wacker Flagship Financial.
Drive
Chicago,
IL 60606
Lorna C. 10/24/45 Vice President Vice President of John Nuveen & Co.
Ferguson Incorporated; Vice President (since
333 West January 1998); of Nuveen Advisory Corp.
Wacker and Nuveen Institutional Advisory Corp.
Drive
Chicago,
IL 60606
William M. 3/2/64 Vice President Vice President of Nuveen Advisory Corp.
Fitzgerald (since December 1995); Assistant Vice
333 West President of Nuveen Advisory Corp.
Wacker (from September 1992 to December 1995),
Drive prior thereto, Assistant Portfolio
Chicago, Manager of Nuveen Advisory Corp.
IL 60606
Stephen D. 5/31/54 Vice President Vice President of John Nuveen & Co.
Foy and Controller Incorporated and (since May 1998) The
333 West John Nuveen Company; Certified Public
Wacker Accountant.
Drive
Chicago,
IL 60606
J. Thomas 7/5/55 Vice President Vice President of Nuveen Advisory Corp.;
Futrell Chartered Financial Analyst.
333 West
Wacker
Drive
Chicago,
IL 60606
Richard A. 3/26/63 Vice President Vice President of Nuveen Institutional
Huber Advisory Corp. (since March 1998) and
333 West Nuveen Advisory Corp. (since January
Wacker 1997); prior thereto Vice President and
Drive Portfolio Manager of Flagship
Chicago, Financial.
IL 60606
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
Positions
Date of and Offices Principal Occupations
Name and Address Birth with Trust During Past Five Years
- ---------------- ------- ----------- ----------------------
<S> <C> <C> <C>
Steven J. Krupa 8/21/57 Vice President Vice President of Nuveen Advisory Corp.
333 West
Wacker Drive
Chicago, IL
60606
Larry W. Martin 7/27/51 Vice President Vice President, Assistant Secretary and
333 West and Assistant Assistant General Counsel of John
Wacker Drive Secretary Nuveen & Co. Incorporated; Vice
Chicago, IL President and Assistant Secretary of
60606 Nuveen Advisory Corp.; Vice President
and Assistant Secretary of Nuveen
Institutional Advisory Corp.; Assistant
Secretary of The John Nuveen Company
and (since January 1997) Nuveen Asset
Management Inc.
Edward F. 7/7/65 Vice President Vice President (since September 1996),
Neild, IV previously Assistant Vice President of
333 West Nuveen Advisory Corp., portfolio
Wacker Drive manager prior thereto; Vice President
Chicago, IL (since September 1996), previously
60606 Assistant Vice President (since May
1995) of Nuveen Institutional Advisory
Corp., Portfolio Manager prior thereto;
Chartered Financial Analyst.
Stephen S. 9/20/57 Vice President Vice President (since September 1997),
Peterson previously Assistant Vice President
333 West (since September 1996) of Nuveen
Wacker Drive Advisory Corp., Portfolio Manager prior
Chicago, IL thereto.
60606
Stuart W. 5/1/56 Vice President Vice President of John Nuveen & Co.
Rogers Incorporated
333 West
Wacker Drive
Chicago, IL
60606
Thomas C. 7/31/51 Vice President Vice President of Nuveen Advisory Corp.
Spalding, Jr. and Nuveen Institutional Advisory
333 West Corp.; Chartered Financial Analyst.
Wacker Drive
Chicago, IL
60606
Gifford R. 9/9/56 Vice President Vice President, Assistant Secretary and
Zimmerman and Secretary Associate General Counsel, formerly
333 West Assistant General Counsel, of John
Wacker Drive Nuveen & Co. Incorporated; Vice
Chicago, IL President (since May 1993) and
60606 Secretary (since July 1999) of Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp; Assistant Secretary of
The John Nuveen Company; Chartered
Financial Analyst.
</TABLE>
Peter Sawers and Timothy Schwertfeger serve as members of the Executive
Committee of the Board of Trustees. The Executive Committee, which meets
between regular meetings of the Board of Trustees, is authorized to exercise
all of the powers of the Board of Trustees.
The trustees of the Trust are directors or trustees, as the case may be, of
37 Nuveen open-end funds and 54 Nuveen closed-end funds advised by Nuveen
Advisory Corp. None of the independent trustees has ever been a director,
officer, or employee of, or a consultant to, Nuveen Advisory, Nuveen or their
affiliates.
S-15
<PAGE>
Each trustee who is not affiliated with Nuveen or Nuveen Advisory receives a
fee. The Trust requires no employees other than its officers, all of whom are
compensated by Nuveen.
The following table sets forth compensation paid by the Trust to each of the
trustees of the Trust and the total compensation paid to each trustee during
the fiscal year ended May 31, 1999. The Trust has no retirement or pension
plans. The officers and trustees affiliated with Nuveen serve without any
compensation from the Trust.
<TABLE>
<CAPTION>
Total
Aggregate Compensation
Compensation From Trust and
from the Series Fund Complex
Name of Trustee* of this Trust Paid to Trustees
---------------- --------------- ----------------
<S> <C> <C>
Robert P. Bremner........................ $6,032 $73,000
Lawrence H. Brown........................ $6,536 $80,000
Anne E. Impellizzeri..................... $6,032 $73,000
Peter R. Sawers.......................... $6,054 $73,750
William J. Schneider..................... $6,032 $73,000
Judith M. Stockdale...................... $6,032 $73,500
</TABLE>
- --------
*Pursuant to a deferred compensation agreement with the Trust, deferred
amounts are treated as though an equivalent dollar amount has been invested
in shares of one or more eligible Nuveen Funds. Total deferred fees for each
participating Trustee (including the return from the assumed investment in
the eligible Nuveen Funds) payable from the Trust is as follows:
Bremner--$173
Impellizzeri--$1,156
Sawers--$1,173
Schneider--$1,156
Stockdale--$289
The officers and directors of each Fund, in the aggregate, own less than 1%
of the shares of the Fund.
The following table sets forth the percentage ownership of each person, who,
as of September 8, 1999, owns of record, or is known by Registrant to own of
record or beneficially 5% or more of any class of a Fund's shares.
S-16
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Kansas
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 13.21%
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 979D0
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
PaineWebber for the benefit of 6.40
Sonya Ropfogel and Leonard
Dated 8-20-81
155 N. Market Ste 1000
Wichita, KS 67202-1824
Fager & Co. 6.20
c/o Commerce Bank & Trust
Attn: Trust Dept.
3035 SW Topeka Blvd
Topeka, KS 66611
Nuveen Flagship Kansas
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 19.54
Class B Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97NC3
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Kansas
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 31.20
Class C Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97NE0
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
NFSC FEBO W52-008770 7.35
Gary D. Baker
9903 W. 17th St N
Wichita, KS 67212
Nuveen Flagship Kansas
Municipal Bond Fund Trukan & Co. 49.13
Class R Shares............ P.O. Box 3699
Wichita, KS 67201
Fahnestock Co. Inc. FBO 31.12
A430025807
125 Broad Street
New York, NY 10004
Fahnestock Co. Inc. FBO 12.13
A430660033
125 Broad Street
New York, NY 10004
</TABLE>
S-17
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
- ---------------------- ------------------------- ------------
<S> <C> <C>
Donaldson Lufkin & Jenrette 5.14%
SECS Corp.
P.O. Box 2052
Jersey City, NJ 07303-2052
Nuveen Flagship Kentucky
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 10.61
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 971X8
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Kentucky
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 12.70
Class B Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97NC4
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Kentucky
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 31.40
Class C Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97CM4
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Kentucky
Municipal Bond Fund Ronald G. Barlow 55.41
Class R Shares............ 10136 Scale Rd
Benton, KY 42025-6748
Hugh M. Cohen 12.54
3005 Aubert Ave
Louisville, KY 40206-2601
Shelley Cohen 12.53
3005 Aubert Ave
Louisville, KY 40206-2601
Edward D. Jones & Co. FAO 9.57
Joseph E. Knight
EDJ 421-04756-1-4
P.O. Box 2500
Maryland Heights, MO 63043-8500
Nuveen Flagship Michigan
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 51.90
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97E75
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-18
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Michigan Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 38.76%
Class B Shares................... for the sole benefit of its customers
Attn: Fund Admin. / 97ND4
4800 Deer Lake Dr E. Fl 3
Jacksonville, FL 32246-6484
Ruth A. Weglarz 7.76
David A. & Michael J. Hagen TRS
Elaine M. Hagen Irrevocable Trust
47991 Ben Franklin Drive
Shelby Township, MI 48315
Nuveen Flagship Michigan Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 60.84
Class C Shares................... for the sole benefit of its customers
Attn: Fund Admin. / 97GW2
4800 Deer Lake Dr E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Missouri Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 26.45
Class A Shares................... for the sole benefit of its customers
Attn: Fund Admin. / 973G2
4800 Deer Lake Dr E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Missouri Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 34.41
Class B Shares................... for the sole benefit of its customers
Attn: Fund Admin. / 97NC6
4800 Deer Lake Dr E. Fl 3
Jacksonville, FL 32246-6484
Smith Barney Inc 6.36
00159609738
388 Greenwich Street
New York, NY 10013-2339
Prudential Securities Inc. FBO 6.05
Mr. Keith McClanahan TTEE UW Rella
Maxine McClanahan FBO Rella Maxine
401 SE Oldham Pkwy
Lees Summit, MO 64081-2930
Smith Barney Inc 5.50
00159614216
388 Greenwich Street
New York, NY 10013-2339
</TABLE>
S-19
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Missouri Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 54.31%
Class C Shares................... for the sole benefit of its customers
Attn: Fund Admin. / 97DD3
4800 Deer Lake Dr E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Missouri Municipal
Bond Fund Susan Williams TTEE 47.26
Class R Shares................... Neil M. Bischoff Martha
Trust U.A. DTD 09-21-93
2830 Hilly Haven Court
St. Louis, MO 63129
Donaldson Lufkin Jenrette 46.17
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Nuveen Flagship Ohio Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 36.44
Class A Shares................... for the sole benefit of its customers
Attn: Fund Admin. / 97E84
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Ohio Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 38.34
Class B Shares................... for the sole benefit of its customers
Attn: Fund Admin. / 97ND5
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Ohio Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 52.56
Class C Shares................... for the sole benefit of its customers
Attn: Fund Admin. / 97GY8
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Wisconsin
Municipal Bond Fund Salomon Smith Barney Inc. 12.12
Class A Shares................... 00127113901
333 West 34th St.--3rd Floor
New York, NY 10001
PaineWebber for the benefit of 5.90
Richard A. Uihlein
P.O. Box 241580
Milwaukee, WI 53224-9035
</TABLE>
S-20
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Wisconsin
Municipal Bond Fund PaineWebber for the benefit of 14.21%
Class B Shares............ Mr. William J. Hurkman
2304 South Arch Street
Janesville, WI 53546-6126
NFSC FEBO A7T-055425 10.91
Thomas H. Daniels
2336 N 1st 2
Milwaukee, WI 53212
Merrill Lynch, Pierce, Fenner & Smith 7.40
for the sole benefit of its customers
Attn: Fund Admin. / 97ND1
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Everen Clearing Corp. 5.34
A.C. 1552-7391
111 East Kilbourn Avenue
Milwaukee, WI 53202
Nuveen Flagship Wisconsin
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 9.30
Class C Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97NE3
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Everen Securities Inc. 7.10
A.C. 3973-8110
111 East Kilbourn Avenue
Milwaukee, WI 53202
Nuveen Flagship Wisconsin 56.31
Municipal Bond Fund David L. Diehl
Class R Shares............ Bonnie M. Diehl
494 B. Prairie Ln.
Hudson, WI 54016
Elizabeth H. Sohn 43.16
Elizabeth H. Sohn Trust
N14651 Wintergreen Lake Rd.
Park Falls, WI 54552-7069
</TABLE>
S-21
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the
investment and reinvestment of the assets of each of the Funds. Nuveen Advisory
also administers the Trust's business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. See "Fund
Service Providers" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and
the Trust, each of the Funds has agreed to pay an annual management fee at the
rates set forth below:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- ------------------------ --------------
<S> <C>
For the first $125 million....................................... .5500 of 1%
For the next $125 million........................................ .5375 of 1%
For the next $250 million........................................ .5250 of 1%
For the next $500 million........................................ .5125 of 1%
For the next $1 billion.......................................... .5000 of 1%
For net assets over $2 billion................................... .4750 of 1%
</TABLE>
Nuveen Advisory has agreed to waive all or a portion of its management fee or
reimburse certain expenses of the Ohio Fund in order to prevent total operating
expenses (including Nuveen Advisory's fee, but excluding interest, taxes, fees
incurred in acquiring and disposing of portfolio securities, any asset-based
distribution or service fees and, to the extent permitted, extraordinary
expenses) in any fiscal year from exceeding .75 of 1% of average daily net
asset value of any class of shares of the Fund.
For the last three fiscal years, the Funds paid net management fees as
follows:
<TABLE>
<CAPTION>
Management Fees Net of Fee Waivers and Expense
Expense Reimbursement Paid Reimbursements
for the Year Ended For the Year Ended
----------------------------- -----------------------
5/31/97 5/31/98 5/31/99 5/31/97 5/31/98 5/31/99
--------- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Kansas Municipal Bond
Fund.................... 159,550 360,823 479,476 339,334 191,060 173,046
Kentucky Municipal Bond
Fund.................... 1,300,570 2,227,288 2,577,305 989,872 310,289 102,078
Michigan Municipal Bond
Fund.................... 1,194,710 1,804,027 1,870,026 378,083 -- --
Missouri Municipal Bond
Fund.................... 823,757 1,308,176 1,380,379 326,922 -- 4,300
Ohio Municipal Bond Fund. 2,430,648 3,609,901 3,702,803 355,267 -- --
Wisconsin Municipal Bond
Fund.................... -- -- 22,260 146,340 156,639 156,046
</TABLE>
In addition to the management fee of Nuveen Advisory, each Fund pays all
other costs and expenses of its operations and a portion of the Trust's general
administrative expenses allocated in proportion to the net assets of each Fund.
Nuveen Advisory is a wholly owned subsidiary of John Nuveen & Co.
Incorporated ("Nuveen"), the Funds' principal underwriter. Nuveen is the
sponsor of the Nuveen Defined Portfolios, and is the principal underwriter for
the Nuveen Mutual Funds, and has served as co-managing underwriter for the
shares of the Nuveen Exchange-Traded Funds. Over 1,300,000 individuals have
invested to date in Nuveen's funds and Defined Portfolios. Founded in 1898,
Nuveen is a subsidiary of The John Nuveen Company which, in turn, is
S-22
<PAGE>
approximately 78% owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul
is located in St. Paul, Minnesota and is principally engaged in providing
property-liability insurance through subsidiaries. Effective January 1, 1997,
The John Nuveen Company acquired Flagship Resources Inc., and as part of that
acquisition, Flagship Financial, the adviser to the Flagship Funds, was merged
with Nuveen Advisory.
The Funds, the other Nuveen funds, Nuveen Advisory, and other related
entities have adopted a code of ethics which essentially prohibits all Nuveen
fund management personnel, including Nuveen fund portfolio managers, from
engaging in personal investments which compete or interfere with, or attempt to
take advantage of, a Fund's anticipated or actual portfolio transactions, and
is designed to assure that the interests of Fund shareholders are placed before
the interests of Nuveen personnel in connection with personal investment
transactions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory is responsible for decisions to buy and sell securities for
the Funds and for the placement of the Funds' securities business, the
negotiation of the prices to be paid for principal trades and the allocation of
its transactions among various dealer firms. Portfolio securities will normally
be purchased directly from an underwriter or in the over-the-counter market
from the principal dealers in such securities, unless it appears that a better
price or execution may be obtained elsewhere. Portfolio securities will not be
purchased from Nuveen or its affiliates except in compliance with the
Investment Company Act of 1940.
The Funds expect that substantially all portfolio transactions will be
effected on a principal (as opposed to an agency) basis and, accordingly, do
not expect to pay any brokerage commissions. Purchases from underwriters will
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers will include the spread between the bid and asked price.
Given the best price and execution obtainable, it will be the practice of the
Funds to select dealers which, in addition, furnish research information
(primarily credit analyses of issuers and general economic reports) and
statistical and other services to Nuveen Advisory. It is not possible to place
a dollar value on information and statistical and other services received from
dealers. Since it is only supplementary to Nuveen Advisory's own research
efforts, the receipt of research information is not expected to reduce
significantly Nuveen Advisory's expenses. While Nuveen Advisory will be
primarily responsible for the placement of the business of the Funds, the
policies and practices of Nuveen Advisory in this regard must be consistent
with the foregoing and will, at all times, be subject to review by the Board of
Trustees.
Nuveen Advisory reserves the right to, and does, manage other investment
accounts and investment companies for other clients, which may have investment
objectives similar to the Funds. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Funds and the portfolios of its other clients purchasing or selling
securities whenever decisions are made to purchase or sell securities by a Fund
and one or more of such other clients simultaneously. In making such
allocations the main factors to be considered will be the respective investment
objectives of the Fund and such other clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other clients, the size of investment
commitments generally held by the Fund and such other clients and opinions of
the persons responsible for recommending investments to the Fund and such other
clients. While this procedure could have a detrimental effect on the price or
amount of the securities available to the Funds from time to time, it is the
opinion of the Board of Trustees that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
S-23
<PAGE>
Under the Investment Company Act of 1940, the Funds may not purchase
portfolio securities from any underwriting syndicate of which Nuveen is a
member except under certain limited conditions set forth in Rule 10f-3. The
Rule sets forth requirements relating to, among other things, the terms of an
issue of Municipal Obligations purchased by a Fund, the amount of Municipal
Obligations which may be purchased in any one issue and the assets of a Fund
which may be invested in a particular issue. In addition, purchases of
securities made pursuant to the terms of the Rule must be approved at least
quarterly by the Board of Trustees, including a majority of the trustees who
are not interested persons of the Trust.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Funds
will be determined separately for each class of the Funds' shares by The Chase
Manhattan Bank, the Funds' custodian, as of the close of trading (normally 4:00
p.m. Eastern Time) on each day on which the Exchange is normally open for
trading. The Exchange is not open for trading on New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. The net asset value per share of a class of shares of a
Fund will be computed by dividing the market value of the Fund's assets
attributable to the class, less the liabilities attributable to the class, by
the number of shares of the class outstanding.
In determining net asset value for the Funds, the Funds' custodian utilizes
the valuations of portfolio securities furnished by a pricing service approved
by the trustees. Securities for which quotations are not readily available
(which constitute a majority of the securities held by the Funds) are valued at
fair value as determined by the pricing service using methods which include
consideration of the following: yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. The pricing service may
employ electronic data processing techniques and/or a matrix system to
determine valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Trust under the general supervision of the
Board of Trustees.
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the
advice of Morgan, Lewis & Bockius LLP, counsel to the Trust.
Each Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, a Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, a Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second, a
Fund must diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets is comprised of
cash, cash items, United States Government securities, securities of other
regulated investment companies and other securities limited in respect of any
one issuer to an amount not greater in value than 5% of the value of a Fund's
total assets and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of the total assets is
invested in the securities of any one issuer (other than United States
Government securities and securities of other regulated investment companies)
or two or more issuers controlled by a Fund and engaged in the same, similar or
related trades or businesses.
S-24
<PAGE>
As a regulated investment company, a Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (which includes dividends,
taxable interest, taxable original issue discount and market discount income,
income from securities lending, net short-term capital gain in excess of long-
term capital loss, and any other taxable income other than "net capital gain"
(as defined below) and is reduced by deductible expenses) and (ii) its net tax-
exempt interest (the excess of its gross tax-exempt interest income over
certain disallowed deductions). A Fund may retain for investment its net
capital gain (which consists of the excess of its net long-term capital gain
over its short-term capital loss). However, if a Fund retains any net capital
gain or any investment company taxable income, it will be subject to tax at
regular corporate rates on the amount retained. If a Fund retains any capital
gain, such Fund may designate the retained amount as undistributed capital
gains in a notice to its shareholders who, if subject to federal income tax on
long-term capital gains, (i) will be required to include in income for federal
income tax purposes, as long-term capital gain, their shares of such
undistributed amount, and (ii) will be entitled to credit their proportionate
shares of the tax paid by such Fund against their federal income tax
liabilities if any, and to claim refunds to the extent the credit exceeds such
liabilities. For federal income tax purposes, the tax basis of shares owned by
a shareholder of the Fund will be increased by an amount equal under current
law to the difference between the amount of the includible gain and the tax
deemed paid by the shareholder in respect of such shares. Each Fund intends to
distribute at least annually to its shareholders all or substantially all of
its net tax-exempt interest and any investment company taxable income and net
capital gain.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if they had been incurred in the succeeding year.
Each Fund also intends to satisfy conditions (including requirements as to
the proportion of its assets invested in Municipal Obligations) that will
enable it to designate distributions from the interest income generated by
investments in Municipal Obligations, which is exempt from regular federal
income tax when received by such Fund, as exempt-interest dividends.
Shareholders receiving exempt-interest dividends will not be subject to regular
federal income tax on the amount of such dividends. Insurance proceeds received
by a Fund under any insurance policies in respect of scheduled interest
payments on defaulted Municipal Obligations will be excludable from federal
gross income under Section 103(a) of the Code. In the case of non-appropriation
by a political subdivision, however, there can be no assurance that payments
made by the insurer representing interest on "non-appropriation" lease
obligations will be excludable from gross income for federal income tax
purposes.
Distributions by a Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by a Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If a Fund purchases a Municipal Obligation at a market discount, any gain
realized by the Fund upon sale or redemption of the Municipal Obligation will
be treated as taxable interest income to the extent such gain does not exceed
the market discount, and any gain realized in excess of the market discount
will be treated as capital gains. Any net long-term capital gains realized by a
Fund and distributed to shareholders in cash or additional shares, will be
taxable to shareholders as long-term capital gains regardless of the length of
time investors have owned shares of a Fund. Distributions by a Fund that do not
constitute ordinary income dividends, exempt-interest dividends, or capital
gain dividends will be treated as a return of capital to the extent of (and in
reduction of) the shareholder's tax basis in his or her shares. Any excess will
be treated as gain from the sale of his or her shares, as discussed below.
S-25
<PAGE>
If a Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of
income designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income that was tax-
exempt during the period covered by the distribution.
If a Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to a Fund, defer a Fund's losses, cause
adjustments in the holding periods of a Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Because the taxable portion of a Fund's investment income consists primarily
of interest, none of its dividends, whether or not treated as exempt-interest
dividends, is expected to qualify under the Internal Revenue Code for the
dividends received deductions for corporations.
Prior to purchasing shares in a Fund, the impact of dividends or
distributions which are expected to be or have been declared, but not paid,
should be carefully considered. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect
of reducing the per share net asset value by the per share amount of the
dividend or distribution.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by a Fund (and received by
the shareholders) on December 31.
The redemption or exchange of the shares of a Fund normally will result in
capital gain or loss to the shareholders. Present law taxes both long- and
short-term capital gains of corporations at the rates applicable to ordinary
income. For non-corporate taxpayers, however, (i) gain on the sale of shares
held for more than 18 months will generally be taxed at a maximum marginal rate
of 20%, (ii) gain on the sale of shares held for more than one year but not
more than 18 months will generally be taxed at a maximum marginal rate of 28%,
and (iii) gain on the sale of shares held for not more than one year and other
ordinary income will generally be taxed at a maximum marginal rate of 39.6%.
Because of the limitations on itemized deductions and the deduction for
personal exemptions applicable to higher income taxpayers, the effective tax
rate on net income may be higher in certain circumstances.
All or a portion of a sales charge paid in purchasing shares of a Fund cannot
be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent shares of a Fund or another fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
Any disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Moreover, losses
recognized by a shareholder on the redemption or exchange of shares of a Fund
held for six months or less are disallowed to the extent of any distribution of
exempt-interest dividends received with respect to such shares and, if not
disallowed, such losses are treated as long-term capital losses to the extent
of any distributions of long-term capital gains made with respect to such
shares. In addition, no loss will be allowed on the redemption or exchange of
shares of a Fund if the shareholder purchases other shares of such Fund
(whether through reinvestment of distributions or otherwise) or the shareholder
acquires or enters into a contract or option to acquire securities that are
substantially identical to shares of a Fund within a period of 61 days
beginning 30 days before and ending 30 days after such redemption or exchange.
If disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.
S-26
<PAGE>
It may not be advantageous from a tax perspective for shareholders to redeem
or exchange shares after tax-exempt income has accrued but before the record
date for the exempt-interest dividend representing the distribution of such
income. Because such accrued tax-exempt income is included in the net asset
value per share (which equals the redemption or exchange value), such a
redemption could result in treatment of the portion of the sales or redemption
proceeds equal to the accrued tax-exempt interest as taxable gain (to the
extent the redemption or exchange price exceeds the shareholder's tax basis in
the shares disposed of) rather than tax-exempt interest.
In order to avoid a 4% federal excise tax, a Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which such Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Funds intend to make timely distributions in
compliance with these requirements and consequently it is anticipated that they
generally will not be required to pay the excise tax.
If in any year a Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from Municipal Obligations), and distributions to its shareholders would
be taxable to shareholders as ordinary dividend income for federal income tax
purposes to the extent of the Fund's available earnings and profits.
Because the Funds may invest in private activity bonds, the interest on which
is not federally tax-exempt to persons who are "substantial users" of the
facilities financed by such bonds or "related persons" of such "substantial
users," the Funds may not be an appropriate investment for shareholders who are
considered either a "substantial user" or a "related person" within the meaning
of the Code. For additional information, investors should consult their tax
advisers before investing in a Fund.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals. Interest on certain Municipal Obligations, such
as bonds issued to make loans for housing purposes or to private entities (but
not for certain tax-exempt organizations such as universities and non-profit
hospitals), is included as an item of tax preference in determining the amount
of a taxpayer's alternative minimum taxable income. To the extent that a Fund
receives income from Municipal Obligations subject to the alternative minimum
tax, a portion of the dividends paid by it, although otherwise exempt from
federal income tax, will be taxable to shareholders to the extent that their
tax liability is determined under the alternative minimum tax regime. The Funds
will annually supply shareholders with a report indicating the percentage of
Fund income attributable to Municipal Obligations subject to the federal
alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is
increased by 75% of the difference between an alternative measure of income
("adjusted current earnings") and the amount otherwise determined to be the
alternative minimum taxable income. Interest on all Municipal Obligations, and
therefore all distributions by the Funds that would otherwise be tax-exempt, is
included in calculating a corporation's adjusted current earnings.
Tax-exempt income, including exempt-interest dividends paid by a Fund, will
be added to the taxable income of individuals receiving social security or
railroad retirement benefits in determining whether a portion of that benefit
will be subject to federal income tax.
S-27
<PAGE>
The Code provides that interest on indebtedness incurred or continued to
purchase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of a Fund may
be considered to have been made with borrowed funds even though such funds are
not directly traceable to the purchase of shares.
The Funds are required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Funds their correct taxpayer identification
number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or
administrative action, and any such change may be retroactive with respect to
Fund transactions. Shareholders are advised to consult their own tax advisers
for more detailed information concerning the federal taxation of the Funds and
the income tax consequences to their shareholders.
State Tax Matters
The discussion of tax treatment is based on the assumptions that the Funds
will qualify under Subchapter M of the Code as regulated investment companies
and as qualified investment funds under applicable state law, that they will
satisfy the conditions which will cause distributions to qualify as exempt-
interest dividends to shareholders when distributed as intended, and that each
Fund will distribute all interest and dividends it receives to its
shareholders. Unless otherwise noted, shareholders in each Fund will not be
subject to state income taxation on distributions that are attributable to
interest earned on the municipal obligations issued by that state or its
subdivisions, or on obligations of the United States. Shareholders generally
will be required to include capital gain distributions in their income for
state tax purposes. The tax discussion summarizes general state tax laws which
are currently in effect and are subject to change by legislative or
administrative action; any such changes may be retroactive with respect to the
applicable Fund's transactions. Investors should consult a tax adviser for more
detailed information about state taxes to which they may be subject.
Kansas
The following is a general, abbreviated summary of certain provisions of the
applicable Kansas tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Kansas Fund.
The foregoing summary does not address the taxation of other shareholders nor
does it discuss any local taxes that may be applicable. These provisions are
subject to change by legislative or administrative action, and any such change
may be retroactive with respect to Kansas Fund transactions.
The following is based on the assumptions that the Kansas Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Kansas Fund distributions to qualify as
exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Kansas Fund's shareholders.
The Kansas Fund will be subject to the Kansas corporate franchise tax and the
Kansas corporate income tax only if it has a sufficient nexus with Kansas. If
it is subject to such taxes, it does not expect to pay a material amount of
either tax.
S-28
<PAGE>
Distributions by the Kansas Fund that are attributable to interest on any
obligation of Kansas and its political subdivisions issued after December 31,
1987, and interest on certain such obligations issued before January 1, 1988,
or to interest on obligations of the United States, its territories,
possessions or instrumentalities that are exempt from state taxation under
federal law will not be subject to the Kansas personal income tax or the Kansas
corporate income tax. All other distributions, including distributions
attributable to capital gains, will be subject to the Kansas personal and
corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Kansas Fund
will be subject to the Kansas personal and corporate income taxes.
Shares of the Kansas Fund may be subject to the Kansas estate tax if owned by
a Kansas decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Kansas and local tax matters.
Kentucky
The following is a general, abbreviated summary of certain provisions of the
applicable Kentucky tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Kentucky
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Kentucky Fund transactions.
The following is based on the assumptions that the Kentucky Fund will qualify
under Subchapter M of the Code as regulated investment companies, that it will
satisfy the conditions which will cause the Kentucky Fund's distributions to
qualify as exempt-interest dividends to shareholders, and that it will
distribute all interest and dividends it receives to the Kentucky Fund's
shareholders.
The Kentucky Fund will be subject to the Kentucky corporate income tax, the
Kentucky intangible property tax, and the Kentucky corporation license tax only
if it has a sufficient nexus with Kentucky. If it is subject to such taxes, it
does not expect to pay a material amount of any such tax.
Distributions from the Kentucky Fund that are attributable to interest on any
obligation of Kentucky and its political subdivisions ("Kentucky Obligations")
or to interest on obligations of the United States, its territories,
possessions, or instrumentalities that are exempt from state taxation under
federal law ("Federal Obligations") will not be subject to the Kentucky
personal income tax or the Kentucky corporate income tax. All other
distributions, including distributions attributable to capital gains, will be
subject to the Kentucky personal and corporate income tax.
Resident shareholders will not be subject to the Kentucky intangible property
tax on the portion of the fair cash value of their Kentucky Fund shares that
are attributable to Kentucky Obligations or Federal Obligations.
Gain on the sale, exchange, or other disposition of shares of the Kentucky
Fund will be subject to the Kentucky personal and corporate income taxes.
Shares of the Kentucky Fund may be subject to the Kentucky inheritance tax
and the Kentucky estate tax if owned by a Kentucky decedent at the time of
death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Kentucky and local tax matters.
S-29
<PAGE>
Michigan
The following is a general, abbreviated summary of certain provisions of the
applicable Michigan state tax law as presently in effect as it directly governs
the taxation of resident individual and corporate shareholders of the Michigan
Fund. This summary does not address the taxation of other shareholders. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Michigan Fund transactions.
The following is based on the assumptions that the Michigan Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Michigan Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Michigan Fund's shareholders.
The Michigan Fund will be subject to the Michigan single business tax only if
it has a sufficient nexus with Michigan. If it is subject to the single
business tax, it does not expect to pay a material amount of such tax.
Distributions by the Michigan Fund attributable to interest on any obligation
of Michigan and its political subdivisions ("Michigan Obligations") or to
interest on obligations of the United States, its territories, possessions, or
instrumentalities that are exempt from state taxation under federal law
("Federal Obligations") will not be subject to the Michigan personal income
tax. In addition, under current administrative practice of the Michigan
Department of Revenue, dividends attributable to gains realized from the sale
or exchange of Federal Obligations will not be subject to the Michigan personal
income tax. All other distributions, including distributions attributable to
capital gains (other than capital gains realized from the sale of Federal
Obligations), will be subject to the Michigan income tax.
Residents of Michigan cities imposing local income taxes will not be subject
to such taxes on the Michigan Fund's distributions of income attributable
either (1) to interest earned on Federal Obligations or of state or local
governments or (2) to gains on the sale of Federal Obligations.
Gain on the sale, exchange, or other disposition of shares of the Michigan
Fund will be subject to the Michigan personal income tax.
Shares of the Michigan Fund may be subject to the Michigan inheritance and
estate taxes if owned by a Michigan decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Michigan and local tax matters, particularly
with regard to the Michigan single business tax.
Missouri
The following is a general, abbreviated summary of certain provisions of the
applicable Missouri tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Missouri
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Missouri Fund transactions.
S-30
<PAGE>
The following is based on the assumptions that the Missouri Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Missouri Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Missouri Fund's shareholders.
The Missouri Fund will be subject to the Missouri corporate franchise tax and
the Missouri corporate income tax only if it has a sufficient nexus with
Missouri. If it is subject to such taxes, it does not expect to pay a material
amount with respect to either tax.
Distributions by the Missouri Fund that are attributable to interest on
obligations of Missouri and its political subdivisions or to interest on
obligations of the United States, its territories, possessions, or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Missouri personal income tax or the Missouri corporate
income tax. All other distributions, including distributions attributable to
capital gains, will be subject to the Missouri personal and corporate income
taxes.
Gain on the sale, exchange, or other disposition of shares of the Missouri
Fund will be subject to the Missouri personal income tax and the Missouri
corporate income tax.
Shares of the Missouri Fund may be subject to the Missouri estate tax if
owned by a Missouri decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Missouri and local tax matters.
Ohio
The following is a general, abbreviated summary of certain provisions of the
applicable Ohio tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Ohio Fund.
This summary does not address the taxation of other shareholders nor does it
discuss any local taxes that may be applicable. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive with respect to Ohio Fund transactions.
The following is based on the assumptions that the Ohio Fund will qualify
under Subchapter M of the Code as a regulated investment company and under Ohio
law as a qualified investment trust, that it will file any report that may be
required of it under the Ohio Revised Code, that it will satisfy the conditions
which will cause Ohio Fund distributions to qualify as exempt-interest
dividends to shareholders, and that it will distribute all interest and
dividends it receives to the Ohio Fund's shareholders.
The Ohio Fund is not subject to Ohio taxes.
Distributions by the Ohio Fund attributable to interest on or gain from the
sale of any interest-bearing obligation of Ohio and its political subdivisions
("Ohio Obligations") or to interest on obligations of the United States, its
territories, possessions, or instrumentalities that are exempt from state
taxation under federal law ("Federal Obligations") will not be subject to the
Ohio personal income tax, Ohio school district income taxes, and Ohio municipal
income taxes. All other distributions, including distributions attributable to
capital gains (other than capital gains on Ohio Obligations), will be subject
to the Ohio personal income tax, Ohio school district income taxes, and Ohio
municipal income taxes.
In computing their Ohio corporation franchise tax on the net income basis,
shareholders will not be subject to tax on the portion of distributions by the
Ohio Fund that is attributable to interest on or gain from the sale of Ohio
Obligations, interest on similar obligations of other states or their political
subdivisions, or interest on Federal Obligations. In computing their corporate
franchise tax on the net worth basis, shareholders must include in their tax
base their shares of the Ohio Fund.
S-31
<PAGE>
Gain on the sale, exchange or other disposition of shares of the Ohio Fund
will be subject to the Ohio personal income tax, Ohio school district income
taxes, Ohio municipal income taxes and the Ohio corporation franchise tax.
Shares of the Ohio Fund may be subject to the Ohio estate tax if owned by an
Ohio decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Ohio and local tax matters.
Wisconsin
The following is a general, abbreviated summary of certain provisions of the
applicable Wisconsin tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Wisconsin
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Wisconsin Fund transactions.
The following is based on the assumptions that the Wisconsin Fund will
qualify under Subchapter M of the Code as a regulated investment company, that
it will satisfy the conditions which will cause Wisconsin Fund distributions to
qualify as exempt-interest dividends to shareholders, and that it will
distribute all interest and dividends it receives to the Wisconsin Fund's
shareholders.
The Wisconsin Fund will be subject to the Wisconsin corporate franchise tax
or the corporate income tax only if it has a sufficient nexus with Wisconsin.
If it is subject to such taxes, it does not expect to pay a material amount of
either tax.
Distributions by the Wisconsin Fund that are attributable to interest earned
on any obligations of Wisconsin and its political subdivisions that are exempt
from the Wisconsin personal income tax under Wisconsin law ("Wisconsin
Obligations") or to interest or dividends earned on obligations of the United
States, its territories, possessions or instrumentalities that are exempt from
state taxation under federal law ("Federal Obligations") will not be subject to
the Wisconsin personal income tax. All other distributions, including
distributions attributable to capital gains, will be subject to the Wisconsin
personal income tax. A certain portion of such capital gains distributions,
however, will be exempt from Wisconsin personal income tax.
All Wisconsin Fund distributions to corporate shareholders, regardless of
source, will be subject to the Wisconsin franchise tax.
Gain on the sale, exchange, or other disposition of shares of the Wisconsin
Fund will be subject to the Wisconsin personal income and corporate franchise
taxes. In the case of individuals, however, a certain portion of such gain will
be exempt from Wisconsin personal income tax.
Shares of the Wisconsin Fund may be subject to the Wisconsin estate tax if
owned by a Wisconsin decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for detailed
information concerning Wisconsin state and local tax matters.
S-32
<PAGE>
PERFORMANCE INFORMATION
The historical investment performance of the Funds may be shown in the form
of "yield," "taxable equivalent yield," "average annual total return,"
"cumulative total return" and "taxable equivalent total return" figures, each
of which will be calculated separately for each class of shares.
In accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission ("SEC"), yield is computed by dividing the
net investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 4.20%.
In computing yield, the Funds follow certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Funds use to prepare their annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in a Fund's financial statements.
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by the remainder of (1 minus the stated combined federal
and state income tax rate, taking into account the deductibility of state taxes
for federal income tax purposes) and adding the product to that portion, if
any, of the yield that is not tax exempt.
S-33
<PAGE>
The taxable equivalent yields quoted below are based upon (1) the stated
combined federal and state income tax rates and (2) the yields for the 30-day
period quoted in the left-hand column.
<TABLE>
<CAPTION>
As of May 31, 1999
------------------------------------------
Combined Federal Taxable
Yield and State Tax Rate* Equivalent Yield
----- ------------------- ----------------
<S> <C> <C> <C>
Kansas Municipal Bond Fund
Class A Shares............... 4.09% 43.50% 7.24%
Class B Shares............... 3.52% 43.50% 6.23%
Class C Shares............... 3.72% 43.50% 6.58%
Class R Shares............... 4.47% 43.50% 7.91%
Kentucky Municipal Bond Fund
Class A Shares............... 4.21% 43.00% 7.39%
Class B Shares............... 3.64% 43.00% 6.39%
Class C Shares............... 3.84% 43.00% 6.74%
Class R Shares............... 4.59% 43.00% 8.05%
Michigan Municipal Bond Fund
Class A Shares............... 3.92% 42.50% 6.82%
Class B Shares............... 3.34% 42.50% 5.81%
Class C Shares............... 3.54% 42.50% 6.16%
Class R Shares............... 4.30% 42.50% 7.48%
Missouri Municipal Bond Fund
Class A Shares............... 4.05% 43.00% 7.11%
Class B Shares............... 3.47% 43.00% 6.09%
Class C Shares............... 3.67% 43.00% 6.44%
Class R Shares............... 4.43% 43.00% 7.77%
Ohio Municipal Bond Fund
Class A Shares............... 3.63% 44.00% 6.48%
Class B Shares............... 3.03% 44.00% 5.41%
Class C Shares............... 3.23% 44.00% 5.77%
Class R Shares............... 3.99% 44.00% 7.13%
Wisconsin Municipal Bond Fund
Class A Shares............... 4.23% 43.50% 7.49%
Class B Shares............... 3.67% 43.50% 6.50%
Class C Shares............... 3.87% 43.50% 6.85%
Class R Shares............... 4.63% 43.50% 8.19%
</TABLE>
- --------
* The combined tax rates used in these tables represent the highest or one
of the highest combined tax rates applicable to state taxpayers, rounded
to the nearest .5%; these rates do not reflect the current federal tax
limitations on itemized deductions and personal exemptions, which may
raise the effective tax rate and taxable equivalent yield for taxpayers
above certain income levels.
S-34
<PAGE>
For additional information concerning taxable equivalent yields, see the
Taxable Equivalent Yields table in the Prospectus.
The Funds may from time to time in their advertising and sales materials
report a quotation of their current distribution rate. The distribution rate
represents a measure of dividends distributed for a specified period.
Distribution rate is computed by taking the most recent monthly tax-free income
dividend per share, multiplying it by 12 to annualize it, and dividing by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen Defined Portfolios, or the
maximum public offering price). The distribution rate differs from yield and
total return and therefore is not intended to be a complete measure of
performance. Distribution rate may sometimes differ from yield because a Fund
may be paying out more than it is earning and because it may not include the
effect of amortization of bond premiums to the extent such premiums arise after
the bonds were purchased.
The distribution rates as of the date quoted, based on the maximum public
offering price then in effect for the Funds, and assuming the imposition of the
maximum sales charge for Class A Shares of 4.20% were as follows:
<TABLE>
<CAPTION>
May 31, 1999
-------------------------------
Distribution Rates
-------------------------------
Class A Class B Class C Class R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Kansas Municipal Bond Fund................ 4.49% 3.97% 4.17% 4.95%
Kentucky Municipal Bond Fund.............. 4.66% 4.12% 4.34% 5.09%
Michigan Municipal Bond Fund ............. 4.76% 4.20% 4.42% 5.17%
Missouri Municipal Bond Fund.............. 4.70% 4.16% 4.37% 5.13%
Ohio Municipal Bond Fund.................. 4.77% 4.26% 4.46% 5.19%
Wisconsin Municipal Bond Fund............. 4.28% 3.70% 3.93% 4.69%
</TABLE>
Average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation
assumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Total returns for Class A Shares of each fund reflect actual performance for
all periods. For Classes B, C and R, total returns reflect actual performance
for periods since class inception, and Class A performance for periods prior to
inception, adjusted for the differences in sales charges (and for Classes B and
C, fees) between the classes.
S-35
<PAGE>
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
Inception Dates
----------------
<S> <C>
Kansas Municipal Bond Fund
Class A Shares............................................ January 9, 1992
Class B Shares............................................ February 1, 1997
Class C Shares............................................ February 1, 1997
Class R Shares............................................ February 1, 1997
Kentucky Municipal Bond Fund
Class A Shares............................................ May 4, 1987
Class B Shares............................................ February 1, 1997
Class C Shares............................................ October 4, 1993
Class R Shares............................................ February 1, 1997
Michigan Municipal Bond Fund
Class A Shares............................................ June 27, 1985
Class B Shares............................................ February 1, 1997
Class C Shares............................................ June 22, 1993
Class R Shares............................................ February 1, 1997
Missouri Municipal Bond Fund
Class A Shares............................................ August 3, 1987
Class B Shares............................................ February 1, 1997
Class C Shares............................................ February 2, 1994
Class R Shares............................................ February 1, 1997
Ohio Municipal Bond Fund
Class A Shares............................................ June 27, 1985
Class B Shares............................................ February 1, 1997
Class C Shares............................................ August 3, 1993
Class R Shares............................................ February 1, 1997
Wisconsin Municipal Bond Fund
Class A Shares............................................ June 1, 1994
Class B Shares............................................ February 1, 1997
Class C Shares............................................ February 1, 1997
Class R Shares............................................ February 1, 1997
</TABLE>
S-36
<PAGE>
The annual total return figures for the Funds, including the effect of the
maximum sales charge for Class A Shares, and applicable CDSC for Class B
Shares, for the one-year, five-year, and ten-year periods (as applicable) ended
May 31, 1999 and for the period from inception through May 31, 1999,
respectively, were:
<TABLE>
<CAPTION>
Annual Total Returns
-----------------------------------------------------
One year Five years Ten years From inception
ended ended ended through
May 31, 1999 May 31, 1999 May 31, 1999 May 31, 1999
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Kansas Municipal Bond
Fund
Class A Shares........ -0.51% 5.81% N/A 6.19%
Class B Shares........ -0.88% 5.78% N/A 6.09%
Class C Shares........ 3.18% 6.31% N/A 6.41%
Class R Shares........ 4.06% 6.95% N/A 6.96%
Kentucky Municipal Bond
Fund
Class A Shares........ -0.70% 5.85% 6.94% 7.40%
Class B Shares........ -1.04% 5.93% 6.94% 7.39%
Class C Shares........ 3.12% 6.18% 6.82% 7.19%
Class R Shares........ 3.89% 6.84% 7.44% 7.81%
Michigan Municipal Bond
Fund
Class A Shares........ -0.90% 5.65% 6.67% 7.74%
Class B Shares........ -1.23% 5.76% 6.68% 7.74%
Class C Shares........ 2.90% 6.00% 6.52% 7.46%
Class R Shares........ 3.66% 6.67% 7.18% 8.11%
Missouri Municipal Bond
Fund
Class A Shares........ -0.39% 5.71% 6.87% 7.15%
Class B Shares........ -0.86% 5.77% 6.85% 7.14%
Class C Shares........ 3.31% 6.03% 6.73% 6.95%
Class R Shares........ 4.17% 6.73% 7.37% 7.58%
Ohio Municipal Bond Fund
Class A Shares........ -0.41% 5.40% 6.52% 7.56%
Class B Shares........ -0.76% 5.46% 6.51% 7.56%
Class C Shares........ 3.39% 5.74% 6.40% 7.30%
Class R Shares........ 4.22% 6.41% 7.03% 7.93%
Wisconsin Municipal Bond
Fund
Class A Shares........ -0.52% N/A N/A 5.49%
Class B Shares........ -0.92% N/A N/A 5.46%
Class C Shares........ 3.29% N/A N/A 5.97%
Class R Shares........ 4.04% N/A N/A 6.55%
</TABLE>
S-37
<PAGE>
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Cumulative total return calculations
that do not include the effect of the sales charge would be reduced if such
charge were included.
The cumulative total return figures for the Funds, including the effect of
the maximum sales charge for the Class A Shares, and applicable CDSC for Class
B Shares, for the one-year, five-year, and ten-year periods (as applicable)
ended May 31, 1999, and for the period since inception through May 31, 1999,
respectively, using the performance of the oldest class for periods prior to
the inception of the newer classes, as described above, were as follows:
<TABLE>
<CAPTION>
Cumulative Total Returns
--------------------------------------------------------
One year Five years Ten years From
ended ended ended inception through
May 31, 1999 May 31, 1999 May 31, 1999 May 31, 1999
------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
Kansas Municipal Bond
Fund
Class A Shares........ -0.51% 32.65% N/A 55.92%
Class B Shares........ -0.88% 32.42% N/A 54.75%
Class C Shares........ 3.18% 35.81% N/A 58.26%
Class R Shares........ 4.06% 39.91% N/A 64.43%
Kentucky Municipal Bond
Fund
Class A Shares........ -0.70% 32.88% 95.67% 135.61%
Class B Shares........ -1.04% 33.39% 95.59% 135.34%
Class C Shares........ 3.12% 34.97% 93.36% 130.06%
Class R Shares........ 3.89% 39.21% 104.99% 146.69%
Michigan Municipal Bond
Fund
Class A Shares........ -0.90% 31.64% 90.81% 182.56%
Class B Shares........ -1.23% 32.34% 90.90% 182.28%
Class C Shares........ 2.90% 33.79% 88.02% 172.25%
Class R Shares........ 3.66% 38.10% 100.14% 196.19%
Missouri Municipal Bond
Fund
Class A Shares ....... -0.39% 32.03% 94.26% 126.17%
Class B Shares........ -0.86% 32.39% 93.94% 126.07%
Class C Shares........ 3.31% 34.01% 91.82% 121.23%
Class R Shares........ 4.17% 38.47% 103.70% 137.30%
</TABLE>
S-38
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Returns
--------------------------------------------------------
One year Five years Ten years From
ended ended ended inception through
May 31, 1999 May 31, 1999 May 31, 1999 May 31, 1999
------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Ohio Municipal Bond Fund
Class A Shares ....... -0.41% 30.07% 88.13% 176.02%
Class B Shares........ -0.76% 30.47% 87.82% 175.75%
Class C Shares........ 3.39% 32.22% 85.90% 166.87%
Class R Shares........ 4.22% 36.40% 97.28% 189.45%
Wisconsin Municipal Bond
Fund
Class A Shares ....... -0.52% N/A N/A 30.64%
Class B Shares........ -0.92% N/A N/A 30.40%
Class C Shares........ 3.29% N/A N/A 33.63%
Class R Shares........ 4.04% N/A N/A 37.28%
</TABLE>
Calculation of taxable equivalent total return is also not subject to a
prescribed formula. Taxable equivalent total return for a specific period is
calculated by first taking a hypothetical initial investment in Fund shares on
the first day of the period, computing the total return for each calendar year
in the period in the manner described above, and increasing the total return
for each such calendar year by the amount of additional income that a taxable
fund would need to have generated to equal the income on an after-tax basis,
at a specified income tax rate (usually the highest marginal federal tax
rate), calculated as described above under the discussion of "taxable
equivalent yield." The resulting amount for the calendar year is then divided
by the initial investment amount to arrive at a "taxable equivalent total
return factor" for the calendar year. The taxable equivalent total return
factors for all the calendar years are then multiplied together and the result
is then annualized by taking its Nth root (N representing the number of years
in the period) and subtracting 1, which provides a taxable equivalent total
return expressed as a percentage.
Using a 43.5% marginal federal tax rate for 1999, the annual taxable
equivalent total return for the Kansas Municipal Bond Fund, Class A Shares on
net asset value, for the five-year period ended May 31, 1999 was 10.87%.
Class A Shares of the Funds are sold at net asset value plus a current
maximum sales charge of 4.20% of the offering price. This current maximum
sales charge will typically be used for purposes of calculating performance
figures. Yield, returns and net asset value of each class of shares of the
Funds will fluctuate. Factors affecting the performance of the Funds include
general market conditions, operating expenses and investment management. Any
additional fees charged by a securities representative or other financial
services firm would reduce returns described in this section. Shares of the
Funds are redeemable at net asset value, which may be more or less than
original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Funds may also compare their performance with that of:
(1) the Consumer Price Index or various unmanaged bond indexes such as the
Lehman Brothers Municipal Bond Index and the Salomon Brothers High Grade
Corporate Bond Index and (2) other fixed income or municipal bond mutual funds
or mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. ("Morningstar"), Wiesenberger Investment
Companies Service ("Wiesenberger") and CDA Investment Technologies, Inc.
("CDA") or similar independent services which monitor the performance of
mutual funds, or other industry or financial publications such as Barron's,
Changing Times, Forbes and Money Magazine. Performance comparisons by these
indexes, services or publications may rank mutual funds over different periods
of time by means of aggregate, average, year-by-year, or other types of total
return and performance figures. Any given performance quotation or performance
comparison should not be considered as representative of the performance of
the Funds for any future period.
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<PAGE>
Each Fund may from time to time in its advertising and sales materials
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds. These taxable investments
have investment characteristics that differ from those of the Funds. U.S.
Government bonds, for example, are long-term investments backed by the full
faith and credit of the U.S. Government, and bank CDs are generally short-term,
FDIC-insured investments, which pay fixed principal and interest but are
subject to fluctuating rollover rates. Money market funds are short-term
investments with stable net asset values, fluctuating yields and special
features enhancing liquidity.
There are differences and similarities between the investments which the
Funds may purchase and the investments measured by the indexes and reporting
services which are described herein. The Consumer Price Index is generally
considered to be a measure of inflation. The CDA Mutual Fund-Municipal Bond
Index is a weighted performance average of other mutual funds with a federally
tax-exempt income objective. The Salomon Brothers High Grade Corporate Bond
Index is an unmanaged index that generally represents the performance of high
grade long-term taxable bonds during various market conditions. The Lehman
Brothers Municipal Bond Index is an unmanaged index that generally represents
the performance of high grade intermediate and long-term municipal bonds during
various market conditions. Lipper calculates municipal bond fund averages based
on average maturity and credit quality. Morningstar rates mutual funds by
overall risk-adjusted performance, investment objectives, and assets. Lipper,
Morningstar, Wiesenberger and CDA are widely recognized mutual fund reporting
services whose performance calculations are based upon changes in net asset
value with all dividends reinvested and which do not include the effect of any
sales charges. The market prices and yields of taxable and tax-exempt bonds
will fluctuate. The Funds primarily invest in investment grade Municipal
Obligations in pursuing their objective of as high a level of current interest
income which is exempt from federal and state income tax as is consistent, in
the view of the Funds' management, with preservation of capital.
The Funds may also compare their taxable equivalent total return performance
to the total return performance of taxable income funds such as treasury
securities funds, corporate bond funds (either investment grade or high yield),
or Ginnie Mae funds. These types of funds, because of the character of their
underlying securities, differ from municipal bond funds in several respects.
The susceptibility of the price of treasury bonds to credit risk is far less
than that of municipal bonds, but the price of treasury bonds tends to be
slightly more susceptible to change resulting from changes in market interest
rates. The susceptibility of the price of investment grade corporate bonds and
municipal bonds to market interest rate changes and general credit changes is
similar. High yield bonds are subject to a greater degree of price volatility
than municipal bonds resulting from changes in market interest rates and are
particularly susceptible to volatility from credit changes. Ginnie Mae bonds
are generally subject to less price volatility than municipal bonds from credit
concerns, due primarily to the fact that the timely payment of monthly
installments of principal and interest are backed by the full faith and credit
of the U.S. Government, but Ginnie Mae bonds of equivalent coupon and maturity
are generally more susceptible to price volatility resulting from market
interest rate changes. In addition, the volatility of Ginnie Mae bonds due to
changes in market interest rates may differ from municipal bonds of comparable
coupon and maturity because bonds of the sensitivity of Ginnie Mae prepayment
experience to change in interest rates.
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<PAGE>
ADDITIONAL INFORMATION ON THE PURCHASE
AND REDEMPTION OF FUND SHARES
As described in the Prospectus, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of a Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with
respect to any distribution or service plan applicable to its shares. As a
result of the differences in the expenses borne by each class of shares, net
income per share, dividends per share and net asset value per share will vary
among a Fund's classes of shares.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include
distribution and service fees.
The minimum initial investment is $3,000 per fund share class ($50 if you
establish a systematic investment plan), and may be lower for accounts opened
through fee-based programs.
Class A Shares may be purchased at a public offering price equal to the
applicable net asset value per share plus an up-front sales charge imposed at
the time of purchase as set forth in the Prospectus. Shareholders may qualify
for a reduced sales charge, or the sales charge may be waived in its entirety,
as described below. Class A Shares are also subject to an annual service fee of
.20%. See "Distribution and Service Plan." Set forth below is an example of the
method of computing the offering price of the Class A shares of a Fund. The
example assumes a purchase on May 31, 1999 of Class A shares from the Nuveen
Kansas Municipal Bond Fund aggregating less than $50,000 subject to the
schedule of sales charges set forth in the Prospectus at a price based upon the
net asset value of the Class A shares.
<TABLE>
<S> <C>
Net Asset Value per share......................................... $10.49
Per Share Sales Charge--4.20% of public offering price (4.39% of
net asset value per share)....................................... .46
------
Per Share Offering Price to the Public............................ $10.95
</TABLE>
The Funds receive the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown in the Prospectus to Authorized Dealers.
Reduction or Elimination of Up-Front Sales Charge on Class A Shares and Class R
Share Purchase Availability
Rights of Accumulation. You may qualify for a reduced sales charge on a
purchase of Class A Shares of any Fund if the amount of your purchase, when
added to the value that day of all of your prior purchases of shares of any
Fund or of another Nuveen Mutual Fund, or Nuveen exchange-traded fund, or units
of a Nuveen Defined Portfolio, on which an up-front sales charge or ongoing
distribution fee is imposed or is normally imposed, falls within the amounts
stated in the Class A Sales Charges and Commissions table in "How You Can Buy
and Sell Shares" in the Prospectus. You or your financial adviser must notify
Nuveen or the Fund's transfer agent of any cumulative discount whenever you
plan to purchase Class A Shares of a Fund that you wish to qualify for a
reduced sales charge.
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<PAGE>
Letter of Intent. You may qualify for a reduced sales charge on a purchase of
Class A Shares of any Fund if you plan to purchase Class A Shares of Nuveen
Mutual Funds over the next 13 months and the total amount of your purchases
would, if purchased at one time, qualify you for one of the reduced sales
charges shown in the Class A Sales Charges and Commissions table in "How You
Can Buy and Sell Shares" in the Prospectus. In order to take advantage of this
option, you must complete the applicable section of the Application Form or
sign and deliver either to an Authorized Dealer or to the Fund's transfer agent
a written Letter of Intent in a form acceptable to Nuveen. A Letter of Intent
states that you intend, but are not obligated, to purchase over the next 13
months a stated total amount of Class A Shares that would qualify you for a
reduced sales charge shown above. You may count shares of a Nuveen Mutual Fund
that you already own on which you paid an up-front sales charge or an ongoing
distribution fee and any Class B or C Shares of a Nuveen Mutual Fund that you
purchase over the next 13 months towards completion of your investment program,
but you will receive a reduced sales charge only on new Class A Shares you
purchase with a sales charge over the 13 months. You cannot count towards
completion of your investment program Class A Shares that you purchase without
a sales charge through investment of distributions from a Nuveen Mutual Fund or
a Nuveen Defined Portfolio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of a Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required
payment. By establishing a Letter of Intent, you irrevocably appoint Nuveen as
attorney to give instructions to redeem any or all of your escrowed shares,
with full power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Defined Portfolio Distributions. You may purchase
Class A Shares without an up-front sales charge by reinvestment of
distributions from any of the various Defined Portfolios sponsored by Nuveen.
There is no initial or subsequent minimum investment requirement for such
reinvestment purchases.
Group Purchase Programs. If you are a member of a qualified group, you may
purchase Class A Shares of any Fund or of another Nuveen Mutual Fund at the
reduced sales charge applicable to the group's purchases taken as a whole. A
"qualified group" is one which has previously been in existence, has a purpose
other than investment, has ten or more participating members, has agreed to
include Fund sales publications in mailings to members and has agreed to comply
with certain administrative requirements relating to its group purchases.
Under any group purchase program, the minimum initial investment in Class A
shares of any particular Fund or portfolio for each participant in the program
is $3,000 and the minimum monthly investment in Class A shares of any
particular Fund or portfolio by each participant is $50. No certificates will
be issued for any
S-42
<PAGE>
participant's account. All dividends and other distributions by a Fund will be
reinvested in additional Class A Shares of the same Fund. No participant may
utilize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each
participant must fill out special application materials, which the group
administrator may obtain from the group's financial adviser, by calling Nuveen
toll-free (800) 257-8787.
Reinvestment of Redemption Proceeds from Unaffiliated Funds Subject to Merger
or Closure. You may also purchase Class A Shares at net asset value without a
sales charge if the purchase takes place through a broker-dealer and represents
the reinvestment of the proceeds of the redemption of shares of one or more
registered investment companies not affiliated with Nuveen that are subject to
merger or closure. You must provide appropriate documentation that the
redemption occurred not more than one year prior to the reinvestment of the
proceeds in Class A Shares, and that you either paid an up-front sales charge
or were subject to a contingent deferred sales charge in respect of the
redemption of such shares of such other investment company.
Special Sales Charge Waivers. Class A Shares of a Fund may be purchased at
net asset value without a sales charge, by the following categories of
investors:
. investors purchasing $1,000,000 or more;
. officers, trustees and former trustees of the Nuveen and Flagship Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services; and
. any eligible employer-sponsored qualified defined contribution retirement
plan. Eligible plans are those with at least 25 employees and which
either (a) make an initial purchase of one or more Nuveen Mutual Funds
aggregating $500,000 or more or (b) execute a Letter of Intent to
purchase in the aggregate $500,000 or more of fund shares. Nuveen will
pay Authorized Dealers a sales commission on such purchases equal to 1%
of the first $2.5 million, plus 2.5% of any amount purchased over $5.0
million. For this category of investors a contingent deferred sales
charge of 1% will be assessed on redemptions within 18 months of
purchase, unless waived. Municipal bond funds are not a suitable
investment for individuals investing in retirement plans.
Holders of Class C Shares acquired on or before January 31, 1997 can convert
those shares to Class A Shares of the same fund at the shareholder's
affirmative request six years after the date of purchase. Holders of Class C
Shares must submit their request to the transfer agent no later than the last
business day of the 71st month following the month in which they purchased
their shares. Holders of Class C Shares purchased after that date will not have
the option to convert those shares to Class A Shares.
S-43
<PAGE>
Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net asset
value without the imposition of any sales load, fee, or other charge, so that
the value of each shareholder's account immediately before conversion will be
the same as the value of the account immediately after conversion. Class B
Shares acquired through reinvestment of distributions will convert into Class A
Shares based on the date of the initial purchase to which such shares relate.
For this purpose, Class B Shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B Shares in accordance with
such procedures as the Board of Trustees may determine from time to time. Class
B Shares that are converted to Class A Shares will remain subject to an annual
service fee that is identical in amount for both Class B Shares and Class A
Shares. Since net asset value per share of the Class B Shares and the Class A
Shares may differ at the time of conversion, a shareholder may receive more or
fewer Class A Shares than the number of Class B Shares converted. Any
conversion of Class B Shares into Class A Shares will be subject to the
continuing availability of an opinion of counsel or a private letter ruling
from the Internal Revenue Service to the effect that the conversion of shares
would not constitute a taxable event under federal income tax law. Conversion
of Class B Shares into Class A Shares might be suspended if such an opinion or
ruling were no longer available.
Any Class A Shares purchased pursuant to a special sales charge waiver must
be acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Funds. You or your
financial adviser must notify Nuveen or the Fund's transfer agent whenever you
make a purchase of Class A Shares of any Fund that you wish to be covered under
these special sales charge waivers.
Class A Shares of any Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment
company. All purchases under the special sales charge waivers will be subject
to minimum purchase requirements as established by the Funds.
In determining the amount of your purchases of Class A Shares of any Fund
that may qualify for a reduced sales charge, the following purchases may be
combined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their
immediate family members (i.e., their spouses, parents, children, grandparents,
grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a
sibling's spouse, and a spouse's siblings); or (3) all purchases made through a
group purchase program as described above.
Class R Share Purchase Eligibility. Class R Shares are available for
purchases of $2.5 million or more and for purchases using dividends and capital
gains distributions on Class R Shares. Class R Shares also are available for
the following categories of investors:
. officers, trustees and former trustees of the Nuveen and Flagship Funds
and their immediate family members or trustees/directors of any fund,
sponsored by Nuveen, any parent company of Nuveen and subsidiaries
thereof and their immediate family members;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
S-44
<PAGE>
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
Any shares purchased by investors falling within any of the first four
categories listed above must be acquired for investment purposes and on the
condition that they will not be transferred or resold except through redemption
by the fund.
In addition, purchasers of Nuveen Defined Portfolios may reinvest their
distributions from such Defined Portfolios in Class R Shares, if, before
September 6, 1994, such purchasers had elected to reinvest distributions in
Nuveen Fund shares (before June 13, 1995 for Nuveen Municipal Bond Fund
shares). Shareholders may exchange their Class R Shares of any Nuveen Fund into
Class R Shares of any other Nuveen Fund.
The reduced sales charge programs may be modified or discontinued by the
Funds at any time upon prior written notice to shareholders of the Funds.
For more information about the purchase of Class A Shares or reduced sales
charge programs, or to obtain the required application forms, call Nuveen toll-
free at (800) 257-8787.
Reduction or Elimination of Contingent Deferred Sales Charge
Class A Shares are normally redeemed at net asset value, without any
Contingent Deferred Sales Charge ("CDSC"). However, in the case of Class A
Shares purchased at net asset value on or after July 1, 1996 because the
purchase amount exceeded $1 million, where the Authorized Dealer did not waive
the sales commission, a CDSC of 1% is imposed on any redemption within 18
months of purchase. In the case of Class B Shares redeemed within six years of
purchase, a CDSC is imposed, beginning at 5% for redemptions within the first
year, declining to 4% for redemptions within years two and three, and declining
by 1% each year thereafter until disappearing after the sixth year. Class C
Shares are redeemed at net asset value, without any CDSC, except that a CDSC of
1% is imposed upon redemption of Class C Shares that are redeemed within 12
months of purchase.
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge, or that represent an increase in the value of a Fund
account due to capital appreciation, and then will redeem shares held for the
longest period, unless the shareholder specifies another order. No CDSC is
charged on shares purchased as a result of automatic reinvestment of dividends
or capital gains paid. In addition, no CDSC will be charged on exchanges of
shares into another Nuveen Mutual Fund or Nuveen Money Market fund. The holding
period is calculated on a monthly basis and begins the first day of the month
in which the order for investment is received. The CDSC is calculated based on
the lower of the redeemed shares' cost or net asset value at the time of the
redemption and is deducted from the redemption proceeds. Nuveen receives the
amount of any CDSC shareholders pay. If shares subject to a CDSC are exchanged
for shares of a Nuveen money market fund, the CDSC would be imposed on the
subsequent redemption of those money market shares, and the period during which
the shareholder holds the money market fund shares would be counted in
determining the remaining duration of the CDSC. The Fund may elect not to so
count the period during which the shareholder held the money market fund
shares, in which event the amount of any applicable CDSC would be reduced in
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<PAGE>
accordance with applicable rules by the amount of any 12b-1 plan payments to
which those money market funds shares may be subject.
The CDSC may be waived or reduced under the following seven special
circumstances: 1) redemptions within one year following the death or
disability, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended, of a shareholder; 2) in whole or in part for redemptions of
shares by shareholders with accounts in excess of specified breakpoints that
correspond to the breakpoints under which the up-front sales charge on Class A
Shares is reduced pursuant to Rule 22d-1 under the Act; 3) redemptions of
shares purchased under circumstances or by a category of investors for which
Class A Shares could be purchased at net asset value without a sales charge; 4)
in connection with the exercise of a reinstatement privilege whereby the
proceeds of a redemption of a Fund's shares subject to a sales charge are
reinvested in shares of certain Funds within a specified number of days; 5) in
connection with the exercise of a Fund's right to redeem all shares in an
account that does not maintain a certain minimum balance or that the applicable
board has determined may have material adverse consequences to the shareholders
of such Fund; 6) redemptions made pursuant to a Fund's systematic withdrawal
plan, up to 12% of the current market value; and 7) redemptions of Class B or
Class C Shares if the proceeds are transferred to an account managed by another
Nuveen Adviser and the adviser refunds the advance service and distribution
fees to Nuveen. If a Fund waives or reduces the CDSC, such waiver or reduction
would be uniformly applied to all Fund shares in the particular category. In
waiving or reducing a CDSC, the Funds will comply with the requirements of Rule
22d-1 of the Investment Company Act of 1940, as amended.
General Matters
The Funds may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
tax-free, fixed income securities.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are
expected to sell certain minimum amounts of shares of the Nuveen Mutual Funds
during specified time periods. Promotional support may include providing sales
literature to and holding informational or educational programs for the benefit
of such Authorized Dealers' representatives, seminars for the public, and
advertising and sales campaigns, Nuveen may reimburse a participating
Authorized Dealer for up to one-half of specified media costs incurred in the
placement of advertisements which jointly feature the Authorized Dealer and
Nuveen Funds and Nuveen Defined Portfolios.
Such reimbursement will be based on the number of Nuveen Fund shares sold,
the dollar amounts of such sales, or a combination of the foregoing, during the
prior calendar year according to an established schedule. Any such support or
reimbursement would be provided by Nuveen out of its own assets, and not out of
the assets of the Funds, and will not change the price an investor pays for
shares or the amount that a Fund will receive from such a sale.
To help advisers and investors better understand and most efficiently use the
Funds to reach their investment goals, the Funds may advertise and create
specific investment programs and systems. For example, this may include
information on how to use the Funds to accumulate assets for future education
needs or periodic payments such as insurance premiums. The Funds may produce
software, electronic information sites, or additional sales literature to
promote the advantages of using the Funds to meet these and other specific
investor needs.
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<PAGE>
Exchanges of shares of a Fund for shares of a Nuveen Money Market fund may be
made on days when both funds calculate a net asset value and make shares
available for public purchase. Shares of the Nuveen money market funds may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
for business. In addition to the holidays observed by the Fund, the Nuveen
money market funds observe and will not make fund shares available for purchase
on the following holidays: Martin Luther King's Birthday, Columbus Day and
Veterans Day.
In addition, you may exchange Class R Shares of any Fund for Class A Shares
of the same Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of that
Fund.
Each Fund may suspend the right of redemption, or delay payment to redeeming
shareholders for more than seven days, when the New York Stock Exchange is
closed (not including customary weekend and holiday closings); when trading in
the markets a Fund normally uses is restricted, or the SEC determines that an
emergency exists so that trading of a Fund's portfolio securities or
determination of a Fund's net asset value is not reasonably practical; or the
SEC by order permits the suspension of the right of redemption or the delay in
payment to redeeming shareholders for more than seven days.
The Funds have reserved the right to redeem in kind (that is, to pay
redemption requests in cash and portfolio securities, or wholly in portfolio
securities), although the Funds have no present intention to redeem in kind.
The Funds voluntarily have committed to pay in cash all requests for redemption
by any shareholder, limited as to each shareholder during any ninety-day period
to the lesser of $250,000 or 1% of the net asset value of a Fund at the
beginning of the ninety-day period.
Shares will be registered in the name of the investor or the investor's
financial adviser. A change in registration or transfer of shares held in the
name of a financial adviser may only be made by an order in good form from the
financial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to the Funds' transfer agent. No share
certificates will be issued for fractional shares.
A fee of 1% of the current market value of any shares represented by a
certificate will be charged if the certificate is lost, stolen or destroyed.
The fee is paid to Seaboard Surety Company for insurance of the lost, stolen,
or destroyed certificate.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy Shares" in
the Prospectus.
Nuveen serves as the principal underwriter of the shares of the Funds
pursuant to a "best efforts" arrangement as provided by a distribution
agreement with the Nuveen Flagship Multistate Trust IV, dated February 1, 1997
("Distribution Agreement"). Pursuant to the Distribution Agreement, the Trust
appointed Nuveen to be its agent for the distribution of the Funds' shares on a
continuous offering basis. Nuveen sells shares to or through brokers, dealers,
banks or other qualified financial intermediaries (collectively referred to as
"Dealers"), or others, in a manner consistent with the then effective
registration statement of the Trust. Pursuant to the Distribution Agreement,
Nuveen, at its own expense, finances certain activities incident to the sale
and distribution of the Funds' shares, including printing and distributing of
prospectuses and statements of additional information to other than existing
shareholders, the printing and distributing of sales literature, advertising
and payment of compensation and giving of concessions to Dealers. Nuveen
receives for its services the excess, if any, of the sales price of the Funds'
shares less the net asset value of those shares, and reallows a majority or all
of such amounts to the Dealers who sold the shares; Nuveen may act as such a
Dealer. Nuveen also receives compensation pursuant to a distribution plan
adopted by the Trust pursuant to Rule 12b-1 and described herein under
"Distribution and Service Plan." Nuveen receives any CDSCs imposed on
redemptions of Shares.
S-47
<PAGE>
The following table sets forth the aggregate amount of underwriting
commissions with respect to the sale of Fund shares and the amount thereof
retained by Nuveen (or Flagship Financial Inc., which Nuveen acquired on
January 1, 1997) for each of the Funds for the last three fiscal years. All
figures are to the nearest thousand.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
May 31, 1999 May 31, 1998 May 31, 1997
------------------------ ------------------------ ------------------------
Amount of Amount Amount of Amount Amount of Amount
Underwriting Retained By Underwriting Retained By Underwriting Retained By
Commissions Nuveen Commissions Nuveen Commissions Nuveen
Fund ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Kansas Fund............. 287 6 255 35 251 35
Kentucky Fund........... 1,082 137 1,076 141 1,057 145
Michigan Fund........... 579 46 397 55 553 76
Missouri Fund........... 606 30 490 36 632 87
Ohio Fund............... 1,028 77 891 113 931 124
Wisconsin Fund.......... 134 16 143 19 170 21
</TABLE>
DISTRIBUTION AND SERVICE PLAN
The Funds have adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B and Class C Shares under each
Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of Class B and Class C Shares,
respectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of
preparing, printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of Class B and Class C
Shares, certain other expenses associated with the distribution of Class B and
Class C Shares, and any distribution-related expenses that may be authorized
from time to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C
Shares under each Fund's Plan will be payable to Authorized Dealers in
connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to
shareholders.
Each Fund may spend up to .20 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .20 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. Each Fund may spend up to .55 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
.20 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
For the fiscal year ended May 31, 1999, 100% of service fees and distribution
fees were paid out as compensation to Authorized Dealers. Prior to February 1,
1997, the service fee for the Michigan Municipal Bond Fund and the Ohio
Municipal Bond Fund was .25% for both Class A and Class C Shares and the
distribution fee was .75% for Class C Shares. Prior to February 1, 1997, the
service fee for the Kansas Municipal Bond Fund, the Kentucky Municipal Bond
Fund, the Missouri Municipal Bond Fund, and the Wisconsin Municipal Bond Fund
was .20% for Class C Shares and the distribution fee for Class A Shares was
.40% and
S-48
<PAGE>
.75% for the Class C Shares. Thereafter, for all of the Funds the service fees
for Class A and Class C Shares was .20% and the distribution fee for Class C
Shares was .55%.
<TABLE>
<CAPTION>
Compensation Paid to
Authorized Dealers for
end of Fiscal 1999
----------------------
<S> <C>
Kansas Municipal Bond Fund
Class A................................................ $218,928
Class B................................................ $ 47,078
Class C................................................ $ 30,218
Kentucky Municipal Bond Fund
Class A................................................ $924,591
Class B................................................ $ 65,879
Class C................................................ $236,689
Michigan Bond Fund
Class A................................................ $531,983
Class B................................................ $ 57,940
Class C................................................ $360,422
Missouri Municipal Bond Fund
Class A................................................ $477,400
Class B................................................ $ 36,025
Class C................................................ $ 91,871
Ohio Municipal Bond Fund
Class A................................................ $955,303
Class B................................................ $101,641
Class C................................................ $365,952
Wisconsin Municipal Bond Fund
Class A................................................ $ 54,123
Class B................................................ $ 26,697
Class C................................................ $ 18,488
</TABLE>
Under each Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest in the Plan cast in
person at a meeting called for the purpose of voting on the Plan. The Plan may
be continued only if the trustees who vote to approve such continuance
conclude, in the exercise of reasonable business judgment and in light of their
fiduciary duties under applicable law, that there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders. The Plan may not be
amended to increase materially the cost which a class of shares may bear under
the Plan without the approval of the shareholders of the affected class, and
any other material amendments of the Plan must be approved by the non-
interested trustees by a vote cast in person at a meeting called for the
purpose of considering such amendments. During the continuance of the Plan, the
selection and nomination of the non-interested trustees of the Trust will be
committed to the discretion of the non-interested trustees then in office.
S-49
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois 60603 has been selected as auditors for all the Funds. In
addition to audit services, the auditors will provide consultation and
assistance on accounting, internal control, tax and related matters. The
financial statements incorporated by reference elsewhere in this Statement of
Additional Information and the information for prior periods set forth under
"Financial Highlights" in the Prospectus have been audited by the auditors as
indicated in their reports with respect thereto, and are included in reliance
upon the authority of those auditors in giving their reports.
The custodian of the Funds' assets is The Chase Manhattan Bank, 4 New York
Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting, and portfolio accounting services.
The Funds' transfer, shareholder services, and dividend paying agent is Chase
Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts 02108.
FINANCIAL STATEMENTS
The audited financial statements for each Fund's most recent fiscal year
appear in the Fund's Annual Reports and are incorporated herein by reference.
S-50
<PAGE>
APPENDIX A
Ratings of Investments
The four highest ratings of Moody's for Municipal Obligations are Aaa, Aa, A
and Baa. Municipal Obligations rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to Municipal Obligations which are of
"high quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat greater than in Aaa rated
Municipal Obligations. The Aaa and Aa rated Municipal Obligations comprise what
are generally known as "high grade bonds." Municipal Obligations that are rated
A by Moody's possess many favorable investment attributes and are considered
upper medium grade obligations. Factors giving security to principal and
interest of A rated Municipal Obligations are considered adequate, but elements
may be present, which suggest a susceptibility to impairment sometime in the
future. Municipal Obligations rated Baa by Moody's are considered medium grade
obligations (i.e., they are neither highly protected nor poorly secured). Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's bond rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1 indicates that the
bond ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its general rating category.
The four highest ratings of S&P for Municipal Obligations are AAA, AA, A and
BBB. Municipal Obligations rated AAA have a strong capacity to pay principal
and interest. The rating of AA indicates that capacity to pay principal and
interest is very strong and such bonds differ from AAA issues only in small
degree. The category of A describes bonds which have a strong capacity to pay
principal and interest, although such bonds are somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions. The
BBB rating is the lowest "investment grade" security rating by S&P. Municipal
Obligations rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas such bonds normally exhibit adequate protection
parameters, adverse economic conditions are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for
bonds in the A category.
The four highest ratings of Fitch for Municipal Obligations are AAA, AA, A
and BBB. Municipal Obligations rated AAA are considered to be investment grade
and of the highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events. Municipal Obligations rated AA are considered
to be investment grade and of very high quality. The obligor's ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated "AAA." Because Municipal Obligations rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+." Municipal
Obligations rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Municipal
Obligations rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
The "Other Corporate Obligations" category of temporary investments are
corporate (as opposed to municipal) debt obligations rated AAA by S&P or Aaa by
Moody's. Corporate debt obligations rated AAA by S&P have an extremely strong
capacity to pay principal and interest. The Moody's corporate debt rating of
Aaa is comparable to that set forth above for Municipal Obligations.
A-1
<PAGE>
Subsequent to its purchase by a Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by such Fund.
Neither event requires the elimination of such obligation from a Fund's
portfolio, but Nuveen Advisory will consider such an event in its determination
of whether the Fund should continue to hold such obligation.
A-2
<PAGE>
APPENDIX B
DESCRIPTION OF HEDGING TECHNIQUES
Set forth below is additional information regarding the various Fund's
defensive hedging techniques and use of repurchase agreements.
Futures and Index Transactions
Financial Futures. A financial future is an agreement between two parties to
buy and sell a security for a set price on a future date. They have been
designed by boards of trade which have been designated "contracts markets" by
the Commodity Futures Trading Commission ("CFTC").
The purchase of financial futures is for the purpose of hedging a Fund's
existing or anticipated holdings of long-term debt securities. When a Fund
purchases a financial future, it deposits in cash or securities an "initial
margin" of between 1% and 5% of the contract amount. Thereafter, the Fund's
account is either credited or debited on a daily basis in correlation with the
fluctuation in price of the underlying future or other requirements imposed by
the exchange in order to maintain an orderly market. The Fund must make
additional payments to cover debits to its account and has the right to
withdraw credits in excess of the liquidity, the Fund may close out its
position at any time prior to expiration of the financial future by taking an
opposite position. At closing a final determination of debits and credits is
made, additional cash is paid by or to the Fund to settle the final
determination and the Fund realizes a loss or gain depending on whether on a
net basis it made or received such payments.
The sale of financial futures is for the purpose of hedging a Fund's existing
or anticipated holdings of long-term debt securities. For example, if a Fund
owns long-term bonds and interest rates were expected to increase, it might
sell financial futures. If interest rates did increase, the value of long-term
bonds in the Fund's portfolio would decline, but the value of the Fund's
financial futures would be expected to increase at approximately the same rate
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have.
Among the risks associated with the use of financial futures by the Funds as
a hedging device, perhaps the most significant is the imperfect correlation
between movements in the price of the financial futures and movements in the
price of the debt securities which are the subject of the hedge.
Thus, if the price of the financial future moves less or more than the price
of the securities which are the subject of the hedge, the hedge will not be
fully effective. To compensate for this imperfect correlation, the Fund may
enter into financial futures in a greater dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the prices of
such securities has been greater than the historical volatility of the
financial futures. Conversely, the Fund may enter into fewer financial futures
if the historical volatility of the price of the securities being hedged is
less than the historical volatility of the financial futures.
The market prices of financial futures may also be affected by factors other
than interest rates. One of these factors is the possibility that rapid changes
in the volume of closing transactions, whether due to volatile markets or
movements by speculators, would temporarily distort the normal relationship
between the markets in the financial future and the chosen debt securities. In
these circumstances as well as in periods of rapid and large price movements.
The Fund might find it difficult or impossible to close out a particular
transaction.
Options on Financial Futures. The Funds may also purchase put or call options
on financial futures which are traded on a U.S. Exchange or board of trade and
enter into closing transactions with respect to such options to terminate an
existing position. Currently, options can be purchased with respect to
financial futures on U.S. Treasury Bonds on The Chicago Board of Trade. The
purchase of put options on financial futures is analogous to the purchase of
put options by a Fund on its portfolio securities to hedge against the risk of
rising interest rates. As with options on debt securities, the holder of an
option may terminate his position by selling an option of the same Fund. There
is no guarantee that such closing transactions can be effected.
B-1
<PAGE>
Index Contracts
Index Futures. A tax-exempt bond index which assigns relative values to the
tax-exempt bonds included in the index is traded on the Chicago Board of Trade.
The index fluctuates with changes in the market values of all tax-exempt bonds
included rather than a single bond. An index future is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash--rather than any security--equal to specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the index future was originally written. Thus,
an index future is similar to traditional financial futures except that
settlement is made in cash.
Index Options. The Funds may also purchase put or call options on U.S.
Government or tax-exempt bond index futures and enter into closing transactions
with respect to such options to terminate an existing position. Options on
index futures are similar to options on debt instruments except that an option
on an index future gives the purchaser the right, in return for the premium
paid, to assume a position in an index contract rather than an underlying
security at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance of the writer's futures margin account
which represents the amount by which the market price of the index futures
contract, at exercise, is less than the exercise price of the option on the
index future.
Bond index futures and options transactions would be subject to risks similar
to transactions in financial futures and options thereon as described above. No
series will enter into transactions in index or financial futures or related
options unless and until, in the Adviser's opinion, the market for such
instruments has developed sufficiently.
Repurchase Agreements
A Fund may invest temporarily up to 5% of its assets in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Fund from a third party with the understanding that they will be
repurchased by the seller at a fixed price on an agreed date. These agreements
may be made with respect to any of the portfolio securities in which the Fund
is authorized to invest. Repurchase agreements may be characterized as loans
secured by the underlying securities. The Fund may enter into repurchase
agreements with (i) member banks of the Federal Reserve System having total
assets in excess of $500 million and (ii) securities dealers, provided that
such banks or dealers meet the creditworthiness standards established by the
Fund's board of trustees ("Qualified Institutions"). The Adviser will monitor
the continued creditworthiness of Qualified Institutions, subject to the
oversight of the Fund's board of trustees.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the custodian at all times
in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the securities, the Fund may suffer
a loss to the extent proceeds from the sale of the underlying securities are
less than the repurchase price.
The resale price reflects the purchase price plus an agreed upon market rate
of interest which is unrelated to the coupon rate or date of maturity of the
purchased security. The collateral is marked to market daily. Such agreements
permit the Fund to keep all its assets earning interest while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature.
B-2
<PAGE>
VAI-MS4-9.99
<PAGE>
May 31, 1999 Annual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
Dependable, tax-free
income to help
you keep more
of what you earn.
[Photo appears here]
Kansas
Missouri
Wisconsin
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship Kansas Municipal Bond Fund
6 Nuveen Flagship Missouri Municipal Bond Fund
9 Nuveen Flagship Wisconsin Municipal Bond Fund
12 Portfolio of Investments
26 Statement of Net Assets
27 Statement of Operations
28 Statement of Changes in Net Assets
30 Notes to Financial Statements
35 Financial Highlights
39 Report of Independent Public Accountants
40 Building a Better Portfolio
41 Fund Information
<PAGE>
[Photo of Timothy R. Schwertfeger Appears Here]
Timothy R. Schwertfeger
Chairman of the Board
DEAR
Shareholder
I invite you to take a few minutes to read the annual report we've prepared for
you on the performance of your Nuveen state municipal bond fund for the fiscal
year ended May 31, 1999. You, along with your financial adviser, have made a
sound choice in choosing Nuveen to manage this portion of your assets. Since
1898, more than 1.3 million investors have trusted us to help them build and
sustain the wealth of a lifetime.
I'm pleased to report your fund continued to meet its primary objective of
providing you with dependable tax-free income and attractive after-tax total
returns. I will briefly describe the national economic environment during the
past 12 months. My discussion is followed by comments about the strategies
employed in managing your fund from the portfolio manager of each fund
represented in this report.
The Year In Review. The Federal Reserve eased short-term rates for the first
time in almost three years by cutting the federal funds rate in the fall of 1998
three times, bringing it to 4.75%. A month after the close of your fund's fiscal
year, the Fed raised its target by 25 basis points to 5%. (Be sure to read your
fund manager's comments about managing your fund in a rising interest rate
environment.)
The fed funds rate is the rate that banks charge each other for overnight
loans and serves as the basis many financial institutions use for setting
interest charges on a variety of products, from mortgage and car loans to credit
cards.
The Fed's rate cuts were made to avert a potential domestic credit crunch
and restore some stability to global markets. The moves seemed to have worked,
as the U.S. economy since has continued its pattern of non-inflationary growth,
accompanied by low interest rates and unemployment levels that remain among the
lowest in three decades, prompting the late June reversal by the Fed.
All indications point to a confident U.S. consumer who is comfortable with
the current state of the economy, especially the performance of the housing,
stock and job markets. This confidence is reflected in the most recent Consumer
Confidence Index report, issued by the University of Michigan's Conference Board
Inc., which showed a record-setting eighth consecutive month of gains in June.
On the global front, the turmoil of the past two years appears to be fading
somewhat, as international financial markets have begun to send recovery
signals.
Domestic inflation continues to be benign, with an increase of 2.1% for the
12 months ended May 31, 1999. The general backdrop of inflation indicators
continued to be mild, with the employment cost index, average hourly earnings,
and import and producer price trends all remaining favorable.
Federal Reserve Chairman Alan Greenspan recently stated that a key factor
in achieving today's peaceful coexistence of economic growth and low inflation
has been increased productivity. Improvements in productivity, spurred by
technological advances, have been responsible for
1
<PAGE>
offsetting wage and other inflationary pressures that we would normally expect
to see as part of a growing economy.
Why Municipal Bonds? Our municipal bond funds continued to offer attractive,
stable income in a market that places a high premium on yield. In 1998,
municipal bonds represented a reasonably insulated haven in an otherwise
turbulent market, with lower volatility relative to Treasury bonds and other
fixed-income investments. Even in 1999, with interest rates rising again,
municipals outperformed Treasuries through the end of May.
The high ratio of tax-exempt municipal yields to Treasury yields sheltered
municipal bonds, to some extent, from the price decline that occurred in the
Treasury market during the first part of the year. While the yield on 30-year
Treasury bonds rose from 5.10% at the end of December to 5.83% as of May 31,
1999, the yield on the Bond Buyer Revenue Bond Index, an unmanaged index of
long-term municipal revenue bonds, gained 15 basis points--from 5.26% to 5.41%.
Given the inverse relationship between interest rates and bond prices, we saw
bond prices fall as rates rose over this period.
Though municipal bond prices did decrease, the decline was not as dramatic
as the drop in Treasuries.
This performance differential reflects the fact that Treasuries had become
relatively expensive as the result of safe-haven buying during the international
economic crises in 1998. As the financial turmoil subsided, however, foreign
investors returned to investing in their own countries rather than in U.S.
dollar-denominated securities, and the decline in demand caused U.S. Treasuries
to drop in price.
At the end of May 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 93%, compared with the historical average of
86% for the period of 1986-1999. For investors, this meant that quality long-
term municipal bonds offered yields comparable to those of long Treasury bonds--
even before the tax advantages of municipal bonds were taken into account.
During the funds' fiscal year, that ratio hit a high of 104% in December.
On an after-tax basis in today's market, municipal bonds continue to
present an exceptionally attractive investment option relative to Treasuries.
During 1998, lower interest rates and the strong economy combined to
generate high levels of new municipal issuance and a significant increase in the
refinancing of existing bonds. Municipal issuance in 1998 reached $284 billion,
up 29% over 1997.
In the first part of 1999, however, as the market settled into a more
stable interest rate environment, refunding activity has dropped off
dramatically, resulting in a drop in municipal supply. This, in turn, has
enhanced the attractiveness of the municipal bonds that were brought to market,
as demand--especially from individual investors--remained relatively strong.
The Value of Nuveen Expertise. Nuveen Mutual Funds are a diverse collection of
investments featuring highly regarded asset management firms--Premier
Advisers/SM/--who direct the investment activities of each portfolio.
The Premier Advisers are firms that have earned a reputation for excellence
in their field of expertise--including Nuveen Investment Advisory Services for
income investing, Rittenhouse Financial Services for growth investing and
Institutional Capital Corporation for value investing.
For more information on our funds, contact your financial adviser for a
prospectus, or call Nuveen at (800) 621-7227, or download one from
www.nuveen.com. Please read the prospectus carefully before you invest or send
money.
We encourage you to talk with your financial adviser about Nuveen's
expanding array of investments and the ways they can help you establish a
diversified portfolio designed to build and sustain long-term financial
security.
We are grateful for the confidence you have placed in us and are dedicated
to maintaining your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1999
2
<PAGE>
NUVEEN FLAGSHIP KANSAS MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Mike Davern discusses fund performance, the municipal market
and key investment strategies for the Kansas fund for the fiscal year ended May
31, 1999.
In what state is the Kansas economy? Unemployment was only 3.4% in May in
Kansas, which is experiencing healthy growth in per capita income. Beyond its
traditional roots in agriculture, the state's economy has diversified broadly
into manufacturing, trade and service sectors.
Kansas' expanding economy has led to growing infrastructure and school
financing needs, resulting in strong municipal bond issuance in 1998. Despite
rising interest rates in 1999, issuance in Kansas continued to grow in 1999.
Increasing concerns about rising economic growth and potential inflation caused
bond yields to rise and prices to fall. However, municipal bonds held their
values quite well compared to U.S. Treasury bonds.
How did Nuveen Flagship Kansas Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Kansas Municipal Bond Fund generated a total return on net
asset value of 3.81%. That compares to the 3.82% average annual total return
posted by the Lipper Kansas Municipal Debt Peer Group.* The fund ranked 8th out
of 13 municipal bond funds for the fiscal year period in its Lipper peer group.
Total return equals a fund's income, plus capital gains distributions, if any,
plus or minus changes in net asset value. The fund's taxable equivalent total
return, for investors in the 35.5% combined federal and state income tax
bracket, was 6.52%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.27%. For investors in
the combined 35.5% federal and state income tax bracket, that is equivalent to a
yield of 6.62% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined.
To protect the fund's income stream, we looked for bonds with call dates far in
the future--or better yet, that are noncallable. Only 3% of the Kansas portfolio
is callable between now and the year 2002.
For example, the fund recently acquired three bond issues, each with call
protection of 10 or more years. The issues included a Topeka Public Building
Commission lease for a state office building, an electric system revenue bond
for the city of Holton and a water and sewer bond for the city of Wichita. All
three bonds are insured.
We also continued to search for bonds that offered attractive yields and
sound underlying credit quality.
In addition to assessing the credit quality of individual issuers, Nuveen
Research helps us monitor events in the municipal market and analyze how those
events affect individual state and national municipal markets. For example,
during spring 1998, a major not-for-profit healthcare provider in Philadelphia
declared bankruptcy. While the impact of this bankruptcy was most pronounced in
the healthcare sector of the Pennsylvania municipal market, it was felt to a
lesser extent throughout the municipal market.
Comments cover the year ended May 31, 1999; performance statistics are
quoted for Class A shares at net asset value.
** The Lipper Peer Group return represents the average annualized return of
13 funds in the Lipper Other States Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate), plus capital gains
distributions, if any, plus or minus changes in net asset value.
3
<PAGE>
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues. Using the expertise of Nuveen Research, we considered only
those bonds that offered adequate compensation for the level of risk.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield now
reflected the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Kansas Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's maturity beyond that of our Lipper peer group.
We believe that bond yields are currently attractive relative to inflation.
Should interest rates fall or remain stable, the portfolio's longer maturity
would be advantageous.
Although the Kansas economy is growing, and the overall level of issuance
has increased, the Kansas municipal bond market still offers limited supply. As
such, it becomes a challenge to find new investments that offer good value.
However, as a major investor in the Kansas market, we will continue to have
excellent access to undervalued securities that provide income and the
opportunity for price appreciation.
"To protect the fund's income stream, we looked for bonds with call dates far in
the future--or better yet, that are noncallable. Only 3% of the Kansas portfolio
is callable between now and the year 2002."
4
<PAGE>
NUVEEN FLAGSHIP KANSAS MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
A Shares B Shares C Shares R Shares
NAV $ 10.49 $ 10.43 $ 10.51 $ 10.55
- ------------------------------------------------------------------------------
May's Declared Dividend* $0.0410 $0.0345 $0.0365 $0.0435
- ------------------------------------------------------------------------------
Fund Symbol FKSTX N/A N/A N/A
- ------------------------------------------------------------------------------
CUSIP 67065R101 67065R200 67065R309 67065R408
- ------------------------------------------------------------------------------
Inception Date 1/92 2/97 2/97 2/97
- ------------------------------------------------------------------------------
* Paid June 1, 1999
Total Returns (Annualized)/+/
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.81% -0.51% 3.07% 3.18% 4.06%
- ------------------------------------------------------------------------------
1-Year TER** 6.52% 2.09% 5.38% 5.60% 6.90%
- ------------------------------------------------------------------------------
5-Year 6.72% 5.81% 5.94% 6.31% 6.95%
- ------------------------------------------------------------------------------
Since Inception 6.81% 6.19% 6.09% 6.41% 6.96%
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate of
35.50%).
Index Comparison/*/
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Kansas Municipal Kansas Municipal Municipal
Bond Fund (Offer) Bond Fund (NAV) Bond Index
<S> <C> <C> <C>
January
- -------
1992 9,580 10,000 10,000
May
- ---
1992 10,701 11,170 10,982
1993 12,244 12,781 12,328
1994 11,457 11,960 11,890
1995 13,060 13,630 13,681
1996 13,472 14,060 14,207
1997 14,927 15,580 15,645
1998 15,848 16,540 16,685
1999 15,696 16,384 16,580
</TABLE>
______ Nuveen Flagship Kansas Municipal Bond Fund (Offer) $15,686
______ Nuveen Flagship Kansas Municipal Bond Fund (NAV) $16,384
______ Lehman Brothers Municipal Bond Index $16,580
/*/ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month
- -----
<S> <C>
June .0435
July .0435
August .0435
September .0435
October .0425
November .0425
December .0425
January .0425
February .0425
March .0425
April .0410
May .0410
</TABLE>
Portfolio Statistics
Fund Net Assets $126.5 million
- ------------------------------------------------------
Effective Maturity 20.82 years
- ------------------------------------------------------
Average
Effective Duration 8.56
- ------------------------------------------------------
Top Five Sectors/1/
Tax Obligation (Limited) 23%
- ------------------------------------------------------
Health Care 19%
- ------------------------------------------------------
Housing (Multifamily) 15%
- ------------------------------------------------------
U.S. Guaranteed 11%
- ------------------------------------------------------
Utilities 8%
- ------------------------------------------------------
Bond Credit Quality/1/
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
AAA/U.S.
Guaranteed....... 46%
AA............... 15%
A................ 18%
BBB/NR........... 21%
</TABLE>
/1/ as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
5
<PAGE>
NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Mike Davern discusses fund performance, the municipal market
and key investment strategies for the Missouri fund for the fiscal year ended
May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
How strong is Missouri's economy? With an unemployment rate of only 3.5% in
May, Missouri's economy is quite diversified in fields such as defense,
manufacturing, services and tourism. Population growth continues at a rate in
excess of 5% per year, and per capita income is growing rapidly.
Missouri's expanding economy led to growing infrastructure and school
financing needs, resulting in strong municipal bond issuance in 1998. Rising
interest rates in 1999, however, significantly slowed municipal bond activity--
both new issuance and refundings--in the latter half of the fund's fiscal year.
There were two reasons the market slowed--the increased interest rates, which
primarily slowed new issuance, plus the fact that the refunding market has
essentially been exhausted. Municipalities flooded the market with refundings in
recent years when interest rates were dropping. A provision of the Tax Reform
Act of 1986, however, limits municipalities to only one tax-exempt refunding of
a bond issuance.
As was the case on the national level, increasing concerns about strong
economic growth and potential inflation caused bond yields to rise and prices
to fall. However, municipal bonds held their values quite well compared to U.S.
Treasury bonds.
How did Nuveen Flagship Missouri Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Missouri Municipal Bond Fund generated a total return on
net asset value of 3.95%, outperforming the 3.47% average annual total return
posted by the Lipper Missouri Municipal Debt Peer Group.* The fund ranked 3rd
out of 23 municipal bond funds for the fiscal year period in its Lipper peer
group. Total return equals a fund's income, plus capital gains distributions, if
any, plus or minus changes in net asset value. The fund's taxable equivalent
total return, for investors in the 35% combined federal and state income tax
bracket, was 6.65%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.22%. For investors in
the combined 35% federal and state income tax bracket, that is equivalent to a
yield of 6.49% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates decline. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable.
Although most Missouri bonds are callable, the portfolio has a high
percentage of non-callable securities--only 2.3% is callable between now and the
year 2001. As a large institutional buyer, the fund receives high priority when
desirable issues come to market.
A good example of a high-quality non-callable security in the portfolio is
an issue by the Missouri Development Finance Board Solid Waste Project. The
bonds are rated by Moody's Investors Service as Aa2, the second highest rating
it issues.
* The Lipper Peer Group return represents the average annualized return of the
23 funds in the Lipper Missouri Municipal Debt category. The return assumes
reinvestment of dividends and does not reflect any applicable sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate), plus capital gains
distributions, if any, plus or minus changes in net asset value.
6
<PAGE>
Maturing in 2029, the securities carry a 5.2% coupon. The bonds are backed
by Procter & Gamble, which is able to use the disposal project for waste
produced by one of its plants. If interest rates fall and the bond market
rallies, this issue will appreciate in value without having to be concerned
about the shortness of time until the call date.
In addition to call protection, we continue to search for bonds that offer
attractive yields and sound underlying credit quality.
Nuveen Research also helps us monitor events in the municipal market and
analyze how those events affect individual state and national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider in
Philadelphia declared bankruptcy. While the impact of this bankruptcy was most
pronounced in the healthcare sector of the Pennsylvania municipal market, it was
felt to a lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not
being compensated adequately for taking on additional credit risk.
With spreads having widened, lower-rated securities have become more
attractive on a risk-adjusted basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues. Using the expertise of Nuveen Research, we considered only
those bonds that offered adequate compensation for the level of risk.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield reflected
the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Missouri Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's maturity beyond that of our Lipper peer group. We
believe that bond yields are currently attractive relative to inflation. Should
interest rates fall or remain stable, the portfolio's longer maturity would be
advantageous.
With Missouri's strong economy and influx of population, we expect there
will continue to be a buoyant supply and demand for municipal bonds in areas
such as housing, healthcare, education and utilities. We will continue to seek
out undervalued securities that provide income and the opportunity for price
appreciation through credit rating upgrades.
"To protect the fund's income stream, we looked for bonds with call dates far in
the future--or better yet, that are noncallable. Although most Missouri bonds
are callable, the portfolio has a high percentage of non-callable securities--
only 2.3% is callable between now and the year 2001."
7
<PAGE>
NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 11.12 $ 11.11 $ 11.11 $ 11.12
- ----------------------------------------------------------------------------------------------------
May's Declared Dividend* $0.0455 $0.0385 $0.0405 $0.0475
- ----------------------------------------------------------------------------------------------------
Fund Symbol FMOTX N/A FMOCX N/A
- ----------------------------------------------------------------------------------------------------
CUSIP 67065R812 67065R796 67065R788 67065R770
- ----------------------------------------------------------------------------------------------------
Inception Date 8/87 2/97 2/94 2/97
- ----------------------------------------------------------------------------------------------------
* Paid June 1, 1999
</TABLE>
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C>
1-Year 3.95% -0.39% 3.09% 3.31% 4.17%
- --------------------------------------------------------------------------------------------------------------
1-Year TER** 6.65% 2.19% 5.37% 5.71% 6.99%
- --------------------------------------------------------------------------------------------------------------
5-Year 6.62% 5.71% 5.93% 6.03% 6.73%
- --------------------------------------------------------------------------------------------------------------
10-Year 7.32% 6.87% 6.85% 6.73% 7.37%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 35%).
Index Comparison(*)
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Missouri Municipal Missouri Municipal Municipal
May Bond Fund (Offer) Bond Fund (NAV) Bond Index
- ---
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,140 10,585 10,731
1991 11,146 11,635 11,813
1992 12,227 12,763 12,974
1993 13,758 14,361 14,526
1994 14,091 14,708 14,885
1995 15,245 15,913 16,240
1996 15,779 16,471 16,982
1997 17,086 17,835 18,391
1998 18,678 19,496 20,117
1999 19,417 20,269 21,058
</TABLE>
- --- Nuveen Flagship Missouri Municipal Bond Fund (Offer) $19,417
- --- Nuveen Flagship Missouri Municipal Bond Fund (NAV) $20,269
- --- Lehman Brothers Minicipal Bond Index $21,058
(*) The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month
- -----
<S> <C>
June .0460
July .0460
August .0460
September .0460
October .0460
November .0460
December .0460
January .0460
February .0455
March .0455
April .0455
May .0455
</TABLE>
Portfolio Statistics
Fund Net Assets $ 257.6 million
- -------------------------------------------------------------------------------
Effective Maturity 19.86 years
- -------------------------------------------------------------------------------
Average Effective Duration 7.62
- -------------------------------------------------------------------------------
Top Five Sectors/1/
Health Care 17%
- -------------------------------------------------------------------------------
Tax Obligation (Limited) 15%
- -------------------------------------------------------------------------------
U.S. Guaranteed 12%
- -------------------------------------------------------------------------------
Housing (Multifamily) 11%
- -------------------------------------------------------------------------------
Long-Term Care 8%
- -------------------------------------------------------------------------------
Bond Credit Quality/1/
[PIE CHART APPEARS HERE]
AAA/U.S.Guaranteed......................................................... 56%
AA......................................................................... 13%
A.......................................................................... 9%
BBB/NR..................................................................... 22%
/1/ as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
8
<PAGE>
NUVEEN FLAGSHIP WISCONSIN MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Mike Davern discusses fund performance, the municipal market
and key investment strategies for the Wisconsin fund for the fiscal year ended
May 31, 1999.
How strong is Wisconsin's economy? Wisconsin continues to enjoy a healthy,
diversified economy with a mixture of agriculture, manufacturing, services and
retail trade. Efforts to attract business and promote development and job
training in Wisconsin have been largely successful.
Wisconsin's expanding economy led to growing infrastructure and housing
financing needs, resulting in strong municipal bond issuance in 1998. Rising
interest rates in 1999, however, significantly slowed municipal bond activity--
both new issuance and refundings--in the latter half of the fund's fiscal year.
There were two reasons the market slowed--the increased interest rates, which
primarily slowed new issuance, plus the fact that the refunding market has
essentially been exhausted. Municipalities flooded the market with refundings in
recent years when interest rates were dropping. A provision of the Tax Reform
Act of 1986, however, limits municipalities to only one tax-exempt refunding of
a bond issuance.
Although Wisconsin has a state income tax, most municipal bonds issued in
Wisconsin are only exempt from federal income tax. The limited number of bonds
that have the double-tax exemption are in very strong demand.
As was the case on the national level, increasing concerns about rising
economic growth and potential inflation caused bond yields to rise and prices to
fall. However, municipal bonds held their values quite well compared to U.S.
Treasury bonds.
How did Nuveen Flagship Wisconsin Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Wisconsin Municipal Bond Fund generated a total return on
net asset value of 3.83%, outperforming the 3.52% average annual total return
posted by the Lipper Other States Municipal Debt Peer Group.* The fund's taxable
equivalent total return, for investors in the 35.5% combined federal and state
income tax bracket, was 6.40%.** Total return equals a fund's income, plus
capital gains distributions, if any, plus or minus changes in net asset value.
As of May 31, 1999, the fund's SEC 30-day yield was 4.42%. For investors in
the combined 35.5% federal and state income tax bracket, that is equivalent to a
yield of 6.85% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates decline. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable. Currently, the portfolio contains no bonds that are
callable before the year 2002, at which point only 4.7% of the portfolio is
subject to being called.
In addition, we continued to seek out bonds that offered double tax
exemption. Currently, nearly 60% of the fund is invested in double-tax exempt
Wisconsin paper, which is a relatively high percentage.
Comments cover the year ended May 31, 1999; performance statistics are
quoted for Class A shares at net asset value.
* The Lipper Peer Group return represents the average annual ized return of
the 79 funds in the Lipper Other States Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate), plus capital gains
distributions, if any, plus or minus changes in net asset value.
<PAGE>
For instance, the fund purchased six separate double-tax exempt bond issues
during the second quarter of 1999, ranging from an additional purchase of AAA
rated Wisconsin Center District bonds already owned by the fund, to the purchase
of two separate non-rated transactions for Sturtevant and Jackson County's
Community Development Authorities.
As a large institutional buyer, Nuveen often receives priority when
desirable issues come to market.
In addition to call protection and double tax-exemption, we continue to
search for bonds that offer attractive yields and sound underlying credit
quality.
Nuveen Research also helps us monitor events in the municipal market and
analyze how those events affect individual state and national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider in
Philadelphia declared bankruptcy. While the impact of this bankruptcy was most
pronounced in the healthcare sector of the Pennsylvania municipal market, it was
felt to a lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues. Using the expertise of Nuveen Research, we considered only
those bonds that offered adequate compensation for the level of risk.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield now
reflected the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Wisconsin Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's maturity beyond that of our Lipper peer group. We
believe that bond yields are currently attractive in relation to inflation.
Should interest rates fall or remain stable, the portfolio's longer maturity
would be advantageous.
With Wisconsin's strong economy and influx of population, there will
continue to be a buoyant supply and demand for municipal bonds in areas such as
housing, healthcare, education and utilities. We will continue to seek out
undervalued securities that provide income and the opportunity for price
appreciation through credit rating upgrades.
"We continued to seek out bonds that offered double tax exemption. Currently,
nearly 60% of the fund is invested in double-tax exempt Wisconsin paper, which
is a relatively high percentage."
10
<PAGE>
NUVEEN FLAGSHIP WISCONSIN MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 10.20 $ 10.23 $ 10.22 $ 10.23
- -------------------------------------------------------------------------------
May's Declared Dividend* $0.0380 $0.0315 $0.0335 $0.0400
- -------------------------------------------------------------------------------
Fund Symbol FWIAX N/A N/A N/A
- -------------------------------------------------------------------------------
CUSIP 67065R721 67065R713 67065R697 67065R689
- -------------------------------------------------------------------------------
Inception Date 6/94 2/97 2/97 2/97
- -------------------------------------------------------------------------------
* Paid June 1, 1999
</TABLE>
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C>
1-Year 3.83% -0.52% 3.05% 3.29% 4.04%
- -------------------------------------------------------------------------------
1-Year TER** 6.40% 1.94% 5.18% 5.55% 6.73%
- -------------------------------------------------------------------------------
3-Year 7.11% 5.59% 6.46% 6.66% 7.36%
- -------------------------------------------------------------------------------
Since Inception 6.40% 5.49% 5.78% 5.97% 6.55%
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 35.5%).
Index Comparison(R)
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Wisconsin Municipal Wisconsin Municipal Municipal Bond
June Bond Fund (Offer) Bond Fund (NAV) Index
<S> <C> <C> <C>
1994 9,580 10,000 10,000
May
1995 10,137 10,582 10,816
1996 10,728 11,198 11,534
1997 11,509 12,013 12,488
1998 12,614 13,167 13,568
1999 13,058 13,630 14,147
</TABLE>
- ------ Nuveen Flagship Wisconsin Municipal Bond Fund (Offer) $13,058
- ------ Nuveen Flagship Wisconsin Municipal Bond Fund (NAV) $13,630
- ------ Lehman Brothers Muncipal Bond Index $14,147
(R) The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
Month
- -----
June .0410
July .0400
August .0400
September .0400
October .0400
November .0400
December .0400
January .0380
February .0380
March .0380
April .0380
May .0380
Portfolio Statistics
Fund Net Assets $ 36.6 million
- -------------------------------------------------------------------------------
Effective Maturity 20.57 years
- -------------------------------------------------------------------------------
Average Effective Duration 9.23
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Top Five Sectors/1/
- -------------------------------------------------------------------------------
Tax Obligation (Limited) 44%
- -------------------------------------------------------------------------------
U.S. Guaranteed 12%
- -------------------------------------------------------------------------------
Long-Term Care 8%
- -------------------------------------------------------------------------------
Utilities 7%
- -------------------------------------------------------------------------------
Housing (Multifamily) 6%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Bond Credit Quality/1/
- -------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
AAA/U.S.Guaranteed........................................................ 41%
AA........................................................................ 4%
A......................................................................... 18%
BBB/NR.................................................................... 37%
/1/ as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
___
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Kansas Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 5.3%
$ 1,000,000 Dodge City, Kansas, Pollution Control Revenue Refunding Bonds, 5/02 at 102 Aa3 $ 1,077,150
Series 1992 (Excel Corporation Project/Cargill), 6.625%, 5/01/05
3,700,000 Ford County, Kansas, Sewage and Solid Waste Disposal Revenue 6/08 at 102 A+ 3,654,564
Bonds (Excel Corporation Project/Cargill) Series 1998,
5.400%, 6/01/28 (Alternative Minimum Tax)
2,000,000 Garden City, Kansas, Sewage Disposal Revenue Bonds, Series 1997 9/07 at 102 BBB+ 2,026,860
(Monfort, Inc. Project, ConAgra, Inc. - Guarantor), 5.750%,
9/01/17 (Alternative Minimum Tax)
- ---------------------------------------------------------------------------------------------------------------------------------
Capital Goods - 3.8%
4,550,000 City of Clearwater, Kansas, Pollution Control Refunding Revenue 2/02 at 101 A+ 4,785,144
Bonds (Vulcan Materials Company), Series 1992, 6.375%, 2/01/12
- ---------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclical - 0.6%
650,000 Wichita Airport Authority of the City of Wichita, Kansas, 3/02 at 102 AA 711,458
Airport Facilities Refunding Revenue Bonds (Wichita Airport
Hotel Associates, L.P. Project), Series 1992, 7.000%, 3/01/05
- ---------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 3.3%
City of Olathe, Kansas, Educational Facilities Refunding and
Improvement Revenue Bonds (MidAmerica Nazarene University Project),
Series 1998:
1,220,000 5.550%, 4/01/13 4/08 at 100 N/R 1,214,425
1,000,000 5.700%, 4/01/18 4/08 at 100 N/R 982,810
City of Olathe, Kansas, Educational Facilities Revenue Bonds
(Kansas Independent College Association Pooled Educational Loan
Program), Series C 1998, Fixed Rate Bonds, Baker University Project:
940,000 5.400%, 10/01/13 10/08 at 100 N/R 926,558
1,000,000 5.600%, 10/01/18 10/08 at 100 N/R 987,940
- ---------------------------------------------------------------------------------------------------------------------------------
Health Care - 18.2%
5,630,000 Colby, Kansas, Health Facilities Refunding Revenue Bonds 8/08 at 100 N/R 5,457,553
(Citizens Medical Center, Inc.), Series 1998, 5.625%, 8/15/16
Kansas Development Finance Authority, Health Facilities Revenue Bonds
(Stormont-Vail HealthCare, Inc.), Series 1996F - Tax Exempt:
2,815,000 5.800%, 11/15/16 11/06 at 100 AAA 2,939,536
3,380,000 5.800%, 11/15/21 11/06 at 100 AAA 3,530,613
Kansas Development Finance Authority, Health Facilities Revenue Bonds
(Stormont-Vail HealthCare, Inc.), Series 1996G - Tax Exempt:
750,000 5.800%, 11/15/16 11/06 at 100 AAA 783,180
2,150,000 5.800%, 11/15/21 11/06 at 100 AAA 2,245,804
Kansas Development Finance Authority, Health Facilities Revenue Bonds
(Hays Medical Center Inc.), Series 1997B:
2,200,000 5.500%, 11/15/17 11/07 at 100 Aaa 2,246,948
1,500,000 5.500%, 11/15/22 11/07 at 100 Aaa 1,533,030
City of Lawrence, Kansas, Hospital Revenue Bonds, Series 1994
(The Lawrence Memorial Hospital):
1,075,000 6.200%, 7/01/14 7/04 at 100 A3 1,126,159
400,000 6.200%, 7/01/19 7/04 at 100 A3 417,760
City of Newton, Kansas, Hospital Refunding Revenue Bonds, Series 1998A
(Newton Healthcare Corporation):
1,000,000 5.700%, 11/15/18 11/08 at 100 BBB- 995,440
1,250,000 5.750%, 11/15/24 11/08 at 100 BBB- 1,240,063
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 100,000 Puerto Rico Industrial, Tourist, Educational, Medical and 1/05 at 102 AAA $ 109,626
Environmental Control Facilities Financing Authority, Hospital
Revenue Bonds, 1995 Series A (Hospital Auxilio Mutuo Obligated
Group Project), 6.250%, 7/01/24
450,000 CSJ Health System of Wichita, Inc., Kansas, Revenue Bonds, Series 11/01 at 102 A+ 481,887
1991X, 7.000%, 11/15/18
- ---------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 14.3%
965,000 City of Kansas City, Kansas, Multi-family Housing Revenue 7/01 at 100 AAA 992,705
Refunding Bonds, Series 1994 (FHA-Insured Mortgage Loan -
Rainbow Towers Project), 6.700%, 7/01/23
Kansas Development Finance Authority, Multi-family Housing Revenue
Bonds (Park Apartments Project), Series 1996:
325,000 5.700%, 12/01/09 (Alternative Minimum Tax) 12/06 at 100 AAA 336,421
665,000 5.900%, 12/01/14 (Alternative Minimum Tax) 12/06 at 100 AAA 694,466
1,150,000 6.000%, 12/01/21 (Alternative Minimum Tax) 12/06 at 100 AAA 1,200,773
5,000,000 Kansas Development Finance Authority, Multi-family Housing Refunding 12/08 at 101 N/R 4,926,150
Revenue Bonds (First Kansas State Partnership, L.P. Project),
Series 1998Y, 6.125%, 12/01/28 (Alternative Minimum Tax)
Lenexa, Kansas, Multi-family Housing Revenue Refunding Bonds
(Barrington Park Apartments Project) Series 1993A:
445,000 6.300%, 2/01/09 2/03 at 102 AA 469,586
475,000 6.400%, 2/01/10 2/03 at 102 AA 501,177
2,000,000 6.450%, 2/01/18 2/03 at 102 AA 2,110,080
1,000,000 6.500%, 2/01/23 2/03 at 102 AA 1,049,080
1,000,000 City of Olathe, Kansas, Multi-family Housing Refunding Revenue Bonds 6/04 at 102 AAA 1,063,570
(Federal National Mortgage Association Program - Deerfield
Apartments Project), Series 1994A, 6.450%, 6/01/19
City of Wichita, Kansas, Multi-family Housing Revenue Refunding Bonds
(The Shores Apartments Project), Series 1994 XI-A:
1,500,000 6.700%, 4/01/19 4/09 at 102 AA 1,639,620
2,000,000 6.800%, 4/01/24 4/09 at 102 AA 2,201,140
900,000 City of Wichita, Kansas, Multi-family Housing Revenue Bonds 11/05 at 102 A 930,429
(Brentwood Apartments Project), Senior Lien Series 1995 IX-A,
5.850%, 12/01/25
- ---------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 6.6%
2,445,000 City of Kansas City, Kansas, GNMA Collateralized Mortgage Revenue 5/05 at 103 Aaa 2,542,849
Bonds, Series 1995, 5.900%, 11/01/27 (Alternative Minimum Tax)
295,000 City of Olathe, Kansas, Labette County, Collateralized Single 2/05 at 105 Aaa 328,034
Family Mortgage Refunding Revenue Bonds, Series 1994C-I,
7.800%, 2/01/25
1,360,000 Sedgwick and Shawnee Counties, Kansas, Single Family Mortgage No Opt. Call Aaa 1,505,955
Revenue Bonds (Mortgage-Backed Securities Program), 1997
Series A-1, 6.950%, 6/01/29 (Alternative Minimum Tax)
1,250,000 Sedgwick and Shawnee Counties, Kansas, Single Family Mortgage 6/08 at 105 Aaa 1,374,788
Revenue Bonds (Mortgage-Backed Securities Program), 1998
Series A-1, 5.500%, 12/01/22 (Alternative Minimum Tax)
1,460,000 Sedgwick, Shawnee, and Leavenworth Counties, Kansas, GNMA 6/99 at 103 AAA 1,505,771
Collateralized Mortgage Revenue Bonds, 1989 Series A,
7.875%, 12/01/21 (Alternative Minimum Tax)
940,000 Sedgwick and Shawnee Counties, Kansas, Collateralized Single 11/04 at 105 Aaa 1,041,125
Family Mortgage Refunding Revenue Bonds, Series 1994A-III,
8.125%, 5/01/24 (Alternative Minimum Tax)
- ---------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 1.5%
1,350,000 Commonwealth of Puerto Rico, General Obligation Public Improvement 7/04 at 102 AAA 1,516,496
Bonds of 1994, 6.450%, 7/01/17
350,000 Unified School District No. 437 (Auburn - Washburn), Shawnee 3/02 at 100 AAA 373,674
County, Kansas, General Obligation Refunding Bonds, Series 1992,
6.600%, 9/01/09
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Kansas Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Option Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - 22.3%
4,450,000 State of Kansas, Department of Transportation, Highway Revenue 9/02 at 102 AA+ $ 4,816,502
Bonds, Series 1992A, 6.000%, 9/01/12
1,050,000 Kansas Development Finance Authority, Revenue Bonds, Series 1992T, 12/00 at 102 N/R 1,102,311
(State of Kansas - Kansas Highway Patrol Central Training
Facility), 6.600%, 12/01/07
Puerto Rico Highway and Transportation Authority, Highway Revenue
Bonds, Series W:
1,000,000 5.500%, 7/01/13 No Opt. Call A 1,063,120
1,000,000 5.500%, 7/01/15 No Opt. Call AAA 1,069,090
750,000 Puerto Rico Highway and Transportation Authority, Highway Revenue No Opt. Call A 797,340
Bonds, Series X, 5.500%, 7/01/13
7,800,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 8,022,300
Bonds, Series Y of 1996, 5.500%, 7/01/36
520,000 Puerto Rico Highway and Transportation Authority, Transportation 7/08 at 101 A 493,938
5.000%, 7/01/38
20,000 Puerto Rico Infrastructure Finance Authority, Special Tax Revenue 7/99 at 101 BBB+ 20,463
Bonds, Series 1988A, 7.750%, 7/01/08
500,000 Puerto Rico Public Buildings Authority, Government Facilities 7/07 at 101 1/2 A 497,065
Revenue Bonds, Series B, Guaranteed by the Commonwealth of
Puerto Rico, 5.250%, 7/01/21
250,000 Shawnee County, Kansas, Certificates of Participation, 7/09 at 100 N/R 239,770
Series 1999A (Shawnee Community Mental Health Center, Inc.
Project), 5.350%, 7/01/19
Topeka Public Building Commission, Kansas, Revenue Bonds, Series
1998 (State of Kansas - 10th and Jackson Projects):
1,000,000 5.000%, 6/01/24 6/09 at 100 AAA 976,970
3,250,000 5.000%, 6/01/31 6/09 at 100 AAA 3,146,683
1,000,000 Topeka Public Building Commission, Kansas, Revenue Bonds, Series 6/09 at 100 AAA 970,110
1999 (State of Kansas - Department of Social and Rehabilitation
Services Project), 5.000%, 6/01/30
2,000,000 Virgin Islands Public Finance Authority, Revenue and Refunding 10/08 at 101 BBB- 2,016,520
Bonds (Virgin Islands Matching Fund Loan Notes),
Series 1998A (Senior Lien/Refunding), 5.625%, 10/01/25
14,025,000 The Unified Government of Wyandotte County, Kansas City, Kansas, No Opt. Call AAA 3,049,175
Sales Tax Special Obligation Revenue Bonds (Kansas International
Speedway Corporation Project), Series 1999, 0.000%, 12/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.3%
1,500,000 Puerto Rico Ports Authority, Special Facilities Revenue Bonds, 6/06 at 102 BBB- 1,608,795
1996 Series A (American Airlines, Inc. Project), 6.250%,
6/01/26 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 10.8%
440,000 Unified School District No. 340, Jefferson County, Kansas, 9/04 at 100 AAA 487,137
General Obligation Bonds, Series 1994, 6.350%, 9/01/14
(Pre-refunded to 9/01/04)
12,475,000 Johnson County, Kansas, Residual Revenue and Refunding Bonds, No Opt. Call Aaa 6,639,195
Series 1992, 0.000%, 5/01/12
540,000 City of Kansas City, Kansas, Utility System Refunding and 9/04 at 102 AAA 607,219
Improvement Revenue Bonds, Series 1994, 6.375%, 9/01/23
(Pre-refunded to 9/01/04)
1,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1994 7/04 at 101 1/2 AAA 1,123,330
(General Obligation Bonds), 6.450%, 7/01/17 (Pre-refunded to
7/01/04)
80,000 Puerto Rico Highway and Transportation Authority, Highway 7/02 at 101 1/2 AAA 87,710
Revenue Bonds, Series T, 6.625%, 7/01/18 (Pre-refunded to
7/01/02)
Reno and Labette Counties, Kansas, Single Family Mortgage Revenue
Bonds, Series 1983A:
2,120,000 0.000%, 12/01/15 No Opt. Call AAA 921,670
1,000,000 0.000%, 12/01/15 No Opt. Call Aaa 434,750
2,095,000 Reno, Sedwick, and Finney Counties, Kansas, Single Family No Opt. Call AAA 888,301
Mortgage Revenue Bonds, Series 1984A, 0.000%, 4/01/16
2,250,000 City of Wichita, Kansas, Revenue Bonds (CSJ Health System of 11/01 at 102 A+*** 2,478,038
Wichita, Inc.), Series 1985 XXV (Remarketed), 7.200%, 10/01/15
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Option Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities - 7.7%
1,500,000 City of Gardner, Kansas, Electric Utility System Revenue Bonds, 11/01 at 101 N/R $ 1,589,475
Series 1992 Refunding, 7.000%, 11/01/09
1,000,000 City of Holton, Kansas, Electric System Revenue Bonds, Series 12/08 at 100 AA 963,610
1999A, 5.150%, 12/01/21
Kansas City, Kansas, Utility System Refunding and Improvement
Revenue Bonds, Series 1994:
2,500,000 6.250%, 9/01/14 9/04 at 102 AAA 2,762,675
1,110,000 6.375%, 9/01/23 9/04 at 102 AAA 1,227,272
750,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/08 at 101 1/2 BBB+ 719,460
Series DD, 5.000%, 7/01/28
Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series T:
215,000 6.125%, 7/01/08 7/04 at 102 BBB+ 237,630
150,000 6.000%, 7/01/16 7/04 at 102 BBB+ 160,711
5,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series
O, 0.000%, 7/01/17 No Opt. Call AAA 2,035,399
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 2.9%
3,000,000 Kansas Development Finance Authority, Water Pollution Control 11/03 at 102 AA+ 3,238,589
Revolving Fund Revenue Bonds, 1993 SRF Series II
(Leveraged Bonds), 6.000%, 11/01/14
350,000 City of Newton, Kansas, Wastewater Treatment System Refunding 3/02 at 102 N/R 384,688
Revenue Bonds, Series 1998, 7.125%, 3/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
143,325,000 Total Investments - (cost $118,230,539) - 98.6% 124,655,408
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.4% 1,830,4
-----------------------------------------------------------------------------------------------------------------
Net Assets - 100% $126,485,866
=================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year)
and prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal
and interest. Securities are normally considered to be
equivalent to AAA rated securities .
N/R Investment is not rated.
See accompanying notes to financial statements.
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Missouri Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Cyclical - 0.9%
$ 2,125,000 Missouri Economic Development Export and Infrastructure Board, 12/01 at 102 N/R $2,243,214
Industrial Development
Revenue Refunding Bonds (Drury Inn Project), Series 1988
Remarketing, 8.250%, 12/01/12
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 3.2%
3,000,000 The Industrial Development Authority of the County of Cape 5/08 at 101 AA 2,932,620
Girardeau, Missouri, Solid Waste
Disposal Revenue Bonds (The Procter & Gamble Products Company
Project), 1998 Series, 5.300%, 5/15/28 (Alternative Minimum Tax)
5,500,000 Missouri State Development Finance Board, Solid Waste Disposal No Opt. Call AA 5,397,425
Revenue Bonds (Procter & Gamble Paper Products Company Project),
Series 1999, 5.200%, 3/15/29
(Alternative Minimum Tax) (DD)
- ----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 8.0%
1,000,000 Missouri Higher Education Loan Authority, Student Loan Revenue 2/02 at 102 A 1,053,850
Bonds, Series 1992
Subordinate Lien, 6.500%, 2/15/06 (Alternative Minimum Tax)
4,190,000 Missouri Higher Education Loan Authority, Student Loan 2/04 at 102 A 4,439,724
Revenue Bonds, Series 1994F, 6.750%, 2/15/09 (Alternative
Minimum Tax)
1,155,000 Health and Educational Facilities Authority of the State of No Opt. Call AA 1,185,018
Missouri, Educational Facilities
Revenue Bonds (Rockhurst University), Series 1999, 5.500%,
10/01/25
3,630,000 Health and Educational Facilities Authority of the State of 6/04 at 102 A2 3,886,387
Missouri, Educational Facilities
Revenue Bonds (University of Health Sciences Project), Series
1994, 6.350%, 6/01/14
Health and Educational Facilities Authority of the State of
Missouri, Educational Facilities Revenue Bonds (Maryville
University of Saint Louis Project), Series 1997:
1,475,000 5.625%, 6/15/13 6/07 at 101 Baa1 1,537,865
1,250,000 5.750%, 6/15/17 6/07 at 101 Baa1 1,271,425
3,000,000 Health and Educational Facilities Authority of the State of 11/08 at 101 AA+ 2,831,760
State of Missouri, Educational Facilities
Revenue Bonds (Washington University), Series 1998A, 5.000%,
11/15/37
1,100,000 Health and Educational Facilities Authority of the State of 10/08 at 100 N/R 1,022,890
Missouri, Educational Facilities
Revenue Bonds (The Barstow School), Series 1998, 5.250%,
10/01/23
The Industrial Development Authority of the City of St. Louis,
Missouri, Industrial Revenue Refunding Bonds (Kiel Center
Multipurpose Arena Project), Series 1992:
650,000 7.625%, 12/01/09 (Alternative Minimum Tax) 12/02 at 102 N/R 696,456
1,000,000 7.750%, 12/01/13 (Alternative Minimum Tax) 12/02 at 102 N/R 1,073,730
500,000 7.875%, 12/01/24 (Alternative Minimum Tax) 12/02 at 102 N/R 538,820
1,000,000 Curators of the University of Missouri, Facilities Revenue 11/07 at 101 AA+ 1,059,880
Bonds, Series 1997,
5.800%, 11/01/27
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care - 16.4%
415,000 Dent County, Missouri, Industrial Development Authority, 6/01 at 102 N/R 438,684
Industrial Development Revenue Bonds (Southeast Missouri
Community Treatment Center), 8.500%, 6/01/12
775,000 Farmington, Missouri, Industrial Development Authority, Revenue 6/01 at 102 N/R 821,810
Bonds, Series 1992 (Southeast Missouri Community Treatment
Center Project), 8.500%, 6/01/12
1,150,000 The Industrial Development Authority of the City of Hannibal, 3/06 at 102 AAA 1,197,633
Missouri, Health Facilities Revenue Bonds, Series 1996A (Hannibal
Regional Hospital), 5.750%, 3/01/22
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
The Industrial Development Authority of the County of Jackson,
State of Missouri Health Care System Revenue Bonds, Saint Joseph
Health Center Issue, Series 1992:
$ 2,000,000 6.500%, 7/01/12 7/02 at 102 AAA $2,159,560
6,250,000 6.500%, 7/01/19 7/02 at 102 AAA 6,758,125
2,565,000 Health and Educational Facilities Authority of the State of 2/02 at 102 AAA 2,742,472
Missouri, Health Facilities Revenue Bonds (Health Midwest),
Series 1992B, 6.250%, 2/15/12
555,000 Health and Educational Facilities Authority of the 11/02 at 102 BBB+ 595,010
State of Missouri, Health Facilities Revenue Bonds (Heartland
Health System Project), Series 1992, 6.875%, 11/15/04
Health and Educational Facilities Authority of the State of
Missouri, Health Facilities Revenue Bonds (BJC Health System),
Series 1994A:
2,450,000 6.750%, 5/15/12 No Opt. Call AA 2,895,361
650,000 6.500%, 5/15/20 5/04 at 102 AA 733,551
Health and Educational Facilities Authority of the State of
Missouri, Health Facilities Revenue Bonds (Freeman Health System
Project), Series 1998:
3,700,000 5.250%, 2/15/18 2/08 at 102 BBB+ 3,592,441
1,675,000 5.250%, 2/15/28 2/08 at 102 BBB+ 1,598,486
395,000 Health and Educational Facilities Authority of the 2/06 at 102 BBB+ 418,929
State of Missouri, Health Facilities Revenue Bonds (Lake of the
Ozarks General Hospital Inc.), Series 1996, 6.500%, 2/15/21
Health and Educational Facilities Authority of the State of
Missouri, Health Facilities Revenue Bonds (Capital Region Medical
Center), Series 1998:
790,000 5.250%, 11/01/23 11/06 at 100 BBB+ 757,460
350,000 5.300%, 11/01/28 11/06 at 100 BBB+ 334,439
Health and Educational Facilities Authority of the
State of Missouri, Health Facilities Revenue Bonds (Lester Cox
Medical Center), Series 1992H:
2,650,000 0.000%, 9/01/17 No Opt. Call AAA 1,021,469
4,740,000 0.000%, 9/01/21 No Opt. Call AAA 1,459,114
6,300,000 0.000%, 9/01/22 No Opt. Call AAA 1,836,828
1,000,000 State Environmental Improvement and Energy Resource Authority, No Opt. Call A3 1,088,640
Missouri Pollution Control Revenue Refunding Bonds, American
Cyanamid Company Issue, Series 1994, 5.800%, 9/01/09
3,000,000 The Industrial Development Authority of the County of 5/08 at 101 BBB+ 2,906,070
Taney, Missouri, Hospital Revenue Bonds (The Skaggs Community
Hospital Association), Series 1998, 5.400%, 5/15/28
The Curators of the University of Missouri, Health Facilities Revenue
Bonds (University of Missouri Health System), Series 1996A:
2,000,000 5.500%, 11/01/16 11/06 at 102 AAA 2,041,920
1,390,000 5.600%, 11/01/26 11/06 at 102 AAA 1,434,605
The Industrial Development Authority of the City of West Plains,
Missouri, Hospital Facilities Revenue Bonds (Ozark Medical Center),
Series 1997:
1,000,000 5.500%, 11/15/12 11/07 at 101 BBB- 994,340
2,095,000 5.600%, 11/15/17 11/07 at 101 BBB- 2,068,854
2,230,000 5.650%, 11/15/22 11/07 at 101 BBB- 2,190,150
- ----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 10.8%
650,000 The Industrial Development Authority of Kansas City, Missouri, 2/08 at 102 AAA 659,887
Multi-family Housing Revenue Refunding Bonds (President Gardens
Apartment Project), Series 1997A, 5.550%, 8/01/25
2,000,000 Missouri Economic Development Export and Infrastructure Board, 9/99 at 102 AA 2,053,420
Multi-family Housing Revenue Refunding Bonds, 1991 Series A
(Quality Hill Projects), 7.500%, 9/15/21
(Mandatory put 9/15/11)
885,000 Missouri Housing Development Commission, Multi-family Housing 12/05 at 103 N/R 919,683
Revenue Bonds, Series 1995A (Primm Place Apartments Project),
6.250%, 12/01/17 (Alternative Minimum Tax)
1,000,000 Missouri Housing Development Commission, Multi-family Housing 6/08 at 100 AAA 1,006,360
Revenue Refunding Bonds (FHA-Insured Mortgage Loans), Series 1998,
5.450%, 6/01/28 (Alternative Minimum Tax)
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Missouri Municipal Bond Fund(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 2,815,000 Missouri Housing Development Commission, Multi-family 4/08 at 102 N/R $ 2,804,444
Housing Revenue Bonds (The Mansion Apartments Phase II
Project), Series 1999, 6.125%, 10/01/22 (Alternative Minimum Tax)
655,000 The Industrial Development Authority of the City of Raytown, 1/07 at 100 AAA 667,936
Missouri, Multi-family Housing Refunding Revenue Bonds
(Brittany Place Apartments Project), Series 1997A, 5.600%,
1/01/21 (Alternative Minimum Tax)
2,000,000 Housing Authority of St. Louis County, Missouri, Multi-family 3/05 at 102 AAA 2,133,060
Housing Revenue Refunding Bonds (Kensington Square Apartments
Project), Series 1995, 6.650%, 3/01/20
9,105,000 The Industrial Development Authority of the County of St. 8/06 at 105 AAA 9,977,805
Louis, Missouri, Multi-family Housing Revenue Bonds, Series
1996A (GNMA Mortgage-Backed Securities - Covington Manor
Apartments), 6.875%, 8/20/36 (Alternative Minimum Tax)
3,685,000 Industrial Development Authority of the County of St. Louis, 1/08 at 100 AAA 3,758,221
Missouri, Multi-family Housing Revenue Refunding Bonds
(Bonhomme Village Apartments Project), Series 1997A,
5.450%, 1/01/28
500,000 Industrial Development Authority of the County of St. Louis, 3/09 at 102 AAA 498,405
Missouri, Multi-family Housing Revenue Refunding Bonds
(GNMA Collateralized - Lucas Hunt Village Apartments Project),
Series 1999A, 5.200%, 9/20/31
1,890,000 Land Clearance for Redevelopment Authority of the City of 5/03 at 102 AAA 1,975,315
St. Louis, Missouri, Multi-family Mortgage Refunding Bonds
- Series 1993 (FHA-Insured Mortgage Loan - St. Louis Place
Apartments), 6.250%, 8/01/27
1,425,000 The Industrial Development Authority of University City, 8/07 at 102 Aaa 1,482,570
Missouri, Revenue Refunding Bonds, Series 1997A (GNMA
Collateralized - River Valley Apartments), 5.900%, 2/20/37
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 8.1%
1,500,000 Greene County, Missouri, Collateralized Single Family No Opt. Call AAA 1,632,165
Mortgage Revenue Bonds, Series 1996, 6.300%, 12/01/22
(Alternative Minimum Tax)
1,665,000 Missouri Housing Development Commission, Single Family 1/07 at 102 AAA 1,753,079
Mortgage Revenue Bonds (Homeownership Loan Program),
1996 Series D, 6.125%, 3/01/28 (Alternative Minimum Tax)
920,000 Missouri Housing Development Commission, Single Family 3/07 at 105 AAA 1,039,517
Mortgage Revenue Bonds (Homeownership Loan Program),
1997 Series A-2, 7.300%, 3/01/28 (Alternative
Minimum Tax)
250,000 Missouri Housing Development Commission, Single Family 3/07 at 101 AAA 259,490
Mortgage Revenue Bonds (Homeownership Loan Program),
1997 Series B-2, 5.900%, 9/01/28 (Alternative
Minimum Tax)
105,000 Missouri Housing Development Commission, Single Family 2/00 at 102 AAA 108,201
Mortgage Revenue Bonds (GNMA Mortgage-Backed Securities
Program), 1990 Series A, 7.625%, 2/01/22 (Alternative
Minimum Tax)
Missouri Housing Development Commission, Single
Family Mortgage Revenue Bonds (Homeownership Loan
Program), 1995 Series B Remarketing:
2,140,000 6.375%, 9/01/20 (Alternative Minimum Tax) 9/06 at 102 AAA 2,269,427
1,690,000 6.450%, 9/01/27 (Alternative Minimum Tax) 9/06 at 102 AAA 1,800,036
595,000 Missouri Housing Development Commission, Single Family 6/00 at 102 AAA 616,372
Mortgage Revenue Bonds (GNMA Mortgage-Backed Securities
Program), 1990 Series B, 7.750%, 6/01/22 (Alternative
Minimum Tax)
1,335,000 Missouri Housing Development Commission, Single Family 2/01 at 102 AAA 1,395,262
Mortgage Revenue Bonds (GNMA Mortgage-Backed Securities
Program), 1991 Series A, 7.375%, 8/01/23 (Alternative
Minimum Tax)
Missouri Housing Development Commission, Single Family
Mortgage Revenue Bonds (GNMA Mortgage-Backed Securities
Program), 1994 Series A:
360,000 6.700%, 12/01/07 (Alternative Minimum Tax) 12/04 at 102 AAA 380,030
1,585,000 7.125%, 12/01/14 (Alternative Minimum Tax) 12/04 at 102 AAA 1,704,398
700,000 7.200%, 12/01/17 (Alternative Minimum Tax) 12/04 at 102 AAA 753,459
1,700,000 Missouri Housing Development Commission, Single Family 9/07 at 101 AAA 1,741,973
Mortgage Revenue Bonds (Homeownership Loan Program),
1997 Series C-2 , 5.500%, 9/01/17 (Alternative Minimum
Tax)
980,000 Missouri Housing Development Commission, Single Family 3/08 at 105 AAA 1,076,295
Mortgage Revenue Bonds (Homeownership Loan Program),
1998 Series B-2, 6.400%, 3/01/29 (Alternative Minimum
Tax)
1,200,000 Missouri Housing Development Commission, Single Family 9/08 at 105 AAA 1,313,220
Mortgage Revenue Bonds (Homeownership Loan Program),
1998 Series D-2, 6.300%, 3/01/29 (Alternative Minimum
Tax)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/ Single Family (continued)
$ 3,000,000 Missouri Housing Development Commission, Single Family 9/08 at 101 AAA $ 2,967,120
Mortgage Revenue Bonds (Homeownership Loan Program),
1998 Series E-1, 5.200%, 9/01/23 (Alternative Minimum Tax)
Industrial/Other -0.2%
500,000 City of Jefferson, Missouri, Industrial Refunding 4/00 at 100 N/R 504,735
Revenue Bond, Series 1992 (Scholastic, Inc. Project),
7.200%, 4/01/03
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 8.3%
1,000,000 The Industrial Development Authority of the City of 12/08 at 104 AAA 1,005,150
Bridgeton, Missouri, Facilities Revenue Bonds, Series
1999A (GNMA Collateralized- Mizpah Assisted Living
Services Project), 5.600%, 12/20/38
4,800,000 The Industrial Development Authority of Kansas City, 11/08 at 102 N/R 4,593,744
Missouri, Retirement Facility Refunding and Improvement
Revenue Bonds, Series 1998A (Kingswood Project),
5.875%, 11/15/29
1,000,000 The Industrial Development Authority of the City of 8/05 at 102 N/R 1,062,580
Lees Summit, Missouri Health Facilities Revenue Bonds
(John Knox Village Project), Series 1995, 6.625%,
8/15/13
3,750,000 Health and Educational Facilities Authority of the 2/06 at 102 N/R 3,918,638
State of Missouri, Health Facilities Revenue Bonds
(Lutheran Senior Services), Series 1996A,
6.375%, 2/01/27
3,000,000 Health and Educational Facilities Authority of the 2/07at 102 N/R 3,073,080
State of Missouri, Health Facilities Revenue Bonds
(Lutheran Senior Services), Series 1997, 5.875%,
2/01/23
The Industrial Development Authority of the County of
St. Louis, Missouri, Refunding Revenue Bonds
(Friendship Village of South County Project), Series
1996A:
1,265,000 5.750%, 9/01/05 No Opt. Call N/R 1,337,662
1,800,000 6.250%, 9/01/10 9/06 at 102 N/R 1,938,690
The Industrial Development Authority of the County of
St. Louis, Missouri, Revenue Bonds (Bethesda Living
Centers - Autumn View Gardens at Schuetz Road Project),
Series 1998B:
475,000 5.750%, 8/15/18 8/03 at 100 N/R 456,546
1,500,000 5.850%, 8/15/28 8/08 at 102 N/R 1,456,950
2,425,000 The Industrial Development Authority of the County of 8/05 at 104 AAA 2,628,991
St. Louis, Missouri, Healthcare Facilities Revenue
Bonds, Series1995 (GNMA Collateralized -Mother of
Perpetual Help Project), 6.250%, 8/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -3.3%
1,000,000 Jefferson City School District, Missouri, General No Opt. Call Aa 1,180,490
Obligation Bonds, Series 1991A, 6.700%, 3/01/11
Commonwealth of Puerto Rico, General Obligation Public
Improvement Bonds of 1994:
2,500,000 6.450%, 7/01/17 7/04 at 102 AAA 2,808,325
3,350,000 6.500%, 7/01/23 7/04 at 1011/2 AAA 3,770,794
1,540,000 Francis Howell School District, St. Charles County, No Opt. Call AAA 772,279
Missouri, General Obligation Bonds, Series 1998C
(Missouri Direct Deposit Program), 0.000%, 3/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 14.4%
2,285,000 The Public Building Corporation of the City of Branson, 11/06 at 101 BBB 2,425,710
Missouri, Leasehold Revenue Bonds, Series 1995 (City
Hall and Fire Station Improvement Projects), 6.250%,
11/01/12
1,025,000 Excelsior Springs, Missouri, School District Building No Opt.Call AAA 496,315
Corporation, Leasehold Revenue Bonds, Excelsior Springs
40 School District of Excelsior Springs, Missouri,
Series 1994, 0.000%, 3/01/14
2,000,000 Jackson County, Missouri, Public Facilities Authority, 12/04 at 100 AAA 2,166,620
Leasehold Revenue Refunding and Improvement Bonds
(Capital Improvements Project), Series 1994, 6.125%,
12/01/15
1,200,000 Land Clearance For Redevelopment Authority, Kansas 12/05 at 102 AAA 1,276,428
City, Missouri, Lease Revenue Bonds (Municipal
Auditorium and Muehlebach Hotel Redevelopment Project),
Series 1995A, 5.900%, 12/01/18
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Missouri Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
The City of Lake Saint Louis, Missouri, Certificates of
Participation, Public Facilities Authority, Series 1993
(Municipal Golf Course Project):
$1,020,000 6.900%, 12/01/05 12/02 at 103 N/R $ 1065,900
2,720,000 7.550%, 12/01/14 12/02 at 103 N/R 2,856,000
1,500,000 Missouri School Boards Association, Insured Lease 3/06 at 101 AAA 1,585,725
Participation Certificates (Fox C-6 School District, Jefferson
County, Missouri Project), Series 1996, 5.625%, 3/01/11
320,000 State of Missouri, Certificates of Participation (Psychiatric 11/05 at 100 AA 340,003
Rehabilitation Center Project), Series A 1995, 6.000%,
11/01/15
1,500,000 Puerto Rico Highway and Transportation Authority, Highway 7/02 at 101 1/2 A 1,627,110
Revenue Bonds, 1992 Series V, 6.625%, 7/01/12
5,900,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 6,068,150
Revenue Bonds, 1996 Series Y, 5.500%, 7/01/36
1,400,000 Puerto Rico Highway and Transportation Authority, Highway No Opt. Call AAA 1,496,726
Revenue Bonds, Series W, 5.500%, 7/01/15
5,500,000 Puerto Rico Public Buildings Authority, Revenue Refunding No Opt. Call A 5,763,120
Bonds, Series L, Guaranteed by the Commonwealth of Puerto
Rico, 5.500%, 7/01/21
250,000 Puerto Rico Public Buildings Authority, Government 7/07 at 101 1/2 A 248,533
Facilities Revenue Bonds, Series B, Guaranteed by the
Commonwealth of Puerto Rico, 5.250%, 7/01/21
3,000,000 Regional Convention and Sports Complex Authority, St. Louis 8/03/ at 102 Aa3 3,106,500
County, Missouri, Convention and Sports Facility Project
Refunding Bonds, Series B 1993, 5.750%, 8/15/21
780,000 Land Clearance for Redevelopment Authority of the City of St. 7/07 at 101 AAA 787,753
Louis, Missouri Kiel Site Lease Revenue Refunding Bonds,
Series 1997B, 5.300%, 7/01/16
Regional Convention and Sports Complex Authority, City of St.
Louis, Missouri, Convention and Sports Facility Project
Refunding Bonds, Series C 1997:
1,660,000 5.300%, 8/15/17 8/07 at 100 AAA 1,675,156
4,000,000 5.300%, 8/15/20 8/07 at 100 AAA 4,032,800
45,000 The City of St. Louis, Missouri, Regional Convention and 8/03 at 100 N/R 49,133
Sports Complex Authority, Convention and Sports Facility
Project Bonds, Series C of 1991, 7.900%, 8/15/21
- -------------------------------------------------------------------------------------------------------------------------------
Transportation - 4.2%
2,000,000 Puerto Rico Ports Authority, Special Facilities Revenue Bonds, 6/06 at 102 BBB 2,145,060
1996 Series A (American Airlines, Inc. Project), 6.250%,
6/01/26 (Alternative Minimum Tax)
The City of St. Louis, Missouri, Airport Revenue Bonds, Series
1997 (1997 Capital Improvement Program), Lambert-St. Louis
International Airport:
285,000 5.250%, 7/01/22 (Alternative Minimum Tax) 7/07 at 101 AAA 278,830
4,500,000 5.250%, 7/01/27 (Alternative Minimum Tax) 7/07 at 101 AAA 4,393,215
4,050,000 The City of St. Louis, Missouri, at 102 Parking Revenue 12/06 at 102 AAA 4,104,189
Refunding Bonds, Series 1996, 5.375%, 12/15/21
- -------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 11.9%
4,500,000 Cape Girardeau County, Missouri, Single Family Mortgage No Opt. Call Aaa 2,076,705
Revenue Bonds, Series 1983, 0.000%, 12/01/14
1,500,000 Clay County Public Building Authority, Leasehold Refunding and 5/02 at 102 N/R*** 1,676,970
Improvement Revenue Bonds, Series 1992 (Paradise Pointe Golf
Course Project), 7.625%, 5/15/14 (Pre-refunded to 5/15/02)
1,070,000 Greene County, Missouri, Single Family Mortgage Revenue Bonds, No Opt. Call Aaa 454,868
Series 1984, 0.000%, 3/01/16
50,000 City of Hamilton, Missouri, Waterworks Revenue Bonds, Series 7/99 at 103 1/2 N/R*** 51,943
1989, 7.750%, 7/01/14 (Pre-refunded to 7/01/99)
4,000,000 City of Kansas City, Missouri, General Improvement Airport 9/04 at 101 AAA 4,555,320
Revenue Bonds, Series 1994B, 6.875%, 9/01/14 (Pre-refunded to
9/01/04)
645,000 Kansas City Municipal Assistance Corporation, Leasehold 11/01 at 101 A3*** 692,904
Improvement Revenue Bonds, Series 1991A (Truman Medical Center
Charitable Foundation Project), 7.000%, 11/01/09 (Pre-refunded
to 11/01/01)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 2,500,000 The Industrial Development Authority of the City of Kirkwood, 7/02 at 102 N/R*** $ 2,721,525
Missouri, Health Care System Revenue Bonds, St. Joseph Hospital
of Kirkwood Issue, Series 1992, 6.500%, 7/01/12 (Pre-refunded
to 7/01/02)
1,000,000 Missouri Economic Development Export and Infrastructure Board, 5/02 at 100 N/R*** 1,086,650
Industrial Development Revenue Bonds (Community Water Company
Inc. Project), Series 1992, 7.125%, 5/01/17 (Alternative
Minimum Tax) (Pre-refunded to 5/15/02)
805,000 Health and Educational Facilities Authority of the State of 2/06 at 102 BBB+*** 912,540
Missouri, Health Facilities Revenue Bonds (Lake of the Ozarks
General Hospital Inc.), Series 1996, 6.500%, 2/15/21 (Pre-
refunded to 2/15/06)
1,500,000 Health and Educational Facilities Authority of the State of 10/04 at 101 A2*** 1,666,695
Missouri, Educational Facilities Revenue Bonds (Saint Louis
University High School), Series 1994, 6.350%, 10/01/14 (Pre-
refunded to 10/01/04)
155,000 State Environmental Improvement and Energy Resource Authority, 10/00 at 102 N/R*** 164,999
State of Missouri, Water Pollution Control Revenue Bonds (State
Revolving Fund Program), Series 1990A, 7.000%, 10/01/10 (Pre-
refunded to 10/01/00)
Industrial Development Authority of the County of St. Louis,
Missouri, Health Care Facilities Revenue Bonds, Series 1992
(Lutheran Health Care Association):
2,565,000 7.375%, 2/01/14 (Pre-refunded to 2/01/02) 2/02 at 102 N/R*** 2,832,299
2,650,000 7.625%, 2/01/22 (Pre-refunded to 2/01/02) 2/02 at 102 N/R*** 2,942,799
290,000 Certificates of Receipt, Series 1993, St. Louis County, No Opt. Call AAA 306,910
Missouri, GNMA Collateralized Mortgage Revenue Bonds, Series
1989A (Escrowed with United States Governmental Obligations),
5.650%, 8/01/15 (Alternative Minimum Tax)
1,000,000 Regional Convention and Sports Complex Authority, County of St. 8/03 at 100 AAA 1,117,050
Louis, Missouri, Convention and Sports Facility Project Bonds,
Series 1991B, 7.000%, 8/15/11 (Pre-refunded to 8/15/03)
1,325,000 Land Clearance for Redevelopment Authority of the City of St. 7/00 at 102 N/R*** 1,409,588
Louis, Lease Revenue Bonds, Series 1992 (Station East
Redevelopment Project), 7.750%, 7/01/21 (Pre-refunded to
7/01/00)
3,975,000 City of St. Louis, Missouri, Parking Revenue Bonds, Series 12/02 at 102 AA-*** 4,401,915
1992, 6.625%, 12/15/21 (Pre-refunded to 12/15/02)
955,000 Regional Convention and Sports Complex Authority, City of St. 8/03 at 100 Aaa 1,098,794
Louis, Missouri, Convention and Sports Facility Bonds, Series
1991C, 7.900%, 8/15/21 (Pre-refunded to 8/15/03)
445,000 The Board of Education of the City of St. Louis, Missouri, 10/01 at 102 AAA 483,577
General Obligation School Building Bonds, Series 1991, 6.750%,
4/01/11 (Pre-refunded to 10/01/01)
Vandalia, Missouri, Combined Water and Sewer System Revenue Bonds,
Series 1990:
50,000 7.625%, 4/01/06 (Pre-refunded to 4/01/00) 4/00 at 101 N/R*** 52,292
50,000 7.625%, 4/01/07 (Pre-refunded to 4/01/00) 4/00 at 101 N/R*** 52,292
- --------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.0%
1,500,000 State Environmental Improvement and Energy Resource Authority, 5/00 at 102 AA- 1,572,585
Missouri, Environmental Improvement Revenue Bonds (Union
Electric Company Project), Series 1990A, 7.400%, 5/01/20
1,500,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, No Opt. Call AAA 610,620
Series O, 0.000%, 7/01/17
2,000,000 City of Sikeston, Missouri, Electric System Revenue Bonds, 1992 No Opt. Call AAA 2,263,800
Series, 6.200%, 6/01/10
City of Sikeston, Missouri, Electric System Revenue Refunding
Bonds, 1996 Series:
2,750,000 6.000%, 6/01/13 No Opt. Call AAA 3,079,258
1,070,000 6.000%, 6/01/14 No Opt. Call AAA 1,200,722
6,000,000 6.000%, 6/01/16 No Opt. Call AAA 6,700,260
- --------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -3.1%
20,000 Public Water Supply District No. 6, Clay County, Missouri, 6/99 at 101 N/R 20,259
Revenue Bonds, Series 1988, 8.200%, 6/01/01
400,000 East Central Missouri Water and Sewer Authority, St. Charles 8/00 at 100 N/R 408,868
County, Missouri, Water System Refunding Revenue Bonds, Series
1992 (St. Charles County Public Water Supply District No. 2
Project), 7.000%, 8/01/08
3,600,000 State Environmental Improvement and Energy Resources Authority, 12/01 at 102 Aa1 3,885,120
State of Missouri, Water Pollution Control Revenue Bonds (State
Revolving Fund Program - Multiple Participants), Series 1991A,
6.875% 6/01/14
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Missouri Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optioal Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 2,000,000 State Environmental Improvement and Energy Resources 7/02 at 102 Aa1 $ 2,150,960
Authority, State of Missouri, Water Pollution Control Revenue
Bonds (State Revolving Fund Program - Multiple Participant
Series), Series 1992A, 6.550%, 7/01/14
600,000 State Environmental Improvement and Energy Resources 7/04 at 102 Aa1 677,387
Authority, State of Missouri, Water Pollution Control Revenue
Bonds (State Revolving Fund Program - Multiple Participant
Series), Series 1994B, 7.200%, 7/01/16
595,000 State Environmental Improvement and Energy Resources 10/00 at 102 Aa1 830,824
Authority, State of Missouri, Water Pollution Control Revenue
Bonds (State Revolving Fund Program - City of Springfield
Project), Series 1990A, 7.000%, 10/01/10
125,000 City of Osceola, Missouri, Sewer System Refunding and 11/99 at 100 N/R 126,530
Improvement Revenue Bonds, Series 1989, 8.000%, 11/01/09
- --------------------------------------------------------------------------------------------------------------------------------
$ 257,070,000 Total Investments - (cost $241,080,848) - 98.8% 254,587,623
==============------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 3,033,445
-------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 257,621,068
==============================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public acccountants): Dates (month and year)
and prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal
and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated
(DD) Portion of security purchased on a delayed basis (note
1).
See accompanying notes to financial statements.
22
<PAGE>
Portfolio of Investments
Nuveen Flagship Wisconsin Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods - 1.5%
Community Development Authority of the Village of Menomomee Falls,
Wisconsin, Development Revenue Bonds, Series 1996 (Herker Industries,
Inc. Project):
$ 255,000 5.200%, 3/01/07 (Alternative Minimum Tax) 3/01 at 103 N/R $ 257,764
300,000 5.250%, 3/01/08 (Alternative Minimum Tax) 3/01 at 103 N/R 302,586
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 2.7%
1,000,000 Redevelopment Authority of the City of Green Bay, Wisconsin, Industrial
Development Revenue Bonds, Series 1999 (Fort James Project), 5.600%, No Opt. Call Baa2 1,003,530
5/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 4.3%
475,000 Housing Authority of the City of Ashland, Wisconsin, Student Housing
Revenue Bonds, Series 1998 (Northland College Project), 5.100%, 4/01/18 4/08 at 100 Aa3 461,581
500,000 Community Development Authority of the City of Madison, Wisconsin,
Fixed Rate Development Revenue Bonds, Series 1998A (Fluno Center Project), 11/06 at 102 AA- 491,910
5.000%, 11/01/20
600,000 University of Puerto Rico, University System Revenue Bonds, Series M,
5.250%, 6/01/25 6/05 at 101 1/2 AAA 602,916
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 2.8%
500,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority, Hospital Revenue Bonds, 1/05 at 102 AAA 548,130
1995 Series A (Hospital Auxilio Mutuo Obligated Group Project),
6.250% 7/01/24
450,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority, Hospital Revenue Refunding Bonds, 8/05 at 101 1/2 AAA 484,218
1995 Series A (FHA-Insured Mortgage Pila Hospital Project), 5.875%,
8/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 6.3%
Housing Authority of Dane County, Wisconsin, Multi-family Housing
Revenue Bonds (Forest Harbor Apartments Project):
25,000 5.900%, 7/01/12 7/02 at 102 N/R 25,926
50,000 5.950%, 7/01/13 7/02 at 102 N/R 51,622
50,000 6.000%, 7/01/14 7/02 at 102 N/R 51,417
200,000 Redevelopment Authority of the City of Milwaukee, Wisconsin,
Multi-family Housing Revenue Bonds, Series 1993 8/07 at 102 N/R 207,852
(FHA-Insured Mortgage Loan - City Hall Square
Apartments Project), 6.000%, 8/01/22 (Alternative Minimum Tax)
500,000 Housing Authority of the City of Sheboygan, Wisconsin, Multi-family
Revenue Refunding Bonds, Series 1998A (Lake Shore Apartments), 5/06 at 102 AAA 503,215
5.100%, 11/20/26
300,000 Walworth County, Wisconsin, Housing Authority, Housing Revenue Bonds,
Series 1997 (FHA-Insured Mortgage Loan - Kiwanis Heritage, Inc. 9/05 at 102 N/R 305,739
Senior Apartments Project), 5.550%, 9/01/22
Housing Authority of the City of Waukesha, Wisconsin,
Multi-family Housing Revenue Refunding Bonds, Series 1996A
(GNMA Collateralized Mortgage Loan - Westgrove Woods
Project) :
350,000 5.800%, 12/01/18 (Alternative Minimum Tax) 12/06 at 102 AAA 364,795
750,000 6.000%, 12/01/31 (Alternative Minimum Tax) 12/06 at 102 AAA 786,533
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 3.8%
1,000,000 Guam Housing Corporation, Single Family Mortgage Revenue Bonds
(Guaranteed Mortgage-Backed Securities Program, 1998 Series A, 5.750%, No Opt. Call AAA 1,067,490
9/01/31 (Alternative Minimum Tax)
205,000 Puerto Rico Housing Bank and Finance Agency, Affordable Housing
Mortgage Subsidy Program, Single Family Mortgage Revenue Bonds, 4/05 at 102 AAA 215,055
Portfolio I, 6.250%, 4/01/29 (Alternative Minimum Tax)
115,000 Virgin Islands Housing Finance Authority, Single Family Mortgage
Revenue Refunding Bonds (GNMA Mortage-Backed Securities Program), 3/05 at 102 AAA 122,409
1995 Series A, 6.450%, 3/01/16 (Alternative Minimum Tax)
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Flagship Wisconsin Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Care - 7.9%
Housing Authority of Sheboygan County, Wisconsin, Housing
Revenue Refunding Bonds (Rocky Knoll Health Center Project),
Series 1994:
$ 150,000 5.300%, 12/01/17 12/04 at 100 A1 $ 148,551
195,000 5.300%, 12/01/18 12/04 at 100 A1 192,319
395,000 5.300%, 12/01/19 12/04 at 100 A1 387,878
1,000,000 Housing Authority of the City of Superior, Wisconsin, Hospital 7/04 at 102 N/R
Revenue Refunding Bonds1,042,690 Series 1996 (GNMA Collateralized
- St. Francis Home, Inc. Project), 6.150%, 7/20/31
1,120,000 Waukesha County Housing Authority, Housing Revenue Refunding Bonds, Series 12/03 at 102 N/R 1,101,318
1998 (The Arboretum Project), 5.250%, 12/01/21 (Alternative Minimum Tax)
(Optional put 12/01/12)
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 4.8%
250,000 Government of Guam, General Obligation Bonds, Series 1993A, 5.400%, 11/03 at 102 BBB- 250,333
11/15/18
1,300,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 5.375%, 7/07 at 100 A 1,310,114
7/01/25
200,000 Commonwealth of Puerto Rico, Public Improvement General Obligation 7/08 at 101 A 192,108
Refunding Bonds, Series 1998, 5.000%, 7/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 43.4%
1,500,000 Community Development Authority of the City of Cudahy, Wisconsin, 6/06 at 100 N/R 1,565,700
Redevelopment Lease Revenue Bonds, Series 1995, 6.000%, 6/01/11
1,000,000 Redevelopment Authority of the Village of De Forest, Wisconsin, 2/08 at 100 N/R 970,280
Redevelopment Lease Revenue Bonds, Series 1999B, 5.100%, 2/01/18
1,500,000 Community Development Authority of the City of Glendale, Wisconsin, 9/08 at 100 N/R 1,507,575
Community Development Lease Revenue Bonds, Series 1998A, 5.400%,
9/01/18
500,000 Community Development Authority of the Village of Jackson, Wisconsin, 12/09 at 100 N/R 490,085
Community Development Revenue Refunding Bonds, Series 1999, 5.100%,
12/01/17
300,000 Community Development Authority of the City of Madison, Wisconsin, 3/05 at 100 Aa2 322,200
Lease Revenue Bonds, Series 1995 (Monona Terrace Community and
Convention Center Project), 6.100%, 3/01/10
200,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, Series 7/06 at 101 1/2 A 197,704
1995, Guaranteed by the Commonwealth of Puerto Rico, 5.000%,
7/01/15
320,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/02 at 101 1/2 A 347,117
Bonds, 1992 Series V, 6.625%, 7/01/12
600,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/06 at 101 1/2 A 613,098
Bonds, 1996 Series Y, 5.500%, 7/01/26
Puerto Rico Highway and Transportation Authority, Transportation
Revenue Bonds, Series A:
1,000,000 0.000%, 7/01/17 No Opt. Call AAA 407,080
1,200,000 5.000%, 7/01/17 7/08 at 101 A 1,139,856
750,000 Puerto Rico Infrastructure Financing Authority, Special Tax Revenue 1/08 at 101 AAA 745,988
Bonds, Series 1997A, 5.000%, 7/01/17
600,000 Puerto Rico Public Buildings Authority, Public Education and Health , 7/03 at 101 1/2 A 634,176
Facilities Refunding Bonds Series M, Guaranteed by the Commonwealth
of Puerto Rico, 5.750%, 7/01/15
1,250,000 Puerto Rico Public Buildings Authority, Government Facilities Revenue 7/07 at 101 1/2 A 1,242,663
Bonds, Series B, Guaranteed by the Commonwealth of Puerto Rico,
5.250%, 7/01/21
Southeast Wisconsin Professional Baseball Park District, Sales Tax
Revenue Bonds, Series 1997:
1,390,000 0.000%, 12/15/27 No Opt. Call AAA 302,408
1,000,000 0.000%, 12/15/29 No Opt. Call AAA 195,220
500,000 Southeast Wisconsin Professional Baseball Park District, Sales Tax No Opt. Call AAA 524,455
Revenue Refunding Bonds, Series 1998A, 5.500%, 12/15/26
375,000 Waterfront Redevelopment Authority of the City of Sturgeon Bay, 10/08 at 100 N/R 354,068
Wisconsin, Redevelopment Lease Revenue Bonds, Series 1998A,
5.200%, 10/01/21
Community Development Authority of the Village of Sturtevant,
Wisconsin, Redevelopment Lease Revenue Refunding Bonds, Series
1999:
775,000 4.700%, 12/01/11 12/08 at 100 N/R 767,266
335,000 4.800%, 12/01/12 12/08 at 100 N/R 332,075
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 600,000 Virgin Islands Public Finance Authority, Revenue and Refunding Bonds 10/08 at 101 BBB- $ 604,956
(Virgin Islands Matching Fund Loan Notes), Series 1998A (Senior Lien
/Refunding), 5.625%, 10/01/25
500,000 Wauwatosa Redevelopment Authority, Milwaukee County, Wisconsin, 12/07 at 100 AAA 527,080
Redevelopment Authority Lease Revenue Bonds, Series 1997, 5.650%,
12/01/16
1,500,000 Wisconsin Center District, Senior Dedicated Tax Revenue Bonds, Series No Opt. Call AAA 568,515
1996A, 0.000%, 12/15/17
Wisconsin Center District, Junior Dedicated Tax Revenue Refunding
Bonds, Series 1999:
1,000,000 5.250%, 2/15/23 No Opt. Call AAA 1,018,730
500,000 5.250%, 12/15/27 No Opt. Call AAA 508,550
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.5%
500,000 Puerto Rico Ports Authority, Special Facilities Revenue Bonds, 1996 6/06 at 102 BBB- 536,265
Series A (American Airlines, Inc. Project), 6.250%, 6/01/26
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 12.0%
590,000 Commonwealth of Puerto Rico, General Obligation Public Improvement 7/02 at 101 1/2 AAA 649,844
Bonds of 1992, 6.800%, 7/01/21 (Pre-refunded to 7/01/02)
145,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 7/04 at 102 BBB+*** 162,693
7/01/24 1994-T, 6.375%, Pre-refunded to 7/01/04)
125,000 Puerto Rico Telephone Authority, Revenue Refunding Bonds, Series 1/03 at 101 1/2 AAA 132,920
M, 5.400%, 1/01/08 (Pre-refunded to 1/01/03)
Southeast Wisconsin Professional Baseball Park District, Sales
Tax Revenue Bonds, Series 1996:
225,000 5.650%, 12/15/16 (Pre-refunded to 3/13/07) 3/07 at 101 AAA 244,737
1,600,000 5.800%, 12/15/26 (Pre-refunded to 3/13/07) 3/07 at 101 AAA 1,761,584
Redevelopment Authority of the City of Superior, Wisconsin,
Revenue Bonds, Series 1994 (Superior Memorial Hospital Inc.,
FHA-Insured Mortgage Loan):
150,000 5.600%, 11/01/07 (Pre-refunded to 5/01/02) 5/02 at 102 AA*** 159,509
175,000 5.700%, 11/01/09 (Pre-refunded to 5/01/02) 5/02 at 102 AA*** 186,022
1,000,000 Wisconsin Center District, Junior Dedicated Tax Revenue Bonds, 12/06 at 101 A*** 1,091,579
Series 1996B, 5.700%, 12/15/20 (Pre-refunded to 12/15/06)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.8%
315,000 Guam Power Authority, Revenue Bonds, 1992 Series A, 6.300%, 10/02 at 102 BBB 343,003
10/01/22
1,085,000 Guam Power Authority, Revenue Bonds, 1993 Series A, 5.250%, 10/01/23 10/03 at 102 BBB 1,060,858
115,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 7/04 at 102 BBB+ 123,211
6.000%, 7/01/16
300,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, 7/05 at 100 BBB+ 299,012
Series Z, 5.250%, 7/01/21
650,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series AA, 7/07 at 101 1/2 AAA 661,108
5.375%, 7/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
$38,405,000 Total Investments - (cost $34,983,288) - 97.8% 35,779,189
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.2% 797,457
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $36,576,646
====================================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year) and
prices of the earliest optional call or redemption. There
may be other call provisions at varying prices at later
dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal and
interest. Securities are normally considered to be
equivalent to AAA rated securities. N/R Investment is not
rated.
See accompanying notes to financial statements.
25
<PAGE>
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $ 124,655,408 $ 254,587,623 $ 35,779,189
Cash -- 934,608 247,331
Receivables:
Fund Manager (note 6) -- -- 975
Interest 1,833,137 4,637,090 629,944
Investments sold 245,299 610,000 --
Shares sold 216,515 541,403 59,486
Other assets 99,847 153,076 33,409
- ------------------------------------------------------------------------------------------------------------------------
Total assets 127,050,206 261,463,800 36,750,334
- ------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 162,762 -- --
Payables:
Investments purchased -- 2,501,069 --
Shares redeemed 70,349 676,343 20,411
Accrued expenses:
Management fees (note 6) 52,892 114,759 --
12b-1 distribution and service fees (notes 1 and 6) 28,475 53,472 10,151
Other 48,681 82,609 54,136
Dividends payable 201,181 414,480 88,990
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 564,340 3,842,732 173,688
- ------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $ 126,485,866 $ 257,621,068 $ 36,576,646
========================================================================================================================
Class A Shares (note 1)
Net assets $ 113,139,895 $ 238,497,570 $ 29,217,432
Shares outstanding 10,781,680 21,447,292 2,863,862
Net asset value and redemption price per share $ 10.49 $ 11.12 $ 10.20
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.95 $ 11.61 $ 10.65
========================================================================================================================
Class B Shares (note 1)
Net assets $ 6,496,553 $ 5,286,196 $ 3,795,001
Shares outstanding 623,031 475,775 371,022
Net asset value, offering and redemption price per share $ 10.43 $ 11.11 $ 10.23
========================================================================================================================
Class C Shares (note 1)
Net assets $ 6,170,510 $ 13,443,921 $ 3,457,285
Shares outstanding 586,927 1,209,958 338,278
Net asset value, offering and redemption price per share $ 10.51 $ 11.11 $ 10.22
========================================================================================================================
Class R Shares (note 1)
Net assets $ 678,908 $ 393,381 $ 106,928
Shares outstanding 64,330 35,374 10,449
Net asset value, offering and redemption price per share $ 10.55 $ 11.12 $ 10.23
========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
Statement of Operations
Year Ended May 31, 1999
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 6,567,781 $ 14,608,020 $ 1,686,624
- ----------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 652,522 1,384,679 178,306
12b-1 service fees - Class A (notes 1 and 6) 218,928 477,400 54,123
12b-1 distribution and service fees - Class B (notes 1 and 6) 47,078 36,025 26,697
12b-1 distribution and service fees - Class C (notes 1 and 6) 30,218 91,871 18,488
Shareholders' servicing agent fees and expenses 50,392 122,883 34,365
Custodian's fees and expenses 51,760 62,708 54,717
Trustees' fees and expenses (note 6) 2,674 4,091 2,200
Professional fees 16,865 23,948 8,527
Shareholders' reports - printing and mailing expenses 44,625 68,055 31,648
Federal and state registration fees 8,559 8,077 4,608
Other expenses 5,673 13,655 1,524
- ----------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,129,294 2,293,392 415,203
Custodian fee credit (note 1) (1,884) (1,015) (6,040)
Expense reimbursement (note 6) (173,046) (4,300) (156,046)
- ----------------------------------------------------------------------------------------------------------------------
Net expenses 954,364 2,288,077 253,117
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 5,613,417 12,319,943 1,433,507
- ----------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions (notes 1 and 4) 392,767 932,600 31,594
Net change in unrealized appreciation or depreciation of investments (1,874,001) (3,631,812) (354,954)
- ----------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (1,481,234) (2,699,212) (323,360)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 4,132,183 $ 9,620,731 $ 1,110,147
======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Kansas Missouri
------------------------------ ---------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/99 5/31/98 5/31/99 5/31/98
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 5,613,417 $ 4,985,423 $ 12,319,943 $ 12,020,586
Net realized gain from investment transactions (notes 1 and 4) 392,767 219,884 932,600 1,812,321
Net change in unrealized appreciation or depreciation of investments (1,874,001) 3,771,101 (3,631,812) 7,426,322
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 4,132,183 8,976,408 9,620,731 21,259,229
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (5,236,017) (4,879,573) (11,626,924) (11,520,934)
Class B (199,683) (74,108) (155,720) (44,804)
Class C (171,237) (28,659) (531,389) (452,917)
Class R (8,514) (638) (4,200) (2,126)
- --------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,615,451) (4,982,978) (12,318,233) (12,020,781)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 31,570,124 19,450,846 30,981,161 29,016,642
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 2,397,854 2,514,735 5,097,764 6,950,162
- --------------------------------------------------------------------------------------------------------------------------------
33,967,978 21,965,581 36,078,925 35,966,804
Cost of shares redeemed (13,183,041) (15,361,968) (22,186,899) (26,158,524)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 20,784,937 6,603,613 13,892,026 9,808,280
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 19,301,669 10,597,043 11,194,524 19,046,728
Net assets at the beginning of year 107,184,197 96,587,154 246,426,544 227,379,816
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 126,485,866 $ 107,184,197 $ 257,621,068 $ 246,426,544
================================================================================================================================
Balance of undistributed net investment income
at end of year $ 412 $ 2,446 $ 5,069 $ 3,359
================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
Wisconsin
--------------------------------
Year Ended Year Ended
5/31/99 5/31/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,433,507 $ 944,621
Net realized gain from investment transactions (notes 1 and 4) 31,594 1,965
Net change in unrealized appreciation or depreciation of investments (354,954) 867,069
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 1,110,147 1,813,655
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,227,494) (888,945)
Class B (104,859) (30,662)
Class C (97,280) (21,939)
Class R (3,847) (2,181)
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (1,433,480) (943,727)
- ---------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 10,740,181 13,525,996
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 960,959 586,627
- ---------------------------------------------------------------------------------------------------------------------------
11,701,140 14,112,623
Cost of shares redeemed (2,401,689) (1,522,817)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 9,299,451 12,589,806
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 8,976,118 13,459,734
Net assets at the beginning of year 27,600,528 14,140,794
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 36,576,646 $ 27,600,528
===========================================================================================================================
Balance of undistributed net investment income at end of year $ 947 $ 920
===========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust IV (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Kansas Municipal Bond Fund ("Kansas"), the
Nuveen Flagship Missouri Municipal Bond Fund ("Missouri") and the Nuveen
Flagship Wisconsin Municipal Bond Fund ("Wisconsin") (collectively, the
"Funds"), among others. The Trust was organized as a Massachusetts business
trust on July 1, 1996.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitment. At May
31, 1999, Missouri had an outstanding delayed delivery purchase commitment of
$2,501,069. There were no such outstanding purchase commitments in either of the
other Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. All monthly
tax-exempt income dividends paid during the fiscal year ended May 31, 1999, have
been designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
30
<PAGE>
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of shareholders.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended May 31, 1999.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Kansas
-------------------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
-------------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 2,070,976 $22,111,543 1,446,744 $15,169,400
Class B 338,463 3,592,058 246,506 2,575,382
Class C 485,599 5,195,815 154,351 1,624,614
Class R 63,074 670,708 7,647 81,450
Shares issued to shareholders due to reinvestment of distributions:
Class A 204,225 2,180,079 235,108 2,451,515
Class B 11,758 124,503 4,460 46,453
Class C 8,496 90,854 1,567 16,481
Class R 225 2,418 27 286
- ---------------------------------------------------------------------------------------------------------------------------------
3,182,816 33,967,978 2,096,410 21,965,581
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,133,132) (12,087,524) (1,456,152) (15,220,254)
Class B (34,327) (362,189) (3,593) (37,812)
Class C (68,688) (732,197) (3,309) (34,615)
Class R (104) (1,131) (6,549) (69,287)
- ---------------------------------------------------------------------------------------------------------------------------------
(1,236,251) (13,183,041) (1,469,603) (15,361,968)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase 1,946,565 $20,784,937 626,807 $6,603,613
=================================================================================================================================
</TABLE>
31
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Missouri
-------------------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
-------------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 2,059,573 $23,245,894 2,105,625 $23,418,825
Class B 347,008 3,910,407 131,214 1,466,418
Class C 305,854 3,443,979 371,741 4,116,750
Class R 33,897 380,881 1,309 14,649
Shares issued to shareholders due to reinvestment of distributions:
Class A 415,813 4,695,252 594,998 6,583,121
Class B 9,733 109,725 2,790 31,032
Class C 25,897 291,783 30,239 333,908
Class R 89 1,004 189 2,101
- ---------------------------------------------------------------------------------------------------------------------------------
3,197,949 36,078,925 3,238,105 35,966,804
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,812,770) (20,424,817) (2,183,973) (24,315,900)
Class B (30,293) (338,255) (26,702) (298,879)
Class C (124,260) (1,397,146) (137,556) (1,532,745)
Class R (2,376) (26,681) (976) (11,000)
- ---------------------------------------------------------------------------------------------------------------------------------
(1,969,699) (22,186,899) (2,349,207) (26,158,524)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase 1,228,250 $13,892,026 888,898 $9,808,280
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Wisconsin
-------------------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
-------------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 608,036 $76,270,838 1,023,987 $10,392,120
Class B 210,301 2,185,117 185,214 1,883,674
Class C 215,001 2,223,917 123,287 1,250,046
Class R 5,783 60,309 15 156
Shares issued to shareholders due to reinvestment of distributions:
Class A 79,265 821,500 54,801 552,761
Class B 6,147 63,822 1,536 15,642
Class C 6,933 72,025 1,578 16,051
Class R 347 3,612 215 2,173
- ---------------------------------------------------------------------------------------------------------------------------------
1,131,813 11,701,140 1,390,633 14,112,623
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (188,176) (1,949,001) (143,260) (1,453,452)
Class B (27,493) (285,123) (6,763) (69,320)
Class C (16,267) (167,457) (4) (45)
Class R (11) (108) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
(231,947) (2,401,689) (150,027) (1,522,817)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase 899,866 $9,299,451 1,240,606 $12,589,806
=================================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1999, to shareholders of record on June 9,
1999, as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $ .0410 $ .0455 $ .0380
Class B .0345 .0385 .0315
Class C .0365 .0405 .0335
Class R .0430 .0475 .0400
================================================================================
</TABLE>
32
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended May 31,
1999, were as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities $ 51,103,738 $ 42,258,268 $ 10,420,515
Short-term municipal securities 7,300,000 1,000,000 1,000,000
Sales:
Long-term municipal securities 31,681,554 29,437,358 2,827,902
Short-term municipal securities 7,300,000 1,000,000 1,000,000
===========================================================================================================================
</TABLE>
At May 31, 1999, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
At May 31, 1999, Kansas had an unused capital loss carryforward of $4,239,199
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, the carryforward will expire as in the year 2003.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31,1999, were as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $ 7,002,084 $ 14,245,137 $ 973,142
depreciation (577,215) (738,362) (177,241)
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $ 6,424,869 $ 13,506,775 $ 795,901
===========================================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- -------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1999, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares, the majority of which were paid
out as concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $ 287,000 $ 606,372 $ 134,199
Paid to authorized dealers 281,327 576,668 117,933
===========================================================================================================================
</TABLE>
33
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended May 31, 1999, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $ 261,956 $ 248,237 $ 119,611
===========================================================================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the fiscal year ended May 31, 1999, the
Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $ 68,592 $ 70,460 $ 39,557
===========================================================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Funds were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 1999, as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $ 26,721 $ 19,628 $ 4,564
===========================================================================================================================
</TABLE>
7. Composition of Net Assets
At May 31, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $ 124,299,783 $ 243,913,616 $ 35,753,400
Balance of undistributed net investment
income 412 5,069 947
Accumulated net realized gain (loss) from
investment transactions (4,239,198) 195,608 26,398
Net unrealized appreciation of investments
6,424,869 13,506,775 795,901
- ------------------------------------------------------------------------------------------------------------------------
Net assets $ 126,485,866 $ 257,621,068 $ 36,576,646
========================================================================================================================
</TABLE>
34
<PAGE>
Financial Highlights
35
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------ --------------------------------
KANSAS**
Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income(a) (Loss) Total Income Gains Total Value Return(b)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (1/92)
1999 $ 10.60 $ .51 $ (.11) $ .40 $ (.51) $ -- $ (.51) $ 10.49 3.81%
1998 10.19 .52 .41 .93 (.52) -- (.52) 10.60 9.32
1997 9.83 .53 .36 .89 (.53) -- (.53) 10.19 9.21
1996 10.01 .54 (.18) .36 (.54) -- (.54) 9.83 3.63
1995 9.83 .55 .18 .73 (.55) -- (.55) 10.01 7.80
Class B (2/97)
1999 10.54 .43 (.11) .32 (.43) -- (.43) 10.43 3.07
1998 10.13 .44 .41 .85 (.44) -- (.44) 10.54 8.57
1997 (c) 10.23 .13 (.12) .01 (.11) -- (.11) 10.13 .13
Class C (2/97)
1999 10.63 .45 (.11) .34 (.46) -- (.46) 10.51 3.18
1998 10.21 .47 .42 .89 (.47) -- (.47) 10.63 8.85
1997 (c) 10.18 .15 .04 .19 (.16) -- (.16) 10.21 1.85
Class R (2/97)
1999 10.66 .54 (.11) .43 (.54) -- (.54) 10.55 4.06
1998 10.22 .56 .43 .99 (.55) -- (.55) 10.66 9.84
1997 (c) 10.20 .18 (.02) .16 (.14) -- (.14) 10.22 1.55
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income
to Average to Average to Average to Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (1/92)
1999 $ 113,140 .90% 4.63% .75% 4.78% 27%
1998 102,217 .90 4.79 .71 4.98 13
1997 95,891 1.03 4.80 .57 5.31 55
1996 96,694 1.08 5.11 .54 5.67 72
1995 83,683 1.10
Class B (2/97)
1999 6,497 1.65 3.89 1.51 4.03 27
1998 3,238 1.65 4.02 1.45 4.22 13
1997 (c) 605 1.65* 4.24* 1.27* 4.62* 40
Class C (2/97)
1999 6,171 1.45 4.10 1.32 4.23 27
1998 1,716 1.44 4.21 1.24 4.41 13
1997 (c) 91 1.45* 4.49* 1.09* 4.85* 40
Class R (2/97)
1999 679 .70 4.86 .59 4.97 27
1998 12 .70 4.97 .51 5.16 13
1997 (c) -- .08* 6.53* -- 6.61* 40
====================================================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kansas.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) From commencement of class operations as noted.
36
<PAGE>
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- -------------------------
MISSOURI** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/87)
1999 $ 11.23 $ .55 $ (.11) $ .44 $ (.55) $ -- $ (.55) $ 11.12 3.95%
1998 10.80 .56 .43 .99 (.56) -- (.56) 11.23 9.32
1997 10.51 .56 .29 .85 (.56) -- (.56) 10.80 8.29
1996 10.72 .58 (.21) .37 (.58) -- (.58) 10.51 3.51
1995 10.50 .60 .22 .82 (.60) -- (.60) 10.72 8.19
Class B (2/97)
1999 11.23 .47 (.12) .35 (.47) -- (.47) 11.11 3.09
1998 10.80 .47 .44 .91 (.48) -- (.48) 11.23 8.53
1997 (c) 10.81 .16 (.01) .15 (.16) -- (.16) 10.80 1.40
Class C (2/94)
1999 11.23 .49 (.12) .37 (.49) -- (.49) 11.11 3.31
1998 10.80 .50 .43 .93 (.50) -- (.50) 11.23 8.74
1997 10.50 .51 .29 .80 (.50) -- (.50) 10.80 7.80
1996 10.72 .51 (.21) .30 (.52) -- (.52) 10.50 2.84
1995 10.50 .53 .23 .76 (.54) -- (.54) 10.72 7.60
Class R (2/97)
1999 11.23 .58 (.12) .46 (.57) -- (.57) 11.12 4.17
1998 10.80 .58 .43 1.01 (.58) -- (.58) 11.23 9.56
1997 (c) 10.90 .17 (.12) .05 (.15) -- (.15) 10.80 .43
===========================================================================================================
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets(000) ment ment ment (a) ment (a) Rate
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (8/87)
1999 $ 238,498 .86% 4.87% .86% 4.87% 12%
1998 233,456 .87 5.02 .87 5.02 19
1997 218,924 1.00 5.13 .86 5.27 41
1996 212,717 1.05 5.12 .80 5.37 38
1995 205,089 1.08 5.37 .67 5.78 40
Class B (2/97)
1999 5,286 1.61 4.13 1.61 4.13 12
1998 1,677 1.62 4.25 1.62 4.25 19
1997 (c) 454 1.62* 4.42* 1.45* 4.59* 41
Class C (2/94)
1999 13,444 1.41 4.32 1.41 4.32 12
1998 11,253 1.42 4.47 1.42 4.47 19
1997 7,968 1.55 4.57 1.40 4.72 41
1996 6,220 1.60 4.54 1.35 4.79 38
1995 3,989 1.63 4.76 1.20 5.19 40
Class R (2/97)
1999 393 .66 5.07 .65 5.08 12
1998 41 .67 5.22 .67 5.22 19
1997 (c) 34 .67* 5.53* .55* 5.65* 41
===========================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Missouri.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6)
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
37
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- -------------------------
WISCONSIN** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/94)
1999 $ 10.28 $ .47 $ (.08) $ .39 $ (.47) $ -- $ (.47) $ 10.20 3.83%
1998 9.80 .49 .49 .98 (.50) -- (.50) 10.28 10.19
1997 9.61 .51 .19 .70 (.51) -- (.51) 9.80 7.40
1996 9.79 .50 (.18) .32 (.50) -- (.50) 9.61 3.35
1995 (c) 9.58 .49 .21 .70 (.49) -- (.49) 9.79 7.36*
Class B (2/97)
1999 10.31 .39 (.08) .31 (.39) -- (.39) 10.23 3.05
1998 9.82 .42 .49 .91 (.42) -- (.42) 10.31 9.46
1997 (c) 9.87 .12 (.06) .06 (.11) -- (.11) 9.82 .60
Class C (2/97)
1999 10.30 .41 (.07) .34 (.42) -- (.42) 10.22 3.29
1998 9.82 .44 .49 .93 (.45) -- (.45) 10.30 9.59
1997 (c) 9.87 .13 (.07) .06 (.11) -- (.11) 9.82 .65
Class R (2/97)
1999 10.31 .49 (.08) .41 (.49) -- (.49) 10.23 4.04
1998 9.82 .53 .48 1.01 (.52) -- (.52) 10.31 10.47
1997 (c) 9.87 .15 (.07) .08 (.13) -- (.13) 9.82 .84
=========================================================================================================
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets(000) ment ment ment (a) ment (a) Rate
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (6/94)
1999 $ 29,217 1.17% 4.04% .68% 4.53% 9%
1998 24,313 1.36 4.06 .55 4.87 10
1997 14,004 1.61 4.10 .51 5.20 42
1996 12,370 1.51 4.15 .64 5.02 47
1995 (c) 8,278 2.31* 3.33* .39* 5.25* 52
Class B (2/97)
1999 3,795 1.94 3.28 1.43 3.79 9
1998 1,877 2.08 3.28 1.32 4.04 10
1997 (c) 20 2.18* 3.57* .94* 4.81* 42
Class C (2/97)
1999 3,457 1.73 3.49 1.23 3.99 9
1998 1,366 1.89 3.47 1.11 4.25 10
1997 (c) 76 1.98* 3.62* .69* 4.91* 42
Class R (2/97)
1999 107 .97 4.25 .48 4.74 9
1998 45 1.12 4.28 .32 5.08 10
1997 (c) 40 1.28* 4.39* -- 5.67* 42
===========================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Missouri.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
38
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust IV:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship Kansas Municipal Bond Fund, Nuveen
Flagship Missouri Municipal Bond Fund, and Nuveen Flagship Wisconsin Municipal
Bond Fund (collectively, the "Funds") (three of the portfolios constituting the
Nuveen Flagship Multistate Trust IV (a Massachusetts business trust)), as of May
31, 1999, and the related statements of operations for the year then ended, and
the statements of changes in net assets and the financial highlights for each of
the two years then ended. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1999, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Kansas Municipal Bond Fund, Nuveen Flagship Missouri Municipal Bond
Fund, and Nuveen Flagship Wisconsin Municipal Bond Fund of the Nuveen Flagship
Multistate Trust IV as of May 31, 1999, and the results of their operations for
the year then ended, and the changes in their net assets and the financial
highlights for each of the two years then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 20, 1999
39
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety of
funds designed to
help you reach your
financial goals.
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
Dividend and
Growth Fund
Income
Income Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio -- one that balances
different types of investments, levels of risk and tax management -- can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred/(R)/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
40
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
41
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[Photo of John Nuveen, Sr., APPEARS HERE]
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
May 31, 1999 Annual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
[Photo Appears Here]
Dependable, tax-free
income to help
you keep more
of what you earn.
Kentucky
Michigan
Ohio
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship Kentucky Municipal Bond Fund
6 Nuveen Flagship Michigan Municipal
Bond Fund
9 Nuveen Flagship Ohio Municipal Bond
Fund
12 Portfolio of Investments
37 Statement of Net Assets
38 Statement of Operations
39 Statement of Changes in Net Assets
41 Notes to Financial Statements
47 Financial Highlights
51 Report of Independent Public
Accountants
52 Building a Better Portfolio
53 Fund Information
<PAGE>
[Photo of Timothy R. Schwertfeger Appears Here]
Timothy R. Schwertfeger
Chairman of the Board
Dear
Shareholder
I invite you to take a few minutes to read the annual report we've prepared for
you on the performance of your Nuveen state municipal bond fund for the fiscal
year ended May 31, 1999. You, along with your financial adviser, have made a
sound choice in choosing Nuveen to manage this portion of your assets. Since
1898, more than 1.3 million investors have trusted us to help them build and
sustain the wealth of a lifetime.
I'm pleased to report your fund continued to meet its primary objective of
providing you with dependable tax-free income and attractive after-tax total
returns. I will briefly describe the national economic environment during the
past 12 months. My discussion is followed by comments about the strategies
employed in managing your fund from the portfolio manager of each fund
represented in this report.
The Year In Review.
The Federal Reserve eased short-term rates for the first time in almost three
years by cutting the federal funds rate in the fall of 1998 three times,
bringing it to 4.75%. A month after the close of your fund's fiscal year, the
Fed raised its target by 25 basis points to 5%. (Be sure to read your fund
manager's comments about managing your fund in a rising interest rate
environment.)
The fed funds rate is the rate that banks charge each other for overnight
loans and serves as the basis many financial institutions use for setting
interest charges on a variety of products, from mortgage and car loans to credit
cards.
The Fed's rate cuts were made to avert a potential domestic credit crunch and
restore some stability to global markets. The moves seemed to have worked, as
the U.S. economy since has continued its pattern of non-inflationary growth,
accompanied by low interest rates and unemployment levels that remain among the
lowest in three decades, prompting the late June reversal by the Fed.
All indications point to a confident U.S. consumer who is comfortable with the
current state of the economy, especially the performance of the housing, stock
and job markets. This confidence is reflected in the most recent Consumer
Confidence Index report, issued by the University of Michigan's Conference Board
Inc., which showed a record-setting eighth consecutive month of gains in June.
On the global front, the turmoil of the past two years appears to be fading
somewhat, as international financial markets have begun to send recovery
signals.
Domestic inflation continues to be benign, with an increase of 2.1% for the 12
months ended May 31, 1999. The general backdrop of inflation indicators
continued to be mild, with the employment cost index, average hourly earnings,
and import and producer price trends all remaining favorable.
Federal Reserve Chairman Alan Greenspan recently stated that a key factor in
achieving today's peaceful coexistence of economic growth and low inflation has
been increased productivity. Improvements in productivity, spurred by
technological advances, have been responsible for
1
<PAGE>
offsetting wage and other inflationary pressures that we would normally expect
to see as part of a growing economy.
Why Municipal Bonds?
Our municipal bond funds continued to offer attractive, stable income in a
market that places a high premium on yield. In 1998, municipal bonds represented
a reasonably insulated haven in an otherwise turbulent market, with lower
volatility relative to Treasury bonds and other fixed-income investments. Even
in 1999, with interest rates rising again, municipals outperformed Treasuries
through the end of May.
The high ratio of tax-exempt municipal yields to Treasury yields sheltered
municipal bonds, to some extent, from the price decline that occurred in the
Treasury market during the first part of the year. While the yield on 30-year
Treasury bonds rose from 5.10% at the end of December to 5.83% as of May 31,
1999, the yield on the Bond Buyer Revenue Bond Index, an unmanaged index of
long-term municipal revenue bonds, gained 15 basis points--from 5.26% to 5.41%.
Given the inverse relationship between interest rates and bond prices, we saw
bond prices fall as rates rose over this period.
Though municipal bond prices did decrease, the decline was not as dramatic
as the drop in Treasuries.
This performance differential reflects the fact that Treasuries had become
relatively expensive as the result of safe-haven buying during the international
economic crises in 1998. As the financial turmoil subsided, however, foreign
investors returned to investing in their own countries rather than in U.S.
dollar-denominated securities, and the decline in demand caused U.S. Treasuries
to drop in price.
At the end of May 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 93%, compared with the historical average of
86% for the period of 1986-1999. For investors, this meant that quality long-
term municipal bonds offered yields comparable to those of long Treasury bonds--
even before the tax advantages of municipal bonds were taken into account.
During the funds' fiscal year, that ratio hit a high of 104% in December.
On an after-tax basis in today's market, municipal bonds continue to
present an exceptionally attractive investment option relative to Treasuries.
During 1998, lower interest rates and the strong economy combined to
generate high levels of new municipal issuance and a significant increase in the
refinancing of existing bonds. Municipal issuance in 1998 reached $284 billion,
up 29% over 1997.
In the first part of 1999, however, as the market settled into a more
stable interest rate environment, refunding activity has dropped off
dramatically, resulting in a drop in municipal supply. This, in turn, has
enhanced the attractiveness of the municipal bonds that were brought to market,
as demand--especially from individual investors--remained relatively strong.
The Value of Nuveen Expertise. Nuveen Mutual Funds are a diverse collection of
investments featuring highly regarded asset management firms--Premier
Advisers/SM/--who direct the investment activities of each portfolio.
The Premier Advisers are firms that have earned a reputation for excellence
in their field of expertise--including Nuveen Investment Advisory Services for
income investing, Rittenhouse Financial Services for growth investing and
Institutional Capital Corporation for value investing.
For more information on our funds, contact your financial adviser for a
prospectus, or call Nuveen at (800) 621-7227, or download one from
www.nuveen.com. Please read the prospectus carefully before you invest or send
money.
We encourage you to talk with your financial adviser about Nuveen's
expanding array of investments and the ways they can help you establish a
diversified portfolio designed to build and sustain long-term financial
security.
We are grateful for the confidence you have placed in us and are dedicated
to maintaining your trust in the years ahead.
Sincerely,
/S/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1999
Following an April 15, 1999 special meeting of Nuveen Kentucky Limited Term
Municipal Bond Fund shareholders, that fund was reorganized into Nuveen Flagship
Kentucky Municipal Bond Fund effective April 23, 1999. The combination of the
funds' investment portfolios will benefit investors through lower operating
costs, greater investment efficiencies and improved portfolio diversification.
2
<PAGE>
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the Kentucky fund for the fiscal year
ended May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
In what shape is Kentucky's economy? The state continues to diversify into a
more modern manufacturing and service oriented base, which is helping to reduce
its reliance on the historically important industries of coal, tobacco and heavy
industry. Kentucky's unemployment rate has fallen to 4.2% at May 31 from 4.8% a
year ago. Job growth has been concentrated in health services, business services
and retail trade.
Generally, Kentucky's per capita income is lower than the national average.
A bright spot for Kentucky is that Amazon.com, the Seattle-based internet book
seller, recently announced that it would locate two distribution centers in
Kentucky. Amazon was attracted to the state by its central location in the U.S.
and its generally lower wages. Although the Kentucky economy continues to
strengthen, the municipal market has seen relatively little supply during the
fiscal year. Rising interest rates in 1999 slowed municipal bond activity--both
new issuance and refundings--in the latter half of the fund's fiscal year.
There were two reasons the market slowed--the increased interest rates,
which primarily slowed new issuance, plus the fact that the refunding market has
essentially been exhausted. Municipalities flooded the market with refundings in
recent years when interest rates were dropping. A provision of the Tax Reform
Act of 1986, however, limits municipalities to only one tax-exempt refunding of
a bond issuance.
Throughout the period, municipal bonds held their values quite well
compared to U.S. Treasury bonds.
How did Nuveen Flagship Kentucky Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Kentucky Municipal Bond Fund generated a total return on
net asset value of 3.66%, outperforming the 3.53% average annual total return
posted by the Lipper Kentucky Municipal Debt Peer Group.* Total return equals a
fund's income and capital gains distributions, if any, plus or minus changes in
net asset value. The fund's taxable equivalent total return, for investors in
the 35% combined federal and state income tax bracket, was 6.37%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.39%. For investors in the
combined 35% federal and state income tax bracket, that is equivalent to a yield
of 6.75% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable.
In addition to call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality. Examples of
recent acquisitions include bonds for Louisville Regional Airport where Federal
Express is a major carrier, and issuances by Bellarmine College and Kentucky
Housing Corporation. We rely on Nuveen Research to help identify these
opportunities.
*The Lipper Peer Group return represents the average annualized total return
of the funds in the Lipper Kentucky Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
**Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
3
<PAGE>
In addition to assessing the credit quality of individual issuers, Nuveen
Research helps us monitor events in the municipal market and analyze how those
events affect individual state and national municipal markets. For example,
during spring 1998, a major not-for-profit healthcare provider in Philadelphia
declared bankruptcy. While the impact of this bankruptcy was most pronounced in
the healthcare sector of the Pennsylvania municipal market, it was felt to a
lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia health-care situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues. Using the expertise of Nuveen Research, we considered only
those bonds that offered adequate compensation for the level of risk.
For instance, the fund benefited from Nuveen's strength in analyzing
multifamily housing bonds when we purchased the entire issue of City of
Henderson Residential Revenue bonds. Working closely with the issuer and the
underwriter, Nuveen negotiated stronger credit protections and favorable pricing
for this complicated transaction.
Shown only to a few institutional investors, this transaction represents
added value to investors in the fund. Our team's expertise and resources makes
us particularly qualified to analyze, negotiate and price these bonds
correctly.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield reflected
the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Kentucky Municipal Bond Fund?
Rising interest rates in 1999 have made it advantageous for us to lock in higher
yields by extending the portfolio's maturity beyond that of our benchmark. We
believe that bond yields are currently attractive in relation to inflation.
Should interest rates fall or remain stable, the portfolio's longer duration
would be advantageous.
Although Kentucky's economy is becoming stronger and more diversified, the
supply of available bonds continues to be thin. Nevertheless, we will continue
to seek out undervalued securities that provide income and the opportunity for
price appreciation through credit rating upgrades.
"The fund benefited from Nuveen's strength in analyzing multi-family
housing bonds when we purchased the entire issue of City of Henderson
Residential Revenue bonds. Working closely with the issuer and the underwriter,
Nuveen negotiated stronger credit protections and favorable pricing for this
complicated transaction."
4
<PAGE>
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
Highlights as of May 31, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 11.22 $ 11.22 $ 11.21 $ 11.20
- -------------------------------------------------------------------------------------
May's Declared Dividend* $0.0455 $0.0385 $0.0405 $0.0475
- -------------------------------------------------------------------------------------
Fund Symbol FKYTX N/A FKYCX N/A
- -------------------------------------------------------------------------------------
CUSIP 67065R507 67065R606 67065R705 67065R804
- -------------------------------------------------------------------------------------
Inception Date 5/87 2/97 10/93 2/97
- -------------------------------------------------------------------------------------
</TABLE>
* Paid June 1, 1999
<TABLE>
<CAPTION>
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year 3.66% -0.70% 2.90% 3.12% 3.89%
- -----------------------------------------------------------------------
1-Year TER** 6.37% 1.89% 5.19% 5.53% 6.72%
- -----------------------------------------------------------------------
5-Year 6.77% 5.85% 6.09% 6.18% 6.84%
- -----------------------------------------------------------------------
10-Year 7.41% 6.94% 6.94% 6.82% 7.44%
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 35%).
Index Comparison.*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Kentucky Municipal Kentucky Municipal Municipal
May Bond Fund (Offer) Bond Fund (NAV) Bond Index
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,191 10,638 10,731
1991 11,248 11,741 11,813
1992 12,317 12,857 12,974
1993 13,844 14,451 14,526
1994 14,110 14,728 14,885
1995 15,439 16,116 16,240
1996 16,063 16,768 16,982
1997 17,325 18,085 18,391
1998 18,883 19,711 20,117
1999 19,579 20,438 21,058
</TABLE>
Nuveen Flagship Kentucky Municipal Bond Fund (Offer) $19,579
Nuveen Flagship Kentucky Municipal Bond Fund (NAV) $ 20,438
Lehman Brothers Municipal Bond Index $21,058
* The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Index is comprised of a broad range of investment-grade
Bond Index. The Lehman Index is comprised of a broad range of investment-grade
municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to A shares (4.20%) and all ongoing fund expenses.
Monthly Tax-Free Dividends (Class A Shares)*
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
June .0475
July .0475
August .0475
September .0475
October .0465
November .0465
December .0465
January .0465
February .0465
March .0455
April .0455
May .0455
</TABLE>
* The fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0237 per share.
Morningstar Rating/TM 1/
****
Overall rating among 1,586 municipal bond funds as of 5/31/99.
<TABLE>
<CAPTION>
Portfolio Statistics
<S> <C>
Fund Net Assets $515 million
- -------------------------------------
Effective Maturity 19.64 years
- -------------------------------------
Average
Effective Duration 6.92
- -------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Top Five Sectors/2/
<S> <C>
Tax Obligation (Limited) 21%
- ----------------------------------
Health Care 19%
- ----------------------------------
U.S. Guaranteed 13%
- ----------------------------------
Utilities 9%
- ----------------------------------
Water and Sewer 8%
- ----------------------------------
</TABLE>
Bond Credit Quality/2/
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed..56%
AA...........6%
A...........18%
BBB/NR......20%
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/1/ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A Shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of 5/31/99
and are subject to change every month. Past performance is no guarantee of
future results. Ratings are calculated from the fund's three-, five-, and 10-
year average annual returns (if applicable) in excess of 90-day Treasury bill
returns, with appropriate fee adjustments, and a risk factor that reflects fund
performance below 90-day T-bill returns. A shares of the fund received 4 stars
for the 3- and 5-year periods and 3 stars for the 10-year period. The top 10% of
the funds in a broad asset class receive 5 stars and the next 22.5% receive 4
stars. The fund was rated among 1586, 1184, and 368 funds for the three-, five-,
and 10-year periods, respectively.
/2/ as a percentage of total bond holdings
5
<PAGE>
NUVEEN FLAGSHIP MICHIGAN MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Mike Davern discusses fund performance, the municipal market
and key investment strategies for the Michigan fund for the fiscal year ended
May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
How strong is Michigan's economy? With an unemployment rate of 3.9% at May 31,
the Michigan economy continues to diversify beyond the economically sensitive
automobile industry. At the same time, the auto industry has been a positive
contributor to Michigan's economy during the past fiscal year.
In response to low interest rates, the expanding economy and Michigan's
continued population growth, the state's municipal bond issuance surged in 1998.
A significant percentage of new Michigan issues represents general obligation
bonds for school districts and are of extremely high quality.
Rising interest rates in 1999, however, significantly slowed municipal bond
activity--both new issuance and refundings--in the latter half of the fund's
fiscal year.
There were two reasons the market slowed--the increased interest rates,
which primarily slowed new issuance, plus the fact that the refunding market has
essentially been exhausted. Municipalities flooded the market with refundings in
recent years when interest rates were dropping. A provision of the Tax Reform
Act of 1986, however, limits municipalities to only one tax-exempt refunding per
issue.
As was the case on the national level, increasing concerns about rising
economic growth and potential inflation caused bond yields to rise and prices to
fall. However, municipal bonds held their values quite well compared to U.S.
Treasury bonds.
How did Nuveen Flagship Michigan Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Michigan Municipal Bond Fund generated a total return on
net asset value of 3.45%, outperforming the 3.3% average annual total return
posted by the Lipper Michigan Municipal Debt Peer Group.* Total return equals a
fund's income and capital gains distributions, if any, plus or minus changes in
net asset value. The fund's taxable equivalent return, for investors in the 34%
combined federal and state income tax bracket, was 6.07%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.09%. For investors in
the combined 34% federal and state income tax bracket, that is equivalent to a
yield of 6.2% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates decline. To protect the fund's income
stream, we look for bonds with call dates far in the future--or better yet, that
are noncallable. Only 7% of the Michigan portfolio is callable between now and
the year 2001.
In addition to good call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality. We rely on Nuveen
Research to help identify these opportunities.
* The Lipper Peer Group return represents the average annualized total return of
the 49 funds in the Lipper Michigan Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
**Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
6
<PAGE>
Nuveen Research also helps us monitor events in the municipal market and
analyze how those events affect individual state and national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider
in Philadelphia declared bankruptcy. While the impact of this bankruptcy was
most pronounced in the healthcare sector of the Pennsylvania municipal market,
it was felt to a lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues. Using the expertise of Nuveen Research, we considered only
those bonds that offered adequate compensation for the level of risk.
Other bonds in the portfolio with a high coupon and good call protection
often are "pre-refunded" as interest rates fall, as they did in '98. A pre-
refunding establishes an escrow of U.S. government securities designed to retire
the original debt at a designated date. As a result, the bond price rises
through the elimination of credit risk due to the U.S. government escrow account
and the acceleration of maturity to the call date. So, pre-refunding is a big
plus for the portfolio.
In recent months, however, we have taken advantage of rising interest rates
by selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield reflected
the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Michigan Municipal Bond Fund?
Rising interest rates in 1999 have made it advantageous for us to lock in higher
yields by extending the portfolio's maturity beyond that of our benchmark.
We believe that bond yields are currently attractive in relation to
inflation. Should interest rates fall or remain stable, the portfolio's longer
duration would be beneficial.
With Michigan's strong economy and influx of population, we expect there
will continue to be a buoyant supply and demand for municipal bonds in areas
such as housing, healthcare, education and utilities. We will continue to seek
out undervalued securities that provide income and the opportunity for price
appreciation through credit rating upgrades.
"Other bonds in the portfolio with a high coupon and good call protection often
are "pre-refunded" as interest rates fall... A pre-refunding is a big plus for
the portfolio."
7
<PAGE>
NUVEEN FLAGSHIP MICHIGAN MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $11.83 $ 11.85 $ 11.82 $ 11.83
- ----------------------------------------------------------------------------------------------------
May's Declared Dividend* $0.049 $0.0415 $0.0435 $0.0510
- ----------------------------------------------------------------------------------------------------
Fund Symbol FMITX N/A FLMCX NMMIX
- ----------------------------------------------------------------------------------------------------
CUSIP 67065R853 67065R846 67065R838 67065R820
- ----------------------------------------------------------------------------------------------------
Inception Date 6/85 2/97 6/93 2/97
- ----------------------------------------------------------------------------------------------------
</TABLE>
*Paid June 1, 1999
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year 3.45% -0.90% 2.69% 2.90% 3.66%
- ----------------------------------------------------------------------------------------------------
1-Year TER** 6.07% 1.61% 4.90% 5.22% 6.38%
- ----------------------------------------------------------------------------------------------------
5-Year 6.57% 5.65% 5.92% 6.00% 6.67%
- ----------------------------------------------------------------------------------------------------
10-Year 7.14% 6.67% 6.68% 6.52% 7.18%
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate of
34%).
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Michigan Municipal Michigan Municipal Municipal
May Bond Fund (Offer) Bond Fund (NAV) Bond Index
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,174 10,620 10,731
1991 11,064 11,549 11,813
1992 12,142 12,674 12,974
1993 13,630 14,227 14,526
1994 13,882 14,491 14,885
1995 15,070 15,730 16,240
1996 15,616 16,301 16,982
1997 16,935 17,678 18,391
1998 18,453 19,262 20,117
1999 19,088 19,925 21,058
</TABLE>
Nuveen Flagship Michigan Municipal Bond Fund (Offer) $19,088
Nuveen Flagship Michigan Municipal Bond Fund (NAV) $19,925
Lehman Brothers Municipal Bond Index $21,058
* The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
Monthly Tax-Free Dividends (Class A Shares)*
[BAR CHART APPEARS HERE]
Month
- -----
June .0500
July .0500
August .0500
September .0500
October .0500
November .0500
December .0500
January .0500
February .0500
March .0500
April .0490
May .0490
* The fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0565 per share.
Portfolio Statistics
Fund Net Assets $343 million
- ----------------------------------------------------------------------
Effective Maturity 17.03 years
- ----------------------------------------------------------------------
Average
Effective Duration 7.45
- ----------------------------------------------------------------------
Top Five Sectors/1/
U.S. Guaranteed 22%
- ----------------------------------------------------------------------
Health Care 18%
- ----------------------------------------------------------------------
Tax Obligation (Limited) 15%
- ----------------------------------------------------------------------
Tax Obligation (General) 14%
- ----------------------------------------------------------------------
Water and Sewer 6%
- ----------------------------------------------------------------------
Bond Credit Quality/1/
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed......59%
AA..............15%
A............... 8%
BBB/NR..........18%
/1/ as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
8
<PAGE>
NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Tom Futrell discusses fund performance, the municipal market
and key investment strategies for the Ohio fund for the
fiscal year ended May 31, 1999.
Comments cover the year ended May 31, 1999; performance
statistics are quoted for Class A shares at net asset value.
How strong is Ohio's economy? The Ohio economy continues to diversify beyond
manufacturing, on which it is still more reliant than most states. The
unemployment rate is 4.2% as of May 31, and job growth is concentrated in the
construction and services area, with some high technology growth in northern
Ohio.
The importance of industrial exports has increased the state's exposure to the
global economy, a concern last fall in light of Asia's difficulties. However,
the Far East's improved outlook is currently a positive for the state.
In response to low interest rates and Ohio's expanding economy, the state's
municipal bond issuance was healthy in 1998.
Rising interest rates in 1999, however, significantly slowed municipal bond
activity--both new issuance and refundings--in the latter half of the fund's
fiscal year. There were two reasons the market slowed--the increased interest
rates, which primarily slowed new issuance, plus the fact that the refunding
market has essentially been exhausted. Municipalities flooded the market with
refundings in recent years when interest rates were dropping. A provision of the
Tax Reform Act of 1986, however, limits municipalities to only one tax-exempt
refunding per issue.
As was the case on the national level, increasing concerns about strong
economic growth and potential inflation caused bond yields to rise and prices to
fall. However, municipal bonds held their values quite well compared to U.S.
Treasury bonds.
How did Nuveen Flagship Ohio Municipal Bond Fund perform during its fiscal year?
Nuveen Flagship Ohio Municipal Bond Fund generated a total return on net asset
value of 3.92%, outperforming the 3.52% average annual total return posted by
the Lipper Ohio Municipal Debt Peer Group.* The fund ranked 12th out of 51
municipal bond funds for the fiscal year period in its Lipper category. Total
return equals a fund's income and capital gain distributions, if any, plus or
minus changes in net asset value. The fund's taxable equivalent total return,
for investors in the 36% combined federal and state income tax bracket, was
6.76%.**
As of May 31, 1999, the fund's SEC 30-day yield was 3.78%. For investors in
the combined 36% federal and state income tax bracket, that is equivalent to a
yield of 5.91% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they are likely to do if interest rates decline. To protect the fund's
income stream, we looked for bonds with call dates far in the future--or better
yet, that are noncallable.
In addition to good call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality. For instance, we
added a block of Ohio Housing Residential Mortgage Program bonds because they
offered both high credit quality and relatively high yields.
In addition to the bonds' structure, we believe that this state-run agency
does an excellent job in financing the construction of homes and apartment
buildings.
* The Lipper Peer Group return represents the average annualized total return
of the 51 funds in the Lipper Ohio Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
9
<PAGE>
To help pay for the purchase, we took advantage of demand by retail individual
bond investors and strategically sold several intermediate maturity bonds. By
doing so, we were able to maintain the fund's long-term focus and offset the
inherent shortening of the portfolio that happens over time.
With interest rates at a higher level, and the widening differential between
low-rated and high-rated credits, we took the opportunity to investigate lower-
rated issues. Using the expertise of Nuveen Research, we considered only those
bonds that offered adequate compensation for the level of risk.
For instance, the fund was able to purchase Ohio Water Development Authority
bonds paying a 5.875% coupon due 2020. At the time of purchase, the yield
represented about 0.65 percentage points over high-grade bond yields. The bonds
helped finance Toledo Edison's Bay Shore Power Project, which involves modifying
one of Toledo Edison's conventional coal-fired facilities using an advanced
technology. Once converted, the facility will be able to produce extremely low-
cost energy.
In recent months, we have taken advantage of rising interest rates by selling
some bonds at a loss--because as interest rates rose, prices of the bonds fell--
and subsequently buying similar securities, whose yield now reflected the higher
interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Ohio Municipal Bond Fund? With Ohio's
strong economy and expanding financing needs, we expect there will continue to
be a buoyant supply and demand for municipal bonds in areas such as housing,
healthcare, education and utilities.
We will continue to seek out lower investment grade and non-rated
opportunities to improve the incremental yield of the fund and boost income. We
will also continue to buy bonds that have maturities in the 20-30 year range.
"We added a block of Ohio Housing Residential Mortgage Program bonds because
they offered both high credit quality and relatively high yields. In addition to
the bonds' structure, we believe that this state-run agency does an excellent
job in financing the construction of homes and apartment buildings."
10
<PAGE>
NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND
Highlights as of May 31, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 11.57 $ 11.56 $ 11.56 $ 11.57
- -------------------------------------------------------------------------------
May's Declared Dividend* $0.0480 $0.0410 $0.0430 $0.0500
- -------------------------------------------------------------------------------
Fund Symbol FOHTX N/A FOHCX NXOHX
- -------------------------------------------------------------------------------
CUSIP 67065R762 67065R754 67065R747 67065R739
- -------------------------------------------------------------------------------
Inception Date 6/85 2/97 8/93 2/97
- -------------------------------------------------------------------------------
</TABLE>
*Paid June 1, 1999
<TABLE>
<CAPTION>
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year 3.92% -0.41% 3.18% 3.39% 4.22%
- -------------------------------------------------------------------------------
1-Year TER** 6.76% 2.32% 5.61% 5.94% 7.19%
- -------------------------------------------------------------------------------
5-Year 6.30% 5.40% 5.62% 5.74% 6.41%
- -------------------------------------------------------------------------------
10-Year 6.98% 6.52% 6.51% 6.40% 7.03%
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years, which is not reflected in
the return figures. Class C shares have a 1% CDSC for redemptions within one
year which is not reflected in the one-year total return.
**Taxable Equivalent Return (based on a combined federal and state tax rate of
36%).
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Ohio Municipal Ohio Municipal Municipal
May Bond Fund (Offer) Bond Fund (NAV) Bond Index
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,140 10,585 10,731
1991 11,103 11,590 11,813
1992 12,188 12,722 12,974
1993 13,553 14,148 14,526
1994 13,854 14,461 14,885
1995 14,962 15,618 16,240
1996 15,501 16,180 16,982
1997 16,645 17,374 18,391
1998 18,100 18,893 20,117
1999 18,813 19,638 21,058
</TABLE>
- -- Nuveen Flagship Ohio Municipal Bond Fund (Offer) $18,813
- -- Nuveen Flagship Ohio Municipal Bond Fund (NAV) $19,638
- -- Lehman Brothers Municipal Bond Fund Index $21,058
(*) The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
Monthly Tax-Free Dividends (Class A Shares)*
[BAR CHART APPEARS HERE]
Month
- -----
June .0490
July .0490
August .0490
September .0490
October .0480
November .0480
December .0480
January .0480
February .0480
March .0480
April .0480
May .0480
* The fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0447 per share.
Portfolio Statistics
Fund Net Assets $698 million
- --------------------------------------
Effective Maturity 19.02 years
- --------------------------------------
Average
- --------------------------------------
Effective Duration 6.71
- --------------------------------------
Top Five Sectors/1/
U.S. Guaranteed 18%
- --------------------------------------
Tax Obligation (General) 16%
- --------------------------------------
Health Care 15%
- --------------------------------------
Utilities 13%
- --------------------------------------
Housing (Single-Family) 8%
- --------------------------------------
Bond Credit Quality/1/
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed.... 67%
AA............ 7%
A............. 10%
BBB/NR........ 16%
/1/ as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Materials -- 0.2%
<S> <C> <C> <C> <C>
$1,000,000 Jefferson County, Kentucky, Pollution Control Revenue 7/03 at 103 AA- $ 1,088,980
Bonds (E.I. du Pont de Nemours and Company Project),
1982 Series A, 6.300%, 7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Staples -- 0.1%
320,000 City of Newport, Kentucky, Industrial Building Revenue No Opt. Call N/R 320,035
Bonds, Series 1996A (Louis Truath Dairy, Inc. Project),
4.800%, 6/01/99
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 2.4%
5,085,000 City of Campbellsville, Kentucky, Industrial Building 3/09 at 102 BBB- 4,950,248
Revenue Bonds (Campbellsville University Project),
Series 1999, 5.500%, 3/01/29
5,930,000 County of Jefferson, Kentucky, College Revenue Bonds 5/09 at 101 Baa2 5,667,301
(Bellarmine College Project), Series 1999, 5.250%,
5/01/29 (DD)
500,000 Kentucky Higher Education Student Loan Corporation, No Opt. Call Aaa 540,415
Insured Student Loan Revenue Bonds, 1991 Series B,
6.800%, 6/01/03 (Alternative Minimum Tax)
700,000 Northern Kentucky University, Consolidated Education 5/01 at 102 AAA 756,217
Building Revenue Bonds, Series F, 7.000%, 5/01/10
475,000 University of Kentucky, Consolidated Educational No Opt. Call AAA 492,518
Buildings Revenue Bonds, Series O, 5.000%, 5/01/03
- ------------------------------------------------------------------------------------------------------------------------------------
Energy -- 4.0%
325,000 City of Ashland, Kentucky, Pollution Control 2/00 at 102 1/2 Baa1 338,332
Revenue Refunding Bonds (Ashland Oil Inc. Project),
Series 1988A, 7.375%, 7/01/09
5,000,000 City of Ashland, Kentucky, Pollution Control 8/02 at 102 Baa1 5,390,350
Revenue Refunding Bonds (Ashland Oil Inc. Project),
Series 1992, 6.650%, 8/01/09
9,000,000 City of Ashland, Kentucky, Sewage and Solid Waste 2/05 at 102 Baa1 10,071,900
Waste Revenue Bonds, Series 1995 (Ashland Oil Inc.
Project), 7.125%, 2/01/22 (Alternative Minimum Tax)
4,360,000 City of Ashland, Kentucky, Solid Waste Revenue Bonds, 10/01 at 102 Baa1 4,668,296
Series 1991 (Ashland Oil Inc. Project), 7.200%,
10/01/20 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products -- 5.5%
2,370,000 Hancock County, Kentucky, Solid Waste Disposal Facilities 5/06 at 102 A- 2,599,084
Revenue Bonds (Willamette Industries, Inc. Project),
Series 1996, 6.600%, 5/01/26
9,750,000 County of Henderson, Kentucky, Solid Waste Disposal Revenue 3/05 at 102 Baa2 10,431,720
Bonds (MacMillan Bloedel Project), Series 1995, 7.000%,
3/01/25 (Alternative Minimum Tax)
1,500,000 Maysville, Kentucky, Industrial Development Revenue Bonds, 2/00 at 103 N/R 1,558,365
Crystal Tissue Project, 8.000%, 2/01/09 (Alternative
Minimum Tax)
3,750,000 County of Perry, Kentucky, Solid Waste Disposal Bonds 6/04 at 102 N/R 4,058,550
(TJ International Project), Series 1994, 7.000%, 6/01/24
(Alternative Minimum Tax)
County of Perry, Kentucky, Solid Waste Disposal Revenue
Bonds (TJ International Project), Series 1996:
4,240,000 6.800%, 5/01/26 (Alternative Minimum Tax) 5/06 at 102 N/R 4,598,322
2,000,000 6.550%, 4/15/27 (Alternative Minimum Tax) 4/07 at 102 N/R 2,134,240
2,820,000 City of Wickliffe, Kentucky, Solid Waste Disposal Facility 4/06 at 102 A1 3,042,244
Revenue Bonds, Series 1996 (Westvaco Corporation Project),
6.375%, 4/01/26 (Alternative Minimum Tax)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 19.2%
<S> <C> <C> <C> <C>
$ 1,310,000 County of Christian, Kentucky, Hospital Revenue Bonds, 7/06 at 102 A- $ 1,360,566
Series 1996A, Jennie Stuart Medical Center, 6.000%, 7/01/17
3,500,000 County of Christian, Kentucky, Hospital Revenue and 7/06 at 102 A- 3,741,150
Refunding Bonds, Series 1997A, Jennie Stuart Medical
Center, 6.000%, 7/01/13
5,270,000 County of Clark, Kentucky, Hospital Refunding and 3/07 at 102 BBB- 5,486,597
Improvement Revenue Bonds (Clark Regional Medical
Center Project), Series 1997, 6.200%, 4/01/13
3,300,000 County of Daviess, Kentucky, Insured Hospital Revenue 8/02 at 102 AAA 3,559,281
Bonds (ODCH, Inc. Project), Series 1992A, 6.250%, 8/01/22
2,705,000 County of Floyd, Kentucky, Hospital Revenue Refunding 2/01 at 102 AAA 2,865,352
Bonds (FHA-Insured Mortgage Loan-Highland Hospital
Corporation Project), Series 1991, 7.500%, 8/01/10
4,000,000 County of Hopkins, Kentucky, Hospital Revenue Bonds, 11/01 at 102 AAA 4,300,840
Series 1991 (The Trover Clinic Foundation, Incorporated),
6.625%, 11/15/11
County of Jefferson, Kentucky, Health Facilities Revenue
Bonds, Series 1992 (Jewish Hospital Healthcare Services
Inc. Project):
1,190,000 6.500%, 5/01/15 5/02 at 102 AAA 1,283,058
12,785,000 6.550%, 5/01/22 5/02 at 102 AAA 13,802,175
4,625,000 County of Jefferson, Kentucky, Health Facilities Revenue 7/07 at 101 AAA 4,560,851
Bonds, Series 1997 (University Medical Center, Inc.
Project), 5.250%, 7/01/22
17,640,000 County of Jefferson, Kentucky, Health Facilities Revenue 10/07 at 101 AAA 17,125,618
Bonds, Series 1997 (Alliant Health System, Inc.),
5.125%, 10/01/27
7,800,000 County of Jefferson, Kentucky, Health Facilities Revenue 10/08 at 101 AAA 7,598,994
Bonds, Series 1998 (Alliant Health System, Inc.),
5.200%, 10/01/28
2,900,000 County of Jefferson, Kentucky, Insured Hospital Revenue 10/02 at 102 AAA 3,141,367
Bonds, Series 1992 (Alliant Health System, Inc. Project),
6.436%, 10/01/14
1,000,000 Kentucky Development Finance Authority (St. Elizabeth 11/01 at 100 AAA 1,045,280
Medical Center), Revenue Refunding Bonds, 6.000%,
11/01/10
5,000,000 Kentucky Economic Development Finance Authority, Hospital 12/03 at 102 AAA 5,415,700
Facilities Revenue Bonds, Series 1993A (Saint Elizabeth
Medical Center, Inc. Project), 6.000%, 12/01/22
9,500,000 Kentucky Economic Development Finance Authority, Hospital 2/07 at 102 AAA 9,882,470
Revenue and Refunding Revenue Bonds, Series 1997
(Pikeville United Methodist Hospital of Kentucky,
Inc. Project), 5.700%, 2/01/28
Kentucky Economic Development Finance Authority, Hospital
System Refunding and Improvement Revenue Bonds, Series 1997
(Appalachian Regional Healthcare, Inc. Project):
500,000 5.500%, 10/01/07 No Opt. Call N/R 510,960
500,000 5.600%, 10/01/08 4/08 at 102 N/R 513,535
3,500,000 5.850%, 10/01/17 4/08 at 102 N/R 3,538,885
1,500,000 5.875%, 10/01/22 4/08 at 102 N/R 1,511,220
2,435,000 McCracken County, Kentucky, Hospital Facilities Revenue 11/04 at 102 AAA 2,681,179
Refunding Bonds, Series1994A (Mercy Health System),
6.300%, 11/01/06
City of Radcliff, Kentucky, Tax-Exempt Mortgage Revenue
Refunding Bonds, Series 1997 (GNMA Backed - Lincoln Trail
Care and Treatment Facility):
650,000 5.100%, 7/20/07 No Opt. Call AAA 662,981
1,555,000 5.650%, 1/20/19 7/07 at 102 AAA 1,603,936
2,800,000 City of Russell, Kentucky, Health System Revenue Bonds, 1/08 at 102 BBB 2,750,020
Our Lady of Bellefonte Hospital Issue, Series 1997
(Franciscan Health Partnership, Inc. Refunding
Revenue Bonds), 5.500%, 7/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 2.1%
2,500,000 Greater Kentucky Housing Assistance Corporation, Mortgage 1/03 at 100 AAA 2,569,200
Revenue Refunding Bonds, Series 1993A (FHA-Insured Mortgage
Loans - Section 8 Assisted Projects), 6.250%, 7/01/24
3,510,000 City of Henderson, Kentucky, Residential Facilities Revenue 5/09 at 102 N/R 3,515,686
Bonds (Pleasant Pointe Project), Senior Tax-Exempt Series
1999A, 6.125%, 5/01/29 (WI)
County of Jefferson, Kentucky, Multifamily Housing Revenue
Bonds (Kentucky Towers Project), Series 1998A:
700,000 5.000%, 8/20/18 8/08 at 102 AAA 690,585
2,900,000 5.650%, 8/20/34 8/08 at 102 AAA 2,989,494
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 705,000 City of Louisville, Kentucky, Multifamily Housing Revenue Refunding No Opt. Call Aa2 $ 706,622
Bonds, Series 1989 (Station House Square Associates L.P. Project),
5.125%, 7/15/19 (Mandatory put 7/15/99)
335,000 County of Martin, Kentucky, Mortgage Revenue Refunding Bonds, Series 9/99 at 105 Aa 344,135
1995 (FHA Insured Mortgage Loan-Section 8 Assisted Project),
5.375%, 7/01/05
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.2%
7,000,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1996 Series E, 7/06 at 102 AAA 7,452,690
6.300%, 1/01/28 (Alternative Minimum Tax)
3,000,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1997 Series B, 6/07 at 102 AAA 3,195,150
6.250%, 7/01/28 (Alternative Minimum Tax)
1,145,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA Insured/ VA 7/00 at 102 AAA 1,189,449
Guaranteed Mortgage Loans), 1988 Series C, 7.900%, 1/01/21
(Alternative Minimum Tax)
175,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA Insured/VA 7/00 at 102 AAA 175,735
Guaranteed), 1990 Series B, 7.800%, 1/01/21 (Alternative Minimum Tax)
1,000,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 7/02 at 102 AAA 1,061,050
or Guaranteed Mortgage Loans), Series 1992B, 6.625%, 7/01/14
415,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 1/03 at 102 AAA 438,311
or Guaranteed Mortgage Loans), Series 1991C-1, 6.600%, 1/01/11
100,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1993 Series B 1/04 at 102 AAA 103,437
(Federally Insured or Guaranteed Mortgage Loans), 5.150%, 7/01/07
3,560,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1998 Series F, 1/09 at 101 AAA 3,508,166
5.000%, 7/01/18 (Alternative Minimum Tax)
830,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 1/04 at 102 AAA 880,331
or Guaranteed Mortgage Loans), 1994 Series A, 6.500%, 7/01/17
1,990,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 7/04 at 102 AAA 2,120,624
or Guaranteed Mortgage Loans), 1994 Series C, 6.400%, 1/01/17
1,975,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 1/05 at 102 AAA 2,110,742
or Guaranteed Mortgage Loans), 1995 Series B, 6.625%, 7/01/26
(Alternative Minimum Tax)
5,335,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1999 Series B, 4/09 at 101 AAA 5,303,470
5.250%, 1/01/28 (Alternative Minimum Tax) (DD1)
9,480,000 Kentucky Housing Corporation, Housing Revenue Bonds, Series A, 4/09 at 101 AAA 9,421,319
5.200%, 1/01/31
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 3.4%
County of Jefferson, Kentucky, First Mortgage Revenue Bonds, Series 1994
(The First Christian Church Homes of Kentucky Project):
1,240,000 6.000%, 11/15/09 11/04 at 102 BBB 1,290,580
715,000 6.125%, 11/15/13 11/04 at 102 BBB 745,144
3,210,000 6.125%, 11/15/18 11/04 at 102 BBB 3,345,334
Kentucky Economic Development Finance Authority, Health Care Facilities
Revenue Bonds, Series 1998 (The Christian Church Homes of Kentucky Inc.
Obligated Group):
1,800,000 5.375%, 11/15/23 5/08 at 102 BBB 1,731,312
4,250,000 5.500%, 11/15/30 5/08 at 102 BBB 4,090,200
200,000 Kentucky Economic Development Finance Authority, Hospital Revenue No Opt. Call Aa3 204,736
Refunding Bonds, Series 1996 (Green River Regional Mental Health/
Mental Retardation Board, Inc.), 5.200%, 11/01/01
5,700,000 Kentucky Economic Development Finance Authority, Tax Exempt Mortgage 1/08 at 105 AAA 6,097,005
Revenue Bonds (South Central Nursing Homes, Inc. Project), Series
1997A, 6.000%, 7/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 1.9%
4,790,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 (General 7/06 at 101 1/2 A 4,849,827
Obligation Bonds), 5.400%, 7/01/25
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 100 A 2,015,560
5.375%, 7/01/25
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 280,000 Commonwealth of Puerto Rico, Public Improvement Refunding Bonds, No Opt. Call A $ 296,355
Series 1993 (General Obligation Bonds), 5.375%, 7/01/05
3,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998 (General 7/08 at 101 A 2,877,840
Obligation Bonds), 5.000%, 7/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 21.2%
615,000 Boone County, Kentucky, School District Finance Corporation School 2/03 at 102 A1 648,917
Building Refunding and Improvement Revenue Bonds, Series 1993,
6.000%, 2/01/18
1,595,000 City of Bowling Green Municipal Projects Corporation, 12/04 at 102 A2 1,756,382
Kentucky, Lease Revenue Bonds, Series 1994, 6.500%, 12/01/14
1,005,000 Casey County School District Finance Corporation, School Building 3/05 at 102 A1 1,058,647
Revenue Bonds, Series 1995, 5.750%, 3/01/15
Daviess County, Kentucky, School District Finance Corporation,
School Building Revenue Bonds, Series 1994:
505,000 5.800%, 5/01/11 5/04 at 102 A1 544,132
535,000 5.800%, 5/01/12 5/04 at 102 A1 569,952
570,000 5.800%, 5/01/13 5/04 at 102 A1 605,939
600,000 5.800%, 5/01/14 5/04 at 102 A1 636,468
1,070,000 Fleming County School District Finance Corporation, School 3/05 at 102 A 1,127,673
Building Revenue Bonds, Series 1995, 5.875%, 3/01/15
3,155,000 City of Florence, Kentucky, Public Properties Corporation, 6/07 at 102 AAA 3,261,702
First Mortgage Revenue Bonds (Administrative Office Complex
Project), Series 1997, 5.500%, 6/01/27
Floyd County, Kentucky, Public Properties Corporation, First Mortgage
Revenue Bonds (Floyd County Justice Center Project), Series 1995A:
465,000 5.500%, 9/01/17 3/06 at 102 A 481,419
1,260,000 5.550%, 9/01/23 3/06 at 102 A 1,305,851
3,550,000 Floyd County, Kentucky, Public Properties Corporation, First Mortgage 3/06 at 102 A 3,803,115
Revenue Bonds (Floyd County Justice Center Project), Series 1996B,
6.200%, 9/01/26
1,200,000 Floyd County School District Finance Corporation, Kentucky, School 5/05 at 102 A1 1,246,728
Building Revenue Bonds, Series 1995, 5.500%, 5/01/15
2,280,000 Grant County School District Finance Corporation, School Building 3/07 at 102 Aaa 2,319,649
Revenue Bonds, Series 1997, 5.375%, 3/01/17
Hardin County, Kentucky, Building Commission Revenue Bonds (Detention
Facility Project), Series 1994:
525,000 6.200%, 12/01/11 12/04 at 102 AAA 579,044
1,775,000 6.250%, 12/01/14 12/04 at 102 AAA 1,966,150
Hardin County, Kentucky, School District Finance Corporation, School
Building Revenue Bonds, Series of 1991:
265,000 6.800%, 6/01/08 6/01 at 103 A1 286,433
300,000 6.800%, 6/01/10 6/01 at 103 A1 324,264
3,465,000 Hopkins County, Kentucky, School District Finance Corporation, 6/04 at 102 A1 3,718,084
School Building Revenue Bonds, Series 1994, 6.200%, 6/01/19
4,195,000 Jefferson County, Kentucky, School District Finance Corporation, 2/06 at 102 AAA 4,190,008
School Building Revenue Bonds, Series 1996A, 5.125%, 2/01/16
4,600,000 Jefferson County, Kentucky, School District Finance Corporation, 2/09 at 101 AAA 4,176,984
School Building Revenue Bonds, Series 1998C, 4.500%, 2/01/19
1,072,876 County of Jefferson, Kentucky, Equipment Lease Purchase 6/99 at 101 N/R 1,100,954
Revenue Bonds, Series 1987 (Energy System Project), 9.000%, 6/01/03
197,818 County of Jefferson, Kentucky, Equipment Lease Purchase 6/99 at 102 N/R 205,742
Revenue Bonds, Series 1988 (Energy System Project), 9.500%, 6/01/03
2,500,000 Jefferson County, Kentucky, Capital Projects Corporation Lease Revenue 8/99 at 51 31/32 Aa3 1,288,225
Bonds, Series 1987B, 0.000%, 8/15/08
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
City of Jeffersontown, Kentucky, Public Projects Refunding and Improvements,
Certificates of Participation:
$ 100,000 5.000%, 11/01/05 No Opt. Call A $ 104,776
1,000,000 5.750%, 11/01/15 11/06 at 102 A 1,058,470
Jessamine County, Kentucky, School District Finance Corporation, School
Building Revenue Bonds, Series 1991:
510,000 6.750%, 6/01/10 6/01 at 103 A1 553,554
545,000 6.750%, 6/01/11 6/01 at 103 A1 591,543
2,500,000 Jessamine County, Kentucky, School District Finance Corporation, School 6/04 at 102 A1 2,667,450
Building Revenue Bonds, Series 1994, 6.125%, 6/01/19
5,650,000 Jessamine County, Kentucky, School District Finance Corporation, School 1/06 at 102 A1 5,828,653
Building Revenue Bonds, Series 1995,
5.500%, 1/01/21
4,500,000 Kenton County, Kentucky, Public Properties Corporation, First Mortgage 3/09 at 101 A1 4,276,035
Revenue Bonds (Courthouse Facilities Project), 1998 Series A,
5.000%, 3/01/29
400,000 Commonwealth of Kentucky, State Property and Buildings Commission, Revenue 11/01 at 102 A+ 432,512
and Revenue Refunding Bonds, Project No. 40, 2nd Series, 6.875%, 11/01/07
250,000 Commonwealth of Kentucky, State Property and Buildings Commission, Revenue 10/01 at 102 A 270,125
and Revenue Refunding Bonds, Project No. 53, 6.625%, 10/01/07
60,000 The Turnpike Authority of Kentucky, Economic Development Road Revenue No Opt. Call AAA 63,842
and Revenue Refunding Bonds (Revitalization Projects), Series 1993,
5.400%, 7/01/05
1,000,000 The Turnpike Authority of Kentucky, Economic Development Road Revenue 7/05 at 102 AAA 1,045,520
and Revenue Refunding Bonds (Revitalization Projects), Series 1995,
5.625%, 7/01/15
125,000 The Turnpike Authority of Kentucky, Resource Recovery Road Revenue 7/99 at 100 A+ 125,239
Refunding Bonds, 1985 Series A, 6.000%, 7/01/09
Lexington, Kentucky, Center Corporation, Mortgage Revenue Refunding and
Improvement Bonds, Series 1993A:
2,600,000 0.000%, 10/01/11 No Opt. Call A1 1,410,032
2,550,000 0.000%, 10/01/12 No Opt. Call A1 1,305,779
435,000 Lincoln County, Kentucky, School District Finance Corporation, School 5/02 at 102 A1 463,566
Building Revenue Bonds, Series 1992, 6.200%, 5/01/12
1,525,000 McCracken County, Kentucky, Public Properties Corporation, Public 9/06 at 102 AAA 1,629,539
Project Revenue Bonds (Court Facilities Project), Series 1995,
5.900%, 9/01/26
2,365,000 McCreary County, Kentucky, School District Finance Corporation, 8/05 at 102 A 2,462,083
School Building Revenue Bonds, Second Series of 1995, 5.600%,
8/01/16
1,410,000 Morgan County, Kentucky, School District Finance Corporation School 9/04 at 102 A1 1,509,320
Building Revenue Bonds, Series 1994, 6.000%, 9/01/14
Mount Sterling, Kentucky, Lease Revenue Bonds (Kentucky League of
Cities Funding Program), Series 1993A:
775,000 5.625%, 3/01/03 No Opt. Call Aa 811,185
13,000,000 6.200%, 3/01/18 3/03 at 102 Aa 13,635,180
Pendleton County, Kentucky, County Lease Revenue Bonds, Kentucky
Associated Counties Leasing Trust Program, Series 1993A:
12,960,000 6.500%, 3/01/19 3/03 at 102 A 13,693,018
500,000 6.400%, 3/01/19 No Opt. Call A 568,465
2,000,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, Series 1995, 7/06 at 101 1/2 A 1,944,340
Guaranteed by the Commonwealth of Puerto Rico, 5.000%, 7/01/19
8,250,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, 7/16 at 100 A 8,485,125
Series Y of 1996, 5.500%, 7/01/36
115,000 Puerto Rico Infrastructure Finance Authority, Special Tax Revenue Bonds, 7/99 at 101 BBB+ 117,663
Series 1988A, 7.750%, 7/01/08
7,000,000 Warren County, Kentucky, Justice Center Expansion Corporation, First 9/07 at 102 AAA 6,975,150
Mortgage Revenue Bonds, AOC Judicial Facility Series 1997A, 5.250%,
9/01/24
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation -- 4.6%
$10,640,000 Kenton County Airport Board (Commonwealth of Kentucky), Special 2/02 at 100 BBB $10,840,670
Facilities Revenue Bonds, 1992 Series A (Delta Air Lines, Inc.
Project), 6.125%, 2/01/22 (Alternative Minimum Tax)
300,000 Kenton County, Kentucky, Airport Board, Cincinnati/Northern No Opt. Call AAA 307,521
Kentucky International Airport Revenue Bonds, Series 1996A,
5.000%, 3/01/02 (Alternative Minimum Tax)
1,250,000 Kenton County, Kentucky, Airport Board, Cincinnati/Northern 3/06 at 102 AAA 1,314,375
Kentucky International Airport Revenue Bonds, Series 1996B (non-AMT),
5.750%, 3/01/13
5,000,000 Regional Airport Authority of Louisville and Jefferson County, 7/05 at 102 AAA 5,130,350
Kentucky, Airport System Revenue Bonds, 1995 Series A, 5.625%,
7/01/25 (Alternative Minimum Tax)
6,000,000 Regional Airport Authority of Louisville and Jefferson County, 3/09 at 101 Baa3 6,004,260
Kentucky, Special Facilities Revenue Bonds, 1999 Series A
(Airis Louisville, L.L.C. Project), 5.500%, 3/01/19 (Alternative
Minimum Tax) (WI)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 13.4%
430,000 Bardstown Independent School District Finance Corporation, School 11/02 at 102 A1*** 471,112
Building Refunding and Improvement Revenue Bonds, Series of 1992,
6.375%, 5/01/17 (Pre-refunded to 11/01/02)
725,000 Bell County, Kentucky, School District Finance Corporation, School 9/01 at 102 A*** 786,814
Building Revenue Bonds, Series 1991, 6.875%, 9/01/11 (Pre-refunded
to 9/01/01)
1,000,000 Boone County, Kentucky, School District Finance Corporation, School 9/01 at 103 A1*** 1,091,780
Building Revenue Bonds, Series C of 1991, 6.750%, 9/01/11
(Pre-refunded to 9/01/01)
1,215,000 Boone County, Kentucky, School District Finance Corporation, School 12/02 at 102 A1*** 1,323,427
Building Refunding and Improvement Revenue Bonds, Series 1992,
6.125%, 12/01/17 (Pre-refunded to 12/01/02)
Christian County, Kentucky, School District Finance Corporation, School
Building Revenue Bonds, Series 1991:
565,000 6.750%, 6/01/10 (Pre-refunded to 6/01/01) 6/01 at 102 A*** 609,036
600,000 6.750%, 6/01/11 (Pre-refunded to 6/01/01) 6/01 at 102 A*** 646,764
1,645,000 City of Edgewood, Kentucky, Public Properties Corporation, First 12/01 at 102 A2*** 1,794,465
Mortgage Revenue Bonds (Public Facilities Project), Series 1991,
6.700%, 12/01/21 (Pre-refunded to 12/01/01)
City of Florence, Kentucky, Public Properties Corporation First
Mortgage Revenue Bonds (Recreational Facilities Project):
100,000 7.000%, 3/01/10 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 108,225
320,000 7.000%, 3/01/14 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 347,184
345,000 7.000%, 3/01/15 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 374,308
360,000 7.000%, 3/01/16 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 390,582
17,000,000 Jefferson County, Kentucky, Capital Projects Corporation, 2/01 at 24 11/16 AAA 3,929,040
Lease Revenue Bonds, Series 1989B, 0.000%, 8/15/19
(Pre-refunded to 2/15/01)
4,900,000 County of Jefferson, Kentucky, Insured Hospital Revenue Bonds, 10/02 at 102 AAA 5,344,675
Series 1992 (Alliant Health System, Inc. Project), 6.436%, 10/01/14
(Pre-refunded to 10/29/02)
Kenton County, Kentucky, Public Parks Corporation, Mortgage Revenue
Bonds Series 1990:
1,290,000 7.000%, 3/01/08 (Pre-refunded to 3/01/00) 3/00 at 101 A*** 1,338,233
1,070,000 7.100%, 3/01/10 (Pre-refunded to 3/01/00) 3/00 at 101 A*** 1,110,735
815,000 Kenton County School District Finance Corporation, Kentucky, School 12/01 at 102 A+*** 888,725
Building Revenue Bonds, Series 1991, 6.800%, 12/01/11 (Pre-refunded
to 12/01/01)
3,000,000 Kentucky Development Finance Authority, Hospital Revenue Bonds, 10/99 at 102 A*** 3,101,250
Series 1989A (St. Luke Hospital, Inc.), 7.500%, 10/01/12
(Pre-refunded to 10/01/99)
Kentucky Development Finance Authority, Sisters of Charity of Nazareth
Health Corporation, Hospital Revenue Bonds, Series 1989:
1,750,000 7.375%, 11/01/16 (Pre-refunded to 11/01/99) 11/99 at 102 A1*** 1,813,368
500,000 7.375%, 11/01/16 (Pre-refunded to 11/01/99) 11/99 at 102 AAA 518,410
Kentucky Development Finance Authority, Hospital Facilities Revenue
Bonds, Series 1991A (St. Luke Hospital, Inc.):
2,000,000 7.000%, 10/01/11 (Pre-refunded to 10/01/01) 10/01 at 102 AAA 2,184,980
9,070,000 7.000%, 10/01/21 (Pre-refunded to 10/01/01) 10/01 at 102 AAA 9,908,884
580,000 Kentucky Development Finance Authority, Sisters of Charity of Nazareth 11/01 at 102 A1*** 628,482
Health Corporation, Revenue Refunding Bonds, Series 1991, 6.600%,
11/01/06 (Pre-refunded to 11/01/01)
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 600,000 Kentucky Infrastructure Authority, Infrastructure Revolving Fund Program 6/05 at 102 A*** $ 675,450
Revenue Bonds, 1995 Series J, 6.375%, 6/01/14 (Pre-refunded to
6/01/05)
1,495,000 Kentucky Infrastructure Authority Governmental Agencies Program, Revenue 8/99 at 102 A*** 1,536,053
Refunding Bonds, Series 1989A, 7.800%, 8/01/08 (Pre-refunded to
8/01/99)
2,075,000 Commonwealth of Kentucky, State Property and Buildings Commission 9/04 at 102 A+*** 2,286,401
Revenue Bonds, Project No. 56, 6.000%, 9/01/14 (Pre-refunded to
9/01/04)
4,875,000 The Turnpike Authority of Kentucky, Economic Development Road Revenue 5/00 at 101 1/2 AAA 5,128,939
Bonds (Revitalization Projects), Series 1990, 7.250%, 5/15/10
(Pre-refunded to 5/15/00)
250,000 Laurel County, Kentucky, School District Finance Corporation, School 3/01 at 102 A*** 268,445
Building Revenue Bonds, 7.000%, 3/01/10 (Pre-refunded to 3/01/01)
1,000,000 Lawrence County, Kentucky, School District Finance Corporation, School 11/04 at 102 A1*** 1,140,320
Building Revenue Bonds, Series 1994, 6.750%, 11/01/14 (Pre-refunded
to 11/01/04)
Lexington-Fayette Urban County Government, Kentucky, Governmental
Project Revenue Bonds, Series 1994 (University of Kentucky Alumni
Association, Inc., Commonwealth Library Project):
3,195,000 6.750%, 11/01/17 (Pre-refunded to 11/01/04) 11/04 at 102 AAA 3,658,435
4,320,000 6.750%, 11/01/24 (Pre-refunded to 11/01/04) 11/04 at 102 AAA 4,946,616
2,790,000 The City of Louisville Parking Authority of River City (PARC), Inc., 6/01 at 103 A*** 3,034,934
Kentucky, First Mortgage Revenue Bonds, Series 1991,
6.875%, 12/01/20 (Pre-refunded to 6/01/01)
Montgomery County, Kentucky, School District Finance Corporation,
School Building Revenue Bonds, Series 1991:
305,000 6.800%, 6/01/09 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 328,509
325,000 6.800%, 6/01/10 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 350,051
350,000 6.800%, 6/01/11 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 376,978
2,000,000 Northern Kentucky University Certificates of Participation, Student 1/01 at 102 AAA 2,147,860
Housing Facilities, Series 1991, 7.250%, 1/01/12 (Pre-refunded to
1/01/01)
1,230,000 Perry County, Kentucky, School District Finance Corporation, School 7/02 at 102 A1*** 1,334,636
Building Revenue Bonds, Series 1992, 6.250%, 7/01/11 (Pre-refunded to
7/01/02)
1,990,000 Western Kentucky University, Housing and Dining System Revenue Bonds, 12/00 at 102 AAA 2,143,767
Series 1990L, 7.400%, 12/01/10 (Pre-refunded to 12/01/00)
940,000 Western Kentucky University, Consolidated Educational Building Revenue 11/00 at 102 AAA 1,010,002
Bonds, Series 1990J, 7.400%, 5/01/10 (Pre-refunded to 11/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 8.6%
7,000,000 County of Boone, Kentucky, Collateralized Pollution Control Revenue 1/04 at 102 AAA 7,164,570
Refunding Bonds, 1994 Series A (The Cincinnati Gas and Electric
Company Project), 5.500%, 1/01/24
5,030,000 County of Carroll, Kentucky, Collateralized Pollution Control Revenue 2/02 at 102 Aa2 5,328,631
Bonds (Kentucky Utilities Company Project), 1992 Series B,
6.250%, 2/01/18
County of Jefferson, Kentucky, Pollution Control Revenue Bonds, 1990
Series A (Louisville Gas and Electric Company Project):
1,000,000 7.450%, 6/15/15 6/00 at 102 Aa2 1,050,650
1,750,000 5.900%, 4/15/23 4/05 at 102 Aa2 1,837,028
1,250,000 Mercer County, Kentucky, Collateralized Pollution Control Revenue Bonds 2/02 at 102 Aa2 1,325,837
(Kentucky Utilities Company Project), Series 1992A, 6.250%, 2/01/18
Owensboro, Kentucky, Electric Light and Power Revenue Bonds,
Series 1991B:
7,100,000 0.000%, 1/01/11 No Opt. Call AAA 4,032,658
6,475,000 0.000%, 1/01/12 No Opt. Call AAA 3,472,543
7,900,000 0.000%, 1/01/17 No Opt. Call AAA 3,169,243
13,300,000 0.000%, 1/01/18 No Opt. Call AAA 5,047,350
5,100,000 0.000%, 1/01/19 No Opt. Call AAA 1,830,135
4,725,000 0.000%, 1/01/20 No Opt. Call AAA 1,605,933
400,000 City of Owensboro, Kentucky, Electric Light and Power System Revenue No Opt. Call AAA 329,760
Bonds, Series 1993A, 0.000%, 1/01/04 (Alternative Minimum Tax)
3,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 7/04 at 102 BBB+ 3,214,230
6.000%, 7/01/16
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$ 4,795,000 Trimble County, Kentucky, Pollution Control Revenue Bonds 11/00 at 102 Aa2 $ 5,093,489
(Louisville Electric Company), Series 1990A, 7.625%,
11/01/20 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 7.8%
625,000 City of Danville, Kentucky, Multi-City Lease Revenue 12/01 at 103 AAA 681,931
Bonds (City of Radcliff, Kentucky, Sewer System Revenue
Project), Fixed Rate Series 1991-B, 6.875%, 3/01/19
(Optional put 12/01/10)
1,750,000 City of Henderson, Kentucky, Water and Sewer Revenue and
Refunding Bonds, Series 1994A, 6.100%, 11/01/14 11/04 at 103 AAA 1,933,138
Kenton County Water District No. 1, Water District Revenue Bonds,
Series 1995B:
200,000 5.600%, 2/01/04 No Opt. Call AAA 212,852
2,040,000 5.700%, 2/01/20 8/05 at 102 AAA 2,150,221
500,000 Kentucky Infrastructure Authority, Infrastructure Revolving Fund
Program Revenue Bonds, 1991 Series E, 6.500%, 6/01/11 6/01 at 102 A 535,660
1,000,000 Kentucky Infrastructure Authority, Governmental Agencies Program
Revenue Refunding Bonds, 1993 Series E, 5.750%, 8/01/18 8/03 at 102 A 1,027,320
Kentucky Infrastructure Authority, Infrastructure Revolving Fund Program
Revenue Bonds,1995 Series J:
440,000 6.300%, 6/01/10 6/05 at 102 A 493,596
360,000 6.350%, 6/01/11 6/05 at 102 A 404,798
Kentucky Infrastructure Authority, Governmental Agencies Program Revenue
Bonds, 1995 Series G:
420,000 6.300%, 8/01/10 8/05 at 102 A 470,102
445,000 6.350%, 8/01/11 8/05 at 102 A 499,277
825,000 6.375%, 8/01/14 8/05 at 102 A 927,688
405,000 Kentucky Infrastructure Authority, Governmental Agencies Program Revenue 8/99 at 102 A 416,077
Refunding Bonds, Series 1989A, 7.800%, 8/01/08
Louisville and Jefferson County Metropolitan Sewer District (Commonwealth
of Kentucky), Sewer and Drainage System Revenue Bonds, Series 1994A:
2,720,000 6.750%, 5/15/19 11/04 at 102 AAA 3,116,766
2,070,000 6.500%, 5/15/24 11/04 at 102 AAA 2,346,842
2,500,000 6.750%, 5/15/25 11/04 at 102 AAA 2,864,674
3,865,000 Louisville and Jefferson County Metropolitan Sewer District (Commonwealth 2/05 at 102 Aaa 3,916,056
of Kentucky), Sewer and Drainage System Revenue Bonds, Series 1996A,
5.400%, 5/15/22
10,500,000 Louisville and Jefferson County Metropolitan Sewer District (Commonwealth 5/07 at 101 AAA 10,446,344
of Kentucky), Sewer and Drainage System Revenue Bonds, Series 1997A,
5.250%, 5/15/27
6,000,000 Louisville and Jefferson County Metropolitan Sewer District (Commonwealth 11/07 at 101 AAA 6,059,759
of Kentucky), Sewer and Drainage System Revenue Bonds, Series 1997B,
5.350%, 5/15/22
1,000,000 Louisville and Jefferson County Metropolitan Sewer District (Commonwealth 5/08 at 101 AAA 921,089
of Kentucky), Sewer and Drainage System Revenue Bonds, Series 1998A,
4.750%, 5/15/28
500,000 Paducah, Kentucky, Waterworks Revenue Refunding Bonds, Series 1991, 6.700%, 7/01 at 102 AAA 539,534
7/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
$545,555,694 Total Investments - (cost $492,461,610) - 101.6% 523,340,679
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (1.6)% (8,206,210)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $515,134,469
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report
of independent public accountants): Dates (month and
year) and prices of the earliest optional call or
redemption. There may be other call provisions at
varying prices at later dates.
** Ratings (not covered by the report of independent
public accountants): Using the higher of Standard &
Poor's or Moody's rating.
*** Securities are backed by an escrow or trust
containing sufficient U.S. government or U.S.
government agency securities which ensures the
timely payment of principal and interest. Securities
are normally considered to be equivalent to AAA
rated securities.
N/R Investment is not rated.
(DD) Security purchased on a delayed delivered basis
(note 1).
(DD1) Portion of security purchased on a delayed delivery
basis (note 1).
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods 0.3%
$1,055,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (WMX 12/03 at 102 A1 $1,110,904
Technologies, Inc. Project), Series 1993, 6.000%, 12/01/13
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclical - 3.2%
2,500,000 Michigan Strategic Fund, Limited Obligation Refunding Revenue No Opt. Call A1 2,877,825
Bonds, Series 1991A, 7.100%, 2/01/06
5,000,000 Michigan Strategic Fund, Multi-Modal Interchangeable Rate 9/05 at 102 A 5,362,650
Pollution Control Refunding Revenue Bonds (General Motors
Corporation), Series 1995, 6.200%, 9/01/20
2,650,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds No Opt. Call A- 2,752,290
(Worthington Armstrong Venture Project), Series 1997, 5.750%,
10/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 0.9%
210,000 Board of Control of Grand Valley State University, Michigan, 10/99 at 101 A+ 214,893
General Revenue Bonds, Series 1988, 7.875%, 10/01/08
750,000 Michigan Higher Education Student Loan Authority, Student Loan 6/06 at 102 Aaa 788,730
Revenue Bonds, Series XVII-A, 5.750%, 6/01/13 (Alternative
Minimum Tax)
1,000,000 Michigan Higher Education Student Loan Authority, Student Loan 6/08 at 101 AAA 998,230
Revenue Bonds, Series XVII-B, 5.400%, 6/01/18 (Alternative Minimum
Tax)
1,000,000 Board of Trustees of Western Michigan University, Michigan, General 11/02 at 102 AAA 1,094,810
Revenue Bonds, Series 1992A, 6.250%, 11/15/12
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 2.2%
7,500,000 The Economic Development Corporation of Dickinson County (Michigan), 10/03 at 102 Baa1 7,660,500
Pollution Control Refunding Revenue Bonds (Champion International
Corporation Project), Series 1993, 5.850%, 10/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 18.1%
1,000,000 The Economic Development Corporation of the City of Dearborn, 11/05 at 102 AAA 1,060,780
Hospital Revenue Bonds (Oakwood Obligated Group), Series 1995A,
5.750%, 11/15/15
500,000 City of Farmington Hills, Hospital Finance Authority (Michigan), 2/02 at 102 AAA 542,885
Hospital Revenue Bonds (Botsford General Hospital), Series 1992A,
6.500%, 2/15/11
City of Flint Hospital Building Authority, Revenue Rental Bonds,
Series 1998B (Hurley Medical Center):
1,000,000 5.375%, 7/01/18 7/08 at 101 Baa1 952,370
1,000,000 5.375%, 7/01/28 7/08 at 101 Baa1 935,240
160,000 County of Grand Traverse (Michigan), Hospital Finance Authority, 7/02 at 102 AAA 172,102
Hospital Revenue Refunding Bonds (Munson Healthcare Obligated
Group), Series 1992A, 6.250%, 7/01/22
6,000,000 City of Kalamazoo Hospital Finance Authority, Hospital Revenue 5/06 at 102 AAA 6,315,660
Refunding and Improvement Bonds (Bronson Methodist Hospital),
Series 1996, 5.875%, 5/15/26
1,290,000 Kent Hospital Finance Authority (Michigan), Hospital Revenue 11/01 at 102 AAA 1,382,867
Refunding Bonds (Pine Rest Christian Hospital), Series 1992,
6.500%, 11/01/10
3,530,000 Lake View Community Hospital Authority (Michigan), Hospital 2/07 at 101 N/R 3,434,055
Revenue Refunding Bonds, Series 1997, 6.250%, 2/15/13
40,000 Michigan State Hospital Finance Authority, Hospital Revenue and 8/99 at 101 BBB 40,934
Refunding Bonds (The Detroit Medical Center Obligated Group),
Series 1988B, 8.125%, 8/15/08
3,000,000 Michigan State Hospital Finance Authority, Revenue Refunding 7/99 at 101 BBB+ 3,036,000
Bonds, Memorial Hospital Owosso Series 1987A, 7.375%, 1/01/03
6,500,000 Michigan State Hospital Finance Authority, Revenue and Refunding 8/03 at 102 BBB 6,618,625
Bonds (The Detroit Medical Center Obligated Group), Series 1993A,
6.500%, 8/15/18
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 11/01 at 102 AAA 1,072,800
Refunding Bonds (Sparrow Obligated Group), Series 1991, 6.500%,
11/15/11
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$2,920,000 Michigan State Hospital Finance Authority, Hospital Revenue and 8/04 at 102 BBB $2,685,728
Refunding Bonds (The Detroit Medical Center Obligated Group),
Series 1993B, 5.500%, 8/15/23
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue and 1/05 at 102 AA- 1,074,740
Refunding Bonds (Otsego Memorial Hospital, Gaylord, Michigan),
Series 1995, 6.125%, 1/01/15
2,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 7/05 at 102 AAA 2,042,420
Refunding Bonds (Port Huron Hospital Obligated Group),
Series 1995, 5.500%, 7/01/15
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue No Opt. Call BBB 1,058,960
Refunding Bonds (Gratiot Community Hospital, Alma, Michigan)
Series 1995, 6.100%, 10/01/07
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 10/06 at 102 BBB 1,042,630
Bonds (Michigan Community Hospital), Series 1996, 6.250%, 10/01/27
2,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 8/07 at 101 AA- 2,002,140
Refunding Bonds (Mercy Health Services), Series 1997S, 5.500%, 8/15/20
Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds (Genesys Regional Medical Center
Obligated Group), Series 1998A:
1,000,000 5.500%, 10/01/18 10/08 at 101 BBB 972,100
4,000,000 5.500%, 10/01/27 10/08 at 101 BBB 3,812,360
1,975,000 Michigan State Hospital Finance Authority, Hospital Revenue and 5/08 at 101 BBB 1,892,208
Refunding Bonds (Hackley Hospital Obligated Group),
Series 1998A, 5.375%, 5/15/19
1,250,000 Michigan State Hospital Finance Authority, Hospital Revenue 8/08 at 101 BBB 1,099,650
Bonds (The Detroit Medical Center Obligated Group),
Series 1998A, 5.250%, 8/15/28
Pontiac Michigan Hospital Finance Authority, Hospital Revenue
Refunding Bonds, Nomc Obligation Group:
3,000,000 6.000%, 8/01/18 8/03 at 102 BBB- 3,025,680
5,165,000 6.000%, 8/01/23 8/03 at 102 BBB- 5,206,837
8,345,000 Royal Oak, Michigan, Hospital Finance Authority, Hospital 1/06 at 102 AA 8,104,330
Revenue Refunding Bonds (William Beaumont
Hospital), Series 1996I, 5.250%, 1/01/20
2,000,000 Saginaw Hospital Finance Authority (Michigan), Hospital Revenue 10/99 at 102 BBB+ 2,056,340
Refunding Bonds (Saginaw General Hospital),
Series 1989, 7.625%, 10/01/08
500,000 City of Saginaw (Michigan), Hospital Finance Authority (St. 7/01 at 102 AAA 535,565
Lukes Hospital), Hospital Revenue Refunding Bonds,
Series 1991C, 6.750%, 7/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 4.0%
430,000 Grand Rapids Housing Corporation, Multifamily Revenue Refunding 1/04 at 104 AAA 473,602
Bonds, Series 1992 (FHA Insured Mortgage Loan -- Section 8
Assisted Elderly Project), 7.375%, 7/15/41
750,000 Grand Rapids Housing Finance Authority, Multifamily Housing 9/04 at 100 AAA 821,760
Refunding Revenue Bonds, Series 1990A (Fannie Mae Collateralized),
7.625%, 9/01/23
1,190,000 Michigan State Housing Development Authority, Limited Obligation 4/05 at 102 Aaa- 1,279,607
Multifamily Revenue Refunding Bonds, Series 1995A (GNMA
Collateralized Program-Parc Pointe Apartments), 6.500%, 10/01/15
6,000,000 Michigan State Housing Development Authority, Section 8 Assisted No Opt. Call AA- 1,683,240
Mortgage Revenue Bonds, Series 1983I, 0.000%, 4/01/14
5,000,000 Michigan State Housing Development Authority, Rental Housing 4/01 at 102 AA- 5,304,300
Revenue Bonds, 1990 Series B, 7.550%, 4/01/23
190,000 Michigan State Housing Development Authority, Rental Housing 1/02 at 102 AA- 202,010
Revenue Bonds, 1991 Series B, 7.100%, 4/01/21
400,000 Michigan State Housing Development Authority, Rental Housing 10/02 at 102 AA- 426,444
Revenue Bonds, 1992 Series A, 6.650%, 4/01/23
1,000,000 Michigan State Housing Development Authority, Rental Housing 6/05 at 102 AAA 1,062,920
Revenue Bonds, 1995 Series B, 6.150%, 10/01/15
2,500,000 Michigan State Housing Development Authority, Rental Housing 4/09 at 101 AAA 2,475,500
Revenue Bonds, 1999 Series A, 5.300%, 10/01/37
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family - 3.7%
$ 820,000 Michigan State Housing Development Authority, Single Family Mortgage 6/00 at 102 AA+ $ 847,634
Revenue Bonds, Series 1990A, 7.500%, 6/01/15
2,015,000 Michigan State Housing Development Authority, Single Family Mortgage 12/00 at 102 AA+ 2,096,547
Revenue Bonds, Series 1990C, 7.550%, 12/01/15
2,000,000 Michigan State Housing Development Authority, Single Family Mortgage 6/04 at 102 AA+ 2,116,400
Revenue Bonds, Series 1994A, 6.450%, 12/01/14
3,930,000 Michigan State Housing Development Authority, Single Family Mortgage 12/04 at 102 AA+ 4,110,819
Revenue Refunding Bonds, Series 1994C, 6.500%, 6/01/16
775,000 Michigan State Housing Development Authority, Single Family Mortgage 6/05 at 102 AA+ 810,108
Revenue Bonds, Series 1995A, 6.800%, 12/01/16
1,500,000 Michigan State Housing Development Authority, Single Family Mortgage 12/06 at 102 AA+ 1,577,805
Revenue Bonds, Series 1996D, 5.950%, 12/01/16
1,250,000 Michigan State Housing Development Authority, Single Family Mortgage 6/07 at 102 AAA 1,314,150
Revenue Bonds, Series 1997A, 6.050%, 12/01/27
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 5.5%
2,000,000 The Economic Development Corporation of the Charter Township of Grand 7/09 at 101 A 1,918,620
Rapids (Michigan), Limited Obligation Revenue Bonds
(Porter Hills Obligated Group Cook Valley Estates Project),
Series 1999, 5.450%, 7/01/29
2,500,000 The Economic Development Corporation of the City of Kalamazoo 5/07 at 102 BBB 2,601,425
(Kalamazoo County, Michigan), Limited Obligation Revenue and
Refunding Revenue Bonds (Friendship Village of Kalamazoo),
Series 1997A, 6.250%, 5/15/27
Michigan State Hospital Finance Authority Revenue Bonds
(Presbyterian), Villages of Michigan Obligation Group, Series 1997:
600,000 6.375%, 1/01/15 1/07 at 102 N/R 635,022
1,200,000 6.500%, 1/01/25 7/05 at 102 N/R 1,270,272
500,000 6.375%, 1/01/25 1/07 at 102 N/R 526,905
Michigan Strategic Fund, Limited Obligation Revenue Bonds
(Porter Hills Presbyterian Village Inc. Project), Series 1998:
400,000 5.300%, 7/01/18 7/08 at 101 A 387,608
2,675,000 5.375%, 7/01/28 7/08 at 101 A 2,587,073
2,000,000 Michigan Strategic Fund, Limited Obligation Revenue and Refunding 11/08 at 101 N/R 1,928,540
Revenue Bonds, Series 1998 (Holland Home), 5.750%, 11/15/28
7,110,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds 6/08 at 100 BBB+ 6,793,107
(Clark Retirement Community Inc. Project), Series 1998,
5.250%, 6/01/18
250,000 The Economic Development Corporation of the City of Warren, Nursing 3/02 at 101 Aaa 261,745
Home Revenue Refunding Bonds
(GNMA Mortgage-Backed Security - Autumn Woods Project),
Series 1992, 6.900%, 12/20/22
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 13.6%
400,000 County of Bay, State of Michigan, West Side Regional Sewage Disposal 11/99 at 102 A 411,516
System Bonds, 6.400%, 5/01/02
410,000 Bishop International Airport Authority, County of Genesee, State of 12/10 at 100 AAA 399,713
Michigan, Limited Tax General Obligation Refunding Bonds,
Series 1999-A, 5.150%, 12/01/19
5,000,000 Brighton Area Schools, County of Livingston, State of Michigan, 1992 No Opt. Call AAA 1,663,200
Refunding Bonds, Series II (General Obligation Unlimited Tax),
0.000%, 5/01/20
1,200,000 Coopersville Area Public Schools, Counties of Ottawa and Muskegon, 5/09 at 100 AAA 1,147,092
State of Michigan, 1999 School Building and Site Bonds (General
Obligation - Unlimited Tax), 5.000%, 5/01/29
8,210,000 School District of the City of Detroit, Wayne County, Michigan, 5/09 at 101 AAA 7,562,395
School Building and Site Improvement Bonds (Unlimited Tax General
Obligation), Series 1998A, 4.750%, 5/01/28
500,000 City of East Lansing Building Authority, County of Ingham, State of 10/99 at 102 AA 515,735
Michigan, Building Authority Refunding Bonds, Series 1991, 7.000%,
10/01/16
2,430,000 School District of the City of Garden City, County of Wayne, State of 5/04 at 101 AAA 2,662,600
Michigan, 1994 Refunding Bonds (General Obligation - Unlimited Tax),
6.400%, 5/01/11
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,000,000 Lake Orion Community School District, County of 5/05 at 101 AAA $ 1,025,100
Oakland, State of Michigan, 1995 Refunding Bonds
(General Obligation - Unlimited Tax), 5.500%, 5/01/20
2,700,000 Livonia Public Schools, School District County of No Opt. Call AAA 1,785,159
Wayne, State of Michigan, 1992 School Building and Site Bonds,
Series II (General Obligation - Unlimited Tax), 0.000%, 5/01/08
1,345,000 Mona Shores Public Schools, County of Muskegon, 5/05 at 102 AAA 1,400,791
State of Michigan, 1995 School Building and Site Bonds (General
Obligation - Unlimited Tax), 5.500%, 5/01/14
Okemos Public Schools, County of Ingham, State of
Michigan, 1993 Refunding Bonds:
1,000,000 0.000%, 5/01/17 No Opt. Call AAA 392,910
1,020,000 0.000%, 5/01/18 No Opt. Call AAA 379,022
1,415,000 Plymouth-Canton Community Schools, Counties of Wayne 5/09 at 100 AA+ 1,322,572
and Washtenaw, State of Michigan, 1999 School Building and Site
Bonds (General Obligation - Unlimited Tax), 4.750%, 5/01/21
1,500,000 Portage Lake Water and Sewage Authority, Houghton 10/05 at 102 AAA 1,644,825
County, Michigan, General Obligation Limited Tax Refunding Bonds,
6.200%, 10/01/20
Commonwealth of Puerto Rico, Public Improvement Bonds of 1994 (General
Obligation Bonds):
3,125,000 6.450%, 7/01/17 7/04 at 102 AAA 3,510,406
370,000 6.500%, 7/01/23 7/04 at 101 1/2 AAA 416,476
500,000 Redford Union Schools, District No. 1, County of No Opt. Call AAA 489,625
Wayne, State of Michigan, 1997 Refunding Bonds (General Obligation -
Unlimited Tax), 5.000%, 5/01/22
1,650,000 County of St. Clair, State of Michigan, Building Authority Bonds, 4/06 at 101 AAA 1,685,970
General Obligation Limited Tax, Series 1996, 5.375%, 4/01/15
750,000 South Lyon Community Schools, Counties of Oakland, 5/01 at 102 AA+ 793,763
Washtenaw and Livingston, State of Michigan, 1991 Refunding Bonds
(General Obligation - Unlimited Tax), 6.250%, 5/01/14
2,470,000 Waterford School District, County of Oakland, State 6/04 at 101 AAA 2,744,022
of Michigan, School District Bonds, Series 1995 (General Obligation -
Unlimited Tax), 6.375%, 6/01/14
5,000,000 Wayland Union School District, Counties of Allegan, 5/05 at 101 AAA 5,573,000
Barry and Kent, State of Michigan, 1994 School and Building Site Bonds
(General Obligation - Unlimited Tax), 6.250%, 5/01/14
1,250,000 Wayne County Building Authority (State of Michigan), 6/06 at 102 AAA 1,257,575
Capital Improvement Bonds, Series 1996A (Limited Tax General
Obligation), 5.250%, 6/01/16
3,270,000 West Ottawa Public Schools, County of Ottawa, State No Opt. Call AAA 1,284,816
of Michigan, 1992 Refunding Bonds (General Obligation - Unlimited
Tax), 0.000%, 5/01/17
1,000,000 Western Townships Utilities Authority, Sewage 1/02 at 100 AAA 1,056,630
Disposal System Refunding Bonds, Series 1991, 6.500%, 1/01/10
5,175,000 Williamston Community School District, General No Opt. Call AAA 5,413,361
Obligation - Unlimited Tax, Series 1996, 5.500%, 5/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 14.6%
2,000,000 City of Detroit Building Authority, Revenue Bonds 2/07 at 101 A 2,144,760
(District Court Madison Center), Series A, 6.150%, 2/01/11
2,000,000 City of Detroit, Michigan, Downtown Development 7/08 at 100 AAA 1,836,120
Authority, Tax Increment Refunding Bonds (Development Area No. 1
Projects), Series 1998A, 4.750%, 7/01/25
9,460,000 Detroit/Wayne County Stadium Authority (State of 2/07 at 102 AAA 9,384,225
Michigan), Building Authority (Stadium Bonds), Series 1997 (Wayne
County Limited Tax General Obligation), 5.250%, 2/01/27
Downtown Development Authority of The City of Grand Rapids, Michigan,
Tax Increment Revenue Bonds, Series 1994:
3,985,000 0.000%, 6/01/17 No Opt. Call AAA 1,558,972
3,495,000 0.000%, 6/01/18 No Opt. Call AAA 1,293,045
1,650,000 6.875%, 6/01/24 6/04 at 102 AAA 1,859,501
2,000,000 Lansing Michigan Building Authority, Refunding 6/05 at 101 AA+ 2,077,000
Bonds, 5.600%, 6/01/19
250,000 Michigan Municipal Bond Authority, State Revolving 12/01 at 100 AAA 250,848
Fund Revenue Bonds, Series 1992A, 4.750%, 12/01/09
5,500,000 Michigan Municipal Bond Authority, Local Government No Opt. Call AAA 3,738,295
Loan Program Revenue Bonds, Series 1991A (Insured Wayne County
Refunding Bonds), 0.000%, 12/01/07
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 2,800,000 Michigan Municipal Bond Authority, Local Government No Opt. Call AAA $ 1,840,804
Loan Program Revenue Bonds, Series 1991C, Group A, 0.000%, 6/15/08
State Building Authority, State of Michigan, 1991 Revenue Refunding
Bonds, Series I:
1,000,000 6.750%, 10/01/11 10/01 at 102 AA 1,079,050
5,000,000 6.250%, 10/01/20 10/01 at 102 AA 5,300,000
7,585,000 State Building Authority, State of Michigan, 1991 10/01 at 102 AA 8,040,100
Revenue Bonds, Series II, 6.250%, 10/01/20
6,000,000 The House of Representatives of the State of No Opt. Call AAA 1,656,720
Michigan, Certificates of Participation, 0.000%, 8/15/23
2,260,000 Puerto Rico Highway and Transportation Authority, 7/02 at 101 1/2 A 2,451,512
Highway Revenue Bonds 1992 Series V, 6.625%, 7/01/12
1,000,000 Puerto Rico Highway and Transportation Authority, 7/16 at 100 A 1,028,500
Highway Revenue Bonds, Series Y of 1996, 5.500%, 7/01/36
3,500,000 Puerto Rico Highway and Transportation Authority, 7/08 at 101 A 3,324,580
Transportation Revenue Bonds, Series A, 5.000%, 7/01/38
1,085,000 Romulus Tax Increment Finance Authority, Wayne 11/06 at 100 N/R 1,181,522
County, Michigan (Limited Obligation Revenue Bonds), 1994,
Development Bonds, Remarketed, 6.750%, 11/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 2.2%
250,000 Capital Region Airport Authority (Lansing, Michigan), Airport 7/02 at 102 AAA 271,378
Revenue Bonds, Series 1992, 6.700%, 7/01/21 (Alternative Minimum Tax)
2,250,000 Charter County of Wayne, Michigan, Detroit Metropolitan Wayne No Opt. Call AAA 2,124,045
County Airport, Airport Revenue Bonds, Series 1998B, 4.875%, 12/01/23
Charter County of Wayne, Michigan, Detroit Metropolitan Wayne County
Airport, Airport Revenue Bonds, Series 1998A:
2,500,000 5.000%, 12/01/22 (Alternative Minimum Tax) 12/08 at 101 AAA 2,375,700
3,000,000 5.000%, 12/01/28 (Alternative Minimum Tax) 12/08 at 101 AAA 2,817,570
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 21.6%
1,000,000 City of Battle Creek, County of Calhoun, State of 5/04 at 102 BBB*** 1,163,430
Michigan, Battle Creek Downtown Development Authority, 1994
Development Bonds, 7.600%, 5/01/16 (Pre-refunded to 5/01/04)
1,800,000 City of Battle Creek, County of Calhoun State of 5/04 at 102 A-*** 2,083,554
Michigan, Tax Increment Finance Authority, 1994 Development Bonds,
7.400%, 5/01/16 (Pre-refunded to 5/01/04)
1,000,000 City of Bay City, County of Bay, State of Michigan, 1/01 at 102 AAA 1,063,970
Electric Utility System Revenue Bonds, 1991 Series, 6.600%, 1/01/12
(Pre-refunded to 1/01/01)
1,895,000 Buena Vista School District, County of Saginaw, 5/01 at 102 N/R*** 2,053,195
State of Michigan, 1991 School Building and Site Bonds (General
Obligation Unlimited Tax), 7.200%, 5/01/16 (Pre-refunded to 5/01/01)
1,000,000 The Central Michigan University Board of Trustees, General Revenue 10/00 at 102 A+*** 1,065,190
Bonds, Series 1990, 7.000%, 10/01/10 (Pre-refunded to 10/01/00)
750,000 City of Detroit, Michigan, General Obligation Bonds (Unlimited Tax), 4/01 at 102 AAA 820,943
Series 1991, 8.000%, 4/01/11 (Pre-refunded to 4/01/01)
300,000 School District of the City of Detroit, Wayne 5/00 at 102 Aa1*** 317,823
County, Michigan, School Building and Site Bonds,
Series XXIII, 7.750%, 5/01/10 (Pre-refunded to 5/01/00)
1,650,000 School District of the City of Detroit, Wayne 5/01 at 102 Aaa 1,786,043
County, Michigan, School Building and Site Bonds (Unlimited Tax General
Obligation), Series 1991, 7.150%, 5/01/11 (Pre-refunded to 5/01/01)
2,600,000 School District of the City of Detroit, Wayne County, Michigan, 5/06 at 102 AAA 2,848,898
School Building and Site Improvement Bonds (Unlimited Tax General
Obligation), Series 1996A, 5.700%, 5/01/25 (Pre-refunded to 5/01/06)
10,700,000 City of Detroit, Michigan, Downtown Development 7/06 at 102 A-*** 12,068,851
Authority, Tax Increment Refunding Bonds (Development Area No. 1
Projects), Series 1996C, 6.250%, 7/01/25 (Pre-refunded to 7/01/06)
2,000,000 City of Detroit, Michigan, Water Supply System 7/00 at 102 AAA 2,121,980
Revenue Bonds, Series 1990, 7.250%, 7/01/20 (Pre-refunded to 7/01/00)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 500,000 City of Farmington Hills, Hospital Finance 2/02 at 102 AAA $ 542,885
Authority, Michigan, Hospital Revenue Bonds (Botsford General Hospital),
Series 1992A, 6.500%, 2/15/22 (Pre-refunded to 2/15/02)
340,000 County of Grand Traverse, Michigan, Hospital Finance 7/02 at 102 AAA 369,237
Authority, Hospital Revenue Refunding Bonds (Munson Healthcare Obligated
Group), Series 1992A, 6.250%, 7/01/22 (Pre-refunded to 7/01/02)
2,500,000 Haslett Public Schools, Counties of Ingham, Clinton 5/00 at 101 AA+*** 2,618,625
and Shiawassee, State of Michigan, 1990 School Building and Site
Bonds, 7.500%, 5/01/20 (Pre-refunded to 5/01/00)
750,000 City of Hudsonville Building Authority, County of 10/02 at 102 AAA 827,378
Ottawa, State of Michigan, Building Authority Refunding Bonds,
Series 1992, 6.600%, 10/01/17 (Pre-refunded to 10/01/02)
2,000,000 Huron Valley School District, Counties of Oakland 5/01 at 102 N/R*** 2,157,620
and Livingston, State of Michigan, 1991 School Building and Site
Bonds, 7.100%, 5/01/08 (Pre-refunded to 5/01/01)
1,940,000 City of Kalamazoo, Michigan, Hospital Finance Authority, Hospital 5/03 at 102 A1*** 2,136,328
Revenue Refunding and Improvement Bonds (Bronson Methodist Hospital),
Series 1992A, 6.375%, 5/15/17 (Pre-refunded to 5/15/03)
4,000,000 Lake Orion Community School District, County of 5/05 at 101 AAA 4,614,320
Oakland, State of Michigan 1994 Refunding Bonds (General Obligation -
Unlimited Tax), 7.000%, 5/01/15 (Pre-refunded to 5/01/05)
825,000 Menominee, Michigan, Area Public School District, 5/00 at 102 AA+*** 871,951
7.400%, 5/01/20 (Pre-refunded to 5/01/00)
3,000,000 Michigan Higher Education Facilities Authority 5/01 at 103 A*** 3,280,560
Revenue, Limited Obligation, Aquinas College Project,
7.350%, 5/01/11 (Pre-refunded to 5/01/01)
555,000 Michigan Municipal Bond Authority, State Revolving Fund Revenue 10/02 at 102 AA+*** 611,521
Bonds, Series 1992A, 6.600%, 10/01/18 (Pre-refunded to 10/01/02)
Michigan Municipal Bond Authority, State Revolving
Fund Revenue Bonds, Series 1994:
950,000 7.000%, 10/01/04 No Opt. Call AA+*** 1,079,675
1,000,000 6.500%, 10/01/14 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,128,830
1,000,000 6.500%, 10/01/17 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,128,830
500,000 Michigan State Hospital Finance Authority, Hospital 12/02 at 102 AAA 557,735
Revenue Bonds (MidMichigan Obligated Group), Series 1992, 6.900%,
12/01/24 (Pre-refunded to 12/01/02)
1,000,000 Michigan State Hospital Finance Authority, Henry Ford Health 7/00 at 102 AAA 1,058,110
System, Series A, 7.000%, 7/01/10 (Pre-refunded to 7/01/00)
1,000,000 Michigan Hospital Finance Authority (Oakwood Hospital Obligated 7/00 at 102 AAA 1,059,080
Group), 7.100%, 7/01/18 (Pre-refunded to 7/01/00)
800,000 Michigan State Hospital Finance Authority, Sisters of Mercy 2/01 at 102 AAA 860,824
Health Corporation, Series J, 7.200%, 2/15/18 (Pre-refunded to 2/15/01)
1,000,000 Michigan State Hospital Finance Authority, Hospital 11/01 at 102 Aa2*** 1,092,290
Revenue Bonds (Daughters of Charity National Health System-Providence
Hospital), Series 1991, 7.000%, 11/01/21 (Pre-refunded to 11/01/01)
1,065,000 Mona Shores Public Schools, County of Muskegon, 5/05 at 102 AAA 1,153,864
State of Michigan, 1995 School Building and Site Bonds (General
Obligation - Unlimited Tax), 5.500%, 5/01/14 (Pre-refunded to 5/01/05)
2,335,000 Oakland County, Michigan, Economic Development 1/00 at 102 N/R*** 2,464,593
Corporation, Limited Obligation Revenue Bonds, Pontiac Osteopathic
Hospital Project, 9.625%, 1/01/20 (Pre-refunded to 1/01/00)
1,000,000 Oakland County, Michigan, Economic Development Corporation, Limited 11/04 at 102 Aaa 1,151,760
Obligation Revenue Refunding Bonds, Cranbrook Educational Community,
Series C, 6.900%, 11/01/14 (Pre-refunded to 11/01/04)
1,800,000 Puerto Rico Commonwealth Highway Authority, Highway 7/00 at 102 AAA 1,920,762
Revenue Bonds, Series Q, 7.750%, 7/01/16 (Pre-refunded to 7/01/00)
1,040,000 Rockford Public Schools, County of Kent, State of Michigan, 1990 5/00 at 101 N/R*** 1,087,195
School Building and Site and Refunding Bonds (General Obligation
Bonds), 7.375%, 5/01/19 (Pre-refunded to 5/01/00)
180,000 Saginaw-Midland Municipal Water Supply Corporation, State of 9/04 at 102 A*** 206,075
Michigan, Water Supply Revenue Bonds (Limited Tax General Obligation),
Series 1992, 6.875%, 9/01/16 (Pre-refunded to 9/01/04)
2,925,000 Spring Lake Public Schools, General Obligation 5/07 at 100 AAA 3,184,126
Bonds, Series 1997, 5.700%, 5/01/23 (Pre-refunded to 5/01/07)
1,000,000 Regents of the University of Michigan, Hospital Revenue Bonds, 12/00 at 100 AA*** 1,041,970
Series 1990, 6.375%, 12/01/24 (Pre-refunded to 12/01/00)
</TABLE>
25
<PAGE>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 3,500,000 Regents of the University of Michigan, Medical Service Plan Revenue 12/01 at 102 Aa2*** $ 3,789,940
6.500%, 12/01/21 (Pre-refunded to 12/01/01)
7,000,000 Vicksburg Community Schools, Counties of Kalamazoo and St. Joseph, 5/06 at 37 1/4 AAA 1,919,400
State of Michigan, 1991 School Building and Site Bonds, 0.000%,
5/01/20 (Pre-refunded to 5/01/06)
2,500,000 Waterford School District, County of Oakland, State 6/04 at 101 AAA 2,763,325
of Michigan, School District Bonds, Series 1995 (General Obligation -
Unlimited Tax), 6.250%, 6/01/13 (Pre-refunded to 6/01/04)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 3.4%
400,000 Michigan Public Power Agency, Belle River Project, 1/03 at 102 AA- 398,804
Refunding Revenue Bonds, 1993 Series A, 5.250%, 1/01/18
3,000,000 Michigan State South Central Power Agency, Power 11/04 at 102 Baa1 3,352,830
Supply System Revenue Refunding Bonds, 7.000%, 11/01/11
3,500,000 Michigan State Strategic Fund, Limited Obligation Revenue Refunding 6/04 at 102 AAA 3,871,805
Bonds, Detroit Education Company, Series B, 6.450%, 6/15/24
1,000,000 Monroe County, Michigan, Economic Development Corporation, No Opt. Call AAA 1,238,360
Limited Obligation Revenue Refunding Bonds, Collateralized,
Detroit Edison Company, Series, AA, 6.950%, 9/01/22
1,000,000 County of Monroe, Michigan, Pollution Control No Opt. Call AAA 1,093,500
Revenue Bonds (The Detroit Edison Company Project),
Series A-1994, 6.350%, 12/01/04 (Alternative Minimum Tax)
4,000,000 Puerto Rico Electric Power Authority, Power Revenue No Opt. Call AAA 1,628,320
Bonds, Series O, 0.000%, 7/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 5.6%
City of Detroit, Michigan, Sewage Disposal System Revenue
Refunding Bonds, Series 1995-B:
1,500,000 5.250%, 7/01/15 7/05 at 101 AAA 1,517,174
10,500,000 5.250%, 7/01/21 7/05 at 101 AAA 10,438,364
1,570,000 City of Detroit, Michigan, Water Supply System, No Opt. Call AAA 1,676,304
Revenue Second Lien Bonds, Series 1995-A, 5.550%, 7/01/12
2,230,000 City of Detroit, Michigan, Water Supply System, No Opt. Call AAA 2,380,992
Revenue Second Lien Bonds, Series 1995-B, 5.550%, 7/01/12
3,400,000 City of Grand Rapids, Michigan, Sanitary Sewer 7/08 at 101 AAA 3,133,099
System Improvement and Refunding Revenue Bonds,
Series 1998A, 4.750%, 1/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
$358,885,000 Total Investments - (cost $316,731,299) - 98.9% 339,524,760
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 3,860,058
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $343,384,818
=====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year) and
prices of the earliest optional call or redemption. There
may be other call provisions at varying prices at later
dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal and
interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
26
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 0.3%
$ 1,650,000 Toledo Lucas County Ohio Port Authority, Port Revenue Refunding 3/02 at 102 AA- $ 1,800,365
Facilities, Cargill Inc. Project, 7.250%, 3/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Goods - 0.2%
1,335,000 Ohio Water Development Authority, Revenue Bonds, USA Waste 3/02 at 102 N/R 1,420,961
Services, Series 1992, 7.750%, 9/01/07 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 4.2%
2,050,000 Miami University, Ohio, University Revenue Bonds, 6.900%, 12/01/04 12/99 at 102 A+ 2,124,477
3,500,000 State of Ohio, Education Loan Revenue Bonds, Series 1997A 6/07 at 102 AAA 3,627,365
(Supplemental Student Loan Program), 1997A1, 5.850%,
12/01/19 (Alternative Minimum Tax)
1,750,000 State of Ohio (Ohio Higher Educational Facility Commission), 12/04 at 102 AAA 1,848,735
Higher Educational Facility Revenue Bonds (University of Dayton
1994 Project), 5.800%, 12/01/19
2,025,000 State of Ohio (Ohio Higher Educational Facility Commission), 12/03 at 102 AAA 2,252,327
Higher Educational Facility Mortgage Revenue Bonds
(University of Dayton 1992 Project), 6.600%, 12/01/17
1,200,000 State of Ohio (Ohio Higher Educational Facility Commission), 9/06 at 101 N/R 1,241,472
Higher Educational Facility Revenue Bonds (The University of
Findlay 1996 Project), 6.125%, 9/01/16
7,000,000 State of Ohio, Higher Educational Facility Revenue 5/07 at 102 AAA 7,088,200
Bonds (Xavier University 1997 Project), 5.375%, 5/15/22
Ohio Higher Educational Facility Commission, Case
Western Reserve University:
1,870,000 7.125%, 10/01/14 10/00 at 102 AA 1,991,999
750,000 6.500%, 10/01/20 No Opt. Call AA 881,303
2,250,000 Ohio State Higher Educational Facility Revenue Bonds, John 4/07 at 102 A2 2,352,150
Carroll University Project, 5.750%, 4/01/19
4,250,000 University of Cincinnati, Ohio, General Receipts Bonds, 6/07 at 100 AAA 4,299,555
Series AB, 5.375%, 6/01/20
1,230,000 Youngstown State University, Ohio, General Receipts Bonds, 12/04 at 102 AAA 1,366,136
6.000%, 12/15/16
- -----------------------------------------------------------------------------------------------------------------------------------
Energy - 0.5%
2,125,000 County of Ashtabula, Ohio, Industrial Development Refunding 5/02 at 102 Baa2 2,280,210
Revenue Bonds, 1992 Series A (Ashland Oil, Inc. Project),
6.900%, 5/01/10
1,000,000 Ohio Air Quality Development Authority, State of Ohio, Air 4/01 at 102 Baa1 1,061,640
Quality Development Refunding Revenue Bonds, Series 1992
(Ashland Oil, Inc. Project), 6.850%, 4/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 14.6%
10,000,000 Akron, Bath and Copley Joint Township Hospital District, Ohio, 11/09 at 101 Baa1 9,437,900
Hospital Facilities Revenue Bonds, Series 1998A (Summa Health
System Project), 5.375%, 11/15/24
1,250,000 County of Butler, Ohio, Hospital Facilities Revenue Refunding and 1/02 at 102 BBB- 1,331,725
Improvement Bonds, Series 1991 (Fort Hamilton-Hughes Memorial
Hospital Center), 7.500%, 1/01/10
City of Cambridge, Ohio, Hospital Revenue Refunding Bonds, Series
1991 (Guernsey Memorial Hospital Project):
500,000 8.000%, 12/01/06 12/01 at 102 BBB 541,440
1,000,000 8.000%, 12/01/11 12/01 at 102 BBB 1,082,880
1,500,000 County of Cuyahoga, Ohio, Hospital Improvement and Refunding 1/06 at 102 AAA 1,541,145
Revenue Bonds, Series 1996A (University Hospitals Health
System, Inc. Project), 5.625%, 1/15/26
1,000,000 County of Cuyahoga, Ohio, Hospital Improvement and Refunding 2/07 at 102 AAA 1,032,390
Revenue Bonds, Series 1997 (The MetroHealth System Project),
5.625%, 2/15/17
</TABLE>
27
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 2,000,000 Cuyahoga County, Ohio, Industrial Development Refunding Revenue 8/01 at 103 AAA $ 2,159,720
Bonds, Series 1991 (University Health Care Center Project),
7.300%, 8/01/11
2,010,000 County of Erie, Ohio Hospital Improvement and Refunding Revenue 1/02 at 102 A 2,160,830
Bonds, Series 1992 (Firelands Community Hospital Project),
6.750%, 1/01/08
County of Franklin, Ohio, Hospital Refunding and Improvement
Revenue Bonds, 1996 Series A (The Children's Hospital Project):
1,575,000 5.750%, 11/01/15 11/06 at 101 Aa 1,647,072
5,275,000 5.875%, 11/01/25 11/06 at 101 Aa 5,535,321
County of Franklin, Ohio, Hospital Revenue Bonds, Holy Cross
Health Systems Corporation, Series 1996:
965,000 5.800%, 6/01/16 6/06 at 102 AA 1,018,789
2,000,000 5.875%, 6/01/21 6/06 at 102 AA 2,108,620
1,500,000 Franklin County, Ohio, Hospital Revenue Refunding Bonds (Holy 6/00 at 102 AAA 1,587,315
Cross Health System - Mt. Carmel Health), Series 1990-A,
7.625%, 6/01/09
3,000,000 County of Franklin, Ohio, Hospital Improvement Revenue 5/09 at 102 Aa3 2,909,160
Bonds, Series 1999 (The Childrens Hospital Project),
5.200%, 5/01/29
3,000,000 County of Hamilton, Ohio, Hospital Facilities Revenue, 1/03 at 102 A 3,213,480
Refunding Bonds, Series 1992A (Bethesda Hospital, Inc.),
6.250%, 1/01/12
7,890,000 County of Lorain, Ohio, Hospital Facilities Revenue and Refunding 11/05 at 102 AAA 7,916,116
Bonds, Series 1995 (EMH Regional Medical Center), 5.375%, 11/01/21
2,250,000 County of Lorain, Ohio, Hospital Facilities Revenue Bonds, Series 9/07 at 102 AAA 2,303,843
1997B (Catholic Healthcare Partners), 5.500%, 9/01/27
1,000,000 County of Lucas, Ohio, Hospital Improvement Revenue Bonds, Series 8/00 at 102 AAA 1,055,160
1990A (St. Vincent Medical Center), 6.750%, 8/15/20
3,000,000 County of Lucas, Ohio, Hospital Improvement Revenue Bonds, Series 8/02 at 102 AAA 3,264,810
1992 (St. Vincent Medical Center), 6.500%, 8/15/12
500,000 Mansfield, Ohio, Hospital Improvement Revenue Bonds, Series 12/01 at 102 AAA 540,220
1991 (Mansfield General Hospital Project), 6.700%, 12/01/09
2,000,000 County of Marion, Ohio, Hospital Refunding and Improvement Revenue 5/06 at 102 BBB+ 2,137,960
Bonds, Series 1996 (The Community Hospital), 6.375%, 5/15/11
1,250,000 Maumee, Ohio, Hospital Facilities Revenue Bonds (St. Luke's 12/04 at 102 AAA 1,337,613
Hospital), Series 1994, 5.800%, 12/01/14
4,405,000 County of Miami, Ohio, Hospital Facilities Revenue Refunding 5/06 at 102 BBB 4,588,777
and Improvement Bonds, Series 1996A (Upper Valley Medical Center),
6.250%, 5/15/16
4,205,000 Miami County, Ohio, Hospital Facilities Revenue Refunding and 5/06 at 102 BBB 4,386,446
Improvement Bonds (Upper Valley Medical Center), Series 1996C,
6.250%, 5/15/13
City of Middleburg Heights, Ohio, Hospital Improvement Refunding
Revenue Bonds, Series 1995 (Southwest General Health Center Project):
4,000,000 5.625%, 8/15/15 8/08 at 102 AAA 4,168,640
2,000,000 5.750%, 8/15/21 8/08 at 102 AAA 2,098,480
11,000,000 Montgomery County, Ohio, Health System Revenue Bonds, Franciscan 1/08 at 102 BBB 10,757,890
Medical Center Dayton Campus Issue, Series 1997, 5.500%, 7/01/18
County of Montgomery, Ohio, Hospital Facilities Revenue Refunding
and Improvement Bonds, Series 1996 (Kettering Medical Center):
1,500,000 5.625%, 4/01/16 4/06 at 102 AAA 1,547,295
7,000,000 6.250%, 4/01/20 No Opt. Call AAA 8,010,590
2,500,000 Montgomery County, Ohio, Revenue Bonds, Sisters of Charity Health 5/03 at 101 AAA 2,729,950
Care, Series 1992A, 6.250%, 5/15/08
4,000,000 City of Parma, Ohio, Hospital Improvement and Refunding Revenue 11/08 at 101 A- 3,877,560
Bonds, Series 1998 (The Parma Community Hospital Association),
5.375%, 11/01/29
2,750,000 County of Trumbull, Ohio, Hospital Refunding and Improvement Revenue 11/01 at 102 AAA 3,008,363
Bonds, Series 1991 (Trumbull Memorial Hospital Project), Series
1991B, 6.900%, 11/15/12
750,000 County of Tuscarawas, Ohio, Hospital Facilities Revenue Bonds, 10/03 at 102 Baa2 790,448
Series 1993A (Union Hospital Project), 6.500%, 10/01/21
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multi-family - 4.9%
$1,600,000 Butler County, Ohio, Multifamily Housing Revenue Bonds, Series 1998 9/08 at 103 N/R $ 1,593,424
(Anthony Wayne Apartments Project), 6.500%, 9/01/30 (Alternative
Minimum Tax)
1,150,000 County of Clark, Ohio, Multifamily Housing Revenue Bonds 11/08 at 103 N/R 1,134,360
(Church of God Retirement Home), Series 1998, 6.250%, 11/01/30
(Alternative Minimum Tax)
16,160,000 County of Franklin, Ohio, Mortgage Revenue Bonds, Series 1997 10/07 at 103 Aaa 16,458,960
(GNMA Collateralized - Columbus Properties Project), 5.600%,
4/20/39 (Alternative Minimum Tax)
6,200,000 Hamilton County, Multifamily Housing Revenue Bonds (Huntington 1/07 at 102 AAA 6,381,784
Meadows Project), Series 1997, 5.700%, 1/01/27 (Alternative
Minimum Tax)
2,800,000 Ohio Capital Corporation for Housing Mortgage Revenue Refunding 1/02 at 100 AAA 2,825,284
Bonds, FHA Section 8 Assisted Project, Series 1997C, 5.700%,
1/01/24
4,000,000 Ohio Capital Corporation for Housing Mortgage Revenue 1/02 at 100 AAA 4,012,240
Refunding Bonds, Series 1998A (FHA Insured Mortgage Loans -
Section 8 Assisted Projects), 5.300%, 1/01/24
Ohio Capital Corporation for Housing, Multifamily Housing
Refunding Revenue Bonds, Series 1989A:
310,000 7.500%, 11/01/11 11/99 at 103 AAA 323,212
1,215,000 7.600%, 11/01/23 11/99 at 103 AAA 1,266,783
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.6%
4,965,000 Ohio Housing Finance Agency, Residential Mortgage Revenue 9/07 at 102 AAA 5,119,759
Bonds, 1996 Series B-3 (Mortgage-Backed Securities
Program), 5.750%, 9/01/28 (Alternative Minimum Tax)
5,435,000 Ohio Housing Finance Agency, Residential Mortgage Revenue 9/07 at 102 AAA 5,604,409
Bonds, Series 1997C, 5.750%, 9/01/28 (Alternative Minimum Tax)
5,410,000 Ohio Housing Finance Agency, Residential Mortgage Revenue 3/08 at 101 1/2 AAA 5,519,607
Bonds, 1997 Series D-1 (Mortgage-Backed Securities Program),
5.500%, 3/01/19 (Alternative Minimum Tax)
1,990,000 Ohio Housing Finance Agency, Residential Mortgage Revenue 9/04 at 102 AAA 2,104,326
Bonds, Series 1994-A1 (GNMA Mortgage-Backed Securities
Program), 6.100%, 9/01/14
3,095,000 Ohio Housing Finance Agency, Residential Mortgage Revenue 9/08 at 102 AAA 3,120,967
Bonds, 1997 Series B (Mortgage-Backed Securities Program),
5.400%, 9/01/29 (Alternative Minimum Tax)
5,145,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds, 9/04 at 102 AAA 5,490,693
Series 1994B1, 6.375%, 9/01/14
11,250,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds, 9/08 at 101 AAA 11,175,525
1999 Series A1 (Mortgage-Backed Securities Program), 5.250%,
9/01/30 (Alternative Minimum Tax)
12,875,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds, 9/07 at 102 AAA 13,616,214
Series 1997A, 6.150%, 3/01/29 (Alternative Minimum Tax)
400,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue 3/00 at 102 AAA 412,744
Bonds (GNMA Mortgage-Backed Securities Program), 1990
Series A, 7.400%, 9/01/15
445,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue 9/00 at 102 AAA 465,047
Bonds (GNMA Mortgage-Backed Securities Program), 1990
Series D, 7.500%, 9/01/13
250,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue Bonds 9/01 at 102 AAA 262,410
(GNMA Mortgage-Backed Securities Program), 1991 Series D, 7.050%,
9/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial/Other - 0.4%
2,775,000 Cleveland-Cuyahoga County Port Authority (Ohio), Development 5/08 at 102 N/R 2,739,230
Revenue Bonds (Port of Cleveland Bond Fund - Jergens, Inc.,
Project), Series 1998A, 5.375%, 5/15/18 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 2.3%
4,030,000 County of Cuyahoga, Ohio, Health Care Facilities Revenue Bonds, 6/00 at 100 N/R 4,192,288
Series 1990 (Altenheim Project), 9.280%, 6/01/15
1,500,000 County of Franklin, Ohio, Health Care Facilities Revenue Bonds, 7/03 at 102 N/R 1,511,415
Series 1993 (Ohio Presbyterian Retirement Services), 6.500%,
7/01/23
3,120,000 County of Franklin, Ohio, Health Care Facilities Revenue Bonds, 11/05 at 102 Aa2 3,277,310
Series 1995 (Heinzerling Foundation), 6.200%, 11/01/20
655,000 Franklin County, Hospital Revenue Refunding Bonds, FHA Insured 8/00 at 102 N/R 676,615
Mortgage Loan (Worthington Christian Village Nursing Home),
7.000%, 8/01/16
</TABLE>
29
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Care (continued)
County of Hamilton, Ohio, Health Care Facilities Revenue Bonds,
Series 1998A (Twin Towers):
$ 1,000,000 5.125%, 10/01/18 10/08 at 101 A $ 968,920
1,250,000 5.125%, 10/01/23 10/08 at 101 A 1,185,500
County of Marion, Ohio, Health Care Facilities Refunding and
Improvement Revenue Bonds, Series 1993 (United Church Homes, Inc.
Project):
1,250,000 6.375%, 11/15/10 11/03 at 102 BBB- 1,307,413
750,000 6.300%, 11/15/15 11/03 at 102 BBB- 781,425
2,130,000 City of Napoleon, Ohio, Health Care Facilities Mortgage Revenue 9/04 at 102 Aa 2,322,020
Refunding Bonds, Series 1994 (The Lutheran Orphans and Old
Folks Home Society at Napoleon, Inc. FHA Insured Project),
6.875%, 8/01/23
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 15.7%
Adams County/Ohio Valley School District, Counties of Adams and
Highland, Ohio, School Improvement Unlimited Tax General Obligation
Bonds, Series 1995:
6,000,000 7.000%, 12/01/15 No Opt. Call AAA 7,347,120
9,500,000 5.250%, 12/01/21 12/05 at 102 AAA 9,535,530
3,955,000 City of Akron, Ohio, General Obligation Bonds, Various Purpose 12/04 at 102 AAA 4,478,919
Improvement Bonds, Series 1994 (Limited Tax), 6.750%, 12/01/14
Anthony Wayne Local School District, Lucas, Wood and Fulton
Counties, Ohio, School Facilities Construction and Improvement
Bonds:
600,000 0.000%, 12/01/13 No Opt. Call AAA 291,012
2,850,000 5.750%, 12/01/24 12/05 at 101 AAA 3,003,758
1,000,000 Archbold Area Local School District, General Obligation Bonds 12/06 at 102 AAA 1,075,330
(Unlimited Tax), Series 1996,
6.000%, 12/01/21
1,000,000 Aurora City School District, Ohio, General Obligation (Unlimited 12/05 at 102 AAA 1,062,500
Tax), School Improvement Bonds, Series 1995, 5.800%, 12/01/16
2,905,000 Board of Education, Batavia Local School District, County of 12/05 at 102 AAA 3,303,392
Clermont, Ohio, School Improvement Bonds, Series 1995 (Unlimited
Tax), Bank Qualified, 6.300%, 12/01/22
2,500,000 Buckeye Valley Local School District, Ohio, General Obligation Bonds No Opt. Call AAA 2,992,400
(Unlimited Tax), School Improvement Bonds, Series 1995A, 6.850%,
12/01/15
Chesapeake - Union Exempt Village School District, Ohio, General
Obligation Bonds, Series 1986:
125,000 8.500%, 12/01/04 No Opt. Call N/R 149,255
125,000 8.500%, 12/01/05 No Opt. Call N/R 152,113
125,000 8.500%, 12/01/06 No Opt. Call N/R 154,625
125,000 8.500%, 12/01/07 No Opt. Call N/R 156,846
125,000 8.500%, 12/01/08 No Opt. Call N/R 158,933
130,000 8.500%, 12/01/09 No Opt. Call N/R 166,780
4,745,000 City of Cleveland, Ohio, Various Purpose General Obligation Bonds, 11/04 at 102 AAA 5,408,398
Series 1994, 6.625%, 11/15/14
550,000 County of Columbiana, Ohio, County Jail Facilities Construction 12/04 at 102 AA 627,297
Bonds (General Obligation Unlimited Tax), 6.600%, 12/01/17
1,500,000 City of Columbus, Ohio, General Obligation Refunding Bonds, 1/02 at 102 Aaa 1,618,845
Series 1992B, 6.500%, 1/01/10
City of Columbus, Franklin County, Ohio, General Obligation Bonds:
590,000 9.375%, 4/15/06 No Opt. Call AAA 764,616
500,000 9.375%, 4/15/07 No Opt. Call AAA 661,745
1,000,000 County of Cuyahoga, Ohio, General Obligation Various Purpose No Opt. Call AA+ 1,048,850
Refunding Bonds, Series 1993B (Limited Tax Obligation),
5.250%, 10/01/13
1,345,000 County of Cuyahoga, Ohio, General Obligation Bonds (Limited Tax No Opt. Call AA+ 1,446,991
Obligation), 5.650%, 5/15/18
200,000 City of Dayton, Ohio, General Obligation Bonds (Three Issues), No Opt. Call A+ 204,792
Limited Tax, 10.500%, 10/01/99
750,000 City of Defiance, Ohio, Waterworks System Improvement Bonds, 12/04 at 102 AAA 824,685
Series 1994, 6.200%, 12/01/20
Delaware City School District, Delaware County, Ohio, School
Facilities Construction and Improvement Bonds (General Obligation
Unlimited Tax):
1,000,000 0.000%, 12/01/10 No Opt. Call AAA 576,090
1,000,000 0.000%, 12/01/11 No Opt. Call AAA 543,790
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
$ 250,000 East Holmes Local School District, Ohio School Improvement Refunding 6/99 at 102 AAA $ 255,843
Bonds, General Obligations - Unlimited Tax, 7.700%, 12/01/08
1,110,000 City of Fairborn, Ohio General Obligation Bonds, Utility Improvement 10/02 at 102 AAA 1,226,850
Bonds, Series 1991, 7.000%, 10/01/11
4,040,000 County of Franklin, Ohio, Refunding Bonds, Series 1993 (Limited 12/08 at 102 AAA 4,116,396
Tax General Obligation Bonds), 5.375%, 12/01/20
1,575,000 Garaway Local School District, Ohio School Improvement Bonds, Series 12/00 at 102 AAA 1,682,242
1990 (General Obligation - Unlimited Tax Bonds), 7.200%, 12/01/14
620,000 County of Geauga, Ohio, General Obligation (Limited Tax), Sewer District No Opt. Call Aa2 706,540
Improvement Bonds (Bainbridge Water Project), 6.850%, 12/01/10
1,000,000 Grandview Heights City School District, Franklin County, Ohio School 12/05 at 101 AA 1,085,980
Facilities Construction and Improvement Bonds (General Obligation -
Unlimited Tax), 6.100%, 12/01/19
1,000,000 Highland Local School District, Morrow and Delaware Counties, Ohio, 12/07 at 102 AAA 1,070,590
School Facilities Construction and Improvement Bonds (General
Obligation - Unlimited-Tax), 5.875%, 12/01/19
1,000,000 Huron County, Ohio, Correctional Facility Bonds (Limited Tax 12/07 at 102 AAA 1,079,600
General Obligation), 5.850%, 12/01/16
1,000,000 Indian Valley Local School District, Ohio General Obligation 12/05 at 102 AAA 1,058,340
(Unlimited Tax), School Improvement Bonds, Series 1995,
5.750%, 12/01/19
1,200,000 County of Jefferson, Ohio, Human Services Building Construction Bonds, 12/01 at 102 AAA 1,307,196
Series 1991 (General Obligation - Limited Tax), 6.625%, 12/01/14
1,885,000 City of Kent, Ohio, General Obligation (Limited Tax), Sewer System 12/02 at 102 Aa3 2,066,865
Improvement Refunding Bonds, Series 1992, 6.500%, 12/01/10
1,070,000 Kettering, Ohio, General Obligation Bonds (Limited Tax), 6.650%, 12/01 at 102 Aa3 1,158,254
12/01/12
1,000,000 Kettering City School District, Ohio, General Obligation Bonds 12/05 at 101 AAA 1,003,380
(Unlimited Tax), 5.250%, 12/01/22
500,000 Kings Local School District, General Obligation (Unlimited Tax), 12/05 at 100 AAA 512,205
School Improvement Bonds, Series 1995, 5.500%, 12/01/21
500,000 Kirtland Local School District, Ohio, School Improvement Bonds, Series 12/99 at 102 N/R 519,220
1989, General Obligation Unlimited Tax Bonds, 7.500%, 12/01/09
1,000,000 Lakeview, Ohio, Local School District, General Obligation Bonds, 12/04 at 102 AAA 1,156,290
6.900%, 12/01/14
1,440,000 Lakewood, Ohio, General Obligation Bonds, Series 1995B, 12/05 at 102 Aa3 1,529,986
5.750%, 12/01/15
1,000,000 Lakota Local School District, County of Butler, Ohio, School Improvement 12/05 at 100 AAA 1,109,530
Unlimited Tax General Obligation Bonds, Series 1994, 6.125%, 12/01/17
Logan County, Ohio, General Obligation Bonds:
155,000 7.750%, 12/01/02 No Opt. Call A 173,797
155,000 7.750%, 12/01/03 No Opt. Call A 177,797
155,000 7.750%, 12/01/04 No Opt. Call A 181,393
155,000 7.750%, 12/01/05 No Opt. Call A 184,593
155,000 7.750%, 12/01/06 No Opt. Call A 187,311
1,000,000 County of Lucas, Ohio, General Obligation (Limited Tax), Various 12/02 at 102 A1 1,097,980
Purpose Improvement Bonds, Series 1992, 6.650%, 12/01/12
1,000,000 County of Lucas, Ohio, General Obligation (Limited Tax), Various 12/05 at 102 AAA 1,026,400
Purpose Improvement Bonds, Series 1995-1, 5.400%, 12/01/15
1,000,000 County of Mahoning, Ohio, General Obligation Bonds, Various Purpose 12/99 at 102 AAA 1,039,070
Improvement Bonds, Series 1989, Limited Tax, 7.200%, 12/01/09
865,000 Marysville, Ohio, Exempt Village School District, General Obligation No Opt. Call AAA 362,781
Bonds, 0.000%, 12/01/16
1,215,000 Mason City School District, Counties of Warren and Butler, Ohio, 12/09 at 101 Aa3 1,237,964
School Improvement Unlimited Tax General Obligation Bonds,
Series 1998, 5.300%, 12/01/17
1,000,000 City of North Olmsted, Ohio, General Obligation (Limited Tax), 12/02 at 102 AAA 1,086,740
Various Purpose Bonds, Series 1992, 6.250%, 12/15/12
North Royalton City School District, Ohio, School Improvement Bonds,
Bonds, Series 1994:
2,200,000 6.000%, 12/01/14 12/09 at 102 AAA 2,463,010
2,400,000 6.100%, 12/01/19 12/09 at 102 AAA 2,623,416
</TABLE>
31
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 600,000 Oak Hills, Ohio, Local School District, General Obligation Bonds, 12/07 at 101 Aa3 $ 627,546
Series 1997A, 5.700%, 12/01/25
1,000,000 State of Ohio, Full Faith and Credit, General Obligation No Opt. Call AA+ 1,119,790
Infrastructure Improvement Bonds, Series 1994, 6.000%, 8/01/10
State of Ohio, Full Faith and Credit General Obligation
Infrastructure Improvement Bonds, Series 1995:
750,000 6.200%, 8/01/13 8/05 at 102 AA+ 840,870
2,000,000 6.200%, 8/01/14 8/05 at 102 AA+ 2,242,320
7,640,000 State of Ohio, Full Faith and Credit General Obligation No Opt. Call AAA 3,767,666
Infrastructure Improvement Bonds, Series 1993, 0.000%, 8/01/13
500,000 Olmsted Falls, Ohio, Local School District, General Obligation Bonds, 12/01 at 102 AAA 550,245
7.050%, 12/15/11
1,750,000 Pickerington Local School District, Fairfield and Franklin Counties, 12/01 at 102 A1 1,892,345
Ohio, General Obligation Bonds
(Pickerington Public Library Project - Unlimited Tax),
6.750%, 12/01/16
Pickerington Ohio Local School District, General Obligation Bonds:
500,000 0.000%, 12/01/11 No Opt. Call AAA 271,895
500,000 0.000%, 12/01/13 No Opt. Call AAA 242,510
1,000,000 Revere Local School District, Ohio, School Improvement Bonds, 12/03 at 102 AAA 1,071,650
Series 1993 (General Obligation Unlimited Tax Bonds),
6.000%, 12/01/16
2,340,000 City of Stow, Ohio, Safety Center Construction Bonds 12/05 at 102 A1 2,556,310
(General Obligation Limited Tax), 6.200%, 12/01/20
2,870,000 City of Strongsville, Ohio, Various Purpose Improvement Bonds, 12/06 at 102 Aa3 3,091,191
Series 1996 (General Obligation - Limited Tax), 5.950%, 12/01/21
540,000 Trumbull County, Ohio, General Obligation Sewer Bonds, Series 1994, 12/04 at 102 AAA 596,003
6.200%, 12/01/14
1,320,000 Twinsburg Ohio City School District, General Obligation Bonds, 12/01 at 102 AAA 1,429,151
6.700%, 12/01/11
Upper Arlington Ohio City School District, General Obligation Bonds:
1,830,000 0.000%, 12/01/11 No Opt. Call AAA 995,136
1,870,000 0.000%, 12/01/12 No Opt. Call AAA 959,665
1,910,000 Vandalia Ohio, General Obligation Bonds, 5.850%, 12/01/21 12/06 at 101 Aa3 2,031,782
750,000 West Geauga Local School District, Ohio, School Improvement Bonds, 11/04 at 102 AAA 814,913
Series 1994 (General Obligation Unlimited Tax), 5.950%, 11/01/12
1,000,000 Woodridge, Ohio, Local School District, General Obligation Bonds, 12/04 at 102 AAA 1,071,620
6.000%, 12/01/19
1,425,000 Wooster City School District, Wayne County, Ohio, General Obligation 12/02 at 102 AAA 1,573,499
Bonds (Unlimited Tax), For School Building Construction and
Improvement, 6.500%, 12/01/17
300,000 Youngstown, Ohio, General Obligation Bonds, Limited Tax, Series 1994, 12/04 at 102 AAA 329,712
6.125%, 12/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 6.3%
500,000 County of Athens, Ohio, Community Mental Health Revenue Bonds, 6/01 at 102 AA- 533,065
1991 Series I, 6.900%, 6/01/10
6,000,000 City of Cleveland, Ohio, Certificates of Participation, Series 1997, 11/07 at 102 AAA 6,007,020
Cleveland Stadium Project, 5.250%, 11/15/27
3,000,000 County of Hamilton, Ohio, Sales Tax Bonds, Series 1998B, Hamilton 6/08 at 101 AAA 2,896,170
County Football Project, 5.000%,12/01/27
1,500,000 Ohio State Building Authority (Juvenile Correctional Building), 9/04 at 102 AAA 1,704,255
6.600%, 10/01/14
1,100,000 Ohio State Department of Transportation Certificates of 4/02 at 102 AAA 1,185,085
Participation, Panhandle Rail Line Project Series 1992A,
6.500%, 4/15/12
27,850,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 28,643,725
Bonds, Series Y of 1996, 5.500%, 7/01/36
2,700,000 Puerto Rico Public Buildings Authority, Revenue Refunding Bonds, No Opt. Call A 2,829,168
Series L Guaranteed by the Commonwealth of Puerto Rico,
5.500%, 7/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 4.3%
9,840,000 City of Cleveland, Ohio, Airport System Revenue Bonds, Series 1997A, 1/08 at 101 AAA 9,487,728
5.125%, 1/01/27 (Alternative Minimum Tax)
8,500,000 City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds, 2/08 at 102 BBB 8,516,150
Series 1998A (Emery Air Freight Corporation and Emery Worldwide
Airlines, Inc.-Guarantors), 5.625%, 2/01/18
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation (continued)
$11,000,000 State of Ohio, Turnpike Revenue Bonds, 1996 Series A, Issued by the Ohio No Opt. Call AAA $ 11,944,130
Turnpike Commission, 5.500%, 2/15/26
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 17.8%
2,000,000 City of Athens, County of Athens, Ohio, Sanitary Sewer System Mortgage 12/09 at 100 A*** 2,375,960
Revenue Bonds, Series 1989, 7.300%, 12/01/14 (Pre-refunded to 12/01/09)
3,000,000 City of Barberton, Ohio Hospital Facilities Revenue Bonds, Series 1992 1/02 at 102 N/R*** 3,291,390
(The Barberton Citizens Hospital Company Project), 7.250%, 1/01/12
(Pre-refunded to 1/01/02)
2,630,000 City of Bedford, Ohio, Hospital Facilities Refunding Revenue Bonds, 5/00 at 102 N/R*** 2,773,309
Series 1990 (The Community Hospital of Bedford, Inc.), 8.500%,
5/15/09 (Pre-refunded to 5/15/00)
1,000,000 Canal Winchester Local School District, Franklin and Fairfield Counties, 12/01 at 102 AAA 1,100,420
Ohio, General Obligation Bonds (Unlimited Tax), For School Facilities
Construction and Improvement, 7.100%, 12/01/13 (Pre-refunded to 12/01/01)
1,085,000 County of Clermont, Ohio, Hospital Facilities Revenue Bonds, Series 1989A 9/01 at 100 AAA 1,172,592
(Mercy Health System, Province of Cincinnati), 7.500%, 9/01/19
(Pre-refunded to 9/01/01)
County of Clermont, Ohio, Sewer System Revenue Bonds, Series 1990,
Clermont County Sewer District:
1,000,000 7.250%, 12/01/11 (Pre-refunded to 12/01/00) 12/00 at 102 AAA 1,074,780
2,000,000 7.375%, 12/01/20 (Pre-refunded to 12/01/00) 12/00 at 102 AAA 2,153,200
3,700,000 County of Clermont, Ohio, Sewer System Revenue Bonds, Series 1991, 12/01 at 102 AAA 4,067,780
Clermont County Sewer District, 7.100%, 12/01/21
(Pre-refunded to 12/01/01)
City of Cleveland, Ohio, General Obligaton Bonds,
Series 1988:
1,010,000 7.500%, 8/01/08 (Pre-refunded to 2/01/03) 2/03 at 100 AAA 1,130,533
1,010,000 7.500%, 8/01/09 (Pre-refunded to 2/01/03) 2/03 at 100 AAA 1,130,533
500,000 City of Cleveland, Ohio, Various Purpose General Obligation Bonds, 7/02 at 102 AAA 545,565
Series 1992, 6.375%, 7/01/12 (Pre-refunded to 7/01/02)
790,000 Board of Education of the Cleveland City School District, Ohio, School 12/01 at 102 Aaa 889,595
Improvement Bonds, Series 1991 (General Obligation Unlimited Tax Bonds),
8.250%, 12/01/08 (Pre-refunded to 12/01/01)
920,000 City of Cleveland, Ohio, First Mortgage Revenue Refunding Bonds, Series F, 1/02 at 102 AAA 996,572
1992-B, 6.500%, 1/01/11 (Pre-refunded to 1/01/02)
City of Cleveland, Ohio, Waterworks Improvement and Refunding Revenue
Bonds, First Mortgage Revenue Bonds, Series 1996-H:
2,280,000 5.750%, 1/01/21 (Pre-refunded to 1/01/06) 1/06 at 102 AAA 2,505,811
5,795,000 5.750%, 1/01/26 (Pre-refunded to 1/01/06) 1/06 at 102 AAA 6,368,937
County of Cuyahoga, Ohio, Hospital Revenue Bonds (Meridia Health
System), Series 1995:
250,000 6.250%, 8/15/14 (Pre-refunded to 8/15/05) 8/05 at 102 AAA 281,838
5,500,000 6.250%, 8/15/24 (Pre-refunded to 8/15/05) 8/05 at 102 AAA 6,200,425
1,250,000 Conversion and Remarketing of the County of Cuyahoga, Ohio, Hospital 10/00 at 103 N/R*** 1,348,838
Improvement Revenue Bonds (Deaconess Hospital of Cleveland Project),
Series 1985B, 7.450%, 10/01/18 (Pre-refunded to 10/01/00)
5,750,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds, Series 1990 (Meridia 8/00 at 102 AAA 6,124,843
Health System), 7.250%, 8/15/19 (Pre-refunded to 8/15/00)
305,000 County of Cuyahoga, Ohio, Distribution System Improvement Revenue Bonds, 6/99 at 102 N/R*** 311,274
Series 1989 (The Medical Center Company Project), 7.800%, 6/01/09
(Pre-refunded to 6/01/99)
1,000,000 City of Delphos, Ohio, Sewer System Mortgage Revenue Bonds, Series 1990, 9/00 at 102 AAA 1,066,140
7.250%, 9/01/20 (Pre-refunded to 9/01/00)
2,500,000 Fairlawn, Ohio, Health Care Facilities Revenue Bonds, Series 1989 10/99 at 102 N/R*** 2,593,250
(The Village at Saint Edward Project), 8.750%, 10/01/19
(Pre-refunded to 10/01/99)
1,350,000 County of Franklin, Ohio, Hospital Facilities Improvement Revenue Bonds, 5/00 at 102 AAA 1,425,533
Series 1990A (Riverside United Methodist Hospital Project), 7.250%,
5/15/20 (Pre-refunded to 5/15/00)
1,000,000 County of Franklin, Ohio, Hospital Facilities Refunding and Improvement 5/00 at 102 AAA 1,059,640
Revenue Bonds, Series 1990B (Riverside United Methodist Hospital Project),
7.600%, 5/15/20 (Pre-refunded to 5/15/00)
1,350,000 County of Franklin, Ohio, Hospital Facilities Mortgage Revenue Bonds, 7/01 at 103 N/R*** 1,515,726
1991 Series A (Ohio Presbyterian Retirement Services), 8.750%,
7/01/21 (Pre-refunded to 7/01/01)
</TABLE>
33
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,000,000 County of Franklin, Ohio, Revenue Bonds, Series 7/01 at 100 N/R*** $1,066,970
1991 (OCLC Online Computer Library Center, Incorporated
Project), 7.200%, 7/15/06 (Pre-refunded to 7/15/01)
1,000,000 Board of Education, Gahanna-Jefferson City School 12/00 at 102 N/R*** 1,071,880
District, Franklin County, Ohio, General
Obligation Bonds, Series 1990A, 7.125%, 12/01/14
(Pre-refunded to 12/01/00)
City of Garfield Heights, Ohio, Hospital Improvement and Refunding
Revenue Bonds, Series 1992B (Marymount Hospital Project):
3,000,000 6.650%, 11/15/11 (Pre-refunded to 11/15/02) 11/02 at 102 AA-*** 3,314,760
3,500,000 6.700%, 11/15/15 (Pre-refunded to 11/15/02) 11/02 at 102 AA-*** 3,872,820
1,720,000 Franciscan Sisters of the Poor Health System, Inc. 7/02 at 102 BBB*** 1,888,319
Revenue Bonds, Hamilton County, Ohio, Health
System Revenue Bonds, Providence Hospital Issue Series 1992, 6.875%,
7/01/15 (Pre-refunded to 7/01/02)
1,495,000 County of Hamilton, Ohio, Judson Care Center 8/00 at 101 1/4 AA-*** 1,587,660
Nursing Home and Board and Care Project (FHA
Insured Mortgage), 7.800%, 8/01/19 (Pre-refunded to 8/01/00)
1,000,000 Hudson Local School District, General Obligation 12/00 at 102 A1*** 1,073,290
Unlimited Tax, 7.100%, 12/15/13 (Pre-refunded to 12/15/00)
1,000,000 Board of Education of the Hudson Local School 12/00 at 102 A1*** 1,074,240
District, Ohio, School Facilities Improvement
Bonds, Series 1991A, 7.100%, 12/15/14 (Pre-refunded to
12/15/00)
1,000,000 Kent State University (A State University of 5/02 at 102 AAA 1,090,940
Ohio), General Receipts Bonds, Series 1992,
6.500%, 5/01/22 (Pre-refunded to 5/01/02)
1,500,000 City of Lorain, Ohio, Hospital Refunding Revenue 11/02 at 102 A1*** 1,684,110
Bonds, Series 1992 (Lakeland Community Hospital,
Inc.), 6.500%, 11/15/12
1,500,000 County of Lucas, Ohio, Hospital Facilities Revenue 12/01 at 102 N/R*** 1,678,965
Bonds, Series 1991 (Flower Memorial Hospital),
8.125%, 12/01/11 (Pre-refunded to 12/01/01)
4,250,000 County of Mahoning, Ohio, Hospital Improvement 10/02 at 100 AAA 4,539,765
Revenue Bonds, Series 1991 (YHA, Inc. Project),
Series 1991A, 7.000%, 10/15/14 (Pre-refunded to
10/15/02)
1,150,000 County of Marion, Ohio, Health Care Facilities 12/99 at 103 N/R*** 1,215,194
Revenue Bonds, Series 1990 (United Church Homes,
Inc.), 8.875%, 12/01/12 (Pre-refunded to 12/01/99)
1,000,000 The Board of Education of the Marysville Exempted 12/00 at 102 AAA 1,074,110
Village School District, Union County, Ohio,
School Improvement Bonds, General Obligation (Unlimited
Tax), 7.200%, 12/01/10 (Pre-refunded to 12/01/00)
1,250,000 City of Marysville, Ohio, Water System Mortgage 12/01 at 101 AAA 1,361,488
Revenue Bonds, Series 1991, 7.050%, 12/01/21
(Pre-refunded to 12/01/01)
1,850,000 Massillon City School District, Ohio, General 12/00 at 102 AAA 1,987,104
Obligation Unlimited Tax Bonds School Improvement
Bonds, Series 1990, 7.200%, 12/01/11 (Pre-refunded
to 12/01/00)
1,000,000 Board of Education of the Mentor Exempted Village 12/02 at 100 AAA 1,040,530
School District, Ohio, Improvement Bonds,
Series 1989 (General Obligation Bonds), 7.400%,
12/01/11 (Pre-refunded to 12/01/02)
3,000,000 City of Middleburg Heights, Ohio, Hospital 8/01 at 102 AAA 3,270,870
Improvement Revenue Bonds, Series 1991 (Southwest
General Hospital Project), 7.200%, 8/15/19
(Pre-refunded to 8/15/01)
Ohio Housing Finance Agency Single Family Mortgage
Revenue Bonds:
6,460,000 0.000%, 1/15/15 (Pre-refunded to 1/15/11) 1/11 at 67 1/32 AAA 2,474,761
5,700,000 0.000%, 1/15/15 (Pre-refunded to 7/15/11) 7/11 at 70 15/32 AAA 2,240,955
20,000 Ohio Building Authority, State Facilities 4/03 at 100 AAA 23,466
Refunding Bonds (Frank J. Lausche State Office
Building), 1982 Series A, 10.125%, 10/01/06
(Pre-refunded to 4/01/03)
1,000,000 State of Ohio, Ohio Higher Educational Facilities 5/00 at 100 AAA 1,037,830
Commission (Ohio Northern University Project),
7.300%, 5/15/10 (Pre-refunded to 5/15/00)
4,630,000 Ohio Water Development Authority, State of Ohio, No Opt. Call AAA 5,128,327
Water Development Revenue Bonds, Pure Water
1990 Series I, 6.000%, 12/01/16
1,000,000 County of Ottawa, Ohio, Sanitary Sewer System 9/01 at 102 AAA 1,090,460
Special Assessment Bonds (Portage-Catawba
Island Project), Series 1991, 7.000%, 9/01/11
(Pre-refunded to 9/01/01)
1,000,000 City of Parma, Ohio, Various Purpose General 12/00 at 102 A*** 1,080,190
Obligation Bonds, Series 1990 (Limited Tax
Obligation), 7.600%, 12/01/11 (Pre-refunded to 12/01/00)
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,600,000 Pickerington Ohio Local School District, General Obligation Bonds, 12/00 at 102 AAA $ 1,720,624
Series 1990B, 7.250%, 12/01/13, (Pre-refunded to 12/01/00)
700,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue Bonds, 7/00 at 102 AAA 746,963
Series Q, 7.750%, 7/01/10 (Pre-refunded to 7/01/00)
1,500,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, 7/01 at 102 Aaa 1,629,810
7.000%, 7/01/21 (Pre-refunded to 7/01/01)
3,165,000 Reynoldsburg City School District, Ohio, General Obligation Bonds, 12/02 at 102 AAA 3,499,952
For School Building Construction and Improvement, 6.550%,
12/01/17 (Pre-refunded to 12/01/02)
1,200,000 Ridgemont Local School District, Ohio, General Obligation (Unlimited Tax), 12/02 at 102 N/R*** 1,345,056
School Improvement Bonds, Series 1992, 7.250%, 12/01/14 (Pre-refunded
to 12/01/02)
605,000 Scioto County, Ohio Human Services Building Bonds, General Obligation, 8/01 at 101 N/R*** 654,084
7.150%, 8/01/11 (Pre-refunded to 8/01/01)
1,725,000 County of Shelby, Ohio, Hospital Facilities Revenue Refunding and 9/02 at 102 N/R*** 1,942,402
Improvement Bonds, Series 1992 (The Shelby County Memorial Hospital
Association), 7.700%, 9/01/18 (Pre-refunded to 9/01/02)
1,000,000 Sylvania, Ohio, City School District, General Obligation Bonds, 6.600%, 6/02 at 102 AAA 1,095,690
6/01/16 (Pre-refunded to 6/01/02)
1,000,000 University of Cincinnati, General Receipts Bonds, Series O, 6.300%, 12/02 at 102 AA*** 1,096,310
6/01/12 (Pre-refunded to 12/01/02)
4,775,000 County of Warren, Ohio, Hospital Facilities Improvement and Refunding 7/01 at 102 Aa2*** 5,188,420
Revenue Bonds, Series 1991 (Otterbein Home Project), 7.200%, 7/01/11
(Pre-refunded to 7/01/01)
750,000 County of Warren, Ohio, Waterworks System Revenue Bonds, Series 1992, 12/02 at 102 AAA 830,595
Warren County Water District, 6.600%, 12/01/16 (Pre-refunded to
12/01/02)
1,500,000 City of Warren, Ohio, General Obligation (Limited Tax), Sewerage System 11/00 at 102 BBB+*** 1,618,500
Improvement Bonds, Series 1990, 7.750%, 11/01/10 (Pre-refunded to
11/01/00)
1,500,000 Washington County, Ohio, Hospital Revenue Bonds (Marietta Area Health Care, 9/02 at 102 Baa1*** 1,676,760
Inc. Project), Series 1992, 7.375%, 9/01/12 (Pre-refunded to 9/01/02)
1,500,000 Westerville, Minerva Park and Blendon, Ohio, Joint Township Hospital 9/01 at 102 AAA 1,637,985
District (St. Ann's Hospital Project), Series 1991A, 7.100%, 9/15/21
(Pre-refunded to 9/15/01)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 13.1%
City of Cleveland, Ohio, Public Power System First Mortgage Revenue
Bonds, Series 1994A:
2,250,000 0.000%, 11/15/12 No Opt. Call AAA 1,157,220
1,535,000 0.000%, 11/15/13 No Opt. Call AAA 746,148
10,685,000 City of Cleveland, Ohio, Public Power System Improvement First Mortgage 11/01 at 102 AAA 11,618,655
Revenue Bonds, Series 1991B, 7.000%, 11/15/17
1,900,000 City of Cleveland, Ohio, Public Power System Improvement First Mortgage 11/01 at 102 AAA 2,066,022
Revenue Bonds, Series 1991A, 7.000%, 11/15/17
4,000,000 City of Cleveland, Ohio, Public Power System, First Mortgage Revenue 11/06 at 102 AAA 3,868,520
Refunding Bonds, Series 1996, Sub-Series 1, 5.000%, 11/15/24
7,520,000 Ohio Municipal Electric Generation Agency (American Municipal Power - 2/03 at 102 AAA 7,585,574
Ohio, Inc.), 5.375%, 2/15/24
Ohio Air Quality Development Authority, Revenue Bonds, 1985 Series A,
(Columbus Southern Power Company Project):
1,750,000 6.375%, 12/01/20 12/02 at 102 AAA 1,895,740
7,000,000 6.250%, 12/01/20 6/03 at 102 Baa1 7,393,750
750,000 State of Ohio, Pollution Control Revenue Refunding Bonds, Ohio Air 7/99 at 102 Baa3 767,715
Quality Development Authority, 1989 Series B, (Ohio Edison Company
Project), 7.625%, 7/01/23
5,900,000 Ohio Air Quality Development Authority, State of Ohio, Air Quality 8/99 at 102 Baa1 6,056,232
Development Revenue Refunding Bonds (Ohio Power Company Project),
Series B, 7.400%, 8/01/09
2,000,000 Ohio Air Quality Development Authority, State of Ohio, Pollution Control 3/00 at 102 AAA 2,094,240
Revenue Refunding Bonds, 1990 Series A (Ohio Edison Company Project),
7.450%, 3/01/16
15,000,000 State of Ohio, Ohio Air Quality Development Authority, Air Quality 9/05 at 102 A+ 15,911,100
Development Revenue Refunding Bonds, 1995 Series (The Dayton Power
and Light Company Project), 6.100%, 9/01/30
</TABLE>
35
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$ 6,000,000 State of Ohio, Ohio Air Quality Development Authority, Air Quality 4/07 at 102 AAA $ 6,140,640
Development Revenue Bonds (JMG Funding, Limited Partnership Project),
Series 1997, 5.625%, 1/01/23 (Alternative Minimum Tax)
500,000 Ohio Water Development Authority, State of Ohio, Collateralized Water 8/02 at 102 AA- 539,495
Development Revenue Refunding Bonds, 1992 Series A (The Dayton Power
and Light Company Project), 6.400%, 8/15/27
7,050,000 Ohio Water Development Authority, Pollution Control Revenue (Ohio 7/99 at 102 Baa3 7,216,521
Edison Company), 7.625%, 7/01/23
15,600,000 Ohio Water Development Authority, State of Ohio, Solid Waste Disposal 9/08 at 102 N/R 15,839,772
Revenue Bonds (Bay Shore Power Project) Tax Exempt Series 1998A,
5.875%, 9/01/20 (Alternative Minimum Tax)
1,545,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, No Opt. Call BBB+ 611,434
Series O, 0.000%, 7/01/17
- ----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 5.2%
City of Bellefontaine, Sewer System First Mortgage Revenue Refunding
and Improvement Bonds (Bank Qualified):
1,000,000 6.800%, 12/01/07 12/02 at 101 Baa1 1,100,020
1,000,000 6.900%, 12/01/11 12/02 at 101 Baa1 1,103,270
3,000,000 County of Butler, Ohio, Sewer System Revenue Bonds, Series 1996, 12/06 at 101 AAA 3,011,220
5.250%, 12/01/21
13,000,000 City of Cleveland, Ohio, Waterworks Improvement First Mortgage No Opt. Call AAA 13,683,930
Refunding Revenue Bonds, Series G, 1993, 5.500%, 1/01/21
80,000 City of Cleveland, Ohio, Waterworks Improvement First Mortgage 1/02 at 102 AAA 86,338
Revenue Refunding Bonds, Series F, 1992B, 6.500%, 1/01/11
5,000,000 City of Cleveland, Ohio, Waterworks Improvement and Refunding 1/08 at 101 AAA 4,826,550
Revenue Bonds, Series I, 1998, 5.000%, 1/01/28
City of Cleveland, Ohio, Waterworks Improvement and Refunding Revenue
Bonds, First Mortgage Series 1996-H:
40,000 5.750%, 1/01/21 1/06 at 102 AAA 42,171
55,000 5.750%, 1/01/26 1/06 at 102 AAA 57,876
1,600,000 County of Greene, Ohio, Water System Revenue Bonds, Series 1996, 12/07 at 102 AAA 1,734,159
6.125%, 12/01/21
2,200,000 City of Greenville, Ohio (Darke County), Wastewater System First 12/02 at 102 AAA 2,400,265
Mortgage Revenue Bonds, Series 1992 (Governmental Enterprise
Revenue Bonds), 6.350%, 12/01/17
1,000,000 City of Hamilton, Ohio, Water System Mortgage Revenue Bonds, 10/01 at 102 AAA 1,072,839
1991 Series A, 6.400%, 10/15/10
795,000 City of Huber Heights, Ohio, Water System Revenue Bonds, Series 1995, No Opt. Call AAA 274,115
0.000%, 12/01/19
1,000,000 County of Montgomery, Ohio, Water Revenue Bonds, Greater Moraine 11/02 at 102 AAA 1,086,979
Beavercreek Sewer District, Series 1992, 6.250%, 11/15/17
1,000,000 Mount Gilead, Ohio, Water System Revenue, First Mortgage Bonds, 12/02 at 102 N/R 1,121,149
7.200%, 12/01/17
1,000,000 Ohio Water Development Authority, State of Ohio, Water Development 6/05 at 102 AAA 1,066,739
Revenue Bonds, 1995 Fresh Water Series, 5.900%, 12/01/21
2,000,000 Ohio Water Development Authority State of Ohio Water Development 6/08 at 101 AAA 1,969,799
Revenue Bonds, Fresh Water Series 1998, 5.125%, 12/01/23
750,000 Toledo, Ohio, Sewer System, Revenue Mortgage Bonds, 6.350%, 11/15/17 11/04 at 102 AAA 834,172
500,000 Toledo, Ohio, Waterworks System, Revenue Refunding Mortgage Bonds, 11/04 at 102 AAA 558,859
6.450%, 11/15/24
- ----------------------------------------------------------------------------------------------------------------------------------
$ 665,515,000 Total Investments - (cost $634,842,457) - 97.4% 680,075,080
==============--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.6% 17,873,967
----------------------------------------------------------------------------------------------------------------
Net Assets - 100% $697,949,047
================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year)
and prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal
and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
36
<PAGE>
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $523,340,679 $339,524,760 $680,075,080
Cash 1,803,538 -- 473,734
Receivables:
Interest 7,284,656 5,331,005 12,554,701
Investments sold -- 850,000 6,778,700
Shares sold 492,817 222,722 686,459
Other assets 242,693 222,169 258,560
- ----------------------------------------------------------------------------------------------------------------------------
Total assets 533,164,383 346,150,656 700,827,234
- ----------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 1,521,114 --
Payables:
Investments purchased 16,332,674 -- --
Shares redeemed 315,526 538,040 916,943
Accrued expenses:
Management fees (note 6) 135,773 157,946 313,933
12b-1 distribution and service fees (notes 1 and 6) 113,014 81,785 123,452
Other 125,628 47,588 202,607
Dividends payable 1,007,299 419,365 1,321,252
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 18,029,914 2,765,838 2,878,187
- ----------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $515,134,469 $343,384,818 $697,949,047
============================================================================================================================
Class A Shares (note 1)
Net assets $467,126,510 $260,396,154 $471,074,723
Shares outstanding 41,630,717 22,002,441 40,716,447
Net asset value and redemption price per share $ 11.22 $ 11.83 $ 11.57
Offering price per share (net asset value per share plus maximum sales charge
of 4.20% of offering price) $ 11.71 $ 12.35 $ 12.08
============================================================================================================================
Class B Shares (note 1)
Net assets $ 9,922,940 $ 7,732,645 $ 14,494,335
Shares outstanding 884,147 652,742 1,253,766
Net asset value, offering and redemption price per share $ 11.22 $ 11.85 $ 11.56
============================================================================================================================
Class C Shares (note 1)
Net assets $ 37,246,090 $ 48,946,404 $ 50,889,097
Shares outstanding 3,322,380 4,142,231 4,402,702
Net asset value, offering and redemption price per share $ 11.21 $ 11.82 $ 11.56
============================================================================================================================
Class R Shares (note 1)
Net assets $ 838,929 $ 26,309,615 $161,490,892
Shares outstanding 74,932 2,223,772 13,959,995
Net asset value, offering and redemption price per share $ 11.20 $ 11.83 $ 11.57
============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
Statement of Operations
Year Ended May 31, 1999
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $28,715,685 $20,077,314 $40,635,823
- ----------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 2,679,383 1,870,026 3,702,803
12b-1 service fees - Class A (notes 1 and 6) 924,591 531,983 955,303
12b-1 distribution and service fees - Class B (notes 1 and 6) 65,879 57,940 101,641
12b-1 distribution and service fees - Class C (notes 1 and 6) 236,689 360,422 365,952
Shareholders' servicing agent fees and expenses 247,472 139,136 487,240
Custodian's fees and expenses 120,066 82,000 136,608
Trustees' fees and expenses (note 6) 8,978 4,681 13,560
Professional fees 34,746 16,657 21,353
Shareholders' reports - printing and mailing expenses 110,856 78,853 146,631
Federal and state registration fees 6,934 15,836 30,644
Other expenses 22,270 25,943 35,665
- ----------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 4,457,864 3,183,477 5,997,400
Custodian fee credit (note 1) (11,312) (2,125) --
Expense reimbursement (note 6) (102,078) -- --
- ----------------------------------------------------------------------------------------------------------------
Net expenses 4,344,474 3,181,352 5,997,400
- ----------------------------------------------------------------------------------------------------------------
Net investment income 24,371,211 16,895,962 34,638,423
- ----------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions (notes 1 and 4) 510,764 2,296,613 1,618,785
Net change in unrealized appreciation or depreciation of investments (7,334,078) (7,584,682) (9,049,017)
- ----------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (6,823,314) (5,288,069) (7,430,232)
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $17,547,897 $11,607,893 $27,208,191
================================================================================================================
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Kentucky
----------------------------
Year Ended Year Ended
5/31/99 5/31/98
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 24,371,211 $ 24,365,910
Net realized gain from investment transactions (notes 1 and 4) 510,764 2,172,160
Net change in unrealized appreciation or depreciation of investments (7,334,078) 14,097,294
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 17,547,897 40,635,364
- ------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (22,685,548) (22,954,811)
Class B (286,307) (102,552)
Class C (1,381,734) (1,254,173)
Class R (38,706) (32,294)
From accumulated net realized gains from investment transactions:
Class A (949,721) (1,984,678)
Class B (13,524) (10,705)
Class C (63,109) (120,396)
Class R (1,619) (2,930)
- ------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (25,420,268) (26,462,539)
- ------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization of Kentucky Limited (note 1) 9,633,669 --
Net proceeds from sale of shares 58,123,682 47,501,865
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 12,771,045 15,618,317
- ------------------------------------------------------------------------------------------------------------------
80,528,396 63,120,182
Cost of shares redeemed (42,438,595) (48,645,223)
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 38,089,801 14,474,959
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets 30,217,430 28,647,784
Net assets at the beginning of year 484,917,039 456,269,255
- ------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $515,134,469 $484,917,039
==================================================================================================================
Balance of undistributed net investment income at the end of year $ 3,931 $ 25,015
==================================================================================================================
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
Statement of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
Michigan Ohio
---------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/99 5/31/98 5/31/99 5/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 16,895,962 $ 16,864,427 $ 34,638,423 $ 35,243,212
Net realized gain from investment transactions (notes 1 and 4) 2,296,613 1,595,690 1,618,785 4,967,956
Net change in unrealized appreciation or depreciation of investments (7,584,682) 10,225,980 (9,049,017) 16,619,119
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 11,607,893 28,686,097 27,208,191 56,830,287
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (13,190,292) (13,344,536) (23,597,778) (24,388,584)
Class B (255,860) (63,731) (448,001) (182,260)
Class C (2,123,812) (1,982,594) (2,161,843) (2,008,254)
Class R (1,398,706) (1,409,716) (8,432,580) (8,687,614)
From accumulated net realized gains from investment transactions:
Class A (1,239,012) (597,076) (1,818,617) (1,996,392)
Class B (28,005) (3,361) (40,242) (16,956)
Class C (223,599) (101,904) (185,121) (178,327)
Class R (125,490) (61,084) (623,027) (681,846)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (18,584,776) (17,564,002) (37,307,209) (38,140,233)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 47,599,095 28,641,868 76,326,399 63,755,865
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 6,087,951 10,647,679 17,436,625 24,926,989
- ----------------------------------------------------------------------------------------------------------------------------------
53,687,046 39,289,547 93,763,024 88,682,854
Cost of shares redeemed (43,389,935) (37,642,403) (75,213,088) (83,801,938)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 10,297,111 1,647,144 18,549,936 4,880,916
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 3,320,228 12,769,239 8,450,918 23,570,970
Net assets at the beginning of year 340,064,590 327,295,351 689,498,129 665,927,159
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $343,384,818 $340,064,590 $697,949,047 $689,498,129
==================================================================================================================================
Balance of undistributed net investment income at the end of year $ 23,937 $ 96,645 $ 34,534 $ 36,313
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust IV (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Kentucky Municipal Bond Fund ("Kentucky"),
the Nuveen Flagship Michigan Municipal Bond Fund ("Michigan") and the Nuveen
Flagship Ohio Municipal Bond Fund ("Ohio") (collectively, the "Funds"), among
others. The Trust was organized as a Massachusetts business trust on July 1,
1996.
After the close of business on April 23, 1999, Nuveen Flagship Kentucky Limited
Term Municipal Bond Fund ("Kentucky Limited") reorganized into Kentucky as
approved by the shareholders of Kentucky Limited on April 15, 1999.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1999, Kentucky had outstanding delayed delivery and when-issued purchase
commitments of $16,332,674. There were no such outstanding purchase commitments
in either of the other funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
41
<PAGE>
Notes to Financial Statements (continued)
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. All monthly
tax-exempt income dividends paid during the fiscal year ended May 31, 1999, have
been designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended May 31, 1999.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
42
<PAGE>
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Kentucky
------------------------------------------------------
Year Ended 5/31/99 Year Ended 5/31/98
-------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of Kentucky Limited:
Class A 596,400 $ 6,760,656 -- $ --
Class C 251,869 2,854,283 -- --
Class R 1,657 18,730 -- --
Shares sold:
Class A 3,649,401 41,613,655 3,217,301 36,434,351
Class B 535,579 6,099,201 323,485 3,657,888
Class C 901,574 10,264,891 639,620 7,226,085
Class R 12,814 145,935 16,255 183,541
Shares issued to shareholders due to reinvestment of distributions:
Class A 1,036,557 11,833,474 1,281,834 14,485,026
Class B 12,216 139,432 4,212 47,833
Class C 68,926 785,998 94,246 1,063,652
Class R 1,065 12,141 1,937 21,806
- -----------------------------------------------------------------------------------------------------------------------------
7,068,058 80,528,396 5,578,890 63,120,182
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (3,271,484) (37,270,021) (3,866,440) (43,715,326)
Class B (38,705) (440,621) (1,809) (20,440)
Class C (414,950) (4,727,847) (434,290) (4,909,457)
Class R (9) (106) -- --
- -----------------------------------------------------------------------------------------------------------------------------
(3,725,148) (42,438,595) (4,302,539) (48,645,223)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 3,342,910 $ 38,089,801 1,276,351 $ 14,474,959
=============================================================================================================================
Michigan
------------------------------------------------------
Year Ended 5/31/99 Year Ended 5/31/98
-------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 2,626,252 $ 31,703,772 1,390,245 $ 16,660,336
Class B 355,032 4,296,838 287,386 3,449,240
Class C 837,002 10,095,573 589,706 7,052,332
Class R 125,559 1,502,912 123,751 1,479,960
Shares issued to shareholders due to reinvestment of distributions:
Class A 352,015 4,259,327 678,487 8,087,898
Class B 8,755 106,023 2,834 34,056
Class C 56,899 687,366 127,033 1,512,300
Class R 85,549 1,035,235 84,732 1,013,425
- -----------------------------------------------------------------------------------------------------------------------------
4,447,063 53,687,046 3,284,174 39,289,547
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,812,412) (33,923,328) (2,418,756) (28,925,631)
Class B (28,668) (347,390) (5,100) (61,520
Class C (541,578) (6,514,267) (498,829) (5,971,586)
Class R (215,849) (2,604,950) (224,782) (2,683,666
- -----------------------------------------------------------------------------------------------------------------------------
(3,598,507) (43,389,935) (3,147,467) (37,642,403)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 848,556 $ 10,297,111 136,707 $ 1,647,144
=============================================================================================================================
</TABLE>
43
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Ohio
------------------------------------------------------
Year Ended 5/31/99 Year Ended 5/31/98
-------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 4,107,940 $ 48,297,312 3,219,388 $ 37,568,749
Class B 666,096 7,825,915 516,543 6,021,505
Class C 978,318 11,491,425 995,368 11,636,371
Class R 741,899 8,711,747 730,018 8,529,240
Shares issued to shareholders due to reinvestment of distributions:
Class A 854,764 10,063,343 1,424,465 16,558,328
Class B 18,133 213,273 9,946 116,135
Class C 68,099 800,943 139,502 1,619,985
Class R 540,083 6,359,066 569,608 6,632,541
- -----------------------------------------------------------------------------------------------------------------------------
7,975,332 93,763,024 7,604,838 88,682,854
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (4,536,687) (53,343,458) (4,938,984) (57,591,525)
Class B (63,145) (740,574) (38,316) (446,171)
Class C (653,874) (7,678,737) (692,246) (8,051,008)
Class R (1,146,476) (13,450,319) (1,520,403) (17,713,234)
- -----------------------------------------------------------------------------------------------------------------------------
(6,400,182) (75,213,088) (7,189,949) (83,801,938)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 1,575,150 $ 18,549,936 414,889 $ 4,880,916
=============================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1999, to shareholders of record on June 9,
1999, as follows:
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0455 $.0490 $.0480
Class B .0385 .0415 .0410
Class C .0405 .0435 .0430
Class R .0475 .0510 .0500
=============================================================================================================================
</TABLE>
44
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended May 31,
1999, were as follows:
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities in the reorganization of Kentucky Limited $ 7,668,659 -- --
Long-term municipal securities 91,279,981 $65,480,003 $83,759,088
Short-term municipal securities 36,950,000 17,300,000 39,000,000
Sales:
Long-term municipal securities 47,876,582 62,082,584 78,785,847
Short-term municipal securities 38,950,000 17,300,000 39,000,000
===========================================================================================================================
</TABLE>
At May 31, 1999, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1999, were as follows:
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $32,057,961 $24,045,107 $45,980,905
depreciation (1,178,892) (1,251,646) (748,282)
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $30,879,069 $22,793,461 $45,232,623
===========================================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
===========================================================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1999, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares, the majority of which were paid
out as concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $1,082,479 $579,165 $1,028,321
Paid to authorized dealers 945,660 532,961 951,725
===========================================================================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
45
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended May 31, 1999, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $ 423,501 $ 335,941 $ 524,451
===========================================================================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the fiscal year ended May 31, 1999, the
Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $ 139,540 $ 157,320 $ 214,544
===========================================================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Funds were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 1999, as follows:
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $ 14,573 $ 13,756 $ 47,829
===========================================================================================================================
</TABLE>
7. Composition of Net Assets
At May 31, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $484,099,880 $319,392,956 $651,723,017
Balance of undistributed net investment income 3,931 23,937 34,534
Accumulated net realized gain from investment transactions 151,589 1,174,464 958,873
Net unrealized appreciation of investments 30,879,069 22,793,461 45,232,623
- ---------------------------------------------------------------------------------------------------------------------------
Net assets $515,134,469 $343,384,818 $697,949,047
===========================================================================================================================
</TABLE>
46
<PAGE>
Financial Highlights
47
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- --------------------------
KENTUCKY** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income(a) (Loss) Total Income Gains Total Value Return(b)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/87)
1999 $11.39 $.56 $(.15) $ .41 $(.56) $(.02) $(.58) $11.22 3.66%
1998 11.05 .59 .38 .97 (.58) (.05) (.63) 11.39 9.00
1997 10.82 .60 .24 .84 (.60) (.01) (.61) 11.05 7.87
1996 10.99 .61 (.17) .44 (.61) -- (.61) 10.82 4.04
1995 10.65 .61 .35 .96 (.62) -- (.62) 10.99 9.42
Class B (2/97)
1999 11.39 .48 (.15) .33 (.48) (.02) (.50) 11.22 2.90
1998 11.06 .50 .38 .88 (.50) (.05) (.55) 11.39 8.10
1997 (c) 11.07 .17 (.01) .16 (.17) -- (.17) 11.06 1.47
Class C (10/93)
1999 11.38 .50 (.15) .35 (.50) (.02) (.52) 11.21 3.12
1998 11.04 .52 .39 .91 (.52) (.05) (.57) 11.38 8.43
1997 10.81 .54 .24 .78 (.54) (.01) (.55) 11.04 7.29
1996 10.99 .54 (.17) .37 (.55) -- (.55) 10.81 3.38
1995 10.65 .55 .35 .90 (.56) -- (.56) 10.99 8.82
Class R (2/97)
1999 11.37 .58 (.15) .43 (.58) (.02) (.60) 11.20 3.89
1998 11.03 .61 .39 1.00 (.61) (.05) (.66) 11.37 9.25
1997 (c) 11.08 .20 (.04) .16 (.21) -- (.21) 11.03 1.42
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment(a) ment(a) Rate
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (5/87)
1999 $467,127 .84% 4.88% .82% 4.90% 10%
1998 451,338 .84 5.12 .77 5.19 12
1997 430,803 .99 5.20 .75 5.44 13
1996 410,808 1.02 5.19 .71 5.50 17
1995 394,457 1.04 5.49 .68 5.85 28
Class B (2/97)
1999 9,923 1.60 4.12 1.56 4.16 10
1998 4,273 1.59 4.33 1.54 4.38 12
1997 (c) 544 1.59* 4.56* 1.39* 4.76* 13
Class C (10/93)
1999 37,246 1.40 4.33 1.37 4.36 10
1998 28,630 1.39 4.57 1.33 4.63 12
1997 24,468 1.54 4.64 1.29 4.89 13
1996 20,647 1.57 4.63 1.27 4.93 17
1995 15,831 1.58 4.92 1.23 5.27 28
Class R (2/97)
1999 839 .64 5.09 .62 5.11 10
1998 675 .64 5.31 .58 5.37 12
1997 (c) 455 .64* 5.62* .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 custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) From commencement of class operations as noted.
48
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------------- --------------------------
MICHIGAN** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income(a) (Loss) Total Income Gains Total Value Return (b)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A (6/85)
1999 $12.07 $.60 $(.18) $ .42 $(.60) $(.06) $(.66) $11.83 3.45%
1998 11.68 .61 .42 1.03 (.61) (.03) (.64) 12.07 8.95
1997 11.37 .62 .31 .93 (.61) (.01) (.62) 11.68 8.42
1996 11.59 .63 (.22) .41 (.63) -- (.63) 11.37 3.61
1995 11.31 .65 .28 .93 (.65) -- (.65) 11.59 8.57
CLASS B (2/97)
1999 12.09 .51 (.18) .33 (.51) (.06) (.57) 11.85 2.69
1998 11.70 .52 .42 .94 (.52) (.03) (.55) 12.09 8.12
1997 (c) 11.66 .17 .04 .21 (.17) -- (.17) 11.70 1.86
CLASS C (6/93)
1999 12.06 .53 (.18) .35 (.53) (.06) (.59) 11.82 2.90
1998 11.66 .54 .43 .97 (.54) (.03) (.57) 12.06 8.45
1997 11.35 .55 .32 .87 (.55) (.01) (.56) 11.66 7.84
1996 11.58 .56 (.22) .34 (.57) -- (.57) 11.35 2.96
1995 11.30 .58 .28 .86 (.58) -- (.58) 11.58 7.98
CLASS R (2/97)
1999 12.07 .62 (.18) .44 (.62) (.06) (.68) 11.83 3.66
1998 11.68 .63 .42 1.05 (.63) (.03) (.66) 12.07 9.16
1997 (c) 11.66 .21 .02 .23 (.21) -- (.21) 11.68 2.01
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
MICHIGAN** Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, (000) ment ment ment(a) ment(a) Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (6/85)
1999 $260,396 .84% 4.94% .84% 4.94% 18%
1998 263,632 .84 5.11 .84 5.11 13
1997 259,055 .97 5.21 .85 5.33 34
1996 248,422 1.01 5.23 .82 5.42 54
1995 250,380 1.03 5.59 .80 5.82 37
CLASS B (2/97)
1999 7,733 1.60 4.20 1.60 4.20 18
1998 3,839 1.59 4.32 1.59 4.32 13
1997 (c) 380 1.59* 4.52* 1.59* 4.52* 34
CLASS C (6/93)
1999 48,946 1.39 4.39 1.39 4.39 18
1998 45,690 1.39 4.56 1.39 4.56 13
1997 41,649 1.52 4.65 1.40 4.77 34
1996 41,365 1.56 4.67 1.37 4.86 54
1995 37,122 1.58 5.02 1.35 5.25 37
CLASS R (2/97)
1999 26,310 .64 5.14 .64 5.14 18
1998 26,904 .64 5.31 .64 5.31 13
1997 (c) 26,211 .65* 5.57* .65* 5.57* 34
====================================================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Michigan.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
49
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------------- --------------------------
OHIO** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income(a) (Loss) Total Income Gains Total Value Return (b)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A (6/85)
1999 $11.74 $.58 $(.13) $ .45 $(.58) $(.04) $(.62) $11.57 3.92%
1998 11.41 .60 .38 .98 (.60) (.05) (.65) 11.74 8.76
1997 11.21 .61 .20 .81 (.61) -- (.61) 11.41 7.38
1996 11.43 .62 (.21) .41 (.63) -- (.63) 11.21 3.59
1995 11.21 .64 .22 .86 (.64) -- (.64) 11.43 7.99
CLASS B (2/97)
1999 11.73 .49 (.12) .37 (.50) (.04) (.54) 11.56 3.18
1998 11.41 .51 .38 .89 (.52) (.05) (.57) 11.73 7.89
1997 (c) 11.42 .17 (.01) .16 (.17) -- (.17) 11.41 1.45
CLASS C (8/93)
1999 11.73 .52 (.13) .39 (.52) (.04) (.56) 11.56 3.39
1998 11.41 .54 .37 .91 (.54) (.05) (.59) 11.73 8.12
1997 11.21 .55 .20 .75 (.55) -- (.55) 11.41 6.80
1996 11.43 .55 (.21) .34 (.56) -- (.56) 11.21 3.03
1995 11.20 .57 .23 .80 (.57) -- (.57) 11.43 7.50
CLASS R (2/97)
1999 11.73 .60 (.12) .48 (.60) (.04) (.64) 11.57 4.22
1998 11.41 .62 .37 .99 (.62) (.05) (.67) 11.73 8.89
1997 (c) 11.42 .21 (.01) .20 (.21) -- (.21) 11.41 1.77
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
OHIO** Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, (000) ment ment ment(a) ment(a) Rate
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CLASS A (6/85)
1999 $471,075 .85% 4.94% .85% 4.94% 11%
1998 472,821 .85 5.15 .85 5.15 15
1997 463,253 .96 5.32 .89 5.39 17
1996 443,077 1.02 5.31 .92 5.41 31
1995 445,566 1.03 5.70 .95 5.78 31
CLASS B (2/97)
1999 14,494 1.61 4.20 1.61 4.20 11
1998 7,422 1.61 4.39 1.61 4.39 15
1997 (c) 1,649 1.60* 4.63* 1.60* 4.63* 17
CLASS C (8/93)
1999 50,889 1.40 4.39 1.40 4.39 11
1998 47,036 1.40 4.60 1.40 4.60 15
1997 40,713 1.51 4.77 1.44 4.84 17
1996 34,939 1.56 4.75 1.47 4.84 31
1995 28,461 1.58 5.13 1.50 5.21 31
CLASS R (2/97)
1999 161,491 .65 5.14 .65 5.14 11
1998 162,220 .65 5.35 .65 5.35 15
1997 (c) 160,312 .65* 5.65* .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 custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
50
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust IV:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship Kentucky Municipal Bond Fund,
Nuveen Flagship Michigan Municipal Bond Fund and Nuveen Flagship Ohio Municipal
Bond Fund (collectively, the "Funds") (three of the portfolios constituting the
Nuveen Flagship Multistate Trust IV (a Massachusetts business trust)), as of
May 31, 1999, and the related statements of operations for the year then ended,
and the statements of changes in net assets and the financial highlights for
each of the two years then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1999, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Kentucky Municipal Bond Fund, Nuveen Flagship Michigan Municipal Bond
Fund and Nuveen Flagship Ohio Municipal Bond Fund of the Nuveen Flagship
Multistate Trust IV as of May 31, 1999, and the results of their operations for
the year then ended, and the changes in their net assets and the financial
highlights for each of the two years then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 20, 1999
51
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
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
Dividend and
Growth Fund
Income
Income Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
52
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
53
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[Photo of John Nuveen Sr. Appears Here]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VAN-5-5-99
