<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1998.
1933 ACT REGISTRATION NO. 333-14725
1940 ACT REGISTRATION NO. 811-07873
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
<TABLE>
<CAPTION>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
<S> <C>
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 3 [X]
</TABLE>
(Check appropriate box or boxes)
----------------
NUVEEN FLAGSHIP MUNICIPAL TRUST
(Exact name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, 60606
Illinois
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 917-7700
With a copy to:
Gifford R. Zimmerman, Esq.--Vice Thomas S. Harman
President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606 Morgan, Lewis & Bockius LLP
(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
to paragraph (b) [X]
on August 28, 1998 pursuant to
[_] paragraph (a)(1)
on (date) pursuant to paragraph
(b) [_]75 days after filing pursuant
to paragraph (a)(2)
[_]
60 days after filing pursuant to
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 LOCATION IN STATEMENT
OF FORM N-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
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 25 Indemnification
26 Business and Other Connections of 26 Business and Other Connections of the
the Investment Adviser Investment Adviser
27 Principal Underwriters 27 Principal Underwriters
28 Location of Accounts and Reports 28 Location of Accounts and Reports
29 Management Services 29 Management Services
30 Undertakings 30 Undertakings
</TABLE>
<PAGE>
PART A--PROSPECTUS
NUVEEN FLAGSHIP MUNICIPAL TRUST
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
NUVEEN
Municipal
Bond Funds
August 28, 1998
Prospectus
Dependable, tax-free income
to help you keep more of
what you earn.
National
Like all mutual fund shares
these securities have not
been approved or disapproved
by the Securities and Exchange
Commission or any state securi-
ties 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
- -----------------------------
[PHOTO]
<PAGE>
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
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 18
- -----------------------------------------------------------------
Management Fees 19
- -----------------------------------------------------------------
What Securities We Invest In 19
- -----------------------------------------------------------------
How We Select Investments 21
- -----------------------------------------------------------------
What the Risks Are 21
- -----------------------------------------------------------------
How We Manage Risk 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 26
- -----------------------------------------------------------------
Systematic Investing 26
- -----------------------------------------------------------------
Special Services 28
- -----------------------------------------------------------------
How to Sell Shares 28
- -----------------------------------------------------------------
Section 4 General Information
This section summarizes the funds' distribution policies and other general fund
information.
Distributions and Taxes 30
- -----------------------------------------------------------------
Distribution and Service Plans 31
- -----------------------------------------------------------------
Net Asset Value 32
- -----------------------------------------------------------------
Fund Service Providers 32
- -----------------------------------------------------------------
Section 5 Financial Highlights
This section provides the funds' financial performance for the past 5 years.
<PAGE>
August 28, 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 one of the Nuveen Mutual Funds listed above may be right for
you. Please read it carefully before investing and keep it for future reference.
To learn more about how Nuveen Mutual Funds can help you achieve your financial
goals, talk with your financial adviser. Or call us at (800) 257-8787 for more
information
A Century of Investment Experience
Since our founding in 1898, John Nuveen & Co. Incorporated has been synonymous
with investments that withstand the test of time. Today we offer a broad range
of quality investments designed for individuals seeking to build and maintain
wealth.
Section 1 The Funds 1
<PAGE>
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. As with any mutual fund investment, loss
of money is a risk of investing.
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;
How the Fund Has Performed
The fund's portfolio manager is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
annual fund returns for each of the past ten years as well as annualized fund,
peer group and market benchmark returns for the one-, five- and ten-year periods
ending December 31, 1997. This information is intended to help you assess the
potential rewards and risks of a fund investment. Of course, past results do not
predict future performance.
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.
Average Annual Total Returns for
the Periods Ending
December 31, 1997
--------------------------------
Class 1 Year 5 Years 10 Years
- ----------------------------------------------
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%
- ----------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 9.39% 7.03% 8.35%
40 Section 1 The Funds
<PAGE>
How the Fund Has Performed (cont.)
Growth of a $10,000 Investment/1/
May 1, 1998-April 30, 1998
[Graph appears here]
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 1,547, 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,
(see "Financial Highlights" for dates), 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% 6.13% 8.00%
Class C 7.73% 6.24% 7.80%
Class R 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,
(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, 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,
(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-
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,
(see "Financial Highlights" for dates), 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,
(see "Financial Highlights" for dates), 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/8/ (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/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 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/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 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. In this capacity,
Nuveen Advisory, 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>
For the most recent fiscal year, the funds paid the following management fees to
Nuveen Advisory, as a percentage of average net assets:
<TABLE>
<S> <C>
Municipal Bond Fund .45
Insured Fund .48
All-American Fund .49
Limited Term Fund .26
Intermediate Fund .44
</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.
Section 2 How We Manage Your Money 19
<PAGE>
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the funds will only purchase these bonds where the issuer has a
strong incentive to continue making appropriations until maturity.
Quality Municipal Bonds
The funds purchase only quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of
purchase or are non-rated but judged to be investment grade by the funds'
investment adviser. Each fund 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 maintain 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 See: "How We Manage Risk-Hedging and
other Defensive Investment Strategies." The funds may invest in short-term, high
quality taxable securities if suitable short-term municipal bonds are not
available at reasonable prices and yields. For more information on eligible
short-term investments, see the Statement of Additional Information.
Delayed Delivery Transactions
The funds may buy or sell securities on a when-issued or delayed-delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15 to 45 days of the trade. Such transactions involve an
20 Section 2 How We Manage Your Money
<PAGE>
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 creditworthiness of each fund's
municipal investments, and analyze economic, political and demographic trends
affecting the municipal markets. We utilize these resources to identify
municipal obligations with favorable characteristics we believe are not yet
recognized by the market. We then select those higher-yielding and undervalued
municipal obligations that we believe represent the most attractive values.
Portfolio Turnover
A fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The funds intend to keep portfolio turnover relatively
low in order to reduce trading costs and the realization of taxable capital
gains. Each fund, however, may make limited short-term trades to take advantage
of market opportunities or reduce market risk.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund -- even the most
conservative -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in these funds. Because of
these and other risks, you should consider an investment in any of these funds
to be a long-term investment.
Interest rate risk: the risk that the value of the fund's portfolio will decline
because of rising market interest rates (bond prices move in the opposite
direction of interest rates). The longer the average maturity (duration) of a
fund's portfolio, the greater its interest rate risk. See "What Securities We
Invest In Portfolio Maturity."
Income risk: the risk that the income from the fund's portfolio will decline
because of falling market interest rates. This can result when the fund invests
the proceeds from new share sales, or from matured or called bonds, at market
interest rates that are below the portfolio's current earnings rate.
Credit risk: the risk that an issuer of a bond is unable to meet its obligation
to make interest and principal payments due to changing market conditions.
Generally, lower rated bonds provide higher current income but are considered to
carry greater credit risk than higher rated bonds.
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
Section 2 How We Manage Your Money 21
<PAGE>
inflation increases, the value of the funds' assets can decline as can the value
of the funds' distributions.
How We Manage Risk
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. The funds limit this
investment risk generally by restricting the type and maturities of municipal
bonds they purchase, and by diversifying their investment portfolios
geographically as well as across different industry sectors.
Investment Limitations
The funds have adopted certain investment limitations (based on total assets)
that cannot be changed without shareholder approval and are designed to limit
your investment risk and maintain portfolio diversification. Each fund may not
have more than:
- 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 and other
features. Your financial adviser can help you determine which class is best for
you. We offer a number of features for your convenience. Please see the
Statement of Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or Class R shares, you
should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge (CDSC) would apply upon
redemption;
. the amount of any distribution or service fees that you may incur while
you own the shares;
. whether you will be reinvesting income or capital gain distributions in
additional shares;
. whether you qualify for a sales charge waiver or reduction.
For a summary of the charges and expenses for each class, please see 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 Nuveen Municipal Bond Fund, Nuveen Insured
Municipal Bond Fund, and Nuveen Flagship All-American Municipal Bond 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 the other
classes.
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
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 and directors of Nuveen or employees of authorized dealers
. Bank trust departments
Class R Eligibility
. Certain employees and directors of Nuveen or employees of 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
normally ends at 4 P.M. New York time.
Through a Financial Adviser
You may buy shares through your financial adviser, who can handle all the
details for you, including opening a new account. Financial advisers can also
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisers generally can help you develop a
customized financial plan, select investments and monitor and review your
portfolio on an ongoing basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisers are paid either from fund
sales charges and fees or by charging you a separate fee in lieu of a sales
charge for ongoing investment advice and services. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Investor Services,
P.O. Box 5186, 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 "Special Services--Fund Direct" below),
paid to a third party or sent payable to you at an address other than your
address of record. You must complete the appropriate section of the account
application or Account Update Form to participate in the fund's systematic
withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for the same class of another Nuveen mutual fund available in your state. Your
exchange must meet the minimum purchase requirements of the fund into which you
are exchanging. 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, Nuveen Investor Services, 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
monthly to shareholders of record as of the ninth of each month, payable the
first business day of the following month.
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial adviser or
call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the funds invest in municipal bonds, the regular monthly dividends you
receive will be exempt from regular federal income tax. All or a portion of
these dividends, however, may be subject to state and local taxes or to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how
long you have owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains, including any percentage of your fund
dividends attributable to municipal obligations, that you were paid during the
prior year. You will receive this statement from the firm where you purchased
your fund shares if you hold your investment in street name. Nuveen will send
you this statement if you hold your shares in registered form. The tax status of
your dividends is not affected by whether you reinvest your dividends or
receive them in cash. If you receive social security benefits, you should be
aware that any tax-free income is taken into account in calculating the amount
of these benefits that may be subject to federal income tax.
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 & 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
Authorized Dealers, including Nuveen, for providing account services to
Section 4 General Information 31
<PAGE>
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 price you pay for your shares is based on the fund's net asset value
per share which is determined as of the close of trading (normally 4:00
p.m. eastern time) on each day the New York Stock Exchange is open for
business. Net asset value is calculated for each class by taking the fair
value of the class' total assets, including interest or dividends accrued
but not yet collected, less all liabilities, and dividing by the total
number of shares outstanding. The result, rounded to the nearest cent, is
the net asset value per share. All valuations are subject to review by
the funds' Board of Trustees or its delegate.
In determining net asset value, expenses are accrued and applied daily
and securities and other assets for which market quotations are
available are valued at market value. 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(a) Gain (Loss) Total Income Gains Total Value Return(b) (000) Assets(a) Assets(a) 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(c) 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(e) 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(c) 9.24 .09 (.11) (.02) (.07) -- (.07) 9.15 (.25) 468 1.53* 4.39* 2
1997(e) 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(c) 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(e) 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(c) 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) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) For the two months ended April 30.
(d) For the fiscal year ending February 28/29.
(e) From commencement of class operations as noted through February 28/29.
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(a) Gain (Loss) Total Income Gains Total Value Return(b) (000) Assets(a) Assets(a) 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(c) 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(e) 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(c) 10.82 .09 (.16) (.07) (.08) -- (.08) 10.67 (.65) 488 1.59* 4.36* 12
1997(e) 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(c) 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(e) 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(c) 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) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) For the two months ended April 30.
(d) For the fiscal year ending February 28/29.
(e) From commencement of class operations as noted through February 28.
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(a) Gain (Loss) Total Income Gains Total Value Return(b) (000) Assets(a) Assets(a) 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(c) 10.67 .55 .29 .84 (.55) (.06) (.61) 10.90 8.02 216,575 .87+ 5.54+ 39
1996(d) 10.79 .61 (.12) .49 (.61) -- (.61) 10.67 4.64 207,992 .83 5.60 79
1995(d) 10.61 .63 .18 .81 (.63) -- (.63) 10.79 8.01 185,495 .76 6.02 71
1994(d) 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(e) 10.98 .12 (.06) .06 (.13) -- (.13) 10.91 .54 711 1.55+ 4.83+ 39
Class C (6/93)
1998 10.89 .53 .52 1.05 (.54) (.09) (.63) 11.31 9.75 62,336 1.36 4.72 20
1997(c) 10.66 .50 .29 .79 (.50) (.06) (.56) 10.89 7.48 54,850 1.42+ 4.99+ 39
1996(d) 10.78 .55 (.12) .43 (.55) -- (.55) 10.66 4.07 47,314 1.37 5.05 79
1995(d) 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(e) 10.99 .15 (.07) .08 (.16) -- (.16) 10.91 .69 183 .61+ 5.95+ 39
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the 11 months 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) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge,
and are not annualized except where noted.
(c) For the 11 months ending April 30.
(d) For the year ending May 31.
(e) From commencement of class operations as noted through April 30.
(f) From commencement of class operations as noted through 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(a) Gain (Loss) Total Income Gains Total Value Return(b) (000) Assets(a) Assets(a) 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 $.52 $ -- $(.52) $10.88 8.97% $42,339 .79% 4.76% 20%
1997(c) 10.27 .47 .20 .67 (.47) -- (.47) 10.47 6.64 40,906 .68+ 4.96+ 26
1996(d) 10.29 .51 (.02) .49 (.51) -- (.51) 10.27 4.84 46,742 .62 4.86 81
1995(d) 10.16 .51 .13 .64 (.51) -- (.51) 10.29 6.63 42,069 .54 5.15 102
1994(d) 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 20
1997(c) 10.28 .44 .17 .61 (.42) -- (.42) 10.47 6.00 2,540 1.23+ 4.38+ 26
1996(f) 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 (.54) -- (.54) 10.86 9.17 602 .59 4.95 20
1997(e) 10.60 .13 (.15) (.02) (.13) -- (.13) 10.45 (.15) 469 .40+ 5.40+ 26
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the 11 months ending April 30, 1997, reflects
the financial highlights of Flagship Intermediate.
+++ The amount shown includes a distribution in excess of capital gains of $.01
per share.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) For the 11 months ending April 30.
(d) For the year ending May 31.
(e) From commencement of class operations as noted through April 30.
(f) From commencement of class operations as noted through 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(a) Gain (Loss) Total Income Gains Total Value Return(b) (000) Assets(a) Assets(a) 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 30%
1997(c) 10.57 .46 .04 .50 (.46) -- (.46) 10.61 4.78 425,401 .80+ 4.76+ 29
1996(d) 10.65 .51 (.09) .42 (.50) -- (.50) 10.57 4.03 489,157 .79 4.77 39
1995(d) 10.60 .51 .04 .55 (.50) -- (.50) 10.65 5.41 569,196 .74 4.88 20
1994(d) 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(c) 10.56 .44 .03 .47 (.43) -- (.43) 10.60 4.49 23,551 1.11+ 4.44+ 29
1996(f) 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 4.86 30
1997(e) 10.73 .12 (.13) (.01) (.13) -- (.13) 10.59 (.09) 40 .55+ 5.07+ 29
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the 11 months ending April 30, 1997, reflects
the financial highlights of Flagship Limited Term.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) For the 11 months ending April 30.
(d) For the year ending May 31.
(e) From commencement of class operations as noted through April 30.
(f) From commencement of class operations as noted through 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
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) 257-8787 to request a free copy of any of
these materials or other fund information.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549.
1. Long-term and insured long-term portfolios.
2. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
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 rating 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 potentially above-
average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk 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. As with any mutual fund investment,
loss of money is a risk of investing.
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
The fund's portfolio manager is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
annual fund returns for each of the past ten years as well as annualized fund,
peer group and market benchmark returns for the one-, five- and ten-year periods
ending December 31, 1997. This information is intended to help you assess the
potential rewards and risks of a fund investment. Of course, past results do not
predict future performance.
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.
Average 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%
- --------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 9.39% 7.03% 8.35%
40 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge imposed
On Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None 5%/9/ 1%/10/ None
</TABLE>
Annual Fund Operating Expenses/11/
Paid From Fund Assets
<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 Operating Expenses .80% 1.56% 1.35% .60%
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you invest
$10,000 in the fund for the time period indicted and then either redeem your
shares at the end of a period. The example assumes that your investment has a 5%
return each year and that the fund's operating expenses remain the same. Your
actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 498 $ 554 $ 137 $ 61 $ 498 $ 159 $ 137 $ 61
3 Years $ 665 $ 812 $ 428 $192 $ 665 $ 493 $ 428 $192
5 Years $ 846 $ 965 $ 739 $335 $ 846 $ 850 $ 739 $335
10 Years $1,368 $1,652 $1,624 $750 $1,368 $1,652 $1,624 $750
</TABLE>
<TABLE>
<CAPTION>
How the Fund Is Invested (as of 4/30/98)
Portfolio Statistics
<S> <C>
Weighted Average Maturity 18.7 years
Weighted Average Duration 6.8 years
Weighted Average Credit Quality AA
Number of Issues 198
</TABLE>
<TABLE>
<CAPTION>
Credit Quality
<S> <C>
AAA 40.3%
AA 34.9%
A 18.6%
BBB 5.9%
NR/Other 0.3%
</TABLE>
<TABLE>
<CAPTION>
Industry Diversification (Top 5)
[Chart appears here]
<S> <C>
Utilities 25%
Health Care 19%
U.S. Guaranteed 11%
Water/Sewer 10%
Tax Obligation-Limited 8%
Other 27%
</TABLE>
1. Class R total returns reflect actual performance for all periods; Classes
A, B and C total returns reflect actual performance for periods since class
inception, (see "Financial Highlights" for dates), and Class R performance
for periods prior to class inception, adjusted for the differences in fees
between the classes (see What are the Costs of Investing?). The year-to-
date return as of 3/31/98 was 1.18%. The bar chart and highest/lowest
quarterly returns do not reflect sales charges, which would reduce returns,
while the 1-,5- and 10-year annual return table does.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns reflect the performance of the Lipper 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.
Returns assume reinvestment of dividends and do not reflect any applicable
sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced Class A sales charges apply to purchases of $50,000 or more. See
"How You Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 41
<PAGE>
AUGUST 28, 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 28, 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-17
Investment Adviser and Investment Management Agreement..................... S-27
Portfolio Transactions..................................................... S-28
Net Asset Value............................................................ S-29
Tax Matters................................................................ S-30
Performance Information.................................................... S-34
Additional Information on the Purchase and Redemption of Fund Shares....... S-43
Distribution and Service Plan.............................................. S-51
Independent Public Accountants and Custodian............................... S-53
Financial Statements....................................................... S-53
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Description of Hedging Techniques.............................. B-1
</TABLE>
The audited financial statements for each Fund's most recent fiscal year
appear in the Funds' Annual Reports. The Annual Reports accompany this
Statement of Additional Information.
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
INVESTMENT POLICIES
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of that Fund:
(1) Invest in securities other than Municipal Obligations and 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.
S-2
<PAGE>
(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
S-3
<PAGE>
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, and (3) temporary investments as described below, the
income from which may be subject to state income tax or to both federal and
state income taxes. See Appendix A for more information about ratings by
Moody's, S&P, and Fitch.
As described in the Prospectus, each Fund may invest in Municipal Obligations
that constitute participations in a lease obligation or installment purchase
contract obligation (hereafter collectively called "lease obligations") of a
municipal authority or entity. Although lease obligations do not constitute
general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although nonappropriation lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. A Fund will seek to minimize the special
risks associated with such securities by only investing in those
nonappropriation leases where Nuveen Advisory has determined that the issuer
has a strong incentive to continue making appropriations and timely
S-4
<PAGE>
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.
S-5
<PAGE>
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
S-6
<PAGE>
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.
S-7
<PAGE>
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
S-8
<PAGE>
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 1997 and 1998 fiscal
year-end of each Fund as indicated, were
<TABLE>
<CAPTION>
FISCAL
YEAR
-----------
1997 1998
---- ----
<S> <C> <C>
Nuveen Municipal Bond Fund.................................... 12%* 10%
Nuveen Insured Municipal Bond Fund............................ 35%* 40%
Nuveen Flagship All-American Municipal Bond Fund.............. 39%** 20%
Nuveen Flagship Intermediate Municipal Bond Fund.............. 26%** 20%
Nuveen Flagship Limited Term Municipal Bond Fund.............. 29%** 30%
</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 Trustee 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 Trustee 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 58 Trustee PrivaTrusteetor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- -------------------------------------------------------------------------------
Lawrence H. Brown 63 Trustee Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company
- -------------------------------------------------------------------------------
Anne E. Impellizzeri 65 Trustee 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 Trustee 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 Trustee 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 Trustee 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 41 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.
- -------------------------------------------------------------------------------
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 43 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 41 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Larry W. Martin 47 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.
- -------------------------------------------------------------------------------
Edward F. Neild, IV 33 Vice President Vice President (since September
333 West Wacker Drive 1996), previously Assistant Vice
Chicago, IL 60606 President (since December 1993)
of Nuveen Advisory Corp.,
Portfolio Manager prior thereto;
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.
</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>
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. 47 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 64 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 33 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.
- -------------------------------------------------------------------------------
Gifford R. Zimmerman 41 Vice President and Vice President, Assistant
333 West Wacker Drive Secretary Secretary and Associate General
Chicago, IL 60606 Counsel formerly Assistant
General Counsel of John Nuveen
& Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen Advisory
Corp.; Vice President 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........................ $12,332 $66,446
Lawrence H. Brown........................ $13,496 $79,000
Anne E. Impellizzeri..................... $12,332 $73,000
Margaret K. Rosenheim.................... $ 5,170(1) $29,506(2)
Peter R. Sawers.......................... $12,332 $73,000
William J. Schneider..................... $12,332 $66,446
Judith M. Stockdale...................... $ 8,530(3) $49,000(3)
</TABLE>
- --------
(1) Includes $292 in interest accrued on deferred compensation from prior
years; former Trustee, retired July 1997.
(2) Includes $1,256 in interest accrued on deferred compensation from prior
years.
(3) 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 July 22, 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. 6.58%
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>
Donaldson Lufkin Jenrette 5.95
Securities Corporation Inc
PO Box 2052
Jersey City NJ 07303-9998
MLPF&S 12.92
For the Benefit of
Its Customers
Attn: Fund Admn/#97NBD
4800 Deer Lake Dr E Fl 3
Jacksonville FL 32246-6484
Prudential Securities Inc. 5.18
FBO
L Deane Shepard
11590 N Meridian St
Carmel IN 46032-4529
Nuveen Municipal Bond Fund
Class C Shares................ Donaldson Lufkin Jenrette 5.13%
Securities Corporation Inc
PO Box 2052
Jersey City NJ 07303-9998
MLPF&S 5.54
For the Benefit of
Its Customers
Attn: Fund Admn/#97GX9
4800 Deer Lake Dr E Fl 3
Jacksonville FL 32246-6484
David W. Elliott Tr 8.88
U/A 03/03/94
David W. Elliott Rev Trust
1291 Sunniwood Pl
Rochester MI 48306-2474
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 14.75%
Attn: Fund Admn
4800 Deer Lake Dr E FL 5
Jacksonville, FL 32246-6484
Elizabeth W. Arnold 5.12
P.O. Box 263
Winfield, IL 60190-0263
Ruth Martin 5.02
9240 Lehigh Ave
Morton Grove, IL 60053-2310
PRUDENTIAL SECURITIES INC. FBO 7.34
Mr. Joseph J. Gurnaby TTEE
UW James Cozzi Residuary Trust
% Richard Green
464 N. Lake St
Mundelein, IL 60060-1825
Raymond James & Assoc. INC 5.21
For Margin Acct#14818799
FAO Hubert F. Brown &
Dyan C. Brown JTWROS
241 River Pointe Cir NE
Charleston, TN 37310-6113
Nuveen Insured Municipal Bond
Fund Class C Shares........... NFSC FEBO #041-686468 5.09
Harrie L. Barbara Day Living Trust
Harrie L. Day
UA 091394
23406 Candlewood Way
West Hills, CA 91307
MLPF&S for the Benefit of its Customers 10.20
Attn: Fund Admn/#97 GW6
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
FIRST ALBANY CORPORATION 5.01
AC 7266-3620
Eugene Santacattarina and
30 So Pearl Street
Albany, NY 12207
</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 37.84%
& 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 37.51%
& 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 C
Shares........................ Merrill Lynch, Pierce, Fenner 59.12%
& 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 60.69%
1761 Buttonbush Circle
Palm City, FL 34990-8093
James R. Williams 10.07%
Nancy S. Williams JT Wros
3988 Paradise Rd Ctr H
Las Vegas, NV 89109-0930
Edna Bennett Pierce 5.00%
Edna P. Bennett Rev Trust
U/A DTD 1-15-87
1201 Snuff Mill Rd.
Wilmington, DE 19807-1043
</TABLE>
S-24
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Intermediate
Municipal Bond Fund Class A
Shares........................ Merrill Lynch, Pierce, Fenner 26.66%
& 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 56.28%
& 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 69.59%
U/A Jul 26 89
Patricia G. Diemer Trust
950 Hawthorne Ln
Northbrook, IL 60062-3417
Merrill Lynch, Pierce, Fenner 9.60%
& Smith for the sole benefit
of its Customers
Attn: Fund Administration
SPC #97805
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
Dorothy L. Weber 5.81%
Sterling L. Rice JT Wros
230 Willowbrook CT Ste 1
Wilder, KY 41071-3320
R. G. Van Moppes TTER 8.70%
U/A Dtd Feb 4 85
Russell G. Van Moppes
Living Trust
P.O. Box 97308
Bellevue, WA 98009-9308
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Limited Term
Municipal Bond Fund Class A
Shares........................ Merrill Lynch, Pierce, Fenner 28.24%
& 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 41.30%
& 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........................ Karen M. Bergan 15.21%
2109 Northwestern Ave.
Ames, IA 50010-4524
Books & Video Productions Inc. 28.34
Karen Bergan VP
2730 Graham St.
Ames IA 50010-7700
Edna Bennett Pierce 23.44
Edna P Bennett Rev Trusts
U/A DTD 1-15-87
1201 Snuff Mill Rd.
Wilmington DE 19807-1043
George A Paulik Jr. 14.19
Janice L Paulik Jt Wros
409 Bonnie Brae Rd.
Hinsdale, IL 60521-2815
</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
--------------------------------- ------------------------
2/29/96 2/28/97* 4/30/98 2/29/96 2/28/97* 4/30/98
----------- ---------- ---------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Municipal Bond
Fund................... $12,797,372 12,969,912 13,208,603 $4,313 0 0
Nuveen Insured Municipal
Bond Fund.............. 3,756,793 3,795,515 3,921,179 1,303 0 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
------------------------------ -------------------------
5/31/96 4/30/97* 4/30/98 5/31/96 4/30/97* 4/30/98
---------- --------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
All-American Fund..... $ 644,844 948,683 1,429,247 $588,351 269,587 0
Intermediate Fund..... 0 781 113,797 269,930 216,714 109,859
Limited Term Fund..... 1,259,810 1,406,439 2,018,209 332,579 75,003 0
</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 $37 billion in taxable and 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 $38 billion in tax-exempt
securities under management as of the date of this Statement. Over 1,300,000
individuals have invested to date in Nuveen's 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 LLP, counsel to the Trust.
Each Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, a Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, a Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second, 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, 1998
--------------------------------
FEDERAL TAXABLE
YIELD TAX RATE* EQUIVALENT YIELD
----- --------- ----------------
<S> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares....................... 4.15% 39.6% 6.87%
Class B Shares....................... 3.57% 39.6% 5.91%
Class C Shares....................... 3.77% 39.6% 6.24%
Class R Shares....................... 4.53% 39.6% 7.50%
Nuveen Insured Municipal Bond Fund
Class A Shares....................... 3.89% 39.6% 6.44%
Class B Shares....................... 3.31% 39.6% 5.48%
Class C Shares....................... 3.51% 39.6% 5.81%
Class R Shares....................... 4.27% 39.6% 7.07%
Nuveen Flagship All-American Municipal
Bond Fund
Class A Shares....................... 4.33% 39.6% 7.17%
Class B Shares....................... 3.77% 39.6% 6.24%
Class C Shares....................... 3.97% 39.6% 6.57%
Class R Shares....................... 4.73% 39.6% 7.83%
Nuveen Flagship Intermediate Municipal
Bond Fund
Class A Shares....................... 3.90% 39.6% 6.46%
Class C Shares....................... 3.47% 39.6% 5.75%
Class R Shares....................... 4.23% 39.6% 7.00%
Nuveen Flagship Limited Term Municipal
Bond Fund
Class A Shares....................... 3.66% 39.6% 6.06%
Class C Shares....................... 3.41% 39.6% 5.65%
Class R Shares....................... 3.96% 39.6% 6.56%
</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, 1998
DISTRIBUTION RATES
-------------------------------
CLASS A CLASS B CLASS C CLASS R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund............... 4.56% 4.00% 4.19% 4.95%
Nuveen Insured Municipal Bond Fund....... 4.64% 4.08% 4.29% 5.03%
Nuveen Flagship All-American Municipal
Bond Fund............................... 4.97% 4.45% 4.67% 5.41%
Nuveen Flagship Intermediate Municipal
Bond Fund............................... 4.49% N/A 4.08% 4.81%
Nuveen Flagship Limited Term Municipal
Bond Fund............................... 4.60% N/A 4.39% 4.95%
</TABLE>
Average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation
assumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Total returns for 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, 1998, and for the period from inception through April 30, 1998,
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,
1998 30, 1998 1998 1998
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares................ 4.43% 5.16% 7.26% 6.82%
Class B Shares................ 4.09% 5.18% 7.12% 6.76%
Class C Shares................ 8.20% 5.29% 6.93% 6.24%
Class R Shares................ 9.09% 6.31% 7.98% 7.29%
</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, 1998, and for the period from inception through April
30, 1998, 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,
1998 1998 1998 1998
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Insured Municipal Bond
Fund
Class A Shares.............. 4.45% 5.17% 7.87% 7.15%
Class B Shares.............. 4.14% 5.11% 7.69% 7.02%
Class C Shares.............. 8.39% 5.22% 7.49% 6.71%
Class R Shares.............. 9.17% 6.25% 8.55% 7.78%
</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, 1998, and for the period from inception through April 30, 1998,
respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-----------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
APRIL APRIL 30, APRIL 30,
30, 1998 1998 1998
-------- ---------- ---------
<S> <C> <C> <C>
Nuveen Flagship All-American Municipal
Bond Fund
Class A Shares......................... 5.67% 6.04% 8.29%
Class B Shares......................... 5.51% 6.18% 8.28%
Class C Shares......................... 9.75% 6.35% 8.17%
Class R Shares......................... 10.45% 7.00% 8.80%
</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 and five-year periods ended April 30, 1998, and for the period
from inception through April 30, 1998, respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
------------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30,
1998 1998 1998
--------- ---------- ---------
<S> <C> <C> <C>
Nuveen Flagship Intermediate Municipal
Bond Fund
Class A Shares........................ 5.74% 5.59% 6.67%
Class C Shares........................ 8.47% 5.67% 6.67%
Class R Shares........................ 9.17% 6.25% 7.26%
</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, five-year and ten-year periods ended April 30, 1998, and for
the period from inception through April 30, 1998, respectively, were as
follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
---------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
APRIL APRIL 30, APRIL 30, APRIL 30,
30, 1998 1998 1998 1998
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Flagship Limited Term
Municipal Bond Fund
Class A Shares............... 4.03% 4.40% 6.23% 6.36%
Class C Shares............... 6.33% 4.59% 6.17% 6.29%
Class R Shares............... 6.87% 4.95% 6.50% 6.63%
</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, 1998, and for the period since inception through April 30, 1998,
respectively, using the performance of the oldest class for periods prior to
the inception of the newer classes, as described above were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1998 1998 1998 1998
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares............... 4.43% 28.58% 101.47% 310.57%
Class B Shares............... 4.09% 28.71% 98.86% 305.48%
Class C Shares............... 8.20% 29.41% 95.40% 265.55%
Class R Shares............... 9.09% 35.80% 115.48% 351.64%
</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, 1998, and for the period since inception through April
30, 1998, respectively, using the performance of the oldest class for periods
prior to the inception of the newer classes, as described above were as
follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1998 1998 1998 1998
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Insured Municipal Bond
Fund
Class A Shares.............. 4.45% 28.67% 113.56% 118.97%
Class B Shares.............. 4.14% 28.28% 109.73% 115.95%
Class C Shares.............. 8.39% 28.94% 105.83% 109.09%
Class R Shares.............. 9.17% 35.42% 127.23% 134.12%
</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, 1998, and for the period since inception through April
30, 1998, respectively, using the performance of the oldest class for periods
prior to the inception of the newer classes, as described above were as
follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30,
1998 1998 1998
--------- ---------- ---------
<S> <C> <C> <C>
Nuveen Flagship All-American Municipal
Bond Fund
Class A Shares........................ 5.67% 34.09% 114.30%
Class B Shares........................ 5.51% 34.94% 114.12%
Class C Shares........................ 9.75% 36.07% 112.15%
Class R Shares........................ 10.45% 40.28% 124.23%
</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 and five-year periods ended April 30, 1998, and for
the period since inception through April 30, 1998, respectively, using the
performance of the oldest class for periods prior to the inception of the newer
classes, as described above were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------------
FROM
ONE YEAR FIVE YEARS INCEPTION
ENDED ENDED THROUGH
APRIL APRIL 30, APRIL 30,
30, 1998 1998 1998
-------- ---------- ---------
<S> <C> <C> <C>
Nuveen Flagship Intermediate Municipal
Bond Fund
Class A Shares......................... 5.74% 31.27% 43.78%
Class C Shares......................... 8.47% 31.78% 43.77%
Class R Shares......................... 9.17% 35.39% 48.25%
</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, five-year, and ten-year periods ended April 30, 1998,
and for the period since inception through April 30, 1998, respectively, using
the performance of the oldest class for periods prior to the inception of the
newer classes, as described above were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1998 1998 1998 1998
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Flagship Limited Term
Municipal Bond Fund
Class A Shares.............. 4.03% 24.01% 83.08% 91.46%
Class C Shares.............. 6.33% 25.18% 82.00% 90.12%
Class R Shares.............. 6.87% 27.30% 87.78% 96.50%
</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 1998, the annual
taxable equivalent total return for the Nuveen Municipal Bond Fund's Class R
Shares for the ten year period ended April 30, 1998, was 12.07%.
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.
Class A Shares may be purchased at a public offering price equal to the
applicable net asset value per share plus an up-front sales charge imposed at
the time of purchase as set forth in the Prospectus. Shareholders may qualify
for a reduced sales charge, or the sales charge may be waived in its entirety,
as described below. Class A Shares are also subject to an annual service fee of
.20%. See "Distribution and Service Plans." Set forth below is an example of
the method of computing the offering price of the Class A shares of a Fund. The
example assumes a purchase on April 30, 1998 of Class A shares from the Nuveen
Municipal Bond Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Prospectus at a price based upon the net asset
value of the Class A shares.
<TABLE>
<S> <C>
Net Asset Value per share.......................................... $9.46
Per Share Sales Charge--4.20% of public offering price (4.38% of
net asset value per share)........................................ .41
Per Share Offering Price to the Public............................. $9.87
</TABLE>
The Funds receive the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown in the Prospectus to Authorized Dealers.
S-43
<PAGE>
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>
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>
S-44
<PAGE>
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% (0.75%
and 0.50%, respectively, for the Intermediate and Limited Term Funds) of
the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25%
(0.50% for the Intermediate Fund) 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% (0.75% and 0.50%, respectively, for the
Intermediate and Limited Term Funds) 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 Nuveen exchange-traded 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 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 B or 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.
S-45
<PAGE>
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 initial investment in Class A
Shares of any particular Fund or portfolio for each participant is $3,000 and,
the minimum monthly investment in Class A Shares of any particular Fund or
portfolio by each participant in the program is $50. 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) 257-8787.
Reinvestment of Redemption Proceeds from Unaffiliated Funds. You may also
purchase Class A Shares at net asset value without a sales charge if the
purchase takes place through a broker-dealer and represents the reinvestment of
the proceeds of the redemption of shares of one or more registered investment
companies not affiliated with Nuveen. You must provide appropriate
documentation that the redemption occurred not more than one year prior to the
reinvestment of the proceeds in Class A Shares, and that you either paid an up-
front sales charge or were subject to a contingent deferred sales charge in
respect of the redemption of such shares of such other investment company.
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<PAGE>
Class A Shares of a Fund may be purchased at net asset value without a sales
charge, and may be purchased by the following categories of investors:
. investors purchasing $1,000,000 or more
. officers, trustees and former trustees of the Nuveen and Flagship Funds;
. bona fide, full-time and retired employees and directors 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.
. any eligible employer-sponsored qualified defined contribution retirement
plan. Eligible plans are those with at least 25 employees and which
either (a) make an initial purchase of one or more Nuveen Mutual Funds
aggregating $500,000 or more or (b) execute a Letter of Intent to
purchase in the aggregate $500,000 or more of fund shares. Nuveen will
pay Authorized Dealers a sales commission on such purchases equal to 1%
of the first $2.5 million, plus 2.5% of any amount purchased over $5.0
million. For this category of investors a contingent deferred sales
charge of 1% will be assessed on redemptions within 18 months of
purchase, unless waived. Municipal bond funds are not a suitable
investment for individuals investing in retirement plans.
Holders of Class C Shares acquired on or before January 31, 1997 can convert
those shares to Class A Shares of the same fund at the shareholder's
affirmative request six years after 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.
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
S-47
<PAGE>
sibling's spouse, and a spouse's siblings); or (3) all purchases made through a
group purchase program as described above.
Class R Share Purchase Eligibility. Class R Shares are available for
purchases of $2.5 million or more and for purchases using dividends and capital
gains distributions on Class R Shares. Class R Shares also are available for
the following categories of investors:
. officers, trustees and former trustees of the Nuveen and Flagship Funds
and their immediate family members or trustees/directors of any fund,
sponsored by Nuveen, any parent company of Nuveen and subsidiaries
thereof and their immediate family members;
. bona fide, full-time and retired employees and directors of Nuveen, any
parent company of Nuveen, and subsidiaries thereof, or their immediate
family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
. Any shares purchased by investors falling within any of the first four
categories listed above must be acquired for investment purposes and on
the condition that they will not be transferred or resold except through
redemption by the fund.
In addition, purchasers of Nuveen 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.
If you are eligible to purchase either Class R Shares or Class A Shares
without a sales charge at net asset value, you should be aware of the
differences between these two classes of shares. Class A Shares are subject to
an annual service fee to compensate Authorized Dealers for providing you with
ongoing account service. Class R Shares are not subject to a distribution or
service fee and, consequently, holders of Class R Shares may not receive the
sale types or levels of services from Authorized Dealers. In choosing between
Class A Shares and Class R Shares, you should weigh the benefits of the
services to be provided by Authorized Dealers against the annual service fee
imposed upon the Class A Shares.
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.
S-48
<PAGE>
REDUCTION OR ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
Class A Shares are normally redeemed at net asset value, without any
Contingent Deferred Sales Charge ("CDSC"). However, in the case of Class A
Shares purchased at net asset value on or after July 1, 1996 because the
purchase amount exceeded $1 million, where the Authorized Dealer did not waive
the sales commission, a CDSC of 1% is imposed on any redemption within 18
months of purchase. In the case of Class B Shares redeemed within six years of
purchase, a CDSC is imposed, beginning at 5% for redemptions within the first
year, declining to 4% for redemptions within years two and three, and declining
by 1% each year thereafter until disappearing after the sixth year. Class C
Shares are redeemed at net asset value, without any CDSC, except that a CDSC of
1% is imposed upon redemption of Class C Shares that are redeemed within 12
months of purchase.
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge, 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 systematic
withdrawal plan, up to 12% of the current market value. 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.
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<PAGE>
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.
The Funds have authorized one or more brokers to accept on their behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Funds' behalf.
The Funds will be deemed to have received a purchase or redemption order when
an authorized broker or, if applicable, a broker's authorized designee accepts
the order. Customer orders received by such broker (or their designee) will be
priced at the Funds' net asset value next computed after they are accepted by
an authorized broker (or their designee). Orders accepted by an authorized
broker (or their designee) before the close of regular trading on the New York
Stock Exchange will receive that day's share price; orders accepted after the
close of trading will receive the next business day's share price.
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
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<PAGE>
offering basis. Nuveen sells shares to or through brokers, dealers, banks or
other qualified financial intermediaries (collectively referred to as
"Dealers"), or others, in a manner consistent with the then effective
registration statement of the Trust. Pursuant to the Distribution Agreement,
Nuveen, at its own expense, finances certain activities incident to the sale
and distribution of the Funds' shares, including printing and distributing of
prospectuses and statements of additional information to other than existing
shareholders, the printing and distributing of sales literature, advertising
and payment of compensation and giving of concessions to Dealers. Nuveen
receives for its services the excess, if any, of the sales price of the Funds'
shares less the net asset value of those shares, and reallows a majority or all
of such amounts to the Dealers who sold the shares; Nuveen may act as such a
Dealer. Nuveen also receives compensation pursuant to a distribution plan
adopted by the Trust pursuant to Rule 12b-1 and described herein under
"Distribution and Service Plan." Nuveen receives any CDSCs imposed on
redemptions of Shares.
The aggregate amounts of underwriting commissions with respect to the sale of
Fund shares and the amount thereof retained by Nuveen (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, 1998 APRIL 30, 1997* FEBRUARY 29, 1996
------------------------ ------------------------ ------------------------
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................... 738 98 967 170 1,575 316
Nuveen Insured Municipal
Bond Fund.............. 563 86 687 56 880 97
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997** MAY 31, 1996
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
FUND COMMISSIONS NUVEEN COMMISSIONS FLAGSHIP COMMISSIONS FLAGSHIP
- ---- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Flagship All-
American Municipal Bond
Fund................... 586 56 456 61 557 74
Nuveen Flagship
Intermediate Municipal
Bond Fund.............. 92 15 73 16 137 28
Nuveen Flagship Limited
Term Municipal Bond
Fund................... 367 10 332 66 543 108
</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
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of record with respect to the Class B and Class C Shares, as well as, without
limitation, expenses of printing and distributing prospectuses to persons other
than shareholders of the Fund, expenses of preparing, printing and distributing
advertising and sales literature and reports to shareholders used in connection
with the sale of Class B and Class C Shares, certain other expenses associated
with the distribution of Class B and Class C Shares, and any distribution-
related expenses that may be authorized from time to time by the Board of
Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C
Shares under each Fund's Plan will be payable to Authorized Dealers in
connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to
shareholders.
Each Fund may spend up to .20 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .20 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. Each Fund may spend up to .55 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
.20 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
For the fiscal years ended April 30, 1998 100% of service fees and
distribution fees were paid out as compensation to authorized dealers.
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1998
----------------------
<S> <C>
Nuveen Municipal Bond Fund
Class A......................................... $168,211
Class B......................................... $20,535
Class C......................................... $35,175
Nuveen Insured Municipal Bond Fund
Class A......................................... $159,932
Class B......................................... $24,096
Class C......................................... $50,525
Nuveen Flagship All-American Municipal Bond Fund
Class A......................................... $448,070
Class B......................................... $37,097
Class C......................................... $444,993
Nuveen Flagship Intermediate Municipal Bond Fund
Class A......................................... $82,472
Class C......................................... $22,125
Nuveen Flagship Limited Term Municipal Bond Fund
Class A......................................... $870,789
Class C......................................... $155,040
</TABLE>
Under each Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest
S-52
<PAGE>
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 is 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-53
<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>
NUVEEN
Municipal
Bond Funds
April 30, 1998
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
National
National Insured
<PAGE>
Highlights
As of April 30, 1998
For Class A shares on net asset value
Credit Quality Performance Highlights
Nuveen Municipal Bond Fund
[Pie chart appears here]
AAA 40%
AA 35%
A 19%
BBB/NR 6%
. Competitive taxable equivalent yield of 6.28%
for investors in the 31% income tax bracket
. One-year total return of 9.00%
. Paralleled Lipper peer group average
Nuveen Insured Municipal Bond Fund
[Pie chart appears here]
Insured 73%
U.S.
Guaranteed 27%
. Competitive taxable equivalent yield of 5.88%
for investors in the 31% income tax bracket
. One-year total return of 9.05%
. Outperformed Lipper peer group average
Contents
1 Dear Shareholder
3 Municipal Bond Fund Commentary
and Overview
6 Insured Municipal Bond Fund Commentary and Overview
9 Report of Independent
Public Accountants
10 Portfolio of Investments
27 Statement of Net Assets
28 Statement of Operations
29 Statement of Changes in Net Assets
30 Notes to Financial Statements
35 Financial Highlights
40 Building Better Portfolios
41 Fund Information
Is it Time for a Financial Check-Up?
Now is a great time to sit down with your financial adviser and review your
financial plan. How can you make sure that your investment strategy is strong
enough to provide the income you need today and versatile enough to change as
your goals do? Here are some guidelines:
. Make sure you and your adviser understand your current situation. How have
your goals, objectives and risk profile changed? What are your current tax
concerns, interests, lifestyle?
. Revisit your current investment choices. If the value of one portion of your
portfolio has grown substantially, it may be time me to rebalance asset
classes.
. Determine how your asset mix will be implemented. Changing your asset
allocation is generally a gradual process. Make sure you and your adviser
have a clear understanding of each other's responsibilities. Define and
discuss what you want in terms of support from your adviser.
. Keep revisiting your plan. Don't assume that once you've revised your plan
and reallocated your portfolio the process is finished.
It's recommended that you meet at least once a year with your financial
adviser -- and usually more if there have been significant changes in interest
rates, tax laws, retirement plan distributions, lifestyle or health. Even if
things haven't changed, it makes good financial sense to keep in touch with your
adviser.
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to report that over the past 12 months, the Nuveen national
municipal bond funds continued to perform well and meet their objectives of
providing attractive tax-free income and after-tax total returns. As of April
30, 1998, Class A shareholders in the Nuveen Municipal Bond Fund and the Nuveen
Insured Municipal Bond Fund were receiving SEC yields on net asset value of
4.33% and 4.06%, respectively. To match these yields, investors in the 31%
federal income tax bracket would have to earn 6.28% and 5.88% on taxable
alternatives.
The declining interest rate environment over the past year had a significant
impact on the funds' performance. As the chart below illustrates, the yield on
the Bond Buyer 40, an unmanaged index of long-term municipal bonds, fell from
5.89% to 5.39% during the year. The decline reduced the funds' income levels, as
higher-yielding bonds that were called or sold from the portfolio had to be
replaced with bonds paying today's lower interest rates. As a result, the funds'
dividends were reduced slightly to reflect the level of income being earned by
the portfolios.
[Bond Buyer 40 chart appears here]
However, the decline in interest rates also had a positive impact on the funds
because many portfolio holdings appreciated in value during the period. Many of
the bonds in the portfolios have higher coupon rates than are available in
today's market, and the value of those bonds increased as rates trended
downward. The price appreciation resulting from this and other factors led to
the funds' strong total returns over the year.
The Economy in Review
The past 12 months were noteworthy for the ongoing performance of the equity
markets, which continued to exhibit remarkable strength. Fixed-income
investments also enjoyed bullish performance, as declining interest rates and
low inflation provided the ideal backdrop for a bond market rally. Much of the
decline in interest rates resulted from expectations that the financial problems
of Asia would restrain the prices of imported goods and reduce foreign demand
for U.S. products and services, thereby keeping inflation at moderate levels.
These inflation expectations were largely fulfilled, as the Consumer Price Index
rose only 1.4% for the 12 months ended April 1998, remaining at one of its
lowest levels in more than 30 years.
In coming months, we will continue to closely watch several key factors that are
likely to affect the future of the
1
<PAGE>
Nuveen offers an ever-expanding range of products designed to help investors
build a diversified, tax-efficient portfolio.
economy, including demand for goods and services, changes in U.S. production
capacity, the availability of qualified employees, and stability of the money
supply. While it is still too early for the full impact of Asia's financial
difficulties to show up in U.S. economic statistics, the potential long-term
effect of this crisis on American markets is of special concern. We expect that
the development of these factors will continue to influence the tone of the
fixed-income markets during the remainder of the year.
Building Better Portfolios
As economic events unfold, we believe that many investors will find
diversification to be an increasingly important investment strategy. An
appropriately diversified portfolio that is invested in a variety of asset
classes that each react differently to changes in the economic environment can
help cushion your portfolio against risk.
Many investors select Nuveen municipal bond funds because their emphasis on
dependable tax-free income and attractive after-tax returns makes them ideal for
building and maintaining long-term financial security. These funds can work
together with other Nuveen investments to create the foundation of a
diversified, well-balanced portfolio. Recent studies by Nuveen Research have
demonstrated that balanced portfolios combining municipal bonds and stocks
provided superior after-tax returns and lower levels of risk compared with
portfolios of stocks and taxable bonds.
You and your financial adviser may want to consider combining your Nuveen
municipal bond fund with an investment in the new Nuveen European Value Fund, an
equity mutual fund that offers a portfolio of quality European company stocks
for investors seeking long-term growth and international diversification. This
fund is just one of an ever-expanding range of Nuveen products and services
designed to help investors achieve diversification while building a tax-
efficient, risk-sensitive investment portfolio. If you'd like to learn more
about the Nuveen European Value Fund or any of our other investments, contact
your financial adviser or call Nuveen Investor Services for a prospectus at
(800) 621-7227. Please read it carefully before you invest.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of John Nuveen & Co. On behalf of everyone at
Nuveen, I thank you for your continued confidence in us and our family of
investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
June 15, 1998
2
<PAGE>
Nuveen Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Tom Spalding discusses the Nuveen Municipal Bond Fund
and reviews factors that affected performance over the past year.
Comments cover the one-year period ended April 30, 1998 and all performance
statistics are quoted for Class A shares.
Over the past 12 months, we have enjoyed a bull market in fixed-income
investments, including municipal bonds. As interest rates con continue to drop
and the nation's economy steams ahead, municipal bond new issue and refunding
activity has taken off, totaling $220 billion nationally in 1997 and more than
$68 billion in the first quarter of 1998, up 70% over the same period last year.
This environment afforded numerous opportunities to find value in the essential
services sector, especially among bonds issued by schools, water and sewer
districts, and hospitals. The bull market also brought volatility, as the
continued strength of the economy caused concern that robust growth would be
accompanied by higher inflation. This volatility also provided opportunities as
we took advantage of temporary dips in the market to find value.
As Tim mentioned in his letter to shareholders, the Nuveen Municipal Bond Fund
performed well over the past 12 months, generating a total return on net asset
value of 9.00%, which is equivalent to a taxable return of 11.32% for
shareholders in the 31% federal tax bracket. The total return is in line with
the 9.02% average annual return for the Lipper peer group of national municipal
bond funds. The fund also earned a five-star rating by Morningstar*,
demonstrating its outstanding record of delivering attractive risk-adjusted
total returns.
Fund Structure Contributes to Solid Performance
Since the fund's duration (a measure of price volatility in relation to changes
in interest rates) was shorter than that of the benchmark Lehman Index,
careful security and sector selection allowed the fund to post competitive
returns with lower volatility. Longer duration funds are generally able to
participate more in market rallies and, conversely, suffer more during periods
of rising interest rates. This indicates that our fund management strategies
helped the fund perform in line with its peers without the risk of increased
volatility associated with a longer duration. Some of the strategies that paid
off for the fund during the year emphasized sector allocation, credit quality
and call protection.
Sector Allocation
The fund's two largest sector allocations are utility bonds and health care
bonds, accounting for 25% and 19%, respectively, of the fund's net assets. The
fund established its core position in health care bonds in the mid-1990s, when
uncertainty surrounding industry reform created opportunities for value
investing. At that time, we sought out bonds of fundamentally strong facilities
with competitive positions and healthy financial operations that were being
penalized by the uncertainty surrounding the industry. Since that time, the
health care debate has subsided and many of these bonds have been pre-refunded,
resulting in price stability and dependable income for the portfolio.
We see a similar opportunity in the public utility sector, with the relative
scarcity of new issuance and the restructuring of existing bonds making that
sector more attractive. The nationwide deregulation of the electric utility
sector has also provided numerous opportunities for value investing. We continue
to look for credits that will be dominant after the storm of deregulation has
passed, especially the bonds of those issuers who stand to benefit from
deregulation, including low-cost
3
<PAGE>
providers with fundamentally sound financials and favorable customer bases. We
feel that our investment in this sector will provide the same upside potential
that health care bonds did a few years ago.
Credit Quality
As of April 30, 75% of the portfolio was invested in bonds rated AA or better.
Some of the fund's lower-rated credits have been pre-refunded as issuers took
advantage of lower interest rates. Currently, our preference is to add bonds
that are higher-rated since we believe the market does not offer adequate yield
compensation for the additional credit risk presented by lower-rated bonds.
Call Protection
Finally, the fund benefits from well-diversified call protection that will
heighten, in part, the fund's ability to maintain predictable income for
investors. Staggered call exposure helps protect the fund from reinvestment risk
in the event that interest rates cycle downward.
Strategies for the Future
We continue to manage the fund by focusing on the selection of undervalued
securities that provide both attractive income and the opportunity for price
appreciation relative to the market, consistent with the preservation of
capital.
In the coming months, we will maintain a conservative approach to managing the
fund, maintaining a shorter duration than the market. If the yield curve remains
flat throughout the year, we will continue to seek maturities of less than 25
years, favoring bonds in the 15- to 20-year range. It is our opinion that in the
current environment, long-term yields are not high enough to warrant assuming
the additional interest rate risk associated with longer-maturity bonds.
Similarly, with the difference in the yields of higher- and lower-rated bonds at
such tight levels, we will continue to focus on higher-rated bonds.
* Overall rating within the municipal bond category for Class R shares for the
period ended 4/30/98. Morningstar proprietary ratings reflect historical risk-
adjusted performance and are subject to change every month. Ratings are
calculated from a fund's three-, five- 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 five stars for each of the three-, five- and
10-year periods ended 4/30/98. In an investment category, 10% of funds receive
five stars. 1,547 municipal bond funds were rated for the three-year period, 809
for the five-year period and 346 for the 10-year period, each ending 4/30/98.
4
<PAGE>
Nuveen Municipal Bond Fund
Performance Overview
As of April 30, 1998
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Monthly Tax-Free Dividends (Class A Shares)/1/
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.039 0.039 0.039 0.039 0.039 0.039 0.039 0.0375 0.0375 0.0375 0.0375 0.0375
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 6/95 2/97 6/95 11/76
Net Asset Value $9.46 $9.46 $9.44 $9.46
Fund Net Assets ($000) $2,924,493
Average Weighted Maturity (Years) 18.69
Average Weighted Duration (Years) 6.81
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 9.00% 4.43% 8.09% 8.20% 9.09%
5-Year 6.06% 5.16% 5.34% 5.29% 6.31%
10-Year 7.72% 7.26% 7.12% 6.93% 7.98%
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.76% 4.56% 4.00% 4.19% 4.95%
SEC 30-Day Yield 4.33% 4.15% 3.57% 3.77% 4.53%
Taxable Equivalent Yield/3/ 6.28% 6.01% 5.17% 5.46% 6.57%
- -----------------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<S> <C> <C> <C>
4/88 10000 10000 9580
4/89 11117 11389 10911
4/90 12841 12850 12311
4/91 13455 13472 12906
4/92 14665 14595 13982
4/93 16057 15677 15019
4/94 16747 16231 15549
4/95 17496 16992 16279
4/96 18940 18117 17356
4/97 22276 21073 20188
4/98 22202 21035 20147
</TABLE>
- -- Lehman Brothers Municipal Bond Index $22,202
- -- Nuveen Municipal Bond Fund (NAV) $21,035
- -- Nuveen Municipal Bond Fund (Offer) $20,147
Past performance is not predictive of future results.
<TABLE>
<CAPTION>
Top 5 Sectors
<S> <C>
Utilities 25%
Health Care 19%
U.S. Guaranteed 11%
Water & Sewer 9%
Tax Obligation (Limited) 8%
</TABLE>
1 The fund also paid shareholders taxable distributions in November of $0.0303
per share.
2 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
3 Based on SEC yield and a federal income tax rate of 31%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to A shares (4.20%) and all ongoing fund
expenses. For periods prior to inception of Class A shares, performance
reflects Class R share performance adjusted for differences in expenses,
which are primarily differences in distribution and service fees.
5
<PAGE>
Nuveen Insured Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Steve Krupa discusses the Nuveen Insured Municipal Bond Fund
and reviews factors that affected performance over the past year.
Comments cover the one-year period ended April 30, 1998 and all performance
statistics are quoted for Class A shares.
Over the past 12 months, we have enjoyed a bull market in fixed-income
investments, including municipal bonds. As interest rates continue to drop and
the nation's economy steams ahead, municipal bond new issue and refunding
activity has taken off, totaling $220 billion nationally in 1997 and more than
$68 billion in the first quarter of 1998, up 70% over the same period last year.
This environment afforded numerous opportunities to find value in the essential
services sector, especially among bonds issued by schools, water and sewer
districts, and hospitals. The bull market also brought volatility, as the
continued strength of the economy caused concern that robust growth would be
accompanied by higher inflation. This volatility also provided opportunities as
we took advantage of temporary dips in the market to find value.
The Nuveen Insured Municipal Bond Fund turned in strong performance over the
past 12 months, beating its Lipper peer average return of 8.46% and ranking 10th
out of 51 insured municipal bond funds. During a period of declining interest
rates and appreciating bond prices, the fund's total return performance of 9.05%
slightly under-performed the benchmark Lehman Index return of 9.67% because the
fund's average duration (a measure of its price volatility in relation to
changes in interest rates) was shorter than that of the Lehman Index. Longer
duration funds are generally able to participate more in market rallies and,
conversely, suffer more during periods of rising interest rates. However, our
other fund management strategies helped the fund perform well without the risk
of increased volatility associated with a longer duration.
Pre-Refunding and High Embedded Yields Keep Trading to a Minimum
As interest rates declined, a record number of bond issuers advance refunded
their debt obligations. These bonds are then secured by U.S. government
securities until the bonds are called. This pre-refunding activity keeps the
credit quality of the portfolio high and the coupon payments stable, but
moderates participation in bond rallies. Whenever possible, we sold pre-refunded
bonds that were expected to be called in the next 18 months and replaced them
with longer-term bonds to help lengthen the duration of the fund.
In addition, we limited bond sales to maximize after-tax total return. Many of
the longer-term bonds with high yields have appreciated in value and would
trigger significant capital gains if they were sold. As a result, we held bonds
with higher embedded yields to protect investors from return-reducing tax
liabilities.
Fund Will Continue to Focus on Boosting Current Yield and Total Return
In the coming months, we plan to increase the amount of AMT bonds in the
portfolio. AMT bonds -- those subject to the alternative minimum tax -- are
issued with higher yields than other types of bonds, helping to support a higher
income.
Another strategy that should help boost the total return for investors will be
the fund's increased exposure to health care bonds. The fund holds a core
position in health care bonds because uncertainty surrounding industry reform
created numerous opportunities for value investing. We seek bonds of
fundamentally strong facilities with competitive positions and healthy financial
operations that are undervalued by the market.
6
<PAGE>
We also see similar opportunity in the public utility sector as deregulation
makes this sector appear undervalued. We continue to look for credits that will
remain dominant after deregulation, emphasizing the bonds of issuers who stand
to benefit from deregulation as low-cost providers with fundamentally sound
financials and favorable customer bases. We feel that this sector will also
provide upside potential.
Additional Strategies for the Future
We continue to manage the fund by focusing on the selection of undervalued
securities that provide both attractive income and the opportunity for price
appreciation relative to the market, consistent with the preservation of
capital.
The primary focus of the fund will continue to be call protection -- helping to
maintain a stable dividend for investors. The fund benefits from well-
diversified call protection that will heighten, in part, the fund's ability to
maintain a dependable income level. Less than 6% of the total portfolio is
subject to call prior to the year 2001. Staggered call exposure helps protect
the fund from reinvestment risk in the event that interest rates cycle downward.
Finally, we'll continue to purchase hospital and public power bonds that Nuveen
Research feels are well positioned in the current deregulation environment.
7
<PAGE>
Nuveen Insured Municipal Bond Fund
Performance Overview
As of April 30, 1998
- -------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)/1/
- -------------------------------------------------
[GRAPH APPEARS HERE]
M--0.046
J--0.046
J--0.046
A--0.046
S--0.046
O--0.046
N--0.046
D--0.046
J--0.0445
F--0.0445
M--0.0445
A--0.0445
<TABLE>
<CAPTION>
- -------------------------------------------------
Top 5 Sectors
- -------------------------------------------------
<S> <C>
U.S. Guaranteed 27%
.................................................
Health Care 16%
.................................................
Tax Obligation (General) 14%
.................................................
Tax Obligation (Limited) 9%
.................................................
Utilities 9%
- -------------------------------------------------
</TABLE>
1 The fund also paid shareholders taxable distributions in November of $0.0351
per share.
2 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
3 Based on SEC yield and a federal income tax rate of 31%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to A shares (4.20%) and all ongoing fund
expenses. For periods prior to inception of Class A shares, performance
reflects Class R share performance adjusted for differences in expenses,
which are primarily differences in distribution and service fees.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Portfolio Statistics
- ----------------------------------------------------------------------------------------
Share Class A B C R
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception Date 9/94 2/97 9/94 12/86
........................................................................................
Net Asset Value $11.03 $11.03 $10.92 $ 10.98
........................................................................................
Fund Net Assets ($000) $830,557
........................................................................................
Average Weighted Maturity (Years) 19.32
........................................................................................
Average Weighted Duration (Years) 6.56
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Annualized Total Return/2/
- ----------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- ----------------------------------------------------------------------------------------
1-Year 9.05% 4.45% 8.14% 8.39% 9.17%
........................................................................................
5-Year 6.08% 5.17% 5.27% 5.22% 6.25%
........................................................................................
10-Year 8.33% 7.87% 7.69% 7.49% 8.55%
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Tax-Free Yields
- ----------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- ----------------------------------------------------------------------------------------
Distribution Rate 4.84% 4.64% 4.08% 4.29% 5.03%
........................................................................................
SEC 30-Day Yield 4.06% 3.89% 3.31% 3.51% 4.27%
........................................................................................
Taxable Equivalent Yield/3/ 5.88% 5.64% 4.80% 5.09% 6.19%
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Index Comparison/4/
Lehman Brothers Nuveen Insured Nuveen Insured
Municipal Bond Municipal Bond Municipal Bond
Index Fund (NAV) Fund (Offer)
<S> <C> <C> <C>
4/88 10000 10000 9580
4/89 11117 11537 11053
4/90 11761 12044 11538
4/91 13455 13748 13171
4/92 14665 15063 14431
4/93 16956 17501 16766
4/94 16559 16842 16135
4/95 18989 19563 18741
4/96 19186 19745 18916
4/97 22276 22374 21434
4/98 22202 22262 21336
</TABLE>
Lehman Brothers Municipal Bond Index $22,202
Nuveen Insured Municipal Bond Fund (NAV) $22,262
Nuveen Insured Municipal Bond Fund (Offer) $21,336
Past performance is not predictive of future results.
8
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Municipal Trust:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of the Nuveen Municipal Bond Fund and Nuveen Insured
Municipal Bond Fund (two of the portfolios constituting the Nuveen Flagship
Municipal Trust (a Massachusetts business trust)), as of April 30, 1998, and the
related statements of operations, statements of changes in net assets and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1998, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Municipal Bond Fund and Nuveen Insured Municipal Bond Fund of the Nuveen
Flagship Municipal Trust as of April 30, 1998, and the results of their
operations, the changes in their net assets and their financial highlights for
the periods indicated thereon in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 18, 1998
9
<PAGE>
Portfolio of Investments
Nuveen Municipal Bond Fund
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska - 0.4%
$ 12,375,000 Alaska Housing Finance Corporation, Collateralized Home Mortgage Bonds, 12/03 at 103 AAA $ 12,525,233
1990 Series A, 5.850%, 6/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Arizona - 2.8%
7,750,000 Arizona Board of Regents, Arizona State University, System Revenue 7/02 at 101 AA 8,075,733
Refunding Bonds, Series 1992-A, 5.750%, 7/01/12
20,350,000 Salt River Project Agricultural Improvement and Power District, Arizona, 1/02 at 100 AA 20,435,470
Salt River Project Electric System Revenue Bonds, 1992 Series C,
5.500%, 1/01/28
9,145,000 Salt River Project Agricultural Improvement and Power District, Arizona, 1/99 at 100 Aaa 9,145,183
Salt River Project Electric System Revenue Bonds, 1973 Series A,
5.000%, 1/01/10
Salt River Project Agricultural Improvement and Power District, Arizona
Electric System Revenue Refunding Bonds, 1993 Series C:
5,000,000 4.900%, 1/01/08 1/04 at 102 AA 5,067,300
33,820,000 4.750%, 1/01/17 1/04 at 100 AA 31,667,695
7,000,000 The Industrial Development Authority of the City of Scottsdale, Arizona, 9/01 at 102 AAA 7,240,590
Hospital Revenue Refunding Bonds, (Scottsdale Memorial Hospitals),
Series 1996 A, 5.625%, 9/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Arkansas - 0.5%
11,210,000 Jefferson County, Arkansas, Hospital Refunding Revenue Bonds, Series 7/03 at 102 A 12,025,976
1993, 6.000%, 7/01/06
3,000,000 Jefferson County, Arkansas, Pollution Control Revenue Refunding Bonds 12/02 at 102 BBB- 2,990,700
(Entergy Arkansas, Inc. Project) Series 1997, 5.600%, 10/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
California - 14.8%
21,220,000 California Health Facilities Financing Authority, Insured Health 7/04 at 102 AAA 20,758,253
Facility Refunding Revenue Bonds (Catholic Healthcare West) 1994
Series A, 5.000%, 7/01/14
12,000,000 California Health Facilities Financing Authority Revenue Bonds, 11/08 at 101 AAA 11,336,760
(USCF - Stanford Health Care), 1998 Series B, 5.000%,11/15/28
State of California, Department of Water Resources, Central Valley
Project, Water System Revenue Bonds, Series L:
15,515,000 5.700%, 12/01/16 6/03 at 101 1/2 AA 16,047,009
9,500,000 5.750%, 12/01/19 12/03 at 101 1/2 AA 9,819,865
12,250,000 5.500%, 12/01/23 6/03 at 101 1/2 AA 12,363,803
21,000,000 State of California, Department of Water Resources, Central Valley 12/03 at 101 AA 19,466,790
Project, Water System Revenue Bonds, Series M, 4.875%, 12/01/27
12,000,000 State Public Works Board of the State of California, Lease Revenue 11/04 at 102 Aaa 13,932,360
Bonds (Department of Corrections), 1994 Series A, 7.000%, 11/01/19
(Pre-refunded to 11/01/04)
11,500,000 California Statewide Communities Development Authority, Insured Health 10/03 at 102 AAA 11,723,790
Facilities Revenue, Certificates of Participation (UniHealth America),
1993 Series A, 5.500%, 10/01/14
38,795,000 California Statewide Communities Development Authority, Certificates of 7/03 at 102 AA 38,997,122
Participation, St. Joseph Health System Obligated Group, 5.500%,
7/01/23
15,725,000 Central Joint Powers Health Financing Authority, Certificates of 2/03 at 102 Baa1 15,580,487
Participation, Series 1993 (Community Hospitals of Central California),
5.250%, 2/01/13
9,000,000 East Bay Municipal Utility District (Alameda and Contra Costa Counties, 6/03 at 102 AAA 8,619,300
California), Water System Subordinated Revenue Refunding Bonds, Series
1993A, 5.000%, 6/01/21
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
California (continued)
Foothill/Eastern Transportation Corridor Agency, Toll Road
Revenue Bonds Series 1995A:
$ 45,000,000 0.000%, 1/01/23 No Opt. Call Baa $ 11,207,250
15,000,000 6.000%, 1/01/34 1/05 at 102 Baa 15,520,800
17,040,000 Los Angeles Convention and Exhibition Center Authority, 8/03 at 102 AAA 17,011,884
Lease Revenue Bonds, 1993 Refunding
Series A, The City of Los Angeles (California),
5.125%, 8/15/13
17,575,000 Department of Water and Power of the City of Los Angeles, 4/02 at 102 Aa 18,872,035
California, Water Works Revenue
Bonds, Issue of 1992, 6.500%, 4/15/32
16,000,000 The City of Los Angeles (California), Refunding, 6/03 at 102 AAA 16,458,720
Series 1993-C, Series 1993-B, 5.700%, 6/01/23
20,670,000 The City of Los Angeles, California, Wastewater 11/03 at 102 AAA 20,258,047
System Revenue Bonds, Series 1993-D,
5.200%, 11/01/21
15,750,000 Los Angeles County, Metropolitan Transportation 7/03 at 102 AA- 16,161,233
Authority, Proposition A, Sales Tax Revenue
Refunding Bonds, Series 1993-A, 5.500%, 7/01/13
17,185,000 Los Angeles County Metropolitan Transit Authority, 7/03 at 102 AAA 15,981,019
Proposition C, Sales Tax Revenue Second Senior
Bonds, Series 1993-B, 4.750%, 7/01/18
8,000,000 Los Angeles County Metropolitan Transit Authority, 7/03 at 102 AAA 7,911,280
Proposition C Sales Tax Revenue Second Senior
Bonds, Series 1993-B, 5.250%, 7/01/23
Los Angeles County Sanitation Districts Financing
Authority, Capital Projects Revenue Bonds,
1993 Series A (Senior Ad Valorem Obligation Bonds):
10,500,000 5.375%, 10/01/13 10/03 at 102 AA 10,702,020
20,750,000 5.000%, 10/01/23 10/03 at 100 AA 19,663,530
31,360,000 Los Angeles County Transportation Commission (California) 7/02 at 102 Aaa 34,844,410
Proposition C Sales Tax Revenue Bonds,
Second Senior Bonds, Series 1992-A, 6.750%, 7/01/19
(Pre-refunded to 7/01/02)
5,000,000 The Metropolitan Water District of Southern California, 7/02 at 102 AA 5,043,800
Water Revenue Bonds, Issue of 1992,
5.500%, 7/01/19
22,220,000 Northern California Power Agency, Hydroelectric Project 7/98 at 102 A- 22,766,612
Number One Revenue Bonds, Refunding
Series E, 7.150%, 7/01/24
17,700,000 Sacramento County Sanitation Districts Financing Authority, 12/03 at 102 AA 16,205,235
1993 Revenue Bonds, 4.750%, 12/01/23
8,050,000 The Regents of the University of California, Refunding 9/02 at 102 A+*** 8,972,208
Revenue Bonds (Multiple Purpose Projects),
Series A, 6.875%, 9/01/16 (Pre-refunded to 9/01/02)
- --------------------------------------------------------------------------------------------------------------------------------
Colorado - 1.2%
27,685,000 Colorado Housing and Finance Authority, Single-Family 11/01 at 102 Aa1 29,294,883
Housing Revenue Refunding Bonds,
1991 Series A, 7.250%, 11/01/31
6,445,000 City and County of Denver, Colorado, Airport System 11/01 at 100 AAA 6,651,111
Revenue Bonds, Series 1996D, 5.875%, 11/15/16
- --------------------------------------------------------------------------------------------------------------------------------
Connecticut - 0.1%
2,970,000 Connecticut Resources Recovery Authority, Bridgeport 1/00 at 100 A 3,011,194
Resco Company, L.P. Project Bonds,
Series B, 8.625%, 1/01/04
- --------------------------------------------------------------------------------------------------------------------------------
Delaware - 0.3%
7,055,000 Delaware River Port Authority Refunding Revenue, 1/99 at 102 AAA 7,350,957
Series 1989, 7.375%, 1/01/07
- --------------------------------------------------------------------------------------------------------------------------------
Florida - 2.1%
31,000,000 Hillsborough County Industrial Development Authority, 5/02 at 103 AA 35,637,910
Pollution Control Revenue Refunding Bonds
(Tampa Electric Company Project) Series 1992,
8.000%, 5/01/22
25,000,000 Orlando Utilities Commission, Water and Electric Subordinated 10/99 at 100 Aa2 23,790,750
Revenue Bonds, Series 1989D, 5.000%, 10/01/23
1,350,000 The Elderly Housing Corporation of Sarasota, Inc., 7/98 at 103 N/R 1,395,522
(Elderly Housing Project for the Sarasota
Housing Authority) First Mortgage Revenue Bonds,
Series 1978, 7.500%, 7/01/09
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hawaii - 0.3%
$ 8,000,000 Department of Budget and Finance of the State of Hawaii, Special Purpose 7/01 at 102 AAA $ 8,921,520
Revenue Bonds, Kapiolani Health Care System Obligated Group (Pali Momi
Medical Center Project), Series 1991, 7.650%, 7/01/19 (Pre-refunded to
7/01/01)
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois - 19.2%
16,270,000 City of Chicago, General Obligation Bonds (Emergency Telephone System) 1/03 at 102 AAA 16,525,927
Series 1993, 5.625%, 1/01/23
7,880,000 City of Chicago, General Obligation Bonds, Project Series 1993, 1/04 at 102 AAA 7,784,258
5.250%, 1/01/18
21,995,000 Chicago Metropolitan Housing Development Corporation, Housing Development 7/02 at 102 AA 23,324,818
Revenue Refunding Bonds (FHA-Insured Mortgage Loans-Section 8 Assisted
Projects) Series 1992B, 6.900%, 7/01/22
7,965,000 City of Chicago, Motor Fuel Tax Revenue Bonds, Refunding Series 1993, 1/03 at 101 AAA 7,648,312
5.000%, 1/01/16
18,710,000 City of Chicago (Illinois), Chicago-O'Hare International Airport, General 1/04 at 102 AAA 17,961,787
Airport Second Lien, Revenue Refunding Bonds, 1993 Series C,
5.000%, 1/01/18
61,150,000 City of Chicago (Illinois), Chicago-O'Hare International Airport, General 1/04 at 102 A+ 58,989,571
Airport Revenue Refunding Bonds, 1993 Series A, 5.000%, 1/01/16
22,335,000 City of Chicago, Water Revenue Bonds, Series 1995, 5.000%, 11/01/15 11/06 at 102 AAA 21,601,519
25,380,000 The County of Cook, Illinois, General Obligation Bonds, Series 1993A, 11/03 at 100 AAA 24,116,076
5.000%, 11/15/23
17,300,000 DuPage Water Commission (DuPage, Cook and Will Counties, Illinois) General 3/02 at 100 AAA 17,892,871
Obligation Water Refunding Bonds, Series 1992, 5.750%, 3/01/11
11,350,000 DuPage Water Commission (DuPage, Cook and Will Counties, Illinois) Water 5/03 at 102 Aa1 11,376,332
Refunding Revenue Bonds, Series 1993, 5.250%, 5/01/14
8,500,000 Illinois Development Finance Authority, Revenue and Refunding Bonds, Series 2/00 at 102 Baa2 9,280,895
1990A (Columbus-Cuneo-Cabrini Medical Center), 8.500%, 2/01/15
17,075,000 Illinois Educational Facilities Authority, Revenue Refunding Bonds, The 7/03 at 102 Aa1 17,396,181
University of Chicago, Series 1993B, 5.600%, 7/01/24
55,100,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1994A 8/04 at 102 AA 58,185,600
(Northwestern Memorial Hospital), 6.000%, 8/15/24
6,115,000 Illinois Health Facilities Authority Revenue Refunding Bonds, Series 1993 10/03 at 102 A- 6,159,089
(Illinois Masonic Medical Center), 5.500%, 10/01/19
10,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1992 10/02 at 102 AAA 10,721,500
(Highland Park Hospital), 6.200%, 10/01/22
34,120,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 (Rush- 11/03 at 102 AAA 34,244,197
Presbyterian-St. Luke's Medical Center Obligated Group), 5.500%, 11/15/25
7,275,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1994 (Southern 3/04 at 102 AAA 7,580,332
Illinois Hospital Services), 5.850%, 3/01/14
15,000,000 Illinois Health Facilities Authority, FHA Insured Mortgage Revenue Bonds, 2/06 at 102 AAA 15,804,450
Series 1996 (Sinai Health System), 6.000%, 2/15/24
15,100,000 State of Illinois, General Obligation Bonds, Series of March 1992 (Full 10/02 at 102 AA 16,318,419
Faith and Credit), 6.200%, 10/01/04
State of Illinois, General Obligation Bonds, Series of August 1992 (Full
Faith and Credit):
14,750,000 5.875%, 6/01/10 6/02 at 102 AA 15,687,658
5,000,000 5.875%, 6/01/11 6/02 at 102 AA 5,296,650
10,000,000 State of Illinois, General Obligation Bonds, Series of April 1993 (Full 4/03 at 102 AA 10,333,900
Faith & Credit), 5.700%, 04/01/18
14,200,000 State of Illinois, Build Illinois Bonds (Sales Tax Revenue Bonds), Series 6/03 at 102 AAA 14,008,158
S, 5.250%, 6/15/18
15,315,000 State of Illinois, Build Illinois Bonds (Sales Tax Revenue Bonds), Series O, 6/01 at 100 AAA 15,863,890
6.000%, 6/15/18
The Illinois State Toll Highway Authority, Toll Highway Priority Revenue
Bonds, 1992 Series A:
20,000,000 6.450%, 1/01/13 1/03 at 102 A+ 21,510,400
8,655,000 6.200%, 1/01/16 1/03 at 102 AAA 9,302,048
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois (continued)
Metropolitan Pier and Exposition Authority (Illinois), McCormick Place
Expansion Project Bonds, Series 1992A:
$ 11,305,000 0.000%, 6/15/17 No Opt. Call AAA $ 4,012,597
56,180,000 6.500%, 6/15/27 (Pre-refunded to 6/15/03) 6/03 at 102 Aaa 62,487,890
16,510,000 Metropolitan Pier and Exposition Authority (Illinois), Dedicated State Tax 6/07 at 101 AAA 16,698,709
Revenue Bonds, Series 1997, 5.125%, 6/01/11
5,000,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake, McHenry and 6/03 at 102 AAA 5,401,050
Will Counties, Illinois, General Obligation Refunding Bonds, Series 1993C,
5.800%, 6/1/13 (Pre-refunded to 6/01/03)
1,705,000 The Elderly Housing Corporation of Zion, Illinois, Housing Development 3/05 at 100 A 1,747,983
Revenue Bonds (Dell-Zion Associates Section 8 Assisted Project) Series
1978, 7.750%, 3/1/10
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana - 3.8%
10,835,000 Duneland School Building Corporation, First Mortgage Bonds, Series 1997, 8/07 at 101 AAA 11,016,161
5.450%, 8/01/15
11,590,000 Indiana Health Facility Financing Authority, Hospital Revenue Refunding 9/02 at 102 AAA 12,537,135
Bonds, Series 1992A (Methodist Hospital of Indiana, Inc.), 5.750%, 9/01/11
49,600,000 Indiana Health Facilities Financing Authority, Hospital Revenue Bonds 11/03 at 102 Aa2 50,723,936
(Daughters of Charity) Series 1993, 5.750%, 11/15/22
10,100,000 Indiana State Office Building Commission Correctional Facilities Program, 12/03 at 100 AA- 10,971,428
Revenue Bonds, Series 1991, 6.375%, 7/01/16
2,750,000 The Indianapolis Local Public Improvement Bond Bank, Series 1992 D Bonds, 2/03 at 102 AA 3,031,463
6.750%, 2/1/20
12,500,000 The Indianapolis Local Public Improvement Bond Bank, Series 1993 A Bonds, 1/03 at 102 AAA 13,115,750
6.000%, 1/10/18
8,400,000 Marion County Convention and Recreational Facilities Authority, Excise Taxes 6/08 at 101 AAA 7,944,720
Lease Rental Revenue Subordinate Bonds, Series 1997A, 5.000%, 6/01/27
2,390,000 Southwind Housing, Inc., 7.125%, 11/15/21 No Opt. Call N/R 2,864,487
- ------------------------------------------------------------------------------------------------------------------------------------
Iowa - 0.3%
3,815,000 City of Davenport, Iowa, Hospital Facility Revenue Bonds (Mercy Hospital 7/04 at 100 AAA 4,202,337
Project), Series 1992, 6.625%, 7/01/14
3,250,000 Iowa Housing Finance Authority, Single Family Mortgage Bonds, 1977 Series 8/98 at 100 Aaa 3,259,425
A, 5.875%, 8/01/08
- ------------------------------------------------------------------------------------------------------------------------------------
Kentucky - 3.1%
34,500,000 County of Carroll, Kentucky, Collateralized Pollution Control Revenue Bonds 9/02 at 102 Aa2 38,879,775
(Kentucky Utilities Company Project) 1992 Series A, 7.450%, 9/15/16
2,645,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA Insured/VA 7/01 at 102 AAA 2,791,718
Guaranteed), 1991 Series A, 7.250%, 1/01/17
17,600,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1993 Series B 1/04 at 102 AAA 18,066,928
(Federally Insured or Guaranteed Mortgage Loans), 5.300%, 7/01/10
14,400,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1993 Series B 1/04 at 102 AAA 14,752,944
(Federally Insured or Guaranteed Mortgage Loans), 5.400%, 7/01/14
16,980,000 The Turnpike Authority of Kentucky, Resource Recovery Road Revenue Refunding 1/99 at 100 A+ 16,981,019
Bonds, 1987 Series A, 5.000%, 7/01/08
- ------------------------------------------------------------------------------------------------------------------------------------
Maine - 0.8%
Maine State Housing Authority, Mortgage Purchase Bonds, 1994 Series A:
13,650,000 5.650%, 11/15/20 2/04 at 102 AA 13,828,133
10,000,000 5.700%, 11/15/26 2/04 at 102 AA 10,130,200
- ------------------------------------------------------------------------------------------------------------------------------------
Maryland - 0.1%
2,500,000 Community Development Administration, Maryland Department of Housing and 1/07 at 102 Aa2 2,624,100
Community Development, Housing Revenue Bonds, Series 1996 A,
5.875%, 7/01/16
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts -- 3.1%
$ 15,000,000 Massachusetts Bay Transportation Authority, Certificates 8/00 at 102 AAA $ 16,413,900
of Participation, 1990 Series A,
7.650%, 8/01/15 (Pre-refunded to 8/01/00)
5,170,000 The Commonwealth of Massachusetts, General Obligation No Opt. Call AA- 5,244,862
Refunding Bonds, 1993 Series C,
4.700%, 8/01/02
Massachusetts Water Resources Authority, General Revenue
Bonds, 1990 Series A:
6,500,000 7.500%, 4/01/16 (Pre-refunded to 4/01/00) 4/00 at 102 AAA 7,029,555
9,605,000 6.000%, 4/01/20 (Pre-refunded to 4/01/00) 4/00 at 100 AAA 9,949,916
Massachusetts Water Resources Authority, General Revenue
Refunding Bonds, 1993 Series B:
14,765,000 5.250%, 3/01/13 3/03 at 102 A 14,772,235
10,795,000 5.000%, 3/01/22 3/03 at 100 A 10,219,087
26,050,000 Massachusetts Water Resources Authority, General Revenue 12/04 at 102 A 25,608,974
Bonds, 1993 Series C,
5.250%, 12/01/20
- ---------------------------------------------------------------------------------------------------------------------------------
Michigan -- 5.0%
15,000,000 School District of the City of Detroit, Wayne County,
Michigan, School Building and Site Improvement Bonds 5/06 at 102 AAA 15,520,050
(Unlimited Tax General Obligation), Series 1996A,
5.700%, 5/01/25
Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds (The Detroit Medical Center Obligated
Group) Series 1993B:
19,585,000 5.750%, 8/15/13 8/04 at 102 A 19,984,142
59,360,000 5.500%, 8/15/23 8/04 at 102 A 59,273,928
3,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 10/05 at 100 BBB*** 3,550,800
Refunding Bonds (Genesys Health System Obligated Group),
Series 1995A, 7.500%, 10/01/27 (Pre-refunded to 10/01/05)
12,080,000 Michigan State Housing Development Authority, Rental Housing
Revenue Bonds, 1994 Series B, 4/04 at 102 AAA 12,467,406
5.700%, 4/01/12
15,000,000 State of Michigan, State Trunk Line Fund Bonds,
Series 1992A, 5.500%, 10/01/21 10/02 at 100 AA- 15,069,300
16,805,000 Hospital Finance Authority of the City of St. Joseph,
Revenue Refunding Bonds (Mercy Memorial Medical Center 1/04 at 102 AAA 16,575,444
Obligated Group), Series 1993, 5.250%, 1/01/16
5,000,000 Regents of the University of Michigan, Hospital Revenue
Refunding Bonds, Series 1986A, 12/98 at 100 AA 5,009,900
6.625%, 12/01/10
- ---------------------------------------------------------------------------------------------------------------------------------
Minnesota -- 0.4%
2,165,000 Minnesota Housing Finance Agency, Housing Development Bonds, 2/01 at 100 AA 2,193,297
1977 Series A, 6.250%, 2/01/20
8,965,000 Minnesota Housing Finance Agency, Rental Housing Bonds, 2/05 at 102 AAA 9,319,386
1995 Series D, 5.800%, 8/01/11
- ---------------------------------------------------------------------------------------------------------------------------------
Missouri -- 0.8%
6,195,000 Missouri Housing Development Commission, Housing Development 9/04 at 100 AA+ 6,286,190
Bonds, Series B 1979, (Federally Insured Mortgage Bonds),
7.000%, 09/15/22
15,750,000 Health and Educational Facilities Authority of the State of
Missouri, Health Facilities Refunding and Improvement 10/99 at 102 1/2 BBB+ 16,981,808
Revenue Bonds (Heartland Health Systems Project)
8.125%, 10/01/10
- ---------------------------------------------------------------------------------------------------------------------------------
Montana -- 0.2%
5,825,000 Montana Health Facility Authority, Health Care Revenue 6/06 at 102 BBB- 6,155,161
Bonds, Series 1996 (Community Medical Center, Inc.),
6.375%, 6/01/18
- ---------------------------------------------------------------------------------------------------------------------------------
Nebraska -- 1.1%
28,800,000 Consumers Public Power District, Nebraska, Nuclear Facility 6/98 at 100 A+ 28,806,336
Revenue Bonds, 1968 Series, 5.100%, 1/01/03
2,195,000 Hospital Authority No. 1 of Hall County, Nebraska, Hospital 6/98 at 103 AA*** 2,265,833
Facility Revenue Bonds (Lutheran Hospitals and Homes Society
Grand Island Project) Series 1977, 6.750%, 12/01/07
(Pre-refunded to 6/01/98)
- ---------------------------------------------------------------------------------------------------------------------------------
Nevada -- 0.3%
8,630,000 City of Reno, Nevada, Insured Hospital Revenue Bonds 5/03 at 102 AAA 9,040,529
(St. Mary's Regional Medical Center),
Series 1993A, 5.800%, 5/15/13
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Hampshire - 0.3%
$ 8,500,000 The Industrial Development Authority of the State of New Hampshire, 12/01 at 103 Ba1 $ 9,166,400
Pollution Control Revenue Bonds (Central Maine Power Company Project,
1984 Series B), 7.375%, 5/01/14
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey - 0.4%
10,750,000 New Jersey Housing and Mortgage Finance Agency, Housing Revenue Bonds, 5/02 at 102 A+ 11,576,783
1992 Series A, 6.950%, 11/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
New York - 6.8%
11,190,000 Battery Park City Authority, Senior Revenue Refunding Bonds, Series 11/03 at 102 AA 11,000,553
1993A, 5.000%, 11/01/13
5,000,000 Municipal Assistance Corporation for the City of New York (A Public No Opt. Call AA 5,491,050
Benefit Corporation of the State of New York), Series L Bonds,
6.000%, 7/01/07
2,350,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series C, No Opt. Call A3 2,511,892
6.000%, 8/15/04
8,000,000 The City of New York, General Obligation Bonds, Fiscal 1994 Series D, 8/03 at 101 1/2 A3 8,268,400
5.750%, 8/15/11
8,525,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 9,394,891
Fixed Rate Bonds, Subseries C-1, 6.625%, 8/01/12 (Pre-refunded to
8/01/02)
The City of New York, General Obligation Bonds, Fiscal 1996 Series G:
7,500,000 5.900%, 2/01/05 No Opt. Call A3 7,961,550
12,655,000 5.750%, 2/01/17 2/06 at 101 1/2 A3 13,044,268
15,620,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series F, 8/06 at 101 1/2 A3 16,538,300
6.000%, 8/01/16
The City of New York, General Obligation Bonds, Fiscal 1995 Series F:
13,850,000 6.625%, 2/15/25 (Pre-refunded to 2/15/05) 2/05 at 101 A3*** 15,609,504
150,000 6.625%, 2/15/25 2/05 at 101 A3 164,768
8,600,000 New York City (New York), Municipal Water Finance Authority, Water and 6/02 at 101 1/2 A2 9,061,132
Sewer System Revenue Bonds, Fiscal 1993 Series A, 6.000%, 6/15/17
8,400,000 Dormitory Authority of the State of New York, Beth Israel Medical Center 11/00 at 102 AAA 8,924,748
Revenue Bonds, Series 1996, 6.000%, 11/01/15
8,000,000 Dormitory Authority of the State of New York, Mental Health Services 2/07 at 102 A- 8,070,560
Facilities Improvement, Revenue Bonds, Series 1997B, 5.500%, 8/15/17
15,000,000 Dormitory Authority of the State of New York, The New York and Presbyterian 2/08 at 101 AAA 13,758,450
Hospital, FHA-Insured Mortgage Hospital Revenue Bonds, Series 1998, 4.750%,
8/01/27
New York State Housing Finance Agency, Health Facilities Revenue Bonds (New
York City), 1990 Series A Refunding:
16,160,000 8.000%, 11/01/08 (Pre-refunded to 11/01/00) 11/00 at 102 Aaa 17,930,490
3,330,000 8.000%, 11/01/08 11/00 at 102 BBB+ 3,648,315
8,000,000 New York Local Government Assistance Corporation (A Public Benefit 4/02 at 102 AAA 8,911,120
Corporation of the State of New York), Series 1991D Bonds, 7.000%, 4/01/18
11,490,000 State of New York Mortgage Agency, Mortgage Revenue Bonds, Eighth Series A, 10/98 at 100 Aaa 11,777,250
6.875%, 4/01/17
Power Authority of the State of New York, General Purpose Bonds, Series CC:
3,990,000 5.000%, 1/01/08 (Pre-refunded to 1/01/03) 1/03 at 102 Aa2*** 4,166,159
17,270,000 5.250%, 1/01/18 (Pre-refunded to 1/01/03) 1/03 at 102 Aa2*** 18,213,114
5,000,000 Triborough Bridge and Tunnel Authority (New York), General Purpose Revenue 1/04 at 100 Aa3 4,603,700
Bonds, Series 1994A, 4.750%, 1/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
North Carolina - 3.0%
16,750,000 North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds, 1/99 at 100 Baa1 16,909,628
Refunding Series 1989 A, 6.500%, 1/01/24
68,250,000 North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds, 1/03 at 102 Baa1 71,885,678
Refunding Series 1993 B, 6.250%, 1/01/12
Housing Authority of the City of Wilmington, North Carolina, First Mortgage
Revenue Bonds, Series 1979:
60,000 7.750%, 6/01/98 No Opt. Call N/R 60,194
1,195,000 7.750%, 6/01/10 No Opt. Call N/R 1,261,550
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oklahoma - 0.3%
$ 5,375,000 The Comanche County Hospital Authority (Lawton, Oklahoma), Hospital 7/99 at 102 AAA $ 5,732,115
Revenue Bonds, Series 1989, 8.050%, 7/01/16 (Pre-refunded to 7/01/99)
2,970,000 Midwest City Memorial Hospital Authority (Midwest City, Oklahoma) 4/02 at 102 BBB+*** 3,330,855
Hospital Revenue Bonds Series 1992, 7.375%, 4/01/12 (Pre-refunded to
4/01/02)
- ------------------------------------------------------------------------------------------------------------------------------------
Oregon - 0.4%
10,000,000 State of Oregon, Department of Administrative Services, Certificates of 5/07 at 101 AAA 10,431,700
Participation, 1997 Series A, 5.800%, 5/1/24
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 2.8%
10,000,000 Lehigh County Industrial Development Authority, Pollution Control Revenue 9/04 at 102 AAA 11,024,100
Refunding Bonds, 1994 Series B (Pennsylvania Power & Light Company
Project), 6.400%, 9/01/29
22,500,000 Pennsylvania Housing Finance Agency, Rental Housing Refunding Bonds, Issue 7/03 at 102 AAA 23,285,250
1993, 5.750%, 7/01/14
Pennsylvania Housing Finance Agency, Multi-Family Housing Refunding Bonds
(Federal Housing Administration Insured Mortgage Loans) Issue FHA 1992:
4,025,000 8.100%, 7/01/13 7/02 at 102 AAA 4,387,331
16,830,000 8.200%, 7/01/24 7/02 at 102 AAA 18,406,298
16,600,000 Pennsylvania Intergovernmental Cooperation Authority, Special Tax Revenue 6/03 at 100 AAA 15,838,392
Refunding Bonds (City of Philadelphia Funding Program), Series of 1993A,
5.000%, 6/15/22
7,000,000 City of Philadelphia, Pennsylvania, Water and Sewer Revenue Bonds, 8/01 at 100 AAA 7,577,360
Sixteenth Series, 7.000%, 8/01/18 (Pre-refunded to 8/01/01)
- ------------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.3%
7,595,000 Rhode Island Convention Center Authority, Refunding Revenue Bonds, 1993 5/03 at 100 AAA 7,272,061
Series B, 5.000%, 5/15/20
- ------------------------------------------------------------------------------------------------------------------------------------
Texas - 4.7%
City of Austin, Texas, Water, Sewer and Electric Refunding Revenue
Bonds, Series 1982:
260,000 14.000%, 11/15/01 (Pre-refunded to 5/15/99) 5/99 at 100 AAA 273,793
260,000 14.000%, 11/15/01 (Pre-refunded to 5/15/99) 5/99 at 100 A2*** 301,995
16,450,000 14.000%, 11/15/01 No Opt. Call A2 19,372,672
29,500,000 Brazos River Authority (Texas) Collateralized Revenue Refunding Bonds 8/00 at 102 AAA 30,264,345
(Houston Lighting & Power Company Project) Series 1995, 5.800%, 8/01/15
6,585,000 Crowley Independent School District, Tarrant & Johnson Counties, 8/08 at 100 AAA 7,391,728
Unlimited Tax School Building Bonds, Series 1997, 6.500%, 8/01/23
25,800,000 Harris County, Texas, Toll Road Senior Lien Revenue Refunding Bonds, 8/04 at 102 AAA 26,195,514
Series 1994, 5.300%, 8/15/13
7,000,000 Harris County Health Facilities Development Corporation (Texas), No Opt. Call AAA 7,597,240
Hospital Revenue Bonds (St. Luke's Episcopal Hospital Project),
Series 1991A, 6.750%, 2/15/21
47,245,000 City of San Antonio, Texas, Electric and Gas Systems Revenue Refunding 2/02 at 101 Aa1 45,624,024
Bonds, New Series 1992, 5.000%, 2/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
Utah - 3.5%
Intermountain Power Agency (Utah), Power Supply Revenue Refunding Bonds,
1993 Series A:
6,300,000 5.500%, 7/01/13 7/03 at 102 A+ 6,383,223
25,175,000 5.500%, 7/01/20 7/03 at 102 A+ 25,187,588
47,085,000 5.000%, 7/01/23 7/03 at 100 A+ 44,198,219
2,200,000 Intermountain Power Agency (Utah), Power Supply Revenue Bonds, 1986 7/98 at 100 A+ 2,200,858
Series B, 6.000%, 7/01/15
6,740,000 Intermountain Power Agency (Utah), Power Supply Revenue Bonds, 1986 7/98 at 100 A+ 6,394,845
Series C, 5.000%, 7/01/18
15,100,000 Intermountain Power Agency (Utah), Power Supply Revenue Refunding Bonds, 7/07 at 102 AAA 15,769,685
1997 Series B, 5.750%, 7/01/19
1,490,000 Layton, Utah, Industrial Development Revenue Bonds (C.D.I. Ltd. Project- 6/98 at 100 N/R 1,493,740
K Mart Guaranteed), 8.750%, 6/01/05
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Vermont - 0.1%
$ 215,000 University of Vermont and State Agricultural College, Housing, Dining 7/98 at 101 A+ $ 217,936
and Student Services Facilities System Bonds, Lot 1 Series 1969-A,
6.300%, 7/01/06
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia - 3.9%
690,000 Industrial Development Authority of the City of Chesapeake, Medical 9/98 at 100 N/R 693,090
Facility Insured-Mortgage Revenue Bonds (Medical Facilities of America
XIV Project) Series 1979, 7.500%, 9/01/01
7,750,000 Richmond Metropolitan Authority (Virginia), Expressway Revenue and 7/02 at 102 AAA 8,352,252
Refunding Bonds, Series 1992-B, 6.250%, 7/15/22
50,000,000 Virginia Housing Development Authority, Commonwealth Mortgage Bonds, 1/02 at 102 AA+ 52,340,000
1992 Series A, 7.150%, 1/01/33
3,070,000 Virginia Housing Development Authority, Multi-Family Mortgage Bonds, 5/98 at 101 AA+ 3,107,730
1978 Series B, 6.700%, 11/01/21
Virginia Housing Development Authority, Multi-Family Housing Bonds, 1993
Series C:
19,080,000 5.550%, 5/01/08 5/03 at 102 AA+ 19,727,765
28,075,000 5.900%, 5/01/14 5/03 at 102 AA+ 29,016,635
- ------------------------------------------------------------------------------------------------------------------------------------
Washington - 6.9%
23,260,000 Public Utility District No. 1 of Chelan County, Rocky Reach Hydro-Electric 1/99 at 100 AA 23,265,581
System Revenue Bonds, Series of 1957, 5.000%, 7/01/13
6,450,000 Public Utility District No. 1 of Chelan County, Rocky Reach Hydro-Electric 1/99 at 100 AA 6,449,420
System Revenue Bonds, Series of 1968, 5.125%, 7/01/23
14,335,000 Public Utility District No. 1 of Douglas County, Washington, Wells 9/98 at 101 A+ 13,032,808
Hydroelectric Revenue Bonds, Series of 1963, 4.000%, 9/01/18
7,250,000 Municipality of Metropolitan Seattle, Sewer Refunding Revenue Bonds, 1/03 at 102 AAA 7,571,827
Series Y, 5.700%, 1/01/12
5,000,000 Washington Public Power Supply System, Nuclear Project No. 1 Refunding No Opt. Call Aa1 6,075,450
Revenue Bonds, Series 1989B, 7.125%, 7/01/16
Washington Public Power Supply System, Nuclear Project No. 1 Refunding
Revenue Bonds, Series 1993A:
14,260,000 7.000%, 7/01/07 No Opt. Call Aa1 16,420,960
18,500,000 5.750%, 7/01/13 7/03 at 102 Aa1 19,145,650
10,000,000 5.700%, 7/01/17 7/03 at 102 AAA 10,219,000
7,805,000 Washington Public Power Supply System, Nuclear Project No. 1 Refunding No Opt. Call Aa1 9,138,874
Revenue Bonds, Series 1993B, 7.000%, 7/01/09
10,000,000 Washington Public Power Supply System (Bonneville), Nuclear Project 7/03 at 102 Aa1 10,008,000
No. 1 Refunding Revenue Bonds, Series 1993C, 5.375%, 7/01/15
8,835,000 Washington Public Power Supply System, Nuclear Project No. 3 Refunding 7/03 at 102 Aa1 9,058,701
Revenue Bonds, Series 1993B, 5.700%, 7/01/18
Washington Public Power Supply System, Nuclear Project No. 3 Refunding
Revenue Bonds, Series 1993C:
9,180,000 5.300%, 7/01/10 7/03 at 102 Aa1 9,287,864
51,070,000 5.375%, 7/01/15 7/03 at 102 Aa1 50,530,190
11,545,000 5.500%, 7/01/18 7/03 at 102 Aa1 11,446,867
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 4.4%
4,500,000 Wisconsin Housing and Economic Development Authority, Insured Mortgage No Opt. Call AA 4,642,200
Revenue Refunding Bonds, 1977 Series A, 5.800%, 6/01/17
8,500,000 Wisconsin Housing and Economic Development Authority, Multi-Family Housing 4/02 at 102 A1 9,123,814
Revenue Bonds, 1992 Series B, 7.050%, 11/01/22
28,200,000 Wisconsin Housing and Economic Development Authority, Housing Revenue 12/03 at 102 A1 28,734,953
Bonds, 1993 Series C, 5.800%, 11/01/13
13,700,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 11/01 at 102 AAA 14,603,651
Series 1991 (Columbia Hospital, Inc.), 6.250%, 11/15/21
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Wisconsin (continued)
$ 9,830,000 Wisconsin Health and Educational Facilities Authority, Health 6/02 at 102 AAA $ 10,522,228
Facilities Refunding Revenue Bonds (SSM Health Care),
Series 1992AA, 6.250%, 6/01/20
3,750,000 Wisconsin Health and Educational Facilities Authority, Revenue 10/04 at 102 AAA 3,957,262
Bonds, Series 1994A (Froedtert Memorial Lutheran
Hospital, Inc.), 5.875%, 10/01/13
6,000,000 Wisconsin Health and Educational Facilities Authority, Revenue 12/02 at 102 AAA 6,322,560
Bonds, Series 1992A (Meriter Hospital, Inc.), 6.000%, 12/01/22
18,500,000 Wisconsin Health and Educational Facilities Authority Revenue 8/03 at 102 AAA 18,018,444
Bonds, Series 1993 (Aurora Health Care Obligated
Group), 5.250%, 8/15/23
32,000,000 Wisconsin Health and Educational Facilities Authority, Revenue 5/06 at 102 AAA 32,908,480
Bonds, Series 1996 (Aurora Medical Group, Inc.
Project), 5.750%, 11/15/25
- ------------------------------------------------------------------------------------------------------------------------------------
$ 2,849,465,000 Total Investments --(cost--$2,654,721,175)--98.5% 2,881,961,684
===============---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.5% 42,530,887
---------------------------------------------------------------------------------------------------------------
Net Assets--100% $ 2,924,492,571
===============================================================================================================
</TABLE>
* Optional Call Provision (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices
at later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to
be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Insured Municipal Bond Fund
April 30, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Alabama -- 8.1%
$ 5,600,000 The Alabama Public Health Care Authority, Mortgage Revenue 10/06 at 102 AAA $ 5,925,696
Bonds, Series 1996, 6.000%, 10/01/25
2,120,000 The Water Supply Board of the City of Albertville (Alabama) 3/02 at 102 AAA 2,308,023
Water Revenue Bonds, Series 1992, 6.700%, 3/01/11
3,500,000 City of Athens, Alabama, Electric Revenue Warrants, Series 6/05 at 102 AAA 3,721,375
1995, 6.000%, 6/01/25
4,405,000 The Governmental Utility Services Corporation of the City of 12/99 at 102 AAA 4,705,333
Auburn, Floating/Fixed Rate Wastewater Treatment Revenue
Bonds, Series 1984, 7.300%, 1/01/12
1,875,000 The Special Care Facilities Financing Authority of the City 1/01 at 102 AAA 1,965,694
of Birmingham, Baptist Medical Centers Revenue Bonds,
Series 1991-A, (The Baptist Medical Centers), 7.000%,
1/01/21
1,225,000 The Utilities Board of the City of Daphne (Alabama), Water, 6/00 at 102 AAA 1,319,105
Gas and Sewer Revenue Refunding Bonds, Series 1990B,
7.350%, 6/01/20
6,750,000 The Public Building Authority of the City of Huntsville 10/05 at 102 AAA 7,163,303
(Alabama), Municipal Justice and Public Safety Center Lease
Revenue Bonds, Series 1996A, 6.000%, 10/01/25
3,000,000 City of Madison (Alabama), General Obligation School 2/04 at 102 AAA 3,264,990
Warrants, Series 1994, 6.250%, 2/01/19
5,500,000 City of Madison (Alabama), General Obligation Warrants, 4/05 at 102 AAA 5,842,815
Series 1995, 6.000%, 4/01/23
3,000,000 Mobile County, Alabama, General Obligation Tax Pledge 2/00 at 102 AAA 3,191,070
Warrants, Series 1991, 6.700%, 2/01/11 (Pre-refunded to
2/01/00)
5,580,000 BMC Special Care Facilities Financing Authority of the City 9/07 at 102 AAA 5,560,805
of Montgomery, Revenue Bonds, Series 1997-C (Baptist
Medical Center), 5.375%, 9/01/22
12,000,000 The Medical Clinic Board of The City of Montgomery, Alabama, 3/06 at 102 AAA 12,693,000
Health Care Facility Revenue Bonds, Jackson Hospital &
Clinic, Series 1996, 6.000%, 3/01/26
The Utilities Board of the City of Oneonta (Alabama), Utility
Revenue Bonds, Series 1994:
2,860,000 6.900%, 11/01/24 (Pre-refunded to 11/01/04) 11/04 at 102 AAA 3,295,378
140,000 6.900%, 11/01/24 11/04 at 102 AAA 158,903
West Morgan-East Lawrence Water Authority, Water Revenue
Bonds, Series 1994:
2,200,000 6.800%, 8/15/19 (Pre-refunded to 8/15/04) 8/04 at 102 AAA 2,515,612
3,000,000 6.850%, 8/15/25 (Pre-refunded to 8/15/04) 8/04 at 102 AAA 3,437,820
- ---------------------------------------------------------------------------------------------------------------------------------
Alaska -- 2.9%
Alaska Industrial Development and Export Authority, Revolving
Fund Bonds, Series 1997A:
4,500,000 5.900%, 4/01/17 4/07 at 102 AAA 4,722,570
5,000,000 6.125%, 4/01/27 4/07 at 102 AAA 5,359,850
8,565,000 Alaska Housing Finance Corporation, Mortgage Revenue Bonds, 6/06 at 102 AAA 9,028,281
1996 Series A, 6.000%, 12/01/15
5,000,000 Alaska Housing Finance Corporation, Mortgage Revenue Bonds, 6/07 at 102 AAA 5,226,300
1997 Series A, 6.000%, 6/01/27
- ---------------------------------------------------------------------------------------------------------------------------------
Arizona -- 2.1%
5,000,000 Navajo County, Arizona, Pollution Control Corporation, 8/03 at 102 A- 5,129,000
Pollution Control Revenue Refunding Bonds (Arizona Public
Service Company), 1993 Series A, 5.875%, 8/15/28
6,000,000 Tempe Union High School District No. 213 of Maricopa County, 7/04 at 101 AAA 6,461,460
Arizona, School Improvement and Refunding Bonds, Series
1994, 6.000%, 7/01/10
5,000,000 City of Tucson, Arizona, Water System Revenue Bonds, Series 7/08 at 100 AAA 5,533,350
1994-A, 6.000%, 7/01/21
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------------
California -- 8.9% <C> <C> <C>
<C> <S>
$ 3,525,000 Brea Public Financing Authority (Orange County, California), 8/01 at 102 AAA $ 3,886,277
1991 Tax Allocation Revenue Bonds, Series A (Redevelopment
Project AB), 7.000%, 8/1/15 (Pre-refunded to 8/01/01)
5,000,000 California Health Facilities Financing Authority, Insured 7/06 at 102 AAA 5,300,250
Health Facility Refunding Revenue Bonds (Catholic
Healthcare West), 1996 Series A, 6.000%, 7/01/25
8,000,000 Culver City Unified School District, (Los Angeles County, 2/08 at 101 AAA 7,679,920
California), General Obligation Bonds, Election of 1996,
Series 1998, 5.125%, 8/01/37
1,000,000 M-S-R Public Power Agency (California), San Juan Project 7/98 at 100 AAA 1,003,010
Refunding Revenue Bonds, Series H, 5.900%, 7/01/20
13,750,000 Ontario Redevelopment Financing Authority (San Bernardino 8/03 at 102 AAA 14,547,088
County, California) 1993 Revenue Bonds (Ontario
Redevelopment Project No. 1), 5.800%, 8/01/23
5,295,000 County of Riverside, California (1994 Desert Justice Facility 12/04 at 101 AAA 5,679,364
Project) Certificates of Participation, 6.000%, 12/01/12
(Pre-refunded to 12/04/04)
2,250,000 Sacramento Municipal Utility District (California), Electric 9/01 at 102 AAA 2,451,870
Revenue Bonds, 1991 Series Y, 6.500%, 9/01/21 (Pre-refunded
to 9/01/01)
2,435,000 County of San Diego, California, Certificates of 8/08 at 102 AAA 2,304,216
Participation, Sharp Healthcare Obligated Group, 5.000%,
8/15/28 (DD)
17,500,000 San Joaquin Hills Transportation Corridor Agency Toll Road 1/07 at 102 AAA 17,206,525
Refunding Revenue Bonds, Series 1997A, 5.250%, 1/15/30
3,000,000 Santa Clara County Financing Authority, Lease Revenue Bonds, 11/07 at 102 AAA 2,873,190
(VMC Facility Replacement Project, 1994 Series A, 5.000%,
11/15/22
10,000,000 The Regents of the University of California, Revenue Bonds 9/02 at 102 AAA 10,996,000
(Multiple Purpose Projects), Series D, 6.375%, 9/01/24
(Pre-refunded to 9/01/02)
- --------------------------------------------------------------------------------------------------------------------------------
Colorado -- 1.0%
4,500,000 Board of Water Commissioners, City and County of Denver, 11/01 at 101 AAA 4,835,925
Colorado, Certificates of Participation, Series 1991,
6.625%, 11/15/11
3,500,000 Jefferson County, Colorado, Refunding, Certificates of 12/02 at 102 AAA 3,873,590
Participation, 6.650%, 12/01/08
- --------------------------------------------------------------------------------------------------------------------------------
Delaware -- 0.5%
3,600,000 Delaware Economic Development Authority, Pollution Control 5/02 at 102 AAA 3,915,216
Refunding Revenue Bonds (Delmarva Power & Light Company
Project) Series 1992 Series B, 6.750%, 5/01/19
- --------------------------------------------------------------------------------------------------------------------------------
Florida -- 0.1%
920,000 Florida Keys Aqueduct Authority, Water Revenue Refunding 9/01 at 101 AAA 999,810
Bonds, Series 1991, 6.750%, 9/01/21 (Pre-refunded to
9/01/01)
80,000 Florida Keys Aqueduct Authority, Water Revenue, 6.750%, 9/01 at 101 AAA 86,124
9/01/21
- --------------------------------------------------------------------------------------------------------------------------------
Georgia -- 2.8%
5,000,000 City of Albany (Georgia), Sewerage System Revenue Bonds, 7/02 at 102 AAA 5,517,750
Series 1992, 6.625%, 7/01/17 (Pre-refunded to 7/01/02)
5,000,000 Development Authority of Appling County (Georgia), Pollution 1/04 at 101 AAA 5,583,300
Control Revenue Bonds (Oglethorpe Power Corporation Hatch
Project), Series 1994, 7.150%, 1/01/21
2,250,000 Chatham County Hospital Authority, Hospital Revenue Bonds 1/01 at 101 AAA 2,444,940
(Memorial Medical Center, Inc.) (Savannah, Georgia), Series
1990A, 7.000%, 1/01/21 (Pre-refunded to 1/01/01)
3,020,000 Development Authority of the City of Marietta, First Mortgage 9/05 at 102 AAA 3,190,177
Revenue Bonds (Life College, Inc.), Series 1995A and Series
1995B, 5.950%, 9/01/19
6,180,000 Marietta Development Authority (Life College), 6.250%, 9/05 at 102 AAA 6,775,072
9/01/25
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois--14.9%
$ 2,500,000 City of Chicago (Illinois), General Obligation Adjustable 7/02 at 101 1/2 AAA $ 2,768,850
Rate Bonds, Central Public Library Project, Series C
of 1988, 6.850%, 1/01/17 (Pre-refunded to 7/01/02)
5,000,000 City of Chicago, General Obligation Bonds, Project Series A 1/02 at 102 AAA 5,381,000
of 1992, 6.250%, 1/01/12 (Pre-refunded to 1/01/02)
Chicago School Reform Board of Trustees of the Board of
Education of the City of Chicago, Illinois, Unlimited Tax
General Obligation Bonds, Series 19:
9,590,000 5.800%, 12/01/17 12/07 at 102 AAA 10,070,267
10,000,000 5.750%, 12/01/27 12/07 at 102 AAA 10,411,800
10,000,000 5.250%, 12/01/30 12/07 at 102 AAA 9,681,400
12,800,000 Public Building Commission of Chicago (Illinois), Building
Revenue Bonds, Series A of 1993, 12/03 at 102 AAA 13,252,224
5.750%, 12/01/18
6,540,000 Town of Cicero, Cook County, Illinois, General Obligation
Corporate Purpose Bonds, Series 1994A, 12/04 at 102 AAA 7,208,519
6.400%, 12/01/14
7,500,000 The County of Cook, Illinois, General Obligation Bonds, 11/03 at 100 AAA 7,126,500
Series 1993A, 5.000%, 11/15/23
2,500,000 Community College District No. 508, Cook County, Illinois,
Certificates of Participation, No Opt. Call AAA 3,191,700
8.750%, 1/01/07
2,370,000 Board of Governors of State Colleges and Universities
(Illinois), Eastern Illinois University, 4/04 at 102 AAA 2,591,168
Auxiliary Facilities System Revenue Bonds, Series 1994A,
6.375%, 4/01/16
1,900,000 Illinois Educational Facilities Authority, Revenue Refunding 5/06 at 102 AAA 2,064,008
Bonds, (Midwestern University), Series 1966B, 6.250%, 5/15/26
6,595,000 Illinois Health Facilities Authority, Revolving Fund Pooled 2/99 at 103 AAA 6,967,354
Financing Program, Methodist Health Services Corporation,
Peoria, 8.000%, 8/01/15
4,500,000 Illinois Health Facilities Authority, Revenue Bonds, Series 5/04 at 102 AAA 4,874,040
1994 (Ingalls Health System Project), 6.250%, 5/15/24
3,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 8/04 at 102 AAA 3,209,730
1994A (The University of Chicago Hospitals Project),
6.125%, 8/15/24
4,000,000 Illinois Health Facilities Authority, Health Care Facilities 11/04 at 102 AAA 4,512,360
Revenue Bonds, Series 1995, (Northwestern Medical Faculty
Foundation, Inc.), 6.500%, 11/15/15 (Pre-refunded to 11/15/04)
7,000,000 Illinois Health Facilities Authority, Revenue Bonds, 1/06 at 102 AAA 7,371,840
(Carle Foundation), Series 1996, 6.000%, 1/01/27
169,000 Illinois Health Facilities Authority, Revenue (Community 1/06 at 102 AAA 192,746
Provider Pooled Loan Program), 7.900%, 8/15/03
1,003,000 Illinois Health Facilities Authority, Revenue Bonds Series 5/98 at 101 AAA 1,016,109
1988-B, (Community Provider Pooled Loan Program),
7.900%, 8/15/03
5,000,000 State of Illinois, General Obligation Bonds, Series of August 8/04 at 102 AA 5,257,900
1994, 5.875%, 8/01/19
State of Illinois, General Obligation Bonds, Series of February
1995:
3,065,000 6.100%, 2/01/19 2/05 at 102 AAA 3,275,136
5,545,000 6.100%, 2/01/20 2/05 at 102 AAA 5,925,165
4,000,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake, 6/03 at 102 AAA 4,329,880
McHenry and Will Counties, Illinois, General Obligation
Refunding Bonds, Series 1993C, 5.850%, 6/01/23
(Pre-refunded to 6/01/03)
2,850,000 Village of Woodridge, Dupage, Will and Cook Counties, Illinois 12/07 at 105 AAA 2,880,581
Multifamity Revenue Refunding Bonds, (GNMA Collateralized
Mortgage Loan, Hawthorn Ridge Apartments), 5.650%, 12/20/32
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana--7.4%
5,000,000 Indiana Health Facility Financing Authority, Hospital Revenue 5/02 at 102 AAA 5,360,100
Refunding and Improvement Bonds, Series 1992 (Community
Hospitals Projects), 6.400%, 5/01/12
5,000,000 Indiana Municipal Power Agency, Power Supply System Revenue 1/03 at 102 AAA 5,332,250
Bonds, 1993 Series A, 6.125%, 1/01/19
Indiana Housing Finance Authority, Single Family Mortgage
Revenue Bonds, 1997 Series B-2:
1,755,000 6.000%, 7/01/16 1/07 at 101 1/2 Aaa 1,826,393
10,620,000 6.125%, 1/01/27 1/07 at 102 Aaa 11,071,031
3,750,000 City of Indianapolis, Indiana, Gas Utility System Revenue Bonds,
Series 1992 A, 6.200%, 6/01/23 6/02 at 102 AAA 4,014,413
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indiana (continued)
$ 4,950,000 Jasper County, Indiana, Collateralized Pollution Control Refunding Revenue
Bonds (Northern Indiana Public Service Company Project), Series 1991,
7.100%, 7/01/17 7/01 at 102 AAA $ 5,376,492
2,000,000 Lawrence Central High School Building Corporation, Marion County,
Indiana, First Mortgage Bonds, Series 1990, 7.250%, 7/01/08
(Pre-refunded to 7/01/00) 7/00 at 102 AAA 2,166,180
3,300,000 Marion County Convention and Recreational Facilities Authority (Indiana),
Excise Taxes Lease Rental Revenue Bonds, Series 1991B, 7.000%, 6/01/21
(Pre-refunded to 6/01/01) 6/01 at 102 AAA 3,617,889
13,000,000 Marion County Convention and Recreational Facilities Authority, Excise Taxes
Lease Rental Revenue Subordinate Bonds, Series 1997A, 5.000%, 6/01/27 6/08 at 101 AAA 12,295,400
2,250,000 Hospital Authority of Monroe County, Hospital Revenue Refunding Bonds,
Series 1989 (Bloomington Hospital Project), 7.125%, 5/01/11 5/99 at 101 AAA 2,332,778
1,000,000 City of Princeton, Indiana, Pollution Control Refunding Revenue Bonds,
1990 Series (Public Service Company of Indiana, Inc. Project C),
7.375%, 3/15/12 3/00 at 102 AAA 1,067,970
2,000,000 Hospital Authority of St. Joseph County (Indiana), Fixed Rate Hospital
Revenue Refunding Bonds, Series 1991A (Memorial Hospital of South Bend
Project), 7.000%, 8/15/20 (Pre-refunded to 8/15/01) 8/01 at 102 AAA 2,199,020
2,190,000 Shelby County Jail Building Corporation, First Mortgage Bonds (Shelby
County, Indiana), 6.500%, 7/15/09 (Pre-refunded to 7/15/02) 7/02 at 102 AAA 2,407,796
2,265,000 Southwest Allen Multi School Bldg. Corp., First Mortgage Refunding Bonds,
Series 1992 B, Fort Wayne, Indiana, 6.375%, 1/15/09 1/02 at 101 AAA 2,424,773
- ------------------------------------------------------------------------------------------------------------------------------------
Louisiana - 2.7%
7,000,000 Louisiana Public Facilities Authority, Hospital Revenue Refunding Bonds
(Southern Baptist Hospital Project), Series 1992, 6.800%, 5/15/12
(Pre-refunded to 5/15/02) 5/02 at 102 AAA 7,755,370
1,595,000 Louisiana Public Facilities Authority, Fixed Rate Health and Education
Capital Facilities Revenue Bonds (West Jefferson Medical Center),
Series 1985D, 7.900%, 12/01/15 12/98 at 102 AAA 1,659,948
State of Louisiana General Obligation Bonds, Series 1992-A:
5,000,000 6.500%, 5/01/09 5/02 at 102 AAA 5,482,550
2,000,000 6.500%, 5/01/12 (Pre-refunded to 5/01/02) 5/02 at 102 AAA 2,193,020
4,750,000 Hospital Service District No. 1 of the Parish of Tangipahoa, State of
Louisiana, Hospital Revenue Bonds (Series 1994), 6.250%, 2/01/24 2/04 at 102 AAA 5,144,535
- ------------------------------------------------------------------------------------------------------------------------------------
Maine - 3.7%
3,175,000 Maine Health and Higher Educational Facilities Authority, Revenue Bonds,
Series 1994B, 7.000%, 7/01/24 7/04 at 102 AAA 3,604,070
11,500,000 Maine Health and Higher Educational Facilities Authority, Revenue Bonds,
Series 1995A, 5.875%, 7/01/25 7/05 at 102 AAA 12,067,985
12,750,000 Maine State Housing Authority, Mortgage Purchase Bonds, 1996 Series B-2,
6.450%, 11/15/26 5/06 at 102 AAA 13,664,558
Old Orchard Beach, General Obligation:
750,000 6.650%, 9/01/09 9/02 at 103 AAA 833,168
500,000 6.650%, 9/01/10 9/02 at 103 AAA 551,675
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 3.2%
3,500,000 City of Boston, Massachusetts, Revenue Bonds, Boston City Hospital (FHA
Insured Mortgage), Series A, 7.625%, 2/15/21 (Pre-refunded to 8/15/00) 8/00 at 102 Aaa 3,822,000
1,150,000 City of Haverhill, Massachusetts, General Obligation Municipal Purpose
Loan of 1992, Series A, 7.000%, 6/15/12 (Pre-refunded to 6/15/02) 6/02 at 102 AAA 1,283,538
1,250,000 Massachusetts Bay Transportation Authority, Certificates of
Participation, 1990 Series A, 7.650%, 8/01/15 (Pre-refunded to 8/01/00) 8/00 at 102 AAA 1,367,825
2,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds,
Capital Asset Program Issue, Series F, 7.300%, 10/01/18 (Pre-refunded
to 4/01/00) 4/00 at 102 AAA 2,154,080
3,400,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds,
New England Medical Center Hospitals Issue, Series F, 6.625%, 7/01/25 7/02 at 102 AAA 3,696,888
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts (continued)
$ 4,000,000 Massachusetts Health and Educational Facilities Authority, 7/02 at 102 AAA $ 4,330,560
Revenue Bonds, South Shore Hospital Issue, Series D,
6.500%, 7/01/22
5,875,000 Massachusetts Health and Educational Facilities Authority, 11/03 at 102 AAA 5,742,871
Revenue Bonds, Cape Cod Health Systems, Inc. Issue,
Series A, 5.250%, 11/15/21
4,000,000 Massachusetts Health and Educational Facilities Authority, 10/05 at 102 AAA 4,229,640
Revenue Bonds, Berkshire Health Systems Issue, Series D,
6.000%, 10/01/19
- --------------------------------------------------------------------------------------------------------------------------------
Michigan -- 5.0%
12,130,000 City of Bay City, County of Bay, State of Michigan, 1991 No Opt. Call AAA 3,519,641
General Obligation Unlimited Tax Street Improvement Bonds,
0.000%, 6/01/21
5,000,000 Caledonia Community Schools, Counties of Kent, Allegan and 5/02 at 102 AAA 5,518,950
Barry, State of Michigan, 1992 School Building and Site
and Refunding Bonds (General Obligation -- Unlimited Tax),
6.700%, 5/01/22 (Pre-refunded to 5/01/02)
2,500,000 Chelsea School District, Counties of Washtenaw and Jackson, 5/05 at 101 AAA 2,639,625
State of Michigan, 1995 School Building and Site Bonds
(General Obligation -- Unlimited Tax), 6.000%, 5/01/19
2,000,000 City of Detroit, Michigan, Sewage Disposal System Revenue Bonds, 7/01 at 102 AAA 2,175,260
Series 1991, 6.625%, 7/01/21 (Pre-refunded to 7/01/01)
4,750,000 City of Detroit, Michigan, Sewage Disposal System Revenue Refunding 7/05 at 100 AAA 4,525,990
Bonds, Series 1995-B, 5.000%, 7/01/25
5,000,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 11/06 at 102 AAA 5,227,450
(Sparrow Obligated Group), Series 1996, 5.900%, 11/15/26
8,280,000 Michigan State Housing Development Authority, Rental Housing Revenue 4/07 at 102 AAA 8,704,184
Bonds, 1997 Series A, 6.100%, 10/01/33
2,000,000 Michigan Strategic Fund Limited Obligation Refunding Revenue Bonds 12/01 at 102 AAA 2,173,700
(The Detroit Edison Company Pollution Control Bonds Project),
Series 1991DD, 6.875%, 12/01/21
Petoskey Hospital Finance Authority, Limited Obligation Revenue and
Refunding Bonds (Northern Michigan Hospitals Obligated Group),
Series 1998:
3,000,000 5.000%, 11/15/18 5/08 at 102 AAA 2,873,610
3,270,000 5.000%, 11/15/27 5/08 at 102 AAA 3,077,888
1,085,000 School District of the City of River Rouge, County of Wayne, 5/03 at 101 1/2 AAA 1,109,564
State of Michigan, 1993 School Building and Site Bonds (General
Obligation -- Unlimited Tax), 5.625%, 5/01/22
- --------------------------------------------------------------------------------------------------------------------------------
Mississippi -- 0.8%
6,400,000 Medical Center Educational Building Corporation (Mississippi), 12/04 at 102 AAA 7,006,784
Revenue Bonds, Series 1993 (University of Mississippi Medical
Center Project), 5.900%, 12/01/23 (Pre-refunded to 12/01/04)
- --------------------------------------------------------------------------------------------------------------------------------
Missouri -- 1.3%
2,000,000 The Industrial Development Authority of St. Charles County, 4/08 at 102 AAA 1,991,040
Missouri Multifamily Housing Revenue Bonds (Ashwood
Apartments Project), Series 1998A, 5.600% 4/01/30 (DD)
7,950,000 St. Louis Municipal Finance Corporation, City Justice Center, 2/06 at 102 AAA 8,485,274
Leasehold Revenue Improvement Bonds, Series 1996A (City of
St. Louis, Missouri, Lessee), 5.950%, 2/15/16
- --------------------------------------------------------------------------------------------------------------------------------
Nebraska -- 0.6%
5,000,000 Nebraska Investment Finance Authority, Health Facilities Revenue 2/08 at 102 AAA 5,068,900
Bonds (Childrens Healthcare Services Obligated Group),
Series 1997, 5.500%, 8/15/27
- --------------------------------------------------------------------------------------------------------------------------------
Nevada -- 0.6%
2,500,000 County of Churchill, Nevada, Health Care Facilities Revenue Bonds 1/04 at 102 AAA 2,629,800
(Western Health Network, Inc.), Series 1994A, 6.000%, 1/01/24
2,000,000 Clark County, Nevada, Industrial Development Refunding Revenue Bonds 10/02 at 102 AAA 2,223,120
(Nevada Power Company Project) Series 1992C, 7.200%, 10/01/22
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Hampshire - 0.4%
$ 2,850,000 New Hampshire Higher Educational and Health Facilities Authority, 7/02 at 102 AAA $ 3,064,491
Revenue Refunding Bonds, University System of New Hampshire Issue,
Series 1992, 6.250%, 7/01/20
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey - 0.4%
1,480,000 New Jersey Housing and Mortgage Finance Agency, Home Mortgage Purchase 5/98 at 103 AAA 1,526,798
Revenue Bonds, 1987 Series B, 8.100%, 10/01/17
1,745,000 Housing Finance Corporation of the Township of Pennsauken (Pennsauken, 5/98 at 104 AAA 1,811,345
New Jersey), Section 8 Assisted Housing Revenue Bonds,
1979 Series A, 8.000%, 4/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
New Mexico - 0.9%
3,000,000 City of Albuquerque, New Mexico, Hospital System Revenue Bonds, 8/98 at 101 AAA 3,048,420
1992 Series B (Presbyterian Healthcare Services) 6.600%, 8/01/07
4,445,000 City of Farmington, New Mexico, Pollution Control Revenue Refunding 12/02 at 102 AAA 4,826,559
Bonds, 1992 Series A (Public Service Company of New Mexico, San Juan
and Four Corners Projects), 6.375%, 12/15/22
- ------------------------------------------------------------------------------------------------------------------------------------
New York - 9.7%
Metropolitan Transportation Authority (New York), Commuter Facilities
Revenue Bonds, Series 1992B:
4,955,000 6.250%, 7/01/17 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 5,403,873
6,925,000 6.250%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 7,552,336
5,000,000 Metropolitan Transportation Authority, Commuter Facilities Revenue Bonds, 7/04 at 101 1/2 AAA 5,584,000
Series 1994A, 6.375%, 7/01/18 (Pre-refunded to 7/01/04)
5,925,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 6,529,587
Fixed Rate Bonds, Subseries C-1, 6.625%, 8/01/12 (Pre-refunded to 8/01/02)
75,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 81,696
6.625%, 8/01/12
3,010,000 The City of New York, General Obligation Bonds, Fiscal 1993 Series E, 5/03 at 101 1/2 AAA 3,205,530
6.000%, 5/15/16
3,750,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series B, 2/02 at 101 1/2 AAA 4,099,950
7.000%, 2/01/2018
19,500,000 The City of New York Municipal Water Finance Authority, 6/06 at 101 AAA 19,547,580
Water and Sewer System Revenue Bonds, Series A, 5.375%, 6/15/26
New York City, Municipal Water Finance Authority,
Water and Sewer Revenue Bonds, Fiscal 1992 Series A:
3,010,000 6.750%, 6/15/16 (Pre-refunded to 6/15/01) 6/01 at 101 AAA 3,258,746
3,320,000 6.750%, 6/15/16 6/01 at 101 AAA 3,561,165
4,470,000 New York City Municipal Water Finance Authority, Water and Sewer 6/02 at 101 1/2 AAA 4,616,169
System Revenue Bonds, Fiscal 1993 Series A, 5.750%, 6/15/18
3,900,000 New York City Transit Authority, Transit Facilities Refunding No Opt. Call AAA 4,005,729
Revenue Bonds, Series 1993 (Livingston Plaza Project),
5.400%, 1/01/18
New York City Industrial Development Agency, Civic Facility Revenue Bonds
(USTA National Tennis Center Incorporated Project):
3,500,000 6.500%, 11/15/10 11/04 at 102 AAA 3,907,050
3,000,000 6.600%, 11/15/11 11/04 at 102 AAA 3,360,210
5,240,000 Triborough Bridge and Tunnel Authority, Special Obligation Refunding Bonds, 1/01 at 102 AAA 5,638,240
Series 1991B, 6.875%, 1/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio - 0.3%
2,500,000 Dublin City School District, Franklin, Delaware and Union Counties, Ohio, 12/02 at 102 AAA 2,733,200
Various Purpose School Building Construction and Improvement Bonds
(General Obligation), 6.200%, 12/01/19
(Pre-refunded to 12/01/02)
- ------------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.7%
220,000 Muskogee County Home Finance Authority (Oklahoma) Single Family Mortgage 6/00 at 102 AAA 230,245
Revenue Refunding Bonds, Series 1990 A, 7.600%, 12/01/10
5,000,000 Oklahoma Industries Authority, Health System Revenue Bonds 8/05 at 102 AAA 5,502,200
(Obligated Group consisting of Baptist Medical Center of Oklahoma, Inc.,
and South Oklahoma City Hospital Corporation), 6.250%, 8/15/12
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania - 1.1%
$ 3,000,000 North Penn Water Authority (Montgomery County, Pennsylvania), Water 11/04 at 101 AAA $ 3,449,490
Revenue Bonds, Series of 1994, 7.000%, 11/01/24 (Pre-refunded to
11/01/04)
3,900,000 The Philadelphia Municipal Authority, Philadelphia, Pennsylvania, 11/01 at 102 AAA 4,331,496
Justice Lease Revenue Bonds, 1991 Series B, 7.125%, 11/15/18
(Pre-refunded to 11/15/01)
1,000,000 Washington County Hospital Authority (Pennsylvania), Hospital Revenue 7/00 at 102 AAA 1,072,700
Refunding Bonds, Series A of 1990 (The Washington Hospital Project),
7.150%, 7/1/17
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 0.5%
3,750,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1992 (General 7/02 at 101 1/2 AAA 4,125,113
Obligation Bonds), 6.600%, 7/01/13 (Pre-refunded to 7/01/02)
- ------------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 2.6%
4,000,000 City of Cranston, Rhode Island, General Obligation Bonds, 7.200%, 7/01 at 101 1/2 AAA 4,401,880
7/15/11 (Pre-refunded to 7/15/01)
3,130,000 Kent County Water Authority (Rhode Island), General Revenue Bonds, 7/04 at 102 AAA 3,433,798
1994 Series A, 6.350%, 7/15/14
1,000,000 Providence Housing Development Corporation, Mortgage Revenue Refunding 7/04 at 102 AAA 1,075,870
Bonds, Series 1994A, 6.650%, 7/01/15
2,250,000 Rhode Island Depositors Economic Corporation, Special Obligation Bonds, 8/02 at 102 AAA 2,486,205
1992 Series A, 6.625%, 8/01/19 (Pre-refunded to 8/01/02)
10,000,000 Rhode Island Clean Water Finance Agency, Wastewater Treatment System 9/07 at 102 AAA 10,352,200
Revenue Bonds, (City of Cranston Ocean State LLC Project) Series 1997,
5.800%, 9/01/22
- ------------------------------------------------------------------------------------------------------------------------------------
South Carolina - 3.3%
Charleston County, South Carolina, Charleston Public Facilities
Corporation, Certificates of Participation, Series 1994 B:
1,430,000 6.875%, 6/01/14 (Pre-refunded to 6/01/04) 6/04 at 102 AAA 1,636,978
70,000 6.875%, 6/01/14 6/04 at 102 AAA 78,317
2,385,000 7.000%, 6/01/19 (Pre-refunded to 6/01/04) 6/04 at 102 AAA 2,744,586
115,000 7.000%, 6/01/19 6/04 at 102 AAA 129,413
5,435,000 Greenville Memorial Auditorium District, Public Facilities Corporation, 3/06 at 102 AAA 5,637,019
Greenville Memorial Auditorium District, Taxable Certificates of
Participation, 5.750%, 3/01/22
15,000,000 Orangeburg County, South Carolina, Solid Waste Disposal Facilities 11/02 at 101 AAA 15,293,400
Revenue Bond, (South Carolina Electric & Gas Company Project), Series
1994, 5.700%, 11/01/24
2,000,000 City of Rock Hill, South Carolina, Combined Utility System Revenue Bonds, 1/01 at 102 AAA 2,127,140
Series 1991, 6.375%, 1/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
Texas - 6.2%
3,000,000 Bexar County (Texas), Health Facilities Development Corporation, Hospital 8/04 at 102 AAA 3,414,030
Revenue Bonds (Baptist Memorial Hospital System Project), Series 1994,
6.750%, 8/15/19 (Pre-refunded to 8/15/04)
4,575,000 Harris County, Texas, Toll Road Senior Lien, Revenue Refunding Bonds, 8/02 at 102 AAA 5,036,343
Series 1992A, 6.500%, 8/15/17 (Pre-refunded to 8/15/02)
1,000,000 Harris County Hospital District Refunding Revenue Bonds, Texas, Series No Opt. Call AAA 1,196,610
1990, 7.400%, 2/15/10
500,000 City of Houston, Texas, Senior Lien Hotel Occupancy Tax and Parking 7/01 at 100 N/R*** 540,255
Facilities, Series 1985 A, 7.000%, 7/01/15 (Pre-refunded to 7/01/01)
825,000 Lower Colorado River Authority, Priority Refunding Revenue Bonds, Series 1/01 at 102 AAA 890,266
1991, Series B, 7.000%, 1/01/11
Retama Development Corporation, Special Facilities Revenue Bonds,
(Retama Park Racetrack Project) Series 1993:
9,715,000 8.750%, 12/15/18 No Opt. Call AAA 14,109,580
5,405,000 10.000%, 12/15/20 No Opt. Call AAA 8,836,958
5,000,000 Tarrant County Health Facilities Development Corporation, Hospital No Opt. Call AAA 5,497,700
Revenue Refunding and Improvement Bonds (Fort Worth Osteopathic
Hospital, Inc. Project), Series 1993, 6.000%, 5/15/21
</TABLE>
25
<PAGE>
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas (continued)
$ 6,080,000 Texas Health Facilities Development Corporation, Hospital Revenue 8/03 at 102 AAA $ 6,587,680
Bonds (All Saints Episcopal Hospitals of Fort Worth Project),
Series 1993B, 6.250%, 8/15/22
5,115,000 Texas Department Of Housing And Community Affairs, Single Family 9/07 at 102 AAA 5,264,460
Mortgage Revenue Bonds, 1997 Series A, Teams Structure,
5.800%, 9/01/29
- ------------------------------------------------------------------------------------------------------------------------------------
Utah -- 0.9%
3,055,000 State of Utah, State Building Ownership Authority, Lease Revenue 11/05 at 100 AAA 3,162,504
Bonds (State Facilities Master Lease Program), Series 1995A,
5.750%, 5/15/18
140,000 Utah Housing Finance Agency, Single Family Mortgage Senior Bonds, No Opt. Call AAA 148,538
1988 Issue C (Federally Insured or Guaranteed Mortgage Loans),
8.375%, 7/01/19
3,500,000 White City Water Improvement District, Salt Lake County, Utah, 2/05 at 100 AAA 3,926,860
General Obligation Water Bonds, Series 1995, 6.600%, 2/01/25
(Pre-refunded to 2/01/05)
- ------------------------------------------------------------------------------------------------------------------------------------
Vermont -- 1.9%
15,000,000 Vermont Housing Finance Agency Single Family Housing Bonds, 6/07 at 101 1/2 AAA 15,567,900
Series 9, 5.900%, 5/01/29
- ------------------------------------------------------------------------------------------------------------------------------------
Washington -- 1.0%
1,000,000 City of Marysville, Washington, Water and Sewer Revenue Bonds, 12/03 at 100 AAA 1,127,220
Series 1991 7.000%, 12/01/11 (Pre-refunded to 12/01/03)
5,000,000 Washington Public Power Supply System, Nuclear Project No. 2 No Opt. Call AAA 5,226,050
Refunding Revenue Bonds, Series 1993B, 5.400%, 7/01/05
2,000,000 Bellingham School District No. 501, Whatcom County, Washington, 12/04 at 100 AAA 2,161,500
Unlimited Tax General Obligation Bonds, Series 1994,
6.125%, 12/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Washington D.C. -- 1.1%
2,500,000 District of Columbia (Washington, D.C.), General Obligation Bonds, 6/00 at 102 AAA 2,712,624
Series 1990B) 7.500%, .6/01/10 (Pre-refunded to 6/01/00)
6,000,000 District of Columbia (Washington, D.C.) General Obligation Bonds, 6/04 at 102 AAA 6,549,660
Series 1994B, 6.100%, 6/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin -- 0.4%
2,000,000 City of Superior, Wisconsin, Limited Obligation Refunding Revenue No Opt. Call AAA 2,428,000
Bonds (Midwest Energy Resources Company Project), Series E-1991,
6.900%, 8/01/21
1,000,000 Three Lakes School District General Obligation, 6.750%, 4/01/12 4/03 at 100 AAA 1,106,380
(Pre-refunded to 4/01/03)
- ------------------------------------------------------------------------------------------------------------------------------------
Wyoming -- 0.3%
2,000,000 The Trustees of the University of Wyoming, Facilities Revenue Bonds, 6/00 at 101 AAA 2,126,200
Series 1991, 7.100%, 6/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
$ 772,887,000 Total Investments -- (cost $755,378,043) -- 98.3% 816,355,212
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.7% 14,201,336
-----------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $830,556,548
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
(DD) Security purchased on a delayed delivery basis (note 1).
N/R Investment is not rated.
See accompanying notes to financial statements.
26
<PAGE>
Statement of Net Assets
April 30, 1998
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $2,881,961,684 $816,355,212
Cash -- 8,207,219
Receivables:
Interest 53,346,124 15,802,946
Investments sold 2,053,523 --
Shares sold 7,721,213 345,016
Other assets 625,439 13,135
- -------------------------------------------------------------------------------------------------------
Total assets 2,945,707,983 840,723,528
- -------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 8,331,912 --
Payables:
Investments purchased -- 7,213,764
Shares redeemed 2,362,458 338,300
Accrued expenses:
Management fees (note 6) 1,091,007 328,079
12b-1 distribution and service fees (notes 1 and 6) 20,567 23,187
Other 253,517 17,241
Dividends payable 9,155,951 2,246,409
- -------------------------------------------------------------------------------------------------------
Total liabilities 21,215,412 10,166,980
- -------------------------------------------------------------------------------------------------------
Net assets (note 7) $2,924,492,571 $830,556,548
=======================================================================================================
Class A Shares (note 1)
Net assets $ 97,028,957 $ 90,459,270
Shares outstanding 10,259,878 8,202,981
Net asset value and redemption price per share $ 9.46 $ 11.03
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 9.87 $ 11.51
=======================================================================================================
Class B Shares (note 1)
Net assets $ 4,136,389 $ 4,992,139
Shares outstanding 437,368 452,650
Net asset value, offering and redemption price per share $ 9.46 $ 11.03
=======================================================================================================
Class C Shares (note 1)
Net assets $ 4,885,554 $ 8,036,759
Shares outstanding 517,330 735,744
Net asset value, offering and redemption price per share $ 9.44 $ 10.92
=======================================================================================================
Class R Shares (note 1)
Net assets $2,818,441,671 $727,068,380
Shares outstanding 297,869,252 66,189,488
Net asset value, offering and redemption price per share $ 9.46 $ 10.98
=======================================================================================================
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Statement of Operations
Year Ended April 30, 1998
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- --------------------------------------------------------------------------------------------------------------
Investment Income (note 1) $165,513,628 $47,569,459
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Expenses
Management fees (note 6) 13,208,603 3,921,179
12b-1 service fees - Class A (notes 1 and 6) 168,211 159,932
12b-1 distribution and service fees - Class B (notes 1 and 6) 20,535 24,096
12b-1 distribution and service fees - Class C (notes 1 and 6) 35,175 50,525
Shareholders' servicing agent fees and expenses 2,663,348 813,658
Custodian's fees and expenses 326,102 134,255
Trustees' fees and expenses (note 6) 62,390 17,730
Professional fees 357,897 100,708
Shareholders' reports - printing and mailing expenses 835,966 337,974
Federal and state registration fees -- 19,455
Portfolio insurance expense -- 29,555
Other expenses 134,832 41,837
- --------------------------------------------------------------------------------------------------------------
Total expenses 17,813,059 5,650,904
- --------------------------------------------------------------------------------------------------------------
Net investment income 147,700,569 41,918,555
- --------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 7,384,205 6,786,199
Net change in unrealized appreciation or depreciation of investments 100,807,694 23,049,222
- --------------------------------------------------------------------------------------------------------------
Net gain from investments 108,191,899 29,835,421
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $255,892,468 $71,753,976
==============================================================================================================
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Municipal Bond Insured Municipal Bond
----------------------------------------------- -------------------------------------------
Year Ended Two Months Ended Year Ended Year Ended Two Months Ended Year Ended
4/30/98 4/30/97 2/28/97 4/30/98 4/30/97 2/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 147,700,569 $ 25,358,832 $ 153,982,497 $ 41,918,555 $ 7,018,725 $ 42,143,020
Net realized gain (loss) from
investment transactions (notes 1 and 4) 7,384,205 124,391 13,454,600 6,786,199 (986,589) (1,089,131)
Net change in unrealized appreciation
or depreciation of investments 100,807,694 (29,401,558) (11,748,742) 23,049,222 (10,703,435) (7,672,084)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations 255,892,468 (3,918,335) 155,688,355 71,753,976 (4,671,299) 33,381,805
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (4,066,811) (605,734) (2,735,302) (3,941,471) (590,571) (2,881,559)
Class B (85,661) (1,502) (45) (102,807) (2,670) (832)
Class C (205,194) (38,827) (146,481) (294,623) (41,445) (224,876)
Class R (144,088,029) (24,664,380) (151,041,117) (37,785,864) (6,443,374) (38,675,228)
From accumulated net realized gains from
investment transactions:
Class A (268,871) -- (304,876) (249,043) -- (211,577)
Class B (6,710) -- -- (6,889) -- --
Class C (15,012) -- (19,401) (20,375) -- (17,777)
Class R (9,099,862) -- (13,873,562) (2,288,357) -- (2,484,412)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (157,836,150) (25,310,443) (168,120,784) (44,689,429) (7,078,060) (44,496,261)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 188,619,020 32,164,961 288,845,641 75,516,982 7,673,973 84,624,586
Net proceeds from shares issued
to shareholders due to reinvestment
of distributions 123,635,013 19,772,961 133,505,722 30,119,890 4,668,785 29,865,624
- ------------------------------------------------------------------------------------------------------------------------------------
312,254,033 51,937,922 422,351,363 105,636,872 12,342,758 114,490,210
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (336,624,740) (63,401,060) (436,065,365) (92,161,203) (17,108,094) (110,894,714)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions (24,370,707) (11,463,138) (13,714,002) 13,475,669 (4,765,336) 3,595,496
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 73,685,611 (40,691,916) (26,146,431) 40,540,216 (16,514,695) (7,518,960)
Net assets at the beginning of period 2,850,806,960 2,891,498,876 2,917,645,307 790,016,332 806,531,027 814,049,987
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $2,924,492,571 $2,850,806,960 $2,891,498,876 $830,556,548 $790,016,332 $806,531,027
====================================================================================================================================
Balance of undistributed net investment
income at the end of period $ 532,412 $ 1,277,538 $ 1,229,149 $ 320,020 $ 526,230 $ 585,565
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Municipal Trust (the "Trust") is an open-end diversified
investment company registered under the Investment Company Act of 1940, as
amended. The Trust comprises the Nuveen Municipal Bond Fund ("Municipal Bond")
and the Nuveen Insured Municipal Bond Fund ("Insured Municipal Bond")
(collectively the "Funds"), among others. The Trust was organized as a
Massachusetts business trust on July 1, 1996.
The John Nuveen Company ("Nuveen"), parent of John Nuveen & Co. Incorporated and
Nuveen Advisory Corp., respectively, the distributor ("Distributor") and
investment advisor ("Adviser") of the Funds, entered into an agreement under
which Nuveen acquired Flagship Resources Inc. and after the close of business
on January 31, 1997, consolidated their respective mutual fund businesses. This
agreement was approved at a meeting by the shareholders of the Flagship Funds in
December 1996.
After the close of business on January 31, 1997, Municipal Bond and Insured
Municipal Bond were reorganized into the Trust. Prior to the reorganization,
Municipal Bond was a Massachusetts Business Trust and Insured Municipal Bond was
a series of the Nuveen Insured Tax-Free Bond Fund, Inc., each an open-end
diversified management investment company. As part of this reorganization, the
Funds changed their fiscal year ends from February 28 to April 30.
Each fund seeks to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price
quotes are not readily available (which is usually the case for municipal
securities), the pricing service establishes fair market value based on yields
or prices of municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, indications of value from securities dealers and general
market conditions. Temporary investments in securities that have variable rate
and demand features qualifying them as short-term securities are valued at
amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject
to market fluctuation during this period. The Funds have instructed the
custodian to segregate assets in a separate account with a current value at
least equal to the amount of the when-issued and delayed delivery purchase
commitments. At April 30, 1998, Insured Municipal Bond had outstanding delayed
delivery purchase commitments of $4,314,278. Municipal Bond had no such
outstanding purchase commitments.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt
securities when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
30
<PAGE>
Federal Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount as amounts in excess of $.001 per share.
Furthermore, each Fund intends to satisfy conditions which will enable interest
from municipal securities, which is exempt from regular federal income tax, to
retain such tax-exempt status when distributed to the shareholders of the Funds.
All monthly tax-exempt income dividends paid during the fiscal year ended April
30, 1998, have been designated Exempt Interest Dividends. Net realized capital
gain and market discount distributions are subject to federal taxation.
Insurance
Insured Municipal Bond invests in municipal securities which are either covered
by insurance or backed by an escrow or trust account containing sufficient U.S.
government or U.S. government agency securities, both of which ensure the timely
payment of principal and interest. Each insured municipal security is covered by
Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
Such insurance does not guarantee the market value of the municipal securities
or the value of the Fund's shares. Original Issue Insurance and Secondary
Market Insurance remain in effect as long as the municipal securities covered
thereby remain outstanding and the insurer remains in business, regardless of
whether the Fund ultimately disposes of such municipal securities. Consequently,
the market value of the municipal securities covered by Original Issue
Insurance or Secondary Market Insurance may reflect value attributable to the
insurance. Portfolio Insurance is effective only while the municipal securities
are held by the Fund. Accordingly, neither the prices used in determining the
market value of the underlying municipal securities nor the net asset value of
the Fund's shares include value, if any, attributable to the Portfolio
Insurance. Each policy of the Portfolio Insurance does, however, give the Fund
the right to obtain permanent insurance with respect to the municipal security
covered by the Portfolio Insurance policy at the time of its sale.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a 1% contingent deferred sales charge ("CDSC") if
redeemed within 18 months of purchase. Class B Shares are sold without a sales
charge but incur annual 12b-1 distribution and service fees. An investor
purchasing Class B Shares agrees to pay a CDSC of up to 5% depending upon the
length of time the shares are held by the investor (CDSC is reduced to 0% at the
end of six years). Class B Shares convert to Class A Shares eight years after
purchase. Class C Shares are sold without a sales charge but incur annual 12b-1
distribution and service fees. An investor purchasing Class C Shares agrees to
pay a CDSC of 1% if Class C Shares are redeemed within one year of purchase.
Class R Shares are not subject to any sales charge or 12b-1 distribution or
service fees. Class R Shares are available for purchases of over $1 million and
in other limited circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the fiscal year ended April 30, 1998.
Expense Allocation
Expenses of each Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
31
<PAGE>
Notes to Financial Statements (continued)
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Municipal Bond
-------------------------------------------------------------------------------------
Year Ended Two Months Ended Year Ended
4/30/98 4/30/97 2/28/97
-------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 3,610,340 $ 34,138,865 1,026,576 $ 9,412,803 7,913,532 $ 72,392,333
Class B 425,808 4,027,584 46,550 424,404 4,630 43,000
Class C 198,476 1,867,171 52,166 473,637 379,075 3,482,943
Class R 15,747,999 148,585,400 2,404,891 21,854,117 23,272,855 212,927,365
Shares issued to shareholders due to
reinvestment of distributions:
Class A 314,639 2,970,090 43,927 402,112 222,308 2,045,959
Class B 5,660 53,689 32 293 -- --
Class C 18,178 171,005 3,585 32,777 13,729 126,401
Class R 12,768,468 120,440,229 2,112,348 19,337,779 14,285,524 131,333,362
- ----------------------------------------------------------------------------------------------------------------------------
33,089,568 312,254,033 5,690,075 51,937,922 46,091,653 422,351,363
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,356,476) (12,834,251) (762,269) (6,963,040) (4,751,496) (43,639,384)
Class B (45,312) (430,447) -- -- -- --
Class C (285,886) (2,670,807) (14,973) (135,974) (53,764) (496,539)
Class R (33,956,929) (320,689,235) (6,174,392) (56,302,046) (42,855,041) (391,929,442)
- ----------------------------------------------------------------------------------------------------------------------------
(35,644,603) (336,624,740) (6,951,634) (63,401,060) (47,660,301) (436,065,365)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (2,555,035) $ (24,370,707) (1,261,559) $(11,463,138) (1,568,648) $ (13,714,002)
============================================================================================================================
<CAPTION>
Insured Municipal Bond
-------------------------------------------------------------------------------------
Year Ended Two Months Ended Year Ended
4/30/98 4/30/97 2/28/97
-------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 2,354,322 $ 26,011,707 290,416 $ 3,095,852 2,993,504 $ 32,144,825
Class B 407,571 4,505,416 24,672 264,169 21,053 227,426
Class C 311,528 3,417,614 58,684 618,793 169,708 1,808,841
Class R 3,788,731 41,582,245 348,752 3,695,159 4,720,426 50,443,494
Shares issued to shareholders due to
reinvestment of distributions:
Class A 242,808 2,675,963 34,181 365,671 182,510 1,968,382
Class B 5,134 56,987 41 439 -- --
Class C 22,045 240,583 3,214 34,077 19,086 203,691
Class R 2,475,051 27,146,357 400,458 4,268,598 2,579,133 27,693,551
- ----------------------------------------------------------------------------------------------------------------------------
9,607,190 105,636,872 1,160,418 12,342,758 10,685,420 114,490,210
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (891,941) (9,818,160) (135,522) (1,441,615) (1,146,982) (12,317,662)
Class B (5,821) (65,030) -- -- -- --
Class C (129,381) (1,413,103) (38,598) (406,595) (155,088) (1,641,544)
Class R (7,358,468) (80,864,910) (1,438,979) (15,259,884) (9,079,255) (96,935,508)
- ----------------------------------------------------------------------------------------------------------------------------
(8,385,611) (92,161,203) (1,613,099) (17,108,094) (10,381,325) (110,894,714)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,221,579 $ 13,475,669 (452,681) $ (4,765,336) 304,095 $ 3,595,496
============================================================================================================================
</TABLE>
32
<PAGE>
3. Distributions to Shareholders
On May 8, 1998, the Funds declared dividend distributions from their tax-exempt
net investment income which were paid on June 1, 1998, to shareholders of
record on May 8, 1998, as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- -------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $ .0375 $ .0445
Class B .0315 .0375
Class C .0330 .0390
Class R .0390 .0460
===============================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended April
30, 1998, were as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- --------------------------------------------------------------------------------
<S> <C> <C>
Purchases:
Investments in municipal securities $ 296,289,928 $ 332,662,243
Temporary municipal investments 282,310,000 185,160,000
Sales:
Investments in municipal securities 338,802,326 325,772,128
Temporary municipal investments 282,310,000 205,660,000
================================================================================
</TABLE>
At April 30, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at April 30, 1998, were as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- --------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $ 228,842,882 $ 61,116,168
depreciation (1,602,373) (138,999)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 227,240,509 $ 60,977,169
================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5000 of 1%
For the next $125 million .4875 of 1
For the next $250 million .4750 of 1
For the next $500 million .4625 of 1
For the next $1 billion .4500 of 1
For net assets over $2 billion .4250 of 1
================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of each Fund in order to limit total expenses to .75 of 1% of the
average daily net asset value of Municipal Bond and .975 of 1% of the average
daily net asset value of Insured Municipal Bond, excluding any 12b-1 fees
applicable to Class A, B and C Shares. The Adviser may also voluntarily agree to
reimburse additional expenses from time to time, which may be terminated at any
time at its discretion.
33
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended April 30, 1998, the Distributor collected sales
charges on purchases of Class A Shares of approximately $737,900 and $563,000
for Municipal Bond and Insured Municipal Bond, respectively, of which
approximately $640,000 and $476,800, respectively, were paid out as concessions
to authorized dealers. The Distributor also received 12b-1 service fees on Class
A Shares, substantially all of which were paid to compensate authorized dealers
for providing services to shareholders relating to their investments.
During the fiscal year ended April 30, 1998, the Distributor compensated
authorized dealers directly with approximately $175,700 and $259,800 in
commission advances at the time of purchase for Municipal Bond and Insured
Municipal Bond, respectively. To compensate for commissions advanced to
authorized dealers, all 12b-1 service fees collected on Class B Shares during
the first year following a purchase, all 12b-1 distribution fees on Class B
Shares, and all 12b-1 service and distribution fees on Class C Shares during the
first year following a purchase are retained by the Distributor. During the
fiscal year ended April 30, 1998, the Distributor retained approximately $36,900
and $42,700 in such 12b-1 fees for Municipal Bond and Insured Municipal Bond,
respectively. The remaining 12b-1 fees charged to the Funds were paid to
compensate authorized dealers for providing services to shareholders relating to
their investments. The Distributor retained approximately $8,700 and $5,900 of
CDSC on share redemptions for Municipal Bond and Insured Municipal Bond,
respectively, during the fiscal year ended April 30, 1998.
7. Composition of Net Assets
At April 30, 1998, the Funds had an unlimited number of $.01 par value per
shares authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $2,695,428,979 $767,208,238
Balance of undistributed net investment income 532,412 320,020
Accumulated net realized gain from investment transactions 1,290,671 2,051,121
Net unrealized appreciation of investments 227,240,509 60,977,169
- ---------------------------------------------------------------------------------------------
Net assets $2,924,492,571 $830,556,548
=============================================================================================
</TABLE>
8. Investment Composition
At April 30, 1998, revenue sources by municipal purpose, expressed as a percent
of total investments, were as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Education and Civic Organizations -% 5%
Health Care 19 16
Housing/Multifamily 7 2
Housing/Single family 6 8
Tax Obligation/General 7 14
Tax Obligation/Limited 8 9
Transportation 7 2
U.S. Guaranteed 11 27
Utilities 25 9
Water and Sewer 9 7
Other 1 1
- ---------------------------------------------------------------------------------------------
100% 100%
=============================================================================================
</TABLE>
Certain long-term and intermediate-term investments owned by the Funds are
either covered by insurance issued by several private insurers or are backed by
an escrow or trust containing U.S. government or U.S. government agency
securities, either of which ensure the timely payment of principal and interest
in the event of default (29% for Municipal Bond and 100% for Insured Municipal
Bond). Such insurance or escrow, however, does not guarantee the market value
of the municipal securities or the value of the Funds' shares (see note 1).
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
34
<PAGE>
Financial Highlights
35
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------------------- ----------------------------
MUNICIPAL BOND
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
April 30, Value Income (a) Gain (Loss) Total Income Gains Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/95)
1998 $9.14 $.46 $.35 $ .81 $(.46) $(.03) $(.49) $9.46 9.00%
1997 (c) 9.24 .08 (.10) (.02) (.08) -- (.08) 9.14 (.23)
1997 (d) 9.28 .48 -- .48 (.47) (.05) (.52) 9.24 5.26
1996 (e) 9.15 .34 .14 .48 (.32) (.03) (.35) 9.28 5.33
Class B (2/97)
1998 9.15 .38 .35 .73 (.39) (.03) (.42) 9.46 8.09
1997 (c) 9.24 .09 (.11) (.02) (.07) -- (.07) 9.15 (.25)
1997 (e) 9.23 .03 .01 .04 (.03) -- (.03) 9.24 .47
Class C (6/95)
1998 9.14 .40 .34 .74 (.41) (.03) (.44) 9.44 8.20
1997 (c) 9.23 .07 (.09) (.02) (.07) -- (.07) 9.14 (.21)
1997 (d) 9.26 .42 -- .42 (.40) (.05) (.45) 9.23 4.64
1996 (e) 9.15 .29 .13 .42 (.28) (.03) (.31) 9.26 4.59
Class R (11/76)
1998 9.15 .48 .34 .82 (.48) (.03) (.51) 9.46 9.09
1997 (c) 9.24 .08 (.09) (.01) (.08) -- (.08) 9.15 (.09)
1997 (d) 9.28 .49 .01 .50 (.49) (.05) (.54) 9.24 5.53
1996 (d) 9.00 .51 .31 .82 (.51) (.03) (.54) 9.28 9.31
1995 (d) 9.28 .52 (.21) .31 (.51) (.08) (.59) 9.00 3.60
1994 (d) 9.45 .52 (.07) .45 (.52) (.10) (.62) 9.28 4.79
=================================================================================================================
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales
charge and are not annualized.
(c) For the two months ended April 30.
(d) For the fiscal year ended February 28/29.
(e) From commencement of class operations as noted through February
28/29.
36
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ----------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment(a) ment(a) Rate
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 97,029 .80% 4.83% .80% 4.83% 10%
70,331 .77* 5.13* .77* 5.13* 2
68,204 .81 5.11 .81 5.11 12
37,089 .86* 5.11* .83* 5.14* 17
4,136 1.56 4.05 1.56 4.05 10
468 1.53* 4.39* 1.53* 4.39* 2
43 1.51* 5.23* 1.51* 5.23* 12
4,886 1.35 4.29 1.35 4.29 10
5,360 1.32* 4.58* 1.32* 4.58* 2
5,039 1.54 4.37 1.54 4.37 12
1,915 1.64* 4.33* 1.58* 4.39* 17
2,818,442 .60 5.04 .60 5.04 10
2,774,648 .57* 5.33* .57* 5.33* 2
2,818,214 .57 5.35 .57 5.35 12
2,878,641 .59 5.53 .59 5.53 17
2,741,178 .59 5.79 .59 5.79 17
2,700,007 .62 5.49 .62 5.49 15
============================================================================
</TABLE>
37
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as
follows:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
---------------------------------- -----------------------------
INSURED MUNICIPAL BOND
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
April 30, Value Income (a) Gain (Loss) Total Income Gains Total Value Return (b)
- -------------------------------------------------------------------------------------------------------------------
<S> <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%
1997 (c) 10.82 .09 (.16) (.07) (.09) -- (.09) 10.66 (.63)
1997 (d) 10.97 .56 (.13) .43 (.54) (.04) (.58) 10.82 4.04
1996 (d) 10.40 .54 .57 1.11 (.54) -- (.54) 10.97 10.90
1995 (e) 10.31 .26 .12 .38 (.27) (.02) (.29) 10.40 3.84
Class B (2/97)
1998 10.67 .46 .39 .85 (.46) (.03) (.49) 11.03 8.14
1997 (c) 10.82 .09 (.16) (.07) (.08) -- (.08) 10.67 (.65)
1997 (e) 10.80 .04 .02 .06 (.04) -- (.04) 10.82 .55
Class C (9/94)
1998 10.56 .48 .39 .87 (.48) (.03) (.51) 10.92 8.39
1997 (c) 10.72 .08 (.16) (.08) (.08) -- (.08) 10.56 (.73)
1997 (d) 10.85 .46 (.09) .37 (.46) (.04) (.50) 10.72 3.48
1996 (d) 10.31 .46 .54 1.00 (.46) -- (.46) 10.85 9.88
1995 (e) 10.29 .23 .08 .31 (.27) (.02) (.29) 10.31 3.09
Class R (12/86)
1998 10.62 .56 .39 .95 (.56) (.03) (.59) 10.98 9.17
1997 (c) 10.78 .09 (.15) (.06) (.10) -- (.10) 10.62 (.60)
1997 (d) 10.92 .57 (.11) .46 (.56) (.04) (.60) 10.78 4.38
1996 (d) 10.38 .57 .54 1.11 (.57) -- (.57) 10.92 10.94
1995 (d) 10.81 .57 (.40) .17 (.58) (.02) (.60) 10.38 1.85
1994 (d) 10.85 .57 .02 .59 (.57) (.06) (.63) 10.81 5.47
===================================================================================================================
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales
charge and are not annualized.
(c) For the two months ended April 30.
(d) For the fiscal year ended February 28/29.
(e) From commencement of class operations as noted through February 28.
38
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ----------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment(a) ment(a) Rate
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 90,459 .86% 4.91% .86% 4.91% 40%
69,291 .84* 5.12* .84* 5.12* 12
68,268 .87 5.07 .87 5.07 35
46,943 .92 5.00 .91 5.01 27
14,097 1.27* 5.28* 1.00* 5.55* 25
4,992 1.61 4.14 1.61 4.14 40
488 1.59* 4.36* 1.59* 4.36* 12
228 1.58* 4.84* 1.58* 4.84* 35
8,037 1.41 4.36 1.41 4.36 40
5,615 1.39* 4.57* 1.39* 4.57* 12
5,448 1.61 4.33 1.61 4.33 35
5,151 1.63 4.34 1.63 4.34 27
3,979 1.75* 4.83* 1.75* 4.83* 25
727,068 .66 5.12 .66 5.12 40
714,622 .64* 5.31* .64* 5.31* 12
732,587 .63 5.31 .63 5.31 35
761,936 .63 5.33 .63 5.33 27
736,702 .64 5.67 .64 5.67 25
745,914 .65 5.21 .65 5.21 11
=============================================================================
</TABLE>
39
<PAGE>
Building Better Portfolios with Nuveen
Nuveen Family
of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth Funds
Nuveen Rittenhouse
Growth Fund
Growth and
Income Funds
European Value Fund
Growth and
Income Stock Fund
Balanced Municipal
and Stock Fund
Balanced Stock
and Bond Fund
Municipal
Bond Funds
National Funds
Long-Term
Insured
Intermediate-Term
Limited Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
Reducing the impact of taxes and moderating risk are important goals for many
risk-sensitive investors seeking to build better portfolios. For these
investors, a tax-efficient, risk-resistant investment portfolio often forms the
foundation of a carefully crafted financial plan for building and sustaining
wealth. Nuveen is committed to providing investors and their financial advisers
with a range of products and investment tools to help build better portfolios.
Mutual Funds
Nuveen Mutual Funds offer investors access to the Nuveen family of Premier
Advisers/SM/, including Nuveen Advisory Corp., Institutional Capital Corp. and
Rittenhouse Financial Services. Our equity, balanced and income funds seek to
provide consistent performance, time-tested strategies to reduce risk and
experienced, professional management.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Unit Trusts
Nuveen Unit Trusts are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred/R/
Nuveen MuniPreferred offers investors a AAA-rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
40
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Shareholder Services, Inc.
Nuveen Investor Services
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
41
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time -- with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 621-7227 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
1898
NUVEEN 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime./TM/
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com VAN-N1-4.98
<PAGE>
NUVEEN
Municipal Bond Funds
April 30, 1998
Annual Report
Dependable, tax-free income to help you keep more of what you earn.
All-American
Intermediate
Limited Term
[PHOTO APPEARS HERE]
<PAGE>
Highlights
As of April 30, 1998
For Class A shares on net asset value
* Overall rating within the municipal bond category for Class A shares for the
period ended 4/30/98. Morningstar proprietary ratings reflect historical risk-
adjusted performance and are subject to change every month. Ratings are
calculated from a fund's three-, five- 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 all three funds earned four stars for each of the three- and
five-year periods ended 4/30/98, and for the 10-year period for the Limited
Term fund. In an investment category, 10% of funds receive five stars and
22.5% receive four stars. 1,547 municipal bond funds were rated for the three-
year period, 809 for the five-year period, and 346 for the 10-year period,
each ended 4/30/98.
Credit Quality Performance Highlights
Nuveen Flagship All-American Municipal Bond Fund
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
AAA 29%
AA 6%
A 21%
BBB/NR 44%
</TABLE>
. **** Four-star rating by Morningstar*
. Outperformed Lehman Municipal Bond Index and Lipper peer group
average by more than 100 basis points
. Ranked in the top 10% of national municipal bond funds by
Lipper
Nuveen Flagship Intermediate Municipal Bond Fund
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
AAA 31%
AA 11%
A 23%
BBB/NR 35%
</TABLE>
. **** Four-star rating by Morningstar*
. Outperformed Lehman 7-Year Municipal Bond Index and
Lipper peer group average by more than 100 basis points
. Ranked in the top 5% of national intermediate-term
municipal bond funds by Lipper
Nuveen Flagship Limited Term Municipal Bond Fund
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
AAA 36%
AA 6%
A 26%
BBB/NR 32%
</TABLE>
. **** Four-star rating by Morningstar*
. Paralleled Lehman 5-Year Municipal Bond Index and outperformed
Lipper peer group average by more than 100 basis points
. Ranked in the top 10% of national short-intermediate municipal
bond funds by Lipper
<TABLE>
<CAPTION>
Contents
<C> <S>
1 Dear Shareholder
3 All-American Commentary and Overview
6 Intermediate Commentary and Overview
9 Limited Term Commentary and Overview
12 Portfolio of Investments
33 Statement of Net Assets
34 Statement of Operations
35 Statement of Changes in Net Assets
36 Notes to Financial Statements
42 Financial Highlights
48 Report of Independent Public Accountants
49 Building Better Portfolios
</TABLE>
Is it Time for a Financial Check-Up?
Now is a great time to sit down with your financial adviser and review your
financial plan. How can you make sure that your investment strategy is strong
enough to provide the income you need today and versatile enough to change as
your goals do? Here are some guidelines:
. Make sure you and your adviser understand your current situation. How have
your goals, objectives and risk profile changed? What are your current tax
concerns, interests, lifestyle?
. Revisit your current investment choices. If the value of one portion of your
portfolio has grown substantially, it may be time to rebalance asset classes.
. Determine how your asset mix will be implemented. Changing your asset
allocation is generally a gradual process. Make sure you and your adviser have
a clear understanding of each other's responsibilities. Define and discuss
what you want in terms of support from your adviser.
. Keep revisiting your plan. Don't assume that once you've revised your plan and
reallocated your portfolio the process is finished.
It's recommended that you meet at least once a year with your financial adviser-
and usually more if there have been significant changes in interest rates, tax
laws, retirement plan distributions, lifestyle or health.
Even if things haven't changed, it makes good financial sense to keep in touch
with your adviser.
<PAGE>
Dear Shareholder
[TIMOTHY R. SCHWERTFEGER PHOTO APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to report that over the past 12 months, the Nuveen national
municipal bond funds continued to perform well and meet their objectives of
providing attractive tax-free income and after-tax performance. Once again, all
three funds generated competitive yields and were ranked in the top 10 percent
of their respective Lipper peer groups based on their outstanding total returns.
Each fund also received a four-star rating by Morningstar, demonstrating strong
risk-adjusted performance in addition to the superior overall performance
recognized by Lipper.
The declining interest rate environment over the past year had a significant
impact on the funds' performance. As the chart below illustrates, the yield on
the Bond Buyer 40, an unmanaged index of long-term municipal bonds, fell from
5.89% to 5.39% during the year. The decline reduced the income levels of the
All-American and Intermediate funds, as higher-yielding bonds that were called
or sold from the portfolios had to be replaced with bonds paying today's lower
interest rates. As a result, the dividends for these funds were reduced to
reflect the levels of income being earned by the portfolios. The Limited Term
fund's income was not impacted during the period because its low turnover and
good call protection supported the dividend through the low interest rate
environment. In addition, the accumulation of income from higher-yielding bonds
purchased over the past couple of years allowed us to increase its dividend
during the period.
[Bond Buyer 40 Chart Appears Here]
The decline in interest rates also led to many portfolio holdings appreciating
in value during the year. Many of the bonds in the portfolios have higher coupon
rates than are available in today's market, and the value of those bonds
increased as rates trended downward. The price appreciation resulting from this
and other factors led to the fund's outstanding total returns over the year.
The Economy in Review
The past 12 months were noteworthy for the ongoing performance of the equity
markets, which continued to exhibit remarkable strength. Fixed-income
investments also enjoyed bullish performance, as declining interest rates and
low inflation provided the ideal backdrop for a bond market rally. Much of the
decline in interest rates resulted from expectations that the financial problems
of Asia would restrain the prices of imported goods and reduce foreign demand
for U.S. products and services, thereby keeping inflation at moderate levels.
These inflation expectations were largely fulfilled, as the Consumer Price Index
1
<PAGE>
Nuveen offers an ever-expanding range of products designed to help investors
build a diversified, tax-efficient portfolio.
rose only 1.4% for the 12 months ended April 1998, remaining at one of its
lowest levels in more than 30 years.
In coming months, we will continue to closely watch several key factors that are
likely to affect the future of the economy, including demand for goods and
services, changes in U.S. production capacity, the availability of qualified
employees, and stability of the money supply. While it is still too early for
the full impact of Asia's financial difficulties to show up in U.S. economic
statistics, the potential long-term effect of this crisis on American markets is
of special concern. We expect that the development of these factors will
continue to influence the tone of the fixed-income markets during the remainder
of the year.
Building Better Portfolios
As economic events unfold, we believe that many investors will find
diversification to be an increasingly important investment strategy. An
appropriately diversified portfolio that is invested in a variety of asset
classes that each react differently to changes in the economic environment can
help cushion your portfolio against risk.
Many investors select Nuveen municipal bond funds because their emphasis on
dependable tax-free income and attractive after-tax returns makes them ideal for
building and maintaining long-term financial security. These funds can work
together with other Nuveen investments to create the foundation of a
diversified, well-balanced portfolio. Recent studies by Nuveen Research have
demonstrated that balanced portfolios combining municipal bonds and stocks
provided superior after-tax returns and lower levels of risk compared with
blends of stocks and taxable bonds.
You and your financial adviser may want to consider combining your Nuveen
municipal bond fund with an investment in the new Nuveen European Value Fund, an
equity mutual fund that offers a portfolio of quality European company stocks
for investors seeking long-term growth and international diversification. This
fund is just one of an ever-expanding range of Nuveen products and services
designed to help investors achieve diversification while building a tax-
efficient, risk-sensitive investment portfolio. If you'd like to learn more
about the Nuveen European Value Fund or any of our other investments, contact
your financial adviser or call Nuveen Investor Services for a prospectus at
(800) 621-7227. Please read it carefully before you invest.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of John Nuveen & Co. On behalf of everyone at
Nuveen, I thank you for your continued confidence in us and our family of
investments.
Sincerely,
/s/ Tim R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
June 15, 1998
2
<PAGE>
Nuveen Flagship All-American Municipal Bond Fund
Portfolio Manager's Comments
Rick Huber, portfolio manager of the All-American fund, talks about the
municipal market over the past year and the performance of the fund.
Comments cover the one-year period ended April 30, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
The Year in Review
Over the past 12 months, we have enjoyed a bull market in fixed-income
investments, including municipal bonds. Bond prices rose as interest rates
continued to drop and inflation remained at 30-year lows. However, the
performance of the municipal market was moderated by the effect of heavy supply,
as the lower rate environment stimulated a substantial increase in new issuance
as well as the refinancing of existing bonds. The first quarter of 1998 saw $68
billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued in recent weeks with May's long-awaited sale
of the first segment of Long Island (New York) Power Authority's $7 billion
offering, the largest issuance in municipal bond history. The publicity
surrounding this issue brought an unusual level of attention to the municipal
market and may stimulate additional interest in municipal bonds.
Investment Objective
The All-American fund is a long-term municipal bond fund that seeks to provide a
high level of current income consistent with capital preservation. The fund
invests in a nationally diversified portfolio of investment-grade quality
municipal bonds with an average maturity of 15-30 years. Nuveen follows a
disciplined investment process and tax-conscious portfolio management strategies
that emphasize competitive tax-free income and attractive after-tax total
returns over time.
Fund Performance
Once again, the All-American fund was an exceptional performer by every measure.
Its 10.32% total return outperformed the Lehman Brothers Municipal Bond Index
return by more than 100 basis points, as well as its Lipper peer group average
return of 9.02%. The fund was ranked in the top 10 percent of national municipal
bond funds by Lipper (16th of the 237 funds in the grouping), and earned a four-
star rating by Morningstar. The fund's distribution yield of 5.19% is one of the
most competitive dividend rates in its category (SEC yield was 4.52% for the
same period). Shareholders in the 31% federal income tax bracket would have had
to earn at least 7.52% on a comparable taxable investment to equal the All-
American fund's distribution yield on a taxable equivalent basis (or 6.55% to
equal the SEC yield).
Income Levels
The fund has performed well during this period of declining interest rates,
although its dividend had to be reduced in January to compensate for the lower
levels of income produced when cash inflows and proceeds from called and sold
bonds were used to purchase bonds paying today's lower rates. However, the fund
continues to pay competitive dividend rates because our in-depth research allows
us to find those higher-yielding and undervalued bonds that perform well
throughout market cycles.
Price Appreciation
Our careful research also helped us purchase bonds that appreciated in value due
to credit upgrades and pre-refundings. Over the past year, a large percentage of
the bonds in the portfolio were pre-refunded by their issuers. In a pre-
refunding, bonds are essentially paid off by their issuer and backed by U.S.
Treasury securities until they can be called from the portfolio. The pre-
refunding increases the credit quality of the bond significantly, and it
appreciates in value as a result. This price appreciation accounts for a large
percentage of the growth in total return over the past year. Other
3
<PAGE>
bonds in the portfolio increased in value because their credit ratings were
upgraded during the year. Credit upgrades were common throughout 1997 and the
first quarter of 1998 as the financial conditions of many municipalities
improved with the booming economy.
Strategies Over the Past Year
Maintaining the income level of the fund has been a priority over the past year.
To meet our goal of sustaining a competitive dividend, one focus has been on
call protection, which helps reduce the volatility of the income stream by
ensuring that only a small percentage of bonds could be called away from the
portfolio at any one time. In our efforts to improve the call protection of the
fund, we searched for bonds that have attractive call features or are not
callable at all. This ensures that if interest rates remain steady or continue
to drop, the higher-paying bonds in the portfolio will not be called away
immediately and will remain in the portfolio generating competitive income
levels unless we choose to sell them.
Another strategy over the past year was to purchase shorter-duration bonds with
maturities of 15-20 years. We felt that this was an excellent area of value in
the municipal bond market because these bonds offered attractive income levels
compared to their historical levels of volatility. Duration is a measure of
price volatility in relation to changes in interest rates. Longer-duration
bonds, which tend to be more volatile, offered little incremental yield for
taking on the additional interest rate risk they carry. Also, with shorter-
duration bonds, the fund should be less affected by interest rate movements.
Although it would be less affected by a market downturn, the shorter-duration
fund will also be less able to participate in a market rally.
We also increased our holdings of health care bonds during the year, reflecting
the value opportunities we saw in this sector, particularly in hospital and
long-term care bonds. Health care bonds now represent 17% of the portfolio, the
fund's largest holding. When we purchased these bonds, they offered good yields
and the potential for price appreciation. Since that time, many of these bonds
have been pre-refunded or have increased in value due to other factors such as
credit upgrades.
Outlook for the Future
In the coming months, we plan to manage the fund more conservatively, and will
work toward a shorter duration.
In addition, we plan to reposition the credit quality of the fund during the
next year. Currently, the fund is heavily weighted in the lower categories of
investment-grade quality bonds, with 44% in BBB and non-rated bonds. However, we
plan to replace many of these lower-rated bonds with bonds that have higher
credit ratings. At present, credit spreads remain tight, meaning that the
difference in yields between higher-rated and lower-rated bonds is unusually
small. By purchasing higher-rated bonds, we will increase the credit quality of
the fund with little impact on the fund's income levels. We anticipate that
credit spreads will widen again and that the higher-rated bonds will increase in
value as a result. Higher-rated bonds will also help us position the fund more
conservatively since they are less subject to market fluctuations.
4
<PAGE>
Nuveen Flagship All-American Municipal Bond Fund
Performance Overview
As of April 30, 1998
[BAR GRAPH OF MONTHLY TAX-FREE DIVIDENDS (CLASS A SHARES) GOES HERE]
<TABLE>
<CAPTION>
<S> <C>
M 0.04990
J 0.05020
J 0.05020
A 0.05020
S 0.05020
O 0.05020
N 0.05020
D 0.05020
J 0.04900
F 0.04900
M 0.04900
A 0.04900
</TABLE>
<TABLE>
<CAPTION>
=======================================
Top 5 Sectors
=======================================
<S> <C>
Health Care 17%
- ---------------------------------------
Transportation 14%
- ---------------------------------------
Utilities 13%
- ---------------------------------------
U.S. Guaranteed 11%
- ---------------------------------------
Education and Civic Organizations 10%
=======================================
</TABLE>
1 The fund also paid shareholders taxable distributions in December of $0.0914
per share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
3 Based on SEC yield and a federal income tax rate of 31%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to A shares (4.20%) and all ongoing fund
expenses.
<TABLE>
<CAPTION>
=============================================================================
Portfolio Statistics
=============================================================================
Share Class A B C R
=============================================================================
<S> <C> <C> <C> <C> <C>
Inception Date 10/88 2/97 6/93 2/97
- -----------------------------------------------------------------------------
Net Asset Value $11.32 $11.33 $11.31 $ 11.32
- -----------------------------------------------------------------------------
Fund Net Assets ($000) $312,244
- -----------------------------------------------------------------------------
Average Weighted Maturity (Years) 21.61
- -----------------------------------------------------------------------------
Average Weighted Duration (Years) 7.60
=============================================================================
=============================================================================
Annualized Total Return/2/
=============================================================================
Share Class A(NAV) A(Offer) B C R
=============================================================================
1-Year 10.32% 5.67% 9.51% 9.75% 10.45%
- -----------------------------------------------------------------------------
5-Year 6.95% 6.04% 6.33% 6.35% 7.00%
- -----------------------------------------------------------------------------
Since Inception 8.77% 8.29% 8.28% 8.17% 8.80%
=============================================================================
=============================================================================
Tax-Free Yields
=============================================================================
Share Class A(NAV) A(Offer) B C R
=============================================================================
Distribution Rate 5.19% 4.97% 4.45% 4.67% 5.41%
- -----------------------------------------------------------------------------
SEC 30-Day Yield 4.52% 4.33% 3.77% 3.97% 4.73%
- -----------------------------------------------------------------------------
Taxable Equivalent Yield/3/ 6.55% 6.28% 5.46% 5.75% 6.86%
=============================================================================
</TABLE>
[GRAPH OF INDEX COMPARISON/4/ GOES HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
9/88 10000 10000 9580
4/89 10176 10063 9640
4/90 11331 11307 10832
4/91 12381 12233 11719
4/92 13739 13876 13293
4/93 15322 15795 15131
4/94 16180 16764 16060
4/95 18002 18496 17719
4/96 18561 19173 18367
4/97 19414 20072 19229
4/98 21398 22367 21427
</TABLE>
|||| Lehman Brothers Municipal Bond Index $21,398
|||| Nuveen Flagship All-American Municipal Bond Fund (NAV) $22,367
|||| Nuveen Flagship All-American Municipal Bond Fund (Offer) $21,427
Past performance is not predictive of future results.
5
<PAGE>
Nuveen Flagship Intermediate Municipal Bond Fund
Portfolio Manager's Comments
Paul Brennan, portfolio manager of the Intermediate fund, talks about the
municipal market over the past year and the performance of the fund.
Comments cover the one-year period ended April 30, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
The Year in Review
Over the past 12 months, we have enjoyed a bull market in fixed-income
investments, including municipal bonds. Bond prices rose as interest rates
continued to drop and inflation remained at 30-year lows. However, the
performance of the municipal market was moderated by the effect of heavy supply,
as the lower rate environment stimulated a substantial increase in new issuance
as well as the refinancing of existing bonds. The first quarter of 1998 saw $68
billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued in recent weeks with May's long-awaited sale
of the first segment of Long Island (New York) Power Authority's $7 billion
offering, the largest issuance in municipal bond history. The publicity
surrounding this issue brought an unusual level of attention to the municipal
market and may stimulate additional interest in municipal bonds.
Investment Objective
The Intermediate fund is an intermediate-term municipal bond fund that seeks a
balance of current income and capital preservation potential. The fund invests
in a nationally diversified portfolio of investment-grade municipal bonds with
an average maturity of 5-10 years. Nuveen follows a disciplined investment
process and tax-conscious portfolio management strategies that emphasize
competitive tax-free income and attractive after-tax total returns over time.
Fund Performance
The fund performed exceptionally well compared with its benchmark and peer
group. Its total return of 8.97% outperformed the Lehman 7-Year Municipal Bond
Index return of 7.84%, and surpassed its Lipper peer group average by almost 200
basis points. The fund was ranked in the top five percent of national
intermediate municipal bond funds by Lipper (fifth of the 139 funds in the
grouping) and received a four-star rating by Morningstar.
Although the fund posted these outstanding results for the year, it experienced
a dividend reduction in April as a result of the declining interest rate
environment. As interest rates fell over the past year, we had to replace bonds
that were called or sold with bonds paying today's lower interest rates. With
its resulting lower income levels, the fund's dividend was adjusted to align
with its income rate.
Strategies Over the Past Year
Maturity and Duration
We achieved this outstanding performance by purchasing securities at the longer
end of the intermediate-term maturity spectrum and were rewarded as interest
rates dropped and these bonds outperformed shorter maturity bonds on a relative
scale. The fund maintained a significantly longer duration than its benchmark
and peer group (6.79 average weighted duration compared with 5.42 for the Lehman
7-Year Index), which was an important factor in performance. Duration is a
measure of the fund's price volatility in relation to changes in interest rates.
With a longer duration, the Intermediate fund was better able to participate in
this year's market rally. However, it would also have been more adversely
affected had the bond market experienced a downturn.
6
<PAGE>
Call Protection
During the year, we structured the fund to maintain superior call protection by
purchasing bonds with favorable call provisions as well as those that are not
callable at all. This ensures that if interest rates remain steady or continue
to drop, the higher-paying bonds in the portfolio will not be called away
immediately and will remain in the portfolio generating competitive income
levels unless we choose to sell them. Call protection helps ensure a more stable
dividend and also helped the fund outperform its peers as interest rates fell
and many similar funds experienced bond calls that adversely affected their
income levels.
Undervalued Securities
By leveraging Nuveen's award-winning research department, we were able to find
undervalued bonds that also contributed to the fund's strong performance. For
example, many of the bonds in the portfolio were pre-refunded during the year.
In a pre-refunding, bonds are essentially paid off by their issuer and backed by
U.S. Treasury securities until they can be called from the portfolio. The pre-
refunding increases the credit quality of the bond significantly, and it
appreciates in value as a result. This price appreciation accounted for a
significant percentage of the fund's total return over the past year.
Research also helped us maintain a competitive dividend during the year by
allowing us to find lower-rated, higher-yielding bonds. The incremental yield
offered by these higher-yielding bonds contributed to the fund's strong
dividend. We also took advantage of Nuveen's research team to find undervalued
securities in the health care sector. The fund has a relatively heavy weighting
in this sector, which offers competitive yields and good potential for price
appreciation.
Outlook for the Future
In the coming months, we will continue to utilize the same strategies that led
to such strong performance for the fund over the last year. Since income is a
top objective of the fund, we will work toward maintaining superior call
protection and helping ensure the strength of the dividend. In addition, we will
continue to maintain a relatively long duration compared with the benchmark
Lehman 7-Year Index. This means more volatility for the fund should interest
rates fluctuate, but also will ensure that the fund is able to maximize its
participation in any potential market rallies.
7
<PAGE>
Nuveen Flagship Intermediate Municipal Bond Fund
Performance Overview
As of April 30, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.04280 0.04300 0.04300 0.04300 0.04300 0.04300 0.04300 0.04300 0.04300 0.04300 0.04300 0.04200
M J J A S O N D J F M A
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A C R
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Inception Date 9/92 12/95 2/97
Net Asset Value $10.88 $10.89 $ 10.86
Fund Net Assets ($000) $46,474
Average Weighted Maturity (Years) 8.69
Average Weighted Duration (Years) 6.79
- --------------------------------------------------------------------------------------
Annualized Total Return/2/
Share Class A(NAV) A(Offer) C R
- --------------------------------------------------------------------------------------
1-Year 8.97% 5.74% 8.47% 9.17%
5-Year 6.24% 5.59% 5.67% 6.25%
Since Inception 7.25% 6.67% 6.67% 7.26%
- --------------------------------------------------------------------------------------
Tax-Free Yields
Share Class A(NAV) A(Offer) C R
- --------------------------------------------------------------------------------------
Distribution Rate 4.63% 4.49% 4.08% 4.81%
SEC 30-Day Yield 4.02% 3.90% 3.47% 4.23%
Taxable Equivalent Yield/3/ 5.83% 5.65% 5.03% 6.13%
- --------------------------------------------------------------------------------------
</TABLE>
Index Comparison/4/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
9/92 10000 9700 10000 10000
4/93 10798 10474 10679 10574
4/94 11253 10915 10979 10890
4/95 11789 11436 11805 11582
4/96 12792 12409 12851 12515
4/97 13516 13111 13520 13094
4/98 14818 14374 14841 14195
</TABLE>
Lehman Brothers 7-Year Municipal Bond Index $14,195
Lehman Brothers 10-Year Municipal Bond Index $14,841
Nuveen Flagship Intermediate Municipal Bond Fund (NAV) $14,818
Nuveen Flagship Intermediate Municipal Bond Fund (Offer) $14,374
Past performance is not predictive of future results.
<TABLE>
<CAPTION>
Top 5 Sectors
- ---------------------------------------------
<S> <C>
Health Care 25%
Tax Obligation (Limited) 14%
Transportation 12%
Utilities 9%
Education and Civic Organizations 9%
- ---------------------------------------------
</TABLE>
1 The fund also paid taxable distributions to shareholders in December of
$0.0034 per share.
2 Class A share returns are actual. Class C and R share returns are actual for
the period since class inception; returns prior to class inception are Class
A share returns adjusted for differences in sales charges and expenses, which
are primarily differences in distribution and service fees. Class A shares
have a 3.0% maximum sales charge. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
3 Based on SEC yield and a federal income tax rate of 31%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in
Class A shares of the Nuveen fund compared with the Lehman Brothers 7-Year
and 10-Year Municipal Bond Indexes. In the past, the fund's performance was
compared against the Lehman 10-Year Municipal Bond Index. Begining this year,
we will compare the fund's performance with the Lehman 7-Year Municipal Bond
Index because that index better corresponds to the fund's investment
policies, which require that the fund maintain a weighted average portfolio
maturity of 5-10 years. The Lehman Municipal Bond Indexes are comprised of a
broad range of investment-grade municipal bonds, and do not reflect any
initial or ongoing expenses. The Nuveen fund return depicted in the chart
reflects the initial maximum sales charge applicable to A shares (3.0%) and
all ongoing fund expenses.
8
<PAGE>
Nuveen Flagship Limited Term Municipal Bond Fund
Portfolio Manager's Comments
Rick Huber, portfolio manager of the Limited Term fund, talks about the
municipal market over the past year and the performance of the fund.
Comments cover the one-year period ended April 30, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
The Year in Review
Over the past 12 months, we have enjoyed a bull market in fixed-income
investments, including municipal bonds. Bond prices rose as interest rates
continued to drop and inflation remained at 30-year lows. However, the
performance of the municipal market was moderated by the effect of heavy supply,
as the lower rate environment stimulated a substantial increase in new issuance
as well as the refinancing of existing bonds. The first quarter of 1998 saw $68
billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued in recent weeks with May's long-awaited sale
of the first segment of Long Island (New York) Power Authority's $7 billion
offering, the largest issuance in municipal bond history. The publicity
surrounding this issue brought an unusual level of attention to the municipal
market and may stimulate additional interest in municipal bonds.
Investment Objective
The Limited Term fund is a short/intermediate-term municipal bond fund that
seeks current income consistent with a high level of capital preservation. The
fund invests in a nationally diversified portfolio of investment-grade municipal
bonds with an average maturity of one to seven years. Nuveen follows a
disciplined investment process and tax-conscious portfolio management strategies
that emphasize competitive tax-free income and attractive after-tax total
returns over time.
Fund Performance
The Limited Term fund performed well, generating a competitive dividend and
total return compared with its peers. The fund's total return of 6.67%
outperformed its Lipper peer group of national short/intermediate-term municipal
bond funds by 138 basis points and was ranked second of the 34 funds in the
grouping for the year. The fund essentially paralleled the unmanaged Lehman
Brothers 5-Year Municipal Bond Index return of 6.73% and was given a four-star
rating by Morningstar. During a period when many municipal bond funds
experienced dividend reductions due to the lower interest rate environment, the
dividend for the Limited Term fund actually increased during the period. Through
foresight and strategic management, we structured the fund so that we locked in
good yields and a relatively high income stream that could support the dividend
through this lower interest rate environment.
Although the Limited Term fund is a relatively conservative municipal bond fund
when compared with the other longer-term Nuveen funds in this report, its strong
performance was achieved through a more aggressive management strategy than most
shorter-term municipal bond funds undertake. It has a relatively heavy weighting
in higher-yielding BBB and non-rated bonds and maintains a longer duration than
many short-term funds.
Duration is a measure of the price volatility of the fund in relation to a
change in interest rates. Longer duration funds are better able to participate
in a market rally, but will suffer more in a down market. Although the fund is
subject to more volatility than its peers with shorter maturities and durations,
it provides an excellent opportunity for more conservative investors who want to
invest in the municipal bond market for the shorter-term with less price
volatility and greater income stability than can be found with longer-term
funds.
9
<PAGE>
Strategies Over the Past Year
During the past year, our research-intensive bond selection process allowed us
to find opportunities throughout the country to enhance the yield and
performance potential of the fund. We found value in a range of maturities,
regions and sectors, including the health care industry. The portfolio was
heavily weighted in health care securities because the tremendous amount of
issuance in that sector forced issuers to offer attractive yields. The fund also
benefited as health care bonds, particularly those issued by long-term care
providers, appreciated in value during the year. However, we feel that we have
maximized our opportunities in the health care sector for now, so we will be
looking for ways to diversify the fund more in other sectors of the municipal
market in the coming months.
Outlook for the Future
During the coming year, we plan to take a more conservative approach to managing
the fund, including repositioning its credit quality. Currently, the fund is
heavily weighted in the lower categories of investment-grade quality bonds, with
32% in BBB and non-rated bonds. However, we plan to replace many of these lower-
rated bonds with bonds that have higher credit ratings. At present, credit
spreads remain tight, meaning that the difference in yields between higher-rated
and lower-rated bonds is unusually small. By purchasing higher-rated bonds, we
will increase the credit quality of the fund without significantly impacting
current income levels. We anticipate that credit spreads will widen again and
that the higher-rated bonds will increase in value as a result. Higher-rated
bonds will help us position the fund more conservatively since they are less
subject to market fluctuations.
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nuveen Flagship Limited Term Municipal Bond Fund
Performance Overview
As of April 30, 1998
Portfolio Statistics
Share Class A C R
Inception Date 10/87 12/95 2/97
Net Asset Value $10.80 $10.79 $ 10.78
Fund Net Assets ($000) $472,787
Average Weighted Maturity (Years) 5.53
Average Weighted Duration (Years) 4.42
Annualized Total Return/1/
Share Class A(NAV) A(Offer) C R
1-Year 6.67% 4.03% 6.33% 6.87%
5-Year 4.94% 4.40% 4.59% 4.95%
10-Year 6.50% 6.23% 6.17% 6.50%
Tax-Free Yields
Share Class A(NAV) A(Offer) C R
Distribution Rate 4.72% 4.60% 4.39% 4.95%
SEC 30-Day Yield 3.76% 3.66% 3.41% 3.96%
Taxable Equivalent Yield/2/ 5.45% 5.30% 4.94% 5.74%
</TABLE>
Index Comparison/3/
4/88 10000 10000 9750 10000
4/89 10215 10284 10027 10324
4/90 11197 11273 10992 11430
4/91 11812 11678 11386 12040
4/92 12450 12271 11964 12794
4/93 14598 14358 13999 15294
4/94 15150 14960 14586 16138
4/95 15952 15656 15665 17039
4/96 16898 16387 15978 18232
4/97 18214 17691 17249 20047
4/98 19311 18769 18308 21711
- -- Lehman Brother 5-year Municipal Bond Index $19,311
- -- Lehman Brother 10-year Municipal Bond Index $21,711
- -- Nuveen Flagship Limited Term Municipal Bond Fund (NAV) $18,769
- -- Nuveen Flagship Limited Term Municipal Bond Fund (Offer) $18,308
Monthly Tax-Free Dividends (Class A Shares)
0.04150 M
0.04250 J
0.04250 J
0.04250 A
0.04250 S
0.04250 O
0.04250 N
0.04250 D
0.04250 J
0.04250 F
0.04250 M
0.04250 A
Top 5 Sectors
Health Care 23%
Utiities 14%
Education and Civic Organizations 12%
Tax Obligation (General) 10%
Tax Obligation (Limited) 9%
1 Class A share returns are actual. Class C and R share returns are actual for
the period since class inception; returns prior to class inception are Class A
share returns adjusted for differences in sales charges and expenses, which are
primarily differences in distribution and service fees. Class A shares have a
2.5% maximum sales charge. Class C shares have a 1% CDSC for redemptions within
one year which is not reflected in the one-year total return.
2 Based on SEC yield and a federal income tax rate of 31%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
3 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers 5-Year and
10-Year Municipal Bond Indexes. In the past, the fund's performance was compared
against the Lehman 10-Year Municipal Bond Index. Begining this year, we will
compare the fund's performance with the Lehman 5-Year Municipal Bond Index,
which can now be used as a 10-year comparison and better corresponds to the
fund's investment policies. The Lehman Municipal Bond Indexes are comprised of a
broad range of investment-grade municipal bonds, and do not reflect any initial
or ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (2.5%) and all ongoing fund
expenses.
11
<PAGE>
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska - 1.5%
$ 5,000,000 Alaska Industrial Development and Export Authority, Revolving Fund 4/08 at 101 AAA $4,805,100
Refunding Bonds, Series 1998A, 5.250%, 4/01/23 (DD)
- ------------------------------------------------------------------------------------------------------------------------------------
California - 10.2%
5,000,000 California Health Facilities Financing Authority, Insured Refunding 7/07 at 102 AAA 5,114,100
Revenue Bonds (Pomona Valley Hospital Medical Center), 1997 Series A,
5.625%, 7/01/19
2,000,000 California Pollution Control Financing Authority, Pollution Control No Opt. Call A 2,160,320
Refunding Revenue Bonds (San Diego Gas and Electric Company), 1996
Series A, 5.900%, 6/01/14
5,000,000 California Statewide Communities Development Authority, Special 10/07 at 102 Baa3 5,043,600
Facilities Lease Revenue Bonds, 1997 Series A, 5.700%, 10/01/33
8,000,000 Contra Costa Home Mortgage Finance Authority, California, 1984 Home No Opt. Call AAA 2,899,600
Mortgage Revenue Bonds, 0.000%, 9/01/17
2,000,000 Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue No Opt. Call Baa 1,432,680
Bonds, Series 1995A, 0.000%, 1/01/05
7,000,000 Long Beach Aquarium of the Pacific, Revenue Bonds (Aquarium of the 7/05 at 102 BBB 7,239,820
Pacific Project), 1995 Series A, 6.125%, 7/01/23
4,000,000 Regional Airports Improvement Corporation, Facilities Sublease 5/06 at 102 BBB- 4,344,480
Refunding Revenue Bonds, Issue of 1996, Delta Air Lines, Inc.
(Los Angeles International Airport), 6.350%, 11/01/25
Sacramento Cogeneration Authority, Cogeneration Project Revenue Bonds
(Procter & Gamble Project), 1995 Series:
500,000 6.200%, 7/01/06 7/05 at 102 BBB- 542,585
1,000,000 6.500%, 7/01/21 7/05 at 102 BBB- 1,086,330
2,000,000 Taft Public Financing Authority, Lease Revenue Bonds, 1997 Series A 1/07 at 101 BBB+ 2,093,000
(Community Correctional Facility Acquisition Project), 6.050%, 1/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado - 5.6%
E-470 Public Highway Authority, Capital Improvement Trust Fund, Highway
Revenue Bonds, Senior Bonds:
6,000,000 0.000%, 8/31/05 No Opt. Call Aaa 4,275,360
2,000,000 6.950%, 8/31/20 (Pre-refunded to 8/31/05) 8/05 at 103 Aaa 2,348,940
11,800,000 Colorado Health Facilities Authority, Retirement Facilities (Liberty No Opt. Call Aaa 3,120,982
Heights), 0.000%, 7/15/22
5,000,000 City and County of Denver, Colorado, Airport System Revenue Bonds, 11/07 at 101 AAA 4,930,650
Series 1997E, 5.250%, 11/15/23
2,500,000 Hyland Hills Park and Recreation District, Adams County, Colorado 12/06 at 101 N/R 2,698,475
Special Revenue Refunding and Improvement Bonds, Series 1996A, 6.750%,
12/15/15
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut - 1.8%
2,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue 11/04 at 102 AAA 2,270,860
Bonds, Nursing Home Program Issue, Series 1994, AHF/Hartford, Inc.
Project, 7.125%, 11/01/14
3,305,000 State of Connecticut Health and Educational Facilities Authority, No Opt. Call AAA 3,455,609
Revenue Bonds, Trinity College Issue, Series F, 5.500%, 7/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware - 0.6%
1,750,000 Delaware Economic Development Authority, First Mortgage Revenue Bonds 5/07 at 102 BBB 1,833,493
(Peninsula United Methodist Homes, Inc. Issue), Series 1997A, 6.300%,
5/01/22
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florida - 2.6%
$ 1,000,000 Town of Lady Lake, Florida, Industrial Development Revenue Bonds 7/00 at 102 N/R *** $1,129,900
(Sunbelt Utilities, Inc. Project), Series 1990, 9.625%, 7/01/15
(Pre-refunded to 7/01/00)
1,955,000 Nassau County, Florida (GF/Amelia Island Properties, Inc. 1/03 at 103 N/R 2,271,690
Project), ICF/MR Revenue Bonds, Series 1993A, 9.750%, 1/01/23
1,750,000 Polk County Industrial Development Authority (Florida), Solid 12/06 at 102 A1+ 1,818,495
Waste Disposal Facility Revenue Bonds (Tampa Electric Company Project),
Series 1996, 5.850%, 12/01/30
1,965,000 Sanford Florida Airport Authority, Industrial Development Revenue, 5/06 at 102 N/R 2,104,142
Central Florida Terminals, Inc. Project, Series A, 7.500%, 5/01/10
645,000 Sanford Airport Authority (Florida), Industrial Development 5/07 at 102 N/R 676,779
Revenue Bonds (Central Florida Terminals Inc. Project), Series 1997C,
7.500%, 5/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia - 1.7%
2,000,000 Brunswick and Glynn County (Georgia) Development Authority, 3/08 at 102 Baa2 1,983,020
Revenue Refunding Bonds, Series 1998 (Georgia Pacific Corporation Project),
5.550%, 3/01/26
2,000,000 Municipal Electric Authority of Georgia, General Power Revenue Bonds, No Opt. Call A 2,089,300
1993C Series, 5.700%, 1/01/19
1,000,000 Municipal Electric Authority of Georgia, Project One Special No Opt. Call A+ 1,135,920
Obligation Bonds, Fifth Crossover Series, 6.500%, 1/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois - 8.4%
1,750,000 City of Chicago, Illinois, Gas Supply Revenue Bonds, 1990 Series A 5/00 at 102 AA- 1,904,210
(The Peoples Gas, Light and Coke Company Project), 8.100%, 5/01/20
1,000,000 City of Chicago, Illinois, Gas Supply Refunding Revenue Bonds, 6/05 at 102 AA- 1,062,970
1995 Series A (The Peoples Gas, Light and Coke Company Project), 6.100%,
6/01/25
2,000,000 Illinois Development Finance Authority (The Presbyterian Home, 9/06 at 102 AA- 2,181,720
Lake Forest Place Project), Revenue Bonds, Series 1996 B, 6.300%, 9/01/22
4,000,000 Illinois Educational Facilities Authority, Revenue Refunding Bonds 12/04 at 100 BBB 4,388,040
(Columbia College), Series 1992, 6.875%, 12/01/17
3,750,000 Illinois Educational Facilities Authority, Revenue Refunding Bonds, 7/01 at 102 A+ *** 4,121,888
Loyola University of Chicago, Series 1991-A, 7.125%, 7/01/21 (Pre-refunded
to 7/01/01)
2,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, 8/06 at 102 N/R 2,220,240
Series 1995A (Fairview Obligated Group), 7.125%, 8/15/17
6,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, 2/07 at 102 A- 6,076,440
Series 1996B (Sarah Bush Lincoln Health Center), 5.750%, 2/15/22
4,000,000 Illinois Health Facilities Authority, Revenue Bonds (Victory Health 8/07 at 101 A- 4,053,880
Service), Series 1997A, 5.750%, 8/15/27
145,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1989 1/99 at 102 BBB+ 150,413
(Westlake Community Hospital), 7.875%, 1/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana - 6.0%
1,000,000 Town of Fishers, Indiana, Economic Development First Mortgage 9/98 at 102 N/R 1,028,990
Revenue Bonds (United Student Aid Funds, Inc. Project), Series 1989,
8.375%, 9/01/14
1,750,000 Indiana Health Facility Financing Authority, Hospital Revenue 8/00 at 102 N/R *** 1,935,553
Bonds, Series 1990 (Hancock Memorial Hospital Project), 8.300%, 8/15/20
(Pre-refunded to 8/15/00)
4,000,000 The Trustees of Indiana University, Indiana University Student Fee No Opt. Call AAA 2,025,800
Bonds, Series K, 0.000%, 8/01/11
2,000,000 Indianapolis Airport Authority, Special Facilities Revenue Bonds, 7/04 at 102 BBB 2,239,620
Series 1994 (Federal Express Corporation Project), 7.100%, 1/15/17
4,000,000 Indianapolis Airport Authority, Specialty Facility Revenue Bonds, 11/05 at 102 Baa2 4,310,680
Series 1995A (United Airlines, Inc., Indianapolis Maintenance Center
Project), 6.500%, 11/15/31
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
Indiana (continued)
<S> <C> <C> <C> <C>
$5,450,000 City of Indianapolis, Indiana, Economic Development Revenue Bonds 7/06 at 102 A $5,679,881
(Willowbrook Apartments Project), Senior Series 1996A, 6.500%,
7/01/26
500,000 Hospital Authority of Monroe County (Indiana), Hospital Revenue 5/02 at 101 AAA 547,680
Bonds, Series 1992 (Bloomington Hospital Project), 6.700%, 5/01/12
(Pre-refunded to 5/01/02)
1,000,000 Rockport Pollution Control (Indiana Michigan Power Company), 7.600%, 3/01 at 102 Baa2 1,085,380
3/01/16
- ---------------------------------------------------------------------------------------------------------------------------
Kentucky - 7.9%
5,000,000 City of Ashland, Kentucky, Sewage and Solid Waste Revenue Bonds, 2/05 at 102 Baa1 5,642,950
Series 1995 (Ashland Inc. Project), 7.125%, 2/01/22
5,000,000 County of Henderson, Kentucky, Solid Waste Disposal Revenue Bonds 3/05 at 102 Baa2 5,457,500
(MacMillan Bloedel Project), Series 1995, 7.000%, 3/01/25
4,500,000 Jefferson County, Kentucky, Capital Projects Corporation, Lease No Opt. Call A+ 2,145,645
Revenue Bonds, Series 1992A, 0.000%, 8/15/12
2,000,000 Kentucky Economic Development Finance Authority, Hospital System 4/08 at 102 BBB 2,038,540
Refunding and Improvement Revenue Bonds, Series 1997
(Appalachian Regional Healthcare, Inc. Project), 5.875%, 10/01/22
5,000,000 Louisville and Jefferson County Metropolitan Sewer District 11/04 at 102 AAA 5,729,050
(Commonwealth of Kentucky), Sewer and Drainage System Revenue
Bonds, Series 1994A, 6.750%, 5/15/25
3,500,000 Pendleton County, Kentucky, County Lease Revenue Bonds, Kentucky 3/03 at 102 A 3,711,120
Associated Counties Leasing Trust Program, Series 1993-A,
6.500%, 3/01/19
- ---------------------------------------------------------------------------------------------------------------------------
Louisiana - 0.7%
2,000,000 City of New Orleans, Audubon Park Commission, Aquarium Revenue 4/02 at 102 N/R *** 2,287,520
Bonds, Series 1992, 8.000%, 4/01/12 (Pre-refunded to 4/01/02)
- ---------------------------------------------------------------------------------------------------------------------------
Maryland - 0.7%
2,000,000 Maryland Energy Financing Administration, Limited Obligation Solid 12/06 at 102 A- 2,183,880
Waste Disposal Revenue Bonds (Wheelabrator Water Technologies,
Baltimore L.L.C. Projects), 1996 Series, 6.450%, 12/01/16
- ---------------------------------------------------------------------------------------------------------------------------
Massachusetts - 2.3%
4,900,000 Massachusetts Health and Educational Facilities Authority, Revenue 12/05 at 102 A1 5,304,544
Bonds, Dana-Farber Cancer Institute Issue, Series G-1, 6.250%,
12/01/22
2,000,000 Massachusetts Port Authority, Revenue Bonds, Series 1997-B, 5.375%, 7/07 at 101 AA- 1,969,440
7/01/27
- ---------------------------------------------------------------------------------------------------------------------------
Michigan - 2.4%
3,315,000 Detroit/Wayne County Stadium Authority (State of Michigan), 2/07 at 102 AAA 3,266,336
Building Authority (Stadium) Bonds, Series 1997
(Wayne County Limited Tax General Obligation), 5.250%,
2/01/27
2,000,000 Michigan State Hospital Finance Authority, Hospital Revenue and 10/08 at 102 BBB 1,957,900
Refunding Bonds (Genesys Regional Medical Center Obligated Group),
Series 1998A, 5.500%, 10/01/18
2,000,000 Pontiac, Michigan Hospital Finance Authority, Hospital Revenue 8/03 at 102 BBB- 2,033,840
Refunding, Nomc Obligation Group, 6.000%, 8/01/13
420,000 Western Townships Utilities Authority, Sewage Disposal System Bonds, 1/99 at 102 BBB+ 438,934
Series 1989, 8.200%, 1/01/18
- ---------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.7%
2,000,000 Claiborne County, Mississippi, Pollution Control Revenue Refunding 5/00 at 102 BBB- 2,111,780
Bonds (System Energy Resources, Inc. Project), Series 1995, 7.300%,
5/01/25
- ---------------------------------------------------------------------------------------------------------------------------
New Hampshire - 1.9%
700,000 New Hampshire Higher Educational and Health Facilities Authority, 7/99 at 100 A 707,686
Hospital Revenue Bonds, Catholic Medical Center Issue, Series 1989,
6.000%, 7/01/17
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Hampshire (continued)
$ 600,000 New Hampshire Higher Educational And Health Facilities 1/01 at 102 A $ 647,664
Authority, Hospital Revenue Bonds, St. Joseph Hospital Issue,
Series 1991, 7.500%, 1/01/16
425,000 The Essex County Improvement Authority (Essex County, New 4/04 at 102 BBB+ 461,006
Jersey), City of Newark, General Obligation Lease Revenue Bonds,
Series 1994, 6.600%, 4/01/14
2,400,000 New Jersey Economic Development Authority, Electric Energy 6/02 at 102 N/R 2,630,016
Facility Revenue Bonds (Vineland Cogeneration Limited Partnership
Project), Series 1992, 7.875%, 6/01/19
1,375,000 New Jersey Economic Development Authority, Insured Revenue 5/05 at 102 AAA 1,495,533
Bonds (Educational Testing Service Issue), Series 1995B,
6.125%, 5/15/15
- ---------------------------------------------------------------------------------------------------------------------------------
New York -- 11.5%
1,900,000 The City of New York, New York, General Obligation Bonds, 2/02 at 101 1/2 A3 2,105,523
Fiscal 1992 Series B, 7.500%, 2/01/09
The City of New York (New York), General Obligation Bonds,
Fiscal 1992, Series D:
685,000 7.500%, 2/01/17 (Pre-refunded to 2/01/02) 2/02 at 101 1/2 Aaa 769,371
750,000 7.500%, 2/01/18 (Pre-refunded to 2/01/02) 2/02 at 101 1/2 Aaa 842,378
3,000,000 The City of New York (New York), General Obligation Bonds, 4/07 at 101 A3 3,213,210
Fiscal 1997 Series I, 6.250%, 4/15/27
1,750,000 New York City Housing Development Corporation, Multi-Unit 6/01 at 102 AAA 1,867,145
Mortgage Refunding Bonds (FHA Insured Mortgage Loans),
1991 Series A, 7.350%, 6/01/19
1,480,000 Dormitory Authority of the State of New York, City University No Opt. Call BBB+ 1,561,785
System Consolidated Second General Resolution Revenue Bonds,
Series 1993A, 5.750%, 7/01/18
2,500,000 Dormitory Authority of the State of New York, Department of 7/05 at 102 BBB+ *** 2,849,500
Health of the State of New York, Revenue Bonds, Series 1995,
6.625%, 7/01/24 (Pre-refunded to 7/01/05)
3,000,000 New York State Housing Finance Agency, Service Contract 9/05 at 102 BBB+ 3,269,970
Obligation Revenue Bonds, 1995 Series A, 6.375%, 9/15/15
1,590,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue 4/01 at 102 Aa2 1,687,515
Bonds, 1991 Series UU, 7.750%, 10/01/23
5,500,000 New York State Urban Development Corporation, State Facilities No Opt. Call BBB+ 5,746,455
Revenue Bonds, 1995 Refunding Series, 5.700%, 4/01/20
1,500,000 New York State Urban Development Corporation, Project Revenue No Opt. Call BBB+ 1,533,285
Bonds (Center for Industrial Innovation), 1995 Refunding Series,
5.500%, 1/01/13
2,125,000 New York State Urban Development Corporation, Project Revenue No Opt. Call BBB+ 2,175,129
Bonds (University Facilities Grants), 1995 Refunding Series,
5.500%, 1/01/19
7,500,000 The Port Authority of New York and New Jersey, Special Project 10/06 at 102 N/R 8,219,625
Bonds, Series 4, KIAC Partners Project, 6.750%, 10/01/19
- ---------------------------------------------------------------------------------------------------------------------------------
North Carolina -- 0.9%
1,400,000 Martin County Industrial Facilities and Pollution Control 11/05 at 102 A 1,457,582
Financing Authority (North Carolina), Solid Waste Disposal
Revenue Bonds, Series 1995 (Weyerhaeuser Company Project),
6.000%, 11/01/25
1,299,276 Woodfin Treatment Facility, Inc. (North Carolina), 12/03 at 102 N/R 1,357,067
Proportionate Interest Certificates, 6.750%, 12/01/13
- ---------------------------------------------------------------------------------------------------------------------------------
North Dakota -- 0.2%
490,000 North Dakota Housing Finance Agency, Single Family Mortgage 7/99 at 103 Aa2 511,663
Program Bonds, 1989 Series B, 8.000%, 7/01/13
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio - 8.7%
$ 2,000,000 City of Cleveland, Ohio, Airport System Revenue Bonds, 1/08 at 101 AAA $ 1,914,480
Series 1997A, 5.125%, 1/01/27
1,400,000 Cleveland Public Power System, 7.000%, 11/15/17 11/01 at 102 AAA 1,533,420
1,350,000 County of Columbiana, Ohio, County Jail Facilities Construction 12/04 at 102 AA 1,545,656
Bonds (General Obligation - Unlimited Tax), 6.700%, 12/01/24
1,000,000 County of Cuyahoga, Ohio, Health Care Facilities Revenue Bonds, 6/00 at 100 N/R 1,081,860
Series 1990 (Altenheim Project), 9.280%, 6/01/15
3,000,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds (Meridia Health 8/05 at 102 AAA 3,369,390
System), Series 1995, 6.250%, 8/15/24 (Pre-refunded to 8/15/05)
1,000,000 County of Cuyahoga, Ohio, Hospital Facilities Revenue Bonds, 2/03 at 102 A1 1,073,140
Series 1993, Health Cleveland, Inc. (Fairview General Hospital
Project), 6.300%, 8/15/15
2,350,000 City of Garfield Heights, Ohio, Hospital Improvement and Refunding 11/02 at 102 A 2,548,011
Revenue Bonds, Series 1992B (Marymount Hospital Project),
6.700%, 11/15/15
1,500,000 County of Lucas, Ohio, Hospital Facilities Revenue Bonds, Series 12/01 at 102 N/R *** 1,710,960
1991 (Flower Memorial Hospital), 8.125%, 12/01/11
(Pre-refunded to 12/01/01)
3,500,000 County of Miami, Ohio, Hospital Facilities Revenue Refunding and 5/06 at 102 BBB 3,715,740
Improvement Bonds, Series 1996A (Upper Valley Medical Center),
6.375%, 5/15/26
2,750,000 State of Ohio, Ohio Air Quality Development Authority, Air Quality 9/05 at 102 A+ 2,928,888
Development Revenue Refunding Bonds, 1995 Series (The Dayton Power
and Light Company Project), 6.100%, 9/01/30
1,750,000 State of Ohio (Ohio Higher Educational Facility Commission), 12/03 at 102 AAA 1,940,435
Higher Educational Facility Mortgage Revenue Bonds (University of
Dayton 1992 Project), 6.600%, 12/01/17
3,500,000 County of Shelby, Ohio, Hospital Facilities Revenue Refunding and 9/02 at 102 BBB 3,907,365
Improvement Bonds, Series 1992 (The Shelby County Memorial Hospital
Association), 7.700%, 9/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.9%
2,750,000 Trustees of the Tulsa Municipal Airport Trust, Revenue Bonds, 6/05 at 102 Baa2 2,907,878
Series 1995 (American Airlines), 6.250%, 6/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 4.4%
2,500,000 Allegeheny County Higher Education Building Authority 2/06 at 102 Baa3 2,658,600
(Commonwealth of Pennsylvania), College Revenue Bonds, Series A
of 1996 (Robert Morris College), 6.400%, 2/15/14
1,500,000 Clarion County Hospital Authority, Hospital Revenue Refunding Bonds, 7/99 at 102 N/R 1,599,615
Series 1989 (Clarion Hospital Project), 8.100%, 7/01/12
1,000,000 Delaware County Industrial Development Authority, Pollution Control 4/01 at 102 AAA 1,088,730
Revenue Refunding Bonds, 1991 Series A (Philadelphia Electric
Company Project), 7.375%, 4/01/21
500,000 Falls Township Hospital Authority, Refunding Revenue Bonds, 8/02 at 102 AAA 548,360
The Delaware Valley Medical Center Project (FHA Insured Mortgage),
Series 1992, 7.000%, 8/01/22
1,000,000 Latrobe Industrial Development Authority (Commonwealth of 5/04 at 102 Baa1 1,081,350
Pennsylvania) College Revenue Bonds (Saint Vincent College Project),
Series 1994, 6.750%, 5/01/24
1,700,000 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 7/03 at 102 Baa1 1,814,648
Fourteenth Series, 6.375%, 7/01/26
4,500,000 The Hospitals and Higher Education Facilities Authority of 11/03 at 102 A- 4,857,075
Philadelphia, Hospital Revenue Bonds, Series A of 1993 (Temple
University Hospital), 6.625%, 11/15/23
- -----------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.5%
1,600,000 Rhode Island Housing and Mortgage Finance Corporation, Homeownership 10/00 at 102 AA+ 1,690,768
Opportunity Bonds, Series 3-A, 7.850%, 10/01/16
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
South Carolina - 2.6%
$ 1,975,000 Berkeley County School District, Certificates of Participation, 2/04 at 102 AAA $ 2,149,156
6.300%, 2/01/16
1,770,000 Georgetown County Water and Sewer District, Water and Sewer System 6/05 at 102 N/R 1,996,383
Revenue Refunding and Improvement Bonds, Junior Lien Series 1995,
6.500%, 6/01/25
1,000,000 South Carolina Housing Finance and Development Authority, Multifamily 6/05 at 102 BBB+ 1,062,790
Housing Mortgage Revenue Bonds (United Dominion-Hunting Ridge
Apartments Project), Series 1995, 6.750%, 6/01/25
1,000,000 South Carolina Housing Finance and Development Authority, Multifamily 11/05 at 102 AA- 1,029,510
Housing Revenue Refunding Bonds (Runaway Bay Apartments Project),
Series 1995, 6.125%, 12/01/15
1,750,000 York County, South Carolina, Water and Sewer System Revenue Bonds, 12/03 at 102 N/R 1,772,820
Series 1995, 6.500%, 12/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
South Dakota - 0.8%
2,500,000 Education Loans Incorporated (South Dakota), Tax Exempt Fixed Rate 6/08 at 102 A2 2,450,525
Student Loan Asset-Backed Callable Notes, Subordinate Series
1998-1K, 5.600%, 6/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 2.8%
2,985,000 The Health and Educational Facilities Board of the Metropolitan 2/08 at 102 AA 2,976,941
Government of Nashville and Davidson County, Tennessee, Multi-Modal
Interchangeable Rate, Health Facility Revenue Bonds, 5.500%, 5/01/23
2,155,000 The Health and Educational Housing Facility Board of the County of 8/07 at 105 N/R 2,637,138
Shelby, Tennessee, ICF/MR Revenue Bonds (Open Arms Developmental
Centers), Series 1992A, 9.750%, 8/01/19
1,380,000 South Fulton Tennessee, Inc. Industrial Development Board, Industrial 10/05 at 102 A3 1,488,620
Development Revenue, Tyson Foods Inc., Project, 6.350%, 10/01/15
1,500,000 Wilson County, Tennessee, Certificates of Participation (Wilson 6/04 at 102 A 1,605,555
County Educational Facilities Corporation), Series 1994,
6.250%, 6/30/15
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 7.8%
7,000,000 Alliance Airport Authority, Special Facilities Revenue Bonds, Series 4/06 at 102 BBB 7,474,110
1996 (Federal Express Corporation Project), 6.375%, 4/01/21
7,000,000 Brazos River Authority, Pollution Control Revenue Refunding Bonds 5/08 at 102 AAA 6,925,310
(Texas Utilities Electric Company Project), Series 1998A, 5.550%,
5/01/33 (WI)
2,000,000 Dallas-Fort Worth International Airport Facility Improvement 11/02 at 102 Baa2 2,212,320
Corporation, American Airlines, Inc. Revenue Bonds, Series 1992,
7.250%, 11/01/30
2,500,000 Lower Neches Valley Authority, Industrial Development Corporation, 3/08 at 101 AA 2,506,250
Refunding Revenue Bonds, Series 1998 (Mobil Oil Refining Corporation
Project), 5.550%, 3/01/33
2,000,000 North Central Texas Health Facilities Development Corporation, Health 2/06 at 102 BBB 2,129,360
Facilities Development Revenue Bonds (C.C. Young Memorial Home
Project), Series 1996, 6.375%, 2/15/20
2,895,000 Port of Bay City Authority of Matagorda County, Texas, Revenue Bonds 5/06 at 102 A+ 3,133,577
(Hoechst Celanese Corporation Project), Series 1996, 6.500%, 5/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
Utah - 0.7%
2,000,000 Carbon County, Utah, Solid Waste Disposal Refunding Revenue Bonds 2/05 at 102 BBB+ 2,306,139
(Laidlaw Inc./ECDC Environmental, L.C. Project), 1995 Series A,
7.500%, 2/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Virginia - 1.2%
2,000,000 Industrial Development Authority of the County of Hanover, Hospital No Opt. Call AAA 2,302,139
Revenue Bonds, Series 1995 (Memorial Regional Medical Center Project
at Hanover Medical Park), 6.375%, 8/15/18
1,250,000 Southeastern Public Service Authority of Virginia, Senior Revenue 7/03 at 102 A- 1,288,749
Bonds, Series 1993 (Regional Solid Waste System), 6.000%, 7/01/13
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
Washington D.C. - 0.5%
<S> <C> <C> <C> <C>
$ 1,480,000 District of Columbia, University Revenue Bonds (Georgetown 4/99 at 102 A+ $1,546,836
University Issue), Series 1990B, 7.150%, 4/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
West Virginia - 0.2%
500,000 Mason County, West Virginia, Pollution Control Revenue Bonds 1/00 at 102 Baa1 527,364
(Appalachian Power Company Project), Series G, 7.400%, 1/01/14
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 0.3%
840,000 Village of Fall Creek, Wisconsin Municipal Nursing Home Mortgage 7/99 at 100 N/R 873,338
Revenue Bonds, Series 1989, 9.875%, 7/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
$311,749,276 Total Investments - (cost $285,702,426) - 99.0% 309,218,001
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.0% 3,026,220
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $312,244,221
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent
public accountants): Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call
provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or Moody's
rating.
*** Securities are backed by an escrow or trust containing sufficient
U.S. government or U.S. government agency securities which ensures
the timely payment of principal and interest. Securities are
normally considered to be equivalent to AAA rated securities.
(DD) Security purchased on a delayed delivery basis (note 1).
(WI) Security purchased on a when-issued basis (note 1).
N/R Investment is not rated.
See accompanying notes to financial statements.
18
<PAGE>
Portfolio of Investments
Nuveen Flagship Intermediate Municipal Bond Fund
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona - 1.2%
$ 520,000 The Industrial Development Authority of the County of Pima, Single 5/07 at 102 AAA $ 538,918
Family Mortgage Revenue Refunding Bonds, Series 1997B, 5.850%, 5/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
California - 2.3%
1,000,000 Sacramento Cogeneration Authority Cogeneration Project Revenue Bonds 7/05 at 102 BBB- 1,085,170
(Procter & Gamble Project), 1995 Series, 6.200%, 7/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado - 8.9%
2,300,000 E-470 Public Highway Authority, Capital Improvement Trust Fund 8/05 at 95 29/32 Aaa 1,572,027
Highway Revenue Bonds, Senior Bonds, 0.000%, 8/31/06
(Pre-refunded to 8/31/05)
500,000 Colorado Health Facilities Authority Revenue Bonds, Series 1995 12/05 at 102 A- 540,545
(Covenant Retirement Communities Inc.), 6.200%, 12/01/07
1,000,000 City and County of Denver, Colorado, Airport System Revenue Bonds, 11/05 at 102 AAA 1,044,820
Series 1996B, 5.400%, 11/15/06
900,000 Eagle County Air Terminal Corporation, Airport Terminal Project No Opt. Call N/R 956,727
Revenue Bonds, Series 1996, 6.750%, 5/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Connecticut - 0.7%
335,000 Eastern Connecticut Resource Recovery Authority, Solid Waste 1/03 at 102 BBB 338,554
Revenue Bonds (Wheelabrator Lisbon Project), Series 1993A,
5.150%, 1/01/05
- -----------------------------------------------------------------------------------------------------------------------------------
Delaware - 1.1%
500,000 Delaware Economic Development Authority, First Mortgage Revenue 5/07 at 102 BBB 527,055
Bonds (Peninsula United Methodist Homes, Inc. Issue), Series 1997A,
6.100%, 5/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Florida - 5.5%
275,000 State of Florida, Full Faith and Credit, Broward County Expressway No Opt. Call AA+ 388,933
Authority Bonds, Series of 1984, 9.875%, 7/01/09
1,000,000 Palm Beach County, Florida School Board, Certificates of No Opt. Call AAA 1,075,620
Participation, Series A, 5.800%, 8/01/04
1,000,000 Sanford, Florida, Airport Authority Industrial Development No Opt. Call N/R 1,066,450
Revenue, Central Florida Terminals Inc. Project, Series A,
7.500%, 5/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois - 5.6%
1,000,000 Illinois Health Facilities Authority Revenue Bonds, Series 1996 No Opt. Call A- 1,068,230
(Mercy Hospital and Medical Center Project) 6.000%, 1/01/06
Illinois Health Facilities Authority Revenue Bonds, Series 1998
(Centegra Health System):
500,000 5.500%, 9/01/09 9/08 at 101 A- 513,765
500,000 5.500%, 9/01/10 9/08 at 101 A- 511,435
500,000 Illinois Health Facilities Authority Revenue Bonds (Victory Health 8/07 at 101 A- 524,710
Service), Series 1997A, 5.750%, 8/15/08
- -----------------------------------------------------------------------------------------------------------------------------------
Indiana - 2.2%
500,000 Indiana Bond Bank Special Program Bonds, Series 1997 B 2/07 at 102 AA- 530,405
(Hendricks County Redevelopment Authority, Pittboro Project),
5.750%, 2/01/08
500,000 Indiana Health Facility Financing Authority, Variable Rate No Opt. Call AA+ 504,895
Hospital Revenue Bonds (Charity Obligated Group - Daughters of
Charity National Health System), Series 1997D, 5.000%, 11/01/26
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Intermediate Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kansas - 1.0%
$ 420,000 Lenexa, Kansas, Multifamily Housing Revenue Refunding, Barrington Park 2/03 at 102 AA $ 441,668
Apartments Project, Series 1993A, 6.200%, 2/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Kentucky - 5.0%
1,165,000 Kentucky Infrastructure Authority, Governmental Agencies Program Revenue 8/05 at 102 A 1,236,764
Refunding Bonds, 1995 Series H, 5.600%, 8/01/06
1,000,000 McCracken County, Kentucky, Hospital Revenue Refunding, Mercy Health No Opt. Call AAA 1,088,750
System, Series A, 6.100%, 11/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 0.6%
265,000 Louisiana Public Facilities Authority, Student Loan Revenue Bonds, 9/02 at 102 Aaa 280,775
6.600%, 3/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland - 1.1%
500,000 Maryland Health and Higher Educational Facilities Authority, Refunding 1/07 at 102 A- 528,635
Revenue Bonds, Pickersgill Issue, Series 1997A, 5.750%, 1/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 5.3%
Massachusetts Health and Educational Facilities Authority, Revenue
Bonds, Dana-Farber Cancer Institute Issue, Series G-1:
500,000 6.500%, 12/01/05 No Opt. Call A1 556,005
750,000 6.500%, 12/01/06 12/05 at 102 A1 848,970
1,000,000 Massachusetts Water Pollution Abatement Trust, Water Pollution 2/04 at 102 AA+ 1,064,350
Abatement Revenue Bonds (SESD Loan Program), 1994 Series A,
5.700%, 2/01/05
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan - 8.7%
750,000 Michigan Municipal Bond Authority, State Revolving Fund No Opt. Call AA+ 853,275
Revenue Bonds, Series 1994, 7.000%, 10/01/04
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue No Opt. Call BBB 1,068,000
Refunding Bonds (Gratiot Community Hospital, Alma, Michigan),
Series 1995, 6.100%, 10/01/07
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue and No Opt. Call BBB 1,022,240
Refunding Bonds (Genesys Regional Medical Center Obligated
Group), Series 1998A, 5.500%, 10/01/08
1,000,000 County of Monroe, Michigan, Pollution Control Revenue Bonds No Opt. Call AAA 1,095,510
(The Detroit Edison Company Project), Series A-1994,
6.350%, 12/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Missouri - 1.5%
300,000 Missouri State Health & Educational Facilities Authority, Health 2/07 at 102 N/R 309,912
Facilities Revenue Refunding, Lutheran Senior Services, 5.550%,
2/01/09
350,000 The Industrial Development Authority of the City of St. Louis, Missouri, 12/02 at 102 N/R 379,992
Industrial Revenue Refunding Bonds (Kiel Center Multipurpose Arena
Project), Series 1992, 7.625%, 12/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Nebraska - 2.1%
1,000,000 Energy America Natural Gas Revenue Note (Metropolitan Utility District No Opt. Call N/R 979,460
Project), Series 1997B, 5.700%, 7/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey - 1.1%
500,000 New Jersey Economic Development Authority, Insured Revenue Bonds No Opt. Call AAA 525,570
(Educational Testing Service Issue), Series 1995B, 5.500%, 5/15/05
- -----------------------------------------------------------------------------------------------------------------------------------
New Mexico - 0.2%
80,000 New Mexico Educational Assistance Foundation Student Loan Revenue, No Opt. Call Aaa 84,947
Senior Series One, 6.300%, 12/01/02
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York - 13.2%
$ 500,000 Albany Housing Authority, City of Albany, New York, Limited Obligation 10/05 at 102 Baa1 $ 516,260
Bonds, Series 1995, 5.700%, 10/01/06
200,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series G, No Opt. Call A3 211,104
5.750%, 2/01/06
500,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series B, 8/06 at 101 A3 528,380
5.700%, 8/15/07
35,000 The City of New York, General Obligation Bonds, Fiscal 1993 Series F, 2/05 at 101 A3*** 38,940
6.375%, 2/15/06 (Pre-refunded to 2/15/05)
665,000 The City of New York, General Obligation Bonds, Fiscal 1995 Series F, 2/05 at 101 A3 728,641
6.375%, 2/15/06
1,000,000 Dormitory Authority of the State of New York, Mental Health Services 2/07 at 102 A- 1,078,600
Facilities Improvement Revenue Bonds, Series 1997A, 6.000%, 2/15/08
750,000 New York State Housing Finance Agency, Health Facilities Revenue No Opt. Call BBB+ 795,923
Refunding Bonds (New York City), 1996 Series A, 6.000%, 5/01/06
1,000,000 The Port Authority of New York and New Jersey, Special Project Bonds, No Opt. Call N/R 1,124,730
Series 4, KIAC Partners Project, 7.000%, 10/01/07
1,000,000 The Port Authority of New York and New Jersey, Special Project Bonds, No Opt. Call AAA 1,122,140
Series 6, JFK International Air Terminal LLC Project, 6.250%, 12/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio - 10.7%
Cleveland-Cuyahoga County Port Authority, Subordinate Refunding Revenue
Bonds, Series 1997 (Rock and Roll Hall of Fame and Museum Project):
360,000 5.750%, 12/01/07 No Opt. Call N/R 381,190
425,000 5.850%, 12/01/08 No Opt. Call N/R 453,675
1,000,000 County of Franklin, Ohio, Hospital Refunding and Improvement Revenue 11/06 at 101 Aa 1,062,580
Bonds, 1996 Series A (The Childrens Hospital Project), 5.550%, 11/01/07
1,000,000 County of Hamilton, Ohio, Hospital Facilities Revenue Bonds, Series No Opt. Call AAA 1,042,230
1993 (Childrens Hospital Medical Center), 5.200%, 5/15/09
900,000 Miami County, Ohio, Hospital Facilities Revenue Refunding & No Opt. Call BBB 966,051
Improvement, Upper Valley Medical Center, Series C, 6.000%, 5/15/06
1,000,000 State of Ohio (Ohio Public Facilities Commission), Higher Education No Opt. Call AAA 1,073,290
Capital Facilities Bonds, Series II-1994B, 5.750%, 11/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 5.3%
Pennsylvania Higher Educational Facilities Authority (Commonwealth of
Pennsylvania), Geneva College Revenue Bonds, Series of 1998:
470,000 4.900%, 4/01/07 No Opt. Call BBB- 460,741
495,000 4.950%, 4/01/08 No Opt. Call BBB- 484,580
500,000 City of Philadelphia, Pennsylvania Gas Works Revenue Bonds, Fourteenth No Opt. Call Baa1 544,225
Series, 7.000%, 7/01/02
1,500,000 Municipal Authority of Westmoreland County (Westmoreland County, No Opt. Call AAA 961,845
Pennsylvania), Municipal Service Revenue Bonds, Series of 1995A,
0.000%, 8/15/07
- -----------------------------------------------------------------------------------------------------------------------------------
South Carolina - 0.5%
230,000 City of Myrtle Beach, South Carolina, Myrtle Beach Public Facilities No Opt. Call A3 242,599
Corporation, Certificates of Participation (City of Myrtle Beach
Convention Center Project), Series 1992, 6.750%, 7/01/02
- -----------------------------------------------------------------------------------------------------------------------------------
South Dakota - 1.2%
550,000 Student Loan Finance Corporation (South Dakota), Student Loan Revenue No Opt. Call A+ 569,151
Bonds, Series 1994A, 5.850%, 8/01/00
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 3.3%
500,000 City of Clarksville, Tennessee, Hospital Revenue Refunding and No Opt. Call Baa1 525,740
Improvement Bonds, Series 1993 (Clarksville Memorial Hospital
Project), 6.000%, 7/01/03
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Intermediate Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tennessee (continued)
$ 500,000 Memphis-Shelby County Airport Authority, Special Facilities Revenue No Opt. Call BBB $ 500,955
Refunding Bonds, Series 1997 (Federal Express Corporation),
5.350%, 9/01/12
500,000 The Industrial Development Board of the Metropolitan Government of No Opt. Call BBB+ 522,180
Nashville and Davidson County, Industrial Development Revenue
Refunding and Improvement Bonds (Osco Treatment), 6.000%, 5/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 5.8%
345,000 Brazos Higher Education Authority, Inc., Student Loan Revenue No Opt. Call Aaa 365,076
Refunding Bonds, Series 1993A-1, 6.200%, 12/01/02
3,000,000 Goose Creek Consolidated Independent School District, Texas, No Opt. Call AAA 1,768,050
Unlimited Tax Refunding Bonds, Series 1993, 0.000%, 2/15/09
535,000 Texas Department of Housing and Community Affairs, Multifamily No Opt. Call A 560,904
Housing Revenue Bonds (NHP-Foundation - Asmara Project) Series
1996A, 5.800%, 1/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Utah - 0.6%
290,000 Salt Lake County, Utah, College Revenue Bonds (Westminster College 10/07 at 101 BBB 283,065
of Salt Lake City Project), Series 1997, 5.200%, 10/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Washington D.C. - 0.5%
205,000 District of Columbia, University Revenue Bonds (American University 10/06 at 101 AAA 212,610
Issue), Series 1996, 5.375%, 10/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 1.6%
750,000 Wisconsin Health and Educational Facilities Authority, Revenue 10/07 at 101 BBB 732,757
Bonds, Series 1998 (Carroll College, Inc. Project),
5.000%, 10/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Wyoming - 0.5%
200,000 State of Wyoming, Farm Loan Board, Capital Facilities Refunding 10/02 at 102 AA- 216,014
Revenue Bonds, Series 1992, 6.100%, 10/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
$45,315,000 Total Investments - (cost $42,614,695) - 97.3% 45,227,308
=========== ------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.7% 1,247,112
------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $46,474,420
==================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
***Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
22
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska - 0.5%
$ 945,000 Alaska Industrial Development and Export Authority Revolving Fund Bonds, No Opt. Call A2 $ 959,884
Series 1992A, 5.700%, 4/01/99
1,250,000 Alaska Student Loan Corporation Student Loan Revenue Bonds, 1997 Series A, No Opt. Call AAA 1,269,863
5.200%, 7/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Arizona - 0.5%
250,000 Arizona Educational Loan Marketing Corporation, Educational Loan Revenue No Opt. Call Aa 263,310
Bonds, 6.125%, 9/01/02
2,000,000 City of Tucson, Arizona, General Obligation Refunding Bonds, Series No Opt. Call AAA 2,103,600
1995, 5.375%, 7/01/05
- -----------------------------------------------------------------------------------------------------------------------------------
California - 3.1%
4,380,000 Central Joint Powers Health Financing Authority, Certificates of No Opt. Call Baa1 4,475,528
Participation, Series 1993 (Community Hospitals of Central California),
5.250%, 2/01/04
1,250,000 Long Beach Aquarium of the Pacific Revenue Bonds (Aquarium of the Pacific No Opt. Call BBB 1,312,713
Project) 1995 Series A, 5.750%, 7/01/05
Sacramento Cogeneration Authority Cogeneration Project Revenue Bonds
(Procter & Gamble Project), 1995 Series:
1,000,000 5.900%, 7/01/02 No Opt. Call BBB- 1,048,350
500,000 6.000%, 7/01/03 No Opt. Call BBB- 530,430
500,000 7.000%, 7/01/04 No Opt. Call BBB- 558,375
4,800,000 Southern California Public Power Authority, Power Project Revenue Bonds, No Opt. Call AAA 5,113,728
1996 Subordinate Refunding, Series A (Palo Verde Project), 5.500%,
7/01/05
1,500,000 Taft Public Financing Authority, Lease Revenue Bonds, 1997 Series A No Opt. Call BBB+ 1,561,725
(Community Correctional Facility Acquisition Project), 5.500%, 1/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado - 5.0%
9,000,000 E-470 Public Highway Authority, Capital Improvement Trust Fund, 8/05 at 95 29/32 Aaa 6,151,410
Highway Revenue Bonds, Senior Bonds, 0.000%, 8/31/06 (Pre-refunded to
8/31/05)
City of Arvada, Colorado, Limited Sales and Use Tax Revenue Bonds,
Series 1991:
500,000 6.200%, 6/01/98 No Opt. Call N/R 500,940
500,000 6.300%, 6/01/99 No Opt. Call N/R 512,860
400,000 6.400%, 6/01/00 No Opt. Call N/R 417,888
2,815,000 Colorado Health Facilities Authority Revenue Bonds, Series 1995 No Opt. Call A- 2,938,128
(Covenant Retirement Communities Inc.), 5.650%,12/01/04
Colorado Housing and Finance Authority, Single-Family Housing Revenue
Refunding Bonds, 1991 Series A:
1,515,000 0.000%, 11/01/01 No Opt. Call Aa1 1,245,754
3,515,000 0.000%, 11/01/02 No Opt. Call Aa1 2,715,408
6,475,000 City and County of Denver, Colorado, Airport System Revenue Bonds, No Opt. Call AAA 6,900,796
Series 1996 B, 5.750%, 11/15/04
1,400,000 Eagle County, Air Terminal Corporation, Airport Terminal Project Revenue No Opt. Call N/R 1,488,242
Bonds, Series 1996, 6.750%, 5/01/06
500,000 Hyland Hills Park and Recreation District, Adams County, Colorado Special No Opt. Call N/R 513,800
Revenue Refunding and Improvement Bonds, Series 1996A, 5.400%, 12/15/00
200,000 University of Colorado, Certificates of Participation, Series D, Colorado 12/98 at 102 A2*** 207,700
Association of School Boards (Lease Purchase Finance Program), 7.100%,
12/01/00 (Pre-refunded to 12/01/98)
- -----------------------------------------------------------------------------------------------------------------------------------
Connecticut - 3.2%
City of Bridgeport, Connecticut, General Obligation Refunding Bonds,
1996 Series A:
4,650,000 5.250%, 9/01/04 No Opt. Call AAA 4,853,159
1,000,000 6.000%, 9/01/05 No Opt. Call AAA 1,088,860
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Connecticut (continued)
$2,800,000 State of Connecticut Health and Educational Facilities Authority, No Opt. Call BBB- $2,909,620
Revenue Bonds, Quinnipiac College Issue, Series D,
5.625%, 7/01/03
1,000,000 State of Connecticut Health and Educational Facilities Authority No Opt. Call BBB 993,430
Revenue Bonds Hospital for Special Care Issue, Series B,
5.125%, 7/01/07
Connecticut Development Authority, First Mortgage Gross Revenue
Health Care Project Refunding Bonds (Church Homes, Inc.,
Congregational Avery Heights Project), 1997 Series:
780,000 5.100%, 4/01/04 No Opt. Call BBB 789,298
1,100,000 5.200%, 4/01/05 No Opt. Call BBB 1,114,938
1,135,000 5.300%, 4/01/06 No Opt. Call BBB 1,152,910
820,000 City of New Haven, Connecticut, General Obligation Bonds, No Opt. Call AAA 908,002
Issue of 1992, 9.250%, 3/01/02
City of New Haven, Connecticut, General Obligation Bonds,
Series 1992B:
285,000 5.900%, 12/01/98 No Opt. Call AAA 288,483
340,000 5.900%, 12/01/98 No Opt. Call Baa1 343,910
650,000 Town of Stratford, Connecticut General Obligation Bonds, No Opt. Call N/R 666,276
6.900%, 3/01/99
- -----------------------------------------------------------------------------------------------------------------------------------
Florida -- 2.0%
1,000,000 Dade County, Florida, Aviation Revenue Bonds (Series U), No Opt. Call Aa3 1,010,460
6.400%, 10/01/98
450,000 North Springs Improvement District (Broward County, Florida), Water No Opt. Call N/R 473,639
and Sewer Revenue Bonds, Series 1991, 7.900%, 10/01/01
4,940,000 Housing Finance Authority of Polk County (Florida), Multifamily 7/05 at 101 AAA 5,122,237
Housing Revenue Bonds (Winter Oaks Apartments Project),
Series 1997A, 5.250%, 7/01/22
2,625,000 Sanford, Florida, Airport Authority Industrial Development Revenue, No Opt. Call N/R 2,757,851
Central Florida Terminals Inc. Project A, 7.300%, 5/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia -- 0.7%
3,000,000 City of Atlanta, Georgia, Airport Facilities Revenue Refunding Bonds, No Opt. Call AAA 3,360,510
Series 1996, 6.500%, 1/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois -- 3.0%
360,000 DeKalb, Illinois, Home Rule Units Single Family Mortgage Revenue Bonds No Opt. Call Aaa 368,402
(GNMA Mortgage-Backed Securities Program), Series 1991 A,
6.700%, 12/01/99
970,000 Illinois Health Facilities Authority Revenue, Refunding, Galesburg No Opt. Call AA 992,562
Cottage Hospital, 5.400%, 5/01/00
1,500,000 Illinois Health Facilities Authority Revenue Refunding Bonds (Sarah No Opt. Call A- 1,556,610
Bush Lincoln Health Center), Series 1996B, 5.500%, 2/15/06
Illinois Health Facilities Authority Revenue Bonds (Victory Health
Service), Series 1997A:
945,000 5.000%, 8/15/05 No Opt. Call A- 950,377
995,000 5.000%, 8/15/06 No Opt. Call A- 995,259
1,045,000 5.750%, 8/15/07 No Opt. Call A- 1,098,232
605,000 5.750%, 8/15/08 8/07 at 101 A- 634,899
1,550,000 Illinois Health Facilities Authority, Revenue Bonds, ServantCor, 8/99 at 102 N/R*** 1,647,619
Series 1989B, 7.500%, 8/15/01 (Pre-refunded to 8/15/99)
325,000 Illinois Health Facilities Authority Revenue Bonds, The Carle No Opt. Call AAA 331,107
Foundations, Series 1989C, 6.700%, 1/01/99
735,000 Illinois Health Facilities Authority Revenue Bonds, Series 1996 No Opt. Call A- 760,512
(Mercy Hospital and Medical Center Project), 5.600%, 1/01/02
3,000,000 State of Illinois, General Obligation Bonds, Series of March 1992 10/02 at 102 AA 3,242,070
(Full Faith and Credit), 6.200%, 10/01/04
1,530,000 Village of Romeoville, Will County, Illinois, General Obligation No Opt. Call N/R 1,593,709
Working Cash Bonds, Series 1991F, 7.850%, 1/01/01
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indiana - 0.8%
Indiana Bond Bank Special Program Bonds, Series 1997 B (Hendricks County
Redevelopment Authority, Pittboro Project):
$ 1,525,000 5.250%, 2/01/03 No Opt. Call AA- $1,567,761
1,075,000 5.400%, 2/01/04 No Opt. Call AA- 1,115,485
1,250,000 Valparaiso Multi-School Building Corporation (Porter County, Indiana),
First Mortgage Bonds, Series 1992, 6.100%, 7/01/01 No Opt. Call AAA 1,316,809
- -----------------------------------------------------------------------------------------------------------------------------------
Iowa - 0.5%
Iowa Student Loan Liquidity Corporation, Iowa Partnership Loan Revenue
Bonds, 1992 Series:
600,000 5.850%, 7/01/99 No Opt. Call A 610,728
325,000 6.000%, 7/01/00 No Opt. Call A 333,726
600,000 6.100%, 7/01/01 No Opt. Call A 621,420
650,000 6.200%, 7/01/02 No Opt. Call A 680,316
- -----------------------------------------------------------------------------------------------------------------------------------
Kentucky - 8.5%
3,180,000 County of Christian, Kentucky, Hospital Revenue and Refunding Bonds, No Opt. Call A- 3,325,453
Series 1997A, Jennie Stuart Medical Center, 5.500%, 7/01/06
City of Jeffersontown, Kentucky, Public Projects Refunding and
Improvements, Certificates of Participation:
235,000 4.650%, 11/01/02 No Opt. Call A 237,691
520,000 4.750%, 11/01/03 No Opt. Call A 528,554
Kenton County, Water District No. 1, Water District Revenue Bonds,
Series 1995B:
475,000 5.600%, 2/01/03 No Opt. Call AAA 500,151
500,000 5.600%, 2/01/05 No Opt. Call AAA 531,385
Kentucky Development Finance Authority, Sisters of Charity of Nazareth
Health Corporation, Revenue Refunding Bonds, Series 1991:
1,280,000 5.750%, 11/01/98 No Opt. Call A+ 1,291,558
1,330,000 6.000%, 11/01/01 No Opt. Call A+ 1,397,418
2,720,000 6.600%, 11/01/06 11/01 at 102 A+ 2,942,387
Kentucky Economic Development Finance Authority, Hospital System
Refunding and Improvement Revenue Bonds, Series 1997 (Appalachian
Regional Healthcare, Inc. Project):
2,540,000 5.200%, 10/01/04 No Opt. Call BBB 2,559,177
2,670,000 5.300%, 10/01/05 No Opt. Call BBB 2,692,668
1,315,000 5.400%, 10/01/06 No Opt. Call BBB 1,330,898
1,460,000 Kentucky Higher Education Student Loan Corporation, Insured Student No Opt. Call Aaa 1,583,195
Loan Revenue Bonds, 1991 Series B, 6.800%, 6/01/03
180,000 Kentucky Infrastructure Authority Revenue Refunding, Wastewater Revolving No Opt. Call A 186,831
Fund Program, Series C, 5.300%, 6/01/03
Kentucky Infrastructure Authority, Governmental Agencies Program Revenue
Refunding Bonds, 1995 Series H:
1,945,000 5.300%, 8/01/03 No Opt. Call A 2,020,622
675,000 5.400%, 8/01/04 No Opt. Call A 707,738
1,000,000 5.500%, 8/01/05 No Opt. Call A 1,054,890
1,000,000 The Turnpike Authority of Kentucky, Resource Recovery Road Revenue No Opt. Call A+ 1,298,200
Refunding Bonds, 1985 Series A, 9.625%, 7/01/05
Regional Airport Authority of Louisville and Jefferson County, Kentucky,
Airport System Revenue Bonds, 1997 Series A:
1,375,000 5.750%, 7/01/00 No Opt. Call AAA 1,418,230
455,000 5.750%, 7/01/01 No Opt. Call AAA 473,296
1,535,000 5.750%, 7/01/02 No Opt. Call AAA 1,609,770
3,225,000 Mount Sterling, Kentucky, Lease Revenue Bonds (Kentucky League of Cities No Opt. Call Aa 3,370,190
Funding Program), Series 1993A, 5.625%, 3/01/03
10,800,000 City of Owensboro, Kentucky, Electric Light and Power System Revenue Bonds, No Opt. Call AAA 8,396,352
Series 1993A, 0.000%, 1/01/04
270,000 County of Warren, Kentucky, Hospital Revenue Bonds, Series 1998 (Bowling 4/08 at 101 AAA 275,473
Green-Warren County Community Hospital Corporation), 5.000%, 4/01/06
</TABLE>
25
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Louisiana - 2.9%
$6,000,000 Parish of East Baton Rouge, State of Louisiana, Pollution Control No Opt. Call A+ $6,225,780
Refunding Revenue Bonds (Hoechst Celanese Corporation Project),
Series 1993, 5.400%, 12/01/02
1,215,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds (Our No Opt. Call AAA 1,230,382
Lady of Lourdes Regional Medical Center Project), Series 1992,
4.900%, 2/01/00
1,170,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds (Womans No Opt. Call A3 1,237,100
Hospital Foundation Project), Series 1992, 6.750%, 10/01/02
2,500,000 Louisiana Offshore Terminal Authority, Deepwater Port Refunding No Opt. Call A 2,639,475
Revenue Bonds (LOOP INC. Project) First Stage, Series 1992B, 6.100%,
9/01/02
Office Facilities Corporation, A Louisiana Not-for-Profit Corporation,
Capital Facilities, Series 1990:
400,000 7.250%, 12/01/99 No Opt. Call BBB+ 419,184
770,000 7.350%, 12/01/00 No Opt. Call BBB+ 826,487
Ouachita Parish, Louisiana, Hospital Service District No. 1 Revenue,
Glenwood Regional Medical Center:
440,000 7.000%, 7/01/98 No Opt. Call A 442,143
425,000 7.000%, 7/01/99 No Opt. Call A 439,616
300,000 7.250%, 7/01/00 No Opt. Call A 318,600
- -----------------------------------------------------------------------------------------------------------------------------------
Maine - 0.4%
1,615,000 Maine Educational Loan Marketing Corporation, Series 1992, Student 5/02 at 101 A 1,710,107
Loan Revenue Refunding Bonds, Subordinate Series 1, 6.600%, 5/01/05
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland - 1.3%
Maryland Energy Financing Administration Limited Obligation Solid Waste
Disposal Revenue Bonds (Wheelabrator Water Technologies Baltimore L.L.C.
Projects) 1996 Series:
2,280,000 5.650%, 12/01/03 No Opt. Call A- 2,388,300
1,000,000 5.850%, 12/01/05 No Opt. Call A- 1,064,420
2,400,000 Northeast Maryland Waste Disposal Authority, Resource Recovery Revenue No Opt. Call AAA 2,705,856
Refunding Bonds (Southwest Resource Recovery Facility), Series 1993,
7.150%, 1/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 5.0%
265,000 City of Brockton, Massachusetts, General Obligation Bonds, 5.350%, 6/15/00 No Opt. Call A- 270,682
Massachusetts Educational Financing Authority, Education Loan Revenue
Bonds, Issue E, Series 1995:
875,000 5.500%, 7/01/01 No Opt. Call AAA 895,073
2,680,000 5.700%, 7/01/04 No Opt. Call AAA 2,788,996
Massachusetts Educational Financing Authority, Education Loan Revenue
Bonds, Issue E, Series 1997B:
1,970,000 5.250%, 7/01/06 No Opt. Call AAA 2,031,208
2,775,000 5.350%, 7/01/07 7/06 at 102 AAA 2,875,483
Massachusetts Municipal Wholesale Electric Company, Power Supply System
Revenue Bonds, 1992 Series A:
2,635,000 6.300%, 7/01/00 No Opt. Call Aaa 2,751,204
3,800,000 6.300%, 7/01/00 No Opt. Call AAA 3,967,580
1,000,000 The Commonwealth of Massachusetts, General Obligation Refunding Bonds, No Opt. Call AA- 1,027,290
Series 1992A, 6.100%, 8/01/99
1,000,000 Massachusetts Convention Center Authority, Hynes Convention Center No Opt. Call Aa3 1,006,680
Refunding Bonds, Series 1992, 5.900%, 9/01/98
City of New Bedford, Massachusetts, General Obligation Landfill Closure
Bonds, Series 1993:
600,000 5.250%, 3/01/00 No Opt. Call Baa3 610,242
600,000 5.400%, 3/01/01 No Opt. Call Baa3 614,304
600,000 5.500%, 3/01/02 No Opt. Call Baa3 619,542
2,500,000 The New England Education Loan Marketing Corporation, Student Loan No Opt. Call A1 2,592,625
Refunding Bonds, 1993 Series E, 5.625%, 7/01/04
415,000 City of Springfield, Massachusetts, General Obligation Refunding No Opt. Call A 424,126
Bonds, Series 1992A, 5.800%, 9/01/99
City of Springfield, Massachusetts, General Obligation School Project
Loan, Act of 1948 Bonds, Series B:
815,000 5.800%, 9/01/99 No Opt. Call Baa3 831,854
250,000 6.100%, 9/01/02 No Opt. Call Baa3 264,470
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michigan - 6.3%
$3,315,000 The Economic Development Corporation of the City of Detroit, Resource No Opt. Call AAA $3,446,274
Recovery Revenue Bonds, Series 1991A, 6.350%, 5/01/00
3,000,000 Greater Detroit Resource Recovery Authority, Michigan, Resource No Opt. Call AAA 3,166,410
Revenue Refunding Bonds, Series 1996-A, 5.500%, 12/13/04
650,000 City of Madison Heights Tax Increment Finance Authority, Michigan, No Opt. Call N/R 695,045
Revenue Bonds Series 1991, 8.500%, 3/15/01
900,000 Michigan Higher Education Student Loan Authority, Student Loan No Opt. Call AAA 934,785
Revenue Bonds, Series XII-E, 6.375%, 10/01/00
2,000,000 Michigan Higher Education Student Loan Authority, Alternative Minimum No Opt. Call Aa1 2,041,140
Tax, 5.400%, 9/01/00
2,700,000 Michigan State Hospital Finance Authority (Michigan), Hospital No Opt. Call AAA 2,768,067
Revenue Refunding Bonds (St. John Hospital), Series 1993A, 5.400%,
5/15/00
3,075,000 Michigan State Hospital Finance Authority, Hospital Revenue Refunding No Opt. Call BBB 3,136,408
Bonds (Gratiot Community Hospital, Alma, Michigan), Series 1995,
5.300%, 10/01/01
1,000,000 Michigan State Hospital Finance Authority, Revenue Refunding Bonds No Opt. Call AA- 1,083,700
(Mercy Health Services Obligated Group), 1997 Series T, 6.000%, 8/15/06
1,505,000 Michigan State Hospital Finance Authority, Hospital Revenue and No Opt. Call BBB 1,538,471
Refunding Bonds (Genesys Regional Medical Center Obligated Group),
Series 1998A, 5.500%, 10/01/08
Michigan State Housing Development Authority, Rental Housing Revenue Bonds,
1995 Series B:
3,085,000 5.450%, 4/01/05 No Opt. Call AAA 3,224,103
3,325,000 5.450%, 10/01/05 6/05 at 102 AAA 3,484,002
4,095,000 Pontiac, Michigan, Hospital Finance Authority, Hospital Revenue 8/00 at 100 BBB- 4,175,385
Refunding, NOMC Obligation Group, 5.800%, 8/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.6%
Mississippi Hospital Equipment and Facilities Authority, Revenue Refunding
Bonds, Series 1995 (Mississippi Baptist Medical Center):
1,690,000 5.350%, 5/01/03 No Opt. Call AAA 1,756,552
1,000,000 5.400%, 5/01/04 No Opt. Call AAA 1,046,350
- -----------------------------------------------------------------------------------------------------------------------------------
Missouri - 0.6%
Missouri State Health & Educational Facilities Authority, Health
Facilities Revenue Refunding, Lutheran Senior Services:
500,000 5.200%, 2/01/04 No Opt. Call N/R 508,030
600,000 5.300%, 2/01/05 No Opt. Call N/R 614,478
600,000 5.400%, 2/01/06 No Opt. Call N/R 612,708
700,000 5.500%, 2/01/07 No Opt. Call N/R 718,270
510,000 The City of St. Louis, Missouri Regional Convention and Sports No Opt. Call N/R 532,848
Complex Authority Convention and Sports Facility Project Bonds,
Series C of 1991, 7.750%, 8/15/01
- -----------------------------------------------------------------------------------------------------------------------------------
Nebraska - 1.0%
5,000,000 Energy America, Natural Gas Revenue Bonds (Nebraska Public Gas Agency No Opt. Call N/R 4,901,400
Project), Series 1998B, 5.450%, 4/15/08
- -----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 0.5%
505,000 New Hampshire Higher Educational And Health Facilities Authority, No Opt. Call A 537,886
Hospital Revenue Bonds, St. Joseph Hospital Issue, Series 1991,
7.250%, 1/01/01
New Hampshire Housing Finance Authority, Single Family Residential
Mortgage Bonds, 1991 Series D:
330,000 6.200%, 1/01/99 No Opt. Call Aa 333,584
325,000 6.350%, 1/01/00 No Opt. Call Aa 333,346
325,000 6.450%, 1/01/01 No Opt. Call Aa 337,188
890,000 New Hampshire Housing Finance Authority, Multi-Family Housing No Opt. Call A1 892,706
Revenue Refunding Bonds, 1991 Series 1, 6.300%, 7/01/98
</TABLE>
27
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey - 6.4%
$2,730,000 New Jersey Economic Development Authority Electric Energy Facility No Opt. Call N/R $2,776,328
Revenue Bonds (Vineland Cogeneration Limited Partnership Project),
Series 1992, 6.750%, 6/01/99
New Jersey Health Care Facilities Financing Authority, Revenue and
Refunding Bonds, Capital Health System Obligated Group, Series 1997:
1,745,000 4.700%, 7/01/04 No Opt. Call A- 1,737,601
1,885,000 5.000%, 7/01/05 No Opt. Call A- 1,898,987
1,665,000 5.000%, 7/01/06 No Opt. Call A- 1,668,763
1,620,000 5.000%, 7/01/07 No Opt. Call A- 1,616,938
New Jersey Health Care Facilities Financing Authority, Bayonne Hospital
Obligated Group, Revenue Bonds, Series 1994:
860,000 5.750%, 7/01/00 No Opt. Call AAA 888,639
1,000,000 5.800%, 7/01/01 No Opt. Call AAA 1,044,812
790,000 5.900%, 7/01/02 No Opt. Call AAA 834,860
New Jersey Economic Development Authority, First Mortgage Revenue Bonds
(Franciscan Oaks Project), Series 1997:
1,420,000 5.300%, 10/01/05 No Opt. Call N/R 1,432,056
830,000 5.400%, 10/01/06 No Opt. Call N/R 840,035
4,300,000 New Jersey Economic Development Authority, Insured Revenue Bonds No Opt. Call AAA 4,519,902
(Educational Testing Service Issue), Series 1995B, 5.500%, 5/15/05
New Jersey Educational Facilities Authority, Stevens Institute of
Technology Issue Revenue Bonds, 1992 Series A:
1,155,000 6.000%, 7/01/99 No Opt. Call A- 1,181,657
1,275,000 6.100%, 7/01/00 No Opt. Call A- 1,322,902
995,000 6.200%, 7/01/01 No Opt. Call A- 1,046,919
1,165,000 6.300%, 7/01/02 No Opt. Call A- 1,243,509
New Jersey Higher Educational Facilities Authority, Higher Educational
Facilities Revenue Bonds, Saint Peters College, Issue 1992 Series B:
295,000 6.100%, 7/01/00 No Opt. Call BBB 305,959
355,000 6.200%, 7/01/01 No Opt. Call BBB 373,417
4,995,000 New Jersey Wastewater Treatment Trust, Wastewater Treatment Insured No Opt. Call AAA 5,511,083
Refunding Bonds, Series 1996C, 6.250%, 5/15/05
- -----------------------------------------------------------------------------------------------------------------------------------
New York - 16.7%
Albany Housing Authority, City of Albany, New York, Limited Obligation
Bonds, Series 1995:
500,000 5.100%, 10/01/01 No Opt. Call Baa1 508,930
700,000 5.250%, 10/01/02 No Opt. Call Baa1 715,316
750,000 5.400%, 10/01/03 No Opt. Call Baa1 771,113
750,000 5.500%, 10/01/04 No Opt. Call Baa1 770,963
1,000,000 5.600%, 10/01/05 No Opt. Call Baa1 1,029,590
500,000 5.700%, 10/01/06 10/05 at 102 Baa1 516,260
700,000 5.850%, 10/01/07 10/05 at 102 Baa1 718,872
City of Jamestown, Chautauqua County, New York, Public Improvement
(Serial) Bonds, 1991 Series A:
150,000 7.000%, 3/15/04 No Opt. Call Baa2 167,726
750,000 7.000%, 3/15/05 No Opt. Call Baa2 846,765
1,000,000 Metropolitan Transportation Authority (New York), Transit Facilities No Opt. Call BBB+ 1,075,170
Service Contract Bonds, Series N, 6.625%, 7/01/02
1,280,000 The City of New York (New York), General Obligation Bonds, Fiscal 5/98 at 101 1/2 Aaa 1,361,805
1988 Series A, 8.250%, 11/01/99
2,750,000 New York City General Obligation Bonds, Fiscal 1991 Series B, No Opt. Call A3 3,351,205
8.250%, 6/01/06
1,000,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series E, No Opt. Call A3 1,089,200
6.500%, 2/15/04
The City of New York, General Obligation Bonds, Fiscal 1996 Series G:
3,000,000 5.700%, 2/01/03 No Opt. Call A3 3,139,590
500,000 5.750%, 2/01/06 No Opt. Call A3 527,760
3,000,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series H, No Opt. Call A3 3,109,110
5.400%, 8/01/04
4,000,000 The City of New York, General Obligation Bonds, Fiscal 1995 Series F, No Opt. Call Aaa 4,254,160
6.100%, 2/15/02
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
New York (continued)
<C> <S> <C> <C> <C>
The City of New York, General Obligation Bonds, Fiscal 1997
Series I:
$ 5,000,000 5.625%, 4/15/05 No Opt. Call A3 $5,235,450
5,000,000 6.000%, 4/15/09 4/07 at 101 A3 5,378,250
1,000,000 Dormitory Authority of the State of New York, State University 5/00 at 102 A-- 1,075,980
Educational Facilities Revenue Bonds, Series 1990A, 7.400%,
5/15/01
4,155,000 Dormitory Authority of the State of New York, Revenue Bonds, No Opt. Call BBB+ 4,286,298
City University Issue, Series U, 5.875%, 7/01/00
2,900,000 Dormitory Authority of the State of New York, Department of No Opt. Call BBB+ 3,088,732
Health of the State of New York, Refunding Bonds, 1990 Issue,
6.750%, 7/01/01
Dormitory Authority of the State of New York, State University
Educational Facilities Revenue Bonds, Series 1995A:
6,500,000 5.250%, 5/15/01 No Opt. Call A-- 6,660,225
2,000,000 6.500%, 5/15/05 No Opt. Call A-- 2,211,760
1,000,000 Dormitory Authority of the State of New York, State University 5/99 at 102 A--*** 1,051,020
Educational Facilities, Revenue Bonds, Series 1989A, 7.000%,
5/15/02 (Pre-refunded to 5/15/99)
Dormitory Authority of the State of New York, NYACK Hospital,
Revenue Bonds, Series 1996:
1,000,000 5.500%, 7/01/00 No Opt. Call Baa 1,015,730
1,000,000 6.000%, 7/01/06 No Opt. Call Baa 1,061,840
3,315,000 Dormitory Authority of the State of New York City, University No Opt. Call BBB+ 3,525,005
System Revenue Bonds, 1996 Series 2, 6.000%, 7/01/04
5,000,000 New York State Housing Finance Agency, Health Facilities No Opt. Call BBB+ 5,277,450
Revenue Bonds, (New York City), 1996 Series A Refunding,
5.875%, 5/01/04
615,000 New York State Medical Care Facilities Finance Agency, Mental 6/98 at 102 A-- 629,336
Health Services, Facilities Improvement Revenue Bonds, Series
1987A, 8.250%, 2/15/99
New York State Urban Development Corporation, Project Revenue
Bonds (Center for Industrial Innovation), 1995 Refunding
Series:
2,405,000 5.300%, 1/01/04 No Opt. Call BBB+ 2,463,898
1,265,000 6.250%, 1/01/05 No Opt. Call BBB+ 1,361,064
695,000 New York State Urban Development Corporation, Correctional No Opt. Call BBB+ 706,912
Facilities Revenue Bonds, Series G, 6.500%, 1/01/99
1,000,000 New York State Urban Development Corporation, Correctional No Opt. Call BBB+ 1,021,650
Capital Facilities Revenue Bonds, 1993 Refunding Series,
5.250%, 1/01/02
Onondaga County, Resource Recovery Agency, System Revenue
Bonds (Development Costs-1992 Series):
570,000 5.900%, 5/01/98 No Opt. Call Baa1 570,011
480,000 6.100%, 5/01/99 No Opt. Call Baa1 485,678
630,000 6.200%, 5/01/00 No Opt. Call Baa1 644,156
3,700,000 The Port Authority of New York and New Jersey, Special Project No Opt. Call N/R 4,161,501
Bonds, Series 4, KIAC Partners Project, 7.000%, 10/01/07
3,035,000 The Port Authority of New York and New Jersey, Special Project No Opt. Call AAA 3,289,212
Bonds, Series 6, JFK International Air Terminal LLC Project,
6.000%, 12/01/05
- ---------------------------------------------------------------------------------------------------------------------------------
North Carolina -- 1.2%
5,475,000 North Carolina Municipal Power Agency Number 1, Catawba 1/03 at 102 A-- 5,820,035
Electric Revenue Bonds, Series 1992, 6.000%, 1/01/05
- ---------------------------------------------------------------------------------------------------------------------------------
Ohio -- 7.2%
City of Barberton, Ohio, Hospital Facilities Revenue Bonds,
Series 1992 (The Barberton Citizens Hospital Company Project):
500,000 6.250%, 1/01/99 No Opt. Call A 508,005
750,000 6.400%, 1/01/00 No Opt. Call A 778,185
500,000 6.550%, 1/01/01 No Opt. Call A 528,500
</TABLE>
29
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio (continued)
City of Cambridge, Ohio, Hospital Revenue Refunding Bonds, Series 1991,
(Guernsey Memorial Hospital Project):
$ 545,000 7.500%, 12/01/98 No Opt. Call BBB $ 555,922
595,000 7.650%, 12/01/99 No Opt. Call BBB 625,678
640,000 7.750%, 12/01/00 No Opt. Call BBB 691,021
680,000 7.850%, 12/01/01 No Opt. Call BBB 750,910
Cleveland-Cuyahoga County Port Authority Subordinate Refunding Revenue
Bonds, Series 1997 (Rock and Roll Hall of Fame and Museum Project):
850,000 5.000%, 12/01/01 No Opt. Call N/R 863,617
1,000,000 5.100%, 12/01/02 No Opt. Call N/R 1,020,010
750,000 5.350%, 12/01/04 No Opt. Call N/R 774,735
335,000 5.600%, 12/01/06 No Opt. Call N/R 350,782
260,000 County of Cuyahoga, Ohio, Health Care Facilities Revenue Bonds, Series No Opt. Call N/R 270,795
1990 (Altenheim Project), 8.750%, 6/01/99
County of Cuyahoga, Ohio, Hospital Revenue Bonds (Meridia Health System),
Series 1995:
500,000 5.750%, 8/15/00 No Opt. Call AAA 518,035
795,000 5.850%, 8/15/01 No Opt. Call AAA 834,003
735,000 5.950%, 8/15/02 No Opt. Call AAA 781,209
1,175,000 County of Erie, Ohio Hospital Improvement and Refunding Revenue Bonds, No Opt. Call A 1,191,991
Series 1992 (Firelands Community Hospital Project), 6.100%, 1/01/99
County of Lucas, Ohio, Hospital Facilities Revenue Bonds, Series 1991
(Flower Memorial Hospital):
700,000 7.200%, 12/01/98 No Opt. Call N/R 713,615
685,000 5.500%, 12/01/99 No Opt. Call N/R 701,282
County of Lucas, Ohio, Hospital Facilities Revenue Bonds, Series 1993
(Flower Hospital):
370,000 5.800%, 12/01/01 No Opt. Call N/R 387,682
790,000 5.900%, 12/01/02 No Opt. Call N/R 837,250
435,000 6.000%, 12/01/03 No Opt. Call N/R 467,003
5,195,000 County of Lucas, Ohio, Hospital Revenue Refunding Bonds, Series 1996 No Opt. Call AAA 5,650,498
(ProMedica Healthcare Obligated Group), 6.000%, 11/15/05
1,000,000 Miami County Ohio Hospital Facilities Revenue, Refunding & Improvement, No Opt. Call BBB 1,073,390
Upper Valley Medical Center, Series C, 6.000%, 5/15/06
1,040,000 State of Ohio, State Economic Development Revenue Bonds (Ohio 6/98 at 102 A- 1,063,348
Enterprise Bond Fund), Series 1991-2 and Series 1991-3 (Superior Forge
& Steel Corporation), 7.250%, 6/01/01
3,825,000 State of Ohio, Elementary and Secondary Education Capital Facilities No Opt. Call AAA 4,023,556
Bonds, Series 1995A, 5.700%, 6/01/02
County of Sandusky, Ohio, Hospital Facilities Revenue Refunding Bonds
Series 1998 (Memorial Hospital):
910,000 4.500%, 1/01/01 No Opt. Call BBB- 903,967
1,030,000 4.600%, 1/01/02 No Opt. Call BBB- 1,021,544
1,375,000 4.700%, 1/01/03 No Opt. Call BBB- 1,362,034
1,460,000 4.800%, 1/01/04 No Opt. Call BBB- 1,445,999
1,030,000 4.900%, 1/01/05 No Opt. Call BBB- 1,019,607
830,000 5.000%, 1/01/06 No Opt. Call BBB- 821,360
500,000 5.050%, 1/01/07 No Opt. Call BBB- 493,925
750,000 5.100%, 1/01/09 1/08 at 102 BBB- 733,478
225,000 County of Shelby, Ohio, Hospital Facilities Revenue Refunding and No Opt. Call BBB 226,604
Improvement Bonds, Series 1992 (The Shelby County Memorial Hospital
Association), 6.100%, 9/01/98
- -----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.7%
3,120,000 Oklahoma Industries Authority, Hospital Revenue Bonds (Deaconess Health No Opt. Call BBB 3,161,527
Care Corporation Project), Series 1997A, 5.250%, 10/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 9.9%
5,000,000 County of Allegheny, Pennsylvania, Airport Revenue Refunding Bonds, No Opt. Call AAA 5,235,150
Series 1997A (Pittsburgh International Airport), 5.500%, 1/01/05
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania (continued)
Allegheny County Hospital Development Authority (Allegheny County,
Pennsylvania) Hospital Revenue Bonds, Series 1991 A, St. Margaret
Memorial Hospital):
$ 400,000 6.600%, 10/01/98 No Opt. Call BBB+ $ 404,584
400,000 6.700%, 10/01/99 No Opt. Call BBB+ 415,360
400,000 6.800%, 10/01/00 No Opt. Call BBB+ 424,108
3,830,000 Delaware County Authority (Pennsylvania), Health Facilities Revenue 11/05 at 100 BBB+*** 4,169,606
Bonds, Series 1993A (Mercy Health Corporation of Southeastern
Pennsylvania Obligated Group), 6.000%, 11/15/07 (Pre-refunded to
11/15/05)
4,000,000 Delaware County Industrial Development Authority (Pennsylvania) No Opt. Call A 4,216,280
Refunding Revenue Bonds, Series A 1997 (Resource Recovery Facility),
6.000%, 1/01/03
1,500,000 Monroeville, Pennsylvania Hospital Authority, Hospital Revenue No Opt. Call A- 1,585,605
Refunding, Forbes Health System, 5.750%, 10/01/05
655,000 Montgomery County Higher Education and Health Authority (Pennsylvania) No Opt. Call BBB+ 680,597
Hospital Facilities Revenue Bonds Series of 1991 (Pottstown Memorial
Medical Center Project), 7.000%, 11/15/99
2,500,000 Pennsylvania Intergovernmental Cooperation Authority, Special Tax No Opt. Call AAA 2,597,075
Revenue Bonds (City of Philadelphia Funding Program), Series of
1992, 6.000%, 6/15/00
City of Philadelphia, Pennsylvania Gas Works Revenue Bonds, Fourteenth
Series:
3,600,000 5.600%, 7/01/99 No Opt. Call Baa1 3,662,460
3,425,000 5.700%, 7/01/00 No Opt. Call Baa1 3,521,654
1,390,000 Philadelphia Hospital and Higher Educational Facilities Authority of No Opt. Call BBB+ 1,410,516
Philadelphia, Revenue Refunding Bonds, Series of 1992
(Philadelphia MR Project), 5.300%, 8/01/99
3,990,000 The School District of Philadelphia, Pennsylvania, General Obligation No Opt. Call AAA 4,185,390
Bonds, Series A of 1994, 5.450%, 7/01/04
1,080,000 The School District of Philadelphia, Pennsylvania, General Obligation No Opt. Call AAA 1,104,678
Bonds, Series A of 1992, 6.050%, 5/15/99
5,000,000 City of Philadelphia, Pennsylvania, Water and Wastewater Revenue No Opt. Call AAA 5,155,550
Bonds, Series 1993, 5.150%, 6/15/04
Philadelphia Pennsylvania Hospitals & Higher Education Facilities
Authority, Hospital Revenue Refunding, Pennsylvania Hospital:
3,490,000 5.850%, 7/01/02 No Opt. Call BBB+ 3,638,779
2,020,000 6.050%, 7/01/04 No Opt. Call BBB+ 2,131,787
2,000,000 6.150%, 7/01/05 No Opt. Call BBB+ 2,127,700
- -----------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.9%
4,035,000 Rhode Island Housing and Mortgage Finance Corporation, Multi-Family No Opt. Call AAA 4,169,366
Housing Bonds, 1995 Series A, 5.350%, 7/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 1.2%
The Health and Educational Facilities Board of the Metropolitan
Government of Nashville and Davidson County, Tennessee, Revenue R
Refunding Bonds, Series 1998:
400,000 5.150%, 7/01/05 7/03 at 102 N/R 394,788
400,000 5.250%, 7/01/06 7/03 at 102 N/R 395,267
500,000 5.300%, 7/01/07 7/03 at 102 N/R 493,540
500,000 5.350%, 7/01/08 7/03 at 102 N/R 493,030
500,000 5.400%, 7/01/09 7/03 at 102 N/R 496,734
3,250,000 The Industrial Development Board of the Metropolitan Government of No Opt. Call N/R 3,394,170
Nashville and Davidson County (Tennessee), Industrial Development
Revenue Refunding and Improvement Bonds (Osco Treatment), 6.000%,
5/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 2.5%
1,575,000 Anderson County, Texas, Refunding Revenue Bonds (Coffield Prison Farm No Opt. Call AAA 1,608,610
Project), Series 1992 Supported by a Lease with the Texas Department
of Criminal Justice, 5.300%, 3/15/00
Brazos Higher Education Authority, Inc., Student Loan Revenue Refunding
Bonds, Series 1993A-1:
1,510,000 5.900%, 12/01/00 No Opt. Call Aaa 1,562,940
1,075,000 6.050%, 12/01/01 No Opt. Call Aaa 1,123,632
</TABLE>
31
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas (continued)
$ 1,325,000 North Central Texas Health Facilities Development Corporation, Health 2/01 at 100 BBB $ 1,378,847
Facilities Development Revenue Bonds (C.C. Young Memorial Home
Project), Series 1996, 5.700%, 2/15/03
1,000,000 The City of Pasadena (Texas) Industrial Development Corporation, 10/98 at 100 A 1,009,440
Economic Development Revenue Bonds Series 1991 (Universities
Space Research Association Lunar and Planetary Institute
Project), 7.050%, 10/01/01
The State of Texas, Texas College Student Loan Senior Lien Revenue
Bonds, Series 1991:
590,000 6.900%, 4/01/99 No Opt. Call A 603,321
565,000 7.000%, 4/01/00 No Opt. Call A 587,610
1,190,000 7.100%, 4/01/01 No Opt. Call A 1,256,865
Tyler Health Facilities Development Corporation, Hospital Revenue Bonds
(Mother Frances Hospital Regional Health Care Center Project), Series
1997A:
1,650,000 5.125%, 7/01/05 7/02 at 100 Baa2 1,651,715
1,100,000 5.200%, 7/01/06 7/02 at 100 Baa2 1,100,527
- ------------------------------------------------------------------------------------------------------------------------------------
Vermont - 0.4%
Vermont Student Assistance Corporation Education Loan Finance Program
Revenue Bonds 1992 Series A-3:
1,000,000 5.900%, 12/15/00 No Opt. Call AAA 1,031,790
1,000,000 6.050%, 12/15/01 No Opt. Call AAA 1,040,600
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia - 1.3%
2,850,000 Newport News Redevelopment and Housing Authority, Multifamily Housing 5/05 at 102 AAA 2,992,015
Revenue Bonds (Fredericksburg-Oxford Project), Series 1997A, 5.550%,
5/01/27
3,000,000 Virginia Public Building Authority, State Building Revenue Bonds, 8/04 at 101 AA*** 3,308,430
Series 1994A, 6.250%, 8/01/15 (Pre-refunded to 8/01/04)
- ------------------------------------------------------------------------------------------------------------------------------------
Washington - 1.0%
1,670,000 Washington Health Care Facilities Authority, Revenue Bonds, Series 1992 No Opt. Call AAA 1,773,440
(The Childrens Hospital and Medical Center, Seattle), 6.000%, 10/01/02
3,000,000 Washington Public Power Supply System, Nuclear Project No. 1 Refunding No Opt. Call Aa1 3,175,290
Revenue Bonds, Series 1993A, 5.700%, 7/01/06
- ------------------------------------------------------------------------------------------------------------------------------------
Washington, D.C. - 0.1%
500,000 District of Columbia Redevelopment Land Agency (Washington, D.C.), No Opt. Call Baa 504,320
Sports Arena Special Tax Revenue Bonds (Series 1996), 5.300%, 11/01/99
- ------------------------------------------------------------------------------------------------------------------------------------
West Virginia - 1.9%
7,000,000 The County Commission of Pleasants County, West Virginia, Pollution No Opt. Call A 6,898,290
Control Revenue Bonds (West Penn Power Company Pleasants Station
Project), 1998 Series D, 4.700%, 11/01/07
2,000,000 West Virginia Public Energy Authority, Energy Revenue Bonds (Morgantown 1/06 at 102 AA+ 2,008,360
Energy Associates Project), 1990 Series A, 5.050%, 7/01/08
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 0.5%
Wisconsin Health and Educational Facilities Authority, Revenue Bonds,
Series 1993A (Lutheran Hospital-La Crosse, Inc.):
1,100,000 5.200%, 2/15/00 No Opt. Call AAA 1,119,393
1,155,000 5.300%, 2/15/01 No Opt. Call AAA 1,185,457
- ------------------------------------------------------------------------------------------------------------------------------------
$452,110,000 Total Investments - (cost $449,002,163) - 98.3% 464,606,518
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.7% 8,179,990
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $472,786,508
=====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
32
<PAGE>
Statement of Net Assets
April 30, 1998
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $309,218,001 $45,227,308 $464,606,518
Cash 2,903,973 256,854 2,321,947
Receivables:
Interest 5,079,934 739,142 7,730,276
Investments sold 7,567,300 105,000 685,000
Shares sold 1,337,403 368,915 411,531
Other assets 91,562 2,341 27,772
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 326,198,173 46,699,560 475,783,044
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 11,918,204 -- --
Shares redeemed 471,618 20,200 810,216
Accrued expenses:
Management fees (note 6) 126,218 14,084 171,127
12b-1 distribution and service fees (notes 1 and 6) 84,077 9,125 88,227
Other 41,749 5,404 51,269
Dividends payable 1,312,086 176,327 1,875,697
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 13,953,952 225,140 2,996,536
- ---------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $312,244,221 $46,474,420 $472,786,508
===========================================================================================================================
Class A Shares (note 1)
Net assets $236,690,772 $42,338,909 $438,133,771
Shares outstanding 20,903,984 3,891,691 40,572,636
Net asset value and redemption price per share $ 11.32 $ 10.88 $ 10.80
Offering price per share (net asset value per share plus maximum sales
charge of 4.20%, 3.00% and 2.50%, respectively, of offering price) $ 11.82 $ 11.22 $ 11.08
===========================================================================================================================
Class B Shares (note 1)
Net assets $ 8,706,484 N/A N/A
Shares outstanding 768,605 N/A N/A
Net asset value, offering and redemption price per share $ 11.33 N/A N/A
===========================================================================================================================
Class C Shares (note 1)
Net assets $ 62,336,486 $ 3,533,134 $ 33,951,550
Shares outstanding 5,511,780 324,552 3,146,798
Net asset value, offering and redemption price per share $ 11.31 $ 10.89 $ 10.79
===========================================================================================================================
Class R Shares (note 1)
Net assets $ 4,510,479 $ 602,377 $ 701,187
Shares outstanding 398,294 55,451 65,020
Net asset value, offering and redemption price per share $ 11.32 $ 10.86 $ 10.78
===========================================================================================================================
N/A--Intermediate and Limited Term are not authorized to issue Class B Shares.
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
Statement of Operations
Year Ended April 30, 1998
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- ----------------------------------------------------------------------------------------------------------------------------
Investment Income (note 1) $17,694,074 $2,482,982 $25,361,069
============================================================================================================================
<S> <C> <C> <C>
Expenses
Management fees (note 6) 1,429,247 223,656 2,018,209
12b-1 service fees--Class A (notes 1 and 6) 448,070 82,472 870,789
12b-1 distribution and service fees--Class B (notes 1 and 6) 37,097 N/A N/A
12b-1 distribution and service fees--Class C (notes 1 and 6) 444,993 22,125 155,040
Shareholders' servicing agent fees and expenses 139,272 34,462 274,935
Custodian's fees and expenses 67,246 51,207 99,449
Trustees' fees and expenses (note 6) 5,300 1,360 4,911
Professional fees 20,664 11,355 45,965
Shareholders' reports--printing and mailing expenses 66,543 19,864 128,808
Federal and state registration fees 29,586 30,624 24,948
Other expenses 13,950 598 26,306
- ----------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 2,701,968 477,723 3,649,360
Expense reimbursement (note 6) -- (109,859) --
- ----------------------------------------------------------------------------------------------------------------------------
Net expenses 2,701,968 367,864 3,649,360
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 14,992,106 2,115,118 21,711,709
- ----------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 1,444,589 445,080 1,183,699
Net change in unrealized appreciation or depreciation of investments 11,090,769 1,234,467 6,803,680
- ----------------------------------------------------------------------------------------------------------------------------
Net gain from investments 12,535,358 1,679,547 7,987,379
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $27,527,464 $3,794,665 $29,699,088
============================================================================================================================
N/A--Intermediate and Limited Term are not authorized to issue Class B Shares.
See accompanying notes to financial statements.
</TABLE>
34
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
------------------------------ ------------------------------ -----------------------------
Year Ended 11 Months Ended Year Ended 11 Months Ended Year Ended 11 Months Ended
4/30/98 4/30/97* 4/30/98 4/30/97** 4/30/98 4/30/97***
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 14,992,106 $ 13,301,910 $ 2,115,118 $ 2,147,178 $ 21,711,709 $ 21,032,242
Net realized gain from
investment transactions
(notes 1 and 4) 1,444,589 2,249,650 445,080 147,832 1,183,699 1,658,088
Net change in unrealized
appreciation
or depreciation of
investments 11,090,769 4,859,517 1,234,467 801,793 6,803,680 116,950
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from operations 27,527,464 20,411,077 3,794,665 3,096,803 29,699,088 22,807,280
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to
Shareholders (note 1)
From undistributed net
investment income:
Class A (11,812,757) (10,934,899) (1,964,556) (2,059,165) (20,496,170) (19,952,270)
Class B (172,772) (3,405) N/A N/A N/A N/A
Class C (2,809,735) (2,349,107) (122,737) (74,318) (1,226,668) (809,432)
Class R (207,336) (1,421) (26,788) (4,137) (12,840) (286)
From accumulated net
realized gains
from investment
transactions:
Class A (1,796,387) (1,174,852) (1,421) - - -
Class B (34,421) - N/A N/A N/A N/A
Class C (476,161) (285,764) (104) - - -
Class R (30,203) - (19) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions to
shareholders (17,339,772) (14,749,448) (2,115,625) (2,137,620) (21,735,678) (20,761,988)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
(note 2)
Net proceeds from sale of
shares 76,968,241 45,105,197 8,010,746 7,641,512 102,797,645 55,204,267
Net proceeds from shares
issued to shareholders
due to reinvestment of
distributions 9,893,852 6,771,634 1,256,923 1,250,991 13,729,912 12,418,014
- ------------------------------------------------------------------------------------------------------------------------------------
86,862,093 51,876,831 9,267,669 8,892,503 116,527,557 67,622,281
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (57,124,785) (40,524,782) (8,387,774) (13,864,964) (100,696,272) (125,247,208)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from Fund share
transactions 29,737,308 11,352,049 879,895 (4,972,461) 15,831,285 (57,624,927)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets 39,925,000 17,013,678 2,558,935 (4,013,278) 23,794,695 (55,579,635)
Net assets at the
beginning of year 272,319,221 255,305,543 43,915,485 47,928,763 448,991,813 504,571,448
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of
year $312,244,221 $272,319,221 $46,474,420 $ 43,915,485 $ 472,786,508 $ 448,991,813
====================================================================================================================================
Balance of undistributed
net investment income at
the end of year $ 2,584 $ 13,078 $ 10,595 $ 9,558 $ 990,831 $ 1,014,800
====================================================================================================================================
</TABLE>
* Information represents eight months of Flagship All-American and
three months of All-American (see note 1).
** Information represents eight months of Flagship Intermediate and three
months of Intermediate (see note 1).
*** Information represents eight months of Flagship Limited Term and three
months of Limited Term (see note 1).
N/A - Intermediate and Limited Term are not authorized to issue Class B Shares.
See accompanying notes to financial statements.
35
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Municipal Trust (the "Trust") is an open-end diversified
investment company registered under the Investment Company Act of 1940, as
amended. The Trust comprises the Nuveen Flagship All-American Municipal Bond
Fund ("All-American"), the Nuveen Flagship Intermediate Municipal Bond Fund
("Intermediate") and the Nuveen Flagship Limited Term Municipal Bond Fund
("Limited Term") (collectively, the "Funds"), among others. The Trust was
organized as a Massachusetts business trust on July 1, 1996.
The John Nuveen Company ("Nuveen"), parent of John Nuveen & Co. Incorporated and
Nuveen Advisory Corp., respectively, the distributor ("Distributor") and
investment advisor ("Adviser") of the Funds, entered into an agreement under
which Nuveen acquired Flagship Resources Inc. and after the close of business on
January 31, 1997, consolidated their respective mutual fund businesses. This
agreement was approved at a meeting by the shareholders of the Flagship Funds in
December 1996.
After the close of business on January 31, 1997, Flagship All-American Tax
Exempt Fund ("Flagship All-American"), Flagship Intermediate Tax Exempt Fund
("Flagship Intermediate") and Flagship Limited Term Tax Exempt Fund ("Flagship
Limited Term") were reorganized into the Trust. At this time they were renamed
Nuveen Flagship All-American Municipal Bond Fund, Nuveen Flagship Intermediate
Municipal Bond Fund and Nuveen Flagship Limited Term Municipal Bond Fund,
respectively. The Funds had a May 31 fiscal year end prior to being reorganized
into the Trust and now have an April 30 fiscal year end.
Each Fund seeks to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
April 30, 1998, All-American had outstanding when-issued and delayed delivery
purchase commitments of $11,918,204. Intermediate and Limited Term had no such
outstanding purchase commitments.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
36
<PAGE>
Federal Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal income tax, to retain such tax-exempt status when
distributed to the shareholders of the Funds. All monthly tax-exempt income
dividends paid during the fiscal year ended April 30, 1998, have been designated
Exempt Interest Dividends. Net realized capital gain and market discount
distributions are subject to federal taxation.
Flexible Sales Charge Program
Each Fund offers Class A, C and R Shares. All-American also offers Class B
Shares. Class A Shares are sold with a sales charge and incur an annual 12b-1
service fee. Class A Share purchases of $1 million or more are sold at net asset
value without an up-front sales charge but may be subject to a 1% contingent
deferred sales charge ("CDSC") if redeemed within 18 months of purchase. Class B
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class B Shares agrees to pay a CDSC of up
to 5% depending upon the length of time the shares are held by the investor
(CDSC is reduced to 0% at the end of six years). Class B Shares convert to Class
A Shares eight years after purchase. Class C Shares are sold without a sales
charge but incur annual 12b-1 distribution and service fees. An investor
purchasing Class C Shares agrees to pay a CDSC of 1% if Class C Shares are
redeemed within one year of purchase. Class R Shares are not subject to any
sales charge or 12b-1 distribution or service fees. Class R Shares are available
for purchases of over $1 million and in other limited circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the fiscal year ended April 30, 1998.
Expense Allocation
Expenses of each Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
37
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
All-American
---------------------------------------------------------
Year Ended 11 Months Ended
4/30/98 4/30/97*
---------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 4,008,652 $ 45,606,077 2,917,181 $ 31,668,207
Class B 700,155 7,946,597 65,162 712,816
Class C 1,301,462 14,740,803 1,153,656 12,540,237
Class R 771,291 8,674,764 16,754 183,937
Shares issued to shareholders due
to reinvestment of distributions:
Class A 660,598 7,458,579 514,027 5,592,134
Class B 9,097 103,693 24 265
Class C 188,101 2,120,043 108,469 1,178,627
Class R 18,643 211,537 56 608
- --------------------------------------------------------------------------------------------------------
7,657,999 86,862,093 4,775,329 51,876,831
- --------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (3,632,808) (40,915,436) (3,061,374) (33,300,392)
Class B (5,833) (66,678) -- --
Class C (1,013,258) (11,466,412) (665,228) (7,224,390)
Class R (408,450) (4,676,259) -- --
- --------------------------------------------------------------------------------------------------------
(5,060,349) (57,124,785) (3,726,602) (40,524,782)
- --------------------------------------------------------------------------------------------------------
Net increase 2,597,650 $ 29,737,308 1,048,727 $ 11,352,049
========================================================================================================
*Information represents eight months of Flagship All-American and three
months of All-American (see note 1).
Intermediate
-----------------------------------------------------
Year Ended 11 Months Ended
4/30/98 4/30/97*
-----------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
Shares sold:
Class A 554,517 $ 6,064,556 539,437 $ 5,639,771
Class C 167,492 1,829,477 145,976 1,523,605
Class R 10,730 116,713 44,829 478,136
Shares issued to shareholders due
to reinvestment of distributions:
Class A 107,654 1,165,426 118,796 1,215,858
Class C 7,941 86,053 3,777 34,796
Class R 500 5,444 32 337
- --------------------------------------------------------------------------------------------------------
848,834 9,267,669 852,847 8,892,503
- --------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (678,166) (7,363,971) (1,302,182) (13,627,224)
Class C (93,422) (1,016,745) (22,717) (237,740)
Class R (640) (7,058) -- --
- --------------------------------------------------------------------------------------------------------
(772,228) (8,387,774) (1,324,899) (13,864,964)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) 76,606 $ 879,895 (472,052) $ (4,972,461)
=========================================================================================================
*Information represents eight months of Flagship Intermediate and three
months of Intermediate (see note 1).
</TABLE>
38
<PAGE>
<TABLE>
Limited Term
--------------------------------------------------------
Year Ended 11 Months Ended
4/30/98 4/30/97*
--------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 7,703,171 $ 83,615,063 4,064,504 $ 43,309,184
Class C 1,703,471 18,465,192 1,111,314 11,854,862
Class R 65,900 717,390 3,763 40,221
Shares issued to shareholders due to reinvestment of distributions:
Class A 1,182,240 12,786,447 1,125,302 11,989,359
Class C 86,601 936,081 40,213 428,533
Class R 680 7,384 11 122
- ---------------------------------------------------------------------------------------------------------------------------------
10,742,063 116,527,557 6,345,107 67,622,281
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (8,422,781) (91,261,871) (11,367,265) (121,107,007)
Class C (865,221) (9,376,253) (388,996) (4,140,201)
Class R (5,334) (58,148) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
(9,293,336) (100,696,272) (11,756,261) (125,247,208)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,448,727 $ 15,831,285 (5,411,154) $ (57,624,927)
=================================================================================================================================
</TABLE>
*Information represents eight months of Flagship Limited Term and three
months of Limited Term (see note 1).
3. Distributions to Shareholders
On May 8, 1998, the Funds declared dividend distributions from their tax-exempt
net investment income which were paid on June 1, 1998, to shareholders of record
on May 8, 1998, as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- ---------------------------------------------------------------------------------------------------------------------------------
Dividend per share:
<S> <C> <C> <C>
Class A $.0490 $.0420 $.0425
Class B .0420 N/A N/A
Class C .0440 .0370 .0395
Class R .0510 .0435 .0445
=================================================================================================================================
</TABLE>
N/A-Intermediate and Limited Term are not authorized to issue Class B Shares.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended
April 30, 1998, were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- --------------------------------------------------------------------------------
Purchases:
<S> <C> <C> <C>
Investments in municipal securities $84,058,362 $ 8,718,382 $143,131,970
Temporary municipal investments 40,550,000 5,200,000 35,300,000
Sales:
Investments in municipal securities 57,040,922 10,910,056 136,821,408
Temporary municipal investments 40,550,000 5,200,000 35,300,000
================================================================================
</TABLE>
At April 30, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
At April 30, 1998, Limited Term had an unused capital loss carryforward of
$3,968,888, available for federal income tax purposes to be applied against
future capital gains, if any. If not applied, the carryforward will expire in
the year 2003.
39
<PAGE>
Notes to Financial Statements (continued)
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at April 30, 1998, were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- ---------------------------------------------------------------------------
Gross unrealized:
<S> <C> <C> <C>
appreciation $23,793,953 $2,689,514 $16,196,241
depreciation (278,378) (76,901) (591,886)
- ---------------------------------------------------------------------------
Net unrealized appreciation $23,515,575 $2,612,613 $15,604,355
===========================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
All-American & Intermediate
Average Daily Net Asset Value Management Fee
- ------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5000 of 1%
For the next $125 million .4875 of 1
For the next $250 million .4750 of 1
For the next $500 million .4625 of 1
For the next $1 billion .4500 of 1
For net assets over $2 billion .4250 of 1
==============================================================================
Limited Term
Average Daily Net Asset Value Management Fee
- ------------------------------------------------------------------------------
For the first $125 million .4500 of 1%
For the next $125 million .4375 of 1
For the next $250 million .4250 of 1
For the next $500 million .4125 of 1
For the next $1 billion .4000 of 1
For net assets over $2 billion .3750 of 1
==============================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended April 30, 1998, the Distributor collected sales
charges on purchases of Class A Shares of approximately $585,700, $91,500 and
$367,200 for All-American, Intermediate and Limited Term, respectively, of which
approximately $529,400, $76,400 and $357,500, respectively, were paid out as
concessions to authorized dealers. The Distributor also received 12b-1 service
fees on Class A Shares, substantially all of which were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
During the fiscal year ended April 30, 1998, the Distributor compensated
authorized dealers directly with approximately $547,800, $17,700 and $593,100 in
commission advances at the time of purchase for All-American, Intermediate and
Limited Term, respectively. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares for All-American
during the first year following a purchase, all 12b-1 distribution fees on Class
B Shares for All-American, and all 12b-1 service and distribution fees on Class
C Shares during the first year following a purchase are retained by the
Distributor. During the fiscal year ended April 30, 1998, the Distributor
retained approximately $154,900, $9,600 and $78,600 in such 12b-1 fees for All-
American, Intermediate and Limited Term, respectively. The remaining 12b-1 fees
charged to the Funds were paid to compensate authorized dealers for providing
services to shareholders relating to their investments. The Distributor also
collected and retained approximately $23,400, $6,600 and $80,800 of CDSC on
share redemptions for All-American, Intermediate and Limited Term, respectively,
during the fiscal year ended April 30, 1998.
40
<PAGE>
7. Composition of Net Assets
At April 30, 1998, each Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $288,687,354 $43,708,365 $460,205,454
Balance of undistributed net investment income 2,584 10,595 990,831
Accumulated net realized gain (loss) from investment transactions 38,708 142,847 (4,014,132)
Net unrealized appreciation of investments 23,515,575 2,612,613 15,604,355
- -------------------------------------------------------------------------------------------------------------------
Net assets $312,244,221 $46,474,420 $472,786,508
===================================================================================================================
</TABLE>
8. Investment Composition
At April 30, 1998, the revenue sources by municipal purpose, expressed as a
percent of total investments, were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Education and Civic Organizations 10% 9% 12%
Energy 3 2 2
Forest and Paper Products 3 -- --
Health Care 17 25 23
Housing/Multifamily 3 2 4
Industrial 3 1 2
Long Term Care 6 4 4
Tax Obligation/General 2 8 10
Tax Obligation/Limited 9 14 9
Transportation 14 12 7
U.S.Guaranteed 11 6 8
Utilities 13 9 14
Water and Sewer 3 7 3
Other 3 1 2
- --------------------------------------------------------------------------------
100% 100% 100%
================================================================================
</TABLE>
Certain long-term and intermediate-term investments owned by the Funds are
either covered by insurance issued by several private insurers or are backed by
an escrow or trust containing U.S. government or U.S. government agency
securities, both of which ensure the timely payment of principal and interest in
the event of default (24% for All-American, 24% for Intermediate and 34% for
Limited Term). Such insurance or escrow, however, does not guarantee the market
value of the municipal securities or the value of any of the Funds' shares.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
41
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------------- ---------------------------------
ALL AMERICAN Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
April 30, Value Income (a) Gain (Loss) Total Income Gains Total Value Return
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <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%
1997 (c) 10.67 .55 .29 .84 (.55) (.06) (.61) 10.90 8.02
1996 (d) 10.79 .61 (.12) .49 (.61) -- (.61) 10.67 4.64
1995 (d) 10.61 .63 .18 .81 (.63) -- (.63) 10.79 8.01
1994 (d) 11.07 .65 (.30) .35 (.65) (.16)+++ (.81) 10.61 2.99
Class B (2/97)
1998 10.91 .51 .51 1.02 (.51) (.09) (.60) 11.33 9.51
1997 (e) 10.98 .12 (.06) .06 (.13) -- (.13) 10.91 .54
Class C (6/93)
1998 10.89 .53 .52 1.05 (.54) (.09) (.63) 11.31 9.75
1997 (c) 10.66 .50 .29 .79 (.50) (.06) (.56) 10.89 7.48
1996 (d) 10.78 .55 (.12) .43 (.55) -- (.55) 10.66 4.07
1995 (d) 10.60 .57 .18 .75 (.57) -- (.57) 10.78 7.42
1994 (f) 11.09 .57 (.32) .25 (.57) (.17)+++ (.74) 10.60 2.16+
Class R (2/97)
1998 10.91 .61 .51 1.12 (.62) (.09) (.71) 11.32 10.45
1997 (e) 10.99 .15 (.07) .08 (.16) -- (.16) 10.91 .69
===================================================================================================================================
</TABLE>
+ Annualized.
++ Information included prior to the 11 months ended 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) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) For the 11 months ended April 30.
(d) For the year ended May 31.
(e) From commencement of class operations as noted through April 30.
(f) From commencement of class operations as noted through May 31.
42
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment (a) ment (a) Rate
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$236,691 .81% 5.27% .81% 5.27% 20%
216,575 .98+ 5.43+ .87+ 5.54+ 39
207,992 1.02 5.41 .83 5.60 79
185,495 1.06 5.72 .76 6.02 71
159,867 1.05 5.34 .62 5.77 81
8,706 1.56 4.47 1.56 4.47 20
711 1.55+ 4.83+ 1.55+ 4.83+ 39
62,336 1.36 4.72 1.36 4.72 20
54,850 1.53+ 4.88+ 1.42+ 4.99+ 39
47,314 1.57 4.85 1.37 5.05 79
45,242 1.61 5.17 1.31 5.47 71
39,997 1.63+ 4.62+ 1.09+ 5.16+ 81
4,510 .61 5.42 .61 5.42 20
183 .61+ 5.95+ .61+ 5.95+ 39
===========================================================================================
</TABLE>
43
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------------- ------------------------------
INTERMEDIATE++ Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
April 30, Value Income (a) Gain (Loss) Total Income Gains Total Value Return (b)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
1998 $10.47 $.52 $ .41 $ .93 $(.52) $ -- $(.52) $10.88 8.97%
1997 (c) 10.27 .47 .20 .67 (.47) -- (.47) 10.47 6.64
1996 (d) 10.29 .51 (.02) .49 (.51) -- (.51) 10.27 4.84
1995 (d) 10.16 .51 .13 .64 (.51) -- (.51) 10.29 6.63
1994 (d) 10.35 .52 (.13) .39 (.52) (.06)+++ (.58) 10.16 3.72
Class C (12/95)
1998 10.47 .46 .42 .88 (.46) -- (.46) 10.89 8.47
1997 (c) 10.28 .44 .17 .61 (.42) -- (.42) 10.47 6.00
1996 (f) 10.57 .23 (.30) (.07) (.22) -- (.22) 10.28 (1.78)+
Class R (2/97)
1998 10.45 .54 .41 .95 (.54) -- (.54) 10.86 9.17
1997 (e) 10.60 .13 (.15) (.02) (.13) -- (.13) 10.45 (.15)
==================================================================================================================================
</TABLE>
+ Annualized.
++ Information included prior to the 11 months ended April 30, 1997,
reflects the financial highlights of Flagship Intermediate.
+++ The amount shown includes a distribution in excess of capital gains of
$.01 per share.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) For the 11 months ended April 30.
(d) For the year ended May 31.
(e) From commencement of class operations as noted through April 30.
(f) From commencement of class operations as noted through May 31.
44
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment (a) ment (a) Rate
- -------------------------------------------------------------------------------
$ 42,339 1.03% 4.52% .79% 4.76% 20%
40,906 1.18+ 4.46+ .68+ 4.96+ 26
46,742 1.17 4.31 .62 4.86 81
42,069 1.24 4.45 .54 5.15 102
35,891 1.29 4.04 .40 4.93 69
3,533 1.58 3.96 1.34 4.20 20
2,540 1.71+ 3.90+ 1.23+ 4.38+ 26
1,187 1.73+ 3.68+ 1.13+ 4.28+ 81
602 .83 4.71 .59 4.95 20
469 .82+ 4.98+ .40+ 5.40+ 26
===============================================================================
</TABLE>
45
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------------- ---------------------------------
LIMITED TERM++ Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
April 30, Value Income (a) Gain (Loss) Total Income Gains Total Value Return(b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <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%
1997 (c) 10.57 .46 .04 .50 (.46) -- (.46) 10.61 4.78
1996 (d) 10.65 .51 (.09) .42 (.50) -- (.50) 10.57 4.03
1995 (d) 10.60 .51 .04 .55 (.50) -- (.50) 10.65 5.41
1994 (d) 10.74 .52 (.13) .39 (.52) (.01) (.53) 10.60 3.58
Class C (12/95)
1998 10.60 .47 .19 .66 (.47) -- (.47) 10.79 6.33
1997 (c) 10.56 .44 .03 .47 (.43) -- (.43) 10.60 4.49
1996 (f) 10.76 .22 (.19) .03 (.23) -- (.23) 10.56 .46+
Class R (2/97)
1998 10.59 .53 .19 .72 (.53) -- (.53) 10.78 6.87
1997 (e) 10.73 .12 (.13) (.01) (.13) -- (.13) 10.59 (.09)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Information included prior to the 11 months ended April 30, 1997, reflects
the financial highlights of Flagship Limited Term.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) For the 11 months ended April 30.
(d) For the year ended May 31.
(e) From commencement of class operations as noted through April 30.
(f) From commencement of class operations as noted through May 31.
46
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------
Ratio of Ratio of Net Ratio of Ratio of
Expenses to Investment Income Expenses to Net Investment
Average Net to Average Net Average Net Income to Average Portfolio
Ending Net Assets Before Assets Before Assets After Net Assets After Turnover
Assets (000) Reimbursement Reimbursement Reimbursement (a) Reimbursement (a) Rate
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$438,134 .77% 4.70% .77% 4.70% 30%
425,401 .82+ 4.74+ .80+ 4.76+ 29
489,157 .84 4.72 .79 4.77 39
569,196 .82 4.80 .74 4.88 20
704,627 .79 4.67 .70 4.76 22
33,952 1.12 4.35 1.12 4.35 30
23,551 1.12+ 4.43+ 1.11+ 4.44+ 29
15,415 1.43+ 3.93+ 1.19+ 4.17+ 39
701 .59 4.86 .59 4.86 30
40 .55+ 5.07+ .55+ 5.07+ 29
==========================================================================================================
</TABLE>
47
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Municipal Trust:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship All-American Municipal Bond Fund,
Nuveen Flagship Intermediate Municipal Bond Fund, and Nuveen Flagship Limited
Term Municipal Bond Fund (collectively, the "Funds") (three of the portfolios
constituting the Nuveen Flagship Municipal Trust (a Massachusetts business
trust)), as of April 30, 1998, the related statements of operations, statements
of changes in net assets and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
statements and financial highlights for the Funds for the years ended April 30,
1997 and prior were audited by other auditors whose report dated June 13, 1997,
expressed an unqualified opinion on those financial statements and financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1998, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship All-American Municipal Bond Fund, Nuveen Flagship Intermediate
Municipal Bond Fund, and Nuveen Flagship Limited Term Municipal Bond Fund of the
Nuveen Flagship Municipal Trust as of April 30, 1998, and the results of their
operations, the changes in their net assets, and the financial highlights for
the year then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 18, 1998
48
<PAGE>
Building Better Portfolios with Nuveen
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your
financial goals.
Growth Funds
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
European Value Fund
Growth and Income Stock Fund
Balanced Municipal and Stock Fund
Balanced Stock and Bond Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate-Term
Limited Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
Reducing the impact of taxes and moderating risk are important goals for many
risk-sensitive investors seeking to build better portfolios. For these
investors, a tax-efficient, risk-resistant investment portfolio often forms the
foundation of a carefully crafted financial plan for building and sustaining
wealth. Nuveen is committed to providing investors and their financial advisers
with a range of products and investment tools to help build better portfolios.
Mutual Funds
Nuveen Mutual Funds offer investors access to the Nuveen family of Premier
Advisers/SM/, including Nuveen Advisory Corp., Institutional Capital Corp. and
Rittenhouse Financial Services. Our equity, balanced and income funds seek to
provide consistent performance, time-tested strategies to reduce risk and
experienced, professional management.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Unit Trusts
Nuveen Unit Trusts are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA-rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
49
<PAGE>
Serving Investors for Generations
[JOHN NUVEEN, SR. PHOTO APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
1898
NUVEEN 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime.(TM)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VAN-N2-4.98
<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
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 Funds 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 Funds 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 28TH DAY OF JULY, 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 July 28, 1998
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Trustee (Principal
Executive Officer) /s/ Gifford R. Zimmerman
Anthony T. Dean President and Trustee By____________________________
Robert P. Bremner Trustee Gifford R. Zimmerman
Lawrence H. Brown Trustee Attorney-in-Fact
Anne E. Impellizzeri Trustee July 28, 1998
Peter R. Sawers Trustee
William J. Schneider Trustee
Judith M. Stockdale Trustee
</TABLE>
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, GIFFORD R. ZIMMERMAN
AND LARRY W. MARTIN TO EXECUTE THIS REGISTRATION STATEMENT, AND AMENDMENTS
THERETO, FOR EACH OF THE OFFICERS AND 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.
i. Opinion of Morgan, Lewis & Bockius LLP
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 - D2
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
Agreements 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 Martin
- --------------------------
Assistant Secretary
<PAGE>
EXHIBIT E2
Renewal of Distribution Agreement
This Agreement made this 31st day of July, 1997 by and between Nuveen Flagship
Municipal Trust, a Massachusetts business trust (the "Fund"), and John Nuveen &
Co. Incorporated, a Delaware corporation (the "Underwriter");
WHEREAS, the parties hereto are the contracting parties under that certain
Distribution Agreement (the "Agreement") pursuant to which the Underwriter
acts as agent for the distribution of shares of the Fund; and
WHEREAS, the Agreement terminates August 1, 1997 unless continued in the manner
required by the Investment Company Act of 1940;
WHEREAS, the Board of Trustees of the Fund, at a meeting called for the purpose
of reviewing the Agreement has approved the Agreement and its continuance
until August 1, 1998 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, 1998 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
JOHN NUVEEN & CO. INCORPORATED
By: /s/ Anna Kucinskis
---------------------------
Vice President
ATTEST:
/s/ Larry Martin
- --------------------------
Assistant Secretary
<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 Secretary of the Fund, and that as such 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.
July 23, 1998
/s/ Gifford R. Zimmerman
-------------------------------
Gifford R. Zimmerman, 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.
