<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1997.
1933 ACT REGISTRATION NO. 333-14729
1940 ACT REGISTRATION NO. 811-07755
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
<TABLE>
<CAPTION>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
<S> <C>
Pre-Effective Amendment No. 3 [X]
Post-Effective Amendment No. [_]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Pre-Effective Amendment No. 3 [X]
</TABLE>
(Check appropriate box or boxes)
----------------
NUVEEN FLAGSHIP MULTISTATE TRUST II
(Exact name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, 60606
Illinois
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 917-7700
James J. Wesolowski, Esq.--Vice With a copy to:
President and Secretary Thomas A. Harman
333 West Wacker Drive Fried, Frank, Harris, Shriver &
Chicago, Illinois 60606 Jacobson
(Name and Address of Agent for Service) 1001 Pennsylvania Ave., NW
Suite 800
Washington, D.C. 20004
APPROXIMATE DATE OF PROPOSED OFFERING: As soon as practicable after the
effective date of this Registration Statement.
Pursuant to Reg. (S) 270.24f-2 under the Investment Company Act of 1940,
Registrant hereby declares that an indefinite number or amount of shares are
being registered under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CONTENTS
OF
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO.
AND
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO.
This Registration Statement comprises the following papers and contents:
The Facing Sheet
Cross-Reference Sheet
Part A-The Prospectus
Part B-The Statement of Additional Information
Copy of Annual Reports and Semi-Annual Reports to
Shareholders (the financial statements from which are
incorporated by reference into the Statement of Additional
Information)
Part C-Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST II
----------------
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
ITEM IN PART A
OF FORM N-1A PROSPECTUS LOCATION
-------------- -------------------
<S> <C>
1 Cover Page Cover Page
2 Synopsis Expense Information
3 Condensed Financial Information Financial Highlights
4 General Description of Registrant Fund Strategies
5 Management of the Fund General Information
5A Management's Discussion of Fund Incorporated by Reference to Annual and
Performance Semi-Annual Reports to Shareholders; Taxes
and Tax Reporting
6 Capital Stock and Other How to Select a Purchase Option; Taxes and
Securities Tax Reporting
7 Purchase of Securities Being Investing in the Funds
Offered
8 Redemption or Repurchase How to Sell Fund Shares
9 Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM IN PART B LOCATION IN STATEMENT
OF FORM N-1A OF ADDITIONAL INFORMATION
--------------- -------------------------
<S> <C>
10 Cover Page Cover Page
11 Table of Contents Cover Page
12 General Information and History Not Applicable
13 Investment Objectives and Investment Policies and Investment
Policies Portfolio
14 Management of the Fund Management
15 Control Persons and Principal Management
Holders of Securities
16 Investment Advisory and Other Investment Adviser and Investment
Services Management Agreement; Portfolio
Transactions Distribution and Service Plan;
Independent Public Accountants and
Custodian
17 Brokerage Allocation and Other Portfolio Transactions
Practices
18 Capital Stock and Other See "How to Select a Purchase Option" and
Securities "Taxes and Tax Reporting" in the Prospectus
19 Purchase, Redemption and Pricing Additional Information on the Purchase and
of Securities Redemption of Fund Shares; Net Asset Value
20 Tax Status Tax Matters
21 Underwriters Additional Information on the Purchase and
Redemption of Fund Shares; See "Investing
in the Funds" and "Fund Service Providers"
in the Prospectus
22 Calculation of Performance Data Performance Information
23 Financial Statements Incorporated by Reference to Annual and
Semi-Annual Reports to Shareholders
</TABLE>
<PAGE>
PART A--PROSPECTUS
NUVEEN FLAGSHIP MULTISTATE TRUST II
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
- --------------------------------------------------------------------------------
OVERVIEW
The funds listed above are part of the Nuveen Flagship Multistate Trust II, an
open-end investment company. Each fund seeks to provide high double or triple
tax-free income and preservation of capital through investments in diversified
portfolios of quality municipal bonds whose income is exempt from regular
federal, state and, in some cases, local income taxes.
Each fund offers a set of flexible purchase options which permit you to
purchase fund shares in the way that is best suited to your individual circum-
stances and investment needs. For detailed information about these flexible
purchase options, please refer to "How to Select a Purchase Option" later in
this prospectus.
This prospectus contains important information you should know before invest-
ing. Please read it carefully and keep it for future reference. You can find
more detailed information about each fund in the statement of additional infor-
mation which is part of this prospectus by reference. For a free copy, write to
Nuveen or call (800) 621-7227.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER U.S. GOVERNMENT AGENCY. SHARES OF THE FUNDS
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
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.
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<S> <C>
OVERVIEW 1
FUND SUMMARIES AND FINANCIAL HIGHLIGHTS 2
FUND STRATEGIES
Investment Objective 12
How the Funds Select Investments 12
Risk Reduction Strategies 13
INVESTING IN THE FUNDS
How to Buy Fund Shares 14
How to Select a Purchase Option 14
How to Sell Fund Shares 16
Exchanging Shares 17
Optional Features and Services 17
DIVIDENDS AND TAXES
How the Funds Pay Dividends 19
Taxes and Tax Reporting 19
Taxable Equivalent Yields 20
GENERAL INFORMATION
How to Contact Nuveen 20
Fund Service Providers 20
How the Funds Report Performance 21
How Fund Shares are Priced 21
Organization 22
APPENDIX
Special State Considerations 22
</TABLE>
FEBRUARY 1, 1997
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship Connecticut Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: July 13, 1987
NET ASSETS: $216.6 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 1.31% 5.76% 5.18% 5.18% 5.76%
5 YEARS 6.50% 7.42% 6.84% 6.80% 7.42%
INCEPTION 7.01% 7.50% 7.00% 6.89% 7.50%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C total
returns reflect Class A performance for periods prior to class inception,
adjusted for the differences in sales charges and fees between the classes.
Class B and R total returns reflect Class A performance for all periods,
adjusted for the differences in sales charges (and for Class B, fees) between
the classes. See Overview of Fund Operating Expenses and Shareholder Transac-
tion Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 19.6
Average Modified Duration 7.2
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
AAA (46%)
AA (17%)
A (25%)
BBB (11%)
NR (1%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Health Care (20%)
Education (15%)
Resource Recovery (14%)
Hospitals (13%)
Non-State General Obligations (8%)
Other (30%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 5%(2) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.54% 0.54% 0.54% 0.54%
12b-1 FEES 0.20% 0.95% 0.75% --
OTHER 0.12% 0.12% 0.12% 0.12%
- ---------------------------------------------------------------------------------------------
TOTAL (GROSS) 0.86% 1.61% 1.41% 0.66%
WAIVERS/
REIMBURSEMENTS (0.19%) (0.19%) (0.19%) (0.19%)
- ---------------------------------------------------------------------------------------------
TOTAL (NET) 0.67% 1.42% 1.22% 0.47%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 49 $ 54 $ 12 $ 5
3 YEARS $ 63 $ 77 $ 39 $15
5 YEARS $ 78 $ 89 $ 67 $26
10 YEARS $122 $150 $148 $59
</TABLE>
Information as of 11/30/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Deloitte & Touche LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
<CAPTION>
- ---------------- ------------------------------------------------------------------
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
May 31, Value Income(c) Investments(a) Income Gains Value
- ---------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (7/87)
1997 (d) $10.23 $.28 $ .34 $(.28) $ -- $10.57
- ------------------------------------------------------------------------------------
1996 10.38 .57 (.14) (.58) -- 10.23
- ------------------------------------------------------------------------------------
1995 10.17 .58 .22 (.59) -- 10.38
- ------------------------------------------------------------------------------------
1994 10.66 .59 (.39) (.60) (.09) 10.17
- ------------------------------------------------------------------------------------
1993 10.05 .61 .61 (.61) -- 10.66
- ------------------------------------------------------------------------------------
1992 9.84 .63 .21 (.63) -- 10.05
- ------------------------------------------------------------------------------------
1991 9.64 .63 .20 (.63) -- 9.84
- ------------------------------------------------------------------------------------
1990 9.78 .63 (.13) (.63) (.01) 9.64
- ------------------------------------------------------------------------------------
1989 9.25 .63 .55 (.64) (.01) 9.78
- ------------------------------------------------------------------------------------
1988 (e) 9.58 .54 (.31) (.56) -- 9.25
- ------------------------------------------------------------------------------------
CLASS C (10/93)
1997 (d) 10.22 .25 .34 (.25) -- 10.56
- ------------------------------------------------------------------------------------
1996 10.36 .52 (.14) (.52) -- 10.22
- ------------------------------------------------------------------------------------
1995 10.16 .53 .20 (.53) -- 10.36
- ------------------------------------------------------------------------------------
1994 (e) 11.06 .33 (.84) (.33) (.06) 10.16
- ------------------------------------------------------------------------------------
<CAPTION>
- ----------------- --------------------------------------------------------
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
May 31, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ----------------- --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (7/87)
1997 (d) 12.26%+ $209.9 .82%+ 5.37%+ 18%
- --------------------------------------------------------------------------
1996 4.18 202.2 .74 5.52 24
- --------------------------------------------------------------------------
1995 8.21 203.2 .73 5.84 25
- --------------------------------------------------------------------------
1994 1.70 202.6 .65 5.52 30
- --------------------------------------------------------------------------
1993 12.48 184.7 .66 5.88 19
- --------------------------------------------------------------------------
1992 8.81 141.2 .65 6.30 18
- --------------------------------------------------------------------------
1991 8.97 103.6 .67 6.49 18
- --------------------------------------------------------------------------
1990 5.34 73.0 .60 6.55 31
- --------------------------------------------------------------------------
1989 13.36 49.0 .70 6.62 32
- --------------------------------------------------------------------------
1988 (e) 3.09 25.6 .54 6.54 71
- --------------------------------------------------------------------------
CLASS C (10/93)
1997 (d) 11.70+ 6.7 1.37+ 4.84+ 18
- --------------------------------------------------------------------------
1996 3.71 7.2 1.29 4.96 24
- --------------------------------------------------------------------------
1995 7.53 5.5 1.28 5.27 25
- --------------------------------------------------------------------------
1994 (e) (6.48) 4.4 1.22 4.77 30
- --------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Flagship Financial, predecessor to Nuveen Advisory.
(d) For the six months ending November 30, 1996.
(e) From commencement of class operations as noted.
- --------------------------------------------------------------------------------
NOTES:
(1) 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% is imposed on
redemptions of certain purchases of $1 million or more within 18 months of
purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the fund eliminated the 0.20% distribution fee
on Class A shares and reduced the distribution fee on Class C shares from
0.75% to 0.55%. These lower expenses are reflected in the table and are
expected to reduce total operating expenses on Class A from 0.87% to 0.67%
and on Class C from 1.42% to 1.22%, as reflected in the table. Long-term
holders of Class B and C shares may pay more in distribution fees and CDSCs
than the maximum initial sales charge permitted under National Association
of Securities Dealers (NASD) Rules of Fair Practice. The
waiver/reimbursement levels shown reflect Nuveen's current undertaking,
made in connection with its acquisition of Flagship Resources as described
in "Fund Service Providers--Investment Adviser," to continue Flagship's
dividend-setting practices. Nuveen also has voluntarily agreed through July
31, 1997 to waive fees or reimburse expenses so that the total operating
expenses (not counting distribution and service fees) for the fund do not
exceed 0.75% of average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
- -------------------------------------------------------------------------------
PAGE 3
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship New York Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: December 22, 1986
NET ASSETS: $171.9 million
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 1.26% 5.69% 4.98% 5.00% 5.98%
5 YEARS 6.42% 7.34% 6.65% 6.65% 7.67%
INCEPTION 6.72% 7.19% 6.61% 6.53% 7.50%
</TABLE>
Class R total returns reflect actual performance for all periods; Class A and C
total returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class R performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B total returns reflect Class R performance for all periods,
adjusted for the differences in sales charges and fees between the classes. See
Overview of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEAR HERE]
Average Maturity 21.9
Average Modified Duration 8.0
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APEARS HERE]
Below Inv. Grade (3%)
NR (5%)
BBB (38%)
AAA (14%)
AA (19%)
A (21%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Municipal Appropriation Obligations (25%)
Industrial Development and Polution Control (13%)
Education (9%)
Health Care (8%)
Non-State General Obligations (7%)
Other (38%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 5%(2) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER EXPENSES 0.16% 0.16% 0.16% 0.16%
- --------------------------------------------------------
TOTAL (GROSS) 0.91% 1.66% 1.46% 0.71%
WAIVERS/ REIMBURSEMENTS -- -- -- --
- --------------------------------------------------------
TOTAL (NET) 0.91% 1.66% 1.46% 0.71%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 51 $ 56 $ 15 $ 7
3 YEARS $ 70 $ 84 $ 46 $23
5 YEARS $ 90 $102 $ 80 $40
10 YEARS $149 $177 $175 $88
</TABLE>
Information as of 8/31/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 4
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Arthur Andersen LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
- -------------------------------------------------------------------------------------
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
February 28/29, Value Income(c) Investments(a) Income Gains Value
--------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997(g) $10.610 $.282 $(.246) $(.276) $ -- $10.370
- -------------------------------------------------------------------------------------
1996 10.120 .555 .487 (.552) -- 10.610
- -------------------------------------------------------------------------------------
1995(d) 10.230 .277 (.067) (.273) (.047) 10.120
- -------------------------------------------------------------------------------------
CLASS C (9/94)
1997(g) 10.640 .239 (.242) (.237) -- 10.400
- -------------------------------------------------------------------------------------
1996 10.110 .478 .528 (.476) -- 10.640
- -------------------------------------------------------------------------------------
1995(d) 10.110 .231 .038 (.222) (.047) 10.110
- -------------------------------------------------------------------------------------
CLASS R (12/86)
1997(g) 10.640 .291 (.240) (.291) -- 10.400
- -------------------------------------------------------------------------------------
1996 10.150 .582 .490 (.582) -- 10.640
- -------------------------------------------------------------------------------------
1995 10.720 .579 (.529) (.573) (.047) 10.150
- -------------------------------------------------------------------------------------
1994 10.610 .578 .161 (.580) (.049) 10.720
- -------------------------------------------------------------------------------------
1993 9.880 .603 .806 (.598) (.081) 10.610
- -------------------------------------------------------------------------------------
1992(e) 9.820 .163 .053 (.156) -- 9.880
- -------------------------------------------------------------------------------------
1991(f) 9.380 .629 .441 (.630) -- 9.820
- -------------------------------------------------------------------------------------
1990(f) 9.560 .631 (.181) (.630) -- 9.380
- -------------------------------------------------------------------------------------
1989(f) 9.180 .633 .380 (.633) -- 9.560
- -------------------------------------------------------------------------------------
1988(f) 8.760 .625 .420 (.625) -- 9.180
- -------------------------------------------------------------------------------------
1987(d)(f) 9.600 .612 (.840) (.612) -- 8.760
- -------------------------------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
February 28/29, Return(b) (millions) Assets(c) Net Assets(c) Rate
--------------- --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997(g) .37% $18.9 .96%+ 5.29%+ 18%
- -------------------------------------------------------------------------------------
1996 10.52 15.7 .99 5.31 47
- -------------------------------------------------------------------------------------
1995(d) 2.21 3.2 1.00+ 5.87+ 29
- -------------------------------------------------------------------------------------
CLASS C (9/94)
1997(g) (.01) .7 1.71+ 4.54+ 18
- -------------------------------------------------------------------------------------
1996 10.13 .6 1.73 4.55 47
- -------------------------------------------------------------------------------------
1995(d) 2.80 .1 1.75+ 5.16+ 29
- -------------------------------------------------------------------------------------
CLASS R (12/86)
1997(g) .51 152.3 .71+ 5.54+ 18
- -------------------------------------------------------------------------------------
1996 10.80 154.8 .74 5.57 47
- -------------------------------------------------------------------------------------
1995 .75 149.5 .74 5.79 29
- -------------------------------------------------------------------------------------
1994 7.10 146.3 .75 5.33 15
- -------------------------------------------------------------------------------------
1993 14.79 107.1 .75 5.84 12
- -------------------------------------------------------------------------------------
1992(e) 2.21 66.5 .75+ 6.27+ 16
- -------------------------------------------------------------------------------------
1991(f) 11.79 59.4 .75 6.50 19
- -------------------------------------------------------------------------------------
1990(f) 4.92 44.3 .75 6.65 51
- -------------------------------------------------------------------------------------
1989(f) 11.34 29.0 .75 6.63 85
- -------------------------------------------------------------------------------------
1988(f) 12.20 15.0 .75 6.89 71
- -------------------------------------------------------------------------------------
1987(d)(f) (2.44) 8.2 .37+ 6.46+ 20
- -------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the three months ending February 29.
(f) For the year ending November 30.
(g) For the six months ending August 31, 1996.
NOTES:
- ------------------------------------------------------------------------------
(1)Reflects sales charge in effect February 1, 1997. 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% is imposed on redemptions of certain
purchases of $1 million or more within 18 months of purchase.
(2)CDSC declines to 0% at the end of six years.
(3)Imposed only on redemptions within 12 months of purchase.
(4)Effective February 1, 1997, the funds reduced the service fee on Class A
and C shares from 0.25% to 0.20% and reduced the distribution fee on Class
C shares from 0.75% to 0.55%. These lower expenses are reflected in the
table and are expected to reduce total operating expenses on Class A from
0.96% to 0.91% and on Class C from 1.71% to 1.46%, as reflected in the
table. Long-term holders of Class B and C shares may pay more in
distribution fees and CDSCs than the maximum initial sales charge permitted
under National Association of Securities Dealers (NASD) Rules of Fair Prac-
tice. Nuveen Advisory has agreed to waive some or all of its fees or reim-
burse expenses to prevent total operating expenses (not counting distribu-
tion and service fees) from exceeding 0.75% of the fund's average daily net
assets.
(5)The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
- --------------------------------------------------------------------------------
PAGE 5
<PAGE>
- --------------------------------------------------------------------------------
Nuveen New York Insured Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: December 22, 1986
NET ASSETS: $359.0 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 0.78% 5.20% 4.45% 4.33% 5.45%
5 YEARS 6.17% 7.07% 6.36% 6.35% 7.37%
INCEPTION 6.34% 6.81% 6.22% 6.14% 7.09%
</TABLE>
Class R total returns reflect actual performance for all periods; Class A and C
total returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class R performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B total returns reflect Class R performance for all periods,
adjusted for the differences in sales charges and the fees between the classes.
See Overview of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 21.9
Average Modified Duration 7.7
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
Insured (85%)
Escrowed (15%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Housing Facilities (18%)
General Obligation Bonds (17%)
Escrowed Bonds (15%)
Water/Sewer Facilities (11%)
Transportation (11%)
Other (28%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 5%(2) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.54% 0.54% 0.54% 0.54%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER EXPENSES 0.15% 0.15% 0.15% 0.15%
- ------------------------------------------------
TOTAL (GROSS) 0.89% 1.64% 1.44% 0.69%
WAIVERS/
REIMBURSEMENTS -- -- -- --
- ------------------------------------------------
TOTAL (NET) 0.89% 1.64% 1.44% 0.69%
</TABLE>
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING
PERIOD CLASS A CLASS B CLASS C CLASS R
- -----------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 51 $ 56 $ 15 $ 7
3 YEARS $ 69 $ 84 $ 46 $22
5 YEARS $ 89 $101 $ 79 $38
10 YEARS $147 $174 $172 $86
</TABLE>
Information as of 8/31/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 6
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Arthur Andersen LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
February 28/29, Value Income(c) Investments(a) Income Gains Value
---------------- --------- ---------- -------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997 (e) $10.610 $.266 $(.285) $(.261) $ -- $10.330
- -----------------------------------------------------------------------------------------
1996 10.150 .521 .492 (.524) (.029)(f) 10.610
- -----------------------------------------------------------------------------------------
1995 (d) 10.160 .253 .037 (.260) (.040)(f) 10.150
- -----------------------------------------------------------------------------------------
CLASS C (9/94)
1997 (e) 10.610 .226 (.284) (.222) -- 10.330
- -----------------------------------------------------------------------------------------
1996 10.120 .442 .524 (.447) (.029)(f) 10.610
- -----------------------------------------------------------------------------------------
1995 (d) 10.030 .207 .133 (.210) (.040)(f) 10.120
- -----------------------------------------------------------------------------------------
CLASS R (12/86)
1997 (e) 10.610 .273 (.280) (.273) -- 10.330
- -----------------------------------------------------------------------------------------
1996 10.150 .548 .495 (.554) (.029)(f) 10.610
- -----------------------------------------------------------------------------------------
1995 10.630 .555 (.440) (.555) (.040)(f) 10.150
- -----------------------------------------------------------------------------------------
1994 10.620 .550 .035 (.543) (.032) 10.630
- -----------------------------------------------------------------------------------------
1993 9.780 .566 .849 (.562) (.013) 10.620
- -----------------------------------------------------------------------------------------
1992 9.320 .590 .467 (.597) -- 9.780
- -----------------------------------------------------------------------------------------
1991 9.250 .598 .068 (.596) -- 9.320
- -----------------------------------------------------------------------------------------
1990 9.060 .596 .190 (.596) -- 9.250
- -----------------------------------------------------------------------------------------
1989 9.100 .593 (.040) (.593) -- 9.060
- -----------------------------------------------------------------------------------------
1988 9.830 .606 (.730) (.606) -- 9.100
- -----------------------------------------------------------------------------------------
1987 (d) 9.600 .130 .230 (.130) -- 9.830
- -----------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
February 28/29, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ------------------ --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997 (e) (.15)% $30.6 .94%+ 5.00%+ 14%
- ---------------------------------------------------------------------------
1996 10.19 24.7 .93 4.97 17
- ---------------------------------------------------------------------------
1995 (d) 3.01 7.3 1.05+ 5.41+ 11
- ---------------------------------------------------------------------------
CLASS C (9/94)
1997 (e) (.53) 2.2 1.69+ 4.25+ 14
- ---------------------------------------------------------------------------
1996 9.71 1.4 1.69 4.21 17
- ---------------------------------------------------------------------------
1995 (d) 3.53 .3 1.80+ 4.65+ 11
- ---------------------------------------------------------------------------
CLASS R (12/86)
1997 (e) (.03) 326.2 .69+ 5.25+ 14
- ---------------------------------------------------------------------------
1996 10.51 343.3 .67 5.26 17
- ---------------------------------------------------------------------------
1995 1.37 345.1 .65 5.57 11
- ---------------------------------------------------------------------------
1994 5.57 388.2 .68 5.11 5
- ---------------------------------------------------------------------------
1993 14.96 314.9 .73 5.56 6
- ---------------------------------------------------------------------------
1992 11.66 167.0 .69 6.08 4
- ---------------------------------------------------------------------------
1991 7.61 80.5 .73 6.46 13
- ---------------------------------------------------------------------------
1990 8.75 40.4 .85 6.35 30
- ---------------------------------------------------------------------------
1989 6.37 20.2 .97 6.58 62
- ---------------------------------------------------------------------------
1988 (.85) 14.1 .61 6.73 36
- ---------------------------------------------------------------------------
1987 (d) 3.76 5.2 -- 4.97+ --
- ---------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the six months ending August 31, 1996.
(f) The amounts shown include distributions in excess of capital gains of $.0024
per share for the year ended 2/29/96 and $.0015 per share for the year
ended 2/28/95.
Notes:
(1) Sales charge in effect February 1, 1997. 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% is imposed on redemptions of certain purchases of
$1 million or more within 18 months of purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the funds reduced the service fee on Class A and
C shares from 0.25% to 0.20% and reduced the distribution fee on Class C
shares from 0.75% to 0.55%. These lower expenses are reflected in the table
and are expected to reduce total operating expenses on Class A from 0.94% to
0.89% and on Class C from 1.64% to 1.44%, as reflected in the table. Long-
term holders of Class B and C shares may pay more in distribu-tion fees and
CDSCs than the maximum initial sales charge permitted under National
Association of Securities Dealers (NASD) Rules of Fair Practice. Nuveen
Advisory has agreed to waive some or all of its fees or reimburse expenses
to prevent total operating expenses (not counting distribution and service
fees) from exceeding 0.975% of the fund's average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to the
end of each holding period, your expenses would be higher. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
- --------------------------------------------------------------------------------
PAGE 7
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship New Jersey Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION:December 13, 1991
NET ASSETS: $58.3 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 1.23% 5.66% 5.01% 4.87% 6.01%
INCEPTION 5.79% 6.80% 6.09% 6.05% 7.10%
</TABLE>
Class R total returns reflect actual performance for all periods; Class A and C
total returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class R performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B total returns reflect Class R performance for all periods,
adjusted for the differences in sales charges and fees between the classes. See
Overview of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 18.8
Average Modified Duration 7.7
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
NR (4%)
BBB (15)
A (18%)
AAA (54%)
AA (9%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Other (35%)
State/Territorial
General
Obligations (6%)
Municipal Reverse/
Water & Sewer (11%)
Non-State General
Obligations (19%)
Industrial Development
and Pollution
Control (17%)
Hospitals (12%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 5%(2) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER EXPENSES 0.36% 0.36% 0.36% 0.36%
- ---------------------------------------------------
TOTAL (GROSS) 1.11% 1.86% 1.66% 0.91%
WAIVERS/
REIMBURSEMENTS (0.16%) (0.16%) (0.16%) (0.16%)
- ---------------------------------------------------
TOTAL (NET) 0.95% 1.70% 1.50% 0.75%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 51 $ 57 $ 15 $ 8
3 YEARS $ 71 $ 85 $ 47 $24
5 YEARS $ 92 $104 $ 82 $42
10 YEARS $154 $181 $179 $93
</TABLE>
Information as of 7/31/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 8
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Arthur Andersen LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
January 31, Value Income(c) Investments(a) Income Gains Value
---------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997 (d) $10.400 $.261 $(.287) $(.254) $ -- $10.120
- -------------------------------------------------------------------------------------
1996 9.730 .519 .685 (.534) -- 10.400
- -------------------------------------------------------------------------------------
1995 (e) 10.030 .205 (.209) (.210) (.086) 9.730
- -------------------------------------------------------------------------------------
CLASS C (9/94)
1997 (d) 10.380 .227 (.292) (.215) -- 10.100
- -------------------------------------------------------------------------------------
1996 9.710 .443 .683 (.456) -- 10.380
- -------------------------------------------------------------------------------------
1995 (e) 9.770 .159 (.050) (.169) -- 9.710
- -------------------------------------------------------------------------------------
CLASS R (12/91)
1997 (d) 10.410 .266 (.280) (.266) -- 10.130
- -------------------------------------------------------------------------------------
1996 9.740 .551 .677 (.558) -- 10.410
- -------------------------------------------------------------------------------------
1995 10.710 .524 (.886) (.522) (.086) 9.740
- -------------------------------------------------------------------------------------
1994 9.960 .513 .810 (.513) (.060) 10.710
- -------------------------------------------------------------------------------------
1993 (e) 9.525 .445 .431 (.441) -- 9.960
- -------------------------------------------------------------------------------------
1992 9.525 -- -- -- -- 9.525
- -------------------------------------------------------------------------------------
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
January 31, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ------------------ --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997 (d) (.23)% $13.9 1.00%+ 5.02%+ 8%
- ---------------------------------------------------------------------------
1996 12.63 10.7 1.00 5.10 39
- ---------------------------------------------------------------------------
1995 (e) .02 2.7 1.00+ 5.34+ 32
- ---------------------------------------------------------------------------
CLASS C (9/94)
1997 (d) (.61) 1.9 1.75+ 4.27+ 8
- ---------------------------------------------------------------------------
1996 11.80 1.1 1.75 4.37 39
- ---------------------------------------------------------------------------
1995 (e) 1.16 .5 1.75+ 4.62+ 32
- ---------------------------------------------------------------------------
CLASS R (12/91)
1997 (d) (.11) 42.4 .75+ 5.27+ 8
- ---------------------------------------------------------------------------
1996 12.88 43.3 .75 5.43 39
- ---------------------------------------------------------------------------
1995 (3.27) 39.6 .75 5.32 32
- ---------------------------------------------------------------------------
1994 13.60 36.5 .75 4.84 52
- ---------------------------------------------------------------------------
1993 (e) 9.36 16.2 .75+ 4.96+ 9
- ---------------------------------------------------------------------------
1992 -- .02 -- -- --
- ---------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(d) For the six months ending July 31, 1996.
(e) From commencement of class operations as noted.
- --------------------------------------------------------------------------------
NOTES:
(1) Sales charge in effect February 1, 1997. 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% is imposed on redemptions of certain purchase of
$1 million or ore within 18 months of purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the funds reduced the service fee on Class A
and C shares from 0.25% to 0.20% and reduced the distribution fee on Class
C shares from 0.75% to 0.55%. These lower expenses are reflected in the
table and are expected to reduce total operating expenses on Class A from
1.00% to 0.95% and on Class C from 1.75% to 1.50%, as reflected in the
table. Long-term holders of Class B and C shares may pay more in
distribution fees and CDSCs than the maximum initial sales charge permitted
under National Association of Securities Dealers (NASD) Rules of Fiar
Practice. The waiver/reimbursement levels shown reflect Nuveen's current
undertaking, made in connection with its acquisition of Flagship Resources
as described in "Fund Service Providers--Investment Adviser," to continue
Flagship's dividend-setting practices. Nuveen also has voluntarily agreed
through July 31, 1997 to waive fees or reimburse expenses so that the total
operating expenses (not counting distribution and service fees) for the
fund do not exceed 0.75% of average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
---------------
PAGE 9
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: September 16, 1992
NET ASSETS: $7.5 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS C CLASS R
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR 1.19% 4.32% 3.96% 4.32%
INCEPTION 5.94% 6.72% 6.34% 6.72%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C and R
total returns reflect Class A performance for all periods, adjusted for the
differences in sales charges (and for Class C, fees) between the classes. See
Overview of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE:
Average Maturity 7.6
Average Modified Duration 5.4]
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE:
AA (20%)
A (10%)
BBB (23%)
NR (6%)
AAA (41%)]
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE:
Non-State General Obligations (28%)
Hospitals (15%)
Education (9%)
Industrial Development and Pollution Control (15%)
Municipal Revenue/Other (8%)
Other (25%)]
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS R
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES CHARGE ON PURCHASES 3.00%(1) -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 1%(2) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (3)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS R
- ------------------------------------------
<S> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55%
12B-1 FEES 0.20% 0.75% --
OTHER EXPENSES 1.00% 1.00% 1.00%
- ------------------------------------------
TOTAL (GROSS) 1.75% 2.30% 1.55%
WAIVERS/
REIMBURSEMENTS (1.10%) (1.10%) (1.10%)
- ------------------------------------------
TOTAL (NET) 0.65% 1.20% 0.45%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (4)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS C CLASS R
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 YEAR $ 36 $ 12 $ 5
3 YEARS $ 50 $ 38 $14
5 YEARS $ 65 $ 66 $25
10 YEARS $109 $145 $57
</TABLE>
- --------------------------------------------------------------------------------
Information as of 11/30/96 See Notes on Next Page
PAGE 10
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Deloitte & Touche LLP, the fund's independent
auditors at that time, and the fund's subsequent unaudited semi-annual report.
For a free copy of the fund's latest annual and semi-annual reports, write to
Nuveen or call (800) 621-7227.
- ---------- --------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION
DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
May 31 Value Income(c) Investments(a) Income Gains Value
------------- --------- ---------- -------------- ---------- --------- ---------
<C> <C> <C> <C> <C> <C> <C>
CLASS A
(9/92)
1997(e) $10.14 $.25 $.22 $(.25) $-- $10.36
- ---------------------------------------------------------------------------------
1996 10.25 .51 (.11) (.51) -- 10.14
- ---------------------------------------------------------------------------------
1995 10.04 .50 .22 (.51) -- 10.25
- ---------------------------------------------------------------------------------
1994 10.15 .53 (.10) (.52) (.02) 10.04
- ---------------------------------------------------------------------------------
1993(d) 9.70 .34 .45 (.34) -- 10.15
- ---------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA:
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Total Net Assets Average Net Average Turnover
Return(b) (millions) Assets(c) Net Assets(c) Rate
-------------------- -------------------------- ---------
<C> <C> <C> <S> <C>
9.44%+ $7.5 .74%+ 4.85%+ 7%
- ---------------------------------------------------------------------------------
3.89 8.3 .60 4.90 17
- ---------------------------------------------------------------------------------
7.42 9.2 .69 5.04 35
- ---------------------------------------------------------------------------------
4.27 9.3 .16 5.10 27
- ---------------------------------------------------------------------------------
11.07 5.6 .40+ 4.84+ 29
- ---------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Flagship Financial, predecessor to Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the six months ending November 30, 1996.
- -------------------------------------------------------------------------------
NOTES:
(1) 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% is imposed
on redemptions of certain purchases of $1 million or more within 18 months
of purchase.
(2) Imposed only on redemptions within 12 months of purchase.
(3) Effective February 1, 1997, the fund eliminated the 0.20% distribution fee
on Class A shares and reduced the distribution fee on Class C shares from
0.75% to 0.55%. These lower expenses are reflected in the table and are
expected to reduce total operating expenses on Class A from 0.85% to 0.65%
and on Class C from 1.40% to 1.20%, as reflected in the table. Long-term
holders of Class C shares may pay more in distribution fees and CDSCs than
the maximum initial sales charge permitted under National Association of
Securities Dealers (NASD) Rules of Fair Practice. The waiver/reimbursement
levels shown reflect Nuveen's current undertaking, made in connection with
its acquisition of Flagship Resources as described in "Fund Service Prov-
iders--Investment Adviser," to continue Flagship's dividend-setting prac-
tices. Nuveen also has voluntarily agreed through July 31, 1997 to waive
fees or reimburse expenses so that the total operating expenses (not
counting distribution and service fees) for the fund do not exceed 0.75%
of average daily net assets.
(4) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to
the end of each holding period, your expenses would be higher. This
example does not represent past or future expenses; actual expenses may be
higher or lower.
- --------------------------------------------------------------------------------
PAGE-11
<PAGE>
FUND STRATEGIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of each fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local and state income taxes as is consistent with preservation of capital.
There is no assurance that the funds will achieve their investment objective.
INVESTOR SUITABILITY
The funds are a suitable investment for tax-conscious investors seeking to:
.. Earn regular monthly tax-free dividends;
.. Preserve investment capital over time;
.. Reduce taxes on investment income;
.. Set aside money systematically for retirement, estate planning or college
funding.
The funds are not a suitable investment for individuals seeking to:
.. Pursue an aggressive, high-growth investment strategy;
.. Invest through an IRA or 401k plan;
.. Avoid fluctuations in share price.
- --------------------------------------------------------------------------------
HOW THE FUNDS SELECT
INVESTMENTS
TAX-FREE MUNICIPAL BONDS
The funds invest primarily in municipal bonds that pay interest that is exempt
from regular federal, state and, in some cases, local income taxes. Income from
these bonds may be subject to the federal alternative minimum tax.
Municipal bonds are either general obligation or revenue bonds and typically
are issued to finance public projects (such as roads or public buildings), to
pay general operating expenses, or to refinance outstanding debt. Municipal
bonds may also be issued for private activities, such as housing, medical and
educational facility construction, or for privately owned industrial develop-
ment and pollution control projects. General obligation bonds are backed by the
full faith and credit, or taxing authority, of the issuer and may be repaid
from any revenue source; revenue bonds may be repaid only from the revenues of
a specific facility or source.
The New York Insured Fund primarily purchases insured municipal bonds. See
"Insurance" below. Under normal market conditions, the Nuveen New York Insured
Fund will invest at least 65% of its assets in insured municipal bonds.
FOCUS ON QUALITY MUNICIPAL BONDS
The funds focus on quality municipal bonds that are either 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 funds'
investment adviser. If suitable municipal bonds from a specific state are not
available at attractive prices and yields, a fund may invest in municipal bonds
of U.S. territories (such as Puerto Rico and Guam) which are exempt from
regular federal, state, and local income taxes. The New York Fund, New York
Insured Fund and the New Jersey Fund may not invest more than 20% of their net
assets in these territorial municipal bonds. The New York Insured Fund will
invest at least 80% of its net assets in insured municipal bonds or municipal
bonds backed by an escrow or trust account that contains sufficient U.S.
government-backed securities to assure timely payment of interest and princi-
pal.
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 leases where the issuer has a strong
incentive to continue making appropriations until maturity.
Bond ratings are furnished by Standard & Poor's Corporation, Fitch Investors
Services, and Moody's Investors Services. The ratings BBB and Baa are not iden-
tical--S&P and Fitch consider bonds rated BBB to have adequate capacity to pay
principal and interest; Moody's considers bonds rated Baa to have some specula-
tive characteristics. Bond ratings represent the opinions of the ratings agen-
cies; they are not absolute standards of quality.
VALUE INVESTING STRATEGY
The funds' investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer above-average total
return potential. The adviser emphasizes fundamental research and selects
municipal bonds on the basis of its evaluation of each bond's relative value in
terms of current yield, price, credit quality and future prospects. The adviser
then monitors each fund's portfolio to assure that municipal bonds purchased
continue to represent over time, in its opinion, the best values available.
PORTFOLIO MATURITY
Each fund purchases municipal bonds with different maturities in pursuit of its
investment objective, but
- -------------------------------------------------------------------------
PAGE-12------
<PAGE>
maintains under normal market conditions an investment portfolio with an
overall weighted average maturity within a defined range. The New Jersey
Intermediate Fund maintains a weighted average portfolio maturity of 5 to 10
years. The Connecticut Fund, the New York Fund, the New York Insured Fund, and
the New Jersey Fund are long-term funds and normally maintain a weighted
average portfolio maturity of 15 to 30 years. See "Defensive Investment Strat-
egies" below for further information.
INSURANCE
Insured municipal bonds are purchased primarily by the New York Insured Fund.
Insured municipal bonds are either covered by individual, permanent insurance
policies (obtained either at the time of issuance or subsequently), or covered
"while in fund" under a master portfolio insurance policy purchased by a fund.
Insurance guarantees only the timely payment of interest and principal on the
bonds; it does not guarantee the value of either individual bonds or fund
shares.
Portfolio insurance policies are effective only so long as the fund continues
to own the covered bond, and the price the fund would receive upon sale of
such a bond would not benefit from the insurance. Insurers under master port-
folio insurance policies currently include MBIA Insurance Corp., AMBAC Indem-
nity Corp., Financial Security Assurance, Inc., and Financial Guaranty Insur-
ance Co. The fund's investment adviser may obtain master policies from other
insurers, but only from insurers that specialize in insuring municipal bonds
and whose claims-paying ability is rated Aaa or AAA by Moody's and S&P.
Insurers are responsible for making their own assessment of the insurability
of a municipal bond.
An insured fund can invest up to 20% of its net assets in uninsured municipal
bonds which are backed by an escrow containing sufficient U.S. Government or
U.S. Government agency securities to ensure timely payment of principal and
interest. Such bonds are normally regarded as having the credit characteris-
tics of the underlying U.S. Government-backed securities.
PORTFOLIO TURNOVER
A fund buys and sells portfolio securities in the normal course of its invest-
ment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The funds intend to keep portfolio turnover rela-
tively low in order to reduce trading costs and the realization of taxable
capital gains. Each fund, however, may make limited short-term trades to take
advantage of market opportunities and reduce market risk.
DELAYED DELIVERY TRANSACTIONS
Each fund may buy or sell bonds on a when-issued or delayed delivery basis,
making payment or taking delivery at a later date, normally within 15 to 45
days of the trade date. This type of transaction may involve an element of
risk because no interest accrues on the bonds prior to settlement and, since
securities are subject to market fluctuation, the value of the bonds at time
of delivery may be less (or more) than cost.
- -------------------------------------------------------------------------------
RISK REDUCTION STRATEGIES
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. Interest rate risk is
the risk that changes in market interest rates will affect the value of a
fund's investment portfolio. In general, the value of a municipal bond falls
when interest rates rise, and increases when interest rates fall. Credit risk
is the risk that an issuer of a municipal bond is unable to meet its obliga-
tion to make interest and principal payments. In general, lower rated munic-
ipal bonds are perceived to carry a greater degree of risk in the issuer's
ability to make interest and principal payments. Municipal bonds with longer
maturities (durations) or lower ratings generally provide higher current
income, but are subject to greater price fluctuation due to changes in market
conditions than bonds with shorter maturities or higher ratings, respectively.
Because the funds primarily purchase municipal bonds from a specific state,
each fund also bears investment risk from 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. As non-diversified
funds, the Connecticut, New Jersey and New Jersey Intermediate Funds generally
are subject to greater share price fluctuations due to these changes than the
New York and New York Insured Funds in this prospectus, which are diversified
funds.
The funds limit your investment risk generally by restricting the types and
maturities of municipal bonds they purchase, and by diversifying their invest-
ment portfolios across different industry sectors. The funds should be consid-
ered long-term investments and may not be suitable for investors with short-
term investment horizons.
INVESTMENT LIMITATIONS
The funds have adopted certain investment limitations (based on total fund
assets) designed to limit your investment risk and maintain portfolio diversi-
fication. Each fund may not have more than:
.. 25% in any one industry sector, such as electric utilities or health care;
- -------------------------------------------------------------------------------
PAGE 13
<PAGE>
.. 10% in borrowings (33% if used to meet redemptions).
As diversified funds, the New York and the New York Insured Funds also may not
have more than:
.. 5% in securities of any one issuer (except U.S. government securities or for
25% of each fund's assets).
DEFENSIVE INVESTMENT STRATEGIES
Each fund may invest in high quality short-term municipal securities in order
to reduce risk and preserve capital. Under normal market conditions, each fund
may invest only up to 20% of net assets in short-term municipal securities
that are exempt from regular federal income tax, although the funds may invest
up to 100% as a temporary defensive measure in response to adverse market
conditions. During temporary defensive periods, the weighted average maturity
of a fund's investment portfolio may fall below the defined range described
above under "Portfolio Maturity."
If suitable short-term municipal investments are not reasonably available, the
funds may invest in short-term taxable securities that are rated Aaa or AAA,
by Moody's or S&P, respectively, or issued by the U.S. government, and that
have a maturity of one year or less or have a variable interest rate.
Each fund may also use various investment strategies designed to limit the
risk of bond price fluctuations and to preserve capital. These hedging strate-
gies include using financial futures contracts, options on financial futures,
or options based on either an index of long-term tax-free securities or on
debt securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have
no present intent to use these strategies.
FUNDAMENTAL INVESTMENT POLICIES
Each fund's investment objective as well as the policies described above in
"Focus on Quality Municipal Bonds," "Insurance," and "Risk Reduction Strate-
gies" are fundamental and may not be changed without the approval of a
majority of the shareholders of each fund.
INVESTING IN THE FUNDS
- -------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
You may open an account with $3,000 and make additional investments at any
time with as little as $50. Reinvestment of Nuveen unit trust distributions
have no purchase minimums. The share price you pay will depend on when Nuveen
receives your order: orders received before the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) will receive
that day's share price; otherwise you will receive the next business day's
share price.
BUYING SHARES THROUGH A FINANCIAL ADVISER
You may buy fund shares through your financial adviser, who can handle all the
details for you, including establishing an account with Nuveen. Financial
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 assure your investments
continue to meet your needs as circumstances change.
Financial advisers are usually paid either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge for ongoing invest-
ment advice and services.
If you do not have a financial adviser, call (800) 621-7227 and Nuveen can
refer you to one in your area.
BUYING SHARES BY MAIL
You may also open an account and purchase shares by mail by completing the
enclosed Nuveen application and mailing it along with your check (payable to
the appropriate fund) to the address listed under "How to Contact Nuveen."
Sales charges are not waived when you buy shares by mail.
Each fund reserves the right to reject any purchase order and waive or
increase minimum investment requirements. The funds also reserve the right to
suspend the issuance of shares at any time; any suspension, however, will not
affect your ability to redeem shares.
- -------------------------------------------------------------------------------
HOW TO SELECT A PURCHASE OPTION
The funds offer you a variety of flexible options when buying shares. Whether
you typically work with a financial adviser on a commission or a fee basis or
- -------------------------------------------------------------------------------
PAGE 14
<PAGE>
prefer to work on a more self-directed basis, you can purchase shares in the
way that is most suited to your individual circumstances and investment needs.
Each of the four available ways to purchase fund shares is called a class of
shares: Class A, Class B, Class C and Class R. While each of these classes
features different sales charges, on-going fees and eligibility requirements,
each entitles you to a share of the same portfolio of municipal bonds.
Selecting the class of shares which is most appropriate for you will depend on
a variety of factors. You should weigh carefully whether you and your financial
adviser work on a commission or fee basis, the types of services that you will
receive, the amount you intend to buy, how long you plan to own your investment
and whether or not you will reinvest dividends. If you compensate your finan-
cial adviser directly, you should consider the fees your financial adviser
charges for investment advice or handling your trades in addition to any sales
charges and fees imposed by the funds. Please refer to your financial adviser's
sales material for further information. Each class of shares is described in
more detail below and under "Fund Service Providers--The Distributor." Your
financial adviser can explain each option and help you determine which is most
appropriate for you, or you can call (800) 621-7227.
BUYING CLASS A SHARES
You may buy Class A shares at their public offering price on the day of
purchase. The price you pay will equal the Class A NAV (net asset value) plus a
sales charge based upon the amount of your purchase. Class A shares also bear a
0.20% annual service fee which compensates your financial adviser for providing
you with ongoing service.
The following Class A sales charges and commissions apply to all funds
described in this prospectus except the New Jersey Intermediate Fund:
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
<CAPTION>
AUTHORIZED DEALER
SALES CHARGE COMMISSION
------------------------------------- -----------------
AS % OF
AS % OF PUBLIC YOUR NET AS % OF PUBLIC
PURCHASE AMOUNT OFFERING PRICE INVESTMENT OFFERING PRICE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 4.20% 4.38% 3.70%
$50,000-100,000 4.00 4.18 3.50
$100,000-250,000 3.50 3.63 3.00
$250,000-500,000 2.50 2.56 2.00
$500,000-1,000,000 2.00 2.04 1.50
$1,000,000 and over --(1) -- --(1)
</TABLE>
The following Class A sales charges and commissions apply to the New Jersey
Intermediate Fund:
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
<CAPTION>
AUTHORIZED DEALER
SALES CHARGE COMMISSION
------------------------------------- -----------------
AS % OF
AS % OF PUBLIC YOUR NET AS % OF PUBLIC
PURCHASE AMOUNT OFFERING PRICE INVESTMENT OFFERING PRICE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 3.00% 3.09% 2.50%
$50,000-100,000 2.50 2.56 2.00
$100,000-250,000 2.00 2.04 1.50
$250,000-500,000 1.50 1.52 1.25
$500,000-1,000,000 1.25 1.27 1.00
$1,000,000 and over --(1) -- --(1)
</TABLE>
(1) Nuveen pays authorized dealers a commission equal to the sum of 1% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of any
amount over $5 million. Unless the authorized dealer waived the commission,
you may be assessed a contingent deferred sales charge (CDSC) of 1% if you
redeem any of your shares within 18 months of purchase. The CDSC is calcu-
lated on the lower of your purchase price or redemption proceeds.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in connec-
tion with sales meetings, seminars, prospecting seminars and other events at
which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of adver-
tising that features the products and services of both parties. The statement
of additional information contains further information about these programs.
- --------------------------------------------------------------------------------
OTHER SALES CHARGE DISCOUNTS
Nuveen offers a number of programs that enable you to reduce or eliminate the
sales charge on Class A shares:
Sales Charge Reductions
Sales Charge Waivers
.. Rights of Accumulation
. Unit Trust Reinvestment
.. Letter of Intent (LOI)
.. Group Purchase . Purchases using Redemptions from Unrelated Funds
. Fee-Based Programs
. Bank Trust Departments
. Certain Employees of Nuveen or Authorized Dealers
Please refer to the statement of additional information for detailed descrip-
tions of these programs. Further information on these programs is also avail-
able through your financial adviser or by calling (800) 621-7227. Your finan-
cial adviser can also provide and
- --------------------------------------------------------------------------------
PAGE 15
<PAGE>
help you prepare the necessary application forms. You or your financial adviser
are responsible for notifying Nuveen about your eligibility for any sales
charge reduction or waiver at the time of each purchase.
The funds may modify or discontinue these programs at any time upon written
notice to shareholders.
BUYING CLASS B SHARES
You may buy Class B shares at their public offering price on the day of
purchase. The price you pay will equal the Class B NAV. There is no initial
sales charge, but Class B shares bear a 0.20% annual service fee which compen-
sates your financial adviser for providing you with ongoing service, and a
0.75% annual distribution fee which compensates Nuveen for paying your finan-
cial adviser a 4% commission at the time of purchase. The New Jersey Interme-
diate Fund does not currently offer Class B shares.
Class B shares convert automatically to Class A shares eight years after
purchase. Class B shares will convert only if the fund is assured that the
conversion does not generate tax consequences for investors, based upon the
opinion of outside counsel or the written assurance of the IRS.
- --------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGE
If you redeem Class B shares within six years of purchase, you will be assessed
a contingent deferred sales charge (CDSC) based upon the following schedule:
<TABLE>
<CAPTION>
DURING YEAR
------------------------------------------
1 2 3 4 5 6 7+
----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1% 0%
</TABLE>
The CDSC is calculated on the lower of your purchase price or redemption
proceeds.
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of
purchase. The price you pay will equal the Class C NAV. There is no initial
sales charge, Class C shares bear a 0.20% annual service fee which compensates
your financial adviser for providing you with ongoing service, and a 0.55%
annual distribution fee which compensates Nuveen for paying your financial
adviser for the sale, including a 1% commission at the time of sale.
If you redeem your Class C shares within one year of purchase, you may be
assessed a CDSC of 1%. The CDSC is calculated on the lower of your purchase
price or redemption proceeds.
BUYING CLASS R SHARES
You may purchase Class R shares at their public offering price on the day of
purchase. The price you pay will equal the Class R NAV. You may purchase Class
R shares only if you are investing at least $1 million or would otherwise
qualify to purchase Class A shares without a sales charge as described under
"Other Sales Charge Discounts" above. There are no sales charges or ongoing
fees. Class R Shares have lower ongoing expenses than Class A Shares.
- --------------------------------------------------------------------------------
HOW TO SELL FUND SHARES
You may use one of the methods described below to redeem your shares on any day
the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your redemption request in good order.
Your redemption request must be received before the close of trading of the New
York Stock Exchange (normally 4 p.m. Eastern time) for you to receive that
day's price. The funds do not charge any redemption fees, although you will be
assessed a CDSC where applicable.
SELLING SHARES THROUGH YOUR FINANCIAL ADVISER
You may sell fund shares by contacting your financial adviser who can provide
and help you prepare all the necessary documentation. Your financial adviser
may charge you for this service.
SELLING SHARES BY TELEPHONE
Unless you have declined telephone redemption privileges, you may sell fund
shares by calling (800) 621-7227. Your redemption must not exceed $50,000 and
you may not redeem by telephone shares held in certificate form. Checks will be
issued only to the shareholder on record and mailed to the address on record.
If you have established electronic funds transfer privileges on your account,
you may have redemption proceeds transferred electronically to your bank
account; if you are redeeming $1,000 or more, you may expedite your request by
having your redemption proceeds wired directly into your bank account.
Nuveen and Shareholder Services, Inc. ("SSI") will be liable for losses
resulting from unauthorized telephone redemptions only if they do not follow
reasonable procedures designed to verify the identity of the caller. You should
immediately verify your trade confirmations when you receive them.
SELLING SHARES BY MAIL
You may sell fund shares by mail by sending a written request to Nuveen at the
address listed below under "How to Contact Nuveen." Your request must include
the following information:
.. The fund's name;
.. Your name and account number;
.. The dollar or share amount you wish to redeem;
.. The signature of each owner exactly as it appears on the account;
- -------------------------------------------------------------------------
PAGE-16------
<PAGE>
.. The name of the person you want your redemption proceeds paid to, if other
than to the shareholder of record;
.. The address you want your redemption proceeds sent to, if other than to the
address of record;
.. Any certificates you have for the shares; and
.. Any required signature guarantees.
Signatures must be guaranteed if you are redeeming more than $50,000, you want
the check payable to someone other than the shareholder on record, or you want
the check sent to another address (or the address on record has been changed
within the last 60 days). Signature guarantees must be obtained from a bank,
brokerage firm or other financial intermediary that is a member of an approved
Medallion Guarantee Program or that is otherwise approved by the fund. A notary
public cannot provide a signature guarantee.
Unless other arrangements are made, checks will be sent to your address on
record. Checks will normally be mailed within one business day, but in no event
more than seven days from receipt of your redemption request. If any shares
were purchased less than 15 days prior to your request, the fund will not mail
your redemption proceeds until the check for your purchase has cleared, which
may take up to 15 days.
Each fund may suspend redemptions or delay payment on redemptions for more than
seven days (three days for street name accounts) in certain extraordinary
circumstances as described in the statement of additional information.
OPERATION OF THE CDSC
When you redeem Class A, Class B, or Class C shares subject to a CDSC, the fund
will first redeem any shares that are not subject to a CDSC or that 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 CDSC, the
CDSC is calculated on the lower of your purchase price or redemption proceeds,
deducted from your redemption proceeds, and paid to Nuveen. The CDSC may be
waived under certain special circumstances as described in the statement of
additional information.
ACCOUNT MINIMUMS
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
unit trust reinvestment account. You will not be assessed a CDSC on an involun-
tary redemption.
- --------------------------------------------------------------------------------
EXCHANGING SHARES
You may exchange fund shares at any time for the same class of shares in
another Nuveen mutual fund that is available within your state. You may
exchange fund shares by calling (800) 621-7227 or by mailing your written
request to Nuveen at the address listed under "How to Contact Nuveen."
You must have owned your fund shares for at least 15 days and your exchange
must meet the minimum purchase requirements of the fund into which you are
exchanging. No CDSC will be assessed on an exchange, and the holding period of
your investment will be carried over to the new fund for purposes of deter-
mining any future CDSC. You may not exchange Class B shares for shares of a
Nuveen money market fund.
Because an exchange is treated for tax purposes as the concurrent sale and
purchase of fund shares, you should consult your tax adviser about the tax
consequences of any contemplated exchange. Each fund reserves the right to
limit or terminate exchange privileges if it believes doing so is in the best
interests of fund shareholders.
RESTRICTIONS ON MARKET TIMING
The exchange privilege is not intended to permit you to use a fund for short-
term trading. Excessive exchange activity may interfere with portfolio manage-
ment, raise fund operating expenses or otherwise have an adverse effect on fund
shareholders. In order to limit excessive exchange activity and in other
circumstances where the funds' investment adviser believes doing so would be in
the best interests of the fund, each fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of exchanges, or
reject any exchange. You will be notified in the event this happens to the
extent required by law.
- --------------------------------------------------------------------------------
OPTIONAL FEATURES AND SERVICES
SYSTEMATIC INVESTMENT
Once you have opened an account, you may make regular investments of $50 or
more a month through automatic deductions from your bank account (see "Fund
Direct--Electronic Funds Transfer" below), or directly from your paycheck. To
invest regularly from your bank account, simply complete the appropriate
section of the account application. To invest regularly from your paycheck,
call Nuveen for a Payroll Direct Deposit Enrollment form. If you need
PAGE-17
- -------------------------------------------------------------------------------
<PAGE>
additional copies of these forms, or would like assistance completing them,
contact your financial adviser or call Nuveen toll-free at (800) 621-7227.
One of the benefits of systematic investing is "dollar cost averaging." Because
you are making fixed payments, you buy fewer shares when the price is high, and
more when the price is low. As a result, the average price you pay will be less
than the average share price of fund shares over this period. Dollar cost aver-
aging does not assure profits or protect against losses in a steadily declining
market. Since dollar cost averaging involves continuous investment regardless
of fluctuating price levels, you should consider your financial ability to
continue investing in declining as well as rising markets before deciding to
invest in this way.
Systematic investing may also make you eligible for reduced sales charges on
shares of the fund as well as other Nuveen mutual funds (see "Other Sales
Charge Discounts").
- --------------------------------------------------------------------------------
THE POWER OF SYSTEMATIC INVESTING
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. Theses annual returns do not
reflect past or projected fund performance.
<TABLE>
<CAPTION>
(CHART APPEARS HERE)
ACCOUNT VALUES FOR TOTAL RETURNS OF
AMOUNT ------------------------------------
YEAR INVESTED 4.00% 5.00% 6.00%
---- -------- ------- ------- -------
<S> <C> <C> <C> <C>
0 $ 2,874 $ 2,874 $ 2,874 $ 2,874
5 8,622 9,861 10,203 10,561
10 14,370 18,391 19,610 20,929
15 20,118 28,807 31,681 34,913
20 25,866 41,525 47,173 53,779
</TABLE>
SYSTEMATIC WITHDRAWALS
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly or semi-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 to participate in
the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concur-
rent purchases of Class A, B or C shares because you may unnecessarily pay a
sales charge or CDSC on these purchases.
REINSTATEMENT PRIVILEGE
If you redeem fund shares on which you paid an initial sales charge or contin-
gent deferred sales charge (CDSC), you may reinvest all or part of your redemp-
tion proceeds up to one year later without incurring any additional charge. You
may only reinvest into the same class of shares you redeemed and will receive
the share price next determined after Nuveen receives your reinvestment
request. You may exercise this privilege only once per redemption request.
If you paid a CDSC, your CDSC will be refunded and your holding period rein-
stated. You should consult your tax adviser about the tax consequences of exer-
cising your reinstatement privilege.
FUND DIRECT--ELECTRONIC FUNDS TRANSFER
You may arrange to transfer funds electronically between your bank account and
your fund account by completing the appropriate section of the account applica-
tion. If you need additional copies of this form, or would like assistance
completing it, contact your financial adviser or call Nuveen at (800) 621-7227.
You may use Fund Direct to quickly and conveniently purchase or sell shares by
telephone, systematically invest or withdraw funds, or send dividend payments
directly to your bank account.
If you have established electronic funds transfer privileges on your account,
you may request that redemption proceeds of $1,000 or more be wired directly
into your bank account. While you will generally receive your redemption
proceeds more quickly than a regular telephone redemption, the fund may charge
you a fee for this expedited service.
- -------------------------------------------------------------------------
PAGE-18------
<PAGE>
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
HOW THE FUNDS PAY DIVIDENDS
The funds pay tax-free dividends monthly and any taxable capital gains or other
distributions once a year in December. The funds declare dividends on or about
the ninth of each month and generally pay dividends on the first business day
of the following month.
PAYMENT AND REINVESTMENT OPTIONS
The funds automatically reinvest your dividends each month 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. If you wish to do so, complete the
appropriate section of the account application, contact your financial adviser
or call Nuveen at (800) 621-7227.
CALCULATION OF FUND DIVIDENDS
Each fund pays dividends based upon its past and projected net income in order
to distribute substantially all of its net income each fiscal year.
In order to maintain a more stable monthly dividend, each fund may sometimes
distribute less or more than the amount of net income earned in a particular
period as a result of fluctuations in a fund's net income. Undistributed net
income is included in the fund's share price; similarly, distributions from
previously undistributed net income reduce the fund's share price. This divi-
dend policy is not expected to affect the management of a fund's portfolio.
Dividends for Class A, B, C and R shares are determined in the same manner and
at the same time. Dividends per share will vary based on which class of fund
shares you own, reflecting the different ongoing fees and other expenses of
each class.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAXES AND TAX REPORTING
The discussion below and in the statement of additional information provides
general tax information related to an investment in fund shares. Because tax
laws are complex and often change, you should consult your tax adviser about
the tax consequences of a specific fund investment.
Each fund primarily invests in municipal bonds from a specific state or in
municipal bonds whose income is otherwise exempt from regular federal, state
and local income taxes. Consequently, the regular monthly dividends you receive
will be exempt from regular federal, state and, in some cases, local income
taxes. All or a portion of these dividends, however, may be subject to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how
long you have owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Each year, you will receive a year-end statement that describes the tax status
of dividends paid to you during the preceding year, including the source of its
investment income by state and the portion of its income that is subject to
AMT. You will receive this statement from the firm where you purchased your
fund shares if you hold your investment in street name; Nuveen will send you
this statement if you hold your shares in registered form.
The tax status of your dividends is not affected by whether you reinvest your
dividends or receive them in cash.
BUYING OR SELLING SHARES CLOSE TO A RECORD DATE
If you purchase fund shares shortly before the record date for a taxable divi-
dend, the entire dividend you receive may be taxable to you even though a
portion of the dividend effectively represents a return of your purchase price.
This is commonly known as "buying a dividend." 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.
TAX CONSEQUENCES OF PRIVATE ACTIVITY BONDS
Because each fund may invest in private activity bonds, the portion of your
regular monthly dividends derived from the income earned on these bonds that
would otherwise be tax-exempt will be treated as taxable income if:
.. you are subject to the AMT (including corporate shareholders);
.. you are a "substantial user" of a facility financed by these bonds; or
.. you are a "related person" of a substantial user.
REDEEMING SHARES HELD LESS THAN SIX MONTHS
If you sell or exchange shares that you have owned for less than six months and
you recognized a short-
PAGE-19
- -------------------------------------------------------------------------------
<PAGE>
term capital loss when you redeemed your shares, the loss you can claim will
be reduced by the amount of tax-free dividends paid to you on those shares.
Any remaining short-term capital loss will be treated as long-term capital
loss to the extent you also received capital gain dividends on those shares.
You should consult your tax adviser for complete information about these
rules. Please consider the tax consequences carefully when contemplating a
redemption.
OTHER IMPORTANT TAX INFORMATION
In order to avoid corporate taxation of its earnings and to pay tax-free divi-
dends, each fund must meet certain I.R.S. requirements that govern the fund's
sources of income, diversification of assets and distribution of earnings to
shareholders. Each fund has met these requirements in the past and intends to
do so in the future. If a fund failed to do so, the fund would be required to
pay corporate taxes on its earnings and all your distributions would be
taxable as ordinary income.
A fund may be required to withhold 31% of certain of your dividends if you
have not provided the fund with your correct taxpayer identification number
(normally your social security number), or if you are otherwise subject to
back-up withholding.
If you receive social security benefits, you should be aware that tax-free
income is taken into account in calculating the amount of these benefits that
may be subject to federal income tax.
If you borrow money to buy fund shares, you may not deduct the interest on
that loan. Under I.R.S. rules, fund shares may be treated as having been
bought with borrowed money even if the purchase cannot be traced directly to
borrowed money.
- -------------------------------------------------------------------------------
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
<TABLE>
<CAPTION>
TAX-FREE YIELD
TAX RATE 4.00% 4.50% 5.00% 5.50% 6.00%
- ------
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
statement of additional information or consult your tax adviser.
GENERAL INFORMATION
- -------------------------------------------------------------------------------
HOW TO CONTACT NUVEEN
GENERAL INFORMATION
If you would like general information about Nuveen Mutual Funds or any other
Nuveen product, call (800) 621-7227 between 7:30 a.m. and 7:00 p.m. Central
time.
PURCHASES, REDEMPTIONS AND OTHER TRANSACTIONS
If you are calling to purchase or redeem shares, request an exchange or
conduct other account transactions, call (800) 621-7227 between 7:30 a.m. and
7:00 p.m. Central time. If you are sending a written request to Nuveen, you
should mail your request to the following address:
Nuveen Mutual Funds
c/o Shareholder Services Inc.
P.O. Box 5330
Denver, CO 80217-5330
When purchasing fund shares by mail, please be sure to include a check made
out to the name of the Fund and mark clearly on your check which class of
shares you are purchasing. If you do not specify which class of shares you are
purchasing, Nuveen will assume you are buying Class A shares if you are
opening a new account; if you are adding to an existing account, Nuveen will
assume you wish to buy more shares of the class you already own.
- -------------------------------------------------------------------------------
FUND SERVICE PROVIDERS
INVESTMENT ADVISER
Nuveen Advisory Corp. ("Nuveen Advisory") serves as the investment adviser to
the funds and in this capacity is responsible for the selection and on-going
monitoring of the municipal bonds in each fund's investment portfolio. Nuveen
Advisory serves as investment adviser to investment portfolios with more than
$35 billion in municipal assets under management. The activities of Nuveen
Advisory, which also include managing the funds' business affairs and
providing certain clerical, bookkeeping and other administrative services, are
overseen by the funds' Board of Trustees. Established in 1976, Nuveen Advisory
is a wholly-owned subsidiary of John Nuveen & Co. Incorporated, which itself
is approximately 78% owned by the St. Paul Companies, Inc. Effective January
1, 1997, The John Nuveen Company acquired Flagship Resources Inc., and as part
of that acquisition, Flagship Financial, the adviser to Flagship Funds, was
merged with Nuveen Advisory.
- -------------------------------------------------------------------------------
PAGE 20
<PAGE>
For providing these services, Nuveen Advisory is paid an annual management fee
according to the following schedule:
- -------------------------------------------------------------------------------
MANAGEMENT FEES
<TABLE>
<CAPTION>
AVERAGE DAILY MANAGEMENT
NET ASSET VALUE 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>
Nuveen will waive some or all of its fees or reimburse expenses so that the
total operating expenses (not counting distribution and service fees) for the
New York Fund, the New Jersey Fund (through July 31, 1997) and the New York
Insured Fund do not exceed 0.75%, 0.75% and 0.975%, respectively, of average
daily net assets. Nuveen will waive some or all of its fees or reimburse
expenses so that the total operating expenses (not counting distribution and
service fees) for each fund are, in Nuveen's opinion, competitive with similar
funds, and may discontinue this practice at any time. For more information
about fees and expenses, see the fund operating expense tables in the Fund
Summaries.
PORTFOLIO MANAGERS
Overall investment management strategy and operating policies for the funds
are set by the Investment Policy Committee of Nuveen Advisory. The Investment
Policy Committee is comprised of the principal executive officers and port-
folio 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.
Daniel S. Solender is the portfolio manager for the New York Fund and the New
York Insured Fund. Mr. Solender has managed the funds since September 1994 and
joined Nuveen Advisory in January 1992. Stephen S. Peterson is an Assistant
Vice President of Nuveen Advisory and the portfolio manager for the New Jersey
Fund. Mr. Peterson has managed the fund since its inception in March 1992 and
joined Nuveen Advisory in October 1991. Richard Huber is the portfolio manager
for the Connecticut Fund and the New Jersey Intermediate Fund. Mr. Huber has
managed the funds since 1993 and since 1995 had been a Vice President of Flag-
ship Financial Inc., the fund's prior investment adviser, until becoming an
employee of Nuveen Advisory upon the acquisition of Flagship Resources Inc. by
The John Nuveen Company in January 1997.
THE DISTRIBUTOR
John Nuveen and Co. Incorporated serves as the selling agent and distributor
of the funds' shares. In this capacity, Nuveen manages the offering of the
funds' shares and is responsible for all sales and promotional activities. In
order to reimburse Nuveen for its costs in connection with these activities,
including compensation paid to authorized dealers, each fund has adopted a
distribution and service plan under Rule 12b-1 of the Investment Company Act
of 1940.
The plan authorizes each fund to pay Nuveen an annual 0.20% service fee on the
average daily net assets of Class A, B and C shares outstanding and annual
distribution fees of 0.75% and 0.55%, respectively, on the average daily net
assets of Class B and C shares outstanding. In order to help compensate Nuveen
for the sales commission paid to financial advisers at the time of sale on
sales of Class B and
Class C shares, Nuveen retains the first year's service fee on sales of Class
B shares and all Class B distribution fees; and retains the first year's
service and distribution fees on sales of Class C shares. Otherwise, Nuveen
pays these fees to the broker of record. The statement of additional informa-
tion contains a detailed description of the plan and its provisions.
TRANSFER AGENT
Each fund has appointed a transfer agent which is responsible for distributing
dividend payments and providing certain bookkeeping, data processing and other
administrative services in connection with the maintenance of shareholder
accounts. Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330,
currently serves as transfer agent for each fund.
- -------------------------------------------------------------------------------
HOW THE FUNDS REPORT
PERFORMANCE
Each fund may quote its yield and total return in reports to shareholders,
sales literature and advertisements. The funds may also compare their invest-
ment results to various passive indices or other mutual funds with similar
investment objectives. Comparative performance information may include data
from Lipper Analytical Services, Inc., Morningstar, Inc. and other industry
publications. See the statement of additional information for a more detailed
discussion.
- -------------------------------------------------------------------------------
HOW FUND SHARES ARE PRICED
The share price for each class of fund shares, also called its net asset value
(NAV), is calculated every business day as of the close of regular trading on
the New York Stock Exchange (normally 4 p.m. Eastern time). The net asset
value for a class of fund shares is computed by calculating the total value of
the class' portion of the fund's portfolio investments and other
- -------------------------------------------------------------------------------
PAGE 21
<PAGE>
assets, subtracting any liabilities or other debts, and dividing by the total
number of its shares outstanding.
The prices of municipal bonds in each fund's investment portfolio are provided
by a pricing service approved and supervised by the fund's Board of Trustees.
When price quotes are not readily available (which is usually the case for
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.
- --------------------------------------------------------------------------------
ORGANIZATION
The Trust is an open-end diversified investment company under the Investment
Company Act of 1940, consisting of multiple funds. The shares of each fund are
divided into classes. Each class of shares represents an interest in the same
portfolio of investments and the shares of each class have equal rights as to
voting, redemption, dividends and liquidation. However, each class bears
different sales charges and service fees. B shares convert to A shares after 8
years. C shares purchased before February 1, 1997 convert to A shares six years
after purchase, but only if you request conversion. You must submit your
request to SSI no later than the last business day of the 71st month following
the month in which you purchased your shares.
The funds are not required to and do not intend to hold annual meetings. Share-
holders owning ten percent or more of a fund's outstanding shares may call a
special meeting for any purpose, including to elect or remove trustees or to
change fundamental policies.
The New York and New Jersey Funds were formed as a result of mergers between
existing Nuveen and Flagship funds. The performance and the financial informa-
tion of each fund reflects that of the predecessor Nuveen fund.
APPENDIX
- --------------------------------------------------------------------------------
SPECIAL STATE CONSIDERATIONS
Because the funds primarily purchase municipal bonds from a specific state,
each fund also bears investment risk from economic, political or regulatory
changes that could adversely affect municipal bond issuers in that state and
therefore the value of the fund's investment portfolio. The following discus-
sion of special state considerations was obtained from official offering state-
ments 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 informa-
tion.
CONNECTICUT
Connecticut's economy, historically based on the insurance, defense manufactur-
ing, finance and real estate industries, is slowly recovering from one of the
most severe recessions in the country, which was due in part to reductions in
defense spending and the downsizing of the foregoing industries. The construc-
tion, trade and service industries are expected to lead the state's economic
recovery. Connecticut is the highest income state in the nation.
While the state's per capital personal income levels are 135% of the national
average, the state's ratio of tax-supported debt to personal income is among
the highest in the nation. These high debts are expected to limit the state's
financial flexibility. The state's general obligation bonds are rated Aa by
Moody's and AA- by Standard and Poor's.
Tax Treatment:
The Connecticut Fund's regular monthly dividends will not be subject to the
Connecticut personal income tax to the extent they are paid out of income
earned on or capital gains realized from the sale of Connecticut municipal
bonds or out of income earned on obligations of U.S. territories and posses-
sions. The portion of the Connecticut Fund's monthly dividends that is attrib-
utable to income earned on other obligations will be subject to the Connecticut
personal income tax. You also will be subject to Connecticut personal income
tax to the extent the Connecticut Fund distributes any taxable income or real-
ized capital gains (other than capital gains on Connecticut municipal bonds),
or if you sell or exchange Connecticut Fund shares and realize a capital gain
on the transaction.
- --------------------------------------------------------------------------------
PAGE 22
<PAGE>
The treatment of corporate shareholders of the Connecticut 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.
NEW YORK
While New York State historically has been one of the wealthiest states in the
nation, for decades its economy has grown more slowly than the nation as a
whole. There are many reasons for this slow growth. New York has a very high
state and local tax burden relative to other states. Declines in the banking
and financial services industry, cutbacks in defense spending, and an overbuilt
real estate market have hurt the State's economy. High taxes and other factors
have prompted some businesses and individuals to leave the State, or not to
move to the State. More affluent residents of its cities have moved to the
suburbs and been replaced by less affluent residents, who may require more
government support. Cities outside the state have developed financial and busi-
ness resources which make them less dependent on New York City, which has
hindered its economic recovery. The State projects a slow rate of economic
growth in 1996. The State's 1995 unemployment rate was 6.3%. New York City's
1995 unemployment rate was 8.2%. New York State general obligation bonds are
rated A by Moody's and A- by Standard & Poor's; New York City general obliga-
tion bonds are rated Baa1 by Moody's and BBB+ by Standard & Poor's.
The State ended its 1995-96 fiscal year with a GAAP operating deficit. The $378
million proposed 1996-97 State budget projects a balanced general fund,
receipts of $31.9 billion, and disbursements of $31.2 billion. The Governor
also proposed an alternative budget to replace over $1 billion in Medicaid
reimbursements which the federal government might not pay.
New York City ended its 1996 fiscal year with an operating surplus of approxi-
mately $5 million. Before the State enacted its 1996-97 budget, New York City
adopted a fiscal year 1997 budget in June 1996 which provided for $33.4 billion
in spending. In March 1996, Moody's announced that it was reviewing the City's
general obligation bond rating pending adoption of the City's 1997 budget. S&P
placed the City on negative credit watch in January 1995. The City's 1997
budget of $33.3 billion reduces spending from the previous year and cuts $1.1
billion from City agencies. The Governor and the legislature have not agreed on
how much State aid to provide the City in fiscal 1998, and the City may have to
adopt further budget cuts after the 1998 State budget is adopted. Recent
changes in federal law may lower the amount of federal aid the City receives.
If State and federal aid to the City declines, savings in the City's budget may
be lower than projected and the Mayor may be required to propose additional
spending cuts or tax increases to balance the City's budget in 1997 and beyond.
If serious financial difficulties arise that hamper the ability of the State,
its agencies, New York City, other municipalities, or school districts to issue
bonds or increase the risk that they may default on their obligations to pay
bondholders, the market value of the bonds they have issued may decrease. In
addition, without help from the State legislature, the State Constitution may
prevent the City from issuing bonds after 1997 because of declining real estate
values within the City. If the City cannot issue bonds to pay for capital
improvements, this would increase its budget deficits in later years.
Tax Treatment.
The New York Funds' regular monthly dividends will not be subject to New York
state or New York city personal income taxes to the extent they are paid out of
income earned on New York municipal bonds or out of income earned on obliga-
tions of U.S. territories and possessions. The portion of the New York Funds'
monthly dividends that is attributable to income earned on other obligations
will be subject to the New York state or the New York city personal income
taxes. You also will be subject to New York state and New York city personal
income taxes to the extent the New York Funds distribute any taxable income or
realized capital gains, or if you sell or exchange shares of the New York Funds
and realize a capital gain on the transaction.
The treatment of corporate and unincorporated business shareholders of the New
York Funds 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.
NEW JERSEY
New Jersey has a diversified economic base comprised of various manufacturing,
construction and service industries. Compared to other states, New Jersey ranks
high in per capita personal income. The national recession, however, adversely
affected the State's employment rate. Economic recovery is expected to be slow
and uneven.
The fiscal year 1997 budget totaled $15.8 billion, a 1.3% decrease from the
previous year. The balanced budget includes $607 million in surplus. Whether
the State can achieve a balanced budget depends on its ability to reduce expen-
ditures and collect estimated tax revenues.
The 1995 fiscal year audited general fund revenues were $16.6 billion against
expenditures of $16.5 billion, leaving a general fund surplus of approximately
$100 million. In October 1996, the unemployment rate was 6.1%. The state ranks
second in the U.S. to Connecticut in per capita income. New
PAGE-23
- -------------------------------------------------------------------------------
<PAGE>
Jersey's general obligation bonds are rated Aa1 by Moody's and AA+ by Standard
and Poor's.
Tax Treatment.
The New Jersey Funds' regular monthly dividends will not be subject to New
Jersey gross income tax to the extent they are paid out of income earned on or
capital gains realized from the sale of New Jersey municipal bonds or U.S.
government securities. You will be subject to New Jersey gross income tax,
however, to the extent the New Jersey Funds distribute any taxable income. If
you realize a capital gain on the sale or exchange of shares of the New Jersey
Funds, you will not be subject to New Jersey gross income tax. If you realize a
capital loss on the sale or exchange of shares of the New Jersey Funds, you may
not use the loss to offset other New Jersey taxable capital gains.
The treatment of corporate shareholders of the New Jersey Funds 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.
- --------------------------------------------------------------------------------
PAGE 24
<PAGE>
Nuveen Family of Mutual Funds
Nuveen's family of funds is designed to help you reach your finan-
cial goals. The funds below are grouped by investment objectives.
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME FUNDS
National Funds/1/
State Funds
Alabama Michigan
Arizona Missouri
California/2/ New Jersey/3/
Colorado New Mexico
Connecticut New York/2/
Florida/3/ North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky/4/ South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts/2/ Wisconsin
Notes
1. Long-term, long-term insured, intermediate-term and limited-term
portfolios.
2. Long-term and long-term insured portfolios.
3. Long-term and intermediate-term portfolios.
4. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
- --------------------------------------------------------------------------------
OVERVIEW
The funds listed above are part of the Nuveen Flagship Multistate Trust II, an
open-end investment company. Each fund seeks to provide high double or triple
tax-free income and preservation of capital through investments in diversified
portfolios of quality municipal bonds whose income is exempt from regular
federal, state and, in some cases, local income taxes.
Each fund offers a set of flexible purchase options which permit you to
purchase fund shares in the way that is best suited to your individual circum-
stances and investment needs. For detailed information about these flexible
purchase options, please refer to "How to Select a Purchase Option" later in
this prospectus.
This prospectus contains important information you should know before invest-
ing. Please read it carefully and keep it for future reference. You can find
more detailed information about each fund in the statement of additional infor-
mation which is part of this prospectus by reference. For a free copy, write to
Nuveen or call (800) 621-7227.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER U.S. GOVERNMENT AGENCY. SHARES OF THE FUNDS
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
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.
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<S> <C>
OVERVIEW 1
FUND SUMMARIES AND FINANCIAL HIGHLIGHTS 2
FUND STRATEGIES
Investment Objective 6
How the Funds Select Investments 6
Risk Reduction Strategies 7
INVESTING IN THE FUNDS
How to Buy Fund Shares 8
How to Select a Purchase Option 9
How to Sell Fund Shares 10
Exchanging Shares 11
Optional Features and Services 11
DIVIDENDS AND TAXES
How the Funds Pay Dividends 13
Taxes and Tax Reporting 13
Taxable Equivalent Yields 14
GENERAL INFORMATION
How to Contact Nuveen 15
Fund Service Providers 15
How the Funds Report Performance 16
How Fund Shares are Priced 16
Organization 16
APPENDIX
Special State Considerations 17
</TABLE>
FEBRUARY 1, 1997
<PAGE>
- --------------------------------------------------------------------------------
Nuveen California Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION:
July 1, 1986
NET ASSETS:
$228.0 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 1.80% 6.26% 5.64% 5.47% 6.65%
5 YEARS 5.62% 6.51% 5.86% 5.79% 6.86%
10 YEARS 6.42% 6.86% 6.27% 6.23% 7.18%
INCEPTION 6.63% 7.08% 6.49% 6.44% 7.38%
</TABLE>
Class R total returns reflect actual performance for all periods; Class A and C
total returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class R performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B total returns reflect Class R performance for all periods,
adjusted for the differences in sales charges and fees between the classes. See
Overview of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 20.9
Average Modified Duration 8.1
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
AA (20%)
A (21%)
BBB (4%)
BB (2%)
NR (3%)
AAA (50%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Educational Facilities (15%)
Housing Facilities (14%)
Lease Rental Facilities (14%)
Escrowed Bonds (10%)
Other (31%)
Health Care Facilities (16%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
TRANSACTION EXPENSE CLASS A CLASS B CLASS C CLASS R
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS -- (1) 5%(2) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
FUND EXPENSE CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER 0.15% 0.15% 0.15% 0.15%
- ------------------------------------------------------
TOTAL (GROSS) 0.90% 1.65% 1.45% 0.70%
WAIVERS/
REIMBURSEMENTS -- -- -- --
- ------------------------------------------------------
TOTAL EXPENSES (NET) 0.90% 1.65% 1.45% 0.70%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 51 $ 56 $ 15 $ 7
3 YEARS $ 69 $ 84 $ 46 $22
5 YEARS $ 90 $101 $ 79 $39
10 YEARS $148 $175 $174 $87
</TABLE>
Information as of 8/31/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Arthur Andersen LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
- ---------- ---------------------------------- ---------------------------------
<TABLE>
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION DATE)
<S> <C> <C> <C> <C> <C> <C>
Net Realized Dividends Distribu-
Year Ending Beginning Net and Unreal- from Net tions Ending
February Net Asset Investment ized Gain Investment from Net Asset
28/29, Value Income(c) (Loss) From Income Capital Value
-------------- --------- ---------- Investments(a) ---------- Gains ---------
-------------- ---------
CLASS A (9/94)
1997(g) $10.580 $.275 $(.238) $(.267) $ -- $10.350
- -------------------------------------------------------------------------------------
1996 10.100 .549 .473 (.542) -- 10.580
- -------------------------------------------------------------------------------------
1995(d) 10.210 .270 (.031) (.275) (.074) 10.100
- -------------------------------------------------------------------------------------
CLASS C (9/94)
1997(g) 10.580 .237 (.239) (.228) -- 10.350
- -------------------------------------------------------------------------------------
1996 10.100 .470 .474 (.464) -- 10.580
- -------------------------------------------------------------------------------------
1995(d) 10.040 .218 .139 (.223) (.074) 10.100
- -------------------------------------------------------------------------------------
CLASS R (7/86)
1997(g) 10.600 .283 (.221) (.282) -- 10.380
- -------------------------------------------------------------------------------------
1996 10.130 .575 .467 (.572) -- 10.600
- -------------------------------------------------------------------------------------
1995 10.740 .582 (.531) (.587) (.074) 10.130
- -------------------------------------------------------------------------------------
1994 10.850 .598 (.054) (.596) (.058) 10.740
- -------------------------------------------------------------------------------------
1993 10.140 .633 .707 (.626) (.004) 10.850
- -------------------------------------------------------------------------------------
1992(e) 9.920 .429 .218 (.427) -- 10.140
- -------------------------------------------------------------------------------------
1991(f) 9.790 .639 .133 (.642) -- 9.920
- -------------------------------------------------------------------------------------
1990(f) 9.850 .641 (.058) (.643) -- 9.790
- -------------------------------------------------------------------------------------
1989(f) 9.240 .649 .610 (.649) -- 9.850
- -------------------------------------------------------------------------------------
1988(f) 9.280 .647 (.040) (.647) -- 9.240
- -------------------------------------------------------------------------------------
1987(f) 9.600 .652 (.320) (.652) -- 9.280
- -------------------------------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
<S> <C> <C> <C> <C> <C>
Ratio of Ratio of Net
Year Ending Ending Expenses to Investment Portfolio
February Total Net Assets Average Net Income to Turnover
28/29, Return(b) (millions) Assets(c) Average Rate
- ------------------ --------- ---------- ------------- Net Assets(c) ----------
---------------
CLASS A (9/94)
1997(g) .38% $17.0 .95%+ 5.17%+ 31%
- -------------------------------------------------------------------------------------
1996 10.36 12.7 .96 5.27 36
- -------------------------------------------------------------------------------------
1995(d) 2.52 3.1 1.00+ 5.81+ 32
- -------------------------------------------------------------------------------------
CLASS C (9/94)
1997(g) -- .7 1.70+ 4.43+ 31
- -------------------------------------------------------------------------------------
1996 9.53 .7 1.71 4.52 36
- -------------------------------------------------------------------------------------
1995(d) 3.71 .2 1.75+ 5.03+ 32
- -------------------------------------------------------------------------------------
CLASS R (7/86)
1997(g) .62 210.4 .70+ 5.43+ 31
- -------------------------------------------------------------------------------------
1996 10.54 216.4 .71 5.53 36
- -------------------------------------------------------------------------------------
1995 .78 208.1 .71 5.83 32
- -------------------------------------------------------------------------------------
1994 5.08 218.4 .73 5.47 19
- -------------------------------------------------------------------------------------
1993 13.66 183.2 .71 6.05 5
- -------------------------------------------------------------------------------------
1992(e) 6.61 133.4 .67+ 6.30+ --
- -------------------------------------------------------------------------------------
1991(f) 8.16 107.5 .69 6.48 15
- -------------------------------------------------------------------------------------
1990(f) 6.14 78.7 .69 6.51 8
- -------------------------------------------------------------------------------------
1989(f) 14.12 52.0 .75 6.79 22
- -------------------------------------------------------------------------------------
1988(f) 6.87 29.6 .70 7.09 48
- -------------------------------------------------------------------------------------
1987(f) 3.28 19.1 .18 6.62 17
- -------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the eight months ending February 29.
(f) For the year ending June 30.
(g) For the six months ending August 31, 1996.
- -------------------------------------------------------------------------------
NOTES:
(1)Sales charge in effect February 1, 1997. 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% is imposed on redemptions of certain purchases of $1
million or more within 18 months of purchase.
(2)CDSC declines to 0% at the end of six years.
(3)Imposed only on redemptions within 12 months of purchase.
(4)Effective February 1, 1997, the funds reduced the service fee on Class A and
C shares from 0.25% to 0.20% and reduced the distribution fee on Class C
shares from 0.75% to 0.55%. These lower expenses are reflected in the table
and are expected to reduce total operating expenses on Class A from 0.95% to
0.90% and on Class C from 1.70% to 1.45%, as reflected in the table. Long-
term holders of Class B and C shares may pay more in distribution fees and
CDSCs than the maximum initial sales charge permitted under National
Association of Securities Dealers (NASD) Rules of Fair Practice. Nuveen
Advisory has agreed to waive some or all of its fees or reimburse expenses to
prevent total operating expenses (not counting distribution and service fees)
from exceeding 0.75% of the fund's average daily net assets.
(5)The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to the
end of each holding period, your expenses would be higher. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
- --------------------------------------------------------------------------------
PAGE 3
<PAGE>
- --------------------------------------------------------------------------------
Nuveen California Insured Municipal Bond Fund
PERFORMANCE INFORMATION (AS OF 8/31/96)
INCEPTION:
July 1, 1986
NET ASSETS:
$220.8 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 1.73% 6.19% 5.44% 5.41% 6.45%
5 YEARS 6.11% 7.01% 6.25% 6.12% 7.26%
10 YEARS 6.37% 6.82% 6.22% 6.10% 7.08%
INCEPTION 6.52% 6.96% 6.37% 6.23% 7.22%
</TABLE>
Class R total returns reflect actual performance for all periods; Class A and C
total returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class R performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B total returns reflect Class R performance for all periods,
adjusted for the differences in sales charges and fees between the classes. See
Overview of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 22.95
Average Modified Duration 7.97
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
Insured (95%)
Escrowed (5%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Escrowed Bonds (17%)
Lease Rental Facilities (16%)
Health Care Facilities (15%)
Housing Facilities (10%)
Water/Sewer Facilities (9%)
Other (33%)
EXPENSE INFORMATION (AS OF 8/31/96)
SHAREHOLDER
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 5%(2) 1%(3) --
- -------------------------------------------------------------------------------------------
</TABLE>
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12B-1 FEE 0.20% 0.95% 0.75% --
OTHER 0.15% 0.15% 0.15% 0.15%
- --------------------------------------------------------------------------------------------------
TOTAL (GROSS) 0.90% 1.65% 1.45% 0.70%
WAIVERS/
REIMBURSEMENTS -- -- -- --
- --------------------------------------------------------------------------------------------------
TOTAL (NET) 0.90% 1.65% 1.45% 0.70%
- --------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING
PERIOD CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 51 $ 56 $ 15 $ 7
3 YEARS $ 69 $ 84 $ 46 $22
5 YEARS $ 90 $101 $ 79 $39
10 YEARS $148 $175 $174 $87
- --------------------------------------------------------------------------------------------------
</TABLE>
Information as of 8/31/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 4
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Arthur Andersen LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
- --------- ---------------------------------- ----------------------------------
<TABLE>
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION
DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Year Ending Beginning Net ized Gain from Net from Ending
February Net Asset Investment (Loss) From Investment Capital Net Asset
28/29, Value Income(c) Investments(a) Income Gains Value
-------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997 (g) $10.760 $.271 $(.267) $(.264) $ -- $10.500
- ------------------------------------------------------------------------------------
1996 10.250 .530 .505 (.525) -- 10.760
- ------------------------------------------------------------------------------------
1995 (d) 10.220 .255 .068 (.265) (.028) 10.250
- ------------------------------------------------------------------------------------
CLASS C (9/94)
1997 (g) 10.670 .223 (.251) (.222) -- 10.420
- ------------------------------------------------------------------------------------
1996 10.150 .448 .516 (.444) -- 10.670
- ------------------------------------------------------------------------------------
1995 (d) 10.060 .210 .123 (.215) (.028) 10.150
- ------------------------------------------------------------------------------------
CLASS R (7/86)
1997 (g) 10.740 .278 (.262) (.276) -- 10.480
- ------------------------------------------------------------------------------------
1996 10.230 .556 .507 (.553) -- 10.740
- ------------------------------------------------------------------------------------
1995 10.670 .559 (.412) (.559) (.028) 10.230
- ------------------------------------------------------------------------------------
1994 10.850 .560 (.101) (.556) (.083) 10.670
- ------------------------------------------------------------------------------------
1993 10.010 .584 .871 (.579) (.036) 10.850
- ------------------------------------------------------------------------------------
1992 (e) 9.650 .401 .360 (.401) -- 10.010
- ------------------------------------------------------------------------------------
1991 (f) 9.480 .600 .176 (.606) -- 9.650
- ------------------------------------------------------------------------------------
1990 (f) 9.630 .608 (.151) (.607) -- 9.480
- ------------------------------------------------------------------------------------
1989 (f) 9.020 .607 .610 (.607) -- 9.630
- ------------------------------------------------------------------------------------
1988 (f) 8.980 .600 .040 (.600) -- 9.020
- ------------------------------------------------------------------------------------
1987 (f) 9.600 .630 (.620) (.630) -- 8.980
- ------------------------------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION
DATE)
Ratio of Net
Ratio of Investment
Year Ending Ending Expenses to Income to Portfolio
February Total Net Assets Average Net Average Turnover
28/29, Return(b) (in thousands) Assets(c) Net Assets(c) Rate
- ----------------- --------- -------------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997 (g) .07% $ 22.7 .95%+ 5.02%+ 26%
- ------------------------------------------------------------------------------------
1996 10.32 17.3 .97 5.00 38
- ------------------------------------------------------------------------------------
1995 (d) 3.33 4.8 1.05+ 5.45+ 25
- ------------------------------------------------------------------------------------
CLASS C (9/94)
1997 (g) (.24) .9 1.70+ 4.28+ 26
- ------------------------------------------------------------------------------------
1996 9.67 1.0 1.71 4.26 38
- ------------------------------------------------------------------------------------
1995 (d) 3.45 .2 1.80+ 4.69+ 25
- ------------------------------------------------------------------------------------
CLASS R (7/86)
1997 (g) .18 197.1 .70+ 5.28+ 26
- ------------------------------------------------------------------------------------
1996 10.63 205.6 .70 5.29 38
- ------------------------------------------------------------------------------------
1995 1.68 198.9 .70 5.60 25
- ------------------------------------------------------------------------------------
1994 4.27 208.1 .71 5.12 14
- ------------------------------------------------------------------------------------
1993 15.05 168.9 .75 5.72 9
- ------------------------------------------------------------------------------------
1992 (e) 7.99 100.9 .64+ 5.97+ 7
- ------------------------------------------------------------------------------------
1991 (f) 8.43 74.6 .68 6.26 29
- ------------------------------------------------------------------------------------
1990 (f) 4.93 50.6 .70 6.36 13
- ------------------------------------------------------------------------------------
1989 (f) 13.97 35.0 .82 6.52 23
- ------------------------------------------------------------------------------------
1988 (f) 7.44 22.4 .82 6.77 31
- ------------------------------------------------------------------------------------
1987 (f) (.13) 16.2 .17 6.48 4
- ------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the three months ending February 29.
(f) For the year ending June 30.
(g) For the six months ending August 31, 1996.
- --------------------------------------------------------------------------------
NOTES:
(1)Sales charge in effect February 1, 1997. 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% is imposed on redemptions of certain purchases of $1
million or more within 18 months of purchase.
(2)CDSC declines to 0% at the end of six years.
(3)Imposed only on redemptions within 12 months of purchase.
(4)Effective February 1, 1997, the funds reduced the service fee on Class A and
C shares from 0.25% to 0.20% and reduced the distribution fee on Class C
shares from 0.75% to 0.55%. These lower expenses are reflected in the table
and are expected to reduce total operating expenses on Class A from 0.95% to
0.90% and on Class C from 1.70% to 1.45%, as reflected in the table. Long-
term holders of Class B and C shares may pay more in distribution fees and
CDSCs than the maximum initial sales charge permitted under National
Association of Securities Dealers (NASD) Rules of Fair Practice. Nuveen
Advisory has agreed to waive some or all of its fees or reimburse expenses to
prevent total operating expenses (not counting distribution and service fees)
from exceeding 0.975% of the fund's average daily net assets.
(5)The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to the
end of each holding period, your expenses would be higher. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
- --------------------------------------------------------------------------------
PAGE 5
<PAGE>
FUND STRATEGIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of each fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital. There is no
assurance that the funds will achieve their investment objective.
INVESTOR SUITABILITY
The funds are a suitable investment for tax-conscious investors seeking to:
.. Earn regular monthly tax-free dividends;
.. Preserve investment capital over time;
.. Reduce taxes on investment income;
.. Set aside money systematically for retirement, estate planning or college
funding.
The funds are not a suitable investment for individuals seeking to:
.. Pursue an aggressive, high-growth investment strategy;
.. Invest through an IRA or 401k plan;
.. Avoid fluctuations in share price.
- --------------------------------------------------------------------------------
HOW THE FUNDS SELECT
INVESTMENTS
TAX-FREE MUNICIPAL BONDS
The funds invest primarily in municipal bonds from a specific state that pay
interest that is exempt from regular federal, state and, in some cases, local
income taxes. Income from these bonds may be subject to the federal alternative
minimum tax.
Municipal bonds are either general obligation or revenue bonds and typically
are issued to finance public projects (such as roads or public buildings), to
pay general operating expenses, or to refinance outstanding debt. Municipal
bonds may also be issued for private activities, such as housing, medical and
educational facility construction, or for privately owned industrial develop-
ment and pollution control projects. General obligation bonds are backed by the
full faith and credit, or taxing authority, of the issuer and may be repaid
from any revenue source; revenue bonds may be repaid only from the revenues of
a specific facility or source.
The California Insured Fund primarily purchases insured municipal bonds. See
"Insurance" below. Under normal market conditions, the California Insured Fund
will invest at least 65% of its assets in insured municipal bonds.
FOCUS ON QUALITY MUNICIPAL BONDS
The funds focus on quality municipal bonds that are either 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 funds'
investment adviser. If suitable municipal bonds from California are not avail-
able at attractive prices and yields, a fund may invest in municipal bonds of
U.S. territories (such as Puerto Rico and Guam) which are exempt from regular
federal, state, and local income taxes. The funds may not invest more than 20%
of their net assets in these territorial municipal bonds.
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the funds will only purchase leases where the issuer has a strong
incentive to continue making appropriations until maturity.
Bond ratings are furnished by Standard & Poor's Corporation, Fitch Investors
Services, and Moody's Investors Services. The ratings BBB and Baa are not iden-
tical--S&P and Fitch consider bonds rated BBB to have adequate capacity to pay
principal and interest; Moody's considers bonds rated Baa to have some specula-
tive characteristics. Bond ratings represent the opinions of the ratings agen-
cies; they are not absolute standards of quality.
VALUE INVESTING STRATEGY
The funds' investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer above-average total
return potential. The adviser emphasizes fundamental research and selects
municipal bonds on the basis of its evaluation of each bond's relative value in
terms of current yield, price, credit quality and future prospects. The adviser
then monitors each fund's portfolio to assure that municipal bonds purchased
continue to represent over time, in its opinion, the best values available.
PORTFOLIO MATURITY
Each fund purchases municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an invest-
ment portfolio with an overall weighted average maturity within a defined
range. All of the funds described in this prospectus are long-term funds and
normally maintain a weighted average portfolio maturity of 15 to 30 years. See
"Defensive Investment Strategies" below for further information.
- --------------------------------------------------------------------------------
PAGE 6
<PAGE>
INSURANCE
Insured municipal bonds are purchased primarily by the California Insured Fund.
Insured municipal bonds are either covered by individual, permanent insurance
policies (obtained either at the time of issuance or subsequently), or covered
"while in fund" under a master portfolio insurance policy purchased by a fund.
Insurance guarantees only the timely payment of interest and principal on the
bonds; it does not guarantee the value of either individual bonds or fund
shares.
Portfolio insurance policies are effective only so long as the fund continues
to own the covered bond, and the price the fund would receive upon sale of such
a bond would not benefit from the insurance. Insurers under master portfolio
insurance policies currently include MBIA Insurance Corp., AMBAC Indemnity
Corp., Financial Security Assurance, Inc., and Financial Guaranty Insurance Co.
The funds' investment adviser may obtain master policies from other insurers,
but only from insurers that specialize in insuring municipal bonds and whose
claims-paying ability is rated Aaa or AAA by Moody's or S&P. Insurers are
responsible for making their own assessment of the insurability of a municipal
bond.
An insured fund can invest up to 20% of its net assets in uninusured municipal
bonds which are backed by an escrow containing sufficient U.S. Government or
U.S. Government agency securities to ensure timely payment of principal and
interest. Such bonds are normally regarded as having the credit characteristics
of the underlying U.S. Government-backed securities.
PORTFOLIO TURNOVER
A fund buys and sells portfolio securities in the normal course of its invest-
ment activities. The proportion of the fund's investment portfolio that is sold
and replaced with new securities during a year is known as the fund's portfolio
turnover rate. The funds intend to keep portfolio turnover 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 and reduce market risk.
DELAYED DELIVERY TRANSACTIONS
Each fund may buy or sell bonds on a when-issued or delayed delivery basis,
making payment or taking delivery at a later date, normally within 15 to 45
days of the trade date. This type of transaction may involve an element of risk
because no interest accrues on the bonds prior to settlement and, since securi-
ties are subject to market fluctuation, the value of the bonds at time of
delivery may be less (or more) than cost.
- --------------------------------------------------------------------------------
RISK REDUCTION STRATEGIES
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. Interest rate risk is the
risk that changes in market interest rates will affect the value of a fund's
investment portfolio. In general, the value of a municipal bond falls when
interest rates rise, and increases when interest rates fall. Credit risk is the
risk that an issuer of a municipal bond is unable to meet its obligation to
make interest and principal payments. In general, lower rated municipal bonds
are perceived to carry a greater degree of risk in the issuer's ability to make
interest and principal payments. Municipal bonds with longer maturities (dura-
tions) or lower ratings generally provide higher current income, but are
subject to greater price fluctuation due to changes in market conditions than
bonds with shorter maturities or higher ratings, respectively.
Because the funds primarily purchase municipal bonds from California, each fund
also bears investment risk from economic, political or regulatory changes that
could adversely affect municipal bond issuers in the state and therefore the
value of the fund's investment portfolio.
The funds limit your investment risk generally by restricting the types and
maturities of municipal bonds they purchase, and by diversifying their invest-
ment portfolios across different industry sectors. The funds should be consid-
ered long-term investments and may not be suitable for investors with short-
term investment horizons.
INVESTMENT LIMITATIONS
The funds have adopted certain investment limitations (based on total fund
assets) designed to limit your investment risk and maintain portfolio diversi-
fication. Each fund may not have more than:
.. 25% in any one industry sector, such as electric utilities or health care;
.. 10% in borrowings (33% if used to meet redemptions).
As diversified funds, the funds also may not have more than:
.. 5% in securities of any one issuer (except U.S. government securities or for
25% of each fund's assets).
DEFENSIVE INVESTMENT STRATEGIES
Each fund may invest in high quality short-term municipal securities in order
to reduce risk and preserve capital. Under normal market conditions, each fund
may invest only up to 20% of net assets in short-term municipal securities that
are exempt from regular federal income tax, although the funds may invest up to
100% as a temporary defensive measure
- --------------------------------------------------------------------------------
PAGE 7
<PAGE>
in response to adverse market conditions. During temporary defensive periods,
the weighted average maturity of a fund's investment portfolio may fall below
the defined range described above under "Portfolio Maturity."
If suitable short-term municipal investments are not reasonably available, the
funds may invest in short-term taxable securities that are rated Aaa or AAA,
by Moody's or S&P, respectively, or issued by the U.S. government, and that
have a maturity of one year or less or have a variable interest rate.
Each fund may also use various investment strategies designed to limit the
risk of bond price fluctuations and to preserve capital. These hedging strate-
gies include using financial futures contracts, options on financial futures,
or options based on either an index of long-term tax-free securities or on
debt securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have
no present intent to use these strategies.
FUNDAMENTAL INVESTMENT POLICIES
Each fund's investment objective as well as the policies described above in
"Focus on Quality Municipal Bonds," "Insurance," and "Risk Reduction Strate-
gies" are fundamental and may not be changed without the approval of a
majority of the shareholders of each fund.
INVESTING IN THE FUNDS
- -------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
You may open an account with $3,000 and make additional investments at any
time with as little as $50. Reinvestment of Nuveen unit trust distributions
have no purchase minimums. The share price you pay will depend on when Nuveen
receives your order: orders received before the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) will receive
that day's share price; otherwise you will receive the next business day's
share price.
BUYING SHARES THROUGH A FINANCIAL ADVISER
You may buy fund shares through your financial adviser, who can handle all the
details for you, including establishing an account with Nuveen. Financial
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 assure your investments
continue to meet your needs as circumstances change.
Financial advisers are usually paid either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge for ongoing invest-
ment advice and services.
If you do not have a financial adviser, call (800) 621-7227 and Nuveen can
refer you to one in your area.
BUYING SHARES BY MAIL
You may also open an account and purchase shares by mail by completing the
enclosed Nuveen application and mailing it along with your check (payable to
the appropriate fund) to the address listed under "How to Contact Nuveen."
Sales charges are not waived when you buy shares by mail.
Each fund reserves the right to reject any purchase order and waive or
increase minimum investment requirements. The funds also reserve the right to
suspend the issuance of shares at any time; any suspension, however, will not
affect your ability to redeem shares.
- -------------------------------------------------------------------------------
PAGE 8
<PAGE>
- --------------------------------------------------------------------------------
HOW TO SELECT A PURCHASE
OPTION
The funds offer you a variety of flexible options when buying shares. Whether
you typically work with a financial adviser on a commission or a fee basis or
prefer to work on a more self-directed basis, you can purchase shares in the
way that is most suited to your individual circumstances and investment needs.
Each of the four available ways to purchase fund shares is called a class of
shares: Class A, Class B, Class C and Class R. While each of these classes
features different sales charges, on-going fees and eligibility requirements,
each entitles you to a share of the same portfolio of municipal bonds.
Selecting the class of shares which is most appropriate for you will depend on
a variety of factors. You should weigh carefully whether you and your financial
adviser work on a commission or fee basis, the types of services that you will
receive, the amount you intend to buy, how long you plan to own your investment
and whether or not you will reinvest dividends. If you compensate your finan-
cial adviser directly, you should consider the fees your financial adviser
charges for investment advice or handling your trades in addition to any sales
charges and fees imposed by the funds. Please refer to your financial adviser's
sales material for further information. Each class of shares is described in
more detail below and under "Fund Service Providers--The Distributor." Your
financial adviser can explain each option and help you determine which is most
appropriate for you, or you can call (800) 621-7227.
BUYING CLASS A SHARES
You may buy Class A shares at their public offering price on the day of
purchase. The price you pay will equal the Class A NAV (net asset value) plus a
sales charge based upon the amount of your purchase. Class A shares also bear a
0.20% annual service fee which compensates your financial adviser for providing
you with ongoing service.
The following Class A sales charges and commissions apply to all funds
described in this prospectus:
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
<CAPTION>
AUTHORIZED DEALER
SALES CHARGE COMMISSION
------------------------------------- -----------------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 4.20% 4.38% 3.70%
$50,000-100,000 4.00 4.18 3.50
$100,000-250,000 3.50 3.63 3.00
$250,000-500,000 2.50 2.56 2.00
$500,000-1,000,000 2.00 2.04 1.50
$1,000,000 and over --(1) -- --(1)
</TABLE>
(1) Nuveen pays authorized dealers a commission equal to the sum of 1% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of any
amount over $5 million. Unless the authorized dealer waived the commission,
you may be assessed a contingent deferred sales charge (CDSC) of 1% if you
redeem any of your shares within 18 months of purchase. The CDSC is calcu-
lated on the lower of your purchase price or redemption proceeds.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in connec-
tion with sales meetings, seminars, prospecting seminars and other events at
which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of adver-
tising that features the products and services of both parties. The statement
of additional information contains further information about these programs.
- --------------------------------------------------------------------------------
OTHER SALES CHARGE DISCOUNTS
Nuveen offers a number of programs that enable you to reduce or eliminate the
sales charge on Class A shares:
Sales Charge Reductions
.. Rights of Accumulation
.. Letter of Intent (LOI)
.. Group Purchase
Sales Charge Waivers
.. Unit Trust Reinvestment
.. Purchases using Redemptions from Unrelated Funds
.. Fee-Based Programs
.. Bank Trust Departments
.. Certain Employees of Nuveen or Authorized Dealers
Please refer to the statement of additional information for detailed descrip-
tions of these programs. Further information on these programs is also avail-
able through your financial adviser or by calling (800) 621-7227. Your finan-
cial adviser can also provide and help you prepare the necessary application
forms. You or your financial adviser are responsible for notifying Nuveen about
your eligibility for any sales charge reduction or waiver at the time of each
purchase.
The funds may modify or discontinue these programs at any time upon written
notice to shareholders.
BUYING CLASS B SHARES
You may buy Class B shares at their public offering price on the day of
purchase. The price you pay will equal the Class B NAV. There is no initial
sales
- --------------------------------------------------------------------------------
PAGE 9
<PAGE>
charge, but Class B shares bear a 0.20% annual service fee which compensates
your financial adviser for providing you with ongoing service, and a 0.75%
annual distribution fee which compensates Nuveen for paying your financial
adviser a 4% commission at the time of purchase.
Class B shares convert automatically to Class A shares eight years after
purchase. Class B shares will convert only if the fund is assured that the
conversion does not generate tax consequences for investors, based upon the
opinion of outside counsel or the written assurance of the IRS.
- -------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGE
If you redeem Class B shares within six years of purchase, you will be
assessed a contingent deferred sales charge (CDSC) based upon the following
schedule:
The CDSC is calculated on the lower of your purchase price or redemption
proceeds.
<TABLE>
<CAPTION>
DURING YEAR
---------------------------
1 2 3 4 5 6 7+
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1% 0%
</TABLE>
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of
purchase. The price you pay will equal the Class C NAV. There is no initial
sales charge, Class C shares bear a 0.20% annual service fee which compensates
your financial adviser for providing you with ongoing service, and a 0.55%
annual distribution fee which compensates Nuveen for paying your financial
adviser for the sale, including a 1% commission at the time of sale.
If you redeem your Class C shares within one year of purchase, you may be
assessed a CDSC of 1%. The CDSC is calculated on the lower of your purchase
price or redemption proceeds.
BUYING CLASS R SHARES
You may purchase Class R shares at their public offering price on the day of
purchase. The price you pay will equal the Class R NAV. You may purchase Class
R shares only if you are investing at least $1 million or would otherwise
qualify to purchase Class A shares without a sales charge as described under
"Other Sales Charge Discounts" above. There are no sales charges or ongoing
fees. Class R Shares have lower ongoing expenses than Class A Shares.
- -------------------------------------------------------------------------------
HOW TO SELL FUND SHARES
You may use one of the methods described below to redeem your shares on any
day the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your redemption request in good order.
Your redemption request must be received before the close of trading of the
New York Stock Exchange (normally 4 p.m. Eastern time) for you to receive that
day's price. The funds do not charge any redemption fees, although you will be
assessed a CDSC where applicable.
SELLING SHARES THROUGH YOUR FINANCIAL ADVISER
You may sell fund shares by contacting your financial adviser who can provide
and help you prepare all the necessary documentation. Your financial adviser
may charge you for this service.
SELLING SHARES BY TELEPHONE
Unless you have declined telephone redemption privileges, you may sell fund
shares by calling (800) 621-7227. Your redemption must not exceed $50,000 and
you may not redeem by telephone shares held in certificate form. Checks will
be issued only to the shareholder on record and mailed to the address on
record. If you have established electronic funds transfer privileges on your
account, you may have redemption proceeds transferred electronically to your
bank account; if you are redeeming $1,000 or more, you may expedite your
request by having your redemption proceeds wired directly into your bank
account.
Nuveen and Shareholder Services, Inc. ("SSI") will be liable for losses
resulting from unauthorized telephone redemptions only if they do not follow
reasonable procedures designed to verify the identity of the caller. You
should immediately verify your trade confirmations when you receive them.
SELLING SHARES BY MAIL
You may sell fund shares by mail by sending a written request to Nuveen at the
address listed below under "How to Contact Nuveen." Your request must include
the following information:
.. The fund's name;
.. Your name and account number;
.. The dollar or share amount you wish to redeem;
.. The signature of each owner exactly as it appears on the account;
.. The name of the person you want your redemption proceeds paid to, if other
than to the shareholder of record;
.. The address you want your redemption proceeds sent to, if other than to the
address of record;
.. Any certificates you have for the shares; and
.. Any required signature guarantees.
Signatures must be guaranteed if you are redeeming more than $50,000, you want
the check payable to someone other than the shareholder on record, or you want
the check sent to another address (or the
- -------------------------------------------------------------------------------
PAGE 10
<PAGE>
address on record has been changed within the last 60 days). Signature guaran-
tees must be obtained from a bank, brokerage firm or other financial interme-
diary that is a member of an approved Medallion Guarantee Program or that is
otherwise approved by the fund. A notary public cannot provide a signature
guarantee.
Unless other arrangements are made, checks will be sent to your address on
record. Checks will normally be mailed within one business day, but in no event
more than seven days from receipt of your redemption request. If any shares
were purchased less than 15 days prior to your request, the fund will not mail
your redemption proceeds until the check for your purchase has cleared, which
may take up to 15 days.
Each fund may suspend redemptions or delay payment on redemptions for more than
seven days (three days for street name accounts) in certain extraordinary
circumstances as described in the statement of additional information.
OPERATION OF THE CDSC
When you redeem Class A, Class B, or Class C shares subject to a CDSC, the fund
will first redeem any shares that are not subject to a CDSC or that represent
an increase in the value of your fund account due to capital appreciation, and
then redeem the shares you have owned for the longest period of time, unless
you ask the fund to redeem your shares in a different order. No CDSC is imposed
on shares you buy through the reinvestment of dividends and capital gains. The
holding period is calculated on a monthly basis and begins on the first day of
the month in which you buy shares. When you redeem shares subject to a CDSC,
the CDSC is calculated on the lower of your purchase price or redemption
proceeds, deducted from your redemption proceeds, and paid to Nuveen. The CDSC
may be waived under certain special circumstances as described in the statement
of additional information.
ACCOUNT MINIMUMS
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
unit trust reinvestment account. You will not be assessed a CDSC on an involun-
tary redemption.
- --------------------------------------------------------------------------------
EXCHANGING SHARES
You may exchange fund shares at any time for the same class of shares in
another Nuveen mutual fund that is available within California. You may
exchange fund shares by calling (800) 621-7227 or by mailing your written
request to Nuveen at the address listed under "How to Contact Nuveen."
You must have owned your fund shares for at least 15 days and your exchange
must meet the minimum purchase requirements of the fund into which you are
exchanging. No CDSC will be assessed on an exchange, and the holding period of
your investment will be carried over to the new fund for purposes of deter-
mining any future CDSC. You may not exchange Class B shares for shares of a
Nuveen money market fund.
Because an exchange is treated for tax purposes as the concurrent sale and
purchase of fund shares, you should consult your tax adviser about the tax
consequences of any contemplated exchange. Each fund reserves the right to
limit or terminate exchange privileges if it believes doing so is in the best
interests of fund shareholders.
RESTRICTIONS ON MARKET TIMING
The exchange privilege is not intended to permit you to use a fund for short-
term trading. Excessive exchange activity may interfere with portfolio manage-
ment, raise fund operating expenses or otherwise have an adverse effect on fund
shareholders. In order to limit excessive exchange activity and in other
circumstances where the funds' investment adviser believes doing so would be in
the best interests of the fund, each fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of exchanges, or
reject any exchange. You will be notified in the event this happens to the
extent required by law.
- --------------------------------------------------------------------------------
OPTIONAL FEATURES AND SERVICES
SYSTEMATIC INVESTMENT
Once you have opened an account, you may make regular investments of $50 or
more a month through automatic deductions from your bank account (see "Fund
Direct--Electronic Funds Transfer" below), or directly from your paycheck. To
invest regularly from your bank account, simply complete the appropriate
section of the account application. To invest regularly from your paycheck,
call Nuveen for a Payroll Direct Deposit Enrollment form. If you need addi-
tional copies of these forms, or would like assistance completing them, contact
your financial adviser or call Nuveen toll-free at (800) 621-7227.
One of the benefits of systematic investing is "dollar cost averaging." Because
you are making fixed payments, you buy fewer shares when the price is high, and
more when the price is low. As a result, the average price you pay will be less
than the average share price of fund shares over this period. Dollar cost aver-
aging does not assure profits or protect against losses in a steadily declining
market. Since dollar cost averaging involves continuous investment regardless
of fluctuating price levels, you should consider your financial ability to
continue investing in declining as well as rising markets before deciding to
invest in this way.
- --------------------------------------------------------------------------------
PAGE 11
<PAGE>
Systematic investing may also make you eligible for reduced sales charges on
shares of the fund as well as other Nuveen mutual funds (see "Other Sales
Charge Discounts").
- -------------------------------------------------------------------------------
THE POWER OF SYSTEMATIC INVESTING
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
<TABLE>
<CAPTION>
(CHART APPEARS HERE)
ACCOUNT VALUES FOR TOTAL RETURNS OF
AMOUNT -------------------------------------
YEAR INVESTED 4.00% 5.00% 6.00%
---- -------- ------- ------- -------
<S> <C> <C> <C> <C>
0 $ 2,874 $ 2,874 $ 2,874 $ 2,874
5 8,622 9,861 10,203 10,561
10 14,370 18,391 19,610 20,929
15 20,118 28,807 31,681 34,913
20 25,866 41,525 47,173 53,779
</TABLE>
SYSTEMATIC WITHDRAWALS
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to
receive payments monthly, quarterly or semi-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 to participate in
the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concur-
rent purchases of Class A, B or C shares because you may unnecessarily pay a
sales charge or CDSC on these purchases.
REINSTATEMENT PRIVILEGE
If you redeem fund shares on which you paid an initial sales charge or contin-
gent deferred sales charge (CDSC), you may reinvest all or part of your
redemption proceeds up to one year later without incurring any additional
charge. You may only reinvest into the same class of shares you redeemed and
will receive the share price next determined after Nuveen receives your rein-
vestment request. You may exercise this privilege only once per redemption
request.
If you paid a CDSC, your CDSC will be refunded and your holding period rein-
stated. You should consult your tax adviser about the tax consequences of
exercising your reinstatement privilege.
FUND DIRECT--ELECTRONIC FUNDS TRANSFER
You may arrange to transfer funds electronically between your bank account and
your fund account by completing the appropriate section of the account appli-
cation. If you need additional copies of this form, or would like assistance
completing it, contact your financial adviser or call Nuveen at (800) 621-
7227. You may use Fund Direct to quickly and conveniently purchase or sell
shares by telephone, systematically invest or withdraw funds, or send dividend
payments directly to your bank account.
If you have established electronic funds transfer privileges on your account,
you may request that redemption proceeds of $1,000 or more be wired directly
into your bank account. While you will generally receive your redemption
proceeds more quickly than a regular telephone redemption, the fund may charge
you a fee for this expedited service.
- -------------------------------------------------------------------------------
PAGE 12
<PAGE>
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
HOW THE FUNDS PAY DIVIDENDS
The funds pay tax-free dividends monthly and any taxable capital gains or other
distributions once a year in December. The funds declare dividends on the ninth
of each month and generally pay dividends or about on the first business day of
the following month.
PAYMENT AND REINVESTMENT OPTIONS
The funds automatically reinvest your dividends each month in additional fund
shares 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. If you wish to do so, complete the
appropriate section of the account application, contact your financial adviser
or call Nuveen at (800) 621-7227.
CALCULATION OF FUND DIVIDENDS
Each fund pays dividends based upon its past and projected net income in order
to distribute substantially all of its net income each fiscal year.
In order to maintain a more stable monthly dividend, each fund may sometimes
distribute less or more than the amount of net income earned in a particular
period as a result of fluctuations in a fund's net income. Undistributed net
income is included in the fund's share price; similarly, distributions from
previously undistributed net income reduce the fund's share price. This divi-
dend policy is not expected to affect the management of a fund's portfolio.
Dividends for Class A, B, C and R shares are determined in the same manner and
at the same time. Dividends per share will vary based on which class of fund
shares you own, reflecting the different ongoing fees and other expenses of
each class.
- --------------------------------------------------------------------------------
TAXES AND TAX REPORTING
The discussion below and in the statement of additional information provides
general tax information related to an investment in fund shares. Because tax
laws are complex and often change, you should consult your tax adviser about
the tax consequences of a specific fund investment.
Each fund primarily invests in municipal bonds from a specific state or in
municipal bonds whose income is otherwise exempt from regular federal, state
and local income taxes. Consequently, the regular monthly dividends you receive
will be exempt from regular federal, state and, in some cases, local income
taxes. All or a portion of these dividends, however, may be subject to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how
long you have owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Each year, you will receive a year-end statement that describes the tax status
of dividends paid to you during the preceding year, including the source of its
investment income by state and the portion of its income that is subject to
AMT. You will receive this statement from the firm where you purchased your
fund shares if you hold your investment in street name; Nuveen will send you
this statement if you hold your shares in registered form.
The tax status of your dividends is not affected by whether you reinvest your
dividends or receive them in cash.
BUYING OR SELLING SHARES CLOSE TO A RECORD DATE
If you purchase fund shares shortly before the record date for a taxable divi-
dend, the entire dividend you receive may be taxable to you even though a
portion of the dividend effectively represents a return of your purchase price.
This is commonly known as "buying a dividend." 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.
TAX CONSEQUENCES OF PRIVATE ACTIVITY BONDS
Because each fund may invest in private activity bonds, the portion of your
regular monthly dividends derived from the income earned on these bonds that
would otherwise be tax-exempt will be treated as taxable income if:
.. you are subject to the AMT (including corporate shareholders);
.. you are a "substantial user" of a facility financed by these bonds; or
.. you are a "related person" of a substantial user.
- --------------------------------------------------------------------------------
PAGE 13
<PAGE>
REDEEMING SHARES HELD LESS THAN SIX MONTHS
If you sell or exchange shares that you have owned for less than six months
and you recognized a short-term capital loss when you redeemed your shares,
the loss you can claim will be reduced by the amount of tax-free dividends
paid to you on those shares. Any remaining short-term capital loss will be
treated as long-term capital loss to the extent you also received capital gain
dividends on those shares. You should consult your tax adviser for complete
information about these rules. Please consider the tax consequences carefully
when contemplating a redemption.
OTHER IMPORTANT TAX INFORMATION
In order to avoid corporate taxation of its earnings and to pay tax-free divi-
dends, each fund must meet certain I.R.S. requirements that govern the fund's
sources of income, diversification of assets and distribution of earnings to
shareholders. Each fund has met these requirements in the past and intends to
do so in the future. If a fund failed to do so, the fund would be required to
pay corporate taxes on its earnings and all your distributions would be
taxable as ordinary income.
A fund may be required to withhold 31% of certain of your dividends if you
have not provided the fund with your correct taxpayer identification number
(normally your social security number), or if you are otherwise subject to
back-up withholding.
If you receive social security benefits, you should be aware that tax-free
income is taken into account in calculating the amount of these benefits that
may be subject to federal income tax.
If you borrow money to buy fund shares, you may not deduct the interest on
that loan. Under I.R.S. rules, fund shares may be treated as having been
bought with borrowed money even if the purchase cannot be traced directly to
borrowed money.
- -------------------------------------------------------------------------------
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
<TABLE>
<CAPTION>
TAX-FREE YIELD
TAX RATE 4.00% 4.50% 5.00% 5.50% 6.00%
- -------
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
statement of additional information or consult your tax adviser.
- -------------------------------------------------------------------------------
PAGE 14
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
HOW TO CONTACT NUVEEN
GENERAL INFORMATION
If you would like general information about Nuveen Mutual Funds or any other
Nuveen product, call (800) 621-7227 between 7:30 a.m. and 7:00 p.m. Central
time.
PURCHASES, REDEMPTIONS AND OTHER TRANSACTIONS
If you are calling to purchase or redeem shares, request an exchange or conduct
other account transactions, call (800) 621-7227 between 7:30 a.m. and 7:00 p.m.
Central time. If you are sending a written request to Nuveen, you should mail
your request to the following address:
Nuveen Mutual Funds
c/o Shareholder Services Inc.
P.O. Box 5330
Denver, CO 80217-5330
When purchasing fund shares by mail, please be sure to include a check made out
to the name of the Fund and mark clearly on your check which class of shares
you are purchasing. If you do not specify which class of shares you are
purchasing, Nuveen will assume you are buying Class A shares if you are opening
a new account; if you are adding to an existing account, Nuveen will assume you
wish to buy more shares of the class you already own.
- --------------------------------------------------------------------------------
FUND SERVICE PROVIDERS
INVESTMENT ADVISER
Nuveen Advisory Corp. ("Nuveen Advisory") serves as the investment adviser to
the funds and in this capacity is responsible for the selection and on-going
monitoring of the municipal bonds in each fund's investment portfolio. Nuveen
Advisory serves as investment adviser to investment portfolios with more than
$35 billion in municipal assets under management. The activities of Nuveen
Advisory, which also include managing the funds' business affairs and providing
certain clerical, bookkeeping and other administrative services, are overseen
by the funds' Board of Trustees. Established in 1976, Nuveen Advisory is a
wholly-owned subsidiary of John Nuveen & Co. Incorporated, which itself is
approximately 78% owned by the St. Paul Companies, Inc. Effective January 1,
1997, The John Nuveen Company acquired Flagship Resources Inc., and as part of
that acquisition, Flagship Financial, the adviser to the Flagship Funds, was
merged with Nuveen Advisory.
For providing these services, Nuveen Advisory is paid an annual management fee
according to the following schedule:
- --------------------------------------------------------------------------------
MANAGEMENT FEES
<TABLE>
<CAPTION>
AVERAGE DAILY MANAGEMENT
NET ASSET VALUE 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>
Nuveen will waive some or all of its fees or reimburse expenses so that the
total operating expenses (not counting distribution and service fees) for the
California Fund and the California Insured Fund do not exceed 0.75% and 0.975%,
respectively, of average daily net assets. For more information about fees and
expenses, see the fund operating expense tables in the Fund Summaries.
PORTFOLIO MANAGERS
Overall investment management strategy and operating policies for the funds are
set by the Investment Policy Committee of Nuveen Advisory. The Investment
Policy Committee is comprised of the principal executive officers and 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 munic-
ipal 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.
Steven J. Krupa is the portfolio manager for the California Fund and the Cali-
fornia Insured Fund. Mr. Krupa has been a Vice President of Nuveen Advisory
since 1990.
THE DISTRIBUTOR
John Nuveen and Co. Incorporated serves as the selling agent and distributor of
the funds' shares. In this capacity, Nuveen manages the offering of the funds'
shares and is responsible for all sales and promotional activities. In order to
reimburse Nuveen for its costs in connection with these activities, including
compensation paid to authorized dealers, each fund has adopted a distribution
and service plan under Rule 12b-1 of the Investment Company Act of 1940.
The plan authorizes each fund to pay Nuveen an annual 0.20% service fee on the
average daily net assets of Class A, B and C shares outstanding and annual
distribution fees of 0.75% and 0.55%, respectively, on the average daily net
assets of Class B and C shares outstanding. In order to help compensate Nuveen
for the sales commission paid to financial
- --------------------------------------------------------------------------------
PAGE 15
<PAGE>
advisers at the time of sale on sales of Class B and Class C shares, Nuveen
retains the first year's service fee on sales of Class B shares and all Class B
distribution fees; and retains the first year's service and distribution fees on
sales of Class C shares. Otherwise, Nuveen pays these fees to the broker of
record. The statement of additional informa-tion contains a detailed description
of the plan and its provisions.
TRANSFER AGENT
Each fund has appointed a transfer agent which is responsible for distributing
dividend payments and providing certain bookkeeping, data processing and other
administrative services in connection with the maintenance of shareholder
accounts. Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330,
currently serves as transfer agent for each fund.
- -------------------------------------------------------------------------------
HOW THE FUNDS REPORT
PERFORMANCE
Each fund may quote its yield and total return in reports to shareholders,
sales literature and advertisements. The funds may also compare their invest-
ment results to various passive indices or other mutual funds with similar
investment objectives. Comparative performance information may include data
from Lipper Analytical Services, Inc., Morningstar, Inc. and other industry
publications. See the statement of additional information for a more detailed
discussion.
- -------------------------------------------------------------------------------
HOW FUND SHARES ARE PRICED
The share price for each class of fund shares, also called its net asset value
(NAV), is calculated every business day as of the close of regular trading on
the New York Stock Exchange (normally 4 p.m. Eastern time). The net asset
value for a class of fund shares is computed by calculating the total value of
the class' portion of the fund's portfolio investments and other assets,
subtracting any liabilities or other debts, and dividing by the total number
of its shares outstanding.
The prices of municipal bonds in each fund's investment portfolio are provided
by a pricing service approved and supervised by the fund's Board of Trustees.
When price quotes are not readily available (which is usually the case for
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. When price quotes are readily available for a
municipal bond, the price used is the average of the quoted bid and asked
prices (or their yield equivalent).
- -------------------------------------------------------------------------------
ORGANIZATION
The Trust is an open-end diversified investment company under the Investment
Company Act of 1940, consisting of multiple funds. The shares of each fund are
divided into classes. Each class of shares represents an interest in the same
portfolio of investments and the shares of each class have equal rights as to
voting, redemption, dividends and liquidation. However, each class bears
different sales charges and service fees. B shares convert to A shares after 8
years. C shares purchased before February 1, 1997 convert to A shares six
years after purchase, but only if you request conversion. You must submit your
request to SSI no later than the last business day of the 71st month following
the month in which you purchased your shares.
The funds are not required to and do not intend to hold annual meetings.
Shareholders owning ten percent or more of a fund's outstanding shares may
call a special meeting for any purpose, including to elect or remove trustees
or to change fundamental policies.
- -------------------------------------------------------------------------------
PAGE 16
<PAGE>
APPENDIX
- -------------------------------------------------------------------------------
SPECIAL STATE CONSIDERATIONS
Because the funds primarily purchase municipal bonds from California, each
fund also bears investment risk from economic, political or regulatory changes
that could adversely affect municipal bond issuers in the state and therefore
the value of the fund's investment portfolio. 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 invest-
ment. See the statement of additional information for further information.
CALIFORNIA
California's economy, the largest in the nation, is undergoing a slow, steady
growth following a recession from mid-1990 to late 1993 in which the construc-
tion, manufacturing and financial services industries were adversely affected,
job losses were severe, and substantial, broad-based revenue shortfalls
affected both the state and local governments. The state's 1995 unemployment
rate was % and average personal income was $20,406. California's general
obligation bonds are rated A1 by Moody's and A+ by Standard and Poor's.
The taxing authority of California's governmental entities is limited due to
the adoption of "Proposition 13" and other amendments to the California
Constitution. Proposition 13, adopted by voters in 1978, limits to 1% of full
cash value the rate of ad valorem property taxes on real property and gener-
ally restricts the reassessment of property to 2% per year, except upon new
construction or change of ownership (subject to a number of exemptions).
Because the basic 1% ad valorem tax levy is applied against the assessed value
of property as of the owner's date of acquisition, the amount of tax on simi-
larly situated properties varies widely. The state and local governments are
also subject to annual "appropriations limits" imposed by Article XIIIB of the
California Constitution, which limits the state and local governments from
spending the proceeds of tax revenues, regulatory licenses, user charges or
other fees beyond imposed appropriations limits which are adjusted annually to
reflect changes in cost of living and population. Revenues in excess of the
limitations are measured over a two year cycle. Local governments must return
any excess to taxpayers by rate reductions; the state must refund 50% of any
excess, with the other 50% paid to schools and community colleges. A 1986
initiative statute called "Proposition 62" requires either a majority or 2/3
voter approval for any increase in general or special taxes. Court decisions
had struck down most of Proposition 62, but the California Supreme Court
upheld its constitutionality in September 1995. Many aspects of the decision,
such as whether it applies retroactively, remain unclear, but its future
effect will be to further limit the fiscal flexibility of many local govern-
ments. The complex and ambiguous nature of the foregoing limitations makes it
impossible to fully determine their impact on California Municipal Obligations
or the ability of the state and local governments to pay debt service on Cali-
fornia Municipal Obligations.
On November 5, 1996, California voters approved Proposition 218 which added
Articles XIIIC and XIIID to the California Constitution, imposing certain vote
requirements and other limitations on the imposition of new or increased and
in some cases existing taxes, assessments and property-related fees and
charges. Proposition 218 also extends the initiative power to include the
reduction or repeal of any local taxes, assessments, fees and charges. This
extension of the initiative power is not limited to taxes imposed on or after
the effective date of Proposition 218, and could result in the retroactive
repeal or reduction in any existing taxes, assessments, fees or charges. If
such a repeal or reduction occurs in a particular California entity, the
financial condition of that entity may be adversely impacted and rating down-
grades and/or defaults may result. Additionally, the voter approval require-
ment reduces the financial flexibility of local governments to deal with
fiscal problems by limiting the ability to increase taxes, assessments, fees
or charges. In some cases, this loss of flexibility may, and in fact has, been
cited as the reason for rating downgrades. No assurances can be given that
California entities will be able to raise taxes to meet future spending
requirements. In addition, at this time it is not clear exactly how Proposi-
tion 218 will be interpreted by a court.
California ended its 1994-95 fiscal year with a general fund surplus of
approximately $590 million, reducing the accumulated budget deficit to approx-
imately $1.14 billion. As a result of the improved revenues, the state's cash
position has substantially recovered. Only $2 billion of cash flow borrowing
was needed during 1995-96, and only about $3 billion is projected for 1996-97,
with no external borrowing over the end of the fiscal year. The Governor's
proposed budget for 1996-97 projects $47.1 billion of revenues and transfers,
and $46.5 billion of expenditures, resulting in a budget reserve at June 30,
1997 of about $500 million. A number of issues related to the 1996-97 budget
still have to be resolved, including the Governor's tax reduction proposals
and his proposals for future health and welfare cuts.
- -------------------------------------------------------------------------------
PAGE 17
<PAGE>
California's finances have improved since 1994 after its significant financial
difficulties reduced its credit standing in the early 1990's. However, should
the financial condition of California deteriorate again, its credit ratings
could be further reduced, and the market value and marketability of all
outstanding notes and bonds issued by California, its public authorities or
local governments could be adversely affected.
Tax Treatment.
The California Funds' regular monthly dividends will not be subject to Cali-
fornia personal income taxes to the extent they are paid out of income earned
on California municipal obligations or U.S. government securities. You will be
subject to California personal income taxes, however, to the extent the Cali-
fornia Funds distribute any taxable income or realized capital gains, or if you
sell or exchange shares of the California Funds and realize capital gain on the
transaction.
The treatment of corporate shareholders of the California Funds differs from
that described above. Corporate shareholders should refer to the statement of
additional information for more detailed information.
- --------------------------------------------------------------------------------
PAGE 18
<PAGE>
Nuveen Family of Mutual Funds
Nuveen's family of funds is designed to help you reach your finan-
cial goals. The funds below are grouped by investment objectives.
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME FUNDS
National Funds/1/
State Funds
Alabama Michigan
Arizona Missouri
California/2/ New Jersey/3/
Colorado New Mexico
Connecticut New York/2/
Florida/3/ North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky/4/ South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts/2/ Wisconsin
Notes
1. Long-term, long-term insured, intermediate-term and limited-term
portfolios.
2. Long-term and long-term insured portfolios.
3. Long-term and intermediate-term portfolios.
4. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
- --------------------------------
OVERVIEW
The funds listed above are part of the Nuveen Flagship Multistate Trust II, an
open-end investment company. Each fund seeks to provide high double or triple
tax-free income and preservation of capital through investments in diversified
portfolios of quality municipal bonds whose income is exempt from regular
federal, state and, in some cases, local income taxes.
Each fund offers a set of flexible purchase options which permit you to
purchase fund shares in the way that is best suited to your individual circum-
stances and investment needs. For detailed information about these flexible
purchase options, please refer to "How to Select a Purchase Option" later in
this prospectus.
This prospectus contains important information you should know before invest-
ing. Please read it carefully and keep it for future reference. You can find
more detailed information about each fund in the statement of additional infor-
mation which is part of this prospectus by reference. For a free copy, write to
Nuveen or call (800) 621-7227.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER U.S. GOVERNMENT AGENCY. SHARES OF THE FUNDS
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
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.
- --------------------------------
CONTENTS
<TABLE>
<S> <C>
OVERVIEW 1
FUND SUMMARIES AND FINANCIAL HIGHLIGHTS 2
FUND STRATEGIES
Investment Objective 6
How the Funds Select Investments 6
Risk Reduction Strategies 7
INVESTING IN THE FUNDS
How to Buy Fund Shares 8
How to Select a Purchase Option 8
How to Sell Fund Shares 10
Exchanging Shares 11
Optional Features and Services 11
DIVIDENDS AND TAXES
How the Funds Pay Dividends 13
Taxes and Tax Reporting 13
Taxable Equivalent Yields 14
GENERAL INFORMATION
How to Contact Nuveen 15
Fund Service Providers 15
How the Funds Report Performance 16
How Fund Shares are Priced 16
Organization 16
APPENDIX
Special State Considerations 17
</TABLE>
FEBRUARY 1, 1997
<PAGE>
- ---------------------------------------------------------------------
Nuveen Massachusetts Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: December 10, 1986
NET ASSETS: $80.9 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 1.10% 5.53% 4.69% 4.68% 5.69%
5 YEARS 6.32% 7.21% 6.43% 6.40% 7.44%
INCEPTION 5.85% 6.31% 5.68% 5.57% 6.56%
</TABLE>
Class R total returns reflect actual performance for all periods; Class A and C
total returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class R performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B total returns reflect Class R performance for all periods,
adjusted for the differences in sales charges and fees between the classes. See
Overview of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEAR HERE:
Average Maturity 20.3
Average Modified Duration 5.9]
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEAR HERE:
AAA (48%)
AA (13%)
A (23%)
BBB (14%)
NR (2%)]
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE:
Escrowed Bonds (24%)
General Obligation Bonds (22%)
Housing Facilities (19%)
Health Care Facilities (15%)
Educational Facilities (14%)
Other (6%)]
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS -- (1) 5%(2) 1%(3) --
</TABLE>
- --------------------------------------------------------------------------------
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ---------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12b-1 FEES 0.20% 0.95% 0.75% --
OTHER EXPENSES 0.21% 0.21% 0.21% 0.21%
- ---------------------------------------------------
TOTAL (GROSS) 0.96% 1.71% 1.51% 0.76%
WAIVERS/
REIMBURSEMENTS (0.01%) (0.01%) (0.01%) (0.01%)
- ---------------------------------------------------
TOTAL (NET) 0.95% 1.70% 1.50% 0.75%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 51 $ 57 $ 15 $ 8
3 YEARS $ 71 $ 85 $ 47 $24
5 YEARS $ 92 $104 $ 82 $42
10 YEARS $154 $181 $179 $93
</TABLE>
Information as of 8/31/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Arthur Andersen LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION
DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Year Ending Beginning Net ized Gain from Net from Ending
February Net Asset Investment (Loss) From Investment Capital Net Asset
28/29, Value Income(c) Investments(a) Income Gains Value
------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997(g) $9.940 $.263 $ (.181) $(.252) $ -- $9.770
- ---------------------------------------------------------------------------------------------------------------
1996 9.560 .513 .388 (.521) -- 9.940
- ---------------------------------------------------------------------------------------------------------------
1995(d) 9.540 .254 .025 (.259) -- 9.560
- ---------------------------------------------------------------------------------------------------------------
CLASS C (9/94)
1997(g) 9.890 .223 (.177) (.216) -- 9.720
- ---------------------------------------------------------------------------------------------------------------
1996 9.510 .437 .392 (.449) -- 9.890
- ---------------------------------------------------------------------------------------------------------------
1995(d) 9.280 .188 .254 (.212) -- 9.510
- ---------------------------------------------------------------------------------------------------------------
CLASS R (12/86)
1997(g) 9.910 .267 (.173) (.264) -- 9.740
- ---------------------------------------------------------------------------------------------------------------
1996 9.540 .537 .378 (.545) -- 9.910
- ---------------------------------------------------------------------------------------------------------------
1995 9.940 .541 (.403) (.538) -- 9.540
- ---------------------------------------------------------------------------------------------------------------
1994 9.910 .543 .038 (.541) (.010) 9.940
- ---------------------------------------------------------------------------------------------------------------
1993 9.210 .563 .704 (.563) (.004) 9.910
- ---------------------------------------------------------------------------------------------------------------
1992(e) 9.130 .146 .077 (.143) -- 9.210
- ---------------------------------------------------------------------------------------------------------------
1991(f) 8.760 .577 .375 (.582) -- 9.130
- ---------------------------------------------------------------------------------------------------------------
1990(f) 8.900 .587 (.144) (.583) -- 8.760
- ---------------------------------------------------------------------------------------------------------------
1989(f) 8.600 .587 .300 (.587) -- 8.900
- ---------------------------------------------------------------------------------------------------------------
1988(f) 8.250 .581 .350 (.581) -- 8.600
- ---------------------------------------------------------------------------------------------------------------
1987(d)(f) 9.600 .577 (1.350) (.577) -- 8.250
- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Ratio of Net
Ratio of Investment
Year Ending Ending Expenses to Income to Portfolio
February Total Net Assets Average Net Average Turnover
28/29, Return(b) (millions) Assets(c) Net Assets(c) Rate
------------- --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997(g) .85% $5.6 1.00%+ 5.21%+ 3%
- ----------------------------------------------------------------------------------------------
1996 9.62 4.3 1.00 5.21 6
- ----------------------------------------------------------------------------------------------
1995(d) 3.05 1.1 1.00+ 5.75+ 17
- ----------------------------------------------------------------------------------------------
CLASS C (9/94)
1997(g) .49 .8 1.75+ 4.46+ 3
- ----------------------------------------------------------------------------------------------
1996 8.87 .6 1.75 4.45 6
- ----------------------------------------------------------------------------------------------
1995(d) 4.86 .1 1.75+ 5.11+ 17
- ----------------------------------------------------------------------------------------------
CLASS R (12/86)
1997(g) .98 74.5 .75+ 5.46+ 3
- ----------------------------------------------------------------------------------------------
1996 9.80 76.8 .75 5.49 6
- ----------------------------------------------------------------------------------------------
1995 1.64 71.6 .75 5.77 17
- ----------------------------------------------------------------------------------------------
1994 5.96 71.9 .75 5.38 3
- ----------------------------------------------------------------------------------------------
1993 14.21 53.2 .75 5.91 5
- ----------------------------------------------------------------------------------------------
1992(e) 2.44 34.5 .71+ 6.31+ 5
- ----------------------------------------------------------------------------------------------
1991(f) 11.19 31.2 .75 6.39 19
- ----------------------------------------------------------------------------------------------
1990(f) 5.21 20.8 .75 6.68 23
- ----------------------------------------------------------------------------------------------
1989(f) 10.62 15.5 .75 6.64 31
- ----------------------------------------------------------------------------------------------
1988(f) 11.56 9.5 .75 6.74 55
- ----------------------------------------------------------------------------------------------
1987(d)(f) (8.19) 5.7 .37+ 6.47+ 34
- ----------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the three months ending February 29.
(f) For the year ending November 30.
(g) For the six months ending August 31, 1996.
- --------------------------------------------------------------------------------
NOTES:
(1) Sales charge in effect February 1, 1997. 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% is imposed on redemptions of certain purchases of $1
million or more within 18 months of purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the funds reduced the service fee on Class A and
C shares from 0.25% to 0.20% and reduced the distribution fee on Class C
shares from 0.75% to 0.55%. These lower expenses are reflected in the table
and are expected to reduce total operating expenses on Class A from 1.00% to
0.95% and on Class C from 1.75% to 1.50%, as reflected in the table. Long-
term holders of Class B and C shares may pay more in distribution fees and
CDSCs than the maximum initial sales charge permitted under National
Association of Securities Dealers (NASD) Rules of Fair Practice. Nuveen
Advisory will waive some or all of its fees or reimburse expenses so that
the total operating expenses (not counting distribution and service fees)
for the fund (through July 31, 1997) do not exceed 0.75% of average daily
net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to the
end of each holding period, your expenses would be higher. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
-----------------
PAGE 3
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Massachusetts Insured Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: December 22, 1986
NET ASSETS: $64.4 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS B CLASS C CLASS R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR 0.58% 4.98% 4.23% 4.12% 5.23%
5 YEARS 6.00% 6.89% 6.18% 6.11% 7.19%
INCEPTION 6.01% 6.47% 5.86% 5.76% 6.76%
</TABLE>
Class R total returns reflect actual performance for all periods; Class A and C
total returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class R performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B total returns reflect Class R performance for all periods,
adjusted for the differences in sales charges and fees between the classes. See
Overview of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 18.5
Average Modified Duration 6.2
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
A (3%)
AA (1%)
AAA (96%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
General Obligation Bonds (39%)
Escrowed Bonds (20%)
Health Care Facilities (17%)
Educational Facilities (16%)
Electric Utilities (3%)
Other (5%)
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
(Maximum, as % of Offering Price)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES CHARGE ON PURCHASES 4.20%(1) -- -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS -- (1) 5%(2) 1%(3) --
- ------------------------------------------------------------------------------------------
</TABLE>
OVERVIEW OF FUND OPERATING EXPENSES (4)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES 0.55% 0.55% 0.55% 0.55%
12b-1 FEES 0.20% 0.95% 0.75% --
OTHER 0.23% 0.23% 0.23% 0.23%
- ------------------------------------------------
TOTAL (GROSS) 0.98% 1.73% 1.53% 0.78%
WAIVERS/
REIMBURSEMENTS -- -- -- --
- ------------------------------------------------
TOTAL (NET) 0.98% 1.73% 1.53% 0.78%
</TABLE>
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING
PERIOD CLASS A CLASS B CLASS C CLASS R
- -----------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 52 $ 57 $ 16 $ 8
3 YEARS $ 72 $ 86 $ 48 $25
5 YEARS $ 94 $105 $ 83 $43
10 YEARS $157 $184 $182 $97
</TABLE>
Information as of 8/31/96 See Notes on Next Page
- --------------------------------------------------------------------------------
PAGE 4
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights below are excerpted from the fund's latest annual
report which has been audited by Arthur Andersen LLP, the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a free
copy of the fund's latest annual and semi-annual reports, write to Nuveen or
call (800) 621-7227.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
CLASS INVESTMENT OPERATIONS AND DISTRIBUTIONS:
(INCEPTION
DATE)
Net Realized Distribu-
and Unreal- Dividends tions
Beginning Net ized Gain from Net from Ending
Year Ending Net Asset Investment (Loss) From Investment Capital Net Asset
February 28/29, Value Income(c) Investments(a) Income Gains Value
--------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997 (e) $10.490 $.261 $(.243) $(.258) $ -- $10.250
- ---------------------------------------------------------------------------------------------
1996 10.060 .512 .433 (.515) -- 10.490
- ---------------------------------------------------------------------------------------------
1995 (d) 10.030 .249 .039 (.258) -- 10.060
- ---------------------------------------------------------------------------------------------
CLASS C (9/94)
1997 (e) 10.470 .223 (.254) (.219) -- 10.220
- ---------------------------------------------------------------------------------------------
1996 10.040 .434 .435 (.439) -- 10.470
- ---------------------------------------------------------------------------------------------
1995 (d) 9.910 .202 .137 (.209) -- 10.040
- ---------------------------------------------------------------------------------------------
CLASS R (12/86)
1997 (e) 10.500 .270 (.250) (.270) -- 10.250
- ---------------------------------------------------------------------------------------------
1996 10.060 .538 .445 (.543) -- 10.500
- ---------------------------------------------------------------------------------------------
1995 10.450 .545 (.386) (.549) -- 10.060
- ---------------------------------------------------------------------------------------------
1994 10.440 .537 -- (.527) -- 10.450
- ---------------------------------------------------------------------------------------------
1993 9.650 .551 .784 (.545) -- 10.440
- ---------------------------------------------------------------------------------------------
1992 9.360 .570 .301 (.581) -- 9.650
- ---------------------------------------------------------------------------------------------
1991 9.140 .568 .219 (.567) -- 9.360
- ---------------------------------------------------------------------------------------------
1990 8.960 .571 .178 (.569) -- 9.140
- ---------------------------------------------------------------------------------------------
1989 9.030 .576 (.070) (.576) -- 8.960
- ---------------------------------------------------------------------------------------------
1988 9.540 .582 (.510) (.582) -- 9.030
- ---------------------------------------------------------------------------------------------
1987 (d) 9.600 .131 (.060) (.131) -- 9.540
- ---------------------------------------------------------------------------------------------
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION
DATE)
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Year Ending Total Net Assets Average Net Average Turnover
February 28/29, Return(b) (millions) Assets(c) Net Assets(c) Rate
- ------------------ --------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A (9/94)
1997 (e) .20% $ 6.4 1.03%+ 4.99%+ 1%
- ---------------------------------------------------------------------------------------------
1996 9.59 5.3 1.07 4.94 1
- ---------------------------------------------------------------------------------------------
1995 (d) 2.99 2.0 1.15+ 5.34+ 10
- ---------------------------------------------------------------------------------------------
CLASS C (9/94)
1997 (e) (.28) .8 1.78+ 4.25+ 1
- ---------------------------------------------------------------------------------------------
1996 8.80 .7 1.81 4.20 1
- ---------------------------------------------------------------------------------------------
1995 (d) 3.52 .3 1.90+ 4.58+ 10
- ---------------------------------------------------------------------------------------------
CLASS R (12/86)
1997 (e) .22 57.2 .78+ 5.24+ 1
- ---------------------------------------------------------------------------------------------
1996 9.99 60.1 .81 5.21 1
- ---------------------------------------------------------------------------------------------
1995 1.77 57.1 .79 5.54 10
- ---------------------------------------------------------------------------------------------
1994 5.22 58.3 .84 5.09 3
- ---------------------------------------------------------------------------------------------
1993 14.28 47.1 .86 5.47 2
- ---------------------------------------------------------------------------------------------
1992 9.57 28.2 .72 5.93 5
- ---------------------------------------------------------------------------------------------
1991 8.95 15.6 .85 6.19 6
- ---------------------------------------------------------------------------------------------
1990 8.52 8.6 .97 6.17 15
- ---------------------------------------------------------------------------------------------
1989 5.84 5.4 .97 6.44 41
- ---------------------------------------------------------------------------------------------
1988 1.14 4.9 .59 6.53 42
- ---------------------------------------------------------------------------------------------
1987 (d) .75 2.3 -- 5.82+ --
- ---------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value and are annualized in the
first year after commencement of class operations.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(d) From commencement of class operations as noted.
(e) For the six months ending August 31, 1996.
- --------------------------------------------------------------------------------
NOTES:
(1) Sales charge in effect February 1, 1997. 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% is imposed on redemptions of certain purchases of $1
million or more within 18 months of purchase.
(2) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective February 1, 1997, the funds reduced the service fee on Class A and
C shares from 0.25% to 0.20% and reduced the distribution fee on Class C
shares from 0.75% to 0.55%. These lower expenses are reflected in the table
and are expected to reduce total operating expenses on Class A from 1.03% to
0.98% and on Class C from 1.78% to 1.53%, as reflected in the table. Long-
term holders of Class B and C shares may pay more in distribution fees and
CDSCs than the maximum initial sales charge permitted under National
Association of Securities Dealers (NASD) Rules of Fair Practice. Nuveen
Advisory has agreed to waive some or all of its fees or reimburse expenses
to prevent total operating expenses (not counting distribution and service
fees) from exceeding 0.975% of the fund's average daily net assets.
(5) The expenses shown assume that you redeem your shares at the end of each
holding period. If instead you redeemed your shares immediately prior to the
end of each holding period, your expenses would be higher. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
- --------------------------------------------------------------------------------
PAGE 5
<PAGE>
FUND STRATEGIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of each fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital. There is no
assurance that the funds will achieve their investment objective.
INVESTOR SUITABILITY
The funds are a suitable investment for tax-conscious investors seeking to:
.. Earn regular monthly tax-free dividends;
.. Preserve investment capital over time;
.. Reduce taxes on investment income;
.. Set aside money systematically for retirement, estate planning or college
funding.
The funds are not a suitable investment for individuals seeking to:
.. Pursue an aggressive, high-growth investment strategy;
.. Invest through an IRA or 401k plan;
.. Avoid fluctuations in share price.
- --------------------------------------------------------------------------------
HOW THE FUNDS SELECT
INVESTMENTS
TAX-FREE MUNICIPAL BONDS
The funds invest primarily in municipal bonds from a specific state that pay
interest that is exempt from regular federal, state and, in some cases, local
income taxes. Income from these bonds may be subject to the federal alternative
minimum tax.
Municipal bonds are either general obligation or revenue bonds and typically
are issued to finance public projects (such as roads or public buildings), to
pay general operating expenses, or to refinance outstanding debt. Municipal
bonds may also be issued for private activities, such as housing, medical and
educational facility construction, or for privately owned industrial develop-
ment and pollution control projects. General obligation bonds are backed by the
full faith and credit, or taxing authority, of the issuer and may be repaid
from any revenue source; revenue bonds may be repaid only from the revenues of
a specific facility or source.
The Massachusetts Insured Fund primarily purchases insured municipal bonds. See
"Insurance" below. Under normal market conditions, the Massachusetts Insured
Fund will invest at least 65% of its assets in insured municipal bonds.
FOCUS ON QUALITY MUNICIPAL BONDS
The funds focus on quality municipal bonds that are either 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 funds'
investment adviser. If suitable municipal bonds from a specific state are not
available at attractive prices and yields, a fund may invest in municipal bonds
of U.S. territories (such as Puerto Rico and Guam) which are exempt from
regular federal, state, and local income taxes. The Massachusetts Funds may not
invest more than 20% of their net assets in these territorial municipal bonds.
The Massachusetts Insured Fund will invest at least 80% of its net assets in
insured municipal bonds or municipal bonds backed by an escrow or trust account
that contains sufficient U.S. government-backed securities to assure timely
payment of interest and principal.
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 leases where the issuer has a strong
incentive to continue making appropriations until maturity.
Bond ratings are furnished by Standard & Poor's Corporation, Fitch Investors
Services, and Moody's Investors Services. The ratings BBB and Baa are not iden-
tical--S&P and Fitch consider bonds rated BBB to have adequate capacity to pay
principal and interest; Moody's considers bonds rated Baa to have some specula-
tive characteristics. Bond ratings represent the opinions of the ratings agen-
cies; they are not absolute standards of quality.
VALUE INVESTING STRATEGY
The funds' investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer above-average total
return potential. The adviser emphasizes fundamental research and selects
municipal bonds on the basis of its evaluation of each bond's relative value in
terms of current yield, price, credit quality and future prospects. The adviser
then monitors each fund's portfolio to assure that municipal bonds purchased
continue to represent over time, in its opinion, the best values available.
PORTFOLIO MATURITY
Each fund purchases municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an invest-
ment portfolio with an overall weighted average maturity within a defined
range. All of the funds described in this prospectus are long-term funds and
normally maintain a weighted average portfolio maturity of 15 to 30 years. See
"Defensive Investment Strategies" below for further information.
- --------------------------------------------------------------------------------
6
<PAGE>
INSURANCE
Insured municipal bonds are purchased primarily by the Massachusetts Insured
Fund. Insured municipal bonds are either covered by individual, permanent
insurance policies (obtained either at the time of issuance or subsequently),
or covered "while in fund" under a master portfolio insurance policy purchased
by a fund. Insurance guarantees only the timely payment of interest and prin-
cipal on the bonds; it does not guarantee the value of either individual bonds
or fund shares.
Portfolio insurance policies are effective only so long as the fund continues
to own the covered bond, and the price the fund would receive upon sale of such
a bond would not benefit from the insurance. Insurers under master portfolio
insurance policies currently include MBIA Insurance Corp., AMBAC Indemnity
Corp., Financial Security Assurance, Inc., and Financial Guaranty Insurance Co.
The fund's investment adviser may obtain master policies from other insurers,
but only from insurers that specialize in insuring municipal bonds and whose
claims-paying ability is rated Aaa or AAA by Moody's or S&P. Insurers are
responsible for making their own assessment of the insurability of a municipal
bond.
An insured fund can invest up to 20% of its net assets in uninsured municipal
bonds which are backed by an escrow containing sufficient U.S. Government or
U.S. Government agency securities to ensure timely payment of principal and
interest. Such bonds are normally regarded as having the credit characteristics
of the underlying U.S. Government-backed securities.
PORTFOLIO TURNOVER
A fund buys and sells portfolio securities in the normal course of its invest-
ment activities. The proportion of the fund's investment portfolio that is sold
and replaced with new securities during a year is known as the fund's portfolio
turnover rate. The funds intend to keep portfolio turnover 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 and reduce market risk.
DELAYED DELIVERY TRANSACTIONS
Each fund may buy or sell bonds on a when-issued or delayed delivery basis,
making payment or taking delivery at a later date, normally within 15 to 45
days of the trade date. This type of transaction may involve an element of risk
because no interest accrues on the bonds prior to settlement and, since securi-
ties are subject to market fluctuation, the value of the bonds at time of
delivery may be less (or more) than cost.
- --------------------------------------------------------------------------------
RISK REDUCTION STRATEGIES
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. Interest rate risk is the
risk that changes in market interest rates will affect the value of a fund's
investment portfolio. In general, the value of a municipal bond falls when
interest rates rise, and increases when interest rates fall. Credit risk is the
risk that an issuer of a municipal bond is unable to meet its obligation to
make interest and principal payments. In general, lower rated municipal bonds
are perceived to carry a greater degree of risk in the issuer's ability to make
interest and principal payments. Municipal bonds with longer maturities (dura-
tions) or lower ratings generally provide higher
current income, but are subject to greater price fluctuation due to changes in
market conditions than bonds with shorter maturities or higher ratings, respec-
tively.
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. As non-diversified
funds, the Massachusetts and Massachusetts Insured Funds generally are subject
to greater share price fluctuations due to these changes than other funds which
are diversified.
The funds limit your investment risk generally by restricting the types and
maturities of municipal bonds they purchase, and by diversifying their invest-
ment portfolios across different industry sectors. The funds should be consid-
ered long-term investments and may not be suitable for investors with short-
term investment horizons.
INVESTMENT LIMITATIONS
The funds have adopted certain investment limitations (based on total fund
assets) designed to limit your investment risk and maintain portfolio diversi-
fication. Each fund may not have more than:
.. 25% in any one industry sector, such as electric utilities or health care;
.. 10% in borrowings (33% if used to meet redemptions).
DEFENSIVE INVESTMENT STRATEGIES
Each fund may invest in high quality short-term municipal securities in order
to reduce risk and preserve capital. Under normal market conditions, each fund
may invest only up to 20% of net assets in short-term municipal securities that
are exempt from regular federal income tax, although the funds may invest up to
100% as a temporary defensive measure in response to adverse market conditions.
During
- --------------------------------------------------------------------------------
PAGE 7
<PAGE>
temporary defensive periods, the weighted average maturity of a fund's invest-
ment portfolio may fall below the defined range described above under "Port-
folio Maturity."
If suitable short-term municipal investments are not reasonably available, the
funds may invest in short-term taxable securities that are rated Aaa or AAA,
by Moody's or S&P, respectively, or issued by the U.S. government, and that
have a maturity of one year or less or have a variable interest rate.
Each fund may also use various investment strategies designed to limit the
risk of bond price fluctuations and to preserve capital. These hedging strate-
gies include using financial futures contracts, options on financial futures,
or options based on either an index of long-term tax-free securities or on
debt securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have
no present intent to use these strategies.
FUNDAMENTAL INVESTMENT POLICIES
Each fund's investment objective as well as the policies described above in
"Focus on Quality Municipal Bonds," "Insurance," and "Risk Reduction Strate-
gies" are fundamental and may not be changed without the approval of a
majority of the shareholders of each fund.
INVESTING IN THE FUNDS
- -------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
You may open an account with $3,000 and make additional investments at any
time with as little as $50. Reinvestment of Nuveen unit trust distributions
have no purchase minimums. The share price you pay will depend on when Nuveen
receives your order: orders received before the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) will receive
that day's share price; otherwise you will receive the next business day's
share price.
BUYING SHARES THROUGH A FINANCIAL ADVISER
You may buy fund shares through your financial adviser, who can handle all the
details for you, including establishing an account with Nuveen. Financial
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 assure your investments
continue to meet your needs as circumstances change.
Financial advisers are usually paid either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge for ongoing invest-
ment advice and services.
If you do not have a financial adviser, call (800) 621-7227 and Nuveen can
refer you to one in your area.
BUYING SHARES BY MAIL
You may also open an account and purchase shares by mail by completing the
enclosed Nuveen application and mailing it along with your check (payable to
the appropriate fund) to the address listed under "How to Contact Nuveen."
Sales charges are not waived when you buy shares by mail.
Each fund reserves the right to reject any purchase order and waive or
increase minimum investment requirements. The funds also reserve the right to
suspend the issuance of shares at any time; any suspension, however, will not
affect your ability to redeem shares.
- -------------------------------------------------------------------------------
HOW TO SELECT A PURCHASE
OPTION
The funds offer you a variety of flexible options when buying shares. Whether
you typically work with a financial adviser on a commission or a fee basis or
- -------------------------------------------------------------------------------
PAGE 8
<PAGE>
prefer to work on a more self-directed basis, you can purchase shares in the
way that is most suited to your individual circumstances and investment needs.
Each of the four available ways to purchase fund shares is called a class of
shares: Class A, Class B, Class C and Class R. While each of these classes
features different sales charges, on-going fees and eligibility requirements,
each entitles you to a share of the same portfolio of municipal bonds.
Selecting the class of shares which is most appropriate for you will depend on
a variety of factors. You should weigh carefully whether you and your financial
adviser work on a commission or fee basis, the types of services that you will
receive, the amount you intend to buy, how long you plan to own your investment
and whether or not you will reinvest dividends. If you compensate your finan-
cial adviser directly, you should consider the fees your financial adviser
charges for investment advice or handling your trades in addition to any sales
charges and fees imposed by the funds. Please refer to your financial adviser's
sales material for further information. Each class of shares is described in
more detail below and under "Fund Service Providers--The Distributor." Your
financial adviser can explain each option and help you determine which is most
appropriate for you, or you can call (800) 621-7227.
BUYING CLASS A SHARES
You may buy Class A shares at their public offering price on the day of
purchase. The price you pay will equal the Class A NAV (net asset value) plus a
sales charge based upon the amount of your purchase. Class A shares also bear a
0.20% annual service fee which compensates your financial adviser for providing
you with ongoing service.
The following Class A sales charges and commissions apply to all funds
described in this prospectus:
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
<CAPTION>
AUTHORIZED DEALER
SALES CHARGE COMMISSION
------------------------------------- -----------------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 4.20% 4.38% 3.70%
$50,000-100,000 4.00 4.18 3.50
$100,000-250,000 3.50 3.63 3.00
$250,000-500,000 2.50 2.56 2.00
$500,000-1,000,000 2.00 2.04 1.50
$1,000,000 and over --(1) -- --(1)
</TABLE>
(1) Nuveen pays authorized dealers a commission equal to the sum of 1% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of any
amount over $5 million. Unless the authorized dealer waived the commission,
you may be assessed a contingent deferred sales charge (CDSC) of 1% if you
redeem any of your shares within 18 months of purchase. The CDSC is calcu-
lated on the lower of your purchase price or redemption proceeds.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in connec-
tion with sales meetings, seminars, prospecting seminars and other events at
which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of adver-
tising that features the products and services of both parties. The statement
of additional information contains further information about these programs.
- --------------------------------------------------------------------------------
OTHER SALES CHARGE DISCOUNTS
Nuveen offers a number of programs that enable you to reduce or eliminate the
sales charge on Class A shares:
Sales Charge Reductions Sales Charge Waivers
.. Rights of Accumulation . Unit Trust Reinvestment
.. Letter of Intent (LOI) . Purchases using Redemptions from Unrelated Funds
.. Group Purchase . Fee-Based Programs
. Bank Trust Departments
. Certain Employees of Nuveen or Authorized Dealers
Please refer to the statement of additional information for detailed descrip-
tions of these programs. Further information on these programs is also avail-
able through your financial adviser or by calling (800) 621-7227. Your finan-
cial adviser can also provide and help you prepare the necessary application
forms. You or your financial adviser are responsible for notifying Nuveen about
your eligibility for any sales charge reduction or waiver at the time of each
purchase.
The funds may modify or discontinue these programs at any time upon written
notice to shareholders.
BUYING CLASS B SHARES
You may buy Class B shares at their public offering price on the day of
purchase. The price you pay will equal the Class B NAV. There is no initial
sales charge, but Class B shares bear a 0.20% annual service fee which compen-
sates your financial adviser for providing you with ongoing service, and a
0.75% annual distribution fee which compensates Nuveen for paying your finan-
cial adviser a 4% commission at the time of purchase.
- --------------------------------------------------------------------------------
PAGE 9
<PAGE>
Class B shares convert automatically to Class A shares eight years after
purchase. Class B shares will convert only if the fund is assured that the
conversion does not generate tax consequences for investors, based upon the
opinion of outside counsel or the written assurance of the IRS.
- -------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGE
If you redeem Class B shares within six years of purchase, you will be
assessed a contingent deferred sales charge (CDSC) based upon the following
schedule:
<TABLE>
<CAPTION>
DURING YEAR
---------------------------
1 2 3 4 5 6 7+
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1% 0%
</TABLE>
The CDSC is calculated on the lower of your purchase price or redemption
proceeds.
BUYING CLASS C SHARES
You may buy Class C shares at their public offering price on the day of
purchase. The price you pay will equal the Class C NAV. There is no initial
sales charge, Class C shares bear a 0.20% annual service fee which compensates
your financial adviser for providing you with ongoing service, and a 0.55%
annual distribution fee which compensates Nuveen for paying your financial
adviser for the sale, including a 1% commission at the time of sale.
If you redeem your Class C shares within one year of purchase, you may be
assessed a CDSC of 1%. The CDSC is calculated on the lower of your purchase
price or redemption proceeds.
BUYING CLASS R SHARES
You may purchase Class R shares at their public offering price on the day of
purchase. The price you pay will equal the Class R NAV. You may purchase Class
R shares only if you are investing at least $1 million or would otherwise
qualify to purchase Class A shares without a sales charge as described under
"Other Sales Charge Discounts" above. There are no sales charges or ongoing
fees. Class R Shares have lower ongoing expenses than Class A Shares.
- -------------------------------------------------------------------------------
HOW TO SELL FUND SHARES
You may use one of the methods described below to redeem your shares on any
day the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your redemption request in good order.
Your redemption request must be received before the close of trading of the
New York Stock Exchange (normally 4 p.m. Eastern time) for you to receive that
day's price. The funds do not charge any redemption fees, although you will be
assessed a CDSC where applicable.
SELLING SHARES THROUGH YOUR FINANCIAL ADVISER
You may sell fund shares by contacting your financial adviser who can provide
and help you prepare all the necessary documentation. Your financial adviser
may charge you for this service.
SELLING SHARES BY TELEPHONE
Unless you have declined telephone redemption privileges, you may sell fund
shares by calling (800) 621-7227. Your redemption must not exceed $50,000 and
you may not redeem by telephone shares held in certificate form. Checks will
be issued only to the shareholder on record and mailed to the address on
record. If you have established electronic funds transfer privileges on your
account, you may have redemption proceeds transferred electronically to your
bank account; if you are redeeming $1,000 or more, you may expedite your
request by having your redemption proceeds wired directly into your bank
account.
Nuveen and Shareholder Services, Inc. ("SSI") will be liable for losses
resulting from unauthorized telephone redemptions only if they do not follow
reasonable procedures designed to verify the identity of the caller. You
should immediately verify your trade confirmations when you receive them.
SELLING SHARES BY MAIL
You may sell fund shares by mail by sending a written request to Nuveen at the
address listed below under "How to Contact Nuveen." Your request must include
the following information:
.. The fund's name;
.. Your name and account number;
.. The dollar or share amount you wish to redeem;
.. The signature of each owner exactly as it appears on the account;
.. The name of the person you want your redemption proceeds paid to, if other
than to the shareholder of record;
.. The address you want your redemption proceeds sent to, if other than to the
address of record;
.. Any certificates you have for the shares; and
.. Any required signature guarantees.
Signatures must be guaranteed if you are redeeming more than $50,000, you want
the check payable to someone other than the shareholder on record, or you want
the check sent to another address (or the address on record has been changed
within the last 60 days). Signature guarantees must be obtained from a bank,
brokerage firm or other financial intermediary that is a member of an approved
Medallion Guarantee Program or that is otherwise approved by the fund. A
notary public cannot provide a signature guarantee.
- -------------------------------------------------------------------------------
PAGE 10
<PAGE>
Unless other arrangements are made, checks will be sent to your address on
record. Checks will normally be mailed within one business day, but in no
event more than seven days from receipt of your redemption request. If any
shares were purchased less than 15 days prior to your request, the fund will
not mail your redemption proceeds until the check for your purchase has
cleared, which may take up to 15 days.
Each fund may suspend redemptions or delay payment on redemptions for more
than seven days (three days for street name accounts) in certain extraordinary
circumstances as described in the statement of additional information.
OPERATION OF THE CDSC
When you redeem Class A, Class B, or Class C shares subject to a CDSC, the
fund will first redeem any shares that are not subject to a CDSC or that
represent an increase in the value of your fund account due to capital appre-
ciation, and then redeem the shares you have owned for the longest period of
time, unless you ask the fund to redeem your shares in a different order. No
CDSC is imposed on shares you buy through the reinvestment of dividends and
capital gains. The holding period is calculated on a monthly basis and begins
on the first day of the month in which you buy shares. When you redeem shares
subject to a CDSC, the CDSC is calculated on the lower of your purchase price
or redemption proceeds, deducted from your redemption proceeds, and paid to
Nuveen. The CDSC may be waived under certain special circumstances as
described in the statement of additional information.
ACCOUNT MINIMUMS
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
unit trust reinvestment account. You will not be assessed a CDSC on an invol-
untary redemption.
- -------------------------------------------------------------------------------
EXCHANGING SHARES
You may exchange fund shares at any time for the same class of shares in
another Nuveen mutual fund that is available within your state. You may
exchange fund shares by calling (800) 621-7227 or by mailing your written
request to Nuveen at the address listed under "How to Contact Nuveen."
You must have owned your fund shares for at least 15 days and your exchange
must meet the minimum purchase requirements of the fund into which you are
exchanging. No CDSC will be assessed on an exchange, and the holding period of
your investment will be carried over to the new fund for purposes of deter-
mining any future CDSC. You may not exchange Class B shares for shares of a
Nuveen money market fund.
Because an exchange is treated for tax purposes as the concurrent sale and
purchase of fund shares, you should consult your tax adviser about the tax
consequences of any contemplated exchange. Each fund reserves the right to
limit or terminate exchange privileges if it believes doing so is in the best
interests of fund shareholders.
RESTRICTIONS ON MARKET TIMING
The exchange privilege is not intended to permit you to use a fund for short-
term trading. Excessive exchange activity may interfere with portfolio manage-
ment, raise fund operating expenses or otherwise have an adverse effect on
fund shareholders. In order to limit excessive exchange activity and in other
circumstances where the funds' investment adviser believes doing so would be
in the best interests of the fund, each fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of exchanges, or
reject any exchange. You will be notified in the event this happens to the
extent required by law.
- -------------------------------------------------------------------------------
OPTIONAL FEATURES AND SERVICES
SYSTEMATIC INVESTMENT
Once you have opened an account, you may make regular investments of $50 or
more a month through automatic deductions from your bank account (see "Fund
Direct--Electronic Funds Transfer" below), or directly from your paycheck. To
invest regularly from your bank account, simply complete the appropriate
section of the account application. To invest regularly from your paycheck,
call Nuveen for a Payroll Direct Deposit Enrollment form. If you need addi-
tional copies of these forms, or would like assistance completing them,
contact your financial adviser or call Nuveen toll-free at (800) 621-7227.
One of the benefits of systematic investing is "dollar cost averaging."
Because you are making fixed payments, you buy fewer shares when the price is
high, and more when the price is low. As a result, the average price you pay
will be less than the average share price of fund shares over this period.
Dollar cost averaging does not assure profits or protect against losses in a
steadily declining market. Since dollar cost averaging involves continuous
investment regardless of fluctuating price levels, you should consider your
financial ability to continue investing in declining as well as rising markets
before deciding to invest in this way.
Systematic investing may also make you eligible for reduced sales charges on
shares of the fund as well as other Nuveen mutual funds (see "Other Sales
Charge Discounts").
- -------------------------------------------------------------------------------
PAGE 11
<PAGE>
- -------------------------------------------------------------------------------
THE POWER OF SYSTEMATIC INVESTING
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
<TABLE>
<CAPTION>
[CHART APPEARS HERE]
ACCOUNT VALUES FOR TOTAL RETURNS OF
AMOUNT -------------------------------------
YEAR INVESTED 4.00% 5.00% 6.00%
---- -------- ------- ------- -------
<S> <C> <C> <C> <C>
0 $ 2,874 $ 2,874 $ 2,874 $ 2,874
5 8,622 9,861 10,203 10,561
10 14,370 18,391 19,610 20,929
15 20,118 28,807 31,681 34,913
20 25,866 41,525 47,173 53,779
</TABLE>
SYSTEMATIC WITHDRAWALS
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to
receive payments monthly, quarterly or semi-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 to participate in
the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concur-
rent purchases of Class A, B or C shares because you may unnecessarily pay a
sales charge or CDSC on these purchases.
REINSTATEMENT PRIVILEGE
If you redeem fund shares on which you paid an initial sales charge or contin-
gent deferred sales charge (CDSC), you may reinvest all or part of your
redemption proceeds up to one year later without incurring any additional
charge. You may only reinvest into the same class of shares you redeemed and
will receive the share price next determined after Nuveen receives your rein-
vestment request. You may exercise this privilege only once per redemption
request.
If you paid a CDSC, your CDSC will be refunded and your holding period rein-
stated. You should consult your tax adviser about the tax consequences of
exercising your reinstatement privilege.
FUND DIRECT--ELECTRONIC FUNDS TRANSFER
You may arrange to transfer funds electronically between your bank account and
your fund account by completing the appropriate section of the account appli-
cation. If you need additional copies of this form, or would like assistance
completing it, contact your financial adviser or Nuveen at (800) 621-7227. You
may use Fund Direct to quickly and conveniently purchase or sell shares by
telephone, systematically invest or withdraw funds, or send dividend payments
directly to your bank account.
If you have established electronic funds transfer privileges on your account,
you may request that redemption proceeds of $1,000 or more be wired directly
into your bank account. While you will generally receive your redemption
proceeds more quickly than a regular telephone redemption, the fund may charge
you a fee for this expedited service.
- -------------------------------------------------------------------------------
PAGE 12
<PAGE>
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
HOW THE FUNDS PAY DIVIDENDS
The funds pay tax-free dividends monthly and any taxable capital gains or other
distributions once a year in December. The funds declare dividends on or about
the ninth of each month and generally pay dividends on the first business day
of the following month.
PAYMENT AND REINVESTMENT OPTIONS
The funds automatically reinvest your dividends each month 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. If you wish to do so, complete the
appropriate section of the account application, contact your financial adviser
or call Nuveen at (800) 621-7227.
CALCULATION OF FUND DIVIDENDS
Each fund pays dividends based upon its past and projected net income in order
to distribute substantially all of its net income each fiscal year.
In order to maintain a more stable monthly dividend, each fund may sometimes
distribute less or more than the amount of net income earned in a particular
period as a result of fluctuations in a fund's net income. Undistributed net
income is included in the fund's share price; similarly, distributions from
previously undistributed net income reduce the fund's share price. This divi-
dend policy is not expected to affect the management of a fund's portfolio.
Dividends for Class A, B, C and R shares are determined in the same manner and
at the same time. Dividends per share will vary based on which class of fund
shares you own, reflecting the different ongoing fees and other expenses of
each class.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAXES AND TAX REPORTING
The discussion below and in the statement of additional information provides
general tax information related to an investment in fund shares. Because tax
laws are complex and often change, you should consult your tax adviser about
the tax consequences of a specific fund investment.
Each fund primarily invests in municipal bonds from a specific state or in
municipal bonds whose income is otherwise exempt from regular federal, state
and local income taxes. Consequently, the regular monthly dividends you receive
will be exempt from regular federal, state and, in some cases, local income
taxes. All or a portion of these dividends, however, may be subject to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how
long you have owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Each year, you will receive a year-end statement that describes the tax status
of dividends paid to you during the preceding year, including the source of its
investment income by state and the portion of its income that is subject to
AMT. You will receive this statement from the firm where you purchased your
fund shares if you hold your investment in street name; Nuveen will send you
this statement if you hold your shares in registered form.
The tax status of your dividends is not affected by whether you reinvest your
dividends or receive them in cash.
BUYING OR SELLING SHARES CLOSE TO A RECORD DATE
If you purchase fund shares shortly before the record date for a taxable divi-
dend, the entire dividend you receive may be taxable to you even though a
portion of the dividend effectively represents a return of your purchase price.
This is commonly known as "buying a dividend." 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.
TAX CONSEQUENCES OF PRIVATE ACTIVITY BONDS
Because each fund may invest in private activity bonds, the portion of your
regular monthly dividends derived from the income earned on these bonds that
would otherwise be tax-exempt will be treated as taxable income if:
.. you are subject to the AMT (including corporate shareholders);
.. you are a "substantial user" of a facility financed by these bonds; or
.. you are a "related person" of a substantial user.
- --------------------------------------------------------------------------------
PAGE 13
<PAGE>
REDEEMING SHARES HELD LESS THAN SIX MONTHS
If you sell or exchange shares that you have owned for less than six months
and you recognized a short-term capital loss when you redeemed your shares,
the loss you can claim will be reduced by the amount of tax-free dividends
paid to you on those shares. Any remaining short-term capital loss will be
treated as long-term capital loss to the extent you also received capital gain
dividends on those shares. You should consult your tax adviser for complete
information about these rules. Please consider the tax consequences carefully
when contemplating a redemption.
OTHER IMPORTANT TAX INFORMATION
In order to avoid corporate taxation of its earnings and to pay tax-free divi-
dends, each fund must meet certain I.R.S. requirements that govern the fund's
sources of income, diversification of assets and distribution of earnings to
shareholders. Each fund has met these requirements in the past and intends to
do so in the future. If a fund failed to do so, the fund would be required to
pay corporate taxes on its earnings and all your distributions would be
taxable as ordinary income.
A fund may be required to withhold 31% of certain of your dividends if you
have not provided the fund with your correct taxpayer identification number
(normally your social security number), or if you are otherwise subject to
back-up withholding.
If you receive social security benefits, you should be aware that tax-free
income is taken into account in calculating the amount of these benefits that
may be subject to federal income tax.
If you borrow money to buy fund shares, you may not deduct the interest on
that loan. Under I.R.S. rules, fund shares may be treated as having been
bought with borrowed money even if the purchase cannot be traced directly to
borrowed money.
- -------------------------------------------------------------------------------
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
<TABLE>
<CAPTION>
TAX-FREE YIELD
TAX RATE 4.00% 4.50% 5.00% 5.50% 6.00%
- -------
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
statement of additional information or consult your tax adviser.
- -------------------------------------------------------------------------------
PAGE 14
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
HOW TO CONTACT NUVEEN
GENERAL INFORMATION
If you would like general information about Nuveen Mutual Funds or any other
Nuveen product, call (800) 621-7227 between 7:30 a.m. and 7:00 p.m. Central
time.
PURCHASES, REDEMPTIONS AND OTHER TRANSACTIONS
If you are calling to purchase or redeem shares, request an exchange or conduct
other account transactions, call (800) 621-7227 between 7:30 a.m. and 7:00 p.m.
Central time. If you are sending a written request to Nuveen, you should mail
your request to the following address:
Nuveen Mutual Funds
c/o Shareholder Services Inc.
P.O. Box 5330
Denver, CO 80217-5330
When purchasing fund shares by mail, please be sure to include a check made out
to the name of the Fund and mark clearly on your check which class of shares
you are purchasing. If you do not specify which class of shares you are
purchasing, Nuveen will assume you are buying Class A shares if you are opening
a new account; if you are adding to an existing account, Nuveen will assume you
wish to buy more shares of the class you already own.
- --------------------------------------------------------------------------------
FUND SERVICE PROVIDERS
INVESTMENT ADVISER
Nuveen Advisory Corp. ("Nuveen Advisory") serves as the investment adviser to
the funds and in this capacity is responsible for the selection and on-going
monitoring of the municipal bonds in each fund's investment portfolio. Nuveen
Advisory serves as investment adviser to investment portfolios with more than
$35 billion in municipal assets under management. The activities of Nuveen
Advisory, which also include managing the funds' business affairs and providing
certain clerical, bookkeeping and other administrative services, are overseen
by the funds' Board of Trustees. Established in 1976, Nuveen Advisory is a
wholly-owned subsidiary of John Nuveen & Co. Incorporated, which itself is
approximately 78% owned by the St. Paul Companies, Inc. Effective January 1,
1997, The John Nuveen Company acquired Flagship Resources Inc., and as part of
that acquisition, Flagship Financial, the adviser to the Flagship Funds, was
merged with Nuveen Advisory.
For providing these services, Nuveen Advisory is paid an annual management fee
according to the following schedule:
MANAGEMENT FEES
<TABLE>
<CAPTION>
AVERAGE DAILY MANAGEMENT
NET ASSET VALUE 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>
Nuveen will waive some or all of its fees or reimburse expenses so that the
total operating expenses (not counting distribution and service fees) for the
Massachusetts Fund and the Massachusetts Insured Fund do not exceed 0.75% and
0.975%, respectively, of average daily net assets. For more information about
fees and expenses, see the fund operating expense tables in the Fund Summaries.
PORTFOLIO MANAGERS
Overall investment management strategy and operating policies for the funds are
set by the Investment Policy Committee of Nuveen Advisory. The Investment
Policy Committee is comprised of the principal executive officers and 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 munic-
ipal 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.
Stephen S. Peterson is an Assistant Vice President of Nuveen Advisory and the
portfolio manager for the Massachusetts Fund and the Massachusetts Insured
Fund. Mr. Peterson has managed the funds since May 1993 and joined Nuveen Advi-
sory in October 1991.
THE DISTRIBUTOR
John Nuveen and Co. Incorporated serves as the selling agent and distributor of
the funds' shares. In this capacity, Nuveen manages the offering of the funds'
shares and is responsible for all sales and promotional activities. In order to
reimburse Nuveen for its costs in connection with these activities, including
compensation paid to authorized dealers, each fund has adopted a distribution
and service plan under Rule 12b-1 of the Investment Company Act of 1940.
The plan authorizes each fund to pay Nuveen an annual 0.20% service fee on the
average daily net assets of Class A, B and C shares outstanding and
- --------------------------------------------------------------------------------
PAGE 15
<PAGE>
annual distribution fees of 0.75% and 0.55%, respectively, on the average
daily net assets of Class B and C shares outstanding. In order to help compen-
sate Nuveen for the sales commission paid to financial advisers at the time of
sale on sales of Class B and Class C shares, Nuveen retains the first year's
service fee on sales of Class B shares and all Class B distribution fees; and
retains the first year's service and distribution fees on sales of Class C
shares. Otherwise, Nuveen pays these fees to the broker of the record. The
statement of additional information contains a detailed description of the
plan and its provisions.
TRANSFER AGENT
Each fund has appointed a transfer agent which is responsible for distributing
dividend payments and providing certain bookkeeping, data processing and other
administrative services in connection with the maintenance of shareholder
accounts. Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330,
currently serves as transfer agent for each fund.
- -------------------------------------------------------------------------------
HOW THE FUNDS REPORT
PERFORMANCE
Each fund may quote its yield and total return in reports to shareholders,
sales literature and advertisements. The funds may also compare their invest-
ment results to various passive indices or other mutual funds with similar
investment objectives. Comparative performance information may include data
from Lipper Analytical Services, Inc., Morningstar, Inc. and other industry
publications. See the statement of additional information for a more detailed
discussion.
- -------------------------------------------------------------------------------
HOW FUND SHARES ARE PRICED
The share price for each class of fund shares, also called its net asset value
(NAV), is calculated every business day as of the close of regular trading on
the New York Stock Exchange (normally 4 p.m. Eastern time). The net asset
value for a class of fund shares is computed by calculating the total value of
the class' portion of the fund's portfolio investments and other assets,
subtracting any liabilities or other debts, and dividing by the total number
of its shares outstanding.
The prices of municipal bonds in each fund's investment portfolio are provided
by a pricing service approved and supervised by the fund's Board of Trustees.
When price quotes are not readily available (which is usually the case for
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.
- -------------------------------------------------------------------------------
ORGANIZATION
The Trust is an open-end diversified investment company under the Investment
Company Act of 1940, consisting of multiple funds. The shares of each fund are
divided into classes. Each class of shares represents an interest in the same
portfolio of investments and the shares of each class have equal rights as to
voting, redemption, dividends and liquidation. However, each class bears
different sales charges and service fees. B shares convert to A shares after 8
years. C shares purchased before February 1, 1997 convert to A shares six
years after purchase, but only if you request conversion. You must submit your
request to SSI no later than the last business day of the 71st month following
the month in which you purchased your shares.
The funds are not required to and do not intend to hold annual meetings.
Shareholders owning ten percent or more of a fund's outstanding shares may
call a special meeting for any purpose, including to elect or remove trustees
or to change fundamental policies.
- -------------------------------------------------------------------------------
PAGE 16
<PAGE>
APPENDIX
- -------------------------------------------------------------------------------
SPECIAL STATE CONSIDERATIONS
Because the funds primarily purchase municipal bonds from a specific state,
each fund also bears investment risk from economic, political or regulatory
changes that could adversely affect municipal bond issuers in that state and
therefore the value of the fund's investment portfolio. The following discus-
sion of special state considerations was obtained from official offering
statements of these issuers and has not been independently verified by the
funds. The discussion includes general state tax information related to an
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.
MASSACHUSETTS
Massachusetts is experiencing an economic recovery based largely on growth in
the services, trade, finance, insurance, real estate and construction indus-
tries. Nonetheless, the state's economic growth is expected to lag behind the
rest of the nation until the year 2000 due to restructuring in the computer,
defense and health care sectors of the state's economy.
The state's fiscal 1996 revenues were approximately $17.3 billion against
expenditures of $16.9 billion. The fiscal 1997 budget approved by the governor
on June 30, 1996, provides for approximately $17.452 billion in expenditures
against an estimated $17.296 billion in revenues. In September 1996, Massachu-
setts' unemployment rate was 4.2%. In 1994, personal income in Massachusetts
was $25,609 compared to the national average of $21,699. The state's uninsured
general obligation bonds are rated A1 by Moody's and A+ by Standard and
Poor's.
Tax Treatment:
The Massachusetts Funds' regular monthly dividends will not be subject to
Massachusetts personal income taxes to the extent they are paid out of income
earned on Massachusetts municipal bonds or U.S. government securities. You
will be subject to Massachusetts personal income taxes, however, to the extent
the Massachusetts Funds distribute any taxable income, or if you sell or
exchange Massachusetts Funds shares and realize a capital gain on the transac-
tion.
The treatment of corporate shareholders of the Massachusetts Funds differs
from that described above. Corporate shareholders should refer to the state-
ment of additional information for more detailed information and are urged to
consult their tax adviser.
- -------------------------------------------------------------------------------
PAGE 17
<PAGE>
Nuveen Family of Mutual Funds
Nuveen's family of funds is designed to help you reach your finan-
cial goals. The funds below are grouped by investment objectives.
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME FUNDS
National Funds/1/
State Funds
Alabama Michigan
Arizona Missouri
California/2/ New Jersey/3/
Colorado New Mexico
Connecticut New York/2/
Florida/3/ North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky/4/ South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts/2/ Wisconsin
Notes
1. Long-term, long-term insured, intermediate-term and limited-term
portfolios.
2. Long-term and long-term insured portfolios.
3. Long-term and intermediate-term portfolios.
4. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
<PAGE>
FEBRUARY 1, 1997
NUVEEN FLAGSHIP MULTISTATE TRUST II
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
NUVEEN FLAGSHIP NEW JERSEY INTERMEDIATE MUNICIPAL BOND FUND
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND
NUVEEN FLAGSHIP CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND
NUVEEN FLAGSHIP CONNECTICUT MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus of
the Nuveen Flagship Multistate Trust II dated February 1, 1997. The Prospectus
may be obtained without charge from certain securities representatives, banks,
and other financial institutions that have entered into sales agreements with
John Nuveen & Co. Incorporated, or from the Funds, by mailing a written request
to the Funds, c/o John Nuveen & Co. Incorporated, 333 West Wacker Drive,
Chicago, Illinois 60606 or by calling (800) 414-7447.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-30
Investment Adviser and Investment Management Agreement..................... S-37
Portfolio Transactions..................................................... S-38
Net Asset Value............................................................ S-39
Tax Matters................................................................ S-39
Performance Information.................................................... S-45
Additional Information on the Purchase and Redemption of Fund Shares....... S-53
Distribution and Service Plans............................................. S-56
Independent Public Accountants and Custodians.............................. S-58
Financial Statements....................................................... S-58
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 and the unaudited financial statements for
the most recent semi-annual period for each Fund appear in the Funds' Semi-
Annual Reports; each is included herein by reference. The Semi-Annual Reports
accompany this Statement of Additional Information.
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
INVESTMENT POLICIES
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of that Fund:
(1) Invest in securities other than Municipal Obligations and temporary
investments, as those terms are defined in the Prospectus.
(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 New York Municipal Bond Fund, the New
York Insured Municipal Bond Fund, the California Municipal Bond Fund, and
the California Insured 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.
(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
S-2
<PAGE>
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 II (the "Trust") is an open-end
diversified 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 II. The Trust is 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 ten series: the Nuveen Flagship New York Municipal Bond Fund
(formerly the Nuveen New York Tax-Free Value Fund, a series of the Nuveen Tax-
Free Bond Fund, Inc.); the Nuveen New York Insured Municipal Bond Fund
(formerly the Nuveen New York Insured Tax-Free Value Fund, a series of the
Nuveen Insured Tax-Free Bond Fund, Inc.); the Nuveen Flagship New Jersey
Municipal Bond Fund (formerly the Nuveen New Jersey Tax-Free Value Fund, a
series of the Nuveen Multistate Tax-Free Trust); the Nuveen Flagship New Jersey
Intermediate Municipal Bond Fund (formerly the Flagship New Jersey Intermediate
Tax Exempt Fund, as a series of the Flagship Tax Exempt Funds Trust); the
Nuveen California Municipal Bond Fund (formerly the Nuveen California Tax-Free
Value Fund, a series of the Nuveen California Tax-Free Fund, Inc.); the Nuveen
California Insured Municipal Bond Fund (formerly the Nuveen California Insured
Tax-Free Value Fund, a series of the Nuveen Insured Tax-Free Bond Fund, Inc.);
the Nuveen Flagship California Intermediate Municipal Bond Fund (formerly the
Flagship California Intermediate Tax Exempt Fund, a series of the Flagship Tax
Exempt Funds Trust); the Nuveen Flagship Connecticut Municipal Bond Fund
(formerly the Flagship Connecticut Double Tax Exempt Fund, a series of the
Flagship Tax Exempt Funds Trust); the Nuveen Massachusetts Municipal Bond Fund
(formerly the Nuveen Massachusetts Tax-Free Value Fund, a series of the Nuveen
Tax-Free Bond Fund, Inc.); and the Nuveen Massachusetts Insured Municipal Bond
Fund (formerly the Nuveen Massachusetts Insured Tax-Free Value Fund, a series
of the Nuveen Insured Tax-Free Bond Fund, Inc.). The Nuveen Flagship California
Intermediate Municipal Bond Fund has issued no shares to date. Certain matters
under the Investment Company Act of 1940 which must be submitted to a vote of
the holders of the outstanding voting securities of a series company shall not
be deemed to have been effectively acted upon unless approved by the holders of
a majority of the outstanding voting securities of each series affected by such
matter.
PORTFOLIO SECURITIES
As described in the Prospectus, each of the Funds invests primarily in a
portfolio of Municipal Obligations free from regular federal and state income
tax in each Fund's respective state, which generally will be Municipal
Obligations issued within the Fund's respective state. In general, Municipal
Obligations include debt obligations issued by states, cities and local
authorities to obtain funds for various public purposes, including construction
of a wide range of public facilities such as airports, bridges, highways,
hospitals, housing, mass transportation, schools, streets and water and sewer
works. Industrial development bonds and pollution control bonds that are issued
by or on behalf of public authorities to finance various privately-rated
facilities are included within the term Municipal Obligations if the interest
paid thereon is exempt from federal income tax.
The investment assets of each Fund will consist of (1) Municipal Obligations
which are rated at the time of purchase within the four highest grades (Baa or
BBB or better) by Moody's Investors Service, Inc. ("Moody's"), by Standard and
Poor's Corporation ("S&P") or by Fitch Investors Service, Inc. ("Fitch"), (2)
unrated Municipal Obligations which, in the opinion of Nuveen Advisory, have
credit characteristics equivalent to bonds rated within the four highest grades
by Moody's, S&P or Fitch, except that the Fund may not invest more than 20% of
its net assets in unrated bonds and (3) temporary investments as described
below, the income from which may be subject to state income tax or to both
federal and state income taxes. See Appendix A for more information about
ratings by Moody's, S&P, and Fitch.
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
S-3
<PAGE>
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.
INSURANCE
Each insured Municipal Obligation held by the Nuveen New York Insured
Municipal Bond Fund, the Nuveen California Insured Municipal Bond Fund, and the
Nuveen Massachusetts Insured Municipal Bond Fund (the "Funds") will either be
(1) covered by an insurance policy applicable to a specific security and
obtained by the issuer of the security or a third party at the time of original
issuance ("Original Issue Insurance"), (2) covered by an insurance policy
applicable to a specific security and obtained by the Fund or a third party
subsequent to the time of original issuance ("Secondary Market Insurance"), or
(3) covered by a master municipal insurance policy purchased by the Funds
("Portfolio Insurance"). The Funds currently maintain a policy of Portfolio
Insurance with MBIA Insurance Corporation, AMBAC Indemnity Corporation,
Financial Security Assurance, Inc., and Financial Guaranty Insurance Company,
and may in the future obtain other policies of Portfolio Insurance, depending
on the availability of such policies on terms favorable to the Fund. However,
the Funds may determine not to obtain such policies and to emphasize
investments in Municipal Obligations insured under Original Issue Insurance or
Secondary Market Insurance. In any event, the Funds will only obtain policies
of Portfolio Insurance issued by insurers whose claims-paying ability is rated
Aaa by Moody's Investors Service, Inc. ("Moody's") or AAA by Standard & Poor's
Corporation ("S&P"). The Funds currently intend to obtain insurance polices
only from mono-line insurers specializing in insuring municipal debt. Municipal
Obligations covered by Original Issue Insurance or Secondary Market Insurance
are themselves typically assigned a rating of Aaa or AAA, as the case may be,
by virtue of the Aaa or AAA claims-paying ability of the insurer and would
generally be assigned a lower rating if the ratings were based primarily upon
the credit characteristics of the issuer without regard to the insurance
feature. By way or contrast, the ratings, if any, assigned to Municipal
Obligations insured under Portfolio Insurance will be based primarily upon the
credit characteristics of the issuers without regard to the insurance feature,
and will generally carry a rating that is below Aaa or AAA. While in the
portfolio of a Fund, however, a Municipal Obligation backed by Portfolio
Insurance will effectively be of the same quality as a Municipal Obligation
issued by an issuer of comparable credit characteristics that is backed by
Original Issue Insurance or Secondary Market Insurance.
The Funds' policy of investing in Municipal Obligations insured by insurers
whose claims-paying ability is rated Aaa or AAA will apply only at the time of
the purchase of a security, and a Fund will not be required to dispose of
securities in the event Moody's or S&P, as the case may be, downgrades its
assessment of the claims-paying ability of a particular insurer or the credit
characteristics of a particular issuer. In this connection, it should be noted
that in the event Moody's or S&P or both should down grade its assessment of
the claims-paying ability of a particular insurer, it could also be expected to
downgrade the ratings assigned to Municipal Obligations insured under Original
Issue Insurance or Secondary Market Insurance issued by such insurer, and
Municipal Obligations insured under Portfolio Insurance issued by such insurer
would also be of reduced quality in the portfolio of the Fund. Moody's and S&P
continually assess the claims-paying ability of insurers and the credit
characteristics of issuers, and there can be no assurance that they will not
downgrade their assessments subsequent to the time a Fund purchases securities.
In addition to insured Municipal Obligations, a Fund may invest in Municipal
Obligations that are entitled to the benefit of an escrow or trust account
which contains securities issued or guaranteed by the U.S. Government or U.S.
Government agencies, backed by the full faith and credit of the United States,
and sufficient in amount to ensure the payment of interest and principal on the
original interest payment and maturity dates ("collateralized obligations").
These collateralized obligations generally will not be insured and will
include, but are not limited to, Municipal Obligations that have been (1)
advance refunded where the proceeds of the refunding have been used to purchase
U.S. Government or U.S. Government agency securities that are placed in escrow
and whose interest or maturing principal payments, or both, are sufficient to
cover the remaining scheduled debt service on the Municipal Obligations, and
(2) issued under state or local housing finance programs which use the issuance
proceeds to fund mortgages that are then exchanged for U.S. Government or U.S.
Government agency securities and deposited with a trustee as security for the
Municipal Obligations. These collateralized obligations are normally regarded
as having the credit characteristics of the underlying
S-4
<PAGE>
U.S. Government or U.S. Government agency securities. Collateralized
obligations will not constitute more than 20% of a Fund's assets.
Each insured Municipal Obligation in which a Fund invests will be covered by
Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
There is no limitation on the percentage of a Fund's assets that may be
invested in Municipal Obligations insured by any given insurer.
Original Issue Insurance. Original Issue Insurance is purchased with respect
to a particular issue of Municipal Obligations by the issuer thereof or a third
party in conjunction with the original issuance of such Municipal Obligations.
Under such insurance, the insurer unconditionally guarantees to the holder of
the Municipal Obligation the timely payment of principal and interest on such
obligation when and as such payments shall become due but shall not be paid by
the issuer, except that in the event of any acceleration of the due date of the
principal by reason of mandatory or
optional redemption (other than acceleration by reason of a mandatory sinking
fund payment), default or otherwise, the payments guaranteed may be made in
such amounts and at such times as payments of principal would have been due had
there not been such acceleration. The insurer is responsible for such payments
less any amounts received by the holder from any trustee for the Municipal
Obligation issuers or from any other source. Original Issue Insurance does not
guarantee payment on an accelerated basis, the payment of any redemption
premium (except with respect to certain premium payments in the case of certain
small issue industrial development and pollution control Municipal
Obligations), the value of the shares of the Fund, the market value of
Municipal Obligations, or payments of any tender purchase price upon the tender
of the Municipal Obligations. Original Issue Insurance also does not insure
against nonpayment of principal of or interest on Municipal Obligations
resulting from the insolvency, negligence or any other act or omission of the
trustee or other paying agent for such obligations.
In the event that interest on or principal of a Municipal Obligation covered
by insurance is due for payment but is unpaid by the issuer thereof, the
applicable insurer will make payments to its fiscal agent (the "Fiscal Agent")
equal to such unpaid amounts of principal and interest not later than one
business day after the insurer has been notified that such nonpayment has
occurred (but not earlier than the date such payment is due). The Fiscal Agent
will disburse to the Fund the amount of principal and interest which is then
due for payment but is unpaid upon receipt by the Fiscal Agent of (i) evidence
of the Fund's right to receive payment of such principal and interest and (ii)
evidence, including any appropriate instruments of assignment, that all of the
rights to payment of such principal or interest then due for payment shall
thereupon vest in the insurer. Upon payment by the insurer of any principal or
interest payments with respect to any Municipal Obligations, the insurer shall
succeed to the rights of a Fund with respect to such payment.
Original Issue Insurance remains in effect as long as the Municipal
Obligations covered thereby remain outstanding and the insurer remains in
business, regardless of whether a Fund ultimately disposes of such Municipal
Obligations. Consequently, Original Issue Insurance may be considered to
represent an element of market value with respect to the Municipal Obligations
so insured, but the exact effect, if any, of this insurance on such market
value cannot be estimated.
Secondary Market Insurance. Subsequent to the time of original issuance of a
Municipal Obligation, a Fund or a third party may, upon the payment of a single
premium, purchase insurance on such Municipal Obligation. Secondary Market
Insurance generally provides the same type of coverage as is provided by
Original Issue Insurance and remains in effect as long as the Municipal
Obligation covered thereby remain outstanding, the holder of such Municipal
Obligation does not voluntarily relinquish the Secondary Market Insurance and
the insurer remains in business, regardless of whether the Fund ultimately
disposes of such Municipal Obligation.
One of the purposes of acquiring Secondary Market Insurance with respect to a
particular Municipal Obligation would be to enable a Fund to enhance the value
of such Municipal Obligation. A Fund, for example, might seek to purchase a
particular Municipal Obligation and obtain Secondary Market Insurance with
respect thereto if, in the opinion of Nuveen Advisory, the market value of such
Municipal Obligation, as insured, would exceed the current value of the
Municipal Obligation without insurance plus the cost of the Secondary Market
Insurance. Similarly, if a Fund owns but wishes to sell a Municipal Obligation
that is then covered by Portfolio Insurance, the Fund might seek to obtain
Secondary Market Insurance with respect thereto if, in the opinion of Nuveen
Advisory, the net proceeds of a sale by the Fund of such obligation, as
insured, would exceed the current value of such obligation plus the cost of the
Secondary Market Insurance.
Portfolio Insurance. Portfolio Insurance guarantees the payment of principal
and interest on specified eligible Municipal Obligations purchased by a Fund.
Except as described below, Portfolio Insurance generally provides the same type
of coverage as is provided by Original Issue Insurance or Secondary Market
Insurance. Municipal Obligations insured under one Portfolio Insurance policy
would generally not be insured under any other policy purchased by a Fund. A
Municipal Obligation is eligible for coverage under a policy if it meets
certain requirements of the insurer. Portfolio Insurance is intended to reduce
financial risk, but the cost thereof and compliance with investment
restrictions imposed under the policy will reduce the yield to shareholders of
a Fund.
If a Municipal Obligation is already covered by Original Issue Insurance or
Secondary Market Insurance, then such Municipal Obligation is not required to
be additionally insured under any policy of Portfolio Insurance that a Fund may
purchase. All premiums respecting Municipal Obligations covered by Original
Issue Insurance or Secondary Market Insurance are paid in advance by the issuer
or other party obtaining the insurance.
S-5
<PAGE>
Portfolio Insurance policies are effective only as to Municipal Obligations
owned by and held by a Fund, and do not cover Municipal Obligations for which
the contract for purchase fails. A "when-issued" Municipal Obligation will be
covered under a Portfolio Insurance policy upon the settlement date of the
issue of such "when-issued" Municipal Obligation. In determining whether to
insure Municipal Obligations held by a Fund, an insurer will apply its own
standards, which correspond generally to the standards it has established for
determining the insurability of new issues of Municipal Obligations. See
"Original Issue Insurance" above.
Each Portfolio Insurance policy will be noncancellable and will remain in
effect so long as a Fund is in existence, the Municipal Obligations covered by
the policy continue to be held by the Fund, and the Fund pays the premiums for
the policy. Each insurer will generally reserve the right at any time upon 90
days' written notice to a Fund to refuse to insure any additional securities
purchased by the Fund after the effective date of such notice. The Board of
Trustees will
generally reserve the right to terminate each policy upon seven days' written
notice to an insurer if it determines that the cost of such policy is not
reasonable in relation to the value of the insurance to the Fund.
Each Portfolio Insurance policy will terminate as to any Municipal Obligation
that has been redeemed from or sold by a Fund on the date of such redemption or
the settlement date of such sale, and an insurer shall not have any liability
thereafter under a policy as to any such Municipal Obligation, except that if
the date of such redemption or the settlement date of such sale occurs after a
record date and before the related payment date with respect to any such
Municipal Obligation, the policy will terminate as to such Municipal Obligation
on the business day immediately following such payment date. Each policy will
terminate as to all Municipal Obligations covered thereby on the date on which
the last of the covered Municipal Obligations mature, are redeemed or are sold
by a Fund.
One or more policies of Portfolio Insurance may provide a Fund, pursuant to
an irrevocable commitment of the insurer, with the option to exercise the right
to obtain permanent insurance ("Permanent Insurance") with respect to a
Municipal Obligation that is to be sold by the Fund. The Fund would exercise
the right to obtain Permanent Insurance upon payment of a single, predetermined
insurance premium payable from the proceeds of the sale of such Municipal
Obligation. It is expected that the Fund will exercise the right to obtain
Permanent Insurance for a Municipal Obligation only if, in the opinion of
Nuveen Advisory, upon such exercise the net proceeds from the sale by the Fund
of such obligation, as insured, would exceed the proceeds from the sale of such
obligation without insurance.
The Permanent Insurance premium with respect to each such obligation is
determined based upon the insurability of each such obligation as of the date
of purchase by the Fund and will not be increased or decreased for any change
in the creditworthiness of such obligation unless such obligation is in default
as to payment or principal or interest, or both. In such event, the Permanent
Insurance premium shall be subject to an increase predetermined at the date of
purchase by the Fund.
Each Fund generally intends to retain any insured securities covered by
Portfolio Insurance that are in default or in significant risk of default and
to place a value on the insurance, which ordinarily will be the difference
between the market value of the defaulted security and the market value of
similar securities of minimum investment grade (i.e., rated BBB) that are not
in default. In certain circumstances, however, Nuveen Advisory may determine
that an alternative value for the insurance, such as the difference between the
market value of the defaulted security and either its par value or the market
value of securities of a similar nature that are not in default or in
significant risk of default, is more appropriate. To the extent that the Fund
holds such defaulted securities, it may be limited in its ability to manage its
investment portfolio and to purchase other Municipal Obligations. Except as
described above with respect to securities covered by Portfolio Insurance that
are in default or subject to significant risk of default, the Funds will not
place any value on the insurance in valuing the Municipal Obligations that it
holds.
Because each Portfolio Insurance policy will terminate as to Municipal
Obligations sold by a Fund on the date of sale, in which event the insurer will
be liable only for those payments of principal and interest that are then due
and owing (unless Permanent Insurance is obtained by the Fund), the provision
for this insurance will not enhance the marketability of securities held by a
Fund, whether or not the securities are in default or in significant risk of
default. On the other hand, since Original Issue Insurance and Secondary Market
Insurance generally will remain in effect as long as Municipal Obligations
covered thereby are outstanding, such insurance may enhance the marketability
of such securities, even when such securities are in default or in significant
risk of default, but the exact effect, if any, on marketability cannot be
estimated. Accordingly, the Funds may determine to retain or, alternatively, to
sell Municipal Obligations covered by Original Issue Insurance or Secondary
Market Insurance that are in default or in significant risk of default.
Premiums for a Portfolio Insurance policy are paid monthly, and are adjusted
for purchases and sales of Municipal Obligations covered by the policy during
the month. The yield on a Fund is reduced to the extent of the insurance
premiums it pays. Depending upon the characteristics of the Municipal
Obligations held by a Fund, the annual premium rate for policies of Portfolio
Insurance is estimated to range from .15% to .30% of the value of the Municipal
Obligations covered under the policy. Because the majority of the Municipal
Obligations in the Funds were not covered by policies of Portfolio Insurance
during the year ended February 29, 1996, premium expenses as a percentage of
the value of Municipal Obligations held by the Funds for such period were .00%.
Set forth below is information about the various municipal bond insurers with
whom the Funds currently maintain policies of Portfolio Insurance.
S-6
<PAGE>
AMBAC INDEMNITY CORPORATION ("AMBAC INDEMNITY")
AMBAC Indemnity is a Wisconsin-domiciled stock insurance corporation
regulated by the Office of the Commissioner of Insurance of the State of
Wisconsin and licensed to do business in 50 states, the District of Columbia,
the Territory of Guam and the Commonwealth of Puerto Rico, with admitted assets
of approximately $2,440,000,000 (unaudited) and statutory capital of
approximately $1,387,000,000 (unaudited) as of March 31, 1996. Statutory
capital consists of AMBAC Indemnity's policyholders' surplus and statutory
contingency reserve. AMBAC Indemnity is a wholly-owned subsidiary of AMBAC,
Inc., a 100% publicly-held company. Moody's , S&P and Fitch Investors Service,
L.P., each have assigned a triple-A claims-paying ability rating to AMBAC
Indemnity.
AMBAC Indemnity has obtained a ruling from the Internal Revenue Service to
the effect that the insuring of an obligation by AMBAC Indemnity will not
affect the treatment for federal income tax purposes of interest on such
obligation and that insurance proceeds representing maturing interest paid by
AMBAC Indemnity under policy provisions substantially identical to those
contained in its municipal bond insurance policy shall be treated for federal
income tax purposes in the same manner as if such payments were made by the
issuer of the bonds.
Copies of AMBAC Indemnity's financial statements prepared in accordance with
statutory accounting standards are available from AMBAC Indemnity. The address
of AMBAC Indemnity's administrative offices and its telephone number are One
State Street Plaza, 17th Floor, New York, New York 10004 and (212) 668-0340.
FINANCIAL SECURITY ASSURANCE INC. ("FINANCIAL SECURITY")
Financial Security is a monoline insurance company incorporated under the
laws of the State of New York. Financial Security is licensed to engage in the
financial guaranty insurance business in all 50 states, the District of
Columbia and Puerto Rico.
Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprise Holdings, Inc.,
U.S. West Capital Corporation and the Tokio Marine and Fire Insurance Co., Ltd.
No shareholder is obligated to pay any debts of or any claims against Financial
Security. Financial Security is domiciled in the State of New York and is
subject to regulation by the State of New York Insurance Department. As of
March 31, 1996, the total policyholders' surplus and contingency reserves and
the total unearned premium reserve, respectively, of Financial Security and its
consolidated subsidiaries were, in accordance with statutory accounting
principles, approximately $650,052,000 (unaudited) and $387,239,000
(unaudited), the total shareholders' equity and the total unearned premium
reserve, respectively, of Financial Security and its consolidated subsidiaries
were, in accordance with generally accepted accounting principles,
approximately $779,177,000 (unaudited) and $340,226,000 (unaudited). Copies of
Financial Security's financial statements may be obtained by writing to
Financial Security at 350 Park Avenue, New York, New York 10022, Attention:
Communications Department. Financial Security's telephone number is (212) 826-
0100.
MBIA INSURANCE CORPORATION ("MBIA")
MBIA, formerly known as Municipal Bond Investors Assurance Corporation, is
the principal operating subsidiary of MBIA Inc., a New York Stock Exchange
listed company. MBIA Inc. is not obligated to pay the debts of or claims
against MBIA. MBIA is a limited liability corporation rather than a several
liability association. MBIA is domiciled in the State of New York and licensed
to do business to all 50 states, the District of Columbia, the Commonwealth of
Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin
Islands of the United States and the Territory of Guam.
As of December 31, 1994, MBIA had admitted assets of $3.4 billion (audited),
total liabilities of $2.3 billion (audited), and total capital and surplus of
$1.1 billion (audited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. As of
December 31, 1995, MBIA had admitted assets of $3.8 billion (audited), total
liabilities of $2.5 billion (audited), and total capital and surplus of $1.3
billion (audited), determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. Copies of MBIA's
year end financial statements prepared in accordance with statutory accounting
practices are available from MBIA. The address of MBIA is 113 King Street,
Armonk, New York 10504.
MBIA's policy unconditionally and irrevocably guarantees to the Nuveen
Insured Municipal Bond Fund the full and complete payment required to be made
by or on behalf of the issuer to the applicable paying agent or its successor
of an amount equal to (i) the principal of (either at the stated maturity or by
advancement of maturity pursuant to a mandatory sinking fund payment) and
interest on, the Municipal Obligations as such payments shall become due but
shall not be so paid (except that in the event of any acceleration of the due
date of such principal by reason of mandatory or optional redemption or
acceleration resulting from default or otherwise, other than any advancement of
maturity pursuant to a mandatory sinking fund payment, the payments guaranteed
by MBIA's policy shall be made in such amounts and at such times as such
payments of principal would have been due had there not been any such
acceleration) and (ii) the reimbursement of any such payment which is
subsequently recovered from the Fund pursuant to a final judgment by a court of
competent jurisdiction that such payment constitutes an avoidable preference to
the Fund within the meaning of any applicable bankruptcy law (a "Preference").
S-7
<PAGE>
MBIA's policy does not insure against loss of any prepayment premium which
may at any time be payable with respect to any Municipal Obligation. MBIA's
policy does not, under any circumstance, insure against loss relating to: (i)
optional or mandatory redemptions (other than mandatory sinking fund
redemptions); (ii) any payments to be made on an accelerated basis; (iii)
payments of the purchase price of Municipal Obligations upon tender thereof; or
(iv) any Preference relating to (i) through (iii) above. MBIA's policy also
does not insure against nonpayment of principal of or interest on the Municipal
Obligations resulting from the insolvency, negligence or any other act or
omission of any paying agent for the Municipal Obligations.
With respect to small issue industrial development bonds and pollution
control revenue bonds covered by the policy, MBIA guarantees the full and
complete payments required to be made by or on behalf of an issuer of such
bonds if there occurs pursuant to the terms of the bonds an event which results
in the loss of the tax-exempt status of interest on such
bonds, including principal, interest or premium payments payable thereon, if
any, as and when required to be made by or on behalf of the issuer pursuant to
the terms of such bonds.
When MBIA receives from the paying agent or the Fund, (1) telephonic or
telegraphic notice (subsequently confirmed in writing by registered or
certified mail), or (2) written notice by registered or certified mail, that a
required payment of any insured amount which is then due has not been made,
MBIA on the due date of such payment or within one business day after receipt
of notice of such nonpayment, whichever is later, will make a deposit of funds,
in an account with State Street Bank and Trust Company, N.A., in New York, New
York, or its successor, sufficient for the payment of any such insured amounts
which are then due. Upon presentment and surrender of such Municipal
Obligations or presentment of such other proof of ownership of the Municipal
Obligations, together with any appropriate instruments of assignment to
evidence the assignment of the insured amounts due on the Municipal Obligations
as are paid by MBIA, and appropriate instruments to effect the appointment of
MBIA as agent for the Fund in any legal proceeding related to payment of
insured amounts on Municipal Obligations, such instruments being in a form
satisfactory to State Street Bank and Trust Company, N.A., State Street Bank
and Trust Company, N.A. shall disburse to the Fund or the paying agent payment
of the insured amounts due on such Municipal Obligations, less any amount held
by the paying agent for the payment of such insured amounts and legally
available therefor.
FINANCIAL GUARANTY INSURANCE COMPANY ("FINANCIAL GUARANTY")
The Portfolio Insurance Policy is non-cancellable except for failure to pay
the premium. The premium rate for each purchase of a security covered by the
Portfolio Insurance Policy is fixed for the life of the Insured Bond. The
insurance premiums are payable monthly by the Fund and are adjusted for
purchases, sales and payments prior to maturity of Insured Bonds during the
month. In the event of a sale of any Insured Bond by the Fund or payment
thereof prior to maturity, the Portfolio Insurance policy terminates as to such
Insured Bond.
Under the provisions of the Portfolio Insurance Policy, Financial Guaranty
unconditionally and irrevocably agrees to pay to State Street Bank and Trust
Company, or its successor, as its agent (the "Fiscal Agent"), that portion of
the principal of and interest on the Insured Bonds which shall become due for
payment but shall be unpaid by reason of nonpayment by the issuer of the
Insured Bonds. The term "due for payment" means, when referring to the
principal of an Insured Bond, its stated maturity date or the date on which it
shall have been called for mandatory sinking fund redemption and does not refer
to any earlier date on which payment is due by reason of call for redemption
(other than by mandatory sinking fund redemption), acceleration or other
advancement of maturity and means, when referring to interest on an Insured
Bond, the stated date for payment of interest. In addition, the Portfolio
Insurance Policy covers nonpayment by the issuer that results from any payment
of principal or interest made by such issuer on the Insured Bond to the Fund
which has been recovered from the Fund or its shareholders pursuant to the
United States Bankruptcy Code by a trustee in bankruptcy in accordance with a
final, nonappealable order of a court having competent jurisdiction.
Financial Guaranty will make such payments to the Fiscal Agent on the date
such principal or interest becomes due for payment or on the business day next
following the day on which Financial Guaranty shall have received notice of
nonpayment, whichever is later. The Fiscal Agent will disburse the Trustee the
face amount of principal and interest which is then due for payment but is
unpaid by reason of nonpayment by the issuer, but only upon receipt by the
Fiscal Agent of (i) evidence of the Trustee's right to receive payment of the
principal or interest due for payment and (ii) evidence, including any
appropriate instruments of assignment, that all of the rights to payment of
such principal or interest due for payment thereupon shall vest in Financial
Guaranty. Upon such disbursement, Financial Guaranty shall become the owner of
the Insured Bond, appurtenant coupon or right to payment of principal or
interest on such Insured Bond and shall be fully subrogated to all of the
Trustee's rights thereunder, including the right to payment, thereof.
In determining whether to insure municipal securities held in the Fund,
Financial Guaranty will apply its own standards which are not necessarily the
same as the criteria used in regard to the selection of securities by the Fund.
Certain of the municipal securities insured under the Portfolio Insurance
Policy may also be insured under an insurance policy obtained by the issuer of
such municipal securities. The premium for any insurance policy or policies
obtained by an issuer or Insured Bonds has been paid in advance by such issuer
and any such policy or policies are non-cancellable and will continue in force
so long as the Insured Bonds so insured are outstanding. Financial Guaranty has
also agreed, if requested by the Funds on or before the fifth day preceding the
1st day of any month, to insure to maturity Insured Bonds sold by the Trustee
during the month immediately following such request of the Funds. The
S-8
<PAGE>
premium for any such insurance to maturity provided by Financial Guaranty is
paid by the Fund and any such insurance is non-cancellable and will continue in
force so long as the Bonds so insured are outstanding.
Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the
"Corporation"), a Delaware holding company. The Corporation is a subsidiary of
General Electric Capital Corporation. Financial Guaranty is a monoline
financial guaranty insurer domiciled in the State of New York and subject to
regulation by the State of New York Insurance Department. As of March 31, 1996,
the total capital and surplus of Financial Guaranty was approximately
$1,032,675,000. Financial Guaranty prepares financial statements on the basis
of both statutory accounting principles and generally accepted accounting
principles. Copies of such financial statements may be obtained by writing to
Financial Guaranty at 115 Broadway, New York, New York 10006, Attention:
Communications Department (telephone number:
(212) 312-3000) or to the New York State Insurance Department at 160 West
Broadway, 18th Floor, New York, New York 10013, Attention: Property Companies
Bureau (telephone number: (212) 602-0389).
The policies of insurance obtained by the Fund from Financial Guaranty and
the negotiations in respect thereof represent the only relationship between
Financial Guaranty and the Fund. Otherwise neither Financial Guaranty nor its
parent, FGIC Corporation, or any affiliate thereof has any significant
relationship, direct or indirect, with the Fund or the Board of Trustees of the
Fund.
The above municipal bond insurers have insurance claims-paying ability
ratings of AAA from S&P and Aaa from Moody's. Financial Guaranty also has an
insurance claims-paying ability rating of AAA from Fitch.
An S&P insurance claims-paying ability rating is an assessment of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with its terms. An insurer with an insurance
claims-paying ability rating of AAA has the highest rating assigned by S&P.
Capacity to honor insurance contracts is adjudged by S&P to be extremely strong
and highly likely to remain so over a long period of time. A Moody's insurance
claims-paying ability rating is an opinion of the ability of an insurance
company to repay punctually senior policyholder obligations and claims. An
insurer with an insurance claims-paying ability rating of Aaa is adjudged by
Moody's to be of the best quality. In the opinion of Moody's, the policy
obligations of an insurance company with an insurance claims-paying ability
rating of Aaa carry the smallest degree of credit risk and, while the financial
strength of these companies is likely to change, such changes as can be
visualized are most unlikely to impair the company's fundamentally strong
position.
An insurance claims-paying ability rating by S&P or Moody's does not
constitute an opinion on any specific contract in that such an opinion can only
be rendered upon the review of the specific insurance contract. Furthermore, an
insurance claims-paying ability rating does not take into account deductibles,
surrender or cancellation penalties or the timeliness of payment, nor does it
address the ability of a company to meet nonpolicy obligations (i.e., debt
contracts).
The assignment of ratings by S&P or Moody's to debt issues that are fully or
partially supported by insurance policies, contracts or guarantees is a
separate process form the determination of claims-paying ability ratings. The
likelihood of a timely flow of funds from the insurer to the trustee for the
bondholders is a key element in the rating determination for such debt issues.
S&P's and Moody's ratings are not recommendations to buy, sell or hold the
Municipal Obligations insured by policies issued by AMBAC Indemnity, Financial
Security, MBIA or Financial Guaranty and such ratings may be subject to
revision or withdrawal at any time by the rating agencies. Any downward
revision or withdrawal of either or both ratings may have an adverse effect on
the market price of the Municipal Obligations insured by policies issued by
AMBAC Indemnity, Financial Security, MBIA or Financial Guaranty.
S&P's ratings of AMBAC Indemnity, Financial Security, MBIA and Financial
Guaranty should be evaluated independent of Moody's ratings. Any further
explanation as to the significance of the ratings may be obtained only from the
applicable rating agency. See Appendix A for more information about ratings by
Moody's, S&P, and Fitch.
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 its investment objective. Securities may be
sold in anticipation of market decline or purchased in anticipation of market
rise and later sold. In addition, a security may be sold and another of
comparable quality purchased at approximately the same time to take advantage
of what Nuveen Advisory believes to be a temporary disparity in the normal
yield relationship between the two securities. Each Fund may make changes in
its investment portfolio in order to limit its exposure to changing market
conditions. Changes in a Fund's investments are known as "portfolio turnover."
While it is impossible to predict future portfolio turnover rates, the annual
portfolio turnover rate for each of the Funds is generally not expected to
exceed 75%. However, each Fund reserves the right to make changes in its
investments whenever it deems such action advisable and, therefore, a Fund's
annual portfolio turnover rate may exceed 75% in particular years depending
upon market conditions.
S-9
<PAGE>
The portfolio turnover rates for the Funds, for the fiscal year-end of the Fund
as a series of its predecessor entity (described above), as indicated, were:
<TABLE>
<CAPTION>
FISCAL
YEAR
1995 1996
---- ----
<S> <C> <C>
Nuveen Flagship New York Municipal Bond Fund (2/28)........... 29% 47%
Nuveen New York Insured Municipal Bond Fund (2/28)............ 11% 17%
Nuveen Flagship New Jersey Municipal Bond Fund (1/31)......... 32% 39%
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
(5/31)....................................................... 35% 17%
Nuveen California Municipal Bond Fund (2/28).................. 32% 36%
Nuveen California Insured Municipal Bond Fund (2/28).......... 25% 38%
Nuveen Flagship Connecticut Municipal Bond Fund (5/31)........ 25% 24%
Nuveen Massachusetts Municipal Bond Fund (2/28)............... 17% 6%
Nuveen Massachusetts Insured Municipal Bond Fund (2/28)....... 10% 1%
</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 Fund reserves the right to sell
these securities before the settlement date if it is deemed advisable. If a
when-issued security is sold before delivery any gain or loss would not be tax-
exempt. The Funds commonly engage in when-issued transactions in order to
purchase or sell newly-issued Municipal Obligations, and may engage in delayed
delivery transactions in order to manage its operations more effectively.
SPECIAL CONSIDERATIONS RELATING TO MUNICIPAL OBLIGATIONS OF DESIGNATED STATES
As described in the Prospectus, except for investments in temporary
investments, each of the Funds will invest primarily all of its net assets in
municipal bonds that are exempt from federal and state tax in that state
("Municipal Obligations"), generally Municipal Obligations issued in its
respective state. Each Fund is therefore more susceptible to political,
economic or regulatory factors adversely affecting issuers of Municipal
Obligations in its state. Brief summaries of these factors are contained in the
Prospectus. Set forth below is additional information that bears upon the risk
of investing in Municipal Obligations issued by public authorities in the
states of currently offered Funds. This information was obtained from official
statements of issuers located in the respective states as well as from other
publicly available official documents and statements. The Funds have not
independently verified any of the information contained in such statements and
documents. The information below is intended only as a general summary, and is
not intended as a discussion of any specific factor that may affect any
particular obligation or issuer.
FACTORS PERTAINING TO NEW YORK
As described above, except to the extent the New York Municipal Bond Fund and
the New York Insured Municipal Bond Fund (the "New York Funds") invest in
temporary investments, the New York Funds will invest substantially all of its
assets in New York Municipal Obligations. The New York Funds are therefore
susceptible to political, economic or regulatory factors affecting New York
State and governmental bodies within New York State. Some of the more
significant events and conditions relating to the financial situation in New
York are summarized below. The following information provides only a brief
summary of the complex factors affecting the financial situation in New York,
is derived from sources that are generally available to investors and is
believed to be accurate. It is based on information drawn from official
statements and prospectuses issued by, and other information reported by, the
State of New York (the "State"), by its various public bodies (the "Agencies"),
and by other entities located within the State, including the City of New York
(the "City"), in connection with the issuance of their respective securities.
There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on State or local government
finances generally, will not adversely affect the market value of New York
Municipal Obligations held in the portfolio of the New York Fund or the ability
of particular obligors to make timely payments of debt service on (or relating
to) those obligations.
S-10
<PAGE>
(1) The State: The State has historically been one of the wealthiest states
in the nation. For decades, however, the State economy has grown more slowly
than that of the nation as a whole, gradually eroding the State's relative
economic affluence. Statewide, urban centers have experienced significant
changes involving migration of the more affluent to the suburbs and an influx
of generally less affluent residents. Regionally, the older Northeast cities
have suffered because of the relative success that the South and the West have
had in attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City. The State has for many
years had a very high state and local tax burden relative to other states. The
burden of State and local taxation, in combination with the many other causes
of regional economic dislocation, has contributed to the decisions of some
businesses and individuals to relocate outside, or not locate within, the
State.
State Economy Remains Sluggish: The State's economy has been slow to recover
from the 1989-92 recession and continues to lag behind the nation and other
urban, industrial states. Over the last three full years, 1993-95, total New
York State job growth has averaged only 0.6% annually compared to 2.6% yearly
job growth for the nation. In 1995 the State ranked 49th among all states for
job growth. Unemployment for the first half of 1996 stood at 6.3% within New
York State versus 5.5% national unemployment for the same period. New York's
employment picture has been marked by job reductions in commercial banking,
defense-related manufacturing, and government. Despite modest improvements in
tourism, media, financial services, and real estate, the state as a whole has
regained, as of mid-1996, only 40% of the 517,000 jobs lost during the
recession. Although average household income levels continue to be higher in
the State than the national average, New York's personal income growth has been
two-thirds the national pace, with total personal income growing on average
3.8% per year in New York compared to 5.8% annually nationwide. There is
concern that income growth has been concentrated among high earners, masking
declines of low earners, and that a widening income gap carries the potential
to undermine overall consumer spending and aggravate social service
expenditures. Many uncertainties exist in forecasts of both the national and
State economies and there can be no assurance that the State's economy will
perform at a level sufficient to meet the State's projections of receipts and
disbursements.
1996-97 Fiscal Year. The State's budget was enacted by the Legislature on
July 13, 1996, more than three months after the start of the fiscal year. Prior
to the adaptation of the budget, the Legislature enacted appropriations for
disbursements considered to be necessary for State operations and other
purposes, including necessary appropriations for state-supported debt service.
The State Financial Plan for the 1996-97 fiscal year was formulated on July 25,
1996 and is based on the State's budget as enacted as well as actual results
for the first quarter of the fiscal year. Each State Financial Plan is updated
in July (if a budget is in place), October, and January.
The October update to the 1996-97 Financial Plan projects a GAAP-basis
General Fund operating surplus of $93 million (0.3% revenues). Total revenues
in the General Fund are projected at $32.50 billion, consisting of $29.39
billion in tax revenues and $3.11 billion in miscellaneous revenues. Personal
income tax is expected to reach $16.83 billion, or 52% of total tax revenue,
with robust growth fueled in part by financial sector bonus payments.
Although revisions to the 1996-97 State Financial Plan contained in the
October update are favorable, the State faces certain risks which could
potentially cost the State up to one-half billion dollars (1.5% revenues). The
Division of Budget believes these risks are balanced by reserves in the 1996-97
State Financial Plan, however, there can be no assurances that these reserves
will fully offset litigation or other risks to the State. The greatest risks
relate to the economy and tax collections, which could produce either favorable
or unfavorable results during the year. Additional risks come from the
potential impact of certain litigation now pending against the State.
The 1996-97 State Financial Plan includes actions that will provide non-
recurring resources and savings totalling approximately $1.3 billion. These
include the use of $481 million in surplus funds available from MMIA, $134
million in savings from a refinancing of certain pension obligations, $88
million in projected savings from bond refundings, and $36 million in surplus
fund transfers. The balance is composed of $314 million in resources carried
forward from the States 1995-96 fiscal year and various other actions,
including that portion of the proposed tax amnesty program that is projected to
be non-recurring.
Future Budget Projections: The State closed projected budget gaps of $5.0
billion and $3.9 billion for its 1995-96 and 1996-97 fiscal years,
respectively. The 1997-98 gap was projected at $1.4 billion base on the
Governor's proposed budget of December 1995. As a result of changes made in the
enacted budget, the gap is now expected by the State Division of Budget to be
larger. However, the gap is not expected to be as large as those in the prior
two fiscal years.
The out-year projection will be impacted by a variety of factors. Enacted tax
reductions, which reduced receipts in the 1996-97 fiscal year by an incremental
$2.4 billion, are projected to reduce receipts in the 1997-98 fiscal year by an
additional increment of $2.1 billion. The use of up to $1.3 billion of non-
recurring resources in 1996-97, and the annualized costs of certain programs
increases in the 1996-97 annualized budget, will both add additional pressure
in closing the 1997-98 gap.
Impact of Welfare Reform: On August 22, 1996, the President signed into law
the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
This federal legislation fundamentally changed the programmatic and fiscal
responsibilities for administration of welfare programs at the federal, state,
and local levels. The new law abolishes the federal Aid to Families with
Dependent Children (AFDC), and creates a new Temporary Assistance to Needy
S-11
<PAGE>
Families program (TANF) funded with federal block grant to states. The new law
also imposes a five-year durational limit on TANF recipients, requires that
virtually all recipients be engaged in work or community service activities
within two years of receiving benefits, and limits assistance provided to
certain immigrants and other classes of individuals. States are required to
meet these federally mandated job participation rates, or that fail to conform
with certain other federal standards, face potential sanctions in the form of a
reduced federal block grant.
The State expects that funding levels provided under the TANF block grant
initially will be higher than currently anticipated in the State's financial
plan. Spending close to $8 billion on welfare in the 1996-97 fiscal year, the
State has among the most generous programs in the nation, and the only one
mandated by a State Constitution (Article XVII). The Governor has previously
noted that the current state program is unsustainable in its current form, and
in November 1996 submitted a reform proposal for the State Legislature to
consider. The net fiscal impact of any changes to the State's welfare programs
that are necessary to conform with federal law will be dependent upon such
factors as the ability of the State to avoid any federal fiscal penalties, the
level of additional resources required to comply with any new State and/or
federal requirements, and the division of non-federal welfare costs between the
State and its localities.
Indebtedness. As of March 31, 1996, the total amount of long-term State
general obligation debt authorized but unissued stood at $1.5 billion. As of
the same date, the State had approximately $4.8 billion in general obligation
bonds, including $294 million in commercial paper outstanding.
In June 1990, legislation was enacted creating the New York Local Government
Assistance Corporation ("LGAC"), a public benefit corporation empowered to
issue long-term obligations to fund certain payments to local governments
traditionally funded through the State's annual seasonal borrowing. As of June
30, 1996, LGAC has issued its bonds to provide net proceeds of $4.7 billion
completing the program.
Financing of capital programs by other public authorities of the State is
also obtained from lease-purchase and contractual-obligation financing
arrangements, the debt service for which is paid from State appropriations. As
of March 31, 1996, there were $19.6 billion of such other financing
arrangements outstanding and additional financings of this nature by public
authorities.
Ratings. Moody's rating of the State's general obligation bonds stood at A on
January 24, 1996, and S&P's rating stood at A- with a positive outlook, on
January 24, 1996, an improvement from S&P's stable outlook from February 1994
through April 1993 and negative outlook prior to April 1993. Previously,
Moody's lowered its rating to A on June 6, 1990, its rating having been A1
since May 27, 1986. S&P lowered its rating from A to A- on January 13, 1992.
S&P's previous ratings were A from March 1990 to January 1992, AA- from August
1987 to March 1990 and A+ from November 1982 to August 1987.
Moody's maintained its A rating and S&P continued its A- rating in connection
with the State's issuance of $75 million of general obligation bonds in August
1996.
(2) The City and the Municipal Assistance Corporation ("MAC"): The City
accounts for approximately 40% of the State's population and personal income,
and the City's financial health affects the State in numerous ways.
In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among other actions,
the State Legislature (i) created MAC to assist with long-term financing for
the City's short-term debt and other cash requirements and (ii) created the
State Financial Control Board (the "Control Board") to review and approve the
City's budgets and four-year financial plans (the financial plans also apply to
certain City-related public agencies).
The New York City economy has continued to grow slowly in 1996 greatly aided
by a record Wall Street performance. The surge in profits, capital gains, and
year end bonuses is likely to continue to fuel growth in the City's economy and
economically sensitive taxes into fiscal year 1997. Although employment growth
citywide has improved in recent months, the City has yet to completely regain
the numbers of jobs lost during the City's 1989-1992 recession. After a
substantial decline in the early 1990's, the City's real estate market has
begun to rebound, as exhibited by declining Class A vacancy rates and rising
asking rents. This combined with an acute shortage of rental housing in
Manhattan has led to numerous new construction and renovation projects. Total
reported crimes are at their lowest levels since the 1960's. Hotel occupancy
rates are near record highs, topping 80% in August 1996. As income growth has
outpaced national levels in Manhattan, the more populous outer boroughs have
seen their income levels drop in relation to regional and national levels. As a
result, the City has become increasingly reliant upon a highly taxed base of
wealth to support a myriad of social services for an increasingly poor majority
of residents, further straining City resources and flexibility.
Fiscal Year 1997 and the 1997-2000 Financial Plan. The November revision to
the City's Financial Plan was greatly aided by an additional $450 million in
additional tax revenues, mainly resulting from increased earnings on Wall
Street, allowing the City to reduce risks that appeared in the budget, scale
back anticipated budget cuts, and fund a new $70 million textbook initiative
for the public schools. After instructing his Agency heads in August to produce
current year expenditure cuts totalling $500 million, the Mayor only needs
further cuts of $179 million to achieve a projected balance.
S-12
<PAGE>
Despite the recent improvement, the City faces significant out-year budget
gaps. The City projects expenditures to increase five times faster than
revenues and budget gaps to more than double between Fiscal 1998 and Fiscal
2000. The City's budget gap is projected to rise from $1.2 billion in Fiscal
1998 (4% revenues), to $2.1 billion in Fiscal 1999 and $3.0 billion in Fiscal
2000. The gaps are driven primarily by expenditures for new labor agreements as
well as medical and debt service costs. As well, enacted and proposed tax cuts
account for about $1 billion of the Fiscal 1999 and 2000 gaps. The City
Comptroller and State Comptroller have each warned that the current and out-
year budgets include significant risks, including the renewal of the income tax
surcharge, potential Board of Education overspending, the postponed Port
Authority ground lease payments, and anticipated labor costs savings. In 1997
as in past years, the City relies on one-time resources ($1.2 billion) to help
achieve budgetary balance.
The City is reliant upon the intergovernmental transfers for a substantial
portion of its budget. State categorical grants of $6.2 billion account for 19%
of gross City revenues. Federal categorical grants of $3.96 billion account for
12% of gross City revenues. An extended delay by the State in adopting its
fiscal year budget or in the 1997-98 adoption of the federal budget would
negatively impact upon the City's financial condition and ability to close
budget gaps for fiscal years 1998 and thereafter.
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. If the State experiences
revenue shortfalls or spending increases beyond its projections during its
1996-97 fiscal year or subsequent years, such developments could result in
reductions in projected State aid to the City. In addition, there can be no
assurance that State budgets for the 1997-98 or future fiscal years will be
adopted by the April 1 statutory deadline and that there will not be adverse
effects on the City's cash flow and additional City expenditures as a result of
such delays.
Given the foregoing, there can be no assurance that the City will continue to
maintain a balanced budget during fiscal year 1997 or thereafter, or that it
can maintain a balanced budget without additional tax or other revenue
increases or reductions in City services, which could adversely affect the
City's economic base.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and which includes the
City's capital, revenue and expense projections. The City is required to submit
its financial plans to review bodies, including the Control Board. If the City
were to experience certain adverse financial circumstances, including the
occurrence or the substantial likelihood and the imminence of the occurrence of
an annual operating deficit of more than $100 million or the loss of access to
the public credit markets to satisfy the City's capital and seasonal financial
requirements, the Control Board would be required by State law to exercise
certain powers, including prior approval of City financial plans, proposed
borrowings and certain contracts.
The City projections set forth in the Plan are based on various assumptions
and contingencies which are uncertain and which may not materialize. Changes in
major assumptions could significantly affect the City's ability to balance its
budget as required by State law and to meet its annual cash flow and financing
requirements. Such assumptions and contingencies include the timing of any
regional and local economic recovery, the absence of wage increases in excess
of the increases assumed in its financial plan, employment growth, provision of
State and Federal aid and mandate relief, State legislative approval of future
State budgets, levels of education expenditures as may be required by State
law, adoption of future City budgets by the New York City Council, approval by
the Governor or the State Legislature and the cooperation of MAC with respect
to various other actions proposed in the Plan and changes in federal tax law.
The City's ability to maintain a balanced operating budget is dependent on
whether it can implement necessary service and personnel reduction programs
successfully. As discussed above, the City must identify additional expenditure
reductions and revenue sources to achieve balanced operating budgets for fiscal
year 1998 and thereafter. Any such proposed expenditure reductions will be
difficult to implement because of their size and the substantial expenditure
reductions already imposed on City operations in recent years.
Attaining a balanced budget is also dependent upon the City's ability to
market its securities successfully in the public credit markets. On May 3,
1996, the Mayor announced a $1 billion reduction in City capital spending over
a five year period through fiscal year 2000. The City's financing program for
fiscal years 1996 through 1999 contemplates capital spending of $14.1 billion,
which will be financed through issuance of general obligation bonds, Water
Authority Revenue Bonds and Covered Organization obligations, and will be used
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make capital investments. The City's financing program
assumes the receipt of approximately $1 billion from the sale of City's sewer
and water systems. However, the City Comptroller has obtained a court order
blocking such sale, which the City is appealing. In the event such appeal is
unsuccessful the City would be required to reduce capital spending during the
next four years or find additional sources of funds in such amount. A
significant portion of such bond financing is used to reimburse the City's
general fund for capital expenditures already incurred. In addition, the City
issues revenue and tax anticipation notes to finance its seasonal working
capital requirements. The terms and success of projected public sales of City
general obligation bonds and notes will be subject to prevailing market
conditions at the time of the sale, and no assurance can be given that the
credit markets will absorb the projected amounts of public bond and note sales.
In addition, future developments concerning the City and public discussion of
such developments, the City's future financial needs and other issues may
affect the market for outstanding
S-13
<PAGE>
City general obligation bonds and notes. If the City were unable to sell its
general obligation bonds and notes, it would be prevented from meeting its
planned operating and capital expenditures.
The City faces limitations on its borrowing capacity after Fiscal 1997 under
the State Constitution that will prevent it from additional general obligation
borrowings, as a late result of the declining real estate values in the City
during the early 1990's. To ensure that the City can meet finance future
capital necessities and improvements, the City has proposed for State approval
the Infrastructure Finance Authority (IFA). The new IFA debt would be secured
with City personal income taxes and would not be subject to the Constitutional
limits. The City has already built the IFA into its Financing Plan, yet risks
remain as to the timing of State approval and what kind of cap, if any, will be
on debt issuance. The inability to finance capital improvements would increase
the City's budget gaps in later years or require it to significantly curtail
capital spending which would lead to a deterioration in the City's
infrastructure and ability to deliver services.
The City is a defendant in a significant number of lawsuits and is subject to
numerous claims and investigations, including, but not limited to, actions
commenced and claims asserted against the City arising out of alleged
constitutional violations, torts, breaches of contracts, and other violations
of law and condemnation proceedings. While the ultimate outcome and fiscal
impact, if any, on the proceedings and claims are not currently predictable,
adverse determinations in certain of them might have a material adverse effect
upon the City's ability to carry out its financial plan. As of June 30, 1995,
the City estimated its potential future liability on outstanding claims to be
$2.5 billion.
Fiscal Years 1991 through 1996. The City achieved balanced operating results
in accordance with generally accepted accounting principles for fiscal years
1991 through 1996. The City was required to close substantial budget gaps in
these fiscal years in order to maintain balanced operating results.
Ratings. As of the date of this prospectus, Moody's rating of the City's
general obligation bonds stood at Baa1 and S&P's rating stood at A-. On
February 11, 1991, Moody's had lowered its rating from A.
In December 1996, Moody's confirmed its Baa1 rating in connection with a
scheduled December 1996 sale of $625 million of the City's general obligation
bonds. S&P also confirmed its rating of the City's general obligation bonds in
connection with such general obligation bond issue in December 1996.
In January 1995, in response to the City's plan to borrow $120 million to
refund debt due in February without imposing additional cuts in the fiscal 1995
budget, S&P's placed the City on negative credit watch. In late May 1996, S&P
confirmed the City's rating citing improvements in the revised fiscal year 1997
budget. Any rating decrease would negatively affect the marketability of the
City's bonds and significantly increase the City's financing costs.
On October 12, 1993, Moody's increased its rating of the City's issuance of
$650 million of Tax Anticipation Notes ("TANs") to MIG-1 from MIG-2. Prior to
that date, on May 9, 1990, Moody's revised downward its rating on outstanding
City revenue anticipation notes from MIG-1 to MIG-2 and rated the $900 million
notes then being sold MIG-2. S&P's rating of the October 1993 TANs issue
increased to SP-1 from SP-2. Prior to that date, on April 29, 1991, S&P revised
downward its rating on City revenue anticipation notes from SP-1 to SP-2.
As of December 31, 1995, the City and MAC had, respectively, $24.4 billion
and $4.0 billion of outstanding net long-term indebtedness.
(3) The State Agencies: Certain Agencies of the State have faced substantial
financial difficulties which could adversely affect the ability of such
Agencies to make payments of interest on, and principal amounts of, their
respective bonds. The difficulties have in certain instances caused the State
(under so-called "moral obligation" provisions, which are non-binding statutory
provisions for State appropriations to maintain various debt service reserve
funds) to appropriate funds on behalf of the Agencies. Moreover, it is expected
that the problems faced by these Agencies will continue and will require
increasing amounts of State assistance in future years. Failure of the State to
appropriate necessary amounts or to take other action to permit those Agencies
having financial difficulties to meet their obligations could result in a
default by one or more of the Agencies. Such default, if it were to occur,
would be likely to have a significant adverse affect on investor confidence in,
and therefore the market price of, obligations of the defaulting Agencies. In
addition, any default in payment on any general obligation of any Agency whose
bonds contain a moral obligation provision could constitute a failure of
certain conditions that must be satisfied in connection with Federal guarantees
of City and MAC obligations and could thus jeopardize the City's long-term
financing plans.
(4) State Litigation: The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal
laws. Included in the State's outstanding litigation are a number of cases
challenging the constitutionality or the adequacy and effectiveness of a
variety of significant social welfare programs primarily involving the State's
mental hygiene programs. Adverse judgments in these matters generally could
result in injunctive relief coupled with prospective changes in patient care
which could require substantial increased financing of the litigated programs
in the future.
The State is also engaged in a variety of claims wherein significant monetary
damages are sought. Actions commenced by several Indian nations claim that
significant amounts of land were unconstitutionally taken from the
S-14
<PAGE>
Indians in violation of various treaties and agreements during the eighteenth
and nineteenth centuries. The claimants seek recovery of approximately six
million acres of land, as well as compensatory and punitive damages.
(5) Other Municipalities: Certain localities in addition to New York City
could have financial problems leading to requests for additional State
assistance. Although many cities and towns in upstate New York have been
operating under a high level of fiscal stress since the late 1980's, their
fiscal erosion has been in process for over two decades. Factors contributing
to this include: a loss of high-wage manufacturing jobs, including large
military, textile, and industrial component facilities; a dramatic loss of
population; unfunded government mandates; contentious municipal labor issues
and collective bargaining agreements; large elderly populations; high poverty
rates; and tax appeals, compounding the loss to a City's tax base. Struggling
to provide a consistent level of government services from a deflated tax base,
many local governments have become increasingly reliant upon governmental
transfers. The potential impact on the State of such actions by localities is
not included in projections of State receipts and expenditures in the State's
1996-97 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted
in the creation of the Financial Control Board for the City of Yonkers (the
"Yonkers Board") by the State in 1984. The Yonkers Board is charged with
oversight of the fiscal affairs of Yonkers. Future actions taken by the
Governor or the State Legislature to assist Yonkers could result in allocation
of State resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1993, the total indebtedness of all localities in
the State (other than New York City) was approximately $17.7 billion. State law
requires the Comptroller to review and make recommendations concerning the
budgets of those local government units other than New York City authorized by
State law to issue debt to finance deficits during the period that such deficit
financing is outstanding. Fifteen localities had outstanding indebtedness for
State financing at the close of their fiscal year ending in 1993. In December
1995, in reaction to continuing financial problems, the Troy Municipal
Assistance Corp., which was created in 1995, imposed a 1996 budget plan upon
Troy, New York. In November 1996, Troy MAC issued debt to refinance $55 million
of the City's $72 million in outstanding debt, including certain lease
obligations at the time in default. A similar municipal assistance corporation
has also been established for Newburgh. In addition, several other smaller New
York cities, including Utica, Rome, Schenectady and Niagara Falls have faced
continuing budget deficits, as federal and state aid and local tax revenues
have declined while government expenses have increased. The financial problems
being experienced by the State's smaller urban centers place additional strains
upon the State's financial condition at a time when the State is struggling
with its own budget gaps.
Certain proposed Federal expenditure reductions could reduce, or in some
cases eliminate, Federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities to
increase local revenues to sustain those expenditures. In addition, proposed
changes in the treatment of capital gains for federal income tax purposes could
reduce tax receipts of the state and city. If the State, New York City or any
of the Agencies were to suffer serious financial difficulties jeopardizing
their respective access to the public credit markets, the marketability of
notes and bonds issued by localities within the State, including notes or bonds
in the Fund, could be adversely affected. Localities also face anticipated and
potential problems resulting from certain pending litigation, judicial
decisions, and long-range economic trends. The longer-range potential problems
of declining urban population, increasing expenditures, and other economic
trends could adversely affect certain localities and require increasing State
assistance in the future.
However, 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.
There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on State or local governmental
finances generally, will not adversely affect the market value of New Jersey
Municipal Obligations held in the portfolio of the New Jersey Fund or the
ability of particular obligors to make timely payments of debt service on (or
relating to) those obligations.
The State and Its Economy. The State is the ninth largest state in population
and the fifth smallest in land area. With an average of 1,062 people per square
mile, it is the most densely populated of all the states. The State's economic
base is diversified, consisting of a variety of manufacturing, construction and
service industries, supplemented by rural areas with selective commercial
agriculture. Historically, New Jersey's average per capita income has been well
above the national average, and in 1994 the State ranked second among the
states in per capita personal income ($27,742).
The New Jersey Economic Policy Council, a statutory arm of the New Jersey
Department of Commerce and Economic Development, has reported in New Jersey
Economic Indicators, a monthly publication of the New Jersey Department of
Labor, Division of Labor Market and Demographic Research, that in 1988 and 1989
employment in New Jersey's manufacturing sector failed to benefit from the
export boom experienced by many Midwest states and the State's service sectors,
which had fueled the State's prosperity since 1982, lost momentum. In the
meantime, the prolonged fast growth in the State in the mid 1980s resulted in a
tight labor market situation, which has led to relatively high wages and
housing prices. This means that, while the incomes of New Jersey residents are
relatively high, the State's business sector has become more vulnerable to
competitive pressures.
S-15
<PAGE>
The onset of the national recession (which officially began in July 1990
according to the National Bureau of Economic Research) caused an acceleration
of New Jersey's job losses in construction and manufacturing. In addition, the
national recession caused an employment downturn in such previously growing
sectors as wholesale trade, retail trade, finance, utilities and trucking and
warehousing. Reflecting the downturn, the rate of unemployment in the State
rose from a low of 3.6% during the first quarter of 1989 to an estimated 6.6%
in April 1996, which is greater than the national average of 5.4% in April
1996. The State's October 1996 unemployment rate has shown slight improvement;
6.1% vs. 4.9% national average.
Because some sectors will lag due to continued excess capacity, employers
even in rebounding sectors can be expected to remain cautious about hiring
until they become convinced that improved business will be sustained, and
certain firms will continue to merge or downsize to increase profitability.
Economic recovery is likely to be slow and uneven in New Jersey, with
unemployment receding at a correspondingly slow pace.
Debt Service. The primary method for State financing of capital projects is
through the sale of the general obligation bonds of the State. These bonds are
backed by the full faith and credit of the State tax revenues and certain other
fees are pledged to meet the principal and interest payments and if provided,
redemption premium payments, if any, required to repay the bonds. As of June
30, 1995, there was a total authorized bond indebtedness of approximately $9.48
billion, of which $3.65 billion was issued and outstanding, $4.0 billion was
retired (including bonds for which provision for payment has been made through
the sale and issuance of refunding bonds) and $1.83 billion was unissued. The
debt service obligation for such outstanding indebtedness is $456.8 million for
fiscal year 1996.
New Jersey's Budget and Appropriation System. The State operates on a fiscal
year beginning July 1 and ending June 30. At the end of fiscal year 1989, there
was a surplus in the State's general fund (the fund into which all State
revenues not otherwise restricted by statute are deposited and from which
appropriations are made) of $411.2 million. At the end of fiscal year 1990,
there was a surplus in the general fund of $1.0 million. At the end of fiscal
year 1991, there was a surplus in the general fund of $1.4 million. New Jersey
closed its fiscal year 1992 with a surplus in the general fund of $760.8
million, fiscal year 1993 with a surplus of $937.4 million, and fiscal year
1994 with a surplus of $926.0 million. New Jersey closed its fiscal year 1995
with a surplus of $569 million. It is estimated that the State closed its
fiscal year 1996 with a $607 million surplus.
In order to provide additional revenues to balance future budgets, to
redistribute school aid and to contain real property taxes, on June 27, 1990,
and July 12, 1990, Governor Florio signed into law legislation which was
estimated to raise approximately $2.8 billion in additional taxes (consisting
of $1.5 billion in sales and use taxes and $1.3 billion in income taxes), the
biggest tax hike in New Jersey history. There can be no assurance that receipts
and collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990, with the increase
in the State's sales and use tax rate from 6.0% to 7.0% and the elimination of
exemptions for certain products and services not previously subject to the tax,
such as telephone calls, disposable paper products (which has since been
reinstated), soaps and detergents, janitorial services, alcoholic beverages and
cigarettes. At the time of enactment, it was projected that these taxes would
raise approximately $1.5 billion in additional revenue. Projections and
estimates of receipts from sales and use taxes, however, have been subject to
variance in recent fiscal years.
The second part of the tax hike took effect on January 1, 1991, in the form
of an increased state income tax on individuals. At the time of enactment, it
was projected that this increase would raise approximately $1.3 billion in
additional income taxes to fund a new school aid formula, a new homestead
rebate program and state assumption of welfare and social services costs.
Projections and estimates of receipts from income taxes, however, have also
been subject to variance in recent fiscal years. Under the legislation, income
tax rates increased from their previous range of 2.0% to 3.5% to a new range of
2.0% to 7.0%, with the higher rates applying to married couples with incomes
exceeding $70,000 who file joint returns, and to individuals filing single
returns with incomes of more than $35,000.
The Florio administration had contended that the income tax package would
help reduce local property tax increases by providing more state aid to
municipalities. Under the income tax legislation the State assumed
approximately $289.0 million in social services costs that previously were paid
by counties and municipalities and funded by property taxes. In addition, under
the new formula for funding school aid, an extra $1.1 billion was proposed to
be sent by the State to school districts beginning in 1991, thus reducing the
need for property tax increases to support education programs.
Effective July 1, 1992, the State's sales and use tax rate decreased from 7%
to 6%. Effective January 1, 1994, an across-the-board 5% reduction in the
income tax rates was enacted and effective January 1, 1995, further reductions
ranging from 1% up to 10% in income tax rates took effect.
On June 30, 1995, Governor Whitman signed the New Jersey Legislature's $16.0
billion budget for fiscal year 1996. The balanced budget, which includes $607
million in surplus, is $300 million more than the 1995 budget. As part of the
Fiscal Year 1996 Budget, the State enacted several additional tax cuts. For the
Gross Income Tax, a 15 percent reduction of personal income tax rates became
effective on January 1, 1996. This cut was in addition to the tax rate
reductions that were implemented during Fiscal Year 1994 and Fiscal Year 1995.
Effective April 1, 1996, yellow pages advertisements will be exempt from the
State's Sales Tax. For the Corporation Business Tax, effective July 1, 1996, a
reduction in the
S-16
<PAGE>
Corporation Business Tax rate from 9.0 percent to 7.5 percent will apply to
those corporations that have an allocated net income of $100,000 or less. Also
effective July 1, 1996, corporations' sales will be double weighted in
calculating receipt factors in determining a multistate corporation's New
Jersey State Corporation Business Tax liability.
On July 12, 1994, the New Jersey Supreme Court declared the State's Quality
Education Act of 1990 unconstitutional and gave the Chief Executive and the
Legislature until Fiscal Year 1998 to achieve "substantial equivalence" between
spending on pupils in poor urban districts and spending on their counterparts
in wealthy suburban districts. The New Jersey Supreme Court also said that it
expected the State to address the continuing disparity during the Fiscal Year
1996 and 1997 budgets. The Fiscal Year 1996 Budget provides special needs
districts with $100 million in increased State formula aid. Whether the State
can achieve a balanced budget depends on its ability to enact and implement
expenditure reductions and to collect estimated tax revenues. The fiscal year
1997 budget totaled $15.797 billion, a 1.3% decrease from the fiscal year 1996
budget, and includes an estimated $276 million surplus.
Litigation. The State is a party in numerous legal proceedings pertaining to
matters incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. Included in
the State's outstanding litigation are cases challenging the following: the
funding of teachers' pension funds, the adequacy of Medicaid reimbursement for
hospital services, the hospital assessment authorized by the Health Care Reform
Act of 1992, various provisions, and the constitutionality, of the Fair
Automobile Insurance Reform Act of 1990, the State's role in a consent order
concerning the construction of a resource facility in Passaic County, actions
taken by the Bureau of Securities against an individual, the State's actions
regarding alleged chromium contamination of State-owned property in Hudson
County, the issuance of emergency redirection orders and a draft permit by the
Department of Environmental Protection and Energy, refusal of the State to
share with Camden County federal funding the State recently received for
disproportionate share hospital payments made to county psychiatric facilities,
the State's failure to reimburse certain hospitals' charity care costs, and the
constitutionality of annual A-901 hazardous and solid waste licensure renewal
fees collected by the Department of Environmental Protection and Energy.
Adverse judgments in these and other matters could have the potential for
either a significant loss of revenue or a significant unanticipated expenditure
by the State.
At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New
Jersey Tort Claims Act. In addition, at any given time, there are various
numbers of contract claims against the State and State agencies seeking
recovery of monetary damages. The State is unable to estimate its exposure for
these claims.
Debt Ratings. For many years prior to 1991, both Moody's and S&P had rated
New Jersey general obligation bonds Aaa and AAA, respectively. On July 3, 1991,
however, S&P downgraded New Jersey general obligation bonds to AA+. On June 4,
1992, S&P placed New Jersey general obligation bonds on CreditWatch with
negative implications, citing as its principal reason for its caution the
denial by the federal government of New Jersey's request for $450 million in
retroactive Medicaid payments for psychiatric hospitals. These funds were
critical to closing a $1 billion gap in the State's $15 billion budget for
fiscal year 1992 which ended on June 30, 1992. Under New Jersey state law, the
gap in the budget must be closed before the new budget year began on July 1,
1992. S&P suggested the State could close fiscal year 1992's budget gap and
help fill fiscal year 1993's hole by a reversion of $700 million of pension
contributions to its general fund under a proposal to change the way the State
calculates its pension liability.
On July 6, 1992, S&P reaffirmed its AA+ rating for New Jersey general
obligation bonds and removed the debt from its CreditWatch list, although it
stated that New Jersey's long-term financial outlook was negative. S&P was
concerned that the State was entering fiscal year 1993 with only a $26 million
surplus and remained concerned about whether the State economy would recover
quickly enough to meet lawmakers' revenue projections. It also remained
concerned about the recent federal ruling leaving in doubt how much the State
was due in retroactive Medicaid reimbursements and a ruling by a federal judge,
now on appeal, of the State's method for paying for uninsured hospital
patients. However, on July 27, 1994, S&P announced that it was changing the
State's outlook from negative to stable due to a brightening of the State's
prospects as a result of Governor Whitman's effort to trim spending and cut
taxes, coupled with an improving economy. S&P reaffirmed its AA+ rating at the
same time, and has since maintained both rating and outlook.
On August 24, 1992, Moody's downgraded New Jersey general obligation bonds to
Aa1, stating that the reduction reflected a developing pattern of reliance on
nonrecurring measures to achieve budgetary balance, four years of financial
operations marked by revenue shortfalls and operating deficits, and the
likelihood that serious financial pressures would persist. On August 5, 1994,
and again on August 18, 1995 Moody's reaffirmed its Aa1 rating, citing on the
positive side New Jersey's broad-based economy, high income levels, history of
maintaining a positive financial position and moderate (albeit rising) debt
ratios, and, on the negative side, a continued reliance on one-time revenues
and a dependence on pension-related savings to achieve budgetary balance.
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA
As described above, except to the extent the California Municipal Bond Fund
and the California Insured Municipal Bond Fund (the "California Funds") invest
in temporary investments, the California Funds will invest substantially all of
S-17
<PAGE>
their assets in California Municipal Obligations. The Funds are therefore
susceptible to political, economic or regulatory factors affecting issuers of
California Municipal Obligations.
These include the possible adverse effects of certain California
constitutional amendments, legislative measures, voter initiatives and other
matters that are described below. The following information provides only a
brief summary of the complex factors affecting the financial situation in
California (the "State") and is derived from sources that are generally
available to investors and is believed to be accurate. No independent
verification has been made of the accuracy or completeness of any of the
following information. It is based in part on information obtained from various
State and local agencies in California or contained in Official Statements for
various California Municipal Obligations.
During the early 1990's, California experienced significant financial
difficulties, which reduced its credit standing, but the State's finances have
improved since 1994. The ratings of certain related debt of other issuers for
which California has an outstanding lease purchase, guarantee or other
contractual obligation (such as for state-insured hospital bonds) are generally
linked directly to California's rating. Should the financial condition of
California deteriorate again, its credit ratings could be further reduced, and
the market value and marketability of all outstanding notes and bonds issued by
California, its public authorities or local governments could be adversely
affected.
ECONOMIC OVERVIEW
California's economy is the largest among the 50 states and one of the
largest in the world. The State's population of more than 32 million represents
over 12% of the total United States population and grew by 27% in the 1980s.
Total personal income in the State, at an estimated $703 billion in 1994,
accounts for almost 13% of all personal income in the nation. Total employment
is over 14 million, the majority of which is in the service, trade and
manufacturing sectors.
From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others,
were all severely affected, particularly in Southern California. Job losses
were the worst of any post-war recession. Employment levels stabilized by late
1993 and steady growth has occurred since early 1994. Pre-recession job levels
are expected to be reached in 1996. Unemployment, while remaining higher than
the national average, has come down substantially from its 10% peak in January.
Economic indicators show a steady recovery underway in California since the
start of 1994. However, any delay or reversal of the recovery may create new
shortfalls in State revenues.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS
Limitation on Taxes. Certain California Municipal Obligations may be
obligations of issuers which rely in whole or in part, directly or indirectly,
on ad valorem property taxes as a source of revenue. The taxing powers of
California local governments and districts are limited by Article XIIIA of the
California Constitution, enacted by the voters in 1978 and commonly known as
"Proposition 13." Briefly, Article XIIIA limits to 1% of full cash value the
rate of ad valorem property taxes on real property and generally restricts the
reassessment of property to 2% per year, except upon new construction or change
of ownership (subject to a number of exemptions). Taxing entities may, however,
raise ad valorem taxes above the 1% limit to pay debt service on voter-approved
bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the acquisition-based
assessment system of Proposition 13, and on June 18, 1992 the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through ad
valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special tax." Court
decisions, however, allowed a non-voter approved levy of "general taxes" which
were not dedicated to a specific use. In response to these decisions, the
voters of the State of 1986 adopted an initiative statute which imposed
significant new limits on the ability of local entities to raise or levy
general taxes, except by receiving majority local voter approval. Significant
elements of this initiative, "Proposition 62," have been overturned in recent
court cases. An initiative proposed to re-enact the provisions of Proposition
62 as a constitutional amendment was defeated by the voters in November 1990,
but such a proposal may be renewed in the future.
On November 5, 1996, California voters approved Proposition 218 which added
Articles XIIIC and XIIID to the California Constitution, imposing certain vote
requirements and other limitations on the imposition of new or increased and in
some cases existing taxes, assessments and property-related fees and charges.
Proposition 218 also extends the initiative power to include the reduction or
repeal of any local taxes, assessments, fees and charges. This extension of the
initiative power is not limited to taxes imposed on or after the effective date
of Proposition 218, and could result in the retroactive repeal or reduction in
any existing taxes, assessments, fees or charges. If such a repeal or reduction
occurs in a particular California entity, the financial condition of that
entity may be adversely impacted and rating downgrades and/or defaults may
result. Additionally, the voter approval requirement reduces the financial
flexibility of local governments to deal with fiscal problems by limiting the
ability to increase taxes, assessments, fees or charges. In some cases, this
loss of flexibility may, and in fact has, been cited as the reason for rating
downgrades. No assurances can be
S-18
<PAGE>
given that California entities will be able to raise taxes to meet future
spending requirements. In addition, at this time it is not clear exactly how
Proposition 218 will be interpreted by a court.
Appropriations Limits. The State and its local governments are subject to an
annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits
the State or any covered local government from spending "appropriations subject
to limitation" in excess of the appropriations limit imposed. "Appropriations
subject to limitation" are authorizations to spend "proceeds of taxes," which
consist of tax revenues and certain other funds, including proceeds from
regulatory licenses, user charges or other fees, to the extent that such
proceeds exceed the cost of providing the product or service, but "proceeds of
taxes" exclude most State subventions to local governments. No limit is imposed
on appropriations of funds which are not "proceeds of taxes," such as
reasonable user charges or fees, and certain other non-tax funds, including
bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January 1,
1979, or subsequently authorized by the voters, (2) appropriations arising from
certain emergencies declared by the Governor, (3) appropriations for certain
capital outlay projects, (4) appropriations by the State of post-1989 increases
in gasoline taxes and vehicle weight fees, and (5) appropriations made in
certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such adjustments
were liberalized in 1990 to follow more closely growth in the State's economy.
"Excess" revenues are measured over a two year cycle. Local governments must
return any excess to taxpayers by rate reductions. The State must refund 50% of
any excess, with the other 50% paid to schools and community colleges. With
more liberal annual adjustment factors since 1988, and depressed revenues since
1990 because of the recession, few governments are currently operating near
their spending limits, but this condition may change over time. Local
governments may by voter approval exceed their spending limits for up to four
years. During fiscal year 1986-87, State receipts from proceeds of taxes
exceeded its appropriations limit by $1.1 billion, which was returned to
taxpayers. Since that year, appropriations subject to limitation have been
under the State limit. State appropriations were $6.5 billion under the limit
for fiscal year 1995-96.
A 1986 initiative statute, called "Proposition 62," imposed additional limits
on local governments by requiring either majority or 2/3 voter approval for any
increases in "general taxes" or "special taxes," respectively (other than
property taxes, which are unchangeable). Court decisions had struck down most
of Proposition 62 and many local governments, especially cities, had enacted or
raised local "general taxes" without voter approval. In September, 1995, the
California Supreme Court overruled the prior cases, and upheld the
constitutionality of Proposition 62. Many aspects of this decision remain
unclear (such as its impact on charter (home rule) cities, and whether it will
have retroactive effect), but its future effect will be to further limit the
fiscal flexibility of many local governments.
Because of the complex nature of Articles XIIIA and XIIIB of the California
Constitution, the ambiguities and possible inconsistencies in their terms, and
the impossibility of predicting future appropriations or changes in population
and cost of living, and the probability of continuing legal challenges, it is
not currently possible to determine fully the impact of Article XIIIA or
Article XIIIB on California Municipal Obligations or on the ability of the
State or local governments to pay debt service on such California Municipal
Obligations. It is not possible, at the present time, to predict the outcome of
any pending litigation with respect to the ultimate scope, impact or
constitutionality of either Article XIIIA or Article XIIIB, or the impact of
any such determinations upon State agencies or local governments, or upon their
ability to pay debt service on their obligations. Future initiatives or
legislative changes in laws or the California Constitution may also affect the
ability of the State or local issuers to repay their obligations.
OBLIGATIONS OF THE STATE OF CALIFORNIA
Under the California Constitution, debt service on outstanding general
obligation bonds is the second charge to the General Fund after support of the
public school system and public institutions of higher education. Total
outstanding general obligation bonds and lease purchase debt of California
increased from $9.4 billion at June 30, 1987 to $23.8 billion at February 1,
1996. In FY 1994-95, debt service on general obligation bonds and lease
purchase debt was approximately 5.3% of General Fund revenues.
RECENT FINANCIAL RESULTS
The principal sources of General Fund revenues in 1994-1995 were the
California personal income tax (43% of total revenues), the sales tax (34%),
bank and corporation taxes (13%), and the gross premium tax on insurance (3%).
The State maintains a Special Fund for Economic Uncertainties (the "Economic
Uncertainties Fund"), derived from General Fund revenues, as a reserve to meet
cash needs of the General Fund, but which is required to be replenished as soon
as sufficient revenues are available. Year-end balances in the Economic
Uncertainties Fund are included for financial reporting purposes in the General
Fund balance. In most recent years, the State has budgeted to maintain the
Economic Uncertainties Fund at around 3% of General Fund expenditures but
essentially no reserve was budgeted from 1992-93, to 1995-96 because revenues
had been reduced by the recession and an accumulated budget deficit had to be
paid.
S-19
<PAGE>
General. Throughout the 1980's, State spending increased rapidly as the State
population and economy also grew rapidly, including increased spending for many
assistance programs to local governments, which were constrained by Proposition
13 and other laws. The largest State program is assistance to local public
school districts. In 1988, an initiative (Proposition 98) was enacted which
(subject to suspension by a two-thirds vote of the Legislature and the
Governor) guarantees local school districts and community college districts a
minimum share of State General Fund revenues (currently about 35%).
Since the start of the 1990-91 fiscal year, the State has faced adverse
economic, fiscal, and budget conditions. The economic recession seriously
affected State tax revenues. It also caused increased expenditures for health
and welfare programs. The State is also facing a structural imbalance in its
budget with the largest programs supported by the General Fund (education,
health, welfare and corrections) growing at rates significantly higher than the
growth rates for the principal revenue sources of the General Fund. These
structural concerns will be exacerbated in coming years by the expected need to
substantially increase capital and operating funds for corrections as a result
of a "Three Strikes" law enacted in 1994.
Recent Budgets. As a result of these factors, among others, from the late
1980's until 1992-93, the State had a period of nearly chronic budget
imbalance, with expenditures exceeding revenues in four out of six years, and
the State accumulated and sustained a budget deficit in the budget reserve, the
SFEU approaching $2.8 billion at its peak at June 30, 1993. Starting in the
1990-91 Fiscal Year and for each year thereafter, each budget required
multibillion dollar actions to bring projected revenues and expenditures into
balance and to close large "budget gaps" which were identified. The Legislature
and Governor eventually agreed on a number of different steps to produce Budget
Acts in the years 1991-92 to 1995-96, including:
. significant cuts in health and welfare program expenditures;
. transfers of program responsibilities and some funding sources from the
State to local governments, coupled with some reduction in mandates on
local government;
. transfer of about $3.6 billion in annual local property tax revenues from
cities, counties, redevelopment agencies and some other districts to
local school districts, thereby reducing state funding for schools;
. reduction in growth of support for higher education programs, coupled
with increases in student fees;
. revenue increases (particularly in the 1992-93 Fiscal Year budget), most
of which were for a short duration;
. increased reliance on aid from the federal government to offset the costs
of incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less
federal aid than the State Administration had requested); and
. various one-time adjustment and accounting changes.
Despite these budget actions, the effects of the recession led to large
unanticipated deficits in the SFEU, as compared to projected positive balances.
By the start of the 1993-94 Fiscal Year, the accumulated deficit was so large
(almost $2.8 billion) that is was impractical to budget to retire it in one
year, so a two-year program was implemented, using the issuance of revenue
anticipation warrants to carry a portion of the deficit over the end of the
fiscal year. When the economy failed to recover sufficiently in 1993-94, a
second two-year plan was implemented in 1994-95, to carry the final retirement
of the deficit into 1995-96.
The combination of stringent budget actions cutting State expenditures, and
the turnaround of the economy by late 1993, finally led to the restoration of
positive financial results. While General Fund revenues and expenditures were
essentially equals in FY 1992-93 (following two years of excess expenditures
over revenues), the General Fund had positive operating results in FY 1993-94,
1994-95, and 1995-96 which have reduced the accumulated budget deficit to about
$70 million as of June 30, 1996.
A consequence of the accumulated budget deficits in the early 1990's together
with other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual budget,
was to significantly reduce the State's cash resources available to pay its
ongoing obligations. When the Legislature and the Governor failed to adopt a
budget for the 1992-93 Fiscal Year by July 1, 1992, which would have allowed
the State to carry out its normal annual cash flow borrowing to replenish its
cash reserves, the State Controller was forced to issue approximately $3.8
billion of registered warrants ("IOUs") over a 2-month period to pay a variety
of obligations representing prior years' or continuing appropriations, and
mandates from court orders.
The State's cash condition became so serious that from late spring 1992 until
1995, the State had to rely on issuance of short term notes which matured in a
subsequent fiscal year to finance its ongoing deficit, and pay current
obligations. With the repayment of the last of these deficit notes in April,
1996, the State does not plan to rely further on external borrowing across
fiscal years, but will continue its normal cash flow borrowings during a fiscal
year.
S-20
<PAGE>
Current Budget. For the first time in four years, the State entered the 1995-
96 fiscal year with strengthening revenues based on an improving economy. The
major feature of the Governor's proposed Budget, a 15% phased cut in personal
income and business taxes, was rejected by the Legislature.
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34 days
after the start of the fiscal year. The Budget Act projected General Fund
revenues and transfers of $44.1 billion, a 3.5 percent increase from prior
years. Expenditures were budgeted at $43.4 billion, a 4 percent increase. A
principal feature of the 1995-96 Budget Act, in addition to those noted above
was the first significant increase in per-pupil funding for public schools and
community colleges in four years.
In its regular budget update in May, 1996, the Department of Finance
indicated that, with the strengthening economy, State General Fund revenues for
1995-96 would be about $46.1 billion, some $2 billion higher than originally
estimated. Because of mandated spending for public schools, the failure to
receive expected federal aid for illegal immigrants, and the failure of
Congress to enact welfare reform which the Administration had expected would
reduce State costs, expenditures for 1995-96 were also increased, to about
$45.4 billion. As a result, the Department estimated that the accumulated
budget deficit would be reduced to about $70 million as of June 30, 1996.
As a result of the improved revenues, that State's cash position has
substantially recovered. Only $2 billion of cash flow borrowing was needed
during 1995-96, and only about $3 billion is projected for 1996-97, with no
external borrowing over the end of the fiscal year.
The Governor's proposed budget for 1996-97 projects $47.1 billion of revenues
and transfers, and $46.5 billion of expenditures, resulting in a budget reserve
at June 30, 1997 of about $500 million. A number of issues related to the 1996-
97 budget still have to be resolved, including the Governor's tax reduction
proposals, and his proposals for further health and welfare cuts.
BOND RATING
State general obligation bonds are currently rated A1 by Moody's and A+ by
S&P. Both of these ratings have been reduced in several stages from AAA levels
which the State held until late 1991.
There can be no assurance that such ratings will be maintained in the future.
It should be noted that the creditworthiness of obligations issued by local
California issuers may be unrelated to the creditworthiness of obligations
issued by the State of California, and that there is no obligation on the part
of the State to make payment on such local obligations in the event of default.
LEGAL PROCEEDINGS
The State is involved in certain legal proceedings (described in the State's
recent financial statements) that, if decided against the State, may require
the State to make significant future expenditures or may substantially impair
revenues. Trial courts have recently entered tentative decisions or injunctions
which would overturn several parts of the State's recent budget compromises.
The matters covered by these lawsuits include a deferral of payments by
California to the Public Employees Retirement System, reductions in welfare
payments and the use of certain cigarette tax funds for health costs. All of
these cases are subject to further proceedings and appeals, and if California
eventually loses, the final remedies may not have to be implemented in one
year.
OBLIGATIONS OF OTHER ISSUERS
OTHER ISSUERS OF CALIFORNIA MUNICIPAL OBLIGATIONS
There are a number of State agencies, instrumentalities and political
subdivisions of the State that issue Municipal Obligations, some of which may
be conduit revenue obligations payable from payments from private borrowers.
These entities are subject to various economic risks and uncertainties, and the
credit quality of the securities issued by them may vary considerably from the
credit quality of obligations backed by the full faith and credit of the State.
State Assistance. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently, the
California Legislature enacted measures to provide for the redistribution of
the State's General Fund surplus to local agencies, the reallocation of certain
State revenues to local agencies and the assumption of certain governmental
functions by the State to assist municipal issuers to raise revenues. Total
local assistance from the State's General Fund was budgeted at approximately
75% of General Fund expenditures in recent years, including the effect of
implementing reductions in certain aid programs. To reduce State General Fund
support for school districts, the 1992-93 and 1993-94 Budget Acts caused local
governments to transfer $3.9 billion of property tax revenues to school
districts, representing loss of the post-Proposition 13 "bailout" aid. Local
governments have in return received greater revenues and greater flexibility to
operate health and welfare programs. To the extent the State should be
constrained by its Article XIIIB appropriations limit, or its obligation to
conform to Proposition 98, or other fiscal considerations, the absolute level,
or the rate of growth, of State assistance to local governments may continue to
be reduced. Any such reductions in State aid could compound the serious fiscal
constraints already experienced by many local governments, particularly
counties. At least one rural county (Butte) publicly announced that it might
enter bankruptcy proceedings in August 1990, although such plans were put off
after the Governor approved legislation to provide additional funds for the
S-21
<PAGE>
county. Other counties have also indicated that their budgetary condition is
extremely grave. Los Angeles County, the largest in the State, faced a nominal
$1.2 billion gap in its 1995-96 budget, half of which was in the County health
care system. The gaps were closed only with significant cuts in services and
personnel, particularly in the health care system, federal aid, and transfer of
some funds from other local governments to the County pursuant to special
legislation. The County's debt was downgraded by Moody's and S&P in the summer
of 1995. Orange County, just emerged from Federal Bankruptcy Court protection
in June 1996, has significantly reduced county services and personnel, and
faces strict financial conditions following large investment fund losses in
1994 which resulted in bankruptcy.
Assessment Bonds. California Municipal Obligations which are assessment bonds
may be adversely affected by a general decline in real estate values or a
slowdown in real estate sales activity. In many cases, such bonds are secured
by land which is undeveloped at the time of issuance but anticipated to be
developed within a few years after issuance. In the event of such reduction or
slowdown, such development may not occur or may be delayed, thereby increasing
the risk of a default on the bonds. Because the special assessments or taxes
securing these bonds are not the personal liability of the owners of the
property assessed, the lien on the property is the only security for the bonds.
Moreover, in most cases the issuer of these bonds is not required to make
payments on the bonds in the event of delinquency in the payment of assessments
or taxes, except from amounts, if any, in a reserve fund established for the
bonds.
California Long Term Lease Obligations. Certain California long-term lease
obligations, though typically payable from the general fund of the
municipality, are subject to "abatement" in the event the facility being leased
is unavailable for beneficial use and occupancy by the municipality during the
term of the lease. Abatement is not a default, and there may be no remedies
available to the holders of the certificates evidencing the lease obligation in
the event abatement occurs. The most common cases of abatement are failure to
complete construction of the facility before the end of the period during which
lease payments have been capitalized and uninsured casualty losses to the
facility (e.g., due to earthquake). In the event abatement occurs with respect
to a lease obligation, lease payments may be interrupted (if all available
insurance proceeds and reserves are exhausted) and the certificates may not be
paid when due.
Several years ago the Richmond Unified School District (the "District")
entered into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover operating
deficits. Following a fiscal crisis in which the District's finances were taken
over by a State receiver (including a brief period under bankruptcy court
protection), the District failed to make rental payments on this lease,
resulting in a lawsuit by the Trustee for the Certificate of Participation
holders, in which the State was named defendant (on the grounds that it
controlled the District's finances). One of the defenses raised in answer to
this lawsuit was the invalidity of the original lease transaction. The trial
court has upheld the validity of the District's lease, and the case has been
settled. Any judgment in any future case against the position asserted by the
Trustee in the Richmond case may have adverse implications for lease
transactions of a similar nature by other California entities.
OTHER CONSIDERATIONS
The repayment of industrial development securities secured by real property
may be affected by California laws limiting foreclosure rights of creditors.
Securities backed by healthcare and hospital revenues may be affected by
changes in State regulations, governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment project
area after the start of redevelopment activity. In the event that assessed
values in the redevelopment project decline (e.g., because of a major natural
disaster such as an earthquake), the tax increment revenue may be insufficient
to make principal and interest payments on these bonds. Both Moody's and S&P
suspended ratings on California tax allocation bonds after the enactment of
Articles XIIIA and XIIIB, and only resumed such ratings on a selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity which
increased such tax rate to repay that entity's general obligation indebtedness.
As a result, redevelopment agencies (which, typically, are the issuers of tax
allocation securities) no longer receive an increase in tax increment when
taxes on property in the project area are increased to repay voter-approved
bonded indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been or
may be introduced which would modify existing taxes or other revenue-raising
measures or which either would further limit or, alternatively, would increase
the abilities of State and local governments to impose new taxes or increase
existing taxes. It is not possible, at present, to predict the extent to which
any such legislation will be enacted. Nor is it possible, at present, to
determine the impact of any such legislation on California Municipal
Obligations in which the Fund may invest, future allocations of State revenues
to local governments or the abilities of State or local governments to pay the
interest on, or repay the principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject
to major seismic activity. Northern California in 1989 and Southern California
in 1994 experienced major earthquakes causing billions of dollars in damages.
S-22
<PAGE>
The federal government provided more than $13 billion in aid for both
earthquakes, and neither event is expected to have any long-term negative
economic impact. Any California Municipal Obligation in the Fund could be
affected by an interruption of revenues because of damaged facilities, or,
consequently, income tax deductions for casualty losses or property tax
assessment reductions. Compensatory financial assistance could be constrained
by the inability of (i) an issuer to have obtained earthquake insurance
coverage at reasonable rates; (ii) an insurer to perform on its contracts of
insurance in the event of widespread losses; or (iii) the federal or State
government to appropriate sufficient funds within their respective budget
limitations.
FACTORS PERTAINING TO CONNECTICUT
Connecticut's economy, historically based on the insurance, defense
manufacturing, finance and real estate industries, is slowly recovering from
one of the most severe recessions in the country, which was due in part to
reductions in defense spending and the downsizing of the forgoing industries.
The construction, trade and service industries are expected to lead the state's
economic recovery. Connecticut is the highest income state in the nation.
While the state's per capita personal income levels are 135% of the national
average, the state's ratio of tax-supported debt to personal income is among
the highest in the nation. These high debts are expected to limit the state's
financial flexibility. The state's general obligation bonds are rated Aa by
Moody's and AA- by Standard and Poor's.
FACTORS PERTAINING TO MASSACHUSETTS
As described above, except to the extent the Massachusetts Municipal Bond
Fund and the Massachusetts Insured Municipal Bond Fund (the "Massachusetts
Funds") invest in temporary investments, the Massachusetts Funds will invest
substantially all of its net assets in Massachusetts Municipal Obligations. The
Massachusetts Funds are therefore susceptible to political, economic or
regulatory factors affecting issuers of Massachusetts Municipal Obligations.
Without intending to be complete, the following briefly summarizes the current
financial situation, as well as some of the complex factors affecting the
financial situation, in the Commonwealth of Massachusetts (the "Commonwealth").
It is derived from sources that are generally available to investors and is
based in part on information obtained from various agencies in Massachusetts.
No independent verification has been made of the accuracy or completeness of
the following information.
There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on Commonwealth or local
government finances generally, will not adversely affect the market value of
Massachusetts Obligations in the Funds or the ability of particular obligors to
make timely payments of debt service on (or relating to) those obligations.
1997 FISCAL YEAR BUDGET
The fiscal 1997 budget approved by the Governor on June 30, 1996, provides
for approximately $17.452 billion in fiscal 1997 expenditures. The Executive
Office for Administration and Finance estimates fiscal 1997 total revenues to
be approximately $17.296 billion, including approximately $12.197 billion in
tax revenues which represents an increase of approximately $146 million or 1.2%
over estimated fiscal 1996 tax collections. The tax revenue estimate reflects
adjustments for certain tax reductions, a change in the way the Commonwealth
calculates the tax liability for certain mutual fund companies, and an increase
in the cigarette tax.
The recent enactment of federal welfare reform legislation is not expected to
have a material effect on the Commonwealth's finances in fiscal 1997. The
Executive Office for Administration and Finance is currently evaluating the
impact of the legislation on the Commonwealth's spending for public assistance
programs.
On August 8, 1996, the Governor approved legislation changing the
apportionment formula for the business corporations tax payable by certain
mutual fund service corporations. Effective January 1, 1997, the legislation
changes the computation of the sales factor. The new law requires the affected
corporations to increase their numbers of employees by 5% per year for five
years, subject to certain conditions. The Department of Revenue estimates that
the changes will result in a revenue reduction of approximately $10 million in
fiscal 1997 and approximately $39 million to $53 million on an annualized
basis, starting in fiscal 1998.
On July 24, 1996, the Legislature overrode the Governor's veto of legislation
imposing a tax increase on certain tobacco products. The Department of Revenue
estimates that these changes will result in approximately $74 million in
additional tax revenue for fiscal 1997, approximately $80 million to $90
million in additional revenue in 1998, and between $73 million and $83 million
by fiscal 2000.
The Department of Revenue's fiscal 1997 tax revenue forecasts have been
adjusted for the $150 million personal income tax reduction mandated by the
fiscal 1996 supplemental appropriations bill approved on July 30, 1996.
1996 Fiscal Year. Preliminary figures for fiscal 1996 indicate that tax
collections totaled approximately $12.051 billion, approximately $886.1
million, or 7.9%, greater than tax collections for fiscal 1995. The Department
of Revenue believes that the strong tax revenue growth in fiscal 1996 was due
partly to one-time factors that may not recur in fiscal 1997.
The Governor approved the final fiscal 1996 appropriations bills on July 30,
1996, and August 10, 1996. Fiscal 1996 spending is currently estimated at
approximately $16.930 billion, with revenues totaling approximately $17.281
S-23
<PAGE>
billion. These assumptions would result in a fiscal 1996 year-end transfer to
the Commonwealth Stabilization Fund of approximately $95.4 million, bringing
its balance to approximately $543 million, the maximum allowed under state law.
The bill approved on July 30, 1996 mandates a personal income tax reduction of
$150 million to be funded by a fiscal 1996 transfer from the General Fund to
the Tax Reduction Fund and to be implemented by a temporary increase in the
amount of the personal exemption allowable for the 1996 taxable year.
As of June 30, 1996, the Commonwealth had a cash position of approximately
$889 million, not including the Stabilization Fund. This compares to a
projected position of $645.5 million. The fiscal 1996 year-end cash position
reflected approximately $161.7 million in advance payments for fiscal 1997
expenses and approximately $110 million in capital expenditures for which the
Commonwealth has not yet issued bonds or notes to reimburse itself.
On November 1, 1995, the Governor released a proposal to reorganize state
government, and on January 23, 1996, he filed implementing legislation
constituting eight bills. Two of the eight reorganization bills became law in
March; the other six bills were disapproved by the legislature. Pursuant to the
two bills and the fiscal 1997 budget, effective July 1, 1996, the number of
Executive Offices was reduced from eleven to six. Offices eliminated include
the Executive Office of Communities and Development (which became the
Department of Housing and Community Development), the Executive Office of
Economic Affairs (which became the Department of Economic Development, with
certain functions transferred to a new Department of Labor and Workforce
Development), the Executive Office of Labor (which became the Department of
Labor and Workforce Development), and the Executive Office of Education, and a
hundred various state boards and commissions were abolished.
On November 28, 1995, the Governor approved a modified version of the
legislation he had filed in September to change the apportionment formula used
for the business corporations tax on certain firms. The new formula will become
effective for certain federal defense contractors on January 1, 1996, and will
be phased in over five years for manufacturing firms generally. The Department
of Revenues estimates that the legislation will reduce revenues by $44 million
in fiscal 1996 and by $90 million in fiscal 1997. If the new formula were fully
effective for all covered businesses, it is estimated that the annual revenue
reduction would be $100 million to $150 million.
On January 23, 1996, the Governor filed legislation that would reduce the
personal income tax rate over two years. The Executive Office for
Administration and Finance estimates that this cut would reduce base tax
revenues by approximately $133 million in fiscal 1997, an additional $265
million in fiscal 1998 and a further $132 million in fiscal 1999, at which time
the tax reduction would be fully implemented.
1995 Fiscal Year. Budgeted revenues and other sources, including non-tax
revenues, collected in fiscal 1995 were approximately $16.387 billion,
approximately $837 million, or 5.4%, above fiscal 1994 revenues of $15.550
billion. Fiscal 1995 tax revenue collections were approximately $11.163
billion, approximately $12 million above the Department of Revenue's revised
fiscal year 1995 tax revenue estimate of $10.151 billion and $556 million, or
5.2%, above fiscal year tax revenues of $10.607 billion.
Budgeted expenditures and other uses of funds in fiscal 1995 were
approximately $16.251 billion, approximately $728 million, or 4.7%, above
fiscal 1994 budgeted expenditures and uses of $15.523 billion. The Commonwealth
ended fiscal 1995 with an operating gain of $137 million and an ending fund
balance of $726 million.
On February 10, 1995, the Governor signed into law certain reforms to the
Commonwealth's program for Aid to Families with Dependent Children ("AFDC"),
subject to federal approval of certain waivers. On August 4, 1995, the federal
government granted a waiver of federal regulations for the Commonwealth's
proposed changes to its AFDC program. However, the federal government imposed
additional conditions upon the proposed two-year limit on the availability of
AFDC benefits for able-bodied adults. On September 23, 1995, the Governor
accepted the federal waiver (except for the provision regarding no time limit
on benefits), and on November 1, 1995, the changes to the AFDC program were
implemented. Fiscal 1996 budget appropriations were expected to be sufficient
to cover program costs.
On November 8, 1994, the voters in the statewide general election approved an
initiative petition that would slightly increase the portion of the gasoline
tax revenue credited to the Highway Fund, one of the Commonwealth's three major
budgetary funds, prohibit the transfer of money from the Highway Fund to other
funds for non-highway purposes and exclude the Highway Fund balance in the
computation "consolidated net surplus" for purposes of state finance laws. The
initiative petition also provides that no more than 15% of gasoline tax
revenues may be used for mass transportation purposes, such as expenditures
related to the Massachusetts Bay Transit Authority. This is not a
constitutional amendment and is subject to amendment or repeal by the
Legislature, which may also, notwithstanding the terms of the petition,
appropriate moneys from the Highway Fund in such amounts and for such purposes
as it determines, subject only to a constitutional restriction that such moneys
be used for highways or mass transit purposes.
1994 Fiscal Year. Fiscal 1994 tax revenue collections were approximately
$10.607 billion, $87 million below the Department of Revenue's fiscal year 1994
tax revenue estimate of $10.694 billion and $677 million above fiscal 1993 tax
revenues of $9.930 billion. Budgeted revenues and other sources, including non-
tax revenues, collected in fiscal 1994 were approximately $15.550 billion.
Total revenues and other sources increased by approximately 5.7% from fiscal
1993 to fiscal 1994 while tax revenues increased by 6.8% for the same period.
Budgeted expenditures and other uses of funds in
S-24
<PAGE>
fiscal 1994 were approximately $15.523 billion, which is $826.5 million or
approximately 5.6% higher than fiscal 1993 budgeted expenditures and other
uses.
In June, 1993, the Legislature adopted and the Governor signed into law
comprehensive education reform legislation. The legislation established a
fiscal 1993 state spending base of approximately $1.288 billion for local
education purposes and required annual increases in state expenditures for such
purposes above that base, subject to appropriation, estimated to be
approximately $175 million in fiscal 1994, approximately $396 million in fiscal
1995, approximately $625 million in fiscal 1996 and approximately $867 million
in fiscal 1997, with additional annual increases anticipated in later years.
The fiscal 1994, 1995, and 1996 budgets have fully funded the requirements
imposed by this legislation.
1993 Fiscal Year. The Commonwealth's budgeted expenditures and other uses
were approximately $14.696 billion in fiscal 1993, which is approximately
$1.280 billion or 9.6% higher than fiscal 1992 expenditures and other uses.
Final fiscal 1993 budgeted expenditures were $23 million lower than the initial
July 1992 estimates of fiscal 1993 budgeted expenditures. Budgeted revenues and
other sources for fiscal 1993 totalled approximately $14.710 billion, including
tax revenues of $9.930 billion. Total revenues and other sources increased by
approximately 6.9% from fiscal 1992 to fiscal 1993, while tax revenues
increased by 4.7% for the same period. Overall, fiscal 1993 ended with a
surplus of revenues and other sources over expenditures and other uses of $13.1
million and aggregate ending fund balances in the budgeted operating funds of
the Commonwealth of approximately $562.5 million.
1992 Fiscal Year. The Commonwealth's budgeted expenditures and other uses
were approximately $13.4 billion in fiscal 1992, which is $238.7 million or
1.7% lower than fiscal 1991 budgeted expenditures. Final fiscal 1992 budgeted
expenditures were $300 million more than the initial July 1991 estimates of
budgetary expenditures, due in part to increases in certain human services
programs, including an increase of $268.7 million for the Medicaid program and
$50.0 million for mental retardation consent decree requirements. Budgeted
revenues and other sources for fiscal 1992 totalled approximately $13.7 billion
(including tax revenues of approximately $9.5 billion), reflecting an increase
of approximately 0.7% from fiscal 1991 to 1992 and an increase of 5.4% in tax
revenues for the same period. Overall, fiscal 1992 ended with an excess of
revenues and other sources over expenditure and other uses of $312.3 million
and with positive fund balances of $549.4 million.
Employment. Reversing a trend of relatively low unemployment during the early
and mid 1980's, the Massachusetts unemployment rate beginning in 1990 increased
significantly to where the Commonwealth's unemployment rate exceeded the
national unemployment rate. For example, during 1991, the Massachusetts
unemployment rate averaged 9.0% while the average United States unemployment
rate was 6.7%. Since 1993, the average monthly unemployment rate has declined
steadily and has been at or below the national average. The Massachusetts
unemployment rate in September 1996 was 4.2%, as compared with the United
States unemployment rate of 5.2% for the same period. Factors which may
significantly and adversely affect the employment rate in the Commonwealth
include reductions in federal government spending on defense-related
industries. Due to this and other considerations, there can be no assurance
that unemployment in the Commonwealth will not increase in the future.
Debt Ratings. S&P currently rates the Commonwealth's uninsured general
obligation bonds at A+. At the same time, S&P currently rates state and agency
notes at SP1. From 1989 through 1993, the Commonwealth had experienced a steady
decline in its S&P rating, with its decline beginning in May 1989, when S&P
lowered its rating on the Commonwealth's general obligation bonds and other
Commonwealth obligations from AA+ to AA and continuing a series of further
reductions until October, 1993, when the rating declined to A+. S&P last
affirmed the Commonwealth's rating at A+ on September 16, 1996.
Moody's currently rates the Commonwealth's uninsured general obligation bonds
at A1 and its notes at MIG-1. From 1989 through 1992, the Commonwealth had
experienced a steady decline in its rating by Moody's. In May 1989, Moody's
lowered its rating on the Commonwealth's notes from MIG-1 to MIG-2. On June 21,
1989, Moody's reduced the Commonwealth's general obligation rating from Aa to
A. On November 15, 1989, Moody's reduced the rating on the Commonwealth's
general obligations from A to Baa1, and on March 9, 1990, Moody's reduced the
rating of the Commonwealth's general obligation bonds from Baa1 to Baa. In
September 1992, Moody's raised the Commonwealth's rating to A. A further
increase to A1 was given in November 1994. The Commonwealth's A1 rating was
last affirmed September 17, 1996.
There can be no assurance that these ratings will continue.
In recent years, certain public bodies and municipalities in the Commonwealth
have faced serious financial difficulties which have affected the credit
standing and borrowing abilities of the respective entities and may have
contributed to higher interest rates on debt obligations. The continuation of,
or an increase in, such financial difficulties could result in declines in the
market values of, or default on, existing obligations in the Fund. Should there
be during the term of the Fund a financial crisis relating to public bodies or
municipalities in the Commonwealth, the market value and marketability of all
outstanding bonds issued by certain public authorities or municipalities in the
Fund and interest income to the Fund could be adversely affected.
Total Bond and Note Liabilities. The total general obligation bond
indebtedness of the Commonwealth (including Dedicated Income Tax Debt and
Special Obligation Debt) as of July 1, 1996 was approximately $10.012 billion.
There
S-25
<PAGE>
were also outstanding approximately $240 million in general obligation notes
and other short term general obligation debt. The total bond and note
liabilities of the Commonwealth as of July 1, 1996, including guaranteed bond
was approximately $13.619 billion.
Debt Service. During the 1980s, capital expenditures were increased
substantially, which accounts for a significant rise in debt service since
1989. In November, 1988, the Executive Office for Administration and Finance
established an administrative limit on state-financed capital spending in the
Capital Projects Fund of $925 million per fiscal year. Capital expenditures
were $847.0 million, $694.1 million, $575.9 million, $760.6 million and $902.2
million in fiscal 1991, fiscal 1992, fiscal 1993, fiscal 1994 and fiscal 1995,
respectively. Commonwealth-financed capital expenditures are projected to be
approximately $898.0 million in fiscal 1996. Debt service expenditures for
fiscal 1991, fiscal 1992, fiscal 1993, fiscal 1994 and fiscal 1995 were $942.3
million, $898.3 million, $1.140 billion, $1.149 billion, and $1.231 billion,
respectively, and are projected to be approximately $1.199 billion for fiscal
1996. The amounts represented do not include debt service on notes issued to
finance certain Medicaid-related liabilities, certain debt service contract
assistance payment to Massachusetts Bay Transportation Authority ($205.5
million projected in fiscal 1996), the Massachusetts Convention Center ($24.6
million projected in fiscal 1996), the Massachusetts Government Land Bank ($6
million projected in fiscal 1996), the Massachusetts Water Pollution Abatement
Trust ($16.6 million projected in fiscal 1996) and grants to municipalities
under the school building assistance program to defray a portion of the debt
service costs on local school bonds ($174.5 million projected in fiscal 1996).
In January 1990, legislation was passed to impose a limit on debt service
beginning in fiscal 1991, providing that no more than 10% of the total
appropriations in any fiscal year may be expended for payment of interest and
principal on general obligation debt (excluding the Fiscal Recovery Bonds).
This law may be amended or repealed by the legislature. The percentage of total
appropriations expended from the budgeted operating funds for debt service
(excluding debt service on Fiscal Recovery Bonds) was 5.6%, 5.9% and 5.4%, for
fiscal 1994, fiscal 1995 and fiscal 1996, respectively.
Certain Liabilities. Among the material future liabilities of the
Commonwealth are significant unfunded general liabilities of its retirement
systems and a program to fund such liabilities; a program whereby, starting in
1978, the Commonwealth began assuming full financial responsibility for all
costs of the administration of justice within the Commonwealth; continuing
demands to raise aggregate aid to cities, towns, schools and other districts
and transit authorities above current levels; and Medicaid expenditures which
have increased each year since the program was initiated. The Commonwealth has
signed consent decrees to continue improving mental health care and programs
for the mentally retarded in order to meet federal standards, including those
governing receipt of federal reimbursements under various programs, and the
parties in those cases have worked cooperatively to resolve the disputed
issues.
As a result of comprehensive legislation approved in January, 1988, the
Commonwealth is required, beginning in fiscal 1989 to fund future pension
liabilities currently and to amortize the Commonwealth's unfunded liabilities
over 40 years. The funding schedule must provide for annual payments in each of
the ten years ending fiscal 1998 which are at least equal to the total
estimated pay-as-you-go pension costs in each year. As a result of this
requirement, the funding requirements for fiscal 1996, 1997 and 1998 are
estimates to be increased to approximately $1.007 billion, $1.061 billion and
$1.128 billion, respectively.
Litigation. The Commonwealth is engaged in various lawsuits involving
environmental and related laws, including an action brought on behalf of the
U.S. Environmental Protection Agency alleging violations of the Clean Water Act
and seeking to enforce the clean-up of Boston Harbor. The MWRA, successor in
liability to the Metropolitan District Commission, has assumed primary
responsibility for developing and implementing a court-approved plan for the
construction of the treatment facilities necessary to achieve compliance with
federal requirements. Under the Clean Water Act, the Commonwealth may be liable
for costs of compliance in these or any other Clean Water cases if the MWRA or
a municipality is prevented from raising revenues necessary to comply with a
judgment. The MWRA currently projects that the total cost of construction of
the treatment facilities required under the court's order is approximately
$3.562 billion in current dollars, with approximately $840 billion to be spent
on or after December 31, 1995. On October 18, 1995, the court entered an order
which reduced the MWRA's obligation to build certain additional secondary
treatment facilities, which is estimated by the MWRA will save ratepayers
approximately $165 million.
The Department of Public Welfare has been sued for the alleged unlawful
denial of personal care attendant services to certain disabled Medicaid
recipients. The Superior Court has denied the plaintiff's motion for
preliminary injunction and class certification. If the plaintiffs were to
prevail on their claims and the Commonwealth were required to provide all of
the services sought by the plaintiffs to all similarly situated persons, it
would substantially increase the annual cost to the Commonwealth. The
Department of Public Welfare currently estimates this increase to be as much as
$200 million per year.
There are also actions pending in which recipients of human services
benefits, such as welfare recipients, the mentally retarded, the elderly, the
handicapped, children, residents of state hospitals and inmates of corrections
institutions, seek expanded levels of services and benefits and in which
providers of services to such recipients challenge the rates at which they are
reimbursed by the Commonwealth. To the extent that such actions result in
judgments requiring the Commonwealth to provide expanded services or benefits
or pay increased rates, additional operating and capital expenditures might be
needed to implement such judgments.
S-26
<PAGE>
In 1995, the Spaulding Rehabilitation Hospital ("Spaulding") filed an action
to enforce an agreement to acquire its property by eminent domain in connection
with the Central Artery/Third Harbor Tunnel Project. If successful, Spaulding
could recover the fair market value of its property in addition to its
relocation costs with respect to its personal property. Spaulding has signed
interrogatories indicating that it believes that the property is worth more
than $60 million.
The Commonwealth faces an additional potential liability of approximately $40
million in connection with a taking by the Massachusetts Highway Department
related to the relocation of Northern Avenue in Boston.
In addition there are several tax matters in litigation which could result in
significant refunds to taxpayers if decisions unfavorable to the Commonwealth
are rendered. In Commissioner of Revenue v. BayBank Middlesex, the Commonwealth
appealed an Appellate Tax Board ruling that granted abatements to 12
Massachusetts banks for tax years 1984 to 1990. The Appellate Tax Board
decision held that the measure of bank excise tax did not include certain
income from tax exempt obligations. On January 24, 1996, the Supreme Judicial
Court affirmed the Appellate Tax Board's decision. The potential liability is
approximately $55 million, including similarly situated banks and tax years
after 1990. Approximately $70 million in taxes and interest are at issue in
several other cases are pending.
A variety of other civil suits pending against the Commonwealth may also
affect its future liabilities. These include challenges to the Commonwealth's
allocation of school aid under Section 9C of Chapter 29 of the General Laws. No
prediction is possible as to the ultimate outcome of these proceedings.
On March 22, 1995, the Supreme Judicial Court held in Perini Corporation v.
Commission of Revenues that certain deductions from the net worth measure of
the Massachusetts corporate excise tax violate the Commerce Clause of the
United States Constitution. On April 30, 1996, the Supreme Judicial Court
entered a partial final judgment implementing its decision for tax years ending
prior to January 1, 1995. The Department of Revenue estimates that tax revenues
in the amount of $40 million to $55 million may be abated as a result of the
partial final judgment. On May 13, 1996, the Court entered an order for
judgment and memorandum concerning relief for tax years ending on or after
January 1, 1996. The Department of Revenue is estimating the fiscal impact of
that ruling.
Many factors, in addition to those cited above, do or may have a bearing upon
the financial condition of the Commonwealth, including social and economic
conditions, many of which are not within the control of the Commonwealth.
Expenditure and Tax Limitation Measures. Limits have been established on
state tax revenues by legislation approved by the Governor on October 25, 1986
and by an initiative petition approved by the voters on November 4, 1986. The
legislation passed by an initiative petition established a state tax revenue
growth limit for each fiscal year. Any excess in state tax revenue collections
over the prescribed limit is to be applied as a proportional credit against the
personal income tax liability of all taxpayers in the Commonwealth. The
legislation passed by the October 1986 legislation established a state tax
revenue growth limit for each fiscal year using a different measure. Tax
revenues in fiscal 1991 through fiscal 1995 were lower than the limit set by
the limitations and the Executive Office for Administration and Finance
currently estimates that same tax revenues in fiscal 1996 will not teach the
limit imposed by either of these statutes.
In November 1980, voters approved Proposition 2 1/2, a statewide limitation
initiative, to constrain levels of property taxation and to limit the certain
charges and fees imposed on cities and towns. Under the terms of Proposition 2
1/2, the increase in the property tax levy is limited to the lesser of: 1) 2.5%
over the previous year's levy plus any growth in the tax base attributable to
certain new construction and 2) 2.5% of the full and fair cash value of the
real estate and personal property therein. Proposition 2 1/2 does permit
communities, with voter approval, to assess taxes in excess of its levy limit
for certain reasons, including payment of specified debt service costs.
Legislation has also been enacted providing for certain local option taxes. A
voter initiative petition approved at the statewide general election in
November, 1990 regulates the distribution of Local Aid of no less than 40% of
collections from individual income taxes, sales and use taxes, corporate excise
taxes, and the balance of the state lottery fund to cities and towns. Local Aid
payments expressly remain subject to annual appropriation, and fiscal 1992,
fiscal 1993, fiscal 1994 and fiscal 1995 appropriations for Local Aid did not
meet, and fiscal 1996 appropriations for Local Aid do not meet, the levels set
forth in the initiative law.
Estate Tax Revisions. The fiscal 1993 budget included legislation which
gradually phases out the current Massachusetts estate tax and replaces it with
a "sponge tax" in 1997. The "sponge tax" is based on the maximum amount of the
credit for state taxes allowed for federal estate tax purposes. The estate tax
is phased out by means of annual increases in the basic exemption from the
original $200,000 level. The exemption is increased to $300,000 for 1993,
$400,000 for 1994, $500,000 for 1995 and $600,000 for 1996. In addition, the
legislation includes a full marital deduction starting July 1, 1994. The
marital deduction had been limited to 50% of the Massachusetts adjusted gross
estate. The static fiscal impact of the phase out of the estate tax was
estimated to be approximately $24.8 million in fiscal 1994 and approximately
$72.5 million in fiscal 1995.
Other Issuers of Massachusetts Obligations. There are a number of state
agencies, instrumentalities and political subdivisions of the Commonwealth that
issue Municipal Obligations, some of which may be conduit revenue obligations
payable from payments from private borrowers. These entities are subject to
various economic risks and uncertainties, and the credit quality of the
securities issued by them may vary considerably from the credit quality of
obligations backed by
S-27
<PAGE>
the full faith and credit of the Commonwealth. The brief summary above does not
address, nor does it attempt to address, any difficulties and the financial
situations of those other issuers of Massachusetts Obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series, portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit. Finally, the potential daily deposit requirements in
futures contracts create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost of the initial
premium. Losses due to hedging transactions will reduce yield. Net gains, if
any, from hedging and other portfolio transactions will be distributed as
taxable distributions to shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and
deposits would exceed 5% of such series' net assets. Each series will invest in
these instruments only in markets believed by the investment adviser to be
active and sufficiently liquid. For further information regarding these
investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, including up to 5% in adequately collateralized
repurchase agreements relating thereto. Interest on each instrument is taxable
for Federal income tax purposes and would reduce the amount of tax-free
interest payable to shareholders.
TEMPORARY INVESTMENTS
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable "temporary investments."
Temporary investments will not exceed 20% of a Fund's assets except when made
for defensive purposes. The Funds will invest only in taxable temporary
investments that are either U.S. Government securities or are rated within the
highest grade by Moody's, S&P, or Fitch and mature 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.
S-28
<PAGE>
Certain Municipal Obligations may carry variable or floating rates of
interest whereby the rate of interest is not fixed, but varies with changes in
specified market rates or indices, such as a bank prime rate or a tax-exempt
money market index.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the
extent permitted under its investment objective, policies and limitations. Such
notes may be issued for different purposes and may be secured differently from
those mentioned above.
The Funds may also invest in the following taxable temporary investments:
U.S. Government Direct Obligations are issued by the United States
Treasury and include bills, notes and bonds.
--Treasury bills are issued with maturities of up to one year. They are
issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
--Treasury notes are longer-term interest bearing obligations with
original maturities of one to seven years.
--Treasury bonds are longer-term interest-bearing obligations with
original maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been
established as instrumentalities of the United States Government to supervise
and finance certain types of activities. These agencies include, but are not
limited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States, and Tennessee Valley Authority. Issues of these agencies, while not
direct obligations of the United States Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury or
supported by the issuing agencies' right to borrow from the Treasury. There can
be no assurance that the United States Government itself will pay interest and
principal on securities as to which it is not legally so obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable
interest bearing instrument with a specific maturity. CDs are issued by banks
in exchange for the deposit of funds and normally can be traded in the
secondary market, prior to maturity. The Fund will only invest in U.S. dollar
denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few days to nine months. Commercial paper may be purchased from
U.S. corporations.
Other Corporate Obligations--The Funds may purchase notes, bonds and
debentures issued by corporations if at the time of purchase there is less than
one year remaining until maturity or if they carry a variable or floating rate
of interest.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. Government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during a Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Funds will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the
opinion of Nuveen Advisory present minimal credit risk. The risk to the Funds
is limited to the ability of the issuer to pay the agreed-upon repurchase price
on the delivery date; however, although the value of the underlying collateral
at the time the transaction is entered into always equals or exceeds the
agreed-upon repurchase price, if the value of the collateral declines there is
a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but a Fund might incur a loss if the value of the
collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by a Fund may be delayed or limited. Nuveen
Advisory will monitor the value of collateral at the time the transaction is
entered into and at all times subsequent during the term of the repurchase
agreement in an effort to determine that the value always equals or exceeds the
agreed upon price. In the event the value of the collateral declined below the
repurchase price, Nuveen Advisory will demand additional collateral from the
issuer to increase the value of the collateral to at least that of the
repurchase price. Each of the Funds will not invest more than 10% of its assets
in repurchase agreements maturing in more than seven days.
S-29
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Funds under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has eight
trustees, two of whom are "interested persons" (as the term "interested
persons" is defined in the Investment Company Act of 1940) and six of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Timothy R. Schwertfeger* 47 Chairman and Chairman since July 1, 1996 of The John Nuveen
333 West Wacker Drive Trustee Company, John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory
Corp.; prior thereto Executive Vice President and
Director of The John Nuveen Company (since March
1992), John Nuveen & Co. Incorporated, Nuveen
Advisory Corp. (since October 1992) and Nuveen
Institutional Advisory Corp. (since October 1992).
Anthony T. Dean* 51 President and President since July 1, 1996 of The John Nuveen
333 West Wacker Drive Trustee Company, John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory
Corp.; prior thereto, Executive Vice President and
Director of The John Nuveen Company (since March
1992), John Nuveen & Co. Incorporated, Nuveen
Advisory Corp. (since October 1992) and Nuveen
Institutional Advisory Corp. (since October 1992).
Lawrence H. Brown 62 Trustee Retired (August 1989) as Senior Vice President of
201 Michigan Avenue The Northern Trust Company.
Highwood, IL 60040
Robert P. Bremner 56 Trustee Private Investor and Management Consultant.
3725 Huntington Street, N.W.
Washington, D.C. 20015
Anne E. Impellizzeri 64 Trustee President and Chief Executive Officer of Blanton-
3 West 29th Street Peale Institute (since December 1990); prior
New York, NY 10001 thereto, Vice President of New York City
Partnership (from 1987 to 1990).
Margaret K. Rosenheim 70 Trustee Helen Ross Professor of Social Welfare Policy,
969 East 60th Street School of Social Service Administration,
Chicago, IL 60637 University of Chicago.
Peter R. Sawers 63 Trustee Adjunct Professor of Business and Economics,
22 The Landmark University of Dubuque, Iowa; Adjunct Professor,
Northfield, IL 60093 Lake Forest Graduate School of Management, Lake
Forest, Illinois (since January 1992); prior
thereto, Executive Director, Towers Perrin
Australia (management consultant); Chartered
Financial Analyst; Certified Management
Consultant.
William J. Schneider 52 Trustee Senior Partner, Miller-Valentine Partners, Vice
4000 Miller-Valentine Ct. President, Miller-Valentine Realty, Inc.
P.O. Box 744
Dayton, OH 45401
William M. Fitzgerald 32 Vice President Vice President of Nuveen Advisory Corp. (since
333 West Wacker Drive December 1995); Assistant Vice President of Nuveen
Chicago, IL 60606 Advisory Corp. (from September 1992 to December
1995), prior thereto Assistant Portfolio Manager
of Nuveen Advisory Corp. (from June 1988 to
September 1992).
Kathleen M. Flanagan 49 Vice President Vice President of John Nuveen & Co. Incorporated.
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
S-30
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
J. Thomas Futrell 41 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Steven J. Krupa 39 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis 50 Vice President Vice President of John Nuveen & Co. Incorporated.
333 West Wacker Drive
Chicago, IL 60606
Larry W. Martin 45 Vice President Vice President (since September 1992), and Assistant Secretary
333 West Wacker Drive and Assistant General Counsel of John Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice President (since May 1993) and Assistant
Secretary of Nuveen Advisory Corp.; Vice President (since
May 1993) and Assistant Secretary (since January 1992) of
Nuveen Institutional Advisory Corp.; Assistant Secretary of
The John Nuveen Company (since February 1993).
Edward F. Nield, IV 31 Vice President Vice President (since September 1996), previously Assistant Vice
One South Main Street President (since December 1993) of Nuveen Advisory Corp.,
Dayton, OH 45402 portfolio manager prior thereto (since January 1992); Vice
President (since September 1996), previously Assistant Vice
President (since May 1995) of Nuveen Institutional Advisory
Corp., portfolio manager prior thereto (since January 1992).
O. Walter Renfftlen 57 Vice President Vice President and Controller of the John Nuveen Company
333 West Wacker Drive (since March 1992), John Nuveen & Co. Incorporated,
Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen Institutional Advisory
Corp.
Thomas C. Spalding, Jr. 45 Vice President Vice President of Nuveen Advisory Corp. and Nuveen
333 West Wacker Drive Institutional Advisory Corp.; Chartered Financial Analyst.
Chicago, IL 60606
H. William Stabenow 62 Vice President Vice President and Treasurer of the John Nuveen Company
333 West Wacker Drive (since March 1992), John Nuveen & Co. Incorporated,
Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen Institutional Advisory
Corp, (since January 1992).
Gifford R. Zimmerman 40 Vice President Vice President (since September 1992), Assistant Secretary and
333 West Wacker Drive Assistant General Counsel of John Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice President (since May 1993) and Assistant
Secretary of Nuveen Advisory Corp.; Vice President (since
May 1993) and Assistant Secretary (since January 1992) of
Nuveen Institutional Advisory Corp.
</TABLE>
Anthony Dean, Margaret Rosenheim and Timothy Schwertfeger serve as members of
the Executive Committee of the Board of Trustees. The Executive Committee, which
meets between regular meetings of the Board of Trustees, is authorized to
exercise all of the powers of the Board of Trustees.
The trustees of the Trust are also directors or trustees, as the case may be,
of 9 other Nuveen open-end funds and 52 Nuveen closed-end funds.
S-31
<PAGE>
The following table sets forth estimated compensation paid or accrued by the
Trust to each of the trustees of the Trust for the first full fiscal year and
the total compensation that all Nuveen Funds paid to each trustee during the
calendar year 1996. 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........................ $1,448(3) $20,500(3)
Lawrence H. Brown........................ $3,237 $58,500
Anne E. Impellizzeri..................... $3,237 $58,500
Margaret K. Rosenheim.................... $3,579(2) $66,315(1)
Peter R. Sawers.......................... $3,237 $58,500
William S. Schneider..................... $1,518(3) $21,500(3)
</TABLE>
- --------
(1) Includes $1,565 in interest accrued on deferred compensation from prior
years.
(2) Includes $324 in interest accrued on deferred compensation from prior
years.
(3) As a trustee of the Flagship Funds, for the 12 month period ended May 31,
1996.
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 January 3, 1997, owns of record, or is known by Registrant to own of
record or beneficially 5% or more of any class of a Fund's shares.
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship New York Municipal
Bond Fund MLPF&S for the sole benefit of 33.01%
Class A Shares................... its customers
Attn Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville FL 32246-6484
Nuveen Flagship New York Municipal
Bond Fund MLPF&S for the sole benefit of 46.56
Class C Shares................... its customers
Attn Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville FL 32246-6484
Prudential Securities Inc. FBO 7.83
Ms Hanifa Omerhodzic
170 Windom Ave
Orchard Park NY 14127-1518
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship New York Municipal
Bond Fund BHC Securities Inc. 8.34%
Class R Shares.................... FAO 70001464
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103
Nuveen New York Insured Municipal
Bond Fund BHC Securities Inc. 14.87
Class A Shares.................... FAO 70015729
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103N
FSC FEBO # OSN-710261 7.44
Beverly S. Greenberg
150 E. 69th St. Apt. 15B
New York, NY 10021
Nuveen New York Insured Municipal
Bond Fund Arlene Krasnoff 11.47
Class C Shares.................... 21707 82nd Ave.
Queens Village, NY 11427-1103
Ruth Preston & 8.68
Sara P. Costello &
Patricia N. Kohl
JT TEN WROS NOT TC
2 Middleton Rd.
Greenport, NY 11944-1115
Donaldson Lufkin Jenrette 7.53
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-9998
Harriette Rosenbloom 5.83
3777 Independence Ave.
Bronx, NY 10463-1409
Nuveen New York Insured Municipal
Bond Fund BHC Securities Inc. 22.64
Class R Shares.................... FAO 70001770
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103
</TABLE>
S-33
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship New
Jersey Municipal Bond MLPF&S for the sole benefit of 13.93%
Fund its customers
Class A Shares........ Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship New
Jersey Municipal Bond William G. Osborne 20.12
Fund % Aurachem Corp.
Class C Shares........ South 3R & Somerset St.
PO Box 471
Harrison, NJ 07029-0471
Alvin H. Frankel Agent for 7.32
Louise I. Grill
U/POA DTD Jun 17 94
601 Haddon Ave
Collingswood, NJ 08108-3703
Donaldson Lufkin Jenrette 5.33
Securities Corporation Inc
PO Box 2052
Jersey City, NJ 07303-9998
Nuveen Flagship New
Jersey Intermediate Merrill Lynch Pierce Fenner & 22.65
Municipal Bond Fund Smith for the sole benefit of its customers
Class A Shares........ Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen California
Municipal Bond Fund NFSC FEBO # OFP-002135 19.56
Class C Shares........ Michele Chiapella
103 Northwood Commons
Chico, CA 95926
Paul R. Hoeber 19.53
611 Bay St. Apt. 4
San Francisco, CA 94133-1619
Elizabeth Pazdra 12.73
3829 State Highway 49
Placerville, CA 95667-6301
John C. MacGregor-Scott Tr 6.19
UA JUN 22 87
MacGregor-Scott Rev Fam Trust
720 W Camino Real Ave.
Arcadia, CA 91007-7839
David Neil Daniels & 5.23
Judy Curry Daniels Trs
UA JAN 13 94
Daniels Revocable Trust
305 Tioga Ct
Palo Alto, CA 94306-4543
</TABLE>
S-34
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen California
Municipal Bond Fund Smith Barney Shearson 5.08%
Class R Shares........ 00119601999
388 Greenwich Street
New York, NY 10013
Nuveen California 5.63
Insured Municipal Bond Smith Barney Shearson Inc
Fund 00152919411
Class A Shares........ 388 Greenwich Street
New York, NY 10013
Nuveen Flagship
Connecticut Municipal MLPF&S for the Sole Benefit & 26.46
Bond Fund of its Customers
Class A Shares........ Attn; Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship
Connecticut Municipal Merrill Lynch Pierce Fenner 38.38
Bond Fund & Smith for the sole benefit of its customers
Class C Shares........ Attn: Fund Administration
4800 Deer Lake Dr E Fl 3
Jacksonville, FL 32246-6484
Nuveen Massachusetts
Municipal Bond Fund NFSC FEBO #OC8-412740 6.31
Class A Shares........ Barbara Polverari
PO Box 30
W Springfield, MA 01090
Smith Barney Inc. 6.04
00162105158
388 Greenwich Street
New York, New York 10013
Montgomery Securities 5.18
752-08450-12
Attn: Mutual Funds - 4th Floor
600 Montgomery Street
San Francisco, CA 94111
Nuveen Massachusetts
Municipal Bond Fund Hudson L. Matson 15.43
Class C Shares........ 39 Griggs Rd.
Sutton, MA 01590-1015
Swastika Sengupta 9.20
23 Loumar Dr. # 2
Pittsfield, MA 01201-5932
Mary H. Melville 9.19
4 Paul Revere Rd.
Worcester MA 01609-1210
Loren Robbins 7.00
51 Main St.
N. Chelmsford, MA 01863-1628
Anthony Macolini 5.75
17 Nossdale Rd.
Jamaica Plain, MA 02130-3022
</TABLE>
S-35
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Charles G. Allen, Jr. Tr. 5.34%
UA MAR 05 54
UW Flora A. Generess
FBO Charles G. Allen Jr. Et al
221 James St. #65
Barre, MA 01005-8805
Nuveen Massachusetts Insured
Municipal Bond Fund NFSC FEBO # DKR-016039 6.44
Class A Shares.................. Allen Wrightington
Mary Ann Wrightington
93 Micajah Pond
Plymouth, MA 02360
Gerald W. Mahoney &
Elaine Mahoney Tr 5.72
UA 10/05/94
Mahoney Rev. Trust
162 Oakland St.
Fall River, MA 02720-6114
Nuveen Massachusetts Insured
Municipal Bond Fund Edward D. Jones and Co. FAO 12.73
Class C Shares.................. George A. Dauteuil &
Pauline Dauteuil
EDJ# 258-03788-1-4
P.O. Box 2500
Maryland Heights, MD 63043-8500
Ruth Biller
51 Oak Rd. 12.54
Canton, MA 02021-2625
Rose E. Frisch
3 Hillside Pl. 11.54
Cambridge, MA 02140-3617
Daniel M. Flynn &
Kathleen F. Flynn 11.28
JT TEN WROS NOT TC
232 North Rd.
Hampden, MA 01036-9659
John Sullivan
6 Margaret St. 11.26
Boston, MA 02113-2523
Theodora C. Roy 5.95
148 Mountain Rd.
Holyoke MA 01040-9523
Magdalene S. Kapuscienski &
Gene S. Kapuscienski 5.01
JT TEN WROS NOT TC
15 D Country Club Lane
Milford, MA 01757
</TABLE>
S-36
<PAGE>
INVESTMENT ADVISER AND INVESTMENT
MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the
investment and reinvestment of the assets of each of the Funds. Nuveen Advisory
also administers the Trust's business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. See "Fund
Service Providers" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and
the Trust, each of the Funds has agreed to pay an annual management fee at the
rates set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE FEE MANAGEMENT FEE
- --------------------------------- --------------
<S> <C>
For the first $125 million....................................... .5500 of 1%
For the next $125 million........................................ .5375 of 1%
For the next $250 million........................................ .5250 of 1%
For the next $500 million........................................ .5125 of 1%
For the next $1 billion.......................................... .5000 of 1%
For assets over $2 billion....................................... .4750 of 1%
</TABLE>
Nuveen Advisory will waive through July 31, 1997 all or a portion of its
management fee or reimburse certain expenses of the California, California
Insured, Massachusetts, Massachusetts Insured, New Jersey, New York and New
York Insured Municipal Bond Funds 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 (.975 for insured Funds) of 1%
of average daily net asset value of any class of shares of those Funds.
Nuveen Advisory has agreed to waive some or all of its fees or reimburse
expenses to prevent total operating expenses (not counting distribution and
service fees) from exceeding 0.75% of average daily net assets of the New York,
California, and Massachusetts Funds, and 0.975% of average daily net assets of
the New York Insured, California Insured, and Massachusetts Insured Funds. For
the New Jersey, New Jersey Intermediate, Connecticut, and the California
Intermediate Funds, Nuveen Advisory has committed through at least 1998 to
waive fees or reimburse expenses to the extent necessary to maintain a dividend
level competitive with that of similar funds, and has voluntarily agreed
through July 31, 1997 to waive fees or reimburse expenses so that the total
operating expenses (not counting distribution and service fees) for the fund do
not exceed 0.75% of average daily net assets.
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF EXPENSE FEE WAIVERS AND EXPENSE
REIMBURSEMENT PAID TO NUVEEN REIMBURSEMENTS
ADVISORY FOR THE YEAR ENDED FOR THE YEAR ENDED
-------------------------------- -----------------------
1/31/94 1/31/95 1/31/96 1/31/94 1/31/95 1/31/96
---------- ---------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
New Jersey Municipal
Bond Fund.............. $ 85,065 156,717 152,929 61,303 54,105 115,121
</TABLE>
For the last three fiscal years, the New York Municipal Bond Fund, the New
York Insured Municipal Bond Fund, the California Municipal Bond Fund, the
California Insured Municipal Bond Fund, the Massachusetts Municipal Bond Fund,
and the Massachusetts Insured Municipal Bond Fund paid net management fees to
Nuveen Advisory as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF EXPENSE FEE WAIVERS AND EXPENSE
REIMBURSEMENT PAID TO NUVEEN REIMBURSEMENTS
ADVISORY FOR THE YEAR ENDED FOR THE YEAR ENDED
------------------------------ -----------------------
2/28/94 2/28/95 2/29/96 2/28/94 2/28/95 2/29/96
---------- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
New York Municipal Bond
Fund................... $ 688,156 786,847 852,809 34,007 4,556 29,700
New York Insured
Municipal Bond Fund.... $1,968,122 1,921,472 1,940,010 0 1,767 0
California Municipal
Bond Fund.............. $1,130,541 1,123,360 1,199,571 0 3,483 3,302
California Insured
Municipal Bond Fund.... $1,053,393 1,073,336 1,156,993 0 2,697 1,695
Massachusetts Municipal
Bond Fund.............. $ 320,135 370,394 366,859 37,413 17,319 59,879
Massachusetts Insured
Municipal Bond Fund.... $ 295,357 302,241 346,952 0 1,148 788
</TABLE>
S-37
<PAGE>
For the last three fiscal years, the New Jersey Intermediate Municipal Bond
Fund, the California Intermediate Municipal Bond Fund, and the Connecticut
Municipal Bond Fund paid net management fees to Flagship Financial, predecessor
to Nuveen Advisory as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF
EXPENSE REIMBURSEMENT
PAID TO FLAGSHIP FEE WAIVERS AND EXPENSE
FINANCIAL FOR THE YEAR REIMBURSEMENTS
ENDED FOR THE YEAR ENDED
------------------------ -----------------------
5/31/94 5/31/95 5/31/96 5/31/94 5/31/95 5/31/96
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
New Jersey Intermediate
Municipal Bond Fund.......... $ 0 0 0 40,542 45,333 101,996
California Intermediate
Municipal Bond Fund.......... $ 0 0 0 0 0 0
Connecticut Municipal Bond
Fund......................... $255,441 396,094 421,811 768,360 615,631 636,447
</TABLE>
As discussed in the Prospectus, 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. Founded in 1898,
Nuveen is the oldest and largest investment banking firm specializing in the
underwriting and distribution of tax-exempt securities and maintains the
largest research department in the investment banking community devoted
exclusively to the analysis of municipal securities. In 1961, Nuveen began
sponsoring the Nuveen Tax-Exempt Unit Trust and since that time has issued more
than $36 billion in tax-exempt unit trusts, including over $12 billion in tax-
exempt insured unit trusts. In addition, Nuveen open-end and closed-end funds
held approximately $35 billion in tax-exempt securities under management as of
the date of this Statement. Over 1,000,000 individuals have invested to date in
Nuveen's tax-exempt funds and trusts. Nuveen is a subsidiary of The John Nuveen
Company which, in turn, is approximately 78% owned by The St. Paul Companies,
Inc. ("St. Paul"). St. Paul is located in St. Paul, Minnesota and is
principally engaged in providing property-liability insurance through
subsidiaries. Effective January 1, 1997, The John Nuveen Company acquired
Flagship Resources Inc., and as part of that acquisition, Flagship Financial,
the adviser to the Flagship Funds, was merged with Nuveen Advisory.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's
Research Department. The Nuveen Research Department reviews more than $100
billion in municipal bonds every year.
The Funds, the other Nuveen funds, Nuveen Advisory, and other related
entities have adopted a code of ethics which essentially prohibits all Nuveen
fund management personnel, including Nuveen fund portfolio managers, from
engaging in personal investments which compete or interfere with, or attempt to
take advantage of, a Fund's anticipated or actual portfolio transactions, and
is designed to assure that the interests of Fund shareholders are placed before
the interests of Nuveen personnel in connection with personal investment
transactions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of each Fund, will place orders in such manner as, in the opinion
of management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be
obtained elsewhere. Portfolio securities will not be purchased from Nuveen or
its affiliates except in compliance with the Investment Company Act of 1940.
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
S-38
<PAGE>
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 those 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 New York Stock
Exchange (the "Exchange") is normally open for trading. The Exchange is not
open for trading on New Year's Day, Washington's Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share of a class of shares of a Fund will be computed
by dividing the value of the Fund's assets attributable to the class, less the
liabilities attributable to the class, by the number of shares of the class
outstanding.
In determining net asset value for the Funds, each Fund's custodian utilizes
the valuations of portfolio securities furnished by a pricing service approved
by the trustees. The pricing service values portfolio securities at the mean
between the quoted bid and asked price or the yield equivalent when quotations
are readily available. Securities for which quotations are not readily
available (which constitute a majority of the securities held by the Funds) are
valued at fair value as determined by the pricing service using methods which
include consideration of the following: yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. The pricing service may
employ electronic data processing techniques and/or a matrix system to
determine valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Trust under the general supervision of the
Board of Trustees.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based upon the
advice of Fried, Frank, Harris, Shriver & Jacobson, counsel to the Trust.
Each Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, a Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, a Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second, 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"). 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
S-39
<PAGE>
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.
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
after a purchase of such shares prior to the record date will have the effect
of reducing the per share net asset value by the per share amount of the
dividend or distribution.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by a Fund (and received by
the shareholders) on December 31.
The redemption or exchange of the shares of a Fund normally will result in
capital gain or loss to the shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, net capital gains (i.e., the excess of net long-term
capital gain over net short-term
S-40
<PAGE>
capital loss) will be taxed at a maximum marginal rate of 28%, while short-term
capital gains and other ordinary income will be taxed at a maximum marginal
rate of 39.6%. Because of the limitations on itemized deductions and the
deduction for personal exemptions applicable to higher income taxpayers, the
effective tax rate may be higher in certain circumstances.
All or a portion of a sales charge paid in purchasing shares of a Fund cannot
be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent shares of a Fund or another fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
Any disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Moreover, losses
recognized by a shareholder on the redemption or exchange of shares of a Fund
held for six months or less are disallowed to the extent of any distribution of
exempt-interest dividends received with respect to such shares and, if not
disallowed, such losses are treated as long-term capital losses to the extent
of any distributions of long-term capital gains made with respect to such
shares. In addition, no loss will be allowed on the redemption or exchange of
shares of a Fund if the shareholder purchases other shares of such Fund
(whether through reinvestment of distributions or otherwise) or the shareholder
acquires or enters into a contract or option to acquire securities that are
substantially identical to shares of a Fund within a period of 61 days
beginning 30 days before and ending 30 days after such redemption or exchange.
If disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.
It may not be advantageous from a tax perspective for shareholders to redeem
or exchange shares after tax-exempt income has accrued but before the record
date for the exempt-interest dividend representing the distribution of such
income. Because such accrued tax-exempt income is included in the net asset
value per share (which equals the redemption or exchange value), such a
redemption could result in treatment of the portion of the sales or redemption
proceeds equal to the accrued tax-exempt interest as taxable gain (to the
extent the redemption or exchange price exceeds the shareholder's tax basis in
the shares disposed of) rather than tax-exempt interest.
In order to avoid a 4% federal excise tax, a Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which such Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Funds intend to make timely distributions in
compliance with these requirements and consequently it is anticipated that they
generally will not be required to pay the excise tax.
If in any year a Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from Municipal Obligations), and distributions to its shareholders would
be taxable to shareholders as ordinary dividend income for federal income tax
purposes to the extent of the Fund's available earnings and profits.
Among the requirements that a Fund must meet in order to qualify under
Subchapter M in any year is that less than 30% of its gross income must be
derived from the sale or other disposition of securities and certain other
assets held for less than three months.
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.
S-41
<PAGE>
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.
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.
NEW YORK
The following is a general, abbreviated summary of certain provisions of the
applicable New York tax law as presently in effect as it directly governs the
taxation of resident individual, corporate, and unincorporated business
shareholders of the New York Fund. This summary does not address the taxation
of other shareholders nor does it discuss any local taxes, other than New York
City taxes, that may be applicable. These provisions are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to New York Fund transactions.
The following is based on the assumptions that the New York Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause New York Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the New York Fund's shareholders.
The New York Fund will be subject to the New York State corporate franchise
tax and the New York City general corporation tax only if it has a sufficient
nexus with New York State or New York City. If it is subject to such taxes, it
does not expect to pay a material amount of either tax.
Distributions by the New York Fund that are attributable to interest on any
obligation of New York and its political subdivisions or to interest on
obligations of U.S. territories and possessions that are exempt from state
taxation under federal law will not be subject to the New York State personal
income tax or the New York City personal income or unincorporated business
taxes. Distributions by the New York Fund that are attributable to interest on
obligations of the United States or its instrumentalities ("Federal
Obligations") will be exempt from the New York State personal income tax or the
New York City personal income or unincorporated business taxes only if, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of Federal Obligations. The New York Fund does not expect
to meet this requirement, however, and such distributions will be subject to
tax. All other distributions, including distributions attributable to capital
gains, will be subject to the New York State personal income tax and the New
York City personal income and unincorporated business taxes.
All distributions from the New York Fund, regardless of source, will increase
the taxable base of shareholders subject to the New York State franchise tax or
the New York City general corporation tax.
Gain from the sale, exchange, or other disposition of shares of the New York
Fund will be subject to the New York State personal income and franchise taxes
and the New York City personal income, unincorporated business, and general
corporation taxes.
S-42
<PAGE>
Shares of the New York Fund may be subject to the New York State estate tax
if owned by a New York decedent at the time of death.
NEW JERSEY
The following is a general, abbreviated summary of certain provisions of the
applicable New Jersey tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the New Jersey
Funds. This summary does not address the taxation of other shareholders nor
does it discuss any local taxes that may be applicable. These provisions are
subject to change by legislative or administrative action, and any such change
may be retroactive with respect to transactions of the New Jersey Funds.
The following is based on the assumptions that the New Jersey Funds will
qualify under Subchapter M of the Code as regulated investment companies and
under New Jersey law as qualified investment funds, that they will satisfy the
conditions which will cause New Jersey Funds' distributions to qualify as
exempt-interest dividends to shareholders, and that they will distribute all
interest and dividends they receive to the New Jersey Funds' shareholders.
The New Jersey Funds will be subject to the New Jersey corporation business
tax or the New Jersey corporation income tax only if it has a sufficient nexus
with New Jersey. If it is subject to either tax, it does not expect to pay a
material amount of either tax.
Distributions by the New Jersey Funds that are attributable to interest or
gains on any obligation of New Jersey or its political subdivisions or to
interest or gains on obligations of the United States, its territories,
possessions, or instrumentalities that are exempt from state taxation under
federal law will not be subject to the New Jersey gross income tax. All other
distributions will be subject to the New Jersey gross income tax.
All distributions from the New Jersey Funds, regardless of source, will
increase the taxable base of shareholders subject to the New Jersey corporation
business tax or the New Jersey corporation income tax.
Gain on the sale, exchange, or other disposition of shares of the New Jersey
Funds will not be subject to the New Jersey gross income tax. Conversely,
losses from such transactions may not be used to offset New Jersey taxable
gains. Gains from such transactions will be subject to the New Jersey
corporation income tax.
Shares of the New Jersey Funds may be subject to the New Jersey inheritance
tax or the New Jersey estate tax if owned by a New Jersey decedent at the time
of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning New Jersey and local tax matters.
CALIFORNIA
The following is a general, abbreviated summary of certain provisions of the
applicable California tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the California
Funds. This summary does not address the taxation of other shareholders nor
does it discuss any local taxes that may be applicable. These provisions are
subject to change by legislative or administrative action, and any such change
may be retroactive with respect to transactions of the California Funds.
The following is based on the assumptions that the California Funds will
qualify under Subchapter M of the Code as regulated investment companies, that
they will satisfy the conditions which will cause distributions of the
California Funds to qualify as exempt-interest dividends to shareholders, and
that they will distribute all interest and dividends they receive to the
California Funds' shareholders.
The California Funds will not be subject to the California corporate
franchise tax. The California Funds will be subject to the California corporate
income tax only if it has a sufficient nexus with California. If it is subject
to the California corporate income tax, it does not expect to pay a material
amount of such tax.
Distributions by the California Funds that are attributable to interest on
any obligation of California 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 California personal income tax. All other distributions,
including distributions attributable to capital gains, will be subject to the
California personal income tax.
All distributions of California Funds to corporate shareholders, regardless
of source, will be subject to the California corporate franchise tax.
Gain on the sale, exchange, or other disposition of shares of the California
Funds will be subject to the California personal income and corporate franchise
taxes.
Shares of the California Funds may be subject to the California estate tax if
held by a California decedent at the time of death.
S-43
<PAGE>
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning California tax matters.
CONNECTICUT
The following is a general, abbreviated summary of certain provisions of the
applicable Connecticut tax law as presently in effect as it directly governs
the taxation of resident individual and corporate shareholders of the
Connecticut 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 Connecticut Fund
transactions.
The following is based on the assumptions that the Connecticut Fund will
qualify under Subchapter M of the Code as a regulated investment company, that
it will satisfy the conditions which will cause Connecticut Fund distributions
to qualify as exempt-interest dividends to shareholders, and that it will
distribute all interest and dividends it receives to the Connecticut Fund's
shareholders.
The Connecticut Fund will be subject to the Connecticut corporation business
tax only if it has a sufficient nexus with Connecticut. If it is subject to
that tax, it does not expect to pay a material amount of such tax.
Distributions from the Connecticut Fund that are attributable to interest or
gain on any obligation of Connecticut and its political subdivisions
("Connecticut Obligations") or to interest on obligations of U.S. territories
and possessions that are exempt from state taxation under federal law will not
be subject to the Connecticut personal income tax. Distributions from the
Connecticut Fund that are attributable to interest on obligations of the United
States or its instrumentalities ("Federal Obligations") will be exempt from the
Connecticut personal income tax only if, at the close of each quarter of its
taxable year, the Connecticut Fund holds at least 50% of its gross assets in
Federal Obligations. The Connecticut Fund does not expect to meet this
requirement, however, and such distributions will be subject to tax. All other
distributions, including distributions attributable to capital gain (other than
capital gain on Connecticut Obligations), will be subject to the Connecticut
personal income tax.
All distributions from the Connecticut Fund, regardless of source, will be
subject to the Connecticut corporation business tax, but corporate shareholders
may be permitted a dividends received deduction for a portion of Connecticut
Fund distributions received.
Gain on the sale, exchange, or other disposition of shares of the Connecticut
Fund will be subject to the Connecticut personal income tax and the Connecticut
corporation business tax.
Shares of the Connecticut Fund may be subject to the Connecticut succession
tax, the Connecticut transfer tax, and the Connecticut estate tax if owned by,
or subject to a general power of appointment by, a Connecticut decedent at the
time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Connecticut and local tax matters.
MASSACHUSETTS
The following is a general, abbreviated summary of certain provisions of the
applicable Massachusetts tax law as presently in effect as it directly governs
the taxation of resident individual and corporate shareholders of the
Massachusetts Funds. This summary does not address the taxation of other
shareholders nor does it discuss any local taxes that may be applicable. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to the Massachusetts Funds'
transactions.
The following is based on the assumptions that the Massachusetts Funds will
qualify under Subchapter M of the Code as regulated investment companies, that
they will satisfy the conditions which will cause distributions of the
Massachusetts Funds to qualify as exempt-interest dividends to shareholders,
and that they will distribute all interest and dividends they receive to the
Massachusetts Funds' shareholders.
The Massachusetts Funds are not subject to the Massachusetts corporate excise
tax, the Massachusetts franchise tax, or the Massachusetts income tax.
Distributions by the Massachusetts Funds that are attributable to interest on
or gain from the sale or exchange of any obligation of Massachusetts and its
political subdivisions, agencies and instrumentalities or to interest on
obligations of the United States and its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Massachusetts personal income tax. All other
distributions will be subject to the Massachusetts personal income tax.
Distributions by the Massachusetts Funds, regardless of source, are subject
to the Massachusetts excise tax.
Gain on the sale, exchange, or other disposition of shares of the
Massachusetts Funds will be subject to the Massachusetts personal income and
corporate excise tax.
S-44
<PAGE>
Shares of the Massachusetts Funds may be subject to the Massachusetts estate
tax if owned by a Massachusetts decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Massachusetts state and local tax matters.
PERFORMANCE INFORMATION
The historical investment performance of the Funds may be shown in the form
of "yield," "taxable equivalent yield," "average annual total return,"
"cumulative total return" and "taxable equivalent total return" figures, each
of which will be calculated separately for each class of shares.
In accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission ("SEC"), yield is computed by dividing the
net investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 4.20%.
In computing yield, the Funds follow certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Funds use to prepare their annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in a Fund's financial statements.
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by the remainder of (1 minus the stated combined federal
and state income tax rate, taking into account the deductibility of state taxes
for federal income tax purposes) and adding the product to that portion, if
any, of the yield that is not tax exempt.
S-45
<PAGE>
The taxable equivalent yields quoted below are based upon (1) the stated
combined federal and state income tax rates and (2) the yields for the 30-day
period quoted in the left-hand column. None of the Funds had Class B Shares
outstanding as of the date of this Statement of Additional Information.
<TABLE>
<CAPTION>
AS OF JULY 31, 1996
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
New Jersey Municipal Bond
Fund
Class A Shares............. 4.78% 43.5% 8.46%
Class C Shares............. 4.25% 43.5% 7.52%
Class R Shares............. 5.24% 43.5% 9.27%
<CAPTION>
AS OF AUGUST 31, 1996
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
New York Municipal Bond
Fund**
Class A Shares............. 4.69% 43.5% 8.30%
Class C Shares............. 4.13% 43.5% 7.31%
Class R Shares............. 5.14% 43.5% 9.10%
New York Insured Municipal
Bond Fund**
Class A Shares............. 4.30% 43.5% 7.61%
Class C Shares............. 3.73% 43.5% 6.60%
Class R Shares............. 4.74% 43.5% 8.39%
California Municipal Bond
Fund
Class A Shares............. 4.53% 45.0% 8.24%
Class C Shares............. 3.96% 45.0% 7.20%
Class R Shares............. 4.98% 45.0% 9.05%
California Insured Municipal
Bond Fund
Class A Shares............. 4.45% 45.0% 8.09%
Class C Shares............. 3.88% 45.0% 7.05%
Class R Shares............. 4.90% 45.0% 8.91%
Massachusetts Municipal Bond
Fund
Class A Shares............. 4.42% 47.0% 8.34%
Class C Shares............. 3.85% 47.0% 7.26%
Class R Shares............. 4.87% 47.0% 9.19%
Massachusetts Insured
Municipal Bond Fund
Class A Shares............. 4.03% 47.0% 7.60%
Class C Shares............. 3.45% 47.0% 6.51%
Class R Shares............. 4.47% 47.0% 8.43%
<CAPTION>
AS OF NOVEMBER 30, 1996
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
New Jersey Intermediate
Municipal Bond Fund
Class A Shares............. 4.03% 43.5% 7.13%
Class C Shares............. N/A N/A N/A
Class R Shares............. N/A N/A N/A
California Intermediate
Municipal Bond Fund
Class A Shares............. N/A N/A N/A
Class C Shares............. N/A N/A N/A
Class R Shares............. N/A N/A N/A
Connecticut Municipal Bond
Fund
Class A Shares............. 4.64% 42.5% 8.07%
Class C Shares............. 4.30% 42.5% 7.48%
Class R Shares............. N/A N/A N/A
</TABLE>
- --------
* The combined tax rates used in these tables represent the highest or one
of the highest combined tax rates applicable to state taxpayers, rounded
to the nearest .5%; these rates do not reflect the current federal tax
limitations on itemized deductions and personal exemptions, which may
raise the effective tax rate and taxable equivalent yield for taxpayers
above certain income levels.
** Reflects a combined federal, state and New York City tax rate.
S-46
<PAGE>
For additional information concerning taxable equivalent yields, see the
Taxable Equivalent Yields tables in the Prospectus.
The Funds may from time to time in their advertising and sales materials
report a quotation of their current distribution rate. The distribution rate
represents a measure of dividends distributed for a specified period.
Distribution rate is computed by taking the most recent monthly tax-free income
dividend per share, multiplying it by 12 to annualize it, and dividing by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen UITs, or the maximum public
offering price). The distribution rate differs from yield and total return and
therefore is not intended to be a complete measure of performance. Distribution
rate may sometimes differ from yield because a Fund may be paying out more than
it is earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
The distribution rates as of the period quoted, based on the maximum public
offering price then in effect for the Funds, and assuming the imposition of the
maximum sales charge for Class A Shares of 4.20%, were as follows:
<TABLE>
<CAPTION>
JULY 31, 1996
-----------------------
DISTRIBUTION RATES
-----------------------
CLASS A CLASS C CLASS R
------- ------- -------
<S> <C> <C> <C>
New Jersey Municipal Bond Fund.................... 4.77% 4.22% 5.21%
<CAPTION>
AUGUST 31, 1996
-----------------------
DISTRIBUTION RATES
-----------------------
CLASS A CLASS C CLASS R
------- ------- -------
<S> <C> <C> <C>
New York Municipal Bond Fund...................... 5.10% 4.56% 5.60%
New York Insured Municipal Bond Fund.............. 4.79% 4.24% 5.23%
California Municipal Bond Fund ................... 5.00% 4.46% 5.49%
California Insured Municipal Bond Fund............ 4.82% 4.26% 5.27%
Massachusetts Municipal Bond Fund................. 4.94% 4.44% 5.42%
Massachusetts Insured Municipal Bond Fund......... 4.82% 4.29% 5.27%
<CAPTION>
NOVEMBER 30, 1996
-----------------------
DISTRIBUTION RATES
-----------------------
CLASS A CLASS C CLASS R
------- ------- -------
<S> <C> <C> <C>
New Jersey Intermediate Bond Fund................. 4.65% N/A N/A
California Intermediate Municipal Bond Fund....... N/A N/A N/A
Connecticut Municipal Bond Fund................... 4.98% 4.67% N/A
</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 the oldest class of each fund reflect actual performance
for all periods. For other classes existing prior to February 1, 1997, total
returns reflect actual performance for periods since class inception, and the
oldest class's performance for periods prior to inception, adjusted for the
differences in sales charges and fees between the classes. For classes created
on February 1, 1997, total returns reflect the oldest class's performance for
all periods, adjusted for the differences in sales charges and fees between the
classes.
S-47
<PAGE>
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
INCEPTION DATES
------------------
<S> <C>
New Jersey Municipal Bond Fund
Class A Shares....................................... September 6, 1994
Class B Shares....................................... February 1, 1997
Class C Shares....................................... September 6, 1994
Class R Shares....................................... July 26, 1991
New York Municipal Bond Fund
Class A Shares....................................... September 6, 1994
Class B Shares....................................... February 1, 1997
Class C Shares....................................... September 6, 1994
Class R Shares....................................... December 10, 1986
New York Insured Municipal Bond Fund
Class A Shares....................................... September 6, 1994
Class B Shares....................................... February 1, 1997
Class C Shares....................................... September 6, 1994
Class R Shares....................................... December 10, 1986
California Municipal Bond Fund
Class A Shares....................................... September 6, 1994
Class B Shares....................................... February 1, 1997
Class C Shares....................................... September 6, 1994
Class R Shares....................................... July 1, 1986
California Insured Municipal Bond Fund
Class A Shares....................................... September 6, 1994
Class B Shares....................................... February 1, 1997
Class C Shares....................................... September 6, 1994
Class R Shares....................................... July 1, 1986
Massachusetts Municipal Bond Fund
Class A Shares....................................... September 6, 1994
Class B Shares....................................... February 1, 1997
Class C Shares....................................... September 6, 1994
Class R Shares....................................... December 10, 1986
Massachusetts Insured Municipal Bond Fund
Class A Shares....................................... September 6, 1994
Class B Shares....................................... February 1, 1997
Class C Shares....................................... September 6, 1994
Class R Shares....................................... December 10, 1986
New Jersey Intermediate Municipal Bond Fund
Class A Shares....................................... September 16, 1992
Class C Shares....................................... February 1, 1997
Class R Shares....................................... February 1, 1997
Connecticut Municipal Bond Fund
Class A Shares....................................... July 13, 1987
Class B Shares....................................... February 1, 1997
Class C Shares....................................... October 4, 1993
Class R Shares....................................... February 1, 1997
</TABLE>
The annual total return figures for the New Jersey Municipal Bond Fund,
including the effect of the maximum sales charge for Class A shares, for the
one-year and five-year periods (as applicable) ended July 31, 1996 and for the
period from inception through July 31, 1996, were:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
------------------------------------------
ONE YEAR FIVE YEARS FROM INCEPTION
ENDED ENDED THROUGH
JULY 31, 1996 JULY 31, 1996 JULY 31, 1996
------------- ------------- --------------
<S> <C> <C> <C> <C>
New Jersey Municipal
Bond Fund
Class A Shares........ 1.23% N/A 5.79%
Class B Shares........ 5.01% N/A 6.09%
Class C Shares........ 4.87% N/A 6.05%
Class R Shares........ 6.01% N/A 7.10%
</TABLE>
S-48
<PAGE>
The annual total return figures for the New York Municipal Bond Fund, the New
York Insured Municipal Bond Fund, the Massachusetts Municipal Bond Fund, and
the Massachusetts Insured Municipal Bond Fund, including the effect of the
maximum sales charge for Class A shares, for the one-year and five-year periods
(as applicable) ended August 31, 1996 and for the period from inception through
August 31, 1996 were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-------------------------------
ONE YEAR FIVE YEARS FROM INCEPTION
ENDED ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1996 AUGUST 31, 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
New York Municipal Bond
Fund
Class A Shares........ 1.26% 6.42% 6.72%
Class B Shares........ 4.98% 6.65% 6.61%
Class C Shares........ 5.00% 6.65% 6.53%
Class R Shares........ 5.98% 7.67% 7.50%
New York Insured
Municipal Bond Fund
Class A Shares........ 0.78% 6.17% 6.34%
Class B Shares........ 4.45% 6.36% 6.22%
Class C Shares........ 4.33% 6.35% 6.14%
Class R Shares........ 5.45% 7.37% 7.09%
Massachusetts Municipal
Bond Fund
Class A Shares........ 1.10% 6.32% 5.85%
Class B Shares........ 4.69% 6.43% 5.68%
Class C Shares........ 4.68% 6.40% 5.57%
Class R Shares........ 5.69% 7.44% 6.56%
Massachusetts Insured
Municipal Bond Fund
Class A Shares........ 0.58% 6.00% 6.01%
Class B Shares........ 4.23% 6.18% 5.86%
Class C Shares........ 4.12% 6.11% 5.76%
Class R Shares........ 5.23% 7.19% 6.76%
</TABLE>
The annual total return figures for the California Municipal Bond Fund and
the California Insured Municipal Bond Fund, including the effect of the maximum
sales charge for Class A Shares, for the one-year, five-year, and ten-year
periods (as applicable) ended August 31, 1996, and for the period from
inception through August 31, 1996 were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-----------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS FROM INCEPTION
ENDED ENDED ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1996 AUGUST 31, 1996 AUGUST 31, 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
California Municipal
Bond Fund
Class A Shares........ 1.80% 5.62% 6.42% 6.63%
Class B Shares........ 5.64% 5.86% 6.27% 6.49%
Class C Shares........ 5.47% 5.79% 6.23% 6.44%
Class R Shares........ 6.65% 6.86% 7.18% 7.38%
California Insured
Municipal Bond Fund
Class A Shares........ 1.73% 6.11% 6.37% 6.52%
Class B Shares........ 5.44% 6.25% 6.22% 6.37%
Class C Shares........ 5.41% 6.12% 6.10% 6.23%
Class R Shares........ 6.45% 7.26% 7.08% 7.22%
</TABLE>
S-49
<PAGE>
The annual total return figures for the New Jersey Intermediate Bond Fund,
including the effect of the maximum sales charge for Class A shares, for the
one-year and five-year periods ended November 30, 1996 and for the period from
inception through November 30, 1996; and for the Connecticut Municipal Bond
Fund, including the effect of the maximum sales charge for Class A Shares, for
the one-year period ended November 30, 1996 for the Class A Shares and the
Class C Shares, and for the five-year period for the Class A Shares, and for
the period since inception through November 30, 1996 were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-----------------------------------------------------
ONE YEAR FIVE YEARS FROM INCEPTION
ENDED ENDED THROUGH
NOVEMBER 30, 1996 NOVEMBER 30, 1996 NOVEMBER 30, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
New Jersey Intermediate
Municipal Bond Fund
Class A Shares........ 1.19% N/A 5.94%
Class C Shares........ 3.96% N/A 6.34%
Class R Shares........ 4.32% N/A 6.72%
Connecticut Municipal
Bond Fund
Class A Shares........ 1.31% 6.50% 7.01%
Class B Shares........ 5.18% 6.84% 7.00%
Class C Shares........ 5.18% 6.80% 6.89%
Class R Shares........ 5.76% 7.42% 7.50%
</TABLE>
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Cumulative total return calculations
that do not include the effect of the sales charge would be reduced if such
charge were included.
The cumulative total return figures for the New Jersey Municipal Bond Fund,
including the effect of the maximum sales charge for the Class A Shares, for
the one-year and five-year periods ended July 31, 1996, and for the period
since inception through July 31, 1996, 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 RETURN
-----------------------
FROM
ONE YEAR INCEPTION
ENDED FIVE YEARS THROUGH
JULY 31, ENDED JULY 31,
1996 JULY 31, 1996 1996
-------- ------------- ---------
<S> <C> <C> <C>
New Jersey Municipal Bond
Fund
Class A Shares.......... 1.23% N/A 28.28%
Class B Shares.......... 5.01% N/A 29.86%
Class C Shares.......... 4.87% N/A 29.66%
Class R Shares.......... 6.01% N/A 35.44%
</TABLE>
S-50
<PAGE>
The cumulative total return figures for the New York Municipal Bond Fund, the
New York Insured Municipal Bond Fund, the Massachusetts Municipal Bond Fund,
and the Massachusetts Insured Municipal Bond Fund, including the effect of the
maximum sales charge for the Class A Shares, for the one-year and five-year
periods (as applicable) ended August 31, 1996, and for the period since
inception through August 31, 1996 were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------
ONE YEAR FIVE YEARS FROM
ENDED ENDED INCEPTION
AUGUST 31, AUGUST 31, AUGUST 31,
1996 1996 1996
---------- ---------- ----------
<S> <C> <C> <C> <C>
New York Municipal Bond Fund
Class A Shares................... 1.26% 36.50% 87.81%
Class B Shares................... 4.98% 38.02% 85.98%
Class C Shares................... 5.00% 37.99% 84.67%
Class R Shares................... 5.98% 44.72% 101.51%
New York Insured Municipal Bond
Fund
Class A Shares................... .78% 34.94% 81.52%
Class B Shares................... 4.45% 36.14% 79.43%
Class C Shares................... 4.33% 36.04% 78.09%
Class R Shares................... 5.45% 42.73% 94.32%
Massachusetts Municipal Bond Fund
Class A Shares................... 1.10% 35.86% 73.54%
Class B Shares................... 4.69% 36.56% 70.81%
Class C Shares................... 4.68% 36.36% 69.04%
Class R Shares................... 5.69% 43.20% 85.17%
Massachusetts Insured Municipal
Bond Fund
Class A Shares................... .58% 33.83% 76.11%
Class B Shares................... 4.23% 34.95% 73.66%
Class C Shares................... 4.12% 34.51% 72.12%
Class R Shares................... 5.23% 41.50% 88.45%
</TABLE>
The cumulative total return figures for the California Municipal Bond Fund
and the California Insured Municipal Bond Fund, including the effect of the
maximum sales charge for the Class A Shares, for the one-year, five-year, and
ten-year periods (as applicable) ended August 31, 1996, and for the period
since inception were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1996 1996 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
California Municipal Bond
Fund
Class A Shares ........... 1.80% 31.44% 86.28% 92.15%
Class B Shares............ 5.64% 32.97% 83.67% 89.47%
Class C Shares............ 5.47% 32.49% 83.05% 88.59%
Class R Shares............ 6.65% 39.39% 100.00% 106.39%
California Insured Municipal
Bond Fund
Class A Shares ........... 1.73% 34.55% 85.46% 90.01%
Class B Shares............ 5.44% 35.44% 82.88% 87.37%
Class C Shares............ 5.41% 34.61% 80.74% 84.95%
Class R Shares............ 6.45% 42.00% 98.18% 103.13%
</TABLE>
S-51
<PAGE>
The cumulative total return figures for the New Jersey Intermediate Municipal
Bond Fund, the California Intermediate Municipal Bond Fund, and the Connecticut
Municipal Bond Fund, including the effect of the maximum sales charge for the
Class A Shares, for the one-year period ended November 30, 1996, and for the
period since inception through November 30, 1996, respectively, were as
follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
--------------------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
New Jersey Intermediate
Municipal Bond Fund
Class A Shares................ 1.19% N/A 27.49%
Class C Shares................ 3.96% N/A 29.50%
Class R Shares................ 4.32% N/A 31.43%
Connecticut Municipal Bond Fund
Class A Shares................ 1.31% 37.04% 88.79%
Class B Shares................ 5.18% 39.19% 88.63%
Class C Shares................ 5.18% 38.92% 86.81%
Class R Shares................ 5.76% 43.05% 97.07%
</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 47.0% maximum marginal tax rate for 1997, the annual taxable
equivalent total return for the Massachusetts Municipal Bond Fund's shares for
the five-year period ended August 31, 1996 with respect to the Class R shares
was 12.65%.
Class A Shares of the Funds are sold at net asset value plus a current
maximum sales charge of 4.20% of the offering price. This current maximum sales
charge will typically be used for purposes of calculating performance figures.
Yield, returns and net asset value of each class of shares of the Funds will
fluctuate. Factors affecting the performance of the Funds include general
market conditions, operating expenses and investment management. Any additional
fees charged by a securities representative or other financial services firm
would reduce returns described in this section. Shares of the Funds are
redeemable at net asset value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Funds may also compare their performance with that of:
(1) the Consumer Price Index or various unmanaged bond indexes such as the
Lehman Brothers Municipal Bond Index and the Salomon Brothers High Grade
Corporate Bond Index and (2) other fixed income or municipal bond mutual funds
or mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. ("Morningstar"), Wiesenberger Investment
Companies Service ("Wiesenberger") and CDA Investment Technologies, Inc.
("CDA") or similar independent services which monitor the performance of mutual
funds, or other industry or financial publications such as Barron's, Changing
Times, Forbes and Money Magazine. Performance comparisons by these indexes,
services or publications may rank mutual funds over different periods of time
by means of aggregate, average, year-by-year, or other types of total return
and performance figures. Any given performance quotation or performance
comparison should not be considered as representative of the performance of the
Funds for any future period.
Each Fund may from time to time in its advertising and sales materials
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds. These taxable investments
have investment characteristics that differ from those of the Funds. U. S.
Government bonds, for example, are long-term investments backed by 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
S-52
<PAGE>
generally represents the performance of high grade intermediate and long-term
municipal bonds during various market conditions. 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 Fund primarily invests 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.
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 shares 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.
REDUCTION OR ELIMINATION OF UP-FRONT SALES CHARGE ON CLASS A SHARES
Cumulative Discount. 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 Municipal Mutual Fund, or units of a Nuveen unit trust, on which
an up-front sales charge or ongoing distribution fee is imposed, falls within
the amounts stated in the Class A Sales Charges and Commissions table in "How
to Select a Purchase Option" in the Prospectus. You or your financial adviser
must notify Nuveen or the Fund's transfer agent of any cumulative discount
whenever you plan to purchase Class A Shares of a Fund that you wish to qualify
for a reduced sales charge.
Letter of Intent. You may qualify for a reduced sales charge on a purchase of
Class A Shares of any Fund if you plan to purchase Class A Shares of Nuveen
Mutual Funds over the next 13 months and the total amount of your purchases
would, if purchased at one time, qualify you for one of the reduced sales
charges shown in the Class A Sales Charges and Commissions table in "How to
Select a Purchase Option" in the Prospectus. In order to take advantage of this
option, you must complete the applicable section of the Application Form or
sign and deliver either to an Authorized Dealer or to the Fund's transfer agent
a written Letter of Intent in a form acceptable to Nuveen. A Letter of Intent
states that you intend, but are not obligated, to purchase over the next 13
months a stated total amount of Class A Shares that would qualify you for a
reduced sales charge shown above. You may count shares of a Nuveen Municipal
Mutual Fund that you already own on which you paid an up-front sales charge or
an ongoing distribution fee and any Class 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 Municipal
Mutual Fund or a Nuveen Unit Trust or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of a Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these
S-53
<PAGE>
purchases. All dividends and capital gains distributions on Class A Shares held
in escrow will be credited to your account. If total purchases, less
redemptions, prior to the expiration of the 13 month period equal or exceed the
amount specified in your Letter of Intent, the Class A Shares held in escrow
will be transferred to your account. If the total purchases, less redemptions,
exceed the amount specified in your Letter of Intent and thereby qualify for a
lower sales charge than the sales charge specified in your Letter of Intent,
you will receive this lower sales charge retroactively, and the difference
between it and the higher sales charge paid will be used to purchase additional
Class A Shares on your behalf. If the total purchases, less redemptions, are
less than the amount specified, you must pay Nuveen an amount equal to the
difference between the amounts paid for these purchases and the amounts which
would have been paid if the higher sales charge had been applied. If you do not
pay the additional amount within 20 days after written request by Nuveen or
your financial adviser, Nuveen will redeem an appropriate number of your
escrowed Class A Shares to meet the required payment. By establishing a Letter
of Intent, you irrevocably appoint Nuveen as attorney to give instructions to
redeem any or all of your escrowed shares, with full power of substitution in
the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Unit Trust Distributions. You may purchase Class A
Shares without an up-front sales charge by reinvestment of distributions from
any of the various unit trusts sponsored by Nuveen. There is no initial or
subsequent minimum investment requirement for such reinvestment purchases.
Group Purchase Programs. If you are a member of a qualified group, you may
purchase Class A Shares of any Fund or of another Nuveen Municipal Mutual Fund
at the reduced sales charge applicable to the group's purchases taken as a
whole. A "qualified group" is one which has been in existence for more than six
months, has a purpose other than investment, has five 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 monthly investment in Class A
Shares of any particular Fund or portfolio by each participant is $25, and the
minimum monthly investment in Class A Shares of any particular Fund or
portfolio for all participants in the program combined is $1,000. 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 checking the
applicable box on the enclosed Application Form or by calling Nuveen toll-free
(800) 621-7227.
Reinvestment of Redemption Proceeds from Unaffiliated Funds. You may also
purchase Class A Shares at net asset value without a sales charge if the
purchase takes place through a broker-dealer and represents the reinvestment of
the proceeds of the redemption of shares of one or more registered investment
companies not affiliated with Nuveen. You must provide appropriate
documentation that the redemption occurred not more than 60 days prior to the
reinvestment of the proceeds in Class A Shares, and that you either paid an up-
front sales charge or were subject to a contingent deferred sales charge in
respect of the redemption of such shares of such other investment company.
Special Sales Charge Waivers. Class A Shares of a Fund may be purchased at
net asset value without a sales charge, and Class R Shares may be purchased, by
the following categories of investors:
. officers, trustees and former trustees of the Nuveen and Flagship Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
Holders of Class C Shares acquired on or before January 31, 1997 can convert
those shares to Class A Shares of the same fund at the shareholder's
affirmative request six years after the date of purchase. Holders of Class C
Shares purchased after that date will not have the option to convert those
shares to Class A Shares.
S-54
<PAGE>
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 and their children under 21 years
of age); or (3) all purchases made through a group purchase program as
described above.
The reduced sales charge programs may be modified or discontinued by the
Funds at any time upon prior written notice to shareholders of the Funds.
For more information about the purchase of Class A Shares or reduced sales
charge programs, or to obtain the required application forms, call Nuveen toll-
free at (800) 621-7227.
REDUCTION OR ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
Class A Shares are normally redeemed at net asset value, without any
Contingent Deferred Sales Charge ("CDSC"). However, in the case of Class A
Shares purchased at net asset value on or after July 1, 1996 because the
purchase amount exceeded $1 million, where the Authorized Dealer did not waive
the sales commission, a CDSC of 1% is imposed on any redemption within 18
months of purchase. In the case of Class B Shares redeemed within six years of
purchase, a CDSC is imposed, beginning at 5% for redemptions within the first
year, declining to 4% for redemptions within years two and three, and declining
by 1% each year thereafter until disappearing after the sixth year. Class C
Shares are redeemed at net asset value, without any CDSC, except that a CDSC of
1% is imposed upon redemption of Class C Shares that are redeemed within 12
months of purchase.
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge, and then in the reverse order in which the shares were
purchased, 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 money market Fund. The holding period is
calculated on a monthly basis and begins the first day of the month in which
the order for investment is received. The CDSC is calculated based on the lower
of the redeemed shares' cost or net asset value at the time of the redemption
and is deducted from the redemption proceeds. Nuveen receives the amount of any
CDSC shareholders pay. If Class A or Class C shares subject to a CDSC are
exchanged for shares of a Nuveen money market fund, the CDSC would be imposed
on the subsequent redemption of those money market shares, and the period
during which the shareholder holds the money market fund shares would be
counted in determining the remaining duration of the CDSC. The Fund may elect
not to so count the period during which the shareholder held the money market
fund shares, in which event the amount of any applicable CDSC would be reduced
in accordance with applicable SEC rules by the amount of any 12b-1 plan
payments to which those money market funds shares may be subject.
The CDSC may be waived or reduced under the following six special
circumstances: 1) redemptions within one year following the death or
disability, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended, of a shareholder; 2) in whole or in part for redemptions of
shares by shareholders with accounts in excess of specified breakpoints that
correspond to the breakpoints under which the up-front sales charge on Class A
Shares is reduced pursuant to Rule 22d-1 under the Act; 3) redemptions of
shares purchased under circumstances or by a category of investors for which
Class A Shares could be purchased at net asset value without a sales charge; 4)
in connection with the exercise of a reinstatement privilege whereby the
proceeds of a redemption of a Fund's shares subject to a sales charge are
reinvested in shares of certain Funds within a specified number of days; 5) in
connection with the exercise of a Fund's right to redeem all shares in an
account that does not maintain a certain minimum balance or that the applicable
board has determined may have material adverse consequences to the shareholders
of such Fund; and 6) redemptions made pursuant to a Fund's automatic withdrawal
plan, up to specified amounts. If a Fund waives or reduces the CDSC, such
waiver or reduction would be uniformly applied to all Fund shares in the
particular category. In waiving or reducing a CDSC, the Funds will comply with
the requirements of Rule 22d-1 of the Investment Company Act of 1940, as
amended.
GENERAL MATTERS
The Funds may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
tax-free, fixed income securities.
To help advisers and investors better understand and most efficiently use the
Fund to reach their investment goals, the Funds may advertise and create
specific investment programs and systems. For example, this may include
information
S-55
<PAGE>
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 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.
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.
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 Shareholder Services, Inc., the Funds'
transfer agent. No share certificates will be issued for fractional shares.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy Fund
Shares" in the Prospectus.
Nuveen serves as the principal underwriter of the shares of the Funds
pursuant to a "best efforts" arrangement as provided by a distribution
agreement with the Nuveen Flagship Multistate Trust IV, dated February 1, 1997
("Distribution Agreement"). Pursuant to the Distribution Agreement, the Trust
appointed Nuveen to be its agent for the distribution of the Funds' shares on a
continuous offering basis. Nuveen sells shares to or through brokers, dealers,
banks or other qualified financial intermediaries (collectively referred to as
"Dealers"), or others, in a manner consistent with the then effective
registration statement of the Trust. Pursuant to the Distribution Agreement,
Nuveen, at its own expense, finances certain activities incident to the sale
and distribution of the Funds' shares, including printing and distributing of
prospectuses and statements of additional information to other than existing
shareholders, the printing and distributing of sales literature, advertising
and payment of compensation and giving of concessions to Dealers. Nuveen
receives for its services the excess, if any, of the sales price of the Funds'
shares less the net asset value of those shares, and reallows a majority or all
of such amounts to the Dealers who sold the shares; Nuveen may act as such a
Dealer. Nuveen also receives compensation pursuant to a distribution plan
adopted by the Trust pursuant to Rule 12b-1 and described herein under
"Distribution and Service Plan." Nuveen receives any CDSCs imposed on
redemptions of Shares.
The following table sets forth the aggregate amount of underwriting
commissions with respect to the sale of Fund shares and the amount thereof
retained by Nuveen, Inc. (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
JANUARY 31, 1996 JANUARY 31, 1995 JANUARY 31, 1994
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
COMMISSIONS NUVEEN COMMISSIONS NUVEEN COMMISSIONS NUVEEN
FUND ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
New Jersey Fund......... 241 16 255 35 527 76
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 29, 1996 FEBRUARY 28, 1995 FEBRUARY 28, 1994
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
COMMISSIONS NUVEEN COMMISSIONS NUVEEN COMMISSIONS NUVEEN
FUND ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
New York Fund........... 272 33 428 64 989 146
New York Insured Fund... 450 71 850 126 3,018 411
California Fund......... 221 33 370 60 949 148
California Insured Fund. 357 56 517 93 1,421 209
Massachusetts Fund...... 96 12 170 20 430 52
Massachusetts Insured
Fund................... 113 14 147 24 435 66
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1995 MAY 31, 1994
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
COMMISSIONS NUVEEN COMMISSIONS NUVEEN COMMISSIONS NUVEEN
FUND ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
New Jersey Intermediate
Fund................... 19 4 31 6 118 20
California Intermediate
Fund................... 0 0 0 0 0 0
Connecticut Fund........ 349 47 447 60 1,033 138
</TABLE>
S-56
<PAGE>
DISTRIBUTION AND SERVICE PLAN
The Funds have adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B and Class C Shares under each
Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of Class B and Class C Shares,
respectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of
preparing, printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of Class B and Class C
Shares, certain other expenses associated with the distribution of Class B and
Class C Shares, and any distribution-related expenses that may be authorized
from time to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C
Shares under each Fund's Plan will be payable to Authorized Dealers in
connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to
shareholders.
Each Fund may spend up to .20 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .20 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. Each Fund may spend up to .55 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
..20 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
For the fiscal year ended January 31, 1996 with respect to the New Jersey
Municipal Bond Fund, the fiscal year ended February 29, 1996 with respect to
the New York Municipal Bond Fund and New York Insured Municipal Bond Fund, the
California Municipal Bond Fund, the California Insured Municipal Bond Fund, the
Massachusetts Municipal Bond Fund, and the Massachusetts Insured Municipal Bond
Fund, and the fiscal year ended May 31, 1996 with respect to the New Jersey
Intermediate Bond Fund, the California Intermediate Municipal Bond Fund, and
the Connecticut Municipal Bond Fund, 100% of service fees and distribution fees
were paid out as compensation to Authorized Dealers. For such periods, the
service fee for the New York Municipal Bond Fund, the New York Insured
Municipal Bond Fund, the New Jersey Municipal Bond Fund, the California
Municipal Bond Fund, the California Insured Municipal Bond Fund, the
Massachusetts Municipal Bond Fund, and the Massachusetts Insured Municipal Bond
Fund was .25% for both Class A and Class C Shares and the distribution fee was
..75% for Class C Shares. For such periods, the service fee for the New Jersey
Intermediate Fund, the California Intermediate Municipal Bond Fund, and the
Connecticut Municipal Bond Fund Class C Shares was .20% and the distribution
fee was .40% for the Class A Shares and .75% for the Class C Shares.
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1996
----------------------
<S> <C>
New York Municipal Bond Fund (2/29/96)
Class A............................................... $26,638
Class C............................................... $ 4,101
New York Insured Municipal Bond Fund (2/29/96)
Class A............................................... $42,326
Class C............................................... $ 8,893
New Jersey Municipal Bond Fund (1/31/96)
Class A............................................... $16,159
Class C............................................... $ 7,121
New Jersey Intermediate Municipal Bond Fund (5/31/96)
Class A............................................... $36,470
Class C............................................... N/A
California Municipal Bond Fund (2/29/96)
Class A............................................... $19,006
Class C............................................... $ 4,155
California Insured Municipal Bond Fund (2/29/96)
Class A............................................... $25,512
Class C............................................... $ 6,916
California Intermediate Municipal Bond Fund (5/31/96)
Class A............................................... N/A
Class C............................................... N/A
</TABLE>
S-57
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1996
----------------------
<S> <C>
Connecticut Municipal Bond Fund (5/31/96)
Class A................................................ $ 818,000
Class C................................................ $ 62,142
Massachusetts Municipal Bond Fund (2/29/96)
Class A................................................ $ 6,732
Class C................................................ $ 2,609
Massachusetts Insured Municipal Bond Fund (2/29/96)
Class A................................................ $ 8,932
Class C................................................ $ 5,438
</TABLE>
Under each Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest in the Plan cast in
person at a meeting called for the purpose of voting on the Plan. The Plan may
be continued only if the trustees who vote to approve such continuance
conclude, in the exercise of reasonable business judgment and in light of their
fiduciary duties under applicable law, that there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders. The Plan may not be
amended to increase materially the cost which a class of shares may bear under
the Plan without the approval of the shareholders of the affected class, and
any other material amendments of the Plan must be approved by the non-
interested trustees by a vote cast in person at a meeting called for the
purpose of considering such amendments. During the continuance of the Plan, the
selection and nomination of the non-interested trustees of the Trust will be
committed to the discretion of the non-interested trustees then in office.
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 New York Municipal
Bond Fund, the New York Insured Municipal Bond Fund, the New Jersey Municipal
Bond Fund, the New Jersey Intermediate Municipal Bond Fund, the California
Municipal Bond Fund, the California Insured Municipal Bond Fund, the
Massachusetts Municipal Bond Fund, and the Massachusetts Insured Municipal Bond
Fund. Deloitte & Touche LLP, independent public accountants, 1700 Courthouse
Plaza N.E., Dayton, Ohio 45402 has been selected as auditors for the California
Intermediate Municipal Bond Fund and the Connecticut Municipal Bond Fund. 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 respective
auditors as indicated in their respective reports with respect thereto, and are
included in reliance upon the authority of that firm in giving that report.
The custodian of the Funds' assets is The Chase Manhattan Bank, 770 Broadway,
New York, New York 10003. The custodian performs custodial, fund accounting,
portfolio accounting, shareholder, and transfer agency services.
FINANCIAL STATEMENTS
The audited financial statements for each Fund's most recent fiscal year
appear in the Fund's Annual Reports and the unaudited financial statements for
the most recent semi-annual period for each fund appear in the Fund's Semi-
Annual Reports, each is included herein by reference. The Annual Reports and
the Semi-annual Reports accompany this Statement of Additional Information.
S-58
<PAGE>
APPENDIX A
RATINGS OF INVESTMENTS
The four highest ratings of Moody's for Municipal Obligations are Aaa, Aa, A
and Baa. Municipal Obligations rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to Municipal Obligations which are of
"high quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat greater than in Aaa rated
Municipal Obligations. The Aaa and Aa rated Municipal Obligations comprise what
are generally known as "high grade bonds." Municipal Obligations that are rated
A by Moody's possess many favorable investment attributes and are considered
upper medium grade obligations. Factors giving security to principal and
interest of A rated Municipal Obligations are considered adequate, but elements
may be present, which suggest a susceptibility to impairment sometime in the
future. Municipal Obligations rated Baa by Moody's are considered medium grade
obligations (i.e., they are neither highly protected nor poorly secured). Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's bond rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1 indicates that the
bond ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its general rating category.
The four highest ratings of S&P for Municipal Obligations are AAA, AA, A and
BBB. Municipal Obligations rated AAA have a strong capacity to pay principal
and interest. The rating of AA indicates that capacity to pay principal and
interest is very strong and such bonds differ from AAA issues only in small
degree. The category of A describes bonds which have a strong capacity to pay
principal and interest, although such bonds are somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions. The
BBB rating is the lowest "investment grade" security rating by S&P. Municipal
Obligations rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas such bonds normally exhibit adequate protection
parameters, adverse economic conditions are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for
bonds in the A category.
The four highest ratings of Fitch for Municipal Obligations are AAA, AA, A
and BBB. Municipal Obligations rated AAA are considered to be investment grade
and of the highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events. Municipal Obligations rated AA are considered
to be investment grade and of very high quality. The obligor's ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated "AAA." Because Municipal Obligations rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+." Municipal
Obligations rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Municipal
Obligations rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
The "Other Corporate Obligations" category of temporary investments are
corporate (as opposed to municipal) debt obligations rated AAA by S&P or Aaa by
Moody's. Corporate debt obligations rated AAA by S&P have an extremely strong
capacity to pay principal and interest. The Moody's corporate debt rating of
Aaa is comparable to that set forth above for Municipal Obligations.
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-1
<PAGE>
APPENDIX B
DESCRIPTION OF HEDGING TECHNIQUES
Set forth below is additional information regarding the various Fund's
defensive hedging techniques and use of repurchase agreements.
FUTURES AND INDEX TRANSACTIONS
Financial Futures. A financial future is an agreement between two parties to
buy and sell a security for a set price on a future date. They have been
designed by boards of trade which have been designated "contracts markets" by
the Commodity Futures Trading Commission ("CFTC").
The purchase of financial futures is for the purpose of hedging a Fund's
existing or anticipated holdings of long-term debt securities. When a Fund
purchases a financial future, it deposits in cash or securities an "initial
margin" of between 1% and 5% of the contract amount. Thereafter, the Fund's
account is either credited or debited on a daily basis in correlation with the
fluctuation in price of the underlying future or other requirements imposed by
the exchange in order to maintain an orderly market. The Fund must make
additional payments to cover debits to its account and has the right to
withdraw credits in excess of the liquidity, the Fund may close out its
position at any time prior to expiration of the financial future by taking an
opposite position. At closing a final determination of debits and credits is
made, additional cash is paid by or to the Fund to settle the final
determination and the Fund realizes a loss or gain depending on whether on a
net basis it made or received such payments.
The sale of financial futures is for the purpose of hedging a Fund's existing
or anticipated holdings of long-term debt securities. For example, if a Fund
owns long-term bonds and interest rates were expected to increase, it might
sell financial futures. If interest rates did increase, the value of long-term
bonds in the Fund's portfolio would decline, but the value of the Fund's
financial futures would be expected to increase at approximately the same rate
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have.
Among the risks associated with the use of financial futures by the Funds as
a hedging device, perhaps the most significant is the imperfect correlation
between movements in the price of the financial futures and movements in the
price of the debt securities which are the subject of the hedge.
Thus, if the price of the financial future moves less or more than the price
of the securities which are the subject of the hedge, the hedge will not be
fully effective. To compensate for this imperfect correlation, the Fund may
enter into financial futures in a greater dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the prices of
such securities has been greater than the historical volatility of the
financial futures. Conversely, the Fund may enter into fewer financial futures
if the historical volatility of the price of the securities being hedged is
less than the historical volatility of the financial futures.
The market prices of financial futures may also be affected by factors other
than interest rates. One of these factors is the possibility that rapid changes
in the volume of closing transactions, whether due to volatile markets or
movements by speculators, would temporarily distort the normal relationship
between the markets in the financial future and the chosen debt securities. In
these circumstances as well as in periods of rapid and large price movements.
The Fund might find it difficult or impossible to close out a particular
transaction.
Options on Financial Futures. The Funds may also purchase put or call options
on financial futures which are traded on a U.S. Exchange or board of trade and
enter into closing transactions with respect to such options to terminate an
existing position. Currently, options can be purchased with respect to
financial futures on U.S. Treasury Bonds on The Chicago Board of Trade. The
purchase of put options on financial futures is analogous to the purchase of
put options by a Fund on its portfolio securities to hedge against the risk of
rising interest rates. As with options on debt securities, the holder of an
option may terminate his position by selling an option of the same Fund. There
is no guarantee that such closing transactions can be effected.
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
B-1
<PAGE>
which two parties agree to take or make delivery of an amount of cash--rather
than any security--equal to specified dollar amount times the difference
between the index value at the close of the last trading day of the contract
and the price at which the index future was originally written. Thus, an index
future is similar to traditional financial futures except that settlement is
made in cash.
Index Options. The Funds may also purchase put or call options on U.S.
Government or tax-exempt bond index futures and enter into closing transactions
with respect to such options to terminate an existing position. Options on
index futures are similar to options on debt instruments except that an option
on an index future gives the purchaser the right, in return for the premium
paid, to assume a position in an index contract rather than an underlying
security at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance of the writer's futures margin account
which represents the amount by which the market price of the index futures
contract, at exercise, is less than the exercise price of the option on the
index future.
Bond index futures and options transactions would be subject to risks similar
to transactions in financial futures and options thereon as described above. No
series will enter into transactions in index or financial futures or related
options unless and until, in the Adviser's opinion, the market for such
instruments has developed sufficiently.
REPURCHASE AGREEMENTS
A Fund may invest temporarily up to 5% of its assets in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Fund from a third party with the understanding that they will be
repurchased by the seller at a fixed price on an agreed date. These agreements
may be made with respect to any of the portfolio securities in which the Fund
is authorized to invest. Repurchase agreements may be characterized as loans
secured by the underlying securities. The Fund may enter into repurchase
agreements with (i) member banks of the Federal Reserve System having total
assets in excess of $500 million and (ii) securities dealers, provided that
such banks or dealers meet the creditworthiness standards established by the
Fund's board of trustees ("Qualified Institutions"). The Adviser will monitor
the continued creditworthiness of Qualified Institutions, subject to the
oversight of the Fund's board of trustees.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the custodian at all times
in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the securities, the Fund may suffer
a loss to the extent proceeds from the sale of the underlying securities are
less than the repurchase price.
The resale price reflects the purchase price plus an agreed upon market rate
of interest which is unrelated to the coupon rate or date of maturity of the
purchased security. The collateral is marked to market daily. Such agreements
permit the Fund to keep all its assets earning interest while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature.
B-2
<PAGE>
[NUVEEN LOGO]
Nuveen Tax-Free
Mutual Funds [PHOTOGRAPH APPEARS HERE]
Dependable tax-free
income for generations
CALIFORNIA
CALIFORNIA INSURED
MASSACHUSETTS
MASSACHUSETTS INSURED
NEW YORK
NEW YORK INSURED
OHIO
SEMIANNUAL REPORT/AUGUST 31, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
8 Fund performance
12 Portfolio of investments
59 Statement of net assets
61 Statement of operations
63 Statement of changes in net assets
67 Notes to financial statements
78 Financial highlights
<PAGE>
Dear
shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
" Municipal bonds continue to play an important role in meeting the investment
goals of conservative investors."
As I begin my duties as the new chairman and chief executive officer of John
Nuveen & Co. Incorporated and chairman of the board of the Nuveen mutual funds,
I am pleased to have this opportunity to report to you on the performance of
your funds. My experience at Nuveen over the past 19 years has shaped my
commitment to maintaining Nuveen's tradition of value investing and prudent
management. Our goal is to help our shareholders meet their need for tax-free
investment income with a full range of investment choices. We continue to focus
on providing attractive levels of income, diversification, and professional
research-oriented management, in the belief that this focus will contribute to
many more years of investment success for our fund shareholders. The performance
of the mutual funds covered in this report demonstrates the ability of quality
investments to provide attractive tax-free income. As of August 31, 1996,
current yields on net asset values for R shares for these funds ranged from
4.51% to 5.11%. To match these yields, an investor in the 36% federal income tax
bracket would have had to earn at least 7.05% on taxable alternatives. When
state taxes are taken into account, the power of tax-free investing is even more
apparent, increasing the required taxable-equivalent yield to a range of 7.98%
to 8.71%. Taxable yields at this
3
<PAGE>
level on investments of comparable quality can be difficult to achieve in
today's markets.
Market appreciation of bonds in the portfolios further improved
investors' overall experience for the 12 months ending August 31, 1996. Total
returns on R shares, representing changes in net asset value and reinvestment of
all dividends and capital gains, if any, ranged from 5.23% to 6.65%, equivalent
to taxable investments with total returns of 9.38% to 10.73%.
I would like to take this opportunity to share with you the news of some
recent developments that will give Nuveen more flexibility to meet expanded
investor needs for capital preservation, current income, and future growth. For
nearly 100 years, we have offered products and services designed for the prudent
investor, services that have grown over the years as a natural extension of our
expertise in municipal bonds. We are now embarking on new endeavors, as we grow
to serve the broader needs of today's conservative investor.
In November, Nuveen will introduce the Nuveen Growth and Income Stock Fund,
designed to provide a high-quality equity complement to our current municipal
bond funds. The fund will be offered in affiliation with Institutional Capital
Corporation (ICAP), an institutional equity management firm located in Chicago
who shares Nuveen's values and investment management style. Tailor-made to
address the needs of many Nuveen investors, the fund can play a critical role in
achieving a balanced strategy for investors who expect their investments to
provide a core element of their financial security.
In addition, Nuveen plans to acquire Flagship Resources, Inc., a fixed-income
mutual fund specialist based in Dayton, Ohio. Flagship is a firm that shares our
views on the importance of research and emphasizes a conservative, value-
oriented approach to portfolio management. The tax-exempt mutual fund activities
of Flagship and Nuveen expect to be merged in January 1997, enabling us to offer
more than 40 municipal funds, the broadest selection available in the U.S.
Intermediate and limited term national funds as well as product offerings in 24
states, will provide more tax-free options to match investors' individual needs.
We are excited about these recent developments, and we are pleased to be
bringing Nuveen investors expanded options for achieving wealth preservation,
dependable income, and long-term asset growth. We thank you for your continued
confidence in Nuveen.
Sincerely,
Timothy R. Schwertfeger
Chairman of the Board
October 15, 1996
4
<PAGE>
Answering your questions
Tom Spalding, head of Nuveen's portfolio management team, discusses the
investment environment and recent factors affecting the municipal market
How did the municipal market perform over the past year?
Unlike the prior two years, 1996's bond market has not been easy to categorize.
While 1994 represented the worst period in recent bond market history and 1995
the best in a decade, this year has seen a stream of mixed reports on the state
of the economy that have alternately caused investors to view the markets with
enthusiasm, then uncertainty. Despite this climate, the municipal bond market
has rewarded investors with solid returns, dependable income, and opportunities
to purchase bonds with strong credit quality. Over the past year, municipal
bonds have continued to outperform Treasuries, an indication of the strength and
resilience of this market segment.
What has been Nuveen's investment approach over the past year?
Nuveen continues to pursue its value investing strategy, a disciplined approach
to security selection and portfolio construction designed to deliver above
market performance by identifying individual bonds with current yields, prices,
credit quality, and future prospects that are exceptionally attractive relative
to
5
<PAGE>
[PHOTO OF TOM SPALDING]
Tom Spalding, head of Nuveen's portfolio management team, answers investors'
questions on developments in the municipal market.
other bonds in the market. This approach was rewarded over the past year, as
many of our portfolio holdings were upgraded by the national rating agencies,
indicating that our Research Department's judgments about credit quality were on
target.
As opportunity allowed, we purchased bonds at discounts from their par value.
These bonds, which have coupon rates slightly below market levels, are less
likely to be called from our portfolios, assuring more stable yields for our
investors.
What is your outlook for the municipal market?
A look at the current economy shows a combination of factors that historically
bodes well for the bond market. Inflation continues at the same modest pace that
it has demonstrated over the past five years. The Federal Reserve's decision to
stand pat on short-term rates since January indicates that it believes inflation
is under control. The economy continues to enjoy modest expansion, supported by
generally level producer prices, low wage pressures, and a stable money supply.
Fading worries about tax reform-and the potential effect of a flat tax proposal-
have resulted in increased demand for tax-free products. New issuance of bonds
remains adequate but modest, further supporting a favorable environment for
investors.
6
<PAGE>
What are some of the factors affecting dividend changes?
All Nuveen funds are structured to provide an attractive stream of tax-free
income. For many investors, stability of income is another important objective.
To help investors satisfy this objective, we set dividends on Nuveen funds
conservatively, seeking a level that we expect will be sustainable for several
months. Still, dividends ultimately depend on the overall earnings of each fund,
which can be reduced by bond calls, fluctuations in interest rates, and other
portfolio changes.
When the Federal Reserve Board cut rates between July 1995 and January 1996,
long-term municipal bond yields reacted by declining almost 130 basis points
from their levels at the beginning of 1995. Current long-term rates are well
below those at the start of the decade. As older, higher-yielding bonds are
called from some portfolios, they must be replaced with the bonds available in
the market today, reducing fund earnings. To minimize the effect of bond calls
in the future, Nuveen has taken advantage of opportunities to invest in non-
callable bonds as well as bonds priced at a discount from their par value.
7
<PAGE>
NUVEEN CALIFORNIA
TAX-FREE VALUE FUND
CALIFORNIA
Shareholders have enjoyed relatively stable dividends. From time to time,
adjustments in the monthly dividend are made to reflect the current earnings of
the portfolio.
12 MONTH DIVIDEND HISTORY--R SHARES
9/95 - .0480
10/95 - .0475
11/95 - .0475
12/95 - .0465
1/96 - .0465
2/96 - .0465
3/96 - .0465
4/96 - .0465
5/96 - .0465
6/96 - .0475
7/96 - .0475
8/96 - .0475
- --------------------------------------------------------
FUND HIGHLIGHTS 8/31/96
- --------------------------------------------------------
Current SEC yield on R Shares* 8.03%
Taxable-equivalent yield on R Shares** 8.67%
12-mo. total return on R Shares* 6.65%
Taxable-equivalent total return on R Shares 10.73%
Combined tax rate 42.0%
- --------------------------------------------------------
The dividend history used in this chart constitutes past performances and does
not necessarily predict the future dividends of the Fund.
See footnote on page 11.
NUVEEN CALIFORNIA INSURED
TAX-FREE VALUE FUND
CALIFORNIA INSURED
In keeping with the Fund's goal of providing attractive, dependable tax-free
income, shareholders enjoyed 12 months of steady dividends.
12 MONTH DIVIDEND HISTORY--R SHARES
9/95 - .0460 3/96 - .0460
10/95 - .0460 4/96 - .0460
11/95 - .0460 5/96 - .0460
12/95 - .0460 6/96 - .0460
1/96 - .0460 7/96 - .0460
2/96 - .0460 8/96 - .0460
- --------------------------------------------------------
FUND HIGHLIGHTS 8/31/96
- --------------------------------------------------------
Current SEC yield on R Shares* 4.96%
Taxable-equivalent yield on R Shares** 8.55%
Annual total return on R Shares* 6.45%
Taxable-equivalent total return on R Shares 10.40%
Combined tax rate 42.0%
- --------------------------------------------------------
The dividend history used in this chart constitutes past performances and does
not necessarily predict the future dividends of the Fund.
See footnote on page 11.
8
<PAGE>
NUVEEN MASSACHUSETTS
TAX-FREE VALUE FUND
MASSACHUSETTS
The Fund adjusted its monthly tax-free dividend twice during the period as
older, higher coupon bonds were called away and replaced with today's lower
yielding bonds.
12 MONTH DIVIDEND HISTORY--R SHARES
9/95 - .0455 3/96 - .0440
10/95 - .0455 4/96 - .0440
11/95 - .0455 5/96 - .0440
12/95 - .0450 6/96 - .0440
1/96 - .0450 7/96 - .0440
2/96 - .0450 8/96 - .0440
- ------------------------------------------------------
FUND HIGHLIGHTS 8/31/96
- ------------------------------------------------------
Current SEC yield on R Shares* 4.92%
Taxable-equivalent yield on R Shares** 8.71%
Annual total return on R Shares* 5.69%
Taxable-equivalent total return on R Shares 10.04%
Combined tax rate 43.5%
- ------------------------------------------------------
The dividend history used in this chart constitutes past performances and does
not necessarily predict the future dividends of the Fund.
See footnote on page 11.
NUVEEN MASSACHUSETTS INSURED
TAX-FREE VALUE FUND
MASSACHUSETTS INSURED
In keeping with the Fund's goal of providing attractive, dependable tax-free
income, shareholders enjoyed 12 months of steady dividends.
12 MONTH DIVIDEND HISTORY--R SHARES
9/95 - .0450 3/96 - .0450
10/95 - .0450 4/96 - .0450
11/95 - .0450 5/96 - .0450
12/95 - .0450 6/96 - .0450
1/96 - .0450 7/96 - .0450
2/96 - .0450 8/96 - .0450
- -------------------------------------------------------
FUND HIGHLIGHTS 8/31/96
- -------------------------------------------------------
Current SEC yield on R Shares* 4.51%
Taxable-equivalent yield on R Shares** 7.98%
Annual total return on R Shares* 5.23%
Taxable-equivalent total return on R Shares 9.38%
Combined tax rate 43.5%
- -------------------------------------------------------
The dividend history used in this chart constitutes past performances and does
not necessarily predict the future dividends of the Fund.
See footnote on page 11.
9
<PAGE>
NUVEEN NEW YORK
TAX-FREE VALUE FUND
New York
In keeping with the Fund's goal of providing attractive, dependable tax-free
income, shareholders enjoyed 12 months of steady dividends.
12 MONTH DIVIDEND HISTORY--R SHARES
[PERFORMANCE GRAPH APPEARS HERE]
9/95 - .0485 3/96 - .0485
10/95 - .0485 4/96 - .0485
11/95 - .0485 5/96 - .0485
12/95 - .0485 6/96 - .0485
1/96 - .0485 7/96 - .0485
2/96 - .0485 8/96 - .0485
- ------------------------------------------------------------
FUND HIGHLIGHTS 8/31/96
- ------------------------------------------------------------
Current SEC yield on R Shares* 5.11%
Taxable-equivalent yield on R Shares** 8.59%
Annual total return on R Shares* 5.98%
Taxable-equivalent total return on R Shares 9.90%
Combined tax rate 40.5%
- ------------------------------------------------------------
The dividend history used in this chart constitutes past performances and does
not necessarily predict the future dividends of the Fund.
See footnote on page 11.
NUVEEN NEW YORK INSURED
TAX-FREE VALUE FUND
NEW YORK INSURED
Shareholders enjoyed relatively stable dividends and a capital gains
distribution in November. From time to time, adjustments in the monthly dividend
are made to reflect the current earnings of the portfolio.
12 MONTH DIVIDEND HISTORY--R SHARES
[PERFORMANCE GRAPH APPEARS HERE]
9/95 - .0460 3/96 - .0460
10/95 - .0460 4/96 - .0460
11/95 - .0750 (with Capital Gains) 5/96 - .0460
12/95 - .0460 6/96 - .0450
1/96 - .0460 7/96 - .0450
2/96 - .0460 8/96 - .0450
- ------------------------------------------------------------
FUND HIGHLIGHTS 8/31/96
- ------------------------------------------------------------
Current SEC yield on R Shares* 4.78%
Taxable-equivalent yield on R Shares** 8.03%
Annual total return on R Shares* 5.45%
Taxable-equivalent total return on R Shares 9.16%
Combined tax rate 40.5%
- ------------------------------------------------------------
The dividend history used in this chart constitutes past performances and does
not necessarily predict the future dividends of the Fund.
See footnote on page 11.
10
<PAGE>
NUVEEN OHIO
TAX-FREE VALUE FUND
Ohio
In keeping with the Fund's goal of providing attractive, dependable tax-free
income, shareholders enjoyed 12 months of steady dividends.
12 MONTH DIVIDEND HISTORY--R SHARES
[PERFORMANCE GRAPH APPEARS HERE]
9/95 - .0470 3/96 - .0470
10/95 - .0470 4/96 - .0470
11/95 - .0470 5/96 - .0470
12/95 - .0470 6/96 - .0470
1/96 - .0470 7/96 - .0470
2/96 - .0470 8/96 - .0470
- ------------------------------------------------------------
FUND HIGHLIGHTS 8/31/96
- ------------------------------------------------------------
Current SEC yield on R Shares* 4.90%
Taxable-equivalent yield on R Shares** 8.31%
Annual total return on R Shares* 5.32%
Taxable-equivalent total return on R Shares 9.20%
Combined tax rate 41.0%
- ------------------------------------------------------------
The dividend history used in this chart constitutes past performances and does
not necessarily predict the future dividends of the Fund.
See footnote on page 11.
* All shares issued prior to September 6, 1994, have been designated as Class R
shares, which are currently available only for dividend reinvestment and certain
other restricted situations. Please see Financial Highlights beginning on page
78 for additional data on Class A and Class C shares.
** An investor subject to the indicated income tax rate would have to receive
this return from a fully taxable investment to equal the stated yield and total
return on an after-tax basis.
11
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN CALIFORNIA TAX-FREE VALUE FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,200,000 California Statewide Cmntys Develop Auth Revenue Ctfs of
Participation Series 1996 Methodist Hospital of Southern Calif,
5.500%, 7/01/10 AAA 7/06 at 102 $ 3,106,272
3,150,000 California Educational Facilities Authority Revenue Bonds
(University of Southern California Project) Series 1989 A,
7.200%, 10/01/15 Aa 10/97 at 102 3,296,790
4,500,000 California Educational Facilities Authority Revenue Bonds
(University of San Francisco), Series 1996, 6.000%, 10/01/26 Aaa 10/06 at 102 4,544,010
California Educational Facilities Authority, Revenue Bonds
(Loyola Marymount University) Series 1996:
1,380,000 5.875%, 10/01/16 Aaa 10/06 at 102 1,379,917
2,405,000 5.900%, 10/01/21 (DD) Aaa 10/06 at 102 2,397,039
California Health Facilities Financing Authority, Insured Health
Facility Revenue Bonds (Small Facilities Pooled Loan Program),
1994 Series B:
3,000,000 7.400%, 4/01/14 A 4/05 at 102 3,373,860
3,635,000 7.500%, 4/01/22 A 4/05 at 102 4,112,385
3,750,000 California Health Facilities Financing Authority, Insured
Revenue Bond (Sutter/CHS), 5.875%, 8/15/16 Aaa 8/06 at 102 3,715,125
1,700,000 California Health Facilities Financing Authority, Hospital
Revenue Refunding Bonds (Sutter Health) Series 1989A,
7.000%, 1/01/09 A1 1/99 at 102 1,811,027
2,000,000 California Health Facilities Financing Authority, Health Facility
Revenue Bonds (Health Dimensions, Incorporated) 1990
Series A, 7.500%, 5/01/15 (Pre-refunded to 5/01/00) Ba 5/00 at 102 2,235,740
2,000,000 California Health Facilities Financing Authority, Health Facility
Revenue Bonds (Sisters of Providence), Series 1990,
7.500%, 10/01/10 (Pre-refunded to 10/01/00) AA- 10/00 at 102 2,250,520
3,380,000 California Health Facilities Financing Authority, Kaiser
Permanente, Revenue Bonds, 1990 Series A, 7.000%, 12/01/10 AA 12/00 at 102 3,681,699
4,750,000 California Housing Finance Agency Home Mortgage Revenue
Bonds, 1995 Series F, 5.950%, 8/01/14 Aaa 8/05 at 102 4,749,715
1,060,000 California State Public Works Board, High Technology Facilities
Lease, The Regents of the University of California, San Diego
Facility, 7.375%, 4/01/06 A1 No Opt. Call 1,127,490
2,905,000 California Statewide Communities Development Authority,
Senior Lien Multifamily Housing Revenue Bonds (Monte Vista
Terrace), Series 1996A, 6.375%, 9/01/20 AAA 9/06 at 100 2,931,929
2,000,000 California Statewide Communities Development Authority,
Certificates of Participation, Huntington Memorial Hospital,
5.750%, 7/01/16 AAA 7/06 at 102 1,963,860
2,500,000 Certificates of Participation, California Statewide Communities
Development Authority (Solheim Lutheran Home),
6.500%, 11/01/17 A 11/04 at 102 2,571,825
3,000,000 Certificates of Participation, California Statewide Communities
Development Authority, St. Joseph Health System Obligated
Group, 6.500%, 7/01/15 Aa 7/04 at 102 3,131,430
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8,470,000 State Public Works Board of the State of California Lease
Revenue Bonds (The Trustees of The California State
University), 1992 Series A (Various California State University
Projects), 6.700%, 10/01/17 A 10/02 at 102 $ 8,964,309
5,000,000 State Public Works Board of the State of California Lease
Revenue Bonds (The Trustees of The California State
University), 1993 Series A (Various California State
University Projects), 5.500%, 12/01/18 A 12/03 at 102 4,616,850
5,000,000 State Public Works Board of the State of California Lease
Revenue Bonds (Department of Corrections) 1996 Series A
(California Substance Abuse Treatment Facility and State
Prison at Corcoran (Corcoran II)), 5.250%, 1/01/21 Aaa 1/06 at 100 4,628,050
5,900,000 State of California, Department of Water Resources, Central
Valley Project, Water System Revenue Bonds, Series M,
5.000%, 12/01/15 Aa 12/03 at 101 5,252,829
1,500,000 Insured Certificates of Participation (Channing House), Series
1991A, ABAG Finance Authority For Nonprofit Corporations,
7.125%, 1/01/21 A 1/01 at 102 1,606,545
2,035,000 Certificates of Participation (1991 Capital Improvement Project),
Bella Vista Water District (California), 7.375%, 10/01/17 Baa 10/01 at 102 2,150,730
7,000,000 Brea Redevelopment Agency (Orange County, California), 1993
Tax Allocation Refunding Bonds (Redevelopment Project AB),
5.500%, 8/01/17 Aaa 8/03 at 102 6,629,490
1,000,000 Carson Redevelopment Agency (California), Redevelopment
Project Area No. 2, Refunding Tax Allocation Bonds, Series
1993, 6.000%, 10/01/13 Baa 10/03 at 102 973,400
2,000,000 Carson Redevelopment Agency (California), Redevelopment
Project Area No. 1, Tax Allocation Bonds, Series 1993,
6.000%, 10/01/16 Baa1 10/03 at 102 1,942,000
1,755,000 Central Joint Powers Health Financing Authority, Certificates of
Participation, Series 1993 (Community Hospitals of Central
California), 5.000%, 2/01/23 A 2/03 at 100 1,446,576
2,000,000 Certificates of Participation, Insured Health Facility Revenue,
(Sierra Sunrise Lodge) Series 1991A, 6.750%, 2/01/21 A 2/01 at 102 2,079,360
5,000,000 Contra Costa Water District (Contra Costa County, California),
Water Revenue Refunding Bonds, Series F, 5.000%, 10/01/20 Aaa 10/02 at 101 1/2 4,416,250
6,500,000 County of Contra Costa, Mortgage Revenue Refunding Bonds,
Series 1993A (FHA Insured Mortgage Loan -- Cedar Pointe
Apartments Project), 6.150%, 9/01/25 AAA 9/03 at 103 6,543,420
2,000,000 Hospital Revenue Certificates of Participation (Desert Hospital
Corporation Project), Series 1990, 8.100%, 7/01/20
(Pre-refunded to 7/01/00) AAA 7/00 at 102 2,285,760
3,200,000 Certificates of Participation, Desert Sands Unified School
District (Capital Projects Program), Series 1995,
5.750%, 3/01/20 Aaa 3/05 at 102 3,141,376
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN CALIFORNIA TAX-FREE VALUE FUND -- CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------- <C>
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,950,000 East Bay Municipal Utility District (Alameda and Contra Costa
Counties, California), Water System Subordinated Revenue
Bonds, Series 1990, 7.500%, 6/01/18 (Pre-refunded to 6/01/00) Aaa 6/00 at 102 $ 2,185,268
4,000,000 East Bay Municipal Utility District (Alameda and Contra Costa
Counties, California), Water System Subordinated Revenue
Bonds, Series 1991, 6.375%, 6/01/21 (Pre-refunded to 12/01/01) Aaa 12/01 at 102 4,401,480
2,500,000 Fontana Public Financing Authority (San Bernardino County,
California), Tax Allocation Revenue Bonds (North Fontana
Redevelopment Project), 1990 Series A, 7.250%, 9/01/20 BB+ 9/00 at 102 2,441,750
2,475,000 City of Loma Linda California, Hospital Revenue Bonds (Loma
Linda University Medical Center Project), Series 1993-A,
6.000%, 12/01/06 BBB 12/03 at 102 2,435,549
5,000,000 The Community Redevelopment Agency of the City of
Los Angeles, California, Multifamily Housing Revenue
Refunding Bonds, 1995 Series A (Angelus Plaza Project),
7.400%, 6/15/10 AAA 6/05 at 105 5,491,500
3,505,000 Harbor Department of the City of Los Angeles (California),
Revenue Bonds, Issue of 1988, 7.600%, 10/01/18 AAA No Opt. Call 4,240,454
255,000 The City of Los Angeles 1987 Home Mortgage Revenue Bonds
(GNMA Mortgaged-Backed Securities Program),
8.100%, 5/01/17 Aaa No Opt. Call 268,280
4,595,000 Los Angeles County Public Works Finance Authority, Revenue
Bonds, Series 1994A (Los Angeles County Regional Park and
Open Space District), 6.125%, 10/01/10 Aa 10/04 at 102 4,735,837
3,740,000 Los Angeles County Public Works Financing Authority, Lease
Revenue Refunding Bonds (County of Los Angeles 1996
Master Refunding Project), Series A, 5.250%, 9/01/14 Aaa 9/06 at 102 3,494,207
3,735,000 Los Angeles County Public Works Financing Authority, Lease
Revenue Refunding Bonds (County of Los Angeles 1996
Master Refunding Project), Series B, 5.250%, 9/01/13 (DD) Aaa 9/06 at 102 3,516,727
190,000 County of Los Angeles Single Family Mortgage Revenue Bonds
(GNMA Mortgage Backed Securities Program), 1987 Issue A,
8.000%, 3/01/17 Aaa No Opt. Call 198,826
2,000,000 Los Angeles County Transportation Commission (California),
Sales Tax Revenue Refunding Bonds, Series 1989-A,
7.400%, 7/01/15 AA- 7/99 at 102 2,170,300
Los Angeles County Transportation Commission (California),
Proposition C Sales Tax Revenue Bonds, Second Senior Bonds,
Series 1992-A
2,300,000 6.250%, 7/01/13 Aaa 7/02 at 102 2,406,168
4,445,000 6.000%, 7/01/23 Aaa 7/02 at 102 4,476,293
1,260,000 Marysville Community Development Agency, Marysville Plaza
Project, 1992 Tax Allocation Refunding Bonds (Bank
Qualified), 7.250%, 3/01/21 Baa 3/02 at 102 1,341,018
740,000 Community Development Agency of The City of Menlo Park,
Multifamily Housing Revenue Bonds (FHA-Insured Mortgage
Loan -- The Gateway Project), Series 1987A, 8.250%, 12/01/28 Aa 6/97 at 103 776,534
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,000,000 Modesto Irrigation District Financing Authority, Refunding
Revenue Bonds, Series A, 6.000%, 10/01/15 Aaa 10/06 at 102 $ 5,083,000
860,000 City of Monterey, Hospital Revenue Bonds, (Monterey Peninsula
Hospital Project) Series 1984 A, 7.375% 7/01/14 A+ 1/97 at 102 885,671
1,500,000 Community Facilities District No. 1 of the North City West
School Facilities Financing Authority, Special Tax Bonds, Series
1989A, 7.850%, 9/01/19 (Pre-refunded to 9/01/99) N/R 9/99 at 102 1,675,680
2,930,000 Northern California Power Agency, Hydroelectric Project
Number One Revenue Bonds, Refunding Series E,
7.150%, 7/01/24 A 7/98 at 102 3,072,574
2,080,000 City of Ontario, (San Bernardino County, California), Limited
Obligation Improvement Bonds, Assessment District No. 100C,
(California Commerce Center -- Phase III), 8.000%, 9/02/11 N/R 3/97 at 103 2,155,192
1,430,000 Redding Joint Powers Financing Authority Lease Revenue Bonds,
(Capital Improvement Projects) Series 1993, 6.250%, 6/01/23 A 6/03 at 102 1,394,479
7,290,000 City of Riverside, California, Multifamily Housing Revenue
Bonds, (Fannie Mae Pass-through Certificate Program/
Birchwood Park Apartment Project), Series 1992A,
6.500%, 1/01/18 AAA 7/02 at 100 7,444,912
205,000 Sacramento Municipal Utility District (California), Subordinated
Electric Revenue Bonds, 1985 Refunding Series,
8.000%, 11/15/10 Baa1 10/96 at 100 205,494
3,500,000 Sacramento Municipal Utility District, Electric Revenue Bonds,
1988 Series W, 7.875%, 8/15/16 (Pre-refunded to 8/15/98) Aaa 8/98 at 102 3,811,395
2,315,000 Limited Obligation Refunding Bonds, City of Salinas,
Consolidated Refunding District 94-3, Series No. A-181
Monterey County, California, 7.400%, 9/02/09 N/R 9/06 at 103 2,402,600
2,080,000 City of Salinas, Housing Facility Refunding Revenue Bonds,
Series 1994A (GNMA Collateralized -- Villa Serra Project),
6.500%, 7/20/17 AAA 7/04 at 102 2,142,483
8,680,000 San Bernardino County, California, Certificates of Participation,
Series 1995 (Medical Center Financing Project),
5.500%, 8/01/15 (DD) Aaa 8/05 at 102 8,339,484
2,000,000 San Francisco City and County School District Facilities
Improvement Series D, 6.000%, 6/15/14 Aaa 6/04 at 102 2,045,100
5,000,000 City and County of San Francisco, Redevelopment Financing
Authority, 1993 Series C Tax Allocation Revenue Bonds,
(San Francisco Redevelopment Projects), 5.125%, 8/01/18 A 8/03 at 103 4,428,450
3,070,000 Certificates of Participation, (1993 Seismic Retrofit Financing
Project), City of San Leandro, California, San Leandro Public
Financing Authority, 5.900%, 6/01/13 A 6/03 at 102 3,010,503
1,000,000 Certificates of Participation Series 1991, San Mateo County
Board of Education, (Administration Building Project),
7.100%, 5/01/21 A+ 5/99 at 102 1,051,960
1,750,000 Certificates of Participation, Insured Revenue, City of
Santa Barbara, (FACT Retirement Services), 5.850%, 8/01/15 A 8/06 at 102 1,686,930
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN CALIFORNIA TAX-FREE VALUE FUND -- CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,000,000 Housing Authority of the County of Santa Cruz, Multifamily
Housing Refunding Revenue Bonds, Series 1990A,
(Fannie Mae Collateralized), 7.750%, 7/01/23 AAA 7/00 at 102 $ 3,188,460
2,000,000 Certificates of Participation, (1990 Financing Project), Sonoma
County Office of Education, 7.375%, 7/01/20
(Pre-refunded to 7/01/00) A+ 7/00 at 102 2,229,940
12,750,000 Southern California Public Power Authority (a public entity
organized under the laws of the State of California) (Palo Verde
Project), Power Project Revenue Bonds, 1993 Refunding
Series A, 5.000%, 7/01/15 (DD) Aa 7/03 at 102 11,381,288
740,000 Southern California Public Power Authority, Transmission
Project Revenue Bonds, 1986 Refunding Series B (Southern
Transmission Project), 5.500%, 7/01/23 Aa 9/96 at 100 732,363
1,100,000 Certificates of Participation, (1992 Financing Project) Series B,
County of Tulare, Tulare County Public Facilities Corporation,
6.875%, 11/15/12 Baa1 11/02 at 102 1,148,356
4,200,000 Certificates of Participation, (Capital Improvement Program),
1996 Series A, County of Tulare, California, 6.000%, 2/15/16 Aaa 2/06 at 102 4,208,484
The Regents of the University of California, 1993 Refunding
Certificates of Participation (UCLA Central Chiller/
Cogeneration Facility):
1,750,000 5.500%, 11/01/17 Aa 11/03 at 102 1,652,735
3,500,000 5.600%, 11/01/20 Aa 11/03 at 102 3,269,454
4,335,000 6.000%, 11/01/21 Aa 11/03 at 102 4,254,586
- -------------------------------------------------------------------------------------------------------------------------
$235,430,000 Total Investments -- (cost $228,572,506) -- 103.7% 236,539,342
=============------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 1.0%
$ 700,000 California Health Facilities Authority, Variable Rate Revenue
Bonds, (St. Joseph Health System), Series 1991B, Variable Rate
Demand Bonds, 3.650%, 7/01/09+ VMIG-1 700,000
1,500,000 State of California, 1996-97 Revenue Anticipation
Notes, Index Notes Series C-5, 3.650%, 6/30/97 VMIG-1 1,500,000
- -------------------------------------------------------------------------------------------------------------------------
$ 2,200,000 Total Temporary Investments -- 1.0% 2,200,000
=============------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (4.7%) (10,702,293)
- -------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $228,037,049
=========================================================================================================================
</TABLE>
16
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET PORTFOLIO
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 32 $119,374,734 50%
RATINGS* AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 13 46,586,365 20
PORTFOLIO OF A+ A1 5 7,106,088 3
INVESTMENTS A, A-- A, A2, A3 13 42,364,646 18
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 7 10,196,547 4
TEMPORARY BB+, BB, BB-- Ba1, Ba, Ba2, Ba3 2 4,677,490 2
INVESTMENTS): Non-rated Non-rated 3 6,233,472 3
- ---------------------------------------------------------------------------------------------------------------------
TOTAL 75 $236,539,342 100%
=====================================================================================================================
</TABLE>
* Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R -- Investment is not rated.
** Optional Call Provisions: Dates (month and year) and prices of the earliest
call or redemption. There may be other call provisions at varying prices at
later dates.
(DD) Portion of Security purchased on a delayed basis (note 1).
+ 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.
17
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN CALIFORNIA INSURED TAX-FREE VALUE FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 California Educational Facilities Authority, Revenue Bonds
(Pepperdine University), Series 1990, 7.200%, 11/01/15
(Pre-refunded to 11/01/00) Aaa 11/00 at 102 $ 1,119,550
4,500,000 California Educational Facilities Authority Revenue Bonds
(University of San Francisco), Series 1996, 6.000%, 10/01/26 Aaa 10/06 at 102 4,544,010
6,000,000 California Health Facilities Authority, Kaiser Permanente
Medical Care Program, Semiannual Tender Revenue Bonds,
1983 Tender Bonds, 5.450%, 10/01/13 AA 10/01 at 101 5,622,540
6,340,000 California Housing Finance Agency, Housing Revenue Bonds
(Insured), 1991 Series B, 6.850%, 8/01/23 Aaa 2/02 at 102 6,635,317
5,000,000 California Housing Finance Agency, Home Mortgage Revenue
Bonds, 1995 Series F, 5.950%, 8/01/14 Aaa 8/05 at 102 4,999,700
240,000 California Public Capital Improvements Financing Authority
(A Joint Powers Agency) Revenue Bonds (Pooled Projects),
Series 1988B, 8.100%, 3/01/18 Aaa 3/98 at 102 252,602
8,500,000 California Statewide Communities Development Authority,
Sutter Health Obligated Group, Certificates of Participation,
6.125%, 8/15/22 Aaa 8/02 at 102 8,558,140
4,000,000 California Statewide Communities Development Authority,
Certificates of Participation, (Sutter Health Obligated Group),
Series 1993, 5.500%, 8/15/13 Aaa 8/03 at 102 3,871,440
6,000,000 California Statewide Communities Development Authority,
Certificates of Participation, Huntington Memorial Hospital,
5.500%, 7/01/10 AAA 7/06 at 102 5,824,260
5,000,000 State Public Works Board of the State of California Lease
Revenue Bonds (Department of Corrections), 1990 Series A
(State Prison-Madera County), 7.000%, 9/01/09
(Pre-refunded to 9/01/00) Aaa 9/00 at 102 5,543,700
5,000,000 State Public Works Board of the State of California Lease
Revenue Bonds (Department of Corrections), 1996 Series A
(California Substance Abuse Treatment Facility and State
Prison at Corcoran (Corcoran II)), 5.250%, 1/01/21 Aaa 1/06 at 100 4,628,050
5,000,000 State of California Various Purpose General Obligation Bonds,
5.500%, 4/01/19 Aaa 4/03 at 102 4,737,000
1,225,000 Redevelopment Agency of the City of Barstow, Central
Redevelopment Project Tax Allocation Bonds, 1994 Series A,
7.000%, 9/01/14 Aaa No Opt. Call 1,411,102
7,005,000 Big Bear Lake Financing Authority (San Bernardino County,
California) 1995 Tax Allocation Refunding Revenue Bonds,
6.300%, 8/01/25 Aaa 8/05 at 102 7,303,763
7,000,000 City of Big Bear Lake, California, 1992 Water Revenue
Refunding Bonds, 6.375%, 4/01/22 (Pre-refunded to 4/01/02) Aaa 4/02 at 102 7,703,290
3,525,000 Brea Public Financing Authority (Orange County, California),
1991 Tax Allocation Revenue Bonds, Series A (Redevelopment
Project AB), 7.000%, 8/01/15 (Pre-refunded to 8/01/01) Aaa 8/01 at 102 3,955,685
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,000,000 Calaveras County Water District (California), Certificates of
Participation (1991 Ebbetts Pass Water System Improvements
Project), 6.900%, 5/01/16 (Pre-refunded to 5/01/01) Aaa 5/01 at 102 $ 3,339,930
7,000,000 Chino Unified School District, Certificates of Participation
(1995 Master Lease Program), 6.125%, 9/01/26 Aaa 9/05 at 102 7,140,350
850,000 Redevelopment Agency of the City of Concord, Central Concord
Redevelopment Project, Tax Allocation Bonds, Series 1988-2,
7.875%, 7/01/07 Aaa 7/98 at 102 915,212
500,000 Cotati-Rohnert Park Unified School District (Sonoma County,
California), General Obligation Bonds, Election 1990, Series B,
9.000%, 8/01/06 Aaa 8/99 at 102 566,055
2,000,000 East Bay Municipal Utility District (Alameda and Contra Costa
Counties,California), Water System Subordinated Revenue
Bonds, Series 1990, 7.500%, 6/01/18
(Pre-refunded to 6/01/00) Aaa 6/00 at 102 2,241,300
2,000,000 Eastern Municipal Water District (Riverside County, California),
Water and Sewer Revenue, Certificates of Participation,
Series 1991, 6.500%, 7/01/20 (Pre-refunded to 7/01/01) Aaa 7/01 at 102 2,200,080
3,865,000 Fallbrook Sanitary District, (San Diego County, California),
1991 Certificates of Participation (Wastewater Facilities
Refunding Project), 6.600%, 2/01/13 Aaa 2/01 at 100 4,108,070
2,500,000 Fontana Public Financing Authority (San Bernardino County,
California), Tax Allocation Revenue Bonds (North Fontana
Redevelopment Project), 1990 Series A, 7.000%, 9/01/10 Aaa 9/00 at 102 2,730,400
3,000,000 Gilroy Unified School District, Santa Clara County, California,
Certificates of Participation, Series of 1994, 6.250%, 9/01/12 Aaa 9/04 at 102 3,153,660
3,500,000 City of Glendale, California, Insured Health Facilities Revenue
Bonds (Glendale Memorial Hospital and Health Center), 1995
Series A, 5.600%, 11/15/25 AAA 11/05 at 102 3,328,605
1,000,000 LaQuinta Redevelopment Agency, LaQuinta Redevelopment
Project Tax Allocation Refunding Bonds, Series 1994 (Project
Area No. 1), 7.300%, 9/01/12 Aaa No Opt. Call 1,182,360
5,000,000 The Community Redevelopment Agency of the City of
Los Angeles, California, Multifamily Housing Revenue
Refunding Bonds, 1995 Series A (Angelus Plaza Project),
7.400%, 6/15/10 AAA 6/05 at 105 5,491,500
2,000,000 The City of Los Angeles (California), Los Angeles Convention
and Exhibition Center, Certificates of Participation,
1990 Series, 7.000%, 8/15/21 (Pre-refunded to 8/15/00) Aaa 8/00 at 102 2,215,620
Department of Water and Power of the City of Los Angeles,
California, Electric Plant Refunding Revenue Bonds,
Second Issue of 1993:
5,000,000 5.400%, 11/15/31 Aa 11/03 at 102 4,504,850
6,000,000 5.400%, 11/15/31 Aaa 11/03 at 102 5,486,520
260,000 The City of Los Angeles 1987 Home Mortgage Revenue Bonds
(GNMA Mortgage-Backed Securities Program),
8.100%, 5/01/17 Aaa No Opt. Call 273,541
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN CALIFORNIA INSURED TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Los Angeles County Metropolitan Transportation Authority
(California), Proposition A, Sales Tax Revenue Refunding
Bonds, Series 1993-A, 5.000%, 7/01/21 Aaa 7/03 at 100 $ 2,198,100
5,000,000 Los Angeles County Transportation Commission (California),
Proposition C Sales Tax Revenue Bonds, Second Senior Bonds,
Series 1992-A, 6.250%, 7/01/13 Aaa 7/02 at 102 5,230,800
Modesto Irrigation District Financing Authority, Domestic
Water Project Revenue Bonds, Series 1992A:
9,500,000 6.125%, 9/01/19 Aaa 9/02 at 102 9,649,910
5,750,000 5.500%, 9/01/22 Aaa 9/02 at 100 5,384,588
2,500,000 Mt. Diablo Hospital District, Insured Hospital Revenue Bonds,
1990 Series A, 8.000%, 12/01/11 (Pre-refunded to 12/01/00) Aaa 12/00 at 102 2,868,500
2,000,000 Mt. Diablo Unified School District, Community Facilities
District No. 1, Special Tax Bonds, Series 1990, (Contra Costa
County, California), 7.050%, 8/01/20 Aaa 8/00 at 102 2,181,260
2,555,000 City of Napa Mortgage Revenue Refunding Bonds, Series 1992A
(FHA Insured Mortgage Loan -- Creekside Park Apartments
Project), 6.625%, 7/01/24 Aaa 7/02 at 102 2,638,906
2,000,000 City of Napa Mortgage Revenue Refunding Bonds, Series 1994A
(FHA Insured Mortgage Loan -- Creekside Park II Apartments
Project), 6.625%, 7/01/25 Aaa 7/04 at 101 2,070,700
7,040,000 Norwalk Community Facilities Financing Authority
(Los Angeles County, California) Tax Allocation Refunding
Revenue Bonds, 1995 Series A, 6.050%, 9/01/25 Aaa 9/05 at 102 6,997,126
2,500,000 City of Oakland, California, Special Refunding Revenue Bonds
(Pension Financing), 1988 Series A, 7.600%, 8/01/21 Aaa 8/98 at 102 2,687,000
4,885,000 Ontario Redevelopment Financing Authority (San Bernardino
County, California), 1992 Revenue Bonds (Project No. 1,
Center City and Cimarron Redevelopment Projects),
6.250%, 8/01/15 Aaa 2/02 at 102 5,064,866
1,250,000 Palm Desert Redevelopment Agency Project Area No. 1, as
Amended (Added Territory Only) Subordinated Tax Allocation
Bonds Issue of 1989, 7.400%, 5/01/09 Aaa 5/97 at 101 1,287,300
2,000,000 Redevelopment Agency of the City of Pittsburgh, California,
Los Medanos Community Development Project, Tax Allocation
Bonds, Series 1991, 7.150%, 8/01/21 Aaa 8/01 at 103 2,273,460
1,500,000 Port of Oakland, California, Revenue Bonds, 1989 Series B,
7.250%, 11/01/16 Aaa 5/97 at 102 1,558,185
County of Riverside, California (1994 Desert Justice Facility
Project), Certificates of Participation:
3,600,000 6.000%, 12/01/17 Aaa 12/04 at 101 3,605,940
2,500,000 6.250%, 12/01/21 Aaa 12/04 at 101 2,574,900
3,000,000 Sacramento Municipal Utility District, Electric Revenue Bonds,
1991 Series Y, 6.500%, 9/01/21 (Pre-refunded to 9/01/01) Aaa 9/01 at 102 3,307,740
2,500,000 San Bernardino County Transportation Authority, Sales Tax
Revenue Bonds (Limited Tax Bonds), 1992 Series A,
6.000%, 3/01/10 Aaa 3/02 at 102 2,576,775
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000,000 San Diego Regional Building Authority Lease Revenue Bonds,
Series 1990A (San Miguel Consolidated Fire Protection
District Project), 7.250%, 1/01/20 (Pre-refunded to 1/01/00) Aaa 1/00 at 102 $ 2,208,440
Redevelopment Agency of the City and County of San Francisco
Lease Revenue Bonds, Series 1994 (George R. Moscone
Convention Center):
2,250,000 6.800%, 7/01/19 Aaa 7/04 at 102 2,461,118
1,000,000 6.750%, 7/01/24 Aaa 7/04 at 102 1,092,690
2,250,000 Redevelopment Agency of the City of San Jose, Merged Area
Redevelopment Project, Tax Allocation Bonds, Series 1993,
4.750%, 8/01/24 Aaa 2/04 at 102 1,888,425
3,000,000 City of Shasta Lake 1996--2 Certificates of Participation,
6.000%, 4/01/16 Aaa 4/05 at 102 3,005,640
2,000,000 Southern California Rapid Transit District, Certificates of
Participation (Workers' Compensation Funding Program),
7.500%, 7/01/05 Aaa 1/01 at 102 1/2 2,248,380
3,040,000 Sulphur Springs Union School District (County of Los Angeles,
California), General Obligation Bonds, Election 1991, Series A,
0.000%, 9/01/15 Aaa No Opt. Call 983,075
105,000 Thousand Oaks Redevelopment Agency (Ventura County,
California), Single Family Mortgage Revenue Refunding Bonds,
Issue of 1986, 7.900%, 1/01/16 Aaa 1/97 at 102 107,797
6,250,000 Tri-City Hospital District, Insured Refunding Revenue Bonds,
Series 1996A, 5.625%, 2/15/17 Aaa 2/06 at 102 6,043,563
2,500,000 The Regents of the University of California Refunding Revenue
Bonds (1989 Multiple Purpose Projects), Series C,
5.000%, 9/01/23 Aaa 9/03 at 102 2,187,324
5,000,000 City of Vallejo Refunding Revenue Bonds, 1996 Series A
(Water Improvement Project), 5.875%, 5/01/26 Aaa 5/06 at 102 4,957,900
- -------------------------------------------------------------------------------------------------------------------------
$214,785,000 Total Investments -- (cost $207,453,584) -- 98.2% 216,928,610
=============------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 0.3%
$ 600,000 California Health Facilities Financing Authority, Refunding
============= Revenue Bonds, (St. Joseph Health System), Series 1985B,
Variable Rate Demand Bonds, 3.650%, 7/01/13+ VMIG-1 600,000
- -------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.5% 3,238,029
- -------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $220,766,639
=========================================================================================================================
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN CALIFORNIA INSURED TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 59 $206,801,220 95%
RATINGS* AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 2 10,127,390 5
PORTFOLIO OF
INVESTMENTS
(EXCLUDING
TEMPORARY
INVESTMENTS):
- -------------------------------------------------------------------------------------------------------------------------
TOTAL 61 $216,928,610 100%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
All of the bonds in the portfolio, excluding temporary investments in short-
term municipal securities, are either covered by Original Issue Insurance,
Secondary Market Insurance or Portfolio Insurance, or are backed by an escrow or
trust containing sufficient U.S. Government or U.S. Government agency
securities, any of which ensure the timely payment of principal and interest.
* Ratings: Using the higher of Standard & Poor's or Moody's rating.
** 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.
+ 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.
22
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts Health and Educational, Facilities Authority,
Revenue Refunding Bonds, Youville Hospital Issue (FHA
Insured Project), Series B:
$ 2,500,000 6.000%, 2/15/25 Aa 2/04 at 102 $ 2,497,550
2,000,000 6.000%, 2/15/34 Aa 2/04 at 102 1,971,460
250,000 Massachusetts Bay Transportation Authority, General
Transportation System Bonds, 1988 Series A, 7.750%,
3/01/10 (Pre-refunded to 3/01/98) Aaa 3/98 at 102 267,763
1,000,000 Massachusetts Bay Transportation Authority, General
Transportation Bonds, 1991 Series A, 7.000%, 3/01/11
(Pre-refunded to 3/01/01) Aaa 3/01 at 102 1,112,090
Massachusetts Educational Loan Authority, Education Loan
Revenue Bonds, Issue C, Series 1985A:
160,000 7.875%, 6/01/03 AAA 6/97 at 102 167,606
1,185,000 7.875%, 6/01/03 AAA 6/00 at 100 1,243,646
1,320,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Emerson Hospital Issue, Series C, 8.000%,
7/01/18 (Pre-refunded to 7/01/00) AAA 7/00 at 102 1,491,996
250,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Mount Auburn Hospital Issue, Series A,
7.875%, 7/01/18 (Pre-refunded to 7/01/98) Aaa 7/98 at 102 270,568
350,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Salem Hospital Issue, Series A, 7.250%,
7/01/09 (Pre-refunded to 7/01/97) Aaa 7/97 at 100 359,562
500,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Series 1989 (Cardinal Cushing General
Hospital), 8.875%, 7/01/18 N/R 7/99 at 102 1/2 533,315
1,180,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Suffolk University Issue, Series A, 8.125%,
7/01/20 (Pre-refunded to 7/01/00) Baa 7/00 at 101 1/2 1,327,299
500,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Newton-Wellesley Hospital Issue, Series C,
8.000%, 7/01/18 (Pre-refunded to 7/01/98) Aaa 7/98 at 102 542,135
500,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Saint Elizabeth's Hospital Of Boston Issue
(FHA-Insured Project), Series B, 7.750%, 8/01/27
(Pre-refunded to 8/01/97) Aaa 8/97 at 102 526,745
750,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Baystate Medical Center Issue, Series C,
7.500%, 7/01/20 (Pre-refunded to 7/01/99) A+ 7/99 at 102 818,970
1,000,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Boston College Issue, Series J,
6.625%, 7/01/21 Aaa 7/01 at 102 1,071,980
500,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Refunding Bonds, Worcester Polytechnic Institute
Issue, Series E, 6.625%, 9/01/17 A+ 9/02 at 102 528,570
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 495,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Brockton Hospital Issue, Series B,
8.000%, 7/01/07 A 7/97 at 102 $ 515,523
250,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, University Hospital Issue, Series C,
7.250%, 7/01/10 Aaa 7/00 at 102 273,390
750,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, New England Medical Center Hospitals Issue,
Series F, 6.625%, 7/01/25 Aaa 7/02 at 102 800,355
2,750,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, New England Deaconess Hospital Issue,
Series D, 6.875%, 4/01/22 A 4/02 at 102 2,878,563
1,000,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Suffolk University Issue, Series B,
6.350%, 7/01/22 AAA 7/02 at 102 1,029,390
1,000,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, MetroWest Health, Inc. Issue, Series C,
6.500%, 11/15/18 (Pre-refunded to 11/15/02) Aaa 11/02 at 102 1,107,710
885,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Cable Housing and Health Services Issue,
Series A, 5.625%, 7/01/13 Aaa 7/03 at 102 868,415
Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds, Lahey Clinic Medical Center Issue, Series B:
1,000,000 5.625%, 7/01/15 Aaa 7/03 at 102 967,230
2,000,000 5.375%, 7/01/23 Aaa 7/03 at 102 1,840,360
700,000 Massachusetts Health and Educational, Facilities Authority,
Revenue Bonds (Daughters of Charity National Health
System--The Carney Hospital), Series D, 6.100%, 7/01/14 Aa 7/04 at 102 701,211
3,700,000 Massachusetts Housing Finance Agency, Housing Project
Revenue Bonds, 6.375%, 4/01/21 A1 4/03 at 102 3,717,908
1,000,000 Massachusetts Housing Finance Agency, Residential
Development Bonds, 6.250%, 11/15/14 Aaa 11/02 at 102 1,014,610
1,000,000 Massachusetts Housing Finance Agency, Residential
Development Bonds, 1992 Series D, 6.875%, 11/15/21 Aaa 5/02 at 102 1,042,610
500,000 Massachusetts Housing Finance Agency, Single Family Housing
Revenue Bonds, Series 18, 7.350%, 12/01/16 Aa 6/01 at 102 528,165
1,250,000 Massachusetts Housing Finance Agency, Single Family Housing
Revenue Bonds, Series B, 7.700%, 6/01/17 Aa 6/98 at 102 1,318,300
1,440,000 Massachusetts Industrial Finance Agency, Pollution Control
Revenue Bonds, 1993 Series (Eastern Edison Company
Project), 5.875%, 8/01/08 BBB 8/03 at 102 1,380,658
975,000 Massachusetts Industrial Finance, Library Revenue Bonds
(Malden Public Library Project), Series 1994, 7.250%, 1/01/15 Aaa 1/05 at 102 1,117,496
1,000,000 Massachusetts Industrial Finance Agency, Resource Recovery
Revenue Bonds (SEMASS Project), Series 1991A,
9.000%, 7/01/15 N/R 7/01 at 103 1,110,060
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 250,000 Massachusetts Industrial Finance Agency, Revenue Bonds,
College of the Holy Cross-1992 Issue, 6.450%, 1/01/12
(Pre-refunded to 1/01/02) A1 1/02 at 102 $ 273,610
455,000 Massachusetts Industrial Finance Agency, Revenue
(Sturdy Memorial Hospital), 7.900%, 6/01/09 BBB+ 6/99 at 102 487,000
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds
(Springfield College Project--1989 Issue), 7.800%, 10/01/09 A 10/99 at 103 561,815
1,335,000 Massachusetts Industrial Finance Agency, Revenue Bonds,
Merrimack College Issue, Series 1992, 7.125%, 7/01/12 BBB- 7/02 at 102 1,427,128
1,250,000 Massachusetts Industrial Finance Agency, Revenue Bonds,
Phillips Academy Issue, Series 1993, 5.375%, 9/01/23 Aa1 9/08 at 102 1,159,525
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds
(Whitehead Institute for Biomedical Research--1993 Issue),
5.125%, 7/01/26 Aa 7/03 at 102 446,830
2,290,000 Massachusetts Industrial Finance Agency, Revenue and
Refunding Bonds, 1995 Series A (Lesley College Project),
6.300%, 7/01/25 AAA 7/05 at 102 2,363,280
1,750,000 Massachusetts Industrial Finance Agency, Revenue Bonds,
Harvard Community Health Plan, Inc., Issue 1988 Series B
(Refunding Bonds), 8.125%, 10/01/17 A 10/98 at 102 1,884,348
1,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds
(College of the Holy Cross--1996 Issue), 5.500%, 3/01/20 Aaa 3/06 at 102 948,880
500,000 Massachusetts Port Authority, Revenue Refunding Bonds,
Series 1978, 7.125%, 7/01/12 Aa 1/94 at 101 1/2 503,555
635,000 Massachusetts Port Authority, Revenue Bonds, Series 1982,
13.000%, 7/01/13 Aaa No Opt. Call 1,065,625
165,000 Massachusetts ST, General Obligation Bonds, Consolidated Loan
of 1990 Series A, 7.250%, 3/01/09 (Pre-refunded to
3/01/00) Aaa 3/00 at 102 182,280
1,000,000 Massachusetts Turnpike Authority, Turnpike Revenue Bonds,
1993 Series A, 5.125%, 1/01/23 Aaa 1/03 at 102 895,130
715,000 The Commonwealth of Massachusetts, General Obligation
Refunding Bonds, 1993 Series A, 5.500%, 2/01/11 A 2/03 at 102 700,686
250,000 The Massachusetts Bay Transportation Authority, Certificates of
Participation, Series 1988, 7.800%, 1/15/14 A- 12/06 at 100 288,260
City of Attleboro, Massachusetts, General Obligation Bonds:
450,000 6.250%, 1/15/10 Baa1 1/03 at 102 462,047
450,000 6.250%, 1/15/11 Baa1 1/03 at 102 460,553
Town of Barnstable, Massachusetts, General Obligation Bonds:
880,000 5.750%, 9/15/13 Aa 9/04 at 102 879,498
490,000 5.750%, 9/15/14 Aa 9/04 at 102 486,996
250,000 City of Boston, Massachusetts, General Obligation Bonds,
1989 Series A, 7.700%, 2/01/09 (Pre-refunded to 2/01/99) A 2/99 at 102 273,620
1,000,000 City of Boston, Massachusetts, General Obligation Bonds, 1991
Series A, 6.750%, 7/01/11 Aaa 7/01 at 102 1,105,720
1,500,000 City of Boston, Massachusetts, Revenue Bonds, Boston City
Hospital (FHA Insured Mortgage), Series A, 7.625%, 2/15/21
(Pre-refunded to 8/15/00) Aaa 8/00 at 102 1,687,815
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Boston Water and Sewer Commission (A Public Instrumentality
of the Commonwealth of Massachusetts), General Revenue
Bonds, 1986 Series A (Senior Series):
$ 180,000 7.875%, 11/01/13 (Pre-refunded to 11/01/96) A 11/96 at 102 $ 184,775
320,000 7.875%, 11/01/13 A 11/96 at 102 328,365
500,000 Boston Water and Sewer Commission, General Revenue Bonds,
1991 Series A (Senior Series), 7.000%, 11/01/18
(Pre-refunded to 11/01/01) Aaa 11/01 at 102 561,160
985,000 Boston-Mount Pleasant Housing Development Corporation,
Multifamily Housing Refunding Revenue Bonds,
Series 1992 A, 6.750%, 8/01/23 AAA 8/02 at 102 1,017,190
1,000,000 Dartmouth Housing Development Corporation Multifamily
Housing Refunding Revenue Bonds, Series 1989 (Crossroads
Apartments), FNMA Collateral, 7.375%, 7/01/24 AAA 1/98 at 103 1,032,480
Town of Deerfield, Massachusetts, General Obligation School
Bonds of 1992, School Project Loan, Act of 1948,
Bank-Qualified Unlimited Tax:
420,000 6.200%, 6/15/09 A1 6/02 at 102 445,129
415,000 6.250%, 6/15/10 A1 6/02 at 102 439,356
525,000 City of Haverhill, Massachusetts, General Obligation, Municipal
Purpose Loan of 1991 Bonds, 7.500%, 10/15/11 Baa 10/01 at 102 576,403
250,000 City of Holyoke, Massachusetts, General Obligation Bonds,
8.150%, 6/15/06 Aaa 6/02 at 103 298,075
590,000 City of Holyoke, Massachusetts, General Obligation Bonds,
1991 Series A, 8.000%, 6/01/01 Baa No Opt. Call 632,303
500,000 City of Holyoke, Massachusetts, General Obligation School
Project Loan, Act of 1948, 7.650%, 8/01/09 Baa 8/01 at 102 552,155
750,000 City of Holyoke, Massachusetts, General Obligation Refunding
Bonds, 7.000%, 11/01/08 Baa 11/02 at 102 808,403
City of Lowell, Massachusetts, General Obligation
Qualified Bonds:
545,000 8.300%, 2/15/05 Baa1 No Opt. Call 645,269
445,000 8.400%, 1/15/09 (Pre-refunded to 1/15/01) Aaa 1/01 at 102 518,332
1,000,000 City of Lynn, Massachusetts, General Obligation Bonds,
7.850%, 1/15/11 (Pre-refunded to 1/15/02) Aaa 1/02 at 104 1,176,380
500,000 Town of Monson, Massachusetts, General Obligation School
Project Loan, Act of 1948 Bonds, 7.700%, 10/15/10
(Pre-refunded to 10/15/00) Aaa 10/00 at 102 566,795
500,000 Town of Palmer, Massachusetts, General Obligation School
Project Loan, Act of 1948, 1990 Series B, 7.700%, 10/01/10
(Pre-refunded to 10/01/00) Aaa 10/00 at 102 566,320
500,000 Town of Palmer, Massachusetts, General Obligation Refunding
Bonds, 5.500%, 10/01/10 Aaa 10/03 at 102 499,245
1,130,000 City of Peabody, Massachusetts, General Obligation Electric
Bonds, 6.950%, 8/01/09 Aaa 8/00 at 100 1,220,321
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 250,000 Town of Sandwich, Massachusetts, Unlimited Tax, General
Obligation Bonds, 7.100%, 11/01/07 (Pre-refunded to 11/01/98) Aaa 11/98 at 102 1/2 $ 270,438
1,250,000 Somerville Housing Authority (Massachusetts), Mortgage
Revenue Bonds, Series 1990 (GNMA Collateralized-
Clarendon Hill Towers Project), 7.950%, 11/20/30 AAA 5/00 at 102 1,327,738
425,000 South Essex Sewerage District, Massachusetts, General
Obligation Bonds, 9.000%, 12/01/00 A No Opt. Call 493,765
1,000,000 City of Springfield, Massachusetts, General Obligation School
Project Loan, Act of 1948 Bonds, Series B, 7.100%, 9/01/11 Baa 9/02 at 102 1,073,770
City of Taunton, Massachusetts, General
Obligation (Electric Loan Act of 1969) Bonds:
1,465,000 8.000%, 2/01/02 A No Opt. Call 1,666,847
1,005,000 8.000%, 2/01/03 A No Opt. Call 1,159,226
250,000 University of Lowell Building Authority (Massachusetts),
Facilities Bonds, Fourth Series A (General Obligation Bonds),
7.400%, 11/01/07 A 11/97 at 102 264,222
500,000 University of Massachusetts Building Authority, Project
Revenue Bonds, Series 1988-A (General Obligation Bonds),
7.500%, 5/01/14 A 5/98 at 102 535,604
1,000,000 City of Worcester, Massachusetts, General Obligation Bonds,
8/01/04 BBB+ 8/02 at 102 1,039,500
1,000,000 Puerto Rico Aqueduct and Sewer Authority, Revenue Bonds,
Series 1988A, 7.875%, 7/01/17 (Pre-refunded to 7/01/98) AAA 7/98 at 102 1,085,060
2,250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series P, 7.000%, 7/01/21 (Pre-refunded to 7/01/01) Aaa 7/01 at 102 2,519,257
- -------------------------------------------------------------------------------------------------------------------------
$ 74,705,000 Total Investments -- (cost $74,866,438) -- 97.7% 78,991,293
- -------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 0.9%
$ 500,000 The Commonwealth of Massachusetts, Dedicated Income Tax
Bonds, Fiscal Recovery Loan, Act of 1990, Series B, Variable
Rate Demand Bonds, 3.650%, 12/01/97+ VMIG-1 500,000
200,000 Massachusetts Health and Educational Facilities Authority
(Capital Asset Program), Variable Rate Demand Bonds,
3.850%, 1/01/35+ VMIG-1 200,000
- -------------------------------------------------------------------------------------------------------------------------
$ 700,000 Total Temporary Investments -- 0.9% 700,000
- -------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.4% 1,177,502
- -------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 80,868,795
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 41 $38,023,178 48%
RATINGS* AA+, AA, AA- Aa1, Aa, Aa2, Aa3 10 10,493,090 13
PORTFOLIO OF A+ A1 6 6,223,543 8
INVESTMENTS A, A- A, A2, A3 14 11,735,619 15
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 13 10,872,488 14
TEMPORARY Non-rated Non-rated 2 1,643,375 2
INVESTMENTS):
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL 86 $78,991,293 100%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
** 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.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
28
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 250,000 Massachusetts Bay Transportation Auth, General Transportation
System Revenue, 1990 Series A, 7.250%, 3/01/03 Aaa 3/00 at 102 $ 276,373
250,000 Massachusetts Bay Transportation Auth, General Transportation
System 1989 Series A, 7.100%, 3/01/13 (Pre-refunded to 3/01/99) Aaa 3/99 at 102 270,968
1,000,000 Massachusetts Bay Transportation Authority, General
Transportation System Bonds, 1992 Series A, 5.750%, 3/01/22 Aaa 3/02 at 100 970,730
250,000 Massachusetts Bay Transportation Authority, Certificates of
Participation, 1990 Series A, 7.650%, 8/01/15
(Pre-refunded to 8/01/00) Aaa 8/00 at 102 281,665
450,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, St. Luke's Hospital of New Bedford Issue,
Series B, 7.750%, 7/01/13 (Pre-refunded to 7/01/97) Aaa 7/97 at 102 472,842
200,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, South Shore Hospital Issue, Series B, 8.125%,
7/01/17 (Pre-refunded to 7/01/97) Aaa 7/97 at 102 210,762
250,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, South Shore Hospital Issue, Series C, 7.500%,
7/01/20 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 279,455
1,000,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, South Shore Hospital Issue, Series D,
6.500%, 7/01/22 Aaa 7/02 at 102 1,059,290
300,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Mount Auburn Hospital Issue, Series A,
7.875%, 7/01/18 (Pre-refunded to 7/01/98) Aaa 7/98 at 102 324,681
750,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Lahey Clinic Medical Center Issue, Series A,
7.600%, 7/01/08 (Pre-refunded to 7/01/98) Aaa 7/98 at 102 808,238
Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Lahey Clinic Medical Center Issue, Series B:
1,700,000 5.625%, 7/01/15 Aaa 7/03 at 102 1,644,291
2,500,000 5.375%, 7/01/23 Aaa 7/03 at 102 2,300,450
800,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Berkshire Health Systems Issue, Series A,
7.600%, 10/01/14 (Pre-refunded to 10/01/98) Aaa 10/98 at 102 867,320
750,000 Massachusetts Health and Educational Facilities Authority
Revenue Bonds, Salem Hospital Issue, Series A,
7.250%, 7/01/09 (Pre-refunded to 7/01/97) Aaa 7/97 at 100 770,490
250,000 Massachusetts Health & Ed. Facs Authority, Revenue Bonds,
Capital Asset Program, 7.200%, 7/01/09 Aaa 7/99 at 102 269,908
500,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, University Hospital Issue, Series C,
7.250%, 7/01/19 Aaa 7/00 at 102 545,495
250,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Newton-Wellesley Hospital Issue, Series C,
8.000%, 7/01/18 (Pre-refunded to 7/01/98) Aaa 7/98 at 102 271,068
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
<TABLE>
<CAPTION>
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND--CONTINUED
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 250,000 Massachusetts Health and Educational Facilities Authority
Revenue Bonds, Northeastern University Issue, Series B,
7.600%, 10/01/10 Aaa 10/98 at 102 $ 269,993
1,600,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Northeastern University Issue, Series E,
6.550%, 10/01/22 Aaa 10/02 at 102 1,725,632
500,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Baystate Medical Center Issue, Series C,
7.500%, 7/01/20 (Pre-refunded to 7/01/99) A+ 7/99 at 102 545,980
500,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Stonehill College Issue, Series D,
7.700%, 7/01/20 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 563,145
1,000,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Boston College Issue, Series J,
6.625%, 7/01/21 Aaa 7/01 at 102 1,071,980
500,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Berklee College of Music Issue, Series C,
6.875%, 10/01/21 Aaa 10/01 at 102 545,035
1,000,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Brigham and Woman's Hospital Issue,
Series D, 6.750%, 7/01/24 A1 7/01 at 102 1,039,460
250,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Beverly Hospital Issue, Series D,
7.300%, 7/01/19 (Pre-refunded to 7/01/99) Aaa 7/99 at 102 273,495
1,500,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, New England Medical Center Hospitals Issue,
Series F, 6.625%, 7/01/25 Aaa 7/02 at 102 1,600,710
1,450,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Boston University Issue, Series M,
6.000%, 10/01/22 Aaa 10/02 at 100 1,458,338
2,000,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Bentley College Issue, Series I,
6.125%, 7/01/17 Aaa 7/02 at 102 2,037,120
350,000 Massachusetts Housing Finance Agency, Housing Revenue Bonds,
1989 Series A, 7.600%, 12/01/16 Aaa 12/99 at 103 368,116
500,000 Massachusetts Housing Finance Agency, Single Family Housing
Revenue Bonds, Series 18, 7.350%, 12/01/16 Aa 6/01 at 102 528,165
250,000 Massachusetts Housing Finance Agency, Single Family Housing
Revenue Bonds, Series 8, 7.700%, 6/01/17 Aa 6/98 at 102 263,660
1,590,000 Massachusetts Industrial Finance Agency, Library Revenue Bonds,
(Malden Public Library Project), Series 1994, 7.250%, 1/01/15 Aaa 1/05 at 102 1,822,379
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds,
Brandeis University Issue, 1989 Series C, 6.800%, 10/01/19 Aaa 10/99 at 102 535,710
200,000 Massachusetts Industrial Finance Agency, Revenue Bonds,
Harvard Community Health Plan, Inc., Issue 1988 Series B
(Refunding Bonds), 7.750%, 10/01/08 Aaa 10/98 at 102 216,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 250,000 Massachusetts Industrial Finance Agency, Revenue Bonds,
Milton Academy Issue, Series A, 7.250%, 9/01/19
(Pre-refunded to 9/01/99) Aaa 9/99 at 102 $ 274,485
375,000 Massachusetts Industrial Finance Agency, Revenue Bonds,
Museum of Science Issue, Series 1989, 7.300%, 11/01/09
(Pre-refunded to 11/01/99) Aaa 11/99 at 102 413,475
1,000,000 Massachusetts Industrial Finance Agency, Revenue Refunding
Bonds, Mount Holyoke College Issue, Series 1992A,
6.300%, 7/01/13 Aaa 7/01 at 102 1,045,270
420,000 Massachusetts Industrial Finance Agency Revenue Bonds,
Babson College Issue, Series 1995A, 5.800%, 10/01/10 Aaa 10/05 at 102 427,228
1,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds,
(College of the Holy Cross - 1996 Issue), 5.500%, 3/01/20 Aaa 3/06 at 102 948,880
2,000,000 Massachusetts Municipal Wholesale Electric Company, Power
Supply System Revenue Bonds, 1993 Series A,
5.000%, 7/01/10 Aaa 7/03 at 102 1,869,820
1,000,000 Massachusetts Port Authority, Revenue Bonds, Series 1982,
13.000%, 7/01/13 Aaa No Opt. Call 1,678,150
250,000 Massachusetts ST, General Obligation Bonds, Consolidated Loan
of 1990 Series A, 7.250%, 3/01/09 (Pre-refunded to 3/01/00) Aaa 3/00 at 102 276,182
Massachusetts ST, General Obligation Bonds, Consolidated Loan
Series 1992-A:
500,000 6.500%, 6/01/08 Aaa 6/02 at 101 540,940
1,200,000 6.000%, 6/01/13 Aaa 6/02 at 100 1,218,792
1,000,000 Massachusetts Turnpike Authority, Turnpike Revenue Bonds,
1993 Series A, 5.125%, 1/01/23 Aaa 1/03 at 102 895,130
1,000,000 City of Boston, Massachusetts, General Obligation Bonds,
1991 Series A, 6.750%, 7/01/11 Aaa 7/01 at 102 1,105,720
500,000 City of Boston, Massachusetts, Revenue Bonds, Boston City
Hospital (FHA Insured Mortgage), Series A, 7.625%, 2/15/21
(Pre-refunded to 8/15/00) Aaa 8/00 at 102 562,605
500,000 Boston Water and Sewer Commission, General Revenue Bonds,
1991 Series A, (Senior Series), 7.000%, 11/01/18
(Pre-refunded to 11/01/01) Aaa 11/01 at 102 561,160
500,000 Boston Water and Sewer Commission, (A Public Instrumentality
of The Commonwealth of Massachusetts), General Revenue
Bonds, 1988 Series A, (Subordinated Series),
7.250%, 11/01/06 Aaa 11/98 at 100 528,445
500,000 City of Fall River, Massachusetts General Obligation Bonds,
7.200%, 6/01/10 Aaa 6/01 at 102 554,890
250,000 Town of Groveland, Massachusetts, General Obligation Bonds,
6.900%, 6/15/07 Aaa 6/01 at 102 275,348
1,000,000 City of Haverhill, Massachusetts, General Obligation, Hospital
Refunding Bonds, Series A, 6.700%, 9/01/10 Aaa 9/01 at 102 1,080,570
250,000 City of Holyoke, Massachusetts, General Obligation Bonds,
8.150%, 6/15/06 Aaa 6/02 at 103 298,075
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
<TABLE>
<CAPTION>
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND--CONTINUED
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 450,000 City of Leominster, Massachusetts, General Obligation Bonds,
7.500%, 4/01/09 Aaa 4/00 at 102 $ 500,913
2,625,000 City of Lowell, Massachusetts, General Obligation State
Qualified Bonds, 5.600%, 11/01/12 Aaa 11/03 at 102 2,578,249
1,025,000 City of Lynn, Massachusetts, General Obligation Bonds,
6.750%, 1/15/02 Aaa No Opt. Call 1,116,861
250,000 Lynn, Massachusetts, Water and Sewer Commission, General
Revenue Bonds, 1990 Series A, 7.250%, 12/01/10
(Pre-refunded to 12/01/00) Aaa 12/00 at 102 279,888
1,000,000 Town of Mansfield, Massachusetts, General Obligation Bonds,
6.700%, 1/15/11 Aaa 1/02 at 102 1,085,390
250,000 Town of Methuen, Massachusetts, General Obligation Bonds,
7.400%, 5/15/04 Aaa 5/00 at 102 276,145
500,000 Town of Monson, Massachusetts, General Obligation School
Project Loan, Act of 1948 Bonds, 7.700%, 10/15/10
(Pre-refunded to 10/15/00) Aaa 10/00 at 102 566,795
1,500,000 Town of Monson, Massachusetts, General Obligation, Bank-
Qualified Unlimited Tax, School Refunding Bonds,
5.500%, 10/15/10 Aaa No Opt. Call 1,503,555
300,000 Town of North Andover, Massachusetts, General Obligation
Bonds, 7.400%, 9/15/10 Aaa 9/00 at 103 335,946
North Middlesex Regional School District, School Bonds
of 1990:
270,000 7.200%, 6/15/08 Aaa 6/00 at 103 299,109
245,000 7.200%, 6/15/09 Aaa 6/00 at 103 271,413
250,000 City of Northampton, Massachusetts, General Obligation Bonds,
Bank-Qualified, 5.300%, 3/01/10 Aaa 3/03 at 102 246,050
190,000 Town of Northfield, Massachusetts, General Obligation Bonds,
Municipal Purpose Loan of 1992, Bank-Qualified,
6.350%, 10/15/09 Aaa 10/01 at 102 201,875
270,000 Town of Palmer, Massachusetts, General Obligation School
Bonds of 1990, Series A, School Project Loan of 1948,
7.300%, 3/01/10 (Pre-refunded to 3/01/00) Aaa 3/00 at 102 298,712
250,000 Town of Palmer, Massachusetts, General Obligation, School
Project Loan, Act of 1948, 1990 Series B, 7.700%, 10/01/10
(Pre-refunding to 10/01/00) Aaa 10/00 at 102 283,160
1,000,000 Town of Palmer, Massachusetts, General Obligation Refunding
Bonds, 5.500%, 10/01/10 Aaa 10/03 at 102 998,490
440,000 Quaboag Regional School District, General Obligation School
Bonds of 1991, Ult - Bank Qualified, 6.250%, 6/15/08 Aaa 6/02 at 102 469,682
City of Salem, Massachusetts, General Obligation Bonds:
500,000 6.800%, 8/15/09 Aaa 8/01 at 102 550,035
900,000 6.000%, 7/15/10 Aaa 7/02 at 102 932,157
250,000 Town of Sandwich, Massachusetts, Unlimited Tax, General
Obligation Bonds, 7.100%, 11/01/07
(Pre-refunded to 11/01/98) Aaa 11/98 at 1021/2 270,438
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND--CONTINUED
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 515,000 Southern Berkshire Regional School Dist, General Obligation
School Bonds, Unlimited Tax, 7.500%, 4/15/07
(Pre-refunded to 4/15/02) Aaa 4/02 at 102 $ 592,199
1,145,000 Southern Berkshire Regional School District, Massachusetts,
General Obligation School Bonds, 7.000%, 4/15/11 Aaa 4/02 at 102 1,281,953
250,000 City of Springfield, Massachusetts, Municipal Purpose Loan of
1988, (General Obligation Bonds.), 7.000%, 11/01/07 Aaa 11/98 at 103 269,815
220,000 Taunton, Massachusetts, General Obligation Bonds,
6.800%, 9/01/09 Aaa 9/01 at 103 241,514
455,000 Town of Wareham, Massachusetts, General Obligation School
Bonds, 7.050%, 1/15/07 Aaa 1/01 at 103 503,066
250,000 City of Westfield, Massachusetts, General Obligation Bonds,
7.100%, 12/15/08 (Pre-refunded to 12/15/00) Aaa 12/00 at 102 278,648
215,000 Town of Whately, Massachusetts, General Obligation Bonds,
6.350%, 1/15/09 Aaa 1/02 at 102 226,548
1,210,000 Town of Winchendon, Massachusetts, Unlimited Tax, General
Obligation Bonds, 6.050%, 3/15/10 Aaa 3/03 at 102 1,260,273
160,000 City of Worcester, Massachusetts, General Obligation Bonds,
6.900%, 5/15/07 Aaa 5/02 at 102 179,496
1,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of
1995 (General Obligation Bonds), 5.750%, 7/01/24 Aaa 7/05 at 1011/2 977,520
2,290,000 Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority, Hospital
Revenue Bonds, 1995 Series A, (Hospital Auxilio Mutuo
Obligated Group Project), 6.250%, 7/01/16 Aaa 1/05 at 102 2,398,981
- -------------------------------------------------------------------------------------------------------------------------
$59,060,000 Total Investments -- (cost $58,941,628) -- 96.8% 62,318,985
===========--------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 1.7%
$ 1,100,000 The Commonwealth of Massachusetts, Dedicated Income Tax
=========== Bonds, Fiscal Recovery Loan, Act of 1990, Series B, Variable
Rate Demand Bonds, 3.650%, 12/01/97+ VMIG-1 1,100,000
- -------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.5% 951,666
- -------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $64,370,651
=========================================================================================================================
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
NUMBER OF MARKET PORTFOLIO
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 80 $59,941,720 96%
RATINGS* AA+, AA, AA- Aa1, Aa, Aa2, Aa3 2 791,825 1
PORTFOLIO OF A+ A1 2 1,585,440 3
INVESTMENTS
(EXCLUDING
TEMPORARY
INVESTMENTS):
- -------------------------------------------------------------------------------------------------
TOTAL 84 $62,318,985 100%
- -------------------------------------------------------------------------------------------------
</TABLE>
All of the bonds in the portfolio, excluding temporary investments in short-term
municipal securities, are either covered by Original Issue Insurance,
Secondary Market Insurance or Portfolio Insurance, or are backed by an escrow or
trust containing sufficient U.S. Government or U.S. Government agency
securities, any of which ensure the timely payment of principal and interest.
* Ratings: Using the higher of Standard & Poor's or Moody's rating.
** 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.
+ 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.
34
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
NUVEEN NEW YORK TAX-FREE VALUE FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 Certificates of Participation, The State of New York,
Commissioner of the Office of Mental Health of the State of
New York, 8.300%, 9/01/12 Baa1 9/97 at 102 $ 527,000
500,000 Dormitory Authority of the State of New York, Hospital
Revenue Bonds, Long Island Jewish Medical Center
(FHA-Insured Mortgage), Series 1988, 7.750%, 8/15/27 AAA 2/98 at 102 528,940
500,000 Dormitory Authority of the State of New York, City University
Refunding Bonds, 1988B Issue, 8.200%, 7/01/13 Baa1 7/98 at 102 540,035
750,000 Dormitory Authority of the State of New York, GNMA
Collateralized Revenue Bonds (Park Ridge Housing, Inc.
Project), Series 1989, 7.850%, 2/01/29 AAA 2/99 at 102 808,995
1,985,000 Dormitory Authority of the State of New York, United Health
Services, Inc., FHA-Insured Mortgage Revenue Bonds,
Series 1989, 7.350%, 8/01/29 AAA 2/00 at 102 2,130,580
1,000,000 Dormitory Authority of the State of New York, City University
System Consolidated Revenue Bonds, Series 1990A,
7.625%, 7/01/20 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 1,125,560
2,000,000 Dormitory Authority of the State of New York, State University
Educational Facilities Revenue Bonds, Series 1990A,
7.400%, 5/15/01 Baa1 5/00 at 102 2,156,380
750,000 Dormitory Authority of the State of New York, City University
System Consolidated, Second General Resolution Revenue
Bonds, Series 1990C, 7.500%, 7/01/10 Baa1 2/99 at 99 861,165
2,250,000 Dormitory Authority of the State of New York, Judicial
Facilities Lease Revenue Bonds (Suffolk County Issue),
Series 1991A, 9.500%, 4/15/14 Baa1 10/96 at 115 7/8 2,624,828
2,000,000 Dormitory Authority of the State of New York, State University
Educational Facilities Revenue Bonds, Series 1993A,
5.500%, 5/15/08 Baa1 No Opt. Call 1,929,580
1,500,000 Dormitory Authority of the State of New York, City University
System Consolidated Second General Resolution Revenue
Bonds, Series 1993A, 5.750%, 7/01/07 Baa1 No Opt. Call 1,492,110
1,375,000 Dormitory Authority of the State of New York, University of
Rochester, Strong Memorial Hospital Revenue Bonds,
Series 1994, 5.500%, 7/01/21 A1 7/04 at 102 1,280,826
2,225,000 Dormitory Authority of the State of New York, Court Facilities
Lease Revenue Bonds (The City of New York Issue),
Series 1993A, 5.700%, 5/15/22 Baa1 5/03 at 101 1/2 2,049,247
1,125,000 Dormitory Authority of the State of New York, State University
Education Facilities, Revenue Bonds, Series 1993B,
5.250%, 5/15/09 Baa1 No Opt. Call 1,052,505
2,225,000 Dormitory Authority of the State of New York, City University
Refunding Bonds, 1993C Issue, 5.750%, 7/01/12 Baa1 No Opt. Call 2,145,323
2,195,000 Dormitory Authority of the State of New York, Revenue Bonds,
Upstate Community Colleges, Series 1995A, 6.500%, 7/01/07 Baa1 No Opt. Call 2,307,186
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN NEW YORK TAX-FREE VALUE FUND CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,500,000 Dormitory Authority of the State of New York, Nursing Homes
Revenue Bonds, (Letter of Credit Secured), 1995 Issue A,
5.750%, 7/01/17 Aa3 7/05 at 102 $ 3,378,235
2,500,000 Dormitory Authority of the State of New York, W.K. Nursing
Home Corporation, FHA-Insured Mortgage Revenue Bonds,
Series 1996, 5.950%, 2/01/16 AAA 8/06 at 102 2,495,575
2,615,000 Empire State Development Corporation, New York State Urban
Development Corporation, Project Revenue Bonds (Pine
Barrens), 1996 Series, 5.375%, 4/01/17 Baa1 4/05 at 102 2,339,353
3,000,000 New York Local Government Assistance Corporation,
Series 1993B, Refunding Bonds, 5.000%, 4/01/23 A 4/04 at 100 2,601,900
2,000,000 New York State Medical Care Facilities Finance Agency, Mental
Health Services Facilities Improvement Revenue Bonds, 1992
Series A, 5.500%, 8/15/21 Aaa 2/02 at 100 1,860,400
1,545,000 New York State Environmental Facilities Corporation, State Park
Infrastructure Special Obligation Bonds, Series 1993A,
5.750%, 3/15/13 Baa1 3/03 at 101 1,475,954
2,250,000 New York State Finance Agency, Housing Project Mortgage
Revenue Bonds, 1996 Series A Refunding, 6.125%, 11/01/20 Aaa 5/06 at 102 2,261,880
200,000 New York State Housing Finance Agency, State University
Construction Refunding Bonds, 1986 Series A,
8.000%, 5/01/11 Aaa No Opt. Calls 245,970
1,650,000 New York State Housing Finance Agency, Insured Multi-Family
Mortgage Housing Revenue Bonds, 1992 Series A,
6.950%, 8/15/12 Aa 8/02 at 102 1,747,977
New York State Housing Finance Agency, Health Facilities
Revenue Bonds (New York City), 1990 Series A Refunding:
1,660,000 8.000%, 11/01/08 (Pre-refunded to 11/01/00 Aaa 11/00 at 102 1,902,974
340,000 8.000%, 11/01/08 BBB+ 11/00 at 102 378,760
2,990,000 New York State Housing Finance Agency, Service Contract
Obligation Revenue Bonds, 1993 Series C Refunding,
5.875%, 9/15/14 Baa1 9/03 at 102 2,837,091
4,250,000 New York State Housing Finance Agency, Service Contract
Obligation Revenue Bonds, 1993 Series A, 5.500%, 9/15/22 Baa1 9/03 at 102 3,795,123
1,000,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home Insured Mortgage Revenue Bonds, 1987
Series A, 8.000%, 2/15/27 (Pre-refunded to 8/15/97) Aaa 8/97 at 102 1,049,330
995,000 New York State Medical Care Facilities Finance Agency, Albany
Medical Center Hospital Project Revenue Bonds, 1987 Series A,
8.000%, 2/15/28 AAA 8/98 at 102 1,069,516
995,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home Insured Mortgage Revenue Bonds, 1989
Series B, 7.350%, 2/15/29 Aa 8/99 at 102 1,065,456
1,000,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home FHA-Insured Mortgage Revenue Bonds,
1988 Series C, 7.700%, 2/15/22 (Pre-refunded to 8/15/98) AAA 8/98 at 102 1,083,160
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,250,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home FHA-Insured Mortgage Revenue Bonds,
1987 Series A, 8.300%, 2/15/22 (Pre-refunded to 2/15/98) AAA 2/98 at 102 $ 1,346,088
2,250,000 New York State Medical Care Facilities Finance Agency, Hospital
Insured Mortgage Revenue Bonds, 1987 Series A Refunding,
8.000%, 2/15/25 (Pre-refunded to 8/15/97) Aaa 8/97 at 102 2,378,408
2,000,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home FHA-Insured Mortgage Revenue Bonds,
1992 Series B, 6.200%, 8/15/22 AAA 8/02 at 102 2,030,640
1,495,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home FHA-Insured Mortgage Revenue Bonds,
1992 Series D, 6.450%, 2/15/09 AAA 2/03 at 102 1,589,469
1,460,000 New York State Medical Care Facilities Finance Agency, Mental
Health Services Facilities Improvement Revenue Bonds, 1991
Series A, 7.500%, 2/15/21 (Pre-refunded to 2/15/01) Aaa 2/01 at 102 1,653,289
2,500,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home FHA-Insured Mortgage Revenue Bonds,
1994 Series A, 6.200%, 2/15/21 AAA 2/04 at 102 2,523,925
1,500,000 New York State Medical Care Facilities Finance Agency, Mental
Health Services Facilities Improvement Revenue Bonds,
1994 Series E, 6.500%, 8/15/24 Baa1 8/04 at 102 1,539,165
1,000,000 New York State Medical Care Facilities Finance Agency, Health
Center Projects Revenue Bonds (Secured Mortgage Program),
1995 Series A, 6.375%, 11/15/19 Aa 11/05 at 102 1,029,750
1,250,000 New York State Medical Care Facilities Agency, New York
Downtown Hospital Secured Hospital Revenue Bonds,
1995 Series A, 6.700%, 2/15/12 Baa 2/05 at 102 1,273,738
2,470,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home FHA-Insured Mortgage Revenue Bonds,
1994 Series C, 6.400%, 8/15/14 AAA 8/04 at 102 2,551,584
New York State Medical Care Facilities Finance Agency,
New York Hospital FHA-Insured Mortgage Revenue Bonds,
1994 Series A:
1,000,000 6.750%, 8/15/14 Aaa 2/05 at 102 1,090,210
1,000,000 6.800%, 8/15/24 Aaa 2/05 at 102 1,093,540
New York State Medical Care Facilities Finance Agency,
Brookdale Hospital Medical Center Secured Hospital Revenue
Bonds, 1995 Series A:
1,000,000 6.400%, 2/15/01 Baa No Opt. Call 1,026,400
2,700,000 6.800%, 8/15/12 Baa 2/05 at 102 2,771,604
4,000,000 New York State Medical Care Facilities Finance Agency,
Montefiore Medical Center FHA-Insured Mortgage Revenue
Bonds, 1995 Series A, 5.750%, 2/15/25 Aaa 2/05 at 102 3,888,080
1,000,000 New York State Urban Development Corporation, Section 236
Revenue Bonds, Series 1992A, 6.750%, 1/01/26 Aaa 1/02 at 102 1,079,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN NEW YORK TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,100,000 New York State Urban Development Corporation, Project
Revenue Bonds (Syracuse University Center for Science and
Technology), Series 1987, 7.875%, 1/01/17
(Pre-refunded to 1/01/98) Baa1 1/98 at 102 $ 1,174,063
1,000,000 New York State Urban Development Corporation, Correctional
Capital Facilities Revenue Bonds, Series 1, 7.500%, 1/01/20
(Pre-refunded to 1/01/00) Aaa 1/00 at 102 1,110,580
2,000,000 New York State Urban Development Corporation, Project
Revenue Bonds (Clarkson Center for Advanced Materials
Processing Loan), Series 1990, 7.800%, 1/01/20
(Pre-refunded to 1/01/01) Baa1 1/01 at 102 2,275,800
2,900,000 New York State Urban Development Corporation, State Facilities
Revenue Bonds, Series 1991, 7.500%, 4/01/20
(Pre-refunded to 4/01/01) Aaa 4/01 at 102 3,295,473
1,000,000 New York State Urban Development Corporation, Project
Revenue Bonds (Cornell Center for Theory and Simulation in
Science and Engineering Grant), Series 1993, 6.00%, 1/01/14 Baa 1/03 at 102 966,990
New York State Urban Development Corporation, Correctional
Capital Facilities Revenue Bonds, 1993 Refunding Series:
2,490,000 5.750%, 1/01/13 Baa1 1/03 at 102 2,363,458
5,090,000 5.500%, 1/01/15 Baa1 1/03 at 102 4,642,691
380,000 New York State Mortgage Agency, Mortgage Revenue Bonds,
Ninth Series E, 8.100%, 10/01/17 Aa 4/98 at 102 396,184
3,000,000 State of New York, General Obligation Refunding Bonds,
Series 1995C, 5.625%, 10/01/20 A 10/05 at 101 2,888,850
2,100,000 Town of Babylon Industrial Development Agency, (New York),
Resource Recovery Revenue Bonds, Series 1985 (Ogden Martin
Systems of Babylon, Inc. Project), 8.500%, 1/01/19 Baa1 7/98 at 103 2,318,337
1,000,000 City of Batavia Housing Authority, Tax-Exempt Mortgage
Revenue Refunding Bonds, Series 1994A (Washington Towers--
FHA-Insured Mortgage), 6.500%, 1/01/23 Aaa 7/01 at 102 1,017,520
1,000,000 Town of Brookhaven, Industrial Development Agency, 1993
Civic Facility Revenue Bonds (Dowling College/The National
Aviation and Transportation Center Civic Facility),
6.750%, 3/01/23 BBB 3/03 at 102 1,026,300
2,000,000 Certificates of Participation, The State of New York, The City
University of New York (John Jay College of Criminal Justice
Project Refunding), 6.000%, 8/15/06 Baa1 No Opt. Call 2,020,840
2,470,000 Dutchess County Industrial Development Agency, Civic Facility
Revenue Bonds (the Bard College Project), Series 1992,
7.000%, 11/01/17 A 11/03 at 102 2,610,765
1,000,000 County of Franklin Industrial Development Agency, Lease
Revenue Bonds (County Correctional Facility Project),
Series 1992, 6.750%, 11/01/12 BBB 11/02 at 102 1,044,160
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 750,000 Town of Hempstead Industrial Development Agency, Civic
Facility Revenue Bonds, (United Cerebral Palsy Association
of Nassau County, Inc. Civic Facility Project--1989 Series),
7.500%, 10/01/09 Aa2 10/99 at 102 $ 790,343
2,500,000 Housing New York Corporation, Senior Revenue Refunding
Bonds, Series 1993, 5.00%, 11/01/13 AA 11/03 at 102 2,258,975
1,000,000 Metropolitan Transportation Authority, Commuter Facilities
Revenue Bonds, Series 1992B, 6.250%, 7/01/17 Aaa 7/02 at 102 1,033,320
1,000,000 Metropolitan Transportation Authority (New York), Commuter
Facilities 1987 Service Contract Bonds, Series 3, 7.500%,
7/01/16 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 1,121,200
4,000,000 Metropolitan Transportation Authority (New York), Transit
Facilities Service Contract Bonds, Series P, 5.750%, 7/01/15 Baa1 7/03 at 101 1/2 3,765,240
1,025,000 Metropolitan Transportation Authority, Transit Facilities
Revenue Bonds, Series J, 6.500%, 7/01/18 Aaa 7/02 at 102 1,094,926
2,000,000 The City of New York, General Obligation Bonds, Fiscal 1992
Series B, 7.500%, 2/01/06 Baa1 2/02 at 101 1/2 2,204,040
45,000 The City of New York, General Obligation Bonds, Fiscal 1992
Series C, Fixed Rate Bonds, Subseries C1, 6.625%, 8/01/13 Aaa 8/02 at 101 1/2 48,642
The City of New York, General Obligation Bonds, Fiscal 1996
Series G:
2,000,000 5.750%, 2/01/17 Baa1 2/06 at 101 1/2 1,841,140
2,500,000 5.750%, 2/01/20 Baa1 2/06 at 101 1/2 2,277,274
1,000,000 The City of New York, General Obligation Bonds, Fiscal 1996
Series F, 5.750%, 2/01/19 Baa1 2/06 at 101 1/2 912,600
2,000,000 The City of New York, General Obligation Bonds, Fiscal 1997
Series C, 5.875%, 2/01/16 Baa1 8/06 at 101 1/2 1,874,600
2,000,000 New York City Housing Development Corporation,
Multi-Family Mortgage Revenue Bonds (FHA Insured
Mortgage Loan), 1993 Series A, 6.550%, 10/01/15 AAA 4/03 at 102 2,071,480
1,000,000 New York City Housing Development Corporation, Multi-Unit
Mortgage Refunding Bonds (FHA Insured Mortgage Loans),
1991 Series A, 7.350%, 6/01/19 AAA 6/01 at 102 1,061,970
1,000,000 New York City Housing Development Corporation, Multi-Family
Housing Revenue Bonds, 1993 Series A, 5.850%, 5/01/26 Aa 5/03 at 102 972,480
1,500,000 New York City, Municipal Water Finance Authority (New York),
Water and Sewer System Revenue Bonds, Fiscal 1991 Series C,
7.750%, 6/15/20 (Pre-refunded to 6/15/01) Aaa 6/01 at 101 1/2 1,714,530
2,000,000 New York City Municipal Water Finance Authority, Water and
Sewer Revenue Bonds, Fiscal 1993 Series A, 5.500%, 6/15/20 A 6/02 at 100 1,834,940
4,000,000 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Fiscal 1996 Series A,
6.000%, 6/15/25 A 6/05 at 101 3,980,560
4,000,000 New York City Housing Development Corporation, Multi-Family
Housing Revenue Bonds, 1996 Series A, 5.625%, 5/01/12 (WI) Aa 5/06 at 102 3,940,360
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN NEW YORK TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 4,845,000 New York City Industrial Development Agency, Civic Facility
Revenue Bonds, (1992 The Lighthouse, Inc. Project),
6.500%, 7/01/22 AA 7/02 at 102 $ 5,037,104
New York City Industrial Development Agency Civic Facility
Revenue Bonds, (College of New Rochelle Project), Series 1995:
1,000,000 6.200%, 9/01/10 Baa 9/05 at 102 988,950
1,000,000 6.300%, 9/01/15 Baa 9/05 at 102 973,570
2,345,000 Newark-Wayne Community Hospital, Inc., Hospital Revenue
Improvement and Refunding Bonds, Series 1993A,
7.600%, 9/01/15 N/R 9/03 at 102 2,215,603
1,000,000 Orangetown Housing Authority (Rockland County, New York),
Housing Facilities Revenue Bonds, (Orangetown Senior
Housing Center--1990 Series), 7.600%, 4/01/30
(Pre-refunded to 10/01/00) A 10/00 at 102 1,127,350
South Orangetown Central School District, Rockland County,
New York, Serial General Obligation Bonds, Series 1990:
390,000 6.875%, 10/01/08 A No Opt. Call 440,739
390,000 6.875%, 10/01/09 A No Opt. Call 439,347
3,015,000 Suffolk County Industrial Development Agency, Civic Facility
Revenue Bonds, (Dowling College Civic Facility), Series 1994,
6.625%, 6/01/24 BBB 6/04 at 102 3,063,270
1,000,000 Suffolk County Industrial Development Agency, Civic Facility
Revenue Refunding Bonds, (Dowling College Civic Facility),
Series 1996, 6.700%, 12/01/20 BBB 12/06 at 102 998,080
2,000,000 34th Street Partnership, Inc., 34th Street Business Improvement
District, Capital Improvement Bonds, Series 1993,
5.500%, 1/01/23 A1 1/03 at 102 1,825,260
2,000,000 Triborough Bridge and Tunnel Authority (New York), Special
Obligation Refunding Bonds, Series 1991B, 7.100%, 1/01/10 A1 1/01 at 102 2,165,060
2,000,000 Triborough Bridge and Tunnel Authority, Special Obligation
Refunding Bonds, Series 1991B, 7.100%, 1/01/10 Aaa 1/01 at 102 2,196,900
2,100,000 UFA Development Corporation, Utica, New York, FHA-Insured
Mortgage Revenue Bonds, Series 1993 (Loretto-Utica Project),
5.950%, 7/01/35 Aa 7/04 at 102 2,025,996
2,000,000 New York City Industrial Development Agency, Civic Facility
Revenue Bonds (1992 Jewish Board of Family and Children
Services, Inc., Project), 6.750%, 12/15/12 BBB-- 12/02 at 102 2,037,160
- -------------------------------------------------------------------------------------------------------------------------
$172,180,000 Total Investments -- (cost $167,654,909) -- 100.9% 173,498,824
============-------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 0.4%
$ 700,000 The City of New York, General Obligation Bonds, Fiscal 1994
========== Series A, Adjustable Rate Bonds, Subseries A-4, Variable Rate
Demand Bonds, 3.600%, 8/01/21+ VMIG-1 700,000
- -------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (1.3)% (2,276,863)
- -------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $171,921,961
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 34 $ 53,553,654 31%
RATINGS* AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 11 22,642,860 13
PORTFOLIO OF A+ A1 3 5,271,146 3
INVESTMENTS A, A-- A, A2, A3 8 15,924,451 9
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 40 73,891,110 43
TEMPORARY Non-Rated Non-Rated 1 2,215,603 1
INVESTMENTS):
- -------------------------------------------------------------------------------------------------------------------------
TOTAL 97 $173,498,824 100%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
** 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 and later dates.
(WI) Security purchased on a when issued basis (note 1).
+ 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.
41
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,415,000 Dormitory Authority of the State of New York, College and
University Revenue (Pooled Capital Program), Series 1985,
7.800%, 12/01/05 Aaa 12/98 at 102 $ 1,527,747
1,490,000 Dormitory Authority of the State of New York, United Health
Services, Inc., FHA-Insured Mortgage Revenue Bonds,
Series 1989, 7.350%, 8/01/29 AAA 2/00 at 102 1,599,277
1,490,000 Dormitory Authority of the State of New York, Iona College,
Insured Revenue Bonds, Series 1988, 7.625%, 7/01/09 Aaa 7/98 at 102 1,599,187
1,200,000 Dormitory Authority of the State of New York, State University
Educational Facilities, Revenue Bonds, Series 1989B,
7.250%, 5/15/15 (Pre-refunded to 5/15/00) Aaa 5/00 at 102 1,331,568
1,000,000 Dormitory Authority of the State of New York, United Cerebral
Palsy Association of Westchester County, Inc., Insured Revenue
Bonds, Series 1992, 6.200%, 7/01/12 Aaa 7/02 at 102 1,035,940
1,000,000 Dormitory Authority of the State of New York, Manhattanville
College, Insured Revenue Bonds, Series 1990,
7.500%, 7/01/22 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 1,121,200
2,500,000 Dormitory Authority of the State of New York, City University
System Consolidated Second General Resolution Revenue
Bonds, Series 1990C, 7.000%, 7/01/14 Aaa 7/00 at 102 2,715,100
1,800,000 Dormitory Authority of the State of New York, City University
System Consolidated Second General Resolution Revenue
Bonds, Series 1993A, 5.750%, 7/01/18 Aaa No Opt. Call 1,798,722
6,295,000 Dormitory Authority of the State of New York, City University
System Consolidated Second General Resolution Revenue
Bonds, Series 1990F, 7.500%, 7/01/20
(Pre-refunded to 7/01/00) Aaa 7/00 at 102 7,057,954
2,500,000 Dormitory Authority of the State of New York, Cooper Union,
Insured Revenue Bonds, Series 1990, 7.200%, 7/01/20 Aaa 7/01 at 102 2,777,975
2,500,000 Dormitory Authority of the State of New York, State University
Educational Facilities, Revenue Bonds, Series 1993A,
5.250%, 5/15/15 Aaa No Opt. Call 2,383,800
1,200,000 Dormitory Authority of the State of New York, State University
Educational Facilities, Revenue Bonds, Series 1990C,
7.000%, 5/15/18 (Pre-refunded to 5/15/00) Aaa 5/00 at 102 1,321,440
2,000,000 Dormitory Authority of the State of New York, State University
Educational Facilities, Revenue Bonds, Series 1990A,
6.500%, 5/15/19 (Pre-refunded to 5/15/00) Aaa 5/00 at 100 2,136,100
5,000,000 Dormitory Authority of the State of New York, New York
University Insured Revenue Bonds, Series 1991,
6.250%, 7/01/09 Aaa 7/01 at 102 5,223,850
1,000,000 Dormitory Authority of the State of New York, Fordham
University, Insured Revenue Bonds, Series 1990,
7.200%, 7/01/15 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 1,110,750
4,640,000 Dormitory Authority of the State of New York, Mount Sinai
School of Medicine, Insured Revenue Bonds, Series 1994A,
5.000%, 7/01/21 Aaa 7/04 at 102 4,118,139
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,175,000 Dormitory Authority of the State of New York, University of
Rochester, Strong Memorial Hospital Revenue Bonds,
Series 1994, 5.500%, 7/01/21 Aaa 7/04 at 102 $ 1,104,571
1,500,000 Dormitory Authority of the State of New York, Sarah Lawrence
College, Revenue Bonds, Series 1995, 6.000%, 7/01/24 Aaa 7/05 at 102 1,513,530
6,460,000 Dormitory Authority of the State of New York, St. Vincent's
Hospital and Medical Center of New York, FHA-Insured
Mortgage Revenue Bonds, Series 1995, 5.800%, 8/01/25 Aaa 8/05 at 102 6,287,583
3,730,000 Dormitory Authority of the State of New York, Maimonides
Medical Center, FHA-Insured Mortgage Hospital Revenue
Bonds, Series 1996A, 5.750%, 8/01/24 Aaa 2/06 at 102 3,626,343
New York Medical Care Facilities Finance Agency, Mental Health
Services Facilities Improvement Revenue Bonds, 1992 Series A:
5,000 6.375%, 8/15/17 (Pre-refunded to 2/15/02) Aaa 2/02 at 102 5,466
6,145,000 6.375%, 8/15/17 Aaa 12/02 at 102 6,437,625
3,500,000 New York State Energy Research and Development Authority,
Gas Facilities Revenue Bonds, 1996 Series (The Brooklyn
Union Gas Company Project), 5.500%, 1/01/21 Aaa 1/06 at 102 3,335,220
2,500,000 New York State Energy Research and Development Authority,
Pollution Control Revenue Bonds (Central Hudson Gas &
Electric Corporation Project), 1984 Series B, 7.375%, 10/01/14 Aaa 10/99 at 103 2,752,975
1,450,000 New York State Environmental Facilities Corporation, State
Water Pollution Control, Revolving Fund Revenue Bonds,
Series 1990C, (Pooled Loan Issue), 7.200%, 3/15/11 Aaa 6/00 at 102 1,585,836
New York State Finance Agency, Housing Project Mortgage
Revenue Bonds, 1996 Series A Refunding:
750,000 5.875%, 11/01/10 Aaa 5/06 at 102 758,453
5,000,000 6.125%, 11/01/20 Aaa 5/06 at 102 5,026,400
2,195,000 New York State Housing Finance Agency, Multi-Family Housing
Revenue Bonds, (AMBAC Insured Program), 1989 Series A,
7.450%, 11/01/28 Aaa 11/99 at 102 2,312,652
995,000 New York State Medical Care Facilities Finance Agency, Albany
Medical Center Hospital Project Revenue Bonds, 1987 Series A,
8.000%, 2/15/28 AAA 8/98 at 102 1,069,516
895,000 New York State Medical Care Facilities Finance Agency,
St. Francis Hospital Project Revenue Bonds, 1988 Series A,
7.625%, 11/01/21 Aaa 11/98 at 102 966,716
4,765,000 New York State Medical Care Facilities Finance Agency, Secured
Hospital Revenue Bonds, 1987 Series A, 7.100%, 2/15/27 Aaa 2/97 at 102 4,908,331
1,995,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home Insured Mortgage Revenue Bonds,
1989 Series B, 7.350%, 2/15/29 Aa 8/99 at 102 2,136,266
1,500,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home, FHA-Insured Mortgage Revenue Bonds,
1987 Series A, 8.300%, 2/15/22 (Pre-refunded to 2/15/98) AAA 2/98 at 102 1,615,305
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND -- CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home FHA-Insured Mortgage Revenue Bonds,
1989 Series A, 7.250%, 2/15/24 Aa 2/99 at 102 $ 1,597,755
1,300,000 New York State Medical Care Facilities Finance Agency,
St. Luke's-Roosevelt Hospital Center FHA-Insured Mortgage
Revenue Bonds, 1989 Series B, 7.450%, 2/15/29
(Pre-refunded to 2/15/00) Aaa 2/00 at 102 1,444,521
3,200,000 New York State Medical Care Facilities Finance Agency, North
Shore University Hospital, Mortgage Project Revenue Bonds,
1990 Series A, 7.200%, 11/01/20 Aaa 11/00 at 102 3,504,288
2,000,000 New York State Medical Care Facilities Finance Agency, Hospital
and Nursing Home, FHA-Insured Mortgage Revenue Bonds,
1989 Series A, 7.250%, 2/15/24 Aaa 2/99 at 102 2,132,260
1,670,000 New York State Medical Care Facilities Finance Agency,
Our Lady of Victory Hospital Project Revenue Bonds,
1991 Series A, 6.625%, 11/01/16 Aaa 11/01 at 102 1,782,892
New York State Medical Care Facilities Finance Agency, Sisters
of Charity Hospital of Buffalo Project Revenue Bonds,
1991 Series A:
500,000 6.600%, 11/01/10 Aaa 11/01 at 102 537,935
1,550,000 6.625%, 11/01/18 Aaa 11/01 at 102 1,654,780
1,000,000 New York State Medical Care Facilities Finance Agency, Aurelia
Osborn Fox Memorial Hospital Project Revenue Bonds,
1992 Series A, 6.500%, 11/01/19 Aaa 11/01 at 102 1,055,160
2,815,000 New York State Medical Care Facilities Finance Agency, Mental
Health Services Facilities Improvement Revenue Bonds,
1992 Series B, 6.250%, 8/15/18 Aaa 2/02 at 102 2,898,437
3,000,000 New York State Medical Care Facilities Finance Agency, South
Nassau Communities Hospital Project Revenue Bonds,
1992 Series A, 6.125%, 11/01/11 Aaa 11/02 at 102 3,102,840
1,500,000 New York State Medical Care Facilities Finance Agency, Mental
Health Services Facilities Improvement Revenue Bonds,
1994 Series A, 5.250%, 8/15/23 Aaa 2/04 at 102 1,368,225
2,500,000 New York State Medical Care Facilities Finance Agency, St. Mary's
Hospital (Rochester) Mortgage Project Revenue Bonds,
1994 Series A Refunding, 6.200%, 11/01/14 Aaa 11/03 at 102 2,585,375
7,000,000 New York State Medical Care Facilities Finance Agency, New
York Hospital FHA-Insured Mortgage Revenue Bonds,
1994 Series A, 6.800%, 8/15/24 Aaa 2/05 at 102 7,654,780
5,890,000 New York State Medical Care Facilities Finance Agency,
Montefiore Medical Center FHA-Insured Mortgage Revenue
Bonds, 1995 Series A, 5.750%, 2/15/15 Aaa 2/05 at 102 5,788,044
4,000,000 New York State Medical Care Facilities Finance Agency, Mental
Health Services Facilities Improvement Revenue Bonds,
1993 Series F Refunding, 5.250%, 2/15/19 Aaa 2/04 at 102 3,680,920
7,300,000 New York State Thruway Authority, General Revenue Bonds,
Series A, 5.750%, 1/01/19 Aaa 1/02 at 102 7,142,247
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 2,000,000 New York State Thruway Authority, Local Highway and Bridge
Service Contract Bonds, Series 1994, 5.750%, 4/01/13 Aaa 4/04 at 102 $ 2,000,620
New York State Urban Development Corporation, Section 236
Revenue Bonds, Series 1992A:
3,850,000 6.700%, 1/01/12 Aaa 1/02 at 102 4,150,916
9,650,000 6.750%, 1/01/26 Aaa 1/02 at 102 10,412,350
2,000,000 New York State Urban Development Corporation, Correctional
Capital Facilities Revenue Bonds, Series 1, 7.500%, 1/01/20
(Pre-refunded to 1/01/00) Aaa 1/00 at 102 2,221,160
New York State Urban Development Corporation, Correctional
Facilities Revenue Bonds, Series G:
1,500,000 7.250%, 1/01/14 (Pre-refunded to 1/01/00) Aaa 1/00 at 102 1,654,365
575,000 7.000%, 1/01/17 (Pre-refunded to 1/01/00) Aaa 1/00 at 102 629,763
1,000,000 New York State Urban Development Corporation, Correctional
Facilities Revenue Bonds, 1993A, Refunding Series,
5.250%, 1/01/14 Aaa No Opt. Call 952,360
4,000,000 New York State Urban Development Corporation Revenue
Bonds, (Sports Facility Assistance Program), 1996 Series A,
5.500%, 4/01/19 Aaa 4/06 at 102 3,818,320
2,000,000 Power Authority of the State of New York, General Purpose
Bonds, Series Z, 6.500%, 1/01/19 Aaa 1/02 at 102 2,130,260
225,000 State of New York Mortgage Agency, Mortgage Revenue Bonds,
Eighth Series D, 8.375%, 10/01/17 Aa 1/98 at 102 234,565
390,000 State of New York Mortgage Agency, Mortgage Revenue Bonds,
Ninth Series E, 8.100%, 10/01/17 Aa 4/98 at 102 406,610
3,500,000 State of New York Mortgage Agency, Homeowner Mortgage
Revenue Bonds, Series 29-C-1, 5.650%, 4/01/15 Aaa 10/03 at 102 3,386,495
280,000 Albany, New York, Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, Series 1988A,
7.500%, 12/01/17 Aaa 12/98 at 102 303,190
6,000,000 Battery Park City Authority, Senior Revenue Refunding Bonds,
Series 1993A, 5.250%, 11/01/17 Aaa 11/03 at 102 5,541,720
1,250,000 County of Broome, New York, Certificates of Participation,
(Public Safety Facility), Series 1994, 5.250%, 4/01/22 Aaa 4/04 at 102 1,148,725
2,250,000 Buffalo and Fort Erie Public Bridge Authority, Toll Bridge
System Revenue Bonds, Series 1995, 5.750%, 1/01/25 Aaa 1/05 at 101 2,205,113
1,000,000 City of Buffalo, New York, Refunding Serial Bonds, 1991,
6.150%, 2/01/04 Aaa 1/01 at 101 1,055,730
8,385,000 Buffalo Municipal Water Finance Authority, Water System
Revenue Bonds, Series 1992, 5.750%, 7/01/19 Aaa 7/03 at 102 8,201,872
2,000,000 Buffalo Sewer Authority, Sewer System Revenue Bonds, Series G,
5.000%, 7/01/12 Aaa 7/03 at 100 1,840,400
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Camden Central School District, Oneida County, New York,
School District (Serial) Bonds, 1991:
$ 500,000 7.100%, 6/15/07 Aaa No Opt. Call $ 583,200
600,000 7.100%, 6/15/08 Aaa No Opt. Call 700,182
600,000 7.100%, 6/15/09 Aaa No Opt. Call 700,074
275,000 7.100%, 6/15/10 Aaa No Opt. Call 321,258
1,000,000 Erie County Water Authority, (New York), Water Works System
Revenue Bonds, Series 1990B, 6.750%, 12/01/14 Aaa 12/01/09 1,073,140
470,000 City of Glen Cove, Nassau County, New York, General
Obligation Serial Bonds, 1995 Series A, 5.625%, 6/15/11 Aaa No Opt. Call 472,773
500,000 Greece Central School District, Monroe County, New York,
General Obligation Bonds, School District (Serial) Bonds,
1992, 6.000%, 6/15/09 Aaa No Opt. Call 531,450
Town of Halfmoon, Saratoga County, New York, Public
Improvement (Serial) Bonds, 1991:
385,000 6.500%, 6/01/09 Aaa No Opt. Call 427,962
395,000 6.500%, 6/01/10 Aaa No Opt. Call 438,584
395,000 6.500%, 6/01/11 Aaa No Opt. Call 438,545
1,350,000 Town of Hempstead Industrial Development Agency, Civic
Facility Revenue Bonds, (Hofstra University Project--
Series 1996), 5.800%, 7/01/15 Aaa 7/06 at 102 1,338,431
4,000,000 Metropolitan Transportation Authority, Commuter Facilities
Subordinated Revenue Bonds, Series 1995-1, (Grand Central
Terminal Redevelopment Project), 5.700%, 7/01/24 Aaa 7/05 at 101 3,882,920
4,500,000 Metropolitan Transportation Authority, Commuter Facilities
Revenue Bonds, Series 1996A, 6.100%, 7/01/26 Aaa 7/06 at 102 4,550,625
1,000,000 Metropolitan Transportation Authority, Transit Facilities Service
Contract Bonds, Series L, 7.500%, 7/01/17 Aaa 7/98 at 102 1,071,660
10,340,000 Metropolitan Transportation Authority, Transit Facilities Revenue
Bonds, Series J, 6.500%, 7/01/18 Aaa 7/02 at 102 11,045,395
Middle Country Central School District at Centereach in the
Town of Brookhaven, Suffolk Co., N.Y., School District (Serial)
Bonds, 1991 (ULT):
475,000 6.900%, 12/15/07 Aaa No Opt. Call 550,098
475,000 6.900%, 12/15/08 Aaa No Opt. Call 549,727
Public Improvement Serial Bonds 1992, County of Monroe,
New York, General Obligation Bonds:
375,000 6.500%, 6/01/15 Aaa 6/01 at 102 396,818
375,000 6.500%, 6/01/16 Aaa 6/01 at 102 396,818
350,000 6.500%, 6/01/17 Aaa 6/01 at 102 370,363
3,725,000 Montgomery, Otsego, Schoharie, Solid Waste Management
Authority, Solid Waste System Revenue Bonds, Series 1990,
7.250%, 1/01/14 (Pre-refunded to 1/01/00) Aaa 1/00 at 103 4,140,487
Mount Sinai Union Free School District, Suffolk County,
New York, School District (Serial) Bonds, 1989:
1,000,000 7.250%, 2/15/15 (Pre-refunded to 2/15/00) Aaa 2/00 at 102 1,105,510
1,000,000 7.250%, 2/15/17 (Pre-refunded to 2/15/00) Aaa 2/00 at 102 1,105,510
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mount Sinai Union Free School District, County of Suffolk,
New York, School District Refunding (Serial) Bonds, 1992:
$ 500,000 6.200%, 2/15/15 Aaa No Opt. Call $ 530,955
1,035,000 6.200%, 2/15/16 Aaa No Opt. Call 1,101,012
1,500,000 County of Nassau, New York, General Obligation Serial Bonds,
Serial General Improvement Bonds, Series O, 5.700%, 8/01/13 Aaa 8/04 at 103 1,506,885
4,840,000 Nassau County Industrial Development Agency, Civic Facility
Revenue Bonds, (Hofstra University Project--Series 1991),
6.750%, 8/01/11 Aaa 8/01 at 102 5,306,624
1,020,000 City of New Rochelle, Westchester County, New York, General
Obligations, Public Improvement Bonds, 1994 Series B,
6.200%, 8/15/22 Aaa 8/04 at 102 1,048,560
The City of New York, General Obligation Bonds, Fiscal 1992
Series C, Fixed Rate Bonds, Subseries C-1:
3,000,000 6.250%, 8/01/10 (Pre-refunded to 8/01/02) Aaa 8/02 at 101 1/2 3,272,700
1,000,000 6.250%, 8/01/10 Aaa 8/02 at 101 1/2 1,045,940
75,000 The City of New York, General Obligation Bonds, Fiscal 1992
Series C, 6.625%, 8/01/12 Aaa 8/02 at 101 1/2 81,072
2,600,000 The City of New York, General Obligation Bonds, Fiscal 1993
Series C, 6.000%, 8/01/12 Aaa 8/02 at 101 1/2 2,661,490
2,520,000 The City of New York, General Obligation Bonds, Fiscal 1993
Series E, 5.750%, 5/15/12 Aaa 5/03 at 101 1/2 2,527,459
The City of New York, General Obligation Bonds, Fiscal 1990,
Series B:
1,300,000 7.000%, 10/01/15 Aaa No Opt. Call 1,378,572
2,000,000 7.000%, 10/01/16 Aaa No Opt. Call 2,301,940
1,025,000 7.000%, 10/01/17 Aaa No Opt. Call 1,086,951
310,000 7.000%, 10/01/18 Aaa No Opt. Call 328,736
500,000 The City of New York, General Obligation Bonds, Fiscal 1988
Series A, 8.250%, 11/01/02 (Pre-refunded to 11/01/97) Aaa 11/97 at 101 1/2 531,455
1,000,000 New York City Educational Construction Fund, Revenue Bonds,
Series 1994, Senior Subordinated Revenue Bonds,
5.625%, 4/01/13 Aaa 4/04 at 101 1/2 988,800
New York City Health and Hospitals Corporation, Health
System Bonds, 1993 Series A:
2,500,000 5.625%, 2/15/13 Aaa 2/03 at 102 2,453,925
11,980,000 5.750%, 2/15/22 Aaa 2/03 at 102 11,598,796
5,000,000 Pass-Through Certificates of New York City HDC Multifamily
Housing, Limited Obligation Bonds, Series 1991A,
6.500%, 2/20/19 Aaa 7/97 at 105 5,772,600
1,000,000 New York City Housing Development Corporation, MultiFamily
Housing Revenue Bonds, 1993 Series B, 5.850%, 5/01/26 Aaa 5/03 at 102 981,950
1,000,000 New York City Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1991 Series A,
7.250%, 6/15/15 (Pre-refunded to 6/15/00) Aaa 6/00 at 101 1/2 1,105,060
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1992 Series A:
$ 2,000,000 6.750%, 6/15/16 Aaa 6/01 at 101 $ 2,159,980
1,250,000 6.750%, 6/15/16 Aaa 6/01 at 101 1,348,888
New York City Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1993 Series A:
6,765,000 5.750%, 6/15/18 Aaa 6/02 at 101 1/2 6,661,157
4,650,000 5.500%, 6/15/20 Aaa 6/02 at 100 4,365,374
7,000,000 New York City Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1996 Series B,
5.750%, 6/15/26 Aaa 6/06 at 101 6,857,620
1,000,000 New York City Transit Authority, Transit Facilities Revenue
Bonds, Series 1990 (Livingston Plaza Project),
7.500%, 1/01/20 (Pre-refunded to 1/01/00) Aaa 1/00 at 102 1,108,600
7,225,000 New York City Transit Authority, Transit Facilities Refunding
Revenue Bonds, Series 1993 (Livingston Plaza Project),
7.500%, 1/01/20 Aaa 1/03 at 100 6,561,167
2,200,000 The Trust for Cultural Resources of The City of New York,
Revenue Refunding Bonds, Series 1991A, (The American
Museum of Natural History), 6.900%, 4/01/21
(Pre-refunded to 4/01/01) Aaa 4/01 at 102 2,440,174
1,000,000 New York City Industrial Development Agency, Civic Facility
Revenue Bonds, (USTA National Tennis Center Incorporated
Project), 6.375%, 11/15/14 Aaa 11/04 at 102 1,057,540
1,000,000 New York City Industrial Development Agency, Civic Facility
Revenue Bonds, (New School for Social Research Project),
Series 1995A, 5.750%, 9/01/15 Aaa 9/05 at 102 989,180
1,590,000 City of Niagara Falls, Niagara County, New York, Public
Improvement (Serial)Bonds, 1994, 6.900%, 3/01/21 Aaa 3/04 at 102 1,749,095
5,725,000 Niagara Falls Bridge Commission, Toll Bridge System Revenue
Bonds, Series 1992, 6.125%, 10/01/19
(Pre-refunded to 10/01/02) Aaa 10/02 at 102 6,249,639
Town of North Hempstead, Nassau County, New York, Public
Improvement (Serial)Bonds, 1991, Series B, Unlimited Tax:
425,000 6.800%, 6/01/10 (Pre-refunded to 6/01/00) Aaa 6/00 at 102 465,486
425,000 6.800%, 6/01/11 (Pre-refunded to 6/01/00) Aaa 6/00 at 102 465,486
Town of North Hempstead, Nassau County, New York, General
Obligation Refunding Serial Bonds, Refunding Serial Bonds--
1992, Series B:
1,500,000 6.375%, 4/01/09 Aaa No Opt. Call 1,644,480
1,505,000 6.400%, 4/01/14 Aaa No Opt. Call 1,641,157
Nyack Union Free School District, Rockland County, New York,
School District Serial Bonds 1992:
625,000 6.500%, 4/01/12 Aaa 4/02 at 102 669,369
625,000 6.500%, 4/01/13 Aaa 4/02 at 102 670,306
625,000 6.500%, 4/01/14 Aaa 4/02 at 102 668,738
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rensselaer County, New York, General Obligation Serial Bonds,
Series 1991:
$ 960,000 6.700%, 2/15/13 Aaa No Opt. Call $ 1,086,461
960,000 6.700%, 2/15/14 Aaa No Opt. Call 1,085,290
960,000 6.700%, 2/15/15 Aaa No Opt. Call 1,083,485
700,000 County of Rockland, New York, Solid Waste Management
Authority, General Obligation Bonds, Series 1996B,
5.550%, 12/15/16 Aaa 12/06 at 102 677,999
Rondout Valley Central School District at Accord, Ulster
County, New York, General Obligation, School District (Serial)
Bonds, 1991:
550,000 6.800%, 6/15/06 Aaa No Opt. Call 628,843
550,000 6.850%, 6/15/07 Aaa No Opt. Call 631,785
550,000 6.850%, 6/15/08 Aaa No Opt. Call 631,554
550,000 6.850%, 6/15/09 Aaa No Opt. Call 630,900
550,000 6.850%, 6/15/10 Aaa No Opt. Call 631,147
County of Suffolk, New York, General Obligation Refunding
(Serial) Bonds, Public Improvement Refunding Bonds,
1993 Series B:
1,000,000 6.900%, 4/01/01 Aaa 4/00 at 102 1,096,640
600,000 6.150%, 5/01/10 Aaa 5/03 at 102 626,561
County of Suffolk, New York, General Obligation Refunding
(Serial) Bonds, Public Improvement Refunding Bonds,
1993 Series F:
1,895,000 5.250%, 7/15/09 Aaa 7/02 at 102 1,866,157
1,890,000 5.300%, 7/15/10 Aaa 7/02 at 102 1,855,130
1,860,000 5.400%, 7/15/11 Aaa 7/02 at 102 1,831,318
County of Suffolk, New York, General Obligation Refunding
(Serial) Bonds, Public Improvement Refunding Bonds,
1993 Series G:
1,630,000 5.400%, 4/01/11 Aaa 4/02 at 102 1,605,207
625,000 5.400%, 4/01/15 Aaa 4/02 at 102 602,050
1,000,000 Suffolk County Industrial Development Agency, (Suffolk County,
New York), Suffolk County Southwest Sewer System
Revenue Bonds, Series 1994, 4.750%, 2/01/09 Aaa 2/04 at 101 921,660
1,800,000 Suffolk County Water Authority, New York, Water System
Revenue Bonds, Series 1993 Refunding, 5.100%, 6/01/11 Aaa No Opt. Call 1,722,815
3,700,000 Suffolk County Water Authority, New York, Water System
Revenue Bonds, Series 1994, 5.000%, 6/01/17 Aaa 6/03 at 102 3,310,241
2,750,000 Triborough Bridge and Tunnel Authority, General Purpose
Revenue Bonds, Series X, 6.500%, 1/01/19 Aaa 1/02 at 101 1/2 2,916,127
2,000,000 Triborough Bridge and Tunnel Authority, General Purpose
Revenue Bonds, Series T, 7.000%, 1/01/20
(Pre-refunded to 1/01/01) Aaa 1/01 at 102 2,221,520
1,175,000 Triborough Bridge and Tunnel Authority, General Purpose
Revenue Bonds, Series S, 7.000%, 1/01/21
(Pre-refunded to 1/01/01) Aaa 1/01 at 101 1/2 1,300,313
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8,650,000 Triborough Bridge and Tunnel Authority, Special Obligation
Refunding Bonds, Series 1991B, 6.875%, 1/01/15 Aaa 1/01 at 102 $9,401,771
1,750,000 City of Yonkers, New York, General Obligation School Bonds--
1990-C, 7.375%, 12/01/09 (Pre-refunded to 12/01/00) Aaa 12/00 at 102 1,971,200
- -------------------------------------------------------------------------------------------------------------------------
$345,750,000 Total Investments -- (cost $339,090,235) -- 99.3% 356,439,152
============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.7% 2,535,090
- -------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $358,974,242
=========================================================================================================================
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET PORTFOLIO
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 151 $352,063,956 99%
RATINGS* AA+, AA, AA- Aa1, Aa, Aa2, Aa3 4 4,375,196 1
PORTFOLIO OF
INVESTMENTS:
- -------------------------------------------------------------------------------------------------------------------------
TOTAL 155 $356,439,152 100%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
All of the bonds in the portfolio are either covered by Original Issue
Insurance, Secondary Market Insurance or Portfolio Insurance, or are backed by
an escrow or trust containing sufficient U.S. Government or U.S. Government
agency securities, any of which ensure the timely payment of principal and
interest.
* Ratings: Using the higher of Standard & Poor's or Moody's rating.
** 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.
See accompanying notes to financial statements.
50
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
NUVEEN OHIO TAX-FREE VALUE FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000,000 Ohio Air Quality Development Authority, State of Ohio,
Pollution Control Revenue Refunding Bonds, 1990 Series A
(Ohio Edison Company Project), 7.450%, 3/01/16 Aaa 3/00 at 102 $ 2,191,680
1,000,000 Ohio Air Quality Development Authority, State of Ohio, Air
Quality Development Revenue Refunding Bonds (Ohio Power
Company Project), Series B, 7.400%, 8/01/09 Baa1 8/99 at 102 1,048,860
2,000,000 Ohio Air Quality Development Authority, State of Ohio,
Collateralized Pollution Control Revenue Refunding Bonds,
Series 1992 (The Cleveland Electric Illuminating Company
Project), 8.000%, 12/01/13 Aaa 6/02 at 103 2,344,440
1,250,000 Ohio Capital Corporation for Housing, Multifamily Housing
Refunding Revenue Bonds, Series 1989A, 7.600%, 11/01/23 AAA 11/97 at 105 1,330,388
755,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue
Bonds (GNMA Mortgage-Backed Securities Program), 1990
Series A, 7.400%, 9/01/15 AAA 3/00 at 102 795,815
655,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue
Bonds (GNMA Mortgage-Backed Securities Program), 1990
Series D, 7.500%, 9/01/13 AAA 9/00 at 102 690,481
335,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue
Bonds (GNMA Mortgage-Backed Securities Program), 1991
Series D, 7.050%, 9/01/16 Aaa 9/01 at 102 352,336
1,750,000 Ohio Water Development Authority, State of Ohio,
Collateralized Water Development Revenue Refunding Bonds,
1992 Series A (The Dayton Power and Light Company Project),
6.400%, 8/15/27 AA- 8/02 at 102 1,813,525
1,000,000 Ohio Water Development Authority, State of Ohio, Water
Development Revenue Bonds, 1995 Fresh Water Series,
5.900%, 12/01/21 Aaa 6/05 at 102 996,640
1,000,000 State of Ohio (Ohio Higher Educational Facility Commission),
Higher Educational Facility Revenue Bonds (Ohio Wesleyan
University Project), 7.650%, 11/15/07 Aaa 11/97 at 102 1,061,540
1,750,000 State of Ohio (Ohio Higher Educational Facility Commission),
Higher Educational Facility Revenue Bonds (University of
Dayton 1994 Project), 5.800%, 12/01/19 Aaa 12/04 at 102 1,720,233
1,750,000 State of Ohio, Air Quality Development Revenue Bonds
(Columbus Southern Power Company Project), Series 1985 A,
6.375%, 12/01/20 Aaa 12/02 at 102 1,840,230
1,475,000 State of Ohio, Full Faith and Credit, General Obligation
Infrastructure Improvement Bonds, Series 1996,
6.650%, 8/01/05 Aa1 No Opt. Call 1,652,738
1,000,000 State of Ohio, Full Faith and Credit, General Obligation
Infrastructure Improvement Bonds, Series 1994,
6.000%, 8/01/10 Aa1 No Opt. Call 1,050,620
250,000 State of Ohio, Higher Educational Facility, Mortgage Revenue
Bonds (Ohio Dominican College Project), 8.500%, 12/01/07
(Pre-refunded to 12/01/97) N/R 12/97 at 102 267,825
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN OHIO TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 400,000 State of Ohio, Higher Educational Facility, Mortgage Revenue
Bonds (John Carroll University Project), 9.250%, 10/01/07
(Pre-refunded to 10/01/97) A 10/97 at 102 $ 429,736
60,000 State of Ohio, Mortgage Revenue Bonds, Series 1987A (FHA
Insured Mortgage Loan-I.O.O.F. Home of Ohio, Inc. Nursing
Home and Board and Care Project), 8.150%, 8/01/02 AAA 8/97 at 103 63,328
1,000,000 State of Ohio, Ohio Building Authority, State Correctional
Facilities Refunding Bonds, 1986 Series B, 7.125%, 9/01/09 AA- 9/96 at 102 1,022,090
1,000,000 State of Ohio, Ohio Higher Educational Facilities Commission
(Ohio Northern University Project), 7.300%, 5/15/10
(Pre-refunded to 5/15/00) Aaa 5/00 at 100 1,091,170
750,000 State of Ohio, Pollution Control Revenue Refunding Bonds,
Ohio Air Quality Development Authority, 1989 Series B
(Ohio Edison Company Project), 7.625%, 7/01/23 Baa3 7/99 at 102 790,470
5,000,000 State of Ohio, Turnpike Revenue Bonds, 1996 Series A, Issued
by the Ohio Turnpike Commission, 5.500%, 2/15/26 Aaa 2/06 at 102 4,758,800
Adams County/Ohio Valley School District, Counties of Adams
and Highland, Ohio, School Improvement Unlimited Tax
General Obligation Bonds, Series 1995:
2,000,000 7.000%, 12/01/15 Aaa No Opt. Call 2,312,860
3,865,000 5.250%, 12/01/21 Aaa 12/05 at 102 3,606,432
3,955,000 City of Akron, Ohio, General Obligation Bonds, Various Purpose
Improvement Bonds, Series 1994 (Limited Tax),
6.750%, 12/01/14 Aaa 12/04 at 102 4,381,072
1,500,000 City of Akron, Ohio, Waterworks System Mortgage Revenue
Improvement Bonds, Series 1991, 6.550%, 3/01/12
(Pre-refunded to 3/01/01) Aaa 3/01 at 102 1,636,860
2,850,000 Anthony Wayne Local School District, Lucas, Wood and Fulton
Counties, Ohio, School Facilities Construction and
Improvement Bonds, 5.750%, 12/01/24 Aaa 12/05 at 101 2,785,505
1,000,000 Archbold Area Local School District, General Obligation Bonds
(Unlimited Tax), Series 1996, 6.000%, 12/01/21 Aaa 11/06 at 102 1,012,450
1,000,000 Aurora City School District, Ohio, General Obligation
(Unlimited Tax) School Improvement Bonds, Series 1995,
5.800%, 12/01/16 Aaa 12/05 at 102 998,120
1,000,000 Board of Education, Beavercreek Local School District, County
of Greene, Ohio, School Improvement Bonds, Series 1996
(Unlimited Tax General Obligation), 6.600%, 12/01/15 Aaa No Opt. Call 1,109,880
1,415,000 City of Bedford, Ohio, Hospital Facilities Refunding Revenue
Bonds, Series 1990 (The Community Hospital of Bedford, Inc.),
8.500%, 5/15/09 (Pre-refunded to 5/15/00) N/R 5/00 at 102 1,599,870
City of Bellefontaine, Sewer System First Mortgage Revenue
Refunding and Improvement Bonds (Bank Qualified):
1,000,000 6.800%, 12/01/07 Baa1 12/02 at 101 1,057,500
1,000,000 6.900%, 12/01/11 Baa1 12/02 at 101 1,057,890
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Buckeye Valley Local School District, Ohio, General Obligation
(Unlimited Tax) Bonds, School Improvement Bonds,
Series 1995A, 6.850%, 12/01/15 Aaa No Opt. Call $ 2,847,450
1,250,000 County of Butler, Ohio, Hospital Facilities Revenue Refunding
and Improvement Bonds, Series 1991 (Fort Hamilton-Hughes
Memorial Hospital Center), 7.500%, 1/10/10 Baa 1/02 at 102 1,323,100
1,000,000 County of Butler, Ohio, Sewer System Revenue Bonds,
Series 1996, 5.250%, 12/01/21 Aaa 12/06 at 101 930,590
1,000,000 Canal Winchester Local School District, Franklin and Fairfield
Counties, Ohio, General Obligation Bonds (Unlimited Tax),
For School Facilities Construction and Improvement,
7.100%, 12/01/13 (Pre-refunded to 12/01/01) Aaa 12/01 at 102 1,124,390
1,000,000 Clermont County, Ohio, Road Improvement Bonds, Series 1990,
7.125%, 9/01/11 (Pre-refunded to 9/01/00) Aaa 9/00 at 102 1,106,670
2,000,000 County of Clermont, Ohio, Sewer System Revenue Bonds, Series
1990, Clermont County Sewer District, 7.375%, 12/01/20
(Pre-refunded to 12/01/00) Aaa 12/00 at 102 2,242,040
1,000,000 County of Clermont, Ohio, Sewer System Revenue Bonds, Series
1991, Clermont County Sewer District, 7.100%, 12/01/21
(Pre-refunded to 12/01/01) Aaa 12/01 at 102 1,124,390
1,000,000 County of Clermont, Ohio, Waterworks System Revenue Bonds,
Series 1991, Clermont County Sewer District,
6.625%, 12/01/13 (Pre-refunded to 12/01/01) Aaa 12/01 at 102 1,103,030
2,000,000 Board of Education of the Cleveland City School District, Ohio,
General Obligation Unlimited Tax Bonds, Library
Improvement Bonds, Series 1992A, 5.875%, 12/01/11 Aaa 12/02 at 102 2,019,300
1,500,000 City of Cleveland, Ohio, Public Power System First Mortgage
Revenue Bonds, Series 1994A, 7.000%, 11/15/24 Aaa 11/04 at 102 1,684,650
990,000 City of Cleveland, Ohio, Waterworks Improvement First
Mortgage Revenue Refunding Bonds, Series F, 1992B,
6.500%, 1/01/11 Aaa 1/02 at 102 1,044,430
1,750,000 City of Cleveland, Ohio, Waterworks Improvement First
Mortgage Revenue Bonds, Series F, 1992A, 6.500%, 1/01/21
(Pre-refunded to 1/01/02) Aaa 1/02 at 102 1,921,273
1,000,000 City of Cleveland, Waterworks Revenue Refunding and
Improvement Bonds, First Mortgage, Series 1996-H,
5.750%, 1/01/21 Aaa 1/06 at 102 977,500
10,000 City of Cleveland, Ohio, First Mortgage Revenue Refunding
Bonds, Series F, 1992-B, 6.500%, 1/01/11
(Pre-refunded to 1/01/02) Aaa 1/02 at 102 10,979
1,000,000 Coldwater Exempted Village School District, Mercer County,
Ohio, General Obligation Bonds, 7.00%, 12/01/13
(Pre-refunded to 12/01/99) Aaa 12/99 at 102 1,092,970
1,500,000 City of Columbus, Ohio, General Obligation Refunding Bonds,
Series 1992B, 6.500%, 1/01/10 Aaa 1/02 at 102 1,607,085
2,050,000 City of Columbus, Ohio, Various Purpose Unlimited Tax Bonds,
Series 1993-1, 5.250%, 9/15/18 Aaa 9/03 at 102 1,946,065
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN OHIO TAX-FREE VALUE FUND CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 County of Cuyahoga, Ohio, General Obligation (Unlimited Tax)
Various Purpose Improvement and Refunding Bonds,
Series 1991, 7.000%, 10/01/13
(Pre-refunded to 10/01/01) N/R 10/01 at 102 $ 1,675,545
1,000,000 County of Cuyahoga, Ohio, General Obligation Various Purpose
Refunding Bonds, Series 1993B (Limited Tax Obligation),
5.250%, 10/01/13 Aa No Opt. Call 963,370
1,000,000 County of Cuyahoga, Ohio, General Obligation (Limited Tax)
Various Purpose Improvement Bonds, Series 1995,
5.250%, 11/15/15 Aa 11/05 at 102 956,210
1,250,000 Conversion and Remarketing of the County of Cuyahoga, Ohio,
Hospital Improvement Revenue Bonds (Deaconess Hospital of
Cleveland Project), Series 1995B, 7.450%, 10/01/18
(Pre-refunded to 10/01/00) A1 10/00 at 103 1,410,650
2,750,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds, Series
1990 (Meridia Health System), 7.250%, 8/15/19 A1 8/00 at 102 2,953,720
2,000,000 City of Dayton, Ohio, Airport Revenue Refunding Bonds, Series
1995 (James M. Cox Dayton International Airport),
5.250%, 12/01/15 Aaa 12/05 at 101 1,898,800
750,000 City of Defiance, Ohio, Waterworks System Improvement Bonds,
Series 1994, 6.200%, 12/01/20 Aaa 12/04 at 102 783,173
1,110,000 City of Fairborn, Ohio, General Obligation Bonds, Utility
Improvement Bonds, Series 1991, 7.000%, 10/01/11 Aaa 10/02 at 102 1,243,189
2,790,000 County of Franklin, Ohio, Refunding Bonds, Series 1993
(Limited Tax General Obligation Bonds), 5.375%, 12/01/20 Aaa 12/08 at 102 2,647,850
1,500,000 County of Franklin, Ohio, Health Care Facilities Revenue Bonds,
Series 1993 (Ohio Presbyterian Retirement Services),
6.500%, 7/01/23 N/R 7/03 at 102 1,391,370
500,000 County of Franklin, Ohio, Hospital Facilities Improvement
Revenue Bonds, Series 1990A (Riverside United Methodist
Hospital Project), 7.250%, 5/15/20 Aaa 5/00 at 102 543,705
1,350,000 County of Franklin, Ohio, Hospital Facilities Mortgage Revenue
Bonds, 1991 Series A (Ohio Presbyterian Retirement Services),
8.750%, 7/01/21 N/R 7/01 at 103 1,429,812
695,000 County of Franklin, Ohio, Revenue Bonds, Series 1991 (OCLC
Online Computer Library Center, Incorporated Project),
7.000%, 8/01/16 N/R 8/00 at 102 711,152
1,575,000 County of Franklin, Ohio, Hospital Refunding and Improvement
Revenue Bonds, 1996 Series A (The Children's Hospital
Project), 5.750%, 11/01/15 Aa 11/06 at 101 1,543,516
2,000,000 County of Franklin, Ohio, Hospital Revenue Bonds, Holy Cross
Health Systems Corporation, Series 1996, 5.875%, 6/01/21 Aa 6/06 at 102 1,946,420
1,000,000 County of Franklin, Ohio, Revenue Bonds, Series 1991 (OCLC
Online Computer Library Center, Incorporated Project),
7.200%, 7/15/06 N/R 7/01 at 100 1,064,070
250,000 City of Fremont, Ohio, Sewerage System Mortgage Revenue
Bonds, Series 1987, 8.100%, 12/01/07
(Pre-refunded to 12/01/97) A- 12/97 at 102 266,618
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Board of Education, Gahanna-Jefferson City School District,
Franklin County, Ohio, General Obligation Bonds, Series
1990 A, 7.125%, 12/01/14 (Pre-refunded to 12/01/00) A1 12/00 at 102 $ 1,109,420
1,000,000 City of Garfield Heights, Ohio, General Obligation (Limited
Tax) Various Purpose Improvement Bonds, 5.600%, 11/01/16 Aaa 11/06 at 102 974,570
3,000,000 City of Garfield Heights, Ohio, Hospital Improvement and
Refunding Revenue Bonds, Series 1992B (Marymount
Hospital Project), 6.650%, 11/15/11 A 11/02 at 102 3,111,810
1,000,000 County of Geauga, Ohio, General Obligation (Limited Tax)
Sewer District Improvement Bonds (Bainbridge Water Project),
5.625%, 12/01/15 Aa 12/05 at 102 976,370
Grandview Heights City School District, Franklin County, Ohio,
School Facilities Construction and Improvement Bonds
(General Obligation-Unlimited Tax):
2,000,000 6.100%, 12/01/19 AA 12/05 at 101 2,034,080
1,520,000 5.550%, 12/01/19 AA No Opt. Call 1,483,991
250,000 City of Grandview Heights, Franklin County, Ohio, Library
Building Mortgage Revenue Bonds (Board of Trustees of the
Grandview Heights Public Library-Lessee), 8.250%, 12/01/07
(Pre-refunded to 12/01/97) N/R 12/97 at 102 267,260
1,600,000 County of Greene, Ohio, Water System Revenue Bonds, Series
1996, 6.125%, 12/01/21 Aaa 12/07 at 102 1,642,240
1,000,000 City of Greenville, Ohio (Dark County), Wastewater System First
Mortgage Revenue Bonds, Series 1992 (Governmental
Enterprise Revenue Bonds), 6.350%, 12/01/17 Aaa 10/02 at 102 1,056,690
1,495,000 County of Hamilton, Ohio, Judson Care Center Nursing Home
and Board and Care Project (FHA Insured Mortgage),
7.800%, 8/01/19 A+ 8/00 at 101 1/4 1,586,614
400,000 City of Hubbard, Ohio, Municipal Center Bond, Anticipation
Notes, Series 1987, 8.800%, 11/15/17 N/R 5/98 at 102 430,080
1,700,000 Indian Lake Local School District Logan and Auglaize Counties,
Ohio, School Facilities Construction and Improvement Bonds,
(General Obligation-Unlimited Tax), 5.375%, 12/01/23 Aaa 12/06 at 101 1,611,498
1,000,000 Indian Valley Local School District, Ohio, General Obligation
(Unlimited Tax) School Improvement Bonds, Series 1995,
5.750%, 12/01/19 Aaa 12/05 at 102 979,190
1,000,000 Kent State University (A State University of Ohio), General
Receipts Bonds, Series 1992, 6.500%, 5/01/22 Aaa 5/02 at 102 1,071,610
2,630,000 Kings Local School District, General Obligation (Unlimited Tax)
School Improvement Bonds, Series 1995, 5.500%, 12/01/21 Aaa 12/05 at 100 2,534,242
500,000 Kirtland Local School District, Ohio, School Improvement
Bonds, Series 1989 General Obligation Unlimited Tax Bonds,
7.500%, 12/01/09 A1 12/99 at 102 544,535
1,500,000 City of Lakewood, Ohio, Various Purpose General Obligation
Bonds, Series 1992 (Limited Tax Obligation),
6.500%, 12/01/12 Aa 12/02 at 102 1,630,020
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN OHIO TAX-FREE VALUE FUNDCONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Lakota Local School District, County of Butler, Ohio, School
Improvement Unlimited Tax General Obligation Bonds,
Series 1994, 6.125%, 12/01/17 Aaa 12/05 at 100 $ 1,029,040
1,500,000 City of Lorain, Ohio, Hospital Refunding Revenue Bonds, Series
1992 (Lakeland Community Hospital, Inc.), 6.500%, 11/15/12 A1 11/02 at 102 1,530,840
500,000 City of Lorain, Ohio, Sewer System Mortgage Revenue
Refunding Bonds, Series 1988, 8.750%, 4/01/11 BBB- 4/98 at 102 542,710
1,000,000 County of Lucas, Ohio, General Obligation (Limited Tax)
Various Purpose Improvement Bonds, Series 1992,
6.650%, 12/01/12 A 12/02 at 102 1,028,930
1,000,000 County of Lucas, Ohio, General Obligation (Limited Tax)
Various Purpose Improvement Bonds, Series 1995-1,
5.400%, 12/01/15 Aaa 12/05 at 102 971,370
1,000,000 County of Mahoning, Ohio, General Obligation Bonds, Various
Purpose Improvement Bonds, Series 1989, Limited Tax,
7.200%, 12/01/09 Aaa 12/99 at 102 1,091,850
2,000,000 County of Mahoning, Ohio, Hospital Improvement and
Refunding Revenue Bonds, Series 1986 (St. Elizabeth Hospital
Medical Center Project), 7.375%, 12/01/09 A1 6/98 at 100 2,043,000
2,355,000 County of Mahoning, Ohio, Hospital Improvement Revenue
Bonds, Series 1991 (YHA, Inc. Project), Series 1991A,
7.000%, 10/15/14 Aaa 10/00 at 102 2,537,089
1,000,000 County of Marion, Ohio, Health Care Facilities Refunding and
Improvement Revenue Bonds, Series 1993 (United Church
Homes, Inc. Project), 6.375%, 11/15/10 BBB- 11/03 at 102 976,010
1,150,000 County of Marion, Ohio, Health Care Facilities Revenue Bonds,
Series 1990 (United Church Home, Inc.), 8.875%, 12/01/12
(Pre-refunded to 12/01/99) N/R 12/99 at 103 1,320,821
750,000 County of Marion, Ohio, Health Care Facilities Refunding and
Improvement Revenue Bonds, Series 1993 (United Church
Homes, Inc. Project), 6.300%, 11/15/15 BBB- 11/03 at 102 711,023
1,000,000 The Board of Education of the Marysville Exempted Village
School District, Union County, Ohio, School Improvement
Bonds, General Obligation (Unlimited Taxes),
7.200%, 12/01/10 (Pre-refunded to 12/01/00) Aaa 12/00 at 102 1,114,340
1,250,000 City of Marysville, Ohio, Water System Mortgage Revenue
Bonds, Series 1991, 7.050%, 12/01/21 Aaa 12/01 at 101 1,392,838
1,000,000 Board of Education of the Mentor Exempted Village School
District, Ohio, Improvement Bonds, Series 1989 (General
Obligation Bonds), 7.400%, 12/01/11
(Pre-refunded to 12/01/02) Aaa 12/02 at 100 1,104,950
1,500,000 County of Montgomery, Ohio, Hospital Facilities Revenue
Refunding and Improvement Bonds, Series 1996 (Kettering
Medical Center), 5.625%, 4/01/16 Aaa 4/06 at 102 1,466,850
1,000,000 County of Montgomery, Ohio, Water Revenue Bonds, Greater
Moraine-Beavercreek Sewer District Series 1992,
6.250% 11/15/17 Aaa 11/02 at 102 1,043,210
</TABLE>
56
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,000,000 City of Mount Vernon, Ohio, Hospital Refunding Revenue
Bonds, Series 1986A (Knox Community Hospital),
7.875%, 6/01/12 N/R 12/96 at 103 $ 3,092,430
2,245,000 City of Napoleon, Ohio, Health Care Facilities 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 Aa 9/04 at 102 2,386,817
1,000,000 City of North Olmsted, Ohio, General Obligation (Limited Tax)
Various Purpose Bonds, Series 1992, 6.250%, 12/15/12 Aaa 12/02 at 102 1,051,680
1,000,000 City of Parma, Ohio, Various Purpose General Obligation Bonds,
Series 1990 (Limited Tax Obligation), 7.600%, 12/01/11 A 12/00 at 102 1,127,540
1,750,000 Pickerington Local School District, Fairfield and Franklin
Counties, Ohio, General Obligation Bonds (Pickerington
Public Library Project) (Unlimited Tax), 6.750%, 12/01/16 A 12/01 at 102 1,843,380
1,000,000 Revere Local School District, Ohio, School Improvement Bonds,
Series 1993 (General Obligation Unlimited Tax Bonds),
6.000%, 12/01/16 Aaa 12/03 at 102 1,012,990
1,500,000 Reynoldsburg City School District, Franklin, Fairfield and
Licking Counties, Ohio, General Obligation Bonds (Unlimited
Tax) For School Building Construction and Improvement,
6.550%, 12/01/17 Aaa 12/02 at 102 1,621,410
1,200,000 Ridgemont Local School District, Ohio, General Obligation
(Unlimited Tax) School Improvement Bonds, Series 1992,
7.250%, 12/01/14 N/R 12/02 at 102 1,305,156
735,000 City of Salem, Ohio, Sewer System Mortgage Revenue Bonds,
Series 1987, 7.500%, 11/01/11 (Pre-refunded to 11/01/96) N/R 11/96 at 102 753,963
1,000,000 The Board of Education of the Springfield City School District,
Clark County, Ohio, School Improvement Bonds, General
Obligation (Unlimited Tax), 6.600%, 12/01/12 Aaa 12/01 at 102 1,087,720
2,340,000 City of Stow, Ohio, Safety Center Construction Bonds (General
Obligation Limited Tax), 6.200%, 12/01/20 A1 12/05 at 102 2,386,261
3,080,000 Sylvania City School District, Ohio, General Obligation
(Unlimited Tax) School Improvement Bonds, Series 1995,
5.750%, 12/01/22 Aaa 12/05 at 101 3,012,363
1,070,000 County of Trumbull, Ohio, Correctional Facilities Bonds, Series
1995 (General Obligation Limited Tax), 7.000%, 12/01/04 Aaa No Opt. Call 1,214,311
1,000,000 County of Trumbull, Ohio, Hospital Refunding and
Improvement Revenue Bonds, Series 1991 (Trumbell Memorial
Hospital Project), Series 1991B, 6.900%, 11/15/12 Aaa 11/01 at 102 1,103,730
750,000 County of Tuscarawas, Ohio, Hospital Facilities Revenue Bonds,
Series 1993A (Union Hospital Project), 6.500%, 10/01/21 Baa 10/03 at 102 710,385
1,000,000 University of Cincinnati, Ohio General Receipts Bonds, Series I,
7.300%, 6/01/09 (Pre-refunded to 6/01/99) AA- 6/99 at 100 1,073,650
1,000,000 University of Cincinnati, General Receipts Bonds, Series O,
6.300%, 6/01/12 AA- 12/02 at 102 1,047,330
1,000,000 University of Cincinnati, General Receipts Bonds, Series V,
5.500%, 6/01/15 AA- 6/05 at 101 974,240
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN OHIO TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 The University of Toledo (A State University of Ohio) General
Receipts Bonds, Series 1994, 5.350%, 6/01/25 Aaa 6/04 at 102 $ 1,406,954
1,950,000 County of Warren, Ohio, Hospital Facilities Improvement and
Refunding Revenue Bonds, Series 1991 (Otterbein Home
Project), 7.200%, 7/01/11 Aa1 7/01 at 102 2,093,480
250,000 City of Warren, Ohio, General Obligation Limited Tax, Various
Purpose Improvement Bonds, 8.625%, 11/15/13
(Pre-refunded to 11/15/98) BBB+ 11/98 at 102 277,270
1,500,000 City of Warren, Ohio, General Obligation (Limited Tax)
Sewerage System Improvement Bonds, Series 1990,
7.750%, 11/01/10 (Pre-refunded to 11/01/00) BBB+ 11/00 at 102 1,708,544
1,750,000 City of Washington, Ohio, Water System Mortgage Revenue
Bonds, Series 1993, 5.375%, 12/01/19 Aaa 12/03 at 101 1,633,344
750,000 West Geauga Local School District, Ohio, School Improvement
Bonds, Series 1994 (General Obligation Unlimited Tax),
5.950%, 11/01/12 Aaa 11/04 at 102 767,677
500,000 Wooster City School District, Wayne County, Ohio, General
Obligation Bonds (Unlimited Tax) For School Building
Construction and Improvement, 6.500%, 12/01/17 Aaa 12/02 at 102 538,599
3,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series X, 5.500%, 7/01/25 A- 7/05 at 100 2,797,140
- -------------------------------------------------------------------------------------------------------------------------
$170,805,000 Total Investments - (cost $169,211,038) -- 98.6% 177,383,921
============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.4% 2,505,087
- -------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $179,889,008
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 69 $103,052,144 58%
RATINGS* AA+, AA, AA- Aa1, Aa, Aa2, Aa3 17 24,648,467 14
PORTFOLIO OF A+ A1 8 13,565,040 8
INVESTMENTS: A, A- A, A2, A3 7 10,605,154 6
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 11 10,203,762 6
Non-rated Non-rated 13 15,309,354 8
- -----------------------------------------------------------------------------------------------------------------
TOTAL 125 $177,383,921 100%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R -- Investment is not rated.
** 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.
See accompanying notes to financial statements.
58
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
(Unaudited) AUGUST 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $236,539,342 $216,928,610 $ 78,991,293 $ 62,318,985
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 2,200,000 600,000 700,000 1,100,000
Cash 214,914 272,613 295,680 169,227
Receivables:
Interest 3,781,216 3,539,873 1,171,926 1,005,662
Shares sold 333,691 249,667 45,367 29,670
Investments sold 46,200 -- -- --
Other assets 6,826 4,621 3,844 1,133
------------ ------------ ------------ ------------
Total assets 243,122,189 221,595,384 81,208,110 64,624,677
------------ ------------ ------------ ------------
LIABILITIES
Payables:
Investments purchased 14,264,059 -- -- --
Shares reacquired -- 87,215 -- --
Accrued expenses:
Management fees (note 6) 106,156 102,940 38,088 30,405
Other 92,252 82,165 48,463 25,346
Dividends payable 622,673 556,425 252,764 198,275
------------ ------------ ------------ ------------
Total liabilities 15,085,140 828,745 339,315 254,026
------------ ------------ ------------ ------------
Net assets (note 7) $228,037,049 $220,766,639 $ 80,868,795 $ 64,370,651
============ ============ ============ ============
Class A Shares (note 1)
Net assets $ 16,952,703 $ 22,728,330 $ 5,575,913 $ 6,368,939
============ ============ ============ ============
Shares outstanding 1,637,398 2,164,059 570,888 621,514
============ ============ ============ ============
Net asset value and redemption price per share $ 10.35 $ 10.50 $ 9.77 $ 10.25
============ ============ ============ ============
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 10.84 $ 10.99 $ 10.23 $ 10.73
============ ============ ============ ============
Class C Shares (note 1)
Net assets $ 722,815 $ 936,247 $ 786,508 $ 846,620
============ ============ ============ ============
Shares outstanding 69,816 89,887 80,957 82,846
============ ============ ============ ============
Net asset value, offering and redemption price per share $ 10.35 $ 10.42 $ 9.72 $ 10.22
============ ============ ============ ============
Class R Shares (note 1)
Net assets $210,361,531 $197,102,062 $ 74,506,374 $ 57,155,092
============ ============ ============ ============
Shares outstanding 20,274,353 18,808,742 7,650,711 5,576,842
============ ============ ============ ============
Net asset value and redemption price per share $ 10.38 $ 10.48 $ 9.74 $ 10.25
============ ============ ============ ============
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statement.
59
<PAGE>
STATEMENT OF NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
NA NY INS OH
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $173,498,824 $356,439,152 $177,383,921
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 700,000 -- --
Cash 36,638 -- 42,012
Receivables:
Interest 2,310,278 4,188,767 2,854,224
Shares sold 16,470 85,391 189,025
Investments sold 60,000 -- 150,000
Other assets 2,605 15,268 2,989
------------ ------------ ------------
Total assets 176,624,815 360,728,578 180,622,171
------------ ------------ ------------
LIABILITIES
Payables:
Investments purchased 3,993,255 -- --
Shares reacquired -- 52,000 1,668
Accrued expenses:
Management fees (note 6) 80,313 165,674 84,464
Other 79,518 454,205 98,451
Dividends payable 549,768 1,082,456 548,580
------------ ------------ ------------
Total liabilities 4,702,854 1,754,335 733,163
------------ ------------ ------------
Net assets (note 7) $171,921,961 $358,974,242 $179,889,008
============ ============ ============
Class A Shares (note 1)
Net assets $ 18,941,870 $ 30,575,497 $ 16,654,039
============ ============ ============
Shares outstanding 1,826,771 2,960,137 1,611,111
============ ============ ============
Net asset value and redemption price per share $ 10.37 $ 10.33 $ 10.34
============ ============ ============
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 10.86 $ 10.82 $ 10.83
============ ============ ============
Class C Shares (note 1)
Net assets $ 711,060 $ 2,240,716 $ 2,447,945
============ ============ ============
Shares outstanding 68,396 216,952 237,837
============ ============ ============
Net asset value, offering and redemption price per share $ 10.40 $ 10.33 $ 10.29
Class R Shares (note 1)
Net assets $152,269,031 $326,158,029 $160,787,024
============ ============ ============
Shares outstanding 14,646,005 31,587,612 15,573,722
============ ============ ============
Net asset value and redemption price per share $ 10.40 $ 10.33 $ 10.32
============ ============ ============
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
STATEMENT OF OPERATIONS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
Six months ended August 31, 1996 AUGUST 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 6,959,313 $ 6,570,683 $ 2,512,746 $ 1,948,144
----------- ----------- ----------- -----------
Expenses:
Management fees (note 6) 617,847 598,926 222,848 177,953
12b-1 service fees - Class A (note 1) 18,000 23,962 6,250 7,217
12b-1 distribution and service fees - Class C (note 1) 3,606 4,733 3,522 4,024
Shareholders' servicing agent fees and expenses 76,263 71,077 34,558 29,425
Custodian's fees and expenses 39,385 31,681 20,754 20,204
Directors' fees and expenses (note 6) 2,553 2,265 1,295 1,866
Professional fees 10,268 7,459 7,961 5,922
Shareholders' reports - printing and mailing expenses 43,454 34,282 15,038 8,676
Federal and state registration fees 1,206 1,763 2,322 2,390
Portfolio insurance expense - 12,074 - 2,458
Other expenses 7,461 6,742 3,305 2,733
----------- ----------- ----------- -----------
Total expenses before expense reimbursement 820,043 794,964 317,853 262,868
Expense reimbursement from investment adviser (note 6) - - (4,365) -
----------- ----------- ----------- -----------
Net expenses 820,043 794,964 313,488 262,868
----------- ----------- ----------- -----------
Net investment income 6,139,270 5,775,719 2,199,258 1,685,276
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions, net
of taxes, if applicable (notes 1 and 4) (826,085) (671,021) (94,972) -
Net change in unrealized appreciation or depreciation
of investments (4,146,759) (4,844,258) (1,379,754) (1,573,160)
----------- ----------- ----------- -----------
Net gain (loss) from investments (4,972,844) (5,515,279) (1,474,726) (1,573,160)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations $ 1,166,426 $ 260,440 $ 724,532 $ 112,116
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
STATEMENT OF OPERATIONS
Six months ended August 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NY NY INS OH
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 5,322,665 $10,718,430 $ 5,507,819
----------- ----------- -----------
Expenses:
Management fees (note 6) 465,528 971,392 492,498
12b-1 service fees - Class A (note 1) 21,875 34,690 18,607
12b-1 distribution and service fees - Class C (note 1) 3,248 8,245 11,898
Shareholders' servicing agent fees and expenses 67,740 141,583 76,701
Custodian's fees and expenses 26,662 37,866 27,125
Directors' fees and expenses (note 6) 1,139 4,579 2,362
Professional fees 9,599 16,324 7,782
Shareholders' reports - printing and mailing expenses 28,141 42,988 36,741
Federal and state registration fees 1,187 4,037 2,373
Portfolio insurance expenses -- 5,627 --
Other expenses 4,759 11,481 6,372
----------- ----------- -----------
Total expenses before expense reimbursement 629,878 1,278,812 682,459
Expense reimbursement from investment adviser (note 6) -- -- --
----------- ----------- -----------
Net expenses 629,878 1,278,812 682,459
----------- ----------- -----------
Net investment income 4,692,787 9,439,618 4,825,360
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (721,907) (1,574,234) 20,631
Net change in unrealized appreciation or depreciation
of investments (3,219,365) (8,205,201) (4,467,205)
----------- ----------- -----------
Net gain (loss) from investments (3,941,272) (9,779,435) (4,446,574)
----------- ----------- -----------
Net increase (decrease) in net assets from operations $ 751,515 $ (339,817) $ 378,786
=========== =========== ===========
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
(Unaudited) AUGUST 31, 1996
- ------------------------------------------------------------------------------------------------------------------------
CA CA INS
- ------------------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended
ended 8/31/96 2/29/96 ended 8/31/96 2/29/96
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 6,139,270 $ 12,198,392 $ 5,775,719 $ 11,206,229
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (826,085) 1,855,177 (671,021) 764,418
Net change in unrealized appreciation or depreciation
of investments (4,146,759) 8,120,195 (4,844,258) 9,456,488
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from operations 1,166,426 22,173,764 260,440 21,427,135
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (364,074) (388,705) (471,545) (496,274)
Class C (15,454) (18,278) (20,197) (28,991)
Class R (5,720,552) (11,713,501) (5,233,063) (10,613,497)
From accumulated net realized gains from investment
transactions:
Class A -- -- -- --
Class C -- -- -- --
Class R -- -- -- --
In excess of net realized gains from investment
transactions:
Class A -- -- -- --
Class C -- -- -- --
Class R -- -- -- --
------------ ------------ ------------ ------------
Decrease in net assets from distributions
to shareholders (6,100,080) (12,120,484) (5,724,805) (11,138,762)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 4,812,782 9,631,213 7,698,910 12,814,061
Class C 97,358 518,671 166,268 927,664
Class R 6,039,676 22,522,458 5,219,652 12,331,198
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 190,739 173,826 229,709 248,069
Class C 11,681 13,296 13,135 16,740
Class R 3,470,107 7,264,916 3,097,777 6,444,797
------------ ------------ ------------ ------------
14,622,343 40,124,380 16,425,451 32,782,529
------------ ------------ ------------ ------------
Cost of shares redeemed:
Class A (491,156) (567,970) (2,065,732) (1,021,240)
Class C (55,241) (64,962) (257,252) (167,154)
Class R (10,888,532) (31,186,974) (11,803,950) (21,853,091)
------------ ------------ ------------ ------------
(11,434,929) (31,819,906) (14,126,934) (23,041,485)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets derived from Fund
share transactions 3,187,414 8,304,474 2,298,517 9,741,044
------------ ------------ ------------ ------------
Net increase (decrease) in net assets (1,746,240) 18,357,754 (3,165,848) 20,029,417
Net assets at the beginning of period 229,783,289 211,425,535 223,932,487 203,903,070
------------ ------------ ------------ ------------
Net assets at the end of period $228,037,049 $229,783,289 $220,766,639 $223,932,487
============ ============ ============ ============
Balance of undistributed net investment income at end
of period $ 182,145 $ 142,955 $ 185,061 $ 134,147
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
MA MA INS
- --------------------------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended
ended 8/31/96 2/29/96 ended 8/31/96 2/29/96
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,199,258 $ 4,246,614 $ 1,685,276 $ 3,277,512
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (94,972) (217,900) -- 12,456
Net change in unrealized appreciation or depreciation
of investments (1,379,754) 3,250,694 (1,573,160) 2,682,527
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 724,532 7,279,408 112,116 5,972,495
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (126,835) (139,213) (142,833) (174,644)
Class C (15,386) (11,360) (16,992) (22,692)
Class R (2,025,587) (4,149,329) (1,520,597) (3,106,193)
From accumulated net realized gains from investment
transactions:
Class A -- -- -- --
Class C -- -- -- --
Class R -- -- -- --
In excess of net realized gains from investment
transactions:
Class A -- -- -- --
Class C -- -- -- --
Class R -- -- -- --
----------- ----------- ----------- -----------
Decrease in net assets from distributions
to shareholders (2,167,808) (4,299,902) (1,680,422) (3,303,529)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 1,556,557 3,487,963 1,663,869 3,509,564
Class C 179,535 510,754 174,512 359,914
Class R 3,182,737 7,760,983 1,206,411 3,473,819
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 76,235 75,540 82,370 104,279
Class C 11,954 7,603 15,948 20,520
Class R 1,436,227 2,962,447 1,086,452 2,184,979
----------- ----------- ----------- -----------
6,443,245 14,805,290 4,229,562 9,653,075
----------- ----------- ----------- -----------
Cost of shares redeemed:
Class A (270,658) (436,265) (547,185) (415,735)
Class C (31,579) (33,924) (33,759) (32,222)
Class R (5,530,093) (8,395,795) (3,809,369) (5,205,452)
----------- ----------- ----------- -----------
(5,832,330) (8,865,984) (4,390,313) (5,653,409)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets derived from Fund
share transactions 610,915 5,939,306 (160,751) 3,999,666
----------- ----------- ----------- -----------
Net increase (decrease) in net assets (832,361) 8,918,812 (1,729,057) 6,668,632
Net assets at the beginning of period 81,701,156 72,782,344 66,099,708 59,431,076
----------- ----------- ----------- -----------
Net assets at the end of period $80,868,795 $81,701,156 $64,370,651 $66,099,708
=========== =========== =========== ===========
Balance of undistributed net investment income at end of period $ 34,434 $ 2,984 $ 6,359 $ 1,505
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NY NY INS
- ----------------------------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended
ended 8/31/96 2/29/96 ended 8/31/96 2/29/96
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 4,692,787 $ 8,950,610 $ 9,439,618 $ 18,895,145
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (721,907) 1,772,126 (1,574,234) 973,136
Net change in unrealized appreciation or depreciation
of investments (3,219,365) 5,658,638 (8,205,201) 15,965,392
------------ ------------ ----------- ------------
Net increase (decrease) in net assets from operations 751,515 16,381,374 (339,817) 35,833,673
------------ ------------ ----------- ------------
DISTRIBUTION TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (456,680) (551,771) (687,359) (834,291)
Class C (14,532) (18,002) (36,184) (36,998)
Class R (4,219,235) (8,358,840) (8,713,530) (18,227,897)
From accumulated net realized gains from investment
transactions:
Class A - - - (51,671)
Class C - - - (2,889)
Class R - - - (861,604)
In excess of net realized gains from investment
transactions:
Class A - - - (4,745)
Class C - - - (265)
Class R - - - (79,130)
------------ ------------ ----------- ------------
Decrease in net assets from distributions
to shareholders (4,690,447) (8,928,613) (9,437,073) (20,099,490)
------------ ------------ ----------- ------------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 4,427,064 13,070,637 8,494,901 18,519,780
Class C 179,090 556,433 908,424 1,180,461
Class R 5,941,538 12,367,225 6,408,212 13,478,031
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 282,829 358,186 479,970 621,995
Class C 9,422 12,262 27,564 23,992
Class R 3,035,446 6,297,279 6,181,745 14,466,972
------------ ------------ ----------- ------------
13,875,389 32,662,022 22,500,816 48,291,231
------------ ------------ ----------- ------------
Cost of shares redeemed:
Class A (1,135,431) (1,336,675) (2,494,898) (2,316,785)
Class C (109,321) (23,961) (29,363) (153,831)
Class R (7,922,987) (20,329,583) (20,689,673) (44,754,684)
------------ ------------ ----------- ------------
(9,167,739) (21,690,219) (23,213,934) (47,225,300)
------------ ------------ ----------- ------------
Net increase (decrease) in net assets derived from Fund
share transactions 4,707,650 10,971,803 (713,118) 1,065,931
------------ ------------ ----------- ------------
Net increase (decrease) in net assets 768,718 18,424,564 (10,490,008) 16,800,114
Net assets at the beginning of period 171,153,243 152,728,679 369,464,250 352,664,136
------------ ------------ ----------- ------------
Net assets at the end of period $171,921,961 $171,153,243 $358,974,242 $ 369,464,250
============ ============ ============ =============
Balance of undistributed net investment income at end of period $ 129,158 $ 126,818 $ 61,993 $ 59,448
============ ============ ============ =============
</TABLE>
See accompanying notes to financial statements.
65
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
OH
- -------------------------------------------------------------------------------------------
Six months Year ended
ended 8/31/96 2/29/96
- -------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 4,825,360 $ 9,415,389
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) 20,631 730,235
Net change in unrealized appreciation or depreciation
of investments (4,467,205) 6,013,907
------------ ------------
Net increase (decrease) in net assets from operations 378,786 16,159,531
------------ ------------
DISTRIBUTION TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (381,797) (435,348)
Class C (51,835) (62,605)
Class R (4,412,572) (8,957,352)
From accumulated net realized gains from investment
transactions:
Class A -- --
Class C -- --
Class R -- --
In excess of net realized gains from investment
transactions:
Class A -- --
Class C -- --
Class R -- --
Decrease in net assets from distributions ------------ ------------
to shareholders (4,846,204) (9,455,305)
------------ ------------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 4,778,935 8,850,862
Class C 600,657 1,260,641
Class R 3,222,271 10,592,955
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 236,805 253,231
Class C 41,893 49,706
Class R 3,041,970 6,293,847
------------ ------------
11,922,531 27,301,242
------------ ------------
Cost of shares redeemed:
Class A (939,666) (809,723)
Class C (303,938) (95,567)
Class R (8,482,415) (18,392,616)
------------ ------------
(9,726,019) (19,297,906)
------------ ------------
Net increase (decrease) in net assets derived from Fund
share transactions 2,196,512 8,003,336
------------ ------------
Net increase (decrease) in net assets (2,270,906) 14,707,562
Net assets at the beginning of period 182,159,914 167,452,352
------------ ------------
Net assets at the end of period $179,889,008 $182,159,914
============ ============
Balance of undistributed net investment income at end
of period $ 47,872 $ 68,716
============ ============
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
NOTES TO FINANCIAL STATEMENTS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
(Unaudited) AUGUST 31, 1996
1. GENERAL INFORMATION AND SIGNIFICANT
ACCOUNTING POLICIES
At August 31, 1996, the state Funds (the "Funds") covered in this report are
Nuveen California Tax-Free Fund, Inc. (comprising the Nuveen California and
California Insured Tax-Free Value Funds), Nuveen Tax-Free Bond Fund, Inc.
(comprising the Nuveen Massachusetts, New York and Ohio Tax-Free Value Funds)
and Nuveen Insured Tax-Free Bond Fund, Inc. (comprising the Nuveen Massachusetts
and New York Insured Tax-Free Value Funds).
Additional state Funds covering other states may be established in the future.
Each Fund invests primarily in a diversified portfolio of municipal obligations
issued by state and local government authorities within its respective single
state.
The Funds are registered under the Investment Company Act of 1940 as open-end,
diversified management investment companies.
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
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board of Directors. Temporary investments in
securities that have variable rate and demand features qualifying them as short-
term securities are traded and valued at amortized cost.
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 be settled a month or more after the transaction date. Any securities so
purchased are subject to market fluctuations 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 its purchase commitments. At
August 31, 1996, there were purchase commitments in California Special and New
York Special of $14,264,059 and $3,993,255, respectively. There were no such
purchase commitments in any of the other Funds.
67
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts after month-end. Net
realized capital gains and/or market discount from investment transactions are
distributed to shareholders not less frequently than annually. Furthermore,
capital gains are distributed only to the extent they exceed available capital
loss carryovers.
Income Taxes
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 such 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 ordinary taxable income from investment
transactions, where applicable.
Insurance
Each Fund is a separate taxpayer for federal income tax purposes and intends to
comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies by distributing to shareholders 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, each Fund intends
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
respective Funds.
The California Insured, Massachusetts Insured and New York Insured Tax-Free
Value Funds invest in municipal securities which are covered by insurance or
backed by an escrow or trust account containing sufficient U.S. Government or
U.S. Government agency securities, both of which ensure the timely payment of
principal and interest. Each insured municipal security is covered by Original
Issue Insurance, Secondary Market Insurance or Portfolio Insurance. Such
insurance does not guarantee the market value of the municipal securities or the
value of the Funds' shares. Original Issue Insurance and Secondary Market
Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in
68
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
business, regardless of whether the Funds ultimately dispose of such municipal
securities. Consequently, the market value of the municipal securities covered
by Original Issue Insurance or Secondary Market Insurance may reflect value
attributable to the insurance. Portfolio Insurance is effective only while the
municipal securities are held by the Funds. Accordingly, neither the prices used
in determining the market value of the underlying municipal securities nor the
net asset value of the Funds' shares include value, if any, attributable to the
Portfolio Insurance. Each policy of the Portfolio Insurance does, however, give
the Funds the right to obtain permanent insurance with respect to the municipal
security covered by the Portfolio Insurance policy at the time of its sale.
Flexible sales Charge Program
Effective September 6, 1994, each Fund commenced offering Class "A" Shares and
Class "C" Shares. Class "A" Shares incur a front-end sales charge and an annual
12b-1 service fee. 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 contingent deferred sales charge ("CDSC'') of 1% if Class
"C" Shares are redeemed within 12 months of purchase.
Prior to the offering of Class "A" and Class "C" Shares, the shares outstanding
were renamed Class "R" and are not subject to any 12b-1 distribution or service
fees. Effective with the offering of the new classes, Class "R" Shares are
generally available only for reinvestment of dividends by current "R"
shareholders and for already established Nuveen Unit Investment Trust
reinvestment accounts.
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 are recorded to the
specific class.
Derivative Financial Instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including futures, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Funds are
authorized to invest in such financial instruments, and may do so in the future,
they did not make any such investments during the six months ended August 31,
1996, other than occasional purchase of high quality synthetic money market
securities which were held temporarily pending the reinvestment in long-term
portfolio securities, if applicable.
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
CA CA INS
- -----------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended
ended 8/31/96 2/29/96 ended 8/31/96 2/29/96
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 464,799 927,895 733,978 1,211,972
Class C 9,390 50,026 15,777 89,705
Class R 580,220 2,165,620 497,294 1,177,751
Shares issued to shareholders due to reinvestment
of distributions:
Class A 18,361 16,682 21,816 23,441
Class C 1,126 1,279 1,259 1,594
Class R 333,274 700,563 294,697 614,344
----------- ----------- ----------- -----------
1,407,170 3,862,065 1,564,821 3,118,807
----------- ----------- ----------- -----------
Shares redeemed:
Class A (47,325) (54,537) (194,933) (95,872)
Class C (5,378) (6,378) (24,615) (15,721)
Class R (1,050,886) (2,990,150) (1,130,785) (2,088,697)
----------- ----------- ----------- -----------
(1,103,589) (3,051,065) (1,350,333) (2,200,290)
----------- ----------- ----------- -----------
Net increase (decrease) 303,581 811,000 214,488 918,517
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
MA MA INS
- -----------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended
ended 8/31/96 2/29/96 ended 8/31/96 2/29/96
- -----------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 159,489 356,285 163,097 339,891
Class C 18,480 51,779 17,150 34,914
Class R 327,975 795,556 118,143 337,797
Shares issued to shareholders due to reinvestment
of distributions:
Class A 7,781 7,663 8,008 10,031
Class C 1,227 775 1,555 1,987
Class R 146,996 303,251 105,572 211,766
----------- ----------- ----------- -----------
661,948 1,515,309 413,525 936,386
----------- ----------- ----------- -----------
Shares redeemed:
Class A (27,819) (44,057) (53,729) (40,197)
Class C (3,275) (3,523) (3,314) (3,095)
Class R (567,665) (857,146) (371,006) (503,288)
----------- ----------- ----------- -----------
(598,759) (904,726) (428,049) (546,580)
----------- ----------- ----------- -----------
Net increase (decrease) 63,189 610,583 (14,524) 389,806
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NY NY INS
- ----------------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended
ended 8/31/96 2/29/96 ended 8/31/96 2/29/96
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 426,261 1,261,309 823,705 1,778,309
Class C 17,304 53,367 88,040 113,081
Class R 570,480 1,182,028 619,746 1,291,786
Shares issued to shareholders due to reinvestment of
distributions:
Class A 27,155 34,236 46,305 59,314
Class C 902 1,167 2,661 2,279
Class R 290,584 603,620 596,091 1,387,801
--------- --------- --------- ---------
1,332,686 3,135,727 2,176,548 4,632,570
--------- --------- --------- ---------
Shares redeemed:
Class A (109,684) (127,601) (242,315) (220,550)
Class C (10,537) (2,280) (2,838) (14,453)
Class R (764,056) (1,956,584) (2,002,524) (4,307,682)
--------- --------- --------- ---------
(884,277) (2,086,465) (2,247,677) (4,542,685)
--------- --------- --------- ---------
Net increase (decrease) 448,409 1,049,262 (71,129) 89,885
========= ========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
OH
- --------------------------------------------------------------------------------
Six months Year ended
ended 8/31/96 2/29/96
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold:
Class A 461,575 846,644
Class C 58,238 120,707
Class R 312,443 1,015,491
Shares issued to shareholders due to reinvestment
of distributions:
Class A 22,774 24,156
Class C 4,045 4,767
Class R 292,801 604,197
--------- ---------
1,151,876 2,615,962
--------- ---------
Shares redeemed:
Class A (91,022) (76,763)
Class C (29,520) (9,130)
Class R (820,324) (1,765,109)
--------- ---------
(940,866) (1,851,002)
--------- ---------
Net increase (decrease) 211,010 764,960
========= =========
- --------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. DISTRIBUTIONS TO SHAREHOLDERS
On September 9, 1996, the Funds declared dividend distributions from their
tax-exempt net investment income which were paid on October 1, 1996, to
shareholders of record on September 9, 1996, as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------
CA CA INS MA MA INS
- --------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $.0450 $.0440 $.0420 $.0430
Class C .0385 .0370 .0360 .0365
Class R .0475 .0460 .0440 .0450
====== ====== ====== ======
- --------------------------------------------------------
- ------------------------------------------------
NY NY INS OH
- ------------------------------------------------
Dividend per share:
Class A $.0460 $.0430 $.0450
Class C .0395 .0365 .0380
Class R .0485 .0450 .0470
====== ====== ======
</TABLE>
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended August
31, 1996, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
Investments in municipal securities $85,419,750 $59,283,685 $5,036,225 $ 955,210
Temporary municipal investments 35,400,000 26,725,000 3,400,000 2,600,000
SALES
Investments in municipal securities 70,156,907 55,088,191 2,706,776 765,000
Temporary municipal investments 33,600,000 34,025,000 5,300,000 3,000,000
=========== ========== ========= =========
- -------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NY NY INS OH
- --------------------------------------------------------------------------------
PURCHASES
Investments in municipal securities $42,461,671 $56,269,623 $21,086,235
Temporary municipal investments 7,200,000 24,800,000 9,700,000
SALES
Investments in municipal securities 30,401,456 49,566,336 19,049,220
Temporary municipal investments 10,300,000 31,800,000 10,500,000
=========== =========== ===========
- --------------------------------------------------------------------------------
</TABLE>
72
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
At August 31, 1996, 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 August 31, 1996, the Funds' last fiscal year end, the following
Funds had unused capital loss carryforwards available for federal
income tax purposes to be applied against future capital gains, if
any. If not applied, the carryovers will expire as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
CA CA INS MA MA INS
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expiration year:
1997 $ - $ - $ - $ 59,693
1999 - - - 18,885
2003 765,306 341,931 275,030 172,689
2004 - - 507,247 27,409
--------- -------- -------- --------
Total 765,306 $341,931 $782,277 $278,676
========= ======== ======== ========
- ------------------------------------------------------------------
- ---------------------------------------
OH
- ---------------------------------------
Expiration year:
1997 $ -
1999 -
2003 -
2004 237,140
---------
Total $ 237,140
=========
- ---------------------------------------
</TABLE>
73
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1996, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
Appreciation $ 8,810,811 $ 9,982,504 $ 4,334,755 $ 3,594,172
Depreciation (843,975) (507,478) (209,900) (216,815)
------------ ------------ ------------ ------------
Net unrealized appreciation $ 7,966,836 $ 9,475,026 $ 4,124,855 $ 3,377,357
- ---------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------
NY NY INS OH
- -----------------------------------------------------------------------------
Gross unrealized:
Appreciation $ 6,807,214 $ 18,582,374 $ 8,663,051
Depreciation (963,299) (1,233,457) (490,168)
------------ ------------ ------------
Net unrealized appreciation $ 5,843,915 $ 17,348,917 $ 8,172,883
- -----------------------------------------------------------------------------
</TABLE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' investment management agreements with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays to the Adviser 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>
- ------------------------------------------------------
Average daily net asset value Management fee
- ------------------------------------------------------
<S> <C>
For the first $125,000,000 .55 of 1%
For the next $125,000,000 .5375 of 1
For the next $250,000,000 .525 of 1
For the next $500,000,000 .5125 of 1
For the next $1,000,000,000 .5 of 1
For net assets over $2,000,000,000 .475 of 1
- ------------------------------------------------------
</TABLE>
The management fee is reduced by, or the Adviser assumes certain expenses of
each Fund, in an amount necessary to prevent the total expenses of each Fund
(including the management fee, but excluding interest, taxes, fees incurred in
acquiring and disposing of portfolio securities, 12b-1 Service and Distribution
fees, and to the extent permitted, extraordinary expenses) in any fiscal year
from exceeding .75 of 1% of the average daily net asset value of the California,
Massachusetts, New York and
74
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
Ohio Tax-Free Value Funds, .80 of 1% of the average daily net asset value of the
California Insured and New York Insured Tax-Free Value Funds, and .90 of 1% of
the average daily net asset value of the Massachusetts Insured Tax-Free Value
Fund.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Funds pay no
compensation directly to its directors who are affiliated with the Adviser or to
its officers, all of whom receive remuneration for their services to the Funds
from the Adviser.
7. COMPOSITION OF NET ASSETS
At August 31, 1996, each Fund had common stock authorized at $.01 par value per
share. The composition of net assets as well as the number of authorized shares
were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $221,479,459 $212,119,504 $ 77,593,003 $ 61,265,611
Balance of undistributed net investment income 182,145 185,061 34,434 6,359
Accumulated net realized gain (loss) from investment
transactions (1,591,391) (1,012,952) (883,497) (278,676)
Distributions in excess of net realized gains from
investment transactions -- -- -- --
Net unrealized appreciation of investments 7,966,836 9,475,026 4,124,855 3,377,357
------------ ------------ ------------ ------------
Net assets $228,037,049 $220,766,639 $ 80,868,795 $ 64,370,651
============ ============ ============ ============
Authorized shares:
Class A 40,000,000 40,000,000 200,000,000 200,000,000
Class C 45,000,000 45,000,000 260,000,000 240,000,000
Class R 40,000,000 40,000,000 40,000,000 60,000,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NY NY INS OH
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $166,021,360 $343,220,975 $171,884,762
Balance of undistributed net investment income 129,158 61,993 47,872
Accumulated net realized gain (loss) from investment
transactions (72,472) (1,573,503) (216,509)
Distributions in excess of net realized gains from
investment transactions -- (84,140) --
Net unrealized appreciation of investments 5,843,915 17,348,917 8,172,883
------------ ------------ ------------
Net assets $171,921,961 $358,974,242 $179,889,008
============ ============ ============
Authorized shares:
Class A 200,000,000 200,000,000 200,000,000
Class C 220,000,000 200,000,000 220,000,000
Class R 80,000,000 100,000,000 80,000,000
--------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At August 31, 1996, the revenue sources by municipal
purpose for these investments, expressed as a percent of total investments, were
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CA CA INS MA MA INS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Bonds:
Housing Facilities 14% 10% 19% 2%
Lease Rental Facilities 14 16 -- --
Health Care Facilities 16 15 15 17
Educational Facilities 15 3 14 16
Water/Sewer Facilities 5 9 1 1
Transportation 1 1 2 1
Electric Utilities 8 6 -- 3
Pollution Control -- -- 2 --
Other 16 19 1 1
General Obligation Bonds 1 4 22 39
Escrowed Bonds 10 17 24 20
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
NY NY INS OH
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Revenue Bonds:
Housing Facilities 23% 18% 4%
Lease Rental Facilities 19 4 1
Health Care Facilities 4 8 17
Educational Facilities 13 10 4
Water/Sewer Facilities 3 11 8
Transportation 1 11 4
Electric Utilities -- 1 2
Pollution Control 3 2 6
Other 8 3 1
General Obligation Bonds 13 17 38
Escrowed Bonds 13 15 15
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
76
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
Certain long-term and intermediate-term investments owned by the Funds are
covered by insurance issued by several private insurers or are backed by an
escrow or trust containing U.S. Government or U.S. Government agency securities,
either of which ensure the timely payment of principal and interest in the event
of default (42% for California, 100% for California Insured, 43% for
Massachusetts, 100% for Massachusetts Insured, 22% for New York, 100% for New
York Insured and 60% for Ohio). Such insurance or escrow, however, does not
guarantee the market value of the municipal securities or the value of the
Funds' shares.
Certain temporary investments in short-term municipal securities have credit
enhancements (letters of credit, guarantees or insurance) issued by third party
domestic or foreign banks or other institutions (99% for California, 100% for
California Insured, 100% for Massachusetts, 100% for Massachusetts Insured, 100%
for New York, N/A for New York Insured and N/A for Ohio).
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
9. OTHER MATTERS
The John Nuveen Company, parent of John Nuveen &Co. Incorporated and Nuveen
Advisory Corp., respectively the distributor and investment adviser of your
Fund, has entered into an agreement pursuant to which Nuveen will acquire
Flagship Resources Inc. and consolidate their respective mutual fund businesses.
This agreement is subject to the approval of the shareholders of the Flagship
funds. As part of the consolidation of Flagship into Nuveen, the Board of
Directors of the Nuveen Tax-Free Bond Fund has determined that it is in the best
interests of the Nuveen New York and Ohio Tax-Free Value Funds to be reorganized
and combined with Flagship's existing New York and Ohio funds after the Flagship
funds have become a part of the Nuveen Fund family. These combinations are
subject to the approval of the shareholders of both the affected Nuveen and
Flagship Funds at shareholder meetings scheduled for December, 1996.
77
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
----------------------------------------------------------------
Net
realized and Dividends from
Net asset Net unrealized gain tax-exempt Distributions Net asset Total return
value beginning investment (loss) from net investment from value end of on net asset
of period income investments** income capital gains period value+
- ---------------------------------------------------------------------------------------------------------------------------------
CA
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 $ 10.580 $ .275 $ (.238) $ (.267) $ -- $ 10.350 .38%
Year ended
2/29/96 10.100 .549++ .473 (.542) -- 10.580 10.36
9/6/94 to
2/28/95 10.210 .270++ (.031) (.275) (.074) 10.100 2.52
CLASS C
Six months ended
8/31/96 10.580 .237 (.239) (.228) -- 10.350 --
Year ended
2/29/96 10.100 .470++ .474 (.464) -- 10.580 9.53
9/16/94 to
2/28/95 10.040 .218++ .139 (.223) (.074) 10.100 3.71
CLASS R
Six months ended
8/31/96 10.600 .283 (.221) (.282) -- 10.380 .62
Year ended
2/29/96 10.130 .575 .467 (.572) -- 10.600 10.54
Year ended 2/28,
1995 10.740 .582 (.531) (.587) (.074) 10.130 .78
1994 10.850 .598 (.054) (.596) (.058) 10.740 5.08
1993 10.140 .633 .707 (.626) (.004) 10.850 13.66
8 months ended
2/29/92 9.920 .429 .218 (.427) -- 10.140 6.61
Year ended 6/30,
1991 9.790 .639 .133 (.642) -- 9.920 8.16
1990 9.850 .641 (.058) (.643) -- 9.790 6.14
1989 9.240 .649++ .610 (.649) -- 9.850 14.12
1988 9.280 .647++ (.040) (.647) -- 9.240 6.87
1987+++ 9.600 .652++ (.320) (.652) -- 9.280 3.28
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 90.
78
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
-----------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Net assets average income to average to average net income to average Portfolio
end of period net assets before net assets before assets after net assets after turnover
(in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ----------------------------------------------------------------------------------------------------------------------------------
CA
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 $ 16,953 .95%* 5.17%* .95%* 5.17%* 31%
Year ended
2/29/96 12,709 1.00 5.23 .96 5.27 36
9/6/94 to
2/28/95 3,146 1.41* 5.40* 1.00* 5.81* 32
CLASS C
Six months ended
8/31/96 723 1.70* 4.43* 1.70* 4.43* 31
Year ended
2/29/96 684 1.84 4.39 1.71 4.52 36
9/16/94 to
2/28/95 200 2.41* 4.37* 1.75* 5.03* 32
CLASS R
Six months ended
8/31/96 210,362 .70* 5.43* .70* 5.43* 31
Year ended
2/29/96 216,390 .71 5.53 .71 5.53 36
Year ended 2/28,
1995 208,080 .71 5.83 .71 5.83 32
1994 218,430 .73 5.47 .73 5.47 19
1993 183,215 .71 6.05 .71 6.05 5
8 months ended
2/29/92 133,377 .67* 6.30* .67* 6.30* --
Year ended 6/30,
1991 107,508 .69 6.48 .69 6.48 15
1990 78,704 .69 6.51 .69 6.51 8
1989 52,048 .77 6.77 .75 6.79 22
1988 29,640 .88 6.91 .70 7.09 48
1987+++ 19,094 1.19 5.61 .18 6.62 17
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
79
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------------------------------------------
Net
realized and Dividends from
Net Asset Net unrealized gain tax-exempt Distribution Net asset
value beginning investment (loss) from net investment from value end of
of period income investments** income capital gains period
- ---------------------------------------------------------------------------------------------------------------------------
CA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 $10.760 $ .271 $(.267) $(.264) $ -- $10.500
Year ended
2/29/96 10.250 .530++ .505 (.525) -- 10.760
9/6/94 to
2/28/95 10.220 .255++ .068 (.265) (.028) 10.250
CLASS C
Six months ended
8/31/96 10.670 .223 (.251) (.222) -- 10.420
Year ended
2/29/96 10.150 .448++ .516 (.444) -- 10.670
9/12/94 to
2/28/95 10.060 .210++ .123 (.215) (.028) 10.150
CLASS R
Six months ended
8/31/96 10.740 .278 (.262) (.276) -- 10.480
Year ended
2/29/96 10.230 .556 .507 (.553) -- 10.740
Year ended 2/28,
1995 10.670 .559 (.412) (.559) (.028) 10.230
1994 10.850 .560 (.101) (.556) (.083) 10.670
1993 10.010 .584 .871 (.579) (.036) 10.850
8 months ended
2/29/92 9.650 .401 .360 (.401) -- 10.010
Year ended 6/30,
1991 9.480 .600 .176 (.606) -- 9.650
1990 9.630 .608 (.151) (.607) -- 9.480
1989 9.020 .607 .610 (.607) -- 9.630
1988 8.980 .600++ .040 (.600) -- 9.020
1987+++ 9.600 .630++ (.620) (.630) -- 8.980
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
80
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of Port-
expenses to net investment expenses net investment folio
Total return Net assets average income to average to average net income to average turn-
on net asset end of period net assets before net assets before assets after net assets after over
value (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ------------------------------------------------------------------------------------------------------------------------------------
CA INS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 .07% $ 22,728 .95%* 5.02%* .95%* 5.02%* 26%
Year ended
2/29/96 10.32 17,250 .98 4.99 .97 5.00 38
9/6/94 to
2/28/95 3.33 4,753 1.24* 5.26* 1.05* 5.45* 25
CLASS C
Six months ended
8/31/96 (.24) 936 1.70* 4.28* 1.70* 4.28* 26
Year ended
2/29/96 9.67 1,040 1.74 4.23 1.71 4.26 38
9/12/94 to
2/28/95 3.45 222 2.44* 4.05* 1.80* 4.69* 25
CLASS R
Six months ended
8/31/96 .18 197,102 .70* 5.28* .70* 5.28* 26
Year ended
2/29/96 10.63 205,642 .70 5.29 .70 5.29 38
Year ended 2/28,
1995 1.68 198,928 .70 5.60 .70 5.60 25
1994 4.27 208,115 .71 5.12 .71 5.12 14
1993 15.05 168,852 .75 5.72 .75 5.72 9
8 months ended
2/29/92 7.99 100,933 .64* 5.97* .64* 5.97* 7
Year ended 6/30,
1991 8.43 74,551 .68 6.26 .68 6.26 29
1990 4.93 50,625 .70 6.36 .70 6.36 13
1989 13.97 35,032 .82 6.52 .82 6.52 23
1988 7.44 22,394 .99 6.60 .82 6.77 31
1987+++ (.13) 16,192 1.06 5.59 .17 6.48 4
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
81
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------ --------------------------------
Net
realized and Dividends from
Net asset Net unrealized gain tax-exempt Distribution Net asset
value beginning investment (loss) from net investment from value end of
of period income investments** income capital gains period
- -----------------------------------------------------------------------------------------------------------------------------------
MA
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 $9.940 $.263++ $ (.181) $(.252) $ -- $9.770
Year ended
2/29/96 9.560 .513++ .388 (.521) -- 9.940
9/6/94 to
2/28/95 9.540 .254++ .025 (.259) -- 9.560
CLASS C
Six months ended
8/31/96 9.890 .223++ (.177) (.216) -- 9.720
Year ended
2/29/96 9.510 .437++ .392 (.449) -- 9.890
10/5/94 to
2/28/95 9.280 .188++ .254 (.212) -- 9.510
CLASS R
Six months ended
8/31/96 9.910 .267++ (.173) (.264) -- 9.740
Year ended
2/29/96 9.540 .537++ .378 (.545) -- 9.910
Year ended 2/28,
1995 9.940 .541++ (.403) (.538) -- 9.540
1994 9.910 .543++ .038 (.541) (.010) 9.940
1993 9.210 .563++ .704 (.563) (.004) 9.910
3 months ended
2/29/92 9.130 .146 .077 (.143) 9.210
Year ended 11/30, --
1991 8.760 .577++ .375 (.582) -- 9.130
1990 8.900 .587++ (.144) (.583) -- 8.760
1989 8.600 .587++ .300 (.587) -- 8.900
1988 8.250 .581++ .350 (.581) -- 8.600
12/10/86 to
11/30/87 9.600 .577++ (1.350) (.577) -- 8.250
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 90.
82
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
-----------------------------------------------------------------------------------------------------------------
Ratio of Retio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net asset average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A .85% $ 5,576 1.01%* 5.20%* 1.00%* 5.21%* 3%
Six months ended
8/31/96 9.62 4,290 1.17 5.04 1.00 5.21 6
Year ended
2/29/96 3.05 1,067 1.87* 4.88* 1.00* 5.75* 17
9/6/94 to
2/28/95 .49 787 1.76* 4.45* 1.75* 4.46* 3
CLASS C
Six months ended 8.87 638 2.24 3.96 1.75 4.45 6
8/31/96
Year ended 4.86 147 3.40* 3.46* 1.75* 5.11* 17
2/29/96
10/5/94 to
2/28/95 .98 74,506 .76* 5.45* .75* 5.46* 3
CLASS R
Six months ended
8/31/96 9.80 76,773 .82 5.42 .75 5.49 6
Year ended
2/29/96 1.64 71,568 .77 5.75 .75 5.77 17
Year ended 2/28, 5.96 71,942 .81 5.32 .75 5.38 3
1995 14.21 53,231 .87 5.79 .75 5.91 5
1994
1993 2.44 34,470 .71* 6.31* .71* 6.31* 5
3 months ended
2/29/92 11.19 31,150 .77 6.37 .75 6.39 19
Year ended 11/30, 5.21 20,829 .85 6.58 .75 6.68 23
1991 10.62 15,513 1.09 6.30 .75 6.64 31
1990 11.56 9,485 1.24 6.25 .75 6.74 55
1989
1988 (8.19) 5,681 1.54* 5.30* .37* 6.47* 34
12/10/86 to
11/30/87
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
83
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
--------------------------- --------------------------------
Net
realized and Dividends from
Net asset Net unrealized gain tax-exempt Distribution Net asset
value beginning investment (loss) from net investment from value end of
of period income investments** income capital gains period
- ------------------------------------------------------------------------------------------------------------------------------------
MAINS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 $10.490 $ .261 $(.243) $(.258) $ -- $10.250
Year ended
2/29/96 10.060 .512++ .433 (.515) -- 10.490
9/6/94 to
2/28/95 10.030 .249++ .039 (.258) -- 10.060
CLASS C
Six months ended
8/31/96 10.470 .223 (.254) (.219) -- 10.220
Year ended
2/29/96 10.040 .434 .435 (.439) -- 10.470
9/14/94 to
2/28/95 9.910 .202++ .137 (.209) -- 10.040
CLASS R
Six months ended
8/31/96 10.500 .270 (.250) (.270) -- 10.250
Year ended
2/29/96 10.060 .538 .445 (.543) -- 10.500
Year ended 2/28,
1995 10.450 .545 (.386) (.549) -- 10.060
1994 10.440 .537 -- (.527) -- 10.450
1993 9.650 .551 .784 (.545) -- 10.440
Year ended
2/29/92 9.360 .570 .301 (.581) -- 9.650
Year ended 2/28,
1991 9.140 .568 .219 (.567) -- 9.360
1990 8.960 .571++ .178 (.569) -- 9.140
1989 9.030 .576++ (.070) (.576) -- 8.960
Year ended
2/29/88 9.540 .582++ (.510) (.582) -- 9.030
12/10/86 to
2/28/87 9.600 .131++ (.060) (.131) -- 9.540
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 90.
84
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
-----------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A .20% $ 6,369 1.03%* 4.99%* 1.03%* 4.99%* 1%
Six months ended
8/31/96 9.59 5,291 1.09 4.92 1.07 4.94 1
Year ended
2/29/96 2.99 1,956 1.36* 5.13* 1.15* 5.34* 10
9/6/94 to
2/28/95 (.28) 847 1.78* 4.25* 1.78* 4.25* 1
CLASS C
Six months ended 8.80 706 1.81 4.20 1.81 4.20 1
8/31/96
Year ended 3.52 338 2.07* 4.41* 1.90* 4.58* 10
2/29/96
9/14/94 to .22 57,155 .78* 5.24* .78* 5.24* 1
2/28/95
CLASS R 9.99 60,102 .81 5.21 .81 5.21 1
Six months ended
8/31/96 1.77 57,137 .79 5.54 .79 5.54 10
Year ended
2/29/96 5.22 58,255 .84 5.09 .84 5.09 3
Year ended 2/28,
1995 14.28 47,098 .86 5.47 .86 5.47 2
1994
1993 9.57 28,189 .72 5.93 .72 5.93 5
Year ended
2/29/92 8.95 15,625 .85 6.19 .85 6.19 6
Year ended 2/28,
1991 8.52 8,649 1.20 5.94 .97 6.17 15
1990
1989 5.84 5,404 1.87 5.54 .97 6.44 41
Year ended
2/29/88 1.14 4,895 1.75 5.37 .59 6.53 42
12/10/86 to
2/28/87 .75 2,312 5.18* .64* -- 5.82+ --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
85
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------------------------------------------
Net
realized and Dividends from
Net asset Net unrealized gain tax-exempt Distributions Net asset
value beginning investment (loss)from net investment from value end of
of period income investments** income capital gains period
- -----------------------------------------------------------------------------------------------------------------------------
NY
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 $10.610 $ .282 $(.246) $(.276) $ -- $10.370
Year ended
2/29/96 10.120 .555++ .487 (.552) -- 10.610
9/6/94 to
2/28/95 10.230 .277++ (.067) (.273) (.047) 10.120
CLASS C
Six months ended
8/31/96 10.640 .239 (.242) (.237) -- 10.400
Year ended
2/29/96 10.110 .478++ .528 (.476) -- 10.640
9/13/94 to
2/28/95 10.110 .231++ .038 (.222) (.047) 10.110
CLASS R
Six months ended
8/31/96 10.640 .291 (.240) (.291) -- 10.400
Year ended
2/29/96 10.150 .582++ .490 (.582) -- 10.640
Year ended 2/28,
1995 10.720 .579 (.529) (.573) (.047) 10.150
1994 10.610 .578++ .161 (.580) (.049) 10.720
1993 9.880 .603++ .806 (.596) (.081) 10.610
3 months ended
2/29/92 9.820 .163 .053 (.156) -- 9.880
Year ended 11/30,
1991 9.380 .629++ .441 (.630) -- 9.820
1990 9.560 .631++ (.181) (.630) -- 9.380
1989 9.180 .633++ .380 (.633) -- 9.560
1988 8.760 .625++ .420 (.625) -- 9.180
12/10/86 to
11/30/87 9.600 .612++ (.840) (.612) -- 8.760
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 90.
86
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
----------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ------------------------------------------------------------------------------------------------------------------------------------
NY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 .37% $ 18,942 .96%* 5.29%* .96%* 5.29%* 18%
Year ended
2/29/96 10.52 15,732 1.02 5.28 .99 5.31 47
9/6/94 to
2/28/95 2.21 3,189 1.56* 5.31* 1.00* 5.87* 29
CLASS C
Six months ended
8/31/96 (.01) 711 1.71* 4.54* 1.71* 4.54* 18
Year ended
2/29/96 10.13 646 1.99 4.29 1.73 4.55 47
9/13/94 to
2/28/95 2.80 86 7.97* (1.06)* 1.75* 5.16* 29
CLASS R
Six months ended
8/31/96 .51 152,269 .71* 5.54* .71* 5.54* 18
Year ended
2/29/96 10.80 154,776 .76 5.55 .74 5.57 47
Year ended 2/28,
1995 .75 149,454 .74 5.79 .74 5.79 29
1994 7.10 146,297 .78 5.30 .75 5.33 15
1993 14.79 107,146 .84 5.75 .75 5.84 12
3 months ended
2/29/92 2.21 66,491 .75* 6.27* .75* 6.27* 16
Year ended 11/30,
1991 11.79 59,351 .79 6.46 .75 6.50 19
1990 4.92 44,347 .81 6.59 .75 6.65 51
1989 11.34 29,040 .98 6.40 .75 6.63 85
1988 12.20 14,975 1.09 6.55 .75 6.89 71
12/10/86 to
11/30/87 (2.44) 8,239 1.38* 5.45* .37* 6.46* 20
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
87
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------- ------------------------------
Net
realized and Dividends from
Net asset Net unrealized gain tax-exempt Distributions Net asset
value beginning Investment (loss)from net investment from value end of
of period imcome investments** income capital gains period
- ----------------------------------------------------------------------------------------------------------------------------
NY INS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 $10.610 $ .266 $(.285) $(.261) $ -- $10.330
Year ended
2/29/96 10.150 .521 .492 (.524) (.029)*** 10.610
9/6/94 to
2/28/95 10.160 .253++ .037 (.260) (.040)*** 10.150
CLASS C
Six months ended
8/31/96 10.610 .226 (.284) (.222) -- 10.330
Year ended
2/29/96 10.120 .442 .524 (.447) (.029)*** 10.610
9/13/94 to
2/28/95 10.030 .207++ .133 (.210) (.040)*** 10.120
CLASS R
Six months ended
8/31/96 10.610 .273 (.280) (.273) -- 10.330
Year ended
2/29/96 10.150 .548 .495 (.554) (.029)*** 10.610
Year ended 2/28,
1995 10.630 .555 (.440) (.555) (.040)*** 10.150
1994 10.620 .550 .035 (.543) (.032) 10.630
1993 9.780 .566 .849 (.562) (.013) 10.620
Year ended
2/29/92 9.320 .590 .467 (.597) -- 9.780
Year ended 2/28,
1991 9.250 .598 .068 (.596) -- 9.320
1990 9.060 .596 .190 (.596) -- 9.250
1989 9.100 .593++ (.040) (.593) -- 9.060
Year ended
2/29/88 9.830 .606++ (.730) (.606) -- 9.100
12/10/86 to
2/28/87 9.600 .130++ .230 (.130) -- 9.830
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 90.
88
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
-------------------------------------------------------------------------------------------------------
Ratios of Ratio of Ratio of Ratio of
expenses to net investment expenses to net investment
Total return Net assets average income to average average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------------------------
NY INS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 (.15)% $ 30,575 .94%* 5.00%* .94%* 5.00%* 14%
Year ended
2/29/96 10.19 24,747 .93 4.97 .93 4.97 17
9/6/94 to
2/28/95 3.01 7,258 1.13* 5.33* 1.05* 5.41* 11
CLASS C
Six months ended
8/31/96 (.53) 2,241 1.69* 4.25* 1.69* 4.25* 14
Year ended
2/29/96 9.71 1,369 1.69 4.21 1.69 4.21 17
9/13/94 to
2/28/95 3.53 285 2.32* 4.13* 1.80* 4.65* 11
CLASS R
Six months ended
8/31/96 (.03) 326,158 .69* 5.25* .69* 5.25* 14
Year ended
2/29/96 10.51 343,348 .67 5.26 .67 5.26 17
Year ended 2/28,
1995 1.37 345,121 .65 5.57 .65 5.57 11
1994 5.57 388,176 .68 5.11 .68 5.11 5
1993 14.96 314,877 .73 5.56 .73 5.56 6
Year ended
2/29/92 11.66 167,048 .69 6.08 .69 6.08 4
Year ended 2/28,
1991 7.61 80,484 .73 6.46 .73 6.46 13
1990 8.75 40,372 .85 6.35 .85 6.35 30
1989 6.37 20,206 1.05 6.50 .97 6.58 62
Year ended
2/29/88 (.85) 14,078 1.12 6.22 .61 6.73 36
12/10/86 to
2/28/87 3.76 5,177 3.19* 1.78* -- 4.97* --
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
89
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
---------------------------------------------------------------------
Net
realized and Dividends from
Net asset Net unrealized gain tax-exempt Distributions Net asset
value beginning investment (loss) from net investment from value end of
of period income investments** income capital gains period
- -------------------------------------------------------------------------------------------------------------------------
OH
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 $10.600 $ .274 $(.264) $(.270) $ -- $10.340
Year ended
2/29/96 10.200 .538++ .404 (.542) -- 10.600
9/6/94 to
2/28/95 10.160 .266++ .087 (.272) (.041) 10.200
CLASS C
Six months ended
8/31/96 10.550 .231 (.263) (.228) -- 10.290
Year ended
2/29/96 10.160 .458++ .395 (.463) -- 10.550
9/15/94 to
2/28/95 10.070 .219++ .133 (.221) (.041) 10.160
CLASS R
Six months ended
8/31/96 10.580 .280 (.258) (.282) -- 10.320
Year ended
2/29/96 10.180 .563++ .403 (.566) -- 10.580
Year ended 2/28,
1995 10.610 .568 (.388) (.569) (.041) 10.180
1994 10.580 .570++ .087 (.565) (.062) 10.610
1993 9.870 .595++ .728 (.589) (.024) 10.580
3 months ended
2/29/92 9.770 .154 .126 (.153) (.027) 9.870
Year ended 11/30,
1991 9.530 .619 .287 (.624) (.042) 9.770
1990 9.550 .624 .003 (.624) (.023) 9.530
1989 9.040 .629++ .510 (.629) -- 9.550
1988 8.610 .626++ .430 (.626) -- 9.040
12/10/86 to
11/30/87 9.600 .600++ (.990) (.600) -- 8.610
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Net of taxes, if applicable (note 1).
*** The amounts shown include distributions in excess of capital gains of
$.0024 per share for the year ended 2/29/96 and $.0015 per share for the
period ended 2/28/95.
+ Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gains distributions, if any, and changes in net
asset value per share. The total returns shown for Class A Shares do not
include the effect of applicable front-end sales charges. The total returns
shown for Class C Shares do not include the effect of applicable contingent
deferred sales charges. Class R Shares are not subject to any front-end or
contingent deferred sales charges.
++ Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser, if applicable (note 6).
+++ Shares in the California and California Insured Funds were first offered
for sale on 7/1/86.
90
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of Port-
expenses to net investment expenses net investment folio
Total return Net assets average income to average to average net income to average turn-
on net asset end of period net assets before net assets before assets after net assets after over
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ----------------------------------------------------------------------------------------------------------------------------------
OH
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
8/31/96 .12% $ 16,654 .97%* 5.13%* .97%* 5.13%* 11%
Year ended
2/29/96 9.43 12,904 1.03 5.08 .98 5.13 33
9/6/94 to
2/28/95 3.63 4,320 1.27* 5.40* 1.00* 5.67* 28
CLASS C
Six months ended
8/31/96 (.29) 2,448 1.72* 4.38* 1.72* 4.38* 11
Year ended
2/29/96 8.55 2,163 1.75 4.36 1.73 4.38 33
9/15/94 to
2/28/95 3.63 901 2.09* 4.58* 1.75* 4.92* 28
CLASS R
Six months ended
8/31/96 .23 160,787 .72* 5.39* .72* 5.39* 11
Year ended
2/29/96 9.70 167,092 .76 5.38 .74 5.40 33
Year ended 2/28,
1995 1.99 162,231 .73 5.70 .73 5.70 28
1994 6.30 167,448 .75 5.28 .75 5.28 9
1993 13.88 133,797 .84 5.77 .75 5.86 13
3 months ended
2/29/92 2.87 90,121 .70* 6.16* .70* 6.16* 3
Year ended 11/30,
1991 9.84 81,649 .71 6.37 .71 6.37 16
1990 6.86 56,887 .74 6.61 .74 6.61 38
1989 12.97 37,714 .82 6.59 .75 6.66 66
1988 12.56 20,144 .98 6.71 .75 6.94 55
12/10/86 to
11/30/87 (4.10) 9,135 1.33* 5.59* .39* 6.53* 26
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
91
<PAGE>
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
[PHOTO APPEARS HERE]
Your
investment
partners
Since 1898, John Nuveen & Co. Incorporated has worked to bring together the
various participants in the municipal bond industry and build strong
partnerships that benefit all concerned. Investors, financial advisers,
municipal officials, investment bankers--Nuveen believes that forging
relationships within these groups based on trust and value is the key to
successful investing.
As the oldest and largest municipal bond specialist in the United States,
Nuveen's investment bankers work with issuers to understand and meet their needs
in structuring and selling their bond issues.
Nuveen also works closely with financial advisers around the country,
including brokerage firms, banks, insurance companies, and independent financial
planners, to bring the benefits of tax-free investing to you. These advisers are
experts at identifying your needs and recommending the best solutions for your
situation. Together we make a powerful team, helping you create a successful
investment plan that meets your needs today and in the future.
[LOGO OF NUVEEN]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286 VSA-2-8.96
[RECYCLE LOGO]
<PAGE>
Nuveen Tax-Free [PHOTO APPEARS HERE]
Mutual Funds
Dependable tax-free
income for generations
CALIFORNIA
CALIFORNIA INSURED
MASSACHUSETTS
MASSACHUSETTS INSURED
NEW YORK
NEW YORK INSURED
OHIO
ANNUAL REPORT/FEBRUARY 29, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
9 Fund performance
16 Report of independent public accountants
17 Portfolio of investments
58 Statement of net assets
60 Statement of operations
62 Statement of changes in net assets
66 Notes to financial statements
82 Financial highlights
<PAGE>
Dear
shareholder
Since the beginning of the recovery in early 1995, we've enjoyed a welcome
rebound in the bond markets--a sharp contrast to 1994, which was one of the most
volatile periods in bond market history. In fact, 1995 unfolded as one of the
best years for bonds in a decade, as the bond market responded to a climate of
slowing economic growth and diminished inflationary pressure.
The changing profile of the bond markets over the past two years reminds us
that weathering the ups and downs of the markets is a normal part of the
investment process. By maintaining a long-term perspective on your investments,
you can minimize the impact of short-term fluctuations and keep the focus on
achieving your goals. Municipal bond funds continue to play an integral role in
helping investors reach those goals, offering the attractive tax-free income and
solid total returns that they seek.
Over the past year, we have kept our sights focused on successfully meeting
your fund's objectives. As of February 29, 1996, the current annual SEC yield on
offering price for R shares for the mutual funds covered in this report ranged
from 4.21% to 4.99%. To match these yields, an investor in the 36% federal
income tax bracket would have had to earn between 6.58% to 7.80% on taxable
alternatives. The effect of state taxes further enhances the after-tax yield
advantage provided by municipal bonds.
[PHOTO OF RICHARD J. FRANKE APPEARS HERE]
"Over time,
municipal bonds
have proven to
be a valuable
and dependable
component of
successful invest-
ment programs."
3
<PAGE>
Reflecting the rebound in the bond markets, each of these funds reported gains
in portfolio value since February 28, 1995. The 12-month total returns on net
asset value for R Shares, reflecting portfolio gains plus reinvested dividend
income and capital gains distributions, if any, ranged from 9.70% to 10.80%,
which translate to 13.66% to 14.81% on a taxable-equivalent basis. This strong
performance rewarded investors who weathered the volatility of 1994, and reminds
us again of the importance of municipal bonds to a well-rounded, long-term
investment plan.
As some of you may know, on June 30, 1996, I will be retiring as the Chairman
and Chief Executive Officer of John Nuveen & Co. Incorporated and as Chairman of
the Board of the Nuveen Funds. As I look back over the 41 years I have spent at
Nuveen, I'm proud to have been associated with a firm that holds integrity,
honesty, and value as the cornerstones of its business. I'm confident that these
traditions will continue to be the hallmarks of Nuveen.
Over the past few years, I have been working closely with other Nuveen
managers to ensure that the company and the funds continue to be guided by
strong and talented management following my retirement. Timothy Schwertfeger,
who has been with Nuveen since 1977, will succeed me as Chief Executive Officer
and Chairman of Nuveen. He currently serves as Executive Vice President of
Nuveen and President of the Nuveen Funds. I am very confident in his abilities
and the abilities of the entire Nuveen management team.
The management transition has been well planned, and it will have no effect on
portfolio management or the way dividends are set. Our management team is
committed to continuing Nuveen's successful tradition of value investing and
prudent management, helping our shareholders meet their need for tax-free
investment income with a full range of investment choices.
Our focus will continue to be on building shareholder value, providing
research-oriented management, and maintaining our leadership role in the
municipal bond market. With this focus, we anticipate many more years of
accomplishment for our shareholders and our firm.
I'd like to take this occasion to thank you for selecting Nuveen mutual fund
investments.
Sincerely,
/s/ Richard J. Franke
Richard J. Franke
Chairman of the Board
April 15, 1996
4
<PAGE>
Answering your
questions
Tom Spalding, head of Nuveen's portfolio management team, discusses factors
affecting the municipal market and efforts made to provide value for
shareholders.
How did the investment climate over the past year affect municipal bonds?
In 1995, the combination of slow economic growth and low inflation created the
ideal environment for the bond markets, which responded with a sustained rally.
Citing the lack of significant inflation, the Federal Reserve Board moved to cut
interest rates in July and December 1995, and again at the end of January 1996.
This succession of rate cuts helped to bring down long-term municipal bond
yields by almost 130 basis points over the year and to increase net asset
values. The rebound of the municipal bond market was not as great as that of the
taxable market due to the much-publicized discussion of major tax reform
legislation and concern about its potential impact on tax-free investments. Yet,
in 1995, most Nuveen mutual funds enjoyed taxable-equivalent total returns of
14% or better.
5
<PAGE>
[PHOTO OF TOM SPALDING APPEARS HERE]
Tom Spalding, head of Nuveen's portfolio management team, answers investors'
questions on developments in the municipal market.
What was Nuveen's approach to investing during this period?
During 1995, we continued to pursue our philosophy of value investing, a
disciplined approach designed to deliver above-market performance by emphasizing
securities that offer good intrinsic value and that are underpriced or
undervalued by the market. This approach has been rewarded over the past year,
as we saw many of our portfolio holdings upgraded by the ratings agencies,
confirming our Research Department's judgments about credit quality. We also
moved to protect current income by investing more of our portfolio in non-
callable bonds when possible. These bonds are less likely to be redeemed before
maturity so that their yield is assured for the long term in the event of
falling interest rates. As is our policy, we continue to invest only in
investment-grade quality securities.
Has Nuveen made any major investment changes over the past year?
No. In the search for income and total return, our value investing approach
continues to concentrate on individual bonds with current yields, prices, credit
quality, and future prospects that are exceptionally attractive relative to
other bonds in the market. Because attractive issues may appear any time over
the course of the year, we are constantly vigilant for new opportunities, with
the goal of ensuring that the funds are always positioned to meet their
objectives: as high a level of current tax-free income as is consistent with
preservation of capital. This means that our analysts continuously assess
investment
6
<PAGE>
possibilities across the entire spectrum of geographical and sector
opportunities nationwide. Currently, we favor revenue bonds for essential
services, such as those issued by water and sewer facilities and utilities,
especially public power authorities providing electricity at competitive rates.
We have reduced our positions in general obligation bonds issued by counties and
cities, which have suffered financial strains as the result of spending cuts at
the state and federal levels.
What does Nuveen see as the impact of the flat tax proposals on the municipal
market?
Because of the implications for tax-free investments such as municipal bonds and
bond funds, we have been closely monitoring the various flat tax proposals
currently being debated in Congress. While the presidential primaries
spotlighted the debate, it is important to note that none of the proposals
currently under discussion has gained a strong consensus. In addition,
implementation of any measure that manages to pass both houses is at least two
years away. As the election year progresses, focus seems to be shifting from tax
reform to other economic matters. However, the high profile discussion--and the
attendant concern about the potential impact of tax reform on tax-free
investments--did affect the market for municipal bonds in 1995, causing these
bonds to underperform their taxable counterparts for the year.
7
<PAGE>
Given the low likelihood that the tax preference on municipal bonds will be
eliminated or dramatically reduced in the near future, Nuveen believes that it
is inadvisable to manage our funds toward one specific outcome. Instead, we will
continue to follow our value investing philosophy as the optimal way to pursue
our investors' objectives. In our view, this approach offers investors greater
price stability in the event of volatile markets. Once the tax issue is
resolved, we're confident that municipal bonds--because of their high credit
quality and attractive yields--will continue to hold a strategic place in the
prudent investor's portfolio. We will continue to monitor developments in the
tax debate as well as changes in other economic and political conditions while
keeping our focus on achieving the objectives of your fund.
What is Nuveen's market outlook for 1996?
Although inflation currently remains low and economic growth remains moderate,
we continue to watch these factors for potential changes and impact on the bond
market. During this election year, we are also closely monitoring any changes in
economic and tax policy that may affect the municipal market. The fundamentals
in the long term are sound, with the supply of municipal bonds down from past
years, and with a growing number of individual investors seeking to diversify
their portfolios and to increase their tax-free income.
8
<PAGE>
NUVEEN CALIFORNIA
TAX-FREE VALUE FUND
California
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen California Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 6/86 6/87 6/88 6/89 6/90 6/91 6/92 6/93 6/94 6/95 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $21,255 10,000 10,838 11,590 12,849 13,663 14,826 16,500 18,393 18,357 19,898 21,255
Lehman Brothers Municipal Bond
Index-Total $22,127 10,000 10,862 11,668 12,996 13,881 15,131 16,913 18,935 18,968 20,641 22,127
Nuveen CA Tax-Free Value
Fund-Total $19,538 9,525 9,838 10,513 11,998 12,735 13,775 15,317 17,049 16,801 18,155 19,538
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 10.54% 7.77% 7.72%
A Shares on NAV 10.36% N/A 8.69%
A Shares on offering price** 5.39% N/A 5.36%
C Shares on NAV 9.53% N/A 9.17%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.65 cents per share for Class R Shares
translated into a distribution yield of 5.26% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 42%
combined state and federal income tax bracket would have to earn 9.07% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.99% on February 29, 1996, translated
into 8.60% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.64% from a year ago. The average annual total return on NAV for
this class was 10.54%, which translated into a taxable-equivalent total return
of 14.73%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
9
<PAGE>
NUVEEN CALIFORNIA INSURED
TAX-FREE VALUE FUND
California Insured
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen California
Insured Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 6/86 6/87 6/88 6/89 6/90 6/91 6/92 6/93 6/94 6/95 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $21,255 10,000 10,838 11,590 12,849 13,663 14,826 16,500 18,393 18,357 19,898 21,255
Lehman Brothers Municipal Bond
Index-Total $22,127 10,000 10,862 11,668 12,996 13,881 15,131 16,913 18,935 18,968 20,641 22,127
Nuveen CA Insured Tax-Free Value
Fund-Total $19,313 9,525 9,513 10,220 11,648 12,223 13,252 14,929 16,752 16,501 17,911 19,313
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 10.63% 8.20% 7.59%
A Shares on NAV 10.32% N/A 9.24%
A Shares on offering price** 5.35% N/A 5.89%
C Shares on NAV 9.67% N/A 8.99%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.60 cents per share for Class R Shares
translated into a distribution yield of 5.14% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 42%
combined state and federal income tax bracket would have to earn 8.86% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.93% on February 29, 1996, translated
into 8.50% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.99% from a year ago. The average annual total return on NAV for
this class was 10.63%, which translated into a taxable-equivalent total return
of 14.64%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
10
<PAGE>
NUVEEN MASSACHUSETTS
TAX-FREE VALUE FUND
Massachusetts
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen Massachusetts
Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,316 10,000 9,973 10,980 12,127 12,997 14,247 15,587 17,219 16,236 19,316
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen MA Tax-Free Value
Fund-Total $17,466 9,525 8,745 9,756 10,793 11,355 12,626 13,969 15,603 14,627 17,466
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 9.80% 8.32% 6.82%
A Shares on NAV 9.62% N/A 8.57%
A Shares on offering price** 4.69% N/A 5.25%
C Shares on NAV 8.87% N/A 9.91%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.50 cents per share for Class R Shares
translated into a distribution yield of 5.45% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 43.5%
combined state and federal income tax bracket would have to earn 9.65% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.61% on February 29, 1996, translated
into 8.16% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 3.88% from a year ago. The average annual total return on NAV for
this class was 9.80%, which translated into a taxable-equivalent total return of
14.31%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
11
<PAGE>
NUVEEN MASSACHUSETTS INSURED
TAX-FREE VALUE FUND
Massachusetts Insured
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen Massachusetts
Insured Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,316 10,000 9,973 10,980 12,127 12,997 14,247 15,587 17,219 16,236 19,316
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen MA Insured Tax-Free Value
Fund-Total $17,911 9,525 8,940 10,086 11,109 11,793 12,976 14,284 15,940 14,959 17,911
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 9.99% 8.08% 7.11%
A Shares on NAV 9.59% N/A 8.51%
A Shares on offering price** 4.65% N/A 5.19%
C Shares on NAV 8.80% N/A 8.49%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.50 cents per share for Class R Shares
translated into a distribution yield of 5.14% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 43.5%
combined state and federal income tax bracket would have to earn 9.10% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.21% on February 29, 1996, translated
into 7.45% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.37% from a year ago. The average annual total return on NAV for
this class was 9.99%, which translated into a taxable-equivalent total return of
14.24%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
12
<PAGE>
NUVEEN NEW YORK
TAX-FREE VALUE FUND
New York
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen New York Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,581 10,000 9,972 10,985 12,143 13,027 14,309 15,687 17,362 16,400 19,581
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen NY Tax-Free Value
Fund-Total $19,096 9,525 9,293 10,427 11,609 12,181 13,617 15,070 16,944 15,747 19,096
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 10.80% 8.97% 7.86%
A Shares on NAV 10.52% N/A 8.58%
A Shares on offering price** 5.55% N/A 5.25%
C Shares on NAV 10.13% N/A 8.86%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.85 cents per share for Class R Shares
translated into a distribution yield of 5.47% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 40.5%
combined state and federal income tax bracket would have to earn 9.19% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.75% on February 29, 1996, translated
into 7.98% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.83% from a year ago. The average annual total return on NAV for
this class was 10.80%, which translated into a taxable-equivalent total return
of 14.81%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
13
<PAGE>
NUVEEN NEW YORK INSURED
TAX-FREE VALUE FUND
New York Insured
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen New York Insured
Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,581 10,000 9,972 10,985 12,143 13,028 14,311 15,689 17,367 16,405 19,590
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen NY Insured Tax-Free Value
Fund-Total $18,516 9,525 9,025 10,152 11,263 11,888 13,254 14,634 16,468 15,284 18,516
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares 10.51% 8.70% 7.50%
A Shares 10.19% N/A 8.93%
A Shares on offering price** 5.23% N/A 5.59%
C Shares 9.71% N/A 9.10%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.60 cents per share for Class R Shares
translated into a distribution yield of 5.20% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 40.5%
combined state and federal income tax bracket would have to earn 8.74% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.39% on February 29, 1996, translated
into 7.38% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.53% from a year ago. The average annual total return on NAV for
this class was 10.51%, which translated into a taxable-equivalent total return
of 14.32%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued on or after
September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
14
<PAGE>
NUVEEN OHIO
TAX-FREE VALUE FUND
Ohio
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen Ohio Tax-Free
Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,751 10,000 9,974 11,002 12,176 13,076 14,376 15,774 17,475 16,518 19,751
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen OH Tax-Free Value
Fund-Total $18,992 9,525 9,135 10,281 11,615 12,411 13,632 15,035 16,923 15,861 18,992
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 5 years Since inception+
- -------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 9.70% 8.34% 7.80%
A Shares on NAV 9.44% N/A 8.86%
A Shares on offering price** 4.51% N/A 5.53%
C Shares on NAV 8.55% N/A 8.41%
- -------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.70 cents per share for Class R Shares
translated into a distribution yield of 5.33% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 41%
combined state and federal income tax bracket would have to earn 9.03% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.51% on February 29, 1996, translated
into 7.64% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 3.93% from a year ago. The average annual total return on NAV for
this class was 9.70%, which translated into a taxable-equivalent total return of
13.66%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
15
<PAGE>
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Nuveen California Tax-Free Fund, Inc.
Nuveen Tax-Free Bond Fund, Inc.
Nuveen Insured Tax-Free Bond Fund, Inc.
We have audited the accompanying statements of net assets of NUVEEN CALIFORNIA
TAX-FREE FUND, INC. (comprising the Nuveen California and California Insured
Tax-Free Value Funds) (a Maryland corporation), NUVEEN TAX-FREE BOND FUND, INC.
(comprising the Nuveen Massachusetts, New York and Ohio Tax-Free Value Funds)
and NUVEEN INSURED TAX-FREE BOND FUND, INC. (comprising the Nuveen Massachusetts
and New York Insured Tax-Free Value Funds) (both Minnesota corporations),
including the portfolios of investments, as of February 29, 1996, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996, 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 other 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 each of the
respective funds constituting the Nuveen California Tax-Free Fund, Inc., Nuveen
Tax-Free Bond Fund, Inc. and Nuveen Insured Tax-Free Bond Fund, Inc., as of
February 29, 1996, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for the periods indicated thereon in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 8, 1996
16
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN CALIFORNIA TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,150,000 California Educational Facilities Authority
(University of Southern California),
7.200%, 10/01/15 10/97 at 102 Aa $ 3,350,340
California Health Facilities Financing Authority
(Small Facilities Pooled Loan Program):
3,000,000 7.400%, 4/01/14 4/05 at 102 A 3,408,600
3,635,000 7.500%, 4/01/22 4/05 at 102 A 4,155,641
1,700,000 California Health Facilities Authority (Sutter Health
System), 7.00%, 1/01/09 1/99 at 102 A1 1,829,846
2,000,000 California Health Facilities Financing Authority
(Health Dimensions, Inc.), 7.500%, 5/01/15
(Pre-refunded to 5/01/00) 5/00 at 102 Ba 2,291,120
2,000,000 California Health Facilities Financing Authority
(Sisters of Providence), 7.500%, 10/01/10 10/00 at 102 AA- 2,308,540
3,380,000 California Health Facilities Financing Authority
(Kaiser Permanente), 7.000%, 12/01/10 12/00 at 102 Aa3 3,764,036
2,425,000 California Housing Finance Agency, Home
Mortgage, 8.100%, 8/01/16 8/96 at 102 Aa 2,504,104
4,000,000 California Housing Finance Agency,
5.900%, 8/01/17 2/06 at 102 Aaa 4,023,600
California Public Works Board (California State
University Project),
8,470,000 6.700% 10/01/17 10/02 at 102 A 9,278,970
5,000,000 5.500%, 12/01/18 12/03 at 102 A 4,790,000
1,060,000 California State Public Works Board, High
Technology Facilities Lease (The Regents of
the University of California-San Diego Facility),
7.375%, 4/01/06 No Opt. Call A1 1,143,062
2,250,000 California State Public Works Board (Department of
Corrections-State Prisons-Susanville),
5.375%, 6/01/18 6/02 at 102 A1 2,140,538
2,500,000 California Statewide Communities Development
Corporation (Solheim Lutheran Home),
Certificates of Participation, 6.500%, 11/01/17 11/04 at 102 A 2,598,200
3,000,000 California Statewide Communities Development
Authority (St. Joseph Health System),
Certificates of Participation, 6.500%, 7/01/15 7/04 at 102 Aa 3,237,570
1,500,000 ABAG Finance Authority for Nonprofit
Corporations (Channing House), Certificates of
Participation, 7.125%, 1/01/21 1/01 at 102 A 1,626,915
2,035,000 Bella Vista Water District, Certificates of
Participation, 7.375%, 10/01/17 10/01 at 102 Baa 2,168,801
7,000,000 Brea Redevelopment Agency, Tax Allocation,
5.500%, 8/01/17 8/03 at 102 Aaa 6,865,880
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Carson Redevelopment Agency Tax Allocation:
$ 1,000,000 6.000%, 10/01/13 10/03 at 102 Baa $ 999,400
2,000,000 6.000%, 10/01/16 10/03 at 102 Baa1 1,961,680
2,000,000 Chico Redevelopment Agency, Certificates of
Participation (Sierra Sunrise Lodge),
6.750%, 2/01/21 2/01 at 102 A 2,098,240
6,500,000 Contra Costa County, FHA Insured Mortgage (Cedar
Pointe Apartments), 6.150%, 9/01/25 9/03 at 103 AAA 6,600,425
2,000,000 Desert Hospital District, Certificates of Participation,
8.100%, 7/01/20 (Pre-refunded to 7/01/00) 7/00 at 102 AAA 2,347,540
3,200,000 Desert Sands Unified School District Certificates of
Participation, 5.750%, 3/01/20 3/05 at 102 Aaa 3,232,480
East Bay Municipal Utility District, Water System:
1,950,000 7.500%, 6/01/18 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 2,238,308
4,000,000 6.375%, 6/01/21 (Pre-refunded to 12/01/01) 12/01 at 102 Aaa 4,501,200
2,500,000 Fontana Public Financing Authority, Tax Allocation
(North Fontana Redevelopment Project),
7.250%, 9/01/20 9/00 at 102 A 2,694,600
3,000,000 Fresno Health Facilities, Refunding Bonds (Holy
Cross Health Systems Corporation),
5.625%, 12/01/15 12/03 at 102 Aaa 2,978,490
2,475,000 Loma Linda University Medical Center,
6.000%, 12/01/06 12/03 at 102 BBB 2,553,086
5,000,000 Los Angeles Community Redevelopment Agency,
Multi-Family Housing (Angelus Plaza),
7.400%, 6/15/10 6/05 at 105 AAA 5,586,850
3,505,000 Los Angeles Harbor, 7.600%, 10/01/18 10/98 at 102 AAA 3,930,157
255,000 Los Angeles Home Mortgage (GNMA),
8.100%, 5/01/17 No Opt. Call Aaa 273,472
2,400,000 Los Angeles State Building Authority,
7.500%, 3/01/11 (Pre-refunded to 3/01/98) 3/98 at 102 AAA 2,621,184
4,595,000 Los Angeles County Public Works Finance Authority
(Los Angeles County Regional Park and Open
Space), 6.125%, 10/01/10 10/04 at 102 Aa 4,895,099
195,000 Los Angeles County, Single Family Mortgage,
(GNMA), 8.000%, 3/01/17 No Opt. Call Aaa 208,001
2,000,000 Los Angeles County Transportation Commission,
Sales Tax, 7.400%, 7/01/15 7/99 at 102 AA- 2,221,160
Los Angeles County Transportation Commission:
2,300,000 6.250%, 7/01/13 7/02 at 102 Aaa 2,449,523
4,445,000 6.000%, 7/01/23 7/02 at 102 Aaa 4,614,221
1,260,000 Marysville Community Development Agency,
Tax Allocation, 7.250%, 3/01/21 3/02 at 102 Baa 1,352,484
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 740,000 Menlo Park Community Development Agency,
FHA Insured, Multi-Family Housing,
8.250%, 12/01/28 6/97 at 103 Aa $ 784,444
875,000 Monterey Hospital Revenue, 7.375%, 7/01/14 7/96 at 102 A+ 901,556
2,165,000 Napa County, Certificates of Participation,
5.250%, 5/15/13 5/03 at 102 A1 2,059,998
1,500,000 North City West School Facilities Authority,
Community Facilities District No. 1,
7.850%, 9/01/19 (Pre-refunded to 9/01/99) 9/99 at 102 N/R 1,715,385
2,950,000 Northern California Power Agency,
7.150%, 7/01/24 7/98 at 102 A 3,182,726
Northridge Water District, Certificates of
Participation:
1,780,000 5.250%, 2/01/14 2/06 at 102 Aaa 1,709,031
1,105,000 5.250%, 2/01/18 2/06 at 102 Aaa 1,051,783
2,120,000 Ontario Assessment District No. 100C,
Limited Obligation, 8.000%, 9/02/11 3/96 at 103 N/R 2,197,783
3,270,000 Palmdale Elementary School District,
5.400%, 8/01/25 8/05 at 102 Aaa 3,182,953
2,920,000 Rancho Mirage Redevelopment Agency, Tax
Allocation, 5.500%, 4/01/29 4/04 at 102 A 2,658,514
1,450,000 Redding Joint Powers Financing Authority,
6.250%, 6/01/23 6/03 at 102 A 1,439,502
Riverside Multi-Family Housing:
3,285,000 6.500%, 1/01/18 7/02 at 100 AAA 3,377,177
4,005,000 6.500%, 1/01/18 7/02 at 100 AAA 4,117,380
Sacramento Area Flood Control Agency, Capital
Assessment District 2:
3,000,000 5.375%, 10/01/15 10/05 at 102 Aaa 2,948,160
3,000,000 5.375%, 10/01/25 10/05 at 102 Aaa 2,904,930
205,000 Sacramento Municipal Utility District,
Subordinated Electric Revenue,
8.000%, 11/15/10 No Opt. Call Baa1 205,642
4,000,000 Sacramento Municipal Utility District,
7.875%, 8/15/16 (Pre-refunded to 8/15/98) 8/98 at 102 Aaa 4,461,400
2,315,000 Salinas Tax Allocation, 7.400%, 9/02/09 3/96 at 103 N/R 2,407,762
2,080,000 Salinas, (Villa Sierra-GNMA), 6.500%, 7/20/17 7/04 at 102 AAA 2,162,659
4,000,000 San Bernadino, Certificates of Participation,
5.500%, 8/01/15 8/05 at 102 Aaa 3,931,920
10,240,000 San Francisco Airports Commission,
6.100%, 5/01/25 5/04 at 101 Aaa 10,710,733
5,000,000 San Francisco City and County Redevelopment
Financing Authority, Tax Allocation,
5.125%, 8/01/18 8/03 at 103 A 4,535,700
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,070,000 San Leandro, Certificates of Participation,
5.900%, 6/01/13 6/03 at 102 A $ 3,083,784
1,000,000 San Mateo County Board of Education,
Certificates of Participation, 7.100%, 5/01/21 5/99 at 102 A+ 1,063,180
Santa Barbara, Certificates of Participation
(Fact Retirement Services):
1,750,000 5.850%, 8/01/15 8/06 at 102 A 1,738,870
2,975,000 5.750%, 8/01/20 8/06 at 102 A 2,911,841
3,000,000 Santa Cruz Housing Authority, Multi-Family
Housing, FNMA, 7.750%, 7/01/23 7/00 at 102 AAA 3,225,660
2,000,000 Sonoma County Office of Education, Certificates
of Participation, 7.375%, 7/01/20
(Pre-refunded to 7/01/00) 7/00 at 102 A+ 2,283,580
Southern California Public Power Authority:
4,760,000 7.000%, 7/01/22 7/96 at 102 1/2 Aa 4,924,172
740,000 5.500%, 7/01/23 7/96 at 100 Aa 719,058
2,825,000 Stockton Hospitals (St. Joseph Hospital),
6.700%, 6/01/15 12/98 at 100 A 2,912,745
3,000,000 Thousand Oaks Redevelopment Agency,Tax
Allocation, 5.375%, 12/01/25 12/05 at 102 Aaa 2,904,600
1,100,000 Tulare County, Certificates of Participation,
6.875%, 11/15/12 11/02 at 102 Baa1 1,157,519
University of California (UCLA Center Chiller/
Cogeneration), Certificates of Participation:
3,500,000 5.600%, 11/01/20 11/03 at 102 Aa 3,379,530
4,335,000 6.000%, 11/01/21 11/03 at 102 Aa 4,431,886
3,335,000 University of California Research Facilities,
5.800%, 9/01/23 9/01 at 102 A- 3,296,580
4,000,000 Walnut Creek (John Muir Medical Center),
Certificates of Participation, 5.000%, 2/15/16 2/04 at 102 Aaa 3,715,920
- ---------------------------------------------------------------------------------------------------------------------------
$ 218,080,000 Total Investments - (Cost $214,125,831) - 98.5% 226,239,426
==============-------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 0.2%
$ 400,000 California Pollution Control Finance Authority
============== (Shell Oil Company), Variable Rate Demand
Bonds, 3.150%, 11/01/00+ VMIG-1 400,000
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 3,143,863
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 229,783,289
===========================================================================================================================
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 29 $102,875,637 45%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 12 36,519,939 16
PORTFOLIO OF A+ A1 7 11,421,760 5
INVESTMENTS A, A-- A, A2, A3 17 56,411,428 25
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 7 10,398,612 5
TEMPORARY BB+, BB, BB-- Ba1, Ba, Ba2, Ba3 1 2,291,120 1
INVESTMENTS): Non-rated Non-rated 3 6,320,930 3
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 76 $226,239,426 100%
===========================================================================================================================
</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.
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.
21
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA INSURED TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 California Education Facilities Authority
(Pepperdine University), 7,200%, 11/01/15
(Pre-refunded to 11/01/00) 11/00 at 102 Aaa $ 1,143,840
6,000,000 California Health Facilities Authority (Kaiser
Permanente), 5.450%, 10/01/13 10/01 at 101 Aa3 5,798,880
6,340,000 California Housing Finance Agency,
6.850%, 8/01/23 2/02 at 102 Aaa 6,663,213
240,000 California Public Capital Improvement Finance
Authority (Pooled Projects), 8.100%, 3/01/18 3/98 at 102 Aaa 258,067
5,000,000 California Public Works Board, Department of
Corrections--State Prisons, 7.000%, 9/01/09
(Pre-refunded to 9/01/00) 9/00 at 102 Aaa 5,672,050
8,500,000 California Statewide Community Development
Authority (Sutter Health), 6.125%, 8/15/22 8/02 at 102 Aaa 8,899,245
9,000,000 California Statewide Communities Development
Authority (Sutter Health), Certificates of
Participation, 5.500%, 8/15/13 8/03 at 102 Aaa 8,979,750
1,225,000 Barstow Redevelopment Agency, Tax Allocation,
7.000%, 9/01/14 No Opt. Call Aaa 1,463,005
7,005,000 Big Bear Lake Financing Authority,
6.300%, 8/01/25 8/05 at 102 Aaa 7,488,415
7,000,000 Big Bear Lake Water System, 6.375%, 4/01/22 4/02 at 102 Aaa 7,468,090
3,525,000 Brea Public Financing Authority, Tax Allocation,
7.000%, 8/01/15 (Pre-refunded to 8/01/01) 8/01 at 102 Aaa 4,053,433
2,000,000 Burbank Wastewater System, 5.500%, 6/01/25 6/05 at 102 Aaa 1,961,320
3,000,000 Calaveras County Water District, Certificates of
Participation, 6.900%, 5/01/16 (Pre-refunded to
5/01/01) 5/01 at 102 Aaa 3,419,730
2,000,000 Castaic Lake Water Agency, Certificates of
Participation, 7.125%, 8/01/16 (Pre-refunded
to 8/01/00) 8/00 at 102 Aaa 2,274,900
7,000,000 Chino Unified School District, Certificates of
Participation, 6.125%, 9/01/26 9/05 at 102 Aaa 7,366,310
850,000 Concord Redevelopment Agency, Tax Allocation
(Central Concord Project), 7.875%, 7/01/07 7/98 at 102 Aaa 931,549
500,000 Cotati-Rohnert Park Unified School District,
9.000%, 8/01/06 8/99 at 102 Aaa 579,100
4,050,000 Cucamonga County Water District, Certificates of
Participation, 5.450%, 9/01/23 3/04 at 102 Aaa 3,918,375
2,000,000 East Bay Municipal Utility District, Water System,
7.500%, 6/01/18 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 2,295,700
2,000,000 Eastern Municipal Water District, Water and
Sewer, Certificates of Participation,
6.500%, 7/01/20 (Pre-refunded to 7/01/01) 7/01 at 102 Aaa 2,248,840
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,865,000 Fallbrook Sanitary District, Certificates
of Participation, 6.600%, 2/01/13 2/01 at 100 Aaa $ 4,158,701
2,500,000 Fontana Public Financing Authority, Tax
Allocation (North Fontana Redevelopment
Project), 7.000%, 9/01/10 9/00 at 102 Aaa 2,781,850
3,000,000 Gilroy Unified School District, Certificates of
Participation, 6.250%, 9/01/12 9/04 at 102 Aaa 3,208,620
7,000,000 Glendale Memorial Hospital and Health Center,
5.600%, 11/15/25 11/05 at 102 AAA 6,778,030
1,000,000 LaQuinta Redevelopment Agency, Tax
Allocation, 7.300%, 9/01/12 No Opt. Call Aaa 1,235,200
5,000,000 Lancaster Redevelopment Agency, Tax
Allocation, 5.800%, 8/01/23 8/03 at 102 Aaa 5,070,350
5,000,000 Los Angeles Community Redevelopment Agency,
Multi-Family Housing (Angelus Plaza),
7.400%, 6/15/10 6/05 at 105 AAA 5,586,850
2,000,000 Los Angeles Convention and Exhibition Center,
Certificates of Participation, 7.000%, 8/15/21
(Pre-refunded to 8/15/00) 8/00 at 102 Aaa 2,266,720
Los Angeles Department of Water and Power:
5,000,000 5.400%, 11/15/31 11/03 at 102 Aa 4,739,000
6,000,000 5.400%, 11/15/31 11/03 at 102 Aaa 5,739,300
260,000 Los Angeles Home Mortgage (GNMA),
8.100%, 5/01/17 No Opt. Call Aaa 278,834
Los Angeles Wastewater System:
800,000 5.700% 6/01/20 6/03 at 102 Aaa 800,208
5,000,000 5.700% 6/01/23 6/03 at 102 Aaa 5,019,100
5,000,000 Los Angeles County Transportation Commission,
6.250%, 7/01/13 7/02 at 102 Aaa 5,325,050
Modesto Irrigation District Financing Authority,
Domestic Water Project:
4,500,000 6.125%, 9/01/19 9/02 at 102 Aaa 4,721,715
5,750,000 5.500%, 9/01/22 9/02 at 100 Aaa 5,636,035
2,500,000 Mt. Diablo Hospital District, 8.000%, 12/01/11
(Pre-refunded to 12/01/00) 12/00 at 102 Aaa 2,957,175
2,000,000 Mt. Diablo Unified School District, Special Tax,
7.050%, 8/01/20 8/00 at 102 Aaa 2,227,960
Napa FHA-Insured (Creekside Apartments):
2,555,000 6.625%, 7/01/24 7/02 at 102 Aaa 2,661,722
2,000,000 6.625%, 7/01/25 7/04 at 101 Aaa 2,091,080
7,040,000 Norwalk Community Facilities Financing
Authority, Tax Allocation, 6.050%, 9/01/25 9/05 at 102 Aaa 7,395,379
2,500,000 Oakland Pension Financing, 7.600%, 8/01/21 8/98 at 102 Aaa 2,730,725
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA INSURED TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,250,000 Palm Desert Redevelopment Agency,
Tax Allocation, 7.400%, 5/01/09 5/97 at 101 Aaa $ 1,306,575
2,000,000 Pittsburgh Redevelopment Agency
(Los Medanos Community Project),
Tax Allocation, 7.150%, 8/01/21 8/01 at 103 Aaa 2,330,180
1,500,000 Port of Oakland, 7.250%, 11/01/16 5/97 at 102 Aaa 1,580,160
1,270,000 Rancho Cucamonga Redevelopment Agency,
Tax Allocation, 7.125%, 9/01/19
(Pre-refunded to 9/01/99) 9/99 at 102 Aaa 1,422,502
Riverside County Desert Justice Facility
Corporation, Certificates of Participation:
3,600,000 6.000%, 12/01/17 12/04 at 101 Aaa 3,738,276
2,500,000 6.250%, 12/01/21 12/04 at 101 Aaa 2,638,875
3,000,000 Sacramento Municipal Utility District, Electric
System, 6.500%, 9/01/21
(Pre-refunded to 9/01/01) 9/01 at 102 Aaa 3,382,170
4,240,000 Saddleback Unified School District Public
Financing Authority, 5.650%, 9/01/17 9/05 at 102 Aaa 4,221,683
6,030,000 San Bernardino Certificates of Participation,
5.500%, 8/01/15 8/05 at 102 Aaa 5,927,369
2,500,000 San Bernardino County Transportation
Authority, Sales Tax, 6.000%, 3/01/10 3/02 at 102 Aaa 2,623,775
2,000,000 San Diego Regional Building Authority
(San Miguel Fire Protection District),
7.250%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 2,258,800
San Francisco City and County Redevelopment
Agency (George R. Moscone Convention Center):
2,250,000 6.800%, 7/01/19 7/04 at 102 Aaa 2,532,443
1,000,000 6.750%, 7/01/24 7/04 at 102 Aaa 1,122,180
2,250,000 San Jose Redevelopment Agency, Tax Allocation,
4.750%, 8/01/24 2/04 at 102 Aaa 1,989,630
2,000,000 San Marcos Public Facilities Authority, Tax
Allocation, 5.500%, 8/01/23 8/03 at 102 Aaa 1,962,420
4,750,000 Southern California Public Power Authority,
5.000%, 7/01/22 7/03 at 100 Aaa 4,350,383
2,000,000 Southern California Rapid Transit Finance
Authority, Certificates of Participation,
7.500%, 7/01/05 1/01 at 102 1/2 Aaa 2,275,880
3,040,000 Sulphur Springs Union School District,
0.000%, 9/01/15 No Opt. Call Aaa 1,021,501
125,000 Thousand Oaks Redevelopment Agency,
Single Family Mortgage, 7.900%, 1/01/16 1/97 at 102 Aaa 129,780
5,250,000 Tracy Area Public Facilities Financing Agency,
5.500%, 10/01/21 (WI) 10/06 at 102 Aaa 5,078,378
- ---------------------------------------------------------------------------------------------------------------------------
$ 211,060,000 Total Investments - (Cost $203,867,092) - 97.4% 218,186,376
==============-------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 3.5%
$ 1,000,000 California Health Facilities Financing Authority
(St. Joseph Health System), Series A,
Variable Rate Demand Bonds,
3.150%, 7/01/13+ VMIG-1 $ 1,000,000
500,000 California Health Facilities Financing Authority
(St. Joseph Health System) Series B,
Variable Rate Demand Bonds,
3.100%, 7/01/13+ VMIG-1 500,000
700,000 California Health Facilities Financing Authority
(St. Joseph Health System), Series 1991 B,
Variable Rate Demand Bonds,
3.100%, 7/01/09+ VMIG-1 700,000
3,200,000 California Statewide Communities Development
Authority (St. Joseph Health System), Certificates
of Participation, Variable Rate Demand Bonds,
3.100%, 7/01/24+ VMIG-1 3,200,000
California Pollution Control Finance Authority
(Shell Oil Company), Variable Rate
Demand Bonds:
800,000 3.150%, 10/01/07+ VMIG-1 800,000
200,000 3.150%, 10/01/11+ VMIG-1 200,000
1,500,000 Santa Ana Health Facilities Authority
(Town and Country),
Variable Rate Demand Bonds,
3.250%, 10/01/20+ A-1 1,500,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 7,900,000 Total Temporary Investments - 3.5% 7,900,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.9)% (2,153,889)
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 223,932,487
===========================================================================================================================
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA INSURED TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 60 $207,648,496 95%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 2 10,537,880 5
PORTFOLIO OF
INVESTMENTS
(EXCLUDING
TEMPORARY
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 62 $218,186,376 100%
===========================================================================================================================
</TABLE>
All of the bonds in the portfolio, excluding temporary investments in short-term
municipal securities, are either covered by Original Issue Insurance, Secondary
Market Insurance or Portfolio Insurance, or are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government agency securities, any
of which ensure the timely payment of principal and interest.
* 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. (WI) Security purchased
on a when-issued basis (note 1).
+ 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.
26
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts General Obligation,
$ 165,000 7.250%, 3/01/09 (Pre-refunded to 3/01/00) 3/00 at 102 Aaa $ 186,302
715,000 5.500%, 2/01/11 2/03 at 102 A 720,734
Massachusetts Bay Transportation Authority:
250,000 7.750%, 3/01/10 (Pre-refunded to 3/01/98) 3/98 at 102 Aaa 273,940
1,000,000 7.000%, 3/01/11 (Pre-refunded to 3/01/01) 3/01 at 102 Aaa 1,137,570
250,000 Massachusetts Bay Transportation Authority,
Certificates of Participation, 7.800%, 1/15/14 12/06 at 100 BBB 291,145
160,000 Massachusetts Educational Loan Authority,
7.875%, 6/01/03 6/97 at 102 AAA 170,426
1,345,000 Massachusetts Health and Educational Facilities
Authority (Emerson Hospital),
8.000%, 7/01/18 (Pre-refunded to 7/01/00) 7/00 at 102 N/R 1,560,577
250,000 Massachusetts Health and Educational Facilities
Authority (Mount Auburn Hospital),
7.875%, 7/01/18 (Pre-refunded to 7/01/98) 7/98 at 102 Aaa 277,333
350,000 Massachusetts Health and Educational Facilities
Authority (Salem Hospital), 7.250%, 7/01/09
(Pre-refunded to 7/01/97) 7/97 at 100 Aaa 366,951
500,000 Massachusetts Health and Educational Facilities
Authority (Cardinal Cushing General Hospital),
8.875%, 7/01/18 7/99 at 102 1/2 N/R 542,560
Massachusetts Health and Educational Facilities
Authority (Suffolk University):
1,180,000 8.125%, 7/01/20 (Pre-refunded to 7/01/00) 7/00 at 101 1/2 Baa 1,362,393
1,000,000 6.350%, 7/01/22 7/02 at 102 AAA 1,046,960
500,000 Massachusetts Health and Educational Facilities
Authority (Newton-Wellesley Hospital),
8.000%, 7/01/18 7/98 at 102 Aaa 556,050
500,000 Massachusetts Health and Educational Facilities
Authority, FHA-Insured (St. Elizabeth's
Hospital of Boston), 7.750%, 8/01/27
(Pre-refunded to 8/01/97) 8/97 at 102 Aaa 538,510
750,000 Massachusetts Health and Educational Facilities
Authority, (Baystate Medical Center),
7.500%, 7/01/20 (Pre-refunded to 7/01/99) 7/99 at 102 A+ 836,115
1,000,000 Massachusetts Health and Educational Facilities
Authority (Boston College), 6.625%, 7/01/21 7/01 at 102 Aaa 1,096,280
500,000 Massachusetts Health and Educational Facilities
Authority (Worcester Polytechnic Institute),
6.625%, 9/01/17 9/02 at 102 A+ 541,300
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 495,000 Massachusetts Health and Educational Facilities
Authority (Brockton Hospital),
8.000%, 7/01/07 7/97 at 102 A $ 521,992
250,000 Massachusetts Health and Educational Facilities
Authority (University Hospital),
7.250%, 7/01/10 7/00 at 102 Aaa 278,668
750,000 Massachusetts Health and Educational Facilities
Authority (New England Medical Center),
6.625%, 7/01/25 7/02 at 102 Aaa 831,825
1,750,000 Massachusetts Health and Educational Facilities
Authority (New England Deaconess Hospital),
6.875%, 4/01/22 4/02 at 102 A 1,849,750
1,000,000 Massachusetts Health and Educational Facilities
Authority (Metrowest Health),
6.500%, 11/15/18 11/02 at 102 A 986,450
885,000 Massachusetts Health and Educational Facilities
Authority (Cable Housing and Health Services),
5.625%, 7/01/13 7/03 at 102 Aaa 893,239
Massachusetts Health and Educational Facilities
Authority (Lahey Clinic Medical Center):
1,000,000 5.625%, 7/01/15 7/03 at 102 Aaa 989,460
2,000,000 5.375%, 7/01/23 7/03 at 102 Aaa 1,911,660
700,000 Massachusetts Health and Educational Facilities
Authority (Daughters of Charity),
6.100%, 7/01/14 7/04 at 102 Aa 719,103
Massachusetts Health and Educational Facilities
Authority (Youville Hospital):
2,500,000 6.000%, 2/15/25 2/04 at 102 Aa 2,534,525
2,000,000 6.000%, 2/15/34 2/04 at 102 Aa 2,012,600
1,950,000 Massachusetts Housing Finance Agency,
Housing Project, 6.375%, 4/01/21 4/03 at 102 A1 1,967,921
Massachusetts Housing Finance Agency,
Residential Development:
1,000,000 6.250%, 11/15/14 11/02 at 102 Aaa 1,026,200
1,000,000 6.875%, 11/15/21 5/02 at 102 Aaa 1,049,350
Massachusetts Housing Finance Agency, Single
Family Housing:
500,000 7.350%, 12/01/16 6/01 at 102 Aa 533,245
1,250,000 7.700%, 6/01/17 6/98 at 102 Aa 1,333,513
1,440,000 Massachusetts Industrial Finance Agency,
Pollution Control (Eastern Edison),
5.875%, 8/01/08 8/03 at 102 Baa2 1,434,154
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 975,000 Massachusetts Industrial Finance Authority
(Malden Public Library Project),
7.250%, 1/01/15 1/05 at 102 Aaa $ 1,141,550
1,000,000 Massachusetts Industrial Finance Agency
(Semass Project), 9.000%, 7/01/15 7/01 at 103 N/R 1,098,090
250,000 Massachusetts Industrial Finance Agency
(College of the Holy Cross), 6.450%, 1/01/12 1/02 at 102 A1 267,743
475,000 Massachusetts Industrial Finance Agency (Sturdy
Memorial Hospital), 7.900%, 6/01/09 6/99 at 102 BBB+ 513,428
500,000 Massachusetts Industrial Finance Agency
(Springfield College), 7.800%, 10/01/09 10/99 at 103 A 575,375
1,380,000 Massachusetts Industrial Finance Agency
(Merrimack College), 7.125%, 7/01/12 7/02 at 102 BBB- 1,483,845
1,600,000 Massachusetts Industrial Finance Agency
(Phillips Academy), 5.375%, 9/01/23 9/08 at 102 Aa1 1,550,864
500,000 Massachusetts Industrial Finance Agency
(Whitehead Institute for Biomedical Research),
5.125%, 7/01/26 7/03 at 102 Aa 458,355
2,290,000 Massachusetts Industrial Finance Agency
(Lesley College), 6.300%, 7/01/25 7/05 at 102 AAA 2,412,194
1,750,000 Massachusetts Industrial Finance Agency (Harvard
Community Health), 8.125%, 10/01/17 10/98 at 102 A 1,907,605
1,000,000 Massachusetts Municipal Wholesale
Electric Company, 5.000%, 7/01/17 7/04 at 102 Aaa 932,230
Massachusetts Port Authority:
500,000 7.125%, 7/01/12 7/98 at 100 Aa 506,290
635,000 13.000%, 7/01/13 No Opt. Call Aaa 1,099,839
Massachusetts Turnpike Authority:
500,000 5.000%, 1/01/13 1/03 at 100 A1 470,905
1,000,000 5.125%, 1/01/23 1/03 at 102 Aaa 933,710
Attleboro General Obligation:
450,000 6.250%, 1/15/10 1/03 at 102 Baa1 475,362
450,000 6.250%, 1/15/11 1/03 at 102 Baa1 472,131
Barnstable General Obligation:
880,000 5.750%, 9/15/13 9/04 at 102 Aa 904,842
490,000 5.750%, 9/15/14 9/04 at 102 Aa 501,853
Boston General Obligation:
250,000 7.700%, 2/01/09 (Pre-refunded to 2/01/99) 2/99 at 102 A 279,715
1,000,000 6.750%, 7/01/11 7/01 at 102 Aaa 1,132,660
1,500,000 Boston City Hospital, FHA Insured Mortgage,
7.625%, 2/15/21 (Pre-refunded to 8/15/00) 8/00 at 102 Aaa 1,713,420
Boston Water and Sewer Commission:
180,000 7.875%, 11/01/13 (Pre-refunded to 11/01/96) 11/96 at 102 A 188,901
320,000 7.875%, 11/01/13 11/96 at 102 A 335,120
500,000 7.000%, 11/01/18 (Pre-refunded to 11/01/01) 11/01 at 102 Aaa 575,675
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 Boston-Mount Pleasant Housing
Development Corporation, Multi-Family
Housing, 6.750%, 8/01/23 8/02 at 102 AAA $1,042,250
1,000,000 Dartmouth Housing Development Corporation
Multi-Family Housing, 7.375%, 7/01/24 1/98 at 103 AAA 1,043,270
Deerfield General Obligation:
420,000 6.200%, 6/15/09 6/02 at 102 A1 459,136
415,000 6.250%, 6/15/10 6/02 at 102 A1 452,176
525,000 Haverhill General Obligation, 7.500%, 10/15/11 10/01 at 102 Baa 580,099
Holyoke General Obligation:
685,000 8.000%, 6/01/01 No Opt. Call Baa 743,636
250,000 8.150%, 6/15/06 6/02 at 103 Aaa 302,635
750,000 7.000%, 11/01/08 11/02 at 102 Baa 840,615
500,000 7.650%, 8/01/09 8/01 at 102 Baa 560,110
Lowell General Obligation:
545,000 8.300%, 2/15/05 No Opt. Call Baa1 654,164
445,000 8.400%, 1/15/09 (Pre-refunded to 1/15/01) 1/01 at 102 Aaa 531,277
1,000,000 Lynn General Obligation, 7.850%, 1/15/11
(Pre-refunded to 1/15/02) 1/02 at 104 Aaa 1,209,040
500,000 Monson General Obligation School Project,
7.700%, 10/15/10 (Pre-refunded to 10/15/00) 10/00 at 102 Aaa 581,585
Palmer General Obligation:
500,000 7.700%, 10/01/10 (Pre-refunded to 10/01/00) 10/00 at 102 Aaa 581,045
500,000 5.500%, 10/01/10 10/03 at 102 Aaa 512,135
1,130,000 Peabody General Obligation, 6.950%, 8/01/09 8/00 at 100 Aaa 1,245,362
550,000 Quincy Hospital, FHA-Insured, 7.875%, 1/15/16 7/96 at 102 AAA 570,295
250,000 Sandwich General Obligation,
7.100%, 11/01/07 (Pre-refunded to 11/01/98) 11/98 at 102 1/2 Aaa 276,613
1,250,000 Somerville Housing Authority (GNMA),
7.950%, 11/20/30 5/00 at 102 AAA 1,343,074
425,000 South Essex Sewerage District, General
Obligation, 9.000%, 12/01/00 No Opt. Call A 508,622
250,000 Southeastern Massachusetts University
Building Authority, 7.800%, 5/01/16
(Pre-refunded to 5/01/96) 5/96 at 102 A 256,847
1,000,000 Springfield General Obligation, 7.100%, 9/01/11 9/02 at 102 Baa 1,099,700
Taunton General Obligation:
1,465,000 8.000%, 2/01/02 No Opt. Call A 1,727,234
1,005,000 8.000%, 2/01/03 No Opt. Call A 1,204,240
250,000 University of Lowell Building Authority,
7.400%, 11/01/07 11/97 at 102 A 269,634
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 University of Massachusetts Building Authority,
7.500%, 5/01/14 5/98 at 102 A $ 546,740
1,000,000 Worcester General Obligation, 6.000%, 8/01/04 8/02 at 102 BBB+ 1,070,840
1,000,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 1,111,000
2,250,000 Puerto Rico Electric Power Authority,
7.000%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 Aaa 2,584,394
- ---------------------------------------------------------------------------------------------------------------------------
$ 72,620,000 Total Investments (Cost $72,713,663) - 95.7% 78,218,271
===============------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 3.2%
$ 2,600,000 Massachusetts Dedicated Income Tax Variable Rate
Demand Bonds, 3.350%, 12/01/97+ VMIG-1 2,600,000
===============------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 882,885
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 81,701,156
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 39 $35,505,977 46%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 10 11,055,190 14
PORTFOLIO OF A+ A1 7 4,995,296 6
INVESTMENTS A, A-- A, A2, A3 15 11,878,959 15
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 14 11,581,622 15
TEMPORARY Non-rated Non-rated 3 3,201,227 4
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 88 $78,218,271 100%
===========================================================================================================================
</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.
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.
31
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts General Obligation:
$ 500,000 6.500%, 6/01/08 6/02 at 101 Aaa $ 548,990
250,000 7.250%, 3/01/09 (Pre-refunded to 3/01/00) 3/00 at 102 Aaa 282,275
1,200,000 6.000%, 6/01/13 6/02 at 100 Aaa 1,237,356
Massachusetts Bay Transportation Authority,
General Transportation System:
250,000 7.250%, 3/01/03 3/00 at 102 Aaa 278,590
250,000 7.100%, 3/01/13 (Pre-refunded to 3/01/99) 3/99 at 102 Aaa 276,333
1,000,000 5.750%, 3/01/22 3/02 at 100 Aaa 1,004,780
250,000 Massachusetts Bay Transportation Authority,
Certificates of Participation, 7.650%, 8/01/15
(Pre-refunded to 8/01/00) 8/00 at 102 Aaa 288,848
750,000 Massachusetts College Building Authority,
7.250%, 5/01/16 5/96 at 102 Aaa 769,958
450,000 Massachusetts Health and Educational Facilities
Authority (St. Luke's Hospital of New Bedford),
7.750%, 7/01/13 (Pre-refunded to 7/01/97) 7/97 at 102 Aaa 483,300
Massachusetts Health and Educational Facilities
Authority (South Shore Hospital):
200,000 8.125%, 7/01/17 (Pre-refunded to 7/01/97) 7/97 at 102 Aaa 215,772
250,000 7.500%, 7/01/20 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 286,783
1,000,000 6.500%, 7/01/22 7/02 at 102 Aaa 1,096,030
300,000 Massachusetts Health and Educational Facilities
Authority (Mount Auburn Hospital),
7.875%, 7/01/18 (Pre-refunded to 7/01/98) 7/98 at 102 Aaa 332,799
Massachusetts Health and Educational Facilities
Authority (Lahey Clinic Medical Center):
750,000 7.600%, 7/01/08 (Pre-refunded to 7/01/98) 7/98 at 102 Aaa 827,423
1,700,000 5.625%, 7/01/15 7/03 at 102 Aaa 1,682,082
2,500,000 5.375%, 7/01/23 7/03 at 102 Aaa 2,389,575
800,000 Massachusetts Health and Educational Facilities
Authority (Berkshire Health Systems),
7.600%, 10/01/14 (Pre-refunded to 10/01/98) 10/98 at 102 Aaa 889,392
750,000 Massachusetts Health and Educational Facilities
Authority (Salem Hospital), 7.250%, 7/01/09
(Pre-refunded to 7/01/97) 7/97 at 100 Aaa 786,323
250,000 Massachusetts Health and Educational Facilities
Authority (Capital Asset Program),
7.200%, 7/01/09 7/99 at 102 Aaa 274,795
500,000 Massachusetts Health and Educational Facilities
Authority (University Hospital), 7.250%, 7/01/19 7/00 at 102 Aaa 556,920
250,000 Massachusetts Health and Educational Facilities
Authority (Newton-Wellesley Hospital),
8.000%, 7/01/18 7/98 at 102 Aaa 278,025
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts Health and Educational Facilities
Authority (Northeastern University):
$ 250,000 7.600%, 10/01/10 10/98 at 102 Aaa $ 274,570
1,600,000 6.550%, 10/01/22 10/02 at 102 Aaa 1,762,208
500,000 Massachusetts Health and Educational Facilities
Authority (Baystate Medical Center),
7.500%, 7/01/20 (Pre-refunded to 7/01/99) 7/99 at 102 A+ 557,410
500,000 Massachusetts Health and Educational Facilities
Authority (Stonehill College), 7.700%, 7/01/20
(Pre-refunded to 7/01/00) 7/00 at 102 Aaa 577,495
1,000,000 Massachusetts Health and Educational Facilities
Authority (Boston College), 6.625%, 7/01/21 7/01 at 102 Aaa 1,096,280
500,000 Massachusetts Health and Educational Facilities
Authority (Berklee College of Music),
6.875%, 10/01/21 10/01 at 102 Aaa 559,940
1,000,000 Massachusetts Health and Educational Facilities
Authority (Brigham and Women's Hospital),
6.750%, 7/01/24 7/01 at 102 Aa 1,053,890
250,000 Massachusetts Health and Educational Facilities
Authority (Beverly Hospital), 7.300%, 7/01/19
(Pre-refunded to 7/01/99) 7/99 at 102 Aaa 279,658
1,500,000 Massachusetts Health and Educational Facilities
Authority (New England Medical Center),
6.625%, 7/01/25 7/02 at 102 Aaa 1,663,650
1,450,000 Massachusetts Health and Educational Facilities
Authority (Boston University), 6.000%, 10/01/22 10/02 at 100 Aaa 1,494,776
2,000,000 Massachusetts Health and Educational Facilities
Authority (Bentley College), 6.125%, 7/01/17 7/02 at 102 Aaa 2,096,840
350,000 Massachusetts Housing Finance Agency,
7.600%, 12/01/16 12/99 at 103 Aaa 372,257
Massachusetts Housing Finance Agency, Single
Family Housing:
500,000 7.350%, 12/01/16 6/01 at 102 Aa 533,245
250,000 7.700%, 6/01/17 6/98 at 102 Aa 266,703
1,590,000 Massachusetts Industrial Finance Authority (Malden
Public Library Project), 7.250%, 1/01/15 1/05 at 102 Aaa 1,861,604
500,000 Massachusetts Industrial Finance Agency,
(Brandeis University), 6.800%, 10/01/19 10/99 at 102 Aaa 548,405
200,000 Massachusetts Industrial Finance Agency
(Harvard Community Health Plan),
7.750%, 10/01/08 10/98 at 102 Aaa 219,918
250,000 Massachusetts Industrial Finance Agency,
(Milton Academy), 7.250%, 9/01/19
(Pre-refunded to 9/01/99) 9/99 at 102 Aaa 280,420
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 375,000 Massachusetts Industrial Finance Agency
(Museum of Science), 7.300%, 11/01/09
(Pre-refunded to 11/01/99) 11/99 at 102 Aaa $ 422,918
1,000,000 Massachusetts Industrial Finance Agency
(Mount Holyoke College), 6.300%, 7/01/13 7/01 at 102 Aaa 1,065,590
420,000 Massachusetts Industrial Finance Agency
(Babson College), 5.800%, 10/01/10 10/05 at 102 Aaa 441,521
2,000,000 Massachusetts Municipal Wholesale Electric
Company, 5.000%, 7/01/10 7/03 at 102 Aaa 1,937,200
1,000,000 Massachusetts Port Authority, 13.000%, 7/01/13 No Opt. Call Aaa 1,732,030
1,000,000 Massachusetts Turnpike Authority, 5.125%, 1/01/23 1/03 at 102 Aaa 933,710
1,000,000 Boston General Obligation, 6.750%, 7/01/11 7/01 at 102 Aaa 1,132,660
500,000 Boston City Hospital (FHA-Insured Mortgage),
7.625%, 2/15/21 (Pre-refunded to 8/15/00) 8/00 at 102 Aaa 571,140
Boston Water and Sewer Commission:
500,000 7.250%, 11/01/06 11/98 at 100 Aaa 537,015
500,000 7.000%, 11/01/18 (Pre-refunded to 11/01/01) 11/01 at 102 Aaa 575,675
500,000 Fall River General Obligation, 7.200%, 6/01/10 6/01 at 102 Aaa 566,775
250,000 Town of Groveland Unlimited Tax, 6.900%, 6/15/07 6/01 at 102 Aaa 280,090
1,000,000 Haverhill General Obligation, 6.700%, 9/01/10 9/01 at 102 Aaa 1,107,140
250,000 Holyoke General Obligation, 8.150%, 6/15/06 6/02 at 103 Aaa 302,635
450,000 Leominster General Obligation, 7.500%, 4/01/09 4/00 at 102 Aaa 513,194
2,625,000 Lowell General Obligation, 5.600%, 11/01/12 11/03 at 102 Aaa 2,652,116
1,025,000 Lynn General Obligation, 6.750%, 1/15/02 No Opt. Call Aaa 1,146,534
250,000 Lynn Water and Sewer Commission,
7.250%, 12/01/10 (Pre-refunded to 12/01/00) 12/00 at 102 Aaa 286,875
1,000,000 Mansfield General Obligation, 6.700%, 1/15/11 1/02 at 102 Aaa 1,108,920
250,000 Methuen General Obligation, 7.400%, 5/15/04 5/00 at 102 Aaa 281,088
500,000 Monson General Obligation School Project,
7.700%, 10/15/10 (Pre-refunded to 10/15/00) 10/00 at 102 Aaa 581,585
1,500,000 Monson General Obligation, 5.500%, 10/15/10 No Opt. Call Aaa 1,557,300
300,000 North Andover General Obligation, 7.400%, 9/15/10 9/00 at 103 Aaa 342,006
North Middlesex Region School District,
General Obligation:
270,000 7.200%, 6/15/08 6/00 at 103 Aaa 304,223
245,000 7.200%, 6/15/09 6/00 at 103 Aaa 276,054
250,000 Northampton General Obligation, 5.300%, 3/01/10 3/03 at 102 Aaa 250,475
190,000 Northfield General Obligation, 6.350%, 10/15/09 10/01 at 102 Aaa 204,389
Palmer General Obligation:
270,000 7.300%, 3/01/10 (Pre-refunded to 3/01/00) 3/00 at 102 Aaa 305,348
250,000 7.700%, 10/01/10 (Pre-refunded to 10/01/00) 10/00 at 102 Aaa 290,523
1,000,000 5.500%, 10/01/10 10/03 at 102 Aaa 1,024,270
440,000 Quaboag Regional School District, General
Obligation, 6.250%, 6/15/08 6/02 at 102 Aaa 475,424
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salem General Obligation:
$ 500,000 6.800%, 8/15/09 8/01 at 102 Aaa $ 555,885
900,000 6.000%, 7/15/10 7/02 at 102 Aaa 954,288
250,000 Sandwich General Obligation, 7.100%, 11/01/07
(Pre-refunded to 11/01/98) 11/98 at 102 1/2 Aaa 276,613
Southern Berkshire Regional School District,
General Obligation:
515,000 7.500%, 4/15/07 (Pre-refunded to 4/15/02) 4/02 at 102 Aaa 608,400
1,145,000 7.000%, 4/15/11 4/02 at 102 Aaa 1,319,326
250,000 Springfield Geneal Obligation, 7.000%, 11/01/07 11/98 at 103 Aaa 273,643
220,000 Taunton General Obligation, 6.800%, 9/01/09 9/01 at 103 Aaa 246,435
455,000 Wareham School Project General Obligation,
7.050%, 1/15/07 1/01 at 103 Aaa 513,148
250,000 Westfield General Obligation, 7.100%, 12/15/08
(Pre-refunded to 12/15/00) 12/00 at 102 Aaa 285,497
215,000 Whately General Obligation, 6.350%, 1/15/09 1/02 at 102 Aaa 232,540
1,210,000 Winchendon General Obligation, 6.050%, 3/15/10 3/03 at 102 Aaa 1,296,500
160,000 Worcester General Obligation, 6.900% 5/15/07 5/02 at 102 Aaa 184,150
1,000,000 Puerto Rico Commonwealth, General Obligation,
5.750%, 7/01/24 7/05 at 101 1/2 Aaa 1,016,160
2,290,000 Puerto Rico Industrial Medical and Environmental
Authority, 6.250%, 7/01/16 1/05 at 102 Aaa 2,460,580
- ---------------------------------------------------------------------------------------------------------------------------
$ 58,810,000 Total Investments - (Cost $58,764,889) - 96.4% 63,715,206
==============-------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-
TERM MUNICIPAL SECURITIES - 2.3%
$ 1,200,000 Massachusetts Dedicated Income Tax, Variable
Rate Demand Bonds, 3.350%, 12/01/97+ VMIG-1 1,200,000
300,000 Massachusetts Industrial Finance Agency (Showa
Women's Institute Boston), Variable Rate
Demand Bonds, 3.600%, 3/15/04+ VMIG-1 300,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 1,500,000 Total Temporary Investments - 2.3% 1,500,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 884,502
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 66,099,708
===========================================================================================================================
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 80 $61,303,958 96%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 3 1,853,838 3
PORTFOLIO OF A+ A1 1 557,410 1
INVESTMENTS
(EXCLUDING
TEMPORARY
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 84 $63,715,206 100%
===========================================================================================================================
</TABLE>
All of the bonds in the portfolio, exluding temporary investments in short-term
municipal securities, are either covered by Original Issue Insurance,
Secondary Market Insurance or Portfolio Insurance, or are backed by an escrow or
trust containing sufficient U.S. Government or U.S. Government
agency securities, any of which ensure the timely payment of principal and
interest.
* 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.
+ 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.
36
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN NEW YORK TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 4,000,000 New York Local Government Assistance Corporation,
5.500%, 4/01/21 4/03 at 102 A $ 3,844,720
500,000 New York State (Commissioner of Office of Mental
Health), Certificates of Participation,
8.300%, 9/01/12 9/97 at 102 Baal 536,065
3,000,000 New York State Energy Research and Development
Authority, 6.100%, 8/15/20 7/05 at 102 A1 3,106,530
1,545,000 New York State Environmental Facilities Corporation
(State Park Infrastructure), 5.750%, 3/15/13 3/03 at 101 Baal 1,535,823
3,000,000 New York State General Obligation,
5.625%, 10/01/20 10/05 at 101 A 3,004,890
200,000 New York State Housing Finance Agency, State
University Construction, 8.000%, 5/01/11 No Opt. Calls Aaa 255,060
1,650,000 New York State Housing Finance Agency, Insured
Multi-Family Mortgage Housing,
6.950%, 8/15/12 8/02 at 102 Aa 1,770,104
2,000,000 New York State Housing Finance Agency, Health
Facilities (New York City), 8.000%, 11/01/08 11/00 at 102 BBB+ 2,257,780
New York State Housing Finance Agency, Service
Contract Obligation:
500,000 6.125%, 3/15/20 9/03 at 102 Baal 511,215
3,750,000 5.500%, 9/15/22 9/03 at 102 Baal 3,528,450
3,000,000 6.500%, 3/15/25 9/05 at 102 Baal 3,170,940
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, Insured
Mortgage (St. Vincent's Hospital),
8.000%, 2/15/27 (Pre-refunded to 8/15/97) 8/97 at 102 Aaa 1,065,830
995,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, Insured
Mortgage (Albany Medical Center),
8.000%, 2/15/28 8/98 at 102 AAA 1,085,396
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home,
FHA-Insured, 7.350%, 2/15/29 8/99 at 102 Aa 1,083,640
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-Insured
(Buffalo General Hospital), 7.700%, 2/15/22
(Pre-refunded to 8/15/98) 8/98 at 102 AAA 1,111,020
1,250,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured (Catholic Medical Center),
8.300%, 2/15/22 (Pre-refunded to 2/15/98) 2/98 at 102 AAA 1,381,725
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,250,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Columbia-Presbyterian),
8.000%, 2/15/25 (Pre-refunded to 8/15/97) 8/97 at 102 Aaa $ 2,430,315
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Mental Health Services):
1,460,000 7.500%, 2/15/21 2/01 at 102 AAA 1,696,038
2,000,000 5.500%, 8/15/21 2/02 at 100 AAA 1,947,860
1,500,000 6.500%, 8/15/24 8/04 at 102 Baal 1,583,250
2,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
FHA-Insured, 6.200%, 8/15/22 8/02 at 102 AAA 2,087,460
1,520,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured (Bayley Seton/St. Joseph's Hospital),
6.450%, 2/15/09 2/03 at 102 AAA 1,662,698
2,500,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured (St. Vincent's Medical Center),
6.200%, 2/15/21 2/04 at 102 AAA 2,581,475
1,250,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(New York Downtown Hospital),
6.700%, 2/15/12 2/05 at 102 Baa 1,298,638
2,480,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home,
6.400%, 8/15/14 8/04 at 102 AAA 2,622,327
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured New York Hospital:
1,000,000 6.750%, 8/15/14 2/05 at 102 Aaa 1,125,190
1,000,000 6.800%, 8/15/24 2/05 at 102 Aaa 1,134,930
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Brookdale Hospital Medical Center):
1,000,000 6.400%, 2/15/01 No Opt. Call Baa 1,035,520
2,700,000 6.800%, 8/15/12 2/05 at 102 Baa 2,826,306
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Health Care Center),
6.375%, 11/15/19 11/05 at 102 Aa 1,048,710
380,000 New York State Mortgage Agency,
8.100%, 10/01/17 4/98 at 102 Aa 404,768
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 New York State Urban Development Corporation,
6.750%, 1/01/26 1/02 at 102 Aaa $ 1,106,060
1,100,000 New York State Urban Development Corporation
(Syracuse University Center for Science and
Technology), 7.875%, 1/01/17
(Pre-refunded to 1/01/98) 1/98 at 102 Baal 1,200,573
New York State Urban Development Corporation,
Correctional Capitol Facilities:
1,000,000 5.625%, 1/01/07 1/03 at 102 Baal 1,002,330
2,490,000 5.750%, 1/01/13 1/03 at 102 Baal 2,421,799
1,250,000 5.500%, 1/01/15 1/03 at 102 Baal 1,195,538
1,000,000 7.500%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 1,137,820
2,000,000 New York State Urban Development Corporation
(Clarkson Center for Advanced Materials
Processing), 7.800%, 1/01/20 (Pre-refunded to
1/01/01) 1/01 at 102 Baal 2,335,260
2,900,000 New York State Urban Development Corporation,
State Facilities, 7.500%, 4/01/20 (Pre-refunded
to 4/01/01) 4/01 at 102 Aaa 3,378,268
1,000,000 New York State Urban Development Corporation
(Cornell Center for Theory and Simulation),
6.00%, 1/01/14 1/03 at 102 Baa 1,005,010
2,615,000 New York State Urban Development Corporation
(Pine Barrens), 5.375%, 4/01/17 4/05 at 102 Baal 2,391,574
2,100,000 Babylon Industrial Development Agency,
Resource Recovery, 8.500%, 1/01/19 7/98 at 103 Baal 2,376,927
1,000,000 Batavia Housing Authority, FHA-Insured
(Washington Towers), 6.500%, 1/01/23 7/01 at 102 Aaa 1,025,060
1,000,000 Brookhaven Industrial Development Agency, Civic
Facility (Dowling College/National Aviation
Center), 6.750%, 3/01/23 3/03 at 102 BBB 1,041,710
2,000,000 New York State, Certificates of Participation
(John Jay College of Criminal Justice),
6.000%, 8/15/06 No Opt. Call Baal 2,077,080
500,000 Dormitory Authority of the State of New York
(Long Island Jewish Medical Center),
FHA-Insured, 7.750%, 8/15/27 2/98 at 102 AAA 536,535
Dormitory Authority of the State of New York
(City University):
1,500,000 5.750%, 7/01/07 No Opt. Call Baal 1,522,980
750,000 7.500%, 7/01/10 No Opt. Call Baal 886,005
2,225,000 5.750%, 7/01/12 No Opt. Call Baal 2,244,780
1,500,000 5.500%, 7/01/12 7/03 at 102 Baal 1,440,540
500,000 8.200%, 7/01/13 7/98 at 102 Baal 553,735
1,000,000 7.625%, 7/01/20 7/00 at 102 AAA 1,154,640
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* ATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 750,000 Dormitory Authority of the State of New York,
GNMA (Park Ridge Housing, Inc),
7.850%, 2/01/29 2/99 at 102 AAA $ 819,203
1,985,000 Dormitory Authority of the State of New York
(United Health Services), 7.350%, 8/01/29 2/00 at 102 AAA 2,165,159
3,500,000 Dormitory Authority of the State of New York
(Nursing Homes), 5.750%, 7/01/17 7/05 at 102 Aa3 3,438,505
Dormitory Authority of the State of New York
(State University):
2,000,000 7.400%, 5/15/01 5/00 at 102 Baal 2,187,740
2,000,000 5.500%, 5/15/08 No Opt. Call Baal 1,998,060
1,125,000 5.250%, 5/15/09 No Opt. Call Baal 1,086,446
2,000,000 5.500%, 5/15/13 No Opt. Call Baal 1,964,900
2,250,000 Dormitory Authority of the State of New York,
Judicial Facilities (Suffolk County),
9.500%, 4/15/14 4/96 at 116 3/32 Baa1 2,625,480
1,375,000 Dormitory Authority of the State of New York
(University of Rochester, Strong Memorial
Hospital), 5.500%, 7/01/21 7/04 at 102 A1 1,337,353
4,000,000 Dormitory Authority of the State of New
York, Court Facilities, 5.625%, 5/15/13 5/03 at 101 1/2 Baal 3,835,840
2,195,000 Dormitory Authority of the State of New York
(Upstate Community Colleges),
6.500%, 7/01/07 No Opt. Call Baal 2,362,786
2,470,000 Dutchess County Industrial Development
Authority, Civic Facilities (Bard College),
7.000%, 11/01/17 11/03 at 102 A 2,643,369
1,000,000 Franklin County Industrial Development Agency
(County Correctional Facility),
6.750%, 11/01/12 11/02 at 102 BBB 1,068,490
750,000 Hempstead Industrial Development Authority,
Civic Facility (United Cerebral Palsy Association
of Nassau County) 7.500%, 10/01/09 10/99 at 102 Aa2 797,168
2,500,000 Housing New York Corporation, 5.00%, 11/01/13 11/03 at 102 AA 2,298,650
1,000,000 Metropolitan Transportation Authority,
Commuter Facilities, 6.250%, 7/01/17 7/02 at 102 Aaa 1,064,320
1,000,000 Metropolitan Transportation Authority,
Commuter Facilities Service Contract,
7.500%, 7/01/16 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,149,720
1,025,000 Metropolitan Transportation Authority, Transit
Facilities, 6.500%, 7/01/18 7/02 at 102 Aaa 1,130,503
1,055,000 Monroe County Water Authority, Water System,
6.000%, 8/01/17 8/02 at 102 AA 1,076,944
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City General Obligation:
$ 2,500,000 7.000%, 8/01/04 No Opt. Call Baal $ 2,732,325
2,000,000 7.500%, 2/01/06 2/02 at 101 1/2 Baal 2,236,000
45,000 6.625%, 8/01/13 8/02 at 101 1/2 Aaa 49,738
2,500,000 6.000%, 2/15/20 2/05 at 101 Baal 2,424,300
New York City Housing Development Corporation,
Multi-Family Mortgage (FHA Insured):
2,000,000 6.550%, 10/01/15 4/03 at 102 AAA 2,093,180
2,500,000 5.850%, 5/01/26 5/03 at 102 AA 2,492,724
1,000,000 New York City Housing Development Corporation,
Multi-Unit Mortgage (FHA Insured),
7.350%, 6/01/19 6/01 at 102 AAA 1,073,680
New York City Municipal Water Finance Authority,
Water and Sewer System:
3,000,000 5.375%, 6/15/19 6/04 at 101 AAA 2,899,230
1,500,000 7.750%, 6/15/20 (Pre-refunded to 6/15/01) 6/01 at 101 1/2 Aaa 1,766,790
2,000,000 5.500%, 6/15/20 6/02 at 100 A 1,910,880
3,500,000 New York City Industrial Development Agency,
Civic Facility (The Lighthouse Project),
6.500%, 7/01/22 7/02 at 102 Aa2 3,642,240
New York City Industrial Development Agency
(College of New Rochelle):
1,000,000 6.200%, 9/01/10 9/05 at 102 Baa 1,010,320
1,000,000 6.300%, 9/01/15 9/05 at 102 Baa 1,006,090
2,405,000 Newark-Wayne Community Hospital,
7.600%, 9/01/15 9/03 at 102 N/R 2,429,242
1,000,000 Orangetown Housing Authority, Housing Facilities,
(Orangetown Guaranty), 7.600%, 4/01/30
(Pre-refunded to 10/01/00) 10/00 at 102 A 1,157,040
South Orangetown Central School District, General
Obligation:
390,000 6.875%, 10/01/08 No Opt. Call A 454,697
390,000 6.875%, 10/01/09 No Opt. Call A 454,939
3,015,000 Suffolk County Industrial Development Agency
(Dowling College Civic Facility), 6.625%, 6/01/24 6/04 at 102 BBB 3,191,769
2,000,000 34th Street Partnership Business Improvement
District, Capital Improvement,
5.500%, 1/01/23 1/03 at 102 A1 1,904,340
Triborough Bridge and Tunnel Authority:
2,000,000 7.100%, 1/01/10 1/01 at 102 A1 2,214,880
2,000,000 7.100%, 1/01/10 1/01 at 102 Aaa 2,242,460
2,100,000 UFA Development Corporation, FHA-Insured
(Loretto-Utica Project), 5.950%, 7/01/35 7/04 at 102 Aa 2,105,418
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000,000 Westchester County Industrial Development Agency,
Civic Facility (Jewish Board of Family and
Children Services), 6.750%, 12/15/12 12/02 at 102 BBB- $ 2,066,620
- ---------------------------------------------------------------------------------------------------------------------------
$ 158,685,000 Total Investments - (Cost $156,315,155) - 96.6% 165,378,435
==============-------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 2.2%
New York City General Obligation,
Variable Rate Demand Bonds:
$ 900,000 3.450%, 8/15/05+ VMIG-1 900,000
800,000 3.400%, 8/15/20+ VMIG-1 800,000
1,500,000 3.300%, 8/01/22+ VMIG-1 1,500,000
600,000 3.450%, 8/15/22+ VMIG-1 600,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 3,800,000 Total Temporary Investments - 2.2% 3,800,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 1,974,808
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 171,153,243
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 31 $ 46,979,690 28%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 11 20,158,871 12
PORTFOLIO OF A+ A1 4 8,563,103 5
INVESTMENTS A, A-- A, A2, A3 7 13,470,535 8
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 40 73,776,994 45
TEMPORARY Non-rated Non-rated 1 2,429,242 2
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 94 $165,378,435 100%
===========================================================================================================================
</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.
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.
42
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8,000,000 New York State Energy Research and Development
Authority (The Brooklyn Union Gas Company),
5.500%, 1/01/21 1/06 at 102 Aaa $ 7,866,400
2,500,000 New York State Energy Research and Development
Authority, Pollution Control (Central Hudson Gas
& Electric Corporation), 7.375%, 10/01/14 10/99 at 103 Aaa 2,802,650
1,450,000 New York State Environmental Facilities Corporation,
Water Pollution Control, Pooled Loan,
7.200%, 3/15/11 6/00 at 102 Aaa 1,614,343
2,200,000 New York State Housing Finance Agency, Multi-
Family Housing, 7.450%, 11/01/28 11/99 at 102 Aaa 2,338,886
995,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, Insured
Mortgage (Albany Medical Center),
8.000%, 2/15/28 8/98 at 102 AAA 1,085,396
895,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(St. Francis Hospital), 7.625%, 11/01/21 11/98 at 102 Aaa 984,187
4,765,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Bronx Lebanon), 7.100%, 2/15/27 2/97 at 102 Aaa 4,969,371
2,000,000 New York State Medical Care Facilities
Agency, Hospital and Nursing Home, FHA-
Insured, 7.350%, 2/15/29 8/99 at 102 Aa 2,167,280
1,500,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured (Catholic Medical Center),
8.300%, 2/15/22 (Pre-refunded to 2/15/98) 2/98 at 102 AAA 1,658,070
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home,
FHA-Insured (Montefiore Medical Center):
1,500,000 7.250%, 2/15/24 2/99 at 102 Aa 1,621,800
2,000,000 7.250%, 2/15/24 2/99 at 102 Aaa 2,167,600
1,300,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(St. Luke's-Roosevelt Hospital Center),
7.450%, 2/15/29 (Pre-refunded to 2/15/00) 2/00 at 102 Aaa 1,478,815
1,865,000 New York State Medical Care Facilities Finance
Agency, Long-Term Health Care (Capital
Guaranty Insured Program), 6.450%, 11/01/14 5/02 at 102 Aaa 2,001,966
3,200,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(North Shore University Hospital),
7.200%, 11/01/20 11/00 at 102 Aaa 3,581,184
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,670,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Our Lady of Victory),
6.625%, 11/01/16 11/01 at 102 Aaa $ 1,842,962
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Sisters of Charity of Buffalo):
500,000 6.600%, 11/01/10 11/01 at 102 Aaa 552,220
1,550,000 6.625%, 11/01/18 11/01 at 102 Aaa 1,710,534
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Aurelia Osborn Fox Memorial Hospital),
6.500%, 11/01/19 11/01 at 102 Aaa 1,097,430
3,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(South Nassau Communities Hospital),
6.125%, 11/01/11 11/02 at 102 Aaa 3,162,570
New York State Medical Care Facilities Finance
Agency, Mental Health Services, Facilities
Improvement Revenue:
1,415,000 5.750%, 2/15/14 8/03 at 102 Aaa 1,426,773
4,000,000 5.375%, 2/15/14 2/04 at 102 Aaa 3,905,400
3,250,000 5.700%, 8/15/14 2/03 at 102 Aaa 3,265,080
6,150,000 6.375%, 8/15/17 12/02 at 102 Aaa 6,556,208
2,815,000 6.250%, 8/15/18 2/02 at 102 Aaa 2,974,611
2,500,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(St. Mary's Hospital--Rochester Project),
6.200%, 11/01/14 11/03 at 102 Aaa 2,649,900
7,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home,
FHA-Insured, 6.800%, 8/15/24 2/05 at 102 Aaa 7,944,510
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Montefiore Medical Center):
3,390,000 5.750%, 2/15/15 2/05 at 102 Aaa 3,413,188
4,175,000 5.750%, 2/15/25 2/05 at 102 Aaa 4,179,927
New York State Mortgage Agency:
225,000 8.375%, 10/01/17 1/98 at 102 Aa 239,810
390,000 8.100%, 10/01/17 4/98 at 102 Aa 415,420
3,500,000 New York State Mortgage Agency, Homeowner
Mortgage, 5.650%, 4/01/15 10/03 at 102 Aaa 3,520,370
New York State Thruway Authority:
2,000,000 5.750%, 4/01/13 4/04 at 102 Aaa 2,054,580
7,300,000 5.750%, 1/01/19 1/02 at 102 Aaa 7,342,778
3,950,000 5.500%, 1/01/23 1/02 at 100 Aaa 3,871,000
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York State Urban Development Corporation:
$ 3,850,000 6.700%, 1/01/12 1/02 at 102 Aaa $ 4,256,945
9,650,000 6.750%, 1/01/26 1/02 at 102 Aaa 10,673,479
New York State Urban Development Corporation,
Correctional Facilities:
1,500,000 7.250%, 1/01/14 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 1,693,530
1,000,000 5.250%, 1/01/14 No Opt. Call Aaa 982,320
575,000 7.000%, 1/01/17 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 644,127
2,000,000 7.500%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 2,275,640
2,000,000 Power Authority of the State of New York, General
Purpose, 6.500%, 1/01/19 1/02 at 102 Aaa 2,194,520
280,000 Albany Municipal Water Finance Authority,
Water and Sewer System, 7.500%, 12/01/17 12/98 at 102 Aaa 308,350
1,795,000 Albany Municipal Water Finance Authority
5.500%, 12/01/22 12/03 at 102 Aaa 1,763,982
1,250,000 Broome County, Certificates of Participation,
5.250%, 4/01/22 4/04 at 102 Aaa 1,179,688
2,250,000 Buffalo and Fort Erie Public Bridge Authority,
5.750%, 1/01/25 1/05 at 101 Aaa 2,279,700
1,000,000 Buffalo General Obligation, 6.150%, 2/01/04 1/01 at 101 Aaa 1,077,130
8,385,000 Buffalo Municipal Water Finance Authority,
Water System, 5.750%, 7/01/19 7/03 at 102 Aaa 8,441,431
2,000,000 Buffalo Sewer Authority, Sewer System,
5.000%, 7/01/12 7/03 at 100 Aaa 1,898,120
Camden Central School District,
General Obligation:
500,000 7.100%, 6/15/07 No Opt. Call Aaa 602,965
600,000 7.100%, 6/15/08 No Opt. Call Aaa 727,914
600,000 7.100%, 6/15/09 No Opt. Call Aaa 728,772
275,000 7.100%, 6/15/10 No Opt. Call Aaa 333,614
1,560,000 Dormitory Authority of the State of New York,
College and University (Pooled Capital Program),
7.800%, 12/01/05 12/98 at 102 Aaa 1,711,850
1,490,000 Dormitory Authority of the State of New York
(United Health Services), 7.350%, 8/01/29 2/00 at 102 AAA 1,625,232
1,490,000 Dormitory Authority of the State of New York
(Iona College), 7.625%, 7/01/09 7/98 at 102 Aaa 1,626,499
1,200,000 Dormitory Authority of the State of New York,
Educational Facilities (State University),
7.250%, 5/15/15 (Pre-refunded to 5/15/00) 5/00 at 102 Aaa 1,363,956
1,000,000 Dormitory Authority of the State of New York
(United Cerebral Palsey Association of
Westchester County), 6.200%, 7/01/12 7/02 at 102 Aaa 1,056,150
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Dormitory Authority of the State of New York
(Manhattanville College), 7.500%, 7/01/22
(Pre-refunded to 7/01/00) 7/00 at 102 Aaa $ 1,149,720
Dormitory Authority of the State of New
York (City University System):
2,500,000 7.000%, 7/01/14 7/00 at 102 Aaa 2,772,850
1,000,000 6.500%, 7/01/14 7/96 at 100 Aaa 1,010,850
1,800,000 5.750%, 7/01/18 No Opt. Call Aaa 1,867,932
6,295,000 7.500%, 7/01/20 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 7,237,487
2,500,000 Dormitory Authority of the State of New
York (Cooper Union), 7.200%, 7/01/20 7/01 at 102 Aaa 2,835,325
Dormitory Authority of the State of New York,
Educational Facilities (State University):
2,500,000 5.250%, 5/15/15 No Opt. Call Aaa 2,447,975
1,200,000 7.000%, 5/15/18 (Pre-refunded to 5/15/00) 5/00 at 102 Aaa 1,352,472
2,000,000 6.500%, 5/15/19 (Pre-refunded to 5/15/00) 5/00 at 100 Aaa 2,182,140
5,000,000 Dormitory Authority of the State of New York,
(New York University), 6.250%, 7/01/09 7/01 at 102 Aaa 5,394,250
1,000,000 Dormitory Authority of the State of New York
(Fordham University), 7.200%, 7/01/15
(Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,137,910
4,640,000 Dormitory Authority of the State of New York,
(Mount Sinai School of Medicine),
5.000%, 7/01/21 7/04 at 102 Aaa 4,321,510
1,500,000 Dormitory Authority of the State of New York
(Sarah Lawrence College), 6.000%, 7/01/24 7/05 at 102 Aaa 1,568,325
2,000,000 Dormitory Authority of the State of New York
(Ellis Hospital), 5.600%, 8/01/25 8/05 at 102 Aaa 1,961,740
2,015,000 Dormitory Authority of the State of New York
(St. Vincents Hospital and Medical Center),
5.800%, 8/01/25 8/05 at 102 Aaa 2,049,416
1,000,000 Erie County Water Authority, Water Works,
6.750%, 12/01/14 12/09 at 100 Aaa 1,141,190
Glen Cove General Obligation:
445,000 5.500%, 6/15/09 No Opt. Call Aaa 466,605
455,000 5.600%, 6/15/10 No Opt. Call Aaa 478,942
470,000 5.625%, 6/15/11 No Opt. Call Aaa 488,838
500,000 Greece Central School District, General
Obligation, 6.000%, 6/15/09 No Opt. Call Aaa 551,420
Half Moon General Obligation:
385,000 6.500%, 6/01/09 No Opt. Call Aaa 445,114
395,000 6.500%, 6/01/10 No Opt. Call Aaa 455,072
395,000 6.500%, 6/01/11 No Opt. Call Aaa 453,326
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600,000 Jamesville-Dewitt Central School District,
General Obligation, 5.750%, 6/15/04 No Opt. Call Aaa $ 652,914
1,000,000 Metropolitan Transportation Authority, Transit
Facilities Service Contract, 7.500%, 7/01/17 7/98 at 102 Aaa 1,089,560
10,340,000 Metropolitan Transportation Authority, Transit
Facilities 6.500%, 7/01/18 7/02 at 102 Aaa 11,404,296
Middle Country Central School District at
Centereach (Town of Brookhaven),
General Obligation:
475,000 6.900%, 12/15/07 No Opt. Call Aaa 568,988
475,000 6.900%, 12/15/08 No Opt. Call Aaa 571,781
Monroe County General Obligation:
375,000 6.500%, 6/01/15 6/01 at 102 Aaa 410,756
375,000 6.500%, 6/01/16 6/01 at 102 Aaa 411,491
350,000 6.500%, 6/01/17 6/01 at 102 Aaa 384,059
3,725,000 Montgomery, Otsego, Schoharie County Solid
Waste Management Authority, Solid Waste System,
7.250%, 1/01/14 (Pre-refunded to 1/01/00) 1/00 at 103 Aaa 4,228,918
Mount Sinai Union Free School District General
Obligation:
1,000,000 7.250%, 2/15/15 (Pre-refunded to 2/15/00) 2/00 at 102 Aaa 1,130,310
500,000 6.200%, 2/15/15 No Opt. Call Aaa 551,180
1,035,000 6.200%, 2/15/16 No Opt. Call Aaa 1,144,110
1,000,000 7.250%, 2/15/17 (Pre-refunded to 2/15/00) 2/00 at 102 Aaa 1,130,310
1,500,000 Nassau County General Obligation,
5.700%, 8/01/13 8/04 at 103 Aaa 1,566,060
4,840,000 Nassau County Industrial Development Agency,
Civic Facilities (Hofstra University Project),
6.750%, 8/01/11 8/01 at 102 Aaa 5,369,109
1,020,000 New Rochelle General Obligation,
6.200%, 8/15/22 8/04 at 102 Aaa 1,089,166
New York City General Obligation:
500,000 8.250%, 11/01/02 (Pre-refunded to 11/01/97) 11/97 at 101 1/2 Aaa 544,775
3,000,000 6.250%, 8/01/10 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 Aaa 3,355,770
1,000,000 6.250%, 8/01/10 8/02 at 101 1/2 Aaa 1,067,160
3,520,000 5.750%, 5/15/12 5/03 at 101 1/2 Aaa 3,622,326
75,000 6.625%, 8/01/12 8/02 at 101 1/2 Aaa 82,985
2,600,000 6.000%, 8/01/12 8/02 at 101 1/2 Aaa 2,721,342
1,300,000 7.000%, 10/01/15 No Opt. Call Aaa 1,405,859
2,000,000 7.000%, 10/01/16 10/99 at 100 Aaa 2,411,520
1,025,000 7.000%, 10/01/17 No Opt. Call Aaa 1,108,466
310,000 7.000%, 10/01/18 No Opt. Call Aaa 335,243
1,000,000 5.375%, 10/01/20 10/03 at 101 1/2 Aaa 957,880
1,000,000 New York City Educational Construction Fund
5.625%, 4/01/13 4/04 at 101 1/2 Aaa 1,016,100
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City Health and Hospitals Corporation:
$ 2,500,000 5.625%, 2/15/13 2/03 at 102 Aaa $ 2,522,700
11,980,000 5.750%, 2/15/22 2/03 at 102 Aaa 11,955,561
5,000,000 New York City Housing Development Corporation
Pass-Through Certificates, Multi-Family Housing,
FHA Insured 6.500%, 2/20/19 7/97 at 105 Aaa 5,984,600
1,000,000 New York City Housing Development Corporation
Multi-Family, FHA Insured, 5.850%, 5/01/26 5/03 at 102 Aaa 1,004,840
3,250,000 New York City Municipal Water Financing,
6.750%, 6/15/16 6/01 at 101 Aaa 3,601,890
New York City Municipal Water Finance
Authority, Water and Sewer System:
1,000,000 7.250%, 6/15/15 (Pre-refunded to 6/15/00) 6/00 at 101 1/2 Aaa 1,134,550
6,765,000 5.750%, 6/15/18 6/02 at 101 1/2 Aaa 6,824,261
2,525,000 5.375%, 6/15/19 6/04 at 101 Aaa 2,440,185
4,650,000 5.500%, 6/15/20 6/02 at 100 Aaa 4,560,999
New York City Transit Authority Transit Facilities
(Livingston Plaza Project):
1,000,000 7.500%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 1,137,820
8,725,000 5.250%, 1/01/20 1/03 at 100 Aaa 8,188,849
2,200,000 New York City Trust for Cultural Resources
(American Museum of Natural History),
6.900%, 4/01/21 (Pre-refunded to 4/01/01) 4/01 at 102 Aaa 2,502,940
1,000,000 New York City Industrial Development Agency,
Civic Facility (USTA National Tennis Center
Incorporated Project), 6.375%, 11/15/14 11/04 at 102 Aaa 1,080,530
1,000,000 New York City Industrial Development Agency
(New School for Social Research),
5.750%, 9/01/15 9/05 at 102 Aaa 1,016,410
1,590,000 Niagara Falls General Obligation,
6.900%, 3/01/21 3/04 at 102 Aaa 1,807,019
5,725,000 Niagara Falls Bridge Commission, Toll Bridge
System Revenue, 6,125%, 10/01/19
(Pre-refunded to 10/01/02) 10/02 at 102 Aaa 6,398,203
North Hempstead General Obligation:
1,500,000 6.375%, 4/01/09 No Opt. Call Aaa 1,709,490
425,000 6.800%, 6/01/10 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 476,153
425,000 6.800%, 6/01/11 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 476,153
1,505,000 6.400%, 4/01/14 No Opt. Call Aaa 1,702,622
North Hempstead Solid Waste Management
Authority:
2,175,000 5.000%, 2/01/07 2/04 at 102 Aaa 2,192,705
1,825,000 5.000%, 2/01/12 2/04 at 102 Aaa 1,748,551
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nyack Union Free School District:
$ 625,000 6.500%, 4/01/12 4/02 at 102 Aaa $ 686,544
625,000 6.500%, 4/01/13 4/02 at 102 Aaa 686,894
625,000 6.500%, 4/01/14 4/02 at 102 Aaa 688,288
Rensselaer County General Obligation:
960,000 6.700%, 2/15/13 No Opt. Call Aaa 1,126,339
960,000 6.700%, 2/15/14 No Opt. Call Aaa 1,126,138
960,000 6.700%, 2/15/15 No Opt. Call Aaa 1,125,226
Rondout Valley Central School District,
General Obligation:
550,000 6.800%, 6/15/06 No Opt. Call Aaa 649,033
550,000 6.850%, 6/15/07 No Opt. Call Aaa 652,933
550,000 6.850%, 6/15/08 No Opt. Call Aaa 656,288
550,000 6.850%, 6/15/09 No Opt. Call Aaa 656,508
550,000 6.850%, 6/15/10 No Opt. Call Aaa 655,171
Suffolk County General Obligation:
1,000,000 6.900%, 4/01/01 4/00 at 102 Aaa 1,120,510
1,895,000 5.250%, 7/15/09 7/02 at 102 Aaa 1,913,419
600,000 6.150%, 5/01/10 5/03 at 102 Aaa 641,418
1,890,000 5.300%, 7/15/10 7/02 at 102 Aaa 1,901,699
1,630,000 5.400%, 4/01/11 4/02 at 102 Aaa 1,642,763
1,860,000 5.400%, 7/15/11 7/02 at 102 Aaa 1,874,954
1,000,000 5.400%, 7/15/12 7/02 at 102 Aaa 1,005,890
630,000 5.400%, 4/01/14 4/02 at 102 Aaa 628,595
625,000 5.400%, 4/01/15 4/02 at 102 Aaa 619,894
1,000,000 Suffolk County Industrial Development Agency,
Southwest Sewer System, 4.750%, 2/01/09 2/04 at 101 Aaa 963,010
Suffolk County Water Authority, Water System:
1,800,000 5.100%, 6/01/11 No Opt. Call Aaa 1,774,530
2,565,000 5.625%, 6/01/16 6/02 at 102 Aaa 2,558,613
3,700,000 5.000%, 6/01/17 6/03 at 102 Aaa 3,458,501
Triborough Bridge and Tunnel Authority, General
Purpose Revenue:
2,750,000 6.500%, 1/01/19 1/02 at 101 1/2 Aaa 3,007,095
2,000,000 7.000%, 1/01/20 (Pre-refunded to 1/01/01) 1/01 at 102 Aaa 2,273,580
1,175,000 7.000%, 1/01/21 (Pre-refunded to 1/01/01) 1/01 at 101 1/2 Aaa 1,330,934
8,650,000 Triborough Bridge and Tunnel Authority, Special
Obligation, 6.875%, 1/01/15 1/01 at 102 Aaa 9,607,205
1,750,000 Yonkers General Obligation, 7.375%, 12/01/09
(Pre-refunded to 12/01/00) 12/00 at 102 Aaa 2,022,405
- ---------------------------------------------------------------------------------------------------------------------------
$ 338,925,000 Total Investments - (Cost $333,979,266) - 97.3% 359,533,384
==============-------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 1.9%
$ 3,500,000 New York City General Obligation Fiscal
1995B-B6 Insured, Adjustable Rate,
3.450%, 8/15/05+ VMIG-1 $ 3,500,000
1,500,000 New York City General Obligation, Variable Rate
Demand Bonds, 3.300%, 8/01/22+ VMIG-1 1,500,000
200,000 New York City General Obligation Bonds,
Adjustable Rate, 3.450%, 8/15/22+ VMIG-1 200,000
1,800,000 Port Authority of New York and New
Jersey, Versatile Structure Obligations,
3.050%, 5/01/19+ A-1+ 1,800,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 7,000,000 Total Temporary Investments - 1.9% 7,000,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.8% 2,930,866
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 369,464,250
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 155 $355,089,074 99%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 4 4,444,310 1
PORTFOLIO OF
INVESTMENTS
(EXCLUDING
TEMPORARY
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 159 $359,533,384 100%
===========================================================================================================================
</TABLE>
All of the bonds in the portfolio, excluding temporary investments in short-term
municipal securities, are either covered by Original Issue Insurance, Secondary
Market Insurance or Portfolio Insurance, or are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government agency securities, any
of which ensure the timely payment of principal and interest.
* 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.
+ 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.
50
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN OHIO TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio Air Quality Development Authority,
Pollution Control (Ohio Edison Company):
$ 2,000,000 7.450%, 3/01/16 3/00 at 102 Aaa $ 2,233,060
750,000 7.625%, 7/01/23 7/99 at 102 Baa3 803,318
3,000,000 5.625%, 11/15/29 11/03 at 102 Aaa 2,977,290
1,750,000 Ohio Air Quality Development Authority,
Pollution Control (Columbus Southern
Power Company), 6.375%, 12/01/20 12/02 at 102 Aaa 1,882,650
1,000,000 Ohio Air Quality Development Authority,
Pollution Control (Ohio Power Company),
7.400%, 8/01/09 8/99 at 102 Baa1 1,060,600
2,000,000 Ohio Air Quality Development Authority,
Pollution Control (Cleveland Electric
Illuminating Company), 8.000%, 12/01/13 6/02 at 103 Aaa 2,399,380
1,000,000 Ohio Building Authority (State Correctional
Facilities), 7.125%, 9/01/09 9/96 at 102 A1 1,033,980
1,250,000 Ohio Capital Corporation for Housing, Multi-
Family Housing, 7.600%, 11/01/23 11/97 at 105 AAA 1,333,663
Ohio General Obligation:
1,475,000 6.650%, 8/01/05 No Opt. Call Aa 1,710,764
1,000,000 6.000%, 8/01/10 No Opt. Call Aa 1,090,530
250,000 Ohio Higher Educational Facility Commission
(Ohio Dominican College), 8.500%, 12/01/07
(Pre-refunded to 12/01/97) 12/97 at 102 N/R 274,655
400,000 Ohio Higher Educational Facility Commission
(John Carroll University), 9.250%, 10/01/07
(Pre-refunded to 10/01/97) 10/97 at 102 A 442,048
1,000,000 Ohio Higher Educational Facility Commission
(Ohio Wesleyan University), 7.650%, 11/15/07 11/97 at 102 Aaa 1,085,360
1,000,000 Ohio Higher Educational Facility Commission
(Ohio Northern University), 7.300%, 5/15/10
(Pre-refunded to 5/15/00) 5/00 at 100 Aaa 1,119,240
1,750,000 Ohio Higher Educational Facility Commission
(University of Dayton), 5.800%, 12/01/19 12/04 at 102 Aaa 1,784,195
Ohio Housing Finance Agency, Single Family
Mortgage (GNMA):
695,000 7.500%, 9/01/13 9/00 at 102 AAA 742,295
850,000 7.400%, 9/01/15 3/00 at 102 AAA 906,168
350,000 7.050%, 9/01/16 9/01 at 102 Aaa 372,918
2,500,000 Ohio Turnpike Commission, 5.750%, 2/15/24 2/04 at 102 AA-- 2,557,975
1,750,000 Ohio Water Development Authority
(Dayton Power and Light Company),
6.400%, 8/15/27 8/02 at 102 AA-- 1,877,575
100,000 Ohio IOOF Home (FHA-Insured), 8.150%, 8/01/02 8/97 at 103 AAA 107,156
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN OHIO TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adams County/Ohio Valley School District,
General Obligation:
$ 2,000,000 7.000%, 12/01/15 No Opt. Call Aaa $ 2,397,860
3,865,000 5.250%, 12/01/21 12/05 at 102 Aaa 3,719,560
3,955,000 Akron General Obligation, Limited Tax,
6.750%, 12/01/14 12/04 at 102 Aaa 4,496,400
1,500,000 Akron Waterworks System, 6.550%, 3/01/12
(Pre-refunded to 3/01/01) 3/01 at 102 Aaa 1,676,235
3,350,000 Anthony Wayne Local School District, General
Obligation, 5.750%, 12/01/24 12/05 at 101 Aaa 3,393,919
1,000,000 Aurora City School District, General Obligation,
5.800%, 12/01/16 12/05 at 102 Aaa 1,025,190
1,475,000 Bedford Hospital (Community Hospital),
8.500%, 5/15/09 (Pre-refunded to 5/15/00) 5/00 at 102 N/R 1,667,960
Bellefontaine Sewer System:
1,000,000 6.800%, 12/01/07 12/02 at 101 Baa1 1,072,040
1,000,000 6.900%, 12/01/11 12/02 at 101 Baa1 1,072,360
2,500,000 Buckeye Valley Local School District, General
Obligation, 6.850%, 12/01/15 No Opt. Call Aaa 2,955,350
1,250,000 Butler County Hospital Facilities (Fort Hamilton-
Hughes Memorial Hospital), 7.500%, 1/01/10 1/02 at 102 Baa 1,340,863
1,000,000 Canal Winchester Local School District, General
Obligation, Unlimited Tax, 7.100%, 12/01/13
(Pre-refunded to 12/01/01) 12/01 at 102 Aaa 1,158,100
1,000,000 Centerville General Obligation, 5.625%, 12/01/26 12/05 at 101 Aaa 1,001,610
1,000,000 Clermont County, Road Improvement,
Limited Tax, 7.125%, 9/01/11
(Pre-refunded to 9/01/00) 9/00 at 102 Aaa 1,136,400
Clermont County Sewer System Revenue:
2,000,000 7.375%, 12/01/20 (Pre-refunded to 12/01/00) 12/00 at 102 Aaa 2,305,680
1,000,000 7.100%, 12/01/21 (Pre-refunded to 12/01/01) 12/01 at 102 Aaa 1,158,100
1,000,000 Clermont County Waterworks System,
6.625%, 12/01/13 (Pre-refunded to 12/01/01) 12/01 at 102 Aaa 1,134,100
2,000,000 Cleveland City School District, General Obligation,
Unlimited Tax, 5.875%, 12/01/11 12/02 at 102 Aaa 2,078,820
1,500,000 Cleveland Public Power System,
7.000%, 11/15/24 11/04 at 102 Aaa 1,728,555
Cleveland Waterworks Mortgage:
1,000,000 6.500%, 1/01/11 1/02 at 102 Aaa 1,100,490
1,750,000 6.500%, 1/01/21 (Pre-refunded to 1/01/02) 1/02 at 102 Aaa 1,966,370
1,000,000 Coldwater Exempted Village School District,
Unlimited Tax, 7.000%, 12/01/13
(Pre-refunded to 12/01/99) 12/99 at 102 Aaa 1,119,690
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 Columbus General Obligation, Unlimited Tax,
6.500%, 1/01/10 1/02 at 102 Aaa $ 1,625,145
2,050,000 Columbus General Obligation, 5.250%, 9/15/18 9/03 at 102 Aaa 2,006,212
1,500,000 Cuyahoga County General Obligation,
Unlimited Tax,
7.000%, 10/01/13 (Pre-refunded to 10/01/01) 10/01 at 102 N/R 1,722,885
1,000,000 Cuyahoga County General Obligation,
5.250%, 10/01/13 No Opt. Call AA 983,610
1,000,000 Cuyahoga County General Obligation, Public
Improvements, 5.250%, 11/15/15 11/05 at 102 Aa 972,990
1,250,000 Cuyahoga County, Hospital Improvement
(Deaconess Hospital), 7.450%, 10/01/18
(Pre-refunded to 10/01/00) 10/00 at 103 A1 1,448,888
2,750,000 Cuyahoga County Hospital (Meridia Health
System), 7.250%, 8/15/19 8/00 at 102 A1 2,993,155
2,000,000 Dayton Airport Refunding Bonds (James
M. Cox-Dayton International Airport),
5.250%, 12/01/15 12/05 at 101 Aaa 1,934,200
750,000 Defiance Waterworks System, General Obligation,
Unlimited Tax, 6.200%, 12/01/20 12/04 at 102 Aaa 806,955
1,110,000 Fairborn General Obligation, Limited Tax,
7.000%, 10/01/11 10/02 at 102 Aaa 1,265,777
2,790,000 Franklin County Limited Tax, 5.375%, 12/01/20 12/08 at 102 Aaa 2,806,712
Franklin County, Hospital Facilities (Ohio
Presbyterian Retirement Services):
1,350,000 8.750%, 7/01/21 7/01 at 103 N/R 1,448,064
1,500,000 6.500%, 7/01/23 7/03 at 102 N/R 1,423,830
500,000 Franklin County, Refunding and Improvement
Bonds (Riverside Hospital), 7.250%, 5/15/20 5/00 at 102 Aaa 555,865
705,000 Franklin County, FHA Insured (Worthington
Village Nursing Home), 7.000%, 8/01/16 8/00 at 102 N/R 732,107
1,000,000 Franklin County, Hospital Facilities
(Riverside United Methodist Hospital),
5.750%, 5/15/20 5/03 at 102 Aa 983,860
1,000,000 Franklin County, (OCLC Online Computer
Library Center Project), 7.200%, 7/15/06 7/01 at 100 N/R 1,079,340
250,000 Fremont Sewerage System, 8.100%, 12/01/07
(Pre-refunded to 12/01/97) 12/97 at 102 A-- 272,973
1,000,000 Gahanna-Jefferson School District, General
Obligation, Unlimited Tax, 7.125%, 12/01/14
(Pre-refunded to 12/01/00) 12/00 at 102 A1 1,138,440
3,000,000 Garfield Heights (Marymount Hospital),
6.650%, 11/15/11 11/02 at 102 A 3,156,420
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN OHIO TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Geauga County General Obligation,
5.625%, 12/01/15 12/05 at 102 Aa $ 1,009,330
Grandview Heights City School District, General
Obligation:
2,000,000 6.100%, 12/01/19 12/05 at 101 AA 2,102,060
1,020,000 5.550%, 12/01/19 No Opt. Call AA 1,036,820
250,000 Grandview Heights, Library Building Mortgage,
8.250%, 12/01/07 (Pre-refunded to 12/01/97) 12/97 at 102 N/R 273,918
1,000,000 Greenville Wastewater System, 6.350%, 12/01/17 10/02 at 102 Aaa 1,074,990
1,495,000 Hamilton County, FHA-Insured (Judson Care
Center), 7.800%, 8/01/19 8/00 at 101 5/16 A+ 1,615,168
400,000 Hubbard Sewer System, 8.800%, 11/15/17 5/98 at 102 N/R 437,992
1,000,000 Indian Lake Local School District,
General Obligation, 5.375%, 12/01/23 12/06 at 101 Aaa 975,970
1,000,000 Indian Valley Local School District, General
Obligation, 5.750%, 12/01/19 12/05 at 102 Aaa 1,018,300
1,000,000 Kent State University, General Receipts,
6.500%, 5/01/22 5/02 at 102 Aaa 1,101,050
1,000,000 Kettering City School District, General Obligation,
Unlimited Tax, 5.300%, 12/01/14 12/05 at 101 Aaa 978,410
3,630,000 Kings Local School District, General Obligation,
5.500%, 12/01/21 12/05 at 100 Aaa 3,602,485
500,000 Kirtland Local School District, General Obligation,
Unlimited Tax, 7.500%, 12/01/09 12/99 at 102 A1 552,840
1,500,000 Lakewood General Obligation, 6.500%, 12/01/12 12/02 at 102 Aa 1,657,650
1,000,000 Lakota Local School District, General Obligation,
Unlimited Tax, 6.125%, 12/01/17 12/05 at 100 Aaa 1,054,710
500,000 Lorain General Obligation, 5.650%, 12/01/15 12/05 at 102 Aaa 509,725
1,500,000 Lorain Hospital (Lakeland Community Hospital),
6.500%, 11/15/12 11/02 at 102 A1 1,558,890
500,000 Lorain Sewer System, 8.750%, 4/01/11 4/98 at 102 BBB-- 557,500
1,000,000 Lucas County General Obligation, Limited Tax,
6.650%, 12/01/12 12/02 at 102 A 1,046,070
1,500,000 Lucas County General Obligation,
5.400%, 12/01/15 12/05 at 102 Aaa 1,473,945
1,000,000 Mahoning County General Obligation,
Limited Tax, 7.200%, 12/01/09 12/99 at 102 Aaa 1,109,720
2,000,000 Mahoning County, Hospital Improvement
(St. Elizabeth Hospital Medical Center),
7.375%, 12/01/09 6/96 at 102 A1 2,052,260
2,355,000 Mahoning County, Hospital Improvement
(YHA Inc. Project), 7.000%, 10/15/14 10/00 at 102 Aaa 2,616,264
1,000,000 Marion County (United Church Homes, Inc. Project),
6.375%, 11/15/10 11/03 at 102 BBB-- 1,008,520
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marion County, Health Facilities (United Church
Homes, Inc.):
$ 1,150,000 8.875%, 12/01/12 (Pre-refunded to 12/01/99) 12/99 at 103 N/R $ 1,358,622
750,000 6.300%, 11/15/15 11/03 at 102 BBB-- 724,095
1,000,000 Marysville Exempted Village School District, General
Obligation, Unlimited Tax, 7.200%, 12/01/10
(Pre-refunded to 12/01/00) 12/00 at 102 Aaa 1,145,360
1,250,000 Marysville Water System, 7.050%, 12/01/21 2/01 at 101 Aaa 1,434,675
1,000,000 Mentor Village Exempted School District,
General Obligation, Unlimited Tax,
7.400%, 12/01/11 (Pre-refunded to 12/01/02) 12/02 at 100 Aaa 1,133,490
1,000,000 Montgomery County Water (Greater Moraine-Beaver
Creek Sewer District), 6.250%, 11/15/17 11/02 at 102 Aaa 1,067,300
3,000,000 Mount Vernon (Knox Community Hospital),
7.875%, 6/01/12 6/96 at 103 N/R 3,099,690
2,265,000 Napolean (Luthern Orphan's and Old Folks Home
Project), 6.875%, 8/01/23 9/04 at 102 Aa 2,449,915
1,000,000 North Olmstead, General Obligation, Limited Tax,
6.250%, 12/15/12 12/02 at 102 Aaa 1,080,350
1,000,000 Northeast Ohio Regional Sewer District, Wastewater
Improvement, 5.600%, 11/15/16 11/05 at 101 Aaa 1,001,180
500,000 Ottawa County General Obligation,
5.750%, 12/01/14 12/05 at 102 Aaa 512,630
1,000,000 Parma General Obligation, Limited Tax,
7.600%, 12/01/11 12/00 at 102 A 1,158,680
1,750,000 Pickerington Local School District, General
Obligation, Unlimited Tax, 6.750%, 12/01/16 12/01 at 102 A 1,875,808
1,000,000 Revere Local School District, General Obligation,
Unlimited Tax, 6.000%, 12/01/16 12/03 at 102 Aaa 1,044,560
1,500,000 Reynoldsburg City School District, General
Obligation, Unlimited Tax, 6.550%, 12/01/17 12/02 at 102 Aaa 1,661,925
1,200,000 Ridgemont Local School District, General
Obligation, Unlimited Tax, 7.250%, 12/01/14 12/02 at 102 N/R 1,286,472
735,000 Salem Sewer System, 7.500%, 11/01/11
(Pre-refunded to 11/01/96) 11/96 at 102 N/R 769,176
1,000,000 Springfield City School District, General Obligation,
Unlimited Tax, 6.600%, 12/01/12 12/01 at 102 Aaa 1,109,790
2,340,000 Stow General Obligation, 6.200%, 12/01/20 12/05 at 102 A1 2,464,651
3,080,000 Sylvania City School District, General Obligation,
5.750%, 12/01/22 12/05 at 101 Aaa 3,120,379
1,070,000 Trumbull County General Obligation,
7.000%, 12/01/04 No Opt. Call Aaa 1,260,449
1,000,000 Trumbull County Hospital (Trumbull Memorial
Hospital), 6.900%, 11/15/12 11/01 at 102 Aaa 1,120,840
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN OHIO TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 750,000 Tuscarawas County, Hospital Facilities (Union
Hospital), 6.500%, 10/01/21 10/03 at 102 Baa $ 727,688
University of Cincinnati, General Receipts:
1,000,000 7.300%, 6/01/09 (Pre-refunded to 6/01/99) 6/99 at 100 AA-- 1,098,110
1,000,000 6.300%, 6/01/12 12/02 at 102 AA-- 1,077,520
1,600,000 5.500%, 6/01/15 6/05 at 101 AA-- 1,587,648
1,500,000 University of Toledo, General Receipts,
5.350%, 6/01/25 6/04 at 102 Aaa 1,430,670
2,650,000 Walnut Township Local School District, General
Obligation, 6.200%, 12/01/20 No Opt. Call Aaa 2,950,961
1,950,000 Warren County, Hospital Facilities, Otterbein Home
Project, 7.200%, 7/01/11 7/01 at 102 Aa1 2,125,363
Warren General Obligation, Limited Tax:
1,500,000 7.750%, 11/01/10 (Pre-refunded to 11/01/00) 11/00 at 102 BBB+ 1,756,740
250,000 8.625%, 11/15/13 (Pre-refunded to 11/15/98) 11/98 at 102 BBB+ 284,936
2,500,000 Washington Water System, 5.375%, 12/01/19 12/03 at 101 Aaa 2,408,900
750,000 West Geauga Local School District, General
Obligation, Unlimited Tax, 5.950%, 11/01/12 11/04 at 102 Aaa 786,480
500,000 Wooster City School District, General Obligation,
Unlimited Tax, 6.500%, 12/01/17 12/02 at 102 Aaa 552,243
3,000,000 Puerto Rico Electric Power Authority,
5.500%, 7/01/25 7/05 at 100 A-- 2,879,670
- ---------------------------------------------------------------------------------------------------------------------------
$ 168,710,000 Total Investments - (Cost $167,189,364) - 98.7% 179,829,453
===========================================================================================================================
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 0.4%
$ 500,000 Cuyahoga County, University Hospital of
Cleveland, Variable Rate Demand Bonds,
3.400%, 1/01/16+ VMIG-1 500,000
300,000 Ohio Air Quality Development Authority
(The Cincinnati Gas and Electric Company),
Variable Rate Demand Bonds, 3.450%, 9/01/30+ VMIG-1 300,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 800,000 Total Temporary Investments - 0.4% 800,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 1,530,461
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 182,159,914
===========================================================================================================================
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 66 $103,834,421 58%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 16 24,321,720 13
PORTFOLIO OF A+ A1 9 14,858,272 8
INVESTMENTS A, A-- A, A2, A3 7 10,831,669 6
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 11 10,408,660 6
TEMPORARY Non-rated Non-rated 13 15,574,711 9
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 122 $179,829,453 100%
===========================================================================================================================
</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.
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.
57
<PAGE>
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $226,239,426 $218,186,376 $ 78,218,271 $ 63,715,206
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 400,000 7,900,000 2,600,000 1,500,000
Cash - 401,476 114,539 119,718
Receivables:
Interest 3,966,815 3,247,317 1,092,435 1,001,565
Shares sold 23,967 144,099 37,818 11,460
Investments sold - - - -
Other assets 12,536 9,831 4,176 2,806
------------ ------------ ------------ ------------
Total assets 230,642,744 229,889,099 82,067,239 66,350,755
------------ ------------ ------------ ------------
LIABILITIES
Payables:
Investments purchased - 5,215,642 - -
Shares reacquired 40,000 56,538 24,922 -
Cash overdraft 68,006 - - -
Accrued expenses:
Management fees (note 7) 100,051 97,484 35,880 29,076
Other 52,068 50,374 43,994 25,856
Dividends payable 599,330 536,574 261,287 196,115
------------ ------------ ------------ ------------
Total liabilities 859,455 5,956,612 366,083 251,047
------------ ------------ ------------ ------------
Net assets (note 8) $229,783,289 $223,932,487 $ 81,701,156 $ 66,099,708
============ ============ ============ ============
Class A Shares (note 1)
Net Assets $ 12,709,245 $ 17,250,452 $ 4,289,634 $ 5,290,906
============ ============ ============ ============
Shares outstanding 1,201,563 1,603,198 431,437 504,138
============ ============ ============ ============
Net asset value and redemption price per share $ 10.58 $ 10.76 $ 9.94 $ 10.49
============ ============ ============ ============
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 11.08 $ 11.27 $ 10.41 $ 10.98
============ ============ ============ ============
Class C Shares (note 1)
Net Assets $ 684,050 $ 1,040,354 $ 638,184 $ 706,398
============ ============ ============ ============
Shares outstanding 64,678 97,466 64,525 67,455
============ ============ ============ ============
Net asset value, offering and redemption price per share $ 10.58 $ 10.67 $ 9.89 $ 10.47
============ ============ ============ ============
Class R Shares (note 1)
Net Assets $216,389,994 $205,641,681 $ 76,773,338 $ 60,102,404
============ ============ ============ ============
Shares outstanding 20,411,745 19,147,536 7,743,405 5,724,133
============ ============ ============ ============
Net asset value and redemption price per share $ 10.60 $ 10.74 $ 9.91 $ 10.50
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------
NY NY INS OH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $165,378,435 $359,533,384 $179,829,453
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 3,800,000 7,000,000 800,000
Cash 112,018 221,918 141,353
Receivables:
Interest 2,344,826 4,042,665 2,940,082
Shares sold 195,831 53,593 24,037
Investments sold - - 115,000
Other assets 5,854 23,239 7,506
------------ ------------ ------------
Total assets 171,836,964 370,874,799 183,857,431
------------ ------------ ------------
LIABILITIES
Payables:
Investments purchased - - 993,430
Shares reacquired 2,756 45,457 701
Cash overdraft - - -
Accrued expenses:
Management fees (note 7) 74,192 158,596 79,739
Other 68,252 90,386 75,057
Dividends payable 538,521 1,116,110 548,590
------------ ------------ ------------
Total liabilities 683,721 1,410,549 1,697,517
------------ ------------ ------------
Net assets (note 8) $171,153,243 $369,464,250 $182,159,914
============ ============ ============
Class A Shares (note 1)
Net Assets $ 15,731,737 $ 24,746,961 $ 12,904,370
============ ============ ============
Shares outstanding 1,483,039 2,332,442 1,217,784
============ ============ ============
Net asset value and redemption price per share $ 10.61 $ 10.61 $ 10.60
============ ============ ============
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 11.11 $ 11.11 $ 11.10
============ ============ ============
Class C Shares (note 1)
Net Assets $ 645,881 $ 1,369,280 $ 2,163,317
============ ============ ============
Shares outstanding 60,727 129,089 205,074
============ ============ ============
Net asset value, offering and redemption price per share $ 10.64 $ 10.61 $ 10.55
============ ============ ============
Class R Shares (note 1)
Net Assets $154,775,625 $343,348,009 $167,092,227
============ ============ ============
Shares outstanding 14,548,997 32,374,299 15,788,804
============ ============ ============
Net asset value and redemption price per share $ 10.64 $ 10.61 $ 10.58
============ ============ ============
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
59
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended February 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 13,781,032 $ 12,733,263 $ 4,837,922 $ 3,805,611
------------ ------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 1,202,873 1,158,688 426,738 347,740
12b-1 distribution and service fees (note 1) 23,161 32,428 9,341 14,370
Shareholders' servicing agent fees and expenses 151,174 130,018 73,530 56,187
Custodian's fees and expenses 85,828 68,050 51,005 49,007
Directors' fees and expenses (note 7) 4,158 3,876 2,710 1,955
Professional fees 28,924 30,203 16,976 13,484
Shareholders' reports - printing and mailing expenses 76,149 70,338 56,416 31,903
Federal and state registration fees 3,918 2,763 9,534 1,469
Portfolio insurance expense - 17,622 - 4,854
Other expenses 9,757 14,743 4,937 7,918
------------ ------------ ------------ ------------
Total expenses before expense reimbursement 1,585,942 1,528,729 651,187 528,887
Expense reimbursement from investment adviser (note 7) (3,302) (1,695) (59,879) (788)
------------ ------------ ------------ ------------
Net expenses 1,582,640 1,527,034 591,308 528,099
------------ ------------ ------------ ------------
Net investment income 12,198,392 11,206,229 4,246,614 3,277,512
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions, net
of taxes, if applicable (notes 1 and 5) 1,855,177 764,418 (217,900) 12,456
Net change in unrealized appreciation or depreciation of
investments 8,120,195 9,456,488 3,250,694 2,682,527
------------ ------------ ------------ ------------
Net gain from investments 9,975,372 10,220,906 3,032,794 2,694,983
------------ ------------ ------------ ------------
Net increase in net assets from operations $ 22,173,764 $ 21,427,135 $ 7,279,408 $ 5,972,495
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------
NY NY INS OH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 10,173,134 $ 21,352,872 $ 10,738,180
------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 882,509 1,940,010 956,869
12b-1 distribution and service fees (note 1) 30,739 51,219 35,618
Shareholders' servicing agent fees and expenses 143,133 214,972 172,725
Custodian's fees and expenses 58,808 71,270 56,916
Directors' fees and expenses (note 7) 1,440 6,208 1,008
Professional fees 24,971 37,406 25,755
Shareholders' reports - printing and mailing expenses 99,517 102,967 105,217
Federal and state registration fees 2,874 7,586 3,245
Portfolio insurance expenses - 7,559 -
Other expenses 8,233 18,530 8,030
------------ ------------ ------------
Total expenses before expense reimbursement 1,252,224 2,457,727 1,365,383
Expense reimbursement from investment adviser (note 7) (29,700) - (42,592)
------------ ------------ ------------
Net expenses 1,222,524 2,457,727 1,322,791
------------ ------------ ------------
Net investment income 8,950,610 18,895,145 9,415,389
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 5) 1,772,126 973,136 730,235
Net change in unrealized appreciation or depreciation of
investments 5,658,638 15,965,392 6,013,907
------------ ------------ ------------
Net gain from investments 7,430,764 16,938,528 6,744,142
------------ ------------ ------------
Net increase in net assets from operations $ 16,381,374 $ 35,833,673 $16,159,531
============ ============ ===========
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
CA CA INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 12,198,392 $ 12,056,682 $ 11,206,229 $ 11,038,593
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 1,855,177 (2,621,487) 764,418 (1,106,384)
Net change in unrealized appreciation or depreciation
of investments 8,120,195 (8,272,724) 9,456,488 (6,870,030)
------------ ------------ ------------ ------------
Net increase in net assets from operations 22,173,764 1,162,471 21,427,135 3,062,179
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From net investment income:
Class A (388,705) (40,773) (496,274) (59,786)
Class C (18,278) (2,883) (28,991) (4,199)
Class R (11,713,501) (12,099,560) (10,613,497) (10,954,036)
From accumulated net realized gains from investment
transactions:
Class A - (6,186) - (2,542)
Class C - (231) - (317)
Class R - (1,542,643) - (545,843)
In excess of net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
------------ ------------ ------------ ------------
Decrease in net assets from distributions to shareholders (12,120,484) (13,692,276) (11,138,762) (11,566,723)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 9,631,213 3,153,792 12,814,061 4,571,343
Class C 518,671 189,814 927,664 277,611
Class R 22,522,458 24,628,063 12,331,198 21,455,944
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 173,826 17,920 248,069 24,201
Class C 13,296 1,844 16,740 1,935
Class R 7,264,916 8,806,336 6,444,797 7,133,691
------------ ------------ ------------ ------------
40,124,380 36,797,769 32,782,529 33,464,725
------------ ------------ ------------ ------------
Cost of shares redeemed:
Class A (567,970) (117,370) (1,021,240) (71,333)
Class C (64,962) (1,036) (167,154) (68,234)
Class R (31,186,974) (31,154,367) (21,853,091) (29,032,260)
------------ ------------ ------------ ------------
(31,819,906) (31,272,773) (23,041,485) (29,171,827)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets derived from Fund
share transactions 8,304,474 5,524,996 9,741,044 4,292,898
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 18,357,754 (7,004,809) 20,029,417 (4,211,646)
Net assets at the beginning of year 211,425,535 218,430,344 203,903,070 208,114,716
------------ ------------ ------------ ------------
Net assets at the end of year $229,783,289 $211,425,535 $223,932,487 $203,903,070
============ ============ ============ ============
Balance of undistributed net investment income at end of year $ 142,955 $ 65,047 $ 134,147 $ 66,680
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ----------------------------------------------------------------------------------------------------------------------------
MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 4,246,614 $ 4,066,454 $ 3,277,512 $ 3,106,605
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (217,900) (558,617) 12,456 (212,554)
Net change in unrealized appreciation or depreciation
of investments 3,250,694 (2,393,115) 2,682,527 (1,878,784)
----------- ------------ ----------- -----------
Net increase in net assets from operations 7,279,408 1,114,722 5,972,495 1,015,267
----------- ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From net investment income:
Class A (139,213) (16,122) (174,644) (22,806)
Class C (11,360) (1,197) (22,692) (5,217)
Class R (4,149,329) (4,021,155) (3,106,193) (3,099,363)
From accumulated net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
In excess of net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
----------- ------------ ----------- -----------
Decrease in net assets from distributions to shareholders (4,299,902) (4,038,474) (3,303,529) (3,127,386)
----------- ------------ ----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 3,487,963 1,057,696 3,509,564 1,906,377
Class C 510,754 144,012 359,914 324,825
Class R 7,760,983 10,510,784 3,473,819 7,040,265
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 75,540 8,778 104,279 11,338
Class C 7,603 594 20,520 2,330
Class R 2,962,447 2,815,745 2,184,979 2,160,636
----------- ------------ ----------- -----------
14,805,290 14,537,609 9,653,075 11,445,771
----------- ------------ ----------- -----------
Cost of shares redeemed:
Class A (436,265) (32,507) (415,735) (37,958)
Class C (33,924) - (32,222) -
Class R (8,395,795) (10,741,355) (5,205,452) (8,119,665)
----------- ------------ ----------- -----------
(8,865,984) (10,773,862) (5,653,409) (8,157,623)
----------- ------------ ----------- -----------
Net increase (decrease) in net assets derived from Fund
share transactions 5,939,306 3,763,747 3,999,666 3,288,148
----------- ------------ ----------- -----------
Net increase (decrease) in net assets 8,918,812 839,995 6,668,632 1,176,029
Net assets at the beginning of year 72,782,344 71,942,349 59,431,076 58,255,047
----------- ------------ ----------- -----------
Net assets at the end of year $81,701,156 $ 72,782,344 $66,099,708 $59,431,076
=========== ============ =========== ===========
Balance of undistributed net investment income at end of year $ 2,984 $ 56,272 $ 1,505 $ 27,522
=========== ============ =========== ===========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
NY NY INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 8,950,610 $ 8,356,495 $ 18,895,145 $ 19,887,434
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 1,772,126 (1,122,982) 973,136 691,691
Net change in unrealized appreciation or depreciation of
investments 5,658,638 (6,026,320) 15,965,392 (17,661,749)
------------ ------------ ------------ ------------
Net increase from net assets from operations 16,381,374 1,207,193 35,833,673 2,917,376
------------ ------------ ------------ ------------
DISTRIBUTION TO SHAREHOLDERS (note 1)
From net investment income:
Class A (551,771) (35,341) (834,291) (93,178)
Class C (18,002) (818) (36,998) (3,586)
Class R (8,358,840) (8,216,539) (18,227,897) (19,795,360)
From accumulated net realized gains from investment
transactions:
Class A - (2,464) (51,671) (11,988)
Class C - (28) (2,889) (504)
Class R - (697,769) (861,604) (1,367,629)
In excess of net realized gains from investment
transactions:
Class A - - (4,745) (483)
Class C - - (265) (20)
Class R - - (79,130) (55,065)
------------ ------------ ------------ ------------
Decrease in net assets from distributions to shareholders (8,928,613) (8,952,959) (20,099,490) (21,327,813)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 13,070,637 3,107,225 18,519,780 7,035,288
Class C 556,433 81,795 1,180,461 271,337
Class R 12,367,225 26,513,287 13,478,031 34,286,843
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 358,186 18,206 621,995 61,394
Class C 12,262 417 23,992 1,940
Class R 6,297,279 6,975,322 14,466,972 16,604,261
------------ ------------ ------------ ------------
32,662,022 36,696,252 48,291,231 58,261,063
------------ ------------ ------------ ------------
Cost of shares redeemed:
Class A (1,336,675) (51,915) (2,316,785) (99,736)
Class C (23,961) - (153,831) -
Class R (20,329,583) (22,466,951) (44,754,684) (75,263,107)
------------ ------------ ------------ ------------
(21,690,219) (22,518,866) (47,225,300) (75,362,843)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets derived from Fund
share transactions 10,971,803 14,177,386 1,065,931 (17,101,780)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 18,424,564 6,431,620 16,800,114 (35,512,217)
Net assets at the beginning of year 152,728,679 146,297,059 352,664,136 388,176,353
------------ ------------ ------------ ------------
Net assets at the end of year $171,153,243 $152,728,679 $369,464,250 $352,664,136
============ ============ ============ ============
Balance of undistributed net investment income at end of year $ 126,818 $ 104,821 $ 59,448 $ 263,489
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------
OH
- ---------------------------------------------------------------------------------------------
Year ended Year ended
2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 9,415,389 $ 9,142,413
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 730,235 (967,375)
Net change in unrealized appreciation or depreciation
of investments 6,013,907 (5,055,416)
------------ ------------
Net increase in net assets from operations 16,159,531 3,119,622
------------ ------------
DISTRIBUTION TO SHAREHOLDERS (note 1)
From net investment income:
Class A (435,348) (58,833)
Class C (62,605) (9,333)
Class R (8,957,352) (9,076,904)
From accumulated net realized gains from investment
transactions:
Class A - (4,637)
Class C - (879)
Class R - (652,495)
In excess of net realized gains from investment
transactions:
Class A - -
Class C - -
Class R - -
------------ ------------
Decrease in net assets from distributions to shareholders (9,455,305) (9,803,081)
------------ ------------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 8,850,862 4,240,889
Class C 1,260,641 871,689
Class R 10,592,955 15,813,517
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 253,231 28,946
Class C 49,706 6,902
Class R 6,293,847 6,935,311
------------ ------------
27,301,242 27,897,254
------------ ------------
Cost of shares redeemed:
Class A (809,723) (115,343)
Class C (95,567) (3,158)
Class R (18,392,616) (21,090,544)
------------ ------------
(19,297,906) (21,209,045)
------------ ------------
Net increase (decrease) in net assets derived from Fund
share transactions 8,003,336 6,688,209
------------ ------------
Net increase (decrease) in net assets 14,707,562 4,750
Net assets at the beginning of year 167,452,352 167,447,602
------------ ------------
Net assets at the end of year $182,159,914 $167,452,352
============ ============
Balance of undistributed net investment income at end of year $ 68,716 $ 108,632
============ ============
- ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
65
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT
ACCOUNTING POLICIES
At February 29, 1996, the state Funds (the "Funds") covered in this report are
Nuveen California Tax-Free Fund, Inc. (comprising the Nuveen California and
California Insured Tax-Free Value Funds), Nuveen Tax-Free Bond Fund, Inc.
(comprising the Nuveen Massachusetts, New York and Ohio Tax-Free Value Funds)
and Nuveen Insured Tax-Free Bond Fund, Inc. (comprising the Nuveen Massachusetts
and New York Insured Tax-Free Value Funds).
Additional state Funds covering other states may be established in the future.
Each Fund invests primarily in a diversified portfolio of municipal obligations
issued by state and local government authorities in a single state.
The Funds are registered under the Investment Company Act of 1940 as open-end,
diversified management investment companies.
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
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board of Directors. Temporary investments in
securities that have variable rate and demand features qualifying them as short-
term securities are traded and valued at amortized cost.
Securities transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined using the specific identification
method. Securities purchased on a when-issued or delayed delivery basis may be
settled a month or more after the transaction date. Any securities so purchased
are subject to market fluctuations 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 their purchase commitments. At February 29, 1996,
such purchase commitments in California Insured amount to $5,215,642. There were
no such purchase commitments in any of the other Funds.
66
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
Interest income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and distribution to shareholders
Net investment income is declared as a dividend monthly and payment is made or
reinvestment is credited to shareholder accounts after month-end. Net realized
gains from investment transactions are distributed to shareholders not less
frequently than annually only to extent they exceed available capital loss
carryovers.
Distributions to shareholders of net investment income and net realized gains
from investment transactions are recorded on the ex-dividend date. The amount
and timing of such 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 result and will be classified as either distributions in excess
of net investment income or distributions in excess of net realized gains from
investment transactions, if applicable.
Income tax
Each Fund is a separate taxpayer for federal income tax purposes and intends to
comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies by distributing all of its net investment income,
in addition to any significant amounts of net realized gains from investments,
to shareholders. The Funds currently consider significant net realized gains as
amounts in excess of $.001 per share. Furthermore, each Fund intends 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 income
dividends paid during the year ended February 29, 1996, have been designated
Exempt Interest Dividends.
Insurance
The California Insured, Massachusetts Insured and New York Insured Tax-Free
Value Funds invest in municipal securities which are either covered by insurance
or backed by an escrow or trust account containing sufficient U.S. Government or
U.S. Government agency securities, both of which ensure the timely payment of
principal and interest. Each insured municipal security is covered by Original
Issue Insurance, Secondary Market Insurance or Portfolio Insurance. Such
insurance does not guarantee the market value of the municipal securities or the
value of the Funds' shares. Original Issue Insurance and secondary Market
Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in business, regardless of whether
the Funds ultimately dispose of such municipal securities. Consequently, the
market value of the municipal securities covered by Original Issue
67
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Insurance or Secondary Market Insurance may reflect value attributable to the
insurance. Portfolio Insurance is effective only while the municipal securities
are held by the Funds. Accordingly, neither the prices used in determining the
market value of the underlying municipal securities nor the net asset value of
the Funds' shares include value, if any, attributable to the Portfolio
Insurance. Each policy of the Portfolio Insurance does, however, give the Funds
the right to obtain permanent insurance with respect to the municipal security
covered by the Portfolio Insurance policy at the time of its sale.
Flexible sales charge program
Effective September 6, 1994, each Fund commenced offering Class "A" Shares and
Class "C" Shares. Class "A" Shares incur a front-end sales charge and an annual
12b-1 service fee. Class "C" Shares are sold without a sales charge but incur
annual 12b-1 distribution and service fees. Effective June 13, 1995, an investor
purchasing Class "C" Shares agrees to pay a contingent deferred sales charge
("CDSC") of 1% if Class "C" Shares are redeemed within 12 months of purchase.
Prior to the offering of Class "A" and Class "C" Shares, the shares outstanding
were renamed Class "R" and are not subject to any 12b-1 distribution or service
fees. Effective with the offering of the new classes, Class "R" Shares will
generally be available only for reinvestment of dividends by current "R"
shareholders and for already established Nuveen Unit Investment Trust
reinvestment accounts.
Derivative financial instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including future, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Funds are
authorized to invest in such financial instruments, and may do so in the future,
they did not make any such investments during the year ended February 29, 1996,
other than occasional purchases of high quality synthetic money market
securities, if applicable.
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.
68
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
2. EXPENSE ALLOCATION
Expenses of the Funds that are not directly attributable to any 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 are recorded to the specific
class. Effective August 1, 1995, the Funds adopted a multiple class plan
pursuant to Rule 18f-3 under the investment Company Act of 1940 and now
designate class specific expenses to include Rule 12b-1 distribution and service
fees, and other expenses incurred for services received by a class that differ
in either amount or kind. A breakdown of the class specific expenses is as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
February 29, 1996):
Class A $19,006 $25,512 $ 6,732 $ 8,932
Class C 4,155 6,916 2,609 5,438
Shareholders' servicing agent fees and expenses
(for the five month period ended July 31, 1995):
Class A 3,235 4,044 2,378 2,346
Class C 205 227 209 215
Class R 62,876 57,527 29,261 19,878
Shareholders' reports-printing and mailing expenses
(for the five month period ended July 31, 1995):
Class A 1,525 1,808 988 520
Class C 201 190 23 44
Class R 40,490 36,738 37,136 33,910
Federal and state registration fees (for the five month period
ended July 31, 1995):
Class A 985 950 1,207 471
Class C 290 20 1,050 106
Class R 459 48 4,457 633
- --------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
NY NY INS OH
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
February 29, 1996):
Class A $26,638 $42,326 $21,336
Class C 4,101 8,893 14,282
Shareholders' servicing agent fees and expenses (for the
five month period ended July 31, 1995):
Class A 5,805 5,554 4,802
Class C 925 288 564
Class R 56,825 89,427 67,199
Shareholders' reports-printing and mailing expenses (for
the five month period ended July 31, 1995):
Class A 1,599 1,436 2,069
Class C 91 110 240
Class R 65,948 59,582 75,389
Federal and state registration fees (for the five month period
ended July 31, 1995):
Class A 821 1,324 1,207
Class C 194 27 207
Class R 448 525 456
- ----------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
3. FUND SHARES
Transactions in shares were as follows:
- --------------------------------------------------------------------------------------------------------------------------
CA CA INS
- --------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A $ 927,895 $ 321,777 $ 1,211,972 $ 468,407
Class C 50,026 19,666 89,705 28,545
Class R 2,165,620 2,433,649 1,177,751 2,136,079
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from net
realized gains from investment transactions:
Class A 16,682 1,856 23,441 2,486
Class C 1,279 191 1,594 201
Class R 700,563 884,995 614,344 714,801
------------ ----------- ---------- ---------
3,862,065 3,662,134 3,118,807 3,350,519
------------ ----------- ---------- ----------
Shares redeemed:
Class A (54,537) (12,110) (95,872) (7,236)
Class C (6,378) (106) (15,721) (6,858)
Class R (2,990,150) (3,116,035) (2,088,697) (2,915,964)
------------ ----------- ---------- ----------
(3,051,065) (3,128,251) (2,200,290) (2,930,058)
------------ ----------- ---------- ----------
Net increase (decrease) 811,000 533,883 918,517 420,461
============ =========== ========== ==========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------------------------------------------
MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 356,285 114,157 339,891 197,250
Class C 51,779 15,429 34,914 33,405
Class R 795,556 1,117,491 337,797 702,214
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from net
realized gains from investment transactions:
Class A 7,663 956 10,031 1,171
Class C 775 65 1,987 244
Class R 303,251 277,942 211,766 225,446
------------ ------------ ------------ ------------
1,515,309 1,526,040 936,386 1,159,730
------------ ------------ ------------ ------------
Shares redeemed:
Class A (44,057) (3,567) (40,197) (4,008)
Class C (3,523) - (3,095) -
Class R (857,146) (1,130,507) (503,288) (823,516)
------------ ------------ ------------ ------------
(904,726) (1,134,074) (546,580) (827,524)
------------ ------------ ------------ ------------
Net increase (decrease) 610,583 391,966 389,806 332,206
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
NY NY INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,261,309 318,594 1,778,309 719,364
Class C 53,367 8,430 113,081 27,982
Class R 1,182,028 2,613,112 1,291,786 3,411,938
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from net
realized gains from investment transactions:
Class A 34,236 1,882 59,314 6,336
Class C 1,167 43 2,279 200
Class R 603,620 701,622 1,387,801 1,652,628
------------ ------------ ------------ ------------
3,135,727 3,643,683 4,632,570 5,818,448
------------ ------------ ------------ ------------
Shares redeemed:
Class A (127,601) (5,381) (220,550) (10,331)
Class C (2,280) - (14,453) -
Class R (1,956,584) (2,245,562) (4,307,682) (7,580,245)
------------ ------------ ------------ ------------
(2,086,465) (2,250,943) (4,542,685) (7,590,576)
------------ ------------ ------------ ------------
Net increase (decrease) 1,049,262 1,392,740 89,885 (1,772,128)
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------------
OH
- ---------------------------------------------------------------------------------------------
Year ended Year ended
2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold:
Class A 846,644 432,196
Class C 120,707 88,344
Class R 1,015,491 1,586,702
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from net
realized gains from investment transactions:
Class A 24,156 2,972
Class C 4,767 711
Class R 604,197 696,759
------------ ------------
2,615,962 2,807,684
------------ ------------
Shares redeemed:
Class A (76,763) (11,421)
Class C (9,130) (325)
Class R (1,765,109) (2,131,282)
------------ ------------
(1,851,002) (2,143,028)
------------ ------------
Net increase (decrease) 764,960 664,656
============ ============
- ---------------------------------------------------------------------------------------------
</TABLE>
74
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
4. DISTRIBUTIONS TO SHAREHOLDERS
On March 8, 1996, the Funds declared dividend distributions from their ordinary
income which were paid on April 1, 1996, to shareholders of record on March 8,
1996, as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $ .0440 $ .0440 $ .0420 $ .0430
Class C .0375 .0370 .0360 .0365
Class R .0465 .0460 .0440 .0450
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NY NY INS OH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $ .0460 $ .0440 $ .0450
Class C .0395 .0375 .0380
Class R .0485 .0460 .0470
============ ============ ============
- ------------------------------------------------------------------------------------------------------------
</TABLE>
5. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the year ended February 29,
1996, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
Investments in municipal securities $ 86,931,529 $ 88,694,265 $ 8,378,588 $ 4,607,844
Temporary municipal investments 97,900,000 84,425,000 20,800,000 16,400,000
SALES
Investments in municipal securities 76,815,188 80,308,313 4,213,420 327,390
Temporary municipal investments 97,500,000 78,225,000 19,000,000 16,600,000
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NY NY INS OH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASES
Investments in municipal securities $ 78,935,027 $ 58,943,158 $ 65,139,819
Temporary municipal investments 30,250,000 39,200,000 27,400,000
SALES
Investments in municipal securities 73,742,136 65,415,317 55,993,586
Temporary municipal investments 27,650,000 33,600,000 27,400,000
============ ============ ============
- ------------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS
At February 29, 1996, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes for each Fund.
At February 29, 1996, the Funds had unused capital loss carryforwards available
for federal income tax purposes to be applied against future capital gains, if
any. If not applied, the carryovers will expire as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
CA CA INS MA MA INS
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Expiration year:
1997 $ - $ - $ - $ 47,237
1999 - - - 18,885
2003 518,192 220,919 275,030 172,689
2004 247,114 121,012 507,247 39,865
-------- -------- -------- --------
Total $765,306 $341,931 $782,277 $278,676
======== ======== ======== ========
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------
OH
- -----------------------------
<S> <C>
Expiration year:
1997 $ -
1999 -
2003 -
2004 237,140
--------
Total $237,140
========
- -----------------------------
</TABLE>
76
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
6. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at February 29, 1996, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CA CA INS MA MA INS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
Gross unrealized:
Appreciation $12,556,045 $14,643,216 $ 5,577,358 $5,000,960
Depreciation (442,450) (323,932) (72,750) (50,643)
----------- ----------- ----------- ----------
Net unrealized appreciation $12,113,595 $14,319,284 $ 5,504,608 $4,950,317
=========== =========== =========== ==========
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
NY NY INS OH
- -------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
Appreciation $ 9,487,337 $26,164,455 $12,797,421
Depreciation (424,057) (610,337) (157,332)
----------- ----------- -----------
Net unrealized appreciation $ 9,063,280 $25,554,118 $12,640,089
=========== =========== ===========
- -------------------------------------------------------------------
</TABLE>
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS
7. MANAGEMENT FEE AND OTHER TRANSACTIONS
WITH AFFILIATES
Under the Funds' investment management agreements with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays to the Adviser 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>
- ------------------------------------------------------------
Average daily net asset value Management fee
- ------------------------------------------------------------
<S> <C>
For the first $125,000,000 .55 of 1%
For the next $125,000,000 .5375 of 1
For the next $250,000,000 .525 of 1
For the next $500,000,000 .5125 of 1
For the next $1,000,000,000 .5 of 1
For net assets over $2,000,000,000 .475 of 1
- ------------------------------------------------------------
</TABLE>
The management fee is reduced by, or the Adviser assumes certain expenses of
each Fund, in an amount necessary to prevent the total expenses of each Fund
(including the management fee, but excluding interest, taxes, fees incurred in
acquiring and disposing of portfolio securities, 12b-1 Service and Distribution
fees, and to the extent permitted, extraordinary expenses) in any fiscal year
from exceeding .75 of 1% of the average daily net asset value of the California,
Massachusetts, New York and Ohio Tax-Free Value Funds and .975 of 1% of the
average daily net asset value of the California Insured, Massachusetts Insured
and New York Insured Tax-Free Value Funds. The Adviser may also voluntarily
agree to reimburse additional expenses from time to time, which may be
voluntarily terminated at any time at its discretion.
The management fee referred to above compensates the Adviser for overall
investment advisory and administrative services, and general office facilities.
The Funds pay no compensation directly to their directors who are affiliated
with the Adviser or to their officers, all of whom receive remuneration for
their services to the Funds from the Adviser.
78
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
8. COMPOSITION OF NET ASSETS
At February 29, 1996, each Fund had common stock authorized at $.01 par value
per share. The composition of net assets as well as the number of authorized
shares were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $218,292,045 $209,820,987 $ 76,982,089 $ 61,426,562
Balance of undistributed net investment income 142,955 134,147 2,984 1,505
Accumulated net realized gain (loss) from investment
transactions (765,306) (341,931) (788,525) (278,676)
Distributions in excess of net realized gains from investment
transactions - - - -
Net unrealized appreciation of investments 12,113,595 14,319,284 5,504,608 4,950,317
------------ ------------ ------------ ------------
Net assets $229,783,289 $223,932,487 $ 81,701,156 $ 66,099,708
============ ============ ============ ============
Authorized shares:
Class A 40,000,000 40,000,000 200,000,000 200,000,000
Class C 45,000,000 45,000,000 260,000,000 240,000,000
Class R 40,000,000 40,000,000 40,000,000 60,000,000
============ ============ ============ ============
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
NY NY INS OH
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $161,313,710 $343,934,825 $169,688,249
Balance of undistributed net investment income 126,818 59,448 68,716
Accumulated net realized gain (loss) from investment
transactions 649,435 - (237,140)
Distributions in excess of net realized gains from investment
transactions - (84,141) -
Net unrealized appreciation of investments 9,063,280 25,554,118 12,640,089
------------ ------------ ------------
Net assets $171,153,243 $369,464,250 $182,159,914
============ ============ ============
Authorized shares:
Class A 200,000,000 200,000,000 200,000,000
Class C 220,000,000 200,000,000 220,000,000
Class R 80,000,000 100,000,000 80,000,000
============ ============ ============
-----------------------------------------------------------------------------------------------------------
</TABLE>
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS
9. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At February 29, 1996, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Bonds:
Health Care Facilities 19% 14% 16% 18%
Housing Facilities 14 8 19 2
Lease Rental Facilities 8 14 - -
Educational Facilities 13 - 13 15
Water/Sewer Facilities 2 13 1 1
Transportation 5 1 2 1
Electric Utilities 2 7 1 3
Pollution Control - - 2 -
Other 25 26 1 1
General Obligation Bonds - 2 23 40
Escrowed Bonds 12 15 22 19
--- --- --- ---
100% 100% 100% 100%
=== === === ===
- ---------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NY NY INS OH
- --------------------------------------------------------------------------------------------------------------
Revenue Bonds:
Health Care Facilities 4% 10% 15%
Housing Facilities 17 16 5
Lease Rental Facilities 19 1 1
Educational Facilities 16 9 4
Water/Sewer Facilities 4 11 6
Transportation 1 10 2
Electric Utilities - 1 3
Pollution Control 5 3 7
Other 9 4 1
General Obligation Bonds 12 19 41
Escrowed Bonds 13 16 15
--- --- ---
100% 100% 100%
=== === ===
- --------------------------------------------------------------------------------------------------------------
</TABLE>
80
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
Certain long-term and intermediate-term investments owned by the Funds are
either covered by insurance issued by several private insurers or are backed by
an escrow or trust containing U.S. Government or U.S. Government agency
securities, both of which ensure the timely payment of principal and interest in
the event of default (39% for California, 100% for California Insured, 43% for
Massachusetts, 100% for Massachusetts Insured, 22% for New York, 100% for New
York Insured and 59% for Ohio). Such insurance, however, does not guarantee the
market value of the municipal securities or the value of the Fund's shares.
All of the temporary investments in short-term municipal securities have credit
enhancements (letters of credit, guarantees or insurance) issued by third party
domestic or foreign banks or other institutions.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
81
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------------------------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distribution Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
- --------------------------------------------------------------------------------------------------------------------------------
CA
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Year ended
2/29/96 $10.100 $.549* $ .473 $(.542) $ - $10.580
9/6/94 to
2/28/95 10.210 .270* (.031) (.275) (.074) 10.100
CLASS C
Year ended
2/29/96 10.100 .470* .474 (.464) - 10.580
9/16/94 to
2/28/95 10.040 .218* .139 (.223) (.074) 10.100
CLASS R
Year ended
2/29/96 10.130 .575 .467 (.572) - 10.600
Year ended 2/28,
1995 10.740 .582 (.531) (.587) (.074) 10.130
1994 10.850 .598 (.054) (.596) (.058) 10.740
1993 10.140 .633 .707 (.626) (.004) 10.850
8 months ended
2/29/92 9.920 .429 .218 (.427) - 10.140
Year ended 6/30,
1991 9.790 .639 .133 (.642) - 9.920
1990 9.850 .641 (.058) (.643) - 9.790
1989 9.240 .649* .610 (.649) - 9.850
1988 9.280 .647* (.040) (.647) - 9.240
1987** 9.600 .652* (.320) (.652) - 9.280
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
82
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10.36% $ 12,709 1.00% 5.23% .96% 5.27% 36%
2.52 3,146 1.41+ 5.40+ 1.00+ 5.81+ 32
9.53 684 1.84 4.39 1.71 4.52 36
3.71 200 2.41+ 4.37+ 1.75+ 5.03+ 32
10.54 216,390 .71 5.53 .71 5.53 36
0.78 208,080 .71 5.83 .71 5.83 32
5.08 218,430 .73 5.47 .73 5.47 19
13.66 183,215 .71 6.05 .71 6.05 5
6.61 133,377 .67+ 6.30+ .67+ 6.30+ -
8.16 107,508 .69 6.48 .69 6.48 15
6.14 78,704 .69 6.51 .69 6.51 8
14.12 52,048 .77 6.77 .75 6.79 22
6.87 29,640 .88 6.91 .70 7.09 48
3.28 19,094 1.19 5.61 .18 6.62 17
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
83
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CA INS
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $10.250 $.530* $.505 $(.525) $ -- $10.760
9/6/94 to
2/28/95 10.220 .255* .068 (.265) (.028) 10.250
CLASS C
Year ended
2/29/96 10.150 .448* .516 (.444) -- 10.670
9/12/94 to
2/28/95 10.060 .210* .123 (.215) (.028) 10.150
CLASS R
Year ended
2/29/96 10.230 .556 .507 (.553) -- 10.740
Year ended 2/28,
1995 10.670 .559 (.412) (.559) (.028) 10.230
1994 10.850 .560 (.101) (.556) (.083) 10.670
1993 10.010 .584 .871 (.579) (.036) 10.850
8 months ended
2/29/92 9.650 .401 .360 (.401) -- 10.010
Year ended 6/30,
1991 9.480 .600 .176 (.606) -- 9.650
1990 9.630 .608 (.151) (.607) -- 9.480
1989 9.020 .607 .610 (.607) -- 9.630
1988 8.980 .600* .040 (.600) -- 9.020
1987** 9.600 .630* (.620) (.630) -- 8.980
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
84
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
10.32% $ 17,250 .98% 4.99% .97% 5.00% 38%
3.33 4,753 1.24+ 5.26+ 1.05+ 5.45+ 25
9.67 1,040 1.74 4.23 1.71 4.26 38
3.45 222 2.44+ 4.05+ 1.80+ 4.69+ 25
10.63 205,642 .70 5.29 .70 5.29 38
1.68 198,928 .70 5.60 .70 5.60 25
4.27 208,115 .71 5.12 .71 5.12 14
15.05 168,852 .75 5.72 .75 5.72 9
7.99 100,933 .64+ 5.97+ .64+ 5.97+ 7
8.43 74,551 .68 6.26 .68 6.26 29
4.93 50,625 .70 6.36 .70 6.36 13
13.97 35,032 .82 6.52 .82 6.52 23
7.44 22,394 .99 6.60 .82 6.77 31
(.13) 16,192 1.06 5.59 .17 6.48 4
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
85
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MA
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $9.560 $.513* $.388 $(.521) $ -- $9.940
9/6/94 to
2/28/95 9.540 .254* .025 (.259) -- 9.560
CLASS C
Year ended
2/29/96 9.510 .437* .392 (.449) -- 9.890
10/5/94 to
2/28/95 9.280 .188* .254 (.212) -- 9.510
CLASS R
Year ended
2/29/96 9.540 .537* .378 (.545) -- 9.910
Year ended 2/28,
1995 9.940 .541* (.403) (.538) -- 9.540
1994 9.910 .543* .038 (.541) (.010) 9.940
1993 9.210 .563* .704 (.563) (.004) 9.910
3 months ended
2/29/92 9.130 .146 .077 (.143) -- 9.210
Year ended 11/30,
1991 8.760 .577* .375 (.582) -- 9.130
1990 8.900 .587* (.144) (.583) -- 8.760
1989 8.600 .587* .300 (.587) -- 8.900
1988 8.250 .581* .350 (.581) -- 8.600
12/10/86 to
11/30/87 9.600 .577* (1.350) (.577) -- 8.250
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
86
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
9.62% $ 4,290 1.17% 5.04% 1.00% 5.21% 6%
3.05 1,067 1.87+ 4.88+ 1.00+ 5.75+ 17
8.87 638 2.24 3.96 1.75 4.45 6
4.86 147 3.40+ 3.46+ 1.75+ 5.11+ 17
9.80 76,773 .82 5.42 .75 5.49 6
1.64 71,568 .77 5.75 .75 5.77 17
5.96 71,942 .81 5.32 .75 5.38 3
14.21 53,231 .87 5.79 .75 5.91 5
2.44 34,470 .71+ 6.31+ .71+ 6.31+ 5
11.19 31,150 .77 6.37 .75 6.39 19
5.21 20,829 .85 6.58 .75 6.68 23
10.62 15,513 1.09 6.30 .75 6.64 31
11.56 9,485 1.24 6.25 .75 6.74 55
(8.19) 5,681 1.54+ 5.30+ .37+ 6.47+ 34
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
87
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MA INS
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $10.060 $.512* $.433 $(.515) $ -- $10.490
9/6/94 to
2/28/95 10.030 .249* .039 (.258) -- 10.060
CLASS C
Year ended
2/29/96 10.040 .434 .435 (.439) -- 10.470
9/14/94 to
2/28/95 9.910 .202* .137 (.209) -- 10.040
CLASS R
Year ended
2/29/96 10.060 .538 .445 (.543) -- 10.500
Year ended 2/28,
1995 10.450 .545 (.386) (.549) -- 10.060
1994 10.440 .537 -- (.527) -- 10.450
1993 9.650 .551 .784 (.545) -- 10.440
Year ended
2/29/92 9.360 .570 .301 (.581) -- 9.650
Year ended 2/28,
1991 9.140 .568 .219 (.567) -- 9.360
1990 8.960 .571* .178 (.569) -- 9.140
1989 9.030 .576* (.070) (.576) -- 8.960
Year ended
2/29/88 9.540 .582* (.510) (.582) -- 9.030
12/10/86 to
2/28/87 9.600 .131* (.060) (.131) -- 9.540
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
88
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
9.59% $ 5,291 1.09% 4.92% 1.07% 4.94% 1%
2.99 1,956 1.36+ 5.13+ 1.15+ 5.34+ 10
8.80 706 1.81 4.20 1.81 4.20 1
3.52 338 2.07+ 4.41+ 1.90+ 4.58+ 10
9.99 60,102 .81 5.21 .81 5.21 1
1.77 57,137 .79 5.54 .79 5.54 10
5.22 58,255 .84 5.09 .84 5.09 3
14.28 47,098 .86 5.47 .86 5.47 2
9.57 28,189 .72 5.93 .72 5.93 5
8.95 15,625 .85 6.19 .85 6.19 6
8.52 8,649 1.20 5.94 .97 6.17 15
5.84 5,404 1.87 5.54 .97 6.44 41
1.14 4,895 1.75 5.37 .59 6.53 42
.75 2,312 5.18+ .64+ -- 5.82+ --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
89
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NY
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $10.120 $.555* $.487 $(.552) $ -- $10.610
9/6/94 to
2/28/95 10.230 .277* (.067) (.273) (.047) 10.120
CLASS C
Year ended
2/29/96 10.110 .478* .528 (.476) -- 10.640
9/13/94 to
2/28/95 10.110 .231* .038 (.222) (.047) 10.110
CLASS R
Year ended
2/29/96 10.150 .582* .490 (.582) -- 10.640
Year ended 2/28,
1995 10.720 .579 (.529) (.573) (.047) 10.150
1994 10.610 .578* 161 (.580) (.049) 10.720
1993 9.880 .603* .806 (.598) (.081) 10.610
3 months ended
2/29/92 9.820 .163 .053 (.156) -- 9.880
Year ended 11/30,
1991 9.380 .629* .441 (.630) -- 9.820
1990 9.560 .631* (.181) (.630) -- 9.380
1989 9.180 .633* .380 (.633) -- 9.560
1988 8.760 .625* .420 (.625) -- 9.180
12/10/86 to
11/30/87 9.600 .612* (.840) (.612) -- 8.760
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
90
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
10.52% $15,732 1.02% 5.28% .99% 5.31% 47%
2.21 3,189 1.56+ 5.31+ 1.00+ 5.87+ 29
10.13 646 1.99 4.29 1.73 4.55 47
2.80 86 7.97+ (1.06)+ 1.75+ 5.16+ 29
10.80 154,776 .76 5.55 .74 5.57 47
75 149,454 .74 5.79 .74 5.79 29
7.10 146,297 .78 5.30 .75 5.33 15
14.79 107,146 .84 5.75 .75 5.84 12
2.21 66,491 .75+ 6.27+ .75+ 6.27+ 16
11.79 59,351 .79 6.46 .75 6.50 19
4.92 44,347 .81 6.59 .75 6.65 51
11.34 29,040 .98 6.40 .75 6.63 85
12.20 14,975 1.09 6.55 .75 6.89 71
(2.44) 8,239 1.38+ 5.45+ .37+ 6.46+ 20
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
91
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NY INS
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $10.150 $.521 $.492 $(.524) $(.029)*** $10.610
9/6/94 to
2/28/95 10.160 .253* .037 (.260) (.40)*** 10.150
CLASS C
Year ended
2/29/96 10.120 .442 .524 (.447) (.029)*** 10.610
9/13/94 to
2/28/95 10.030 .207* .133 (.210) (.040)*** 10.120
CLASS R
Year ended
2/29/96 10.150 .548 .495 (.554) (.029)*** 10.610
Year ended 2/28,
1995 10.630 .555 (.440) (.555) (.040)*** 10.150
1994 10.620 .550 .035 (.543) (.032) 10.630
1993 9.780 .566 .849 (.562) (.013) 10.620
Year ended
2/29/92 9.320 .590 .467 (.597) -- 9.780
Year ended 2/28,
1991 9.250 .598 .068 (.596) -- 9.320
1990 9.060 .596 .190 (.596) -- 9.250
1989 9.100 .593* (.040) (.593) -- 9.060
Year ended
2/29/88 9.830 .606* (.730) (.606) -- 9.100
12/10/86 to
2/28/87 9.600 .130* .230 (.130) -- 9.830
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
92
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
10.19% $24,747 .93% 4.97% .93% 4.97% 17%
3.01 7,258 1.13+ 5.33+ 1.05+ 5.41+ 11
9.71 1,369 1.69 4.21 1.69 4.21 17
3.53 285 2.32+ 4.13+ 1.80+ 4.65+ 11
10.51 343,348 .67 5.26 .67 5.26 17
1.37 345,121 .65 5.57 .65 5.57 11
5.57 388,176 .68 5.11 .68 5.11 5
14.96 314,877 .73 5.56 .73 5.56 6
11.66 167,048 .69 6.08 .69 6.08 4
7.61 80,484 .73 6.46 .73 6.46 13
8.75 40,372 .85 6.35 .85 6.35 30
6.37 20,206 1.05 6.50 .97 6.58 62
(.85) 14,078 1.12 6.22 .61 6.73 36
3.76 5,177 3.19+ 1.78+ -- 4.97+ --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
93
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OH
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $10.200 $.538* $.404 $(.542) $ -- $10.600
9/6/94 to
2/28/95 10.160 .266* .087 (.272) (.041) 10.200
CLASS C
Year ended
2/29/96 10.160 .458* .395 (.463) -- 10.550
9/15/94 to
2/28/95 10.070 .219* .133 (.221) (.041) 10.160
CLASS R
Year ended
2/29/96 10.180 .563* .403 (.566) -- 10.580
Year ended 2/28,
1995 10.610 .568 (.388) (.569) (.041) 10.180
1994 10.580 .570* .087 (.565) (.062) 10.610
1993 9.870 .595* .728 (.589) (.024) 10.580
3 months ended
2/29/92 9.770 .154 .126 (.153) (.027) 9.870
Year ended 11/30,
1991 9.530 .619 .287 (.624) (.042) 9.770
1990 9.550 .624 .003 (.624) (.023) 9.530
1989 9.040 .629* .510 .629 -- 9.550
1988 8.610 .626* .430 (.626) -- 9.040
12/10/86 to
11/30/87 9.600 .600* (.990) (.600) -- 8.610
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser, if applicable. See note 7 of Notes to Financial
Statements.
**Shares in the California and California Insured Funds were first offered for
sale on 7/1/86.
***The amounts shown include distributions in excess of capital gains of $.0024
per share for the year ended 2/29/96 and $.0015 per share for the period ended
2/28/95.
+Annualized.
++Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gain distribution if any, and changes in net asset
value per share.
+++Net of taxes, if applicable. See note 1 of Notes to Financial Statements.
94
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
9.44% $ 12,904 1.03% 5.08% .98% 5.13% 33%
3.63 4,320 1.27+ 5.40+ 1.00+ 5.67+ 28
8.55 2,163 1.75 4.36 1.73 4.38 33
3.63 901 2.09+ 4.58+ 1.75+ 4.92+ 28
9.70 167,092 .76 5.38 .74 5.40 33
1.99 162,231 .73 5.70 .73 5.70 28
6.30 167,448 .75 5.28 .75 5.28 9
13.88 133,797 .84 5.77 .75 5.86 13
2.87 90,121 .70+ 6.16+ .70+ 6.16+ 3
9.84 81,649 .71 6.37 .71 6.37 16
6.86 56,887 .74 6.61 .74 6.61 38
12.97 37,714 .82 6.59 .75 6.66 66
12.56 20,144 .98 6.71 .75 6.94 55
(4.10) 9,135 1.33+ 5.59+ .39+ 6.53+ 26
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
95
<PAGE>
Your
investment
partners
Since 1898, John Nuveen & Co. Incorporated has worked to bring together the
various participants in the municipal bond industry and build strong
partnerships that benefit all concerned. Investors, financial advisers,
municipal officials, investment bankers--Nuveen believes that forging
relationships within these groups based on trust and value is the key to
successful investing.
As the oldest and largest municipal bond specialist in the United States,
Nuveen's investment bankers work with issuers to understand and meet their needs
in structuring and selling their bond issues.
Nuveen also works closely with financial advisers around the country,
including brokerage firms, banks, insurance companies, and independent
financial planners, to bring the benefits of tax-free investing to you. These
advisers are experts at identifying your needs and recommending the best
solutions for your situation. Together we make a powerful team, helping you
create a successful investment plan that meets your needs today and in the
future.
[PHOTO OF PAINTING APPEARS HERE]
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
[LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
[RECYCLING LOGO]
<PAGE>
Nuveen Tax-Free
Mutual Funds
Dependable tax-free
income for generations
ARIZONA
FLORIDA
MARYLAND
MICHIGAN
NEW JERSEY
PENNSYLVANIA
VIRGINIA
[PHOTO OF COUPLE APPEARS HERE]
SEMIANNUAL REPORT/JULY 31, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
8 Fund performance
12 Portfolio of investments
41 Statement of net assets
43 Statement of operations
45 Statement of changes in net assets
49 Notes to financial statements
60 Financial highlights
<PAGE>
Dear
shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER]
"Over time, municipal bonds have proven to be a valuable and dependable
component of successful investment programs."
As I begin my duties as the new chairman and chief executive officer of John
Nuveen & Co. Incorporated and chairman of the board of the Nuveen mutual funds,
I am pleased to have this opportunity to report to you on the performance of
your funds. My experience at Nuveen over the past 19 years has shaped my
commitment to maintaining Nuveen's tradition of value investing and prudent
management. We strive to help our shareholders meet their need for tax-free
investment income with a full range of investment choices. Our focus will
continue to be on building shareholder value, providing research-oriented
management, and delivering dependable performance. We believe this focus will
contribute to many more years of investment success for our fund shareholders.
Municipal bonds continue to play an important role in meeting the investment
goals of conservative investors. The performance of the mutual funds covered in
this report demonstrates the ability of quality investments to provide
attractive tax-free income. As of July 31, 1996, the current annual yields on
offering prices for R shares for these funds ranged from 4.80% to 5.27%. To
match these yields, an investor in the 36% federal income tax bracket would have
had to earn at least 7.50% on taxable alternatives. And when state taxes are
taken into account, the power of tax-free investing is even
3
<PAGE>
more apparent. Without question, taxable yields at this level on investments of
comparable quality can be difficult to achieve in today's markets.
With the strength of the bond market last year, all of these funds saw an
increase in net asset value per share, further improving investors' overall
experience for the 12-month period ending July 31, 1996, while producing returns
that continue to be very attractive. Total returns for R Shares, representing
changes in net asset value and reinvestment of all dividends and capital gains,
if any, ranged from 5.74% to 7.42%, equivalent to taxable investments with total
returns of 9.06% to 10.94%.
The years ahead present opportunities as well as challenges for all of us. I
want to thank you for your continued confidence in Nuveen mutual funds, and I
look forward to sharing reports of continued progress with you.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
September 15, 1996
4
<PAGE>
Answering your questions
Tom Spalding, head of Nuveen's portfolio management team, discusses the
investment environment and recent factors affecting the municipal market.
How did the municipal market perform over the last year?
Following the outstanding performance of 1995, the beginning of 1996 saw a
slight price decline in the overall bond market. Municipal bonds, however,
maintained an edge over Treasuries and finished the first half of this year on a
positive note with a rally in bond prices. Over the past 12 months, the
municipal market continued to reward investors with solid returns and
opportunities to purchase bonds with strong credit quality.
What has been Nuveen's investment approach over the past year?
Nuveen continues to pursue its value investing strategy, a disciplined approach
to security selection and portfolio construction designed to deliver above-
market performance by identifying individual bonds with current yields, prices,
credit quality, and future prospects that are exceptionally attractive relative
to other bonds in the market. This approach was rewarded over the past year, as
many of our portfolio
5
<PAGE>
[Photo of Tom Spalding]
Tom Spalding, head of Nuveen's portfolio management team, answers investors'
questions on developments in the municipal market.
holdings were upgraded by the national rating agencies, indicating that our
Research Department's judgments about credit quality were on target.
As opportunity allowed, we purchased bonds at discounts from their par value.
These bonds, which have coupon rates slightly below market levels, are less
likely to be called from our portfolios, assuring more stable yields for our
investors.
What is your outlook for the municipal market?
A look at the current economy shows that inflation continues along at the same
modest pace that it has demonstrated over the past five years. Generally level
producer prices, low wage pressure, and a stable money supply are supportive of
a moderately expanding economy. Despite this ideal combination of slow expansion
and low inflation, investors continue to maintain a watchful eye for any
indication of acceleration or the reappearance of inflation. Some economists
believe that the Federal Reserve Open Market Committee will likely increase
short-term interest rates, which could cause long-term rates to rise and bond
prices to fall.
6
<PAGE>
What are some of the factors affecting dividend stability and changes?
All Nuveen funds are structured to provide an attractive stream of tax-free
income. For many investors, stability of income is another important objective.
To help investors satisfy this objective, we set dividends on Nuveen funds
conservatively, seeking a level that we expect will be sustainable for at least
several months. For many of the funds that have seen dividend reductions over
the past year, the changes were relatively small. Still, dividends ultimately
depend on the overall earnings of each fund, which can be reduced by bond calls,
fluctuations in interest rates, and other portfolio changes.
When the Federal Reserve Board cut rates between July 1995 and January 1996,
long-term municipal bond yields reacted by declining almost 130 basis points
from their levels at the beginning of 1995. Current long-term rates are well
below those at the start of the decade. As older, higher-yielding bonds are
called from some portfolios, they are replaced with the bonds available in the
market today, reducing fund earnings. To reduce the effect of bond calls and
protect investors' current income, Nuveen has taken advantage of opportunities
to invest in non-callable bonds as well as bonds priced at a discount from their
par value.
7
<PAGE>
NUVEEN ARIZONA TAX-FREE VALUE FUND
Arizona
Shareholders enjoyed a year of relatively steady monthly dividends, with a
slight decrease in December.
12 MONTH DIVIDEND HISTORY-R SHARES
[BAR CHART APPEARS HERE]
8/95 .0450 2/96 .0435
9/95 .0450 3/96 .0435
10/95 .0450 4/96 .0435
11/95 .0450 5/96 .0435
12/95 .0435 6/96 .0435
1/96 .0435 7/96 .0435
- --------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- --------------------------------------------------------
Current SEC yield on R Shares* 5.00%
Taxable-equivalent yield on R Shares** 8.26%
12-mo. total return on R Shares* 6.20%
Taxable-equivalent total return on R Shares** 9.63%
Combined state and federal tax rate 39.5%
- --------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
NUVEEN FLORIDA TAX-FREE VALUE FUND
Florida
Nuveen funds set dividends with stability in mind, seeking a level that can be
sustained over time. The Fund adjusted the monthly dividend in January to a
level in line with the portfolio's earnings rate.
12 MONTH DIVIDEND HISTORY-R SHARES
[BAR CHART APPEARS HERE]
8/95 .0440 2/96 .0430
9/95 .0440 3/96 .0430
10/95 .0440 4/96 .0430
11/95 .0440 5/96 .0430
12/95 .0440 6/96 .0430
1/96 .0430 7/96 .0430
- --------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- --------------------------------------------------------
Current SEC yield on R Shares* 4.95%
Taxable-equivalent yield on R Shares** 7.73%
12-mo. total return on R Shares* 6.71%
Taxable-equivalent total return on R Shares** 9.68%
Federal tax rate 36.0%
- --------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
8
<PAGE>
NUVEEN MARYLAND TAX-FREE VALUE FUND
Maryland
Nuveen funds set dividends with stability in mind, seeking a level that can be
sustained over time. The Fund adjusted the monthly dividend in January to a
level in line with the portfolio's earnings rate.
12 MONTH DIVIDEND HISTORY--R SHARES
(BAR CHART APPEARS HERE)
<TABLE>
<S> <C> <C> <C>
8/95 .0430 2/96 .0425
9/95 .0430 3/96 .0425
10/95 .0430 4/96 .0425
11/95 .0430 5/96 .0425
12/95 .0430 6/96 .0425
1/96 .0425 7/96 .0425
</TABLE>
<TABLE>
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
<S> <C>
Current SEC yield on R Shares* 4.80%
Taxable-equivalent yield on R Shares** 7.87%
12-mo. total return on R Shares* 5.74%
Taxable-equivalent total return on R Shares** 9.06%
Combined state and federal tax rate 39.0%
- -------------------------------------------------------
</TABLE>
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
NUVEEN MICHIGAN TAX-FREE VALUE FUND
Michigan
Shareholders enjoyed a year of relatively steady monthly dividends with a slight
decrease in January. In addition, shareholders received a capital gains
distribution in November.
12 MONTH DIVIDEND HISTORY--R SHARES
(BAR CHART APPEARS HERE)
<TABLE>
<S> <C> <C> <C> <C>
8/95 .0455 2/96 .0445
9/95 .0455 3/96 .0445
10/95 .0455 of which 4/96 .0445
11/95 .0776 (.0321 is Capital Gains) 5/96 .0445
12/95 .0455 6/96 .0445
1/96 .0455 7/96 .0445
</TABLE>
<TABLE>
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
<S> <C>
Current SEC yield on R Shares* 5.08%
Taxable-equivalent yield on R Shares** 8.47%
12-mo. total return on R Shares* 6.78%
Taxable-equivalent total return on R Shares** 10.35%
Combined state and federal tax rate 40.0%
- -------------------------------------------------------
</TABLE>
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
9
<PAGE>
NUVEEN NEW JERSEY TAX-FREE VALUE FUND
New Jersey
Nuveen funds set dividends with stability in mind, seeking a level that can be
sustained over time. The Fund adjusted its monthly dividend in December and
March to a level in line with the portfolio's earnings rate.
12 MONTH DIVIDEND HISTORY-R SHARES
[BAR CHART APPEARS HERE]
8/95 .0475 2/96 .0460
9/95 .0475 3/96 .0440
10/95 .0475 4/96 .0440
11/95 .0475 5/96 .0440
12/95 .0460 6/96 .0440
1/96 .0460 7/96 .0440
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
Current SEC yield on R Shares* 5.24%
Taxable-equivalent yield on R Shares** 8.73%
12-mo. total return on R Shares* 6.01%
Taxable-equivalent total return on R Shares** 9.73%
Combined state and federal tax rate 40.0%
- -------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
NUVEEN PENNSYLVANIA TAX-FREE VALUE FUND
Pennsylvania
Shareholders enjoyed a year of relatively steady monthly dividends, with a
dividend decrease in January to bring the dividend in line with current
earnings.
12 MONTH DIVIDEND HISTORY-R SHARES
[BAR CHART APPEARS HERE]
8/95 .0440 2/96 .0430
9/95 .0440 3/96 .0430
10/95 .0440 4/96 .0430
11/95 .0440 5/96 .0430
12/95 .0440 6/96 .0430
1/96 .0430 7/96 .0430
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
Current SEC yield on R Shares* 5.27%
Taxable-equivalent yield on R Shares** 8.50%
12-mo. total return on R Shares* 6.69%
Taxable-equivalent total return on R Shares** 9.90%
Combined state and federal tax rate 38.0%
- -------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on page 11.
10
<PAGE>
NUVEEN VIRGINIA TAX-FREE
VALUE FUND
Virginia
Shareholders enjoyed a dividend increase during the past 12 months in addition
to a capital gains distribution in November.
12 MONTH DIVIDEND HISTORY--R SHARES
[BAR CHART APPEARS HERE]
8/95 .0440
9/95 .0440
10/95 .0440
11/95 .0822 (of which .0382 is Capital Gains)
12/95 .0440
1/96 .0450
2/96 .0450
3/96 .0450
4/96 .0450
5/96 .0450
6/96 .0450
7/96 .0450
Capital Gains
- -------------------------------------------------------
FUND HIGHLIGHTS 7/31/96
- -------------------------------------------------------
Current SEC yield on R Shares* 5.12%
Taxable-equivalent yield on R Shares** 8.46%
Total return on R Shares* 7.42%
Taxable-equivalent total return on R Shares** 10.94%
Combined state and federal tax rate 39.5%
- -------------------------------------------------------
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
See footnotes on this page.
* All shares issued prior to September 6, 1994, have been designated as Class R
Shares, which are currently available only for dividend reinvestment and certain
other restricted situations. Please see Financial Highlights beginning on page
60 for additional data on Class A and C Shares.
**An investor subject to the indicated state and federal income tax rate would
have to receive this return from a fully taxable investment to equal the stated
yield and total return on an after-tax basis.
11
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
ARIZONA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Arizona Board of Regents, Arizona State University, System
Revenue Refunding Bonds, Series 1992-A
$ 500,000 5.750%, 7/01/12 AA 7/02 at 101 $ 503,800
500,000 5.500%, 7/01/19 AA 7/02 at 101 478,950
100,000 Arizona Educational Loan Marketing Corporation, Educational
Loan Revenue Bonds, 6.375%, 9/01/05
(Alternative Minimum Tax) Aa 9/02 at 101 104,149
200,000 Arizona Educational Loan Marketing Corporation, 1992
Educational Loan Revenue Bonds, Series B, 7.000%, 3/01/05
(Alternative Minimum Tax) A 3/02 at 101 213,486
300,000 Arizona Health Facilities Authority, Hospital System Revenue
Refunding Bonds (Phoenix Baptist Hospital and Medical
Center, Inc. and Medical Environments, Inc.),
Series 1992, 6.250%, 9/01/11 Aaa 9/03 at 100 314,199
200,000 Arizona Municipal Financing Program, Certificates of
Participation, Series 20, 7.700%, 8/01/10 Aaa No Opt. Call 234,782
500,000 Arizona State University Research Park, Development Refunding
Bonds, Series 1995, 5.000%, 7/01/21 Aaa 7/06 at 100 455,875
250,000 State of Arizona Refunding, Certificates of Participation, Series
1992B, 6.250%, 9/01/10 Aaa 9/02 at 102 263,338
500,000 Student Loan Acquisition Authority of Arizona (A nonprofit
corporation organized pursuant to the laws of the State of
Arizona) Student Loan Revenue Bonds, Series 1994,
6.600%, 5/01/10 (Alternative Minimum Tax) Aa 5/04 at 102 528,460
175,000 Wastewater Management Authority of Arizona, Wastewater
Treatment Financial Assistance Revenue Bonds
Series 1992A, 5.950%, 7/01/12 Aaa 7/02 at 102 180,250
250,000 Wastewater Management Authority of Arizona, Wastewater
Treatment Financial Assistance Revenue Bonds,
Series 1995, 5.750%, 7/01/15 Aaa 7/05 at 102 250,488
700,000 Apache County (Arizona) Public Finance Corporation,
Certificates of Participation, Series 1994,
Arizona Department of Corrections, 5.500%, 5/01/10 A 5/00 at 102 708,519
195,000 Central Arizona Water Conservation District (Central Arizona
Project), Contract Revenue Bonds, Series B 1991,
6.500%, 11/01/11 (Pre-refunded to 5/01/01) AA- 5/01 at 102 213,642
300,000 Sierra Vista Unified School District No. 68 of Cochise County,
Arizona, General Obligation Refunding Bonds,
Series 1992, 7.500%, 7/01/10 Aaa No Opt. Call 362,055
250,000 Sedona-Oak Creek Joint Unified School District No. 9 of
Coconino and Yavapai Counties, Arizona, School Improvement
Bonds, Project of 1992, Series A (1992), 6.750%, 7/01/07 A- 7/01 at 101 269,733
550,000 City of Douglas (Arizona), Municipal Property Corporation,
Municipal Facilities Excise Tax Revenue Bonds,
Series 1995, 5.750%, 7/01/15 Aaa 7/05 at 101 551,001
280,000 Eloy Municipal Property Corporation, Municipal Facilities
Revenue Bonds, Series 1992, 7.000%, 7/01/11 BBB 7/02 at 101 297,665
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 The Industrial Development Authority of The City of Glendale,
Arizona, Revenue Bonds, Midwestern University, Series
1996A, 6.000%, 5/15/16 (WI) AAA 5/06 at 102 $ 503,095
375,000 Maricopa Rural Road Improvement District of Pinal County,
Arizona, Refunding Bonds, Series 1994, 6.900%, 7/01/05 N/R 7/99 at 101 392,404
300,000 Hospital District No. One, Maricopa County, Arizona, Hospital
Facilities Refunding Bonds, Series B (1992), 6.250%, 6/01/10 Aaa 6/04 at 101 315,024
500,000 The Industrial Development Authority of the County of Maricopa
(Arizona), Insured Health Facility Revenue Bonds (Catholic
Healthcare West), 1993 Series A, 5.625%, 7/01/23 Aaa 7/03 at 102 481,215
500,000 The Industrial Development Authority of the County of
Maricopa (Arizona), Samaritan Health Services, Hospital
System Revenue Refunding Bonds, Series 1990A, 7.000%, 12/01/16 Aaa No Opt. Call 582,605
600,000 The Industrial Development Authority of the County of Maricopa,
Arizona, Baptist Hospital System Revenue Refunding Bonds,
Series 1995, 5.500%, 9/01/16 Aaa 9/05 at 101 579,120
Kyrene Elementary School; District No. 28 of Maricopa County,
Arizona, School Improvement Bonds, Project of 1990,
Series E (1993):
265,000 6.000%, 7/01/12 (Pre-refunded to 7/01/02) Aaa 7/02 at 100 282,532
50,000 6.000%, 7/01/12 Aaa 7/02 at 100 51,334
500,000 The Industrial Development Authority of the County of Mohave
(Arizona) Industrial Development Revenue Bonds, 1994 Series
(Citizens Utilities Company Projects), 6.600%, 5/01/29
(Alternative Minimum Tax) AAA 11/03 at 101 515,370
1,000,000 Navajo County, Arizona, Pollution Control Corporation,
Pollution Control Revenue Refunding Bonds (Arizona
Public Service Company), 1993 Series A, 5.875%,
8/15/28 Baa1 8/03 at 102 968,050
1,000,000 Navajo County, Arizona, Pollution Control Corporation,
Pollution Control Revenue Refunding Bonds (Arizona
Public Service Company), 1993 Series A, 5.500%, 8/15/28 Aaa 8/03 at 102 961,450
425,000 City of Peoria, Arizona Improvement District No. 8801 (North
Valley Power Center) Improvement Bonds, 7.300%, 1/01/12 BBB 1/03 at 101 449,166
250,000 City of Phoenix Civic Improvement Corporation, Airport
Terminal Excise Tax Revenue Bonds, Series 1989, 7.800%,
7/01/11 (Alternative Minimum Tax) AA+ 7/97 at 102 262,148
295,000 Phoenix Housing Finance Corporation, Mortgage Revenue
Refunding Bonds, Series 1992A (FHA Insured Mortgage
Loans-Section 8 Assisted Projects), 6.500%, 7/01/24 Aaa 7/02 at 101 301,558
400,000 City of Phoenix (Arizona), Civic Improvement Corporation,
Wastewater System Lease Revenue Bonds, Series 1993,
6.125% 7/01/23 (Pre-refunded to 7/01/03) AAA 7/03 at 102 437,244
1,000,000 City of Phoenix Civic Improvement Corporation (Arizona),
Wastewater System Lease Revenue Refunding Bonds,
Series 1993, 5.000% 7/01/18 A1 7/04 at 102 900,840
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
ARIZONA.....CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 530,000 City of Phoenix Civic Improvement Corporation, Junior Lien
Water System Revenue Bonds, Series 1996, 6.000%, 7/01/19 Aa 7/06 at 100 $ 538,077
200,000 Phoenix Industrial Development Authority (FHA Insured Chris
Ridge Village Project), 6.750%, 11/01/12 AAA 11/02 at 101 209,506
300,000 City of Phoenix, Arizona, Junior Lien Street and Highway User
Revenue Refunding Bonds, Series 1992, 6.250%, 7/01/11 A+ 7/02 at 102 314,955
500,000 The Industrial Development Authority of the City of Phoenix,
Arizona, Multi-family Housing Revenue Refunding Bonds,
Series 1993 (GNMA Collateralized - Meadow Glen Apartments
Project), 5.800%, 8/20/28 Aaa 2/03 at 102 481,010
485,000 The Industrial Development Authority of the City of Phoenix,
Arizona, Statewide Single Family Mortgage Revenue Bonds,
Series 1995, 6.150%, 12/01/08 (Alternative Minimum Tax) AAA 6/05 at 102 487,808
The Industrial Development Authority of the City of Phoenix,
Arizona, Hospital Revenue Bonds (John C. Lincoln Hospital
and Health Center) Series 1994:
500,000 6.000% 12/01/10 BBB+ 12/03 at 102 496,160
500,000 6.000% 12/01/14 BBB+ 12/03 at 102 484,830
240,000 The Industrial Development Authority of the County of Pima
(Arizona) Industrial Development Lease Obligation Refunding
Revenue Bonds, 1988 Series A (Irvington Project),
7.250%, 7/15/10 Aaa 1/02 at 103 262,106
300,000 Tucson Unified School District No. 1 of Pima County, Arizona,
School Improvement Bonds, Project of 1989, Series D (1992),
6.100%, 7/01/12 Aaa 7/02 at 102 312,093
640,000 The Industrial Development Authority of the County of Pima,
Arizona, Health Care System Revenue Bonds, Carondelet
Health Care Corporation of Arizona Issue, Series 1993,
5.250%, 7/01/13 Aaa No Opt. Call 618,733
455,000 The Industrial Development Authority of the County of Pima
(Arizona) Single Family Mortgage Revenue Refunding Bonds,
Series 1995A, 6.500%, 2/01/17 A 8/05 at 102 464,678
Pinal County, Arizona, Certificates of Participation,
Series 1994:
300,000 6.375%, 6/01/06 AA 6/02 at 100 318,960
200,000 6.500%, 6/01/09 AA 6/02 at 100 212,588
280,000 Salt River Project Agricultural Improvement and Power District,
Arizona, Salt River Project Electric System Revenue Bonds,
1986 Series C, 5.750%, 1/01/20 Aa 8/96 at 100 274,168
300,000 Salt River Project Agricultural Improvement and Power District,
Arizona, Salt River Project Electric System Revenue Bonds,
1992 Series D, 5.750%, 1/01/19 Aa 1/02 at 100 296,079
225,000 City of Tempe, General Obligation Bonds Series 1992B,
6.000%, 7/01/08 AA+ 7/02 at 101 235,001
500,000 The Industrial Development Authority of the City of Tempe,
Arizona, Multi-Family Mortgage Refunding Bonds, Series
1993A (FHA Insured Mortgage Loan -- Quadrangles Village
Apartments), 6.250%, 6/01/26 AAA 6/03 at 102 503,655
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600,000 Tempe Union High School District No. 213 of Maricopa County,
Arizona, School Improvement and Refunding Bonds,
Series 1994, 6.000%, 7/01/12 Aaa 7/04 at 101 $ 624,288
500,000 City of Tucson, Arizona, General Obligation Bonds,
Series 1984-G (1994), 6.250%, 7/01/18 Aaa 7/04 at 101 520,340
575,000 Tucson Airport Authority, Inc. (Arizona), Airport Revenue
Bonds, Refunding Series 1993, 5.700%, 6/01/13 Aaa 6/03 at 102 576,415
250,000 Business Development Finance Corporation, Tucson (Arizona),
Local Development Lease Revenue Refunding Bonds,
Series 1992, 6.250%, 7/01/12 Aaa 7/02 at 102 262,135
390,000 City of Tucson, Arizona, Water System Revenue Bonds,
Series 1994-A (1996), 6.000%, 7/01/21 Aaa 7/06 at 101 399,149
300,000 Arizona Board of Regents, University of Arizona, System
Revenue Refunding Bonds, Series 1992, 6.250%, 6/01/11 AA 6/02 at 102 314,427
335,000 Yavapai County Community College District of Yavapai County
Arizona, Revenue Bonds Series 1993, 6.000%, 7/01/12 A- 7/03 at 101 340,175
675,000 Yuma Union High School District No. 70 of Yuma County,
Arizona, School Improvement Bonds, Series 1994,
5.700%, 7/01/06 Aaa 7/02 at 101 701,317
- ------------------------------------------------------------------------------------------------------------------------
$ 23,790,000 Total Investments -- (Cost $23,536,931) -- 100.7% 24,162,200
================--------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 0.4%
$ 100,000 Maricopa County, Arizona Pollution Control Corporation,
================ Pollution Control Revenue Refunding Bonds, (Arizona Public
Service Company Palo Verde Project), 1994 Series B, Variable
Rate Demand Bonds, 3.600%, 5/01/29+ A-1+ 100,000
- ------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (1.1)% (267,249)
- ------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 23,994,951
========================================================================================================================
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
ARIZONA--CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 32 $13,581,090 56%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 13 4,280,449 18
PORTFOLIO OF A+ A1 2 1,215,795 5
INVESTMENTS A, A-- A, A2, A3 5 1,996,591 8
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 5 2,695,871 11
TEMPORARY Non-rated Non-rated 1 392,404 2
INVESTMENTS):
- ----------------------------------------------------------------------------------------------------------
TOTAL 58 $24,162,200 100%
- ----------------------------------------------------------------------------------------------------------
</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.
(WI) Security purchased on a when-issued basis (note 1).
+ 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.
16
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
FLORIDA
<TABLE>
<CAPTION>
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
<S> <C> <C> <C> <C>
$2,500,000 Florida Housing Finance Agency, Housing Revenue Bonds,
(Antigua Club Apartments Project), 1995 Series A1, 6.875%,
8/01/26 (Alternative Minimum Tax) Aaa 2/05 at 102 $2,642,650
1,000,000 Florida Housing Finance Agency, Multi-Family Housing
Revenue Refunding Bonds, 1991 Series C, 6.200%,
8/01/16 AAA 8/06 at 102 1,008,510
750,000 Florida Housing Finance Agency, General Mortgage Revenue
Refunding Bonds, 1992 Series A, 6.400%, 6/01/24 AAA 6/02 at 103 762,045
1,440,000 Florida Housing Finance Agency, Multi-Family Housing
Revenue Bond, 1989 Series I, (GNMA Collateralized-
Driftwood Terrace Apartments Project), 7.650%, 12/20/31
(Alternative Minimum Tax) AAA 6/99 at 103 1,522,627
1,000,000 Florida Municipal Power Agency, All-Requirements Power
Supply Project Revenue Bonds, Series 1992, 6.250%, 10/01/21
(Pre-refunded to 10/01/02) Aaa 10/02 at 102 1,101,900
1,145,000 Florida Municipal Power Agency, Stanton II Project Revenue
Bonds, Series 1992, 6.000%, 10/01/27
(Pre-refunded to 10/01/02) Aaa 10/02 at 102 1,245,176
1,650,000 State of Florida Department of Transportation, Turnpike
Revenue Bonds, Series 1992A, 6.350%, 7/01/22
(Pre-refunded to 7/01/02) Aaa 7/02 at 101 1,809,275
1,160,000 State of Florida, Faith and Credit, State Board of Education,
Public Education Capital Outlay Bonds, Series 1986-C,
7.100%, 6/01/07 Aaa No Opt. Call 1,207,618
300,000 State of Florida, Full Faith and Credit, Pollution Control Bonds,
Series Y, Division of Bond Finance of the Department of
General Services, 6.600%, 7/01/17 Aa 7/02 at 101 321,849
2,680,000 State of Florida, Full Faith and Credit State Board of Education,
Public Education Capital Outlay Bonds, Series 1989-A
(Refunding Bonds), 7.250%, 6/01/23 Aa 6/00 at 102 2,946,392
460,000 State of Florida, Full Faith and Credit, State Board of Education,
Public Education Capital Outlay Bonds, Series 1989-A
(Refunding Bonds), 7.250%, 6/01/23
(Pre-refunded to 6/01/00) Aaa 6/00 at 102 512,408
2,250,000 State of Florida, Full Faith and Credit, State Board of Education,
Public Education Capital Outlay Bonds, 1994 Series B,
5.875%, 6/01/20 Aa 6/05 at 101 2,254,793
300,000 Brevard County Educational Facilities Authority (Florida),
Educational Facilities Refunding And Improvement Revenue
Bonds, Series 1992, 6.875%, 11/01/22 BBB 11/02 at 102 308,694
600,000 Housing Finance Authority of Broward County, Florida,
Multifamily Housing Revenue Refunding Bonds, (Lakeside
Apartments Project), Series 1995, 7.000%, 2/01/25 AAA 2/05 at 102 637,596
190,000 City of Cape Coral Health Facilities Authority, Hospital
Refunding and Improvement Revenue Bonds, Series A, (The
Cape Coral Medical Center, Inc. Project), 8.125%, 11/01/08 Aaa No Opt. Call 208,873
1,000,000 Charlotte County, Florida, Utility System Refunding
Revenue Bonds, Series 1996A, 6.200%, 10/01/23 (WI) Aaa 10/97 at 100 1,004,410
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
FLORIDA--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 Dade County, Florida, Aviation Facilities Revenue Bonds,
1992 Series B, 6.550%, 10/01/13 (Alternative Minimum Tax) Aaa 10/02 at 102 $ 1,067,900
115,000 Housing Finance Authority of Dade County (Florida), Single
Family Mortgage Revenue Bonds, Series B, 7.250%, 9/01/23
(Alternative Minimum Tax) Aaa 3/01 at 102 119,614
2,480,000 Dade County, Florida, Public Facilities Revenue Refunding Bonds
(Jackson Memorial Hospital), Series 1993A, 4.875%, 6/01/15 Aaa 6/03 at 102 2,191,799
465,000 Dade County, Florida, Special Housing Revenue Bonds
(City of Miami Developments--Indenture VIII),
Series A, 12.000%, 7/01/12 A 1/97 at 102 477,197
255,000 Dade County, Florida, Special Obligation Bonds,
(Courthouse Center Project), Series 1994, 6.300%, 4/01/14 A 4/04 at 102 268,064
250,000 Dade County Health Facilities Authority, Hospital Revenue
Refunding Bonds, Series 1989, (South Miami Hospital Project),
7.000%, 10/01/18 (Pre-refunded to 10/01/99) Aaa 10/99 at 102 274,253
300,000 Dade County Health Facilities Authority, Hospital Revenue
Refunding Bonds, Series 1992, (North Shore Medical Center
Project), 6.500%, 8/15/15 Aaa 8/02 at 102 317,973
1,000,000 Town of Davie, Florida, Water and Sewer Improvement and Refunding,
Revenue Bonds, Series 1992, 6.250%, 10/01/17 Aaa 10/02 at 102 1,036,410
600,000 The City of Daytona Beach, Florida, Water and Sewer Revenue Bonds,
Series 1992, 6.000%, 11/15/14 Aaa 11/02 at 102 613,884
1,600,000 City of Dunedin (Florida), Hospital Revenue Refunding Bonds,
Series 1993, (Mease Health Care), 5.375%, 11/15/13 Aaa 11/03 at 101 1,553,408
325,000 Escambia County Housing Finance Authority (Florida), Single
Family Mortgage Revenue Bonds, Series 1992A, (Multi-County
Program), 6.900%, 4/01/20 (Alternative Minimum Tax) Aaa 10/02 at 102 336,476
2,000,000 Escambia County Housing Finance Authority (Florida), Single Family
Mortgage Revenue Bonds, (Multi-County Program), Series
1995, 6.950%, 10/01/27 (Alternative Minimum Tax) Aaa 4/05 at 102 2,054,300
500,000 Certificates of Participation, Series 1992, The School Board of
Escambia County, Florida, 6.375%, 2/01/12 Aaa 2/02 at 100 522,810
500,000 City of Gainesville, Florida, Utilities System Revenue Bonds,
1992 Series A, 6.500%, 10/01/22 Aa 10/02 at 102 556,165
1,000,000 Hillsborough County Aviation Authority, Florida, Tampa
International Airport Revenue Bonds, Series 1996B, 5.875%,
10/01/23 Aaa 10/06 at 102 1,004,220
1,200,000 Hillsborough County Industrial Development Authority, Pollution
Control Revenue Refunding Bonds (Tampa Electric Company
Project) Series 1992, 8.000%, 5/01/22 Aa2 5/02 at 103 1,388,544
250,000 Hillsborough County, Florida, Capital Improvement, Non-Ad Valorem
Revenue Bonds, (Museum of Science and Industry Project),
Series 1992, 6.400%, 1/01/12 (Pre-refunded to 1/01/00) A 1/00 at 102 269,625
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 250,000 City of Hollywood, Florida, Water and Sewer
Revenue Bonds, Series 1991, 6.875%, 10/01/21
(Pre-refunded to 10/01/01) Aaa 10/01 at 102 $ 280,500
470,000 Jacksonville Electric Authority, (Jacksonville,
Florida), Electric System Revenue Bonds, Series
Two 1987A-1, 7.500%, 10/01/02 Aa1 10/97 at 101 1/2 491,512
500,000 Jacksonville Electric Authority, (Jacksonville,
Florida), St. Johns River Power Park System
Refunding Revenue Bonds, Issue Two, Series Seven,
5.500%, 10/01/14 Aa1 10/02 at 101 487,355
250,000 City of Jacksonville, Florida, Excise Taxes Revenue
Refunding Bonds, Series 1992, 6.500%, 10/01/13 Aaa 10/02 at 102 267,633
605,000 Jacksonville Health Facilities Authority, Health
Facilities Revenue Refunding Bonds, Daughters of
Charity National Health System, Inc, St. Vincent's
Medical Center Issue, Series 1990, 7.500%, 11/01/15
(Pre-refunded to 11/01/00) Aaa 11/00 at 102 684,830
1,750,000 Jacksonville Health Facilities Authority, Hospital
Revenue Bonds, (New Children's Hospital at Baptist
Medical Center Project), Series 1991, 7.000%,
6/01/21 Aaa 6/01 at 102 1,917,720
375,000 City of Jacksonville, Florida, Water and Sewer
Development Revenue Bonds, Series 1992, (Jacksonville
Suburban Utilities Corporation Project), 6.750%,
6/01/22 (Alternative Minimum Tax) A 6/02 at 102 394,223
250,000 Town of Jupiter, Florida, Water Revenue Bonds,
Series 1992B, 6.250%, 10/01/18 Aaa 10/01 at 102 258,195
1,300,000 Kissimmee Utility Authority (Florida), Electric System
Improvement and Refunding Revenue Bonds, Series
1993, 5.375%, 10/01/12 Aaa 10/03 at 102 1,273,103
845,000 Housing Finance Authority of Manatee County, Florida,
Single Family Mortgage Revenue Bonds, Series 1994-Sub
Series 3, 7.600%, 11/01/26 (Alternative Minimum Tax) Aaa 11/05 at 105 924,531
2,550,000 City of Miami Beach, Florida, Water and Sewer Revenue
Bonds, Series 1995, 5.375%, 9/01/15 Aaa 9/05 at 102 2,467,176
250,000 North Broward Hospital District (Florida), Hospital
Revenue Refunding Bonds, Series 1992A, 6.250%,
1/01/12 Aaa 1/02 at 102 261,203
1,500,000 Orange County, Florida, Sales Tax Revenue Bonds,
Series 1993B, 5.375%, 1/01/24 Aaa 1/03 at 102 1,419,810
145,000 Orange County, Florida, Sales Tax Revenue Bonds,
Series 1989, 6.125%, 1/01/19 Aaa No Opt. Call 155,324
500,000 Orange County, Florida, Water Utilities System Revenue
Bonds, Series 1992, 6.250%, 10/01/17 Aaa 4/02 at 102 517,310
1,000,000 Orange County Housing Finance Authority, Multifamily
Housing Revenue Bonds, (Ashley Point Apartments
Project), 1994 Series A, 7.100%, 10/01/24 (Alternative
Minimum Tax) BBB+ 10/01 at 101 1,024,870
1,250,000 Orlando (Florida) Utilities Commission, Water and
Electric Subordinated Revenue Bonds, Series 1992A,
6.000%, 10/01/20 Aa 10/02 at 102 1,261,513
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
FLORIDA--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 State of Florida, Orlando-Orange County Expressway Authority,
Senior Lien Revenue Refunding Bonds, Series of 1993,
5.500%, 7/01/18 Aaa 7/03 at 102 $ 980,610
1,000,000 State of Florida, Orlando-Orange County Expressway Authority,
Junior Lien Revenue Refunding Bonds, Series of 1993A,
5.125%, 7/01/20 Aaa 7/03 at 102 917,450
Palm Beach County, Florida, Criminal Justice Facilities, Revenue
Refunding Bonds, Series 1993:
1,000,000 5.300%, 6/01/05 Aaa No Opt. Call 1,025,090
1,000,000 5.375%, 6/01/10 Aaa No Opt. Call 1,001,860
2,000,000 City of Pensacola Health Facilities Authority, Health Facilities
Revenue Bonds, (Daughters of Charity National Health
System-Sacred Heart Hospital of Pensacola), Series 1993,
5.250%, 1/01/11 Aa 1/03 at 102 1,913,180
2,000,000 Pinellas County (Florida), Health Facilities Authority, Hospital
Revenue Bonds, Series 1993 (Morton Plant Health System
Project), 5.500%, 11/15/18 Aaa 11/03 at 102 1,926,500
565,000 St. Lucie County, Florida, Solid Waste System Revenue Bonds,
Series 1990, 6.000%, 9/01/15 (Pre-refunded to 9/01/99) Aaa 9/99 at 100 593,182
630,000 City of St. Petersburg Health Facilities Authority (Florida),
Revenue Bonds, Series 1985A (Allegany Health System Loan
Program), 7.000%, 12/01/15 Aaa 12/01 at 102 694,701
1,000,000 City of Sarasota, Florida, Water and Sewer System Revenue
Bonds, Series 1988-A 7.625%, 10/01/08
(Pre-refunded to 10/01/96) Aaa 10/96 at 102 1,026,160
165,000 City of Tampa, Florida, Water and Sewer Systems Revenue
Bonds, Series 1992, 6.000%, 10/01/17 Aaa 10/02 at 101 167,370
335,000 City of Tampa, Florida, Water and Sewer Systems Revenue
Bonds, Series 1992, 6.000%, 10/01/17
(Pre-refunded to 10/01/02) Aaa 10/02 at 101 361,783
1,000,000 Turtle Run Community Development District, (Coral Springs,
Florida), Water Management Benefit Tax Refunding Bonds,
Series 1993, 6.400%, 5/01/11 A1 5/03 at 100 1,045,770
2,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of
1996, (General Obligation Bonds), 5.400%, 7/01/25 A 7/06 at 101 1/2 2,312,800
- -------------------------------------------------------------------------------------------------------------------------------
$60,250,000 Total Investments -- (cost $59,719,592) -- 98.5% 61,600,722
==============-----------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 1.9%
$ 1,200,000 Jacksonville Health Facilities Authority, Hospital Revenue
==============
Bonds, (Baptist Medical Center Project), Series 1993, Variable
Rate Demand Bonds, 3.650%, 6/01/08+ A-1 1,200,000
- -------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.4)% (228,063)
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $62,572,659
===============================================================================================================================
</TABLE>
20
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 46 $43,878,176 71%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 9 11,621,303 19
PORTFOLIO OF A+ A1 1 1,045,770 2
INVESTMENTS A, A- A, A2, A3 5 3,721,909 6
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 1,333,564 2
TEMPORARY
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL 63 $61,600,722 100%
- ---------------------------------------------------------------------------------------------------------------------------------
</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.
(WI) Security purchased on a when-issued basis (note 1).
+ 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.
21
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
MARYLAND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,500,000 Washington Metropolitan Area Transit Authority (District of
Columbia), Gross Revenue Transit Refunding Bonds, Series
1993, 5.250%, 7/01/14 Aaa 1/04 at 102 $1,435,305
500,000 Community Development Administration, Department of
Housing and Community Development, State of Maryland,
Single Family Program Bonds, 1987 First Series,
7.000%, 4/01/14 Aa 4/97 at 103 518,320
1,440,000 Community Development Administration, Department of
Housing and Community Development, State of Maryland,
Single Family Program Bonds, 1991 Fourth Series,
7.450%, 4/01/32 (Alternative Minimum Tax) Aa 4/01 at 102 1,504,181
Community Development Administration, Department of
Housing and Community Development, State of Maryland,
Multi-Family Housing Revenue Bonds (Insured Mortgage
Loans), 1992 Series D:
700,000 6.700%, 5/15/27 Aa 5/02 at 102 728,287
500,000 6.750%, 5/15/33 Aa 5/02 at 102 520,165
1,855,000 Maryland Economic Development Corporation (Health and
Mental Hygiene Providers Facilities Acquisition Program)
Revenue Bonds, Series 1996A, 7.625%, 4/01/21 N/R 4/11 at 102 1,747,169
500,000 Maryland Health and Higher Educational Facilities Authority,
Revenue Bonds, Sinai Hospital of Baltimore Issue, Series 1990,
7.000%, 7/01/19 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 551,380
500,000 Maryland Health and Higher Educational Facilities Authority,
Revenue Bonds, Francis Scott Key Medical Center Issue, Series
1990, 6.750%, 7/01/23 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 546,945
1,005,000 Maryland Health and Higher Educational Facilities Authority,
Doctors' Community Hospital Issue, Series 1990, 8.750%,
7/01/22 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 1,169,890
1,000,000 Maryland Health and Higher Educational Facilities Authority,
Refunding Revenue Bonds, Francis Scott Key Medical Center
Issue, Series 1993, 5.000%, 7/01/13 Aaa 7/03 at 102 928,190
1,000,000 Maryland Health and Higher Educational Facilities Authority,
Project and Refunding Revenue Bonds, Doctors Community
Hospital Issue, Series 1993, 5.750%, 7/01/13 Baa 7/03 at 102 919,810
1,760,000 Maryland Stadium Authority, Convention Center Expansion
Lease Revenue Bonds, Series 1994, 5.875%, 12/15/12 Aaa 12/04 at 102 1,797,558
Maryland Stadium Authority, Sports Facilities Lease Revenue
Bonds, Series 1989D:
500,000 7.375%, 12/15/04 (Alternative Minimum Tax) Aa 12/99 at 102 549,940
500,000 7.500%, 12/15/10 (Alternative Minimum Tax) Aa 12/99 at 102 547,185
3,010,000 Maryland Transportation Authority, Special Obligation Revenue
Bonds, Baltimore/Washington International Airport Projects,
Series 1994-A (Qualified Airport Bonds), 6.400%, 7/01/19
(Alternative Minimum Tax) Aa 7/04 at 102 3,092,926
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,000,000 Maryland Transportation Authority, Transportation Facilities
Projects, Revenue Bonds, Series 1992, 5.750%, 7/01/15 A1 7/02 at 100 $1,000,690
2,000,000 State of Maryland, General Obligation Bonds, State and Local
Facilities Loan of 1993, Third Series (Capital Improvement
and Refunding Bonds), 4.600%, 7/15/06 Aaa 7/03 at 101 1,912,860
2,000,000 Baltimore County, Maryland, General Obligation Bonds,
Baltimore County Pension Funding Bonds, 1991 Refunding
Series, 6.700%, 7/01/11 Aaa 7/98 at 102 2,114,860
600,000 City of Baltimore, Maryland (Mayor and City Council of
Baltimore), General Obligation Consolidated Public
Improvement Refunding Bonds of 1992--Series A,
6.500%, 10/15/12 (Pre-refunded to 10/15/02) Aaa 10/02 at 100 657,330
2,295,000 Mayor and City Council of Baltimore (City of Baltimore,
Maryland), General Obligation Consolidated Public
Improvement Refunding Bonds of 1995--Series A,
7.375%, 10/15/03 Aaa No Opt. Call 2,645,883
1,000,000 Baltimore City, Maryland, Mortgage Revenue Refunding Bonds,
Series 1992 (Gnma Collateralized-Tindeco Wharf Apartments
Project), 6.700%, 12/20/28 AAA 12/02 at 102 1,038,180
1,500,000 Mayor and City Council of Baltimore (Maryland), Port Facilities
Revenue Bonds (Consolidation Coal Sales Company Project),
1984B, 6.500%, 10/01/11 AA- 4/02 at 103 1,628,160
1,500,000 City of Baltimore, Maryland (Mayor and City Council of
Baltimore), Project and Refunding Revenue Bonds (Water
Projects), Series 1996-A, 5.500%, 7/01/26 Aaa 7/06 at 101 1,445,625
625,000 Mayor and City Council of Baltimore (Maryland), Project and
Refunding Revenue Bonds (Water Projects), Series 1990-A,
6.500%, 7/01/20 (Pre-refunded to 7/01/00) Aaa 7/00 at 100 669,050
2,165,000 City of Gaithersburg, Maryland, Nursing Home Revenue
Refunding Bonds, (Shady Grove Adventist Nursing and
Rehabilitation Center Project), Series 1992A, 6.500%, 9/01/12 Aaa No Opt. Call 2,368,467
1,000,000 Howard County, Maryland, Mortgage Revenue Refunding
Bonds, Series 1992 (Howard Hills Townhouses Project--FHA
Insured Mortgage Loan), 6.400%, 7/01/24 Aaa 7/02 at 102 1,026,500
2,000,000 Howard County, Maryland, Multifamily Housing Revenue
Refunding Bonds, Series 1994, (Chase Glen Project), 7.000%,
7/01/24 (Mandatory put 7/01/04) N/R 7/02 at 104 2,128,320
700,000 The Maryland National Capital Park and Planning Commission,
Maryland, (Prince George's County, Maryland), General
Obligation Bonds, Prince George's County Park Acquisition
and Development Bonds, Series L-2, 6.125%, 7/01/02
(Pre-refunded to 7/01/02) Aa 7/02 at 102 761,040
1,000,000 Housing Opportunities Commission of Montgomery County,
(Montgomery County, Maryland), Multifamily Housing
Revenue Bonds, 1995 Series A, 6.000%, 7/01/20 Aa 7/05 at 102 996,160
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
MARYLAND--CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 450,000 Housing Opportunities Commission of Montgomery County,
(Montgomery County, Maryland), Single Family Mortgage
Revenue Bonds, 1986 Series C, 7.250%, 7/01/13 Aa 7/99 at 100 $ 464,184
1,615,000 Housing Opportunities Commission of Montgomery County,
(Montgomery County, Maryland), Single Family Mortgage
Revenue Bonds, 1994 Series A, 6.600%, 7/01/14 Aa 7/04 at 102 1,673,108
1,000,000 Montgomery County, Maryland, Solid Waste System Revenue
Bonds, (1993 Series A), 5.875%, 6/01/13 (Alternative
Minimum Tax) Aaa 6/03 at 102 1,009,160
1,500,000 Morgan State University, Maryland, Academic Fees and
Auxiliary Facilities Fees, Revenue Refunding Bonds,
1993 Series, 6.100%, 7/01/20 Aaa No Opt. Call 1,580,760
1,000,000 Northeast Maryland Waste Disposal Authority, Resource
Recovery Revenue Refunding Bonds, (Southwest Resource
Recovery Facility), Series 1992, 6.900%, 1/01/00 Aaa No Opt. Call 1,067,990
600,000 Prince George's County, Maryland, Hospital Revenue Bonds,
Dimensions Health Corporation, Series 1992, 6.700%, 7/01/97 A No Opt. Call 614,580
1,550,000 Housing Authority of Prince George's County, Maryland,
Mortgage Revenue Refunding Bonds, Series 1992A (New
Keystone Apartments Project-FHA Insured Mortgage Loan),
6.800%, 7/01/25 Aaa 1/02 at 102 1,616,480
1,500,000 Prince George's County, Maryland, Pollution Control Revenue
Refunding Bonds (Potomac Electric Project), 1993 Series,
6.375%, 1/15/23 A+ 1/03 at 102 1,564,275
1,000,000 University of Maryland System, Auxiliary Facility and Tuition
Revenue Bonds, 1993 Refunding Series C, 5.000%, 10/01/11 AA+ 10/03 at 101 955,380
1,170,000 Washington Suburban Sanitary District, Maryland,
(Montgomery and Prince George's Counties, Maryland),
General Construction Bonds of 1991 (Second Series),
8.000%, 1/01/02 Aa1 No Opt. Call 1,352,380
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of
1992 (General Obligation Bonds), 6.600%, 7/01/13
(Pre-refunded to 7/01/02) Aaa 7/02 at 101 1/2 556,910
1,750,000 Puerto Rico Aqueduct and Sewer Authority, Revenue Bonds,
Series 1988A, 7.875%, 7/01/17 (Pre-refunded to 7/01/98) AAA 7/98 at 102 1,908,148
2,000,000 Puerto Rico Highway and Transportation Authority, Highway
Revenue Bonds, (Series X), 5.250%, 07/01/14 A- 7/03 at 101 1/2 1,810,780
185,000 Puerto Rico Electric Power Authority, Power Revenue
Refunding Bonds, Series 1989-N, 7.125%, 7/01/14 A- 7/99 at 101 1/2 199,638
315,000 Puerto Rico Electric Power Authority, Power Revenue
Refunding Bonds, Series 1989-0, 7.125%, 7/01/14
(Pre-refunded to 7/01/99) AAA 7/99 at 101 1/2 344,442
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority,
Hospital Revenue Bonds, 1995 Series A, (Hospital Auxilio
Mutuo Obligated Group Project), 6.250%, 7/01/16 Aaa 1/05 at 102 $ 1,043,900
- ----------------------------------------------------------------------------------------------------------------------------------
$ 52,790,000 Total Investments -- (cost $53,138,209) -- 98.1% 54,712,491
================------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 1.3%
$ 700,000 Maryland Health and Higher Educational Facilities Authority,
================ Kaiser Permanente Revenue Bonds, 1995 Series A, Variable
Rate Demand Bonds, 3.500%, 7/01/15+ VMIG-1 700,000
- ----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.6% 364,906
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 55,777,397
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 24 $32,528,739 59%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 12,198,490 22
PORTFOLIO OF A+ A1 2 2,564,965 5
INVESTMENTS A, A- A, A2, A3 3 2,624,998 5
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 1 919,810 2
TEMPORARY Non-rated Non-rated 2 3,875,489 7
INVESTMENTS):
- --------------------------------------------------------------------------------------------------------------------------
TOTAL 45 $54,712,491 100%
- --------------------------------------------------------------------------------------------------------------------------
</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.
+ 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.
25
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
MICHIGAN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,145,000 Board of Trustees of Michigan State University, General Revenue
Bonds, Series 1992 A, 6.250%, 8/15/15 AA- 8/02 at 101 $ 1,171,427
Michigan Municipal Bond Authority, State Revolving Fund
Reserve Bond, Series 1992A:
1,000,000 4.750%, 12/01/09 Aaa 12/01 at 100 923,030
555,000 6.600%, 10/01/18 Aa 10/02 at 102 585,902
950,000 Michigan Municipal Bond Authority, State Revolving Fund
Revenue Bonds, Series 1994, 7.000%, 10/01/04 Aa No Opt. Call 1,073,652
1,000,000 Michigan Public Power Agency, Belle River Project Refunding
Revenue Bonds, 1993 Series A, 5.250%, 1/01/18 AA- 1/03 at 102 918,650
Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds, (The Detroit Medical Center Obligated
Group), Series 1988B:
460,000 8.125%, 8/15/08 (Pre-refunded to 8/15/98) Aaa 8/98 at 102 502,798
40,000 8.125%, 8/15/08 A 8/98 at 102 43,056
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue
Bonds, (Daughters of Charity National Health System-
Providence Hospital), Series 1991, 7.000%, 11/01/21 Aa 11/01 at 102 1,076,110
500,000 Michigan State Hospital Finance Authority, Hospital Revenue
Bonds, (Mid-Michigan Obligated Group), Series 1992,
6.900%, 12/01/24 A 12/02 at 102 523,615
860,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds (The Detroit Medical Center Obligated
Group) Series 1993B, 5.000%, 8/15/02 A No Opt. Call 857,325
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds, (Otsego Memorial Hospital Gaylord,
Michigan), Series 1995, 6.125%, 1/01/15 AA 1/05 at 102 1,017,650
1,190,000 Michigan State Housing Development Authority, Limited
Obligation Multi-Family Revenue Refunding Bonds, Series
1995A, (GNMA Collateralized Program-Parc Pointe
Apartments), 6.500%, 10/01/15 Aaa 10/05 at 102 1,237,207
1,000,000 Michigan State Housing Development Authority, Single Family
Mortgage Revenue Bonds, 1995 Series A, 6.800%, 12/01/16 AA+ 6/05 at 102 1,039,510
1,740,000 Michigan State Housing Finance Authority, Hospital Revenue
and Refunding Bonds, (Daughters of Charity National Health
System-St. Mary's Medical Center of Saginaw, Inc.) Series
1995, 5.500%, 11/01/05 Aa No Opt. Call 1,777,793
Michigan State Housing Development Authority, Rental
Housing Revenue Bonds, 1992 Series A:
500,000 6.400%, 4/01/05 A+ 10/02 at 102 524,215
500,000 6.650%, 4/01/23 A+ 10/02 at 102 514,840
1,000,000 Michigan State Housing Development Authority, Rental
Housing Revenue Bonds, 1994 Series B, 5.700%, 4/01/12 A+ 4/04 at 102 972,670
1,055,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds,
(WMX Technologies, Inc. Project), Series 1993, 6.000%,
12/01/13 (Alternative Minimum Tax) A1 12/03 at 102 1,060,834
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,000,000 State Building Authority, State of Michigan,
1991 Revenue Bonds, Series II, 6.250%,
10/01/20 AA- 10/01 at 102 $1,011,680
400,000 County of Bay, Michigan, Bay County West
Side Regional Sewage Disposal System
Bonds, 6.400%, 5/01/02 A 11/96 at 102 408,000
250,000 Capital Region Airport Authority, (Lansing,
Michigan), Airport Revenue Bonds, Series
1992, 6.700%, 7/01/21 (Alternative Minimum
Tax) Aaa 7/02 at 102 265,653
1,000,000 School District of the City of Dearborn,
County of Wayne, State of Michigan, 1992
School Building and Site Bonds, (General
Obligation Unlimited Tax), 6.000%, 5/01/14 AA 5/01 at 102 1,014,420
1,500,000 City of Detroit, Michigan, Convention Facility
Limited Tax Revenue Refunding Bonds, (Cobo
Hall Expansion Project), Series 1993, 5.250%,
9/30/12 Aaa 9/03 at 102 1,424,640
1,000,000 City of Detroit, Michigan, Water Supply System
Revenue and Revenue Refunding Bonds, Series
1993, 4.750%, 7/01/19 Aaa 7/04 at 102 855,900
1,000,000 Dexter Community Schools, Counties of Washtenaw
and Livingston, State of Michigan, 1993 School
Building and Site and Refunding Bonds, (General
Obligation Unlimited Tax), 5.000%, 5/01/17 AA 5/03 at 102 895,760
445,000 Grand Rapids Housing Corporation, Multi-Family
Revenue Refunding Bonds, Series 1992 (FHA
Insured Mortgage Loan-Section 8 Assisted
Elderly Project), 7.375%, 7/15/41 AAA 1/04 at 104 483,337
500,000 County of Grand Traverse (Michigan), Hospital
Finance Authority, Hospital Revenue Refunding
Bonds (Munson Healthcare Obligated Group),
Series 1992A, 6.250%, 7/01/22 Aaa 7/02 at 102 510,435
950,000 Huron Valley School District, Counties of
Oakland and Livingston, State of Michigan,
1996 Refunding Bonds (General Obligation
-Unlimited Tax), 5.750%, 5/01/22 (WI) Aaa 5/07 at 100 946,742
1,000,000 Lake Orion Community School District,County
of Oakland, State of Michigan, 1995
Refunding Bonds, (General Obligation
-Unlimited Tax), 5.500%, 5/01/20 Aaa 5/05 at 101 964,600
1,250,000 City of Lansing, Sewage Disposal System
Revenue and Revenue Refunding Bonds, 1994
Series, 5.850%, 5/01/14 Aaa 5/04 at 102 1,255,125
1,000,000 County of Monroe, Michigan, Pollution Control
Revenue Bonds, (The Detroit Edison Company
Project), Series A-1994, 6.350%, 12/01/04
(Alternative Minimum Tax) Aaa No Opt. Call 1,088,870
City of Muskegon, County of Muskegon, State of
Michigan, Water Supply System Revenue Bonds,
Series 1993:
450,000 4.500%, 5/01/12 Baa1 5/01 at 101 375,534
450,000 4.500%, 5/01/13 Baa1 5/01 at 101 372,794
180,000 Saginaw-Midland Municipal Water Supply
Corporation, State of Michigan, Water Supply
Revenue Bonds (Limited Tax General Obligation),
Series 1992, 6.875%, 9/01/16 A 9/04 at 102 196,864
200,000 Hospital Finance Authority of the City of
St. Joseph, Michigan, Hospital Revenue
Refunding and Improvement Bonds, (Mercy
Memorial Medical Center, Inc.), Series 1986A,
7.300%, 10/01/00 (Pre-refunded to 10/01/96) AAA 10/96 at 102 205,174
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
MICHIGAN--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,000,000 Regents of the University of Michigan, Hospital
Revenue Bonds, Series 1990, 6.375%, 12/01/24 Aa 12/00 at 100 $ 1,017,260
250,000 The Economic Development Corporation of the City
of Warren, Nursing Home Revenue Refunding Bonds,
(GNMA Mortgage-Backed Security-Autumn Woods
Project), Series 1992, 6.900%, 12/20/22 Aaa 3/02 at 101 261,175
1,000,000 Charter County of Wayne, Michigan, Airport Revenue
Refunding Bonds (Detroit Metropolitan Wayne County
Airport), Subordinate Lien, Series 1993C, 5.250%,
12/01/13 Aaa 12/03 at 102 946,560
1,000,000 Western Townships Utilities Authority, Sewage
Disposal System Refunding Bonds, Series
1991, 6.500%, 1/01/10 AAA 1/02 at 100 1,059,420
500,000 Puerto Rico Aqueduct and Sewer Authority,
Revenue Bonds, Series 1988A, 7.875%,
7/01/17 (Pre-refunded to 7/01/98) AAA 7/98 at 102 545,185
250,000 Puerto Rico Public Buildings Authority, Public
Education and Health Facilities Bonds,
Series L, 6.875%, 7/01/21 (Pre-refunded to
7/01/02) Aaa 7/02 at 101 1/2 281,812
- ---------------------------------------------------------------------------------------------------------------------
$32,070,000 Total Investments -- (cost $31,212,932) -- 98.3% 32,207,224
================-----------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 2.1%
$ 700,000 Regents of the University of Michigan, Hospital
================ Revenue Bonds, Series 1995A, (Adjustable Rate
Demand), Variable Rate Demand Bonds, 3.750%,
12/01/27+ VMIG-1 700,000
- ---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.4%) (154,672)
- ---------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $32,752,552
=====================================================================================================================
</TABLE>
28
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 18 $13,757,663 43%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 12 12,599,814 39
PORTFOLIO OF A+ A1 4 3,072,559 10
INVESTMENTS A, A-- A, A2, A3 5 2,028,860 6
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 2 748,328 2
TEMPORARY
INVESTMENTS):
- -----------------------------------------------------------------------------------------------------------
TOTAL 41 $32,207,224 100%
- -----------------------------------------------------------------------------------------------------------
</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.
(WI) Security purchased on a when-issued basis (note 1).
+ 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.
29
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NEW JERSEY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,415,000 The Delaware River and Bay Authority, Revenue Bonds, Series
1993, 5.000%, 1/01/17 Aaa 1/04 at 102 $1,292,334
1,000,000 New Jersey Economic Development Authority, Gas Facilities
Revenue Bonds, 1991 Series A, (Elizabethtown Gas Company
Project), 6.750%, 10/01/21 (Alternative Minimum Tax) A3 10/96 at 102 1,022,300
200,000 New Jersey Economic Development Authority, Lease Rental
Bonds, 1992 Series, (Liberty State Park Project), 6.800%,
3/15/22 (Pre-refunded to 3/15/02) A1 3/02 at 102 222,922
1,000,000 New Jersey Economic Development Authority, Economic
Development Bonds, (Yeshiva K'Tana of Passaic-1992 Project),
8.000%, 9/15/18 N/R No Opt. Call 1,148,500
2,965,000 New Jersey Economic Development Authority, Economic
Development Bonds, (Bridgewater Resources Inc. Project),
1994 Series A, 8.375%, 11/01/04 (Alternative Minimum Tax) N/R No Opt. Call 3,082,770
250,000 New Jersey Economic Development Authority, Solid Waste
Disposal Facility Revenue Bonds, (Garden State Paper
Company, Inc. Project), Series 1992, 7.125%, 4/01/22
(Alternative Minimum Tax) Aa1 4/02 at 102 267,253
1,285,000 New Jersey Economic Development Authority, Economic
Growth Bond, Composite Issue-1992 Second Series H,
5.300%, 12/01/07 (Alternative Minimum Tax) Aa3 12/03 at 102 1,266,727
650,000 New Jersey Economic Development Authority, Market
Transition Facility Senior Lien Revenue Bonds, Series 1994A,
5.875%, 7/01/11 Aaa 7/04 at 102 663,923
975,000 New Jersey Educational Facilities Authority, Trenton State
College Issue, Revenue Bonds, Series 1976 D,
6.750%, 7/01/08 A+ 1/97 at 100 977,077
835,000 New Jersey Educational Facilities Authority, Princeton
University Revenue Bonds, 1994 Series A, 5.875%, 7/01/11 Aaa 7/04 at 100 859,148
1,930,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Hackensack Hospital Issue, Series A, 8.750%, 7/01/09 Aaa No Opt. Call 2,235,056
2,065,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Series 1990-E, (Kennedy Memorial Hospital),
8.375%, 7/01/10 A1 7/01 at 102 2,381,585
700,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Community Medical Center/Kensington Manor Care
Center Issue, Series E, 7.000%, 7/01/20 Aaa 7/00 at 102 757,484
480,000 New Jersey Health Care Facilities Financing Authority Revenue
Bonds, Community Memorial Hospital Association Issue,
Series C, 8.000%, 7/01/14 A 7/98 at 102 513,571
3,000,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Newton Memorial Hospital Issue,
Series A, 7.500%, 7/01/19 A- 7/99 at 102 3,201,870
400,000 New Jersey Health Care Facilities Financing Authority,
Refunding Revenue Bonds, Atlantic City Medical Center
Issue, Series C, 6.800%, 7/01/05 A 7/02 at 102 432,268
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 800,000 New Jersey Health Care Facilities Financing Authority, Revenue
Bonds, Palisades Medical Center, Obligated Group Issue,
Series 1992, 7.500%, 7/01/06 Ba1 7/02 at 102 $ 809,608
1,750,000 New Jersey Housing Finance Agency, Special Pledge Revenue
Obligations, 1975 Series One, 9.000%, 11/01/18 A1 11/96 at 104 1,827,123
2,000,000 New Jersey Housing and Mortgage Finance Agency, Multi-Family
Housing Revenue Bonds, 1995 Series A, 6.000%, 11/01/14 Aaa 5/05 at 102 2,018,700
700,000 New Jersey Housing and Mortgage Finance Agency, Housing
Revenue Bonds, 1992 Series A, 6.950%, 11/01/13 A+ 5/02 at 102 741,090
375,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
1984 Series, 10.375%, 1/01/03 AAA No Opt. Call 449,434
1,750,000 New Jersey Turnpike Authority, Turnpike Revenue Refunding
Bonds, Series 1991-C, 6.500%, 1/01/08 A No Opt. Call 1,899,905
1,000,000 State of New Jersey, General Obligation Bonds, Series D,
5.800%, 2/15/07 Aa1 No Opt. Call 1,052,420
1,000,000 Pollution Control Financing Authority of Camden County,
(Camden County, New Jersey), Solid Waste Disposal and
Resource Recovery System Revenue Bonds, Series 1991 C,
7.125%, 12/01/01 (Alternative Minimum Tax) BBB+ No Opt. Call 1,017,330
2,645,000 Pollution Control Financing Authority of Camden County,
(Camden County, New Jersey), Solid Waste Disposal and
Resource Recovery System Revenue Bonds, Series 1991 D,
7.250%, 12/01/10 BBB+ 12/01 at 102 2,721,864
500,000 The Essex County Improvement Authority, (Essex County,
New Jersey), County Guaranteed Pooled Revenue Bonds,
Series 1992A, 6.500%, 12/01/12 Baa1 12/02 at 102 518,640
500,000 The Board of Education of The Township of Hillsborough, in
the County of Somerset, State of New Jersey, General
Obligation School Purpose Bonds, Series 1992, 5.875%,
8/01/11 AA No Opt. Call 519,245
400,000 The Hudson County Improvement Authority, Multi-Family
Housing Revenue Bonds, Series 1992 A, (Conduit Financing-
Observer Park Project), 6.900%, 6/01/22 (Alternative
Minimum Tax) AAA 6/04 at 100 416,116
1,605,000 The Board of Education of the Borough of Little Ferry,
Bergen County, New Jersey, Certificates of Participation,
6.300%, 1/15/08 N/R No Opt. Call 1,622,559
The Board of Education of the Township of Monroe, In the
county of Gloucester, New Jersey, School Bonds, Series 1993:
725,000 5.200%, 8/01/11 Aaa No Opt. Call 707,680
825,000 5.200%, 8/01/14 Aaa No Opt. Call 792,124
500,000 North Bergen Housing Development Corporation (North Bergen,
New Jersey), Mortgage Revenue Bonds, Series 1978, (FHA-Insured
Mortgage Loan-Section 8 Assisted Project), 7.400%, 9/01/20 N/R 8/96 at 102 1/2 510,265
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NEW JERSEY--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 300,000 The Township of North Bergen, (Hudson County, New Jersey), Fiscal
Year Adjustment General Obligation Bonds, Series 1992,
6.500%, 8/15/12 Aaa 8/02 at 102 $ 320,754
2,350,000 The Ocean County Utilities Authority (New Jersey), Wastewater
Revenue Bonds, Refunding Series 1987, 5.000%, 1/01/14 Aaa 1/97 at 100 2,153,940
2,215,000 County of Passaic, State of New Jersey, General Obligation Refunding
Bonds, Series 1993, 5.125%, 9/01/12 Aaa No Opt. Call 2,135,216
270,000 The Union County Utilities Authority, (New Jersey), Solid Waste
System Revenue Bonds, Series D, 6.850%, 6/15/14
(Alternative Minimum Tax) Aaa 6/02 at 102 284,726
The Union County Utilities Authority, (New Jersey), Solid Waste
System Revenue Bonds, 1991 Series A:
195,000 7.100%, 6/15/06 (Alternative Minimum Tax) A- 6/02 at 102 200,349
1,100,000 7.200%, 6/15/14 (Alternative Minimum Tax) A- 6/02 at 102 1,110,043
100,000 University of Medicine and Dentistry of New Jersey Bonds, Series E,
6.500%, 12/01/18 (Pre-refunded to 12/01/01) AA 12/01 at 102 110,382
300,000 The Wanaque Borough Sewage Authority, (Passaic County, New Jersey),
Sewer Revenue Bonds, (Series 1992), (Bank Qualified),
7.000%, 12/01/21 Baa1 12/02 at 102 317,703
Delaware River Port Authority, Revenue Bonds, Series of 1995:
550,000 5.400%, 1/01/15 Aaa 1/06 at 102 532,829
1,000,000 5.500%, 1/01/26 Aaa 1/06 at 102 961,250
1,175,000 Virgin Islands Housing Finance Authority, Single Family Mortgage
Revenue Refunding Bonds, (GNMA Mortgage-Backed Securities
Program), 1995 Series A, 6.450%, 3/01/16
(Alternative Minimum Tax) AAA 3/05 at 102 1,192,002
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1995
(General Obligation Bonds), 5.750%, 7/01/24 Aaa 7/05 at 101 1/2 2,002,300
1,000,000 Puerto Rico Aqueduct and Sewer Authority, Revenue Bonds, Series
1988A, 7.875%, 7/01/17 (Pre-refunded to 7/01/98) AAA 7/98 at 102 1,090,369
60,000 Puerto Rico Highway and Transportation Authority, Highway Revenue
Bonds, (Series T), 6.625%, 7/01/18 (Pre-refunded to 7/01/02) A 7/02 at 101 1/2 66,899
Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P:
790,000 7.000%, 7/01/07 A- No Opt. Call 896,333
1,875,000 7.000%, 7/01/21 (Pre-refunded to 7/01/01) Aaa 7/01 at 102 2,107,518
1,500,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds,
Series Z, 5.250%, 7/01/21 A- 7/05 at 100 1,361,685
1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority, Hospital
Revenue Bonds, 1995 Series A, (Hospital Auxilio Mutuo Obligated
Group Project), 6.250%, 7/01/16 Aaa 1/05 at 102 1,043,900
- ------------------------------------------------------------------------------------------------------------------------------------
$ 54,005,000 Total Investments -- (Cost $54,837,515) -- 95.8% 55,837,089
==============----------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENT IN SHORT-TERM
MUNICIPAL SECURITIES -- 3.1%
$ 500,000 New Jersey Economic Development Authority, Dock Facility
Revenue Refunding Bonds, (Bayonne/IMTT-Bayonne Project),
Series 1993A, Variable Rate Demand Bonds,
3.400%, 12/01/27+ VMIG-1 $ 500,000
1,300,000 The Port Authority of New York and New Jersey, Versatile
Structure Obligations, Series 2, Variable Rate Demand Bonds,
3.600%, 5/01/19+ A-1+ 1,300,000
- -----------------------------------------------------------------------------------------------------------------------
$ 1,800,000 Total Temporary Investments -- 3.1% 1,800,000
- -----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.1% 636,205
- -----------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $58,273,294
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 21 $24,016,803 43%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 5 3,216,027 6
PORTFOLIO OF A+ A1 5 6,149,797 11
INVESTMENTS: A, A- A, A2, A3 10 10,705,223 19
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 4,575,537 8
TEMPORARY BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 809,608 2
INVESTMENTS): Non-rated Non-rated 4 6,364,094 11
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL 50 $55,837,089 100%
- -----------------------------------------------------------------------------------------------------------------------------
</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.
+ 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.
33
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
PENNSYLVANIA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Pennsylvania Economic Development Financing Authority
(Sun Company, Inc. (R&M) Project) Series 1994A,
7.600%, 12/01/24 (Alternative Minimum Tax) Baa1 12/04 at 102 $ 2,754,875
750,000 Pennsylvania Higher Educational Facilities Authority, Revenue
Bonds (Thomas Jefferson University--Life Sciences Building
Project), 1989 Series A, 6.000%, 7/01/19 Aa 7/99 at 102 755,183
600,000 Pennsylvania Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1991-32, 7.150%, 4/01/15 AA+ 10/01 at 102 637,938
1,250,000 Pennsylvania Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1996-50A, 6.000%, 10/01/13 AA+ 4/06 at 102 1,254,038
2,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1996-51, 6.375%, 4/01/28
(Alternative Minimum Tax) AA+ 4/06 at 102 2,020,280
1,390,000 Pennsylvania Intergovernmental Cooperative Authority
(City of Philadelphia Funding Program) Series of 1994,
7.000%, 6/15/05 Aaa No Opt. Call 1,594,122
1,500,000 Pennsylvania Intergovernmental Cooperative Authority Special
Tax Revenue Refunding Bonds (City of Philadelphia Funding
Program) Series of 1996, 5.500%, 6/15/20 Aaa 6/06 at 100 1,446,810
2,300,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike
Revenue Bonds, Series O of 1992, 5.500%, 12/01/17 Aaa 12/02 at 102 2,201,054
1,475,000 Allegheny County Hospital Development Authority (Allegheny
County, Pennsylvania), Hospital Revenue Bonds, Series Q
(Allegheny Valley Hospital, Sublessee), 7.000%, 8/01/15 A No Opt. Call 1,638,209
1,500,000 Allegheny County Hospital Development Authority, (Allegheny
County, Pennsylvania) Health and Education Revenue Bonds,
Series 1992 (The Rehabilitation Institute of Pittsburgh
Project), 7.000%, 6/01/22 BBB 6/02 at 102 1,521,420
3,000,000 Allegheny County Residential Finance Authority Mortgage
Revenue Bonds (FHA Insured Mortgage, Ladies Grand Army
of the Republic Health Facility Project) 1995 Series G,
6.350%, 10/01/36 AAA 10/05 at 100 3,015,180
2,000,000 Allegheny County Residential Finance Authority, Single Family
Mortgage Revenue Bonds, 1994 Series Y, 0.000%, 5/01/27
(Alternative Minimum Tax) Aaa No Opt. Call 231,280
2,000,000 Armstrong County Hospital Authority (Armstrong County,
Pennsylvania), Health Center Revenue Refunding Bonds,
Series 1991 (Canterbury Place Project), 6.500%, 12/01/21 Aaa 12/01 at 100 2,111,480
1,000,000 Bucks County Community College Authority, Bucks County,
Pennsylvania, College Building Revenue and Refunding
Bonds, Series of 1992, 6.250%, 6/15/14 Aa 6/02 at 100 1,020,300
2,850,000 Deer Lakes School District (Allegheny County, Pennsylvania),
General Obligation Bonds, Series of 1995, 6.350%, 1/15/14 Aaa 1/04 at 100 2,970,812
800,000 Greater Lebanon Refuse Authority, Lebanon County,
Pennsylvania Solid Waste Revenue Bonds, Series of 1992,
7.000%, 11/15/04 A- 11/02 at 100 846,440
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,500,000 Indiana County Industrial Development Authority Pollution
Control Refunding Revenue Bonds (New York State Electric
and Gas Corporation Project), 1994 Series A,
6.000%, 6/01/06 Aaa No Opt. Call $ 3,728,375
3,000,000 Indiana County Industrial Development Authority Pollution
Control Refunding Revenue Bonds, Series 1995 (Pennsylvania
Electric Company Project), 5.350%, 11/01/10 Aaa No Opt. Call 2,972,310
950,000 Luzerne County Industrial Development Authority Exempt
Facilities Revenue Bonds, 1992 Series B (Pennsylvania Gas and
Water Company Project), 7.125%, 12/01/22 (Alternative
Minimum Tax) Baa1 12/02 at 102 995,087
1,500,000 Luzerne County Industrial Development Authority Exempt
Facilities Revenue Refunding Bonds, 1994 Series A
(Pennsylvania Gas and Water Company Project), 7.000%,
12/01/17 (Alternative Minimum Tax) Aaa 12/04 at 102 1,655,520
2,000,000 McKeesport Area School District (Allegheny County,
Pennsylvania) General Obligation Bonds, Series of 1996A,
6.000%, 10/01/25 (WI) Aaa 10/06 at 100 2,005,080
3,000,000 County of Montgomery, Pennsylvania, General Obligation
Bonds, Series A of 1995, 6.100%, 10/15/25 Aaa 10/00 at 100 3,060,270
3,000,000 Montgomery County Higher Education and Health Authority
Mortgage Revenue Bonds, Series of 1996 (Waverly Heights
Project), 6.375%, 1/01/26 BBB 1/06 at 101 2,935,500
1,800,000 Northampton County Higher Education Authority, University
Revenue Bonds, Series of 1991 (Lehigh University),
6.900%, 10/15/06 Aaa 10/01 at 102 1,982,268
1,000,000 Northumberland County Industrial Development Authority
Exempt Facilities Revenue Bonds, 1993 Series (Roaring Creek
Water Company Project), 6.375%, 10/15/23 (Alternative
Minimum Tax) N/R 10/03 at 102 929,230
2,000,000 Philadelphia Authority for Industrial Development Project
Revenue Refunding Bonds (PGH Development Corporation),
Series of 1993, 5.250%, 7/01/17 AA 7/03 at 102 1,833,620
2,000,000 City of Philadelphia, Pennsylvania Gas Works Revenue Bonds,
Fourteenth Series, 6.375%, 7/01/14 Aaa 7/03 at 102 2,091,100
2,750,000 The Hospitals and Higher Education Facilities Authority of
Philadelphia Hospital Revenue Bonds, Series A of 1993
(Temple University Hospital), 6.625%, 11/15/23 A- 11/03 at 102 2,789,600
1,275,000 The Hospitals and Higher Education Facilities Authority of
Philadelphia Hospital Revenue Refunding Bonds, Series A of
1996 (St. Agnes Medical Center/Franciscan Health System
Project), 5.250%, 7/01/10 Aaa 7/98 at 100 1,225,058
3,000,000 Urban Redevelopment Authority of Pittsburgh Home
Improvement Loan Bonds, 1995 Series A, 6.375%, 8/01/18
(Alternative Minimum Tax) A 8/05 at 102 3,005,880
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
PENNSYLVANIA--CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,100,000 Urban Redevelopment Authority of Pittsburgh Mortgage
Revenue Bonds, 1994 Series A, 6.625%, 4/01/22 (Alternative
Minimum Tax) A1 4/04 at 102 $1,115,136
500,000 Saint Mary Hospital Authority Hospital Revenue Bonds, Series
1992A, (Franciscan Health System/Saint Mary Hospital of
Langhorne, Inc.), 6.500%, 7/01/12 Aaa 7/02 at 102 533,200
230,000 Health Care Facilities Authority of Sayre (Pennsylvania),
Series 1991A Revenue Bonds, Guthrie Healthcare System,
7.100%, 3/01/17 Aaa 3/01 at 102 251,586
350,000 Washington County Hospital Authority, Hospital Revenue
Bonds, Series 1992 (Monongahela Valley Hospital, Inc.
Project), 6.750%, 12/01/08 A 4/02 at 102 366,162
935,000 The Municipal Authority of the Borough of West View
(Allegheny County, Pennsylvania), Special Obligation Bonds,
Series of 1985A, 9.500%, 11/15/14 Aaa No Opt. Call 1,293,824
600,000 The General Municipal Authority of the City of Wilkes-Barre,
College Misericordia Revenue Bonds, Refunding Series A of
1992, 7.750%, 12/01/12 N/R 12/00 at 100 642,317
- --------------------------------------------------------------------------------------------------------------
$61,405,000 Total Investments -- (cost $59,398,291) -- 95.5% 61,430,544
===========---------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 4.5% 2,868,345
- --------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $64,298,889
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 18 $34,369,329 56%
RATINGS** AA-, AA, AA- Aa1, Aa, Aa2, Aa3 6 7,521,359 12
PORTFOLIO OF A+ A1 1 1,115,136 2
INVESTMENTS: A, A- A, A2, A3 5 8,646,291 14
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 8,206,882 13
Non-rated Non-rated 2 1,571,547 3
- --------------------------------------------------------------------------------------------------------------
TOTAL 36 $61,430,544 100%
- --------------------------------------------------------------------------------------------------------------
</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.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
36
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
VIRGINIA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Metropolitan Washington Airports Authority, Airport System
Revenue Bonds, Series 1992A:
$1,500,000 6.625%, 10/01/19 (Alternative Minimum Tax) Aaa 10/02 at 102 $1,579,935
1,500,000 6.250%, 10/01/21 (Alternative Minimum Tax) Aaa 10/02 at 102 1,526,205
1,000,000 Metropolitan Washington Airports Authority, Airport System
Revenue Bonds, Series 1994A, 5.750%, 10/01/20
(Alternative Minimum Tax) Aaa 10/04 at 102 985,150
2,260,000 City of Virginia Beach Development Authority (Virginia),
Hospital Revenue Bonds (Sentara Bayside Hospital),
Series 1991, 6.300%, 11/01/21 Aa 11/01 at 102 2,283,933
800,000 Virginia College Building Authority, Educational Facilities
Revenue Bonds (Randolph-Macon College Project), Series of
1992, 6.625%, 5/01/13 A- 5/02 at 102 838,352
Virginia College Building Authority, Educational Facilities
Revenue Bonds (The Washington and Lee University Project),
Series of 1994:
1,250,000 5.750%, 1/01/14 Aa 1/04 at 102 1,247,888
1,000,000 5.800%, 1/01/24 Aa 1/04 at 102 991,130
650,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1990 Series B, Subseries B-4,
6.850%, 7/01/17 Aa1 1/00 at 102 672,458
4,000,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1992 Series A, 7.150%, 1/01/33 Aa1 1/02 at 102 4,249,760
800,000 Virginia Housing Development Authority, Multi-Family
Housing Bonds, 1992 Series D, 6.800%, 11/01/09 AA+ 5/02 at 102 845,696
1,090,000 Virginia Public Building Authority, State Building Revenue
Bonds, Series 1991A, 6.500%, 8/01/11 Aa 8/01 at 102 1,196,624
1,000,000 Virginia Resources Authority, Sewer System Revenue Bonds,
1995 Series A, (Hopewell Regional Wastewater Treatment
Facility Project), 6.000%, 10/01/25
(Alternative Minimum Tax) AA 10/05 at 102 980,340
1,960,000 Virginia Resources Authority, Solid Waste Disposal System
Revenue Bonds, (County of Prince William, Virginia-
Refunding), 1995 Series A, 5.500%, 4/01/15 AA 4/05 at 102 1,883,599
1,500,000 Virginia Resources Authority, Water and Sewer System Revenue
Bonds, 1995 Series A (Sussex County Project),
5.600%, 10/01/25 AA 10/05 at 102 1,426,590
800,000 Virginia Resources Authority, Water System Refunding Revenue
Bonds, 1992 Series A, 6.450%, 4/01/13 AA 4/02 at 102 842,096
1,000,000 Town of Abingdon, Virginia, General Obligation Capital
Improvement Bonds, Series 1992, 6.250%, 8/01/12 A 8/02 at 102 1,036,570
2,060,000 Industrial Development Authority of Albemarle County,
Virginia, Hospital Refunding Revenue Bonds (Martha Jefferson
Hospital), Series 1993, 5.875%, 10/01/13 A 10/03 at 102 2,018,409
2,250,000 Capital Region Airport Commission, Richmond (Virginia),
International Airport Projects, Airport Revenue Bonds,
Series 1995A, 5.625%, 7/01/25 A aa 7/05 at 102 2,202,705
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
VIRGINIA--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 750,000 Charlottesville-Albemarle Airport Authority, (Virginia), Airport
Revenue Refunding Bonds, Series 1995, 6.125%, 12/01/13
(Alternative Minimum Tax) BBB 12/05 at 102 731,955
2,500,000 Chesapeake Bay Bridge and Tunnel District, General Resolution
Revenue Bonds, Refunding Series 1991, 6.375%, 7/01/22
(Pre-refunded to 7/01/01) Aaa 7/01 at 102 2,732,575
1,000,000 Industrial Development Authority of Covington-Alleghany
County, Virginia, Hospital Facility Revenue Bonds,
(Alleghany Regional Hospital) Series 1992, 6.625%, 4/01/12
(Pre-refunded to 4/01/02) A- 4/02 at 102 1,105,070
1,700,000 County of Cumberland, Virginia, Certificates of Participation,
Series 1994, 5.480%, 7/15/97 N/R No Opt. Call 1,702,023
1,460,000 Industrial Development Authority of Fairfax County, Virginia,
Hospital Revenue Refunding Bonds, (Inova Health System
Hospitals Project) Series 1993A, 5.000%, 8/15/13 Aaa No Opt. Call 1,372,969
3,250,000 Fairfax County (Virginia) Water Authority, Water Refunding
Revenue Bonds, Series 1992, 5.750%, 4/01/29 Aa 4/02 at 100 3,127,183
3,000,000 Hampton Roads Regional Jail Authority, Regional Jail Facility
Revenue Bonds, Series 1996A, 5.500%, 7/01/24 Aaa 7/06 at 102 2,890,140
500,000 Industrial Development Authority of the City of Hampton,
Virginia, Hospital Revenue and Refunding Bonds (Sentara
Hampton General Hospital), Series 1994A, 6.500%, 11/01/12 A 11/04 at 102 514,055
2,500,000 Henrico County, Virginia, Water and Sewer System Refunding
Revenue Bonds, Series 1992, 6.250%, 5/01/13 AA- 5/02 at 100 2,554,675
1,000,000 Loudoun County Sanitation Authority (Virginia), Water and
Sewer System Revenue Bonds, Refunding Series 1992,
6.250%, 1/01/16 Aaa 1/03 at 102 1,035,970
1,000,000 Industrial Development Authority of Loudoun County, Virginia,
University Facilities Revenue Refunding Bonds (The George
Washington University), Series of 1992, 6.250%, 5/15/22 A1 5/02 at 102 1,021,810
1,500,000 Industrial Development Authority of the City of Lynchburg,
Virginia, Educational Facilities Revenue Bonds, (Randolph-
Macon Women's College), Series 1993, 5.875%, 9/01/13 A 9/03 at 102 1,490,325
2,080,000 Peninsula Ports Authority of Virginia, Health System Revenue
and Refunding Bonds (Riverside Health System Project),
Series 1992A, 6.625%, 7/01/18 Aa 7/02 at 102 2,173,496
2,500,000 Prince William County Park Authority, (Virginia), Revenue
Bonds, Series 1994, 6.875%, 10/15/16 A- 10/04 at 102 2,669,775
1,000,000 Prince William County Service Authority (Virginia), Water and
Sewer System Revenue Bonds, Series 1991, 6.000%, 7/01/29 Aaa 7/01 at 100 1,003,940
3,005,000 City of Richmond, Virginia, General Obligation Public
Improvement Bonds, Series 1993B, 5.500%, 7/15/23 AA 7/03 at 102 2,877,226
1,000,000 Industrial Development Authority of the City of Roanoke,
Virginia, Hospital Revenue Bonds (Roanoke Memorial Hospitals,
Community Hospital of Roanoke Valley and Franklin Memorial Hospital
Project), Series 1990, 6.500%, 7/01/25 (Pre-refunded to 7/01/00) Aaa 7/00 at 100 1,069,740
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS** PROVISIONS* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Development Authority of Rockingham County,
Virginia, Educational Facilities Revenue Bonds, (Bridgewater
College), Series 1993:
$ 400,000 5.600%, 10/01/06 Baa1 10/03 at 102 $ 399,320
400,000 5.700%, 10/01/07 Baa1 10/03 at 102 399,472
2,750,000 Southeastern Public Service Authority of Virginia, Senior
Revenue Bonds, Series 1993, (Regional Solid Waste System),
6.000%, 7/01/13 (Alternative Minimum Tax) A- 7/03 at 102 2,702,590
480,000 Suffolk Redevelopment Authority Multifamily Housing (Chase
Heritage Project), 7.000%, 7/01/24 (Mandatory Put 7/01/04) Baa3 7/02 at 104 503,093
4,000,000 Upper Occoquan Sewerage Authority (Virginia), Regional
Sewerage System Revenue Refunding Bonds, Series of 1993,
5.000%, 7/01/21 Aaa 1/04 at 102 3,597,800
800,000 Puerto Rico Highway and Transportation Authority,
Highway Revenue Bonds, (Series T), 6.625%, 7/01/18
(Pre-refunded to 7/01/02) A 7/02 at 101 1/2 891,992
- ------------------------------------------------------------------------------------------------------------------------------------
$ 64,995,000 Total Investments -- (Cost $62,627,296) -- 98.7% 65,374,634
================--------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES -- 0.3%
$ 200,000 Peninsula Ports Authority of Virginia Refunding Bonds
================ (Dominion Terminal Associates Project -- Series 1987C),
Variable Rate Demand Bonds, 3.550%, 7/01/16+ P-1 200,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.0% 645,636
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 66,220,270
====================================================================================================================================
</TABLE>
39
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
VIRGINIA--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NUMBER OF MARKET MARKET
STANDARD & POOR'S MOODY'S SECURITIES VALUE PERCENT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 11 $19,997,129 31%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 15 27,352,694 42
PORTFOLIO OF A+ A1 1 1,021,810 2
INVESTMENTS A, A- A, A2, A3 9 13,267,138 20
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 2,033,840 3
TEMPORARY Non-rated Non-rated 1 1,702,023 2
INVESTMENTS):
- -------------------------------------------------------------------------------------------------------
TOTAL 41 $65,374,634 100%
- -------------------------------------------------------------------------------------------------------
</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.
+ 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.
40
<PAGE>
STATEMENT OF NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
(Unaudited) JULY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $24,162,200 $61,600,722 $54,712,491 $32,207,224
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 100,000 1,200,000 700,000 700,000
Cash 47,075 120,935 - 236,738
Receivables:
Interest 271,118 891,455 521,768 448,885
Shares sold - - 35,401 226,206
Investments sold 10,000 - 61,664 -
Deferred organization costs (note 1) 3,554 3,414 4,027 4,506
Other assets 4,939 4,090 6,368 5,662
----------- ----------- ----------- -----------
Total assets 24,598,886 63,820,616 56,041,719 33,829,221
----------- ----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased 503,583 1,006,372 - 921,086
Shares reacquired - 14,486 293 -
Accrued expenses:
Management fees (note 6) 11,083 28,771 25,890 15,061
Other 33,839 60,844 92,806 50,584
Dividends payable 55,430 137,484 145,333 89,938
----------- ----------- ----------- -----------
Total liabilities 603,935 1,247,957 264,322 1,076,669
----------- ----------- ----------- -----------
Net assets (note 7) $23,994,951 $62,572,659 $55,777,397 $32,752,552
=========== =========== =========== ===========
Class A Shares (note 1)
Net assets $ 4,683,638 $ 8,927,494 $ 9,335,001 $ 4,923,363
=========== =========== =========== ===========
Shares outstanding 448,735 870,440 919,190 471,362
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.44 $ 10.26 $ 10.16 $ 10.44
=========== =========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 10.93 $ 10.74 $ 10.64 $ 10.93
=========== =========== =========== ===========
Class C Shares (note 1)
Net assets $ 482,826 $ 245,949 $ 1,712,343 $ 265,308
=========== =========== =========== ===========
Shares outstanding 46,633 24,076 168,755 25,435
=========== =========== =========== ===========
Net asset value, offering and redemption price per share $ 10.35 $ 10.22 $ 10.15 $ 10.43
=========== =========== =========== ===========
Class R Shares (note 1)
Net assets $18,828,487 $53,399,216 $44,730,053 $27,563,881
=========== =========== =========== ===========
Shares outstanding 1,815,543 5,201,347 4,400,123 2,637,250
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.37 $ 10.27 $ 10.17 $ 10.45
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
STATEMENT OF NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NJ PA VA
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1)............. $55,837,089 $61,430,544 $65,374,634
Temporary investments in short-term municipal securities,
at amortized cost (note 1).............................................. 1,800,000 - 200,000
Cash...................................................................... 233,336 4,204,181 105,065
Receivables:
Interest................................................................ 638,899 854,021 816,351
Shares sold............................................................. 18,136 48,228 42,060
Investments sold........................................................ - - -
Deferred organization costs (note 1)...................................... 3,794 4,108 2,825
Other assets.............................................................. 8,023 8,961 8,221
----------- ----------- -----------
Total assets......................................................... 58,539,277 66,550,043 66,549,156
----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased................................................... - 1,971,027 -
Shares reacquired....................................................... 38 3,608 39,907
Accrued expenses:
Management fees (note 6)................................................ 26,961 29,682 30,575
Other................................................................... 72,264 77,731 88,182
Dividends payable......................................................... 166,720 169,106 170,222
----------- ----------- -----------
Total liabilities.................................................... 265,983 2,251,154 328,886
----------- ----------- -----------
Net assets (note 7)....................................................... $58,273,294 $64,298,889 $66,220,270
=========== =========== ===========
Class A Shares (note 1)
Net assets................................................................ $13,889,997 $ 7,907,452 $ 7,893,642
=========== =========== ===========
Shares outstanding........................................................ 1,372,220 762,543 762,402
=========== =========== ===========
Net asset value and redemption price per share............................ $ 10.12 $ 10.37 $ 10.35
=========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price)........................ $ 10.60 $ 10.86 $ 10.84
=========== =========== ===========
Class C Shares (note 1)
Net assets................................................................ $ 1,938,675 $ 1,104,338 $ 975,023
=========== =========== ===========
Shares outstanding........................................................ 191,871 107,704 94,435
=========== =========== ===========
Net asset value, offering and redemption price per share.................. $ 10.10 $ 10.25 $ 10.32
=========== =========== ===========
Class R Shares (note 1)
Net assets................................................................ $42,444,622 $55,287,099 $57,351,605
=========== =========== ===========
Shares outstanding........................................................ 4,188,504 5,345,160 5,540,577
=========== =========== ===========
Net asset value and redemption price per share............................ $ 10.13 $ 10.34 $ 10.35
=========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
STATEMENT OF OPERATIONS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
Six months ended July 31, 1996 JULY 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 690,043 $ 1,746,592 $ 1,615,835 $ 978,358
Expenses:
Management fees (note 6) 64,478 166,678 151,547 90,983
12b-1 service fees--Class A (note 1) 5,208 8,957 10,223 5,395
12b-1 distribution and service fees--Class C (note 1) 1,880 919 8,069 1,284
Shareholders' servicing agent fees and expenses 11,541 29,177 32,487 17,117
Custodian's fees and expenses 18,523 21,281 28,495 17,569
Trustees' fees and expenses (note 6) 462 1,115 269 698
Professional fees 6,859 6,362 5,973 5,989
Shareholders' reports--printing and mailing expenses 4,730 11,625 11,006 10,697
Federal and state registration fees 3,267 2,332 3,601 5,184
Amortization of deferred organization costs (note 1) 3,444 3,584 3,801 3,918
Other expenses 1,492 2,912 2,719 2,150
---------- ----------- ----------- ---------
Total expenses before expense reimbursement 121,884 254,942 258,190 160,984
Expense reimbursement from investment adviser (note 6) (26,872) (17,779) (33,243) (30,237)
---------- ----------- ----------- ---------
Net expenses 95,012 237,163 224,947 130,747
---------- ----------- ----------- ---------
Net investment income 595,031 1,509,429 1,390,888 847,611
---------- ----------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) 80,171 (191,644) 69,944 (132,211)
Net change in unrealized appreciation or depreciation
of investments (755,735) (1,542,928) (1,551,912) (850,846)
---------- ----------- ----------- ---------
Net gain (loss) from investments (675,564) (1,734,572) (1,481,968) (983,057)
---------- ----------- ----------- ---------
Net increase (decrease) in net assets from operations $ (80,533) $ (225,143) $ (91,080) $(135,446)
========== =========== =========== =========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
STATEMENT OF OPERATIONS
Six months ended July 31, 1996
(Unaudited
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
NJ PA VA
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 1,705,372 $ 1,885,494 $ 1,945,718
----------- ----------- -----------
Expenses:
Management fees (note 6) 155,884 173,278 178,477
12b-1 service fees--Class A (note 1) 15,688 8,413 8,521
12b-1 distribution and service fees--Class C (note 1) 8,295 5,358 4,312
Shareholders' servicing agent fees and expenses 43,468 46,174 38,918
Custodian's fees and expenses 24,121 24,759 21,265
Trustees' fees and expenses (note 6) 372 1,130 509
Professional fees 7,398 7,350 9,960
Shareholders' reports--printing and mailing expenses 16,013 16,930 27,466
Federal and state registration fees 3,878 1,827 4,719
Amortization of deferred organization costs (note 1) 3,596 3,876 2,998
Other expenses 2,630 3,503 4,436
----------- ----------- -----------
Total expenses before expense reimbursement 281,343 292,598 301,581
Expense reimbursement from investment adviser (note 6) (44,790) (42,539) (45,370)
----------- ----------- -----------
Net expenses 236,553 250,059 256,211
----------- ----------- -----------
Net investment income 1,468,819 1,635,435 1,689,507
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (87,605) 336,310 (152,534)
Net change in unrealized appreciation or depreciation of
investments (1,453,280) (1,793,427) (1,407,357)
----------- ----------- -----------
Net gain (loss) from investments (1,540,885) (1,457,117) (1,559,891)
----------- ----------- -----------
Net increase (decrease) in net assets from operations $ (72,066) $ 178,318 $ 129,616
=========== =========== ===========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited) NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
AZ FL
- ----------------------------------------------------------------------------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 595,031 $ 1,030,283 $ 1,509,429 $ 2,868,644
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) 80,171 (27,336) (191,644) (140,189)
Net change in unrealized appreciation or depreciation
of investments (755,735) 1,629,699 (1,542,928) 4,780,693
------------- ----------- ----------- ------------
Net increase (decrease) in net assets from operations (80,533) 2,632,646 (225,143) 7,509,148
------------- ----------- ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (100,351) (101,157) (169,243) (148,024)
Class C (7,445) (6,237) (3,692) (5,956)
Clas R (478,991) (937,616) (1,347,434) (2,730,462)
From accumulated net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
------------- ----------- ----------- ------------
Decrease in net assets from distributions to
shareholders (586,787) (1,045,010) (1,520,369) (2,884,442)
------------- ----------- ----------- ------------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 995,578 2,882,755 3,769,515 4,315,210
Class C 175,003 273,019 98,276 77,334
Class R 821,396 2,473,853 2,896,310 8,465,473
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 48,032 38,250 76,281 52,678
Class C 6,801 5,264 1,890 3,575
Class R 284,351 529,462 735,720 1,500,287
------------- ----------- ----------- ------------
2,331,161 6,202,603 7,577,992 14,414,557
------------- ----------- ----------- ------------
Cost of shares redeemed:
Class A (147,063) (303,388) (577,968) (173,983)
Class C (20,312) (3,168) (17,677) -
Class R (1,257,396) (1,449,215) (3,972,806) (11,564,633)
------------- ----------- ----------- ------------
(1,424,771) (1,755,771) (4,568,451) (11,738,616)
------------- ----------- ----------- ------------
Net increase (decrease) in net assets derived from
Fund share transactions 906,390 4,446,832 3,009,541 2,675,941
------------- ----------- ----------- ------------
Net increase (decrease) in net assets 239,070 6,034,468 1,264,029 7,300,647
Net assets at the beginning of period 23,755,881 17,721,413 61,308,630 54,007,983
------------- ----------- ----------- ------------
Net assets at the end of period $ 23,994,951 $23,755,881 $62,572,659 $ 61,308,630
============= =========== =========== ============
Balance of undistributed net investment income at
end of period $ 10,053 $ 1,809 $ 9,856 $ 20,796
============= =========== =========== ============
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
MD MI
- -----------------------------------------------------------------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 1,390,888 $ 2,553,861 $ 847,611 $ 1,588,746
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) 69,944 138,640 (132,211) 414,083
Net change in unrealized appreciation or depreciation
of investments (1,551,912) 3,998,568 (850,846) 2,255,770
------------ ----------- ------------ -----------
Net increase (decrease) in net assets from operations (91,080) 6,691,069 (135,446) 4,258,599
------------ ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (195,799) (198,145) (104,973) (110,174)
Class C (32,415) (47,180) (5,262) (5,812)
Class R (1,142,660) (2,335,847) (734,750) (1,479,047)
From accumulated net realized gains from investment
transactions:
Class A - - - (9,042)
Class C - - - (536)
Class R - - - (88,511)
------------ ----------- ------------ -----------
Decrease in net assets from distributions to
shareholders (1,370,874) (2,581,172) (844,985) (1,693,122)
------------ ----------- ------------ -----------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 3,456,516 5,206,011 1,159,300 3,071,799
Class C 409,217 645,990 105,803 146,180
Class R 1,005,910 4,099,669 839,280 3,061,856
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 128,488 112,734 57,826 58,075
Class C 24,087 39,318 4,221 5,428
Class R 719,216 1,461,612 491,142 1,044,771
------------ ----------- ------------ -----------
5,743,434 11,565,334 2,657,572 7,388,109
------------ ----------- ------------ -----------
Cost of shares redeemed:
Class A (929,050) (350,679) (206,614) (171,433)
Class C (119,567) (195,323) (68,959) (4,206)
Class R (3,142,740) (4,647,731) (3,033,446) (3,009,162)
------------ ----------- ------------ -----------
(4,191,357) (5,193,733) (3,309,019) (3,184,801)
------------ ----------- ------------ -----------
Net increase (decrease) in net assets derived from
Fund share transactions 1,552,077 6,371,601 (651,447) 4,203,308
------------ ----------- ------------ -----------
Net increase (decrease) in net assets 90,123 10,481,498 (1,631,878) 6,768,785
Net assets at the beginning of period 55,687,274 45,205,776 34,384,430 27,615,645
------------ ----------- ------------ -----------
Net assets at the end of period $55,777,397 $55,687,274 $32,752,552 $ 34,384,430
============ =========== ============ ============
Balance of undistributed net investment income at
end of period $ 20,950 $ 936 $ 13,519 $ 10,893
============ =========== ============ ============
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NJ PA
- ----------------------------------------------------------------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 1,468,819 $ 2,617,653 $ 1,635,435 $ 3,007,154
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (87,605) (30,019) 336,310 (36,684)
Net change in unrealized appreciation or depreciation
of investments (1,453,280) 3,249,789 (1,793,427) 4,855,692
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations (72,066) 5,837,423 178,318 7,826,162
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (313,893) (329,633) (160,008) (173,805)
Class C (35,567) (32,025) (21,440) (28,974)
Class R (1,121,588) (2,282,656) (1,392,116) (2,830,558)
From accumulated net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
----------- ----------- ----------- -----------
Decrease in net assets from distributions to
shareholders (1,471,048) (2,644,314) (1,573,564) (3,033,337)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 3,959,032 7,757,684 2,521,674 4,222,635
Class C 1,069,271 573,759 171,876 633,225
Class R 2,408,112 4,461,592 1,558,285 6,005,478
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 193,747 181,529 119,325 126,885
Class C 16,206 16,615 16,723 24,758
Class R 788,782 1,567,807 870,401 1,786,453
----------- ----------- ----------- -----------
8,435,150 14,558,986 5,258,284 12,799,434
----------- ----------- ----------- -----------
Cost of shares redeemed:
Class A (610,784) (406,168) (435,904) (281,318)
Class C (170,835) (32,865) (162,915) (105,804)
Class R (2,867,023) (5,070,204) (3,228,000) (6,418,284)
----------- ----------- ----------- -----------
(3,648,642) (5,509,237) (3,826,819) (6,805,406)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets derived from
Fund share transactions 4,786,508 9,049,749 1,431,465 5,994,028
----------- ----------- ----------- -----------
Net increase (decrease) in net assets 3,243,394 12,242,858 36,219 10,786,853
Net assets at the beginning of period 55,029,900 42,787,042 64,262,670 53,475,817
----------- ----------- ----------- -----------
Net assets at the end of period $58,273,294 $55,029,900 $64,298,889 $64,262,670
=========== =========== =========== ===========
Balance of undistributed net investment income at
end of period $ 5,899 $ 8,128 $ 67,522 $ 5,651
=========== =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
VA
- -----------------------------------------------------------------------------------------
6 months ended Year ended
7/31/96 1/31/96
- -----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 1,689,507 $ 3,221,308
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) (152,534) 334,528
Net change in unrealized appreciation or depreciation
of investments (1,407,357) 4,882,314
----------- -----------
Net increase (decrease) in net assets from operations 129,616 8,438,150
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (170,312) (191,806)
Class C (18,258) (23,926)
Class R (1,506,322) (2,997,681)
From accumulated net realized gains from investment
transactions:
Class A - (15,706)
Class C - (2,511)
Class R - (193,671)
------------ -----------
Decrease in net assets from distributions to
shareholders (1,694,892) (3,425,301)
------------ -----------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 2,309,281 3,799,529
Class C 190,331 402,084
Class R 1,695,463 3,456,619
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 94,767 109,800
Class C 13,477 21,313
Class R 916,279 1,928,344
------------ -----------
5,219,598 9,717,689
------------ -----------
Cost of shares redeemed:
Class A (249,945) (543,599)
Class C (505) (54,845)
Class R (3,251,629) (5,446,943)
----------- -----------
(3,502,079) (6,045,387)
----------- -----------
Net increase (decrease) in net assets derived from
Fund share transactions 1,717,519 3,672,302
------------- -----------
Net increase (decrease) in net assets 152,243 8,685,151
Net assets at the beginning of period 66,068,027 57,382,876
------------ -----------
Net assets at the end of period $66,220,270 $66,068,027
=========== ===========
Balance of undistributed net investment income at
end of period $ 24,321 $ 29,706
=========== ===========
- -----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
(Unaudited) JULY 31, 1996
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Multistate Tax-Free Trust (the "Trust") is an open-end diversified
management series investment company registered under the Investment Company Act
of 1940. The Trust comprises seven single-state tax-free mutual funds (the
Nuveen Tax-Free Value Funds--the "Funds"). Each Fund constitutes a separate
series of the Trust and is itself an open-end diversified management investment
company, commonly referred to as a mutual fund. The Trust was organized as a
Massachusetts Business Trust on July 26, 1991.
The Trust currently has seven authorized state tax-free Funds: the Nuveen
Arizona Tax-Free Value Fund, the Nuveen Florida Tax-Free Value Fund, the Nuveen
Maryland Tax-Free Value Fund, the Nuveen Michigan Tax-Free Value Fund, the
Nuveen New Jersey Tax-Free Value Fund, the Nuveen Pennsylvania Tax-Free Value
Fund and the Nuveen Virginia Tax-Free Value Fund. Additional state Funds may be
established in the future. Sale of Fund shares first commenced on February 28,
1992. Each Fund invests primarily in municipal obligations issued within its
respective state.
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
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board of Trustees. Temporary investments in
securities that have variable rate and demand features qualifying them as short-
term securities are traded and valued at amortized cost.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 be settled a month or more after the transaction date. Any securities so
purchased are subject to market fluctuation during this period. The Trust has
instructed the custodian to segregate assets in a separate account with a
current value at least equal to the amount of its purchase commitments. At July
31, 1996, the Nuveen Arizona Tax-Free Value Fund, the Nuveen Florida Tax-Free
Value Fund, the Nuveen Michigan Tax-Free Value Fund and the Nuveen Pennsylvania
Tax-Free Value Fund had purchase commitments of $503,583, $1,006,372, $921,086
and $1,971,027, respectively. There were no such purchase commitments in any of
the other Funds.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts after month-end. Net
realized capital gains and/or market discount from investment transactions are
distributed to shareholders not less frequently than annually. Furthermore,
capital gains are distributed only to the extent they exceed available capital
loss carryovers.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of such 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 ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes and intends to
comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies by distributing to shareholders 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, each Fund intends
to satisfy conditions which will
50
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
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 respective Funds.
Deferred Organization Costs
Costs incurred by the Trust in connection with its organization and initial
registration of shares were deferred and are being amortized over a 60-month
period beginning February 28, 1992. If any of the initial shares of each Fund
are redeemed during this period, the proceeds of the redemption will be reduced
by the pro-rata share of the unamortized organization costs as of the date of
redemption.
Flexible Sales Charge Program
Effective September 6, 1994, each Fund commenced offering Class "A" Shares and
Class "C" Shares. Class "A" Shares incur a front-end sales charge and an annual
12b-1 service fee. 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 contingent deferred sales charge ("CDSC") of 1% if Class
"C" Shares are redeemed within 12 months of purchase.
Prior to the offering of Class "A" and Class "C" shares, the shares outstanding
were renamed Class "R" and are not subject to any 12b-1 distribution or service
fees. Effective with the offering of the new classes, Class "R" Shares are
generally available only for reinvestment of dividends by current "R"
shareholders and for already established Nuveen Unit Investment Trust
reinvestment accounts.
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 are recorded to the
specific class.
Derivative Financial Instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including futures, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Funds are
authorized to invest in such financial instruments, and may do so in the future,
they did not make any such investments during the six months ended July 31,
1996.
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
AZ FL
-------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A........................................ 95,720 274,843 368,010 420,409
Class C........................................ 17,173 26,227 9,680 7,638
Class R........................................ 79,301 239,176 281,558 824,725
Shares issued to shareholders due to
reinvestment of distributions:
Class A........................................ 4,594 3,655 7,421 5,125
Class C........................................ 656 505 184 350
Class R........................................ 27,344 51,292 71,339 147,052
-------- -------- -------- ----------
224,788 595,698 738,192 1,405,299
-------- -------- -------- ----------
Shares redeemed:
Class A........................................ (14,203) (29,122) (56,672) (16,925)
Class C........................................ (1,971) (313) (1,759) -
Class R........................................ (121,856) (139,521) (387,156) (1,126,197)
-------- -------- -------- ----------
(138,030) (168,956) (445,587) (1,143,122)
-------- -------- -------- ----------
Net increase (decrease)......................... 86,758 426,742 292,605 262,177
======== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
MD MI
-------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A........................................ 340,366 514,083 110,746 294,831
Class C........................................ 40,084 63,846 10,100 13,867
Class R........................................ 98,219 406,673 79,818 293,923
Shares issued to shareholders due to
reinvestment of distributions:
Class A........................................ 12,609 11,066 5,514 5,538
Class C........................................ 2,365 3,894 403 521
Class R........................................ 70,366 144,632 46,749 99,905
-------- -------- -------- ----------
564,009 1,144,194 253,330 708,585
-------- -------- -------- ----------
Shares redeemed:
Class A........................................ (91,734) (34,362) (19,757) (16,428)
Class C........................................ (11,726) (19,328) (6,631) (401)
Class R........................................ (308,765) (459,618) (292,035) (288,460)
-------- -------- -------- ----------
(412,225) (513,308) (318,423) (305,289)
-------- -------- -------- ----------
Net increase (decrease)......................... 151,784 630,886 (65,093) 403,296
======== ======== ======== ==========
</TABLE>
52
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
NJ PA
- -------------------------------------------------------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
7/31/96 1/31/96 7/31/96 1/31/96
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 389,135 765,342 244,231 411,858
Class C 104,875 56,488 17,037 62,079
Class R 236,000 440,121 151,468 585,804
Shares issued to shareholders due to
reinvestment of distributions:
Class A 19,066 17,820 11,521 12,297
Class C 1,597 1,638 1,632 2,439
Class R 77,435 154,754 84,205 174,784
-------- --------- ------- ---------
828,108 1,436,163 510,094 1,249,261
-------- --------- ------- ---------
Shares redeemed:
Class A (60,708) (40,094) (41,975) (27,436)
Class C (17,170) (3,290) (16,079) (10,542)
Class R (283,077) (500,152) (314,520) (628,872)
-------- --------- ------- ---------
(360,955) (543,536) (372,574) (666,850)
-------- --------- ------- ---------
Net increase (decrease) 467,153 892,627 137,520 582,411
======== ========= ======= =========
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VA
- ------------------------------------------------------------------------------
6 months ended Year ended
7/31/96 1/31/96
- ------------------------------------------------------------------------------
<S> <C> <C>
Shares sold:
Class A 223,468 369,049
Class C 18,561 39,142
Class R 165,250 336,826
Shares issued to shareholders due to
reinvestment of distributions:
Class A 9,169 10,624
Class C 1,307 2,074
Class R 88,523 186,098
-------- ---------
506,278 943,813
-------- ---------
Shares redeemed:
Class A (24,243) (52,547)
Class C (50) (5,359)
Class R (317,156) (529,723)
-------- ---------
(341,449) (587,629)
-------- ---------
Net increase (decrease) 164,829 356,184
======== =========
- ------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. DISTRIBUTIONS TO SHAREHOLDERS
On August 9, 1996, the Funds declared dividend
distributions from their tax-exempt net investment income
which were paid on September 3, 1996, to shareholders of
record on August 9, 1996, as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
AZ FL MD MI
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $ .0420 $ .0410 $ .0405 $ .0425
Class C .0350 .0345 .0340 .0355
Class R .0435 .0430 .0425 .0445
=========== =========== =========== ==========
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
NJ PA VA
- ----------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $ .0420 $ .0435 $ .0430
Class C .0355 .0365 .0365
Class R .0440 .0455 .0450
=========== =========== ===========
- ----------------------------------------------------------------
</TABLE>
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments
in municipal securities and temporary municipal
investments for the six months ended July 31, 1996, were
as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
AZ FL MD MI
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
Investments in municipal securities $ 3,291,056 $ 10,262,905 $ 3,186,028 $ 5,199,868
Temporary municipal investments 4,700,000 7,300,000 4,600,000 2,000,000
SALES
Investments in municipal securities 1,716,359 7,083,827 1,920,358 5,262,625
Temporary municipal investments 4,600,000 6,100,000 3,900,000 1,900,000
=========== ============ =========== ===========
- -----------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NJ PA VA
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASES
Investments in municipal securities $8,436,379 $19,485,655 $15,963,730
Temporary municipal investments 9,700,000 8,200,000 5,805,000
SALES
Investments in municipal securities 4,218,392 21,327,024 14,212,239
Temporary municipal investments 7,900,000 10,200,000 5,605,000
========== =========== ===========
- --------------------------------------------------------------------------------
</TABLE>
At July 31, 1996, 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 January 31, 1996, the Funds' last fiscal year end, the following
Funds had unused capital loss carryforwards available for federal
income tax purposes to be applied against future capital gains, if
any. If not applied, the carryovers will expire as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
AZ FL MD
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Expiration year:
2003 $127,444 $ 87,166 $203,995
2004 17,690 141,494 377,963
-------- -------- --------
Total $145,134 $228,660 $581,958
======== ======== ========
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
NJ PA
- --------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2003 $ 35,921 $377,256
2004 419,632 468,676
-------- --------
Total $455,553 $845,932
======== ========
- --------------------------------------------------------------------
</TABLE>
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of
investments at July 31, 1996, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
AZ FL MD MI
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
Appreciation $ 795,624 $2,136,894 $1,851,506 $1,071,352
Depreciation (170,355) (255,764) (277,224) (77,060)
---------- ---------- ---------- ----------
Net unrealized appreciation $ 625,269 $1,881,130 $1,574,282 $ 994,292
========== ========== ========== ==========
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
NJ PA VA
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
Appreciation $1,492,929 $2,208,247 $2,964,213
Depreciation (493,355) (175,994) (216,875)
---------- ---------- ----------
Net unrealized appreciation $ 999,574 $2,032,253 $2,747,338
========== ========== ==========
- ---------------------------------------------------------------------
</TABLE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with Nuveen Advisory
Corp. (the "Adviser"), a wholly owned subsidiary of The John Nuveen
Company, each Fund pays to the Adviser 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>
- ------------------------------------------------------
Average daily net asset value Management fee
- ------------------------------------------------------
<S> <C>
For the first $125,000,000 .55 of 1%
For the next $125,000,000 .5375 of 1
For the next $250,000,000 .525 of 1
For the next $500,000,000 .5125 of 1
For the next $1,000,000,000 .5 of 1
For net assets over $2,000,000,000 .475 of 1
- ------------------------------------------------------
</TABLE>
From inception of the Trusts on December 13, 1991 through July 31,
1996, the Adviser waived part of its management fees or reimbursed
certain expenses of each Fund in order to limit total expenses to .75
of 1% of the average daily net asset value of each Fund, excluding any
12b-1 fees applicable to Class A and Class C. The Adviser has
currently agreed to continue its fee waivers and expense
reimbursements through July 31, 1997.
56
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
The management fee compensates the Adviser for overall investment
advisory and administrative services, and general office facilities.
The Trust pays no compensation directly to its trustees who are
affiliated with the Adviser or to its officers, all of whom receive
remuneration for their services to the Trust from the Adviser.
7. COMPOSITION OF NET ASSETS
At July 31, 1996, there were an unlimited number of $.01 par value
shares authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $23,434,238 $61,101,976 $54,694,178 $31,699,688
Balance of undistributed net investment income 10,053 9,856 20,950 13,519
Accumulated net realized gain (loss) from investment
transactions (74,609) (420,303) (512,013) 45,053
Net unrealized appreciation of investments 625,269 1,881,130 1,574,282 994,292
----------- ----------- ----------- -----------
Net assets $23,994,951 $62,572,659 $55,777,397 $32,752,552
=========== =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
NJ PA VA
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $57,838,337 $62,734,553 $63,590,890
Balance of undistributed net investment income 5,899 67,522 24,321
Accumulated net realized gain (loss) from investment
transactions (570,516) (535,439) (142,279)
Net unrealized appreciation of investments 999,574 2,032,253 2,747,338
----------- ----------- -----------
Net assets $58,273,294 $64,298,889 $66,220,270
=========== =========== ===========
- -------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general
obligation, escrowed and revenue bonds. At July 31, 1996, the revenue
sources by municipal purpose for these investments, expressed as a
percent of total investments, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
AZ FL MD MI
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Bonds:
Health Care Facilities 15% 17% 14% 21%
Housing Facilities 10 19 22 16
Water/Sewer Facilities 10 10 3 14
Pollution Control 11 2 6 7
Educational Facilities 14 1 4 4
Transportation 2 6 10 4
Lease Rental Facilities 7 1 5 3
Electric Utilities 2 7 1 3
Other 8 8 7 7
General Obligation Bonds 16 13 15 16
Escrowed Bonds 5 16 13 5
--- --- --- ---
100% 100% 100% 100%
=== === === ===
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
NJ PA VA
- ---------------------------------------------------------------
<S> <C> <C> <C>
Revenue Bonds:
Health Care Facilities 16% 27% 13%
Housing Facilities 12 14 10
Water/Sewer Facilities 5 - 22
Pollution Control 10 21 -
Educational Facilities 5 5 10
Transportation 8 4 11
Lease Rental Facilities 3 - 4
Electric Utilities 4 3 -
Other 11 9 11
General Obligation Bonds 15 15 10
Escrowed Bonds 11 2 9
--- --- ---
100% 100% 100%
=== === ===
- ---------------------------------------------------------------
</TABLE>
58
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
Certain long-term and intermediate-term investments owned by the Funds
are covered by insurance issued by several private insurers or are
backed by an escrow or trust containing U.S. Government or U.S.
Government agency securities, either of which ensure the timely
payment of principal and interest in the event of default (50% for
Arizona, 60% for Florida, 52% for Maryland, 37% for Michigan, 40% for
New Jersey, 46% for Pennsylvania and 32% for Virginia). Such insurance
or escrow, however, does not guarantee the market value of the
municipal securities or the value of the Funds' shares.
Certain temporary investments in short-term municipal securities have
credit enhancements (letters of credit, guarantees or insurance)
issued by third party domestic or foreign banks or other institutions
(100% for Arizona, 100% for Florida, 0% for Maryland, 0% for Michigan,
100% for New Jersey, N/A for Pennsylvania and 100% for Virginia).
For additional information regarding each investment security, refer
to the Portfolio of Investments of each Fund.
59
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------ ----------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ------------------------------------------------------------------------------------------------------------------------------------
ARIZONA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 $10.740 $.258 $ (.306) $(.252) $ --- $10.440
Year ended 1/31,
1996 9.930 .503 .829 (.522) --- 10.740
9/6/94 to
1/31/95 10.030 .203 (.086) (.217) --- 9.930
CLASS C
Six months ended
7/31/96 10.650 .217 (.307) (.210) --- 10.350
Year ended 1/31,
1996 9.840 .419 .830 (.439) --- 10.650
9/9/94 to
1/31/95 9.940 .169 (.052) (.217) --- 9.840
CLASS R
Six months ended
7/31/96 10.670 .265 (.304) (.261) --- 10.370
Year ended 1/31,
1996 9.850 .529 .831 (.540) --- 10.670
1995 10.880 .536 (1.026) (.540) --- 9.850
1994 10.050 .531 .853 (.522) (.032) 10.880
1993 9.525 .438 .563 (.435) (.041) 10.050
12/13/91 to
1/31/92 9.525 --- --- --- --- 9.525
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
60
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(.42)% $ 4,684 1.23%* 4.65%* 1.00%* 4.88%* 7%
13.68 3,895 1.31 4.49 1.00 4.80 5
1.24 1,124 1.60* 4.68* 1.00* 5.28* 29
(.82) 483 1.98* 3.90* 1.75* 4.13* 7
12.90 328 2.11 3.66 1.75 4.02 5
1.25 43 3.51* 2.79* 1.75* 4.55* 29
(.34) 18,828 .98* 4.91* .75* 5.14* 7
14.09 19,533 1.15 4.72 .75 5.12 5
(4.39) 16,554 1.06 5.12 .75 5.43 29
14.07 16,140 1.25 4.48 .75 4.98 11
10.71 8,026 1.75* 3.94* .75* 4.94* 43
- 15 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
--------------------------------------------------------------------
Net realized Dividends from
Net asset Net and unrealized tax-exempt net Distributions Net asset
value beginning investment gain (loss) from investment from capital value end
of period income++ investments** income gains of period
- --------------------------------------------------------------------------------------------------------------------------
FLORIDA
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 $10.560 $.252 $(.306) $(.246) $ - $10.260
Year ended 1/31,
1996 9.730 .488 .840 (.498) - 10.560
9/6/94 to
1/31/95 9.890 .193 (.148) (.202) (.003) 9.730
CLASS C
Six months ended
7/31/96 10.510 .207 (.290) (.207) - 10.220
Year ended 1/31,
1996 9.730 .413 .789 (.422) - 10.510
9/16/94 to
1/31/95 9.720 .152 .021 (.163) - 9.730
CLASS R
Six months ended
7/31/96 10.570 .256 (.298) (.258) - 10.270
Year ended 1/31,
1996 9.750 .518 .824 (.522) - 10.570
1995 10.740 .508 (.985) (.510) (.003) 9.750
1994 9.960 .511 .779 (.510) - 10.740
1993 9.525 .440 .431 (.436) - 9.960
12/13/91 to
1/31/92 9.525 - - - - 9.525
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
62
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
------------------------------------------------------------------------------------------------
Ratio of Ratio of
Ratio of net investment Ratio of net investment
Total Net assets expenses to income to expenses income to
return on end of average net average net to average net average net Portfolio
net asset period (in assets before assets before assets after assets after turnover
value+ thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ---------------------------------------------------------------------------------------------------------------------------------
FLORIDA
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 (.49)% $ 8,927 1.06%* 4.70%* 1.00%* 4.76%* 12%
Year ended 1/31,
1996 13.92 5,823 1.21 4.53 1.00 4.74 21
9/6/94 to
1/31/95 .52 1,392 1.56* 4.52* 1.00* 5.08* 4
CLASS C
Six months ended
7/31/96 (.77) 246 1.81* 3.95* 1.75* 4.01* 12
Year ended 1/31,
1996 12.54 168 2.16 3.62 1.75 4.03 21
9/16/94 to
1/31/95 1.84 78 2.84* 3.26* 1.75* 4.35* 4
CLASS R
Six months ended
7/31/96 (.37) 53,399 .81* 4.95* .75* 5.01* 12
Year ended 1/31,
1996 14.05 55,318 .88 4.93 .75 5.06 21
1995 (4.33) 52,538 .84 5.12 .75 5.21 4
1994 13.22 48,254 .89 4.69 .75 4.83 3
1993 9.33 23,727 1.24* 4.35* .75* 4.84* 1
12/13/91 to
1/31/92 - 15 - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
--------------------------------------------------------------------
Net realized Dividends from
Net asset Net and unrealized tax-exempt net Distributions Net asset
value beginning investment gain (loss) from investment from capital value end
of period income++ investments** income gains of period
- --------------------------------------------------------------------------------------------------------------------------
MARYLAND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 $10.430 $.254 $ (.281) $(.243) $ - $10.160
Year ended 1/31,
1996 9.600 .483 .844 (.497) - 10.430
9/6/94 to
1/31/95 9.840 .198 (.229) (.207) (.002) 9.600
CLASS C
Six months ended
7/31/96 10.420 .211 (.277) (.204) - 10.150
Year ended 1/31,
1996 9.590 .409 .842 (.421) - 10.420
9/15/94 to
1/31/95 9.750 .160 (.153) (.167) - 9.590
CLASS R
Six months ended
7/31/96 10.440 .258 (.273) (.255) - 10.170
Year ended 1/31,
1996 9.610 .513 .838 (.521) - 10.440
1995 10.620 .513 (1.008) (.513) (.002) 9.610
1994 9.910 .509 .727 (.503) (.023) 10.620
1993 9.525 .442 .395 (.442) (.010) 9.910
12/13/91 to
1/31/92 9.525 - - - - 9.525
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
64
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
------------------------------------------------------------------------------------------------
Ratio of Ratio of
Ratio of net investment Ratio of net investment
Total Net assets expenses to income to expenses income to
return on end of average net average net to average net average net Portfolio
net asset period (in assets before assets before assets after assets after turnover
value+ thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ---------------------------------------------------------------------------------------------------------------------------------
MARYLAND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 (.24)% $ 9,335 1.12%* 4.74%* 1.00%* 4.86%* 4%
Year ended 1/31,
1996 14.07 6,860 1.33 4.41 1.00 4.74 17
9/6/94 to
1/31/95 (.26) 1,605 1.59* 4.67* 1.00* 5.26* 35
CLASS C
Six months ended
7/31/96 (.62) 1,712 1.87* 3.99* 1.75* 4.11* 4
Year ended 1/31,
1996 13.24 1,438 2.06 3.73 1.75 4.04 17
9/15/94 to
1/31/95 .12 860 1.86* 4.44* 1.75* 4.55* 35
CLASS R
Six months ended
7/31/96 (.12) 44,730 .87* 5.00* .75* 5.12* 4
Year ended 1/31,
1996 14.33 47,389 1.04 4.78 .75 5.07 17
1995 (4.58) 42,741 .89 5.14 .75 5.28 35
1994 12.71 47,822 .86 4.74 .75 4.85 4
1993 8.96 28,283 1.02* 4.69* .75* 4.96* 20
12/13/91 to
1/31/92 - 15 - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------ ----------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MICHIGAN
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
Six months ended
7/31/96 $10.740 $.262 $(.307) $(.255) $ - $10.440
Year ended 1/31,
1996 9.870 .510 .911 (.519) (.032) 10.740
9/6/94 to
1/31/95 10.090 .204 (.209) (.212) (.003) 9.870
CLASS C
Six months ended
7/31/96 10.730 .216 (.303) (.213) - 10.430
Year ended 1/31,
1996 9.850 .430 .922 (.440) (.032) 10.730
9/16/94 to
1/31/95 9.910 .161 (.050) (.171) - 9.850
CLASS R
Six months ended
7/31/96 10.750 .267 (.300) (.267) - 10.450
Year ended 1/31,
1996 9.880 .539 .906 (.543) (.032) 10.750
1995 10.860 .529 (.972) (.534) (.003) 9.880
1994 10.060 .531 .808 (.528) (.011) 10.860
1993 9.525 .456 .554 (.449) (.026) 10.060
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
66
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(.40)% $ 4,923 1.18%* 4.73%* 1.00%* 4.91%* 16%
14.68 4,027 1.35 4.52 1.00 4.87 33
.02 897 2.62* 3.68* 1.00* 5.30* 35
(.79) 265 1.93* 3.98* 1.75* 4.16* 16
13.96 231 2.08 3.79 1.75 4.12 33
1.18 75 3.52* 2.76* 1.75* 4.53* 35
(.28) 27,564 .93* 4.98* .75* 5.16* 16
14.93 30,126 1.05 4.87 .75 5.17 33
(3.98) 26,644 .96 5.12 .75 5.33 35
13.58 25,085 1.07 4.67 .75 4.99 3
10.80 14,684 1.62* 4.19* .75* 5.06* 32
- 15 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- ----------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
----------------------------------------------------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NEW JERSEY
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
Six months ended
7/31/96 $10.400 $.261 $(.287) $(.254) $ -- $10.120
Year ended 1/31,
1996 9.730 .519 .685 (.534) -- 10.400
9/6/94 to
1/31/95 10.030 .205 (.209) (.210) (.086) 9.730
CLASS C
Six months ended
7/31/96 10.380 .227 (.292) (.215) -- 10.100
Year ended 1/31,
1996 9.710 .443 .683 (.456) -- 10.380
9/21/94 to
1/31/95 9.770 .159 (.050) (.169) -- 9.710
CLASS R
Six months ended
7/31/96 10.410 .266 (.280) (.266) -- 10.130
Year ended 1/31,
1996 9.740 .551 .677 (.558) -- 10.410
1995 10.710 .524 (.886) (.522) (.086) 9.740
1994 9.960 .513 .810 (.513) (.060) 10.710
1993 9.525 .445 .431 (.441) -- 9.960
12/13/91 to
1/31/92 9.525 -- -- -- -- 9.525
- ----------------------------------------------------------------------------------------------------------------------------
See notes on page 72.
</TABLE>
68
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
(.23)% $13,890 1.16%* 4.86%* 1.00%* 5.02%* 8%
12.63 10,661 1.25 4.85 1.00 5.10 39
.02 2,741 1.31* 5.03* 1.00* 5.34* 32
(.61) 1,939 1.91* 4.11* 1.75* 4.27* 8
11.80 1,065 1.96 4.16 1.75 4.37 39
1.16 464 2.00* 4.37* 1.75* 4.62* 32
(.11) 42,445 .91* 5.11* .75* 5.27* 8
12.88 43,304 .98 5.20 .75 5.43 39
(3.27) 39,582 .89 5.18 .75 5.32 32
13.60 36,462 .98 4.61 .75 4.84 52
9.36 16,208 1.43* 4.28* .75* 4.96* 9
-- 15 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------------------------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ----------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Six months ended
7/31/96 $10.600 $.263 $(.247) $(.246) $ ---- $10.370
Year ended 1/31,
1996 9.750 .498 .862 (.510) ---- 10.600
9/6/94 to
1/31/95 9.920 .206 (.164) (.212) ---- 9.750
CLASS C
Six months ended
7/31/96 10.480 .216 (.242) (.204) ---- 10.250
Year ended 1/31,
1996 9.650 .417 .843 (.430) ---- 10.480
9/6/94 to
1/31/95 9.920 .176 (.235) (.211) ---- 9.650
CLASS R
Six months ended
7/31/96 10.570 .267 (.239) (.258) ---- 10.340
Year ended 1/31,
1996 9.730 .527 .846 (.533) ---- 10.570
1995 10.810 .531 (1.077) (.534) ---- 9.730
1994 10.010 .533 .807 (.534) (.006) 10.810
1993 9.525 .451 .481 (.443) (.004) 10.010
12/13/91 to
1/31/92 9.525 --- --- --- --- 9.525
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 72.
70
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
----------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
.18% $ 7,907 1.14%* 4.85%* 1.00%* 4.99%* 31%
14.22 5,817 1.30 4.52 1.00 4.82 52
.49 1,483 1.87* 4.56* 1.00* 5.43* 74
(.22) 1,104 1.89* 4.09* 1.75* 4.23* 31
13.27 1,101 2.14 3.70 1.75 4.09 52
(.53) 494 2.52* 3.90* 1.75* 4.67* 74
30 55,287 .88* 5.10* .75* 5.23* 31
14.40 57,345 .96 4.93 .75 5.14 52
(4.94) 51,499 .91 5.27 .75 5.43 74
13.67 48,720 .94 4.82 .75 5.01 5
9.97 23,680 1.25* 4.53* .75* 5.03* 15
--- 15 --- --- --- --- ---
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Operating performance Less distributions
------------------------------ ----------------------------
Net Dividends
realized and from tax-
Net asset Net unrealized gain exempt net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VIRGINIA
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
Six months ended
7/31/96 $10.600 $.263 $(.255) $(.258) $ - $10.350
Year ended 1/31,
1996 9.760 .509 .878 (.509) (.038) 10.600
9/6/94 to
1/31/95 9.980 .201 (.207) (.214) - 9.760
CLASS C
Six months ended
7/31/96 10.570 .221 (.252) (.219) - 10.320
Year ended 1/31,
1996 9.740 .432 .868 (.432) (.038) 10.570
9/8/94 to
1/31/95 9.950 .171 (.167) (.214) - 9.740
CLASS R
Six months ended
7/31/96 10.600 .268 (.248) (.270) - 10.350
Year ended 1/31,
1996 9.770 .537 .864 (.533) (.038) 10.600
1995 10.740 .531 (.964) (.537) - 9.770
1994 10.030 .529 .726 (.527) (.018) 10.740
1993 9.525 .439 .499 (.433) - 10.030
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Net of taxes, if applicable (note 1).
+ Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gains distributions, if any, and changes in net
asset value per share. The total returns shown for Class A Shares do not
include the effect of applicable front-end sales charges. The total returns
shown for Class C Shares do not include the effect of applicable contingent
deferred sales charges. Class R Shares are not subject to any front-end or
contingent deferred sales charges.
++ Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser (note 6).
72
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
JULY 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
.11% $ 7,894 1.14%* 4.86%* 1.00%* 5.00%* 22%
14.50 5,874 1.20 4.73 1.00 4.93 42
.01 2,215 1.57* 4.70* 1.00* 5.27* 40
(.27) 975 1.89* 4.11* 1.75* 4.25* 22
13.58 789 1.92 4.04 1.75 4.21 42
.10 378 2.20* 4.12* 1.75* 4.57* 40
.23 57,352 .89* 5.11* .75* 5.25* 22
14.65 59,405 .94 5.04 .75 5.23 42
(3.92) 54,791 .82 5.33 .75 5.40 40
12.78 55,773 .84 4.94 .75 5.03 7
10.04 37,196 .96* 4.71* .75* 4.92* 12
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
Your
investment
partners
Since 1898, John Nuveen & Co. Incorporated has worked to bring together the
various participants in the municipal bond industry and build strong
partnerships that benefit all concerned. Investors, financial advisers,
municipal officials, investment bankers-Nuveen believes that forging
relationships within these groups based on trust and value is the key to
successful investing.
As the oldest and largest municipal bond specialist in the United States,
Nuveen's investment bankers work with issuers to understand and meet their needs
in structuring and selling their bond issues.
Nuveen also works closely with financial advisers around the country,
including brokerage firms, banks, insurance companies, and independent financial
planners, to bring the benefits of tax-free investing to you. These advisers are
experts at identifying your needs and recommending the best solutions for your
situation. Together we make a powerful team, helping you create a successful
investment plan that meets your needs today and in the future.
[JOHN NUVEEN PHOTO APPEARS HERE]
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
[RECYCLED LOGO APPEARS HERE]
[LOGO OF NUVEEN]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
OEFI-SEP96
<PAGE>
Nuveen Tax-Free
Mutual Funds
Dependable tax-free
income for generations
ARIZONA
FLORIDA
MARYLAND
MICHIGAN
NEW JERSEY
PENNSYLVANIA
VIRGINIA
[PHOTO OF COUPLE APPEARS HERE]
ANNUAL REPORT/JANUARY 31, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
9 Fund performance
16 Portfolio of investments
39 Statement of net assets
41 Statement of operations
43 Statement of changes in net assets
47 Notes to financial statements
62 Financial highlights
<PAGE>
Dear
shareholder
[PHOTO OF RICHARD J. FRANKE APPEARS HERE]
"Over time,
municipal bonds
have proven to
be a valuable
and dependable
component of
successful invest-
ment programs."
During 1995, we enjoyed a welcome rebound in the bond markets--a sharp contrast
to 1994, which was one of the most volatile periods in bond market history. In
fact, 1995 unfolded as one of the best years for bonds in a decade, as the bond
market responded to a climate of slowing economic growth and diminished
inflationary pressure.
The changing profile of the bond market over the past two years serves to
remind us that weathering the ups and downs of the markets is a normal part of
the investment process. By maintaining a long-term perspective on your
investments, you can minimize the impact of short-term fluctuations and keep the
focus on achieving your goals. Municipal bond funds continue to play an integral
role in helping investors reach those goals, offering the attractive tax-free
income and solid total returns that they seek.
Throughout the past year, we have kept our sights focused on successfully
meeting your fund's objectives. As of January 31, 1996, the current annual SEC
yield on offering price for R Shares for the mutual funds covered in this report
ranged from 4.44% to 4.96%. To match these yields, an investor in the 36%
federal income tax bracket would have had to earn at least 6.94% on taxable
alternatives. The effect of state taxes further enhances the after-tax yield
advantage provided by municipal bonds.
3
<PAGE>
Reflecting the rebound in the bond market, each of these funds reported gains
in portfolio value since January 31, 1995. The 12-month total returns on net
asset value, reflecting portfolio gains plus reinvested dividend income, ranged
from 12.88% to 14.93%, which translate to 16.80% to 18.68% on a taxable-
equivalent basis. This strong performance rewarded investors who had weathered
the volatility of 1994, and reminds us again of the importance of municipal
bonds to a well-rounded, long-term investment plan.
As some of you may know, on June 30, 1996, I will be retiring as the chairman
and chief executive officer of John Nuveen & Co. Incorporated, and as chairman
of the board of the Nuveen Funds. As I look back over the 41 years I have spent
at Nuveen, I'm proud to have been associated with a firm that holds integrity,
honesty, and value as the cornerstones of its business. I'm confident that these
traditions will continue to be the hallmarks of Nuveen.
Over the past few years, I have been working closely with other Nuveen
managers to ensure that the company and the funds continue to be guided by
strong and talented management following my retirement. Timothy Schwertfeger has
been named as my successor as Chief Executive Officer and Chairman of Nuveen,
and Chairman of the Funds. He is currently Executive Vice President of Nuveen
and President of the Nuveen Funds. I am very confident in his abilities and the
abilities of the entire Nuveen management team.
The transition in management has been well planned and it will have no effect
on portfolio management, or the way dividends are set. Our management team is
committed to continuing Nuveen's successful tradition of value investing and
prudent management, helping our shareholders meet their needs for tax-free
investment income with a full range of investment choices.
Our focus will continue to be on building shareholder value, providing
research-oriented management, and maintaining our leadership role in the
municipal bond market. With this focus, we anticipate many more years of
progress and accomplishment for our shareholders and our firm.
I'd like to take this occasion to thank you for selecting Nuveen mutual fund
investments.
Sincerely,
/s/ Richard J. Franke
Richard J. Franke
Chairman of the Board
March 15, 1996
4
<PAGE>
Answering your questions
Tom Spalding, head of Nuveen's portfolio management team, discusses factors
affecting the municipal market and efforts made to provide value for
shareholders.
How did the investment climate over the past year affect municipal bonds?
In 1995, the combination of slow economic growth and low inflation created the
ideal environment for bond markets, which responded with a sustained rally.
Citing the lack of significant inflation, the Federal Reserve Board moved to cut
interest rates in July and December 1995 and again at the end of January 1996.
This succession of rate cuts helped to bring down long-term municipal bond
yields by almost 150 basis points over the year and increase net asset values.
The municipal bond rebound was somewhat less than that of taxable bonds due to
the high-profile discussion of major tax reform legislation--and concern about
the potential impact of this legislation on tax-free investments. Yet in 1995,
most Nuveen mutual funds enjoyed taxable-equivalent total returns of 17% or
better.
5
<PAGE>
[PHOTO OF TOM SPALDING APPEARS HERE]
Tom Spalding, head of Nuveen's portfolio management team, answers investors'
questions on developments in the municipal market.
What was Nuveen's approach to investing during this period?
During 1995, we continued to pursue our philosophy of value investing, a
disciplined approach designed to deliver above-market performance by emphasizing
securities that offer good intrinsic value but that are underpriced or
undervalued by the market. This approach was rewarded over the past year, as we
saw many of our portfolio holdings upgraded by the rating agencies, confirming
that our Research Department's judgments about credit quality were on target. We
also moved to protect current income by investing more of our portfolio in non-
callable bonds when possible. These bonds are cannot be redeemed before maturity
so that their yield is assured for the long term in the event of falling
interest rates. As is our policy, we continue to invest only in investment-grade
quality securities.
Has Nuveen made any major investment changes over the past year?
No. In the search for income and total return, our value investing approach
continues to concentrate on individual bonds with current yields, prices, credit
quality, and future prospects that are exceptionally attractive relative to
other bonds in the market. Because attractive issues may appear any time over
the course of the year, we are constantly vigilant for new opportunities, with
the goal of ensuring that the funds are always positioned to meet their
objectives: as high a level of current tax-free income as is consistent with
preservation of capital. This means
6
<PAGE>
that our analysts continuously assess investment possibilities across the entire
spectrum of geographical and sector opportunities nationwide. Currently, we
favor revenue bonds for essential services (such as those issued by water and
sewer facilities and utilities, especially public power authorities providing
electricity at competitive rates). We have reduced our positions in general
obligation bonds issued by counties and cities, which have suffered strained
financial backing as the result of spending cuts at the state and federal
levels.
What does Nuveen see as the impact of the flat tax proposals on the municipal
market?
Because of the implications for tax-free investments such as municipal bonds and
bond funds, we have been closely monitoring the various flat tax proposals
currently being debated in Congress. While election-year politics have focused a
spotlight on the debate, it is important to note that none of the proposals
currently under discussion has gained a strong consensus. In addition,
implementation of any measure that manages to pass both houses is almost
certainly two years--or more--away.
Given the uncertainty surrounding this issue, Nuveen has taken the position
that it is inadvisable to manage our funds toward one specific outcome. Instead,
we continue to believe that pursuing our value investing philosophy is the
optimal way to meet our investors' objectives. We believe that this
7
<PAGE>
approach offers investors greater price stability during volatile markets. Once
the tax issue is resolved, we're confident that municipal bonds--because of
their high credit quality and attractive yields--will continue to hold a
strategic place in the prudent investor's portfolio. We will continue to monitor
developments in the tax debate as well as changes in other economic and
political conditions while keeping our focus on achieving the objectives of your
fund.
What is Nuveen's market outlook for 1996?
Although inflation currently remains low and economic growth is moderating, we
continue to watch these factors for potential changes and impact on the bond
market. During this election year, we're also closely monitoring any changes in
economic and tax policy that may impact the municipal market. The fundamentals
in the long term are sound with the supply of municipal bonds down from past
years, and a growing number of individual investors seeking to diversify their
portfolios, and to increase their tax-free income.
8
<PAGE>
NUVEEN ARIZONA TAX-FREE
VALUE FUND
Arizona
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Arizona Tax-Free
Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Tax-Adjusted
Lehman Brothers Lehman Brothers Nuveen AZ Tax-Free
Municipal Bond Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,321
1.93 10,983 10,959 10,545
7.93 11,643 11,618 11,222
1.94 12,328 12,277 12,029
7.94 11,861 11,811 11,400
1.95 11,890 11,815 11,502
7.95 12,796 12,716 12,316
1.96 13,681 13,574 13,123
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,574
___ Nuveen AZ Tax-Free Value Fund - Total $13,123
($13,777 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.09% 7.57% 8.51%
A Shares on NAV 13.68% N/A 10.55%+
A Shares on offering price** 8.56% N/A 6.97%+
C Shares on NAV 12.90% N/A 10.07%+
The fund's current dividend of 4.35 cents per share for Class R Shares
translated into a distribution yield of 4.89% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 39.5% combined state
and federal income tax bracket would have to earn 8.08% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.32% from a year ago. The average annual total return on NAV for
this class was 14.09%, which translates into a taxable-equivalent total return
of 17.76%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
9
<PAGE>
NUVEEN FLORIDA TAX-FREE
VALUE FUND
Florida
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Florida Tax-Free
Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers
Municipal Bond Nuveen FL Tax-Free
Index Value Fund
1.92 10,000 9,525
7.92 10,698 10,167
1.93 10,983 10,414
7.93 11,643 11,064
1.94 12,328 11,791
7.94 11,861 11,162
1.95 11,890 11,281
7.95 12,796 12,012
1.96 13,681 12,867
___ Lehman Brothers Municipal Bond Index - Total $13,681
___ Nuveen FL Tax-Free Value Fund - Total $12,867
($13,509 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.05% 7.31% 7.97%
A Shares on NAV 13.92% N/A 10.15%+
A Shares on offering price** 8.79% N/A 6.59%+
C Shares on NAV 12.54% N/A 10.43%+
- -------------------------------------------------------------------
The fund's current dividend of 4.30 cents per share for Class R Shares
translated into a distribution yield of 4.88% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 36% federal income
tax bracket would have to earn 7.63% on a taxable investment to match this tax-
free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.41% from a year ago. The average annual total return on NAV for
this class was 14.05%, which translates into a taxable-equivalent total return
of 17.13%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
10
<PAGE>
NUVEEN MARYLAND TAX-FREE
VALUE FUND
Maryland
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Maryland Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers Tax-Adjusted
Municipal Bond Lehman Brothers Nuveen MD Tax-Free
Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,173
1.93 10,983 10,960 10,379
7.93 11,643 11,619 11,101
1.94 12,328 12,279 11,698
7.94 11,861 11,814 11,142
1.95 11,890 11,818 11,163
7.95 12,796 12,718 12,055
1.96 13,681 13,573 12,762
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,573
___ Nuveen MD Tax-Free Value Fund - Total $12,762
($13,398 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.33% 7.14% 7.74%
A Shares on NAV 14.07% N/A 9.64%+
A Shares on offering price** 8.94% N/A 6.10%+
C Shares on NAV 13.24% N/A 9.55%+
- -------------------------------------------------------------------
The fund's current dividend of 4.25 cents per share for Class R Shares
translated into a distribution yield of 4.89% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 39% combined state
and federal income tax bracket would have to earn 8.02% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.64% from a year ago. The average annual total return on NAV for
this class was 14.33%, which translates into a taxable-equivalent total return
of 17.87%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
11
<PAGE>
NUVEEN MICHIGAN TAX-FREE
VALUE FUND
Michigan
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Michigan Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Tax-Adjusted
Lehman Brothers Lehman Brothers Nuveen MI
Municipal Municipal Tax-Free
Bond Index Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,346
1.93 10,983 10,946 10,554
7.93 11,643 11,604 11,297
1.94 12,328 12,249 11,987
7.94 11,861 11,785 11,479
1.95 11,890 11,778 11,511
7.95 12,796 12,676 12,355
1.96 13,681 13,517 13,230
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,517
___ Nuveen MI Tax-Free Value Fund - Total $13,230
($13,890 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.93% 7.83% 8.74%
A Shares on NAV 14.68% N/A 10.28%+
A Shares on offering price** 9.52% N/A 6.72%+
C Shares on NAV 13.96% N/A 10.92%+
- -------------------------------------------------------------------
The fund's current dividend of 4.45 cents per share for Class R Shares
translated into a distribution yield of 4.97% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 40% combined state
and federal income tax bracket would have to earn 8.28% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.81% from a year ago. The average annual total return on NAV for
this class was 14.93%, which translates into a taxable-equivalent total return
of 18.68%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
12
<PAGE>
NUVEEN NEW JERSEY TAX-FREE
VALUE FUND
New Jersey
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen New Jersey Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers Tax-Adjusted
Municipal Bond Lehman Brothers Nuveen NJ Tax-Free
Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,234
1.93 10,983 10,953 10,416
7.93 11,643 11,612 11,064
1.94 12,328 12,265 11,833
7.94 11,861 11,800 11,370
1.95 11,890 11,798 11,447
7.95 12,796 12,697 12,175
1.96 13,681 13,545 12,922
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,545
___ Nuveen NJ Tax-Free Value Fund - Total $12,922
($13,566 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 12.88% 7.45% 8.08%
A Shares on NAV 12.63% N/A 8.87%+
A Shares on offering price** 7.56% N/A 5.35%+
C Shares on NAV 11.80% N/A 9.46%+
- -------------------------------------------------------------------
The fund's current dividend of 4.60 cents per share for Class R Shares
translated into a distribution yield of 5.30% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 40% combined state
and federal income tax bracket would have to earn 8.83% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 6.88% from a year ago. The average annual total return on NAV for
this class was 12.88%, which translates into a taxable-equivalent total return
of 16.80%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
13
<PAGE>
NUVEEN PENNSYLVANIA TAX-FREE
VALUE FUND
Pennsylvania
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Pennsylvania
Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers Tax-Adjusted
Municipal Bond Lehman Brothers Nuveen PA Tax-Free
Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,255
1.93 10,983 10,969 10,475
7.93 11,643 11,629 11,199
1.94 12,328 12,300 11,906
7.94 11,861 11,834 11,246
1.95 11,890 11,849 11,319
7.95 12,796 12,752 12,173
1.96 13,681 13,620 12,949
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,620
___ Nuveen PA Tax-Free Value Fund - Total $12,949
($13,595 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares 14.40% 7.33% 8.14%
A Shares 14.22% N/A 10.33%+
A Shares on offering price** 9.08% N/A 6.76%+
C Shares 13.27% N/A 8.88%+
- -------------------------------------------------------------------
The fund's current dividend of 4.30 cents per share for Class R Shares
translated into a distribution yield of 4.88% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 38% combined state
and federal income tax bracket would have to earn 7.87% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.63% from a year ago. The average annual total return on NAV for
this class was 14.40%, which translates into a taxable-equivalent total return
of 17.84%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued on or after
September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
14
<PAGE>
NUVEEN VIRGINIA TAX-FREE VALUE FUND
Virginia
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Virginia Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers Tax-Adjusted Nuveen VA
Municipal Bond Lehman Brothers Tax-Free
Index Municipal Bond Index Value Fund
--------------- -------------------- ----------
<S> <C> <C> <C>
1/92 10,000 10,000 9,525
7/92 10,698 10,698 10,264
1/93 10,983 10,957 10,481
7/93 11,643 11,615 11,157
1/94 12,328 12,272 11,820
7/94 11,861 11,807 11,281
1/95 11,890 11,807 11,357
7/95 12,796 12,707 12,149
1/96 13,681 13,557 13,021
</TABLE>
Lehman Brothers Municipal Bond Index -- Total $13,681
Tax-Adjusted Lehman Brothers Municipal Bond Index (reduced by state tax
effects)-- Total $13,557
Nuveen VA Tax-Free Value Fund -- Total $13,021 ($13,670 if purchased at
NAV)
Past performance is not predictive of future performance
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN
1 year 3 years Since inception
<S> <C> <C> <C>
R Shares on NAV 14.65% 7.51% 8.29%
A Shares on NAV 14.50% N/A 10.14%+
A Shares on offering price** 9.35% N/A 6.58%+
C Shares on NAV 13.58% N/A 9.63%+
</TABLE>
The fund's current dividend of 4.50 cents per share for Class R Shares
translated into a distribution yield of 5.09% as of January 31, 1996. The annual
distribution yield is calculated by multiplying the dividend by 12, and dividing
this number by the current offering price. Investors in the 39.5% combined state
and federal income tax bracket would have to earn 8.41% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.50% from a year ago. The average annual total return on NAV for
this class was 14.65%, which translates into a taxable-equivalent total return
of 18.30%.
* One-year, 3-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
The Lehman Municipal Bond Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to R Shares at the time (4.75%) and all ongoing fund expenses.
15
<PAGE>
PORTFOLIO OF INVESTMENTS
ARIZONA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 250,000 Arizona Certificates of Participation,
6.250%, 9/01/10 9/02 at 102 Aaa $ 272,493
Arizona Educational Loan Marketing Corporation,
Alternative Minimum Tax:
200,000 7.000%, 3/01/05 3/02 at 101 A 210,860
100,000 6.375%, 9/01/05 9/02 at 101 Aa 105,202
300,000 Arizona Health Facilities Authority (Phoenix Baptist
Hospital and Medical Center), 6.250%, 9/01/11 9/03 at 100 Aaa 324,888
200,000 Arizona Municipal Financing Program, Certificates
of Participation, 7.700%, 8/01/10 No Opt. Call Aaa 248,448
200,000 Arizona State Transportation Board,
6.500%, 7/01/11 (Pre-refunded to 7/01/02) 7/02 at 101 1/2 Aaa 228,050
700,000 Arizona State University Research Park,
5.000%, 7/01/21 7/06 at 100 Aaa 673,190
Arizona State University:
500,000 5.750%, 7/01/12 7/02 at 101 AA 514,705
500,000 5.500%, 7/01/19 7/02 at 101 AA 500,730
500,000 Arizona Student Loan Acquisition Authority,
Alternative Minimum Tax, 6.600%, 5/01/10 5/04 at 102 Aa 518,205
Arizona Wastewater Management Authority:
175,000 5.950%, 7/01/12 7/02 at 102 Aaa 185,719
250,000 5.750%, 7/01/15 7/05 at 102 Aaa 261,385
700,000 Apache County Public Finance Corporation,
Certificates of Participation, 5.500%, 5/01/10 5/00 at 102 A 714,119
195,000 Central Arizona Water Conservation District,
6.500%, 11/01/11 (Pre-refunded to 5/01/01) 5/01 at 102 AA- 219,646
300,000 Cochise County Unified School District No. 68,
General Obligation, 7.500%, 7/01/10 No Opt. Call Aaa 382,296
250,000 Coconino and Yavapai Counties, Joint Unified School
District No. 9, 6.750%, 7/01/07 7/01 at 101 A- 273,245
550,000 Douglas Municipal Property Corporation,
5.750%, 7/01/15 7/05 at 101 Aaa 574,294
280,000 Eloy Municipal Property Corporation,
7.000%, 7/01/11 7/02 at 101 BBB 301,034
375,000 Maricopa Rural Road Improvement District,
6.900%, 7/01/05 7/99 at 101 N/R 396,461
300,000 Maricopa County Hospital District No. 1,
6.250%, 6/01/10 6/04 at 101 Aaa 328,662
500,000 Maricopa County Industrial Development Authority
(Samaritan Health Services), 7.000%, 12/01/16 No Opt. Call Aaa 622,100
600,000 Maricopa County Industrial Development Authority
(Baptist Hospital), 5.500%, 9/01/16 9/05 at 101 Aaa 603,804
Maricopa County School District No. 28,
General Obligation:
265,000 6.000%, 7/01/12 (Pre-refunded to 7/01/02) 7/02 at 100 Aaa 291,733
50,000 6.000%, 7/01/12 7/02 at 100 Aaa 52,784
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 Maricopa County Unified School District No. 41,
6.500%, 7/01/08 (Pre-refunded to 7/01/02) 7/02 at 100 Aaa $ 225,750
250,000 Maricopa County Unified School District No. 69
(Paradise Valley), 6.500%, 7/01/09
(Pre-refunded to 7/01/01) 7/01 at 100 Aaa 278,998
500,000 Mohave County Industrial Development Authority
(Citizens Utilities Company), Alternative
Minimum Tax, 6.600%, 5/01/29 11/03 at 101 AAA 528,845
Navajo County Pollution Control Corporation
(Arizona Public Service Company):
1,000,000 5.875%, 8/15/28 8/03 at 102 Baa1 993,510
750,000 5.500%, 8/15/28 8/03 at 102 Aaa 747,165
425,000 Peoria Improvement District (North Valley Power
Center), 7.300%, 1/01/12 1/03 at 101 BBB 461,835
200,000 Phoenix General Obligation, 6.500%, 7/01/11
(Pre-refunded to 7/01/99) 7/99 at 102 AA+ 220,116
250,000 Phoenix Civic Improvement Corporation, Airport
Terminal Excise Tax, Alternative Minimum Tax,
7.800%, 7/01/11 7/97 at 102 AA+ 266,505
295,000 Phoenix Housing Finance Corporation FHA-Insured,
6.500%, 7/01/24 7/02 at 101 Aaa 305,310
Phoenix Civic Improvement Corporation, Wastewater
System:
1,000,000 5.000%, 7/01/18 7/04 at 102 A1 950,180
400,000 6.125%, 7/01/23 (Pre-refunded to 7/01/03) 7/03 at 102 AAA 452,028
200,000 Phoenix Industrial Development Authority,
FHA-Insured (Chris Ridge Village Project),
6.750%, 11/01/12 11/02 at 101 AAA 212,054
300,000 Phoenix Junior Lien Street and Highway,
6.250%, 7/01/11 7/02 at 102 A+ 320,919
500,000 Phoenix Industrial Development Authority, GNMA
(Meadow Glen Apartments), 5.800%, 8/20/28 2/03 at 102 Aaa 498,530
485,000 Phoenix Industrial Development Authority, Single
Family Mortgage, Alternative Minimum Tax,
6.150%, 12/01/08 6/05 at 102 AAA 489,641
Phoenix Industrial Development Authority
(John C. Lincoln Hospital and Health Center):
500,000 6.000%, 12/01/10 12/03 at 102 BBB+ 517,530
500,000 6.000%, 12/01/14 12/03 at 102 BBB+ 497,495
290,000 Pima County Industrial Development Authority
(Tucson Electric), 7.250%, 7/15/10 1/02 at 103 Aaa 328,999
300,000 Pima County Unified School District No. 1,
General Obligation, 6.100%, 7/01/12 7/02 at 102 Aaa 321,852
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS
ARIZONA-CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 500,000 Pima County, Single Family Mortgage,
6.500%, 2/01/17 8/05 at 102 A $ 515,525
Pinal County, Certificates of Participation:
300,000 6.375%, 6/01/06 6/02 at 100 AA 329,895
200,000 6.500%, 6/01/09 6/02 at 100 AA 215,810
Salt River Project Agricultural Improvement and
Power District:
300,000 5.750%, 1/01/19 1/02 at 100 Aa 302,748
280,000 5.750%, 1/01/20 3/96 at 100 Aa 279,997
225,000 Tempe General Obligation, 6.000%, 7/01/08 7/02 at 101 AA+ 242,118
500,000 Tempe Industrial Development Authority,
Multi-Family Housing, FHA-Insured
(Quadrangles Village Apartments),
6.250%, 6/01/26 6/03 at 102 AAA 513,815
600,000 Tempe Union High School District No. 213,
General Obligation, 6.000%, 7/01/12 7/04 at 101 Aaa 643,674
500,000 Tucson General Obligation, 6.250%, 7/01/18 7/04 at 101 Aaa 544,885
575,000 Tucson Airport Authority, 5.700%, 6/01/13 6/03 at 102 Aaa 591,376
250,000 Tucson Local Business Development Finance
Corporation, 6.250%, 7/01/12 7/02 at 102 Aaa 272,115
300,000 University of Arizona, 6.250%, 6/01/11 6/02 at 102 AA 323,064
335,000 Yavapai County Community College,
6.000%, 7/01/12 7/03 at 101 A- 349,076
675,000 Yuma County Union High School District No. 70,
General Obligation, 5.700%, 7/01/06 7/02 at 101 Aaa 720,285
- -----------------------------------------------------------------------------------------------------------------------------------
$22,125,000 Total Investments--(Cost $21,884,694)--97.9% 23,265,698
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--2.1% 490,183
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $23,755,881
===================================================================================================================================
</TABLE>
18
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 31 $12,725,168 55%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 4,038,741 17
PORTFOLIO OF A+ A1 2 1,271,099 5
INVESTMENTS: A, A- A, A2, A3 5 2,062,825 9
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 5 2,771,404 12
Non-rated Non-rated 1 396,461 2
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 57 $23,265,698 100%
===================================================================================================================================
</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.
N/R - Investment is not rated.
See accompanying notes to financial statements.
19
<PAGE>
PORTFOLIO OF INVESTMENTS
FLORIDA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 300,000 Florida Department of General Services, General
Obligation, 6.600%, 7/01/17 7/02 at 101 Aa $ 332,154
2,500,000 Florida Housing Finance Agency, Alternative
Minimum Tax, 6.875%, 8/01/26 2/05 at 102 Aaa 2,672,225
750,000 Florida Housing Finance Agency, 6.400%, 6/01/24 6/02 at 103 AAA 776,003
30,000 Florida Housing Finance Agency, Home Ownership
(GNMA), Alternative Minimum Tax,
8.595%, 11/01/18 No Opt. Call AAA 31,802
Florida Municipal Power Agency:
1,000,000 6.250%, 10/01/21 (Pre-refunded to 10/01/02) 10/02 at 102 Aaa 1,135,100
1,145,000 6.000%, 10/01/27 (Pre-refunded to 10/01/02) 10/02 at 102 Aaa 1,283,179
1,000,000 Florida Municipal Power Agency, St. Lucie Project,
5.500%, 10/01/12 10/02 at 102 Aaa 1,022,390
Florida State Board of Education:
1,160,000 7.100%, 6/01/07 No Opt. Call Aaa 1,276,766
2,250,000 5.875%, 6/01/20 6/05 at 101 Aa 2,338,110
460,000 7.250%, 6/01/23 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 527,450
2,680,000 7.250%, 6/01/23 6/00 at 102 Aa 3,007,255
1,650,000 Florida Turnpike Authority,
6.350%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 101 Aaa 1,863,279
300,000 Brevard County Educational Facilities Authority
(Florida Institute of Technology),
6.875%, 11/01/22 11/02 at 102 BBB 308,484
600,000 Broward County Housing Finance Authority
(Lakeside Apartments), 7.000%, 2/01/25 2/05 at 102 AAA 647,310
190,000 Cape Coral Health Facilities Authority
(Cape Coral Medical Center), 8.125%, 11/01/08 No Opt. Call Aaa 212,589
1,000,000 Dade County (Miami International Airport),
Alternative Minimum Tax, 6.550%, 10/01/13 10/02 at 102 Aaa 1,096,780
115,000 Dade County Housing Finance Authority, Single
Family Mortgage,
Alternative Minimum Tax, 7.250%, 9/01/23 3/01 at 102 Aaa 121,089
2,480,000 Dade County (Jackson Memorial Hospital),
4.875%, 6/01/15 6/03 at 102 Aaa 2,348,982
470,000 Dade County Special Housing (City of Miami
Developments), 12.000%, 7/01/12 3/96 at 102 A 482,220
255,000 Dade County (Courthouse Center), 6.300%, 4/01/14 4/04 at 102 A 274,717
250,000 Dade County Health Facilities Authority
(South Miami Hospital),
7.000%, 10/01/18 (Pre-refunded to 10/01/99) 10/99 at 102 Aaa 281,388
300,000 Dade County Health Facilities Authority (North
Shore Medical Center), 6.500%, 8/15/15 8/02 at 102 Aaa 326,976
1,000,000 Davie Water and Sewer System, 6.250%, 10/01/17 10/02 at 102 Aaa 1,073,510
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600,000 Daytona Beach Water and Sewer System,
6.000%, 11/15/14 11/02 at 102 Aaa $ 636,288
1,600,000 Dunedin (Mease Health Care), 5.375%, 11/15/13 11/03 at 101 Aaa 1,615,632
Escambia County Housing Finance Authority,
Single Family Mortgage,
Alternative Minimum Tax:
325,000 6.900%, 4/01/20 10/02 at 102 Aaa 340,727
2,000,000 6.950%, 10/01/27 4/05 at 102 Aaa 2,098,140
500,000 Escambia County School Board, Certificates of
Participation, 6.375%, 2/01/12 2/02 at 100 Aaa 536,735
500,000 Gainesville Utility System, 6.500%, 10/01/22 10/02 at 102 Aa 549,080
1,200,000 Hillsborough County Industrial Development
Authority, Pollution
Control (Tampa Electric), 8.000%, 5/01/22 5/02 at 103 Aa2 1,439,112
250,000 Hillsborough County, Capital Improvement (Museum
of Science and Industry),
6.400%, 1/01/12 (Pre-refunded to 1/01/00) 1/00 at 102 A 275,633
250,000 Hollywood Water and Sewer System,
6.875%, 10/01/21 (Pre-refunded to 10/01/01) 10/01 at 102 Aaa 288,305
Jacksonville Electric Authority:
470,000 7.500%, 10/01/02 10/97 at 101-1/2 Aa1 503,224
500,000 5.500%, 10/01/14 10/02 at 101 Aa1 501,975
790,000 5.250%, 10/01/21 10/02 at 101 Aa1 766,648
1,000,000 5.250%, 10/01/28 10/02 at 101 Aa1 967,340
250,000 Jacksonville Excise Taxes, 6.500%, 10/01/13 10/02 at 102 Aaa 276,795
605,000 Jacksonville Health Facilities Authority
(Daughters of Charity Health System--St. Vincent),
7.500%, 11/01/15 (Pre-refunded to 11/01/00) 11/00 at 102 Aaa 706,900
375,000 Jacksonville Water and Sewer (Jacksonville Suburban
Utilities Corporation), Alternative Minimum Tax,
6.750%, 6/01/22 6/02 at 102 A2 409,174
250,000 Jupiter Water System, 6.250%, 10/01/18 10/01 at 102 Aaa 266,320
1,300,000 Kissimmee Utility Authority, Electric System,
5.375%, 10/01/12 10/03 at 102 Aaa 1,322,451
1,000,000 Manatee County Housing Finance Authority,
Single Family Mortgage, Alternative Minimum Tax,
7.600%, 11/01/26 11/05 at 105 Aaa 1,104,650
2,550,000 Miami Beach Water and Sewer System,
5.375%, 9/01/15 9/05 at 102 Aaa 2,549,873
250,000 North Broward Hospital District, 6.250%, 1/01/12 1/02 at 102 Aaa 268,555
Orange County Sales Tax:
145,000 6.125%, 1/01/19 No Opt. Call Aaa 158,768
1,500,000 5.375%, 1/01/24 1/03 at 102 Aaa 1,489,200
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS
FLORIDA--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 Orange County Water Utilities System,
6.250%, 10/01/17 4/02 at 102 Aaa $ 535,045
1,000,000 Orange County Housing Finance Authority
(Ashley Point Apartments), Alternative Minimum
Tax, 7.100%, 10/01/24 10/01 at 101 BBB+ 1,037,930
Orlando Utilities Commission:
1,250,000 6.000%, 10/01/20 10/02 at 102 Aa 1,291,213
1,000,000 5.500%, 10/01/20 10/99 at 100 Aa 999,250
Orlando and Orange County Expressway Authority:
1,000,000 5.500%, 7/01/18 7/03 at 102 Aaa 1,007,620
1,000,000 5.125%, 7/01/20 7/03 at 102 Aaa 968,820
Palm Beach County Criminal Justice Facilities:
1,000,000 5.300%, 6/01/05 No Opt. Call Aaa 1,063,100
1,000,000 5.375%, 6/01/10 No Opt. Call Aaa 1,045,810
2,000,000 Pensacola Health Facilities Authority (Daughters of
Charity-Sacred Heart), 5.250%, 1/01/11 1/03 at 102 Aa 1,966,420
2,000,000 Pinellas County Health Facilities Authority
(Morton Plant Health System), 5.500%, 11/15/18 11/03 at 102 Aaa 2,005,080
565,000 St. Lucie County Solid Waste System,
6.000%, 9/01/15 (Pre-refunded to 9/01/99) 9/99 at 100 Aaa 606,059
500,000 St. Petersburg Health Facilities Authority
(St. Joseph's Hospital Inc.), 7.000%, 12/01/15 12/01 at 102 Aaa 567,450
1,000,000 Sarasota Water and Sewer System,
7.625%, 10/01/08 (Pre-refunded to 10/01/96) 10/96 at 102 Aaa 1,045,910
500,000 Tampa Water and Sewer System,
6.000%, 10/01/17 (Pre-refunded to 10/01/02) 10/02 at 101 Aaa 554,690
1,000,000 Turtle Run Community Development District,
6.400%, 5/01/11 5/03 at 100 A1 1,061,390
2,000,000 West Palm Beach Utility System, 5.400%, 10/01/23 10/02 at 101 Aaa 1,978,580
- -----------------------------------------------------------------------------------------------------------------------------------
$57,410,000 Total Investments--(Cost $56,821,593)--98.3% 60,245,650
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.7% 1,062,980
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $61,308,630
===================================================================================================================================
</TABLE>
22
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 43 $41,734,321 69%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 12 14,661,781 24
PORTFOLIO OF A+ A1 1 1,061,390 2
INVESTMENTS: A, A- A, A2, A3 4 1,441,744 3
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 1,346,414 2
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 62 $60,245,650 100%
===================================================================================================================================
</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.
See accompanying notes to financial statements.
23
<PAGE>
PORTFOLIO OF INVESTMENTS
MARYLAND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 Maryland Community Development Administration,
Single Family Mortgage, 7.000%, 4/01/14 4/97 at 103 Aa $ 521,810
1,500,000 Maryland Community Development Administration,
Department of Housing and Community
Development, Alternative Minimum Tax,
7.450%, 4/01/32 4/01 at 102 Aa 1,577,790
Maryland Community Development Administration,
Multi-Family Housing:
700,000 6.700%, 5/15/27 5/02 at 102 Aa 732,018
500,000 6.750%, 5/15/33 5/02 at 102 Aa 524,485
2,000,000 Maryland General Obligation, 4.600%, 7/15/06 7/03 at 101 Aaa 2,011,080
500,000 Maryland Health and Higher Educational Facilities
Authority (Sinai Hospital of Baltimore),
7.000%, 7/01/19 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 568,115
Maryland Health and Higher Educational Facilities
Authority (Doctor's Community Hospital):
1,000,000 5.750%, 7/01/13 7/03 at 102 Baa 942,270
1,005,000 8.750%, 7/01/22 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,212,422
Maryland Health and Higher Educational Facilities
Authority (Francis Scott Key Medical Center):
1,800,000 5.000%, 7/01/13 7/03 at 102 Aaa 1,741,986
500,000 6.750%, 7/01/23 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 563,100
700,000 Maryland National Capital Park and Planning
Commission, 6.125%, 7/01/10
(Pre-refunded to 7/01/02) 7/02 at 102 Aa 784,539
1,760,000 Maryland Stadium Authority, 5.875%, 12/15/12 12/04 at 102 Aaa 1,859,845
Maryland Stadium Authority, Sports Facility,
Alternative Minimum Tax:
500,000 7.375%, 12/15/04 12/99 at 102 Aa 561,605
500,000 7.500%, 12/15/10 12/99 at 102 Aa 556,130
3,415,000 Maryland Transportation Authority (Baltimore/
Washington International Airport),
Alternative Minimum Tax, 6.400%, 7/01/19 7/04 at 102 Aaa 3,600,639
1,000,000 Maryland Transportation Authority, 5.750%, 7/01/15 7/02 at 100 A1 1,014,660
2,000,000 Baltimore County General Obligation,
6.700%, 7/01/11 7/98 at 102 Aaa 2,143,380
Baltimore General Obligation:
2,295,000 7.375%, 10/15/03 No Opt. Call Aaa 2,751,177
600,000 6.500%, 10/15/12 (Pre-refunded to 10/15/02) 10/02 at 100 Aaa 678,750
1,000,000 Baltimore, GMNA (Tindeco Wharf Apartments
Project), 6.700%, 12/20/28 12/02 at 102 AAA 1,048,290
1,500,000 Baltimore Port Facilities (Consolidated Coal Sales
Company), 6.500%, 10/01/11 4/02 at 103 Aa3 1,654,575
625,000 Baltimore Water System, 6.500%, 7/01/20
(Pre-refunded to 7/01/00) 7/00 at 100 Aaa 687,131
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,165,000 Gaithersburg (Shady Grove Adventist Nursing and
Rehabilitation Center), 6.500%, 9/01/12 No Opt. Call Aaa $ 2,489,490
1,000,000 Howard County (Howard Hills Townhouse Project-
FHA Insured) 6.400%, 7/01/24 7/02 at 102 Aaa 1,045,020
2,000,000 Howard County Multi-Family Mortgage (Chase
Glen Project), 7.000%, 7/01/24 (Mandatory
put 7/01/04) 7/02 at 104 N/R 2,206,920
1,000,000 Montgomery County Housing Opportunities
Commission, Multi-Family Housing,
6.000%, 7/01/20 7/05 at 102 Aa 1,016,470
Montgomery County Housing Opportunities
Commission, Single Family Housing:
450,000 7.250%, 7/01/13 7/96 at 103 Aa 467,474
1,615,000 6.600%, 7/01/14 7/04 at 102 Aa 1,695,524
1,000,000 Montgomery County Solid Waste Resource
Recovery Project, 5.875%, 6/01/13 6/03 at 102 Aaa 1,045,190
1,500,000 Morgan State University, 6.100%, 7/01/20 No Opt. Call Aaa 1,688,775
1,000,000 Northeast Maryland Waste Disposal Authority,
Resource Recovery, 6.900%, 1/01/00 No Opt. Call Aaa 1,098,040
600,000 Prince George's County (Dimensions Health
Corporation), 6.700%, 7/01/97 No Opt. Call A 622,992
1,550,000 Prince George's County Housing Authority,
(New Keystone Apartments-FHA Insured),
6.800%, 7/01/25 1/02 at 102 Aaa 1,638,118
1,500,000 Prince George's County Pollution Control
(Potomac Electric Project), 6.375%, 1/15/23 1/03 at 102 A+ 1,601,625
1,000,000 University of Maryland, 5.000%, 10/01/11 10/03 at 101 AA+ 995,100
1,500,000 Washington D.C. Metro Area Transit Authority,
Transit Refunding Bonds, 5.250%, 7/01/14 1/04 at 102 Aaa 1,485,090
1,170,000 Washington Suburban Sanitary District,
8.000%, 1/01/02 No Opt. Call Aa1 1,399,706
500,000 Commonwealth of Puerto Rico, General Obligation,
6.600%, 7/01/13 (Pre-refunded to 7/01/02) 7/02 at 101-1/2 Aaa 574,435
1,750,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 A 1,952,405
2,000,000 Puerto Rico Highway and Transportation Authority,
5.250%, 7/01/21 7/03 at 101-1/2 A 1,906,900
Puerto Rico Electric Power Authority:
630,000 7.000%, 7/01/07 (Pre-refunded to 7/01/99) 7/99 at 101-1/2 A- 701,448
315,000 7.125%, 7/01/14 (Pre-refunded to 7/01/99) 7/99 at 101-1/2 AAA 352,620
185,000 7.125%, 7/01/14 7/99 at 101-1/2 A- 201,704
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
PORTFOLIO OF INVESTMENTS
MARYLAND-CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Puerto Rico Industrial Medical and
Environmental Authority, 6.250%, 7/01/16 1/05 at 102 Aaa $ 1,089,390
- ------------------------------------------------------------------------------------------------------------------------------------
$51,330,000 Total Investments--(cost $51,884,039)-98.8% 55,010,233
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.2% 677,041
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $ 55,687,274
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 22 $31,372,083 57%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 12,487,226 22
PORTFOLIO OF A+ A1 2 2,616,285 5
INVESTMENTS: A, A- A, A2, A3 5 5,385,449 10
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 1 942,270 2
Non-rated Non-rated 1 2,206,920 4
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 44 $55,010,233 100%
===================================================================================================================================
</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.
N/R-Investment is not rated.
See accompanying notes to financial statements.
26
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
MICHIGAN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Michigan Building Authority, 6.250%, 10/01/20 10/01 at 102 AA- $ 1,060,740
1,740,000 Michigan Hospital Finance Authority (Daughters of
Charity), 5.500%,11/01/05 No Opt. Call Aa 1,839,371
1,000,000 Michigan Hospital Finance Authority (Otsego
Memorial Hospital Gaylord), 6.125%, 1/01/15 1/05 at 102 AA 1,041,980
1,190,000 Michigan Housing Development Authority
(Parc Pointe Apartments), 6.500%, 10/01/15 10/05 at 102 Aaa 1,248,667
1,000,000 Michigan Housing Development Authority, Single
Family Mortgage, 6.800%, 12/01/16 6/05 at 102 AA+ 1,048,130
Michigan Housing Development Authority,
Rental Housing:
500,000 6.400%, 4/01/05 10/02 at 102 A+ 531,000
500,000 6.650%, 4/01/23 10/02 at 102 A+ 517,225
Michigan Municipal Bond Authority:
250,000 4.750%, 12/01/09 12/01 at 100 Aaa 244,650
555,000 6.600%, 10/01/18 10/02 at 102 Aa 600,738
950,000 Michigan Municipal Bond Authority, State
Revolving Fund, 7.000%,10/01/04 No Opt. Call Aa 1,116,944
1,000,000 Michigan Public Power Agency (Belle River Project),
5.250% 1/01/18 1/03 at 102 AA- 968,950
Michigan State Hospital Finance Authority
(Detroit Medical Center):
860,000 5.000%, 8/15/02 No Opt. Call A 851,959
460,000 8.125%, 8/15/08 (Pre-refunded to 8/15/98) 8/98 at 102 Aaa 515,232
40,000 8.125%, 8/15/08 8/98 at 102 A 43,786
1,000,000 Michigan State Hospital Finance Authority
(Daughters of Charity Health System),
7.000%, 11/01/21 11/01 at 102 Aa 1,091,500
500,000 Michigan State Hospital Finance Authority
(Mid-Michigan Obligated
Group), 6.900%, 12/01/24 12/02 at 102 A 532,390
1,145,000 Michigan State University, 6.250%, 8/15/15 8/02 at 101 AA- 1,206,394
1,055,000 Michigan Strategic Fund (WMX Technologies),
Alternative Minimum Tax, 6.000%, 12/01/13 12/03 at 102 A1 1,080,689
400,000 Bay County General Obligation, West Side Regional
Sewage Disposal System, 6.400%, 5/01/02 5/96 at 102 A 408,000
250,000 Capital Region Airport Authority, Alternative
Minimum Tax, 6.700%, 7/01/21 7/02 at 102 Aaa 273,175
1,000,000 Dearborn School District, General Obligation,
6.000%, 5/01/14 5/01 at 102 AA 1,043,140
1,500,000 Detroit Convention Facility (Cobo Hall),
5.250%, 9/30/12 9/03 at 102 A 1,452,945
1,000,000 Detroit Water Supply System, 4.750%, 7/01/19 7/04 at 102 Aaa 926,040
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
MICHIGAN-CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Dexter Community Schools, General Obligation,
5.000%, 5/01/17 5/03 at 102 AA $ 945,490
445,000 Grand Rapids Housing Corporation, Multi-Family
Mortgage, 7.375%, 7/15/41 1/04 at 104 AAA 492,050
500,000 Grand Traverse County Hospital Finance Authority
(Munson Healthcare), 6.250%, 7/01/22 7/02 at 102 Aaa 531,715
1,150,000 Greenville Public Schools, General Obligation,
5.750%, 5/01/19 (DD) 5/04 at 101 Aaa 1,178,980
1,250,000 Lansing Sewage Disposal System, 5.850%, 5/01/14 5/04 at 102 Aaa 1,309,263
1,000,000 Monroe County Pollution Control (Detroit Edison
Company), Alternative Minimum Tax,
6.350%, 12/01/04 No Opt. Call Aaa 1,127,330
Muskegon Water Supply System:
450,000 4.500%, 5/01/12 5/01 at 101 Baa1 399,587
450,000 4.500%, 5/01/13 5/01 at 101 Baa1 394,533
1,000,000 Reeths-Puffer Schools, General Obligation,
5.750%, 5/01/15 5/05 at 101 Aaa 1,029,550
180,000 Saginaw-Midland Municipal Water Supply
Corporation, 6.875%, 9/01/06 9/04 at 102 A 199,723
200,000 St. Joseph Hospital Finance Authority (Mercy
Memorial Medical Center), 7.300%, 10/01/00
(Pre-refunded to 10/01/96) 10/96 at 102 AAA 209,174
1,000,000 University of Michigan Hospital, 6.375%, 12/01/24 12/00 at 100 Aa 1,031,690
1,000,000 University of Michigan Student Fee, 5.500%, 4/01/12 4/03 at 102 AA+ 1,023,410
250,000 Warren Economic Development Corporation, GNMA
(Autumn Woods Project), 6.900%, 12/20/22 3/02 at 101 Aaa 264,705
1,000,000 Wayne County (Detroit Metropolitan Wayne County
Airport), 5.250%, 12/01/13 12/03 at 102 Aaa 984,010
1,000,000 Western Township Utilities Authority, Sewage
Disposal System, 6.500%, 1/01/10 1/02 at 100 AAA 1,083,670
1,000,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 A 1,115,660
250,000 Puerto Rico Public Buildings Authority,
6.875%, 7/01/21 (Pre-refunded to 7/01/02) 7/02 at 101-1/2 Aaa 291,057
- ------------------------------------------------------------------------------------------------------------------------------------
$32,020,000 Total Investments-(cost $31,410,104)--96.7% 33,255,242
===========-------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES--1.8%
$ 600,000 University of Michigan Hospital, Adjustable Rate
=========== Demand Bonds, 3.500%, 12/01/27+ VMIG-1 600,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.5% 529,188
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $ 34,384,430
====================================================================================================================================
</TABLE>
28
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 16 $11,709,268 35%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 14,018,477 42
PORTFOLIO OF A+ A1 3 2,128,914 7
INVESTMENTS A, A- A, A2, A3 7 4,604,463 14
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 794,120 2
TEMPORARY
INVESTMENTS):
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 41 $33,255,242 100%
===================================================================================================================================
</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.
(DD) Security purchased on a delayed delivery basis (note 1).
+ 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.
29
<PAGE>
PORTFOLIO OF INVESTMENTS
NEW JERSEY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 New Jersey Economic Development Authority
(Elizabethtown Gas Company), Alternative
Minimum Tax, 6.750%, 10/01/21 10/96 at 102 A3 $ 1,031,330
200,000 New Jersey Economic Development Authority
(Liberty State Park Project), 6.800%, 3/15/22 3/02 at 102 A1 218,124
1,000,000 New Jersey Economic Development Authority
(Yeshiva K'tana of Passaic), 8.000%, 9/15/18 No Opt. Call N/R 1,191,120
2,965,000 New Jersey Economic Development Authority
(Bridgewater Resources, Inc.), Alternative
Minimum Tax, 8.375%, 11/01/04 No Opt. Call N/R 3,148,237
250,000 New Jersey Economic Development Authority, Solid
Waste Disposal Facility (Garden State Paper
Company), 7.125%, 4/01/22 4/02 at 102 Aa1 274,143
1,285,000 New Jersey Economic Development Authority,
Alternative Minimum Tax, 5.300%, 12/01/07 12/03 at 102 Aa1 1,291,849
1,025,000 New Jersey Economic Development Authority
(Educational Testing Service), 6.500%, 5/15/05 No Opt. Call Aaa 1,138,601
650,000 New Jersey Economic Development Authority,
5.875%, 7/01/11 7/04 at 102 Aaa 690,554
975,000 New Jersey Educational Facilities Authority
(Trenton State College), 6.750%, 7/01/08 7/96 at 100 A+ 981,962
835,000 New Jersey Educational Facilities Authority
(Princeton University), 5.875%, 7/01/11 7/04 at 100 Aaa 889,375
1,500,000 New Jersey Educational Facilities Authority
(Higher Education Facilities Trust Fund),
5.125%, 9/01/02 No Opt. Call Aaa 1,576,830
1,000,000 New Jersey General Obligation, 5.800%, 2/15/07 No Opt. Call Aa1 1,108,150
1,215,000 New Jersey Health Care Facilities Financing
Authority (Hackensack Hospital),
8.750%, 7/01/09 No Opt. Call Aaa 1,479,323
700,000 New Jersey Health Care Facilities Financing
Authority (Community Medical Center/Kensington
Manor Care Center), 7.000%, 7/01/20 7/00 at 102 Aaa 777,427
480,000 New Jersey Health Care Facilities Authority
(Community Memorial Hospital), 8.000%, 7/01/14 7/98 at 102 A 523,474
400,000 New Jersey Health Care Facilities Financing
Authority (Atlantic City Medical Center),
6.800%, 7/01/05 7/02 at 102 A 436,828
850,000 New Jersey Health Care Facilities Financing
Authority (Palisades Medical Center),
7.500%, 7/01/06 7/02 at 102 Ba 879,011
1,750,000 New Jersey Housing Finance Agency,
9.000%, 11/01/18 11/99 at 100 A1 1,827,245
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000,000 New Jersey Housing and Mortgage Finance Agency,
Multi-Family Housing, 6.000%, 11/01/14 5/05 at 102 Aaa $ 2,059,160
700,000 New Jersey Housing and Mortgage Finance Agency,
6.950%, 11/01/13 5/02 at 102 A+ 745,500
New Jersey Turnpike Authority:
375,000 10.375%, 1/01/03 No Opt. Call AAA 466,973
1,750,000 6.500%, 1/01/08 No Opt. Call A 2,025,293
1,415,000 Delaware River and Bay Authority, 5.000%, 1/01/17 1/04 at 102 Aaa 1,372,975
1,000,000 Delaware River Port Authority, 5.500%, 1/01/26 1/06 at 102 Aaa 1,004,720
1,000,000 Camden County Pollution Control Finance Authority,
Solid Waste Disposal and Resource
Recovery, Alternative Minimum Tax,
7.125%, 12/01/01 No Opt. Call BBB+ 1,034,220
2,645,000 Camden County Pollution Control Finance Authority,
Solid Waste Disposal and Resource Recovery
System, 7.250%, 12/01/10 12/01 at 102 BBB+ 2,803,197
500,000 Essex County Improvement Authority,
6.500%, 12/01/12 12/02 at 102 Baa1 536,010
500,000 Hillsborough Township School District,
5.875%, 8/01/11 No Opt. Call AA 545,105
400,000 Hudson County Improvement Authority
Multi-Family Housing (Observer Park Project),
Alternative Minimum Tax, 6.900%, 6/01/22 6/04 at 100 AAA 421,688
1,605,000 Little Ferry Board of Education, Certificates of
Participation, 6.300%, 1/15/08 No Opt. Call N/R 1,664,337
Monroe Township Board of Education, General
Obligation:
725,000 5.200%, 8/01/11 No Opt. Call Aaa 738,550
825,000 5.200%, 8/01/14 No Opt. Call Aaa 840,263
600,000 Morris County General Obligation, 5.000%, 7/15/09 7/05 at 100 Aaa 606,972
500,000 North Bergen Housing Development Corporation,
FHA-Insured, 7.400%, 9/01/20 8/96 at 102/1/\\2\\ N/R 512,850
300,000 North Bergen Township General Obligation,
6.500%, 8/15/12 8/02 at 102 Aaa 332,100
2,350,000 Ocean County Utilities Authority, 5.000%, 1/01/14 1/97 at 100 Aaa 2,210,692
2,215,000 Passaic County General Obligation, 5.125%, 9/01/12 No Opt. Call Aaa 2,234,647
775,000 Rutgers State University, 8.000%, 5/01/18
(Pre-refunded to 5/01/98) 5/98 at 102 Aaa 860,514
Union County Utilities Authority, Solid Waste
System, Alternative Minimum Tax:
195,000 7.100%, 6/15/06 6/02 at 102 A- 209,307
1,100,000 7.200%, 6/15/14 6/02 at 102 A- 1,176,076
270,000 6.850%, 6/15/14 6/02 at 102 Aaa 289,697
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
NEW JERSEY--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100,000 University of Medicine and Dentistry of New Jersey,
6.500%, 12/01/18 (Pre-refunded to 12/01/01) 12/01 at 102 AA $ 113,743
300,000 Wanaque Borough Sewerage Authority,
7.000%, 12/01/21 12/02 at 102 Baa1 323,658
1,175,000 Virgin Islands Housing Finance Authority,
Alternative Minimum Tax, 6.450%, 3/01/16 3/05 at 102 AAA 1,211,519
2,000,000 Puerto Rico Commonwealth General Obligation,
5.750%, 7/01/24 7/05 at 101 1/2 Aaa 2,075,380
1,000,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 A 1,115,660
60,000 Puerto Rico Highway Transportation Authority,
6.625%, 7/01/18 (Pre-refunded to 7/01/02) 7/02 at 101 1/2 A 69,015
Puerto Rico Electric Power Authority:
790,000 7.000%, 7/01/07 No Opt. Call A- 928,778
1,875,000 7.000%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 A- 2,172,693
1,000,000 Puerto Rico Industrial Medical and Environmental
Authority, 6.250%, 7/01/16 1/05 at 102 Aaa 1,089,389
- -----------------------------------------------------------------------------------------------------------------------------------
$50,125,000 Total Investments--(Cost $50,801,410)--96.8% 53,254,264
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--3.2% 1,775,636
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $55,029,900
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 22 $24,367,349 46%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 5 3,332,990 6
PORTFOLIO OF A+ A1 4 3,772,831 7
INVESTMENTS: A, A- A, A2, A3 10 9,688,454 18
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 4,697,085 9
BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 879,011 2
Non-rated Non-rated 4 6,516,544 12
- -----------------------------------------------------------------------------------------------------------------------------------
Total 50 $53,254,264 100%
===================================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by 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 accountants): Using the
higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
See accompanying notes to financial statements.
32
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
PENNSYLVANIA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Pennsylvania Economic Development Financing
Authority (Sun Co--R&M Project), Alternative
Minimum Tax, 7.600%, 12/01/24 12/04 at 102 Baa1 $ 2,822,650
Pennsylvania General Obligation:
2,000,000 6.400%, 1/01/99 No Opt. Call AA- 2,136,220
1,290,000 5.000%, 5/01/03 No Opt. Call AA- 1,338,736
2,000,000 5.300%, 5/01/05 No Opt. Call AA 2,106,680
2,500,000 Pennsylvania Higher Education Assistance Agency,
Student Loan, 4.625%, 12/01/00 No Opt. Call AAA 2,508,975
750,000 Pennsylvania Higher Educational Facilities Authority
(Thomas Jefferson University), 6.000%, 7/01/19 7/99 at 102 Aa 768,555
600,000 Pennsylvania Housing Finance Agency, Single
Family Mortgage, 7.150%, 4/01/15 10/01 at 102 Aa 646,956
1,795,000 Pennsylvania Industrial Development Authority,
7.000%, 1/01/06 No Opt. Call Aaa 2,127,775
1,390,000 Pennsylvania Intergovernmental Cooperative
Authority (City of Philadelphia Funding
Program), 7.000%, 6/15/05 No Opt. Call Aaa 1,640,992
2,300,000 Pennsylvania Turnpike Commission,
5.500%, 12/01/17 12/02 at 102 Aaa 2,305,382
1,000,000 Allegheny County (Greater Pittsburgh International
Airport), Alternative Minimum Tax,
7.000%, 1/01/18 1/00 at 102 Aaa 1,061,710
1,375,000 Allegheny County Hospital Development Authority
(Allegheny Valley Hospital), 7.000%, 8/01/15 No Opt. Call A 1,597,709
1,500,000 Allegheny County Hospital Development Authority
(Rehabilitation Institute of Pittsburgh),
7.000%, 6/01/22 6/02 at 102 BBB 1,548,465
3,000,000 Allegheny County Residential Financing Authority
(Ladies Grand Army of the Republic Health),
6.350%, 10/01/36 10/05 at 100 AAA 3,052,770
2,000,000 Allegheny County Residential Finance Authority,
Single Family Mortgage, (GNMA), Alternative
Minimum Tax, 0.000%, 5/01/27 No Opt. Call Aaa 232,940
2,000,000 Armstrong County Hospital Authority (Canterbury
Place Project), 6.500%, 12/01/21 12/01 at 100 Aaa 2,140,100
1,000,000 Bucks County Community College Authority,
6.250%, 6/15/14 6/02 at 100 Aa 1,045,510
2,850,000 Deer Lakes School District, General Obligation,
6.350%, 1/15/14 1/04 at 100 Aaa 3,067,968
800,000 Greater Lebanon Refuse Authority, Solid Waste,
7.000%, 11/15/04 11/02 at 100 A- 860,104
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
PENNSYLVANIA--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,500,000 Indiana County Industrial Development Authority,
Pollution Control (New York State Electric and
Gas Corporation), 6.000%, 6/01/06 No Opt. Call Aaa $ 3,873,345
3,000,000 Indiana County Industrial Development Authority,
Pollution Control (Pennsylvania Electric
Company), 5.350%, 11/01/10 No Opt. Call Aaa 3,121,440
Luzerne County Industrial Development Authority
(Pennsylvania Gas and Water Company),
Alternative Minimum Tax:
1,500,000 7.000%, 12/01/17 12/04 at 102 Aaa 1,706,490
950,000 7.125%, 12/01/22 12/02 at 102 Baa1 1,018,315
3,000,000 Montgomery County Higher Educational and Health
Authority (Waverly Heights), 6.375%,
1/01/26 (DD) 1/06 at 101 BBB 2,999,790
1,800,000 Northampton County Higher Education Authority
(Lehigh University), 6.900%, 10/15/06 10/01 at 102 Aaa 2,041,560
1,000,000 Northumberland County Industrial Development
Authority (Roaring Creek Water Company),
Alternative Minimum Tax, 6.375%, 10/15/23 10/03 at 102 N/R 965,270
2,000,000 Philadelphia Gas Works, 6.375%, 7/01/14 7/03 at 102 Aaa 2,177,420
1,000,000 Philadelphia Municipal Authority, 5.625%, 11/15/14 11/03 at 102 Aaa 1,005,890
Pittsburgh Urban Redevelopment Authority,
Alternative Minimum Tax:
3,280,000 6.375%, 8/01/18 8/05 at 102 A 3,318,638
1,100,000 6.625%, 4/01/22 4/04 at 102 A1 1,132,241
500,000 St. Mary's Hospital Authority (Franciscan Health
System/St. Mary of Langhorne), 6.500%, 7/01/12 7/02 at 102 Aaa 543,820
230,000 Sayre Health Care Facilities Authority (Guthrie
Healthcare System), 7.100%, 3/01/17 3/01 at 102 Aaa 258,713
Southeastern Pennsylvania Transportation
Authority:
1,500,000 6.500%, 3/01/04 No Opt. Call Aaa 1,702,980
1,000,000 6.500%, 3/01/05 No Opt. Call Aaa 1,140,920
2,250,000 University of Pittsburgh, 6.125%, 6/01/21 6/02 at 102 Aaa 2,375,865
350,000 Washington County Hospital Authority
(Monongahela Valley Hospital), 6.750%, 12/01/08 4/02 at 102 A 370,832
935,000 West View Municipal Authority, 9.500%, 11/15/14 No Opt. Call Aaa 1,324,718
600,000 Wilkes-Barre General Municipal Authority
(College Misericordia), Alternative Minimum
Tax, 7.750%, 12/01/12 12/00 at 100 N/R 661,650
- ------------------------------------------------------------------------------------------------------------------------------------
$62,145,000 Total Investments-(cost $60,924,413)-100.8% 64,750,094
===========-------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES-3.1%
$ 2,000,000 Geisinger Authority (Montaur Co.), Variable Rate
Demand Bonds, 3.600%, 7/01/22+ A-1+ $ 2,000,000
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities-(3.9)% (2,487,424)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets-100% 64,262,670
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 21 $39,411,773 61%
RATINGS** AA+,AA,AA- Aa1,Aa,Aa2,Aa3 6 8,042,657 12
PORTFOLIO OF A+ A1 1 1,132,241 2
INVESTMENTS A,A- A,A2,A3 4 6,147,283 9
(EXCLUDING BBB+,BBB,BBB- Baa1,Baa,Baa2,Baa3 4 8,389,220 13
TEMPORARY Non-rated Non-rated 2 1,626,920 3
INVESTMENTS):
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 38 $64,750,094 100%
====================================================================================================================================
</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.
N/R - Investment is not rated.
(DD) Security purchased on a delayed delivery basis (note 1).
+ 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.
35
<PAGE>
PORTFOLIO OF INVESTMENTS
VIRGINIA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 800,000 Virginia College Building Authority
(Randolph-Macon College), 6.625%, 5/01/13 5/02 at 102 A- $ 856,392
Virginia College Building Authority
(The Washington and Lee University):
1,250,000 5.750% 1/01/14 1/04 at 102 Aa 1,287,538
1,000,000 5.800%, 1/01/24 1/04 at 102 Aa 1,027,640
Virginia Housing Development Authority:
800,000 6.800%, 11/01/09 5/02 at 102 AA+ 854,472
650,000 6.850%, 7/01/17 1/00 at 102 AA+ 675,168
4,000,000 7.150%, 1/01/33 1/02 at 102 AA+ 4,242,320
Virginia Public Building Authority:
1,090,000 6.500%, 8/01/11 8/01 at 102 Aa 1,229,040
750,000 6.250%, 8/01/14 8/04 at 101 Aa 814,050
800,000 Virginia Resource Authority, Water System,
6.450%, 4/01/13 4/02 at 102 AA 853,448
1,000,000 Virginia Resource Authority, Sewer System,
Alternative Minimum Tax, 6.000%, 10/01/25 10/05 at 102 AA 1,033,400
4,425,000 Virginia Transportation Board, 6.000%, 5/15/19 5/98 at 102 Aa 4,542,041
1,000,000 Abingdon General Obligation, 6.250%, 8/01/12 8/02 at 102 A 1,071,050
1,410,000 Albemarle County Industrial Development Authority
(Martha Jefferson Hospital), 5.800%, 10/01/09 10/03 at 102 A 1,449,790
1,500,000 Capital Region Airport Commission (Richmond
International Airport), 5.625%, 7/01/20 7/05 at 102 Aaa 1,518,840
750,000 Charlottesville-Albemarle Airport Authority,
Alternative Minimum Tax, 6.125%, 12/01/13 12/05 at 102 BBB 765,285
2,500,000 Chesapeake Bay Bridge and Tunnel Commission,
6.375%, 7/01/22 7/01 at 102 Aaa 2,671,800
1,000,000 Covington-Alleghany County Industrial Development
Authority (Alleghany Regional Hospital),
6.625%, 4/01/12 (Pre-refunded to 4/01/02) 4/02 at 102 A- 1,138,330
1,700,000 Cumberland County Certificate of Participation,
5.480%, 7/15/97 No Opt. Call N/R 1,700,000
2,500,000 Fairfax County Economic Development Authority
(Ogden Martin Systems Project), Alternative
Minimum Tax, 7.750%, 2/01/11 2/99 at 103 A1 2,747,375
1,460,000 Fairfax County Industrial Development Authority
(Inova Health System) 5.000%, 8/15/13 No Opt. Call Aaa 1,439,020
1,500,000 Giles County Industrial Development Authority
(Hoechst Celanese Corporation), Alternative
Minimum Tax, 6.625%, 12/01/22 12/02 at 102 AA- 1,571,775
500,000 Hampton Industrial Development Authority
(Sentara Hampton General Hospital),
6.500%, 11/01/12 11/04 at 102 A 533,215
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Henrico County Water and Sewer System,
6.250%, 5/01/13 5/02 at 100 A1 $ 2,615,925
1,000,000 Loudoun County Sanitation Authority, Water and
Sewer System, 6.250%, 1/01/16 1/03 at 102 Aaa 1,073,740
2,000,000 Loudoun County Industrial Development Authority
(The George Washington University),
6.250%, 5/15/22 5/02 at 102 A1 2,104,700
1,500,000 Lynchburg Industrial Development Authority
(Randolph-Macon Women's College),
5.875%, 9/01/13 9/03 at 102 A 1,531,860
750,000 Nelson County Service Authority, Water and Sewer
System, 5.500%, 7/01/18 7/03 at 102 Aaa 748,523
1,580,000 Peninsula Ports Authority of Virginia (Riverside
Health System), 6.625%, 7/01/18 7/02 at 102 Aa 1,697,678
2,500,000 Prince William County Park Authority,
6.875%, 10/15/16 10/04 at 102 A- 2,767,100
1,000,000 Prince William County Service Authority, Water and
Sewer System, 6.000%, 7/01/29 7/01 at 100 Aaa 1,033,250
3,005,000 Richmond General Obligation, 5.500%, 7/15/23 7/03 at 102 AA 3,012,603
1,155,000 Roanoke Industrial Development Authority
(Roanoke Memorial Hospitals), 6.500%, 7/01/25
(Pre-refunded to 7/01/00) 7/00 at 100 Aaa 1,269,818
Rockingham County Industrial Development
Authority (Bridgewater College):
400,000 5.600%, 10/01/06 10/03 at 102 Baa1 433,244
400,000 5.700%, 10/01/07 10/03 at 102 Baa1 425,168
2,750,000 Southeastern Public Service Authority (Regional Solid
Waste System), Alternative Minimum Tax,
6.000%, 7/01/13 7/03 at 102 A- 2,782,368
4,000,000 Upper Occoquan Sewer Authority, 5.000%, 7/01/21 1/04 at 102 Aaa 3,836,000
2,260,000 Virginia Beach Development Authority (Sentara
Bayside Hospital), 6.300%, 11/01/21 11/01 at 102 Aa 2,368,977
Metropolitan Washington D. C. Airports Authority,
Alternative Minimum Tax:
1,000,000 5.750%, 10/1/20 10/04 at 102 AAA 1,017,060
1,500,000 6.250%, 10/1/21 10/02 at 102 AAA 1,587,720
800,000 Puerto Rico Highway Transportation Authority,
6.625%, 7/01/18 7/02 at 101 1/2 A 863,064
- ------------------------------------------------------------------------------------------------------------------------------------
$62,485,000 Total Investments-(cost $61,036,092)--98.7% 65,190,787
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.3% 877,240
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $66,068,027
====================================================================================================================================
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS
VIRGINIA-CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 10 $16,195,771 25%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 14 25,210,150 39
PORTFOLIO A+ A1 3 7,468,000 11
INVESTMENTS: A, A- A, A2, A3 9 12,993,169 20
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 3 1,623,697 2
Non-rated Non-rated 1 1,700,000 3
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 40 $65,190,787 100%
===================================================================================================================================
</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.
N/R - Investment is not rated.
See accompanying notes to financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
AZ FL MD MI
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $23,265,698 $60,245,650 $55,010,233 $33,255,242
Temporary investments in short-term municipal securities,
at amortized cost (note 1) - - - 600,000
Cash 242,662 280,875 293,584 76,087
Receivables:
Interest 262,440 935,255 472,689 475,195
Shares sold 86,335 51,425 132,184 350,928
Investments sold - 5,000 - 938,132
Deferred organization costs (note 1) 6,998 6,998 7,828 8,424
Other assets 501 4,519 1,029 15,413
----------- ----------- ----------- -----------
Total assets 23,864,634 61,529,722 55,917,547 35,719,421
----------- ----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased - - - 1,184,207
Shares reacquired - 13,223 - -
Cash overdraft - - - -
Accrued expenses:
Management fees (note 7) 10,895 28,402 25,779 15,849
Other 46,078 47,287 67,118 44,646
Dividends payable 51,780 132,180 137,376 90,289
----------- ----------- ----------- -----------
Total liabilities 108,753 221,092 230,273 1,334,991
----------- ----------- ----------- -----------
Net assets (note 8) $23,755,881 $61,308,630 $55,687,274 $34,384,430
=========== =========== =========== ===========
Class A Shares (note 1)
Net assets $ 3,894,689 $ 5,823,021 $ 6,860,436 $ 4,027,268
=========== =========== =========== ===========
Shares outstanding 362,624 551,681 657,949 374,859
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.74 $ 10.56 $ 10.43 $ 10.74
=========== =========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 11.25 $ 11.06 $ 10.92 $ 11.25
=========== =========== =========== ===========
Class C Shares (note 1)
Net assets $ 327,826 $ 167,925 $ 1,437,861 $ 231,328
=========== =========== =========== ===========
Shares outstanding 30,775 15,971 138,032 21,564
=========== =========== =========== ===========
Net asset value, offering and redemption price per share $ 10.65 $ 10.51 $ 10.42 $ 10.73
=========== =========== =========== ===========
Class R Shares (note 1)
Net assets $19,533,366 $55,317,684 $47,388,977 $30,125,834
=========== =========== =========== ===========
Shares outstanding 1,830,754 5,235,606 4,540,303 2,802,718
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.67 $ 10.57 $ 10.44 $ 10.75
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NJ PA VA
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $53,254,264 $64,750,094 $65,190,787
Temporary investments in short-term municipal securities,
at amortized cost (note 1) - 2,000,000 -
Cash 1,227,903 - 270,963
Receivables:
Interest 664,668 761,603 837,425
Shares sold 103,874 28,669 -
Investments sold - - -
Deferred organization costs (note 1) 7,390 7,984 5,824
Other assets 14,133 35,893 13,090
----------- ----------- -----------
Total assets 55,272,232 67,584,243 66,318,089
----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased - 3,015,938 -
Shares reacquired 12,384 55,248 -
Cash overdraft - 1,615 -
Accrued expenses:
Management fees (note 7) 25,346 29,831 30,744
Other 43,227 54,749 54,585
Dividends payable 161,375 164,192 164,733
----------- ----------- -----------
Total liabilities 242,332 3,321,573 250,062
----------- ----------- -----------
Net assets (note 8) $55,029,900 $64,262,670 $66,068,027
=========== =========== ===========
Class A Shares (note 1)
Net assets $10,660,701 $ 5,816,905 $ 5,874,288
=========== =========== ===========
Shares outstanding 1,024,727 548,766 554,008
=========== =========== ===========
Net asset value and redemption price per share $ 10.40 $ 10.60 $ 10.60
=========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 10.89 $ 11.10 $ 11.10
=========== =========== ===========
Class C Shares (note 1)
Net assets $ 1,065,019 $ 1,101,179 $ 788,903
=========== =========== ===========
Shares outstanding 102,569 105,115 74,618
=========== =========== ===========
Net asset value, offering and redemption price per share $ 10.38 $ 10.48 $ 10.57
=========== =========== ===========
Class R Shares (note 1)
Net assets $43,304,180 $57,344,586 $59,404,836
=========== =========== ===========
Shares outstanding 4,158,146 5,424,007 5,603,960
=========== =========== ===========
Net asset value and redemption price per share $ 10.41 $ 10.57 $ 10.60
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
STATEMENT OF OPERATIONS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
Year Ended January 31, 1996 JANUARY 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 1,189,234 $ 3,304,797 $ 2,957,714 $ 1,827,408
------------ ------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 111,599 313,075 280,013 169,780
12b-1 distribution and service fees (note 1) 6,771 9,232 22,018 7,144
Shareholders' servicing agent fees and expenses 22,979 47,824 69,638 43,765
Custodian's fees and expenses 40,994 50,179 72,294 47,593
Trustees' fees and expenses (note 7) 506 617 1,976 1,006
Professional fees 20,251 23,172 32,726 16,969
Shareholders' reports--printing and mailing expenses 21,551 51,528 54,329 29,592
Federal and state registration fees 3,910 5,074 7,109 6,098
Amortization of deferred organization costs (note 1) 6,785 7,610 6,077 5,585
Other expenses 2,534 6,349 6,210 4,266
------------ ------------ ------------ ------------
Total expenses before expense reimbursement 237,880 514,660 552,390 331,798
Expense reimbursement from investment adviser (note 7) (78,929) (78,507) (148,537) (93,136)
------------ ------------ ------------ ------------
Net expenses 158,951 436,153 403,853 238,662
------------ ------------ ------------ ------------
Net investment income 1,030,283 2,868,644 2,553,861 1,588,746
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 5) (27,336) (140,189) 138,640 414,083
Net change in unrealized appreciation or depreciation
of investments 1,629,699 4,780,693 3,998,568 2,255,770
------------ ------------ ------------ ------------
Net gain from investments 1,602,363 4,640,504 4,137,208 2,669,853
------------ ------------ ------------ ------------
Net increase in net assets from operations $ 2,632,646 $ 7,509,148 $ 6,691,069 $ 4,258,599
============ ============ ============ ============
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
STATEMENT OF OPERATIONS
Year Ended January 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NJ PA VA
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 3,006,443 $ 3,464,924 $ 3,701,411
------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 268,050 323,825 340,698
12b-1 distribution and service fees (note 1) 23,280 16,190 15,510
Shareholders' servicing agent fees and expenses 61,463 82,103 78,664
Custodian's fees and expenses 43,166 45,385 51,430
Trustees' fees and expenses (note 7) 1,276 1,268 1,628
Professional fees 23,290 21,640 19,516
Shareholders' reports--printing and mailing expenses 66,799 73,091 72,151
Federal and state registration fees 2,991 7,801 3,614
Amortization of deferred organization costs (note 1) 6,895 7,391 7,375
Other expenses 6,701 7,087 7,190
------------ ------------ ------------
Total expenses before expense reimbursement 503,911 585,781 597,776
Expense reimbursement from investment adviser (note 7) (115,121) (128,011) (117,673)
------------ ------------ ------------
Net expenses 388,790 457,770 480,103
------------ ------------ ------------
Net investment income 2,617,653 3,007,154 3,221,308
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 5) (30,019) (36,684) 334,528
Net change in unrealized appreciation or depreciation
of investments 3,249,789 4,855,692 4,882,314
------------ ------------ ------------
Net gain from investments 3,219,770 4,819,008 5,216,842
------------ ------------ ------------
Net increase in net assets from operations $ 5,837,423 $ 7,826,162 $ 8,438,150
============ ============ ============
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
AZ FL
- ------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 1,030,283 $ 874,402 $ 2,868,644 $ 2,567,258
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (27,336) (127,639) (140,189) (88,470)
Net change in unrealized appreciation or depreciation
of investments 1,629,699 (1,415,009) 4,780,693 (4,454,622)
----------- ----------- ------------ -----------
Net increase (decrease) in net assets from operations 2,632,646 (668,246) 7,509,148 (1,975,834)
----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (101,157) (11,579) (148,024) (12,861)
Class C (6,237) (786) (5,956) (807)
Class R (937,616) (863,461) (2,730,462) (2,538,376)
From accumulated net realized gains from investment
transactions:
Class A - - - (11)
Class C - - - -
Class R - - - (13,228)
----------- ----------- ------------ -----------
Decrease in net assets from distributions to
shareholders (1,045,010) (875,826) (2,884,442) (2,565,283)
----------- ----------- ------------ -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 2,882,755 1,124,442 4,315,210 1,665,651
Class C 273,019 51,694 77,334 73,100
Class R 2,473,853 4,004,198 8,465,473 13,751,923
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 38,250 2,269 52,678 4,072
Class C 5,264 509 3,575 230
Class R 529,462 464,469 1,500,287 1,376,114
----------- ----------- ------------ -----------
6,202,603 5,647,581 14,414,557 16,871,090
----------- ----------- ------------ -----------
Cost of shares redeemed:
Class A (303,388) (30,002) (173,983) (314,814)
Class C (3,168) (9,346) - -
Class R (1,449,215) (2,482,522) (11,564,633) (6,261,459)
----------- ----------- ------------ -----------
(1,755,771) (2,521,870) (11,738,616) (6,576,273)
----------- ----------- ------------ -----------
Net increase in net assets derived from Fund shares
transactions 4,446,832 3,125,711 2,675,941 10,294,817
----------- ----------- ------------ -----------
Net increase (decrease) in net assets 6,034,468 1,581,639 7,300,647 5,753,700
Net assets at the beginning of year 17,721,413 16,139,774 54,007,983 48,254,283
----------- ----------- ------------ -----------
Net assets at the end of year $23,755,881 $17,721,413 $ 61,308,630 $54,007,983
=========== =========== ============ ===========
Balance of undistributed net investment income at
end of year $ 1,809 $ 16,536 $ 20,796 $ 36,594
=========== =========== ============ ===========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MD MI
- ------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,553,861 $ 2,439,904 $ 1,588,746 $ 1,402,059
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 138,640 (720,598) 414,083 (138,495)
Net change in unrealized appreciation or depreciation
of investments 3,998,568 (4,017,204) 2,255,770 (2,255,350)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 6,691,069 (2,297,898) 4,258,599 (991,786)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (198,145) (14,257) (110,174) (7,070)
Class C (47,180) (9,717) (5,812) (582)
Class R (2,335,847) (2,417,246) (1,479,047) (1,399,025)
From accumulated net realized gains from investment
transactions:
Class A - (5) (9,042) (1)
Class C - - (536) -
Class R - (10,234) (88,511) (7,967)
----------- ----------- ----------- -----------
Decrease in net assets from distributions to
shareholders (2,581,172) (2,451,459) (1,693,122) (1,414,645)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 5,206,011 1,562,186 3,071,799 881,646
Class C 645,990 818,595 146,180 73,345
Class R 4,099,669 9,116,010 3,061,856 6,369,706
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 112,734 5,306 58,075 2,560
Class C 39,318 5,892 5,428 338
Class R 1,461,612 1,385,256 1,044,771 872,246
----------- ----------- ----------- -----------
11,565,334 12,893,245 7,388,109 8,199,841
----------- ----------- ----------- -----------
Cost of shares redeemed:
Class A (350,679) (2,267) (171,433) (9,411)
Class C (195,323) (226) (4,206) -
Class R (4,647,731) (10,757,200) (3,009,162) (3,253,109)
----------- ----------- ----------- -----------
(5,193,733) (10,759,693) (3,184,801) (3,262,520)
----------- ----------- ----------- -----------
Net increase in net assets derived from Fund share
transactions 6,371,601 2,133,552 4,203,308 4,937,321
----------- ----------- ----------- -----------
Net increase (decrease) in net assets 10,481,498 (2,615,805) 6,768,785 2,530,890
Net assets at the beginning of year 45,205,776 47,821,581 27,615,645 25,084,755
----------- ----------- ----------- -----------
Net assets at the end of year $55,687,274 $45,205,776 $34,384,430 $27,615,645
=========== =========== =========== ===========
Balance of undistributed net investment income at
end of year $ 936 $ 28,247 $ 10,893 $ 17,180
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NJ PA
- ------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,617,653 $ 2,037,788 $ 3,007,154 $ 2,714,124
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (30,019) (452,878) (36,684) (835,288)
Net change in unrealized appreciation or depreciation
of investments 3,249,789 (2,665,300) 4,855,692 (4,232,526)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 5,837,423 (1,080,390) 7,826,162 (2,353,690)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (329,633) (35,663) (173,805) (17,517)
Class C (32,025) (5,043) (28,974) (5,177)
Class R (2,282,656) (1,973,703) (2,830,558) (2,690,297)
From accumulated net realized gains from investment
transactions:
Class A - (773) - -
Class C - - - -
Class R - (341,737) - -
----------- ----------- ----------- -----------
Decrease in net assets from distributions to
shareholders (2,644,314) (2,356,919) (3,033,337) (2,712,991)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 7,757,684 2,826,031 4,222,635 1,465,445
Class C 573,759 458,588 633,225 480,657
Class R 4,461,592 10,783,764 6,005,478 12,882,787
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 181,529 18,788 126,885 9,834
Class C 16,615 2,567 24,758 3,155
Class R 1,567,807 1,592,197 1,786,453 1,624,542
----------- ----------- ----------- -----------
14,558,986 15,681,935 12,799,434 16,466,420
----------- ----------- ----------- -----------
Cost of shares redeemed:
Class A (406,168) (122,722) (281,318) (27,047)
Class C (32,865) (1,205) (105,804) -
Class R (5,070,204) (5,795,917) (6,418,284) (6,616,545)
----------- ----------- ----------- -----------
(5,509,237) (5,919,844) (6,805,406) (6,643,592)
----------- ----------- ----------- -----------
Net increase in net assets derived from Fund share
transactions 9,049,749 9,762,091 5,994,028 9,822,828
----------- ----------- ----------- -----------
Net increase (decrease) in net assets 12,242,858 6,324,782 10,786,853 4,756,147
Net assets at the beginning of year 42,787,042 36,462,260 53,475,817 48,719,670
----------- ----------- ----------- -----------
Net assets at the end of year $55,029,900 $42,787,042 $64,262,670 $53,475,817
=========== =========== =========== ===========
Balance of undistributed net investment income at
end of year $ 8,128 $ 34,789 $ 5,651 $ 31,834
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
VA
- ----------------------------------------------------------------------------------
Year ended Year ended
1/31/96 1/31/95
- ----------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 3,221,308 $ 2,965,312
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 334,528 (110,113)
Net change in unrealized appreciation or depreciation
of investments 4,882,314 (5,022,831)
----------- -----------
Net increase (decrease) in net assets from operations 8,438,150 (2,167,632)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (191,806) (20,902)
Class C (23,926) (4,516)
Class R (2,997,681) (2,960,225)
From accumulated net realized gains from investment
transactions:
Class A (15,706) -
Class C (2,511) -
Class R (193,671) -
----------- -----------
Decrease in net assets from distributions to
shareholders (3,425,301) (2,985,643)
----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 3,799,529 2,169,078
Class C 402,084 359,962
Class R 3,456,619 9,464,055
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 109,800 6,496
Class C 21,313 2,776
Class R 1,928,344 1,626,894
----------- -----------
9,717,689 13,629,261
----------- -----------
Cost of shares redeemed:
Class A (543,599) (10,247)
Class C (54,845) -
Class R (5,446,943) (6,855,537)
----------- -----------
(6,045,387) (6,865,784)
----------- -----------
Net increase in net assets derived from Fund share
transactions 3,672,302 6,763,477
----------- -----------
Net increase (decrease) in net assets 8,685,151 1,610,202
Net assets at the beginning of year 57,382,876 55,772,674
----------- -----------
Net assets at the end of year $66,068,027 $57,382,876
=========== ===========
Balance of undistributed net investment income at
end of year $ 29,706 $ 21,811
=========== ===========
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
1. GENERAL INFORMATION AND SIGNIFICANT
ACCOUNTING POLICIES
The Nuveen Multistate Tax-Free Trust (the "Trust") is an open-end diversified
management series investment company registered under the Investment Company Act
of 1940. The Trust comprises seven single-state tax-free mutual funds (the
Nuveen Tax-Free Value Funds--the "Funds"). Each Fund constitutes a separate
series of the Trust and is itself an open-end diversified management investment
company, commonly referred to as a mutual fund. The Trust was organized as a
Massachusetts Business Trust on July 26, 1991.
The Trust currently has seven authorized state tax-free Funds: the Nuveen
Arizona Tax-Free Value Fund, the Nuveen Florida Tax-Free Value Fund, the Nuveen
Maryland Tax-Free Value Fund, the Nuveen Michigan Tax-Free Value Fund, the
Nuveen New Jersey Tax-Free Value Fund, the Nuveen Pennsylvania Tax-Free Value
Fund and the Nuveen Virginia Tax-Free Value Fund. Additional state Funds may be
established in the future. Sale of Fund shares first commenced on February 28,
1992. Each Fund invests primarily in municipal obligations issued within its
respective state.
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
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board of Trustees. Temporary investments in
securities that have variable rate and demand features qualifying them as short-
term securities are traded and valued at amortized cost.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 be settled a month or more after the transaction date. Any securities so
purchased are subject to market fluctuation during this period. The Trust has
instructed the custodian to segregate assets in a separate account with a
current value at least equal to the amount of its purchase commitments. At
January 31, 1996, the Nuveen Michigan Tax-Free Value Fund and the Nuveen
Pennsylvania Tax-Free Value Fund had purchase commitments of $1,184,207 and
$3,015,938, respectively. There were no such purchase commitments in any of the
other Funds.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and
Distributions to
Shareholders
Net investment income is declared as a dividend monthly and payment is made or
reinvestment is credited to shareholder accounts after month-end. Net realized
gains from securities transactions are distributed to shareholders not less
frequently than annually only to the extent they exceed available capital loss
carryovers.
Distributions to shareholders of net investment income and net realized gains
from investment transactions are recorded on the ex-dividend date. The amount
and timing of such 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 result and will be classified as either distributions in excess
of net investment income or distributions in excess of net realized gains from
investment transactions, if applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes and intends to
comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies by distributing all of its net investment income,
in addition to any significant amounts of net realized gains from investments,
to shareholders. The Funds currently consider significant net realized gains as
amounts in excess of $.001 per share. Furthermore, each Fund intends 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 respective Funds. All
income dividends paid during the year ended January 31, 1996, have been
designated Exempt Interest Dividends.
48
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
Deferred
Organization Costs
Costs incurred by the Trust in connection with its organization and initial
registration of shares were deferred and are being amortized over a 60-month
period beginning February 28, 1992. If any of the initial shares of each Fund
are redeemed during this period, the proceeds of the redemption will be reduced
by the pro-rata share of the unamortized organization costs as of the date of
redemption.
Flexible Sales Charge
Program
Effective September 6, 1994, each Fund commenced offering Class "A" Shares and
Class "C" Shares. Class "A" Shares incur a front-end sales charge and an annual
12b-1 service fee. Class "C" Shares are sold without a sales charge but incur
annual 12b-1 distribution and service fees. Effective June 13, 1995, an investor
purchasing Class "C" Shares agrees to pay a contingent deferred sales charge
("CDSC") of 1% if Class "C" Shares are redeemed within 12 months of purchase.
Prior to the offering of Class "A" and Class "C" shares, the shares outstanding
were renamed Class "R" and are not subject to any 12b-1 distribution or service
fees. Effective with the offering of the new classes, Class "R" Shares are
generally available only for reinvestment of dividends by current "R"
shareholders and for already established Nuveen Unit Investment Trust
reinvestment accounts.
Derivative Financial
Instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including future, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Funds are
authorized to invest in such financial instruments, and may do so in the future,
they did not make any such investments during the year ended January 31, 1996.
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.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. EXPENSE ALLOCATION
Expenses of the Funds that are not directly attributable to any 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 are recorded to the specific
class. Effective August 1, 1995, the Funds adopted a multiple class plan
pursuant to Rule 18f-3 under the Investment Company Act of 1940 and now
designate class specific expenses to include Rule 12b-1 distribution and service
fees, and other expenses incurred for services received by a class that differ
in either amount or kind. A breakdown of the class specific expenses is as
follows:
<TABLE>
<CAPTION>
AZ FL MD MI
<S> <C> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
January 31, 1996):
Class A $ 5,232 $ 7,876 $10,477 $ 5,692
Class C 1,539 1,356 11,541 1,452
Shareholders' servicing agent fees and expenses (for the
six month period ended July 31, 1995):
Class A 1,219 2,388 2,357 1,704
Class C 103 57 401 90
Class R 9,209 17,836 29,394 18,320
Shareholders' reports-printing and mailing expenses
(for the six month period ended July 31, 1995):
Class A 574 1,437 1,691 757
Class C 88 57 324 51
Class R 17,565 32,346 26,895 11,718
Federal and state registration fees (for the six month
period ended July 31, 1995):
Class A 237 786 1,101 199
Class C 9 379 734 13
Class R 1,870 715 756 2,324
</TABLE>
50
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
NJ PA VA
<S> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
January 31, 1996):
Class A $16,159 $ 9,108 $ 9,870
Class C 7,121 7,082 5,640
Shareholders' servicing agent fees and expenses (for the
six month period ended July 31, 1995):
Class A 3,208 2,563 2,427
Class C 185 360 265
Class R 15,598 32,785 36,716
Shareholders' reports-printing and mailing expenses
(for the six month period ended July 31, 1995):
Class A 1,760 1,336 1,588
Class C 205 76 220
Class R 36,338 31,233 40,281
Federal and state registration fees (for the six month
period ended July 31, 1995):
Class A 886 1,858 744
Class C 69 1,378 40
Class R 749 1,519 1,185
</TABLE>
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. FUND SHARES
Transactions in shares were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AZ FL
- ---------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 274,843 116,098 420,409 175,913
Class C 26,227 5,260 7,638 7,959
Class R 239,176 401,984 824,725 1,397,272
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 3,655 237 5,125 435
Class C 505 54 350 24
Class R 51,292 48,864 147,052 139,011
-------- --------- ---------- ----------
595,698 572,497 1,405,299 1,720,614
-------- --------- ---------- ----------
Shares redeemed:
Class A (29,122) (3,087) (16,925) (33,276)
Class C (313) (958) - -
Class R (139,521) (254,213) (1,126,197) (639,360)
-------- --------- ---------- ----------
(168,956) (258,258) (1,143,122) (672,636)
-------- --------- ---------- ----------
Net increase 426,742 314,239 262,177 1,047,978
======== ========= ========== ==========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
MD MI
- -----------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 514,083 166,832 294,831 91,636
Class C 63,846 89,009 13,867 7,542
Class R 406,673 921,445 293,923 631,960
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 11,066 570 5,538 269
Class C 3,894 635 521 35
Class R 144,632 142,445 99,905 87,694
--------- ---------- -------- --------
1,144,194 1,320,936 708,585 819,136
--------- ---------- -------- --------
Shares redeemed:
Class A (34,362) (240) (16,428) (987)
Class C (19,328) (24) (401) -
Class R (459,618) (1,119,703) (288,460) (332,766)
--------- ---------- -------- --------
(513,308) (1,119,967) (305,289) (333,753)
--------- ---------- -------- --------
Net increase 630,886 200,969 403,296 485,383
========= ========== ======== ========
- -----------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NJ PA
- -----------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 765,342 292,386 411,858 153,866
Class C 56,488 47,588 62,079 50,810
Class R 440,121 1,077,289 585,804 1,297,150
Shares issued to shareholders due to reinvestment of
distributions from net investment income and
from net realized gains from investment transactions:
Class A 17,820 1,978 12,297 1,047
Class C 1,638 270 2,439 329
Class R 154,754 161,549 174,784 165,879
---------- --------- --------- ---------
1,436,163 1,581,060 1,249,261 1,669,081
---------- --------- --------- ---------
Shares redeemed:
Class A (40,094) (12,705) (27,436) (2,866)
Class C (3,290) (125) (10,542) --
Class R (500,152) (581,386) (628,872) (676,175)
---------- --------- --------- ---------
(543,536) (594,216) (666,850) (679,041)
---------- --------- --------- ---------
Net increase 892,627 986,844 582,411 990,040
========== ========= ========= ========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
VA
- ------------------------------------------------------------------------------------
Year ended Year ended
1/31/96 1/31/95
- ------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold:
Class A 369,049 227,287
Class C 39,142 38,465
Class R 336,826 931,986
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 10,624 690
Class C 2,074 296
Class R 186,098 165,173
-------- ---------
943,813 1,363,897
-------- ---------
Shares redeemed:
Class A (52,547) (1,095)
Class C (5,359) --
Class R (529,723) (680,380)
-------- ---------
(587,629) (681,475)
-------- ---------
Net increase 356,184 682,422
======== =========
- ------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. DISTRIBUTIONS TO SHAREHOLDERS
On February 9, 1996, the Funds declared dividend distributions from their
ordinary income which were paid on March 1, 1996, to shareholders of record on
February 9, 1996, as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AZ FL MD MI
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $ .0420 $ .0410 $ .0405 $ .0425
Class C .0350 .0345 .0340 .0355
Class R .0435 .0430 .0425 .0445
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
NJ PA VA
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $ .0440 $ .0410 $ .0430
Class C .0375 .0340 .0365
Class R .0460 .0430 .0450
=========== =========== ===========
- --------------------------------------------------------------------------------------
</TABLE>
5. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the year ended January 31,
1996, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
Investments in municipal securities $ 5,373,232 $14,977,473 $15,605,953 $13,336,382
Temporary municipal investments 7,000,000 11,900,000 9,500,000 7,900,000
SALES
Investments in municipal securities 938,787 11,397,779 8,399,990 9,860,816
Temporary municipal investments 7,200,000 11,900,000 10,500,000 7,900,000
=========== =========== =========== ===========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
NJ PA VA
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASES
Investments in municipal securities $27,941,714 $41,972,985 $29,255,837
Temporary municipal investments 19,400,000 20,880,000 13,000,000
SALES
Investments in municipal securities 17,713,121 29,645,304 25,325,007
Temporary municipal investments 21,000,000 19,880,000 14,300,000
=========== =========== ===========
- -----------------------------------------------------------------------------------------------------
</TABLE>
At January 31, 1996, 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 January 31, 1996, the following Funds had unused capital loss carryforwards
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, the carryovers will expire as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
AZ FL MD
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expiration year:
2003 $127,444 $ 87,166 $ 65,355
2004 17,690 141,494 516,603
-------- -------- --------
Total $145,134 $228,660 $581,958
======== ======== ========
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
NJ PA
- ------------------------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2003 $ 35,921 $377,256
2004 419,632 468,676
-------- --------
Total $455,553 $845,932
======== ========
- ------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
6. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at January 31, 1996, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AZ FL MD MI
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
Appreciation $1,382,474 $3,438,260 $3,207,733 $1,847,996
Depreciation (1,470) (14,203) (81,539) (2,858)
---------- ---------- ---------- ----------
Net unrealized appreciation $1,381,004 $3,424,057 $3,126,194 $1,845,138
========== ========== ========== ==========
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NJ PA VA
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
Appreciation $2,520,888 $3,860,621 $4,243,525
Depreciation (68,034) (34,940) (88,830)
---------- ---------- ----------
Net unrealized appreciation $2,452,854 $3,825,681 $4,154,695
========== ========== ==========
</TABLE>
7. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays to the Adviser 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>
- -------------------------------------------------------
Average daily net asset value Management fee
- -------------------------------------------------------
<S> <C>
For the first $125,000,000 .55 of 1%
For the next $125,000,000 .5375 of 1
For the next $250,000,000 .525 of 1
For the next $500,000,000 .5125 of 1
For the next $1,000,000,000 .5 of 1
For net assets over $2,000,000,000 .475 of 1
- -------------------------------------------------------
</TABLE>
From inception of the Trusts on December 13, 1991 through January 31, 1996, the
Adviser waived part of its management fees or reimbursed certain expenses of
each Fund in order to limit total expenses to .75 of 1% of the average daily net
asset value of each Fund, excluding any 12b-1 fees applicable to Class A and
Class C. The Adviser has currently agreed to continue its fee waivers and
expense reimbursements through July 31, 1996.
58
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to its Trustees who are affiliated with the Adviser or to
its officers, all of whom receive remuneration for their services to the Trust
from the Adviser.
8. COMPOSITION OF NET ASSETS
At January 31, 1996, there were an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $22,527,848 $58,092,437 $53,142,102 $32,351,135
Balance of undistributed net investment income 1,809 20,796 936 10,893
Accumulated net realized gain (loss) from investment
transactions (154,780) (228,660) (581,958) 177,264
Net unrealized appreciation of investments 1,381,004 3,424,057 3,126,194 1,845,138
----------- ----------- ----------- -----------
Net assets $23,755,881 $61,308,630 $55,687,274 $34,384,430
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
NJ PA VA
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $53,051,830 $61,303,237 $61,873,371
Balance of undistributed net investment income 8,128 5,651 29,706
Accumulated net realized gain (loss) from investment
transactions (482,912) (871,899) 10,255
Net unrealized appreciation of investments 2,452,854 3,825,681 4,154,695
----------- ----------- -----------
Net assets $55,029,900 $64,262,670 $66,068,027
=========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
9. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At January 31, 1996, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
AZ FL MD MI
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Bonds:
Pollution Control 11% 2% 6% 7%
Housing Facilities 11 16 23 12
Health Care Facilities 11 15 12 21
Water/Sewer Facilities 6 9 -- 15
Electric Utilities 2 16 1 3
Educational Facilities 14 1 5 7
Transportation 3 5 11 4
Lease Rental Facilities 8 1 5 3
Other 8 9 7 5
General Obligation Bonds 17 9 15 17
Escrowed Bonds 9 17 15 6
-- -- -- --
100% 100% 100% 100%
=== === === ===
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
NJ PA VA
- -------------------------------------------------------------
<S> <C> <C> <C>
Revenue Bonds:
Pollution Control 13% 24% --%
Housing Facilities 10 8 9
Health Care Facilities 7 17 11
Water/Sewer Facilities 5 -- 17
Electric Utilities 2 3 --
Educational Facilities 9 13 12
Transportation 8 5 12
Lease Rental Facilities 3 2 6
Other 12 11 23
General Obligation Bonds 19 15 6
Escrowed Bonds 12 2 4
-- -- --
100% 100% 100%
=== === ===
- -------------------------------------------------------------
</TABLE>
60
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
Certain long-term and intermediate-term investments owned by the Funds are
covered by insurance issued by several private insurers or are backed by an
escrow or trust containing U.S. Government or U.S. Government agency securities,
either of which ensure the timely payment of principal and interest in the event
of default (51% for Arizona, 61% for Florida, 54% for Maryland, 30% for
Michigan, 47% for New Jersey, 47% for Pennsylvania, and 24% for Virginia). Such
insurance or escrow, however, does not guarantee the market value of the
municipal securities or the value of the Funds' shares.
All of the temporary investments in short-term municipal securities have credit
enhancements (letters of credit, guarantees or insurance) issued by third party
domestic or foreign banks or other institutions.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
61
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Income from investment
operations Less distributions
------------------------------------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ARIZONA
- ------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 $ 9.930 $.503 $ .829 $(.522) $ - $10.740
9/6/94 to
1/31/95 10.030 .203 (.086) (.217) - 9.930
CLASS C
Year ended 1/31,
1996 9.840 .419 .830 (.439) - 10.650
9/9/94 to
1/31/95 9.940 .169 (.052) (.217) - 9.840
CLASS R
Year ended 1/31,
1996 9.850 .529 .831 (.540) - 10.670
1995 10.880 .536 (1.026) (.540) - 9.850
1994 10.050 .531 .853 (.522) (.032) 10.880
1993 9.525 .438 .563 (.435) (.041) 10.050
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ------------------------------------------------------------------------------------------------------------------
FLORIDA
- ------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 9.730 .488 .840 (.498) - 10.560
9/6/94 to
1/31/95 9.890 .193 (.148) (.202) (.003) 9.730
CLASS C
Year ended 1/31,
1996 9.730 .413 .789 (.422) - 10.510
9/16/94 to
1/31/95 9.720 .152 .021 (.163) - 9.730
CLASS R
Year ended 1/31,
1996 9.750 .518 .824 (.522) - 10.570
1995 10.740 .508 (.985) (.510) (.003) 9.750
1994 9.960 .511 .779 (.510) - 10.740
1993 9.525 .440 .431 (.436) - 9.960
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 68.
62
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
---------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
13.68% $ 3,895 1.31% 4.49% 1.00% 4.80% 5%
1.24 1,124 1.60* 4.68* 1.00* 5.28* 29
12.90 328 2.11 3.66 1.75 4.02 5
1.25 43 3.51* 2.79* 1.75* 4.55* 29
14.09 19,533 1.15 4.72 .75 5.12 5
(4.39) 16,554 1.06 5.12 .75 5.43 29
14.07 16,140 1.25 4.48 .75 4.98 11
10.71 8,026 1.75* 3.94* .75* 4.94* 43
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
13.92 5,823 1.21 4.53 1.00 4.74 21
.52 1,392 1.56* 4.52* 1.00* 5.08* 4
12.54 168 2.16 3.62 1.75 4.03 21
1.84 78 2.84* 3.26* 1.75* 4.35* 4
14.05 55,318 .88 4.93 .75 5.06 21
(4.33) 52,538 .84 5.12 .75 5.21 4
13.22 48,254 .89 4.69 .75 4.83 3
9.33 23,727 1.24* 4.35* .75* 4.84* 1
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- ------------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- -----------------------------------------------------------------------------------------------------------------------------------
MARYLAND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Year ended 1/31,
1996 $ 9.600 $.483 $ .844 $(.497) $ - $10.430
9/6/94 to
1/31/95 9.840 .198 (.229) (.207) (.002) 9.600
CLASS C
Year ended 1/31,
1996 9.590 .409 .842 (.421) - 10.420
9/15/94 to
1/31/95 9.750 .160 (.153) (.167) - 9.590
CLASS R
Year ended 1/31,
1996 9.610 .513 .838 (.521) - 10.440
1995 10.620 .513 (1.008) (.513) (.002) 9.610
1994 9.910 .509 .727 (.503) (.023) 10.620
1993 9.525 .442 .395 (.442) (.010) 9.910
12/13/91 to
1/31/92 9.525 - - - - 9.525
- -----------------------------------------------------------------------------------------------------------------------------------
MICHIGAN
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 9.870 .510 .911 (.519) (.032) 10.740
9/6/94 to
1/31/95 10.090 .204 (.209) (.212) (.003) 9.870
CLASS C
Year ended 1/31,
1996 9.850 .430 .922 (.440) (.032) 10.730
9/16/94 to
1/31/95 9.910 .161 (.050) (.171) - 9.850
CLASS R
Year ended 1/31,
1996 9.880 .539 .906 (.543) (.032) 10.750
1995 10.860 .529 (.972) (.534) (.003) 9.880
1994 10.060 .531 .808 (.528) (.011) 10.860
1993 9.525 .456 .554 (.449) (.026) 10.060
12/13/91 to
1/31/92 9.525 - - - - 9.525
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 68.
64
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
14.07% $ 6,860 1.33% 4.41% 1.00% 4.74% 17%
(.26) 1,605 1.59* 4.67* 1.00* 5.26* 35
13.24 1,438 2.06 3.73 1.75 4.04 17
.12 860 1.86* 4.44* 1.75* 4.55* 35
14.33 47,389 1.04 4.78 .75 5.07 17
(4.58) 42,741 .89 5.14 .75 5.28 35
12.71 47,822 .86 4.74 .75 4.85 4
8.96 28,283 1.02* 4.69* .75* 4.96* 20
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
14.68 4,027 1.35 4.52 1.00 4.87 33
.02 897 2.62* 3.68* 1.00* 5.30* 35
13.96 231 2.08 3.79 1.75 4.12 33
1.18 75 3.52* 2.76* 1.75* 4.53* 35
14.93 30,126 1.05 4.87 .75 5.17 33
(3.98) 26,644 .96 5.12 .75 5.33 35
13.58 25,085 1.07 4.67 .75 4.99 3
10.80 14,684 1.62* 4.19* .75* 5.06* 32
- 15 - - - - -
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- ------------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 $ 9.730 $.519 $ .685 $(.534) $ - $10.400
9/6/94 to
1/31/95 10.030 .205 (.209) (.210) (.086) 9.730
CLASS C
Year ended 1/31,
1996 9.710 .443 .683 (.456) - 10.380
9/21/94 to
1/31/95 9.770 .159 (.050) (.169) - 9.710
CLASS R
Year ended 1/31,
1996 9.740 .551 .677 (.558) - 10.410
1995 10.710 .524 (.886) (.522) (.086) 9.740
1994 9.960 .513 .810 (.513) (.060) 10.710
1993 9.525 .445 .431 (.441) - 9.960
12/13/91 to
1/31/92 9.525 - - - - 9.525
PENNSYLVANIA
CLASS A
Year ended 1/31,
1996 9.750 .498 .862 (.510) - 10.600
9/6/94 to
1/31/95 9.920 .206 (.164) (.212) - 9.750
CLASS C
Year ended 1/31,
1996 9.650 .417 .843 (.430) - 10.480
9/6/94 to
1/31/95 9.920 .176 (.235) (.211) - 9.650
CLASS R
Year ended 1/31,
1996 9.730 .527 .846 (.533) - 10.570
1995 10.810 .531 (1.077) (.534) - 9.730
1994 10.010 .533 .807 (.534) (.006) 10.810
1993 9.525 .451 .481 (.443) (.004) 10.010
12/13/91 to
1/31/92 9.525 - - - - 9.525
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 68.
66
<PAGE>
NUVEEN TAX-FREE MUTUAL ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
-------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12.63% $10,661 1.25% 4.85% 1.00% 5.10% 39%
.02 2,741 1.31* 5.03* 1.00* 5.34* 32
11.80 1,065 1.96 4.16 1.75 4.37 39
1.16 464 2.00* 4.37* 1.75* 4.62* 32
12.88 43,304 .98 5.20 .75 5.43 39
(3.27) 39,582 .89 5.18 .75 5.32 32
13.60 36,462 .98 4.61 .75 4.84 52
9.36 16,208 1.43* 4.28* .75* 4.96* 9
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
14.22 5,817 1.30 4.52 1.00 4.82 52
.49 1,483 1.87* 4.56* 1.00* 5.43* 74
13.27 1,101 2.14 3.70 1.75 4.09 52
(.53) 494 2.52* 3.90* 1.75* 4.67* 74
14.40 57,345 .96 4.93 .75 5.14 52
(4.94) 51,499 .91 5.27 .75 5.43 74
13.67 48,720 .94 4.82 .75 5.01 5
9.97 23,680 1.25* 4.53* .75* 5.03* 15
- 15 - - - - -
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Income from investment
operations Less distributions
--------------------------- -------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income++ investments** income capital gains period
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VIRGINIA
- -------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 $ 9.760 $.509 $ .878 $(.509) $(.038) $10.600
9/6/94 to
1/31/95 9.980 .201 (.207) (.214) - 9.760
CLASS C
Year ended 1/31,
1996 9.740 .432 .868 (.432) (.038) 10.570
9/8/94 to
1/31/95 9.950 .171 (.167) (.214) - 9.740
CLASS R
Year ended 1/31,
1996 9.770 .537 .864 (.533) (.038) 10.600
1995 10.740 .531 (.964) (.537) - 9.770
1994 10.030 .529 .726 (.527) (.018) 10.740
1993 9.525 .439 .499 (.433) - 10.030
12/13/91 to
1/31/92 9.525 - - - - 9.525
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized. For the year ended 1/31/93, the information is based on the period
beginning 2/28/92, commencement of operations.
** Net of taxes, if applicable (note 1).
+ Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gains distributions, if any, and changes in stock
price per share.
++ Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser (note 7).
68
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses to net investment
Total return Net assets average income to average average net assets income to average Portfolio
on net asset end of period net assets before net assets before after reimburse- net assets after turnover
value+ (in thousands) reimbursement reimbursement ment++ reimbursement++ rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
14.50% $ 5,874 1.20% 4.73% 1.00% 4.93% 42%
.01 2,215 1.57* 4.70* 1.00* 5.27* 40
13.58 789 1.92 4.04 1.75 4.21 42
.10 378 2.20* 4.12* 1.75* 4.57* 40
14.65 59,405 .94 5.04 .75 5.23 42
(3.92) 54,791 .82 5.33 .75 5.40 40
12.78 55,773 .84 4.94 .75 5.03 7
10.04 37,196 .96* 4.71* .75* 4.92* 12
- 15 - - - - -
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Nuveen Multistate Tax-Free Trust:
We have audited the accompanying statements of net assets of Nuveen Multistate
Tax-Free Trust (a Massachusetts business trust comprising the Arizona, Florida,
Maryland, Michigan, New Jersey, Pennsylvania and Virginia Nuveen Tax-Free Value
Funds), including the portfolios of investments, as of January 31, 1996, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of each of the
respective funds constituting the Nuveen Multistate Tax-Free Trust as of January
31, 1996, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and the
financial highlights for the periods indicated in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 1, 1996
70
<PAGE>
[PHOTO APPEARS HERE]
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
Your
investment
partners
Since 1898, John Nuveen & Co. Incorporated has worked to bring together the
various participants in the municipal bond industry and build strong
partnerships that benefit all concerned. Investors, financial advisers,
municipal officials, investment bankers--Nuveen believes that forging
relationships within these groups based on trust and value is the key to
successful investing.
As the oldest and largest municipal bond specialist in the United States,
Nuveen's investment bankers work with issuers to understand and meet their needs
in structuring and selling their bond issues.
Nuveen also works closely with financial advisers around the country,
including brokerage firms, banks, insurance companies, and independent financial
planners, to bring the benefits of tax-free investing to you. These advisers are
experts at identifying your needs and recommending the best solutions for your
situation. Together we make a powerful team, helping you create a successful
investment plan that meets your needs today and in the future.
[LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
OEFI-MAR96 [RECYCLE LOGO]
<PAGE>
[LOGO OF SHIP ART]
Statement of Investments in Securities and Net Assets May 31, 1996
.................................................................................
Municipal Bonds
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Education
--------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 250 Connecticut State Health and Educational Facilities Authority Revenue -
Fairfield University - Series F 6.900% 07/01/14 $ 252,532
500 Connecticut State Health and Educational Facilities Authority Revenue -
Quinnipiac College - Series D 6.000 07/01/13 465,150
5,575 Connecticut State Health and Educational Facilities Authority Revenue -
Quinnipiac College - Series D 6.000 07/01/23 4,994,420
500 Connecticut State Health and Educational Facilities Authority Revenue -
Capital Asset - Series C 7.000 01/01/20 538,000
500 Connecticut State Health and Educational Facilities Authority Revenue -
Sacred Heart University - Series 1993 B 5.700 07/01/16 433,815
1,500 Connecticut State Health and Educational Facilities Authority Revenue -
Sacred Heart University - Series 1993 B 5.500 07/01/09 1,427,370
500 Connecticut State Health and Educational Facilities Authority Revenue -
Sacred Heart University - Series 1993 B 5.800 07/01/23 434,045
1,000 Connecticut State Health and Educational Facilities Authority Revenue -
Trinity College - Series C 6.000 07/01/12 1,012,060
2,000 Connecticut State Health and Educational Facilities Authority Revenue -
Yale University 5.929 06/10/30 1,959,600
6,475 Connecticut State Health and Educational Facilities Authority Revenue -
Hartford University - Series 1992 D 6.750 07/01/12 6,530,556
4,000 Connecticut State Health and Educational Facilities Authority Revenue -
Trinity College - Series D 6.125 07/01/24 4,064,400
1,000 Connecticut State Health and Educational Facilities Authority Revenue -
Sacred Heart University - Series 1992 A 6.850 07/01/22 1,044,180
2,000 Connecticut State Health and Educational Facilities Authority Revenue -
Loomis Chaffee School - Series B 6.000 07/01/25 1,994,420
2,500 Connecticut State Health and Educational Facilities Authority Revenue -
Kent School - Series 1995 B 5.400 07/01/23 2,328,675
2,240 Connecticut State Health and Educational Facilities Authority Revenue -
Connecticut State University System - Series 1995 5.125 11/01/15 2,024,714
Health Care
--------------------------------------------------------------------------------------------------------------------------
2,000 Connecticut State Health and Educational Facilities Authority Revenue -
Saint Camillus Health Center - Series 1994 6.250 11/01/18 2,052,200
1,000 Connecticut State Health and Educational Facilities Authority Revenue -
Sharon Health Care - Series 1994 6.250 11/01/21 1,024,540
5,000 Connecticut State Health and Educational Facilities Authority Revenue -
Saint Joseph's Manor - Series 1994 6.250 11/01/16 5,134,450
3,695 Connecticut State Health and Educational Facilities Authority Revenue -
Saint Camillus Health Center - Series 1994 6.250 11/01/18 3,785,675
3,000 Connecticut State Health and Educational Facilities Authority Revenue -
Jewish Home for the Elderly - Series 1994 6.250 11/01/20 3,073,620
1,500 Connecticut State Health and Educational Facilities Authority Revenue -
Highland View Manor, Incorporated - Series 1994 7.200 11/01/10 1,653,555
4,200 Connecticut State Health and Educational Facilities Authority Revenue -
Highland View Manor, Incorporated - Series 1994 7.500 11/01/16 4,700,892
</TABLE>
4 F-46 Connecticut
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
<C> <S> <C> <C> <C>
$1,100 Connecticut State Health and Educational Facilities Authority Revenue -
Wadsworth Glen Health Care Center - Series 1994 7.200% 11/01/10 $1,212,607
1,000 Connecticut State Health and Educational Facilities Authority Revenue -
Wadsworth Glen Health Care Center - Series 1994 7.500 11/01/16 1,119,260
2,000 Connecticut State Health and Educational Facilities Authority Revenue -
AHF/Hartford, Incorporated - Series 1994 7.125 11/01/24 2,237,520
4,115 Connecticut State Health and Educational Facilities Authority Revenue -
Nursing Home Program - Abbott Terrace Health Center Project - Series 1996 A 5.750 11/01/13 3,991,591
4,365 Connecticut State Health and Educational Facilities Authority Revenue -
Fairfield Nursing Home Program - Series 1996 6.250 11/01/21 4,315,414
7,000 Connecticut Development Authority - Duncaster - Series 1992 6.750 09/01/15 7,208,390
Hospitals
-----------------------------------------------------------------------------------------------------------------------
100 Connecticut State Health and Educational Facilities Authority Revenue -
St. Mary's Hospital - Issue B 7.600 07/01/03 104,871
1,000 Connecticut State Health and Educational
Facilities Authority Revenue -
Greenwich Academy Issue - Series 1996 A 5.700 03/01/16 974,470
2,000 Connecticut State Health and Educational Facilities Authority Revenue -
Greenwich Academy Issue - Series 1996 A 5.750 03/01/26 1,933,500
2,600 Connecticut State Health and Educational Facilities Authority Revenue -
Bristol Hospital - Series A 7.000 07/01/20 2,792,296
190 Connecticut State Health and Educational Facilities Authority Revenue -
St. Mary's Hospital - Series C 7.375 07/01/20 195,164
5,500 Connecticut State Health and Educational Facilities Authority Revenue -
Yale-New Haven Hospital - Issue F 7.100 07/01/25 5,926,690
1,750 Connecticut State Health and Educational Facilities Authority Revenue -
Waterbury Hospital - Issue B 7.000 07/01/20 1,879,430
900 Connecticut State Health and Educational Facilities Authority Revenue -
St. Raphael Hospital - Series D 6.625 07/01/14 952,740
3,500 Connecticut State Health and Educational Facilities Authority Revenue -
Middlesex Hospital - Series G 6.250 07/01/12 3,584,420
2,000 Connecticut State Health and Educational Facilities Authority Revenue -
Bridgeport Hospital - Series 1992 6.625 07/01/18 2,094,640
4,200 Connecticut State Health and Educational Facilities Authority Revenue -
New Britain Hospital - Series B 6.000 07/01/24 4,154,766
1,100 Connecticut State Health and Educational Facilities Authority Revenue -
William W. Backus Hospital - Series 1992 C 6.000 07/01/12 1,071,191
1,645 Connecticut State Health and Educational Facilities Authority Revenue -
Day Kimball Hospital - Series 1995 A 5.375 07/01/26 1,502,494
3,000 Connecticut State Health and Educational Facilities Authority Revenue -
Greenwich Hospital Issue - Series 1996 A 5.750 07/01/16 2,930,040
Housing/Multifamily
-----------------------------------------------------------------------------------------------------------------------
835 Connecticut State Housing Finance Authority - Series 1991A 7.200 11/15/08 863,699
955 Connecticut State Housing Finance Authority - Series 1991C 6.700 11/15/22 973,451
2,250 Connecticut State Housing Finance Authority - Series 1993 A 6.200 05/15/14 2,268,360
1,045 Connecticut State Housing Finance Authority - Series C 7.625 11/15/17 1,082,024
70 Connecticut State Housing Finance Authority - Series B1 7.550 11/15/08 70,692
</TABLE>
Connecticut F-47 5
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
<C> <S> <C> <C> <C>
$3,750 Connecticut State Housing Finance Authority - Series A 6.100% 05/15/17 $3,741,075
1,505 Connecticut State Housing Finance Authority - Subseries B-2 6.750 05/15/22 1,541,060
1,500 New Britain, CT Senior Citizens Housing Development Mortgage Revenue -
Nathan Hale Apartments - Series 1992A 6.875 07/01/24 1,543,980
Housing/Single Family
--------------------------------------------------------------------------------------------------------------------------
1,500 Connecticut State Housing Finance Authority - Subseries A-1 6.100 05/15/17 1,501,125
2,500 Connecticut Housing Finance Authority - Housing Mortgage Finance Program -
Series 1993 E, Subseries E-1 & E-2 - Series 1995 F, Subseries F-1, F-2 & Series H 6.000 05/15/17 2,456,075
Industrial Development and Pollution Control
--------------------------------------------------------------------------------------------------------------------------
770 Connecticut State Development Authority Water Facility Revenue -
Bridgeport Hydraulic Company 7.250 06/01/20 823,253
2,000 Connecticut State Development Authority Water Facility Revenue -
Connecticut Water Company 6.650 12/15/20 2,190,300
2,250 Connecticut State Development Authority Revenue - Solid Waste Disposal
Facilities - Pfizer Incorporated - Series 1994 7.000 07/01/25 2,500,358
Municipal Revenue/Other
--------------------------------------------------------------------------------------------------------------------------
1,690 Connecticut State Development Authority Revenue -
Jewish Community Center - Greater New Haven - Series 1992 6.600 09/01/17 1,746,446
405 New Haven, CT Facility Revenue - Easter Seal Goodwill Industries
Rehabilitation Center Project 8.500 04/01/01 420,601
995 New Haven, CT Facility Revenue - Easter Seal Goodwill Industries
Rehabilitation Center Project 8.875 04/01/16 1,046,899
Municipal Revenue/Utility
--------------------------------------------------------------------------------------------------------------------------
1,000 Commonwealth of Puerto Rico Electric Power Authority Revenue -
Series 1995 Z 5.500 07/01/16 932,100
Municipal Revenue/Water & Sewer
--------------------------------------------------------------------------------------------------------------------------
1,000 Connecticut State Clean Water Revenue - Series 1991 7.000 01/01/11 1,081,500
1,000 Connecticut State Clean Water Revenue - Series 1994 5.800 06/01/16 995,320
Non-State General Obligations
--------------------------------------------------------------------------------------------------------------------------
325 Canterbury, CT General Obligation 7.200 05/01/09 374,611
225 East Haven, CT General Obligation 7.000 09/15/02 240,664
300 East Haven, CT General Obligation 7.000 09/15/05 323,439
200 Glastonbury, CT General Obligation 7.200 08/15/06 232,554
200 Glastonbury, CT General Obligation 7.200 08/15/07 233,070
200 Glastonbury, CT General Obligation 7.200 08/15/08 233,222
200 Griswold, CT General Obligation 7.500 04/01/02 227,826
200 Griswold, CT General Obligation 7.500 04/01/03 230,622
200 Griswold, CT General Obligation 7.500 04/01/04 233,048
150 Griswold, CT General Obligation 7.500 04/01/05 176,324
340 Middletown, CT General Obligation 6.900 04/15/06 383,323
3,105 New Haven, CT General Obligation - Series 1991 7.400 08/15/11 3,372,682
</TABLE>
6 F-48 Connecticut
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
.................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
<C> <S> <C> <C> <C>
$1,000 New Haven, CT General Obligation - Series 1992 A 9.250% 03/01/02 $1,166,490
1,000 New Haven, CT General Obligation - Series 1992 A 7.400 03/01/12 1,085,410
1,250 New Haven, CT General Obligation - Series 1995 5.750 02/15/14 1,249,875
1,250 New Haven, CT General Obligation - Series 1995 5.750 02/15/15 1,242,800
120 New London, CT General Obligation 7.300 12/01/05 139,477
100 New London, CT General Obligation 7.300 12/01/07 117,247
160 Old Saybrook, CT General Obligation - Series 1989 7.400 05/01/08 186,461
160 Old Saybrook, CT General Obligation - Series 1989 7.400 05/01/09 186,379
275 Old Saybrook, CT General Obligation - Series 1991 6.500 02/15/10 301,202
270 Old Saybrook, CT General Obligation - Series 1991 6.500 02/15/11 295,526
925 Oxford, CT General Obligation 7.000 02/01/09 1,000,332
225 Plainfield, CT General Obligation - Series 1991 7.000 09/01/00 237,175
100 Plainfield, CT General Obligation - Series 1991 7.000 09/01/01 105,815
100 Plainfield, CT General Obligation - Series 1991 7.100 09/01/02 106,399
310 Plainfield, CT General Obligation - Series 1991 7.100 09/01/03 330,104
100 Plainfield, CT General Obligation - Series 1991 7.200 09/01/04 106,463
335 Plainfield, CT General Obligation - Series 1991 7.250 09/01/06 364,976
335 Plainfield, CT General Obligation - Series 1991 7.300 09/01/08 363,019
155 Plainfield, CT General Obligation - Series 1991 7.300 09/01/10 165,850
825 Plainfield, CT General Obligation - Series 1992 6.375 08/01/11 869,616
700 Torrington, CT General Obligation 6.400 05/15/11 738,080
680 Torrington, CT General Obligation 6.400 05/15/12 715,224
535 Waterbury, CT General Obligation - Series 1992 7.250 03/01/01 574,531
140 Winchester, CT General Obligation 6.750 04/15/06 156,810
140 Winchester, CT General Obligation 6.750 04/15/07 156,848
140 Winchester, CT General Obligation 6.750 04/15/08 156,919
140 Winchester, CT General Obligation 6.750 04/15/09 156,668
140 Winchester, CT General Obligation 6.750 04/15/10 156,527
725 Woodstock, CT Special Obligation Revenue - Woodstock Academy 6.900 03/01/06 783,585
Pre-refunded or Escrowed
-------------------------------------------------------------------------------------------------------------------------
2,200 Bridgeport, CT General Obligation - Series 1995 5.700 09/01/15 2,311,650
1,300 Connecticut State Health and Educational Facilities Authority Revenue -
Lutheran General Health Care - Parkside Lodges 7.375 07/01/19 1,523,704
3,255 Connecticut State Health and Educational Facilities Authority Revenue -
University of Hartford - Series C 8.000 07/01/18 3,630,725
1,250 Connecticut State Health and Educational Facilities Authority Revenue -
San Raphael Hospital - Series C 7.500 07/01/14 1,354,325
1,000 Connecticut State Health and Educational Facilities Authority Revenue -
Taft School - Series A 7.375 07/01/20 1,103,620
645 New Haven, CT General Obligation - Series 1988 7.200 10/01/07 698,470
1,130 Stratford, CT General Obligation 7.300 03/01/12 1,261,634
535 Waterbury, CT General Obligation - Series 1992 7.250 03/01/02 598,328
785 Waterbury, CT General Obligation 7.300 03/01/05 879,640
780 Waterbury, CT General Obligation - Series 1992 7.400 03/01/06 877,453
</TABLE>
Connecticut F-49 7
<PAGE>
Statement of Investments in Securities and Net Assets May 31, 1996
.................................................................................
Municipal Bonds (continued)
<TABLE>
<CAPTION>
Face
Amount Face Market
(000) Description Rate Maturity Value
Resource Recovery
---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$3,085 Connecticut State Resource Recovery Authority - Bridgeport Resco Company - Project A 7.625% 01/01/09 $ 3,212,102
170 Connecticut State Resource Recovery Authority - Bridgeport Resco Company - Project A 7.500 01/01/04 177,760
1,180 Connecticut State Resource Recovery Authority - Wallingford Project 7.125 11/15/08 1,227,460
3,300 Connecticut State Resource Recovery Authority - American Ref-Fuel Company of
Southeastern Connecticut - Series A 8.000 11/15/15 3,569,478
400 Connecticut State Resource Recovery Authority - Wallingford Project - Series 1991 6.750 11/15/03 421,240
500 Connecticut State Resource Recovery Authority - Wallingford Project - Series 1991 6.800 11/15/04 524,355
5,250 Connecticut State Resource Recovery Authority - American Ref-Fuel Project - Series 1992 A 6.450 11/15/22 5,341,612
6,465 Eastern Connecticut Resource Recovery Authority - Solid Waste Revenue -
Wheelabrator Lisbon Project - Series 1993 A 5.500 01/01/20 5,704,199
Special Tax Revenue
----------------------------------------------------------------------------------------------------------------------------
1,150 Connecticut State Special Tax Obligation Revenue Transportation Infrastructure -
Series 1992 B 6.125 09/01/12 1,197,495
3,475 Commonwealth of Puerto Rico Infrastructure Financing Authority - Series A 7.750 07/01/08 3,752,409
State/Territorial General Obligations
----------------------------------------------------------------------------------------------------------------------------
2,800 Connecticut State College Savings - Series B 0.000 12/15/11 1,139,544
1,000 Connecticut State General Obligation Capital Appreciation - College Savings
Plan - Series A 0.000 05/15/09 481,590
3,000 Connecticut State College Savings - Series 1993 A 0.000 06/15/11 1,256,760
2,000 Connecticut State General Obligation - Series 1995 B 5.375 10/01/13 1,911,880
3,000 Connecticut State General Obligation - Series 1995 B 5.375 10/01/14 2,848,860
1,400 Connecticut State General Obligation - Series 1995 B 5.375 10/01/15 1,321,936
2,350 Commonwealth of Puerto Rico Public Improvement - General Obligation - Series 1996 A 5.400 07/01/25 2,118,360
Student Loan Revenue Bonds
----------------------------------------------------------------------------------------------------------------------------
440 Connecticut State Higher Education Supplemental Loan Authority Revenue - Series A 7.000 11/15/05 467,751
4,225 Connecticut State Higher Education Supplemental Loan Authority Revenue - Series A 7.200 11/15/10 4,500,681
1,890 Connecticut State Higher Education Supplemental Loan Authority Revenue - Family
Educational Loan - Series 1994 A 6.300 11/15/10 1,914,457
1,415 Connecticut State Higher Education Supplemental Loan Authority Revenue - Family
Educational Loan - Series 1994 A 6.350 11/15/11 1,438,715
Total Investments in Securities - Municipal Bonds (cost $200,073,283) - 98.9% 207,134,067
Excess of Other Assets over Liabilities - 1.1% 2,327,792
Total Net Assets - 100.0% $209,461,859
</TABLE>
See notes to financial statements.
8 F-50 Connecticut
<PAGE>
[LOGO OF SHIP ART]
Statement of Assets and Liabilities May 31, 1996
.................................................................................
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at market value (cost $200,073,283) $207,134,067
Receivable for Fund shares sold 397,955
Interest receivable 3,284,125
Other 12,418
Total assets 210,828,565
LIABILITIES:
Bank overdraft 334
Payable for Fund shares reacquired 242,791
Distributions payable 983,056
Accrued expenses 140,525
Total liabilities 1,366,706
NET ASSETS 209,461,859
Class A:
Applicable to 19,768,778 shares of beneficial interest
issued and outstanding $202,219,158
Net asset value per share $ 10.23
Class C:
Applicable to 708,990 shares of beneficial interest issued
and outstanding $ 7,242,701
Net asset value per share $ 10.22
</TABLE>
LOGO OF SHIP ART]
Statement of Operations For the year ended May 31, 1996
.................................................................................
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME - INTEREST $ 13,204,254
EXPENSES:
Distribution fees - Class A (Note E) 818,000
Distribution fees - Class C (Note E) 62,142
Investment advisory fees (Note E) 1,058,258
Custody and accounting fees 120,470
Transfer agent's fees 116,400
Registration fees 4,414
Legal fees 5,463
Audit fees 18,300
Trustees' fees 5,856
Shareholder services fees (Note E) 16,315
Other 6,391
Advisory fees waived (Note E) (636,447)
Total expenses before credits 1,595,562
Custodian fee credit (Note B) (23,850)
Net expenses 1,571,712
Net investment income 11,632,542
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security transactions 951,483
Change in unrealized appreciation (depreciation) of
investments (3,913,226)
Net loss on investments (2,961,743)
Net increase in net assets resulting from operations $ 8,670,799
See notes to financial statements.
</TABLE>
Connecticut F-51 9
<PAGE>
[LOGO OF SHIP ART]
Statements of Changes in Net Assets
.................................................................................
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS Year Ended Year Ended
Operations: May 31, 1996 May 31, 1995
<S> <C> <C>
Net investment income $ 11,632,542 $ 11,797,430
Net realized gain (loss) on security transactions 951,483 (1,147,834)
Change in unrealized appreciation (depreciation) of
investments (3,913,226) 5,043,946
Net increase in net assets resulting from operations 8,670,799 15,693,542
Distributions to Class A shareholders:
From net investment income (11,371,201) (11,573,696)
Distributions to Class C shareholders:
From net investment income (327,137) (271,123)
Net decrease in net assets from distributions to
shareholders (11,698,338) (11,844,819)
Fund share transactions (Note C):
Proceeds from shares sold 17,698,654 18,096,796
Net asset value of shares issued in reinvestment of
distributions 6,666,728 6,902,687
Cost of shares reacquired (20,622,363) (27,068,572)
Net increase (decrease) in net assets from Fund share transactions 3,743,019 (2,069,089)
Total increase in net assets 715,480 1,779,634
NET ASSETS:
Beginning of year 208,746,379 206,966,745
End of year $209,461,859 $208,746,379
NET ASSETS CONSIST OF:
Paid-in surplus $204,040,272 $200,363,049
Accumulated net realized gain (loss) on security
transactions (1,639,197) (2,590,680)
Unrealized appreciation (depreciation) of investments 7,060,784 10,974,010
$209,461,859 $208,746,379
</TABLE>
See notes to financial statements.
10 F-52 Connecticut
<PAGE>
[LOGO OF SHIP ART]
Notes to Financial Statements
.................................................................................
A. Description of Business
The Flagship Connecticut Double Tax Exempt Fund (Fund) is a sub-trust of the
Flagship Tax Exempt Funds Trust (Trust), a Massachusetts business trust
organized on March 8, 1985. The Fund is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund commenced investment operations on July 13, 1987. On
October 4, 1993, the Fund began to offer Class C shares to the investing
public. Class A shares are sold with a front-end sales charge. Class C shares
are sold with no front-end sales charge but are assessed a contingent
deferred sales charge if redeemed within one year from the time of purchase.
Both classes of shares have identical rights and privileges except with
respect to the effect of sales charges, the distribution and/or service fees
borne by each class, expenses specific to each class, voting rights on
matters affecting a single class and the exchange privilege of each class.
Shares of beneficial interest in the Fund, which are registered under the
Securities Act of 1933, as amended, are offered to the public on a continuous
basis.
B. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund.
Estimates: The preparation of financial statements and daily calculation of
net asset value in conformity with generally accepted accounting principles
requires management to fairly value, at market, investment securities and
make estimates and assumptions regarding the reported amounts of assets and
liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. The financial
statements reflect these inherent valuations, estimates and assumptions, and
actual results could differ.
Security Valuations: Portfolio securities for which market quotations are
readily available are valued on the basis of prices provided by a pricing
service which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities
and various relationships between securities in determining the values. If
market quotations are not readily available from such pricing service,
securities are valued at fair value as determined under procedures
established by the Trustees. Short-term securities are stated at amortized
cost, which is equivalent to fair value.
The Fund must maintain a diversified investment portfolio as a registered
investment company, however, the Fund's investments are primarily in the
securities of its state. Such concentration subjects the Fund to the effects
of economic changes occurring within that state.
Federal Income Taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute to its shareholders all of its tax exempt net
investment income and net realized gains on security transactions. Therefore,
no federal income tax provision is required.
Distributions from net realized capital gains may differ for financial
statement and tax purposes primarily due to the treatment of wash sales and
post-October capital losses. The effect on dividend distributions of certain
book-to-tax timing differences is presented as excess distributions in the
statement of changes in net assets.
Security Transactions: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses
on security transactions are determined on the identified cost basis.
Interest income is recorded on the accrual basis. The Fund amortizes original
issue discounts and premiums paid on purchases of portfolio securities on the
same basis for both financial reporting and tax purposes. Market discounts,
if applicable, are recognized as ordinary income upon disposition or
maturity.
Investment Income, Expenses and Distributions: Interest income and estimated
expenses are accrued daily. Daily dividends are declared from net investment
income and paid monthly. Net realized gains from security transactions, to
the extent they exceed available capital loss carryforwards, are distributed
to shareholders at least annually.
Connecticut F-53 11
<PAGE>
Notes to Financial Statements
.................................................................................
Expense Allocation: Shared expenses incurred by the Trust are allocated among
the sub-trusts based on each sub-trust's ratio of net assets to the combined
net assets. Specifically identified direct expenses are charged to each sub-
trust as incurred. Fund expenses not specific to any class of shares are
prorated among the classes based upon the eligible net assets of each class.
Specifically identified direct expenses of each class are charged to that
class as incurred.
The Fund has entered into an agreement with the custodian, whereby it earns
custodian fee credits for temporary cash balances. These credits, which
offset custodian fees that may be charged to the Fund, are based on 80% of
the daily effective federal funds rate.
Securities Purchased on a "When-issued" Basis: The Fund may, upon adequate
segregation of securities as collateral, purchase and sell portfolio
securities on a "when-issued" basis. These securities are registered by a
municipality or government agency, but have not been issued to the public.
Delivery and payment take place after the date of the transaction and such
securities are subject to market fluctuations during this period. The current
market value of these securities is determined in the same manner as other
portfolio securities. There were no "when-issued" purchase commitments
included in the statement of investments at May 31, 1996.
C. Fund Shares
At May 31, 1996, there were an indefinite number of shares of beneficial
interest with no par value authorized for each class. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1996 May 31, 1995
-------------------------- -------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Class A:
Shares sold 1,453,108 $ 15,066,282 1,602,626 $ 15,975,568
Shares issued on reinvestment 624,317 6,491,833 678,768 6,764,804
Shares reacquired (1,889,024) (19,630,307) (2,620,302) (25,899,326)
Net increase (decrease) 188,401 $ 1,927,808 (338,908) $ (3,158,954)
Class C:
Shares sold 253,267 $ 2,632,372 210,358 $ 2,121,228
Shares issued on reinvestment 16,838 174,895 13,861 137,883
Shares reacquired (95,257) (992,056) (119,184) (1,169,246)
Net increase 174,848 $ 1,815,211 105,035 $ 1,089,865
</TABLE>
D. Purchases and Sales of Municipal Bonds
Purchases and sales of municipal bonds for the year ended May 31, 1996,
aggregated $55,060,012 and $50,457,129, respectively. At May 31, 1996, cost
for federal income tax purposes is $200,080,021 and net unrealized
appreciation aggregated $7,054,046, of which $8,434,574 related to
appreciated securities and $1,380,528 related to depreciated securities.
At May 31, 1996, the Fund has available a capital loss carryforward of
approximately $1,608,900 to offset future net capital gains expiring on May
31, 2003.
12 F-54 Connecticut
<PAGE>
Notes to Financial Statements
.................................................................................
E. Transactions with Investment Advisor and Distributor
Flagship Financial Inc. (Advisor), under the terms of an agreement which
provides for furnishing of investment advice, office space and facilities to
the Fund, receives fees computed monthly on the average daily net assets of
the Fund at an annualized rate of 1/2 of 1%. During the year ended May 31,
1996, the Advisor, at its discretion, permanently waived $636,447 of its
advisory fees. Included in accrued expenses at May 31, 1996 are accrued
advisory fees of $17,810. Also, under an agreement with the Fund, the
Advisor may subsidize certain expenses excluding advisory and distribution
fees.
The Fund has a Distribution Agreement with Flagship Funds Inc.
(Distributor). The Distributor serves as the exclusive selling agent and
distributor of the Fund's Class A and Class C shares and in that capacity
is responsible for all sales and promotional efforts including printing of
prospectuses and reports used for sales purposes. Pursuant to Rule 12b-1
under the Investment Company Act of 1940, the Fund has adopted a plan to
reimburse the Distributor for its actual expenses incurred in the
distribution and promotion of all classes of the Fund's shares. The maximum
amount payable for these expenses on an annual basis is .40% and .95% of the
Fund's average daily net assets for Class A and Class C shares,
respectively. Included in accrued expenses at May 31, 1996 are accrued
distribution fees of $68,815 and $5,760 for Class A and Class C shares,
respectively. Certain non-promotional expenses directly attributable to
current shareholders are aggregated by the Distributor and passed through to
the Fund as shareholder services fees.
In its capacity as national wholesale underwriter for the shares of the
Fund, the Distributor received commissions on sales of the Fund's Class A
shares of approximately $349,000 for the year ended May 31, 1996, of which
approximately $301,600 was paid to other dealers. For the year ended May 31,
1996, the Distributor received approximately $400 of contingent deferred
sales charges on redemptions of shares. Certain officers and trustees of the
Trust are also officers and/or directors of the Distributor and/or Advisor.
F. Line of Credit
The Trust participates in a line of credit in which a maximum amount of $30
million is provided by State Street Bank & Trust Co. The Fund may
temporarily borrow up to $10 million under the line of credit. Borrowings
are collateralized with pledged securities and are due on demand with
interest at 1% above the federal funds rate. The average daily amount of
borrowings under the line of credit during the year ended May 31, 1996 was
approximately $186,500, at a weighted average annualized interest rate of
6.63%. At May 31, 1996, the Fund had no borrowings outstanding under the
line of credit.
Connecticut F-55 13
<PAGE>
[LOGO OF SHIP ART]
Financial Highlights Selected data for each share of beneficial
interest outstanding throughout the year.
.................................................................................
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A May 31, 1996 May 31, 1995 May 31, 1994 May 31, 1993 May 31, 1992
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.38 $ 10.17 $ 10.66 $ 10.05 $ 9.84
Income from investment operations:
Net investment income 0.57 0.58 0.59 0.61 0.63
Net realized and unrealized gain (loss) on
securities (0.14) 0.22 (0.39) 0.61 0.21
Total from investment operations 0.43 0.80 0.20 1.22 0.84
Less distributions:
From net investment income (0.58) (0.59) (0.60) (0.61) (0.63)
From net realized capital gains (0.01)
In excess of net realized capital gains (0.08)
Total distributions (0.58) (0.59) (0.69) (0.61) (0.63)
Net asset value, end of year $ 10.23 $ 10.38 $ 10.17 $ 10.66 $ 10.05
Total return/(a)/ 4.18% 8.21% 1.70% 12.48% 8.81%
Ratios to average net assets:
Actual net of waivers and
reimbursements:
Expenses/(b)/ 0.74% 0.73% 0.65% 0.66% 0.65%
Net investment income 5.52% 5.84% 5.52% 5.88% 6.30%
Assuming credits and no
waivers or reimbursements:
Expenses 1.03% 1.03% 1.03% 1.04% 1.05%
Net investment income 5.23% 5.54% 5.14% 5.50% 5.90%
Net assets at end of year (000's) $202,219 $203,210 $202,607 $184,743 $141,215
Portfolio turnover rate 24.22% 25.01% 30.19% 19.31% 18.16%
</TABLE>
(a) The total returns shown do not include the effect of applicable front-end
sales charge.
(b) During the year ended May 31, 1996, the Fund has earned credits from the
custodian which reduce service fees incurred. If included, the ratio of
expenses to average net assets would be 0.73%; prior year numbers have not
been restated to reflect these credits.
14 F-56 Connecticut
<PAGE>
[LOGO OF SHIP ART] Selected data for each share of beneficial
Financial Highlights interest outstanding throughout the period.
.................................................................................
<TABLE>
<CAPTION>
Period From
Year Ended Year Ended October 4, 1993 to
Class C May 31, 1996 May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.36 $10.16 $11.06
Income from investment operations:
Net investment income 0.52 0.53 0.33
Net realized and unrealized gain
(loss) on securities (0.14) 0.20 (0.84)
Total from investment operations 0.38 0.73 (0.51)
Less distributions:
From net investment income (0.52) (0.53) (0.33)
From net realized capital gains (0.01)
In excess of net realized capital gains (0.05)
Total distributions (0.52) (0.53) (0.39)
Net asset value, end of period $10.22 $10.36 $10.16
Total return/(a)/ 3.71% 7.53% (6.48%)
Ratios to average net assets
(annualized where appropriate):
Actual net of waivers and
reimbursements:
Expenses/(b)/ 1.29% 1.28% 1.22%
Net investment income 4.96% 5.27% 4.77%
Assuming credits and no
waivers or reimbursements:
Expenses 1.58% 1.58% 1.77%
Net investment income 4.67% 4.97% 4.22%
Net assets at end of period (000's) $7,243 $5,536 $4,360
Portfolio turnover rate 24.22% 25.01% 30.19%
</TABLE>
(a) The total returns shown do not include the effect of applicable
contingent deferred sales charge and are annualized where appropriate.
(b) During the year ended May 31, 1996, the Fund has earned credits
from the custodian which reduce service fees incurred. If included, the
ratio of expenses to average net assets would be 1.28%; prior period numbers
have not been restated to reflect these credits.
Connecticut F-57 15
<PAGE>
[LOGO OF SHIP ART]
Independent Auditors' Report
.................................................................................
TO THE SHAREHOLDERS AND TRUSTEES
FLAGSHIP CONNECTICUT
DOUBLE TAX EXEMPT FUND
We have audited the accompanying statement of assets and liabilities,
including the statement of investments in securities and net assets, of the
Flagship Connecticut Double Tax Exempt Fund as of May 31, 1996, the related
statement of operations for the year then ended, and the statements of changes
in net assets and the financial highlights for each of the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the Fund's custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the Flagship
Connecticut Double Tax Exempt Fund at May 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
July 3, 1996
16 F-58 Connecticut
<PAGE>
PART C--OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements:
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information through incorporation
by reference to each Fund's most recent Annual and Semi-Annual Reports:
Portfolio of Investments
Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Report of Independent Public Accountants
(b) Exhibits:
<TABLE>
<C> <S>
1(a). Declaration of Trust of Registrant.
1(b). Amended and Restated Establishment and Designation of Series of
Shares of Beneficial Interest dated October 11, 1996.
1(c). Certificate for the Establishment and Designation of Classes dated
July 10, 1996.
2. By-Laws of Registrant.
3. Not applicable.
4. Specimen certificates of Shares of each Fund.
5. Form of Management Agreement between Registrant and Nuveen Advisory
Corp.
6. Form of Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated.
7. Not applicable.
8. Form of Custodian Agreement between Registrant and Chase Manhattan
Bank.
9(a). Form of Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company.
9(b). Form of Transfer Agency Agreement between Registrant and Shareholder
Services, Inc.
10. Opinion of Fried, Frank, Harris, Shriver & Jacobson.*
11(a). Consent of Arthur Andersen LLP, Independent Public Accountants.
11(b). Consent of Deloitte & Touche LLP, Independent Public Accountants.*
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Plan of Distribution and Service Pursuant to Rule 12b-1 for the Class
A Shares, Class B Shares and Class C Shares of each Fund.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
18. Multi-Class Plan Adopted Pursuant to Rule 18f-3.
99(a). Original Powers of Attorney for the Trustees authorizing, among oth-
ers, James J. Wesolowski and Gifford R. Zimmerman to execute the Reg-
istration Statement.
99(b). Certified copy of Resolution of Board of Trustees authorizing the
signing of the names of trustees and officers on the Registrant's
Registration Statement pursuant to power of attorney.
</TABLE>
- --------
* To be filed by pre-effective amendment.
C- 1
<PAGE>
ITEM 25: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26: NUMBER OF HOLDERS OF SECURITIES
At January 3, 1997:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SERIES RECORD HOLDERS
--------------- --------------
Nuveen Flagship New York Municipal Bond Fund
<S> <C>
Class A Shares......................................... 1,972
Class B Shares......................................... 0
Class C Shares......................................... 84
Class R Shares......................................... 5,026
Nuveen New York Insured Municipal Bond Fund
Class A Shares......................................... 1,569
Class B Shares......................................... 0
Class C Shares......................................... 77
Class R Shares......................................... 9,229
Nuveen Flagship New Jersey Municipal Bond Fund
Class A Shares......................................... 1,309
Class B Shares......................................... 0
Class C Shares......................................... 105
Class R Shares......................................... 1,998
Nuveen Flagship New Jersey Intermediate Municipal Bond
Fund
Class A Shares......................................... 271
Class C Shares......................................... 0
Class R Shares......................................... 0
Nuveen California Municipal Bond Fund
Class A Shares......................................... 829
Class B Shares......................................... 0
Class C Shares......................................... 37
Class R Shares......................................... 5,097
Nuveen California Insured Municipal Bond Fund
Class A Shares......................................... 1,004
Class B Shares......................................... 0
Class C Shares......................................... 62
Class R Shares......................................... 4,519
Nuveen Flagship California Intermediate Municipal Bond
Fund
Class A Shares......................................... 0
Class C Shares......................................... 0
Class R Shares......................................... 0
Nuveen Flagship Connecticut Municipal Bond Fund
Class A Shares......................................... 3,708
Class B Shares......................................... 0
Class C Shares......................................... 174
Class R Shares......................................... 0
Nuveen Massachusetts Municipal Bond Fund
Class A Shares......................................... 512
Class B Shares......................................... 0
Class C Shares......................................... 36
Class R Shares......................................... 2,578
Nuveen Massachusetts Insured Municipal Bond Fund
Class A Shares......................................... 413
Class B Shares......................................... 0
Class C Shares......................................... 25
Class R Shares......................................... 1,938
</TABLE>
C-2
<PAGE>
ITEM 27: INDEMNIFICATION
Section 4 of Article XII of Registrant's Amended and Restated Declaration of
Trust provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being or
having been such a Trustee, director, officer, employee or agent and against
amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Covered Person may now or hereafter be entitled,
shall continue as to a person who has ceased to be such a Covered Person and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
----------------
The trustees and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith,
C-3
<PAGE>
gross negligence and willful disregard of duty (i.e., where the insured did not
act in good faith for a purpose he or she reasonably believed to be in the best
interest of Registrant or where he or she shall have had reasonable cause to
believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
ITEM 28: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Flagship
Admiral Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free
Money Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., and Nuveen
Tax-Free Reserves, Inc. It also serves as investment adviser to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen
Municipal Market Opportunity Fund, Inc., Nuveen California Municipal Market
Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen
California Investment Quality Municipal Fund, Inc., Nuveen New York Investment
Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment
Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal
Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select
Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund,
Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal
Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income
Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen
Premier Insured Municipal Income Fund, Inc. Nuveen Premium Income Municipal
Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc.,
Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income
Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, and Nuveen Insured Premium Income Municipal Fund 2. Nuveen
Advisory Corp. has no other clients or business at the present time. The
principal business address for all of these investment companies is 333 West
Wacker Drive, Chicago, Illinois 60606.
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than Timothy R.
Schwertfeger and Anthony T. Dean, of the investment adviser has engaged during
the last two years for his account or in the capacity of director, officer,
employee, partner or trustee, see the descriptions under "Management" in the
Statement of Additional Information.
Timothy R. Schwertfeger is Chairman and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Schwertfeger has, during the last two years, been
Chairman and formerly Executive Vice President and Director of the John Nuveen
Company, John Nuveen & Co. Incorporated, and Nuveen Institutional Advisory
Corp. Anthony T. Dean is President and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Dean has, during the last two years, been Executive
Vice President and Director of The John Nuveen Company and John Nuveen & Co.
Incorporated; and Director of Nuveen Institutional Advisory Corp.
C-4
<PAGE>
ITEM 29: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co., Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies:Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship
Municipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund Inc., Nuveen Tax-Free
Reserves, Inc., Flagship Admiral Funds Inc., and Nuveen Investment Trust.
Nuveen also acts as depositor and principal underwriter of the Nuveen Tax-
Exempt Unit Trust, a registered unit investment trust. Nuveen has also served
or is serving as co-managing underwriter to the following closed-end management
type investment companies: Nuveen Municipal Value Fund, Inc., Nuveen California
Municipal Value Fund, Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen
Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund, Inc., Nuveen
Performance Plus Municipal Fund, Inc., Nuveen California Performance Plus
Municipal Fund, Inc., Nuveen New York Performance Plus Municipal Fund, Inc.,
Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal Market Opportunity
Fund, Inc., Nuveen California Municipal Market Opportunity Fund, Inc., Nuveen
Investment Quality Municipal Fund, Inc., Nuveen California Investment Quality
Municipal Fund, Inc., Nuveen New York Investment Quality Municipal Fund, Inc.,
Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida Investment Quality
Municipal Fund, Nuveen New Jersey Investment Quality Municipal Fund, Inc.,
Nuveen Pennsylvania Investment Quality Municipal Fund, Nuveen Select Quality
Municipal Fund, Inc., Nuveen California Select Quality Municipal Fund, Inc.,
Nuveen New York Select Quality Municipal Fund, Inc., Nuveen Quality Income
Municipal Fund, Inc., Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen
Florida Quality Income Municipal Fund, Nuveen Michigan Quality Income Municipal
Fund, Inc., Nuveen Ohio Quality Income Municipal Fund, Inc., Nuveen Texas
Quality Income Municipal Fund, Nuveen California Quality Income Municipal Fund,
Inc., Nuveen New York Quality Income Municipal Fund, Inc., Nuveen Premier
Municipal Income Fund, Inc., Nuveen Premier Insured Municipal Income Fund,
Inc., Nuveen Select Tax-Free Income Portfolio, Nuveen Premium Income Municipal
Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc.,
Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income
Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select
Tax-Free Income Portfolio 2, Nuveen Insured California Select Tax-Free Income
Portfolio, Nuveen Insured New York Select Tax-Free Income Portfolio and Nuveen
Select Tax-Free Income Portfolio 3.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- --------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger Chairman of the Board, Chairman of the Board
333 West Wacker Drive Chief Executive Officer and Trustee
Chicago, IL 60606
Anthony T. Dean President President and Trustee
333 West Wacker Drive
Chicago, IL 60606
Bruce P. Bedford Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
John P. Amboian Executive Vice President None
333 West Wacker Drive and Chief Financial Officer
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
Richard P. Davis Vice President None
One South Main Street
Dayton, OH 45402
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITIONS AND OFFICES OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ----------------------------------------------------------------------------------
<S> <C> <C>
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President None
333 West Wacker Drive
Chicago, IL 60606
Robert D. Freeland Vice President None
333 West Wacker Drive
Chicago, IL 60606
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Robert B. Kuppenheimer Vice President None
19900 MacArthur Blvd.
Irvine, CA 92612
Larry W. Martin Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Assistant Secretary
Chicago, IL 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
O. Walter Renfftlen Vice President Vice President and
333 West Wacker Drive and Controller Controller
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Assistant Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
ITEM 30: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
C-6
<PAGE>
The Chase Manhattan Bank, N.A., 770 Broadway, New York, New York 10003
maintains all general and subsidiary ledgers, journals, trial balances, records
of all portfolio purchases and sales, and all other required records not
maintained by Nuveen Advisory Corp., Shareholder Services, Inc. or Boston
Financial.
Shareholder Services, Inc., P.O. Box 5330, Denver, Colorado 80217-5330 and
Boston Financial Data Services, 225 Franklin Street, Boston, Massachusetts
02106 maintain all the required records in their capacity as transfer, dividend
paying, and shareholder service agents for the Funds.
ITEM 31: MANAGEMENT SERVICES
Not applicable.
ITEM 32: UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest Annual Report to Sharehold-
ers upon request and without charge.
(d) The Registrant agrees to call a meeting of shareholders for the purpose of
voting upon the question of the removal of any trustee or trustees when re-
quested to do so in writing by the record holders of at least 10% of the Reg-
istrant's outstanding shares and to assist the shareholders in communications
with other shareholders as required by section 16(c) of the Act.
C-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT THIS REGISTRATION STATEMENT
MEETS ALL THE REQUIREMENTS FOR EFFECTIVENESS UNDER PARAGRAPH (B) OF RULE 485
UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 10TH DAY OF
JANUARY, 1997.
NUVEEN FLAGSHIP MULTISTATE TRUST II
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ O. Walter Renfftlen
-------------------------------
O. Walter Renfftlen Vice President and January 10, 1997
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board |
and Trustee (Principal |
Executive Officer) |
| /s/ Gifford R. Zimmerman
Anthony T. Dean President and Trustee | By__________________________
| Gifford R. Zimmerman
Lawrence H. Brown Trustee | Attorney-in-Fact
|
Anne E. Impellizzeri Trustee |
| January 10, 1997
Margaret K. Rosenheim Trustee |
|
Peter R. Sawers Trustee |
Robert P. Bremner Trustee
William J. Schneider Trustee
</TABLE>
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, JAMES J. WESOLOWSKI
AND GIFFORD R. ZIMMERMAN TO EXECUTE THIS REGISTRATION STATEMENT, AND
AMENDMENTS THERETO, FOR EACH OF THE OFFICERS AND TRUSTEES OF REGISTRANT ON
WHOSE BEHALF THIS REGISTRATION STATEMENT IS FILED, HAS BEEN EXECUTED AND IS
INCORPORATED BY REFERENCE TO THIS REGISTRATION STATEMENT.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
1(a). Declaration of Trust of Registrant.
1(b). Amended and Restated Establishment and Designation of
Series of Shares of Beneficial Interest dated October
11, 1996.
1(c). Certificate for the Establishment and Designation of
Classes dated July 10, 1996.
2. By-Laws of Registrant.
3. Not applicable.
4. Specimen certificates of Shares of each Fund.
5. Form of Management Agreement between Registrant and
Nuveen Advisory Corp.
6. Form of Distribution Agreement between Registrant and
John Nuveen & Co. Incorporated.
7. Not applicable.
8. Form of Custodian Agreement between Registrant and
Chase Manhattan Bank.
9(a). Form of Transfer Agency and Service Agreement between
Registrant and State Street Bank and Trust Company.
9(b). Form of Transfer Agency Agreement between Registrant
and Shareholder Services, Inc.
10. Opinion of Fried, Frank, Harris, Shriver & Jacobson.*
11(a). Consent of Arthur Andersen LLP, Independent Public
Accountants.
11(b). Consent of Delotte & Touche LLP, Independent Public
Accountants.*
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Plan of Distribution and Service Pursuant to Rule
12b-1 for the Class A Shares, Class B Shares and
Class C Shares of each Fund.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
18. Multi-Class Plan Adopted Pursuant to Rule 18f-3.
99(a). Original Powers of Attorney for the Trustees autho-
rizing, among others, James J. Wesolowski and Gifford
R. Zimmerman to execute the Registration Statement.
99(b). Certified copy of Resolution of Board of Trustees au-
thorizing the signing of the names of trustees and
officers on the Registrant's Registration Statement
pursuant to power of attorney.
</TABLE>
- --------
* To be filed by pre-effective amendment.
<PAGE>
EXHIBIT 4
Number Class [ ] Shares
Nuveen Flagship Multistate Trust II
[Name of Series]
Organized Under the Laws of the Commonwealth of Massachusetts
This is to certify that See Reverse for
Certain Definitions
is the owner of
CUSIP [ ]
Fully Paid and Non-Assessable Class [ ] Shares
___________________________________________________________________________
of beneficial interest, with the par value of one-cent ($.01) each, of the [Name
of Series] series of the Nuveen Flagship Multistate Trust II (herein called the
"Trust") transferable on the books of the Trust by the holder hereof in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed. The shares represented by this certificate are issued and held subject
to all of the provisions of the Declaration of Trust establishing the Trust as a
Massachusetts business trust and any amendments thereto and any designation of
classes, and the By-Laws of the Trust, and any amendments thereto, copies of
which are on file with the Transfer Agent, to all of which the holder by
acceptance hereof expressly assents. This certificate is executed on behalf of
the Trust by the officers as officers and not individually and the obligations
hereof are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of the Trust.
This certificate is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACsimile signatures of its duly authorized officers.
Dated:
Nuveen Flagship Multistate Trust II
Assistant Secretary, Nuveen Flagship Chairman Nuveen Flagship Multistate
Multistate Trust II Trust II
<PAGE>
Nuveen Flagship Multistate Trust II
[Name of Series]
Nuveen Flagship Multistate Trust II (the "Trust") will furnish to any
shareholder, upon request and without charge, a full statement of the
designations, preferences, limitation as to dividends, qualifications and terms
and conditions of redemption and relative rights and preferences of the shares
of each class or series of the Trust authorized to be issued, so far as they
have been determined, and the authority of the Board of Trustees to determine
the relative rights and preferences of subsequent classes or series. Any such
request should be addressed to the Secretary of the Trust.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT - ___________ Custodian ____________ under Uniform gifts
(Cust) (Minor)
to Minors Act ____________
(State)
Additional abbreviations may also be used though not in the above list.
__________________________________________________________________________
For value received,____________ hereby sell, assign and transfer unto
_____________________________________
Please insert social security or other identifying number of assignee
___________________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
_____________________________________________________________________________
___________________________________________________________________ Shares of
beneficial interest represented by the within certificate, and do hereby
irrevocably constitute and appoint _________________________________________
________________________________________________________________Attorney to
<PAGE>
transfer the said shares on the books of the within-named Trust with full power
of substitution in the premises.
Dated, _________________________ NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the certificate in every
particular, without alteration or
enlargement or any change whatever.
Owner___________________________ The signature(s) must be guaranteed by one
of the following entities: U.S. bank,
trust company, credit union, savings
association, or foreign bank having a U.S.
correspondent bank: a U.S. registered
securities dealer or broker, municipal
securities dealer or broker, or government
securities dealer or broker; or a national
securities exchange, registered securities
association or clearing agency.
Signature of Co-Owner, if any
_________________________________
Signature(s) guaranteed by:
________________________________________________________________________________
PLEASE NOTE: This document contains a watermark when viewed at an angle. It is
invalid without this watermark: NUVEEN
________________________________________________________________________________
This Space Must Not Be Covered In Any Way
<PAGE>
EXHIBIT 5
INVESTMENT MANAGEMENT AGREEMENT
-------------------------------
AGREEMENT made as of the 1st day of February, l997, by and between NUVEEN
FLAGSHIP MULTISTATE TRUST II, a Massachusetts business trust (the "Fund"), and
NUVEEN ADVISORY CORP., a Delaware corporation (the "Adviser").
W I T N E S S E T H
- - - - - - - - - -
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser for,
and to manage the investment and reinvestment of the assets of each of the
Fund's series as set forth on Exhibit A attached hereto (the "Portfolios") or as
may exist from time to time in accordance with the Fund's investment objective
and policies and limitations relating to such Portfolio, and to administer the
Fund's affairs to the extent requested by and subject to the supervision of the
Board of Trustees of the Fund for the period and upon the terms herein set
forth. The investment of the assets of each Portfolio shall be subject to the
Fund's policies, restrictions and limitations with respect to securities
investments as set forth in the Fund's registration statement on Form N-1A under
the Securities Act of 1933 and the Investment Company Act of l940 covering the
Fund's Portfolios' shares of beneficial interest, including the Prospectus and
Statement of Additional Information forming a part thereof, all as filed with
the Securities and Exchange Commission and as from time to time amended, and all
applicable laws and the
<PAGE>
regulations of the Securities and Exchange Commission relating to the management
of registered open-end, management investment companies.
The Adviser accepts such employment and agrees during such period to render such
services, to furnish office facilities and equipment and clerical, bookkeeping
and administrative services (other than such services, if any, provided by the
Fund's custodian, transfer agent and shareholder service agent, and the like)
for the Fund, to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions,
and to assume the obligations herein set forth for the compensation herein
provided. The Adviser shall, for all purposes herein provided, be deemed to be
an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for nor represent the Fund in any
way, nor otherwise be deemed an agent of the Fund.
2. For the services and facilities described in Section l, the Fund will pay to
the Adviser, at the end of each calendar month, an investment management fee
related to each of the Fund's Portfolios. For each Portfolio, calculated
separately, the fees shall be computed at the rate of:
RATE NET ASSETS
------ ----------
.5500% For the first $125 million
.5375% For the next $125 million
.5250% For the next $250 million
.5125% For the next $500 million
.5000% For the next $1 billion
.4750% For assets over $2 billion
2
<PAGE>
For the month and year in which this Agreement becomes effective, or terminates,
and for any month and year in which a Portfolio is added or eliminated from the
Fund, there shall be an appropriate proration on the basis of the number of days
that the Agreement shall have been in effect, or the Portfolio shall have
existed, during the month and year, respectively. The services of the Adviser
to the Fund under this Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services or other services to others so long as
its services hereunder are not impaired thereby.
3. In addition to the services and facilities described in Section 1, the
Adviser shall assume and pay, but only to the extent hereinafter provided, the
following expenses related to the Nuveen California Municipal Bond Fund, Nuveen
California Insured Municipal Bond Fund, Nuveen Massachusetts Municipal Bond
Fund, Nuveen Massachusetts Insured Municipal Bond Fund, Nuveen Flagship New York
Municipal Bond Fund and Nuveen New York Insured Municipal Bond Fund Portfolios
only: (x) any expenses for services rendered by a custodian for the safekeeping
of those Portfolio's securities or property, for keeping its books of account,
for calculating the net asset value of the Portfolios as provided in the
Declaration of Trust of the Fund, and any other charges of the custodian; and
(y) the cost and expenses of the Portfolios; operations, including compensation
of the trustees, transfer, dividend disbursing and shareholder service agent
expenses, legal fees, expenses of independent accountants, costs of share
certificates, expenses of preparing, printing and distributing reports to
shareholders and governmental agencies, and all fees payable to Federal, State,
or other governmental agencies on account of the registration of securities
issued by the Portfolios, filing of corporate
3
<PAGE>
documents or otherwise. Nothwithstanding the foregoing, the Adviser shall not be
obligated to assume or pay interest, taxes, fees incurred in acquiring and
disposing of portfolio securities or extraordinary expenses of the Portfolios.
The Portfolios shall not incur any obligation for management or administrative
expenses which the Portfolio intends the Adviser to assume and pay hereunder
without first obtaining the written approval of the Adviser.
The foregoing enumerated expenses for the Nuveen California Municipal Bond
Fund, Nuveen California Insured Municipal Bond Fund, Nuveen Massachusetts
Municipal Bond Fund, Nuveen Massachusetts Insured Municipal Bond Fund, Nuveen
Flagship New York Municipal Bond Fund and Nuveen New York Insured Municipal Bond
Fund Portfolios are hereby assumed by the Adviser to the extent they, together
with the Adviser's fee payable hereunder (but excluding interest, taxes, fees
incurred in acquiring and disposing of portfolio securities and extraordinary
expenses), exceed during any fiscal year: (a) .75 of 1% of each Portfolio's
average net assets for such year for Nuveen California Municipal Bond Fund,
Nuveen Massachusetts Municipal Bond Fund and Nuveen Flagship New York Municipal
Bond Fund; or (b) .975 of 1% of each Portfolio's average net assets for such
year for Nuveen California Insured Municipal Bond Fund, Nuveen Massachusetts
Insured Municipal Bond Fund and Nuveen New York Insured Municipal Bond Fund. To
the extent they do not exceed such percentages, such expenses shall be properly
chargeable to those Portfolios. If, at the end of any month, the expenses of the
Portfolios properly chargeable to the income account on a year-to-date basis
shall exceed the appropriate percentage of average net assets, the payment to
the Adviser for that month shall be reduced and, if necessary, the Adviser shall
assume and
4
<PAGE>
pay expenses pursuant hereto so that the total year-to-date net expense will not
exceed such percentage. As of the end of the Portfolios' fiscal year the
foregoing computation and assumption of expenses shall be readjusted, if
necessary, so that the expenses assumed and paid by the Adviser, if any, are
such, and the aggregate compensation payable to the Adviser related to each
Portfolio for the year, (otherwise equal to the percentage set forth in Section
2 hereof of the average net asset value as determined and described herein
throughout the fiscal year) is diminished as may be necessary, so that the total
amount of expenses of each Portfolio borne by the Fund shall not exceed the
applicable expense limitation.
The net asset value of each Portfolio shall be calculated as provided in the
Declaration of Trust of the Fund. On each day when net asset value is not
calculated, the net asset value of a share of beneficial interest of a Portfolio
shall be deemed to be the net asset value of such share as of the close of
business on the last day on which such calculation was made for the purpose of
the foregoing computations.
4. Regardless of any of the above provisions, the Adviser guarantees that the
total expenses of each Portfolio in any fiscal year, exclusive of taxes,
interest, brokerage commissions, and extraordinary expenses such as litigation
costs, shall not exceed, and the Adviser undertakes to pay or refund to the
Portfolio any amount up to but not greater than the aggregate fees received by
the Adviser under this Agreement for such fiscal year, the limitation imposed by
any jurisdiction in which the Fund continues to offer and sell shares of the
Portfolio after exceeding such limitation. Except as otherwise agreed to by the
Fund or the Adviser or unless otherwise
5
<PAGE>
required by the law or regulation of any state, any reimbursement by the Adviser
to a Portfolio under this section shall not exceed the management fee payable to
the Adviser by a Portfolio under this Agreement.
5. The Adviser shall arrange for officers or employees of the Adviser to
serve, without compensation from the Fund, as trustees, officers or agents of
the Fund, if duly elected or appointed to such positions, and subject to their
individual consent and to any limitations imposed by law.
6. Subject to applicable statutes and regulations, it is understood that
officers, trustees, or agents of the Fund are, or may be, interested in the
Adviser as officers, directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Adviser may be interested in
the Fund otherwise than as trustees, officers or agents.
7. The Adviser shall not be liable for any loss sustained by reason of the
purchase, sale or retention of any security, whether or not such purchase, sale
or retention shall have been based upon the investigation and research made by
any other individual, firm or corporation, if such recommendation shall have
been selected with due care and in good faith, except loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the Adviser
in the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
6
<PAGE>
8. The Adviser currently manages other investment accounts and funds,
including those with investment objectives similar to the Fund, and reserves the
right to manage other such accounts and funds in the future. Securities
considered as investments for a Portfolio of the Fund may also be appropriate
for other Portfolios or for other investment accounts and funds that may be
managed by the Adviser. Subject to applicable laws and regulations, the Adviser
will attempt to allocate equitably portfolio transactions among the Fund's
Portfolios and the portfolios of its other investment accounts and funds
purchasing securities whenever decisions are made to purchase or sell securities
by a Portfolio and another fund's portfolio or one or more of such other
accounts or funds simultaneously. In making such allocations, the main factors
to be considered by the Adviser will be the respective investment objectives of
the Fund Portfolio or Portfolios purchasing such securities and such other
accounts and funds, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Fund
Portfolios and such other accounts and funds, the size of investment commitments
generally held by the Fund Portfolios and such accounts and funds, and the
opinions of the persons responsible for recommending investments to the Fund and
such other accounts and funds.
9. This Agreement shall continue in effect until August 1, 1997, unless and
until terminated by either party as hereinafter provided, and shall continue in
force from year to year thereafter, but only as long as such continuance is
specifically approved, at least annually, in the manner required by the
Investment Company Act of l940.
7
<PAGE>
This Agreement shall automatically terminate in the event of its assignment, and
may be terminated at any time without the payment of any penalty by the Fund or
by the Adviser upon sixty (60) days' written notice to the other party. The
Fund may effect termination by action of the Board of Trustees, or, with respect
to any Fund Portfolio, by vote of a majority of the outstanding voting
securities of that Portfolio, accompanied by appropriate notice.
This Agreement may be terminated, at any time, without the payment of any
penalty, by the Board of Trustees of the Fund, or, with respect to any Fund
Portfolio, by vote of a majority of the outstanding voting securities of that
Portfolio, in the event that it shall have been established by a court of
competent jurisdiction that the Adviser, or any officer or director of the
Adviser, has taken any action which results in a breach of the covenants of the
Adviser set forth herein.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation, described in Section
2, earned prior to such termination.
10. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule, or otherwise, the remainder shall not be thereby
affected.
8
<PAGE>
11. The Adviser and its affiliates reserve the right to grant, at any time, the
use of the name "Nuveen" or the name "Flagship", or any approximation or
abbreviation thereof, to any other investment company or business enterprise.
Upon termination of this Agreement by either party, or by its terms, the Fund
shall thereafter refrain from using any name of the Fund which includes "Nuveen"
or "Flagship" or any approximation or abbreviation thereof, or is sufficiently
similar to such name as to be likely to cause confusion with such name, and
shall not allude in any public statement or advertisement to the former
association.
12. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for receipt of such notice.
13. The Fund's Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts. This Agreement is executed on behalf of the Fund
by the Fund's officers as officers and not individually and the obligations
imposed upon the Fund by this Agreement are not binding upon any of the Fund's
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Fund.
9
<PAGE>
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year above written.
NUVEEN FLAGSHIP MULTISTATE TRUST II
by: ________________________________________
Vice President
Attest: __________________________________
Assistant Secretary
NUVEEN ADVISORY CORP.
by: ________________________________________
Vice President
Attest: __________________________________
Assistant Secretary
10
<PAGE>
Exhibit A
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
11
<PAGE>
EXHIBIT 6
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made as of the 1st day of February, l997 between NUVEEN
FLAGSHIP MULTISTATE TRUST II, a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Fund"), and JOHN NUVEEN & CO. INCORPORATED,
a Delaware corporation (the "Underwriter").
W I T N E S S E T H
- - - - - - - - - -
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of shares of beneficial interest, par value $.0l per share,
including such series or classes of shares as may now or hereafter be authorized
(the "Shares"), in jurisdictions wherein Shares may legally be offered for sale;
provided, however, that the Fund, in its absolute discretion, may: (a) issue or
sell Shares directly to holders of Shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of dividends or distributions, or otherwise; and (b) issue or
sell Shares at net asset value in connection with merger or consolidation with,
or acquisition of the assets of, other investment companies or similar
companies.
2. The Underwriter hereby accepts appointment as agent for the distribution of
the Shares and agrees that it will use its best efforts to sell such part of the
authorized Shares remaining unissued as from time to time shall be effectively
registered under the Securities Act of l933 ("Securities Act"), at prices
determined as hereinafter provided and on terms hereinafter set forth, all
subject to applicable Federal and State laws and regulations and to the
Declaration of Trust of the Fund.
3. The Fund agrees that it will use its best efforts to keep effectively
registered under the Securities Act for sale, as herein contemplated, such
Shares as the Underwriter shall reasonably request and as the Securities and
Exchange Commission shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Fund may terminate, suspend,
or withdraw the offering of the Shares, or Shares of any series or class,
whenever, in its sole discretion, it deems such action to be desirable.
5. The Underwriter shall sell Shares to, or through, brokers, dealers, banks or
other qualified financial intermediaries (hereinafter referred to as "dealers"),
or others, in such manner not inconsistent with the provisions hereof and the
then effective Registration Statement of the Fund under the Securities Act (and
related Prospectus and Statement of Additional Information) as the Underwriter
may determine from time to time, provided that no dealer, or other person, shall
be appointed nor authorized to act as agent of the Fund without the prior
consent of the Fund. The Underwriter shall have the right to enter into
agreements with brokers, dealers and banks (referred to herein as "dealers") of
its choice for the sale of Shares and fix therein the portion of
<PAGE>
the sales charge which may be allocated to such dealers; provided that the Fund
shall approve the form of such agreements and shall evidence such approval by
filing said form and any amendments thereto as attachments to this Agreement,
which shall be filed as an exhibit to the Fund's currently effective
registration statement under the Securities Act. Shares sold to dealers shall be
for resale by such dealers only at the public offering price(s) set forth in the
Fund's then current Prospectus. The current forms of such agreements are
attached hereto as Exhibits 1, 2 and 3.
6. Shares offered for sale, or sold by the Underwriter, shall be so offered or
sold at a price per Share determined in accordance with the then current
Prospectus relating to the sale of Shares except as departure from such prices
shall be permitted by the rules and regulations of the Securities and Exchange
Commission. Any public offering price shall be the net asset value per Share
plus a sales charge of not more than 4.75% of such public offering price.
Shares may be sold at net asset value without a sales charge to such class or
classes of investors or in such class or classes of transactions as may be
permitted under applicable rules of the Securities and Exchange Commission and
as described in the then current Prospectus of the Fund. The net asset value
per Share of each series or class shall be calculated in accordance with the
Declaration of Trust of the Fund and shall be determined in the manner, and at
the time, set forth in the then current Prospectus of the Fund relating to such
Shares.
7. The price the Fund shall receive for all Shares purchased from the Fund
shall be the net asset value used in determining the public offering price
applicable to the sale of such Shares. The excess, if any, of the sales price
over the net asset value of Shares sold by the Underwriter as agent shall be
retained by the Underwriter as a commission for its services hereunder. Out of
such commission, the Underwriter may allow commissions or concessions to dealers
in such amounts as the Underwriter shall determine from time to time. Except as
may be otherwise determined by the Underwriter and the Fund from time to time,
such commissions or concessions shall be uniform to all dealers.
8. The Underwriter shall issue and deliver, or cause to be issued and
delivered, on behalf of the Fund such confirmations of sales made by it as
agent, pursuant to this Agreement, as may be required. At, or prior to, the
time of issuance of Shares, the Underwriter will pay, or cause to be paid, to
the Fund the amount due the Fund for the sale of such Shares. Certificates
shall be issued, or Shares registered on the transfer books of the Fund, in such
names and denominations as the Underwriter may specify.
9. The Fund will execute any and all documents, and furnish any and all
information, which may be reasonably necessary in connection with the
qualification of the Shares for sale (including the qualification of the Fund as
a dealer, where necessary or advisable) in such states as the Underwriter may
reasonably request (it being understood that the Fund shall not be required,
without its consent, to comply with any requirement which, in its opinion, is
unduly burdensome).
2
<PAGE>
l0. The Fund will furnish to the Underwriter, from time to time, such
information with respect to the Fund and the Shares as the Underwriter may
reasonably request for use in connection with the sale of Shares. The
Underwriter agrees that it will not use or distribute, nor will it authorize
dealers or others to use, distribute or disseminate, in connection with the sale
of such Shares, any statements other than those contained in the Fund's current
Prospectus and Statement of Additional Information, except such supplemental
literature or advertising as shall be lawful under Federal and State securities
laws and regulations, and that it will furnish the Fund with copies of all such
material.
ll. The Underwriter shall order Shares from the Fund only to the extent that it
shall have received purchase orders therefor. The Underwriter will not make,
nor authorize any dealers or others, to make: (a) any short sale of Shares; or
(b) any sale of Shares to any officer or trustee of the Fund, nor to any officer
or trustee of the Underwriter, or of any corporation or association furnishing
investment advisory, managerial, or supervisory services to the Fund, nor to any
such corporation or association, unless such sales are made in accordance with
the then current Prospectus relating to the sale of such Shares.
l2. In selling Shares for the account of the Fund, the Underwriter will in all
respects conform to the requirements of all Federal and State laws and the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
relating to such sales, and will indemnify and save harmless the Fund from any
damage or expense on account of any wrongful act by the Underwriter or any
employee, representative, or agent of the Underwriter. The Underwriter will
observe and be bound by all the provisions of the Declaration of Trust of the
Fund (and of any fundamental policies adopted by the Fund pursuant to the
Investment Company Act of l940, notice of which shall have been given by the
Fund to the Underwriter) which at the time in any way require, limit, restrict,
prohibit or otherwise regulate any action on the part of the Underwriter.
l3. The Underwriter will require each dealer to conform to the provisions hereof
and of the Registration Statement (and related Prospectus) at the time in effect
under the Securities Act with respect to the public offering price of the
Shares, and neither the Underwriter nor any such dealer shall withhold the
placing of purchase orders so as to make a profit thereby.
l4. The Fund will pay, or cause to be paid, expenses (including the fees and
disbursements of its own counsel) of any registration of Shares under the
Securities Act, expenses of qualifying or continuing the qualification of the
Shares for sale and, in connection therewith, of qualifying or continuing the
qualification of the Fund as a dealer or broker under the laws of such states as
may be designated by the Underwriter under the conditions herein specified, and
expenses incident to the issuance of the Shares such as the cost of Share
certificates, issue taxes, and fees of the transfer and shareholder service
agent. The Underwriter will pay, or cause to be paid, all expenses (other than
expenses which any dealer may bear pursuant to any agreement with the
Underwriter) incident to the sale and distribution of the Shares issued or sold
hereunder, including, without limiting the generality of the foregoing, all:
(a) expenses of printing and distributing any Prospectus and Statement of
Additional Information and of preparing, printing
3
<PAGE>
and distributing or disseminating any other literature, advertising and selling
aids in connection with such offering of the Shares for sale (except that such
expenses need not include expenses incurred by the Fund in connection with the
preparation, printing and distribution of any report or other communication to
holders of Shares in their capacity as such), and (b) expenses of advertising in
connection with such offering. No transfer taxes, if any, which may be payable
in connection with the issue or delivery of Shares sold as herein contemplated,
or of the certificates for such Shares, shall be borne by the Fund, and the
Underwriter will indemnify and hold harmless the Fund against liability for all
such transfer taxes.
l5. This agreement shall continue in effect until August l, l997, unless and
until terminated by either party as hereinafter provided, and will continue from
year to year thereafter, but only so long as such continuance is specifically
approved, at least annually, in the manner required by the Investment Company
Act of l940. Either party hereto may terminate this agreement on any date by
giving the other party at least six months' prior written notice of such
termination, specifying the date fixed therefor. Without prejudice to any other
remedies of the Fund in any such event, the Fund may terminate this agreement at
any time immediately upon any failure of fulfillment of any of the obligations
of the Underwriter hereunder.
Without prejudice to any other remedies of the Fund in any such event, the Fund
may terminate this Agreement at any time immediately upon any failure of
fulfillment of any of the obligations of the Underwriter hereunder.
l6. This agreement shall automatically terminate in the event of its assignment.
l7. Any notice under this agreement shall be in writing, addressed, and
delivered or mailed, postage pre-paid, to the other party at such address as
such other party may designate for the receipt of such notice.
18. The Declaration of Trust of the Fund on file with the Secretary of State of
the Commonwealth of Massachusetts was executed on behalf of the Fund by the
initial trustees of the Fund and not individually, and any obligation of the
Fund shall be binding only upon the assets of the Fund (or applicable series
thereof) and shall not be binding upon any trustee, officer or shareholder of
the Fund. Neither the authorization of any action by the trustees or
shareholders of the Fund nor the execution of this agreement on behalf of the
Fund shall impose any liability upon any Trustee, officer or shareholder of the
Fund.
4
<PAGE>
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this agreement
to be executed on its behalf as of the day and year first above written.
NUVEEN FLAGSHIP MULTISTATE TRUST II
By_____________________________________
Vice President
Attest:
____________________________
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By____________________________________
Vice President
Attest:
____________________________
Assistant Secretary
5
<PAGE>
EXHIBIT 8
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Appointment 1
2. Delivery of Documents 1
3. Definitions 3
4. Delivery and Registration of the Property 4
5. Voting Rights 5
6. Receipt and Disbursement of Money 5
6A. Advances By Custodian 7
7. Receipt and Delivery of Securities 8
8. Use of Securities Depository or the Book Entry System 9
9. Segregated Account 11
10. Instructions Consistent With The Declaration, etc. 12
11. Transaction Not Requiring Instructions, 15
Collection of Income and Other Payments 15
Miscellaneous Transactions 16
12. Transactions Requiring Instructions 16
13. Purchase of Securities 19
14. Sale of Securities 20
15. Not In Use 20
16. Records 20
17. Cooperation with Accountants 21
18. Reports to Fund Independent Public Accountants 21
19. Confidentiality 21
20. Equipment Failures 22
21. Rights to Receive Advice 22
22. Compliance with Governmental Rules and Regulations 23
23. Compensation 23
24. Indemnification 23
25. Responsibility of Chase Manhattan Bank 25
26. Collection of Income 26
27. Ownership Certificates for Tax Purposes 26
28. Effective Period; Terminations and Amendment 27
29. Successor Custodian 28
30. Notices 29
31. Further Actions 29
32. Amendments 29
33. Additional Funds 29
34. Miscellaneous 30
35. Declaration of Trust 30
</TABLE>
<PAGE>
CUSTODY AGREEMENT
=================
THIS AGREEMENT is made as of the 1st day of February, 1997 by and between
NUVEEN FLAGSHIP MULTISTATE TRUST II (the "Fund"), and THE CHASE MANHATTAN BANK.
W I T N E S S E T H
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interest in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund currently has authorized the ten series listed on
Appendix A (such series together with all other series subsequently established
by the Fund and made subject to this Contract in accordance with paragraph 33,
being herein referred to as the "Fund(s)):
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints The Chase Manhattan Bank to
act as custodian of its portfolio securities, cash and other property on the
terms set forth in this Agreement. The Chase Manhattan Bank accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Section 23 of this Agreement.
2. DELIVERY OF DOCUMENTS. The Fund has furnished The Chase Manhattan
Bank with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the appointment
of The Chase Manhattan Bank as Custodian of the portfolio securities, cash and
other property of the Fund and approving this Agreement;
1
<PAGE>
(b) Incumbency and signature certificates identifying and containing the
signatures of the Fund's officers and/or the persons authorized to sign Proper
Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Declaration of Trust filed with the State of
Massachusetts and all amendments thereto (such Declaration of Trust as currently
in effect and from time to time, be amended, are herein called the
"Declaration");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
currently in effect and as they shall from time to time be amended, are herein
called the "By-Laws"),
(e) Resolutions of the Fund's Board of Trustees appointing the investment
advisor of the Fund and resolutions of the Fund's Board of Trustees and the
Fund's Shareholders approving the proposed Investment Advisory Agreement between
the Fund and the advisor (the "Advisory Agreement");
(f) The Advisory Agreement
(g) The Fund's Registration Statement on Form N-1A under the 1940 Act and
the Securities Act of 1933, as amended ("the 1933 Act") as filed with the SEC;
and
(h) The Fund's most recent prospectus and statement of additional
information including all amendments and supplements thereto (the "Prospectus").
Upon request the Fund will furnish The Chase Manhattan Bank with copies
of all amendments of or supplements to the foregoing, if any. The Fund will
also furnish The Chase Manhattan Bank upon request with a copy of the opinion of
counsel for the Fund with respect to the validity of the Shares and the status
of such Shares under the 1933 Act filed with the SEC, and any other applicable
federal law or regulation.
2
<PAGE>
3. DEFINITIONS.
(a) "Authorized Person". As used in this Agreement, the term "Authorized
Person" means the Fund's President, Treasurer and any other person, whether or
not any such person is an officer or employee of the Fund, duly authorized by
the Board of Trustees of the Fund to give Proper Instructions on behalf of the
Fund as set forth in resolutions of the Fund's Board of Trustees.
(b) "Book-Entry System". As used in this Agreement, the term "Book-Entry
System" means a book-entry system authorized by the U.S. Department of Treasury,
its successor or successors and its nominee or nominees.
(c) "Proper Instructions". Proper Instructions as used herein means a
writing signed or initialed by two or more persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if The Chase Manhattan Bank reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
such oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Fund accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and The Chase Manhattan Bank are
satisfied that such procedures afford adequate safeguards for the Fund's assets.
For purposes of this Section, Proper Instructions shall include instructions
received by The Chase Manhattan Bank pursuant to any three-party agreement which
requires a segregated asset account in accordance with Section 9.
(d) "Property". The term "Property", as used in this Agreement, means:
3
<PAGE>
(i) any and all securities and other property of the Fund which the
Fund may from time to time deposit, or cause to be deposited, with The
Chase Manhattan Bank or which The Chase Manhattan Bank may from time
to time hold for the Fund;
(ii) all income in respect of any such securities or other property;
(iii) all proceeds of the sales of any of such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the Fund, which
are received by The Chase Manhattan Bank from time to time from or on
behalf of the Fund.
(e) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successors and its nominee or
nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Trustees approving deposits by The Chase
Manhattan Bank therein.
4. DELIVERY AND REGISTRATION OF THE PROPERTY. The Fund will deliver or
cause to be delivered to The Chase Manhattan Bank all securities and all moneys
owned by it, including payments of interest, principal and capital distributions
and cash received for the issuance of its Shares, at any time during the period
of this Agreement, except for securities and monies to be delivered to any
subcustodian appointed pursuant to Section 7 hereof. The Chase Manhattan Bank
will not be responsible for such securities and such monies until actually
received by it. All securities delivered to The Chase Manhattan Bank or to any
such subcustodian (other than in bearer form) shall be registered in the name of
the Fund or in the name of a nominee of the Fund or in the name of The Chase
Manhattan Bank or any nominee of The Chase Manhattan Bank (with or without
indication of fiduciary
4
<PAGE>
status) or in the name of any subcustodian or any nominee of such subcustodian
appointed pursuant to Paragraph 7 hereof or shall be properly endorsed and in
form for transfer satisfactory to The Chase Manhattan Bank.
5. VOTING RIGHTS. With respect to all securities, however registered, it
is understood that the voting and other rights and powers shall be exercised by
the Fund. The Chase Manhattan Bank's only duty shall be to mail for delivery on
the next business day to the Fund any documents received, including proxy
statements and offering circulars, with any proxies for securities registered in
a nominee name executed by such nominee. Where warrants, options, tenders or
other securities have fixed expiration dates, the Fund understands that in order
for The Chase Manhattan Bank to act, The Chase Manhattan Bank must receive the
Fund's instructions at its offices in New York, addressed as The Chase Manhattan
Bank may from time to time request, by no later than noon (NY City time) at
least one business day prior to the last scheduled date to act with respect
thereto (or such earlier date or time as The Chase Manhattan Bank may reasonably
notify the Fund). Absent The Chase Manhattan Bank's timely receipt of such
instructions, such instruments will expire without liability to The Chase
Manhattan Bank.
6. RECEIPT AND DISBURSEMENT OF MONEY.
(a) The Chase Manhattan Bank shall open and maintain a custody account for
the Fund, subject only to draft or order by The Chase Manhattan Bank acting
pursuant to the terms of this Agreement, and shall hold in such account, subject
to the provisions hereof, all cash received by it from or for the Fund other
than cash maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the 1940 Act. Funds held by The Chase
Manhattan Bank for the Fund may be deposited by it to its credit at The Chase
Manhattan Bank in the Banking Department of The Chase Manhattan Bank or in such
other banks or trust companies as it may in its discretion deem necessary or
desirable; provided,
5
<PAGE>
however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act, and that each such bank or trust company shall be
approved by vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by The Chase Manhattan Bank in its capacity as Custodian and
shall be withdrawable by The Chase Manhattan Bank only in that capacity.
(b) Upon receipt of Proper Instructions (which may be continuing
instructions as deemed appropriate by the parties) The Chase Manhattan Bank
shall make payments of cash to, or for the account of, the Fund from such cash
only (i) for the purchase of securities, options, futures contracts or options
on futures contracts for the Fund as provided in Section 13 hereof; (ii) in the
case of a purchase of securities effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set forth in Section 8
hereof; (iii) in the case of repurchase agreements entered into between the Fund
and The Chase Manhattan Bank, or another bank, or a broker-dealer which is a
member of The National Association of Securities Dealers, Inc. ("NASD"), either
(a) against delivery of the securities either in certificate form or through an
entry crediting The Chase Manhattan Bank's account at the Federal Reserve Bank
with such securities or (b) against delivery of the receipt evidencing purchase
by the Fund of securities owned by The Chase Manhattan Bank along with written
evidence of the agreement by The Chase Manhattan Bank to repurchase such
securities from the Fund; (iv) for transfer to a time deposit account of the
Fund in any bank, whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund; (v) for the payment of dividends
or other distributions on shares declared pursuant to the governing documents of
the Fund, or for the payment of interest, taxes, administration, distribution or
advisory fees or expenses which are to be borne by the Fund under the terms of
this Agreement, any Advisory Agreement, or any
6
<PAGE>
administration agreement; (vi) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Fund and held
by or to be delivered to The Chase Manhattan Bank; (vii) to a subcustodian
pursuant to Section 7 hereof; (viii) for such common expenses incurred by the
Fund in the ordinary course of its business, including but not limited to
printing and mailing expenses, legal fees, accountants fees, exchange fees; or
(ix) for any other proper purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board of Trustees
or of the Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the person or persons
to whom such payment is to be made.
(c) The Chase Manhattan Bank is hereby authorized to endorse and collect
all checks, drafts or other orders for the payment of money received as
custodian for the Fund.
6A. ADVANCES BY CUSTODIAN. The Custodian may from time to time agree to
advance cash to the Fund, without interest, for the fund's other proper
corporate purposes. If the Custodian advances cash for any purpose, the Fund
shall and hereby does grant to the Custodian a security interest in Fund
securities equal in value to the amount of the cash advance but in no event
shall the value of securities in which a security interest has been granted
exceed 20% of the value of the Fund's total assets at the time of the pledge;
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to reasonably dispose of any securities
in which it has a security interest to the extent necessary to obtain
reimbursement.
7
<PAGE>
7. RECEIPT AND DELIVERY OF SECURITIES.
(a) Except as provided by Section 8 hereof, The Chase Manhattan Bank shall
hold and physically segregate all securities and noncash Property received by it
for the Fund. All such securities and non-cash Property are to be held or
disposed of by The Chase Manhattan Bank for the Fund pursuant to the terms of
this Agreement. In the absence of Proper Instructions accompanied by a
certified resolution authorizing the specific transaction by the Fund's Board,
The Chase Manhattan Bank shall have no power or authority to withdraw, deliver,
assign, hypothecate, pledge or otherwise dispose of any such securities and
investments, except in accordance with the express terms provided for in this
Agreement. In no case may any Trustee, officer, employee or agent of the Fund
withdraw any securities. In connection with its duties under this Section 7,
The Chase Manhattan Bank may, at its own expense, enter into subcustodian
agreements with other banks or trust companies for the receipt of certain
securities and cash to be held by The Chase Manhattan Bank for the account of
the Fund pursuant to this Agreement; provided that each such bank or trust
company has an aggregate capital, surplus and undivided profits, as shown by its
last published report, of not less than twenty million dollars ($20,000,000) and
that such bank or trust company agrees with The Chase Manhattan Bank to comply
with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder. The Chase Manhattan Bank will be liable for acts or
omissions of any subcustodian. The Chase Manhattan Bank shall employ sub-
custodians upon receipt of Proper Instructions, but only in accordance with an
applicable vote by the Board of Trustees of the Fund.
(b) Promptly after the close of business on each day The Chase Manhattan
Bank shall furnish the Fund with confirmations and a summary of all transfers to
or from the account of the Fund during said day. Where securities are
transferred to the account of the Fund established at a Securities Depository or
Book Entry
8
<PAGE>
System pursuant to Section 8 hereof, The Chase Manhattan Bank shall also by
book-entry or otherwise identify as belonging to such Fund the quantity of
securities in a fungible bulk of securities registered in the name of The Chase
Manhattan Bank (or its nominee) or shown in The Chase Manhattan Bank's account
on the books of a Securities Depository or Book-Entry System. At least monthly
and from time to time, The Chase Manhattan Bank shall furnish the Fund with a
detailed statement of the Property held for the Fund under this Agreement.
8. USE OF SECURITIES DEPOSITORY OR BOOK-ENTRY SYSTEM. The Fund shall
deliver to The Chase Manhattan Bank a certified resolution of the Board of
Trustees of the Fund approving, authorizing and instructing The Chase Manhattan
Bank on a continuous and ongoing basis until instructed to the contrary by
Proper Instructions actually received by The Chase Manhattan Bank (i) to deposit
in a Securities Depository or Book-Entry System all securities of the Fund
eligible for deposit therein and (ii) to utilize a Securities Depository or
Book-Entry System to the extent possible in connection with the performance of
its duties hereunder, including without limitation settlements of purchases and
sales of securities by the Fund, and deliveries and returns of securities
collateral in connection with borrowings. Without limiting the generality of
such use, it is agreed that the following provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will at all times (1) be represented in an
account of The Chase Manhattan Bank in the Securities Depository or Book Entry
System (the "Account") and (2) be segregated from any assets and cash controlled
by The Chase Manhattan Bank in other than a fiduciary or custodian capacity but
may be commingled with other assets held in such capacities. The Chase
Manhattan Bank will effect payment for securities and receive and deliver
securities in accordance with accepted industry practices as set forth in (b)
below, unless the Fund has given
9
<PAGE>
The Chase Manhattan Bank Proper Instructions to the contrary. The records of The
Chase Manhattan Bank with respect to securities of the Fund maintained in a
Securities Depository or Book Entry System shall identify by book entry those
securities belonging to the Fund.
(b) The Chase Manhattan Bank shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the Securities Depository or
Book Entry System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of The Chase Manhattan Bank to
reflect such payment and transfer for the account of the Fund. Upon receipt of
Proper Instructions, The Chase Manhattan Bank shall transfer securities sold for
the account of the Fund upon (i) receipt of advice from the Securities
Depository or Book Entry System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the records of
The Chase Manhattan Bank to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities Depository or Book Entry
System of transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by The Chase Manhattan Bank and be provided to
the Fund at its request. Upon request, The Chase Manhattan Bank shall furnish
the Fund confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in a Securities Depository
or Book Entry System for the account of the Fund.
(c) The Chase Manhattan Bank shall provide the Fund with any report
obtained by The Chase Manhattan Bank on the Securities Depository or Book Entry
System's accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities Depository or Book Entry
System;
10
<PAGE>
(d) All Books and records maintained by The Chase Manhattan Bank which
relate to the Fund participation in a Securities Depository or Book-Entry System
will at all times during The Chase Manhattan Bank's regular business hours be
open to the inspection of the Fund's duly authorized employees or agents, and
the Fund will be furnished with all information in respect of the services
rendered to it as it may require.
(e) Anything to the contrary in this Agreement notwithstanding, The Chase
Manhattan Bank shall be liable to the Fund for any loss or damage to the Fund
resulting from any negligence, misfeasance or misconduct of The Chase Manhattan
Bank or any of its agents or of any of its or their employees in connection with
its or their use of the Securities Depository or Book Entry Systems or from
failure of The Chase Manhattan Bank or any such agent to enforce effectively
such rights as it may have against such Securities Depository or Book Entry
System; at the election of the Fund, it shall be entitled to be subrogated to
the rights of The Chase Manhattan Bank with respect to any claim against the
Securities Depository or Book Entry System or any other person which The Chase
Manhattan Bank may have as a consequence of any such loss or damage if and to
the extent that the Fund has not been made whole for any such loss or damage.
9. SEGREGATED ACCOUNT. The Chase Manhattan Bank shall upon receipt of
Proper Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by The
Chase Manhattan Bank pursuant to Section 8 hereof, (i) in accordance with the
provisions of any agreement among the Fund, The Chase Manhattan Bank and a
broker dealer registered under the Securities and Exchange Act of 1934 and a
member of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The Options
Clearing
11
<PAGE>
Corporation and of any registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash
or government securities in connection with options purchased, sold or written
by the Fund or commodity futures contracts or options thereon purchased or sold
by the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
10. INSTRUCTIONS CONSISTENT WITH THE DECLARATION , ETC.
(a) Unless otherwise provided in this Agreement, The Chase Manhattan Bank
shall act only upon Proper Instructions. The Chase Manhattan Bank may assume
that any Proper Instructions received hereunder are not in any way inconsistent
with any provision of the Declaration or By-Laws or any vote or resolution of
the Fund's Board of Trustees or any committee thereof. The Chase Manhattan Bank
shall be entitled to rely upon any Proper Instructions actually received by The
Chase Manhattan Bank pursuant to this Agreement. The Fund agrees that The Chase
Manhattan Bank shall incur no liability in acting in good faith upon Proper
Instructions given to The Chase Manhattan Bank, except to the extent such
liability was incurred as a result of The Chase Manhattan Bank's negligence or
willful misconduct. In accord with instructions from the Fund, as
12
<PAGE>
required by accepted industry practice or as The Chase Manhattan Bank may elect
in effecting the execution of Fund instructions, advances of cash or other
Property made by The Chase Manhattan Bank, arising from the purchase, sale,
redemption, transfer or other disposition of Property of the Fund, or in
connection with the disbursement of funds to any party, or in payment of fees,
expenses, claims or liabilities owed to The Chase Manhattan Bank by the Fund, or
to any other party which has secured judgment in a court of law against the Fund
which creates an overdraft in the accounts or over-delivery of Property, shall
be deemed a loan by The Chase Manhattan Bank to the Fund, payable on demand,
bearing interest at such rate customarily charged by The Chase Manhattan Bank
for similar loans.
(b) The Fund agrees that test arrangements, authentication methods or other
security devices to be used with respect to instructions which the Fund may give
by telephone, telex, TWX, facsimile transmission, bank wire or other
teleprocess, or through an electronic instruction system, shall be processed in
accordance with terms and conditions for the use of such arrangements, methods
or devices as The Chase Manhattan Bank may put into effect and modify from time
to time. The Fund shall safeguard any test keys, identification codes or other
security devices which The Chase Manhattan Bank makes available to the Fund and
agrees that the Fund shall be responsible for any loss, liability or damage
incurred by The Chase Manhattan Bank or by the Fund as a result of The Chase
Manhattan Bank's acting in accordance with instructions from any unauthorized
person using the proper security device except to the extent such loss,
liability or damage was incurred as a result of The Chase Manhattan Bank's
negligence or willful misconduct. The Chase Manhattan Bank may electronically
record, but shall not be obligated to so record, any instructions given by
telephone and any other telephone discussions with respect to the Fund. In the
event that the Fund uses The Chase Manhattan Bank's Asset Management system or
any successor electronic
13
<PAGE>
communications or information system, the Fund agrees that The Chase Manhattan
Bank is not responsible for the consequences of the failure of that system to
perform for any reason, beyond the reasonable control of The Chase Manhattan
Bank, or the failure of any communications carrier, utility, or communications
network. In the event that system is inoperable, the Fund agrees that it will
accept the communication of transaction instructions by telephone, facsimile
transmission on equipment compatible to The Chase Manhattan Bank's facsimile
receiving equipment or by letter, at no additional charge to the Fund.
(c) The Chase Manhattan Bank shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund and the maturity
of futures contracts purchased or sold by the Fund) received by The Chase
Manhattan Bank from issuers of the securities being held for the Fund. With
respect to tender or exchange offers, The Chase Manhattan Bank shall transmit
promptly by facsimile to the Fund all written information received by The Chase
Manhattan Bank from issuers of the securities whose tender or exchange is sought
and from the party (or his agents) making the tender or exchange offer. If the
Fund desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Fund shall notify The Chase Manhattan Bank at
least three business days prior to the date on which The Chase Manhattan Bank is
to take such action or upon the date such notification is first received by the
Fund, if later. If any Property registered in the name of a nominee of The
Chase Manhattan Bank is called for partial redemption by the issuer of such
property, The Chase Manhattan Bank is authorized to allot the called portion to
the respective beneficial holders of the Property in such manner deemed to be
fair and equitable by The Chase Manhattan Bank in its sole discretion.
14
<PAGE>
11. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. The Chase Manhattan Bank is
authorized to take the following action without Proper Instructions:
(a) Collection of Income and Other Payments. The Chase Manhattan Bank
shall:
(i) collect and receive on a timely basis for the account of the
Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and similar
items, included or to be included in the Property of the Fund, and
promptly advise the Fund of such receipt and shall credit such income,
as collected, to the Fund. From time to time, The Chase Manhattan
Bank may elect, but shall not be obligated, to credit the account with
interest, dividends or principal payments on payable or contractual
settlement date, in anticipation of receiving same from a payor,
central depository, broker or other agent employed by the Fund or The
Chase Manhattan Bank. Any such crediting and posting shall be at the
Fund's sole risk, and The Chase Manhattan Bank shall be authorized to
reverse any such advance posting in the event it does not receive good
funds from any such payor, central depository, broker or agent of the
Customer. The Chase Manhattan Bank agrees to promptly notify the Fund
of the reversal of any such advance posting.
(ii) endorse and deposit for collection in the name of the Fund,
checks, drafts, or other orders for the payment of money on the same
day as received;
(iii) receive and hold for the account of the Fund all securities
received by the Fund as a result of a stock dividend, share split-up
or reorganization, merger, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities issued
15
<PAGE>
with respect to any portfolio securities of the Fund held by The Chase
Manhattan Bank hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed or retired, or
otherwise become payable on the date such securities become payable;
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other
payments and the endorsement for collection of checks, drafts and
other negotiable instruments;
(vi) to effect an exchange of the securities where the par value
is changed, and to surrender securities at maturity or upon an earlier
call for redemption, or when securities otherwise become payable,
against payment therefore in accordance with accepted industry
practice. If any Property registered in the name of a nominee of The
Chase Manhattan Bank is called for partial redemption by the issuer of
such property, The Chase Manhattan Bank is authorized to allot the
called portion to the respective beneficial holders of the Property in
such manner deemed to be fair and equitable by The Chase Manhattan
Bank in its sole discretion.
(b) Miscellaneous Transactions. The Chase Manhattan Bank is authorized to
deliver or cause to be delivered Property against payment or other consideration
or written receipt therefor for examination by a dealer selling for the account
of the Fund in accordance with street delivery custom.
12. TRANSACTIONS REQUIRING INSTRUCTIONS. In addition to the actions
requiring Proper Instructions set forth herein, upon receipt of Proper
Instructions and not otherwise, The Chase Manhattan Bank, directly or through
the use of a Securities Depository or Book-Entry System, shall:
16
<PAGE>
(a) Execute and deliver to such persons as may be designated in such
Proper Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) Deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
issuer of securities or corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for the Fund to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
issuer of securities or corporation, against receipt of such certificates of
deposit, interim receipts or other instruments or documents, and cash, if any,
as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said instructions to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
(e) Release securities belonging to the Fund to any bank or trust company
for the purpose of pledge or hypothecation to secure any loan incurred by the
Fund; provided, however, that securities shall be released only upon payment to
The Chase Manhattan Bank of the monies borrowed, or upon receipt of adequate
collateral as agreed upon by the Fund and The Chase Manhattan Bank which may be
in the form of cash or obligations issued by the U.S. government, its agencies
or instrumentalities, except that in cases where additional collateral is
required to secure a borrowing already made, subject to proper prior
authorization, further securities may be released for that purpose; and pay such
loan upon re-delivery to it
17
<PAGE>
of the securities pledged or hypothecated therefore and upon surrender of the
note or notes evidencing the loan; and
(f) Deliver securities in accordance with the provisions of any agreement
among the Fund, The Chase Manhattan Bank and a broker-dealer registered under
the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any agreement
among the Fund, The Chase Manhattan Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund; and
(h) Deliver securities against payment or other consideration or written
receipt therefore for transfer of securities into the name of the Fund or The
Chase Manhattan Bank or a nominee of either, or for exchange or securities for a
different number of bonds, certificates, or other evidence, representing the
same aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to The Chase Manhattan Bank;
(i) Exchange securities in temporary form for securities in definitive
form;
(j) Surrender, in connection with their exercise, warrants, rights or
similar securities, provided that in each case, the new securities and cash, if
any, are to be delivered to The Chase Manhattan Bank;
18
<PAGE>
(k) Deliver securities upon receipt of payment in connection with any
repurchase agreement related to such securities entered into by the Fund;
(l) Deliver securities pursuant to any other proper corporate purpose, but
only upon receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee signed by an
officer of the Funds and certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made.
13. PURCHASE OF SECURITIES. Promptly after each purchase of securities,
options, futures contracts or options on futures contracts by the investment
advisor, the Fund shall deliver to The Chase Manhattan Bank (as Custodian)
Proper Instructions specifying with respect to each such purchase: (a) the name
of the issuer and the title of the securities, (b) the number of shares of the
principal amount purchased and accrued interest, if any, (c) the dates of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, (f) the name of the person from whom or the broker
through whom the purchase was made and (g) the Fund name. The Chase Manhattan
Bank shall upon receipt of securities purchased by or for the Fund registered in
the name of the Fund or in the name of a nominee of The Chase Manhattan Bank or
of the Fund or in proper form for transfer or upon receipt of evidence of title
to options, futures contracts or options on futures contracts purchased by the
Fund, pay out of the moneys held for the account of the Fund the total amount
payable to the person from whom or the broker through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Proper Instructions. Except as specifically stated otherwise in this
Agreement, in any and every case where payment for purchase of securities for
the account of the Fund is made by
19
<PAGE>
The Chase Manhattan Bank in advance of receipt of the securities purchased in
the absence of specific written instructions from the Fund to so pay in advance,
The Chase Manhattan Bank shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by The
Chase Manhattan Bank.
14. SALE OF SECURITIES. Promptly after each sale of securities by the Fund
at the instruction of the investment advisor, the Fund shall deliver to The
Chase Manhattan Bank (as Custodian) Proper Instructions, specifying with respect
to each such sale; (a) the name of the issuer and the title of the security, (b)
the number of shares or principal amount sold, and accrued interest, if any, (c)
the date of sale, (d) the sale price per unit, (e) the total amount payable to
the Fund upon such sale, (f) the name of the broker through whom or the person
to whom the sale was made and (g) the Fund name. The Chase Manhattan Bank shall
deliver the securities upon receipt of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as set
forth in such Proper Instructions. Subject to the foregoing, The Chase
Manhattan Bank may accept payment in such form as shall be satisfactory to it,
and may deliver securities and arrange for payment in accordance with the
customs prevailing among dealers in securities.
15. NOT IN USE.
16. RECORDS. The books and records pertaining to the Fund which are in the
possession of The Chase Manhattan Bank shall be the property of the Fund. Such
books and records shall be prepared and maintained as required by the 1940 Act,
as amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representative, shall have access to such books
and records at all times during The Chase Manhattan Bank's normal business
hours, and such books and records shall be surrendered to the Fund promptly upon
request. Upon reasonable request of the Fund, copies of any such books and
records
20
<PAGE>
shall be provided by The Chase Manhattan Bank to the Fund or the Fund's
authorized representative at the Fund's expense.
17. COOPERATION WITH ACCOUNTANTS. The Chase Manhattan Bank shall cooperate
with the Fund's independent certified public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement to
assure that the necessary information is made available to such accountants for
the expression of their unqualified opinion, including but not limited to the
opinion included in the Fund's Form N-1A, Form N-SAR and other reports to the
Securities and Exchange Commission and with respect to any other requirement of
such Commission.
18. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. The Chase Manhattan
Bank shall provide the Fund, at such times as the Fund may reasonably require,
with reports by independent public accountants on the accounting system,
internal accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities deposited
and/or maintained in a Securities Depository or Book Entry System, relating to
the services provided by The Chase Manhattan Bank under this Contract; such
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
19. CONFIDENTIALITY. The Chase Manhattan Bank agrees on behalf of itself
and its employees to treat confidentially and as the proprietary information of
the Fund all records and other information relative to the Fund and its prior,
present or potential Shareholders and relative to the advisors and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after
21
<PAGE>
prior notification to and approval in writing by the Fund, which approval shall
not be unreasonably withheld and may not be withheld where The Chase Manhattan
Bank may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Fund. Nothing contained herein,
however, shall prohibit The Chase Manhattan Bank from advertising or soliciting
the public generally with respect to other products or services, regardless of
whether such advertisement or solicitation may include prior, present or
potential Shareholders of the Fund.
20. EQUIPMENT FAILURES. In the event of equipment failures beyond The
Chase Manhattan Bank's control, The Chase Manhattan Bank shall, at no additional
expense to the Fund, take reasonable steps to minimize service interruptions but
shall not have liability with respect thereto. The Chase Manhattan Bank shall
enter into and shall maintain in effect with appropriate parties one or more
agreements making reasonable provisions for back up emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
21. RIGHT TO RECEIVE ADVICE.
(a) Advice of Fund. If The Chase Manhattan Bank shall be in doubt as to
any action to be taken or omitted by it, it may request, and shall receive, from
the Fund clarification or advice.
(b) Advice of Counsel. If The Chase Manhattan Bank shall be in doubt as to
any question of law involved in any action to be taken or omitted by The Chase
Manhattan Bank, it may request advice at its own cost from counsel of its own
choosing (who may be counsel for the Fund or The Chase Manhattan Bank, at the
option of The Chase Manhattan Bank).
(c) Conflicting Advice. In case of conflict between directions or advice
received by The Chase Manhattan Bank pursuant to sub-paragraph (a) of this
22
<PAGE>
paragraph and advice received by The Chase Manhattan Bank pursuant to
subparagraph (b) of this paragraph, The Chase Manhattan Bank shall be entitled
to rely on and follow the advice received pursuant to the latter provision
alone.
(d) Protection of The Chase Manhattan Bank. The Chase Manhattan Bank shall
be protected in any action or inaction which it takes or omits to take in
reliance on any directions or advice received pursuant to subparagraphs (a) or
(b) of this section which The Chase Manhattan Bank, after receipt of any such
directions or advice, in good faith believes to be consistent with such
directions or advice. However, nothing in this paragraph shall be construed as
imposing upon The Chase Manhattan Bank any obligation (i) to seek such
directions or advice, or (ii) to act in accordance with such directions or
advice when received, unless, under the terms of another provision of this
Agreement, the same is a condition to The Chase Manhattan Bank's properly taking
or omitting to take such action. Nothing in this subsection shall excuse The
Chase Manhattan Bank when an action or omission on the part of The Chase
Manhattan Bank constitutes willful misfeasance, bad faith, negligence or
reckless disregard by The Chase Manhattan Bank of its duties under this
Agreement.
22. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. The Fund assumes
full responsibility for insuring that the contents of each Prospectus of the
Fund complies with all applicable requirements of the 1933 Act, the 1940 Act,
and any laws, rules and regulations of governmental authorities having
jurisdiction.
23. COMPENSATION. As compensation for the services rendered by The Chase
Manhattan Bank during the term of this Agreement, the Fund will pay to The Chase
Manhattan Bank, in addition to reimbursement of its out-of-pocket expenses,
monthly fees as outlined in Exhibit A.
24. INDEMNIFICATION. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless The Chase Manhattan Bank and its nominees from all
23
<PAGE>
taxes, charges, expenses, assessments, claims, and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the Securities
Exchange Act of 1934, the 1940 Act, and any state and foreign securities and
blue sky laws, all as or to be amended from time to time) and expenses,
including (without limitation) attorney's fees and disbursements (hereafter
"liabilities and expenses"), arising directly or indirectly from any action or
thing which The Chase Manhattan Bank takes or does or omits to take or do (i) at
the request or on the direction of or in reliance on the advice of the Fund, or
(ii) upon Proper Instructions, provided, that neither The Chase Manhattan Bank
nor any of its nominees or sub-custodians shall be indemnified against any
liability to the Fund or to its Shareholders (or any expenses incident to such
liability) arising out of (x) The Chase Manhattan Bank's or such nominee's or
sub-custodian's own willful misfeasance, bad faith, negligence or reckless
disregard of its duties under this Agreement or any agreement between The Chase
Manhattan Bank and any nominee or subcustodian or (y) The Chase Manhattan Bank's
own negligent failure to perform its duties under this Agreement. The Chase
Manhattan Bank similarly agrees to indemnify and hold harmless the Fund from all
liabilities and expenses arising directly or indirectly from The Chase Manhattan
Bank's or such nominee's or sub-custodian's willful misfeasance, bad faith,
negligence or reckless disregard in performing its duties under this agreement.
In the event of any advance of cash for any purpose made by The Chase Manhattan
Bank resulting from orders or Proper Instructions of the Fund, or in the event
that The Chase Manhattan Bank or its nominee or subcustodian shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's or sub-custodian's own negligent action, negligent failure
to act, willful misconduct, or reckless disregard, the Fund shall
24
<PAGE>
promptly reimburse The Chase Manhattan Bank for such advance of cash or such
taxes, charges, expenses, assessments claims or liabilities.
25. RESPONSIBILITY OF THE CHASE MANHATTAN BANK. In the performance of its
duties hereunder, The Chase Manhattan Bank shall be obligated to exercise care
and diligence and to act in good faith to insure the accuracy and completeness
of all services performed under this Agreement. The Chase Manhattan Bank shall
be responsible for its own negligent failure or that of any subcustodian it
shall appoint to perform its duties under this Agreement but to the extent that
duties, obligations and responsibilities are not expressly set forth in this
Agreement, The Chase Manhattan Bank shall not be liable for any act or omission
which does not constitute willful misfeasance, bad faith, or negligence on the
part of The Chase Manhattan Bank or such subcustodian or reckless disregard of
such duties, obligations and responsibilities. Without limiting the generality
of the foregoing or of any other provision of this Agreement, The Chase
Manhattan Bank in connection with its duties under this Agreement shall, so long
as and to the extent it is in the exercise of reasonable care, not be under any
duty or obligation to inquire into and shall not be liable for or in respect of
(a) the validity or invalidity or authority or lack thereof of any advice,
direction, notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which The Chase Manhattan Bank
believes to be genuine, (b) the validity of the issue of any securities
purchased or sold by the Fund, the legality of the purchase or sale thereof or
the propriety of the amount paid or received therefor, (c) the legality of the
issue or sale of any Shares, or the sufficiency of the amount to be received
therefore, (d) the legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor, (e) the legality of the declaration or payment
of any dividend or distribution on Shares, of (f) delays or errors or loss of
data occurring by reason of circumstances beyond The Chase Manhattan Bank's
control, including acts of civil
25
<PAGE>
or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown (except as provided in Section 20), flood or catastrophe,
acts of God, insurrection, war, riots, or failure of the mail, transportation,
communication or power supply.
26. COLLECTION OF INCOME. The Chase Manhattan Bank shall collect on a
timely basis all income and other payments with respect to registered securities
held hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by The Chase Manhattan Bank or
its agent thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing, The Chase
Manhattan Bank shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due the Fund on
securities loaned pursuant to the provisions of Section 9 shall be the
responsibility of the Fund. The Chase Manhattan Bank will have no duty or
responsibility in connection therewith, other than to provide the Fund with such
information or data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the Fund is properly
entitled.
27. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Chase Manhattan Bank
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to securities of the Fund held by it and in connection with
transfers of securities.
26
<PAGE>
28. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT.
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that The Chase Manhattan Bank shall not act under Section 8 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities Depository or Book Entry System, as
required by Rule 17f-4 under the Investment Company Act of 1940, as amended;
provided further, however, that the Fund shall not amend or terminate this
Agreement in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust, and further provided, that the Fund
may at any time by action of its Board of Trustees (i) substitute another bank
or trust company for The Chase Manhattan Bank by giving notice as described
above to The Chase Manhattan Bank, or (ii) immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for The Chase
Manhattan Bank by the Comptroller of the Currency or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to The Chase
Manhattan Bank such compensation as may be due as of the date of such
termination and shall likewise reimburse The Chase Manhattan Bank for its costs,
expenses and disbursements.
27
<PAGE>
29. SUCCESSOR CUSTODIAN
If a successor custodian shall be appointed by the Board of Trustees of the
Fund, The Chase Manhattan Bank shall, upon termination, deliver to such
successor custodian at the office of the custodian, duly endorsed and in the
form for transfer, all securities then held by it hereunder and shall transfer
to an account of the successor custodian all of the Fund's securities held in a
Securities Depository or Book Entry System.
If no such successor custodian shall be appointed, The Chase Manhattan Bank
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
The Chase Manhattan Bank on or before the date when such termination shall be
come effective, then The Chase Manhattan Bank shall have the right to deliver to
a bank or trust company, which is a "bank" as defined in the 1940 Act, doing
business in New York, New York, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
The Chase Manhattan Bank and all instruments held by The Chase Manhattan Bank
relative thereto and all other property held by it under this Agreement and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities Depository or Book Entry System. Thereafter, such bank
or trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of The Chase Manhattan Bank after the date of termination hereof
owing to failure of the Fund to procure the certified copy of the vote referred
to or of
28
<PAGE>
the Board of Trustees to appoint a successor custodian, The Chase Manhattan Bank
shall be entitled to fair compensation for its services during such period as
The Chase Manhattan Bank retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of The Chase Manhattan Bank shall remain in full force and effect.
30. NOTICES. All notices and other communications (collectively referred
to as "Notice" or "Notices") in this section hereunder shall be in writing and
shall be first sent by telegram, cable, telex, or facsimile sending device and
thereafter by overnight mail for delivery on the next business day. Notices
shall be addressed (a) if to The Chase Manhattan Bank, at The Chase Manhattan
Bank's address, 4 New York Plaza, 3rd Floor, New York, New York, 10004,
facsimile number (212) 623-8997; (b) if to the Fund, at the address of the Fund
Attention: Controller, facsimile number (312) 917-8049; or (c) if to neither of
the foregoing, at such other address as shall have been notified to the sender
of any such Notice or other communication. Notices sent by overnight mail shall
be deemed to have been given the next business day. Notices sent by messenger
shall be deemed to have been given on the day delivered, and notices sent by
confirming telegram, cable, telex or facsimile sending device shall be deemed to
have been given immediately. All postage, cable, telegram, telex and facsimile
sending device charges arising from the sending of a Notice hereunder shall be
paid by the sender.
31. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
32. AMENDMENTS. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
33. ADDITIONAL FUNDS. In the event that the Fund establishes one or more
series of Shares in addition to the series listed on Appendix A, with respect to
which
29
<PAGE>
it desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a Fund
hereunder.
34. MISCELLANEOUS. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall insure to the benefit of the parties hereto and their respective
successors.
35. DECLARATION OF TRUST. The Fund's Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts. This agreement is executed
on behalf of the Fund by the Fund's officers as officers and not individually
and the obligations imposed upon the Fund by this Agreement are not binding upon
any of the Fund's Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Fund.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
THE CHASE MANHATTAN BANK
Attest:___________________________ By: ___________________________
THOMAS V. DIBELLA PETER C. ARRIGHETTI
VICE PRESIDENT SENIOR VICE PRESIDENT
NUVEEN FLAGSHIP MULTISTATE
TRUST II
Attest:___________________________ By: ___________________________
GIFFORD R. ZIMMERMAN O. WALTER RENFFTLEN
ASSISTANT GENERAL COUNSEL VICE PRESIDENT &
CONTROLLER
31
<PAGE>
Appendix A
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen California Intermediate Municipal Bond Fund
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
32
<PAGE>
EXHIBIT A
---------
CUSTODY SERVICE FEE
-------------------
ADMINISTRATION AND MAINTENANCE FEE
- ----------------------------------
.01375% (1 3/8 Basis Points) on first $10 billion
.00875% (7/8 Basis Point) on second $10 billion
.0075% (3/4 Basis Point) on third $10 billion
.005% (1/2 Basis Point) on remainder
TRANSACTION FEES
- ----------------
$15.00 Per Book Entry Transaction
$25.00 Per Physical Transaction
$35.00 Per Future Contract or Option wire
$8.00 Per outgoing Wire Transfer for ETFs
$5.00 Per incoming and outgoing Wire Transfer for Open
End and Money Market Funds
NOTES:
1. Schedule should be applied to total assets for all Exchange Traded funds,
Open End Load Funds, and Money Market Funds.
2. Add $5.00 per book entry transaction and physical transaction if Custody
inputs trades.
BALANCES
--------
1. During each month, daily net overdrafts are offset by daily net cash
balances dollar for dollar with no penalty or charge for daily net
overdrafts.
2. At the end of each month, the net overdraft for the month incurs an
overdraft charge computed as follows:
The negative net cumulative balance plus 10% reserves multiplied by
the average monthly Fed Funds rate divided by 365 days.
33
<PAGE>
3. Net credit balance at month end carries forward and is eligible for offset
with overdrafts in the next month. The carry forward net credit balance
incurs a 10% reduction. Carry forward balances expire at the end of each
portfolio's fiscal year end for "fully invested funds"; for new funds not
fully invested, the credit balance carries forward until the fund become
fully invested. Each series of the Fund will use its best efforts to keep
its cumulative balances at each calendar quarter end below $50 million.
4. Nuveen Institutional Advisory Corp. or Nuveen Advisory Corp. will be
responsible for promptly advising The Chase Manhattan Bank of the date a
new fund becomes fully invested.
5. Effective January 1, 1996, FDIC charges will be no longer applied to the
portfolios.
6. Overdrafts are permissible only as a means of compensating for positive
balances.
7. Due to FDIC capitalization requirements, overdrafts are not permissible on
June 30th and December 31st.
34
<PAGE>
EXHIBIT 9(a)
NUVEEN FLAGSHIP MULTISTATE TRUST II
TRANSFER AGENCY AGREEMENT
This agreement is made as of the XXst day of XXXX, 1996, between NUVEEN
FLAGSHIP MULTISTATE TRUST II, a Massachusetts business trust having its
principal office and place of business at 333 West Wacker Drive, Chicago,
Illinois 60606, on behalf of the eight series named NUVEEN CALIFORNIA
MUNICIPAL BOND FUND, NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND, NUVEEN
MASSACHUSETTS MUNICIPAL BOND FUND, NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND
FUND, NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND, NUVEEN FLAGSHIP NEW YORK
MUNICIPAL BOND FUND, NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND, NUVEEN
FLAGSHIP NEW JERSEY INTERMEDIATE MUNICIPAL BOND FUND (hereinafter referred to
as the "Fund"), and SHAREHOLDER SERVICES, INC., a Colorado corporation having
its place of business at 3410 South Galena Street, Denver, Colorado 80231
(hereinafter referred to as the "Transfer Agent").
In consideration of the mutual promises hereinafter set forth, the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall
have the following meanings:
1.1 "Approved Institution" shall mean a broker-dealer, broker, bank or
other entity named in a Certificate, as hereinafter defined, and having
account(s) in the Trust or the Distributor or an agent it appoints, in each
case acting on behalf of the Fund for the benefit of its clients. From time to
time the Fund may amend a previously delivered Certificate by delivering to the
Transfer Agent a Certificate naming an additional entity as an Approved
Institution or deleting any entity named as an Approved Institution in a
previously delivered Certificate.
1.2 "Business Day" shall mean each day on which the New York Stock
Exchange is open for trading.
1.3 "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Transfer Agent by the Fund and which is signed by any Officer, as hereinafter
defined, and actually received by the Transfer Agent. "Certificate" shall also
include any notice submitted to the Transfer Agent by electronic or telephone
transmission, reasonably believed by the Transfer Agent to be genuine and to
have been properly made, signed or authorized by an Officer.
1.4 "Computer Tape" shall mean any computer/electromagnetic tape or
transmission transmitted by an Approved Institution, via a remote terminal or
other similar link, into a data
1
<PAGE>
processing, storage, or collection system or similar system (the "System"),
located on the Transfer Agent's premises. For purposes of Section 5.1, such
Computer Tape shall be deemed to have been furnished at such times as are
agreed upon from time to time by the Transfer Agent and Fund only if the
information reflected thereon was input into the system at such times as are
agreed upon from time to time by the Transfer Agent and the Fund.
1.5 "Custodian" shall mean, with respect to the Fund, Chase Manhattan Bank
of New York as custodian under the terms and conditions of the Custody
Agreement between the Custodian and the Fund, or in any case any successor(s)
to such Custodian performing similar functions for or on behalf of the Fund.
1.6 "Direct Accounts" means accounts registered in the name(s) of
shareholders other than Approved Institutions.
1.7 "Distributor" shall mean John Nuveen & Co. Incorporated (hereinafter
referred to as "Nuveen & Co."), as distributor under the terms and conditions
of the Distributor's Contract between the Fund and Nuveen & Co., wherein Nuveen
& Co. has the exclusive right to sell shares of the Fund to investors against
orders therefor at net asset value, or any successor(s) to Nuveen & Co.
performing a similar function for or on behalf of the Fund.
1.8 "Effective Date" shall mean ______________or the date the Fund begins
operations.
1.9 "Series" shall mean each individual portfolio of the Fund covered by
this agreement, if any, each being a separate portfolio of securities and other
assets, interests in which are represented by a separate series of the Fund's
shares, and such terms shall include any other such portfolio that may be
created for which the Transfer Agent agrees to act as transfer agent pursuant
to Article 10 of this Agreement.
1.10 "Officer" shall mean the Fund's Chairman of the Board, President, any
Vice President, Secretary, any Assistant Secretary, Treasurer, any Assistant
Treasurer and any other person duly authorized by the Board of Trustees of the
Fund to execute or give any Certificate on behalf of the Fund and named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time.
1.11 "Prospectus" shall mean the most current Fund prospectus and
statement of additional information relating to the Shares, actually received
by the Transfer Agent from the Fund and shall include to the extent applicable,
shares designated as comprising any and all classes of any series of the Fund.
1.12 "Shares" shall mean full or fractional shares comprising all or any
part of each series representing the beneficial interest in the Fund and shall
include to the extent applicable, shares designated as comprising any and all
classes of any series of the Fund.
2
<PAGE>
ARTICLE 2
APPOINTMENT OF TRANSFER AGENT
2.1 The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of the Shares of the Fund and as dividend disbursing agent for
the Fund during the term of this Agreement.
2.2 The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform the duties hereinafter set
forth.
2.3. In connection with such appointment, upon or prior to executing this
Agreement, the Fund shall deliver to the Transfer Agent such of the following
as have not already been furnished to the Transfer Agent:
(a) A copy of the Declaration of Trust of the Fund and all amendments
thereto certified by the Secretary of the Fund;
(b) A copy of the By-Laws of the Fund certified by the Secretary of the
Fund;
(c) A copy of resolutions of the Board of Trustees of the Fund, certified
by the Secretary of the Fund, authorizing the execution of this Transfer Agency
Agreement;
(d) A Certificate signed by the Secretary of the Fund specifying the names
and specimen signatures of the Officers of the Fund;
(e) Specimen Share certificates for Shares of each series of the Fund in
the form approved by the Board of Trustees of the Fund, together with a
certificate signed by the Secretary of the Fund as to such approval;
(f) Copies of the most recently filed Post-Effective Amendment to the
Fund's Registration Statement, filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and under the
Investment Company Act of 1940, as amended, together with any applications for
exemptive relief from any of the provisions of such laws filed by the Fund and
the record of any formal action of the Securities and Exchange Commission with
respect to all such applications; and
(g) Opinion of Counsel for the Fund to the effect that (1) beneficial
interest in each Fund is divided into an unlimited number of shares of
beneficial interest, (2) the issue and sale of the Fund's authorized but
unissued Shares have been duly authorized under Massachusetts law, (3) the
outstanding Shares are fully paid and non-assessable and (4) upon the issue and
sale of any authorized and unissued Shares and upon receipt of the authorized
consideration therefor in an amount not less than either the Shares' net asset
value or par value, if any, established and in force at the time of their sale,
the Fund Shares so issued will be validly issued, fully paid and
non-assessable.
2.4. The Fund shall either (a) furnish the Transfer Agent with sufficient
supplies of blank share certificates in the form approved from time to time by
the Board of Trustees of the Fund, and from time to time will renew such
supplies upon request of the Transfer Agent, or (b) authorize the Transfer
3
<PAGE>
Agent to itself create laser-printed Share certificates in the form approved
by the Board of Trustees of the Fund. Any such blank Share certificates
shall be properly signed, by facsimile or otherwise, by authorized
Officers and, if required, shall bear the seal of the Fund or a facsimile
thereof. Notwithstanding the death, resignation or removal of any Officer
authorized to sign such Share certificates, the Transfer Agent may continue to
countersign and issue Share certificates bearing such Officer's signature until
otherwise directed by the Fund. The Fund agrees to indemnify and exonerate,
save and hold the Transfer Agent harmless, from and against any and all claims
or demands that may be asserted against the Transfer Agent with respect to the
genuineness of any Share certificate supplied to the Transfer Agent by the Fund
pursuant to this Agreement.
ARTICLE 3
AUTHORIZATION AND ISSUANCE OF SHARES
3.1. The Transfer Agent shall maintain records of accounts evidencing
ownership of Shares as provided in this Agreement and in the Fund's Prospectus
and, subject to the terms and conditions of this Agreement, when requested
shall countersign, record, issue, and deliver certificates for Shares both upon
original issue and transfer. Evidence of the ownership of Shares shall be
maintained on the Transfer Agent's records in book (uncertificated) form, or,
if requested by an Approved Institution (or the Distributor or its agent acting
on behalf of such Approved Institution) or shareholder, share certificates
shall be issued, subject to the provisions of Article 5 hereof, to evidence the
ownership of Shares.
3.2. Prior to the issuance of any Shares pursuant to Share splits and
prior to any reduction in the number of Shares outstanding, the Fund shall
deliver the following documents to the Transfer Agent:
(a) A copy of the resolution(s) adopted by the Board of Trustees of the
Fund and/or the shareholders of the relevant Fund, certified by the Secretary
of the Fund, authorizing such issuance of additional Shares of such Fund or
such reduction, as the case may be;
(b) In the case of the issuance of Shares, an opinion of counsel for the
Fund with respect to matters set forth in Section 2.3(g) hereof as to such
shares; and
(c) Such additional documents as the Transfer Agent may reasonable
request.
ARTICLE 4
RECAPITALIZATION OR CAPITAL ADJUSTMENT
4.1. In the case of any Share split, recapitalization or other capital
adjustment, the Transfer Agent will, in the case of accounts represented by
uncertificated Shares, cause the account records to be adjusted, as necessary,
to reflect the number of Shares held for the account of each such shareholder
as a result of such adjustment, or, in the case of Shares represented by
certificates, will, if so instructed by the Fund, issue revised Share
certificates in exchange for, or upon transfer of, outstanding Share
certificates in the old form, in either case upon receiving:
4
<PAGE>
(a) A Certificate authorizing the issuance of revised Share certificates
and any other action required to be taken by the Transfer Agent in connection
with any such split, recapitalization or other capital adjustment;
(b) A copy of any amendment to the Declaration of Trust of the Fund,
certified by the Secretary of the Fund, with respect to the adjustment;
(c) Specimen Share certificates in the revised form approved by the Board
of Trustees of the Fund;
(d) An opinion of counsel for the Fund with respect to the matters set
forth in Article 2, Section 2.3(g) hereof as to such Shares; and
(e) Such additional documents as the Transfer Agent may reasonably
request.
4.2. The Fund shall either (a) furnish the Transfer Agent with a
sufficient supply of blank Share certificates in any new form authorized in
connection with any such Share split, recapitalization or other capital
adjustment, and from time to time will replenish such supply upon the request
of the Transfer Agent, or (b) authorize the Transfer Agent to itself create
laser-printed Share certificates in the form approved by the Board of Trustees
of the Fund. Any such blank Share certificates shall be properly signed by
authorized Officers and, if required, shall bear the Fund's seal or facsimile
thereof.
ARTICLE 5
ISSUANCE, REDEMPTION, AND TRANSFER OF SHARES
5.1. (a) On each Business Day, the Transfer Agent shall accept, at such
time as are agreed upon from time to time by the Transfer Agent and the Fund,
(i) purchase orders received by the Transfer Agent directly from an Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) or an individual investor, (ii) redemption requests either
received from a shareholder, whether or not an Approved Institution (or the
Distributor or its agent acting on behalf of such Approved Institution), or
contained in a Certificate, and (iii) requests for exchanges of the Fund's
Shares of a given class for Shares of another fund received from a shareholder,
whether or not an Approved Institution (or the Distributor or its agent acting
on behalf of such Approved Institution), or contained in a Certificate,
provided that (1) such purchase order, exchange request or redemption request,
as the case may be, is in conformity with the Fund's purchase, exchange, and
redemption procedures, as applicable, described in the Prospectus, and (2) if
such type of purchase order, exchange request, or redemption request is not
described in the Prospectus in effect upon the commencement date of the
Agreement, the Transfer Agent has agreed to accept and act as to such order or
request. Upon receipt on any Business Day of any check drawn or endorsed to
the Transfer Agent, the Fund or the Distributor for the purchase of Shares, or
any payment made by Automated Clearing House or Federal Funds wire, the
Transfer Agent shall deposit such check or payment in the bank account
established by the Fund or the Distributor for the collection of such amounts
and shall wire such amounts to the Fund's Custodian on the next Business Day.
The Transfer Agent shall have no responsibility hereunder for the Fund's
compliance with states securities registration laws ("Blue Sky laws") relating
to such purchase
5
<PAGE>
orders, except to the extent that the Transfer Agent will maintain records
in a manner that will enable the Fund to monitor the total number of
Shares of the Fund sold in each state and shall provide the Fund reports as to
such sales as specified in Appendix B to this Agreement.
(b) On each Business Day, the Transfer Agent shall also accept, at such
times as are agreed upon from time to time by the Transfer Agent and the Fund,
a Computer Tape consistent in all respects with the Transfer Agent's tape
layout package, as amended from time to time, which is believed by the Transfer
Agent to be furnished by or on behalf of any Approved Institution, setting
forth data as to purchases, redemptions and exchanges of Shares irrespective of
whether payment of the purchase price accompanies such computer tape. The
Transfer Agent may rely on the data on such Computer Tapes as accurate, and
shall not be responsible hereunder for errors in such Computer Tapes furnished
to it hereunder, unless caused by the Transfer Agent's own negligence, bad
faith or willful misconduct.
(c) On each Business Day, the Fund shall provide or cause to be provided
to the Transfer Agent, at such time as the parties hereto shall agree, the net
asset value per share for the Fund and such other information as the Transfer
Agent may reasonably request.
5.2. On the Business Day following each Business Day, at such time as the
Transfer Agent and the Fund shall agree, an authorized employee of the Transfer
Agent shall confirm the following information by summary sheet transmitted by
electronic or other electromagnetic means to an authorized employee or agent of
the Fund (or by such other form as shall be agreed upon from time to time by
the Fund and the Transfer Agent):
(a) The total dollar amount to be applied toward the purchase of Shares of
the Fund and the number of Shares of the Fund purchased on such prior Business
Day, computed by aggregating the amounts so specified in (i) the purchase
orders received by the Transfer Agent on such prior Business Day from
individual investors and (ii) all Computer Tapes described in Section 5.1(b)
timely received by the Transfer Agent with respect to such prior Business Day;
(b) The total dollar value and number of Shares of the Fund redeemed on
such prior Business Day, computed by aggregating the amounts so specified in
(i) the redemption requests received by the Transfer Agent directly on the
preceding Business Day from shareholders, and (ii) all Computer Tapes described
in Section 5.1(b) relating to such prior Business Day; and
(c) The total dollar value and number of Shares of the Fund to be
exchanged for Shares of another fund and the number of Shares of such other
fund to be issued in such exchanges on such prior Business Day, and the total
dollar value and number of shares of the Fund to be issued in exchange for
shares of another fund on such prior business day (if not included in 5.2(a)
above) computed by aggregating the amounts represented by any exchange requests
received directly by the Transfer Agent from shareholders and the amounts
specified in all Computer Tapes described in Section 5.1(b) relating to such
prior Business Day.
5.3. Following each Business Day, the Transfer Agent will (on a day on
which banks in Denver, Colorado, Chicago, Illinois and New York, New York are
open for business but in any event on or prior to the Fifth Business Day
following such Business Day) advise the Distributor of the amount of cash
necessary to be wired to the Custodian, representing purchase orders for
appropriate Fund's
6
<PAGE>
Shares received by the Transfer Agent as to such Business Day, as set
forth in Section 5.1 above. As to each Business Day, the Transfer Agent will
advise the Fund of the amount of cash representing exchange orders received by
the Transfer Agent as to such Business Day, such advice to be given on the next
Business Day.
5.4. As to each Business Day, the Transfer Agent shall issue to, and
redeem from, the accounts specified in a purchase order, redemption request, or
exchange request received by the Transfer Agent in proper form in accordance
with the Prospectus and, when required by the Prospectus, properly endorsed by
the record owner thereof with the record owner's or owners' signature(s)
guaranteed by a U.S. commercial bank or U.S. trust company, a member of a
national securities exchange, a foreign bank with a U.S. correspondent bank or
a federally-chartered savings and loan association, or shall issue to, and/or
redeem from, the accounts specified in a Computer Tape received by the Transfer
Agent from an Approved Institution, the appropriate number of full and
fractional Shares based on the net asset value per Share of the relevant series
of the relevant Funds specified in an advice received as to such Business Day
from the Fund. Notwithstanding the foregoing, if a redemption specified in a
redemption request received directly by the Transfer Agent or in a Computer
Tape is for a dollar value of Shares in excess of the dollar value of
uncertificated Shares in the specified account plus the dollar value of
certificated Shares in the specified account for which the Transfer Agent has
received the tender of a Share certificate or certificates in proper form as
described above, the Transfer Agent shall not effect such redemption in whole
or part. In such case involving a Computer Tape, the Transfer Agent shall
orally or by electronic or other electromagnetic means advise both the Fund and
the Approved Institution (or the Distributor or its agent if acting on behalf
of such Approved Institution) which supplied such Computer Tape of such
discrepancy. In such case involving a direct shareholder, the Transfer Agent
shall, within five (5) business days, notify such shareholder directly, orally
or in writing.
5.5. The Transfer Agent shall, as of each Business Day specified in a
Certificate described in Section 6.1, issue Shares of the Fund, based on the
net asset value per Share of the Fund specified in an advice received from the
Fund to such Business Day, in connection with a reinvestment of a dividend or
distribution on Shares of the Fund.
5.6. On each Business Day, the Transfer Agent shall advise the Fund by
computer/electromagnetic tape specifying, with respect to the immediately
preceding Business Day: the total number of Shares of the Fund (including
fractional Shares) issued and outstanding at the opening of business on such
day; the total number of Shares of the Fund sold on such day, pursuant to
Section 5.2; the total number of Shares of the Fund redeemed or exchanged on
such day; the total number of Shares of the Fund, if any, sold on such day
pursuant to preceding Section 5.4, and the total number of Shares of the Fund
issued and outstanding at the close of business on such day. Unless the Fund
or its agent shall advise the Transfer Agent of any error in the information
contained in such computer/electromagnetic tape (the "Initial Tape") prior to
the transmission of the next computer/electromagnetic tape by the Transfer
Agent, the Transfer Agent shall be deemed to have fulfilled its
responsibilities hereunder with respect to the accuracy of the data on
subsequent computer/electromagnetic tapes submitted to the Fund that are based,
in whole or in part upon any inaccurate data from the Initial Tape.
5.7. In connection with each purchase, exchange and redemption of Shares
other than pursuant to a Computer Tape submitted by an Approved Institution (or
by the Distributor or its agent acting on
7
<PAGE>
behalf of such Approved Institution), the Transfer Agent shall send to
the shareholder such statements as are described in the Prospectus or as
otherwise reasonably instructed in writing by the Funds. If the Prospectus
indicates that certificates for Shares are available, and if specifically
requested in writing by any shareholder, or if otherwise required hereunder,
the Transfer Agent will countersign, issue and mail to such shareholder, at the
address set forth in the records of the Transfer Agent, a Share certificate for
any full Shares requested.
5.8. In computing the redemption proceeds to be paid to any shareholder or
to an account for an Approved Institution, the Transfer Agent shall first
compute the amount of any withholding for federal income taxes for which the
Transfer Agent has the responsibility under this Agreement to calculate such
withholding, in such manner as the Fund and the Transfer Agent shall agree from
time to time in conformity with instructions provided by the Fund to the
Transfer Agent. The Transfer Agent shall also compute any withholding for
federal income taxes for which the Transfer Agent has such responsibility at
the time of any exchange of a Fund's shares for another fund's shares. In the
case of a redemption of Shares directly by a shareholder of record and not by
means of a Computer Tape submitted by an Approved Institution (or by the
Distributor or its agent acting on behalf of such Approved Institution), upon
deposit of moneys in a redemption account by the relevant Custodian against
which the Transfer Agent is authorized by the Fund to draw checks in connection
with a redemption of Shares of the Fund, the Transfer Agent shall cancel the
redeemed Shares and after making appropriate deduction for any withholding of
taxes required of it by this Agreement or applicable law, make payment of (i)
the redemption proceeds to the order of the shareholder, and (ii) any tax
withheld to the Internal Revenue Service, in accordance with the Fund's
redemption and payment procedures described in the Prospectus or as otherwise
reasonably described in a written instruction from the Fund. In the case of an
exchange of Shares directly by a shareholder of record and not by means of a
Computer Tape submitted by an Approved Institution (or the Distributor or its
agent acting on behalf of such Approved Institution), upon deposit of moneys in
an account by the relevant Custodian against which the Transfer Agent is
authorized by the Fund to draw checks in connection with an exchange of Shares
of a fund, the Transfer Agent shall cancel the exchanged Shares, and withhold
and pay taxes required under this Agreement and applicable law. In the case of
a redemption of Shares pursuant to a Computer Tape, the Transfer Agent shall,
on the next Business Day, send the Fund a Computer Tape setting forth the
amount of redemption proceeds due each Approved Institution. If such Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) has previously furnished the Transfer Agent withholding
instructions with respect to such redemption or any exchange of Shares pursuant
to a Computer Tape, the Transfer Agent shall include in the Computer Tape
furnished to the Fund information as to the amount of such withholding.
5.9. The Transfer Agent shall not be required to issue Shares of any fund
(other than with respect to the reinvestment of dividends or distributions on
shares owned by an existing shareholder if so stated in the Certificate) after
it has received a Certificate stating that the sale of Shares of that fund has
been suspended or discontinued.
5.10. The Transfer Agent shall not be responsible for the payment of any
original issue or other taxes required to be paid by the Fund in connection
with the issuance of any Shares.
5.11. The Transfer Agent shall not be responsible for issuing or
effecting any "stop transfer" or other similar order or restrictions on any
Shares held in the name of an Approved Institution. In the
8
<PAGE>
case of Shares registered in the name of a shareholder other than an
Approved Institution as to which a "stop transfer" or other similar order or
restriction applies, the Transfer Agent will adhere to the terms of such stop
transfer or similar order, except that it may rely on a Certificate to effect a
redemption, exchange or transfer of such Shares, notwithstanding such stop
order or restriction.
5.12. The Transfer Agent shall accept (a) a Computer Tape which is
furnished by or on behalf of any Approved Institution (or the Distributor or
its agent acting on behalf of such Approved Institution) and represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and (b) as to Shares standing
directly in the name of a shareholder other than an Approved Institution,
transfer instructions in proper form in accordance with the Fund's Prospectus
and the Transfer Agent's rules described herein, and shall effect the transfer
specified in said Computer Tape or transfer instructions, provided that any
necessary documents or Share certificates have been tendered to the Transfer
Agent.
5.13. (a) Except as otherwise provided in sub-paragraph (b) of this
Section 5.13 and in Section 5.14, Shares will be transferred, exchanged or
redeemed other than pursuant to Computer Tapes from an Approved Institution (or
the Distributor on its agent acting on behalf of such Approved Institution)
upon presentation to the Transfer Agent of endorsed Share certificates or, in
the case of uncertificated Shares, instructions endorsed in proper form in
accordance with the Prospectus as stated in Section 5.4, accompanied by such
documents as the Transfer Agent reasonably deems necessary to evidence the
authority of the person making such transfer, exchange or redemption, and
bearing satisfactory evidence of the payment of transfer taxes. In the case of
small estates, where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate small estates affidavit under applicable law
or with a surety bond, and without further approval of the Fund, transfer or
redeem Shares registered in the name of a decedent if the current market value
of the Shares being redeemed or transferred does not exceed such amount as may
from time to time be prescribed by the applicable state statutes and
regulations. The Transfer Agent reserves the right to refuse to transfer,
exchange or redeem Shares until it is reasonably satisfied that the endorsement
on the Share certificate or instructions is valid and genuine, and for that
purpose it will require, unless otherwise instructed by an Officer, a signature
guarantee as stated in Section 5.4 of this Agreement. The Transfer Agent also
reserves the right to refuse to transfer, exchange or redeem Shares until it is
reasonably satisfied that the requested transfer, exchange or redemption is
legally authorized, or until it is reasonably satisfied that there is no basis
to any claims adverse to such transfer, exchange or redemption. The Transfer
Agent may, in effecting transfers, exchanges and redemptions of Shares, rely
upon those provisions of the Uniform Act for the Simplification of Fiduciary
Security Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, applicable to the transfer of securities.
(b) Notwithstanding the foregoing or any other provision contained in this
Agreement to the contrary, the Transfer Agent shall be fully protected by the
Fund in requiring any instructions, documents, assurances, endorsements or
guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, exchange or transfer of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be consistent
with the transfer, exchange and redemption procedures described in the
Prospectus, or in any instructions or certificates provided to the Transfer
Agent by the Fund.
9
<PAGE>
5.14. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be expected to require, as a condition
to any transfer, redemption or exchange of any Shares pursuant to a Computer
Tape, any documents, including, without limitation, any documents of
the kind described in Section 5.13(a) to evidence the authority of the person
requesting the transfer, exchange or redemption and/or the payment of any
transfer taxes, and shall be fully protected in acting in accordance with the
applicable provisions of this Agreement.
5.15. Nothing contained in this Agreement shall constitute any agreement
or representation by the Transfer Agent to permit, or to agree to permit, any
Approved Institution to input information into the System, although the
Transfer Agent may, with the Fund's written permission, permit access to the
System by an Approved Institution to retrieve data or information as to such
Approved Institution's accounts.
ARTICLE 6
DIVIDENDS AND DISTRIBUTIONS
6.1. The Fund shall furnish to the Transfer Agent a Certificate either (i)
setting forth with respect to each series of the Fund the date of the
declaration of a dividend or distribution, the date of accrual or payment
thereof, as the case may be, the record date as of which shareholders entitled
to payment or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution for each series of the Fund, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable by the Transfer Agent with respect to such
dividend or distribution on such payment date, or (ii) stating that the
declaration of dividends and distributions shall be on a daily or other
periodic basis and containing information of the type set forth in subsection
(i) hereof.
6.2. Upon the payment date specified in the relevant Certificate, the
Transfer Agent shall, in the case of a cash dividend or distribution, advise
the Fund (by telephone or other electronic transmission) of the amount of cash
necessary to make the payment of the dividend or distribution to the
shareholders of record as of such payment date, including the amounts to be
paid to Approved Institutions. The Fund shall be responsible for having the
appropriate Custodian transfer a sufficient amount of cash to a dividend
disbursement account maintained by the Fund for the relevant Series against
which the Transfer Agent shall cause checks, ACH or federal funds wire payment
to be drawn to the order of such shareholders or Approved Institutions in
payment of the dividend. The Transfer Agent shall not be liable for any
improper payments made in accordance with a Certificate described in Section
6.1. If the Transfer Agent shall not receive from the appropriate Custodian
sufficient cash to make payments of any cash dividend or distribution to
shareholders of the Fund as of the record date, the Transfer Agent shall, upon
notifying the Fund, withhold payment to all shareholders of record as of the
record date until sufficient cash is provided to the Transfer Agent unless
otherwise instructed by the Fund by a Certificate and acceptable to the
Transfer Agent. In the case of dividends or distributions reinvested in
additional Shares of a series of the Fund, the Transfer Agent shall follow the
procedures set forth in Section 5.5.
6.3. The Transfer Agent shall in no way be responsible for the
determination of the rate or form of dividends or capital gain distributions
due shareholders.
10
<PAGE>
6.4. The Transfer Agent shall, upon request of the Fund, file such
appropriate information returns concerning the payment of dividends and capital
gain distributions and redemptions with the proper Federal, state and local
authorities as are required by law to be filed by the Fund but shall in no
dividends or distributions or on redemption proceeds due shareholders, except
and only to the extent required of it by applicable law for accounts of
shareholders other than Approved Institutions. If any amount is to be
withheld from any dividend or distribution paid to, or exchange or redemption
proceeds or other cash distribution from, the account of an Approved
Institution, such Approved Institution (or the Distributor or its agent acting
on behalf of such Approved Institution) may advise the Transfer Agent of the
amount to be withheld therefrom, and if such advice is provided in a timely
manner to the Transfer Agent, the Transfer Agent will provide a separate check
for such amount to the Approved Institution, which shall be responsible for the
proper application of such withheld amounts.
ARTICLE 7
CONCERNING THE FUND
7.1. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign or give Share certificates or
Certificates, together with a specimen signature of each new Officer.
7.2. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent in a timely manner the Fund's currently effective Prospectus,
copies of any exemptive relief obtained by the Fund under applicable securities
laws and copies of any amendments to the Fund; Declaration of Trust, By-Laws
and any other documents to be furnished by the Fund under this Agreement to
enable the Transfer Agent to carry out its duties hereunder, and, for purposes
of this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus, exemptive relief or other document
until it is actually received by the Transfer Agent.
7.3 The Transfer Agent has been advised by the Fund and agrees that the
Fund's Declaration of Trust is on file with the Secretary of State of the
Commonwealth of Massachusetts and that this Agreement has been executed by the
officers of the Fund, as officers and not individually. The obligations of the
Agreement are not binding upon the Trustees, officers or shareholders of the
Fund individually but are binding only upon the assets and property of the Fund
or a particular series of Shares. The Transfer Agent agrees to look only to
the assets of the Fund or a particular series of Shares for payment under such
Agreement and that the shareholders, Trustees and officers shall not be liable
therefore.
ARTICLE 8
CONCERNING THE TRANSFER AGENT
8.1. Subject to the standard of care set forth in Section 8.4, the
Transfer Agent shall not be liable and shall be fully protected in acting upon
any Computer Tape, Certificate, oral instructions, writing or document
reasonably believed by it to be genuine and to have been signed (in the case of
written instructions or documents) or made by the proper person or persons and
shall not be held to have
11
<PAGE>
any notice of any change of authority of any person until receipt of written
notice thereof from the Fund or such person. Subject to the standard
of care set forth in Section 8.4, the Transfer Agent shall be similarly
protected in processing Share certificates which it reasonably believes to bear
the proper manual or facsimile signatures of the Officers of the Fund and the
proper countersignature of the Transfer Agent or any prior transfer agent.
8.2. The Transfer Agent covenants that it shall carry out its
responsibilities under this Agreement in accordance and compliance with the
provisions of applicable laws and regulations governing its operation as a
transfer agent.
8.3. The Transfer Agent shall keep and maintain on behalf of the Fund such
records which the Fund or the Transfer Agent is, or may be, required to keep
and maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rule 31a-1 under the Investment Company Act of
1940, relating to the maintenance of records in connection with the services to
be provided hereunder. The Transfer Agent agrees to make such records
available for inspection by the Trust at reasonable times and otherwise to keep
confidential all records and other information relative to the Fund and its
shareholders, except when the Transfer Agent reasonably believes it has been
requested to divulge such information by duly-constituted authorities or court
process, or requested by a shareholder with respect to information concerning
an account as to which such shareholder has either a legal or beneficial
interest or when requested by the Fund, the shareholder, or the dealer of
record as to such account.
8.4 (a) The Transfer Agent shall not be liable for any loss or damage,
including, without limitation, attorneys' fees, expenses and court costs,
resulting from the Transfer Agent's actions or omissions to act under or in
connection with this Agreement and its duties and responsibilities hereunder,
except for any loss or damage arising out of its own failure to act in good
faith, or its negligence or willful misfeasance.
(b) The Transfer Agent shall, provided such coverage is readily available
to the Transfer Agent at reasonable rates and upon reasonable terms and
conditions, maintain an insurance policy or surety bond, in the face amount of
$10 million per covered transaction against losses suffered by the Transfer
Agent in excess of the policy deductibles arising from errors or omission on
the part of the Transfer Agent in carrying out its responsibilities under this
Agreement and other agreements. The Transfer Agent shall upon request, furnish
promptly to the Fund copies of all insurance policies maintained pursuant to
this Section 8.4(b) that have not previously been furnished to the Fund.
(c) Any costs or losses incurred by the Fund for the processing of any
purchase, redemption, exchange or other share transactions at a price per share
other than the price per share applicable to the effective date of the
transaction (the foregoing being generally referred to herein as "as of"
transactions) will be handled in the following manner:
1. For each calendar year, if all "as of" transactions
for the year resulting from the actions or inactions of the
Transfer Agent, taken in the aggregate, result in a net loss
to the Fund ("net loss"), Transfer Agent will reimburse the
Fund for such net loss, except to the extent that such net
loss may be offset by application of
12
<PAGE>
a "net benefit" to the Fund carried over from prior calendar
years pursuant to sub-paragraph 2 immediately below.
2. For each calendar year, if all "as of" transactions
for the year resulting from the actions or inactions of the
Transfer Agent, taken in the aggregate, result in a net
benefit to the Fund ("net benefit"), the Fund shall not
reimburse the Transfer Agent for the amount of such net
benefit; however, any "net benefit" for any calendar year may
be used to offset, in whole or in part, any "net loss"
suffered by the Fund in any future calendar year so as to
reduce the amount by which the Transfer Agent shall be
required to reimburse the Fund for such "net loss" in such
year pursuant to sub-paragraph 1 immediately above.
3. Any "net loss" for which the Transfer Agent
reimburses the Fund in any calendar year shall not be carried
over into future years so as to offset any "net benefit" in
such future years.
8.5 The Fund shall indemnify and exonerate, save and hold harmless the
Transfer Agent and its officers, directors, employees and agents (hereinafter
the Transfer Agent and such persons are referred to as "Indemnitees") from and
against any and all liabilities or losses arising from claims or demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs associated with defending against such claims and demands,) of any nature
which any Indemnitee may sustain or incur or which may be asserted against any
Indemnitee by any person arising out of or in any manner related to any action
taken or omitted to be taken by the Transfer Agent in good faith and without
negligence or willful misconduct in reasonable reliance upon (i) any provision
of this Agreement; (ii) the Prospectus; (iii) any instruction or order
including, without limitation, any Computer Tape reasonably believed by the
Transfer Agent to have been received from an Approved Institution (or the
Distributor or its agent acting on behalf of such Approved Institution); (iv)
any instrument or order reasonably believed by the Transfer Agent to be genuine
and to be signed, countersigned or executed by any duly authorized Officer, (v)
any Certificate or other instructions of an Officer, (vi) any opinion of legal
counsel for the Fund; (vii) any records or data supplied by the Fund's prior
transfer agent; or (viii) any order of any court, arbitration panel or other
judicial entity.
8.6. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matters arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or omitted by it in
good faith and without negligence or willful misconduct in accordance with such
written instructions. The Transfer Agent may consult with counsel to the Fund,
at the expense of the Fund and shall be fully protected with respect to
anything done or omitted by it in good faith and without negligence or willful
misfeasance in accordance with the advice or opinion of counsel to the Fund.
Such application by the Transfer Agent for written instructions from an Officer
of the Fund may, at the option of the Transfer Agent, set forth in writing any
action proposed to be taken or omitted by the Transfer Agent with respect to
its duties or obligations under this Agreement and the date on and/or after
which such action shall be taken, and the Transfer Agent shall not be liable
(other than for its bad faith, negligence or willful misfeasance) for any
action taken or omitted in accordance with a proposal included in any such
application on or after the date specified therein unless, prior to taking or
omitting any such
13
<PAGE>
action, the Transfer Agent has received written instructions in response to
such application specifying the action to be taken or omitted.
8.7. Any report, confirmation or other document furnished to the Fund or
to an Approved Institution as part of the Transfer Agent's responsibilities
under this Agreement shall be deemed final and conclusive on the 8th Business
Day after such report, confirmation or document has been furnished
to the Fund or Approved Institution, as the case may be, and the Transfer Agent
shall not be liable to the Fund or such Approved Institution under this
Agreement as to any error or omission in such report, confirmation or document
that is not reported to the Transfer Agent within such 7-day period.
8.8. The Transfer Agent shall deliver Share certificates by courier or by
certified or registered mail to the shareholder's address in the records of the
Transfer Agent. The Transfer Agent shall advise the Fund of any Share
certificates returned as undeliverable after being transmitted by courier or
mailed as herein provided for.
8.9. The Transfer Agent may issue new Share certificates in place of Share
certificates represented to have been lost, stolen, or destroyed upon receiving
instructions satisfactory to the Transfer Agent. If the Transfer Agent
receives written notification from the owner of the lost, destroyed, or stolen
Share certificate within a reasonable time after the owner has notice of such
loss, destruction or theft, the Transfer Agent shall issue a replacement Share
certificate upon receipt of an affidavit or affidavits of loss or nonreceipt
and an indemnity agreement executed by the registered owner or his legal
representative, and supported (a) in the case of a certificate having a value
at the time of replacement of less than $100, by a fixed penalty surety bond
for twice the then-current market value of Shares represented by said
certificate and (b) in the case of a certificate having a value at time of
replacement of $100 or more, by an open penalty bond, in form satisfactory to
the Transfer Agent or (c) by such other documentation or reasonable assurances
in a particular case as may be set forth in a Certificate. If the Fund
receives such written notification from the owner of the lost, destroyed or
stolen Share certificate within a reasonable time after the owner has notice of
it, the Fund shall promptly notify the Transfer Agent. The Transfer Agent may
issue new Share certificates in exchange for, and upon surrender of, mutilated
Share certificates.
8.10. The Transfer Agent will supply shareholder lists to the Fund from
time to time upon receiving a request therefor from an Officer of the Fund.
8.11. At the request of an Officer, the Transfer Agent will address and
mail such appropriate notices to shareholders as to the Fund may direct, at the
Fund's expense.
8.12. Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency of
the amount to be received therefor, or the authority of an Approved Institution
or of the Fund, as the case may be, to request such sale or issuance;
14
<PAGE>
(b) The legality of a transfer, exchange or of a redemption of any Shares
by an Approved Institution, the propriety of the amount to be paid therefor, or
the authority of an Approved Institution to request such transfer, exchange or
redemption;
(c) The legality of the declaration of any dividend or capital gains
distribution by the Fund, or the legality of the issue of any Shares in payment
of any Share dividend or distribution; or
(d) The legality of any recapitalization or readjustment of the Shares.
8.13. The Transfer Agent shall be entitled to receive, and the Fund
hereby agrees to pay to the Transfer Agent for its performance hereunder,
including its performance of the duties and functions set forth in Appendix B
hereto, (i) its reasonable out-of-pocket expenses (including without limitation
legal expenses, court costs, and attorney's fees associated with litigation or
arbitration) incurred in connection with this Agreement and its performance
hereunder and (ii) such compensation as is specified in Appendix C hereto as
such fees may be amended from time to time by agreement in writing by the
Transfer Agent and the Fund.
8.14. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set
forth in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
8.15. The Transfer Agent shall indemnify and exonerate, save and hold
harmless the Fund, and its officers, directors, employees and agents, from and
against any and all liabilities or losses arising from claims and demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs), of any nature which the Fund or any officer, director, employee or
agent may sustain or incur or which may be asserted against them by any person
arising out of or in any manner related to the Transfer Agent's failure to
comply with the terms of this Agreement or which arise out of the Transfer
Agent's negligence or willful misconduct provided, however, that the Transfer
Agent shall not indemnify and exonerate, save and hold harmless, the Fund, its
officers, directors, employees, and agents for anything arising out of or in
any manner related to the Fund's failure to comply with the terms of this
Agreement or which arises out of the Fund's, or any officer's, director's,
employee's or agent's (other than the Transfer Agent) negligence or willful
misconduct or the Transfer Agent's reliance on information or instructions
received from, or issued on behalf of, the Fund.
ARTICLE 9
TERMINATION
9.1. The initial term of this Agreement shall commence on the Effective
Date and shall continue through June 30, 1997 (the "Initial Term") unless
earlier terminated pursuant to Section 9.2. Thereafter, unless earlier
terminated by either party at the end of the Initial Term upon at least 90
days' prior written notice, this Agreement shall continue from day to day
thereafter (such period shall be referred to as the "Renewal Term"), until
either of the parties hereto terminates this Agreement by giving at least 6
months' prior written notice to the other party, whereupon this Agreement shall
terminate automatically upon the expiration of the 6-month period specified in
the written notice. In the event such
15
<PAGE>
notice of termination is given by the Fund, it shall be accompanied by
a copy of a resolution of the Board of Trustees of the Fund, certified by the
Secretary or any Assistant Secretary, electing to terminate this Agreement. In
the event such notice is given by the Transfer Agent, the Fund shall, on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Trustees certified by the Secretary or any Assistant
Secretary designating a successor transfer agent or transfer agents. In the
absence of such designation by the Fund, the Transfer Agent may designate a
successor transfer agent. If the Fund fails to designate a successor transfer
agent, the Fund shall, upon the date specified for termination of this
Agreement and delivery of the records maintained hereunder, be deemed to be its
own transfer agent and the Transfer Agent shall thereby be relieved of all
duties and responsibilities pursuant to this Agreement.
9.2 Notwithstanding Section 9.1 hereof, this Agreement may be terminated
at any time by the Fund upon not less than 60 days' written notice from the
Fund to the Transfer Agent notifying the Transfer Agent: (i) if a majority of
the Trustees who are not "interested persons" (as that term is defined in the
Investment Company Act of 1940) upon completion of the procedures set forth
below have reasonably made a specific finding that the Transfer Agent has
failed on a continuing basis to perform its duties pursuant to this Agreement
in a satisfactory manner consistent with then current industry standards and
practices or (ii) if there is instituted or pending an action or proceeding by
or before any court or governmental, administrative or regulatory agency
against or involving the parties hereto, their affiliates, the Trustees of the
Fund or any of them and challenging the making of this Agreement or alleging
that any material term of the Agreement is contrary to law or any governmental
agency has threatened in writing to commence such an action or proceeding.
Prior to any termination pursuant to clause (i), the Board of Trustees of the
Fund shall provide the Transfer Agent with a written statement of the specific
aspects of the Transfer Agent's performance of its duties that are
unsatisfactory, the specific incident or incidents giving rise to the Board of
Trustees' conclusion and any written material that the Board of Trustees'
relied upon in making such a determination. The Transfer Agent shall have 30
days to respond to such written statement. If no response is made, or if,
after reasonable consideration of the response of the Transfer Agent, such
response is unsatisfactory to the Board of Trustees, then the Board of Trustees
of the Fund may terminate the Agreement pursuant to clause (i) thereof. For
purposes of making a finding as contemplated by clause (i) above, the Transfer
Agent shall be, absent unusual circumstances, conclusively presumed to have
failed on a continuing basis to perform its duties pursuant to this Agreement
in a satisfactory manner consistent with the industry standards and practices
prevailing on the date of this Agreement if any of the following should occur:
(1) The Transfer Agent through its fault is unable
(more than once in a twelve-month period) to process daily activity for
any two successive Business Days and to confirm information generated by
such activity by the fourth Business Day following the later of such two
Business Days. (For example, assuming no holidays, daily activity on
a Monday and Tuesday is not confirmed by the following Monday.)
(2) The Transfer Agent through its fault is unable (more
than two times in any twelve-month period) to provide system access to
personnel of an Approved Institution for six hours between 9:00 a.m. and 5:00
p.m. Chicago time on three successive Business Days.
16
<PAGE>
(3) The Transfer Agent through its fault is unable (more
than twice in any one year) to create and mail dividend checks within four
Business Days after the Fund's payable date (assuming that the required
information has been furnished to the Transfer Agent on the record date).
(4) The Transfer Agent through its fault is unable to
instruct various financial institutions on daily money movements from and to
the Funds' Custodians for two successive Business Days by the Fourth Business
Day following the later of such two Business Days. (For this purpose,
instructions based on reasonable estimates are treated as fulfilling the
Transfer Agent's obligations hereunder.)
(5) The Transfer Agent through its fault is unable (more
than twice in any twelve-month period) to transmit dividend activity to an
Approved Institution within five Business days from the relevant Fund's
payable date.
For purposes of the foregoing, an event described in any of the foregoing
clauses 1 through 5 shall be deemed not to have occurred if the Transfer
Agent's inability to perform is a result, directly or indirectly of faulty or
inadequate performance by service provider including, but not limited to,
telephone companies, pricing services, Nuveen & Co., Approved Institutions, and
banks other than the Transfer Agent and its agents and employees or a result,
directly or indirectly, of other events out of the Transfer Agent's reasonable
control. Also for the purposes of the foregoing, if the Transfer Agent
processes transactions or instructions (as the case may be) as required
hereunder within the time periods indicated but more than 10% of the
transactions, checks or instructions, as the case may be, are inaccurate in any
material respect, and are not corrected within the requisite time then the
Transfer Agent shall be deemed to have been unable to perform the relevant
service within the requisite time.
9.3. In the event of termination of this Agreement, the Transfer Agent
will facilitate transfer of the records maintained by it hereunder and
cooperate with such successor transfer agent as may be designated pursuant to
the provisions of Section 9.1 hereof with respect to delivery of such records
and assumption by such successor transfer agent of its duties. In the event
the Fund or the Transfer Agent terminates the Transfer Agency Agreement at any
time, the Fund shall be responsible for the payment of fees and expenses of the
Transfer Agent relating to the conversion to the new Transfer Agent.
ARTICLE 10
ADDITIONAL SERIES
10.1. In the event that the Fund establishes one or more Series in
addition to the Series named herein with respect to which it desires to have
the Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing at least 60 days in advance of
the sale of Shares of such Series and shall deliver to the Transfer Agent the
documents listed in Section 2.3 with respect to such Series. Unless the
Transfer Agent declines in writing within a reasonable time to provide such
services, the Shares of such Series shall be subject to this Agreement.
17
<PAGE>
ARTICLE 11
MISCELLANEOUS
11.1. The Fund agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of the
Transfer Agent hereunder, it shall advise the Transfer Agent of such proposed
change at least 30 days prior to the intended date of the same, and shall
proceed with such change only if it shall have received the written consent of
the Transfer Agent hereto, and shall have received and agreed to the schedule
of charges, if any, specified by the Transfer Agent necessary to effect such
change.
11.2. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its office at 333 West
Wacker Drive, Chicago, Illinois 60606, Attention: Mr. Stuart Rogers, or at
such other place as the Fund may from time to time designate in writing.
11.3. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Transfer Agent shall be sufficiently given
if addressed to the Transfer Agent, Attention: President, and mailed or
delivered to it at its office at 3410 South Galena Street, Denver, Colorado
80231, with a copy to be sent to Andrew J. Donohue at OppenheimerFunds, Inc.
Two World Trade Center, New York, NY 10048 or at such other place as the
Transfer Agent may from time to time designate in writing.
11.4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties.
11.5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund or the Transfer Agent
without the written consent of the other party. A change of ownership of the
Transfer Agent as a result of an internal reorganization of the Transfer Agent,
its parent corporation or affiliates shall not be deemed to be an "assignment"
hereunder. A change in "control" (as defined under the Investment Company Act
of 1940) of the Transfer Agent's parent corporation shall not be deemed an
"assignment" hereunder. A sale of a controlling interest in the capital stock
or of all or substantially all of the assets of the Transfer Agent to a third
party unaffiliated with the Transfer Agent or its parent corporation shall be
deemed to be an "assignment" hereunder.
11.6. This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado applicable to agreements to be wholly
performed in that state.
18
<PAGE>
11.7. This Agreement may be executed in any number of counterparts each
of which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
11.8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
11.9. Neither the Fund nor the Transfer Agent will be liable or
responsible hereunder for delays or errors by reason of circumstances
reasonably beyond its control, including, without limitation, acts of civil or
military authority, national emergencies, labor difficulties, fire, mechanical
breakdown, flood, catastrophe, acts of God, insurrection, war, riots, or
failure of transportation, communication or power supply.
11.10. The Fund shall establish and maintain such bank accounts, with
such bank or banks as are selected by the Fund, as are necessary so that the
Transfer Agent may perform the services to be provided hereunder. To the
extent that performance of such services shall require the Transfer Agent
directly to disburse amounts for payments of dividends, redemption proceeds or
other purposes, the Fund shall provide such bank or banks with all instructions
and authorizations necessary to evidence the Transfer Agent's authority to
effect such transactions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the day
and year first above written.
Attest: NUVEEN FLAGSHIP MULTISTATE TRUST II
By:
- ----------------------------------- ----------------------------------
Name Title Name Title
Attest: SHAREHOLDER SERVICES, INC.
By:
- ----------------------------------- ----------------------------------
Name Title Barbara Hennigar, President
19
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST II
TRANSFER AGENCY AGREEMENT
Appendix A
Officer's Certificate
I, ____________________________, the Secretary of Nuveen Flagship
Multistate Trust II, a Massachusetts business trust (the "Fund"), do hereby
certify that:
The following individuals have been duly authorized by the Trustees of the
Fund in conformity with the Fund's Declaration of Trust and By-Laws to execute
any Certificate, instruction, notice or other instrument, including an
amendment to Appendix B to this Agreement, or to give oral instructions on
behalf of the Fund, and the signatures set forth opposite their respective
names are their true and correct signatures.
NAME TITLE SIGNATURE
- ---- ----- ---------
__________________________ Chairman _______________________________
__________________________ President _______________________________
__________________________ Secretary _______________________________
__________________________ Trustee _______________________________
__________________________ Vice President _______________________________
__________________________ ________________ _______________________________
__________________________ ________________ _______________________________
__________________________ ________________ _______________________________
__________________________ ________________ _______________________________
__________________________ ________________ _______________________________
__________________________ ________________ _______________________________
__________________________ ________________ _______________________________
________________________________, Secretary
Name
20
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST II
TRANSFER AGENCY AGREEMENT
Appendix B
Transfer Agent Services
SERVICE: SSI WILL:
- -------
New Account Set-Ups Process new sales applications.
Place telephone calls to account
representatives as needed to clarify
instructions for new account set-ups.
Purchases - New and Subsequent Process mailed-in, lockbox, bank
wire, list billing, ACH, and telephone
payments as received. Coordinate and
balance UIT reinvestment payments.
Transfers Negotiate and process all transfer
requests.
Exchanges - Mail and Telephone Negotiate and process exchange requests.
Record telephone exchange requests.
Redemptions - Mail and Telephone Negotiate and process mailed in,
ACH and telephone redemption requests.
Record telephone redemption requests.
Wire Order Purchases and Redemptions Process wire order purchases and
redemptions for designated settlement
period accepted on recorded telephone
lines and via NSCC FUND/SERV. Process
purchases and redemptions for same day
wire settlement.
Account Maintenance Process all written and telephone
(Address Changes, Dividend maintenance. For address (Address
Option Changes, Name Changes, Changes, Dividend Option changes, prepare
Broker or Dealer Changes, etc.) and mail a notice of the address change
to the former address.
Certificate Issuances Issue certificates as requested by
shareholders.
Telephone Services Provide efficient handling of all
incoming shareholder and broker/dealer
telephone calls. Make outgoing
clarification calls/coordination with
Chase on UIT/ETF consolidations. Provide
timely problem resolution for all
servicing calls. Provide automated trend
reporting.
1
<PAGE>
SERVICE: SSI WILL:
- -------- ---------
Correspondence with Shareholders Respond to all shareholder and broker/
and Broker/Dealers dealer written inquiries. Document all
correspondence affecting shareholder
accounts on the Shareholder Accounting
System.
Shareholder Confirms Prepare and mail confirmations of daily
(Daily/Monthly/ account activity. Prepare and mail
Quarterly/Annual) monthly, quarterly, and annual
confirmations as directed by the fund.
Dealer Confirms Prepare and mail weekly dealer
confirmations listing activity on client
accounts as directed by the Fund.
Distribution Disbursements Prepare and mail cash distribution
checks. Process reinvested distributions.
Commission Statements Provide bimonthly commission statements
listing each purchase and the portion of
the sales charge paid to the broker/
dealer.
Commission Checks Provide bimonthly commission checks to
broker/dealers.
Daily Transmission of Reports Transmit daily transaction activity
reports, balancing reports, and sales
information via telephone lines to a
printer at Nuveen.
Fund Summary Sheets Prepare daily reports that summarize by
type of transaction all capital stock
activity for each fund. Transmit/
download wire/capital stock activity
information to Chase.
Sales Reporting Provide daily, weekly, monthly,
quarterly, and annual reports of sales
information.
12b-1 Reporting Complete 12b-1 processing including
calculating the 12b-1 payment amounts
and sending checks to the broker/dealer
home offices. Provide a listing broken
down by sales representative within each
branch.
Invalid Taxpayer Identification Mail Forms W-9 as required to validate
Number Solicitation and taxpayer identification numbers;
Backup Withholding institute backup withholding as required
by IRS regulations, and timely send all
notices.
Regulatory Reporting Compute, prepare, and mail all necessary
reports to shareholders, federal, and/or
state authorities (Forms 1099-DIV, 1099-
B, and 1042S).
2
<PAGE>
SERVICE: SSI WILL:
- -------- ---------
Front-End Imaging of Documents Front-end Image all incoming documents.
Cost Basis Reporting Provide cost basis information as available
to shareholders annually for use in
determining capital gains and losses.
Blue Sky Reporting Provide monthly report of purchases and
redemptions by state.
Financial Reporting Mailings Provide mail handling for 2 financial
reports per fund per year to Nuveen
shareholders.
Prospectus Mailings Provide mail handling for 1 prospectus per
fund per year to Nuveen shareholders.
Proxy Solicitation and Tabulation Perform 1 proxy solicitation and
tabulation per fund per year.
Networking Accounts Provide transmission and appropriate
services for each network level.
Cash Availability Transmit mutual fund activity to designated
entity on a daily basis for cash
availability purposes.
Commission/12b-1 Balancing Provide balancing reports for commission
and 12b-1 payments.
3
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST II
TRANSFER AGENCY AGREEMENT
Appendix C
Fee Schedule
The Transfer Agent will provide the transfer agent services listed on
Appendix B for the Fund at the rates set forth below:
Annual Transfer Agent Fees:
- ---------------------------
ANNUAL-PER-ACCOUNT FEES *
-------------------------
First 150,000 Accounts** $19.25 per account
Next 100,000 Accounts** $18.75 per account
Next 50,000 Accounts** $18.25 per account
Over 300,000 Accounts** $17.75 per account
Out-Of-Pocket Expenses:
- ----------------------
Out-of-pocket expenses may be incurred by either the Fund or the Transfer
Agent and are not included in the annual Transfer Agent Fees. Those
out-of-pocket expenses directly incurred by the Transfer Agent will be billed
to the Fund on a monthly basis. These out-of-pocket expenses include, but are
not limited to, the printing of forms, envelopes, postage and proxy
solicitation fees for the shareholder mailings, costs of abandoned property
reports or searches for missing or inactive shareholders, equipment and system
access costs, microfilm, telephone line and usage charges, overnight express
mail charges, check signature plates and stamps, and programmer/analyst and
testing technician time beyond that agreed to in writing. Bank charges and
earnings credit will be billed directly to the Fund by United Missouri Bank (or
other banks). The Transfer Agent may require the prior payment of anticipated
out-of-pocket expenses, from time to time.
_________________
* Payable on a monthly basis for each non-retirement plan account in existence
at the end of the month. Retirement Plan accounts may be subject to a separate
fee schedule to be negotiated.
** The determination of the number of accounts for purposes of determining the
per account fee shall be based on all Nuveen Funds using the same fee schedule
and shall be allocated on a Fund by Fund basis in a manner determined by the
Transfer Agent based on the number of accounts in each fund.
These fees are valid for XXX months after which they are subject to change,
from time to time.
The Transfer Agent shall, from time to time, but no more frequently than
monthly, send an invoice to the Fund itemizing the compensation and expense
reimbursement. The Fund shall pay such invoice (except to the extent that the
amount thereof is in dispute) by wire not later than 30 days after receipt of
the invoice.
4
<PAGE>
Exhibit 9(b)
NUVEEN FLAGSHIP MULTISTATE TRUST II
TRANSFER AGENCY AGREEMENT
This agreement is made as of the 1st day of February, 1997, between NUVEEN
FLAGSHIP MULTISTATE TRUST II, a Massachusetts business trust having its
principal office and place of business at 333 West Wacker Drive, Chicago,
Illinois 60606, on behalf of the eight series named NUVEEN CALIFORNIA MUNICIPAL
BOND FUND, NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND, NUVEEN MASSACHUSETTS
MUNICIPAL BOND FUND, NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND FUND, NUVEEN
NEW YORK INSURED MUNICIPAL BOND FUND, NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND
FUND, NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND, NUVEEN FLAGSHIP NEW JERSEY
INTERMEDIATE MUNICIPAL BOND FUND (hereinafter referred to as the "Fund"), and
SHAREHOLDER SERVICES, INC., a Colorado corporation having its place of business
at 3410 South Galena Street, Denver, Colorado 80231 (hereinafter referred to as
the "Transfer Agent").
In consideration of the mutual promises hereinafter set forth, the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have
the following meanings:
1.1 "Approved Institution" shall mean a broker-dealer, broker, bank or
other entity named in a Certificate, as hereinafter defined, and having
account(s) in the Trust or the Distributor or an agent it appoints, in each case
acting on behalf of the Fund for the benefit of its clients. From time to time
the Fund may amend a previously delivered Certificate by delivering to the
Transfer Agent a Certificate naming an additional entity as an Approved
Institution or deleting any entity named as an Approved Institution in a
previously delivered Certificate.
1.2 "Business Day" shall mean each day on which the New York Stock
Exchange is open for trading.
1.3 "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the Transfer
Agent by the Fund and which is signed by any Officer, as hereinafter defined,
and actually received by the Transfer Agent. "Certificate" shall also include
any notice submitted to the Transfer Agent by electronic or telephone
transmission, reasonably believed by the Transfer Agent to be genuine and to
have been properly made, signed or authorized by an Officer.
1
<PAGE>
1.4 "Computer Tape" shall mean any computer/electromagnetic tape or
transmission transmitted by an Approved Institution, via a remote terminal or
other similar link, into a data processing, storage, or collection system or
similar system (the "System"), located on the Transfer Agent's premises. For
purposes of Section 5.1, such Computer Tape shall be deemed to have been
furnished at such times as are agreed upon from time to time by the Transfer
Agent and Fund only if the information reflected thereon was input into the
system at such times as are agreed upon from time to time by the Transfer Agent
and the Fund.
1.5 "Custodian" shall mean, with respect to the Fund, Chase Manhattan Bank
of New York as custodian under the terms and conditions of the Custody Agreement
between the Custodian and the Fund, or in any case any successor(s) to such
Custodian performing similar functions for or on behalf of the Fund.
1.6 "Direct Accounts" means accounts registered in the name(s) of
shareholders other than Approved Institutions.
1.7 "Distributor" shall mean John Nuveen & Co. Incorporated (hereinafter
referred to as "Nuveen & Co."), as distributor under the terms and conditions of
the Distributor's Contract between the Fund and Nuveen & Co., wherein Nuveen &
Co. has the exclusive right to sell shares of the Fund to investors against
orders therefor at net asset value, or any successor(s) to Nuveen & Co.
performing a similar function for or on behalf of the Fund.
1.8 "Effective Date" shall mean February 1, 1997 or the date the Fund
begins operations.
1.9 "Series" shall mean each individual portfolio of the Fund covered by
this agreement, if any, each being a separate portfolio of securities and other
assets, interests in which are represented by a separate series of the Fund's
shares, and such terms shall include any other such portfolio that may be
created for which the Transfer Agent agrees to act as transfer agent pursuant to
Article 10 of this Agreement.
1.10 "Officer" shall mean the Fund's Chairman of the Board, President, any
Vice President, Secretary, any Assistant Secretary, Treasurer, any Assistant
Treasurer and any other person duly authorized by the Board of Trustees of the
Fund to execute or give any Certificate on behalf of the Fund and named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time.
1.11 "Prospectus" shall mean the most current Fund prospectus and
statement of additional information relating to the Shares, actually received by
the Transfer Agent from the Fund and shall include to the extent applicable,
shares designated as comprising any and all classes of any series of the Fund.
1.12 "Shares" shall mean full or fractional shares comprising all or any
part of each series representing the beneficial interest in the Fund and shall
include to the extent applicable, shares designated as comprising any and all
classes of any series of the Fund.
2
<PAGE>
ARTICLE 2
APPOINTMENT OF TRANSFER AGENT
2.1 The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of the Shares of the Fund and as dividend disbursing agent for
the Fund during the term of this Agreement.
2.2 The Transfer Agent hereby accepts appointment as transfer agent
and dividend disbursing agent and agrees to perform the duties hereinafter set
forth.
2.3. In connection with such appointment, upon or prior to executing
this Agreement, the Fund shall deliver to the Transfer Agent such of the
following as have not already been furnished to the Transfer Agent:
(a) A copy of the Declaration of Trust of the Fund and all
amendments thereto certified by the Secretary of the Fund;
(b) A copy of the By-Laws of the Fund certified by the Secretary of
the Fund;
(c) A copy of resolutions of the Board of Trustees of the Fund,
certified by the Secretary of the Fund, authorizing the execution of this
Transfer Agency Agreement;
(d) A Certificate signed by the Secretary of the Fund specifying the
names and specimen signatures of the Officers of the Fund;
(e) Specimen Share certificates for Shares of each series of the
Fund in the form approved by the Board of Trustees of the Fund, together with a
certificate signed by the Secretary of the Fund as to such approval;
(f) Copies of the most recently filed Post-Effective Amendment to
the Fund's Registration Statement, filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and under the
Investment Company Act of 1940, as amended, together with any applications for
exemptive relief from any of the provisions of such laws filed by the Fund and
the record of any formal action of the Securities and Exchange Commission with
respect to all such applications; and
(g) Opinion of Counsel for the Fund to the effect that (1)
beneficial interest in each Fund is divided into an unlimited number of shares
of beneficial interest, (2) the issue and sale of the Fund's authorized but
unissued Shares have been duly authorized under Massachusetts law, (3) the
outstanding Shares are fully paid and non-assessable and (4) upon the issue and
sale of any authorized and unissued Shares and upon receipt of the authorized
consideration therefor in an amount not less than either the Shares' net asset
value or par value, if any, established and in force at the time of their sale,
the Fund Shares so issued will be validly issued, fully paid and non-assessable.
3
<PAGE>
2.4. The Fund shall either (a) furnish the Transfer Agent with
sufficient supplies of blank share certificates in the form approved from time
to time by the Board of Trustees of the Fund, and from time to time will renew
such supplies upon request of the Transfer Agent, or (b) authorize the Transfer
Agent to itself create laser-printed Share certificates in the form approved by
the Board of Trustees of the Fund. Any such blank Share certificates shall be
properly signed, by facsimile or otherwise, by authorized Officers and, if
required, shall bear the seal of the Fund or a facsimile thereof.
Notwithstanding the death, resignation or removal of any Officer authorized to
sign such Share certificates, the Transfer Agent may continue to countersign and
issue Share certificates bearing such Officer's signature until otherwise
directed by the Fund. The Fund agrees to indemnify and exonerate, save and hold
the Transfer Agent harmless, from and against any and all claims or demands that
may be asserted against the Transfer Agent with respect to the genuineness of
any Share certificate supplied to the Transfer Agent by the Fund pursuant to
this Agreement.
ARTICLE 3
AUTHORIZATION AND ISSUANCE OF SHARES
3.1. The Transfer Agent shall maintain records of accounts evidencing
ownership of Shares as provided in this Agreement and in the Fund's Prospectus
and, subject to the terms and conditions of this Agreement, when requested shall
countersign, record, issue, and deliver certificates for Shares both upon
original issue and transfer. Evidence of the ownership of Shares shall be
maintained on the Transfer Agent's records in book (uncertificated) form, or, if
requested by an Approved Institution (or the Distributor or its agent acting on
behalf of such Approved Institution) or shareholder, share certificates shall be
issued, subject to the provisions of Article 5 hereof, to evidence the ownership
of Shares.
3.2. Prior to the issuance of any Shares pursuant to Share splits and
prior to any reduction in the number of Shares outstanding, the Fund shall
deliver the following documents to the Transfer Agent:
(a) A copy of the resolution(s) adopted by the Board of Trustees of
the Fund and/or the shareholders of the relevant Fund, certified by the
Secretary of the Fund, authorizing such issuance of additional Shares of such
Fund or such reduction, as the case may be;
(b) In the case of the issuance of Shares, an opinion of counsel for
the Fund with respect to matters set forth in Section 2.3(g) hereof as to such
shares; and
(c) Such additional documents as the Transfer Agent may reasonably
request.
ARTICLE 4
RECAPITALIZATION OR CAPITAL ADJUSTMENT
4.1. In the case of any Share split, recapitalization or other
capital adjustment, the Transfer Agent will, in the case of accounts represented
by uncertificated Shares, cause the account records to
4
<PAGE>
be adjusted, as necessary, to reflect the number of Shares held for the account
of each such shareholder as a result of such adjustment, or, in the case of
Shares represented by certificates, will, if so instructed by the Fund, issue
revised Share certificates in exchange for, or upon transfer of, outstanding
Share certificates in the old form, in either case upon receiving:
(a) A Certificate authorizing the issuance of revised Share
certificates and any other action required to be taken by the Transfer Agent in
connection with any such split, recapitalization or other capital adjustment;
(b) A copy of any amendment to the Declaration of Trust of the Fund,
certified by the Secretary of the Fund, with respect to the adjustment;
(c) Specimen Share certificates in the revised form approved by the
Board of Trustees of the Fund;
(d) An opinion of counsel for the Fund with respect to the matters
set forth in Article 2, Section 2.3(g) hereof as to such Shares; and
(e) Such additional documents as the Transfer Agent may reasonably
request.
4.2. The Fund shall either (a) furnish the Transfer Agent with a
sufficient supply of blank Share certificates in any new form authorized in
connection with any such Share split, recapitalization or other capital
adjustment, and from time to time will replenish such supply upon the request of
the Transfer Agent, or (b) authorize the Transfer Agent to itself create laser-
printed Share certificates in the form approved by the Board of Trustees of the
Fund. Any such blank Share certificates shall be properly signed by authorized
Officers and, if required, shall bear the Fund's seal or facsimile thereof.
ARTICLE 5
ISSUANCE, REDEMPTION, AND TRANSFER OF SHARES
5.1. (a) On each Business Day, the Transfer Agent shall accept, at
such time as are agreed upon from time to time by the Transfer Agent and the
Fund, (i) purchase orders received by the Transfer Agent directly from an
Approved Institution (or the Distributor or its agent acting on behalf of such
Approved Institution) or an individual investor, (ii) redemption requests either
received from a shareholder, whether or not an Approved Institution (or the
Distributor or its agent acting on behalf of such Approved Institution), or
contained in a Certificate, and (iii) requests for exchanges of the Fund's
Shares of a given class for Shares of another fund received from a shareholder,
whether or not an Approved Institution (or the Distributor or its agent acting
on behalf of such Approved Institution), or contained in a Certificate, provided
that (1) such purchase order, exchange request or redemption request, as the
case may be, is in conformity with the Fund's purchase, exchange, and redemption
procedures, as applicable, described in the Prospectus, and (2) if such type of
purchase order, exchange request, or redemption request is not described in the
Prospectus in effect upon the commencement date of the Agreement, the Transfer
Agent has agreed to accept and act as to such
5
<PAGE>
order or request. Upon receipt on any Business Day of any check drawn or
endorsed to the Transfer Agent, the Fund or the Distributor for the purchase of
Shares, or any payment made by Automated Clearing House or Federal Funds wire,
the Transfer Agent shall deposit such check or payment in the bank account
established by the Fund or the Distributor for the collection of such amounts
and shall wire such amounts to the Fund's Custodian on the next Business Day.
The Transfer Agent shall have no responsibility hereunder for the Fund's
compliance with states securities registration laws ("Blue Sky laws") relating
to such purchase orders, except to the extent that the Transfer Agent will
maintain records in a manner that will enable the Fund to monitor the total
number of Shares of the Fund sold in each state and shall provide the Fund
reports as to such sales as specified in Appendix B to this Agreement.
(b) On each Business Day, the Transfer Agent shall also accept, at
such times as are agreed upon from time to time by the Transfer Agent and the
Fund, a Computer Tape consistent in all respects with the Transfer Agent's tape
layout package, as amended from time to time, which is believed by the Transfer
Agent to be furnished by or on behalf of any Approved Institution, setting forth
data as to purchases, redemptions and exchanges of Shares irrespective of
whether payment of the purchase price accompanies such computer tape. The
Transfer Agent may rely on the data on such Computer Tapes as accurate, and
shall not be responsible hereunder for errors in such Computer Tapes furnished
to it hereunder, unless caused by the Transfer Agent's own negligence, bad faith
or willful misconduct.
(c) On each Business Day, the Fund shall provide or cause to be
provided to the Transfer Agent, at such time as the parties hereto shall agree,
the net asset value per share for the Fund and such other information as the
Transfer Agent may reasonably request.
5.2. On the Business Day following each Business Day, at such time as
the Transfer Agent and the Fund shall agree, an authorized employee of the
Transfer Agent shall confirm the following information by summary sheet
transmitted by electronic or other electromagnetic means to an authorized
employee or agent of the Fund (or by such other form as shall be agreed upon
from time to time by the Fund and the Transfer Agent):
(a) The total dollar amount to be applied toward the purchase of
Shares of the Fund and the number of Shares of the Fund purchased on such prior
Business Day, computed by aggregating the amounts so specified in (i) the
purchase orders received by the Transfer Agent on such prior Business Day from
individual investors and (ii) all Computer Tapes described in Section 5.1(b)
timely received by the Transfer Agent with respect to such prior Business Day;
(b) The total dollar value and number of Shares of the Fund redeemed
on such prior Business Day, computed by aggregating the amounts so specified in
(i) the redemption requests received by the Transfer Agent directly on the
preceding Business Day from shareholders, and (ii) all Computer Tapes described
in Section 5.1(b) relating to such prior Business Day; and
(c) The total dollar value and number of Shares of the Fund to be
exchanged for Shares of another fund and the number of Shares of such other fund
to be issued in such exchanges on such prior Business Day, and the total dollar
value and number of shares of the Fund to be issued in
6
<PAGE>
exchange for shares of another fund on such prior business day (if not included
in 5.2(a) above) computed by aggregating the amounts represented by any exchange
requests received directly by the Transfer Agent from shareholders and the
amounts specified in all Computer Tapes described in Section 5.1(b) relating to
such prior Business Day.
5.3. Following each Business Day, the Transfer Agent will (on a day
on which banks in Denver, Colorado, Chicago, Illinois and New York, New York are
open for business but in any event on or prior to the Fifth Business Day
following such Business Day) advise the Distributor of the amount of cash
necessary to be wired to the Custodian, representing purchase orders for
appropriate Fund's Shares received by the Transfer Agent as to such Business
Day, as set forth in Section 5.1 above. As to each Business Day, the Transfer
Agent will advise the Fund of the amount of cash representing exchange orders
received by the Transfer Agent as to such Business Day, such advice to be given
on the next Business Day.
5.4. As to each Business Day, the Transfer Agent shall issue to, and
redeem from, the accounts specified in a purchase order, redemption request, or
exchange request received by the Transfer Agent in proper form in accordance
with the Prospectus and, when required by the Prospectus, properly endorsed by
the record owner thereof with the record owner's or owners' signature(s)
guaranteed by a U.S. commercial bank or U.S. trust company, a member of a
national securities exchange, a foreign bank with a U.S. correspondent bank or a
federally-chartered savings and loan association, or shall issue to, and/or
redeem from, the accounts specified in a Computer Tape received by the Transfer
Agent from an Approved Institution, the appropriate number of full and
fractional Shares based on the net asset value per Share of the relevant series
of the relevant Funds specified in an advice received as to such Business Day
from the Fund. Notwithstanding the foregoing, if a redemption specified in a
redemption request received directly by the Transfer Agent or in a Computer Tape
is for a dollar value of Shares in excess of the dollar value of uncertificated
Shares in the specified account plus the dollar value of certificated Shares in
the specified account for which the Transfer Agent has received the tender of a
Share certificate or certificates in proper form as described above, the
Transfer Agent shall not effect such redemption in whole or part. In such case
involving a Computer Tape, the Transfer Agent shall orally or by electronic or
other electromagnetic means advise both the Fund and the Approved Institution
(or the Distributor or its agent if acting on behalf of such Approved
Institution) which supplied such Computer Tape of such discrepancy. In such
case involving a direct shareholder, the Transfer Agent shall, within five (5)
business days, notify such shareholder directly, orally or in writing.
5.5. The Transfer Agent shall, as of each Business Day specified in a
Certificate described in Section 6.1, issue Shares of the Fund, based on the net
asset value per Share of the Fund specified in an advice received from the Fund
to such Business Day, in connection with a reinvestment of a dividend or
distribution on Shares of the Fund.
5.6. On each Business Day, the Transfer Agent shall advise the Fund
by computer/electromagnetic tape specifying, with respect to the immediately
preceding Business Day: the total number of Shares of the Fund (including
fractional Shares) issued and outstanding at the opening of business on such
day; the total number of Shares of the Fund sold on such day, pursuant to
Section 5.2; the total number of Shares of the Fund redeemed or exchanged on
such day; the total
7
<PAGE>
number of Shares of the Fund, if any, sold on such day pursuant to preceding
Section 5.4, and the total number of Shares of the Fund issued and outstanding
at the close of business on such day. Unless the Fund or its agent shall advise
the Transfer Agent of any error in the information contained in such
computer/electromagnetic tape (the "Initial Tape") prior to the transmission of
the next computer/electromagnetic tape by the Transfer Agent, the Transfer Agent
shall be deemed to have fulfilled its responsibilities hereunder with respect to
the accuracy of the data on subsequent computer/electromagnetic tapes submitted
to the Fund that are based, in whole or in part upon any inaccurate data from
the Initial Tape.
5.7. In connection with each purchase, exchange and redemption of
Shares other than pursuant to a Computer Tape submitted by an Approved
Institution (or by the Distributor or its agent acting on behalf of such
Approved Institution), the Transfer Agent shall send to the shareholder such
statements as are described in the Prospectus or as otherwise reasonably
instructed in writing by the Funds. If the Prospectus indicates that
certificates for Shares are available, and if specifically requested in writing
by any shareholder, or if otherwise required hereunder, the Transfer Agent will
countersign, issue and mail to such shareholder, at the address set forth in the
records of the Transfer Agent, a Share certificate for any full Shares
requested.
5.8. In computing the redemption proceeds to be paid to any
shareholder or to an account for an Approved Institution, the Transfer Agent
shall first compute the amount of any withholding for federal income taxes for
which the Transfer Agent has the responsibility under this Agreement to
calculate such withholding, in such manner as the Fund and the Transfer Agent
shall agree from time to time in conformity with instructions provided by the
Fund to the Transfer Agent. The Transfer Agent shall also compute any
withholding for federal income taxes for which the Transfer Agent has such
responsibility at the time of any exchange of a Fund's shares for another fund's
shares. In the case of a redemption of Shares directly by a shareholder of
record and not by means of a Computer Tape submitted by an Approved Institution
(or by the Distributor or its agent acting on behalf of such Approved
Institution), upon deposit of moneys in a redemption account by the relevant
Custodian against which the Transfer Agent is authorized by the Fund to draw
checks in connection with a redemption of Shares of the Fund, the Transfer Agent
shall cancel the redeemed Shares and after making appropriate deduction for any
withholding of taxes required of it by this Agreement or applicable law, make
payment of (i) the redemption proceeds to the order of the shareholder, and (ii)
any tax withheld to the Internal Revenue Service, in accordance with the Fund's
redemption and payment procedures described in the Prospectus or as otherwise
reasonably described in a written instruction from the Fund. In the case of an
exchange of Shares directly by a shareholder of record and not by means of a
Computer Tape submitted by an Approved Institution (or the Distributor or its
agent acting on behalf of such Approved Institution), upon deposit of moneys in
an account by the relevant Custodian against which the Transfer Agent is
authorized by the Fund to draw checks in connection with an exchange of Shares
of a fund, the Transfer Agent shall cancel the exchanged Shares, and withhold
and pay taxes required under this Agreement and applicable law. In the case of
a redemption of Shares pursuant to a Computer Tape, the Transfer Agent shall, on
the next Business Day, send the Fund a Computer Tape setting forth the amount of
redemption proceeds due each Approved Institution. If such Approved Institution
(or the Distributor or its agent acting on behalf of such Approved Institution)
has previously furnished the Transfer Agent withholding instructions with
respect to such redemption or any exchange of Shares pursuant to a Computer
Tape, the Transfer
8
<PAGE>
Agent shall include in the Computer Tape furnished to the Fund information as to
the amount of such withholding.
5.9. The Transfer Agent shall not be required to issue Shares of any
fund (other than with respect to the reinvestment of dividends or distributions
on shares owned by an existing shareholder if so stated in the Certificate)
after it has received a Certificate stating that the sale of Shares of that fund
has been suspended or discontinued.
5.10. The Transfer Agent shall not be responsible for the payment of
any original issue or other taxes required to be paid by the Fund in connection
with the issuance of any Shares.
5.11. The Transfer Agent shall not be responsible for issuing or
effecting any "stop transfer" or other similar order or restrictions on any
Shares held in the name of an Approved Institution. In the case of Shares
registered in the name of a shareholder other than an Approved Institution as to
which a "stop transfer" or other similar order or restriction applies, the
Transfer Agent will adhere to the terms of such stop transfer or similar order,
except that it may rely on a Certificate to effect a redemption, exchange or
transfer of such Shares, notwithstanding such stop order or restriction.
5.12. The Transfer Agent shall accept (a) a Computer Tape which is
furnished by or on behalf of any Approved Institution (or the Distributor or its
agent acting on behalf of such Approved Institution) and represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and (b) as to Shares standing
directly in the name of a shareholder other than an Approved Institution,
transfer instructions in proper form in accordance with the Fund's Prospectus
and the Transfer Agent's rules described herein, and shall effect the transfer
specified in said Computer Tape or transfer instructions, provided that any
necessary documents or Share certificates have been tendered to the Transfer
Agent.
5.13. (a) Except as otherwise provided in sub-paragraph (b) of this
Section 5.13 and in Section 5.14, Shares will be transferred, exchanged or
redeemed other than pursuant to Computer Tapes from an Approved Institution (or
the Distributor on its agent acting on behalf of such Approved Institution) upon
presentation to the Transfer Agent of endorsed Share certificates or, in the
case of uncertificated Shares, instructions endorsed in proper form in
accordance with the Prospectus as stated in Section 5.4, accompanied by such
documents as the Transfer Agent reasonably deems necessary to evidence the
authority of the person making such transfer, exchange or redemption, and
bearing satisfactory evidence of the payment of transfer taxes. In the case of
small estates, where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate small estates affidavit under applicable law
or with a surety bond, and without further approval of the Fund, transfer or
redeem Shares registered in the name of a decedent if the current market value
of the Shares being redeemed or transferred does not exceed such amount as may
from time to time be prescribed by the applicable state statutes and
regulations. The Transfer Agent reserves the right to refuse to transfer,
exchange or redeem Shares until it is reasonably satisfied that the endorsement
on the Share certificate or instructions is valid and genuine, and for that
purpose it will require, unless otherwise instructed by an Officer, a signature
guarantee as stated in Section 5.4 of this Agreement. The Transfer Agent also
reserves the right to refuse to transfer, exchange or redeem Shares until it is
reasonably satisfied that the requested transfer, exchange or redemption is
legally authorized, or until it is reasonably
9
<PAGE>
satisfied that there is no basis to any claims adverse to such transfer,
exchange or redemption. The Transfer Agent may, in effecting transfers,
exchanges and redemptions of Shares, rely upon those provisions of the Uniform
Act for the Simplification of Fiduciary Security Transfers or the Uniform
Commercial Code, as the same may be amended from time to time, applicable to the
transfer of securities.
(b) Notwithstanding the foregoing or any other provision contained in
this Agreement to the contrary, the Transfer Agent shall be fully protected by
the Fund in requiring any instructions, documents, assurances, endorsements or
guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, exchange or transfer of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be consistent
with the transfer, exchange and redemption procedures described in the
Prospectus, or in any instructions or certificates provided to the Transfer
Agent by the Fund.
5.14. Notwithstanding any provision contained in this Agreement to
the contrary, the Transfer Agent shall not be expected to require, as a
condition to any transfer, redemption or exchange of any Shares pursuant to a
Computer Tape, any documents, including, without limitation, any documents of
the kind described in Section 5.13(a) to evidence the authority of the person
requesting the transfer, exchange or redemption and/or the payment of any
transfer taxes, and shall be fully protected in acting in accordance with the
applicable provisions of this Agreement.
5.15. Nothing contained in this Agreement shall constitute any
agreement or representation by the Transfer Agent to permit, or to agree to
permit, any Approved Institution to input information into the System, although
the Transfer Agent may, with the Fund's written permission, permit access to the
System by an Approved Institution to retrieve data or information as to such
Approved Institution's accounts.
ARTICLE 6
DIVIDENDS AND DISTRIBUTIONS
6.1. The Fund shall furnish to the Transfer Agent a Certificate
either (i) setting forth with respect to each series of the Fund the date of the
declaration of a dividend or distribution, the date of accrual or payment
thereof, as the case may be, the record date as of which shareholders entitled
to payment or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution for each series of the Fund, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable by the Transfer Agent with respect to such
dividend or distribution on such payment date, or (ii) stating that the
declaration of dividends and distributions shall be on a daily or other periodic
basis and containing information of the type set forth in subsection (i) hereof.
6.2. Upon the payment date specified in the relevant Certificate, the
Transfer Agent shall, in the case of a cash dividend or distribution, advise the
Fund (by telephone or other electronic transmission) of the amount of cash
necessary to make the payment of the dividend or distribution to the
shareholders of record as of such payment date, including the amounts to be paid
to Approved
10
<PAGE>
Institutions. The Fund shall be responsible for having the appropriate Custodian
transfer a sufficient amount of cash to a dividend disbursement account
maintained by the Fund for the relevant Series against which the Transfer Agent
shall cause checks, ACH or federal funds wire payment to be drawn to the order
of such shareholders or Approved Institutions in payment of the dividend. The
Transfer Agent shall not be liable for any improper payments made in accordance
with a Certificate described in Section 6.1. If the Transfer Agent shall not
receive from the appropriate Custodian sufficient cash to make payments of any
cash dividend or distribution to shareholders of the Fund as of the record date,
the Transfer Agent shall, upon notifying the Fund, withhold payment to all
shareholders of record as of the record date until sufficient cash is provided
to the Transfer Agent unless otherwise instructed by the Fund by a Certificate
and acceptable to the Transfer Agent. In the case of dividends or distributions
reinvested in additional Shares of a series of the Fund, the Transfer Agent
shall follow the procedures set forth in Section 5.5.
6.3. The Transfer Agent shall in no way be responsible for the
determination of the rate or form of dividends or capital gain distributions due
shareholders.
6.4. The Transfer Agent shall, upon request of the Fund, file such
appropriate information returns concerning the payment of dividends and capital
gain distributions and redemptions with the proper Federal, state and local
authorities as are required by law to be filed by the Fund but shall in no way
be responsible for the collection or withholding of taxes due on such dividends
or distributions or on redemption proceeds due shareholders, except and only to
the extent required of it by applicable law for accounts of shareholders other
than Approved Institutions. If any amount is to be withheld from any dividend
or distribution paid to, or exchange or redemption proceeds or other cash
distribution from, the account of an Approved Institution, such Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) may advise the Transfer Agent of the amount to be withheld
therefrom, and if such advice is provided in a timely manner to the Transfer
Agent, the Transfer Agent will provide a separate check for such amount to the
Approved Institution, which shall be responsible for the proper application of
such withheld amounts.
ARTICLE 7
CONCERNING THE FUND
7.1. The Fund shall promptly deliver to the Transfer Agent written
notice of any change in the Officers authorized to sign or give Share
certificates or Certificates, together with a specimen signature of each new
Officer.
7.2. It shall be the sole responsibility of the Fund to deliver to
the Transfer Agent in a timely manner the Fund's currently effective Prospectus,
copies of any exemptive relief obtained by the Fund under applicable securities
laws and copies of any amendments to the Fund; Declaration of Trust, By-Laws and
any other documents to be furnished by the Fund under this Agreement to enable
the Transfer Agent to carry out its duties hereunder, and, for purposes of this
Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus, exemptive relief or other document
until it is actually received by the Transfer Agent.
11
<PAGE>
7.3 The Transfer Agent has been advised by the Fund and agrees that
the Fund's Declaration of Trust is on file with the Secretary of State of the
Commonwealth of Massachusetts and that this Agreement has been executed by the
officers of the Fund, as officers and not individually. The obligations of the
Agreement are not binding upon the Trustees, officers or shareholders of the
Fund individually but are binding only upon the assets and property of the Fund
or a particular series of Shares. The Transfer Agent agrees to look only to the
assets of the Fund or a particular series of Shares for payment under such
Agreement and that the shareholders, Trustees and officers shall not be liable
therefore.
ARTICLE 8
CONCERNING THE TRANSFER AGENT
8.1. Subject to the standard of care set forth in Section 8.4, the
Transfer Agent shall not be liable and shall be fully protected in acting upon
any Computer Tape, Certificate, oral instructions, writing or document
reasonably believed by it to be genuine and to have been signed (in the case of
written instructions or documents) or made by the proper person or persons and
shall not be held to have any notice of any change of authority of any person
until receipt of written notice thereof from the Fund or such person. Subject to
the standard of care set forth in Section 8.4, the Transfer Agent shall be
similarly protected in processing Share certificates which it reasonably
believes to bear the proper manual or facsimile signatures of the Officers of
the Fund and the proper countersignature of the Transfer Agent or any prior
transfer agent.
8.2. The Transfer Agent covenants that it shall carry out its
responsibilities under this Agreement in accordance and compliance with the
provisions of applicable laws and regulations governing its operation as a
transfer agent.
8.3. The Transfer Agent shall keep and maintain on behalf of the Fund
such records which the Fund or the Transfer Agent is, or may be, required to
keep and maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rule 31a-1 under the Investment Company Act of
1940, relating to the maintenance of records in connection with the services to
be provided hereunder. The Transfer Agent agrees to make such records available
for inspection by the Trust at reasonable times and otherwise to keep
confidential all records and other information relative to the Fund and its
shareholders, except when the Transfer Agent reasonably believes it has been
requested to divulge such information by duly-constituted authorities or court
process, or requested by a shareholder with respect to information concerning an
account as to which such shareholder has either a legal or beneficial interest
or when requested by the Fund, the shareholder, or the dealer of record as to
such account.
8.4 (a) The Transfer Agent shall not be liable for any loss or
damage, including, without limitation, attorneys' fees, expenses and court
costs, resulting from the Transfer Agent's actions or omissions to act under or
in connection with this Agreement and its duties and responsibilities hereunder,
except for any loss or damage arising out of its own failure to act in good
faith, or its negligence or willful misfeasance.
12
<PAGE>
(b) The Transfer Agent shall, provided such coverage is readily
available to the Transfer Agent at reasonable rates and upon reasonable terms
and conditions, maintain an insurance policy or surety bond, in the face amount
of $10 million per covered transaction against losses suffered by the Transfer
Agent in excess of the policy deductibles arising from errors or omission on the
part of the Transfer Agent in carrying out its responsibilities under this
Agreement and other agreements. The Transfer Agent shall upon request, furnish
promptly to the Fund copies of all insurance policies maintained pursuant to
this Section 8.4(b) that have not previously been furnished to the Fund.
(c) Any costs or losses incurred by the Fund for the processing of
any purchase, redemption, exchange or other share transactions at a price per
share other than the price per share applicable to the effective date of the
transaction (the foregoing being generally referred to herein as "as of"
transactions) will be handled in the following manner:
1. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent,
taken in the aggregate, result in a net loss to the Fund ("net
loss"), Transfer Agent will reimburse the Fund for such net loss,
except to the extent that such net loss may be offset by
application of a "net benefit" to the Fund carried over from prior
calendar years pursuant to sub-paragraph 2 immediately below.
2. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent,
taken in the aggregate, result in a net benefit to the Fund ("net
benefit"), the Fund shall not reimburse the Transfer Agent for the
amount of such net benefit; however, any "net benefit" for any
calendar year may be used to offset, in whole or in part, any "net
loss" suffered by the Fund in any future calendar year so as to
reduce the amount by which the Transfer Agent shall be required to
reimburse the Fund for such "net loss" in such year pursuant to
sub-paragraph 1 immediately above.
3. Any "net loss" for which the Transfer Agent reimburses the Fund in
any calendar year shall not be carried over into future years so
as to offset any "net benefit" in such future years.
8.5 The Fund shall indemnify and exonerate, save and hold harmless the
Transfer Agent and its officers, directors, employees and agents (hereinafter
the Transfer Agent and such persons are referred to as "Indemnitees") from and
against any and all liabilities or losses arising from claims or demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs associated with defending against such claims and demands) of any nature
which any Indemnitee may sustain or incur or which may be asserted against any
Indemnitee by any person arising out of or in any manner related to any action
taken or omitted to be taken by the Transfer Agent in good faith and without
negligence or willful misconduct in reasonable reliance upon (i) any provision
of this Agreement; (ii) the Prospectus; (iii) any instruction or order
including, without limitation, any Computer Tape reasonably believed by the
Transfer Agent to have been received from an Approved Institution (or the
Distributor or its agent acting on behalf of such Approved Institution); (iv)
any instrument or order reasonably believed
13
<PAGE>
by the Transfer Agent to be genuine and to be signed, countersigned or executed
by any duly authorized Officer, (v) any Certificate or other instructions of an
Officer, (vi) any opinion of legal counsel for the Fund; (vii) any records or
data supplied by the Fund's prior transfer agent; or (viii) any order of any
court, arbitration panel or other judicial entity.
8.6. At any time the Transfer Agent may apply to an Officer of the
Fund for written instructions with respect to any matters arising in connection
with the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or omitted by it in good
faith and without negligence or willful misconduct in accordance with such
written instructions. The Transfer Agent may consult with counsel to the Fund,
at the expense of the Fund and shall be fully protected with respect to anything
done or omitted by it in good faith and without negligence or willful
misfeasance in accordance with the advice or opinion of counsel to the Fund.
Such application by the Transfer Agent for written instructions from an Officer
of the Fund may, at the option of the Transfer Agent, set forth in writing any
action proposed to be taken or omitted by the Transfer Agent with respect to its
duties or obligations under this Agreement and the date on and/or after which
such action shall be taken, and the Transfer Agent shall not be liable (other
than for its bad faith, negligence or willful misfeasance) for any action taken
or omitted in accordance with a proposal included in any such application on or
after the date specified therein unless, prior to taking or omitting any such
action, the Transfer Agent has received written instructions in response to such
application specifying the action to be taken or omitted.
8.7. Any report, confirmation or other document furnished to the Fund
or to an Approved Institution as part of the Transfer Agent's responsibilities
under this Agreement shall be deemed final and conclusive on the 8th Business
Day after such report, confirmation or document has been furnished to the Fund
or Approved Institution, as the case may be, and the Transfer Agent shall not be
liable to the Fund or such Approved Institution under this Agreement as to any
error or omission in such report, confirmation or document that is not reported
to the Transfer Agent within such 7-day period.
8.8. The Transfer Agent shall deliver Share certificates by courier
or by certified or registered mail to the shareholder's address in the records
of the Transfer Agent. The Transfer Agent shall advise the Fund of any Share
certificates returned as undeliverable after being transmitted by courier or
mailed as herein provided for.
8.9. The Transfer Agent may issue new Share certificates in place of
Share certificates represented to have been lost, stolen, or destroyed upon
receiving instructions satisfactory to the Transfer Agent. If the Transfer
Agent receives written notification from the owner of the lost, destroyed, or
stolen Share certificate within a reasonable time after the owner has notice of
such loss, destruction or theft, the Transfer Agent shall issue a replacement
Share certificate upon receipt of an affidavit or affidavits of loss or
nonreceipt and an indemnity agreement executed by the registered owner or his
legal representative, and supported (a) in the case of a certificate having a
value at the time of replacement of less than $100, by a fixed penalty surety
bond for twice the then-current market value of Shares represented by said
certificate and (b) in the case of a certificate having a value at time of
replacement of $100 or more, by an open penalty bond, in form satisfactory to
the Transfer Agent or (c) by such other documentation or reasonable assurances
in a particular case as may be set forth in a Certificate. If the Fund receives
such written notification from the owner of the lost, destroyed
14
<PAGE>
or stolen Share certificate within a reasonable time after the owner has notice
of it, the Fund shall promptly notify the Transfer Agent. The Transfer Agent may
issue new Share certificates in exchange for, and upon surrender of, mutilated
Share certificates.
8.10. The Transfer Agent will supply shareholder lists to the Fund
from time to time upon receiving a request therefor from an Officer of the Fund.
8.11. At the request of an Officer, the Transfer Agent will address
and mail such appropriate notices to shareholders as to the Fund may direct, at
the Fund's expense.
8.12. Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency
of the amount to be received therefor, or the authority of an Approved
Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer, exchange or of a redemption of any
Shares by an Approved Institution, the propriety of the amount to be paid
therefor, or the authority of an Approved Institution to request such transfer,
exchange or redemption;
(c) The legality of the declaration of any dividend or capital gains
distribution by the Fund, or the legality of the issue of any Shares in payment
of any Share dividend or distribution; or
(d) The legality of any recapitalization or readjustment of the
Shares.
8.13. The Transfer Agent shall be entitled to receive, and the Fund
hereby agrees to pay to the Transfer Agent for its performance hereunder,
including its performance of the duties and functions set forth in Appendix B
hereto, (i) its reasonable out-of-pocket expenses (including without limitation
legal expenses, court costs, and attorney's fees associated with litigation or
arbitration) incurred in connection with this Agreement and its performance
hereunder and (ii) such compensation as is specified in Appendix C hereto as
such fees may be amended from time to time by agreement in writing by the
Transfer Agent and the Fund.
8.14. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
8.15. The Transfer Agent shall indemnify and exonerate, save and hold
harmless the Fund, and its officers, directors, employees and agents, from and
against any and all liabilities or losses arising from claims and demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs), of any nature which the Fund or any officer, director, employee or agent
may sustain or incur or which may be asserted against them by any person arising
out of or in any manner related to the Transfer Agent's
15
<PAGE>
failure to comply with the terms of this Agreement or which arise out of the
Transfer Agent's negligence or willful misconduct provided, however, that the
Transfer Agent shall not indemnify and exonerate, save and hold harmless, the
Fund, its officers, directors, employees, and agents for anything arising out of
or in any manner related to the Fund's failure to comply with the terms of this
Agreement or which arises out of the Fund's, or any officer's, director's,
employee's or agent's (other than the Transfer Agent) negligence or willful
misconduct or the Transfer Agent's reliance on information or instructions
received from, or issued on behalf of, the Fund.
ARTICLE 9
TERMINATION
9.1. The initial term of this Agreement shall commence on the Effective
Date and shall continue through June 30, 1997 (the "Initial Term") unless
earlier terminated pursuant to Section 9.2. Thereafter, unless earlier
terminated by either party at the end of the Initial Term upon at least 90 days'
prior written notice, this Agreement shall continue from day to day thereafter
(such period shall be referred to as the "Renewal Term"), until either of the
parties hereto terminates this Agreement by giving at least 6 months' prior
written notice to the other party, whereupon this Agreement shall terminate
automatically upon the expiration of the 6-month period specified in the written
notice. In the event such notice of termination is given by the Fund, it shall
be accompanied by a copy of a resolution of the Board of Trustees of the Fund,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement. In the event such notice is given by the Transfer Agent, the
Fund shall, on or before the termination date, deliver to the Transfer Agent a
copy of a resolution of its Board of Trustees certified by the Secretary or any
Assistant Secretary designating a successor transfer agent or transfer agents.
In the absence of such designation by the Fund, the Transfer Agent may designate
a successor transfer agent. If the Fund fails to designate a successor transfer
agent, the Fund shall, upon the date specified for termination of this Agreement
and delivery of the records maintained hereunder, be deemed to be its own
transfer agent and the Transfer Agent shall thereby be relieved of all duties
and responsibilities pursuant to this Agreement.
9.2 Notwithstanding Section 9.1 hereof, this Agreement may be terminated
at any time by the Fund upon not less than 60 days' written notice from the Fund
to the Transfer Agent notifying the Transfer Agent: (i) if a majority of the
Trustees who are not "interested persons" (as that term is defined in the
Investment Company Act of 1940) upon completion of the procedures set forth
below have reasonably made a specific finding that the Transfer Agent has failed
on a continuing basis to perform its duties pursuant to this Agreement in a
satisfactory manner consistent with then current industry standards and
practices or (ii) if there is instituted or pending an action or proceeding by
or before any court or governmental, administrative or regulatory agency against
or involving the parties hereto, their affiliates, the Trustees of the Fund or
any of them and challenging the making of this Agreement or alleging that any
material term of the Agreement is contrary to law or any governmental agency has
threatened in writing to commence such an action or proceeding. Prior to any
termination pursuant to clause (i), the Board of Trustees of the Fund shall
provide the Transfer Agent with a written statement of the specific aspects of
the Transfer Agent's performance of its duties that are unsatisfactory, the
specific incident or incidents giving rise to the Board of Trustees' conclusion
and any written material that the Board of Trustees' relied upon in making such
a determination. The
16
<PAGE>
Transfer Agent shall have 30 days to respond to such written statement. If no
response is made, or if, after reasonable consideration of the response of the
Transfer Agent, such response is unsatisfactory to the Board of Trustees, then
the Board of Trustees of the Fund may terminate the Agreement pursuant to clause
(i) thereof. For purposes of making a finding as contemplated by clause (i)
above, the Transfer Agent shall be, absent unusual circumstances, conclusively
presumed to have failed on a continuing basis to perform its duties pursuant to
this Agreement in a satisfactory manner consistent with the industry standards
and practices prevailing on the date of this Agreement if any of the following
should occur:
(1) The Transfer Agent through its fault is unable (more than once in
a twelve-month period) to process daily activity for any two successive Business
Days and to confirm information generated by such activity by the fourth
Business Day following the later of such two Business Days. (For example,
assuming no holidays, daily activity on a Monday and Tuesday is not confirmed by
the following Monday.)
(2) The Transfer Agent through its fault is unable (more than two
times in any twelve-month period) to provide system access to personnel of an
Approved Institution for six hours between 9:00 a.m. and 5:00 p.m. Chicago time
on three successive Business Days.
(3) The Transfer Agent through its fault is unable (more than twice in
any one year) to create and mail dividend checks within four Business Days after
the Fund's payable date (assuming that the required information has been
furnished to the Transfer Agent on the record date).
(4) The Transfer Agent through its fault is unable to instruct various
financial institutions on daily money movements from and to the Funds'
Custodians for two successive Business Days by the Fourth Business Day following
the later of such two Business Days. (For this purpose, instructions based on
reasonable estimates are treated as fulfilling the Transfer Agent's obligations
hereunder.)
(5) The Transfer Agent through its fault is unable (more than twice in
any twelve-month period) to transmit dividend activity to an Approved
Institution within five Business days from the relevant Fund's payable date.
For purposes of the foregoing, an event described in any of the foregoing
clauses 1 through 5 shall be deemed not to have occurred if the Transfer Agent's
inability to perform is a result, directly or indirectly of faulty or inadequate
performance by service provider including, but not limited to, telephone
companies, pricing services, Nuveen & Co., Approved Institutions, and banks
other than the Transfer Agent and its agents and employees or a result, directly
or indirectly, of other events out of the Transfer Agent's reasonable control.
Also for the purposes of the foregoing, if the Transfer Agent processes
transactions or instructions (as the case may be) as required hereunder within
the time periods indicated but more than 10% of the transactions, checks or
instructions, as the case may be, are inaccurate in any material respect, and
are not corrected within the requisite time then the Transfer Agent shall be
deemed to have been unable to perform the relevant service within the requisite
time.
17
<PAGE>
9.3. In the event of termination of this Agreement, the Transfer Agent
will facilitate transfer of the records maintained by it hereunder and cooperate
with such successor transfer agent as may be designated pursuant to the
provisions of Section 9.1 hereof with respect to delivery of such records and
assumption by such successor transfer agent of its duties. In the event the Fund
or the Transfer Agent terminates the Transfer Agency Agreement at any time, the
Fund shall be responsible for the payment of fees and expenses of the Transfer
Agent relating to the conversion to the new Transfer Agent.
ARTICLE 10
ADDITIONAL SERIES
10.1. In the event that the Fund establishes one or more Series in
addition to the Series named herein with respect to which it desires to have the
Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing at least 60 days in advance of the
sale of Shares of such Series and shall deliver to the Transfer Agent the
documents listed in Section 2.3 with respect to such Series. Unless the
Transfer Agent declines in writing within a reasonable time to provide such
services, the Shares of such Series shall be subject to this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1. The Fund agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Transfer Agent
hereunder, it shall advise the Transfer Agent of such proposed change at least
30 days prior to the intended date of the same, and shall proceed with such
change only if it shall have received the written consent of the Transfer Agent
hereto, and shall have received and agreed to the schedule of charges, if any,
specified by the Transfer Agent necessary to effect such change.
11.2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at 333 West Wacker
Drive, Chicago, Illinois 60606, Attention: Mr. Stuart Rogers, or at such other
place as the Fund may from time to time designate in writing.
11.3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent, Attention: President, and mailed or delivered
to it at its office at 3410 South Galena Street, Denver, Colorado 80231, with a
copy to be sent to Andrew J. Donohue at OppenheimerFunds, Inc. Two World Trade
Center, New York, NY 10048 or at such other place as the Transfer Agent may from
time to time designate in writing.
18
<PAGE>
11.4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties.
11.5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund or the Transfer Agent
without the written consent of the other party. A change of ownership of the
Transfer Agent as a result of an internal reorganization of the Transfer Agent,
its parent corporation or affiliates shall not be deemed to be an "assignment"
hereunder. A change in "control" (as defined under the Investment Company Act
of 1940) of the Transfer Agent's parent corporation shall not be deemed an
"assignment" hereunder. A sale of a controlling interest in the capital stock
or of all or substantially all of the assets of the Transfer Agent to a third
party unaffiliated with the Transfer Agent or its parent corporation shall be
deemed to be an "assignment" hereunder.
11.6. This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado applicable to agreements to be wholly
performed in that state.
11.7. This Agreement may be executed in any number of counterparts
each of which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
11.8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
11.9. Neither the Fund nor the Transfer Agent will be liable or
responsible hereunder for delays or errors by reason of circumstances reasonably
beyond its control, including, without limitation, acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown,
flood, catastrophe, acts of God, insurrection, war, riots, or failure of
transportation, communication or power supply.
11.10. The Fund shall establish and maintain such bank accounts, with
such bank or banks as are selected by the Fund, as are necessary so that the
Transfer Agent may perform the services to be provided hereunder. To the extent
that performance of such services shall require the Transfer Agent directly to
disburse amounts for payments of dividends, redemption proceeds or other
purposes, the Fund shall provide such bank or banks with all instructions and
authorizations necessary to evidence the Transfer Agent's authority to effect
such transactions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
Attest: NUVEEN FLAGSHIP MULTISTATE TRUST II
_________________________________ By:__________________________________
Name Title Name Title
19
<PAGE>
Attest: SHAREHOLDER SERVICES, INC.
_________________________________ By:____________________________________
Name Title Barbara Hennigar, President
20
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST II
TRANSFER AGENCY AGREEMENT
Appendix A
Officer's Certificate
I, ____________________________, the Secretary of Nuveen Flagship
Multistate Trust II, a Massachusetts business trust (the "Fund"), do hereby
certify that:
The following individuals have been duly authorized by the Trustees of
the Fund in conformity with the Fund's Declaration of Trust and By-Laws to
execute any Certificate, instruction, notice or other instrument, including an
amendment to Appendix B to this Agreement, or to give oral instructions on
behalf of the Fund, and the signatures set forth opposite their respective names
are their true and correct signatures.
<TABLE>
<CAPTION>
NAME TITLE SIGNATURE
- ---- ----- ---------
<S> <C> <C>
___________________ Chairman ___________________
___________________ President ___________________
___________________ Secretary ___________________
___________________ Trustee ___________________
___________________ Vice President ___________________
___________________ ______________ ___________________
___________________ ______________ ___________________
___________________ ______________ ___________________
___________________ ______________ ___________________
___________________ ______________ ___________________
___________________ ______________ ___________________
___________________ ______________ ___________________
</TABLE>
________________________________, Secretary
Name
21
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST II
TRANSFER AGENCY AGREEMENT
Appendix B
Transfer Agent Services
SERVICE: SSI WILL:
- ------- --------
New Account Set-Ups Process new sales applications. Place
telephone calls to account
representatives as needed to clarify
instructions for new account set-ups.
Purchases - New and Subsequent Process mailed-in, lockbox, bank wire,
list billing, ACH, and telephone payments
as received. Coordinate and balance UIT
reinvestment payments.
Transfers Negotiate and process all transfer
requests.
Exchanges - Mail and Telephone Negotiate and process exchange requests.
Record telephone exchange requests.
Redemptions - Mail and Telephone Negotiate and process mailed in, ACH and
telephone redemption requests. Record
telephone redemption requests.
Wire Order Purchases and Redemptions Process wire order purchases and
redemptions for designated settlement
period accepted on recorded telephone
lines and via NSCC FUND/SERV. Process
purchases and redemptions for same day
wire settlement.
Account Maintenance Process all written and telephone
(Address Changes, Dividend Option maintenance. For address changes,
Changes, Name Changes, Broker or prepare and mail a notice of the
Dealer Changes, etc.) address change to the former address.
Certificate Issuances Issue certificates as requested by
shareholders.
Telephone Services Provide efficient handling of all
incoming shareholder and broker/dealer
telephone calls. Make outgoing
clarification calls/coordination with
Chase on UIT/ETF consolidations. Provide
timely problem resolution for all
servicing calls. Provide automated trend
reporting.
1
<PAGE>
SERVICE: SSI WILL:
- ------- --------
Correspondence with Shareholders Respond to all shareholder and
and Broker/Dealers broker/dealer written inquiries.
Document all correspondence affecting
shareholder accounts on the Shareholder
Accounting System.
Shareholder Confirms Prepare and mail confirmations of daily
(Daily/Monthly/Quarterly/Annual) account activity. Prepare and mail
monthly, quarterly, and
annual confirmations as directed by the
fund.
Dealer Confirms Prepare and mail weekly dealer
confirmations listing activity on client
accounts as directed by the Fund.
Distribution Disbursements Prepare and mail cash distribution
checks. Process reinvested distributions.
Commission Statements Provide bimonthly commission statements
listing each purchase and the portion of
the sales charge paid to the
broker/dealer.
Commission Checks Provide bimonthly commission checks to
broker/dealers.
Daily Transmission of Reports Transmit daily transaction activity
reports, balancing reports, and sales
information via telephone lines to a
printer at Nuveen.
Fund Summary Sheets Prepare daily reports that summarize by
type of transaction all capital stock
activity for each fund. Transmit/download
wire/capital stock activity information
to Chase.
Sales Reporting Provide daily, weekly, monthly,
quarterly, and annual reports of sales
information.
12b-1 Reporting Complete 12b-1 processing including
calculating the 12b-1 payment amounts and
sending checks to the broker/dealer home
offices. Provide a listing broken down by
sales representative within each branch.
Invalid Taxpayer Identification Mail Forms W-9 as required to validate
Number Solicitation and taxpayer identification numbers;
Backup Withholding institute backup withholding as required
by IRS regulations, and timely send all
notices.
2
<PAGE>
Regulatory Reporting Compute, prepare, and mail all necessary
reports to shareholders, federal, and/or
state authorities (Forms 1099-DIV,
1099-B, and 1042S).
3
<PAGE>
SERVICE: SSI WILL:
- ------- --------
Front-End Imaging of Documents Front-end Image all incoming documents.
Cost Basis Reporting Provide cost basis information as
available to shareholders annually for
use in determining capital gains and
losses.
Blue Sky Reporting Provide monthly report of purchases and
redemptions by state.
Financial Reporting Mailings Provide mail handling for 2 financial
reports per fund per year to Nuveen
shareholders.
Prospectus Mailings Provide mail handling for 1 prospectus
per fund per year to Nuveen shareholders.
Proxy Solicitation and Tabulation Perform 1 proxy solicitation and
tabulation per fund per year.
Networking Accounts Provide transmission and appropriate
services for each network level.
Cash Availability Transmit mutual fund activity to
designated entity on a daily basis for
cash availability purposes.
Commission/12b-1 Balancing Provide balancing reports for commission
and 12b-1 payments.
4
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST II
TRANSFER AGENCY AGREEMENT
Appendix C
Fee Schedule
The Transfer Agent will provide the transfer agent services listed on
Appendix B for the Fund at the rates set forth below:
Annual Transfer Agent Fees:
- --------------------------
ANNUAL-PER-ACCOUNT FEES *
-------------------------
First 150,000 Accounts** $ 19.25 per account
Next 100,000 Accounts** $ 18.75 per account
Next 50,000 Accounts** $ 18.25 per account
Over 300,000 Accounts** $ 17.75 per account
Out-Of-Pocket Expenses:
- ----------------------
Out-of-pocket expenses may be incurred by either the Fund or the
Transfer Agent and are not included in the annual Transfer Agent Fees. Those
out-of-pocket expenses directly incurred by the Transfer Agent will be billed to
the Fund on a monthly basis. These out-of-pocket expenses include, but are not
limited to, the printing of forms, envelopes, postage and proxy solicitation
fees for the shareholder mailings, costs of abandoned property reports or
searches for missing or inactive shareholders, equipment and system access
costs, microfilm, telephone line and usage charges, overnight express mail
charges, check signature plates and stamps, and programmer/analyst and testing
technician time beyond that agreed to in writing. Bank charges and earnings
credit will be billed directly to the Fund by United Missouri Bank (or other
banks). The Transfer Agent may require the prior payment of anticipated out-of-
pocket expenses, from time to time.
_________________
* Payable on a monthly basis for each non-retirement plan account in existence
at the end of the month. Retirement Plan accounts may be subject to a separate
fee schedule to be negotiated.
** The determination of the number of accounts for purposes of determining the
per account fee shall be based on all Nuveen Funds using the same fee schedule
and shall be allocated on a Fund by Fund basis in a manner determined by the
Transfer Agent based on the number of accounts in each fund.
These fees are valid for XXX months after which they are subject to change, from
time to time.
5
<PAGE>
The Transfer Agent shall, from time to time, but no more frequently than
monthly, send an invoice to the Fund itemizing the compensation and expense
reimbursement. The Fund shall pay such invoice (except to the extent that the
amount thereof is in dispute) by wire not later than 30 days after receipt of
the invoice.
6
<PAGE>
EXHIBIT 11(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 1, 1996, for the Nuveen Multistate Tax-Free Trust, comprising the
New Jersey Tax-Free Value Fund, and to all references to our firm included in or
made a part of this registration statement on Form N-1A of Nuveen Flagship
Multistate Trust II.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 7, 1997
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 8, 1996, for the Nuveen Tax-Free Bond Fund, Inc., comprising the
Nuveen Massachusetts Tax-Free Value Fund, and to all references to our firm
included in or made a part of this registration statement on Form N-1A of Nuveen
Flagship Multistate Trust II.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 7, 1997
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 8, 1996, for the Nuveen Tax-Free Bond Fund, Inc., comprising the
Nuveen New York Tax-Free Value Fund, and to all references to our firm included
in or made a part of this registration statement on Form N-1A of Nuveen Flagship
Multistate Trust II.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 7, 1997
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 8, 1996, for the Nuveen California Tax-Free Fund, Inc., comprising
the Nuveen California and California Insured Tax-Free Value Funds, and to all
references to our firm included in or made a part of this registration statement
on Form N-1A of Nuveen Flagship Multistate Trust II.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 7, 1997
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 8, 1996, for the Nuveen Insured Tax-Free Bond Fund, Inc., comprising
the Nuveen Massachusetts and New York Insured Tax-Free Value Funds, and to all
references to our firm included in or made a part of this registration statement
on Form N-1A of Nuveen Flagship Multistate Trust II.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 7, 1997
<PAGE>
EXHIBIT 15
Nuveen Flagship Municipal Trust
Nuveen Flagship Multistate Trust I
Nuveen Flagship Multistate Trust II
Nuveen Flagship Multistate Trust III
Nuveen Flagship Multistate Trust IV
Plan of Distribution and Service
Pursuant to Rule 12b-1
January 30, 1997
Whereas, Nuveen Flagship Municipal Trust, Nuveen Flagship Multistate Trust
I, Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III and
Nuveen Flagship Multistate Trust IV, each a Massachusetts business trust (each,
a "Fund"), engages in business as an open-end management investment company and
is registered under the Investment Company Act of 1940, as amended (the "Act");
Whereas, each Fund is authorized to and may or does issue shares of
beneficial interest in separate series, with the shares of each such series
representing the interests in a separate portfolio of securities and other
assets (each Fund's series together with all other such series subsequently
established by a Fund being referred to herein individually as a "Series" and
collectively as the "Series");
Whereas, each Fund has outstanding the Series set forth on Exhibit A;
Whereas, each Fund, on behalf of each Series, employs John Nuveen & Co.
Incorporated (the "Distributor") as distributor of the shares of each Series of
each Fund (the "Shares") pursuant to a Distribution Agreement dated as of
February 1, 1997;
Whereas, each Fund is authorized to issue Shares in four different classes
("Classes"): Class A, Class B, Class C and Class R (although not all Series will
issue all Classes of Shares).
Whereas, each Fund, on behalf of its Series, desires to adopt a Plan of
Distribution and Service pursuant to Rule 12b-1 under the Act ("Rule 12b-1"),
and the Board of Trustees of each Fund has determined that there is a reasonable
likelihood that adoption of this Plan of Distribution and Service will benefit
the Fund and its shareholders;
Whereas, each Fund, on behalf of its Series, has adopted a Multiple Class
Plan Pursuant to Rule 18f-3 (the "Rule 18f-3 Plan") to enable the various
Classes of Shares to be granted
<PAGE>
different rights and privileges and to bear different expenses, and has an
effective registration statement on file with the SEC containing a Prospectus
describing such Classes of Shares;
Whereas, as described in the Rule 18f-3 Plan, the purchase of Class A
Shares is generally subject to an up-front sales charge, as set forth in the
Fund's Prospectus and Statement of Additional Information, and the purchase of
Class B and Class C Shares will not be subject to an up-front sales charge, but
in lieu thereof the Class B Shares will be subject to an asset-based
distribution fee (and a declining contingent deferred sales charge) and Class C
Shares will be subject to an asset-based distribution fee (and a one-year
contingent deferred sales charge), as described in the Prospectus for the
Shares; and
Whereas, Shares representing an investment in Class B will automatically
convert to Class A Shares 8 years after the investment, as described in the
Prospectus for the Shares;
Now, Therefore, each Fund, on behalf of its Series, hereby adopts, and the
Distributor hereby agrees to the terms of, this Plan of Distribution and Service
(the "Plan") in accordance with Rule 12b-1, on the following terms and
conditions:
1. (a) Each Fund, on behalf of its Series, is authorized to compensate the
Distributor for services performed and expenses incurred by the
Distributor in connection with the distribution of Shares of Class A,
Class B and Class C of the Fund and the servicing of accounts holding
such Shares.
(b) The amount of such compensation paid during any one year shall consist
of:
(i) with respect to Class A Shares, a Service Fee not to exceed .20
% of average daily net assets of the Class A Shares of the
Fund;
(ii) with respect to Class B Shares, a Service Fee not to exceed
.20% of average daily net assets of the Class B Shares of the
Fund, plus a Distribution Fee not to exceed .75% of average
daily net assets of the Class B Shares of the Fund; and
(iii) (A) with respect to Class C Shares of Long-Term and
Intermediate series, a Service Fee not to exceed .20% of
average daily net assets of the Class C Shares of the Fund,
plus a Distribution Fee not to exceed .55% of average daily net
assets of the Class C Shares of the Fund; and
(B) with respect to Class C Shares of Limited-Term series, a
Service Fee not to exceed .20% of average daily net assets of
the Class C Shares of the
-2-
<PAGE>
Fund, plus a Distribution Fee not to exceed .35% of average
daily net assets of the Class C Shares of the Fund.
Such compensation shall be calculated and accrued daily and paid
monthly or at such other intervals as the Board of Trustees may
determine.
(c) With respect to Class A Shares, the Distributor shall pay any Service
Fees it receives under the Plan for which a particular underwriter,
dealer, broker, bank or selling entity having a Dealer Agreement in
effect ("Authorized Dealer", which may include the Distributor) is the
dealer of record to such Authorized Dealers to compensate such
organizations for providing services to shareholders relating to their
investment. The Distributor may retain any Service Fees not so paid.
(d) With respect to the Class B Shares, the Distributor:
(i) shall retain the Distribution Fee to compensate it for costs
associated with the distribution of the Class B Shares,
including the payment of broker commissions to Authorized
Dealers (which may include the Distributor) who were the dealer
of record with respect to the purchase of those shares; and
(ii) shall pay any Service Fees it receives under the Plan for which
a particular Authorized Dealer is the dealer of record (which
may include the Distributor) to such Authorized Dealers to
compensate such organizations for providing services to
shareholders relating to their investment; provided, however,
that the Distributor shall be entitled to retain, for the first
year after purchase of the Class B Shares, the Service Fee to
the extent that it may have pre-paid the Service Fee for that
period to the Authorized Dealer of record.
The Distributor may retain any Distribution or Service Fees not so
paid.
(e) With respect to the Class C Shares, the Distributor:
(i) shall pay the Distribution Fee it receives under the Plan with
respect to Class C Shares for which a particular Authorized
Dealer is the dealer of record (which may include the
Distributor) to such Authorized Dealers to compensate such
organizations in connection with such share sales; provided,
however, that the Distributor shall be entitled to retain, for
the
-3-
<PAGE>
first year after purchase of the Class C Shares, the
Distribution Fee to the extent that it may have pre-paid the
Distribution Fee for that period to the Authorized Dealer of
record; and
(ii) shall pay any Service Fees it receives under the Plan for which
a particular Authorized Dealer is the dealer of record (which
may include the Distributor) to such Authorized Dealers to
compensate such organizations for providing services to
shareholders relating to their investment; provided, however,
that the Distributor shall be entitled to retain, for the first
year after purchase of the Class C Shares, the Service Fee to
the extent that it may have pre-paid the Service Fee for that
period to the Authorized Dealer of record.
The Distributor may retain any Distribution or Service Fees not so
paid.
(f) Services for which such Authorized Dealers may receive Service Fee
payments include any or all of the following: maintaining account records for
shareholders who beneficially own Shares; answering inquiries relating to the
shareholders' accounts, the policies of the Fund and the performance of their
investment; providing assistance and handling transmission of funds in
connection with purchase, redemption and exchange orders for Shares; providing
assistance in connection with changing account setups and enrolling in various
optional fund services; producing and disseminating shareholder communications
or servicing materials; the ordinary or capital expenses, such as equipment,
rent, fixtures, salaries, bonuses, reporting and recordkeeping and third party
consultancy or similar expenses, relating to any activity for which payment is
authorized by the Board; and the financing of any other activity for which
payment is authorized by the Board.
(g) Payments of Distribution or Service Fees to any organization as of any
month-end (or other period-end, as appropriate) will not exceed the appropriate
amount based on the annual percentages set forth in subparagraphs (c), (d) and
(e) above, based on average net assets of accounts for which such organization
appeared on the records of the Fund and/or its transfer agent as the
organization of record during the preceding month (period).
2. This Plan shall not take effect until the Plan, together with any
related agreement(s), has been approved by votes of a majority of both (a) the
Board of Trustees of the Fund, and (b) those Trustees of the Fund who are not
"interested persons" of the Fund (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to it (the "Rule 12b-1 Trustees") cast in person at a meeting (or
meetings) called for the purpose of voting on the Plan and such related
Agreement(s).
-4-
<PAGE>
3. This Plan shall remain in effect until August 1, 1997, and shall
continue in effect thereafter so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
paragraph 2.
4. The Distributor shall provide to the Board of Trustees of the Fund
and the Board shall review, at least quarterly, a written report of
distribution- and service-related activities, Distribution Fees, Service Fees,
and the purposes for which such activities were performed and expenses incurred.
5. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority (as defined in the Act) of the
outstanding voting Shares of a Series of the Fund.
6. This Plan may not be amended to increase materially the amount of
compensation payable by a Series with respect to Class A, Class B or Class C
Shares under paragraph 1 hereof unless such amendment is approved by a vote of
at least a majority (as defined in the Act) of the outstanding voting Shares of
that Class of Shares of the Series. No material amendment to the Plan shall be
made unless approved in the manner provided in paragraph 2 hereof.
7. While this Plan is in effect, the selection and nomination of the
Trustees who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the Trustees who are not such interested
persons.
8. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 4 hereof, for a period of
not less than six years from the date of the Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
-5-
<PAGE>
EXHIBIT A
TO Plan of Distribution and Service Pursuant to Rule 12b-1
NUVEEN FLAGSHIP MUNICIPAL TRUST
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST I
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Oklahoma Municipal Bond Fund *
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST II
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen California Intermediate Municipal Bond Fund *
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST III
Nuveen Flagship Alabama Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship South Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
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
* Funds not currently offered which will be described in a Trust's N-1A
registration statement but not included in the publicly-disseminated prospectus
<PAGE>
EXHIBIT 16
SCHEDULE OF COMPUTATION OF PERFORMANCE FIGURES*
I. YIELD
A. Yield Formula
Yield is computed according the following formula:
[ ( A - B )/6/ ]
YIELD = 2 [ ( ----- / 1 ) - 1 ]
[ ( CD ) ]
Where:
A = dividends and interest(degrees) earned during the period.
B = expenses accrued for the period (net of reimbursements).
C = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
D = the maximum offering price per share on the last day of the period.
- ---------
* The maximum sales charge in effect during the periods shown was 4.20%.
(degrees)Interest earned on tax-exempt obligations is determined as follows:
A. In the case of a tax-exempt obligation (1) with a current market premium
or (2) issued at a discount where the current market discount is less
than the then-remaining portion of the original issue discount, it is
necessary to first compute the yield to maturity (YTM). The YTM is then
divided by 360 and the quotient is multiplied by the market value of the
obligation (plus accrued interest).
B. In the case of a tax-exempt obligation issued at a discount where the
current market discount is in excess of the then-remaining portion of the
original issue discount, the adjusted original issue discount basis of
the obligation (plus accrued interest) is used in lieu of the market
value of the obligation (plus accrued interest) in computing the yield to
maturity (YTM). The YTM is then divided by 360 and the quotient is multi-
plied by the adjusted original issue basis of the obligation (plus ac-
crued interest).
C. In the case of a tax-exempt obligation issued without original issue
discount and having a current market discount, the coupon rate of interest
is used in lieu of the yield to maturity. The coupon rate is then divided
by 360 and the quotient is multiplied by the par value of the obligation.
B. Yield Calculations
1. New York Municipal Bond Fund
The following is the 30-day yield as of August 31, 1996, for the Class A
Shares of the Fund:
[([$ 90,467.72 - $ 15,060.64] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [ 1,802,197.98 X $ 10.82]
= 4.69%
The following is the 30-day yield as of August 31, 1996, for the Class C
Shares of the Fund:
[([$ 3,358.98 - $ 992.45] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [ 66,733.31 X $ 10.40]
= 4.13%
The following is the 30-day yield as of August 31, 1996, for the Class R
Shares of the Fund:
[([$ 733,438.79 - $ 90,559.63] )/6/ - 1 ]
----------------------------- + 1
Yield = 2 [14,571,815.25 X $ 10.40]
= 5.14%
1
<PAGE>
2. New York Insured Municipal Bond Fund
The following is the 30-day yield as of August 31, 1996, for the Class A
Shares of the Fund:
[ ( [$ 133,886.85 - $ 23,052.62] )/6/ ]
Yield = 2 [ ( ------------------------------- + 1 ) - 1 ]
[ ( [ 2,897,059.84 X $ 10.78] ) ]
= 4.30%
The following is the 30-day yield as of August 31, 1996, for the Class C
Shares of the Fund:
[ ( [$ 9,932.51 - $ 3,095.03] )/6/ ]
Yield = 2 [ ( ------------------------------- + 1 ) - 1 ]
[ [ 214,864.83 X $ 10.33] ) ]
= 3.73%
The following is the 30-day yield as of August 31, 1996, for the Class R
Shares of the Fund:
[ ( [$ 1,460,093.08 - $ 183,548.53] )/6/ ]
Yield = 2 [ ( ------------------------------- + 1 ) - 1 ]
[ ( [ 31,604,493.98 X $ 10.33] ) ]
= 4.74%
3. New Jersey Municipal Bond Fund
The following is the 30-day yield as of July 31, 1996, for the Class A
Shares of the Fund:
[ ( [$ 67,906.09 - $ 11,218.72] )/6/ ]
Yield = 2 [ ( ------------------------------- + 1 ) - 1 ]
[ ( [ 1,360,442.14 X $ 10.56] ) ]
= 4.78%
The following is the 30-day yield as of July 31, 1996, for the Class C
Shares of the Fund:
[ ( [$ 9,391.14 - $ 2,715.10] )/6/ ]
Yield = 2 [ ( ------------------------------- + 1 ) - 1 ]
[ ( [ 188,455.94 X $ 10.10] ) ]
= 4.25%
The following is the 30-day yield as of July 31, 1996, for the Class R
Shares of the Fund:
[ ( [$ 209,878.19 - $ 26,004.28] )/6/ ]
Yield =2 [ ( ------------------------------- + 1 ) - 1 ]
[ ( [ 4,200,202.28 X $ 10.13] ) ]
= 5.24%
4. New Jersey Intermediate Municipal Bond Fund
The following is a 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[ ( [$ 31,516.46 - $ 5,506.51] )/6/ ]
Yield = 2 [ ( ------------------------------- + 1 ) - 1 ]
[ ( [ 731,611.28 X $ 10.68] ) ]
= 4.03%
5. California Municipal Bond Fund
The following is a 30-day yield as of August 31, 1996, for the Class A
Shares of the Fund:
[ ( [$ 75,145.11 - $ 12,554.62] )/6/ ]
Yield = 2 [ ( ------------------------------- + 1 ) ]
[ ( [ 1,550,994.04 X $ 10.80] ) ]
= 4.53%
The following is a 30-day yield as of August 31, 1996, for the Class C
Shares of the Fund:
[ ( [$ 3,355.95 - $ 1,008.23] )/6/ ]
Yield = 2 [ ( ------------------------------- + 1 ) - 1 ]
[ [ 69,255.14 X $ 10.35] ) ]
= 3.96%
The following is a 30-day yield as of August 31, 1996, for the Class R
Shares of the Fund:
[ ( [$ 983,408.05 - $ 120,581.68] )/6/ ]
Yield = 2 [ ( ------------------------------- + 1 ) - 1 ]
[ ( [ 20,252,201.42 X $ 10.38] ) ]
= 4.98%
2
<PAGE>
6. California Insured Municipal Bond Fund
The following is a 30-day yield as of August 31, 1996, for the Class A
Shares of the Fund:
[([$ 101,247.19 - $ 17,107.19] )/6/ - 1 ]
----------------------------- + 1
Yield =2 [ 2,087,863.59 X $ 10.96]
= 4.45%
The following is a 30-day yield as of August 31, 1996, for the Class C
Shares of the Fund:
[([$ 4,282.64 - $ 1,302.19] )/6/ - 1 ]
----------------------------- + 1
Yield =2 [ 89,074.69 X $ 10.42]
= 3.88%
The following is a 30-day yield as of August 31, 1996, for the Class R
Shares of the Fund:
[([$ 910,537.65 - $ 112,837.68] )/6/ - 1 ]
----------------------------- + 1
Yield =2 [18,817,252.98 X $ 10.48]
= 4.90%
7. Connecticut Municipal Bond Fund
The following is a 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[([$ 978,348.73 - $ 138,552.23] )/6/ - 1 ]
----------------------------- + 1
Yield =2 [19,885,006.52 X $ 11.03]
= 4.64%
The following is a 30-day yield as of November 30, 1996, for the Class C
Shares of the Fund:
[([$ 33,418.95 - $ 7,928.61] )/6/ - 1 ]
----------------------------- + 1
Yield =2 [ 679,242.58 X $ 10.56]
= 4.30%
8. Massachusetts Municipal Bond Fund
The following is a 30-day yield as of August 31, 1996, for the Class A
Shares of the Fund:
[([$ 25,298.03 - $ 4,520.20] )/6/ - 1 ]
----------------------------- + 1
Yield =2 [ 550,608.59 X $ 10.20]
= 4.42%
The following is a 30-day yield as of August 31, 1996, for the Class C
Shares of the Fund:
[([ $ 3,530.49 - $ 1,103.91] )/6/ - 1 ]
----------------------------- + 1
Yield =2 [ 78,363.31 X $ 9.72]
= 3.85%
The following is a 30-day yield as of August 31, 1996, for the Class R
Shares of the Fund:
[([$ 346,312.56 - $ 46,409.62] )/6/ - 1 ]
----------------------------- + 1
Yield =2 [ 7,669,578.98 X $ 9.74]
= 4.87%
9. Massachusetts Insured Municipal Bond Fund
The following is a 30-day yield as of August 31, 1996, for the Class A
Shares of the Fund:
[([$ 26,957.27 - $ 5,323.70] )/6/ - 1 ]
----------------------------- + 1
Yield =2 [ 606,560.93 X $ 10.70]
= 4.03%
3
<PAGE>
The following is a 30-day yield as of August 31, 1996, for the Class C Shares
of the Fund:
[ ( [$ 3,672.03 - $ 1,252.58] )/6/ ]
Yield = 2 [ ( -------------------------- + 1 ) - 1 ]
[ ( [ 82,841.89 X $ 10.22 ] ) ]
= 3.45%
The following is a 30-day yield as of August 31, 1996, for the Class R Shares
of the Fund:
[ ( [$248,816.19 - $37,227.90] )/6/ ]
Yield = 2 [ ( -------------------------- + 1 ) - 1 ]
[ ( [ 5,598,031.86 X $ 10.25 ] ) ]
= 4.47%
II. TAXABLE EQUIVALENT YIELD
A. Taxable Equivalent Yield Formula
The Taxable Equivalent Yield Formula is as follows:
Tax Exempt Yield
Taxable Equivalent Yield = ------------------------------------------------
(1 - combined federal and state income tax rate)
B. Taxable Equivalent Yield Calculations
Based on combined federal and state income tax rates of 43.5% for New Jersey and
New Jersey Intermediate, 43.5% for New York and New York Insured, 45.0% for
California and California Insured, 47.0% for Massachusetts and Massachusetts
Insured, and 42.5% for Connecticut, the Taxable Equivalent Yields for the Class
A Shares, Class C Shares and R Shares, where applicable, for the 30-day period
ended August 31, 1996 or November 30, 1996, where applicable, are as
follows:
<TABLE>
<CAPTION>
Class A Shares Class C Shares Class R Shares
---------------- ---------------- ----------------
<S> <C> <C> <C>
4.69% 4.13% 5.14%
New York Municipal Bond -------- = 8.30% -------- = 7.31% -------- = 9.10%
Fund: 1 - .435 1 - .435 1 - .435
4.30% 3.73% 4.74%
New York Insured Munici- -------- = 7.61% -------- = 6.60% -------- = 8.39%
pal Bond Fund: 1 - .435 1 - .435 1 - .435
4.78% 4.25% 5.24%
New Jersey Municipal -------- = 8.46% -------- = 7.52% -------- = 9.27%
Bond Fund: 1 - .435 1 - .435 1 - .435
4.03% n/a n/a
New Jersey Intermediate -------- = 7.13% -------- = n/a -------- = n/a
Municipal Bond Fund: 1 - .435 n/a n/a
4.53% 3.96% 4.98%
California Municipal Bond -------- = 8.24% -------- = 7.20% -------- = 9.05%
Fund: 1 - .450 1 - .450 1 - .450
4.45% 3.88% 4.90%
California Insured Munici- -------- = 8.09% -------- = 7.05% -------- = 8.91%
pal Bond Fund: 1 - .450 1 - .450 1 - .450
4.64% 4.30% n/a
Connecticut Municipal -------- = 8.07% -------- = 7.48% -------- = n/a
Bond Fund: 1 - .425 1 - .425 n/a
4.42% 3.85% 4.87%
Massachusetts Municipal -------- = 8.34% -------- = 7.26% -------- = 9.19%
Bond Fund: 1 - .470 1 - .470 1 - .470
4.03% 3.45% 4.47%
Massachusetts Insured -------- = 7.60% -------- = 6.51% -------- = 8.43%
Municipal Bond Fund: 1 - .470 1 - .470 1 - .470
</TABLE>
4
<PAGE>
III. DISTRIBUTION RATE
A. Distribution Rate Formula
The formula for calculation of distribution rate is as follows:
Distribution Rate = 12 X most recent tax-exempt income dividend per share
-----------------------------------------------------
share price
B. Distribution Rate Calculations
1. New York Municipal Bond Fund:
The following is the distribution rate as of August 31, 1996, based on the
maximum public offering price for the New York Fund.
Class A Distribution Rate = 12 X $.0460
-----------
$10.82
------
= 5.10%
Class C Distribution Rate = 12 X $.0395
-----------
$10.40
-----
= 4.56%
Class R Distribution Rate = 12 X $.0485
-----------
$10.40
------
= 5.60%
2. New York Insured Municipal Bond Fund:
The following is the distribution rate as of August 31, 1996, based on the
maximum public offering price for the New York Insured Fund.
Class A Distribution Rate = 12 X $.0430
-----------
$10.78
------
= 4.79%
Class C Distribution Rate = 12 X $.0365
-----------
$10.33
------
= 4.24%
Class R Distribution Rate = 12 X $.0450
-----------
$10.33
------
= 5.23%
5
<PAGE>
3. New Jersey Municipal Bond Fund:
The following is the distribution rate as of July 31, 1996, based on the
maximum public offering price for the New Jersey Fund.
Class A Distribution Rate = 12 X $.0420
-----------
$10.56
= 4.77%
Class C Distribution Rate = 12 X $.0355
-----------
$10.10
= 4.22%
Class R Distribution Rate = 12 X $.0440
-----------
$10.13
= 5.21%
4. New Jersey Intermediate Municipal Bond Fund:
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the New Jersey Intermediate Bond Fund.
Class A Distribution Rate = 12 X $.04139
-----------
$10.68
= 4.65%
5. California Municipal Bond Fund
The following is the distribution rate as of August 31, 1996, based on maxi-
mum public offering price for the California Fund:
Class A Distribution Rate = 12 X $.0450
-----------
$10.80
= 5.00%
Class C Distribution Rate = 12 X $.0385
-----------
$10.35
= 4.46%
Class R Distribution Rate = 12 X $.0475
-----------
$10.38
= 5.49%
6
<PAGE>
6. California Insured Municipal Bond Fund
The following is the distribution rate as of August 31, 1996, based on the
maximum public offering price for the California Insured Fund:
Class A Distribution Rate = 12 X $.0440
-----------
$10.96
= 4.82%
Class C Distribution Rate = 12 X $.0370
-----------
$10.42
= 4.26%
Class R Distribution Rate = 12 X $.0460
-----------
$10.48
= 5.27%
7. Connecticut Municipal Bond Fund:
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the Connecticut Municipal Bond Fund.
Class A Distribution Rate = 12 X $.04573
------------
$11.03
= 4.98%
Class C Distribution Rate = 12 X $.04106
------------
$10.56
= 4.67%
8. Massachusetts Municipal Bond Fund:
The following is the distribution rate as of August 31, 1996, based on the
maximum public offering price for the Massachusetts Fund.
Class A Distribution Rate = 12 X $.0420
----------
$10.20
= 4.94%
Class C Distribution Rate = 12 X $.0360
-----------
$9.72
= 4.44%
Class R Distribution Rate = 12 X $.0440
-----------
$9.74
= 5.42%
7
<PAGE>
9. Massachusetts Insured Municipal Bond Fund:
The following is the distribution rate as of August 31, 1996, based on the
maximum public offering price for the Massachusetts Insured Fund.
Class A Distribution Rate = 12 X $.0430
-----------
$10.70
= 4.82%
Class C Distribution Rate = 12 X $.0365
-----------
$10.22
= 4.29%
Class R Distribution Rate = 12 X $.0450
-----------
$10.25
= 5.27%
IV. AVERAGE ANNUAL TOTAL RETURN
A. Average Annual Total Return Formula
Average Annual Total Return is computed according to the following formula:
ERV /1//N
T = --- -1
P
Where: T=average annual total return.
P=a hypothetical initial payment of $1,000.
N=number of years.
ERV=ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10-year (or fractional portion thereof)
periods at the end of such 1, 5 or 10-year (or fractional portion
thereof) periods.
B. Average Annual Total Return Calculations
The following are the average annual total returns for Class A Shares of the
Funds for the period from inception and the 1, 5 and 10-year periods ended
August 31, 1996 or November 30, 1996, whichever applicable, including the
current maximum sales charge. Class A total returns reflect actual performance
for the periods since class inception and Class R performance for periods prior
to class inception, adjusted for the differences in sales charges and fees
between the classes.
ANNUAL CLASS A TOTAL RETURNS INCLUDING CURRENT MAXIMUM SALES CHARGE OF 4.20%:
1. New York Municipal Bond Fund
$1,013 /1///1/
A. 1 year ended August 31, 1996 = (------) -1 = 1.26%
$1,000 -----
-----
$1,365 /1///5/
B. 5 years ended August 31, 1996 = (------ ) -1 = 6.42%
$1,000 ----
----
$1,878 /1//9.692
C. Inception through August 31, = (------) -1 = 6.72%
1996 $1,000 ----
----
8
<PAGE>
2. New York Insured Municipal Bond Fund
( $1,008 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 0.78%
( $1,000 ) =====
( $1,349 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.17%
( $1,000 ) =====
( $1,815 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 6.34%
( $1,000 ) =====
3. New Jersey Municipal Bond Fund
( $1,012 )/1///1/
A. 1 year ended July 31, 1996 = ( ------ ) -1 = 1.23%
( $1,000 ) =====
( $1,283 )/1///4.4216/
B. Inception through July 31, 1996 = ( ------ ) -1 = 5.79%
( $1,000 ) =====
4. New Jersey Intermediate Municipal Bond Fund
( $1,012 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 1.19%
( $1,000 ) =====
( $1,275 )/1///4.2053/
B. Inception through November 30, 1996 = ( ------ ) -1 = 5.94%
( $1,000 ) =====
5. California Municipal Bond Fund
( $1,018 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 1.80%
( $1,000 ) =====
( $1,314 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 5.62%
( $1,000 ) =====
( $1,863 )/1///10/
C. 10 years ended August 31, 1996 = ( ------ ) -1 = 6.42%
( $1,000 ) =====
( $1,922 )/1///10.168/
D. Inception through August 31, 1996 = ( ------ ) -1 = 6.63%
( $1,000 ) =====
6. California Insured Municipal Bond Fund
( $1,017 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 1.73%
( $1,000 ) =====
( $1,346 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.11%
( $1,000 ) =====
( $1,855 )/1///10/
C. 10 years ended August 31, 1996 = ( ------ ) -1 = 6.37%
( $1,000 ) =====
( $1,900 )/1///10.168/
D. Inception through August 31, 1996 = ( ------ ) -1 = 6.52%
( $1,000 ) =====
7. Connecticut Municipal Bond Fund:
( $1,013 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 1.31%
( $1,000 ) =====
( $1,370 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.50%
( $1,000 ) =====
( $1,888 )/1///9.3854/
C. Inception through November 30, 1996 = ( ------ ) -1 = 7.01%
( $1,000 ) =====
9
<PAGE>
8. Massachusetts Municipal Bond Fund
( $1,011 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 1.10%
( $1,000 ) =====
( $1,359 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.32%
( $1,000 ) =====
( $1,735 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 5.85%
( $1,000 ) =====
9. Massachusetts Insured Municipal Bond Fund
( $1,006 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 0.58%
( $1,000 ) =====
( $1,338 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.00%
( $1,000 ) =====
( $1,761 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 6.01%
( $1,000 ) =====
ANNUAL CLASS B TOTAL RETURNS:
1. New York Municipal Bond Fund
( $1,050 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 4.98%
( $1,000 ) =====
( $1,380 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.65%
( $1,000 ) =====
( $1,860 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 6.61%
( $1,000 ) =====
2. New York Insured Municipal Bond Fund
( $1,045 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 4.45%
( $1,000 ) =====
( $1,361 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.36%
( $1,000 ) =====
( $1,794 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 6.22%
( $1,000 ) =====
3. New Jersey Municipal Bond Fund
( $1,050 )/1///1/
A. 1 year ended July 31, 1996 = ( ------ ) -1 = 5.01%
( $1,000 ) =====
( $1,299 )/1///4.4216/
B. Inception through July 31, 1996 = ( ------ ) -1 = 6.09%
( $1,000 ) =====
4. California Municipal Bond Fund
( $1,056 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.64%
( $1,000 ) =====
( $1,330 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 5.86%
( $1,000 ) =====
( $1,837 )/1///10/
C. 10 years ended August 31, 1996 = ( ------ ) -1 = 6.27%
( $1,000 ) =====
( $1,895 )/1///10.168/
D. Inception through August 31, 1996 = ( ------ ) -1 = 6.49%
( $1,000 ) =====
10
<PAGE>
5. California Insured Municipal Bond Fund
( $1,054 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.44%
( $1,000 ) =====
( $1,354 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.25%
( $1,000 ) =====
( $1,829 )/1///10/
C. 10 years ended August 31, 1996 = ( ------ ) -1 = 6.22%
( $1,000 ) =====
( $1,874 )/1///10.168/
D. Inception through August 31, 1996 = ( ------ ) -1 = 6.37%
( $1,000 ) =====
6. Connecticut Municipal Bond Fund
( $1,052 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.18%
( $1,000 ) =====
( $1,392 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.84%
( $1,000 ) =====
( $1,886 )/1///9.3854/
C. Inception through August 31, 1996 = ( ------ ) -1 = 7.00%
( $1,000 ) =====
7. Massachusetts Municipal Bond Fund
( $1,047 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 4.69%
( $1,000 ) =====
( $1,366 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.43%
( $1,000 ) =====
( $1,708 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 5.68%
( $1,000 ) =====
8. Massachusetts Insured Municipal Bond Fund
( $1,042 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 4.23%
( $1,000 ) =====
( $1,350 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.18%
( $1,000 ) =====
( $1,737 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 5.86%
( $1,000 ) =====
ANNUAL CLASS C TOTAL RETURNS:
1. New York Municipal Bond Fund
( $1,050 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.00%
( $1,000 ) =====
( $1,380 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.65%
( $1,000 ) =====
( $1,847 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 6.53%
( $1,000 ) =====
11
<PAGE>
2. New York Insured Municipal Bond Fund
( $1,043 )/1//1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 4.33%
( $1,000 ) =====
( $1,360 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.35%
( $1,000 ) =====
( $1,781 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 6.14%
( $1,000 ) =====
3. New Jersey Municipal Bond Fund
( $1,049 )/1//1/
A. 1 year ended July 31, 1996 = ( ------ ) -1 = 4.87%
( $1,000 ) =====
( $1,297 )/1///4.4216/
B. Inception through July 31, 1996 = ( ------ ) -1 = 6.05%
( $1,000 ) =====
4. New Jersey Intermediate Municipal Bond Fund
( $1,040 )/1//1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 3.96%
( $1,000 ) =====
( $1,295 )/1///4.2053/
B. Inception through November 30, 1996 = ( ------ ) -1 = 6.34%
( $1,000 ) =====
5. California Municipal Bond Fund
( $1,055 )/1//1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.47%
( $1,000 ) =====
( $1,325 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 5.79%
( $1,000 ) =====
( $1,830 )/1///10/
C. 10 years ended August 31, 1996 = ( ------ ) -1 = 6.23%
( $1,000 ) =====
( $1,886 )/1///10.168/
D. Inception through August 31, 1996 = ( ------ ) -1 = 6.44%
( $1,000 ) =====
6. California Insured Municipal Bond Fund
( $1,054 )/1//1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.41%
( $1,000 ) =====
( $1,346 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.12%
( $1,000 ) =====
( $1,807 )/1///10/
C. 10 years ended August 31, 1996 = ( ------ ) -1 = 6.10%
( $1,000 ) =====
( $1,850 )/1///10.168/
D. Inception through August 31, 1996 = ( ------ ) -1 = 6.23%
( $1,000 ) =====
7. Connecticut Municipal Bond Fund:
( $1,052 )/1//1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 5.18%
( $1,000 ) =====
( $1,389 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 6.80%
( $1,000 ) =====
( $1,868 )/1///9.3854/
C. Inception through November 30, 1996 = ( ------ ) -1 = 6.89%
( $1,000 ) =====
12
<PAGE>
8. Massachusetts Municipal Bond Fund
( $1,047 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 4.68%
( $1,000 ) =====
( $1,364 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.40%
( $1,000 ) =====
( $1,690 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 5.57%
( $1,000 ) =====
9. Massachusetts Insured Municipal Bond Fund
( $1,041 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 4.12%
( $1,000 ) =====
( $1,345 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.11%
( $1,000 ) =====
( $1,721 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 5.76%
( $1,000 ) =====
ANNUAL CLASS R TOTAL RETURNS:
1. New York Municipal Bond Fund
( $1,060 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.98%
( $1,000 ) =====
( $1,447 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 7.67%
( $1,000 ) =====
( $2,015 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 7.50%
( $1,000 ) =====
2. New York Insured Municipal Bond Fund
( $1,055 )/1///1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.45%
( $1,000 ) =====
( $1,427 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 7.37%
( $1,000 ) =====
( $1,943 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 7.09%
( $1,000 ) =====
3. New Jersey Municipal Bond Fund
( $1,060 )/1///1/
A. 1 year ended July 31, 1996 = ( ------ ) -1 = 6.01%
( $1,000 ) =====
( $1,354 )/1///4.4216/
B. Inception through July 31, 1996 = ( ------ ) -1 = 7.10%
( $1,000 ) =====
4. New Jersey Intermediate Municipal Bond Fund
( $1,043 )/1///1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 4.32%
( $1,000 ) =====
( $1,314 )/1///4.2053/
B. Inception through November 30, 1996 = ( ------ ) -1 = 6.72%
( $1,000 ) =====
13
<PAGE>
5. California Municipal Bond Fund
( $1,067 )/1//1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 6.65%
( $1,000 ) =====
( $1,394 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 6.86%
( $1,000 ) =====
( $2,000 )/1///10/
C. 10 years ended August 31, 1996 = ( ------ ) -1 = 7.18%
( $1,000 ) =====
( $2,064 )/1///10.168/
D. Inception through August 31, 1996 = ( ------ ) -1 = 7.38%
( $1,000 ) =====
6. California Insured Municipal Bond Fund
( $1,065 )/1//1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 6.45%
( $1,000 ) =====
( $1,420 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 7.26%
( $1,000 ) =====
( $1,982 )/1///10/
C. 10 years ended August 31, 1996 = ( ------ ) -1 = 7.08%
( $1,000 ) =====
( $2,031 )/1///10.168/
D. Inception through August 31, 1996 = ( ------ ) -1 = 7.22%
( $1,000 ) =====
7. Connecticut Municipal Bond Fund:
( $1,058 )/1//1/
A. 1 year ended November 30, 1996 = ( ------ ) -1 = 5.76%
( $1,000 ) =====
( $1,430 )/1///5/
B. 5 years ended November 30, 1996 = ( ------ ) -1 = 7.42%
( $1,000 ) =====
( $1,971 )/1///9.3854/
C. Inception through November 30, 1996 = ( ------ ) -1 = 7.50%
( $1,000 ) =====
8. Massachusetts Municipal Bond Fund
( $1,057 )/1//1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.69%
( $1,000 ) =====
( $1,432 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 7.44%
( $1,000 ) =====
( $1,852 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 6.56%
( $1,000 ) =====
9. Massachusetts Insured Municipal Bond Fund
( $1,052 )/1//1/
A. 1 year ended August 31, 1996 = ( ------ ) -1 = 5.23%
( $1,000 ) =====
( $1,415 )/1///5/
B. 5 years ended August 31, 1996 = ( ------ ) -1 = 7.19%
( $1,000 ) =====
( $1,885 )/1///9.692/
C. Inception through August 31, 1996 = ( ------ ) -1 = 6.76%
( $1,000 ) =====
14
<PAGE>
V. CUMULATIVE TOTAL RETURN
A. Cumulative Total Return Formula
Cumulative Total Return is computed according to the following formula:
ERV - P
T = -------
P
Where: T = cumulative total return.
P = a hypothetical initial payment of $1,000.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the inception of the Fund or at the first day of a specified
1-year, 5-year or 10-year period.
B. Cumulative Total Return Calculation
The following are the cumulative total returns for Class Shares of the
Funds for the periods from inception and for the one, five and 10-year periods
ended August 31, 1996 or November 30, 1996 whichever applicable, assuming no
imposition of sales charges. Class total returns reflect actual performance
for the periods since class inception and Class R performance for periods prior
to class inception, adjusted for the differences in sales charges and fees
between the classes.
CUMULATIVE CLASS A TOTAL RETURNS INCLUDING CURRENT MAXIMUM SALES CHARGES OF
4.20%:
1. New York Municipal Bond Fund
( $1,013 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 1.26%
( $1,000 ) =====
( $1,365 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 36.50%
( $1,000 ) ======
( $1,878 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 87.81%
( $1,000 ) ======
2. New York Insured Municipal Bond Fund
( $1,008 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 0.78%
( $1,000 ) =====
( $1,349 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 34.94%
( $1,000 ) ======
( $1,815 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 81.52%
( $1,000 ) ======
3. New Jersey Municipal Bond Fund
( $1,012 - $1,000 )
A. 1 year ended July 31, 1996 = ( --------------- ) = 1.23%
( $1,000 ) =====
( $1,283 - $1,000 )
B. 5 years ended July 31, 1996 = ( --------------- ) = 28.28%
( $1,000 ) ======
4. New Jersey Intermediate Municipal Bond Fund
( $1,012 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 1.19%
( $1,000 ) =====
( $1,275 - $1,000 )
B. Inception through November 30, 1996 = ( --------------- ) = 27.49%
( $1,000 ) ======
15
<PAGE>
5. California Municipal Bond Fund
( $1,018 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 1.80%
( $1,000 ) =====
( $1,314 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 31.44%
( $1,000 ) ======
( $1,863 - $1,000 )
C. 10 years ended August 31, 1996 = ( --------------- ) = 86.28%
( $1,000 ) ======
( $1,922 - $1,000 )
D. Inception through August 31, 1996 = ( --------------- ) = 92.15%
( $1,000 ) ======
6. California Insured Municipal Bond Fund
( $1,017 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 1.73%
( $1,000 ) =====
( $1,346 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 34.55%
( $1,000 ) ======
( $1,855 - $1,000 )
C. 10 years ended August 31, 1996 = ( --------------- ) = 85.46%
( $1,000 ) ======
( $1,900 - $1,000 )
D. Inception through August 31, 1996 = ( --------------- ) = 90.01%
( $1,000 ) ======
7. Connecticut Municipal Bond Fund
( $1,013 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 1.31%
( $1,000 ) =====
( $1,370 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 37.04%
( $1,000 ) ======
( $1,888 - $1,000 )
C. Inception through November 30, 1996 = ( --------------- ) = 88.79%
( $1,000 ) ======
8. Massachusetts Municipal Bond Fund
( $1,011 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 1.10%
( $1,000 ) =====
( $1,359 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 35.86%
( $1,000 ) ======
( $1,735 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 73.54%
( $1,000 ) ======
9. Massachusetts Insured Municipal Bond Fund
( $1,006 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 0.58%
( $1,000 ) =====
( $1,338 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 33.83%
( $1,000 ) ======
( $1,761 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 76.11%
( $1,000 ) ======
16
<PAGE>
CUMULATIVE CLASS B TOTAL RETURNS:
- ---------------------------------
1. New York Municipal Bond Fund
( $1,050 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.98%
( $1,000 ) =====
( $1,380 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 38.02%
( $1,000 ) ======
( $1,860 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 85.98%
( $1,000 ) ======
2. New York Insured Municipal Bond Fund
( $1,045 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.45%
( $1,000 ) =====
( $1,361 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 36.14%
( $1,000 ) ======
( $1,794 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 79.43%
( $1,000 ) ======
3. New Jersey Municipal Bond Fund
( $1,050 - $1,000 )
A. 1 year ended July 31, 1996 = ( --------------- ) = 5.01%
( $1,000 ) =====
( $1,299 - $1,000 )
B. Inception through July 31, 1996 = ( --------------- ) = 29.86%
( $1,000 ) ======
4. California Municipal Bond Fund
( $1,056 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 5.64%
( $1,000 ) =====
( $1,330 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 32.97%
( $1,000 ) ======
( $1,837 - $1,000 )
C. 10 years ended August 31, 1996 = ( --------------- ) = 83.67%
( $1,000 ) ======
( $1,895 - $1,000 )
D. Inception through August 31, 1996 = ( --------------- ) = 89.47%
( $1,000 ) ======
5. California Insured Municipal Bond Fund
( $1,054 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 5.44%
( $1,000 ) =====
( $1,354 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 35.44%
( $1,000 ) ======
( $1,829 - $1,000 )
C. 10 years ended August 31, 1996 = ( --------------- ) = 82.88%
( $1,000 ) ======
( $1,874 - $1,000 )
D. Inception through August 31, 1996 = ( --------------- ) = 87.37%
( $1,000 ) ======
6. Connecticut Municipal Bond Fund
( $1,052 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 5.18%
( $1,000 ) =====
( $1,392 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 39.19%
( $1,000 ) ======
( $1,886 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 88.63%
( $1,000 ) ======
16
<PAGE>
7. Massachusetts Municipal Bond Fund
( $1,047 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.69%
( $1,000 ) =====
( $1,366 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 36.56%
( $1,000 ) ======
( $1,708 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 70.81%
( $1,000 ) ======
8. Massachusetts Insured Municipal Bond Fund
( $1,042 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.23%
( $1,000 ) =====
( $1,350 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 34.95%
( $1,000 ) ======
( $1,737 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 73.66%
( $1,000 ) ======
CUMULATIVE CLASS C TOTAL RETURNS:
1. New York Municipal Bond Fund
( $1,050 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 5.00%
( $1,000 ) =====
( $1,380 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 37.99%
( $1,000 ) ======
( $1,847 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 84.67%
( $1,000 ) ======
2. New York Insured Municipal Bond Fund
( $1,043 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.33%
( $1,000 ) =====
( $1,360 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 36.04%
( $1,000 ) ======
( $1,781 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 78.09%
( $1,000 ) ======
3. New Jersey Municipal Bond Fund
( $1,049 - $1,000 )
A. 1 year ended July 31, 1996 = ( --------------- ) = 4.87%
( $1,000 ) =====
( $1,297 - $1,000 )
B. Inception through July 31, 1996 = ( --------------- ) = 29.66%
( $1,000 ) ======
4. New Jersey Intermediate Municipal Bond Fund
( $1,040 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 3.96%
( $1,000 ) =====
( $1,295 - $1,000 )
B. Inception through November 30, 1996 = ( --------------- ) = 29.50%
( $1,000 ) ======
5. California Municipal Bond Fund
( $1,055 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 5.47%
( $1,000 ) =====
( $1,325 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 32.49%
( $1,000 ) ======
( $1,830 - $1,000 )
C. 10 years ended August 31, 1996 = ( --------------- ) = 83.05%
( $1,000 ) ======
( $1,886 - $1,000 )
D. Inception through August 31, 1996 = ( --------------- ) = 88.59%
( $1,000 ) ======
18
<PAGE>
6. California Insured Municipal Bond Fund
( $1,054 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 5.41%
( $1,000 ) =====
( $1,346 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 34.61%
( $1,000 ) ======
( $1,807 - $1,000 )
C. 10 years ended August 31, 1996 = ( --------------- ) = 80.74%
( $1,000 ) ======
( $1,850 - $1,000 )
D. Inception through August 31, 1996 = ( --------------- ) = 84.95%
( $1,000 ) ======
7. Connecticut Municipal Bond Fund
( $1,052 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 5.18%
( $1,000 ) =====
( $1,389 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 38.92%
( $1,000 ) ======
( $1,868 - $1,000 )
C. Inception through November 30, 1996 = ( --------------- ) = 86.81%
( $1,000 ) ======
8. Massachusetts Municipal Bond Fund
( $1,047 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.68%
( $1,000 ) =====
( $1,364 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 36.36%
( $1,000 ) ======
( $1,690 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 69.04%
( $1,000 ) ======
9. Massachusetts Insured Municipal Bond Fund
( $1,041 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.12%
( $1,000 ) =====
( $1,345 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 34.51%
( $1,000 ) ======
( $1,721 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 72.12%
( $1,000 ) ======
CUMULATIVE CLASS R TOTAL RETURNS:
1. New York Municipal Bond Fund
( $1,060 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 5.98%
( $1,000 ) =====
( $1,447 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 44.72%
( $1,000 ) ======
( $2,015 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 101.51%
( $1,000 ) =======
2. New York Insured Municipal Bond Fund
( $1,055 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 5.45%
( $1,000 ) =====
( $1,427 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 42.73%
( $1,000 ) ======
( $1,943 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 94.32%
( $1,000 ) ======
19
<PAGE>
3. New Jersey Municipal Bond Fund
( $1,060 - $1,000 )
A. 1 year ended July 31, 1996 = ( --------------- ) = 6.01%
( $1,000 ) =====
( $1,354 - $1,000 )
B. Inception through July 31, 1996 = ( --------------- ) = 35.44%
( $1,000 ) ======
4. Flagship New Jersey Intermediate Municipal Bond Fund
( $1,043 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 4.32%
( $1,000 ) =====
( $1,314 - $1,000 )
B. Inception through November 30, 1996 = ( --------------- ) = 31.43%
( $1,000 ) ======
5. California Municipal Bond Fund
( $1,067 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 6.65%
( $1,000 ) =====
( $1,394 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 39.39%
( $1,000 ) ======
( $2,000 - $1,000 )
C. 10 years ended August 31, 1996 = ( --------------- ) = 100.00%
( $1,000 ) =======
( $2,064 - $1,000 )
D. Inception through August 31, 1996 = ( --------------- ) = 106.39%
( $1,000 ) =======
6. California Insured Municipal Bond Fund
( $1,065 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 6.45%
( $1,000 ) =====
( $1,420 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 42.00%
( $1,000 ) ======
( $1,982 - $1,000 )
C. 10 years ended August 31, 1996 = ( --------------- ) = 98.18%
( $1,000 ) ======
( $2,031 - $1,000 )
D. Inception through August 31, 1996 = ( --------------- ) = 103.13%
( $1,000 ) =======
7. Connecticut Municipal Bond Fund
( $1,058 - $1,000 )
A. 1 year ended November 30, 1996 = ( --------------- ) = 5.76%
( $1,000 ) =====
( $1,430 - $1,000 )
B. 5 years ended November 30, 1996 = ( --------------- ) = 43.05%
( $1,000 ) ======
( $1,971 - $1,000 )
C. Inception through November 30, 1996 = ( --------------- ) = 97.07%
( $1,000 ) ======
8. Massachusetts Municipal Bond Fund
( $1,057 - $1,000 )
A. 1 year ended August 31, 1996 = ( --------------- ) = 5.69%
( $1,000 ) =====
( $1,432 - $1,000 )
B. 5 years ended August 31, 1996 = ( --------------- ) = 43.20%
( $1,000 ) ======
( $1,852 - $1,000 )
C. Inception through August 31, 1996 = ( --------------- ) = 85.17%
( $1,000 ) ======
20
<PAGE>
9. Massachusetts Insured Municipal Bond Fund
A. 1 year ended August 31, 1996 = $1,052 - $1,000 = 5.23%
( --------------- ) =====
$1,000
B. 5 years ended August 31, 1996 = $1,415 - $1,000 = 41.50%
( --------------- ) ======
$1,000
C. Inception through
August 31, 1996 = $1,885 - $1,000 = 88.45%
( --------------- ) ======
$1,000
VI. TAXABLE EQUIVALENT TOTAL RETURN
A. Taxable Equivalent Total Return Formula
Each Fund's taxable equivalent total return for a specific period is calcu-
lated by first taking a hypothetical initial investment in the Fund's shares on
the first day of the period, computing the Fund's total return for each fiscal
year in the period according to the above formula, and increasing the total re-
turn for each such fiscal year by the amount of additional income that a tax-
able fund would need to have generated to equal the income of the Fund on an
after-tax basis, at a specified tax rate (usually the highest marginal federal
or combined federal and state tax rate), calculated pursuant to the formula
presented above under "taxable equivalent yield." The resulting amount for the
fiscal year is then divided by the initial investment amount to arrive at a
"taxable equivalent total return factor" for the fiscal year. The taxable
equivalent total return factors for all the fiscal years in the period are then
multiplied together and the result is then annualized by taking its Nth root (N
representing the number of years in the period) and subtracting 1, which pro-
vides a taxable equivalent total return expressed as a percentage.
B. Taxable Equivalent Total Return Calculations
The taxable equivalent total return calculations for the Class R Shares of
the Massachusetts Municipal Bond Fund for the five-year period ended August 31,
1996 are set forth on the following pages assuming a combined federal and state
income tax rate of 47.0% based on 1997 rates.
Fund Name: Nuveen MA Tax-Free Value Class R
Since 08/31/91
<TABLE>
<CAPTION>
TOTAL PERIOD
NAV INCOME CAP FROM FROM DOLLAR TO DATE TAX ENDING ENDING REINV
PER DATE PER SHARE PER SHARE GAINS INCOME GAINS DIST. T-E INC. SAVINGS SHARES WEALTH NAV
- -------- --------- --------- ----- ------ ----- ------ -------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/91 9.05 .04850 1,105 $10,000 9.06
09/30/91 9.11 .04850 $53.591 $ -- $53.591 $ 53.591 1,111 $10,120 9.13
10/31/91 9.16 .04850 $53.876 $ -- $53.876 $107.467 1,117 $10,229 9.17
11/30/91 9.13 .04850 $54.161 $ -- $54.161 $161.628 1,123 $10,250 9.14
12/31/91 9.26 .04750 $53.326 $ -- $53.326 $214.953 1,128 $10,449 9.26
01/31/92 9.22 .04750 $53.599 $ -- $53.599 $268.552 1,134 $10,457 9.22
02/29/92 9.21 .04750 $53.875 $ -- $53.875 $322.428 1,140 $10,500 9.21
03/31/92 9.19 .04750 $54.153 $ -- $54.153 $376.581 1,146 $10,531 9.21
04/30/92 9.23 .04750 $54.432 $ -- $54.432 $431.013 1,152 $10,631 9.24
05/31/92 9.29 .04750 $54.712 $ -- $54.712 $485.725 1,158 $10,755 9.29
06/30/92 9.40 .04750 $54.992 $ -- $54.992 $540.717 1,164 $10,938 9.41
07/31/92 9.69 .04750 $55.270 $ -- $55.270 $595.987 1,169 $11,330 9.66
08/31/92 9.51 .04650 $54.372 $ -- $54.372 $650.359 $576.7 1,236 $11,751 9.52
09/30/92 9.54 .04650 $57.458 $ -- $57.458 $ 57.458 1,242 $11,845 9.55
10/31/92 9.34 .04650 $57.737 $ -- $57.737 $115.195 1,248 $11,655 9.34
11/30/92 9.51 .04650 $58.025 $ -- $58.025 $173.220 1,254 $11,925 9.51
12/31/92 9.58 .04650 .0039 $58.309 $4.890 $63.199 $231.528 1,261 $12,076 9.58
01/31/93 9.62 .04650 $58.615 $ -- $58.615 $290.143 1,267 $12,185 9.63
02/28/93 9.91 .04650 $58.898 $ -- $58.898 $349.042 1,273 $12,611 9.92
03/31/93 9.73 .04650 $59.174 $ -- $59.174 $408.216 1,279 $12,441 9.74
04/30/93 9.80 .04500 $57.539 $ -- $57.539 $465.755 1,285 $12,588 9.81
05/31/93 9.83 .04500 $57.803 $ -- $57.803 $523.558 1,290 $12,685 9.83
06/30/93 9.97 .04500 $58.067 $ -- $58.067 $581.625 1,296 $12,923 9.97
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
TOTAL PERIOD
NAV INCOME CAP FROM FROM DOLLAR TO DATE TAX ENDING ENDING REINV
PER DATE PER SHARE PER SHARE GAINS INCOME GAINS DIST. T-E INC. SAVINGS SHARES WEALTH NAV
- -------- --------- --------- ----- ------ ----- ------ -------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/93 9.94 .04500 $58.330 $ -- $58.330 $639.955 1,302 $12,943 9.94
08/31/93 10.12 .04500 $58.594 $ -- $58.594 $698.549 $619.4 1,369 $13,855 10.13
09/30/93 10.20 .04500 $61.608 $ -- $61.608 $ 61.608 1,375 $14,026 10.21
10/31/93 10.18 .04500 .0102 $61.880 $14.026 $75.906 $123.488 1,383 $14,075 10.17
11/30/93 10.04 .04500 $62.216 $ -- $62.216 $185.704 1,389 $13,943 10.05
12/31/93 10.16 .04500 $62.494 $ -- $62.494 $248.199 1,395 $14,172 10.16
01/31/94 10.26 .04500 $62.771 $ -- $62.771 $310.970 1,401 $14,375 10.25
02/28/94 9.94 .04400 $61.646 $ -- $61.646 $372.616 1,407 $13,988 9.93
03/31/94 9.51 .04400 $61.919 $ -- $61.919 $434.535 1,414 $13,446 9.35
04/30/94 9.49 .04400 $62.210 $ -- $62.210 $496.745 1,420 $13,480 9.46
05/31/94 9.54 .04450 $63.210 $ -- $63.210 $559.955 1,427 $13,614 9.53
06/30/94 9.46 .04450 $63.505 $ -- $63.505 $623.460 1,434 $13,564 9.46
07/31/94 9.55 .04450 $63.804 $ -- $63.804 $687.264 1,440 $13,756 9.58
08/31/94 9.53 .04450 $64.100 $ -- $64.100 $751.364 $666.3 1,517 $14,458 9.54
09/30/94 9.33 .04450 $67.510 $ -- $67.510 $ 67.510 1,524 $14,222 9.33
10/31/94 9.13 .04550 $69.357 $ -- $69.357 $136.867 1,532 $13,987 9.11
11/30/94 8.90 .04550 $69.703 $ -- $69.703 $206.570 1,540 $13,704 8.94
12/31/94 9.12 .04550 $70.058 $ -- $70.058 $276.628 1,547 $14,112 9.12
01/31/95 9.32 .04550 $70.407 $ -- $70.407 $347.036 1,555 $14,492 9.36
02/28/95 9.54 .04550 $70.750 $ -- $70.750 $417.785 1,562 $14,905 9.58
03/31/95 9.58 .04550 $71.086 $ -- $71.086 $488.871 1,570 $15,038 9.60
04/30/95 9.57 .04550 $71.423 $ -- $71.423 $560.294 1,577 $15,094 9.56
05/31/95 9.79 .04550 $71.763 $ -- $71.763 $632.056 1,585 $15,513 9.79
06/30/95 9.67 .04550 $72.096 $ -- $72.096 $704.152 1,592 $15,394 9.67
07/31/95 9.68 .04550 $72.435 $ -- $72.435 $776.588 1,599 $15,483 9.66
08/31/95 9.73 .04550 $72.777 $ -- $72.777 $849.364 $753.2 1,684 $16,389 9.77
09/30/95 9.75 .04550 $76.638 $ -- $76.638 $ 76.638 1,692 $16,499 9.78
10/31/95 9.84 .04550 $76.994 $ -- $76.994 $153.632 1,700 $16,728 9.87
11/30/95 9.95 .04550 $77.349 $ -- $77.349 $230.981 1,708 $16,992 9.98
12/31/95 9.99 .04500 $76.848 $ -- $76.848 $307.829 1,715 $17,137 9.99
01/31/96 10.00 .04500 $77.194 $ -- $77.194 $385.023 1,723 $17,231 10.00
02/29/96 9.91 .04500 $77.541 $ -- $77.541 $462.564 1,731 $17,154 9.94
03/31/96 9.76 .04400 $76.162 $ -- $76.162 $538.726 1,739 $16,970 9.77
04/30/96 9.70 .04400 $76.505 $ -- $76.505 $615.230 1,747 $16,942 9.70
05/31/96 9.69 .04400 $76.852 $ -- $76.852 $692.082 1,755 $17,002 9.69
06/30/96 9.73 .04400 $77.201 $ -- $77.201 $769.282 1,762 $17,149 9.73
07/31/96 9.76 .04400 $77.550 $ -- $77.550 $846.832 1,770 $17,279 9.79
08/31/96 9.74 .04400 $77.898 $ -- $77.898 $924.730 $820.0 1,863 $18,142 9.73
Tax Rate 47.00%
Load 0.00%
Past Year: Total Return 10.70%
5.0021 Years: Total Return 81.42%
Annualized 12.65%
</TABLE>
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> MASSACHUSETTS TAX FREE VALUE CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 75566
<INVESTMENTS-AT-VALUE> 79691
<RECEIVABLES> 1217
<ASSETS-OTHER> 300
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 81208
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 339
<TOTAL-LIABILITIES> 339
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77593
<SHARES-COMMON-STOCK> 571
<SHARES-COMMON-PRIOR> 431
<ACCUMULATED-NII-CURRENT> 34
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (883)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4125
<NET-ASSETS> 5576
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2513
<OTHER-INCOME> 0
<EXPENSES-NET> 314
<NET-INVESTMENT-INCOME> 2199
<REALIZED-GAINS-CURRENT> (95)
<APPREC-INCREASE-CURRENT> (1380)
<NET-CHANGE-FROM-OPS> 725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 127
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 159
<NUMBER-OF-SHARES-REDEEMED> 28
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> (832)
<ACCUMULATED-NII-PRIOR> 3
<ACCUMULATED-GAINS-PRIOR> (789)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 223
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 318
<AVERAGE-NET-ASSETS> 4958
<PER-SHARE-NAV-BEGIN> 9.94
<PER-SHARE-NII> .263
<PER-SHARE-GAIN-APPREC> (.181)
<PER-SHARE-DIVIDEND> .252
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.77
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> MASSACHUSETTS TAX FREE VALUE CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 75566
<INVESTMENTS-AT-VALUE> 79691
<RECEIVABLES> 1217
<ASSETS-OTHER> 300
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 81208
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 339
<TOTAL-LIABILITIES> 339
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77593
<SHARES-COMMON-STOCK> 81
<SHARES-COMMON-PRIOR> 65
<ACCUMULATED-NII-CURRENT> 34
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (883)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4125
<NET-ASSETS> 787
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2513
<OTHER-INCOME> 0
<EXPENSES-NET> 314
<NET-INVESTMENT-INCOME> 2199
<REALIZED-GAINS-CURRENT> (95)
<APPREC-INCREASE-CURRENT> (1380)
<NET-CHANGE-FROM-OPS> 725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (832)
<ACCUMULATED-NII-PRIOR> 3
<ACCUMULATED-GAINS-PRIOR> (789)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 223
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 318
<AVERAGE-NET-ASSETS> 699
<PER-SHARE-NAV-BEGIN> 9.89
<PER-SHARE-NII> .223
<PER-SHARE-GAIN-APPREC> (.177)
<PER-SHARE-DIVIDEND> .216
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.72
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> MASSACHUSETTS TAX FREE VALUE CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 75566
<INVESTMENTS-AT-VALUE> 79691
<RECEIVABLES> 1217
<ASSETS-OTHER> 300
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 81208
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 339
<TOTAL-LIABILITIES> 339
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77593
<SHARES-COMMON-STOCK> 7651
<SHARES-COMMON-PRIOR> 7743
<ACCUMULATED-NII-CURRENT> 34
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (883)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4125
<NET-ASSETS> 74506
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2513
<OTHER-INCOME> 0
<EXPENSES-NET> 314
<NET-INVESTMENT-INCOME> 2199
<REALIZED-GAINS-CURRENT> (95)
<APPREC-INCREASE-CURRENT> (1380)
<NET-CHANGE-FROM-OPS> 725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2026
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 328
<NUMBER-OF-SHARES-REDEEMED> 568
<SHARES-REINVESTED> 147
<NET-CHANGE-IN-ASSETS> (832)
<ACCUMULATED-NII-PRIOR> 3
<ACCUMULATED-GAINS-PRIOR> (789)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 223
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 318
<AVERAGE-NET-ASSETS> 74712
<PER-SHARE-NAV-BEGIN> 9.91
<PER-SHARE-NII> .267
<PER-SHARE-GAIN-APPREC> (.173)
<PER-SHARE-DIVIDEND> .264
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.74
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety to
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> NUVEEN MASS INS CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 60042
<INVESTMENTS-AT-VALUE> 63419
<RECEIVABLES> 1035
<ASSETS-OTHER> 171
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64625
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 254
<TOTAL-LIABILITIES> 254
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61266
<SHARES-COMMON-STOCK> 622
<SHARES-COMMON-PRIOR> 504
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (279)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3377
<NET-ASSETS> 6369
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1948
<OTHER-INCOME> 0
<EXPENSES-NET> 263
<NET-INVESTMENT-INCOME> 1685
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (1573)
<NET-CHANGE-FROM-OPS> 112
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 143
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 163
<NUMBER-OF-SHARES-REDEEMED> 53
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> (1729)
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> (279)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 178
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 263
<AVERAGE-NET-ASSETS> 5725
<PER-SHARE-NAV-BEGIN> 10.49
<PER-SHARE-NII> .261
<PER-SHARE-GAIN-APPREC> (.243)
<PER-SHARE-DIVIDEND> .258
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety to
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 023
<NAME> NUVEEN MASS INS CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 60042
<INVESTMENTS-AT-VALUE> 63419
<RECEIVABLES> 1035
<ASSETS-OTHER> 171
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64625
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 254
<TOTAL-LIABILITIES> 254
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61266
<SHARES-COMMON-STOCK> 83
<SHARES-COMMON-PRIOR> 67
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (279)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3377
<NET-ASSETS> 847
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1948
<OTHER-INCOME> 0
<EXPENSES-NET> 263
<NET-INVESTMENT-INCOME> 1685
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (1573)
<NET-CHANGE-FROM-OPS> 112
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> (1729)
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> (279)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 178
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 263
<AVERAGE-NET-ASSETS> 798
<PER-SHARE-NAV-BEGIN> 10.47
<PER-SHARE-NII> .223
<PER-SHARE-GAIN-APPREC> (.254)
<PER-SHARE-DIVIDEND> .219
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.22
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety to
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> NUVEEN MASS INS CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 60042
<INVESTMENTS-AT-VALUE> 63419
<RECEIVABLES> 1035
<ASSETS-OTHER> 171
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64625
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 254
<TOTAL-LIABILITIES> 254
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61266
<SHARES-COMMON-STOCK> 5577
<SHARES-COMMON-PRIOR> 5724
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (279)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3377
<NET-ASSETS> 57155
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1948
<OTHER-INCOME> 0
<EXPENSES-NET> 263
<NET-INVESTMENT-INCOME> 1685
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (1573)
<NET-CHANGE-FROM-OPS> 112
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1521
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 118
<NUMBER-OF-SHARES-REDEEMED> 371
<SHARES-REINVESTED> 106
<NET-CHANGE-IN-ASSETS> (1729)
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> (279)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 178
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 263
<AVERAGE-NET-ASSETS> 57563
<PER-SHARE-NAV-BEGIN> 10.50
<PER-SHARE-NII> .270
<PER-SHARE-GAIN-APPREC> (.250)
<PER-SHARE-DIVIDEND> .270
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> NUVEEN CAL SPECIAL CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 230773
<INVESTMENTS-AT-VALUE> 238739
<RECEIVABLES> 4161
<ASSETS-OTHER> 222
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 243122
<PAYABLE-FOR-SECURITIES> 14264
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 821
<TOTAL-LIABILITIES> 15085
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221479
<SHARES-COMMON-STOCK> 1637
<SHARES-COMMON-PRIOR> 1202
<ACCUMULATED-NII-CURRENT> 182
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1591)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7967
<NET-ASSETS> 16953
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6959
<OTHER-INCOME> 0
<EXPENSES-NET> 820
<NET-INVESTMENT-INCOME> 6139
<REALIZED-GAINS-CURRENT> (826)
<APPREC-INCREASE-CURRENT> (4147)
<NET-CHANGE-FROM-OPS> 1166
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 364
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 465
<NUMBER-OF-SHARES-REDEEMED> 47
<SHARES-REINVESTED> 18
<NET-CHANGE-IN-ASSETS> (1746)
<ACCUMULATED-NII-PRIOR> 143
<ACCUMULATED-GAINS-PRIOR> (763)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 820
<AVERAGE-NET-ASSETS> 14277
<PER-SHARE-NAV-BEGIN> 10.58
<PER-SHARE-NII> .275
<PER-SHARE-GAIN-APPREC> (.238)
<PER-SHARE-DIVIDEND> .267
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.35
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 023
<NAME> NUVEEN CAL SPECIAL CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 230773
<INVESTMENTS-AT-VALUE> 238739
<RECEIVABLES> 4161
<ASSETS-OTHER> 222
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 243122
<PAYABLE-FOR-SECURITIES> 14264
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 821
<TOTAL-LIABILITIES> 15085
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221479
<SHARES-COMMON-STOCK> 70
<SHARES-COMMON-PRIOR> 65
<ACCUMULATED-NII-CURRENT> 182
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1591)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7967
<NET-ASSETS> 723
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6959
<OTHER-INCOME> 0
<EXPENSES-NET> 820
<NET-INVESTMENT-INCOME> 6139
<REALIZED-GAINS-CURRENT> (826)
<APPREC-INCREASE-CURRENT> (4147)
<NET-CHANGE-FROM-OPS> 1166
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9
<NUMBER-OF-SHARES-REDEEMED> 5
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (1746)
<ACCUMULATED-NII-PRIOR> 143
<ACCUMULATED-GAINS-PRIOR> (763)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 820
<AVERAGE-NET-ASSETS> 715
<PER-SHARE-NAV-BEGIN> 10.58
<PER-SHARE-NII> .237
<PER-SHARE-GAIN-APPREC> (.239)
<PER-SHARE-DIVIDEND> .228
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.35
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> NUVEEN CAL SPECIAL CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 230773
<INVESTMENTS-AT-VALUE> 238739
<RECEIVABLES> 4161
<ASSETS-OTHER> 222
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 243122
<PAYABLE-FOR-SECURITIES> 14264
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 821
<TOTAL-LIABILITIES> 15085
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221479
<SHARES-COMMON-STOCK> 20274
<SHARES-COMMON-PRIOR> 20412
<ACCUMULATED-NII-CURRENT> 182
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1591)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7967
<NET-ASSETS> 210362
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6959
<OTHER-INCOME> 0
<EXPENSES-NET> 820
<NET-INVESTMENT-INCOME> 6139
<REALIZED-GAINS-CURRENT> (826)
<APPREC-INCREASE-CURRENT> (4147)
<NET-CHANGE-FROM-OPS> 1166
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5721
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 580
<NUMBER-OF-SHARES-REDEEMED> 1051
<SHARES-REINVESTED> 333
<NET-CHANGE-IN-ASSETS> (1746)
<ACCUMULATED-NII-PRIOR> 143
<ACCUMULATED-GAINS-PRIOR> (765)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 820
<AVERAGE-NET-ASSETS> 210100
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> .283
<PER-SHARE-GAIN-APPREC> (.221)
<PER-SHARE-DIVIDEND> .282
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.38
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statments and is qualified in its entirety by refernces
to such documents.
</LEGEND>
<SERIES>
<NUMBER>032
<NAME> CALIFORNIA INSURED TAX-FREE VALUE-A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 208054
<INVESTMENTS-AT-VALUE> 217529
<RECEIVABLES> 3790
<ASSETS-OTHER> 276
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 221595
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 828
<TOTAL-LIABILITIES> 828
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 212120
<SHARES-COMMON-STOCK> 2164
<SHARES-COMMON-PRIOR> 1603
<ACCUMULATED-NII-CURRENT> 185
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1013)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9475
<NET-ASSETS> 22728
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6571
<OTHER-INCOME> 0
<EXPENSES-NET> 795
<NET-INVESTMENT-INCOME> 5776
<REALIZED-GAINS-CURRENT> (671)
<APPREC-INCREASE-CURRENT> (4844)
<NET-CHANGE-FROM-OPS> 260
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 472
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 734
<NUMBER-OF-SHARES-REDEEMED> 195
<SHARES-REINVESTED> 22
<NET-CHANGE-IN-ASSETS> (3166)
<ACCUMULATED-NII-PRIOR> (342)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 599
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 795
<AVERAGE-NET-ASSETS> 19005
<PER-SHARE-NAV-BEGIN> 10.76
<PER-SHARE-NII> .271
<PER-SHARE-GAIN-APPREC> (.267)
<PER-SHARE-DIVIDEND> .264
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statments and is qualified in its entirety by refernces
to such documents.
</LEGEND>
<SERIES>
<NUMBER>033
<NAME> CALIFORNIA INSURED TAX-FREE VALUE-C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 208054
<INVESTMENTS-AT-VALUE> 217529
<RECEIVABLES> 3790
<ASSETS-OTHER> 276
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 221595
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 828
<TOTAL-LIABILITIES> 828
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 212120
<SHARES-COMMON-STOCK> 90
<SHARES-COMMON-PRIOR> 97
<ACCUMULATED-NII-CURRENT> 185
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1013)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9475
<NET-ASSETS> 936
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6571
<OTHER-INCOME> 0
<EXPENSES-NET> 795
<NET-INVESTMENT-INCOME> 5776
<REALIZED-GAINS-CURRENT> (671)
<APPREC-INCREASE-CURRENT> (4844)
<NET-CHANGE-FROM-OPS> 260
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16
<NUMBER-OF-SHARES-REDEEMED> 25
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (3166)
<ACCUMULATED-NII-PRIOR> (342)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 599
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 795
<AVERAGE-NET-ASSETS> 939
<PER-SHARE-NAV-BEGIN> 10.67
<PER-SHARE-NII> .223
<PER-SHARE-GAIN-APPREC> (.251)
<PER-SHARE-DIVIDEND> .222
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.42
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statments and is qualified in its entirety by refernces
to such documents.
</LEGEND>
<SERIES>
<NUMBER>031
<NAME> CALIFORNIA INSURED TAX-FREE VALUE-R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 208054
<INVESTMENTS-AT-VALUE> 217529
<RECEIVABLES> 3790
<ASSETS-OTHER> 276
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 221595
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 828
<TOTAL-LIABILITIES> 828
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 212120
<SHARES-COMMON-STOCK> 18809
<SHARES-COMMON-PRIOR> 19148
<ACCUMULATED-NII-CURRENT> 185
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1013)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9475
<NET-ASSETS> 197102
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6571
<OTHER-INCOME> 0
<EXPENSES-NET> 795
<NET-INVESTMENT-INCOME> 5776
<REALIZED-GAINS-CURRENT> (671)
<APPREC-INCREASE-CURRENT> (4844)
<NET-CHANGE-FROM-OPS> 260
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5233
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 497
<NUMBER-OF-SHARES-REDEEMED> 1131
<SHARES-REINVESTED> 295
<NET-CHANGE-IN-ASSETS> (3166)
<ACCUMULATED-NII-PRIOR> (342)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 599
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 795
<AVERAGE-NET-ASSETS> 198167
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> .278
<PER-SHARE-GAIN-APPREC> (.262)
<PER-SHARE-DIVIDEND> .276
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.48
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER>022
<NAME> NUVEEN NY VALUE CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 168355
<INVESTMENTS-AT-VALUE> 174199
<RECEIVABLES> 2387
<ASSETS-OTHER> 39
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 176625
<PAYABLE-FOR-SECURITIES> 3993
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 710
<TOTAL-LIABILITIES> 4703
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166021
<SHARES-COMMON-STOCK> 1827
<SHARES-COMMON-PRIOR> 1483
<ACCUMULATED-NII-CURRENT> 129
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (72)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5844
<NET-ASSETS> 18942
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5323
<OTHER-INCOME> 0
<EXPENSES-NET> 630
<NET-INVESTMENT-INCOME> 4693
<REALIZED-GAINS-CURRENT> (722)
<APPREC-INCREASE-CURRENT> (3219)
<NET-CHANGE-FROM-OPS> 752
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 457
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 426
<NUMBER-OF-SHARES-REDEEMED> 110
<SHARES-REINVESTED> 27
<NET-CHANGE-IN-ASSETS> 769
<ACCUMULATED-NII-PRIOR> 127
<ACCUMULATED-GAINS-PRIOR> 649
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 466
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 630
<AVERAGE-NET-ASSETS> 17354
<PER-SHARE-NAV-BEGIN> 10.61
<PER-SHARE-NII> .282
<PER-SHARE-GAIN-APPREC> (.246)
<PER-SHARE-DIVIDEND> .276
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.37
<EXPENSE-RATIO> .96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER>023
<NAME> NUVEEN NY VALUE CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 168355
<INVESTMENTS-AT-VALUE> 174199
<RECEIVABLES> 2387
<ASSETS-OTHER> 39
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 176625
<PAYABLE-FOR-SECURITIES> 3993
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 710
<TOTAL-LIABILITIES> 4703
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166021
<SHARES-COMMON-STOCK> 68
<SHARES-COMMON-PRIOR> 61
<ACCUMULATED-NII-CURRENT> 129
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (72)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5844
<NET-ASSETS> 711
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5323
<OTHER-INCOME> 0
<EXPENSES-NET> 630
<NET-INVESTMENT-INCOME> 4693
<REALIZED-GAINS-CURRENT> (722)
<APPREC-INCREASE-CURRENT> (3219)
<NET-CHANGE-FROM-OPS> 752
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17
<NUMBER-OF-SHARES-REDEEMED> 11
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 769
<ACCUMULATED-NII-PRIOR> 127
<ACCUMULATED-GAINS-PRIOR> 649
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 466
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 630
<AVERAGE-NET-ASSETS> 644
<PER-SHARE-NAV-BEGIN> 10.64
<PER-SHARE-NII> .239
<PER-SHARE-GAIN-APPREC> (.242)
<PER-SHARE-DIVIDEND> .232
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.40
<EXPENSE-RATIO> 1.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER>021
<NAME> NUVEEN NY VALUE CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 168355
<INVESTMENTS-AT-VALUE> 174199
<RECEIVABLES> 2387
<ASSETS-OTHER> 39
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 176625
<PAYABLE-FOR-SECURITIES> 3993
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 710
<TOTAL-LIABILITIES> 4703
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166021
<SHARES-COMMON-STOCK> 14646
<SHARES-COMMON-PRIOR> 14549
<ACCUMULATED-NII-CURRENT> 129
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (72)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5844
<NET-ASSETS> 152269
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5323
<OTHER-INCOME> 0
<EXPENSES-NET> 630
<NET-INVESTMENT-INCOME> 4693
<REALIZED-GAINS-CURRENT> (722)
<APPREC-INCREASE-CURRENT> (3219)
<NET-CHANGE-FROM-OPS> 752
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4219
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 570
<NUMBER-OF-SHARES-REDEEMED> 764
<SHARES-REINVESTED> 291
<NET-CHANGE-IN-ASSETS> 769
<ACCUMULATED-NII-PRIOR> 127
<ACCUMULATED-GAINS-PRIOR> 649
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 466
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 630
<AVERAGE-NET-ASSETS> 150886
<PER-SHARE-NAV-BEGIN> 10.64
<PER-SHARE-NII> .291
<PER-SHARE-GAIN-APPREC> (.240)
<PER-SHARE-DIVIDEND> .291
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.40
<EXPENSE-RATIO> .71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 032
<NAME> NUVEEN NEW YORK INSURED CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 339090
<INVESTMENTS-AT-VALUE> 356439
<RECEIVABLES> 4275
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 360729
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1754
<TOTAL-LIABILITIES> 1754
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 343221
<SHARES-COMMON-STOCK> 2960
<SHARES-COMMON-PRIOR> 2332
<ACCUMULATED-NII-CURRENT> 62
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1573)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17349
<NET-ASSETS> 30575
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10719
<OTHER-INCOME> 0
<EXPENSES-NET> 1279
<NET-INVESTMENT-INCOME> 9440
<REALIZED-GAINS-CURRENT> (1574)
<APPREC-INCREASE-CURRENT> (8205)
<NET-CHANGE-FROM-OPS> (340)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 687
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 824
<NUMBER-OF-SHARES-REDEEMED> 242
<SHARES-REINVESTED> 46
<NET-CHANGE-IN-ASSETS> (10490)
<ACCUMULATED-NII-PRIOR> 59
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (84)
<GROSS-ADVISORY-FEES> 971
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1279
<AVERAGE-NET-ASSETS> 27519
<PER-SHARE-NAV-BEGIN> 10.61
<PER-SHARE-NII> .266
<PER-SHARE-GAIN-APPREC> (.285)
<PER-SHARE-DIVIDEND> .261
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 033
<NAME> NUVEEN NEW YORK INSURED CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 339090
<INVESTMENTS-AT-VALUE> 356439
<RECEIVABLES> 4275
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 360729
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1754
<TOTAL-LIABILITIES> 1754
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 343221
<SHARES-COMMON-STOCK> 217
<SHARES-COMMON-PRIOR> 129
<ACCUMULATED-NII-CURRENT> 62
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1573)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17349
<NET-ASSETS> 2241
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10719
<OTHER-INCOME> 0
<EXPENSES-NET> 1279
<NET-INVESTMENT-INCOME> 9440
<REALIZED-GAINS-CURRENT> (1574)
<APPREC-INCREASE-CURRENT> (8205)
<NET-CHANGE-FROM-OPS> (340)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 36
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 88
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> (10490)
<ACCUMULATED-NII-PRIOR> 59
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (84)
<GROSS-ADVISORY-FEES> 971
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1279
<AVERAGE-NET-ASSETS> 1634
<PER-SHARE-NAV-BEGIN> 10.61
<PER-SHARE-NII> .226
<PER-SHARE-GAIN-APPREC> (.284)
<PER-SHARE-DIVIDEND> .222
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> NUVEEN NEW YORK INSURED CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 339090
<INVESTMENTS-AT-VALUE> 356439
<RECEIVABLES> 4274
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 360729
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1755
<TOTAL-LIABILITIES> 1755
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 343221
<SHARES-COMMON-STOCK> 31588
<SHARES-COMMON-PRIOR> 32374
<ACCUMULATED-NII-CURRENT> 62
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1573)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17349
<NET-ASSETS> 326158
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10719
<OTHER-INCOME> 0
<EXPENSES-NET> 1279
<NET-INVESTMENT-INCOME> 9440
<REALIZED-GAINS-CURRENT> (1574)
<APPREC-INCREASE-CURRENT> (8205)
<NET-CHANGE-FROM-OPS> (340)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8714
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 620
<NUMBER-OF-SHARES-REDEEMED> 2003
<SHARES-REINVESTED> 596
<NET-CHANGE-IN-ASSETS> (10490)
<ACCUMULATED-NII-PRIOR> 59
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (84)
<GROSS-ADVISORY-FEES> 971
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1278
<AVERAGE-NET-ASSETS> 328925
<PER-SHARE-NAV-BEGIN> 10.61
<PER-SHARE-NII> .273
<PER-SHARE-GAIN-APPREC> (.280)
<PER-SHARE-DIVIDEND> .273
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> .69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 052
<NAME> NUVEEN NJ TAX-FREE VALUE FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 56638
<INVESTMENTS-AT-VALUE> 57637
<RECEIVABLES> 657
<ASSETS-OTHER> 245
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58539
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 266
<TOTAL-LIABILITIES> 266
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57838
<SHARES-COMMON-STOCK> 1372
<SHARES-COMMON-PRIOR> 1025
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (571)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1000
<NET-ASSETS> 13890
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1705
<OTHER-INCOME> 0
<EXPENSES-NET> 236
<NET-INVESTMENT-INCOME> 1469
<REALIZED-GAINS-CURRENT> (88)
<APPREC-INCREASE-CURRENT> (1453)
<NET-CHANGE-FROM-OPS> (72)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 314
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 389
<NUMBER-OF-SHARES-REDEEMED> 61
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> 3243
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (483)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 156
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 281
<AVERAGE-NET-ASSETS> 12620
<PER-SHARE-NAV-BEGIN> 10.40
<PER-SHARE-NII> .261
<PER-SHARE-GAIN-APPREC> (.287)
<PER-SHARE-DIVIDEND> .254
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 053
<NAME> NUVEEN NJ TAX-FREE VALUE FUND CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 56638
<INVESTMENTS-AT-VALUE> 57637
<RECEIVABLES> 657
<ASSETS-OTHER> 245
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58539
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 266
<TOTAL-LIABILITIES> 266
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57838
<SHARES-COMMON-STOCK> 192
<SHARES-COMMON-PRIOR> 103
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (571)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1000
<NET-ASSETS> 1939
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1705
<OTHER-INCOME> 0
<EXPENSES-NET> 236
<NET-INVESTMENT-INCOME> 1469
<REALIZED-GAINS-CURRENT> (88)
<APPREC-INCREASE-CURRENT> (1453)
<NET-CHANGE-FROM-OPS> (72)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 36
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 105
<NUMBER-OF-SHARES-REDEEMED> 17
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 3243
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (483)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 156
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 281
<AVERAGE-NET-ASSETS> 1668
<PER-SHARE-NAV-BEGIN> 10.38
<PER-SHARE-NII> .227
<PER-SHARE-GAIN-APPREC> (.292)
<PER-SHARE-DIVIDEND> .215
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.10
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 051
<NAME> NUVEEN NJ TAX-FREE VALUE FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 56638
<INVESTMENTS-AT-VALUE> 57637
<RECEIVABLES> 657
<ASSETS-OTHER> 245
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58539
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 266
<TOTAL-LIABILITIES> 266
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57838
<SHARES-COMMON-STOCK> 4189
<SHARES-COMMON-PRIOR> 4158
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (571)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1000
<NET-ASSETS> 42445
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1705
<OTHER-INCOME> 0
<EXPENSES-NET> 236
<NET-INVESTMENT-INCOME> 1469
<REALIZED-GAINS-CURRENT> (88)
<APPREC-INCREASE-CURRENT> (1453)
<NET-CHANGE-FROM-OPS> (72)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1122
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 236
<NUMBER-OF-SHARES-REDEEMED> 283
<SHARES-REINVESTED> 77
<NET-CHANGE-IN-ASSETS> 3243
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (483)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 156
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 281
<AVERAGE-NET-ASSETS> 42709
<PER-SHARE-NAV-BEGIN> 10.41
<PER-SHARE-NII> .266
<PER-SHARE-GAIN-APPREC> (.280)
<PER-SHARE-DIVIDEND> .266
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.13
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP NEW YORK TAX EXEMPT FUND
<SERIES>
<NUMBER> 131
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 50,036,611
<INVESTMENTS-AT-VALUE> 53,534,211
<RECEIVABLES> 1,071,452
<ASSETS-OTHER> 7,106
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 54,612,769
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 504,205
<TOTAL-LIABILITIES> 504,205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,735,954
<SHARES-COMMON-STOCK> 4,757,469
<SHARES-COMMON-PRIOR> 4,748,782
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (11,969)
<ACCUMULATED-NET-GAINS> (1,113,021)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,497,600
<NET-ASSETS> 54,108,564
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,627,368
<OTHER-INCOME> 0
<EXPENSES-NET> (193,351)
<NET-INVESTMENT-INCOME> 1,434,017
<REALIZED-GAINS-CURRENT> (15,630)
<APPREC-INCREASE-CURRENT> 2,090,103
<NET-CHANGE-FROM-OPS> 3,508,490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,405,329)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 326,681
<NUMBER-OF-SHARES-REDEEMED> (382,802)
<SHARES-REINVESTED> 64,808
<NET-CHANGE-IN-ASSETS> 2,070,200
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,097,391)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 131,017
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 326,585
<AVERAGE-NET-ASSETS> 52,263,677
<PER-SHARE-NAV-BEGIN> 10.45
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.42
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.87
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 99,900
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP NEW YORK TAX EXEMPT FUND
<SERIES>
<NUMBER> 133
<NAME> CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> MAR-04-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 50,036,611
<INVESTMENTS-AT-VALUE> 53,534,211
<RECEIVABLES> 1,071,452
<ASSETS-OTHER> 7,106
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 54,612,769
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 504,205
<TOTAL-LIABILITIES> 504,205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,735,954
<SHARES-COMMON-STOCK> 220,382
<SHARES-COMMON-PRIOR> 60,603
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (11,969)
<ACCUMULATED-NET-GAINS> (1,113,021)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,497,600
<NET-ASSETS> 54,108,564
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,627,368
<OTHER-INCOME> 0
<EXPENSES-NET> (193,351)
<NET-INVESTMENT-INCOME> 1,434,017
<REALIZED-GAINS-CURRENT> (15,630)
<APPREC-INCREASE-CURRENT> 2,090,103
<NET-CHANGE-FROM-OPS> 3,508,490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (40,657)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 160,392
<NUMBER-OF-SHARES-REDEEMED> (2,061)
<SHARES-REINVESTED> 1,448
<NET-CHANGE-IN-ASSETS> 1,761,557
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,097,391)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 131,017
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 326,585
<AVERAGE-NET-ASSETS> 52,263,677
<PER-SHARE-NAV-BEGIN> 10.45
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 0.42
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.87
<EXPENSE-RATIO> 1.22
<AVG-DEBT-OUTSTANDING> 99,900
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP NEW JERSEY DOUBLE TAX EXEMPT FUND
<SERIES>
<NUMBER> 171
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 10,686,802
<INVESTMENTS-AT-VALUE> 11,221,098
<RECEIVABLES> 209,867
<ASSETS-OTHER> 38,068
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,469,033
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 135,414
<TOTAL-LIABILITIES> 135,414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,950,625
<SHARES-COMMON-STOCK> 1,098,322
<SHARES-COMMON-PRIOR> 1,119,318
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3,216)
<ACCUMULATED-NET-GAINS> (148,086)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 534,296
<NET-ASSETS> 11,333,619
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 332,773
<OTHER-INCOME> 0
<EXPENSES-NET> (24,229)
<NET-INVESTMENT-INCOME> 308,544
<REALIZED-GAINS-CURRENT> 19,190
<APPREC-INCREASE-CURRENT> 423,679
<NET-CHANGE-FROM-OPS> 751,413
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (311,760)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102,221
<NUMBER-OF-SHARES-REDEEMED> (137,718)
<SHARES-REINVESTED> 14,501
<NET-CHANGE-IN-ASSETS> 219,761
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (167,276)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 28,333
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 99,335
<AVERAGE-NET-ASSETS> 11,302,213
<PER-SHARE-NAV-BEGIN> 9.93
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.40
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.32
<EXPENSE-RATIO> 0.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP NEW JERSEY INTERMEDIATE DOUBLE
<SERIES>
<NUMBER> 201
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 6,954,138
<INVESTMENTS-AT-VALUE> 7,363,953
<RECEIVABLES> 139,765
<ASSETS-OTHER> 59,661
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,563,379
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,649
<TOTAL-LIABILITIES> 48,649
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,310,234
<SHARES-COMMON-STOCK> 725,649
<SHARES-COMMON-PRIOR> 820,239
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,032)
<ACCUMULATED-NET-GAINS> (204,287)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 409,815
<NET-ASSETS> 7,514,730
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 217,653
<OTHER-INCOME> 0
<EXPENSES-NET> (28,145)
<NET-INVESTMENT-INCOME> 189,508
<REALIZED-GAINS-CURRENT> 29,868
<APPREC-INCREASE-CURRENT> 138,067
<NET-CHANGE-FROM-OPS> 357,443
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (192,494)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24,609
<NUMBER-OF-SHARES-REDEEMED> (130,981)
<SHARES-REINVESTED> 11,782
<NET-CHANGE-IN-ASSETS> (802,851)
<ACCUMULATED-NII-PRIOR> 1,954
<ACCUMULATED-GAINS-PRIOR> (234,155)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,441
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 76,614
<AVERAGE-NET-ASSETS> 7,755,216
<PER-SHARE-NAV-BEGIN> 10.14
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.22
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.36
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP CONNECTICUT DOUBLE TAX EXEMPT FUND
<SERIES>
<NUMBER> 101
<NAME> CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 200,247,961
<INVESTMENTS-AT-VALUE> 213,822,698
<RECEIVABLES> 3,630,517
<ASSETS-OTHER> 594,647
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 218,047,862
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,462,451
<TOTAL-LIABILITIES> 1,462,451
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 204,150,708
<SHARES-COMMON-STOCK> 29,855,155
<SHARES-COMMON-PRIOR> 19,768,778
<ACCUMULATED-NII-CURRENT> 13,923
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,153,737)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,574,957
<NET-ASSETS> 216,585,411
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,597,239
<OTHER-INCOME> 0
<EXPENSES-NET> (870,037)
<NET-INVESTMENT-INCOME> 5,727,202
<REALIZED-GAINS-CURRENT> 485,240
<APPREC-INCREASE-CURRENT> 6,513,953
<NET-CHANGE-FROM-OPS> 12,726,395
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,536,229)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 611,074
<NUMBER-OF-SHARES-REDEEMED> (829,537)
<SHARES-REINVESTED> 304,840
<NET-CHANGE-IN-ASSETS> 7,662,159
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,639,197)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 533,115
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,122,743
<AVERAGE-NET-ASSETS> 212,663,497
<PER-SHARE-NAV-BEGIN> 10.23
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.57
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 149,100
<AVG-DEBT-PER-SHARE> 0.01
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP CONNECTICUT DOUBLE TAX EXEMPT FUND
<SERIES>
<NUMBER> 103
<NAME> CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 200,247,961
<INVESTMENTS-AT-VALUE> 213,822,698
<RECEIVABLES> 3,630,517
<ASSETS-OTHER> 594,647
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 218,047,862
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,462,451
<TOTAL-LIABILITIES> 1,462,451
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 204,150,708
<SHARES-COMMON-STOCK> 635,103
<SHARES-COMMON-PRIOR> 708,990
<ACCUMULATED-NII-CURRENT> 13,923
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,153,957)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,574,737
<NET-ASSETS> 216,585,411
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,597,239
<OTHER-INCOME> 0
<EXPENSES-NET> (870,037)
<NET-INVESTMENT-INCOME> 5,727,202
<REALIZED-GAINS-CURRENT> 485,240
<APPREC-INCREASE-CURRENT> 6,513,953
<NET-CHANGE-FROM-OPS> 12,726,395
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (177,050)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 81,805
<NUMBER-OF-SHARES-REDEEMED> (166,145)
<SHARES-REINVESTED> 10,453
<NET-CHANGE-IN-ASSETS> (538,607)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,639,197)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 533,115
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,122,743
<AVERAGE-NET-ASSETS> 212,663,497
<PER-SHARE-NAV-BEGIN> 10.22
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.56
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 149,100
<AVG-DEBT-PER-SHARE> 0.01
</TABLE>
<PAGE>
EXHIBIT 18
NUVEEN FLAGSHIP MUNICIPAL TRUST
NUVEEN FLAGSHIP MULTISTATE TRUST I
NUVEEN FLAGSHIP MULTISTATE TRUST II
NUVEEN FLAGSHIP MULTISTATE TRUST III
NUVEEN FLAGSHIP MULTISTATE TRUST IV
MULTIPLE CLASS PLAN
ADOPTED PURSUANT TO RULE 18f-3
WHEREAS, Nuveen Flagship Municipal Trust, Nuveen Flagship Multistate Trust
I, Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III and
Nuveen Flagship Multistate Trust IV, each a Massachusetts business trust (each a
"Fund" and collectively, the "Funds"), each engage in business as an open-end
management investment company and are each registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, each Fund is authorized to and may or does issue shares of
beneficial interest in separate series, with the shares of each such series
representing the interests in a separate portfolio of securities and other
assets (each Fund's series together with all other such series subsequently
established by a Fund being referred to herein individually as a "Series" and
collectively as the "Series");
WHEREAS, each Fund is authorized to and has divided the shares of each
Series into four classes, designated as Class A Shares, Class B Shares, Class C
Shares and Class R Shares, and may offer all or less than all of these classes
for public sale at any time; and
WHEREAS, the Board of each Fund as a whole, and the Trustees who are not
interested persons of each such Fund (as defined in the Act) (the "Non-
Interested Members"), after having been furnished and having evaluated
information reasonably necessary to evaluate this Multiple Class Plan (the
"Plan"), have determined in the exercise of their reasonable business judgment
that the Plan is in the best interests of each class of each Series
individually, and each Series and each Fund as a whole.
NOW, THEREFORE, each Fund hereby adopts this Plan, effective the date hereof, in
accordance with Rule 18f-3 under the Act:
<PAGE>
Section 1. Class Differences. Each class of shares of a Series shall
represent interests in the same portfolio of investments of that Series and,
except as otherwise set forth in this Plan, shall differ solely with respect to:
(i)distribution, service and other charges and expenses as provided for in
Sections 2 and 3 of this Plan; (ii)the exclusive right of each class of shares
to vote on matters submitted to shareholders that relate solely to that class or
for which the interests of one class differ from the interests of another class
or classes; (iii)such differences relating to eligible investors as may be set
forth in the prospectus and statement of additional information of each Series,
as the same may be amended or supplemented from time to time (each a
"Prospectus" and "SAI" and collectively, the "Prospectus" and "SAI"); (iv)the
designation of each class of shares; and (v)conversion features.
Section 2. Distribution and Service Arrangements; Conversion
Features. Class A Shares, Class B Shares, Class C Shares and Class R Shares of
each Fund shall differ in the manner in which such shares are distributed and in
the services provided to shareholders of each such class as follows:
(a) Class A Shares:
(i) Class A Shares shall be sold at net asset value
subject to a front-end sales charge set forth in the Prospectus
and SAI;
(ii) Class A Shares shall be subject to an annual service
fee("Service Fee") pursuant to a Plan of Distribution and Service
Pursuant to Rule 12b-1 (the "12b-1 Plan") not to exceed 0.20 of
1% of the average daily net assets of the Series allocable to
Class A Shares, which, as set forth in the Prospectus, SAI and
the 12b-1 Plan, may be used to compensate certain authorized
dealers for providing ongoing account services to shareholders;
and
(iii) Class A Shares shall not be subject to a
Distribution Fee (as hereinafter defined); and
(iv) As described in the Prospectus and SAI, certain Class
A shares purchased at net asset value without imposition of a
front-end sales charge that are redeemed within 18 months of
purchase shall be subject to a contingent deferred sales charge
("CDSC") of 1% of the lower of (a) the net asset value of Class A
Shares at the time of purchase or (b) the net asset value of
Class A Shares at the time of redemption, as set forth in the
Prospectus and SAI.
-2-
<PAGE>
(b) Class B Shares:
(i) Class B Shares shall be sold at net asset value
without a front-end sales charge;
(ii) Class B Shares shall be subject to a Service Fee
pursuant to the 12b-1 Plan not to exceed 0.20 of 1% of average
daily net assets of the Series allocable to Class B Shares,
which, as set forth in the Prospectus, SAI and the 12b-1 Plan,
may be used to compensate certain authorized dealers for
providing ongoing account services to shareholders;
(iii) Class B Shares shall be subject to an annual
distribution fee ("Distribution Fee") pursuant to the 12b-1 Plan
not to exceed 0.75 of 1% of average daily net assets of the
Series allocable to Class B Shares, which, as set forth in the
Prospectus, SAI and the 12b-1 Plan, will be used to reimburse
John Nuveen & Co. Incorporated, the Funds' distributor, for
certain expenses and for providing compensation to certain
authorized dealers;
(iv) Class B Shares redeemed within 6 years of purchase
shall be subject to a CDSC described below of the lower of (a)
the net asset value of Class B Shares at the time of purchase or
(b) the net asset value of Class B Shares at the time of
redemption, as set forth in the Prospectus and SAI; and
Years Since Purchase
of Class B Shares CDSC
0-1 5%
1-2 4%
2-3 4%
3-4 3%
4-5 2%
5-6 1%
(v) Class B Shares will automatically convert to Class A
Shares eight years after purchase, as set forth in the Prospectus
and SAI.
-3-
<PAGE>
(c) Class C Shares/*/:
(i) Class C Shares shall be sold at net asset value
without a front-end sales charge;
(ii) Class C Shares shall be subject to a Service Fee
pursuant to the 12b-1 Plan not to exceed 0.20 of 1% of average
daily net assets of the Series allocable to Class C Shares,
which, as set forth in the Prospectus, SAI and the 12b-1 Plan,
may be used to compensate certain authorized dealers for
providing ongoing account services to shareholders;
(iii) Class C Shares shall be subject to a Distribution
Fee pursuant to the 12b-1 Plan not to exceed 0.55 of 1% of
average daily net assets of the Series allocable to Class C
Shares, except that any Limited-Term or Short-Term Series
(together the "Limited-Term Series") shall be subject to a
Distribution Fee pursuant to the 12b-1 Plan not to exceed 0.35 of
1% of average daily net assets of the Limited-Term Series
allocable to Class C Shares; which, as set forth in the
Prospectus, SAI and the 12b-1 Plan, will be used to reimburse
John Nuveen & Co. Incorporated, the Funds' distributor, for
certain expenses and for providing compensation to certain
authorized dealers; and
(iv) Class C Shares redeemed within 12 months of purchase
shall be subject to a CDSC of 1% of the lower of (a) the net
asset value of Class C Shares at the time of purchase or (b) the
net asset value of Class C Shares at the time of redemption, as
set forth in the Prospectus and SAI.
(d) Class R Shares:
(i) Class R Shares shall be sold at net asset value
without a front-end sales charge to a limited group of investors
as described in the Prospectus and SAI;
(ii) Class R Shares shall not be subject to a Service Fee;
and
(iii) Class R Shares shall not be subject to a
Distribution Fee.
- ------------------------
/*/Class C shareholders who acquired their shares from a Nuveen Fund on or prior
to the reorganization of the Fund (scheduled for January 31, 1997) will retain
the option to convert their shares to Class A shares of the same Fund at the end
of their six-year holding period, as described in the prospectus and SAI for the
Nuveen Fund in effect prior to the date of that reorganization.
-4-
<PAGE>
Section 3. Allocation of Income, Expenses, Gains and Losses.
(a) Investment Income, and Realized and Unrealized Gains and Losses.
The daily investment income, and realized and unrealized gains and losses, of a
Series will be allocated to each class of shares based on each class' relative
percentage of the total value of shares outstanding of the Series at the
beginning of the day, after such net assets are adjusted for the prior day's
capital share transactions.
(b) Series Level Expenses. Expenses that are attributable to a
Series, but not a particular class thereof ("Series level expenses"), will be
allocated to each class of shares based on each class' relative percentage of
the total value of shares outstanding of the Series at the beginning of the day,
after such net assets are adjusted for the prior day's capital share
transactions. Series level expenses include fees for services that are received
equally by the classes under the same fee arrangement. All expenses
attributable to a Series that are not "class level expenses" (as defined below)
shall be Series level expenses, including but not limited to transfer agency
fees and expenses, share registration expenses, and shareholder reporting
expenses.
(c) Class Level Expenses. Expenses that are directly attributable to
a particular class of shares, including the expenses relating to the
distribution of a class' shares, or to services provided to the shareholders of
a class, as set forth in Section 2 of this Plan, will be incurred by that class
of shares. Class level expenses include expenses for services that are unique
to a class of shares in either form or amount. "Class level expenses" shall
include, but not be limited to, 12b-1 Service Fees, 12b-1 Distribution Fees,
expenses associated with the addition of share classes to a Fund (to the extent
that the expenses were not fully accrued prior to the issuance of the new
classes of shares), expenses of administrative personnel and services required
to support the shareholders of a specific class, litigation or other legal
expenses relating to a specific class of shares, directors' fees or expenses
incurred as a result of issues relating to a specific class of shares, and
accounting expenses relating to a specific class of shares.
(d) Fee Waivers and Expense Reimbursements. On a daily basis, if the
Series level expenses and the class level expenses (not including 12b-1 plan
payments) exceed the daily expense cap for the Series, an appropriate
waiver/reimbursement will be made to the Series. The amount of such
reimbursement to each class will be in an amount such that the expenses of the
class with the highest expense ratio (excluding Service Fees and Distribution
Fees) will be equal to the daily expense cap after reimbursement. The expense
reimbursement will be allocated to each class of shares based on each class'
relative percentage of the total value of shares outstanding of the Series at
the beginning of the day, after such net assets are adjusted for the prior day's
capital share transactions.
-5-
<PAGE>
Section 4. Exchange Privilege. Shares of a class of a Series may be
exchanged only for shares of the same class of another Series, except as
otherwise set forth in the Prospectus and SAI.
Section 5. Term and Termination.
(a) The Series. This Plan shall become effective with respect to each
Series on the date hereof, and shall continue in effect with respect to such
Class A, Class B, Class C and Class R Shares of each such Series until
terminated in accordance with the provisions of Section 5(c) hereof.
(b) Additional Series or Classes. This Plan shall become effective
with respect to any class of shares of a Series other than Class A, Class B,
Class C or Class R and with respect to each additional Series or class thereof
established by a Fund after the date hereof and made subject to this Plan upon
commencement of the initial public offering thereof (provided that the Plan has
previously been approved with respect to such additional Series or class by
votes of a majority of both (i) the members of the Board of a Fund, as a whole,
and (ii) the Non-Interested Members, cast at a meeting held before the initial
public offering of such additional Series or classes thereof), and shall
continue in effect with respect to each such additional Series or class until
terminated in accordance with provisions of Section 5(c) hereof. An addendum
setting forth such specific and different terms of such additional series or
classes shall be attached to or made part of this Plan.
(c) Termination. This Plan may be terminated at any time with respect
to any Fund or any Series or class thereof, as the case may be, by vote of a
majority of both the members of the Board of a Fund, as a whole, and the Non-
Interested Members. The Plan may remain in effect with respect to a particular
Fund or any Series or class thereof even if it has been terminated in accordance
with this Section 5(c) with respect to any other Fund or Series or class
thereof.
Section 6. Subsequent Funds. The parties hereto intend that any
open-end investment company established subsequent to the date set forth below
for which Nuveen Institutional Advisory Corp. acts as investment adviser (each a
"Future Fund"), will be covered by the terms and conditions of this Plan,
provided that the Board of such Future Fund as a whole, and the Non-Interested
Members of such Future Fund, after having been furnished and having evaluated
information reasonably necessary to evaluate the Plan, have determined in the
exercise of their reasonable business judgment that the Plan is in the best
interests of each class of each Series of such Future Fund individually, and
each Series of such Future Fund and such Future Fund as a whole.
-6-
<PAGE>
Section 7. Amendments.
(a) General. Except as set forth below, any material amendment to
this Plan affecting a Fund or Series or class thereof shall require the
affirmative vote of a majority of both the members of the Board of that Fund, as
a whole, and the Non-Interested Members that the amendment is in the best
interests of each class of each Series individually and each Series as a whole.
(b) Future Funds. Any amendment to the Plan solely for the purpose of
adding a Future Fund as a party hereto in accordance with Section 6, will not
require any action by the Boards of the Funds.
Dated: July 24, 1996
-7-
