<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR ABOUT JANUARY 12,
1999
REGISTRATION NOS. 333-
811-07751
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
NUVEEN FLAGSHIP MULTISTATE TRUST IV
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
333 West Wacker Drive
Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (312) 917-7700
Copy to:
<TABLE>
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GIFFORD R. ZIMMERMAN, ESQ. DAVID A. STURMS, ESQ.
VICE PRESIDENT AND SECRETARY VEDDER, PRICE, KAUFMAN & KAMMHOLZ
JOHN NUVEEN & CO. INCORPORATED 222 NORTH LASALLE STREET
333 WEST WACKER DRIVE CHICAGO, ILLINOIS 60601
CHICAGO, ILLINOIS 60606
(NAME AND ADDRESS OF AGENT FOR SERVICE) THOMAS S. HARMAN, ESQ.
MORGAN LEWIS & BOCKIUS LLP
1800 M STREET, NW
WASHINGTON, DC 20036
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
this Registration Statement becomes effective.
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It is proposed that this filing will become effective on February 11, 1999
pursuant to Rule 488.
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<PAGE> 2
NUVEEN FLAGSHIP MULTISTATE TRUST IV
CROSS-REFERENCE SHEET PURSUANT TO RULE 481(A) OF REGULATION C UNDER
THE SECURITIES ACT OF 1933
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FORM N-14
ITEM NO. PROSPECTUS/PROXY
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PART A INFORMATION REQUIRED IN THE PROSPECTUS/PROXY STATEMENT
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Item 1. Beginning of Registration Statement and
Outside Front Cover Page of
Prospectus/Proxy Statement.............. Outside front cover page of Prospectus/Proxy
Statement
Item 2. Beginning and Outside Back Cover Page of
Prospectus/Proxy Statement.............. Outside back cover page of Prospectus/Proxy Statement
Item 3. Fee Table, Synopsis Information and Risk
Factors................................. Summary; Risk Factors
Item 4. Information about the Transaction....... Summary; The Proposed Reorganization
Item 5. Information about the Registrant........ Outside front cover page of Prospectus/Proxy
Statement; Summary; The Proposed Reorganization;
Other Information; Exhibit A; Prospectus and
Statement of Additional Information of the Kentucky
Fund (incorporated by reference)
Item 6. Information about the Company Being
Acquired................................ Outside front cover page of Prospectus/Proxy
Statement; Summary; Exhibit A; Prospectus Statement
of Additional Information of the Kentucky Limited
Term Fund (incorporated by reference)
Item 7. Voting Information...................... Other Information; Voting Information and
Requirements
Item 8. Interest of Certain Persons and
Experts................................. Summary; The Proposed Reorganization
Item 9. Additional Information Required for
Reoffering by Persons Deemed to be
Underwriters............................ Not applicable
</TABLE>
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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Item 10. Cover Page.............................. Cover Page
Item 11. Table of Contents....................... Table of Contents
Item 12. Additional Information about the
Registrant.............................. Additional Information about the Kentucky Fund;
Incorporation of Documents by Reference
Item 13. Additional Information about the Company
Being Acquired.......................... Additional Information about the Kentucky Limited
Term Fund; Incorporation of Documents by Reference
Item 14. Financial Statements.................... Financial Statements; Incorporation of Documents by
Reference
</TABLE>
PART C OTHER INFORMATION
Items 15-17. Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C of this Registration
Statement.
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* References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
<PAGE> 3
NUVEEN LOGO
IMPORTANT INFORMATION FOR SHAREHOLDERS OF
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
Your Nuveen Flagship Kentucky Limited Term Municipal Bond Fund will host a
Special Meeting of Shareholders on Thursday, April 15, 1999, at our headquarters
in Chicago, Illinois. The purpose is to vote on an important proposal affecting
your fund.
The first few pages of this booklet summarize Nuveen's proposal and explain the
proxy process -- including how to cast your votes. Before you vote, please read
the full text of the proxy statement for a complete understanding of the
proposal.
Q. WHAT ARE SHAREHOLDERS BEING ASKED TO VOTE ON AT THE UPCOMING SPECIAL
SHAREHOLDER MEETING ON APRIL 15?
A. The Board of Trustees for the Nuveen Flagship Kentucky Limited Term Municipal
Bond Fund (the "Kentucky Limited Term Fund") has called a Special Shareholder
Meeting for Thursday, April 15, 1999 at which you will be asked to vote on a
reorganization (the "Reorganization") of your fund into the Nuveen Flagship
Kentucky Municipal Bond Fund (the "Kentucky Fund").
Q. ARE THERE ANY DIFFERENCES BETWEEN THE FUNDS?
A. The Kentucky Fund is substantially the same as the Kentucky Limited Term Fund
in its philosophy, investment objectives and policies and day-to-day
portfolio management except that the Kentucky Limited Term Fund maintains a
weighted average portfolio maturity between 1 and 7 years while the Kentucky
Fund maintains a weighted average portfolio maturity between 15 and 30 years.
In evaluating the Reorganization, the Kentucky Limited Term Fund shareholders
should consider the impact of investing in a long-term municipal bond fund.
Q. WHAT ADVANTAGES WILL THIS PRODUCE FOR FUND SHAREHOLDERS?
A. We expect the proposed Reorganization to (i) lower gross operating expenses
as a percentage of net assets due to the Kentucky Fund's larger net assets
and greater economies of scale; (ii) improve portfolio diversification; (iii)
lower portfolio transaction costs; and (iv) retain the exemption of dividends
from the Kentucky state personal income tax. The Board believes that these
potential benefits, together with the potentially higher distributions from
the Kentucky Fund, should offset the risks associated with investments in a
long term bond fund.
Q. HAS THE FUND'S BOARD OF TRUSTEES APPROVED THE PROPOSAL?
A. The Board of Trustees for the Kentucky Limited Term Fund unanimously agreed
that this Reorganization is in your best interests and recommends that you
vote in favor of it.
Q. WHAT IS THE TIMETABLE FOR THE REORGANIZATION?
A. Effective December 31, 1998, the Kentucky Limited Term Fund was closed to new
investors; existing investors, however, may continue to make additional
purchases and reinvest dividends. If approved by shareholders on April 15,
1999, the Reorganization is expected to take effect on April 23, 1999.
Q. WILL I RECEIVE NEW SHARES IN EXCHANGE FOR MY CURRENT SHARES?
A. Yes. Upon approval and completion of the Reorganization, shareholders of the
Kentucky Limited Term Fund will exchange their shares for shares of the
Kentucky Fund based upon a specified exchange ratio determined by the ratio
of the respective net asset values of the funds. You will receive Kentucky
Fund shares whose aggregate value at the time of issuance will equal the
aggregate value of your Kentucky Limited Term Fund shares on that date.
<PAGE> 4
Q. IF I OWN SHARES IN CERTIFICATE FORM, WILL I NEED TO EXCHANGE THEM FOR
CERTIFICATES OF MY NEW FUND?
A. Certificates for Kentucky Fund shares will not be issued automatically as
part of the Reorganization, although we will send you certificates upon
request. If you currently own Kentucky Limited Term Fund shares in
certificate form, you will need to return these certificates to Nuveen in
order to receive new certificates for your Kentucky Fund shares.
If you prefer, however, you may exchange your certificates for book entry
shares. These shares are held in a convenient computerized system that
enables shareholders to receive a complete and accurate record of their
holdings without having to worry about the safekeeping of certificates or the
expense involved with replacing a lost or stolen certificate. Just complete
the appropriate section of the Letter of Transmittal requesting book entry
shares. Regardless of the way you choose to hold your shares after the
Reorganization, certificates should be returned to the fund's transfer agent
by certified mail as soon as possible.
Q. WILL I HAVE TO PAY ANY FEES OR EXPENSES IN CONNECTION WITH THE
REORGANIZATION?
A. You will pay no fees or sales charges directly in connection with the
implementation of the proposed changes. However, the costs associated with
the Reorganization will be borne by the Kentucky Limited Term Fund. These
costs are estimated to be $0.066 per share. The costs are expected to be more
than offset over time by the anticipated lower operating costs of the
Kentucky Fund.
Q. HOW DO MANAGEMENT FEES AND OTHER FUND OPERATING EXPENSES COMPARE BETWEEN THE
TWO FUNDS?
A. The Kentucky Fund has a higher investment management fee schedule than the
Kentucky Limited Term Fund. Total gross operating expenses (before waivers
and reimbursements) as a percentage of net assets for the Kentucky Fund are
lower than those for the Kentucky Limited Term Fund, reflecting the larger
net assets and greater economies of scale of the Kentucky Fund. For the past
fiscal year, net operating expenses (after waivers and reimbursements) as a
percentage of net assets for the Kentucky Limited Term Fund were lower than
those for the Kentucky Fund, but only because of voluntary expense
waivers/reimbursements by Nuveen. There can be no assurance that Nuveen will
continue these waivers/reimbursements for the Kentucky Limited Term Fund if
the Reorganization is not approved.
Q. WILL THIS REORGANIZATION CREATE A TAXABLE EVENT FOR ME?
A. The Reorganization is intended to be done on a tax-free basis for federal
income tax purposes. Therefore, you will recognize no gain or loss for
federal income tax purposes as a result of the Reorganization. In addition,
the tax basis and holding period of the Kentucky Fund shares you receive will
be the same as the tax basis and holding period of your Kentucky Limited Term
Fund shares.
Q. CAN I EXCHANGE OR REDEEM MY KENTUCKY LIMITED TERM FUND SHARES BEFORE THE
REORGANIZATION TAKES PLACE?
A. You may exchange your Kentucky Limited Term Fund shares for shares of any
other Nuveen Mutual Fund, or redeem your shares, at any time. If you choose
to do so, your request will be treated as a normal exchange or redemption of
shares and will be a taxable transaction for federal income tax purposes.
Nuveen will waive any deferred sales charge that would otherwise apply to a
redemption or exchange of shares.
Q. HOW DO I VOTE MY SHARES?
A. You can vote your shares by completing and signing the enclosed proxy
card(s), and mailing them in the enclosed postage-paid envelope. If you need
any assistance, or have any questions regarding the proposals or how to vote
your shares, please call your financial adviser or Nuveen at (800) 621-7227
weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Q. WILL NUVEEN CONTACT ME?
A. You may receive a call from D.F. King, our proxy solicitation agent, to
verify that you received your proxy materials and to answer any questions you
may have about the Reorganization.
<PAGE> 5
NUVEEN LOGO
February 15, 1999
DEAR NUVEEN FUND SHAREHOLDER:
Enclosed is a proxy asking you to vote on the reorganization of your Fund into
the Nuveen Flagship Kentucky Municipal Bond Fund, a mutual fund that pursues a
similar investment objective. Subject to shareholder approval, you will become a
shareholder of the Nuveen Flagship Kentucky Municipal Bond Fund.
The enclosed Prospectus/Proxy Statement contains information you will need to
make an informed decision. For your convenience, we also have provided a brief
question and answer section, which we hope you will find useful as you review
your materials before voting. For more detailed information about the
reorganization, please refer to the Prospectus/Proxy Statement.
THE PROPOSAL HAS BEEN APPROVED BY THE TRUSTEES FOR YOUR FUND, WHO UNANIMOUSLY
RECOMMEND YOU VOTE "FOR" THE PROPOSAL. Please give this matter your prompt
attention. We will need to receive your proxy card before the shareholder
meeting scheduled for April 15, 1999. YOUR IMMEDIATE RESPONSE WILL HELP SAVE ON
THE COSTS OF ADDITIONAL SOLICITATIONS. We look forward to your participation,
and we thank you for your continued confidence in Nuveen.
PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
<PAGE> 6
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
APRIL 15, 1999
February 15, 1999
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
Notice is hereby given that a Special Meeting of shareholders of the Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund (the "Kentucky Limited Term
Fund" or a "Fund"), a series of the Nuveen Flagship Multistate Trust IV (the
"Trust"), a Massachusetts business trust, will be held in the 31st floor
conference room of John Nuveen & Co. Incorporated, 333 West Wacker Drive, in
Chicago on Thursday, April 15, 1999 at 10:00 a.m., Central Time (the "Special
Meeting"), for the following purposes:
1. To approve an Agreement and Plan of Reorganization pursuant to which
the Kentucky Limited Term Fund would (i) transfer all of its assets
to the Nuveen Flagship Kentucky Municipal Bond Fund (the "Kentucky
Fund") in exchange solely for Class A, C and R shares of beneficial
interest of the Kentucky Fund and the Kentucky Fund's assumption of
the liabilities of the Kentucky Limited Term Fund, (ii) distribute
such shares of the Kentucky Fund to the holders of shares of the
Kentucky Limited Term Fund and (iii) be liquidated, dissolved and
terminated as a series of the Trust in accordance with the Trust's
Declaration of Trust.
2. To transact such other business as may properly come before the
Special Meeting.
Shareholders of record as of the close of business on February 1, 1999 are
entitled to notice of and to vote at the Special Meeting or any adjournment
thereof.
IN ORDER TO AVOID DELAY AND ADDITIONAL EXPENSE, AND TO ASSURE THAT YOUR SHARES
ARE REPRESENTED, IF YOU DO NOT EXPECT TO BE PRESENT IN PERSON AT THE SPECIAL
MEETING, YOU ARE REQUESTED TO FILL IN, SIGN AND MAIL THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Gifford R. Zimmerman
Vice President and Secretary
<PAGE> 7
PROSPECTUS/
PROXY STATEMENT
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
RELATING TO THE ACQUISITION OF ASSETS AND LIABILITIES OF
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
This Prospectus/Proxy Statement is being furnished to shareholders of the Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund (the "Kentucky Limited Term
Fund" or a "Fund"), a series of the Nuveen Flagship Multistate Trust IV (the
"Trust"), a Massachusetts business trust, and relates to the special meeting of
shareholders of the Kentucky Limited Term Fund to be held in the 31st floor
conference room of John Nuveen & Co., Incorporated, 333 West Wacker Drive, in
Chicago on Thursday, April 15, 1999 at 10:00 a.m., Central Time and at any and
all adjournments thereof (the "Special Meeting"). Shareholders of record as of
the close of business on February 1, 1999 are entitled to vote at the Special
Meeting or any adjournment thereof. The primary purpose of the Special Meeting
is to approve or disapprove the proposed reorganization of the Kentucky Limited
Term Fund into the Nuveen Flagship Kentucky Municipal Bond Fund (the "Kentucky
Fund," which may also sometimes be referred to as a "Fund") (the
"Reorganization"). The Reorganization will result in shareholders of the
Kentucky Limited Term Fund in effect exchanging their Class A, C and R shares of
the Kentucky Limited Term Fund for corresponding Class A, C and R shares of the
Kentucky Fund. The purpose of the Reorganization is to permit the shareholders
of the Kentucky Limited Term Fund to (i) achieve certain economies of scale from
the Kentucky Fund's larger net asset size and the potentially lower operating
expenses associated therewith, and (ii) obtain greater portfolio diversity and
potentially lower portfolio transaction costs.
The Kentucky Fund is also a series of the Trust. The investment objective of the
Kentucky Fund is to provide as high a level of current interest income exempt
from regular federal, state and, in some cases, local income taxes as is
consistent with preservation of capital. There can be no assurance that the
Kentucky Fund will achieve its investment objective. The address, principal
executive office and telephone number of the Funds is 333 West Wacker Drive,
Chicago, Illinois 60606, (312) 917-7700 or (800) 621-7227. The enclosed proxy
and this Prospectus/Proxy Statement are first being sent to shareholders of the
Kentucky Limited Term Fund on or about February , 1999.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
This Prospectus/Proxy Statement sets forth concisely the information
shareholders of the Kentucky Limited Term Fund should know before voting on the
Reorganization (in effect, investing in Class A, C or R shares of the Kentucky
Fund) and constitutes an offering of Class A, C or R shares of beneficial
interest, par value $.01 per share, of the Kentucky Fund only. Please read it
carefully and retain it for future reference. A Statement of Additional
Information dated February , 1999, relating to this Prospectus/Proxy Statement
(the "Reorganization SAI") has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated herein by reference. A Prospectus
(the "Funds' Prospectus") and Statement of Additional Information containing
additional information about the Kentucky Fund and the Kentucky Limited Term
Fund, each dated September 30, 1998, have been filed with the SEC and are
incorporated herein by reference. A copy of the Funds' Prospectus accompanies
this Prospectus/Proxy Statement. Copies of the foregoing may be obtained without
charge by calling or writing the Funds at the telephone number or address shown
above. If you wish to request the Reorganization SAI, please ask for the
"Reorganization SAI." IN ADDITION, EACH FUND WILL FURNISH, WITHOUT CHARGE, A
COPY OF ITS MOST RECENT ANNUAL REPORT AND SUBSEQUENT SEMI-ANNUAL REPORT TO A
SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST SHOULD BE DIRECTED TO THE RESPECTIVE
FUND BY CALLING (800) 621-7227 OR BY WRITING THE RESPECTIVE FUND AT 333 WEST
WACKER DRIVE, CHICAGO, ILLINOIS 60606.
------------------------
No person has been authorized to give any information or make any representation
not contained in this Prospectus/Proxy Statement and, if so given or made, such
information or representation must not be relied upon as having been authorized.
This Prospectus/Proxy Statement does not constitute an offer to sell or a
solicitation of an offer to buy any securities in any jurisdiction in which, or
to any person to whom, it is unlawful to make such offer or solicitation.
------------------------
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), and in accordance therewith files reports and other
information with the SEC. Such reports, other information and proxy statements
filed by the Trust can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at its Regional Office at 500 West Madison Street, Chicago, Illinois.
Copies of such material can also be obtained from the SEC's
<PAGE> 8
Public Reference Branch, Office of Consumer Affairs and Information Services,
Washington, D.C. 20549, at prescribed rates. In addition, the SEC maintains a
Web site (http://www.sec.gov) that contains reports, other information and proxy
statements filed by the Trust, such information is filed electronically with the
SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval system
(EDGAR).
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS FEBRUARY , 1999.
<PAGE> 9
PROSPECTUS/
PROXY STATEMENT
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
RELATING TO THE ACQUISITION OF ASSETS AND LIABILITIES OF
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
TABLE OF CONTENTS
<TABLE>
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PAGE
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PROPOSAL 1: THE PROPOSED REORGANIZATION......... 1
SUMMARY......................................... 1
The Reorganization.......................... 1
Reasons for the Proposed Reorganization..... 1
Comparison of the Kentucky Fund with the
Kentucky Limited Term Fund................ 2
RISK FACTORS.................................... 10
Similarities of Risks....................... 10
Differences in Risks........................ 10
THE PROPOSED REORGANIZATION..................... 11
Terms of the Agreement...................... 11
Description of Securities to be Issued...... 11
Continuation of Shareholder Accounts and
Plans; Share Certificates................. 12
</TABLE>
<TABLE>
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PAGE
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Certain Federal Income Tax Consequences..... 12
Expenses.................................... 13
Legal Matters............................... 13
Financial Statements........................ 13
RECOMMENDATION OF THE BOARD..................... 13
OTHER INFORMATION............................... 14
SHAREHOLDERS OF THE KENTUCKY FUND AND THE
KENTUCKY LIMITED TERM FUND............. 14
SHAREHOLDER PROPOSALS....................... 15
VOTING INFORMATION AND REQUIREMENTS............. 15
Exhibit A: Financial Highlights................. A-1
</TABLE>
<PAGE> 10
PROPOSAL 1. THE PROPOSED REORGANIZATION
A. SUMMARY
The following is a summary of, and is qualified by reference to, the more
complete information contained in this Prospectus/ Proxy Statement and the
information attached hereto or incorporated herein by reference (including the
Agreement and Plan of Reorganization). As discussed more fully below and
elsewhere in this Prospectus/Proxy Statement, the Board of Trustees of the Trust
(the "Board") believes the proposed Reorganization (as defined herein) is in the
best interests of shareholders of the Kentucky Limited Term Fund and would not
result in dilution of shareholders' interest. As a result of the Reorganization,
shareholders of the Kentucky Limited Term Fund will become shareholders of the
Kentucky Fund and will cease to be shareholders of the Kentucky Limited Term
Fund.
Shareholders should read the entire Prospectus/Proxy Statement carefully
together with the Funds' Prospectus incorporated herein by reference and
accompanying this Prospectus/Proxy Statement. This Prospectus/Proxy Statement
constitutes an offering of Class A, C and R shares of the Kentucky Fund only.
THE REORGANIZATION
This Prospectus/Proxy Statement is being furnished to shareholders of the
Kentucky Limited Term Fund in connection with the proposed combination of the
Fund with and into the Kentucky Fund pursuant to the terms and conditions of the
Agreement and Plan of Reorganization dated December 18, 1998 between the
Kentucky Limited Term Fund and the Kentucky Fund (the "Agreement"). The
Agreement provides that the Kentucky Limited Term Fund will (i) transfer all of
its assets to the Kentucky Fund in exchange solely for Class A, C and R shares
of the Kentucky Fund and the Kentucky Fund's assumption of the liabilities of
the Kentucky Limited Term Fund, (ii) distribute to each shareholder of the
Kentucky Limited Term Fund shares of the respective class of shares of the
Kentucky Fund equal in value to their existing shares of the Kentucky Limited
Term Fund as a distribution in liquidation of the Kentucky Limited Term Fund and
(iii) be liquidated, dissolved and terminated as a series of the Trust in
accordance with the Trust's Declaration of Trust promptly following the Closing
(as defined herein) (the "Reorganization").
The Board of Trustees of the Trust has determined that the Reorganization is in
the best interests of the Kentucky Limited Term Fund and that the interests of
existing shareholders of the Kentucky Limited Term Fund will not be diluted as a
result of the Reorganization. The Board of the Trust unanimously approved the
Reorganization and the Agreement on December 18, 1998.
The Kentucky Limited Term Fund will pay all of the Funds' costs associated with
the Reorganization, which are estimated to be $72,000 (or $0.066 per share).
However, the Board of Trustees of the Trust believes that these costs will be
more than offset over time by the anticipated lower operating costs of the
Kentucky Fund.
The Board is asking shareholders of the Kentucky Limited Term Fund to approve
the Reorganization at the Special Meeting to be held on April 15, 1999. If
shareholders of the Kentucky Limited Term Fund approve the Reorganization, it is
expected that the Closing of the Reorganization will be after the close of
business on April 23, 1999, but it may be at a different time as described
herein.
THE BOARD RECOMMENDS A VOTE "FOR" THE REORGANIZATION. FOR THE KENTUCKY LIMITED
TERM FUND, APPROVAL OF THE REORGANIZATION REQUIRES THE FAVORABLE VOTE OF THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES ENTITLED TO VOTE. SEE "VOTING
INFORMATION AND REQUIREMENTS" BELOW.
REASONS FOR THE PROPOSED REORGANIZATION
The Board believes that the proposed Reorganization would be in the best
interests of the Kentucky Limited Term Fund because it would permit the
shareholders of the Fund to (i) achieve certain economies of scale and
potentially lower operating expenses from the Kentucky Fund's larger net asset
size, and (ii) obtain greater portfolio diversity and potentially lower
portfolio transaction costs.
In determining whether to recommend approval of the Reorganization to
shareholders of the Kentucky Limited Term Fund, the Board considered a number of
factors, including, but not limited to: (i) the expenses and advisory fees
applicable to the Kentucky Limited Term Fund and the Kentucky Fund before the
Reorganization and the estimated expense ratios of the Kentucky Fund after the
Reorganization; (ii) the investment performance of the Kentucky Limited Term
Fund compared to the Kentucky Fund: (iii) the terms and conditions of the
Agreement and whether the Reorganization would result in dilution of the
Kentucky Limited Term Fund's shareholder interests; (iv) the economies of scale
potentially realized through the combination of the Funds; (v) the compatibility
of the Funds' investment objectives and policies, particularly the Kentucky
Fund's focus on longer maturity bonds and its higher interest rate risk compared
to the Kentucky Limited Term Fund; (vi) the compatibility of the Funds' service
features available to shareholders, including the retention of applicable
holding periods and exchange privileges; (vii) the costs estimated to be
incurred by the respective Funds as a result of the Reorganization; (viii) the
future growth prospects of the Kentucky Limited Term Fund; (ix) the anticipated
federal income tax consequences of the Reorganization; and (x) the similarities
in state tax treatment of the Kentucky Limited Term Fund's distributions
compared with the Kentucky Fund.
1
<PAGE> 11
In this regard, the Board reviewed information provided by Nuveen Advisory Corp.
(the "Adviser") relating to the anticipated impact on the shareholders of the
Kentucky Limited Term Fund as a result of the Reorganization. The Board
considered the probability that the increase in asset levels of the combined
fund after the Reorganization would result in the following potential benefits
for shareholders of the Kentucky Limited Term Fund, although there can be no
assurances in this regard:
A. Achievement of Economies of Scale and Reduced Per Share Expenses. Combining
the net assets of the Kentucky Limited Term Fund with the assets of the
Kentucky Fund will lead to reduced total operating expenses for shareholders
of the Kentucky Limited Term Fund, respectively, on a per share basis, by
allowing fixed and relatively fixed costs, such as accounting, legal and
printing expenses, to be spread over a larger asset base. Any reductions in
expenses on a per share basis should, in turn, increase portfolio net income
available for distributions to shareholders of the Kentucky Limited Term
Fund. For the Kentucky Limited Term Fund, the Adviser currently is
voluntarily waiving some or all of its fees or reimbursing certain expenses
and, for the Kentucky Fund, the Adviser has done so in the past. Before these
waivers/ reimbursements, the net operating expenses of the Kentucky Fund is
lower than those of the Kentucky Limited Term Fund. However, there can be no
assurance that the Adviser will continue the waivers/reimbursements for the
Kentucky Limited Term Fund if the Reorganization is not completed.
B. Benefits to the Portfolio Management Process. The larger net asset size of
the Kentucky Fund generally permits it to purchase larger individual
portfolio investments that may result in reduced transaction costs or more
favorable pricing and provide the opportunity for greater portfolio
diversity. A larger more diverse fund may also be able to produce a more
stable and consistent dividend rate than a smaller, less diverse fund.
The Board also considered that the costs of the Reorganization will be paid by
the Kentucky Limited Term Fund regardless of whether or not the Reorganization
is completed (and such costs are not subject to the current
waivers/reimbursements). In addition, the Board considered that the
Reorganization would result in benefits and economies for the Adviser, including
those from the higher advisory fee schedule for the Kentucky Fund and the
elimination of the voluntary waivers/reimbursements for the Kentucky Limited
Term Fund.
COMPARISON OF THE KENTUCKY FUND WITH THE KENTUCKY LIMITED TERM FUND
Investment Objectives. The Kentucky Fund and the Kentucky Limited Term Fund have
similar investment objectives. The investment objective of the Funds is to
provide as high a level of current interest income exempt from regular federal,
state and, in some cases, local income taxes as is consistent with preservation
of capital. Both funds seek income exempt from the Kentucky personal income tax.
Investment Policies. The Kentucky Fund and the Kentucky Limited Term Fund have
similar investment policies, except that the Kentucky Fund invests in
longer-term municipal bonds and therefore bears more interest rate risk. The
Funds invest substantially all of their assets (at least 80%) in municipal bonds
that pay interest that is exempt for regular federal, state, and in some cases,
local income taxes. Both Funds purchase only quality municipal bonds that either
are rated investment grade (AAA/Aaa to BBB/Baa) by independent ratings agencies
at the time of purchase or are non-rated but judged to be investment grade by
the Adviser. Both Funds invest at least 80% of their net assets in
investment-grade quality municipal bonds. Bond ratings are furnished by Standard
& Poor's Corporation ("S&P"), Moody's Investor Services ("Moody's"), and Fitch
Investors Service, Inc. ("Fitch"). According to published guidelines, securities
rated BBB by S&P are regarded by S&P as having an adequate capacity to pay
interest and repay principal. Whereas such securities normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely, in the opinion of S&P, to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. According to published guidelines, securities rated Baa by Moody's
are considered by Moody's as medium grade obligations. Such securities are, in
the opinion of Moody's, neither highly protected nor poorly secured. Interest
payments and principal security appear to Moody's to be adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. In the opinion of Moody's they lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
The Kentucky Limited Term Fund and the Kentucky Fund have different policies
with respect to diversification. The Kentucky Fund is a diversified fund,
whereas the Kentucky Limited Term Fund is non-diversified. A non-diversified
fund may invest a higher percentage of its assets in relatively fewer issuers
than a diversified fund.
The primary difference between the Funds is that the Kentucky Limited Term Fund
is a limited-term fund that under normal market conditions maintains an overall
weighted average portfolio maturity of 1 to 7 years while the Kentucky Fund is a
long-term fund that under normal market conditions maintains a weighted average
portfolio maturity of 15 to 30 years. The Board, however, believes that the
benefits to the Kentucky Limited Term Fund's shareholders, including potentially
lower operating costs and potentially higher distributions, should, for most
shareholders, offset over time any increased risks of investing in longer-term
bonds. In evaluating the Reorganization, each Kentucky Limited Term Fund
shareholder should consider the impact of investing in a long-term fund. For a
description of the risks involved in investing in a long-term fund, please see
the section below entitled "Differences in Risks."
2
<PAGE> 12
Credit Quality. A comparison of the credit qualities of the respective
portfolios of the Kentucky Fund and the Kentucky Limited Term Fund, as of
November 30, 1998, is set forth in the table below.
<TABLE>
<CAPTION>
PORTFOLIO CREDIT QUALITY
- ------------------------------------------------------------------------------------------------------------------
KENTUCKY KENTUCKY
CREDIT RATING FUND LIMITED TERM FUND PRO FORMA (1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AAA 54.85 44.11 54.62
AA 5.96 19.35 6.48
A 22.22 25.60 22.06
BBB/Unrated 16.97 10.94 16.84
------------- ----------------- -------------
TOTAL 100.00 100.00 100.00
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects the effect of the Reorganization.
As of November 30, 1998, the Kentucky Limited Term Fund and Kentucky Fund were
invested in similarly-rated securities. On November 30, 1998, the average
portfolio credit quality was AA for both the Kentucky Limited Term Fund and the
Kentucky Fund.
Maturity and Duration. A comparison of the maturity and duration of the
respective portfolios of the Kentucky Fund and the Kentucky Limited Term Fund as
of November 30, 1998, is set forth in the table below.
<TABLE>
<CAPTION>
PORTFOLIO MATURITY INFORMATION
- --------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE
FUND MATURITY EFFECTIVE MATURITY MODIFIED DURATION
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kentucky 21.5 19.9 6.3
Kentucky Limited Term 7.2 5.7 4.8
Pro-Forma (1) 21.2 19.6 6.3
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects the effect of the Reorganization.
Funds with longer average maturities and duration will generally be subject to
greater interest rate risk. Please see "B. Risk Factors -- Differences in Risks"
below for a description of maturity, duration and interest rate risk.
Performance Information. A comparison of the total returns for the Kentucky Fund
and the Kentucky Limited Term Fund for the periods ending November 30, 1998, is
set forth in the table below.
<TABLE>
<CAPTION>
TOTAL RETURNS (1)
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
CUMULATIVE -----------------------------------------------------------
FUND CLASS INCEPTION DATE YTD RETURN 1 YEAR 3 YEAR 5 YEAR TEN YEAR INCEPTION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kentucky A (NAV) 5/87 5.20 6.69 6.40 6.12 8.12 8.03
A (Offer) 5/87 0.78 2.19 4.89 5.21 7.66 7.63
C 10/93 4.70 6.05 5.84 5.53 7.53 7.44
R 2/97 5.42 6.93 6.48 6.16 8.14 8.05
Kentucky Limited Term A (NAV) 9/95 4.36 5.36 5.45 N/A N/A 5.99
A (Offer) 9/95 1.75 2.71 4.58 N/A N/A 5.16
C 9/95 3.92 4.99 5.08 N/A N/A 5.62
R 2/97 4.49 5.62 5.53 N/A N/A 6.07
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A share returns are actual. Class 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 4.20% and 2.50% maximum sales charge for the Kentucky Fund and
the Kentucky Limited Term Fund, respectively. Class C shares have a 1% CDSC
for redemptions within one year which is not reflected in the one-year total
return.
3
<PAGE> 13
The following table is a comparison of the respective yields and distribution
rates for the Kentucky Fund and the Kentucky Limited Term Fund as of November
30, 1998.
<TABLE>
<CAPTION>
SEC YIELD AND DISTRIBUTION INFORMATION (1)
- ---------------------------------------------------------------------------------------------------------------------
SEC 30-DAY YIELD
--------------------------------------
DISTRIBUTION BEFORE WAIVERS/ AFTER WAIVERS/
FUND CLASS RATE REIMBURSEMENTS REIMBURSEMENTS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kentucky A (NAV) 4.87 3.98 3.98
A (Offer) 4.67 3.82 3.82
C 4.35 3.44 3.44
R 5.09 4.18 4.18
Kentucky Limited Term A (NAV) 4.12 2.93 3.19
A (Offer) 4.02 2.86 3.11
C 3.77 2.62 2.85
R 4.37 3.13 3.39
Pro-Forma A (NAV) 4.87 3.97 3.97
A (Offer) 4.67 3.81 3.81
C 4.35 3.38 3.38
R 5.09 4.17 4.17
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The SEC 30-Day Yield is computed in accordance with SEC rules by dividing
the net investment income per share (computed in accordance with a
standardized method prescribed by the rules) earned during the 30-day period
by the NAV (or the maximum offering price where noted). The Distribution
Rate is computed by taking the monthly dividend per share, multiplying it by
12 to annualize it, and dividing by the NAV (or the maximum offering price
where noted). The Distribution Rate differs from the SEC Yield and total
return and is not intended to be a complete measure of performance.
Distribution Rate may differ from SEC Yield due to a number of factors,
including that Distribution Rates may not include the effect of amortization
of bond premiums to the extent such premiums arise after the bonds were
purchased and that there may be differences between the amount a Fund is
earning and what it is paying out.
The total returns, yields and distribution rates are not necessarily indicative
of future results. The performance of an investment company is the result of
conditions in the securities markets, portfolio management and operating
expenses. Although information such as that shown above is useful in reviewing a
fund's performance and in providing some basis for comparison with other
investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods. In the
absence of expense reimbursements for the Kentucky Fund and the Kentucky Limited
Term Fund, the Funds' total returns, yields and distribution rates would have
been reduced.
Investment Adviser. The Kentucky Fund and the Kentucky Limited Term Fund are
both managed by the Adviser. The Adviser is a wholly owned subsidiary of John
Nuveen & Co. Incorporated ("Nuveen"). Nuveen is the sponsor and principal
underwriter of both Fund's shares and has sponsored or underwritten more than
$60 billion of investment company securities. Nuveen and its affiliates
currently have more than $50 billion in assets under management. Today it offers
a broad range of quality investments designed for individuals seeking to build
and maintain wealth. Founded in 1898, Nuveen is a subsidiary of The John Nuveen
Company which, in turn, is approximately 78% owned by The St. Paul Companies,
Inc. ("St. Paul"). St. Paul is located in St. Paul, Minnesota and is principally
engaged in providing property liability insurance through subsidiaries. The
Adviser's principal office is located at 333 West Wacker Drive, Chicago,
Illinois 60606.
Advisory and Other Fees. The contractual advisory fees and total operating
expenses of the Kentucky Fund are different from those of the Kentucky Limited
Term Fund. Pursuant to an investment management agreement between the Adviser
and the Trust, the Kentucky Fund and the Kentucky Limited Term Fund pay the
Adviser annual management fees at the rates set forth below:
<TABLE>
<CAPTION>
KENTUCKY FUND
- ---------------------------------------------------
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- ---------------------------------------------------
<S> <C>
For the first $125 million 0.5500%
For the next $125 million 0.5375%
For the next $250 million 0.5250%
For the next $500 million 0.5125%
For the next $1 billion 0.5000%
For assets over $2 billion 0.4750%
- ---------------------------------------------------
</TABLE>
4
<PAGE> 14
<TABLE>
<CAPTION>
KENTUCKY LIMITED TERM FUND
- ---------------------------------------------------
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- ---------------------------------------------------
<S> <C>
For the first $125 million 0.4500%
For the next $125 million 0.4375%
For the next $250 million 0.4250%
For the next $500 million 0.4125%
For the next $1 billion 0.4000%
For assets over $2 billion 0.3750%
- ---------------------------------------------------
</TABLE>
For the fiscal year ended May 31, 1998, the Kentucky Fund paid the Adviser
$2,227,288 (after expense reimbursement) and would have paid $2,537,577
(assuming no expense reimbursement). For the fiscal year ended May 31, 1998, the
Kentucky Limited Term Fund paid the Adviser $0 (after expense reimbursement) and
would have paid $52,982 (assuming no expense reimbursement). For a complete
description of the advisory services provided to the Funds, see the Kentucky
Fund and the Kentucky Limited Term Fund Summaries in the Funds' Prospectus and
the sections of the Funds' Prospectus and Statement of Additional Information
entitled "Fund Service Providers Investment Adviser" and "Investment Adviser and
Investment Management Agreement," respectively.
For the Kentucky Limited Term Fund, the Adviser is currently voluntarily waiving
some or all of its fees or reimbursing certain expenses. Before these
waivers/reimbursements, the net operating expenses of the Kentucky Fund is lower
than those of the Kentucky Limited Term Fund. However, there can be no assurance
that such waivers or reimbursements will continue for the Kentucky Limited Term
Fund if the Reorganization is not completed.
The Kentucky Fund and the Kentucky Limited Term Fund have adopted similar
distribution and service plans (the "Distribution and Service Plans") pursuant
to Rule 12b-1 under the 1940 Act. The Distribution and Service Plans authorize
each Fund to pay Nuveen an annual 0.20% service fee on the average daily net
assets of Class A and C shares outstanding. The plans also authorize each Fund
to pay Nuveen an annual distribution fee on the average daily net assets of
Class C shares outstanding of 0.55% for the Kentucky Fund and 0.35% for the
Kentucky Limited Term Fund. In order to help compensate Nuveen for the sales
commissions paid to financial advisers at the time of sale of Class C shares,
Nuveen retains the first year's service and distribution fees on sales of Class
C shares. After the first year, Nuveen pays these fees to the broker of record.
The distributor of the Kentucky Limited Term Fund's shares and the Kentucky
Fund's shares is Nuveen. For a complete description of these arrangements with
respect to the Kentucky Fund, see the sections of the Funds' Prospectuses and
Statement of Additional Information entitled "Fund Service Providers -- The
Distributor" and "Distribution and Service Plan," respectively.
The tables below set forth (i) the fees and expenses paid by the Kentucky Fund
and the Kentucky Limited Term Fund during the fiscal year ended May 31, 1998 and
(ii) pro forma expenses for the combined fund for Class A, C and R shares.
5
<PAGE> 15
EXPENSE COMPARISON TABLE
CLASS A SHARES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
KENTUCKY
KENTUCKY LIMITED TERM
FUND FUND PRO FORMA (1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of Offering Price)(2) 4.20% 2.50% 4.20%
Contingent Deferred Sales Charge (CDSC) (as a percentage of
the lower of the original purchase price or redemption
proceeds)(2) none none none
ANNUAL FUND OPERATING EXPENSES
Management Fees .54% .45% .54%
Rule 12b-1 Fees .20% .20% .20%
Other Expenses .10% .69% .10%
-------- ------------ -------------
Total Gross Fund Operating Expenses (before waivers and
reimbursements) .84% 1.34% .84%
-------- ------------ -------------
Total Net Fund Operating Expenses (after waivers and
reimbursements)(3) .77% .66% .77%
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES ASSUMING
REDEMPTION AT THE END OF THE PERIOD (4)
One Year $ 502 $ 383 $ 502
Three Years $ 677 $ 664 $ 677
Five Years $ 866 $ 966 $ 866
Ten Years $1,414 $1,822 $1,414
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Expense Comparison Table
(1) The Pro Forma column reflects expenses estimated to be paid on new shares
purchased from the combined fund subsequent to the Reorganization and
reflects the effect of the Reorganization.
(2) The sales charge may be reduced or waived based on the amount of purchase or
for certain eligible categories of investors. A CDSC of 1% for the Kentucky
Fund and .50% for the Kentucky Limited Term Fund is imposed on redemptions
of certain purchases of $1 million or more within 18 months of purchase.
(3) The Adviser stopped voluntarily waiving its fees and reimbursing certain
expenses for the Kentucky Fund on June 3, 1998.
(4) Expense examples reflect what an investor would pay on a $10,000 investment,
assuming a 5% annual return and reinvestment of all dividends, based on
total fund operating expenses before waivers and reimbursements. Actual
returns will differ.
6
<PAGE> 16
EXPENSE COMPARISON TABLE
CLASS C SHARES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
KENTUCKY
KENTUCKY LIMITED TERM
FUND FUND PRO FORMA (1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases none none none
Contingent Deferred Sales Charge (CDSC) (as a percentage of
the lower of the original purchase price or redemption
proceeds) (2) 1.00% 1.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (as a percentage of average
net assets)
Management Fees .54% .45% .54%
Rule 12b-1 Fees .75% .55% .75%
Other Expenses .10% .69% .10%
-------- ------------ -------------
Total Gross Fund Operating Expenses (before waivers and
reimbursements) 1.39% 1.69% 1.39%
-------- ------------ -------------
Total Net Fund Operating Expenses (after waivers and
reimbursements) (3) 1.33% 1.01% 1.33%
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES ASSUMING
REDEMPTION AT THE END OF THE PERIOD (4)
One Year $ 142 $ 172 $ 142
Three Years $ 440 $ 533 $ 440
Five Years $ 761 $ 918 $ 761
Ten Years $1,669 $1,998 $1,669
- ------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Expense Comparison Table
(1) The Pro Forma column reflects expenses estimated to be paid on new shares
purchased from the combined fund subsequent to the Reorganization and
reflects the effect of the Reorganization.
(2) Imposed only on redemptions within 12 months of purchase.
(3) The Adviser stopped voluntarily waiving its fees and reimbursing certain
expenses for the Kentucky Fund on June 3, 1998.
(4) Expense examples reflect what an investor would pay on a $10,000 investment,
assuming a 5% annual return and reinvestment of all dividends and
distributions, based on total fund operating expenses before waivers and
reimbursements. Actual returns will differ.
EXPENSE COMPARISON TABLE
CLASS R SHARES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
KENTUCKY
KENTUCKY LIMITED TERM
FUND FUND PRO FORMA (1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases none none none
Contingent Deferred Sales Charge (CDSC) (as a percentage of
the lower of the original purchase price or redemption
proceeds) none none none
ANNUAL FUND OPERATING EXPENSES (as a percentage of average
net assets)
Management Fees .54% .45% .54%
Rule 12b-1 Fees -- -- --
Other Expenses .10% .68% .10%
-------- ------------ -------------
Total Gross Fund Operating Expenses (before waivers and
reimbursements) .64% 1.13% .64%
-------- ------------ -------------
Total Net Fund Operating Expenses (after waivers and
reimbursements) (2) .58% .46% .58%
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES ASSUMING
REDEMPTION AT THE END OF THE PERIOD (3)
One Year $ 65 $ 115 $ 65
Three Years $205 $ 359 $205
Five Years $357 $ 622 $357
Ten Years $798 $1,375 $798
- ------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Expense Comparison Table
(1) The Pro Forma column reflects expenses estimated to be paid on new shares
purchased from the combined fund subsequent to the Reorganization and
reflects the effect of the Reorganization.
(2) The Adviser stopped voluntarily waiving its fees and reimbursing certain
expenses for the Kentucky Fund on June 3, 1998.
(3) Expense examples reflect what an investor would pay on a $10,000 investment,
assuming a 5% annual return and reinvestment of all dividends and
distributions, based on total fund operating expenses before waivers and
reimbursements. Actual returns will differ.
Distribution, Purchase, Valuation, Redemption and Exchange of Shares. The
Kentucky Fund offers four (4) classes of shares and the Kentucky Limited Term
Fund offers three (3) classes of shares. The Class A shares of the Kentucky Fund
and the Kentucky Limited Term Fund are subject to an initial sales charge and a
0.20% annual service fee. The following Class A sales charges and commissions
apply to the Kentucky Fund and the Kentucky Limited Term Fund.
7
<PAGE> 17
KENTUCKY
CLASS A SALES CHARGES AND COMMISSIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
---------------------------------- --------------
AS % OF PUBLIC AS % OF YOUR AS % OF PUBLIC
PURCHASE AMOUNT OFFERING PRICE NET INVESTMENT 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>
KENTUCKY LIMITED TERM
CLASS A SALES CHARGES AND COMMISSIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
---------------------------------- --------------
AS % OF PUBLIC AS % OF YOUR AS % OF PUBLIC
PURCHASE AMOUNT OFFERING PRICE NET INVESTMENT Offering Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 2.50% 2.56% 2.00%
$50,000 but less than $100,000 2.00 2.04 1.60
$100,000 but less than $250,000 1.50 1.52 1.20
$250,000 but less than $500,000 1.25 1.27 1.00
$500,000 but less than $1,000,000 0.75 0.76 .60
$1,000,000 and over --(1) -- .50(1)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays authorized dealers a commission equal
to the sum of 1.00% (0.50% for the Kentucky Limited Term Fund) of the first
$2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of any amount
over $5 million. If you redeem your shares within 18 months of purchase, you
may have to pay a contingent deferred sales charge (CDSC) of 1.00% (0.50%
for the Kentucky Limited Term Fund) of either your purchase price or your
redemption proceeds, whichever is lower. You do not have to pay this CDSC if
your financial adviser has made arrangements with Nuveen and agrees to waive
the commission.
The initial sales charge applicable to Class A shares of the Kentucky Fund will
be waived for Class A shares acquired in the Reorganization. Any subsequent
purchases of Class A shares of the Kentucky Fund after the Reorganization will
be subject to the initial sales charge, excluding Class A shares purchased
through the dividend reinvestment plan.
The Class C shares of the Kentucky Fund and the Kentucky Limited Term Fund do
not incur a sales charge when purchased, but each are subject to a .20% annual
service fee and an annual distribution fee of .55% and .35%, respectively. Class
C shares are also subject to a CDSC of 1.00% if redeemed within the first year
after purchase.
Class R shares of the Kentucky Fund and the Kentucky Limited Term Fund have no
sales charges or ongoing fees. For a complete description of the Class A, C and
R shares, see the sections of the Funds' Prospectus and Statement of Additional
Information entitled "Section 3 -- How You Can Buy and Sell Shares" and
"Additional Information on the Purchase and Redemption of Fund Shares,"
respectively.
No contingent deferred sales charge will be imposed on Class C shares of the
Kentucky Limited Term Fund in connection with the Reorganization. The holding
period and conversion period for Class C shares of the Kentucky Fund received in
connection with the Reorganization will be measured from the earlier of the time
(i) the holder purchased such shares from the Kentucky Limited Term Fund or (ii)
the holder purchased such shares from any other Nuveen national or state fund
and subsequently exchanged them for shares of the Kentucky Limited Term Fund.
Shares of the Kentucky Fund and the Kentucky Limited Term Fund may be purchased
through a financial adviser, by check, by electronic transfer, and by exchange
from certain other open-end mutual funds distributed by Nuveen. For a complete
description regarding purchase of shares and exchange of shares of the Kentucky
Fund and the Kentucky Limited Term Fund, see the sections of the Funds'
Prospectus and Statement of Additional Information entitled "Section 3 -- How
You Can Buy and Sell Shares" and "Additional Information on the Purchase and
Redemption of Fund Shares," respectively.
Shares of the Kentucky Fund and the Kentucky Limited Term Fund properly
presented for redemption may be redeemed or exchanged at the next determined net
asset value per share (subject to any applicable deferred sales charge). Nuveen
will waive any deferred sales charge that would otherwise apply to a redemption
or exchange of Kentucky Limited Term Fund shares made prior to the
Reorganization. Shares of either the Kentucky Fund or the Kentucky Limited Term
Fund may be redeemed or exchanged through a financial adviser by mail or by
special redemption privileges (telephone exchange, telephone redemption, by
check or by electronic transfer). If any shares of the Kentucky Fund or the
Kentucky Limited Term Fund were purchased less than 15 days prior to your
request, the Funds do not mail the redemption proceeds until the check for the
purchase has cleared, which can take up to 15 days. In addition, the Kentucky
Fund and the Kentucky Limited Term
8
<PAGE> 18
Fund may suspend redemptions or delay payment on redemptions for more than seven
days (three days for street name accounts) in certain extraordinary
circumstances as described in the Funds' Statement of Additional Information. In
order to limit excessive exchange activity and in other circumstances where the
Adviser believes doing so would be in the best interests of a Fund, the Kentucky
Fund and the Kentucky Limited Term Fund reserve the right to revise or terminate
the exchange privilege, limit the amount or number of exchanges, or reject any
exchange. Shareholders are notified in the event this happens to the extent
required by law.
No further purchases of the shares of the Kentucky Limited Term Fund may be made
after the date on which the shareholders of the Kentucky Limited Term Fund
approve the Reorganization, and the stock transfer books of the Kentucky Limited
Term Fund will be permanently closed as of the date of Closing. Only redemption
requests and transfer instructions received in proper form by the close of
business on the day prior to the date of Closing will be fulfilled by the
Kentucky Limited Term Fund. Redemption requests or transfer instructions
received by the Kentucky Limited Term Fund after that date will be treated by
the Fund as requests for the redemption or instructions for transfer of the
shares of the Kentucky Fund credited to the accounts of the shareholders of the
Kentucky Limited Term Fund. Redemption requests or transfer instructions
received by the Kentucky Limited Term Fund after the close of business on the
day prior to the date of Closing will be forwarded to the Kentucky Fund. For a
complete description of the redemption arrangements for the Funds, see the
sections of the Funds' Prospectuses entitled "Investing in the Funds -- How to
Sell Fund Shares."
Capitalization. The following table sets forth the capitalization of the
Kentucky Fund and the Kentucky Limited Term Fund as of November 30, 1998, and
the pro forma capitalization of the combined fund as if the Reorganization had
occurred on that date. These numbers may differ at the time of Closing.
CAPITALIZATION TABLE AS OF NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
KENTUCKY KENTUCKY LIMITED
FUND TERM FUND Pro Forma (1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSETS
Class A shares 466,860,435 8,147,214 475,007,649
Class B shares 6,554,245 N/A 6,554,245
Class C shares 31,145,672 2,987,159 34,132,831
Class R shares 794,895 18,577 813,472
----------- ---------- -----------
Total 505,355,247 11,152,950 516,508,197
=========== ========== ===========
NET ASSET VALUE PER SHARE
Class A shares 11.46 10.19 11.46
Class B shares 11.46 N/A 11.46
Class C shares 11.45 10.18 11.45
Class R shares 11.44 10.17 11.44
SHARES OUTSTANDING
Class A shares 40,739,829 799,642 41,450,755
Class B shares 571,833 N/A 571,833
Class C shares 2,720,086 293,307 2,980,973
Class R shares 69,511 1,827 71,135
----------- ---------- -----------
Total 44,101,259 1,094,776 45,074,696
=========== ========== ===========
SHARES AUTHORIZED
Class A shares Unlimited Unlimited Unlimited
Class B shares Unlimited N/A Unlimited
Class C shares Unlimited Unlimited Unlimited
Class R shares Unlimited Unlimited Unlimited
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The pro forma figures reflect the effect of the Reorganization.
N/A The Kentucky Limited Term Fund is not authorized to issue Class B Shares.
9
<PAGE> 19
B. RISK FACTORS
SIMILARITIES OF RISKS
The investment objectives of the Kentucky Fund and the Kentucky Limited Term
Fund are substantially the same. The investment policies of the Funds are
substantially the same insofar as they may 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 nonrated but judged to be
investment grade by the Adviser. If suitable municipal bonds from Kentucky are
not available at attractive prices and yields, the Funds may invest in municipal
bonds of U.S. territories (such as Puerto Rico and Guam) which are exempt from
regular federal, state, and local income taxes.
The Funds may 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 may only purchase leases where the issuer has a strong
incentive to continue making appropriations until maturity. The Kentucky Fund
and the Kentucky Limited Term Fund also engage in certain common investment
practices such as the purchase and sale of securities on a "when-issued" and
"delayed delivery" basis. In addition, the Funds may periodically engage in
hedging transactions as described in the sections of the Funds' Statement of
Additional Information entitled "Investment Policies and Investment
Portfolio -- Hedging and Other Defensive Actions." To the extent that the
investment objectives and investment policies and practices are substantially
the same, the risks associated with an investment in the Funds are substantially
the same.
The Funds invest at least 80% of their total assets in Kentucky municipal
securities. A fund, such as the Funds, that concentrates its investments in
issuers located in any one state generally is more susceptible to economic,
political or regulatory events that adversely affect the state in which such
company has concentrated its investments than a fund that does not concentrate
its investments in any one state. For a general description of the risks
involved in investing in Kentucky municipal bonds, see the sections of the
Funds' Statement and Additional Information entitled "Investment Policies and
Investment Portfolio -- Factors Pertaining to Kentucky," and of the Funds'
Prospectus entitled "Appendix: Additional State Information."
The Kentucky Fund and the Kentucky Limited Term Fund may also invest a
substantial portion of their assets in securities that are subject to the
federal alternative minimum tax. As with the Kentucky Limited Term Fund, the
Kentucky Fund may not be a suitable investment for shareholders subject to the
federal alternative minimum tax.
Investment in either the Kentucky Fund or the Kentucky Limited Term Fund may not
be appropriate for all investors. The Funds are not intended to be a complete
investment program, and investors should consider their long-term investment
goals and financial needs when making an investment decision with respect to the
Funds. An investment in either Fund is intended to be a long-term investment and
should not be used as a trading vehicle.
DIFFERENCES IN RISKS
The Kentucky Fund and the Kentucky Limited Term Fund engage in some dissimilar
investment practices. To the extent that the investment practices of the Funds
differ, the risks associated with an investment in the Kentucky Fund are
different from the risks associated with an investment in the Kentucky Limited
Term Fund. An investment in the Kentucky Fund may not be appropriate for all
Kentucky Limited Term Fund's shareholders. For a complete description of the
risks of an investment in the Kentucky Fund or the Kentucky Limited Term Fund,
see the sections in the Funds' Prospectus entitled "Fund Strategies."
Diversification. The Kentucky Limited Term Fund is a non-diversified fund,
whereas the Kentucky Fund is a diversified fund. Non-diversified funds generally
are more susceptible to economic, political or regulatory events that adversely
affect an issuer in which such fund invests than a diversified fund. A
diversified fund, however, is less likely to benefit from economic, political or
regulatory events that beneficially affect issuers in which it invests because
it generally invests a smaller percentage of its assets in each issuer in which
it invests.
Maturity and Duration. The Kentucky Limited Term Fund is a limited-term fund and
normally maintains a weighted average portfolio maturity of 1 to 7 years. The
Kentucky Fund is a long-term fund and normally maintains a weighted average
portfolio maturity of 15 to 30 years. For a comparison of the Funds' average
portfolio maturity and duration, including pro-forma figures, see "Comparison of
the Kentucky Fund with the Kentucky Limited Term Fund -- Maturity and Duration"
above. Both dollar-weighted average maturity and duration reflect the
sensitivity of a Fund to interest rate fluctuations, whereby a fund with a
longer maturity and duration reacts more strongly to interest rate changes than
a Fund with a shorter maturity and duration. The average dollar-weighted
maturity of a Fund is the dollar-weighted average of the stated maturities of
all debt instruments held by the Fund. Duration is the weighted present value of
principal and interest payments expressed in years and may measure the
sensitivity of a Fund's net asset value to incremental changes in interest rates
more accurately than average maturity. For example, a Fund with a duration of
5.0 years should have about half the interest rate sensitivity of a Fund with a
duration of 10.0 years, because the Fund with the shorter duration will receive
payments (and can reinvest at prevailing interest rates) twice as quickly (on
average).
10
<PAGE> 20
C. THE PROPOSED REORGANIZATION
The material features of the Agreement are summarized below. This summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Agreement attached as
Appendix A to the Reorganization SAI, a copy of which may be obtained without
charge by calling the Funds at (800) 621-7227 and asking for the "Reorganization
SAI."
TERMS OF THE AGREEMENT
Pursuant to the Agreement, the Kentucky Fund series of the Trust will acquire
all of the assets and the liabilities of the Kentucky Limited Term Fund series
of the Trust on the date of the Closing in consideration for Class A, C and R
shares of the Kentucky Fund.
Subject to the Kentucky Limited Term Fund's shareholders approving the
Reorganization, the closing (the "Closing") will occur April 23, 1999 or such
later date as soon as practicable thereafter as the Kentucky Fund and the
Kentucky Limited Term Fund may mutually agree.
On the date of the Closing, the Kentucky Limited Term Fund will transfer to the
Kentucky Fund all of its assets and liabilities. The Kentucky Fund will in turn
transfer to the Kentucky Limited Term Fund a number of its Class A, C and R
shares equal in value to the value of the net assets of the Fund, transferred to
the Kentucky Fund as of the date of the Closing, as determined in accordance
with the valuation method described in the Kentucky Fund's then current
prospectus. In order to minimize any potential for undesirable federal income
and excise tax consequences in connection with the Reorganization, the Kentucky
Fund and the Kentucky Limited Term Fund may individually distribute on or before
the Closing all or substantially all of their respective undistributed net
investment income (including net capital gains) as of such date.
The Kentucky Limited Term Fund will distribute in complete liquidation the Class
A, C and R shares of the Kentucky Fund to the shareholders of the respective
class of the Kentucky Limited Term Fund promptly after the Closing and then will
be liquidated, dissolved and terminated as a series of the Trust in accordance
with the Trust's Declaration of Trust.
The Kentucky Limited Term Fund has made certain standard representations and
warranties to the Kentucky Fund regarding its capitalization, status and conduct
of business.
Unless waived in accordance with the Agreement, the obligations of the parties
to the Agreement are conditioned upon, among other things:
A. the approval of the Reorganization by shareholders of the Kentucky
Limited Term Fund;
B. the absence of any rule, regulation, order, injunction or proceeding
preventing or seeking to prevent the consummation of the transactions
contemplated by the Agreement;
C. the receipt of all necessary approvals, registrations and exemptions
under federal and state laws;
D. the truth in all material respects as of the Closing of the
representations and warranties of the parties and performance and
compliance in all material respects with the parties' agreements,
obligations and covenants required by the Agreement;
E. the effectiveness under applicable law of the registration statement
of the Kentucky Fund of which this Prospectus/Proxy Statement forms
a part and the absence of any stop orders under the Securities Act
of 1933, as amended, pertaining thereto; and
F. the receipt of opinions of counsel relating to, among other things,
the tax-free nature of the Reorganization for federal income tax
purposes.
The Agreement may be terminated or amended with respect to a Reorganization by
the mutual consent of the parties either before or after approval thereof by the
shareholders of the Kentucky Limited Term Fund, provided that no such amendment
after such approval shall be made if it would have a material adverse affect on
the interests of the Fund's shareholders. The Agreement also may be terminated
by the non-breaching party if there has been a material misrepresentation,
material breach of any representation or warranty, material breach of contract
or failure of any condition to Closing.
The Board recommends that you vote to approve the Reorganization, as it believes
the Reorganization is in the best interests of the Kentucky Limited Term Fund
and that the interests of existing shareholders will not be diluted as a result
of consummation of the proposed Reorganization.
DESCRIPTION OF SECURITIES TO BE ISSUED
Shares of Beneficial Interest. Beneficial interests in the Kentucky Fund being
offered hereby are represented by transferable Class A, C and R shares, par
value $0.01 per share. The Declaration of Trust of the Municipal Trust permits
the trustees, as they deem necessary or desirable, to create one or more
separate investment portfolios and to issue a separate series of
11
<PAGE> 21
shares for each portfolio and, subject to compliance with the 1940 Act, to
further subdivide the shares of a series into one or more classes of shares for
such portfolio.
Voting Rights of Shareholders. Holders of shares of the Kentucky Fund are
entitled to one vote per share on matters as to which they are entitled to vote;
however, separate votes generally are taken by each series on matters affecting
an individual series.
The Kentucky Fund operates as a series of the Trust, an open-end management
investment company registered with the SEC under the 1940 Act. In addition to
the specific voting rights described above, shareholders of the Kentucky Fund
are entitled, under current law, to vote with respect to certain other matters,
including changes in fundamental investment policies and restrictions and the
ratification of the selection of independent auditors. Moreover, under the 1940
Act, shareholders owning not less than 10% of the outstanding shares of the
Trust may request that the board of trustees call a shareholders' meeting for
the purpose of voting upon the removal of trustee(s).
CONTINUATION OF SHAREHOLDER ACCOUNTS AND PLANS; SHARE CERTIFICATES
If the Reorganization is approved, the Kentucky Fund will establish an account
for each Kentucky Limited Term Fund's shareholder containing the appropriate
number of shares of the appropriate class of the Kentucky Fund. The shareholder
services and shareholder programs of the Kentucky Fund and the Kentucky Limited
Term Fund are substantially identical. Shareholders of the Kentucky Limited Term
Fund who are accumulating shares of the Kentucky Limited Term Fund under the
dividend reinvestment plan, or who are receiving payment under the systematic
withdrawal plan with respect to shares of the Kentucky Limited Term Fund, will
retain the same rights and privileges after the Reorganization in connection
with the Kentucky Fund Class A, C or R shares received in the Reorganization
through substantially identical plans maintained by the Kentucky Fund. Chase
Manhattan Bank, custodian for the Kentucky Limited Term Fund, serves as the
custodian for the assets of the Kentucky Fund.
Upon approval of the Reorganization, shareholders of the Kentucky Limited Term
Fund who currently own shares in certificate form are asked to surrender these
shares to the Kentucky Limited Term Fund's transfer agent, Chase Global Fund
Services, P.O. Box 5186, NY, NY 10274. Kentucky Limited Term Fund shareholders
must submit a written request to Chase in order to receive certificates for
their Kentucky Fund shares. No certificates for Kentucky Fund shares will be
issued as part of the Reorganization except upon request.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences of the Reorganization to shareholders of the Kentucky Limited Term
Fund and shareholders of the Kentucky Fund. The discussion set forth below is
for general information only and may not apply to a holder subject to special
treatment under the Internal Revenue Code of 1986, as amended (the "Code"), such
as a holder that is a bank, an insurance company, a dealer in securities, a
tax-exempt organization, or a foreign person, or that acquired its Class A, C
and R shares of the Kentucky Limited Term Fund pursuant to the exercise of
employee stock options or otherwise as compensation. It is based upon the Code,
legislative history, Treasury regulations, judicial authorities, published
positions of the Internal Revenue Service (the "Service") and other relevant
authorities, all as in effect on the date hereof and all of which are subject to
change or different interpretations (possibly on a retroactive basis). This
summary is limited to shareholders who hold their Kentucky Limited Term Fund
shares as capital assets. No advance rulings have been or will be sought from
the Service regarding any matter discussed in this Prospectus/ Proxy Statement.
Accordingly, no assurances can be given that the Service could not successfully
challenge the intended federal income tax treatment described below.
Shareholders should consult their own tax advisers to determine the specific
federal income tax consequences of all transactions relating to the
Reorganization, as well as the effects of state, local and foreign tax laws and
possible changes to the tax laws.
The Reorganization is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Code. It is a condition to the Closing of
the Reorganization that the Trust and the Fund receive an opinion from Vedder,
Price, Kaufman & Kammholz ("Vedder Price") substantially to the effect that for
federal income tax purposes:
A. The acquisition by the Kentucky Fund of the assets of the Kentucky
Limited Term Fund in exchange solely for Class A, C and R shares of
the Kentucky Fund and the assumption by the Kentucky Fund of the
liabilities of the Kentucky Limited Term Fund will qualify as
tax-free reorganization within the meaning of Section 368(a)(1)(c) of
the Code.
B. No gain or loss will be recognized by the Kentucky Limited Term Fund
or the Kentucky Fund upon the transfer to the Kentucky Fund of the
assets of the Kentucky Limited Term Fund in exchange solely for the
Class A, C and R shares of the Kentucky Fund and the assumption by
the Kentucky Fund of the liabilities of the Kentucky Limited Term
Fund.
C. The Kentucky Fund's basis in the Kentucky Limited Term Fund's assets
received in the Reorganization will equal the basis of such assets in
the hands of the Kentucky Limited Term Fund immediately prior to the
12
<PAGE> 22
transfer, and the Kentucky Fund's holding period of such assets will, in each
instance, include the period during which the assets were held by the Kentucky
Limited Term Fund.
D. No gain or loss will be recognized by the shareholders of the
Kentucky Limited Term Fund upon the exchange of their shares of the
Kentucky Limited Term Fund for the Class A, C and R shares of the
Kentucky Fund.
E. The aggregate tax basis in the Class A, C and R shares of the
Kentucky Fund received by the shareholders of the Kentucky Limited
Term Fund will be the same as the aggregate tax basis of the shares
of the Kentucky Limited Term Fund surrendered in exchange therefor.
F. The holding period of the Class A, C and R shares of the Kentucky
Fund received by the shareholders of the Kentucky Limited Term Fund
will include the holding period of the shares of the Kentucky
Limited Term Fund surrendered in exchange therefor provided such
surrendered shares of the Kentucky Limited Term Fund are held as
capital assets by such shareholder.
In rendering its opinions, Vedder Price will rely upon certain representations
of the management of the Kentucky Fund and the Kentucky Limited Term Fund and
assume that the Reorganization will be consummated as described in the Agreement
and that redemptions of shares of the Kentucky Limited Term Fund occurring prior
to the Closing and post-Closing redemption of shares of the Kentucky Fund that
are received in the Reorganization will consist solely of redemptions in the
ordinary course of business.
The Kentucky Fund intends to be taxed under the rules applicable to regulated
investment companies as defined in Section 851 of the Code, which are the same
rules currently applicable to the Kentucky Limited Term Fund and its
shareholders.
EXPENSES
Because the benefits of the Reorganization is anticipated to accrue almost
exclusively to shareholders of the Kentucky Limited Term Fund, the Kentucky
Limited Term Fund will pay all of the costs associated with the Reorganization.
The Board of Trustees of the Trust believes that these costs will be more than
offset over time by the anticipated lower operating costs of the Funds.
Management of the Kentucky Limited Term Fund estimates that expenses for the
Reorganization will equal approximately $72,000. In addition, separate from the
Reorganization, the Adviser has agreed to waive its right to seek reimbursement
from the Kentucky Limited Term Fund for any remaining unamortized organizational
expenses.
The Board of the Trust has determined that the foregoing arrangement with
respect to expenses is fair and reasonable.
As noted above, shareholders of the Kentucky Limited Term Fund may redeem their
shares or, exchange their shares for shares of certain other open-end mutual
funds distributed by Nuveen including the Nuveen Flagship Limited Term Municipal
Bond Fund, at any time prior to the closing of the Reorganization. See
"Distribution, Purchase, Valuation, Redemption and Exchange of Shares" above.
Redemptions and exchanges of shares generally are taxable transactions for
federal income tax purposes, unless your shares are held in an account that is
not subject to taxation, such as an individual retirement account or other
tax-qualified retirement plan. Shareholders should consult with their own tax
advisers regarding the federal, state and local tax consequences of potential
transactions.
LEGAL MATTERS
Certain legal matters concerning the federal income tax consequences of the
Reorganization and issuance of Class A, C and R shares of the Kentucky Fund will
be passed on by Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601.
FINANCIAL STATEMENTS
For condensed financial information for the Kentucky Fund and the Kentucky
Limited Term Fund, see "Financial Highlights" in the Fund's Prospectus and
Exhibit A to this Prospectus/Proxy Statement.
In addition, incorporated by reference in their respective entireties are the
unaudited financial statements for the six months ended November 30, 1998 and
the audited financial statements for the fiscal year ended May 31, 1998 for the
Kentucky Fund and the Kentucky Limited Term Fund attached as Exhibit C to the
Reorganization SAI.
D. RECOMMENDATION OF THE BOARD
The Board of the Trust has unanimously approved the Agreement and has determined
that participation in the Reorganization is in the best interests of the
Kentucky Limited Term Fund. THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE PROPOSED REORGANIZATION.
13
<PAGE> 23
OTHER INFORMATION
A. SHAREHOLDERS OF THE KENTUCKY FUND AND THE KENTUCKY LIMITED TERM FUND
As of February 1, 1999, the trustees and officers of the Kentucky Fund as a
group own less than 1% of the shares of the Kentucky Fund. The following table
sets forth the percentage of each person who, as of February 1, 1999, owns of
record, or is known by the Trust to own of record or beneficially own 5% or more
of any class of shares of the Kentucky Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- ------------------------------------------------------------------------------------------------
<C> <S> <C>
A
B
C
R
</TABLE>
At the close of business on February 1, 1999, the record date with respect to
the Special Meeting of shareholders of the Kentucky Limited Term Fund, there
were Class A shares, Class C shares and
Class R shares, respectively, of the Fund. As of February 1,
1999, the trustees and officers of the Kentucky Limited Term Fund as a group own
less than 1% of the outstanding shares of the Kentucky Limited Term Fund. The
following table sets forth the percentage of each person who, as of February 1,
1999, owns of record, or is known by the Trust to own of record or beneficially
own 5% or more of any class of shares of the Kentucky Limited Term Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- ------------------------------------------------------------------------------------------------
<C> <S> <C>
A
C
R
</TABLE>
14
<PAGE> 24
B. SHAREHOLDER PROPOSALS
As a general matter, the Kentucky Fund does not intend to hold future regular
annual or special meetings of its shareholders unless required by the 1940 Act.
In the event the Reorganization is not consummated, the Kentucky Limited Term
Fund does not intend to hold future regular annual or special meetings of its
shareholders unless required by the 1940 Act. Any shareholder who wishes to
submit proposals for consideration at a meeting of shareholders of the Kentucky
Fund or the Kentucky Limited Term Fund should send such proposal to the
respective Fund at 333 West Wacker Drive, Chicago, Illinois 60606. To be
considered for presentation at a shareholders' meeting, rules promulgated by the
SEC require that, among other things, a shareholder's proposal must be received
at the offices of the Fund a reasonable time before a solicitation is made.
Timely submission of a proposal does not necessarily mean that such proposal
will be included.
VOTING INFORMATION AND REQUIREMENTS
Holders of shares of the Kentucky Limited Term Fund are entitled to one vote per
share on matters as to which they are entitled to vote. The Kentucky Limited
Term Fund does not utilize cumulative voting.
Each valid proxy given by a shareholder of the Kentucky Limited Term Fund will
be voted by the persons named in the proxy in accordance with the instructions
marked thereon and as the persons named in the proxy may determine on such other
business as may come before the Special Meeting on which shareholders are
entitled to vote. If no designation is made, the proxy will be voted by the
persons named in the proxy as recommended by the Board "FOR" approval of the
Reorganization. Abstentions and broker non-votes (i.e. shares held by brokers or
nominees, typically in "street name," as to which (i) instructions have not been
received from beneficial owners or persons entitled to vote and (ii) the broker
or nominee does not have discretionary voting power on a particular matter) do
not count as votes "FOR" the proposal and are treated as votes "AGAINST." Thirty
percent of the outstanding shares of the Fund entitled to vote on the proposals
must be present in person or by proxy to have a quorum to conduct business at
the Special Meeting. Abstentions and broker non-votes will be deemed present for
quorum purposes.
Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the Kentucky Limited Term Fund a written notice of
revocation, by delivering a duly executed proxy bearing a later date, or by
attending the Special Meeting and voting in person. The giving of a proxy will
not affect your right to vote in person if you attend the Special Meeting and
wish to do so.
It is not anticipated that any action will be asked of the shareholders of the
Kentucky Limited Term Fund other than as indicated above, but if other matters
are properly brought before the Special Meeting, it is intended that the persons
named in the proxy will vote in accordance with their judgment.
APPROVAL OF THE REORGANIZATION WILL REQUIRE THE FAVORABLE VOTE OF THE HOLDERS OF
A MAJORITY OF THE OUTSTANDING SHARES OF THE KENTUCKY LIMITED TERM FUND ENTITLED
TO VOTE.
In the event that sufficient votes in favor of a proposal are not received by
the scheduled time of the Special Meeting, the persons named in the proxy may
propose and vote in favor of one or more adjournments of the Special Meeting to
permit further solicitation of proxies. If sufficient shares were present to
constitute a quorum, but insufficient votes had been cast in favor of a proposal
to approve it, proxies would be voted in favor of adjournment only if the Board
determined that adjournment and additional solicitation was reasonable and in
the best interest of the shareholders of the Kentucky Limited Term Fund, taking
into account the nature of the proposal, the percentage of the votes actually
cast, the percentage of negative votes, the nature of any further solicitation
that might be made and the information provided to shareholders about the
reasons for additional solicitation. Any such adjournment will require the
affirmative vote of the holders of a majority of the outstanding shares voted at
the session of the Special Meeting to be adjourned.
Proxies of shareholders of the Kentucky Limited Term Fund are solicited by the
Board. Additional solicitation may be made by mail, telephone, telegraph or
personal interview by representatives of the Adviser or Nuveen, or by dealers or
their representatives. In addition, such solicitation servicing may also be
provided by D. F. King, at a cost estimated to be approximately $2,000, plus
reasonable expenses.
February , 1999
PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY.
YOUR VOTE IS IMPORTANT AND YOUR PARTICIPATION
IN THE AFFAIRS OF YOUR FUND DOES MAKE A DIFFERENCE.
15
<PAGE> 25
FINANCIAL HIGHLIGHTS (UNAUDITED) EXHIBIT A
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS INVESTMENT OPERATIONS LESS DISTRIBUTIONS
(INCEPTION DATE) -------------------------------- ----------------------------
NET
REALIZED/ ENDING
BEGINNING NET UNREALIZED NET NET
YEAR ENDED NET ASSET INVESTMENT INVESTMENT INVESTMENT CAPITAL ASSET TOTAL
MAY 31, VALUE INCOME(A) GAIN (LOSS) TOTAL INCOME GAIN TOTAL VALUE RETURN(B)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KENTUCKY**
CLASS A (5/87)
1999(d) $11.39 $.28 $ .07 $ .35 $(.28) $ -- $(.28) $11.46 3.13%
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
1994 11.06 .62 (.40) .22 (.63) -- (.63) 10.65 1.90
CLASS B (2/97)
1999(d) 11.39 .24 .07 .31 (.24) -- (.24) 11.46 2.75
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(d) 11.38 .25 .07 .32 (.25) -- (.25) 11.45 2.86
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
1994(c) 11.46 .36 (.81) (.45) (.36) -- (.36) 10.65 (5.88)*
CLASS R (2/97)
1999(d) 11.37 .29 .08 .37 (.30) -- (.30) 11.44 3.24
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
- -----------------------------------------------------------------------------------------------------------------------------------
KENTUCKY LIMITED***
CLASS A (9/95)
1999(d) $10.12 $.21 $ .07 $ .28 $(.21) $ -- $(.21) $10.19 2.80%
1998 9.92 .44 .20 .64 (.44) -- (.44) 10.12 6.53
1997 9.79 .45 .12 .57 (.44) -- (.44) 9.92 5.96
1996(c) 9.75 .31 .04 .35 (.31) -- (.31) 9.79 5.45*
CLASS C (9/95)
1999(d) 10.12 .19 .06 .25 (.19) -- (.19) 10.18 2.52
1998 9.92 .40 .20 .60 (.40) -- (.40) 10.12 6.17
1997 9.79 .41 .13 .54 (.41) -- (.41) 9.92 5.64
1996(c) 9.75 .29 .04 .33 (.29) -- (.29) 9.79 5.12*
CLASS R (2/97)
1999(d) 10.10 .22 .07 .29 (.22) -- (.22) 10.17 2.93
1998 9.92 .46 .18 .64 (.46) -- (.46) 10.10 6.58
1997(c) 9.98 .15 (.10) .05 (.11) -- (.11) 9.92 .56
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CLASS RATIOS/SUPPLEMENTAL DATA
(INCEPTION DATE) -----------------------------------------------------------------------------------------
RATIO OF
NET RATIO OF
RATIO OF INVESTMENT RATIO OF NET INVESTMENT
ENDING EXPENSES TO INCOME TO EXPENSES INCOME
NET AVERAGE NET AVERAGE NET TO AVERAGE TO AVERAGE PORTFOLIO
YEAR ENDED ASSETS ASSETS BEFORE ASSETS BEFORE NET ASSETS AFTER NET ASSETS AFTER TURNOVER
MAY 31, (000) REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT(A) REIMBURSEMENT(A) RATE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KENTUCKY**
CLASS A (5/87)
1999(d) $466,860 .85%* 4.89%* .85%* 4.89%* 5%
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
1994 369,495 1.03 5.15 .58 5.60 12
CLASS B (2/97)
1999(d) 6,554 1.59* 4.13* 1.59* 4.13* 5
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(d) 31,146 1.40* 4.34* 1.40* 4.34* 5
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
1994(c) 11,172 1.65* 4.39* 1.08* 4.96* 12
CLASS R (2/97)
1999(d) 795 .65* 5.09* .65* 5.09* 5
1998 675 .64 5.31 .58 5.37 12
1997(c) 455 .64* 5.62* .49* 5.77* 13
- ----------------------------------------------------------------------------------------------------------------------------
KENTUCKY LIMITED***
CLASS A (9/95)
1999(d) $ 8,147 1.25%* 3.70%* .87%* 4.08%* --%
1998 8,989 1.34 3.67 .66 4.35 36
1997 8,870 1.68 3.37 .53 4.52 56
1996(c) 8,389 1.67* 3.07* .37* 4.37* 48
CLASS C (9/95)
1999(d) 2,987 1.60* 3.35* 1.22* 3.73* --
1998 2,416 1.69 3.32 1.01 4.00 36
1997 2,144 2.00 3.03 .84 4.19 56
1996(c) 1,767 1.98* 2.78* .64* 4.12* 48
CLASS R (2/97)
1999(d) 19 1.05* 3.90* .67* 4.28* --
1998 16 1.13 3.87 .46 4.54 36
1997(c) -- .86* 4.87* -- 5.73* 56
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kentucky.
*** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kentucky Limited.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
(d) For the six months ended November 30, 1998.
A-1
<PAGE> 26
Supplement Dated December 31,1998 to the
Prospectus Dated September 30,1998
- -------------------
NUVEEN FLAGSHIP MULTISTATE TRUST IV
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
- -------------------
We at John Nuveen & Co. Incorporated appreciate the level of trust you have
placed in us and are committed to providing you with the latest information
regarding your investments. That is why we want to inform you in advance of a
proposed merger of the Nuveen Flagship Kentucky Limited Term Municipal Bond
Fund (the "Fund") into the Nuveen Flagship Kentucky Municipal Bond Fund (the
"Acquired Fund"). The board of directors of the Kentucky Limited Term Fund
have determined that the merger would benefit shareholders in a number of ways,
including:
- - lower gross operating expenses as a percentage of net assets;
- - improved portfolio diversification and lower portfolio transaction costs;
- - continued exemption of dividends from Kentucky state income taxes; and
- - higher dividends per share.
The Board believes that these potential benefits, together with the potentially
higher distributions from the Kentucky Fund, should offset the risks associated
with investments in a long-term bond fund.
The Trustees of the Nuveen Flagship Multistate Trust IV have approved a
tax-free reorganization of the Fund as described below. The Fund is closed to
new investors effective December 31, 1998. Only shareholders with existing
accounts may continue to make additional purchases and to reinvest dividends
into existing accounts.
Under the terms of the reorganization, the Fund would transfer all of its
assets and liabilities to the Acquiring Fund, a series of the Nuveen Flagship
Municipal Trust IV, in a tax-free exchange for an equal value of shares of the
Acquiring Fund. The Acquiring Fund is a municipal bond fund whose investment
objective is to provide as high a level of current interest income exempt from
regular federal, state and, in some cases, local income taxes as is consistent
with preservation of capital. As with any mutual fund, there is no assurance
that the Acquiring Fund will meet its investment objective. The reorganization
is subject to certain regulatory approvals and the approval of the Fund's
shareholders. A meeting of shareholders has been called for April 15, 1999 for
the purpose of voting on the proposed reorganization. Further information
regarding the proposed reorganization and the shareholder meeting will be
contained in a proxy statement that is scheduled to be mailed in mid February,
1999.
<PAGE> 27
NUVEEN
MUNICIPAL
BOND FUNDS
September 30, 1998
- -------------------------------
Prospectus
- -------------------------------
Dependable, tax-free income
to help you keep more of
what you earn.
KANSAS
KENTUCKY
MICHIGAN
MISSOURI [PHOTO APPEARS HERE]
OHIO
WISCONSIN
- -------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- -------------------------------
Like all mutual fund shares these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
<PAGE> 28
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1 THE FUNDS
This section provides you with an overview of the
funds including investment objectives, portfolio
holdings and historical performance information.
Introduction................................................................. 1
Nuveen Flagship Kansas Municipal Bond Fund................................... 2
Nuveen Flagship Kentucky Municipal Bond Fund................................. 4
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund.................... 6
Nuveen Flagship Michigan Municipal Bond Fund................................. 8
Nuveen Flagship Missouri Municipal Bond Fund................................. 10
Nuveen Flagship Ohio Municipal Bond Fund..................................... 12
WE HAVE USED THE ICONS Nuveen Flagship Wisconsin Municipal Bond Fund................................ 14
BELOW THROUGHOUT THIS
PROSPECTUS TO MAKE IT SECTION 2 HOW WE MANAGE YOUR MONEY
EASY FOR YOU TO FIND THE This section gives you a detailed discussion of our investment and risk
TYPE OF INFORMATION management strategies.
YOU NEED.
Who Manages the Funds........................................................ 16
Management Fees.............................................................. 17
What Securities We Invest In................................................. 17
How We Select Investments.................................................... 18
What the Risks Are........................................................... 19
How We Manage Risk........................................................... 20
SECTION 3 HOW YOU CAN BUY AND SELL SHARES
Investment Strategy This section provides the information you need to move money into or out
of your account.
How to Choose a Share Class.................................................. 21
Risks How to Reduce Your Sales Charge.............................................. 23
How to Buy Shares............................................................ 23
Systematic Investing......................................................... 24
Fees, Charges Systematic Withdrawal........................................................ 25
and Expenses Special Services............................................................. 25
How to Sell Shares........................................................... 26
Shareholder SECTION 4 GENERAL INFORMATION
Instructions
This section summarizes the funds' distribution policies and other general
fund information.
Performance and Distributions and Taxes...................................................... 28
Current Portfolio Distribution and Service Plans............................................... 29
Information Net Asset Value.............................................................. 30
Fund Service Providers....................................................... 30
SECTION 5 FINANCIAL HIGHLIGHTS
This section provides the funds' financial performance
for the past 5 years. 31
APPENDIX ADDITIONAL STATE INFORMATION.................................. 38
</TABLE>
<PAGE> 29
September 30,1998
Section 1 The Funds
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
Prospectus
This prospectus is intended to provide important information to
help you evaluate whether one of the Nuveen Mutual Funds listed
above may be right for you. Please read it carefully before
investing and keep it for future reference.
To learn more about how Nuveen Mutual Funds can help you achieve
your financial goals, talk with your financial adviser. Or call
us at (800) 257-8787 for more information
A Century of Investment Experience
Since our founding in 1898, John Nuveen & Co. Incorporated has
been synonymous with investments that withstand the test of time.
Today we offer a broad range of quality investments designed for
individuals seeking to build and maintain wealth.
Section 1 The Funds 1
<PAGE> 30
NUVEEN FLAGSHIP KANSAS MUNICIPAL BOND FUND
FUND OVERVIEW
INVESTMENT OBJECTIVE
The investment objective of the fund is to provide you with as high a level
of current interest income exempt from regular federal, state and, in some
cases, local income taxes as is consistent with preservation of capital.
HOW THE FUND PURSUES ITS OBJECTIVE
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Kansas bonds. The fund is
non-diversified, and may invest more of its assets in a single issuer than
a diversified fund. Greater concentration may increase risk. As with any
mutual fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
IS THIS FUND RIGHT FOR YOU?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
HOW THE FUND HAS PERFORMED
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past five years as well as
annualized fund, peer group and market benchmark returns for the one-,
five-year and inception periods ending December 31, 1997. This information
is intended to help you assess the variability of fund returns over the
past five years (and consequently, the potential rewards and risks of a
fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1993 14.1%
1994 -8.3%
1995 17.7%
1996 3.4%
1997 9.7%
From inception in January 1992 to December 31, 1997, the highest and lowest
quarterly returns were 6.96% and -7.73%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year 5 Year Inception
- ------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 5.11% 5.98% 6.82%
Class A (NAV) 9.67% 6.90% 7.60%
Class B 4.30% 6.00% 6.76%
Class C 9.31% 6.54% 7.23%
Class R 10.47% 7.06% 7.73%
- ------------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 7.67%
Lipper
Peer Group/3/ 7.84% 6.33% 6.85%
</TABLE>
2 Section 1 The Funds
<PAGE> 31
WHAT ARE THE COSTS OF INVESTING?
SHAREHOLDER TRANSACTION EXPENSES/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
ANNUAL FUND OPERATING EXPENSES/11/
Paid From Fund Assets
Share Class A B C R
Management Fees .55% .55% .55% .55%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .15% .15% .14% .15%
Total Annual Fund Operating
Expenses-Gross+ .90% 1.65% 1.44% .70%
+ After Expense Reimbursements
Reimbursements (.19%) (.20%) (.20%) (.19%)
Total Annual Fund Operating Expenses-Net .71% 1.45% 1.24% .51%
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 508 $ 563 $ 147 $ 72 $ 508 $ 168 $ 147 $ 72
3 Years $ 695 $ 839 $ 456 $ 224 $ 695 $ 520 $ 456 $ 224
5 Years $ 898 $1,011 $ 787 $ 390 $ 898 $ 897 $ 787 $ 390
10 Years $1,481 $1,754 $1,724 $ 871 $1,481 $1,754 $1,724 $ 871
</TABLE>
HOW THE FUND IS INVESTED (AS OF 5/31/98)
PORTFOLIO STATISTICS
Weighted Average Maturity 20.6 years
Weighted Average Duration 7.6 years
Weighted Average Credit Quality AA
Number of Issues 60
CREDIT QUALITY
AAA 49%
AA 24%
A 17%
BBB/NR 10%
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Utilities (8%)
Other (27%)
Tax Obligation-Limited (20%)
Health Care (20%)
U.S. Guaranteed (13%)
Housing-Multifamily (12%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.69%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Kansas Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares.
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 3
<PAGE> 32
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level
of current interest income exempt from regular federal, state and, in some
cases, local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Kentucky bonds. As with any mutual
fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How The Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past ten years as well as
annualized fund, peer group and market benchmark returns for the one-,
five- and ten-year periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
ten years (and consequently, the potential rewards and risks of a fund
investment).
TOTAL RETURNS/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1988 13.5%
1989 10.8%
1990 6.5%
1991 12.4%
1992 9.3%
1993 12.3%
1994 -5.4%
1995 17.3%
1996 3.9%
1997 9.1%
During the ten years ending December 31, 1997, the highest and lowest
quarterly returns were 7.13% and -5.54%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
1-, 5- and 10-year average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year 5 Year 10 Year
------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 4.46% 6.21% 8.32%
Class A (NAV) 9.08% 7.12% 8.79%
Class B 4.29% 6.34% 8.31%
Class C 8.41% 6.52% 8.19%
Class R 9.11% 7.13% 8.79%
------------------------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.43% 6.80% 8.42%
</TABLE>
4 Section 1 The Funds
<PAGE> 33
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- -----------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- ----------------------------------------------------------------------------
Management Fees .54% .54% .54% .54%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .10% .10% .10% .10%
Total Annual Fund Operating
Expenses-Gross .84% 1.59% 1.39% .64%
After Expense Reimbursements
Reimbursements (.07%) (.05%) (.06%) (.06%)
Total Annual Fund Operating Expenses-Net .77% 1.54% 1.33% .58%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 502 $ 557 $ 142 $ 65 $ 502 $ 162 $ 142 $ 65
3 Years $ 677 $ 821 $ 440 $205 $ 677 $ 502 $ 440 $205
5 Years $ 866 $ 980 $ 761 $357 $ 866 $ 866 $ 761 $357
10 Years $1,414 $1,688 $1,669 $798 $1,414 $1,688 $1,669 $798
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 20.3 years
Weighted Average Duration 6.4 years
Weighted Average Credit Quality AA
Number of Issues 177
Credit Quality
AAA 52%
AA 6%
A 24%
BBB/NR 18%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Water/Sewer (6%)
Other (29%)
Tax Obligation-Limited (23%)
Health Care (23%)
Utilities (10%)
U.S.Guaranteed (9%)
1. Class A total returns reflect actual performance for all periods; Class
B, C and R total returns reflect actual performance for periods since
class inception, and Class A performance for periods prior to class
inception, adjusted for the differences in fees between the classes (see
"What are the Costs of Investing?"). The year-to-date return as of
6/30/98 was 2.44%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the
funds in the Lipper Kentucky Municipal Debt Category. Returns assume
reinvestment of dividends and do not reflect any applicable sales
charges.
4. As a percent of offering price unless otherwise noted. Authorized
Dealers and other firms may charge additional fees for shareholder
transactions or for advisory services. Please see their materials for
details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How
You Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may
be subject to a contingent deferred sales charge (CDSC) if redeemed
within 18 months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a
CDSC of 5% during the first year, 4% during the second and third years,
3% during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule
12b-1 fees and CDSCs than the economic equivalent of the maximum front-
end sales charge permitted under the National Association of Securities
Dealers Conduct Rules.
Section 1 The Funds 5
<PAGE> 34
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
Fund Overview
INVESTMENT OBJECTIVE
The investment objective of the fund is to provide you with as high a level
of current interest income exempt from regular federal, state and, in some
cases, local income taxes as is consistent with preservation of capital.
HOW THE FUND PURSUES ITS OBJECTIVE
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Kentucky bonds. The fund is
non-diversified, and may invest more of its assets in a single issuer than
a diversified fund. Greater concentration may increase risk. As with any
mutual fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
IS THIS FUND RIGHT FOR YOU?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
HOW THE FUND HAS PERFORMED
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past two years as well as
annualized fund, peer group and market benchmark returns for the one-year
and inception periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
two years (and consequently, the potential rewards and risks of a fund
investment).
TOTAL RETURNS/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1996 4.4%
1997 6.9%
From inception in September 1995 to December 31, 1997, the highest and
lowest quarterly returns were 2.70% and .21%, respectively for the quarters
ending 12/31/95 and 3/31/96. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year Inception
--------------------------------------------------------------------------
<S> <C> <C>
Class A (Offer) 4.28% 5.06%
Class A (NAV) 6.91% 6.24%
Class C 6.57% 5.87%
Class R 7.01% 6.29%
--------------------------------------------------------------------------
LB Market
Benchmark/2/ 6.38% 5.65%
Lipper
Peer Group/3/ 5.61% 4.96%
</TABLE>
6 Section 1 The Funds
<PAGE> 35
What are the Costs of Investing?
SHAREHOLDER TRANSACTION EXPENSES/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A C R/5/
- ------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases 2.50%/6/ None None
- ------------------------------------------------------------------
Maximum Sales Charge Imposed on
Reinvested Dividends None None None
- ------------------------------------------------------------------
Exchange Fees None None None
- ------------------------------------------------------------------
Deferred Sales Charge/7/ None/8/ 1%/9/ None
- ------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES/10/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A C R
- -------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees .45% .45% .45%
- -------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .55% --%
- -------------------------------------------------------------------
OTHER EXPENSES .69% .69% .68%
- -------------------------------------------------------------------
Total Annual Fund Operating
Expenses-Gross 1.34% 1.69% 1.13%
After Expense Reimbursements
- -------------------------------------------------------------------
Reimbursements (.68%) (.68%) (.67%)
- -------------------------------------------------------------------
Total Annual Fund Operating Expenses-Net .66% 1.01% .46%
- -------------------------------------------------------------------
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A C R A C R
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 383 $ 172 $ 115 $ 383 $ 172 $ 115
- -----------------------------------------------------------------------
3 Years $ 664 $ 533 $ 359 $ 664 $ 533 $ 359
- -----------------------------------------------------------------------
5 Years $ 966 $ 918 $ 622 $ 966 $ 918 $ 622
- -----------------------------------------------------------------------
10 Years $1,822 $1,998 $1,375 $1,822 $1,998 $1,375
- -----------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/98)
PORTFOLIO STATISTICS
Weighted Average Maturity 6.1 years
- ------------------------------------------------
Weighted Average Duration 5.0 years
- ------------------------------------------------
Weighted Average Credit Quality AA
- ------------------------------------------------
Number of Issues 33
- ------------------------------------------------
CREDIT QUALITY
AAA 45%
- ------------------------------------------------
AA 19%
- ------------------------------------------------
A 25%
- ------------------------------------------------
BBB/NR 11%
- ------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Transportation (9%)
Health Care (23%)
Tax Obligation-Limited (22%)
Other (22%)
Education and Civic
Organizations (14%)
Housing-Multifamily (10%)
1. Class A total returns reflect actual performance for all periods; Class C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was
1.78%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers 5
Year Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Other States Short-Intermediate Municipal Debt Category. Returns
assume reinvestment of dividends and do not reflect any applicable sales
charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
10. Long-term holders of Class C shares may pay more in Rule 12b-1 fees and
CDSCs than the economic equivalent of the maximum front-end sales charge
permitted under the National Association of Securities Dealers Conduct
Rules.
Section 1 The Funds 7
<PAGE> 36
NUVEEN FLAGSHIP MICHIGAN MUNICIPAL BOND FUND
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level
of current interest income exempt from regular federal, state and, in some
cases, local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Michigan bonds. As with any mutual
fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past ten years as well as
annualized fund, peer group and market benchmark returns for the one-,
five- and ten-year periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
ten years (and consequently, the potential rewards and risks of a fund
investment).
Total Returns(1)
[BAR CHART APPEARS HERE]
Class A Annual Returns
1988 12.5%
1989 10.2%
1990 5.3%
1991 11.6%
1992 9.6%
1993 12.0%
1994 -5.0%
1995 16.3%
1996 3.8%
1997 8.9%
During the ten years ending December 31, 1997, the highest and lowest
quarterly returns were 6.10% and -5.31%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
1-, 5- and 10-year average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year 5 Year 10 Year
-------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 4.38% 6.02% 7.89%
Class A (NAV) 8.93% 6.93% 8.36%
Class B 4.22% 6.17% 7.89%
Class C 8.34% 6.26% 7.72%
Class R 9.13% 6.97% 8.38%
-------------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.50% 6.66% 8.24%
</TABLE>
8 Section 1 The Funds
<PAGE> 37
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- --------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/1/ None
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- -------------------------------------------------------------------------
Management Fees .54% .54% .54% .54%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .10% .10% .10% .10%
Total Operating Expenses .84% 1.59% 1.39% .64%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 502 $ 557 $ 142 $ 65 $ 502 $ 162 $ 142 $ 65
3 Years $ 677 $ 821 $ 440 $205 $ 677 $ 502 $ 440 $205
5 Years $ 866 $ 980 $ 761 $357 $ 866 $ 866 $ 761 $357
10 Years $1,414 $1,688 $1,669 $798 $1,414 $1,688 $1,669 $798
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 18.1 years
Weighted Average Duration 6.5 years
Weighted Average Credit Quality AA
Number of Issues 56
Credit Quality
AAA 54%
AA 19%
A 14%
BBB/NR 13%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation-Limited (16%)
Other (21%)
Tax Obligation-General (16%)
Health Care (24%)
U.S. Guaranteed (17%)
Water/Sewer (6%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are
the Costs of Investing?"). The year-to-date return as of 6/30/98 was
2.43%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Michigan Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 9
<PAGE> 38
NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level
of current interest income exempt from regular federal, state and, in some
cases, local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Missouri bonds. The fund is
non-diversified, and may invest more of its assets in a single issuer than
a diversified fund. Greater concentration may increase risk. As with any
mutual fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past ten years as well as
annualized fund, peer group and market benchmark returns for the one-,
five- and ten-year periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
ten years (and consequently, the potential rewards and risks of a fund
investment).
Total Returns/1/
[Bar Chart Appears Here]
Class A Annual Returns
1988 10.5%
1989 10.2%
1990 6.4%
1991 12.0%
1992 9.0%
1993 13.5%
1994 -6.1%
1995 16.3%
1996 3.9%
1997 9.4%
During the ten years ending December 31, 1997, the highest and lowest
quarterly returns were 6.61% and -5.65%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
1-, 5- and 10-year average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year 5 Year 10 Year
---------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 4.79% 6.17% 7.87%
Class A (NAV) 9.35% 7.09% 8.34%
Class B 4.47% 6.29% 7.86%
Class C 8.76% 6.48% 7.74%
Class R 9.45% 7.10% 8.35%
---------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.69% 6.75% 8.29%
</TABLE>
10 Section 1 The Funds
<PAGE> 39
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- --------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- ---------------------------------------------------------------------------
Management Fees .54% .54% .54% .54%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .13% .13% .13% .13%
Total Operating Expenses .87% 1.62% 1.42% .67%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 505 $ 560 $ 145 $ 68 $ 505 $ 165 $ 145 $ 68
3 Years $ 686 $ 830 $ 449 $214 $ 686 $ 511 $ 449 $214
5 Years $ 882 $ 996 $ 776 $373 $ 882 $ 881 $ 776 $373
10 Years $1,448 $1,721 $1,702 $835 $1,448 $1,721 $1,702 $835
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 19.5 years
Weighted Average Duration 7.2 years
Weighted Average Credit Quality AA-
Number of Issues 143
Credit Quality
AAA 61%
AA 10%
A 12%
BBB/NR 17%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation-Limited (17%)
Other (34%)
Housing-Single-Family (8%)
Health Care (17%)
U.S. Guaranteed (13%)
Housing-Multifamily (11%)
1. Class A total returns reflect actual performance for all periods; Class B,
C and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.50%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Missouri Category. Returns assume reinvestment of dividends and
do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 11
<PAGE> 40
NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level
of current interest income exempt from regular federal, state and, in some
cases, local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bond carry greater credit risk. The fund may bear additional
risk because it invests primarily in Ohio bonds. As with any mutual fund
investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past ten years as well as
annualized fund, peer group and market benchmark returns for the one-,
five- and ten-year periods ending December 31, 1997. This information is
intended to help you assess the variability of fund returns over the past
ten years (and consequently, the potential rewards and risks of a fund
investment).
Total Returns(1)
[BAR CHART APPEARS HERE]
Class A Annual Returns
1988 13.1%
1989 9.7%
1990 6.2%
1991 11.8%
1992 8.5%
1993 11.6%
1994 -4.6%
1995 15.5%
1996 3.3%
1997 8.3%
During the ten years ending December 31, 1997, the highest and lowest
quarterly returns were 6.05% and -4.69%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
1-, 5- and 10-year average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year 5 Year 10 Year
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 3.74% 5.67% 7.72%
Class A (NAV) 8.26% 6.57% 8.18%
Class B 3.48% 5.80% 7.71%
Class C 7.69% 6.00% 7.59%
Class R 8.46% 6.61% 8.20%
-----------------------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.44% 6.85% 8.24%
</TABLE>
12 Section 1 The Funds
<PAGE> 41
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- -------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- --------------------------------------------------------------------
Management Fees .53% .53% .53% .53%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .12% .13% .12% .12%
Total Operating Expenses .85% 1.61% 1.40% .65%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you invest
$10,000 in the fund for the time period indicated and then either redeem or do
not redeem your shares at the end of a period. The example assumes that your
investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 503 $ 559 $ 143 $ 66 $ 503 $ 164 $ 143 $ 66
3 Years $ 680 $ 827 $ 443 $208 $ 680 $ 508 $ 443 $208
5 Years $ 872 $ 991 $ 766 $362 $ 872 $ 876 $ 766 $362
10 Years $1,425 $1,708 $1,680 $810 $1,425 $1,708 $1,680 $810
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 18.9 years
Weighted Average Duration 6.4 years
Weighted Average Credit Quality AA
Number of Issues 273
Credit Quality
AAA 68%
AA 7%
A 12%
BBB/NR 13%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Water/Sewer (7%)
Other (29%)
U.S. Guaranteed (20%)
Tax Obligation-General (18%)
Health Care (15%)
Utilities (11%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.53%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns reflect the performance of the Lipper Ohio Municipal Debt
Index, a managed index that represents the average annualized returns of the
30 largest funds in the Lipper Ohio Municipal Debt Category. Returns assume
reinvestment of dividends and do not reflect any applicable sales
charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 13
<PAGE> 42
NUVEEN FLAGSHIP WISCONSIN MUNICIPAL BOND FUND
Fund Overview
INVESTMENT OBJECTIVE
The investment objective of the fund is to provide you with as high a level
of current interest income exempt from regular federal income taxes as is
consistent with preservation of capital.
HOW THE FUND PURSUES ITS OBJECTIVE
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings
agencies. The fund may buy non-rated municipal bonds if the fund's investment
adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
The principal risks of investing in the fund are interest rate and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal
bond will be unable to make interest and principal payments. In general,
lower rated bonds carry greater credit risk. The fund may bear additional
risk because it invests primarily in Wisconsin bonds. The fund is
non-diversified, and may invest more of its assets in a single issuer than a
diversified fund. Greater concentration may increase risk. As with any mutual
fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
IS THIS FUND RIGHT FOR YOU?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How The Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp, Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past three years as well as
annualized fund, peer group and market benchmark returns for the one-year,
and inception periods ending December 31, 1997. This information is intended
to help you assess the variability of fund returns over the past three years
(and consequently, the potential rewards and risks of a fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1995 17.2%
1996 2.5%
1997 9.4%
From inception in June 1994 to December 31, 1997, the highest and lowest
quarterly returns were 6.57% and -2.64%, respectively for the quarters ending
3/31/95 and 3/31/96. The bar chart and highest/lowest quarterly returns do
not reflect sales charges, which would reduce returns, while the average
annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year Inception
-----------------------------------------------------
<S> <C> <C>
Class A (Offer) 4.81% 6.01%
Class A (NAV) 9.40% 7.32%
Class B 4.94% 6.04%
Class C 9.05% 6.95%
Class R 9.87% 7.45%
-----------------------------------------------------
LB Market
Benchmark/2/ 9.19% 8.47%
Lipper
Peer Group/3/ 8.45% 7.44%
</TABLE>
14 Section 1 The Funds
<PAGE> 43
WHAT ARE THE COSTS OF INVESTING?
SHAREHOLDER TRANSACTION EXPENSES/4/
PAID DIRECTLY FROM YOUR INVESTMENT
Share Class A B C R/5/
- -------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
ANNUAL FUND OPERATING EXPENSES/11/
PAID FROM FUND ASSETS
<TABLE>
<CAPTION>
Share Class A B C R
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .55% .55% .55% .55%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .61% .58% .59% .57%
Total Annual Fund Operating
Expenses-Gross+ 1.36% 2.08% 1.89% 1.12%
+After Expense Reimbursements
Reimbursements (.81%) (.76%) (.78%) (.80%)
Total Annual Fund Operating Expenses-Net .55% 1.32% 1.11% .32%
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 553 $ 605 $ 192 $ 114 $ 553 $ 211 $ 192 $ 114
3 Years $ 833 $ 966 $ 594 $ 356 $ 833 $ 652 $ 594 $ 356
5 Years $1,133 $1,231 $1,021 $ 617 $1,133 $1,119 $1,021 $ 617
10 Years $1,986 $2,226 $2,212 $1,363 $1,986 $2,226 $2,212 $1,363
</TABLE>
HOW THE FUND IS INVESTED (AS OF 5/31/98)
PORTFOLIO STATISTICS
Weighted Average Maturity 22.2 years
Weighted Average Duration 8.6 years
Weighted Average Credit Quality A+
Number of Issues 60
CREDIT QUALITY
AAA 41%
AA 5%
A 18%
BBB/NR 36%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Health Care (6%)
Tax Obligation-Limited (46%)
Other (19%)
Long-Term Care (10%)
Housing-Multifamily (10%)
Utilities (9%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 3.03%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Other States Municipal Debt Category. Returns assume
reinvestment of dividends and do not reflect any applicable sales
charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 15
<PAGE> 44
Section 2 How We Manage Your Money
To help you understand the funds better, this section includes a
detailed discussion of our investment and risk management
strategies. For a more complete discussion of these matters,
please consult the Statement of Additional Information.
Who Manages the Funds
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, IL 60606,
("Nuveen Advisory"), serves as the investment adviser to the
funds and in this capacity is responsible for the selection and
on-going monitoring of the municipal bonds in each fund's
investment portfolio, managing the funds' business affairs and
providing certain clerical, bookkeeping and other administrative
services. Nuveen Advisory serves as investment adviser to
investment portfolios with more than $35 billion in municipal
assets under management.
Overall investment management strategy and operating policies for
the funds are set by the Investment Policy Committee of Nuveen
Advisory. The Investment Policy Committee is comprised of the
principal executive officers and portfolio managers of Nuveen
Advisory and meets regularly to review economic conditions, the
outlook for the financial markets in general and the status of
the municipal markets in particular. Day-to-day operation of each
fund and the execution of its specific investment strategies is
the responsibility of the designated portfolio manager described
below.
Michael S. Davern has been the portfolio manager for the Kansas
and Missouri Funds since 1992, the Michigan Fund since 1993, and
the Wisconsin Fund since 1994. Mr. Davern became a Vice President
of Flagship Financial Inc., the Funds' prior investment adviser
in 1991, and subsequently became a Vice President of Nuveen
Advisory upon the acquisition of Flagship Resources Inc. by The
John Nuveen Company in January 1997. Mr. Davern currently manages
investments for seventeen Nuveen-sponsored investment companies,
including the Arizona, Colorado, and Louisiana Funds. Thomas J.
O'Shaughnessy has been the portfolio manager for the Kentucky
Funds since July 1998, and has been a portfolio manager for
Nuveen Advisory since 1983. Mr. O'Shaughnessy currently manages
investments for fourteen Nuveen-sponsored investment companies,
including the Georgia, Florida, North Carolina, Pennsylvania, and
Tennessee Funds. J. Thomas Futrell has been the portfolio manager
for the Ohio Fund since July 1998. Mr. Futrell is a Chartered
Financial Analyst and has been a Vice President of Nuveen
Advisory since 1991. He currently manages investments for ten
Nuveen-sponsored investment companies, including the
Massachusetts, Massachusetts Insured, and New Jersey Funds.
16 Section 2 How We Manage Your Money
<PAGE> 45
Management Fees
For providing these services, Nuveen Advisory is paid an annual
management fee. The following schedule applies to each fund
described in this prospectus except the Kentucky Limited Term
Fund:
---------------------------------------------------------------
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
---------------------------------------------------------------
For the first $125 million 0.5500%
For the next $125 million 0.5375%
For the next $250 million 0.5250%
For the next $500 million 0.5125%
For the next $1 billion 0.5000%
For assets over $2 billion 0.4750%
The following schedule applies to the Kentucky Limited Term
Fund:
---------------------------------------------------------------
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
---------------------------------------------------------------
For the first $125 million 0.4500%
For the next $125 million 0.4375%
For the next $250 million 0.4250%
For the next $500 million 0.4125%
For the next $1 billion 0.4000%
For assets over $2 billion 0.3750%
For the most recent fiscal year, the funds paid after expense
reimbursements the following management fees to Nuveen Advisory,
as a percentage of average net assets:
Nuveen Flagship Kansas Municipal Bond Fund .36%
Nuveen Flagship Kentucky Municipal Bond Fund .47%
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund .00%
Nuveen Flagship Michigan Municipal Bond Fund .54%
Nuveen Flagship Missouri Municipal Bond Fund .54%
Nuveen Flagship Ohio Municipal Bond Fund .53%
Nuveen Flagship Wisconsin Municipal Bond Fund .00%
What Securities We Invest In
Each fund's investment objective may not be changed without
shareholder approval. The following investment policies may be
changed by the Board of Trustees without shareholder approval
unless otherwise noted in this prospectus or the Statement of
Additional Information.
Municipal Obligations
The funds invest primarily in municipal bonds that pay interest
that is exempt from regular federal, state and, in some cases,
local income tax. Income from these bonds may be subject to the
federal alternative minimum tax.
Section 2 How We Manage Your Money 17
<PAGE> 46
States, local governments and municipalities issue municipal
bonds to raise money for various public purposes such as building
public facilities, refinancing outstanding obligations and
financing general operating expenses.
The funds may purchase municipal bonds that represent lease
obligations. These carry special risks because the issuer of the
bonds may not be obligated to appropriate money annually to make
payments under the lease. In order to reduce this risk, the funds
will only purchase these bonds where the issuer has a strong
incentive to continue making appropriations until maturity.
Quality Municipal Bonds
The funds purchase only quality municipal bonds that are either
rated investment grade (AAA/Aaa to BBB/Baa) by independent rating
agencies at the time of purchase or are non-rated but judged to
be investment grade by the funds' investment adviser. Each fund
will invest at least 80% of its net assets in investment-grade
quality municipal bonds. If suitable municipal bonds from a
specific state are not available at attractive prices and yields,
a fund may invest in municipal bonds of U.S. territories (such as
Puerto Rico and Guam) which are exempt from regular federal,
state, and local income taxes. The Michigan and Ohio Funds may
not invest more than 20% of their net assets in these territorial
municipal bonds.
Portfolio Maturity
Each fund buys municipal bonds with different maturities in
pursuit of its investment objective, but maintains under normal
market conditions an investment portfolio with an overall
weighted average maturity within a defined range. The Kentucky
Limited Term Fund maintains a weighted average portfolio maturity
of 1 to 7 years. All of the other funds described in this
prospectus are long-term funds and normally maintain a weighted
average portfolio maturity of 15 to 30 years.
Short-term Investments
Under normal market conditions, each fund may invest up to 20% of
net assets in short-term, high quality municipal bonds. See "How
We Manage Risk -- Hedging and Other Defensive Investment
Strategies." The funds may invest in short-term, high quality
taxable securities if suitable short-term municipal bonds are not
available at reasonable prices and yields. For more information
on eligible short-term investments, see the Statement of
Additional Information.
Delayed Delivery Transactions
The funds may buy or sell securities on a when-issued or delayed-
delivery basis, paying for or taking delivery of the securities
at a later date, normally within 15 to 45 days of the trade. Such
transactions involve an element of risk because the value of the
security to be purchased may decline before the settlement date.
How We Select Investments
Nuveen Advisory selects municipal obligations for the funds based
upon its assessment of a bond's relative value in terms of
current yield, price, credit quality and future prospects. Nuveen
Advisory is supported by
18 Section 2 How We Manage Your Money
<PAGE> 47
Nuveen's award-winning team of specialized research analysts who
review municipal securities available for purchase, monitor the
continued creditworthiness of each fund's municipal investments,
and analyze economic, political and demographic trends affecting
the municipal markets. We utilize these resources to identify
municipal obligations with favorable characteristics we believe
are not yet recognized by the market. We then select those
higher-yielding and undervalued municipal obligations that we
believe represent the most attractive values.
Portfolio Turnover
A fund buys and sells portfolio securities in the normal course
of its investment activities. The proportion of the fund's
investment portfolio that is sold and replaced with new
securities during a year is known as the fund's portfolio
turnover rate. The funds intend to keep portfolio turnover
relatively low in order to reduce trading costs and the
realization of taxable capital gains. Each fund, however, may
make limited short-term trades to take advantage of market
opportunities or reduce market risk.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund --
even the most conservative -- involves risk, including the risk
that you may receive little or no return on your investment or
even that you may lose part or all of your investment. Therefore,
before investing you should consider carefully the following
risks that you assume when you invest in these funds. Because of
these and other risks, you should consider an investment in any
of these funds to be a long-term investment.
Interest rate risk: the risk that the value of the fund's
portfolio will decline because of rising market interest rates
(bond prices move in the opposite direction of interest rates).
The longer the average maturity (duration) of a fund's portfolio,
the greater its interest rate risk. See "What Securities We
Invest In--Portfolio Maturity."
Income risk: the risk that the income from the fund's portfolio
will decline because of falling market interest rates. This can
result when the fund invests the proceeds from new share sales,
or from matured or called bonds, at market interest rates that
are below the portfolio's current earnings rate.
Credit risk: the risk that an issuer of a bond is unable to meet
its obligation to make interest and principal payments due to
changing market conditions. Generally, lower rated bonds provide
higher current income but are considered to carry greater credit
risk than higher rated bonds. Year 2000 issues may affect the
ability of municipal issuers to meet their payment obligations to
their bond holders, and may adversely affect their credit
ratings.
State Concentration risk: because the funds primarily purchase
municipal bonds from a specific state, each fund also bears
investment risk from the economic, political or regulatory
changes that could adversely affect municipal bond issuers in
that state and therefore the value of the funds' investment
portfolio. See "Appendix--Additional State Information." These
risks may be greater for the Kansas, Kentucky Limited, Missouri
and
Section 2 How We Manage Your Money 19
<PAGE> 48
Wisconsin Funds, which as "non-diversified" funds may concentrate
their investment in municipal bonds of certain issuers to a
greater extent than the Kentucky, Michigan and Ohio Funds
described in this prospectus, which are diversified funds.
Inflation risk: the risk that the value of assets or income from
investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the funds'
assets can decline as can the value of the funds' distributions.
How We Manage Risk
In pursuit of its investment objective, each fund assumes
investment risk, chiefly in the form of interest rate and credit
risk. The funds limit this investment risk generally by
restricting the type and maturities of municipal bonds they
purchase, and by diversifying their investment portfolios
geographically as well as across different industry sectors.
Investment Limitations
The funds have adopted certain investment limitations (based on
total assets) that cannot be changed without shareholder approval
and are designed to limit your investment risk and maintain
portfolio diversification. Each fund may not have more than:
. 25% in any one industry such as electric utilities or health
care.
. 10% in borrowings (33% if used to meet redemptions).
As diversified funds, the Kentucky, Michigan and Ohio Funds may
not have more than:
. 5% in securities in any one issuer (except for U.S.
Government securities or for 25% of the fund's total
assets).
Hedging and Other Defensive Investment Strategies
Each fund may invest up to 100% in cash equivalents and short-
term investments as a temporary defensive measure in response to
adverse market conditions, or to keep cash on hand fully
invested. During these periods, the weighted average maturity of
a fund's investment portfolio may fall below the defined range
described under "Portfolio Maturity."
Each fund may also use various investment strategies designed to
limit the risk of bond price fluctuations and to preserve
capital. These hedging strategies include using financial futures
contracts, options on financial futures, or options based on
either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of the funds' investment
adviser, correlate with the prices of the funds' investments. The
funds, however, have no present intent to use these strategies.
20 Section 2 How We Manage Your Money
<PAGE> 49
Section 3 How You Can Buy and Sell Shares
You can choose from four classes of fund shares, each with a
different combination of sales charges, fees, eligibility
requirements and other features. Your financial adviser can help
you determine which class is best for you. We offer a number of
features for your convenience. Please see the Statement of
Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or
Class R shares, you should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge (CDSC) would
apply upon redemption;
. the amount of any distribution or service fees that you may
incur while you own the shares;
. whether you will be reinvesting income or capital gain
distributions in additional shares;
. whether you qualify for a sales charge waiver or reduction.
For a summary of the charges and expenses for each class, please
see "What are the Costs of Investing?"
Class A Shares
You can buy Class A shares at the offering price, which is the
net asset value per share plus an up-front sales charge. You may
qualify for a reduced sales charge, or the sales charge may be
waived, as described in "How to Reduce Your Sales Charge." Class
A shares are also subject to an annual service fee of .20% which
compensates your financial adviser for providing ongoing service
to you. The up-front Class A sales charge for all funds described
in the prospectus except the Kentucky Limited Term Fund is as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
$50,000 but less than $100,000 4.00% 4.18% 3.50%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
$1,000,000 and over --(1) -- 1.00%(1)
</TABLE>
Section 3 How You Can Buy and Sell Shares 21
<PAGE> 50
The following Class A sales charges and commissions apply to the
Kentucky Limited Term Fund:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 2.50% 2.56% 2.00%
$50,000 but less than $100,000 2.00% 2.04% 1.60%
$100,000 but less than $250,000 1.50% 1.52% 1.20%
$250,000 but less than $500,000 1.25% 1.27% 1.00%
$500,000 but less than $1,000,000 0.75% 0.76% 0.60%
$1,000,000 and over --(1) -- 0.50%(1)
</TABLE>
(1) You can buy $1 million or more of Class A shares at net asset
value without an up-front sales charge. Nuveen pays authorized
dealers of record on these share purchases a sales commission of
1.00% (0.50% for the Kentucky Limited Term fund) of the first
$2.5 million, plus .50% of the next $2.5 million, plus .25% of
the amount over $5.0 million. If you redeem your shares within 18
months of purchase, you may have to pay a CDSC of 1% (0.50% for
the Kentucky Limited Term fund) of either your purchase price or
your redemption proceeds, whichever is lower. You do not have to
pay this CDSC if your financial adviser has made arrangements
with Nuveen and agrees to waive the commission.
Class B Shares
You can buy Class B shares at the offering price, which is the
net asset value per share without any up-front sales charge so
that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of
.95% of average daily assets. The annual .20% service fee
compensates your financial adviser for providing ongoing service
to you. The annual .75% distribution fee compensates Nuveen for
paying your financial adviser a 4% up-front sales commission,
which includes an advance of the first year's service fee. If you
sell your shares within six years of purchase, you will have to
pay a CDSC based on either your purchase price or what you sell
your shares for, whichever amount is lower, according to the
following schedule. You do not pay a CDSC on any Class B shares
you purchase by reinvesting dividends. The Kentucky Limited Term
Fund does not currently offer B shares.
Class B shares automatically convert to Class A shares eight
years after you buy them so that the distribution fees you pay
over the life of your investment are limited. You will continue
to pay an annual service fee on any converted Class B shares.
-----------------------------------------------------------------
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
-----------------------------------------------------------------
CDSC 5% 4% 4% 3% 2% 1%
Class C Shares
You can buy Class C shares at the offering price, which is the
net asset value per share without any up-front sales charge so
that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of 1%.
The annual .20% service fee compensates your financial adviser
for providing ongoing service to you. The annual .55% (0.35% for
the Kentucky Limited Term Fund) distribution fee reimburses
Nuveen for paying your financial adviser an ongoing sales
commission. Nuveen advances the first year's service and
distribution fees. If you sell your shares within 12 months of
purchase, you may have to
22 Section 3 How You Can Buy and Sell Shares
<PAGE> 51
pay a 1% CDSC based on either your purchase price or what you
sell your shares for, whichever amount is lower.
Class R Shares
Under limited circumstances, you may purchase Class R Shares at
the offering price, which is the net asset value on the day of
purchase. In order to qualify, you must be eligible under one of
the programs described in "How to Reduce Your Sales Charge"
(below) or meet certain other purchase size criteria. Class R
Shares are not subject to sales charges or ongoing service or
distribution fees. Class R shares have lower ongoing expenses
than the other classes.
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front
sales charge on Class A shares or to qualify to purchase Class R
shares.
<TABLE>
<CAPTION>
Class A Sales Charge Class A Sales Charge Class R Eligibility
Reductions Waivers
<S> <C> <C>
. Rights of accumulation . Nuveen Defined Portfolio . Certain employees and directors of
. Letter of intent reinvestment Nuveen or employees of authorized dealers
. Group purchase . Purchases using redemptions . Bank trust departments
from unrelated funds
. Retirement plans
. Certain employees and directors
of Nuveen or employees of
authorized dealers
. Bank trust departments
</TABLE>
In addition, Class A shares at net asset value and Class R shares
may be purchased through registered investment advisers,
certified financial planners and registered broker-dealers who
charge asset-based or comprehensive "wrap" fees for their
services. Please refer to the Statement of Additional Information
for detailed program descriptions and eligibility requirements.
Additional information is available from your financial adviser
or by calling (800) 257-8787. Your financial adviser can also
help you prepare any necessary application forms. You or your
financial adviser must notify Nuveen at the time of each purchase
if you are eligible for any of these programs. The funds may
modify or discontinue these programs at any time.
How to Buy Shares
You may open an account with $3,000 per fund share class and make
additional investments at any time with as little as $50. There
is no minimum if you are reinvesting Nuveen Defined Portfolio
distributions. The share price you pay will depend on when Nuveen
receives your order. Orders received before the close of trading
on a business day will receive that day's closing share price,
otherwise you will receive the next business day's price. A
business day is any day the New York Stock Exchange is open for
business and usually ends at 4 p.m. New York time when the
Exchange closes.
Section 3 How You Can Buy and Sell Shares 23
<PAGE> 52
Through a Financial Adviser
You may buy shares through your financial adviser, who can handle
all the details for you, including opening a new account.
Financial advisers can also help you review your financial needs
and formulate long-term investment goals and objectives. In
addition, financial advisers generally can help you develop a
customized financial plan, select investments and monitor and
review your portfolio on an ongoing basis to help assure your
investments continue to meet your needs as circumstances change.
Financial advisers are paid either from fund sales charges and
fees or by charging you a separate fee in lieu of a sales charge
for ongoing investment advice and services. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer you
to one in your area.
By Mail
You may open an account and buy shares by mail by completing the
enclosed application and mailing it along with your check to:
Nuveen Investor Services, P.O. Box 5186, Bowling Green Station,
New York, NY 10274-5186.
Systematic Investing
Once you have established a fund account, systematic investing
allows you to make regular investments through automatic
deductions from your bank account (simply complete the
appropriate section of the account application form) or directly
from your paycheck. To invest directly from your paycheck,
contact your financial adviser or call Nuveen at (800) 257-8787.
Systematic investing may also make you eligible for reduced sales
charges.
The chart below illustrates the benefits of systematic investing
based on a $3,000 initial investment and subsequent monthly
investments of $100 over 20 years. The example assumes you earn a
return of 4%, 5% or 6% annually on your investment and that you
reinvest all dividends. These annual returns do not reflect past
or projected fund performance.
[GRAPH APPEARS HERE]
24 Section 3 How You Can Buy and Sell Shares
<PAGE> 53
One of the benefits of systematic investing is dollar cost
averaging. Because you regularly invest a fixed amount of money
over a period of years regardless of the share price, you buy
more shares when the price is low and fewer shares when the price
is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same
period. To be effective, dollar cost averaging requires that you
invest over a long period of time, and does not assure that you
will profit.
Systematic Investment Plan
You can make regular investments of $50 or more per month by
authorizing us to draw preauthorized checks on your bank account.
You can stop the withdrawals at any time. There is no charge for
this plan.
Payroll Direct Deposit Plan
You can, with your employer's consent, make regular investments
of $25 or more per pay period (meeting the monthly minimum of
$50) by authorizing your employer to deduct this amount
automatically from your paycheck. You can stop the deductions at
any time. There is no charge for this plan.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may
request to have $50 or more withdrawn automatically from your
account. You may elect to receive payments monthly, quarterly,
semi-annually or annually, and may choose to receive a check,
have the monies transferred directly into your bank account (see
"Fund Direct--Electronic Funds Transfer" below), paid to a third
party or sent payable to you at an address other than your
address of record. You must complete the appropriate section of
the account application or Account Update Form to participate in
the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to
make concurrent purchases of Class A, B or C shares because you
may unnecessarily pay a sales charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer
you the following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered
account at any time for the same class of another Nuveen mutual
fund available in your state. Your exchange must meet the minimum
purchase requirements of the fund into which you are exchanging.
Because an exchange is treated for tax purposes as a concurrent
sale and purchase, and any gain may be subject to tax, you should
consult your tax adviser about the tax consequences of any
contemplated exchange.
The exchange privilege is not intended to allow you to use a fund
for short-term trading. Because excessive exchanges may interfere
with portfolio management, raise fund operating expenses or
otherwise have
Section 3 How You Can Buy and Sell Shares 25
<PAGE> 54
an adverse effect on other shareholders, each fund reserves the
right to revise or suspend the exchange privilege, limit the
amount or number of exchanges, or reject any exchange.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your
redemption proceeds up to one year later without incurring any
additional charges. You may only reinvest into the same share
class you redeemed. If you paid a CDSC, we will refund your CDSC
and reinstate your holding period. You may use this reinstatement
privilege only once for any redemption.
Fund Direct
You may link your fund account to your bank account and transfer
money electronically between these accounts and perform a variety
of account transactions, including buying shares by telephone and
systematic investment. You may also have dividends,
distributions, redemption payments or Systematic Withdrawals sent
directly to your bank account.
Your financial adviser can help you complete the forms for these
services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
How to Sell Shares
You may use one of the following ways to sell (redeem) your
shares on any day the New York Stock Exchange is open. You will
receive the share price next determined after Nuveen has received
your properly completed redemption request. Your redemption
request must be received before the close of trading for you to
receive that day's price. While the funds do not charge a
redemption fee, you may be assessed a CDSC, if applicable. When
you redeem Class A, Class B, or Class C shares subject to a CDSC,
the fund will first redeem any shares that are not subject to a
CDSC or that represent an increase in the value of your fund
account due to capital appreciation, and then redeem the shares
you have owned for the longest period of time, unless you ask the
fund to redeem your shares in a different order. No CDSC is
imposed on shares you buy through the reinvestment of dividends
and capital gains. The holding period is calculated on a monthly
basis and begins on the first day of the month in which you buy
shares. When you redeem shares subject to a CDSC, the CDSC is
calculated on the lower of your purchase price or redemption
proceeds, deducted from your redemption proceeds, and paid to
Nuveen. The CDSC may be waived under certain special
circumstances as described in the Statement of Additional
Information.
Through Your Financial Adviser
You may sell your shares through your financial adviser who can
prepare the necessary documentation. Your financial adviser may
charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can
redeem your shares by telephone up to $50,000. You may not redeem
by telephone shares held in certificate form. Checks will be
issued only to the shareholder of record and mailed to the
address of record. If you have established electronic funds
transfer privileges, you may have redemption proceeds transferred
electronically to your bank account. We will normally mail your
check the next business day. Nuveen and Chase Global Funds
Services will be liable for losses resulting from unauthorized
telephone redemptions only if they do not follow reasonable
procedures designed to
26 Section 3 How You Can Buy and Sell Shares
<PAGE> 55
verify the identity of the caller. You should immediately verify
your trade confirmations when you receive them.
By Mail
You can sell your shares at any time by sending a written request
to the appropriate fund, Nuveen Investor Services, P.O. Box 5186,
Bowling Green Station, New York, NY 10274-5186. Your request must
include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the
account;
. The name of the person to whom you want your redemption
proceeds paid (if other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if
other than the address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no
event more than seven days after we receive your request. If you
purchased your shares by check, your redemption proceeds will not
be mailed until your check has cleared. Guaranteed signatures are
required if you are redeeming more than $50,000, you want the
check payable to someone other than the shareholder of record or
you want the check sent to another address (or the address of
record has been changed within the last 60 days). Signature
guarantees must be obtained from a bank, brokerage firm or other
financial intermediary that is a member of an approved Medallion
Guarantee Program or that is otherwise approved by a fund. A
notary public cannot provide a signature guarantee.
AN IMPORTANT NOTE ABOUT INVOLUNTARY REDEMPTION.
FROM TIME TO TIME, THE FUNDS MAY ESTABLISH MINIMUM ACCOUNT SIZE REQUIREMENTS.
THE FUNDS RESERVE THE RIGHT TO LIQUIDATE YOUR ACCOUNT UPON 30 DAYS' WRITTEN
NOTICE IF THE VALUE OF YOUR ACCOUNT FALLS BELOW AN ESTABLISHED MINIMUM. THE
FUNDS PRESENTLY HAVE SET A MINIMUM BALANCE OF $100 UNLESS YOU HAVE AN ACTIVE
NUVEEN DEFINED PORTFOLIO REINVESTMENT ACCOUNT. YOU WILL NOT BE ASSESSED A CDSC
ON AN INVOLUNTARY REDEMPTION.
Section 3 How You Can Buy and Sell Shares 27
<PAGE> 56
Section 4 General Information
To help you understand the tax implications of investing in the funds,
this section includes important details about how the funds make
distributions to shareholders. We discuss some other fund policies, as
well.
Distributions and Taxes
The funds pay tax-free dividends monthly and any taxable capital gains
or other taxable distributions once a year in December. The funds
declare dividends monthly to shareholders of record as of the ninth of
each month, payable the first business day of the following
month.
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund
shares unless you request otherwise. You may request to have your
dividends paid to you by check, deposited directly into your bank
account, paid to a third party, sent to an address other than your
address of record or reinvested in shares of another Nuveen mutual
fund. For further information, contact your financial adviser or call
Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the funds invest in municipal bonds, the regular monthly
dividends you receive will be exempt from regular federal income tax.
All or a portion of these dividends, however, may be subject to state
and local taxes or to the federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital
gains, the funds may realize and distribute taxable income or capital
gains from time to time as a result of each fund's normal investment
activities. Each fund will distribute in December any taxable income
or capital gains realized over the preceding year. Net short-term
gains are taxable as ordinary income. Net long-term capital gains are
taxable as long-term capital gains regardless of how long you have
owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount
and nature of all dividends and capital gains, including any
percentage of your fund dividends attributable to municipal
obligations, that you were paid during the prior year. You will
receive this statement from the firm where you purchased your fund
shares if you hold your investment in street name. Nuveen will send
you this statement if you hold your shares in registered form. The tax
status of your dividends is not affected by whether you reinvest your
dividends or receive them in cash. If you receive social security
benefits, you should be aware that any tax-free income is taken into
account in calculating the amount of these benefits that may be
subject to federal income tax.
28 Section 4 General Information
<PAGE> 57
Tax laws are subject to change, so we urge you to consult your tax
adviser about your particular tax situation and how it might be
affected by current tax law.
Please note that if you do not furnish us with your correct Social
Security number or employer identification number, federal law
requires us to withhold federal income tax from your distributions and
redemption proceeds at a rate of 31%.
BUYING OR SELLING SHARES CLOSE TO A RECORD DATE
Buying fund shares shortly before the record date for a taxable
dividend is commonly known as "buying the dividend." The entire
dividend may be taxable to you even though a portion of the dividend
effectively represents a return of your purchase price. Similarly, if
you sell or exchange fund shares shortly before the record date for a
tax-exempt dividend, a portion of the price you receive may be treated
as a taxable capital gain even though it reflects tax-free income
earned but not yet distributed by the fund.
TAXABLE EQUIVALENT YIELDS
The taxable equivalent yield is the current yield you would need to
earn on a taxable investment in order to equal a stated tax-free yield
on a municipal investment. To assist you to more easily compare
municipal investments like the funds with taxable alternative
investments, the table below presents the taxable equivalent yields
for a range of hypothetical tax-free yields and tax rates:
TAXABLE EQUIVALENT OF TAX-FREE YIELDS
TAX-FREE YIELD
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
The yields and tax rates shown above are hypothetical and do not
predict your actual returns or effective tax rate. For more detailed
information, see the statement of additional information or consult
your tax adviser.
Distribution and Service Plans
John Nuveen & Co. Incorporated serves as the selling agent and
distributor of the funds' shares. In this capacity, Nuveen manages the
offering of the funds' shares and is responsible for all sales and
promotional activities. In order to reimburse Nuveen for its costs in
connection with these activities, including compensation paid to
authorized dealers, each fund has adopted a distribution and service
plan under Rule 12b-1 under the Investment Company Act of 1940. (See
"How to Choose a Share Class" for a description of the distribution
and service fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares
primarily for providing compensation to authorized dealers, including
Nuveen, in connection with the distribution of shares. Nuveen uses the
service fee for Class A, Class B, and Class C shares to compensate
authorized dealers, including Nuveen, for providing account services
to
Section 4 General Information 29
<PAGE> 58
shareholders. These services may include establishing and maintaining
shareholder accounts, answering shareholder inquiries, and providing
other personal services to shareholders. These fees also compensate
Nuveen for other expenses, including printing and distributing
prospectuses to persons other than shareholders, and preparing,
printing, and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of shares.
Because these fees are paid out of the funds' assets on an on-going
basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
Net Asset Value
The price you pay for your shares is based on the fund's net asset
value per share which is determined as of the close of trading
(normally 4:00 p.m. eastern time) on each day the New York Stock
Exchange is open for business. Net asset value is calculated for each
class by taking the fair value of the class' total assets, including
interest or dividends accrued but not yet collected, less all
liabilities, and dividing by the total number of shares outstanding.
The result, rounded to the nearest cent, is the net asset value per
share. All valuations are subject to review by the funds' Board of
Trustees or its delegate.
In determining net asset value, expenses are accrued and applied daily
and securities and other assets for which market quotations are
available are valued at market value. The prices of municipal bonds
are provided by a pricing service and based on the mean between the
bid and asked price. When price quotes are not readily available
(which is usually the case for municipal securities), the pricing
service establishes fair market value based on prices of comparable
municipal bonds.
Fund Service Providers
The custodian of the assets of the funds is The Chase Manhattan Bank,
4 New York Plaza, New York, NY 10004-2413. Chase also provides certain
accounting services to the funds. The funds' transfer, shareholder
services and dividend paying agent, Chase Global Funds Services
Company, P.O. Box 5186, New York, NY 10274-5186, performs bookkeeping,
data processing and administrative services for the maintenance of
shareholder accounts.
Nuveen Advisory and Chase Global Funds Services each rely on computer
systems to manage the funds' investments, process shareholder
transactions and provide shareholder account maintenance. Because of
the way computers historically have stored dates, some of these
systems currently may not be able to correctly process activity
occurring in the year 2000. Nuveen Advisory is working with the funds'
service providers to adapt their systems to address this "Year 2000"
issue. Nuveen advisory and the funds expect, but there can be no
absolute assurance, that the necessary work will be completed on a
timely basis.
30 Section 4 General Information
<PAGE> 59
Section 5 Financial Highlights
The following tables are intended to help you better
understand each fund's recent past performance. The
tables are excerpted from each fund's latest financial
statements audited by Arthur Andersen LLP. You may
obtain the complete statements along with the auditor's
report by requesting from Nuveen a free copy of the
fund's latest annual shareholder report.
Kansas Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
-------------------------------------- ------------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (1/92)
1998 $10.19 $.52 $ .41 $.93 $(.52) $ -- $(.52) $10.60 9.32% $102,217
1997 9.83 .53 .36 .89 (.53) -- (.53) 10.19 9.21 95,891
1996 10.01 .54 (.18) .36 (.54) -- (.54) 9.83 3.63 96,694
1995 9.83 .55 .18 .73 (.55) -- (.55) 10.01 7.80 83,683
1994 10.38 .56 (.46) .10 (.58) (.07)+ (.65) 9.83 .62 80,060
Class B (2/97)
1998 10.13 .44 .41 .85 (.44) -- (.44) 10.54 8.57 3,238
1997(c) 10.23 .13 (.12) .01 (.11) -- (.11) 10.13 .13 605
Class C (2/97)
1998 10.21 .47 .42 .89 (.47) -- (.47) 10.63 8.85 1,716
1997(c) 10.18 .15 .04 .19 (.16) -- (.16) 10.21 1.85 91
Class R (2/97)
1998 10.22 .56 .43 .99 (.55) -- (.55) 10.66 9.84 12
1997(c) 10.20 .18 (.02) .16 (.14) -- (.14) 10.22 1.55 --
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Class A (1/92)
1998 .71% 4.98% 13%
1997 .68 5.24 40
1996 .57 5.31 55
1995 .54 5.67 72
1994 .26 5.37 93
Class B (2/97)
1998 1.45 4.22 13
1997(c) 1.27* 4.62* 40
Class C (2/97)
1998 1.24 4.41 13
1997(c) 1.09* 4.85* 40
Class R (2/97)
1998 .51 5.16 13
1997(c) -- 6.61* 40
- ----------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kansas.
+ The amounts shown reflect distributions in excess of capital gains of $.05
per share.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 31
<PAGE> 60
Kentucky Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
-------------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/87)
1998 $11.05 $.59 $ .38 $ .97 $(.58) $(.05) $(.63) $11.39 9.00% $451,338
1997 10.82 .60 .24 .84 (.60) (.01) (.61) 11.05 7.87 430,803
1996 10.99 .61 (.17) .44 (.61) -- (.61) 10.82 4.04 410,808
1995 10.65 .61 .35 .96 (.62) -- (.62) 10.99 9.42 394,457
1994 11.06 .62 (.40) .22 (.63) -- (.63) 10.65 1.90 369,495
Class B (2/97)
1998 11.06 .50 .38 .88 (.50) (.05) (.55) 11.39 8.10 4,273
1997(c) 11.07 .17 (.01) .16 (.17) -- (.17) 11.06 1.47 544
Class C (10/93)
1998 11.04 .52 .39 .91 (.52) (.05) (.57) 11.38 8.43 28,630
1997 10.81 .54 .24 .78 (.54) (.01) (.55) 11.04 7.29 24,468
1996 10.99 .54 (.17) .37 (.55) -- (.55) 10.81 3.38 20,647
1995 10.65 .55 .35 .90 (.56) -- (.56) 10.99 8.82 15,831
1994(c) 11.46 .36 (.81) (.45) (.36) -- (.36) 10.65 (5.88)* 11,172
Class R (2/97)
1998 11.03 .61 .39 1.00 (.61) (.05) (.66) 11.37 9.25 675
1997(c) 11.08 .20 (.04) .16 (.21) -- (.21) 11.03 1.42 455
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Class A (5/87)
1998 .77% 5.19% 12%
1997 .75 5.44 13
1996 .71 5.50 17
1995 .68 5.85 28
1994 .58 5.60 12
Class B (2/97)
1998 1.54 4.38 12
1997(c) 1.39* 4.76* 13
Class C (10/93)
1998 1.33 4.63 12
1997 1.29 4.89 13
1996 1.27 4.93 17
1995 1.23 5.27 28
1994(c) 1.08* 4.96* 12
Class R (2/97)
1998 .58 5.37 12
1997(c) .49* 5.77* 13
- ----------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997
reflects the financial highlights of Flagship Kentucky.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
32 Section 5 Financial Highlights
<PAGE> 61
Kentucky Limited Term Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
-------------------------------------- ---------------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/95)
1998 9.92 $.44 $ .20 $.64 $(.44) $-- $(.44) $10.12 6.53% 8,989
1997 9.79 .45 .12 .57 (.44) -- (.44) 9.92 5.96 8,870
1996(c) 9.75 .31 .04 .35 (.31) -- (.31) 9.79 5.45* 8,389
Class C (9/95)
1998 9.92 .40 .20 .60 (.40) -- (.40) 10.12 6.17 2,416
1997 9.79 .41 .13 .54 (.41) -- (.41) 9.92 5.64 2,144
1997(c) 9.75 .29 .04 .33 (.29) -- (.29) 9.79 5.12* 1,767
Class R (2/97)
1998 9.92 .46 .18 .64 (.46) -- (.46) 10.10 6.58 16
1997(c) 9.98 .15 (.10) .05 (.11) -- (.11) 9.92 .56 --
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
---------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- ------------------------------------------------------------
<S> <C> <C> <C>
Class A (9/95)
1998 .66% 4.35% 36%
1997 .53 4.52 56
1996(c) .37* 4.37* 48
Class C (9/95)
1998 1.01 4.00 36
1997 .84 4.19 56
1997(c) .64* 4.12* 48
Class R (2/97)
1998 .46 4.54 36
1997(c) -- 5.73* 56
- ------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997 reflects
the financial highlights of Flagship Kentucky Limited Term.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 33
<PAGE> 62
Michigan Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------ ------------------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/85)
1998 $11.68 $.61 $ .42 $1.03 $(.61) $(.03) $(.64) $12.07 8.95% $263,632
1997 11.37 .62 .31 .93 (.61) (.01) (.62) 11.68 8.42 59,055
1996 11.59 .63 (.22) .41 (.63) -- (.63) 11.37 3.61 248,422
1995 11.31 .65 .28 .93 (.65) -- (.65) 11.59 8.57 250,380
1994 11.77 .66 (.43) .23 (.66) (.03)+ (.69) 11.31 1.87 242,993
Class B (2/97)
1998 11.70 .52 .42 .94 (.52) (.03) (.55) 12.09 8.12 3,839
1997(c) 11.66 .17 .04 .21 (.17) -- (.17) 11.70 1.86 380
Class C (6/93)
1998 11.66 .54 .43 .97 (.54) (.03) (.57) 12.06 8.45 45,690
1997 11.35 .55 .32 .87 (.55) (.01) (.56) 11.66 7.84 41,649
1996 11.58 .56 (.22) .34 (.57) -- (.57) 11.35 2.96 41,365
1995 11.30 .58 .28 .86 (.58) -- (.58) 11.58 7.98 37,122
1994(c) 11.86 .54 (.52) .02 (.55) (.03)+ (.58) 11.30 .19* 30,042
Class R (2/97)
1998 11.68 .63 .42 1.05 (.63) (.03) (.66) 12.07 9.16 26,904
1997(c) 11.66 .21 .02 .23 (.21) -- (.21) 11.68 2.01 26,211
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- -------------------------------------------------------------
<S> <C> <C> <C>
Class A (6/85)
1998 .84% 5.11% 13%
1997 .85 5.33 34
1996 .82 5.42 54
1995 .80 5.82 37
1994 .75 5.56 28
Class B (2/97)
1998 1.59 4.32 13
1997(c) 1.59* 4.52* 34
Class C (6/93)
1998 1.39 4.56 13
1997 1.40 4.77 34
1996 1.37 4.86 54
1995 1.35 5.25 37
1994(c) 1.25* 4.89* 28
Class R (2/97)
1998 .64 5.31 13
1997(c) .65* 5.57* 34
- -------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Michigan.
+ The amount shown includes a distribution in excess of capital gains of $.02
per share.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
34 Section 5 Financial Highlights
<PAGE> 63
Missouri Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------ ----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ending Net Asset Investment Investment Investment Capital Asset
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/87)
1998 $10.80 $.56 $ .43 $ .99 $(.56) $ -- $(.56) $11.23
1997 10.51 .56 .29 .85 (.56) -- (.56) 10.80
1996 10.72 .58 (.21) .37 (.58) -- (.58) 10.51
1995 10.50 .60 .22 .82 (.60) -- (.60) 10.72
1994 10.87 .61 (.34) .27 (.61) (.03)+ (.64) 10.50
Class B (2/97)
1998 10.80 .47 .44 .91 (.48) -- (.48) 11.23
1997(c) 10.81 .16 (.01) .15 (.16) -- (.16) 10.80
Class C (2/94)
1998 10.80 .50 .43 .93 (.50) -- (.50) 11.23
1997 10.50 .51 .29 .80 (.50) -- (.50) 10.80
1996 10.72 .51 (.21) .30 (.52) -- (.52) 10.50
1995 10.50 .53 .23 .76 (.54) -- (.54) 10.72
1994(c) 11.33 .02 (.83) (.81) (.02) -- (.02) 10.50
Class R (2/97)
1998 10.80 .58 .43 1.01 (.58) -- (.58) 11.23
1997(c) 10.90 .17 (.12) .05 (.15) -- (.15) 10.80
<CAPTION>
Ratios/Supplemental Data
--------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Total Assets Net Net Turnover
May 31, Return(b) (000) Assets(a) Assets(a) Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (8/87)
1998 9.32% $233,456 .87% 5.02% 19%
1997 8.29 218,924 .86 5.27 41
1996 3.51 212,717 .80 5.37 38
1995 8.19 205,089 .67 5.78 40
1994 2.42 187,347 .62 5.52 34
Class B (2/97)
1998 8.53 1,677 1.62 4.25 19
1997(c) 1.40 454 1.45* 4.59* 41
Class C (2/94)
1998 8.74 11,253 1.42 4.47 19
1997 7.80 7,968 1.40 4.72 41
1996 2.84 6,220 1.35 4.79 38
1995 7.60 3,989 1.20 5.19 40
1994(c) (17.62)* 1,877 1.15* 4.44* 34
Class R (2/97)
1998 9.56 41 .67 5.22 19
1997(c) .43 34 .55* 5.65* 41
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Missouri.
+ The amounts shown reflect distributions in excess of capital gains of $.01
per share for Missouri.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 35
<PAGE> 64
<TABLE>
<CAPTION>
Ohio Municipal Bond Fund**
Investment Operations Less Distributions
------------------------------ ----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ending Net Asset Investment Investment Investment Capital Asset
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/85)
1998 $11.41 $.60 $ .38 $ .98 $(.60) $(.05) $(.65) $11.74
1997 11.21 .61 .20 .81 (.61) -- (.61) 11.41
1996 11.43 .62 (.21) .41 (.63) -- (.63) 11.21
1995 11.21 .64 .22 .86 (.64) -- (.64) 11.43
1994 11.59 .64 (.38) .26 (.64) -- (.64) 11.21
Class B (2/97)
1998 11.41 .51 .38 .89 (.52) (.05) (.57) 11.73
1997(c) 11.42 .17 (.01) .16 (.17) -- (.17) 11.41
Class C (8/93)
1998 11.41 .54 .37 .91 (.54) (.05) (.59) 11.73
1997 11.21 .55 .20 .75 (.55) -- (.55) 11.41
1996 11.43 .55 (.21) .34 (.56) -- (.56) 11.21
1995 11.20 .57 .23 .80 (.57) -- (.57) 11.43
1994(c) 11.69 .46 (.49) (.03) (.46) -- (.46) 11.20
Class R (2/97)
1998 11.41 .62 .37 .99 (.62) (.05) (.67) 11.73
1997(c) 11.42 .21 (.01) .20 (.21) -- (.21) 11.41
<CAPTION>
Ratios/Supplemental Data
--------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Total Assets Net Net Turnover
May 31, Return(b) (000) Assets(a) Assets(a) Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (6/85)
1998 8.76% $472,821 .85% 5.15% 15%
1997 7.38 463,253 .89 5.39 17
1996 3.59 443,077 .92 5.41 31
1995 7.99 445,566 .95 5.78 31
1994 2.24 445,272 .93 5.48 9
Class B (2/97)
1998 7.89 7,422 1.61 4.39 15
1997(c) 1.45 1,649 1.60* 4.63* 17
Class C (8/93)
1998 8.12 47,036 1.40 4.60 15
1997 6.80 40,713 1.44 4.84 17
1996 3.03 34,939 1.47 4.84 31
1995 7.50 28,461 1.50 5.21 31
1994(c) (.17)* 25,674 1.46* 4.79* 9
Class R (2/97)
1998 8.89 162,220 .65 5.35 15
1997(c) 1.77 160,312 .65* 5.65* 17
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Ohio.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
36 Section 5 Financial Highlights
<PAGE> 65
<TABLE>
<CAPTION>
Wisconsin Municipal Bond Fund**
Investment Operations Less Distributions
------------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/94)
1998 $9.80 $.49 $ .49 $ .98 $(.50) $ -- $(.50) $10.28 10.19% $24,313
1997 9.61 .51 .19 .70 (.51) -- (.51) 9.80 7.40 14,004
1996 9.79 .50 (.18) .32 (.50) -- (.50) 9.61 3.35 12,370
1995(c) 9.58 .49 .21 .70 (.49) -- (.49) 9.79 7.36* 8,278
Class B (2/97)
1998 9.82 .42 .49 .91 (.42) -- (.42) 10.31 9.46 1,877
1997(c) 9.87 .12 (.06) .06 (.11) -- (.11) 9.82 .60 20
Class C (2/97)
1998 9.82 .44 .49 .93 (.45) -- (.45) 10.30 9.59 1,366
1997(c) 9.87 .13 (.07) .06 (.11) -- (.11) 9.82 .65 76
Class R (2/97)
1998 9.82 .53 .48 1.01 (.52) -- (.52) 10.31 10.47 45
1997(c) 9.87 .15 (.07) .08 (.13) -- (.13) 9.82 .84 40
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- --------------------------------------------------------------------
<S> <C> <C> <C>
Class A (6/94)
1998 .55% 4.87% 10%
1997 .51 5.20 42
1996 .64 5.02 47
1995(c) .39* 5.25* 52
Class B (2/97)
1998 1.32 4.04 10
1997(c) .94* 4.81* 42
Class C (2/97)
1998 1.11 4.25 10
1997(c) .69* 4.91* 42
Class R (2/97)
1998 .32 5.08 10
1997(c) -- 5.67* 42
- ---------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Wisconsin.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 37
<PAGE> 66
Appendix Additional State Information
Because the funds primarily purchase municipal bonds from a specific
state, each fund also bears investment risk from economic, political
or regulatory changes that could adversely affect municipal bond
issuers in that state and therefore the value of the fund's investment
portfolio. The following discussion of special state considerations
was obtained from official offering statements of these issuers and
has not been independently verified by the funds. The discussion
includes general state tax information related to an investment in
fund shares. Because tax laws are complex and often change, you should
consult your tax adviser about the state tax consequences of a
specific fund investment. See the Statement of Additional Information
for further information.
KANSAS
Growth in the State's trade, services and manufacturing sectors has
decreased the historical dominance of agriculture in the State
economy. Economic performance has been improving, due largely to gains
in aircraft manufacturing and recovery in agriculture. Personal income
grew at 5.4% in 1997 to $24,379, about 95% of the national median.
The State's unemployment rate dropped to 3.5% in June 1998 from its
peak of 5.5% in 1993.
The Kansas State Treasury does not issue general obligation debt. The
State instead relies on revenue and lease financing through the
Department of Transportation (KDOT) and the Development Finance
Authority (KDFA). KDFA provides financing for various public purpose
projects including prison construction, state offices, energy
conservation and university facilities. The KDOT bonds are rated
Aa2/AA+/AA by Moody's, Standard & Poor's, and Fitch respectively. KDFA
ratings vary and when not insured are generally rated A or better by
the major rating agencies.
Tax Treatment
The Kansas Fund's regular monthly dividends will not be subject to
Kansas personal income taxes to the extent they are paid out of income
earned on all Kansas municipal bonds issued after December 31, 1987,
on specified Kansas municipal bonds issued before that date, or on
U.S. government securities. You will be subject to Kansas personal
income taxes, however, to the extent the Kansas Fund distributes any
taxable income or realized capital gains, or if you sell or exchange
Kansas Fund shares and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Kansas Fund is similar
to that described above.
38 Appendix
<PAGE> 67
KENTUCKY
Growth in Kentucky's economy surpassed national growth rates in many
areas during the 1990's in part due to its lower cost of living and
aggressive business recruitment. The Commonwealth's economic base is
concentrated in manufacturing and service industries such as
industrial machinery, electronics and apparel production and insurance
and real estate. Kentucky's "Golden Triangle" bounded by Cincinnati,
Lexington and Louisville has experienced the most intense economic
growth.
Kentucky's average unemployment rate in June 1998 was 4.4%, compared
to the national average of 4.5% in June 1998 and the Commonwealth's
5.5% average in June 1997. Per capita income in 1997 was $20,657,
approximately 81% of national average.
In the past, the Commonwealth has experienced difficulty balancing its
budget, but recent economic growth and moderate debt levels improve
the Commonwealth's financial outlook. Although Kentucky has not issued
general obligation debt since 1965, the Commonwealth actively issues
appropriation-secured debt from several agencies, including the
Kentucky Turnpike Authority, the Kentucky Infrastructure Authority,
and the Kentucky Schools Facilities Construction Commission. Bonds
secured by Commonwealth appropriations generally receive ratings of
"A" or higher from the major rating services. All of Kentucky's
general obligation debt matured in 1995. Like the Commonwealth,
Kentucky Municipalities have not issued general obligation debt,
relying instead on appropriation-secured bonds.
TAX TREATMENT
The Kentucky Funds' regular monthly dividends will not be subject to
the Kentucky individual income tax to the extent they are paid out of
income earned on Kentucky municipal bonds or U.S. government
securities. You will be subject to Kentucky personal income tax,
however, to the extent the Kentucky Funds distribute any taxable
income or realized capital gains, or if you sell or exchange Kentucky
Funds' shares and realize a capital gain on the transaction. You will
not be subject to the Kentucky intangible property tax on the portion
of your Kentucky Funds' shares that is attributable to Kentucky
municipal bonds or U.S. government securities.
If you are employed in Louisville or Jefferson County, you will not be
subject to local occupational license fees on income earned from the
Kentucky Funds. If you are employed elsewhere in Kentucky, you
generally will not be subject to local occupational license fees. The
treatment of corporate shareholders is similar to that described
above, except that they may be subject to local occupational license
fees.
MICHIGAN
Michigan's economy has improved significantly since the 1980's. The
State's unemployment rate was 3.6% in June 1998, compared to national
average of 4.5%. Per capita income has increased each year over the
past decade, and was $25,560 in 1997. Population has remained stable
in the State, increasing by a negligible amount annually. The
manufacturing industry and the presence of the "Big 3" automobile
manufacturers are the primary influence in the economy. Despite recent
strikes and lower automobile sales and profits, the positive economic
impact of the manufacturing industry has contributed to the tax base
and job growth.
Appendix 39
<PAGE> 68
Michigan's economic and financial improvements are reflected in the
state's rating of Aa1/AA+/AA+ by Moody's, Standard & Poor's and Fitch,
respectively. All three rating agencies upgraded the State's credit
rating in 1998.
TAX TREATMENT
The Michigan Fund's regular monthly dividends will not be subject to
the Michigan individual income tax to the extent they are paid out of
income earned on Michigan municipal bonds or paid out of income earned
on or capital gains realized from, the sale of U.S. government
securities. You will be subject to Michigan personal income tax,
however, to the extent the Michigan Fund distributes any taxable
income or realized capital gains (other than capital gains realized
from the sale of U.S. government securities), or if you sell or
exchange Michigan Fund shares and realize a capital gain on the
transaction. If you reside in a Michigan city that imposes local
income taxes, you will not be subject to these taxes on the Michigan
Fund's distributions of income attributable to interest earned on U.S.
government securities or municipal bonds, or to gains on the sale of
U.S. government securities.
The treatment of corporate shareholders of the Michigan Fund differs
from that described above. Corporate shareholders should refer to the
Statement of Additional Information for more detailed
information.
MISSOURI
Missouri maintains a diversified economy, mirroring that of the
nation. Although recent industry growth has shifted to services and
tourism, defense and manufacturing are important elements of the State
economy. Population in Missouri has increased approximately 5.6% from
1990. The State's unemployment rate has steadily declined from the
high of 6.7% in 1991 and was 4.2% in June 1998, compared to the
national average of 4.5%. Per capita income increased 4.4% during 1997
to $24,001, about 94% of the national average.
Missouri retains substantial governmental balances through strategic
budget management. The State's unreserved fund balance in 1997 was
$1.2 billion, or 12.4% of General Fund revenues. Missouri's overall
creditworthiness is reflected in its longstanding Aaa/AAA/AAA rating
by Moody's Standard & Poors, and Fitch, respectively.
TAX TREATMENT
The Missouri Fund's regular monthly dividends will not be subject to
the Missouri individual income tax to the extent they are paid out of
income earned on Missouri municipal bonds or U.S. government
securities. You will be subject to Missouri personal income tax,
however, to the extent the Missouri Fund distributes any taxable
income or realized capital gains, or if you sell or exchange Missouri
Fund shares and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Missouri Fund is
similar to that described above.
40 Appendix
<PAGE> 69
OHIO
The Ohio economy has historically relied on durable goods
manufacturing, but recent growth has brought healthy diversification.
Employment growth in recent years has been concentrated among non-
manufacturing industries, with manufacturing employment tapering off
since its 1969 peak. Still, manufacturing remains an important
component of the State's economy, providing approximately 21% of total
employment in Ohio compared with 15% of national employment. General
economic activity in Ohio tends to be more cyclical than in non-
industrialized states, but during the current national expansion it
has had positive implications in Ohio.
From 1990-1998, the State's unemployment rate ranked at or below the
national average. Ohio's unemployment rate registered 4.5% in June
1998, comparable to the national average of 4.5% in June 1998, and
slightly higher than the State's 4.4% rate in June 1997. Per capita
income in 1997 was $24,661, approximately 96% of the national average.
The State cannot by law operate with a deficit and has well-
established procedures to ensure that appropriations and expenditures
are matched by revenues from the General Revenue Fund. The State is
currently working on revamping its school funding formula, which was
deemed unconstitutional in March 1997 by the Ohio Supreme Court.
Changes to the formula likely will require the State to increase its
aid to local public schools, which could affect the State's financial
position. Moody's gives Ohio general obligation bonds an Aa1 rating,
while Standard & Poor's and Fitch each rate the State AA+.
TAX TREATMENT
The Ohio Fund's regular monthly dividends will not be subject to Ohio
personal income tax, Ohio school district income taxes and Ohio
municipal income taxes to the extent they are derived from interest on
Ohio municipal bonds or U.S. government securities or attributable to
gain made on the sale, exchange or other disposition by the Fund of
Ohio municipal bonds. You will, however, be subject to Ohio personal
income taxes, Ohio school district income taxes and Ohio municipal
income taxes to the extent the Ohio Fund distributes any taxable
income or realized capital gains (other than capital gains on Ohio
municipal bonds), or if you sell or exchange Ohio Fund shares and
realize a net gain on the transaction.
The treatment of corporate shareholders of the Ohio Fund differs from
that described above. Corporate shareholders should refer to the
Statement of Additional Information for more detailed information and
are urged to consult their tax adviser.
WISCONSIN
Wisconsin's economy is diverse and strong with non-agricultural
employment evenly spread between the manufacturing, service and trade
sectors. The State continues its efforts to attract new businesses
with grants and loans for major development projects, labor training
and technology development. Manufacturing remains a dominant sector at
24% and is currently a source of strength.
Appendix 41
<PAGE> 70
The State's unemployment rate was 3.0% in June 1998. Per capita
income was $24,475 in 1997, about 96% of the national average.
The State's general obligations receive Aa2/AA ratings from Moody's
and Standard and Poor's, respectively.
TAX TREATMENT
The Wisconsin Fund's regular monthly dividends will not be subject to
Wisconsin personal income tax to the extent they are paid out of
income earned on certain Wisconsin municipal obligations or on U.S.
government securities. You will be subject to Wisconsin personal
income tax, to the extent the Wisconsin Fund distributes any taxable
income or realized capital gains, or if you sell or exchange Wisconsin
Fund shares and realize capital gains on the transaction. A certain
portion of such capital gains, however, will be exempt from Wisconsin
personal income tax.
The treatment of corporate shareholders of the Wisconsin Fund differs
from that described above. Corporate shareholders should refer to the
Statement of Additional Information for more detailed information and
are urged to consult their tax adviser.
Appendix
<PAGE> 71
NUVEEN MUTUAL FUNDS
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
GROWTH
Nuveen Rittenhouse Growth Fund
GROWTH AND INCOME
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME
NATIONAL MUNICIPAL BOND FUNDS
Long-term
Insured Long-term
Intermediate-term
Limited-term
STATE MUNICIPAL BOND FUNDS
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky/2/ New York/1/
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Shareholder
reports contain management's discussion of market conditions, investment
strategies and performance results as of the fund's latest semi-annual or annual
fiscal year end. Call Nuveen at (800) 257-8787 to request a free copy of any of
these materials or other fund information.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549. The funds'
Investment Company file number is 811-07751.
1. Long-term and insured long-term portfolios.
2. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE> 72
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
Relating to the Acquisition of Assets and Liabilities of
Nuveen Flagship Kentucky Limited Municipal Bond Fund
DATED: FEBRUARY , 1999
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides information about the
Nuveen Flagship Kentucky Municipal Bond Fund (the "Kentucky Fund" or a "Fund"),
a series of the Nuveen Flagship Multistate Trust IV, an open-end investment
company organized as a Massachusetts business trust ("Multistate Trust"), in
addition to information contained in the Prospectus/Proxy Statement of the
Kentucky Fund, dated February , 1999, which also serves as the proxy statement
of the Nuveen Flagship Kentucky Limited Term Municipal Bond Fund (the "Kentucky
Limited Term" or a "Fund"), a series of the Multistate Trust, in connection with
the issuance of Class A, C and R shares of the Kentucky Fund to shareholders of
the Kentucky Limited Term Fund. This Statement of Additional Information is not
a prospectus. It should be read in conjunction with the Prospectus/ Proxy
Statement, into which it has been incorporated by reference and which may be
obtained by contacting the Funds located at 333 West Wacker Drive, Chicago,
Illinois 60606, or by calling (312) 917-7700 or (800) 257-8787.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROPOSED REORGANIZATION OF THE KENTUCKY LIMITED TERM FUND... 1
ADDITIONAL INFORMATION ABOUT THE KENTUCKY AND KENTUCKY
LIMITED TERM FUNDS........................................ 1
FINANCIAL STATEMENTS........................................ 1
Plan and Agreement of Reorganization........................ Exhibit A
Statement of Additional Information for the Kentucky and
Kentucky Limited Term Funds............................... Exhibit B
Financial Statements for the Kentucky Fund and the Kentucky
Limited Term Fund......................................... Exhibit C
</TABLE>
The Funds will provide, without charge, upon the written or oral request of
any person to whom this Statement of Additional Information is delivered, a copy
of any and all documents that have been incorporated by reference in the
registration statement of which this Statement of Additional Information is a
part.
PROPOSED REORGANIZATION OF THE KENTUCKY LIMITED TERM FUND
The shareholders of the Kentucky Limited Term Fund are being asked to
approve an acquisition of all of the assets of the Kentucky Limited Term Fund
solely in exchange for Class A, C and R shares of the Kentucky Fund and the
Kentucky Fund's assumption of the liabilities of the Kentucky Limited Term Fund
(the "Reorganization") pursuant to an Agreement and Plan of Reorganization by
and between the Kentucky Fund and the Kentucky Limited Term Fund (the
"Agreement"). A copy of the form of the Agreement is attached hereto as Exhibit
A.
ADDITIONAL INFORMATION ABOUT THE KENTUCKY AND KENTUCKY LIMITED TERM FUNDS
Incorporated herein by reference in its entirety is the Statement of
Additional Information of the Kentucky and Kentucky Limited Term Funds, dated
September 30, 1998, attached as Exhibit B to this Statement of Additional
Information.
FINANCIAL STATEMENTS
Incorporated herein by reference in their respective entireties are the
unaudited financial statements for the six months ended November 30, 1998 and
the audited financial statements for the Kentucky and Kentucky Limited Term
Funds for the fiscal year ended May 31, 1998, attached as Exhibit C.
<PAGE> 73
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as
of December 18, 1998, by and between the Nuveen Flagship Kentucky Municipal Bond
Fund (the "Acquiring Fund"), a series of the Nuveen Flagship Multistate Trust
IV, a business trust formed under the laws of the Commonwealth of Massachusetts
(the "Acquiring Fund Trust"), and the Nuveen Flagship Kentucky Limited Term
Municipal Bond Fund (the "Acquired Fund"), a series of the Nuveen Flagship
Multistate Trust IV (the "Acquired Fund Trust").
WITNESSETH:
WHEREAS, the Board of Trustees of the Acquiring Fund Trust and the
Acquired Fund Trust, on behalf of the Acquiring Fund and Acquired Fund
respectively, have determined that entering into this Agreement for the
Acquiring Fund to acquire the assets and liabilities of the Acquired Fund is in
the best interests of the shareholders of each respective fund; and
WHEREAS, the parties intend that this transaction qualify as a
reorganization within the meaning of Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. PLAN OF TRANSACTION.
A. Transfer of Assets. Upon satisfaction of the conditions precedent
set forth in Sections 7 and 8 hereof, the Acquired Fund will convey, transfer
and deliver to the Acquiring Fund at the closing, provided for in Section 2
hereof, all of the existing assets of the Acquired Fund (including accrued
interest to the Closing Date), free and clear of all liens, encumbrances and
claims whatsoever (the assets so transferred collectively being referred to as
the "Assets").
B. Consideration. In consideration thereof, the Acquiring Fund agrees
that on the Closing Date, defined in Section 2 hereof, the Acquiring Fund will
(i) deliver to the Acquired Fund, full and fractional Class A, Class C and Class
R shares of beneficial interest of the Acquiring Fund having aggregate net asset
value in an amount equal to the aggregate value of Class A, Class C and Class R
shares, respectively, of the Acquired Fund determined pursuant to Section 3A of
this Agreement (collectively, the "Acquiring Fund Shares") and (ii) assume all
of the Acquired Fund's liabilities as described in Section 3E hereof (the
"Liabilities"). The calculation of full and fractional Class A, Class C and
Class R shares of beneficial interest of the Acquiring Fund to be exchanged
shall be carried out to no less than two (2) decimal places. The Acquiring Fund
Shares shall consist of a number of full and fractional Class A, Class C and
Class R shares of the Acquiring Fund that will permit the Acquired Fund to make
the distribution described below. On the Closing Date, the Acquiring Fund shall
deliver to the Acquired Fund the Acquiring Fund Shares in the Amount determined
pursuant to this Section 1B and the Acquired Fund thereafter shall, in order to
effect the distribution of such shares to the Acquired Fund's shareholders in
liquidation of the Acquired Fund and in exchange for the shareholders' shares of
the Acquired Fund, instruct the Acquiring Fund to register the pro rata interest
in the Acquiring Fund Shares (in full and fractional shares) of each of the
holders of record of shares of the Acquired Fund in accordance with their
holdings of Class A, Class C or Class R shares of the Acquired Fund and shall
provide as part of such instruction a complete and updated list of such holders
(including addresses and taxpayer identification numbers), and the Acquiring
Fund agrees promptly to comply with said instruction. The Acquiring Fund shall
have no obligation to inquire as to the validity, propriety or correctness of
such instruction, but shall assume that such instruction is valid, proper and
correct. All Acquiring Fund Shares delivered to the Acquired Fund in exchange
for such Assets shall be delivered at net asset value without sales load,
commission or other similar fee being imposed.
A-1
<PAGE> 74
2. CLOSING OF THE TRANSACTION.
Closing Date. The closing shall occur April 23, 1999 or such later
date as soon as practicable thereafter, as the parties may mutually agree (the
"Closing Date").
3. PROCEDURE FOR REORGANIZATION.
A. Valuation. The value of the Assets and Liabilities of the Acquired
Fund to be transferred and assumed, respectively, by the Acquiring Fund shall be
computed as of the Closing Date, in the manner set forth in the most recent
Prospectus and Statement of Additional Information of the Acquiring Fund
(collectively, the "Acquiring Fund Prospectus"), copies of which have been
delivered to the Acquired Fund.
B. Delivery of Fund Assets. The Assets shall be delivered to The Chase
Manhattan Bank, 4 New York Plaza, New York 10004, as custodian for the Acquiring
Fund (the "Custodian") for the benefit of the Acquiring Fund, duly endorsed in
proper form for transfer in such condition as to constitute a good delivery
thereof, free and clear of all liens, encumbrances and claims whatsoever, in
accordance with the custom of brokers, and shall be accompanied by all necessary
state stock transfer stamps, the cost of which shall be borne by the Acquired
Fund.
C. Failure to Deliver Securities. If the Acquired Fund is unable to
make delivery pursuant to Section 3B hereof to the Custodian of any of the
Acquired Fund's securities for the reason that any of such securities purchased
by the Acquired Fund have not yet been delivered to it by the Acquired Fund's
broker or brokers, then, in lieu of such delivery, the Acquired Fund shall
deliver to the Custodian, with respect to said securities, executed copies of an
agreement of assignment and due bills executed on behalf of said broker or
brokers, together with such other documents as may be required by the Acquiring
Fund or Custodian, including brokers' confirmation slips.
D. Shareholder Accounts. The Acquiring Fund, in order to assist the
Acquired Fund in the distribution of the Acquiring Fund Shares to the Acquired
Fund shareholders after delivery of the Acquiring Fund Shares to the Acquired
Fund, will establish pursuant to the request of the Acquired Fund an open
account with the Acquiring Fund for each shareholder of the Acquired Fund and,
upon request by the Acquired Fund, shall transfer to such account the exact
number of full and fractional Class A, Class C and Class R shares of the
Acquiring Fund then held by the Acquired Fund specified in the instruction
provided pursuant to Section 2 hereof. The Acquiring Fund is not required to
issue certificates representing Acquiring Fund Shares. Upon liquidation or
dissolution of the Acquired Fund, certificates representing shares of beneficial
interest stock of the Acquired Fund shall become null and void.
E. Liabilities. The Liabilities shall include all of Acquired Fund's
liabilities, debts, obligations, and duties of whatever kind or nature, whether
absolute, accrued, contingent, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable at the Closing Date,
and whether or not specifically referred to in this Agreement.
F. Expenses. In the event that the transactions contemplated herein
are consummated the Acquired Fund agrees to pay (i) for the reasonable outside
expenses of the Acquired Fund and the Acquiring Fund for the transactions
contemplated herein which are solely and directly related to the reorganization;
including, but not by way of limitation, the preparation of the Acquiring Fund
Trust's Registration Statement on Form N-14 (the "Registration Statement") and
the solicitation of the Acquired Fund shareholder proxies; (ii) the Acquired
Fund's and Acquiring Fund's legal counsel's reasonable attorney's fees, which
fees shall be payable pursuant to receipt of an itemized statement; and (iii)
the cost of rendering the tax opinion, more fully referenced in Section 7F
below. In the event that the transactions contemplated herein are not
consummated for any reason, then all reasonable outside expenses of the Acquired
Fund and the Acquiring Fund incurred to the date of termination of this
Agreement shall be borne by the Acquired Fund.
G. Liquidation and Dissolution. As soon as practicable after the
Closing Date but in no event later than one year after the Closing Date, the
Board of Trustees of the Acquired Fund Trust and the Acquired Fund shall
A-2
<PAGE> 75
take all necessary and proper action to completely liquidate and terminate the
Acquired Fund as a series in accordance with Massachusetts law and the Trust's
Declaration of Trust. Immediately after the Closing Date, the stock transfer
books relating to the Acquired Fund shall be closed and no transfer of shares
shall thereafter be made on such books.
4. ACQUIRED FUND'S REPRESENTATIONS AND WARRANTIES.
The Acquired Fund hereby represents and warrants to the Acquiring
Fund, which representations and warranties are true and correct on the date
hereof, and agrees with the Acquiring Fund that:
A. Organization. The Acquired Fund Trust is a Massachusetts Business
Trust duly formed and in good standing under the laws of the State of
Massachusetts and is duly authorized to transact business in the State of
Massachusetts. The Acquired Fund is a separate series of the Acquired Fund Trust
duly designated in accordance with the applicable provisions of the Acquired
Fund Trust's Declaration of Trust. The Acquired Fund Trust and Acquired Fund are
qualified to do business in all jurisdictions in which they are required to be
so qualified, except jurisdictions in which the failure to so qualify would not
have a material adverse effect on the Acquired Fund Trust or Acquired Fund. The
Acquired Fund has all material federal, state and local authorizations necessary
to own all of the properties and assets and to carry on its business as now
being conducted, except authorizations which the failure to so obtain would not
have a material adverse effect on the Acquired Fund.
B. Registration. The Acquired Fund Trust is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management company and such registration has not been revoked or rescinded. The
Acquired Fund is a nondiversified series of the Acquired Fund Trust. The
Acquired Fund Trust and the Acquired Fund are in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder. All of the
outstanding shares of beneficial interest of the Acquired Fund have been duly
authorized and are validly issued, fully paid and nonassessable (except that
shareholders of the Acquired Fund may under certain circumstances be held
personally liable for its obligations) and not subject to pre-emptive or
dissenters' rights.
C. Audited Financial Statements. The statement of assets and
liabilities and the portfolio of investments and the related statements of
operations and changes in net assets of the Acquired Fund audited as of and for
the fiscal year ended May 31, 1998, true and complete copies of which have been
heretofore furnished to the Acquiring Fund, fairly represent the financial
condition and the results of operations of the Acquired Fund as of and for their
respective dates and periods in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved.
D. Financial Statements. The Acquired Fund shall furnish to the
Acquiring Fund (i) an unaudited statement of assets and liabilities and the
portfolio of investments and the related statements of operations and changes in
net assets of the Acquired Fund for the period ended November 30, 1998 and (ii)
an unaudited statement of assets and liabilities as of and for the interim
period ending on the Closing Date; such financial statements will represent
fairly the financial position and portfolio of investments and the results of
the Acquired Fund's operations as of, and for the period ending on, the dates of
such statements in conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved and the results of its
operations and changes in financial position for the periods then ended; and
such financial statements shall be certified by the Treasurer of the Acquired
Fund as complying with the requirements hereof.
E. Contingent Liabilities. There are no contingent Liabilities of the
Acquired Fund not disclosed in the financial statements delivered pursuant to
Sections 4C and 4D which would materially affect the Acquired Fund's financial
condition, and there are no legal, administrative, or other proceedings pending
or, to its knowledge, threatened against the Acquired Fund which would, if
adversely determined, materially affect the Acquired Fund's financial condition.
All Liabilities were incurred by the Acquired Fund in the ordinary course of its
business.
F. Material Agreements. The Acquired Fund is in compliance with all
material agreements, rules, laws, statutes, regulations and administrative
orders affecting its operations or its assets; and except as referred to in
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the Acquired Fund's Prospectus and Statement of Additional Information, there
are no material agreements outstanding relating to the Acquired Fund to which
the Acquired Fund is a party.
G. Tax Returns. At the date hereof, all Federal and other material tax
returns and reports of the Acquired Fund required by law to have been filed by
such dates shall have been filed, and all Federal and other taxes shown thereon
shall have been paid so far as due, or provision shall have been made for the
payment thereof, and to the best of the Acquired Fund's knowledge no such return
is currently under audit and no assessment has been asserted with respect to any
such return.
H. Corporate Authority. The Acquired Fund has the necessary power to
enter into this Agreement and to consummate the transactions contemplated
herein. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein have been duly authorized
by the Acquired Fund Trust's Board of Trustees, and except for obtaining
approval of the holders of the shares of the Acquired Fund, no other corporate
acts or proceedings by the Acquired Fund are necessary to authorize this
Agreement and the transactions contemplated herein. This Agreement has been duly
executed and delivered by the Acquired Fund and constitutes the legal, valid and
binding obligation of Acquired Fund enforceable in accordance with its terms.
I. No Violation; Consents and Approvals. The execution, delivery and
performance of this Agreement by the Acquired Fund does not and will not (i)
violate any provision of the Acquired Fund Trust's Declaration of Trust or the
Designation of Series of the Acquired Fund, (ii) violate any statute, law,
judgment, writ, decree, order, regulation or rule of any court or governmental
authority applicable to the Acquired Fund, (iii) result in a violation or breach
of, or constitute a default under any material contract, indenture, mortgage,
loan agreement, note, lease or other instrument or obligations to which the
Acquired Fund is subject, or (iv) result in the creation or imposition or any
lien, charge or encumbrance upon any property or assets of the Acquired Fund. No
consent, approval, authorization, order or filing with or notice to any court or
governmental authority or agency is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement and no consent
of or notice to any third party or entity is required for the consummation by
the Acquired Fund of the transactions contemplated by this Agreement (except
such as have been obtained under the Securities Act of 1933 (the "Securities
Act"), the 1940 Act or the rules and regulations thereunder and the filing of an
amendment to the Trust's Designation of Series in connection with the
termination of the Acquired Fund).
J. Title. The Acquired Fund has good and marketable title to the
Assets, free and clear of all liens, mortgages, pledges, encumbrances, charges,
claims and equities whatsoever, other than a lien for taxes not yet due and
payable, and full right, power and authority to sell, assign, transfer and
deliver such Assets; upon delivery of such Assets, the Acquiring Fund will
receive good and marketable title to such Assets, free and clear of all liens,
mortgages, pledges, encumbrances, charges, claims and equities other than a lien
for taxes not yet due and payable.
K. Prospectus/Proxy Statement. The Registration Statement and the
Prospectus/Proxy Statement contained therein as of the effective date of the
Registration Statement, as amended or as supplemented if it shall have been
amended or supplemented, conforms and will conform as it relates to the Acquired
Fund, in all material respects. to he applicable requirements of the applicable
Federal and state securities laws and the rules and regulations of the SEC
thereunder, and do not and will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representations or
warranties in this Section 4K apply to statements or omissions made in reliance
upon and in conformity with written information concerning the Acquiring Fund
furnished to the Acquired Fund by the Acquiring Fund.
L. Tax Qualification. The Acquired Fund has qualified or will qualify
as a regulated investment company within the meaning of Section 851 of the Code
for each of its taxable years ending on or prior to the Closing Date; and has
satisfied or will satisfy the distribution requirements imposed by Section 852
of the Code for each of its taxable years on or prior to the Closing Date.
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M. Fair Market Value. The fair market value on a going concern basis
of the Assets will equal or exceed the Liabilities to be assumed by the
Acquiring Fund and those to which the Assets are subject.
5. THE ACQUIRING FUND'S REPRESENTATIONS AND WARRANTIES.
The Acquiring Fund hereby represents and warrants to the Acquired
Fund, which representations and warranties are true and correct on the date
hereof, and agrees with the Acquired Fund that:
A. Organization. The Acquiring Fund Trust is a Massachusetts Business
Trust duly formed and in good standing under the laws of the State of
Massachusetts and is duly authorized to transact business in the State of
Massachusetts. The Acquiring Fund is a separate series of the Acquiring Fund
Trust duly designated in accordance with the applicable provisions of the
Acquiring Fund Trust's Declaration of Trust. The Acquiring Fund Trust and
Acquiring Fund are qualified to do business in all jurisdictions in which they
are required to be so qualified, except jurisdictions in which the failure to so
qualify would not have a material adverse effect on either the Acquiring Fund
Trust or Acquiring Fund. The Acquiring Fund has all material federal, state and
local authorizations necessary to own all of the properties and assets and to
carry on its business and the business thereof as now being conducted, except
authorizations which the failure to so obtain would not have a material adverse
effect on the Acquiring Fund.
B. Registration. The Acquiring Fund Trust is registered under the 1940
Act as an open-end management company and such registration has not been revoked
or rescinded. The Acquiring Fund is a diversified series of the Acquiring Fund
Trust. The Acquiring Fund Trust and the Acquiring Fund are in compliance in all
material respects with the 1940 Act and the rules and regulations thereunder.
All of the outstanding shares of beneficial interest of the Acquiring Fund have
been duly authorized and are validly issued, fully paid and non-assessable
(except that shareholders of the Acquired Fund may under certain circumstances
be held personally liable for its obligations) and not subject to pre-emptive or
dissenters rights.
C. Audited Financial Statements. The statement of assets and
liabilities and the portfolio of investments and the related statements of
operations and changes in net assets of the Acquiring Fund audited as of and for
the fiscal year ended May 31, 1998, true and complete copies of which have been
heretofore furnished to the Acquired Fund fairly represent the financial
condition and the results of operations of the Acquiring Fund as of and for
their respective dates and periods in conformity with generally accepted
accounting principles applied on a consistent basis during the periods involved.
D. Financial Statements. The Acquiring Fund shall furnish to the
Acquired Fund (i) an unaudited statement of assets and liabilities and the
portfolio of investments and the related statements of operations and changes in
net assets of the Acquiring Fund for the period ended November 30, 1998, and
(ii) an unaudited statement of assets and liabilities as of and for the interim
period ending on the Closing Date; such financial statements will represent
fairly the financial position and portfolio of investments and the results of
its operations as of, and for the period ending on, the dates of such statements
in conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved and the results of its operations
and changes in financial position for the periods then ended; and such financial
statements shall be certified by the Treasurer of the Acquiring Fund as
complying with the requirements hereof.
E. Contingent Liabilities. There are no contingent liabilities of the
Acquiring Fund not disclosed in the financial statements delivered pursuant to
Sections 5C and 5D which would materially affect the Acquiring Fund's financial
condition, and there are no legal, administrative, or other proceedings pending
or, to its knowledge, threatened against the Acquiring Fund which would, if
adversely determined, materially affect the Acquiring Fund's financial
condition.
F. Material Agreements. The Acquiring Fund is in compliance with all
material agreements, rules, laws, statutes, regulations and administrative
orders affecting its operations or its assets; and except as referred to in the
Acquiring Fund Prospectus and Statement of Additional Information there are no
material agreements outstanding relating to the Acquiring Fund to which the
Acquiring Fund is a party.
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G. Tax Returns. At the date hereof, all Federal and other material tax
returns and reports of the Acquiring Fund required by law to have been filed by
such dates shall have been filed, and all Federal and other taxes shall have
been paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to any
such return.
H. Corporate Authority. The Acquiring Fund has the necessary power to
enter into this Agreement and to consummate the transactions contemplated
herein. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein have been duly authorized
by the Acquiring Fund's Board of Trustees, no other corporate acts or
proceedings by the Acquiring Fund are necessary to authorize this Agreement and
the transactions contemplated herein. This Agreement has been duly executed and
delivered by the Acquiring Fund and constitutes a valid and binding obligation
of the Acquiring Fund enforceable in accordance with its terms.
I. No Violation; Consents and Approvals. The execution, delivery and
performance of this Agreement by the Acquiring Fund does not and will not (i)
violate any provision of the Acquiring Fund Trust's Declaration of Trust or the
Designation of Series of the Acquiring Fund, (ii) violate any statute, law,
judgment, writ, decree, order, regulation or rule of any court or governmental
authority applicable to the Acquiring Fund or (iii) result in a violation or
breach of, or constitute a default under, any material contract, indenture,
mortgage, loan agreement, note, lease or other instrument or obligation to which
the Acquiring Fund is subject, or (iv) result in the creation or imposition or
any lien, charge or encumbrance upon any property or assets of the Acquiring
Fund. No consent, approval, authorization, order or filing with or notice to any
court or governmental authority or agency is required for the consummation by
the Acquiring Fund of the transactions contemplated by this Agreement and no
consent of or notice to any third party or entity is required for the
consummation by the Acquiring Fund of the transactions contemplated by this
Agreement (except such as have been obtained under the Securities Act, the 1940
Act or the rules and regulations thereunder and the filing of an amendment to
the Trust's Designation of Series in connection with the termination of the
Acquired Fund).
J. Absence of Proceedings. There are no legal, administrative or other
proceedings pending or, to its knowledge, threatened against the Acquiring Fund
which would materially affect its financial condition.
K. Shares of the Acquiring Fund Registration. The Acquiring Fund
Shares to be issued pursuant to Section I hereof will be duly registered under
the Securities Act and all applicable state securities laws.
L. Shares of the Acquiring Fund: Authorization. The shares of
beneficial interest of the Acquiring Fund to be issued pursuant to Section I
hereof have been duly authorized and, when issued in accordance with this
Agreement, will be validly issued and fully paid and non-assessable (except that
shareholders of the Acquired Fund may under certain circumstances be held
personally liable for its obligations) by the Acquiring Fund Trust and conform
in all material respects to the description thereof contained in the Acquiring
Fund's Prospectus furnished to the Acquired Fund.
M. Registration Statement. The Registration Statement and the
Prospectus/Proxy Statement contained therein as of the effective date of the
Registration Statement, and at all times subsequent thereto up to and including
the Closing Date, as amended or as supplemented if they shall have been amended
or supplemented, conforms and will conform as it relates to the Acquiring Fund,
in all material respects, to the applicable requirements of the applicable
Federal securities laws and the rules and regulations of the SEC thereunder, and
do not and will not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representations or warranties in this Section 5M
apply to statements or omissions made in reliance upon and in conformity with
written information concerning the Acquired Fund furnished to the Acquiring Fund
by the Acquired Fund.
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N. Tax Qualification. The Acquiring Fund has qualified or will qualify
as a regulated investment company within the meaning of Section 851 of the Code
for each of its taxable years ending prior to the Closing Date and for its
taxable year that includes the Closing Date; and has satisfied or will satisfy
the distribution requirements imposed by Section 852 of the Code for each of its
taxable years ending prior to the Closing Date and for its taxable year that
includes the Closing Date.
6. COVENANTS.
During the period from the date of this Agreement and continuing until
the Closing Date the Acquired Fund and Acquiring Fund (except as expressly
contemplated or permitted by this Agreement) agree as follows:
A. Other Actions. The Acquired Fund and Acquiring Fund shall operate
only in the ordinary course of business consistent with prior practice. No party
shall take any action that would, or reasonably would be expected to, result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect.
B. Government Filings; Consents. The Acquired Fund and Acquiring Fund
shall file all reports required to be filed by the Acquired Fund and Acquiring
Fund with the SEC between the date of this Agreement and the Closing Date and
shall deliver to the other party copies of all such reports promptly after the
same are filed. Except where prohibited by applicable statutes and regulations,
each party shall promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state, local or federal government
agency or entity in connection with this Agreement or the transactions
contemplated hereby. Each of the Acquired Fund and the Acquiring Fund shall use
all reasonable efforts to obtain all consents, approvals, and authorizations
required in connection with the consummation of the transactions contemplated by
this Agreement and to make all necessary filings with the Secretary of State of
the State of Massachusetts.
C. Preparation of the Registration Statement and the Prospectus/Proxy
Statement. In connection with the Registration Statement and the
Prospectus/Proxy Statement, each party hereto will cooperate with the other and
furnish to the other the information relating to the Acquired Fund or Acquiring
Fund, as the case may be, required by the Securities Act or the Exchange Act and
the rules and regulations thereunder, as the case may be, to be set forth in the
Registration Statement or the Prospectus/Proxy Statement, as the case may be.
The Acquired Fund shall promptly prepare and provide the Prospectus/Proxy
Statement to the Acquiring Fund and the Acquiring Fund shall promptly prepare
and file with the SEC the Registration Statement, in which the Prospectus/Proxy
Statement will be included as a prospectus. In connection with the Registration
Statement, insofar as it relates to the Acquired Fund and its affiliated
persons, the Acquiring Fund shall only include such information as is approved
by the Acquired Fund for use in the Registration Statement. The Acquiring Fund
shall not amend or supplement any such information regarding the Acquired Fund
and such affiliates without the prior written consent of the Acquired Fund which
consent shall not be unreasonably withheld or delayed. The Acquiring Fund shall
promptly notify and provide the Acquired Fund with copies of all amendments or
supplements filed with respect to the Registration Statement. The Acquiring Fund
shall use all reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing.
The Acquiring Fund shall also take any action (other than qualifying to do
business in any jurisdiction in which it is now not so qualified) required to be
taken under any applicable state securities laws in connection with the issuance
of the Acquiring Fund's shares of beneficial interest in the transactions
contemplated by this Agreement, and the Acquired Fund shall furnish all
information concerning the Acquired Fund and the holders of the Acquired Fund's
shares of beneficial interest as may be reasonably requested in connection with
any such action.
D. Access to Information. During the period prior to the Closing Date,
the Acquired Fund shall make available to the Acquiring Fund a copy of each
report, schedule, registration statement and other document (the "Documents")
filed or received by it during such period pursuant to the requirements of
Federal or state securities laws (other than Documents which such party is not
permitted to disclose under applicable law). During the period prior to the
Closing Date, the Acquiring Fund shall make available to the Acquired Fund each
Document pertaining
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to the transactions contemplated hereby filed or received by it during such
period pursuant to Federal or state securities laws (other than Documents which
such party is not permitted to disclose under applicable law).
E. Shareholders Meeting. The Acquired Fund shall call a meeting of the
Acquired Fund shareholders to be held as promptly as practicable for the purpose
of voting upon the approval of this Agreement and the transactions contemplated
herein, and shall furnish a copy of the Prospectus/Proxy Statement and form of
proxy to each shareholder of the Acquired Fund as of the record date for such
meeting of shareholders. The Board shall recommend to the Acquired Fund
shareholders approval of this Agreement and the transactions contemplated
herein, subject to fiduciary obligations under applicable law.
F. Coordination of Portfolios. The Acquired Fund and Acquiring Fund
covenant and agree to coordinate the respective portfolios of the Acquired Fund
and Acquiring Fund from the date of the Agreement up to and including the
Closing Date in order that at Closing, when the Assets are added to the
Acquiring Fund's portfolio, the resulting portfolio will meet the Acquiring
Fund's investment objective, policies and restrictions, as set forth in the
Acquiring Fund's Prospectus, a copy of which has been delivered to the Acquired
Fund.
G. Distribution of the Shares. At Closing the Acquired Fund covenants
that it shall cause to be distributed the Acquiring Fund Shares in the proper
pro rata amount for the benefit of Acquired Fund's shareholders and such that
the Acquired Fund shall not continue to hold amounts of said shares so as to
cause a violation of Section 12(d)(1) of the 1940 Act. The Acquired Fund
covenants further that, pursuant to Section 3G, it shall liquidate and dissolve
as promptly as practicable after the Closing Date. The Acquired Fund covenants
to use all reasonable efforts to cooperate with the Acquiring Fund and the
Acquiring Fund's transfer agent in the distribution of said shares.
H. Brokers or Finders. Each of the Acquired Fund and the Acquiring
Fund represents that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, and each party shall hold the other harmless
from and against any all claims, liabilities or obligations with respect to any
such fees, commissions or expenses asserted by any person to be due or payable
in connection with any of the transactions contemplated by this Agreement on the
basis of any act or statement alleged to have been made by such first party or
its affiliate.
I. Additional Agreements. In case at any time after the Closing Date
any further action is necessary or desirable in order to carry out the purposes
of this Agreement the appropriate party or parties to this Agreement shall take
all such necessary action.
J. Public Announcements. For a period of time from the date of this
Agreement to the Closing Date, the Acquired Fund and the Acquiring Fund will
consult with each other before issuing any press releases or otherwise making
any public statements with respect to this Agreement or the transactions
contemplated herein and shall not issue any press release or make any public
statement prior to such consultation, except as may be required by law or the
rules of any national securities exchange on which such party's securities are
traded.
K. Tax Status of Reorganization. The intention of the parties is that
the transaction will qualify as a reorganization within the meaning of Section
368(a) of the Code. Neither the Acquired Fund Trust, the Acquiring Fund Trust,
the Acquiring Fund nor the Acquired Fund shall take any action, or cause any
action to be taken (including, without limitation, the filing of any tax return)
that is inconsistent with such treatment or results in the failure of the
transaction to qualify as a reorganization within the meaning of Section 368(a)
of the Code. At or prior to the Closing Date, the Acquired Fund Trust, the
Acquiring Fund Trust, the Acquiring Fund and the Acquired Fund will take such
action, or cause such action to be taken, as is reasonably necessary to enable
Vedder, Price, Kaufman & Kammholz, counsel to the Acquired Fund, to render the
tax opinion contemplated herein.
L. Declaration of Dividend. At or immediately prior to the Closing
Date, the Acquired Fund may declare and pay to its stockholders a dividend or
other distribution in an amount large enough so that it will have
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distributed substantially all (and in any event not less than 98%) of its
investment company taxable income (computed without regard to any deduction for
dividends paid) and realized net capital gain, if any, for the current taxable
year through the Closing Date.
7. CONDITIONS TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund hereunder with respect to the
consummation of the Reorganization are subject to the satisfaction, or written
waiver by the Acquired Fund, of the following conditions:
A. Acquired Fund Shareholder Approval. This Agreement and the
transactions contemplated herein shall have been approved by the affirmative
vote of the holders of at least a majority of the outstanding shares of
beneficial interest in the Acquired Fund.
B. Representations, Warranties and Agreements. Each of the
representations and warranties of the Acquiring Fund contained herein shall be
true in all material respects as of the Closing Date, and as of the Closing Date
there shall have been no material adverse change in the financial condition,
results of operations, business properties or assets of the Acquiring Fund, and
the Acquired Fund shall have received a certificate of an authorized officer of
the Acquiring Fund satisfactory in form and substance to the Acquired Fund so
stating. The Acquiring Fund shall have performed and complied in all material
respects with all agreements, obligations and covenants required by this
Agreement to be so performed or complied with by it on or prior to the Closing
Date.
C. Registration Statement Effective. The Registration Statement shall
have become effective and no stop orders under the Securities Act pertaining
thereto shall have been issued.
D. Regulatory Approval. All necessary approvals, registrations, and
exemptions under federal and state securities laws shall have been obtained.
E. No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect, nor shall any proceeding by any state, local or federal
government agency or entity asking any of the foregoing be pending. There shall
not be any action taken or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the transactions contemplated by this
Agreement, which makes the consummation of the transactions contemplated by this
Agreement illegal or which has a material adverse effect on business operations
of the Acquiring Fund.
F. Tax Opinion. The Acquired Fund shall have obtained an opinion from
Vedder, Price, Kaufman & Kammholz, counsel for the Acquired Fund, dated as of
the Closing Date, addressed to the Acquiring Fund Trust, Acquired Fund Trust,
Acquired Fund and Acquiring Fund, that the consummation of the transactions set
forth in this Agreement comply with the requirements of a reorganization as
described in Section 368(a) of the Code, substantially in the form attached as
Annex A.
G. Opinion of Counsel. The Acquired Fund shall have received the
opinion of Vedder, Price, Kaufman & Kammholz, counsel for the Acquiring Fund
Trust and Acquiring Fund, dated as of the Closing Date, addressed to the
Acquired Fund substantially in the form and to the effect that: (i) the
Acquiring Fund Trust is duly organized and existing under the laws of the State
of Massachusetts as a voluntary association with transferable shares of
beneficial interest commonly referred to as a "Massachusetts business trust;"
(ii) the Board of Trustees of the Acquiring Fund Trust has duly designated the
Acquiring Fund as a series of the Acquiring Fund Trust pursuant to the terms of
the Declaration of Trust of the Acquiring Fund Trust; (iii) the Acquiring Fund
Trust is registered as an open-end management company under the 1940 Act; (iv)
this Agreement and the reorganization provided for herein and the execution of
this Agreement have been duly authorized and approved by all requisite action of
the Acquiring Fund Trust and this Agreement has been duly executed and delivered
by the Acquiring Fund Trust on behalf of the Acquiring Fund and (assuming the
Agreement is a valid and binding obligation of the other parties
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thereto) is a valid and binding obligation of the Acquiring Fund, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar law affecting creditors' rights generally,
or by general principals of equity (regardless of whether enforcement is sought
in a proceeding at equity at law); (v) neither the execution or delivery by the
Acquiring Fund Trust on behalf of the Acquiring Fund of this Agreement nor the
consummation by the Acquiring Fund Trust or Acquiring Fund of the transactions
contemplated thereby contravene the Acquiring Fund Trust's Declaration of Trust,
or, to the best of their knowledge, violate any provision of any statute or any
published regulation or any judgment or order disclosed to it by the Acquiring
Fund Trust as being applicable to the Acquiring Fund Trust or the Acquiring
Fund; (vi) to the best of their knowledge based solely on the certificate of an
appropriate officer of the Acquiring Fund attached hereto, there is no pending
or threatened litigation which would have the effect of prohibiting any material
business practice or the acquisition of any material property or the conduct of
any material business of the Acquiring Fund or might have a material adverse
effect on the value of any assets of the Acquiring Fund, (vii) the Acquiring
Fund's Shares have been duly authorized and upon issuance thereof in accordance
with this Agreement will, subject to certain matters regarding the liability of
a shareholder of a Massachusetts business trust, be validly issued, fully paid
and nonassessable; (viii) except as to financial statements and schedules and
other financial and statistical data included or incorporated by reference
therein and subject to usual and customary qualifications with respect to Rule
10b-5 type opinions, as of the effective date of the Registration Statement
filed pursuant to the Agreement, the portions thereof pertaining to the
Acquiring Fund comply as to form in all material respects with the requirements
of the Securities Act, the Securities Exchange Act and the 1940 Act and the
rules and regulations of the SEC thereunder and no facts have come to counsel's
attention which would cause them to believe that as of the effectiveness of the
portions of the Registration Statement applicable to the Acquiring Fund, the
Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ix) to the best of their
knowledge and information and subject to the qualifications set forth below, the
execution and delivery by the Acquiring Fund Trust on behalf of the Acquiring
Fund of the Agreement and the consummation of the transactions therein
contemplated do not require, under the laws of the States of Massachusetts and
Illinois or the federal laws of the United States, the consent, approval,
authorization, registration, qualification or order of, or filing with, any
court or governmental agency or body (except such as have been obtained).
Counsel need express no opinion, however, as to any such consent, approval,
authorization, registration, qualification, order or filing (a) which may be
required as a result of the involvement of other parties to the Agreement in the
transactions contemplated by the Agreement because of their legal or regulatory
status or because of any other facts specifically pertaining to them; (b) the
absence of which does not deprive the Acquired Fund of any material benefit
under the Agreement; or (c) which can be readily obtained without significant
delay or expense to the Acquired Fund, without loss to the Acquired Fund of any
material benefit under the Agreement and without any material adverse effect on
the Acquired Fund during the period such consent, approval, authorization,
registration, qualification or order was obtained. The foregoing opinion relates
only to consents, approvals, authorizations, registrations, qualifications,
orders or filings under (a) laws which are specifically referred to in this
opinion, (b) laws of the States of Massachusetts and Illinois and the federal
laws of the United States which, in counsel's experience, are normally
applicable to transactions of the type provided for in the Agreement and (c)
court orders and judgments disclosed to counsel by the Acquiring Fund Trust on
behalf of the Acquiring Fund in connection with the opinion. In addition,
although counsel need not specifically have considered the possible
applicability to the Acquiring Fund Trust or the Acquiring Fund of any other
laws, orders or judgments, nothing has come to their attention in connection
with their representation of the Acquiring Fund Trust and the Acquiring Fund in
this transaction that has caused them to conclude that any other consent,
approval, authorization, registration, qualification, order or filing is
required. In giving the opinions set forth above, counsel may state that it is
relying on certificates of officers of the Acquiring Fund with regard to matters
of fact and certain certificates and written statements of government officers
with respect to the good standing of the Acquiring Fund and on the opinion of
Bingham Dana LLP as to matters of Massachusetts law.
H. Officer Certificates. The Acquired Fund shall have received a
certificate of an authorized officer of the Acquiring Fund, dated as of the
Closing Date, certifying that (i) the representations and warranties set forth
in Section 5 are true and correct on the Closing Date, together with certified
copies of the resolutions adopted by the Board of Trustees shall be furnished to
the Acquired Fund and that (ii) from the date hereof through the Closing Date,
there shall not have been any change in the business, results of operations,
assets or financial condition or the
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<PAGE> 83
manner of conducting the business of the Acquiring Fund, other than changes in
the ordinary course of its business, which has had a material adverse effect on
such business, results of operations, assets or financial condition.
8. CONDITIONS TO OBLIGATIONS OF ACQUIRING FUND.
The obligations of the Acquiring Fund hereunder with respect to the
consummation of the Reorganization are subject to the satisfaction, or written
waiver by the Acquiring Fund of the following conditions:
A. Acquired Fund Shareholder Approval. This Agreement and the
transactions contemplated herein shall have been approved by the affirmative
vote of the holders of at least a majority of the outstanding shares of
beneficial interest of the Acquired Fund.
B. Representations, Warranties and Agreements. Each of the
representations and warranties of the Acquired Fund contained herein shall be
true in all material respects as of the Closing Date, and as of the Closing Date
there shall have been no material adverse change in the financial condition,
results of operations, business, properties or assets of the Acquired Fund, and
the Acquiring Fund shall have received a certificate of an authorized officer of
the Acquired Fund satisfactory in form and substance to the Acquiring Fund so
stating. The Acquired Fund shall have performed and complied in all material
respects with all agreements, obligations and covenants required by this
Agreement to be so performed or complied with by them on or prior to the Closing
Date.
C. Registration Statement Effective. The Registration Statement shall
have become effective and no stop orders under the Securities Act pertaining
thereto shall have been issued.
D. Regulatory Approval. All necessary approvals, registrations, and
exemptions under federal and state securities laws shall have been obtained.
E. No Injunctions or Restraints, Illegality. No Injunction preventing
the consummation of the transactions contemplated by this Agreement shall be in
effect, nor shall any proceeding by any state, local or federal government
agency or entity seeking any of the foregoing be pending. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the transactions contemplated by this
Agreement, which makes the consummation of the transactions contemplated by this
Agreement illegal.
F. Tax Opinion. The Acquiring Fund shall have obtained an opinion from
Vedder, Price, Kaufman & Kammholz, counsel for the Acquired Fund, dated as of
the Closing Date, addressed to the Acquiring Fund Trust, Acquired Fund Trust,
Acquired Fund and Acquiring Fund, that the consummation of the transactions set
forth in this Agreement comply with the requirements of a reorganization as
described in Section 368(a) of the Code substantially in the form attached as
Annex A.
G. Opinion of Counsel. The Acquiring Fund shall have received the
opinion of Vedder, Price, Kaufman & Kammholz, counsel for the Acquired Fund
Trust and the Acquired Fund, dated as of the Closing Date, addressed to the
Acquiring Fund, substantially in the form and to the effect that: (i) the
Acquired Fund Trust is duly organized and existing under the laws of the State
of Massachusetts as a voluntary association with transferable shares of
beneficial interest commonly referred to as a "Massachusetts business trust;"
(ii) the Board of Trustees of the Acquired Fund Trust has duly designated the
Acquired Fund as a series of the Acquired Fund Trust pursuant to the terms of
the Declaration of Trust of the Acquired Fund Trust; (iii) the Acquired Fund
Trust is registered as an open-end management company under the 1940 Act; (iv)
this Agreement and the reorganization provided for herein and the execution of
this Agreement have been duly authorized by all requisite action of the Acquired
Fund Trust and this Agreement has been duly executed and delivered by the
Acquired Fund Trust on behalf of the Acquired Fund and (assuming the Agreement
is a valid and binding obligation of the other parties thereto) is a valid and
binding obligation of the Acquired Fund, except as such enforceability may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or similar law affecting creditors' rights generally, or by general
principals of equity (regardless of whether enforcement is sought in a
proceeding at equity or law); (v) neither the execution or delivery by the
Acquired Fund Trust on behalf of the Acquired Fund of this Agreement nor the
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<PAGE> 84
consummation by the Acquired Fund Trust or Acquired Fund of the transactions
contemplated thereby contravene the Acquired Fund Trust's Declaration of Trust
or, to their knowledge, violate any provision of any statute, or any published
regulation or any judgment or order disclosed to them by the Acquired Fund Trust
as being applicable to the Acquired Fund Trust or Acquired Fund; (vi) to their
knowledge based solely on the certificate of an appropriate officer of the
Acquired Fund attached thereto, there is no pending, or threatened litigation
involving the Acquired Fund except as disclosed therein; (vii) except as to
financial statements and schedules and other financial and statistical data
included or incorporated by reference therein and subject to usual and customary
qualifications with respect to Rule 10b-5 type opinions, as of the effective
date of the Registration Statement filed pursuant to the Agreement, the portions
thereof pertaining to the Acquired Fund comply as to form in all material
respects with their requirements of the Securities Act, the Securities Exchange
Act and the 1940 Act and the rules and regulations of the SEC thereunder and no
facts have come to counsel's attention which cause them to believe that as of
the effectiveness of the portions of the Registration Statement applicable to
the Acquired Fund, the Registration Statement contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and (viii)
to their knowledge and subject to the qualifications set forth below, the
execution and delivery by the Acquired Fund Trust on behalf of the Acquired Fund
of the Agreement and the consummation of the transactions therein contemplated
do not require, under the laws of the States of Massachusetts or Illinois, or
the federal laws of the United States, the consent, approval, authorization,
registration, qualification or order of, or filing with, any court or
governmental agency or body (except such as have been obtained under the
Securities Act, the 1940 Act or the rules and regulations thereunder and the
filing of an amendment to the Trust's Designation of Series in connection with
the termination of the Acquired Fund.) Counsel need express no opinion, however,
as to any such consent, approval, authorization, registration, qualification,
order or filing (a) which may be required as a result of the involvement of
other parties to the Agreement in the transactions contemplated by the Agreement
because of their legal or regulatory status or because of any other facts
specifically pertaining to them; (b) the absence of which does not deprive the
Acquiring Fund of any material benefit under such agreements; or (c) which can
be readily obtained without significant delay or expense to the Acquiring Fund,
without loss to the Acquiring Fund of any material benefit under the Agreement
and without any material adverse effect on them during the period such consent,
approval authorization, registration, qualification or order was obtained. The
foregoing opinion relates only to consents, approvals, authorizations,
registrations, qualifications, orders or filings under (a) laws which are
specifically referred to in the opinion, (b) laws of the States of Massachusetts
or Illinois and the federal laws of the United States which, in our experience,
are normally applicable to transactions of the type provided for in the
Agreement and (c) court orders and judgments disclosed to counsel by the
Acquired Fund in connection with the opinion. In addition, although counsel need
not specifically considered the possible applicability to the Acquired Fund of
any other laws, orders or judgments, nothing has come to their attention in
connection with their representation of the Acquired Fund in this transaction
that has caused them to conclude that any other consent, approval,
authorization, registration, qualification, order or filing is required. In
giving the opinion set forth above, counsel may state that it is relying on
certificates of officers of the Acquired Fund with regard to matters of fact and
certain certificates and written statutes of government officers with respect to
the good standing of the Acquired Fund and on the opinion of Bingham Dana LLP as
to matters of Massachusetts law.
H. Shareholder List. The Acquired Fund shall have delivered to the
Acquiring Fund an updated list of all shareholders of the Acquired Fund, as
reported by the Acquired Fund's transfer agent, as of one (1) business day prior
to the Closing Date with each shareholder's respective holdings in the Acquired
Fund, taxpayer identification numbers, Form W-9 and last known address.
I. Officer Certificates. The Acquiring Fund shall have received a
certificate of an authorized officer of the Acquired Fund. dated as of the
Closing Date, certifying that (i) the representations and warranties set forth
in Section 4 are true and correct on the Closing Date, together with certified
copies of the resolutions adopted by the Board of Trustees and shareholders and
that (ii) from the date of this Agreement through the Closing Date, there shall
not have been:
(1) any change in the business, results of operations,
assets, or financial condition or the manner of conducting the
business of the Acquired Fund, other than changes in the ordinary
course of its
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<PAGE> 85
business, or any pending or threatened litigation, which has had or
may have a material adverse effect on such business, results of
operations, assets or financial condition;
(2) issued any option to purchase or other right to acquire
shares of the Acquired Fund granted by the Acquired Fund to any person
other than subscriptions to purchase shares at net asset value in
accordance with terms in the Prospectus for the Acquired Fund;
(3) any entering into, amendment or termination of any
contract or agreement by Acquired Fund, except as otherwise
contemplated by this Agreement;
(4) any indebtedness incurred, other than in the ordinary
course of business, by the Acquired Fund for borrowed money or any
commitment to borrow money entered into by the Acquired Fund;
(5) any amendment of the Acquired Fund Trust's Declaration of
Trust or Designation of Series of the Acquired Fund; or
(6) any grant or imposition of any lien, claim, charge or
encumbrance (other than encumbrances arising in the ordinary course of
business with respect to covered options) upon any asset of the
Acquired Fund other than a lien for taxes not yet due and payable.
9. AMENDMENT, WAIVER AND TERMINATION.
A. The parties hereto may, by agreement in writing authorized by the
Board, amend this Agreement at any time before or after approval thereof by the
shareholders of the Acquired Fund, provided, however, that after receipt of
Acquired Fund shareholder approval, no amendment shall be made by the parties
hereto which would have a material adverse affect on the interests of the
Acquired Fund's shareholders without obtaining Acquired Fund's shareholder
approval thereof.
B. At any time prior to the Closing Date, either of the parties may by
written instrument signed by it (i) waive any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the covenants or conditions made for its benefit
contained herein. No delay on the part of either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, or any
single or partial exercise of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege.
C. This Agreement may be terminated, and the transactions contemplated
herein may be abandoned at any time prior to the Closing Date:
(1) by the mutual consents of the Board of the Acquiring Fund
Trust and Acquired Fund Trust on behalf of the Acquired Fund and
Acquiring Fund, respectively;
(2) by the Acquired Fund, if the Acquiring Fund breaches in
any material respect any of its representations, warranties, covenants
or agreements contained in this Agreement and fails to cure promptly
such breach after receipt of notice thereof,
(3) by the Acquiring Fund, if the Acquired Fund breaches in
any material respect any of its representations, warranties, covenants
or agreements contained in this Agreement and fails to cure promptly
such breach after receipt of notice thereof,
(4) by either the Acquired Fund or Acquiring Fund, if the
Closing has not occurred on or prior to September 30, 1999 (provided
that the rights to terminate this Agreement pursuant to this
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<PAGE> 86
subsection (C)(4) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause
of or resulted in the failure of the Closing to occur on or before
such date);
10. REMEDIES.
In the event of termination of this Agreement by either or both of the
Acquired Fund and Acquiring Fund pursuant to Section 9C, written notice thereof
shall forthwith be given by the terminating party to the other party hereto, and
this Agreement shall therefore terminate and become void and have no effect, and
the transactions contemplated herein and thereby shall be abandoned, without
further action by the parties hereto. However, this Section 10 shall not limit
the remedies available for a breach of this Agreement prior to its termination.
11. SURVIVAL.
The provisions set forth in Sections 10 and 16 hereof shall survive
the termination of this Agreement for any cause whatsoever. The representations
and warranties included or provided for herein, or in the Schedules or other
instruments delivered or to be delivered pursuant hereto shall not survive the
Closing Date.
12. NOTICES.
All notices hereunder shall be sufficiently given for all purposes
hereunder if in writing and delivered personally or sent by registered mail or
certified mail, postage prepaid. Notice to the Acquired Fund shall be addressed
to the Acquired Fund c/o Nuveen Advisory Corp., 333 West Wacker Drive, Chicago,
Illinois 60606, Attention: General Counsel, or at such other address as the
Acquired Fund may designate by written notice to the Acquiring Fund. Notice to
the Acquiring Fund shall be addressed to the Acquiring Fund c/o Nuveen Advisory
Corp., 333 West Wacker Drive, Chicago, Illinois, 60606, Attention: General
Counsel, or at such other address and to the attention of such other person as
the Acquiring Fund may designate by written notice to the Acquired Fund. Any
notice shall be deemed to have been served or given as of the date such notice
is delivered personally or mailed.
13. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other party
hereto.
14. BOOKS AND RECORDS.
The Acquired Fund and the Acquiring Fund agree that copies of the
books and records of the Acquired Fund relating to the Assets including, but not
limited to all files, records, written materials; e.g., closing transcripts,
surveillance files and credit reports shall be delivered by the Acquired Fund to
the Acquiring Fund at the Closing Date. In addition to, and without limiting the
foregoing, the Acquired Fund and the Acquiring Fund agree to take such action as
may be necessary in order that the Acquiring Fund shall have reasonable access
to such other books and records as may be reasonably requested, all for three
years after the Closing Date and for the last three tax years ending May 31,
1996, May 31, 1997, and May 31, 1998; namely, general ledger, journal entries,
voucher registers; distribution journal; payroll register, monthly balance owing
report; income tax returns; tax depreciation schedules; and investment tax
credit basis schedules.
15. GENERAL.
This Agreement supersedes all prior agreements between the parties
(written or oral), is intended as a complete and exclusive statement of the
terms of the Agreement between the parties and may not be amended, modified or
changed or terminated orally. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been executed by the
Acquired Fund and Acquiring Fund and delivered to each of the parties hereto.
The
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<PAGE> 87
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. This
Agreement is for the sole benefit of the parties thereto, and nothing in this
Agreement, expressed or implied, is intended to confer upon any other person any
rights or remedies under or by reason of this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Illinois
without regard to principles of conflicts or choice of law.
16. LIMITATION OF LIABILITY.
Consistent with the Acquiring Fund Trust's and the Acquired Fund
Trust's Declarations of Trust, notice is hereby given and the parties hereto
acknowledge and agree that this instrument is executed on behalf of the Trustees
of each Trust on behalf of the Acquiring Fund and the Acquired Fund,
respectively, as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders of the
Acquiring Fund Trust, Acquired Fund Trust, Acquiring Fund or Acquired Fund
individually but binding only upon the assets and property of the Acquiring Fund
or the Acquired Fund as the case may be.
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to
be executed and delivered by their duly authorized officers as of the day and
year first written above.
ACQUIRING FUND TRUST, on behalf of ACQUIRING
FUND
By:
--------------------------------------------
Title:
-----------------------------------------
Attest:
----------------------------
Title:
-----------------------------
ACQUIRED FUND TRUST, on behalf of ACQUIRED FUND
By:
--------------------------------------------
Title:
-----------------------------------------
Attest:
----------------------------
Title:
-----------------------------
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<PAGE> 88
Annex A
, 199__
Nuveen Flagship Kentucky Municipal Bond Fund
333 West Wacker Drive
Chicago, IL 60606
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
333 West Wacker Drive
Chicago, IL 60606
Gentlemen:
You have requested our opinion regarding certain federal income tax consequences
of the proposed reorganization ("Reorganization") of Nuveen Flagship Kentucky
Limited Term Municipal Bond Fund ("Acquired Fund"), a series of the Nuveen
Flagship Multistate Trust IV (the "Trust"), an open-end investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts into Nuveen Flagship Kentucky Municipal Bond Fund ("Acquiring
Fund"), a series of the Trust. The Reorganization contemplates the acquisition
by the Acquiring Fund of substantially all the assets of the Acquired Fund in
exchange for voting shares of beneficial interest ("shares") of the Acquiring
Fund and the assumption by the Acquiring Fund of the Acquired Fund's
liabilities. Thereafter, the shares of the Acquiring Fund will be distributed to
the shareholders of the Acquired Fund and the Acquired Fund will be completely
liquidated and terminated. The foregoing will be accomplished pursuant to an
Agreement and Plan of Reorganization, dated as of December 18, 1998 (the
"Plan"), entered into by the Acquired Trust, on behalf of the Acquired Fund, and
the Acquiring Fund.
In rendering this opinion, we have received and relied upon statements made to
us by certain of your officers. We have also examined certificates of such
officers and such other agreements, documents, and corporate records that have
been made available to us and such other matters as we have deemed relevant for
purposes of this opinion. In such examination, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies and the authenticity of the originals of such latter documents.
Our opinion is based, in part, on the assumption that the proposed
Reorganization described herein will occur in accordance with the Plan and
agreements and the facts and representations set forth or referred to in this
opinion letter, and that such facts and representations are accurate as of the
date hereof and will be accurate on the effective date of the Reorganization
(the "Effective Time"). As more fully discussed below, we have also assumed in
issuing our opinion that the shareholders of the Acquired Fund do not have any
plan or intention to dispose of a certain number of the Acquiring Fund shares
received by them in the Reorganization. We have undertaken no independent
investigation of the accuracy of the facts, representations and assumptions set
forth or referred to herein.
For the purposes indicated above, and based upon the facts, assumptions and
conditions as set forth herein, and the representations made to us by duly
authorized officers on behalf of the Acquired Fund and the Acquiring Fund in a
letter dated ____________, 1998, it is our opinion that:
(1) The acquisition by the Acquiring Fund of
substantially all the assets of the
Acquired Fund in exchange solely for
Acquiring Fund voting shares and the
assumption by the Acquiring Fund of the
Acquired Fund's liabilities, if any,
followed by the distribution by the
Acquired Fund of the Acquiring Fund shares
to the shareholders of the Acquired Fund in
exchange for their Acquired Fund shares in
complete liquidation of the Acquired Fund,
will constitute a "reorganization" within
the meaning of Section 368 (a)(1) of the
Internal Revenue Code of 1986, as amended
(the "Code"), and the Acquiring Fund and
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<PAGE> 89
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
_______________, 199__
Page 2
the Acquired Fund will each be "a party to
a reorganization" within the meaning of
Section 368(b) of the Code;
(2) The Acquired Fund shareholders will
recognize no gain or loss upon the exchange
of all of their Acquired Fund shares for
Acquiring Fund shares in complete
liquidation of the Acquired Fund (Code
Section 354(a)(1));
(3) No gain or loss will be recognized by the
Acquired Fund upon the transfer of
substantially all its assets to the
Acquiring Fund in exchange solely for
Acquiring Fund shares and the assumption by
the Acquiring Fund of the Acquired Fund's
liabilities, if any, and with respect to
the subsequent distribution of those
Acquiring Fund shares to the Acquired Fund
shareholders in complete liquidation of the
Acquired Fund (Code Section 361);
(4) No gain or loss will be recognized by the
Acquiring Fund upon the acquisition of
substantially all the Acquired Fund's
assets in exchange solely for Acquiring
Fund shares and the assumption of the
Acquired Fund's liabilities, if any (Code
Section 1032(a));
(5) The basis of the assets acquired by the
Acquiring Fund will be, in each instance,
the same as the basis of those assets
immediately before the transfer when such
assets were held by the Acquired Fund, and
the holding period of such assets acquired
by the Acquiring Fund will include the
holding period thereof when such assets
were held by the Acquired Fund (Code
Sections 362(b) and 1223(2));
(6) The basis of the Acquiring Fund shares to
be received by the Acquired Fund
shareholders upon liquidation of the
Acquired Fund will be, in each instance,
the same as the basis of the Acquired Fund
shares surrendered in exchange therefor
(Code Section 358(a)(1)); and
(7) The holding period of the Acquiring Fund
shares to be received by the Acquired Fund
shareholders will include the period during
which the Acquired Fund shares to be
surrendered in exchange therefor were held,
provided such Acquired Fund shares were
held as capital assets by those
shareholders on the date of the exchange
(Code Section 1223(1)).
FACTS
Our opinion is based upon the above referenced representations and the following
facts and assumptions, any alteration of which could adversely affect our
conclusions.
The Acquired Fund has been registered and operated since it commenced operations
as a series of an open-end, management investment company under the Investment
Company Act of 1940, 15 U.S.C. Section 80a, et seq. (the "1940 Act"). The
Acquired Fund has qualified and will qualify as a regulated investment company
under Section 851 of the Code for each of its taxable years, and has distributed
and will distribute all or substantially all its income so that it and its
shareholders have been and will be taxed in accordance with Section 852 of the
Code.
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<PAGE> 90
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
_______________, 199__
Page 3
The Acquiring Fund is registered, has operated, and will continue to operate an
open-end, management investment company under the 1940 Act. It has qualified and
will qualify as a regulated investment company under Section 851 of the Code for
each of its taxable years and anticipates so qualifying for all future years,
and has distributed and will distribute all or substantially all its income so
that it and its shareholders will be taxed in accordance with Section 852 of the
Code.
Upon satisfaction of certain terms and conditions set forth in the Plan on or
before the Effective Time, the following will occur: (a) the Acquiring Fund will
acquire substantially all the assets of the Acquired Fund in exchange for the
Acquiring Fund's assumption of substantially all the liabilities of the Acquired
Fund and the issuance of Acquiring Fund shares to the Acquired Fund; (b) the
Acquiring Fund shares will be distributed to the shareholders of the Acquired
Fund in exchange for their Acquired Fund shares; and (c) the Acquired Fund will
be dissolved and liquidated. The assets of the Acquired Fund to be acquired by
the Acquiring Fund consist primarily of short and intermediate-term U.S.
Government securities, cash and other securities held in the Acquired Fund's
portfolio.
As soon as practicable after the Effective Time, the Acquired Fund will be
liquidated and will distribute the newly issued Acquiring Fund shares it
receives pro rata to its shareholders of record in exchange for such
shareholders' interests in the Acquired Fund. The liquidation and distribution
will be accomplished by opening accounts on the books of the Acquiring Fund in
the names of the shareholders of the Acquired Fund (on a class by class basis)
and transferring to those shareholder accounts the pro rata number of Acquiring
Fund shares of each respective class as was previously credited to the Acquired
Fund on the books.
As a result of the Reorganization, every shareholder of the Acquired Fund will
own Acquiring Fund shares that will have an aggregate per share net asset value
immediately after the Effective Time equal to the aggregate per share net asset
value of that shareholder's Acquired Fund shares immediately prior to the
Effective Time. Since the Acquiring Fund shares issued to the shareholders of
the Acquired Fund will be issued at net asset value in exchange for the net
assets of the Acquired Fund having a value equal to the aggregate per share net
asset value of those Acquiring Fund shares so issued, the net asset value of the
Acquiring Fund shares should remain virtually unchanged by the Reorganization.
The management of the Acquired Fund has represented to us that, to the best of
their knowledge, there is no current plan or intention on the part of any
Acquired Fund shareholders to sell, exchange, or otherwise dispose of a number
of Acquiring Fund shares received in the Reorganization that would reduce the
ownership by shareholders of the Acquired Fund to a number of shares of
Acquiring Fund having a value, as of the Effective Time, of less than 50 percent
of all the formerly outstanding shares of the Acquired Fund as of the same time.
In issuing our opinion, we have assumed that there is, in fact, no such plan or
intention. If such assumption were inaccurate, it could adversely affect the
opinions contained herein.
In approving the Reorganization, the Board of Trustees of the Acquired Trust
identified certain benefits that are likely to result from combining the funds,
including administrative and operating efficiencies. The Board also considered
the possible risks and costs of combining the funds and determined that the
Reorganization is likely to provide benefits to the shareholders of the funds
that outweigh the costs incurred.
CONCLUSION
Based on the foregoing, it is our opinion that the acquisition by the Acquiring
Fund, pursuant to the Plan, of substantially all the assets and liabilities of
the Acquired Fund in exchange for voting shares of the Acquiring Fund will
qualify as a reorganization under Code Section 368(a)(1).
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<PAGE> 91
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
_______________, 199__
Page 4
Our opinions set forth above with respect to (1) the nonrecognition of gain or
loss to the Acquired Fund and the Acquiring Fund, (2) the basis and holding
period of the assets received by the Acquiring Fund, (3) the nonrecognition of
gain or loss to the Acquired Fund shareholders upon the receipt of the Acquiring
Fund shares, and (4) the basis and holding period of the Acquiring Fund shares
received by the Acquired Fund shareholders, follow as a matter of law from the
opinion that the acquisition under the Plan will qualify as a reorganization
under Code Section 368(a)(1).
The opinions expressed in this letter are based on the Code, the Income Tax
Regulations promulgated by the Treasury Department thereunder and judicial
authority reported as of the date hereof. We have also considered the position
of the Internal Revenue Service (the "Service") reflected in published and
private rulings. Although we are not aware of any pending changes to these
authorities that would alter our opinions, there can be no assurances that
future legislative or administrative changes, court decisions or Service
interpretations will not significantly modify the statements or opinions
expressed herein.
Our opinions are limited to those federal income tax issues specifically
considered herein and are addressed to and are only for the benefit of the
Acquired Fund, the Acquired Trust and the Acquiring Fund. We do not express any
opinion as to any other federal income tax issues, or any state or local law
issues, arising from the transactions contemplated by the Plan. Although the
discussion herein is based upon our best interpretation of existing sources of
law and expresses what we believe a court would properly conclude if presented
with these issues, no assurance can be given that such interpretations would be
followed if they were to become the subject of judicial or administrative
proceedings.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the use of our name under the captions "PROPOSAL
1. APPROVAL OF THE REORGANIZATION--The Proposed Reorganization--Certain Federal
Income Tax Consequences" and "Legal Matters" in the Prospectus/Proxy Statement
contained in such Registration Statement. In giving such consent, we do not
thereby concede that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
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<PAGE> 92
SEPTEMBER 30, 1998
NUVEEN FLAGSHIP MULTISTATE TRUST IV
NUVEEN FLAGSHIP KANSAS MUNICIPAL BOND FUND
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
NUVEEN FLAGSHIP MICHIGAN MUNICIPAL BOND FUND
NUVEEN FLAGSHIP MISSOURI MUNICIPAL BOND FUND
NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND
NUVEEN FLAGSHIP WISCONSIN MUNICIPAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectuses
of the Nuveen Flagship Multistate Trust IV dated September 30, 1998. 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
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PAGE
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Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-13
Investment Adviser and Investment Management Agreement..................... S-24
Portfolio Transactions..................................................... S-25
Net Asset Value............................................................ S-26
Tax Matters................................................................ S-27
Performance Information.................................................... S-35
Additional Information on the Purchase and Redemption of Fund Shares....... S-43
Distribution and Service Plan.............................................. S-50
Independent Public Accountants and Custodian............................... S-52
Financial Statements....................................................... S-52
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.
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INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
INVESTMENT POLICIES
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of that Fund:
(1) Invest in securities other than Municipal Obligations and short-term
securities, as described in the Prospectus. Municipal Obligations are
municipal bonds that pay interest that is exempt from regular federal,
state and, in some cases, local income taxes.
(2) Invest more than 5% of its total assets in securities of any one
issuer, except this limitation shall not apply to securities of the United
States Government, and to the investment of 25% of such Fund's assets. This
limitation shall apply only to the 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.
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(10) Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions.
(11) Write or purchase put or call options, except to the extent that the
purchase of a stand-by commitment may be considered the purchase of a put,
and except for transactions involving options within the limits described
in the Prospectus and this Statement of Additional Information.
(12) Invest more than 25% of its total assets in securities of issuers in
any one industry; provided, however, that such limitations shall not be
applicable to Municipal Obligations issued by governments or political
subdivisions of governments, and obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(13) Purchase or retain the securities of any issuer other than the
securities of the Fund if, to the Fund's knowledge, those trustees of the
Trust, or those officers and directors of Nuveen Advisory Corp. ("Nuveen
Advisory"), who individually own beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities.
In addition, each Fund, as a non-fundamental policy, may not invest more than
15% of its net assets in "illiquid" securities, including repurchase agreements
maturing in more than seven days.
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed the sole issuer of a security when its assets and
revenues are separate from other governmental entities and its securities are
backed only by its assets and revenues. Similarly, in the case of a non-
governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be deemed to
be the sole issuer. Where a security is also backed by the enforceable
obligation of a superior or unrelated governmental entity or other entity
(other than a bond insurer), it shall also be included in the computation of
securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other
facility, such as a bank guarantee or letter of credit, such a guarantee or
letter of credit would be considered a separate security and would be treated
as an issue of such government, other entity or bank. Where a security is
insured by bond insurance, it shall not be considered a security issued or
guaranteed by the insurer; instead the issuer of such security will be
determined in accordance with the principles set forth above. The foregoing
restrictions do not limit the percentage of the Fund's assets that may be
invested in securities insured by any single insurer.
The foregoing restrictions and limitations, as well as a Fund's policies as
to ratings of portfolio investments, will apply only at the time of purchase of
securities, and the percentage limitations will not be considered violated
unless an excess or deficiency occurs or exists immediately after and as a
result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of each Fund, cannot be changed without approval by holders of a
"majority of the Fund's outstanding voting shares." As defined in the
Investment Company Act of 1940, this means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if the holders of more than 50% of the
Fund's shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
The Nuveen Flagship Multistate Trust 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
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an open-end management series company under SEC Rule 18f-2. Each Fund is a
separate series issuing its own shares. The Trust currently has seven series:
the Nuveen Flagship Kansas Municipal Bond Fund (formerly the Flagship Kansas
Triple Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the
Nuveen Flagship Kentucky Municipal Bond Fund (formerly the Flagship Kentucky
Triple Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund (formerly the
Flagship Kentucky Limited Term Municipal Bond Fund, a series of the Flagship
Tax Exempt Funds Trust); the Nuveen Flagship Michigan Municipal Bond Fund
(formerly the Flagship Michigan Triple Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust); the Nuveen Flagship Missouri Municipal Bond
Fund (formerly the Flagship Missouri Double Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust); the Nuveen Flagship Ohio Municipal Bond Fund
(formerly the Flagship Ohio Double Tax Exempt Fund, a series of the Flagship
Tax Exempt Funds Trust); and the Nuveen Flagship Wisconsin Municipal Bond Fund
(formerly the Flagship Wisconsin Double Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust). Certain matters under the Investment Company
Act of 1940 which must be submitted to a vote of the holders of the outstanding
voting securities of a series company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding voting securities of each Fund affected by such matter.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of a trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Trust and requires that
notice of this disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Declaration of Trust
further provides for indemnification out of the assets and property of the
Trust for all loss and expense of any shareholder personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself were unable to meet its
obligations. The Trust believes the likelihood of these circumstances is
remote.
PORTFOLIO SECURITIES
As described in the Prospectus, each of the Funds invests substantially all
of its assets (at least 80%) in a portfolio of Municipal Obligations free from
regular federal, state and, in some cases, local income tax in each Fund's
respective state, which generally will be Municipal Obligations issued within
the Fund's respective state. In general, Municipal Obligations include debt
obligations issued by states, cities and local authorities to obtain funds for
various public purposes, including construction of a wide range of public
facilities such as airports, bridges, highways, hospitals, housing, mass
transportation, schools, streets and water and sewer works. Industrial
development bonds and pollution control bonds that are issued by or on behalf
of public authorities to finance various privately-rated facilities are
included within the term Municipal Obligations if the interest paid thereon is
exempt from federal income tax.
The investment assets of each Fund will consist of (1) Municipal Obligations
which are rated at the time of purchase within the four highest grades (Baa or
BBB or better) by Moody's Investors Service, Inc. ("Moody's"), by Standard and
Poor's Corporation ("S&P") or by Fitch Investors Service, Inc. ("Fitch"), (2)
unrated Municipal Obligations which, in the opinion of Nuveen Advisory, have
credit characteristics equivalent to bonds rated within the four highest grades
by Moody's, S&P or Fitch, 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.
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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
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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 1997 and 1998 fiscal years for the Funds
were:
<TABLE>
<CAPTION>
FISCAL YEAR
1997 1998
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<S> <C> <C>
Nuveen Flagship Kansas Municipal Bond Fund................... 40% 13%
Nuveen Flagship Kentucky Municipal Bond Fund................. 13% 12%
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund.... 56% 36%
Nuveen Flagship Michigan Municipal Bond Fund................. 34% 13%
Nuveen Flagship Missouri Municipal Bond Fund................. 41% 19%
Nuveen Flagship Ohio Municipal Bond Fund..................... 17% 15%
Nuveen Flagship Wisconsin Municipal Bond Fund................ 42% 10%
</TABLE>
WHEN-ISSUED SECURITIES
Each Fund may purchase and sell Municipal Obligations on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the
regular settlement date. (When-issued transactions normally settle within 15-45
days.) On such transactions the payment obligation and the interest rate are
fixed at the time the buyer enters into the commitment. The commitment to
purchase securities on a when-issued or delayed delivery basis may involve an
element of risk because the value of the securities is subject to market
fluctuation, no interest accrues to the purchaser prior to settlement of the
transaction, and at the time of delivery the market value may be less than
cost. At the time a Fund makes the commitment to purchase a Municipal
Obligation on a when-issued or delayed delivery basis, it will record the
transaction and reflect the amount due and the value of the security in
determining its net asset value. Likewise, at the time a Fund makes the
commitment to sell a Municipal Obligation on a delayed delivery basis, it will
record the transaction and include the proceeds to be received in determining
its net asset value; accordingly, any fluctuations in the value of the
Municipal Obligation sold pursuant to a delayed delivery commitment are ignored
in calculating net asset value so long as the commitment remains in effect. The
Funds will maintain designated readily marketable assets at least equal in
value to commitments to purchase when-issued or delayed delivery securities,
such assets to be segregated by the Custodian specifically for the settlement
of such commitments. The Funds will only make commitments to purchase Municipal
Obligations on a when-issued or delayed delivery basis with the intention of
actually acquiring the securities, but the 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
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additional information that bears upon the risk of investing in Municipal
Obligations issued by public authorities in the states of currently offered
Funds. This information was obtained from official statements of issuers
located in the respective states as well as from other publicly available
official documents and statements. The Funds have not independently verified
any of the information contained in such statements and documents. The
information below is intended only as a general summary, and is not intended as
a discussion of any specific factor that may affect any particular obligation
or issuer.
FACTORS PERTAINING TO KANSAS
Growth in the State's trade, services and manufacturing sectors has decreased
the historical dominance of agriculture in the State economy. Economic
performance has been improving due largely to gains in aircraft manufacturing
and recovery in agriculture. Personal income grew at 5.4% in 1997 to $24,379,
after posting a 5.7% gain in 1996. Per capita income stands at about 95% of the
national median.
The State's unemployment rate dropped to 3.5% in June 1998 from its peak of
5.5% in 1993.
The Kansas State Treasury does not issue general obligation debt. The state
instead relies on revenue and lease financing through the Department of
Transportation (KDOT) and the Development Finance Authority (KDFA). KDFA 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
Growth in Kentucky's economy surpassed national growth rates in many areas
during the 1990's in part due to its lower cost of living and aggressive
business recruitment. The Kentucky economy has continued to prosper under the
same favorable circumstances that have propelled the national economy. The
State's economic base is concentrated in manufacturing and service industries
such as industrial machinery, electronics and apparel production and insurance
and real estate. Kentucky's "Golden Triangle" bounded by Cincinnati, Lexington
and Louisville has experienced the most intense economic growth. The strong
growth in Kentucky's economy is expected to continue, although at a slightly
more moderate rate.
Kentucky's average unemployment rate in June 1998 was 4.4%, compared to the
national average of 4.5% in June 1998 and the State's 5.5% average in June
1997. Per capita income in 1997 was $20,657, approximately 81% of the national
average.
In the past, the State has experienced difficulty balancing its budget, but
recent economic growth and moderate debt levels improve the Commonwealth's
financial outlook. General Fund revenues that exceeded projections and
expenditures that remained within the budget enabled the State to maintain its
Reserve Trust Fund balance of $200 million in fiscal 1997. 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. Like the
State, Kentucky municipalities have not issued general obligation debt, relying
instead on appropriation-secured bonds.
FACTORS PERTAINING TO MICHIGAN
Michigan's economy has improved significantly since the 1980's. The State's
unemployment rate was 3.6% in June 1998, compared to the national average of
4.5%. Michigan's per capita income has increased each year over the past
decade, surpassing that of the nation's in 1994 after years of lagging the
national average. 1997 per
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capita income was $25,560. Population has remained stable in the State,
increasing by a negligible amount annually.
The manufacturing industry and the presence of the "Big 3" automobile
manufacturers are the primary influence in the economy. Despite recent strikes
and lower automobile sales and profits, the positive economic impact of the
manufacturing industry has contributed to the tax base and job growth.
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.
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.
FACTORS PERTAINING TO MISSOURI
Missouri maintains a diversified economy, mirroring that of the nation.
Although recent industry growth has shifted to services and tourism, defense
and manufacturing are important elements of the state economy. McDonnell
Douglas Corporation, one of the largest private employers in the state, employs
approximately 25,000 people, with Chrysler and Ford each employing
approximately 10,000 people.
Population in Missouri has increased approximately 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 June 1998, compared to the national average of 4.5%. Per capita
income increased 4.4% during 1997 to $24,001, which is about 94% of the
national average.
Missouri retains substantial governmental balances through strategic budget
management. The State's unreserved fund balance in 1997 was $1.2 billion, or
12.4% of General Fund revenues. Missouri's overall creditworthiness is
reflected in its long-standing Aaa/AAA/AAA rating by Moody's, S&P, and Fitch,
respectively.
FACTORS PERTAINING TO OHIO
The Ohio economy has historically relied on durable goods manufacturing, but
recent growth has brought healthy diversification. Employment growth in recent
years has been concentrated among non-manufacturing industries, with
manufacturing employment tapering off since its 1969 peak. Still manufacturing
remains an important component of the State's economy, providing approximately
21% of total employment in Ohio compared with 15% of national employment.
General economic activity in Ohio tends to be more cyclical than in non-
industrialized states, but during the current national expansion it has had
positive implications in Ohio.
From 1990 to 1998, the State's unemployment rate ranked at or below the
national average. Ohio's unemployment rate registered 4.5% in June 1998,
comparable to the national average of 4.5% in June 1998 and slightly higher
than the State's 4.4% rate in June 1997. Per capita income in 1997 was $24,661,
approximately 96% of the national average.
The State cannot by law operate with a deficit and has well-established
procedures to ensure that appropriations and expenditures are matched by
revenues from the General Revenue Fund. Recently, as a result of the State's
strong economic performance and its financial management practices, the State
has been able to accumulate sizable financial reserves that should help it
address potential cyclical fluctuations. The State is
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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. Moody's gives Ohio general
obligation bonds an Aa1 rating, while Standard & Poor's and Fitch each rate the
State AA+.
FACTORS PERTAINING TO WISCONSIN
Wisconsin's economy is diverse and strong with non-agricultural employment
evenly spread between the manufacturing, service and trade sectors. The State
continues its efforts to attract new businesses with grants and loans for major
development projects, labor training and technology development. Manufacturing
remains a dominant sector at 24% and is currently a source of strength.
The State's unemployment rate was 3.0% in June 1998. Per capita income was
$24,475 in 1997, which is about 96% of the national average.
The State's general obligations receive Aa2/AA ratings from Moody's and
Standard and Poors, respectively.
HEDGING AND OTHER DEFENSIVE ACTIONS
Each Fund may periodically engage in hedging transactions. Hedging is a term
used for various methods of seeking to preserve portfolio capital value of
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in financial futures and index futures as well as related put and
call options on such instruments. Both parties entering into an index or
financial futures contract are required to post an initial deposit of 1% to 5%
of the total contract price. Typically, option holders enter into offsetting
closing transactions to enable settlement in cash rather than take delivery of
the position in the future of the underlying security. Each Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series, portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit. Finally, the potential daily deposit requirements in
futures contracts create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost of the initial
premium. Losses due to hedging transactions will reduce yield. Net gains, if
any, from hedging and other portfolio transactions will be distributed as
taxable distributions to shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and
deposits would exceed 5% of such series' net assets. Each series will invest in
these instruments only in markets believed by the investment adviser to be
active and sufficiently liquid. For further information regarding these
investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or
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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.
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.
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<PAGE> 102
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.
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
S-11
<PAGE> 103
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> 104
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Funds under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has eight
trustees, two of whom are "interested persons" (as the term "interested
persons" is defined in the Investment Company Act of 1940) and six of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Timothy R. Schwertfeger* 49 Chairman and Chairman since July 1, 1996 of The John
333 West Wacker Drive Trustee Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.; prior
thereto Executive Vice President and
Director of The John Nuveen Company, John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.; Chairman and Director (since January
1997) of Nuveen Asset Management, Inc.;
Director (since 1996) of Institutional
Capital Corporation.
Anthony T. Dean* 53 President and President since July 1, 1996 of The John
333 West Wacker Drive Trustee Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.; prior
thereto, Executive Vice President and
Director of The John Nuveen Company, John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.; President and Director (since January
1997) of Nuveen Asset Management, Inc.;
Chairman and Director (since 1997) of
Rittenhouse Financial Services, Inc.
Robert P. Bremner 58 Trustee Private Investor and Management Consultant.
3725 Huntington Street, N.W.
Washington, D.C. 20015
Lawrence H. Brown 64 Trustee Retired (August 1989) as Senior Vice
201 Michigan Avenue President of The Northern Trust Company.
Highwood, IL 60040
Anne E. Impellizzeri 65 Trustee Executive Director of Manitoga (Center for
5 Peter Cooper Rd. Russel Wright's Design with Nature);
New York, NY 10010 formerly President and Chief Executive
Officer of Blanton-Peale Institute.
</TABLE>
S-13
<PAGE> 105
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Peter R. 65 Trustee Adjunct Professor of Business and Economics,
Sawers University of Dubuque, Iowa; Adjunct
22 The Professor, Lake Forest Graduate School of
Landmark Management, Lake Forest, Illinois; Chartered
Northfield, Financial Analyst; Certified Management
IL 60093 Consultant.
William J. 54 Trustee Senior Partner, Miller-Valentine Partners,
Schneider Vice President, Miller-Valentine Group.
4000
Miller-
Valentine
Ct.
P.O. Box
744
Dayton, OH
45401
Judith M. 50 Trustee Executive Director, Gaylord and Dorothy
Stockdale Donnelley Foundation (since 1994); prior
35 East thereto, Executive Director, Great Lakes
Wacker Dr. Protection Fund (from 1990 to 1994).
Suite 2600
Chicago,
IL 60601
Alan G. 37 Vice President and Vice President and General Counsel (since
Berkshire Assistant Secretary September 1997) and Secretary (since May
333 West 1998) of The John Nuveen Company, John
Wacker Nuveen & Co. Incorporated, Nuveen Advisory
Drive Corp. and Nuveen Institutional Advisory
Chicago, Corp., prior thereto, Partner in the law
IL 60606 firm of Kirkland & Ellis.
Michael S. 41 Vice President Vice President of Nuveen Advisory Corp.
Davern (since January 1997); prior thereto, Vice
333 W. President and Portfolio Manager of Flagship
Wacker Financial.
Drive
Chicago,
IL 60606
Lorna C. 53 Vice President Vice President of John Nuveen & Co.
Ferguson Incorporated; Vice President (since January
333 West 1998); of Nuveen Advisory Corp. and Nuveen
Wacker Institutional Advisory Corp.
Drive
Chicago,
IL 60606
William M. 34 Vice President Vice President of Nuveen Advisory Corp.
Fitzgerald (since December 1995); Assistant Vice
333 West President of Nuveen Advisory Corp. (from
Wacker September 1992 to December 1995), prior
Drive thereto, Assistant Portfolio Manager of
Chicago, Nuveen Advisory Corp.
IL 60606
Stephen D. 44 Vice President and Vice President of John Nuveen & Co.
Foy Controller Incorporated.
333 West
Wacker
Drive
Chicago,
IL 60606
J. Thomas 43 Vice President Vice President of Nuveen Advisory Corp.
Futrell
333 West
Wacker
Drive
Chicago,
IL 60606
Richard A. 35 Vice President Vice President of Nuveen Advisory Corp.
Huber (since January 1997); prior thereto Vice
333 West President and Portfolio Manager of Flagship
Wacker Financial.
Drive
Chicago,
IL 60606
</TABLE>
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<PAGE> 106
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Steven J. 41 Vice President Vice President of Nuveen Advisory Corp.
Krupa
333 West
Wacker Drive
Chicago, IL
60606
Larry W. 47 Vice President Vice President, Assistant Secretary and
Martin Assistant General Counsel of John Nuveen &
333 West Co. Incorporated; Vice President and
Wacker Drive Assistant Secretary of Nuveen Advisory
Chicago, IL Corp.; Vice President and Assistant
60606 Secretary of Nuveen Institutional Advisory
Corp.; Assistant Secretary of The John
Nuveen Company.
Edward F. 33 Vice President Vice President (since September 1996),
Neild, IV previously Assistant Vice President (since
333 West December 1993) of Nuveen Advisory Corp.,
Wacker Drive portfolio manager prior thereto; Vice
Chicago, IL President (since September 1996), previously
60606 Assistant Vice President (since May 1995) of
Nuveen Institutional Advisory Corp.,
portfolio manager prior thereto.
Stephen S. 40 Vice President Vice President (since September 1997),
Peterson previously Assistant Vice President (since
333 West September 1996) of Nuveen Advisory Corp.,
Wacker Drive Portfolio Manager prior thereto.
Chicago, IL
60606
Stuart W. 42 Vice President Vice President of John Nuveen & Co.
Rogers Incorporated
333 West
Wacker Drive
Chicago, IL
60606
Thomas C. 47 Vice President Vice President of Nuveen Advisory Corp. and
Spalding, Jr. Nuveen Institutional Advisory Corp.;
333 West Chartered Financial Analyst.
Wacker Drive
Chicago, IL
60606
H. William 64 Vice President Vice President and Treasurer of The John
Stabenow Nuveen Company, John Nuveen & Co.
333 West Incorporated, Nuveen Advisory Corp. and
Wacker Drive Nuveen Institutional Advisory Corp.
Chicago, IL
60606
William S. 33 Vice President Vice President of John Nuveen & Co.
Swanson Incorporated (since October 1997), prior
333 West thereto, Assistant Vice President (since
Wacker Drive September 1996); formerly, Associate of John
Chicago, IL Nuveen & Co. Incorporated.
60606
Gifford R. 42 Vice President Vice President, Assistant Secretary and
Zimmerman and Secretary Associate General Counsel of John Nuveen &
333 West Co. Incorporated; Vice President and
Wacker Drive Assistant Secretary of Nuveen Advisory
Chicago, IL Corp.; Vice President and Assistant
60606 Secretary of Nuveen Institutional Advisory
Corp; Assistant Secretary of The John Nuveen
Company (since May 1994).
</TABLE>
S-15
<PAGE> 107
Anthony Dean, Peter Sawers and Timothy Schwertfeger serve as members of the
Executive Committee of the Board of Trustees. The Executive Committee, which
meets between regular meetings of the Board of Trustees, is authorized to
exercise all of the powers of the Board of Trustees.
The trustees of the Trust are directors or trustees, as the case may be, of
37 Nuveen open-end funds and 52 Nuveen closed-end funds advised by Nuveen
Advisory Corp.
The following table sets forth compensation paid by the Trust to each of the
trustees of the Trust and the total compensation paid to each trustee during
the fiscal year ended May 31, 1998. 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........................ $6,010 $66,446
Lawrence H. Brown........................ $6,484 $79,000
Anne E. Impellizzeri..................... $6,010 $73,000
Margaret K. Rosenheim*................... $2,277(1) $29,506(2)
Peter R. Sawers.......................... $6,010 $73,000
William J. Schneider..................... $6,010 $66,446
Judith M. Stockdale**.................... $4,223 $49,000
</TABLE>
- --------
*Former trustee; retired July 1997.
**Elected to the Board in July 1997.
(1) Includes $52 in interest accrued on deferred compensation from prior years.
(2) Includes $1,256 in interest accrued on deferred compensation from prior
years.
Each trustee who is not affiliated with Nuveen or Nuveen Advisory receives a
fee. The Trust requires no employees other than its officers, all of whom are
compensated by Nuveen.
The officers and directors of each Fund, in the aggregate, own less than 1%
of the shares of the Fund.
The following table sets forth the percentage ownership of each person, who,
as of September 1, 1998, owns of record, or is known by Registrant to own of
record or beneficially 5% or more of any class of a Fund's shares.
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Kansas
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 14.68%
Class A Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
PaineWebber for the benefit of 6.46
Sonya Ropfogel and Leonard
Ropfogel Ttees Leonard
Dated 8/20/81
155 N. Market, Suite 1000
Wichita KS 67202-1824
</TABLE>
S-16
<PAGE> 108
<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 24.69%
Class B Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Prudential Securities Inc. FBO 7.02
Frank F. Castellano
Patricia J. Castellano JT TEN
14032 Hayes St.
Overland Park KS 66221-2013
Prudential Securities Inc. FBO 5.15
Anna Smisor Smith TTEE Anna Smisor
Smith Living Trust UA DTD 05-18-87
PO Box 125
Sterling KS 67579-0125
Nuveen Flagship Kansas
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 35.33
Class C Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
PaineWebber for the Benefit of 11.95
William C. Loewen
Joyce A. Loewen JT WROS
312 Wind Rows Lake Dr
Goddard KS 67052-9410
Mike Carter 6.60
Jennifer Carter JT TEN
Special Funds Account
11300 Valley HI
Wichita KS 67209-1041
Nuveen Flagship Kansas
Municipal Bond Fund Donaldson Lufkin & Jenrette 75.11
Class R Shares............ Secs Corp
PO Box 2052
Jersey City NJ 07303-2052
Alan K. Saunders 22.97
6616 W. 132nd St.
Overland Park KS 66209-3929
</TABLE>
S-17
<PAGE> 109
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Kentucky
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 10.31%
Class A Shares......... for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Nuveen Flagship Kentucky
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 16.16
Class B Shares......... for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Prudential Securities Inc. FBO 8.85
Mayne Bush Jett
13 Deepwood Dr.
Lexington KY 40505-2105
NFSC FEBO A74-023639 5.64
Elizabeth S. Cuckler, Richard T. Cuckler
2813 Deerfield Dr.
Covington KY 41017-4471
Nuveen Flagship Kentucky
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 33.77
Class C Shares......... for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Nuveen Flagship Kentucky
Municipal Bond Fund Ronald G. Barlow 69.86
Class R Shares......... Nancy Barlow JT TEN
10136 Scale Rd.
Bentok KY 42025-6748
Edward D. Jones & Co. FAO 7.80
Joseph E. Knight
EDJ 421-04756-1-4
PO Box 2500
Maryland Heights MO 63043-8500
Hugh M. Cohen 7.71
3005 Aubert Ave.
Louisville KY 40206-2601
Shelley Cohen 7.71
3005 Aubert Ave.
Louisville KY 40206-2601
</TABLE>
S-18
<PAGE> 110
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Kentucky
Limited Term Municipal Bond
Fund Merrill Lynch, Pierce, Fenner & Smith 36.47%
Class A Shares............. for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
PaineWebber 6.08
for the benefit of
Ted M. Fiorita
6410 St. Andrews Drive
Paducah KY 42001-8751
Nuveen Flagship Kentucky
Limited Term Municipal Bond
Fund Merrill Lynch, Pierce, Fenner & Smith 40.67
Class C Shares............. for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Niti Vermani 6.54
236 Bellefonte Cir.
Ashland KY 41101-2176
Nuveen Flagship Kentucky
Limited Term Municipal Bond
Fund James O. Carroll 100.00
Class R Shares............. Lucille Carroll JTWROS
6621 Astral Dr.
Louisville, KY 40258-3315
Nuveen Flagship Michigan
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 55.44
Class A Shares............. for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Nuveen Flagship Michigan
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 48.30
Class B Shares............. for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Smith Barney Inc 5.91
00159755510
388 Greenwich Street
New York NY 10013-2339
</TABLE>
S-19
<PAGE> 111
<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 64.44%
Class C Shares................... for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Nuveen Flagship Missouri Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 25.67
Class A Shares................... for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Nuveen Flagship Missouri Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 25.02
Class B Shares................... for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Smith Barney Inc 12.85
00159609738
388 Greenwich Street
New York, NY 10013-2339
Smith Barney Inc 11.04
00159614216
388 Greenwich Street
New York, NY 10013-2339
Marvin Labarge 6.91
and Rita Labarge
JT WROS
3939 Towers Rd
Saint Charles, MO 63304-7457
Carmella A Leonard 5.71
Carmella A Leonard Trust
U/A 12/28/94
P.O. Box 286
Saint Albans, MO 63073-0286
Prudential Securities Inc. FBO 5.47
Mr. Keith McClanahan TTEE UW RELLA
Maxine McClanahan FBO RELLA MAXINE
401 SE Oldham Pkwy
Lees Summit, MO 64081-2930
</TABLE>
S-20
<PAGE> 112
<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 52.81%
Class C Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6848
Nuveen Flagship Missouri
Municipal Bond Fund Raymond R Powell 65.48
Class R Shares............ Rosa May Powell TRS
Raymond R Powell Trust
UA DTD 12/15/93
2500 Bluff Blvd.
Columbia MO 65201-6108
Mary Jo Mustello 25.40
8320 NW Forest Dr
Weatherby Lake MO 64152-1655
Pearl R Pavlo 9.08
Pearl Rose Pavlo Rev Liv Trust
U/A 03/30/95
13915 NW 74th St.
Parkville MO 64152-5111
Nuveen Flagship Ohio
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 37.29
Class A Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Nuveen Flagship Ohio
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 32.60
Class B Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
Dean Witter FBO 7.89
Raymond H Penick
1504 Blue Jay Rd.
Church St. Station PO Box 250
New York NY 10013-0250
Nuveen Flagship Ohio
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 56.27
Class C Shares............ for the sole benefit of its customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville FL 32246-6484
</TABLE>
S-21
<PAGE> 113
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Wisconsin
Municipal Bond Fund Smith Barney Inc. 12.98%
Class A Shares............ 00127113901
388 Greenwich Street
NY NY 10013
PaineWebber 6.68
for the benefit of
Richard A Uihlein
PO Box 23434
Milwaukee WI 53223-0434
Nuveen Flagship Wisconsin
Municipal Bond Fund MLPF&S 8.16
Class B Shares............ for the Sole Benefit of its Customers
Attn Fund Admin Sec 97ND1
4800 Deer Lake Dr. E FL 3
Jacksonville FL 32246-6484
PaineWebber 8.10
for the Benefit of
Mr. William J Hurkman and
Mrs. Marian T Hurkman JT TEN
2304 South Arch Street
Janesville WI 53546-6126
PaineWebber 7.73
for the Benefit of
Karl G Gierhahn
3279 S Illinois Avenue
Milwaukee WI 53207-3032
Jeffrey Blakemore 7.39
7000 W Good Hope Rd
Milwaukee WI 53223-4609
Donaldson Lufkin Jenrette 5.69
Securities Corporation Inc
PO Box 2052
Jersey City NJ 07303-2052
Dean Witter FBO 5.63
Lorraine Suminski
1121 North Waverly Pl
Church St Station PO Box 250
New York NY 10013-0250
</TABLE>
S-22
<PAGE> 114
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Wisconsin Municipal
Bond Fund Everen Clearing Corp 13.03%
Class C Shares.................... Acct 3973-8110
Alan R Hyman & Harriet S Hyman
111 East Kilbourn Avenue
Milwaukee WI 53202-6611
Gordon M Derzon 7.61
3440 Topping
Madison WI 53705-1439
Affiliated Leasing Inc 7.04
PO Box 44509
Madison WI 53744-4509
Everen Clearing Corp 6.95
Acct 1810-7992
R Creighton Buck Family Trust
111 East Kilbourn Avenue
Milwaukee WI 53202-6611
Everen Clearing Corp 5.22
Acct 6044-1401
Lyle Pagel TR
111 East Kilbourn Avenue
Milwaukee WI 53202-6611
Everen Clearing Corp 5.04
Acct 7804-2234
Norris L. Tibbets
111 East Kilbourn Avenue
Milwaukee WI 53202-6611
Nuveen Flagship Wisconsin Municipal
Bond Fund Elizabeth H Sohn TR 99.47
Class R Shares.................... Elizabeth H Sohn Trust
U/A Dtd 3/7/96
N14651 Wintergreen Lake Rd
Park Falls WI 54552-7069
</TABLE>
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<PAGE> 115
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the
investment and reinvestment of the assets of each of the Funds. Nuveen Advisory
also administers the Trust's business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. See "Fund
Service Providers" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and
the Trust, each of the Funds except the Kentucky Limited Term Fund has agreed
to pay an annual management fee at the rates set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE FEE MANAGEMENT FEE
- --------------------------------- --------------
<S> <C>
For the first $125 million....................................... .5500 of 1%
For the next $125 million........................................ .5375 of 1%
For the next $250 million........................................ .5250 of 1%
For the next $500 million........................................ .5125 of 1%
For the next $1 billion.......................................... .5000 of 1%
For assets over $2 billion....................................... .4750 of 1%
</TABLE>
The Kentucky Limited Term Fund has agreed to pay an annual management fee at
the rates set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- ----------------------------- --------------
<S> <C>
For the first $125 million....................................... .4500 of 1%
For the next $125 million........................................ .4375 of 1%
For the next $250 million........................................ .4250 of 1%
For the next $500 million........................................ .4125 of 1%
For the next $1 billion.......................................... .4000 of 1%
For assets over $2 billion....................................... .3750 of 1%
</TABLE>
Nuveen Advisory has agreed to waive all or a portion of its management fee or
reimburse certain expenses of the Ohio Fund in order to prevent total operating
expenses (including Nuveen Advisory's fee, but excluding interest, taxes, fees
incurred in acquiring and disposing of portfolio securities, any asset-based
distribution or service fees and, to the extent permitted, extraordinary
expenses) in any fiscal year from exceeding .75 of 1% of average daily net
asset value of any class of shares of the Fund.
For all of the Funds, Nuveen Advisory has committed through at least 1998 to
continue Flagship's general dividend-setting practices.
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For the last three fiscal years, the Funds paid net management fees to
Flagship Financial, predecessor to Nuveen Advisory, and beginning on February
1, 1997, to Nuveen Advisory, as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF FEE WAIVERS AND EXPENSE
EXPENSE REIMBURSEMENT PAID REIMBURSEMENTS
FOR THE YEAR ENDED FOR THE YEAR ENDED
----------------------------- -------------------------
5/31/96 5/31/97 5/31/98 5/31/96 5/31/97 5/31/98
--------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Kansas Municipal Bond
Fund................... 38,552 159,550 360,823 496,188 339,334 191,060
Kentucky Municipal Bond
Fund................... 799,646 1,300,570 2,227,288 1,328,971 989,872 310,289
Kentucky Limited Term
Municipal Bond Fund.... 2,496 -- -- 50,402 108,413 79,972
Michigan Municipal Bond
Fund................... 873,242 1,194,710 1,804,027 586,307 378,083 --
Missouri Municipal Bond
Fund................... 494,006 823,757 1,308,176 598,909 326,922 --
Ohio Municipal Bond
Fund................... 1,899,111 2,430,648 3,609,901 522,006 355,267 --
Wisconsin Municipal Bond
Fund................... -- -- -- 102,593 146,340 156,639
</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
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, in effecting purchases and sales of portfolio securities for
the account of each Fund, will place orders in such manner as, in the opinion
of management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be
obtained elsewhere. Portfolio securities will not be purchased from Nuveen or
its affiliates except in compliance with the Investment Company Act of 1940.
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<PAGE> 117
The Funds expect that all portfolio transactions will be effected on a
principal (as opposed to an agency) basis and, accordingly, do not expect to
pay any brokerage commissions. Purchases from underwriters will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include the spread between the bid and asked price. Given the
best price and execution obtainable, it will be the practice of the Funds to
select dealers which, in addition, furnish research information (primarily
credit analyses of issuers and general economic reports) and statistical and
other services to Nuveen Advisory. It is not possible to place a dollar value
on information and statistical and other services received from dealers. Since
it is only supplementary to Nuveen Advisory's own research efforts, the receipt
of research information is not expected to reduce significantly Nuveen
Advisory's expenses. While Nuveen Advisory will be primarily responsible for
the placement of the business of the Funds, the policies and practices of
Nuveen Advisory in this regard must be consistent with the foregoing and will,
at all times, be subject to review by the Board of Trustees.
Nuveen Advisory reserves the right to, and does, manage other investment
accounts and investment companies for other clients, which may have investment
objectives similar to the Funds. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Funds and the portfolios of its other clients purchasing or selling
securities whenever decisions are made to purchase or sell securities by a Fund
and one or more of such other clients simultaneously. In making such
allocations the main factors to be considered will be the respective investment
objectives of the Fund and such other clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other clients, the size of investment
commitments generally held by the Fund and such other clients and opinions of
the persons responsible for recommending investments to the Fund and such other
clients. While this procedure could have a detrimental effect on the price or
amount of the securities available to a Fund from time to time, it is the
opinion of the Board of Trustees that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
Under the Investment Company Act of 1940, the Funds may not purchase
portfolio securities from any underwriting syndicate of which Nuveen is a
member except under certain limited conditions set forth in Rule 10f-3. The
Rule sets forth requirements relating to, among other things, the terms of an
issue of Municipal Obligations purchased by a Fund, the amount of Municipal
Obligations which may be purchased in any one issue and the assets of a Fund
which may be invested in a particular issue. In addition, purchases of
securities made pursuant to the terms of the Rule must be approved at least
quarterly by the Board of Trustees, including a majority of the trustees who
are not interested persons of the Trust.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Funds
will be determined separately for each class of the Funds' shares by The Chase
Manhattan Bank, the Funds' custodian, as of the close of trading (normally 4:00
p.m. Eastern Time) on each day on which the Exchange is normally open for
trading. The Exchange is not open for trading on New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. The net asset value per share of a class of shares of a
Fund will be computed by dividing the value of the Fund's assets attributable
to the class, less the liabilities attributable to the class, by the number of
shares of the class outstanding.
In determining net asset value for the Funds, 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
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<PAGE> 118
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,
for taxable years beginning on or before August 5, 1997, a Fund must derive
less than 30% of its annual gross income from the sale or other disposition of
any of the following which was held for less than three months: (i) stock or
securities and (ii) certain options, futures, or forward contracts (the "short-
short test"). The short-short test will not be a requirement for qualification
as a regulated investment company for taxable years beginning after August 5,
1997. Third, a Fund must diversify its holdings so that, at the close of each
quarter of its taxable year, (i) at least 50% of the value of its total assets
is comprised of cash, cash items, United States Government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to an amount not greater in value than 5% of the
value of a Fund's total assets and to not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of
the total assets is invested in the securities of any one issuer (other than
United States Government securities and securities of other regulated
investment companies) or two or more issuers controlled by a Fund and engaged
in the same, similar or related trades or businesses.
As a regulated investment company, a Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (which includes dividends,
taxable interest, taxable original issue discount and market discount income,
income from securities lending, net short-term capital gain in excess of long-
term capital loss, and any other taxable income other than "net capital gain"
(as defined below) and is reduced by deductible expenses) and (ii) its net tax-
exempt interest (the excess of its gross tax-exempt interest income over
certain disallowed deductions). A Fund may retain for investment its net
capital gain (which consists of the excess of its net long-term capital gain
over its short-term capital loss). However, if a Fund retains any net capital
gain or any investment company taxable income, it will be subject to tax at
regular corporate rates on the amount retained. If a Fund retains any capital
gain, such Fund may designate the retained amount as undistributed capital
gains in a notice to its shareholders who, if subject to federal income tax on
long-term capital gains, (i) will be required to include in income for federal
income tax purposes, as long-term capital gain, their shares of such
undistributed amount, and (ii) will be entitled to credit their proportionate
shares of the tax paid by such Fund against their federal income tax
liabilities if any, and to claim refunds to the extent the credit exceeds such
liabilities. For federal income tax purposes, the tax basis of shares owned by
a shareholder of the Fund will be increased by an amount equal under current
law to 65% of the amount of undistributed capital gains included in the
shareholder's gross income. Each Fund intends to distribute at least annually
to its shareholders all or substantially all of its net tax-exempt interest and
any investment company taxable income and net capital gain.
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<PAGE> 119
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if they had been incurred in the succeeding year.
Each Fund also intends to satisfy conditions (including requirements as to
the proportion of its assets invested in Municipal Obligations) that will
enable it to designate distributions from the interest income generated by
investments in Municipal Obligations, which is exempt from regular federal
income tax when received by such Fund, as exempt-interest dividends.
Shareholders receiving exempt-interest dividends will not be subject to regular
federal income tax on the amount of such dividends. Insurance proceeds received
by a Fund under any insurance policies in respect of scheduled interest
payments on defaulted Municipal Obligations will be excludable from federal
gross income under Section 103(a) of the Code. In the case of non-appropriation
by a political subdivision, however, there can be no assurance that payments
made by the insurer representing interest on "non-appropriation" lease
obligations will be excludable from gross income for federal income tax
purposes. See "Investment Policies and Investment Portfolio; Portfolio
Securities."
Distributions by a Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by a Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If a Fund purchases a Municipal Obligation at a market discount, any gain
realized by the Fund upon sale or redemption of the Municipal Obligation will
be treated as taxable interest income to the extent such gain does not exceed
the market discount, and any gain realized in excess of the market discount
will be treated as capital gains. Any net long-term capital gains realized by a
Fund and distributed to shareholders in cash or additional shares, will be
taxable to shareholders as long-term capital gains regardless of the length of
time investors have owned shares of a Fund. Distributions by a Fund that do not
constitute ordinary income dividends, exempt-interest dividends, or capital
gain dividends will be treated as a return of capital to the extent of (and in
reduction of) the shareholder's tax basis in his or her shares. Any excess will
be treated as gain from the sale of his or her shares, as discussed below.
If a Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of
income designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income that was tax-
exempt during the period covered by the distribution.
If a Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to a Fund, defer a Fund's losses, cause
adjustments in the holding periods of a Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Because the taxable portion of a Fund's investment income consists primarily
of interest, none of its dividends, whether or not treated as exempt-interest
dividends, is expected to qualify under the Internal Revenue Code for the
dividends received deductions for corporations.
Prior to purchasing shares in a Fund, the impact of dividends or
distributions which are expected to be or have been declared, but not paid,
should be carefully considered. Any dividend or distribution declared shortly
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after a purchase of such shares prior to the record date will have the effect
of reducing the per share net asset value by the per share amount of the
dividend or distribution.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by a Fund (and received by
the shareholders) on December 31.
The redemption or exchange of the shares of a Fund normally will result in
capital gain or loss to the shareholders. Present law taxes both long- and
short-term capital gains of corporations at the rates applicable to ordinary
income. For non-corporate taxpayers, however, (i) gain on the sale of shares
held for more than 18 months will generally be taxed at a maximum marginal rate
of 20%, (ii) gain on the sale of shares held for more than one year but not
more than 18 months will generally be taxed at a maximum marginal rate of 28%,
and (iii) gain on the sale of shares held for not more than one year and other
ordinary income will generally be taxed at a maximum marginal rate of 39.6%.
Because of the limitations on itemized deductions and the deduction for
personal exemptions applicable to higher income taxpayers, the effective tax
rate on net income may be higher in certain circumstances.
All or a portion of a sales charge paid in purchasing shares of a Fund cannot
be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent shares of a Fund or another fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
Any disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Moreover, losses
recognized by a shareholder on the redemption or exchange of shares of a Fund
held for six months or less are disallowed to the extent of any distribution of
exempt-interest dividends received with respect to such shares and, if not
disallowed, such losses are treated as long-term capital losses to the extent
of any distributions of long-term capital gains made with respect to such
shares. In addition, no loss will be allowed on the redemption or exchange of
shares of a Fund if the shareholder purchases other shares of such Fund
(whether through reinvestment of distributions or otherwise) or the shareholder
acquires or enters into a contract or option to acquire securities that are
substantially identical to shares of a Fund within a period of 61 days
beginning 30 days before and ending 30 days after such redemption or exchange.
If disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.
It may not be advantageous from a tax perspective for shareholders to redeem
or exchange shares after tax-exempt income has accrued but before the record
date for the exempt-interest dividend representing the distribution of such
income. Because such accrued tax-exempt income is included in the net asset
value per share (which equals the redemption or exchange value), such a
redemption could result in treatment of the portion of the sales or redemption
proceeds equal to the accrued tax-exempt interest as taxable gain (to the
extent the redemption or exchange price exceeds the shareholder's tax basis in
the shares disposed of) rather than tax-exempt interest.
In order to avoid a 4% federal excise tax, a Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which such Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Funds intend to make timely distributions in
compliance with these requirements and consequently it is anticipated that they
generally will not be required to pay the excise tax.
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<PAGE> 121
If in any year a Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from Municipal Obligations), and distributions to its shareholders would
be taxable to shareholders as ordinary dividend income for federal income tax
purposes to the extent of the Fund's available earnings and profits.
Because the Funds may invest in private activity bonds, the interest on which
is not federally tax-exempt to persons who are "substantial users" of the
facilities financed by such bonds or "related persons" of such "substantial
users," the Funds may not be an appropriate investment for shareholders who are
considered either a "substantial user" or a "related person" within the meaning
of the Code. For additional information, investors should consult their tax
advisers before investing in a Fund.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals. Interest on certain Municipal Obligations, such
as bonds issued to make loans for housing purposes or to private entities (but
not for certain tax-exempt organizations such as universities and non-profit
hospitals), is included as an item of tax preference in determining the amount
of a taxpayer's alternative minimum taxable income. To the extent that a Fund
receives income from Municipal Obligations subject to the alternative minimum
tax, a portion of the dividends paid by it, although otherwise exempt from
federal income tax, will be taxable to shareholders to the extent that their
tax liability is determined under the alternative minimum tax regime. The Funds
will annually supply shareholders with a report indicating the percentage of
Fund income attributable to Municipal Obligations subject to the federal
alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is
increased by 75% of the difference between an alternative measure of income
("adjusted current earnings") and the amount otherwise determined to be the
alternative minimum taxable income. Interest on all Municipal Obligations, and
therefore all distributions by the Funds that would otherwise be tax-exempt, is
included in calculating a corporation's adjusted current earnings.
Tax-exempt income, including exempt-interest dividends paid by a Fund, will
be added to the taxable income of individuals receiving social security or
railroad retirement benefits in determining whether a portion of that benefit
will be subject to federal income tax.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of a Fund may
be considered to have been made with borrowed funds even though such funds are
not directly traceable to the purchase of shares.
The Funds are required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Funds their correct taxpayer identification
number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or
administrative action, and any such change may be retroactive with respect to
Fund transactions. Shareholders are advised to consult their own tax advisers
for more detailed information concerning the federal taxation of the Funds and
the income tax consequences to their shareholders.
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<PAGE> 122
STATE TAX MATTERS
The discussion of tax treatment is based on the assumptions that the Funds
will qualify under Subchapter M of the Code as regulated investment companies
and as qualified investment funds under applicable state law, that they will
satisfy the conditions which will cause distributions to qualify as exempt-
interest dividends to shareholders when distributed as intended, and that each
Fund will distribute all interest and dividends it receives to its
shareholders. Unless otherwise noted, shareholders in each Fund will not be
subject to state income taxation on distributions that are attributable to
interest earned on the municipal obligations issued by that state or its
subdivisions, or on obligations of the United States. Shareholders generally
will be required to include capital gain distributions in their income for
state tax purposes. The tax discussion summarizes general state tax laws which
are currently in effect and are subject to change by legislative or
administrative action; any such changes may be retroactive with respect to the
applicable Fund's transactions. Investors should consult a tax adviser for more
detailed information about state taxes to which they may be subject.
KANSAS
The following is a general, abbreviated summary of certain provisions of the
applicable Kansas tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Kansas Fund.
The foregoing summary does not address the taxation of other shareholders nor
does it discuss any local taxes that may be applicable. These provisions are
subject to change by legislative or administrative action, and any such change
may be retroactive with respect to Kansas Fund transactions.
The following is based on the assumptions that the Kansas Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Kansas Fund distributions to qualify as
exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Kansas Fund's shareholders.
The Kansas Fund will be subject to the Kansas corporate franchise tax and the
Kansas corporate income tax only if it has a sufficient nexus with Kansas. If
it is subject to such taxes, it does not expect to pay a material amount of
either tax.
Distributions by the Kansas Fund that are attributable to interest on any
obligation of Kansas and its political subdivisions issued after December 31,
1987, and interest on certain such obligations issued before January 1, 1988,
or to interest on obligations of the United States, its territories,
possessions or instrumentalities that are exempt from state taxation under
federal law will not be subject to the Kansas personal income tax or the Kansas
corporate income tax. All other distributions, including distributions
attributable to capital gains, will be subject to the Kansas personal and
corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Kansas Fund
will be subject to the Kansas personal and corporate income taxes.
Shares of the Kansas Fund may be subject to the Kansas inheritance tax and
the Kansas estate tax if owned by a Kansas decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Kansas and local tax matters.
KENTUCKY
The following is a general, abbreviated summary of certain provisions of the
applicable Kentucky tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Kentucky
Funds. This summary does not address the taxation of other shareholders nor
does it discuss any local
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<PAGE> 123
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 Funds transactions.
The following is based on the assumptions that the Kentucky Funds will
qualify under Subchapter M of the Code as regulated investment companies, that
they will satisfy the conditions which will cause Kentucky Funds distributions
to qualify as exempt-interest dividends to shareholders, and that they will
distribute all interest and dividends they receive to the Kentucky Funds'
shareholders.
The Kentucky Funds will be subject to the Kentucky corporate income tax, the
Kentucky intangible property tax, and the Kentucky corporation license tax only
if they have a sufficient nexus with Kentucky. If they are subject to such
taxes, they do not expect to pay a material amount of any such tax.
Distributions from the Kentucky Funds that are attributable to interest on
any obligation of Kentucky and its political subdivisions ("Kentucky
Obligations") or to interest on obligations of the United States, its
territories, possessions, or instrumentalities that are exempt from state
taxation under federal law ("Federal Obligations") will not be subject to the
Kentucky personal income tax or the Kentucky corporate income tax. All other
distributions, including distributions attributable to capital gains, will be
subject to the Kentucky personal and corporate income tax.
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
Funds will be subject to the Kentucky personal and corporate income taxes.
Shares of the Kentucky Funds may be subject to the Kentucky inheritance tax
and the Kentucky estate tax if owned by a Kentucky decedent at the time of
death.
Shareholders employed in Louisville or Jefferson County will not be subject
to local occupational license fees on income earned from the Kentucky Funds.
Shareholders employed elsewhere in Kentucky generally will not be subject to
local occupational license fees.
Shareholders that are either corporations or sole proprietors, and that do
business in Louisville or Jefferson County, will not be subject to the local
occupational license fee. Shareholders that are either corporations or sole
proprietors, and that do business elsewhere in Kentucky may, however, be
subject to local occupational license fees.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Kentucky and local tax matters.
MICHIGAN
The following is a general, abbreviated summary of certain provisions of the
applicable Michigan state tax law as presently in effect as it directly governs
the taxation of resident individual and corporate shareholders of the Michigan
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Michigan Fund transactions.
The following is based on the assumptions that the Michigan Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Michigan Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Michigan Fund's shareholders.
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<PAGE> 124
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.
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.
If a shareholder subject to the Michigan single business tax receives
distributions derived from interest on Michigan Obligations or sells or
exchanges shares of the Michigan Fund, such events may affect its single
business tax base.
Gain on the sale, exchange, or other disposition of shares of the Michigan
Fund will be subject to the Michigan personal income tax.
Shares of the Michigan Fund may be subject to the Michigan 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.
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.
S-33
<PAGE> 125
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.
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.
S-34
<PAGE> 126
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 maters.
PERFORMANCE INFORMATION
The historical investment performance of the Funds may be shown in the form
of "yield," "taxable equivalent yield," "average annual total return,"
"cumulative total return" and "taxable equivalent total return" figures, each
of which will be calculated separately for each class of shares.
In accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission ("SEC"), yield is computed by dividing the
net investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
Yield=2[(a-b +1)/6/ -1]
---
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 4.20% (2.5% for the
Kentucky Limited Term Fund).
In computing yield, the Funds follow certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Funds use to prepare their annual and interim
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<PAGE> 127
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.
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, 1998
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
Kansas Municipal Bond Fund
Class A Shares.............. 4.32% 44.30% 7.76%
Class B Shares.............. 3.76% 44.30% 6.75%
Class C Shares.............. 3.96% 44.30% 7.11%
Class R Shares.............. 4.71% 44.30% 8.46%
Kentucky Municipal Bond Fund
Class A Shares.............. 4.06% 43.20% 7.15%
Class B Shares.............. 3.49% 43.20% 6.14%
Class C Shares.............. 3.69% 43.20% 6.50%
Class R Shares.............. 4.43% 43.20% 7.80%
Kentucky Limited Term
Municipal Bond Fund
Class A Shares.............. 3.71% 43.20% 6.53%
Class C Shares.............. 3.45% 43.20% 6.07%
Class R Shares.............. 4.01% 43.20% 7.06%
Michigan Municipal Bond Fund
Class A Shares.............. 4.04% 42.30% 7.00%
Class B Shares.............. 3.47% 42.30% 6.01%
Class C Shares.............. 3.67% 42.30% 6.36%
Class R Shares.............. 4.42% 42.30% 7.66%
Missouri Municipal Bond Fund
Class A Shares.............. 4.17% 43.20% 7.34%
Class B Shares.............. 3.60% 43.20% 6.34%
Class C Shares.............. 3.80% 43.20% 6.69%
Class R Shares.............. 4.55% 43.20% 8.01%
Ohio Municipal Bond Fund
Class A Shares.............. 3.72% 44.10% 6.65%
Class B Shares.............. 3.14% 44.10% 5.62%
Class C Shares.............. 3.34% 44.10% 5.97%
Class R Shares.............. 4.09% 44.10% 7.32%
Wisconsin Municipal Bond Fund
Class A Shares.............. 4.42% 43.70% 7.85%
Class B Shares.............. 3.87% 43.70% 6.87%
Class C Shares.............. 4.06% 43.70% 7.21%
Class R Shares.............. 4.78% 43.70% 8.49%
</TABLE>
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<PAGE> 128
- --------
* The combined tax rates used in these tables represent the highest or one
of the highest combined tax rates applicable to state taxpayers, rounded
to the nearest .5%; these rates do not reflect the current federal tax
limitations on itemized deductions and personal exemptions, which may
raise the effective tax rate and taxable equivalent yield for taxpayers
above certain income levels.
For additional information concerning taxable equivalent yields, see the
Taxable Equivalent Yields table in the Prospectus.
The Funds may from time to time in their advertising and sales materials
report a quotation of their current distribution rate. The distribution rate
represents a measure of dividends distributed for a specified period.
Distribution rate is computed by taking the most recent monthly tax-free income
dividend per share, multiplying it by 12 to annualize it, and dividing by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen 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 period quoted, based on the maximum public
offering price then in effect for the Funds, and assuming the imposition of the
maximum sales charge for Class A Shares of 4.20% (2.5% for the Kentucky Limited
Term Municipal Bond Fund), were as follows:
<TABLE>
<CAPTION>
MAY 31, 1998
-------------------------------
DISTRIBUTION RATES
-------------------------------
CLASS A CLASS B CLASS C CLASS R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Kansas Municipal Bond Fund............... 4.72% 4.21% 4.40% 5.12%
Kentucky Municipal Bond Fund............. 4.79% 4.27% 4.48% 5.22%
Kentucky Limited Term Municipal Bond
Fund.................................... 4.22% N/A 3.97% 4.57%
Michigan Municipal Bond Fund ............ 4.76% 4.22% 4.43% 5.17%
Missouri Municipal Bond Fund............. 4.71% 4.17% 4.38% 5.13%
Ohio Municipal Bond Fund................. 4.80% 4.30% 4.50% 5.22%
Wisconsin Municipal Bond Fund............ 4.59% 4.02% 4.25% 4.95%
</TABLE>
Average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation
assumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Total returns for Class A Shares of each fund reflect actual performance for
all periods. For the Kansas, Kentucky, Michigan, Missouri, Ohio and Wisconsin
Funds, Classes B, C and R, total returns reflect actual performance for periods
since class inception, and Class A performance for periods prior to inception,
adjusted for the differences in sales charges (and for Classes B and C, fees)
between the classes. For the Kentucky Limited Term, Class A total returns
reflect actual performance for all periods and Class C and R total returns
reflect actual performance for periods since class inception, and Class A
performance for all periods prior to class inception, adjusted for the
differences in sales charges between the classes.
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<PAGE> 129
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
INCEPTION DATES
------------------
<S> <C>
Kansas Municipal Bond Fund
Class A Shares.......................................... January 9, 1992
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... February 1, 1997
Class R Shares.......................................... February 1, 1997
Kentucky Municipal Bond Fund
Class A Shares.......................................... May 4, 1987
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... October 4, 1993
Class R Shares.......................................... February 1, 1997
Kentucky Limited Term Municipal Bond Fund
Class A Shares.......................................... September 14, 1995
Class C Shares.......................................... September 14, 1995
Class R Shares.......................................... February 1, 1997
Michigan Municipal Bond Fund
Class A Shares.......................................... June 27, 1985
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... June 22, 1993
Class R Shares.......................................... February 1, 1997
Missouri Municipal Bond Fund
Class A Shares.......................................... August 3, 1987
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... February 2, 1994
Class R Shares.......................................... February 1, 1997
Ohio Municipal Bond Fund
Class A Shares.......................................... June 27, 1985
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... August 3, 1993
Class R Shares.......................................... February 1, 1997
Wisconsin Municipal Bond Fund
Class A Shares.......................................... June 1, 1994
Class B Shares.......................................... February 1, 1997
Class C Shares.......................................... February 1, 1997
Class R Shares.......................................... February 1, 1997
</TABLE>
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<PAGE> 130
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, 1998 and for the period from inception through May 31, 1998,
respectively, were:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS
-----------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS FROM INCEPTION
ENDED ENDED ENDED THROUGH
MAY 31, 1998 MAY 31, 1998 MAY 31, 1998 MAY 31, 1998
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Kansas Municipal Bond
Fund
Class A Shares........ 4.70% 5.14% N/A 6.57%
Class B Shares........ 4.57% 5.15% N/A 6.57%
Class C Shares........ 8.85% 5.70% N/A 6.92%
Class R Shares........ 9.84% 6.23% N/A 7.42%
Kentucky Municipal Bond
Fund
Class A Shares........ 4.46% 5.50% 7.98% 7.75%
Class B Shares........ 4.10% 5.61% 7.97% 7.74%
Class C Shares........ 8.43% 5.81% 7.85% 7.57%
Class R Shares........ 9.25% 6.43% 8.46% 8.18%
Kentucky Limited Term
Municipal Bond Fund
Class A Shares........ 3.92% N/A N/A 5.07%
Class C Shares........ 6.17% N/A N/A 5.71%
Class R Shares........ 6.58% N/A N/A 6.09%
Michigan Municipal Bond
Fund
Class A Shares........ 4.39% 5.33% 7.64% 8.08%
Class B Shares........ 4.12% 5.48% 7.63% 8.08%
Class C Shares........ 8.45% 5.59% 7.47% 7.82%
Class R Shares........ 9.16% 6.30% 8.13% 8.46%
Missouri Municipal Bond
Fund
Class A Shares........ 4.76% 5.39% 7.82% 7.45%
Class B Shares........ 4.53% 5.52% 7.82% 7.44%
Class C Shares........ 8.74% 5.73% 7.70% 7.29%
Class R Shares........ 9.56% 6.36% 8.32% 7.90%
Ohio Municipal Bond Fund
Class A Shares........ 4.19% 5.05% 7.36% 7.85%
Class B Shares........ 3.89% 5.15% 7.35% 7.84%
Class C Shares........ 8.12% 5.37% 7.23% 7.61%
Class R Shares........ 8.89% 5.99% 7.84% 8.22%
Wisconsin Municipal Bond
Fund
Class A Shares........ 5.56% N/A N/A 5.90%
Class B Shares........ 5.46% N/A N/A 5.84%
Class C Shares........ 9.59% N/A N/A 6.66%
Class R Shares........ 10.47% N/A N/A 7.18%
</TABLE>
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<PAGE> 131
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, 1998, and for the period since inception through May 31, 1998,
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, 1998 MAY 31, 1998 MAY 31, 1998 MAY 31, 1998
------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
Kansas Municipal Bond
Fund
Class A Shares........ 4.70% 28.50% N/A 50.21%
Class B Shares........ 4.57% 28.54% N/A 50.13%
Class C Shares........ 8.85% 31.96% N/A 53.38%
Class R Shares........ 9.84% 35.29% N/A 58.02%
Kentucky Municipal Bond
Fund
Class A Shares........ 4.46% 30.72% 115.55% 127.18%
Class B Shares........ 4.10% 31.36% 115.35% 127.03%
Class C Shares........ 8.43% 32.63% 112.87% 123.10%
Class R Shares........ 9.25% 36.55% 125.23% 137.46%
Kentucky Limited Term
Municipal Bond Fund
Class A Shares........ 3.92% N/A N/A 14.36%
Class C Shares........ 6.17% N/A N/A 16.26%
Class R Shares........ 6.58% N/A N/A 17.38%
Michigan Municipal Bond
Fund
Class A Shares........ 4.39% 29.63% 108.74% 173.13%
Class B Shares........ 4.12% 30.55% 108.54% 172.86%
Class C Shares........ 8.45% 31.25% 105.59% 164.59%
Class R Shares........ 9.16% 35.71% 118.41% 185.73%
Missouri Municipal Bond
Fund
Class A Shares ....... 4.76% 30.04% 112.38% 117.58%
Class B Shares........ 4.53% 30.79% 112.27% 117.48%
Class C Shares........ 8.74% 32.12% 109.96% 114.14%
Class R Shares........ 9.56% 36.14% 122.34% 127.80%
</TABLE>
S-40
<PAGE> 132
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
--------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS FROM
ENDED ENDED ENDED INCEPTION THROUGH
MAY 31, 1998 MAY 31, 1998 MAY 31, 1998 MAY 31, 1998
------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Ohio Municipal Bond Fund
Class A Shares ....... 4.19% 27.90% 103.38% 165.62%
Class B Shares........ 3.89% 28.53% 103.21% 165.36%
Class C Shares........ 8.12% 29.89% 100.92% 158.11%
Class R Shares........ 8.89% 33.78% 112.69% 177.74%
Wisconsin Municipal Bond
Fund
Class A Shares ....... 5.56% N/A N/A 25.82%
Class B Shares........ 5.46% N/A N/A 25.49%
Class C Shares........ 9.59% N/A N/A 29.38%
Class R Shares........ 10.47% N/A N/A 31.94%
</TABLE>
Calculation of taxable equivalent total return is also not subject to a
prescribed formula. Taxable equivalent total return for a specific period is
calculated by first taking a hypothetical initial investment in Fund shares on
the first day of the period, computing the total return for each calendar year
in the period in the manner described above, and increasing the total return
for each such calendar year by the amount of additional income that a taxable
fund would need to have generated to equal the income on an after-tax basis, at
a specified income tax rate (usually the highest marginal federal tax rate),
calculated as described above under the discussion of "taxable equivalent
yield." The resulting amount for the calendar year is then divided by the
initial investment amount to arrive at a "taxable equivalent total return
factor" for the calendar year. The taxable equivalent total return factors for
all the calendar years are then multiplied together and the result is then
annualized by taking its Nth root (N representing the number of years in the
period) and subtracting 1, which provides a taxable equivalent total return
expressed as a percentage.
Using the 44.3% maximum marginal federal tax rate for 1998, the annual
taxable equivalent total return for the Kansas Municipal Bond Fund, Class A
Shares, for the one-year period ended May 31, 1998 was 13.49%.
Class A Shares of the Funds are sold at net asset value plus a current
maximum sales charge of 4.20% of the offering price. This current maximum sales
charge will typically be used for purposes of calculating performance figures.
Yield, returns and net asset value of each class of shares of the Funds will
fluctuate. Factors affecting the performance of the Funds include general
market conditions, operating expenses and investment management. Any additional
fees charged by a securities representative or other financial services firm
would reduce returns described in this section. Shares of the Funds are
redeemable at net asset value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Funds may also compare their performance with that of:
(1) the Consumer Price Index or various unmanaged bond indexes such as the
Lehman Brothers Municipal Bond Index and the Salomon Brothers High Grade
Corporate Bond Index and (2) other fixed income or municipal bond mutual funds
or mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. ("Morningstar"), Wiesenberger Investment
Companies Service ("Wiesenberger") and CDA Investment Technologies, Inc.
("CDA") or similar independent services which monitor the performance of mutual
funds, or other industry or financial publications such as Barron's, Changing
Times, Forbes and Money Magazine. Performance comparisons by these indexes,
services or publications may rank mutual funds over different periods of time
by means of aggregate, average, year-by-year, or other types of total return
and performance figures. Any given performance quotation or performance
comparison should not be considered as representative of the performance of the
Funds for any future period.
S-41
<PAGE> 133
Each Fund may from time to time in its advertising and sales materials
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds. These taxable investments
have investment characteristics that differ from those of the Funds. U.S.
Government bonds, for example, are long-term investments backed by the full
faith and credit of the U.S. Government, and bank CDs are generally short-term,
FDIC-insured investments, which pay fixed principal and interest but are
subject to fluctuating rollover rates. Money market funds are short-term
investments with stable net asset values, fluctuating yields and special
features enhancing liquidity.
There are differences and similarities between the investments which the
Funds may purchase and the investments measured by the indexes and reporting
services which are described herein. The Consumer Price Index is generally
considered to be a measure of inflation. The CDA Mutual Fund-Municipal Bond
Index is a weighted performance average of other mutual funds with a federally
tax-exempt income objective. The Salomon Brothers High Grade Corporate Bond
Index is an unmanaged index that generally represents the performance of high
grade long-term taxable bonds during various market conditions. The Lehman
Brothers Municipal Bond Index is an unmanaged index that generally represents
the performance of high grade intermediate and long-term municipal bonds during
various market conditions. Lipper calculates municipal bond fund averages based
on average maturity and credit quality. Morningstar rates mutual funds by
overall risk-adjusted performance, investment objectives, and assets. Lipper,
Morningstar, Wiesenberger and CDA are widely recognized mutual fund reporting
services whose performance calculations are based upon changes in net asset
value with all dividends reinvested and which do not include the effect of any
sales charges. The market prices and yields of taxable and tax-exempt bonds
will fluctuate. The Funds primarily invest in investment grade Municipal
Obligations in pursuing their objective of as high a level of current interest
income which is exempt from federal and state income tax as is consistent, in
the view of the Funds' management, with preservation of capital.
The Funds may also compare their taxable equivalent total return performance
to the total return performance of taxable income funds such as treasury
securities funds, corporate bond funds (either investment grade or high yield),
or Ginnie Mae funds. These types of funds, because of the character of their
underlying securities, differ from municipal bond funds in several respects.
The susceptibility of the price of treasury bonds to credit risk is far less
than that of municipal bonds, but the price of treasury bonds tends to be
slightly more susceptible to change resulting from changes in market interest
rates. The susceptibility of the price of investment grade corporate bonds and
municipal bonds to market interest rate changes and general credit changes is
similar. High yield bonds are subject to a greater degree of price volatility
than municipal bonds resulting from changes in market interest rates and are
particularly susceptible to volatility from credit changes. Ginnie Mae bonds
are generally subject to less price volatility than municipal bonds from credit
concerns, due primarily to the fact that the timely payment of monthly
installments of principal and interest are backed by the full faith and credit
of the U.S. Government, but Ginnie Mae bonds of equivalent coupon and maturity
are generally more susceptible to price volatility resulting from market
interest rate changes. In addition, the volatility of Ginnie Mae bonds due to
changes in market interest rates may differ from municipal bonds of comparable
coupon and maturity because bonds of the sensitivity of Ginnie Mae prepayment
experience to change in interest rates.
S-42
<PAGE> 134
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF FUND SHARES
As described in the Prospectus, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of a Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with
respect to any distribution or service plan applicable to its shares. As a
result of the differences in the expenses borne by each class of shares, net
income per share, dividends per share and net asset value per share will vary
among a Fund's classes of shares.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include
distribution and service fees.
The minimum initial investment is $3,000 per fund share class, and may be
lower for accounts opened through fee-based programs for which the program
sponsor has established a single master account with the fund's transfer agent
and performs all sub-accounting services related to that account.
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, 1998 of Class A shares from the Nuveen
Flagship 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......................................... $10.60
Per Share Sales Charge--4.20% of public offering price (4.34% of
net asset value per share)....................................... .46
------
Per Share Offering Price to the Public............................ $11.06
</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.
The following Class A sales charges and commissions apply to all Funds except
Kentucky Limited Term:
<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>
S-43
<PAGE> 135
The following Class A sales charge and commissions apply to the Kentucky
Limited Term Fund:
<TABLE>
<CAPTION>
AUTHORIZED DEALER
AMOUNT OF SALES CHARGE AS % OF SALES CHARGE AS % OF COMMISSION AS % OF
PURCHASE PUBLIC OFFERING PRICE NET AMOUNT INVESTED PUBLIC OFFERING PRICE
- --------- --------------------- -------------------- ---------------------
<S> <C> <C> <C>
Less than
$50,000 2.50% 2.56% 2.00%
$50,000 but
less than
$100,000 2.00% 2.04% 1.60%
$100,000 but
less than
$250,000 1.50% 1.52% 1.20%
$250,000 but
less than
$500,000 1.25% 1.27% 1.00%
$500,000 but
less than
$1,000,000 0.75% 0.76% 0.60%
$1,000,000
and over --(1) -- 0.50%(1)
</TABLE>
- --------
(1) You can buy $1 million or more of Class A shares at net asset value
without an up-front sales charge. Nuveen pays authorized dealers of record
on these share purchases a sales commission of 1.00% (0.50% for the
Kentucky Limited Term fund) of the first $2.5 million, plus .50% of the
next $2.5 million, plus .25% of the amount over $5.0 million. If you
redeem your shares within 18 months of purchase, you may have to pay a
CDSC of 1% (0.50% for the Kentucky Limited Term fund) of either your
purchase price or your redemption proceeds, whichever is lower. You do not
have to pay this CDSC if your financial adviser has made arrangements with
Nuveen and agrees to waive the commission.
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.
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.
S-44
<PAGE> 136
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 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. You may also
purchase Class A Shares at net asset value without a sales charge if the
purchase takes place through a broker-dealer and represents the reinvestment of
the proceeds of the redemption of shares of one or more registered investment
companies not affiliated with Nuveen. You must provide appropriate
documentation that the redemption occurred not more than one year prior to the
reinvestment of the proceeds in Class A Shares, and that you either paid an up-
front sales charge or were subject to a contingent deferred sales charge in
respect of the redemption of such shares of such other investment company.
S-45
<PAGE> 137
Special Sales Charge Waivers. Class A Shares of a Fund may be purchased at
net asset value without a sales charge, and may be purchased 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.
. 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.
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
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<PAGE> 138
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;
. 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
S-47
<PAGE> 139
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 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
accordance with applicable SEC rules by the amount of any 12b-1 plan payments
to which those money market funds shares may be subject.
The CDSC may be waived or reduced under the following six special
circumstances: 1) redemptions within one year following the death or
disability, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended, of a shareholder; 2) in whole or in part for redemptions of
shares by shareholders with accounts in excess of specified breakpoints that
correspond to the breakpoints under which the up-front sales charge on Class A
Shares is reduced pursuant to Rule 22d-1 under the Act; 3) redemptions of
shares purchased under circumstances or by a category of investors for which
Class A Shares could be purchased at net asset value without a sales charge; 4)
in connection with the exercise of a reinstatement privilege whereby the
proceeds of a redemption of a Fund's shares subject to a sales charge are
reinvested in shares of certain Funds within a specified number of days; 5) in
connection with the exercise of a Fund's right to redeem all shares in an
account that does not maintain a certain minimum balance or that the applicable
board has determined may have material adverse consequences to the shareholders
of such Fund; and 6) redemptions made pursuant to a Fund's systematic
withdrawal plan, up to 12% of the current market value. If a Fund waives or
reduces the CDSC,
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<PAGE> 140
such waiver or reduction would be uniformly applied to all Fund shares in the
particular category. In waiving or reducing a CDSC, the Funds will comply with
the requirements of Rule 22d-1 of the Investment Company Act of 1940, as
amended.
GENERAL MATTERS
The Funds may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
tax-free, fixed income securities.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are
expected to sell certain minimum amounts of shares of the Nuveen mutual funds
during specified time periods.
To help advisers and investors better understand and most efficiently use the
Funds to reach their investment goals, the Funds may advertise and create
specific investment programs and systems. For example, this may include
information on how to use the Funds to accumulate assets for future education
needs or periodic payments such as insurance premiums. The Funds may produce
software, electronic information sites, or additional sales literature to
promote the advantages of using the Funds to meet these and other specific
investor needs.
Exchanges of shares of a Fund for shares of a Nuveen Money Market fund may be
made on days when both funds calculate a net asset value and make shares
available for public purchase. Shares of the Nuveen money market funds may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
for business. In addition to the holidays observed by the Fund, the Nuveen
money market funds observe and will not make fund shares available for purchase
on the following holidays: Martin Luther King's Birthday, Columbus Day and
Veterans Day.
In addition, you may exchange Class R Shares of any Fund for Class A Shares
of the same Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of that
Fund.
Each Fund may suspend the right of redemption, or delay payment to redeeming
shareholders for more than seven days, when the New York Stock Exchange is
closed (not including customary weekend and holiday 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.
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.
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<PAGE> 141
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
and last renewed on July 31, 1998 ("Distribution Agreement"). Pursuant to the
Distribution Agreement, the Trust appointed Nuveen to be its agent for the
distribution of the Funds' shares on a continuous offering basis. Nuveen sells
shares to or through brokers, dealers, banks or other qualified financial
intermediaries (collectively referred to as "Dealers"), or others, in a manner
consistent with the then effective registration statement of the Trust.
Pursuant to the Distribution Agreement, Nuveen, at its own expense, finances
certain activities incident to the sale and distribution of the Funds' shares,
including printing and distributing of prospectuses and statements of
additional information to other than existing shareholders, the printing and
distributing of sales literature, advertising and payment of compensation and
giving of concessions to Dealers. Nuveen receives for its services the excess,
if any, of the sales price of the Funds' shares less the net asset value of
those shares, and reallows a majority or all of such amounts to the Dealers who
sold the shares; Nuveen may act as such a Dealer. Nuveen also receives
compensation pursuant to a distribution plan adopted by the Trust pursuant to
Rule 12b-1 and described herein under "Distribution and Service Plan." Nuveen
receives any CDSCs imposed on redemptions of Shares.
The following table sets forth the aggregate amount of underwriting
commissions with respect to the sale of Fund shares and the amount thereof
retained by Nuveen (or Flagship Financial Inc., which Nuveen acquired on
January 1, 1997) for each of the Funds for the last three fiscal years. All
figures are to the nearest thousand.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
COMMISSIONS NUVEEN COMMISSIONS FLAGSHIP COMMISSIONS FLAGSHIP
FUND ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Kansas Fund............. 255 35 251 35 384 51
Kentucky Fund........... 1,076 141 1,057 145 1,304 174
Kentucky Limited Fund... 25 5 23 4 -- --
Michigan Fund........... 397 55 553 76 594 81
Missouri Fund........... 490 36 632 87 892 120
Ohio Fund............... 891 113 931 124 1,066 141
Wisconsin Fund.......... 143 19 170 21 272 24
</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.
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<PAGE> 142
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, 1998, 100% of service fees and distribution
fees were paid out as compensation to Authorized Dealers. The service fee for
Class A, Class B and Class C Shares was .20% and the distribution fee for Class
B Shares was .75% and for Class C Shares was .55% (.35% for the Kentucky
Limited Term Fund Class C Shares).
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1998
----------------------
<S> <C>
Kansas Municipal Bond Fund
Class A................................................ $195,749
Class B................................................ $ 16,985
Class C................................................ $ 5,028
Kentucky Municipal Bond Fund
Class A................................................ $888,602
Class B................................................ $ 22,890
Class C................................................ $203,304
Kentucky Limited Municipal Bond Fund
Class A................................................ $ 18,810
Class C................................................ $ 12,956
Michigan Bond Fund
Class A................................................ $525,468
Class B................................................ $ 14,397
Class C................................................ $328,163
Missouri Municipal Bond Fund
Class A................................................ $458,460
Class B................................................ $ 10,095
Class C................................................ $ 76,058
Ohio Municipal Bond Fund
Class A................................................ $946,661
Class B................................................ $ 40,065
Class C................................................ $324,807
Wisconsin Municipal Bond Fund
Class A................................................ $ 36,486
Class B................................................ $ 7,440
Class C................................................ $ 3,884
</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
S-51
<PAGE> 143
outstanding voting securities of such class. The Plan may be renewed from year
to year if approved by a vote of the Board of Trustees and a vote of the non-
interested trustees who have no direct or indirect financial interest in the
Plan cast in person at a meeting called for the purpose of voting on the Plan.
The Plan may be continued only if the trustees who vote to approve such
continuance conclude, in the exercise of reasonable business judgment and in
light of their fiduciary duties under applicable law, that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The Plan may not be amended to increase materially the cost which a class of
shares may bear under the Plan without the approval of the shareholders of the
affected class, and any other material amendments of the Plan must be approved
by the non-interested trustees by a vote cast in person at a meeting called for
the purpose of considering such amendments. During the continuance of the Plan,
the selection and nomination of the non-interested trustees of the Trust will
be committed to the discretion of the non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois 60603 has been selected as auditors for the Trust. 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 Fund's 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-52
<PAGE> 144
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> 145
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> 146
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> 147
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.
VAI-MS4 9-98
B-2
<PAGE> 148
NUVEEN
Municipal
Bond Funds
November 30, 1998
Semiannual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Kentucky
Kentucky Limited
Michigan
Ohio
<PAGE> 149
Contents
1 Dear Shareholder
4 Nuveen Flagship Kentucky Municipal Bond Fund Commentary and Overview
6 Nuveen Flagship Kentucky Limited Term Municipal Bond Fund Commentary
and Overview
8 Nuveen Flagship Michigan Municipal Bond Fund Commentary and Overview
10 Nuveen Flagship Ohio Municipal Bond Fund Commentary and Overview
12 Portfolio of Investments
40 Statement of Net Assets
41 Statement of Operations
42 Statement of Changes in Net Assets
44 Notes to Financial Statements
50 Financial Highlights
52 Building Better Portfolios
53 Fund Information
Highlights
As of November 30, 1998
For Class A shares at net asset value
Credit Quality Performance Highlights
Nuveen Flagship Kentucky Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 55% . One-year total return of 6.69%
AA 6% . Outperformed Lipper's Peer Group average
A 22% . Good credit quality, with 61% of the funds
BBB/NR 17% assets invested in AAA- or AA-rated bonds
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 44% . One-year total return of 5.36%
AA 19% . Outperformed Lipper's Peer Group average
A 26% . Good credit quality, with 63% of the funds
BBB/NR 11% assets invested in AAA- or AA-rated bonds
Nuveen Flagship Michigan Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 59% . One-year total return of 6.99%
AA 16% . Outperformed Lipper's Peer Group average
A 10% . Good credit quality, with 75% of the funds
BBB/NR 15% assets invested in AAA- or AA-rated bonds
Nuveen Flagship Ohio Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 68% . One-year total return of 7.19%
AA 7% . Outperformed Lipper's Peer Group average
A 11% . Good credit quality, with 75% of the funds
BBB/NR 14% assets invested in AAA- or AA-rated bonds
<PAGE> 150
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
Dear Shareholder
I'm pleased to report on the performance of the Nuveen Municipal Bond Funds for
the 12 months ended November 30, 1998. Providing a reliable source of tax-free
income and competitive after-tax total returns remains the primary investment
objective for each of these funds. In each case, we achieved this objective,
illustrating once again that Nuveen municipal bond funds can provide an
excellent investment option for income-oriented investors.
The Year in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. This economic turmoil affected the U.S. equity market, which
was very volatile over the past year. The Federal Reserve (the Fed) intervened
in an attempt to soften the impact of the financial crises abroad and in the
U.S. equity market by lowering short-term interest rates in September by a
quarter of a point. Since that time, the Fed has twice again reduced rates,
bringing the federal funds rate to 4.75%. As long term interest rates fell to
historic lows, investors were reminded of the importance of a well balanced
portfolio and professional management. Despite the market volatility throughout
the year, your Nuveen Municipal Bond Fund continued to provide attractive
current market yields and after-tax total returns. Your fund represented a
bright spot among fixed-income investments. In addition, the funds have
maintained good levels of call protection, which provide a strong foundation for
potentially stable income streams in the foreseeable future. Looking ahead, we
will continue to focus on new municipal bond issuance while leveraging our
institutional buying power to buy and sell securities at the best possible
prices and identifying undervalued securities through proprietary market
research.
1
<PAGE> 151
Municipal Market Review
Over the past year, declining interest rates drove yields on 30-year Treasuries
to their lowest levels since 1977. The story in the municipal market, however,
was quite different. With yields on the long Treasury bond pushing below 5% at
times, the yield on the Bond Buyer 40, an unmanaged index of long-term municipal
bonds, fell just 26 basis points - from 5.36% to 5.10% - compared with the
99-point drop in Treasury yields over the past 12 months. As of November 30,
1998, the ratio of municipal yields to Treasury yields stood at 100.8%, compared
with the more typical range of 86-87%. For investors, this means that municipal
bonds currently offer about the same yield as Treasury bonds--before taxes are
taken into account. On an after-tax basis, municipal bonds present an even more
attractive investment option relative to Treasuries.
One of the main factors in the steep decline in Treasury yields during the past
year was the strong interest in these investments by international investors. As
the financial turmoil in Asia continued to spread to economies worldwide and the
dollar strengthened against foreign currencies, the demand for U.S.
dollar-denominated Treasury securities increased. In the municipal market, where
foreign demand was limited by an inability of foreign investors to benefit from
the tax advantages of municipal bonds, low interest rates and a strong economy
combined to generate high levels of new issuance and a dramatic increase in the
refinancing of existing bonds. The first eleven months of 1998 saw $255.24
billion of new municipal issuance and refunding activity, up 28.4% over the same
period in 1997. In terms of total issuance, this puts 1998 on pace to be the
second largest year on record.
2
<PAGE> 152
"The key to taking advantage of the exceptional values currently available in
the municipal market is the expertise of a market specialist, such as Nuveen
Advisory Corp."
In addition, the continued strength of the U.S. economy has brought about
improvements in the fundamental financial health of many municipalities and
boosted the overall credit quality of municipal bonds. In the third quarter of
1998, upgraded issues by the two major rating agencies outnumbered downgrades by
a margin of 7 to 2.
Nuveen Expertise Is Key
The key to taking advantage of the exceptional values currently available in the
municipal market is the expertise of a market specialist, such as Nuveen
Advisory Corp. To this end, Nuveen has assembled the Premier Advisers(SM), a
growing group of experts that can provide time-tested experience and insight in
a variety of investment categories. In addition to Nuveen Advisory Corp., our
Premier Adviser for tax-free investing, you can rely on our other Premier
Advisers to share their wisdom in the equity market, including Institutional
Capital Corporation for value investing and Rittenhouse Financial Services, Inc.
for growth investing. For more information about our funds, including charges
and expenses, contact your financial adviser for a prospectus, or call Nuveen at
(800) 621-7227. Please read the prospectus carefully before you invest or send
money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments can assist you in establishing a diversified
portfolio designed to help you build and sustain long-term financial security.
For more than 100 years, Nuveen has been a respected name in the financial
world. We are grateful for the confidence you have shown in us, and we intend to
continue earning your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1999
3
<PAGE> 153
Nuveen Flagship Kentucky Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses the Nuveen Flagship Kentucky Municipal
Bond Fund and reviews factors that affected performance over the past 12 months.
Comments cover the 12-month period ended November 30, 1998 and all performance
statistics are quoted for Class A shares.
What is the status of Kentucky's economy and its municipal market?
Kentucky has enjoyed an improving economic base that has outperformed the nation
in annual growth since 1990. That base continues to diversify and modernize into
the light manufacturing and service-oriented sectors, reducing the state's
traditional reliance on coal, tobacco, and heavy manufacturing. Continued low
unemployment numbers and job growth concentrated in the retail, business
services, and health services have complemented Kentucky's economic growth and
diversification.
Kentucky's economy is expected to continue in its current positive direction,
although growth in jobs, wages and productivity is expected to moderate
somewhat.
In spite of those improving economic conditions, however, the municipal market
has seen relatively little supply in 1998. In fact, Kentucky ranked just 26th
among the states in year-to-date issuance as of November 30, 1998. Although the
state's total issuance, $2.67 billion, is up 15.6% versus its 1997 issuance, it
has been a challenge trying to identify good values.
How did the Nuveen Flagship Kentucky Municipal Bond Fund's underlying portfolio
perform during the past year?
Over the past 12 months, the Nuveen Flagship Kentucky Municipal Bond Fund
generated a total return on Class A shares at net asset value of 6.69%,
equivalent to a taxable total return of 9.48% for investors in the 35.1%
combined federal and state income tax bracket. That performance exceeded the
6.40% average annual total return posted by the Lipper Kentucky Municipal Debt
Peer Group* of 12 municipal bond funds.
What key strategies were used over the course of the year? Were there any
particular sectors in which Nuveen looked for undervalued securities?
The fund continued to enjoy success with its sector strategy. A sector is a
particular group of bonds usually found in one industry. Currently, our two
largest sector allocations are limited tax obligation bonds and healthcare
securities, which accounted for 24% and 21%, respectively, of the fund's
investments, as of November 30, 1998. Although we continue to see good values in
the healthcare sector, we have looked for opportunities in other sectors,
including utilities and the emerging general obligation sector, to add
diversification to the portfolio. In all cases, our focus is on high-quality
credits that we believe will continue to provide good value over the life of the
fund.
Aside from our sector strategy, the fund has also benefited from
well-diversified call protection, which helped it maintain more predictable
income streams. Staggered call exposure will help to protect the fund from
reinvestment risk in the event that interest rates continue to decline.
The fund also maintained its primary focus on high-quality securities, with 61%
of the portfolio invested in AAA rated or AA rated bonds, as of November 30,
1998. However, Nuveen's extensive research capabilities also make it possible
for us to identify lower-rated debt that we believe offers both strong quality
characteristics and the opportunity for additional yield.
Were there any other factors that affected the fund?
There were two significant events in the state this year that impacted the
fund's investment opportunities. First was the state's tight municipal bond
supply, which made it a challenge to keep the portfolio fully invested. Given
the recent rallies in the municipal market, keeping the fund fully invested
during the year was key.
Another development in Kentucky was a 1998 state court decision that overturned
important restrictions on the issuance of general obligation debt. The resulting
ability of Kentucky municipalities to issue general obligation debt created some
small though important investment opportunities for us, especially given the
year's light municipal issuance volume.
What is your outlook for the Nuveen Flagship Kentucky Municipal Bond Fund?
One important event in the coming year is the anticipated merger of this fund
with the Nuveen Flagship Kentucky Limited Term Municipal Bond Fund. We believe
this merger will enhance economies of scale for shareholders of both funds, but
should not impact the fund's future investment performance.
Overall, we will continue to manage the fund by seeking out undervalued
securities that provide attractive income relative to the market, consistent
with the preservation of capital.
The housing bond sector will be a prime candidate for addition to the portfolio
as a way to increase yield. The reason for this is that single family housing
bonds contain prepayment risk. This prepayment risk increases as interest rates
fall, but it's rewarded in the form of higher yield. In today's market, however,
<PAGE> 154
we view that additional risk as minute due to the low level of current interest
rates. We will also look for opportunities in the general obligation sector,
which will help us further diversify our sector allocation while offering some
potentially attractive values.
* The Lipper Peer Group return represents the average annualized returns of the
funds in the Lipper Kentucky Municipal Debt category. The return assumes
reinvestment of dividends and does not reflect any applicable sales charge.
4
<PAGE> 155
Nuveen Flagship Kentucky Municipal Bond Fund
Performance Overview
As of November 30, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
<TABLE>
<S> <C>
12/97 .0495
1/98 .0475
2/98 .0475
3/98 .0475
4/98 .0475
5/98 .0475
6/98 .0475
7/98 .0475
8/98 .0475
9/98 .0475
10/98 .0465
11/98 .0465
</TABLE>
Top 5 Sectors
<TABLE>
<S> <C>
Tax Obligation (Limited) 24%
- ---------------------------------------------
Health Care 21%
- ---------------------------------------------
U.S. Guaranteed 11%
- ---------------------------------------------
Utilities 10%
- ---------------------------------------------
Water and Sewer 8%
- ---------------------------------------------
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 5/87 2/97 10/93 2/97
- --------------------------------------------------------------------------------
Net Asset Value $11.46 $11.46 $11.45 $11.44
- --------------------------------------------------------------------------------
Total Net Assets ($000) $505,355
- --------------------------------------------------------------------------------
Effective Maturity (Years) 19.91
- --------------------------------------------------------------------------------
Modified Duration (Years) 6.31
- --------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/2/
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 6.69% 2.19% 5.82% 6.05% 6.93%
- --------------------------------------------------------------------------------
5-Year 6.12% 5.21% 5.46% 5.53% 6.16%
- --------------------------------------------------------------------------------
10-Year 8.12% 7.66% 7.65% 7.53% 8.14%
- --------------------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.87% 4.67% 4.14% 4.35% 5.09%
- --------------------------------------------------------------------------------
SEC 30-Day Yield 3.98% 3.82% 3.24% 3.44% 4.18%
- --------------------------------------------------------------------------------
Taxable Equivalent Yield/3/ 6.13% 5.89% 4.99% 5.30% 6.44%
- --------------------------------------------------------------------------------
</TABLE>
1 The Fund also paid shareholders taxable distributions in December of $0.0508
per share.
2 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
<PAGE> 156
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.
3 Based on SEC yield and a federal income tax rate of 35.1%. Represents the
yield on a taxable investment necessary to equal the yield of the Nuveen fund
on an after-tax basis.
5
<PAGE> 157
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Paul Brennan discusses the Nuveen Flagship Kentucky Limited
Term Municipal Bond Fund and reviews factors that affected performance over the
past 12 months.
Comments cover the 12-month period ended November 30, 1998 and all performance
statistics are quoted for Class A shares.
What is the status of Kentucky's economy and its municipal market?
Kentucky has enjoyed an improving economic base that has outperformed the nation
in annual growth since 1990. That base continues to diversify and modernize into
the light manufacturing and service-oriented sectors, reducing the state's
traditional reliance on coal, tobacco, and heavy manufacturing. Continued low
unemployment numbers and job growth concentrated in the retail, business
services, and health services have complemented Kentucky's economic growth and
diversification.
Kentucky's economy is expected to continue in its current positive direction,
although growth in jobs, wages and productivity is expected to moderate
somewhat.
In spite of those improving economic conditions, however, the municipal market
has seen relatively little supply in 1998. In fact, Kentucky ranked just 26th
among the states in year-to-date issuance as of November 30, 1998. Although the
state's total issuance, $2.67 billion, is up 15.6% versus its 1997 issuance, it
has been a challenge trying to identify good values.
How did the Nuveen Flagship Kentucky Limited Term Municipal Bond Fund's
underlying portfolio perform during the past year?
Over the past 12 months, the Nuveen Flagship Kentucky Limited Term Municipal
Bond Fund generated a total return on Class A shares at net asset value of
5.36%, equivalent to a taxable total return of 7.71% for investors in the 35.1%
combined federal and state income tax bracket. That performance exceeded the
5.14% average annual total return posted by the Lipper Other State Short
Intermediate Municipal Debt Peer Group* of 19 municipal bond funds.
What key strategies were used over the course of the year? Were there any
particular sectors in which Nuveen looked for undervalued securities?
The fund continued to enjoy success with its sector strategy. A sector is a
particular group of bonds usually found in one industry. Our two largest sector
allocations were limited tax obligation bonds and health care securities, which
each accounted for 24% of the fund's investments, as of November 30, 1998.
Although we continue to see good values in the healthcare sector, we have looked
for opportunities in other sectors, including housing and the emerging general
obligation sector, to add diversification to the portfolio. In all cases, our
focus is on high-quality credits that we believe will continue to provide good
value over the life of the fund.
Aside from our sector strategy, the fund also benefited from well-diversified
call protection, which helped it maintain more predictable income streams.
Staggered call exposure will help to protect the fund from reinvestment risk in
the event that interest rates continue to decline.
The fund also maintained its primary focus on high-quality securities, with 63%
of the portfolio invested in AAA rated or AA rated bonds, as of November 30,
1998. However, Nuveen's extensive research capabilities also make it possible
for us to identify lower-rated debt that we believe offers both strong quality
characteristics and the opportunity for additional yield.
Were there any other factors that affected the fund?
Another development in Kentucky was a 1998 state court decision that overturned
important restrictions on the issuance of general obligation debt. The resulting
ability of Kentucky municipalities to issue general obligation debt created some
small, though important, investment opportunities for us, especially given the
year's light municipal issuance volume.
What is your outlook for the Nuveen Flagship Kentucky Limited Term Municipal
Bond Fund?
One important event in the coming year is the anticipated merger of this fund
with the Nuveen Flagship Kentucky Municipal Bond Fund. We believe this merger
will enhance economies of scale for shareholders of both funds, and will create
opportunities for our Limited Term investors to enjoy the additional yield and
potentially higher income streams of a longer term portfolio. The merged fund
will continue to seek out undervalued securities that provide attractive income
relative to the market, consistent with the preservation of capital.
Specifically, the housing bond sector will be a prime candidate for addition to
the portfolio as a way to increase yield. The reason for this is that single
family housing bonds contain prepayment risk. This prepayment risk increases as
interest rates fall, but it's rewarded in the form of higher yield. In today's
market, however, we view that additional risk as minute due to the low level of
current interest rates. We will also look for opportunities in the general
obligation sector, which will help us further diversify our sector allocation
<PAGE> 158
while offering some potentially attractive values.
* The Lipper Peer Group return represents the average annualized returns of the
funds in the Lipper Other State Short Intermediate Municipal Debt category.
The return assumes reinvestment of dividends and does not reflect any
applicable sales charge.
6
<PAGE> 159
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Performance Overview
As of November 30, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<C> <C>
12/97 .0365
1/98 .0365
2/98 .0365
3/98 .0365
4/98 .0365
5/98 .0365
6/98 .0365
7/98 .035
8/98 .035
9/98 .035
10/98 .035
11/98 .035
</TABLE>
<TABLE>
Top 5 Sectors
<S> <C>
Tax Obligation (Limited) 24%
........................................
Health Care 24%
........................................
Education and Civic Organizations 14%
........................................
Housing (Multifamily) 10%
........................................
Water and Sewer 9%
- ----------------------------------------
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Inception Date 9/95 9/95 2/97
..............................................................................
Net Asset Value $10.19 $10.18 $10.17
..............................................................................
Total Net Assets ($000) $11,153
..............................................................................
Effective Maturity (Years) 5.74
..............................................................................
Modified Duration (Years) 4.77
- ------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/1/
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-Year 5.36% 2.71% 4.99% 5.62%
..............................................................................
3-Year 5.45% 4.58% 5.08% 5.53%
..............................................................................
Since Inception 5.99% 5.16% 5.62% 6.07%
- ------------------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distribution Rate 4.12% 4.02% 3.77% 4.37%
..............................................................................
SEC 30-Day Yield 3.19% 3.11% 2.85% 3.39%
..............................................................................
Taxable Equivalent Yield/2/ 4.92% 4.79% 4.39% 5.22%
- ------------------------------------------------------------------------------
</TABLE>
1 Class A share returns are actual. Class 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 2.50% maximum sales charge. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a federal income tax rate of 35.1%. Represents the
yield on a taxable investment necessary to equal the yield of the Nuveen fund
on an after-tax basis.
7
<PAGE> 160
Nuveen Flagship Michigan Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses the Nuveen Flagship Michigan Municipal
Bond Fund and reviews factors that affected performance over the past 12 months.
Comments cover the 12-month period ended November 30, 1998 and all performance
statistics are quoted for Class A shares.
What is the status of Michigan's economy and its municipal market?
The Michigan economy continues to expand as it diversifies away from its
dependence on the inherently cyclical auto industry. Unemployment continues to
be below national levels at 3.6%. While the state has diversified its employment
base by increasing employment in the trade and services sectors, it is still
reliant on the auto sector. The state's economy is expected to be more cyclical
than the nation, but the state has positioned itself to be more stable than in
previous years. The state's improved credit quality was recognized in the first
quarter of 1998 by Moody's, which upgraded its rating to Aa1 from Aa2. S&P rates
it AA+. Both ratings remained the same, as of November 30, 1998.
In response to low interest rates, the expanding economy, and Michigan's
continued population growth, the state's municipal bond issuance through
November increased 57% over the same period in 1997. Supply is expected to
remain heavy over the next few years due to the continuing need for
infrastructure financing and increased school spending.
How did the Nuveen Flagship Michigan Municipal Bond Fund's underlying portfolio
perform during the past year?
Over the past 12 months, the Nuveen Flagship Michigan Municipal Bond Fund
generated a total return on Class A shares at net asset value of 6.99%,
equivalent to a taxable total return of 9.64% for investors in the 34% combined
federal and state income tax bracket. That performance exceeded the 6.81%
average annual total return posted by the Lipper Michigan Municipal Debt Peer
Group* of 52 municipal bond funds.
What key strategies were used over the course of the year? Were there any
particular sectors in which Nuveen looked for undervalued securities?
In general, we spent the recent period further improving the Nuveen Flagship
Michigan Municipal Bond Fund's portfolio structure by adding high-quality
securities offering good call protection, higher coupons, and attractive value
relative to the larger market.
We sought out those securities in a number of ways. First, we looked to make new
purchases in sectors offering bonds that our managers believe were not fully
priced by the market. One of the fund's largest sectors, healthcare, with 20% of
the fund's investments, as of November 30, 1998, not only experienced some of
the state's heaviest issuance volume, it also performed well during the period.
Second, we choose to hold onto the high coupon bonds purchased in earlier
periods, which became pre-refunded as interest rates fell. A pre-refunding
establishes an escrow of U.S. government securities designed to pay off the
original debt at a designated call date. As a result, the bond price rises
through the elimination of credit risk and the acceleration of maturity.
We also looked to take advantage of slightly wider yield spreads between higher
and lower-rated securities. Nuveen's extensive research capabilities give us the
ability to identify lower-rated debt that we believe offers both strong credit
characteristics and the opportunity for additional yield. In Michigan, we found
attractive lower-rated bonds in a number of sectors, an example of which
includes non-rated revenue bonds for Holland Homes issued by the Michigan
Strategic Fund. Overall, however, the fund's portfolio continues to be very high
quality, with 75% of its holdings rated AAA or AA, as of November 30, 1998.
The fund also benefited from well-diversified call protection, which helped it
maintain more predictable income streams. Staggered call exposure will help to
protect the fund from reinvestment risk in the event that interest rates
continue to decline.
What is your outlook for the Nuveen Flagship Michigan Municipal Bond Fund?
Overall, we will continue to manage the fund by seeking out undervalued
securities that provide attractive income relative to the market, consistent
with the preservation of capital.
The housing bond sector will be a prime candidate for addition to the portfolio
as a way to increase yield. Since single family housing bonds contain prepayment
risk, they generally come to market at lower prices and higher yields in
comparison to other high quality issues. In today's market, however, we view any
prepayment risk as very low due to the present level of interest rates. In
addition, we intend to use our market clout to work with housing bond issuers to
structure call-protected maturities at good prices.
We will also continue to work closely with Nuveen's research team to identify
lower-rated credits that we believe are of fundamentally high quality, adding
yield to the portfolio without compromising the overall quality of the
portfolio.
* The Lipper Peer Group return represents the average annualized returns of the
funds in the Lipper Michigan Municipal Debt category. The return assumes
reinvestment of dividends and does not reflect any applicable sales charge.
8
<PAGE> 161
Nuveen Flagship Michigan Municipal Bond Fund
Performance Overview
As of November 30, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
<TABLE>
<S> <C>
12/97 .051
1/98 .05
2/98 .05
3/98 .05
4/98 .05
5/98 .05
6/98 .05
7/98 .05
8/98 .05
9/98 .05
10/98 .05
11/98 .05
</TABLE>
Top 5 Sectors
<TABLE>
<S> <C>
U.S. Guaranteed 23%
- ---------------------------------------------
Health Care 20%
- ---------------------------------------------
Tax Obligation (General) 15%
- ---------------------------------------------
Tax Obligation (Limited) 14%
- ---------------------------------------------
Water and Sewer 6%
- ---------------------------------------------
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 6/85 2/97 6/93 2/97
- --------------------------------------------------------------------------------
Net Asset Value $12.18 $12.20 $12.17 $12.18
- --------------------------------------------------------------------------------
Total Net Assets ($000) $351,616
- --------------------------------------------------------------------------------
Effective Maturity (Years) 16.50
- --------------------------------------------------------------------------------
Modified Duration (Years) 6.26
- --------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/2/
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 6.99% 2.46% 6.28% 6.51% 7.20%
- --------------------------------------------------------------------------------
5-Year 6.04% 5.15% 5.42% 5.49% 6.12%
- --------------------------------------------------------------------------------
10-Year 7.79% 7.32% 7.32% 7.17% 7.83%
- --------------------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.93% 4.72% 4.18% 4.39% 5.12%
- --------------------------------------------------------------------------------
SEC 30-Day Yield 3.86% 3.70% 3.11% 3.31% 4.06%
- --------------------------------------------------------------------------------
Taxable Equivalent Yield/3/ 5.85% 5.61% 4.71% 5.02% 6.15%
- --------------------------------------------------------------------------------
</TABLE>
1 The Fund also paid shareholders taxable distributions in December of $0.0281
per share.
2 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
<PAGE> 162
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.
3 Based on SEC yield and a federal income tax rate of 34%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
9
<PAGE> 163
Nuveen Flagship Ohio Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses the Nuveen Flagship Ohio Municipal Bond
Fund and reviews factors that affected performance over the past 12 months.
Comments cover the 12 month period ended November 30, 1998 and all performance
statistics are quoted for Class A shares.
What is the status of Ohio's economy and its municipal market?
Although Ohio's economy remains more reliant on manufacturing than many other
states, it has diversified, reducing the state's reliance on auto and steel
industries. The state's employment growth has trailed the national rate, but its
unemployment rate remains slightly below the national average. Job growth has
been concentrated in construction and the service sectors, with additional jobs
in the high-tech sector concentrated in the northern portion of the state.
The importance of industrial exports to the Ohio economy increases the state's
exposure to the global economy. That exposure has produced some negative effects
in light of the economic difficulties facing Asia, as well as heightened
competition. Steel exports, for example, have experienced declines in part due
to lower priced imports.
Ohio remains one of the country's largest issuers of municipal bonds. In 1998,
the state ranked ninth in year-to-date issuance as of November 30, 1998. Total
issuance, $7.68 billion, was up 8.9% versus the same period in 1997.
How did the Nuveen Flagship Ohio Municipal Bond Fund's underlying portfolio
perform during the past year?
Over the past 12 months, the Nuveen Flagship Ohio Municipal Bond Fund performed
well, generating a total return on Class A shares at net asset value of 7.19%,
equivalent to a taxable total return of 10.07% for investors in the 35.8%
combined federal and state income tax bracket. That performance exceeded the
6.78% average annual total return posted by the Lipper Ohio Municipal Debt Peer
Group* of 52 municipal bond funds.
What key strategies were used over the course of the year? Were there any
particular areas in which Nuveen looked for undervalued securities?
The fund continued to enjoy success with its sector strategy during the recent
period. A sector is a particular group of bonds usually found in one industry.
Currently, our two largest allocations are U.S. Guaranteed Bonds and general tax
obligation securities, which accounted for 20% and 17%, respectively, of the
fund's investments, as of November 30, 1998. These areas not only experienced
some of the state's heaviest issuance volume, they performed well during the
period ended November 30, 1998.
Two other sectors that have performed well recently are housing and healthcare.
The healthcare sector in particular has seen yield spreads widen between
higher-rated and lower-rated securities because bond insurers are increasingly
unwilling to insure securities rated lower than AA.
Aside from our sector strategy, the fund has also benefited from
well-diversified call protection, which helped it maintain more predictable
income streams. Staggered call exposure will help to protect the fund from
reinvestment risk in the event that interest rates continue to decline.
The fund also maintained its primary focus on high-quality securities, with 75%
of the portfolio invested in bonds rated AA or AAA as of November 30, 1998.
However, Nuveen's extensive research capabilities also make it possible for us
to identify lower-rated debt that we believe offers both strong quality
characteristics and the opportunity for additional yield.
The Nuveen Flagship Ohio Municipal Bond Fund is among Nuveen's largest municipal
funds, which means we have to buy bonds in larger blocks to impact the
portfolio's performance. We looked toward large issuers and heavy-issuance
sectors for attractive investment opportunities during the year.
What is your outlook for the Nuveen Flagship Ohio Municipal Bond Fund?
Overall, we will continue to manage the fund by seeking out undervalued
securities that provide attractive income relative to the market, consistent
with the preservation of capital. Specifically, we will continue to improve the
portfolio's overall structure by trying to further improve the fund's call
protection as well as long-term total return prospects.
The housing bond sector will be a prime candidate for addition to the portfolio
as a way to increase yield. The reason for this is that single family housing
bonds contain prepayment risk. This prepayment risk increases as interest rates
fall, but it's rewarded in the form of higher yield. In today's market, however,
we view that additional risk as very low due to the present level of interest
rates.
We will also continue to work closely with Nuveen's research team to identify
lower rated credits that we believe are of fundamentally high quality, adding
yield to the portfolio without compromising the overall quality of the
portfolio.
* The Lipper Peer Group return represents the average annualized returns of the
<PAGE> 164
funds in the Lipper Ohio Municipal Debt category. The return assumes
reinvestment of dividends and does not reflect any applicable sales charge.
10
<PAGE> 165
Nuveen Flagship Ohio Municipal Bond Fund
Performance Overview
As of November 30, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
<TABLE>
<C> <C>
12/97 .0505
1/98 .049
2/98 .049
3/98 .049
4/98 .049
5/98 .049
6/98 .049
7/98 .049
8/98 .049
9/98 .049
10/98 .048
11/98 .048
</TABLE>
Top 5 Sectors
<TABLE>
<S> <C>
U.S. Guaranteed 20%
.................................
Tax Obligation (General) 17%
.................................
Health Care 15%
.................................
Utilities 11%
.................................
Tax Obligation (Limited) 7%
- ---------------------------------
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 6/85 2/97 8/93 2/97
..............................................................................
Net Asset Value $11.84 $11.83 $11.83 $11.84
..............................................................................
Total Net Assets ($000) $706,940
..............................................................................
Effective Maturity (Years) 18.76
..............................................................................
Modified Duration (Years) 6.37
- ------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/2/
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 7.19% 2.70% 6.34% 6.56% 7.41%
..............................................................................
5-Year 5.74% 4.83% 5.08% 5.16% 5.82%
..............................................................................
10-Year 7.58% 7.12% 7.11% 6.99% 7.62%
- ------------------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.86% 4.66% 4.16% 4.36% 5.07%
..............................................................................
SEC 30-Day Yield 3.71% 3.56% 2.97% 3.17% 3.92%
..............................................................................
Taxable Equivalent Yield/3/ 5.78% 5.55% 4.63% 4.94% 6.11%
- ------------------------------------------------------------------------------
</TABLE>
1 The Fund also paid shareholders taxable distributions in December of $0.0504
per share.
2 Class A share returns are actual. Class 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 redemption 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.
3 Based on SEC yield and a federal income tax rate of 35.8%. Represents the
yield on a taxable investment necessary to equal the yield of the Nuveen fund
on an after-tax basis.
11
<PAGE> 166
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky Municipal Bond Fund
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 0.2%
$1,000,000 Jefferson County, Kentucky, Pollution Control 7/03 at 103 AA- $ 1,103,320
Revenue Bonds (E.I. du Pont de Nemours and
Company Project), 1982 Series A, 6.300%,
7/01/12
- ----------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 0.2%
700,000 Northern Kentucky University, 5/01 at 102 AAA 762,818
Consolidated Education Building
Revenue Bonds, Series F,
7.000%. 5/01/10
- ----------------------------------------------------------------------------------------------------------
Energy - 4.0%
5,000,000 City of Ashland, Kentucky, Pollution Control 8/02 at 102 Baa1 5,388,450
Revenue Refunding Bonds (Ashland Oil Inc.
Project), Series 1992, 6.650%, 8/01/09
9,000,000 City of Ashland, Kentucky, Sewage and Solid 2/05 at 102 Baa1 10,139,040
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 10/01 at 102 Baa1 4,719,874
Revenue Bonds, Series 1991 (Ashland Oil Inc.
Project), 7.200%, 10/01/20 (Alternative
Minimum Tax)
- ----------------------------------------------------------------------------------------------------------
Forest and Paper Products - 5.7%
2,370,000 Hancock County, Kentucky, Solid Waste Disposal 5/06 at 102 A- 2,644,802
Facilities Revenue Bonds (Willamette Industries,
Inc. Project), Series 1996, 6.600%, 5/01/26
9,750,000 County of Henderson, Kentucky, Solid Waste 3/05 at 102 Baa2 10,511,768
Disposal Revenue Bonds (MacMillan Bloedel
Project), Series 1995, 7.000%, 3/01/25
(Alternative Minimum Tax)
1,500,000 Maysville (Kentucky) Industrial Development 2/00 at 103 N/R 1,571,925
Revenue Bonds, Crystal Tissue Project,
8.000%, 2/01/09 (Alternative Minimum Tax)
3,750,000 County of Perry, Kentucky, Solid Waste 6/04 at 102 N/R 4,121,250
Disposal Revenue Bonds (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 4,676,381
2,000,000 6.550%, 4/15/27 (Alternative Minimum Tax) 4/07 at 102 N/R 2,175,220
2,820,000 City of Wickliffe, Kentucky, Solid Waste 4/06 at 102 A1 3,092,891
Disposal Facility Revenue Bonds, Series 1996
(Westvaco Corporation Project), 6.375%,
4/01/26 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------
Health Care - 20.7%
1,310,000 County of Christian, Kentucky, Hospital 7/06 at 102 A- 1,407,399
Revenue Bonds, Series 1996A, Jennie Stuart
Medical Center, 6.000%, 7/01/17
3,500,000 County of Christian, Kentucky, Hospital 7/06 at 102 A- 3,825,990
Revenue and Refunding Bonds, Series 1997A,
Jennie Stuart Medical Center, 6.000%, 7/01/13
5,270,000 County of Clark, Kentucky, Hospital Refunding 4/07 at 102 BBB- 5,600,218
and Improvement Revenue Bonds (Clark Regional
Medical Center Project), Series 1997, 6.200%,
4/01/13
3,300,000 County of Daviess, Kentucky, Insured Hospital 8/02 at 102 AAA 3,603,765
Revenue Bonds, 1992 (ODCH, Inc. Project),
Series A, 6.250%, 8/01/22
2,805,000 County of Floyd, Kentucky, Hospital Revenue 2/01 at 102 AAA 3,007,998
Refunding Bonds (FHA Insured Mortgage Loan
</TABLE>
<PAGE> 167
<TABLE>
<S> <C> <C> <C> <C>
Highland Hospital Corporation Project),
Series 1991, 7.500%, 8/01/10
4,000,000 County of Hopkins, Kentucky, Hospital 11/01 at 102 AAA 4,348,960
Revenue Bonds, Series 1991 (The Trover Clinic
Foundation, Incorporated), 6.625%, 11/15/11
</TABLE>
12
<PAGE> 168
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
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 $ 1,299,528
12,785,000 6.550%, 5/01/22 5/02 at 102 AAA 13,981,932
4,625,000 County of Jefferson, Kentucky, Health 7/07 at 101 AAA 4,686,651
Facilities Revenue Bonds, Series 1997,
(University Medical Center, Inc. Project),
5.250%, 7/01/22
15,640,000 County of Jefferson, Kentucky, Health 10/07 at 101 AAA 15,615,445
Facilities Revenue Bonds, Series 1997
(Alliant Health System, Inc.), 5.125%,
10/01/27
7,800,000 County of Jefferson, Kentucky, Health 10/08 at 101 AAA 7,878,468
System Revenue Bonds, Series 1998
(Alliant Health System, Inc.), 5.200%,
10/01/28
7,800,000 County of Jefferson, Kentucky, Insured 10/02 at 102 AAA 8,566,974
Hospital Revenue Bonds, Series 1992
(Alliant Health System, Inc.), 6.436%,
10/01/14
1,750,000 Kentucky Development Finance Authority, 11/99 at 102 A1 1,848,718
Hospital Revenue Bonds (Sisters of
Charity of Nazareth Health Corporation),
Series 1989, 7.375%, 11/01/16
1,000,000 Kentucky Development Finance Authority 11/01 at 100 AAA 1,056,330
(St. Elizabeth Medical Center, Inc.
Project), 6.000%, 11/01/10
5,000,000 Kentucky Economic Development Finance 12/03 at 102 AAA 5,487,100
Authority, Hospital Facilities Revenue
Bonds, Series 1993A (Saint Elizabeth Medical
Center, Inc. Project), 6.000%, 12/01/22
9,500,000 Kentucky Economic Development Finance 2/07 at 102 AAA 10,098,310
Authority, Hospital 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 5.600%, 10/01/08 4/08 at 102 BBB 526,225
3,500,000 5.850%, 10/01/17 4/08 at 102 BBB 3,636,465
1,500,000 5.875%, 10/01/22 4/08 at 102 BBB 1,554,540
2,050,000 McCracken County, Kentucky, Hospital 11/04 at 102 AAA 2,303,811
Facilities Revenue Refunding Bonds,
Series 1994A (Mercy Health System),
6.300%, 11/01/06
1,555,000 City of Radcliff, Kentucky, Tax-Exempt 7/07 at 102 AAA 1,643,433
Mortgage Revenue Refunding Bonds, Series 1997
(GNMA Backed - Lincoln Trail Care and Treatment
Facility), 5.650%, 1/20/19
2,800,000 City of Russell, Kentucky, Health System 1/08 at 102 Baa1 2,829,960
Revenue Bonds, Our Lady of Bellefonte
Hospital Issue, Series 1997 (Franciscan
Health Partnership, Inc.), Refunding Revenue
Bonds, 5.500%, 7/01/15
- -----------------------------------------------------------------------------------------------------------
Housing/Multifamily - 1.3%
2,500,000 Greater Kentucky Housing Assistance Corporation, 7/03 at 100 AAA 2,593,525
Mortgage Revenue Refunding Bonds, Series 1993A
(FHA Insured Mortgage Loans - Section 8
Assisted Projects), 6.250%, 7/01/24
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 701,799
2,900,000 5.650%, 8/20/34 8/08 at 102 AAA 3,028,499
- -----------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.7%
7,000,000 Kentucky Housing Corporation, Housing 7/06 at 102 AAA 7,518,280
</TABLE>
<PAGE> 169
<TABLE>
<S> <C> <C> <C> <C>
Revenue Bonds, 1996 Series E, 6.300%,
1/01/28 (Alternative Minimum Tax)
3,000,000 Kentucky Housing Corporation, Housing 7/07 at 102 AAA 3,239,850
Revenue Bonds, 1997 Series B, 6.250%,
7/01/28 (Alternative Minimum Tax)
435,000 Kentucky Housing Corporation, Housing 1/99 at 102 AAA 444,292
Revenue Bonds (FHA Insured/VA Guaranteed
Mortgage Loans), 1988 Series B, 7.625%,
1/01/09 (Alternative Minimum Tax)
1,360,000 Kentucky Housing Corporation, Housing 7/00 at 102 AAA 1,427,089
Revenue Bonds (FHA Insured/VA Guaranteed
Mortgage Loans), 1988 Series C, 7.900%,
1/01/21 (Alternative Minimum Tax)
635,000 Kentucky Housing Corporation, Housing 7/00 at 102 AAA 651,612
Revenue Bonds (FHA Insured/VA Guaranteed),
1990 Series B, 7.800%, 1/01/21 (Alternative
Minimum Tax)
</TABLE>
13
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<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
November 30, 1998
Principal Optional Call Market
Amount Description Provisions*
Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$1,000,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 7/02 at 102 AAA $1,071,830
or Guaranteed Mortgage Loans), Series 1992B, 6.625%, 7/01/14
450,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 1/03 at 102 AAA 479,682
or Guaranteed Mortgage Loans), Series 1991C-1, 6.600%, 1/01/11
3,560,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 1/09 at 101 AAA 3,569,470
or Guaranteed Mortgage Loans), 1998 Series F, 5.000%, 7/01/18
(Alternative Minimum Tax)
900,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 1/04 at 102 AAA 963,846
or Guaranteed Mortgage Loans), 1994 Series A, 6.500%, 7/01/17
2,095,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured 7/04 at 102 AAA 2,258,515
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 2,133,948
or Guaranteed Mortgage Loans), 1995 Series B, 6.625%, 7/01/26
(Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Long Term Care -- 3.5%
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 1,313,879
715,000 6.125%, 11/15/13 11/04 at 102 BBB 758,594
3,210,000 6.125%, 11/15/18 11/04 at 102 BBB 3,405,714
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 1,806,066
4,250,000 5.500%, 11/15/30 5/08 at 102 BBB 4,264,238
5,700,000 Kentucky Economic Development Finance Authority, Tax Exempt Mortgage 1/08 at 105 AAA 6,193,415
Revenue Bonds (South Central Nursing Homes, Inc. Project), Series 1997A,
6.000%, 7/01/27
- ----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 2.0%
4,790,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 7/06 at 101 1/2 A 4,991,707
(General Obligation Bonds), 5.400%, 7/01/25
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997 7/07 at 101 1/2 A 2,073,640
(General Obligation Bonds), 5.375%, 7/01/25
3,000,000 Commonwealth of Puerto Rico, Public Improvement Refunding Bonds 7/08 at 101 A 2,979,870
of 1998 (General Obligation Bonds), 5.000%, 7/01/26
- ----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 23.6%
615,000 Boone County (Kentucky), School District Finance Corporation, School 2/03 at 102 A1 650,596
Building Refunding and Improvement Revenue Bonds, Series 1993,
6.000%, 2/01/18
1,595,000 City of Bowling Green Municipal Projects Corporation, Kentucky, 12/04 at 102 A2 1,786,942
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 1,076,265
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 551,718
535,000 5.800%, 5/01/12 5/04 at 102 A1 578,790
570,000 5.800%, 5/01/13 5/04 at 102 A1 615,224
600,000 5.800%, 5/01/14 5/04 at 102 A1 646,098
1,070,000 Fleming County School District Finance Corporation, School Building 3/05 at 102 A 1,145,210
Revenue Bonds, Series 1995, 5.875%, 3/01/15
3,155,000 City of Florence, Kentucky, Public Properties Corporation, First 6/07 at 102 AAA 3,344,868
Mortgage Revenue Bonds (Administrative Office Complex Project),
Series 1997, 5.500%, 6/01/27
</TABLE>
14
<PAGE> 171
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligations/Limited (continued)
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 $ 489,682
1,260,000 5.550%, 9/01/23 3/06 at 102 A 1,332,286
3,550,000 Floyd County, Kentucky, Public Properties 3/06 at 105 A 3,868,258
Corporation, First Mortgage Revenue Bonds
(Floyd County Justice Center Project),
Series 1996B, 6.200%, 9/01/26
1,200,000 Floyd County School District Finance Corporation, 5/05 at 102 A1 1,276,284
Kentucky, School Building Revenue Bonds,
Series 1995, 5.500%, 5/01/15
2,280,000 Grant County School District Finance Corporation, 3/07 at 102 Aaa 2,374,688
School Building 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 No Opt. Call AAA 590,326
1,775,000 6.250%, 12/01/14 12/04 at 102 AAA 2,000,532
300,000 Hardin County (Kentucky), School District 6/01 at 103 A1 328,521
Finance Corporation, School Building Revenue
Bonds, Series of 1991, 6.800%, 6/01/10
3,465,000 Hopkins County (Kentucky), School District 6/04 at 102 A1 3,772,519
Finance Corporation, School Building Revenue
Bonds, Series 1994, 6.200%, 6/01/19
1,250,000 Jefferson County Economic Development Corporation 7/01 at 100 A1 1,272,713
(Kentucky), Lease Revenue Bonds, Series 1986,
7.750%, 7/01/16
4,195,000 Jefferson County (Kentucky), School District 2/06 at 102 AAA 4,277,725
Finance Corporation, School Building Revenue
Bonds (Series 199A), 5.125%, 2/01/16
1,167,919 County of Jefferson, Kentucky, Equipment Lease No Opt. Call N/R 1,189,760
Purchase Revenue Bonds, Series 1987 (Energy
System Project), 9.000%, 6/01/03
215,122 County of Jefferson, Kentucky, Equipment Lease No Opt. Call N/R 221,721
Purchase Revenue Bonds, Series 1988 (Energy
System Project), 9.500%, 6/01/03
2,500,000 Jefferson County, Kentucky, Capital Projects 2/02 at 100 Aa3 1,235,900
Corporation, Lease Revenue Bonds,
Series 1987B, 0.000%, 8/15/08
1,000,000 City of Jeffersontown, Kentucky, Public Projects No Opt. Call A 1,082,860
Refunding and Improvements, Certificates of
Participation, 5.750%, 11/01/15
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 561,439
545,000 6.750%, 6/01/11 6/01 at 103 A1 599,969
2,500,000 Jessamine County (Kentucky), School District 6/04 at 102 A1 2,705,275
Finance Corporation, School Building Revenue
Bonds, Series 1994, 6.125%, 6/01/19
5,650,000 Jessamine County (Kentucky), School District 1/06 at 102 A1 5,936,060
Finance Corporation, School Building Revenue
Bonds, Series 1996, 5.500%, 1/01/21
4,500,000 Kenton County, Kentucky, Public Properties 3/09 at 101 A1 4,420,440
Corporation, First Mortgage Revenue Bonds
(Courthouse Facilities Project), 1998
Series A, 5.000%, 3/01/29
400,000 Commonwealth of Kentucky, State Property and 11/01 at 102 A+ 438,188
</TABLE>
<PAGE> 172
<TABLE>
<S> <C> <C> <C> <C>
Buildings Commission Revenue and Revenue
Refunding Bonds, Project No. 40, 2nd
Series, 6.875%, 11/01/07
250,000 Commonwealth of Kentucky, State Property and 10/01 at 102 A 273,758
Buildings Commission Revenue and Revenue
Refunding Bonds, Project No. 53,
6.625%, 10/01/07
2,075,000 Commonwealth of Kentucky, State Property and 9/04 at 102 A+ 2,253,803
Buildings Commission Revenue Bonds,
Project No. 56, 6.000%, 9/01/14
2,000,000 The Turnpike Authority of Kentucky Economic No Opt. Call AAA 2,135,640
Development, Revenue and Revenue Refunding
Bonds (Revitalization Projects),
Series 1993, 5.300%, 7/01/04
1,000,000 The Turnpike Authority of Kentucky Economic 7/05 at 102 AAA 1,072,350
Development, Revenue and Revenue Refunding
Bonds (Revitalization Projects),
Series 1995, 5.625%, 7/01/15
</TABLE>
15
<PAGE> 173
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited (continued)
<C> <S> <C> <C> <C>
$ 250,000 Laurel County, Kentucky, School District Finance Corporation, 3/01 at 102 A $ 272,555
School Building Revenue Bonds, 7.000%, 3/01/10
1,000,000 Lawrence County, Kentucky, School District Finance Corporation, 11/04 at 102 A1 1,146,030
School Building Revenue Bonds, Series 1994, 6.750%, 11/01/14
Lexington, Kentucky, Center Corporation Mortgage Revenue Refunding
and Improvement Bonds, Series 1993A:
2,600,000 0.000%, 10/01/11 No Opt. Call A 1,452,074
2,550,000 0.000%, 10/01/12 No Opt. Call A 1,342,677
435,000 Lincoln County, Kentucky, School District Finance Corporation, 5/02 at 102 A1 469,978
School Building Revenue Bonds, Series 1992, 6.200%, 5/01/12
6,165,000 Louisville, Kentucky, Airport Lease Revenue Bonds, Series 1989A, 2/99 at 103 A 6,390,084
7.875%, 2/01/19 (Alternative Minimum Tax)
1,525,000 McCracken County, Kentucky, Public Properties Corporation, Public 9/06 at 102 AAA 1,665,681
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 2,505,505
School Building Revenue Bonds, Second Series of 1995, 5.600%,
8/01/16
1,410,000 Morgan County, Kentucky, School District Finance Corporation, 9/04 at 102 A1 1,533,742
School Building Revenue Bonds, Series 1994, 6.000%, 9/01/14
13,000,000 Mount Sterling, Kentucky, Lease Revenue Bonds (Kentucky League of 3/03 at 102 Aa 13,813,410
Cities Funding Program), Series 1993A, 6.200%, 3/01/18
Pendleton County, Kentucky, County Lease Revenue Bonds,
Kentucky Associated Counties Leasing Trust Program Series
1993-A:
12,960,000 6.500%, 3/01/19 3/03 at 102 A 13,866,682
500,000 6.400%, 3/01/19 No Opt. Call A 588,105
2,000,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, 7/06 at 101 1/2 A 1,991,000
Series 1995, Guaranteed by the Commonwealth of Puerto Rico,
5.000%, 7/01/19
8,250,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 8,904,720
Revenue Bonds, Series Y of 1996, 5.500%, 7/01/36
115,000 Puerto Rico Infrastructure Finance Authority, Special Tax 7/00 at 100 BBB+ 117,685
Revenue Bonds, Series 1988A, 7.750%, 7/01/08
7,000,000 Warren County, Kentucky, Justice Center Expansion Corporation, 9/07 at 102 AAA 7,206,360
First Mortgage Revenue Bonds, AOC Judicial Facility,
Series 1997A, 5.250%, 9/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 4.1%
10,640,000 Kenton County Airport Board (Commonwealth of Kentucky), Special 2/02 at 100 BBB- 10,811,517
Facilities Revenue Bonds, 1992 Series A (Delta Air Lines, Inc.
Project), 6.125%, 2/01/22 (Alternative Minimum Tax)
1,250,000 Kenton County (Kentucky), Airport Board, Cincinnati/Northern 3/06 at 102 AAA 1,346,975
Kentucky International Airport Revenue Bonds, Series 1996B,
5.750%, 3/01/13
5,000,000 Regional Airport Authority of Louisville and Jefferson County, 7/05 at 102 AAA 5,228,200
Kentucky, Airport System Revenue Bonds, 1995 Series A,
5.625%, 7/01/25 (Alternative Minimum Tax)
2,790,000 The City of Louisville Parking Authority of River City (PARC), 6/01 at 103 A 3,079,323
Inc. (Kentucky), First Mortgage Revenue Bonds, Series 1991,
6.875%, 12/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 10.8%
430,000 Bardstown Independent School District Finance Corporation, 11/02 at 102 A1*** 478,121
School 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, 9/01 at 102 A*** 798,515
School 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, 9/01 at 103 A1*** 1,107,350
School Building Revenue Bonds, Series C of 1991,
6.750%, 9/01/11 (Pre-refunded to 9/01/01)
</TABLE>
16
<PAGE> 174
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,215,000 Boone County (Kentucky), School District Finance Corporation, 12/02 at 102 A1*** $ 1,342,028
School 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*** 617,681
600,000 6.750%, 6/01/11 (Pre-refunded to 6/01/01) 6/01 at 102 A*** 655,944
1,645,000 City of Edgewood, Kentucky, Public Properties Corporation, First 12/01 at 102 A2*** 1,819,321
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*** 109,852
320,000 7.000%, 3/01/14 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 352,336
345,000 7.000%, 3/01/15 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 379,862
360,000 7.000%, 3/01/16 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 396,378
16,750,000 Jefferson County, Kentucky, Capital Projects Corporation, Lease 2/01 at 24 11/16 AAA 3,807,443
Revenue Bonds, Series 1989B, 0.000%, 8/15/19
(Pre-refunded to 2/15/01)
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*** 1,358,860
1,070,000 7.100%, 3/01/10 (Pre-refunded to 3/01/00) 3/00 at 101 A*** 1,128,411
815,000 Kenton County School District Finance Corporation (Kentucky), 12/01 at 102 A+*** 901,643
School 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*** 3,165,390
Series 1989A (St. Luke Hospital, Inc.), 7.500%, 10/01/12
(Pre-refunded to 10/01/99)
500,000 Kentucky Development Finance Authority, Sisters of Charity of 11/99 at 102 AAA 528,865
Nazareth Health Corporation, Hospital Revenue Bonds,
Series 1989, 7.375%, 11/01/16 (Pre-refunded to 11/01/99)
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 2,217,220
9,070,000 7.000%, 10/01/21 (Pre-refunded to 10/01/01) 10/01 at 102 AAA 10,055,093
1,495,000 Kentucky Infrastructure Authority, Governmental Agencies 8/99 at 102 A*** 1,570,288
Program, Revenue Refunding Bonds, Series 1989A, 7.800%,
8/01/08 (Pre-refunded to 8/01/99)
4,875,000 The Turnpike Authority of Kentucky, Economic Development Road 5/00 at 101 1/2 AAA 5,210,059
Revenue Bonds (Revitalization Projects), Series 1990, 7.250%,
5/15/10 (Pre-refunded to 5/15/00)
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 3,725,658
4,320,000 6.750%, 11/01/24 (Pre-refunded to 11/01/04) 11/04 at 102 AAA 5,037,509
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*** 333,322
325,000 6.800%, 6/01/10 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 355,180
350,000 6.800%, 6/01/11 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 382,501
2,000,000 Northern Kentucky University, Certificates of Participation, 1/01 at 102 AAA 2,183,120
Student 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, 7/02 at 102 A1*** 1,353,554
School 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 12/00 at 102 AAA 2,179,329
Bonds, Series 1990L, 7.400%, 12/01/10 (Pre-refunded to 12/01/00)
940,000 Western Kentucky University, Consolidated Educational Building 11/00 at 102 AAA 1,026,621
Revenue Bonds, Series 1990J, 7.400%, 5/01/10
(Pre-refunded to 11/01/00)
</TABLE>
17
<PAGE> 175
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities - 9.9%
$ 7,000,000 County of Boone, Kentucky, Collateralized Pollution Control Revenue 1/04 at 102 AAA $ 7,327,460
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 2/02 at 102 Aa2 5,312,988
Revenue Bonds (Kentucky Utilities Company Project), 1992 Series B,
6.250%, 2/01/18
5,000,000 Cities of Carrollton and Henderson, Kentucky, Public Energy No Opt. Call AAA 5,235,000
Authority of Kentucky Trust Gas Revenue Bonds, Series 1998,
5.000%, 1/01/07
1,000,000 County of Jefferson, Kentucky, Pollution Control Revenue Bonds, 6/00 at 102 Aa2 1,067,770
1990 Series A (Louisville Gas and Electric Company Project),
7.450%, 6/15/15
1,750,000 County of Jefferson, Kentucky, Pollution Control Revenue Bonds, 4/05 at 102 Aa2 1,879,203
1995 Series A (Louisville Gas and Electric Company Project),
5.900%, 4/15/23
1,250,000 Mercer County, Kentucky, Collateralized Pollution Control Revenue 2/02 at 102 Aa2 1,339,988
Bonds (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 4,121,976
6,475,000 0.000%, 1/01/12 No Opt. Call AAA 3,548,106
7,900,000 0.000%, 1/01/17 No Opt. Call AAA 3,251,008
13,300,000 0.000%, 1/01/18 No Opt. Call AAA 5,181,946
5,100,000 0.000%, 1/01/19 No Opt. Call AAA 1,883,940
4,725,000 0.000%, 1/01/20 No Opt. Call AAA 1,654,175
3,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 7/04 at 102 BBB+ 3,267,540
6.000%, 7/01/16
4,795,000 Trimble County, Kentucky, Pollution Control Revenue Bonds 11/00 at 102 Aa2 5,178,312
(Louisville Electric Company), Series 1990A, 7.625%, 11/01/20
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 8.0%
625,000 City of Danville, Kentucky, Multi-City Lease Revenue Bonds 12/01 at 103 AAA 687,881
(City of Radcliff Kentucky, Sewer System Revenue Project),
Fixed Rate Series 1991-B, 6.875%, 3/01/19
1,750,000 City of Henderson, Kentucky, Water and Sewer Revenue and Refunding 11/04 at 103 AAA 1,965,128
Bonds, Series of 1994A, 6.100%, 11/01/14
2,040,000 Kenton County Water District No. 1, Water District Revenue Bonds, 2/05 at 102 AAA 2,186,268
Series 1995B, 5.700%, 2/01/20
500,000 Kentucky Infrastructure Authority, Infrastructure Revolving Fund 6/01 at 102 A 542,900
Program Revenue Bonds, 1991 Series E, 6.500%, 6/01/11
1,000,000 Kentucky Infrastructure Authority, Governmental Agencies Program 8/03 at 102 A 1,046,920
Revenue Refunding Bonds, 1993 Series E, 5.750%, 8/01/18
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 404,208
600,000 6.375%, 6/01/14 6/05 at 102 A 681,455
Kentucky Infrastructure Authority, Governmental Agencies Program
Revenue Bonds, 1995 Series G:
420,000 6.300%, 8/01/10 8/05 at 102 A 472,075
445,000 6.350%, 8/01/11 8/05 at 102 A 500,620
825,000 6.375%, 8/01/14 8/05 at 102 A 932,885
405,000 Kentucky Infrastructure Authority, Governmental Agencies Program 8/99 at 102 A 424,390
Revenue 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 3,174,156
2,070,000 6.500%, 5/15/24 11/04 at 102 AAA 2,388,324
2,500,000 6.750%, 5/15/25 11/04 at 102 AAA 2,917,424
</TABLE>
18
<PAGE> 176
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 3,865,000 Louisville and Jefferson County Metropolitan Sewer District 2/05 at 102 Aaa $ 4,004,178
(Commonwealth 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 5/07 at 101 AAA 10,741,604
(Commonwealth 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 11/07 at 101 AAA 6,234,419
(Commonwealth of Kentucky), Sewer and Drainage System Revenue
Bonds, Series 1997B, 5.350%, 5/15/22
500,000 Paducah, Kentucky, Waterworks Revenue Refunding Bonds, Series 1991, 7/01 at 102 AAA 547,113
6.700%, 7/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
$510,733,041 Total Investments - (cost $458,152,347) - 98.7% 498,596,440
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 6,758,807
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $505,355,247
===================================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** 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.
19
<PAGE> 177
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Staples - 2.9%
$ 320,000 City of Newport, Kentucky, Industrial Building Revenue Bonds, Series 1996A No Opt. Call N/R $322,624
- (Louis Truath Dairy, Inc. Project), 4.800%, 6/01/99
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 14.0%
500,000 City of Berea, Kentucky, Berea College General Obligation Bonds, No Opt. Call Aaa 511,360
Series 1998, 4.800%, 7/01/08 (Alternative Minimum Tax)
500,000 Kentucky Higher Education Student Loan Corporation, Insured Student No Opt. Call Aaa 547,255
Loan Revenue Bonds, 1991 Series B, 6.800%, 6/01/03
(Alternative Minimum Tax)
475,000 University of Kentucky, Consolidated Educational Buildings Revenue No Opt. Call AAA 497,088
Bonds, Series O, 5.000%, 5/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Energy - 3.1%
325,000 City of Ashland, Kentucky, Pollution Control Revenue Refunding Bonds 2/00 at 102 1/2 Baa1 342,904
(Ashland Oil Inc. Project), Series 1988A, 7.375%, 7/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 23.0%
580,000 Kentucky Development Finance Authority, Sisters of Charity of Nazareth 11/01 at 102 A1 637,188
Health Corporation, Revenue Refunding Bonds, Series 1991,
6.600%, 11/01/06
270,000 Kentucky Economic Development Finance Authority, Medical Center Revenue No Opt. Call AAA 270,902
Refunding and Improvement Bonds, Series 1993A (Ashland Hospital
Corporation d/b/a Kings Daughter Medical Center Project), 5.100%, 2/01/99
500,000 Kentucky Economic Development Finance Authority, Hospital System No Opt. Call BBB 523,095
Refunding and Improvement Revenue Bonds, Series 1997
(Appalachian Regional Healthcare, Inc. Project), 5.500%, 10/01/07
385,000 McCracken County, Kentucky, Hospital Facilities Revenue Refunding Bonds, 11/04 at 102 AAA 432,667
Series 1994A (Mercy Health System), 6.300%, 11/01/06
680,000 City of Radcliff, Kentucky, Tax-Exempt Mortgage Revenue Refunding Bonds, No Opt. Call AAA 710,634
Series 1997 (GNMA Backed - Lincoln Trail Care and Treatment Facility),
5.100%, 7/20/07
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 9.6%
705,000 City of Louisville, Kentucky, Multi-Family Housing Revenue Refunding No Opt. Call Aa2 712,952
Bonds, Series 1989 (Station House Square Associates L.P. Project),
5.125%, 7/15/19
350,000 County of Martin, Kentucky, Mortgage Revenue Refunding Bonds, Series 1995 7/01 at 100 Aa 362,016
(FHA Insured Mortgage Loan - Section 8 Assisted Project), 5.375%, 7/01/05
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 1.9%
100,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1993 Series B 1/04 at 102 AAA 104,520
(Federally Insured or Guaranteed Mortgage Loans), 5.150%, 7/01/07
100,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1995 Series F No Opt. Call AAA 102,728
(Federally Insured or Guaranteed Mortgage Loans), 4.800%, 7/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 1.9%
200,000 Kentucky Economic Development Finance Authority, Hospital Revenue No Opt. Call Aa3 206,350
Refunding Bonds, Series 1996 (Green River Regional Mental
Health/Mental Retardation Board, Inc.), 5.200%, 11/01/01
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 2.7%
280,000 Commonwealth of Puerto Rico, Public Improvement Refunding Bonds, Series No Opt. Call A 301,165
1993 (General Obligation Bonds), 5.375%, 7/01/05
</TABLE>
20
<PAGE> 178
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - 23.6%
$ 265,000 Hardin County (Kentucky), School District 6/01 at 103 A1 $ 290,194
Finance Corporation, School Building
Revenue Bonds, Series of 1991, 6.800%, 6/01/08
300,000 Jefferson County, Kentucky, Capital Projects No Opt. Call AAA 319,638
Corporation, Lease Revenue Bonds, Series
1996A, 5.500%, 4/01/03
City of Jeffersontown, Kentucky, Public
Projects Refunding and Improvements,
Certificates of Participation:
505,000 4.850%, 11/01/04 No Opt. Call A 530,806
100,000 5.000%, 11/01/05 No Opt. Call A 106,331
50,000 Kentucky Interlocal School Transportation No Opt. Call A1 52,092
Association (KISTA), Equipment Lease Revenue
Bonds, Series of 1993, 5.200%, 3/01/02
360,000 The Turnpike Authority of Kentucky, Economic No Opt. Call AAA 388,591
Development Road Revenue and Revenue
Refunding Bonds (Revitalization Projects),
Series 1993, 5.400%, 7/01/05
125,000 The Turnpike Authority of Kentucky, Resource No Opt. Call A+ 125,263
Recovery Road Revenue Refunding Bonds,
1985 Series A, 6.000%, 7/01/09
775,000 Mount Sterling, Kentucky, Lease Revenue No Opt. Call Aa 822,260
Bonds (Kentucky League of Cities Funding
Program), Series 1993A, 5.625%, 3/01/03
- -----------------------------------------------------------------------------------------------------------
Transportation - 2.8%
300,000 Kenton County (Kentucky), Airport Board, No Opt. Call AAA 310,083
Cincinnati/Northern Kentucky International
Airport Revenue Bonds, Series 1996A, 5.000%,
3/01/02 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 0.5%
250,000 Jefferson County, Kentucky, Capital 2/01 at 24 11/16 AAA 56,828
Projects Corporation, Lease
Revenue Bonds, Series 1989B, 0.000%,
8/15/19 (Pre-refunded to 2/15/01)
- -----------------------------------------------------------------------------------------------------------
Utilities - 2.9%
400,000 City of Owensboro, Kentucky, Electric No Opt. Call AAA 327,512
Light and Power System Revenue Bonds,
Series 1993A, 0.000%, 1/01/04
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------
Water and Sewer - 8.6%
200,000 Kenton County Water District No. 1, No Opt. Call AAA 215,718
Water District Revenue Bonds, Series
1995B, 5.600%, 2/01/04
Kentucky Infrastructure Authority, Wastewater Revolving Fund
Program Revenue Refunding Bonds, 1995 Series C:
150,000 5.300%, 6/01/03 No Opt. Call A 158,500
200,000 5.500%, 6/01/05 No Opt. Call A 216,016
350,000 Kentucky Infrastructure Authority, No Opt. Call A 366,190
Governmental Agencies Program Revenue and
Revenue Refunding Bonds, 1995 Series H,
5.200%, 8/01/02
- -----------------------------------------------------------------------------------------------------------
$10,600,000 Total Investments - (cost $10,473,622) - 97.5% 10,871,470
- -----------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.5% 281,480
---------------------------------------------------------------------------------------------
Net Assets - 100% $11,152,950
---------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R Investment is not rated.
See accompanying notes to financial statements.
21
<PAGE> 179
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan Municipal Bond Fund
November 30, 1998
<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 12/03 at 102 A1 $ 1,109,058
Revenue Bonds (WMX Technologies, Inc. Project),
Series 1993, 6.000%, 12/01/13 (Alternative
Minimum Tax)
- ----------------------------------------------------------------------------------------------------------
Consumer Cyclical - 2.4%
2,500,000 Michigan Strategic Fund, Limited Obligation No Opt. Call A1 2,941,750
Refunding Revenue Bonds, Series 1991A, 7.100%,
2/01/06
5,000,000 Michigan Strategic Fund, Multi-Modal 9/05 at 102 A 5,447,600
Interchangeable Rate Pollution Control
Refunding Revenue Bonds (General Motors
Corporation), Series 1995, 6.200%, 9/01/20
- ----------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 1.2%
210,000 Board of Control of Grand Valley State 10/00 at 100 A 214,935
University, Michigan, General Revenue Bonds,
Series 1988, 7.875%, 10/01/08
750,000 Michigan Higher Education Student Loan 6/06 at 102 Aaa 803,858
Authority, Student Loan Revenue Bonds, Series
XVII-A, 5.750%, 6/01/13 (Alternative Minimum
Tax)
1,000,000 Michigan Higher Education Student Loan 6/08 at 101 AAA 995,820
Authority, Student Loan Revenue Bonds, Series
XVII-B, 5.400%, 6/01/18 (Alternative Minimum
Tax)
1,000,000 Board of Trustees of Michigan State University, 2/06 at 101 AAA 993,300
General Revenue Bonds, Series 1996, 5.000%,
2/15/26
1,000,000 Board of Trustees of Western Michigan University 11/02 at 102 AAA 1,109,790
(Michigan), General Revenue Bonds, Series 1992A,
6.250%, 11/15/12
- ----------------------------------------------------------------------------------------------------------
Forest and Paper Products - 2.2%
7,500,000 The Economic Development Corporation of 10/03 at 102 Baa1 7,790,100
Dickinson County (Michigan), Pollution Control
Refunding Revenue Bonds (Champion International
Corporation Project), Series 1993, 5.850%,
10/01/18
- ----------------------------------------------------------------------------------------------------------
Health Care - 21.2%
1,000,000 The Economic Development Corporation of the City 11/05 at 102 AAA 1,084,550
of Dearborn, Hospital Revenue Bonds (Oakwood
Obligated Group), Series 1995A, 5.750%, 11/15/15
500,000 City of Farmington Hills Hospital Finance 2/02 at 102 AAA 550,760
Authority (Michigan), 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 996,950
1,000,000 5.375%, 7/01/28 7/08 at 101 Baa1 997,740
500,000 County of Grand Traverse (Michigan), Hospital 7/02 at 102 AAA 545,275
Finance Authority, Hospital Revenue Refunding
Bonds (Munson Healthcare Obligated Group), Series
1992A, 6.250%, 7/01/22
6,000,000 City of Kalamazoo Hospital Finance Authority, 5/06 at 102 AAA 6,469,080
Hospital Revenue Refunding and Improvement Bonds
(Bronson Methodist Hospital), Series 1996,
5.875%, 5/15/26
1,290,000 Kent Hospital Finance Authority (Michigan), 11/01 at 102 AAA 1,398,837
Hospital Revenue Refunding Bonds (Pine Rest
Christian Hospital), Series 1992, 6.500%,
11/01/10
</TABLE>
<PAGE> 180
<TABLE>
<S> <C> <C> <C> <C>
3,530,000 Lake View Community Hospital Authority 2/07 at 101 N/R 3,512,527
(Michigan), Hospital Revenue Refunding Bonds,
Series 1997, 6.250%, 2/15/13
40,000 Michigan State Hospital Finance Authority, 8/00 at 100 A- 40,943
Hospital Revenue and Refunding Bonds (The
Detroit Medical Center Obligated Group), Series
1988B, 8.125%, 8/15/08
3,000,000 Michigan State Hospital Finance Authority, 1/00 at 100 BBB+ 3,036,660
Revenue Refunding Bonds, Memorial Hospital-
Owosso, Series 1987A, 7.375%, 1/01/03
6,500,000 Michigan State Hospital Finance Authority, 8/03 at 102 A- 7,117,500
Revenue and Refunding Bonds (The Detroit
Medical Center Obligated Group), Series 1993A,
6.500%, 8/15/18
</TABLE>
22
<PAGE> 181
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$1,000,000 Michigan State Hospital Finance Authority, 7/99 at 102 AAA $1,042,350
Revenue Refunding, Oakland General Hospital,
7.000%, 7/01/15
1,850,000 Michigan State Hospital Finance Authority, 10/03 at 102 A1 1,681,280
Hospital Revenue Refunding Bonds (McLaren
Obligated Group), Series 1993A, 4.500%,
10/15/21
1,000,000 Michigan State Hospital Finance Authority, 11/01 at 102 AAA 1,085,840
Hospital Revenue Refunding Bonds (Sparrow
Obligated Group), Series 1991, 6.500%,
11/15/11
2,920,000 Michigan State Hospital Finance Authority, 8/04 at 102 A- 2,937,053
Hospital Revenue and Refunding Bonds
(The Detroit Medical Center Obligated
Group), Series 1993B, 5.500%, 8/15/23
1,000,000 Michigan State Hospital Finance Authority, 1/05 at 102 AA- 1,089,970
Hospital Revenue and Refunding Bonds
(Otsego Memorial Hospital Gaylord, Michigan),
Series 1995, 6.125%, 1/01/15
2,000,000 Michigan State Hospital Finance Authority, 7/05 at 102 AAA 2,092,460
Hospital Revenue Refunding Bonds (Port
Huron Hospital Obligated Group), Series
1995, 5.500%, 7/01/15
1,000,000 Michigan State Hospital Finance Authority, No Opt. Call BBB 1,080,090
Hospital Revenue Refunding Bonds (Gratiot
Community Hospital, Alma, Michigan), Series
1995, 6.100%, 10/01/07
4,500,000 Michigan State Hospital Finance Authority, 5/06 at 102 AA- 4,531,590
Hospital Revenue and Refunding Bonds
(Henry Ford Health System), Series 1995A,
5.250%, 11/15/20
1,000,000 Michigan State Hospital Finance Authority, 10/06 at 102 BBB 1,063,720
Hospital Revenue Bonds (Michigan Community
Hospital), Series 1996, 6.250%, 10/01/27
2,000,000 Michigan State Hospital Finance Authority, 8/07 at 101 AA- 2,087,800
Hospital Revenue 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 102 BBB 1,004,460
4,000,000 5.500%, 10/01/27 10/08 at 102 BBB 4,019,120
1,250,000 Michigan State Hospital Finance Authority, 8/08 at 101 A- 1,216,000
Hospital Revenue Bonds (The Detroit Medical
Center Obligated Group), Series 1998A, 5.250%,
8/15/28
Pontiac, Michigan, Hospital Finance Authority,
Hospital Revenue Refunding, Nomc Obligation Group:
3,000,000 6.000%, 8/01/18 8/03 at 102 BBB- 3,068,940
5,165,000 6.000%, 8/01/23 8/03 at 102 BBB- 5,281,058
8,345,000 Royal Oak, Michigan, Hospital Finance Authority, 1/06 at 102 AA 8,407,588
Hospital Revenue Refunding Bonds (William
Beaumont Hospital), Series 1996I, 5.250%,
1/01/20
2,000,000 Saginaw Hospital Finance Authority (Michigan), 10/99 at 102 BBB+ 2,089,840
Hospital Revenue Refunding Bonds (Saginaw
General Hospital), Series 1989, 7.625%,
10/01/08
500,000 City of Saginaw (Michigan), Hospital Finance 7/01 at 102 AAA 541,695
Authority (St. Lukes Hospital), Hospital
Revenue Refunding Bonds, Series 1991 C,
6.750%, 7/01/17
1,000,000 Regents of the University of Michigan, Hospital 12/00 at 100 AA 1,055,700
Revenue Bonds, Series 1990, 6.375%, 12/01/24
3,500,000 Regents of the University of Michigan, Medical 12/01 at 102 Aa2 3,840,690
</TABLE>
<PAGE> 182
<TABLE>
<S> <C> <C> <C> <C>
Service Plan Revenue Bonds, Series 1991,
6.500%, 12/01/21
- ----------------------------------------------------------------------------------------------------------
Housing/Multifamily - 3.3%
435,000 Grand Rapids Housing Corporation, Multifamily 1/04 at 104 AAA 486,787
Revenue Refunding Bonds, Series 1992 (FHA
Insured Mortgage Loan-Section 8 Assisted
Elderly Project), 7.375%, 7/15/41
750,000 Grand Rapids Housing Finance Authority, 9/04 at 100 AAA 832,973
Multifamily Housing Refunding Revenue
Bonds, Series 1990A (Fannie Mae
Collateralized), 7.625%, 9/01/23
1,190,000 Michigan State Housing Development Authority, 10/05 at 102 Aaa 1,292,376
Limited Obligation Multi-Family Revenue
Refunding Bonds, Series 1995A (GNMA
Collateralized Program-Parc Pointe Apartments),
6.500%, 10/01/15
6,000,000 Michigan State Housing Development Authority, No Opt. Call AA- 1,654,260
Section 8 Assisted Mortgage Revenue Bonds,
Series 1983I, 0.000%, 4/01/14
5,000,000 Michigan State Housing Development Authority, 4/01 at 102 AA- 5,372,200
Rental Housing Revenue Bonds, 1990 Series B,
7.550%, 4/01/23
</TABLE>
23
<PAGE> 183
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 290,000 Michigan State Housing Development Authority, No Opt. Call AA- $ 311,747
Rental Housing Revenue Bonds, 1991 Series B,
7.100%, 4/01/21
410,000 Michigan State Housing Development Authority, 10/02 at 102 AA- 441,291
Rental Housing Revenue Bonds, 1992 Series A,
6.650%, 4/01/23
1,000,000 Michigan State Housing Development Authority, 6/05 at 102 AAA 1,074,210
Rental Housing Revenue Bonds, 1995 Series B,
6.150%, 10/01/15
- ---------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.0%
905,000 Michigan State Housing Development Authority, 6/00 at 102 AA+ 943,318
Single Family Mortgage Revenue Bonds,
Series 1990A, 7.500%, 6/01/15
2,325,000 Michigan State Housing Development Authority, 12/00 at 102 AA+ 2,440,553
Single Family Mortgage Revenue Bonds,
Series 1990C, 7.550%, 12/01/15
2,000,000 Michigan State Housing Development Authority, 6/04 at 102 AA+ 2,139,520
Single Family Mortgage Revenue Bonds,
Series 1994A, 6.450%, 12/01/14
3,930,000 Michigan State Housing Development Authority, 12/04 at 102 AA+ 4,159,001
Single Family Mortgage Revenue Refunding Bonds,
Series 1994C, 6.500%, 6/01/16
1,230,000 Michigan State Housing Development Authority, 6/05 at 102 AA+ 1,328,105
Single Family Mortgage Revenue Bonds,
Series 1995 A, 6.800%, 12/01/16
1,500,000 Michigan State Housing Development Authority, 12/06 at 102 AA+ 1,598,925
Single Family Mortgage Revenue Bonds,
Series 1996D, 5.950%, 12/01/16
1,250,000 Michigan State Housing Development Authority, 6/07 at 102 AAA 1,332,025
Single Family Mortgage Revenue Bonds,
Series 1997A, 6.050%, 12/01/27 (Alternative
Minimum Tax)
- ---------------------------------------------------------------------------------------------------------
Long Term Care - 5.0%
2,500,000 The Economic Development Corporation of the City 5/07 at 102 BBB 2,655,725
of Kalamazoo (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 648,396
1,200,000 6.500%, 1/01/25 7/05 at 102 N/R 1,294,728
500,000 6.375%, 1/01/25 1/07 at 102 N/R 537,905
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 403,368
2,675,000 5.375%, 7/01/28 7/08 at 101 A 2,697,443
2,000,000 Michigan Strategic Fund, Limited Obligation 11/08 at 101 N/R 1,997,100
Revenue and Refunding Revenue Bonds,
Series 1998 (Holland Home), 5.750%, 11/15/28
7,110,000 Michigan Strategic Fund, Limited Obligation 6/08 at 100 BBB+ 6,994,960
Revenue Bonds (Clark Retirement Community Inc.
Project), Series 1998, 5.250%, 6/01/18
250,000 The Economic Development Corporation of the 3/02 at 101 Aaa 265,183
City of Warren, Nursing Home Revenue Refunding
Bonds (GNMA Mortgage-Backed Security-Autumn
Woods Project), Series 1992, 6.900%, 12/20/22
- ---------------------------------------------------------------------------------------------------------
Tax Obligation/General - 14.4%
400,000 County of Bay, Michigan, Bay County West Side 5/99 at 102 A 411,808
Regional Sewage Disposal System Bonds,
</TABLE>
<PAGE> 184
<TABLE>
<S> <C> <C> <C> <C>
6.400%, 5/01/02
5,000,000 Brighton Area Schools, County of Livingston, No Opt. Call AAA 1,714,450
State of Michigan, 1992 Refunding Bonds,
Series II (General Obligation Unlimited Tax),
0.000%, 5/01/20
500,000 City of East Lansing Building Authority, 10/99 at 102 AA 524,340
County of Ingham, State of Michigan, Building
Authority Refunding Bonds, Series 1991,
7.000%, 10/01/16
2,430,000 School District of the City of Garden City, 5/04 at 101 AAA 2,714,140
County of Wayne, State of Michigan, 1994
Refunding Bonds (General Obligation - Unlimited
Tax), 6.400%, 5/01/11
1,265,000 Holton Public Schools, Counties of Muskegon, 5/08 at 100 AAA 1,258,903
Oceana and Newaygo State of Michigan, 1998 School
Building and Site Bonds (General Obligation
Unlimited Tax), 5.000%, 5/01/22
</TABLE>
24
<PAGE> 185
<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 5/05 at 101 AAA $ 1,046,080
of Oakland, State of Michigan, 1995 Refunding
Bonds (General Obligation - Unlimited Tax),
5.500%, 5/01/20
2,700,000 Livonia, Michigan, Public Schools School No Opt. Call AAA 1,806,840
District, Series II, 0.000%, 5/01/08
2,410,000 Mona Shores, Michigan, School District, School 5/05 at 102 AAA 2,557,661
Building and Site, 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 403,390
1,020,000 0.000%, 5/01/18 No Opt. Call AAA 389,446
1,500,000 Portage Lake Michigan Water and Sewer Authority,
Refunding, 6.200%, 10/01/20 10/05 at 102 AAA 1,686,255
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 3,575,281
2,370,000 6.500%, 7/01/23 7/04 at 101 1/2 AAA 2,717,418
500,000 Redford Union Schools, District No. 1, County No Opt. Call AAA 507,950
of Wayne, State of Michigan, 1997 Refunding
Bonds (General Obligation - Unlimited Tax),
5.000%, 5/01/22
1,650,000 Saint Clair County Building Authority, 4/06 at 101 AAA 1,723,260
Michigan, General Obligation Bonds,
5.375%, 4/01/15
750,000 South Lyon Community Schools, Counties of 5/01 at 102 AA+ 802,418
Oakland, Washtenaw and Livingston, State
of Michigan, 1991 Refunding Bonds (General
Obligation - Unlimited Tax), 6.250%, 5/01/14
2,925,000 Spring Lake Public Schools, General Obligation 5/07 at 100 AAA 3,125,714
Bonds, Series 1997, 5.700%, 5/01/23
Waterford, Michigan, School District:
2,500,000 6.250%, 6/01/13 6/04 at 101 AAA 2,809,300
2,470,000 6.375%, 6/01/14 6/04 at 101 AAA 2,790,754
5,000,000 Wayland, Michigan, Unit School District, 5/05 at 101 AAA 5,677,550
6.250%, 5/01/14
1,250,000 Wayne County, Michigan, Building Authority, 6/06 at 102 AAA 1,285,313
Capital Improvement, Series A, 5.250%, 6/01/16
3,270,000 West Ottawa, Michigan, Public School District No Opt. Call AAA 1,319,085
Refunding, 0.000%, 5/01/17
2,000,000 Western Townships Utilities Authority, Sewage 1/99 at 102 BBB+ 2,047,700
Disposal System Bonds, Series 1989,
8.200%, 1/01/18
1,000,000 Western Townships Utilities Authority, Sewage 1/02 at 100 AAA 1,072,160
Disposal System Refunding Bonds, Series 1991,
6.500%, 1/01/10
5,175,000 Williamston Community School District, General No Opt. Call AAA 5,644,217
Obligation - Unlimited Tax, Series 1996 (Q-SBLF),
5.500%, 5/01/25
1,000,000 School District of Ypsilanti, County of 5/09 at 100 AAA 987,010
Washtenaw, State of Michigan, 1998
Refunding Bonds (General Obligation Unlimited
Tax), 5.000%, 5/01/20 (WI)
- ----------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 13.4%
2,000,000 City of Detroit Building Authority, Building 2/07 at 101 A 2,182,080
Authority Revenue Bonds (District Court
Madison Center), Series A, 6.150%, 2/01/11
9,460,000 Detroit/Wayne County Stadium Authority (State 2/07 at 102 AAA 9,627,158
of 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 1,600,934
</TABLE>
<PAGE> 186
<TABLE>
<S> <C> <C> <C> <C>
3,495,000 0.000%, 6/01/18 No Opt. Call AAA 1,328,939
1,650,000 6.875%, 6/01/24 6/04 at 102 AAA 1,892,418
2,000,000 Lansing, Michigan, Building Authority, 6/05 at 101 AA+ 2,107,160
Refunding, 5.600%, 6/01/19
250,000 Michigan Municipal Bond Authority, State 12/01 at 100 AAA 252,750
Revolving Fund Revenue Bonds, Series
1992A, 4.750%, 12/01/09
5,500,000 Michigan Municipal Bond Authority, Revenue No Opt. Call AAA 3,776,465
Refunding, Government Loan A, 0.000%, 12/01/07
2,800,000 Michigan Municipal Bond Authority, Local No Opt. Call AAA 1,864,044
Government Loan, Series C, 0.000%, 6/15/08
1,000,000 State Building Authority, State of Michigan, 10/01 at 102 AA 1,091,270
1991 Revenue Refunding Bonds, Series I,
6.750%, 10/01/11
</TABLE>
25
<PAGE> 187
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$5,000,000 State Building Authority, State of Michigan, 10/01 at 102 AA $ 5,371,750
1991 Revenue Refunding Bonds, Series I,
6.250%, 10/01/20
7,585,000 State Building Authority, State of Michigan, 10/01 at 102 AA 8,148,945
1991 Revenue Bonds, Series II,
6.250%, 10/01/20
6,000,000 The House of Representatives of the State of No Opt. Call AAA 1,737,180
Michigan, Certificates of Participation,
0.000%, 8/15/23
2,260,000 Puerto Rico Highway and Transportation 7/02 at 101 1/2 A 2,475,740
Authority, Highway Revenue Bonds, 1992
Series V, 6.625%, 7/01/12
1,000,000 Puerto Rico Highway and Transportation 7/16 at 100 A 1,079,360
Authority, Highway Revenue Bonds, Series Y
of 1996, 5.500%, 7/01/36
1,500,000 Puerto Rico Highway and Transportation 7/08 at 101 A 1,478,295
Authority, Transportation Revenue Bonds,
Series A, 5.000%, 7/01/38
1,085,000 Romulus, Michigan, Tax Increment Finance 11/06 at 100 N/R 1,203,742
Authority, Limited Obligation Revenue,
6.750%, 11/01/19
- ----------------------------------------------------------------------------------------------------------
Transportation -- 1.2%
250,000 Capital Region Airport Authority (Lansing, 7/02 at 102 AAA 275,035
Michigan), Airport Revenue Bonds, Series 1992,
6.700%, 7/01/21 (Alternative Minimum Tax)
4,000,000 Charter County of Wayne, Michigan, Detroit 12/08 at 101 AAA 3,904,400
Metropolitan-Wayne County Airport, Airport
Revenue Bonds, Series 1998A, 5.000%, 12/01/22
(Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 21.4%
1,000,000 City of Battle Creek, County of Calhoun, 5/04 at 102 BBB+*** 1,189,130
State of 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, 5/04 at 102 A-*** 2,126,916
State of 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 1/01 at 102 AAA 1,078,820
Michigan 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*** 2,086,130
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 10/00 at 102 A+*** 1,080,890
Trustees, General Revenue Bonds, Series 1990,
7.000%, 10/01/10 (Pre-refunded to 10/01/00)
750,000 City of Detroit, Michigan, General Obligation 4/01 at 102 AAA 836,783
Bonds (Unlimited Tax), 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*** 323,475
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 1,814,192
County, Michigan, School Building and Site
Bonds (Unlimited Tax General Obligation),
Series 1991, 7.150%, 5/01/11 (Pre-refunded
to 5/01/01)
3,600,000 School District of the City of Detroit, Wayne 5/06 at 102 AAA 4,029,516
County, Michigan, School Building and Site
Improvement Bonds (Unlimited Tax General
</TABLE>
<PAGE> 188
<TABLE>
<S> <C> <C> <C> <C>
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-*** 12,324,795
Authority, Tax Increment Refunding Bonds
(Development Area No. 1 Projects), Series
1996C, 6.250%, 7/01/25 (Pre-refunded to 7/01/06)
1,000,000 City of Detroit, Michigan, Sewage Disposal 7/99 at 101 1/2 AAA 1,038,220
System Revenue Bonds, Series 1989,
7.125%, 7/01/19 (Pre-refunded to 7/01/99)
2,000,000 City of Detroit, Michigan, Water Supply System 7/00 at 102 AAA 2,155,260
Revenue Bonds, Series 1990, 7.250%, 7/01/20
(Pre-refunded to 7/01/00)
500,000 City of Farmington Hills, Hospital Finance 2/02 at 102 AAA 550,760
Authority (Michigan), Hospital Revenue Bonds
(Botsford General Hospital), Series 1992A,
6.500%, 2/15/22 (Pre-refunded to 2/15/02)
3,000,000 City of Grand Rapids, Michigan, Water Supply 1/00 at 102 AAA 3,183,690
System Improvement Revenue Bonds, Series 1990,
7.250%, 1/01/20 (Pre-refunded to 1/01/00)
2,500,000 Haslett Public Schools, Counties of Ingham, 5/00 at 101 AA+*** 2,663,225
Clinton and Shiawassee, State of Michigan,
1990 School Building and Site Bonds,
7.500%, 5/01/20 (Pre-refunded to 5/01/00)
</TABLE>
26
<PAGE> 189
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 750,000 City of Hudsonville Building Authority, County of Ottawa, 10/02 at 102 AAA $ 839,678
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 and 5/01 at 102 N/R*** 2,191,920
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, 5/03 at 102 A1*** 2,170,336
Hospital 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, Michigan, Community School District, Refunding, 5/05 at 101 AAA 4,708,040
7.000%, 5/01/15 (Pre-refunded to 5/01/05)
510,000 Livingston County, Michigan, Genoa-Oceola Sewer Drain No. 1, 5/99 at 102 A*** 526,284
Sanitary Drainage District (Full Faith and Credit of the County),
6.000%, 5/01/08 (Pre-refunded to 5/01/99)
930,000 City of Marquette Hospital Finance Authority, Hospital Revenue 4/99 at 102 A+*** 961,918
Refunding Bonds (Marquette General Hospital, Marquette,
Michigan), 1989 Series C, 7.500%, 4/01/07
(Pre-refunded to 4/01/99)
825,000 Menominee Michigan Area Public School District, 7.400%, 5/01/20 5/00 at 102 AA+*** 886,240
(Pre-refunded to 5/01/00)
3,000,000 Michigan Higher Education Facilities Authority, Limited 5/01 at 103 A*** 3,335,070
Obligation, Aquinas College Project, 7.350%, 5/01/11
(Pre-refunded to 5/01/01)
555,000 Michigan Municipal Bond Authority, State Revolving Fund Reserve 10/02 at 102 AA+*** 620,934
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+ 1,100,452
1,000,000 6.500%, 10/01/14 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,149,020
1,000,000 6.500%, 10/01/17 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,149,020
500,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 12/02 at 102 AAA 566,835
(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 1,073,480
System, Series A, 7.000%, 7/01/10 (Pre-refunded to 7/01/00)
6,000,000 Michigan Hospital Finance Authority (Oakwood Hospital Obligated 7/00 at 102 AAA 6,450,060
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 874,928
Health Corporation, Series J, 7.200%, 2/15/18 (Pre-refunded
to 2/15/01)
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 11/01 at 102 Aa2*** 1,108,810
(Daughters of Charity National Health System-Providence
Hospital), Series 1991, 7.000%, 11/01/21 (Pre-refunded to
11/01/01)
2,400,000 Oakland County, Michigan, Economic Development Corporation, 1/00 at 102 N/R*** 2,602,392
Limited Obligation Revenue, Pontiac Osteopathic Hospital
Project, 9.625%, 1/01/20 (Pre-refunded to 1/01/00)
1,000,000 Oakland County, Michigan, Economic Development Corporation, 11/04 at 102 Aaa 1,173,030
Limited Obligation Revenue Refunding, 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 Revenue, 7/00 at 102 AAA 1,954,980
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, 5/00 at 101 N/R*** 1,105,000
1990 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*** 209,921
Michigan, Water Supply Revenue Bonds (Limited Tax General
Obligation), Series 1992, 6.875%, 9/01/16 (Pre-refunded
to 9/01/04)
7,000,000 Vicksburg Community Schools, Counties of Kalamazoo and 5/06 at 37 1/4 AAA 1,922,060
St. Joseph, State of Michigan, 1991 School Building and
Site Bonds, 0.000%, 5/01/20 (Pre-refunded to 5/01/06)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 3.3%
</TABLE>
<PAGE> 190
<TABLE>
<S> <C> <C> <C> <C>
400,000 Michigan Public Power Agency, Belle River Project Refunding 1/03 at 102 AA- 404,652
Revenue Bonds, 1993 Series A, 5.250%, 1/01/18
3,000,000 Michigan State South Central Power Agency, Power Supply System 11/04 at 102 BBB+ 3,426,030
Revenue Refunding, 7.000%, 11/01/11
3,500,000 Michigan State Strategic Fund, Limited Obligation Revenue 6/04 at 102 AAA 3,934,770
Refunding, Detroit Education Company, Series B, 6.450%,
6/15/24
</TABLE>
27
<PAGE> 191
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$ 1,000,000 Monroe County, Michigan, Economic Development Corporation, No Opt. Call AAA $ 1,283,270
Limited Obligation Revenue Refunding-Collateralized,
Detroit Edison Company, Series AA, 6.950%, 9/01/22
1,000,000 County of Monroe, Michigan, Pollution Control Revenue Bonds No Opt. Call AAA 1,114,210
(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 Bonds, No Opt. Call AAA 1,644,520
Series O, 0.000%, 7/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 5.8%
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 1,548,570
10,500,000 5.250%, 7/01/21 7/05 at 101 AAA 10,684,590
2,885,000 City of Detroit, Michigan, Sewage Disposal System Revenue Bonds, 7/07 at 101 AAA 2,867,082
Series 1997-A, 5.000%, 7/01/22
1,570,000 City of Detroit, Michigan, Water Supply System Revenue Second No Opt. Call AAA 1,716,873
Lien Bonds, Series 1995-A, 5.550%, 7/01/12
2,230,000 City of Detroit, Michigan, Water Supply System Revenue Second No Opt. Call AAA 2,438,615
Lien Bonds, Series 1995-B, 5.550%, 7/01/12
1,000,000 City of Grand Rapids, Michigan, Sanitary Sewer System Improvement 1/00 at 102 AA- 1,058,358
Revenue Refunding Bonds, Series 1990, 7.000%, 1/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
$ 358,345,000 Total Investments -- (cost $315,710,985) --99.1% 348,556,233
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities --0.9% 3,060,158
------------------------------------------------------------------------------------------------------------------
Net Assets --100% $351,616,391
==================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** 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.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
28
<PAGE> 192
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio Municipal Bond Fund
November 30, 1998
<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, 3/02 at 102 AA- $1,831,434
Port Revenue Refunding Facilities, Cargill
Inc. Project, 7.250%, 3/01/22
- ----------------------------------------------------------------------------------------------------------
Capital Goods - 0.2%
1,335,000 Ohio Water Development Authority, Revenue 3/02 at 102 N/R 1,440,051
Bonds, USA Waste Services, Series 1992,
7.750%, 9/01/07 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 4.2%
2,050,000 Miami University, Ohio, University Revenues 12/99 at 102 A+ 2,150,184
Bonds, 6.900%, 12/01/04
3,500,000 State of Ohio, Education Loan Revenue Bonds, 6/07 at 102 AAA 3,632,090
Series 1997A (Supplemental Student Loan
Program), 1997A1, 5.850%, 12/01/19
(Alternative Minimum Tax)
1,750,000 State of Ohio (Ohio Higher Educational Facility 12/04 at 102 AAA 1,883,508
Commission), Higher Educational Facility
Revenue Bonds (University of Dayton 1994
Project), 5.800%, 12/01/19
2,025,000 State of Ohio (Ohio Higher Educational 12/03 at 102 AAA 2,286,428
Facility Commission), 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 9/06 at 101 N/R 1,259,508
Facility Commission), Higher Educational
Facility Revenue Bonds (The University of
Findlay 1996 Project), 6.125%, 9/01/16
7,000,000 State of Ohio (Ohio Higher Educational 5/07 at 102 AAA 7,283,920
Facility Commission), Higher Education
Facility Revenue Bonds (Xavier University
1997 Project), 5.375%, 5/15/22
State of Ohio (Ohio Higher Educational Facility
Commission), Higher Education Facility Revenue
Bonds (Case Western Reserve University, Ohio):
1,870,000 7.125%, 10/01/14 10/00 at 102 AA 2,025,023
750,000 6.500%, 10/01/20 No Opt. Call AA 905,408
2,250,000 State of Ohio (Ohio Higher Educational 4/07 at 102 A2 2,411,978
Facility Commission), Higher Education
Facility Revenue Bonds (John Carroll
University Project), 5.750%, 4/01/19
4,250,000 University of Cincinnati (Ohio), General 6/07 at 100 AAA 4,396,455
Receipts Bonds, Series AB, 5.375%, 6/01/20
1,230,000 Youngstown State University, Ohio, General 12/04 at 102 AAA 1,389,076
Receipts Bonds, 6.000%, 12/15/16
- ----------------------------------------------------------------------------------------------------------
Energy - 0.5%
2,125,000 County of Ashtabula, Ohio, Industrial 5/02 at 102 Baa2 2,284,375
Development Refunding Revenue Bonds, 1992
Series A (Ashland Oil, Inc. Project),
6.900%, 5/01/10
1,000,000 Ohio Air Quality Development Authority, State 4/01 at 102 Baa1 1,068,580
of Ohio, Air Quality Development Refunding
Revenue Bonds, Series 1992 (Ashland Oil, Inc.
Project), 6.850%, 4/01/10
- ----------------------------------------------------------------------------------------------------------
Health Care - 14.9%
1,250,000 County of Butler, Ohio, Hospital Facilities 1/02 at 102 BBB- 1,350,950
Revenue Refunding and 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):
</TABLE>
<PAGE> 193
<TABLE>
<S> <C> <C> <C> <C>
500,000 8.000%, 12/01/06 12/01 at 102 BBB 550,850
1,000,000 8.000%, 12/01/11 12/01 at 102 BBB 1,101,700
1,500,000 County of Cuyahoga, Ohio, Hospital Improvement 1/06 at 102 AAA 1,584,240
and Refunding Revenue Bonds, Series 1996A
(University Hospitals Health System, Inc.
Project), 5.625%, 1/15/26
1,000,000 County of Cuyahoga, Ohio, Hospital Improvement 2/07 at 102 AAA 1,063,810
and Refunding Revenue Bonds, Series 1997
(The MetroHealth System Project), 5.625%,
2/15/17
2,000,000 Cuyahoga County, Ohio, Industrial Development 8/01 at 103 AAA 2,205,060
Refunding Revenue Bonds, Series 1991
(University Health Care Center Project),
7.300%, 8/01/11
</TABLE>
29
<PAGE> 194
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$2,010,000 County of Erie, Ohio, Hospital Improvement and 1/02 at 102 A $ 2,197,694
Refunding Revenue 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
Childrens Hospital Project):
1,575,000 5.750%, 11/01/15 11/06 at 101 Aa 1,679,517
5,275,000 5.875%, 11/01/25 11/06 at 101 Aa 5,656,594
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 1,032,849
2,000,000 5.875%, 6/01/21 6/06 at 102 AA 2,173,380
1,500,000 Franklin County, Ohio, Hospital Revenue 6/00 at 102 AAA 1,612,605
Refunding Bonds (Holy Cross Health System-
Mt. Carmel Health), Series 1990-A,
7.625%, 6/01/09
City of Garfield Heights, Ohio, Hospital
Improvement and Refunding Revenue Bonds,
Series 1992B (Marymount Hospital Project):
3,000,000 6.650%, 11/15/11 11/02 at 102 A 3,292,620
3,500,000 6.700%, 11/15/15 11/02 at 102 A 3,834,285
3,000,000 County of Hamilton, Ohio, Hospital Facilities 1/03 at 102 A 3,273,870
Revenue Refunding Bonds, Series 1992A
(Bethesda Hospital, Inc.), 6.250%, 1/01/12
1,720,000 Franciscan Sisters of the Poor Health System, 7/02 at 102 Baa1 1,853,696
Inc., Hamilton County, Ohio, Health System
Revenue Bonds, Providence Hospital Issue,
Series 1992, 6.875%, 7/01/15
7,890,000 County of Lorain, Ohio, Hospital Revenue 11/05 at 102 AAA 8,074,784
Refunding, Emh Regional Medical Center,
5.375%, 11/01/21
2,220,000 County of Lorain, Ohio, Hospital Facilities 9/07 at 102 AAA 2,329,180
Revenue Bonds, Series 1997B (Catholic
Healthcare Partners), 5.500%, 9/01/27
1,000,000 County of Lucas, Ohio, Hospital Improvement 8/00 at 102 AAA 1,068,500
Revenue Bonds, Series 1990A (St. Vincent
Medical Center), 6.750%, 8/15/20
3,000,000 County of Lucas, Ohio, Hospital Improvement 8/02 at 102 AAA 3,309,330
Revenue Bonds, Series 1992 (St. Vincent Medical
Center), 6.500%, 8/15/12
500,000 Mansfield, Hospital Improvement Revenue 12/01 at 102 AAA 547,050
(Mansfield General Hospital),
6.700%, 12/01/09
2,000,000 County of Marion, Ohio, Hospital Refunding and 5/06 at 102 BBB+ 2,199,700
Improvement Revenue Bonds, Series 1996 (The
Community Hospital), 6.375%, 5/15/11
1,250,000 Maumee Hospital Facilities Revenue (St. Lukes 12/04 at 102 AAA 1,372,175
Hospital), 5.800%, 12/01/14
4,405,000 County of Miami, Ohio, Hospital Facilities 5/06 at 102 BBB 4,711,324
Revenue Refunding and Improvement Bonds,
Series 1996A (Upper Valley Medical Center),
6.250%, 5/15/16
4,205,000 County of Miami, Ohio, Hospital Facilities 5/06 at 102 BBB 4,497,416
Revenue Refunding and Improvement Bonds,
Series 1996C (Upper Valley Medical Center),
6.250%, 5/15/13
4,000,000 City of Middleburg Heights, Ohio, Hospital 8/08 at 102 AAA 4,313,120
Improvement Refunding Revenue Bonds,
Series 1995 (Southwest General Health
Center Project), 5.625%, 8/15/15
2,000,000 City of Middleburg Heights, Ohio, Hospital 8/08 at 102 AAA 2,156,420
Improvement Refunding Revenue Bonds,
Series 1995 (Southwest General Health
Center Project), 5.750%, 8/15/21
</TABLE>
<PAGE> 195
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
11,000,000 County of Montgomery, Ohio, Health System 1/08 at 102 Baa1 11,126,940
Revenue Bonds, Franciscan 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 1,592,715
7,000,000 6.250%, 4/01/20 No Opt. Call AAA 8,298,430
2,500,000 County of Montgomery, Ohio, Sisters of Charity 5/03 at 101 AAA 2,771,750
Health Care, Series 1992A, 6.250%, 5/15/08
2,790,000 City of Mount Vernon, Ohio, Hospital 6/99 at 101 1/2 N/R 2,851,603
Refunding Revenue Bonds, Series 1986A
(Knox Community Hospital), 7.875%, 6/01/12
4,000,000 City of Parma, Ohio, Hospital Improvement and 11/08 at 101 A- 4,045,480
Refunding Revenue Bonds, Series 1998 (The
Parma Community Hospital Association),
5.375%, 11/01/29
</TABLE>
30
<PAGE> 196
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 1,725,000 County of Shelby, Ohio, Hospital Facilities 9/02 at 102 BBB $ 1,918,580
Revenue Refunding and Improvement Bonds,
Series 1992 (The Shelby County Memorial
Hospital Association), 7.700%, 9/01/18
2,750,000 County of Trumbull, Ohio, Hospital Refunding 11/01 at 102 AAA 3,038,310
and Improvement Revenue Bonds, Series 1991
(Trumbell Memorial Hospital Project), Series
1991B, 6.900%, 11/15/12
750,000 County of Tuscarawas, Ohio, Hospital Facilities 10/03 at 102 Baa2 801,855
Revenue Bonds, Series 1993A (Union Hospital
Project), 6.500%, 10/01/21
- -----------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.1%
1,600,000 Butler County, Ohio, Multifamily Housing 9/08 at 103 N/R 1,614,992
Revenue Bonds, Series 1998 (Anthony Wayne
Apartments Project), 6.500%, 9/01/30
(Alternative Minimum Tax)
1,150,000 County of Clark, Ohio, Multifamily Housing 11/08 at 103 N/R 1,153,968
Revenue Bonds (Church of God Retirement Home),
Series 1998, 6.250%, 11/01/30 (Alternative
Minimum Tax)
16,160,000 County of Franklin, Ohio, Mortgage Revenue 10/07 at 103 Aaa 16,654,496
Bonds, Series 1997 (GNMA Collateralized -
Columbus Properties Project), 5.600%, 4/20/39
(Alternative Minimum Tax)
6,200,000 Hamilton County, Multifamily Housing Revenue 1/07 at 102 AAA 6,464,988
Bonds (Huntington Meadows Project), Series 1997,
5.700%, 1/01/27 (Alternative Minimum Tax)
2,800,000 Ohio Capital Corporation for Housing, Mortgage 11/02 at 100 AAA 2,843,288
Revenue Refunding Bonds (FHA Section 8 Assisted
Project), Series 1997C, 5.700%, 1/01/24
6,000,000 Ohio Capital Corporation for Housing, Mortgage 1/02 at 100 AAA 6,031,860
Revenue 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 323,253
1,215,000 7.600%, 11/01/23 11/99 at 103 AAA 1,266,941
- -----------------------------------------------------------------------------------------------------------
Housing/Single Family - 5.4%
4,970,000 Ohio Housing Finance Agency, Residential 9/07 at 102 AAA 5,184,207
Mortgage Revenue 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 9/07 at 102 AAA 5,669,249
Mortgage Revenue Bonds, Series 1997C,
5.750%, 9/01/28 (Alternative Minimum Tax)
4,005,000 Ohio Housing Finance Agency, Residential 3/08 at 101 AAA 4,140,529
Mortgage Revenue 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 9/04 at 102 AAA 2,128,046
Mortgage Revenue Bonds, Series 1994-A1
(GNMA Mortgage-Backed Securities Program),
6.100%, 9/01/14
5,255,000 Ohio Housing Finance Agency, Residential 9/04 at 102 AAA 5,666,309
Mortgage Revenue Bonds, Series 1994-B1,
6.375%, 9/01/14
12,965,000 Ohio Housing Finance Agency, Residential 9/07 at 102 AAA 13,935,301
Mortgage Revenue Bonds, Series 1997A,
6.150%, 3/01/29 (Alternative Minimum Tax)
495,000 Ohio Housing Finance Agency, Single 3/00 at 102 AAA 515,364
Family Mortgage Revenue Bonds (GNMA Mortgage-
Backed Securities Program), 1990 Series A,
7.400%, 9/01/15
Ohio Housing Finance Agency, Single Family
Mortgage Revenue Bonds (GNMA Mortgage-Backed
Securities Program), 1990 Series D:
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
520,000 7.500%, 9/01/13 9/00 at 102 AAA 549,593
260,000 7.050%, 9/01/16 9/01 at 102 AAA 275,436
- -----------------------------------------------------------------------------------------------------------
Industrial/Other - 0.4%
2,860,000 Cleveland-Cuyahoga County Port Authority 5/08 at 102 N/R 2,795,822
(Ohio), Development Revenue Bonds (Port of
Cleveland Bond Fund-Jergens, Inc., Project),
Series 1998A, 5.375%, 5/15/18
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------
Long Term Care - 2.9%
4,030,000 County of Cuyahoga, Ohio, Health Care 6/00 at 100 N/R 4,283,930
Facilities Revenue Bonds, Series 1990
(Altenheim Project), 9.280%, 6/01/15
2,500,000 Fairlawn, Ohio, Health Care Facilities 10/99 at 102 N/R 2,607,600
Revenue Bonds, Series 1989 (The Village
at Saint Edward Project), 8.750%, 10/01/19
</TABLE>
31
<PAGE> 198
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Care (continued)
$1,500,000 County of Franklin, Ohio, Health Care 7/03 at 102 N/R $1,532,370
Facilities Revenue Bonds, Series 1993 (Ohio
Presbyterian Retirement Services), 6.500%,
7/01/23
3,120,000 County of Franklin, Ohio, Health Care Facilities 11/05 at 102 Aa2 3,336,809
Revenue Bonds, Series 1995 (Heinzerling
Foundation), 6.200%, 11/01/20
1,350,000 County of Franklin, Ohio, Hospital Facilities 7/01 at 103 N/R 1,497,501
Mortgage Revenue Bonds, 1991 Series A (Ohio
Presbyterian Retirement Services), 8.750%,
7/01/21
660,000 County of Franklin, Hospital Revenue Refunding 8/00 at 102 N/R 686,433
FHA Insured Mortgage Loan (Worthington
Christian Village Nursing Home), 7.000%,
8/01/16
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 993,770
1,250,000 5.125%, 10/01/23 10/08 at 101 A 1,229,050
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- 1,328,863
750,000 6.300%, 11/15/15 11/03 at 102 BBB- 794,490
2,155,000 City of Napoleon, Ohio, Health Care Facilities 9/04 at 102 Aa 2,387,632
Mortgage Revenue Refunding Bonds, Series 1994
(The Lutheran Orphans and Old Folks Home
Society at Napoleon, Ohio, Inc.-FHA Insured
Project), 6.875%, 8/01/23
- ----------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 16.9%
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 7,607,520
9,500,000 5.250%, 12/01/21 12/05 at 102 AAA 9,694,655
3,955,000 City of Akron, Ohio, General Obligation Bonds, 12/04 at 102 AAA 4,554,855
Various Purpose 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 294,936
2,850,000 5.750%, 12/01/24 12/05 at 101 AAA 3,066,287
1,000,000 Archbold Area Local School District, General 12/06 at 102 AAA 1,112,810
Obligation Bonds (Unlimited Tax), Series 1996,
6.000%, 12/01/21
1,000,000 Aurora City School District, Ohio, General 12/05 at 102 AAA 1,085,000
Obligation (Unlimited Tax), School
Improvement Bonds, Series 1995, 5.800%,
12/01/16
2,905,000 Board of Education, Batavia Local School 12/05 at 102 AAA 3,372,008
District, County of Clermont, Ohio, School
Improvement Bonds, Series 1995 (Unlimited Tax),
6.300%, 12/01/22
1,000,000 Board of Education, Beavercreek Local School
District, County of Greene, Ohio, School No Opt. Call AAA 1,222,760
Improvement Bonds, Series 1996 (Unlimited
Tax General Obligation), 6.600%, 12/01/15
2,500,000 Buckeye Valley Local School District, Ohio, No Opt. Call AAA 3,128,250
General Obligation (Unlimited Tax) Bonds,
School Improvement Bonds, Series 1995A,
6.850%, 12/01/15
Chesapeake-Union Exempt Village School
District, Ohio, General Obligation Bonds
Series 1986:
</TABLE>
<PAGE> 199
<TABLE>
<S> <C> <C> <C> <C>
125,000 8.500%, 12/01/04 No Opt. Call N/R 152,111
125,000 8.500%, 12/01/05 No Opt. Call N/R 155,131
125,000 8.500%, 12/01/06 No Opt. Call N/R 157,763
125,000 8.500%, 12/01/07 No Opt. Call N/R 160,233
125,000 8.500%, 12/01/08 No Opt. Call N/R 162,504
130,000 8.500%, 12/01/09 No Opt. Call N/R 170,863
4,745,000 City of Cleveland, Ohio, Various Purpose 11/04 at 102 AAA 5,508,755
General Obligation Bonds, Series 1994,
6.625%, 11/15/14
550,000 County of Columbiana, Ohio, County Jail 12/04 at 102 AA 639,287
Facilities Construction Bonds (General
Obligation-Unlimited Tax), 6.600%, 12/01/17
</TABLE>
32
<PAGE> 200
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$1,500,000 City of Columbus, Franklin County, Ohio, General Obligation Refunding 1/02 at 102 Aaa $ 1,643,070
Bonds, 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 786,747
500,000 9.375%, 4/15/07 No Opt. Call AAA 683,620
1,000,000 County of Cuyahoga, Ohio, General Obligation Various Purpose No Opt. Call AA+ 1,074,300
Refunding Bonds, Series 1993B (Limited Tax Obligation),
5.250%, 10/01/13
1,345,000 County of Cuyahoga, Ohio, General Obligation Bonds No Opt. Call AA+ 1,489,413
(Limited Tax Obligation), 5.650%, 5/15/18
200,000 City of Dayton, Ohio, General Obligation Bonds (Three Issues), No Opt. Call A+ 212,002
Limited Tax, 10.500%, 10/01/99
750,000 City of Defiance, Ohio, Waterworks System Improvement Bonds, 12/04 at 102 AAA 839,063
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 586,860
1,000,000 0.000%, 12/01/11 No Opt. Call AAA 554,280
2,010,000 City of Dublin, Ohio, General Obligation Bonds, Various Purpose 12/09 at 101 Aa2 2,105,837
Refunding and Improvement Bonds, Series 1998A, 5.250%, 12/01/14
250,000 East Holmes Local School District, Ohio, School Improvement 12/98 at 102 AAA 255,893
Refunding Bonds, General Obligation-Unlimited Tax, 7.700%, 12/01/08
1,110,000 City of Fairborn, Ohio, General Obligation Bonds, Utility 10/02 at 102 AAA 1,249,083
Improvement Bonds, Series 1991, 7.000%, 10/01/11
4,040,000 County of Franklin, Ohio, Refunding Bonds, Series 1993 12/08 at 102 AAA 4,259,534
(Limited Tax General Obligation Bonds), 5.375%, 12/01/20
1,575,000 Garaway Local School District, Ohio, School Improvement Bonds, 12/00 at 102 AAA 1,706,040
Series 1990 (General Obligation-Unlimited Tax Bonds),
7.200%, 12/01/14
620,000 County of Geauga, Ohio, General Obligation (Limited Tax), Sewer No Opt. Call Aa2 759,494
District Improvement Bonds (Bainbridge Water Project),
6.850%, 12/01/10
1,000,000 Grandview Heights City School District, Franklin County, Ohio, 12/05 at 101 AA 1,096,520
School 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, 12/07 at 102 AAA 1,096,050
Ohio, 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 1,106,380
General Obligation), 5.850%, 12/01/16
1,000,000 Indian Valley Local School District, Ohio, General Obligation 12/05 at 102 AAA 1,080,660
(Unlimited Tax), School Improvement Bonds, Series 1995, 5.750%,
12/01/19
1,200,000 County of Jefferson, Ohio, Human Services Building Construction 12/01 at 102 AAA 1,325,352
Bonds, 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 2,096,723
Improvement Refunding Bonds, Series 1992, 6.500%, 12/01/10
1,070,000 Kettering Ohio, Series 1991, Limited Tax Issue, 6.650%, 12/01/12 12/01 at 102 Aa3 1,173,116
1,000,000 Kettering City School District (Ohio), General Obligation 12/05 at 101 AAA 1,018,630
Bonds-Unlimited Tax, 5.250%, 12/01/22
500,000 Kings Local School District, General Obligation (Unlimited Tax)- 12/05 at 100 AAA 523,180
School Improvement Bonds, Series 1995, 5.500%, 12/01/21
500,000 Kirtland Local School District, Ohio, School Improvement Bonds, 12/99 at 102 N/R 528,530
Series 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 1,178,520
6.900%, 12/01/14
1,440,000 Lakewood, Ohio, Series 1995B, 5.750%, 12/01/15 12/05 at 102 Aa3 1,546,128
</TABLE>
33
<PAGE> 201
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$1,000,000 Lakota Local School District, County of Butler, 12/05 at 100 AAA $ 1,132,260
Ohio, School Improvement 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 177,103
155,000 7.750%, 12/01/03 No Opt. Call A 181,424
155,000 7.750%, 12/01/04 No Opt. Call A 185,290
155,000 7.750%, 12/01/05 No Opt. Call A 188,926
155,000 7.750%, 12/01/06 No Opt. Call A 192,191
1,000,000 County of Lucas, Ohio, General Obligation 12/02 at 102 A1 1,110,450
(Limited Tax), Various Purpose Improvement
Bonds, Series 1992, 6.650%, 12/01/12
1,000,000 County of Lucas, Ohio, General Obligation 12/05 at 102 AAA 1,049,780
(Limited Tax), Various Purpose Improvement
Bonds, Series 1995-1, 5.400%, 12/01/15
1,000,000 County of Mahoning, Ohio, General Obligation 12/99 at 102 AAA 1,058,330
Bonds, Various Purpose Improvement Bonds,
Series 1989, Limited Tax, 7.200%, 12/01/09
865,000 Marysville, Ohio, Exempt Village School No Opt. Call AAA 365,687
District, General Obligation Bonds,
0.000%, 12/01/16
1,215,000 Mason City School District, Counties of Warren 12/09 at 101 Aa3 1,269,602
and Butler, Ohio, School Improvement Unlimited
Tax General Obligation Bonds, Series 1998,
5.300%, 12/01/17
2,500,000 North Canton City School District, Ohio, School 12/08 at 101 Aaa 2,514,575
Improvement Refunding Bonds, Series 1998
(General Obligation Unlimited Tax),
5.000%, 12/01/19
1,000,000 City of North Olmsted, Ohio, General Obligation 12/02 at 102 AAA 1,100,810
(Limited Tax), Various Purpose Bonds, Series
1992, 6.250%, 12/15/12
North Royalton City School District, Ohio, School
Improvement Bonds, Series 1994:
2,200,000 6.000%, 12/01/14 12/09 at 102 AAA 2,526,458
2,400,000 6.100%, 12/01/19 12/09 at 102 AAA 2,693,880
600,000 Oak Hills, Ohio, Local School District, General 12/07 at 101 Aa3 641,760
Obligation Bonds, Series 1997A, 5.700%, 12/01/25
1,000,000 State of Ohio, Full Faith and Credit, General No Opt. Call AA+ 1,154,140
Obligation Infrastructure Improvement Bonds,
Series 1994, 6.000%, 8/01/10
Ohio State Infrastructure Improvement:
750,000 6.200%, 8/01/13 8/05 at 102 AA+ 858,413
2,000,000 6.200%, 8/01/14 8/05 at 102 AA+ 2,289,100
7,640,000 Ohio State, College Savings Bonds, No Opt. Call AAA 3,815,263
0.000%, 8/01/13
500,000 Olmsted Falls, Ohio, Local School District, 12/01 at 102 AAA 558,610
General Obligation Bonds, 7.050%, 12/15/11
1,750,000 Pickerington Local School District, Fairfield 12/01 at 102 A1 1,916,758
and Franklin Counties, 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 277,140
500,000 0.000%, 12/01/13 No Opt. Call AAA 245,780
1,000,000 Revere Local School District, Ohio, School 12/03 at 102 AAA 1,102,200
Improvement Bonds, Series 1993 (General
Obligation-Unlimited Tax Bonds),
6.000%, 12/01/16
2,340,000 City of Stow, Ohio, Safety Center Construction 12/05 at 102 A1 2,590,825
Bonds (General Obligation Limited Tax),
</TABLE>
<PAGE> 202
<TABLE>
<S> <C> <C> <C> <C>
6.200%, 12/01/20
2,870,000 City of Strongsville, Ohio, Various Purpose 12/06 at 102 Aa3 3,127,468
Improvement Bonds, Series 1996 (General
Obligation-Limited Tax), 5.950%, 12/01/21
540,000 County of Trumbull, Ohio, General Obligation 12/04 at 102 AAA 606,269
Sewer Bonds, Series 1994, 6.200%, 12/01/14
1,070,000 County of Trumbull, Ohio, Correctional No Opt. Call AAA 1,241,350
Facilities Bonds, Series 1995 (General
Obligation Limited Tax), 7.000%, 12/01/04
1,320,000 Twinsburg, Ohio, City School District, General 12/01 at 102 AAA 1,447,090
Obligation Bonds, 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 1,014,332
1,870,000 0.000%, 12/01/12 No Opt. Call AAA 977,056
1,910,000 Vandalia, Ohio, General Obligation Bonds,
5.850%, 12/01/21 12/06 at 101 Aa 2,057,280
</TABLE>
34
<PAGE> 203
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 750,000 West Geauga Local School District, Ohio, School Improvement Bonds, 11/04 at 102 AAA $ 831,315
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 1,108,810
6.000%, 12/01/19
1,425,000 Wooster City School District, Wayne County, Ohio, General Obligation 12/02 at 102 AAA 1,597,083
Bonds Unlimited Tax), 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 335,631
6.125%, 12/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 6.7%
500,000 County of Athens, Ohio, Community Mental Health Revenue Bonds, 1991 6/01 at 102 AA- 539,565
Series I, 6.900%, 6/01/10
6,000,000 City of Cleveland, Ohio, Certificates of Participation, Series 1997, 11/07 at 102 AAA 6,143,040
Cleveland Stadium Project, 5.250%, 11/15/27
5,000,000 County of Hamilton, Ohio, Sales Tax Bonds, Series 1998B, Hamilton 6/08 at 101 AAA 4,981,000
County Football Project, 5.000%, 12/01/27
1,500,000 Ohio State Building Authority (Juvenile Correctional Building), 9/04 at 102 AAA 1,710,990
6.600%, 10/01/14
1,100,000 Ohio State Department of Transportation, Certificates of 4/02 at 102 AAA 1,200,265
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 30,060,176
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 2,929,392
Series L, Guaranteed by the Commonwealth of Puerto Rico,
5.500%, 7/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Technology - 0.2%
1,000,000 County of Franklin, Ohio, Revenue Bonds, Series 1991 (OCLC Online 7/01 at 100 N/R 1,052,530
Computer Library Center, Incorporated Project), 7.200%, 7/15/06
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 4.3%
9,840,000 City of Cleveland, Ohio, Airport System Revenue Bonds, 1/08 at 101 AAA 9,752,719
Series 1997A, 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 8,629,625
Series 1998A (Emery Air Freight Corporation and Emery Worldwide
Airlines, Inc.-Guarantors) (Non-AMT), 5.625%, 2/01/18
11,000,000 State of Ohio, Turnpike Revenue Bonds, 1996 Series A, Issued by the No Opt. Call AAA 12,148,950
Ohio Turnpike Commission, 5.500%, 2/15/26
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 19.5%
2,000,000 City of Athens (County of Athens, Ohio), Sanitary Sewer System 12/09 at 100 A*** 2,347,300
Mortgage 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, 1/02 at 102 N/R*** 3,352,470
Series 1992 (The Barberton Citizens Hospital Company Project),
7.250%, 1/01/12 (Pre-refunded to 1/01/02)
2,790,000 City of Bedford, Ohio, Hospital Facilities Refunding Revenue Bonds, 5/00 at 102 N/R*** 3,012,363
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 12/01 at 102 AAA 1,117,440
Counties, Ohio, General Obligation Bonds (Unlimited Tax),
For School Facilities Construction and Improvement,
7.100%, 12/01/13 (Pre-refunded to 12/01/01)
County of Clermont, Ohio, Hospital Facilities Revenue Bonds,
Series 1989 A (Mercy Health System, Province of Cincinnati):
1,085,000 7.500%, 9/01/19 (Pre-refunded to 9/01/01) 9/01 at 100 AAA 1,193,728
3,660,000 7.500%, 9/01/19 (Pre-refunded to 9/01/99) 9/99 at 102 AAA 3,850,320
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 1,092,180
2,000,000 7.375%, 12/01/20 (Pre-refunded to 12/01/00) 12/00 at 102 AAA 2,188,940
</TABLE>
35
<PAGE> 204
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$3,700,000 County of Clermont, Ohio, Sewer System Revenue 12/01 at 102 AAA $4,130,051
Bonds, Series 1991, 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 1,152,562
1,010,000 7.500%, 8/01/09 (Pre-refunded to 2/01/03) 2/03 at 100 AAA 1,152,562
500,000 City of Cleveland, Ohio, Various Purpose General 7/02 at 102 AAA 553,370
Obligation Bonds, Series 1992, 6.375%, 7/01/12
(Pre-refunded to 7/01/02)
790,000 Board of Education of the Cleveland City School 12/01 at 102 Aaa 907,307
District, Ohio, School 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 1/02 at 102 AAA 1,011,586
Refunding Bonds, Series F, 1992-B, 6.500%,
1/01/11 (Pre-refunded to 1/01/02)
City of Cleveland, Ohio, Waterworks Improvement
and Refunding Revenue Bonds, 1st Mortgage
Series 1996-H:
2,280,000 5.750%, 1/01/21 (Pre-refunded to 1/01/06) 1/06 at 102 AAA 2,554,672
5,795,000 5.750%, 1/01/26 (Pre-refunded to 1/01/06) 1/06 at 102 AAA 6,493,124
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 287,505
5,500,000 6.250%, 8/15/24 (Pre-refunded to 8/15/05) 8/05 at 102 AAA 6,325,110
1,250,000 Conversion and Remarketing of the County of 10/00 at 103 N/R*** 1,370,438
Cuyahoga, Ohio, Hospital Improvement Revenue
Bonds (Deaconess Hospital of Cleveland
Project), Series 1985B, 7.450%, 10/01/18
(Pre-refunded to 10/01/00)
1,000,000 County of Cuyahoga, Ohio, Hospital Revenue 1/99 at 102 AAA 1,024,560
Improvement and Refunding Bonds, Series 1989 A
(University Hospitals Health System, Inc.
Project), 6.875%, 1/15/19 (Pre-refunded to
1/15/99)
4,000,000 County of Cuyahoga, Ohio, Hospital Facilities 8/99 at 102 Aaa 4,191,240
Revenue Bonds, Series 1989
(Fairview General Hospital), 7.375%, 8/01/19
(Pre-refunded to 8/01/99)
5,750,000 County of Cuyahoga, Ohio, Hospital Facilities 8/00 at 102 AAA 6,221,558
Revenue Bonds, Series 1990 (Meridia
Health System), 7.250%, 8/15/19 (Pre-refunded
to 8/15/00)
4,990,000 County of Cuyahoga, Ohio, Distribution System 6/99 at 102 N/R*** 5,201,676
Improvement Revenue Bonds, 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 9/00 at 102 AAA 1,083,180
Revenue Bonds, Series 1990, 7.250%, 9/01/20
(Pre-refunded to 9/01/00)
2,600,000 County of Erie, Ohio, Franciscan Services 1/99 at 102 N/R*** 2,661,464
Corporation Revenue Bonds, Series 1989A
(Providence Hospital, Inc), 7.625%, 1/01/19
(Pre-refunded to 1/01/99)
1,500,000 City of Findlay, Ohio, General Obligation Bonds, 8/99 at 102 AA-*** 1,570,035
7.200%, 8/01/11 (Pre-refunded to 8/01/99)
1,350,000 County of Franklin, Ohio, Hospital Facilities 5/00 at 102 AAA 1,448,010
Improvement Revenue Bonds, 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 5/00 at 102 AAA 1,077,830
Refunding and Improvement Revenue Bonds,
Series 1990B (Riverside United Methodist
Hospital Project), 7.600%, 5/15/20
(Pre-refunded to 5/15/00)
1,000,000 Board of Education, Gahanna-Jefferson City 12/00 at 102 N/R*** 1,088,760
School District, Franklin County, Ohio,
General Obligation Bonds, Series 1990A,
7.125%, 12/01/14 (Pre-refunded to 12/01/00)
1,495,000 County of Hamilton, Ohio, Judson Care Center 8/00 at 101 1/4 AA-*** 1,616,708
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 12/00 at 102 A1*** 1,090,140
Obligation-Unlimited Tax, 7.100%, 12/15/13
(Pre-refunded to 12/15/00)
1,000,000 Board of Education of the Hudson Local 12/00 at 102 A1*** 1,090,970
School 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 1,106,940
Ohio), General Receipts Bonds, Series 1992,
6.500%, 5/01/22
</TABLE>
36
<PAGE> 205
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$1,500,000 City of Lorain, Ohio, Hospital Refunding 11/02 at 102 A1 $ 1,722,045
Revenue Bonds, Series 1992 (Lakeland
Community Hospital, Inc.), 6.500%, 11/15/12
1,500,000 County of Lucas, Ohio, Hospital Facilities 12/01 at 102 N/R*** 1,712,820
Revenue Bonds, Series 1991 (Flower Memorial
Hospital), 8.125%, 12/01/11 (Pre-refunded
to 12/01/01)
2,000,000 County of Mahoning, Ohio, Hospital No Opt. Call A1 2,028,080
Improvement and Refunding Revenue Bonds,
Series 1986 (St. Elizabeth Hospital Medical
Center Project), 7.375%, 12/01/09
4,250,000 County of Mahoning, Ohio, Hospital 10/02 at 100 AAA 4,602,113
Improvement 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 12/99 at 103 N/R*** 1,246,359
Facilities 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 12/00 at 102 AAA 1,091,220
Exempted 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 12/01 at 101 AAA 1,382,375
Mortgage 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 2,018,757
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 12/02 at 100 AAA 1,061,260
Village 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 3,327,690
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 2,501,054
5,700,000 0.000%, 1/15/15 (Pre-refunded to 7/15/11) 7/11 at 70 15/32 AAA 2,267,973
20,000 Ohio Building Authority, State Facilities 4/03 at 100 AAA 23,759
Refunding Bonds (Frank J. Lausche State
Office Building), 1982 Series A, 10.125%,
10/01/06 (Pre-refunded to 4/01/03)
3,250,000 State of Ohio (Ohio Building Authority), 8/99 at 102 Aaa 3,405,090
State Correctional Facilities Bonds, 1986
Series A, 7.350%, 8/01/06 (Pre-refunded to
8/01/99)
1,000,000 State of Ohio, Ohio Higher Educational 5/00 at 100 AAA 1,054,980
Facilities Commission (Ohio Northern
University Project), 7.300%, 5/15/10
(Pre-refunded to 5/15/00)
1,900,000 Ohio State Public Facilities Commission, 11/99 at 102 Aa3*** 1,970,395
Higher Education Facilities Bonds, Series
1989A, 7.250%, 5/01/04 (Pre-refunded to
11/01/99)
4,630,000 Ohio Water Development Authority, State of No Opt. Call AAA 5,217,084
Ohio, Water Development Revenue Bonds, Pure
Water 1990 Series I, 6.000%, 12/01/16
1,000,000 Ottawa County, Ohio, Special Assessment 9/01 at 102 AAA 1,107,020
Portage, Catawba Isle, 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*** 1,099,100
Obligation Bonds, Series 1990 (Limited Tax
Obligation), 7.600%, 12/01/11 (Pre-refunded
to 12/01/00)
1,600,000 Pickerington, Ohio, Local School District, 12/00 at 102 AAA 1,748,800
General Obligation Bonds, Series 1990B,
7.250%, 12/01/13 (Pre-refunded to 12/01/00)
700,000 Puerto Rico Commonwealth Highway Authority, 7/00 at 102 AAA 760,270
Highway Revenue, Series Q, 7.750%, 7/01/10
(Pre-refunded to 7/01/00)
1,500,000 Puerto Rico Electric Power Authority, Power 7/01 at 102 Aaa 1,655,505
Revenue Bonds, Series P, 7.000%, 7/01/21
(Pre-refunded to 7/01/01)
3,165,000 Reynoldsburg City School District, Ohio, 12/02 at 102 AAA 3,553,029
General Obligation Bonds, School Building
Construction and Improvement, 6.550%,
12/01/17 (Pre-refunded to 12/01/02)
1,200,000 Ridgemont Local School District, Ohio, 12/02 at 102 N/R*** 1,369,896
General Obligation (Unlimited Tax),
School Improvement Bonds, Series 1992,
7.250%, 12/01/14 (Pre-refunded to 12/01/02)
605,000 Scioto County, Ohio, Human Services Building 8/01 at 101 N/R*** 664,611
Bonds, General Obligation Bonds 7.150%,
8/01/11 (Pre-refunded to 8/01/01)
</TABLE>
37
<PAGE> 206
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio Municipal Bond Fund
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 750,000 Southwest Local School District, Ohio, 12/99 at 103 AAA $ 805,148
Hamilton County, General Obligation Bonds,
7.650%, 12/01/10 (Pre-refunded to 12/01/99)
1,000,000 Sylvania, Ohio, City School District, General 6/02 at 102 AAA 1,112,220
Obligation Bonds, 6.600%, 6/01/16
(Pre-refunded to 6/01/02)
1,000,000 University of Cincinnati, General Receipts 12/02 at 102 AA*** 1,112,590
Bonds, Series O, 6.300%, 6/01/12 (Pre-refunded
to 12/01/02)
4,775,000 County of Warren, Ohio, Hospital Facilities 7/01 at 102 Aa2*** 5,273,606
Improvement and Refunding 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 12/02 at 102 AAA 843,338
Revenue Bonds, Series 1992, Warren County
Water District, 6.600%, 12/01/16 (Pre-
refunded to 12/01/02)
1,500,000 City of Warren, Ohio, General Obligation 11/00 at 102 BBB+*** 1,647,480
(Limited Tax), Sewerage System Improvement
Bonds, Series 1990, 7.750%, 11/01/10 (Pre-
refunded to 11/01/00)
1,500,000 Washington County (Marietta Area Health Care 9/02 at 102 Baa1*** 1,708,140
Project), 7.375%, 9/01/12 (Pre-refunded
to 9/01/02)
1,500,000 Westerville, Minerva Park and Blendon, Ohio, 9/01 at 102 AAA 1,663,905
Joint Township Hospital District (St. Anns
Hospital Project), Series 1991A, 7.100%,
9/15/21 (Pre-refunded to 9/15/01)
- ----------------------------------------------------------------------------------------------------------
Utilities - 11.0%
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 1,178,033
1,535,000 0.000%, 11/15/13 No Opt. Call AAA 756,141
10,685,000 City of Cleveland, Ohio, Public Power System 11/01 at 102 AAA 11,781,388
Improvement, First Mortgage Revenue Bonds,
Series 1991B, 7.000%, 11/15/17
1,900,000 Cleveland Public Power System, 7.000%, 11/15/17 11/01 at 102 AAA 2,094,959
4,900,000 City of Cleveland, Ohio, Public Power System, 11/06 at 102 AAA 4,882,213
First Mortgage Revenue Refunding Bonds,
Series 1996, Sub-Series 1, 5.000%, 11/15/24
7,520,000 Ohio Municipal Electric Generation Agency 2/03 at 102 AAA 7,718,754
(American Municipal Power-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 1,919,558
7,000,000 6.250%, 12/01/20 6/03 at 102 Baa1 7,344,890
750,000 Ohio Air Quality Development Authority, 7/99 at 102 Baa3 776,310
Pollution Control Revenue Refunding Bonds,
1989 Series B (Ohio Edison Company Project),
7.625%, 7/01/23
5,900,000 Ohio Air Quality Development Authority, Air 8/99 at 102 Baa1 6,101,485
Quality Development Revenue Refunding Bonds
(Ohio Power Company Project), Series B, 7.400%,
8/01/09
2,000,000 Ohio Air Quality Development Authority, Pollution 3/00 at 102 AAA 2,125,640
Control Revenue Refunding Bonds, 1990 Series A
(Ohio Edison Company Project), 7.450%, 3/01/16
15,000,000 Ohio Air Quality Development Authority, Air 9/05 at 102 A+ 16,185,300
Quality Development Revenue Refunding Bonds,
1995 Series (The Dayton Power and Light
Company Project), 6.100%, 9/01/30
6,000,000 Ohio Air Quality Development Authority, Air 4/07 at 102 AAA 6,272,280
Quality Development Revenue Bonds (JMG
Funding, Limited Partnership Project) Series
1997, 5.625%, 1/01/23 (Alternative Minimum
Tax)
500,000 Ohio Water Development Authority, 8/02 at 102 AA- 538,590
Collateralized Water 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 7/99 at 102 Baa3 7,292,732
Control Revenue (Ohio Edison Company),
7.625%, 7/01/23
1,545,000 Puerto Rico Electric Power Authority, Power No Opt. Call BBB+ 623,763
Revenue Bonds, Series O, 0.000%, 7/01/17
</TABLE>
38
<PAGE> 207
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 $ 1,080,130
1,000,000 6.900%, 12/01/11 12/02 at 101 Baa1 1,084,490
3,000,000 County of Butler, Ohio, Sewer System Revenue 12/06 at 101 AAA 3,068,010
Bonds, Series 1996, 5.250%, 12/01/21
13,000,000 City of Cleveland, Ohio, Waterworks No Opt. Call AAA 14,183,520
Improvement, First Mortgage Refunding
Revenue Bonds, Series G, 1993,
5.500%, 1/01/21
5,000,000 City of Cleveland, Ohio, Waterworks Improvement 1/08 at 101 AAA 4,995,950
and Refunding 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 43,174
55,000 5.750%, 1/01/26 1/06 at 102 AAA 59,216
80,000 City of Cleveland, Ohio, Waterworks Revenue 1/02 at 102 AAA 87,078
Refunding Bonds, First Mortgage Series F,
1992-B, 6.500%, 1/01/11
1,600,000 County of Greene, Ohio, Water System Revenue 12/07 at 102 AAA 1,798,830
Bonds, Series 1996, 6.125%, 12/01/21
2,200,000 City of Greenville, Ohio (Darke County), 12/02 at 102 AAA 2,432,650
Wastewater System, First Mortgage Revenue
Bonds, Series 1992 (Governmental Enterprise
Revenue Bonds), 6.350%, 12/01/17
1,000,000 City of Hamilton, Ohio, Water System Mortgage 10/01 at 102 AAA 1,085,610
Revenue Bonds, 1991 Series A, 6.400%, 10/15/10
795,000 City of Huber Heights, Ohio, Water System No Opt. Call AAA 279,472
Revenue Bonds, Series 1995, 0.000%, 12/01/19
1,000,000 County of Montgomery, Ohio, Water Revenue Bonds, 11/02 at 102 AAA 1,101,207
Greater Moraine Beavercreek Sewer District,
Series 1992, 6.250%, 11/15/17
1,000,000 Mount Gilead, Ohio, Water System Revenue, First 12/02 at 102 N/R 1,078,868
Mortgage Bonds, 7.200%, 12/01/17
1,000,000 Ohio Water Development Authority, State of Ohio, 6/05 at 102 AAA 1,087,638
Water Development Revenue Bonds, 1995 Fresh
Water Series, 5.900%, 12/01/21
2,000,000 Ohio Water Development Authority, State of Ohio, 6/08 at 101 AAA 2,008,618
Water Development Revenue Bonds, Fresh Water
Series 1998, 5.125%, 12/01/23
750,000 Toledo, Ohio, Sewer System Revenue Mortgage 11/04 at 102 AAA 848,675
Bonds, 6.350%, 11/15/17
500,000 Toledo, Ohio, Waterworks Revenue Refunding 11/04 at 102 AAA 568,398
Mortgage Bonds, 6.450%, 11/15/24
- ----------------------------------------------------------------------------------------------------------
$661,410,000 Total Investments - (cost $630,502,682) - 97.7% 690,345,315
=============---------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 1.0%
5,500,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds (The Cleveland VMIG-1 5,500,000
Clinic Foundation), Series 1997D, Variable Rate Demand Bonds,
3.300%, 1/01/26+
1,300,000 Ohio Air Quality Development Authority, State of Ohio, Air VMIG-1 1,300,000
Quality Development Revenue Refunding Bonds
(The Cincinnati Gas and Electric Company Project),
1995 Series A, Variable Rate Demand Bonds, 3.250%, 9/01/30+
- ----------------------------------------------------------------------------------------------------------
$6,800,000 Total Temporary Investments - 1.0% 6,800,000
============----------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 9,795,026
----------------------------------------------------------------------------------------------
Net Assets - 100% $706,940,341
==============================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** 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.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified marked index.
See accompanying notes to financial statements.
39
<PAGE> 208
Statement of Net Assets (Unaudited)
November 30,1998
<TABLE>
<CAPTION>
Kentucky Kentucky Limited Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $498,596,440 $10,871,470 $348,556,233 $690,345,315
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- -- -- 6,800,000
Cash 862,106 121,498 -- --
Receivables:
Interest 7,137,471 160,021 5,383,364 12,932,218
Investments sold -- -- 1,985,000 1,469,863
Shares sold 683,708 8,473 160,722 786,710
Other assets 188,893 22,544 185,500 272,986
- ------------------------------------------------------------------------------------------------------------------------------
Total assets 507,468,618 11,184,006 356,270,819 712,607,092
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- -- 2,888,315 2,857,663
Payables:
Investments purchased -- -- 987,010 --
Shares redeemed 698,286 6 112,158 946,593
Accrued expenses:
Management fees (note 6) 220,836 1,760 154,847 304,741
12b-1 distribution and service fees (notes 1 and 6) 100,501 2,682 78,200 115,946
Other 92,415 13,699 24,470 165,041
Dividends payable 1,001,333 12,909 409,428 1,276,767
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,113,371 31,056 4,654,428 5,666,751
- ------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $505,355,247 $11,152,950 $351,616,391 $706,940,341
==============================================================================================================================
Class A Shares (note 1)
Net assets $466,860,435 $ 8,147,214 $269,790,676 $482,218,847
Shares outstanding 40,739,829 799,642 22,141,318 40,728,929
Net asset value and redemption price per share $ 11.46 $10.19 $12.18 $11.84
Offering price per share (net asset value per share plus maximum
sales charge of 4.20%, 2.50%, 4.20% and 4.20%, respectively,
of offering price) $ 11.96 $10.45 $12.71 $12.36
==============================================================================================================================
Class B Shares (note 1)
Net assets $ 6,554,245 N/A $ 6,057,441 $ 10,654,970
Shares outstanding 571,833 N/A 496,660 900,492
Net asset value, offering and redemption price per share $ 11.46 N/A $12.20 $11.83
==============================================================================================================================
Class C Shares (note 1)
Net assets $31,145,672 $2,987,159 $48,414,979 $ 48,820,003
Shares outstanding 2,720,086 293,307 3,979,336 4,126,526
Net asset value, offering and redemption price per share $ 11.45 $ 10.18 $ 12.17 $ 11.83
==============================================================================================================================
Class R Shares (note 1)
Net assets $ 794,895 $ 18,577 $27,353,295 $165,246,521
Shares outstanding 69,511 1,827 2,245,528 13,958,412
Net asset value, offering and redemption price per share $ 11.44 $ 10.17 $ 12.18 $ 11.84
==============================================================================================================================
</TABLE>
N/A -- Kentucky Limited is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
40
<PAGE> 209
Statement of Operations (Unaudited)
Six Months Ended November 30, 1998
<TABLE>
<CAPTION>
Kentucky Kentucky Limited Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (note 1) $14,220,259 $276,554 $10,031,519 $20,262,270
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 1,324,915 25,132 934,196 1,845,357
12b-1 service fees--Class A (notes 1 and 6) 459,785 8,411 267,346 478,714
12b-1 distribution and service fees--Class B (notes 1 and 6) 26,695 N/A 24,929 41,369
12b-1 distribution and service fees--Class C (notes 1 and 6) 111,322 7,541 176,369 179,076
Shareholders' servicing agent fees and expenses 133,793 15,898 66,925 213,262
Custodian's fees and expenses 51,341 6,365 40,548 72,146
Trustees' fees and expenses (note 6) 3,273 1,250 1,461 6,320
Professional fees 28,197 4,778 10,787 11,626
Shareholders' reports--printing and mailing expenses 40,558 3,397 39,768 62,314
Federal and state registration fees 3,024 1,670 12,464 47,218
Other expenses 15,157 224 12,877 20,820
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 2,198,060 74,666 1,587,670 2,978,222
Expense reimbursement (note 6) (946) (21,388) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses 2,197,114 53,278 1,587,670 2,978,222
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 12,023,145 223,276 8,443,849 17,284,048
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 529,074 22 707,767 618,529
Net change in unrealized appreciation or depreciation of investments 2,498,653 76,785 2,467,106 5,560,995
- ---------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 3,027,727 76,807 3,174,873 6,179,524
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $15,050,872 $300,083 $11,618,722 $23,463,572
=================================================================================================================================
</TABLE>
N/A--Kentucky Limited is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
41
<PAGE> 210
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Kentucky Kentucky Limited
------------------------------- --------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/98 5/31/98 11/30/98 5/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 12,023,145 $ 24,365,910 $ 223,276 $ 503,516
Net realized gain from investment
transactions (notes 1 and 4) 529,074 2,172,160 22 32,390
Net change in unrealized appreciation or
depreciation of investments 2,498,653 14,097,294 76,785 204,860
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 15,050,872 40,635,364 300,083 740,766
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (11,348,062) (22,954,811) (175,582) (409,988)
Class B (116,543) (102,552) N/A N/A
Class C (654,899) (1,254,173) (51,826) (94,041)
Class R (18,175) (32,294) (369) (590)
From accumulated net realized gains from investment
transactions:
Class A -- (1,984,678) -- --
Class B -- (10,705) N/A N/A
Class C -- (120,396) -- --
Class R -- (2,930) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (12,137,679) (26,462,539) (227,777) (504,619)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 31,533,618 47,501,865 909,884 3,676,589
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 6,148,078 15,618,317 103,616 312,624
- ------------------------------------------------------------------------------------------------------------------------------------
37,681,696 63,120,182 1,013,500 3,989,213
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (20,156,681) (48,645,223) (1,353,493) (3,818,637)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 17,525,015 14,474,959 (339,993) 170,576
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 20,438,208 28,647,784 (267,687) 406,723
Net assets at the beginning of period 484,917,039 456,269,255 11,420,637 11,013,914
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $505,355,247 $484,917,039 $11,152,950 $11,420,637
====================================================================================================================================
Balance of undistributed (over-distributed) net investment
income at end of period $ (89,519) $ 25,015 $ (3,515) $ 986
====================================================================================================================================
</TABLE>
N/A--Kentucky Limited is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
42
<PAGE> 211
Statement of Changes in Net Assets (Unaudited) (continued)
<TABLE>
<CAPTION>
Michigan Ohio
------------------------------------ -----------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/98 5/31/98 11/30/98 5/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 8,443,849 $ 16,864,427 $ 17,284,048 $ 35,243,212
Net realized gain from investment
transactions (notes 1 and 4) 707,767 1,595,690 618,529 4,967,956
Net change in unrealized appreciation or
depreciation of investments 2,467,106 10,225,980 5,560,995 16,619,119
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 11,618,722 28,686,097 23,463,572 56,830,287
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (6,590,187) (13,344,536) (11,831,218) (24,388,584)
Class B (108,941) (63,731) (181,379) (182,260)
Class C (1,033,844) (1,982,594) (1,059,467) (2,008,254)
Class R (700,582) (1,409,716) (4,206,068) (8,687,614)
From accumulated net realized gains from investment
transactions:
Class A -- (597,076) -- (1,996,392)
Class B -- (3,361) -- (16,956)
Class C -- (101,904) -- (178,327)
Class R -- (61,084) -- (681,846)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to
shareholders (8,433,554) (17,564,002) (17,278,132) (38,140,233)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 23,229,066 28,641,868 38,977,895 63,755,865
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 2,988,780 10,647,679 8,155,791 24,926,989
- -----------------------------------------------------------------------------------------------------------------------------------
26,217,846 39,289,547 47,133,686 88,682,854
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (17,851,213) (37,642,403) (35,876,914) (83,801,938)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share
transactions 8,366,633 1,647,144 11,256,772 4,880,916
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 11,551,801 12,769,239 17,442,212 23,570,970
Net assets at the beginning of period 340,064,590 327,295,351 689,498,129 665,927,159
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $351,616,391 $340,064,590 $706,940,341 $689,498,129
===================================================================================================================================
Balance of undistributed net investment income
at end of period $ 106,940 $ 96,645 $ 42,229 $ 36,313
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
43
<PAGE> 212
Notes to Financial Statements (Unaudited)
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 Kentucky Limited Term Municipal Bond Fund ("Kentucky
Limited"), 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.
The Board of Trustees has determined that it is in the best interests of
Kentucky Limited to be reorganized and combined with Kentucky. The
reorganization is subject to the approval of the shareholders of Kentucky
Limited at the shareholder meeting scheduled for April, 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
November 30, 1998, Michigan had an outstanding when-issued purchase commitment
of $987,010. There were no such outstanding purchase commitments in any 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 as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
44
<PAGE> 213
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. Net
realized capital gain and market discount distributions are subject to federal
taxation.
Flexible Sales Charge Program
Each Fund offers Class A, C and R Shares. Kentucky, Michigan and Ohio also offer
Class B 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 1%
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
for purchases of over $1 million and in other limited circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the six months ended November 30, 1998.
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.
45
<PAGE> 214
Notes to Financial Statements (Unaudited) (continued)
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Kentucky Kentucky Limited
-------------------------------------------------- ---------------------------------------------------
Six Months Ended 11/30/98 Year Ended 5/31/98 Six Months Ended 11/30/98 Year Ended 5/31/98
-------------------------------------------------- ---------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 2,154,111 $ 24,621,064 3,217,301 $ 36,434,351 26,491 $ 269,099 286,922 $ 2,892,341
Class B 196,943 2,248,423 323,485 3,657,888 N/A N/A N/A N/A
Class C 398,498 4,552,006 639,620 7,226,085 62,847 638,286 76,327 769,248
Class R 9,832 112,125 16,255 183,541 245 2,499 1,495 15,000
Shares issued to
shareholders due to
reinvestment of
distributions:
Class A 498,292 5,701,045 1,281,834 14,485,026 5,521 56,064 23,560 236,867
Class B 4,675 53,531 4,212 47,833 N/A N/A N/A N/A
Class C 34,149 390,252 94,246 1,063,652 4,654 47,200 7,475 75,229
Class R 283 3,250 1,937 21,806 35 352 52 528
- ------------------------------------------------------------------------------------------------------------------------------------
3,296,783 37,681,696 5,578,890 63,120,182 99,793 1,013,500 395,831 3,989,213
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,532,417) (17,504,249) (3,866,440) (43,715,326) (120,551) (1,221,426) (316,310) (3,201,570)
Class B (4,842) (55,420) (1,809) (20,440) N/A N/A N/A N/A
Class C (227,522) (2,596,906) (434,290) (4,909,457) (13,035) (131,963) (61,079) (617,067)
Class R (9) (106) -- -- (10) (104) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(1,764,790) (20,156,681) (4,302,539) (48,645,223) (133,596) (1,353,493) (377,389) (3,818,637)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,531,993 $ 17,525,015 1,276,351 $ 14,474,959 (33,803) $ (339,993) 18,442 $ 170,576
====================================================================================================================================
N/A - Kentucky Limited is not authorized to issue Class B Shares.
</TABLE>
<TABLE>
<CAPTION>
Michigan Ohio
-------------------------------------------------- --------------------------------------------------
Six Months Ended 11/30/98 Year Ended 5/31/98 Six Months Ended 11/30/98 Year Ended 5/31/98
-------------------------------------------------- --------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 1,243,068 $ 15,074,575 1,390,245 $ 16,660,336 2,260,899 $ 26,641,983 3,219,388 $ 37,568,749
Class B 190,340 2,312,184 287,386 3,449,240 267,834 3,158,285 516,543 6,021,505
Class C 410,801 4,972,911 589,706 7,052,332 396,096 4,669,443 995,368 11,636,371
Class R 72,508 869,396 123,751 1,479,960 383,014 4,508,184 730,018 8,529,240
Shares issued to
shareholders due to
reinvestment of
distributions:
Class A 176,834 2,144,540 678,487 8,087,898 407,200 4,800,687 1,424,465 16,558,328
Class B 3,578 43,483 2,834 34,056 7,108 83,807 9,946 116,135
Class C 27,717 335,737 127,033 1,512,300 32,878 387,188 139,502 1,619,985
Class R 38,302 465,020 84,732 1,013,425 244,539 2,884,109 569,608 6,632,541
- -----------------------------------------------------------------------------------------------------------------------------------
2,163,148 26,217,846 3,284,174 39,289,547 3,999,568 47,133,686 7,604,838 88,682,854
- -----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,115,170) (13,520,672) (2,418,756) (28,925,631) (2,229,600) (26,304,956) (4,938,984) (57,591,525)
Class B (14,881) (180,734) (5,100) (61,520) (7,132) (83,809) (38,316) (446,171)
Class C (249,090) (3,006,501) (498,829) (5,971,586) (312,607) (3,679,831) (692,246) (8,051,008)
Class R (93,795) (1,143,306) (224,782) (2,683,666) (493,630) (5,808,318) (1,520,403) (17,713,234)
- -----------------------------------------------------------------------------------------------------------------------------------
(1,472,936) (17,851,213) (3,147,467) (37,642,403) (3,042,969) (35,876,914) (7,189,949) (83,801,938)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase 690,212 $ 8,366,633 136,707 $ 1,647,144 956,599 $ 11,256,772 414,889 $ 4,880,916
===================================================================================================================================
</TABLE>
46
<PAGE> 215
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on December 21, 1998, to shareholders of record on
December 9, 1998, as follows:
<TABLE>
<CAPTION>
Kentucky
Kentucky Limited Michigan Ohio
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $.0465 $.0350 $.0500 $.0480
Class B .0395 N/A .0425 .0410
Class C .0415 .0320 .0445 .0430
Class R .0485 .0370 .0520 .0500
================================================================================
N/A - Kentucky Limited is not authorized to issue Class B Shares.
</TABLE>
The following Funds also declared taxable distributions, which includes capital
gains and/or market discount, which were paid on December 7, 1998, to
shareholders of record on December 2, 1998, as follows:
<TABLE>
<CAPTION>
Kentucky Michigan Ohio
- -------------------------------------------------
<S> <C> <C> <C>
Taxable distributions
per share: $.0237 $.0565 $.0447
=================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended November
30, 1998, were as follows:
<TABLE>
<CAPTION>
Kentucky
Kentucky Limited Michigan Ohio
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Investments in municipal
securities $40,399,667 $ -- $27,054,181 $32,900,914
Temporary municipal
investments 22,550,000 650,000 12,300,000 32,400,000
Sales:
Investments in municipal
securities 22,892,065 265,000 22,457,448 30,815,013
Temporary municipal
investments 24,550,000 650,000 12,300,000 25,600,000
================================================================================
</TABLE>
At November 30, 1998, 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, 1998, the Funds' last fiscal year end, Kentucky Limited had unused
capital loss carryforwards of $70,735 available for federal income tax purposes
to be applied against future capital gains, if any. If not applied, $135 of the
carryforward will expire in the year 2004 and $70,600 of the carryforward will
expire in the year 2005.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at November 30, 1998, were as follows:
<TABLE>
<CAPTION>
Kentucky
Kentucky Limited Michigan Ohio
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $40,444,093 $402,845 $32,877,510 $59,849,151
depreciation -- (4,997) (32,262) (6,518)
- --------------------------------------------------------------------------------
Net unrealized appreciation $40,444,093 $397,848 $32,845,248 $59,842,633
================================================================================
</TABLE>
47
<PAGE> 216
Notes to Financial Statements (Unaudited) (continued)
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Kentucky, Michigan & Ohio
Average Daily Net Asset Value Management Fee
- -------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
===============================================================================
Kentucky Limited
Average Daily Net Asset Value Management Fee
- -------------------------------------------------------------------------------
For the first $125 million .4500 of 1%
For the next $125 million .4375 of 1
For the next $250 million .4250 of 1
For the next $500 million .4125 of 1
For the next $1 billion .4000 of 1
For net assets over $2 billion .3750 of 1
===============================================================================
</TABLE>
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 six months ended November 30, 1998, the Distributor collected sales
charges on purchases of Class A Shares, the majority of which were paid out as
concessions to authorized dealers. 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.
During the six months ended November 30, 1998, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Kentucky
Kentucky Limited Michigan Ohio
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commission advances $207,531 $5,975 $179,242 $233,334
=======================================================================
</TABLE>
48
<PAGE> 217
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares, except for Kentucky Limited, during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, except
for Kentucky Limited, and all 12b-1 service and distribution fees on Class C
Shares during the first year following a purchase are retained by the
Distributor. Kentucky Limited is not authorized to issue Class B Shares. During
the six months ended November 30, 1998, the Distributor retained such 12b-1 fees
as follows:
<TABLE>
<CAPTION>
Kentucky
Kentucky Limited Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12b-1 fees retained $ 59,709 $ 1,849 $ 64,040 $ 91,526
====================================================================================================================================
</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
six months ended November 30, 1998, as follows:
<TABLE>
<CAPTION>
Kentucky
Kentucky Limited Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CDSC retained $ 5,374 $ 178 $ 6,630 $ 12,085
====================================================================================================================================
</TABLE>
7. Composition of Net Assets
At November 30, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Kentucky
Kentucky Limited Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $ 463,802,902 $ 10,829,422 $ 317,462,479 $ 644,429,855
Balance of undistributed (over-distributed) net investment income (89,519) (3,515) 106,940 42,229
Accumulated net realized gain (loss) from investment transactions 1,197,771 (70,805) 1,201,724 2,625,624
Net unrealized appreciation of investments 40,444,093 397,848 32,845,248 59,842,633
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $ 505,355,247 $ 11,152,950 $ 351,616,391 $ 706,940,341
====================================================================================================================================
</TABLE>
49
<PAGE> 218
EXHIBIT A
---------
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date) Investment Operations Less Distributions
--------------------------------- ---------------------------
Net
Realized/ Net Ending
Beginning Net Unrealized Invest- Net
Year Ended Net Asset Investment Investment ment Capital Asset Total
May 31, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KENTUCKY**
Class A (5/87)
1999 (d) $11.39 $.28 $ .07 $ .35 $(.28) $ -- $(.28) $11.46 3.13%
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
1994 11.06 .62 (.40) .22 (.63) -- (.63) 10.65 1.90
Class B (2/97)
1999 (d) 11.39 .24 .07 .31 (.24) -- (.24) 11.46 2.75
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 (d) 11.38 .25 .07 .32 (.25) -- (.25) 11.45 2.86
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
1994 (c) 11.46 .36 (.81) (.45) (.36) -- (.36) 10.65 (5.88)*
Class R (2/97)
1999 (d) 11.37 .29 .08 .37 (.30) -- (.30) 11.44 3.24
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
- ---------------------------------------------------------------------------------------------------------------------
KENTUCKY LIMITED***
Class A (9/95)
1999 (d) $10.12 $.21 $ .07 $ .28 $(.21) $ -- $(.21) $10.19 2.80%
1998 9.92 .44 .20 .64 (.44) -- (.44) 10.12 6.53
1997 9.79 .45 .12 .57 (.44) -- (.44) 9.92 5.96
1996 (c) 9.75 .31 .04 .35 (.31) -- (.31) 9.79 5.45*
Class C (9/95)
1999 (d) 10.12 .19 .06 .25 (.19) -- (.19) 10.18 2.52
1998 9.92 .40 .20 .60 (.40) -- (.40) 10.12 6.17
1997 9.79 .41 .13 .54 (.41) -- (.41) 9.92 5.64
1996 (c) 9.75 .29 .04 .33 (.29) -- (.29) 9.79 5.12*
Class R (2/97)
1999 (d) 10.10 .22 .07 .29 (.22) -- (.22) 10.17 2.93
1998 9.92 .46 .18 .64 (.46) -- (.46) 10.10 6.58
1997 (c) 9.98 .15 (.10) .05 (.11) -- (.11) 9.92 .56
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------
Ratio of Net
Ratio of Investment Ratio of Ratio of Net
Expenses to Income to Expenses Investment
Average Net Average Net to Average Income to Average Portfolio
Year Ended Ending Net Assets Before Assets Before Net Assets After Net Assets After Turnover
May 31, Assets (000) Reimbursement Reimbursement Reimbursement (a) Reimbursement (a) Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KENTUCKY**
Class A (5/87)
1999 (d) $466,860 .85%* 4.89%* .85%* 4.89%* 5%
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
1994 369,495 1.03 5.15 .58 5.60 12
Class B (2/97)
1999 (d) 6,554 1.59* 4.13* 1.59* 4.13* 5
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 (d) 31,146 1.40* 4.34* 1.40* 4.34* 5
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
1994 (c) 11,172 1.65* 4.39* 1.08* 4.96* 12
Class R (2/97)
1999 (d) 795 .65* 5.09* .65* 5.09* 5
1998 675 .64 5.31 .58 5.37 12
1997 (c) 455 .64* 5.62* .49* 5.77* 13
- ----------------------------------------------------------------------------------------------------------------------
KENTUCKY LIMITED***
Class A (9/95)
1999 (d) $ 8,147 1.25%* 3.70%* .87%* 4.08%* --%
1998 8,989 1.34 3.67 .66 4.35 36
1997 8,870 1.68 3.37 .53 4.52 56
1996 (c) 8,389 1.67* 3.07* .37* 4.37* 48
Class C (9/95)
1999 (d) 2,987 1.60* 3.35* 1.22* 3.73* --
1998 2,416 1.69 3.32 1.01 4.00 36
1997 2,144 2.00 3.03 .84 4.19 56
1996 (c) 1,767 1.98* 2.78* .64* 4.12* 48
Class R (2/97)
1999 (d) 19 1.05* 3.90* .67* 4.28* --
1998 16 1.13 3.87 .46 4.54 36
1997 (c) -- .86* 4.87* -- 5.73* 56
======================================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kentucky.
*** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kentucky Limited.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
(d) For the six months ended November 30, 1998.
50
<PAGE> 219
<TABLE>
<CAPTION>
Financial Highlights (Unaudited) (continued)
Selected data for a share outstanding throughout each period is as follows:
Class (Inception Date) Investment Operations Less Distributions
--------------------------------- ---------------------------
Net
Realized/ Net Ending
Net Unrealized Invest- Net
Year Ended Beginning Net Investment Investment ment Capital Asset Total
May 31, Asset Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MICHIGAN**
CLASS A (6/85)
1999(d) $ 12.07 $ .30 $ .11 $ .41 $ (.30) $ -- $ (.30) $ 12.18 3.43%
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
1994 11.77 .66 (.43) .23 (.66) (.03)+ (.69) 11.31 1.87
CLASS B (2/97)
1999(d) 12.09 .26 .11 .37 (.26) -- (.26) 12.20 3.04
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(d) 12.06 .27 .11 .38 (.27) -- (.27) 12.17 3.15
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
1994(c) 11.86 .54 (.52) .02 (.55) (.03)+ (.58) 11.30 .19*
CLASS R (2/97)
1999(d) 12.07 .31 .11 .42 (.31) -- (.31) 12.18 3.53
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
- ---------------------------------------------------------------------------------------------------------------------
OHIO***
CLASS A (6/85)
1999(d) $ 11.74 $ .29 $ .10 $ .39 $ (.29) $ -- $ (.29) $ 11.84 3.37%
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
1994 11.59 .64 (.38) .26 (.64) -- (.64) 11.21 2.24
CLASS B (2/97)
1999(d) 11.73 .25 .10 .35 (.25) -- (.25) 11.83 3.01
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(d) 11.73 .26 .10 .36 (.26) -- (.26) 11.83 3.11
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
1994(c) 11.69 .46 (.49) (.03) (.46) -- (.46) 11.20 (.17)*
CLASS R (2/97)
1999(d) 11.73 .30 .11 .41 (.30) -- (.30) 11.84 3.56
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
------------------------------------------------------------------------------------------------
Ratio of Net
Ratio of Investment Ratio of Ratio of Net
Expenses to Income to Expenses Investment
Average Net Average Net to Average Income to Average Portfolio
Year Ended Ending Net Assets Before Assets Before Net Assets After Net Assets After Turnover
May 31, Assets (000) Reimbursement Reimbursement Reimbursement (a) Reimbursement (a) Rate
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MICHIGAN**
CLASS A (6/85)
1999(d) $ 269,791 .85%* 4.94%* .85%* 4.94%* 7%
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
1994 242,993 1.02 5.29 .75 5.56 28
CLASS B (2/97)
1999(d) 6,057 1.60* 4.19* 1.60* 4.19* 7
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(d) 48,415 1.40* 4.39* 1.40* 4.39* 7
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
1994(c) 30,042 1.61* 4.53* 1.25* 4.89* 28
CLASS R (2/97)
1999(d) 27,353 .65* 5.14* .65* 5.14* 7
1998 26,904 .64 5.31 .64 5.31 13
1997(c) 26,211 .65* 5.57* .65* 5.57* 34
- -----------------------------------------------------------------------------------------------------------------------------
OHIO***
CLASS A (6/85)
1999(d) $ 482,219 .85%* 4.95%* .85%* 4.95%* 4%
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
1994 445,272 1.02 5.39 .93 5.48 9
CLASS B (2/97)
1999(d) 10,655 1.61* 4.20* 1.61* 4.20* 4
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(d) 48,820 1.40* 4.40* 1.40* 4.40* 4
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
1994(c) 25,674 1.60* 4.65* 1.46* 4.79* 9
CLASS R (2/97)
1999(d) 165,247 .65* 5.15* .65* 5.15* 4
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 Michigan.
*** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Ohio.
+ The amount shown includes a distribution in excess of capital gains
of $.02 per share.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
(d) For the six months ended November 30, 1998.
51
<PAGE> 220
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
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
Building a Better Portfolio Can Make You a Successful Investor
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
investment-grade 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> 221
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
53
<PAGE> 222
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR., APPEARS HERE]
John Nuveen, Sr.
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 focused on providing consistent, attractive
performance over time. 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 current 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 equity,
balanced, and tax-free income 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.
1898
NUVEEN
1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime.(SM)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VSA-5-11-98
<PAGE> 223
NUVEEN
Municipal
Bond Funds
May 31, 1998
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Kentucky
Kentucky
Limited
Michigan
Ohio
<PAGE> 224
Highlights
As of May 31, 1998
For Class A shares on net asset value
Credit Quality Performance Highlights
Nuveen Flagship Kentucky Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 52% . Taxable equivalent yield of 6.61%*
AA 6% . Outperformed Lipper peer group average
for the one-year period
A 24% . One-year total return of 9.00%
BBB/NR 18%
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 45% . Steady dividend for 12 consecutive months
AA 19% . Outperformed Lipper peer group average
for the one-year period
A 25% . One-year total return of 6.53%
BBB/NR 11%
Nuveen Flagship Michigan Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 54% . Taxable equivalent yield of 6.48%*
AA 19% . Outperformed Lipper peer group average
for the one-year period
A 14% . One-year total return of 8.95%
BBB/NR 13%
Nuveen Flagship Ohio Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 68% . Taxable equivalent yield of 6.14%*
AA 7% . Outperformed Lipper peer group average
for the one-year period
A 12% . One-year total return of 8.76%
BBB/NR 13%
Contents
1 Dear Shareholder
4 Kentucky Commentary
and Overview
6 Kentucky Limited Term
Commentary and Overview
8 Michigan Commentary
and Overview
10 Ohio Commentary
and Overview
12 Report of Independent
Public Accountants
13 Portfolio of Investments
40 Statement of Net Assets
41 Statement of Operations
42 Statement of Changes in Net Assets
44 Notes to Financial Statements
51 Financial Highlights
56 Building Better Portfolios
57 Fund Information
* For investors in the 31% federal and applicable state income tax bracket.
See your fund's performance overview in this report for more information.
<PAGE> 225
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
I'm pleased to share with you this performance report for your Nuveen municipal
bond fund. Over the past 12 months, each of the funds in this report continued
to perform well and meet their objectives of providing you with attractive tax-
free income and strong after-tax total returns.
For many of our shareholders, this annual report represents the first time you
have received a consolidated report covering performance data for other Nuveen
funds in addition to your own. These consolidated reports are part of our
continuing efforts to control fund expenses; we achieve greater economies of
scale for our shareholders through reducing paper, printing and mailing costs.
By consolidating reports by region and incorporating several funds into one
booklet, we have lowered these administrative expenses and made owning shares in
a Nuveen fund more cost-efficient for you.
The Economy in Review
Fixed-income investments enjoyed bullish performance over the past year, as
declining interest rates and low inflation spurred a bond market rally.
The equity markets also exhibited continued strength despite recent volatility
sparked by Asia's financial problems and their possible effects on U.S.
corporate earnings. Although interest rates have trended slightly upward in
recent months, a year-to-date comparison shows that today's rates are
significantly lower than they were one year ago. As shown in the accompanying
chart, between the end of May 1997 and May 1998, the yield on the Bond Buyer 40,
an unmanaged index of long-term municipal bonds, fell from 5.74% to 5.22%.
Much of the decline in interest rates resulted from expectations that the
financial problems of Asia would restrain the prices of imported goods and
reduce foreign demand for U.S. products and services, thereby keeping inflation
at moderate levels. These inflation expectations were largely fulfilled, as the
Consumer Price Index rose only 1.5% for the 12 months ended May 1998, remaining
at one of
1
<PAGE> 226
"Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality
of many municipal bonds."
its lowest levels in years. The Asian situation also provided additional
strength to the bond market rally, as many investors made a "flight to quality"
by moving assets into high-quality U.S. bonds in the face of the uncertainty in
that region.
In coming months, we will continue to watch closely several key factors that are
likely to affect the future of the economy, including the demand for goods and
services, the availability of qualified employees, the strength of the dollar,
and indications from the Federal Reserve. With many investors still waiting for
the full impact of Asia's difficulties to show up in U.S. economic statistics,
the potential long-term effect of this crisis on American markets continues to
cause concern. We expect that the development of these factors will continue to
influence the tone of the fixed-income markets during the remainder of the year.
Municipal Market Review
As interest rates continued to decline over the past year, bond prices rose.
This price appreciation for the bonds in our portfolios contributed to strong
total returns for the year.
Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality of
many municipal bonds. With the improvements in the fundamental financial health
of many municipalities and revenue projects financed by bonds, major credit
rating agencies upgraded the credit quality of thousands of issuers over the
past year, while downgrading relatively few. These boosts in credit quality also
contributed to the funds' performance as upgraded bonds increased in value.
The combination of low interest rates and a strong economy set new issuance on a
record pace and stimulated a dramatic increase in the refinancing of existing
bonds as issuers sought to lower their interest costs. The first quarter of 1998
saw $68 billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued with May's long-awaited sale of the first
segment of Long Island (New York) Power Authority's $7 billion offering, the
largest issuance in municipal bond history. Although the nationwide supply of
municipal bonds remained heavy, the supply of bonds in each state varied
according to local economic conditions. This level of issuance highlights the
value of Nuveen's expertise in the municipal market, as our portfolio management
teams worked diligently to sift through the available issues to select those
undervalued securities that would help the funds achieve their investment
objectives.
2
<PAGE> 227
"Today, more than ever, you can count on Nuveen for a wide range of investments
that can help you build a well-balanced portfolio designed to achieve your
financial goals."
Diversification: The Key to a Better Portfolio
In view of current market conditions, we believe that investors will find
diversification to be an increasingly important investment strategy in the
months ahead. An appropriately diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can help
cushion your portfolio against volatility and enhance your return potential.
Many investors select Nuveen's municipal bond funds because their emphasis on
dependable tax-free income and attractive after-tax returns makes them ideal for
building and sustaining long-term financial security. These funds also work well
with other Nuveen investments to create the foundation of a diversified, well-
balanced portfolio. In fact, recent studies by Nuveen Research have found that
portfolios combining municipal bonds and stocks generated higher after-tax
returns with lower levels of risk than similar portfolios combining stocks and
Treasury or corporate bonds.
We encourage you to talk to your financial adviser about Nuveen's range of
equity and balanced funds, including the Nuveen European Value Fund. This new
equity mutual fund offers a portfolio of quality European company stocks for
investors seeking long-term growth potential and international diversification.
The fund is just one of an ever-expanding range of Nuveen products and services
designed to help investors achieve diversification while building a tax-
efficient, risk-sensitive investment portfolio. If you'd like to learn more
about the Nuveen European Value Fund or any of our other investments, contact
your financial adviser or call Nuveen Investor Services at (800) 257-8787 for a
prospectus. Please read the information carefully before you invest.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of Nuveen. Today, more than ever, you can count
on Nuveen for a wide range of investments that can help you build a well-
balanced portfolio designed to achieve your financial goals. We thank you for
your continued confidence in us and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1998
3
<PAGE> 228
Nuveen Flagship Kentucky Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses fund performance, the municipal market,
and key investment strategies for the Kentucky fund.
Comments cover the one-year period ended May 31, 1998 and all performance
statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Kentucky's stable financial and economic conditions continued through the first
half of 1998, as recognized by the state's AA credit rating from Standard &
Poor's. Although Kentucky has not issued general obligation debt since 1965, the
state actively issues appropriation-secured debt from several different
agencies--all of which totaled $3 billion in issuance at fiscal year-end.
The commonwealth's new issue volume was up almost 15% during the first quarter
of 1998. Municipal bond investors anticipate a number of statewide projects
authorized for the 1996-1998 biennium, including $103 million of new debt to
fund new juvenile detention centers, state parks, and university projects. In
spite of this increased supply, good values were hard to find, as yield spreads
remained narrow between lower- and higher-rated securities.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Kentucky Municipal Bond Fund was 9.00%, which is equivalent to a taxable return
of 11.93% for investors in the 35.1% combined federal and state income tax
bracket. The fund slightly underperformed the annual return of 9.38% posted by
the Lehman Brothers Municipal Bond Index, but surpassed its Lipper peer group
average of 8.55%. The discrepancy between the national Lehman Index and the
Lipper peer group average of Kentucky municipal bond funds highlights the
effects of the tight supply of long-term bonds in the Kentucky market. The
limited supply and high demand keep bond prices high and yields low compared
with other states that have better bond supplies to meet investor demand.
The fund maintained a portfolio duration similar to its benchmark (a 6.41
duration), which helped keep its performance in line with its peers despite the
difficulty in finding value in the market. Duration is a measure of the fund's
price volatility in relation to changes in interest rates.
Key Strategies
We worked during the year to improve the fund's diversification among different
sectors of the market and investment-grade credit quality levels. To that end,
we focused on reducing the fund's holdings in the health care sector, and at the
same time found attractive opportunities in some bonds issued by U.S.
territories (which are exempt from both federal and Kentucky state income
taxes). We also moved to improve the portfolio's protection against bond calls,
which decreases the likelihood that higher-paying bonds will be called away if
interest rate conditions change.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's key sectors were limited tax obligation and
health care bonds, each of which comprised 23% of the portfolio. Other important
areas included utility bonds at 10% and U.S. guaranteed bonds at 9%.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Tom O'Shaughnessy assumed management responsibilities
for this fund. Tom is a 15-year veteran of Nuveen and an experienced investment
professional who has managed a range of other municipal bond funds.
Tom and his team anticipate a continued healthy state economy, which might
translate into strong bond supply in late 1998 or 1999. Until lower-rated bonds
offer more competitive yields, they will continue to seek value from small,
higher-rated bond issues. At the same time, they will continue to reduce the
fund's holdings in the health care sector and, in the event that bond supplies
and yield spreads improve, will attempt to extend portfolio duration somewhat.
4
<PAGE> 229
<TABLE>
<CAPTION>
Nuveen Flagship Kentucky Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
<S> <C>
0.0495 6/97
0.0495 7/97
0.0495 8/97
0.0495 9/97
0.0495 10/97
0.0495 11/97
0.0495 12/97
0.0475 1/98
0.0475 2/98
0.0475 3/98
0.0475 4/98
0.0475 5/98
</TABLE>
<TABLE>
<CAPTION>
Top 5 Sectors
<S> <C>
Tax Obligation (Limited) 23%
Health Care 23%
Utilities 10%
U.S. Guaranteed 9%
Water and Sewer 6%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 5/87 2/97 10/93 2/97
Net Asset Value $11.39 $11.39 $11.38 $ 11.37
Fund Net Assets ($000) $484,917
Average Weighted Maturity (Years) 20.33
Average Weighted Duration (Years) 6.41
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 9.00% 4.46% 8.10% 8.43% 9.25%
5-Year 6.40% 5.50% 5.77% 5.81% 6.43%
10-Year 8.45% 7.98% 7.97% 7.85% 8.46%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 5.00% 4.79% 4.27% 4.48% 5.22%
SEC 30-Day Yield 4.29% 4.11% 3.55% 3.75% 4.49%
Taxable Equivalent Yield/3/ 6.61% 6.33% 5.47% 5.78% 6.92%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Index Comparison/4/
NUVEEN FLAGSHIP KENTUCKY NUVEEN FLAGSHIP KENTUCKY LEHMAN BROTHERS
MUNICIPAL BOND FUND (NAV) MUNICIPAL BOND OFFER (OFFER) MUNICIPAL BOND INDEX
<S> <C> <C> <C>
5/88 10,000 9,580 10,000
5/89 11,415 10,936 11,149
5/90 12,143 11,633 11,965
5/91 13,403 12,840 13,171
5/92 14,677 14,060 14,466
5/93 16,497 15,804 16,195
5/94 16,813 16,107 16,595
5/95 18,397 17,625 18,107
5/96 19,141 18,337 18,934
5/97 20,645 19,778 20,505
5/98 22,501 21,556 22,430
</TABLE>
Lehman Brothers Municipal Bond Index $22,430
Nuveen Flagship Kentucky Municipal Bond Fund (NAV) $22,501
Nuveen Flagship Kentucky Municipal Bond Fund (Offer) $21,556
Past performance is not predictive of future results.
1 The fund also paid shareholders taxable distributions in December of
$0.0508 per share.
2 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.
3 Based on SEC yield and a combined federal and state income tax rate of
35.1%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
4 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.
5
<PAGE> 230
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses fund performance, the municipal market,
and key investment strategies for the Kentucky Limited fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Kentucky's stable financial and economic conditions continued through the first
half of 1998, as recognized by the state's AA credit rating from Standard &
Poor's. Although Kentucky has not issued general obligation debt since 1965, the
state actively issues appropriation-secured debt from several different
agencies--all of which totaled $3 billion in issuance at fiscal year-end.
The commonwealth's new issue volume was up almost 15% during the first quarter
of 1998. Kentucky municipal bond investors anticipate a number of statewide
projects authorized for the 1996-1998 biennium, including $103 million of new
debt to fund new juvenile detention centers, state parks, and university
projects. In spite of this increased supply, good values were hard to find, as
yield spreads remained narrow between lower- and higher-rated securities.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Kentucky Limited Term Municipal Bond Fund was 6.53%, which is equivalent to a
taxable return of 8.97% for investors in the 35.1% combined federal and state
income tax bracket. The total return was in line with the annual return of 6.69%
posted by the unmanaged Lehman Brothers Five-Year Municipal Bond Index, and
surpassed the Lipper peer group average return of 5.71% for the short-
intermediate term municipal bond funds in the "other states" category. In
addition, the fund provided a competitive taxable equivalent yield of 6.01% for
investors in the 35.1% combined federal and state income tax bracket, and
maintained a steady dividend throughout the period.
Key Strategies
We worked this year to extend the fund's duration, a strategy that helped the
fund outperform its peers. Duration is a measure of the fund's price volatility
in relation to changes in interest rates. The fund's duration of 5.0 years was
longer than the Lehman Five-Year Municipal Bond Index's average duration of 4.05
years. The longer duration allowed the fund to better participate in this year's
market rally, although it would have been more adversely affected had there been
a market downturn. At the same time, we worked to improve the fund's
diversification among different sectors of the market and investment-grade
credit quality levels. To that end, we reduced the fund's holdings in the health
care sector, and at the same time found unique opportunities in the housing
sector.
In addition, we felt that high demand for bonds in the middle of the limited-
term maturity range reduced the selection of good values among those issues.
Instead, we sought attractive opportunities in longer-maturity bonds when
possible.
As of May 31, 1998, the fund was focused on two primary sectors: health care
(23%) and limited tax obligation bonds (22%). Other key holdings included
education and civic organization bonds at 14% and multifamily housing bonds at
10%.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Tom O'Shaughnessy assumed management responsibilities
for this fund. Tom is a 15-year veteran of Nuveen and an experienced investment
professional who has managed a range of other state and national municipal bond
funds.
Tom and his team anticipate a continued healthy state economy, which might
translate into strong bond supply in late 1998 or 1999. Until lower-rated bonds
offer more competitive yields, they will continue to seek value from small,
higher-rated bond issues. They believe the fund is well-positioned for the
coming year, although they will work toward reducing the fund's duration
slightly. At the same time, they expect the fund's steady cash flow to continue,
which will allow them to take advantage of good values and uncommon
opportunities that arise in the market.
6
<PAGE> 231
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
0.0365 6/97
0.0365 7/97
0.0365 8/97
0.0365 9/97
0.0365 10/97
0.0365 11/97
0.0365 12/97
0.0365 1/98
0.0365 2/98
0.0365 3/98
0.0365 4/98
0.0365 5/98
<TABLE>
<CAPTION>
Top 5 Sectors
<S> <C>
Health Care 23%
Tax Obligation (Limited) 22%
Education and Civic Organizations 14%
Housing (Multifamily) 10%
Transportation 9%
- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A C R
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Inception Date 9/95 9/95 2/97
Net Asset Value $10.12 $10.12 $ 10.10
Fund Net Assets ($000) $11,421
Average Weighted Maturity (Years) 6.11
Average Weighted Duration (Years) 5.00
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
Share Class A(NAV) A(Offer) C R
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-Year 6.53% 3.92% 6.17% 6.58%
Since Inception 6.05% 5.07% 5.71% 6.09%
- ----------------------------------------------------------------------
Tax-Free Yields
Share Class A(NAV) A(Offer) C R
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distribution Rate 4.33% 4.22% 3.97% 4.57%
SEC 30-Day Yield 3.90% 3.80% 3.55% 4.10%
Taxable Equivalent Yield/2/ 6.01% 5.86% 5.47% 6.32%
- ----------------------------------------------------------------------
</TABLE>
Index Comparison/3/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers
Nuveen Flagship Kentucky Nuveen Flagship Kentucky Five-Year
Limited Term Municipal Bond Limited Term Municipal Bond Municipal Bond
Fund (NAV) Fund (Offer) Index
<S> <C> <C> <C>
9/95 10000 9750 10000
5/96 10308 10050 10201
5/97 10921 10648 10812
5/98 11634 11343 11537
</TABLE>
Lehman Brothers Five-Year Municipal Bond Index $11,537
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund (NAV) $11,634
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund (Offer) $11,343
Past performance is not predictive of future results.
1 Class A share returns are actual. Class 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 2.5% maximum sales charge. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of 35.1%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
3 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
Five-Year 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 (2.5%) and all ongoing fund
expenses.
7
<PAGE> 232
Nuveen Flagship Michigan Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Mike Davern discusses fund performance, the municipal market,
and key investment strategies for the Michigan fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Michigan's economy has remained healthy throughout 1997 and thus far in 1998,
resulting in credit upgrades for the state's general obligation debt by all
three major debt rating agencies. The upgrades were due in part to Michigan's
accumulated Budget Stabilization Fund reserves, which exceeded $1.2 billion in
1997. These reserves should provide a cushion against future economic downturns,
which are possible because of Michigan's continuing dependence on the cyclical
automobile manufacturing industry. Due in part to the strong national economy,
the state's unemployment rate has been lower than the national average for four
consecutive years, and per capita income has surpassed national averages for the
past two years.
Education spending remains Michigan's priority, with total state and local
funding for schools projected to grow to approximately $12 billion by 1999 - a
50% increase since 1990. Michigan's overall debt burden is manageable, despite a
doubling of new issuance volume during the first quarter of 1998. Investors can
expect additional debt issuance to fund the Michigan Department of
Transportation's Build Michigan II program, which is designed to finance the
rebuilding of the state's roads and bridges.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Michigan Municipal Bond Fund was 8.95%, which is equivalent to a taxable return
of 11.69% for investors in the 34% combined federal and state income tax
bracket. The total return was in line with the annual return of 9.38% posted by
the Lehman Brothers Municipal Bond Index, and surpassed the average return of
8.72% for the peer group of Michigan municipal bond funds tracked by Lipper
Analytical Service, a nationally recognized performance measurement service. In
addition, the fund provided a competitive yield of 4.28%, which is Equivalent
to a taxable yield of 6.48% for investors in the 34% combined federal and state
income tax bracket.
Key Strategies
There were several elements contributing to the fund's performance during the
past year. First was the Michigan fund's conservative structure and shorter
portfolio duration going into the year, which kept the fund largely in line with
its peer group. Duration is a measure of the fund's price volatility in relation
to changes in interest rates. To offset its shorter duration, we focused on
maintaining longer call protection, avoiding issues that would hinder portfolio
performance by being called away because of a near-term change in interest
rates. Education bonds were plentiful this past year, while hospital bonds were
comparatively scarce. Nonetheless, we found good value in both areas in the past
year.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were weighted toward health care
issues, which represented 24% of the portfolio. Other key sectors included U.S.
guaranteed bonds representing 17% of the portfolio, 16% in limited tax
obligation issues, and another 16% in general tax obligation issues.
Outlook for the Future
Going forward, we expect conditions in which we can lengthen the duration of the
portfolio and enhance its already favorable call protection. Higher-quality
issues will continue to dominate the portfolio, because lower-rated securities
currently provide little reward for assuming the additional credit risk.
Overall, we will continue to maintain the fund's current healthy
diversification, which should be aided by continuing strong supply.
8
<PAGE> 233
Nuveen Flagship Michigan Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
0.051 6/97
0.051 7/97
0.051 8/97
0.051 9/97
0.051 10/97
0.051 11/97
0.051 12/97
0.05 1/98
0.05 2/98
0.05 3/98
0.05 4/98
0.05 5/98
Top 5 Sectors
Health Care 24%
U.S. Guaranteed 17%
Tax Obligation (General) 16%
Tax Obligation (Limited) 16%
Water and Sewer 6%
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception Date 6/85 2/97 6/93 2/97
Net Asset Value $12.07 $12.09 $12.06 $ 12.07
Fund Net Assets ($000) $340,065
Average Weighted Maturity (Years) 18.05
Average Weighted Duration (Years) 6.45
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------------------------
1-Year 8.95% 4.39% 8.12% 8.45% 9.16%
5-Year 6.24% 5.33% 5.64% 5.59% 6.30%
10-Year 8.10% 7.64% 7.63% 7.47% 8.13%
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------------------------
Distribution Rate 4.97% 4.76% 4.22% 4.43% 5.17%
SEC 30-Day Yield 4.28% 4.10% 3.54% 3.74% 4.49%
Taxable Equivalent Yield/3/ 6.48% 6.21% 5.36% 5.67% 6.80%
</TABLE>
Index Comparison/4/
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
Nuveen Flagship Michigan Nuveen Flagship Michigan Lehman Brothers
Municipal Bond Fund(NAV) Municipal Bond Fund(Offer) Municipal Bond Index
<S> <C> <C>
5/88 10,000 9,580 10,000
5/89 11,313 10,837 11,149
5/90 12,014 11,510 11,965
5/91 13,065 12,516 13,171
5/92 14,338 13,735 14,466
5/93 16,095 15,419 16,195
5/94 16,393 15,704 16,595
5/95 17,795 17,047 18,107
5/96 18,440 17,666 18,934
5/97 19,998 19,158 20,505
5/98 21,790 20,875 22,430
</TABLE>
Lehman Brothers Municipal Bond Index $22,430
Nuveen Flagship Michigan Municipal Bond Fund(NAV) $21,790
Nuveen Flagship Michigan Municipal Bond Fund(Offer) $20,875
Past performance is not predictive of future results.
/1/ The fund also paid shareholders taxable distributions in December of
$0.0281 per share.
/2/ 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.
/3/ Based on SEC yield and a combined federal and state income tax rate of 34%.
Represents the yield on a taxable investment necessary to equal the yield
of the Nuveen fund on an after-tax basis.
/4/ 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.
9
<PAGE> 234
Nuveen Flagship Ohio Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Walt Parker discusses fund performance, the municipal market,
and key investment strategies for the Ohio fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Ohio's municipal market remained solid through the first half of 1998 with $3.6
billion of new issuance, a 54.4% increase over 1997 levels. General purpose,
health care and education offerings continue to dominate new issue volume,
representing approximately 66% of issuance.
Ohio school district financing continues to occupy the attention of municipal
market participants, as voters rejected a one percent sales tax increase
proposal intended to provide additional school funding last May. Also rejected
was a proposal that would have allowed the legislature to issue general
obligation bonds for school projects. As a consequence, bonds enhanced by the
Ohio School District Credit Enhancement Program continue to carry relatively
diverse ratings in comparison to bonds from other states with similar programs.
Fund Performance
The fund performed well, generating a total return on net asset value of 8.76%,
which is equivalent to a taxable return of 11.76% for investors in the 35.8%
combined federal and state income tax bracket. The fund outperformed the average
return of 8.57% for the peer group of Ohio municipal bond funds tracked by
Lipper Analytical Service, a nationally recognized performance measurement
service. However, it slightly underperformed the return of 9.38% posted by the
Lehman Brothers Municipal Bond Index, primarily due to its shorter duration of
6.44 years, compared with the Lehman Index duration of 7.11 years. Duration is a
measure of price volatility in reaction to changes in interest rates. Although
the shorter duration hindered the fund's ability to participate in this year's
market rally, it helped protect the fund from volatility and would help it to
outperform in a market downturn.
Key Strategies
Since the Ohio Municipal Bond Fund is among Nuveen's largest municipal funds, we
must buy bonds in larger blocks to affect the portfolio's performance.
Therefore, we looked to large issuers and heavy-issuance sectors to implement
many of our strategies during the year.
Through our in-depth research, we continued to uncover value investing
opportunities, as several portfolio holdings received credit upgrades or were
pre-refunded during the year. In a pre-refunding, bonds are essentially paid off
by their issuer and backed by U.S. Treasury securities, which typically leads to
price appreciation. Nuveen's diligent research team helped us find those
securities with the potential for credit upgrades and pre-refundings. That
strategy paid off this year, as evidenced by the fund's 68% holding in AAA rated
bonds and attractive total returns.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were well-diversified, with 20%
of the portfolio invested in U.S. guaranteed issues (which are mostly pre-
refunded bonds), 18% in general tax obligation bonds, 15% in health care issues
and 11% in utility bonds.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Tom Futrell assumed management responsibilities for this
fund. Tom is a 15-year veteran of Nuveen and an experienced investment
professional who has managed a range of other municipal bond funds.
Tom and his team anticipate a continued strong state economy in the near future.
In addition, they expect the yield spread between lower- and higher-quality
bonds to remain tight. With that in mind, they will continue to seek value from
overlooked sectors and issues offering higher yields or strong appreciation
potential. Particular areas they will be monitoring include housing bonds and
issues subject to the alternative minimum tax (AMT), which offer better
opportunities in the current market environment.
10
<PAGE> 235
Nuveen Flagship Ohio Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
0.0505 6/97
0.0505 7/97
0.0505 8/97
0.0505 9/97
0.0505 10/97
0.0505 11/97
0.0505 12/97
0.049 1/98
0.049 2/98
0.049 3/98
0.049 4/98
0.049 5/98
Top 5 Sectors
U.S. Guaranteed 20%
- ---------------------------------------------------
Tax Obligation (General) 18%
- ---------------------------------------------------
Health Care 15%
- ---------------------------------------------------
Utilities 11%
- ---------------------------------------------------
Water and Sewer 7%
- ---------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception Date 6/85 2/97 8/93 2/97
- -------------------------------------------------------------------------------
Net Asset Value $11.74 $11.73 $11.73 $ 11.73
- -------------------------------------------------------------------------------
Fund Net Assets ($000) $689,498
- -------------------------------------------------------------------------------
Average Weighted Maturity (Years) 18.86
- -------------------------------------------------------------------------------
Average Weighted Duration (Years) 6.44
- -------------------------------------------------------------------------------
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------
1-Year 8.76% 4.19% 7.89% 8.12% 8.89%
- -------------------------------------------------------------------------------
5-Year 5.95% 5.05% 5.31% 5.37% 5.99%
- -------------------------------------------------------------------------------
10-Year 7.82% 7.36% 7.35% 7.23% 7.84%
- -------------------------------------------------------------------------------
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------
Distribution Rate 5.01% 4.80% 4.30% 4.50% 5.22%
- -------------------------------------------------------------------------------
SEC 30-Day Yield 3.94% 3.78% 3.20% 3.40% 4.14%
- -------------------------------------------------------------------------------
Taxable Equivalent Yield/3/ 6.14% 5.89% 4.98% 5.30% 6.45%
- -------------------------------------------------------------------------------
</TABLE>
Index Comparison/4/
<TABLE>
<CAPTION>
Nuveen Flagship Ohio Nuveen Flagship Ohio Lehman Brothers
Municipal Bond Fund (NAV) Municipal Bond Fund (Offer) Municipal Bond Index
<S> <C> <C> <C>
5/88 10000 9580 10000
5/89 11236 10764 11149
5/90 11893 11394 11965
5/91 13023 12476 13171
5/92 14295 13695 14466
5/93 15897 15229 16195
5/94 16249 15567 16595
5/95 17549 16812 18107
5/96 18180 17417 18934
5/97 19522 18702 20505
5/98 21229 20337 22430
</TABLE>
[_] Lehman Brothers Municipal Bond Fund (Index) $22,430
[_] Nuveen Flagship Ohio Municipal Bond Fund (NAV) $21,229
[_] Nuveen Flagship Ohio Municipal Bond Fund (Offer) $20,337
Past performance is not predictive of future results.
/1/ The fund also paid shareholders taxable distributions in December of
$0.0504 per share.
/2/ 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.
/3/ Based on SEC yield and a combined federal and state income tax rate of
35.8%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
/4/ 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.
11
<PAGE> 236
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 Kentucky Limited Term Municipal Bond Fund, Nuveen Flagship
Michigan Municipal Bond Fund and Nuveen Flagship Ohio Municipal Bond Fund
(collectively, the "Funds") (four of the portfolios constituting the Nuveen
Flagship Multistate Trust IV (a Massachusetts business trust)), as of May 31,
1998, and the related statements of operations, statements of changes in net
assets and the financial highlights for the year 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. The financial
statements and financial highlights for the Funds for the years ended May 31,
1997 and prior were audited by other auditors whose report dated July 11, 1997,
expressed an unqualified opinion on those financial statements and financial
highlights.
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, 1998, 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 Kentucky Limited Term
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, 1998, and the results of their operations, the changes in their net
assets, and the financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 17, 1998
12
<PAGE> 237
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials - 0.2%
$ 1,000,000 Jefferson County, Kentucky, Pollution Control Revenue Bonds (E.I. du 7/03 at 103 AA- $ 1,092,910
Pont de Nemours and Company Project), 1982 Series A, 6.300%, 7/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 2.4%
Lexington-Fayette Urban County Government (Kentucky), Governmental
Project Bonds (University of Kentucky Alumni Association,
Inc./Commonwealth Library Project), Series 1994:
3,195,000 6.750%, 11/01/17 11/04 at 102 AAA 3,639,968
4,320,000 6.750%, 11/01/24 11/04 at 102 AAA 4,921,646
2,000,000 Northern Kentucky University, Certificates of Participation, Student 1/01 at 102 AAA 2,194,620
Housing Facilities, 7.250%,1/01/12
700,000 Northern Kentucky University (Formerly Northern Kentucky State 5/01 at 102 AAA 765,338
College), Educational Buildings, Series F, 7.000%, 5/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Energy - 4.2%
5,000,000 City of Ashland, Kentucky, Pollution Control Refunding Bonds (Ashland 8/02 at 102 Baa1 5,422,250
Oil, Inc. Project), Series 1992, 6.650%, 8/01/09
9,000,000 City of Ashland, Kentucky, Sewage and Solid Waste Bonds (Ashland Oil, 2/05 at 102 Baa1 10,235,340
Inc. Project), Series 1995, 7.125%, 2/01/22 (Alternative Minimum Tax)
4,360,000 City of Ashland, Kentucky, Solid Waste Revenue Bonds (Ashland Oil, 10/01 at 102 Baa1 4,763,256
Inc. Project), Series 1991, 7.200%, 10/01/20 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 6.0%
2,370,000 Hancock County, Kentucky, Solid Waste Disposal Facilities Revenue 5/06 at 102 A- 2,648,309
Bonds (Willamette Industries, Inc. Project), Series 1996, 6.600%, 5/01/26
9,750,000 County of Henderson, Kentucky, Solid Waste Disposal Revenue Bonds 3/05 at 102 Baa2 10,684,343
(MacMillan Bloedel Project), Series 1995, 7.000%, 3/01/25
(Alternative Minimum Tax)
1,500,000 Maysville, Kentucky, Industrial Development Revenue, Crystal Tissue 2/00 at 103 N/R 1,581,420
Project, 8.000%, 2/01/09 (Alternative Minimum Tax)
Perry County, Kentucky, Solid Waste Disposal Revenue, TJ International:
3,750,000 7.000%, 6/01/24 (Alternative Minimum Tax) 6/04 at 102 N/R 4,153,575
4,240,000 6.800%, 5/01/26 (Alternative Minimum Tax) 5/06 at 102 N/R 4,738,030
2,000,000 6.550%, 4/15/27 (Alternative Minimum Tax) 4/07 at 102 N/R 2,204,720
2,820,000 Wickliffe, Kentucky, Solid Waste Disposal Facility, Westvaco 4/06 at 102 A1 3,094,442
Corporation Project, 6.375%, 4/01/26 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 22.1%
1,310,000 County of Christian, Kentucky, Hospital Revenue Bonds, Jennie Stuart 7/06 at 102 A- 1,393,722
Medical Center, Series 1996A, 6.000%, 7/01/17
3,500,000 County of Christian, Kentucky, Hospital Revenue and Refunding Bonds, 7/06 at 102 A- 3,764,425
Jennie Stuart Medical Center, Series 1997A, 6.000%, 7/01/13
5,270,000 County of Clark, Kentucky, Hospital Refunding and Improvement Revenue 4/07 at 102 BBB- 5,559,376
Bonds (Clark Regional Medical Center Project), Series 1997,
6.200%, 4/01/13
3,300,000 County of Daviess, Kentucky, Insured Hospital Revenue Bonds, 1992 8/02 at 102 AAA 3,578,586
(ODCH, Inc. Project), Series A, 6.250%, 8/01/22
2,905,000 County of Floyd, Kentucky, Hospital Revenue Refunding Bonds (FHA 2/01 at 102 AAA 3,126,100
Insured Mortgage Loan Highland Hospital Corporation Project),
Series 1991, 7.500%, 8/01/10
4,000,000 County of Hopkins, Kentucky, Hospital Revenue Bonds (The Trover 11/01 at 102 AAA 4,338,120
Clinic Foundation, Incorporated), Series 1991, 6.625%, 11/15/11
</TABLE>
13
<PAGE> 238
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
County of Jefferson, Kentucky, Health Facilities Revenue Bonds (Jewish
Hospital Healthcare Services Inc. Project), Series 1992:
$ 1,190,000 6.500%, 5/01/15 5/02 at 102 AAA $ 1,292,400
12,785,000 6.550%, 5/01/22 5/02 at 102 AAA 13,907,779
4,625,000 County of Jefferson, Kentucky, Health Facilities Revenue Bonds 7/07 at 101 AAA 4,632,493
(University Medical Center, Inc. Project), Series 1997, 5.250%, 7/01/22
15,640,000 County of Jefferson, Kentucky, Health Facilities Revenue Bonds 10/07 at 101 AAA 15,370,836
(Alliant Health System, Inc. Project), Series 1997, 5.125%, 10/01/27
7,800,000 County of Jefferson, Kentucky, Insured Hospital Revenue Bonds (Alliant 10/02 at 102 AAA 8,528,754
Health System, Inc. Project), Series 1992, 6.436%, 10/23/14
Kentucky Development Finance Authority, Medical Center Revenue Refunding
and Improvement Bonds (Ashland Hospital Corporation/Kings Daughters
Hospital):
860,000 9.750%, 8/01/05 8/98 at 102 A 884,759
610,000 9.750%, 8/01/11 8/98 at 102 A 627,751
3,000,000 Kentucky Development Finance Authority (Saint Luke Hospital, Inc.), 10/99 at 102 A 3,199,380
Series 1989A, 7.500%, 10/01/12
1,750,000 Kentucky Development Finance Authority, Hospital Revenue Bonds 11/99 at 102 A1 1,858,833
(Sisters of Charity of Nazareth Health Corporation), Series 1989,
7.375%, 11/01/16
2,000,000 Kentucky Development Finance Authority, Hospital Facilities Revenue 10/01 at 102 AAA 2,219,700
Bonds (Saint Lukes Hospital, Inc. Project), Series 1991A,
7.000%, 10/1/11
1,000,000 Kentucky Development Finance Authority (Saint Elizabeth Medical 11/01 at 100 AAA 1,054,180
Center, Inc. Project), 6.000%, 11/01/10
5,000,000 Kentucky Economic Development Finance Authority, Hospital Facilities 12/03 at 102 AAA 5,392,050
Revenue Bonds (Saint Elizabeth Medical Center, Inc. Project), Series
1993A, 6.000%, 12/01/22
4,000,000 Kentucky Economic Development Finance Authority, Hospital Revenue 8/04 at 102 AAA 3,874,760
Bonds (Baptist Healthcare System), Series 1994, 5.000%, 8/15/24
9,500,000 Kentucky Economic Development Finance Authority, Hospital Revenue and 2/07 at 102 AAA 10,003,880
Refunding Revenue Bonds (Pikeville United Methodist Hospital of Kentucky,
Inc. Project), Series 1997, 5.700%, 2/01/28
Kentucky Economic Development Finance Authority, Hospital System Refunding
and Improvement Revenue Bonds (Appalachian Regional Healthcare, Inc.
Project), Series 1997:
500,000 5.600%, 10/01/08 4/08 at 102 BBB 520,265
3,500,000 5.850%, 10/01/17 4/08 at 102 BBB 3,586,870
1,500,000 5.875%, 10/01/22 4/08 at 102 BBB 1,540,455
2,050,000 McCracken County, Kentucky, Hospital Revenue Refunding, Mercy Health 11/04 at 102 AAA 2,288,210
System, Series A, 6.300%, 11/01/06
1,555,000 Radcliff, Kentucky, Mortgage Revenue Refunding, Lincoln Trail Care, 7/07 at 102 AAA 1,625,550
5.650%, 1/20/19
2,800,000 City of Russell, Kentucky, Health System Revenue Bonds, Our Lady of 1/08 at 102 Baa1 2,815,344
Bellefonte Hospital Issue, Series 1997 (Franciscan Health Partnership,
Inc. Refunding Revenue Bonds), 5.500%, 7/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 0.5%
2,500,000 Greater Kentucky Housing Assistance Corporation, Mortgage Revenue 7/03 at 100 AAA 2,583,150
Refunding Bonds, Series 1993A (FHA Insured Mortgage Loans-Section 8
Assisted Projects), 6.250%, 7/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.4%
7,000,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1996 Series E, 7/06 at 102 AAA 7,524,160
6.300%, 1/01/28 (Alternative Minimum Tax)
3,000,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1997 Series B, 7/07 at 102 AAA 3,199,230
6.250%, 7/01/28 (Alternative Minimum Tax)
435,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA Insured/VA 1/99 at 102 AAA 447,537
Guaranteed Mortgage Loans), 1988 Series A, 7.625%, 1/01/09 (Alternative
Minimum Tax)
1,630,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA Insured/VA 7/00 at 102 AAA 1,720,938
Guaranteed Mortgage Loans), 1988 Series C, 7.900%, 1/01/21 (Alternative
Minimum Tax)
1,125,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA Insured/VA 7/00 at 102 AAA 1,184,063
Guaranteed Mortgage Loans), 1990 Series B, 7.800%, 1/01/21 (Alternative
Minimum Tax)
</TABLE>
14
<PAGE> 239
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family(continued)
$1,000,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally 7/02 at 102 AAA $1,071,100
Insured or Guaranteed Mortgage Loans), Series 1992B, 6.625%, 7/01/14
Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured
or Guaranteed Mortgage Loans), Series 1991C-1:
465,000 6.600%, 1/01/11 1/03 at 102 AAA 494,276
130,000 6.650%, 1/01/17 1/03 at 102 AAA 135,078
920,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally 1/04 at 102 AAA 980,490
Insured or Guaranteed Mortgage Loans), 1994 Series A, 6.500%, 7/01/17
2,230,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally 7/04 at 102 AAA 2,389,757
Insured or Guaranteed Mortgage Loans), 1994 Series C, 6.400%, 1/01/17
1,985,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally 1/05 at 102 AAA 2,131,255
Insured or Guaranteed Mortgage Loans), 1995 Series B, 6.625%, 7/01/26
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 3.6%
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 1,308,051
715,000 6.125%, 11/15/13 11/04 at 102 BBB 757,786
3,210,000 6.125%, 11/15/18 11/04 at 102 BBB 3,402,086
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 1,776,600
4,250,000 5.500%, 11/15/30 5/08 at 102 BBB 4,211,750
5,700,000 Kentucky Economic Development Finance Authority, Tax Exempt Mortgage 1/08 at 105 AAA 6,084,240
Revenue Bonds (South Central Nursing Homes, Inc. Project), Series 1997A,
6.000%, 7/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 1.4%
4,790,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 7/06 at 101 1/2 A 4,860,461
(General Obligation Bonds), 5.400%, 7/01/25
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 A 2,023,560
5.375%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 22.8%
430,000 Bardstown Independent School District Finance Corporation, School 11/02 at 102 A1 467,965
Building Refunding and Improvement Revenue Bonds, Series of 1992,
6.375%, 5/01/17
725,000 Bell County, Kentucky, School District Finance Corporation, School 9/01 at 102 A 799,197
Building Revenue Bonds, Series 1991, 6.875%, 9/01/11
1,000,000 Boone County, Kentucky, School District Finance Corporation, School 9/01 at 103 A1 1,107,660
Building Revenue Bonds, 1991 Series C, 6.750%, 9/01/11
1,215,000 Boone County, Kentucky, School District Finance Corporation, School 12/02 at 102 A1 1,306,332
Building Refunding and Improvement Revenue Bonds, Series 1992,
6.125%, 12/01/17
615,000 Boone County, Kentucky, School District Finance Corporation, School 2/03 at 102 A1 648,474
Building Refunding and Improvement Revenue Bonds, Series 1993,
6.000%, 2/01/18
1,595,000 City of Bowling Green Municipal Projects Corporation, Kentucky, 12/04 at 102 A2 1,780,754
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 1,069,230
Revenue Bonds, Series 1995, 5.750%, 3/01/15
Christian County, Kentucky, School District Finance Corporation,
School Building Revenue Bonds, Series 1991:
565,000 6.750%, 6/01/10 6/01 at 102 A 618,709
600,000 6.750%, 6/01/11 6/01 at 102 A 657,036
</TABLE>
15
<PAGE> 240
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
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 $ 543,799
535,000 5.800%, 5/01/12 5/04 at 102 A1 576,104
570,000 5.800%, 5/01/13 5/04 at 102 A1 612,254
600,000 5.800%, 5/01/14 5/04 at 102 A1 642,864
1,070,000 Fleming County School District Finance Corporation, School Building 3/05 at 102 A 1,137,720
Revenue Bonds, Series 1995, 5.875%, 3/01/15
3,155,000 City of Florence, Kentucky, Public Properties Corporation, First 6/07 at 102 AAA 3,273,754
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 484,567
1,260,000 5.550%, 9/01/23 3/06 at 102 A 1,321,173
3,550,000 Floyd County, Kentucky, Public Properties Corporation, First Mortgage 3/06 at 105 A 3,840,497
Revenue Bonds (Floyd County Justice Center Project), Series
1996B, 6.200%, 9/01/26
1,200,000 Floyd County, Kentucky, School District Finance Corporation, School 5/05 at 102 A1 1,244,232
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 2,338,824
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 No Opt. Call AAA 584,288
1,775,000 6.250%, 12/01/14 12/04 at 102 AAA 1,980,421
300,000 Hardin County, Kentucky, School District Finance Corporation, School 6/01 at 103 A1 328,674
Building Revenue Bonds, Series of 1991, 6.800%, 6/01/10
3,465,000 Hopkins County, Kentucky, School District Finance Corporation, School 6/04 at 102 A1 3,758,174
Building Revenue Bonds, Series 1994, 6.200%, 6/01/19
1,250,000 Jefferson County, Kentucky, Economic Development Corporation, Lease 7/01 at 100 A1 1,272,938
Revenue Bonds, Series 1986, 7.750%, 7/01/16
4,195,000 Jefferson County, Kentucky, School District Finance Corporation, School 2/06 at 102 AAA 4,218,534
Building Revenue Bonds (Series 199A), 5.125%, 2/01/16
1,258,871 Jefferson County, Kentucky, Equipment Lease Purchase Revenue Bonds, No Opt. Call N/R 1,289,310
Series 1987 (Energy System Project), 9.000%, 6/01/03
231,641 Jefferson County, Kentucky, Equipment Lease Purchase Revenue Bonds, No Opt. Call N/R 240,452
Series 1988 (Energy System Project), 9.500%, 6/01/03
2,500,000 Jefferson County, Kentucky, Capital Projects Corporation Lease Revenue 2/02 at 100 A1 1,203,775
Bonds, Series 1987B, 0.000%, 8/15/08
1,000,000 City of Jeffersontown, Kentucky, Public Projects Refunding and No Opt. Call A 1,071,220
Improvements, Certificates of Participation, 5.750%, 11/01/15
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 562,086
545,000 6.750%, 6/01/11 6/01 at 103 A1 600,661
2,500,000 Jessamine County, Kentucky, School District Finance Corporation, School 6/04 at 102 A1 2,693,700
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 5,882,102
Building Revenue Bonds, Series 1996, 5.500%, 1/01/21
400,000 Kentucky State Property and Buildings Commission Revenue Refunding, 11/01 at 102 A+ 441,240
Project No. 40, 2nd Series, 6.875%, 11/01/07
250,000 Kentucky State Property and Buildings Commission, Revenue Refunding, 10/01 at 102 A 274,108
Project No. 53, 6.625%, 10/01/07
</TABLE>
16
<PAGE> 241
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 2,075,000 Kentucky State Property and Buildings Commission, Project No. 56, 6.000%, 9/04 at 102 A+ $ 2,234,173
9/01/14
250,000 Laurel County, Kentucky, School District Finance Corporation, School 3/01 at 102 A 273,380
Building Revenue, 7.000%, 3/01/10
1,000,000 Lawrence County, Kentucky, School District Finance Corporation, School 11/04 at 102 A1 1,144,100
Building Revenue, 6.750%, 11/01/14
Lexington, Kentucky, Center Corporation Mortgage Revenue Refunding
and Improvement, Series A:
2,600,000 0.000%, 10/01/11 No Opt. Call A 1,368,458
2,550,000 0.000%, 10/01/12 No Opt. Call A 1,261,332
435,000 Lincoln County, Kentucky, School District Finance Corporation, School 5/02 at 102 A1 467,629
Building Revenue, 6.200%, 5/01/12
1,525,000 McCracken County, Kentucky, Public Properties Corporation Revenue, Public 9/06 at 102 AAA 1,639,207
Project, Court Facilities Project, 5.900%, 9/01/26
2,365,000 McCreary County, Kentucky, School District Finance Corporation, School 8/05 at 102 A 2,485,591
Building Revenue, Second Series, 5.600%, 8/01/16
1,410,000 Morgan County, Kentucky, School District Finance Corporation, School 9/04 at 102 A1 1,526,128
Building Revenue, 6.000%, 9/01/14
13,000,000 Mount Sterling, Kentucky, Lease Revenue Bonds (Kentucky League of Cities 3/03 at 102 Aa 13,769,210
Funding Program), Series 1993A, 6.200%, 3/01/18
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 13,835,189
500,000 6.400%, 3/01/19 No Opt. Call A 582,590
1,230,000 Perry County, Kentucky, School District Finance Corporation, School 7/02 at 102 A1 1,335,325
Building Revenue, 6.250%, 7/01/11
2,000,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, Series 1995, 7/06 at 101 1/2 A 1,954,040
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 8,646,413
Series Y of 1996, 5.500%, 7/01/36
115,000 Puerto Rico Infrastructure Finance Authority, Series 1988A, 7/98 at 102 BBB+ 117,637
7.750%, 7/01/08
7,000,000 Warren County, Kentucky, Justice Center Expansion Corporation Revenue, 9/07 at 102 AAA 7,035,980
First Mortgage, AOC Judicial Facility, Series A, 5.250%, 9/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 5.8%
10,640,000 Kenton County Airport Board (Delta Airlines), 6.125%, 2/01/22 2/02 at 100 BBB- 10,901,744
(Alternative Minimum Tax)
1,250,000 Kenton County, Kentucky, Airport Board, Cincinnati/Northern Kentucky 3/06 at 102 AAA 1,323,063
International Airport Revenue Bonds, Series 1996B, 5.750%, 3/01/13
1,000,000 Kentucky State Turnpike Authority, Economic Development Road Revenue 7/05 at 102 AAA 1,053,370
Refunding, Revitalization Projects, 5.625%, 7/01/15
5,000,000 Regional Airport Authority of Louisville and Jefferson County, Kentucky, 7/05 at 102 AAA 5,166,750
Airport System Revenue Bonds, 1995 Series A, 5.625%, 7/01/25
(Alternative Minimum Tax)
6,165,000 Louisville, Kentucky, Airport Lease Revenue, Series A, 7.875%, 2/01/19 2/99 at 103 A 6,506,171
(Alternative Minimum Tax)
2,790,000 Louisville, Kentucky, Parking Authority, River City, First Mortgage 6/01 at 103 A 3,083,871
Revenue, 6.875%, 12/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 8.8%
500,000 City of Covington, Kentucky, Municipal Properties Corporation, First 8/98 at 103 N/R*** 518,660
Mortgage, City Hall Parking and Park Revenue Bonds, Series
1988A, 8.250%, 8/01/10 (Pre-refunded to 8/01/98)
1,645,000 City of Edgewood, Kentucky, Public Properties Corporation, First 12/01 at 102 A2*** 1,818,992
Mortgage Revenue Bonds (Public Facilities Project), Series 1991,
6.700%, 12/01/21 (Pre-refunded to 12/01/01)
</TABLE>
17
<PAGE> 242
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
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*** $ 110,163
320,000 7.000%, 3/01/14 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 353,411
345,000 7.000%, 3/01/15 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 381,021
360,000 7.000%, 3/01/16 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 397,588
2,750,000 County of Hardin, Kentucky, Hospital Refunding Revenue Bonds, 10/98 at 103 AAA 2,869,983
Series 1988 (Hardin Memorial Hospital Project), 7.875%,
10/01/14 (Pre-refunded to 10/01/98)
16,750,000 Jefferson County, Kentucky, Capital Projects Corporation, 2/01 at 24 11/16 AAA 3,698,903
Lease Revenue Bonds, Series 1989B, 0.000%, 8/15/19
(Pre-refunded to 2/15/01)
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*** 1,367,542
1,070,000 7.100%, 3/01/10 (Pre-refunded to 3/01/00) 3/00 at 101 A*** 1,136,115
815,000 Kenton County, Kentucky, School District Finance Corporation, 12/01 at 102 A+*** 901,472
School Building Revenue Bonds, Series 1991, 6.800%, 12/01/11
(Pre-refunded to 12/01/01)
500,000 Kentucky Development Finance Authority, Sisters of Charity of 11/99 at 102 AAA 530,855
Nazareth Health Corporation, Hospital Revenue Bonds, Series
1989, 7.375%, 11/01/16
9,070,000 Kentucky Development Finance Authority, Hospital Facilities 10/01 at 102 AAA 10,066,340
Revenue Bonds, Series 1991A (St. Luke Hospital, Inc.), 7.000%,
10/01/21 (Pre-refunded to 10/01/01)
2,795,000 Kentucky Infrastructure Authority, Revenue Bonds (Community 9/98 at 102 AAA 2,879,465
Loan Program), Series 1988, 7.850%, 9/01/18 (Pre-refunded to
9/01/98)
1,495,000 Kentucky Infrastructure Authority, Governmental Agencies 8/99 at 102 A*** 1,591,323
Revenue Refunding Program, Series A,
7.800%, 8/01/08 (Pre-refunded to 8/01/99)
1,800,000 Kentucky State Property and Buildings Commission, Project No. 48, 8/98 at 102 A+*** 1,848,564
8.000%, 8/01/08 (Pre-refunded to 8/01/98)
4,875,000 The Turnpike Authority of Kentucky, Economic Development Road 5/00 at 101 1/2 AAA 5,246,719
Revenue Bonds (Revitalization Projects), Series 1990, 7.250%, 5/15/10
(Pre-refunded to 5/15/00)
Lexington, Kentucky, Fayette Urban County Government, Sewer
System Revenue:
830,000 7.600%, 7/01/07 (Pre-refunded 7/01/98) 7/98 at 102 AAA 849,273
900,000 7.600%, 7/01/08 (Pre-refunded 7/01/98) 7/98 at 102 AAA 920,898
Montgomery County, Kentucky, School District Finance Corporation,
School Building Revenue:
305,000 6.800%, 6/01/09 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 333,838
325,000 6.800%, 6/01/10 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 355,729
350,000 6.800%, 6/01/11 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 383,093
385,000 Puerto Rico Infrastructure Finance Authority, Series 1988A, 7/98 at 102 BBB+*** 393,974
7.750%, 7/01/08 (Pre-refunded to 7/01/98)
500,000 Richmond, Kentucky, Water Gas and Sewer, Revenue Refunding 7/98 at 102 AAA 511,525
Bond, Series B, 7.400%, 7/01/15 (Pre-refunded to 7/01/98)
1,990,000 Western, Kentucky, University Revenues, Formerly Western 12/00 at 102 AAA 2,189,239
Kentucky State College, Housing and Dining System, Series L,
7.400%, 12/01/10 (Pre-refunded to 12/01/00)
940,000 Western, Kentucky, University Revenues, Formerly Western 11/00 at 102 AAA 1,031,782
Kentucky State College, Educational Buildings, Series J, 7.400%,
5/01/10 (Pre-refunded to 11/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 10.2%
10,000,000 County of Boone, Kentucky, Collateralized Pollution Control 1/04 at 102 AAA 10,261,300
Revenue 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 2/02 at 102 AA 5,321,187
Revenue Bonds (Kentucky Utilities Company Project), 1992 Series B,
6.250%, 2/01/18
1,000,000 County of Jefferson, Kentucky, Pollution Control Revenue 6/00 at 102 Aa2 1,081,580
Bonds, 1990 Series A (Louisville Gas and Electric Company
Project), 7.450%, 6/15/15
1,750,000 County of Jefferson, Kentucky, Pollution Control Revenue 4/05 at 102 Aa2 1,854,230
Bonds, 1995 Series A (Louisville Gas and Electric Company
Project), 5.900%, 4/15/23
1,250,000 Mercer County, Kentucky, Collateralized Pollution Control 2/02 at 102 AA 1,331,263
Revenue, Kentucky Utilities Company Project, Series A, 6.250%,
2/01/18
</TABLE>
18
<PAGE> 243
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities (continued)
<S> <C> <C> <C> <C>
Owensboro, Kentucky, Electric Light and Power Revenue, Series B:
$ 7,100,000 0.000%, 1/01/11 No Opt. Call AAA $ 3,898,184
6,475,000 0.000%, 1/01/12 No Opt. Call AAA 3,344,985
7,900,000 0.000%, 1/01/17 No Opt. Call AAA 3,092,297
13,300,000 0.000%, 1/01/18 No Opt. Call AAA 4,940,285
5,100,000 0.000%, 1/01/19 No Opt. Call AAA 1,793,823
4,725,000 0.000%, 1/01/20 No Opt. Call AAA 1,579,662
2,500,000 Puerto Rico Electric Power Authority, Power 7/08 at 101 BBB+ 2,424,250
Revenue Bonds, Series DD, 5.000%, 7/01/28
3,000,000 Puerto Rico Electric Power Authority, Power 7/04 at 102 BBB+ 3,211,530
Revenue Bonds, Series T, 6.000%, 7/01/16
4,795,000 Trimble County, Kentucky, Pollution Control 11/00 at 102 Aa2 5,237,674
Revenue, Louisville Gas and Electric Company,
Series A, 7.625%, 11/01/20 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.0%
625,000 City of Danville, Kentucky, Multi-City Lease 12/01 at 103 AAA 681,625
Revenue Bonds (City of Radcliff Kentucky), Sewer
System Revenue Project, Series 1991 B, 6.875%, 3/01/19
1,750,000 City of Henderson, Kentucky, Water and Sewer Revenue 11/04 at 103 AAA 1,947,173
and Refunding Bonds, Series of 1994 A, 6.100%, 11/01/14
2,040,000 Kenton County Water District No. 1, Water District 2/05 at 102 AAA 2,156,198
Revenue Bonds, Series 1995 B, 5.700%, 2/01/20
500,000 Kentucky Infrastructure Authority, Revolving Fund Program, 6/01 at 102 A 543,130
Series E, 6.500%, 6/01/11
1,000,000 Kentucky Infrastructure Authority, Refunding, Governmental 8/03 at 102 A 1,037,340
Agencies Program, Series E, 5.750%, 8/01/18
Kentucky Infrastructure Authority, Revolving Fund, Series J:
440,000 6.300%, 6/01/10 6/05 at 102 A 488,800
360,000 6.350%, 6/01/11 6/05 at 102 A 399,395
600,000 6.375%, 6/01/14 6/05 at 102 A 677,292
1,690,000 Kentucky Infrastructure Authority, Governmental Agencies 8/05 at 102 A 1,891,540
Program, Series G, 6.375%, 8/01/14
405,000 Kentucky Infrastructure Authority, Revenue Refunding, 8/99 at 102 A 428,606
Governmental Agencies Program, Series, A, 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 3,154,655
2,070,000 6.500%, 5/15/24 11/04 at 102 AAA 2,371,743
2,500,000 6.750%, 5/15/25 11/04 at 102 AAA 2,899,499
3,865,000 Louisville and Jefferson County, Kentucky, Metropolitan 2/05 at 102 Aaa 3,930,781
Sewer District, Sewer and Drain System Revenue, Series A,
5.400%, 5/15/22
6,000,000 Louisville and Jefferson County, Kentucky, Metropolitan 11/07 at 101 AAA 6,102,779
Sewer District, Sewer and Drain System Refunding Revenue,
Series B, 5.350%, 5/15/22
500,000 Paducah, Kentucky, Waterworks Revenue Refunding, 6.700%, 7/01/09 7/01 at 102 AAA 547,764
- -----------------------------------------------------------------------------------------------------------------------------------
$493,480,512 Total Investments - (cost $439,366,089) - 98.4% 477,311,529
============-----------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -0.4%
$ 2,000,000 Puerto Rico Highway, Variable Rate Demand Bonds, 3.750%, 7/01/28 A-1+ 2,000,000
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 5,605,510
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $484,917,039
=====================================================================================================================
</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.
+ The security has a maturity of more than one year, but has
variable rate and demand features which qualify it as a short-
term security. The rate disclosed is that currently in effect.
This rate changes periodically based on market conditions or a
specified market index.
See accompanying notes to financial statements.
19
<PAGE> 244
Portfolio of Investments
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Staples - 0.2%
$ 20,000 Newport, Kentucky, Industrial Building, Revenue Refunding, Louis No Opt. Call N/R $ 20,178
Trauth Dairy, Series A, 4.800%, 6/01/99
- ------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 13.5%
500,000 City of Berea, Kentucky, Berea College, General Obligation Bonds, No Opt. Call Aaa 504,160
Series 1998, 4.800%, 7/01/08 (Alternative Minimum Tax) (WI)
500,000 Kentucky Higher Education Student Loan Corporation, Insured Student No Opt. Call Aaa 548,120
Loan Revenue Bonds, 1991 Series B, 6.800%, 6/01/03 (Alternative
Minimum Tax)
475,000 University of Kentucky, University Revenues, Consolidated Educational No Opt. Call AAA 492,580
Buildings, Series O, 5.000%, 5/01/03
- ------------------------------------------------------------------------------------------------------------------------------
Energy - 3.0%
325,000 City of Ashland, Kentucky, Pollution Control Revenue Refunding Bonds 2/00 at 102 1/2 Baa1 347,240
(Ashland Oil Inc. Project), Series 1988A, 7.375%, 7/01/09
- ------------------------------------------------------------------------------------------------------------------------------
Health Care - 22.7%
580,000 Kentucky Development Finance Authority, Sisters of Charity of 11/01 at 102 A1 630,680
Nazareth Health Corporation, Revenue Refunding Bonds, Series
1991, 6.600%, 11/01/06
270,000 Kentucky Economic Development Finance Authority, Medical Center No Opt. Call AAA 272,444
Revenue Refunding and Improvement Bonds, Series 1993A (Ashland
Hospital Corporation/Kings Daughter Medical Center Project),
5.100%, 2/01/99
500,000 Kentucky Economic Development Finance Authority, Hospital System No Opt. Call BBB 516,930
Refunding and Improvement Revenue Bonds, Series 1997 (Appalachian
Regional Healthcare, Inc. Project), 5.500%, 10/01/07
385,000 Mc Cracken County, Kentucky, Hospital Revenue Refunding, Mercy Health 11/04 at 102 AAA 429,737
System, Series A, 6.300%, 11/01/06
710,000 Radcliff, Kentucky, Mortgage Revenue Refunding, Lincoln Trail Care, No Opt. Call AAA 741,055
5.100%, 7/20/07
- ------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 9.5%
705,000 Louisville, Kentucky, Multifamily Revenue Refunding, Station House No Opt. Call Aa2 713,862
Square Association, LP Project, 5.125%, 7/15/19
360,000 Martin County, Kentucky, Mortgage Revenue Refunding, Assisted 7/01 at 100 Aa 371,225
Project, 5.375%, 7/01/05
- ------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 1.8%
100,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1993 Series B 1/04 at 102 AAA 103,550
(Federally Insured or Guaranteed Mortgage Loans), 5.150%, 7/01/07
100,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally No Opt. Call AAA 102,398
Insured or Guaranteed Mortgage Loans), 1995 Series F, 4.800%,
7/01/03
- ------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 1.8%
200,000 Kentucky Economic Development Finance Authority, Hospital Revenue No Opt. Call Aa3 205,056
Refunding Bonds,Series 1996 (Green River Regional Mental Health/Mental
Retardation Board, Inc.), 5.200%, 11/01/01
- ------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 2.6%
280,000 Commonwealth of Puerto Rico, Public Improvement Refunding Bonds, No Opt. Call A 295,848
Series 1993 (General Obligation Bonds), 5.375%, 7/01/05
</TABLE>
20
<PAGE> 245
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited - 21.2%
$ 265,000 Hardin County (Kentucky), School District Finance Corporation, 6/01 at 103 A1 $ 291,519
School Building Revenue Bonds, Series of 1991, 6.800%, 6/01/08
300,000 Jefferson County, Kentucky, Capital Projects Corporation, Lease No Opt. Call AAA 317,439
Revenue Bonds, Series 1996A, 5.500%, 4/01/03
City of Jeffersontown, Kentucky, Public Projects Refunding and
Improvements, Certificates of Participation:
505,000 4.850%, 11/01/04 No Opt. Call A 523,008
100,000 5.000%, 11/01/05 No Opt. Call A 104,340
50,000 Kentucky Interlocal School Transportation Association, Equipment No Opt. Call A1 51,788
Lease Revenue, 5.200%, 3/01/02
775,000 Mount Sterling, Kentucky, Lease Revenue Bonds (Kentucky League of No Opt. Call Aa 816,811
Cities Funding Program), Series 1993A, 5.625%, 3/01/03
325,000 Puerto Rico Commonwealth, Urban Renewal and Housing Corporation, No Opt. Call BBB 320,697
Commonwealth Appropriation Refunding, 0.000%, 10/01/98
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 8.9%
300,000 Kenton County (Kentucky), Airport Board, Cincinnati/Northern No Opt. Call AAA 308,658
Kentucky International Airport Revenue Bonds, Series 1996A, 5.000%,
3/01/02 (Alternative Minimum Tax)
360,000 Kentucky State Turnpike Authority, Economic Development Road No Opt. Call AAA 384,188
Revenue Refunding, Revitalization Projects, 5.400%, 7/01/05
125,000 The Turnpike Authority of Kentucky, Resource Recovery, Road No Opt. Call A+ 125,224
Revenue Refunding Bonds, 1985 Series A, 6.000%, 7/01/09
200,000 Regional Airport Authority of Louisville and Jefferson County, No Opt. Call AAA 200,318
Kentucky, Airport System Revenue Bonds, 1997 Series A, 5.750%,
7/01/98 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 0.5%
250,000 Jefferson County, Kentucky, Capital Projects Corporation, Lease 2/01 at 24 11/16 AAA 55,208
Revenue Bonds, Series 1989B, 0.000%, 8/15/19 (Pre-refunded to 2/15/01)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 2.8%
400,000 City of Owensboro, Kentucky, Electric Light and Power System No Opt. Call AAA 315,872
Revenue Bonds, Series 1993A, 0.000%, 1/01/04 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 8.3%
200,000 Kenton County, Water District No. 1, Water District Revenue No Opt. Call AAA 214,302
Bonds, Series 1995B, 5.600%, 2/01/04
Kentucky Infrastructure Authority, Revenue Refunding Wastewater Revolving
Fund Program,Series C:
150,000 5.300%, 6/01/03 No Opt. Call A 157,310
200,000 5.500%, 6/01/05 No Opt. Call A 213,263
350,000 Kentucky Infrastructure Authority, Governmental Agencies Program, No Opt. Call A 363,789
Revenue and Refunding Bonds, 1995 Series H, 5.200%, 8/01/02
- -----------------------------------------------------------------------------------------------------------------------------------
$10,865,000 Total Investments - (cost $10,737,735) - 96.8% 11,058,797
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.2% 361,840
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $11,420,637
====================================================================================================================
</TABLE>
* Optional Call Provision (not covered by the report of independent
public accountants): Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call
provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or Moody's
rating.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
21
<PAGE> 246
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Capital Goods - 0.3%
$ 1,055,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (WMX 12/03 at 102 A1 $1,108,562
Technologies, Inc. Project), Series 1993, 6.000%, 12/01/13
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclical - 2.5%
2,500,000 Michigan State Strategic Fund, Limited Obligation Refunding Revenue No Opt. Call A1 2,933,150
Bonds, Series 1991A, 7.100%, 2/01/06
5,000,000 Michigan State Strategic Fund, Pollution Control Revenue Refunding, 9/05 at 102 A 5,441,950
General Motors Corporation, 6.200%, 9/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 1.5%
1,000,000 Board of Control of Grand Valley State University, Michigan, General 10/98 at 102 A 1,034,510
Revenue Bonds, Series 1988, 7.875%, 10/01/08
750,000 Michigan Higher Education Student Loan Authority, Student Loan, 6/06 at 102 Aaa 793,253
Series A, 5.750%, 6/01/13 (Alternative Minimum Tax)
1,000,000 Board of Trustees of Michigan State University, General Revenue Bonds, 2/06 at 101 AAA 977,910
Series 1996, 5.000%, 2/15/26
1,000,000 Oakland County Michigan Economic Development Corporation, Limited 11/04 at 102 Aa2 1,140,930
Obligation Revenue Refunding, Cranbrook Educational Community,
Series C, 6.900%, 11/01/14
1,000,000 Board of Trustees of Western Michigan University (Michigan), General 11/02 at 102 AAA 1,104,160
Revenue Bonds, Series 1992A, 6.250%, 11/15/12
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 2.3%
7,500,000 The Economic Development Corporation of Dickinson County (Michigan), 10/03 at 102 Baa1 7,831,050
Pollution Control Refunding Revenue Bonds (Champion International
Corporation Project), Series 1993, 5.850%, 10/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 23.8%
1,000,000 The Economic Development Corporation of the City of Dearborn, 11/05 at 102 AAA 1,068,400
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 549,940
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 Baa 980,100
1,000,000 5.375%, 7/01/28 7/08 at 101 Baa 974,490
500,000 County of Grand Traverse (Michigan), Hospital Finance Authority, 7/02 at 102 AAA 541,635
Hospital Revenue Refunding Bonds (Munson Healthcare Obligated Group),
Series 1992A, 6.250%, 7/01/22
1,940,000 City of Kalamazoo (Michigan), Hospital Finance Authority, Hospital 5/03 at 102 A1 2,159,181
Revenue Refunding and Improvement Bonds (Bronson Methodist Hospital),
Series 1992A, 6.375%, 5/15/17
6,000,000 City of Kalamazoo (Michigan), Hospital Finance Authority, Hospital 5/06 at 102 AAA 6,369,120
Revenue 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 1,396,077
Refunding Bonds (Pine Rest Christian Hospital), Series 1992,
6.500%, 11/01/10
3,530,000 Lake View Community Hospital Authority, Michigan Hospital Revenue 2/07 at 101 N/R 3,472,320
Refunding, 6.250%, 2/15/13
3,000,000 Michigan State Hospital Finance Authority, Revenue Refunding, 1/00 at 100 BBB+ 3,036,360
Memorial Hospital, Owosso, Michigan, Series A, 7.375%, 1/01/03
</TABLE>
22
<PAGE> 247
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 40,000 Michigan State Hospital Finance Authority, Revenue and 8/98 at 102 A $ 41,129
Refunding Bonds (The Detroit Medical Center Obligated Group),
Series 1988B, 8.125%, 8/15/08
6,500,000 Michigan State Hospital Finance Authority, Revenue and Refunding 8/03 at 102 A 7,089,355
Bonds (The Detroit Medical Center Obligated Group), Series 1993A,
6.500%, 8/15/18
2,920,000 Michigan State Hospital Finance Authority, Revenue and Refunding 8/04 at 102 A 2,952,412
Bonds (The Detroit Medical Center Obligated Group), Series 1993B,
5.500%, 8/15/23
1,000,000 Michigan State Hospital Finance Authority, Revenue Refunding, 7/99 at 102 AAA 1,049,110
Oakland General Hospital, 7.000%, 7/01/15
1,000,000 Michigan State Hospital Finance Authority, Revenue Refunding Bonds 11/01 at 102 AAA 1,082,240
(Sparrow Obligated Group), Series 1991, 6.500%, 11/15/11
1,000,000 Michigan State Hospital Finance Authority, Revenue and Refunding 1/05 at 102 AA- 1,086,300
Bonds (Otsego Memorial Hospital, Gaylord, Michigan), Series
1995, 6.125%, 1/01/15
2,000,000 Michigan State Hospital Finance Authority, Revenue Refunding, Port 7/05 at 102 AAA 2,064,860
Huron Hospital Obligation, 5.500%, 7/01/15
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue No Opt. Call BBB 1,074,410
Refunding Bonds (Gratiot Community Hospital, Alma, Michigan),
Series 1995, 6.100%, 10/01/07
4,500,000 Michigan State Hospital Finance Authority, Hospital Revenue and 5/06 at 102 AA 4,470,570
Refunding Bonds (Henry Ford Health System), Series 1995A,
5.250%, 11/15/20
1,000,000 Michigan State Hospital Finance Authority, Central Michigan 10/06 at 102 BBB 1,056,430
Community Hospital, 6.250%, 10/01/27
5,250,000 Michigan State Hospital Finance Authority (Mercy Health Services 8/06 at 101 AAA 5,305,073
Obligated Group), 1996 Series Q, 5.375%, 8/15/26
2,000,000 Michigan State Hospital Finance Authority, Revenue Refunding 8/07 at 101 AA- 2,057,180
(Mercy Health Services), Series S, 5.500%, 8/05/20
Michigan State Hospital Finance Authority, Revenue and Refunding
Bonds (Genesys Regional Medical Center Obligated Group),
Series 1998A:
1,000,000 5.500%, 10/01/18 10/08 at 102 BBB 989,660
4,000,000 5.500%, 10/01/27 10/08 at 102 BBB 3,948,040
2,000,000 Michigan State Hospital Finance Authority, Revenue and Refunding No Opt. Call A3 1,910,060
Bonds (Hackley Hospital Obligated Group), Series 1998A, 5.000%,
5/01/18 (WI)
Pontiac, Michigan, Hospital Finance Authority, Revenue Refunding,
NOMC Obligation Group:
3,000,000 6.000%, 8/01/18 8/03 at 102 BBB- 3,051,930
5,165,000 6.000%, 8/01/23 8/03 at 102 BBB- 5,251,669
8,345,000 Royal Oak, Michigan, Hospital Finance Authority, Revenue Refunding, 1/06 at 102 AA 8,301,940
William Beaumont Hospital, 5.250%, 1/01/20
2,000,000 City of Saginaw, Hospital Finance Authority (Saginaw General 10/99 at 102 BBB+ 2,115,820
Hospital), 7.625%, 10/01/08
500,000 City of Saginaw (Michigan), Hospital Finance Authority (St. Lukes 7/01 at 102 AAA 541,550
Hospital), Revenue Refunding Bonds, Series 1991 C, 6.750%, 7/01/17
1,000,000 Regents of the University of Michigan, Hospital Revenue Bonds, 12/00 at 100 AA 1,056,530
Series 1990, 6.375%, 12/01/24
3,500,000 Regents of the University of Michigan, Medical Service Plan 12/01 at 102 Aa2 3,795,260
Revenue Bonds, Series 1991, 6.500%, 12/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 3.4%
435,000 Grand Rapids Housing Corporation, Multifamily Revenue Refunding 1/04 at 104 AAA 487,187
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 824,978
Refunding Revenue Bonds, Series 1990A (Fannie Mae Collateralized),
7.625%, 9/01/23
1,190,000 Michigan State Housing Development Authority, Limited Obligation 10/05 at 102 Aaa 1,276,620
Multi-Family Revenue Refunding Bonds, Series 1995A (GNMA
Collateralized Program--Parc Pointe Apartments), 6.500%,
10/01/15
6,000,000 Michigan State Housing Development Authority, Series I, 0.000%, No Opt. Call AA- 1,595,520
4/01/14
5,000,000 Michigan State Housing Development Authority, Rental Housing 4/01 at 102 AA- 5,362,150
Revenue Bonds, 1990 Series B, 7.550%, 4/01/23
</TABLE>
23
<PAGE> 248
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Multifamily (continued)
$290,000 Michigan State Housing Development Authority, Rental Housing Revenue No Opt. Call AA- $ 311,448
Bonds, 1991 Series B, 7.100%, 4/01/21
460,000 Michigan State Housing Development Authority, Rental Housing Revenue 10/02 at 102 AA- 494,422
Bonds, 1992 Series A, 6.650%, 4/01/23
1,000,000 Michigan State Housing Development Authority, Rental Housing Revenue 6/05 at 102 AAA 1,060,980
Bonds, 1995 Series B, 6.150%, 10/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.7%
Michigan State Housing Development Authority, Single Family Mortgage
Revenue, Series A:
2,000,000 6.450%, 12/01/14 6/04 at 102 AA+ 2,124,360
1,280,000 7.500%, 6/01/15 6/00 at 102 AA+ 1,338,509
415,000 7.700%, 12/01/16 6/99 at 102 AA+ 426,126
1,250,000 6.050%, 12/01/27 (Alternative Minimum Tax) 6/07 at 102 AAA 1,314,638
3,250,000 Michigan State Housing Development Authority, Single Family Mortgage 12/00 at 102 AA+ 3,419,293
Revenue, Series C, 7.550%, 12/01/15
3,930,000 Michigan State Housing Development Authority, Single Family Mortgage 12/04 at 102 AA+ 4,124,181
Revenue Refunding, Series C, 6.500%, 6/01/16
1,500,000 Michigan State Housing Development Authority, Single Family Mortgage 6/05 at 102 AA+ 1,612,635
Revenue Bonds, 1995 Series A, 6.800%, 12/01/16
1,500,000 Michigan State Housing Development Authority, Single Family Mortgage 12/06 at 102 AA+ 1,579,005
Revenue, Series D, 5.950%, 12/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 2.5%
2,500,000 The Economic Development Corporation of the City of Kalamazoo (Kalamazoo 5/07 at 102 BBB 2,647,475
County, Michigan), Limited Obligation Revenue and Refunding Bonds
(Friendship Village of Kalamazoo), Series 1997A, 6.250%, 5/15/27
1,200,000 Michigan State Hospital Finance Authority, Revenue Bonds (Presbyterian 7/05 at 102 N/R 1,288,428
Villages of Michigan Obligation Group), 6.500%, 1/01/25
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 644,172
500,000 6.375%, 1/01/25 1/07 at 102 N/R 534,320
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 400,644
2,675,000 5.375%, 7/01/28 7/08 at 101 A 2,654,750
250,000 The Economic Development Corporation of the City of Warren, Nursing Home 3/02 at 101 Aaa 265,868
Revenue Refunding Bonds (GNMA Mortgage-Backed Security-Autumn Woods
Project), Series 1992, 6.900%, 12/20/22
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 16.3%
400,000 County of Bay, Michigan, Bay County West Side Regional Sewage Disposal 11/98 at 102 A 411,252
System Bonds, 6.400%, 5/01/02
5,000,000 Brighton Area Schools, County of Livingston, State of Michigan, 1992 No Opt. Call AAA 1,626,100
Refunding Bonds, Series II (General Obligation Unlimited Tax),
0.000%, 5/01/20
3,600,000 School District of the City of Detroit, Wayne County, Michigan, School 5/06 at 102 AAA 3,792,204
Building and Site Improvement Bonds (Unlimited Tax General Obligation),
Series 1996A, 5.700%, 5/01/25
500,000 City of East Lansing Building Authority, County of Ingham, State of 10/99 at 102 AA 529,420
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 2,692,926
Michigan, 1994 Refunding Bonds (General Obligation - Unlimited Tax),
6.400%, 5/01/11
1,000,000 Lake Orion Community School District, County of Oakland, State of 5/05 at 101 AAA 1,027,070
Michigan, 1995 Refunding Bonds (General Obligation-Unlimited Tax),
5.500%, 5/01/20
</TABLE>
24
<PAGE> 249
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,000,000 School District of the City of Lincoln Park, County of Wayne, State of 5/08 at 100 AAA $ 972,100
Michigan, 1998 Refunding Bonds (Unlimited Tax), 5.000%, 5/01/26 (WI)
510,000 Livingston County, Michigan, Genoa, Oceola Sanitation Sewer No. 1, 5/99 at 102 A 530,247
6.000%, 5/01/08
2,700,000 Livonia, Michigan Public Schools School District, Series II, No Opt. Call AAA 1,719,441
0.000%, 5/01/08
2,410,000 Mona Shores, Michigan, School District, School District 5/05 at 102 AAA 2,529,849
Building and Site, 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 381,360
1,020,000 0.000%, 5/01/18 No Opt. Call AAA 368,954
1,500,000 Portage Lake, Michigan, Water and Sewer Authority, Refunding, 10/05 at 102 AAA 1,665,450
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 3,545,500
2,370,000 6.500%, 7/01/23 7/04 at 101 1/2 AAA 2,695,211
500,000 Redford Union Schools, District No. 1, County of Wayne, State No Opt. Call AAA 499,285
of Michigan, 1997 Refunding Bonds (General
Obligation - Unlimited Tax), 5.000%, 5/01/22
2,420,000 Rockford Public Schools, Kent County, 1997 School Building 5/07 at 100 AAA 2,426,728
and Site Bonds, General Obligation Unlimited Tax, 5.250%, 5/01/27
1,650,000 Saint Clair County Building Authority, Michigan, General 4/06 at 101 AAA 1,698,807
Obligation Bonds, 5.375%, 4/01/15
750,000 South Lyon Community Schools, Counties of Oakland, Washtenaw 5/01 at 102 AA+ 802,763
and Livingston, State of Michigan, 1991 Refunding Bonds
(General Obligation-Unlimited Tax), 6.250%, 5/01/14
2,925,000 Spring Lake Public Schools, General Obligation Bonds, Series 5/07 at 100 AAA 3,068,647
1997, 5.700%, 5/01/23
Waterford, Michigan, School District:
2,470,000 6.370%, 6/01/14 6/04 at 101 AAA 2,773,884
2,500,000 6.250%, 6/01/23 6/04 at 101 AAA 2,791,150
5,000,000 Wayland, Michigan, Unit School District, 6.250%, 5/01/14 5/05 at 101 AAA 5,636,250
1,250,000 Wayne County, Michigan, Building Authority, Capital Improvement, 6/06 at 102 AAA 1,266,500
Series A, 5.250%, 6/01/16
3,270,000 West Ottawa, Michigan, Public School District Refunding, 0.000%, 5/01/17 No Opt. Call AAA 1,247,047
2,000,000 Western Townships Utilities Authority, Sewage Disposal System 1/99 at 102 BBB+ 2,086,040
Bonds, Series 1989, 8.200%, 1/01/18
1,000,000 Western Townships Utilities Authority, Sewage Disposal System Refunding 1/02 at 100 AAA 1,071,370
Bonds, Series 1991, 6.500%, 1/01/10
5,175,000 Williamston Community School District, General Obligation-Unlimited Tax, No Opt. Call AAA 5,547,341
Series 1996, 5.500%, 5/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 16.3%
2,000,000 City of Detroit Building Authority, Building Authority Revenue Bonds 2/07 at 101 A 2,150,700
(District Court Madison Center), Series A, 6.150%, 2/01/11
10,700,000 City of Detroit (Michigan), Downtown Development Authority, 7/06 at 102 A- 11,555,358
Tax Increment Refunding Bonds (Development Area No. 1
Projects), Series 1996C, 6.250%, 7/01/25
9,460,000 Detroit/Wayne County Stadium Authority (State of Michigan), Building 2/07 at 102 AAA 9,489,988
Authority, 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 1,513,304
3,495,000 0.000%, 6/01/18 No Opt. Call AAA 1,258,829
1,650,000 6.875%, 6/01/24 6/04 at 102 AAA 1,879,482
2,000,000 Lansing, Michigan, Building Authority, Refunding, 5.600%, 6/01/19 6/05 at 101 AA+ 2,086,740
250,000 Michigan Municipal Bond Authority, State Revolving Fund Revenue Bonds, 12/01 at 100 AAA 251,443
Series 1992A, 4.750%, 12/01/09
5,500,000 Michigan Municipal Bond Authority, Revenue Refunding, Government Loan, No Opt. Call AAA 3,576,210
Series A, 0.000%, 12/01/07
2,800,000 Michigan Municipal Bond Authority, Local Government Loan, Series No Opt. Call AAA 1,773,240
C, 0.000%, 6/15/08
</TABLE>
25
<PAGE> 250
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
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 $1,089,450
5,000,000 6.250%, 10/01/20 10/01 at 102 AA 5,344,600
7,585,000 State Building Authority, State of Michigan, 1991 Revenue Bonds, 10/01 at 102 AA 8,107,758
Series II, 6.250%, 10/01/20
2,260,000 Puerto Rico Highway and Transportation Authority, 6.625%, 7/01/12 7/02 at 101 1/2 A 2,482,587
1,500,000 Puerto Rico Highway and Transportation Authority, Transportation 7/08 at 101 A 1,449,600
Revenue Bonds, Series A, 5.000%, 7/01/38
1,085,000 Romulus, Michigan, Tax Increment Finance Authority, Limited 11/06 at 100 N/R 1,153,594
Obligation Revenue, 6.750%, 11/01/19
250,000 Capital Region Airport Authority (Lansing, Michigan), Airport 7/02 at 102 AAA 273,408
Revenue Bonds, Series 1992, 6.700%, 7/01/21 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 16.7%
1,000,000 City of Battle Creek, County of Calhoun, State of Michigan, 5/04 at 102 BBB+*** 1,186,130
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 Michigan, Tax 5/04 at 102 A-*** 2,120,544
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, Electric 1/01 at 102 AAA 1,081,730
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, State of 5/01 at 102 N/R*** 2,093,520
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 10/00 at 102 A+*** 1,084,630
Revenue Bonds, Series 1990, 7.000%, 10/01/10 (Pre-refunded to 10/01/00)
750,000 City of Detroit, Michigan, General Obligation Bonds (Unlimited 4/01 at 102 AAA 842,558
Tax), Series 1991, 8.000%, 4/01/11 (Pre-refunded to 4/01/01)
300,000 School District of the City of Detroit, Wayne County, Michigan, 5/00 at 102 N/R*** 326,073
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 County, Michigan, 5/01 at 102 AA+*** 1,818,663
School Building and Site Bonds (Unlimited Tax General Obligation),
Series 1991, 7.150%, 5/01/11 (Pre-refunded to 5/01/01)
1,000,000 City of Detroit, Michigan, Sewage Disposal System Revenue Bonds, 7/99 at 101 1/2 AAA 1,050,090
Series 1989, 7.125%, 7/01/19 (Pre-refunded to 7/01/99)
2,000,000 City of Detroit, Michigan, Water Supply System Revenue Bonds, 7/00 at 102 AAA 2,168,900
Series 1990, 7.250%, 7/01/20 (Pre-refunded to 7/01/00)
500,000 City of Farmington Hills Hospital Finance Authority (Michigan), 2/02 at 102 AAA 549,940
Hospital Revenue Bonds (Botsford General Hospital), Series 1992A,
6.500%, 2/15/22 (Pre-refunded to 2/15/02)
3,000,000 City of Grand Rapids, Michigan, Water Supply System Improvement 1/00 at 102 AAA 3,208,950
Revenue Bonds, Series 1990, 7.250%, 1/01/20 (Pre-refunded to 1/01/00)
2,500,000 Haslett Public Schools, Counties of Ingham, Clinton and 5/00 at 101 AA+*** 2,685,575
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 Ottawa, State 10/02 at 102 AAA 836,843
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 and 5/01 at 102 N/R*** 2,198,220
Livingston, State of Michigan, 1991 School Building and Site Bonds,
7.100%, 5/01/08 (Pre-refunded to 5/01/01)
4,000,000 Lake Orion, Michigan, Community School District, Refunding, 5/05 at 101 AAA 4,682,080
7.000%, 5/01/15 (Pre-refunded to 5/01/05)
City of Marquette, Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Marquette General Hospital, Marquette, Michigan),
1989 Series C:
930,000 7.500%, 4/01/07 (Pre-refunded to 4/01/99) 4/99 at 102 A+*** 976,537
2,240,000 7.500%, 4/01/19 (Pre-refunded to 4/01/99) 4/99 at 102 A+*** 2,352,090
825,000 Menominee, Michigan, Area Public School District, 7.400%, 5/01/20 5/00 at 102 AA+*** 893,343
(Pre-refunded to 5/01/00)
3,000,000 Michigan Higher Education Facilities Authority, Limited 5/01 at 103 A*** 3,347,070
Obligation, Aquinas College Project, 7.350%, 5/01/11 (Pre-refunded
to 5/01/01)
</TABLE>
26
<PAGE> 251
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 555,000 Michigan Municipal Bond Authority, State Revolving Fund Reserve 10/02 at 102 AA+*** $ 618,553
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+ 1,094,619
1,000,000 6.500%, 10/01/14 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,141,230
1,000,000 6.500%, 10/01/17 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,141,230
500,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 12/02 at 102 AAA 564,795
(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 1,078,860
System, Series A, 7.000%, 7/01/10 (Pre-refunded to 7/01/00)
6,000,000 Michigan Hospital Finance Authority (Oakwood Hospital Obligated 7/00 at 102 AAA 6,485,040
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 878,480
Health Corporation, 7.200%, 2/15/18 (Pre-refunded to 2/15/01)
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 11/01 at 102 Aa2*** 1,109,590
(Daughters of Charity National Health System-Providence Hospital),
Series 1991, 7.000%, 11/01/21 (Pre-refunded to 11/01/01)
2,400,000 Oakland County, Michigan, Economic Development Corporation, 1/00 at 102 N/R*** 2,648,232
Limited Obligation Revenue, Pontiac Osteopathic Hospital
Project, 9.625%, 1/01/20 (Pre-refunded to 1/01/00)
1,800,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue, 7/00 at 102 AAA 1,971,414
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*** 1,113,611
School Building and Site 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*** 208,737
Michigan, Water Supply Revenue Bonds (Limited Tax General
Obligation), Series 1992, 6.875%, 9/01/16 (Pre-refunded
to 9/01/04)
7,000,000 Vicksburg Community Schools, Counties of Kalamazoo and St. 5/06 at 37 1/4 AAA 1,837,360
Joseph, State of Michigan, 1991 School Building and Site
Bonds, 0.000%, 5/01/20 (Pre-refunded to 5/01/06)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 3.4%
400,000 Michigan Public Power Agency, Belle River Project Refunding 1/03 at 102 AA- 400,644
Revenue Bonds, 1993 Series A, 5.250%, 1/01/18
3,000,000 Michigan State South Central Power Agency, Power Supply System 11/04 at 102 BBB+ 3,415,890
Revenue Refunding, 7.000%, 11/01/11
3,500,000 Michigan State Strategic Fund, Limited Obligation Revenue 6/04 at 102 AAA 3,901,240
Refunding, Detroit Education Company, Series B, 6.450%, 6/15/24
1,000,000 Monroe County, Michigan, Economic Development Corporation, No Opt. Call AAA 1,269,020
Limited Obligation Revenue Refunding Collateralized, Detroit
Edison Company, Series Aa, 6.950%, 9/01/22
1,000,000 County of Monroe, Michigan, Pollution Control Revenue Bonds (The No Opt. Call AAA 1,106,360
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, Formerly No Opt. Call AAA 1,569,920
Puerto Rico Commonwealth Water Resource Authority Power, Capital
Appreciation Refunding, Series N, MBIA, IBC, 0.000%, 7/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.3%
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 1,525,950
10,500,000 5.250%, 7/01/21 7/05 at 101 AAA 10,529,610
2,885,000 City of Detroit, Michigan, Sewage Disposal System Revenue Bonds, 7/07 at 101 AAA 2,813,856
Series 1997-A, 5.000%, 7/01/22
1,570,000 City of Detroit, Michigan, Water Supply System Revenue, Second No Opt. Call AAA 1,701,235
Lien Bonds, Series 1995-A, 5.550%, 7/01/12
2,230,000 City of Detroit, Michigan, Water Supply System Revenue, Second No Opt. Call AAA 2,416,405
Lien Bonds, Series 1995-B, 5.550%, 7/01/12
</TABLE>
27
<PAGE> 252
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water and Sewer (continued)
$ 1,000,000 City of Grand Rapids, Michigan, Sanitary Sewer System Improvement 1/00 at 102 AA-- $ 1,063,349
Revenue Refunding Bonds, Series 1990, 7.000%, 1/01/16
1,250,000 Michigan Municipal Bond Authority, State Revolving Fund, 5.125%, 10/07 at 101 AA+ 1,247,437
10/01/20
- ------------------------------------------------------------------------------------------------------------------------------------
$348,855,000 Total Investments -- (cost $309,809,533) -- 100.0% 340,187,675
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.0% (123,085)
---------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $340,064,590
=====================================================================================================================
</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.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
28
<PAGE> 253
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund
May 31, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials -- 0.3%
$1,650,000 Toledo, Lucas County, Ohio, Port Authority, Port Revenue 3/02 at 102 AA-- $1,846,218
Refunding Facilities, Cargill Inc. Project, 7.250%, 3/01/22
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Goods -- 0.2%
1,425,000 Ohio Water Development Authority, Revenue Bonds, USA Waste 3/02 at 102 N/R 1,545,498
Services, Series 1992, 7.750%, 9/01/07 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples -- 0.1%
1,000,000 Summit County, Ohio, Industrial Development Revenue, Century 11/99 at 100 Aa1 1,022,880
Products Inc. Project, 7.750%, 11/01/05
- ----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 4.4%
1,000,000 Kent State University (A State University of Ohio), General 5/02 at 102 AAA 1,091,710
Receipts Bonds, Series 1992, 6.500%, 5/01/22
2,050,000 Miami University, Ohio, University Revenues, 6.900%, 12/01/04 12/99 at 102 A+ 2,175,583
3,500,000 State of Ohio, Education Loan Revenue Bonds, Series 1997
(Supplemental Student Loan Program), 1997A1, 5.850%, 12/01/19 6/07 at 102 AAA 3,635,275
(Alternative Minimum Tax)
1,750,000 State of Ohio (Ohio Higher Educational Facility Commission), 12/04 at 102 AAA 1,852,235
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 2,267,312
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 1,256,364
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 Bonds (Xavier 5/07 at 102 AAA 7,136,360
University 1997 Project), 5.375%, 5/15/22
Ohio Higher Educational Facility Commission, Case Western Reserve
University, Ohio:
1,870,000 7.125%, 10/01/14 10/00 at 102 AA 2,037,608
750,000 6.500%, 10/01/20 No Opt. Call AA 902,565
2,250,000 Ohio State Higher Educational Facility, John Carroll University 4/07 at 102 A2 2,387,790
Project Revenue, 5.750%, 4/01/19
4,250,000 University of Cincinnati (Ohio), General Receipts Bonds, Series 6/07 at 100 AAA 4,321,273
AB, 5.375%, 6/01/20
1,230,000 Youngstown State University, Ohio, General Receipts, 6.000%, 12/04 at 102 AAA 1,375,386
12/15/16
- ----------------------------------------------------------------------------------------------------------------------------------
Energy -- 0.5%
2,125,000 County of Ashtabula, Ohio, Industrial Development Refunding 5/02 at 102 Baa1 2,299,165
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 1,062,490
Quality Development Refunding Revenue Bonds, Series 1992 (Ashland
Oil, Inc. Project), 6.850%, 4/01/10
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care -- 14.9%
1,250,000 County of Butler, Ohio, Hospital Facilities Revenue Refunding and 1/02 at 102 BBB-- 1,357,088
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 556,610
1,000,000 8.000%, 12/01/11 12/01 at 102 BBB 1,112,190
</TABLE>
29
<PAGE> 254
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
$ 1,500,000 County of Cuyahoga, Ohio, Hospital Improvement and Refunding Revenue 1/06 at 102 AAA $ 1,560,390
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 Revenue 2/07 at 102 AAA 1,046,190
Bonds, Series 1997 (The MetroHealth System Project), 5.625%, 2/15/17
2,000,000 Cuyahoga County, Ohio, Industrial Development Refunding Revenue Bonds, 8/01 at 103 AAA 2,206,320
Series 1991 (University Health Care Center Project), 7.300%, 8/01/11
2,010,000 County of Erie, Ohio, Hospital Improvement and Refunding Revenue Bonds, 1/02 at 102 A 2,195,302
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 Childrens Hospital Project):
1,575,000 5.750%, 11/01/15 11/06 at 101 Aa 1,667,689
5,275,000 5.875%, 11/01/25 11/06 at 101 Aa 5,614,130
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 1,019,822
2,000,000 5.875%, 6/01/21 6/06 at 102 AA 2,142,960
1,500,000 Franklin County, Ohio, Hospital Revenue Refunding Bonds (Holy Cross 6/00 at 102 AAA 1,624,515
Health System--Mt. Carmel Health), Series 1990-A, 7.625%, 6/01/09
City of Garfield Heights, Ohio, Hospital Improvement and Refunding
Revenue Bonds, Series 1992B (Marymount Hospital Project):
3,000,000 6.650%, 11/15/11 11/02 at 102 A 3,272,790
3,500,000 6.700%, 11/15/15 11/02 at 102 A 3,822,245
3,000,000 County of Hamilton, Ohio, Hospital Facilities Revenue Refunding Bonds, 1/03 at 102 A 3,246,030
Series 1992A (Bethesda Hospital, Inc.), 6.250%, 1/01/12
1,720,000 Franciscan Sisters of the Poor Health System, Inc., Hamilton County, 7/02 at 102 Baa1 1,858,305
Ohio, Health System Revenue Bonds, Providence Hospital Issue, Series
1992, 6.875%, 7/01/15
7,890,000 Lorain County, Ohio, Hospital Revenue Refunding, EMH Regional Medical 11/05 at 102 AAA 7,979,788
Center, 5.375%, 11/01/21
2,250,000 County of Lorain, Ohio, Hospital Facilities Revenue Bonds, Series 1997 B 9/07 at 102 AAA 2,326,163
(Catholic Healthcare Partners), 5.500%, 9/01/27
1,000,000 County of Lucas, Ohio, Hospital Improvement Revenue Bonds, Series 1990A 8/00 at 102 AAA 1,071,800
(St. Vincent Medical Center), 6.750%, 8/15/20
3,000,000 County of Lucas, Ohio, Hospital Improvement Revenue Bonds, Series 1992 8/02 at 102 AAA 3,289,470
(St. Vincent Medical Center), 6.500%, 8/15/12
500,000 Mansfield, Hospital Improvement Revenue (Mansfield General Hospital), 12/01 at 102 AAA 546,765
6.700%, 12/01/09
2,000,000 County of Marion, Ohio, Hospital Refunding and Improvement Revenue Bonds, 5/06 at 102 BBB+ 2,191,880
Series 1996 (The Community Hospital), 6.375%, 5/15/11
1,250,000 Maumee Hospital Facilities Revenue (St. Lukes Hospital), 5.800%, 12/01/14 12/04 at 102 AAA 1,338,788
4,405,000 County of Miami, Ohio, Hospital Facilities Revenue Refunding and 5/06 at 102 BBB 4,681,722
Improvement Bonds, Series 1996A (Upper Valley Medical Center), 6.250%,
5/15/16
4,205,000 Miami County, Ohio, Hospital Facilities Revenue Refunding & Improvement, 5/06 at 102 BBB 4,469,158
Upper Valley Medical Center, Series C, 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 4,233,600
2,000,000 5.750%, 8/15/21 8/08 at 102 AAA 2,130,020
11,000,000 Montgomery County, Ohio, Health System Revenue Bonds, Franciscan Medical 1/08 at 102 Baa1 11,018,040
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 1,568,490
7,000,000 6.250%, 4/01/20 No Opt. Call AAA 8,183,070
</TABLE>
30
<PAGE> 255
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
$ 2,500,000 Montgomery County, Ohio, Sisters Charity Health Care, Series A, 5/03 at 101 AAA $ 2,755,325
6.250%, 5/15/08
2,790,000 City of Mount Vernon, Ohio, Hospital Refunding Revenue Bonds, Series 6/02 at 100 N/R 2,852,663
1986A (Knox Community Hospital), 7.875%, 6/01/12
1,725,000 County of Shelby, Ohio, Hospital Facilities Revenue Refunding and 9/02 at 102 BBB 1,929,326
Improvement Bonds, Series 1992 (The Shelby County Memorial Hospital
Association), 7.700%, 9/01/18
2,750,000 County of Trumbull, Ohio, Hospital Refunding and Improvement Revenue 11/01 at 102 AAA 3,112,230
Bonds, Series 1991 (Trumbull Memorial Hospital Project), Series 1991
B, 6.900%, 11/15/12
750,000 County of Tuscarawas, Ohio, Hospital Facilities Revenue Bonds, Series 10/03 at 102 Baa2 800,843
1993A (Union Hospital Project), 6.500%, 10/01/21
1,500,000 Washington County (Marietta Area Health Care Project), 7.375%, 9/01/12 9/02 at 102 Baa1 1,649,175
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 3.9%
16,160,000 County of Franklin, Ohio, Mortgage Revenue Bonds, Series 1997 (GNMA 10/07 at 103 Aaa 16,389,795
Collateralized -- Columbus Properties Project), 5.600%, 4/20/39
(Alternative Minimum Tax)
6,200,000 Hamilton County, Multi-Family Housing Revenue Bonds (Huntington 1/07 at 102 AAA 6,374,158
Meadows Project), Series 1997, 5.700%, 1/01/27 (Alternative Minimum Tax)
2,800,000 Ohio Capital Corporation for Housing, Mortgage Revenue Refunding, FHA, 11/02 at 100 AAA 2,827,832
Section 8 Assisted Project, Series C, 5.700%, 1/01/24
Ohio Capital Corporation for Housing, Multifamily Housing Refunding
Revenue Bonds, Series 1989A:
310,000 7.500%, 11/01/11 11/02 at 100 AAA 326,291
1,215,000 7.600%, 11/01/23 11/02 at 100 AAA 1,278,836
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 5.7%
5,000,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds, 1996 9/07 at 102 AAA 5,141,450
Series B-3 (Mortgage-Backed Securities Program), 5.750%, 9/01/28
(Alternative Minimum Tax)
5,500,000 Ohio Housing Finance Agency, Residential Mortgage Revenue, Series C, 9/07 at 102 AAA 5,655,595
5.750%, 9/01/28 (Alternative Minimum Tax)
5,045,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds, 1997 3/08 at 101 AAA 5,136,415
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 Bonds, 9/04 at 102 AAA 2,110,156
Series 1994-A1 (GNMA Mortage-Backed Securities Program), 6.100%, 9/01/14
5,255,000 Ohio Housing Finance Agency, Residential Mortgage Revenue, Series B-1, 9/04 at 102 AAA 5,633,518
6.375%, 9/01/14
12,995,000 Ohio Housing Finance Agency, Residential Mortgage Revenue, Series A-1, 9/07 at 102 AAA 13,785,226
6.150%, 3/01/29 (Alternative Minimum Tax)
590,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue Bonds (GNMA 3/00 at 102 AAA 617,146
Mortgage-Backed Securities Program), 1990 Series A, 7.400%, 9/01/15
600,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue Bonds 9/00 at 102 AAA 632,526
(GNMA Mortgage-Backed Securities Program), 1990 Series D, 7.500%, 9/01/13
265,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue Bonds (GNMA 9/01 at 102 AAA 280,932
Mortgage-Backed Securities Program), 1991 Series D, 7.050%, 9/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other -- 0.4%
2,860,000 Cleveland-Cuyahoga County Port Authority (Ohio), Development Revenue 5/08 at 102 N/R 2,773,142
Bonds (Port of Cleveland Bond Fund -- Jergens, Inc., Project),
Series 1998A, 5.375%, 5/15/18 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care -- 3.5%
4,030,000 County of Cuyahoga, Ohio, Health Care Facilities Revenue Bonds, Series 6/00 at 100 N/R 4,355,261
1990 (Altenheim Project), 9.280%, 6/01/15
2,500,000 Fairlawn, Ohio, Health Care Facilities Revenue Bonds, Series 1989 (The 10/99 at 102 N/R 2,637,150
Village at Saint Edward Project), 8.750%, 10/01/19
1,500,000 County of Franklin, Ohio, Health Care Facilities Revenue Bonds, Series 7/03 at 102 N/R 1,524,015
1993 (Ohio Presbyterian Retirement Services), 6.500%, 7/01/23
</TABLE>
31
<PAGE> 256
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Long Term Care (continued)
$ 3,120,000 County of Franklin, Ohio, Health Care Facilities Revenue Bonds, Series 11/05 at 102 Aa2 $ 3,309,384
1995 (Heinzerling Foundation), 6.200%, 11/01/20
1,350,000 County of Franklin, Ohio, Hospital Facilities Mortgage Revenue Bonds, 7/01 at 103 N/R 1,511,744
1991 Series A (Ohio Presbyterian Retirement Services), 8.750%, 7/01/21
670,000 Franklin County, Hospital Revenue Refunding, FHA Insured Mortgage Loan 8/00 at 102 N/R 698,984
(Worthington Christian Village Nursing Home), 7.000%, 8/01/16
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 1,324,788
750,000 6.300%, 11/15/15 11/03 at 102 BBB 791,453
2,175,000 City of Napoleon, Ohio, Health Care Facilities Mortgage Revenue 9/04 at 102 Aa 2,404,898
Refunding Bonds, Series 1994 (The Lutheran Orphans and Old Folks
Home Society at Napoleon, Ohio, Inc., FHA Insured Project), 6.875%, 8/01/23
4,775,000 County of Warren, Ohio, Hospital Facilities Improvement and Refunding 7/01 at 102 Aa2 5,286,594
Revenue Bonds, Series 1991 (Otterbein Home Project), 7.200%, 7/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General--17.7%
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 7,485,780
9,500,000 5.250%, 12/01/21 12/05 at 102 AAA 9,528,215
3,955,000 City of Akron, Ohio, General Obligation Bonds, Various Purpose 12/04 at 102 AAA 4,511,271
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 278,994
2,850,000 5.750%, 12/01/24 12/05 at 101 AAA 3,000,651
1,000,000 Archbold Area Local School District, General Obligation Bonds 12/06 at 102 AAA 1,089,740
(Unlimited Tax), Series 1996, 6.000%, 12/01/21
1,000,000 Aurora City School District, Ohio, General Obligation (Unlimited Tax), 12/05 at 102 AAA 1,071,350
School Improvement Bonds, Series 1995, 5.800%, 12/01/16
2,905,000 Board of Education, Batavia Local School District, County of Clermont, 12/05 at 102 AAA 3,337,787
Ohio, School Improvement Bonds, Series 1995 (Unlimited Tax), Bank
Qualified, 6.300%, 12/01/22
1,000,000 Board of Education, Beavercreek Local School District, County of No Opt. Call AAA 1,203,020
Greene, Ohio, School Improvement Bonds, Series 1996 (Unlimited Tax
General Obligation), 6.600%, 12/01/15
2,500,000 Buckeye Valley Local School District, Ohio, General Obligation No Opt. Call AAA 3,077,275
(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 152,495
125,000 8.500%, 12/01/05 No Opt. Call N/R 155,153
125,000 8.500%, 12/01/06 No Opt. Call N/R 157,436
125,000 8.500%, 12/01/07 No Opt. Call N/R 159,914
125,000 8.500%, 12/01/08 No Opt. Call N/R 162,150
130,000 8.500%, 12/01/09 No Opt. Call N/R 170,654
4,745,000 City of Cleveland, Ohio, Various Purpose General Obligation Bonds, 11/04 at 102 AAA 5,467,047
Series 1994, 6.625%, 11/15/14
550,000 County of Columbiana, Ohio, County Jail Facilities Construction Bonds 12/04 at 102 AA 634,387
(General Obligation--Unlimited Tax), 6.600%, 12/01/17
1,500,000 City of Columbus, Ohio, General Obligation Refunding Bonds, Series 1/02 at 102 Aaa 1,634,340
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 784,741
500,000 9.375%, 4/15/07 No Opt. Call AAA 680,035
</TABLE>
32
<PAGE> 257
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,000,000 County of Cuyahoga, Ohio, General Obligation Various Purpose No Opt. Call AA+ $1,057,320
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+ 1,468,888
Obligation), 5.650%, 5/15/18
200,000 City of Dayton, Ohio, General Obligation Bonds, Limited Tax, No Opt. Call A+ 217,036
10.500%, 10/01/99
750,000 City of Defiance, Ohio, Waterworks System Improvement Bonds, Series 12/04 at 102 AAA 830,205
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 554,600
1,000,000 0.000%, 12/01/11 No Opt. Call AAA 522,130
250,000 East Holmes Local School District, Ohio, School Improvement 12/98 at 102 AAA 259,728
Refunding Bonds, General Obligation - Unlimited Tax,
7.700%, 12/01/08
1,110,000 City of Fairborn, Ohio, General Obligation Bonds, Utility 10/02 at 102 AAA 1,241,158
Improvement Bonds, Series 1991, 7.000%, 10/01/11
4,040,000 County of Franklin, Ohio, Refunding Bonds, Series 1993 (Limited Tax 12/08 at 102 AAA 4,130,536
General Obligation Bonds), 5.375%, 12/01/20
1,575,000 Garaway Local School District, Ohio, School Improvement Bonds, 12/00 at 102 AAA 1,714,640
Series 1990 (General Obligation - Unlimited Tax Bonds),
7.200%, 12/01/14
620,000 County of Geauga, Ohio, General Obligation (Limited Tax), Sewer No Opt. Call Aa 751,607
District Improvement Bonds (Bainbridge Water Project),
6.850%, 12/01/10
1,000,000 Grandview Heights City School District, Franklin County, Ohio, 12/05 at 101 AA 1,078,940
School 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 1,077,670
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 General 12/07 at 102 AAA 1,091,440
Obligation), 5.850%, 12/01/16
1,000,000 Indian Valley Local School District, Ohio, General Obligation 12/05 at 102 AAA 1,060,070
(Unlimited Tax), School Improvement Bonds, Series 1995,
5.750%, 12/01/19
1,200,000 County of Jefferson, Ohio, Human Services Building Construction 12/01 at 102 AAA 1,324,428
Bonds, 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 2,076,177
Improvement Refunding Bonds, Series 1992, 6.500%, 12/01/10
1,070,000 Kettering, Ohio, 6.650%, 12/01/12 12/01 at 102 Aa3 1,167,616
1,000,000 Kettering City School District, General Obligation Unlimited Tax, 12/05 at 101 AAA 1,002,720
5.250%, 12/01/22
500,000 Kings Local School District, General Obligation (Unlimited Tax), 12/05 at 100 AAA 513,910
School Improvement Bonds, Series 1995, 5.500%, 12/01/21
500,000 Kirtland Local School District, Ohio, School Improvement Bonds, 12/99 at 102 N/R 532,465
Series 1989, General Obligation Unlimited Tax Bonds,
7.500%, 12/01/09
1,000,000 Lakeview, Ohio, Local School District, 6.900%, 12/01/14 12/04 at 102 AAA 1,170,260
1,440,000 Lakewood, Ohio, Series B, 5.750%, 12/01/15 12/05 at 102 Aa3 1,530,994
1,000,000 Lakota Local School District, County of Butler, Ohio, School 12/05 at 100 AAA 1,120,440
Improvement Unlimited Tax General Obligation Bonds, Series
1994, 6.125%, 12/01/17
Logan County, Ohio, Series 1986:
155,000 7.750%, 12/01/02 No Opt. Call A 177,340
155,000 7.750%, 12/01/03 No Opt. Call A 181,341
155,000 7.750%, 12/01/04 No Opt. Call A 185,017
155,000 7.750%, 12/01/05 No Opt. Call A 187,941
155,000 7.750%, 12/01/06 No Opt. Call A 190,954
1,000,000 County of Lucas, Ohio, General Obligation (Limited Tax), Various 12/02 at 102 A 1,073,450
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 1,035,320
Purpose Improvement Bonds, Series 1995-1, 5.400%, 12/01/15
</TABLE>
33
<PAGE> 258
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,000,000 County of Mahoning, Ohio, General Obligation Bonds, Various Purpose 12/99 at 102 AAA $ 1,067,130
Improvement Bonds, Series 1989, Limited Tax, 7.200%, 12/01/09
865,000 Marysville, Ohio, Exempt Village School District, Improvement, No Opt. Call AAA 344,331
0.000%, 12/01/16
1,215,000 Mason City School District, Counties of Warren and Butler, Ohio, School 12/09 at 101 Aa3 1,249,044
Improvement Unlimited Tax General Obligation Bonds, Series 1998,
5.300%, 2/01/17
3,000,000 North Canton City School District, Ohio, School Improvement Refunding Bonds, 12/08 at 101 Aaa 2,972,670
Series 1998 (General Obligation Unlimited Tax), 5.000%, 12/01/19
1,000,000 City of North Olmsted, Ohio, General Obligation (Limited Tax), Various 12/02 at 102 AAA 1,091,840
Purpose Bonds, Series 1992, 6.250%, 12/15/12
North Royalton City School District, Ohio, School Improvement Bonds,
Series 1994:
2,200,000 6.000%, 12/01/14 12/09 at 102 AAA 2,473,526
2,400,000 6.100%, 12/01/19 12/09 at 102 AAA 2,658,288
600,000 Oak Hills, Ohio, Local School District, Series A, 5.700%, 12/01/25 12/07 at 101 Aa3 633,996
1,250,000 Oak Hills Local School District, Hamilton County, Ohio, School Facilities 12/07 at 101 AAA 1,243,600
Construction and Improvement Bonds, Series B, 5.125%, 12/01/25
1,000,000 State of Ohio, Full Faith and Credit, General Obligation Infrastructure No Opt. Call AA+ 1,138,830
Improvement Bonds, Series 1994, 6.000%, 8/01/10
Ohio State Infrastructure Improvement:
750,000 6.200%, 8/01/13 8/05 at 102 AA+ 849,893
2,000,000 6.200%, 8/01/14 8/05 at 102 AA+ 2,266,380
7,640,000 Ohio State, MBIA, 0.000%, 8/01/13 No Opt. Call AAA 3,611,504
500,000 Olmsted Falls, Ohio, Local School District, 7.050%, 12/15/11 12/01 at 102 AAA 558,875
1,750,000 Pickerington Local School District, Fairfield and Franklin Counties, Ohio, 12/01 at 102 A 1,886,780
General Obligation Bonds (Pickerington Public Library Project), Unlimited
Tax, 6.750%, 12/01/16
Pickerington, Ohio, Local School District Refunding:
500,000 0.000%, 12/01/11 No Opt. Call AAA 261,065
500,000 0.000%, 12/01/13 No Opt. Call AAA 232,495
220,000 Puerto Rico Commonwealth Refunding, 8.000%, 7/01/07 7/98 at 102 A 225,124
2,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998, 7/08 at 101 A 2,421,675
5.000%, 7/01/27
1,000,000 Revere Local School District, Ohio, School Improvement Bonds, Series 1993 12/03 at 102 AAA 1,087,570
(General Obligation Unlimited Tax Bonds), 6.000%, 12/01/16
1,200,000 Ridgemont Local School District, Ohio, General Obligation (Unlimited Tax), 12/02 at 102 N/R 1,319,772
School Improvement Bonds, Series 1992, 7.250%, 12/01/14
2,340,000 City of Stow, Ohio, Safety Center Construction Bonds (General Obligation 12/05 at 102 A1 2,538,572
Limited Tax), 6.200%, 12/01/20
2,870,000 City of Strongsville, Ohio, Various Purpose Improvement Bonds, Series 1996 12/06 at 102 Aa3 3,095,582
(General Obligation-Limited Tax), 5.950%, 12/01/21
540,000 Trumbull County, Ohio, 6.200%, 12/01/14 12/04 at 102 AAA 599,362
1,070,000 County of Trumbull, Ohio, Correctional Facilities Bonds, Series 1995 No Opt. Call AAA 1,238,343
(General Obligation Limited Tax), 7.000%, 12/01/04
1,320,000 Twinsburg, Ohio, City School District, Certificates Eligible, 12/01 at 102 AAA 1,444,819
6.700%, 12/01/11
Upper Arlington, Ohio, City School District:
1,830,000 0.000%, 12/01/11 No Opt. Call AAA 955,498
1,870,000 0.000%, 12/01/12 No Opt. Call AAA 917,441
1,000,000 Upper Arlington, Ohio, City School District, General Obligation Bonds, 12/06 at 101 AAA 995,480
Series 1996, Improvement Bonds, 5.125%, 12/01/19
1,910,000 Vandalia, Ohio, Various Purpose Improvement, 5.850%, 12/01/21 12/06 at 101 Aa 2,038,295
750,000 West Geauga Local School District, Ohio, School Improvement Bonds, 11/04 at 102 AAA 820,215
Series 1994 (General Obligation Unlimited Tax), 5.950%, 11/01/12
1,000,000 Woodridge, Ohio, Local School District, 6.000%, 12/01/19 12/04 at 102 AAA 1,091,050
</TABLE>
34
<PAGE> 259
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,425,000 Wooster City School District, Wayne County, Ohio, General 12/02 at 102 AAA $ 1,589,075
Obligation Bonds (Unlimited Tax), School Building Construction
and Improvement, 6.500%, 12/01/17
300,000 Youngstown, Ohio, 6.125%, 12/01/14 12/04 at 102 AAA 331,722
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited--6.2%
500,000 County of Athens, Ohio, Community Mental Health Revenue Bonds, 1991 6/01 at 102 AA 539,050
Series I, 6.900%, 6/01/10
6,000,000 City of Cleveland, Ohio, Certificates of Participation, Series 11/07 at 102 AAA 6,015,240
1997, Cleveland Stadium Project, 5.250%, 11/15/27
1,500,000 Ohio State Building Authority (Juvenile Correctional Building), 9/04 at 102 AAA 1,694,565
6.600%, 10/01/14
1,100,000 Ohio State Department of Transportation, Certificates of 4/02 at 102 AAA 1,193,874
Participation, Panhandle Rail Line Project, Series A, 6.500%, 4/15/12
1,000,000 Ottawa County, Ohio, Special Assessment, Portage, Catawba Isle, 9/01 at 102 AAA 1,098,530
7.000%, 9/01/11
27,850,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 29,188,193
Bonds, Series Y of 1996, 5.500%, 7/01/36
2,700,000 Puerto Rico Public Buildings Authority, Revenue Guaranteed No Opt. Call A 2,868,210
Refunding, Series L, 5.500%, 7/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--0.2%
1,000,000 County of Franklin, Ohio, Revenue Bonds, Series 1991 (OCLC - Online 7/01 at 100 N/R 1,059,920
Computer Library Center, Incorporated Project), 7.200%, 7/15/06
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation--3.6%
9,840,000 City of Cleveland, Ohio, Airport System Revenue Bonds, Series 1/08 at 101 AAA 9,644,184
1997A, 5.125%, 1/01/27 (Alternative Minimum Tax)
4,000,000 City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds, 2/08 at 102 BBB 4,026,640
Series 1998A (Emery Air Freight Corporation and Emery Worldwide
Airlines, Inc.--Guarantors) (Non-AMT), 5.625%, 2/01/18
11,000,000 State of Ohio, Turnpike Revenue Bonds, 1996 Series A, Issued by No Opt. Call AAA 11,375,320
the Ohio Turnpike Commission, 5.500%, 2/15/26
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed--19.6%
2,000,000 City of Athens (County of Athens, Ohio), Sanitary Sewer System 12/09 at 100 A*** 2,332,680
Mortgage 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 1/02 at 102 N/R*** 3,356,100
1992 (The Barberton Citizens Hospital Company Project), 7.250%,
1/01/12 (Pre-refunded to 1/01/02)
2,790,000 City of Bedford, Ohio, Hospital Facilities Refunding Revenue Bonds, 5/00 at 102 N/R*** 3,050,558
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 12/01 at 102 AAA 1,118,390
Counties, Ohio, General Obligation Bonds (Unlimited Tax), School
Facilities Construction and Improvement, 7.100%, 12/01/13
(Pre-refunded to 12/01/01)
1,400,000 City of Canton, Ohio, General Obligation Bonds, Limited Tax, 12/98 at 103 A+*** 1,470,210
7.875%, 12/01/08 (Pre-refunded to 12/01/98)
County of Clermont, Ohio, Hospital Facilities Revenue Bonds, Series
1989A (Mercy Health System, Province of Cincinnati):
3,660,000 7.500%, 9/01/19 (Pre-refunded to 9/01/99) 9/99 at 102 AAA 3,894,240
1,085,000 7.500%, 9/01/19 (Pre-refunded to 9/01/01) 9/01 at 100 AAA 1,197,829
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 1,096,320
2,000,000 7.375%, 12/01/20 (Pre-refunded to 12/01/00) 12/00 at 102 AAA 2,198,560
3,700,000 County of Clermont, Ohio, Sewer System Revenue Bonds, Series 1991, 12/01 at 102 AAA 4,132,863
Clermont County Sewer District, 7.100%, 12/01/21 (Pre-refunded to
12/01/01)
City of Cleveland, Ohio, General Obligation Bonds, Series 1988:
1,010,000 7.500%, 8/01/08 (Pre-refunded to 2/01/03) 2/03 at 100 AAA 1,152,046
1,010,000 7.500%, 8/01/09 (Pre-refunded to 2/01/03) 2/03 at 100 AAA 1,152,046
</TABLE>
35
<PAGE> 260
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 500,000 City of Cleveland, Ohio, Various Purpose General Obligation Bonds, 7/02 at 102 AAA $ 551,170
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 911,858
Improvement Bonds, Series 1991 (General Obligation Unlimited Tax
Bonds), 8.250%, 12/01/08 (Pre-refunded to 12/01/01)
10,000 City of Cleveland, Ohio, First Mortgage Revenue Refunding Bonds, Series F 1/02 at 102 AAA 10,978
1992-B, 6.500%, 1/01/11 (Pre-refunded to 1/01/02)
5,750,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds (Meridia Health System), 8/05 at 102 AAA 6,548,100
Series 1995, 6.250%, 8/15/14 (Pre-refunded to 8/15/05)
1,250,000 Conversion and Remarketing of the County of Cuyahoga, Ohio, Hospital 10/00 at 103 N/R*** 1,377,538
Improvement Revenue Bonds (Deaconess Hospital of Cleveland Project),
Series 1995B, 7.450%, 10/01/18 (Pre-refunded to 10/01/00)
1,000,000 County of Cuyahoga, Ohio, Hospital Revenue Improvement and Refunding 1/99 at 102 AAA 1,038,900
Bonds, Series 1989 A (University Hospitals Health System, Inc.
Project), 6.875%, 1/15/19 (Pre-refunded to 1/15/99)
4,000,000 County of Cuyahoga, Ohio, Hospital Facilities Revenue Bonds, Series 1989 8/99 at 102 Aaa 4,239,400
(Fairview General Hospital), 7.375%, 8/01/19 (Pre-refunded to 8/01/99)
5,750,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds, Series 1990 (Meridia 8/00 at 102 AAA 6,255,540
Health System), 7.250%, 8/15/19 (Pre-refunded to 8/15/00)
4,990,000 County of Cuyahoga, Ohio, Distribution System Improvement Revenue Bonds, 6/99 at 102 N/R*** 5,278,672
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 1,088,500
7.250%, 9/01/20 (Pre-refunded to 9/01/00)
2,600,000 County of Erie, Ohio, Franciscan Services Corporation, Revenue Bonds, 1/99 at 102 N/R*** 2,708,498
Series 1989A (Providence Hospital, Inc), 7.625%, 1/01/19 (Pre-refunded
to 1/01/99)
1,500,000 City of Findlay, Ohio, General Obligation Bonds, 7.200%, 8/01/11 (Pre- 8/99 at 102 AA-*** 1,586,790
refunded to 8/01/99)
1,350,000 County of Franklin, Ohio, Hospital Facilities Improvement Revenue Bonds, 5/00 at 102 AAA 1,458,122
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 1,086,630
Revenue Bonds, Series 1990B (Riverside United Methodist Hospital
Project), 7.600%, 5/15/20 (Pre-refunded to 5/15/00)
1,000,000 Board of Education, Gahanna-Jefferson City School District, Franklin 12/00 at 102 N/R*** 1,091,860
County, Ohio, General Obligation Bonds, Series 1990 A, 7.125%, 12/01/14
(Pre-refunded to 12/01/00)
6,750,000 City of Hamilton, Ohio, Electric System Mortgage Revenue Bonds, 1988 10/98 at 102 AAA 6,991,988
Series B, 8.000%, 10/15/22 (Pre-refunded to 10/15/98)
1,495,000 County of Hamilton, Ohio, Judson Care Center Nursing Home and Board 8/00 at 101 1/4 AA-*** 1,629,490
and Care Project (FHA Insured Mortgage), 7.800%, 8/01/19 (Pre-
refunded to 8/01/00)
2,325,000 Hancock County, Ohio, Hospital Facilities Revenue Bonds, Series 1989 11/98 at 103 A+*** 2,434,926
(Blanchard Valley Hospital), 7.625%, 11/15/14 (Pre-refunded to
11/15/98)
1,000,000 Hudson Local School District, General Obligation Unlimited Tax, 7.100%, 12/00 at 102 A1*** 1,093,040
12/15/13 (Pre-refunded to 12/15/00)
1,000,000 Board of Education of the Hudson Local School District, Ohio, School 12/00 at 102 A1*** 1,094,310
Facilities Improvement Bonds, Series 1991A, 7.100%, 12/15/14 (Pre-
refunded to 12/15/00)
1,500,000 City of Lorain, Ohio, Hospital Refunding Revenue Bonds, Series 1992 11/02 at 102 A1 1,698,330
(Lakeland Community Hospital, Inc.), 6.500%, 11/15/12
1,500,000 County of Lucas, Ohio, Hospital Facilities Revenue Bonds, Series 1991 12/01 at 102 N/R*** 1,720,500
(Flower Memorial Hospital), 8.125%, 12/01/11 (Pre-refunded to 12/01/01)
2,000,000 County of Mahoning, Ohio, Hospital Improvement and Refunding Revenue No Opt. Call A1 2,127,000
Bonds, Series 1986 (St. Elizabeth Hospital Medical Center Project),
7.375%, 12/01/09
4,250,000 County of Mahoning, Ohio, Hospital Improvement Revenue Bonds, Series 1991 10/02 at 100 AAA 4,732,758
(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 Revenue Bonds, Series 1990 12/99 at 103 N/R*** 1,264,977
(United Church Homes, Inc.), 8.875%, 12/01/12 (Pre-refunded to 12/01/99)
</TABLE>
36
<PAGE> 261
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,000,000 The Board of Education of the Marysville Exempted Village 12/00 at 102 AAA $ 1,095,140
School District, Union County, Ohio, School Improvement Bonds, General
Obligation (Unlimited Taxes), 7.200%, 12/01/10
(Pre-refunded to 12/01/00)
1,250,000 City of Marysville, Ohio, Water System Mortgage Revenue Bonds, 12/01 at 101 AAA 1,383,350
Series 1991, 7.050%, 12/01/21 (Pre-refunded to 12/01/01)
1,850,000 Massillon City School District, Ohio, General Obligation 12/00 at 102 AAA 2,026,009
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 School 12/02 at 100 AAA 1,071,170
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 Improvement Revenue 8/01 at 102 AAA 3,333,900
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 (Mandatory
redemption at 7/15/11):
6,460,000 0.000%, 1/15/15 (Pre-refunded to 1/15/11) 1/11 at 67 1/32 AAA 2,360,290
5,700,000 0.000%, 1/15/15 (Pre-refunded to 7/15/11) 7/11 at 70 15/32 AAA 2,137,329
20,000 Ohio Building Authority, State Facilities Refunding Bonds 4/03 at 100 AAA 24,000
(Frank J. Lausche State Office Building), 1982 Series A, 10.125%,
10/01/06 (Pre-refunded to 4/01/03)
3,250,000 State of Ohio (Ohio Building Authority), State Correctional 8/99 at 102 Aaa 3,444,740
Facilities Bonds, 1986 Series A, 7.350%, 8/01/06
(Pre-refunded to 8/01/99)
1,000,000 State of Ohio, Ohio Higher Educational Facilities Commission 5/00 at 100 AAA 1,063,090
(Ohio Northern University Project), 7.300%, 5/15/10
(Pre-refunded to 5/15/00)
1,900,000 Ohio State Public Facilities Commission, Higher Education 11/99 at 102 AA-*** 1,996,406
Facilities, Series A, 7.250%, 5/01/04 (Pre-refunded to 11/01/99)
4,630,000 Ohio Water Development Authority, State of Ohio, Water Development No Opt. Call AAA 5,131,707
Revenue Bonds, Pure Water 1990 Series I, 6.000%, 12/01/16
1,000,000 City of Parma, Ohio, Various Purpose General Obligation Bonds, 12/00 at 102 A*** 1,105,100
Series 1990 (Limited Tax Obligation), 7.600%, 12/01/11
(Pre-refunded to 12/01/00)
1,600,000 Pickerington, Ohio, Local School District, Series B, 7.250%, 12/00 at 102 AAA 1,755,728
12/01/13 (Pre-refunded to 12/01/00)
Puerto Rico Aqueduct and Sewer Authority, Revenue Bonds, Series 1988A:
1,000,000 7.900%, 7/01/07 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 1,023,480
3,600,000 7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 3,684,456
700,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue, 7/00 at 102 AAA 766,661
Series Q, 7.750%, 7/01/10 (Pre-refunded to 7/01/00)
1,500,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/01 at 102 Aaa 1,656,705
Series P, 7.000%, 7/01/21 (Pre-refunded to 7/01/01)
3,165,000 Reynoldsburg City School District, Ohio, General Obligation 12/02 at 102 AAA 3,535,843
Bonds, School Building Construction and Improvement, 6.550%, 12/01/17
(Pre-refunded to 12/01/02)
605,000 Scioto County, Ohio, Human Services Building Bonds, General 8/01 at 101 N/R*** 666,250
Obligation, 7.150%, 8/01/11 (Pre-refunded to 8/01/01)
750,000 Southwest Local School District, Ohio, Hamilton County, 12/99 at 103 AAA 813,645
7.650%, 12/01/10 (Pre-refunded to 12/01/99)
1,500,000 County of Stark, Ohio, Sanitary Sewerage System Revenue Bonds, 11/98 at 102 AAA 1,557,240
Series 1988, 7.750%, 11/15/18 (Pre-refunded to 11/15/98)
1,000,000 Sylvania, Ohio, City School District, 6.600%, 6/01/16 6/02 at 102 AAA 1,109,070
1,000,000 University of Cincinnati, General Receipts Bonds, Series O, 12/02 at 102 AA*** 1,105,670
6.300%, 6/01/12 (Pre-refunded to 12/01/02)
1,250,000 City of Warren, Ohio, General Obligation Limited Tax, Various 11/98 at 102 BBB+*** 1,302,650
Purpose Improvement Bonds, 8.625%, 11/15/13 (Pre-refunded to 11/15/98)
1,500,000 City of Warren, Ohio, General Obligation (Limited Tax), 11/00 at 102 BBB+*** 1,658,100
Sewerage System Improvement Bonds, Series 1990, 7.750%, 11/01/10
(Pre-refunded to 11/01/00)
1,500,000 Westerville, Minerva Park and Blendon, Ohio, Joint Township Hospital 9/01 at 102 AAA 1,665,690
District (St. Anns Hospital Project), Series 1991A, 7.100%, 9/15/21
(Pre-refunded to 9/15/01)
</TABLE>
37
<PAGE> 262
PORTFOLIO OF INVESTMENTS
NUVEEN FLAGSHIP OHIO MUNICIPAL BOND FUND (Continued)
MAY 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Utilities - 11.2%
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 $ 1,106,280
1,535,000 0.000%, 11/15/13 No Opt. Call AAA 715,325
10,685,000 City of Cleveland, Ohio, Public Power System Improvement, First 11/01 at 102 AAA 11,769,634
Mortgage Revenue Bonds, Series 1991B, 7.000%, 11/15/17
1,900,000 Cleveland Public Power System, 7.000%, 11/15/17 11/01 at 102 AAA 2,092,869
4,900,000 City of Cleveland, Ohio, Public Power System, First Mortgage Revenue 11/06 at 102 AAA 4,829,146
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 7,605,878
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 1,903,615
7,000,000 6.250%,12/01/20 6/03 at 102 Baa1 7,362,810
750,000 State of Ohio, Pollution Control Revenue Refunding Bonds, Ohio Air 7/99 at 102 Baa3 785,715
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 6,162,137
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 3/00 at 102 AAA 2,142,360
Control 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, Revenue 9/05 at 102 A+ 16,187,700
Refunding Bonds, 1995 Series (The Dayton Power and Light Company
Project), 6.100%, 9/01/30
6,000,000 State of Ohio, Ohio Air Quality Development Authority, Air Quality 4/07 at 102 AAA 6,239,040
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- 540,015
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 7,377,261
Edison Company), 7.625%, 7/01/23
1,545,000 Puerto Rico Electric Power Authority, Power Revenue, Formerly Puerto No Opt. Call BBB+ 595,196
Rico Commonwealth Water Resource Authority Power, Series O,
0.000%, 7/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.5%
City of Bellefontaine, Ohio, Sewer System, First Mortgage Revenue
Refunding and Improvement Bonds (Bank Qualified):
1,000,000 6.800%, 12/01/07 12/02 at 101 Baa1 1,084,870
1,000,000 6.900%, 12/01/11 12/02 at 101 Baa1 1,088,020
3,000,000 County of Butler, Ohio, Sewer System Revenue Bonds, Series 1996, 12/06 at 101 AAA 3,008,910
5.250%, 12/01/21
13,000,000 City of Cleveland, Ohio, Waterworks Improvement, First Mortgage No Opt. Call AAA 14,039,220
Refunding Revenue Bonds, Series 1993-G, 5.500%, 1/01/21
City of Cleveland, Ohio, Waterworks Improvement, First Mortgage
Revenue Refunding Bonds, Series 1996-H:
2,320,000 5.750%, 1/01/21 1/06 at 102 AAA 2,452,959
5,850,000 5.750%, 1/01/26 1/06 at 102 AAA 6,185,264
990,000 City of Cleveland, Ohio, Waterworks Improvement, First Mortgage 1/02 at 102 AAA 1,075,209
Revenue Refunding Bonds, Series 1992-B, 6.500%, 1/01/11
1,600,000 County of Greene, Ohio, Water System Revenue Bonds, Series 1996, 12/07 at 102 AAA 1,762,559
6.125%, 12/01/21
2,200,000 City of Greenville, Ohio (Dark County), Wastewater System, First 12/02 at 102 AAA 2,414,521
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, 1991 10/01 at 102 AAA 1,085,269
Series A, 6.400%, 10/15/10
795,000 City of Huber Heights, Ohio, Water System Revenue Bonds, Series 1995, No Opt. Call AAA 264,130
0.000%, 12/01/19
1,000,000 County of Montgomery, Ohio, Water Revenue Bonds, Greater 11/02 at 102 AAA 1,092,779
Moraine-Beavercreek Sewer District, Series 1992, 6.250%, 11/15/17
</TABLE>
38
<PAGE> 263
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water and Sewer (continued)
$ 1,000,000 Mount Gilead, Ohio, Water System, First Mortgage Revenue, 7.200%, 12/02 at 102 N/R $ 1,082,689
12/01/17
1,000,000 Ohio Water Development Authority, State of Ohio Water Development 6/05 at 102 AAA 1,068,359
Revenue Bonds, Fresh Water, Series 1995, 5.900%, 12/01/21
5,000,000 Ohio Water Development Authority, State of Ohio Water Development 6/08 at 101 AAA 4,975,299
Revenue Bonds, Fresh Water, Series 1998, 5.125%, 12/01/23
750,000 Toledo, Ohio, Sewer System Mortgage Revenue, 6.350%, 11/15/17 11/04 at 102 AAA 840,524
500,000 Toledo, Ohio, Waterworks Revenue Refunding Mortgage, 6.450%, 11/04 at 102 AAA 563,129
11/15/24
750,000 County of Warren, Ohio, Waterworks System Revenue Bonds, Series 12/02 at 102 AAA 829,102
1992, Warren County Water District, 6.600%, 12/01/16
- --------------------------------------------------------------------------------------------------------------------------------
$658,690,000 Total Investments -- (cost $627,367,527) -- 98.9% 681,649,166
============--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.1% 7,848,963
-----------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $689,498,129
=================================================================================================================
</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.
39
<PAGE> 264
Statement of Net Assets
May 31,1998
<TABLE>
<CAPTION>
Kentucky Kentucky Limited Term Michigan Ohio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $477,311,529 $11,058,797 $340,187,675 $681,649,166
Temporary investments in short-term municipal securities,
at amoritized cost, which approximates market value (note 1) 2,000,000 - - -
Cash 324,141 142,320 997,437 2,061,114
Receivables:
Fund manager (note 6) - 1,031 - -
Interest 7,336,323 144,653 5,269,075 12,649,721
Investments sold - 627,300 315,000 390,000
Shares sold 648,011 - 1,175,888 598,019
Other assets 165,937 33,104 165,975 320,708
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets 487,785,941 12,007,205 348,111,050 697,668,728
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased - 500,000 5,554,721 4,000,000
Shares redeemed 476,076 - 855,552 675,205
Accrued expenses:
Management fees (note 6) 216,069 - 154,381 307,873
12b-1 distribution and service fees (notes 1 and 6) 97,524 2,654 75,351 114,631
Other 74,388 42,978 18,381 186,054
Dividends payable 2,004,845 40,936 1,388,074 2,886,836
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,868,902 586,568 8,046,460 8,170,599
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $484,917,039 $11,420,637 $340,064,590 $689,498,129
==================================================================================================================================
Class A Shares (note 1)
Net assets $451,337,877 $ 8,988,770 $263,632,098 $472,820,542
Shares outstanding 39,619,843 888,181 21,836,586 40,290,430
Net asset value and redemption price per share $ 11.39 $ 10.12 $ 12.07 $ 11.74
Offering price per share (net asset value per share plus maximum
sales charge of 4.20%, 2.50%, 4.20% and 4.20%, respectively
of offering price) $ 11.89 $ 10.38 $ 12.60 $ 12.25
==================================================================================================================================
Class B Shares (note 1)
Net assets $ 4,273,347 N/A $ 3,838,585 $ 7,421,912
Shares outstanding 375,057 N/A 317,623 632,682
Net asset value, offering and redemption price per share $ 11.39 N/A $ 12.09 $ 11.73
==================================================================================================================================
Class C Shares (note 1)
Net assets $ 28,630,427 $ 2,416,140 $ 45,689,614 $ 47,035,721
Shares outstanding 2,514,961 238,841 3,789,908 4,010,159
Net asset value, offering and redemption price per share $ 11.38 $ 10.12 $ 12.06 $ 11.73
==================================================================================================================================
Class R Shares (note 1)
Net assets $ 675,388 $ 15,727 $ 26,904,293 $162,219,954
Shares outstanding 59,405 1,557 2,228,513 13,824,489
Net asset value, offering and redemption price per share $ 11.37 $ 10.10 $ 12.07 $ 11.73
==================================================================================================================================
</TABLE>
N/A - Kentucky Limited Term is not authorized to issue Class B
Shares.
See accompanying notes to financial statements.
40
<PAGE> 265
Statement of Operations
Year Ended May 31, 1998
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Income (note 1) $28,198,412 $589,327 $19,875,897 $40,990,841
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses
Management fees (note 6) 2,537,577 52,982 1,804,027 3,609,901
12b-1 service fees -- Class A (notes 1 and 6) 888,602 18,810 525,468 946,661
12b-1 distribution and service fees -- Class B (notes 1 and 6) 22,890 N/A 14,397 40,065
12b-1 distribution and service fees -- Class C (notes 1 and 6) 203,304 12,956 328,163 324,807
Shareholders' servicing agent fees and expenses 238,250 3,712 167,041 515,446
Custodian's fees and expenses 82,943 43,066 77,583 119,003
Trustees' fees and expenses (note 6) 8,672 172 6,733 12,743
Professional fees 24,075 9,475 13,720 18,392
Shareholders' reports - printing and mailing expenses 99,639 1,536 63,857 142,305
Federal and state registration fees 17,381 12,821 5,742 2,611
Organizational expenses (note 1) -- 9,800 -- --
Other expenses 19,458 453 4,739 15,695
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 4,142,791 165,783 3,011,470 5,747,629
Expense reimbursement (note 6) (310,289) (79,972) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,832,502 85,811 3,011,470 5,747,629
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 24,365,910 503,516 16,864,427 35,243,212
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 2,172,160 32,390 1,595,690 4,967,956
Net change in unrealized appreciation or depreciation of investments 14,097,294 204,860 10,225,980 16,619,119
- ---------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 16,269,454 237,250 11,821,670 21,587,075
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $40,635,364 $740,766 $28,686,097 $56,830,287
=================================================================================================================================
N/A -- Kentucky Limited Term is not authorized to issue Class B Shares.
</TABLE>
See accompanying notes to financial statements.
41
<PAGE> 266
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Kentucky Kentucky Limited Term
---------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/98 5/31/97* 5/31/98 5/31/97**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 24,365,910 $ 24,225,117 $ 503,516 $ 418,298
Net realized gain (loss) from investment
transactions (notes 1 and 4) 2,172,160 1,216,787 32,390 (70,626)
Net change in unrealized appreciation or
depreciation of investments 14,097,294 8,326,260 204,860 204,943
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 40,635,364 33,768,164 740,766 552,615
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (22,954,811) (23,056,260) (409,988) (345,290)
Class B (102,552) (3,383) N/A N/A
Class C (1,254,173) (1,154,172) (94,041) (70,918)
Class R (32,294) (8,367) (590) (1)
From accumulated net realized gains from investment transactions:
Class A (1,984,678) (227,076) -- --
Class B (10,705) -- N/A N/A
Class C (120,396) (12,818) -- --
Class R (2,930) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (26,462,539) (24,462,076) (504,619) (416,209)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 47,501,865 45,888,380 3,676,589 5,492,681
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 15,618,317 13,715,085 312,624 263,078
- -----------------------------------------------------------------------------------------------------------------------------------
63,120,182 59,603,465 3,989,213 5,755,759
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (48,645,223) (44,095,674) (3,818,637) (5,035,029)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 14,474,959 15,507,791 170,576 720,730
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 28,647,784 24,813,879 406,723 857,136
Net assets at the beginning of year 456,269,255 431,455,376 11,013,914 10,156,778
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $484,917,039 $456,269,255 $11,420,637 $11,013,914
===================================================================================================================================
Balance of undistributed net investment income at end of year $ 25,015 $ 2,935 $ 986 $ 2,089
===================================================================================================================================
</TABLE>
* Information represents eight months of Flagship
Kentucky and four months of Kentucky (note 1).
** Information represents eight months of Flagship Kentucky Limited
Term and four months of Kentucky Limited Term (note 1).
N/A -- Kentucky Limited Term is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
42
<PAGE> 267
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Michigan Ohio
--------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/98 5/31/97* 5/31/98 5/31/97**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 16,864,427 $ 16,075,312 $ 35,243,212 $ 29,268,587
Net realized gain from investment
transactions (notes 1 and 4) 1,595,690 762,060 4,967,956 4,460,158
Net change in unrealized appreciation or
depreciation of investments 10,225,980 7,545,758 16,619,119 4,107,165
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 28,686,097 24,383,130 56,830,287 37,835,910
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (13,344,536) (13,549,214) (24,388,584) (24,358,638)
Class B (63,731) (2,097) (182,260) (10,649)
Class C (1,982,594) (2,012,105) (2,008,254) (1,876,872)
Class R (1,409,716) (479,101) (8,687,614) (2,962,615)
From accumulated net realized gains from investment transactions:
Class A (597,076) (280,388) (1,996,392) --
Class B (3,361) -- (16,956) --
Class C (101,904) (46,664) (178,327) --
Class R (61,084) -- (681,846) --
- ------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (17,564,002) (16,369,569) (38,140,233) (29,208,774)
- ------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the
reorganization of Nuveen Michigan/Ohio (note 1) -- 32,952,082 -- 183,170,717
Net proceeds from shares issued as a capital contribution -- 50,000 -- 50,000
Net proceeds from sale of shares 28,641,868 29,696,576 63,755,865 53,603,783
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 10,647,679 7,300,800 24,926,989 14,753,008
- ------------------------------------------------------------------------------------------------------------------------------
39,289,547 69,999,458 88,682,854 251,577,508
- ------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (37,642,403) (40,504,903) (83,801,938) (72,294,456)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 1,647,144 29,494,555 4,880,916 179,283,052
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 12,769,239 37,508,116 23,570,970 187,910,188
Net assets at the beginning of year 327,295,351 289,787,235 665,927,159 478,016,971
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $340,064,590 $327,295,351 $689,498,129 $665,927,159
==============================================================================================================================
Balance of undistributed net investment income at end of year $ 96,645 $ 32,795 $ 36,313 $ 59,813
==============================================================================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Michigan (note 1).
** Information represents eight months of Flagship Ohio and four months of Ohio
(note 1).
43
See accompanying notes to financial statements.
<PAGE> 268
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, the Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund, the Nuveen Flagship Michigan
Municipal Bond Fund and the Nuveen Flagship Ohio Municipal Bond Fund (the
"Funds"), among others. The Trust was organized as a business trust on July 1,
1996.
The John Nuveen Company ("Nuveen"), parent of John Nuveen & Co. Incorporated and
Nuveen Advisory Corp., respectively, the distributor ("Distributor") and
investment advisor ("Adviser") of the Funds, entered into an agreement under
which Nuveen acquired Flagship Resources Inc. and after the close of business on
January 31, 1997, consolidated their respective mutual fund businesses. This
agreement was approved at a meeting by the shareholders of the Flagship Funds in
December 1996.
After the close of business on January 31, 1997, Flagship Kentucky Triple Tax
Exempt Fund ("Flagship Kentucky") and Flagship Kentucky Limited Term Municipal
Bond Fund ("Flagship Kentucky Limited Term") were reorganized into the Trust and
renamed Nuveen Flagship Kentucky Municipal Bond Fund ("Kentucky") and Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund ("Kentucky Limited Term"),
respectively. Prior to these reorganizations, each Fund was a sub-trust of the
Flagship Tax Exempt Funds Trust.
After the close of business on January 31, 1997, Flagship Michigan Triple Tax
Exempt Fund ("Flagship Michigan") and Nuveen Michigan Tax-Free Value Fund
("Nuveen Michigan") reorganized into Nuveen Flagship Michigan Municipal Bond
Fund ("Michigan"). Prior to the reorganization, Flagship Michigan was a
sub-trust of the Flagship Tax Exempt Funds Trust while Nuveen Michigan was a
series of the Nuveen Multistate Tax-Free Trust. Nuveen Michigan had a fiscal
year end of January 31 prior to being reorganized into Nuveen Flagship Michigan
which has retained the fiscal year end of Flagship Michigan.
After the close of business on January 31, 1997, Flagship Ohio Double Tax Exempt
Fund ("Flagship Ohio") and Nuveen Ohio Tax-Free Value Fund ("Nuveen Ohio")
reorganized into Nuveen Flagship Ohio Municipal Bond Fund ("Ohio"). Prior to the
reorganization, Flagship Ohio was a sub-trust of the Flagship Tax Exempt Funds
Trust while Nuveen Ohio was a series of the Nuveen Tax-Free Bond Fund, Inc.
Nuveen Ohio had a fiscal year end of February 28 prior to being reorganized into
Nuveen Flagship Ohio which has retained the fiscal year end of Flagship Ohio.
The 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, 1998, Kentucky Limited Term and Michigan had outstanding when-issued
purchase commitments of $500,000 and $2,861,460, respectively. There were no
such outstanding purchase commitments in Kentucky and Ohio.
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.
44
<PAGE> 269
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss 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,
1998, 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, C and R Shares. Kentucky, Michigan and Ohio also offer
Class B 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 1%
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
for purchases of over $1 million and in other limited circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, 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, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
Organizational Expenses
The organizational expenses incurred on behalf of Kentucky Limited Term
(approximately $29,400) are being reimbursed to the Adviser on a straight-line
basis over a period of three years. As of May 31, 1998, $19,595 has been
reimbursed.
45
<PAGE> 270
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
Kentucky Kentucky Limited Term
--------------------------------------------------- ------------------------------------------------
Year Ended 5/31/98 Year Ended 5/31/97* Year Ended 5/31/98 Year Ended 5/31/97**
--------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 3,217,301 $ 36,434,351 3,460,838 $ 37,993,876 286,922 $ 2,892,341 410,367 $ 4,052,500
Class B 323,485 3,657,888 49,144 540,802 N/A N/A N/A N/A
Class C 639,620 7,226,085 630,496 6,904,170 76,327 769,248 145,916 1,440,077
Class R 16,255 183,541 40,643 449,532 1,495 15,000 10 104
Shares issued to shareholders
due to reinvestment of
distributions:
Class A 1,281,834 14,485,026 1,178,853 12,941,813 23,560 236,867 22,414 221,045
Class B 4,212 47,833 25 269 N/A N/A N/A N/A
Class C 94,246 1,063,652 69,875 766,751 7,475 75,229 4,292 42,033
Class R 1,937 21,806 570 6,252 52 528 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
5,578,890 63,120,182 5,430,444 59,603,465 395,831 3,989,213 582,999 5,755,759
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (3,866,440) (43,715,326) (3,622,758) (39,765,461) (316,310) (3,201,570) (395,384) (3,906,315)
Class B (1,809) (20,440) -- -- N/A N/A N/A N/A
Class C (434,290) (4,909,457) (394,142) (4,330,213) (61,079) (617,067) (114,591) (1,128,714)
Class R -- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(4,302,539) (48,645,223) (4,016,900) (44,095,674) (377,389) (3,818,637) (509,975) (5,035,029)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 1,276,351 $ 14,474,959 1,413,544 $ 15,507,791 18,442 $ 170,576 73,024 $ 720,730
====================================================================================================================================
</TABLE>
* Information represents eight months of Flagship Kentucky and four months of
Kentucky (note 1).
** Information represents eight months of Flagship Kentucky Limited Term and
four months of Kentucky Limited Term (note 1).
N/A-Kentucky Limited Term is not authorized to issue Class B Shares.
46
<PAGE> 271
<TABLE>
<CAPTION>
Michigan
-----------------------------------------------------
Year Ended 5/31/98 Year Ended 5/31/97*
-----------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of
Nuveen Michigan/Ohio:
Class A -- $ -- 473,278 $ 5,517,761
Class B -- -- -- --
Class C -- -- 29,683 345,582
Class R -- -- 2,323,498 27,088,739
Shares issued as a capital contribution:
Class A -- -- 1,072 12,500
Class B -- -- 1,072 12,500
Class C -- -- 1,074 12,500
Class R -- -- 1,072 12,500
Shares sold:
Class A 1,390,245 16,660,336 2,027,123 23,392,705
Class B 287,386 3,449,240 31,393 364,727
Class C 589,706 7,052,332 474,635 5,492,503
Class R 123,751 1,479,960 38,458 446,641
Shares issued to shareholders due to
reinvestment of distributions:
Class A 678,487 8,087,898 520,958 6,027,568
Class B 2,834 34,056 38 446
Class C 127,033 1,512,300 89,370 1,032,725
Class R 84,732 1,013,425 20,714 240,061
- -----------------------------------------------------------------------------------------------
3,284,174 39,289,547 6,033,438 69,999,458
- -----------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,418,756) (28,925,631) (2,692,127) (31,154,360)
Class B (5,100) (61,520) -- --
Class C (498,829) (5,971,586) (667,098) (7,733,727)
Class R (224,782) (2,683,666) (138,930) (1,616,816)
- -----------------------------------------------------------------------------------------------
(3,147,467) (37,642,403) (3,498,155) (40,504,903)
- -----------------------------------------------------------------------------------------------
Net increase 136,707 $ 1,647,144 2,535,283 $ 29,494,555
===============================================================================================
Ohio
------------------------------------------------------
Year Ended 5/31/98 Year Ended 5/31/97**
------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of
Nuveen Michigan/Ohio:
Class A -- $ -- 1,658,349 $ 18,937,973
Class B -- -- -- --
Class C -- -- 257,097 2,935,519
Class R -- -- 14,124,377 161,297,225
Shares issued as a capital contribution:
Class A -- -- 1,095 12,500
Class B -- -- 1,095 12,500
Class C -- -- 1,095 12,500
Class R -- -- 1,095 12,500
Shares sold:
Class A 3,219,388 37,568,749 3,479,121 39,481,904
Class B 516,543 6,021,505 143,044 1,632,067
Class C 995,368 11,636,371 777,074 8,826,593
Class R 730,018 8,529,240 320,322 3,663,219
Shares issued to shareholders due to
reinvestment of distributions:
Class A 1,424,465 16,558,328 1,078,011 12,246,653
Class B 9,946 116,135 370 4,189
Class C 139,502 1,619,985 83,238 991,709
Class R 569,608 6,632,541 133,093 1,510,457
- ---------------------------------------------------------------------------------------------------
7,604,838 88,682,854 22,058,476 251,577,508
- ---------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (4,938,984) (57,591,525) (5,159,717) (58,567,125)
Class B (38,316) (446,171) -- --
Class C (692,246) (8,051,008) (668,440) (7,657,334)
Class R (1,520,403) (17,713,234) (533,621) (6,069,997)
- ---------------------------------------------------------------------------------------------------
(7,189,949) (83,801,938) (6,361,778) (72,294,456)
- ---------------------------------------------------------------------------------------------------
Net increase 414,889 $ 4,880,916 15,696,698 $179,283,052
====================================================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Michigan (note 1).
** Information represents eight months of Flagship Ohio and four months of Ohio
(note 1).
47
<PAGE> 272
Notes to Financial Statements (continued)
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1998, to shareholders of record on June 9,
1998, as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $.0475 $.0365 $.0500 $.0490
Class B .0405 N/A .0425 .0420
Class C .0425 .0335 .0445 .0440
Class R .0495 .0385 .0520 .0510
====================================================================================================
</TABLE>
N/A - Kentucky Limited Term is not authorized to issue Class B Shares.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1998, were as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Investments in municipal securities $65,088,861 $4,076,566 $47,201,267 $109,670,698
Temporary municipal investments 12,200,000 2,400,000 12,490,000 36,800,000
Sales:
Investments in municipal securities 55,577,312 4,280,183 41,593,563 101,944,564
Temporary municipal investments 10,200,000 2,400,000 12,490,000 46,800,000
====================================================================================================
</TABLE>
At May 31, 1998, 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, 1998, Kentucky Limited Term had unused capital loss carryforwards of
$70,735 available for federal income tax purposes to be applied against future
capital gains, if any. If not applied, $135 of the carryforward will expire in
the year 2004 and $70,600 of the carryforward will expire in the year 2005.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1998, were as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $37,982,636 $324,750 $30,388,047 $54,281,639
depreciation (37,196) (3,688) (9,905) --
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation $37,945,440 $321,062 $30,378,142 $54,281,639
====================================================================================================
</TABLE>
48
<PAGE> 273
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Kentucky, Michigan & Ohio
Average Daily Net Asset Value Management Fee
- -----------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
===========================================================
Kentucky Limited Term
Average Daily Net Asset Value Management Fee
- -----------------------------------------------------------
For the first $125 million .4500 of 1%
For the next $125 million .4375 of 1
For the next $250 million .4250 of 1
For the next $500 million .4125 of 1
For the next $1 billion .4000 of 1
For net assets over $2 billion .3750 of 1
===========================================================
</TABLE>
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, 1998, the Distributor 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
Limited
Kentucky Term Michigan Ohio
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges collected $1,076,392 $25,344 $396,900 $890,567
Paid to authorized dealers 935,851 20,109 341,800 777,704
========================================================================
</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.
During the fiscal year ended May 31, 1998, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commission advances $232,216 $ 14,811 $ 224,418 $ 379,147
====================================================================
</TABLE>
49
<PAGE> 274
Notes to Financial Statements (continued)
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares, except for Kentucky Limited Term, during the
first year following a purchase, all 12b-1 distribution fees on Class B Shares,
except for Kentucky Limited Term, and all 12b-1 service and distribution fees on
Class C Shares during the first year following a purchase are retained by the
Distributor. Kentucky Limited Term is not authorized to issue Class B Shares.
During the fiscal year ended May 31, 1998, the Distributor retained such 12b-1
fees as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12b-1 fees retained $ 88,309 $ 7,484 $ 68,801 $ 123,577
====================================================================================================================================
</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, 1998, as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CDSC retained $ 4,580 $ 2,558 $ 7,977 $ 31,894
====================================================================================================================================
</TABLE>
7. Composition of Net Assets
At May 31, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $446,277,887 $11,169,517 $309,095,846 $633,173,082
Balance of undistributed net investment income 25,015 986 96,645 36,313
Accumulated net realized gain (loss) from investment transactions 668,697 (70,925) 493,957 2,007,095
Net unrealized appreciation of investments 37,945,440 321,062 30,378,142 54,281,639
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $484,917,039 $11,420,637 $340,064,590 $689,498,129
====================================================================================================================================
</TABLE>
50
<PAGE> 275
Financial Highlights
51
<PAGE> 276
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
----------------------------------- --------------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
May 31, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KENTUCKY**
CLASS A (5/87)
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
1994 11.06 .62 (.40) .22 (.63) -- (.63) 10.65 1.90
CLASS B (2/97)
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)
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
1994(c) 11.46 .36 (.81) (.45) (.36) -- (.36) 10.65 (5.88)*
CLASS R (2/97)
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
- -----------------------------------------------------------------------------------------------------------------------------------
KENTUCKY LIMITED TERM***
CLASS A (9/95)
1998 $ 9.92 $.44 $ .20 $ .64 $(.44) $ -- $(.44) $10.12 6.53%
1997 9.79 .45 .12 .57 (.44) -- (.44) 9.92 5.96
1996(c) 9.75 .31 .04 .35 (.31) -- (.31) 9.79 5.45*
CLASS C (9/95)
1998 9.92 .40 .20 .60 (.40) -- (.40) 10.12 6.17
1997 9.79 .41 .13 .54 (.41) -- (.41) 9.92 5.64
1996(c) 9.75 .29 .04 .33 (.29) -- (.29) 9.79 5.12*
CLASS R (2/97)
1998 9.92 .46 .18 .64 (.46) -- (.46) 10.10 6.58
1997(c) 9.98 .15 (.10) .05 (.11) -- (.11) 9.92 .56
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 277
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- -----------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment(a) ment(a) Rate
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$451,338 .84% 5.12% .77% 5.19% 12%
430,803 .99 5.20 .75 5.44 13
410,808 1.02 5.19 .71 5.50 17
394,457 1.04 5.49 .68 5.85 28
369,495 1.03 5.15 .58 5.60 12
4,273 1.59 4.33 1.54 4.38 12
544 1.59* 4.56* 1.39* 4.76* 13
28,630 1.39 4.57 1.33 4.63 12
24,468 1.54 4.64 1.29 4.89 13
20,647 1.57 4.63 1.27 4.93 17
15,831 1.58 4.92 1.23 5.27 28
11,172 1.65* 4.39* 1.08* 4.96* 12
675 .64 5.31 .58 5.37 12
455 .64* 5.62* .49* 5.77* 13
============================================================================
$ 8,989 1.34% 3.67% .66% 4.35% 36%
8,870 1.68 3.37 .53 4.52 56
8,389 1.67* 3.07* .37* 4.37* 48
2,416 1.69 3.32 1.01 4.00 36
2,144 2.00 3.03 .84 4.19 56
1,767 1.98* 2.78* .64* 4.12* 48
16 1.13 3.87 .46 4.54 36
- .86* 4.87* - 5.73* 56
============================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kentucky.
*** Information included prior to the fiscal year ended May 31, 1997 reflects
the financial highlights of Flagship Kentucky Limited Term.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
53
<PAGE> 278
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------- -----------------------------
Net
Realized/ Ending
Beginning Net Unrealized Net Net
Year Ended Net Asset Investment Investment Investment Capital Asset Total
May 31, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MICHIGAN**
CLASS A (6/85)
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
1994 11.77 .66 (.43) .23 (.66) (.03)+ (.69) 11.31 1.87
CLASS B (2/97)
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)
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
1994(c) 11.86 .54 (.52) .02 (.55) (.03)+ (.58) 11.30 .19*
CLASS R (2/97)
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
==========================================================================================================================
OHIO***
CLASS A (6/85)
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
1994 11.59 .64 (.38) .26 (.64) -- (.64) 11.21 2.24
CLASS B (2/97)
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)
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
1994(c) 11.69 .46 (.49) (.03) (.46) -- (.46) 11.20 (.17)*
CLASS R (2/97)
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>
54
<PAGE> 279
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment (a) ment (a) Rate
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$263,632 .84% 5.11% .84% 5.11% 13%
259,055 .97 5.21 .85 5.33 34
248,422 1.01 5.23 .82 5.42 54
250,380 1.03 5.59 .80 5.82 37
242,993 1.02 5.29 .75 5.56 28
3,839 1.59 4.32 1.59 4.32 13
380 1.59* 4.52* 1.59* 4.52* 34
45,690 1.39 4.56 1.39 4.56 13
41,649 1.52 4.65 1.40 4.77 34
41,365 1.56 4.67 1.37 4.86 54
37,122 1.58 5.02 1.35 5.25 37
30,042 1.61* 4.53* 1.25* 4.89* 28
26,904 .64 5.31 .64 5.31 13
26,211 .65* 5.57* .65* 5.57* 34
- ------------------------------------------------------------------------------------
$472,821 .85% 5.15% .85% 5.15% 15%
463,253 .96 5.32 .89 5.39 17
443,077 1.02 5.31 .92 5.41 31
445,566 1.03 5.70 .95 5.78 31
445,272 1.02 5.39 .93 5.48 9
7,422 1.61 4.39 1.61 4.39 15
1,649 1.60* 4.63* 1.60* 4.63* 17
47,036 1.40 4.60 1.40 4.60 15
40,713 1.51 4.77 1.44 4.84 17
34,939 1.56 4.75 1.47 4.84 31
28,461 1.58 5.13 1.50 5.21 31
25,674 1.60* 4.65* 1.46* 4.79* 9
162,220 .65 5.35 .65 5.35 15
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 Michigan.
*** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Ohio.
+ The amount shown includes a distribution in excess of capital gains
of $.02 per share.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor Flagship
Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
55
<PAGE> 280
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
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
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, experienced, professional
security selection and surveillance and 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
investment-grade 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.
56
<PAGE> 281
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
As of August 8, 1998
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
57
<PAGE> 282
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
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 focused on providing consistent, attractive
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 current 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 equity,
balanced, and tax-free income 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.
NUVEEN 1898
OUR SECOND CENTURY 1998
helping investors sustain the wealth of a lifetime./TM/
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VAN-5-5.98
<PAGE> 283
PART C: OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Section 4 of Article XII of Registrant's Amended and Restated Declaration of
Trust provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been such a Trustee, director, officer, employee or agent and against amounts
paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of
a final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and resulting
in payment by a Covered Person, unless there has been either a
determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office by the court or other body
approving the settlement or other disposition or a reasonable
determination, based on a review of readily available facts (as opposed
to a full trial-type inquiry), that he did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting
on the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by policies
maintained by the Trust, shall be severable, shall not affect any other rights
to which any Covered Person may now or hereafter be entitled, shall continue as
to a person who has ceased to be such a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which Trust
personnel other than Covered Persons may be entitled by contract or otherwise
under law.
Expenses of preparation and presentation of a defense to any claim, action, suit
or proceeding subject to a claim for indemnification under this Section 4 shall
be advanced by the Trust prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses
arising out of any such advances; or
C-1
<PAGE> 284
(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office
act on the matter) or independent legal counsel in a written opinion
shall determine, based upon a review of the readily available facts (as
opposed to a full trial-type inquiry), that there is reason to believe
that the recipient ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee, anyone
who has been exempted from being an Interested Person by any rule, regulation or
order of the Commission), and (y) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
The trustees and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 16. EXHIBITS
1(a). Declaration of Trust of the Registrant.(1)
1(b). Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest dated October 11, 1996.(1)
1(c). Certificate for the Establishment and Designation of Classes
dated July 10, 1996.(1)
1(d). Incumbency Certificate.(3)
2. Bylaws of Registrant.(1)
3. Not applicable.
4. Form of Agreement and Plan of Reorganization for Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund into Nuveen
Flagship Kentucky Municipal Bond Fund.+
5. Specimen certificates of Shares.(1)
C-2
<PAGE> 285
6(a). Investment Management Agreement between Registrant and Nuveen
Advisory Corp.(3)
6(b). Renewal of Investment Management Agreement dated May 5, 1998.(4)
7(a). Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated.(3)
7(b). Renewal of Distribution Agreement dated July 31, 1998.(4)
8. Not applicable.
9(a). Custodian Agreement between Registrant and Chase Manhattan
Bank.(3)
9(b). Transfer Agency and Service Agreement between Registrant and
Chase Global Funds Services Company.(4)
10(a). Plan of Distribution and Service Pursuant to Rule 12b-1 for
Class A Shares, Class B Shares and Class C Shares of each
Fund.(2)
10(b). Multi-Class Plan Adopted Pursuant to Rule 18f-3.(2)
11(a). Opinion of Vedder, Price, Kaufman & Kammholz.++
11(b). Opinion of Bingham Dana LLP. ++
12. Form of Tax Opinion of Vedder, Price, Kaufman & Kammholz
relating to the Reorganization.+
13. Not Applicable.
14. Consent of Arthur Andersen LLP, Independent Public
Accountants.++
15. Not applicable.
16. Powers of Attorney.++
17. Form of proxy cards.++
- --------------------
+ Filed herewith as Appendix A to the Reorganization Statement of Additional
Information contained herein.
++ Filed herewith.
(1) Incorporated herein by reference to the initial Registrant's Registration
Statement on Form N-1A, File Number 333-16615, filed on November 22, 1996.
(2) Incorporated herein by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, File Number 333-16615, filed
on January 10, 1997.
(3) Incorporated herein by reference to Post-Effective Amendment No.1 to
Registrant's Registration Statement on Form N-1A, File Number 333-16615, filed
on September 23, 1997.
(4) Incorporated herein by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, File Number 333-16615, filed
on September 30, 1998.
C-3
<PAGE> 286
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant agrees that prior to any public re-offering of
the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offerings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
(2) The undersigned registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
C-4
<PAGE> 287
SIGNATURES
As required by the Securities act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this city of Chicago and state of Illinois, on the 11th day of
January 1999.
NUVEEN FLAGSHIP MULTISTATE TRUST IV
By: /s/ Gifford R. Zimmerman
--------------------------------------
Gifford R. Zimmerman, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated, on January 11, 1999.
SIGNATURE TITLE
- --------- -----
Principal Executive Officer:
/s/ Timothy R. Schwertfeger Chairman and Trustee
- -----------------------------------------
Timothy R. Schwertfeger
Principal Financial Accounting Officer:
/s/ Stephen D. Foy
- -----------------------------------------
Stephen D. Foy Vice President and Controller
Trustees:
/s/ Anthony T. Dean President and Trustee
- -----------------------------------------
Anthony T. Dean
/s/ Robert P. Bremner Trustee
- -----------------------------------------
Robert P. Bremner
/s/ Lawrence H. Brown Trustee
- -----------------------------------------
Lawrence H. Brown
/s/ Anne E. Impellizzeri Trustee
- -----------------------------------------
Anne E. Impellizzeri
/s/ Peter R. Sawers Trustee
- -----------------------------------------
Peter R. Sawers
/s/ William J. Schneider Trustee
- -----------------------------------------
William J. Schneider
/s/ Judith M. Stockdale Trustee
- -----------------------------------------
Judith M. Stockdale
By: /s/ Gifford R. Zimmerman
--------------------------------
Gifford R. Zimmerman
Attorney-in-Fact
An original power of attorney authorizing among others, Gifford R. Zimmerman and
Larry W. Martin to execute this registration statement, and amendments thereto,
for each of the officers and trustees of registrant on whose behalf this
registration statement is filed herewith.
<PAGE> 288
EXHIBIT INDEX
1(a). Declaration of Trust of the Registrant.(1)
1(b). Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest dated October 11, 1996.(1)
1(c). Certificate for the Establishment and Designation of Classes
dated July 10, 1996.(1)
1(d). Incumbency Certificate.(3)
2. Bylaws of Registrant.(1)
3. Not applicable.
4. Form of Agreement and Plan of Reorganization for Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund into Nuveen
Flagship Kentucky Municipal Bond Fund.+
5. Specimen certificates of Shares.(1)
6(a). Investment Management Agreement between Registrant and Nuveen
Advisory Corp.(3)
6(b). Renewal of Investment Management Agreement dated May 5,
1998.(4)
7(a). Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated.(3)
7(b). Renewal of Distribution Agreement dated July 31, 1998.(4)
8. Not applicable.
9(a). Custodian Agreement between Registrant and Chase Manhattan
Bank.(3)
9(b). Transfer Agency and Service Agreement between Registrant and
Chase Global Funds Services Company.(4)
10(a). Plan of Distribution and Service Pursuant to Rule 12b-1 for
Class A Shares, Class B Shares and Class C Shares of each
Fund.(2)
10(b). Multi-Class Plan Adopted Pursuant to Rule 18f-3.(2)
11(a). Opinion of Vedder, Price, Kaufman & Kammholz.++
11(b). Opinion of Bingham Dana LLP. ++
12. Form of Tax Opinion of Vedder, Price, Kaufman & Kammholz
relating to the Reorganization.+
13. Not Applicable.
14. Consent of Arthur Andersen LLP, Independent Public
Accountants.++
15. Not applicable.
16. Powers of Attorney.++
17. Form of proxy cards.++
- --------------------
+ Filed herewith as Appendix A to the Reorganization Statement of Additional
Information contained herein.
++ Filed herewith.
(1) Incorporated herein by reference to the initial Registrant's Registration
Statement on Form N-1A, File Number 333-16615, filed on November 22, 1996.
<PAGE> 289
(2) Incorporated herein by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, File Number 333-16615, filed
on January 10, 1997.
(3) Incorporated herein by reference to Post-Effective Amendment No.1 to
Registrant's Registration Statement on Form N-1A, File Number 333-16615, filed
on September 23, 1997.
(4) Incorporated herein by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, File Number 333-16615, filed
on September 30, 1998.
<PAGE> 1
Exhibit 11a
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601
(312) 609-7500
January 12, 1999
Nuveen Flagship Municipal Trust IV
333 West Wacker Drive
Chicago, Illinois 60606
Re: NUVEEN FLAGSHIP MULTISTATE TRUST IV
REGISTRATION STATEMENT ON FORM N-14
NUVEEN FLAGSHIP KENTUCKY MUNICIPAL BOND FUND
Ladies and Gentlemen:
We are acting as counsel for Nuveen Flagship Multistate Trust IV, a
Massachusetts business trust (the "Trust"), in connection with the Trust's
filing of a registration statement on Form N-14 (the "Registration Statement")
with the Securities and Exchange Commission covering the registration of shares
of beneficial interest, $.01 par value per share, (the "Shares") of the Trust
designated Nuveen Flagship Kentucky Municipal Bond Fund (the "Acquiring Fund"),
pursuant to the proposed reorganization of its series of shares designated
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund (the "Acquired Fund"),
as described in the Registration Statement and pursuant to that certain
Agreement and Plan of Reorganization dated December 18, 1998 by the Trust on
behalf of the Acquiring Fund and the Acquired Fund (the "Agreement").
In that capacity, we have examined such business trust records,
certificates and other documents, and have made such other factual and legal
investigations as we have deemed necessary and appropriate for the purposes of
this opinion. In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to originals of all documents submitted to us as certified copies or
photocopies and the authenticity of the originals of such latter documents.
Insofar as this opinion pertains to matters governed by the laws of the
Commonwealth of Massachusetts, we are relying, with your consent, upon the
opinion of Bingham Dana LLP dated January 12, 1999, which opinion is
satisfactory in substance and form to us.
Based upon the foregoing, it is our opinion that:
(1) The Trust is duly organized and existing under the Trust's
Declaration of Trust and the laws of the Commonwealth of
Massachusetts as a voluntary association with transferable
shares of beneficial interest commonly referred to as a
"Massachusetts business trust."
(2) The Shares, when issued and sold in accordance with the
Trust's Declaration and By-Laws and for the consideration
described in the Agreement and Plan of Reorganization, will
be legally issued, fully paid and non-assessable, except that
shareholders of the Acquiring Fund may under certain
circumstances be held personally liable for its obligations.
<PAGE> 2
We hereby consent to the filing of this opinion as Exhibit 11(a) to
the Registration Statement and to the references to us under the caption "Legal
Opinions" in the Joint Proxy Statement - Prospectus contained in the
Registration Statement.
Respectfully submitted,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
ELC
MLW
DAS
<PAGE> 1
EXHIBIT 11b
Bingham Dana LLP
150 Federal Street
Boston, MA 02110-1726
January 12, 1999
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601-1003
Re: Nuveen Flagship Multistate Trust IV/Nuveen Flagship Kentucky
Municipal Bond Fund
Ladies and Gentlemen:
We have acted as special Massachusetts counsel to Nuveen Flagship
Multistate Trust IV, a Massachusetts business trust (the "Trust"), in connection
with the Trust's Registration Statement on Form N-14 to be filed with the
Securities and Exchange Commission on or about January 12, 1999 (the
"Registration Statement"), with respect to the shares of beneficial interest,
par value $0.01 per share (the "Shares") of its series Nuveen Flagship Kentucky
Municipal Bond Fund (the "Acquiring Fund") to be issued in exchange for all of
the assets of Nuveen Flagship Kentucky Limited-Term Municipal Bond Fund, also a
series of the Trust (the "Acquired Fund"), as described in the Registration
Statement. You have requested that we deliver this opinion to you, as special
counsel to the Trust, for use by you in connection with your opinion to the
Trust with respect to the Shares.
In connection with the furnishing of this opinion, we have examined the
following documents:
(a) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Trust;
(b) a copy, as filed with the Secretary of State of the Commonwealth
of Massachusetts on July 1, 1996, of the Trust's Declaration of Trust (the
"Declaration");
(c) a copy of the Trust's Amended and Restated Establishment and
Designation of Series dated October 9, 1996 (the "Designation of Series");
(d) a copy of the Trust's Establishment and Designation of Classes
dated July 10, 1996 (the "Designation of Classes");
<PAGE> 2
Vedder, Price, Kaufman & Kammholz
January 12, 1999
Page 2
(e) a certificate executed by an appropriate officer of the Trust,
certifying as to, and attaching copies of, the Trust's Declaration,
Designation of Series, Designation of Classes, By-Laws, and certain
resolutions adopted by the Trustees of the Trust;
(f) a printer's proof dated January 7, 1999 of the Registration
Statement; and
(g) a copy of the Agreement and Plan of Reorganization entered into by
the Trust as of December 18, 1998, on behalf of the Acquiring Fund,
providing for (a) the acquisition by the Acquiring Fund of all of the
assets of the Acquired Fund in exchange for the Shares and the Acquiring
Fund's assumption of all of the liabilities of the Acquired Fund and (b)
the pro rata distribution of the shares to the holders of the shares of the
Acquired Fund in liquidation of the Acquired Fund, in the form included as
Exhibit A to the draft Registration Statement referred to in paragraph (f)
above (the "Agreement and Plan of Reorganization").
In such examination, we have assumed the genuineness of all signatures, the
conformity to the originals of all of the documents reviewed by us as copies,
including conformed copies, the authenticity and completeness of all original
documents reviewed by us in original or copy form and the legal competence of
each individual executing any document. We have assumed that the Registration
Statement as filed with the Securities and Exchange Commission will be in
substantially the form of the printer's proof referred to in paragraph (f)
above, and that the Agreement and Plan of Reorganization has been duly
completed, executed and delivered by the parties thereto in substantially the
form of the copy referred to in paragraph (g) above.
This opinion is based entirely on our review of the documents listed above
and such investigation of law as we have deemed necessary or appropriate. We
have made no other review or investigation of any kind whatsoever, and we have
assumed, without independent inquiry, the accuracy of the information set forth
in such documents.
This opinion is limited solely to the internal substantive laws of the
Commonwealth of Massachusetts as applied by courts located in such Commonwealth,
to the extent the same may apply to or govern the transactions covered by this
opinion, except that we express no opinion as to any Massachusetts securities
law.
We understand that all the foregoing assumptions and limitations are
acceptable to you.
<PAGE> 3
Vedder, Price, Kaufman & Kammholz
January 12, 1999
Page 3
Based upon and subject to the foregoing, please be advised that it is our
opinion that:
1. The Trust is duly organized and existing under the Trust's Declaration
of Trust and the laws of the Commonwealth of Massachusetts as a voluntary
association with transferable shares of beneficial interest commonly referred to
as a "Massachusetts business trust."
2. The Shares, when issued and sold in accordance with the Trust's
Declaration and By-Laws and for the consideration described in the Agreement and
Plan of Reorganization, will be legally issued, fully paid and non-assessable,
except that shareholders of the Acquiring Fund may under certain circumstances
be held personally liable for its obligations.
We hereby consent to your reliance on this opinion in connection with your
opinion to the Trust with respect to the Shares and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
BINGHAM DANA LLP
<PAGE> 1
Exhibit 14
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated July 17, 1998, and to all references to our Firm included in or made a
part of this registration statement on Form N-14 of Nuveen Flagship Multistate
Trust IV (comprising the Nuveen Flagship Kentucky Municipal Bond Fund, Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund, Nuveen Flagship Michigan
Municipal Bond Fund, Nuveen Flagship Ohio Municipal Bond Fund, Nuveen Flagship
Kansas Municipal Bond Fund, Nuveen Flagship Missouri Municipal Bond Fund and
Nuveen Flagship Wisconsin Municipal Bond Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 6, 1999
<PAGE> 1
Exhibit 16
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-----------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced trusts, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) her true and lawful
attorney-in-fact and agent, for her on her behalf and in her name, place and
stead, in any and all capacities, to sign, execute and affix her seal thereto
and file one or more Registration Statements on Form N-14 under the Securities
Act of l933, as amended, and the Investment Company Act of l940, as amended,
including any amendment or amendments thereto, with all exhibits, and any and
all other documents required to be filed with any regulatory authority, federal
or state, relating to the reorganization, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as she
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set her hand this 18th day of December, 1998.
/s/ Anne E. Impellizzeri
----------------------------
Anne E. Impellizzeri
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 18th day of December, 1998, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be her voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 2
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-----------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced trusts, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, and GIFFORD R. ZIMMERMAN,
and each of them (with full power to each of them to act alone) her true and
lawful attorney-in-fact and agent, for her on her behalf and in her name, place
and stead, in any and all capacities, to sign, execute and affix her seal
thereto and file one or more Registration Statements on Form N-14 under the
Securities Act of l933, as amended, and the Investment Company Act of l940, as
amended, including any amendment or amendments thereto, with all exhibits, and
any and all other documents required to be filed with any regulatory authority,
federal or state, relating to the reorganization, without limitation, granting
unto said attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in order to effectuate the same as fully to all intents and
purposes as she might or could do if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set her hand this 18th day of December, 1998.
/s/ Judith M. Stockdale
---------------------------------
Judith M. Stockdale
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 18th day of December, 1998, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be her voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 3
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-----------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced trusts, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign, execute and affix his seal thereto
and file one or more Registration Statements on Form N-14 under the Securities
Act of l933, as amended, and the Investment Company Act of l940, as amended,
including any amendment or amendments thereto, with all exhibits, and any and
all other documents required to be filed with any regulatory authority, federal
or state, relating to the reorganization, without limitation, granting unto
said attorneys, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises in order to effectuate the same as fully to all intents and
purposes as he might or could do if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 18th day of December, 1998.
/s/ Robert P. Bremner
----------------------------------
Robert P. Bremner
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 18th day of December, 1998, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 4
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-----------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced trusts, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign, execute and affix his seal thereto
and file one or more Registration Statements on Form N-14 under the Securities
Act of l933, as amended, and the Investment Company Act of l940, as amended,
including any amendment or amendments thereto, with all exhibits, and any and
all other documents required to be filed with any regulatory authority, federal
or state, relating to the reorganization, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 18th day of December, 1998.
/s/ Lawrence H. Brown
-----------------------------------
Lawrence H. Brown
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 18th day of December, 1998, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 5
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-----------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced trusts, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ALAN G. BERKSHIRE, and GIFFORD R. ZIMMERMAN, and each of them
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign, execute and affix his seal thereto
and file one or more Registration Statements on Form N-14 under the Securities
Act of l933, as amended, and the Investment Company Act of l940, as amended,
including any amendment or amendments thereto, with all exhibits, and any and
all other documents required to be filed with any regulatory authority, federal
or state, relating to the reorganization, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 18th day of December, 1998.
/s/ Anthony T. Dean
------------------------------
Anthony T. Dean
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 18th day of December, 1998, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 6
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-----------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced trusts, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign, execute and affix his seal thereto
and file one or more Registration Statements on Form N-14 under the Securities
Act of l933, as amended, and the Investment Company Act of l940, as amended,
including any amendment or amendments thereto, with all exhibits, and any and
all other documents required to be filed with any regulatory authority, federal
or state, relating to the reorganization, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 18th day of December, 1998.
/s/ Peter R. Sawers
------------------------------
Peter R. Sawers
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 18th day of December, 1998, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 7
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-----------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced trusts, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign, execute and affix his seal thereto
and file one or more Registration Statements on Form N-14 under the Securities
Act of l933, as amended, and the Investment Company Act of l940, as amended,
including any amendment or amendments thereto, with all exhibits, and any and
all other documents required to be filed with any regulatory authority, federal
or state, relating to the reorganization, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 18th day of December, 1998.
/s/ William J. Schneider
-------------------------------------
William J. Schneider
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 18th day of December, 1998, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 8
NUVEEN FLAGSHIP MULTISTATE TRUST IV
-----------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced trusts, hereby constitutes and appoints ANTHONY T. DEAN, ALAN
G. BERKSHIRE, and GIFFORD R. ZIMMERMAN, and each of them (with full power to
each of them to act alone) his true and lawful attorney-in-fact and agent, for
him on his behalf and in his name, place and stead, in any and all capacities,
to sign, execute and affix his seal thereto and file one or more Registration
Statements on Form N-14 under the Securities Act of l933, as amended, and the
Investment Company Act of l940, as amended, including any amendment or
amendments thereto, with all exhibits, and any and all other documents required
to be filed with any regulatory authority, federal or state, relating to the
reorganization, without limitation, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could
do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 18th day of December, 1998.
/s/ Timothy R. Schwertfeger
------------------------------
Timothy R. Schwertfeger
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 18th day of December, 1998, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 1
Exhibit 17
- Please fold and detach at perforation. Return the Proxy Ballot only. -
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF THE NUVEEN
FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND TO BE HELD
ON APRIL 15, 1999
The undersigned hereby appoints Timothy R. Schwertfeger, Anthony T. Dean, Alan
G. Berkshire and Gifford R. Zimmerman and each of them, with full powers of
substitution, Proxies for the undersigned to represent and vote the shares of
the undersigned at the Special Meeting of Shareholders of Nuveen Flagship
Kentucky Limited Term Municipal Bond Fund, a series of the Nuveen Flagship
Multistate Trust IV to be held on April 15, 1999, or any adjournment or
adjournments thereof as indicated on the reverse side.
PLEASE BE SURE TO SIGN YOUR PROXY BALLOT ON THE REVERSE SIDE
<PAGE> 2
PROXY SOLICITED BY THE BOARD OF TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF THE NUVEEN FLAGSHIP
KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
TO BE HELD ON APRIL 15, 1999
At the upcoming Special Meeting, shareholders will be asked to approve
a reorganization of the Nuveen Flagship Kentucky Limited Term Municipal Bond
Fund into the Nuveen Flagship Kentucky Municipal Bond Fund and other matters in
connection with the reorganization. Please refer to the accompanying prospectus/
proxy statement and cast your vote on the proxy ballot.
Whether or not you plan to join us at the meeting, please sign, date
and vote the proxy ballot and return it to our proxy tabulator in the enclosed
post-page envelope. Please specify your choice by marking the appropriate box on
the proxy ballot. If you do not mark any boxes, your proxy will be voted in
accordance with the Board of Trustees' recommendations.
NOTE: YOUR PROXY IS NOT VALID UNLESS IT
IS SIGNED. Please sign exactly as your name(s)
appears on the Proxy Ballot. If signing for estates,
trusts or corporations, title or capacity should be stated.
If shares are held jointly, either holder should sign.
PROPOSAL:
1. To approve an Agreement and Plan of Reorganization pursuant to
which the Nuveen Flagship Kentucky Limited Term Municipal Bond
Fund (the "Kentucky Limited Term Fund") would (i) transfer all of
its assets to the Nuveen Flagship Kentucky Municipal Bond Fund
(the "Kentucky Fund") in exchange solely for Class A, C and R
shares of beneficial interest of the Kentucky Fund and the
Kentucky Fund's assumption of the liabilities of the Kentucky
Limited Term Fund, (ii) distribute such shares of the Kentucky
Fund to the holders of shares of the Kentucky Limited Term Fund
and (iii) be liquidated, dissolved and terminated as a series of
the Nuveen Flagship Multistate Trust IV (the "Trust") in
accordance with the Trust's Declaration of Trust.
2. In their discretion, the Proxies indicated on the reverse side of
the Proxy Ballot are authorized to vote upon such other matters as
may properly come before the Special Meeting.
- Please fold and detach at perforation. Return the Proxy Ballot only. -
NUVEEN FLAGSHIP KENTUCKY LIMITED TERM MUNICIPAL BOND FUND
PROXY BALLOT
FOR AGAINST ABSTAIN
1. Approval of Agreement and Plan of Reorganization. [ ] [ ] [ ]
2. In their discretion, the
Proxies are authorized to
vote on such other business
as may come before the
Special Meeting.
Date: , 1999
----------------
---------------------------
---------------------------
Signature(s)
