<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998.
1933 ACT REGISTRATION NO. 333-14725
1940 ACT REGISTRATION NO. 811-07873
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 2 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 2 [X]
(Check appropriate box or boxes)
----------------
NUVEEN FLAGSHIP MUNICIPAL TRUST
(Exact name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 917-7700
Gifford R. Zimmerman, Esq.--Vice With a copy to:
President and Assistant Secretary Thomas S. Harman
333 West Wacker Drive
Chicago, Illinois 60606 Morgan, Lewis & Bockius
(Name and Address of Agent for Service) 1800 M. Street, NW
Washington, DC 20036
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant [X] on August 31, 1998 pursuant to
to paragraph (b) paragraph (a)(1)
[_] on (date) pursuant to paragraph (b) [_] 75 days after filing pursuant
[_] 60 days after filing pursuant to to paragraph (a)(2)
paragraph (a)(1) [_] on (date) pursuant to paragraph
(a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CONTENTS
OF
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO. 333-14725
AND
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO. 811-07873
This Registration Statement comprises the following papers and contents:
The Facing Sheet
Cross-Reference Sheet
Part A-The Prospectus
Part B-The Statement of Additional Information
Copy of Annual Reports to Shareholders (the financial
statements from which are incorporated by reference into the
Statement of Additional Information)
Part C-Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
----------------
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
ITEM IN
PART A
OF FORM N-
1A PROSPECTUS LOCATION
---------- -------------------
<S> <C>
1 Front and Back Cover Pages
2 Risk/Return Summary: Investments, Risks, and
Performance
3 Risk/Return Summary: Fee Table
4 Investment Objectives, Principal Investment
Strategies, and Related Risks
5 Management's Discussion of Fund Performance
6 Management, Organization, and Capital
Structure
7 Shareholder Information
8 Distribution Arrangements
9 Financial Highlights Information
</TABLE>
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM IN
PART B
OF FORM N- LOCATION IN STATEMENT
1A OF ADDITIONAL INFORMATION
---------- -------------------------
<S> <C>
10 Cover Page and Table of Contents
11 Fund History
12 Description of the Fund and Its
Investments and Risks
13 Management of the Fund
14 Control Persons and Principal Holders of
Securities
15 Investment Advisory and Other Services
16 Brokerage Allocation and Other Practices
17 Capital Stock and Other Securities
18 Purchase, Redemption and Pricing of
Securities
19 Taxation of the Fund
20 Underwriters
21 Calculation of Performance Data
22 Financial Statements
</TABLE>
PART C--OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM IN
PART C
OF FORM N-
1A LOCATION IN OTHER INFORMATION
---------- -----------------------------
<S> <C>
23 Exhibits 23 Exhibits
24 Persons Controlled By or Under 24 Persons Controlled By or Under Common
Common Control with the Fund Control with the Fund
25 Indemnification 25Indemnification
26 Business and Other Connections of 26 Business and Other Connections of the
the Investment Adviser Investment Adviser
27 Principal Underwriters 27Principal Underwriters
28 Location of Accounts and Reports 28Location of Accounts and Reports
29 Management Services 29Management Services
30 Undertakings 30Undertakings
</TABLE>
<PAGE>
PART A--PROSPECTUS
NUVEEN FLAGSHIP MUNICIPAL TRUST
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
NUVEEN
Municipal
Bond Funds
August 30, 1998
Prospectus
Dependable, tax-free income
to help you keep more of
what you earn.
National
[PHOTO]
<PAGE>
Table of Contents
Section 1 The Funds
This section provides you with an overview of the funds including investment
objectives, portfolio holdings and historical performance information.
Introduction.................................................. 1
Nuveen Municipal Bond Fund.................................... 2
Nuveen Insured Municipal Bond Fund............................ 4
Nuveen Flagship All-American Municipal Bond Fund.............. 6
Nuveen Flagship Intermediate Municipal Bond Fund.............. 8
Nuveen Flagship Limited Term Municipal Bond Fund.............. 10
Summary of Fund Expenses...................................... 12
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Funds......................................... 16
What Securities We Invest In.................................. 17
How We Select Investments..................................... 18
What the Risks Are............................................ 19
How We Manage Risk............................................ 20
Management Fees............................................... 22
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out of your
account.
How to Choose a Share Class................................... 23
How to Reduce Your Sales Charge............................... 25
How to Buy Shares............................................. 25
Systematic Investing.......................................... 26
Special Services.............................................. 27
How to Sell Shares............................................ 28
Section 4 General Information
This section summarizes the funds' distribution policies and other general fund
information.
Distributions and Taxes....................................... 29
Distribution and Service Plans................................ 30
Net Asset Value............................................... 30
Organization of the Funds..................................... 31
Fund Service Providers........................................ 31
Section 5 Financial Highlights
This section provides the funds' financial performance for the past 5 years.
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
August 30, 1998
Section 1 The Funds
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Prospectus
This prospectus is intended to provide important information to help you
evaluate whether a Nuveen Mutual Fund may be right for you. Please read it
carefully before investing and keep it for future reference.
To learn more about how Nuveen Mutual Funds can help you achieve your financial
goals, talk with your financial adviser. Or call us at (800) 621-7227 for more
information
A Century of Investment Experience
Since our founding in 1898, John Nuveen & Co. Incorporated has been synonymous
with investments that withstand the test of time. Today we offer a broad range
of quality investments designed for individuals seeking to build and maintain
wealth.
Like all mutual fund shares these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
NOT May lose value
FDIC- No bank
INSURED guarantee
Section 1 The Funds 1
<PAGE>
Nuveen Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the Fund is to provide you with as high a level of
current interest income exempt from regular federal income taxes as is
consistent with preservation of capital.
How the Fund Pursues Its Objective
The Fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The Fund may buy non-rated municipal bonds if the Fund's investment adviser
judges them to be investment grade.
The Fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer potential above-
average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the Fund are interest rate and credit risk.
Interest rate risk is the risk that changes in market interest rates will affect
the value of a fund's investment portfolio. In general, the value of a municipal
bond falls when interest rates rise, and rises when interest rates fall. Credit
risk is the risk that an issuer of a municipal bond will be unable to make
interest and principal payments. In general, lower rated municipal bonds may
carry a greater degree of credit risk.
The Fund limits your investment risk generally by restricting the types and
maturities of municipal bonds it purchases and by diversifying its investment
portfolio geographically as well as across different industry sectors.
Is This Fund Right For You?
The Fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this Fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed (as of 4/30/98)
Highlights
Fund Net Assets ($MM): $2,924
Share Class A B C R
Inception Date 6/95 2/97 6/95 11/76
NAV $ 9.46 $ 9.46 $ 9.44 $ 9.46
Latest Dividend $0.0375 $0.0315 $0.0330 $0.0390
Annualized Dividend $0.4500 $0.3780 $0.3960 $0.4680
The Fund's portfolio manager is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
the Fund's Class A annual performance during each of the past ten years as well
as the Fund's Class A annualized one-, five- and ten-year returns through
December 31, 1997.
Total Returns/1/
[Chart Appears Here]
Class A Annual Returns
1988 10.4
1989 10.6
1990 6.0
1991 11.1
1992 8.2
1993 8.3
1994 -2.1
1995 15.0
1996 4.0
1997 8.9
During the ten years ending December 31, 1997, the highest and lowest quarterly
returns were 5.92% and -3.20%, respectively for the quarters ending 6/30/89 and
3/31/94. The year-to-date return as of 3/31/98 was 1.18%.
Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year 5 Year 10 Year
- --------------------------------------------
Class A (Offer) 4.24% 5.75% 7.45%
Class A (NAV) 8.86% 6.67% 7.92%
Class B 4.20% 5.79% 7.32%
Class C 8.06% 5.88% 7.12%
Class R 9.08% 6.93% 8.18%
- --------------------------------------------
Lipper
Peer Group/2/ 9.39% 7.03% 8.35%
LB Market
Benchmark/3/ 9.19% 7.36% 8.58%
2 Section 1 The Funds
<PAGE>
How the Fund Has Performed (cont.)
Growth of a $10,000 Investment/1/
Nuveen Municipal Nuveen Municipal Lehman Brothers
Bond Fund (NAV) Bond Fund (Offer) Municipal Bond Index/3/
4/30/88 10,000.00 9,580.00 10,000.00
4/30/89 11,174.75 10,705.41 10,890.47
4/30/90 11,815.36 11,319.12 11,675.86
4/30/91 13,060.32 12,511.79 13,016.95
4/30/92 14,247.97 13,649.55 14,255.24
4/30/93 15,677.01 15,018.58 16,058.60
4/30/94 15,962.38 15,291.96 16,404.55
4/30/95 16,922.16 16,278.49 17,496.04
4/30/96 18,057.25 17,298.85 18,886.90
4/30/97 19,297.88 18,487.36 20,313.09
4/30/98 21,034.75 20,151.29 22,202.38
Competitive Overview
Lipper Rankings/2/
(National Muni Debt Category)
1-Year 3-Year 5-Year 10-Year
110/237 - - -
Morningstar Rating/4/: *****
Overall rating among 1547, 809 and 346 municipal bond funds for the 3-, 5- and
10-year periods, respectively.
1. Class R total returns actual performance for all periods; Class A, B and C
total returns reflect actual performance for periods since class inception,
and Class R performance for periods prior to class inception, adjusted for
the differences in fees between the classes (see Summary of Fund Expenses).
The bar chart and highest/lowest quarterly returns do not reflect sales
charges, while the 1-, 5- and 10-year annual return table and Class A (Offer)
investment line graph do. Past results do not predict future performance.
2. Lipper Peer Group returns reflect the performance of the Lipper National
Municipal Debt Index, a managed index that represents the average annualized
returns of the 30 largest funds in the Lipper National Municipal Debt
Category. Rankings are within the stated Lipper category. Returns assume
reinvestment of dividends and do not reflect any applicable sales charges.
3. LB Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
4. Overall Class R rating within the municipal bond category. Morningstar
proprietary ratings reflect historical risk-adjusted performance and are
subject to change every month. Ratings are calculated from a fund's 3-, 5-
and 10-year average annual returns in excess of 90-day Treasury bill returns,
with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day Treasury bill returns. Class R Shares of the Fund
earned 5 stars for the 3-, 5- and 10-year periods ended 4/30/98. 10% of funds
in an investment category receive 5 stars.
How the Fund Is Invested (as of 4/30/98)
Credit Quality
AAA 40.3%
AA 34.9%
A 18.6%
BBB 5.9%
NR/Other 0.3%
Industry Diversification (Top 5)
[Chart appears here]
Utilities 25%
Health Care 19%
U.S. Guaranteed 11%
Water/Sewer 10%
Tax Obligation-Limited 8%
Other 27%
Top 5 Holdings
North Carolina Eastern Municipal Power 2.5%
Metropolitan Pier & Exposition Authority 2.1%
Michigan Hospital (Detroit Medical Center) 2.0%
Chicago O'Hare Airport 2.0%
IL Health (Northwestern Memorial Hospital) 2.0%
Holdings will vary.
Portfolio Statistics
Weighted Average Maturity 18.7 years
Weighted Average Duration 6.8 years
Weighted Average Credit Quality AA
Number of Issues 198
Section 1 The Funds 3
<PAGE>
Nuveen Insured Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the Fund is to provide you with as high a level of
current interest income exempt from regular federal income taxes as is
consistent with preservation of capital.
How the Fund Pursues Its Objective
The Fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The Fund may buy non-rated municipal bonds if the Fund's investment adviser
judges them to be investment grade.
The Fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer potential above-
average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the Fund are interest rate and credit risk.
Interest rate risk is the risk that changes in market interest rates will affect
the value of a fund's investment portfolio. In general, the value of a municipal
bond falls when interest rates rise, and rises when interest rates fall. Credit
risk is the risk that an issuer of a municipal bond will be unable to make
interest and principal payments. In general, lower rated municipal bonds may
carry a greater degree of credit risk.
The Fund limits your investment risk generally by restricting the types and
maturities of municipal bonds it purchases and by diversifying its investment
portfolio geographically as well as across different industry sectors.
Is This Fund Right For You?
The Fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this Fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401k plan;
. Avoid fluctuations in share price.
How the Fund Has Performed (as of 4/30/98)
Highlights (as of 4/30/98)
Fund Net Assets ($MM): $831
................................................................
Share Class A B C R
- ----------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/86
................................................................
NAV $ 11.03 $ 11.03 $ 10.92 $ 10.98
................................................................
Latest Dividend $0.0445 $0.0375 $0.0390 $0.0460
................................................................
Annualized Dividend $0.5340 $0.4500 $0.4680 $0.5520
................................................................
The Fund's portfolio manager is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
the Fund's Class A annual performance over the past ten years as well as the
Fund's Class A annualized one-, five- and ten-year returns.
Total Returns/1/
[BAR GRAPH APPEARS HERE]
CLASS A ANNUAL RETURNS
1988 12.6%
1989 10.3%
1990 6.5%
1991 12.5%
1992 9.4%
1993 13.2%
1994 -6.4%
1995 19.0%
1996 3.2%
1997 8.3%
During the ten years ending December 31, 1997, the highest and lowest quarterly
returns were 7.71% and --6.39%, respectively for the quarters ending 3/31/95
and 3/31/94. The year-to-date return as of 3/31/98 was 1.02%.
Annual Total Returns for
the Periods Ending December 31, 1997
....................................
Class 1 Year 5 Year 10 Year
- -------------------------------------------------------
Class A (Offer) 3.75% 6.19% 8.18%
Class A (NAV) 8.33% 7.10% 8.64%
Class B 3.53% 3.53% 6.13% 8.00%
Class C 7.73% 7.73% 6.24% 7.80%
Class R 8.54% 8.54% 7.30% 8.88%
- -------------------------------------------------------
Lipper
Peer Group/2/ 8.38% 6.68% 8.10%
LB Market
Benchmark/3/ 9.19% 7.36% 8.58%
4 Section 1 The Funds
<PAGE>
How the Fund Has Performed (cont.)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Growth of a $10,000 Investment/1/
May 1, 1988 - April 30, 1998
Class A (NAV) Class A (Offer) LB Market Benchmark/3/
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
4/30/88 10,000.00 9,580.00 10,000.00
- --------------------------------------------------------------------------------
4/30/89 11,309.81 10,834.79 10,890.47
- --------------------------------------------------------------------------------
4/30/90 11,877.84 11,378.97 11,675.86
- --------------------------------------------------------------------------------
4/30/91 13,255.29 12,698.56 13,016.95
- --------------------------------------------------------------------------------
4/30/92 14,599.81 13,986.62 14,255.24
- --------------------------------------------------------------------------------
4/30/93 16,576.25 15,880.05 16,058.60
- --------------------------------------------------------------------------------
4/30/94 16,728.07 16,025.49 16,404.55
- --------------------------------------------------------------------------------
4/30/95 17,942.37 17,188.79 17,496.04
- --------------------------------------------------------------------------------
4/30/96 19,237.38 18,429.41 18,886.90
- --------------------------------------------------------------------------------
4/30/97 20,412.92 19,555.58 20,313.09
- --------------------------------------------------------------------------------
4/30/98 22,259.66 21,324.75 22,202.38
- --------------------------------------------------------------------------------
</TABLE>
Competitive Overview (as of 4/30/98)
<TABLE>
<CAPTION>
Lipper Rankings/2/
(National Ins Muni Debt Category)
<S> <C> <C> <C>
1-Year 3-Year 5-Year 10-Year
- ------------------------------------------------------
10/51 10/43 -- --
- ------------------------------------------------------
</TABLE>
Morningstar Rating/4/:**
Overall rating among 1547 municipal bond funds for the 3-year period.
1. Class R total returns actual performance for all periods; Class A, B and C
total returns reflect actual performance for periods since class
inception, and Class R performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see Summary of
Fund Expenses). The bar chart and highest/lowest quarterly returns do not
reflect sales, while the 1-, 5- and 10-year annual return table and class A
(offer) investment line graph do. Past results do not predict future
performance.
2. Lipper Peer Group returns reflect the performance of the Lipper Insured
National Municipal Debt Index, a managed index that represents the average
annualized returns of the 30 largest funds in the Lipper Insured National
Municipal Debt Category. Rankings are within the stated Lipper category.
Returns assume reinvestment of dividends and do not reflect any applicable
sales charges.
3. LB Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
4. Overall Class A rating within the municipal bond category. Morningstar
proprietary ratings reflect historical risk-adjusted performance and are
subject to change every month. Ratings are calculated from a fund's 3-, 5-
and 10-year average annual returns in excess of 90-day Treasury bill
returns, with appropriate fee adjustments and a risk factor that reflects
fund performance below 90-day Treasury bill returns. 10%, 22.5%, 35%, 22.5%
and 10% of funds in an investment category receive 5, 4, 3, 2 and 1 stars,
respectively.
<PAGE>
How the Fund Is Invested (as of 4/30/98)
<TABLE>
<CAPTION>
Credit Quality
<S> <C>
Insured 76%
- ---------------------------
Escrowed 24%
- ---------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Tax Obligation - General (14%)
- -------------------------------------------------
Tax Obligation - Limited ( 9%)
- -------------------------------------------------
Utilities ( 9%)
- -------------------------------------------------
Health Care (16%)
- -------------------------------------------------
U.S. Guaranteed (27%)
- -------------------------------------------------
Other (25%)
- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Top 5 Holdings
<S> <C>
NYC Municipal Water Authority 2.4%
- -------------------------------------------------
San Joaquin Hills CA Transportation 2.1%
- -------------------------------------------------
Vermont Housing Finance Authority 1.9%
- -------------------------------------------------
Orangeburg County SC Waste Disposal 1.8%
- -------------------------------------------------
Ontario Redevelopment Finance Authority 1.8%
- -------------------------------------------------
</TABLE>
Holdings will vary.
<TABLE>
<CAPTION>
<S> <C>
Portfolio Statistics
- -------------------------------------------------
Weighted Average Maturity 19.3 years
- -------------------------------------------------
Weighted Average Duration 6.6 years
- -------------------------------------------------
Weighted Average Credit Quality AAA
- -------------------------------------------------
Number of Issues 178
- -------------------------------------------------
</TABLE>
Section 1 The Funds 5
<PAGE>
Nuveen Flagship All-American Fund
Fund Overview
Investment Objective
The investment objective of the Fund is to provide you with as high a level of
current interest income exempt from regular federal income taxes as is
consistent with preservation of capital.
How the Fund Pursues Its Objective
The Fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The Fund may buy non-rated municipal bonds if the Fund's investment adviser
judges them to be investment grade.
The Fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer potential above-
average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the Fund are interest rate and credit risk.
Interest rate risk is the risk that changes in market interest rates will affect
the value of a fund's investment portfolio. In general, the value of a municipal
bond falls when interest rates rise, and rises when interest rates fall. Credit
risk is the risk that an issuer of a municipal bond will be unable to make
interest and principal payments. In general, lower rated municipal bonds may
carry a greater degree of credit risk.
The Fund limits your investment risk generally by restricting the types and
maturities of municipal bonds it purchases and by diversifying its investment
portfolio geographically as well as across different industry sectors.
Is This Fund Right For You?
The Fund may be a suitable investment for you if you seek to:
.Earn regular monthly tax-free dividends;
.Preserve investment capital over time;
.Reduce taxes on investment income;
.Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this Fund if you seek to:
.Pursue an aggressive, high-growth investment strategy;
.Invest through an IRA or 401(k) plan;
.Avoid fluctuations in share price.
How the Fund Has Performed (as of 4/30/98)
Highlights (as of 4/30/98)
<TABLE>
<CAPTION>
Fund Net Assets ($MM): $312
- -----------------------------------------------------------
Share Class A B C R
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 10/88 2/97 6/93 2/97
- -----------------------------------------------------------
NAV $ 11.32 $ 11.33 $ 11.31 $ 11.32
- -----------------------------------------------------------
Latest Dividend $0.0490 $0.0420 $0.0440 $0.0510
- -----------------------------------------------------------
Annualized Dividend $0.5880 $0.5040 $0.5280 $0.6120
- -----------------------------------------------------------
</TABLE>
The Fund's portfolio manager is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below illustrate
the Fund's Class A annual performance since inception as well as the Fund's
Class A annualized one-, five- and inception returns.
Total Returns/1/
[GRAPH APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
Class A Annual Returns
<S> <C>
1989 11.6%
- ---------------------
1990 5.8%
- ---------------------
1991 14.5%
- ---------------------
1992 10.5%
- ---------------------
1993 14.4%
- ---------------------
1994 -5.9%
- ---------------------
1995 17.5%
- ---------------------
1996 4.8%
- ---------------------
1997 10.8%
- ---------------------
</TABLE>
During the nine years ending December 31, 1997, the highest and lowest quarterly
returns were 6.84% and -5.54%, respectively for the quarters ending 3/31/95 and
3/31/94. The year-to-date return as of 3/31/98 was 1.47%.
<TABLE>
<CAPTION>
Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year 5 Years Inception
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 6.17% 7.06% 8.51%
Class A (NAV) 10.82% 7.99% 9.01%
Class B 6.01% 7.21% 8.50%
Class C 10.24% 7.39% 8.41%
Class R 11.02% 8.03% 9.03%
- ----------------------------------------------------------------------
Lipper Peer
Group/2/ 9.93% 9.03% 8.07%
LB Market
Benchmark/3/ 9.19% 7.36% 8.60%
</TABLE>
6 Section 1 The Funds
<PAGE>
How the Fund Has Performed (cont.)
Growth of a $10,000 Investment/1/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Oct. 3, 1988 - April 30, 1998
- --------------------------------------------------------------------------------
Class A (NAV) Class A (Offer) LB Market Benchmark/3/
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
10/3/88 10,000.00 9,580.00 10,000.00
- --------------------------------------------------------------------------------
4/30/89 10,521.85 10,079.93 10,495.87
- --------------------------------------------------------------------------------
4/30/90 11,110.28 10,643.65 11,252.80
- --------------------------------------------------------------------------------
4/30/91 12,470.29 11,946.54 12,545.29
- --------------------------------------------------------------------------------
4/30/92 13,875.74 13,292.96 13,738.71
- --------------------------------------------------------------------------------
4/30/93 15,987.36 15,315.89 15,476.73
- --------------------------------------------------------------------------------
4/30/94 16,399.70 15,710.91 15,810.15
- --------------------------------------------------------------------------------
4/30/95 17,403.47 16,672.53 16,862.08
- --------------------------------------------------------------------------------
4/30/96 18,731.44 17,944.72 18,202.55
- --------------------------------------------------------------------------------
4/30/97 20,274.31 19,422.79 19,577.07
- --------------------------------------------------------------------------------
4/30/98 22,366.27 21,426.88 21,397.89
- --------------------------------------------------------------------------------
</TABLE>
Competitive Overview (as of 4/30/98)
<TABLE>
<CAPTION>
Lipper Rankings/2/
(National Muni Debt Category)
<S> <C> <C> <C>
1-Year 3-Year 5-Year 10-Year
- -----------------------------------------------------------
16/237 10/192 6/122 --
- -----------------------------------------------------------
</TABLE>
Morningstar Rating/4/: ****
Overall rating among 1547 and 809 municipal bond funds for the 3- and 5-year
periods ended 3/31/98, respectively.
1. Class A total returns actual performance for all periods; Class B, C and R
total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see Summary of
Fund Expenses). The bar chart and highest/lowest quarterly returns do not
reflect sales charges, while the 1- and 5-year annual return table and
Class A (offer) investment line graph (at offer) do. Past results do not
predict future performance.
2. Lipper Peer Group returns reflect the performance of the Lipper National
Municipal Debt Index, a managed index that represents the average
annualized returns of the 30 largest funds in the Lipper National Municipal
Debt Category. Rankings are within the stated Lipper category. Returns
assume reinvestment of dividends and do not reflect any applicable sales
charges.
3. LB Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index.
4. Overall Class A rating within the municipal bond category. Morningstar
proprietary ratings reflect historical risk-adjusted performance and are
subject to change every month. Ratings are calculated from a fund's 3-, 5-
and 10-year average annual returns in excess of 90-day Treasury bill
returns, with appropriate fee adjustments and a risk factor that reflects
fund performance below 90-day Treasury bill returns. Class A Shares of the
Fund earned 4 stars for the 3- and 5-year periods ended 4/30/98. 10% and
22.5% of funds in an investment category receive 5 and 4 stars,
respectively.
<PAGE>
How the Fund Is Invested (as of 4/30/98)
<TABLE>
<CAPTION>
Credit Quality
<S> <C>
AAA 28.9%
- ------------------------------------------------------------
AA 6.2%
- ------------------------------------------------------------
A 21.2%
- ------------------------------------------------------------
BBB 33.6%
- ------------------------------------------------------------
NR/Other 10.1%
- ------------------------------------------------------------
</TABLE>
Industry Diversification (Top 5)
<TABLE>
<CAPTION>
[PIE CHART APPEARS HERE]
<S> <C>
Transportation (14%)
- ------------------------------------------------------------
Utilities (13%)
- ------------------------------------------------------------
Other (35%)
- ------------------------------------------------------------
Education and Civic Organizations (10%)
- ------------------------------------------------------------
Health Care (17%)
- ------------------------------------------------------------
U.S. Guaranteed (11%)
- ------------------------------------------------------------
</TABLE>
Top 5 Holdings
<TABLE>
<CAPTION>
<S> <C>
Port Authority of NY & NJ Special Obligation 2.6%
- -----------------------------------------------------------
Alliance Airport Authority TX 2.4%
- -----------------------------------------------------------
Long Beach CA Aquarium 2.3%
- -----------------------------------------------------------
Brazos TX Pollution Control Revenue 2.2%
- -----------------------------------------------------------
IL Health Sarah Lincoln Health Center 1.9%
- -----------------------------------------------------------
</TABLE>
Holdings will vary.
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Weighted Average Maturity 21.6 years
- -----------------------------------------------------------
Weighted Average Duration 7.6 years
- -----------------------------------------------------------
Weighted Average Credit Quality A
- -----------------------------------------------------------
Number of Issues 124
- -----------------------------------------------------------
</TABLE>
Section 1 The Funds 7
<PAGE>
Nuveen Flagship Intermediate Fund
Fund Overview
Investment Objective
The investment objective of the Fund is to provide you with as high a level of
current interest income exempt from regular federal in come taxes as is
consistent with preservation of capital.
How the Fund Pursues Its Objective
The Fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The Fund may buy non-rated municipal bonds if the Fund's investment adviser
judges them to be investment grade.
The Fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer potential above-
average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the Fund are interest rate and credit risk.
Interest rate risk is the risk that changes in market interest rates will affect
the value of a fund's investment portfolio. In general, the value of a municipal
bond falls when interest rates rise, and rises when interest rates fall. Credit
risk is the risk that an issuer of a municipal bond will be unable to make
interest and principal payments. In general, lower rated municipal bonds may
carry a greater degree of credit risk.
The Fund limits your investment risk generally by restricting the types and
maturities of municipal bonds it purchases and by diversifying its investment
portfolio geographically as well as across different industry sectors.
Is This Fund Right For You?
The Fund may be a suitable investment for you if you seek to:
.Earn regular monthly tax-free dividends;
.Preserve investment capital over time;
.Reduce taxes on investment income;
.Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this Fund if you seek to:
.Pursue an aggressive, high-growth investment strategy;
.Invest through an IRA or 401(k) plan;
.Avoid fluctuations in share price.
How the Fund Has Performed
Highlights (as of 4/30/98)
<TABLE>
<CAPTION>
Fund Net Assets ($MM): $ 46
- -----------------------------------------------------------
Share Class A C R
- -----------------------------------------------------------
<S> <C> <C> <C>
Inception Date 9/92 12/95 2/97
NAV $ 10.88 $ 10.89 $ 10.86
Latest Dividend $0.0420 $0.0370 $0.0435
Annualized Dividend $0.5040 $0.4440 $0.5220
- -----------------------------------------------------------
</TABLE>
The Fund's portfolio manager is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below illustrate
the Fund's Class A annual performance since inception as well as the Fund's
Class A annualized one, five year and inception returns.
Total Returns/1/
Class A Annual Returns
<TABLE>
<CAPTION>
<S> <C>
1993 14.0%
- -------------------------------------
1994 -4.8%
- -------------------------------------
1995 15.6%
- -------------------------------------
1996 4.3%
- -------------------------------------
1997 9.6%
- -------------------------------------
</TABLE>
During the five years ending December 31, 1997, the highest and lowest quarterly
returns were 5.36% and -4.26%, respectively for the quarters ending 3/31/95 and
3/31/94. The year-to-date return as of 3/31/98 was 0.99%.
<TABLE>
<CAPTION>
Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year 5 Year Inception
- -----------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 6.30% 6.83% 7.05%
Class A (NAV) 9.62% 7.49% 7.68%
Class C 8.92% 6.90% 7.08%
Class R 9.61% 7.49% 7.68%
- -----------------------------------------------------------
Lipper Peer
Group/2/ 7.40% 5.98% 6.01%
LB Market
Benchmark/3/ 7.67% 6.61% 6.79%
</TABLE>
8 Section 1 The Funds
<PAGE>
How the Fund Has Performed (cont.)
Growth of a $10,000 Investment/1/
September 15, 1992-April 30, 1998
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Class A (Offer) Class A (NAV) LB Market Benchmark/3/
--------------- ------------- ----------------------
<S> <C> <C> <C>
9/15/92 $ 9,700.00 $10,000.00 $10,000.00
4/30/93 10,620.30 10,948.76 10,639.95
4/30/94 10,960.88 11,299.88 10,970.76
4/30/95 11,483.60 11,838.76 11,611.66
4/30/96 12,363.81 12,746.19 12,492.05
4/30/97 13,189.38 13,597.30 13,162.19
4/30/98 14,373.09 14,817.62 14,195.25
</TABLE>
Competitive Overview (as of 4/30/98)
Lipper Rankings/2/
(National Int Muni Debt Category)
<TABLE>
<CAPTION>
1-Year 3-Year 5-Year 10-Year
- -------------------------------------------------------
<S> <C> <C> <C>
5/139 4/117 6/61 --
- -------------------------------------------------------
</TABLE>
Morningstar Rating/4/: ****
Overall rating among 1547 and 809 municipal bond funds for the 3- and 5-year
periods ended 3/31/98, respectively.
1. Class A total returns actual performance for all periods; Class B, C and R
total returns reflect actual performance for periods since class inception,
and Class A performance for periods prior to class inception (see "Financial
Highlights" for dates), adjusted for the differences in fees between the
classes (see Summary of Fund Expenses). The bar chart and highest/lowest
quarterly returns do not reflect sales charges, while the 1-, 5- and 10-year
annual return table and Class A (offer) investment line graph (at offer) do.
Past results do not predict future performance.
2. Lipper Peer Group returns reflect the performance of the Lipper Intermediate
Municipal Debt Index, a managed index that represents the average annualized
returns of the 30 largest funds in the Lipper Intermediate Municipal Debt
Category. Rankings are within the stated Lipper category. Returns assume
reinvestment of dividends and do not reflect any applicable sales charges.
3. LB Market Benchmark returns reflect the performance of the Lehman Brothers 7
year Municipal Bond Index, an unmanaged index.
4. Overall Class A rating within the municipal bond category. Morningstar
proprietary ratings reflect historical risk-adjusted performance and are
subject to change every month. Ratings are calculated from a fund's 3-, 5-
and 10-year average annual returns in excess of 90-day Treasury bill returns,
with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day Treasury bill returns. Class A Shares of the Fund
earned 4 stars for the 3-, and 5-year periods ended 4/30/98. 10% and 22.5% of
funds in an investment category receive 5 and 4 stars, respectively.
How the Fund Is Invested (as of 4/30/98)
<TABLE>
<CAPTION>
Credit Quality
<S> <C>
AAA 30.7%
- -------------------------------------------------------
AA 11.2%
- -------------------------------------------------------
A 22.7%
- -------------------------------------------------------
BBB 22.9%
- -------------------------------------------------------
NR/Other 12.5%
- -------------------------------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Transportation (12%)
Utilities (9%)
Other (31%)
Education and Civic Organizations (9%)
Health Care (25%)
Tax Obligation-Limited (14%)
</TABLE>
<TABLE>
<CAPTION>
Top 5 Holdings
<S> <C>
Goose Creek TX Independent School District 3.8%
- -------------------------------------------------------
Arapahoe County, CO Highway Revenue 3.4%
- -------------------------------------------------------
Kentucky Infrastructure Authority 2.7%
- -------------------------------------------------------
Port Authority of NY & NJ JFK Airport 2.4%
- -------------------------------------------------------
Port Authority of NY & NJ Special Obligation 2.4%
- -------------------------------------------------------
</TABLE>
Holdings will vary.
<TABLE>
<CAPTION>
Portfolio Statistics
<S> <C>
Weighted Average Maturity 8.7 years
- -------------------------------------------------------
Weighted Average Duration 6.8 years
- -------------------------------------------------------
Weighted Average Credit Quality A+
- -------------------------------------------------------
Number of Issues 65
- -------------------------------------------------------
</TABLE>
Section 1 The Funds 9
<PAGE>
Nuveen Flagship Limited Term Fund
Fund Overview
Investment Objective
The investment objective of the Fund is to provide you with as high a level of
current interest income exempt from regular federal income taxes as is
consistent with preservation of capital.
How the Fund Pursues Its Objective
The Fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The Fund may buy non-rated municipal bonds if the Fund's investment adviser
judges them to be investment grade.
The Fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer potential above-
average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the Fund are interest rate and credit risk.
Interest rate risk is the risk that changes in market interest rates will affect
the value of a fund's investment portfolio. In general, the value of a municipal
bond falls when interest rates rise, and rises when interest rates fall. Credit
risk is the risk that an issuer of a municipal bond will be unable to make
interest and principal payments. In general, lower rated municipal bonds may
carry a greater degree of credit risk.
The Fund limits your investment risk generally by restricting the types and
maturities of municipal bonds it purchases and by diversifying its investment
portfolio geographically as well as across different industry sectors.
Is This Fund Right For You?
The Fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this Fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
<TABLE>
<CAPTION>
Highlights (as of 4/30/98)
<S> <C> <C> <C>
Fund Net Assets ($MM): $473
- -------------------------------------------------------
Share Class A C R
- -------------------------------------------------------
Inception Date 10/87 12/95 2/97
- -------------------------------------------------------
NAV $ 10.80 $ 10.79 $ 10.78
- -------------------------------------------------------
Latest Dividend $0.0425 $0.0395 $0.0445
- -------------------------------------------------------
Annualized Dividend $0.5100 $0.4740 $0.5340
- -------------------------------------------------------
</TABLE>
The Fund's portfolio manager is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
the Fund's Class A annual performance over the past ten years as well as the
Fund's Class A annualized one-, five- and ten-year returns.
Total Returns/1/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Class A Annual Returns
<S> <C>
1988 6.4%
1989 8.1
1990 6.6
1991 10.0
1992 8.7
1993 9.1
1994 (1.9)
1995 10.3
1996 4.1
1997 6.9
</TABLE>
During the ten years ending December 31, 1997, the highest and lowest quarterly
returns were 3.83% and -2.34%, respectively for the quarters ending 6/30/89 and
3/31/94. The year-to-date return as of 3/31/98 was 0.99%.
<TABLE>
<CAPTION>
Annual Total Returns for
the Periods Ending December 31, 1997
-------------------------------------------
Class 1 Year 5 Year 10 Year
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 4.23% 5.06% 6.50%
Class A (NAV) 6.86% 5.59% 6.77%
Class C 6.42% 5.25% 6.44%
Class R 6.84% 5.59% 6.77%
- --------------------------------------------------------------------------------
Lipper Peer Group/2/ 5.29% 4.70% 5.91%
LB Market Benchmark/3/ 6.38% 5.85% 7.13%
</TABLE>
10 Section 1 The Funds
<PAGE>
How the Fund Has Performed (cont.)
Growth of a $10,000 Investment/1/
May 1, 1998-April 30, 1998
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
LB MARKET
(NAV) (OFFER) BENCHMARK
<S> <C> <C> <C>
- ----------------------------------------------------------
4/30/88 10,000.00 9,750.00 10,000.00
4/30/89 10,533.82 10,270.47 10,426.58
4/30/90 11,273,32 10,991.49 11,196.79
4/30/91 12,271.70 11,964.91 12,450.80
4/30/92 13,355.11 13,021.23 13,526.37
4/30/93 14,755.53 14,386.65 14,892.00
4/30/94 15,229.27 14,848.54 15,338.25
4/30/95 15,843.09 15,447.01 16,175.91
4/30/96 16,793.21 16,373.38 17,288.38
4/30/97 17,596.54 17,156.63 18,093.13
4/30/98 18,769.87 18,300.63 19,311.80
</TABLE>
Class A (Offer)
Class A (NAV)
LB Market Benchmark/3/
Competitive Overview (as of 4/30/98)
Lipper Rankings/2/
(National Sht Muni Debt Category)
<TABLE>
<CAPTION>
1-Year 3-Year 5-Year 10-Year
<S> <C> <C> <C>
- ------------------------------
2/34 1/26 2/14 1/6
</TABLE>
Morningstar Rating/4/: ....
Overall rating among 1547, 809 and 346 municipal bond funds for the 3-, 5- and
10-year periods ended 4/30/98, respectively.
1. Class A total returns actual performance for all periods; Class B, C and R
total returns reflect actual performance for periods since class inception,
and Class A performance for periods prior to class inception (see "Financial
Highlights" for dates), adjusted for the differences in fees between the
classes (see Summary of Fund Expenses). The bar chart and highest/lowest
quarterly returns do not reflect sales changes, while the 1-, 5- and 10-year
annual return table and Class A (offer) investments line graph (at offer)
do. Past results do not predict future performance.
2. Lipper Peer Group returns reflect the performance of the Lipper Short
Municipal Debt Index, a managed index that represents the average
annualized returns of the 30 largest funds in the Lipper Short Municipal
Debt Category. Rankings are within the stated Lip per category. Returns
assume reinvestment of dividends and do not reflect any applicable sales
changes.
3. LB Market Benchmark returns reflect the performance of the Lehman Brothers 5
year Municipal Bond Index, an unmanaged index.
4. Overall Class A rating within the municipal bond category. Morningstar
proprietary ratings reflect historical risk-adjusted performance and are
subject to change every month. Ratings are calculated from a fund's 3-, 5-
and 10-year average annual returns in excess of 90-day Treasury bill
returns, with appropriate fee adjustments and a risk factor that reflects
fund performance below 90-day Treasury bill returns. Class A Shares of the
Fund earned 4 stars for the 3-, 5- and 10-year periods ended 4/30/98. 10%
and 22.5% of funds in an investment category receive 5 and 4 stars,
respectively.
How the Fund Is Invested (as of 4/30/98)
Credit Quality
<TABLE>
<S> <C>
AAA 36.3%
AA 5.8%
A 25.5%
BBB 24.8%
NR/Other 7.6%
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Healthcare (23%)
Utilities (14%)
Education and Civic Organizations(12%)
Tax Obligation-Limited (9%)
Tax Obligation-General (10%)
Other (32%)
Top 5 Holdings
<TABLE>
<S> <C>
Owensboro KY Electric Power & Light 1.8%
Denver CO City & County Airport 1.5%
Pleasants County Pollution Control Revenue 1.5%
NY State Dormitory Authority 1.4%
East Baton Rouge LA Pollution Control Revenue 1.3%
</TABLE>
Holdings will vary
Portfolio Statistics
<TABLE>
<S> <C>
Weighted Average Maturity 5.5 years
Weighted Average Duration 4.4 years
Weighted Average Credit Quality A+
Number of Issues 277
</TABLE>
Section 1 The Funds 11
<PAGE>
$
Summary of Fund Expenses
The following tables are intended to help you understand all the expenses and
fees that you would bear directly or indirectly as a fund shareholder.
Shareholder Transaction Expenses/1/ (paid directly from your investment)
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
<TABLE>
<CAPTION>
Share Class A B C R/2/
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.20%/3/ None None None
- --------------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on
Reinvested Dividends None None None None
- --------------------------------------------------------------------------------------------
Exchange Fees None None None None
- --------------------------------------------------------------------------------------------
Deferred Sales Charge/4/ None/5/ 5%/6/ 1%/7/ None
- --------------------------------------------------------------------------------------------
Nuveen Flagship Intermediate Municipal Bond Fund
Share Class A B C R/2/
- --------------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases 3.00%/3/ N/A None None
- --------------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on
Reinvested Dividends None N/A None None
- --------------------------------------------------------------------------------------------
Exchange Fees None N/A None None
- --------------------------------------------------------------------------------------------
Deferred Sales Charge/4/ None/5/ N/A 1%/7/ None
- --------------------------------------------------------------------------------------------
Nuveen Flagship Limited-Term Municipal Bond Fund
Share Class A B C R/2/
- --------------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases 2.50%/3/ N/A None None
- --------------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on
Reinvested Dividends None N/A None None
- --------------------------------------------------------------------------------------------
Exchange Fees None N/A None None
- --------------------------------------------------------------------------------------------
Deferred Sales Charge/4/ None/5/ N/A 1%/7/ None
- --------------------------------------------------------------------------------------------
</TABLE>
1. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
2. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
3. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
4. As a percentage of lesser of purchase price or redemption proceeds.
5. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
6. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
7. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
12 Section 1 The Funds
<PAGE>
Annual Fund Operating Expenses/8/ (paid from fund assets)
8. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers Conduct
Rules.
9. The examples assume that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Your actual costs and returns
may be higher or lower.
Nuveen Municipal Bond Fund
<TABLE>
<CAPTION>
Share Class A B C R
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .45% .45% .45% .45%
.....................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
.....................................................................
Other Expenses .15% .16% .15% .15%
- ---------------------------------------------------------------------
Total Annual Fund Operating Expenses .80% 1.56% 1.35% .60%
.....................................................................
</TABLE>
Examples/9/
These examples are intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The first example assumes
you invest $10,000 in the fund for the time period indicated and then redeem
your shares at the end of those periods:
<TABLE>
<CAPTION>
Share Class A B C R
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $ 498 $ 554 $ 137 $ 61
.....................................................................
3 Years $ 665 $ 812 $ 428 $192
.....................................................................
5 Years $ 846 $ 965 $ 739 $335
.....................................................................
10 Years $1,368 $1,652 $1,624 $750
.....................................................................
</TABLE>
The next example assumes you invest $10,000 in the fund but that you do not
redeem your shares at the the end of these periods:
<TABLE>
<CAPTION>
Share Class A B C R
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $ 498 $ 159 $ 137 $ 61
.....................................................................
3 Years $ 665 $ 493 $ 428 $192
.....................................................................
5 Years $ 846 $ 850 $ 739 $335
.....................................................................
10 Years $1,368 $1,652 $1,624 $750
.....................................................................
</TABLE>
Section 1 The Funds | 13
<PAGE>
Annual Fund Operating Expenses/8/ (paid from fund assets)
Nuveen Insured Municipal Bond Fund
<TABLE>
<CAPTION>
Share Class A B C R
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .48% .48% .48% .48%
.....................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --
.....................................................................
Other Expenses .18% .18% .18% .18%
.....................................................................
Total Annual Fund Operating Expenses .86% 1.61% 1.41% .66%
.....................................................................
</TABLE>
Examples/9/
These examples are intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The first example
assumes you invest $10,000 in the fund for the time period indicated and then
redeem your shares at the end of those periods:
<TABLE>
<CAPTION>
Share Class A B C R
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $ 504 $ 559 $ 144 $ 67
.....................................................................
3 Years $ 683 $ 827 $ 446 $211
.....................................................................
5 Years $ 877 $ 991 $ 771 $368
.....................................................................
10 Years $1,436 $1,710 $1,691 $822
.....................................................................
</TABLE>
The next example assumes you invest $10,000 in the Fund but that you do not
redeem your shares at the the end of these periods:
<TABLE>
<CAPTION>
Share Class A B C R
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $ 504 $ 164 $ 144 $ 67
.....................................................................
3 Years $ 683 $ 508 $ 446 $211
.....................................................................
5 Years $ 877 $ 876 $ 771 $368
.....................................................................
10 Years $1,436 $1,710 $1,691 $822
.....................................................................
</TABLE>
14 | Section 1 The Funds
<PAGE>
Annual Fund Operating Expenses/8/ (paid from fund assets)
Nuveen Flagship All-American Municipal Bond Fund
<TABLE>
<CAPTION>
Share Class A B C R
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .49% .49% .49% .49%
.....................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
.....................................................................
Other Expenses .12% .12% .12% .12%
.....................................................................
Total Annual Fund Operating Expenses .81% 1.56% 1.36% .61%
.....................................................................
</TABLE>
Examples/9/
These Examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The first example
assumes you invest $10,000 in the Fund for the time period indicated and then
redeem your shares at the end of those periods:
<TABLE>
<CAPTION>
Share Class A B C R
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $ 499 $ 554 $ 138 $ 62
.....................................................................
3 Years $ 668 $ 812 $ 431 $195
.....................................................................
5 Years $ 851 $ 965 $ 745 $340
.....................................................................
10 Years $1,380 $1,655 $1,635 $762
.....................................................................
</TABLE>
The next example assumes you invest $10,000 in the Fund but that you do not
redeem your shares at the the end of these periods:
<TABLE>
<CAPTION>
Share Class A B C R
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $ 499 $ 159 $ 138 $ 62
.....................................................................
3 Years $ 668 $ 493 $ 431 $195
.....................................................................
5 Years $ 851 $ 850 $ 745 $340
.....................................................................
10 Years $1,380 $1,655 $1,635 $762
.....................................................................
</TABLE>
Section 1 The Funds | 15
<PAGE>
Annual Fund Operating Expenses/1/ (paid from fund assets)
10. To help maintain competitive dividends, Nuveen Advisory waived fees or
reimbursed expenses during the last fiscal year. These waivers or
reimbursements may be discontinued at any time. The amount of those
reimbursements and the resulting net expenses are shown below:
Nuveen Flagship Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
Share Class A C R
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees .50% .50% .50%
.......................................................................
12b-1 Distribution and Service Fees .20% .75% --%
.......................................................................
Other Expenses .33% .33% .33%
- -----------------------------------------------------------------------
Total Annual Fund Operating Expenses--Gross/10/ 1.03% 1.58% .83%
.......................................................................
Waivers/Reimbursements (.24%) (.24%) (.24%)
- -----------------------------------------------------------------------
Total Annual Fund Operating Expense--Net .79% 1.34% .59%
.......................................................................
</TABLE>
Examples/2/
These Examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The first example assumes
you invest $10,000 in the Fund for the time period indicated and then redeem
your shares at the end of those periods:
<TABLE>
<CAPTION>
Share Class A C R
- -----------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $ 378 $ 136 $ 60
.......................................................................
3 Years $ 545 $ 425 $189
.......................................................................
5 Years $ 726 $ 734 $329
.......................................................................
10 Years $1,249 $1,613 $738
.......................................................................
</TABLE>
The next example assumes you invest $10,000 in the Fund but that you do not
redeem your shares at the the end of these periods:
<TABLE>
<CAPTION>
Share Class A C R
- -----------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $ 378 $ 136 $ 60
.......................................................................
3 Years $ 545 $ 425 $189
.......................................................................
5 Years $ 726 $ 734 $329
.......................................................................
10 Years $1,249 $1,613 $738
.......................................................................
</TABLE>
16 | Section 1 The Funds
<PAGE>
Annual Fund Operating Expenses/8/ (paid from fund assets)
Nuveen Flagship Limited-Term Municipal Bond Fund
<TABLE>
<CAPTION>
Share Class A C R
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees .44% .44% .44%
.......................................................................
12b-1 Distribution and Service Fees .20% .55% --%
.......................................................................
Other Expenses .13% .13% .15%
.......................................................................
Total Annual Fund Operating Expenses .77% 1.12% .59%
.......................................................................
</TABLE>
Examples/2/
These Examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The first example
assumes you invest $10,000 in the Fund for the time period indicated and then
redeem your shares at the end of those periods:
<TABLE>
<CAPTION>
Share Class A C R
- -----------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $ 327 $ 114 $ 60
.......................................................................
3 Years $ 490 $ 356 $189
.......................................................................
5 Years $ 667 $ 617 $329
.......................................................................
10 Years $1,180 $1,363 $738
.......................................................................
</TABLE>
The next example assumes you invest $10,000 in the Fund but that you do not
redeem your shares at the the end of these periods:
<TABLE>
<CAPTION>
Share Class A C R
- -----------------------------------------------------------------------
<S> <C> <C> <C>
1 Year $ 327 $ 114 $ 60
.......................................................................
3 Years $ 490 $ 356 $189
.......................................................................
5 Years $ 667 $ 617 $329
.......................................................................
10 Years $1,180 $1,363 $738
.......................................................................
</TABLE>
Section 1 The Funds | 17
<PAGE>
Section 2 How We Manage Your Money
To help you understand the funds better, this section includes a detailed
discussion of our investment and risk management strategies. For a more complete
discussion of these matters, please consult the Statement of Additional
Information.
Who Manages the Funds
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, IL 60606, ("Nuveen
Advisory"), serves as the investment adviser to the funds and in this capacity
is responsible for the selection and on-going monitoring of the municipal bonds
in each fund's investment portfolio, managing the funds' business affairs and
providing certain clerical, bookkeeping and other administrative services.
Nuveen Advisory serves as investment adviser to investment portfolios with more
than $35 billion in municipal assets under management.
Overall investment management strategy and operating policies for the funds are
set by the Investment Policy Committee of Nuveen Advisory. The Investment Policy
Committee is comprised of the principal executive officers and portfolio
managers of Nuveen Advisory and meets regularly to review economic conditions,
the outlook for the financial markets in general and the status of the municipal
markets in particular. Day-to-day operation of each fund and the execution of
its specific investment strategies is the responsibility of the designated
portfolio manager described below.
Thomas C. Spalding is the portfolio manager for the Municipal Bond Fund. Mr.
Spalding has managed the fund since 1976 and has been a Vice President of Nuveen
Advisory since 1978. Steven J. Krupa is the portfolio manager for the Insured
Fund. Mr. Krupa has managed the fund since 1994 and has been a Vice President of
Nuveen Advisory since 1990. Richard Huber is the portfolio manager for the All-
American Fund and the Limited-Term Fund. Mr. Huber has managed the funds since
1995 and since 1995, had been a Vice President of Flagship Financial Inc., the
funds' prior investment adviser, until becoming a Vice President of Nuveen
Advisory upon the acquisition of Flagship Resources Inc. by The John Nuveen
Company in January 1997. Paul Brennan is the portfolio manager for the
Intermediate Fund. Mr. Brennan has managed or co-managed the fund since
September 1995 and since 1991 had been an employee of Flagship Financial Inc.,
the funds' prior investment adviser, until becoming an Assistant Vice President
of Nuveen Advisory upon the acquisition of Flagship Resources Inc. by The John
Nuveen Company in January 1997.
18 Section 2 How We Manage Your Money
<PAGE>
For providing these services, Nuveen Advisory is paid an annual management fee.
The following schedule applies to each fund described in this prospectus except
the Limited Term Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
<S> <C>
For the first $125 million 0.5000%
For the next $125 million 0.4875%
For the next $250 million 0.4750%
For the next $500 million 0.4625%
For the next $1 billion 0.4500%
For assets over $2 billion 0.4250%
</TABLE>
The following schedule applies to the Limited Term Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
<S> <C>
For the first $125 million 0.4500%
For the next $125 million 0.4375%
For the next $250 million 0.4250%
For the next $500 million 0.4125%
For the next $1 billion 0.4000%
For assets over $2 billion 0.3750%
</TABLE>
What Securities We Invest In
Each fund's investment objective may not be changed without shareholder
approval. The following investment policies may be changed by the Board of
Trustees without shareholder approval unless otherwise noted in this prospectus
or the Statement of Additional Information.
Municipal Obligations
The funds invest primarily in municipal bonds that pay interest that is exempt
from regular federal income tax. Income from these bonds may be subject to the
federal alternative minimum tax.
States, local governments and municipalities issue municipal bonds to raise
money for various public purposes such as building public facilities,
refinancing outstanding obligations and financing general operating expenses. A
municipality may issue general obligation bonds that are payable from the
revenues of a particular project or a special excise tax.
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the funds will only purchase these bonds where the issuer has a
strong incentive to continue making appropriations until maturity.
Quality Municipal Bonds
The funds purchase only quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of
purchase or are non-rated but judged to be investment grade
Section 2 How We Manage Your Money 19
<PAGE>
by the funds' investment adviser. Each fund except the Insured Municipal Bond
Fund will invest at least 80% of its net assets in investment-grade quality
bonds. The Insured Municipal Bond Fund will invest at least 65% of its net
assets in insured municipal bonds, and will invest at least 80% of its net
assets in insured municipal bonds or municipal bonds backed by U.S. Government-
backed securities.
Portfolio Maturity
Each fund buys municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an
investment portfolio with an overall weighted average maturity within a defined
range. The Limited-Term Fund maintains a weighted average portfolio maturity of
1 to 7 years. The Intermediate Fund maintains a weighted average portfolio
maturity of 5 to 10 years. All of the other funds described in this prospectus
are long-term funds and normally maintains a weighted average portfolio
maturity of 15 to 30 years.
Insurance
The Insured Municipal Bond Fund primarily purchases insured municipal bonds.
Insured municipal bonds are either covered by individual, permanent insurance
policies (obtained either at the time of issuance or subsequently) or covered
"while in fund" under a master portfolio insurance policy purchased by a fund.
Insurance guarantees only the timely payment of interest and principal on the
bonds; it does not guarantee the value of either individual bonds or fund
shares.
The Insured Municipal Bond Fund can invest up to 20% of its net assets in
uninsured municipal bonds that are backed by an escrow containing sufficient
U.S. Government or U.S. Government agency securities to ensure timely payment of
principal and interest. Such bonds are normally regarded as having the credit
characteristics of the underlying U.S. Government-backed securities.
Short-term Investments
Under normal market conditions, each fund may invest up to 20% of net assets in
short-term, high quality municipal bonds. The funds may invest in short-term,
high quality taxable securities if suitable short-term municipal bonds are not
available at reasonable prices and yields. For more information on eligible
short-term investments, see the Statement of Additional Information.
Delayed Delivery Transactions
The funds may buy or sell securities on a when-issued or delayed-delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15 to 45 days of the trade. Such transactions involve an element of risk because
the value of the security to be purchased may decline before the settlement
date.
How We Select Investments
Nuveen Advisory selects municipal obligations for the funds based upon its
assessment of a bond's relative value in terms of current yield, price, credit
quality and future prospects. Nuveen Advisory is supported by Nuveen's award-
winning team of specialized research analysts who review municipal securities
available for purchase, monitor the continued
20 Section 2 How We Manage Your Money
<PAGE>
creditworthiness of each fund's municipal investments, and analyze economic,
political and demographic trends affecting the municipal markets. We utilize
these resources to identify municipal obligations with favorable characteristics
we believe are not yet recognized by the market. We then select those higher-
yielding and undervalued municipal obligations that we believe represent the
most attractive values.
Portfolio Turnover
A fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The funds intend to keep portfolio turnover relatively
low in order to reduce trading costs and the realization of taxable capital
gains. Each fund, however, may make limited short-term trades to take advantage
of market opportunities or reduce market risk.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund -- even the most
conservative -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in these funds. Because of
these and other risks, you should consider an investment in any of these funds
to be a long-term investment.
Interest rate risk: the risk that bonds will decline in value because of changes
in interest rates. Generally, bond prices and interest rates move in opposite
directions, with the degree of price fluctuation greater the longer a bond's
maturity (duration).
Credit risk: the risk that an issuer of a bond is unable to meet its obligation
to make interest and principal payments due to changing market conditions.
Generally, lower rated bonds provide higher current income but are considered to
carry greater credit risk than higher rated bonds.
Inflation risk: the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the funds' assets can decline as can the value
of the funds' distributions.
How We Manage Risk
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. The funds limit this
investment risk generally by restricting the type and maturities of municipal
bonds they purchase, and by diversifying their investment portfolios
geographically as well as across different industry sectors.
Investment Limitations
The funds have adopted certain investment limitations (based on total assets)
that cannot be changed without shareholder approval and
Section 2 How We Manage Your Money 21
<PAGE>
are designed to limit your investment risk and maintain portfolio
diversification. Each fund may not have more than:
- 5% in securities in any one issuer (except for U.S. Government securities or
for 25% of the fund's total assets).
- 25% in any one industry such as electric utilities or health care.
- 10% in borrowings (33% if used to meet redemptions).
Hedging and Other Defensive Investment Strategies
Each fund may invest up to 100% in cash equivalents and short-term investments
as a temporary defensive measure in response to adverse market conditions, or to
keep cash on hand fully invested. During these periods, the weighted average
maturity of a fund's investment portfolio may fall below the defined range
described under "Portfolio Maturity."
Each fund may also use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have no
present intent to use these strategies.
22 Section 2 How We Manage Your Money
<PAGE>
Section 3 How You Can Buy and Sell Shares
You can choose from four classes of fund shares, each with a different
combination of sales charges, fees, eligibility requirements a nd other
features. Your financial adviser can help you determine which class is best for
you. We offer a number of features for your convenience. Please see the
Statement of Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or Class R shares, you
should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge (CDSC) would apply upon
redemption;
. the amount of any distribution or service fees that you may incur while
you own the shares;
. whether you will be reinvesting income or capital gain distributions in
additional shares;
. whether you qualify for a sales charge waiver or reduction.
For a summary of the charges and expenses for each class, please see the Summary
of Fund Expenses.
Class A Shares
You can buy Class A shares at the offering price, which is the net asset value
per share plus an up-front sales charge. You may qualify for a reduced sales
charge, or the sales charge may be waived, as described in "How to Reduce Your
Sales Charge." Class A shares are also subject to an annual service fee of .20%
which compensates your financial adviser for providing ongoing service to you.
The up-front Class A sales charge for all funds described in the prospectus
except the Intermediate Fund and Limited Term Fund is as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price* Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
...............................................................................................................
$50,000 but less than $100,000 4.00% 4.18% 3.50%
...............................................................................................................
$100,000 but less than $250,000 3.50% 3.63% 3.00%
...............................................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
...............................................................................................................
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
...............................................................................................................
$1,000,000 and over --* -- --(1)
...............................................................................................................
</TABLE>
Section 3 How You Can Buy and Sell Shares | 23
<PAGE>
The following Class A sales charges and commissions apply to the Intermediate
Fund:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 3.00% 3.09% 2.50%
...............................................................................................................
$50,000 but less than $100,000 2.50% 2.56% 2.00%
...............................................................................................................
$100,000 but less than $250,000 2.00% 2.04% 1.50%
...............................................................................................................
$250,000 but less than $500,000 1.50% 1.52% 1.25%
...............................................................................................................
$500,000 but less than $1,000,000 1.25% 1.27% 1.00%
...............................................................................................................
$1,000,000 and over --(1) -- --(1)
...............................................................................................................
</TABLE>
The following Class A sales charges and commissions apply to the Limited Term
Fund:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 2.50% 2.56% 2.00%
...............................................................................................................
$50,000 but less than $100,000 2.00% 2.04% 1.60%
...............................................................................................................
$100,000 but less than $250,000 1.50% 1.52% 1.20%
...............................................................................................................
$250,000 but less than $500,000 1.25% 1.27% 1.00%
...............................................................................................................
$500,000 but less than $1,000,000 0.75% 0.76% 0.60%
...............................................................................................................
$1,000,000 and over --(1) -- --(1)
...............................................................................................................
</TABLE>
(1) You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays Authorized Dealers of record on these
share purchases a sales commission of 1.00% (0.75% and 0.50%, respectively, for
the Intermediate and Limited-Term funds) of the first $2.5 million, plus .50%
of the next $2.5 million, plus .25% (0.50% for the Intermediate Fund) of the
amount over $5.0 million. If you redeem your shares within 18 months of
purchase, you may have to pay a CDSC of 1% (0.75% and 0.50%, respectively, for
the Intermediate and Limited-Term funds) of either your purchase price or your
redemption proceeds, whichever is lower. You do not have to pay this CDSC if
your financial adviser has made arrangements with Nuveen and agrees to waive the
commission.
Class B Shares
You can buy Class B shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of .95% of average daily assets. The annual .20% service fee
compensates your financial adviser for providing ongoing service to you. The
annual .75% distribution fee compensates Nuveen for paying your financial
adviser a 4% up-front sales commission, which includes an advance of the first
year's service fee. If you sell your shares within six years of purchase, you
will have to pay a CDSC based on either your purchase price or what you sell
your shares for, whichever amount is lower, according to the following schedule.
You do not pay a CDSC on any Class B shares you purchase by reinvesting
dividends. The Intermediate Fund and the Limited Term Fund do not currently
offer B shares.
24 | Section 3 How You Can Buy and Sell Shares
<PAGE>
Class B shares automatically convert to Class A shares eight years after you buy
them so that the distribution fees you pay over the life of your investment are
limited. You will continue to pay an annual service fee on any converted Class
B shares.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
CDSC 5% 4% 4% 3% 2% 1%
...................................................................
</TABLE>
Class C Shares
You can buy Class C shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of 1%. The annual .20% service fee compensates your financial
adviser for providing ongoing service to you. The annual .55% (0.35% for the
Limited Term Fund) distribution fee reimburses Nuveen for paying your financial
adviser an ongoing sales commission. Nuveen advances the first year's service
and distribution fees. If you sell your shares within 12 months of purchase, you
may have to pay a 1% CDSC based on either your purchase price or what you sell
your shares for, whichever amount is lower.
Class R Shares
Under limited circumstances, you may purchase Class R Shares at the offering
price, which is the net asset value on the day of purchase. In order to
qualify, you must be eligible under one of the programs described in "How to
Reduce Your Sales Charge" (below) or meet certain other purchase size criteria.
Class R Shares are not subject to sales charges or ongoing service or
distribution fees. Class R shares have lower ongoing expenses than Class A
shares.
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
Class A Sales Charge Reductions
. Rights of accumulation
. Letter of intent
. Group purchase
Class A Sales Charge Waivers
. Nuveen Unit Trust reinvestment
. Purchases using redemptions from unrelated funds
. Retirement plans
. Certain employees of Nuveen or authorized dealers
. Bank trust departments
Class R Eligibility
. Certain employees of Nuveen or authorized dealers
. Bank trust departments
In addition, Class A shares at net asset value and Class R shares may be
purchased through registered investment advisers, certified financial planners
and registered broker-dealers who charge asset-based or comprehensive "wrap"
fees for their services. Please refer to the Statement of Additional Information
for detailed program descriptions and eligibility requirements. Additional
information is available from your financial
Section 3 How You Can Buy and Sell Shares | 25
<PAGE>
adviser or by calling (800) 257-8787. Your financial adviser can also help you
prepare any necessary application forms. You or your financial adviser must
notify Nuveen at the time of each purchase if you are eligible for any of these
programs. The funds may modify or discontinue these programs at any time.
How to Buy Shares
You may open an account with $3,000 per fund share class ($1,000 for an IRA
account) and make additional investments at any time with as little as $50.
There is no minimum if you are reinvesting Nuveen unit trust distributions. The
share price you pay will depend on when Nuveen receives your order. Orders
received before the close of trading on a business day will receive that day's
closing share price, otherwise you will receive the next business day's price. A
business day is any day the New York Stock Exchange is open for business and
usually ends at 4 p.m. New York time when the Exchange closes.
Through a Financial Adviser
You may buy shares through your financial adviser, who can handle all the
details for you, including opening a new account. Financial advisers can also
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisers generally can help you develop a
customized financial plan, select investments and monitor and review your
portfolio on an ongoing basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisers are paid either from fund
sales charges and fees or by charging you a separate fee in lieu of a sales
charge for ongoing investment advice and services. If you do not have a
financial adviser, call (800) 621-7227 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Mutual Funds, c/o
Chase Global Funds Services Company, P.O. Box 5186, New York, NY 10274-5186.
Systematic Investing
Once you have established a fund account, systematic investing allows you to
make regular investments through automatic deductions from your bank account
(simply complete the appropriate section of the account application form) or
directly from your paycheck. To invest directly from your paycheck, contact your
financial adviser or call Nuveen at (800) 257-8787. Systematic investing may
also make you eligible for reduced sales charges.
26 | Section 3 How You Can Buy and Sell Shares
<PAGE>
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
[CHART APPEARS HERE]
[DATA TO COME]
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time, and does not assure that you will profit.
Systematic Investment Plan
You can make regular investments of $50 or more per month by authorizing us to
draw preauthorized checks on your bank account. You can stop the withdrawals at
any time. There is no charge for this plan.
Payroll Direct Deposit Plan
You can, with your employer's consent, make regular investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct this amount automatically from your paycheck. You can stop the
deductions at any time. There is no charge for this plan.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and may choose to
receive a check, have the monies transferred directly
Section 3 How You Can Buy and Sell Shares | 27
<PAGE>
into your bank account (see "Fund Direct--Electronic Funds Transfer" below),
paid to a third party or sent payable to you at an address other than your
address of record. You must complete the appropriate section of the account
application or Account Update Form to participate in the fund's systematic
withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares for the same class of another Nuveen mutual fund
available in your state. Your exchange must meet the minimum purchase
requirements of the fund into which you are exchanging. You may not exchange
Class B shares for shares of a Nuveen money market fund. Because an exchange is
treated for tax purposes as a concurrent sale and purchase, and any gain may be
subject to tax, you should consult your tax adviser about the tax consequences
of any contemplated exchange.
The exchange privilege is not intended to allow you to use a fund for short-term
trading. Because excessive exchanges may interfere with portfolio management,
raise fund operating expenses or otherwise have an adverse effect on other
shareholders, each fund reserves the right to revise or suspend the exchange
privilege, limit the amount or number of exchanges, or reject any exchange.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a CDSC, we
will refund your CDSC and reinstate your holding period. You may use this
reinstatement privilege only once for any redemption.
Fund Direct
You may link your fund account to your bank account and transfer money
electronically between these accounts and perform a variety of account
transactions, including buying shares by telephone and investing through a
Systematic Investment Plan. You may also have dividends, distributions,
redemption payments or Systematic Withdrawal Plan payments sent directly to your
bank account.
Your financial adviser can help you complete the forms for these services, or
you can call Nuveen at (800) 257-8787 for copies of the necessary forms.
How to Sell Shares
You may use one of the following ways to sell (redeem) your shares on any day
the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your properly completed redemption request.
Your redemption request must be received before the close of trading for you to
receive that day's price. While the funds do not charge a redemption fee, you
may be assessed a CDSC, if applicable. When
28 Section 3 How You Can Buy and Sell Shares
<PAGE>
you redeem Class A, Class B, or Class C shares subject to a CDSC, the fund will
first redeem any shares that are not subject to a CDSC or that represent an
increase in the value of your fund account due to capital appreciation, and then
redeem the shares you have owned for the longest period of time, unless you ask
the fund to redeem your shares in a different order. No CDSC is imposed on
shares you buy through the reinvestment of dividends and capital gains. The
holding period is calculated on a monthly basis and begins on the first day of
the month in which you buy shares. When you redeem shares subject to a CDSC, the
CDSC is calculated on the lower of your purchase price or redemption proceeds,
deducted from your redemption proceeds, and paid to Nuveen. The CDSC may be
waived under certain special circumstances as described in the statement of
additional information.
Through Your Financial Adviser
You may sell your shares through your financial adviser who can prepare the
necessary documentation. Your financial adviser may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by telephone up to $50,000. You may not redeem by telephone shares held
in certificate form. Checks will be issued only to the shareholder of record and
mailed to the address of record. If you have established electronic funds
transfer privileges, you may have redemption proceeds transferred electronically
to your bank account. We will normally mail your check the next business day.
Nuveen and Shareholder Services, Inc. will be liable for losses resulting from
unauthorized telephone redemptions only if they do not follow reasonable
procedures designed to verify the identity of the caller. You should
immediately verify your trade confirmations when you receive them.
By Mail
You can sell your shares at any time by sending a written request to the
appropriate fund, c/o Chase Global Funds Services Company, P.O. Box 5186, New
York, NY 10274-5186. Your request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no event more
than seven days after we receive your request. Guaranteed signatures are
required if you are redeeming more than $50,000, you want the check payable to
someone other than the shareholder of record or you want the check sent to
another address (or the address of record has been changed within the last 60
days). Signature guarantees must be obtained from a bank, brokerage firm or
other financial intermediary that is a member of an approved Medallion Guarantee
Program or that is otherwise approved by a fund. A notary public cannot provide
a signature guarantee.
An Important Note About Involuntary Redemption
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days' written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
Nuveen unit trust reinvestment account. You will not be assessed a CDSC on an
involuntary redemption
Section 3 How You Can Buy and Sell Shares 29
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the funds, this
section includes important details about how the funds make distributions to
shareholders. We discuss some other fund policies, as well.
Distributions and Taxes
The funds pay tax-free dividends monthly and any taxable capital gains or other
taxable distributions once a year in December. The funds declare dividends on
or about the ninth of each month and generally pay dividends on the first
business day of the following month.
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial adviser or
call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the funds invest in municipal bonds, the regular monthly dividends you
receive will be exempt from regular federal income tax. All or a portion of
these dividends, however, may be subject to state and local taxes or to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how
long you have owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains, including any percentage of your fund
dividends attributable to municipal obligations, that you were paid during the
prior year. You will receive this statement from the firm where you purchased
your fund shares if you hold your investment in street name. Nuveen will send
you this statement if you hold your shares in registered form. The tax status of
your dividends is not affected by whether you reinvest your dividends or
receive them in cash. If you receive social security benefits, you should be
aware that any tax-free income is taken into account in calculating the amount
of these benefits that may be subject to federal income tax.
30 Section 4 General Information
<PAGE>
Tax laws are subject to change, so we urge you to consult your tax
adviser about your particular tax situation and how it might be affected
by current tax law.
Please note that if you do not furnish us with your correct Social
Security number or employer identification number, federal law requires
us to withhold federal income tax from your distributions and redemption
proceeds at a rate of 31%.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend
is commonly known as "buying the dividend." The entire dividend may be
taxable to you even though a portion of the dividend effectively
represents a return of your purchase price. Similarly, if you sell or
exchange fund shares shortly before the record date for a tax-exempt
dividend, a portion of the price you receive may be treated as a taxable
capital gain even though it reflects tax-free income earned but not yet
distributed by the fund.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn
on a taxable investment in order to equal a stated tax-free yield on a
municipal investment. To assist you to more easily compare municipal
investments like the funds with taxable alternative investments, the
table below presents the taxable equivalent yields for a range of
hypothetical tax-free yields and tax rates:
Taxable Equivalent Of Tax-Free Yields
Tax-Free Yield
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
The yields and tax rates shown above are hypothetical and do not predict
your actual returns or effective tax rate. For more detailed information,
see the statement of additional information or consult your tax adviser.
Distribution and Service Plans
[LOGO] John Nuveen and Co. Incorporated serves as the selling agent and
distributor of the funds' shares. In this capacity, Nuveen manages the
offering of the funds' shares and is responsible for all sales and
promotional activities. In order to reimburse Nuveen for its costs in
connection with these activities, including compensation paid to
authorized dealers, each fund has adopted a distribution and service plan
under Rule 12b-1 under the Investment Company Act of 1940. (See "How to
Choose a Share Class" on page 23 for a description of the distribution
and service fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares
primarily for providing compensation to Authorized Dealers, including
Nuveen, in connection with the distribution of shares. Nuveen uses the
service fee for Class A, Class B, and Class C shares to compensate
Section 4 General Information 31
<PAGE>
Authorized Dealers, including Nuveen, for providing account services to
shareholders. These services may include establishing and maintaining
shareholder accounts, answering shareholder inquiries, and providing
other personal services to shareholders. These fees also compensate
Nuveen for other expenses, including printing and distributing
prospectuses to persons other than shareholders, the expenses of
preparing, printing, and distributing advertising and sales literature
and reports to shareholders used in connection with the sale of shares.
Because these fees are paid out of the funds' assets on an on-going
basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
Net Asset Value
[LOGO] The funds' net asset value per share is determined as of the close of
trading (normally 4:00 p.m. eastern time) on each day the New York Stock
Exchange is open for business. Net asset value is calculated for each
class by taking the fair value of the class' total assets, including
interest or dividends accrued but not yet collected, less all
liabilities, and dividing by the total number of shares outstanding. The
result, rounded to the nearest cent, is the net asset value per share.
All valuations are subject to review by the funds' Board of Trustees or
its delegate.
In determining net asset value, expenses are accrued and applied daily
and securities and other assets for which market quotations are
available are valued at market value. Common stocks and other equity
securities are valued at the last sales price that day. Securities not
listed on a national securities exchange or Nasdaq are valued at the most
recent bid prices. The prices of municipal bonds are provided by a
pricing service and based on the mean between the bid and asked price.
When price quotes are not readily available (which is usually the case
for municipal securities), the pricing service establishes fair market
value based on prices of comparable municipal bonds.
Fund Service Providers
The custodian of the assets of the funds is The Chase Manhattan Bank,
4 New York Plaza, New York, NY 10004-2413. Chase also provides certain
accounting services to the funds. The funds' transfer, shareholder
services and dividend paying agent, Chase Global Funds Services Company,
P.O. Box 5186, New York, NY 10274-5186, performs bookkeeping, data
processing and administrative services for the maintenance of
shareholder accounts.
32 Section 4 General Information
<PAGE>
[BLANK]
Section 4 General Information | 33
<PAGE>
Section 5 Financial Highlights
The following tables are intended to help you better understand each fund's
recent past performance. The tables are excerpted from each fund's latest
financial statements audited by Arthur Andersen LLP. You may obtain the complete
statements along with the auditor's report by requesting from Nuveen a free copy
of the fund's latest annual shareholder report.
Municipal Bond Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions Ratios/Supplemental Data
----------------------------- ---------------------- ----------------------------
Class
(Inception
Date)
Ratio of
Net Ratio of Net In-
Begin- Realized Expenses vestment Port-
ning and Net Ending Ending to Income to folio
Year Net Net In- Unrealized Invest- Capi- Net Net Average Average Turn-
Ending Asset vestment Investment ment tal Asset Total Assets Net Net over
April 30, Value Income(b) Gain (Loss) Total Income Gains Total Value Return(a) (000) Assets(b) Assets(b) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Class A (6/95)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $9.14 $.46 $.35 $.81 $(.46) $(.03) $(.49) $9.46 9.00% $97,029 80% 4.83% 10%
1997(e) 9.24 .08 (.10) (.02) (.08) -- (.08) 9.14 (.23) 70,331 .77+ 5.13+ 2
1997(d) 9.28 .48 -- .48 (.47) (.05) (.52) 9.24 5.26 68,204 .81 5.11+ 12
1996(c) 9.15 .34 .14 .48 (.32) (.03) (.35) 9.28 5.33 37,089 .83+ 5.14+ 17
Class B (2/97)
1998 9.15 .38 .35 .73 (.39) (.03) (.42) 9.46 8.09 4,136 1.56 4.05 10
1997(e) 9.24 .09 (.11) (.02) (.07) -- (.07) 9.15 (.25) 468 1.53+ 4.39+ 2
1997(c) 9.23 .03 .01 .04 (.03) -- (.03) 9.24 .47 43 1.51+ 5.23+ 12
Class C (6/95)
1998 9.14 .40 .34 .74 (.41) (.03) (.44) 9.44 8.20 4,886 1.35 4.29 10
1997(e) 9.23 .07 (.09) (.02) (.07) -- (.07) 9.14 (.21) 5,360 1.32+ 4.58+ 2
1997(d) 9.26 .42 -- .42 (.40) (.05) (.45) 9.23 4.64 5,039 1.54 4.37 12
1996(c) 9.15 .29 .13 .42 (.28) (.03) (.31) 9.26 4.59 1,915 1.58+ 4.39+ 17
Class R (11/76)
1998 9.15 .48 .34 .82 (.48) (.03) (.51) 9.46 9.09 2,818,442 .60 5.04 10
1997(e) 9.24 .08 (.09) (.01) (.08) -- (.08) 9.15 (.09) 2,774,648 .57+ 5.33+ 2
1997(d) 9.28 .49 .01 .50 (.49) (.05) (.54) 9.24 5.53 2,818,214 .57 5.35 12
1996(d) 9.00 .51 .31 .82 (.51) (.03) (.54) 9.28 9.31 2,878,641 .59 5.53 17
1995(d) 9.28 .52 (.21) .31 (.51) (.08) (.59) 9.00 3.60 2,741,178 .59 5.79 17
1994(d) 9.45 .52 (.07) .45 (.52) (.10) (.62) 9.28 4.79 2,700,007 .62 5.49 15
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted through February 28/29.
(d) For the year ending February 28/29.
(e) For the two months ending April 30.
34 | Section 5 Financial Highlights
<PAGE>
Insured Municipal Bond Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions Ratios/Supplemental Data
----------------------------- ---------------------- ----------------------------
Class
(Inception
Date)
Ratio of
Net Ratio of Net In-
Begin- Realized Expenses vestment Port-
ning and Net Ending Ending to Income to folio
Year Net Net In- Unrealized Invest- Capi- Net Net Average Average Turn-
Ending Asset vestment Investment ment tal Asset Total Assets Net Net over
April 30, Value Income(b) Gain (Loss) Total Income Gains Total Value Return(a) (000) Assets(b) Assets(b) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1998 $10.66 $.54 $ .41 $.95 $(.55) $(.03) $(.58) $11.03 9.05% $ 90,459 .86% 4.91% 40%
1997(e) 10.82 .09 (.16) (.07) (.09) -- (.09) 10.66 (.63) 69,291 .84+ 5.12+ 12
1997(d) 10.97 .56 (.13) .43 (.54) (.04) (.58) 10.82 4.04 68,628 .87 5.07 35
1996(d) 10.40 .54 .57 1.11 (.54) -- (.54) 10.97 10.90 46,943 .91 5.01 27
1995(c) 10.31 .26 .12 .38 (.27) (.02) (.29) 10.40 3.84 14,097 1.00+ 5.55+ 25
Class B (2/97)
1998 10.67 .46 .39 .85 (.46) (.03) (.49) 11.03 8.14 4,992 1.61 4.14 40
1997(e) 10.82 .09 (.16) (.07) (.08) -- (.08) 10.67 (.65) 488 1.59+ 4.36+ 12
1997(c) 10.80 .04 .02 .06 (.04) -- (.04) 10.82 .55 228 1.58+ 4.84+ 35
Class C (9/94)
1998 10.56 .48 .39 .87 (.48) (.03) (.51) 10.92 8.39 8,037 1.41 4.36 40
1997(e) 10.72 .08 (.16) (.08) (.08) -- (.08) 10.56 (.73) 5,615 1.39+ 4.57+ 12
1997(d) 10.85 .46 (.09) .37 (.46) (.04) (.50) 10.72 3.48 5,448 1.61 4.33 35
1996(d) 10.31 .46 .54 1.00 (.46) -- (.46) 10.85 9.88 5,151 1.63 4.34 27
1995(c) 10.29 .23 .08 .31 (.27) (.02) (.29) 10.31 3.09 3,979 1.75+ 4.83+ 25
Class R (12/86)
1998 10.62 .56 .39 .95 (.56) (.03) (.59) 10.98 9.17 727,068 .66 5.12 40
1997(e) 10.78 .09 (.15) (.06) (.10) -- (.10) 10.62 (.60) 714,622 .64+ 5.31+ 12
1997(d) 10.92 .57 (.11) .46 (.56) (.04) (.60) 10.78 4.38 732,587 .63 5.31 35
1996(d) 10.38 .57 .54 1.11 (.57) -- (.57) 10.92 10.94 761,936 .63 5.33 27
1995(d) 10.81 .57 (.40) .17 (.58) (.02) (.60) 10.38 1.85 736,702 .64 5.67 25
1994(d) 10.85 .57 .02 .59 (.57) (.06) (.63) 10.81 5.47 745,914 .65 5.21 11
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted through February 28.
(d) For the year ending February 28/29.
(e) For the two months ending April 30.
Section 5 Financial Highlights | 35
<PAGE>
All-American Municipal Bond Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions Ratios/Supplemental Data
----------------------------- ---------------------- ----------------------------
Class
(Inception
Date)
Ratio of
Net Ratio of Net In-
Begin- Realized Expenses vestment Port-
ning and Net Ending Ending to Income to folio
Year Net Net In- Unrealized Invest- Capi- Net Net Average Average Turn-
Ending Asset vestment Investment ment tal Asset Total Assets Net Net over
April 30, Value Income(b) Gain (Loss) Total Income Gains Total Value Return(a) (000) Assets(b) Assets(b) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/88)
1998 $10.90 $.60 $.51 $1.11 $(.60) $(.09) $(.69) $11.32 10.32% $236,691 81% 5.27% 20%
1997(e) 10.67 .55 .29 .84 (.55) (.06) (.61) 10.90 8.02 216,575 .87+ 5.54+ 39
1996(f) 10.79 .61 (.12) .49 (.61) -- (.61) 10.67 4.64 207,992 .83 5.60 79
1995(f) 10.61 .63 .18 .81 (.63) -- (.63) 10.79 8.01 185,495 .76 6.02 71
1994(f) 11.07 .65 (.30) .35 (.65) (.16)+++ (.81) 10.61 2.99 159,867 .62 5.77 81
Class B (2/97)
1998 10.91 .51 .51 1.02 (.51) (.09) (.60) 11.33 9.51 8,706 1.56 4.47 20
1997(d) 10.98 .12 (.06) .06 (.13) -- (.13) 10.91 .54 711 1.55+ 4.83+ 39
Class C (6/93)
1998 10.89 .53 .51 1.04 (.54) (.09) (.63) 11.31 9.75 62,336 1.36 4.72 20
1997(e) 10.66 .50 .29 .79 (.50) (.06) (.56) 10.89 7.48 54,850 1.42+ 4.99+ 39
1996(f) 10.78 .55 (.12) .43 (.55) -- (.55) 10.66 4.07 47,314 1.37 5.05 79
1995(f) 10.60 .57 .18 .75 (.57) -- (.57) 10.78 7.42 45,242 1.31 5.47 71
1994(f) 11.09 .57 (.32) .25 (.57) (.17)+++ (.74) 10.60 2.16+ 39,997 1.09+ 5.16+ 81
Class R (2/97)
1998 10.91 .61 .51 1.12 (.62) (.09) (.71) 11.32 10.45 4,510 .61 5.42 20
1997(d) 10.99 .15 (.07) .08 (.16) -- (.16) 10.91 .69 183 .61+ 5.95+ 39
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the period ending April 30, 1997 reflects the
financial highlights of Flagship All-American.
+++ The amounts shown include a distribution in excess of capital gains of $.10
per share.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted through May 31.
(d) From commencement of class operations as noted through April 30.
(e) For the 11 months ending April 30.
(f) For the year ending May 31.
36 | Section 5 Financial Highlights
<PAGE>
Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions Ratios/Supplemental Data
----------------------------- ---------------------- ----------------------------
Class
(Inception
Date)
Ratio of
Net Ratio of Net In-
Begin- Realized Expenses vestment Port-
ning and Net Ending Ending to Income to folio
Year Net Net In- Unrealized Invest- Capi- Net Net Average Average Turn-
Ending Asset vestment Investment ment tal Asset Total Assets Net Net over
April 30, Value Income(b) Gain (Loss) Total Income Gains Total Value Return(a) (000) Assets(b) Assets(b) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
1998 $10.47 $.52 $.41 $.93 $.51 $ -- $(.51) $10.88 8.97% $42,339 .79% 4.76% --%
1997(e) 10.27 .47 .20 .67 (.47) -- (.47) 10.47 6.64 40,906 .68+ 4.96+ 26
1996(f) 10.29 .51 (.02) .49 (.51) -- (.51) 10.27 4.84 46,742 .62 4.86 81
1995(f) 10.16 .51 .13 .64 (.51) -- (.51) 10.29 6.63 42,069 .54 5.15 102
1994(f) 10.35 .52 (.13) .39 (.52) (.06)+++ (.58) 10.16 3.72 35,891 .40 4.93 69
Class C (12/95)
1998 10.47 .46 .42 .88 (.46) -- (.46) 10.89 8.47 3,533 1.34 4.20 --
1997(e) 10.28 .44 .17 .61 (.42) -- (.42) 10.47 6.00 2,540 1.23+ 4.38+ 26
1996(c) 10.57 .23 (.30) (.07) (.22) -- (.22) 10.28 (1.78)+ 1,187 1.13+ 4.28+ 81
Class R (2/97)
1998 10.45 .54 .41 .95 (.53) -- (.53) 10.86 9.17 602 .59 4.95 --
1997(d) 10.60 .13 (.15) (.02) (.13) -- (.13) 10.45 (.15) 469 .40+ 5.40+ 26
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the period ending April 30, 1997, reflects
the financial highlights of Flagship Intermediate.
+++ The amount shown reflects a distribution in excess of capital gains of $.01
per share.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted through May 31.
(d) From commencement of class operations as noted through April 30.
(e) For the 11 months ending April 30.
(f) For the year ending May 31.
Section 5 Financial Highlights | 37
<PAGE>
Limited Term Municipal Bond Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions Ratios/Supplemental Data
----------------------------- ---------------------- ----------------------------
Class
(Inception
Date)
Ratio of
Net Ratio of Net In-
Begin- Realized Expenses vestment Port-
ning and Net Ending Ending to Income to folio
Year Net Net In- Unrealized Invest- Capi- Net Net Average Average Turn-
Ending Asset vestment Investment ment tal Asset Total Assets Net Net over
April 30, Value Income(b) Gain (Loss) Total Income Gains Total Value Return(a) (000) Assets(b) Assets(b) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/87)
1998 $10.61 $.51 $.19 $.70 $(.51) $ -- $(.51) $10.80 6.67% $438,134 .77% 4.70 31%
1997(e) 10.57 .46 .04 .50 (.46) -- (.46) 10.61 4.78 425,401 .80+ 4.76+ 29
1996(f) 10.65 .51 (.09) .42 (.50) -- (.50) 10.57 4.03 489,157 .79 4.77 39
1995(f) 10.60 .51 .04 .55 (.50) -- (.50) 10.65 5.41 569,196 .74 4.88 20
1994(f) 10.74 .52 (.13) .39 (.52) (.01) (.53) 10.60 3.58 704,627 .70 4.76 22
Class C (12/95)
1998 10.60 .47 .19 .66 (.47) -- (.47) 10.79 6.33 33,952 1.12 4.35 31
1997(e) 10.56 .44 .03 .47 (.43) -- (.43) 10.60 4.49 23,551 1.11+ 4.44+ 29
1996(c) 10.76 .22 (.19) .03 (.23) -- (.23) 10.56 .46+ 15,415 1.19+ 4.17+ 39
Class R (2/97)
1998 10.59 .53 .19 .72 (.53) -- (.53) 10.78 6.87 701 .59 4.84 31
1997(d) 10.73 .12 (.13) (.01) (.13) -- (.13) 10.59 (.09) 40 .55 5.07+ 29
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the period ending April 30, 1997 reflects the
financial highlights of Flagship Limited Term.
(a) Total returns are calculated on net asset value without any sales charge.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted through May 31.
(d) From commencement of class operations as noted through April 30.
(e) For the 11 months ending April 30.
(f) For the year ending May 31.
38 | Section 5 Financial Highlights
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Municipal Bond Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona
California/1/
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky/2/
Louisiana
Maryland
Massachusetts/1/
Michigan
Missouri
New Jersey/2/
New Mexico
New York/1/
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Shareholder
reports contain management's discussion of market conditions, investment
strategies and performance results as of the fund's latest semi-annual or annual
fiscal year end. Call Nuveen at (800) 621-7227 to request a free copy of any of
these materials or other fund information.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). Visit the SEC on-line at http://www.sec.gov or in
person at the SEC's Public Reference Room in Washington, D.C. Call the SEC at
(800) SEC-0330 for room hours and operation. You may also request fund
information by writing to the SEC's Public Reference Section, Washington, D.C.
20549.
1. Long-term and insured long-term portfolios.
2. Long-term and limited-term portfolios.
<PAGE>
AUGUST , 1998
NUVEEN FLAGSHIP MUNICIPAL TRUST
NUVEEN MUNICIPAL BOND FUND
NUVEEN INSURED MUNICIPAL BOND FUND
NUVEEN FLAGSHIP ALL-AMERICAN MUNICIPAL BOND FUND
NUVEEN FLAGSHIP INTERMEDIATE MUNICIPAL BOND FUND
NUVEEN FLAGSHIP LIMITED TERM MUNICIPAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus of
the Nuveen Flagship Municipal Trust dated August , 1998. The Prospectus may
be obtained without charge from certain securities representatives, banks, and
other financial institutions that have entered into sales agreements with John
Nuveen & Co. Incorporated, or from the Funds, by mailing a written request to
the Funds, c/o John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago,
Illinois 60606 or by calling (800) 257-8787.
TABLE OF CONTENTS
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PAGE
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Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-17
Investment Adviser and Investment Management Agreement..................... S-26
Portfolio Transactions..................................................... S-27
Net Asset Value............................................................ S-28
Tax Matters................................................................ S-29
Performance Information.................................................... S-33
Additional Information on the Purchase and Redemption of Fund Shares....... S-42
Distribution and Service Plan.............................................. S-48
Independent Public Accountants and Custodian............................... S-50
Financial Statements....................................................... S-50
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Description of Hedging Techniques.............................. B-1
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The audited financial statements for each Fund's most recent fiscal year
appear in the Funds' Annual Reports. The Annual Reports accompany this
Statement of Additional Information.
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INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
INVESTMENT POLICIES
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of that Fund:
(1) Invest in securities other than Municipal Obligations and short-term
securities, as described in the Prospectus. Municipal Obligations are
municipal bonds that pay interest that is exempt from regular federal
income taxes.
(2) Invest more than 5% of its total assets in securities of any one
issuer, except this limitation shall not apply to securities of the United
States Government or to the investment of 25% of such Fund's assets.
(3) Borrow money, except from banks for temporary or emergency purposes
and not for investment purposes and then only in an amount not exceeding
(a) 10% of the value of its total assets at the time of borrowing or (b)
one-third of the value of the Fund's total assets including the amount
borrowed, in order to meet redemption requests which might otherwise
require the untimely disposition of securities. While any such borrowings
exceed 5% of such Fund's total assets, no additional purchases of
investment securities will be made by such Fund. If due to market
fluctuations or other reasons, the value of the Fund's assets falls below
300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so.
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (2) above, it may pledge securities
having a market value at the time of pledge not exceeding 10% of the value
of the Fund's total assets.
(5) Issue senior securities as defined in the Investment Company Act of
1940, except to the extent such issuance might be involved with respect to
borrowings described under item (3) above or with respect to transactions
involving futures contracts or the writing of options within the limits
described in the Prospectus and this Statement of Additional Information.
(6) Underwrite any issue of securities, except to the extent that the
purchase or sale of Municipal Obligations in accordance with its investment
objective, policies and limitations, may be deemed to be an underwriting.
(7) Purchase or sell real estate, but this shall not prevent any Fund
from investing in Municipal Obligations secured by real estate or interests
therein or foreclosing upon and selling such security.
(8) Purchase or sell commodities or commodities contracts or oil, gas or
other mineral exploration or development programs, except for transactions
involving futures contracts within the limits described in the Prospectus
and this Statement of Additional Information.
(9) Make loans, other than by entering into repurchase agreements and
through the purchase of Municipal Obligations or temporary investments in
accordance with its investment objective, policies and limitations.
(10) Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions.
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(11) Write or purchase put or call options, except to the extent that the
purchase of a stand-by commitment may be considered the purchase of a put,
and except for transactions involving options within the limits described
in the Prospectus and this Statement of Additional Information.
(12) Invest more than 25% of its total assets in securities of issuers in
any one industry; provided, however, that such limitations shall not be
applicable to Municipal Obligations issued by governments or political
subdivisions of governments, and obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(13) Purchase or retain the securities of any issuer other than the
securities of the Fund if, to the Fund's knowledge, those trustees of the
Trust, or those officers and directors of Nuveen Advisory Corp. ("Nuveen
Advisory"), who individually own beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities.
In addition, each Fund, as a non-fundamental policy, may not invest more than
15% of its net assets in "illiquid" securities, including repurchase agreements
maturing in more than seven days.
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed the sole issuer of a security when its assets and
revenues are separate from other governmental entities and its securities are
backed only by its assets and revenues. Similarly, in the case of a non-
governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be deemed to
be the sole issuer. Where a security is also backed by the enforceable
obligation of a superior or unrelated governmental entity or other entity
(other than a bond insurer), it shall also be included in the computation of
securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other
facility, such as a bank guarantee or letter of credit, such a guarantee or
letter of credit would be considered a separate security and would be treated
as an issue of such government, other entity or bank. Where a security is
insured by bond insurance, it shall not be considered a security issued or
guaranteed by the insurer; instead the issuer of such security will be
determined in accordance with the principles set forth above. The foregoing
restrictions do not limit the percentage of the Fund's assets that may be
invested in securities insured by any single insurer.
The foregoing restrictions and limitations, as well as a Fund's policies as
to ratings of portfolio investments, will apply only at the time of purchase of
securities, and the percentage limitations will not be considered violated
unless an excess or deficiency occurs or exists immediately after and as a
result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of each Fund, cannot be changed without approval by holders of a
"majority of the Fund's outstanding voting shares." As defined in the
Investment Company Act of 1940, this means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if the holders of more than 50% of the
Fund's shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
The Nuveen Flagship Municipal Trust (the "Trust") is an open-end diversified
management series investment company organized as a Massachusetts business
trust on July 1, 1996. Each of the Funds is an open-end management investment
company organized as a series of the Nuveen Flagship Municipal Trust. The Trust
is an open-end management series company under SEC Rule 18f-2. Each Fund is a
separate series issuing its own shares. The Trust currently has five series:
the Nuveen Municipal Bond Fund (originally incorporated in Maryland on October
8, 1976 and reorganized as a Massachusetts business trust on June 12, 1995);
the Nuveen Insured Municipal Bond Fund (formerly a series of the Nuveen Insured
Tax-Free Bond Fund, Inc., a Minnesota corporation incorporated on July 14,
1986); the Nuveen Flagship All-American Municipal Bond Fund (formerly
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the Flagship All-American Tax Exempt Fund, a series of the Flagship Tax Exempt
Funds Trust); the Nuveen Flagship Intermediate Municipal Bond Fund (formerly
the Flagship Intermediate Tax Exempt Fund, a series of the Flagship Tax Exempt
Funds Trust); and the Nuveen Flagship Limited Term Municipal Bond Fund
(formerly the Flagship Limited Term Tax Exempt Fund, a series of the Flagship
Tax Exempt Funds Trust). Certain matters under the Investment Company Act of
1940 which must be submitted to a vote of the holders of the outstanding voting
securities of a series company shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
voting securities of each Fund affected by such matter.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of a trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Trust and requires that
notice of this disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Declaration of Trust
further provides for indemnification out of the assets and property of the
Trust for all loss and expense of any shareholder personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself were unable to meet its
obligations. The Trust believes the likelihood of these circumstances is
remote.
PORTFOLIO SECURITIES
As described in the Prospectus, each Fund invests primarily in a diversified
portfolio of Municipal Obligations issued within the 50 states and certain U.S.
possessions and territories. In general, Municipal Obligations include debt
obligations issued by states, cities and local authorities to obtain funds for
various public purposes, including construction of a wide range of public
facilities such as airports, bridges, highways, hospitals, housing, mass
transportation, schools, streets and water and sewer works. Industrial
development bonds and pollution control bonds that are issued by or on behalf
of public authorities to finance various privately-rated facilities are
included within the term Municipal Obligations if the interest paid thereon is
exempt from federal income tax.
The investment assets of each Fund will consist of (1) Municipal Obligations
which are rated at the time of purchase within the four highest grades (Baa or
BBB or better) by Moody's Investors Service, Inc. ("Moody's"), by Standard and
Poor's Corporation ("S&P") or by Fitch Investors Service, Inc. ("Fitch"), (2)
unrated Municipal Obligations which, in the opinion of Nuveen Advisory, have
credit characteristics equivalent to bonds rated within the four highest grades
by Moody's, S&P or Fitch, except that the Fund may not invest more than 20% of
its net assets in unrated bonds and (3) temporary investments as described
below, the income from which may be subject to state income tax or to both
federal and state income taxes. See Appendix A for more information about
ratings by Moody's, S&P, and Fitch.
As described in the Prospectus, each Fund may invest in Municipal Obligations
that constitute participations in a lease obligation or installment purchase
contract obligation (hereafter collectively called "lease obligations") of a
municipal authority or entity. Although lease obligations do not constitute
general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although nonappropriation lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. A Fund will seek to minimize the special
risks associated with such securities by only investing in those
nonappropriation leases where Nuveen
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Advisory has determined that the issuer has a strong incentive to continue
making appropriations and timely payment until the security's maturity. Some
lease obligations may be illiquid under certain circumstances. Lease
obligations normally provide a premium interest rate which along with regular
amortization of the principal may make them attractive for a portion of the
assets of the Funds.
Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
the laws enacted in the future by Congress, state legislatures or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its Municipal Obligations may be materially affected.
INSURANCE
Each insured Municipal Obligation held by the Nuveen Insured Municipal Bond
Fund will either be (1) covered by an insurance policy applicable to a specific
security and obtained by the issuer of the security or a third party at the
time of original issuance ("Original Issue Insurance"), (2) covered by an
insurance policy applicable to a specific security and obtained by the Fund or
a third party subsequent to the time of original issuance ("Secondary Market
Insurance"), or (3) covered by a master municipal insurance policy purchased by
the Fund ("Portfolio Insurance"). The Fund currently maintains a policy of
Portfolio Insurance with MBIA Insurance Corporation, AMBAC Assurance
Corporation, Financial Security Assurance, Inc., and Financial Guaranty
Insurance Company, and may in the future obtain other policies of Portfolio
Insurance, depending on the availability of such policies on terms favorable to
the Fund. However, the Fund may determine not to obtain such policies and to
emphasize investments in Municipal Obligations insured under Original Issue
Insurance or Secondary Market Insurance. In any event, the Fund will only
obtain policies of Portfolio Insurance issued by insurers whose claims-paying
ability is rated Aaa by Moody's Investors Service, Inc. ("Moody's") or AAA by
Standard & Poor's Corporation ("S&P"). The Fund currently intends to obtain
insurance polices only from mono-line insurers specializing in insuring
municipal debt. Municipal Obligations covered by Original Issue Insurance or
Secondary Market Insurance are themselves typically assigned a rating of Aaa or
AAA, as the case may be, by virtue of the Aaa or AAA claims-paying ability of
the insurer and would generally be assigned a lower rating if the ratings were
based primarily upon the credit characteristics of the issuer without regard to
the insurance feature. By way or contrast, the ratings, if any, assigned to
Municipal Obligations insured under Portfolio Insurance will be based primarily
upon the credit characteristics of the issuers without regard to the insurance
feature, and will generally carry a rating that is below Aaa or AAA. While in
the portfolio of the Fund, however, a Municipal Obligation backed by Portfolio
Insurance will effectively be of the same quality as a Municipal Obligation
issued by an issuer of comparable credit characteristics that is backed by
Original Issue Insurance or Secondary Market Insurance.
The Fund's policy of investing in Municipal Obligations insured by insurers
whose claims-paying ability is rated Aaa or AAA will apply only at the time of
the purchase of a security, and a Fund will not be required to dispose of
securities in the event Moody's or S&P, as the case may be, downgrades its
assessment of the claims-paying ability of a particular insurer or the credit
characteristics of a particular issuer. In this connection, it should be noted
that in the event Moody's or S&P or both should down-grade its assessment of
the claims-paying ability of a particular insurer, it could also be expected to
downgrade the ratings assigned to Municipal Obligations insured under Original
Issue Insurance or Secondary Market Insurance issued by such insurer, and
Municipal Obligations insured under Portfolio Insurance issued by such insurer
would also be of reduced quality in the portfolio of the Fund. Moody's and S&P
continually assess the claims-paying ability of insurers and the credit
characteristics of issuers, and there can be no assurance that they will not
downgrade their assessments subsequent to the time the Fund purchases
securities.
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In addition to insured Municipal Obligations, the Fund may invest in
Municipal Obligations that are entitled to the benefit of an escrow or trust
account which contains securities issued or guaranteed by the U.S. Government
or U.S. Government agencies, backed by the full faith and credit of the United
States, and sufficient in amount to ensure the payment of interest and
principal on the original interest payment and maturity dates ("collateralized
obligations"). These collateralized obligations generally will not be insured
and will include, but are not limited to, Municipal Obligations that have been
(1) advance refunded where the proceeds of the refunding have been used to
purchase U.S. Government or U.S. Government agency securities that are placed
in escrow and whose interest or maturing principal payments, or both, are
sufficient to cover the remaining scheduled debt service on the Municipal
Obligations, and (2) issued under state or local housing finance programs which
use the issuance proceeds to fund mortgages that are then exchanged for U.S.
Government or U.S. Government agency securities and deposited with a trustee as
security for the Municipal Obligations. These collateralized obligations are
normally regarded as having the credit characteristics of the underlying U.S.
Government or U.S. Government agency securities. Collateralized obligations
will not constitute more than 20% of the Fund's assets.
Each insured Municipal Obligation in which the Fund invests will be covered
by Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
There is no limitation on the percentage of the Fund's assets that may be
invested in Municipal Obligations insured by any given insurer.
Original Issue Insurance. Original Issue Insurance is purchased with respect
to a particular issue of Municipal Obligations by the issuer thereof or a third
party in conjunction with the original issuance of such Municipal Obligations.
Under such insurance, the insurer unconditionally guarantees to the holder of
the Municipal Obligation the timely payment of principal and interest on such
obligation when and as such payments shall become due but shall not be paid by
the issuer, except that in the event of any acceleration of the due date of the
principal by reason of mandatory or optional redemption (other than
acceleration by reason of a mandatory sinking fund payment), default or
otherwise, the payments guaranteed may be made in such amounts and at such
times as payments of principal would have been due had there not been such
acceleration. The insurer is responsible for such payments less any amounts
received by the holder from any trustee for the Municipal Obligation issuers or
from any other source. Original Issue Insurance does not guarantee payment on
an accelerated basis, the payment of any redemption premium (except with
respect to certain premium payments in the case of certain small issue
industrial development and pollution control Municipal Obligations), the value
of the shares of the Fund, the market value of Municipal Obligations, or
payments of any tender purchase price upon the tender of the Municipal
Obligations. Original Issue Insurance also does not insure against nonpayment
of principal of or interest on Municipal Obligations resulting from the
insolvency, negligence or any other act or omission of the trustee or other
paying agent for such obligations.
In the event that interest on or principal of a Municipal Obligation covered
by insurance is due for payment but is unpaid by the issuer thereof, the
applicable insurer will make payments to its fiscal agent (the "Fiscal Agent")
equal to such unpaid amounts of principal and interest not later than one
business day after the insurer has been notified that such nonpayment has
occurred (but not earlier than the date such payment is due). The Fiscal Agent
will disburse to the Fund the amount of principal and interest which is then
due for payment but is unpaid upon receipt by the Fiscal Agent of (i) evidence
of the Fund's right to receive payment of such principal and interest and (ii)
evidence, including any appropriate instruments of assignment, that all of the
rights to payment of such principal or interest then due for payment shall
thereupon vest in the insurer. Upon payment by the insurer of any principal or
interest payments with respect to any Municipal Obligations, the insurer shall
succeed to the rights of the Fund with respect to such payment.
Original Issue Insurance remains in effect as long as the Municipal
Obligations covered thereby remain outstanding and the insurer remains in
business, regardless of whether the Fund ultimately disposes of such
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Municipal Obligations. Consequently, Original Issue Insurance may be considered
to represent an element of market value with respect to the Municipal
Obligations so insured, but the exact effect, if any, of this insurance on such
market value cannot be estimated.
Secondary Market Insurance. Subsequent to the time of original issuance of a
Municipal Obligation, the Fund or a third party may, upon the payment of a
single premium, purchase insurance on such Municipal Obligation. Secondary
Market Insurance generally provides the same type of coverage as is provided by
Original Issue Insurance and remains in effect as long as the Municipal
Obligation covered thereby remain outstanding, the holder of such Municipal
Obligation does not voluntarily relinquish the Secondary Market Insurance and
the insurer remains in business, regardless of whether the Fund ultimately
disposes of such Municipal Obligation.
One of the purposes of acquiring Secondary Market Insurance with respect to a
particular Municipal Obligation would be to enable the Fund to enhance the
value of such Municipal Obligation. The Fund, for example, might seek to
purchase a particular Municipal Obligation and obtain Secondary Market
Insurance with respect thereto if, in the opinion of Nuveen Advisory, the
market value of such Municipal Obligation, as insured, would exceed the current
value of the Municipal Obligation without insurance plus the cost of the
Secondary Market Insurance. Similarly, if the Fund owns but wishes to sell a
Municipal Obligation that is then covered by Portfolio Insurance, the Fund
might seek to obtain Secondary Market Insurance with respect thereto if, in the
opinion of Nuveen Advisory, the net proceeds of a sale by the Fund of such
obligation, as insured, would exceed the current value of such obligation plus
the cost of the Secondary Market Insurance.
Portfolio Insurance. Portfolio Insurance guarantees the payment of principal
and interest on specified eligible Municipal Obligations purchased by the Fund.
Except as described below, Portfolio Insurance generally provides the same type
of coverage as is provided by Original Issue Insurance or Secondary Market
Insurance. Municipal Obligations insured under one Portfolio Insurance policy
would generally not be insured under any other policy purchased by the Fund. A
Municipal Obligation is eligible for coverage under a policy if it meets
certain requirements of the insurer. Portfolio Insurance is intended to reduce
financial risk, but the cost thereof and compliance with investment
restrictions imposed under the policy will reduce the yield to shareholders of
the Fund.
If a Municipal Obligation is already covered by Original Issue Insurance or
Secondary Market Insurance, then such Municipal Obligation is not required to
be additionally insured under any policy of Portfolio Insurance that the Fund
may purchase. All premiums respecting Municipal Obligations covered by Original
Issue Insurance or Secondary Market Insurance are paid in advance by the issuer
or other party obtaining the insurance.
Portfolio Insurance policies are effective only as to Municipal Obligations
owned by and held by the Fund, and do not cover Municipal Obligations for which
the contract for purchase fails. A "when-issued" Municipal Obligation will be
covered under a Portfolio Insurance policy upon the settlement date of the
issue of such "when-issued" Municipal Obligation. In determining whether to
insure Municipal Obligations held by the Fund, an insurer will apply its own
standards, which correspond generally to the standards it has established for
determining the insurability of new issues of Municipal Obligations. See
"Original Issue Insurance" above.
Each Portfolio Insurance policy will be noncancellable and will remain in
effect so long as the Fund is in existence, the Municipal Obligations covered
by the policy continue to be held by the Fund, and the Fund pays the premiums
for the policy. Each insurer will generally reserve the right at any time upon
90 days' written notice to the Fund to refuse to insure any additional
securities purchased by the Fund after the effective date of such notice. The
Board of Trustees will generally reserve the right to terminate each policy
upon seven days' written notice to an insurer if it determines that the cost of
such policy is not reasonable in relation to the value of the insurance to the
Fund.
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Each Portfolio Insurance policy will terminate as to any Municipal Obligation
that has been redeemed from or sold by the Fund on the date of such redemption
or the settlement date of such sale, and an insurer shall not have any
liability thereafter under a policy as to any such Municipal Obligation, except
that if the date of such redemption or the settlement date of such sale occurs
after a record date and before the related payment date with respect to any
such Municipal Obligation, the policy will terminate as to such Municipal
Obligation on the business day immediately following such payment date. Each
policy will terminate as to all Municipal Obligations covered thereby on the
date on which the last of the covered Municipal Obligations mature, are
redeemed or are sold by the Fund.
One or more policies of Portfolio Insurance may provide a Fund, pursuant to
an irrevocable commitment of the insurer, with the option to exercise the right
to obtain permanent insurance ("Permanent Insurance") with respect to a
Municipal Obligation that is to be sold by the Fund. The Fund would exercise
the right to obtain Permanent Insurance upon payment of a single, predetermined
insurance premium payable from the proceeds of the sale of such Municipal
Obligation. It is expected that the Fund will exercise the right to obtain
Permanent Insurance for a Municipal Obligation only if, in the opinion of
Nuveen Advisory, upon such exercise the net proceeds from the sale by the Fund
of such obligation, as insured, would exceed the proceeds from the sale of such
obligation without insurance.
The Permanent Insurance premium with respect to each such obligation is
determined based upon the insurability of each such obligation as of the date
of purchase by the Fund and will not be increased or decreased for any change
in the creditworthiness of such obligation unless such obligation is in default
as to payment or principal or interest, or both. In such event, the Permanent
Insurance premium shall be subject to an increase predetermined at the date of
purchase by the Fund.
The Fund generally intends to retain any insured securities covered by
Portfolio Insurance that are in default or in significant risk of default and
to place a value on the insurance, which ordinarily will be the difference
between the market value of the defaulted security and the market value of
similar securities of minimum investment grade (i.e., rated BBB) that are not
in default. In certain circumstances, however, Nuveen Advisory may determine
that an alternative value for the insurance, such as the difference between the
market value of the defaulted security and either its par value or the market
value of securities of a similar nature that are not in default or in
significant risk of default, is more appropriate. To the extent that the Fund
holds such defaulted securities, it may be limited in its ability to manage its
investment portfolio and to purchase other Municipal Obligations. Except as
described above with respect to securities covered by Portfolio Insurance that
are in default or subject to significant risk of default, the Funds will not
place any value on the insurance in valuing the Municipal Obligations that it
holds.
Because each Portfolio Insurance policy will terminate as to Municipal
Obligations sold by the Fund on the date of sale, in which event the insurer
will be liable only for those payments of principal and interest that are then
due and owing (unless Permanent Insurance is obtained by the Fund), the
provision for this insurance will not enhance the marketability of securities
held by the Fund, whether or not the securities are in default or in
significant risk of default. On the other hand, since Original Issue Insurance
and Secondary Market Insurance generally will remain in effect as long as
Municipal Obligations covered thereby are outstanding, such insurance may
enhance the marketability of such securities, even when such securities are in
default or in significant risk of default, but the exact effect, if any, on
marketability cannot be estimated. Accordingly, the Funds may determine to
retain or, alternatively, to sell Municipal Obligations covered by Original
Issue Insurance or Secondary Market Insurance that are in default or in
significant risk of default.
Premiums for a Portfolio Insurance policy are paid monthly, and are adjusted
for purchases and sales of Municipal Obligations covered by the policy during
the month. The yield on the Fund is reduced to the extent of the insurance
premiums it pays. Depending upon the characteristics of the Municipal
Obligations held by the
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Fund, the annual premium rate for policies of Portfolio Insurance is estimated
to range from .15% to .30% of the value of the Municipal Obligations covered
under the policy. Because the majority of the Municipal Obligations in the Fund
were not covered by policies of Portfolio Insurance during the year ended
February 29, 1996, premium expenses as a percentage of the value of Municipal
Obligations held by the Fund for such period were .00%.
Set forth below is information about the various municipal bond insurers with
whom the Nuveen Insured Municipal Bond Fund currently maintains policies of
Portfolio Insurance.
AMBAC ASSURANCE CORPORATION ("AMBAC ASSURANCE")
Ambac Assurance Corporation ("Ambac Assurance") is a Wisconsin-domiciled
stock insurance corporation regulated by the Office of the Commissioner of
Insurance of the State of Wisconsin and licensed to do business in 50 states,
the District of Columbia, the Territory of Guam and the Commonwealth of Puerto
Rico, with admitted assets of approximately $2,968,000,000 (unaudited) and
statutory capital of approximately $1,715,000,000 (unaudited) as of March 31,
1998. Statutory capital consists of Ambac Assurance's policyholders' surplus
and statutory contingency reserve. Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., Moody's Investors Service and
Fitch IBCA, Inc. have assigned a triple-A financial strength rating to Ambac
Assurance.
Ambac Assurance has obtained a ruling from the Internal Revenue Service to
the effect that the insuring of an obligation by Ambac Assurance will not
affect the treatment for federal income tax purposes of interest on such
obligation and that insurance proceeds representing maturing interest paid by
Ambac Assurance under policy provisions substantially identical to those
contained in its municipal bond insurance policy shall be treated for federal
income tax purposes in the same manner as if such payments were made by the
issuer of the Bonds.
Ambac Assurance makes no representation regarding the Bonds or the
advisability of investing in the Bonds and makes no representation regarding,
nor has it participated in the preparation of, the Official Statement other
than the information supplied by Ambac Assurance and presented under the
heading "AMBAC Assurance Corporation".
FINANCIAL SECURITY ASSURANCE INC. ("FINANCIAL SECURITY")
Financial Security is a monoline insurance company incorporated under the
laws of the State of New York. Financial Security is licensed to engage in the
financial guaranty insurance business in all 50 states, the District of
Columbia and Puerto Rico.
Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprise Holdings, Inc.,
U S WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd.
No shareholder is obligated to pay any debts of or any claims against Financial
Security. Financial Security is domiciled in the State of New York and is
subject to regulation by the State of New York Insurance Department. As of
March 31, 1998, the total policyholders' surplus and contingency reserves and
the total unearned premium reserve, respectively, of Financial Security and its
consolidated subsidiaries were, in accordance with statutory accounting
principles, approximately $503,683,000 (unaudited) and $808,603,000
(unaudited), the total shareholders' equity and the total unearned premium
reserve, respectively, of Financial Security and its consolidated subsidiaries
were, in accordance with generally accepted accounting principles,
approximately $923,047,000 (unaudited) and $428,157,000 (unaudited). Copies of
Financial Security's financial statements may be obtained by writing to
Financial Security at 350 Park Avenue, New York, New York 10022, Attention:
Communications Department. Financial Security's telephone number is (212) 826-
0100. Financial Security's financial statements are included as exhibits to the
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the
Securities and Exchange Commission by Holdings and may be reviewed at Holdings'
website:www.fsa.com.
S-9
<PAGE>
MBIA INSURANCE CORPORATION ("MBIA")
The Insurer is the principal operating subsidiary of MBIA Inc., a New York
Stock Exchange listed company. MBIA Inc. is not obligated to pay the debts of
or claims against the Insurer. The Insurer is domiciled in the State of New
York and licensed to do business in and subject to regulation under the laws of
all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United
States and the Territory of Guam. The Insurer has two European branches, one in
the Republic of France and the other in the Kingdom of Spain. New York has laws
prescribing minimum capital requirements, limiting classes and concentrations
of investments and requiring the approval of policy rates and forms. State laws
also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by the Insurer, changes in control and
transactions among affiliates. Additionally, the Insurer is required to
maintain contingency reserves on its liabilities in certain amounts and for
certain periods of time.
As of December 31, 1996 the Insurer had admitted assets of $4.4 billion
(audited), total liabilities of $3.0 billion (audited), and total capital and
surplus of $1.4 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of March 31, 1997, the Insurer had admitted assets of $4.5
billion (unaudited), total liabilities of $3.0 billion (unaudited), and total
capital and surplus of $1.5 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities.
Furthermore, copies of the Insurer's year end financial statements prepared
in accordance with statutory accounting practices are available without charge
from the Insurer. A copy of the Annual Report on Form 10-K of MBIA Inc. is
available from the Insurer or the Securities and Exchange Commission. The
address of the Insurer is 113 King Street, Armonk, New York 10504. The
telephone number of the Insurer is (914) 273-4545.
The Insurer's policy unconditionally and irrevocably guarantees to the Nuveen
Insured Municipal Bond Fund the full and complete payment required to be made
by or on behalf of the issuer to the applicable paying agent or its successor
of an amount equal to (i) the principal of (either at the stated maturity or by
advancement of maturity pursuant to a mandatory sinking fund payment) and
interest on, the Municipal Obligations as such payments shall become due but
shall not be so paid (except that in the event of any acceleration of the due
date of such principal by reason of mandatory or optional redemption or
acceleration resulting from default or otherwise, other than any advancement of
maturity pursuant to a mandatory sinking fund payment, the payments guaranteed
by the Insurer's policy shall be made in such amounts and at such times as such
payments of principal would have been due had there not been any such
acceleration) and (ii) the reimbursement of any such payment which is
subsequently recovered from the Fund pursuant to a final judgment by a court of
competent jurisdiction that such payment constitutes an avoidable preference to
the Fund within the meaning of any applicable bankruptcy law (a "Preference").
The Insurer's policy does not insure against loss of any prepayment premium
which may at any time be payable with respect to any Municipal Obligation. The
Insurer's policy does not, under any circumstance, insure against loss relating
to: (i) optional or mandatory redemptions (other than mandatory sinking fund
redemptions); (ii) any payments to be made on an accelerated basis; (iii)
payments of the purchase price of Municipal Obligations upon tender thereof; or
(iv) any Preference relating to (i) through (iii) above. The Insurer's policy
also does not insure against nonpayment of principal of or interest on the
Municipal Obligations resulting from the insolvency, negligence or any other
act or omission of any paying agent for the Municipal Obligations.
With respect to small issue industrial development bonds and pollution
control revenue bonds covered by the policy, the Insurer guarantees the full
and complete payments required to be made by or on behalf of an
S-10
<PAGE>
issuer of such bonds if there occurs pursuant to the terms of the bonds an
event which results in the loss of the tax-exempt status of interest on such
bonds, including principal, interest or premium payments payable thereon, if
any, as and when required to be made by or on behalf of the issuer pursuant to
the terms of such bonds.
When the Insurer receives from the paying agent or the Fund, (1) telephonic
or telegraphic notice (subsequently confirmed in writing by registered or
certified mail), or (2) written notice by registered or certified mail, that a
required payment of any insured amount which is then due has not been made, the
Insurer on the due date of such payment or within one business day after
receipt of notice of such nonpayment, whichever is later, will make a deposit
of funds, in an account with State Street Bank and Trust Company, N.A., in New
York, New York, or its successor, sufficient for the payment of any such
insured amounts which are then due. Upon presentment and surrender of such
Municipal Obligations or presentment of such other proof of ownership of the
Municipal Obligations, together with any appropriate instruments of assignment
to evidence the assignment of the insured amounts due on the Municipal
Obligations as are paid by the Insurer, and appropriate instruments to effect
the appointment of the Insurer as agent for the Fund in any legal proceeding
related to payment of insured amounts on Municipal Obligations, such
instruments being in a form satisfactory to State Street Bank and Trust
Company, N.A., State Street Bank and Trust Company, N.A. shall disburse to the
Fund or the paying agent payment of the insured amounts due on such Municipal
Obligations, less any amount held by the paying agent for the payment of such
insured amounts and legally available therefor.
FINANCIAL GUARANTY INSURANCE COMPANY ("FINANCIAL GUARANTY")
The Portfolio Insurance Policy is non-cancellable except for failure to pay
the premium. The premium rate for each purchase of a security covered by the
Portfolio Insurance Policy is fixed for the life of the Insured Bond. The
insurance premiums are payable monthly by the Fund and are adjusted for
purchases, sales and payments prior to maturity of Insured Bonds during the
month. In the event of a sale of any Insured Bond by the Fund or payment
thereof prior to maturity, the Portfolio Insurance policy terminates as to such
Insured Bond.
Under the provisions of the Portfolio Insurance Policy, Financial Guaranty
unconditionally and irrevocably agrees to pay to State Street Bank and Trust
Company, or its successor, as its agent (the "Fiscal Agent"), that portion of
the principal of and interest on the Insured Bonds which shall become due for
payment but shall be unpaid by reason of nonpayment by the issuer of the
Insured Bonds. The term "due for payment" means, when referring to the
principal of an Insured Bond, its stated maturity date or the date on which it
shall have been called for mandatory sinking fund redemption and does not refer
to any earlier date on which payment is due by reason of call for redemption
(other than by mandatory sinking fund redemption), acceleration or other
advancement of maturity and means, when referring to interest on an Insured
Bond, the stated date for payment of interest. In addition, the Portfolio
Insurance Policy covers nonpayment by the issuer that results from any payment
of principal or interest made by such issuer on the Insured Bond to the Fund
which has been recovered from the Fund or its shareholders pursuant to the
United States Bankruptcy Code by a trustee in bankruptcy in accordance with a
final, nonappealable order of a court having competent jurisdiction.
Financial Guaranty will make such payments to the Fiscal Agent on the date
such principal or interest becomes due for payment or on the business day next
following the day on which Financial Guaranty shall have received notice of
nonpayment, whichever is later. The Fiscal Agent will disburse the Trustee the
face amount of principal and interest which is then due for payment but is
unpaid by reason of nonpayment by the issuer, but only upon receipt by the
Fiscal Agent of (i) evidence of the Trustee's right to receive payment of the
principal or interest due for payment and (ii) evidence, including any
appropriate instruments of assignment, that all of the rights to payment of
such principal or interest due for payment thereupon shall vest in Financial
Guaranty. Upon such disbursement, Financial Guaranty shall become the owner of
the Insured Bond, appurtenant coupon or right to payment of principal or
interest on such Insured Bond and shall be fully subrogated to all of the
Trustee's rights thereunder, including the right to payment, thereof.
S-11
<PAGE>
In determining whether to insure municipal securities held in the Fund,
Financial Guaranty will apply its own standards which are not necessarily the
same as the criteria used in regard to the selection of securities by the Fund.
Certain of the municipal securities insured under the Portfolio Insurance
Policy may also be insured under an insurance policy obtained by the issuer of
such municipal securities. The premium for any insurance policy or policies
obtained by an issuer or Insured Bonds has been paid in advance by such issuer
and any such policy or policies are non-cancellable and will continue in force
so long as the Insured Bonds so insured are outstanding. Financial Guaranty has
also agreed, if requested by the Funds on or before the fifth day preceding the
1st day of any month, to insure to maturity Insured Bonds sold by the Trustee
during the month immediately following such request of the Funds. The premium
for any such insurance to maturity provided by Financial Guaranty is paid by
the Fund and any such insurance is non-cancellable and will continue in force
so long as the Bonds so insured are outstanding.
Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the
"Corporation"), a Delaware holding company. The Corporation is a subsidiary of
General Electric Capital Corporation. Financial Guaranty is a monoline
financial guaranty insurer domiciled in the State of New York and subject to
regulation by the State of New York Insurance Department. As of March 31, 1998,
the total capital and surplus of Financial Guaranty was $1,267,900,134.
Financial Guaranty prepares financial statements on the basis of both statutory
accounting principles and generally accepted accounting principles. Copies of
such financial statements may be obtained by writing to Financial Guaranty at
115 Broadway, New York, New York 10006, Attention: Communications Department
(telephone number: (212) 312-3000) or to the New York State Insurance
Department at 25 Beaver Street, New York, New York 10004-2319, Attention:
Financial Condition Property/Casualty Bureau (telephone number: (212) 480-
5187).
The policies of insurance obtained by the Fund from Financial Guaranty and
the negotiations in respect thereof represent the only relationship between
Financial Guaranty and the Fund. Otherwise neither Financial Guaranty nor its
parent, FGIC Corporation, or any affiliate thereof has any significant
relationship, direct or indirect, with the Fund or the Board of Trustees of the
Fund.
The above municipal bond insurers have insurance claims-paying ability
ratings of AAA from S&P and Aaa from Moody's. Financial Guaranty also has an
insurance claims-paying ability rating of AAA from Fitch.
An S&P insurance claims-paying ability rating is an assessment of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with its terms. An insurer with an insurance
claims-paying ability rating of AAA has the highest rating assigned by S&P.
Capacity to honor insurance contracts is adjudged by S&P to be extremely strong
and highly likely to remain so over a long period of time. A Moody's insurance
claims-paying ability rating is an opinion of the ability of an insurance
company to repay punctually senior policyholder obligations and claims. An
insurer with an insurance claims-paying ability rating of Aaa is adjudged by
Moody's to be of the best quality. In the opinion of Moody's, the policy
obligations of an insurance company with an insurance claims-paying ability
rating of Aaa carry the smallest degree of credit risk and, while the financial
strength of these companies is likely to change, such changes as can be
visualized are most unlikely to impair the company's fundamentally strong
position.
An insurance claims-paying ability rating by S&P or Moody's does not
constitute an opinion on any specific contract in that such an opinion can only
be rendered upon the review of the specific insurance contract. Furthermore, an
insurance claims-paying ability rating does not take into account deductibles,
surrender or cancellation penalties or the timeliness of payment, nor does it
address the ability of a company to meet nonpolicy obligations (i.e., debt
contracts).
S-12
<PAGE>
The assignment of ratings by S&P or Moody's to debt issues that are fully or
partially supported by insurance policies, contracts or guarantees is a
separate process form the determination of claims-paying ability ratings. The
likelihood of a timely flow of funds from the insurer to the trustee for the
bondholders is a key element in the rating determination for such debt issues.
S&P's and Moody's ratings are not recommendations to buy, sell or hold the
Municipal Obligations insured by policies issued by AMBAC Assurance, Financial
Security, MBIA or Financial Guaranty and such ratings may be subject to
revision or withdrawal at any time by the rating agencies. Any downward
revision or withdrawal of either or both ratings may have an adverse effect on
the market price of the Municipal Obligations insured by policies issued by
AMBAC Assurance, Financial Security, MBIA or Financial Guaranty.
S&P's ratings of AMBAC Assurance, Financial Security, MBIA and Financial
Guaranty should be evaluated independent of Moody's ratings. Any further
explanation as to the significance of the ratings may be obtained only from the
applicable rating agency. See Appendix A for more information about ratings by
Moody's, S&P, and Fitch.
PORTFOLIO TRADING AND TURNOVER
The Funds will make changes in their investment portfolio from time to time
in order to take advantage of opportunities in the municipal market and to
limit exposure to market risk. The Funds may also engage to a limited extent in
short-term trading consistent with their investment objective. Securities may
be sold in anticipation of market decline or purchased in anticipation of
market rise and later sold. In addition, a security may be sold and another of
comparable quality purchased at approximately the same time to take advantage
of what Nuveen Advisory believes to be a temporary disparity in the normal
yield relationship between the two securities. Each Fund may make changes in
its investment portfolio in order to limit its exposure to changing market
conditions. Changes in a Fund's investments are known as "portfolio turnover."
While it is impossible to predict future portfolio turnover rates, the annual
portfolio turnover rate for each of the Funds is generally not expected to
exceed 75%. However, each Fund reserves the right to make changes in its
investments whenever it deems such action advisable and, therefore, a Fund's
annual portfolio turnover rate may exceed 75% in particular years depending
upon market conditions.
The portfolio turnover rates for the Funds, for the 1996 fiscal year-end of
each Fund as a series of its predecessor entity (described above), and for the
1997 fiscal year-end, as indicated, were
<TABLE>
<CAPTION>
FISCAL
YEAR
---------
1996 1997
---- ----
<S> <C> <C>
Nuveen Municipal Bond Fund.................................... 17% 12%*
Nuveen Insured Municipal Bond Fund............................ 27% 35%*
Nuveen Flagship All-American Municipal Bond Fund.............. 79% 39%**
Nuveen Flagship Intermediate Municipal Bond Fund.............. 81% 26%**
Nuveen Flagship Limited Term Municipal Bond Fund.............. 39% 29%**
</TABLE>
- --------
* For the fiscal year ended February 28, 1997. For the period March 1, 1997 to
April 30, 1997, the portfolio turnover rate for the Nuveen Municipal Bond
Fund was 2% and the rate for the Nuveen Insured Municipal Bond Fund was 12%.
** For the eleven months ended April 30, 1997.
S-13
<PAGE>
WHEN-ISSUED SECURITIES
Each Fund may purchase and sell Municipal Obligations on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the
regular settlement date. (When-issued transactions normally settle within 15-45
days.) On such transactions the payment obligation and the interest rate are
fixed at the time the buyer enters into the commitment. The commitment to
purchase securities on a when-issued or delayed delivery basis may involve an
element of risk because the value of the securities is subject to market
fluctuation, no interest accrues to the purchaser prior to settlement of the
transaction, and at the time of delivery the market value may be less than
cost. At the time a Fund makes the commitment to purchase a Municipal
Obligation on a when-issued or delayed delivery basis, it will record the
transaction and reflect the amount due and the value of the security in
determining its net asset value. Likewise, at the time a Fund makes the
commitment to sell a Municipal Obligation on a delayed delivery basis, it will
record the transaction and include the proceeds to be received in determining
its net asset value; accordingly, any fluctuations in the value of the
Municipal Obligation sold pursuant to a delayed delivery commitment are ignored
in calculating net asset value so long as the commitment remains in effect. The
Funds will maintain designated readily marketable assets at least equal in
value to commitments to purchase when-issued or delayed delivery securities,
such assets to be segregated by the Custodian specifically for the settlement
of such commitments. The Funds will only make commitments to purchase Municipal
Obligations on a when-issued or delayed delivery basis with the intention of
actually acquiring the securities, but the Funds reserve the right to sell
these securities before the settlement date if it is deemed advisable. If a
when-issued security is sold before delivery any gain or loss would not be tax-
exempt. The Funds commonly engage in when-issued transactions in order to
purchase or sell newly-issued Municipal Obligations, and may engage in delayed
delivery transactions in order to manage its operations more effectively.
HEDGING AND OTHER DEFENSIVE ACTIONS
Each Fund may periodically engage in hedging transactions. Hedging is a term
used for various methods of seeking to preserve portfolio capital value by
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in financial futures and index futures as well as related put and
call options on such instruments. Both parties entering into an index or
financial futures contract are required to post an initial deposit of 1% to 5%
of the total contract price. Typically, option holders enter into offsetting
closing transactions to enable settlement in cash rather than take delivery of
the position in the future of the underlying security. Each Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series' portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit. Finally, the potential daily deposit requirements in
futures contracts create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost of the initial
premium. Losses due to hedging transactions will reduce yield. Net gains, if
any, from hedging and other portfolio transactions will be distributed as
taxable distributions to shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its
S-14
<PAGE>
premiums and deposits would exceed 5% of such series' net assets. Each series
will invest in these instruments only in markets believed by the investment
adviser to be active and sufficiently liquid. For further information regarding
these investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, including up to 5% in adequately collateralized
repurchase agreements relating thereto. Interest on each instrument is taxable
for Federal income tax purposes and would reduce the amount of tax-free
interest payable to shareholders.
TEMPORARY INVESTMENTS
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable "temporary investments."
Temporary investments will not exceed 20% of a Fund's assets except when made
for defensive purposes. The Funds will invest only in taxable temporary
investments that are either U.S. Government securities or are rated within the
highest grade by Moody's, S&P, or Fitch and mature within one year from the
date of purchase or carry a variable or floating rate of interest. See Appendix
A for more information about ratings by Moody's, S&P, and Fitch.
The Funds may invest in the following federally tax-exempt temporary
investments:
Bond Anticipation Notes (BANs) are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing
for projects that will eventually be funded through the sale of long-term
debt obligations or bonds. The ability of an issuer to meet its obligations
on its BANs is primarily dependent on the issuer's access to the long-term
municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments
to finance the current operations of such governments. Repayment is
generally to be derived from specific future tax revenues. Tax anticipation
notes are usually general obligations of the issuer. A weakness in an
issuer's capacity to raise taxes due to, among other things, a decline in
its tax base or a rise in delinquencies, could adversely affect the
issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or
governmental bodies with the expectation that future revenues from a
designated source will be used to repay the notes. In general, they also
constitute general obligations of the issuer. A decline in the receipt of
projected revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its
obligations on outstanding RANs. In addition, the possibility that the
revenues would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained
from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as
those described above to commercial banks as evidence of borrowings. The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These
notes may have risks similar to the risks associated with TANs and RANs.
S-15
<PAGE>
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities
and their agencies. Payment of principal and interest on issues of
municipal paper may be made from various sources, to the extent the funds
are available therefrom. Maturities of municipal paper generally will be
shorter than the maturities of TANs, BANs or RANs. There is a limited
secondary market for issues of municipal paper.
Certain Municipal Obligations may carry variable or floating rates of
interest whereby the rate of interest is not fixed, but varies with changes in
specified market rates or indices, such as a bank prime rate or a tax-exempt
money market index.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the
extent permitted under its investment objective, policies and limitations. Such
notes may be issued for different purposes and may be secured differently from
those mentioned above.
The Funds may also invest in the following taxable temporary investments:
U.S. Government Direct Obligations are issued by the United States
Treasury and include bills, notes and bonds.
--Treasury bills are issued with maturities of up to one year. They are
issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
--Treasury notes are longer-term interest bearing obligations with
original maturities of one to seven years.
--Treasury bonds are longer-term interest-bearing obligations with
original maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been
established as instrumentalities of the United States Government to supervise
and finance certain types of activities. These agencies include, but are not
limited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States, and Tennessee Valley Authority. Issues of these agencies, while not
direct obligations of the United States Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury or
supported by the issuing agencies' right to borrow from the Treasury. There can
be no assurance that the United States Government itself will pay interest and
principal on securities as to which it is not legally so obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable
interest bearing instrument with a specific maturity. CDs are issued by banks
in exchange for the deposit of funds and normally can be traded in the
secondary market, prior to maturity. The Fund will only invest in U.S. dollar
denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few days to nine months. Commercial paper may be purchased from
U.S. corporations.
Other Corporate Obligations--The Funds may purchase notes, bonds and
debentures issued by corporations if at the time of purchase there is less than
one year remaining until maturity or if they carry a variable or floating rate
of interest.
S-16
<PAGE>
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. Government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during a Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Funds will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the
opinion of Nuveen Advisory present minimal credit risk. The risk to the Funds
is limited to the ability of the issuer to pay the agreed-upon repurchase price
on the delivery date; however, although the value of the underlying collateral
at the time the transaction is entered into always equals or exceeds the
agreed-upon repurchase price, if the value of the collateral declines there is
a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but a Fund might incur a loss if the value of the
collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by a Fund may be delayed or limited. Nuveen
Advisory will monitor the value of collateral at the time the transaction is
entered into and at all times subsequent during the term of the repurchase
agreement in an effort to determine that the value always equals or exceeds the
agreed upon price. In the event the value of the collateral declined below the
repurchase price, Nuveen Advisory will demand additional collateral from the
issuer to increase the value of the collateral to at least that of the
repurchase price. Each of the Funds will not invest more than 10% of its assets
in repurchase agreements maturing in more than seven days.
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Funds under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has eight
trustees, two of whom are "interested persons" (as the term "interested
persons" is defined in the Investment Company Act of 1940) and six of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger* 49 Chairman of the Board Chairman since July 1, 1996
333 West Wacker Drive and Director of The John Nuveen Company,
Chicago, IL 60606 John Nuveen & Co.
Incorporated, Nuveen
Advisory Corp. and Nuveen
Institutional Advisory
Corp., prior thereto
Executive Vice President
and Director of The John
Nuveen Company and John
Nuveen & Co. Incorporated;
Director of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.; Chairman and
Director (since January
1997) of Nuveen Asset
Management, Inc.; Director
(since 1996) of
Institutional Capital
Corporation.
</TABLE>
S-17
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Anthony T. Dean* 53 President and President since July 1,
333 West Wacker Drive Director 1996 of The John Nuveen
Chicago, IL 60606 Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and Nuveen
Institutional Advisory
Corp.; prior thereto,
Executive Vice President
and Director of The John
Nuveen Company, John
Nuveen & Co.
Incorporated, Nuveen
Advisory Corp. (since
October 1992) and Nuveen
Institutional Advisory
Corp. (since October
1992); President and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Chairman and Director
(since 1997) of
Rittenhouse Financial
Services, Inc.
- -------------------------------------------------------------------------------
Robert P. Bremner 57 Director Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- -------------------------------------------------------------------------------
Lawrence H. Brown 63 Director Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company
- -------------------------------------------------------------------------------
Anne E. Impellizeri 65 Director President and Chief
3 West 29th Street Executive Officer of
New York, NY 10001 Blanton-Peale, Institutes
of Religion and Health
(since December 1990).
- -------------------------------------------------------------------------------
Peter R. Sawers 65 Director Adjunct Professor of
22 The Landmark Business and Economics,
Northfield, IL 60093 University of Dubuque,
Iowa; Adjunct Professor,
Lake Forest Graduate
School of Management,
Lake Forest, Illinois.
- -------------------------------------------------------------------------------
William J. Schneider 53 Director Senior Partner, Miller-
4000 Miller-Valentine Ct. Valentine Partners, Vice
P.O. Box 744 President, Miller-
Dayton, OH 45401 Valentine Realty, Inc.
- -------------------------------------------------------------------------------
Judith M. Stockdale 50 Director Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation
Chicago, IL 60601 (since 1994); prior
thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
- -------------------------------------------------------------------------------
Bruce P. Bedford 58 Executive Vice Executive Vice President
333 West Wacker Drive President of John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen
Advisory Corp. and Nuveen
Institutional Advisory
Corp. (since January
1997); prior thereto,
Chairman and CEO of
Flagship Resources Inc.
and Flagship Financial
Inc. and the Flagship
funds.
- -------------------------------------------------------------------------------
Alan G. Berkshire 37 Vice President and Vice President and
333 West Wacker Drive Assistant Secretary General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John Nuveen
Company, John Nuveen &
Co. Incorporated, Nuveen
Advisory Corp. and Nuveen
Institutional Advisory
Corp., prior thereto,
Partner in the law firm
of Kirkland & Ellis.
</TABLE>
S-18
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Michael S. Davern 40 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since January
Chicago, IL 60606 1997); prior thereto, Vice
President and Portfolio Manager
(since September 1991) of
Flagship Financial.
- -------------------------------------------------------------------------------
Lorna C. Ferguson 53 Vice President Vice President of John Nuveen &
333 West Wacker Drive Co. Incorporated; Vice President
Chicago, IL 60606 (since January 1998) of Nuveen
Advisory Corp. and Nuveen
Institutional Advisory Corp.
- -------------------------------------------------------------------------------
William M. Fitzgerald 34 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since December
Chicago, IL 60606 1995); Assistant Vice President
of Nuveen Advisory Corp. (from
September 1992 to December
1995), prior thereto Assistant
Portfolio Manager of Nuveen
Advisory Corp.
- -------------------------------------------------------------------------------
Kathleen M. Flanagan 51 Vice President Vice President of John Nuveen &
333 West Wacker Drive Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Stephen D. Foy 44 Vice President and Vice President of John Nuveen &
333 West Wacker Drive Controller Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
J. Thomas Futrell 42 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Richard A. Huber 35 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since January
Chicago, IL 60606 1997); prior thereto, Vice
President and Portfolio Manager
of Flagship Financial.
- -------------------------------------------------------------------------------
Steven J. Krupa 40 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Anna R. Kucinskis 52 Vice President Vice President of John Nuveen &
333 West Wacker Drive Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Larry W. Martin 46 Vice President and Vice President, Assistant
333 West Wacker Drive Assistant Secretary Secretary and Assistant General
Chicago, IL 60606 Counsel of John Nuveen & Co.
Incorporated; Vice President
(since May 1993) and Assistant
Secretary of Nuveen Advisory
Corp.; Vice President (since May
1993) and Assistant Secretary of
Nuveen Institutional Advisory
Corp.; Assistant Secretary of
The John Nuveen Company.
</TABLE>
S-19
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Edward F. Neild, IV 32 Vice President Vice President (since September
333 West Wacker Drive 1996), previously Assistant
Chicago, IL 60606 Vice President (since December
1993) of Nuveen Advisory Corp.,
Portfolio Manager prior thereto
(since January 1992); Vice
President (since September
1996), previously Assistant
Vice President (since May 1995)
of Nuveen Institutional
Advisory Corp., Portfolio
Manager prior thereto.
- -------------------------------------------------------------------------------
Walter K. Parker 49 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since January
Chicago, IL 60606 1997); prior thereto, Vice
President and Portfolio Manager
(since July 1994) of Flagship
Financial; Portfolio Manager
and CIO Trust Investor for PNC
Bank.
- -------------------------------------------------------------------------------
Stephen S. Peterson 40 Vice President Vice President (since September
333 West Wacker Drive 1997), previously Assistant
Chicago, IL 60606 Vice President (since September
1996) of Nuveen Advisory Corp.,
Portfolio Manager prior
thereto.
- -------------------------------------------------------------------------------
Stuart W. Rogers 42 Vice President Vice President of John Nuveen &
333 West Wacker Drive Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 46 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp.;
Chartered Financial Analyst.
- -------------------------------------------------------------------------------
H. William Stabenow 63 Vice President and Vice President and Treasurer of
333 West Wacker Drive Treasurer The John Nuveen Company, John
Chicago, IL 60606 Nuveen & Co. Incorporated,
Nuveen Advisory Corp. and
Nuveen Institutional Advisory
Corp.
- -------------------------------------------------------------------------------
William S. Swanson 32 Vice President Vice President of John Nuveen &
333 West Wacker Drive Co. Incorporated (since October
Chicago, IL 60606 1997), prior thereto, Assistant
Vice President (since September
1996); formerly, Associate of
John Nuveen & Co. Incorporated.
- -------------------------------------------------------------------------------
Jan E. Terbrueggen 42 Vice President Vice President Nuveen Advisory
333 West Wacker Drive Corp. (since January 1997);
Chicago, IL 60606 prior thereto, Vice President
and Portfolio Manager of
Flagship Financial.
- -------------------------------------------------------------------------------
Gifford R. Zimmerman 41 Vice President and Vice President (since September
333 West Wacker Drive Secretary 1992), Assistant Secretary and
Chicago, IL 60606 Associate General Counsel
formerly Assistant General
Counsel of John Nuveen & Co.
Incorporated; Vice President
(since May 1993) and Assistant
Secretary of Nuveen Advisory
Corp.; Vice President (since
May 1993) and Assistant
Secretary of Nuveen
Institutional Advisory Corp.
</TABLE>
S-20
<PAGE>
Anthony Dean, Timothy Schwertfeger and Peter R. Sawers serve as members of
the Executive Committee of the Board of Trustees. The Executive Committee,
which meets between regular meetings of the Board of Trustees, is authorized to
exercise all of the powers of the Board of Trustees.
The trustees of the Trust are directors or trustees, as the case may be, of
42 Nuveen open-end funds and 52 Nuveen closed-end funds advised by Nuveen
Advisory Corp.
The following table sets forth compensation paid by the Trust to each of the
trustees of the Trust and the total compensation paid to each trustee during
the fiscal year ended April 30, 1998. The Trust has no retirement or pension
plans. The officers and trustees affiliated with Nuveen serve without any
compensation from the Trust.
<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM TRUST AND
FROM THE SERIES FUND COMPLEX
NAME OF TRUSTEE OF THIS TRUST PAID TO TRUSTEES
--------------- --------------- ----------------
<S> <C> <C>
Robert P. Bremner........................ $ 5,127(1) $25,333(1)
Lawrence H. Brown........................ $ 9,364 $74,750
Anne E. Impellizzeri..................... $ 9,364 $74,750
Margaret K. Rosenheim.................... $11,963(2) $84,714(3)
Peter R. Sawers.......................... $ 9,364 $74,750
William J. Schneider..................... $ 5,327(1) $26,333(1)
Judith M. Stockdale...................... $ 0(4) $ 0(4)
</TABLE>
- --------
(1) Includes compensation received as a trustee of the Flagship Funds, for the
period June 1, 1996 to January 1, 1997.
(2) Includes $465 in interest accrued on deferred compensation from prior
years; former Trustee, retired July 1997.
(3) Includes $1,964 in interest accrued on deferred compensation from prior
years.
(4) Elected to the Board in July 1997.
Each trustee who is not affiliated with Nuveen or Nuveen Advisory receives a
fee. The Trust requires no employees other than its officers, all of whom are
compensated by Nuveen.
The officers and directors of each Fund, in the aggregate, own less than 1%
of the shares of the Fund.
The following table sets forth the percentage ownership of each person, who,
as of May 26, 1998, owns of record, or is known by Registrant to own of record
or beneficially 5% or more of any class of a Fund's shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PERCENTAGE
NAME OF FUND AND CLASS OWNER OF OWNERSHIP
---------------------- ------------------- ------------
<C> <S> <C>
Nuveen Municipal Bond Fund
Class B Shares................ Smith Barney Inc. 10.35%
D015DR81311
388 Greenwich Street
New York, New York 10015
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
---------------------- ------------------------- ------------
<C> <S> <C>
BHC Securities, Inc. 7.13
FAO 70875400
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street Suite
1200
Philadelphia, PA 19103
Joseph Robinson & 6.99
Esther Robinson
JT TEN WROS NOT TC
47 Pierce St
Kingston, PA 18704-4632
Dolores J. Corby 6.49
1532 NE 96th St
Seattle, WA 98115-2540
PaineWebber for the 6.02
Benefit of
Carl C. Chaffee
3843 S. Nevia St.
Denver, CO 80237-1636
NFSC FEBO OBV-71031B 5.25
Gregory J. Lyons
P.O. Box 161
East Earl, PA 17519
Nuveen Municipal Bond Fund
Class C Shares................ Oppenheimer & Co., Inc. 5.75%
FBO 020-38275-14
P.O. Box 3484
Church Street Station
New York, NY 10008-8484
PaineWebber for the 5.69%
Benefit of
Irene Ruth Kroske Soule
771 Via Milano Circle
Apopka, FL 32712-3187
Nuveen Insured Municipal Bond
Fund Class A Shares........... NYSC FEBO 08Y-055 646 5.53%
Jack H. Martinelli
Harriet R. Martinelli TTEE
Martinelli Family Trust
U/A 3/27/92 - 748 Pico Ave
San Mateo, CA 94403
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Insured Municipal Bond
Fund Class B Shares........... MLPF&S for the Benefit of its Customers 32.14%
Attn: Fund Admn
4800 Deer Lake Dr E FL 5
Jacksonville, FL 32246-6484
FUBS & Co. FEBO 9.75
Marjorie B. Guy Trustee
FBO Marjorie B. Guy Trust
UTD 5/28/97
5004 Dickers Ave
Tampa, FL 33629
US Clearing Corp 9.69
FBO 953-15168-14
26 Broadway
New York, NY 10006-179B
Ruth Martin 8.54
9240 Lehigh Ave
Morton Grove, IL 60053-2310
Waverly G. Spears Cons 7.03
EST Charles Nolan Anderson Jr.
U/O DTD Oct 28 92
110 Sherwood Dr
Jackson, AL 36545-2135
Riley & Hill 6.85
Uson Rural Development
TEN COM
PO Box 428
Ontario, OR 97914-0428
Nuveen Insured Municipal Bond
Fund Class C Shares........... NFSC FEBO DC8-368148 5.83%
Florence B. Freer
196 Apache Lane
Stratford, CT 06497
Oregon Waste Technology Inc. 5.46
P.O. Box 4008
Brookings, OR 97415-0081
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship All-American
Municipal Bond Fund Class A
Shares........................ Merrill Lynch, Pierce, Fenner 39.32%
& Smith for the sole benefit
of its Customers
Attn: Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship All-American
Municipal Bond Fund Class B
Shares........................ Merrill Lynch, Pierce, Fenner 29.65%
& Smith for the sole benefit
of its Customers
Attn: Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Marianne Zinga 10.99
Susan M. Zinga JTTEN
3 West Noyes
Arlington Heights, IL
60005-3745
Prudential Securities Inc. FBO 7.60
Mrs. Eleanor T. Flaherty
10851 Gulfshore Dr. Apt. 401
Naples, FL 34108-3026
Prudential Securities Inc. FBO 8.86
Alice G. DeAngelo
2500 Virginia Ave. NW
Washington, D.C. 20037-1901
Prudential Securities Inc. FBO 5.98
Hilda A. Hoffman TTER
August A. Hoffman
& Hilda A. Hoffman JT
DBCL Tr UA Dtd 09/29/92
Tequesta, FL 33469
</TABLE>
S-24
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship All-American
Municipal Bond Fund Class C
Shares........................ Merrill Lynch, Pierce, Fenner 63.83%
& Smith for the sole benefit
of its Customers
Attn: Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship All-American
Municipal Bond Fund Class R
Shares........................ Bruce P. Bedford 91.38%
1761 Buttonbush Circle
Palm City, FL 34990-8093
Nuveen Flagship Intermediate
Municipal Bond Fund Class A
Shares........................ Merrill Lynch, Pierce, Fenner 31.27%
& Smith for the sole benefit
of its Customers
Attn: Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship Intermediate
Municipal Bond Fund Class C
Shares........................ Merrill Lynch, Pierce, Fenner 69.10%
& Smith for the sole benefit
of its Customers
Attn: Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship Intermediate
Municipal Bond Fund Class R
Shares........................ Patricia G. Diemer TR 77.48%
U/A Jul 26 89
Patricia G. Diemer Trust
950 Hawthorne Ln
Northbrook, IL 60062-3417
Mary P. Madden 9.97
James R. Madden JT TEN
5090 Jameswood Circle
Kettering, OH 45429-5415
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
---------------------- ------------------------- ------------
<S> <C> <C>
R. G. Van Moppes TTER 9.36%
U/A Dtd Feb 4 85
Russell G. Van Moppes
Living Trust
P.O. Box 97308
Bellevue, WA 98009-9308
Nuveen Flagship Limited Term
Municipal Bond Fund Class A
Shares........................ Merrill Lynch, Pierce, Fenner 29.86%
& Smith for the sole benefit
of its Customers
Attn: Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship Limited Term
Municipal Bond Fund Class C
Shares........................ Merrill Lynch, Pierce, Fenner 58.34%
& Smith for the sole benefit
of its Customers
Attn: Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship Limited Term
Municipal Bond Fund Class R
Shares........................ R. G. Van Moppes TTER U/A 51.54%
Dtd Feb 4 85
Russell G Van Moppes
Living Trust
P.O. Box 97308
Bellevue, WA 98009-9308
Karen M. Bergan 26.38
2109 Northwestern Ave.
Ames, IA 50010-4524
J.C. Bradford & Co. CUST 16.01
FBO Jeffery L. Cooper
330 Commerce St.
Nashville, TN 37201-1805
Catherine C. Smith 5.06
James C. Smith JT TEN
4 Morning View Dr.
Newport Coasts, CA
92657-1500
</TABLE>
S-26
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the
investment and reinvestment of the assets of each of the Funds. Nuveen Advisory
also administers the Trust's business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. See "Fund
Service Providers" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and
the Trust, each of the Funds except the Limited Term Fund has agreed to pay an
annual management fee at the rates set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE FEE MANAGEMENT FEE
- --------------------------------- --------------
<S> <C>
For the first $125 million....................................... .5000 of 1%
For the next $125 million........................................ .4875 of 1%
For the next $250 million........................................ .4750 of 1%
For the next $500 million........................................ .4625 of 1%
For the next $1 billion.......................................... .4500 of 1%
For assets over $2 billion....................................... .4250 of 1%
</TABLE>
The Limited Term Fund has agreed to pay an annual management fee at the rates
set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- ----------------------------- --------------
<S> <C>
For the first $125 million....................................... .4500 of 1%
For the next $125 million........................................ .4375 of 1%
For the next $250 million........................................ .4250 of 1%
For the next $500 million........................................ .4125 of 1%
For the next $1 billion.......................................... .4000 of 1%
For assets over $2 billion....................................... .3750 of 1%
</TABLE>
Nuveen Advisory has agreed to waive some or all of its fees or reimburse
expenses to prevent total operating expenses (not counting distribution and
service fees, taxes, interest, fees incurred in acquiring and disposing of
portfolio securities and, to the extent permitted, extraordinary expenses) from
exceeding 0.75% of the Nuveen Municipal Bond Fund's average daily net assets,
and 0.975% of the Nuveen Insured Municipal Bond Fund's average daily net
assets.
For the All-American, Intermediate, and Limited Term Funds, Nuveen Advisory
has committed through at least 1998 to continue Flagship's general dividend-
setting practices.
For the last three fiscal years, the Nuveen Municipal Bond Fund and the
Nuveen Insured Municipal Bond Fund paid net management fees to Nuveen Advisory
as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF EXPENSE FEE WAIVERS AND EXPENSE
REIMBURSEMENT PAID TO NUVEEN REIMBURSEMENTS
ADVISORY FOR THE YEAR ENDED FOR THE YEAR ENDED
--------------------------------- ------------------------
2/28/95 2/29/96 2/28/97* 2/28/95 2/29/96 2/28/97*
----------- ---------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Municipal Bond
Fund................... $11,932,164 12,797,372 12,969,912 0 4,313 0
Nuveen Insured Municipal
Bond Fund.............. 3,439,021 3,756,793 3,795,515 10,570 1,303 0
</TABLE>
- --------
* For the period March 1, 1997 to April 30, 1997, the management fees were
$2,148,330 and $631,735, respectively, and the fee waivers were $0 for
both funds.
S-27
<PAGE>
For the last three fiscal years, the Nuveen Flagship All-American Municipal
Bond Fund, the Nuveen Flagship Intermediate Municipal Bond Fund, and the Nuveen
Flagship Limited Term Municipal Bond Fund paid net management fees to Flagship
Financial, predecessor to Nuveen Advisory, and beginning on 2/1/97, to Nuveen
Advisory, as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF EXPENSE FEE WAIVERS AND EXPENSE
REIMBURSEMENT PAID TO FLAGSHIP REIMBURSEMENTS
FINANCIAL FOR THE YEAR ENDED FOR THE YEAR ENDED
------------------------------ ------------------------
5/31/95 5/31/96 4/30/97* 5/31/95 5/31/96 4/30/97*
---------- --------- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
All American Fund....... $ 420,954 644,844 948,683 632,023 588,351 269,587
Intermediate Fund....... 0 0 781 187,583 269,930 216,714
Limited Term Fund....... 1,369,218 1,259,810 1,406,439 458,100 332,579 75,003
</TABLE>
- --------
* For the eleven month period ended 4/30/97.
In addition to the management fee of Nuveen Advisory, each Fund pays all
other costs and expenses of its operations and a portion of the Trust's general
administrative expenses allocated in proportion to the net assets of each Fund.
Nuveen Advisory is a wholly owned subsidiary of John Nuveen & Co.
Incorporated ("Nuveen"), the Funds' principal underwriter. In 1961, Nuveen
began sponsoring the Nuveen Tax-Exempt Unit Trust and since that time has
issued more than $36 billion in tax-exempt unit trusts, including over $12
billion in tax-exempt insured unit trusts. In addition, Nuveen open-end and
closed-end funds held approximately $36 billion in tax-exempt securities under
management as of the date of this Statement. Over 1,000,000 individuals have
invested to date in Nuveen's tax-exempt funds and trusts. Founded in 1898,
Nuveen is a subsidiary of The John Nuveen Company which, in turn, is
approximately 78% owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul
is located in St. Paul, Minnesota and is principally engaged in providing
property-liability insurance through subsidiaries. Effective January 1, 1997,
The John Nuveen Company acquired Flagship Resources Inc., and as part of that
acquisition, Flagship Financial, the adviser to the Flagship Funds, was merged
with Nuveen Advisory.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's
Research Department. The Nuveen Research Department reviews more than $100
billion in municipal bonds every year.
The Funds, the other Nuveen funds, Nuveen Advisory, and other related
entities have adopted a code of ethics which essentially prohibits all Nuveen
fund management personnel, including Nuveen fund portfolio managers, from
engaging in personal investments which compete or interfere with, or attempt to
take advantage of, a Fund's anticipated or actual portfolio transactions, and
is designed to assure that the interests of Fund shareholders are placed before
the interests of Nuveen personnel in connection with personal investment
transactions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of each Fund, will place orders in such manner as, in the opinion
of management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be
obtained elsewhere. Portfolio securities will not be purchased from Nuveen or
its affiliates except in compliance with the Investment Company Act of 1940.
S-28
<PAGE>
The Funds expect that all portfolio transactions will be effected on a
principal (as opposed to an agency) basis and, accordingly, do not expect to
pay any brokerage commissions. Purchases from underwriters will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include the spread between the bid and asked price. Given the
best price and execution obtainable, it will be the practice of the Funds to
select dealers which, in addition, furnish research information (primarily
credit analyses of issuers and general economic reports) and statistical and
other services to Nuveen Advisory. It is not possible to place a dollar value
on information and statistical and other services received from dealers. Since
it is only supplementary to Nuveen Advisory's own research efforts, the receipt
of research information is not expected to reduce significantly Nuveen
Advisory's expenses. While Nuveen Advisory will be primarily responsible for
the placement of the business of the Funds, the policies and practices of
Nuveen Advisory in this regard must be consistent with the foregoing and will,
at all times, be subject to review by the Board of Trustees.
Nuveen Advisory reserves the right to, and does, manage other investment
accounts and investment companies for other clients, which may have investment
objectives similar to the Funds. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Funds and the portfolios of its other clients purchasing or selling
securities whenever decisions are made to purchase or sell securities by a Fund
and one or more of such other clients simultaneously. In making such
allocations the main factors to be considered will be the respective investment
objectives of the Fund and such other clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other clients, the size of investment
commitments generally held by the Fund and such other clients and opinions of
the persons responsible for recommending investments to the Fund and such other
clients. While this procedure could have a detrimental effect on the price or
amount of the securities available to a Fund from time to time, it is the
opinion of the Board of Trustees that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
Under the Investment Company Act of 1940, the Funds may not purchase
portfolio securities from any underwriting syndicate of which Nuveen is a
member except under certain limited conditions set forth in Rule 10f-3. The
Rule sets forth requirements relating to, among other things, the terms of an
issue of Municipal Obligations purchased by a Fund, the amount of Municipal
Obligations which may be purchased in any one issue and the assets of a Fund
which may be invested in a particular issue. In addition, purchases of
securities made pursuant to the terms of the Rule must be approved at least
quarterly by the Board of Trustees, including a majority of the trustees who
are not interested persons of the Trust.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Funds
will be determined separately for each class of the Funds' shares by The Chase
Manhattan Bank, the Funds' custodian, as of the close of trading (normally 4:00
p.m. Eastern Time) on each day on which the New York Stock Exchange (the
"Exchange") is normally open for trading. The Exchange is not open for trading
on New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of a class of shares of a Fund will be computed by dividing the
value of the Fund's assets attributable to the class, less the liabilities
attributable to the class, by the number of shares of the class outstanding.
In determining net asset value for the Funds, each Fund's custodian utilizes
the valuations of portfolio securities furnished by a pricing service approved
by the trustees. Securities for which quotations are not readily available
(which constitute a majority of the securities held by the Funds) are valued at
fair value as determined by the pricing service using methods which include
consideration of the following: yields or prices of municipal
S-29
<PAGE>
bonds of comparable quality, type of issue, coupon, maturity and rating;
indications as to value from dealers; and general market conditions. The
pricing service may employ electronic data processing techniques and/or a
matrix system to determine valuations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Trust under the general
supervision of the Board of Trustees.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based upon the
advice of Morgan, Lewis & Bockius, counsel to the Trust.
Each Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, a Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, a Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second, a
Fund must derive less than 30% of its annual gross income from the sale or
other disposition of any of the following which was held for less than three
months: (i) stock or securities and (ii) certain options, futures, or forward
contracts (the "short-short test"). Third, a Fund must diversify its holdings
so that, at the close of each quarter of its taxable year, (i) at least 50% of
the value of its total assets is comprised of cash, cash items, United States
Government securities, securities of other regulated investment companies and
other securities limited in respect of any one issuer to an amount not greater
in value than 5% of the value of a Fund's total assets and to not more than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of the total assets is invested in the securities of any one
issuer (other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by a Fund and
engaged in the same, similar or related trades or businesses.
As a regulated investment company, a Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (which includes dividends,
taxable interest, taxable original issue discount and market discount income,
income from securities lending, net short-term capital gain in excess of long-
term capital loss, and any other taxable income other than "net capital gain"
(as defined below) and is reduced by deductible expenses) and (ii) its net tax-
exempt interest (the excess of its gross tax-exempt interest income over
certain disallowed deductions). A Fund may retain for investment its net
capital gain (which consists of the excess of its net long-term capital gain
over its short-term capital loss). However, if a Fund retains any net capital
gain or any investment company taxable income, it will be subject to tax at
regular corporate rates on the amount retained. If a Fund retains any capital
gain, such Fund may designate the retained amount as undistributed capital
gains in a notice to its shareholders who, if subject to federal income tax on
long-term capital gains, (i) will be required to include in income for federal
income tax purposes, as long-term capital gain, their shares of such
undistributed amount, and (ii) will be entitled to credit their proportionate
shares of the tax paid by such Fund against their federal income tax
liabilities if any, and to claim refunds to the extent the credit exceeds such
liabilities. For federal income tax purposes, the tax basis of shares owned by
a shareholder of the Fund will be increased by an amount equal under current
law to 65% of the amount of undistributed capital gains included in the
shareholder's gross income. Each Fund intends to distribute at least annually
to its shareholders all or substantially all of its net tax-exempt interest and
any investment company taxable income and net capital gain.
S-30
<PAGE>
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if they had been incurred in the succeeding year.
Each Fund also intends to satisfy conditions (including requirements as to
the proportion of its assets invested in Municipal Obligations) that will
enable it to designate distributions from the interest income generated by
investments in Municipal Obligations, which is exempt from regular federal
income tax when received by such Fund, as exempt-interest dividends.
Shareholders receiving exempt-interest dividends will not be subject to regular
federal income tax on the amount of such dividends. Insurance proceeds received
by a Fund under any insurance policies in respect of scheduled interest
payments on defaulted Municipal Obligations will be excludable from federal
gross income under Section 103(a) of the Code. In the case of non-appropriation
by a political subdivision, however, there can be no assurance that payments
made by the insurer representing interest on "non-appropriation" lease
obligations will be excludable from gross income for federal income tax
purposes. See "Investment Policies and Investment Portfolio; Portfolio
Securities."
Distributions by a Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by a Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If a Fund purchases a Municipal Obligation at a market discount, any gain
realized by the Fund upon sale or redemption of the Municipal Obligation will
be treated as taxable interest income to the extent such gain does not exceed
the market discount, and any gain realized in excess of the market discount
will be treated as capital gains. Any net long-term capital gains realized by a
Fund and distributed to shareholders in cash or additional shares, will be
taxable to shareholders as long-term capital gains regardless of the length of
time investors have owned shares of a Fund. Distributions by a Fund that do not
constitute ordinary income dividends, exempt-interest dividends, or capital
gain dividends will be treated as a return of capital to the extent of (and in
reduction of) the shareholder's tax basis in his or her shares. Any excess will
be treated as gain from the sale of his or her shares, as discussed below.
If a Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of
income designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income that was tax-
exempt during the period covered by the distribution.
If a Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to a Fund, defer a Fund's losses, cause
adjustments in the holding periods of a Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Because the taxable portion of a Fund's investment income consists primarily
of interest, none of its dividends, whether or not treated as exempt-interest
dividends, is expected to qualify under the Internal Revenue Code for the
dividends received deductions for corporations.
Prior to purchasing shares in a Fund, the impact of dividends or
distributions which are expected to be or have been declared, but not paid,
should be carefully considered. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect
of reducing the per share net asset value by the per share amount of the
dividend or distribution.
S-31
<PAGE>
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by a Fund (and received by
the shareholders) on December 31.
The redemption or exchange of the shares of a Fund normally will result in
capital gain or loss to the shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, net capital gains (i.e., the excess of net long-term
capital gain over net short-term capital loss) will be taxed at a maximum
marginal rate of 28%, while short-term capital gains and other ordinary income
will be taxed at a maximum marginal rate of 39.6%. Because of the limitations
on itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective tax rate may be higher in certain
circumstances.
All or a portion of a sales charge paid in purchasing shares of a Fund cannot
be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent shares of a Fund or another fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
Any disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Moreover, losses
recognized by a shareholder on the redemption or exchange of shares of a Fund
held for six months or less are disallowed to the extent of any distribution of
exempt-interest dividends received with respect to such shares and, if not
disallowed, such losses are treated as long-term capital losses to the extent
of any distributions of long-term capital gains made with respect to such
shares. In addition, no loss will be allowed on the redemption or exchange of
shares of a Fund if the shareholder purchases other shares of such Fund
(whether through reinvestment of distributions or otherwise) or the shareholder
acquires or enters into a contract or option to acquire securities that are
substantially identical to shares of a Fund within a period of 61 days
beginning 30 days before and ending 30 days after such redemption or exchange.
If disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.
It may not be advantageous from a tax perspective for shareholders to redeem
or exchange shares after tax-exempt income has accrued but before the record
date for the exempt-interest dividend representing the distribution of such
income. Because such accrued tax-exempt income is included in the net asset
value per share (which equals the redemption or exchange value), such a
redemption could result in treatment of the portion of the sales or redemption
proceeds equal to the accrued tax-exempt interest as taxable gain (to the
extent the redemption or exchange price exceeds the shareholder's tax basis in
the shares disposed of) rather than tax-exempt interest.
In order to avoid a 4% federal excise tax, a Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which such Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Funds intend to make timely distributions in
compliance with these requirements and consequently it is anticipated that they
generally will not be required to pay the excise tax.
If in any year a Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from Municipal Obligations), and distributions to its shareholders would
be taxable to
S-32
<PAGE>
shareholders as ordinary dividend income for federal income tax purposes to the
extent of the Fund's available earnings and profits.
Among the requirements that a Fund must meet in order to qualify under
Subchapter M in any year is that less than 30% of its gross income must be
derived from the sale or other disposition of securities and certain other
assets held for less than three months.
Because the Funds may invest in private activity bonds, the interest on which
is not federally tax-exempt to persons who are "substantial users" of the
facilities financed by such bonds or "related persons" of such "substantial
users," the Funds may not be an appropriate investment for shareholders who are
considered either a "substantial user" or a "related person" within the meaning
of the Code. For additional information, investors should consult their tax
advisers before investing in a Fund.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals. Interest on certain Municipal Obligations, such
as bonds issued to make loans for housing purposes or to private entities (but
not for certain tax-exempt organizations such as universities and non-profit
hospitals), is included as an item of tax preference in determining the amount
of a taxpayer's alternative minimum taxable income. To the extent that a Fund
receives income from Municipal Obligations subject to the alternative minimum
tax, a portion of the dividends paid by it, although otherwise exempt from
federal income tax, will be taxable to shareholders to the extent that their
tax liability is determined under the alternative minimum tax regime. The Funds
will annually supply shareholders with a report indicating the percentage of
Fund income attributable to Municipal Obligations subject to the federal
alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is
increased by 75% of the difference between an alternative measure of income
("adjusted current earnings") and the amount otherwise determined to be the
alternative minimum taxable income. Interest on all Municipal Obligations, and
therefore all distributions by the Funds that would otherwise be tax-exempt, is
included in calculating a corporation's adjusted current earnings.
Tax-exempt income, including exempt-interest dividends paid by a Fund, will
be added to the taxable income of individuals receiving social security or
railroad retirement benefits in determining whether a portion of that benefit
will be subject to federal income tax.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of a Fund may
be considered to have been made with borrowed funds even though such funds are
not directly traceable to the purchase of shares.
The Funds are required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Funds their correct taxpayer identification
number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or
administrative action, and any such change may be retroactive with respect to
Fund transactions. Shareholders are advised to consult their own tax advisers
for more detailed information concerning the federal taxation of the Funds and
the income tax consequences to their shareholders.
S-33
<PAGE>
PERFORMANCE INFORMATION
The historical investment performance of the Funds may be shown in the form
of "yield," "taxable equivalent yield," "average annual total return,"
"cumulative total return" and "taxable equivalent total return" figures, each
of which will be calculated separately for each class of shares.
In accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission ("SEC"), yield is computed by dividing the
net investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 4.2% (3.0% for the
Intermediate Municipal Bond Fund and 2.5% for the Limited Term Municipal Bond
Fund).
In computing yield, the Funds follow certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Funds use to prepare their annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in a Fund's financial statements.
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by the remainder of (1 minus the stated federal income tax
rate, taking into account the deductibility of state taxes for federal income
tax purposes) and adding the product to that portion, if any, of the yield that
is not tax exempt.
S-34
<PAGE>
The taxable equivalent yields quoted below are based upon (1) the stated
federal income tax rate and (2) the yields for the 30-day period quoted in the
right hand column.
<TABLE>
<CAPTION>
AS OF APRIL 30, 1997
--------------------------------
FEDERAL TAXABLE
YIELD TAX RATE* EQUIVALENT YIELD
----- --------- ----------------
<S> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares....................... 4.69% 39.6% 7.76%
Class B Shares....................... 4.14% 39.6% 6.85%
Class C Shares....................... 4.34% 39.6% 7.19%
Class R Shares....................... 5.09% 39.6% 8.43%
Nuveen Insured Municipal Bond Fund
Class A Shares....................... 4.57% 39.6% 7.57%
Class B Shares....................... 4.02% 39.6% 6.66%
Class C Shares....................... 4.23% 39.6% 7.00%
Class R Shares....................... 4.97% 39.6% 8.23%
Nuveen Flagship All-American Municipal
Bond Fund
Class A Shares....................... 5.15% 39.6% 8.53%
Class B Shares....................... 4.63% 39.6% 7.67%
Class C Shares....................... 4.83% 39.6% 8.00%
Class R Shares....................... 5.58% 39.6% 9.24%
Nuveen Flagship Intermediate Municipal
Bond Fund
Class A Shares....................... 4.88% 39.6% 8.08%
Class C Shares....................... 4.48% 39.6% 7.42%
Class R Shares....................... 5.24% 39.6% 8.68%
Nuveen Flagship Limited Term Municipal
Bond Fund
Class A Shares....................... 4.31% 39.6% 7.14%
Class C Shares....................... 4.08% 39.6% 6.75%
Class R Shares....................... 4.63% 39.6% 7.67%
</TABLE>
- --------
*These rates do not reflect the current federal tax limitations on itemized
deductions and personal exemptions, which may raise the effective tax rate
and taxable equivalent yield for taxpayers above certain income levels.
For additional information concerning taxable equivalent yields, see the
Taxable Equivalent Yields table in the Prospectus.
The Funds may from time to time in their advertising and sales materials
report a quotation of their current distribution rate. The distribution rate
represents a measure of dividends distributed for a specified period.
Distribution rate is computed by taking the most recent monthly tax-free income
dividend per share, multiplying it by 12 to annualize it, and dividing by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen UITs, or the maximum public
offering price). The distribution rate differs from yield and total return and
therefore is not intended to be a complete
S-35
<PAGE>
measure of performance. Distribution rate may sometimes differ from yield
because a Fund may be paying out more than it is earning and because it may not
include the effect of amortization of bond premiums to the extent such premiums
arise after the bonds were purchased.
The distribution rates as of the period quoted, based on the maximum public
offering price then in effect for the Funds, and assuming the imposition of the
maximum sales charge for Class A Shares of 4.2% for the Municipal Bond Fund,
the Insured Municipal Bond Fund, and the All-American Fund; the maximum sales
charge for Class A Shares of 3.0% for the Intermediate Municipal Bond Fund; and
the maximum sales charge for Class A Shares of 2.5% for the Limited Term
Municipal Bond Fund, were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997
DISTRIBUTION RATES
-------------------------------
CLASS A CLASS B CLASS C CLASS R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund............... 4.91% 4.39% 4.60% 5.31%
Nuveen Insured Municipal Bond Fund....... 4.96% 4.44% 4.60% 5.37%
Nuveen Flagship All-American Municipal
Bond Fund............................... 5.26% 4.73% 4.95% 5.69%
Nuveen Flagship Intermediate Municipal
Bond Fund............................... 4.76% N/A 4.36% 5.12%
Nuveen Flagship Limited Term Municipal
Bond Fund............................... 4.58% N/A 4.39% 4.91%
</TABLE>
Average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation
assumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Total returns for the oldest class of each fund reflect actual performance
for all periods. For other classes, total returns reflect actual performance
for periods since class inception, and the oldest class's performance for
periods prior to inception, adjusted for the differences in sales charges and
fees between the classes.
S-36
<PAGE>
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
INCEPTION DATES
------------------
<S> <C>
Nuveen Municipal Bond Fund
Class A Shares....................................... June 13, 1995
Class B Shares....................................... February 1, 1997
Class C Shares....................................... June 13, 1995
Class R Shares....................................... November 29, 1976
Nuveen Insured Municipal Bond Fund
Class A Shares....................................... September 6, 1994
Class B Shares....................................... February 1, 1997
Class C Shares....................................... September 6, 1994
Class R Shares....................................... December 10, 1986
Nuveen Flagship All-American Municipal Bond Fund
Class A Shares....................................... October 3, 1988
Class B Shares....................................... February 1, 1997
Class C Shares....................................... June 2, 1993
Class R Shares....................................... February 1, 1997
Nuveen Flagship Intermediate Municipal Bond Fund
Class A Shares....................................... September 15, 1992
Class C Shares....................................... December 1, 1995
Class R Shares....................................... February 1, 1997
Nuveen Flagship Limited Term Municipal Bond Fund
Class A Shares....................................... October 19, 1987
Class C Shares....................................... December 1, 1995
Class R Shares....................................... February 1, 1997
</TABLE>
The Nuveen Municipal Bond Fund's average annual return figures, including the
effect of the maximum sales charge for Class A Shares, and applicable CDSC for
Class B shares, for the one-year, five-year and ten-year periods ended April
30, 1997, and for the period from inception through April 30, 1997,
respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
---------------------------------------
FROM
ONE YEAR TEN YEARS INCEPTION
ENDED FIVE YEARS ENDED THROUGH
APR. 30, ENDED APR. APR. 30, APR. 30,
1997 30, 1997 1997 1997
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares................ 2.38% 5.35% 7.07% 6.71%
Class B Shares................ 2.36% 5.41% 6.93% 6.65%
Class C Shares................ 6.16% 5.49% 6.74% 6.15%
Class R Shares................ 7.25% 6.55% 7.81% 7.21%
</TABLE>
S-37
<PAGE>
The Nuveen Insured Municipal Bond Fund's average annual return figures,
including the effect of the maximum sales charge for Class A Shares, and
applicable CDSC for Class B shares, for the one-year, five-year, and ten-year
periods ended April 30, 1997, and for the period from inception through April
30, 1997, respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
----------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1997 1997 1997
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Insured Municipal Bond
Fund
Class A Shares.............. 1.66% 6.02% 7.62% 6.96%
Class B Shares.............. 1.57% 6.00% 7.45% 6.82%
Class C Shares.............. 5.49% 6.04% 7.23% 6.55%
Class R Shares.............. 6.46% 7.14% 8.32% 7.65%
</TABLE>
The Nuveen Flagship All-American Municipal Bond Fund's average annual return
figures, including the effect of the maximum sales charge for Class A shares,
and applicable CDSC for Class B shares, for one-year and five-year periods
ended April 30, 1997, and for the period from inception through April 30, 1997,
respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-----------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
APRIL APRIL 30, APRIL 30,
30, 1997 1997 1997
-------- ---------- ---------
<S> <C> <C> <C>
Nuveen Flagship All-American Municipal
Bond Fund
Class A Shares......................... 3.68% 6.96% 8.05%
Class B Shares......................... 3.68% 7.15% 8.04%
Class C Shares......................... 7.64% 7.28% 7.99%
Class R Shares......................... 8.38% 7.91% 8.61%
</TABLE>
The Nuveen Flagship Intermediate Municipal Bond Fund's average annual return
figures, including the effect of the maximum sales charge for Class A Shares
for the one-year period ended April 30, 1997, and for the period from inception
through April 30, 1997, respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-------------------
FROM
ONE YEAR INCEPTION
ENDED THROUGH
APRIL 30, APRIL 30,
1997 1997
--------- ---------
<S> <C> <C>
Nuveen Flagship Intermediate Municipal Bond Fund
Class A Shares..................................... 3.48% 6.18%
Class C Shares..................................... 5.99% 6.29%
Class R Shares..................................... 6.53% 6.85%
</TABLE>
S-38
<PAGE>
The Nuveen Flagship Limited Term Municipal Bond Fund's average annual return
figures, including the effect of the maximum sales charge for Class A Shares
for the one-year and five-year periods ended April 30, 1997, and for the period
from inception through April 30, 1997, respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-----------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
APRIL APRIL 30, APRIL 30,
30, 1997 1997 1997
-------- ---------- ---------
<S> <C> <C> <C>
Nuveen Flagship Limited-Term Municipal
Bond Fund
Class A Shares......................... 2.18% 5.14% 6.33%
Class C Shares......................... 4.49% 5.34% 6.29%
Class R Shares......................... 4.66% 5.65% 6.60%
</TABLE>
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Cumulative total return calculations
that do not include the effect of the sales charge would be reduced if such
charge were included.
The Nuveen Municipal Bond Fund cumulative total return figures, including the
effect of the maximum sales charge for the Class A Shares, and applicable CDSC
for Class B Shares, for the one-year, five-year, and ten year periods ended
April 30, 1997, and for the period since inception through April 30, 1997,
respectively, using the performance of the oldest class for periods prior to
the inception of the newer classes, as described above were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1997 1997 1997
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares............... 2.38% 29.77% 97.99% 276.63%
Class B Shares............... 2.36% 30.14% 95.39% 271.99%
Class C Shares............... 6.16% 30.64% 91.98% 237.86%
Class R Shares............... 7.25% 37.33% 112.08% 314.01%
</TABLE>
S-39
<PAGE>
The Nuveen Insured Municipal Bond Fund cumulative total return figures,
including the effect of the maximum sales charge for the Class A Shares, and
applicable CDSC for Class B Shares, for the one-year, five-year, and ten-year
periods ended April 30, 1997, and for the period since inception through April
30, 1997, respectively, using the performance of the oldest class for periods
prior to the inception of the newer classes, as described above were as
follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1997 1977 1997
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Insured Municipal Bond
Fund
Class A Shares.............. 1.66% 33.97% 108.48% 100.78%
Class B Shares.............. 1.57% 33.80% 105.17% 98.03%
Class C Shares.............. 5.49% 34.06% 100.95% 92.91%
Class R Shares.............. 6.46% 41.19% 122.45% 114.46%
</TABLE>
The Nuveen Flagship All-American Municipal Bond Fund cumulative total return
figures, including the effect of the maximum sales charge for the Class A
Shares, and applicable CDSC for Class B Shares, for the one-year and five-year
periods ended April 30, 1997, and for the period since inception through April
30, 1997, respectively, using the performance of the oldest class for periods
prior to the inception of the newer classes, as described above were as
follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30,
1997 1997 1997
--------- ---------- ---------
<S> <C> <C> <C>
Nuveen Flagship All-American Municipal
Bond Fund
Class A Shares........................ 3.68% 40.00% 94.22%
Class B Shares........................ 3.68% 41.26% 94.09%
Class C Shares........................ 7.64% 42.08% 93.30%
Class R Shares........................ 8.38% 46.34% 103.03%
</TABLE>
The Nuveen Flagship Intermediate Municipal Bond Fund cumulative total return
figures, including the effect of the maximum sales charge for the Class A
Shares, for the one-year period ended April 30, 1997, and for the period since
inception through April 30, 1997, respectively, using the performance of the
oldest class for periods prior to the inception of the newer classes, as
described above were as follows:
<TABLE>
<CAPTION>
CUMULATIVE
TOTAL RETURN
------------------
FROM
ONE YEAR INCEPTION
ENDED THROUGH
APRIL APRIL 30,
30, 1997 1997
-------- ---------
<S> <C> <C>
Nuveen Flagship Intermediate Municipal Bond Fund
Class A Shares....................................... 3.48% 31.91%
Class C Shares....................................... 5.99% 32.54%
Class R Shares....................................... 6.53% 35.80%
</TABLE>
S-40
<PAGE>
The Nuveen Flagship Limited Term Municipal Bond Fund cumulative total return
figures, including the effect of the maximum sales charge for the Class A
Shares, for the one-year and five-year periods ended April 30, 1997, and for
the period since inception through April 30, 1997, respectively, using the
performance of the oldest class for periods prior to the inception of the newer
classes, as described above were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30,
1997 1997 1997
--------- ---------- ---------
<S> <C> <C> <C>
Nuveen Flagship Limited Term Municipal
Bond Fund
Class A Shares........................ 2.18% 28.50% 79.51%
Class C Shares........................ 4.49% 29.71% 78.80%
Class R Shares........................ 4.66% 31.62% 83.86%
</TABLE>
Calculation of taxable equivalent total return is also not subject to a
prescribed formula. Taxable equivalent total return for a specific period is
calculated by first taking a hypothetical initial investment in Fund shares on
the first day of the period, computing the total return for each calendar year
in the period in the manner described above, and increasing the total return
for each such calendar year by the amount of additional income that a taxable
fund would need to have generated to equal the income on an after-tax basis, at
a specified income tax rate (usually the highest marginal federal tax rate),
calculated as described above under the discussion of "taxable equivalent
yield." The resulting amount for the calendar year is then divided by the
initial investment amount to arrive at a "taxable equivalent total return
factor" for the calendar year. The taxable equivalent total return factors for
all the calendar years are then multiplied together and the result is then
annualized by taking its Nth root (N representing the number of years in the
period) and subtracting 1, which provides a taxable equivalent total return
expressed as a percentage.
Using the 39.6% maximum marginal federal tax rate for 1997, the annual
taxable equivalent total return for the Nuveen Municipal Bond Fund's Class R
Shares for the ten year period ended April 30, 1997, was 12.02%.
Class A Shares of the Funds are sold at net asset value plus a current
maximum sales charge of 4.20% of the offering price (3.0% for the Intermediate
Municipal Bond Fund and 2.5% for the Limited Term Municipal Bond Fund). This
current maximum sales charge will typically be used for purposes of calculating
performance figures. Yield, returns and net asset value of each class of shares
of the Funds will fluctuate. Factors affecting the performance of the Funds
include general market conditions, operating expenses and investment
management. Any additional fees charged by a securities representative or other
financial services firm would reduce returns described in this section. Shares
of the Funds are redeemable at net asset value, which may be more or less than
original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Funds may also compare their performance with that of:
(1) the Consumer Price Index or various unmanaged bond indexes such as the
Lehman Brothers Municipal Bond Index and the Salomon Brothers High Grade
Corporate Bond Index and (2) other fixed income or municipal bond mutual funds
or mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. ("Morningstar"), Wiesenberger Investment
Companies Service ("Wiesenberger") and CDA Investment Technologies, Inc.
("CDA") or similar independent services which monitor the performance of mutual
funds, or other industry or financial publications such as Barron's, Changing
Times, Forbes and Money Magazine. Performance comparisons by these indexes,
services or publications may rank mutual funds over different periods of time
by means of aggregate, average, year-by-year,
S-41
<PAGE>
or other types of total return and performance figures. Any given performance
quotation or performance comparison should not be considered as representative
of the performance of the Funds for any future period.
Each Fund may from time to time in its advertising and sales materials
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds. These taxable investments
have investment characteristics that differ from those of the Funds. U.S.
Government bonds, for example, are long-term investments backed by the full
faith and credit of the U.S. Government, and bank CDs are generally short-term,
FDIC-insured investments, which pay fixed principal and interest but are
subject to fluctuating rollover rates. Money market funds are short-term
investments with stable net asset values, fluctuating yields and special
features enhancing liquidity.
There are differences and similarities between the investments which the
Funds may purchase and the investments measured by the indexes and reporting
services which are described herein. The Consumer Price Index is generally
considered to be a measure of inflation. The CDA Mutual Fund-Municipal Bond
Index is a weighted performance average of other mutual funds with a federally
tax-exempt income objective. The Salomon Brothers High Grade Corporate Bond
Index is an unmanaged index that generally represents the performance of high
grade long-term taxable bonds during various market conditions. The Lehman
Brothers Municipal Bond Index is an unmanaged index that generally represents
the performance of high grade intermediate and long-term municipal bonds during
various market conditions. Lipper calculates municipal bond fund averages based
on average maturity and credit quality. Morningstar rates mutual funds by
overall risk-adjusted performance, investment objectives, and assets. Lipper,
Morningstar, Wiesenberger and CDA are widely recognized mutual fund reporting
services whose performance calculations are based upon changes in net asset
value with all dividends reinvested and which do not include the effect of any
sales charges. The market prices and yields of taxable and tax-exempt bonds
will fluctuate. The Funds primarily invest in investment grade Municipal
Obligations in pursuing their objective of as high a level of current interest
income which is exempt from federal and state income tax as is consistent, in
the view of the Funds' management, with preservation of capital.
The Funds may also compare their taxable equivalent total return performance
to the total return performance of taxable income funds such as treasury
securities funds, corporate bond funds (either investment grade or high yield),
or Ginnie Mae funds. These types of funds, because of the character of their
underlying securities, differ from municipal bond funds in several respects.
The susceptibility of the price of treasury bonds to credit risk is far less
than that of municipal bonds, but the price of treasury bonds tends to be
slightly more susceptible to change resulting from changes in market interest
rates. The susceptibility of the price of investment grade corporate bonds and
municipal bonds to market interest rate changes and general credit changes is
similar. High yield bonds are subject to a greater degree of price volatility
than municipal bonds resulting from changes in market interest rates and are
particularly susceptible to volatility from credit changes. Ginnie Mae bonds
are generally subject to less price volatility than municipal bonds from credit
concerns, due primarily to the fact that the timely payment of monthly
installments of principal and interest are backed by the full faith and credit
of the U.S. Government, but Ginnie Mae bonds of equivalent coupon and maturity
are generally more susceptible to price volatility resulting from market
interest rate changes. In addition, the volatility of Ginnie Mae bonds due to
changes in market interest rates may differ from municipal bonds of comparable
coupon and maturity because bonds of the sensitivity of Ginnie Mae prepayment
experience to change in interest rates.
S-42
<PAGE>
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF FUND SHARES
As described in the Prospectus, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of a Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with
respect to any distribution or service plan applicable to its shares. As a
result of the differences in the expenses borne by each class of shares, net
income per share, dividends per share and net asset value per share will vary
among a Fund's classes of shares.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include
distribution and service fees.
The minimum initial investment is $3,000 per fund share class, and may be
lower for accounts opened through fee-based programs for which the program
sponsor has established a single master account with the fund's transfer agent
and performs all sub-accounting services related to that account.
The following Class A sales charges and commissions apply to all Funds except
the Intermediate Fund and the Limited Term Fund:
CLASS A SALES CHARGES AND COMMISSIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
------------------------------------------- ----------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 4.20% 4.38% 3.70%
$50,000-100,000 4.00 4.18 3.50
$100,000-250,000 3.50 3.63 3.00
$250,000-500,000 2.50 2.56 2.00
$500,000-1,000,000 2.00 2.04 1.50
$1,000,000 and over -(1) - -(1)
</TABLE>
S-43
<PAGE>
The following Class A sales charges and commissions apply to the Intermediate
Fund:
CLASS A SALES CHARGES AND COMMISSIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
------------------------------------------- ----------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 3.00% 3.09% 2.50%
$50,000-100,000 2.50 2.56 2.00
$100,000-250,000 2.00 2.04 1.50
$250,000-500,000 1.50 1.52 1.25
$500,000-1,000,000 1.25 1.27 1.00
$1,000,000 and over -(1) - -(1)
</TABLE>
The following Class A sales charges and commissions apply to the Limited Term
Fund:
CLASS A SALES CHARGES AND COMMISSIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
------------------------------------------- ----------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 2.50% 2.56% 2.00%
$50,000-100,000 2.00 2.04 1.60
$100,000-250,000 1.50 1.52 1.20
$250,000-500,000 1.25 1.27 1.00
$500,000-1,000,000 0.75 0.76 0.50
$1,000,000 and over -(1) - -(1)
</TABLE>
(1) Nuveen pays authorized dealers a commission equal to the sum of 1% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of any
amount over $5 million. Unless the authorized dealer waived the
commission, you may be assessed a contingent deferred sales charge (CDSC)
of 1% if you redeem any of your shares within 18 months of purchase.
The CDSC is calculated on the lower of your purchase price or redemption
proceeds.
REDUCTION OR ELIMINATION OF UP-FRONT SALES CHARGE ON CLASS A SHARES
Rights of Accumulation. You may qualify for a reduced sales charge on a
purchase of Class A Shares of any Fund if the amount of your purchase, when
added to the value that day of all of your prior purchases of shares of any
Fund or of another Nuveen Mutual Fund, or units of a Nuveen unit trust, on
which an up-front sales charge or ongoing distribution fee is imposed, or is
normally imposed, falls within the amounts stated in the Class A Sales Charges
and Commissions table in "How to Select a Purchase Option" in the Prospectus.
You or
S-44
<PAGE>
your financial adviser must notify Nuveen or the Fund's transfer agent of any
cumulative discount whenever you plan to purchase Class A Shares of a Fund that
you wish to qualify for a reduced sales charge.
Letter of Intent. You may qualify for a reduced sales charge on a purchase of
Class A Shares of any Fund if you plan to purchase Class A Shares of Nuveen
Mutual Funds over the next 13 months and the total amount of your purchases
would, if purchased at one time, qualify you for one of the reduced sales
charges shown in the Class A Sales Charges and Commissions table in "How to
Select a Purchase Option" in the Prospectus. In order to take advantage of this
option, you must complete the applicable section of the Application Form or
sign and deliver either to an Authorized Dealer or to the Fund's transfer agent
a written Letter of Intent in a form acceptable to Nuveen. A Letter of Intent
states that you intend, but are not obligated, to purchase over the next 13
months a stated total amount of Class A shares that would qualify you for a
reduced sales charge shown above. You may count shares of a Nuveen Mutual Fund
that you already own on which you paid an up-front sales charge or an ongoing
distribution fee and any Class C Shares of a Nuveen Mutual Fund that you
purchase over the next 13 months towards completion of your investment program,
but you will receive a reduced sales charge only on new Class A Shares you
purchase with a sales charge over the 13 months. You cannot count towards
completion of your investment program Class A Shares that you purchase without
a sales charge through investment of distributions from a Nuveen Mutual Fund or
a Nuveen unit trust, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of a Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required
payment. By establishing a Letter of Intent, you irrevocably appoint Nuveen as
attorney to give instructions to redeem any or all of your escrowed shares,
with full power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Unit Trust Distributions. You may purchase Class A
Shares without an up-front sales charge by reinvestment of distributions from
any of the various unit trusts sponsored by Nuveen. There is no initial or
subsequent minimum investment requirement for such reinvestment purchases.
Group Purchase Programs. If you are a member of a qualified group, you may
purchase Class A Shares of any Fund or of another Nuveen Mutual Fund at the
reduced sales charge applicable to the group's purchases taken as a whole. A
"qualified group" is one which has previously been in existence, has a purpose
other than investment, has ten or more participating members, has agreed to
include Fund sales publications in mailings to members and has agreed to comply
with certain administrative requirements relating to its group purchases.
Under any group purchase program, the minimum monthly investment in Class A
Shares of any particular Fund or portfolio by each participant is $50, and the
minimum initial investment in Class A Shares of any
S-45
<PAGE>
particular Fund or portfolio for each participant in the program combined is
$3,000. No certificate will be issued for any participant's account. All
dividends and other distributions by a Fund will be reinvested in additional
Class A Shares of the same Fund. No participant may utilize a systematic
withdrawal program.
To establish a group purchase program, both the group itself and each
participant must fill out special application materials, which the group
administrator may obtain from the group's financial adviser, by calling Nuveen
toll-free at (800) 621-7227.
Reinvestment of Redemption Proceeds from Unaffiliated Funds. You may also
purchase Class A Shares at net asset value without a sales charge if the
purchase takes place through a broker-dealer and represents the reinvestment of
the proceeds of the redemption of shares of one or more registered investment
companies not affiliated with Nuveen. You must provide appropriate
documentation that the redemption occurred not more than one year prior to the
reinvestment of the proceeds in Class A Shares, and that you either paid an up-
front sales charge or were subject to a contingent deferred sales charge in
respect of the redemption of such shares of such other investment company.
Class A Shares of a Fund may be purchased at net asset value without a sales
charge, and Class R Shares may be purchased, by the following categories of
investors:
. officers, trustees and former trustees of the Nuveen and Flagship Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
and
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
Holders of Class C Shares acquired on or before January 31, 1997 can convert
those shares to Class A Shares of the same fund at the shareholder's
affirmative request six years after date of purchase. Holders of Class C Shares
must submit their request to the transfer agent no later than the last business
day of the 71st month following the month in which they purchased their shares.
Holders of Class C Shares purchased after that date will not have the option to
convert those shares to Class A Shares.
Any Class A Shares purchased pursuant to a special sales charge waiver must
be acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Funds. You or your
financial adviser must notify Nuveen or the Fund's transfer agent whenever you
make a purchase of Class A Shares of any Fund that you wish to be covered under
these special sales charge waivers.
Class A Shares of any Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment
company. All purchases under the special sales charge waivers will be subject
to minimum purchase requirements as established by the Funds.
S-46
<PAGE>
In determining the amount of your purchases of Class A Shares of any Fund
that may qualify for a reduced sales charge, the following purchases may be
combined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their
immediate family members (i.e., their spouses, parents, children, grandparents,
grandchildren parents-in-law, sons-and daughters-in-law, siblings, a sibling's
spouse, and a spouse's siblings); or (3) all purchases made through a group
purchase program as described above.
Class R Share Purchase Eligibility. Class R Shares are available for
purchases of $1 million or more and for purchases using dividends and capital
gains distributions on Class R Shares. Class R Shares also are available for
the following categories of investors:
. officers, trustees and former trustees of the Nuveen and Flagship Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
In addition, purchasers of Nuveen unit investment trusts may reinvest their
distributions from such unit investment trusts in Class R Shares, if, before
September 6, 1994, such purchasers had elected to reinvest distributions in
Nuveen Fund shares (before June 13, 1995 for Nuveen Municipal Bond Fund
shares). Shareholders may exchange their Class R Shares of any Nuveen Fund into
Class R Shares of any other Nuveen Fund.
The reduced sales charge programs may be modified or discontinued by the
Funds at any time upon prior written notice to shareholders of the Funds.
For more information about the purchase of Class A Shares or reduced sales
charge programs, or to obtain the required application forms, call Nuveen toll-
free at (800) 257-8787.
REDUCTION OR ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
Class A Shares are normally redeemed at net asset value, without any
Contingent Deferred Sales Charge ("CDSC"). However, in the case of Class A
Shares purchased at net asset value on or after July 1, 1996 because the
purchase amount exceeded $1 million, where the Authorized Dealer did not waive
the sales commission, a CDSC of 1% is imposed on any redemption within 18
months of purchase. In the case of Class B Shares redeemed within six years of
purchase, a CDSC is imposed, beginning at 5% for redemptions within the first
year, declining to 4% for redemptions within years two and three, and declining
by 1% each year thereafter until disappearing after the sixth year. Class C
Shares are redeemed at net asset value, without any CDSC, except that a CDSC of
1% is imposed upon redemption of Class C Shares that are redeemed within 12
months of purchase.
S-47
<PAGE>
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge, or that represent an increase in the value of a Fund
account due to capital appreciation, and then will redeem shares held for the
longest period, unless the shareholder specifies another order. No CDSC is
charged on shares purchased as a result of automatic reinvestment of dividends
or capital gains paid. In addition, no CDSC will be charged on exchanges of
shares into another Nuveen Mutual Fund or Nuveen money market fund. You may not
exchange Class B Shares for shares of a Nuveen money market fund. The holding
period is calculated on a monthly basis and begins the first day of the month
in which the order for investment is received. The CDSC is calculated based on
the lower of the redeemed shares' cost or net asset value at the time of the
redemption and is deducted from the redemption proceeds. Nuveen receives the
amount of any CDSC shareholders pay. If Class A or Class C shares subject to a
CDSC are exchanged for shares of a Nuveen money market fund, the CDSC would be
imposed on the subsequent redemption of those money market fund shares, and the
period during which the shareholder holds the money market fund shares would be
counted in determining the remaining duration of the CDSC. The Fund may elect
not to so count the period during which the shareholder held the money market
fund shares, in which event the amount of any applicable CDSC would be reduced
in accordance with applicable SEC rules by the amount of any 12b-1 plan
payments to which those money market funds shares may be subject.
The CDSC may be waived or reduced under the following six special
circumstances: 1) redemptions within one year following the death or
disability, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended, of a shareholder; 2) in whole or in part for redemptions of
shares by shareholders with accounts in excess of specified breakpoints that
correspond to the breakpoints under which the up-front sales charge on Class A
Shares is reduced pursuant to Rule 22d-1 under the Act; 3) redemptions of
shares purchased under circumstances or by a category of investors for which
Class A Shares could be purchased at net asset value without a sales charge; 4)
in connection with the exercise of a reinstatement privilege whereby the
proceeds of a redemption of a Fund's shares subject to a sales charge are
reinvested in shares of certain Funds within a specified number of days; 5) in
connection with the exercise of a Fund's right to redeem all shares in an
account that does not maintain a certain minimum balance or that the applicable
board has determined may have material adverse consequences to the shareholders
of such Fund; and 6) redemptions made pursuant to a Fund's automatic withdrawal
plan, up to 12% annually of the original investment amount. If a Fund waives or
reduces the CDSC, such waiver or reduction would be uniformly applied to all
Fund shares in the particular category. In waiving or reducing a CDSC, the
Funds will comply with the requirements of Rule 22d-1 of the Investment Company
Act of 1940, as amended.
GENERAL MATTERS
The Funds may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
tax-free, fixed income securities.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are
expected to sell certain minimum amounts of shares of the Nuveen mutual funds
during specified time periods.
To help advisers and investors better understand and most efficiently use the
Fund to reach their investment goals, the Funds may advertise and create
specific investment programs and systems. For example, this may include
information on how to use the Funds to accumulate assets for future education
needs or periodic payments such as insurance premiums. The Funds may produce
software or additional sales literature to promote the advantages of using the
Funds to meet these and other specific investor needs.
S-48
<PAGE>
Exchanges of shares of a Fund for shares of a Nuveen money market fund may be
made on days when both funds calculate a net asset value and make shares
available for public purchase. Shares of the Nuveen money market funds may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
for business. In addition to the holidays observed by the Fund, the Nuveen
money market funds observe and will not make fund shares available for purchase
on the following holidays: Martin Luther King's Birthday, Columbus Day and
Veterans Day.
In addition, you may exchange Class R Shares of any Fund for Class A Shares
of the same Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of that
Fund.
Each Fund may suspend the right of redemption, or delay payment to redeeming
shareholders for more than seven days, when the New York Stock Exchange is
closed (not including customary weekend and holiday closings); when trading in
the markets a Fund normally uses is restricted, or the SEC determines that an
emergency exists so that trading of a Fund's portfolio securities or
determination of a Fund's net assets value is not reasonably practical; or the
SEC by order permits the suspension of the right of redemption or the delay in
payment to redeeming shareholders for more than seven days.
Shares will be registered in the name of the investor or the investor's
financial adviser. A change in registration or transfer of shares held in the
name of a financial adviser may only be made by an order in good form from the
financial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to the Funds' transfer agent. No share
certificates will be issued for fractional shares.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy Fund
Shares" in the Prospectus.
Nuveen serves as the principal underwriter of the shares of the Funds
pursuant to a "best efforts" arrangement as provided by a distribution
agreement with the Nuveen Flagship Municipal Trust, dated February 1, 1997 and
last renewed on July 31, 1997 ("Distribution Agreement"). Pursuant to the
Distribution Agreement, the Trust appointed Nuveen to be its agent for the
distribution of the Funds' shares on a continuous offering basis. Nuveen sells
shares to or through brokers, dealers, banks or other qualified financial
intermediaries (collectively referred to as "Dealers"), or others, in a manner
consistent with the then effective registration statement of the Trust.
Pursuant to the Distribution Agreement, Nuveen, at its own expense, finances
certain activities incident to the sale and distribution of the Funds' shares,
including printing and distributing of prospectuses and statements of
additional information to other than existing shareholders, the printing and
distributing of sales literature, advertising and payment of compensation and
giving of concessions to Dealers. Nuveen receives for its services the excess,
if any, of the sales price of the Funds' shares less the net asset value of
those shares, and reallows a majority or all of such amounts to the Dealers who
sold the shares; Nuveen may act as such a Dealer. Nuveen also receives
compensation pursuant to a distribution plan adopted by the Trust pursuant to
Rule 12b-1 and described herein under "Distribution and Service Plan." Nuveen
receives any CDSCs imposed on redemptions of Shares.
S-49
<PAGE>
The aggregate amounts of underwriting commissions with respect to the sale of
Fund shares and the amount thereof retained by Nuveen (or by Flagship
Financial, Inc., which Nuveen acquired on January 1, 1997), were as follows
(all figures are to the nearest thousand):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1997* FEBRUARY 29, 1996 FEBRUARY 28, 1995
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
FUND COMMISSIONS NUVEEN COMMISSIONS NUVEEN COMMISSIONS NUVEEN
- ---- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Municipal Bond
Fund................... 967 170 1,575 316 2,248 467
Nuveen Insured Municipal
Bond Fund.............. 687 56 880 97 1,554 296
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1997** MAY 31, 1996 MAY 31, 1995
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
FUND COMMISSIONS FLAGSHIP COMMISSIONS FLAGSHIP COMMISSIONS FLAGSHIP
- ---- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Flagship All-
American Municipal Bond
Fund................... 456 61 557 74 763 104
Nuveen Flagship
Intermediate Municipal
Bond Fund.............. 73 16 137 28 171 34
Nuveen Flagship Limited
Term Municipal Bond
Fund................... 332 66 543 108 797 160
</TABLE>
- --------
*For the fourteen-month period ended April 30, 1997.
**For the eleven-month period ended April 30, 1997.
DISTRIBUTION AND SERVICE PLAN
The Funds have adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B and Class C Shares under each
Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of Class B and Class C Shares,
respectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of
preparing, printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of Class B and Class C
Shares, certain other expenses associated with the distribution of Class B and
Class C Shares, and any distribution-related expenses that may be authorized
from time to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C
Shares under each Fund's Plan will be payable to Authorized Dealers in
connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to
shareholders.
S-50
<PAGE>
Each Fund may spend up to .20 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .20 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. Each Fund may spend up to .55 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
.20 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
For the fiscal years ended April 30, 1997, 100% of service fees and
distribution fees were paid out as compensation to authorized dealers. Prior to
February 1, 1997, the service fee for the Nuveen Municipal Bond Fund and the
Nuveen Insured Municipal Bond Fund was .25% for both Class A and C Shares and
the distribution fee was .75% for Class C Shares. For the Nuveen Flagship All-
American Municipal Bond Fund, the Nuveen Flagship Intermediate Municipal Bond
Fund and the Nuveen Flagship Limited Term Municipal Bond Fund, the service fee
was .20% for all Class C Shares and the distribution fee was .40% for Class A
Shares and .75% for Class C Shares (.50% for the Limited Term Fund).
Thereafter, the service fee for Class A, Class B, and Class C Shares was .20%
and the distribution fee was .75% for Class B Shares and .55% for Class C
Shares (.35% for the Limited Term Fund).
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1997
----------------------
<S> <C>
Nuveen Municipal Bond
Fund*
Class A................. $156,403
Class B................. $390
Class C................. $38,967
Nuveen Insured Municipal
Bond Fund*
Class A................. $163,030
Class B................. $735
Class C................. $58,367
Nuveen Flagship All-
American Municipal Bond
Fund**
Class A................. $683,251
Class B................. $660
Class C................. $421,541
Nuveen Flagship
Intermediate Municipal
Bond Fund**
Class A................. $145,606
Class C................. $16,039
Nuveen Flagship Limited
Term Municipal Bond
Fund**
Class A................. $1,482,478
Class C................. $120,039
</TABLE>
- --------
*For the fourteen month period ended April 30, 1997.
**For the eleven month period ended April 30, 1997.
Under each Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of
S-51
<PAGE>
the Board of Trustees and a vote of the non-interested trustees who have no
direct or indirect financial interest in the Plan cast in person at a meeting
called for the purpose of voting on the Plan. The Plan may be continued only if
the trustees who vote to approve such continuance conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties under
applicable law, that there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders. The Plan may not be amended to increase
materially the cost which a class of shares may bear under the Plan without the
approval of the shareholders of the affected class, and any other material
amendments of the Plan must be approved by the non-interested trustees by a
vote cast in person at a meeting called for the purpose of considering such
amendments. During the continuance of the Plan, the selection and nomination of
the non-interested trustees of the Trust will be committed to the discretion of
the non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago Illinois 60603 has been selected as auditors for the Nuveen Municipal
Bond Fund and the Nuveen Insured Municipal Bond Fund. Deloitte & Touche LLP,
independent auditors, 1700 Courthouse Plaza N.E., Dayton, Ohio 45402 has been
selected for the Nuveen Flagship All-American Municipal Bond Fund, the Nuveen
Flagship Intermediate Municipal Bond Fund, and the Nuveen Flagship Limited Term
Municipal Bond Fund. In addition to audit services, the auditors will provide
consultation and assistance on accounting, internal control, tax and related
matters. The financial statements incorporated by reference elsewhere in this
Statement of Additional Information and the information for prior periods set
forth under "Financial Highlights" in the Prospectus have been audited by the
respective auditors as indicated in their report with respect thereto, and are
included in reliance upon the authority of that firm in giving that report.
The custodian of the assets of the Funds is The Chase Manhattan Bank, 4 New
York Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting and portfolio accounting services.
The Fund's transfer, shareholder services, and dividend paying agent Chase
Global Funds Services Company, P.O. Box 5186, New York, New York 10274-5186.
FINANCIAL STATEMENTS
The audited financial statements for each Fund's most recent fiscal year
appear in the Funds' Annual Reports. The Annual Reports accompany this
Statement of Additional Information.
S-52
<PAGE>
APPENDIX A
RATINGS OF INVESTMENTS
The four highest ratings of Moody's for Municipal Obligations are Aaa, Aa, A
and Baa. Municipal Obligations rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to Municipal Obligations which are of
"high quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat greater than in Aaa rated
Municipal Obligations. The Aaa and Aa rated Municipal Obligations comprise what
are generally known as "high grade bonds." Municipal Obligations that are rated
A by Moody's possess many favorable investment attributes and are considered
upper medium grade obligations. Factors giving security to principal and
interest of A rated Municipal Obligations are considered adequate, but elements
may be present, which suggest a susceptibility to impairment sometime in the
future. Municipal Obligations rated Baa by Moody's are considered medium grade
obligations (i.e., they are neither highly protected nor poorly secured). Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's bond rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1 indicates that the
bond ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its general rating category.
The four highest ratings of S&P for Municipal Obligations are AAA, AA, A and
BBB. Municipal Obligations rated AAA have a strong capacity to pay principal
and interest. The rating of AA indicates that capacity to pay principal and
interest is very strong and such bonds differ from AAA issues only in small
degree. The category of A describes bonds which have a strong capacity to pay
principal and interest, although such bonds are somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions. The
BBB rating is the lowest "investment grade" security rating by S&P. Municipal
Obligations rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas such bonds normally exhibit adequate protection
parameters, adverse economic conditions are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for
bonds in the A category.
The four highest ratings of Fitch for Municipal Obligations are AAA, AA, A
and BBB. Municipal Obligations rated AAA are considered to be investment grade
and of the highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events. Municipal Obligations rated AA are considered
to be investment grade and of very high quality. The obligor's ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated "AAA." Because Municipal Obligations rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+." Municipal
Obligations rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Municipal
Obligations rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
The "Other Corporate Obligations" category of temporary investments are
corporate (as opposed to municipal) debt obligations rated AAA by S&P or Aaa by
Moody's. Corporate debt obligations rated AAA by S&P have an extremely strong
capacity to pay principal and interest. The Moody's corporate debt rating of
Aaa is comparable to that set forth above for Municipal Obligations.
A-1
<PAGE>
Subsequent to its purchase by a Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by such Fund.
Neither event requires the elimination of such obligation from a Fund's
portfolio, but Nuveen Advisory will consider such an event in its determination
of whether the Fund should continue to hold such obligation.
A-2
<PAGE>
APPENDIX B
DESCRIPTION OF HEDGING TECHNIQUES
Set forth below is additional information regarding the various Funds'
defensive hedging techniques and use of repurchase agreements.
FUTURES AND INDEX TRANSACTIONS
Financial Futures. A financial future is an agreement between two parties to
buy and sell a security for a set price on a future date. They have been
designed by boards of trade which have been designated "contracts markets" by
the Commodity Futures Trading Commission ("CFTC").
The purchase of financial futures is for the purpose of hedging a Fund's
existing or anticipated holdings of long-term debt securities. When a Fund
purchases a financial future, it deposits in cash or securities an "initial
margin" of between 1% and 5% of the contract amount. Thereafter, the Fund's
account is either credited or debited on a daily basis in correlation with the
fluctuation in price of the underlying future or other requirements imposed by
the exchange in order to maintain an orderly market. The Fund must make
additional payments to cover debits to its account and has the right to
withdraw credits in excess of the liquidity, the Fund may close out its
position at any time prior to expiration of the financial future by taking an
opposite position. At closing a final determination of debits and credits is
made, additional cash is paid by or to the Fund to settle the final
determination and the Fund realizes a loss or gain depending on whether on a
net basis it made or received such payments.
The sale of financial futures is for the purpose of hedging a Fund's existing
or anticipated holdings of long-term debt securities. For example, if a Fund
owns long-term bonds and interest rates were expected to increase, it might
sell financial futures. If interest rates did increase, the value of long-term
bonds in the Fund's portfolio would decline, but the value of the Fund's
financial futures would be expected to increase at approximately the same rate
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have.
Among the risks associated with the use of financial futures by the Funds as
a hedging device, perhaps the most significant is the imperfect correlation
between movements in the price of the financial futures and movements in the
price of the debt securities which are the subject of the hedge.
Thus, if the price of the financial future moves less or more than the price
of the securities which are the subject of the hedge, the hedge will not be
fully effective. To compensate for this imperfect correlation, the Fund may
enter into financial futures in a greater dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the prices of
such securities has been greater than the historical volatility of the
financial futures. Conversely, the Fund may enter into fewer financial futures
if the historical volatility of the price of the securities being hedged is
less than the historical volatility of the financial futures.
The market prices of financial futures may also be affected by factors other
than interest rates. One of these factors is the possibility that rapid changes
in the volume of closing transactions, whether due to volatile markets or
movements by speculators, would temporarily distort the normal relationship
between the markets in the financial future and the chosen debt securities. In
these circumstances as well as in periods of rapid and large price movements.
The Fund might find it difficult or impossible to close out a particular
transaction.
Options on Financial Futures. The Funds may also purchase put or call options
on financial futures which are traded on a U.S. Exchange or board of trade and
enter into closing transactions with respect to such options
B-1
<PAGE>
to terminate an existing position. Currently, options can be purchased with
respect to financial futures on U.S. Treasury Bonds on The Chicago Board of
Trade. The purchase of put options on financial futures is analogous to the
purchase of put options by a Fund on its portfolio securities to hedge against
the risk of rising interest rates. As with options on debt securities, the
holder of an option may terminate his position by selling an option of the same
Fund. There is no guarantee that such closing transactions can be effected.
INDEX CONTRACTS
Index Futures. A tax-exempt bond index which assigns relative values to the
tax-exempt bonds included in the index is traded on the Chicago Board of Trade.
The index fluctuates with changes in the market values of all tax-exempt bonds
included rather than a single bond. An index future is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash--rather than any security--equal to specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the index future was originally written. Thus,
an index future is similar to traditional financial futures except that
settlement is made in cash.
Index Options. The Funds may also purchase put or call options on U.S.
Government or tax-exempt bond index futures and enter into closing transactions
with respect to such options to terminate an existing position. Options on
index futures are similar to options on debt instruments except that an option
on an index future gives the purchaser the right, in return for the premium
paid, to assume a position in an index contract rather than an underlying
security at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance of the writer's futures margin account
which represents the amount by which the market price of the index futures
contract, at exercise, is less than the exercise price of the option on the
index future.
Bond index futures and options transactions would be subject to risks similar
to transactions in financial futures and options thereon as described above. No
series will enter into transactions in index or financial futures or related
options unless and until, in the Adviser's opinion, the market for such
instruments has developed sufficiently.
REPURCHASE AGREEMENTS
A Fund may invest temporarily up to 5% of its assets in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Fund from a third party with the understanding that they will be
repurchased by the seller at a fixed price on an agreed date. These agreements
may be made with respect to any of the portfolio securities in which the Fund
is authorized to invest. Repurchase agreements may be characterized as loans
secured by the underlying securities. The Fund may enter into repurchase
agreements with (i) member banks of the Federal Reserve System having total
assets in excess of $500 million and (ii) securities dealers, provided that
such banks or dealers meet the creditworthiness standards established by the
Fund's Board of Trustees ("Qualified Institutions"). The Adviser will monitor
the continued creditworthiness of Qualified Institutions, subject to the
oversight of the Fund's board of trustees.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the
B-2
<PAGE>
securities underlying the repurchase agreement will be held by the custodian at
all times in an amount at least equal to the repurchase price, including
accrued interest. If the seller fails to repurchase the securities, the Fund
may suffer a loss to the extent proceeds from the sale of the underlying
securities are less than the repurchase price.
The resale price reflects the purchase price plus an agreed upon market rate
of interest which is unrelated to the coupon rate or date of maturity of the
purchased security. The collateral is marked to market daily. Such agreements
permit the Fund to keep all its assets earning interest while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature.
B-3
<PAGE>
PART C--OTHER INFORMATION
ITEM 23: EXHIBITS.
(b) Exhibits:
<TABLE>
<C> <S> <C>
a(1). Declaration of Trust of Registrant. Filed as Exhibit 1(a) to
Registrant's Registration Statement on Form N-1A (File No.
333-14725) and incorporated herein by reference thereto.
a(2). Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest dated October 11, 1996. Filed
as Exhibit 1(b) to Registrant's Registration Statement on Form
N-1A (File No. 333-14725) and incorporated herein by reference
thereto.
a(3). Certificate for the Establishment and Designation of Classes
dated July 10, 1996. Filed as Exhibit 1(c) to Registrant's
Registration Statement on Form N-1A (File No. 333-14725) and
incorporated herein by reference thereto.
a(4). Incumbency Certificate. Filed as Exhibit 1(d) to Post-Effec-
tive Amendment No. 1 to Registrant's Registration Statement on
Form N-1A (File No. 333-14725) and incorporated herein by ref-
erence thereto.
b. By-Laws of Registrant. Filed as Exhibit 2 to Registrant's Reg-
istration Statement on Form N-1A (File No. 333-14725) and in-
corporated herein by reference thereto.
c. Specimen certificates of Shares of each Fund. Filed as Exhibit
4 to Registrant's Registration Statement on Form N-1A (File
No. 333-14725) and incorporated herein by reference thereto.
d(1). Investment Management Agreement between Registrant and Nuveen
Advisory Corp. Filed as Exhibit 5 to Post-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 333-14725) and incorporated herein by reference
thereto.
d(2). Renewal of Investment Management Agreement dated May 5, 1998.
e(1). Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated. Filed as Exhibit 6 to Post-Effective Amend-
ment No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 333-14725) and incorporated herein by reference
thereto.
e(2). Renewal of Distribution Agreement dated July 31, 1997.
f. Not applicable.
g. Custodian Agreement between Registrant and Chase Manhattan
Bank. Filed as Exhibit 8 to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No.
333-14725) and incorporated herein by reference thereto.
h(1). Transfer Agency Agreement between Registrant and Shareholder
Services, Inc.
h(2). Transfer Agency Agreement between Registrant and Boston Finan-
cial Data Services.
i. Opinion of .
j. Consent of Arthur Andersen LLP, Independent Public Accoun-
tants.
k. Not applicable.
l. Not applicable.
m. Plan of Distribution and Service Pursuant to Rule 12b-1 for
the Class A Shares, Class B Shares and Class C Shares of each
Fund. Filed as Exhibit 15 to Registrant's Registration State-
ment on Form N-1A (File No. 333-14725) and incorporated herein
by reference thereto.
n. Financial Data Schedule.
o. Multi-Class Plan Adopted Pursuant to Rule 18f-3. Filed as Ex-
hibit 18 to Registrant's Registration Statement on Form N-1A
(File No. 333-14725) and incorporated herein by reference
thereto.
z(1). Original Powers of Attorney for each Director authorizing,
among others, Gifford R. Zimmerman and Larry W. Martin to exe-
cute the Registration Statement on his or her behalf. Filed as
Exhibit 99(a) to Post-Effective Amendment No. 1 to Regis-
trant's Registration Statement on Form N-1A (File No. 333-
14725) and incorporated herein by reference thereto.
z(2). Certified copy of Resolution of Board of Trustees authorizing
the signing of the names of trustees and officers on the Reg-
istrant's Registration Statement pursuant to power of attor-
ney.
z(3). Code of Ethics and Reporting Requirements. Filed as Exhibit
[insert number above] to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No.
333-14725) and incorporated herein by reference thereto.
</TABLE>
C-1
<PAGE>
ITEM 24: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 25: INDEMNIFICATION
Section 4 of Article XII of Registrant's Amended and Restated Declaration of
Trust provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being or
having been such a Trustee, director, officer, employee or agent and against
amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Covered Person may now or hereafter be entitled,
shall continue as to a person who has ceased to be such a Covered Person and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
----------------
The trustees and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
C-2
<PAGE>
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she
reasonably believed to be in the best interest of Registrant or where he or she
shall have had reasonable cause to believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
ITEM 26: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Flagship
Admiral Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free
Money Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., and Nuveen
Tax-Free Reserves, Inc. It also serves as investment adviser to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen
Municipal Market Opportunity Fund, Inc., Nuveen California Municipal Market
Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen
California Investment Quality Municipal Fund, Inc., Nuveen New York Investment
Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment
Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal
Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select
Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund,
Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal
Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income
Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen
Premier Insured Municipal Income Fund, Inc. Nuveen Premium Income Municipal
Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc.,
Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income
Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, and Nuveen Insured Premium Income Municipal Fund 2. Nuveen
Advisory Corp. has no other clients or business at the present time. The
principal business address for all of these investment companies is 333 West
Wacker Drive, Chicago, Illinois 60606.
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than Timothy R.
Schwertfeger and Anthony T. Dean, of the investment adviser has engaged during
the last two years for his account or in the capacity of director, officer,
employee, partner or trustee, see the descriptions under "Management" in the
Statement of Additional Information.
Timothy R. Schwertfeger is Chairman and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Schwertfeger has, during the last two years, been
Chairman and formerly Executive Vice President and Director of the John Nuveen
Company, John Nuveen & Co. Incorporated, and Nuveen Institutional Advisory
Corp; Chairman and Director (since January 1997) of Nuveen Asset Management,
Inc.; Chairman and Director of Rittenhouse Financial Services, Inc. Anthony T.
Dean is President and Director of Nuveen Advisory Corp., the investment
adviser. Mr. Dean has, during the
C-3
<PAGE>
last two years, been Executive Vice President and Director of The John Nuveen
Company and John Nuveen & Co. Incorporated; and Director of Nuveen
Institutional Advisory Corp.; Chairman and Director (since January 1997) of
Nuveen Asset Management, Inc.; Chairman and Director of Rittenhouse Financial
Services, Inc.
ITEM 27: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co., Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies: Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship
Municipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free
Reserves, Inc., Flagship Admiral Funds Inc., Nuveen Investment Trust and Nuveen
Investment Trust II. Nuveen also acts as depositor and principal underwriter of
the Nuveen Tax-Free Unit Trust and the Nuveen Unit Trust, registered unit
investment trusts. Nuveen has also served or is serving as co-managing
underwriter to the following closed-end management type investment companies:
Nuveen Municipal Value Fund, Inc., Nuveen California Municipal Value Fund,
Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen Municipal Income Fund,
Inc., Nuveen Premium Income Municipal Fund, Inc., Nuveen Performance Plus
Municipal Fund, Inc., Nuveen California Performance Plus Municipal Fund, Inc.,
Nuveen New York Performance Plus Municipal Fund, Inc., Nuveen Municipal
Advantage Fund, Inc., Nuveen Municipal Market Opportunity Fund, Inc., Nuveen
California Municipal Market Opportunity Fund, Inc., Nuveen Investment Quality
Municipal Fund, Inc., Nuveen California Investment Quality Municipal Fund,
Inc., Nuveen New York Investment Quality Municipal Fund, Inc., Nuveen Insured
Quality Municipal Fund, Inc., Nuveen Florida Investment Quality Municipal Fund,
Nuveen New Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania
Investment Quality Municipal Fund, Nuveen Select Quality Municipal Fund, Inc.,
Nuveen California Select Quality Municipal Fund, Inc., Nuveen New York Select
Quality Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc.,
Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income
Municipal Fund, Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen
Ohio Quality Income Municipal Fund, Inc., Nuveen Texas Quality Income Municipal
Fund, Nuveen California Quality Income Municipal Fund, Inc., Nuveen New York
Quality Income Municipal Fund, Inc., Nuveen Premier Municipal Income Fund,
Inc., Nuveen Premier Insured Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund 2, Inc., Nuveen Insured California Premium Income Municipal
Fund, Inc., Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen
Select Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund,
Inc., Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan
Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal
Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured
California Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium
Income Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select
Tax-Free Income Portfolio, Nuveen Select Tax-Free Income Portfolio 2, Nuveen
Insured California Select Tax-Free Income Portfolio, Nuveen Insured New York
Select Tax-Free Income Portfolio and Nuveen Select Tax-Free Income Portfolio 3.
C-4
<PAGE>
.(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger Chairman of the Board, Chairman of the Board
333 West Wacker Drive Chief Executive Officer and Director
Chicago, IL 60606 and Director
Anthony T. Dean President and Director President and Director
333 West Wacker Drive
Chicago, IL 60606
John P. Amboian Executive Vice President None
333 West Wacker Drive and Chief Financial Officer
Chicago, IL 60606
Bruce P. Bedford Executive Vice President Executive Vice President
333 West Wacker Drive
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
Alan G. Berkshire Vice President and Secretary Vice President
333 West Wacker Drive and Assistant Secretary
Chicago, IL 60606
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President Vice President and
333 West Wacker Drive Controller
Chicago, IL 60606
Robert D. Freeland Vice President None
333 West Wacker Drive
Chicago, IL 60606
Michael G. Gaffney Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Robert B. Kuppenheimer Vice President None
333 West Wacker Drive
Chicago, IL 60606
Larry W. Martin Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Assistant Secretary
Chicago, IL 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------------------------------------------
<S> <C> <C>
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Gifford R. Zimmerman Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
ITEM 28: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004 maintains
all general and subsidiary ledgers, journals, trial balances, records of all
portfolio purchases and sales, and all other required records not maintained by
Nuveen Advisory Corp., Shareholder Services, Inc., Boston Financial, or Chase
Global Fund Services Company.
Until August 10, 1998, Shareholder Services, Inc., P.O. Box 5330, Denver,
Colorado 80217-5330 and Boston Financial Data Services, 225 Franklin Street,
Boston, Massachusetts 02106 will maintain all the required records in their
capacity as transfer, dividend paying, and shareholder service agents for the
Funds. After August 10, 1998, Chase Global Fund Services Company, P.O. Box
5186, New York, New York 10274-5186, will maintain the same records in the same
capacity for the Funds.
ITEM 29: MANAGEMENT SERVICES
Not applicable.
ITEM 30: UNDERTAKINGS
Not applicable.
C-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT AND THE INVESTMENT COMPANY
ACT, THE REGISTRANT CERTIFIES THAT IT MEETS ALL THE REQUIREMENTS FOR
EFFECTIVENESS UNDER PARAGRAPH (B) OF RULE 485 UNDER THE SECURITIES ACT AND HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, DULY AUTHORIZED, IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS,
ON THE DAY OF JUNE, 1998.
NUVEEN FLAGSHIP MUNICIPAL TRUST
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ Stephen D. Foy
-------------------------------
Stephen D. Foy Vice President and June , 1998
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Trustee (Principal
Executive Officer)
Anthony T. Dean President and Trustee
Robert P. Bremner Trustee
Lawrence H. Brown Trustee
Anne E. Impellizzeri Trustee
Peter R. Sawers Trustee
William J. Schneider Trustee
Judith M. Stockdale Trustee
</TABLE>
/s/ Gifford R. Zimmerman
By____________________________
Gifford R. Zimmerman
Attorney-in-Fact
June , 1998
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, GIFFORD R. ZIMMERMAN
AND LARRY W. MARTIN TO EXECUTE THIS REGISTRATION STATEMENT, AND AMENDMENTS
THERETO, FOR JUDITH M. STOCKDALE, HAS BEEN EXECUTED AND IS AN EXHIBIT TO THIS
REGISTRATION STATEMENT. AN ORIGINAL POWER OF ATTORNEY FOR EACH OF THE OTHER
OFFICERS AND DIRECTORS OF THE REGISTRANT HAS BEEN EXECUTED AND IS INCORPORATED
BY REFERENCE IN THIS REGISTRATION STATEMENT.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
d(2). Renewal of Investment Management Agreement dated May
5, 1998.
e(2). Renewal of Distribution Agreement dated July 31,
1997.
h(1). Transfer Agency Agreement between Registrant and
Shareholder Services, Inc.
h(2). Transfer Agency Agreement between Registrant and
Boston Financial Data Services.
i. Opinion of .
j. Consent of Arthur Andersen LLP, Independent Public
Accountants.
n. Financial Data Schedule.
z(2). Certified copy of Resolution of Board of Trustees
authorizing the signing of the names of trustees and
officers on the Registrant's Registration Statement
pursuant to power of attorney.
</TABLE>
<PAGE>
EXHIBIT d(2)
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------------------------
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 5th day of May, 1998 by and between Nuveen Flagship
Municipal Trust, a Massachusetts business trust ( the "Fund"), and Nuveen
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1998 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Trustees, at a meeting called for the purpose of reviewing
the Agreement, have approved the Agreement and its continuance until August 1,
1999 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1999 and ratify and confirm the Agreement in all respects.
NUVEEN FLAGSHIP MUNICIPAL TRUST
By: /s/ Gifford R. Zimmerman
---------------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- ---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ Edward F. Neild
---------------------------------
Vice President
ATTEST:
/s/ Larry W. Martin
- ---------------------------
Assistant Secretary
<PAGE>
Exhibit h(1)
NUVEEN FLAGSHIP MUNICIPAL TRUST
TRANSFER AGENCY AGREEMENT
This agreement is made as of the 1st day of July, 1997, between NUVEEN
FLAGSHIP MUNICIPAL TRUST, a Massachusetts business trust having its principal
office and place of business at 333 West Wacker Drive, Chicago, Illinois 60606,
on behalf of the two series named NUVEEN MUNICIPAL BOND FUND and NUVEEN INSURED
MUNICIPAL BOND FUND (hereinafter referred to as the "Fund"), and SHAREHOLDER
SERVICES, INC., a Colorado corporation having its place of business at 6803
South Tucson Way, Englewood, Colorado 80112 (hereinafter referred to as the
"Transfer Agent").
In consideration of the mutual promises hereinafter set forth, the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have
the following meanings:
1.1 "Approved Institution" shall mean a broker-dealer, broker, bank or
other entity named in a Certificate, as hereinafter defined, and having
account(s) in the Trust or the Distributor or an agent it appoints, in each case
acting on behalf of the Fund for the benefit of its clients. From time to time
the Fund may amend a previously delivered Certificate by delivering to the
Transfer Agent a Certificate naming an additional entity as an Approved
Institution or deleting any entity named as an Approved Institution in a
previously delivered Certificate.
1.2 "Business Day" shall mean each day on which the New York Stock Exchange
is open for trading.
1.3 "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the Transfer
Agent by the Fund and which is signed by any Officer, as hereinafter defined,
and actually received by the Transfer Agent. "Certificate" shall also include
any notice submitted to the Transfer Agent by electronic or telephone
transmission, reasonably believed by the Transfer Agent to be genuine and to
have been properly made, signed or authorized by an Officer.
1.4 "Computer Tape" shall mean any computer/electromagnetic tape or
transmission transmitted by an Approved Institution, via a remote terminal or
other similar link, into a data processing, storage, or collection system or
similar system (the "System"), located on the Transfer Agent's premises. For
purposes of Section 5.1, such Computer Tape shall be deemed to have been
furnished at such times as are agreed upon from time to time by the Transfer
Agent and Fund only if the information reflected thereon was input into the
system at such times as are agreed upon from time to time by the Transfer Agent
and the Fund.
1.5 "Custodian" shall mean, with respect to the Fund, Chase Manhattan Bank
of New York as custodian under the terms and conditions of the Custody Agreement
between the Custodian and the Fund, or in any case any successor(s) to such
Custodian performing similar functions for or on behalf
<PAGE>
of the Fund.
1.6 "Direct Accounts" means accounts registered in the name(s) of
shareholders other than Approved Institutions.
1.7 "Distributor" shall mean John Nuveen & Co. Incorporated (hereinafter
referred to as "Nuveen & Co."), as distributor under the terms and conditions of
the Distributor's Contract between the Fund and Nuveen & Co., wherein Nuveen &
Co. has the exclusive right to sell shares of the Fund to investors against
orders therefor at net asset value, or any successor(s) to Nuveen & Co.
performing a similar function for or on behalf of the Fund.
1.8 "Effective Date" shall mean July 1, 1997 or the date the Fund begins
operations.
1.9 "Series" shall mean each individual portfolio of the Fund, if any, each
being a separate portfolio of securities and other assets, interests in which
are represented by a separate series of the Fund's shares, and such terms shall
include any other such portfolio that may be created for which the Transfer
Agent agrees to act as transfer agent pursuant to Article 10 of this Agreement.
1.10 "Officer" shall mean the Fund's Chairman of the Board, President, any
Vice President, Secretary, any Assistant Secretary, Treasurer, any Assistant
Treasurer and any other person duly authorized by the Board of Trustees of the
Fund to execute or give any Certificate on behalf of the Fund and named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time.
1.11 "Prospectus" shall mean the most current Fund prospectus and statement
of additional information relating to the Shares, actually received by the
Transfer Agent from the Fund and shall include to the extent applicable, shares
designated as comprising any and all classes of any series of the Fund.
1.12 "Shares" shall mean full or fractional shares comprising all or any
part of each series representing the beneficial interest in the Fund and shall
include to the extent applicable, shares designated as comprising any and all
classes of any series of the Fund.
ARTICLE 2
APPOINTMENT OF TRANSFER AGENT
2.1 The Fund hereby constitutes and appoints the Transfer Agent as transfer
agent of all the Shares of the Fund and as dividend disbursing agent for the
Fund during the term of this Agreement.
2.2 The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform the duties hereinafter set
forth.
2.3. In connection with such appointment, upon or prior to executing this
Agreement, the Fund shall deliver to the Transfer Agent such of the following as
have not already been furnished to the Transfer Agent:
(a) A copy of the Declaration of Trust of the Fund and all amendments
thereto certified by the Secretary of the Fund;
<PAGE>
(b) A copy of the By-Laws of the Fund certified by the Secretary of the
Fund;
(c) A copy of resolutions of the Board of Trustees of the Fund, certified
by the Secretary of the Fund, authorizing the execution of this Transfer Agency
Agreement;
(d) A Certificate signed by the Secretary of the Fund specifying the names
and specimen signatures of the Officers of the Fund;
(e) Specimen Share certificates for Shares of each series of the Fund in
the form approved by the Board of Trustees of the Fund, together with a
certificate signed by the Secretary of the Fund as to such approval;
(f) Copies of the most recently filed Post-Effective Amendment to the
Fund's Registration Statement, filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, together with any applications for exemptive relief
from any of the provisions of such laws filed by the Fund and the record of any
formal action of the Securities and Exchange Commission with respect to all such
applications; and
(g) Opinion of Counsel for the Fund to the effect that (1) beneficial
interest in each Fund is divided into an unlimited number of shares of
beneficial interest, (2) the issue and sale of the Fund's authorized but
unissued Shares have been duly authorized under Massachusetts law, (3) the
outstanding Shares are fully paid and non-assessable and (4) upon the issue and
sale of any authorized and unissued Shares and upon receipt of the authorized
consideration therefor in an amount not less than either the Shares' net asset
value or par value, if any, established and in force at the time of their sale,
the Fund Shares so issued will be validly issued, fully paid and non-assessable.
2.4. The Fund shall either (a) furnish the Transfer Agent with sufficient
supplies of blank share certificates in the form approved from time to time by
the Board of Trustees of the Fund, and from time to time will renew such
supplies upon request of the Transfer Agent, or (b) authorize the Transfer Agent
to itself create laser-printed Share certificates in the form approved by the
Board of Trustees of the Fund. Any such blank Share certificates shall be
properly signed, by facsimile or otherwise, by authorized Officers and, if
required, shall bear the seal of the Fund or a facsimile thereof.
Notwithstanding the death, resignation or removal of any Officer authorized to
sign such Share certificates, the Transfer Agent may continue to countersign and
issue Share certificates bearing such Officer's signature until otherwise
directed by the Fund. The Fund agrees to indemnify and exonerate, save and hold
the Transfer Agent harmless, from and against any and all claims or demands that
may be asserted against the Transfer Agent with respect to the genuineness of
any Share certificate supplied to the Transfer Agent by the Fund pursuant to
this Agreement.
ARTICLE 3
AUTHORIZATION AND ISSUANCE OF SHARES
3.1. The Transfer Agent shall maintain records of accounts evidencing
ownership of Shares as provided in this Agreement and in the Fund's Prospectus
and, subject to the terms and conditions of this Agreement, when requested shall
countersign, record, issue, and deliver certificates for Shares both upon
original issue and transfer. Evidence of the ownership of Shares shall be
maintained on the Transfer Agent's records in book (uncertificated) form, or, if
requested by an Approved Institution (or
<PAGE>
the Distributor or its agent acting on behalf of such Approved Institution) or
shareholder, share certificates shall be issued, subject to the provisions of
Article 5 hereof, to evidence the ownership of Shares.
3.2. Prior to the issuance of any Shares pursuant to Share splits and prior
to any reduction in the number of Shares outstanding, the Fund shall deliver the
following documents to the Transfer Agent:
(a) A copy of the resolution(s) adopted by the Board of Trustees of the
Fund and/or the shareholders of the relevant Fund, certified by the Secretary of
the Fund, authorizing such issuance of additional Shares of such Fund or such
reduction, as the case may be;
(b) In the case of the issuance of Shares, an opinion of counsel for the
Fund with respect to matters set forth in Section 2.3(g) hereof as to such
shares; and
(c) Such additional documents as the Transfer Agent may reasonably request.
ARTICLE 4
RECAPITALIZATION OR CAPITAL ADJUSTMENT
4.1. In the case of any Share split, recapitalization or other capital
adjustment, the Transfer Agent will, in the case of accounts represented by
uncertificated Shares, cause the account records to be adjusted, as necessary,
to reflect the number of Shares held for the account of each such shareholder as
a result of such adjustment, or, in the case of Shares represented by
certificates, will, if so instructed by the Fund, issue revised Share
certificates in exchange for, or upon transfer of, outstanding Share
certificates in the old form, in either case upon receiving:
(a) A Certificate authorizing the issuance of revised Share certificates
and any other action required to be taken by the Transfer Agent in connection
with any such split, recapitalization or other capital adjustment;
(b) A copy of any amendment to the Declaration of Trust of the Fund,
certified by the Secretary of the Fund, with respect to the adjustment;
(c) Specimen Share certificates in the revised form approved by the Board
of Trustees of the Fund;
(d) An opinion of counsel for the Fund with respect to the matters set
forth in Article 2, Section 2.3(g) hereof as to such Shares; and
(e) Such additional documents as the Transfer Agent may reasonably request.
4.2. The Fund shall either (a) furnish the Transfer Agent with a sufficient
supply of blank Share certificates in any new form authorized in connection with
any such Share split, recapitalization or other capital adjustment, and from
time to time will replenish such supply upon the request of the Transfer Agent,
or (b) authorize the Transfer Agent to itself create laser-printed Share
certificates in the form approved by the Board of Trustees of the Fund. Any such
blank Share certificates shall be properly signed by authorized Officers and, if
required, shall bear the Fund's seal or facsimile thereof.
<PAGE>
ARTICLE 5
ISSUANCE, REDEMPTION, AND TRANSFER OF SHARES
5.1. (a) On each Business Day, the Transfer Agent shall accept, at such
time as are agreed upon from time to time by the Transfer Agent and the Fund,
(i) purchase orders received by the Transfer Agent directly from an Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) or an individual investor, (ii) redemption requests either received
from a shareholder, whether or not an Approved Institution (or the Distributor
or its agent acting on behalf of such Approved Institution), or contained in a
Certificate, and (iii) requests for exchanges of the Fund's Shares of a given
class for Shares of another fund received from a shareholder, whether or not an
Approved Institution (or the Distributor or its agent acting on behalf of such
Approved Institution), or contained in a Certificate, provided that (1) such
purchase order, exchange request or redemption request, as the case may be, is
in conformity with the Fund's purchase, exchange, and redemption procedures, as
applicable, described in the Prospectus, and (2) if such type of purchase order,
exchange request, or redemption request is not described in the Prospectus in
effect upon the commencement date of the Agreement, the Transfer Agent has
agreed to accept and act as to such order or request. Upon receipt on any
Business Day of any check drawn or endorsed to the Transfer Agent, the Fund or
the Distributor for the purchase of Shares, or any payment made by Automated
Clearing House or Federal Funds wire, the Transfer Agent shall deposit such
check or payment in the bank account established by the Fund or the Distributor
for the collection of such amounts and shall wire such amounts to the Fund's
Custodian on the next Business Day. The Transfer Agent shall have no
responsibility hereunder for the Fund's compliance with states securities
registration laws ("Blue Sky laws") relating to such purchase orders, except to
the extent that the Transfer Agent will maintain records in a manner that will
enable the Fund to monitor the total number of Shares of the Fund sold in each
state and shall provide the Fund reports as to such sales as specified in
Appendix B to this Agreement.
(b) On each Business Day, the Transfer Agent shall also accept, at
such times as are agreed upon from time to time by the Transfer Agent and the
Fund, a Computer Tape consistent in all respects with the Transfer Agent's tape
layout package, as amended from time to time, which is believed by the Transfer
Agent to be furnished by or on behalf of any Approved Institution, setting forth
data as to purchases, redemptions and exchanges of Shares irrespective of
whether payment of the purchase price accompanies such computer tape. The
Transfer Agent may rely on the data on such Computer Tapes as accurate, and
shall not be responsible hereunder for errors in such Computer Tapes furnished
to it hereunder, unless caused by the Transfer Agent's own negligence, bad faith
or willful misconduct.
(c) On each Business Day, the Fund shall provide or cause to be
provided to the Transfer Agent, at such time as the parties hereto shall agree,
the net asset value per share for the Fund and such other information as the
Transfer Agent may reasonably request.
5.2. On the Business Day following each Business Day, at such time as the
Transfer Agent and the Fund shall agree, an authorized employee of the Transfer
Agent shall confirm the following information by summary sheet transmitted by
electronic or other electromagnetic means to an authorized employee or agent of
the Fund (or by such other form as shall be agreed upon from time to time by the
Fund and the Transfer Agent):
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(a) The total dollar amount to be applied toward the purchase of
Shares of the Fund and the number of Shares of the Fund purchased on such prior
Business Day, computed by aggregating the amounts so specified in (i) the
purchase orders received by the Transfer Agent on such prior Business Day from
individual investors and (ii) all Computer Tapes described in Section 5.1(b)
timely received by the Transfer Agent with respect to such prior Business Day;
(b) The total dollar value and number of Shares of the Fund redeemed
on such prior Business Day, computed by aggregating the amounts so specified in
(i) the redemption requests received by the Transfer Agent directly on the
preceding Business Day from shareholders, and (ii) all Computer Tapes described
in Section 5.1(b) relating to such prior Business Day; and
(c) The total dollar value and number of Shares of the Fund to be
exchanged for Shares of another fund and the number of Shares of such other fund
to be issued in such exchanges on such prior Business Day, and the total dollar
value and number of shares of the Fund to be issued in exchange for shares of
another fund on such prior business day (if not included in 5.2(a) above)
computed by aggregating the amounts represented by any exchange requests
received directly by the Transfer Agent from shareholders and the amounts
specified in all Computer Tapes described in Section 5.1(b) relating to such
prior Business Day.
5.3. Following each Business Day, the Transfer Agent will (on a day on
which banks in Denver, Colorado, Chicago, Illinois and New York, New York are
open for business but in any event on or prior to the Fifth Business Day
following such Business Day) advise the Distributor of the amount of cash
necessary to be wired to the Custodian, representing purchase orders for
appropriate Fund's Shares received by the Transfer Agent as to such Business
Day, as set forth in Section 5.1 above. As to each Business Day, the Transfer
Agent will advise the Fund of the amount of cash representing exchange orders
received by the Transfer Agent as to such Business Day, such advice to be given
on the next Business Day.
5.4. As to each Business Day, the Transfer Agent shall issue to, and redeem
from, the accounts specified in a purchase order, redemption request, or
exchange request received by the Transfer Agent in proper form in accordance
with the Prospectus and, when required by the Prospectus, properly endorsed by
the record owner thereof with the record owner's or owners' signature(s)
guaranteed by a U.S. commercial bank or U.S. trust company, a member of a
national securities exchange, a foreign bank with a U.S. correspondent bank or a
federally-chartered savings and loan association, or shall issue to, and/or
redeem from, the accounts specified in a Computer Tape received by the Transfer
Agent from an Approved Institution, the appropriate number of full and
fractional Shares based on the net asset value per Share of the relevant series
of the relevant Funds specified in an advice received as to such Business Day
from the Fund. Notwithstanding the foregoing, if a redemption specified in a
redemption request received directly by the Transfer Agent or in a Computer Tape
is for a dollar value of Shares in excess of the dollar value of uncertificated
Shares in the specified account plus the dollar value of certificated Shares in
the specified account for which the Transfer Agent has received the tender of a
Share certificate or certificates in proper form as described above, the
Transfer Agent shall not effect such redemption in whole or part. In such case
involving a Computer Tape, the Transfer Agent shall orally or by electronic or
other electromagnetic means advise both the Fund and the Approved Institution
(or the Distributor or its agent if acting on behalf of such Approved
Institution) which supplied such Computer Tape of such discrepancy. In such case
involving a direct shareholder, the Transfer Agent shall, within five (5)
business days, notify such shareholder directly, orally or in writing.
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5.5. The Transfer Agent shall, as of each Business Day specified in a
Certificate described in Section 6.1, issue Shares of the Fund, based on the net
asset value per Share of the Fund specified in an advice received from the Fund
to such Business Day, in connection with a reinvestment of a dividend or
distribution on Shares of the Fund.
5.6. On each Business Day, the Transfer Agent shall advise the Fund by
computer/electromagnetic tape specifying, with respect to the immediately
preceding Business Day: the total number of Shares of the Fund (including
fractional Shares) issued and outstanding at the opening of business on such
day; the total number of Shares of the Fund sold on such day, pursuant to
Section 5.2; the total number of Shares of the Fund redeemed or exchanged on
such day; the total number of Shares of the Fund, if any, sold on such day
pursuant to preceding Section 5.4, and the total number of Shares of the Fund
issued and outstanding at the close of business on such day. Unless the Fund or
its agent shall advise the Transfer Agent of any error in the information
contained in such computer/electromagnetic tape (the "Initial Tape") prior to
the transmission of the next computer/electromagnetic tape by the Transfer
Agent, the Transfer Agent shall be deemed to have fulfilled its responsibilities
hereunder with respect to the accuracy of the data on subsequent
computer/electromagnetic tapes submitted to the Fund that are based, in whole or
in part upon any inaccurate data from the Initial Tape.
5.7. In connection with each purchase, exchange and redemption of Shares
other than pursuant to a Computer Tape submitted by an Approved Institution (or
by the Distributor or its agent acting on behalf of such Approved Institution),
the Transfer Agent shall send to the shareholder such statements as are
described in the Prospectus or as otherwise reasonably instructed in writing by
the Funds. If the Prospectus indicates that certificates for Shares are
available, and if specifically requested in writing by any shareholder, or if
otherwise required hereunder, the Transfer Agent will countersign, issue and
mail to such shareholder, at the address set forth in the records of the
Transfer Agent, a Share certificate for any full Shares requested.
5.8. In computing the redemption proceeds to be paid to any shareholder or
to an account for an Approved Institution, the Transfer Agent shall first
compute the amount of any withholding for federal income taxes for which the
Transfer Agent has the responsibility under this Agreement to calculate such
withholding, in such manner as the Fund and the Transfer Agent shall agree from
time to time in conformity with instructions provided by the Fund to the
Transfer Agent. The Transfer Agent shall also compute any withholding for
federal income taxes for which the Transfer Agent has such responsibility at the
time of any exchange of a Fund's shares for another fund's shares. In the case
of a redemption of Shares directly by a shareholder of record and not by means
of a Computer Tape submitted by an Approved Institution (or by the Distributor
or its agent acting on behalf of such Approved Institution), upon deposit of
moneys in a redemption account by the relevant Custodian against which the
Transfer Agent is authorized by the Fund to draw checks in connection with a
redemption of Shares of the Fund, the Transfer Agent shall cancel the redeemed
Shares and after making appropriate deduction for any withholding of taxes
required of it by this Agreement or applicable law, make payment of (i) the
redemption proceeds to the order of the shareholder, and (ii) any tax withheld
to the Internal Revenue Service, in accordance with the Fund's redemption and
payment procedures described in the Prospectus or as otherwise reasonably
described in a written instruction from the Fund. In the case of an exchange of
Shares directly by a shareholder of record and not by means of a Computer Tape
submitted by an Approved Institution (or the Distributor or its agent acting on
behalf of such Approved Institution), upon deposit of moneys in an account by
the relevant Custodian against which the Transfer Agent is authorized by the
Fund to draw checks in connection with an exchange of Shares of a fund, the
Transfer Agent shall cancel the exchanged
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Shares, and withhold and pay taxes required under this Agreement and applicable
law. In the case of a redemption of Shares pursuant to a Computer Tape, the
Transfer Agent shall, on the next Business Day, send the Fund a Computer Tape
setting forth the amount of redemption proceeds due each Approved Institution.
If such Approved Institution (or the Distributor or its agent acting on behalf
of such Approved Institution) has previously furnished the Transfer Agent
withholding instructions with respect to such redemption or any exchange of
Shares pursuant to a Computer Tape, the Transfer Agent shall include in the
Computer Tape furnished to the Fund information as to the amount of such
withholding.
5.9. The Transfer Agent shall not be required to issue Shares of any fund
(other than with respect to the reinvestment of dividends or distributions on
shares owned by an existing shareholder if so stated in the Certificate) after
it has received a Certificate stating that the sale of Shares of that fund has
been suspended or discontinued.
5.10. The Transfer Agent shall not be responsible for the payment of any
original issue or other taxes required to be paid by the Fund in connection with
the issuance of any Shares.
5.11. The Transfer Agent shall not be responsible for issuing or effecting
any "stop transfer" or other similar order or restrictions on any Shares held in
the name of an Approved Institution. In the case of Shares registered in the
name of a shareholder other than an Approved Institution as to which a "stop
transfer" or other similar order or restriction applies, the Transfer Agent will
adhere to the terms of such stop transfer or similar order, except that it may
rely on a Certificate to effect a redemption, exchange or transfer of such
Shares, notwithstanding such stop order or restriction.
5.12. The Transfer Agent shall accept (a) a Computer Tape which is
furnished by or on behalf of any Approved Institution (or the Distributor or its
agent acting on behalf of such Approved Institution) and represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and (b) as to Shares standing
directly in the name of a shareholder other than an Approved Institution,
transfer instructions in proper form in accordance with the Fund's Prospectus
and the Transfer Agent's rules described herein, and shall effect the transfer
specified in said Computer Tape or transfer instructions, provided that any
necessary documents or Share certificates have been tendered to the Transfer
Agent.
5.13. (a) Except as otherwise provided in sub-paragraph (b) of this Section
5.13 and in Section 5.14, Shares will be transferred, exchanged or redeemed
other than pursuant to Computer Tapes from an Approved Institution (or the
Distributor on its agent acting on behalf of such Approved Institution) upon
presentation to the Transfer Agent of endorsed Share certificates or, in the
case of uncertificated Shares, instructions endorsed in proper form in
accordance with the Prospectus as stated in Section 5.4, accompanied by such
documents as the Transfer Agent reasonably deems necessary to evidence the
authority of the person making such transfer, exchange or redemption, and
bearing satisfactory evidence of the payment of transfer taxes. In the case of
small estates, where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate small estates affidavit under applicable law
or with a surety bond, and without further approval of the Fund, transfer or
redeem Shares registered in the name of a decedent if the current market value
of the Shares being redeemed or transferred does not exceed such amount as may
from time to time be prescribed by the applicable state statutes and
regulations. The Transfer Agent reserves the right to refuse to transfer,
exchange or redeem Shares until it is reasonably satisfied that the endorsement
on the Share certificate or instructions is valid and genuine, and for that
purpose it will require, unless otherwise instructed by an Officer, a signature
guarantee as stated in Section 5.4 of this Agreement. The Transfer Agent also
<PAGE>
reserves the right to refuse to transfer, exchange or redeem Shares until it is
reasonably satisfied that the requested transfer, exchange or redemption is
legally authorized, or until it is reasonably satisfied that there is no basis
to any claims adverse to such transfer, exchange or redemption. The Transfer
Agent may, in effecting transfers, exchanges and redemptions of Shares, rely
upon those provisions of the Uniform Act for the Simplification of Fiduciary
Security Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, applicable to the transfer of securities.
(b) Notwithstanding the foregoing or any other provision contained in
this Agreement to the contrary, the Transfer Agent shall be fully protected by
the Fund in requiring any instructions, documents, assurances, endorsements or
guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, exchange or transfer of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be consistent
with the transfer, exchange and redemption procedures described in the
Prospectus, or in any instructions or certificates provided to the Transfer
Agent by the Fund.
5.14. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be expected to require, as a condition to
any transfer, redemption or exchange of any Shares pursuant to a Computer Tape,
any documents, including, without limitation, any documents of the kind
described in Section 5.13(a) to evidence the authority of the person requesting
the transfer, exchange or redemption and/or the payment of any transfer taxes,
and shall be fully protected in acting in accordance with the applicable
provisions of this Agreement.
5.15. Nothing contained in this Agreement shall constitute any agreement or
representation by the Transfer Agent to permit, or to agree to permit, any
Approved Institution to input information into the System, although the Transfer
Agent may, with the Fund's written permission, permit access to the System by an
Approved Institution to retrieve data or information as to such Approved
Institution's accounts.
ARTICLE 6
DIVIDENDS AND DISTRIBUTIONS
6.1. The Fund shall furnish to the Transfer Agent a Certificate either (i)
setting forth with respect to each series of the Fund the date of the
declaration of a dividend or distribution, the date of accrual or payment
thereof, as the case may be, the record date as of which shareholders entitled
to payment or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution for each series of the Fund, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable by the Transfer Agent with respect to such
dividend or distribution on such payment date, or (ii) stating that the
declaration of dividends and distributions shall be on a daily or other periodic
basis and containing information of the type set forth in subsection (i) hereof.
6.2. Upon the payment date specified in the relevant Certificate, the
Transfer Agent shall, in the case of a cash dividend or distribution, advise the
Fund (by telephone or other electronic transmission) of the amount of cash
necessary to make the payment of the dividend or distribution to the
shareholders of record as of such payment date, including the amounts to be paid
to Approved Institutions. The Fund shall be responsible for having the
appropriate Custodian transfer a sufficient amount of cash to a dividend
disbursement account maintained by the Fund for the relevant Series against
which the Transfer Agent shall cause checks, ACH or federal funds wire payment
to be drawn
<PAGE>
to the order of such shareholders or Approved Institutions in payment of the
dividend. The Transfer Agent shall not be liable for any improper payments made
in accordance with a Certificate described in Section 6.1. If the Transfer Agent
shall not receive from the appropriate Custodian sufficient cash to make
payments of any cash dividend or distribution to shareholders of the Fund as of
the record date, the Transfer Agent shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to the Transfer Agent unless otherwise instructed by the Fund
by a Certificate and acceptable to the Transfer Agent. In the case of dividends
or distributions reinvested in additional Shares of a series of the Fund, the
Transfer Agent shall follow the procedures set forth in Section 5.5.
6.3. The Transfer Agent shall in no way be responsible for the
determination of the rate or form of dividends or capital gain distributions due
shareholders.
6.4. The Transfer Agent shall, upon request of the Fund, file such
appropriate information returns concerning the payment of dividends and capital
gain distributions and redemptions with the proper Federal, state and local
authorities as are required by law to be filed by the Fund but shall in no way
be responsible for the collection or withholding of taxes due on such dividends
or distributions or on redemption proceeds due shareholders, except and only to
the extent required of it by applicable law for accounts of shareholders other
than Approved Institutions. If any amount is to be withheld from any dividend or
distribution paid to, or exchange or redemption proceeds or other cash
distribution from, the account of an Approved Institution, such Approved
Institution (or the Distributor or its agent acting on behalf of such Approved
Institution) may advise the Transfer Agent of the amount to be withheld
therefrom, and if such advice is provided in a timely manner to the Transfer
Agent, the Transfer Agent will provide a separate check for such amount to the
Approved Institution, which shall be responsible for the proper application of
such withheld amounts.
ARTICLE 7
CONCERNING THE FUND
7.1. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign or give Share certificates or
Certificates, together with a specimen signature of each new Officer.
7.2. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent in a timely manner the Fund's currently effective Prospectus,
copies of any exemptive relief obtained by the Fund under applicable securities
laws and copies of any amendments to the Fund; Declaration of Trust, By-Laws and
any other documents to be furnished by the Fund under this Agreement to enable
the Transfer Agent to carry out its duties hereunder, and, for purposes of this
Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus, exemptive relief or other document
until it is actually received by the Transfer Agent.
7.3 The Transfer Agent has been advised by the Fund and agrees that the
Fund's Declaration of Trust is on file with the Secretary of State of the
Commonwealth of Massachusetts and that this Agreement has been executed by the
officers of the Fund, as officers and not individually. The obligations of the
Agreement are not binding upon the Trustees, officers or shareholders of the
Fund individually but are binding only upon the assets and property of the Fund
or a particular series of Shares. The Transfer Agent agrees to look only to the
assets of the Fund or a particular series of Shares for payment under such
Agreement and that the shareholders, Trustees and officers shall not be
<PAGE>
liable therefore.
ARTICLE 8
CONCERNING THE TRANSFER AGENT
8.1. Subject to the standard of care set forth in Section 8.4, the Transfer
Agent shall not be liable and shall be fully protected in acting upon any
Computer Tape, Certificate, oral instructions, writing or document reasonably
believed by it to be genuine and to have been signed (in the case of written
instructions or documents) or made by the proper person or persons and shall not
be held to have any notice of any change of authority of any person until
receipt of written notice thereof from the Fund or such person. Subject to the
standard of care set forth in Section 8.4, the Transfer Agent shall be similarly
protected in processing Share certificates which it reasonably believes to bear
the proper manual or facsimile signatures of the Officers of the Fund and the
proper countersignature of the Transfer Agent or any prior transfer agent.
8.2. The Transfer Agent covenants that it shall carry out its
responsibilities under this Agreement in accordance and compliance with the
provisions of applicable laws and regulations governing its operation as a
transfer agent.
8.3. The Transfer Agent shall keep and maintain on behalf of the Fund such
records which the Fund or the Transfer Agent is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rule 31a-1 under the Investment Company Act of 1940, relating
to the maintenance of records in connection with the services to be provided
hereunder. The Transfer Agent agrees to make such records available for
inspection by the Trust at reasonable times and otherwise to keep confidential
all records and other information relative to the Fund and its shareholders,
except when the Transfer Agent reasonably believes it has been requested to
divulge such information by duly-constituted authorities or court process, or
requested by a shareholder with respect to information concerning an account as
to which such shareholder has either a legal or beneficial interest or when
requested by the Fund, the shareholder, or the dealer of record as to such
account.
8.4 (a) The Transfer Agent shall not be liable for any loss or damage,
including, without limitation, attorneys' fees, expenses and court costs,
resulting from the Transfer Agent's actions or omissions to act under or in
connection with this Agreement and its duties and responsibilities hereunder,
except for any loss or damage arising out of its own failure to act in good
faith, or its negligence or willful misfeasance.
(b) The Transfer Agent shall, provided such coverage is readily
available to the Transfer Agent at reasonable rates and upon reasonable terms
and conditions, maintain an insurance policy or surety bond, in the face amount
of $10 million per covered transaction against losses suffered by the Transfer
Agent in excess of the policy deductibles arising from errors or omission on the
part of the Transfer Agent in carrying out its responsibilities under this
Agreement and other agreements. The Transfer Agent shall upon request, furnish
promptly to the Fund copies of all insurance policies maintained pursuant to
this Section 8.4(b) that have not previously been furnished to the Fund.
(c) Any costs or losses incurred by the Fund for the processing of any
purchase, redemption, exchange or other share transactions at a price per share
other than the price per share applicable to the effective date of the
transaction (the foregoing being generally referred to herein as
<PAGE>
"as of" transactions) will be handled in the following manner:
1. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent,
taken in the aggregate, result in a net loss to the Fund ("net
loss"), Transfer Agent will reimburse the Fund for such net loss,
except to the extent that such net loss may be offset by
application of a "net benefit" to the Fund carried over from
prior calendar years pursuant to sub-paragraph 2 immediately
below.
2. For each calendar year, if all "as of" transactions for the year
resulting from the actions or inactions of the Transfer Agent,
taken in the aggregate, result in a net benefit to the Fund ("net
benefit"), the Fund shall not reimburse the Transfer Agent for
the amount of such net benefit; however, any "net benefit" for
any calendar year may be used to offset, in whole or in part, any
"net loss" suffered by the Fund in any future calendar year so as
to reduce the amount by which the Transfer Agent shall be
required to reimburse the Fund for such "net loss" in such year
pursuant to sub-paragraph 1 immediately above.
3. Any "net loss" for which the Transfer Agent reimburses the Fund
in any calendar year shall not be carried over into future years
so as to offset any "net benefit" in such future years.
8.5 The Fund shall indemnify and exonerate, save and hold harmless the
Transfer Agent and its officers, directors, employees and agents (hereinafter
the Transfer Agent and such persons are referred to as "Indemnitees") from and
against any and all liabilities or losses arising from claims or demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs associated with defending against such claims and demands,) of any nature
which any Indemnitee may sustain or incur or which may be asserted against any
Indemnitee by any person arising out of or in any manner related to any action
taken or omitted to be taken by the Transfer Agent in good faith and without
negligence or willful misconduct in reasonable reliance upon (i) any provision
of this Agreement; (ii) the Prospectus; (iii) any instruction or order
including, without limitation, any Computer Tape reasonably believed by the
Transfer Agent to have been received from an Approved Institution (or the
Distributor or its agent acting on behalf of such Approved Institution); (iv)
any instrument or order reasonably believed by the Transfer Agent to be genuine
and to be signed, countersigned or executed by any duly authorized Officer, (v)
any Certificate or other instructions of an Officer, (vi) any opinion of legal
counsel for the Fund; (vii) any records or data supplied by the Fund's prior
transfer agent; or (viii) any order of any court, arbitration panel or other
judicial entity.
8.6. At any time the Transfer Agent may apply to an Officer of the Fund for
written instructions with respect to any matters arising in connection with the
Transfer Agent's duties and obligations under this Agreement, and the Transfer
Agent shall not be liable for any action taken or omitted by it in good faith
and without negligence or willful misconduct in accordance with such written
instructions. The Transfer Agent may consult with counsel to the Fund, at the
expense of the Fund and shall be fully protected with respect to anything done
or omitted by it in good faith and without negligence or willful misfeasance in
accordance with the advice or opinion of counsel to the Fund. Such application
by the Transfer Agent for written instructions from an Officer of the Fund may,
at the option of the Transfer Agent, set forth in writing any action proposed to
be taken or omitted by the Transfer Agent with respect to its duties or
obligations under this Agreement and the
<PAGE>
date on and/or after which such action shall be taken, and the Transfer Agent
shall not be liable (other than for its bad faith, negligence or willful
misfeasance) for any action taken or omitted in accordance with a proposal
included in any such application on or after the date specified therein unless,
prior to taking or omitting any such action, the Transfer Agent has received
written instructions in response to such application specifying the action to be
taken or omitted.
8.7. Any report, confirmation or other document furnished to the Fund or
to an Approved Institution as part of the Transfer Agent's responsibilities
under this Agreement shall be deemed final and conclusive on the 8th Business
Day after such report, confirmation or document has been furnished to the Fund
or Approved Institution, as the case may be, and the Transfer Agent shall not be
liable to the Fund or such Approved Institution under this Agreement as to any
error or omission in such report, confirmation or document that is not reported
to the Transfer Agent within such 7-day period.
8.8. The Transfer Agent shall deliver Share certificates by courier or by
certified or registered mail to the shareholder's address in the records of the
Transfer Agent. The Transfer Agent shall advise the Fund of any Share
certificates returned as undeliverable after being transmitted by courier or
mailed as herein provided for.
8.9. The Transfer Agent may issue new Share certificates in place of Share
certificates represented to have been lost, stolen, or destroyed upon receiving
instructions satisfactory to the Transfer Agent. If the Transfer Agent receives
written notification from the owner of the lost, destroyed, or stolen Share
certificate within a reasonable time after the owner has notice of such loss,
destruction or theft, the Transfer Agent shall issue a replacement Share
certificate upon receipt of an affidavit or affidavits of loss or nonreceipt and
an indemnity agreement executed by the registered owner or his legal
representative, and supported (a) in the case of a certificate having a value at
the time of replacement of less than $100, by a fixed penalty surety bond for
twice the then-current market value of Shares represented by said certificate
and (b) in the case of a certificate having a value at time of replacement of
$100 or more, by an open penalty bond, in form satisfactory to the Transfer
Agent or (c) by such other documentation or reasonable assurances in a
particular case as may be set forth in a Certificate. If the Fund receives such
written notification from the owner of the lost, destroyed or stolen Share
certificate within a reasonable time after the owner has notice of it, the Fund
shall promptly notify the Transfer Agent. The Transfer Agent may issue new Share
certificates in exchange for, and upon surrender of, mutilated Share
certificates.
8.10. The Transfer Agent will supply shareholder lists to the Fund from
time to time upon receiving a request therefor from an Officer of the Fund.
8.11. At the request of an Officer, the Transfer Agent will address and
mail such appropriate notices to shareholders as to the Fund may direct, at the
Fund's expense.
8.12. Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency
of the amount to be received therefor, or the authority of an Approved
Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer, exchange or of a redemption of any
Shares by an Approved Institution, the propriety of the amount to be paid
therefor, or the authority of an Approved
<PAGE>
Institution to request such transfer, exchange or redemption;
(c) The legality of the declaration of any dividend or capital gains
distribution by the Fund, or the legality of the issue of any Shares in payment
of any Share dividend or distribution; or
(d) The legality of any recapitalization or readjustment of the
Shares.
8.13. The Transfer Agent shall be entitled to receive, and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Appendix B hereto, (i) its
reasonable out-of-pocket expenses (including without limitation legal expenses,
court costs, and attorney's fees associated with litigation or arbitration)
incurred in connection with this Agreement and its performance hereunder and
(ii) such compensation as is specified in Appendix C hereto as such fees may be
amended from time to time by agreement in writing by the Transfer Agent and the
Fund.
8.14. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
8.15. The Transfer Agent shall indemnify and exonerate, save and hold
harmless the Fund, and its officers, directors, employees and agents, from and
against any and all liabilities or losses arising from claims and demands
(whether with or without basis in fact or law), and from any and all expenses
(including, without limitation, reasonable attorney's fees, expenses and court
costs), of any nature which the Fund or any officer, director, employee or agent
may sustain or incur or which may be asserted against them by any person arising
out of or in any manner related to the Transfer Agent's failure to comply with
the terms of this Agreement or which arise out of the Transfer Agent's
negligence or willful misconduct provided, however, that the Transfer Agent
shall not indemnify and exonerate, save and hold harmless, the Fund, its
officers, directors, employees, and agents for anything arising out of or in any
manner related to the Fund's failure to comply with the terms of this Agreement
or which arises out of the Fund's, or any officer's, director's, employee's or
agent's (other than the Transfer Agent) negligence or willful misconduct or the
Transfer Agent's reliance on information or instructions received from, or
issued on behalf of, the Fund.
ARTICLE 9
TERMINATION
9.1. The initial term of this Agreement shall commence on the Effective
Date and shall continue through June 5, 1998 (the "Initial Term") unless earlier
terminated pursuant to Section 9.2. Thereafter, this Agreement shall continue
from day to day thereafter (such period shall be referred to as the "Renewal
Term"), until either of the parties hereto terminates this Agreement by giving
at least 30 days prior written notice to the other party, whereupon this
Agreement shall terminate automatically upon the earlier of the expiration of
the 30 day period specified in the written notice or on August 1, 1998. For
every business day which the Agreement continues past June 30, 1998, the Fund
shall pay to the Transfer Agent a daily processing fee of $5,000. This daily
processing fee is in addition to any other fees payable under this Agreement and
it is agreed by the Fund and the transfer Agent that this daily processing fee
is not a penalty but is a reasonable estimate of the expenses that would be
incurred by the Transfer Agent in continuing to offer the Fund the services
provided for under this Agreement. In no event shall the term of this Agreement,
including any "Renewal Term" continue past August 1,
<PAGE>
1998. In the event such notice of termination is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Trustees of the Fund,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement. In the event such notice is given by the Transfer Agent, the
Fund shall, on or before the termination date, deliver to the Transfer Agent a
copy of a resolution of its Board of Trustees certified by the Secretary or any
Assistant Secretary designating a successor transfer agent or transfer agents.
In the absence of such designation by the Fund, the Transfer Agent may designate
a successor transfer agent. If the Fund fails to designate a successor transfer
agent, the Fund shall, upon the date specified for termination of this Agreement
and delivery of the records maintained hereunder, be deemed to be its own
transfer agent and the Transfer Agent shall thereby be relieved of all duties
and responsibilities pursuant to this Agreement.
9.2. Notwithstanding Section 9.1 hereof, this Agreement may be terminated
at any time by the Fund upon not less than 60 days' written notice from the Fund
to the Transfer Agent notifying the Transfer Agent: (i) if a majority of the
Trustees who are not "interested persons" (as that term is defined in the
Investment Company Act of 1940) upon completion of the procedures set forth
below have reasonably made a specific finding that the Transfer Agent has failed
on a continuing basis to perform its duties pursuant to this Agreement in a
satisfactory manner consistent with then current industry standards and
practices or (ii) if there is instituted or pending an action or proceeding by
or before any court or governmental, administrative or regulatory agency against
or involving the parties hereto, their affiliates, the Trustees of the Fund or
any of them and challenging the making of this Agreement or alleging that any
material term of the Agreement is contrary to law or any governmental agency has
threatened in writing to commence such an action or proceeding. Prior to any
termination pursuant to clause (i), the Board of Trustees of the Fund shall
provide the Transfer Agent with a written statement of the specific aspects of
the Transfer Agent's performance of its duties that are unsatisfactory, the
specific incident or incidents giving rise to the Board of Trustees' conclusion
and any written material that the Board of Trustees' relied upon in making such
a determination. The Transfer Agent shall have 30 days to respond to such
written statement. If no response is made, or if, after reasonable
consideration of the response of the Transfer Agent, such response is
unsatisfactory to the Board of Trustees, then the Board of Trustees of the Fund
may terminate the Agreement pursuant to clause (i) thereof. For purposes of
making a finding as contemplated by clause (i) above, the Transfer Agent shall
be, absent unusual circumstances, conclusively presumed to have failed on a
continuing basis to perform its duties pursuant to this Agreement in a
satisfactory manner consistent with the industry standards and practices
prevailing on the date of this Agreement if any of the following should occur:
(1) The Transfer Agent through its fault is unable (more than
once in a twelve-month period) to process daily activity for any two successive
Business Days and to confirm information generated by such activity by the
fourth Business Day following the later of such two Business Days. (For example,
assuming no holidays, daily activity on a Monday and Tuesday is not confirmed by
the following Monday.)
(2) The Transfer Agent through its fault is unable (more than two
times in any twelve-month period) to provide system access to personnel of an
Approved Institution for six hours between 9:00 a.m. and 5:00 p.m. Chicago time
on three successive Business Days.
(3) The Transfer Agent through its fault is unable (more than
twice in any one year) to create and mail dividend checks within four Business
Days after the Fund's payable date (assuming that the required information has
been furnished to the Transfer Agent on the record date).
<PAGE>
(4) The Transfer Agent through its fault is unable to instruct
various financial institutions on daily money movements from and to the Funds'
Custodians for two successive Business Days by the Fourth Business Day following
the later of such two Business Days. (For this purpose, instructions based on
reasonable estimates are treated as fulfilling the Transfer Agent's obligations
hereunder.)
(5) The Transfer Agent through its fault is unable (more than
twice in any twelve-month period) to transmit dividend activity to an Approved
Institution within five Business days from the relevant Fund's payable date.
For purposes of the foregoing, an event described in any of the foregoing
clauses 1 through 5 shall be deemed not to have occurred if the Transfer Agent's
inability to perform is a result, directly or indirectly of faulty or inadequate
performance by service provider including, but not limited to, telephone
companies, pricing services, Nuveen & Co., Approved Institutions, and banks
other than the Transfer Agent and its agents and employees or a result, directly
or indirectly, of other events out of the Transfer Agent's reasonable control.
Also for the purposes of the foregoing, if the Transfer Agent processes
transactions or instructions (as the case may be) as required hereunder within
the time periods indicated but more than 10% of the transactions, checks or
instructions, as the case may be, are inaccurate in any material respect, and
are not corrected within the requisite time then the Transfer Agent shall be
deemed to have been unable to perform the relevant service within the requisite
time.
9.3. In the event the Fund or the Transfer Agent terminates the Transfer
Agency Agreement at any time, the Fund shall be responsible for the payment of
any and all additional fees and expenses of the Transfer Agent relating to the
conversion to the new Transfer Agent. Included in these expenses will be any
travel/entertainment expenses incurred by the Transfer Agent related to
preparation for the conversion that exceed $2,000 in the aggregate per month.
Upon termination of this Agreement, the Transfer Agent will facilitate transfer
of the records maintained by it hereunder and cooperate with such successor
transfer agent as may be designated pursuant to the provisions of Section 9.1
hereof with respect to delivery of such records and assumption by such successor
transfer agent of its duties. The records will be delivered to the successor
transfer agent in the format in which they are maintained and all shareholder
records currently maintained in the ORIN computer system or on imaging discs
will be delivered in either their current format or at the expense of the Fund
will be converted into another format acceptable to the Fund and Transfer Agent.
The Fund must request the conversion of the imaging files to another acceptable
format on or before January 1, 1998 in order to allow the Transfer Agent
sufficient time to convert the records. If no such request is made on or before
that date, the shareholder records will be delivered in the format in which they
are currently stored by the Transfer Agent. The Fund shall be responsible for
any and all expenses related to the delivery of all records and, if applicable,
the conversion of the shareholder records from their current format to any other
format as elected by the Fund.
Upon termination of the Transfer Agency Agreement, the Transfer Agent shall
assist the Fund in transferring any bank accounts currently existing for the
payment of dividends and distributions or redemption of shares of the Fund to
the successor transfer agent. If the Fund elects not to transfer those
accounts, the Transfer Agent shall maintain the accounts for a period of 12
months from termination of this Agreement and then close the accounts and return
any remaining monies in those accounts to the Fund. The Fund shall be
responsible for keeping sufficient funds in those accounts to clear any
outstanding checks and the Transfer Agent shall have no responsibility for any
checks that do not clear that account for any reason.
<PAGE>
Upon the termination of the Transfer Agency Agreement and for a period of three
(3) months thereafter, the Transfer Agent shall identify a specific person to
help interpret records for the Fund or the successor transfer agent. All
requests from the Fund or the successor transfer agent shall be directed to that
person. The Fund shall be responsible for any and all expenses related to such
assistance.
Upon termination of the Transfer Agency Agreement, the Fund and/or the successor
transfer agent shall be responsible for any and all regulatory and/or tax
reporting that may be required for the calendar year during which the
termination of the Agreement occurs. The Transfer Agent will account to the
successor transfer agent or the Fund for any withholding liability accrued for
any taxes withheld during any prior of that year in which it acted as transfer
agent for the Fund, including but not limited to TEFRA.
ARTICLE 10
ADDITIONAL SERIES
10.1. In the event that the Fund establishes one or more Series in
addition to the Series named herein with respect to which it desires to have the
Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing at least 60 days in advance of the
sale of Shares of such Series and shall deliver to the Transfer Agent the
documents listed in Section 2.3 with respect to such Series. Unless the
Transfer Agent declines in writing within a reasonable time to provide such
services, the Shares of such Series shall be subject to this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1. The Fund agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Transfer Agent
hereunder, it shall advise the Transfer Agent of such proposed change at least
30 days prior to the intended date of the same, and shall proceed with such
change only if it shall have received the written consent of the Transfer Agent
hereto, and shall have received and agreed to the schedule of charges, if any,
specified by the Transfer Agent necessary to effect such change.
11.2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at 333 West Wacker
Drive, Chicago, Illinois 60606, Attention: Mr. Stuart Rogers, or at such other
place as the Fund may from time to time designate in writing.
11.3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent, Attention: President, and mailed or delivered
to it at its office at 6803 South Tucson Way, Englewood, Colorado 80112, with a
copy to be sent to Andrew J. Donohue at OppenheimerFunds, Inc. Two World Trade
Center, New York, NY 10048 or at such other place as the Transfer Agent may from
time to time designate in writing.
11.4. This Agreement may not be amended or modified in any manner except
by a written
<PAGE>
agreement executed by both parties.
11.5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund or the Transfer Agent without
the written consent of the other party. A change of ownership of the Transfer
Agent as a result of an internal reorganization of the Transfer Agent, its
parent corporation or affiliates shall not be deemed to be an "assignment"
hereunder. A change in "control" (as defined under the Investment Company Act of
1940) of the Transfer Agent's parent corporation shall not be deemed an
"assignment" hereunder. A sale of a controlling interest in the capital stock or
of all or substantially all of the assets of the Transfer Agent to a third party
unaffiliated with the Transfer Agent or its parent corporation shall be deemed
to be an "assignment" hereunder.
11.6. This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado applicable to agreements to be wholly
performed in that state.
11.7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
11.8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
11.9. Neither the Fund nor the Transfer Agent will be liable or responsible
hereunder for delays or errors by reason of circumstances reasonably beyond its
control, including, without limitation, acts of civil or military authority,
national emergencies, labor difficulties, fire, mechanical breakdown, flood,
catastrophe, acts of God, insurrection, war, riots, or failure of
transportation, communication or power supply.
11.10. The Fund shall establish and maintain such bank accounts, with such
bank or banks as are selected by the Fund, as are necessary so that the Transfer
Agent may perform the services to be provided hereunder. To the extent that
performance of such services shall require the Transfer Agent directly to
disburse amounts for payments of dividends, redemption proceeds or other
purposes, the Fund shall provide such bank or banks with all instructions and
authorizations necessary to evidence the Transfer Agent's authority to effect
such transactions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the day
and year first above written.
Attest: NUVEEN FLAGSHIP MUNICIPAL TRUST
By:
- ---------------------------------- -------------------------------------
Name Title Name Title
Attest: SHAREHOLDER SERVICES, INC.
By:
- ---------------------------------- -------------------------------------
Name Title Barbara Hennigar, President
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
TRANSFER AGENCY AGREEMENT
Appendix A
Officer's Certificate
I, ____________________________, the Secretary of Nuveen Flagship Municipal
Trust, a Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals have been duly authorized by the Trustees of the
Fund in conformity with the Fund's Declaration of Trust and By_Laws to execute
any Certificate, instruction, notice or other instrument, including an amendment
to Appendix B to this Agreement, or to give oral instructions on behalf of the
Fund, and the signatures set forth opposite their respective names are their
true and correct signatures.
<TABLE>
<CAPTION>
Name Title Signature
- ---- ----- ---------
<S> <C> <C>
___________________ Chairman ________________________________
___________________ President ________________________________
___________________ Secretary ________________________________
___________________ Trustee ________________________________
___________________ Vice President ________________________________
____________________________________ ________________________________
____________________________________ ________________________________
____________________________________ ________________________________
____________________________________ ________________________________
____________________________________ _________________________________
____________________________________ _________________________________
____________________________________ _________________________________
</TABLE>
________________________________, Secretary
Name
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
TRANSFER AGENCY AGREEMENT
Appendix B
Transfer Agent Services
<TABLE>
<CAPTION>
Service: SSI Will:
- ------- --------
<S> <C>
New Account Set-Ups Process new sales applications. Place
telephone calls to account
representatives as needed to clarify
instructions for new account set-ups.
Purchases - New and Subsequent Process mailed-in, lockbox, bank wire,
list billing, ACH, and telephone
payments as received. Coordinate and
balance UIT reinvestment payments.
Transfers Negotiate and process all transfer
requests.
Exchanges - Mail and Telephone Negotiate and process exchange requests.
Record telephone exchange requests.
Redemptions - Mail and Telephone Negotiate and process mailed in, ACH and
telephone redemption requests. Record
telephone redemption requests.
Wire Order Purchases and Redemptions Process wire order purchases and
redemptions for designated settlement
period accepted on recorded telephone
lines and via NSCC FUND/SERV. Process
purchases and redemptions for same day
wire settlement.
Account Maintenance Process all written and telephone
(Address Changes, Dividend Option maintenance. For address changes,
Changes, Name Changes, Broker or prepare and mail a notice of the address
Dealer Changes, etc.) change to the former address.
Certificate Issuances Issue certificates as requested by
shareholders.
Telephone Services Provide efficient handling of all
incoming shareholder and broker/dealer
telephone calls. Make outgoing
clarification calls/coordination with
Chase on UIT/ETF consolidations. Provide
timely problem resolution for all
servicing calls. Provide automated trend
reporting.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Service: SSI Will:
- ------- --------
<S> <C>
Correspondence with Shareholders Respond to all shareholder and
and Broker/Dealers broker/dealer written inquiries.
Document all correspondence affecting
shareholder accounts on the Shareholder
Accounting System.
Shareholder Confirms Prepare and mail confirmations of daily
(Daily/Monthly/Quarterly/Annual) account activity. Prepare and mail
monthly, quarterly, and annual
confirmations as directed by the fund.
Dealer Confirms Prepare and mail weekly dealer
confirmations listing activity on client
accounts as directed by the Fund.
Distribution Disbursements Prepare and mail cash distribution
checks. Process reinvested
distributions.
Commission Statements Provide bimonthly commission statements
listing each purchase and the portion of
the sales charge paid to the
broker/dealer.
Commission Checks Provide bimonthly commission checks to
broker/dealers.
Daily Transmission of Reports Transmit daily transaction activity
reports, balancing reports, and sales
information via telephone lines to a
printer at Nuveen.
Fund Summary Sheets Prepare daily reports that summarize by
type of transaction all capital stock
activity for each fund.
Transmit/download wire/capital stock
activity information to Chase.
Sales Reporting Provide daily, weekly, monthly,
quarterly, and annual reports of sales
information.
12b-1 Reporting Complete 12b-1 processing including
calculating the 12b-1 payment amounts
and sending checks to the broker/dealer
home offices. Provide a listing broken
down by sales representative within each
branch.
Invalid Taxpayer Identification Mail Forms W-9 as required to validate
Number Solicitation and taxpayer identification numbers;
Backup Withholding institute backup withholding as required
by IRS regulations, and timely send all
notices.
Regulatory Reporting Compute, prepare, and mail all necessary
reports to shareholders, federal, and/or
state authorities (Forms 1099-DIV,
1099-B, and 1042S).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Service: SSI Will:
- ------- --------
<S> <C>
Front-End Imaging of Documents Front-end Image all incoming documents.
Cost Basis Reporting Provide cost basis information as
available to shareholders annually for
use in determining capital gains and
losses.
Blue Sky Reporting Provide monthly report of purchases and
redemptions by state.
Financial Reporting Mailings Provide mail handling for 2 financial
reports per fund per year to Nuveen
shareholders.
Prospectus Mailings Provide mail handling for 1 prospectus
per fund per year to Nuveen
shareholders.
Proxy Solicitation and Tabulation Perform 1 proxy solicitation and
tabulation per fund per year.
Networking Accounts Provide transmission and appropriate
services for each network level.
Cash Availability Transmit mutual fund activity to
designated entity on a daily basis for
cash availability purposes.
Commission/12b-1 Balancing Provide balancing reports for commission
and 12b-1 payments.
</TABLE>
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
TRANSFER AGENCY AGREEMENT
Appendix C
Fee Schedule
The Transfer Agent will provide the transfer agent services listed on Appendix B
for the Fund at the rates set forth below:
Annual Transfer Agent Fees:
- --------------------------
From July 1, 1997 through termination
Annual-Per-Account Fees *
------------------------
First 150,000 Accounts** $ 21.70 per account
Next 100,000 Accounts** $ 21.10 per account
Next 50,000 Accounts** $ 20.50 per account
Over 300,000 Accounts** $ 20.00 per account
Out-Of-Pocket Expenses:
- ----------------------
Out-of-pocket expenses may be incurred by either the Fund or the Transfer
Agent and are not included in the annual Transfer Agent Fees. Those out-of-
pocket expenses directly incurred by the Transfer Agent will be billed to the
Fund on a monthly basis. These out-of-pocket expenses include, but are not
limited to, the printing of forms, envelopes, postage and proxy solicitation
fees for the shareholder mailings, costs of abandoned property reports or
searches for missing or inactive shareholders, equipment and system access
costs, microfilm, telephone line and usage charges, overnight express mail
charges, check signature plates and stamps, and programmer/analyst and testing
technician time beyond that agreed to in writing. Bank charges and earnings
credit will be billed directly to the Fund by United Missouri Bank (or other
banks). The Transfer Agent may require the prior payment of anticipated out-of-
pocket expenses, from time to time.
- ---------
* Payable on a monthly basis for each non-retirement plan account in
existence at the end of the month. Retirement Plan accounts may be subject to a
separate fee schedule to be negotiated.
** The determination of the number of accounts for purposes of determining the
per account fee shall be based on all Nuveen Funds using the same fee schedule
and shall be allocated on a Fund by Fund basis in a manner determined by the
Transfer Agent based on the number of accounts in each fund.
The Transfer Agent shall, from time to time, but no more frequently than
monthly, send an invoice to the Fund itemizing the compensation and expense
reimbursement. The Fund shall pay such invoice (except to the extent that the
amount thereof is in dispute) by wire not later than 30 days after receipt of
the invoice.
<PAGE>
Exhibit j
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated _____ __, 1998, and to all references to our Firm included in or made a
part of this registration statement of Nuveen Flagship Municipal Trust.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August __, 1998
<PAGE>
EXHIBIT z(1)
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Timothy R. Schwertfeger
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Anthony T. Dean
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Lawrence H. Brown
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) her true and lawful attorney-in-fact and agent, for her on her
behalf and in her name, place and stead, in any and all capacities, to sign,
execute and affix her seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as she might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set her hand this 30th day of January, 1997.
/s/ Anne E. Impellizzeri
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be her voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) her true and lawful attorney-in-fact and agent, for her on her
behalf and in her name, place and stead, in any and all capacities, to sign,
execute and affix her seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as she might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set her hand this 30th day of January, 1997.
/s/ Margaret K. Rosenheim
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be her voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Peter R. Sawers
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ Robert P. Bremner
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------
POWER OF ATTORNEY
-------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-1A, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 30th day of January, 1997.
/s/ William J. Schneider
----------------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 30th day of January, 1997, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
----------------------------------------
My Commission Expires: 10/26/97
<PAGE>
NUVEEN FLAGSHIP MUNICIPAL TRUST
---------------
POWER OF ATTORNEY
---------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, BRUCE P. BEDFORD, LARRY W. MARTIN, GIFFORD R.
ZIMMERMAN, AND THOMAS S. HARMAN each of them (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, for him on his behalf
and in his name, place and stead, in any and all capacities, to sign, execute
and affix his seal thereto and file one or more Registration Statements on Form
N-1A, under the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in order to effectuate
the same as fully to all intents and purposes as he might or could do if
personally present, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 1st day of July, 1997.
/s/ Judith M. Stockdale
------------------------------
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 1st day of July, 1997, personally appeared before me, a Notary Public in
and for said County and State, the person named above who is known to me to be
the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/26/97
- --------------------------------
/s/ Virginia L. Corcoran
------------------------------
My Commission Expires: 10/26/97
<PAGE>
EXHIBIT Z(2)
Certified Resolution
The undersigned, Gifford R. Zimmerman, hereby certifies, on behalf of Nuveen
Flagship Municipal Trust (the "Fund"), (1) that he is the duly elected,
qualified and acting Assistant Secretary of the Fund, and that as such Assistant
Secretary he has custody of its corporate books and records, (2) that attached
to this Certificate is a true and correct copy of a resolution duly adopted by
the Board of Trustees of the Fund at a meeting held on January 22, 1998, and (3)
that said resolution has not been amended or rescinded and remains in full force
and effect.
____ __, 1998
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Assistant Secretary
<PAGE>
FURTHER RESOLVED, that each member of the Board and officer of the Fund who may
be required to execute the registration statement on Form N-1A, or any amendment
or amendments thereto, be, and each of them hereby is, authorized to execute a
power of attorney appointing Timothy R. Schwertfeger, Anthony T. Dean, Bruce P.
Bedford, Larry W. Martin, Gifford R. Zimmerman, and Thomas S. Harman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the registration statement, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done, as fully to all intents and purposes as he might or could
do in person, and ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
