<PAGE>
[NUVEEN LOGO]
Municipal
Bond Funds
February 28, 1997
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
National
[Photo of Couple Appears Here]
<PAGE>
Contents
2 Dear Shareholder
4 Answering Your Questions
6 Municipal Bond Fund Overview
8 Insured Municipal
Bond Fund Overview
11 Financial Section
67 Shareholder Meeting Results
72 Shareholder Information
73 Fund Information
1
<PAGE>
[Photo of Timothy R. Schwertfeger Appears Here]
Timothy R. Schwertfeger
Dear Shareholder
It is my pleasure to report to you on the performance of the Nuveen Municipal
Bond Fund and the Nuveen Insured Municipal Bond Fund, and to welcome new
investors to our family of investments. Both of these funds rewarded investors
during the fiscal year with consistent performance, earning Morningstar's
highest two ratings for the one-year period ended March 31, 1997. The funds
continued to deliver attractive, federally tax-free income while also preserving
your capital. At the same time, the funds add a measure of stability to investor
portfolios containing more volatile equity funds.
As of the fiscal year end, investors in the Nuveen Municipal Bond Fund's A
shares were receiving tax-free dividends providing an annualized tax-free
current yield on net asset value of 4.81%, while investors in the Nuveen Insured
Municipal Bond Fund's A shares were receiving 4.65% annually. To receive these
yields on an after-tax basis, investors in the 31% federal income tax bracket
would have had to receive 6.97% and 6.74%, respectively, from comparable taxable
investments.
Since our last report, Nuveen has undertaken a number of key strategic steps
geared to enhancing our service to you. In January we acquired Flagship
Resources Inc., a respected manager of municipal bond mutual funds, based in
Dayton, Ohio. This added 19 mutual funds to the Nuveen family, giving investors
an expanded array
2
<PAGE>
"Since our last report, Nuveen has undertaken a number of key strategic steps
geared to enhancing our service to you."
of tax-free investment solutions for their personal portfolios. As we increase
our product offerings, we now offer you more flexibility to purchase fund shares
according to your specific circumstances through expanded pricing options.
Nuveen also has created new equity and balanced funds to help investors keep
more of what they have earned. In November we launched the Nuveen Growth and
Income Stock Fund, a fund that seeks to provide superior stock market
performance with moderated risk. Last month we introduced two new balanced
mutual funds, each designed to provide investors an attractive combination of
long-term growth potential and current income.
Nuveen prides itself on helping more than 1.3 million investors maintain the
lifestyle they currently enjoy by providing quality investment solutions with
reduced risk. Thank you for your continued confidence in Nuveen and our family
of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
April 14, 1997
3
<PAGE>
Answering Your Questions
[PHOTO OF TOM SPALDING APPEARS HERE]
Tom Spalding, head of Nuveen's portfolio management team, talks about the
municipal bond market and offers insights into factors that affected fund
performance over the past year.
What key economic factors affected these funds during the past year?
In the last 12 months, the bond market -- despite some fluctuations -- was
relatively stable compared with recent years. Following a strong start to the
year, a succession of mixed reports affecting interest rate and inflation
forecasts caused investors to view the markets with alternating enthusiasm and
uncertainty. In the third quarter of 1996, evidence of an economic slowdown, the
strong U.S. dollar, and lack of inflationary pressures combined to allay
investor fears, sparking a rally in bonds that continued through the post-
election period.
Throughout the year, stock market euphoria focused investors' attention on
stocks and brought record amounts of new money into stock funds, bypassing the
bond market. Some investors, concerned about a possible correction in the stock
market, decided to take their profits, but adopted a wait-and-see attitude about
investing capital gains, electing to go with short-term vehicles until a clearer
picture of market trends emerged. These events affected demand for bond issues
of all types in the last year.
Given this market environment, how did the funds perform?
Both the Municipal Bond Fund and the Insured Municipal Bond Fund rewarded Class
A investors with solid total returns on net asset value for the period,
recording price changes and reinvested dividends of 5.26% and 4.04%,
respectively. During the same period, the Lehman Brothers Municipal Bond Index,
which does not incur operating expenses or transaction costs, reported a 5.51%
total return.
What strategies did you employ to add value?
The fluctuations of 1996 created specific inefficiencies in the market, enabling
Nuveen to uncover and take advantage of price discrepancies to improve fund
portfolios. For example,
4
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"We believe we will continue to find value in the municipal market over the next
12 months, giving prudent investors the attractive tax-free income they seek,
while limiting the volatility inherent in an uncertain market."
we were able to enhance the durability of the funds' dividends by purchasing
bonds with longer call protection. These bonds were less in demand as interest
rates began to rise in 1996, creating a value investing opportunity. These bonds
then appreciated in value more than other bonds as rates moved down during the
year.
What other strategies did you employ
to enhance the funds' relative value?
In the case of the Municipal Bond Fund we generally made the funds more
conservative on the credit and maturity fronts without sacrificing much in the
way of yield. In 1996, tightening yield spreads between lower- and higher-rated
paper made it possible to buy higher-rated bonds for almost the same yields. As
a result, the portion of the fund's assets invested in AAA rated bonds rose.
What impact did interest rates have on performance?
Even with relative stability in 1996, interest rates continued to play a role in
bond market performance. The Federal Reserve altered interest rates only once in
1996, with a 0.25% decrease in January, but anticipation of further moves kept
the markets restless the remainder of the year. With one rate increase already
approved this year, the concern about potential changes in monetary policy
continues in 1997.
What is the current economic outlook?
A look at the current environment shows continued economic growth characterized
by low unemployment, increased manufacturing and construction activity, and lack
of price pressure at the consumer and producer levels. Although inflation
remains at the same subdued levels it has exhibited over the past six years, the
strength of the current economic expansion encouraged the Federal Reserve to
make a preemptive strike against inflation's potential return. It raised short-
term interest rates by 0.25% at the end of March. While the bond market had
already anticipated and discounted much of the impact of this tightening, the
Fed's action set off a decline in the equity market that in -- combination with
the attractive yields currently available -- increased interest in municipal
bonds on the part of investors looking to move out of stocks. We believe we will
continue to find value in the municipal market over the next 12 months, giving
prudent investors the attractive tax-free income they seek, while limiting the
volatility inherent in an uncertain market.
5
<PAGE>
Municipal Bond Fund
Overview
Credit Quality
[Pie Chart Appears Here]
AAA 36%
AA 38%
A 17%
BBB 7%
BB 1%
NR 1%
Diversification
[Pie Chart Appears Here]
Educational 1%
Escrowed Bonds 12%
General Obligations 7%
Utilities 20%
Other 6%
Pollution Control 4%
Lease Rental 2%
Transportation 6%
Water and Sewer 9%
Housing 15%
Health Care 18%
<TABLE>
<CAPTION>
Fund Highlights
- -------------------------------------------------------------------------------
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 6/95 2/97 6/95 11/76
- -------------------------------------------------------------------------------
Net Asset Value (NAV) $9.24 $9.24 $9.23 $9.24
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Net Assets ($000) $2,891,499
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Average Weighted Maturity (years) 20.5
- -------------------------------------------------------------------------------
Duration (years) 8.0
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Share Class A(NAV) A(Offer) B C R
1-Year 5.26% 0.84% 4.64% 4.64% 5.53%
- -------------------------------------------------------------------------------
5-Year 6.54% 5.63% 5.83% 5.74% 6.82%
- -------------------------------------------------------------------------------
10-Year 6.99% 6.53% 6.25% 6.19% 7.26%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.06% 4.85% 4.35% 4.55% 5.26%
- -------------------------------------------------------------------------------
SEC 30-Day Yld 4.81% 4.61% 4.04% 4.24% 5.01%
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Taxable Equiv Yld/2/ 6.97% 6.68% 5.86% 6.14% 7.26%
- -------------------------------------------------------------------------------
</TABLE>
1 Class R Share returns are actual. Class A, B and C Share returns are actual
for the period since class inception; returns prior to class inception are
Class R Share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
Shares have a 4.2% maximum sales charge. Class B Shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the total returns. Class C Shares have a 1% CDSC for redemptions
within one year, which is not reflected in the 1-year total return.
2 Based on the SEC yield and on a federal income tax rate of 31%; represents
the income needed from a taxable investment necessary to equal the income of
the Nuveen fund on an after-tax basis.
6
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Nuveen Municipal Bond Fund
February 28, 1997
* The Index Comparison shows change in value of a $10,000 investment in the A
shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares at the time (4.20%) and all
ongoing fund expenses.
+ The Nuveen Municipal Bond Fund paid a capital gains distribution of $0.0453
per share per share in December 1996.
[Line graph appears here]
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Index Comparison*
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$25,000
- --------------------------------------------------------------------------------
20,000
- --------------------------------------------------------------------------------
15,000
- --------------------------------------------------------------------------------
10,000
- --------------------------------------------------------------------------------
5,000
February 1987 February 1997
- ----Lehman Brothers Municipal Bond Index $20,863
- ----Nuveen Municipal Bond Fund (NAV) $19,654
- ----Nuveen Municipal Bond Fund (Offer) $18,828
Past performance is not predictive of future performance.
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Dividend History (A Shares)/+/
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- --------------------------------------------------------------------------------
.050
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.040
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.030
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.020
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.010
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0
March 1, 1996 February 28, 1997
[PLOT POINTS TO COME]
7
<PAGE>
Insured Municipal Bond Fund Overview
Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
AAA 98%
AA 1%
BBB 1%
</TABLE>
Diversification
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Pollution Control 4%
Lease Rental 13%
Transportation 4%
Utilities 6%
Health Care 20%
Housing 2%
Water and Sewer 8%
Escrowed Bonds 17%
Other 3%
Educational 7%
General Obligations 16%
</TABLE>
Fund Highlights
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 9/94 2/97 9/94 12/86
Net Asset Value (VAV) $10.82 $10.82 $10.72 $10.78
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Total Net Assets ($000) $806,531
<S> <C>
Average Weighted Maturity (years) 21.5
Duration (years) 7.8
- ---------------------------------------------------------------------
</TABLE>
Annualized Total Return/1/
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 4.04% -0.32% 3.40% 3.48% 4.38%
5-Year 7.26% 6.34% 6.46% 6.35% 7.47%
10-Year 7.40% 6.94% 6.63% 6.55% 7.64%
- ---------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 5.10% 4.89% 4.38% 4.53% 5.29%
SEC 30-Day Yld 4.65% 4.45% 3.85% 4.05% 4.83%
Taxable Equiv Yld/7/ 6.74% 6.45% 5.58% 5.87% 7.00%
- ---------------------------------------------------------------------
</TABLE>
/1/Class R Share returns are actual. Class A, B and C Share returns are actual
for the period since class inception; returns prior to class inception are
Class R Share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
Shares have a 4.2% maximum sale charge. Class B Shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the total returns. Class C Shares have a 1% CDSC for redemptions
within one year, which is not reflected in the 1-year total return.
/2/Based on the SEC yield and on a federal income tax rate of 31%; represents
the income needed from a taxable investment necessary to equal the income of
the Nuveen fund on an after-tax basis.
8
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Nuveen Insured Municipal Bond Fund
February 28, 1997 Annual Report
*The Index Comparison shows change in value of a $10,000 investment in the A
shares of the Nuveen fund compared with the Lehman Brothers Municipal Bond
Index. 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 A Shares at the time (4.20%) and all ongoing
fund expenses.
+The Nuveen Insured Municipal Bond Fund paid a capital gains distribution of
$0.0376 per share in December 1996.
Index Comparison*
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
- --Lehman Brothers Municipal Bond Index $20,863
- --Nuveen Insured Municipal Bond Fund (NAV) $20,427
- --Nuveen Insured Municipal Bond Fund (Offer) $19,569
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
[PLOT POINTS TO COME]
9
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Financial Section
Contents
12 Portfolio of Investments
49 Statement of Net Assets
50 Statement of Operations
51 Statement of Changes in Net Assets
53 Notes to Financial Statements
61 Financial Highlights
66 Report of Independent Public
Accountants
<PAGE>
Portfolio of Investments
Municipal Bond
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska -- 1.5%
$ 3,885,000 Alaska Housing Finance Corporation, Insured Mortgage 6/97 at 100 Aa1 $ 3,893,936
Program Bonds, 1978 First Series, 6.375%, 12/01/07
14,500,000 Alaska Housing Finance Corporation, Insured Mortgage 12/03 at 102 Aa1 14,304,540
Program Bonds, 1993 First Series, 5.800%, 12/01/18
Alaska Housing Finance Corporation, Insured Mortgage
Program Bonds, 1990 First Series:
3,290,000 7.650%, 12/01/10 12/00 at 102 Aa1 3,348,036
9,860,000 7.800%, 12/01/30 12/00 at 102 Aa1 10,071,004
12,375,000 Alaska Housing Finance Corporation, Collateralized 12/03 at 102 Aaa 12,172,174
Home Mortgage Bonds, 1990 Series A,
5.850%, 6/01/25
- ----------------------------------------------------------------------------------------------------------------
Arizona -- 2.7%
7,750,000 Arizona Board of Regents, Arizona State University, 7/02 at 101 AA 7,887,175
System Revenue Refunding Bonds, Series 1992-A,
5.750%, 7/01/12
20,350,000 Salt River Project Agricultural Improvement and Power 1/02 at 100 Aa 19,603,359
District, Arizona, Salt River Project Electric System
Revenue Bonds, 1992 Series C, 5.500%, 1/01/28
9,145,000 Salt River Project Agricultural Improvement and Power 7/97 at 100 Aa 8,862,145
District, Arizona, Salt River Project Electric System
Revenue Bonds, 1973 Series A, 5.000%, 1/01/10
Salt River Project Agricultural Improvement and Power
District, Electric System Revenue Refunding Bonds,
1993 Series C:
5,000,000 4.900%, 1/01/08 1/04 at 102 Aa 4,943,800
36,820,000 4.750%, 1/01/17 1/04 at 100 Aa 32,873,632
4,570,000 The Industrial Development Authority of the City of 9/97 at 102 Aaa 4,773,548
Scottsdale, Arizona, Hospital Revenue Refunding
Bonds (Scottsdale Memorial Hospital),
Series 1987 A, 8.500%, 9/01/07
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Arkansas -- 0.4%
11,210,000 Jefferson County, Arkansas, Hospital Refunding 7/03 at 102 A 11,767,249
Revenue Bonds, Series 1993, 6.000%, 7/01/06
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California -- 14.5%
18,970,000 California Health Facilities Financing Authority, Insured 7/04 at 102 Aaa 17,917,165
Health Facility Refunding Revenue Bonds (Catholic
Healthcare West) 1994 Series A, 5.000%, 7/01/14
</TABLE>
12
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<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California -- continued
$38,795,000 California Statewide Communities Development 7/03 at 102 Aa $37,003,835
Authority, Certificates of Participation, St. Joseph
Health System Obligated Group, 5.500%, 7/01/23
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 10/03 at 102 Aaa 11,435,255
20,000,000 5.750%, 10/01/25 10/03 at 102 Aaa 19,846,200
12,000,000 State Public Works Board of the State of California 11/04 at 102 Aaa 14,128,440
Lease Revenue Bonds (Department of Corrections),
1994 Series A (California State Prison--
Monterey County (Soledad II)), 7.000%, 11/01/19
(Pre-refunded to 11/01/04)
State of California, Department of Water Resources,
Central Valley Project, Water System Revenue Bonds,
Series L:
15,515,000 5.700%, 12/01/16 6/03 at 101 1/2 Aa 15,527,877
9,500,000 5.750%, 12/01/19 12/03 at 101 1/2 Aa 9,513,775
12,250,000 5.500%, 12/01/23 12/03 at 101 1/2 Aa 11,808,755
21,000,000 State of California, Department of Water Resources, 12/03 at 101 Aa 18,132,240
Central Valley Project, Water System Revenue
Bonds, Series M, 4.875%, 12/01/27
15,725,000 Central Joint Powers Health Financing Authority, 2/03 at 102 Baa1 14,616,702
Certificates of Participation, Series 1993 (Community
Hospitals of Central California), 5.250%, 2/01/13
9,000,000 East Bay Municipal Utility District (Alameda and 6/03 at 102 Aaa 8,116,650
Contra Costa Counties, California), Water System
Subordinated Revenue Refunding Bonds,
Series 1993A, 5.000%, 6/01/21
Foothill/Eastern Transportation Corridor Agency,
Toll Road Revenue Bonds Series 1995A:
45,000,000 0.000%, 1/01/23 No Opt. Call Baa 8,879,400
15,000,000 6.000%, 1/01/34 1/05 at 102 Baa 14,899,350
17,040,000 Los Angeles Convention and Exhibition Center 8/03 at 102 Aaa 16,521,984
Authority, Lease Revenue Bonds, 1993 Refunding
Series A, The City of Los Angeles (California),
5.125%, 8/15/13
</TABLE>
13
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Portfolio of Investments
Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
California -- continued
<S> <C> <C> <C> <C>
$17,575,000 Department of Water and Power of the City of 4/02 at 102 Aa $18,693,297
Los Angeles, California, Water Works Revenue Bonds,
Issue of 1992, 6.500%, 4/15/32
16,000,000 The City of Los Angeles (California), Wastewater 6/03 at 102 Aaa 15,987,520
System Revenue Bonds, Series 1993-B,
5.700%, 6/01/23
15,615,000 The City of Los Angeles, California, Wastewater System 11/03 at 102 Aaa 14,459,802
Revenue Bonds, Series 1993-D, 5.200%, 11/01/21
15,750,000 Los Angeles County, Metropolitan Transportation 7/03 at 102 AA- 15,506,978
Authority, Proposition A, Sales Tax Revenue
Refunding Bonds, Series 1993-A, 5.500%, 7/01/13
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 7/03 at 102 Aaa 15,000,443
8,000,000 5.250%, 7/01/23 7/03 at 102 Aaa 7,414,080
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 10/03 at 102 Aa 10,185,630
20,750,000 5.000%, 10/01/23 10/03 at 100 Aa 18,602,790
31,360,000 Los Angeles County Transportation Commission 7/02 at 102 Aaa 35,465,338
(California) Proposition C Sales Tax Revenue
Bonds, Second Senior Bonds, Series 1992-A,
6.750%, 7/01/19 (Pre-refunded to 7/01/02)
5,000,000 The Metropolitan Water District of Southern 7/02 at 102 Aa 4,840,400
California, Water Revenue Bonds, Issue of 1992,
5.500%, 7/01/19
22,405,000 Northern California Power Agency, Hydroelectric 7/98 at 102 A 23,517,856
Project Number One Revenue Bonds, Refunding
Series E, 7.150%, 7/01/24
12,600,000 Sacramento County Sanitation Districts Financing 12/03 at 102 Aa 10,804,248
Authority, 1993 Revenue Bonds, 4.750%, 12/01/23
8,050,000 The Regents of the University of California, Refunding 9/02 at 102 A- 9,131,276
Revenue Bonds (Multiple Purpose Projects),
Series A, 6.875%, 9/01/16 (Pre-refunded to 9/01/02)
</TABLE>
14
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<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Colorado -- 1.7%
$29,175,000 Colorado Housing and Finance Authority, Single- 11/01 at 102 Aa $30,897,784
Family Housing Revenue Refunding Bonds,
1991 Series A, 7.250%, 11/01/31
17,850,000 Platte River Power Authority Power Revenue 6/97 at 102 Aa 18,332,664
Crossover Refunding Series, 1987-AA(Junior Lien),
6.875%, 6/01/16
- ----------------------------------------------------------------------------------------------------------------
Connecticut -- 0.1%
830,000 Connecticut Housing Finance Authority, Housing 11/00 at 102 Aa 834,963
Mortgage Finance Program Bonds, 1990 Series B,
1990 Subseries B1, 7.550%, 11/15/08
2,970,000 Connecticut Resources Recovery Authority, 7/97 at 101 1/2 A 3,025,153
Bridgeport Resco Company, L.P. Project Bonds,
Series B, 8.625%, 1/01/04
- ----------------------------------------------------------------------------------------------------------------
District of Columbia -- 0.3%
7,470,000 Capitol Hill Towers, Inc., First Mortgage Revenue 7/97 at 102 N/R 7,647,188
Bonds (FHA Insured Mortgage--Section 8
Assisted Elderly Housing), 8.500%, 1/01/22
- ----------------------------------------------------------------------------------------------------------------
Florida -- 2.9%
4,500,000 Dade County Health Facilities Authority (Florida), 12/99 at 102 Aaa 4,748,220
Hospital Revenue Bonds, Series 1987 (Mount Sinai
Medical Center Project), 8.400%, 12/01/07
(Pre-refunded to 12/01/99)
31,000,000 Hillsborough County Industrial Development 5/02 at 103 AA 36,061,990
Authority, Pollution Control Revenue Refunding
Bonds (Tampa Electric Company Project)
Series 1992, 8.000%, 5/01/22
9,300,000 Jacksonville Electric Authority (Jacksonville,Florida), 10/99 at 101 1/2 Aa1 9,842,376
St. Johns River Power Park System Special
Obligation Bonds, First Crossover Series,
6.500%, 10/01/14
25,000,000 Orlando Utilities Commission, Water and Electric 10/99 at 100 Aa 22,507,000
Subordinated Revenue Bonds, Series 1989D,
5.000%, 10/01/23
8,005,000 City of Pensacola Health Facilities Authority, Health 1/98 at 101 1/2 Aaa 8,394,603
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)
</TABLE>
15
<PAGE>
Portfolio of Investments
Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Florida -- continued
$ 1,420,000 The Elderly Housing Corporation of Sarasota, Inc. 7/97 at 103 N/R $ 1,467,314
(Elderly Housing Project for the Sarasota Housing
Authority) First Mortgage Revenue Bonds,
Series 1978, 7.500%, 7/01/09
- --------------------------------------------------------------------------------------------------------------------
Hawaii -- 0.3%
8,000,000 Department of Budget and Finance of the State of 7/01 at 102 Aaa 9,140,640
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)
- --------------------------------------------------------------------------------------------------------------------
Illinois -- 18.3%
8,500,000 Illinois Development Finance Authority, Revenue and 2/00 at 102 Baa2 9,587,150
Refunding Bonds, Series 1990A (Columbus-Cuneo-
Cabrini Medical Center), 8.500%, 2/01/15
(Pre-refunded to 2/01/00)
17,075,000 Illinois Educational Facilities Authority, Revenue 7/03 at 102 Aa1 16,528,600
Refunding Bonds, The University of Chicago,
Series 1993B, 5.600%, 7/01/24
10,000,000 Illinois Health Facilities Authority, Revenue Bonds, 10/02 at 102 Aaa 10,294,700
Series 1992 (Highland Park Hospital),
6.200%, 10/01/22
6,115,000 Illinois Health Facilities Authority Revenue Refunding 10/03 at 102 A 5,764,305
Bonds, Series 1993 (Illinois Masonic Medical
Center), 5.500%, 10/01/19
34,120,000 Illinois Health Facilities Authority, Revenue Bonds, 11/03 at 102 Aaa 32,082,354
Series 1993 (Rush-Presbyterian-St. Luke's Medical
Center Obligated Group), 5.500%, 11/15/25
7,275,000 Illinois Health Facilities Authority, Revenue Bonds, 3/04 at 102 Aaa 7,396,056
Series 1994 (Southern Illinois Hospital Services),
5.850%, 3/01/14
54,900,000 Illinois Health Facilities Authority, Revenue Bonds, 8/04 at 102 Aa 55,829,457
Series 1994A (Northwestern Memorial Hospital),
6.000%, 8/15/24
15,000,000 Illinois Health Facilities Authority, FHA Insured 2/06 at 102 Aaa 15,246,600
Mortgage Revenue Bonds, Series 1996 (Sinai
Health System), 6.000%, 2/15/24
21,670,000 State of Illinois, Build Illinois Bonds (Sales Tax 6/01 at 100 AAA 22,251,623
Revenue Bonds),Series O, 6.000%, 6/15/18
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Illinois -- continued
$ 14,200,000 State of Illinois, Build Illinois Bonds (Sales Tax 6/03 at 102 AAA $ 13,308,382
Revenue Bonds), Series S, 5.250%, 6/15/18
15,100,000 State of Illinois, General Obligation Bonds, Series 10/02 at 102 AA- 16,372,326
of March 1992 (Full Faith and Credit),
6.200%, 10/01/04
State of Illinois, General Obligation Bonds, Series of
August 1992 (Full Faith and Credit):
14,750,000 5.875%, 6/01/10 6/02 at 102 AA- 15,151,348
5,000,000 5.875%, 6/01/11 6/02 at 102 AA- 5,112,000
10,000,000 State of Illinois, General Obligation Bonds, Series of 4/03 at 102 AA- 9,969,000
April 1993 (Full Faith and Credit), 5.700%, 4/01/18
The Illinois State Toll Highway Authority, Toll Highway
Priority Revenue Bonds, 1992 Series A:
20,000,000 6.450%, 1/01/13 1/03 at 102 A1 21,058,600
8,655,000 6.200%, 1/01/16 1/03 at 102 Aaa 9,049,928
16,270,000 City of Chicago, General Obligation Bonds (Emergency 1/03 at 102 Aaa 15,647,673
Telephone System) Series 1993, 5.625%, 1/01/23
7,880,000 City of Chicago, General Obligation Bonds, Project 1/04 at 102 Aaa 7,381,669
Series 1993, 5.250%, 1/01/18
22,175,000 Chicago Metropolitan Housing Development 7/02 at 102 AA 23,103,467
Corporation, Housing Development Revenue
Refunding Bonds -- (FHA-Insured Mortgage Loans --
Section 8 Assisted Projects) Series 1992B,
6.900%, 7/01/22
7,965,000 City of Chicago, Motor Fuel Tax Revenue Bonds, 1/03 at 101 Aaa 7,227,122
Refunding Series 1993, 5.000%, 1/01/16
57,400,000 City of Chicago (Illinois), Chicago-O'Hare International 1/04 at 102 A1 53,576,586
Airport, General Airport Revenue Refunding Bonds,
1993 Series A, 5.000%, 1/01/16
18,710,000 City of Chicago (Illinois), Chicago-O'Hare International 1/04 at 102 Aaa 17,027,410
Airport, General Airport Second Lien, Revenue
Refunding Bonds, 1993 Series C, 5.000%, 1/01/18
22,335,000 City of Chicago, Water Revenue Bonds, Series 1995, 11/06 at 102 Aaa 20,842,352
5.000%, 11/01/15
25,380,000 The County of Cook, Illinois, General Obligation Bonds, 11/03 at 100 Aaa 22,371,709
Series 1993A, 5.000%, 11/15/23
</TABLE>
17
<PAGE>
Portfolio of Investments
Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Illinois -- continued
$ 17,300,000 DuPage Water Commission (DuPage, Cook 3/02 at 100 Aaa $ 17,393,074
and Will Counties, Illinois) General Obligation
Water Refunding Bonds, Series 1992,
5.750%, 3/01/11
9,500,000 DuPage Water Commission (DuPage, Cook 5/03 at 102 Aa1 9,232,290
and Will Counties, Illinois) Water Refunding
Revenue Bonds, Series 1993, 5.250%, 5/01/14
2,000,000 Village of Hazel Crest, Illinois, Hospital Facilities 7/97 at 102 AAA 2,076,740
Refunding and Improvement Bonds (South Suburban
Hospital Foundation Project), Series 1987, 9.125%,
7/01/17 (Pre-refunded to 7/01/97)
Metropolitan Pier and Exposition Authority (Illinois),
McCormick Place Expansion Project Bonds, Series 1992A:
5,000,000 0.000%, 6/15/17 No Opt. Call Aaa 1,557,400
56,180,000 6.500%, 6/15/27 (Pre-refunded to 6/15/03) 6/03 at 102 Aaa 62,813,734
5,000,000 Regional Transportation Authority, Cook, DuPage, Kane, 6/03 at 102 Aaa 5,110,300
Lake, McHenry and Will Counties, Illinois, General
Obligation Refunding Bonds, Series 1993C,
5.800%, 6/01/13
The Elderly Housing Corporation of Zion, Illinois, Housing
Development Revenue Bonds, (Dell-Zion Associates
Section 8 Assisted Project) Series 1978:
85,000 7.250%, 3/01/98 3/97 at 102 A 86,074
1,705,000 7.750%, 3/01/10 3/97 at 102 A 1,751,154
- -------------------------------------------------------------------------------------------------------------------
Indiana -- 3.1%
49,600,000 Indiana Health Facilities Financing Authority, Hospital 11/03 at 102 AA 48,520,208
Revenue Bonds (Daughters of Charity) Series 1993,
5.750%, 11/15/22
11,590,000 Indiana Health Facility Financing Authority, Hospital 9/02 at 102 Aaa 12,435,838
Revenue Refunding Bonds, Series 1992A (Methodist
Hospital of Indiana, Inc.), 5.750%, 9/01/11
12,550,000 Indiana State Office Building Commission, Capital 7/97 at 102 Aaa 13,017,990
Complex Revenue Bonds, Series 1987 (State Office
Building II Facility), 8.750%, 7/01/12
(Pre-refunded to 7/01/97)
10,100,000 Indiana State Office Building Commission Correctional 12/01 at 102 A1 10,600,859
Facilities Program, Revenue Bonds, Series 1991,
6.375%, 7/01/16
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Indiana -- continued
$ 2,500,000 The Indianapolis Local Public Improvement Bond Bank, 2/03 at 102 A+ $ 2,735,525
Series 1992D Bonds, 6.750%, 2/01/20
2,430,000 Southwind Housing, Inc., 7.125%, 11/15/21 No Opt. Call N/R 2,882,831
- ----------------------------------------------------------------------------------------------------------------
Iowa -- 0.3%
3,720,000 Iowa Housing Finance Authority, Single Family 8/97 at 100 1/2 Aaa 3,744,515
Mortgage Bonds, 1977 Series A, 5.875%, 8/01/08
3,815,000 City of Davenport, Iowa, Hospital Facility Revenue 7/02 at 102 Aaa 4,159,838
Bonds (Mercy Hospital Project), Series 1992,
6.625%, 7/01/14
- ----------------------------------------------------------------------------------------------------------------
Kentucky -- 3.2%
3,330,000 Kentucky Housing Corporation, Housing Revenue Bonds, 7/01 at 102 Aaa 3,523,773
(FHA Insured/VA Guaranteed) 1991 Series A,
7.250%, 1/01/17
Kentucky Housing Corporation, Housing Revenue
Bonds, 1993 Series B (Federally Insured or
Guaranteed Mortgage Loans):
17,600,000 5.300%, 7/01/10 1/04 at 102 Aaa 17,252,752
14,400,000 5.400%, 7/01/14 1/04 at 102 Aaa 14,019,696
The Turnpike Authority of Kentucky, Resource
Recovery Road Revenue Refunding Bonds,
1987 Series A:
9,860,000 8.000%, 7/01/03 7/97 at 102 A+ 10,203,227
8,980,000 5.000%, 7/01/08 7/97 at 100 A+ 8,793,036
34,500,000 County of Carroll, Kentucky, Collateralized Pollution 9/02 at 102 Aa2 39,203,730
Control Revenue Bonds (Kentucky Utilities
Company Project) 1992 Series A, 7.450%, 9/15/16
- ----------------------------------------------------------------------------------------------------------------
Maine -- 0.8%
Maine State Housing Authority, Mortgage Purchase
Bonds, 1994 Series A:
13,650,000 5.650%, 11/15/20 2/04 at 102 AA- 13,335,095
10,000,000 5.700%, 11/15/26 2/04 at 102 AA- 9,747,600
- ----------------------------------------------------------------------------------------------------------------
Maryland -- 0.2%
5,000,000 Community Development Administration Maryland 1/07 at 102 Aa 5,035,600
Department of Housing and Community
Development, Housing Revenue Bonds,
Series 1996A, 5.875%, 7/01/16
</TABLE>
19
<PAGE>
Portfolio of Investments
Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Massachusetts -- 3.1%
$ 15,000,000 Massachusetts Bay Transportation Authority, 8/00 at 102 Aaa $ 16,881,600
Certificates of Participation, 1990 Series A,
7.650%, 8/01/15 (Pre-refunded to 8/01/00)
Massachusetts Water Resources Authority, General
Revenue Bonds, 1990 Series A:
6,500,000 7.500%, 4/01/16 (Pre-refunded to 4/01/00) 4/00 at 102 Aaa 7,228,845
9,605,000 6.000%, 4/01/20 4/00 at 100 A 9,648,607
Massachusetts Water Resources Authority, General
Revenue Refunding Bonds, 1993 Series B:
14,765,000 5.250%, 3/01/13 3/03 at 102 A 14,329,580
10,795,000 5.000%, 3/01/22 3/03 at 100 A 9,655,804
24,650,000 Massachusetts Water Resources Authority, General 12/04 at 102 A 22,925,979
Revenue Bonds, 1993 Series C, 5.250%, 12/01/20
7,670,000 The Commonwealth of Massachusetts, General No Opt. Call A1 7,742,482
Obligation Refunding Bonds, 1993 Series C,
4.700%, 8/01/02
- --------------------------------------------------------------------------------------------------------------------
Michigan -- 4.9%
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 8/04 at 102 A 19,247,355
59,250,000 5.500%, 8/15/23 8/04 at 102 A 56,207,513
3,000,000 Michigan State Hospital Finance Authority, Hospital 10/05 at 100 Baa 3,275,940
Revenue Refunding Bonds (Genesys Health System
Obligated Group), Series 1995A, 7.500%, 10/01/27
10,000,000 Michigan State Housing Development Authority, 10/02 at 102 A+ 10,360,900
Rental Housing Revenue Bonds, 1992 Series A,
6.600%, 4/01/12
12,080,000 Michigan State Housing Development Authority, 4/04 at 102 Aaa 12,138,830
Rental Housing Revenue Bonds, 1994 Series B,
5.700%, 4/01/12
15,000,000 School District of the City of Detroit, Wayne County, 5/06 at 102 Aaa 14,988,150
Michigan, School Building and Site Improvement
Bonds (Unlimited Tax General Obligation),
Series 1996A, 5.700%, 5/01/25
5,000,000 City of Detroit, Michigan, Sewage Disposal System 7/97 at 102 AAA 5,177,150
Revenue Refunding Bonds, Series 1987,
8.250%, 7/01/05 (Pre-refunded to 7/01/97)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Michigan -- continued
$ 16,805,000 Hospital Finance Authority of the City of St. Joseph, 1/04 at 102 Aaa $ 15,927,779
Revenue Refunding Bonds (Mercy Memorial
Medical Center Obligated Group) Series 1993,
5.250%, 1/01/16
5,000,000 Regents of the University of Michigan, Hospital 6/97 at 100 Aa 5,009,350
Revenue Refunding Bonds, Series 1986A,
6.625%, 12/01/10
- -----------------------------------------------------------------------------------------------------------------
Minnesota -- 0.4%
2,430,000 Minnesota Housing Finance Agency, Housing 8/97 at 101 Aa 2,458,188
Development Bonds, 1977 Series A,
6.250%, 2/01/20
9,760,000 Minnesota Housing Finance Agency, Rental Housing 2/05 at 102 Aaa 9,906,595
Bonds, 1995 Series D, 5.800%, 8/01/11
- -----------------------------------------------------------------------------------------------------------------
Missouri -- 0.8%
15,750,000 Health and Educational Facilities Authority of the 10/99 at 102 1/2 BBB+ 17,477,775
State of Missouri, Health Facilities Refunding
and Improvement Revenue Bonds (Heartland Health
System's Project) Series 1989, 8.125%, 10/01/10
6,195,000 Missouri Housing Development Commission, Housing 3/97 at 101 1/2 AA+ 6,304,961
Development Bonds, Series B 1979, (Federally
Insured Mortgage Bonds), 7.000%, 9/15/22
- -----------------------------------------------------------------------------------------------------------------
Nebraska -- 1.3%
33,860,000 Consumers Public Power District, Nebraska, Nuclear 7/97 at 100 A1 33,908,758
Facility Revenue Bonds, 1968 Series,
5.100%, 1/01/03
2,340,000 Hospital Authority No. 1 of Hall County, Nebraska, 6/97 at 103 AA 2,414,529
Hospital Facility Revenue Bonds (Lutheran
Hospitals and Homes Society Grand Island Project)
Series 1977, 6.750%, 12/01/07
- -----------------------------------------------------------------------------------------------------------------
Nevada -- 0.3%
8,630,000 City of Reno, Nevada, Insured Hospital Revenue 5/03 at 102 Aaa 8,800,701
Bonds (St. Mary's Regional Medical Center),
Series 1993A, 5.800%, 5/15/13
</TABLE>
21
<PAGE>
Portfolio of Investments
Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New Hampshire -- 0.3%
$ 8,500,000 The Industrial Development Authority of the State of 12/01 at 103 Baa3 $ 9,020,625
New Hampshire, Pollution Control Revenue Bonds
(Central Maine Power Company Project, 1984
Series B), 7.375%, 5/01/14
- -----------------------------------------------------------------------------------------------------------------
New Jersey -- 0.4%
10,750,000 New Jersey Housing and Mortgage Finance Agency, 5/02 at 102 A+ 11,565,710
Housing Revenue Bonds, 1992 Series A,
6.950%, 11/01/13
- -----------------------------------------------------------------------------------------------------------------
New York -- 7.5%
8,400,000 Dormitory Authority of the State of New York, Beth 11/05 at 102 Aaa 8,721,216
Israel Medical Center Revenue Bonds, Series 1996,
6.000%, 11/01/15
8,000,000 New York Local Government Assistance Corporation 4/02 at 102 Aaa 9,061,520
(A Public Benefit Corporation of the State
of New York), Series 1991D Bonds,
7.000%, 4/01/18 (Pre-refunded to 4/01/02)
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) 11/00 at 102 Aaa 18,468,294
3,330,000 8.000%, 11/01/08 11/00 at 102 BBB+ 3,717,379
7,525,000 Power Authority of the State of New York, General 1/03 at 102 Aa 7,110,072
Purpose Bonds, Series CC, 5.250%, 1/01/18
11,490,000 State of New York Mortgage Agency, Mortgage 4/97 at 102 Aa 11,737,265
Revenue Bonds, Eighth Series A, 6.875%, 4/01/17
10,725,000 Battery Park City Authority, Senior Revenue Refunding 11/03 at 102 AA 9,972,105
Bonds, Series 1993A, 5.000%, 11/01/13
16,270,000 Municipal Assistance Corporation for the City of New 7/97 at 102 Aa 16,796,497
York, New York, Series 59 Bonds, 7.750%, 7/01/06
14,250,000 Municipal Assistance Corporation for the City of New 7/97 at 100 Aa 14,314,838
York, New York, Series 60 Bonds, 6.000%, 7/01/08
18,565,000 Municipal Assistance Corporation for the City of New 7/97 at 102 Aa 19,090,018
York, New York, Series 62 Bonds, 6.750%, 7/01/06
2,350,000 The City of New York, General Obligation Bonds, No Opt. Call Baa1 2,459,111
Fiscal 1996 Series C, 6.000%, 8/15/04
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New York -- continued
$ 5,000,000 The City of New York, General Obligation Bonds, 11/97 at 101 1/2 Aaa $ 5,224,700
Fiscal 1988 Series A, 8.125%, 11/01/06
(Pre-refunded to 11/01/97)
8,000,000 The City of New York, General Obligation Bonds, 8/03 at 102 Baa1 7,891,760
Fiscal 1994 Series D, 5.750%, 8/15/11
8,525,000 The City of New York, General Obligation Bonds, 8/02 at 101 1/2 Aaa 9,505,972
Fiscal 1992 Series C, Fixed Rate Bonds, Subseries
C-1, 6.625%, 8/01/12 (Pre-refunded to 8/01/02)
14,000,000 The City of New York, General Obligation Bonds, 2/05 at 101 Baa1 14,575,960
Fiscal 1995 Series F, 6.625%, 2/15/25
The City of New York, General Obligation Bonds,
Fiscal 1996 Series G:
7,500,000 5.900%, 2/01/05 No Opt. Call Baa1 7,768,125
12,655,000 5.750%, 2/01/17 2/06 at 101 1/2 Baa1 12,126,401
The City of New York, General Obligation Bonds,
Fiscal 1994 Series C:
1,925,000 4.875%, 10/01/01 No Opt. Call Baa1 1,966,580
6,485,000 4.875%, 10/01/01 No Opt. Call Aaa 6,625,076
15,620,000 The City of New York General Obligation Bonds, 8/06 at 101 1/2 Baa1 15,416,471
Fiscal 1997, Series E, 6.000%, 8/01/16
8,600,000 New York City Municipal Water Finance Authority, 6/02 at 101 1/2 A 8,728,312
Water and Sewer Revenue Bonds, Fiscal 1993
Series A, 6.000%, 6/15/17
5,000,000 Triborough Bridge and Tunnel Authority (New York), 1/04 at 100 Aa 4,368,100
General Purpose Revenue Bonds, Series 1994A,
4.750%, 1/01/19
- -----------------------------------------------------------------------------------------------------------------
North Carolina -- 3.3%
17,290,000 North Carolina Eastern Municipal Power Agency, 1/98 at 102 Aaa 18,247,866
Power System Revenue Bonds, Refunding Series
1988A, 8.000%, 1/01/21 (Pre-refunded to 1/01/98)
68,150,000 North Carolina Eastern Municipal Power Agency, 1/03 at 102 Baa1 68,878,524
Power System Revenue Bonds, Refunding Series
1993B, 6.250%, 1/01/12
5,545,000 North Carolina Municipal Power Agency Number 1, 1/98 at 102 Aaa 5,805,393
Catawba Electric Revenue Refunding Bonds,
Series 1988, 7.625%, 1/01/14
23
</TABLE>
<PAGE>
Portfolio of Investments
Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Carolina -- continued
Housing Authority of the City of Wilmington,
North Carolina, First Mortgage Revenue Bonds,
Series 1979:
$ 115,000 7.750%, 6/01/98 6/97 at 100 AA $ 120,437
1,195,000 7.750%, 6/01/10 6/97 at 100 AA 1,247,222
- ----------------------------------------------------------------------------------------------------------------
Oklahoma -- 0.3%
5,375,000 The Comanche County Hospital Authority (Lawton, 7/99 at 102 AAA 5,939,698
Oklahoma), Hospital Revenue Bonds, Series 1989,
8.050%, 7/01/16 (Pre-refunded to 7/01/99)
2,970,000 Midwest City Memorial Hospital Authority (Midwest 4/02 at 102 BBB+ 3,376,385
City, Oklahoma) Hospital Revenue Bonds Series
1992, 7.375%, 4/01/12 (Pre-refunded to 4/01/02)
- ----------------------------------------------------------------------------------------------------------------
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 7/02 at 102 AAA 4,396,991
16,830,000 8.200%, 7/01/24 7/02 at 102 AAA 18,420,603
22,500,000 Pennsylvania Housing Finance Agency, Rental Housing 7/03 at 102 Aaa 22,497,975
Refunding Bonds, Issue 1993, 5.750%, 7/01/14
16,600,000 Pennsylvania Intergovernmental Cooperation Authority, 6/03 at 100 Aaa 14,918,918
Special Tax Revenue Refunding Bonds (City of
Philadelphia Funding Program), Series of 1993A,
5.000%, 6/15/22
10,000,000 Lehigh County Industrial Development Authority, 9/04 at 102 Aaa 10,812,300
Pollution Control Revenue Refunding Bonds, 1994
Series B (Pennsylvania Power & Light Company
Project), 6.400%, 9/01/29
9,300,000 City of Philadelphia, Pennsylvania, Airport Revenue 6/97 at 100 A- 9,369,750
Bonds, Series 1978, Philadelphia International
Airport, 6.200%, 6/15/06
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) 8/01 at 102 AAA 11,405,200
7,000,000 7.000%, 8/01/18 (Pre-refunded to 8/01/01) 8/01 at 100 AAA 7,731,640
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Rhode Island -- 0.2%
$ 7,595,000 Rhode Island Convention Center Authority, 5/03 at 100 Aaa $ 6,740,563
Refunding Revenue Bonds, 1993 Series B,
5.000%, 5/15/20
- ----------------------------------------------------------------------------------------------------------------
South Carolina -- 0.7%
20,750,000 Piedmont Municipal Power Agency, Electric Revenue 1/98 at 102 Aaa 21,686,240
Bonds, 1988 Refunding Series A, 7.400%, 1/01/18
- ----------------------------------------------------------------------------------------------------------------
Texas -- 4.1%
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) 5/99 at 100 A 354,939
18,415,000 14.000%, 11/15/01 No Opt. Call A 23,613,680
4,000,000 11.000%, 11/15/02 (Pre-refunded to 5/15/97) 5/97 at 100 Aaa 4,062,160
29,500,000 Brazos River Authority (Texas) Collateralized Revenue 8/00 at 102 Aaa 29,822,140
Refunding Bonds (Houston Lighting & Power
Company Project) Series 1995, 5.800%, 8/01/15
24,800,000 Harris County, Texas, Toll Road Senior Lien Revenue 8/04 at 102 Aaa 24,645,992
Refunding Bonds, Series 1994, 5.300%, 8/15/13
7,000,000 Harris County Health Facilities Development 2/01 at 102 Aa 7,528,220
Corporation (Texas) Hospital Revenue Bonds
(St. Luke's Episcopal Hospital Project),
Series 1991A, 6.750%, 2/15/21
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) 2/98 at 102 Aaa 5,294,350
3,500,000 8.000%, 2/01/16 (Pre-refunded to 2/01/98) 2/98 at 102 Aaa 3,706,045
16,000,000 City of San Antonio, Texas, Electric and Gas Systems 2/02 at 101 Aa1 14,666,720
Revenue Refunding Bonds, New Series 1992,
5.000%, 2/01/17
5,615,000 City of San Antonio, Texas (Bexar County, Texas) 5/97 at 101 1/2 Aaa 5,740,888
Prior Lien Sewer System Revenue Improvement
Bonds, Series 1987, 7.900%, 5/01/14
(Pre-refunded to 5/01/97)
- ----------------------------------------------------------------------------------------------------------------
Utah -- 3.3%
Intermountain Power Agency (Utah), Power Supply
Revenue Refunding Bonds, 1993 Series A:
6,300,000 5.500%, 7/01/13 7/03 at 103 Aa 6,169,905
44,990,000 5.000%, 7/01/23 7/03 at 100 Aa 40,018,605
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Municipal Bond -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Utah -- continued
$ 16,260,000 Intermountain Power Agency (Utah) Power Supply 7/97 at 102 Aa $16,741,946
Revenue Bonds, Series 1987B, 7.200%, 7/01/19
30,000,000 Intermountain Power Agency Power Supply Revenue 7/97 at 102 Aaa 29,941,200
Refunding Bonds, 1997 Series B,
5.750%, 7/01/19 (WI)
1,615,000 Layton, Utah, Industrial Development Revenue Bonds 6/97 at 100 Ba3 1,616,518
(C.D.I. Ltd. Project -- K Mart Guaranteed),
8.750%, 6/01/05
- ----------------------------------------------------------------------------------------------------------------
Vermont -- 0.1%
235,000 University of Vermont and State Agricultural College, 7/97 at 101 A1 238,156
Housing, Dining and Student Services Facilities
System Bonds, Lot 1, Series 1969-A,
6.300%, 7/01/06
- ----------------------------------------------------------------------------------------------------------------
Virginia -- 3.8%
50,000,000 Virginia Housing Development Authority, 1/02 at 102 Aa1 52,085,000
Commonwealth Mortgage Bonds, 1992 Series A,
7.150%, 1/01/33
3,275,000 Virginia Housing Development Authority, Multi-Family 5/97 at 101 AA+ 3,315,152
Mortgage Bonds, 1978 Series B, 6.700%, 11/01/21
Virginia Housing Development Authority, Multi-Family
Housing Bonds, 1993 Series C:
19,080,000 5.550%, 5/01/08 5/03 at 102 AA+ 19,177,880
28,075,000 5.900%, 5/01/14 5/03 at 102 AA+ 28,490,229
6,240,000 Chesapeake Hospital Authority, Virginia, Hospital 7/98 at 102 Aaa 6,669,624
Facility Revenue Bonds (Chesapeake General
Hospital), Series 1988, 7.625%, 7/01/18
(Pre-refunded to 7/01/98)
870,000 Industrial Development Authority of the City of No Opt. Call N/R 873,811
Chesapeake, Medical Facility Insured-Mortgage
Revenue Bonds (Medical Facilities of America XIV
Project), Series 1979, 7.500%, 9/01/01
- ----------------------------------------------------------------------------------------------------------------
Washington -- 6.9%
Washington Public Power Supply System, Nuclear
Project No. 1 Refunding Revenue Bonds, Series 1993A:
14,260,000 7.000%, 7/01/07 No Opt. Call Aa1 16,218,468
18,500,000 5.750%, 7/01/13 7/03 at 102 Aa1 18,257,465
10,000,000 5.700%, 7/01/17 7/03 at 102 Aaa 9,816,200
26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Washington -- continued
$ 7,805,000 Washington Public Power Supply System, Nuclear No Opt. Call Aa1 $ 8,926,266
Project No. 1 Refunding Revenue Bonds,
Series 1993B, 7.000%, 7/01/09
5,000,000 Washington Public Power Supply System, Nuclear No Opt. Call Aa1 5,766,900
Project No. 1 Refunding Revenue Bonds,
Series 1989B, 7.125%, 7/01/16
10,000,000 Washington Public Power Supply System, Nuclear 7/03 at 102 Aa1 9,474,600
Project No. 1 Refunding Revenue Bonds,
Series 1993C, 5.375%, 7/01/15
8,835,000 Washington Public Power Supply System, Nuclear 7/03 at 102 Aa1 8,574,368
Project No. 3 Refunding Revenue Bonds, Series
Series 1993B, 5.700%, 7/01/18
Washington Public Power Supply System, Nuclear
Project No. 3 Refunding Revenue Bonds, Series 1993C:
9,180,000 5.300%, 7/01/10 7/03 at 102 Aa1 8,943,064
51,070,000 5.375%, 7/01/15 7/03 at 102 Aa1 48,287,706
11,545,000 5.500%, 7/01/18 7/03 at 102 Aa1 10,927,343
6,450,000 Public Utility District No. 1 of Chelan County, Rocky 7/97 at 100 A1 6,335,190
Reach Hydro-Electric System Revenue Bonds,
Series of 1968, 5.125%, 7/01/23
24,745,000 Public Utility District No. 1 of Chelan County, Rocky 7/97 at 100 A1 24,718,770
Reach Hydro-Electric System Revenue Bonds,
Series of 1957, 5.000%, 7/01/13
1,495,000 Columbia Storage Power Exchange, Columbia 4/97 at 100 Aa 1,495,762
Storage Power Exchange Revenue Bonds,
3.875%, 4/01/03
16,250,000 Public Utility District No. 1 of Douglas County, 9/97 at 101 A+ 14,144,812
Washington, Wells Hydroelectric Revenue Bonds,
Series of 1963, 4.000%, 9/01/18
7,250,000 Municipality of Metropolitan Seattle, Sewer 1/03 at 102 Aaa 7,385,574
Refunding Revenue Bonds, Series Y,
5.700%, 1/01/12
- ----------------------------------------------------------------------------------------------------------------
Wisconsin -- 4.3%
13,700,000 Wisconsin Health and Educational Facilities Authority, 11/01 at 102 Aaa 14,164,155
Revenue Bonds, Series 1991 (Columbia Hospital, Inc.),
6.250%, 11/15/21
9,830,000 Wisconsin Health and Educational Facilities Authority, 6/02 at 102 Aaa 10,185,060
Health Facilities Revenue Bonds (SSM Health Care),
Series 1992AA, 6.250%, 6/01/20
27
</TABLE>
<PAGE>
Portfolio of Investments
Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wisconsin -- continued
$ 6,000,000 Wisconsin Health and Educational Facilities Authority, 12/02 at 102 Aaa $ 6,094,080
Revenue Bonds, Series 1992A (Meriter Hospital, Inc.),
6.000%, 12/01/22
18,500,000 Wisconsin Health and Educational Facilities Authority, 8/03 at 102 Aaa 16,887,354
Revenue Bonds, Series 1993 (Aurora Health Care
Obligated Group), 5.250%, 8/15/23
3,750,000 Wisconsin Health and Educational Facilities Authority, 10/04 at 102 Aaa 3,840,862
Revenue Bonds, Series 1994A (Froedtert Memorial
Lutheran Hospital, Inc.), 5.875%, 10/01/13
32,000,000 Wisconsin Health and Educational Facilities Authority, 5/06 at 102 Aaa 31,358,080
Revenue Bonds, Series 1996 (Aurora Medical Group,
Inc. Project), 5.750%, 11/15/25
4,500,000 Wisconsin Housing and Economic Development No Opt.Call A 4,585,274
Authority, Insured Mortgage Revenue Refunding
Bonds, 1977 Series A, 5.800%, 6/01/17
8,500,000 Wisconsin Housing and Economic Development 4/02 at 102 A1 9,046,464
Authority, Multi-Family Housing Revenue Bonds,
1992 Series B, 7.050%, 11/01/22
28,200,000 Wisconsin Housing and Economic Development 12/03 at 102 A1 28,235,531
Authority, Housing Revenue Bonds, 1993 Series C,
5.800%, 11/01/13
- -------------------------------------------------------------------------------------------------------------------
$2,914,200,000 Total Investments -- (cost $2,729,224,394) -- 99.7% 2,885,058,766
==============-----------------------------------------------------------------------------------------------------
Temporary Investments in Short Term Municipal Securities -- 0.2%
$ 5,800,000 Massachusetts Health and Educational Facilities Authority, VMIG-1 5,800,000
(Capital Asset Program), Variable Rate Demand Bonds,
3.450%, 1/01/35+
==============-----------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.1% 640,110
---------------------------------------------------------------------------------------------------
Net Assets -- 100% $2,891,498,876
===================================================================================================
</TABLE>
28
<PAGE>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Summary of Ratings** - Portfolio of Investments (excluding
temporary investments)
<TABLE>
<CAPTION>
Standard Number of Market Market
& Poor's Moody's Securities Value Percent
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
AAA Aaa 83 $1,079,628,869 36%
AA+, AA, AA- Aa1, Aa, Aa2, Aa3 71 1,088,034,131 38
A+ A1 16 253,264,606 9
A, A- A, A2, A3 18 233,709,860 8
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 17 215,933,638 7
BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 1,616,518 1
Non-rated Non-rated 4 12,871,144 1
- --------------------------------------------------------------------------------
Total 210 $2,885,058,766 100%
================================================================================
</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.
(WI) Security purchased on a when-issued basis (see note 1 of the Notes to
Financial Statements).
+ The security has a maturity of more than one year, but has variable rate
and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically
based on market conditions or a specified market index.
See accompanying notes to financial statements.
29
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Insured Municipal Bond
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama -- 8.2%
$ 5,600,000 The Alabama Public Health Care Authority, Mortgage 10/06 at 102 Aaa $ 5,738,656
Revenue Bonds, Series 1996, 6.000%, 10/01/25
2,120,000 The Water Supply Board of the City of Albertville 3/02 at 102 Aaa 2,333,357
(Alabama) Water Revenue Bonds, Series 1992,
6.700%, 3/01/11
3,500,000 City of Athens, Alabama, Electric Revenue Warrants, 6/05 at 102 Aaa 3,620,190
Series 1995, 6.000%, 6/01/25
4,615,000 The Governmental Utility Services Corporation of the 12/99 at 102 Aaa 5,034,180
City of Auburn, Floating/Fixed Rate Wastewater
Treatment Revenue Bonds, Series 1984 (Merscot-
Auburn Limited Partnership Project),
7.300%, 1/01/12
1,875,000 The Special Care Facilities Financing Authority of the 1/01 at 102 Aaa 2,057,231
City of Birmingham -- Baptist Medical Centers
(Alabama), Revenue Bonds, Series 1991-A
(The Baptist Medical Centers), 7.000%, 1/01/21
1,225,000 The Utilities Board of the City of Daphne (Alabama), 6/00 at 102 Aaa 1,346,275
Water, Gas and Sewer Revenue Refunding Bonds,
Series 1990B, 7.350%, 6/01/20
6,750,000 The Public Building Authority of the City of Huntsville 10/05 at 102 Aaa 6,987,668
(Alabama), Municipal Justice and Public Safety
Center Lease Revenue Bonds, Series 1996A,
6.000%, 10/01/25
2,000,000 Jefferson County, Alabama, Sewer Revenue Refunding 2/07 at 101 Aaa 1,965,700
Warrants, Series 1997-A, 5.625%, 2/01/22
3,000,000 City of Madison (Alabama), General Obligation School 2/04 at 102 Aaa 3,199,350
Warrants, Series 1994, 6.250%, 2/01/19
5,500,000 City of Madison (Alabama), General Obligation 4/05 at 102 Aaa 5,691,125
Warrants, Series 1995, 6.000%, 4/01/23
3,000,000 Mobile County, Alabama, General Obligation Tax 2/00 at 102 Aaa 3,246,780
Pledge Warrants, Series 1991, 6.700%, 2/01/11
(Pre-refunded to 2/01/00)
12,000,000 The Medical Clinic Board of the City of Montgomery, 3/06 at 102 Aaa 12,296,280
Alabama, Health Care Facility Revenue Bonds,
Jackson Hospital & Clinic, Series 1996, 6.000%,
3/01/26
3,000,000 City of Muscle Schoals, Alabama, General Obligation 2/06 at 102 Aaa 3,062,580
Various Purpose Warrants, Series 1996, 5.900%,
8/01/25
30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama -- continued
$ 3,000,000 The Utilities Board of the City of Oneonta (Alabama), 11/04 at 102 Aaa $ 3,395,280
Utility Revenue Bonds, Series 1994,
6.900%, 11/01/24
West Morgan -- East Lawrence Water Authority, Water
Revenue Bonds, Series 1994:
2,200,000 6.800%, 8/15/19 (Pre-refunded to 8/15/04) 8/04 at 102 Aaa 2,528,548
3,000,000 6.800%, 8/15/25 (Pre-refunded to 8/15/04) 8/04 at 102 Aaa 3,456,990
- ----------------------------------------------------------------------------------------------------------------
Alaska -- 1.1%
8,565,000 Alaska Housing Finance Corporation, Mortgage 6/06 at 102 Aaa 8,668,979
Revenue Bonds, 1996 Series A, 6.000%, 12/01/15
- ----------------------------------------------------------------------------------------------------------------
Arizona -- 2.0%
5,000,000 Navajo County, Arizona, Pollution Control Corporation, 8/03 at 102 Baa1 4,960,850
Pollution Control Revenue Refunding Bonds
(Arizona Public Service Company), 1993 Series A,
5.875%, 8/15/28
6,000,000 Tempe Union High School District No. 213 of Maricopa 7/04 at 101 Aaa 6,343,680
County, Arizona, School Improvement and Refunding
Bonds, Series 1994, 6.000%, 7/01/10
5,000,000 City of Tucson, Arizona, Water System Revenue Bonds, 7/06 at 101 Aaa 5,206,300
Series 1994-A (1996), 6.000%, 7/01/21
- ----------------------------------------------------------------------------------------------------------------
California -- 11.9%
5,000,000 California Health Facilities Financing Authority, 7/06 at 102 Aaa 5,108,900
Insured Health Facility Refunding Revenue Bonds,
(Mark Twain St. Joseph's HealthCare Corporation),
1996 Series A, 6.000%, 7/01/25
2,500,000 State Public Works Board of the State of California, 12/03 at 102 Aaa 2,364,925
Lease Revenue Bonds (Department of Corrections),
1993 Series B (California State Prison -- Fresno
County, Coalinga), 5.375%, 12/01/19
13,785,000 State Public Works Board of the State of California, 11/06 at 102 Aaa 13,627,162
Lease Revenue Refunding Bonds, (Department
of Corrections), Monterey County, (Soledad II),
5.625%, 11/01/19
2,750,000 Anaheim Public Financing Authority, Lease Revenue 9/07 at 101 Aaa 2,485,890
Bonds, (Anaheim Public Improvements Project),
Senior Lease Revenue Bonds, 1997 Series A,
5.000%, 9/01/27
</TABLE>
31
<PAGE>
Portfolio of Investments
Insured Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California -- continued
$ 3,525,000 Brea Public Financing Authority (Orange County, 8/01 at 102 Aaa $ 3,974,473
California), 1991 Tax Allocation Revenue Bonds,
Series A (Redevelopment Project AB),
7.000%, 8/01/15 (Pre-refunded to 8/01/01
14,740,000 Los Angeles Convention and Exhibition Center Authority, 8/03 at 102 Aaa 13,984,722
Lease Revenue Bonds, 1993 Refunding Series A,
The City of Los Angeles (California),
5.375%, 8/15/18
11,630,000 Los Angeles County Sanitation Districts Financing 10/03 at 102 Aaa 10,850,325
Authority, Capital Projects Revenue Bonds, 1993
Series A (Senior Ad Valorem Obligation Bonds),
5.250%, 10/01/19
M-S-R Public Power Agency (California), San Juan
Project Refunding Revenue Bonds, Series G:
2,500,000 5.300%, 7/01/12 (WI) 7/07 at 101 Aaa 2,490,200
2,500,000 5.375%, 7/01/13 (WI) 7/07 at 101 Aaa 2,491,725
13,750,000 Ontario Redevelopment Financing Authority 8/03 at 102 Aaa 14,438,875
(San Bernardino County, California) 1993 Revenue
Bonds (Ontario Redevelopment Project No. 1),
5.800%, 8/01/23
5,295,000 County of Riverside, California (1994 Desert Justice 12/04 at 101 Aaa 5,538,305
Facility Project) Certificates of Participation,
6.000%, 12/01/12
2,250,000 Sacramento Municipal Utility District, Electric 9/01 at 102 Aaa 2,496,375
Revenue Bonds, 1991 Series Y, 6.500%, 9/01/21
(Pre-refunded to 9/01/01)
6,050,000 The Regents of the University of California Refunding 9/03 at 102 Aaa 5,432,658
Revenue Bonds (1989 Multiple Purpose Projects),
Series C, 5.000%, 9/01/23
10,000,000 The Regents of the University of California, Revenue 9/02 at 102 Aaa 10,724,700
Bonds (Multiple Purpose Projects), Series D,
6.375%, 9/01/24
- ----------------------------------------------------------------------------------------------------------------
Colorado -- 1.1%
4,500,000 Board of Water Commissioners, City and County of 11/01 at 101 Aaa 4,913,145
Denver, Colorado, Certificates of Participation,
Series 1991, 6.625%, 11/15/11
3,500,000 Jefferson County, Colorado, Refunding Certificates of 12/02 at 102 Aaa 3,878,140
Participation, 6.650%, 12/01/08
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware -- 0.5%
$ 3,600,000 Delaware Economic Development Authority, Pollution 5/02 at 102 Aaa $ 3,966,480
Control Refunding Revenue Bonds (Delmarva
Power & Light Company Project) Series 1992B,
6.750%, 5/01/19
- ----------------------------------------------------------------------------------------------------------------
District of Columbia -- 1.1%
2,500,000 District of Columbia (Washington, D.C.) General 6/00 at 102 Aaa 2,782,075
Obligation Bonds (Series 1990B), 7.500%, 6/01/10
(Pre-refunded to 6/01/00)
6,000,000 District of Columbia (Washington, D.C.) General 6/04 at 102 Aaa 6,255,180
Obligation Bonds, Series 1994B, 6.100%, 6/01/11
- ----------------------------------------------------------------------------------------------------------------
Florida -- 0.7%
Florida Keys Aqueduct Authority, Water Revenue
Refunding Bonds, Series 1991:
920,000 6.750%, 9/01/21 (Pre-refunded to 9/01/01) 9/01 at 101 Aaa 1,016,885
80,000 6.750%, 9/01/21 9/01 at 101 Aaa 87,361
Brevard County, Florida, Utility Revenue Bonds,
Series 1985B:
1,520,000 7.375%, 3/01/14 (Pre-refunded to 3/01/98) 3/98 at 102 Aaa 1,605,302
260,000 7.375%, 3/01/14 3/98 at 102 Aaa 272,880
2,405,000 South Broward Hospital District (Florida) Hospital 5/03 at 102 Aaa 2,779,218
Revenue and Refunding Revenue Bonds,
Series 1993, 7.500%, 5/01/08
- ----------------------------------------------------------------------------------------------------------------
Georgia -- 2.9%
5,000,000 City of Albany (Georgia), Sewerage System Revenue 7/02 at 102 Aaa 5,593,200
Bonds, Series 1992, 6.625%, 7/01/17
(Pre-refunded to 7/01/02)
5,000,000 Development Authority of Appling County (Georgia), 1/04 at 101 Aaa 5,631,500
Pollution Control Revenue Bonds (Oglethorpe
Power Corporation Hatch Project), Series 1994,
7.150%, 1/01/21
2,250,000 Chatham County Hospital Authority, Hospital Revenue 1/01 at 102 Aaa 2,496,398
Bonds (Memorial Medical Center, Inc.) (Savannah,
Georgia), Series 1990A, 7.000%, 1/01/21
(Pre-refunded to 1/01/01)
4,590,000 Marietta Development Authority, First Mortgage 9/05 at 102 Aaa 4,916,854
Revenue Bonds, (Life College, Inc.) Series 1995-B,
6.250%, 9/01/25
</TABLE>
33
<PAGE>
Portfolio of Investments
Insured Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Georgia -- continued
$ 3,270,000 Development Authority of the City of Marietta, First 9/05 at 102 Aaa $ 3,356,034
Mortgage Revenue Bonds (Life College, Inc.)
Series 1995A and Series 1995B, 5.950%, 9/01/19
1,000,000 Municipal Electric Authority of Georgia, Project One 1/04 at 102 Aaa 1,102,950
Subordinated Bonds, Series 1994A,
6.500%, 1/01/26
- ----------------------------------------------------------------------------------------------------------------
Illinois -- 13.8%
6,685,000 Illinois Health Facilities Authority, Revolving Fund 2/99 at 103 Aaa 7,287,118
Pooled Financing Program, Methodist Health
Services Corporation, Peoria, 8.000%, 8/01/15
3,000,000 Illinois Health Facilities Authority, Revenue Bonds, 8/04 at 102 Aaa 3,062,490
Series 1994A (The University of Chicago Hospitals
Project), 6.125%, 8/15/24
4,500,000 Illinois Health Facilities Authority, Revenue Bonds, 5/04 at 102 Aaa 4,686,480
Series 1994 (Ingalls Health System Project),
6.250%, 5/15/24
4,000,000 Illinois Health Facilities Authority, Health Care 11/04 at 102 Aaa 4,352,400
Facilities Revenue Bonds, Series 1995
(Northwestern Medical Faculty Foundation, Inc.),
6.500%, 11/15/15
7,000,000 Illinois Health Facilities Authority, Revenue Bonds, 1/06 at 102 Aaa 7,113,680
(Carle Foundation), Series 1996, 6.000%, 1/01/27
2,100,000 Illinois Health Facilities Authority, Ingalls Health 1/00 at 102 Aaa 2,285,136
System Revenue Bonds, Series 1989 (The Ingalls
Memorial Hospital Project), 7.000%, 1/01/19
(Pre-refunded to 1/01/00)
Illinois Health Facilities Authority, Revenue Bonds
Series 1988-B, (Community Provider Pooled
Loan Program):
169,000 7.900%, 8/15/03 No Opt. Call Aaa 194,304
1,181,000 7.900%, 8/15/03 3/97 at 102 Aaa 1,208,895
5,000,000 State of Illinois General Obligation Bonds, Series of 8/04 at 102 AA- 5,039,300
August 1994, 5.875%, 8/01/19
State of Illinois, General Obligation Bonds, Series of
February 1995:
3,065,000 6.100%, 2/01/19 2/05 at 102 Aaa 3,153,272
5,545,000 6.100%, 2/01/20 2/05 at 102 Aaa 5,704,696
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois -- continued
$ 5,000,000 The State of Illinois acting by the Department of 7/06 at 102 Aa $ 4,901,900
Central Management Services for the benefit of
the Department of Public Aid, 5.650%, 7/01/17
2,500,000 City of Chicago (Illinois), General Obligation Adjustable 7/02 at 101 1/2 Aaa 2,803,675
Rate Bonds, Central Public Library Project, Series C
of 1988, 6.850%, 1/01/17 (Pre-refunded to 7/01/02)
5,000,000 City of Chicago, General Obligation Bonds, Project 1/02 at 102 Aaa 5,294,150
Series A of 1992, 6.250%, 1/01/12
7,000,000 City of Chicago, Chicago-O'Hare International Airport 1/06 at 102 Aaa 7,024,780
Passenger Facility Charge Revenue Bonds,
Series 1996A, 5.625%, 1/01/14
1,500,000 Public Building Commission of Chicago, Cook County, 1/98 at 102 Aaa 1,579,800
Illinois, Building Revenue Bonds, Series A of 1988
(Community College District No. 508),
7.700%, 1/01/08 (Pre-refunded to 1/01/98)
21,300,000 Public Building Commission of Chicago (Illinois) 12/03 at 102 Aaa 21,076,350
Building Revenue Bonds, Series A of 1993
(Board of Education of the City of Chicago),
5.750%, 12/01/18
6,540,000 Town of Cicero, Cook County, Illinois, General 12/04 at 102 Aaa 6,991,979
Obligation Corporate Purpose Bonds, Series 1994A,
6.400%, 12/01/14
2,500,000 Community College District No 508, Cook County, No Opt. Call Aaa 3,198,950
Illinois, Certificates of Participation,
8.750%, 1/01/07
2,370,000 Board of Governors of State Colleges and Universities 4/04 at 102 Aaa 2,564,008
(Illinois), Eastern Illinois University, Auxiliary
Facilities System Revenue Bonds, Series 1994A,
6.375%, 4/01/16
4,170,000 Community Unit School District Number 200, McHenry 1/08 at 100 Aaa 4,214,661
County, Illinois, (Woodstock), School Bonds,
Series 1996A, 5.850%, 1/01/16
2,500,000 The Board of Trustees of Northern Illinois University, 4/07 at 100 Aaa 2,472,625
Northern Illinois University, Auxiliary Facilities
System Revenue Bonds, Series 1996,
5.700%, 4/01/16
</TABLE>
35
<PAGE>
Portfolio of Investments
Insured Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Illinois -- continued
$ 4,000,000 Regional Transportation Authority, Cook, DuPage, 6/03 at 102 Aaa $ 3,991,600
Kane, Lake, McHenry and Will Counties, Illinois,
General Obligation Refunding Bonds,
Series 1993C, 5.850%, 6/01/23
- ----------------------------------------------------------------------------------------------------------------
Indiana -- 5.1%
3,750,000 City of Indianapolis, Indiana, Gas Utility System 6/02 a 102 Aaa 3,890,213
Revenue Bonds, Series 1992 A, 6.200%, 6/01/23
5,000,000 Indiana Health Facility Financing Authority, Hospital 5/02 at 102 Aaa 5,296,750
Revenue Refunding and Improvement Bonds,
Series 1992 (Community Hospitals Projects),
6.400%, 5/01/12
1,000,000 Indiana Municipal Power Agency, Power Supply 1/00 at 102 Aaa 1,093,800
System Revenue Bonds, 1990 Series A,
7.100%, 1/01/15 (Pre-refunded to 1/01/00)
5,000,000 Indiana Municipal Power Agency, Power Supply System 1/03 at 102 Aaa 5,111,800
Revenue Bonds, 1993 Series A, 6.125%, 1/01/19
5,350,000 Jasper County, Indiana, Collateralized Pollution 7/01 at 102 Aaa 5,939,356
Control Refunding Revenue Bonds (Northern
Indiana Service Company Project), Series 1991,
7.100%, 7/01/17
2,000,000 Lawrence Central High School Building Corporation, 7/00 at 102 Aaa 2,219,340
Marion County, Indiana, First Mortgage Bonds,
Series 1990, 7.250%, 7/01/08
(Pre-refunded to 7/01/00)
3,300,000 Marion County Convention and Recreational Facilities 6/01 at 102 Aaa 3,687,816
Authority (Indiana), Excise Taxes Lease Rental
Revenue Bonds, Series 1991B, 7,000%, 6/01/21
(Pre-refunded to 6/01/01)
2,250,000 Hospital Authority of Monroe County, Hospital Revenue 5/99 at 101 Aaa 2,387,700
Refunding Bonds, Series 1989 (Bloomington
Hospital Project), 7.125%, 5/01/11
1,000,000 City of Princeton, Indiana, Pollution Control Refunding 3/00 at 102 Aaa 1,094,690
Revenue Bonds, 1990 Series (Public Service
Company of Indiana, Inc. Project C),
7.375%, 3/15/12
3,170,000 Riley Elementary School Building Corporation, (Vigo 1/06 at 102 Aaa 3,129,773
County, Indiana), First Mortgage Bonds, Series
1996, 5.700%, 1/15/18
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Indiana -- continued
$ 2,000,00 Hospital Authority of St. Joseph County (Indiana), 8/01 at 102 Aaa $ 2,217,040
Fixed Rate Hospital Revenue Refunding Bonds,
Series 1991A (Memorial Hospital of South Bend
Project), 7.000%, 8/15/20
2,190,000 Shelby County Jail Building Corporation, First Mortgage 7/02 at 102 Aaa 2,436,594
Bonds (Shelby County, Indiana), 6.500%, 7/15/09
(Pre-refunded to 7/15/02)
2,265,000 Southwest Allen Multi School Bldg. Corp., First 1/02 at 101 Aaa 2,429,756
Mortgage Refunding Bonds, Series 1992 B,
Fort Wayne, Indiana, 6.375%, 1/15/09
- ----------------------------------------------------------------------------------------------------------------
Iowa -- 0.4%
3,450,000 Sewer Revenue Bonds, City of Iowa City, Johnson 7/06 at 100 Aaa 3,460,833
County, Iowa, 5.750%, 7/01/21
- ----------------------------------------------------------------------------------------------------------------
Kentucky -- 0.9%
6,170,000 Kentucky Economic Development Finance Authority, 2/07 at 102 AAA 6,033,766
Hospital Revenue and Refunding Revenue Bonds,
Series 1997, (Pikeville United Methodist Hospital
of Kentucky, Inc. Project), 5.700%, 2/01/28 (WI)
1,000,000 Louisville and Jefferson County Metropolitan Sewer 5/00 at 102 Aaa 1,108,110
District (Commonwealth of Kentucky) Drainage
Revenue Bonds, Series 1989, 7.350%, 5/01/19
(Pre-refunded to 5/01/00)
- ----------------------------------------------------------------------------------------------------------------
Louisiana -- 3.4%
7,000,000 Louisiana Public Facilities Authority, Hospital Revenue 5/02 at 102 Aaa 7,849,450
Refunding Bonds (Southern Baptist Hospital
Project), Series 1992, 6.800%, 5/15/12
(Pre-refunded to 5/15/02)
1,615,000 Louisiana Public Facilities Authority, Fixed Rate Health 12/98 at 102 Aaa 1,742,117
and Education Capital Facilities Revenue Bonds
(West Jefferson Medical Center), Series 1985D,
7.900%, 12/01/15
State of Louisiana General Obligation Bonds,
Series 1992-A:
5,000,000 6.500%, 5/01/09 5/02 at 102 Aaa 5,471,700
2,000,000 6.500%, 5/01/12 5/02 at 102 Aaa 2,188,680
5,640,000 Orleans Parishwide School District, General 3/06 at 100 Aaa 5,183,386
Obligation Bonds, Series 1996, 5.000%, 9/01/20
</TABLE>
37
<PAGE>
Portfolio of Investments
Insured Municipal Bond--continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Louisiana--continued
$ 4,750,000 Hospital Service District No. 1 of the Parish of 2/04 at 102 Aaa $ 4,979,615
Tangipahoa, State of Louisiana, Hospital Revenue
Bonds (Series 1994), 6.250%, 2/01/24
- ------------------------------------------------------------------------------------------------------------------
Maine--2.1%
3,175,000 Maine Health and Higher Educational Facilities 7/04 at 102 Aaa 3,597,751
Authority, Revenue Bonds, Series 1994B,
7.000%, 7/01/24
11,500,000 Maine Health and Higher Educational Facilities 7/05 at 102 Aaa 11,668,015
Authority, Revenue Bonds, Series 1995A,
5.875%, 7/01/25
Town of Old Orchard Beach, Maine, 1992 General
Obligation Bonds:
750,000 6.650%, 9/01/09 9/02 at 103 Aaa 835,140
500,000 6.650%, 9/01/10 9/02 at 103 Aaa 556,760
- ------------------------------------------------------------------------------------------------------------------
Maryland--0.1%
1,000,000 Morgan State University, Maryland, Academic Fees 7/00 at 102 Aaa 1,104,280
and Auxiliary Facilities Fees Revenue Bonds,
1990 Series A, 7.000%, 7/01/20
(Pre-refunded to 7/01/00)
- ------------------------------------------------------------------------------------------------------------------
Massachusetts--3.3%
1,250,000 Massachusetts Bay Transportation Authority, 8/00 at 102 Aaa 1,406,800
Certificates of Participation, 1990 Series A,
7.650%, 8/01/15 (Pre-refunded to 8/01/00)
2,000,000 Massachusetts Health and Educational Facilities 4/00 at 102 Aaa 2,212,780
Authority, Revenue Bonds, Capital Asset Program
Issue, Series F, 7.300%, 10/01/18
(Pre-refunded to 4/01/00)
3,400,000 Massachusetts Health and Educational Facilities 7/02 at 102 Aaa 3,674,006
Authority, Revenue Bonds, New England Medical
Center Hospitals Issue, Series F, 6.625%, 7/01/25
4,000,000 Massachusetts Health and Educational Facilities 7/02 at 102 Aaa 4,318,800
Authority, Revenue Bonds, South Shore Hospital
Issue, Series D, 6.500%, 7/01/22
5,875,000 Massachusetts Health and Educational Facilities 11/03 at 102 AAA 5,384,555
Authority, Revenue Bonds, Cape Cod Health
Systems, Inc. Issue, Series A, 5.250%, 11/15/21
</TABLE>
38
<PAGE>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts -- continued
$ 4,000,000 Massachusetts Health and Educational Facilities 10/05 at 102 Aaa $ 4,083,040
Authority, Revenue Bonds, Berkshire Health
Systems Issue, Series D, 6.000%, 10/01/19
3,500,000 City of Boston, Massachusetts, Revenue Bonds, Boston 8/00 at 102 Aaa 3,935,365
City Hospital (FHA Insured Mortgage), Series A,
7.625%, 2/15/21 (Pre-refunded to 8/15/00)
1,150,000 City of Haverhill, Massachusetts, General Obligation 6/02 at 102 Aaa 1,282,308
Municipal Purpose Loan of 1992, Series A,
7.000%, 6/15/12
- ----------------------------------------------------------------------------------------------------------------
Michigan -- 4.2%
2,400,000 Michigan State Hospital Finance Authority, Hospital 9/02 at 102 Aaa 2,398,560
Revenue and Refunding Bonds (Henry Ford Health
System), Series 1992A, 5.750%, 9/01/17
5,000,000 Michigan State Hospital Finance Authority, Hospital 11/06 at 102 Aaa 5,060,650
Revenue Bonds, (Sparrow Obligated Group), Series
1996, 5.900%, 11/15/26
2,000,000 Michigan Strategic Fund Limited Obligation Refunding 12/01 at 102 Aaa 2,219,500
Revenue Bonds (The Detroit Edison Company Pollution
Control Bonds Project), Collateralized Series 1991DD,
6.875%, 12/01/21
5,475,000 State of Michigan, State Trunk Line Fund Refunding Bonds, 10/02 at 100 Aaa 5,229,884
Series 1992B-2, 5.500%, 10/01/21
12,130,000 City of Bay City, County of Bay, State of Michigan, 1991 No Opt. Call Aaa 3,074,349
General Obligation Unlimited Tax Street Improvement
Bonds, 0.000%, 6/01/21
5,000,000 Caledonia Community Schools, Counties of Kent, Allegan 5/02 at 102 Aaa 5,590,950
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)
2,500,000 Chelsea School District, Counties of Washtenaw and 5/05 at 101 Aaa 2,573,475
Jackson, State of Michigan, 1995 School Building and
Site Bonds (General Obligation -- Unlimited Tax),
6.000%, 5/01/19
2,000,000 City of Detroit, Michigan, Sewage Disposal System 7/01 at 102 Aaa 2,209,600
Revenue Bonds, Series 1991, 6.625%, 7/01/21
(Pre-refunded to 7/01/01)
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Insured Municipal Bond -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michigan -- continued
$6,085,000 School District of the City of River Rouge, County of 5/03 at 101 1/2 Aaa $5,901,294
Wayne, State of Michigan, 1993 School Building and
Site Bonds (General Obligation -- Unlimited Tax),
5.625%, 5/01/22
- ----------------------------------------------------------------------------------------------------------------
Mississippi -- 1.5%
5,460,000 Wilkinson County Mississippi, Industrial Development 8/06 at 102 Aaa 5,355,277
Authority, Certificates of Participation, (Wilkinson County
Correctional Facilities Project), Series 1996B,
5.600%, 8/01/16
6,400,000 Medical Center Educational Building Corporation 12/04 at 102 Aaa 6,444,160
(Mississippi), Revenue Bonds, Series 1993 (University
of Mississippi Medical Center Project),
5.900%, 12/01/23
- ----------------------------------------------------------------------------------------------------------------
Missouri -- 1.0%
7,950,000 St. Louis Municipal Finance Corporation, City Justice 2/06 at 102 Aaa 8,185,320
Center, Leasehold Revenue Improvement Bonds, Series
1996A, (City of St. Louis, Missouri, Lessee),
5.950%, 2/15/16
- ----------------------------------------------------------------------------------------------------------------
Nevada -- 0.6%
2,500,000 County of Churchill, Nevada, Health Care Facilities 1/04 at 102 Aaa 2,545,225
Revenue Bonds (Western Health Care Network, Inc.),
Series 1994A, 6.000%, 1/01/24
2,000,000 Clark County, Nevada, Industrial Development Refunding 10/02 at 102 Aaa 2,258,780
Revenue Bonds (Nevada Power Company Project)
Series 1992C, 7.200%, 10/01/22
- ----------------------------------------------------------------------------------------------------------------
New Hampshire -- 0.4%
2,850,000 New Hampshire Higher Educational and Health Facilities 7/02 at 102 Aaa 2,988,824
Authority, Revenue Refunding Bonds, University System
of New Hampshire Issue, Series 1992, 6.250%, 7/01/20
- ----------------------------------------------------------------------------------------------------------------
New Jersey -- 0.4%
1,480,000 New Jersey Housing and Mortgage Finance Agency, 4/98 at 103 Aaa 1,552,254
Home Mortgage Purchase Revenue Bonds, 1987 Series
B (Remarketing), 8.100%, 10/01/17
1,890,000 Housing Finance Corporation of the Township of 4/05 at 100 Aaa 1,981,438
Pennsauken (Pennsauken, New Jersey), Section
8 Assisted Housing Revenue Bonds (Pennsauken
Housing Associates -- 1979 Elderly Project),
8.000%, 4/01/11
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New Mexico -- 1.0%
$ 3,000,000 City of Albuquerque, New Mexico, Hospital System 8/97 at 102 Aaa $3,097,380
Revenue Bonds, 1992 Series B (Presbyterian Healthcare
Services), 6.600%, 8/01/07
4,445,000 City of Farmington, New Mexico, Pollution Control Revenue 12/02 at 102 Aaa 4,774,908
Refunding Bonds, 1992 Series A (Public Service
Company of New Mexico, San Juan and Four Corners
Projects), 6.375%, 12/15/22
- ----------------------------------------------------------------------------------------------------------------
New York -- 9.8%
8,375,000 Dormitory Authority of the State of New York, Mount Sinai 7/04 at 102 Aaa 7,633,310
School of Medicine, Insured Revenue Bonds, Series
1994A, 5.000%, 7/01/21
6,530,000 New York State Medical Care Facilities Finance Agency, 8/02 at 102 Aaa 6,586,615
Mental Health Services Facilities Improvement
Revenue Bonds, 1992 Series D, 5.900%, 8/15/22
Metropolitan Transportation Authority, Commuter
Facilities Revenue Bonds, Series 1992B:
4,955,000 6.250%, 7/01/17 7/02 at 102 Aaa 5,239,318
6,925,000 6.250%, 7/01/22 7/02 at 102 Aaa 7,309,476
5,000,000 Metropolitan Authority, Commuter Facilities Revenue 7/04 at 101 1/2 Aaa 5,410,550
Bonds, Series 1994A, 6.375%, 7/01/18
285,000 The City of New York, General Obligation Bonds, Fiscal 8/02 at 101 1/2 Aaa 313,377
1992 Series C, 6.625%, 8/01/12
5,715,000 The City of New York, General Obligation Bonds, Fiscal 8/02 at 101 1/2 Aaa 6,372,625
1992 Series C, Fixed Rate Bonds, Subseries C-1,
6.625%, 8/01/12 (Pre-refunded to 8/01/02)
3,010,000 The City of New York, General Obligation Bonds, Fiscal 5/03 at 101 1/2 Aaa 3,095,093
1993 Series E, 6.000%, 5/15/16
3,750,000 The City of New York, General Obligation Bonds, Fiscal 2/02 at 101 1/2 Aaa 4,144,575
1992 Series B, 7.000%, 2/01/18
6,330,000 New York City Municipal Water Finance Authority, Water 6/01 at 101 Aaa 6,897,237
and Sewer System Revenue Bonds, Fiscal 1992
Series A, 6.750%, 6/15/16
2,025,000 New York City Municipal Water Finance Authority, Water 6/99 at 101 1/2 Aaa 2,173,412
and Sewer System Revenue Bonds, Fiscal 1990
Series A, 6.750%, 6/15/14 (Pre-refunded to 6/15/99)
4,470,000 New York City Municipal Water Finance Authority, 6/02 at 101 1/2 Aaa 4,466,826
Water and Sewer System Revenue Bonds,
Fiscal 1993 Series A, 5.750%, 6/15/18
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Insured Municipal Bond -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New York -- continued
$ 3,900,000 New York City Transit Authority, Transit Facilities No Opt. Call Aaa $ 3,820,908
Refunding Revenue Bonds, Series 1993 (Livingston
Plaza Project), 5.400%, 1/01/18
New York City Industrial Development Agency, Civic
Facility Revenue Bonds, (USTA National Tennis Center
Incorporated Project):
3,500,000 6.500%, 11/15/10 11/04 at 102 Aaa 3,881,290
3,000,000 6.600%, 11/15/11 11/04 at 102 Aaa 3,339,690
5,240,000 Triborough Bridge and Tunnel Authority, Special 1/01 at 102 Aaa 5,732,298
Obligation Refunding Bonds, Series 1991B,
6.875%, 1/01/15
3,015,000 Triborough Bridge and Tunnel Authority, Special Obligation 1/02 at 100 Aaa 2,910,681
Bonds, Series 1992, 5.500%, 1/01/17
- ----------------------------------------------------------------------------------------------------------------
North Carolina -- 1.2%
10,000,000 North Carolina Eastern Municipal Power Agency, Power 1/07 at 102 Aaa 10,072,800
System Revenue Bonds, Refunding Series 1996A,
5.700%, 1/01/15
- ----------------------------------------------------------------------------------------------------------------
Ohio -- 1.1%
1,000,000 Board of Education, City School District of Columbus, 12/00 at 102 Aaa 1,113,250
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)
2,500,000 Dublin City School District, Franklin, Delaware and 12/02 at 102 Aaa 2,647,075
Union Counties, Ohio, Various Purpose School Building
Construction and Improvement Bonds (General
Obligation -- Unlimited Tax), 6.200%, 12/01/19
5,000,000 County of Montgomery, Ohio, Hospital Facilities Revenue 4/06 at 102 Aaa 4,959,300
Refunding and Improvement Bonds, Series 1996
(Kettering Medical Center), 5.625%, 4/01/16
- ----------------------------------------------------------------------------------------------------------------
Oklahoma -- 2.0%
5,000,000 Oklahoma Industries Authority, Health System Revenue 8/05 at 102 Aaa 5,375,550
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
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Oklahoma -- continued
$ 295,000 Muskogee County Home Finance Authority (Oklahoma) 6/00 at 102 Aaa $ 311,007
Single Family Mortgage Revenue Refunding Bonds,
Series 1990A, 7.600%, 12/01/10
10,525,000 Tulsa Metropolitan Utility Authority, (Tulsa, Oklahoma), 9/05 at 102 Aaa 10,669,929
Utility Revenue Bonds, Series 1995, 5.750%, 9/01/19
- ------------------------------------------------------------------------------------------------------------------
Pennsylvania -- 1.1%
3,000,000 North Penn Water Authority (Montgomery County, 1/04 at 101 Aaa 3,481,020
Pennsylvania), Water Revenue Bonds, Series of 1994,
7.000%, 11/01/24 (Pre-refunded to 11/01/04)
3,900,000 The Philadelphia Municipal Authority, Philadelphia, 1/01 at 102 Aaa 4,414,761
Pennsylvania, Justice Lease Revenue Bonds, 1991
Series B, 7.125%, 11/15/18 (Pre-refunded to 11/15/01)
1,000,000 Washington County Hospital Authority (Pennsylvania), 7/00 at 102 Aaa 1,093,460
Hospital Revenue Refunding Bonds, Series A of 1990
(The Washington Hospital Project), 7.150%, 7/01/17
- ------------------------------------------------------------------------------------------------------------------
Rhode Island -- 1.4%
2,250,000 Rhode Island Depositors Economic Corporation, 8/02 at 102 Aaa 2,513,138
Special Obligation Bonds, 1992 Series A, 6.625%,
8/01/19 (Pre-refunded to 8/01/02)
4,000,000 City of Cranston, Rhode Island, General Obligation at 101 1/2 Aaa 4,477,040
Bonds, 7.200%, 7/15/11 (Pre-refunded to 7/15/01)
3,130,000 Kent County Water Authority (Rhode Island), General 7/04 at 102 Aaa 3,381,902
Revenue Bonds, 1994 Series A, 6.350%, 7/15/14
1,000,000 Providence Housing Development Corporation, 7/04 at 102 Aaa 1,055,380
Mortgage Revenue Refunding Bonds, Series 1994A
(FHA Insured Mortgage Loan -- Barbara Jordan
Apartments Project) (Providence, Rhode Island),
6.650%, 7/01/15
- ------------------------------------------------------------------------------------------------------------------
South Carolina -- 3.6%
1,000,000 City of Aiken, South Carolina, Water and Sewer 1/00 at 102 Aaa 1,087,750
System Revenue Refunding and Capital Improvement
Bonds, Series 1990, 7.250%, 1/01/14
8,490,000 The School District of Berkeley County, South Carolina, 2/06 at 101 Aaa 8,140,806
Berkeley School Facilities Group, Inc., Certificates of
Participation, Series 1995, 5.250%, 2/01/16
</TABLE>
43
<PAGE>
PORTFOLIO OF INVESTMENTS
INSURED MUNICIPAL BOND -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOUTH CAROLINA -- CONTINUED
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) 6/04 at 102 Aaa $1,651,178
70,000 6.875%, 6/01/14 6/04 at 102 Aaa 78,400
2,385,000 7.000%, 6/01/19 (Pre-refunded to 6/01/04) 6/04 at 102 Aaa 2,771,322
115,000 7.000%, 6/01/19 6/04 at 102 Aaa 129,589
5,600,000 Charleston County, South Carolina, Charleston Public 6/05 at 101 Aaa 5,429,872
Facilities Corporation, Certificates of Participation,
Series 1995, 5.500%, 12/01/20
5,435,000 Greenville Memorial Auditorium District, Public Facilities 3/06 at 102 Aaa 5,431,359
Corporation, Greenville Memorial Auditorium District,
Taxable Certificates of Participation (Bi-Lo Center
Project), Series 1996C, 5.750%, 3/01/22
2,000,000 City of Rock Hill, South Carolina, Combined Utility System 1/00 at 102 Aaa 2,184,200
Revenue Bonds, Series 1990, 7.000%, 1/01/20
(Pre-refunded to 1/01/00)
2,000,000 City of Rock Hill, South Carolina, Combined Utility 1/01 at 102 Aaa 2,118,940
System Revenue Bonds, Series 1991,
6.375%, 1/01/15
- ----------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA -- 0.1%
1,000,000 South Dakota Health and Educational Facilities Authority, 7/00 at 102 Aaa 1,108,350
Revenue Bonds, Series 1990 (McKennan Hospital Issue),
7.250%, 7/01/15 (Pre-refunded to 7/01/00)
- ----------------------------------------------------------------------------------------------------------------
TEXAS -- 3.4%
6,080,000 Texas Health Facilities Development Corporation, 8/03 at 102 Aaa 6,416,650
Hospital Revenue Bonds (All Saints Episcopal
Hospitals of Fort Worth Project), Series 1993B,
6.250%, 8/15/22
3,000,000 Bexar County (Texas), Health Facilities Development 8/04 at 102 Aaa 3,328,410
Corporation, Hospital Revenue Bonds (Baptist
Memorial Hospital System Project), Series 1994,
6.750%, 8/15/19
5,000,000 Bexar Metropolitan Water District, Waterworks System 5/15 at 100 Aaa 4,823,150
Revenue Bonds, Series 1994, 5.000%, 5/01/19
(Pre-refunded to 5/01/15)
4,575,000 Harris County, Texas, Toll Road Senior Lien Revenue 8/02 at 102 Aaa 5,100,851
Refunding Bonds, Series 1992A, 6.500%, 8/15/17
(Pre-refunded to 8/15/02)
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas -- continued
$1,000,000 Harris County Hospital District Refunding Revenue No Opt. Call Aaa $1,199,060
Bonds, Texas, Series 1990, 7.400%, 2/15/10
500,000 City of Houston, Texas, Senior Lien Hotel Occupancy Tax 7/01 at 100 Aaa 551,765
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)
825,000 Lower Colorado River Authority, Priority Refunding 1/01 at 102 Aaa 905,792
Revenue Bonds, Series 1991, Series B, 7.000%, 1/01/11
5,000,000 Tarrant County Health Facilities Development Corporation, No Opt. Call Aaa 5,280,000
Hospital Revenue Refunding and Improvement Bonds
(Fort Worth Osteopathic Hospital, Inc. Project)
Series 1993, 6.000%, 5/15/21
- -----------------------------------------------------------------------------------------------------------------
Utah -- 1.5%
8,055,000 State of Utah, State Building Ownership Authority, Lease 11/05 at 100 Aaa 7,971,470
Revenue Bonds (State Facilities Master Lease Program),
Series 1995A, 5.750%, 5/15/18
220,000 Utah Housing Finance Agency, Single Family Mortgage 1/09 at 100 AA 229,403
Senior Bonds, 1988 Issue C (Federally Insured or
Guaranteed Mortgage Loans), 8.375%, 7/01/19
3,500,000 White City Water Improvement District, Salt Lake 2/05 at 100 Aaa 3,842,160
County, Utah, General Obligation Water Bonds,
Series 1995, 6.600%, 2/01/25
- -----------------------------------------------------------------------------------------------------------------
Virginia -- 1.1%
5,000,000 Industrial Development Authority of the City of 6/07 at 102 Aaa 4,774,850
Fredericksburg, Virginia, Hospital Facilities
Revenue Refunding Bonds, (MediCorp Health
System Obligated Group), Series 1996, 5.250%, 6/15/16
3,000,000 Industrial Development Authority of Loudoun County, 6/05 at 102 Aaa 2,993,400
Virginia, Hospital Revenue Bonds (Loudoun Hospital
Center), Series 1995, 5.800%, 6/01/26
1,050,000 County of Roanoke, Virginia, Water System Revenue 7/01 at 100 Aaa 1,116,738
Bonds, Series 1991, 6.000%, 7/01/31
(Pre-refunded to 7/01/01)
- -----------------------------------------------------------------------------------------------------------------
Washington -- 3.0%
5,000,000 Washington Public Power Supply System, Nuclear No Opt. Call Aaa 5,158,800
Project No. 2 Refunding Revenue Bonds,
Series 1993B, 5.400%, 7/01/05
</TABLE>
45
<PAGE>
Portfolio of Investments
Insured Municipal Bond -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Washington -- continued
$ 2,500,000 Washington Public Power Supply System, Nuclear 7/99 at 102 Aaa $ 2,722,650
Project No. 3 Refunding Revenue Bonds, Series
1989A, 7.250%, 7/01/16 (Pre-refunded to 7/01/99)
1,500,000 City of Marysville, Washington, Water and Sewer 12/03 at 100 Aaa 1,711,140
Revenue Bonds, Series 1991, 7.000%, 12/01/11
(Pre-refunded to 12/01/03)
13,210,000 Public Utility District No. 1 of Snohomish County, 1/03 at 100 Aaa 12,510,927
Washington, Generation System Revenue Bonds,
Series 1993, 5.500%, 1/01/20
2,000,000 Bellingham School District No. 501, Whatcom 12/04 at 100 Aaa 2,095,880
County, Washington, Unlimited Tax General
Obligation Bonds, Series 1994, 6.125%, 12/01/13
- ------------------------------------------------------------------------------------------------------------------
West Virginia -- 0.1%
1,000,000 School Building Authority of West Virginia, Capital 7/00 at 102 Aaa 1,109,670
Improvement Revenue Bonds, Series 1990A, 7.250%,
7/01/15 (Pre-refunded to 7/01/00)
- ------------------------------------------------------------------------------------------------------------------
Wisconsin -- 2.7%
7,020,000 Wisconsin Health and Educational Facilities Authority, 2/03 at 102 Aaa 7,156,960
Revenue Bonds, (Sisters of the Sorrowful Mother --
Ministry Corporation), Series 1993A, 6.125%, 8/15/22
10,410,000 Wisconsin Health and Educational Facilities Authority, 2/07 at 102 Aaa 10,099,260
Revenue Bonds, (Sisters of the Sorrowful Mother --
Ministry Corporation), Series 1997A,
5.700%, 8/15/26 (WI)
1,000,000 Wisconsin Municipal Insurance Commission, Revenue 4/97 at 102 Aaa 1,024,480
Bonds, Series 1987, 8.700%, 4/01/07
2,000,000 City of Superior, Wisconsin, Limited Obligation No Opt. Call Aaa 2,360,120
Refunding Revenue Bonds (Midwest Energy Resources
Company Project) Series E-1991,
6.900%, 8/01/21
1,000,000 School District of Three Lakes, Forest and Oneida 4/03 at 100 Aaa 1,116,130
Counties, Wisconsin, General Obligation Refunding
Bonds, 6.750%, 4/01/12 (Pre-refunded to 4/01/03)
- ------------------------------------------------------------------------------------------------------------------
Wyoming -- 0.3%
2,000,000 The Trustees of the University of Wyoming, Facilities 6/00 at 101 Aaa 2,165,800
Revenue Bonds, Series 1991, 7.100%, 6/01/10
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Puerto Rico -- 0.5%
$ 3,750,000 Commonwealth of Puerto Rico, Public Improvement 7/02 at 101 1/2 Aaa $ 4,198,650
Bonds of 1992 (General Obligation Bonds),
6.600%, 7/01/13 (Pre-refunded to 7/01/02)
- -------------------------------------------------------------------------------------------------------------------------
$791,155,000 Total Investments -- (cost $762,816,240) -- 100.6% 811,447,623
============-------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -- 0.9%
3,050,000 California Health Facilities Authority, Variable Rate VMIG-1 3,050,000
Revenue Bonds, (St. Joseph Health System), Series
1991B, Variable Rate Demand Bonds, 3.350%, 7/01/09+
1,500,000 Gulf Coast Waste Disposal Authority, Pollution Control VMIG-1 1,500,000
Revenue Refunding (Amoco Oil Company Project),
Series 1992, Variable Rate Demand Bonds,
3.450%, 10/01/17+
1,200,000 Irvine Ranch Water District, Variable Rate Demand Bonds, VMIG-1 1,200,000
Consolidated Refunding Bonds, Series A, 3.250%, 5/01/09+
1,100,000 The Commonwealth of Massachusetts, Dedicated Income VMIG-1 1,100,000
Tax Bonds, Fiscal Recovery Loan Act of 1990, Series B,
Variable Rate Demand Bonds, 3.400%, 12/01/97
600,000 Minneapolis/St. Paul Housing and Redevelopment SP-1+ 600,000
Authority, Health Care (Children's Health Care), Series
1995, Variable Rate Demand Bonds, 3.450%, 8/15/25+
- -------------------------------------------------------------------------------------------------------------------------
$ 7,450,000 Total Temporary Investments -- 0.9% 7,450,000
============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (1.5) % (12,366,596)
---------------------------------------------------------------------------------------------------------
Net Assets -- 100% $806,531,027
=========================================================================================================
</TABLE>
====
47
<PAGE>
Portfolio of Investments
Insured Municipal Bond--continued
Summary of Ratings**--Portfolio of Investments (excluding temporary
investments):
<TABLE>
<CAPTION>
Standard Number of Market Market
& Poor's Moody's Securities Value Percent
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AAA Aaa 193 $801,218,070 98%
AA+, AA, AA- Aa1, Aa, Aa2, Aa3 2 5,268,703 1
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 1 4,960,850 1
- ----------------------------------------------------------------------------------------
Total 196 $811,447,623 100%
========================================================================================
</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 (see note 1 of the Notes to
Financial Statements).
+ 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.
====
48
<PAGE>
STATEMENT OF NET ASSETS Nuveen Municipal Bond Funds
FEBRUARY 28, 1997 February 28, 1997 Annual Report
<TABLE>
<CAPTION>
INSURED
MUNICIPAL BOND MUNICIPAL BOND
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market
value (note 1) $2,885,058,766 $811,447,623
Temporary investments in short-term municipal
securities, at amortized cost (note 1) 5,800,000 7,450,000
Cash 55,365 470,129
Receivables:
Interest 39,083,073 10,971,677
Shares sold 282,772 317,250
Investments sold 1,327,284 -
Other assets 35,859 12,594
- -------------------------------------------------------------------------------
Total assets 2,931,643,119 830,669,273
- -------------------------------------------------------------------------------
LIABILITIES
Payables:
Investments purchased 28,500,000 21,382,672
Shares redeemed 618,073 15,888
Accrued expenses:
Management fees (note 6) 1,004,011 295,678
Other 225,996 133,492
Dividends payable 9,796,163 2,310,516
- -------------------------------------------------------------------------------
Total liabilities 40,144,243 24,138,246
- -------------------------------------------------------------------------------
Net assets (note 7) $2,891,498,876 $806,531,027
===============================================================================
CLASS A SHARES (NOTE 1)
Net assets $ 68,203,870 $ 68,268,242
Shares outstanding 7,383,141 6,308,717
Net asset value and redemption price per
share $ 9.24 $ 10.82
Offering price per share (net asset value
per share plus maximum sales charge of
4.20% of offering price) $ 9.65 $ 11.29
===============================================================================
CLASS B SHARES (NOTE 1)
Net assets $ 42,771 $ 227,832
Shares outstanding 4,630 21,053
Net asset value, offering and redemption
price per share $ 9.24 $ 10.82
===============================================================================
CLASS C SHARES (NOTE 1)
Net assets $ 5,038,642 $ 5,447,986
Shares outstanding 545,784 508,252
Net asset value, offering and redemption price
per share $ 9.23 $ 10.72
===============================================================================
CLASS R SHARES (NOTE 1)
Net assets $2,818,213,593 $732,586,967
Shares outstanding 304,966,867 67,973,943
Net asset value, offering and redemption price
per share $ 9.24 $ 10.78
===============================================================================
</TABLE>
49 See accompanying notes to financial statements.
<PAGE>
Statement of Operations
Year ended February 28, 1997
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $170,495,195 $47,345,542
- --------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 12,969,912 3,795,515
12b-1 service fees -- Class A (notes 1 and 6) 133,192 140,125
12b-1 distribution and service fees -- Class B (notes 1 and 6) 16 141
12b-1 distribution and service fees -- Class C (notes 1 and 6) 32,590 51,506
Shareholders' servicing agent fees and expenses 2,262,180 710,003
Custodian's fees and expenses 346,413 135,049
Trustees' fees and expenses (note 6) 39,906 11,034
Professional fees 118,365 32,377
Shareholders' reports -- printing and mailing expenses 367,875 160,896
Federal and state registration fees 78,234 97,491
Portfolio insurance expense - 16,767
Other expenses 164,015 51,618
- --------------------------------------------------------------------------------------------------
Total expenses 16,512,698 5,202,522
- --------------------------------------------------------------------------------------------------
Net investment income 153,982,497 42,143,020
- --------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions
(notes 1 and 4) 13,454,600 (1,089,131)
Net change in unrealized appreciation or depreciation
of investments (11,748,742) (7,672,084)
- --------------------------------------------------------------------------------------------------
Net gain (loss) from investments 1,705,858 (8,761,215)
- --------------------------------------------------------------------------------------------------
Net increase in net assets from operations $155,688,355 $33,381,805
==================================================================================================
</TABLE>
See accompanying notes to financial statements.
50
<PAGE>
Statement of Changes in Net Assets Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
<TABLE>
<CAPTION>
Municipal Bond
--------------------------------------
Year ended 2/28/97 Year ended 2/29/96
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 153,982,497 $ 156,911,846
Net realized gain (loss) from investment transactions
(notes 1 and 4) 13,454,600 10,618,706
Net change in unrealized appreciation or depreciation
of investments (11,748,742) 84,862,109
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 155,688,355 252,392,661
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (2,735,302) (707,943)
Class B (45) N/A
Class C (146,481) (30,677)
Class R (151,041,117) (157,137,272)
From accumulated net realized gains from
investment transactions:
Class A (304,876) (63,661)
Class B - N/A
Class C (19,401) (3,523)
Class R (13,873,562) (8,354,729)
- ------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (168,120,784) (166,297,805)
- ------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 288,845,641 492,450,182
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 133,505,722 124,215,111
- ------------------------------------------------------------------------------------------------------------------------------
422,351,363 616,665,293
- ------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (436,065,365) (526,292,941)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions (13,714,002) 90,372,352
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (26,146,431) 176,467,208
Net assets at the beginning of year 2,917,645,307 2,741,178,099
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $2,891,498,876 $2,917,645,307
==============================================================================================================================
Balance of undistributed net investment income at end of year $ 1,229,149 $ 1,169,597
==============================================================================================================================
N/A - The Funds were not authorized to issue Class B Shares prior to February 1, 1997.
</TABLE>
See accompanying notes to financial statements.
51
<PAGE>
Statement of Changes in Net Assets -- continued
<TABLE>
<CAPTION>
Insured Municipal Bond
----------------------------------------
Year ended 2/28/97 Year ended 2/29/96
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 42,143,020 $ 41,913,841
Net realized gain (loss) from investment transactions (notes 1 and 4) (1,089,131) 4,402,500
Net change in unrealized appreciation or depreciation of investments (7,672,084) 36,885,934
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 33,381,805 83,202,275
- -----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (2,881,559) (1,614,782)
Class B (832) N/A
Class C (224,876) (192,149)
Class R (38,675,228) (40,071,660)
From accumulated net realized gains from investment transactions:
Class A (211,577) --
Class B -- N/A
Class C (17,777) --
Class R (2,484,412) --
- -----------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (44,496,261) (41,878,591)
- -----------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 84,624,586 258,736,089
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 29,865,624 27,690,501
- -----------------------------------------------------------------------------------------------------------------
114,490,210 286,426,590
- -----------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (110,894,714) (268,478,494)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions 3,595,496 17,948,096
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (7,518,960) 59,271,780
Net assets at the beginning of year 814,049,987 754,778,207
- -----------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 806,531,027 $ 814,049,987
=================================================================================================================
Balance of undistributed net investment income at end of year $ 585,565 $ 225,040
=================================================================================================================
N/A - The Funds were not authorized to issue Class B Shares prior to February 1, 1997.
</TABLE>
See accompanying notes to financial statements.
52
<PAGE>
Notes to Financial Statements Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
1. General Information and Significant Accounting Policies
The Nuveen Flagship Municipal Trust (the "Trust") is an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Trust comprises the Nuveen Municipal Bond Fund ("Municipal
Bond") and the Nuveen Insured Municipal Bond Fund ("Insured Municipal Bond")
(collectively, the "Funds"), among others. The Trust was organized as a
Massachusetts business trust on July 1, 1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and Nuveen
Advisory Corp., respectively, the distributor ("Distributor") and investment
advisor ("Adviser") of the Funds, entered into an agreement under which Nuveen
acquired Flagship Resources Inc. and after the close of business on January 31,
1997, consolidated their respective mutual fund businesses. This agreement was
approved at a meeting by the shareholders of the Flagship Funds in December,
1996.
After the close of business on January 31, 1997, Municipal Bond and Insured
Municipal Bond were reorganized into the Trust. Prior to the reorganization,
Municipal Bond was a Massachusetts Business Trust and Insured Municipal Bond
(formerly Nuveen Insured Municipal Bond Fund) was a series of the Nuveen Insured
Tax-Free Bond Fund, Inc., each an open-end diversified management investment
company. As part of this reorganization and subsequent to this reporting period,
the Funds will change their fiscal year ends from February 28 to April 30.
Each Fund seeks to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved 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. 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 28, 1997, Municipal Bond and Insured Municipal Bond had outstanding
purchase commitments of $28,500,000 and $21,382,672, respectively.
53
<PAGE>
Notes to Financial Statements -- continued
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 distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Federal Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, 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 respective Funds. All income dividends
paid during the fiscal year ended February 28, 1997, 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 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 ultimately disposes of such municipal securities. Consequently, the
market value of the municipal securities coverd 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 price 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
54
<PAGE>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
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
Each Fund of the Trust offers Class A, Class B, Class C and Class R Shares.
Class A Shares incur a sales charge on purchases and an annual 12b-1 service
fee. Class B Shares, which were first offered for sale on February 1, 1997, are
sold without a sales charge on purchases but incur annual 12b-1 distribution and
service fees. An investor purchasing Class B Shares agrees to pay a contingent
deferred sales charge ("CDSC") of up to 5% depending upon the length of time the
shares are held (CDSC is reduced to 0% at the end of six years). Class C Shares
are sold without a sales charge on purchases, but incur annual 12b-1
distribution and service fees. An investor purchasing Class C Shares agrees to
pay a CDSC of 1% if Class C Shares are redeemed within 18 months of purchase.
Class R Shares are not subject to any sales charge on purchases or 12b-1
distribution or service fees. Class R Shares are available for purchases of over
$1 million and in other limited circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended February 28, 1997.
Expense Allocation
Expenses of each Fund 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.
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.
55
<PAGE>
Notes to Financial Statements -- continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Municipal Bond
- -----------------------------------------------------------------------------------------------------------
Year ended Year ended
2/28/97 2/29/96
--------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 7,913,532 $ 72,392,333 10,085,967 $ 93,033,904
Class B 4,630 43,000 N/A N/A
Class C 379,075 3,482,943 208,938 1,925,249
Class R 23,272,855 212,927,365 43,438,989 397,491,029
Shares issued to shareholders due to
reinvestment of distributions:
Class A 222,308 2,045,959 48,593 453,018
Class B -- -- N/A N/A
Class C 13,729 126,401 2,138 19,887
Class R 14,285,524 131,333,362 13,470,516 123,742,206
- -----------------------------------------------------------------------------------------------------------
46,091,653 422,351,363 67,255,141 616,665,293
- -----------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (4,751,496) (43,639,384) (6,135,763) (56,994,434)
Class B -- -- N/A N/A
Class C (53,764) (496,539) (4,332) (40,390)
Class R (42,855,041) (391,929,442) (51,218,535) (469,258,117)
- -----------------------------------------------------------------------------------------------------------
(47,660,301) (436,065,365) (57,358,630) (526,292,941)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,568,648) $ (13,714,002) 9,896,511 $ 90,372,352
===========================================================================================================
</TABLE>
N/A - The Funds were not authorized to issue Class B Shares prior to February 1,
1997.
56
<PAGE>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
<TABLE>
<CAPTION>
Insured Municipal Bond
- -----------------------------------------------------------------------------------------------------------
Year ended Year ended
2/28/97 2/29/96
---------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 2,993,504 $ 32,144,825 10,080,588 $ 108,423,277
Class B 21,053 227,426 N/A N/A
Class C 169,708 1,808,841 661,711 7,075,313
Class R 4,720,426 50,443,494 13,451,112 143,237,499
Shares issued to shareholders due to
reinvestment of distributions:
Class A 182,510 1,968,382 88,109 951,544
Class B -- ---- N/A N/A
Class C 19,086 203,691 15,241 161,275
Class R 2,579,133 27,693,551 2,491,979 26,577,682
- -----------------------------------------------------------------------------------------------------------
10,685,420 114,490,210 26,788,740 286,426,590
- -----------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,146,982) (12,317,662) (7,244,524) (78,678,465)
Class B -- -- N/A N/A
Class C (155,088) (1,641,544) (588,441) (6,281,962)
Class R (9,079,255) (96,935,508) (17,181,722) (183,518,067)
- -----------------------------------------------------------------------------------------------------------
(10,381,325) (110,894,714) (25,014,687) (268,478,494)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) 304,095 $ 3,595,496 1,774,053 $ 17,948,096
===========================================================================================================
</TABLE>
N/A - The Funds were not authorized to issue Class B Shares prior to February 1,
1997.
57
<PAGE>
Notes to Financial Statements -- continued
3. Distributions to Shareholders
On March 7, 1997, the Funds declared dividend distributions from their tax-
exempt net investment income which were paid on April 1, 1997, to shareholders
of record on March 7, 1997, as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- -----------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $.0390 $.0460
Class B .0335 .0395
Class C .0350 .0405
Class R .0405 .0475
- -----------------------------------------------------------------------
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended
February 28, 1997, were as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- -----------------------------------------------------------------------
<S> <C> <C>
Purchases
Investments in municipal securities $405,287,241 $287,751,420
Temporary municipal investments 306,980,000 184,950,000
Sales
Investments in municipal securities 354,075,549 274,961,127
Temporary municipal investments 332,780,000 181,500,000
- -----------------------------------------------------------------------
</TABLE>
At February 28, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for each Fund.
At February 28, 1997, Insured Municipal Bond had an unused capital loss
carryover of $1,108,404 available for federal income tax purposes to be applied
against future capital gains, if any. If not applied, the carryover will expire
in the year 2005.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at February 28, 1997, were as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- -----------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $159,647,383 $49,666,040
depreciation (3,813,011) (1,034,657)
- -----------------------------------------------------------------------
Net unrealized appreciation $155,834,372 $48,631,383
=======================================================================
</TABLE>
58
<PAGE>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average daily net asset value 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 net assets over $2 billion .4250 of 1
- --------------------------------------------------------------
</TABLE>
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of each Fund in order to limit total expenses to .75 of 1% of the
average daily net assets of Municipal Bond and .975 of 1% of the average daily
net asset value of Insured Municipal Bond, excluding any 12b-1 fees applicable
to Class A, Class B and Class C Shares. The adviser may also voluntarily agree
to reimburse additional expenses from time to time, which may be terminated at
any time at its discretion.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to its Trustees who are affiliated with the Adviser or to
its officers, all of whom receive remuneration for their services to the Trust
from the Adviser.
The Distributor collected sales charges of approximately $884,200 and $608,500,
for Municipal Bond and Insured Municipal Bond, respectively, on Class A share
purchases, of which approximately $741,300 and $525,700, respectively, were paid
out as concessions to authorized dealers. The Distributor also received 12b-1
service fees on Class A shares, substantially all of which were paid to
compensate authorized dealers for providing services to shareholders relating to
their investments.
During the fiscal year ended February 28, 1997, the Distributor compensated
authorized dealers directly with approximately $4,900 for Municipal Bond and
$9,800 for Insured Municipal Bond in commission advances on Class B and Class C
share sales. Class B and Class C shares purchased are subject to a CDSC if the
shares are redeemed within a specified period of purchase. Effective February 1,
1997, any such CDSC is to be retained by the Distributor to compensate for
commissions advanced to authorized dealers. During the month ended February 28,
1997, no such CDSC was collected or retained by the Distributor. Also effective
February 1, 1997, all 12b-1 service fees collected on Class B shares during the
first year following a purchase, all 12b-1 distribution fees collected on Class
B shares, and all 12b-1 service and distribution fees on Class C shares during
the first year following a purchase are retained by the Distributor to
compensate for commissions advanced to authorized dealers. Accordingly, for the
one month ended February 28, 1997, the Distributor received and retained all
12b-1 service and distribution fees on Class B and Class C shares. The
59
<PAGE>
Notes to Financial Statements -- continued
12b-1 service and distribution fees on Class C shares received by the
Distributor for the eleven months ended January 31, 1997, were substantially all
paid to compensate authorized dealers for providing services to shareholders
relating to their investments.
7. Composition of Net Assets
At February 28, 1997, each Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $2,731,262,756 $758,494,506
Balance of undistributed net investment income 1,229,149 585,565
Accumulated net realized gain (loss) from investment transactions 3,172,599 (1,180,427)
Net unrealized appreciation of investments 155,834,372 48,631,383
- ----------------------------------------------------------------------------------------------------
Net assets $2,891,498,876 $806,531,027
====================================================================================================
</TABLE>
8. Investment Composition
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At February 28, 1997, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
Municipal Bond Insured Municipal Bond
- ---------------------------------------------------------------------
<S> <C> <C>
Revenue Bonds:
Health Care Facilities 18% 20%
Electric Utilities 20 6
Housing Facilities 15 2
Lease Rental Facilities 2 13
Water/Sewer Facilities 9 8
Educational Facilities 1 7
Transportation 6 4
Pollution Control 4 4
Other 6 3
General Obligation Bonds 7 16
Escrowed Bonds 12 17
- ---------------------------------------------------------------------
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, either of which ensure the timely payment of principal and interest
in the event of default (33% 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 (see note 1). 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.
60
<PAGE>
Financial Highlights
61
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Operating Performance Less Distributions
------------------------- ---------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
beginning investment from investment from capital end of asset
MUNICIPAL BOND of period income++ investments income gains period value+
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Year ended,
2/28/97 $9.280 $.482 $(.010) $(.467) $(.045) $9.240 5.26%
6/13/95 to 2/29/96 9.150 .340 .141 (.324) (.027) 9.280 5.33
Class B
2/06/97 to 2/28/97 9.230 .028 .016 (.034) -- 9.240 .47
Class C
Year ended,
2/28/97 9.260 .417 -- (.402) (.045) 9.230 4.64
6/13/95 to 2/29/96 9.150 .290 .126 (.279) (.027) 9.260 4.59
Class R
Year ended,
2/28/97 9.280 .492 .003 (.490) (.045) 9.240 5.53
2/29/96 9.000 .506 .313 (.512) (.027) 9.280 9.31
2/28/95 9.280 .515 (.209) (.511) (.075) 9.000 3.60
2/28/94 9.450 .519 (.075) (.516) (.098) 9.280 4.79
2/28/93 9.080 .555 .414 (.544) (.055) 9.450 11.04
5 months ended,
2/29/92 9.040 .239 .080 (.239) (.040) 9.080 3.56
Year ended,
9/30/91 8.650 .579 .438 (.589) (.038) 9.040 12.15
9/30/90 8.730 .596 (.080) (.596) -- 8.650 6.04
9/30/89 8.520 .597 .239 (.597) (.029) 8.730 10.07
9/30/88 8.020 .596 .536 (.596) (.036) 8.520 14.50
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 64.
62
<PAGE>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------------
Ratio of net Ratio of net
Ratio of investment Ratio of investment
expenses to income to expenses to income to
Net assets average net average net average net average net Portfolio
end of period assets before assets before assets after assets after turnover
(in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A
Year ended,
2/28/97 $ 68,204 .81% 5.11% .81% 5.11% 12%
6/13/95 to 2/29/96 37,089 .86* 5.11* .83* 5.14* 17
Class B
2/06/97 to 2/28/97 43 1.51* 5.23* 1.51* 5.23* 12
Class C
Year ended,
2/28/97 5,039 1.54 4.37 1.54 4.37 12
6/13/95 to 2/29/96 1,915 1.64* 4.33* 1.58* 4.39* 17
Class R
Year ended,
2/28/97 2,818,214 .57 5.35 .57 5.35 12
2/29/96 2,878,641 .59 5.53 .59 5.53 17
2/28/95 2,741,178 .59 5.79 .59 5.79 17
2/28/94 2,700,007 .62 5.49 .62 5.49 15
2/28/93 2,371,669 .61 5.95 .61 5.95 14
5 months ended,
2/29/92 1,835,708 .62* 6.24* .62* 6.24* 6
Year ended,
9/30/91 1,661,420 .60 6.48 .60 6.48 10
9/30/90 1,323,623 .62 6.78 .62 6.78 8
9/30/89 1,119,833 .64 6.85 .64 6.85 12
9/30/88 945,361 .65 7.11 .65 7.11 8
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
Financial Highlights -- continued
<TABLE>
<CAPTION>
Operating Performance Less Distributions
-------------------------- ---------------------------
Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
beginning investment from investment from capital end of asset
INSURED MUNICIPAL BOND of period income++ investments income gains period value+
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Year ended,
2/28/97 $10.970 $.555 $(.128) $(.539) $(.038) $10.820 4.04%
2/29/96 10.400 .542 .568 (.540) - 10.970 10.90
9/6/94 to 2/28/95 10.310 .264 .115 (.273) (.016) 10.400 3.84
Class B
2/04/97 to 2/28/97 10.800 .035 .025 (.040) -- 10.820 .55
Class C
Year ended,
2/28/97 10.850 .464 (.100) (.456) (.038) 10.720 3.48
2/29/96 10.310 .461 .540 (.461) -- 10.850 9.88
9/7/94 to 2/28/95 10.290 .227 .075 (.266) (.016) 10.310 3.09
Class R
Year ended,
2/28/97 10.920 .570 (.110) (.562) (.038) 10.780 4.38
2/29/96 10.380 .570 .540 (.570) -- 10.920 10.94
2/28/95 10.810 .573 (.407) (.580) (.016) 10.380 1.85
2/28/94 10.850 .574 .012 (.565) (.061) 10.810 5.47
2/28/93 10.030 .591 .880 (.589) (.062) 10.850 15.24
2/29/92 9.690 .612 .425 (.617) (.080) 10.030 11.03
2/28/91 9.520 .617 .198 (.611) (.034) 9.690 8.94
2/28/90 9.350 .627 .262 (.630) (.089) 9.520 9.73
2/28/89 9.300 .629 .050 (.629) -- 9.350 7.63
2/29/88 9.790 .637 (.490) (.637) -- 9.300 2.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ 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 sales charge on purchases. The total returns
shown for Class B and Class C Shares do not include the effect of applicable
contingent deferred sales charges. Class R Shares are not subject to any
sales charge on purchases or contingent deferred sales charges.
++ Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser, if applicable (see note 6 of the Notes to
Financial Statements).
64
<PAGE>
Nuveen Municipal Bond Funds
February 28, 1997 Annual Report
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------
Ratio of net Ratio of net
Ratio of investment Ratio of investment
expenses to income to expenses to income to
Net assets average net average net average net average net Portfolio
end of period assets before assets before assets after assets after turnover
(in thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A
Year ended,
2/28/97 $ 68,268 .87% 5.07% .87% 5.07% 35%
2/29/96 46,943 .92 5.00 .91 5.01 27
9/6/94 to 2/28/95 14,097 1.27* 5.28* 1.00* 5.55* 25
Class B
2/04/97 to 2/28/97 228 1.58* 4.84* 1.58* 4.84* 35
Class C
Year ended,
2/28/97 5,448 1.61 4.33 1.61 4.33 35
2/29/96 5,151 1.63 4.34 1.63 4.34 27
9/7/94 to 2/28/95 3,979 1.75* 4.83* 1.75* 4.83* 25
Class R
Year ended,
2/28/97 732,587 .63 5.31 .63 5.31 35
2/29/96 761,936 .63 5.33 .63 5.33 27
2/28/95 736,702 .64 5.67 .64 5.67 25
2/28/94 745,914 .65 5.21 .65 5.21 11
2/28/93 567,232 .72 5.68 .72 5.68 20
2/29/92 306,853 .73 6.12 .73 6.12 45
2/28/91 178,931 .80 6.45 .80 6.45 53
2/28/90 111,806 .83 6.49 .83 6.49 78
2/28/89 66,049 .87 6.83 .87 6.83 106
2/29/88 41,330 .88 6.65 .60 6.93 88
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Municipal Trust:
We have audited the accompanying statements of net assets of Nuveen
Flagship Municipal Trust (comprising the Nuveen Municipal Bond Fund
and Nuveen Insured Municipal Bond Fund) (a Massachusetts business
trust), including the portfolios of investments, as of February 28,
1997, 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
period 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 28, 1997, by correspondence with the custodian
and brokers. As to securities purchased but not received, we
requested confirmation from brokers and, when replies were not
received, we carried out other alternative auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the net
assets of each of the respective funds constituting the Nuveen
Flagship Municipal Trust as of February 28, 1997, 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 11, 1997
66
<PAGE>
Nuveen Municipal Bond Funds
Annual Report
Shareholder Meeting Report
Municipal Bond Fund
<TABLE>
<CAPTION>
A Shares C Shares R Shares
- ----------------------------------------------------------------------------
Directors:
============================================================================
<S> <C> <C> <C> <C>
(A) Bremner For 4,487,013 225,113 217,202,073
Withhold 66,151 3,878 5,367,621
-------------------------------------------------------
Total 4,553,164 228,991 222,569,694
============================================================================
(B) Brown For 4,487,298 225,113 217,558,038
Withhold 65,866 3,878 5,011,656
-------------------------------------------------------
Total 4,553,164 228,991 222,569,694
============================================================================
(C) Dean For 4,487,298 225,113 217,571,983
Withhold 65,866 3,878 4,997,711
-------------------------------------------------------
Total 4,553,164 228,991 222,569,694
============================================================================
(D) Impellizzeri For 4,486,840 224,967 217,141,615
Withhold 66,324 4,024 5,428,079
-------------------------------------------------------
Total 4,553,164 228,991 222,569,694
============================================================================
(E) Rosenheim For 4,486,996 225,113 217,404,320
Withhold 66,168 3,878 5,165,374
-------------------------------------------------------
Total 4,553,164 228,991 222,569,694
============================================================================
(F) Sawers For 4,487,298 225,113 217,534,374
Withhold 65,866 3,878 5,035,320
-------------------------------------------------------
Total 4,553,164 228,991 222,569,694
============================================================================
(G) Schneider For 4,487,204 225,113 217,220,000
Withhold 65,960 3,878 5,349,694
-------------------------------------------------------
Total 4,553,164 228,991 222,569,694
============================================================================
(H) Schwertfeger For 4,487,298 225,113 217,583,290
Withhold 65,866 3,878 4,986,404
-------------------------------------------------------
Total 4,553,164 228,991 222,569,694
============================================================================
AMT Bonds For 3,076,025 177,078 189,021,151
Against 98,550 3,694 11,675,201
Abstain 175,348 5,512 10,959,212
-------------------------------------------------------
Total 3,349,923 186,284 211,655,564
============================================================================
Broker Non Votes 1,203,241 42,707 10,914,130
============================================================================
Investment Grade For 3,118,540 180,749 194,228,414
Against 72,833 24 8,103,310
Abstain 158,550 5,511 9,323,840
-------------------------------------------------------
Total 3,349,923 186,284 211,655,564
============================================================================
Broker Non Votes 1,203,241 42,707 10,914,130
-------------------------------------------------------
</TABLE>
67
<PAGE>
Nuveen Municipal Bond Funds
Annual Report
Shareholder Meeting Report
Municipal Bond Fund
continued
<TABLE>
<CAPTION>
A Shares C Shares R Shares
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illiquid Securities For 2,964,689 172,661 182,791,221
Against 173,596 2,295 16,905,629
Abstain 211,638 11,328 11,958,714
-----------------------------------------------------
Total 3,349,923 186,284 211,655,564
- ------------------------------------------------------------------------------------
Broker Non Votes 1,203,241 42,707 10,914,130
- ------------------------------------------------------------------------------------
Unseasoned Issuers For 2,952,002 165,755 181,049,119
Against 187,134 13,874 17,989,044
Abstain 210,787 6,655 12,617,401
-----------------------------------------------------
Total 3,349,923 186,284 211,655,564
- ------------------------------------------------------------------------------------
Broker Non Votes 1,203,241 42,707 10,914,130
- ------------------------------------------------------------------------------------
Average Maturity For 3,124,986 177,774 195,312,598
Against 47,810 2,998 6,072,642
Abstain 177,127 5,512 10,270,324
-----------------------------------------------------
Total 3,349,923 186,284 211,655,564
- ------------------------------------------------------------------------------------
Broker Non Votes 1,203,241 42,707 10,914,130
- ------------------------------------------------------------------------------------
Temporary Investments For 3,058,114 172,392 190,989,093
Against 114,821 8,381 9,892,061
Abstain 176,988 5,511 10,774,410
-----------------------------------------------------
Total 3,349,923 186,284 211,655,564
- ------------------------------------------------------------------------------------
Broker Non Votes 1,203,241 42,707 10,914,130
- ------------------------------------------------------------------------------------
Single Bank Limits For 3,054,761 171,271 187,266,702
Against 97,698 8,714 12,566,096
Abstain 197,464 6,299 11,822,766
-----------------------------------------------------
Total 3,349,923 186,284 211,655,564
- ------------------------------------------------------------------------------------
Broker Non Votes 1,203,241 42,707 10,914,130
- ------------------------------------------------------------------------------------
Diversification Limit For 3,083,605 179,177 189,779,304
Against 91,926 831 10,659,432
Abstain 174,392 6,276 11,216,828
-----------------------------------------------------
Total 3,349,923 186,284 211,655,564
- ------------------------------------------------------------------------------------
Broker Non Votes 1,203,241 42,707 10,914,130
- ------------------------------------------------------------------------------------
Borrowing For 2,993,632 166,953 181,925,183
Against 160,368 13,819 17,255,952
Abstain 195,923 5,512 12,474,429
-----------------------------------------------------
Total 3,349,923 186,284 211,655,564
- ------------------------------------------------------------------------------------
Broker Non Votes 1,203,241 42,707 10,914,130
-----------------------------------------------------
</TABLE>
68
<PAGE>
Nuveen Municipal Bond Funds
Annual Report
Shareholder Meeting Report
Municipal Bond Fund
continued
<TABLE>
<CAPTION>
A Shares C Shares R Shares
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Futures and Options For 2,972,280 162,868 179,419,391
Against 195,995 12,715 20,372,334
Abstain 181,648 10,701 11,863,839
-----------------------------------------------------
Total 3,349,923 186,284 211,655,564
- ------------------------------------------------------------------------------------
Broker Non Votes 1,203,241 42,707 10,914,130
- ------------------------------------------------------------------------------------
Reorganization For 3,163,683 180,145 195,634,651
Against 36,094 - 5,207,700
Abstain 150,146 6,139 10,813,213
-----------------------------------------------------
Total 3,349,923 186,284 211,655,564
- ------------------------------------------------------------------------------------
Broker Non Votes 1,203,241 42,707 10,914,130
-----------------------------------------------------
</TABLE>
69
<PAGE>
Nuveen Municipal Bond Funds
Annual Report
Shareholder Meeting Report
Insured Municipal Bond Fund
<TABLE>
<CAPTION>
A Shares C Shares R Shares
- --------------------------------------------------------------------------
Directors
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(A) Bremner For 3,745,267 334,354 45,345,064
Withhold 29,867 - 1,111,810
----------------------------------------------------
Total 3,775,134 334,354 46,456,874
- --------------------------------------------------------------------------
(B) Brown For 3,747,747 334,354 45,404,074
Withhold 27,387 - 1,052,800
----------------------------------------------------
Total 3,775,134 334,354 46,456,874
- --------------------------------------------------------------------------
(C) Dean For 3,747,747 334,354 45,404,275
Withhold 27,387 - 1,052,599
----------------------------------------------------
Total 3,775,134 334,354 46,456,874
- --------------------------------------------------------------------------
(D) Impellizzeri For 3,747,710 334,354 45,324,388
Withhold 27,424 - 1,132,486
----------------------------------------------------
Total 3,775,134 334,354 46,456,874
- --------------------------------------------------------------------------
(E) Rosenheim For 3,747,710 334,354 45,356,401
Withhold 27,424 - 1,100,473
----------------------------------------------------
Total 3,775,134 334,354 46,456,874
- --------------------------------------------------------------------------
(F) Sawers For 3,745,564 334,354 45,395,761
Withhold 29,570 - 1,061,113
----------------------------------------------------
Total 3,775,134 334,354 46,456,874
- --------------------------------------------------------------------------
(G) Schneider For 3,745,267 334,354 45,328,346
Withhold 29,867 - 1,128,528
----------------------------------------------------
Total 3,775,134 334,354 46,456,874
- --------------------------------------------------------------------------
(H) Schwertfeger For 3,745,267 334,354 45,383,735
Withhold 29,867 - 1,073,139
----------------------------------------------------
Total 3,775,134 334,354 46,456,874
- --------------------------------------------------------------------------
AMT Bonds For 2,905,988 268,608 37,586,402
Against 95,326 7,218 1,898,185
Abstain 117,898 1,493 2,960,243
----------------------------------------------------
Total 3,119,212 277,319 42,444,830
- --------------------------------------------------------------------------
Broker Non Votes 655,922 57,035 4,012,044
- --------------------------------------------------------------------------
Investment Grade For 2,940,494 275,699 38,391,594
Against 59,688 128 1,524,756
Abstain 119,030 1,492 2,528,480
----------------------------------------------------
Total 3,119,212 277,319 42,444,830
- --------------------------------------------------------------------------
Broker Non Votes 655,922 57,035 4,012,044
----------------------------------------------------
</TABLE>
70
<PAGE>
Nuveen Municipal Bond Funds
Annual Report
Shareholder Meeting Report
Insured Municipal Bond Fund
continued
<TABLE>
<CAPTION>
A Shares C Shares R Shares
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illiquid Securities For 2,856,396 253,814 36,001,651
Against 111,770 13,895 3,128,665
Abstain 151,046 9,610 3,314,514
-----------------------------------------------------------------
Total 3,119,212 277,319 42,444,830
- ------------------------------------------------------------------------------------------------
Broker Non Votes 655,922 57,035 4,012,044
- ------------------------------------------------------------------------------------------------
Unseasoned Issuers For 2,831,211 261,823 35,551,010
Against 124,574 11,548 3,360,400
Abstain 163,427 3,948 3,533,420
-----------------------------------------------------------------
Total 3,119,212 277,319 42,444,830
- ------------------------------------------------------------------------------------------------
Broker Non Votes 655,922 57,035 4,012,044
- ------------------------------------------------------------------------------------------------
Average Maturity For 2,945,401 266,282 38,629,770
Against 45,200 140 1,031,421
Abstain 128,611 10,897 2,783,639
-----------------------------------------------------------------
Total 3,119,212 277,319 42,444,830
- ------------------------------------------------------------------------------------------------
Broker Non Votes 655,922 57,035 4,012,044
- ------------------------------------------------------------------------------------------------
Temporary Investments For 2,896,578 266,422 37,608,726
Against 82,752 - 1,820,661
Abstain 139,882 10,897 3,015,443
-----------------------------------------------------------------
Total 3,119,212 277,319 42,444,830
- ------------------------------------------------------------------------------------------------
Broker Non Votes 655,922 57,035 4,012,044
- ------------------------------------------------------------------------------------------------
Single Bank Limits For 2,902,203 265,380 36,720,283
Against 65,190 1,042 2,338,219
Abstain 151,819 10,897 3,386,328
-----------------------------------------------------------------
Total 3,119,212 277,319 42,444,830
- ------------------------------------------------------------------------------------------------
Broker Non Votes 655,922 57,035 4,012,044
- ------------------------------------------------------------------------------------------------
Reorganization For 2,944,734 277,039 38,872,486
Against 52,735 - 1,008,698
Abstain 121,743 280 2,563,646
-----------------------------------------------------------------
Total 3,119,212 277,319 42,444,830
- ------------------------------------------------------------------------------------------------
Broker Non Votes 655,922 57,035 4,012,044
-----------------------------------------------------------------
</TABLE>
71
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
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
Municipal Bond 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
1. Long-term, insured long-term, intermediate-term and limited-term portfolios.
2. Long-term and insured long-term portfolios.
3. Long-term and intermediate-term portfolios.
4. Long-term and limited-term portfolios.
To purchase additional shares of your Nuveen Municipal Bond Fund, contact your
financial adviser. If you would like to add to your current investment on a
monthly or semi-annual basis, you can sign up for Nuveen's systematic investing
program, which allows you to invest a fixed dollar amount every month
automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you gain the added growth potential of
long-term compounding.
For more information on any of these service options call your adviser, or
Nuveen at (800) 621-7227.
72
<PAGE>
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Margaret K. Rosenheim
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Shareholder Services, Inc.
Nuveen Investor Services
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Fried, Frank, Harris, Shriver
& Jacobson
Washington, D.C.
Public Accountants
Arthur Andersen LLP
Chicago, Illinois
73
<PAGE>
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Serving Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More that 1.3 million investors have
entrusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach - purchasing securities of strong companies and
communities that represent good long-term value - is the cornerstone of Nuveen's
investment philosophy. It is a careful, long-term strategy that offers the
potential for attractive returns with moderated risk. Successful value investing
begins with in-depth research and a discerning eye for marketplace opportunity.
Nuveen's team of investment professionals is backed by the discipline, resources
and expertise of almost a century of investment experience, including one of the
most recognized research departments in the industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of taxable and tax-free investment
products - including equity and fixed-income mutual funds, unit trusts,
exchange-traded funds, individual managed account services, and cash management
products.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
