<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1997.
1933 ACT REGISTRATION NO. 333-14725
1940 ACT REGISTRATION NO. 811-07873
================================================================================
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. 2 [X]
Post-Effective Amendment No.___ [ ]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 2 [X]
</TABLE>
(Check appropriate box or boxes)
----------------
NUVEEN FLAGSHIP MUNICIPAL TRUST
(Exact name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 917-7700
Gifford R. Zimmerman, Esq.--Vice With a copy to:
President and Assistant 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 MUNICIPAL TRUST
----------------
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 MUNICIPAL TRUST
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
- -------------------------------------------------------------------------------
OVERVIEW
The funds listed above are diversified funds and part of the Nuveen Municipal
Trust, an open-end investment company. Each fund seeks to provide high tax-
free income and preservation of capital through investments in diversified
portfolios of quality municipal bonds.
Each fund offers a set of flexible purchase options which permit you to
purchase fund shares in the way that is best suited to your individual 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
information 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 15
How to Sell Fund Shares 16
Exchanging Shares 17
Optional Features and Services 18
DIVIDENDS AND TAXES
How the Funds Pay Dividends 20
Taxes and Tax Reporting 20
Taxable Equivalent Yields 21
GENERAL INFORMATION
How to Contact Nuveen 21
Fund Service Providers 21
How the Funds Report Performance 23
How Fund Shares are Priced 23
Organization 23
</TABLE>
FEBRUARY 1, 1997
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION:
November 29, 1976
NET ASSETS:
$2.9 billion
- --------------------------------------------------------------------------------
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 0.84% 5.27% 4.41% 4.52% 5.42%
5 YEARS 5.58% 6.53% 5.75% 5.70% 6.76%
10 YEARS 6.69% 7.17% 6.57% 6.38% 7.41%
INCEPTION 6.70% 6.94% 6.64% 6.15% 7.20%
</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, and
Class R performance for periods prior to class inception (see "Financial High-
lights" for dates), 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 21.3
Average Modified Duration 8.6
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
AA (37%)
A (22%)
BBB (5%)
BB (1%)
NR (1%)
AAA (34%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Electric Utilities (21%)
Health Care Facilities (17%)
Housing Facilities (16%)
Escrowed Bonds (10%)
Water/Sewer Facilities (9%)
Other (27%)
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 0.45% 0.45% 0.45% 0.45%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER EXPENSES 0.12% 0.12% 0.12% 0.12%
- -------------------------------------------------------------------------------------------------
TOTAL (GROSS) 0.77% 1.52% 1.32% 0.57%
WAIVERS/
REIMBURSEMENTS -- -- -- --
- -------------------------------------------------------------------------------------------------
TOTAL (NET) 0.77% 1.52% 1.32% 0.57%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 50 $ 55 $ 13 $ 6
3 YEARS $ 66 $ 80 $ 42 $18
5 YEARS $ 83 $ 94 $ 72 $32
10 YEARS $133 $161 $159 $71
</TABLE>
Information as of 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
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 (6/95)
1997 (g) $9.280 $.241 $(.206) $(.235) $ -- $9.080
- -------------------------------------------------------------------------------------
1996(d) 9.150 .340 .141 (.324) (.027) 9.280
- -------------------------------------------------------------------------------------
CLASS C (6/95)
1997(g) 9.260 .207 (.185) (.202) -- 9.080
- -------------------------------------------------------------------------------------
1996(d) 9.150 .290 .126 (.279) (.027) 9.260
- -------------------------------------------------------------------------------------
CLASS R (11/76)
1997(g) 9.280 .246 (.199) (.247) -- 9.080
- -------------------------------------------------------------------------------------
1996 9.000 .506 .313 (.512) (.027) 9.280
- -------------------------------------------------------------------------------------
1995 9.280 .515 (.209) (.511) (.075) 9.000
- -------------------------------------------------------------------------------------
1994 9.450 .519 (.075) (.516) (.098) 9.280
- -------------------------------------------------------------------------------------
1993 9.080 .555 .414 (.544) (.055) 9.450
- -------------------------------------------------------------------------------------
1992(e) 9.040 .239 .080 (.239) (.040) 9.080
- -------------------------------------------------------------------------------------
1991(f) 8.650 .579 .438 (.589) (.038) 9.040
- -------------------------------------------------------------------------------------
1990(f) 8.730 .596 (.080) (.596) -- 8.650
- -------------------------------------------------------------------------------------
1989(f) 8.520 .597 .239 (.597) (.029) 8.730
- -------------------------------------------------------------------------------------
1988(f) 8.020 .596 .536 (.596) (.036) 8.520
- -------------------------------------------------------------------------------------
1987(f) 8.780 .598 (.614) (.598) (.146) 8.020
- -------------------------------------------------------------------------------------
1986(f) 7.830 .595 1.162 (.595) (.212) 8.780
- -------------------------------------------------------------------------------------
1985(f) 7.180 .586 .650 (.586) -- 7.830
- -------------------------------------------------------------------------------------
<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 (6/95)
1997 (g) .40% $54.0 .82%+ 5.12%+ 9%
- -------------------------------------------------------------------------------------
1996(d) 5.33 37.1 .83+ 5.14+ 17
- -------------------------------------------------------------------------------------
CLASS C (6/95)
1997(g) .26 3.4 1.57+ 4.36+ 9
- -------------------------------------------------------------------------------------
1996(d) 4.59 1.9 1.58+ 4.39+ 17
- -------------------------------------------------------------------------------------
CLASS R (11/76)
1997(g) .54 2,807.2 .57+ 5.37+ 9
- -------------------------------------------------------------------------------------
1996 9.31 2,878.6 .59 5.53 17
- -------------------------------------------------------------------------------------
1995 3.60 2,741.2 .59 5.79 17
- -------------------------------------------------------------------------------------
1994 4.79 2,700.0 .62 5.49 15
- -------------------------------------------------------------------------------------
1993 11.04 2,371.7 .61 5.95 14
- -------------------------------------------------------------------------------------
1992(e) 3.56 1,835.7 .62+ 6.24+ 6
- -------------------------------------------------------------------------------------
1991(f) 12.15 1,661.4 .60 6.48 10
- -------------------------------------------------------------------------------------
1990(f) 6.04 1,323.6 .62 6.78 8
- -------------------------------------------------------------------------------------
1989(f) 10.07 1,119.8 .64 6.85 12
- -------------------------------------------------------------------------------------
1988(f) 14.50 945.4 .65 7.11 8
- -------------------------------------------------------------------------------------
1987(f) (.39) 764.1 .68 6.85 16
- -------------------------------------------------------------------------------------
1986(f) 23.02 668.4 .71 6.95 39
- -------------------------------------------------------------------------------------
1985(f) 17.73 459.6 .73 7.68 28
- -------------------------------------------------------------------------------------
</TABLE>
+Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value without any sales charge
and are annualized in the first year after commencement of class opera-
tions.
(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 five months ending February 29.
(f) For the year ending September 30.
(g) For the six months ending August 31, 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) CDSC declines to 0% at the end of six years.
(3) Imposed only on redemptions within 12 months of purchase.
(4) Effective 2/1/97, the fund 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 0.82% to 0.77%
and on Class C from 1.57% to 1.32%. 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. Class B shares convert to Class A shares after eight years.
If instead you redeemed your shares prior to the end of each stated period,
your expenses might be higher. This example does not represent past or
future expenses; actual expenses may be higher or lower.
- --------------------------------------------------------------------------------
PAGE 3
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Insured Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION:
December 22, 1986
NET ASSETS:
$793.8 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 1.05% 5.48% 4.64% 4.72% 5.64%
5 YEARS 6.49% 7.39% 6.59% 6.47% 7.60%
INCEPTION 7.04% 7.50% 6.89% 6.65% 7.74%
</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 22.5
Average Modified Duration 8.7
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
Escrowed (15%)
Insured (85%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Health Care Facilities (19%)
General Obligation Bonds (19%)
Escrowed Bonds (15%)
Lease Rental Facilities (11%)
Water/Sewer Facilities (10%)
Other (26%)
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 0.48% 0.48% 0.48% 0.48%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER EXPENSES 0.16% 0.16% 0.16% 0.16%
- ------------------------------------------------
TOTAL (GROSS) 0.84% 1.59% 1.39% 0.64%
WAIVERS/
REIMBURSEMENTS -- -- -- --
- ------------------------------------------------
TOTAL (NET) 0.84% 1.59% 1.39% 0.64%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING
PERIOD CLASS A CLASS B CLASS C CLASS R
- -----------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 50 $ 56 $ 14 $ 7
3 YEARS $ 68 $ 82 $ 44 $20
5 YEARS $ 87 $ 98 $ 76 $36
10 YEARS $141 $169 $167 $80
</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)
<S> <C> <C> <C> <C> <C> <C>
Dividends
Net Realized from Tax- Distribu-
and Unreal- Exempt tions
Beginning Net ized Gain 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
--------------- --------- ---------- -------------- ---------- --------- ---------
CLASS A (9/94)
1997(e) $10.970 $.274 $(.327) $(.267) $ -- $10.650
- -------------------------------------------------------------------------------------
1996 10.400 .542 .568 (.540) -- 10.970
- -------------------------------------------------------------------------------------
1995(d) 10.310 .264 .115 (.273) (.016) 10.400
- -------------------------------------------------------------------------------------
CLASS C (9/94)
1997(e) 10.850 .230 (.315) (.225) -- 10.540
- -------------------------------------------------------------------------------------
1996 10.310 .461 .540 (.461) -- 10.850
- -------------------------------------------------------------------------------------
1995(d) 10.290 .227 .075 (.266) (.016) 10.310
- -------------------------------------------------------------------------------------
CLASS R (12/86)
1997(e) 10.920 .282 (.323) (.279) -- 10.600
- -------------------------------------------------------------------------------------
1996 10.380 .570 .540 (.570) -- 10.920
- -------------------------------------------------------------------------------------
1995 10.810 .573 (.407) (.580) (.016) 10.380
- -------------------------------------------------------------------------------------
1994 10.850 .574 .012 (.565) (.061) 10.810
- -------------------------------------------------------------------------------------
1993 10.030 .591 .880 (.589) (.062) 10.850
- -------------------------------------------------------------------------------------
1992 9.690 .612 .425 (.617) (.080) 10.030
- -------------------------------------------------------------------------------------
1991 9.520 .617 .198 (.611) (.034) 9.690
- -------------------------------------------------------------------------------------
1990 9.350 .627 .262 (.630) (.089) 9.520
- -------------------------------------------------------------------------------------
1989 9.300 .629 .050 (.629) -- 9.350
- -------------------------------------------------------------------------------------
1988 9.790 .637 (.490) (.637) -- 9.300
- -------------------------------------------------------------------------------------
1987(d) 9.600 .127 .190 (.127) -- 9.790
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
<S> <C> <C> <C> <C> <C>
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
- ------------------ --------- ---------- ----------- ------------- ---------
CLASS A (9/94)
1997(e) (.46)% $57.5 .89%+ 5.04%+ 20%
- -------------------------------------------------------------------------------------
1996 10.90 46.9 .91 5.01 27
- -------------------------------------------------------------------------------------
1995(d) 3.84 14.1 1.00+ 5.55+ 25
- -------------------------------------------------------------------------------------
CLASS C (9/94)
1997(e) (.76) 5.2 1.64+ 4.29+ 20
- -------------------------------------------------------------------------------------
1996 9.88 5.2 1.63 4.34 27
- -------------------------------------------------------------------------------------
1995(d) 3.09 4.0 1.75+ 4.83+ 25
- -------------------------------------------------------------------------------------
CLASS R (12/86)
1997(e) (.35) 731.1 .64+ 5.29+ 20
- -------------------------------------------------------------------------------------
1996 10.94 762.0 .63 5.33 27
- -------------------------------------------------------------------------------------
1995 1.85 736.7 .64 5.67 25
- -------------------------------------------------------------------------------------
1994 5.47 745.9 .65 5.21 11
- -------------------------------------------------------------------------------------
1993 15.24 567.2 .72 5.68 20
- -------------------------------------------------------------------------------------
1992 11.03 306.9 .73 6.12 45
- -------------------------------------------------------------------------------------
1991 8.94 178.9 .80 6.45 53
- -------------------------------------------------------------------------------------
1990 9.73 111.8 .83 6.49 78
- -------------------------------------------------------------------------------------
1989 7.63 66.0 .87 6.83 106
- -------------------------------------------------------------------------------------
1988 2.00 41.3 .60 6.93 88
- -------------------------------------------------------------------------------------
1987(d) 3.31 13.2 -- 4.00+ --
- -------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value without any sales charge
and are annualized in the first year after commencement of class opera-
tions.
(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) 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 2/1/97, the fund 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 0.89% to 0.84%
and on Class C from 1.64% to 1.39%. 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 Securi-ties 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. Class B shares convert to Class A shares after eight
years. If instead you redeemed your shares prior to the end of each stated
period, your expenses might be higher. This example does not represent
past or future expenses; actual expenses may be higher or lower.
- ------------------------------------------------------------------------------
PAGE 5
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship All-American Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: October 3, 1988
NET ASSETS: $274.2 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 1.88% 6.35% 5.77% 5.77% 6.35%
5 YEARS 7.57% 8.50% 7.91% 7.85% 8.50%
INCEPTION 8.35% 8.93% 8.34% 8.30% 8.93%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C total
returns reflect Class A performance for periods since class inception (see
"Financial Highlights" for dates), and Class A performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class B and Class 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 Share-
holder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 22.7
Average Modified Duration 7.7
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
NR (12%)
AAA (17%)
AA (7%)
A (25%)
BBB (39%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Industrial Development and Pollution Control (22%)
Hospitals (17%)
Municipal Appropriation Obligations (10%)
Education (7%)
Health Care (7%)
Other (37%)
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 0.49% 0.49% 0.49% 0.49%
12B-1 FEES 0.20% 0.95% 0.75% --
OTHER 0.10% 0.10% 0.10% 0.10%
- -------------------------------------------------------------------------------------------------
TOTAL (GROSS) 0.79% 1.54% 1.34% 0.59%
WAIVERS/
REIMBURSEMENTS -- -- -- --
- -------------------------------------------------------------------------------------------------
TOTAL (NET) 0.79% 1.54% 1.34% 0.59%
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDER EXPENSES (5)
The example illustrates the expenses on a hypothetical $1,000 investment in the
fund based on the Total Expenses shown at left, an assumed annual total return
of 5% and reinvestment of all dividends.
<TABLE>
<CAPTION>
HOLDING PERIOD CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR $ 50 $ 55 $ 14 $ 6
3 YEARS $ 66 $ 81 $ 42 $19
5 YEARS $ 84 $ 95 $ 73 $33
10 YEARS $136 $163 $161 $74
</TABLE>
Information as of 11/30/96 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 Deloitte & Touche LLP., the fund's independent
auditors, and the fund's subsequent unaudited semi-annual report. For a 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 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
---------------- --------- ---------- -------------- ---------- --------- ---------
CLASS A (10/88)
1997(e) $10.67 $.30 $ .44 $(.30) $ -- $11.11
- -------------------------------------------------------------------------------------
1996 10.79 .61 (.12) (.61) -- 10.67
- -------------------------------------------------------------------------------------
1995 10.61 .63 .18 (.63) -- 10.79
- -------------------------------------------------------------------------------------
1994 11.07 .65 (.30) (.65) (.16) 10.61
- -------------------------------------------------------------------------------------
1993 10.40 .67 .76 (.67) (.09) 11.07
- -------------------------------------------------------------------------------------
1992 9.95 .69 .45 (.69) -- 10.40
- -------------------------------------------------------------------------------------
1991 9.73 .72 .22 (.72) -- 9.95
- -------------------------------------------------------------------------------------
1990 9.81 .71 (.06) (.72) (.01) 9.73
- -------------------------------------------------------------------------------------
1989(d) 9.58 .46 .23 (.46) -- 9.81
- -------------------------------------------------------------------------------------
CLASS C (6/93)
1997(e) 10.66 .27 .44 (.27) -- 11.10
- -------------------------------------------------------------------------------------
1996 10.78 .55 (.12) (.55) -- 10.66
- -------------------------------------------------------------------------------------
1995 10.60 .57 .18 (.57) -- 10.78
- -------------------------------------------------------------------------------------
1994(d) 11.09 .57 (.32) (.57) (.17) 10.60
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA:
(INCEPTION DATE)
<S> <C> <C> <C> <C> <C>
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
- ------------------ --------- ---------- ----------- ------------- ---------
CLASS A (10/88)
1997(e) 14.05%+ $220.9 .90%+ 5.51%+ 23%
- -------------------------------------------------------------------------------------
1996 4.64 208.0 .83 5.60 79
- -------------------------------------------------------------------------------------
1995 8.01 185.5 .76 6.02 71
- -------------------------------------------------------------------------------------
1994 2.99 159.9 .62 5.77 81
- -------------------------------------------------------------------------------------
1993 14.25 170.8 .65 6.24 72
- -------------------------------------------------------------------------------------
1992 11.94 129.5 .56 6.81 86
- -------------------------------------------------------------------------------------
1991 10.10 79.6 .42 7.33 94
- -------------------------------------------------------------------------------------
1990 6.92 49.0 .42 7.29 132
- -------------------------------------------------------------------------------------
1989(d) 10.66 25.7 -- 7.27+ 57
- -------------------------------------------------------------------------------------
CLASS C (6/93)
1997(e) 13.47+ 53.2 1.45+ 4.95+ 23
- -------------------------------------------------------------------------------------
1996 4.07 47.3 1.37 5.05 79
- -------------------------------------------------------------------------------------
1995 7.42 45.2 1.31 5.47 71
- -------------------------------------------------------------------------------------
1994(d) 2.16 40.0 1.09+ 5.16+ 81
- -------------------------------------------------------------------------------------
</TABLE>
+Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value without any sales charge
and are annualized in the first year after commencement of class opera-
tions.
(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) 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 shares from 0.99% to 0.79% and
on Class C shares from 1.54% to 1.34%, 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 divi-
dend-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 stated period, your expenses might be higher. This example does
not represent past or future expenses; actual expenses may be higher or
lower.
- ------------------------------------------------------------------------------
PAGE 7
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship Intermediate Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: September 15, 1992
NET ASSETS: $49.1 million
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A
PRICE) (NAV) CLASS C CLASS R
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR 2.65% 5.83% 4.93% 5.83%
INCEPTION 6.72% 7.49% 6.82% 7.49%
- --------------------------------------------------------------------------------------------------
</TABLE>
Class A total returns reflect actual performance for all periods; Class C total
returns reflect Class A performance for periods since class inception (see
"Financial Highlights" for dates), and Class A performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class R total returns reflect Class A performance for all periods,
adjusted for the differences in sales charges between the classes. See Overview
of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 8.9
Average Modified Duration 6.8
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
AAA (43%)
AA (7%)
A (20%)
BBB (20%)
NR (10%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Hospitals (25%)
Municipal Revenue/Transportation (13%)
Municipal Appropiration Obligations (10%)
Non-State General Obligations (10%)
Municipal Revenue/Water & Sewer (8%)
Other (34%)
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
<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 0.50% 0.50% 0.50%
12b-1 FEES 0.20% 0.75% --
OTHER 0.32% 0.32% 0.32%
- -------------------------------------------------------------------------------------------------
TOTAL (GROSS) 1.02% 1.57% 0.82%
WAIVERS/
REIMBURSEMENTS (0.40%) (0.40%) (0.40%)
- -------------------------------------------------------------------------------------------------
TOTAL (NET) 0.62% 1.17% 0.42%
</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 $ 4
3 YEARS $ 49 $ 37 $13
5 YEARS $ 64 $ 64 $24
10 YEARS $105 $142 $53
</TABLE>
- --------------------------------------------------------------------------------
Information as of (11/30/96) 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 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
------------- --------- ---------- -------------- ---------- --------- ---------
<C> <C> <C> <C> <C> <C> <C>
CLASS A
(9/92)
1997(e) $10.27 $.26 $ .38 $(.26) $ -- $10.65
- ---------------------------------------------------------------------------------
1996 10.29 .51 (.02) (.51) -- 10.27
- ---------------------------------------------------------------------------------
1995 10.16 .51 .13 (.51) -- 10.29
- ---------------------------------------------------------------------------------
1994 10.35 .52 (.13) (.52) (.06) 10.16
- ---------------------------------------------------------------------------------
1993(d) 9.70 .36 .64 (.35) -- 10.35
- ---------------------------------------------------------------------------------
CLASS C
(12/95)
1997(e) 10.28 .22 .38 (.23) -- 10.65
- ---------------------------------------------------------------------------------
1996(d) 10.57 .23 (.30) (.22) -- 10.28
- ---------------------------------------------------------------------------------
<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>
12.57%+ $46.8 .71%+ 4.91%+ 10%
- ---------------------------------------------------------------------------------
4.84 46.7 .62 4.86 81
- ---------------------------------------------------------------------------------
6.63 42.1 .54 5.15 102
- ---------------------------------------------------------------------------------
3.72 35.9 .40 4.93 69
- ---------------------------------------------------------------------------------
14.06 19.0 .39+ 4.98+ 102
- ---------------------------------------------------------------------------------
11.77+ 2.3 1.26+ 4.29+ 10
- ---------------------------------------------------------------------------------
(1.78) 1.2 1.13+ 4.28+ 81
- ---------------------------------------------------------------------------------
</TABLE>
+Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value without any sales charge
and are annualized in the first year after commencement of class opera-
tions.
(c) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Flagship Financial, predecessor to Nuveen Advisory or its
predecessor.
(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 shares from 0.82% to
0.62% and on Class C shares from 1.37% to 1.17%, 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 Asso-
ciation 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.
(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 stated period, your expenses might be higher. This example
does not represent past or future expenses; actual expenses may be higher
or lower.
- --------------------------------------------------------------------------------
PAGE 9
<PAGE>
- --------------------------------------------------------------------------------
Nuveen Flagship Limited Term Municipal Bond Fund
PERFORMANCE INFORMATION
INCEPTION: October 19, 1987
NET ASSETS: $487.3 million
- --------------------------------------------------------------------------------
TOTAL RETURN (ANNUALIZED)
<TABLE>
<CAPTION>
CLASS A
(OFFER CLASS A CLASS C CLASS R
PRICE) (NAV)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-YEAR 2.27% 4.89% 4.55% 4.89%
5-YEARS 5.75% 6.28% 5.96% 6.28%
INCEPTION 6.57% 6.87% 6.55% 6.87%
</TABLE>
Class A total returns reflect actual performance for all periods; Class C total
returns reflect actual performance for periods since class inception (see
"Financial Highlights" for dates), and Class A performance for periods prior to
class inception, adjusted for the differences in sales charges and fees between
the classes. Class R total returns reflect Class A performance for all periods,
adjusted for the differences in sales charges between the classes. See Overview
of Fund Operating Expenses and Shareholder Transaction Expenses.
The fund assumes investment risk in pursuit of its investment objective,
chiefly in the form of interest rate risk and credit risk. The fund limits this
risk by purchasing only certain types and maturities of municipal bonds and by
diversifying its investment portfolio geographically and by industry. See Risk
Reduction Strategies in the prospectus for further information.
- --------------------------------------------------------------------------------
MATURITY (YEARS)
[BAR CHART APPEARS HERE]
Average Maturity 5.5
Average Modified Duration 4.5
- --------------------------------------------------------------------------------
CREDIT QUALITY
[PIE CHART APPEARS HERE]
BBB (21%)
NR (6%)
AAA (42%)
AA (6%)
A (25%)
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (TOP 5)
[PIE CHART APPEARS HERE]
Municipal Appropriation Obligations (19%)
Hospitals (16%)
Non-State General Obligations (8%)
Municipal Revenue/Transportation (7%)
Municipal Revenue/Utility (7%)
Other (43%)
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 2.50%(1) -- --
SALES CHARGE ON REINVESTED DIVIDENDS -- -- --
CONTINGENT DEFERRED SALES CHARGE (CDSC) ON REDEMPTIONS --(1) 1%(2) --
- ----------------------------------------------------------------------------------
</TABLE>
OVERVIEW OF FUND OPERATING EXPENSES (3)
(Annual, as % of Average Net Assets)
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS R
- ----------------------------------------
<S> <C> <C> <C>
MANAGEMENT FEES 0.43% 0.43% 0.43%
12b-1 FEES 0.20% 0.55% --
OTHER EXPENSES 0.13% 0.13% 0.13%
- ----------------------------------------
TOTAL (GROSS) 0.76% 1.11% 0.56%
WAIVERS/
REIMBURSEMENTS -- -- --
- ----------------------------------------
TOTAL (NET) 0.76% 1.11% 0.56%
</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 $ 33 $ 11 $ 6
3 YEARS $ 49 $ 35 $18
5 YEARS $ 66 $ 61 $31
10 YEARS $117 $135 $70
- ---------------------------------------------------------------------------------
</TABLE>
Information as of 8/31/96 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, 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 Investments(a) Income Gains Value
---------------- --------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (10/87)
1997(e) $10.57 $.25 $ .20 $(.25) $ -- $10.77
- -------------------------------------------------------------------------------------
1996 10.65 .51 (.09) (.50) -- 10.57
- -------------------------------------------------------------------------------------
1995 10.60 .51 .04 (.50) -- 10.65
- -------------------------------------------------------------------------------------
1994 10.74 .52 (.13) (.52) (.01) 10.60
- -------------------------------------------------------------------------------------
1993 10.29 .55 .45 (.55) -- 10.74
- -------------------------------------------------------------------------------------
1992 10.04 .60 .26 (.60) (.01) 10.29
- -------------------------------------------------------------------------------------
1991 9.92 .63 .13 (.64) -- 10.04
- -------------------------------------------------------------------------------------
1990 9.91 .64 .01 (.64) -- 9.92
- -------------------------------------------------------------------------------------
1989 9.88 .62 .02 (.61) -- 9.91
- -------------------------------------------------------------------------------------
1988(d) 9.75 .36 .13 (.36) -- 9.88
- -------------------------------------------------------------------------------------
CLASS C (12/95)
1997(e) 10.56 .24 .20 (.23) -- 10.77
- -------------------------------------------------------------------------------------
1996(d) 10.76 .22 (.19) (.23) -- 10.56
- -------------------------------------------------------------------------------------
<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 (10/87)
1997(e) 8.59%+ $467.2 .81%+ 4.74%+ 14%
- -------------------------------------------------------------------------------------
1996 4.03 489.2 .79 4.77 39
- -------------------------------------------------------------------------------------
1995 5.41 569.2 .74 4.88 20
- -------------------------------------------------------------------------------------
1994 3.58 704.6 .70 4.76 22
- -------------------------------------------------------------------------------------
1993 10.02 570.5 .70 5.10 20
- -------------------------------------------------------------------------------------
1992 9.04 284.5 .47 5.88 48
- -------------------------------------------------------------------------------------
1991 8.08 67.5 .56 6.32 167
- -------------------------------------------------------------------------------------
1990 6.83 19.0 .70 6.48 38
- -------------------------------------------------------------------------------------
1989 6.81 13.4 .56 6.28 50
- -------------------------------------------------------------------------------------
1988(d) 7.44 9.8 .41+ 5.84+ 67
- -------------------------------------------------------------------------------------
CLASS C (12/95)
1997(e) 8.48+ 20.2 1.11+ 4.41+ 14
- -------------------------------------------------------------------------------------
1996(d) .46 15.4 1.19+ 4.17+ 39
- -------------------------------------------------------------------------------------
</TABLE>
+Annualized.
(a) Net of any applicable taxes.
(b) Total returns are calculated on net asset value without any sales charge
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 shares from 0.96%
to 0.76% and on Class C shares from 1.31% to 1.11%, 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 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.
(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 stated period, your expenses might 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 income taxes as is consis-
tent 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 Nuveen Insured Fund primarily purchases insured municipal bonds. See
"Insurance" below. Under normal market conditions, the Nuveen 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. Each fund except the Insured Municipal Bond Fund will
invest at least 80% of its net assets in investment-grade quality bonds. The
Insured Municipal Bond 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. The Limited-Term Fund maintains a weighted average portfolio maturity of
1 to 7 years. The Intermediate Fund maintains a weighted average portfolio
maturity of 5 to 10 years. All of the other three funds described in this
- -------------------------------------------------------------------------
PAGE-12
<PAGE>
prospectus are long-term funds and normally maintain a weighted average port-
folio maturity of 15 to 30 years. See "Defensive Investment Strategies" below
for further information.
INSURANCE
Insured municipal bonds are purchased primarily by the 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 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, respectively.
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 geographically as well as across different industry sectors.
The funds should be considered 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:
. 5% in securities of any one issuer (except U.S. government securities or for
25% of each fund's assets).
. 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 temporary defensive periods, the weighted average maturity of a fund's
investment portfolio may fall below the defined range described above under
"Portfolio Maturity."
- --------------------------------------------------------------------------------
PAGE 13
<PAGE>
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 strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have
no present intent to use these strategies.
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 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 investment
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 14
<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 except the Intermediate Fund and Limited Term
Funds.
- --------------------------------------------------------------------------------
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>
The following Class A sales charges and commissions apply to the Intermediate
Fund:
- --------------------------------------------------------------------------------
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 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>
The following Class A sales charges and commissions apply to the Limited Term
Municipal Bond Fund:
- --------------------------------------------------------------------------------
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 2.50% 2.56% 2.00%
$50,000-100,000 2.00 2.04 1.60
$100,000-250,000 1.50 1.52 1.20
$250,000-500,000 1.25 1.27 1.00
$500,000-1,000,000 0.75 0.76 0.60
$1,000,000 and over --(1) -- --(1)
</TABLE>
(1) Nuveen pays authorized dealers a commission equal to the sum of 1% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
any amount over $5 million. Unless the authorized dealer waived the
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 calculated on the lower of your purchase price or redemption
proceeds.
- --------------------------------------------------------------------------------
PAGE 15
<PAGE>
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support to authorized dealers in connection with sales meet-
ings, seminars, prospecting seminars and other events at which Nuveen presents
its products and services. Under certain circumstances, Nuveen also will share
with authorized dealers up to half the costs of advertising that features the
products and services of both parties. The statement of additional information
contains further information about these programs. Nuveen pays for these
programs at its own expense and not out of fund assets.
- --------------------------------------------------------------------------------
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 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 Intermediate Fund
and Limited Term Fund do not currently offer B Shares.
Class B shares convert automatically to Class A shares eight years after
purchase. Class B shares will convert only if the fund is assured that the
conversion does not generate tax consequences for investors, based upon the
opinion of outside counsel or the written assurance of the IRS.
- --------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGE
If you redeem Class B shares within six years of purchase, you will be assessed
a contingent deferred sales charge (CDSC) based upon the following schedule:
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, but Class C shares bear a 0.20% annual service fee which compen-
sates your financial adviser for providing you with ongoing service, and a
0.55% (0.35% for the Limited Term Fund) annual distribution fee which compen-
sates 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 were applicable.
- --------------------------------------------------------------------------------
PAGE 16
<PAGE>
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, Shareholder Services, Inc. ("SSI") and Boston Financial Data Services
("Boston Financial") will be liable for losses resulting from unauthorized
telephone redemptions only if they do not follow reasonable procedures
designed to verify the identity of the caller. You should immediately verify
your trade confirmations when you receive them.
SELLING SHARES BY MAIL
You may sell fund shares by mail by sending a written request to Nuveen at the
address listed below under "How to Contact Nuveen." Your request must include
the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person you want your redemption proceeds paid to, if other
than to the shareholder of record;
. The address you want your redemption proceeds sent to, if other than the
address of record;
. Any certificates you have for the shares; and
. Any required signature guarantees.
Signatures must be guaranteed if you are redeeming more than $50,000, you want
the check payable to someone other than the shareholder on record, or you want
the check sent to another address (or the address on record has been changed
within the last 60 days). Signature guarantees must be obtained from a bank,
brokerage firm or other financial intermediary that is a member of an approved
Medallion Guarantee Program or that is otherwise approved by the fund. A
notary public cannot provide a signature guarantee.
Unless other arrangements are made, checks will be sent to your address on
record. Checks will normally be mailed within one business day, but in no
event more than seven days from receipt of your redemption request. If any
shares were purchased less than 15 days prior to your request, the fund will
not mail your redemption proceeds until the check for your purchase has
cleared, which may take up to 15 days.
Each fund may suspend redemptions or delay payment on redemptions for more
than seven days (three days for street name accounts) in certain extraordinary
circumstances as described in the statement of additional information.
OPERATION OF THE CDSC
When you redeem Class A, Class B, or Class C shares subject to a CDSC, the
fund will first redeem any shares that are not subject to a CDSC or that
represent an increase in the value of your fund account due to capital 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 national or state mutual fund. You may exchange fund shares by
calling (800) 621-7227 or by mailing your written request to Nuveen at the
address listed under "How to Contact Nuveen."
You must have owned your fund shares for at least 15 days and your exchange
must meet the minimum purchase requirements of the fund into which you are
- -------------------------------------------------------------------------------
PAGE-17
<PAGE>
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 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. 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. 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 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
- --------------------------------------------------------------------------------
PAGE 18
<PAGE>
same class of shares you redeemed and will receive the share price next deter-
mined 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 Fund Direct transfer 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 19
<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.
Because the funds invest in municipal bonds, the regular monthly dividends you
receive will be exempt from regular federal income tax. All or a portion of
these dividends, however, may be subject to state and local taxes or to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how
long you have owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
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, this is commonly known as "buying a dividend." 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. 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-20
<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 contem-
plating 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 (nor-
mally 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
- --------------------------------------------------------------------------------
PAGE 21
<PAGE>
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.
The following schedule applies to all funds described in this prospectus except
the Limited Term Fund:
- --------------------------------------------------------------------------------
MANAGEMENT FEES
<TABLE>
<CAPTION>
AVERAGE DAILY MANAGEMENT
NET ASSET VALUE FEE
- --------------------------------------
<S> <C>
For the first $125 million 0.5000%
For the next $125 million 0.4875%
For the next $250 million 0.4750%
For the next $500 million 0.4625%
For the next $1 billion 0.4500%
For assets over $2 billion 0.4250%
</TABLE>
The following schedule applies to the Limited Term Fund:
- --------------------------------------------------------------------------------
MANAGEMENT FEES
<TABLE>
<CAPTION>
AVERAGE DAILY MANAGEMENT
NET ASSET VALUE FEE
- --------------------------------------
<S> <C>
For the first $125 million 0.4500%
For the next $125 million 0.4375%
For the next $250 million 0.4250%
For the next $500 million 0.4125%
For the next $1 billion 0.4000%
For assets over $2 billion 0.3750%
</TABLE>
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
Municipal Bond Fund and the Insured Municipal Bond 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.
Thomas C. Spalding is the portfolio manager for the Municipal Bond Fund. Mr.
Spalding has managed the fund since 1976 and has been a Vice President of
Nuveen Advisory since 1978. Steven J. Krupa is the portfolio manager for the
Insured Fund. Mr. Krupa has managed the fund since 1994 and has been a Vice
President of Nuveen Advisory since 1990. Richard Huber is the portfolio manager
for the All-American Fund and the Limited-Term Fund. Mr. Huber has managed the
funds since 1995 and since 1995, had been a Vice President of Flagship Finan-
cial Inc., the funds' prior investment adviser, until becoming a Vice President
of Nuveen Advisory upon the acquisition of Flagship Resources Inc. by The John
Nuveen Company in January 1997. Paul Brennan is the portfolio manager for the
Intermediate Fund. Mr. Brennan has managed or co-managed the fund since
September 1995 and since 1991 had been an employee of Flagship Financial Inc.,
the funds' prior investment adviser, until becoming an employee of Nuveen Advi-
sory 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 each class of shares outstanding. The plan also
authorizes each fund (excluding the Intermediate Municipal Bond Fund and
Limited Term Municipal Bond Fund which do not currently offer Class B shares)
to pay Nuveen an annual 0.75% distribution fee on the average daily net assets
of Class B shares outstanding. The plan also authorizes each fund to pay Nuveen
an annual 0.55% (0.35% for the Limited Term Municipal Bond Fund) distribution
fee on the average daily net assets of Class 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 distribu-
tion 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 information contains a detailed description of the
plan and its provisions.
- --------------------------------------------------------------------------------
PAGE 22
<PAGE>
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 the Municipal Bond Fund and the Insured
Municipal Bond Fund. Boston Financial, P.O. Box 8509, Boston, MA, 02266-8509,
currently serves as transfer agent for the All-American Fund, the Intermediate
Fund, and the Limited Term Fund. The funds intend to consolidate transfer agent
activities with a single firm in the future.
- --------------------------------------------------------------------------------
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. 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.
- --------------------------------------------------------------------------------
PAGE 23
<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 MUNICIPAL TRUST
NUVEEN MUNICIPAL BOND FUND
NUVEEN INSURED MUNICIPAL BOND FUND
NUVEEN FLAGSHIP ALL-AMERICAN MUNICIPAL BOND FUND
NUVEEN FLAGSHIP INTERMEDIATE MUNICIPAL BOND FUND
NUVEEN FLAGSHIP LIMITED TERM 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 Municipal Trust 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-12
Investment Adviser and Investment Management Agreement..................... S-16
Portfolio Transactions..................................................... S-17
Net Asset Value............................................................ S-17
Tax Matters................................................................ S-18
Performance Information.................................................... S-21
Additional Information on the Purchase and Redemption of Fund Shares....... S-27
Distribution and Service Plans............................................. S-30
Independent Public Accountants and Custodians.............................. S-31
Financial Statements....................................................... S-31
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 or to the investment of 25% of such Fund's assets.
(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 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.
S-2
<PAGE>
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 Municipal Trust (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 Municipal Trust. 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 five series:
the Nuveen Municipal Bond Fund (originally incorporated in Maryland on October
8, 1976 and reorganized as a Massachusetts business trust on June 12, 1995);
the Nuveen Insured Municipal Bond Fund (formerly a series of the Nuveen Insured
Tax-Free Bond Fund, Inc., a Minnesota corporation incorporated on July 14,
1986); the Nuveen Flagship All-American Municipal Bond Fund (formerly the
Flagship All-American Tax Exempt Fund, a series of the Flagship Tax Exempt
Funds Trust); the Nuveen Flagship Intermediate Municipal Bond Fund (formerly
the Flagship Intermediate Tax Exempt Fund, a series of the Flagship Tax Exempt
Funds Trust); and the Nuveen Flagship Limited Term Municipal Bond Fund
(formerly the Flagship Limited Term Tax Exempt Fund, a series of the Flagship
Tax Exempt Funds Trust). Certain matters under the Investment Company Act of
1940 which must be submitted to a vote of the holders of the outstanding voting
securities of a series company shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
voting securities of each series affected by such matter.
PORTFOLIO SECURITIES
As described in the Prospectus, each Fund invests primarily in a diversified
portfolio of Municipal Obligations issued within the 50 states and certain U.S.
possessions and territories. 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 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.
S-3
<PAGE>
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 Insured Municipal Bond
Fund 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 Fund ("Portfolio Insurance"). The Fund currently maintains 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 Fund 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 Fund 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 Fund currently intends 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 the 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 Fund's 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 the Fund purchases
securities.
In addition to insured Municipal Obligations, the 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 U.S.
Government or U.S. Government agency securities. Collateralized obligations
will not constitute more than 20% of the Fund's assets.
Each insured Municipal Obligation in which the Fund invests will be covered
by Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
There is no limitation on the percentage of the 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
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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 the 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 the 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, the 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 the Fund to enhance the
value of such Municipal Obligation. The 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 the 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 the 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 the 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
the 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 the 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.
Portfolio Insurance policies are effective only as to Municipal Obligations
owned by and held by the 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 the 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 the 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 the Fund to refuse to insure any additional
securities purchased by the Fund after the effective date of such notice. The
Board of Trustees will
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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 the 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 the 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.
The 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 the 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 the 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 the Fund is reduced to the extent of the insurance
premiums it pays. Depending upon the characteristics of the Municipal
Obligations held by the 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 Fund 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 Fund for such period were .00%.
Set forth below is information about the various municipal bond insurers with
whom the Nuveen Insured Municipal Bond Fund currently maintains policies of
Portfolio Insurance.
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.
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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").
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
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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 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 :
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(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.
The portfolio turnover rates for the Funds, for the fiscal year-end of each
Fund as a series of its predecessor entity (described above), as indicated,
were
<TABLE>
<CAPTION>
FISCAL
YEAR
---------
1995 1996
---- ----
<S> <C> <C>
Nuveen Municipal Bond Fund (2/28)............................... 17% 17%
Nuveen Insured Municipal Bond Fund (2/28)....................... 25% 27%
Nuveen Flagship All-American Municipal Bond Fund (5/31)......... 71% 79%
Nuveen Flagship Intermediate Municipal Bond Fund (5/31)......... 102% 81%
Nuveen Flagship Limited Term Municipal Bond Fund (5/31)......... 20% 39%
</TABLE>
S-9
<PAGE>
WHEN-ISSUED SECURITIES
Each Fund may purchase and sell Municipal Obligations on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the
regular settlement date. (When-issued transactions normally settle within 15-45
days.) On such transactions the payment obligation and the interest rate are
fixed at the time the buyer enters into the commitment. The commitment to
purchase securities on a when-issued or delayed delivery basis may involve an
element of risk because the value of the securities is subject to market
fluctuation, no interest accrues to the purchaser prior to settlement of the
transaction, and at the time of delivery the market value may be less than
cost. At the time a Fund makes the commitment to purchase a Municipal
Obligation on a when-issued or delayed delivery basis, it will record the
transaction and reflect the amount due and the value of the security in
determining its net asset value. Likewise, at the time a Fund makes the
commitment to sell a Municipal Obligation on a delayed delivery basis, it will
record the transaction and include the proceeds to be received in determining
its net asset value; accordingly, any fluctuations in the value of the
Municipal Obligation sold pursuant to a delayed delivery commitment are ignored
in calculating net asset value so long as the commitment remains in effect. The
Funds will maintain designated readily marketable assets at least equal in
value to commitments to purchase when-issued or delayed delivery securities,
such assets to be segregated by the Custodian specifically for the settlement
of such commitments. The Funds will only make commitments to purchase Municipal
Obligations on a when-issued or delayed delivery basis with the intention of
actually acquiring the securities, but the 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.
HEDGING AND OTHER DEFENSIVE ACTIONS
Each Fund may periodically engage in hedging transactions. Hedging is a term
used for various methods of seeking to preserve portfolio capital value by
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in financial futures and index futures as well as related put and
call options on such instruments. Both parties entering into an index or
financial futures contract are required to post an initial deposit of 1% to 5%
of the total contract price. Typically, option holders enter into offsetting
closing transactions to enable settlement in cash rather than take delivery of
the position in the future of the underlying security. Each Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series' portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit. Finally, the potential daily deposit requirements in
futures contracts create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost of the initial
premium. Losses due to hedging transactions will reduce yield. Net gains, if
any, from hedging and other portfolio transactions will be distributed as
taxable distributions to shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and
deposits would exceed 5% of such series' net assets. Each series will invest in
these instruments only in markets believed by the investment adviser to be
active and sufficiently liquid. For further information regarding these
investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, including up to 5% in adequately collateralized
repurchase agreements relating thereto. Interest on each instrument is taxable
for Federal income tax purposes and would reduce the amount of tax-free
interest payable to shareholders.
TEMPORARY INVESTMENTS
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable "temporary investments."
Temporary investments will not exceed 20% of a Fund's assets except when made
for defensive purposes. The Funds will invest only in taxable temporary
investments that are either U.S. Government securities or are rated within the
highest grade by Moody's, S&P, or Fitch and mature 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.
S-10
<PAGE>
The Funds may invest in the following federally tax-exempt temporary
investments:
Bond Anticipation Notes (BANs) are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing
for projects that will eventually be funded through the sale of long-term
debt obligations or bonds. The ability of an issuer to meet its obligations
on its BANs is primarily dependent on the issuer's access to the long-term
municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments
to finance the current operations of such governments. Repayment is
generally to be derived from specific future tax revenues. Tax anticipation
notes are usually general obligations of the issuer. A weakness in an
issuer's capacity to raise taxes due to, among other things, a decline in
its tax base or a rise in delinquencies, could adversely affect the
issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or
governmental bodies with the expectation that future revenues from a
designated source will be used to repay the notes. In general, they also
constitute general obligations of the issuer. A decline in the receipt of
projected revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its
obligations on outstanding RANs. In addition, the possibility that the
revenues would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained
from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as
those described above to commercial banks as evidence of borrowings. The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These
notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities
and their agencies. Payment of principal and interest on issues of
municipal paper may be made from various sources, to the extent the funds
are available therefrom. Maturities of municipal paper generally will be
shorter than the maturities of TANs, BANs or RANs. There is a limited
secondary market for issues of municipal paper.
Certain Municipal Obligations may carry variable or floating rates of
interest whereby the rate of interest is not fixed, but varies with changes in
specified market rates or indices, such as a bank prime rate or a tax-exempt
money market index.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the 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.
S-11
<PAGE>
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.
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. 47 Chairman and Chairman since July 1, 1996 of The John Nuveen
Schwertfeger* Trustee Company, John Nuveen & Co. Incorporated, Nuveen
333 West Wacker Drive Advisory Corp. and Nuveen Institutional Advisory
Chicago, IL 60606 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
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
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 Dec
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
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
333 West Wacker Drive Assistant Secretary and Assistant General Counsel
Chicago, IL 60606 of John Nuveen & Co. 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. Neild, IV 31 Vice President Vice President (since September 1996), previously
One South Main Street Assistant Vice President (since December 1993) of
Dayton, OH 45402 Nuveen Advisory Corp., 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
333 West Wacker Drive Company (since March 1992), John Nuveen & Co.
Chicago, IL 60606 Incorporated, 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
Chicago, IL 60606 Analyst.
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
H. William Stabenow 62 Vice President Vice President and Treasurer of The John Nuveen
333 West Wacker Drive Company (since March 1992), John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. (since January 1992).
Gifford R. Zimmerman 40 Vice President Vice President (since September 1992), Assistant
333 West Wacker Drive and Assistant Secretary and Assistant General Counsel of John
Chicago, IL 60606 Secretary Nuveen & Co. 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.
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........................ $4,200(3) $20,500(3)
Lawrence H. Brown........................ $6,433 $58,500
Anne E. Impellizzeri..................... $6,433 $58,500
Margaret K. Rosenheim.................... $7,881(1) $66,315(2)
Peter R. Sawers.......................... $6,433 $58,500
William J. Schneider..................... $4,405(3) $21,500(3)
</TABLE>
- --------
(1) Includes $365 in interest accrued on deferred compensation from prior
years.
(2) Includes $1,565 in interest accrued on deferred compensation from prior
years.
(3) As a trustee of the Flagship Funds, for the 12 months 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>
NAME AND ADDRESS OF PERCENTAGE
NAME OF FUND AND CLASS OWNER OF OWNERSHIP
---------------------- ------------------- ------------
<C> <S> <C>
Nuveen Municipal Bond Fund
Class C Shares.................. Bill W. Hickey & 18.71%
Erin E. Hickey Jt. Ten.
Wros.
20 Bowen St.
Longmont, CO 80501-5862
Oppenheimer & Co., Inc. 5.51
FBO 020-38275-14
P.O. Box 3484
Church Street Station
New York, NY 10008-8484
Fasteners, Inc. 7.72
c/o Edward D. Otto
P.O. Box 11188
Newington, CT 06111
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PERCENTAGE
NAME OF FUND AND CLASS OWNER OF OWNERSHIP
---------------------- ------------------- ------------
<C> <S> <C>
Nuveen Insured Municipal Bond
Fund Class A Shares............. NFSC FEBO # DBV-055646 5.79%
Jack H. Martinelli
Harriet L. Martinelli
TTEE
Martinelli Family Trust
U/A 3/27/92--748 Pico
Ave.
San Mateo, CA 94403
Nuveen Flagship All-American 36.57
Municipal Bond Fund Class A Merrill Lynch, Pierce,
Shares.......................... Fenner
& Smith for the sole
benefit of its
Customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-
6484
Nuveen Flagship All-American 64.80
Municipal Bond Fund Class C Merrill Lynch, Pierce,
Shares.......................... Fenner
& Smith for the sole
benefit of its
Customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-
6484
Nuveen Flagship Intermediate 33.97
Municipal Bond Fund Class A Merrill Lynch, Pierce,
Shares.......................... Fenner
& Smith for the sole
benefit of its
Customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-
6484
Nuveen Flagship Intermediate 70.15
Municipal Bond Fund Class C Merrill Lynch, Pierce,
Shares.......................... Fenner
& Smith for the sole
benefit of its
Customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-
6484
Nuveen Flagship Limited Term 28.56
Municipal Bond Fund Class A Merrill Lynch, Pierce,
Shares.......................... Fenner
& Smith for the sole
benefit of its
Customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-
6484
Nuveen Flagship Limited Term 60.15
Municipal Bond Fund Class C Merrill Lynch, Pierce,
Shares.......................... Fenner
& Smith for the sole
benefit of its
Customers
Attn Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-
6484
</TABLE>
S-15
<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....................................... .5000 of 1%
For the next $125 million........................................ .4875 of 1%
For the next $250 million........................................ .4750 of 1%
For the next $500 million........................................ .4625 of 1%
For the next $1 billion.......................................... .4500 of 1%
For assets over $2 billion....................................... .4250 of 1%
</TABLE>
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, taxes, interest, fees incurred in acquiring and disposing of
portfolio securities and, to the extent permitted, extraordinary expenses) from
exceeding 0.75% of the Nuveen Municipal Bond Fund's average daily net assets,
and 0.975% of the Nuveen Insured Municipal Bond Fund's average daily net
assets.
For the All-American, Intermediate, and Limited Term 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, taxes, interest, fees incurred in acquiring and
disposing of portfolio securities and, to the extent permitted, extraordinary
expenses) for those funds do not exceed 0.75% of average daily net assets.
For the last three fiscal years, the Nuveen Municipal Bond Fund and the
Nuveen 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>
Nuveen Municipal Bond
Fund................... $11,645,399 11,932,164 12,797,372 0 0 4,313
Nuveen Insured Municipal
Bond Fund.............. 3,265,386 3,439,021 3,756,793 0 10,570 1,303
</TABLE>
For the last three fiscal years, the Nuveen Flagship All-American Municipal
Bond Fund, the Nuveen Flagship Intermediate Municipal Bond Fund, and the Nuveen
Flagship Limited Term Municipal Bond Fund paid net management fees to Flagship
Financial, predecessor to Nuveen Advisory, as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF EXPENSE FEE WAIVERS AND EXPENSE
REIMBURSEMENT PAID TO FLAGSHIP REIMBURSEMENTS
FINANCIAL FOR THE YEAR 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>
All American Fund........ $ 267,846 420,954 644,844 753,169 632,023 588,351
Intermediate Fund........ 0 0 0 146,230 187,583 269,930
Limited Term Fund........ 1,313,071 1,369,218 1,259,810 657,881 458,100 332,579
</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
S-16
<PAGE>
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 the price or
amount of the securities available to a Fund from time to time, it is the
opinion of the Board of Trustees that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
Under the Investment Company Act of 1940, the Funds may not purchase
portfolio securities from any underwriting syndicate of which Nuveen is a
member except under certain limited conditions set forth in Rule 10f-3. The
Rule sets forth requirements relating to, among other things, the terms of an
issue of Municipal Obligations purchased by a Fund, the amount of Municipal
Obligations which may be purchased in any one issue and the assets of a Fund
which may be invested in a particular issue. In addition, purchases of
securities made pursuant to the terms of the Rule must be approved at least
quarterly by the Board of Trustees, including a majority of the trustees who
are not interested persons of the Trust.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Funds
will be determined separately for each class of the Funds' shares by The Chase
Manhattan Bank, the Funds' custodian, as of the close of trading (normally 4:00
p.m. Eastern Time) on each day on which the 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
S-17
<PAGE>
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 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."
S-18
<PAGE>
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 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.
S-19
<PAGE>
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.
Tax-exempt income, including exempt-interest dividends paid by a Fund, will
be added to the taxable income of individuals receiving social security or
railroad retirement benefits in determining whether a portion of that benefit
will be subject to federal income tax.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of a Fund may
be considered to have been made with borrowed funds even though such funds are
not directly traceable to the purchase of shares.
The Funds are required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Funds their correct taxpayer identification
number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or
administrative action, and any such change may be retroactive with respect to
Fund transactions. Shareholders are advised to consult their own tax advisers
for more detailed information concerning the federal taxation of the Funds and
the income tax consequences to their shareholders.
S-20
<PAGE>
PERFORMANCE INFORMATION
The historical investment performance of the Funds may be shown in the form
of "yield," "taxable equivalent yield," "average annual total return,"
"cumulative total return" and "taxable equivalent total return" figures, each
of which will be calculated separately for each class of shares.
In accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission ("SEC"), yield is computed by dividing the
net investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 4.20%.
In computing yield, the Funds follow certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Funds use to prepare their annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in a Fund's financial statements.
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by the remainder of (1 minus the stated combined federal
and state income tax rate, taking into account the deductibility of state taxes
for federal income tax purposes) and adding the product to that portion, if
any, of the yield that is not tax exempt.
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 right 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 AUGUST 31, 1996
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares............. 4.67% 39.6% 7.73%
Class C Shares............. 4.11% 39.6% 6.80%
Class R Shares............. 5.13% 39.6% 8.49%
Nuveen Insured Municipal Bond
Fund
Class A Shares............. 4.51% 39.6% 7.47%
Class C Shares............. 3.94% 39.6% 6.52%
Class R Shares............. 4.96% 39.6% 8.21%
<CAPTION>
AS OF NOVEMBER 30, 1996
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
Nuveen Flagship All-American
Municipal Bond Fund
Class A Shares............. 4.96% 39.6% 8.21%
Class C Shares............. 4.64% 39.6% 7.68%
Class R Shares............. N/A N/A N/A
Nuveen Flagship Intermediate
Municipal Bond Fund
Class A Shares............. 4.84% 39.6% 8.01%
Class C Shares............. 4.44% 39.6% 7.35%
Class R Shares............. N/A N/A N/A
Nuveen Flagship Limited Term
Municipal Bond Fund
Class A Shares............. 4.02% 39.6% 6.66%
Class C Shares............. 3.82% 39.6% 6.32%
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.
S-21
<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 4.2% for the Municipal Bond Fund,
the Insured Municipal Bond Fund, and the All-American Fund; the maximum sales
charge for Class A Shares of 3.0% for the Intermediate Municipal Bond Fund; and
the maximum sales charge for Class A Shares of 2.5% for the Limited Term
Municipal Bond Fund, were as follows:
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1996 DISTRIBUTION RATES
----------------------------------------------
CLASS A CLASS C CLASS R
-------------- -------------- --------------
<S> <C> <C> <C>
Nuveen Municipal Bond
Fund.................... 4.87% 4.36% 5.35%
Nuveen Insured Municipal
Bond Fund............... 4.80% 4.27% 5.26%
<CAPTION>
AS OF NOVEMBER 30, 1996 DISTRIBUTION RATES
------------------------------------------
CLASS A CLASS C CLASS R
-------------- -------------- --------------
<S> <C> <C> <C>
Nuveen Flagship All-
American Municipal Bond
Fund.................... 5.08% 4.78% N/A
Nuveen Flagship
Intermediate Municipal
Bond Fund............... 4.60% 4.21% N/A
Nuveen Flagship Limited
Term Municipal Bond
Fund.................... 4.43% 4.26% 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.
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
INCEPTION DATES
-----------------
<S> <C>
Nuveen Municipal Bond Fund
Class A Shares........................................ June 13, 1995
Class B Shares........................................ February 1, 1997
Class C Shares........................................ June 13, 1995
Class R Shares........................................ November 29, 1976
Nuveen 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
Nuveen Flagship All-American Municipal Bond Fund
Class A Shares........................................ October 3, 1988
Class B Shares........................................ February 1, 1997
Class C Shares........................................ June 2, 1993
Class R Shares........................................ February 1, 1997
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
INCEPTION DATES
------------------
<S> <C>
Nuveen Flagship Intermediate Municipal Bond Fund
Class A Shares....................................... September 15, 1992
Class C Shares....................................... December 1, 1995
Class R Shares....................................... February 1, 1997
Nuveen Flagship Limited Term Municipal Bond Fund
Class A Shares....................................... October 19, 1987
Class C Shares....................................... December 1, 1995
Class R Shares....................................... February 1, 1997
</TABLE>
The Nuveen Municipal Bond Fund's average annual return figures, 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, respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
---------------------------------------
FROM
ONE YEAR TEN YEARS INCEPTION
ENDED FIVE YEARS ENDED THROUGH
AUG. 31, ENDED AUG. AUG. 31, AUG. 31,
1996 31, 1996 1996 1996
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares................ 0.84% 5.58% 6.69% 6.70%
Class B Shares................ 4.41% 5.75% 6.57% 6.64%
Class C Shares................ 4.52% 5.70% 6.38% 6.15%
Class R Shares................ 5.42% 6.76% 7.41% 7.20%
</TABLE>
The Nuveen Insured Municipal Bond Fund's average annual return figures,
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, respectively, were as
follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
------------------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31,
1996 1996 1996
---------- ---------- ----------
<S> <C> <C> <C> <C>
Nuveen Insured Municipal Bond Fund
Class A Shares................... 1.05% 6.49% 7.04%
Class B Shares................... 4.64% 6.59% 6.89%
Class C Shares................... 4.72% 6.47% 6.65%
Class R Shares................... 5.64% 7.60% 7.74%
</TABLE>
The Nuveen Flagship All-American Municipal Bond Fund's average annual return
figures, including the effect of the maximum sales charge for Class A shares,
for one-year and five-year periods (as applicable) ended November 30, 1995, and
for the period from inception through November 30, 1996 were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
--------------------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Nuveen Flagship All-American
Municipal Bond Fund
Class A Shares................ 1.88% 7.57% 8.35%
Class B Shares................ 5.77% 7.91% 8.34%
Class C Shares................ 5.77% 7.85% 8.30%
Class R Shares................ 6.35% 8.50% 8.93%
</TABLE>
S-23
<PAGE>
The Nuveen Flagship Intermediate Municipal Bond Fund's average annual return
figures, including the effect of the maximum sales charge for Class A Shares
for the one-year period ended (as applicable) November 30, 1996, and for the
same period from inception through November 30, 1996 were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-------------------------
FROM
ONE YEAR INCEPTION
ENDED THROUGH
NOVEMBER 30, NOVEMBER 30,
1996 1996
------------ ------------
<S> <C> <C>
Nuveen Flagship Intermediate Municipal Bond
Fund
Class A Shares............................. 2.65% 6.72%
Class C Shares............................. 4.93% 6.82%
Class R Shares............................. 5.83% 7.49%
</TABLE>
The Nuveen Flagship Limited-Term Municipal Bond Fund's average annual return
figures, including the effect of the maximum sales charge for Class A Shares
for the one-year and five-year periods (as applicable) ended November 30, 1996,
and for the period from inception through November 30, 1996 were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
--------------------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Nuveen Flagship Limited-Term
Municipal Bond Fund
Class A Shares................ 2.27% 5.75% 6.57%
Class C Shares................ 4.55% 5.96% 6.55%
Class R Shares................ 4.89% 6.28% 6.87%
</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 Nuveen Municipal Bond Fund cumulative total return figures, 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 through August 31, 1996, 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 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>
Nuveen Municipal Bond Fund
Class A Shares............ 0.84% 31.18% 91.02% 260.15%
Class B Shares............ 4.41% 32.28% 88.90% 256.16%
Class C Shares............ 4.52% 31.97% 85.57% 225.25%
Class R Shares............ 5.42% 38.69% 104.42% 294.78%
</TABLE>
S-24
<PAGE>
The Nuveen Insured Municipal Bond Fund cumulative total return figures,
including the effect of the maximum sales charge for the Class A Shares, for
the one and five-year periods (as applicable) ended August 31, 1996, and for
the period since inception through August 31, 1996, 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 FIVE YEARS INCEPTION
ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31,
1996 1996 1996
---------- ---------- ----------
<S> <C> <C> <C>
Nuveen Insured Municipal Bond Fund
Class A Shares........................ 1.05% 36.99% 93.31%
Class B Shares........................ 4.64% 37.59% 90.70%
Class C Shares........................ 4.72% 36.84% 86.56%
Class R Shares........................ 5.64% 44.24% 105.97%
</TABLE>
The Nuveen Flagship All-American Municipal Bond Fund cumulative total return
figures, including the effect of the maximum sales charge for the Class A
Shares, for the one-year and five-year periods ended November 30, 1996, and for
the period since inception through November 30, 1996, 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 FIVE YEARS INCEPTION
ENDED ENDED THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Nuveen Flagship All-American
Municipal Bond Fund
Class A Shares................ 1.88% 44.03% 92.44%
Class B Shares................ 5.77% 46.30% 92.28%
Class C Shares................ 5.77% 45.91% 91.60%
Class R Shares................ 6.35% 50.35% 100.88%
</TABLE>
The Nuveen Flagship Intermediate Municipal Bond Fund cumulative total return
figures, 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, 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 THROUGH
NOVEMBER 30, NOVEMBER 30,
1996 1996
------------ ------------
<S> <C> <C>
Nuveen Flagship Intermediate Municipal Bond
Fund
Class A Shares............................. 2.65% 31.46%
Class C Shares............................. 4.93% 32.01%
Class R Shares............................. 5.83% 35.52%
</TABLE>
The Nuveen Flagship Limited Term Municipal Bond Fund cumulative total return
figures, including the effect of the maximum sales charge for the Class A
Shares, for the one and five year periods ended November 30, 1996, and for the
period since inception through November 30, 1996, 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 FIVE YEARS INCEPTION
ENDED ENDED THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Nuveen Flagship Limited Term
Municipal Bond Fund
Class A Shares................ 2.27% 32.24% 78.69%
Class C Shares................ 4.55% 33.58% 78.28%
Class R Shares................ 4.89% 35.63% 83.27%
</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
S-25
<PAGE>
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 39.6% maximum marginal federal tax rate for 1997, the annual
taxable equivalent total return for the Nuveen Municipal Bond Fund's Class R
Shares for the ten year period ended August 31, 1996, was 11.67%.
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 (3.0% for the Intermediate
Municipal Bond Fund and 2.5% for the Limited Term Municipal Bond Fund). 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 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.
S-26
<PAGE>
ADDITIONAL INFORMATION ON THE PURCHASE AND
REDEMPTION OF FUND SHARES
As described in the Prospectus, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of a Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with
respect to any distribution or service plan applicable to its shares. As a
result of the differences in the expenses borne by each class of shares, net
income per share, dividends per share and net asset value per share will vary
among a Fund's classes of shares.
Shareholders of each class will 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 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 Fund at the
reduced sales charge applicable to the group's purchases taken as a whole. A
S-27
<PAGE>
"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
certificate 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
at (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 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.
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;
and
. 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 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.
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) 621-7277.
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
S-28
<PAGE>
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 redemp-
tions 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 capi-
tal 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 ex-
changed 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 circum-
stances: 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 share-
holders 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 cer-
tain minimum balance or that the applicable board has determined may have mate-
rial 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 uni-
formly applied to all Fund shares in the particular category. In waiving or re-
ducing 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 partici-
pate 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 spe-
cific investment programs and systems. For example, this may include informa-
tion 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 avail-
able for public purchase. Shares of the Nuveen money market funds may be pur-
chased 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 Veter-
ans 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 determina-
tion of a Fund's net assets 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 fi-
nancial 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' trans-
fer 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.
S-29
<PAGE>
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 Municipal Trust, 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 aggregate amounts of underwriting commissions with respect to the sale of
Fund shares and the amount thereof retained by Nuveen for the Nuveen Municipal
Bond Fund's fiscal years ended February 29, 1996, February 28, 1995, and
February 28, 1994 were $1,575, $316; $2,248, $467; and $5,703, $1,093,
respectively. For the Nuveen Insured Municipal Bond Fund's fiscal years ended
February 29, 1996, February 28, 1995, and February 28, 1994, the amounts
retained were $880, $97; $1,554, $296; and $4,490, $707, respectively. The
aggregate amounts of underwriting commissions with respect to the sale of Fund
shares and the amount thereof retained by Flagship Financial, Inc., which
Nuveen acquired on January 1, 1997, for the Nuveen Flagship All-American
Municipal Bond Fund for the fiscal years ended May 31, 1996, May 31, 1995 and
May 31, 1994 were $556,900, $73,800; $763,400, $104,100; $1,188,000, $161,798,
respectively. For the Nuveen Flagship Intermediate Municipal Bond Fund for the
fiscal years ended May 31, 1996, May 31, 1995 and May 31, 1994 the amounts
retained were $136,700, $27,900; $171,100, $34,400; $460,600, $89,100,
respectively. For the Nuveen Flagship Limited Term Municipal Bond Fund for the
fiscal years ended May 31, 1996, May 31, 1995 and May 31, 1994 the amounts
retained were $543,300, $108,400; $797,200, $160,100; $4,055,400, $818,100.
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 years indicated below, 100% of service fees and distribution
fees were paid out as compensation to authorized dealers. For such periods, the
service fee for the Nuveen Municipal Bond Fund and the Nuveen Insured Municipal
Bond Fund was .25% for both Class A and C Shares and the distribution fee was
.75% for Class C Shares. For the Nuveen Flagship All-American Municipal Bond
Fund, the Nuveen Flagship Intermediate Municipal Bond Fund and the Nuveen
Flagship Limited Term Municipal Bond Fund, the service fee was .20% for all
classes and the distribution fee was .20% for Class A Shares and .75% for Class
C Shares.
S-30
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1996
----------------------
<S> <C>
Nuveen Municipal Bond Fund (2/29/96)
Class A........................................ $36,112
Class C........................................ $7,054
Nuveen Insured Municipal Bond Fund (2/29/96)
Class A........................................ $82,071
Class C........................................ $44,298
Nuveen Flagship All-American Municipal Bond Fund
(5/31/96)
Class A........................................ $800,411
Class C........................................ $436,430
Nuveen Flagship Intermediate Municipal Bond Fund
(5/31/96)
Class A........................................ $180,903
Class C........................................ $3,450
Nuveen Flagship Limited Term Municipal Bond Fund
(5/31/96)
Class A........................................ $2,109,177
Class C........................................ $28,351
</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 CUSTODIANS
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago Illinois 60603 has been selected as auditors for the Nuveen Municipal
Bond Fund and the Nuveen 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 Nuveen Flagship All-American Municipal
Bond Fund, the Nuveen Flagship Intermediate Municipal Bond Fund, and the Nuveen
Flagship Limited Term 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
report with respect thereto, and are included in reliance upon the authority of
that firm in giving that report.
The custodian of the assets of the Funds is The Chase Manhattan Bank, 770
Broadway, New York, New York 10003. The custodian performs custodial, fund
accounting and portfolio accounting services.
FINANCIAL STATEMENTS
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 Annual Reports and
the Semi-Annual Reports accompany this Statement of Additional Information.
S-31
<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 Funds'
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 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.
B-1
<PAGE>
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 Tax-Free
Mutual Funds
Dependable tax-free
income for generations
MUNI BOND
INSURED MUNI BOND
SEMIANNUAL REPORT/AUGUST 31, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
8 Fund performance
9 Portfolio of investments
38 Statement of net assets
39 Statement of operations
40 Statement of changes in net assets
41 Notes to financial statements
50 Financial highlights
<PAGE>
Dear
shareholder
"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.
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 August 31, 1996, current yields on net asset
values for R shares for the Municipal Bond Fund and the Insured Municipal Bond
Fund were 5.13% and 5.01%, respectively. To match these yields, an investor in
the 36% federal income tax bracket would have had to earn 8.02% and 7.83% on
taxable alternatives. Taxable yields at this level on investments of comparable
quality can be difficult to achieve in today's markets.
3
<PAGE>
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, were 5.42% for the Municipal Bond Fund and
5.64% for the Insured Municipal Bond Fund, equivalent to taxable investments
with total returns of 8.59% and 8.70%, respectively.
I would like to take this opportunity to share with you the news of some
recent developments that will give Nuveen the 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 the Nuveen investor, 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,
/s/ Timothy R. Schwertfeger
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>
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
bode 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 MUNICIPAL
BOND FUND
Muni Bond
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. In addition, shareholders received a capital gains distribution
in November.
[PERFORMANCE GRAPH APPEARS HERE]
12 MONTH DIVIDEND HISTORY--R SHARES
9/95 .0430
10/95 .0430
11/95 (Including Capital Gains) .0702
12/95 .0415
1/96 .0415
2/96 .0415
3/96 .0415
4/96 .0415
5/96 .0415
6/96 .0415
7/96 .0405
8/96 .0405
- -------------------------------------------------------
FUND HIGHLIGHTS 8/31/96
- -------------------------------------------------------
Current SEC yield on R Shares* 5.13%
Taxable-equivalent yield on R Shares** 8.02%
Annual total return on R Shares* 5.42%
Taxable-equivalent total return on R Shares 8.59%
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.
* All shares issued prior to June 13, 1995 for Municipal Bond Fund, and
September 6, 1994 for Insured Municipal Bond Fund, 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 50 for additional data on Class A and C shares.
NUVEEN INSURED MUNICIPAL
BOND FUND
Insured Muni Bond
The Fund adjusted its monthly tax-free dividend slightly in December as older,
higher coupon bonds were called away and replaced with today's lower yielding
bonds.
[PERFORMANCE GRAPH APPEARS HERE]
12 MONTH DIVIDEND HISTORY--R SHARES
9/95 .0475
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 .0465
7/96 .0465
8/96 .0465
- -------------------------------------------------------
FUND HIGHLIGHTS 8/31/96
- -------------------------------------------------------
Current SEC yield on R Shares* 5.01%
Taxable-equivalent yield on R Shares** 7.83%
Annual total return on R Shares* 5.64%
Taxable-equivalent total return on R Shares 8.70%
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.
** 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 after-tax basis.
8
<PAGE>
PORTFOLIO OF INVESTMENTS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
(Unaudited) AUGUST 31, 1996
NUVEEN MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALASKA - 1.5%
$ 4,085,000 Alaska Housing Finance Corporation, Insured Mortgage
Program Bonds, 1978 First Series, 6.375%, 12/01/07 Aa 12/96 at 100 $ 4,109,837
14,500,000 Alaska Housing Finance Corporation, Insured Mortgage
Program Bonds, 1993 First Series, 5.800%, 12/01/18 Aa1 12/03 at 102 13,904,485
Alaska Housing Finance Corporation, Insured Mortgage
Program Bonds, 1990 First Series:
3,290,000 7.650%, 12/01/10 Aa1 12/00 at 102 3,321,189
10,885,000 7.800%, 12/01/30 Aa1 12/00 at 102 10,988,190
12,375,000 Alaska State Housing Finance Corporation Collateralized
Mortgage, 5.850%, 6/01/25 Aaa 12/03 at 102 11,827,654
- -------------------------------------------------------------------------------------------------------------------------
ARIZONA - 2.7%
7,750,000 Arizona Board of Regents, Arizona State University, System
Revenue Refunding Bonds, Series 1992-A, 5.750%, 7/01/12 AA 7/02 at 101 7,781,853
20,350,000 Salt River Project Agricultural Improvement and Power District,
Arizona, Salt River Project Electric System Revenue Bonds,
1992 Series C, 5.500%, 1/01/28 Aa 1/02 at 100 18,931,809
9,145,000 Salt River Project Agricultural Improvement and Power District,
Arizona, Salt River Project Electric System Revenue Bonds,
1973 Series A, 5.000%, 1/01/10 Aa 7/97 at 100 8,637,727
Salt River Project Agricultural Improvement and Power District,
Electric System Revenue Refunding Bonds, 1993 Series C:
5,000,000 4.900%, 1/01/08 Aa 1/04 at 102 4,808,200
36,820,000 4.750%, 1/01/17 Aa 1/04 at 100 31,586,773
4,570,000 The Industrial Development Authority of the City of Scottsdale,
Arizona, Hospital Revenue Refunding Bonds (Scottsdale
Memorial Hospital), Series 1987 A, 8.500%, 9/01/07 Aaa 9/97 at 102 4,860,058
- -------------------------------------------------------------------------------------------------------------------------
ARKANSAS - 0.4%
11,210,000 Jefferson County, Arkansas, Hospital Refunding Revenue Bonds,
Series 1993, 6.000%, 7/01/06 A 7/03 at 102 11,577,352
- -------------------------------------------------------------------------------------------------------------------------
CALIFORNIA - 14.8%
16,970,000 California Health Facilities Financing Authority, Insured Health
Facility Refunding Revenue Bonds (Catholic Healthcare West)
1994 Series A, 5.000%, 7/01/14 Aaa 7/04 at 102 15,323,571
38,795,000 California Statewide Communities Development Authority,
Certificates of Participation, St. Joseph Health System
Obligated Group, 5.500%, 7/01/23 Aa 7/03 at 102 35,427,206
California Statewide Communities Development Authority,
Insured Health Facilities Revenue Certificates of Participation
(Unihealth America), 1993 Series A:
11,500,000 5.500%, 10/01/14 Aaa 10/03 at 102 11,053,800
20,000,000 5.750%, 10/01/25 Aaa 10/03 at 102 19,274,800
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 12,000,000 State Public Works Board of the State of California, Lease
Revenue Bonds (Department of Corrections), 1994 Series A
(California State Prison-Monterey County (Soledad II)),
7.000%, 11/01/19 A 11/04 at 102 $ 13,211,880
State of California, Department of Water Resources, Central
Valley Project, Water System Revenue Bonds, Series L:
15,515,000 5.700%, 12/01/16 Aa 6/03 at 101 1/2 15,033,725
9,500,000 5.750%, 12/01/19 Aa 12/03 at 101 1/2 9,197,520
12,250,000 5.500%, 12/01/23 Aa 12/03 at 101 1/2 11,408,548
20,000,000 State of California, Department of Water Resources, Central
Valley Project, Water System Revenue Bonds, Series M,
4.875%, 12/01/27 Aa 12/03 at 101 16,680,400
11,725,000 Central Joint Powers Health Financing Authority, Certificates of
Participation, Series 1993 (Community Hospitals of Central
California), 5.250%, 2/01/13 A 2/03 at 102 10,470,425
9,000,000 East Bay Municipal Utility District (Alameda and Contra Costa
Counties, California), Water System Subordinated Revenue
Refunding Bonds, Series 1993A, 5.000%, 6/01/21 Aaa 6/03 at 102 7,935,840
Foothill/Eastern Transportation Corridor Agency, Toll Road
Revenue Bonds, Series 1995A:
45,000,000 0.000%, 1/01/23 BBB-- No Opt. Call 7,577,550
15,000,000 6.000%, 1/01/34 BBB-- 1/05 at 102 14,200,800
9,040,000 Los Angeles Convention and Exhibition Center Authority, Lease
Revenue Bonds, 1993 Refunding Series A, The City of
Los Angeles (California), 5.125%, 8/15/13 Aaa 8/03 at 102 8,438,478
17,575,000 Department of Water and Power of the City of Los Angeles,
California, Water Works Revenue Bonds, Issue of 1992,
6.500%, 4/15/32 Aa 4/02 at 102 18,494,173
7,000,000 The City of Los Angeles, California, Wastewater System Revenue
Bonds, Refunding Series 1993-A, 5.700%, 6/01/20 Aaa 6/03 at 102 6,791,190
21,000,000 The City of Los Angeles (California), Wastewater System
Revenue Bonds, Series 1993-B, 5.700%, 6/01/23 Aaa 6/03 at 102 20,340,180
15,615,000 The City of Los Angeles, California, Wastewater System Revenue
Bonds, Series 1993-D, 5.200%, 11/01/21 Aaa 11/03 at 102 14,123,611
15,750,000 Los Angeles County, Metropolitan Transportation Authority,
Proposition A, Sales Tax Revenue Refunding Bonds, Series
1993-A, 5.500%, 7/01/13 AA-- 7/03 at 102 15,057,788
Los Angeles County Metropolitan Transit Authority, Proposition
C Sales Tax Revenue Second Senior Bonds, Series 1993-B:
17,185,000 4.750%, 7/01/18 Aaa 7/03 at 102 14,728,061
8,000,000 5.250%, 7/01/23 Aaa 7/03 at 102 7,268,160
Los Angeles County Sanitation Districts Financing Authority,
Capital Projects Revenue Bonds, 1993 Series A (Senior Ad
Valorem Obligation Bonds):
10,500,000 5.375%, 10/01/13 Aa 10/03 at 102 9,938,040
20,750,000 5.000%, 10/01/23 Aa 10/03 at 100 17,975,518
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<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>
CALIFORNIA (CONTINUED)
$ 31,360,000 Los Angeles County Transportation Commission (California)
Proposition C Sales Tax Revenue Bonds, Second Senior Bonds,
Series 1992-A, 6.750%, 7/01/19 (Pre-refunded to 7/01/02) Aaa 7/02 at 102 $ 35,195,014
5,000,000 The Metropolitan Water District of Southern California, Water
Revenue Bonds, Issue of 1992, 5.500%, 7/01/19 Aa 7/02 at 102 4,676,200
12,750,000 Modesto Irrigation District, California, Refunding Certificates of
Participation (1986 Geysers Geothermal Power Project), 1986
Series A, 7.250%, 10/01/15 A1 10/96 at 102 13,042,613
22,405,000 Northern California Power Agency, Hydroelectric Project
Number One Revenue Bonds, Refunding Series E,
7.150%, 7/01/24 A 7/98 at 102 23,495,227
12,600,000 Sacramento County Sanitation Districts Financing Authority,
1993 Revenue Bonds, 4.750%, 12/01/23 Aa 12/03 at 102 10,432,170
7,600,000 County of Santa Clara, California, 1986 Certificates of
Participation (Capital Project I), 8.000%, 10/01/06
(Pre-refunded to 10/01/96) AAA 10/96 at 102 7,779,588
8,050,000 The Regents of the University of California, Refunding Revenue
Bonds (Multiple Purpose Projects), Series A, 6.875%, 9/01/16
(Pre-refunded to 9/01/02) A- 9/02 at 102 9,085,150
- -------------------------------------------------------------------------------------------------------------------------
COLORADO - 1.3%
31,750,000 Colorado Housing and Finance Authority, Single-Family Housing
Revenue Refunding Bonds, 1991 Series A, 7.250%, 11/01/31 Aa 11/01 at 102 33,644,840
3,045,000 City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1992A, 7.250%, 11/15/25 Baa 11/02 at 102 3,381,351
- -------------------------------------------------------------------------------------------------------------------------
CONNECTICUT - 0.2%
2,250,000 Connecticut Housing Finance Authority, Housing Mortgage
Finance Program Bonds, 1990 Series B, 1990 Subseries B1,
7.550%, 11/15/08 Aa 11/00 at 102 2,274,638
2,970,000 Connecticut Resources Recovery Authority, Bridgeport Resco
Company, L.P. Project Bonds, Series B, 8.625%, 1/01/04 A 1/97 at 101 1/2 3,039,350
- -------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA - 0.3%
7,560,000 Capitol Hill Towers, Inc., First Mortgage Revenue Bonds (FHA
Insured Mortgage-Section 8 Assisted Elderly Housing),
8.500%, 1/01/22 N/R 1/97 at 102 7,811,824
- -------------------------------------------------------------------------------------------------------------------------
FLORIDA - 3.3%
13,630,000 State of Florida, Full Faith and Credit, State Board of Education,
Public Education Capital Outlay Refunding Bonds, 1995
Series D, 4.750%, 6/01/17 Aa 6/05 at 101 11,730,387
4,500,000 Dade County Health Facilities Authority (Florida), Hospital
Revenue Bonds, Series 1987 (Mount Sinai Medical Center
Project), 8.400%, 12/01/07 (Pre-refunded to 12/01/99) Aaa 12/99 at 102 4,825,170
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MUNICIPAL BOND FUND--CONTINUED
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FLORIDA (CONTINUED)
$ 31,000,000 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 $ 35,815,230
9,300,000 Jacksonville Electric Authority (Jacksonville, Florida), St. John's
River Power Park System Special Obligation Bonds, First
Crossover Series, 6.500%, 10/01/14 Aa1 10/99 at 101 1/2 9,793,179
25,000,000 Orlando Utilities Commission, Water and Electric Subordinated
Revenue Bonds, Series 1989D, 5.000%, 10/01/23 Aa 10/99 at 100 21,868,000
8,005,000 City of Pensacola Health Facilities Authority, Health Facilities
Revenue Refunding Bonds, Series 1988 (Daughters of Charity
National Health System Sacred Heart Hospital of Pensacola,
Florida), 7.750%, 1/01/03 (Pre-refunded to 1/01/98) Aaa 1/98 at 101 1/2 8,495,386
1,455,000 The Elderly Housing Corporation of Sarasota, Inc. (Elderly
Housing Project for the Sarasota Housing Authority), First
Mortgage Revenue Bonds, Series 1978, 7.500%, 7/01/09 A 1/97 at 103 1,502,549
- --------------------------------------------------------------------------------------------------------------------------
HAWAII - 0.3%
8,000,000 Department of Budget and Finance of the State of Hawaii,
Special Purpose Revenue Bonds, Kapiolani Health Care System
Obligated Group (Pali Momi Medical Center Project), Series
1991, 7.650%, 7/01/19 (Pre-refunded to 7/01/01) Aaa 7/01 at 102 9,124,320
- --------------------------------------------------------------------------------------------------------------------------
ILLINOIS - 18.2%
8,500,000 Illinois Development Finance Authority, Revenue and Refunding
Bonds, Series 1990A (Columbus-Cuneo-Cabrini Medical
Center), 8.500%, 2/01/15 (Pre-refunded to 2/01/00) Baa 2/00 at 102 9,644,865
17,075,000 Illinois Educational Facilities Authority, Revenue Refunding
Bonds, The University of Chicago, Series 1993B,
5.600%, 7/01/24 Aa1 7/03 at 102 15,969,052
10,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1992
(Highland Park Hospital), 6.200%, 10/01/22 Aaa 10/02 at 102 10,122,800
6,115,000 Illinois Health Facilities Authority, Revenue Refunding Bonds,
Series 1993 (Illinois Masonic Medical Center),
5.500%, 10/01/19 A 10/03 at 102 5,547,711
34,120,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1993 (Rush-Presbyterian-St.Luke's Medical Center
Obligated Group), 5.500%, 11/15/25 Aaa 11/03 at 102 31,319,089
7,275,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1994
(Southern Illinois Hospital Services), 5.850%, 3/01/14 Aaa 3/04 at 102 7,208,216
54,900,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1994A
(Northwestern Memorial Hospital), 6.000%, 8/15/24 Aa 8/04 at 102 54,420,723
15,000,000 Illinois Health Facilities Authority, FHA Insured Mortgage
Revenue Bonds, Series 1996 (Sinai Health System),
6.000%, 2/15/24 (WI) Aaa 2/06 at 102 14,635,050
- --------------------------------------------------------------------------------------------------------------------------
</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>
ILLINOIS (CONTINUED)
$ 10,425,000 Illinois Independent Higher Education Loan Authority,
Revenue Bonds, Northwestern University, Series 1983, 8.000%,
12/01/07 Aa1 12/96 at 102 $ 10,717,734
21,670,000 State of Illinois, Build Illinois Bonds (Sales Tax Revenue Bonds),
Series O, 6.000%, 6/15/18 AAA 6/01 at 100 21,267,588
14,200,000 State of Illinois, Build Illinois Bonds (Sales Tax Revenue
Bonds), Series S, 5.250%, 6/15/18 AAA 6/03 at 102 13,034,180
15,100,000 State of Illinois, General Obligation Bonds, Series of March
1992 (Full Faith & Credit), 6.200%, 10/01/04 AA- 10/02 at 102 16,189,465
State of Illinois, General Obligation Bonds, Series of August
1992 (Full Faith & Credit):
14,750,000 5.875%, 6/01/10 AA- 6/02 at 102 14,903,843
5,000,000 5.875%, 6/01/11 AA- 6/02 at 102 5,024,150
10,000,000 State of Illinois, General Obligation Bonds, Series of April 1993
(Full Faith & Credit), 5.700%, 4/01/18 AA- 4/03 at 102 9,633,100
The Illinois State Toll Highway Authority, Toll Highway
Priority Revenue Bonds, 1992 Series A:
20,000,000 6.450%, 1/01/13 A1 1/03 at 102 20,509,000
8,655,000 6.200%, 1/01/16 Aaa 1/03 at 102 8,894,830
16,270,000 City of Chicago, General Obligation Bonds (Emergency
Telephone System) Series 1993, 5.625%, 1/01/23 Aaa 1/03 at 102 15,497,012
7,880,000 City of Chicago, General Obligation Bonds, Project Series 1993,
5.250%, 1/01/18 Aaa 1/04 at 102 7,222,099
22,260,000 Chicago Metropolitan Housing Development Corporation,
Housing Development Revenue Refunding Bonds (FHA-
Insured Mortgage Loans--Section 8 Assisted Projects) Series
1992B, 6.900%, 7/01/22 AA 7/02 at 102 23,017,953
7,965,000 City of Chicago, Motor Fuel Tax Revenue Bonds, Refunding
Series 1993, 5.000%, 1/01/16 Aaa 1/03 at 101 7,089,328
56,000,000 City of Chicago (Illinois), Chicago-O'Hare International Airport,
General Airport Revenue Refunding Bonds, 1993 Series A,
5.000%, 1/01/16 A1 1/04 at 102 50,020,320
18,710,000 City of Chicago (Illinois), Chicago-O'Hare International Airport,
General Airport Second Lien, Revenue Refunding Bonds,
1993 Series C, 5.000%, 1/01/18 Aaa 1/04 at 102 16,504,278
22,335,000 City of Chicago, Water Revenue Bonds, Series 1995,
5.000%, 11/01/15 Aaa 11/06 at 102 19,961,236
25,380,000 The County of Cook, Illinois, General Obligation Bonds, Series
1993A, 5.000%, 11/15/23 Aaa 11/03 at 100 22,040,246
17,300,000 DuPage Water Commission (DuPage, Cook and Will Counties,
Illinois) General Obligation Water Refunding Bonds, Series
1992, 5.750%, 3/01/11 Aaa 3/02 at 100 17,224,226
9,500,000 DuPage Water Commission (DuPage, Cook and Will Counties,
Illinois) General Obligation Water Refunding Revenue Bonds,
Series 1993, 5.250%, 5/01/14 Aa 5/03 at 102 8,881,550
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MUNICIPAL BOND FUND - CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,000,000 Village of Hazel Crest, Illinois, Hospital Facilities Revenue
Refunding and Improvement Bonds (South Suburban Hospital
Foundation Project), Series 1987, 9.125%, 7/01/17
(Pre-refunded to 7/01/97) AAA 7/97 at 102 $ 2,122,040
56,180,000 Metropolitan Pier & Exposition Authority (Illinois) McCormick
Place Expansion Project Bonds, Series 1992A, 6.500%, 6/15/27 A+ 6/03 at 102 57,017,644
5,000,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake,
McHenry and Will Counties, Illinois, General Obligation
Refunding Bonds, Series 1993C, 5.800%, 6/01/13 Aaa 6/03 at 102 5,006,600
The Elderly Housing Corporation of Zion, Illinois, Housing
Development Revenue Bonds (Dell-Zion Associates Section 8
Assisted Project) Series 1978:
165,000 7.250%, 3/01/98 A 3/97 at 102 167,109
1,705,000 7.750%, 3/01/10 A 3/97 at 102 1,744,232
- --------------------------------------------------------------------------------------------------------------------------
INDIANA - 3.1%
3,135,000 City of Indianapolis, Indiana, Resource Recovery Revenue Bonds
(Ogden Martin Systems of Indianapolis, Inc. Project),
7.900%, 12/01/08 A 12/96 at 103 3,252,249
47,100,000 Indiana Health Facilities Financing Authority, Hospital Revenue
Bonds (Daughters of Charity) Series 1993,
5.750%, 11/15/22 Aa 11/03 at 102 45,279,114
11,590,000 Indiana Health Facility Financing Authority, Hospital Revenue
Refunding Bonds, Series 1992A (Methodist Hospital of
Indiana, Inc.), 5.750, 9/01/11 Aaa 9/02 at 102 11,498,091
12,550,000 Indiana State Office Building Commission, Capital Complex
Revenue Bonds, Series 1987 (State Office Building II
Facility), 8.750%, 7/01/12 (Pre-refunded to 7/01/97) Aaa 7/97 at 102 13,289,070
10,000,000 Indiana State Office Building Commission Correctional
Facilities Program, Revenue Bonds, Series 1991, 6.375%, 7/01/16 A1 12/01 at 102 10,261,000
2,500,000 The Indianapolis Local Public Improvement Bond Bank, Series
1992 D Bonds, 6.750%, 2/01/20 A+ 2/03 at 102 2,669,150
2,470,000 Southwind Housing, Inc., 7.125%, 11/15/21 AA No Opt. Call 2,863,397
- --------------------------------------------------------------------------------------------------------------------------
IOWA - 0.3%
3,720,000 Iowa Housing Finance Authority, Single Family Mortgage Bonds,
1977 Series A, 5.875%, 8/01/08 Aaa 2/97 at 101 3,738,488
3,815,000 City of Davenport, Iowa, Hospital Facility Revenue Bonds (Mercy
Hospital Project), Series 1992, 6.625%, 7/01/14 Aaa 7/02 at 102 4,116,805
- --------------------------------------------------------------------------------------------------------------------------
KENTUCKY - 3.2%
3,790,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA
Insured/VA Guaranteed) 1991 Series A, 7.250%, 1/01/17 Aaa 7/01 at 102 3,993,485
- --------------------------------------------------------------------------------------------------------------------------
</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
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
KENTUCKY (CONTINUED)
Kentucky Housing Corporation, Housing Revenue Bonds, 1993
Series B (Federally Insured or Guaranteed Mortgage Loans):
$ 17,600,000 5.300%, 7/01/10 Aaa 1/04 at 102 $ 17,029,056
14,400,000 5.400%, 7/01/14 Aaa 1/04 at 102 13,641,408
The Turnpike Authority of Kentucky, Resource Recovery Road
Revenue Refunding Bonds, 1987 Series A:
9,860,000 8.000%, 7/01/03 A+ 7/97 at 102 10,351,718
8,980,000 5.000%, 7/01/08 A+ 7/97 at 100 8,596,285
34,500,000 County of Carroll, Kentucky, Collateralized Pollution Control
Revenue Bonds (Kentucky Utilities Company Project), 1992
Series A, 7.450%, 9/15/16 AA 9/02 at 102 39,071,940
- ----------------------------------------------------------------------------------------------------------------------------
MAINE - 0.8%
Maine State Housing Authority, Mortgage Purchase Bonds,
1994 Series A:
13,650,000 5.650%, 11/15/20 AA-- 2/04 at 102 12,860,348
10,000,000 5.700%, 11/15/26 AA-- 2/04 at 102 9,371,700
- ----------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS - 3.3%
15,000,000 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 16,899,900
Massachusetts Water Resources Authority, General Revenue
Bonds, 1990 Series A:
6,500,000 7.500%, 4/01/16 (Pre-refunded to 4/01/00) Aaa 4/00 at 102 7,244,575
9,500,000 6.000%, 4/01/20 A 4/00 at 100 9,375,550
Massachusetts Water Resources Authority, General Revenue
Refunding Bonds, 1993 Series B:
14,765,000 5.250%, 3/01/13 A 3/03 at 102 13,835,396
10,795,000 5.000%, 3/01/22 A 3/03 at 100 9,413,240
24,650,000 Massachusetts Water Resources Authority, General Revenue
Bonds, 1993 Series C, 5.250%, 12/01/20 A 12/04 at 102 22,315,399
14,670,000 The Commonwealth of Massachusetts, General Obligation
Refunding Bonds, 1993 Series C, 4.700%, 8/01/02 A1 No Opt. Call 14,590,929
- ----------------------------------------------------------------------------------------------------------------------------
MICHIGAN - 4.9%
4,000,000 Michigan State Hospital Finance Authority, Hospital Revenue
Bonds (Henry Ford Hospital) Series 1985A, 7.500%, 7/01/13
(Pre-refunded to 1/01/97) Aaa 1/97 at 102 4,127,560
Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds (The Detroit Medical Center Obligated
Group) Series 1993B:
19,585,000 5.750%, 8/15/13 A 8/04 at 102 18,716,993
56,000,000 5.500%, 8/15/23 A 8/04 at 102 50,996,400
3,000,000 Michigan State Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Genesys Health System Obligated Group)
Series 1995A, 7.500%, 10/01/27 Baa 10/05 at 100 3,125,910
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MICHIGAN (CONTINUED)
$ 10,000,000 Michigan State Housing Development Authority, Rental Housing
Revenue Bonds, 1992 Series A, 6.600%, 4/01/12 A+ 10/02 at 102 $ 10,301,900
12,080,000 Michigan State Housing Development Authority, Rental Housing
Revenue Bonds, 1994 Series B, 5.700%, 4/01/12 Aaa 4/04 at 102 11,907,739
15,000,000 School District of the City of Detroit, Wayne County, Michigan,
School Building and Site Improvement Bonds (Unlimited Tax
General Obligation), Series 1996A, 5.700%, 5/01/25 Aaa 5/06 at 102 14,596,200
5,000,000 City of Detroit, Michigan, Sewage Disposal System Revenue
Refunding Bonds, Series 1987, 8.250%, 7/01/05
(Pre-refunded to 7/01/97) A 7/97 at 102 5,270,250
16,805,000 Hospital Finance Authority of the City of St. Joseph, Revenue
Refunding Bonds (Mercy Memorial Medical Center Obligated
Group) Series 1993, 5.250%, 1/01/16 Aaa 1/04 at 102 15,636,044
5,000,000 Regents of the University of Michigan, Hospital Revenue
Refunding Bonds, Series 1986A, 6.625%, 12/01/10 Aa 12/96 at 100 5,017,550
- -------------------------------------------------------------------------------------------------------------------------
MINNESOTA - 0.4%
2,520,000 Minnesota Housing Finance Agency, Housing Development
Bonds, 1977 Series A, 6.250%, 2/01/20 AA 2/97 at 101 2,545,931
10,100,000 Minnesota Housing Finance Agency, Rental Housing Bonds,
1995 Series D (Non-AMT), 5.800%, 8/01/11 Aaa 2/05 at 102 10,089,496
- -------------------------------------------------------------------------------------------------------------------------
MISSOURI - 0.8%
15,750,000 Health and Educational Facilities Authority of the State of
Missouri, Health Facilities Refunding and Improvement
Revenue Bonds (Heartland Health System's Project), Series
1989, 8.125%, 10/01/10 BBB+ 10/99 at 102 1/2 17,598,893
6,195,000 Missouri Housing Development Commission, Housing
Development Bonds, Series B 1979 (Federally
Insured Mortgage Bonds), 7.000%, 9/15/22 AA+ 3/97 at 101 1/2 6,314,006
- -------------------------------------------------------------------------------------------------------------------------
NEBRASKA - 1.4%
38,250,000 Consumers Public Power District, Nebraska, Nuclear Facility
Revenue Bonds, 1968 Series, 5.100%, 1/01/03 A1 7/97 at 100 38,290,928
2,475,000 Hospital Authority No. 1 of Hall County, Nebraska, Hospital
Facility Revenue Bonds (Lutheran Hospitals and Homes
Society Grand Island Project) Series 1977, 6.750%, 12/01/07 Aa 12/96 at 103 2,549,646
- -------------------------------------------------------------------------------------------------------------------------
NEVADA - 0.2%
7,130,000 City of Reno, Nevada, Insured Hospital Revenue Bonds
(St. Mary's Regional Medical Center), Series 1993A,
5.800%, 5/15/13 Aaa 5/03 at 102 7,099,127
- -------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE - 0.3%
8,500,000 The Industrial Development Authority of the State of New
Hampshire, Pollution Control Revenue Bonds (Central Maine
Power Company Project, 1984 Series B), 7.375%, 5/01/14 Baa3 12/01 at 103 8,925,085
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<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>
NEW JERSEY - 0.4%
$10,750,000 New Jersey Housing and Mortgage Finance Agency, Housing
Revenue Bonds, 1992 Series A, 6.950%, 11/01/13 A+ 5/02 at 102 $ 11,355,763
- -------------------------------------------------------------------------------------------------------------------------
NEW YORK - 6.9%
8,000,000 New York Local Government Assistance Corporation (A Public
Benefit Corporation of the State of New York), Series 1991D
Bonds, 7.000%, 4/01/18 (Pre-refunded to 4/01/02) Aaa 4/02 at 102 9,028,320
New York State Housing Finance Agency, Health Facilities
Revenue Bonds (New York City), 1990 Series A Refunding:
16,160,000 8.000%, 11/01/08 (Pre-refunded to 11/01/00) Aaa 11/00 at 102 18,525,339
3,330,000 8.000%, 11/01/08 BBB+ 11/00 at 102 3,709,620
7,250,000 Power Authority of the State of New York, General Purpose
Bonds, Series CC, 5.250%, 1/01/18 Aa 1/03 at 102 6,636,505
11,490,000 State of New York Mortgage Agency, Mortgage Revenue Bonds,
Eighth Series A, 6.875%, 4/01/17 Aa 10/96 at 102 11,731,060
10,725,000 Battery Park City Authority, Senior Revenue Refunding Bonds,
Series 1993A, 5.000%, 11/01/13 AA 11/03 at 102 9,547,502
16,270,000 Municipal Assistance Corporation for the City of New York,
New York, Series 59 Bonds, 7.750%, 7/01/06 Aa 7/97 at 102 17,038,107
14,250,000 Municipal Assistance Corporation for the City of New York,
New York, Series 60 Bonds, 6.000%, 7/01/08 Aa 7/97 at 100 14,346,188
18,565,000 Municipal Assistance Corporation for the City of New York,
New York, Series 62 Bonds, 6.750%, 7/01/06 Aa 7/97 at 102 19,253,205
16,500,000 The City of New York, General Obligation Bonds, Fiscal 1994
Series C, 4.875%, 10/01/01 Baa1 No Opt. Call 16,193,760
2,350,000 The City of New York, General Obligation Bonds, Fiscal 1996
Series C, 6.000%, 8/15/04 Baa1 No Opt. Call 2,372,090
5,000,000 The City of New York, General Obligation Bonds, Fiscal 1988
Series A, 8.125%, 11/01/06 (Pre-refunded to 11/01/97) Aaa 11/97 at 101 1/2 5,307,500
8,000,000 The City of New York, General Obligation Bonds, Fiscal 1994
Series D, 5.750%, 8/15/11 Baa1 8/03 at 102 7,533,200
8,525,000 The City of New York, General Obligation Bonds, Fiscal 1992
Series C, Fixed Rate Bonds, Subseries C-1, 6.625%, 8/01/12
(Pre-refunded to 8/01/02) Aaa 8/02 at 101 1/2 9,461,130
14,000,000 The City of New York, General Obligation Bonds, Fiscal 1995
Series F, 6.625%, 2/15/25 Baa1 2/05 at 101 14,210,280
The City of New York, General Obligation Bonds, Fiscal 1996
Series G:
7,500,000 5.900%, 2/01/05 Baa1 No Opt. Call 7,455,450
12,655,000 5.750%, 2/01/17 Baa1 2/06 at 101 1/2 11,649,813
8,600,000 New York City Municipal Water Finance Authority, Water and
Sewer Revenue Bonds, Fiscal 1993 Series A, 6.000%, 6/15/17 A 6/02 at 101 1/2 8,463,690
5,000,000 Triborough Bridge and Tunnel Authority (New York), General
Purpose Revenue Bonds, Series 1994A, 4.750%, 1/01/19 Aa 1/04 at 100 4,244,250
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTH CAROLINA - 3.3%
$ 17,290,000 North Carolina Eastern Municipal Power Agency, Power System
Revenue Bonds, Refunding Series 1988A, 8.000%, 1/01/21
(Pre-refunded to 1/01/98) Aaa 1/98 at 102 $ 18,472,636
68,150,000 North Carolina Eastern Municipal Power Agency, Power System
Revenue Bonds, Refunding Series 1993B, 6.250%, 1/01/12 A 1/03 at 102 68,043,005
5,545,000 North Carolina Municipal Power Agency Number 1, Catawba
Electric Revenue Refunding Bonds, Series 1988, 7.625%, 1/01/14 Aaa 1/98 at 102 5,875,371
Housing Authority of the City of Wilmington, North Carolina,
First Mortgage Revenue Bonds, Series 1979:
115,000 7.750%, 6/01/98 AA No Opt. Call 116,570
1,195,000 7.750%, 6/01/10 AA No Opt. Call 1,212,053
- -------------------------------------------------------------------------------------------------------------------------
OHIO - 0.1%
500,000 State of Ohio (Ohio Building Authority), State Facilities
Refunding Bonds (Toledo Government Center, 1985 Series A),
9.100%, 10/01/04 AA-- 10/96 at 102 512,240
- -------------------------------------------------------------------------------------------------------------------------
OKLAHOMA - 0.3%
5,375,000 The Comanche County Hospital Authority (Lawton, Oklahoma),
Hospital Revenue Bonds, Series 1989, 8.050%, 7/01/16
(Pre-refunded to 7/01/99) AAA 7/99 at 102 5,977,323
2,970,000 Midwest City Memorial Hospital Authority (Midwest City,
Oklahoma) Hospital Revenue Bonds, Series 1992,
7.375%, 4/01/12 (Pre-refunded to 4/01/02) BBB+ 4/02 at 102 3,344,933
- -------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA - 3.4%
Pennsylvania Housing Finance Agency, Multi-Family Housing
Refunding Bonds (Federal Housing Administration Insured
Mortgage Loans) Issue FHA-1992:
4,025,000 8.100%, 7/01/13 AAA 7/02 at 102 4,396,749
16,830,000 8.200%, 7/01/24 AAA 7/02 at 102 18,379,202
22,500,000 Pennsylvania Housing Finance Agency, Rental Housing
Refunding Bonds, Issue 1993, 5.750%, 7/01/14 Aaa 7/03 at 102 22,128,750
16,600,000 Pennsylvania Intergovernmental Cooperation Authority,
Special Tax Revenue Refunding Bonds (City of Philadelphia
Funding Program), Series of 1993A, 5.000%, 6/15/22 Aaa 6/03 at 100 14,601,692
10,000,000 Lehigh County Industrial Development Authority, Pollution
Control Revenue Refunding Bonds, 1994 Series B (Pennsylvania
Power and Light Company Project), 6.400%, 9/01/29 Aaa 9/04 at 102 10,431,300
9,300,000 City of Philadelphia, Pennsylvania, Airport Revenue Bonds,
Series 1978, Philadelphia International Airport,
6.200%, 6/15/06 A-- 6/97 at 100 9,303,255
City of Philadelphia, Pennsylvania, Water and Sewer Revenue
Bonds, Sixteenth Series:
10,000,000 7.500%, 8/01/10 (Pre-refunded to 8/01/01) AAA 8/01 at 102 11,401,800
7,000,000 7.000%, 8/01/18 (Pre-refunded to 8/01/01) AAA 8/01 at 100 7,717,220
- -------------------------------------------------------------------------------------------------------------------------
</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>
RHODE ISLAND - 0.2%
$ 7,595,000 Rhode Island Convention Center Authority, Refunding Revenue
Bonds, 1993 Series B, 5.000%, 5/15/20 Aaa 5/03 at 100 $ 6,653,144
- -------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA - 0.8%
20,750,000 Piedmont Municipal Power Agency, Electric Revenue Bonds,
1988 Refunding Series A, 7.400%, 1/01/18 Aaa 1/98 at 102 21,926,318
- -------------------------------------------------------------------------------------------------------------------------
TEXAS - 4.2%
City of Austin, Texas, Water, Sewer and Electric Refunding
Revenue Bonds, Series 1982:
300,000 14.000%, 11/15/01 (Pre-refunded to 5/15/99) A 5/99 at 100 356,943
18,415,000 14.000%, 11/15/01 A No Opt. Call 23,826,111
4,000,000 11.000%, 11/15/02 (Pre-refunded to 5/15/97) AAA 5/97 at 100 4,196,080
28,500,000 Brazos River Authority (Texas), Collateralized Revenue
Refunding Bonds (Houston Lighting and Power Company
Project), Series 1995, 5.800%, 8/01/15 Aaa 8/00 at 102 28,256,325
24,800,000 Harris County, Texas, Toll Road Senior Lien Revenue Refunding
Bonds, Series 1994, 5.300%, 8/15/13 Aaa 8/04 at 102 23,675,568
7,000,000 Harris County Health Facilities Development Corporation
(Texas), Hospital Revenue Bonds (St. Luke's Episcopal Hospital
Project), Series 1991A, 6.750%, 2/15/21 Aa 2/01 at 102 7,374,920
3,345,000 City of Houston, Texas, Water and Sewer System Prior Lien
Revenue Bonds, Series 1986, 8.200%, 12/01/15
(Pre-refunded to 12/01/96) AAA 12/96 at 102 3,447,959
City of San Antonio, Texas, Electric and Gas Systems Revenue
Improvement Bonds, New Series 1988:
5,000,000 8.000%, 2/01/09 (Pre-refunded to 2/01/98) Aaa 2/98 at 102 5,357,500
3,500,000 8.000%, 2/01/16 (Pre-refunded to 2/01/98) Aaa 2/98 at 102 3,750,250
16,000,000 City of San Antonio, Texas, Electric and Gas Systems Revenue
Refunding Bonds, New Series 1992, 5.000%, 2/01/17 Aa1 2/02 at 101 14,242,080
5,615,000 City of San Antonio, Texas (Bexar County, Texas) Prior Lien
Sewer System Revenue Improvement Bonds, Series 1987,
7.900%, 5/01/14 (Pre-refunded to 5/01/97) Aaa 5/97 at 101 1/2 5,846,170
- -------------------------------------------------------------------------------------------------------------------------
UTAH - 3.0%
Intermountain Power Agency (Utah), Power Supply Revenue
Refunding Bonds, 1993 Series A:
6,300,000 5.500%, 7/01/13 Aa 7/03 at 103 6,049,008
39,990,000 5.000%, 7/01/23 Aa 7/03 at 100 34,471,780
16,260,000 Intermountain Power Agency (Utah), Power Supply Revenue
Bonds, Series 1987B, 7.200%, 7/01/19 Aa 7/97 at 102 16,879,669
30,000,000 Intermountain Power Agency Power Supply Refunding Bonds,
1997 Series B, 5.750%, 7/01/19 (WI) Aaa 7/07 at 102 28,032,900
1,615,000 Layton, Utah, Industrial Development Revenue Bonds (C.D.I. Ltd.
Project--K-Mart Guaranteed), 8.750%, 6/01/05 Ba3 12/96 at 100 1,614,612
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VERMONT - 0.1%
$ 235,000 University of Vermont and State Agricultural College, Housing,
Dining and Student Services Facilities System Bonds, Lot 1
Series 1969-A, 6.300%, 7/01/06 A1 1/97 at 101 $ 238,071
- -------------------------------------------------------------------------------------------------------------------------
VIRGINIA - 3.9%
50,000,000 Virginia Housing Development Authority, Commonwealth Mortgage
Bonds, 1992 Series A, 7.150%, 1/01/33 Aa1 1/02 at 102 53,001,500
3,275,000 Virginia Housing Development Authority, Multi-Family
Mortgage Bonds, 1978 Series B, 6.700%, 11/01/21 AA+ 11/96 at 101 3,311,844
Virginia Housing Development Authority, Multi-Family
Housing Bonds, 1993 Series C:
19,080,000 5.550%, 5/01/08 AA+ 5/03 at 102 18,868,784
28,075,000 5.900%, 5/01/14 AA+ 5/03 at 102 28,041,872
6,240,000 Chesapeake Hospital Authority, Virginia, Hospital Facility
Revenue Bonds (Chesapeake General Hospital), Series 1988,
7.625%, 7/01/18 (Pre-refunded to 7/01/98) Aaa 7/98 at 102 6,724,973
870,000 Industrial Development Authority of the City of Chesapeake,
Medical Facility Insured--Mortgage Revenue Bonds (Medical
Facilities of America XIV Project) Series 1979,
7.500%, 9/01/01 N/R No Opt. Call 874,994
- -------------------------------------------------------------------------------------------------------------------------
WASHINGTON - 6.7%
14,260,000 Washington Public Power Supply System, Nuclear Project No. 1
Refunding Revenue Bonds, Series 1993A, 7.000%, 7/01/07 Aa1 No Opt. Call 15,608,853
7,805,000 Washington Public Power Supply System, Nuclear Project No. 1,
7.000%, 7/01/09 Aa1 No Opt. Call 8,764,547
5,000,000 Washington Public Power Supply System, Nuclear Project No. 1,
Refunding Revenue Bonds, Series 1989B, 7.125%, 7/01/16 Aa1 No Opt. Call 5,618,600
Washington Public Power Supply System, Nuclear
Project No. 1, Refunding Revenue Bonds, Series 1993A:
18,500,000 5.750%, 7/01/13 Aa1 7/03 at 102 17,794,595
10,000,000 5.700%, 7/01/17 Aaa 7/03 at 102 9,536,500
10,000,000 Washington Public Power Supply System, Nuclear Project No. 1,
Refunding Revenue Bonds, Series 1993C, 5.375%, 7/01/15 Aa1 7/03 at 102 9,126,000
8,835,000 Washington Public Power Supply System, Nuclear Project No. 3,
Refunding Revenue Bonds, Series 1993B, 5.700%, 7/01/18 Aa1 7/03 at 102 8,294,386
Washington Public Power Supply System, Nuclear Project No. 3,
Refunding Revenue Bonds, Series 1993C:
9,180,000 5.300%, 7/01/10 Aa1 7/03 at 102 8,486,543
51,070,000 5.375%, 7/01/15 Aa1 7/03 at 102 46,606,481
11,545,000 5.500%, 7/01/18 Aa1 7/03 at 102 10,564,713
6,505,000 Public Utility District No. 1 of Chelan County, Rocky Reach
Hydro-Electric System Revenue Bonds, Series of 1968,
5.125%, 7/01/23 A1 7/97 at 100 6,240,961
25,986,000 Public Utility District No. 1 of Chelan County, Rocky Reach
Hydro-Electric System Revenue Bonds, Series of 1957,
5.000%, 7/01/13 A1 7/97 at 100 25,782,788
- -------------------------------------------------------------------------------------------------------------------------
</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>
WASHINGTON (CONTINUED)
$ 6,805,000 Columbia Storage Power Exchange, Columbia Storage Power
Exchange Revenue Bonds, 3.875%, 4/01/03 Aa 10/96 at 100 $ 6,806,020
16,250,000 Public Utility District No. 1 of Douglas County, Washington,
Wells Hydroelectric Revenue Bonds, Series of 1963,
4.000%, 9/01/18 A+ 9/97 at 101 13,491,724
- --------------------------------------------------------------------------------------------------------------------------
WISCONSIN - 4.2%
13,700,000 Wisconsin Health and Educational Facilities Authority,
Revenue Bonds, Series 1991 (Columbia Hospital, Inc.),
6.250%, 11/15/21 Aaa 11/01 at 102 13,892,484
9,830,000 Wisconsin Health and Educational Facilities Authority,
Health Facilities Refunding Revenue Bonds (SSM Health Care),
Series 1992A, 6.250%, 6/01/20 Aaa 6/02 at 102 9,976,368
6,000,000 Wisconsin Health and Educational Facilities Authority,
Revenue Bonds, Series 1992A (Meriter Hospital, Inc.),
6.000%, 12/01/22 Aaa 12/02 at 102 5,995,380
18,500,000 Wisconsin Health and Educational Facilities Authority,
Revenue Bonds, Series 1993 (Aurora Health Care Obligated
Group), 5.250%, 8/15/23 Aaa 8/03 at 102 16,554,910
3,250,000 Wisconsin Health and Educational Facilities Authority,
Revenue Bonds, Series 1994A (Froedtert Memorial Lutheran
Hospital, Inc.), 5.875%, 10/01/13 Aaa 10/04 at 102 3,239,404
32,000,000 Wisconsin Health and Educational Facilities Authority,
Revenue Bonds, Series 1996 (Aurora Medical Group, Inc.
Project), 5.750%, 11/15/25 Aaa 5/06 at 102 30,457,280
4,500,000 Wisconsin Housing and Economic Development Authority,
Insured Mortgage Revenue Refunding Bonds, 1977 Series A,
5.800%, 6/01/17 A No Opt. Call 4,416,524
8,500,000 Wisconsin Housing and Economic Development Authority,
Multi-Family Housing Revenue Bonds, 1992 Series B,
7.050%, 11/01/22 A1 4/02 at 102 8,918,284
28,200,000 Wisconsin Housing and Economic Development Authority,
Housing Revenue Bonds, 1993 Series C, 5.800%, 11/01/13 A1 12/03 at 102 27,538,991
- --------------------------------------------------------------------------------------------------------------------------
PUERTO RICO - 0.3%
8,000,000 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 8,680,480
- --------------------------------------------------------------------------------------------------------------------------
$2,935,541,000 Total Investments -- (cost $2,754,323,751) -- 99.5% 2,849,912,859
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES -- 1.2%
$ 6,900,000 Jasper County Pollution Control Bonds (Northern Indiana
Public Service Co.), Series 1994B, Variable Rate Demand
Bonds, 3.850%, 6/01/13+ VMIG-1 $ 6,900,000
7,300,000 North Central Texas Health Facilities Development Corporation,
Hospital Revenue Bonds, Series 1985-B, (Methodist Hospitals
of Dallas), Variable Rate Demand Bonds, 3.750%, 10/01/15+ A-1 7,300,000
12,900,000 Sabine River Authority of Texas, Collateralized Pollution Control
Revenue Refunding Bonds (Texas Utilities Electric Company
Project) Series 1996A, Variable Rate Demand Bonds,
3.850%, 3/01/26+ VMIG-1 12,900,000
3,600,000 Schuylkill County Industrial Development Authority Resource
Recovery (Northeastern Power Co. Project), 1985 Variable Rate
Demand Bonds, 3.850%, 12/01/11+ A-1 3,600,000
2,400,000 Regents of the University of Michigan, Hospital Revenue Bonds,
Series 1995A (Adjustable Rate Demand), Variable Rate
Demand Bonds, 3.850%, 12/01/27+ VMIG-1 2,400,000
- -------------------------------------------------------------------------------------------------------------------------
$ 33,100,000 Total Temporary Investments -- 1.2% 33,100,000
=============------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.7)% (18,432,051)
- -------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $2,864,580,808
=========================================================================================================================
</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 81 $ 979,345,068 34%
RATINGS* AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 73 1,072,698,702 37
PORTFOLIO OF A+ A1 18 329,218,069 11
INVESTMENTS A, A-- A, A2, A3 24 327,425,990 11
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 15 130,923,600 5
TEMPORARY BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 1,614,612 1
INVESTMENTS): Non-rated Non-rated 2 8,686,818 1
- -------------------------------------------------------------------------------------------------------------------------
TOTAL 214 $2,849,912,859 100%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
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.
22
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
NUVEEN INSURED MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA -- 8.1%
$ 5,600,000 The Alabama Public Health Care Authority, Mortgage Revenue
Bonds, Series 1996, 6.000%, 10/01/25 Aaa 10/06 at 102 $ 5,595,800
2,120,000 The Water Supply Board of the City of Albertville (Alabama)
Water Revenue Bonds, Series 1992, 6.700%, 3/01/11 Aaa 3/02 at 102 2,301,917
3,500,000 City of Athens, Alabama, Electric Revenue Warrants,
Series 1995, 6.000%, 6/01/25 Aaa 6/05 at 102 3,539,690
4,795,000 The Governmental Utility Services Corporation of the City of
Auburn, Floating/Fixed Rate Wastewater Treatment Revenue
Bonds, Series 1984 (Merscot-Auburn Limited
Partnership Project), 7.300%, 1/01/12 Aaa 12/99 at 102 5,195,526
1,875,000 The Special Care Facilities Financing Authority of the City of
Birmingham-Baptist Medical Centers (Alabama), Revenue Bonds,
Series 1991-A (The Baptist Medical Centers), 7.000%, 1/01/21 Aaa 1/01 at 102 2,021,063
1,225,000 The Utilities Board of the City of Daphne (Alabama), Water,
Gas and Sewer Revenue Refunding Bonds,
Series 1990B, 7.350%, 6/01/20 Aaa 6/00 at 102 1,351,714
6,750,000 The Public Building Authority of the City of Huntsville
(Alabama), Municipal Justice and Public Safety Center Lease
Revenue Bonds, Series 1996A, 6.000%, 10/01/25 Aaa 10/05 at 102 6,823,103
3,000,000 City of Madison (Alabama), General Obligation School
Warrants, Series 1994, 6.250%, 2/01/19 Aaa 2/04 at 102 3,104,430
5,500,000 City of Madison (Alabama), General Obligation Warrants,
Series 1995, 6.000%, 4/01/23 Aaa 4/05 at 102 5,561,930
3,000,000 Mobile County, Alabama, General Obligation Tax Pledge
Warrants, Series 1991, 6.700%, 2/01/11
(Pre-refunded to 2/01/00) Aaa 2/00 at 102 3,253,740
12,000,000 The Medical Clinic Board of The City of Montgomery, Alabama,
Health Care Facility Revenue Bonds, Jackson Hospital and
Clinic, Series 1996, 6.000%, 3/01/26 Aaa 3/06 at 102 11,991,720
City of Muscle Shoals, Alabama, General Obligation Various
Purpose Warrants, Series 1996:
1,725,000 5.800%, 8/01/16 Aaa 2/06 at 102 1,717,048
3,000,000 5.900%, 8/01/25 Aaa 2/06 at 102 3,001,050
3,000,000 The Utilities Board of the City of Oneonta (Alabama), Utility
Revenue Bonds, Series 1994, 6.900%, 11/01/24 Aaa 11/04 at 102 3,337,890
West Morgan-East Lawrence Water Authority, Water Revenue
Bonds, Series 1994:
2,200,000 6.800%, 8/15/19 Aaa 8/04 at 102 2,429,614
3,000,000 6.850%, 8/15/25 Aaa 8/04 at 102 3,322,710
ALASKA -- 1.1%
8,565,000 Alaska Housing Finance Corporation, Mortgage Revenue Bonds,
1996 Series A, 6.000%, 12/01/15 (WI) Aaa 6/06 at 102 8,506,073
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARIZONA -- 2.3%
The Industrial Development Authority of the County of Mohave,
Baptist Hospital System Revenue Bonds, Series 1996:
$ 1,000,000 5.500%, 9/01/21 Aaa 9/06 at 102 $ 942,450
1,000,000 5.750%, 9/01/26 Aaa 9/06 at 102 971,490
5,000,000 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 4,837,000
6,000,000 Tempe Union High School District No. 213 of Maricopa County,
Arizona, School Improvement and Refunding Bonds,
Series 1994, 6.000%, 7/01/10 Aaa 7/04 at 101 6,256,800
5,000,000 City of Tucson, Arizona, Water System Revenue Bonds,
Series 1994-A (1996), 6.000%, 7/01/21 Aaa 7/06 at 101 5,060,800
- -------------------------------------------------------------------------------------------------------------------------
ARKANSAS -- 0.2%
1,500,000 City of Jonesboro, Arkansas, Residential Housing and Health
Care Facilities Board, Hospital Revenue Refunding and
Construction Bonds (St. Bernards Regional Medical Center),
Series 1996 B, 5.900%, 7/01/16 Aaa 7/06 at 102 1,490,325
- -------------------------------------------------------------------------------------------------------------------------
CALIFORNIA -- 9.7%
5,000,000 California Health Facilities Financing Authority, Insured Health
Facility Refunding Revenue Bonds (Mark Twain St. Joseph's
HealthCare Corporation), 1996 Series A, 6.000%, 7/01/25 Aaa 7/06 at 102 4,996,100
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
4,150,000 Fairfield Public Financing Authority (Solano County, California)
1993 Revenue Bonds, Series C (Fairfield Redevelopment
Projects), 5.500%, 8/01/23 Aaa 8/03 at 102 3,898,012
Los Angeles Convention and Exhibition Center Authority,
Lease Revenue Bonds, 1993 Refunding Series A,
The City of Los Angeles (California):
14,740,000 5.375%, 8/15/18 Aaa 8/03 at 102 13,785,143
2,500,000 5.600%, 12/01/28 Aaa 12/03 at 102 2,376,600
11,630,000 Los Angeles County Sanitation Districts Financing Authority,
Capital Projects Revenue Bonds, 1993 Series A
(Senior Ad Valorem Obligation Bonds), 5.250%, 10/01/19 Aaa 10/03 at 102 10,634,937
13,750,000 Ontario Redevelopment Financing Authority (San Bernardino
County, California) 1993 Revenue Bonds (Ontario
Redevelopment Project No. 1), 5.800%, 8/01/23 Aaa No Opt. Call 13,466,888
5,295,000 County of Riverside, California (1994 Desert Justice Facility
Project) Certificates of Participation, 6.000%, 12/01/12 Aaa 12/04 at 101 5,409,372
2,250,000 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 2,480,805
- -------------------------------------------------------------------------------------------------------------------------
</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
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 6,050,000 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 $ 5,293,327
10,000,000 The Regents of the University of California, Revenue Bonds
(Multiple Purpose Projects), Series D, 6.375%, 9/01/24 Aaa 9/02 at 102 10,478,000
- -------------------------------------------------------------------------------------------------------------------------
COLORADO - 1.2%
1,070,000 City of Colorado Springs, Colorado, Hospital Revenue and
Refunding Bonds, Series 1995, 6.000%, 12/15/24 Aaa 12/05 at 102 1,069,165
4,500,000 Board of Water Commissioners, City and County of Denver,
Colorado, Certificates of Participation, Series 1991,
6.625%, 11/15/11 Aaa 11/01 at 101 4,843,530
3,500,000 Jefferson County, Colorado, Refunding Certificates
of Participation, 6.650%, 12/01/08 Aaa 12/02 at 102 3,864,840
- -------------------------------------------------------------------------------------------------------------------------
DELAWARE - 0.5%
3,600,000 Delaware Economic Development Authority, Pollution Control
Refunding Revenue Bonds (Delmarva Power & Light
Company Project) Series 1992B, 6.750%, 5/01/19 Aaa 5/02 at 102 3,921,660
- -------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA - 1.1%
2,500,000 District of Columbia (Washington, D.C.) General Obligation
Bonds (Series 1990B), 7.500%,
6/01/10 (Pre-refunded to 6/01/00) Aaa 6/00 at 102 2,789,650
6,000,000 District of Columbia (Washington, D.C.) General Obligation
Bonds, Series 1994B, 6.100%, 6/01/11 Aaa 6/04 at 102 6,087,360
- -------------------------------------------------------------------------------------------------------------------------
FLORIDA - 0.7%
Florida Keys Aqueduct Authority, Water Refunding Revenue
Bonds, Series 1991:
920,000 6.750%, 9/01/21 (Pre-refunded to 9/01/01) Aaa 9/01 at 101 1,012,883
80,000 6.750%, 9/01/21 Aaa 9/01 at 101 86,331
Brevard County, Florida, Utility Revenue Bonds, Series 1985B:
1,520,000 7.375%, 3/01/14 (Pre-refunded to 3/01/98) Aaa 3/98 at 102 1,620,001
260,000 7.375%, 3/01/14 Aaa 3/98 at 102 276,060
2,405,000 South Broward Hospital District (Florida) Hospital Revenue and
Refunding Revenue Bonds, Series 1993, 7.500%, 5/01/08 Aaa 5/03 at 102 2,756,852
- -------------------------------------------------------------------------------------------------------------------------
GEORGIA - 2.9%
5,000,000 City of Albany (Georgia), Sewerage System Revenue Bonds,
Series 1992, 6.625%, 7/01/17 Aaa 7/02 at 102 5,400,750
5,000,000 Development Authority of Appling County (Georgia), Pollution
Control Revenue Bonds (Oglethorpe Power Corporation Hatch
Project), Series 1994, 7.150%, 1/01/21 Aaa 1/04 at 101 5,581,700
2,250,000 Chatham County Hospital Authority, Hospital Revenue Bonds
(Memorial Medical Center, Inc.), (Savannah, Georgia),
Series 1990A, 7.000%, 1/01/21 Aaa 1/01 at 102 2,437,110
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA (CONTINUED)
$ 4,590,000 Marietta Development Authority, First Mortgage Revenue
Bonds, (Life College Inc), Series 1995-B, 6.250%, 9/01/25 Aaa 9/05 at 102 $ 4,769,515
3,770,000 Development Authority of the City of Marietta, First Mortgage
Revenue Bonds (Life College, Inc.) Series 1995A and
Series 1995B, 5.950%, 9/01/19 Aaa 9/05 at 102 3,777,540
1,000,000 Municipal Electric Authority of Georgia, Project One
Subordinated Bonds, Series 1994A, 6.500%, 1/01/26 Aaa 1/04 at 102 1,071,790
- -------------------------------------------------------------------------------------------------------------------------
ILLINOIS -- 14.1%
6,685,000 Illinois Health Facilities Authority, Revolving Fund Pooled
Financing Program, Methodist Health Services
Corporation, Peoria, 8.000%, 8/01/15 Aaa 2/99 at 103 7,345,745
4,500,000 Illinois Health Facilities Authority Revenue Bonds, Series 1993
(The Children's Memorial Hospital), 5.000%, 8/15/22 Aaa 8/03 at 102 3,887,730
3,000,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1994A (The University of Chicago
Hospitals Project), 6.125%, 8/15/24 Aaa 8/04 at 102 2,976,090
4,500,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1994
(Ingalls Health System Project), 6.250%, 5/15/24 Aaa 5/04 at 102 4,579,740
4,000,000 Illinois Health Facilities Authority, Health Care Facilities
Revenue Bonds, Series 1995 (Northwestern Medical Faculty
Foundation, Inc.), 6.500%, 11/15/15 Aaa 11/04 at 102 4,281,440
7,000,000 Illinois Health Facilities Authority, Revenue Bonds (Carle
Foundation), Series 1996, 6.000%, 1/01/27 Aaa 1/06 at 102 6,860,490
2,100,000 Illinois Health Facilities Authority, Ingalls Health System
Revenue Bonds, Series 1989 (The Ingalls Memorial Hospital
Project), 7.000%, 1/01/19 (Pre-refunded to 1/01/00) Aaa 1/00 at 102 2,287,005
Illinois Health Facilities Authority, Revenue Bonds,
Series 1988-B, (Community Provider Pooled Loan Program):
169,000 7.900%, 8/15/03 Aaa No Opt. Call 191,639
1,236,000 7.900%, 8/15/03 Aaa 10/96 at 102 1,264,861
5,000,000 State of Illinois General Obligation Bonds, Series of August
1994, 5.875%, 8/01/19 AA-- 8/04 at 102 4,870,850
State of Illinois, General Obligation Bonds, Series of February
1995:
3,065,000 6.100%, 2/01/19 Aaa 2/05 at 102 3,091,849
5,545,000 6.100%, 2/01/20 Aaa 2/05 at 102 5,593,574
5,000,000 The State of Illinois acting by the Department of Central
Management Services for the benefit of the Department of
Public Aid Participations, 5.650%, 7/01/17 Aaa 7/06 at 102 4,818,850
2,500,000 City of Chicago (Illinois), General Obligation Adjustable Rate
Bonds, Central Public Library Project, Series C of 1988,
6.850%, 1/01/17 (Pre-refunded to 7/01/02) Aaa 7/02 at 101 1/2 2,784,375
5,000,000 City of Chicago, General Obligation Bonds, Project Series A of
1992, 6.250%, 1/01/12 Aaa 1/02 at 102 5,224,950
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<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>
ILLINOIS (CONTINUED)
$ 1,500,000 Public Building Commission of Chicago, Cook County, Illinois,
Building Revenue Bonds, Series A of 1988 (Community
College District No. 508), 7.700%, 1/01/08 Aaa No Opt. Call $ 1,573,830
21,300,000 Public Building Commission of Chicago (Illinois) Building
Revenue Bonds, Series A of 1993 (Board of Education of the
City of Chicago), 5.750%, 12/01/18 Aaa 12/03 at 102 20,409,021
6,540,000 Town of Cicero, Cook County, Illinois, General Obligation
Corporate Purpose Bonds, Series 1994A, 6.400%, 12/01/14 Aaa 12/04 at 102 6,841,886
2,250,000 The County of Cook, Illinois General Obligation Capital
Improvement Bonds, Series 1996, 5.875%, 11/15/22 Aaa 11/06 at 101 2,211,683
4,200,000 School District Number 25, Cook County, Illinois
(Arlington Heights), School Building Obligations,
Series 1996, 5.700%, 5/01/13 Aaa 5/06 at 102 4,102,560
2,500,000 Community College District No. 508, Cook County, Illinois,
Certificates of Participation, 8.750%, 1/01/07 Aaa No Opt. Call 3,163,300
2,370,000 Board of Governors of State Colleges and Universities (Illinois),
Eastern Illinois University, Auxiliary Facilities System
Revenue Bonds, Series 1994A, 6.375%, 4/01/16 Aaa 4/04 at 102 2,505,588
7,570,000 Village of Franklin Park, Cook County, Illinois, General
Obligation Refunding Bonds (Alternative Revenue Source)
Series 1993, 5.500%, 7/01/22 Aaa 7/04 at 102 7,089,532
4,000,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake,
McHenry and Will Counties, Illinois, General Obligation
Refunding Bonds, Series 1993C, 5.850%, 6/01/23 Aaa 6/03 at 102 3,886,440
- -------------------------------------------------------------------------------------------------------------------------
INDIANA - 5.2%
3,750,000 City of Indianapolis, Indiana, Gas Utility System Revenue
Bonds, Series 1992 A, 6.200%, 6/01/23 Aaa 6/02 at 102 3,850,425
5,000,000 Indiana Health Facilities Financing Authority, Hospital Revenue
Refunding and Improvement Bonds, Series 1992
(Community Hospitals Project), 6.400%, 5/01/12 Aaa 5/02 at 102 5,289,250
1,000,000 Indiana Municipal Power Agency, Power Supply System
Revenue Bonds, 1990 Series A,
7.100%, 1/01/15 (Pre-refunded to 1/01/00) Aaa 1/00 at 102 1,095,360
5,000,000 Indiana Municipal Power Agency, Power Supply System
Revenue Bonds, 1993 Series A, 6.125%, 1/01/19 Aaa 1/03 at 102 5,044,900
5,350,000 Jasper County, Indiana, Collateralized Pollution Control
Refunding Revenue Bonds (Northern Indiana Public Service
Company Project), Series 1991, 7.100%, 7/01/17 Aaa 7/01 at 102 5,835,085
2,000,000 Lawrence Central High School Building Corporation, Marion
County, Indiana, First Mortgage Bonds, Series 1990,
7.250%, 7/01/08 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 2,218,240
3,300,000 Marion County Convention and Recreational Facilities
Authority (Indiana), Excise Taxes Lease Rental Revenue Bonds,
Series 1991B, 7.000%, 6/01/21 (Pre-refunded to 6/01/01) Aaa 6/01 at 102 3,673,263
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDIANA (CONTINUED)
$ 2,250,000 Hospital Authority of Monroe County, Hospital Revenue
Refunding Bonds, Series 1989
(Bloomington Hospital Project), 7.125%, 5/01/11 Aaa 5/99 at 101 $ 2,396,610
1,000,000 City of Princeton,Indiana, Pollution Control Refunding Revenue
Bonds, 1990 Series (Public Service Company of Indiana, Inc.
Project C), 7.375%, 3/15/12 Aaa 3/00 at 102 1,098,970
4,170,000 Riley Elementary School Building Corporation (Vigo County,
Indiana), First Mortgage Bonds, Series 1996,
5.700%, 1/15/18 (WI) Aaa 1/06 at 102 4,042,064
2,000,000 Hospital Authority of St. Joseph County (Indiana), Fixed Rate
Hospital Revenue Refunding Bonds, Series 1991A (Memorial
Hospital of South Bend Project), 7.000%, 8/15/20 Aaa 8/01 at 102 2,171,420
2,190,000 Shelby County Jail Building Corporation, First Mortgage Bonds
(Shelby County, Indiana), 6.500%, 7/15/09
(Pre-refunded to 7/15/02) Aaa 7/02 at 102 2,419,337
2,265,000 Southwest Allen Multi School Bldg. Corp., First Mortgage
Refunding Bonds, Series 1992 B, Fort Wayne, Indiana,
6.375%, 1/15/09 Aaa 1/02 at 101 2,369,575
- ----------------------------------------------------------------------------------------------------------------------------
KENTUCKY - 0.1%
1,000,000 Louisville and Jefferson County Metropolitan Sewer District
(Commonwealth of Kentucky) Drainage Revenue Bonds,
Series 1989, 7.350%, 5/01/19 (Pre-refunded to 5/01/00) Aaa 5/00 at 102 1,107,460
- ----------------------------------------------------------------------------------------------------------------------------
LOUISIANA - 4.2%
2,000,000 Board of Supervisors of Louisiana State University and
Agricultural and Mechanical College, Auxiliary Revenue
Bonds, Series 1996, 5.500%, 7/01/26 (WI) Aaa 7/06 at 102 1,902,940
7,000,000 Louisiana Public Facilities Authority, Hospital Revenue
Refunding Bonds (Southern Baptist Hospital Project), Series
1992, 6.800%, 5/15/12 (Pre-refunded to 5/15/02) Aaa 5/02 at 102 7,796,110
1,635,000 Louisiana Public Facilities Authority, Fixed Rate Health and
Education Capital Facilities Revenue Bonds (West Jefferson
Medical Center), Series 1985D, 7.900%, 12/01/15 Aaa 12/98 at 102 1,779,469
State of Louisiana General Obligation Bonds, Series 1992-A:
5,000,000 6.500%, 5/01/09 Aaa 5/02 at 102 5,360,550
2,000,000 6.500%, 5/01/12 Aaa 5/02 at 102 2,138,140
4,795,000 Public Improvement Bonds, Issue of 1995, City of New Orleans,
Louisiana, 5.900%, 11/01/20 Aaa 11/05 at 100 4,785,362
5,640,000 Orleans Parish Parishwide School District, General Obligation
Bonds, Series 1996, 5.000%, 9/01/20 Aaa 3/06 at 100 4,969,742
4,750,000 Hospital Service District No. 1 of the Parish of Tangipahoa,
State of Louisiana, Hospital Revenue Bonds
(Series 1994), 6.250%, 2/01/24 Aaa 2/04 at 102 4,877,158
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<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>
MAINE -- 2.0%
$ 3,175,000 Maine Health and Higher Educational Facilities Authority,
Revenue Bonds, Series 1994B, 7.000%, 7/01/24 Aaa 7/04 at 102 $ 3,497,898
11,500,000 Maine Health and Higher Educational Facilities Authority,
Revenue Bonds, Series 1995A, 5.875%, 7/01/25 Aaa 7/05 at 102 11,404,205
Town of Old Orchard Beach, Maine,
1992 General Obligation Bonds:
750,000 6.650%, 9/01/09 Aaa 9/02 at 103 822,195
500,000 6.650%, 9/01/10 Aaa 9/02 at 103 548,130
- -------------------------------------------------------------------------------------------------------------------------
MARYLAND -- 0.1%
1,000,000 Morgan State University, Maryland, Academic Fees and Auxiliary
Facilities Fees Revenue Bonds, 1990 Series A,
7.000%, 7/01/20 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 1,101,170
- -------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS -- 3.3%
1,250,000 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 1,408,325
2,000,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Capital Asset Program Issue, Series F,
7.300%, 10/01/18 Aaa 4/00 at 102 2,179,600
3,400,000 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 3,628,276
4,000,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, South Shore Hospital Issue, Series D,
6.500%, 7/01/22 Aaa 7/02 at 102 4,237,160
5,875,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Cape Cod Health Systems, Inc. Issue,
Series A, 5.250%, 11/15/21 AAA 11/03 at 102 5,225,460
4,000,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Berkshire Health Systems Issue, Series D,
6.000%, 10/01/19 Aaa 10/05 at 102 3,997,280
3,500,000 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 3,938,235
1,150,000 City of Haverhill, Massachusetts, General Obligation
Municipal Purpose Loan of 1992, Series A, 7.000%, 6/15/12 Aaa 6/02 at 102 1,266,001
- -------------------------------------------------------------------------------------------------------------------------
MICHIGAN -- 5.7%
2,400,000 Michigan State Hospital Finance Authority (Michigan),
Hospital Revenue and Refunding Bonds (Henry Ford
Health System), Series 1992A, 5.750%, 9/01/17 Aaa 9/02 at 102 2,344,272
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MICHIGAN (CONTINUED)
Michigan State Hospital Finance Authority, Hospital Revenue
Bonds (Sparrow Obligated Group), Series 1996:
$ 1,650,000 5.800%, 11/15/16 Aaa 11/06 at 102 $ 1,606,770
5,000,000 5.900%, 11/15/26 Aaa 11/06 at 102 4,879,050
2,000,000 Michigan Strategic Fund Limited Obligation Refunding Revenue
Bonds (The Detroit Edison Company Pollution Control Bonds
Project), Collateralized Series 1991DD, 6.875%, 12/01/21 Aaa 12/01 at 102 2,184,040
5,475,000 State of Michigan, State Trunk Line Fund Refunding Bonds,
Series 1992B-2, 5.500%, 10/01/21 Aaa 10/02 at 100 5,132,046
12,130,000 City of Bay City, County of Bay, State of Michigan,
1991 General Obligation Unlimited Tax Street
Improvement Bonds, 0.000%, 6/01/21 Aaa No Opt. Call 2,734,466
5,000,000 Caledonia Community Schools, Counties of Kent, Allegan and
Barry, State of Michigan, 1992 School Building and Site and
Refunding Bonds (General Obligation -- Unlimited Tax),
6.700%, 5/01/22 (Pre-refunded to 5/01/02) Aaa 5/02 at 102 5,553,450
2,500,000 Chelsea School District, Counties of Washtenaw and Jackson,
State of Michigan, 1995 School Building and Site Bonds
(General Obligation, -- Unlimited Tax), 6.000%, 5/01/19 Aaa 5/05 at 101 2,522,550
2,000,000 City of Detroit, Michigan, Sewage Disposal System Revenue
Bonds, Series 1991, 6.625%, 7/01/21 (Pre-refunded to 7/01/01) Aaa 7/01 at 102 2,197,980
8,000,000 Livonia Public School District, County of Wayne, State of
Michigan, 1993 Refunding Bonds, 5.500%, 5/01/21 Aaa 5/03 at 102 7,561,360
3,000,000 Board of Trustees of Oakland University, Michigan, General
Revenue Bonds, Series 1995, 5.750%, 5/15/26 Aaa 5/05 at 102 2,939,040
6,085,000 School District of the City of River Rouge, County of Wayne,
State of Michigan, 1993 School Building and Site Bonds
(General Obligation -- Unlimited Tax), 5.625%, 5/01/22 Aaa 5/03 at 101 1/2 5,876,285
- -------------------------------------------------------------------------------------------------------------------------
MISSISSIPPI -- 0.8%
6,400,000 Medical Center Educational Building Corporation (Mississippi),
Revenue Bonds, Series 1993 (University of Mississippi
Medical Center Project), 5.900%, 12/01/23 Aaa 12/04 at 102 6,301,248
- -------------------------------------------------------------------------------------------------------------------------
MISSOURI -- 1.0%
7,950,000 St. Louis Municipal Finance Corporation, City Justice Center,
Leasehold Revenue Improvement Bonds, Series 1996A,
(City of St. Louis, Missouri, Lessee), 5.950%, 2/15/16 Aaa 2/06 at 102 7,998,972
- -------------------------------------------------------------------------------------------------------------------------
NEVADA - 0.6%
2,500,000 County of Churchill, Nevada, Health Care Facilities Revenue
Bonds (Western Health Network, Inc.), Series 1994A,
6.000%, 1/01/24 Aaa 1/04 at 102 2,498,075
2,000,000 Clark County, Nevada, Industrial Development Refunding
Revenue Bonds (Nevada Power Company Project),
Series 1992C, 7.200%, 10/01/22 Aaa 10/02 at 102 2,225,000
- -------------------------------------------------------------------------------------------------------------------------
</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
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW HAMPSHIRE -- 0.4%
$ 2,850,000 New Hampshire Higher Educational and Health Facilities
Authority, Revenue Refunding Bonds, University System of
New Hampshire Issue, Series 1992, 6.250%, 7/01/20 Aaa 7/02 at 102 $ 2,935,899
- -------------------------------------------------------------------------------------------------------------------------
NEW JERSEY -- 0.5%
1,480,000 New Jersey Housing and Mortgage Finance Agency, Home
Mortgage Purchase Revenue Bonds, 1987 Series B
(Remarketing), 8.100%, 10/01/17 Aaa 4/98 at 103 1,557,952
1,890,000 Housing Finance Corporation of the Township of Pennsauken
(Pennsauken, New Jersey), Section 8 Assisted Housing Revenue
Bonds (Pennsauken Housing Associates -- 1979 Elderly
Project), 8.000%, 4/01/11 Aaa 10/96 at 104 1/2 1,980,796
- -------------------------------------------------------------------------------------------------------------------------
NEW MEXICO -- 1.0%
3,000,000 City of Albuquerque, New Mexico, Hospital System
Revenue Bonds, 1992 Series B
(Presbyterian Healthcare Services), 6.600%, 8/01/07 Aaa 8/97 at 102 3,129,270
4,445,000 City of Farmington, New Mexico, Pollution Control
Revenue Refunding Bonds, 1992 Series A (Public Service
Company of New Mexico San Juan and
Four Corners Projects), 6.375%, 12/15/22 Aaa 12/02 at 102 4,657,027
- -------------------------------------------------------------------------------------------------------------------------
NEW YORK -- 11.6%
3,000,000 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 2,997,870
8,375,000 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 7,433,064
6,530,000 New York State Medical Care Facilities Finance Agency, Mental
Health Services Facilities Improvement Revenue Bonds,
1992 Series D, 5.900%, 8/15/22 Aaa 8/02 at 102 6,457,125
6,500,000 New York State Thruway Authority, Highway and Bridge Trust
Fund Bonds, Series 1996A, 5.250%, 4/01/14 Aaa 4/06 at 102 6,132,685
5,000,000 Battery Park City Authority, Senior Revenue Refunding Bonds,
Series 1993A, 5.250%, 11/01/17 Aaa 11/03 at 102 4,618,100
Metropolitan Transportation Authority, Commuter Facilities
Revenue Bonds, Series 1992B:
4,955,000 6.250%, 7/01/17 Aaa 7/02 at 102 5,120,101
6,925,000 6.250%, 7/01/22 Aaa 7/02 at 102 7,111,767
5,000,000 Metropolitan Transportation Authority, Commuter Facilities
Revenue Bonds, Series 1994A, 6.375%, 7/01/18 Aaa 7/04 at 101 1/2 5,241,350
285,000 The City of New York, General Obligation Bonds,
Fiscal 1992 Series C, 6.625%, 8/01/12 Aaa 8/02 at 101 1/2 308,074
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 5,715,000 The City of New York, General Obligation Bonds,
Fiscal 1992 Series C, Fixed Rate Bonds, Subseries C-1,
6.625%, 8/01/12 (Pre-refunded to 8/01/02) Aaa 8/02 at 101 1/2 $ 6,342,564
3,010,000 The City of New York, General Obligation Bonds,
Fiscal 1993 Series E, 6.000%, 5/15/16 Aaa 5/03 at 101 1/2 3,030,980
3,750,000 The City of New York, General Obligation Bonds,
Fiscal 1992 Series B, 7.000%, 2/01/18 Aaa 2/02 at 101 1/2 4,102,950
6,330,000 New York City Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1992 Series A,
6.750%, 6/15/16 Aaa 6/01 at 101 6,834,286
2,025,000 New York City Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1990 Series A,
6.750%, 6/15/14 (Pre-refunded to 6/15/99) Aaa 6/99 at 101 1/2 2,178,515
4,470,000 New York City Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1993 Series A,
5.750%, 6/15/18 Aaa 6/02 at 101 1/2 4,401,386
3,900,000 New York City Transit Authority, Transit Facilities Refunding
Revenue Bonds, Series 1993 (Livingston Plaza Project),
5.400%, 1/01/18 Aaa No Opt. Call 3,744,663
New York City Industrial Development Agency, Civic Facility
Revenue Bonds (USTA National Tennis Center Incorporated
Project):
3,500,000 6.500%, 11/15/10 Aaa 11/04 at 102 3,774,505
3,000,000 6.600%, 11/15/11 Aaa 11/04 at 102 3,250,650
5,240,000 Triborough Bridge and Tunnel Authority, Special Obligation
Refunding Bonds, Series 1991B, 6.875%, 1/01/15 Aaa 1/01 at 102 5,695,408
3,015,000 Triborough Bridge and Tunnel Authority, Special Obligation
Bonds, Series 1992, 5.500%, 1/01/17 Aaa 1/02 at 100 2,857,617
- -------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA -- 0.7%
6,000,000 County of Randolph, North Carolina Certificates of Participation
(1995 Randolph County Projects), 5.300%, 6/01/15 Aaa 6/05 at 102 5,708,580
- -------------------------------------------------------------------------------------------------------------------------
OHIO -- 1.1%
1,000,000 Board of Education, City School District of Columbus, Franklin
County, Ohio, General Obligation Bonds, Series 1990-A
(Unlimited Tax) For School Building Renovation and
Improvement, 7.000%, 12/01/11 (Pre-refunded to 12/01/00) Aaa 12/00 at 102 1,106,700
2,500,000 Dublin City School District, Franklin, Delaware and Union
Counties, Ohio, Various Purpose School Building Construction
and Improvement Bonds (General Obligation -- Unlimited
Tax), 6.200%, 12/01/19 Aaa 12/02 at 102 2,593,600
5,000,000 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 4,889,500
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<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>
OKLAHOMA -- 2.0%
$ 5,000,000 Oklahoma Industries Authority, Health System Revenue Bonds
(Obligated Group consisting of Baptist Medical Center of
Oklahoma, Inc., South Oklahoma City Hospital Corporation
and Baptist Rural Health System, Inc.), Series 1995C,
Fixed Rate Bonds, 6.250%, 8/15/12 Aaa 8/05 at 102 $ 5,252,900
350,000 Muskogee County Home Finance Authority (Oklahoma)
Single Family Mortgage Revenue Refunding Bonds,
Series 1990A, 7.600%, 12/01/10 Aaa 6/00 at 102 367,973
10,525,000 Tulsa Metropolitan Utility Authority (Tulsa, Oklahoma),
Utility Revenue Bonds, Series 1995, 5.750%, 9/01/19 Aaa 9/05 at 102 10,295,239
- -------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA -- 3.3%
3,550,000 County of Berks, Pennsylvania, General Obligation Bonds,
Series of 1995, 5.850%, 11/15/18 Aaa 11/05 at 100 3,538,711
5,000,000 Lehigh County General Purpose Authority, Hospital Revenue
Bonds, Series 1992 (St. Luke's Hospital of Bethlehem,
Pennsylvania Project), 6.250%, 7/01/22 Aaa 7/02 at 102 5,122,200
3,000,000 North Pennsylvania Water Authority (Montgomery County,
Pennsylvania), Water Revenue Bonds, Series of 1994,
7.000%, 11/01/24 (Pre-refunded to 11/01/04) Aaa 11/04 at 101 3,438,780
3,900,000 The Philadelphia Municipal Authority, Philadelphia,
Pennsylvania, Justice Lease Revenue Bonds, 1991 Series B,
7.125%, 11/15/18 (Pre-refunded to 11/15/01) Aaa 11/01 at 102 4,403,919
8,500,000 The Pittsburgh (Pennsylvania), Water and Sewer Authority,
Water and Sewer System Subordinate Revenue Bonds,
Series B of 1995, 5.750%, 9/01/25 Aaa 9/05 at 100 8,295,065
1,000,000 Washington County Hospital Authority (Pennsylvania),
Hospital Revenue Refunding Bonds, Series A of 1990
(The Washington Hospital Project), 7.150%, 7/01/17 Aaa 7/00 at 102 1,087,550
- -------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND -- 1.4%
2,250,000 Rhode Island Depositors Economic Corporation, Special
Obligation Bonds, 1992 Series A,
6.625%, 8/01/19 (Pre-refunded to 8/01/02) Aaa 8/02 at 102 2,488,365
4,000,000 City of Cranston, Rhode Island, General Obligation Bonds,
7.200%, 7/15/11 (Pre-refunded to 7/15/01) Aaa 7/01 at 101 1/2 4,442,680
3,130,000 Kent County Water Authority (Rhode Island), General Revenue
Bonds, 1994 Series A, 6.350%, 7/15/14 Aaa 7/04 at 102 3,268,534
1,000,000 Providence Housing Development Corporation, Mortgage
Revenue Refunding Bonds, Series 1994A (FHA Insured
Mortgage Loan -- Barbara Jordan Apartments Project)
(Providence, Rhode Island), 6.650%, 7/01/15 Aaa 7/04 at 102 1,046,900
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN INSURED MUNICIPAL BOND FUND - CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOUTH CAROLINA - 3.7%
$ 1,000,000 City of Aiken, South Carolina, Water and Sewer System Revenue
Refunding and Capital Improvement Bonds,
Series 1990, 7.250%, 1/01/14 Aaa 1/00 at 102 $ 1,091,840
8,740,000 The School District of Berkeley County, South Carolina,
Berkeley School Facilities Group, Inc., Certificates of
Participation, Series 1995, 5.250%, 2/01/16 Aaa 2/06 at 101 8,217,698
Charleston County, South Carolina, Charleston Public Facilities
Corporation, Certificates of Participation, Series 1994B:
70,000 6.875%, 6/01/14 Aaa 6/04 at 102 76,943
115,000 7.000%, 6/01/19 Aaa 6/04 at 102 126,461
6,500,000 Charleston County, South Carolina, Charleston Public Facilities
Corporation, Certificates of Participation, Series 1995,
5.500%, 12/01/20 Aaa 6/05 at 101 6,170,255
Charleston County, South Carolina, Charleston Public Facilities
Corporation, Certificates of Participation, Series 1994B:
1,430,000 6.875%, 6/01/14 (Pre-refunded to 6/01/04) Aaa 6/04 at 102 1,627,369
2,385,000 7.000%, 6/01/19 (Pre-refunded to 6/01/04) Aaa 6/04 at 102 2,733,210
5,435,000 Greenville Memorial Auditorium District, Public Facilities
Corporation, Greenville Memorial Auditorium District,
Taxable Certificates of Participation (Bi-Lo Center Project),
Series 1996C, 5.750%, 3/01/22 Aaa 3/06 at 102 5,289,777
2,000,000 City of Rock Hill, South Carolina, Combined Utility
System Revenue Bonds, Series 1990, 7.000%, 1/01/20
(Pre-refunded to 1/01/00) Aaa 1/00 at 102 2,184,600
2,000,000 City of Rock Hill, South Carolina, Combined Utility
System Revenue Bonds, Series 1991, 6.375%, 1/01/15 Aaa 1/01 at 102 2,095,100
- ----------------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA - 0.2%
1,000,000 South Dakota Health and Educational Facilities Authority,
Revenue Bonds, Series 1990 (McKennan Hospital Issue),
7.250%, 7/01/15 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 1,107,630
- ----------------------------------------------------------------------------------------------------------------------------
TEXAS - 3.6%
6,080,000 Texas Health Facilities Development Corporation, Hospital
Revenue Bonds (All Saints Episcopal Hospitals of Fort Worth
Project), Series 1993B, 6.250%, 8/15/22 Aaa 8/03 at 102 6,236,864
565,000 Texas Housing Agency, Single Family Mortgage Revenue Bonds,
1985 Series C, 7.875%, 9/01/17 Aa 10/96 at 102 576,882
3,000,000 Bexar County (Texas), Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist Memorial
Hospital System Project), Series 1994, 6.750%, 8/15/19 Aaa 8/04 at 102 3,260,700
5,000,000 Bexar Metropolitan Water District, Waterworks System
Revenue Bonds, Series 1994, 5.000%, 5/01/19
(Pre-refunded to 5/01/15) Aaa 5/15 at 100 4,523,300
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<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>
TEXAS (CONTINUED)
$ 4,575,000 Harris County, Texas, Toll Road Senior Lien, Revenue
Refunding Bonds, Series 1992A, 6.500%,
8/15/17 (Pre-refunded to 8/15/02) Aaa 8/02 at 102 $ 5,059,081
1,000,000 Harris County Hospital District Refunding Revenue Bonds,
Texas, Series 1990, 7.400%, 2/15/10 Aaa No Opt. Call 1,164,400
500,000 City of Houston, Texas, Senior Lien Hotel Occupancy Tax and
Parking Facilities, Weekly Adjustable/Fixed Rate Revenue
Bonds, Series 1985, Custodial Receipts, Series A,
7.000%, 7/01/15 (Pre-refunded to 7/01/01) Aaa 7/01 at 100 549,305
825,000 Lower Colorado River Authority, Priority Refunding Revenue
Bonds, Series 1991, Series B, 7.000%, 1/01/11 Aaa 1/01 at 102 903,375
1,250,000 Sabine River Authority of Texas, Collateralized Pollution Control
Revenue Refunding Bonds (Texas Utilities Electric Company
Project), Series 1993B Bonds, 5.550%, 5/01/22 Aaa 11/03 at 102 1,183,725
5,000,000 Tarrant County Health Facilities Development Corporation,
Hospital Revenue Refunding and Improvement Bonds
(Fort Worth Osteopathic Hospital, Inc. Project), Series 1993,
6.000%, 5/15/21 Aaa No Opt. Call 5,126,600
- -------------------------------------------------------------------------------------------------------------------------
UTAH - 1.2%
5,055,000 State of Utah, State Building Ownership Authority, Lease
Revenue Bonds (State Facilities Master Lease Program),
Series 1995A, 5.750%, 5/15/18 Aaa 11/05 at 100 4,857,804
245,000 Utah Housing Finance Agency, Single Family Mortgage Senior
Bonds, 1988 Issue C (Federally Insured or Guaranteed
Mortgage Loans), 8.375%, 7/01/19 AA 1/09 at 100 251,375
500,000 Provo City, Utah, Energy System Revenue Refunding Bonds,
1993 Series A, 5.750%, 5/15/14 Aaa 5/03 at 102 493,125
3,500,000 White City Water Improvement District,
Salt Lake County, Utah, General Obligation Water Bonds,
Series 1995, 6.600%, 2/01/25 Aaa 2/05 at 100 3,752,840
- -------------------------------------------------------------------------------------------------------------------------
VIRGINIA - 0.5%
3,000,000 Industrial Development Authority of Loudoun County, Virginia,
Hospital Revenue Bonds (Loudoun Hospital Center),
Series 1995, 5.800%, 6/01/26 Aaa 6/05 at 102 2,910,840
1,050,000 County of Roanoke, Virginia, Water System Revenue Bonds,
Series 1991, 6.000%, 7/01/31 (Pre-refunded to 7/01/01) Aaa 7/01 at 100 1,109,052
- -------------------------------------------------------------------------------------------------------------------------
WASHINGTON - 2.2%
6,500,000 Washington Public Power Supply System, Nuclear Project No. 1
Refunding Revenue Bonds, Series 1993A, 5.700%, 7/01/17 Aaa 7/03 at 102 6,198,725
5,000,000 Washington Public Power Supply System, Nuclear Project No. 2
Refunding Revenue Bonds, Series 1993B, 5.400%, 7/01/05 Aaa No Opt. Call 5,027,500
</TABLE>
35
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL RAT- OPT. CALL MARKET
AMOUNT DESCRIPTION INGS* PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WASHINGTON (CONTINUED)
$ 2,500,000 Washington Public Power Supply System, Nuclear Project No. 3
Refunding Revenue Bonds, Series 1989A, 7.250%, 7/01/16
(Pre-refunded to 7/01/99) Aaa 7/99 at 102 $ 2,728,850
1,500,000 City of Marysville, Washington, Water and Sewer Revenue
Bonds, 1991, 7.000%, 12/01/11 (Pre-refunded to 12/01/03) Aaa 12/03 at 100 1,687,755
2,000,000 Bellingham School District No. 501, Whatcom County,
Washington, Unlimited Tax General Obligation Bonds, 1994,
6.125%, 12/01/13 Aaa 12/04 at 100 2,058,440
- --------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA - 0.2%
1,000,000 School Building Authority of West Virginia, Capital
Improvement Revenue Bonds, Series 1990A,
7.250%, 7/01/15 (Pre-refunded to 7/01/00) Aaa 7/00 at 102 1,109,120
- --------------------------------------------------------------------------------------------------------------------------
WISCONSIN - 1.4%
7,020,000 Wisconsin Health and Educational Facilities Authority, Revenue
Bonds (Sisters of the Sorrowful Mother-Ministry Corporation),
Series 1993A, 6.125%, 8/15/22 Aaa 2/03 at 102 6,974,651
1,000,000 Wisconsin Municipal Insurance Commission, Revenue Bonds,
Series 1987, 8.700%, 4/01/07 Aaa 4/97 at 102 1,044,970
2,000,000 City of Superior, Wisconsin, Limited Obligation Refunding
Revenue Bonds (Midwest Energy Resources Company Project)
Series E-1991 (Collateralized), 6.900%, 8/01/21 Aaa No Opt. Call 2,286,480
1,000,000 School District of Three Lakes, Forest and Oneida Counties,
Wisconsin, General Obligation Refunding Bonds,
6.750%, 4/01/12 (Pre-refunded to 4/01/03) Aaa 4/03 at 100 1,103,900
- --------------------------------------------------------------------------------------------------------------------------
WYOMING - 0.3%
2,000,000 The Trustees of the University of Wyoming, Facilities Revenue
Bonds, Series 1991, 7.100%, 6/01/10 Aaa 6/00 at 101 2,190,020
- --------------------------------------------------------------------------------------------------------------------------
PUERTO RICO - 0.5%
3,750,000 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 4,165,381
- --------------------------------------------------------------------------------------------------------------------------
$795,010,000 Total Investments -- (cost $765,118,418) -- 100.7% 799,126,229
- --------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.7%) (5,334,006)
- --------------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $793,792,223
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
NUVEEN INSURED MUNICIPAL BOND FUND--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 203 $788,590,122 98%
RATINGS* AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 3 5,699,107 1
PORTFOLIO OF BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 1 4,837,000 1
INVESTMENTS:
- --------------------------------------------------------------------------------------------------------------------------
TOTAL 207 $799,126,229 100%
- --------------------------------------------------------------------------------------------------------------------------
</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.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
37
<PAGE>
STATEMENT OF NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
MUNI INS. MUNI
BOND BOND
-------------- ------------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $2,849,912,859 $799,126,229
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 33,100,000 -
Cash 26,107 -
Receivables:
Interest 40,494,366 10,685,826
Shares sold 122,353 75,281
Investments sold 165,000 2,052,713
Other assets 53,425 14,573
-------------- ------------
Total assets 2,923,874,110 811,954,622
-------------- ------------
LIABILITIES
Payables:
Investments purchased 47,563,718 15,211,521
Shares reacquired 176,447 56,981
Accrued expenses:
Management fees (note 6) 1,108,034 324,347
Other 635,438 330,781
Dividends payable 9,809,665 2,238,769
-------------- ------------
Total liabilities 59,293,302 18,162,399
-------------- ------------
Net assets (note 7) $2,864,580,808 $793,792,223
============== ============
Class A Shares (note 1)
Net assets $ 54,030,059 $ 57,503,907
============== ============
Shares outstanding 5,952,251 5,400,465
============== ============
Net asset value and redemption price per share $ 9.08 $ 10.65
============== ============
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 9.51 $ 11.15
============== ============
Class C Shares (note 1)
Net assets $ 3,349,917 $ 5,152,126
============== ============
Shares outstanding 368,992 488,830
============== ============
Net asset value, offering and redemption price per share $ 9.08 $ 10.54
============== ============
Class R Shares (note 1)
Net assets $2,807,200,832 $731,136,190
============== ============
Shares outstanding 309,141,414 68,945,126
============== ============
Net asset value and redemption price per share $ 9.08 $ 10.60
============== ============
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
STATEMENT OF OPERATIONS NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
Six months ended August 31, 1996 AUGUST 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 85,538,965 $ 23,568,720
------------ ------------
Expenses:
Management fees (note 6) 6,493,694 1,894,368
12b-1 service fees-Class A (note 1) 57,553 65,012
12b-1 distribution and service fees-Class C (note 1) 12,551 25,937
Shareholders' servicing agent fees and expenses 1,115,315 378,907
Custodian's fees and expenses 187,617 71,423
Directors'/Trustees' fees and expenses (note 6) 25,280 6,887
Professional fees 33,192 9,810
Shareholders' reports - printing and mailing expenses 209,142 89,474
Federal and state registration fees 32,568 50,191
Portfolio insurance expense - 3,588
Other expenses 70,550 24,475
------------ ------------
Total expenses 8,237,462 2,620,072
------------ ------------
Net investment income 77,301,503 20,948,648
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions (note 1) 9,657,526 (2,014,680)
Net change in unrealized appreciation or
depreciation of investments (71,994,006) (22,295,656)
------------ ------------
Net gain (loss) from investments (62,336,480) (24,310,336)
------------ ------------
Net increase (decrease) in net assets from operations $ 14,965,023 $ (3,361,688)
============ ============
- -----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
MUNI BOND INS. MUNI BOND
- -----------------------------------------------------------------------------------------------------------------------------
6 months ended Year ended 6 months ended Year ended
8/31/96 2/29/96 8/31/96 2/29/96
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 77,301,503 $ 156,911,846 $ 20,948,648 $ 41,913,841
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 4) 9,657,526 10,618,706 (2,014,680) 4,402,500
Net change in unrealized appreciation or depreciation
of investments. (71,994,006) 84,862,109 (22,295,656) 36,885,934
-------------- -------------- ------------ -------------
Net increase (decrease) in net assets from operations 14,965,023 252,392,661 (3,361,688) 83,202,275
-------------- -------------- ------------ -------------
DISTRIBUTION TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (1,168,257) (707,943) (1,279,262) (1,614,782)
Class C (54,735) (30,677) (109,131) (192,149)
Class R (76,378,547) (157,137,272) (19,250,029) (40,071,660)
From accumulated net realized gains from
investment transactions:
Class A - (63,661) - -
Class C - (3,523) - -
Class R - (8,354,729) - -
-------------- -------------- ------------ -------------
Decrease in net assets from distributions to shareholders (77,601,539) (166,297,805) (20,638,422) (41,878,591)
-------------- -------------- ------------ -------------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares:
Class A 28,685,003 93,033,904 18,826,722 108,423,277
Class C 1,754,936 1,925,249 1,000,823 7,075,313
Class R 118,253,577 397,491,029 27,323,953 143,237,499
Net proceeds from shares issued to shareholders due to
reinvestment of distributions:
Class A 747,773 453,018 797,851 951,544
Class C 38,908 19,887 92,400 161,275
Class R 60,119,020 123,742,206 12,692,989 26,577,682
-------------- -------------- ------------ -------------
209,599,217 616,665,293 60,734,738 286,426,590
-------------- -------------- ------------ -------------
Cost of shares redeemed:
Class A (11,691,146) (56,994,434) (7,630,127) (78,678,465)
Class C (313,620) (40,390) (934,832) (6,281,962)
Class R (188,022,434) (469,258,117) (48,427,433) (183,518,067)
-------------- -------------- ------------ -------------
(200,027,200) (526,292,941) (56,992,392) (268,478,494)
-------------- -------------- ------------ -------------
Net increase in net assets derived from
Fund share transactions 9,572,017 90,372,352 3,742,346 17,948,096
Net increase (decrease) in net assets (53,064,499) 176,467,208 (20,257,764) 59,271,780
Net assets at the beginning of period 2,917,645,307 2,741,178,099 814,049,987 754,778,207
-------------- -------------- ------------ -------------
Net assets at the end of period $2,864,580,808 $2,917,645,307 $793,792,223 $ 814,049,987
============== ============== ============ =============
Balance of undistributed net investment income
at end of period $ 869,561 $ 1,169,597 $ 535,266 $ 225,040
============== ============== ============ =============
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
40
<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 nationally diversified Funds covered in this report
(the "Funds") are Nuveen Municipal Bond Fund and Nuveen Insured Tax-Free
Bond Fund, Inc. (comprising Nuveen Insured Municipal Bond Fund). Each Fund
invests primarily in a diversified portfolio of municipal obligations
issued by state and local government authorities.
Municipal Bond was originally incorporated in Maryland on October 8, 1976
and reorganized as a Massachusetts Business Trust at the close of business
on June 12, 1995. Insured Municipal Bond was incorporated in Minnesota on
July 11, 1986.
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/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.
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 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 August 31, 1996, Municipal Bond and Insured
Municipal Bond had outstanding purchase commitments of $43,647,500 and
14,657,787, respectively.
41
<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.
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.
Federal 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 enable interest from municipal securities, which is
exempt from regular federal income tax, to retain such tax exempt status
when distributed to the shareholders of the Funds.
Insurance
Insured Municipal Bond invests 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 Fund's 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 Fund
42
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
ultimately disposes 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 Fund. Accordingly, neither the prices used in determining the
market value of the underlying municipal securities nor the net asset value
of the Fund's shares include value, if any, attributable to the Portfolio
Insurance. Each policy of the Portfolio Insurance does, however, give the
Fund 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, for Insured Municipal Bond and June 13, 1995,
for Municipal Bond, both Funds 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" Shares and Class "C" Shares, the shares
outstanding for both Funds 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 purchases of high quality synthetic money market securities
which were held temporarily pending the re-investment in long term
portfolio securities, if applicable.
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
MUNI BOND INS. MUNI BOND
- ----------------------------------------------------------------------------------------------------------
Six months ended Year ended Six months ended Year ended
8/31/96 2/29/96 8/31/96 2/29/96
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 3,165,178 10,085,967 1,759,531 10,080,588
Class C 192,545 208,938 94,560 661,711
Class R 13,014,352 43,438,989 2,572,825 13,451,112
Shares issued to shareholders
due to reinvestment of distributions:
Class A 82,059 48,593 74,550 88,109
Class C 4,271 2,138 8,715 15,241
Class R 6,588,063 13,470,516 1,190,127 2,491,979
---------- ---------- --------- ----------
23,046,468 67,255,141 5,700,308 26,788,740
---------- ---------- --------- ----------
Shares redeemed:
Class A (1,293,783) (6,135,763) (713,301) (7,244,524)
Class C (34,568) (4,332) (88,991) (588,441)
Class R (20,724,530) (51,218,535) (4,571,465) (17,181,722)
---------- ---------- --------- ----------
(22,052,881) (57,358,630) (5,373,757) (25,014,687)
---------- ---------- --------- ----------
Net increase 993,587 9,896,511 326,551 1,774,053
========== ========== ========= ==========
- ----------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
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>
- ---------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- ---------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $.0385 $.0445
Class C .0330 .0375
Class R .0405 .0465
====== ======
- ---------------------------------------------------------
</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>
- ------------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- ------------------------------------------------------------------
<S> <C> <C>
PURCHASES
Investments in municipal securities $320,467,078 $171,317,008
Temporary municipal investments 202,280,000 105,900,000
SALES
Investments in municipal securities 242,216,832 155,118,974
Temporary municipal investments 200,780,000 109,900,000
============ ============
- ------------------------------------------------------------------
</TABLE>
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.
45
<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>
- ----------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- ----------------------------------------------------------
<S> <C> <C>
Gross unrealized:
Appreciation $113,788,927 $36,894,127
Depreciation (18,199,819) (2,886,316)
------------ -----------
Net unrealized appreciation $ 95,589,108 $34,007,811
============ ===========
- ----------------------------------------------------------
</TABLE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' 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 .5 of 1%
For the next $125,000,000 .4875 of 1
For the next $250,000,000 .475 of 1
For the next $500,000,000 .4625 of 1
For the next $1,000,000,000 .45 of 1
For net assets over $2,000,000,000 .425 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, if applicable, and to the extent permitted, extraordinary expenses) in any
fiscal year from exceeding .75 of 1% of the average daily net asset value of
Municipal Bond and .975 of 1% of the average daily net asset value of Insured
Municipal Bond. 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.
46
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Funds pay no
compensation directly to their directors/trustees 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, the Funds had common stock authorized of $.10 par value per
share for Municipal Bond and $.01 par value per share for Insured Municipal
Bond. The composition of net assets as well as the number of authorized shares
is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $2,754,548,775 $758,641,356
Balance of undistributed net investment income 869,561 535,266
Accumulated net realized gain from investment transactions 13,573,364 607,790
Net unrealized appreciation of investments 95,589,108 34,007,811
-------------- ------------
Net assets $2,864,580,808 $793,792,223
============== ============
Authorized Shares:
Class A Unlimited 340,000,000
Class C Unlimited 460,000,000
Class R Unlimited 200,000,000
============== ============
- -------------------------------------------------------------------------------------------
</TABLE>
47
<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>
- ------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- ------------------------------------------------------
<S> <C> <C>
Revenue Bonds:
Electric Utilities 21% 4%
Health Care Facilities 17 19
Housing Facilities 16 2
Lease Rental Facilities 2 11
Water/Sewer Facilities 9 10
Educational Facilities 1 8
Transportation 6 3
Pollution Control 4 4
Other 7 5
General Obligation Bonds 7 19
Escrowed Bonds 10 15
- ------------------------------------------------------
100% 100%
- ------------------------------------------------------
</TABLE>
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 (31% for Municipal
Bond and 100% for Insured Municipal Bond). Such insurance or escrow,
however, does not guarantee the market value of the municipal
securities or the value of any of the Funds' shares.
72% of Municipal Bond's 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.
48
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS SEMIANNUAL REPORT
AUGUST 31, 1996
9. OTHER MATTERS
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and
Nuveen Advisory Corp., respectively the distributor and investment
advisor 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 at a meeting
scheduled for December, 1996.
49
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations 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
- ----------------------------------------------------------------------------------------------------------------------------------
MUNI BOND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
6 mos. ended
8/31/96 $9.280 $.241 $(.206) $(.235) $ -- $9.080
6/13/95 to
2/29/96 9.150 .340++ .141 (.324) (.027) 9.280
CLASS C
6 mos. ended
8/31/96 9.260 .207 (.185) (.202) -- 9.080
6/13/95 to
2/29/96 9.150 .290++ .126 (.279) (.027) 9.260
CLASS R
6 mos. ended
8/31/96 9.280 .246 (.199) (.247) -- 9.080
Year ended
2/29/96 9.000 .506 .313 (.512) (.027) 9.280
Year ended 2/28,
1995 9.280 .515 (.209) (.511) (.075) 9.000
1994 9.450 .519 (.075) (.516) (.098) 9.280
1993 9.080 .555 .414 (.544) (.055) 9.450
5 mos. ended
2/29/92 9.040 .239 .080 (.239) (.040) 9.080
Year ended 9/30,
1991 8.650 .579 .438 (.589) (.038) 9.040
1990 8.730 .596 (.080) (.596) -- 8.650
1989 8.520 .597 .239 (.597) (.029) 8.730
1988 8.020 .596 .536 (.596) (.036) 8.520
1987 8.780 .598 (.614) (.598) (.146) 8.020
1986 7.830 .595 1.162 (.595) (.212) 8.780
1985 7.180 .586 .650 (.586) -- 7.830
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 52.
50
<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 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 net assets after turnover
value+ (in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
.40% $ 54,030 .82%* 5.12%* .82%* 5.12%* 9%
5.33 37,089 .86* 5.11* .83* 5.14* 17
.26 3,350 1.57* 4.36* 1.57* 4.36* 9
4.59 1,915 1.64* 4.33* 1.58* 4.49* 17
.54 2,807,201 .57* 5.37* .57* 5.37* 9
9.31 2,878,641 .59 5.53 .59 5.53 17
3.60 2,741,178 .59 5.79 .59 5.79 17
4.79 2,700,007 .62 5.49 .62 5.49 15
11.04 2,371,669 .61 5.95 .61 5.95 14
3.56 1,835,708 .62* 6.24* .62* 6.24* 6
12.15 1,661,420 .60 6.48 .60 6.48 10
6.04 1,323,623 .62 6.78 .62 6.78 8
10.07 1,119,833 .64 6.85 .64 6.85 12
14.50 945,361 .65 7.11 .65 7.11 8
(.39) 764,092 .68 6.85 .68 6.85 16
23.02 668,416 .71 6.95 .71 6.95 39
17.73 459,627 .73 7.68 .73 7.68 28
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations 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
- --------------------------------------------------------------------------------------------------------------------------
INS. MUNI BOND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
6 mos. ended
8/31/96 $10.970 $ .274 $(.327) $(.267) $ - $10.650
Year ended
2/29/96 10.400 .542++ .568 (.540) - 10.970
9/6/94 to
2/28/95 10.310 .264++ .115 (.273) (.016) 10.400
CLASS C
6 mos. ended
8/31/96 10.850 .230 (.315) (.225) - 10.540
Year ended
2/29/96 10.310 .461 .540 (.461) - 10.850
9/7/94 to 2/28/95 10.290 .227++ .075 (.266) (.016) 10.310
CLASS R
6 mos. ended
8/31/96 10.920 .282 (.323) (.279) - 10.600
Year ended
2/29/96 10.380 .570 .540 (.570) - 10.920
Year ended 2/28,
1995 10.810 .573 (.407) (.580) (.016) 10.380
1994 10.850 .574 .012 (.565) (.061) 10.810
1993 10.030 .591 .880 (.589) (.062) 10.850
Year ended
2/29/92 9.690 .612 .425 (.617) (.080) 10.030
Year ended 2/28,
1991 9.520 .617 .198 (.611) (.034) 9.690
1990 9.350 .627 .262 (.630) (.089) 9.520
1989 9.300 .629 .050 (.629) - 9.350
Year ended
2/29/88 9.790 .637++ (.490) (.637) - 9.300
12/10/86 to
2/28/87 9.600 .127++ .190 (.127) - 9.790
- --------------------------------------------------------------------------------------------------------------------------
</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, if applicable (note 6).
52
<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 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>
(.46)% | $ 57,504 .89%* 5.04%* .89%* 5.04%* 20%
|
10.90 | 46,943 .92 5.00 .91 5.01 27
|
3.84 | 14,097 1.27* 5.28* 1.00* 5.55* 25
|
|
(.76) | 5,152 1.64* 4.29* 1.64* 4.29* 20
|
9.88 | 5,151 1.63 4.34 1.63 4.34 27
3.09 | 3,979 1.75* 4.83* 1.75* 4.83* 25
|
|
(.35) | 731,136 .64* 5.29* .64* 5.29* 20
|
10.94 | 761,956 .63 5.33 .63 5.33 27
|
1.85 | 736,702 .64 5.67 .64 5.67 25
5.47 | 745,914 .65 5.21 .65 5.21 11
15.24 | 567,232 .72 5.68 .72 5.68 20
|
11.03 | 306,853 .73 6.12 .73 6.12 45
|
8.94 | 178,931 .80 6.45 .80 6.45 53
9.73 | 111,806 .83 6.49 .83 6.49 78
7.63 | 66,049 .87 6.83 .87 6.83 106
|
2.00 | 41,330 .88 6.65 .60 6.93 88
|
3.31 | 13,160 3.50* .50* -- 4.00* --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
YOUR
INVESTMENT
PARTNERS
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
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.
[NUVEEN LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
[RECYCLING LOGO]
<PAGE>
[NUVEEN LOGO]
Nuveen Tax-Free
Mutual Funds
Dependable tax-free
income for generations
MUNI BOND
INSURED MUNI BOND
ANNUAL REPORT/FEBRUARY 29, 1996
[PHOTO OF COUPLE APPEARS HERE]
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
9 Fund performance
11 Portfolio of investments
36 Statement of net assets
37 Statement of operations
38 Statement of changes in net assets
39 Notes to financial statements
48 Financial highlights
52 Report of independent public accountants
<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 investment programs."
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 yields
on offering price for R Shares were 4.93% for the Municipal Bond Fund and 5.00%
for the Insured Municipal Bond Fund. To match these yields, an investor in the
36% federal income tax bracket would have had to earn at least 7.70% and 7.81%,
respectively, on taxable alternatives.
3
<PAGE>
Reflecting the rebound in the bond markets, both 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, were 9.31% for the Municipal
Bond Fund and 10.94% for the Insured Municipal Bond Fund. These returns
translate to 12.59% and 14.10%, respectively, 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 rating 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 MUNICIPAL BOND FUND
Muni Bond
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen Municipal Bond
Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 2/86 2/87 2/88 2/89 2/90 2/91 2/92 2/93 2/94 2/95 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers
Municipal Bond Index
-Total $21,997 10,000 11,219 11,513 12,227 13,480 14,723 16,194 18,423 19,441 19,808 21,997
Nuveen Municipal Bond Fund
-Total $20,379 9,525 10,674 11,032 11,854 12,976 14,075 15,466 17,173 17,994 18,644 20,380
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------
1 year 5 years 10 years
- -------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 9.31% 7.68% 7.90%
A Shares on NAV N/A N/A 5.33%+
A Shares on offering price** N/A N/A 0.59%+
C Shares on NAV N/A N/A 4.59%+
- -------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.15 cents per share for Class R Shares
translated into a distribution yield of 5.37% 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 36% federal
income tax bracket would have to earn 8.39% 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 3.11% from a year ago. The average annual total return on NAV for
this class was 9.31%, which translated into a taxable-equivalent total return of
12.59%.
The fund's Class R Share SEC yield of 4.93% on February 29, 1996, translated
into 7.70% on a taxable-equivalent basis.
* One-year, 5-year and 10-year 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 June 13,
1995.
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 INSURED
MUNICIPAL BOND FUND
Insured Muni Bond
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen Insured
Municipal Bond 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>
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 Insured Municipal Bond
Fund-Total $19,688 9,525 9,168 10,497 11,787 12,564 13,911 15,411 17,366 16,028 19,688
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 10.94% 8.80% 8.22%
A Shares on NAV 10.90% N/A 9.99%+
A Shares on offering price** 5.91% N/A 6.62%+
C Shares on NAV 9.88% N/A 8.80%+
- ------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.65 cents per share for Class R Shares
translated into a distribution yield of 5.11% 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 36% federal
income tax bracket would have to earn 7.98% 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 5.20% from a year ago. The average annual total return on NAV for
this class was 10.94%, which translated into a taxable-equivalent total return
of 14.10%.
The fund's Class R Share SEC yield of 5.00% on February 29, 1996, translated
into 7.81% on a taxable-equivalent basis.
* 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>
PORTFOLIO OF INVESTMENTS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALASKA - 0.9%
Alaska Housing Finance Corporation, Insured
Mortgage Program:
$ 4,085,000 6.375%, 12/01/07 6/96 at 101 Aa $ 4,134,714
3,290,000 7.650%, 12/01/10 12/00 at 102 Aa 3,482,399
10,885,000 7.800%, 12/01/30 12/00 at 102 Aa 11,555,189
Alaska State Housing Finance Corporation:
3,675,000 6.375%, 12/01/12 (Pre-refunded to 12/01/02) 12/02 at 102 Aa 4,028,645
2,250,000 6.600%, 12/01/23 (Pre-refunded to 12/01/02) 12/02 at 102 Aa 2,487,623
- ----------------------------------------------------------------------------------------------------------------------------
ARIZONA - 2.4%
7,750,000 Arizona State University, 5.750%, 7/01/12 7/02 at 101 AA 7,876,713
Salt River Project, Agricultural Improvement
and Power District:
5,000,000 4.900%, 1/01/08 1/04 at 102 Aa 4,966,400
9,145,000 5.000%, 1/01/10 7/96 at 100 Aa 8,917,015
26,200,000 4.750%, 1/01/17 1/04 at 100 Aa 23,643,404
20,350,000 5.500%, 1/01/28 1/02 at 100 Aa 19,681,096
4,570,000 Scottsdale Industrial Development Authority
(Scottsdale Memorial Hospital),
8.500%, 9/01/07 9/97 at 102 Aaa 4,939,987
- ----------------------------------------------------------------------------------------------------------------------------
ARKANSAS - 0.4%
11,210,000 Jefferson County Hospital, 6.000%, 7/01/06 7/03 at 102 A 11,895,716
- ----------------------------------------------------------------------------------------------------------------------------
CALIFORNIA - 15.2%
California Department of Water Resources
(Central Valley Project):
15,515,000 5.700%, 12/01/16 6/03 at 101 1/2 Aa 15,593,040
9,500,000 5.750%, 12/01/19 6/03 at 101 1/2 Aa 9,573,720
12,250,000 5.500%, 12/01/23 12/03 at 101 1/2 Aa 11,934,318
20,000,000 4.875%, 12/01/27 12/03 at 101 Aa 17,736,000
13,025,000 California Health Facilities Financing Authority
(Catholic Healthcare West), 5.000%, 7/01/14 7/04 at 102 Aaa 12,142,426
12,000,000 California State Public Works Board,
Department of Corrections (California State
Prison, Monterey), 7.000%, 11/01/19 11/04 at 102 A 13,532,520
34,795,000 California Statewide Communities Development
Authority (St. Joseph Health System),
5.500%, 7/01/23 7/03 at 102 Aa 33,346,484
California Statewide Communities Development
Authority (Unihealth America):
11,500,000 5.500%, 10/01/14 10/03 at 102 Aaa 11,308,870
20,000,000 5.750%, 10/01/25 10/03 at 102 Aaa 20,050,000
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MUNICIPAL BOND FUND-CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 11,725,000 Central California Joint Powers Health Finance
Authority, Certificates of Participation,
5.250%, 2/01/13 2/03 at 102 A $10,803,532
9,000,000 East Bay Municipal Utility District,
5.000%, 6/01/21 6/03 at 102 Aaa 8,313,930
Foothill/Eastern Transportation Corridor Agency:
45,000,000 0.000%, 1/01/23 No Opt. Call BBB-- 8,147,250
15,000,000 6.000%, 1/01/34 1/05 at 102 BBB-- 14,342,100
9,040,000 Los Angeles Convention and Exhibition
Center Authority, 5.125%, 8/15/13 8/03 at 102 Aaa 8,657,518
Los Angeles Department of Water and Power:
17,575,000 6.500%, 4/15/32 4/02 at 102 Aa 18,800,681
13,100,000 6.125%, 1/15/33 1/03 at 102 Aa 13,682,033
Los Angeles Wastewater System:
7,000,000 5.700%, 6/01/20 6/03 at 102 Aaa 7,001,820
15,615,000 5.200%, 11/01/21 11/03 at 102 Aaa 14,637,501
21,000,000 5.700%, 6/01/23 6/03 at 102 Aaa 21,080,220
Los Angeles County Metropolitan Transit
Authority:
15,750,000 5.500%, 7/01/13 7/03 at 102 AA-- 15,328,530
14,935,000 4.750%, 7/01/18 7/03 at 102 Aaa 13,388,481
8,000,000 5.250%, 7/01/23 7/03 at 102 Aaa 7,530,000
Los Angeles County Sanitation Districts
Financing Authority:
6,500,000 5.375%, 10/01/13 10/03 at 102 Aa 6,340,880
19,500,000 5.000%, 10/01/23 10/03 at 100 Aa 17,700,150
31,360,000 Los Angeles County Transportation Commission,
6.750%, 7/01/19 (Pre-refunded to 7/01/02) 7/02 at 102 Aaa 36,041,107
Metropolitan Water District of Southern California:
4,670,000 5.500%, 1/01/10 7/96 at 101 AA+ 4,725,620
5,000,000 5.500%, 7/01/19 7/02 at 102 Aa 4,874,550
12,750,000 Modesto Irrigation District (Geysers Geothermal
Power Project), Certificates of Participation,
7.250%, 10/01/15 10/96 at 102 A1 13,239,983
22,575,000 Northern California Power Agency,
7.150%, 7/01/24 7/98 at 102 A 24,355,942
12,600,000 Sacramento Sanitation District Finance
Authority, 4.750%, 12/01/23 12/03 at 102 Aa 11,043,270
7,600,000 Santa Clara County (Capital Project No. 1),
Certificates of Participation,
8.000%, 10/01/06 (Pre-refunded to 10/01/96) 10/96 at 102 AAA 7,960,012
8,050,000 University of California, 6.875%, 9/01/16
(Pre-refunded to 9/01/02) 9/02 at 102 A-- 9,302,741
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
COLORADO - 1.3%
$31,750,000 Colorado Housing Finance Authority,
7.250%, 11/01/31 11/01 at 102 Aa $33,558,798
4,250,000 Denver City and County Airport System,
7.250%, 11/15/25 11/02 at 102 Baa 4,864,508
- -------------------------------------------------------------------------------------------------------------------------
CONNECTICUT - 0.3%
5,745,000 Connecticut Housing Finance Authority,
7.550%, 11/15/08 11/00 at 102 Aa 5,908,847
2,970,000 Connecticut Resources Recovery Authority,
8.625%, 1/01/04 7/96 at 102 A 3,040,092
- -------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA - 0.3%
7,560,000 CHT Housing, Inc., FHA-Insured,
8.500%, 1/01/22 7/96 at 103 N/R 7,813,940
- -------------------------------------------------------------------------------------------------------------------------
FLORIDA - 2.5%
4,500,000 Dade County Health Facilities Authority
(Mt. Sinai Medical Center),
8.400%, 12/01/07 (Pre-refunded to
12/01/99) 12/99 at 102 Aaa 4,951,665
31,000,000 Hillsborough County Industrial Development
Authority, Pollution Control (Tampa Electric),
8.000%, 5/01/22 5/02 at 103 Aa2 36,898,990
7,000,000 Jacksonville Electric Authority (St. John's
River Power Park System), 6.500%, 10/01/14 10/99 at 101 1/2 Aa1 7,455,980
15,000,000 Orlando Utilities Commission, 5.000%, 10/01/23 10/99 at 100 Aa 13,557,450
8,005,000 Pensacola Health Facilities Authority
(Daughters of Charity), 7.750%, 1/01/03
(Pre-refunded to 1/01/98) 1/98 at 101 1/2 Aaa 8,691,189
1,485,000 Sarasota Elderly Housing Corporation,
7.500%, 7/01/09 7/96 at 104 A 1,548,588
- -------------------------------------------------------------------------------------------------------------------------
HAWAII - 0.3%
8,000,000 Hawaii Department of Budget and Finance
(Kapiolani Health Care System),
7.650%, 7/01/19 (Pre-refunded to 7/01/01) 7/01 at 102 Aaa 9,401,600
- -------------------------------------------------------------------------------------------------------------------------
ILLINOIS - 15.9%
8,500,000 Illinois Development Finance Authority
(Columbus-Cuneo-Cabrini Medical Center),
8.500%, 2/01/15 (Pre-refunded to 2/01/00) 2/00 at 102 Baa 9,909,300
8,500,000 Illinois Educational Facilities Authority
(The University of Chicago), 5.600%, 7/01/24 7/03 at 102 Aaa 8,258,430
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
Illinois General Obligation:
$ 15,100,000 6.200%, 10/01/04 10/02 at 102 AA- $ 16,637,482
14,750,000 5.875%, 6/01/10 6/02 at 102 AA- 15,146,038
5,000,000 5.875%, 6/01/11 6/02 at 102 AA- 5,114,250
10,000,000 5.700%, 4/01/18 4/03 at 102 AA- 9,845,200
4,770,000 Illinois Health Facilities Authority
(Rush Presbyterian), 6.900%, 10/01/02 4/96 at 100 A1 4,778,204
12,420,000 Illinois Health Facilities Authority
(LaGrange Hospital), 7.625%, 7/01/13
(Pre-refunded to 7/01/96) 7/96 at 102 A 12,833,089
10,000,000 Illinois Health Facilities Authority (Highland
Park Hospital), 6.200%, 10/01/22 10/02 at 102 Aaa 10,470,000
6,115,000 Illinois Health Facilities Authority (Illinois
Masonic Medical Center), 5.500%, 10/01/19 10/03 at 102 A 5,641,026
34,120,000 Illinois Health Facilities Authority,
(Rush-Presbyterian-St. Luke's Medical Center),
5.500%, 11/15/25 11/03 at 102 Aaa 32,791,367
10,425,000 Illinois Independent Higher Education Loan
Authority (Northwestern University),
8.000%, 12/01/07 12/96 at 102 Aa1 10,923,628
Illinois Sales Tax:
21,670,000 6.000%, 6/15/18 6/01 at 100 AAA 21,966,229
14,200,000 5.250%, 6/15/18 6/03 at 102 AAA 13,554,610
Illinois State Toll Highway Authority:
20,000,000 6.450%, 1/01/13 1/03 at 102 A1 20,866,200
8,655,000 6.200%, 1/01/16 1/03 at 102 Aaa 9,120,293
Chicago General Obligation:
5,800,000 5.250%, 1/01/18 1/04 at 102 Aaa 5,507,042
16,270,000 5.625%, 1/01/23 1/03 at 102 Aaa 16,046,938
22,335,000 Chicago Metropolitan Housing Development
Corporation, 6.900%, 7/01/22 7/02 at 102 AA 23,309,029
7,965,000 Chicago Motor Fuel Tax, 5.000%, 1/01/16 1/03 at 101 Aaa 7,391,759
Chicago O'Hare International Airport:
46,750,000 5.000%, 1/01/16 1/04 at 102 A1 44,133,870
18,710,000 5.000%, 1/01/18 1/04 at 102 Aaa 17,160,625
15,905,000 Cook County General Obligation,
5.000%, 11/15/23 11/03 at 100 Aaa 14,454,305
Dupage Water Commission, General Obligation:
39,040,000 7.875%, 3/01/11 (Pre-refunded to 3/01/96) 3/96 at 102 Aaa 39,830,560
16,800,000 5.750%, 3/01/11 3/02 at 100 Aaa 17,042,256
9,500,000 5.250%, 5/01/14 5/03 at 102 Aa 9,362,630
2,000,000 Hazel Crest (South Suburban Hospital),
9.125%, 7/01/17 (Pre-refunded to 7/01/97) 7/97 at 102 AAA 2,183,480
- --------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 56,180,000 Metropolitan Pier & Exposition Authority
(McCormick Place Expansion Project),
6.500%, 6/15/27 6/03 at 102 A+ $ 58,538,436
Zion Elderly Housing Corporation:
240,000 7.250%, 3/01/98 3/96 at 102 A 244,795
1,705,000 7.750%, 3/01/10 3/96 at 102 A 1,741,555
- -------------------------------------------------------------------------------------------------------------
INDIANA - 2.7%
47,100,000 Indiana Health Facilities Financing Authority
(Daughters of Charity), 5.750%, 11/15/22 11/03 at 102 Aa 45,996,447
10,500,000 Indiana Health Facilities Financing Authority
(Methodist Hospital), 5.750%, 9/01/11 9/02 at 102 Aaa 10,712,100
12,550,000 Indiana Office Building Commission,
8.750%, 7/01/12 (Pre-refunded to 7/01/97) 7/97 at 102 Aaa 13,641,348
2,500,000 Indianapolis Local Public Improvement,
Bond Bank, 6.750%, 2/01/20 2/03 at 102 + 2,712,850
3,135,000 Indianapolis Resource Recovery (Ogden Martin),
7.900%, 12/01/08 12/96 at 103 A 3,307,300
2,470,000 Southwind Housing, Inc., 7.125%, 11/15/21 No Opt. Call AA 3,058,231
- -------------------------------------------------------------------------------------------------------------
IOWA - 0.3%
4,035,000 Iowa Housing Finance Authority,
5.875%, 8/01/08 8/96 at 101 Aa1 4,071,840
3,815,000 Davenport (Mercy Hospital), 6.625%, 7/01/14 7/02 at 102 Aaa 4,222,404
- -------------------------------------------------------------------------------------------------------------
KENTUCKY - 3.2%
Kentucky Housing Corporation:
17,600,000 5.300%, 7/01/10 1/04 at 102 Aaa 17,269,648
14,400,000 5.400%, 7/01/14 1/04 at 102 Aaa 14,087,520
3,925,000 7.250%, 1/01/17 7/01 at 102 Aaa 4,188,250
Kentucky Turnpike Authority:
9,860,000 8.000%, 7/01/03 7/97 at 102 A+ 10,540,636
8,980,000 5.000%, 7/01/08 7/97 at 100 A+ 8,829,316
34,500,000 Carroll County Pollution Control (Kentucky
Utilities Company), 7.450%, 9/15/16 9/02 at 102 Aa2 39,604,275
- -------------------------------------------------------------------------------------------------------------
MAINE - 0.3%
10,000,000 Maine State Housing Authority,
5.700%, 1/15/26 2/04 at 102 AA- 9,719,600
- -------------------------------------------------------------------------------------------------------------
MASSACHUSETTS - 3.3%
15,000,000 Massachusetts Bay Transportation Authority,
Certificates of Participation,
7.650%, 8/01/15 (Pre-refunded to 8/01/00) 8/00 at 102 Aaa 17,330,850
- ------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MUNICIPAL BOND FUND-CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
$ 19,670,000 Massachusetts General Obligation,
4.700%, 8/01/02 No Opt. Call A1 $ 19,990,818
Massachusetts Water Resources Authority:
14,765,000 5.250%, 3/01/13 3/03 at 102 A 14,202,896
6,500,000 7.500%, 4/01/16 (Pre-refunded to 4/01/00) 4/00 at 102 Aaa 7,412,795
9,500,000 6.000%, 4/01/20 4/00 at 100 A 9,538,570
24,650,000 5.250%, 12/01/20 12/04 at 102 A 23,201,320
5,795,000 5.000%, 3/01/22 3/03 at 100 A 5,208,546
- -------------------------------------------------------------------------------------------------------------
MICHIGAN - 4.5%
3,000,000 Michigan Hospital Finance Authority (Genesys
Health System), 7.500%, 10/01/27 10/05 at 100 Baa 3,162,090
Michigan Housing Development Authority:
3,950,000 6.750%, 7/01/05 7/96 at 100 Aa1 3,960,073
12,080,000 5.700%, 4/01/12 4/04 at 102 Aaa 12,208,531
10,000,000 Michigan Housing Development Authority,
Rental Housing, 6.600%, 4/01/12 10/02 at 102 A+ 10,377,100
4,000,000 Michigan State Hospital Finance Authority
(Henry Ford Hospital), 7.500%, 7/01/13
(Pre-refunded to 1/01/97) 1/97 at 102 Aaa 4,217,040
Michigan State Hospital Finance Authority
(The Detroit Medical Center):
19,585,000 5.750%, 8/15/13 8/04 at 102 A 19,069,327
54,000,000 5.500%, 8/15/23 8/04 at 102 A 50,558,040
5,000,000 Detroit Sewage Disposal System, 8.250%, 7/01/05
(Pre-refunded to 7/01/97) 7/97 at 102 A 5,396,900
16,805,000 St. Joseph Hospital Finance Authority (Mercy
Memorial Medical Center Obligated Group),
5.250%, 1/01/16 1/04 at 102 Aaa 15,979,034
5,000,000 University of Michigan Hospital,
6.625%, 12/01/10 12/96 at 100 Aa 5,051,400
- -------------------------------------------------------------------------------------------------------------
MINNESOTA - 0.9%
Minnesota Housing Finance Agency:
8,600,000 5.800%, 8/01/11 2/05 at 102 Aaa 8,703,630
2,520,000 6.250%, 2/01/20 8/96 at 102 A1 2,555,986
14,420,000 Minneapolis Convention Center,
7.750%, 4/01/11 (Pre-refunded to 4/01/96) 4/96 at 102 Aaa 14,763,773
- -------------------------------------------------------------------------------------------------------------
MISSOURI - 0.9%
2,740,000 Missouri Environmental Improvement and
Energy Resource Authority, Pollution Control
(Associated Electric Cooperative, Inc.),
7.900%, 11/15/14 5/96 at 103 Aa3 2,842,147
------------------------------------------------------------------------------------------------------------
</TABLE>
16
<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>
MISSOURI (CONTINUED)
$ 15,750,000 Missouri Health and Educational Facilities
Authority (Heartland Health), 8.125%, 10/01/10 10/99 at 102 1/2 BBB+ $ 18,042,413
6,195,000 Missouri Housing Development Commission,
7.000%, 9/15/22 3/96 at 101 3/4 AA+ 6,318,776
- ---------------------------------------------------------------------------------------------------------------------------
NEBRASKA - 1.4%
37,895,000 Consumers Public Power District, 5.100%, 1/01/03 7/96 at 100 A1 37,934,411
2,475,000 Hall County Hospital Authority (Sisters of Charity),
6.750%, 12/01/07 6/96 at 103 Aa 2,549,572
- ---------------------------------------------------------------------------------------------------------------------------
NEVADA - 0.2%
7,130,000 Reno, Insured Hospital Revenue (St. Mary's
Regional Medical Center), 5.800%, 5/15/13 5/03 at 102 Aaa 7,293,634
- ---------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE - 0.3%
8,500,000 New Hampshire Industrial Development
Authority, Pollution Control (Central
Maine Power Company), 7.375%, 5/01/14 12/01 at 103 Baa3 9,093,555
- ---------------------------------------------------------------------------------------------------------------------------
NEW JERSEY - 0.4%
10,750,000 New Jersey Housing and Mortgage Finance
Agency, 6.950%, 11/01/13 5/02 at 102 A+ 11,393,818
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK - 7.9%
8,000,000 New York Local Government Assistance
Corporation, 7.000%, 4/01/18 (Pre-refunded
to 4/01/02) 4/02 at 102 Aaa 9,260,080
19,490,000 New York State Housing Finance Agency, Health
Facilities (New York City), 8.000%, 11/01/08 11/00 at 102 BBB+ 22,002,066
11,490,000 New York State Mortgage Agency, 6.875%, 4/01/17 10/96 at 102 Aa 11,810,226
10,725,000 Battery Park City Authority, 5.000%, 11/01/13 11/03 at 102 AA 9,866,893
New York Municipal Assistance Corporation:
16,270,000 7.750%, 7/01/06 7/97 at 102 Aa 17,350,653
18,565,000 6.750%, 7/01/06 7/97 at 102 Aa 19,498,820
23,535,000 7.250%, 7/01/08 7/96 at 102 Aa 24,251,170
14,250,000 6.000%, 7/01/08 7/97 at 100 Aa 14,465,318
New York City General Obligation:
16,500,000 4.875%, 10/01/01 No Opt. Call Baa1 16,183,365
2,350,000 6.000%, 8/15/04 No Opt. Call Baa1 2,412,604
7,500,000 5.900%, 2/01/05 No Opt. Call Baa1 7,598,175
5,000,000 8.125%, 11/01/06 (Pre-refunded to 11/01/97) 11/97 at 101 1/2 Aaa 5,437,700
8,000,000 5.750%, 8/15/11 8/03 at 102 Baa1 7,702,640
8,525,000 6.625%, 8/01/12 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 Aaa 9,734,271
12,655,000 5.750%, 2/01/17 2/06 at 101 1/2 Baa1 11,942,270
14,000,000 6.625%, 2/15/25 2/05 at 101 Baa1 14,716,520
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MUNICIPAL BOND FUND-CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
New York City Municipal Water Finance
Authority, Water and Sewer System:
$ 8,600,000 6.000%, 6/15/17 6/02 at 101 1/2 A $ 8,764,948
10,000,000 7.750%, 6/15/20 (Pre-refunded to 6/15/01) 6/01 at 101 1/2 Aaa 11,778,600
5,000,000 Triborough Bridge and Tunnel Authority,
General Purpose, 4.750%, 1/01/19 1/04 at 100 Aa 4,512,300
- -------------------------------------------------------------------------------------------------------------
NORTH CAROLINA - 3.0%
North Carolina Eastern Municipal Power Agency:
63,160,000 6.250%, 1/01/12 1/03 at 102 A 64,900,058
17,290,000 8.000%, 1/01/21 (Pre-refunded to 1/01/98) 1/98 at 102 Aaa 18,929,092
5,545,000 North Carolina Municipal Power Agency
No. 1, (Catawba), 7.625%, 1/01/14 1/98 at 102 Aaa 5,973,296
Housing Authority of Wilmington:
165,000 7.750%, 6/01/98 6/96 at 100 AA 171,125
1,195,000 7.750%, 6/01/10 6/96 at 100 AA 1,279,295
- -------------------------------------------------------------------------------------------------------------
OHIO - 0.1%
500,000 Ohio Building Authority (Toledo Center),
9.100%, 10/01/04 4/96 at 103 A1 517,205
- -------------------------------------------------------------------------------------------------------------
OKLAHOMA - 0.2%
5,375,000 Comanche County Hospital Authority,
8.050%, 7/01/16 (Pre-refunded to 7/01/99) 7/99 at 102 AAA 6,137,390
2,970,000 Midwest City Memorial Hospital Authority,
7.375%, 4/01/12 4/02 at 102 BBB+ 3,096,195
- -------------------------------------------------------------------------------------------------------------
PENNSYLVANIA - 4.8%
Pennsylvania Housing Finance Agency:
4,025,000 8.100%, 7/01/13 7/02 at 102 AAA 4,459,338
16,830,000 8.200%, 7/01/24 7/02 at 102 AAA 18,639,730
22,500,000 Pennsylvania Housing Finance Agency, Rental
Housing (FNMA), 5.750%, 7/01/14 7/03 at 102 Aaa 22,610,925
15,000,000 Pennsylvania Intergovernmental Cooperative
Authority (Philadelphia Funding Program),
5.000%, 6/15/22 6/03 at 100 Aaa 13,719,600
5,000,000 Allegheny County Hospital Development
Authority (St. Francis Medical Center),
8.125%, 6/01/13 (Pre-refunded to 6/01/96) 6/96 to 102 Aaa 5,160,150
10,000,000 Lehigh County Industrial Development
Authority, Pollution Control (Pennsylvania
Power and Light Company), 6.400%, 9/01/29 9/04 at 102 Aaa 10,839,700
9,300,000 Philadelphia Airport, 6.200%, 6/15/06 6/96 at 100 A-- 9,305,487
- -------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
Philadelphia Water and Sewer:
$ 10,000,000 7.500%, 8/01/10 (Pre-refunded to 8/01/01) 8/01 at 102 AAA $ 11,702,000
5,890,000 7.250%, 7/01/14 (Pre-refunded to 7/01/96) 7/96 at 102 AAA 6,026,471
7,000,000 7.000%, 8/01/18 (Pre-refunded to 8/01/01) 8/01 at 100 AAA 7,912,380
28,075,000 Philadelphia Hospitals and Higher Educational
Facilities Authority (Pennsylvania Hospital),
7.250%, 7/01/14 7/96 at 101 A 28,392,809
- -------------------------------------------------------------------------------------------------------------
RHODE ISLAND - 0.2%
7,595,000 Rhode Island Convention Center Authority,
5.000%, 5/15/20 5/03 at 100 Aaa 6,886,994
- -------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA - 0.8%
20,750,000 Piedmont Municipal Power Agency,
7.400%, 1/01/18 1/98 at 102 Aaa 22,274,918
- -------------------------------------------------------------------------------------------------------------
TEXAS - 4.3%
Austin Water, Sewer and Electric:
300,000 14.000%, 11/15/01 (Pre-refunded to 5/15/99) 5/99 at 100 A 387,408
18,415,000 14.000%, 11/15/01 No Opt. Call A 25,251,341
4,000,000 11.000%, 11/15/02 (Pre-refunded to 5/15/97) 5/97 at 100 AAA 4,355,880
28,500,000 Brazos River Authority, 5.800%, 8/01/15 8/00 at 102 Aaa 28,779,585
24,800,000 Harris County Toll Road, 5.300%, 8/15/13 8/04 at 102 Aaa 24,513,064
7,000,000 Harris County Health Facilities Development
Corporation (St. Luke's Episcopal Hospital),
6.750%, 2/15/21 2/01 at 102 Aa 7,531,230
3,345,000 Houston Water and Sewer System, 8.200%, 12/01/15
(Pre-refunded to 12/01/96) 12/96 at 102 AAA 3,532,588
San Antonio Electric and Gas Systems:
5,000,000 8.000%, 2/01/09 (Pre-refunded to 2/01/98) 2/98 at 102 Aaa 5,486,400
3,500,000 8.000%, 2/01/16 (Pre-refunded to 2/01/98) 2/98 at 102 Aaa 3,840,480
16,000,000 San Antonio Electric and Gas System,
5.000%, 2/01/17 2/02 at 101 Aa1 14,704,640
5,615,000 San Antonio Sewer System, 7.900%, 5/01/14
(Pre-refunded to 5/01/97) 5/97 at 101 1/2 Aaa 5,986,769
- -------------------------------------------------------------------------------------------------------------
UTAH - 3.0%
Intermountain Power Agency:
6,300,000 5.500%, 7/01/13 7/03 at 103 Aa 6,254,325
32,080,000 7.875%, 7/01/14 7/96 at 102 Aa 33,168,795
16,260,000 7.200%, 7/01/19 7/97 at 102 Aa 17,152,186
31,990,000 5.000%, 7/01/23 7/03 at 100 Aa 28,559,712
1,730,000 Layton Industrial Development (K-Mart),
8.750%, 6/01/05 6/96 at 100 Baa3 1,615,889
- -------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MUNICIPAL BOND FUND-CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VERMONT - 0.1%
$ 255,000 University of Vermont, Housing, Dining and
Student Services, 6.300%, 7/01/06 7/96 at 101 A1 $ 258,583
- -------------------------------------------------------------------------------------------------------------------------
VIRGINIA - 3.8%
Virginia Housing Development Authority:
3,275,000 6.700%, 11/01/21 11/96 at 101 AA+ 3,309,027
50,000,000 7.150%, 1/01/33 1/02 at 102 Aa1 52,781,500
Virginia Housing Development Authority,
Multi-Family Housing:
19,080,000 5.550%, 5/01/08 5/03 at 102 AA+ 18,994,903
28,075,000 5.900%, 5/01/14 5/03 at 102 AA+ 27,948,382
6,240,000 Chesapeake Hospital Authority (Chesapeake
General Hospital), 7.625%, 7/01/18
(Pre-refunded to 7/01/98) 7/98 at 102 Aaa 6,887,587
1,035,000 Chesapeake Industrial Development Authority
(Camelot Hall Nursing Home),
7.500%, 9/01/01 No Opt. Call N/R 1,039,016
- -------------------------------------------------------------------------------------------------------------------------
WASHINGTON - 7.0%
Washington Public Power Supply System,
Nuclear Project No. 1:
14,260,000 7.000%, 7/01/07 No Opt. Call Aa 16,383,884
7,805,000 7.000%, 7/01/09 No Opt. Call Aa 8,980,667
18,500,000 5.750%, 7/01/13 7/03 at 102 Aa 18,268,750
10,000,000 5.375%, 7/01/15 7/03 at 102 Aa 9,369,900
5,000,000 7.125%, 7/01/16 No Opt. Call Aa 5,807,700
10,000,000 5.700%, 7/01/17 7/03 at 102 Aaa 9,993,000
Washington Public Power Supply, Nuclear
Project No. 3:
9,180,000 5.300%, 7/01/10 7/03 at 102 Aa 8,904,967
51,070,000 5.375%, 7/01/15 7/03 at 102 Aa 47,635,032
2,095,000 15.000%, 7/01/18 (Pre-refunded to 7/01/96) 7/96 at 103 Aaa 2,238,738
8,835,000 5.700%, 7/01/18 7/03 at 102 Aa 8,568,448
11,545,000 5.500%, 7/01/18 7/03 at 102 Aa 10,899,635
6,635,000 Chelan County Public Utility District No. 1,
5.125%, 7/01/23 7/96 at 100 A1 6,044,286
31,482,000 Chelan County Public Utility District No. 1
(Rocky Reach Hydro-Electric System),
5.000%, 7/01/13 7/96 at 100 A1 30,608,375
6,805,000 Columbia Storage Power Exchange, 3.875%, 4/01/03 4/96 at 100 Aa 6,790,165
15,600,000 Douglas County Public Utility District No. 1
(Wells Hydroelectric), 4.000%, 9/01/18 9/96 at 101 A+ 13,139,256
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WISCONSIN - 3.7%
$ 13,700,000 Wisconsin Health and Educational Facilities
Authority (Columbia Hospital), 6.250%, 11/15/21 11/01 at 102 Aaa $ 14,385,548
6,000,000 Wisconsin Health and Educational Facilities
Authority (Meriter Health Services),
6.000%, 12/01/22 12/02 at 102 Aaa 6,186,720
13,500,000 Wisconsin Health and Educational Facilities
Authority (Aurora Health Care Obligated Group),
5.250%, 8/15/23 8/03 at 102 Aaa 12,560,940
3,250,000 Wisconsin Health and Educational Facilities
Authority (Froedtert Memorial Lutheran Hospital),
5.875%, 10/01/13 10/04 at 102 Aaa 3,332,225
32,000,000 Wisconsin Health and Educational Facilities
Authority (Aurora Medical Group),
5.750%, 11/15/25 5/06 at 102 Aaa 31,659,520
Wisconsin Housing and Economic
Development Authority:
28,200,000 5.800%, 11/01/13 12/03 at 102 A1 28,073,943
4,500,000 5.800%, 6/01/17 No Opt. Call A 4,719,642
8,500,000 7.050%, 11/01/22 4/02 at 102 A1 9,039,580
- -------------------------------------------------------------------------------------------------------------------------
PUERTO RICO - 0.3%
8,000,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 8,888,000
- -------------------------------------------------------------------------------------------------------------------------
$2,830,552,000 Total Investments - (Cost $2,668,395,087) - 97.2% 2,835,978,201
================---------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 1.1%
$ 15,000,000 Harris County Health Facilities Development
Corporation (The Methodist Hospital),
Variable Rate Demand Bonds, 3.450%, 12/01/25+ A-1+ 15,000,000
3,400,000 Hillsborough County Industrial Development
Authority (Tampa Electric Company),
Variable Rate Demand Bonds, 3.450%, 9/01/25+ Aa-2 3,400,000
7,200,000 Metropolitan Nashville Airport Authority, Special
Facilities (American Airlines), Variable Rate
Demand Bonds, 3.500%, 10/01/12+ A-1+ 7,200,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MUNICIPAL BOND FUND-CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES (CONTINUED)
$ 2,800,000 Monroe County Economic Development Corporation,
Pollution Control (The Detroit Edison Company),
Variable Rate Demand Bonds, 3.350%, 10/01/24+ VMIG-1 $ 2,800,000
3,200,000 New York City General Obligation, Fiscal 1995B-B6,
Insured, Adjustable Rate Demand Bonds,
3.450%, 8/15/05+ VMIG-1 3,200,000
- -----------------------------------------------------------------------------------------------------------------------------------
$ 31,600,000 Total Temporary Investments - 1.1% 31,600,000
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.7% 50,067,106
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 2,917,645,307
===================================================================================================================================
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 78 $ 934,014,456 32%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 74 1,037,562,805 37
PORTFOLIO OF A+ A1 20 333,572,856 12
INVESTMENTS A, A-- A, A2, A3 26 367,144,188 13
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 16 154,830,940 5
TEMPORARY Non-rated Non-rated 2 8,852,956 1
INVESTMENTS):
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 216 $ 2,835,978,201 100%
====================================================================================================================================
</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.
22
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN INSURED MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA - 5.5%
$ 2,120,000 Albertville Water Supply Board, 6.700%, 3/01/11 3/02 at 102 Aaa $ 2,354,599
3,500,000 Athens Electric, 6.000%, 6/01/25 6/05 at 102 Aaa 3,649,555
4,795,000 Auburn Government Utility Services Corporation,
Wastewater Treatment, 7.300%, 1/01/21 12/99 at 102 Aaa 5,283,227
1,875,000 Birmingham Special Care Facilities Financing
Authority (Baptist Medical Center),
7.000%, 1/01/21 1/01 at 102 Aaa 2,070,169
Daphne Utilities Board, Water, Gas and Sewer:
1,255,000 7.350%, 6/01/20 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 1,429,571
1,225,000 7.350%, 6/01/20 6/00 at 102 Aaa 1,377,219
Madison General Obligation:
3,000,000 6.250%, 2/01/19 2/04 at 102 Aaa 3,192,570
5,500,000 6.000%, 4/01/23 4/05 at 102 Aaa 5,751,295
3,000,000 Mobile County General Obligation,
6.700%, 2/01/11 (Pre-refunded to 2/01/00) 2/00 at 102 Aaa 3,321,780
3,000,000 Oneanta Utilities Board, 6.900%, 11/01/24 11/04 at 102 Aaa 3,409,740
Orange Beach Water and Sewer and Fire Authority:
3,000,000 5.375%, 5/15/15 5/05 at 102 Aaa 2,919,180
4,500,000 5.400%, 5/15/20 5/05 at 102 Aaa 4,360,815
West Morgan-East Lawrence Water Authority:
2,200,000 6.800%, 8/15/19 8/04 at 102 Aaa 2,487,166
3,000,000 6.850%, 8/15/25 8/04 at 102 Aaa 3,410,700
- -----------------------------------------------------------------------------------------------------------------------------------
ALASKA - 0.6%
5,000,000 Anchorage General Obligation, 5.600%, 1/01/14 1/04 at 100 Aaa 4,935,800
- -----------------------------------------------------------------------------------------------------------------------------------
ARIZONA - 1.2%
3,180,000 Maricopa County Industrial Development
Authority (Baptist Hospital), 5.500%, 9/01/13 9/05 at 101 Aaa 3,197,490
6,000,000 Tempe Union High School District No. 213,
General Obligation, 6.000%, 7/01/10 7/04 at 101 Aaa 6,412,560
- -----------------------------------------------------------------------------------------------------------------------------------
ARKANSAS - 0.3%
2,000,000 Saline County (Saline Memorial Hospital),
6.000%, 9/01/19 9/05 at 102 AAA 2,062,900
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA - 9.5%
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
5,000,000 Brea Redevelopment Agency, Tax Allocation,
5.750%, 8/01/23 8/03 at 102 Aaa 5,037,700
4,150,000 Fairfield Public Finance Authority,
5.500%, 8/01/23 8/03 at 102 Aaa 4,072,022
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN INSURED MUNICIPAL BOND FUND-CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 2,500,000 Los Angeles Community Redevelopment Agency
(Bunker Hill Project), 5.600%, 12/01/28 12/03 at 102 Aaa $ 2,450,125
14,740,000 Los Angeles Convention and Exhibition Center
Authority, 5.375%, 8/15/18 8/03 at 102 Aaa 14,218,351
4,500,000 M-S-R Public Power Agency, San Juan Project,
6.000%, 7/01/20 7/03 at 102 Aaa 4,687,245
13,750,000 Ontario Redevelopment Financing Authority,
5.800%, 8/01/23 8/03 at 102 Aaa 14,470,638
5,295,000 Riverside County Desert Justice Facility
Corporation, Certificates of Participation,
6.000%, 12/01/12 12/04 at 101 Aaa 5,530,945
2,250,000 Sacramento Municipal Utility District,
Electric System, 6.500%, 9/01/21
(Pre-refunded to 9/01/01) 9/01 at 102 Aaa 2,536,628
7,500,000 San Bernardino, Joint Powers Finance Authority,
Tax Allocation, 5.750%, 10/01/25 10/05 at 102 Aaa 7,483,650
1,750,000 San Bernadino, Certificates of Participation,
5.500%, 8/01/22 8/05 at 102 Aaa 1,705,918
10,000,000 University of California, 6.375%, 9/01/24 9/02 at 102 Aaa 10,696,600
- -------------------------------------------------------------------------------------------------------------
COLORADO - 2.3%
6,000,000 Colorado Health Facilities Authority
(Children's Hospital Association),
5.250%, 10/01/26 10/06 at 101 Aaa 5,714,940
4,000,000 Colorado Springs (Memorial Hospital),
6.000%, 12/15/24 12/05 at 102 Aaa 4,155,640
4,500,000 Denver Board of Water Commissioners,
Certificates of Participation, 6.625%, 11/15/11 11/01 at 101 Aaa 4,952,925
3,500,000 Jefferson County Equipment Lease, Certificates
of Participation, 6.650%, 12/01/08 12/02 at 102 Aaa 3,927,875
- -------------------------------------------------------------------------------------------------------------
DELAWARE - 0.5%
3,600,000 Delaware Economic Development Authority,
Pollution Control (Delmarva Power and
Light Company), 6.750%, 5/01/19 5/02 at 102 Aaa 4,005,144
- -------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA - 1.1%
District of Columbia General Obligation:
2,500,000 7.500%, 6/01/10 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 2,862,225
6,000,000 6.100%, 6/01/11 6/04 at 102 Aaa 6,245,280
- -------------------------------------------------------------------------------------------------------------
</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>
FLORIDA - 1.5%
Florida Keys Aqueduct Authority:
$ 920,000 6.750%, 9/01/21 (Pre-refunded to 9/01/01) 9/01 at 101 Aaa $ 1,040,603
80,000 6.750%, 9/01/21 9/01 at 101 Aaa 88,391
Brevard County Utility System:
1,520,000 7.375%, 3/01/14 (Pre-refunded to 3/01/98) 3/98 at 102 Aaa 1,656,131
295,000 7.375%, 3/01/14 3/98 at 102 Aaa 317,995
2,750,000 Lakeland (Lakeland Regional Medical
Center), 5.250% 11/15/25 (WI) 11/06 at 102 Aaa 2,624,573
3,500,000 Sarasota County Utility System,
5.250%, 10/01/25 (WI) 10/06 at 102 Aaa 3,360,350
2,405,000 South Broward Hospital District,
7.500%, 5/01/08 5/03 at 102 Aaa 2,852,522
- ---------------------------------------------------------------------------------------------------------------------------
GEORGIA - 2.8%
1,000,000 Georgia Municipal Electric Authority,
6.500%, 1/01/26 1/04 at 102 Aaa 1,086,310
5,000,000 Albany Sewerage System, 6.625%, 7/01/17 7/02 at 102 Aaa 5,548,400
5,000,000 Appling County Development Authority
(Oglethorpe Power Corporation), 7.150%, 1/01/21 1/04 at 101 Aaa 5,718,350
1,000,000 Atlanta Board of Education, Certificates of
Participation, 7.125%, 6/01/12
(Pre-refunded to 6/01/00) 6/00 at 102 Aaa 1,130,410
2,250,000 Chatham County Hospital Authority
(Savannah Memorial Medical Center),
7.000%, 1/01/21 1/01 at 102 Aaa 2,513,115
Marietta Development Authority (Life College):
2,590,000 5.950%, 9/01/19 9/05 at 102 Aaa 2,755,113
3,770,000 6.250%, 9/01/25 9/05 at 102 Aaa 3,869,528
- ---------------------------------------------------------------------------------------------------------------------------
ILLINOIS - 16.3%
Illinois General Obligation:
3,065,000 6.100%, 2/01/19 2/05 at 102 Aaa 3,218,189
5,000,000 5.875%, 8/01/19 8/04 at 102 AA-- 5,054,100
5,545,000 6.100%, 2/01/20 2/05 at 102 Aaa 5,822,139
6,750,000 Illinois Health Facilities Authority
(Methodist Health Services), 8.000%, 8/01/15 2/99 at 103 Aaa 7,568,573
4,500,000 Illinois Health Facilities Authority
(The Children's Memorial Hospital),
5.000%, 8/15/22 8/03 at 102 Aaa 4,074,975
3,000,000 Illinois Health Facilities Authority
(The University of Chicago Hospitals),
6.125%, 8/15/24 8/04 at 102 Aaa 3,134,220
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
Illinois Health Facilities Authority (Ingalls Health
System):
$ 7,000,000 6.250%, 5/15/14 5/04 at 102 Aaa $ 7,402,500
2,100,000 7.000%, 1/01/19 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 2,355,675
4,500,000 6.250%, 5/15/24 5/04 at 102 Aaa 4,712,175
4,000,000 Illinois Health Facilities Authority
(Northwestern Medical Faculty
Foundation), 6.500%, 11/15/15 11/04 at 102 Aaa 4,377,360
Illinois Health Facilities Authority (Community
Provider Pooled Loan):
33,000 7.900%, 8/15/03 (Pre-refunded to 8/15/96) 8/96 at 102 Aaa 34,346
162,000 7.900%, 8/15/03 No Opt. Call Aaa 190,732
1,268,000 7.900%, 8/15/03 8/99 at 100 Aaa 1,297,912
5,000,000 Illinois Participations--Department of Central
Management Services--Public Aid,
5.650%, 7/01/17 7/06 at 102 Aaa 4,953,700
7,705,000 Illinois State Toll Highway Authority,
6.200%, 1/01/16 1/03 at 102 Aaa 8,119,221
1,910,000 Berwyn (MacNeal Memorial Hospital),
5.500%, 6/01/15 6/06 at 102 Aaa 1,866,605
2,500,000 Chicago General Obligation (Central Public
Library Project), 6.850%, 1/01/17
(Pre-refunded to 7/01/02) 7/02 at 101 1/2 Aaa 2,866,875
Chicago General Obligation:
5,000,000 6.250%, 1/01/12 1/02 at 102 Aaa 5,292,800
5,800,000 5.875%, 1/01/22 1/02 at 102 Aaa 5,846,516
1,500,000 Chicago Public Building Commission
(Community College District No. 508),
7.700%, 1/01/08 1/98 at 102 Aaa 1,657,335
23,300,000 Chicago Public Building Commission
(Board of Education), 5.750%, 12/01/18 12/03 at 102 Aaa 23,195,150
6,540,000 Cicero General Obligation, 6.400%, 12/01/14 12/04 at 102 Aaa 6,998,716
Cook County School District No. 25
(Arlington Heights), Certificates of Participation:
1,400,000 5.300%, 5/01/06 No Opt. Call Aaa 1,439,816
4,200,000 5.700%, 5/01/13 5/06 at 102 Aaa 4,245,948
2,500,000 Community College District No. 508, Cook County,
8.750%, 1/01/07 No Opt. Call Aaa 3,302,925
2,370,000 Eastern Illinois University, 6.375%, 4/01/16 4/04 at 102 Aaa 2,533,530
7,570,000 Franklin Park General Obligation, 5.500%, 7/01/22 7/04 at 102 Aaa 7,369,244
4,000,000 Regional Transportation Authority, General
Obligation, 5.850%, 6/01/23 6/03 at 102 Aaa 4,038,000
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<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>
INDIANA - 5.2%
Indiana Health Facilities Financing Authority
(Community Hospitals Project):
$ 5,000,000 6.400%, 5/01/12 5/02 at 102 Aaa $ 5,331,500
3,000,000 5.600%, 5/15/14 5/06 at 102 Aaa 2,971,020
Indiana Municipal Power Agency,
Power Supply System:
1,000,000 7.100%, 1/01/15 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 1,121,460
5,000,000 6.125%, 1/01/19 1/03 at 102 Aaa 5,168,250
3,750,000 Indianapolis Gas Utility System, 6.200%, 6/01/23 6/02 at 102 Aaa 3,915,600
5,350,000 Jasper County Pollution Control (Northern Indiana
Public Service Company), 7.100%, 7/01/17 7/01 at 102 Aaa 5,969,851
2,000,000 Lawrence Central High School Building
Corporation, First Mortgage,
7.250%, 7/01/08 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 2,274,620
3,300,000 Marion County Convention and Recreational
Facilities Authority, 7.000%, 6/01/21
(Pre-refunded to 6/01/01) 6/01 at 102 Aaa 3,771,009
2,250,000 Monroe County Hospital Authority (Bloomington
Hospital), 7.125%, 5/01/11 5/99 at 101 Aaa 2,440,395
1,000,000 Princeton Pollution Control (Public Service
Company of Indiana), 7.375%, 3/15/12 3/00 at 102 Aaa 1,119,730
2,000,000 St. Joseph County Hospital Authority (Memorial
Hospital of South Bend), 7.000%, 8/15/20 8/01 at 102 Aaa 2,225,180
2,190,000 Shelby County Jail Building Corporation, First
Mortgage, 6.500%, 7/15/09 7/02 at 102 Aaa 2,411,321
1,380,000 South Bend Community School Corporation,
Edison School Building Corporation, First
Mortgage, 6.650%, 1/15/14 7/00 at 100 Aaa 1,514,992
2,265,000 Southwest Allen Multi-School Building Corporation,
6.375%, 1/15/09 1/02 at 101 Aaa 2,419,043
- ---------------------------------------------------------------------------------------------------------------------------
KENTUCKY - 0.1%
1,000,000 Louisville and Jefferson County Metropolitan
Sewer District, 7.350%, 5/01/19
(Pre-refunded to 5/01/00) 5/00 at 102 Aaa 1,136,970
- ---------------------------------------------------------------------------------------------------------------------------
LOUISIANA - 2.9%
Louisiana General Obligation:
5,000,000 6.500%, 5/01/09 5/02 at 102 Aaa 5,519,400
2,000,000 6.500%, 5/01/12 5/02 at 102 Aaa 2,199,860
7,000,000 Louisiana Public Facilities Authority
(Southern Baptist Hospital),
6.800%, 5/15/12 (Pre-refunded to 5/15/02) 5/02 at 102 Aaa 8,018,850
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOUISIANA (CONTINUED)
$ 1,635,000 Louisiana Public Facilities Authority
(West Jefferson Medical Center), 7.900%, 12/01/15 12/98 at 102 Aaa $ 1,813,297
Tangipahoa Parish Hospital Service District No. 1:
4,750,000 6.250%, 2/01/24 2/04 at 102 Aaa 5,017,520
1,250,000 6.125%, 2/01/14 2/04 at 102 Aaa 1,315,413
- ---------------------------------------------------------------------------------------------------------------------------
MAINE - 2.1%
Maine Health and Higher Educational Facilities
Authority:
3,175,000 7.000%, 7/01/24 7/04 at 102 Aaa 3,616,230
11,500,000 5.875%, 7/01/25 7/05 at 102 Aaa 11,756,910
Old Orchard Beach General Obligation:
750,000 6.650%, 9/01/09 9/02 at 103 Aaa 842,145
500,000 6.650%, 9/01/10 9/02 at 103 Aaa 560,235
- ---------------------------------------------------------------------------------------------------------------------------
MARYLAND - 0.1%
1,000,000 Morgan State University, Academic and Auxiliary
Fees, 7.000%, 7/01/20 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,127,480
- ---------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS - 3.8%
1,250,000 Massachusetts Bay Transportation Authority,
Certificates of Participation, 7.650%, 8/01/15
(Pre-refunded to 8/01/00) 8/00 at 102 Aaa 1,444,238
2,000,000 Massachusetts Health and Educational Facilities
Authority (Capital Asset Program),
7.300%, 10/01/18 4/00 at 102 Aaa 2,224,760
3,400,000 Massachusetts Health and Educational Facilities
Authority (New England Medical Center),
6.625%, 7/01/25 7/02 at 102 Aaa 3,770,940
4,000,000 Massachusetts Health and Educational Facilities
Authority (South Shore Hospital),
6.500%, 7/01/22 7/02 at 102 Aaa 4,384,120
1,000,000 Massachusetts Health and Educational Facilities
Authority (Falmouth Hospital),
5.625%, 7/01/11 7/03 at 102 Aaa 1,015,890
2,800,000 Massachusetts Health and Educational Facilities
Authority (Lahey Clinic Medical Center),
5.625%, 7/01/15 7/03 at 102 Aaa 2,770,488
5,875,000 Massachusetts Health and Educational Facilities
Authority (Cape Cod Health System),
5.250%, 11/15/21 11/03 at 102 AAA 5,516,214
4,000,000 Massachusetts Health and Educational Facilities
Authority (Berkshire Health System),
6.000%, 10/01/19 10/05 at 102 Aaa 4,150,400
- ---------------------------------------------------------------------------------------------------------------------------
</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>
MASSACHUSETTS (CONTINUED)
$ 3,500,000 Boston City Hospital (FHA-Insured Mortgage),
7.625%, 2/15/21 (Pre-refunded to 8/15/00) 8/00 at 102 Aaa $ 3,997,980
1,150,000 Haverville General Obligation, 7.000%, 6/15/12 6/02 at 102 Aaa 1,295,291
- ---------------------------------------------------------------------------------------------------------------------------
MICHIGAN - 5.8%
2,400,000 Michigan State Hospital Finance Authority
(Henry Ford Health System), 5.750%, 9/01/17 9/02 at 102 Aaa 2,398,512
5,475,000 Michigan State Trunk Line, 5.500%, 10/01/21 10/02 at 100 Aaa 5,382,473
2,000,000 Michigan Strategic Fund (The Detroit Edison
Company), 6.875%, 12/01/21 12/01 at 102 Aaa 2,244,860
12,130,000 Bay City General Obligation, Unlimited Tax,
0.000%, 6/01/21 No Opt. Call Aaa 2,848,488
5,000,000 Caledonia Community Schools General
Obligation, 6.700%, 5/01/22
(Pre-refunded to 5/01/02) 5/02 at 102 Aaa 5,697,600
2,500,000 Chelsea School District, Counties of Washtenaw and
Jackson, General Obligation,
6.000%, 5/01/19 5/05 at 101 Aaa 2,595,175
2,000,000 Detroit Sewage Disposal System,
6.625%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 Aaa 2,253,500
6,905,000 Detroit Water Supply System, 5.500%, 7/01/25 7/05 at 101 Aaa 6,781,124
8,000,000 Livonia Public School District, General
Obligation, 5.500%, 5/01/21 5/03 at 102 Aaa 7,865,520
3,405,000 Oakland University, 5.750%, 5/15/26 5/05 at 102 Aaa 3,436,905
6,085,000 River Rouge School District, Unlimited Tax,
5.625%, 5/01/22 5/03 at 101 1/2 Aaa 6,059,686
- ---------------------------------------------------------------------------------------------------------------------------
MISSISSIPPI - 0.8%
6,400,000 Medical Center Educational Building Corporation
(University of Mississippi Medical Center Project),
5.900%, 12/01/23 12/04 at 102 Aaa 6,545,152
- ---------------------------------------------------------------------------------------------------------------------------
NEVADA - 0.8%
2,500,000 Churchill County (Western Health Network),
6.000%, 1/01/24 1/04 at 102 Aaa 2,587,075
2,000,000 Clark County Industrial Development (Nevada
Power Company), 7.200%, 10/01/22 10/02 at 102 Aaa 2,273,800
1,160,000 University of Nevada System, 7.125%, 7/01/16
(Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,313,584
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW HAMPSHIRE - 0.4%
$ 2,850,000 New Hampshire Higher Education and
Health Facilities Authority, University System
6.250%, 7/01/20 7/02 at 102 Aaa $ 3,019,518
- ---------------------------------------------------------------------------------------------------------------------------
NEW JERSEY - 0.4%
1,480,000 New Jersey Housing and Mortgage Finance Agency,
Home Mortgage Purchase, 8.100%, 10/01/07 4/98 at 103 Aaa 1,573,654
1,955,000 Pennsauken Township Housing Finance
Corporation, 8.000%, 4/01/11 4/05 at 100 Aaa 2,065,712
- ---------------------------------------------------------------------------------------------------------------------------
NEW MEXICO - 1.0%
3,000,000 Albuquerque Hospital System (Presbyterian
Healthcare Services), 6.600%, 8/01/07 8/97 at 102 Aaa 3,167,910
4,445,000 Farmington Pollution Control (Public Service
Company of New Mexico), 6.375%, 12/15/22 12/02 at 102 Aaa 4,777,842
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK - 12.2%
6,530,000 New York State Medical Care Facilities
Finance Agency, Mental Health Services,
Facilities Improvement, 5.900%, 8/15/22 8/02 at 102 Aaa 6,662,624
3,255,000 New York State Thruway Authority,
5.500%, 1/01/23 1/02 at 100 Aaa 3,189,900
3,000,000 Dormitory Authority of the State of New York
(City University), 5.750%, 7/01/18 No Opt. Call Aaa 3,113,220
8,375,000 Dormitory Authority of the State of New York
(Mount Sinai School of Medicine), 5.000%, 7/01/21 7/04 at 102 Aaa 7,800,140
Metropolitan Transportation Authority, Commuter
Facilities:
4,955,000 6.250%. 7/01/17 7/02 at 102 Aaa 5,273,706
5,000,000 6.375%, 7/01/18 7/04 at 101 1/2 Aaa 5,387,250
6,925,000 6.250%, 7/01/22 7/02 at 102 Aaa 7,332,121
New York City General Obligation:
5,715,000 6.625%, 8/01/12 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 Aaa 6,525,673
285,000 6.625%, 8/01/12 8/02 at 101 1/2 Aaa 315,344
3,010,000 6.000%, 5/15/16 5/03 at 101 1/2 Aaa 3,131,664
3,750,000 7.000%, 2/01/18 2/02 at 101 1/2 Aaa 4,197,750
6,795,000 New York City Health and Hospitals
Corporation, Health System, 5.750%, 2/15/22 2/03 at 102 Aaa 6,781,138
6,330,000 New York City Municipal Water Finance Authority,
6.750%, 6/15/16 6/01 at 101 Aaa 7,016,256
- ---------------------------------------------------------------------------------------------------------------------------
</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>
NEW YORK (CONTINUED)
New York City Municipal Water Finance
Authority, Water and Sewer System:
$ 4,155,000 6.750%, 6/15/14 (Pre-refunded to 6/15/99) 6/99 at 101 1/2 Aaa $ 4,562,855
2,025,000 6.750%, 6/15/14 6/99 at 101 1/2 Aaa 2,196,578
4,470,000 5.750%, 6/15/18 6/02 at 101 1/2 Aaa 4,509,157
1,000,000 New York City Transit Authority, Transit
Facilities (Livingston Plaza Project),
7.500%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 1,137,820
3,900,000 New York City Transit Authority, Transit Facilities,
5.400%, 1/01/18 No Opt. Call Aaa 3,872,505
New York City Industrial Development Agency,
Civic Facility (USTA National Tennis Center
Incorporated Project):
3,500,000 6.500%, 11/15/10 11/04 at 102 Aaa 3,884,685
3,000,000 6.600%, 11/15/11 11/04 at 102 Aaa 3,364,140
Triborough Bridge and Tunnel Authority,
Special Obligation:
5,240,000 6.875%, 1/01/15 1/01 at 102 Aaa 5,819,858
3,015,000 5.500%, 1/01/17 1/02 at 100 Aaa 2,961,574
- ---------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA - 0.4%
3,500,000 Randolph County Certificate of Participation,
5.300%, 6/01/15 6/05 at 102 Aaa 3,394,965
- ---------------------------------------------------------------------------------------------------------------------------
OHIO - 0.5%
1,000,000 Columbus City School District, General Obligation,
Unlimited Tax, 7.000%, 12/01/11 (Pre-refunded
to 12/01/00) 12/00 at 102 Aaa 1,136,820
2,500,000 Dublin City School District, General
Obligation, 6.200%, 12/01/19 12/02 at 102 Aaa 2,656,650
- ---------------------------------------------------------------------------------------------------------------------------
OKLAHOMA - 0.7%
5,000,000 Oklahoma Industries Authority (Baptist
Center-South Oklahoma City Hospital),
6.250%, 8/15/12 8/05 at 102 Aaa 5,383,950
375,000 Muskogee County Home Finance Authority,
Single Family Mortgage, 7.600%, 12/01/10 6/00 at 102 Aaa 397,718
- ---------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA - 3.1%
3,550,000 Berks County General Obligation,
5.850%, 11/15/18 11/05 at 100 Aaa 3,643,507
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN INSURED MUNICIPAL BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 5,000,000 Lehigh County General Purpose Authority
(St. Luke's Hospital of Bethlehem),
6.250%, 7/01/22 7/02 at 102 Aaa $ 5,290,500
3,000,000 North Pennsylvania Water Authority,
7.000%, 11/01/24 (Pre-refunded to 11/01/04) 11/04 at 101 Aaa 3,534,810
7,500,000 Philadelphia Water and Wastewater System,
5.500%, 6/15/14 6/03 at 102 Aaa 7,292,925
3,900,000 Philadelphia Municipal Authority, Justice
Lease, 7.125%, 11/15/18 (Pre-refunded to
11/15/01) 11/01 at 102 Aaa 4,517,799
1,000,000 Washington County Hospital Authority,
Hospital Refunding, 7.150%, 7/01/17 7/00 at 102 Aaa 1,107,460
- ---------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND - 2.7%
Rhode Island Depositors Economic
Protection Corporation, Special Obligation:
7,950,000 6.000%, 8/01/17 8/03 at 102 Aaa 8,188,739
2,250,000 6.625%, 8/01/19 (Pre-refunded to 8/01/02) 8/02 at 102 Aaa 2,564,078
2,500,000 Rhode Island Health and Educational
Building Corporation, Higher
Education, Auxiliary Enterprise,
5.250%, 9/15/23 9/03 at 102 Aaa 2,372,775
4,000,000 Cranston General Obligation, 7.200%, 7/15/11
(Pre-refunded to 7/15/01) 7/01 at 101 1/2 Aaa 4,603,320
3,130,000 Kent County Water Authority, 6.350%, 7/15/14 7/04 at 102 Aaa 3,372,669
1,000,000 Providence Housing Development Corporation,
FHA-Insured (Barbara Jordan Apartments),
6.650%, 7/01/15 7/04 at 102 Aaa 1,060,510
- ---------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA - 2.9%
1,000,000 Aiken Water and Sewer System, 7.250%, 1/01/14 1/00 at 102 Aaa 1,111,430
7,000,000 Berkeley County School District, Certificates of
Participation, 5.250%, 2/01/16 2/06 at 101 Aaa 6,703,690
Charleston County Public Facilities Corporation,
Certificates of Participation:
1,500,000 6.875%, 6/01/14 6/04 at 102 Aaa 1,702,125
2,500,000 7.000%, 6/01/19 6/04 at 102 Aaa 2,854,100
7,000,000 5.500%, 12/01/20 6/05 at 101 Aaa 6,828,430
Rock Hill Combined Utility System:
2,000,000 6.375%, 1/01/15 1/01 at 102 Aaa 2,123,800
2,000,000 7.000%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 2,235,880
- ---------------------------------------------------------------------------------------------------------------------------
</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>
SOUTH DAKOTA - 0.1%
$ 1,000,000 South Dakota Health and Educational Facilities
Authority (McKennan Hospital), 7.250%, 7/01/15 7/00 at 102 Aaa $ 1,112,170
- --------------------------------------------------------------------------------------------------------------------
TENNESSEE - 0.1%
1,000,000 White House Utility District of Robertson and
Sumner Counties, 6.375%, 1/01/22 1/02 at 102 Aaa 1,073,510
- --------------------------------------------------------------------------------------------------------------------
TEXAS - 4.8%
6,080,000 Texas Health Facilities Development Corporation
(All Saints Episcopal Hospitals of Fort Worth),
6.250%, 8/15/22 8/03 at 102 Aaa 6,475,018
655,000 Texas Housing Agency, Single Family Mortgage,
7.875%, 9/01/17 9/96 at 102 Aa 673,340
10,000,000 Texas Turnpike Authority, 5.250%, 1/01/23 1/06 at 102 Aaa 9,509,500
3,000,000 Bexar County Health Facilities Development
Corporation (Baptist Memorial Hospital
System Project), 6.750%, 8/15/19 8/04 at 102 Aaa 3,379,170
5,000,000 Bexar Metropolitan Water District,
5.000%, 5/01/19 (Pre-refunded to 5/01/15) 5/15 at 100 Aaa 4,711,350
4,575,000 Harris County Toll Road, Senior Lien,
6.500%, 8/15/17 (Pre-refunded to 8/15/02) 8/02 at 102 Aaa 5,184,756
1,000,000 Harris County Hospital District, 7.400%, 2/15/10 No Opt. Call Aaa 1,228,250
500,000 Houston Hotel Occupancy Tax and Parking Facilities,
7.000%, 7/01/15 (Pre-refunded to 7/01/01) 7/01 at 100 Aaa 564,260
825,000 Lower Colorado River Authority, Priority Refunding,
7.000%, 1/01/11 1/01 at 102 Aaa 921,476
1,250,000 Sabine River Authority of Texas, Pollution Control
(Texas Utilities Electric Company),
5.550%, 5/01/22 11/03 at 102 Aaa 1,215,450
5,000,000 Tarrant County Health Facilities Development
Corporation (Fort Worth Osteopathic Hospital),
6.000%, 5/15/21 No Opt. Call Aaa 5,349,000
- --------------------------------------------------------------------------------------------------------------------
UTAH - 1.4%
280,000 Utah Housing Finance Agency, Single Family
Mortgage, 8.375%, 7/01/19 1/09 at 100 AA 293,840
4,500,000 Utah State Building Ownership Authority,
5.750%, 5/15/18 11/05 at 100 Aaa 4,541,220
Provo City Energy System:
2,300,000 5.500%, 11/15/11 5/03 at 102 Aaa 2,325,461
500,000 5.750%, 5/15/14 5/03 at 102 Aaa 507,990
3,500,000 White City Water System, 6.600%, 2/01/25 2/05 at 100 Aaa 3,834,285
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN INSURED MUNICIPAL BOND FUND-CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
VIRGINIA - 0.5%
$ 3,000,000 Loudoun County Industrial Development
Authority (Loudoun Hospital Centre),
5.800%, 6/01/26 6/05 at 102 Aaa $ 3,058,080
1,050,000 Roanoke County Water System,
6.000%, 7/01/31 (Pre-refunded to 7/01/01) 7/01 at 100 Aaa 1,135,313
- -------------------------------------------------------------------------------------------------------------
WASHINGTON - 2.3%
6,500,000 Washington Public Power Supply System,
Nuclear Project No. 1, 5.700%, 7/01/17 7/03 at 102 Aaa 6,495,450
5,000,000 Washington Public Power Supply System,
Nuclear Project No. 2, 5.400%, 7/01/05 No Opt. Call Aaa 5,234,800
2,500,000 Washington Public Power Supply System,
Nuclear Project No. 3, 7.250%, 7/01/16
(Pre-refunded to 7/01/99) 7/99 at 102 Aaa 2,792,700
1,500,000 Marysville Water and Sewer System,
7.000%, 12/01/11 (Pre-refunded to 12/01/03) 12/03 at 100 Aaa 1,745,220
2,000,000 Whatcom County School District No. 501,
General Obligation, 6.125%, 12/01/13 12/04 at 100 Aaa 2,100,620
- -------------------------------------------------------------------------------------------------------------
WEST VIRGINIA - 0.1%
1,000,000 West Virginia School Building Authority,
Capital Improvement, 7.250%, 7/01/15
(Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,137,310
- -------------------------------------------------------------------------------------------------------------
WISCONSIN - 1.5%
7,020,000 Wisconsin Health and Educational Facilities
Authority (Sisters of the Sorrowful
Mother-Ministry Corporation), 6.125%, 8/15/22 2/03 at 102 Aaa 7,299,256
1,000,000 Wisconsin Municipal Insurance Commission,
8.700%, 4/01/07 4/97 at 102 Aaa 1,066,960
2,000,000 Superior Limited Obligation (Detroit Edison
Company), 6.900%, 8/01/21 No Opt. Call Aaa 2,394,800
1,000,000 Three Lakes School District, General Obligation,
6.750%, 4/01/12 (Pre-refunded to 4/01/03) 4/03 at 100 Aaa 1,136,520
- -------------------------------------------------------------------------------------------------------------
WYOMING - 0.3%
2,000,000 University of Wyoming Facilities, 7.100%, 6/01/10 6/00 at 101 Aaa 2,211,210
- -------------------------------------------------------------------------------------------------------------
PUERTO RICO - 0.5%
3,750,000 Commonwealth of Puerto Rico, General Obligation,
6.600%, 7/01/13 (Pre-refunded to 7/01/02) 7/02 at 101 1/2 Aaa 4,266,788
- -------------------------------------------------------------------------------------------------------------
$777,888,000 Total Investments - (Cost $750,787,594) - 99.1% 807,091,061
- -------------------------------------------------------------------------------------------------------------
</TABLE>\
34
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 0.5%
$ 1,700,000 Chicago O'Hare International Airport (American
Airlines), Variable Rate Demand Bonds,
3.450%, 12/01/17+ P-1 $ 1,700,000
2,300,000 Massachusetts Dedicated Income Tax, Variable
Rate Demand Bonds, 3.350%, 12/01/97+ VMIG-1 2,300,000
- -------------------------------------------------------------------------------------------------------------
$ 4,000,000 Total Temporary Investments - 0.5% 4,000,000
============-------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.4% 2,958,926
- -------------------------------------------------------------------------------------------------------------
Net Assets - 100% $814,049,987
=============================================================================================================
</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 210 $801,069,781 99%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 3 6,021,280 1
PORTFOLIO OF
INVESTMENTS
(EXCLUDING
TEMPORARY
INVESTMENTS):
- -------------------------------------------------------------------------------------------------------------
TOTAL 213 $807,091,061 100%
=============================================================================================================
</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 of a specified market index.
See accompanying notes to financial statements.
35
<PAGE>
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $2,835,978,201 $807,091,061
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 31,600,000 4,000,000
Cash 197,730 1,249,406
Receivables:
Interest 42,085,690 10,123,776
Shares sold 328,101 290,007
Investments sold 28,152,000 5,000
Other assets 113,742 35,592
-------------- ------------
Total assets 2,938,455,464 822,794,842
-------------- ------------
LIABILITIES
Payables:
Investments purchased 8,595,574 6,032,048
Shares reacquired 406,847 5,000
Accrued expenses:
Management fees (note 7) 1,054,674 311,384
Other 594,408 151,138
Dividends payable 10,158,654 2,245,285
-------------- ------------
Total liabilities 20,810,157 8,744,855
-------------- ------------
Net assets (note 8) $2,917,645,307 $814,049,987
============== ============
Class A Shares (note 1)
Net assets $ 37,089,044 $ 46,942,915
============== ============
Shares outstanding 3,998,797 4,279,685
============== ============
Net asset value and redemption price per share $ 9.28 $ 10.97
============== ============
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 9.72 $ 11.49
============== ============
Class C Shares (note 1)
Net assets $ 1,915,296 $ 5,150,609
============== ============
Shares outstanding 206,744 474,546
============== ============
Net asset value, offering and redemption price per share $ 9.26 $ 10.85
============== ============
Class R Shares (note 1)
Net assets $2,878,640,967 $761,956,463
============== ============
Shares outstanding 310,263,529 69,753,639
============== ============
Net asset value and redemption price per share $ 9.28 $ 10.92
============== ============
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
STATEMENT OF OPERATIONS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
Year ended February 29, 1996 FEBRUARY 29, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- -------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $173,591,010 $47,026,810
------------ -----------
Expenses (note 2):
Management fees (note 7) 12,801,685 3,758,096
12b-1 distribution and service fees (note 1) 43,166 126,369
Shareholders' servicing agent fees and expenses 2,425,718 691,770
Custodians' fees and expenses 313,243 144,251
Directors'/Trustees' fees and expenses (note 7) 27,187 10,438
Professional fees 115,740 67,222
Shareholders reports-printing and mailing expenses 623,740 155,664
Federal and state registration fees 166,260 113,549
Portfolio insurance expenses -- 1,915
Other expenses 166,738 44,998
------------ -----------
Total expenses before expense reimbursement 16,683,477 5,114,272
Expense reimbursement from investment adviser (note 7) (4,313) (1,303)
------------ -----------
Net expenses 16,679,164 5,112,969
------------ -----------
Net investment income 156,911,846 41,913,841
------------ -----------
REALIZED AND UNREALIZED GAIN
FROM INVESTMENTS
Net realized gain from investment transactions, net of taxes,
if applicable (notes 1 and 5) 10,618,706 4,402,500
Net change in unrealized appreciation or depreciation of
investments 84,862,109 36,885,934
------------ -----------
Net gain from investments 95,480,815 41,288,434
------------ -----------
Net increase in net assets from operations $252,392,661 $83,202,275
------------ -----------
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
MUNI BOND INS. MUNI BOND
- ---------------------------------------------------------------------------------------------------------------------------
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 $ 156,911,846 $ 152,460,727 $ 41,913,841 $ 40,930,291
Net realized gain (loss) from investment transactions, net
of taxes, if applicable 10,618,706 9,508,194 4,402,500 (1,781,054)
Net change in unrealized appreciation or depreciation of
investments 84,862,109 (67,140,015) 36,885,934 (25,968,067)
-------------- -------------- ------------- -------------
Net increase in net assets from operations 252,392,661 94,828,906 83,202,275 13,181,170
-------------- -------------- ------------- -------------
DISTRIBUTION TO SHAREHOLDERS (note 1)
From undistributed net invest income:
Class A (707,943) N/A (1,614,782) (204,455)
Class C (30,677) N/A (192,149) (45,156)
Class R (157,137,272) (151,297,051) (40,071,660) (41,157,453)
From accumulated net realized gains from investment
transactions:
Class A (63,661) N/A - (6,709)
Class C (3,523) N/A - (1,121)
Class R (8,354,729) (22,411,997) - (1,157,602)
-------------- -------------- ------------- -------------
Decrease in net assets from distributions to shareholders (166,297,805) (173,709,048) (41,878,591) (42,572,496)
-------------- -------------- ------------- -------------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 93,033,904 N/A 108,423,277 15,273,227
Class C 1,925,249 N/A 7,075,313 4,686,336
Class R 397,491,029 469,226,165 143,237,499 158,370,453
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 453,018 N/A 951,544 105,479
Class C 19,887 N/A 161,275 25,888
Class R 123,742,206 141,568,061 26,577,682 28,508,956
-------------- -------------- ------------- -------------
616,665,293 610,794,226 286,426,590 206,970,339
-------------- -------------- ------------- -------------
Cost of shares redeemed:
Class A (56,994,434) N/A (78,678,465) (1,930,617)
Class C (40,390) N/A (6,281,962) (893,066)
Class R (469,258,117) (490,742,684) (183,518,067) (165,891,052)
-------------- -------------- ------------- -------------
(526,292,941) (490,742,684) (268,478,494) (168,714,735)
-------------- -------------- ------------- -------------
Net increase in net assets derived from Fund share
transactions 90,372,352 120,051,542 17,948,096 38,255,604
-------------- -------------- ------------- -------------
Net increase in net assets 176,467,208 41,171,400 59,271,780 8,864,278
Net assets at the beginning of year 2,741,178,099 2,700,006,699 754,778,207 745,913,929
-------------- -------------- ------------- -------------
Net assets at the end of year $2,917,645,307 $2,741,178,099 $ 814,049,987 $ 754,778,207
============== ============== ============= =============
Balance of undistributed net investment income at end of year $ 1,169,597 $ 2,133,643 $ 225,040 $ 189,790
============== ============== ============= =============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - Muni Bond was not authorized to issue Class "A" Shares or Class "C" Shares
before June 13, 1995.
See accompanying notes to financial statements.
38
<PAGE>
NOTES TO FINANCIAL STATEMENTS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
1. GENERAL INFORMATION AND SIGNIFICANT
ACCOUNTING POLICIES
At February 29, 1996, the nationally diversified Funds covered in this report
(the "Funds") are Nuveen Municipal Bond Fund and Nuveen Insured Tax-Free Bond
Fund, Inc. (comprising the Nuveen Insured Municipal Bond Fund). Each Fund
invests primarily in a diversified portfolio of municipal obligations issued by
state and local government authorities.
Municipal Bond was originally incorporated in Maryland on October 8, 1976 and
reorganized as a Massachusetts Business Trust at the close of business on June
12, 1995. Insured Municipal Bond was incorporated in Minnesota on July 11, 1986.
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/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.
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 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, Insured Municipal Bond had purchase commitments of
$6,032,048. Municipal Bond had no such purchase commitments.
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
Federal 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 income tax, 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
Insured Municipal Bond invests 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 Fund's shares. Original Issued 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 Fund ultimately disposes 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
40
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
while the municipal securities are held by the Fund. Accordingly, neither the
prices used in determining the market value of the underlying municipal
securities nor the net asset value of the Fund's shares include value, if any,
attributable to the Portfolio Insurance. Each policy of the Portfolio Insurance
does, however, give the Fund 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, for Insured Municipal Bond and June 13, 1995, for
Municipal Bond, both Funds 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, for both Funds, 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" Shares and Class "C" Shares, the shares
outstanding for both Funds 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 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.
41
<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 during the
year ended February 29, 1996, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- --------------------------------------------------------------------------------
<S> <C> <C>
12b-1 distribution and service fees:
Class A $ 36,112 $ 82,071
Class C 7,054 44,298
Shareholders' servicing agent fees and expenses:
Class A 729 18,022
Class C 82 1,093
Class R 914,407 247,643
Shareholders' reports--printing and mailing expenses:
Class A 1,275 1,019
Class C 119 66
Class R 374,135 123,497
Federal and state registration fees:
Class A 2,483 3,958
Class C 276 1,109
Class R 89,323 23,054
Professional fees--Class R 46,688 --
- --------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
3. FUND SHARES
Transactions in shares were as follows:
- ---------------------------------------------------------------------------------------------------------------------------
MUNI BOND INS. MUNI BOND
- ---------------------------------------------------------------------------------------------------------------------------
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 10,085,967 N/A 10,080,588 1,538,119
Class C 208,938 N/A 661,711 474,253
Class R 43,438,989 52,970,376 13,451,112 15,709,700
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 48,593 N/A 88,109 10,686
Class C 2,138 N/A 15,241 2,644
Class R 13,470,516 15,973,465 2,491,979 2,822,384
----------- ----------- ----------- -----------
67,255,141 68,943,841 26,788,740 20,557,786
----------- ----------- ----------- -----------
Shares redeemed:
Class A (6,135,763) N/A (7,244,524) (193,293)
Class C (4,332) N/A (588,441) (90,862)
Class R (51,218,535) (55,355,782) (17,181,722) (16,561,539)
----------- ----------- ----------- -----------
(57,358,630) (55,355,782) (25,014,687) (16,845,694)
----------- ----------- ----------- -----------
Net increase 9,896,511 13,588,059 1,774,053 3,712,092
=========== =========== =========== ===========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - Muni Bond was not authorized to issue Class "A" Shares or Class "C" Shares
before June 13, 1995.
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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>
- ----------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- ----------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $.0395 $.0445
Class C .0340 .0375
Class R .0415 .0465
===== =====
- ----------------------------------------------------------------
</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>
- ----------------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- ----------------------------------------------------------------------
<S> <C> <C>
PURCHASES
Investments in municipal securities $517,451,834 $227,340,258
Temporary municipal investments 602,095,000 291,525,000
SALES
Investments in municipal securities 475,094,406 208,113,881
Temporary municipal investments 573,195,000 287,525,000
=========== ===========
- ----------------------------------------------------------------------
</TABLE>
At February 29, 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.
44
<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 follow:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- -------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized: $171,847,948 $57,249,197
Appreciation (4,264,834) (945,730)
Depreciation ------------ -----------
Net unrealized appreciation $167,583,114 $56,303,467
============ ===========
-----------------------------------------------------------------------
</TABLE>
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:
- ----------------------------------------------------------------------
Average daily net asset value Management fee
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
For the first $125,000,000 .5 of 1%
For the next $125,000,000 .4875 of 1
For the next $250,000,000 .475 of 1
For the next $500,000,000 .4625 of 1
For the next $1,000,000,000 .45 of 1
For net assets over $2,000,000,000 .425 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 expense 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, if applicable, and to the extent permitted, extraordinary expenses) in any
fiscal year from exceeding .75 of 1% of the average daily net asset value of
Municipal Bond and .975 of 1% of the average daily net asset value of Insured
Municipal Bond. 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.
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Funds pay no
compensation directly to their directors/trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Funds from the Adviser.
8. COMPOSITION OF NET ASSETS
At February 29, 1996, the Funds had common stock authorized of $.10 par value
per share for Municipal Bond and $.01 par value per share for Insured Municipal
Bond. The composition of net assets as well as the number of authorized shares
is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
MUNI INS. MUNI
BOND BOND
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $2,744,976,758 $754,899,010
Balance of undistributed net investment income 1,169,597 225,040
Accumulated net realized gain from investment transactions 3,915,838 2,622,470
Net unrealized appreciation of investments 167,583,114 56,303,467
-------------- ------------
Net assets $2,917,645,307 $814,049,987
============== ============
Authorized Shares:
Class A Unlimited 340,000,000
Class C Unlimited 460,000,000
Class R Unlimited 200,000,000
============== ============
- ------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
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>
- ----------------------------------------------
MUNI INS. MUNI
BOND BOND
- ----------------------------------------------
<S> <C> <C>
Revenue Bonds:
Electric Utilities 21% 6%
Health Care Facilities 16 20
Housing Facilities 14 1
Water/Sewer Facilities 8 8
Lease Rental Facilities 2 8
Educational Facilities 1 7
Transportation 6 5
Pollution Control 5 4
Other 8 6
General Obligation Bonds 6 19
Escrowed Bonds 13 16
- ----------------------------------------------
100% 100%
- ----------------------------------------------
</TABLE>
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 (30% for Municipal Bond and 100% for Insured Municipal
Bond). 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.
47
<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
- --------------------------------------------------------------------------------------------------------------------------------
MUNI BOND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
6/13/95 to
2/29/96 $9.150 $.340+ $ .141 $(.324) $(.027) $9.280
CLASS C
6/13/95 to
2/29/96 9.150 .290+ .126 (.279) (.027) 9.260
CLASS R
Year ended
2/29/96 9.000 .506 .313 (.512) (.027) 9.280
Year ended 2/28,
1995 9.280 .515 (.209) (.511) (.075) 9.000
1994 9.450 .519 (.075) (.516) (.098) 9.280
1993 9.080 .555 .414 (.544) (.055) 9.450
5 mos. ended
2/29/92 9.040 .239 .080 (.239) (.040) 9.080
Year ended 9/30,
1991 8.650 .579 .438 (.589) (.038) 9.040
1990 8.730 .596 (.080) (.596) - 8.650
1989 8.520 .597 .239 (.597) (.029) 8.730
1988 8.020 .596 .536 (.596) (.036) 8.520
1987 8.780 .598 (.614) (.598) (.146) 8.020
1986 7.830 .595 1.162 (.595) (.212) 8.780
1985 7.180 .586 .650 (.586) - 7.830
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 50.
48
<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>
5.33% $ 37,089 .86%* 5.11%* .83%* 5.14%* 17%
4.59 1,915 1.64* 4.33* 1.58* 4.39* 17
9.31 2,878,641 .59 5.53 .59 5.53 17
3.60 2,741,178 .59 5.79 .59 5.79 17
4.79 2,700,007 .62 5.49 .62 5.49 15
11.04 2,371,669 .61 5.95 .61 5.95 14
3.56 1,835,708 .62* 6.24* .62* 6.24* 6
12.15 1,661,420 .60 6.48 .60 6.48 10
6.04 1,323,623 .62 6.78 .62 6.78 8
10.07 1,119,833 .64 6.85 .64 6.85 12
14.50 945,361 .65 7.11 .65 7.11 8
(.39) 764,092 .68 6.85 .68 6.85 16
23.02 668,416 .71 6.95 .71 6.95 39
17.73 459,627 .73 7.68 .73 7.68 28
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<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
- --------------------------------------------------------------------------------------------------------------------------------
INS. MUNI BOND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Year ended
2/29/96 $10.400 $.542+ $ .568 $(.540) $ - $10.970
9/6/94 to
2/28/95 10.310 .264+ .115 (.273) (.016) 10.400
CLASS C
Year ended
2/29/96 10.310 .461 .540 (.461) - 10.850
9/7/94 to
2/28/95 10.290 .227+ .075 (.266) (.016) 10.310
CLASS R
Year ended
2/29/96 10.380 .570 .540 (.570) - 10.920
Year ended 2/28,
1995 10.810 .573 (.407) (.580) (.016) 10.380
1994 10.850 .574 (.012) (.565) (.061) 10.810
1993 10.030 .591 .880 (.589) (.062) 10.850
Year ended
2/29/92 9.690 .612 .425 (.617) (.080) 10.030
Year ended 2/28,
1991 9.520 .617 .198 (.611) (.034) 9.690
1990 9.350 .627 .262 (.630) (.089) 9.520
1989 9.300 .629 .050 (.629) - 9.350
Year ended
2/29/88 9.790 .637+ (.490) (.637) - 9.300
12/10/86 to
2/28/87 9.600 .127+ .190 (.127) - 9.790
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Net of taxes, if applicable (see note 1).
+ Reflects the waiver of certain management fees or reimbursement of certain
other expenses by the Adviser, if applicable (see note 7).
++ 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.
50
<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>
10.90% $ 46,943 .92% 5.00% .91% 5.01% 27%
3.84 14,097 1.27* 5.28* 1.00* 5.55* 25
9.88 5,151 1.63 4.34 1.63 4.34 27
3.09 3,979 1.75* 4.83* 1.75* 4.83* 25
10.94 761,956 .63 5.33 .63 5.33 27
1.85 736,702 .64 5.67 .64 5.67 25
5.47 745,914 .65 5.21 .65 5.21 11
15.24 567,232 .72 5.68 .72 5.68 20
11.03 306,853 .73 6.12 .73 6.12 45
8.94 178,931 .80 6.45 .80 6.45 53
9.73 111,806 .83 6.49 .83 6.49 78
7.63 66,049 .87 6.83 .87 6.83 106
2.00 41,330 .88 6.65 .60 6.93+ 88
3.31 13,160 3.50* .50* - 4.00* -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors, Trustees and Shareholders of
Nuveen Municipal Bond Fund
Nuveen Insured Tax-Free Bond Fund, Inc.:
We have audited the accompanying statements of net assets of NUVEEN MUNICIPAL
BOND FUND (a Massachusetts Business Trust), and NUVEEN INSURED TAX-FREE BOND
FUND, INC. (comprising the Nuveen Insured Municipal Bond Fund) (a Minnesota
corporation), 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 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
February 29, 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 Nuveen Municipal Bond Fund 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
52
<PAGE>
[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
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
<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:
<TABLE>
<C> <S> <C>
Portfolio of Investments
Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Report of Independent Public Accountants
(b) Exhibits:
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(a). Specimen certificates of Class A Shares of each Fund.*
4(b). Specimen certificates of Class B Shares of each Fund.*
4(c). Specimen certificates of Class C Shares of each Fund.*
4(d). Specimen certificates of Class R Shares of each Fund.*
5. Form of Management Agreement between Registrant and Nuveen Ad-
visory Corp.
6. Form of Distribution Agreement between Registrant and John
Nuveen & Co. Incorporated.
7. Not applicable.
8. Form of Custodian Agreement among Registrant, Nuveen Advisory
Corp. and Chase Manhattan Bank, N.A.
9(a). Form of Transfer Agency and Service Agreement between Regis-
trant 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 Accoun-
tants.
11(b). Consent of Deloitte & Touche LLP, Independent Public Accoun-
tants.*
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 others, James J. Wesolowski and Gifford R. Zimmerman to
execute the Registration Statement.
99(b). Certified copy of Resolution of Board of Trustees authorizing
the signing of the names of trustees and officers on the Reg-
istrant's Registration Statement pursuant to power of attor-
ney.
</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 Municipal Bond Fund
<S> <C>
Class A Shares............................................ 5,545
Class B Shares............................................ 0
Class C Shares............................................ 229
Class R Shares............................................ 87,407
Nuveen Insured Municipal Bond Fund
Class A Shares............................................ 4,083
Class B Shares............................................ 0
Class C Shares............................................ 229
Class R Shares............................................ 23,957
Nuveen Flagship All-American Municipal Bond Fund
Class A Shares............................................ 3,883
Class B Shares............................................ 0
Class C Shares............................................ 818
Class R Shares............................................ 0
Nuveen Flagship Intermediate Municipal Bond Fund
Class A Shares............................................ 1,077
Class C Shares............................................ 33
Class R Shares............................................ 0
Nuveen Flagship Limited Term Municipal Bond Fund
Class A Shares............................................ 10,594
Class C Shares............................................ 169
Class R Shares............................................ 0
</TABLE>
ITEM 27: INDEMNIFICATION
Section 4 of Article XII of Registrant's Amended and Restated Declaration of
Trust provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being or
having been such a Trustee, director, officer, employee or agent and against
amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office;
(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
C-2
<PAGE>
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Covered Person may now or hereafter be entitled,
shall continue as to a person who has ceased to be such a Covered Person and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
----------------
The trustees and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
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.,
C-3
<PAGE>
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.
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
C-4
<PAGE>
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
Richard P. Davis Vice President None
One South Main Street
Dayton, OH 45402
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President None
333 West Wacker Drive
Chicago, IL 60606
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
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>
Larry W. Martin Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Assistant Secretary
Chicago, IL 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
O. Walter Renfftlen Vice President Vice President and
333 West Wacker Drive and Controller Controller
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Assistant Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
ITEM 30: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 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-6
<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 MUNICIPAL TRUST
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ O. Walter Renfftlen
-------------------------------
O. Walter Renfftlen Vice President and January 10, 1997
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Trustee (Principal /s/ Gifford R. Zimmerman
Executive Officer) By____________________________
Anthony T. Dean President and Trustee Gifford R. Zimmerman
Lawrence H. Brown Trustee Attorney-in-Fact
Anne E. Impellizzeri Trustee
Margaret K. Rosenheim Trustee January 10, 1997
Peter R. Sawers 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 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 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 1(a)
DECLARATION OF TRUST
OF
NUVEEN FLAGSHIP MUNICIPAL TRUST
DECLARATION OF TRUST made as of this 1st day of July, 1996 by the Trustees
hereunder.
WHEREAS, the Trustees desire to establish a trust fund for the purposes of
carrying on the business of a management investment company; and
WHEREAS, in furtherance of such purpose, the Trustees and any successor
Trustees elected in accordance with Article V hereof are acquiring and may
hereafter acquire assets and properties which they will hold and manage as
trustees of a Massachusetts business trust with transferable shares in
accordance with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees and any successor Trustees elected or
appointed in accordance with Article V hereof hereby declare that they will hold
all cash, securities and other assets and properties, which they may from time
to time acquire in any manner as Trustees hereunder, IN TRUST, and that they
will manage and dispose of the same upon the following terms and conditions for
the benefit of the holders from time to time of shares of beneficial interest in
this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1. Name. This Trust shall be known as the "Nuveen Flagship
Municipal Trust" and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:
<PAGE>
-2-
(a) The "Trust" refers to the Massachusetts voluntary association
established by this Declaration of Trust, as amended from time to time;
(b) "Trustee" or "Trustees" refers to each signatory to this
Declaration of Trust so long as such signatory shall continue in office in
accordance with the terms hereof, and all other individuals who at the time
in question have been duly elected or appointed and qualified in accordance
with Article V hereof and are then in office;
(c) "Shares" mean the shares of beneficial interest described in
Article IV hereof and include fractions of Shares as well as whole Shares;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 (and
any successor statute) and the Rules and Regulations thereunder, all as
amended from time to time;
(f) The terms "Commission," "Interested Person," "Principal
Underwriter" and "vote of a majority of the outstanding voting securities"
shall have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" or "Declaration" shall mean this
Declaration of Trust as amended or restated from time to time; and
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time.
ARTICLE II
NATURE AND PURPOSE OF TRUST
The Trust is a voluntary association with transferable shares (commonly
known as a business trust) of the type referred to in Chapter 182 of the General
Laws of the Commonwealth of Massachusetts. The Trust is not intended to be,
shall not be deemed to be, and shall not be treated as, a general or a limited
partnership, joint venture, corporation or joint stock company, nor shall the
Trustees or Shareholders or any of them for any purpose be deemed to be, or be
treated in any way whatsoever as though they were, liable or responsible
hereunder as
<PAGE>
-3-
partners or joint venturers. The purpose of the Trust is to engage in, operate
and carry on the business of an open-end management investment company and to do
any and all acts or things as are necessary, convenient, appropriate, incidental
or customary in connection therewith.
The Trust set forth in this instrument shall be deemed made in the
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a business trust, and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust. No provision of this Declaration shall be
effective to require a waiver of compliance with any provision of the Securities
Act of 1933, as amended, or the 1940 Act, or of any valid rule, regulation or
order of the Commission thereunder.
ARTICLE III
REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS
The name of the registered agent of the Trust is CT Corporation System at 2
Oliver Street, Boston, Massachusetts. The principal place of business of the
Trust is 333 West Wacker Drive, Chicago, Illinois 60606. The Trustees may,
without the approval of Shareholders, change the registered agent of the Trust
and the principal place of business of the Trust.
ARTICLE IV
BENEFICIAL INTEREST
Section 1. Shares of Beneficial Interest. The beneficial interest in the
Trust shall be divided into such transferable Shares of beneficial interest, of
such series or classes, and of such designations and par values (if any) and
with such rights, preferences, privileges and restrictions as shall be
determined by the Trustees in their sole discretion, without Shareholder
approval, from time to time and shall initially consist of one class of
transferable shares, par value $.01 per share. The number of Shares is unlimited
and each Share shall be fully paid and nonassessable. The Trustees shall have
full power and authority, in their sole discretion and without obtaining any
prior authorization or vote of the Shareholders of the Trust or of the
Shareholders of any series or class of Shares, to
<PAGE>
-4-
create and establish (and to change in any manner) Shares or any series or
classes thereof with such preferences, voting powers, rights and privileges as
the Trustees may from time to time determine; to divide or combine the Shares or
the Shares of any series or classes thereof into a greater or lesser number; to
classify or reclassify any issued Shares into one or more series or classes of
Shares; to abolish any one or more series or classes of Shares; and to take such
other action with respect to the Shares as the Trustees may deem desirable.
Except as may be specifically set forth in Section 2 of this Article IV or in an
instrument establishing and designating classes or series of Shares, the Shares
shall have the powers, preferences, rights, qualifications, limitations and
restrictions described below:
(i) In the event of the termination of the Trust the holders of the
Shares shall be entitled to receive pro rata the net distributable assets
of the Trust.
(ii) Each holder of Shares shall be entitled to one vote for each
Share held on each matter submitted to a vote of Shareholders, and the
holders of outstanding Shares shall vote together as a single class.
(iii) Dividends or other distributions to Shareholders, when, as and
if declared or made by the Trustees, shall be shared equally by the holders
of Shares on a share for share basis, such dividends or other distributions
or any portion thereof to be paid in cash or to be reinvested in full and
fractional Shares of the Trust as the Trustees shall direct.
(iv) Any Shares purchased, redeemed or otherwise reacquired by the
Trust shall be retired automatically and such retired Shares shall have the
status of authorized but unissued Shares.
(v) Shares may be issued from time to time, without the vote of the
Shareholders (or, if the Trustees in their sole discretion deem advisable,
with a vote of Shareholders), either for cash or for such other
consideration (which may be in any one or more instances a certain
specified consideration or certain specified considerations) and on such
terms as the Trustees, from time to time, may deem advisable, and the Trust
may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities).
<PAGE>
-5-
(vi) The Trust may issue Shares in fractional denominations to the
same extent as its whole Shares, and Shares in fractional denominations
shall be Shares having proportionately to the respective fractions
represented thereby all the rights of whole Shares, including, without
limitation, the right to vote, the right to receive dividends and
distributions and the right to participate upon termination of the Trust.
The Trustees may from time to time, without the vote of Shareholders,
divide or combine Shares into a greater or lesser number without thereby
changing their proportionate beneficial interest in the Trust.
Section 2. Establishment of Series and Classes of Shares.
(a) Series. The Trustees, in their sole discretion, without obtaining any
prior authorization or vote of the Shareholders of the Trust or of the
Shareholders of any series or class of Shares, from time to time may authorize
the division of Shares into two or more series, the number and relative rights,
privileges and preferences of which shall be established and designated by the
Trustees, in their discretion, upon and subject to the following provisions:
(i) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
series as to purchase price, right of redemption, and the price, terms and
manner or redemption, and special and relative rights as to dividends and on
liquidation.
(ii) The number of authorized Shares and the number of Shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(iii) The power of the Trustees to invest and reinvest the assets of
the Trust allocated or belonging to any particular series shall be governed by
Section 1, Article VI hereof unless otherwise provided in the instrument of the
Trustees establishing such series which is hereinafter described.
<PAGE>
-6-
(iv) Each Share of a series shall represent a beneficial interest in
the net assets allocated or belonging to such series only, and such interest
shall not extend to the assets of the Trust generally. Dividends and
distributions on Shares of a particular series may be paid with such frequency
as the Trustees may determine, which may be monthly or otherwise, pursuant to a
standing vote or votes adopted only once or with such frequency as the Trustees
may determine, to the Shareholders of that series only, from such of the income
and capital gains, accrued or realized, from the assets belonging to that
series. All dividends and distributions on Shares of a particular series shall
be distributed pro rata to the Shareholders of that series in proportion to the
number of Shares of that series held by such Shareholders at the date and time
of record established for the payment of such dividends or distributions. Shares
of any particular series of the Trust may be redeemed solely out of the assets
of the Trust allocated or belonging to that series. Upon liquidation or
termination of a series of the Trust, Shareholders of such series shall be
entitled to receive a pro rata share of the net assets of such series only.
(v) Notwithstanding any provision hereof to the contrary, on any
matter submitted to a vote of the Shareholders of the Trust, all Shares then
entitled to vote shall be voted by individual series, except that (i) when
required by the 1940 Act to be voted in the aggregate, Shares shall not be voted
by individual series, (ii) when the Trustees have determined that the matter
affects only the interests of Shareholders of one or more series, only
Shareholders of such series shall be entitled to vote thereon, and (iii) all
series shall vote together on the election of Trustees.
(vi) The establishment and designation of any series of Shares shall
be effective upon the execution by a majority of the Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series or as otherwise provided in such instrument.
(b) Classes. Notwithstanding anything in this Declaration to the contrary,
the Trustees may, in their discretion, without obtaining any prior authorization
or vote of the Shareholders of the Trust or of the Shareholders of any series
or class of Shares, from time to time authorize the division of Shares of the
Trust or any series thereof into Shares of one or more classes upon the
execution by a majority of the Trustees of an instrument setting forth such
establishment and designation and the relative rights and preferences of such
class or classes. All Shares of a class shall be identical with each other
and with the Shares of each other
<PAGE>
-7-
class of the same series except for such variations between classes as may be
approved by the Board of Trustees and set forth in such instrument of
establishment and designation and be permitted under the 1940 Act or pursuant to
any exemptive order issued by the Commission.
Section 3. Ownership of Shares. The ownership and transfer of Shares shall
be recorded on the books of the Trust or its transfer or similar agent. No
certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of Share certificates,
transfer of Shares and similar matters. The record books of the Trust, as kept
by the Trust or any transfer or similar agent of the Trust, shall be conclusive
as to who are the holders of Shares and as to the number of Shares held from
time to time by each Shareholder.
Section 4. No Preemptive Rights, Etc. The holders of Shares shall not, as
such holders, have any right to acquire, purchase or subscribe for any Shares or
securities of the Trust which it may hereafter issue or sell, other than such
right, if any, as the Trustees in their discretion may determine. The holders of
Shares shall have no appraisal rights with respect to their Shares and, except
as otherwise determined by resolution of the Trustees in their sole discretion,
shall have no exchange or conversion rights with respect to their Shares.
Section 5. Assets and Liabilities of Series. In the event that the Trust,
pursuant to Section 2(a) of this Article IV, shall authorize the division of
Shares into two or more series, the following provisions shall apply:
(a) All consideration received by the Trust for the issue or sale of Shares
of a particular series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that series for
all purposes, subject only to the rights of creditors, and shall be so recorded
upon the books of the Trust. Such consideration, assets, income, earnings,
profits and proceeds, including any proceeds derived from the sale, exchange or
liquidation of such assets and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, together with
any General Items (as hereinafter defined) allocated to that series as provided
in the following sentence, are herein referred to as "Assets belonging to" that
<PAGE>
-8-
series. In the event that there are any assets, income, earnings, profits or
proceeds thereof, funds or payments which are not readily identifiable as
belonging to any particular series (collectively "General Items"), the Trustees
shall allocate such General Items to and among any one or more of the series
created from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable; and any General Items allocated to a
particular series shall belong to that series. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all series for
all purposes.
(b) The assets belonging to a particular series shall be charged with the
liabilities of the Trust in respect of that series and with all expenses, costs,
charges and reserves attributable to that series and shall be so recorded upon
the books of the Trust. Liabilities, expenses, costs, charges and reserves
charged to a particular series, together with any General Items (as hereinafter
defined) allocated to that series as provided in the following sentence, are
herein referred to as "liabilities belonging to" that series. In the event there
are any general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular series
(collectively "General Items"), the Trustees shall allocate and charge such
General Items to and among any one or more of the series created from time to
time in such manner and on such basis as the Trustees in their sole discretion
deem fair and equitable; and any General Items so allocated and charges to a
particular series shall belong to that series. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all series for
all purposes.
Section 6. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms of this
Declaration of Trust and to have become a party thereto. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the same nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said decedent under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust property or right to call for a partition or division of the
same or for an accounting. Neither the Trustees, nor any officer, employee or
agent of the Trust shall have any power to bind any Shareholder personally or to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any
<PAGE>
-9-
time personally agree to pay by way of subscription for any Shares or otherwise.
ARTICLE V
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
Section 2. Qualification and Number. Each Trustee shall be a natural
person. A Trustee need not be a Shareholder, a citizen of the United States, or
a resident of the Commonwealth of Massachusetts. By the vote or consent of a
majority of the Trustees then in office, the Trustees may fix the number of
Trustees at a number not less than two (2) nor more than twelve (12) and may
fill the vacancies created by any such increase in the number of Trustees.
Except as determined from time to time by resolution of the Trustees, no
decrease in the number of Trustees shall have the effect of removing any Trustee
from office prior to the expiration of his term, but the number of Trustees may
be decreased in conjunction with the removal of a Trustee pursuant to Section 4
of Article V.
Section 3. Term and Election. Each Trustee shall hold office until the next
meeting of Shareholders called for the purpose of considering the election or
re-election of such Trustee or of a successor to such Trustee, and until his
successor is elected and qualified, and any Trustee who is appointed by the
Trustees in the interim to fill a vacancy as provided hereunder shall have the
same remaining term as that of his predecessor, if any, or such term as the
Trustees may determine. Any vacancy resulting from a newly created Trusteeship
or the death, resignation, retirement, removal, or incapacity of a Trustee may
be filled by the affirmative vote or consent of a majority of the Trustees then
in office.
Section 4. Resignation and Removal. Any Trustee may resign his trust or
retire as a Trustee (without need for prior or subsequent accounting except in
the event of removal) by an instrument in writing signed by him and delivered or
mailed to the Chairman, if any, the President or the Secretary, and such
resignation or retirement shall be effective upon such delivery, or at a later
date according to the terms of the instrument. Any Trustee who has become
incapacitated by illness or injury as determined by a majority of the other
Trustees, may be retired
<PAGE>
-10-
by written instrument signed by a majority of the other Trustees. Except as
aforesaid, any Trustee may be removed from office only for "Cause" (as
hereinafter defined) and only (i) by action of at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding Shares, or (ii) by written instrument,
signed by at least sixty-six and two-thirds percent (66-2/3%) of the remaining
Trustees, specifying the date when such removal shall become effective. "Cause"
shall require willful misconduct, dishonesty, fraud or a felony conviction.
Section 5. Vacancies. The death, declination, resignation, retirement,
removal, or incapacity, of the Trustees, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided herein, or the number of
Trustees as fixed is reduced, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees, and during the period
during which any such vacancy shall occur, only the Trustees then in office
shall be counted for the purposes of the existence of a quorum or any action to
be taken by such Trustees.
Section 6. Ownership of Assets of the Trust. The assets of the Trust shall
be held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or any successor Trustees. All
of the assets of the Trust shall at all times be considered as automatically
vested in the Trustees as shall be from time to time in office. Upon the
resignation, retirement, removal, incapacity or death of a Trustee, such Trustee
shall automatically cease to have any right, title or interest in any of the
Trust property, and the right, title and interest of such Trustee in the Trust
property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective without the execution or delivery of any
conveyancing or other instruments. No Shareholder shall be deemed to have a
severable ownership in any individual asset of the Trust or any right of
partition or possession thereof.
Section 7. Voting Requirements. In addition to the voting requirements
imposed by law or by any other provision of this Declaration of Trust, the
provisions set forth in this Article V may not be amended, altered or repealed
in any respect, nor may any provision inconsistent with this Article V be
adopted, without the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the outstanding Shares. In the event the holders
of the outstanding shares of any series or class are required by law or any
other provision of this Declaration of
<PAGE>
-11-
Trust to approve such an action by a class vote of such holders, such action
must be approved by the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding Shares of such series or class or such lower
percentage as may be required by law or any other provision of this Declaration
of Trust.
ARTICLE VI
POWERS OF TRUSTEES
Section 1. Powers. The Trustees in all instances shall have full, absolute
and exclusive power, control and authority over the Trust assets and the
business and affairs of the Trust to the same extent as if the Trustees were the
sole and absolute owners thereof in their own right. The Trustees shall have
full power and authority to do any and all acts and to make and execute any and
all contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid powers. In
construing the provisions of this Declaration of Trust, there shall be a
presumption in favor of the grant of power and authority to the Trustees.
Subject to any applicable limitation in this Declaration, the Trustees shall
have power and authority:
(a) To invest and reinvest in, to buy or otherwise acquire, to hold,
for investment or otherwise, to sell or otherwise dispose of, to lend or to
pledge, to trade in or deal in securities or interests of all kinds,
however evidenced, or obligations of all kinds, however evidenced, or
rights, warrants, or contracts to acquire such securities, interests, or
obligations, of any private or public company, corporation, association,
general or limited partnership, trust or other enterprise or organization
foreign or domestic, or issued or guaranteed by any national or state
government, foreign or domestic, or their agencies, instrumentalities or
subdivisions (including but not limited to, bonds, debentures, bills, time
notes and all other evidences or indebtedness); negotiable or nonnegotiable
instruments; any and all options and futures contracts, derivatives or
structured securities; government securities and money market instruments
(including but not limited to, bank certificates of deposit, finance paper,
commercial paper, bankers acceptances, and all kinds of repurchase
agreements) and, without limitation, all other kinds and types of financial
instruments;
<PAGE>
-12-
(b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do not reserve that right to the
Shareholders;
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(d) To set record dates for any purpose;
(e) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, investment subadviser,
transfer agent, custodian, underwriter or other independent contractor or
agent;
(f) Subject to Article IX, Section 1 hereof, to merge, or consolidate
the Trust with any other corporation, association, trust or other
organization; or to sell, convey, transfer. or lease all or substantially
all of the assets of the Trust;
(g) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees
shall deem proper;
(h) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(i) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or either
in their or the Trust's name or in the name of a custodian or a nominee or
nominees;
(j) To issue, sell, repurchase, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer and otherwise deal in Shares and in any
options, warrants or other rights to purchase Shares or any other interests
in the Trust other than Shares;
(k) To set apart, from time to time, out of any funds of the Trust a
reserve or reserves for any proper purpose, and to abolish any such
reserve;
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(l) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or
property of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or issuer, and
to pay calls or subscriptions with respect to any security held in the
Trust;
(m) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not
limited to, claims for taxes;
(n) To make distributions to Shareholders;
(o) To borrow money and to pledge, mortgage, or hypothecate the
assets of the Trust;
(p) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon such terms as
shall be established by the Trustees;
(q) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection
to deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(r) To purchase and pay for out of Trust property such insurance as
they may deem necessary or appropriate for the conduct of the business of
the Trust, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, investment
subadvisers or managers, principal underwriters, or independent contractors
of the Trust individually against all claims and liabilities of every
nature arising by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have been taken or
omitted by any such person as Shareholder, Trustee, officer, employee,
agent, investment adviser, subadviser or manager,
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principal underwriter, or independent contractor, whether or not any such
action may be determined to constitute negligence, and whether or not the
Trust would have the power to indemnify such person against such liability;
and
(s) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
Any determination made by or pursuant to the direction of the Trustees in
good faith and consistent with the provisions of this Declaration of Trust shall
be final and conclusive and shall be binding upon the Trust and every holder at
any time of Shares, including, but not limited to the following matters: the
amount of the assets, obligations, liabilities and expenses of the Trust; the
amount of the net income of the Trust from dividends, capital gains, interest or
other sources for any period and the amount of assets at any time legally
available for the payment of dividends or distributions; the amount, purpose,
time of creation, increase or decrease, alteration or cancellation of any
reserves or charges and the propriety thereof (whether or not any obligation or
liability for which such reserves or charges were created shall have been paid
or discharged); the market value, or any quoted price to be applied in
determining the market value, of any security or other asset owned or held by
the Trust; the fair value of any security for which quoted prices are not
readily available, or of any other asset owned or held by the Trust; the number
of Shares of the Trust issued or issuable; the net asset value per Share; any
matter relating to the acquisition, holding and depositing of securities and
other assets by the Trust; any question as to whether any transaction
constitutes a purchase of securities on margin, a short sale of securities, a
borrowing, or an underwriting of the sale of, or participation in any
underwriting or selling group in connection with the public distribution of, any
securities, and any matter relating to the issue, sale, redemption, repurchase,
and/or other acquisition or disposition of Shares of the Trust. No provision of
this Declaration of Trust shall be effective to protect or purport to protect
any Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
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Section 2. Manner of Acting, By-Laws. The By-Laws shall make provision from
time to time for the manner in which the Trustees may take action, including,
without limitation, at meetings within or without Massachusetts, including
meetings held by means of a conference telephone or other communications
equipment, or by written consents, the quorum and notice, if any, that shall be
required for any meeting or other action, and the delegation of some or all of
the power and authority of the Trustees to any one or more committees which they
may appoint from their own number, and terminate, from time to time.
ARTICLE VII
EXPENSES OF THE TRUST
The Trustees shall have the power to reimburse themselves from the Trust
property for their expenses and disbursements, to pay reasonable compensation to
themselves from the Trust property, and to incur and pay out of the Trust
property any other expenses which in the opinion of the Trustees are necessary
or incidental to carry out any of the purposes of this Declaration of Trust, or
to exercise any of the powers of the Trustees hereunder.
ARTICLE VIII
INVESTMENT ADVISER, UNDERWRITER
AND TRANSFER AGENT
Section 1. Investment Adviser. The Trust may enter into written contracts
with one or more persons (which term shall include any firm, corporation, trust
or association), to act as investment adviser or investment subadviser to the
Trust, and as such to perform such functions as the Trustees may deem reasonable
and proper, including, without limitation, investment advisory, management,
research, valuation of assets, clerical and administrative functions, under such
terms and conditions, and for such compensation, as the Trustees may in their
discretion deem advisable.
Upon the termination of any contract with Nuveen Advisory Corp., or any
corporation affiliated with John Nuveen & Co. Incorporated, acting as investment
adviser or manager, the Trustees are hereby required to promptly change the name
of the Trust to a name which does not include "Nuveen" or any approximation or
abbreviation thereof.
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Section 2. Underwriter; Transfer Agent. The Trust may enter into a written
contract or contracts with an underwriter or underwriters or distributor or
distributors whereby the Trust may either agree to sell Shares to the other
party or parties to the contract or appoint such other party or parties its
sales agent or agents for such Shares and with such other provisions as the
Trustees may deem reasonable and proper, and the Trustees may in their
discretion from time to time enter into transfer agency and/or shareholder
service contract(s), in each case with such terms and conditions, and providing
for such compensation, as the Trustees may in their discretion deem advisable.
Section 3. Parties to Contract. Any contract of the character described in
Sections 1 and 2 of this Article VIII or in Article X hereof may be entered into
with any corporation, firm, partnership, trust or association, including,
without limitation, the investment adviser, any investment subadviser or an
affiliate of the investment adviser or investment subadviser, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, or
otherwise interested in such contract and no such contract shall be invalidated
or rendered voidable by reason of the existence of any such relationship, nor
shall any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of said
contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was not inconsistent
with the provisions of this Article VIII, Article X, or the By-Laws. The same
person (including a firm, corporation, partnership, trust or association) may be
the other party to contracts entered into pursuant to Sections 1 and 2 above or
Article X, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 3.
ARTICLE IX
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote only:
(a) for the election or removal of Trustees as provided in Article V, (b) with
respect to any investment advisory or management contract to the extent required
by the 1940 Act, (c) with respect to any termination of the Trust or a series
thereof to the extent and as provided in this Article IX, Section 1, (d) with
respect to any amendment of this Declaration of Trust to the extent and as
provided in Article XIII, Section 4, (e) with
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respect to a merger or consolidation of the Trust or any series thereof with any
corporation, association, trust or other organization or a reorganization or
recapitalization of the Trust or series thereof, or a sale, lease or transfer of
all or substantially all of the assets of the Trust or any series thereof (other
than in the regular course of the Trust's investment activities) to the extent
and as provided in this Article IX, Section 1, (f) to the same extent as the
shareholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, and (g) with
respect to such additional matters relating to the Trust as may be required by
law, the 1940 Act, this Declaration of Trust, the By-Laws of the Trust, or any
registration of the Trust with the Commission or any State, or as the Trustees
may consider necessary or desirable.
An affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding Shares of the Trust (or, in the event of
any action set forth below affecting only one or more series or classes of the
Trust, an affirmative vote of the holders of at least sixty-six and two-thirds
percent of the outstanding Shares of such affected series or class) shall be
required to approve, adopt or authorize (i) a merger or consolidation of the
Trust or a series of the Trust with any corporation, association, trust or other
organization or a reorganization or recapitalization of the Trust or a series of
the Trust, (ii) a sale, lease or transfer of all or substantially all of the
assets of the Trust or series of the Trust (other than in the regular course of
the Trust's investment activities), or (iii) a termination of the Trust or a
series of the Trust (other than a termination by the Trustees as provided for in
Section 1 of Article XIII hereof), unless in any case such action is recommended
by the Trustees, in which case the affirmative vote of a majority of the
outstanding voting securities of the Trust or the affected series or class shall
be required. Nothing contained herein shall be construed as requiring approval
of Shareholders for any transaction, whether deemed a merger, consolidation,
reorganization or otherwise whereby the Trust issues Shares in connection with
the acquisition of assets (including those subject to liabilities) from any
other investment company or similar entity).
Section 2. Meetings. Meetings of the Shareholders of the Trust or any one
or more series thereof may be called and held from time to time for the purpose
of taking action upon any matter requiring the vote or authority of the
Shareholders as herein provided or upon any other matter deemed by the Trustees
to be necessary or desirable. Meetings of the
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Shareholders shall be held at such place within the United States as shall be
fixed by the Trustees, and stated in the notice of the meeting. Meetings of the
Shareholders may be called by the Trustees and shall be called by the Trustees
upon the written request of Shareholders owning at least one-tenth of the
outstanding Shares entitled to vote. Shareholders shall be entitled to at least
ten days' written notice of any meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of the adjournment.
Section 3. Quorum and Action. (a) The Trustees shall set in the By-Laws the
quorum required for the transaction of business by the Shareholders at a
meeting, which quorum shall in no event be less than thirty percent (30%) of the
Shares entitled to vote at such meeting. If a quorum is present when a duly
called or held meeting is convened, the Shareholders present may continue to
transact business until adjournment, even though the withdrawal of a number of
Shareholders originally present leaves less than the proportion or number
otherwise required for a quorum.
(b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the Shares present in person or by proxy and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by any provision of this Declaration of
Trust or the By-Laws.
Section 4. Voting. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted. In the event that there is more than
one series of the Shares, Shares shall be voted by individual series on any
matter submitted to a vote of the Shareholders of the Trust except as provided
in Sections 2(a)(v) and 2(b) of Article IV. There shall be no cumulative voting
in the election of Trustees or on any other matter submitted to a vote of the
Shareholders. Shares may be voted in person or by proxy. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required or permitted by law, this Declaration of Trust or the By-Laws of
the Trust to be taken by Shareholders.
Section 5. Action by Written Consent in Lieu of Meeting of Shareholders.
Any action required or permitted to be taken at a meeting of the Shareholders
may be taken without a meeting by written action signed by all of the
Shareholders entitled to vote on that action. The
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written action is effective when it has been signed by all of those
Shareholders, unless a different effective time is provided in the written
action.
ARTICLE X
CUSTODIAN
All securities and cash of the Trust shall be held by one or more
custodians and subcustodians, each meeting the requirements for a custodian
contained in the 1940 Act, or shall otherwise be held in accordance with the
1940 Act.
ARTICLE XI
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees may in their sole discretion from
time to time declare and pay, or may prescribe and set forth in a duly adopted
vote or votes of the Trustees, the bases and time for the declaration and
payment of, such dividends and distributions to Shareholders as they may deem
necessary or desirable, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with good accounting practices.
Section 2. Redemption of Shares. All shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. The Trust shall redeem the Shares of the Trust or any series or
class thereof at the price determined as hereinafter set forth, upon the
appropriately verified application of the record holder thereof (or upon such
other form of request as the Trustees may determine) at such office or agency
as may be designated from time to time for that purpose by the Trustees. The
Trustees may from time to time specify additional conditions, not inconsistent
with the 1940 Act, regarding the redemption of Shares in the Trust's then
effective prospectus under the Securities Act of 1933.
Section 3. Redemption Price. Shares shall be redeemed at their net asset
value (less any applicable redemption fee or sales charge) determined as set
forth in Section 7 of this Article XI as of such time as the Trustees shall have
theretofore prescribed by resolution. In the absence of such resolution the
redemption price of Shares deposited shall
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be the net asset value of such Shares next determined as set forth in such
Section hereof after receipt of such application.
Section 4. Payment. Payment of the redemption price of Shares of the
Trust or any series or class thereof shall be made in cash or in property or
partly in cash and partly in property to the Shareholder at such time and in the
manner, not inconsistent with the 1940 Act or other applicable laws, as may be
specified from time to time in the Trust's then effective prospectus under the
Securities Act of 1933.
Section 5. Redemption of Shareholder's Interest. The Trustees, in their
sole discretion, may cause the Trust to redeem all of the Shares of the Trust or
one or more series of the Trust held by any Shareholder if the value of such
Shares held by such Shareholder is less than the minimum amount established from
time to time by the Trustees.
Section 6. Suspension of Right of Redemption. Notwithstanding the
foregoing, the Trust may postpone payment of the redemption price and may
suspend the right of the holders of Shares to require the Trust to redeem Shares
(a) during any period when the New York Stock Exchange (the "Exchange") is
closed (other than customary weekend and holiday closings), (b) when trading in
the markets the Trust normally utilizes is restricted, or an emergency exists as
determined by the Commission so that disposal of the Trust's investments or
determination of its net asset value is not reasonably practicable, or (c) for
such other periods as the Commission may by order, rule or otherwise permit.
Section 7. Determination of Net Asset Value and Valuation of Portfolio
Assets. The Trustees may in their sole discretion from time to time prescribe
and shall set forth in the By-Laws or in a duly adopted vote or votes of the
Trustees such bases and times for determining the per Share net asset value of
the Shares and the valuation of portfolio assets as they may deem necessary or
desirable.
The Trust may suspend the determination of net asset value during any
period when it may suspend the right of the holders of Shares to require the
Trust to redeem Shares.
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ARTICLE XII
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability. No personal liability for any debt or
obligation of the Trust shall attach to any Trustee of the Trust. Without
limiting the foregoing, a Trustee shall not be responsible for or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor shall
any Trustee be responsible or liable for the act or omission of any other
Trustee. Nothing contained herein shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Every note, bond, contract, instrument, certificate, Share or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his capacity as Trustees or Trustee and neither such
Trustees or Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officers or officer shall give notice
that this Declaration of Trust is on file with the Secretary of State of the
Commonwealth of Massachusetts, shall recite that the same was executed or made
by or on behalf of the Trust by them as Trustees or Trustee or as officers or
officer and not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding only
upon the assets and property of the Trust, and may contain such further recitals
as they or he may deem appropriate, but the omission thereof shall not operate
to bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust for payment under
such credit, contract or claim; and neither the Shareholders nor the Trustees,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor.
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Section 2. Trustees' Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions thereunder
shall be binding upon everyone interested. A Trustee shall be liable only for
his own willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes of fact or law.
The Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Declaration of Trust and their duties as Trustees
hereunder, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. In discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written reports made to the Trustees
by any officer appointed by them, any independent public accountant and (with
respect to the subject matter of the contract involved) any officer, partner or
responsible employee of any other party to any contract entered into hereunder.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Indemnification. 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
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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
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(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 anyone, as such Disinterested
Trustee, 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 words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
Section 5. Shareholders. No personal liability for any debt or obligation
of the Trust shall attach to any Shareholder or former Shareholder of the Trust.
In case any Shareholder or former Shareholder of the Trust shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of the Trust to
be held harmless from and indemnified against all loss and expense arising from
such liability; provided, however, there shall be no liability or obligation of
the Trust arising hereunder to reimburse any Shareholder for taxes paid by
reason of such Shareholder's ownership of any Share or for losses suffered by
reason of any changes in value of any Trust assets. The Trust shall, upon
request by the Shareholder or former Shareholder, assume the defense of any
claim made against the Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon.
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ARTICLE XIII
MISCELLANEOUS
Section 1. Termination of Trust. Unless terminated as provided herein, the
Trust shall continue without limitation of time. The Trust or any series of the
Trust may be terminated at any time by the Trustees by written notice to the
Shareholders of the Trust, or such Series as the case may be, without a vote of
the Shareholders of the Trust, or of such series, or the Trust or any series of
the Trust may be terminated by the affirmative vote of the Shareholders in
accordance with Section 1 of Article IX hereof.
Upon termination of the Trust or any series thereof, after paying or
otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, as may be determined by the Trustees, the Trust
shall, in accordance with such procedures as the Trustees consider appropriate,
reduce the remaining assets of the Trust or of the particular series thereof to
distributable form in cash or other securities, or any combination thereof, and
distribute the proceeds to the holders of the Shares of the Trust or such series
in the manner set forth by resolution of the Trustees.
Section 2. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each amendment hereto shall be kept in the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment shall be filed by the Trustees with the
Secretary of State of the Commonwealth of Massachusetts, as well as any other
governmental office where such filing may from time to time be required,
provided, however, that the failure to so file will not invalidate this
instrument or any properly authorized amendment hereto. Anyone dealing with the
Trust may rely on a certificate by an officer or Trustee of the Trust as
to whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer or Trustee of the Trust to
be a copy of this instrument or of any such amendments. In this instrument or in
any such amendment, references to this instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this instrument
as a whole and as amended or affected by any such amendment, and masculine
pronouns shall be deemed to include the feminine and the neuter, as the context
shall require. Headings are placed herein for convenience of reference only and
in case of any conflict, the text of this instrument,
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rather than the headings, shall control. This instrument may be executed in any
number of counterparts, each of which shall be deemed an original.
Section 3. Trustees May Resolve Ambiguities. The Trustees may construe any
of the provisions of this Declaration insofar as the same may appear to be
ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Trustees in good faith shall be conclusive as to the
meaning to be given to such provisions.
Section 4. Amendments. Except as otherwise specifically provided in this
Declaration of Trust, this Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees with the consent
of Shareholders holding more than fifty percent (50%) of Shares entitled to vote
except that an amendment which in the determination of the Trustees shall affect
the holders of one or more series or classes of Shares but not the holders of
all outstanding series or classes shall be authorized by vote of the
Shareholders holding a majority of the Shares entitled to vote of each series
and class affected and no vote of Shareholders of a series or class not affected
shall be required. In addition, notwithstanding any other provision to the
contrary contained in this Declaration of Trust, the Trustees may amend this
Declaration of Trust without the vote or consent of Shareholders (i) at any time
if the Trustees deem it necessary in order for the Trust or any series or class
thereby to meet the requirements of applicable Federal or State laws or
regulations, or the requirements of the regulated investment company provisions
of the Internal Revenue Code, (ii) to designate series or classes or exercise
other powers with respect thereto in accordance with Section 1 and 2 or Article
IV hereof, (iii) change the name of the Trust or to supply any omission, cure
any ambiguity or cure, correct or supplement any defective or inconsistent
provision contained herein, or (iv) for any reason at any time before a
registration statement under the Securities Act of 1933, as amended, covering
the initial public offering of Shares has become effective.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole Trustee(s) of the
Trust, have executed this instrument as of the date first written above.
/s/ Anthony T. Dean /s/ Timothy R. Schwertfeger
- ------------------------------ -------------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
STATE OF ILLINOIS )
)SS.
COUNTY OF COOK )
Then personally appeared the above-named person(s) who are known to me to
be Trustee(s) of the Trust whose names(s) and signature(s) are affixed to the
foregoing Declaration of Trust and who acknowledged the same to be his/her free
act and deed, before me this 1st day of July, 1996.
/s/ Olivia Rubio
-------------------------------
Notary Public
My Commission Expires: 2/25/97
---------
- ----------------------------------
"OFFICIAL SEAL"
Olivia Rubio
Notary Public, State of Illinois
My Commission Expires 2/25/97
- ----------------------------------
<PAGE>
EXHIBIT 4
Number Class [ ] Shares
Nuveen Flagship Municipal Trust
[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 Municipal Trust (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
Municipal Trust
Assistant Secretary, Nuveen Flagship Municipal Trust Chairman, Nuveen
Flagship Municipal
Trust
<PAGE>
Nuveen Flagship Municipal Trust
[Name of Series]
Nuveen Flagship Municipal Trust (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 MUNICIPAL TRUST, 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, except the Nuveen Flagship Limited Term Municipal Bond Fund, the
fees shall be computed at the rate of:
RATE NET ASSETS
------ ----------
.5000% For the first $125 million
.4875% For the next $125 million
.4750% For the next $250 million
.4625% For the next $500 million
.4500% For the next $1 billion
.4250% For assets over $2 billion
2
<PAGE>
For Nuveen Flagship Limited Term Municipal Bond Fund, the fees shall be computed
at the rate of:
RATE NET ASSETS
------ ----------
.4500% For the first $125 million
.4375% For the next $125 million
.4250% For the next $250 million
.4125% For the next $500 million
.4000% For the next $1 billion
.3750% For assets over $2 billion
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 Municipal Bond Fund and Nuveen 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
3
<PAGE>
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 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 Municipal Bond Fund and
Nuveen 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 .75 of 1%
of Nuveen Municipal Bond Fund's average net assets for such year, or .975 of 1%
of Nuveen Insured Municipal Bond Fund's average net assets for such year; 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 pay expenses pursuant hereto so that the total
4
<PAGE>
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 MUNICIPAL TRUST
by: ___________________________
Vice President
Attest: ____________________
Assistant Secretary
NUVEEN ADVISORY CORP.
by: ___________________________
Vice President
Attest: ____________________
Assistant Secretary
10
<PAGE>
Exhibit A
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
11
<PAGE>
EXHIBIT 6
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made as of the 1st day of February, l997 between NUVEEN
FLAGSHIP MUNICIPAL TRUST, 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.
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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 MUNICIPAL TRUST
By
-----------------------------
Vice President
Attest:
- ------------------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By
-----------------------------
Vice President
Attest:
- ------------------------------
Assistant Secretary
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EXHIBIT 8
TABLE OF CONTENTS
Page
----
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. Right to Receive Advice 22
22. Compliance with Governmental Rules and Regulations 23
23. Compensation 23
24. Indemnification 23
25. Responsibility of Chase Manhattan Bank 25
26. Collection of Income 26
27. Ownership Certificates for Tax Purposes 26
28. Effective Period; Terminations and Amendment 27
29. Successor Custodian 28
30. Notices 29
31. Further Actions 29
32. Amendments 29
33. Additional Funds 29
34. Miscellaneous 30
35. Declaration of Trust 30
<PAGE>
CUSTODY AGREEMENT
THIS AGREEMENT is made as of the 1st day of February, 1997 by and
between NUVEEN FLAGSHIP MUNICIPAL TRUST (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 intends to initially offer shares in five series,
Nuveen Municipal Bond Fund, Nuveen Insured Municipal Bond Fund, Nuveen Flagship
All-American Municipal Bond Fund, Nuveen Flagship Limited Term Municipal Bond
Fund and Nuveen Flagship Intermediate Municipal Bond Fund (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:
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(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;
(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
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such Shares under the 1933 Act filed with the SEC, and any other applicable
federal law or regulation.
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
3
<PAGE>
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:
(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
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<PAGE>
(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
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
5
<PAGE>
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,
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
6
<PAGE>
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
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
7
<PAGE>
dispose of any securities in which it has a security interest to the extent
necessary to obtain reimbursement.
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
8
<PAGE>
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 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
9
<PAGE>
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 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
10
<PAGE>
safeguarding securities deposited in the Securities Depository or Book Entry
System;
(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
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NASD (or any futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing 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
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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
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
13
<PAGE>
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
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
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<PAGE>
Property in such manner deemed to be fair and equitable by The Chase Manhattan
Bank in its sole discretion.
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
15
<PAGE>
reorganization, merger, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities issued
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
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and not otherwise, The Chase Manhattan Bank, directly or through the use of a
Securities Depository or Book-Entry System, shall:
(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
17
<PAGE>
securities may be released for that purpose; and pay such loan upon re-delivery
to it 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 Nuveen Municipal Bond Fund, Nuveen Insured
29
<PAGE>
Municipal Bond Fund, Nuveen Flagship All-American Municipal Bond Fund, Nuveen
Flagship Limited Term Municipal Bond Fund and Nuveen Flagship Intermediate
Municipal Bond Fund, with respect to which 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 MUNICIPAL
TRUST
Attest: __________________________ By: ___________________________
GIFFORD R. ZIMMERMAN O. WALTER RENFFTLEN
ASSISTANT GENERAL COUNSEL VICE PRESIDENT &
CONTROLLER
31
<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
monthly Fed Funds rate divided by 365 days.
32
<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.
33
<PAGE>
EXHIBIT 9(a)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
(Name of Mutual Fund, Trust or Company)
and
STATE STREET BANK AND TRUST COMPANY
1C-Domestic Trust/Series
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Terms of Appointment; Duties of the Bank......................... 1
2. Fees and Expenses ............................................... 3
3. Representations and Warranties of the Bank....................... 4
4. Representations and Warranties of the Fund....................... 4
5. Indemnification.................................................. 6
6. Covenants of the Fund and the Bank............................... 8
7. Termination of Agreement......................................... 9
8. Additional Funds................................................. 9
9. Assignment....................................................... 9
10. Amendment........................................................10
11. Massachusetts Law to Apply...................................... 10
12. Merger of Agreement............................................. 10
13. No Liability of Shareholders, Trustees, Officers, Etc........... 10
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 199 , by and between Nuveen
Flagship Municipal Trust, a business trust, having its principal office and
place of business at (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and[A
WHEREAS, the Fund intends to initially offer shares in series, the
(NAME EACH PORTFOLIO) (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Article 10, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as
its transfer agent, dividend disbursing agent, custodian of certain retirement
plans and agent in connection with certain other activities, and the Bank
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Terms of Appointment; Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund, on behalf of the Portfolios, hereby employs and appoints the
Bank to act as, and the Bank agrees to act as its transfer agent for
the Fund's authorized and issued common shares, $.01 par value,
("Shares"), dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio,
including without limitation any periodic investment plan or periodic
withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios,
as applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of
<PAGE>
the Fund authorized pursuant to resolutions adopted
by the Board of Trustees (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner
such monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(vii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing.
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(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank
shall: (i) perform the customary services of a transfer agent,
dividend disbursing agent, custodian of certain retirement plans
and, as relevant, agent in connection with accumulation,
open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program),
including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies,
mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident
alien accounts, preparing and filing U.S. Treasury Department
Forms 1099 and other appropriate forms required with respect to
dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements
for Shareholders, and providing Shareholder account information
and (ii) provide a system which will enable the Fund to monitor
the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt
from blue sky reporting for each State and (ii) verify the
establishment of transactions for each State on the system prior
to activation and thereafter monitor the daily activity for each
State. The responsibility of the Bank for the Fund's blue sky
State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by
the Fund and the daily reporting of such transactions to the Fund
as provided above.
(d) Procedures applicable to certain of these services may be
established from time to time by agreement between the Fund and
the Bank.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank an
annual maintenance fee for each Shareholder account as set out in the
initial fee schedule attached hereto. Such fees and out-of-pocket
expenses and advances identified under Section 2.2 below may be changed
from time to time subject to mutual written agreement between the Fund
and the Bank.
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2.2 In addition to the fee paid under Section 2.1 above, the Fund
agrees on behalf of each of the Portfolios to reimburse the Bank
for out-of-pocket expenses or advances incurred by the Bank
for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by the Bank at the request or with the
consent of the Fund, will be reimbursed by the Fund on behalf of the
applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends,
proxies, Fund reports and other mailings to all shareholder accounts
shall be advanced to the Bank by the Fund at least seven (7) days prior
to the mailing date of such materials.
3. Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
4.2 It is empowered under applicable laws and by its Declaration of Trust
and By-Laws to enter into and perform this Agreement.
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4.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.4 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios will be effective on or before the
effective date of this agreement and will remain effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of the Fund being
offered for sale.
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5. Indemnification
5.1 The Bank shall not be responsible for, and the Fund shall on behalf of
the applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required
to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or
willfull misconduct.
(b) Refusal or failure to comply with the terms of this agreement, or
which arise out of the Fund's lack of good faith, negligence or
willful misconduct which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records and documents
which (i) are received by the Bank or its agents or
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furnished to it on behalf of the Fund, and (ii) have been
prepared maintained or performed by the Fund or any other person
or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on
behalf of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in
such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
5.2 The Bank shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility
and shall not be liable for loss or damage due to errors unless said
errors are caused by its negligence, bad faith, or willful misconduct or
that of its employees.
5.3 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the
Bank under this Agreement, and the Bank and its agents or
subcontractors shall not be liable and shall be indemnified by the Fund
on behalf of the applicable Portfolio for any action taken or omitted
by it in reliance upon such instructions or upon the opinion of such
counsel. The Bank, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on
behalf of the Fund, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided the Bank or its agents
or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to
have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former
registrar, or of a co-transfer agent or co-registrar.
5.4 In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
5.5 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.
5.6 In order that the indemnification provisions contained in this Section
5 shall apply, upon the assertion of a claim for which the Fund may
be required to indemnify the Bank, the Bank shall promptly notify the
Fund of such assertion, and shall keep the Fund advised with respect to
all developments concerning such claim. The Fund shall have the option
to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or
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6. Covenants of the Fund and the Bank
6.1 The Fund shall on behalf of each of the Portfolios promptly furnish to
the Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
6.2 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices,
if any; and for the preparation or use, and for keeping account of,
such certificates, forms and devices.
6.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940,
as amended, and the Rules thereunder, the Bank agrees that all such
records prepared or maintained by the Bank relating to the services to
be performed by the Bank hereunder are the property of the Fund and
will be preserved, maintained and made available in accordance with
such Section and Rules, and will be surrendered promptly to the Fund on
and in accordance with its request.
6.4 The Bank and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required by
law.
6.5 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify
the Fund and to secure instructions from an authorized officer of the
Fund as to such inspection. The Bank reserves the right,
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however, to exhibit the Shareholder records to any person whenever it
is advised by its counsel that it may be held liable for the failure to
exhibit the Shareholder records to such person.
7. Termination of Agreement
7.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
7.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material
will be borne by the Fund on behalf of the applicable Portfolio(s).
Additionally, the Bank reserves the right to charge for any other
reasonable expenses associated with such termination and/or a charge
equivalent to the average of three (3) months' fees.
8. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to (LIST FUNDS) with respect to which it desires to
have the Bank render services as transfer agent under the terms hereof,
it shall so notify the Bank in writing, and if the Bank agrees in
writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
9. Assignment
9.1 Except as provided in Section 9.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party
without the written consent of the other party.
9.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
9.3 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is
duly registered as a transfer agent pursuant to Section 17A(c)(2) of
the Securities Exchange Act of 1934, as amended ("Section 17A(c)(2)") or
(ii) a BFDS subsidiary duly registered as a transfer agent pursuant to
Section 17A(c)(2); provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor
as it is for its own acts and omissions.
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10. Amendment
This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution
of the Board of Trustees of the Fund.
11. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts.
12. Merger of Agreement
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
13. No Liability of Shareholders, Trustees, Officers, Etc.
The Trustees have authorized the execution of this contract in their
capacity as Trustees and not individually and the bank acknowledges
and agrees that neither the shareholders, trustees, officers, employees
and other agents of the Trust and the Funds shall personally be bound
by or be liable hereunder, nor shall any resort to their personal
property be had for the satisfaction of any obligation or claim
hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
NUVEEN FLAGSHIP MUNICIPAL TRUST
BY:_____________________________
ATTEST:
_____________________________
STATE STREET BANK AND TRUST COMPANY
BY:_____________________________
Executive Vice President
ATTEST:
_____________________________
<PAGE>
EXHIBIT 9(b)
NUVEEN FLAGSHIP MUNICIPAL TRUST
TRANSFER AGENCY AGREEMENT
This agreement is made as of the 1st day of February, 1997, between NUVEEN
FLAGSHIP MUNICIPAL TRUST, a Massachusetts business trust having its principal
office and place of business at 333 West Wacker Drive, Chicago, Illinois 60606,
on behalf of the two series named NUVEEN MUNICIPAL BOND FUND and NUVEEN INSURED
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.
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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.
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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.
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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
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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
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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 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.
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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 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
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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 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
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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 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.
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(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 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
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<PAGE>
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.
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
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<PAGE>
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.
(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.
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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 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.
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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 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.
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<PAGE>
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 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
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<PAGE>
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 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,
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<PAGE>
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.
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
17
<PAGE>
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.
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
18
<PAGE>
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 MUNICIPAL TRUST
By:
- ------------------------------- -----------------------------------
Name Title Name Title
Attest: SHAREHOLDER SERVICES, INC.
By:
- ------------------------------- -----------------------------------
Name Title Barbara Hennigar, President
19
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
TRANSFER AGENCY AGREEMENT
Appendix A
Officer's Certificate
I, ____________________________, the Secretary of Nuveen Flagship Municipal
Trust, 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 MUNICIPAL TRUST
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 change
Dealer Changes, etc.) 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; institute
Backup Withholding 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 MUNICIPAL TRUST
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 April 8, 1996, for the Nuveen Insured Tax-Free Bond Fund, Inc., comprising
the Nuveen Insured Municipal Bond 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 Municipal Trust.
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 Municipal Bond 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 Municipal Trust.
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:
6
YIELD = 2 [ ( A - B + 1) - 1]
-----
CD
Where:
A = dividends and interest(degrees) earned during the period.
B = expenses accrued for the period (net of reimbursements).
C = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
D = the maximum offering price per share on the last day of the period.
- --------
*The maximum sales charge in effect during the periods shown was 4.20%.
(degrees)Interest earned on tax-exempt obligations is determined as follows:
A. In the case of a tax-exempt obligation (1) with a current market premium
or (2) issued at a discount where the current market discount is less
than the then-remaining portion of the original issue discount, it is
necessary to first compute the yield to maturity (YTM). The YTM is then
divided by 360 and the quotient is multiplied by the market value of the
obligation (plus accrued interest).
B. In the case of a tax-exempt obligation issued at a discount where the
current market discount is in excess of the then-remaining portion of the
original issue discount, the adjusted original issue discount basis of
the obligation (plus accrued interest) is used in lieu of the market
value of the obligation (plus accrued interest) in computing the yield to
maturity (YTM). The YTM is then divided by 360 and the quotient is multi-
plied by the adjusted original issue basis of the obligation (plus ac-
crued interest).
C. In the case of a tax-exempt obligation issued without original issue
discount and having a current market discount, the coupon rate of inter-
est is used in lieu of the yield to maturity. The coupon rate is then di-
vided by 360 and the quotient is multiplied by the par value of the obli-
gation.
1
<PAGE>
B. Yield Calculations
1. Municipal Bond Fund
The following is the 30-day yield as of August 31, 1996, for the Class A
Shares of the Fund:
[$ 246,835.19 - $35,748.98] 6
Yield = 2[ ( ---------------------------- + 1 ) - 1 ]
[ 5,781,891.44 X $ 9.48]
= 4.67%
The following is a 30-day yield as of August 31, 1996, for the Class C
Shares of the Fund:
[$ 15,084.40 - $4,186.12] 6
Yield = 2[ ( ------------------------- + 1 ) - 1 ]
[ 353,368.24 X $ 9.08]
= 4.11%
The following is a 30-day yield as of August 31, 1996, for the Class R
Shares of the Fund:
[$ 13,200,893.74 - $1,328,046.69] 6
Yield = 2[ ( --------------------------------- + 1 ) - 1 ]
[ 309,104,915.57 X $ 9.08]
= 5.13%
2. Insured Municipal Bond Fund
The following is a 30-day yield as of August 31, 1996, for the Class A
Shares of the Fund:
[$ 261,029.43 - $42,169.35] 6
Yield = 2[ ( ---------------------------- + 1 ) - 1 ]
[ 5,291,604.01 X $ 11.12]
= 4.51%
The following is a 30-day yield as of August 31, 1996, for the Class C
Shares of the Fund:
[$ 23,866.12 - $7,081.64] 6
Yield = 2[ ( ------------------------- + 1 ) - 1 ]
[ 489,184.33 X $ 10.54]
= 3.94%
The following is a 30-day yield as of August 31, 1996, for the Class R
Shares of the Fund:
[$ 3,381,247.45 - $394,164.56] 6
Yield = 2[ ( ------------------------------ + 1 ) - 1 ]
[ 68,823,973.31 - $ 10.60]
= 4.96%
3. All-American Municipal Bond Fund
The following is a 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[$ 1,108,974.14 - $161,418.84] 6
Yield = 2[ ( ------------------------------ + 1 ) - 1 ]
[ 19,964,565.18 X $ 11.60]
= 4.96%
The following is a 30-day yield as of November 30, 1996, for the Class C
Shares of the Fund:
[$ 264,474.19 - $62,181.23] 6
Yield = 2[ ( ---------------------------- + 1 ) - 1 ]
[ 4,761,258.27 X $ 11.10]
= 4.64%
2
<PAGE>
4. Intermediate Municipal Bond Fund
The following is a 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[$ 225,271.06 - $31,231.68] 6
Yield = 2[ ( ---------------------------- + 1 ) - 1 ]
[ 4,421,747.06 X $ 10.98]
= 4.84%
The following is a 30-day yield as of November 30, 1996, for the Class C
Shares of the Fund:
[$ 10,671.96 - $ 2,496.24] 6
Yield = 2[ ( -------------------------- + 1 ) - 1 ]
[ 209,475.24 X $ 10.65]
= 4.44%
5. Limited Term Municipal Bond Fund
The following is a 30-day yield as of November 30, 1996, for the Class A
Shares of the Fund:
[$ 1,913,987.23 - $317,958.50] 6
Yield = 2[ ( ------------------------------ + 1 ) - 1 ]
[ 43,522,651.78 X $ 11.05]
= 4.02%
The following is a 30-day yield as of November 30, 1996, for the Class C
Shares of the Fund:
[$ 80,524.58 - $18,232.56] 6
Yield = 2[ ( ---------------------------- + 1 ) - 1 ]
[ 1,831,069.34 X $ 10.77]
= 3.82%
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)
3
<PAGE>
Municipal Trust
B. Taxable Equivalent Yield Calculation
Based on combined federal and state income tax rates of 39.6% for Municipal
Bond, Insured Municipal Bond, All-American Municipal Bond, Intermediate Munici-
pal Bond, and Limited Term Municipal Bond, the Taxable Equivalent Yields for
the Class A Shares, Class C Shares and Class R Shares, where applicable, for
the 30-day period ended August 31, 1996 or November 30, 1996, where applicable,
are as follows:
Class A Shares Class C Shares Class R Shares
--------------- --------------- ---------------
Municipal Bond 4.67% 4.11% 5.13%
Fund: ------- = 7.73% ------- = 6.80% ------- = 8.49%
1 - 1 - 1 -
.396 .396 .396
Insured Munic- 4.51% 3.94% 4.96%
ipal ------- = 7.47% ------- = 6.52% ------- = 8.21%
Bond Fund: 1 - 1 - 1 -
.396 .396 .396
All-American 4.96% 4.64% N/A
Municipal ------- = 8.21% ------- = 7.68% ------- = N/A
Bond Fund: 1 - 1 - N/A
.396 .396
4.84% 4.44% N/A
Intermediate ------- = 8.01% ------- = 7.35% ------- = N/A
Municipal 1 - 1 - N/A
Bond Fund: .396 .396
Limited Term 4.02% 3.82% N/A
Municipal ------- = 6.66% ------- = 6.32% ------- = N/A
Bond Fund: 1 - 1 - N/A
.396 .396
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
4
<PAGE>
B. Distribution Rate Calculations
1. Municipal Bond Fund:
The following is the distribution rate as of August 31, 1996, based on the
maximum public offering price for the Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0385
-----------
$9.48
= 4.87%
Class C Distribution Rate = 12 X $.0330
-----------
$9.08
= 4.36%
Class R Distribution Rate = 12 X $.0405
-----------
$9.08
= 5.35%
2. Insured Municipal Bond Fund:
The following is the distribution rate as of August 31, 1996, based on the
maximum public offering price for the Insured Municipal Bond Fund:
Class A Distribution Rate = 12 X $.0445
-----------
$11.12
= 4.80%
Class C Distribution Rate = 12 X $.0375
-----------
$10.54
= 4.27%
Class R Distribution Rate = 12 X $.0465
-----------
$10.60
= 5.26%
3. All-American Municipal Bond Fund:
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the All-American Municipal Bond Fund:
Class A Distribution Rate = 12 X $.04909
------------
$11.60
= 5.08%
Class C Distribution Rate = 12 X $.04418
------------
$11.10
= 4.78%
5
<PAGE>
4. Intermediate Municipal Bond Fund:
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the Intermediate Municipal Bond Fund:
Class A Distribution Rate = 12 X $.04213
------------
$10.98
= 4.60%
Class C Distribution Rate = 12 X $.03737
------------
$10.65
= 4.21%
5. Limited Term Municipal Bond Fund:
The following is the distribution rate as of November 30, 1996, based on the
maximum public offering price for the Limited Term Municipal Bond Fund:
Class A Distribution Rate = 12 X $.04082
------------
$11.05
= 4.43%
Class C Distribution Rate = 12 X $.03819
------------
$10.77
= 4.26%
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 Au-
gust 31, 1996 or November 30, 1996, whichever applicable, including the current
maximum sales charge. Class A total returns reflect actual performance for pe-
riods 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.
6
<PAGE>
ANNUALIZED CLASS A TOTAL RETURNS including current maximum sales charges of
4.20%:
1. Municipal Bond Fund:
$1,998 /1/1/
A. 1 year ended August 31, 1996 = ------- -1 = 0.84%
( $1,000 ) ----
----
$1,312 /1/5/
B. 5 years ended August 31, 1996 = ------- -1 = 5.58%
( $1,000 ) ----
----
/1/10/
C. 10 years ended August 31, 1996 = $1,910 -1 = 6.69%
( ------- ) ----
$1,000 ----
D. Inception through August 31, 1996 = $3,602 /1/19.754/
------- -1 = 6.70%
( $1,000 ) ----
----
2. Insured Municipal Bond Fund:
$1,011 /1/1/
A. 1 year ended August 31, 1996 = ------- -1 = 1.05%
( $1,000 ) ----
----
/1/5/
B. 5 years ended August 31, 1996 = $1,370 -1 = 6.49%
( ------- ) ----
$1,000 ----
C. Inception through August 31, 1996 = $1,933 /1/9.692/
------- -1 = 7.04%
( $1,000 ) ----
----
3. All-American Municipal Bond Fund:
$1,019 /1/1/
A. 1 year ended November 30, 1996 = ------- -1 = 1.88%
( $1,000 ) ----
----
$1,440 /1/5/
B. 5 years ended November 30, 1996 = -------
( $1,000 ) -1 = 7.57%
----
----
C. Inception through November 30, 1996 = $1,924 /1/8.1588/
( ------- ) -1 = 8.35%
$1,000 ----
----
4. Intermediate Municipal Bond Fund:
$1,027 /1/1/
A. 1 year ended November 30, 1996 = ( ------- )
$1,000 -1 = 2.65%
-----
-----
$1,315
B. Inception through November 30, 1996 = ------- /1/4.2081/
( $1,000 ) -1 = 6.72%
-----
-----
5. Limited Term Municipal Bond Fund:
/1/1/
A. 1 year ended November 30, 1996 =
( $1,023 ) -1 = 2.27%
------- ----
$1,000 ----
B. 5 years ended November 30, 1996 = /1/5/
$1,322
( ------- ) -1 = 5.75%
$1,000 ----
----
/1/9.117/
C. Inception through November 30, 1996 = $1,787
( ------- ) -1 = 6.57%
$1,000 ----
----
7
<PAGE>
ANNUALIZED CLASS B TOTAL RETURNS:
1. Municipal Bond Fund:
$1,044 /1/1/
A. 1 year ended August 31, 1996 = ------- -1 = 4.41%
( $1,000 ) ----
----
B. 5 years ended August 31, 1996 $1,323 /1/5/
= ------- -1 = 5.75%
( $1,000 ) ----
----
$1,889 /1/10/
C. 10 years ended August 31,1996 = ------- -1 = 6.57%
( $1,000 ) ----
----
$3,562 /1/19.754/
D. Inception through August 31, 1996 = ------- -1 = 6.64%
( $1,000 ) ----
----
2. Insured Municipal Bond Fund:
A. 1 year ended August 31, 1996 $1,046 /1/1/
= ( ------- ) -1 = 4.64%
$1,000 ----
----
B. 5 years ended August 31, 1996 $1,376 /1/5/
= ( ------- ) -1 = 6.59%
$1,000 ----
----
$1,907 /1/9.692/
D. Inception through August 31, 1996 = ( ------- ) -1 = 6.89%
$1,000 ----
----
3. All-American Municipal Bond Fund:
A. 1 year ended November 30, 1996 $1,058 /1/1/
= ( ------- ) -1 = 5.77%
$1,000 ----
----
B. 5 years ended November 30, 1996
$1,463 /1/5/
= ( ------- ) -1 = 7.91%
$1,000 ----
----
C. Inception through November 30, 1996 $1,923 /1/8.1588/
= ( ------- ) -1 = 8.34%
$1,000 ----
----
ANNUALIZED CLASS C TOTAL RETURNS:
1. Municipal Bond Fund:
$1,045 /1/1/
A. 1 year ended August 31, 1996 = ------- -1 = 4.52%
( $1,000 ) ----
----
B. 5 years ended August 31, 1996 $1,320 /1/5/
= ( ------- ) -1 = 5.70%
$1,000 ----
----
$1,856 /1/10/
C. 10 years ended August 31, 1996 = ( ------- ) -1 = 6.38%
$1,000 ----
----
D. Inception through August 31, 1996 $3,251 /1/19.754/
= ------- -1 = 6.15%
( $1,000 ) ----
----
8
<PAGE>
2. Insured Municipal Bond Fund:
$1,047 /1/1/
A. 1 year ended August 31, 1996 = ( ------- ) -1 = 4.72%
$1,000 ----
----
$1,368 /1/5/
B. 5 years ended August 31, 1996 = ( ------- ) -1 = 6.47%
$1,000 ----
----
$1,866 /1/9.692/
C. Inception through August 31, 1996 = ( ------- ) -1 = 6.65%
$1,000 ----
----
3. All-American Municipal Bond Fund:
A. 1 year ended November 30, 1996 = $1,058 /1/1/
( ------- ) -1 = 5.77%
$1,000 -----
-----
$1,459 /1/5/
B. 5 years ended November 30, 1996 = ( ------- ) -1 = 7.85%
$1,000 -----
-----
$1,916 /1/8.1588/
C. Inception through November 30, 1996 = ( ------- ) -1 = 8.30%
$1,000 -----
-----
4. Intermediate Municipal Bond Fund:
$1,049 /1/1/
A. 1 year ended November 30, 1996 = ( ------- ) -1 = 4.93%
$1,000 -----
-----
$1,320 /1/4.2081/
B. Inception through November 30, 1996 = ( ------- ) -1 = 6.82%
$1,000 -----
-----
5. Limited Term Municipal Bond Fund:
$1,046 /1/1/
A. 1 year ended November 30, 1996 = ( ------- ) -1 = 4.55%
$1,000 -----
-----
$1,336 /1/5/
B. 5 years ended November 30, 1996 = ( ------- ) -1 = 5.96%
$1,000 -----
-----
$1,783 /1/9.117/
C. Inception through November 30, 1996 = ( ------- ) -1 = 6.55%
$1,000 -----
-----
ANNUALIZED CLASS R TOTAL RETURNS:
1. Municipal Bond Fund:
$1,054 /1/1/
A. 1 year ended August 31, 1996 = ( ------- ) -1 = 5.42%
$1,000 ----
----
$1,387 /1/5/
B. 5 years ended August 31, 1996 = ( ------- ) -1 = 6.76%
$1,000 ----
----
$2,044 /1/10/
C. 10 years ended August 31, 1996 = ( ------- ) -1 = 7.41%
$1,000 ----
----
$3,948 /1/19.754/
D. Inception through August 31, 1996 = ( ------- ) -1 = 7.20%
$1,000 ----
----
9
<PAGE>
2. Insured Municipal Bond Fund:
$1,056 /1/1/
A. 1 year ended August 31, 1996 = ( ------- ) -1 = 5.64%
$1,000 ----
----
$1,442 /1/5/
B. 5 years ended August 31, 1996 = ( ------- ) -1 = 7.60%
$1,000 ----
----
$2,060 /1/9.692/
C. Inception through August 31, 1996 = ( ------- ) -1 = 7.74%
$1,000 ----
----
3. All-American Municipal Bond Fund:
$1,064 /1/1/
A. 1 year ended November 30, 1996 = ( ------- ) -1 = 6.35%
$1,000 ----
----
$1,503 /1/5/
B. 5 years ended November 30, 1996 = ( ------- ) -1 = 8.50%
$1,000 ----
----
$2,009 /1/8.1588/
C. Inception through November 30, 1996 = ( ------- ) -1 = 8.93%
$1,000 ----
----
4. Intermediate Municipal Bond Fund:
$1,058 /1/1/
A. 1 year ended November 30, 1996 = ( ------- ) -1 = 5.83%
$1,000 ----
----
$1,355 /1/4.2081/
B. Inception through November 30, 1996 = ( ------- )
$1,000 -1 = 7.49%
----
----
5. Limited Term Municipal Bond Fund:
$1,049 /1/1/
A. 1 year ended November 30, 1996 = ( ------- ) -1 = 4.89%
$1,000 ----
----
$1,356 /1/5/
B. 5 years ended November 30, 1996 = ( ------- )
$1,000 -1 = 6.28%
----
----
$1,833 /1/9.117/
C. Inception through November 30, 1996 = ( ------- )
$1,000 -1 = 6.87%
----
----
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 the Class Shares of the
Funds for the periods from inception and for the one, five and 10-year period
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.
10
<PAGE>
CUMULATIVE CLASS A TOTAL RETURNS including current maximum sales charge of
4.20%:
1. Municipal Bond Fund:
$1,008 - $1,000
A. 1 year ended August 31, 1996 = ---------------- = 0.84%
( $1,000 ) ----
----
$1,312 - $1,000
B. 5 years ended August 31, 1996 = ---------------- = 31.18%
( $1,000 ) ------
------
C. 10 years ended August 31, 1996 = $1,910 - $1,000 = 91.02%
---------------- ------
( $1,000 ) ------
$3,602 - $1,000
D. Inception through August 31, 1996 = ----------------
( $1,000 ) = 260.15%
------
------
2. Insured Municipal Bond Fund:
A. 1 year ended August 31, 1996 = $1,011 - $1,000 = 1.05%
---------------- ----
( $1,000 ) ----
$1,370 - $1,000
B. 5 years ended August 31, 1996 = ---------------- = 36.99%
( $1,000 ) ------
------
$1,933 - $1,000
C. Inception through August 31, 1996 = ----------------
( $1,000 ) = 93.31%
------
------
3. All-American Municipal Bond Fund:
A. 1 year ended November 30, 1996 = $1,019 - $1,000 = 1.88%
---------------- ----
( $1,000 ) ----
$1,440 - $1,000
B. 5 years ended November 30, 1996 = ----------------
( $1,000 ) = 44.03%
------
------
C. Inception through November 30, 1996 = $1,924 - $1,000
---------------- = 92.44%
( $1,000 ) ------
------
4. Intermediate Municipal Bond Fund:
$1,027 - $1,000
A. 1 year ended November 30, 1996 = ----------------
( $1,000 ) = 2.65%
-----
-----
B. Inception through November 30, 1996 = $1,315 - $1,000
----------------
( $1,000 ) = 31.46%
------
------
5. Limited Term Municipal Bond Fund:
$1,023 - $1,000
A. 1 year ended November 30, 1996 = ----------------
( $1,000 ) = 2.27%
----
----
$1,322 - $1,000
B. 5 years ended November 30, 1996 = ----------------
( $1,000 ) = 32.24%
------
<PAGE>
------
C. Inception through November 30, 1996
= $1,787 - $1,000
----------------
( $1,000 ) = 78.69%
------
------
11
<PAGE>
CUMULATIVE CLASS B TOTAL RETURNS:
1. Municipal Bond Fund:
$1,044 - $1,000
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.41%
$1,000 =====
$1,323 - $1,000
B. 5 years ended August 31, 1996 = ( --------------- ) = 32.28%
$1,000 ======
$1,889 - $1,000
C. 10 years ended August 31, 1996 = ( --------------- ) = 88.90%
$1,000 ======
$3,562 - $1,000
D. Inception through August 31, 1996 = ( --------------- ) = 256.16%
$1,000 =======
2. Insured Municipal Bond Fund:
$1,046 - $1,000
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.64%
$1,000 =====
$1,376 - $1,000
B. 5 years ended August 31, 1996 = ( --------------- ) = 37.59%
$1,000 ======
$1,907 - $1,000
D. Inception through August 31, 1996 = ( --------------- ) = 90.70%
$1,000 ======
3. All-American Municipal Bond Fund:
$1,058 - $1,000
A. 1 year ended November 30, 1996 = ( --------------- ) = 5.77%
$1,000 =====
$1,463 - $1,000
B. 5 years ended November 30, 1996 = ( --------------- ) = 46.30%
$1,000 ======
$1,923 - $1,000
C. Inception through November 30, 1996 = ( --------------- ) = 92.28%
$1,000 ======
CUMULATIVE CLASS C TOTAL RETURNS:
1. Municipal Bond Fund:
$1,045 - $1,000
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.52%
$1,000 =====
$1,320 - $1,000
B. 5 years ended August 31, 1996 = ( --------------- ) = 31.97%
$1,000 ======
$1,856 - $1,000
C. 10 years ended August 31, 1996 = ( --------------- ) = 85.57%
$1,000 ======
$3,251 - $1,000
D. Inception through August 31, 1996 = ( --------------- ) = 225.25%
$1,000 =======
2. Insured Municipal Bond Fund:
$1,047 - $1,000
A. 1 year ended August 31, 1996 = ( --------------- ) = 4.72%
$1,000 =====
$1,368 - $1,000
B. 5 years ended August 31, 1996 = ( --------------- ) = 36.84%
$1,000 ======
$1,866 - $1,000
C. Inception through August 31, 1996 = ( --------------- ) = 86.56%
$1,000 ======
12
<PAGE>
3. All-American Municipal Bond Fund:
$1,058 - $1,000
A. 1 year ended November 30, 1996 = (-----------------) = 5.77%
$1,000 =====
$1,459 - $1,000
B. 5 years ended November 30, 1996 = (-----------------) = 45.91%
$1,000 ======
$1,916 - $1,000
C. Inception through November 30, 1996 = (-----------------) = 91.60%
$1,000 ======
4. Intermediate Municipal Bond Fund:
$1,049 - $1,000
A. 1 year ended November 30, 1996 = (-----------------) = 4.93%
$1,000 =====
$1,320 - $1,000
B. Inception through November 30, 1996 = (-----------------) = 32.01%
$1,000 ======
5. Limited Term Municipal Bond Fund:
$1,046 - $1,000
A. 1 year ended November 30, 1996 = (-----------------) = 4.55%
$1,000 =====
$1,336 - $1,000
B. 5 years ended November 30, 1996 = (-----------------) = 33.58%
$1,000 ======
$1,783 - $1,000
C. Inception through November 30, 1996 = (-----------------) = 78.28%
$1,000 ======
CUMULATIVE CLASS R TOTAL RETURNS:
1. Municipal Bond Fund:
$1,054 - $1,000
A. 1 year ended August 31, 1996 = (-----------------) = 5.42%
$1,000 =====
B. 5 years ended August 31, 1996 = $1,387 - $1,000
(-----------------) = 38.69%
$1,000 ======
$2,044 - $1,000
C. 10 years ended August 31, 1996 = (-----------------) = 104.42%
$1,000 =======
D. Inception through August 31, 1996 = $3,948 - $1,000
(----------------) = 294.78%
$1,000 =======
2. Insured Municipal Bond Fund:
$1,056 - $1,000
A. 1 year ended August 31, 1996 = (-----------------) = 5.64%
$1,000 =====
$1,442 - $1,000
B. 5 years ended August 31, 1996 = (-----------------) = 44.24%
$1,000 ======
C. Inception through August 31, 1996 = $2,060 - $1,000
(-----------------) = 105.97%
$1,000 =======
3. All-American Municipal Bond Fund:
$1,064 - $1,000
A. 1 year ended November 30, 1996 = (-----------------) = 6.35%
$1,000 =====
B. 5 years ended November 30, 1996 = $1,503 - $1,000
(-----------------) = 50.35%
$1,000 ======
$2,009 - $1,000
C. Inception through November 30, 1996 = (-----------------) = 100.88%
$1,000 =======
13
<PAGE>
4. Intermediate Municipal Bond Fund:
$1,058 - $1,000
A. 1 year ended November 30, 1996 = (---------------) = 5.83%
$1,000 =====
$1,355 - $1,000
B. Inception through November 30, 1996 = (---------------) = 35.52%
$1,000 ======
5. Limited Term Municipal Bond Fund:
$1,050 - $1,000
A. 1 year ended November 30, 1996 = (---------------) = 4.98%
$1,000 =====
$1,356 - $1,000
B. 5 years ended November 30, 1996 = (---------------) = 35.63%
$1,000 ======
$1,833 - $1,000
C. Inception through November 30, 1996 = (---------------) = 83.27%
$1,000 ======
VI. TAXABLE EQUIVALENT TOTAL RETURN
A. Taxable Equivalent Total Return Formula
Each Fund's ratable equivalent total return for a specific period is
calculated 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 return for each such fiscal year by the amount of additional income
that a taxable 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
provides 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 Municipal Bond Fund for the 10-year period ended August 31, 1996 are set
forth on the following pages assuming a combined federal and state income tax
rate of 39.6% based on 1997 rates.
14
<PAGE>
Fund Name: Nuveen Muni Bond Fund Class R
Since 08/31/86
<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>
8/31/86 9.06 .05215 1,104 $ 10,000
9/30/86 8.78 .05184 .2120 $57.219 $233.996 $291.214 $ 57.219 1,137 $ 9,982
10/31/86 8.90 .05043 $57.335 $ 57.335 $ 114.553 1,143 $ 10,176
11/30/86 9.03 .05032 $57.534 $ 57.534 $ 172.087 1,150 $ 10,382
12/31/86 8.96 .05003 $57.521 $ 57.521 $ 229.609 1,156 $ 10,359
1/31/87 9.08 .05027 $58.120 $ 58.120 $ 287.729 1,163 $ 10,556
2/28/87 9.11 .05066 $58.895 $ 58.895 $ 346.624 1,169 $ 10,650
3/31/87 9.01 .04934 $57.679 $ 57.679 $ 404.303 1,175 $ 10,591
4/30/87 8.55 .04985 $58.595 $ 58.595 $ 462.898 1,182 $ 10,108
5/31/87 8.36 .04950 $58.523 $ 58.523 $ 521.420 1,189 $ 9,942
6/30/87 8.51 .04968 $59,083 $ 59.083 $ 580.504 1,196 $ 10,180
7/31/87 8.52 .04963 $59.368 $ 59.368 $ 639.872 1,203 $ 10,251
8/31/87 8.53 .04913 $59.113 $ 59.113 $ 698.984 $458.2 1,264 $ 10,781
9/30/87 8.02 .04985 .1465 $63.002 $185.153 $248.115 $ 63.002 1,295 $ 10,384
10/31/87 8.00 .04951 $64.105 $ 64.105 $ 127.107 1,303 $ 10,422
11/30/87 8.20 .04960 $64.619 $ 64.619 $ 191.726 1,311 $ 10,748
12/31/87 8.38 .04900 $64.223 $ 64.223 $ 255.949 1,318 $ 11,048
1/31/88 8.57 .04949 $65.245 $ 65.245 $ 321.194 1,326 $ 11,363
2/28/88 8.62 .04972 $65.926 $ 65.926 $ 387.120 1,334 $ 11,496
3/31/88 8.42 .04969 $66.267 $ 66.267 $ 453.387 1,341 $ 11,295
4/30/88 8.40 .04953 $66.443 $ 66.443 $ 519.830 1,349 $ 11,335
5/31/88 8.39 .04979 $67.186 $ 67.186 $ 587.015 1,357 $ 11,388
6/30/88 8.47 .04989 $67.720 $ 67.720 $ 654.736 1,365 $ 11,565
7/31/88 8.48 .04977 $67.955 $ 67.955 $ 722.691 1,373 $ 11,646
8/31/88 8.45 .05000 $68.670 $ 68.670 $ 791.361 $518.8 1,443 $ 12,193
9/30/88 8.52 .05036 .0360 $72.666 $ 51.945 $124.611 $ 72.666 1,458 $ 12,418
10/31/88 8.65 .04966 $72.382 $ 72.382 $ 145.048 1,466 $ 12,680
11/30/88 8.54 .04997 $73.252 $ 73.252 $ 218.300 1,474 $ 12,592
12/31/88 8.59 .04949 $72.973 $ 72.973 $ 291.273 1,483 $ 12,739
1/31/89 8.75 .04982 $73.883 $ 73.883 $ 365.155 1,491 $ 13,050
2/28/89 8.60 .05035 $75.094 $ 75.094 $ 440.249 1,500 $ 12,901
3/31/89 8.53 .04987 $74.813 $ 74.813 $ 515.062 1,509 $ 12,871
4/30/89 8.74 .04975 $75.070 $ 75.070 $ 590.132 1,518 $ 13,263
5/31/89 8.86 .04919 $74.647 $ 74.647 $ 664.779 1,526 $ 13,520
6/30/89 8.89 .04932 $75.260 $ 75.260 $ 740.039 1,534 $ 13,641
7/31/89 8.94 .05008 $76.844 $ 76.844 $ 816.883 1,543 $ 13,795
8/31/89 8.83 .05007 $77.259 $ 77.259 $ 894.142 $586.2 1,618 $ 14,288
9/30/89 8.73 .04950 .0290 $80.099 $ 46.926 $127.025 $ 80.099 1,633 $ 14,254
10/31/89 8.78 .04972 $81.178 $ 81.178 $ 161.277 1,642 $ 14,416
11/30/89 8.84 .04969 $81.588 $ 81.588 $ 242.865 1,651 $ 14,596
12/31/89 8.87 .04953 $81.783 $ 81.783 $ 324.648 1,660 $ 14,728
1/31/90 8.76 .04970 $82.522 $ 82.522 $ 407.170 1,670 $ 14,628 8.76
2/28/90 8.77 .04970 $82.990 $ 82.990 $ 490.160 1,679 $ 14,727 8.77
3/31/90 8.74 .04970 $83.460 $ 83.460 $ 573.620 1,689 $ 14,760 8.74
4/30/90 8.63 .04970 $83.935 $ 83.935 $ 657.555 1,699 $ 14,659 8.63
5/31/90 8.76 .04970 $84.418 $ 84.418 $ 741.974 1,708 $ 14,964 8.78
6/30/90 8.79 .04970 $84.896 $ 84.896 $ 826.870 1,718 $ 15,100 8.80
7/31/90 8.84 .04970 $85.376 $ 85.376 $ 912.245 1,727 $ 15,271 8.85
8/31/90 8.68 .04970 $85.855 $ 85.855 $ 998.100 $654.3 1,813 $ 15,735 8.69
9/30/90 8.65 .04970 $90.093 $ 90.093 $ 90.093 1,823 $ 15,770 8.67
10/31/90 8.70 .04970 $90.609 $ 90.609 $ 180.702 1,834 $ 15,952 8.72
11/30/90 8.80 .04970 $91.126 $ 91.126 $ 271.828 1,844 $ 16,226 8.82
12/31/90 8.77 .04970 .0384 $91.639 $ 70.804 $162.443 $ 363.468 1,862 $ 16,333 8.77
1/31/91 8.84 .04970 $92.560 $ 92.560 $ 456.028 1,873 $ 16,556 8.87
2/28/91 8.85 .04970 $93.079 $ 93.079 $ 549.106 1,883 $ 16,667 8.85
3/31/91 8.83 .04870 $91.718 $ 91.718 $ 640.824 1,894 $ 16,721 8.83
4/30/91 8.90 .04870 $92.224 $ 92.224 $ 733.048 1,904 $ 16,946 8.91
5/31/91 8.94 .04870 $92.728 $ 92.728 $ 825.776 1,914 $ 17,115 8.93
6/30/91 8.89 .04870 $93.234 $ 93.234 $ 919.009 1,925 $ 17,113 8.89
7/31/91 8.95 .04870 $93.744 $ 93.744 $1,012.754 1,935 $ 17,322 8.95
8/31/91 8.99 .04870 $94.254 $ 94.254 $1,107.008 $725.7 2,027 $ 18,219 8.99
9/30/91 9.04 .04870 $98.697 $ 98.697 $ 98.697 2,038 $ 18,419 9.04
10/31/91 9.07 .04770 $97.191 $ 97.191 $ 195.888 2,048 $ 18,578 9.08
11/30/91 9.04 .04770 $97.701 $ 97.701 $ 293.589 2,059 $ 18,614 9.04
</TABLE>
15
<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>
12/31/91 9.11 .04770 .0398 $ 98.217 $ 81.950 $180.167 $ 391.806 2,079 $18,938 9.11
1/31/92 9.09 .04770 $ 99.160 $ 99.160 $ 490.966 2,090 $18,996 9.09
2/29/92 9.08 .04700 $ 99.681 $ 99.681 $ 590.647 2,101 $19,075 9.08
3/31/92 9.05 .04770 $100.204 $100.204 $ 690.851 2,112 $19,112 9.06
4/30/92 9.09 .04700 $ 99.254 $ 99.254 $ 790.105 2,123 $19,295 9.10
5/31/92 9.13 .04700 $ 99.766 $ 99.766 $ 889.871 2,134 $19,480 9.13
6/30/92 9.22 .04700 $100.280 $100.280 $ 990.151 2,144 $19,772 9.23
7/31/92 9.39 .04700 $100.790 $100.790 $1,090.941 2,155 $20,238 9.37
8/31/92 9.27 .04400 $ 94.830 $ 94.830 $1,185,772 $ 777.4 2,249 $20,851 9.28
9/30/92 9.28 .04400 $ 98.970 $ 98.970 $ 98.970 2,260 $20,973 9.29
10/31/92 9.10 .04400 .0519 $ 99.439 $117.293 $216.731 $ 198.409 2,284 $20,782 9.10
11/30/92 9.22 .04400 $100.487 $100.487 $ 298.895 2,295 $21,157 9.22
12/31/92 9.25 .04400 .0030 $100.966 $ 6.884 $107.850 $ 399.862 2,306 $21,334 9.25
1/31/93 9.29 .04400 $101.479 $101.479 $ 501.341 2,317 $21,527 9.29
2/28/93 9.45 .04400 $101.960 $101.960 $ 603.301 2,328 $22,000 9.46
3/31/93 9.37 .04400 $102.434 $102.434 $ 705.735 2,339 $21,916 9.37
4/30/93 9.41 .04300 $100.576 $100.576 $ 806.311 2,350 $22,110 9.42
5/31/93 9.40 .04300 $101.035 $101.035 $ 907.346 2,360 $22,188 9.41
6/30/93 9.46 .04300 $101.497 $101.497 $1,008.843 2,371 $22,431 9.47
7/31/93 9.43 .04300 $101.958 $101.958 $1,110.801 2,382 $22,461 9.44
8/31/93 9.52 .04300 $102.422 $102.422 $1,213.223 $ 795.4 2,476 $23,574 9.52
9/30/93 9.53 .04300 $106.478 $106.478 $ 106.478 2,487 $23,705 9.53
10/31/93 9.43 .04300 .0812 $106.958 $201.977 $308.935 $ 213.436 2,520 $23,765 9.43
11/30/93 9.36 .04300 $108.367 $108.367 $ 321.802 2,532 $23,697 9.37
12/31/93 9.41 .04300 .0166 $108.864 $ 42.027 $150.891 $ 430.667 2,548 $23,974 9.41
1/31/94 9.45 .04300 $109.554 $109.554 $ 540.220 2,559 $24,186 9.45
2/28/94 9.28 .04200 $107.493 $107.493 $ 647.713 2,571 $23,858 9.27
3/31/94 8.99 .04200 $107.980 $107.980 $ 755.693 2,583 $23,222 8.90
4/30/94 9.00 .04200 $108.489 $108.489 $ 864.182 2,595 $23,356 8.98
5/31/94 9.03 .04200 $108.997 $108.997 $ 973.179 2,607 $23,543 9.02
6/30/94 8.96 .04200 $109.504 $109.504 $1,082.683 2,619 $23,470 8.97
7/31/94 9.03 .04200 $110.017 $110.017 $1,192.700 2,632 $23,764 9.04
8/31/94 9.01 .04300 $113.160 $113.160 $1,305.860 $ 556.1 2,739 $24,680 9.02
9/30/94 8.89 .04300 $117.785 $117.785 $ 117.785 2,752 $24,469 8.89
10/31/94 8.70 .04300 .0492 $118.355 $135.420 $253.775 $ 236.140 2,782 $24,201 8.67
11/30/94 8.53 .04300 $119.614 $119.614 $ 355.754 2,796 $23,847 8.56
12/31/94 8.65 .04300 .0259 $120.214 $ 72.408 $192.623 $ 475.968 2,818 $24,375 8.65
1/31/95 8.81 .04300 $121.172 $121.172 $ 597.140 2,832 $24,947 8.85
2/28/95 9.00 .04300 $121.761 $121.761 $ 718.901 2,845 $25,606 9.03
3/31/95 9.01 .04300 $122.341 $122.341 $ 841.241 2,859 $25,757 9.03
4/30/95 8.99 .04300 $122.923 $122.923 $ 964.164 2,872 $25,822 8.99
5/31/95 9.21 .04300 $123.511 $123.511 $1,087.675 2,886 $26,578 9.21
6/30/95 9.08 .04300 $124.088 $124.088 $1,211.763 2,899 $26,327 9.08
7/31/95 9.08 .04300 $124.675 $124.675 $1,336.438 2,913 $26,452 9.06
8/31/95 9.12 .04300 $125.267 $125.267 $1,461.706 $ 958.3 3,032 $27,651 9.16
9/30/95 9.13 .04300 $130.374 $130.374 $ 130.374 3,046 $27,811 9.17
10/31/95 9.23 .04300 $130.985 $130.985 $ 261.359 3,060 $28,247 9.26
11/30/95 9.33 .04300 .0272 $131.593 $ 83.240 $214.834 $ 392.952 3,083 $28,767 9.36
12/31/95 9.40 .04150 $127.955 $127.955 $ 520.907 3,097 $29,111 9.40
1/31/96 9.38 .04150 $128.520 $128.520 $ 649.427 3,111 $29,177 9.38
2/29/96 9.28 .04150 $129.089 $129.089 $ 778.516 3,124 $28,995 9.33
3/31/96 9.12 .04150 $129.663 $129.663 $ 908.179 3,139 $28,624 9.13
4/30/96 9.04 .04150 $130.252 $130.252 $1,038.431 3,153 $28,503 9.05
5/31/96 9.02 .04150 $130.850 $130.850 $1,169.281 3,168 $28,571 9.01
6/30/96 9.07 .04150 $131.452 $131.452 $1,300.733 3,182 $28,861 9.07
7/31/96 9.13 .04050 $128.872 $128.872 $1,429.605 3,196 $29,180 9.17
8/31/96 9.08 .04050 $129.441 $129.441 $1,559.046 $1,022.1 3,323 $30,172 9.07
Tax Rate 39.60%
Load 0.00%
Past Year: Total Return 9.12%
10.0014 Years: Total Re-
turn 201.72%
Annualized 11.67%
</TABLE>
16
<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> 002
<NAME> NUVEEN MUNICIPAL BOND FUND INC 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> 2787424
<INVESTMENTS-AT-VALUE> 2883013
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<OTHER-ITEMS-ASSETS> 00
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<SHARES-COMMON-STOCK> 5952
<SHARES-COMMON-PRIOR> 3999
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<NET-ASSETS> 54030
<DIVIDEND-INCOME> 0
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<OTHER-INCOME> 0
<EXPENSES-NET> 8237
<NET-INVESTMENT-INCOME> 77302
<REALIZED-GAINS-CURRENT> 9658
<APPREC-INCREASE-CURRENT> (71994)
<NET-CHANGE-FROM-OPS> 14965
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1168
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3165
<NUMBER-OF-SHARES-REDEEMED> 1294
<SHARES-REINVESTED> 82
<NET-CHANGE-IN-ASSETS> (53064)
<ACCUMULATED-NII-PRIOR> 1170
<ACCUMULATED-GAINS-PRIOR> 3916
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 8237
<AVERAGE-NET-ASSETS> 45652
<PER-SHARE-NAV-BEGIN> 9.28
<PER-SHARE-NII> .241
<PER-SHARE-GAIN-APPREC> (.206)
<PER-SHARE-DIVIDEND> .235
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.08
<EXPENSE-RATIO> .82
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</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> 003
<NAME> NUVEEN MUNICIPAL BOND FUND INC CLASS C
<MULTIPLIER> 1000
<S> <C>
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<OTHER-ITEMS-ASSETS> 00
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<OTHER-ITEMS-LIABILITIES> 11729
<TOTAL-LIABILITIES> 59293
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<ACCUMULATED-NET-GAINS> 13573
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 95589
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<DIVIDEND-INCOME> 0
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<APPREC-INCREASE-CURRENT> (71994)
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<NET-CHANGE-IN-ASSETS> (53064)
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<GROSS-EXPENSE> 8237
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<PER-SHARE-NAV-BEGIN> 9.26
<PER-SHARE-NII> .207
<PER-SHARE-GAIN-APPREC> (.185)
<PER-SHARE-DIVIDEND> .202
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<PER-SHARE-NAV-END> 9.08
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> NUVEEN MUNICIPAL BOND FUND INC CLASS R
<MULTIPLIER> 1000
<S> <C>
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<FISCAL-YEAR-END> FEB-28-1997
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<REALIZED-GAINS-CURRENT> 9658
<APPREC-INCREASE-CURRENT> (71994)
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<DISTRIBUTIONS-OF-INCOME> 76379
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<NET-CHANGE-IN-ASSETS> (53064)
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<PER-SHARE-NII> .246
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<PER-SHARE-NAV-END> 9.08
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> NUVEEN INSURED MUNICIPAL BOND FUND NATIONAL CLASS A
<MULTIPLIER> 1000
<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> 765118
<INVESTMENTS-AT-VALUE> 799126
<RECEIVABLES> 12814
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
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<OTHER-ITEMS-LIABILITIES> 2951
<TOTAL-LIABILITIES> 18163
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 758641
<SHARES-COMMON-STOCK> 5400
<SHARES-COMMON-PRIOR> 4280
<ACCUMULATED-NII-CURRENT> 535
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 608
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 34008
<NET-ASSETS> 57504
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23569
<OTHER-INCOME> 0
<EXPENSES-NET> 2620
<NET-INVESTMENT-INCOME> 20949
<REALIZED-GAINS-CURRENT> (2015)
<APPREC-INCREASE-CURRENT> (22,296)
<NET-CHANGE-FROM-OPS> (24,310)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1279
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1760
<NUMBER-OF-SHARES-REDEEMED> 713
<SHARES-REINVESTED> 75
<NET-CHANGE-IN-ASSETS> (20258)
<ACCUMULATED-NII-PRIOR> 225
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<OVERDISTRIB-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 10.97
<PER-SHARE-NII> .274
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<PER-SHARE-NAV-END> 10.65
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<PAGE>
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<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
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references to such documents.
</LEGEND>
<SERIES>
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<NAME> NUVEEN INSURED MUNICIPAL BOND FUND NATIONAL CLASS C
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<S> <C>
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<SHARES-COMMON-STOCK> 489
<SHARES-COMMON-PRIOR> 475
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<ACCUMULATED-NET-GAINS> 608
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<NET-INVESTMENT-INCOME> 20949
<REALIZED-GAINS-CURRENT> (2015)
<APPREC-INCREASE-CURRENT> (22,296)
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<TABLE> <S> <C>
<PAGE>
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<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
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</LEGEND>
<SERIES>
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<NAME> NUVEEN INSURED MUNICIPAL BOND FUND NATIONAL CLASS R
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<REALIZED-GAINS-CURRENT> (2015)
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP ALL-AMERICAN TAX EXEMPT FUND
<SERIES>
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<NAME> CLASS A
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<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP ALL-AM
<SERIES>
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<NAME> CLASS C
<MULTIPLIER> 1
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP INTERMEDIATE TAX EXEMPT FUND
<SERIES>
<NUMBER> 221
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<MULTIPLIER> 1
<S> <C>
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<FISCAL-YEAR-END> MAY-31-1997
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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<CIK> 0000764860
<NAME> FLAGSHIP INTERMEDIATE TAX EXEMPT FUND
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000764860
<NAME> FLAGSHIP LIMITED TERM TAX EXEMPT FUND
<SERIES>
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<NAME> CLASS A
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<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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<CIK> 0000764860
<NAME> FLAGSHIP LIMITED TERM TAX EXEMPT FUND
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<NAME> CLASS C
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<ACCUMULATED-GAINS-PRIOR> (6,851,929)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 742,744
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,102,075
<AVERAGE-NET-ASSETS> 493,809,549
<PER-SHARE-NAV-BEGIN> 10.56
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 0.20
<PER-SHARE-DIVIDEND> (0.23)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.77
<EXPENSE-RATIO> 1.11
<AVG-DEBT-OUTSTANDING> 890,688
<AVG-DEBT-PER-SHARE> 0.02
</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-
