<PAGE>
As filed with the Securities and Exchange Commission on August 27, 1999.
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>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 6 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 6 [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
Gifford R. Zimmerman, Esq.--Vice With a copy to:
President and Secretary Thomas S. Harman
333 West Wacker Drive Morgan, Lewis & Bockius LLP
Chicago, Illinois 60606 1800 M Street, NW
(Name and Address of Agent for Service) Washington, DC 20036
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant [_] on (date) pursuant to paragraph
to paragraph (b) (a)(1)
[_] on pursuant to [_] 75 days after filing pursuant
paragraph (b) to paragraph (a)(2)
[_] 60 days after filing pursuant to [_] on (date) pursuant to paragraph
paragraph (a)(1) (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>
PART A--PROSPECTUS
NUVEEN FLAGSHIP MUNICIPAL TRUST
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
August 27, 1999 Prospectus
NUVEEN
Mutual Funds
Nuveen Municipal Bond Funds
[PICTURE APPEARS HERE]
Dependable, tax-free
income to help
you keep more
of what you earn.
Municipal Bond
Insured Municipal Bond
All-American
Intermediate
Limited Term
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser(SM) for Income Investing
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
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
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 12
What Securities We Invest In 13
How We Select Investments 15
What the Risks Are 15
How We Manage Risk 16
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.
What Share Classes We Offer 17
How to Reduce Your Sales Charge 19
How to Buy Shares 19
Systematic Investing 20
Systematic Withdrawal 21
Special Services 21
How to Sell Shares 22
Section 4 General Information
This section summarizes the funds' distribution policies
and other general fund information.
Dividends, Distributions and Taxes 24
Distribution and Service Plans 25
Net Asset Value 26
Fund Service Providers 26
Year 2000 27
Section 5 Financial Highlights
This section provides the funds' financial performance
for the past five years. 28
</TABLE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
August 27, 1999
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
Introduction
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.
- --------------------------------------------------------------------------------
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
Section 1 The Funds 1
<PAGE>
Nuveen Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal income taxes as is
consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent 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 long-term municipal bonds that offer potentially
above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors and by diversifying its investment portfolio
geographically.
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 interest rates will rise, causing bond
prices to 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 carry greater credit risk. As with any mutual fund investment,
loss of money is a risk of investing.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1998. This information is intended to help
you assess the variability of fund returns over the past ten years (and
consequently, the potential rewards and risks of a fund investment). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
<TABLE>
<S>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.6% 6.0% 11.1% 8.2% 8.3% (2.1)% 15.0% 4.0% 8.5% 8.0%
</TABLE>
During the ten years ending December 31, 1998, the highest and lowest quarterly
returns were 5.92% and -3.20%, respectively for the quarters ending 6/30/89 and
3/31/94. The bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the 1-, 5- and 10-year average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
------------------------------------
Class 1 Year 5 Year 10 Year
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 1.48% 5.30% 7.04%
Class B 1.16% 5.31% 6.90%
Class C 5.47% 5.48% 6.74%
Class R 6.14% 6.44% 7.76%
LB Market
Benchmark/2/ 6.48% 6.22% 8.22%
Lipper
Peer Group/3/ 5.64% 5.70% 7.75%
</TABLE>
2 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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/8/ 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 .12% .12% .12% .12%
- -------------------------------------------------------------------------------
Total Operating Expenses .77% 1.52% 1.32% .57%
- -------------------------------------------------------------------------------
</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. The example assumes
you invest $10,000 in the fund for the time periods indicated and then either
redeem or do not 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 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 $ 495 $ 551 $ 134 $ 58 $ 495 $ 155 $ 134 $ 58
- -------------------------------------------------------------------------------
3 Years $ 656 $ 800 $ 418 $183 $ 656 $ 480 $ 418 $183
- -------------------------------------------------------------------------------
5 Years $ 830 $ 944 $ 723 $318 $ 830 $ 829 $ 723 $318
- -------------------------------------------------------------------------------
10 Years $1,334 $1,610 $1,590 $714 $1,334 $1,610 $1,590 $714
- -------------------------------------------------------------------------------
</TABLE>
1. Class R total returns reflect 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 "What are the Costs of Investing?"). The year-to-
date return as of 6/30/99 was -1.02%.
How the Fund Is Invested (as of 4/30/99)
Portfolio Statistics
<TABLE>
<S> <C>
Effective Maturity 17.44 years
- -------------------------------------------------------------
Average Effective Duration 5.99
- -------------------------------------------------------------
Weighted Average Credit Quality AA+
- -------------------------------------------------------------
Number of Issues 206
- -------------------------------------------------------------
</TABLE>
Credit Quality
<TABLE>
<S> <C>
AAA/U.S. Guaranteed 44%
- --------------------------------------------------------
AA 34%
- --------------------------------------------------------
A 13%
- --------------------------------------------------------
BBB/NR 9%
- --------------------------------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Water/Sewer (9%)
U.S. Guaranteed (15%)
Health Care (18%)
Tax Obligation/ Limited (9%)
Other (26%)
Utilities (23%)
</TABLE>
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 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 rating agencies. The
fund may buy non-rated municipal bonds if the fund's investment adviser judges
them to be investment grade. The fund primarily buys insured municipal
bonds.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued long-term, insured municipal bonds that offer
potentially above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors and by diversifying its investment portfolio
geographically.
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 interest rates will rise, causing bond
prices to 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 carry greater credit risk. As with any mutual fund investment,
loss of money is a risk of investing.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1998. This information is intended to help
you assess the variability of fund returns over the past ten years (and
consequently, the potential rewards and risks of a fund investment). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.3 6.5 12.5 9.4 13.2 (6.4) 19.0 3.2 8.3 5.7
</TABLE>
During the ten years ending December 31, 1998, 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 bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the 1-, 5- and 10-year average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
------------------------------------
Class 1 Year 5 Year 10 Year
- ----------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 1.29% 4.74% 7.51%
Class B 0.95% 4.67% 7.34%
Class C 5.08% 4.82% 7.14%
Class R 5.93% 5.83% 8.19%
- ----------------------------------------------------------------
LB Market
Benchmark/2/ 6.48% 6.22% 8.22%
Lipper Peer
Group/3/ 5.33% 5.33% 7.42%
</TABLE>
4 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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/8/ 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 .48% .48% .48% .48%
- ----------------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .95% .75% --%
- ----------------------------------------------------------------------------
Other Expenses .13% .13% .13% .14%
- ----------------------------------------------------------------------------
Total Operating Expenses .81% 1.56% 1.36% .62%
- ----------------------------------------------------------------------------
</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. The example assumes
you invest $10,000 in the fund for the time periods indicated and then either
redeem or do not 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 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 $ 499 $ 554 $ 138 $ 63 $ 499 $ 159 $ 138 $ 63
- --------------------------------------------------------------------------
3 Years $ 668 $ 812 $ 431 $199 $ 668 $ 493 $ 431 $199
- --------------------------------------------------------------------------
5 Years $ 851 $ 965 $ 745 $346 $ 851 $ 850 $ 745 $346
- --------------------------------------------------------------------------
10 Years $1,380 $1,655 $1,635 $774 $1,380 $1,655 $1,635 $774
- --------------------------------------------------------------------------
</TABLE>
1. Class R total returns reflect 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 "What are the Costs of Investing?"). The year-to-
date return as of 6/30/99 was -1.10%.
How the Fund Is Invested (as of 4/30/99)
Portfolio Statistics
<TABLE>
<S> <C>
Effective Maturity 18.10 years
- --------------------------------------------------
Average Effective Duration 6.26
- --------------------------------------------------
Weighted Average Credit Quality AAA
- --------------------------------------------------
Number of Issues 181
- --------------------------------------------------
</TABLE>
Credit Quality
<TABLE>
<S> <C>
Insured 68%
- --------------------------------------------------
Insured and U.S. Guaranteed 29%
- --------------------------------------------------
U.S. Guaranteed 3%
- --------------------------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Health Care (15%)
Other (23%)
Tax Obligation General (11%)
Utilities (10%)
Housing/Single Family (9%)
U.S. Guaranteed (32%)
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 represent the average annualized returns of the funds in
the Lipper National Insured 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 5
<PAGE>
Nuveen Flagship All-American 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 long-term municipal bonds that offer potentially
above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors and by diversifying its investment portfolio
geographically.
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 interest rates will rise, causing bond
prices to 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 bonds
carry greater credit risk. As with any mutual fund investment, loss of money is
a risk of investing.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1998. This information is intended to help
you assess the variability of fund returns over the past ten years (and
consequently, the potential rewards and risks of a fund investment). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
<TABLE>
Class A Annual Returns
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.6% 5.8% 14.5% 10.5% 14.4% (5.9%) 17.5% 4.8% 10.8% 5.9%
</TABLE>
During the ten years ending December 31, 1998, 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 bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the 1-, 5- and 10-year average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
------------------------------------
Class 1 Year 5 Year 10 Year
- -------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 1.49% 5.43% 8.33%
Class B 1.25% 5.55% 8.32%
Class C 5.39% 5.78% 8.20%
Class R 6.24% 6.45% 8.85%
- -------------------------------------------------------------
LB Market
Benchmark2 6.48% 6.22% 8.22%
Lipper Peer
Group3 5.64% 5.70% 7.75%
</TABLE>
6 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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/8/ 5%/8/ 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 .49% .49% .49% .49%
- ----------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .95% .75% --%
- ----------------------------------------------------------------------
Other Expenses .12% .11% .12% .13%
- ----------------------------------------------------------------------
Total Operating Expense-Gross+ .81% 1.55% 1.36% .62%
- ----------------------------------------------------------------------
After Expense Reimbursements
----------------------------
Expense Reimbursements (.01%) (.01%) (.01%) (.01%)
------------------------------------------------------------------
Total Operating Expenses--Net .80% 1.54% 1.35% .61%
------------------------------------------------------------------
</TABLE>
Reflects a voluntary expense limitation by the fund's investment adviser which
may be modified or discontinued at any time.
The following example is intended to help you compare the cost of investing in
other Mutual fund with the cost of investing in other mutual funds. The example
assumes you invest $10,000 in the fund for the time periods indicated and then
either redeem or do not 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 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 $ 499 $ 553 $ 138 $ 63 $ 499 $ 158 $ 138 $ 63
- -------------------------------------------------------------------------
3 Years $ 668 $ 809 $ 431 $199 $ 668 $ 490 $ 431 $199
- -------------------------------------------------------------------------
5 Years $ 851 $ 960 $ 745 $346 $ 851 $ 845 $ 745 $346
- -------------------------------------------------------------------------
10 Years $1,380 $1,646 $1,635 $774 $1,380 $1,646 $1,635 $774
</TABLE>
1. Class A total returns reflect 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, adjusted in the case of Classes B and
How the Fund Is Invested (as of 4/30/99)
Portfolio Statistics
Effective Maturity 21.47 years
- --------------------------------------------------------
Average Effective Duration 8.34
- --------------------------------------------------------
Weighted Average Credit Quality A+
- --------------------------------------------------------
Number of Issues 194
- --------------------------------------------------------
Credit Quality
AAA/U.S. Guaranteed 33%
- --------------------------------------------------------
AA 10%
- --------------------------------------------------------
A 13%
- --------------------------------------------------------
BBB/NR 44%
- --------------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
U.S.Guaranteed (14%)
Health Care (13%)
Education and Civic Organizations (9%)
Transportation (13%)
Utilities (20%)
Other (31%)
</TABLE>
C for the differences in fees between the classes (see "What are the Costs of
Investing?"). The year-to-date return as of 6/30/99 was -1.33%.
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 7
<PAGE>
Nuveen Flagship Intermediate 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 intermediate-term municipal bonds that offer
potentially above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors and by diversifying its investment portfolio
geographically.
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 interest rates will rise, causing bond
prices to 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 carry greater credit risk. As with any mutual fund investment,
loss of money is a risk of investing.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
six years as well as annualized fund and index returns for the one- and five-
year and since inception periods ending December 31, 1998. This information is
intended to help you assess the variability of fund returns over the past six
years (and consequently, the potential rewards and risks of a fund investment).
Past performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Class A Annual Returns
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
14.0% (4.8%) 15.6% 4.3% 9.6% 5.8%
</TABLE>
During the six years ending December 31, 1998, 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 bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the 1- and 5-year and since inception
average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
------------------------------------
Class 1 Year 5 Year Inception
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 2.60% 5.24% 6.85%
Class C 5.29% 5.32% 6.80%
Class R 6.04% 5.94% 7.41%
- ----------------------------------------------------------------------
LB Market
Benchmark/2/ 6.23% 5.79% 6.56%
Lipper Peer
Group/3/ 5.62% 5.13% 5.95%
</TABLE>
8 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy
and hold shares of the fund.
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
Share Class A C R/5/
- ------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 3.0%/6/ None None
- ------------------------------------------------------------------
Maximum Sales Charge Imposed
on Reinvested Dividends None None None
- ------------------------------------------------------------------
Exchange Fees None None None
- ------------------------------------------------------------------
Deferred Sales Charge/7/ None8 1%/9/ None
- ------------------------------------------------------------------
</TABLE>
Annual Fund Operating Expenses/10/
Paid From Fund Assets
<TABLE>
Share Class A C R
- -------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees .50% .50% .50%
- -------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .75% -%
- -------------------------------------------------------------------
Other Expenses .28% .26% .28%
- -------------------------------------------------------------------
Total Operating Expenses-Gross .98% 1.51% .78%
- -------------------------------------------------------------------
After Expense Reimbursements
Expense Reimbursements (.14%) (.15%) (.14%)
- -------------------------------------------------------------------
Total Operating ExpensesNet .84% 1.36% .64%
- -------------------------------------------------------------------
</TABLE>
Reflects a voluntary expense limitation by the fund's investment adviser which
may be modified or discontinued at any time.
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. The example assumes
you invest $10,000 in the fund for the time periods indicated and then either
redeem or do not 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 costs may be higher or lower.
<TABLE>
Redemption No Redemption
Share Class A C R A C R
- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 397 $ 154 $ 80 $ 397 $ 154 $ 80
- -----------------------------------------------------------
3 Years $ 603 $ 477 $249 $ 603 $ 477 $249
- -----------------------------------------------------------
5 Years $ 825 $ 824 $433 $ 825 $ 824 $433
- -----------------------------------------------------------
10 Years $1,465 $1,802 $966 $1,465 $1,802 $966
- -----------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 4/30/99)
Portfolio Statistics
<TABLE>
<S> <C>
Effective Maturity 9.06 years
- -----------------------------------------------------------
Average Effective Duration 7.16
- -----------------------------------------------------------
Weighted Average Credit Quality A+
- -----------------------------------------------------------
Number of Issues 110
</TABLE>
Credit Quality
<TABLE>
<S> <C>
AAA/U.S. Guaranteed 36%
- -----------------------------------------------------------
AA 6%
- -----------------------------------------------------------
A 17%
- -----------------------------------------------------------
BBB/NR 41%
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Tax Obligation/Limited (14%)
Health Care (20%)
Tax Obligation/General (12%)
Transportation (16%)
Utilities (11%)
Other (27%)
</TABLE>
1. Class A total returns reflect actual performance for all periods; Class 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, adjusted in the case of Class C for the differences
in fees between the classes (see "What are the Costs of Investing?"). The
year-to-date return as of 6/30/99 was -1.93%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers 7
year 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 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. 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 C shares redeemed within one year of purchase are subject to a 1% CDSC.
10.Long-term holders of 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 9
<PAGE>
Nuveen Flagship Limited Term 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 limited-term municipal bonds that offer
potentially above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors and by diversifying its investment portfolio
geographically.
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 interest rates will rise, causing bond
prices to 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 greater credit risk. As with any mutual fund
investment, loss of money is a risk of investing.
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 long-term growth;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1998. This information is intended to help
you assess the variability of fund returns over the past ten years (and
consequently, the potential rewards and risks of a fund investment). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Class A Annual Returns
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.1% 6.6% 10.0% 8.7% 9.1% (1.9%) 10.3% 4.1% 6.9% 5.0%
</TABLE>
During the ten years ending December 31, 1998, 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 bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the 1-, 5- and 10-year average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
-----------------------------------------
Class 1 Year 5 Year 10 Year
- --------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 2.35% 4.26% 6.36%
Class C 4.63% 4.44% 6.29%
Class R 5.20% 4.83% 6.64%
- --------------------------------------------------------------------
LB Market
Benchmark/2/ 5.85% 5.28% 7.08%
Lipper Peer
Group/3/ 4.55% 4.22% 5.80%
</TABLE>
10 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Share Class A C R/5/
- ---------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 2.5%/6/ None None
- ---------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Reinvested Dividends None None None
- ---------------------------------------------------------------------------
Exchange Fees None None None
- ---------------------------------------------------------------------------
Deferred Sales Charge/7/ None/8/ 1%/9/ None
- ---------------------------------------------------------------------------
</TABLE>
Annual Fund Operating Expenses/10/
Paid From Fund Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Share Class A C R
- ---------------------------------------------------------------------------
Management Fees .43% .43% .43%
- ---------------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .55% --%
- ---------------------------------------------------------------------------
Other Expenses .14% .14% .14%
- ---------------------------------------------------------------------------
Total Operating Expenses .77% 1.12% .57%
- ---------------------------------------------------------------------------
</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. The example assumes
you invest $10,000 in the fund for the time periods indicated and then either
redeem or do not 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 costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A C R A C R
- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 327 $ 114 $ 58 $ 327 $ 114 $ 58
- -----------------------------------------------------------
3 Years $ 490 $ 356 $183 $ 490 $ 356 $183
- -----------------------------------------------------------
5 Years $ 667 $ 617 $318 $ 667 $ 617 $318
- -----------------------------------------------------------
10 Years $1,180 $1,363 $714 $1,180 $1,363 $714
</TABLE>
1. Class A total returns reflect actual performance for all periods; Class 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, adjusted in the case of Class C for the differences
in fees between the classes (see "What are the Costs of Investing?"). The
year-to-date return as of 6/30/99 was -.27%.
Portfolio Statistics
<TABLE>
<S> <C>
Effective Maturity 4.97 years
- -----------------------------------------------
Average Effective Duration 4.61
- -----------------------------------------------
Weighted Average Credit Quality A+
- -----------------------------------------------
Number of Issues 277
- -----------------------------------------------
Credit Quality
AAA/U.S. Guaranteed 37%
- -----------------------------------------------
AA 6%
- -----------------------------------------------
A 23%
- -----------------------------------------------
BBB/NR 34%
- -----------------------------------------------
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Health Care (17%)
Utilities (22%)
Education and Civic Organizations (13%)
U.S. Guaranteed (9%)
Tax Obligation/Limited (9%)
Other (30%)
</TABLE>
2. Market Benchmark returns reflect the performance of the Lehman Brothers 5
year Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper National Short Intermediate 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 C shares redeemed within one year of purchase are subject to a 1%
CDSC.
10. Long-term holders of 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 11
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the funds' assets are managed, this section includes
a detailed discussion of the adviser's 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 Investment Advisory Services provides advisory and investment management
services to a broad range of clients. Nuveen Investment Advisory Services is
comprised of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp., both
of which are wholly-owned subsidiaries of John Nuveen & Co. Incorporated
(Nuveen). Nuveen Advisory Corp. (Nuveen Advisory) is the funds' investment
adviser and as such is responsible for the selection and on-going monitoring of
the securities in the funds' portfolio, managing the funds' business affairs and
providing certain clerical, bookkeeping and other administrative services.
Nuveen Advisory is located at 333 West Wacker Drive, Chicago, IL 60606. For
providing these services, Nuveen Advisory is paid an annual management fee. For
the most recent fiscal year, the funds paid the following management fees to
Nuveen Advisory as a percentage of net assets:
Nuveen Municipal Bond Fund .45%
Nuveen Insured Municipal Bond Fund .48%
Nuveen Flagship All-American Municipal Bond Fund .49%
Nuveen Flagship Intermediate Municipal Bond Fund .50%
Nuveen Flagship Limited Term Municipal Bond Fund .43%
Founded in 1898, Nuveen 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. Nuveen is the sponsor and
principal underwriter of the funds' shares and has sponsored or underwritten
more than $60 billion of investment company securities. Nuveen and its
affiliates have approximately $55 billion in 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
12 Section 2 How We Manage Your Money
<PAGE>
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 1987, had been an employee
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 fund's 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.
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.
These bonds include general obligation bonds, which are backed by the full faith
and credit of the issuer and may be repaid from any revenue source, and revenue
bonds, which may be repaid only from the revenue of a specific facility or
source.
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.
In evaluating municipal bonds of different credit qualities or maturities,
Nuveen Advisory takes into account the size of yield spreads. Yield spread is
the additional return the funds may earn by taking on additional credit risk or
interest rate risk. For example, yields on low quality bonds are higher than
yields on high quality bonds because investors must be compensated for incurring
the higher credit risk associated with low quality bonds. If yield spreads do
not provide adequate compensation for the additional risk associated with low
quality bonds, the funds will buy bonds of relatively higher quality. Similarly,
in evaluating bonds of different maturities, Nuveen Advisory evaluates the
comparative yield available on these bonds. If yield spreads on long-term bonds
do not compensate the funds adequately for the additional interest rate risk the
funds must assume, the funds will buy bonds of relatively shorter maturity. In
addition, municipal bonds in a particular industry may provide higher yields
relative
Section 2 How We Manage Your Money 13
<PAGE>
to their risk compared to bonds in other industries. If that occurs, a fund may
buy relatively more bonds from issuers in that industry. In that case, the
fund's portfolio composition would change from time to time.
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 municipal 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.
Portfolio insurance policies are effective only so long as the fund continues to
own the covered bond, and the price the fund would receive upon sale of such a
bond would not benefit from the insurance. Insurers under master portfolio
insurance policies currently include MBIA Insurance Corp., Ambac Assurance
Corporation, Financial Security Assurance, Inc. and Financial Guaranty Insurance
Company. The fund's investment adviser may obtain master policies from other
insurers, but only from insurers that specialize in insuring municipal bonds and
whose claims-paying ability is rated Aaa or AAA by Moody's or S&P. Insurers are
responsible for making their own assessment of the insurability of a municipal
bond.
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. These bonds are normally regarded as having the credit
characteristics of the underlying U.S. Government-backed securities.
14 Section 2 How We Manage Your Money
<PAGE>
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. If the funds invest in taxable
securities, they may not achieve their investment objective. 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. These transactions involve an element of risk
because the value of the security to be purchased may decline before the
settlement date.
How We Select Investments
Nuveen Advisory selects municipal bonds 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 bonds
with favorable characteristics we believe are not yet recognized by the market.
We then select those higher-yielding and undervalued municipal bonds 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: Because the funds invest in fixed-income securities, the
funds are subject to interest rate risk. Interest rate risk is the risk that the
value of a fund's portfolio will decline because of rising interest rates.
Section 2 How We Manage Your Money 15
<PAGE>
Interest rate risk is generally lower for shorter-term investments and higher
for longer-term investments.
Income risk: The risk that the income from a 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: Each fund is subject to credit risk. Credit risk is the risk that
an issuer of a municipal bond will be unable to meet its obligation to make
interest and principal payments due to changing financial or market conditions,
or possibly due to Year 2000 issues.
Inflation risk: The risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the fund's assets can decline as can the value
of the fund's 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.
The Insured Fund also limits investment risk by primarily buying insured
municipal bonds.
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 of any one issuer (except for U.S. Government securities or
for 25% of each 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 Nuveen Advisory's opinion, correlate with the prices
of the funds' investments. The funds, however, have no present intent to use
these strategies.
16 Section 2 How We Manage Your Money
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer 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
services for your convenience. Please see the Statement of Additional
Information for further details.
What Share Classes We Offer
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.
Nuveen retains the up-front sales charge and the service fee on accounts with no
authorized dealer of record. The up-front Class A sales charge for Municipal
Bond Fund, Insured Municipal Bond Fund, and 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 -- 1.00%1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The up-front Class A sales charge for the Intermediate 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 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/ -- 0.75%/1/
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Section 3 How You Can Buy and Sell Shares 17
<PAGE>
The up-front Class A sales charge for the Limited Term Fund is as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 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/ -- 0.50%/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. Nuveen
retains the service and distribution fees on accounts with no authorized dealer
of record. 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 normally 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 Class B shares.
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.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
CDSC 5% 4% 4% 3% 2% 1%
- --------------------------------------------------------------------------------
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 .75% (.55% for the Limited Term Fund). The annual .20% service
fee compensates your financial adviser for providing ongoing service to you.
Nuveen retains the service and distribution fees on accounts with no authorized
dealer of record. The annual .55% (.35% for the Limited Term Fund) distribution
fee reimburses Nuveen for paying your
18 Section 3 How You can Buy and Sell Shares
<PAGE>
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 will normally have to pay a 1% CDSC based on your purchase or sale
price, whichever is lower. You do not pay a CDSC on any Class C shares you
purchase by reinvesting dividends.
Class R Shares
You may purchase Class R shares only under limited circumstances, 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.
<TABLE>
<CAPTION>
Class A Sales Charge Class A Sales Charge Class R Eligibility
Reductions Waivers
<S> <C> <C>
. Rights of accumulation . Nuveen Defined Portfolio or . Certain employees and directors of
Exchange-Traded Fund reinvestment of Nuveen or employees of authorized dealers
. Letter of intent . Certain employees and directors of . Bank trust departments
Nuveen or employees of authorized
dealers
. Group purchase . Bank trust departments
</TABLE>
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 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
Fund shares may be purchased on any business day, which is any day the New York
Stock Exchange is open for business and normally ends at 4 p.m. New York time.
Generally, the Exchange is closed on weekends and national holidays. 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.
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
Section 3 How You Can Buy and Sell Shares 19
<PAGE>
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 on-going basis to help assure your investments continue to
meet your needs as circumstances change. Financial advisers are paid for on-
going investment advice and services either from fund sales charges and fees or
by charging you a separate fee in lieu of a sales charge. 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, Bowling Green Station, New York, NY 10274-5186. No third party
checks will be accepted.
Investment Minimums
The minimum initial investment is $3,000 ($50 if you establish a systematic
investment plan). Subsequent investments must be in amounts of $50 or more. The
funds reserve the right to reject purchase orders and to waive or increase the
minimum investment requirements.
Systematic Investing
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.
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.
[LINE CHART APPEARS HERE]
20 Section 3 How You Can Buy and Sell Shares
<PAGE>
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 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.
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Special Services
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for an appropriate 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 have to pay a sales charge when exchanging shares
that you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
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.
The funds may change or cancel their exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax adviser about
the tax consequences of exchanging your shares.
Section 3 How You Can Buy and Sell Shares 21
<PAGE>
Fund Direct(SM)
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts, and perform a
variety of account transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may 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.
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.
How to Sell Shares
You may sell (redeem) your shares on any business day. 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. If you are selling shares purchased
recently with a check, you will not receive your redemption proceeds until your
check has cleared. This may take up to ten business days from your purchase
date. While the funds do not charge a redemption fee, you may be assessed a
CDSC, if applicable. When you redeem Class A, Class B, or Class C shares subject
to a CDSC, the fund will first redeem any shares that are not subject to a CDSC
or that represent an increase in the value of your fund account due to capital
appreciation, and then redeem the shares you have owned for the longest period
of time, unless you ask the fund to redeem your shares in a different order. No
CDSC is imposed on shares you buy through the reinvestment of dividends and
capital gains. The holding period is calculated on a monthly basis and begins on
the first day of the month in which you buy shares. When you redeem shares
subject to a CDSC, the CDSC is calculated on the lower of your purchase price or
redemption proceeds, deducted from your redemption proceeds, and paid to Nuveen.
The CDSC may be waived under certain special circumstances as described in the
Statement of Additional Information.
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 calling (800) 257-8787. Telephone redemptions are not available if you
own shares in certificate form and may not exceed $50,000. Checks will only be
issued to you as the shareholder of record and mailed to your address of record.
If you have established Fund Direct privileges, you may have redemption proceeds
transferred electronically to your bank account. We will normally mail your
check the next business day.
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also you
should verify your trade confirmations immediately upon receipt.
22 Section 3 How You Can Buy and Sell Shares
<PAGE>
By Mail
You can sell your shares at any time by sending a written request to the
appropriate fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green
Station, 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. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
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.
Redemptions In-Kind
The funds generally pay redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the funds may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
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 Defined Portfolio reinvestment account. You will not be assessed a CDSC
on an involuntary redemption.
Section 3 How You Can Buy and Sell Shares 23
<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.
Dividends, Distributions and Taxes
The funds pay tax-free dividends monthly. In the very unlikely event that the
funds realize capital gains or ordinary income subject to regular federal income
tax, the funds will pay 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 primarily 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 very unlikely, the funds, from time to time, may distribute taxable
income or capital gains. 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 that you were paid during the prior year. If
you hold your investment at the firm where you purchased your fund shares, you
will receive the statement from that firm. If you hold your shares directly at
the fund, Nuveen will send you the statement. The tax status of your dividends
is not affected by whether you reinvest your dividends or elect to receive them
in cash.
If you receive social security or railroad retirement benefits, you should
consult your tax adviser about how an investment in the fund may affect the
federal taxation of your benefits.
24 Section 4 General Information
<PAGE>
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires the fund to
withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax adviser for
more information about taxes.
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 federal 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 federal tax-free
yields and tax rates:
<TABLE>
<CAPTION>
Taxable Equivalent Of Tax-Free Yields
- -----------------------------------------------------------------------------
Tax-Free Yield
<S> <C> <C> <C> <C> <C>
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%
- -----------------------------------------------------------------------------
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax adviser.
Distribution and Service Plans
Nuveen 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" 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 on-going account services to shareholders. These services
may include establishing and
Section 4 General Information 25
<PAGE>
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, and 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.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in
connection with sales meetings, seminars, prospecting seminars and other events
at which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of
advertising that features the products and services of both parties. The
Statement of Additional Information contains further information about these
programs.
Net Asset Value
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. New
York time) on each day the New York Stock Exchange is open for business. Net
asset value is calculated for each class by taking the market 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. 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.
26 Section 4 General Information
<PAGE>
Year 2000
The funds' service providers rely on computer systems to manage the fund's
investments, process shareholder transactions and provide shareholder account
maintenance. Because of the way computers historically have stored dates, some
of these systems currently may not be able to correctly process activity
occurring in the year 2000. Nuveen is working with the funds' service providers
to adapt their systems to address this issue. Nuveen and the funds expect that
the necessary work will be completed on a timely basis, although there can be no
assurance of this.
Year 2000 issues may affect the ability of issuers to meet their interest and
principal payment obligations to their bond holders, and may adversely affect
the bonds' credit ratings and values. Municipal issuers may have greater Year
2000 risks than other issuers. Nuveen Advisory is requesting information from
municipal issuers so that Nuveen Advisory can take the issuers' Year 2000
readiness, if made available, into account in making investment decisions. There
can be no assurance that issuers will provide this information to Nuveen
Advisory, or that issuers will begin or complete the work necessary to address
any Year 2000 issues on a timely basis. Generally, higher rated fixed-income
securities carry less credit risk than lower rated fixed-income securities.
Section 4 General Information 27
<PAGE>
Section 5 Financial Highlights
The financial highlights table is intended to help you understand a Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in a Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by Arthur Andersen LLP, whose report, along with the Funds'
financial statements, are included in the SAI and annual report, which is
available upon request.
Nuveen Municipal Bond Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions
--------------------------------------- ----------------------------------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net 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)
1999 $9.46 $.45 $ .13 $ .58 $(.45) $(.02) $(.47) $9.57 6.28%
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)
1999 9.46 .38 .13 .51 (.38) (.02) (.40) 9.57 5.49
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)
1999 9.44 .40 .15 .55 (.40) (.02) (.42) 9.57 5.91
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)
1999 9.46 .47 .14 .61 (.47) (.02) (.49) 9.58 6.59
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
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Ending Expenses Income
Net to Average to Average Portfolio
Assets Net Net Turnover
(000) Assets (a) Assets(a) Rate
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (6/95)
1999 $ 120,418 .77% 4.71% 12%
1998 97,029 .80 4.83% 10
1997 (c) 70,331 .77* 5.13* 2
1997 (d) 68,204 .81 5.11 12
1996 (e) 37,089 .83* 5.14* 17
Class B (2/97)
1999 10,086 1.52 3.96 12
1998 4,136 1.56 4.05 10
1997 (c) 468 1.53* 4.39* 2
1997 (e) 43 1.51* 5.23* 12
Class C (6/95)
1999 7,191 1.32 4.15 12
1998 4,886 1.35 4.29 10
1997 (c) 5,360 1.32* 4.58* 2
1997 (d) 5,039 1.54 4.37 12
1996 (e) 1,915 1.58* 4.39* 17
Class R (11/76)
1999 2,834,016 .57 4.90 12
1998 2,818,442 .60 5.04 10
1997 (c) 2,774,648 .57* 5.33* 2
1997 (d) 2,818,214 .57 5.35 12
1996 (d) 2,878,641 .59 5.53 17
1995 (d) 2,741,178 .59 5.79 17
</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.
28 Section 5 Financial Highlights
<PAGE>
Nuveen Insured Municipal Bond Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions
---------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net 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)
1999 $11.03 $.54 $ .16 $ .70 $(.54) $(.03) $(.57) $11.16 6.43%
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)
1999 11.03 .45 .16 .61 (.45) (.03) (.48) 11.16 5.63
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)
1999 10.92 .47 .16 .63 (.47) (.03) (.50) 11.05 5.86
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)
1999 10.98 .56 .15 .71 (.55) (.03) (.58) 11.11 6.62
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
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Net to Average to Average Portfolio
Assets Net Net Turnover
(000) Assets (a) Assets (a) Rate
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (9/94)
1999 $109,986 .81% 4.80% 13%
1998 90,459 .86 4.91 40
1997 (c) 69,291 .84* 5.12* 12
1997 (d) 68,268 .87 5.07 35
1996 (d) 46,943 .91 5.01 27
1995 (e) 14,097 1.00* 5.55* 25
Class B (2/97)
1999 13,602 1.56 4.05 13
1998 4,992 1.61 4.14 40
1997 (c) 488 1.59* 4.36* 12
1997 (e) 228 1.58* 4.84* 35
Class C (9/94)
1999 10,947 1.36 4.25 13
1998 8,037 1.41 4.36 40
1997 (c) 5,615 1.39* 4.57* 12
1997 (d) 5,448 1.61 4.33 35
1996 (d) 5,151 1.63 4.34 27
1995 (e) 3,979 1.75* 4.83* 25
Class R (12/86)
1999 726,228 .62 5.00 13
1998 727,068 .66 5.12 40
1997 (c) 714,622 .64* 5.31* 12
1997 (d) 732,587 .63 5.31 35
1996 (d) 761,936 .63 5.33 27
1995 (d) 736,702 .64 5.67 25
</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.
Section 5 Financial Highlights 29
<PAGE>
Nuveen Flagship All-American Municipal Bond Fund+
<TABLE>
<CAPTION>
Investment Operations Less Distributions
---------------------------------- ------------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net 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 (10/88)
1999 $11.32 $.57 $ .12 $ .69 $(.57) $(.01) $(.58) $11.43 6.23%
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)
1999 11.33 .49 .12 .61 (.49) (.01) (.50) 11.44 5.46
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)
1999 11.31 .51 .12 .63 (.51) (.01) (.52) 11.42 5.69
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)
1999 11.32 .60 .13 .73 (.60) (.01) (.61) 11.44 6.54
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
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Net to Average to Average Portfolio
Assets Net Net Turnover
(000) Assets (a) Assets(a) Rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (10/88)
1999 $312,238 .80% 4.98% 10%
1998 236,691 81 5.27 20
1997 (c) 216,575 .87* 5.54* 39
1996 (d) 207,992 .83 5.60 79
1995 (d) 185,495 .76 6.02 71
1994 (d) 159,867 .62 5.77 81
Class B (2/97)
1999 31,804 1.54 4.23 10
1998 8,706 1.56 4.47 20
1997 (e) 711 1.55* 4.83* 39
Class C (6/93)
1999 80,036 1.35 4.43 10
1998 62,336 1.36 4.72 20
1997 (c) 54,850 1.42* 4.99* 39
1996 (d) 47,314 1.37 5.05 79
1995 (d) 45,242 1.31 5.47 71
1994 (f) 39,997 1.09* 5.16* 81
Class R (2/97)
1999 2,737 .61 5.17 10
1998 4,510 .61 5.42 20
1997 (e) 183 .61* 5.95* 39
</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.
30 Section 5 Financial Highlights
<PAGE>
Nuveen Flagship Intermediate Municipal Bond Fund+
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net 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)
1999 $10.88 $.49 $ .17 $ .66 $(.50) $ (.04) $(.54) $11.00 6.14%
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)
1999 10.89 .43 .18 .61 (.44) (.04) (.48) 11.02 5.66
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)
1999 10.86 .52 .16 .68 (.51) (.04) (.55) 10.99 6.42
1998 10.45 .54 .41 .95 (.54) -- (.54) 10.86 9.17
1997 (e) 10.60 .13 (.15) (.02) (.13) -- (.13) 10.45 (.15)
<CAPTION>
Ratios/Supplemental Data
----------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ended Assets Net Net Turnover
April 30, (000) Assets (a) Assets (a) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (9/92)
1999 $51,773 .84% 4.46% 23%
1998 42,339 .79 4.76 20
1997 (c) 40,906 .68* 4.96* 26
1996 (d) 46,742 .62 4.86 81
1995 (d) 42,069 .54 5.15 102
1994 (d) 35,891 .40 4.93 69
Class C (12/95)
1999 9,855 1.36 3.91 23
1998 3,533 1.34 4.20 20
1997 (c) 2,540 1.23* 4.38* 26
1996 (f) 1,187 1.13* 4.28* 81
Class R (2/97)
1999 707 .64 4.66 23
1998 602 .59 4.95 20
1997 (e) 469 .40* 5.40* 26
- ------------------------------------------------------------------------------------------------------------------------------------
</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.
Section 5 Financial Highlights 31
<PAGE>
Nuveen Flagship Limited Term Municipal Bond Fund+
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net 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)
1999 $10.80 $.49 $ .10 $ .59 $(.50) $ -- (.50) $10.89 5.57%
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)
1999 10.79 .45 .10 .55 (.47) -- (.47) 10.87 5.13
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)
1999 10.78 .51 .11 .62 (.53) -- (.53) 10.87 5.81
1998 10.59 .53 .19 .72 (.53) -- (.53) 10.78 6.87
1997 (e) 10.73 .12 (.13) (.01) (.13) -- (.13) 10.59 (.09)
<CAPTION>
Ratios/Supplemental Data
----------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ended Assets Net Net Turnover
April 30, (000) Assets (a) Assets (a) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (10/87)
1999 $456,171 .77% 4.45% 16%
1998 438,134 .77 4.70 30
1997 (c) 425,401 .80* 4.76* 29
1996 (d) 489,157 .79 4.77 39
1995 (d) 569,196 .74 4.88 20
1994 (d) 704,627 .70 4.76 22
Class C (12/95)
1999 88,044 1.12 4.09 16
1998 33,952 1.12 4.35 30
1997 (c) 23,551 1.11* 4.44* 29
1996 (f) 15,415 1.19* 4.17* 39
Class R (2/97)
1999 1,173 .57 4.64 16
1998 701 .59 4.86 30
1997 (e) 40 .55* 5.07* 29
- ------------------------------------------------------------------------------------------------------------------------------------
</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.
32 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
Dividend and Growth Fund
Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
High Yield
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
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. Additional
information about the Funds' investments is available in the Funds' annual and
semi-annual report to shareholders. In the Funds' annual reports, you will find
a discussion of the market conditions and investment strategies that
significantly affected the Funds' performance during their last fiscal year.
Call Nuveen at (800) 257-8787 to request a free copy of any of these materials
or other fund information; or ask your financial adviser for copies.
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. The funds'
Investment Company file number is 811-07873.
1. Long-term and insured long-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
August 27, 1999
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 27, 1999. 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-18
Investment Adviser and Investment Management Agreement..................... S-26
Portfolio Transactions..................................................... S-27
Net Asset Value............................................................ S-28
Tax Matters................................................................ S-29
Performance Information.................................................... S-33
Additional Information on the Purchase and Redemption of Fund Shares....... S-41
Distribution and Service Plan.............................................. S-49
Independent Public Accountants and Custodian............................... S-50
Financial Statements....................................................... S-50
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Description of Hedging Techniques.............................. B-1
</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 six series: the
Nuveen Municipal Bond Fund (originally incorporated in Maryland on October 8,
1976 and reorganized as a Massachusetts business trust on June 12, 1995); the
Nuveen Insured Municipal Bond Fund (formerly a series of the Nuveen Insured
Tax-Free Bond Fund, Inc., a Minnesota corporation incorporated on July 14,
1986); the Nuveen Flagship All-American Municipal Bond Fund (formerly
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the Flagship All-American Tax Exempt Fund, a series of the Flagship Tax Exempt
Funds Trust); the Nuveen Flagship Intermediate Municipal Bond Fund (formerly
the Flagship Intermediate Tax Exempt Fund, a series of the Flagship Tax Exempt
Funds Trust); 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); and the Nuveen High Yield Municipal Bond Fund. The Nuveen High
Yield Municipal Bond Fund is not included in this Statement of Additional
Information. 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
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Advisory has determined that the issuer has a strong incentive to continue
making appropriations and timely payment until the security's maturity. Some
lease obligations may be illiquid under certain circumstances. Lease
obligations normally provide a premium interest rate which along with regular
amortization of the principal may make them attractive for a portion of the
assets of the Funds.
Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
the laws enacted in the future by Congress, state legislatures or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its Municipal Obligations may be materially affected.
Year 2000 Issues
The "Year 2000" problem refers to the fact that many computer programs use
only the last two digits of a year, and do not recognize a year that begins
with "20" instead of "19." If this problem is not corrected, computers could
function improperly or not at all, which could affect the global economy. The
SEC has urged securities issuers to disclose the steps they are taking to
correct any Year 2000 problems.
The Funds invest primarily in municipal securities. If municipal issuers do
not correct any Year 2000 problems in a timely manner, they could experience
problems in conducting their operations or in making payments on their
securities, which could cause the value of these securities to decline.
Municipal issuers could experience three types of Year 2000 problems. First, if
an issuer's internal computer systems experience Year 2000 problems, this could
disrupt an issuer's operations (such as its ability to collect local taxes or
fees). Second, an issuer may rely on other parties for the payments that
support its debt service, such as servicers that collect mortgage or student
loan payments, and those third parties may have Year 2000 problems that
interfere with their ability to forward payments to the issuer. Third, an
issuer may have mechanical problems in sending payments to its securities
holders.
Nuveen Advisory is obtaining information about the Year 2000 readiness of the
issuers of its portfolio securities as part of its ongoing surveillance of the
creditworthiness of those issuers.
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
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rating if the ratings were based primarily upon the credit characteristics of
the issuer without regard to the insurance feature. By way or contrast, the
ratings, if any, assigned to Municipal Obligations insured under Portfolio
Insurance will be based primarily upon the credit characteristics of the
issuers without regard to the insurance feature, and will generally carry a
rating that is below Aaa or AAA. While in the portfolio of the Fund, however, a
Municipal Obligation backed by Portfolio Insurance will effectively be of the
same quality as a Municipal Obligation issued by an issuer of comparable credit
characteristics that is backed by Original Issue Insurance or Secondary Market
Insurance.
The Fund's policy of investing in Municipal Obligations insured by insurers
whose claims-paying ability is rated Aaa or AAA will apply only at the time of
the purchase of a security, and a Fund will not be required to dispose of
securities in the event Moody's or S&P, as the case may be, downgrades its
assessment of the claims-paying ability of a particular insurer or the credit
characteristics of a particular issuer. In this connection, it should be noted
that in the event Moody's or S&P or both should down-grade its assessment of
the claims-paying ability of a particular insurer, it could also be expected to
downgrade the ratings assigned to Municipal Obligations insured under Original
Issue Insurance or Secondary Market Insurance issued by such insurer, and
Municipal Obligations insured under Portfolio Insurance issued by such insurer
would also be of reduced quality in the portfolio of the Fund. Moody's and S&P
continually assess the claims-paying ability of insurers and the credit
characteristics of issuers, and there can be no assurance that they will not
downgrade their assessments subsequent to the time the Fund purchases
securities.
In addition to insured Municipal Obligations, the Fund may invest in
Municipal Obligations that are entitled to the benefit of an escrow or trust
account which contains securities issued or guaranteed by the U.S. Government
or U.S. Government agencies, backed by the full faith and credit of the United
States, and sufficient in amount to ensure the payment of interest and
principal on the original interest payment and maturity dates ("collateralized
obligations"). These collateralized obligations generally will not be insured
and will include, but are not limited to, Municipal Obligations that have been
(1) advance refunded where the proceeds of the refunding have been used to
purchase U.S. Government or U.S. Government agency securities that are placed
in escrow and whose interest or maturing principal payments, or both, are
sufficient to cover the remaining scheduled debt service on the Municipal
Obligations, and (2) issued under state or local housing finance programs which
use the issuance proceeds to fund mortgages that are then exchanged for U.S.
Government or U.S. Government agency securities and deposited with a trustee as
security for the Municipal Obligations. These collateralized obligations are
normally regarded as having the credit characteristics of the underlying U.S.
Government or U.S. Government agency securities. Collateralized obligations
will not constitute more than 20% of the Fund's assets.
Each insured Municipal Obligation in which the Fund invests will be covered
by Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
There is no limitation on the percentage of the Fund's assets that may be
invested in Municipal Obligations insured by any given insurer.
Original Issue Insurance. Original Issue Insurance is purchased with respect
to a particular issue of Municipal Obligations by the issuer thereof or a third
party in conjunction with the original issuance of such Municipal Obligations.
Under such insurance, the insurer unconditionally guarantees to the holder of
the Municipal Obligation the timely payment of principal and interest on such
obligation when and as such payments shall become due but shall not be paid by
the issuer, except that in the event of any acceleration of the due date of the
principal by reason of mandatory or 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
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an accelerated basis, the payment of any redemption premium (except with
respect to certain premium payments in the case of certain small issue
industrial development and pollution control Municipal Obligations), the value
of the shares of the Fund, the market value of Municipal Obligations, or
payments of any tender purchase price upon the tender of the Municipal
Obligations. Original Issue Insurance also does not insure against nonpayment
of principal of or interest on Municipal Obligations resulting from the
insolvency, negligence or any other act or omission of the trustee or other
paying agent for such obligations.
In the event that interest on or principal of a Municipal Obligation covered
by insurance is due for payment but is unpaid by the issuer thereof, the
applicable insurer will make payments to its fiscal agent (the "Fiscal Agent")
equal to such unpaid amounts of principal and interest not later than one
business day after the insurer has been notified that such nonpayment has
occurred (but not earlier than the date such payment is due). The Fiscal Agent
will disburse to the Fund the amount of principal and interest which is then
due for payment but is unpaid upon receipt by the Fiscal Agent of (i) evidence
of the Fund's right to receive payment of such principal and interest and (ii)
evidence, including any appropriate instruments of assignment, that all of the
rights to payment of such principal or interest then due for payment shall
thereupon vest in the insurer. Upon payment by the insurer of any principal or
interest payments with respect to any Municipal Obligations, the insurer shall
succeed to the rights of the Fund with respect to such payment.
Original Issue Insurance remains in effect as long as the Municipal
Obligations covered thereby remain outstanding and the insurer remains in
business, regardless of whether the Fund ultimately disposes of such Municipal
Obligations. Consequently, Original Issue Insurance may be considered to
represent an element of market value with respect to the Municipal Obligations
so insured, but the exact effect, if any, of this insurance on such market
value cannot be estimated.
Secondary Market Insurance. Subsequent to the time of original issuance of a
Municipal Obligation, the Fund or a third party may, upon the payment of a
single premium, purchase insurance on such Municipal Obligation. Secondary
Market Insurance generally provides the same type of coverage as is provided by
Original Issue Insurance and remains in effect as long as the Municipal
Obligation covered thereby remain outstanding, the holder of such Municipal
Obligation does not voluntarily relinquish the Secondary Market Insurance and
the insurer remains in business, regardless of whether the Fund ultimately
disposes of such Municipal Obligation.
One of the purposes of acquiring Secondary Market Insurance with respect to a
particular Municipal Obligation would be to enable the Fund to enhance the
value of such Municipal Obligation. The Fund, for example, might seek to
purchase a particular Municipal Obligation and obtain Secondary Market
Insurance with respect thereto if, in the opinion of Nuveen Advisory, the
market value of such Municipal Obligation, as insured, would exceed the current
value of the Municipal Obligation without insurance plus the cost of the
Secondary Market Insurance. Similarly, if the Fund owns but wishes to sell a
Municipal Obligation that is then covered by Portfolio Insurance, the Fund
might seek to obtain Secondary Market Insurance with respect thereto if, in the
opinion of Nuveen Advisory, the net proceeds of a sale by the Fund of such
obligation, as insured, would exceed the current value of such obligation plus
the cost of the Secondary Market Insurance.
Portfolio Insurance. Portfolio Insurance guarantees the payment of principal
and interest on specified eligible Municipal Obligations purchased by the Fund.
Except as described below, Portfolio Insurance generally provides the same type
of coverage as is provided by Original Issue Insurance or Secondary Market
Insurance. Municipal Obligations insured under one Portfolio Insurance policy
would generally not be insured under any other policy purchased by the Fund. A
Municipal Obligation is eligible for coverage under a policy if it meets
certain requirements of the insurer. Portfolio Insurance is intended to reduce
financial risk, but the cost thereof and compliance with investment
restrictions imposed under the policy will reduce the yield to shareholders of
the Fund.
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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.
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 the 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
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value of the defaulted security and either its par value or the market value of
securities of a similar nature that are not in default or in significant risk
of default, is more appropriate. To the extent that the Fund holds such
defaulted securities, it may be limited in its ability to manage its investment
portfolio and to purchase other Municipal Obligations. Except as described
above with respect to securities covered by Portfolio Insurance that are in
default or subject to significant risk of default, the Funds will not place any
value on the insurance in valuing the Municipal Obligations that it holds.
Because each Portfolio Insurance policy will terminate as to Municipal
Obligations sold by the Fund on the date of sale, in which event the insurer
will be liable only for those payments of principal and interest that are then
due and owing (unless Permanent Insurance is obtained by the Fund), the
provision for this insurance will not enhance the marketability of securities
held by the Fund, whether or not the securities are in default or in
significant risk of default. On the other hand, since Original Issue Insurance
and Secondary Market Insurance generally will remain in effect as long as
Municipal Obligations covered thereby are outstanding, such insurance may
enhance the marketability of such securities, even when such securities are in
default or in significant risk of default, but the exact effect, if any, on
marketability cannot be estimated. Accordingly, the Funds may determine to
retain or, alternatively, to sell Municipal Obligations covered by Original
Issue Insurance or Secondary Market Insurance that are in default or in
significant risk of default.
Premiums for a Portfolio Insurance policy are paid monthly, and are adjusted
for purchases and sales of Municipal Obligations covered by the policy during
the month. The yield on the Fund is reduced to the extent of the insurance
premiums it pays. Depending upon the characteristics of the Municipal
Obligations held by the Fund, the annual premium rate for policies of Portfolio
Insurance is estimated to range from .15% to .30% of the value of the Municipal
Obligations covered under the policy. Because the majority of the Municipal
Obligations in the Fund were not covered by policies of Portfolio Insurance
during the year ended April 30, 1999, 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 $3,573,000,000 (unaudited) and
statutory capital of approximately $2,139,000,000 (unaudited) as of June 30,
1999. 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, 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".
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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 a wholly owned subsidiary
of Financial Security Assurance Holdings Ltd. ("Holdings"), a New York Stock
Exchange listed company. Major shareholders of Holdings include White Mountains
Insurance Group, Inc., XL Capital Ltd., MediaOne 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 June 30, 1999, 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 $1,107,636,000
(audited) and $621,693,000 (audited), the total shareholders' equity and the
total net unearned premium reserve, respectively, of Financial Security and its
consolidated subsidiaries were, in accordance with generally accepted
accounting principles, approximately $1,137,952,000 (audited) and $520,986,000
(audited). 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.
MBIA Insurance Corporation ("MBIA")
The Insurer is the principal operating subsidiary of MBIA Inc., a New York
Stock Exchange listed company (the "Company"). The Company 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, 1998 the Insurer had admitted assets of $6.5 billion
(audited), total liabilities of $4.2 billion (audited), and total capital and
surplus of $2.3 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of March 31, 1999, the Insurer had admitted assets of $6.7
billion (unaudited), total liabilities of $4.4 billion (unaudited), and total
capital and surplus of $2.3 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 the Company 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
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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 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
S-11
<PAGE>
portion of the principal of and interest on the Insured Bonds which shall
become due for payment but shall be unpaid by reason of nonpayment by the
issuer of the Insured Bonds. The term "due for payment" means, when referring
to the principal of an Insured Bond, its stated maturity date or the date on
which it shall have been called for mandatory sinking fund redemption and does
not refer to any earlier date on which payment is due by reason of call for
redemption (other than by mandatory sinking fund redemption), acceleration or
other advancement of maturity and means, when referring to interest on an
Insured Bond, the stated date for payment of interest. In addition, the
Portfolio Insurance Policy covers nonpayment by the issuer that results from
any payment of principal or interest made by such issuer on the Insured Bond to
the Fund which has been recovered from the Fund or its shareholders pursuant to
the United States Bankruptcy Code by a trustee in bankruptcy in accordance with
a final, nonappealable order of a court having competent jurisdiction.
Financial Guaranty will make such payments to the Fiscal Agent on the date
such principal or interest becomes due for payment or on the business day next
following the day on which Financial Guaranty shall have received notice of
nonpayment, whichever is later. The Fiscal Agent will disburse the Trustee the
face amount of principal and interest which is then due for payment but is
unpaid by reason of nonpayment by the issuer, but only upon receipt by the
Fiscal Agent of (i) evidence of the Trustee's right to receive payment of the
principal or interest due for payment and (ii) evidence, including any
appropriate instruments of assignment, that all of the rights to payment of
such principal or interest due for payment thereupon shall vest in Financial
Guaranty. Upon such disbursement, Financial Guaranty shall become the owner of
the Insured Bond, appurtenant coupon or right to payment of principal or
interest on such Insured Bond and shall be fully subrogated to all of the
Trustee's rights thereunder, including the right to payment, thereof.
In determining whether to insure municipal securities held in the Fund,
Financial Guaranty will apply its own standards which are not necessarily the
same as the criteria used in regard to the selection of securities by the Fund.
Certain of the municipal securities insured under the Portfolio Insurance
Policy may also be insured under an insurance policy obtained by the issuer of
such municipal securities. The premium for any insurance policy or policies
obtained by an issuer or Insured Bonds has been paid in advance by such issuer
and any such policy or policies are non-cancellable and will continue in force
so long as the Insured Bonds so insured are outstanding. Financial Guaranty has
also agreed, if requested by the Funds on or before the fifth day preceding the
1st day of any month, to insure to maturity Insured Bonds sold by the Trustee
during the month immediately following such request of the Fund. 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 ("GE Capital"). Neither the Corporation
nor GE Capital is obligated to pay the debts of or the claims against Financial
Guaranty. 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, 1999, the total capital and surplus of
Financial Guaranty was $1,274,619,558. 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).
S-12
<PAGE>
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 Funds or the Board of Trustees of
the Funds.
The above municipal bond insurers have insurance claims-paying ability
ratings of AAA from S&P and Aaa from Moody's. Financial Guaranty also has an
insurance claims-paying ability rating of AAA from Fitch.
An S&P insurance claims-paying ability rating is an assessment of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with its terms. An insurer with an insurance
claims-paying ability rating of AAA has the highest rating assigned by S&P.
Capacity to honor insurance contracts is adjudged by S&P to be extremely strong
and highly likely to remain so over a long period of time. A Moody's insurance
claims-paying ability rating is an opinion of the ability of an insurance
company to repay punctually senior policyholder obligations and claims. An
insurer with an insurance claims-paying ability rating of Aaa is adjudged by
Moody's to be of the best quality. In the opinion of Moody's, the policy
obligations of an insurance company with an insurance claims-paying ability
rating of Aaa carry the smallest degree of credit risk and, while the financial
strength of these companies is likely to change, such changes as can be
visualized are most unlikely to impair the company's fundamentally strong
position.
An insurance claims-paying ability rating by S&P or Moody's does not
constitute an opinion on any specific contract in that such an opinion can only
be rendered upon the review of the specific insurance contract. Furthermore, an
insurance claims-paying ability rating does not take into account deductibles,
surrender or cancellation penalties or the timeliness of payment, nor does it
address the ability of a company to meet nonpolicy obligations (i.e., debt
contracts).
The assignment of ratings by S&P or Moody's to debt issues that are fully or
partially supported by insurance policies, contracts or guarantees is a
separate process form the determination of claims-paying ability ratings. The
likelihood of a timely flow of funds from the insurer to the trustee for the
bondholders is a key element in the rating determination for such debt issues.
S&P's and Moody's ratings are not recommendations to buy, sell or hold the
Municipal Obligations insured by policies issued by Ambac 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
S-13
<PAGE>
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 1998 and 1999 fiscal
year-end of each Fund as indicated, were
<TABLE>
<CAPTION>
Fiscal
Year
---------
1998 1999
---- ----
<S> <C> <C>
Nuveen Municipal Bond Fund...................................... 10% 12%
Nuveen Insured Municipal Bond Fund.............................. 40% 13%
Nuveen Flagship All-American Municipal Bond Fund................ 20% 10%
Nuveen Flagship Intermediate Municipal Bond Fund................ 20% 23%
Nuveen Flagship Limited Term Municipal Bond Fund................ 30% 16%
</TABLE>
When-issued or Delayed-Delivery 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
S-14
<PAGE>
various market environments to partially hedge the portfolio against
fluctuations in market value due to interest rate fluctuations by investment in
financial futures and index futures as well as related put and call options on
such instruments. Both parties entering into an index or financial futures
contract are required to post an initial deposit of 1% to 5% of the total
contract price. Typically, option holders enter into offsetting closing
transactions to enable settlement in cash rather than take delivery of the
position in the future of the underlying security. Each Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series' portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit. Finally, the potential daily deposit requirements in
futures contracts create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost of the initial
premium. Losses due to hedging transactions will reduce yield. Net gains, if
any, from hedging and other portfolio transactions will be distributed as
taxable distributions to shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and
deposits would exceed 5% of such series' net assets. Each series will invest in
these instruments only in markets believed by the investment adviser to be
active and sufficiently liquid. For further information regarding these
investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, including up to 5% in adequately collateralized
repurchase agreements relating thereto. Interest on each instrument is taxable
for Federal income tax purposes and would reduce the amount of tax-free
interest payable to shareholders.
Temporary Investments
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable "temporary investments."
Temporary investments will not exceed 20% of a Fund's assets except when made
for defensive purposes. The Funds will invest only in taxable temporary
investments that are either U.S. Government securities or are rated within the
highest grade by Moody's, S&P, or Fitch and mature within one year from the
date of purchase or carry a variable or floating rate of interest. See Appendix
A for more information about ratings by Moody's, S&P, and Fitch.
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.
S-15
<PAGE>
Tax anticipation notes are usually general obligations of the issuer. A
weakness in an issuer's capacity to raise taxes due to, among other things,
a decline in its tax base or a rise in delinquencies, could adversely
affect the issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or
governmental bodies with the expectation that future revenues from a
designated source will be used to repay the notes. In general, they also
constitute general obligations of the issuer. A decline in the receipt of
projected revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its
obligations on outstanding RANs. In addition, the possibility that the
revenues would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained
from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as
those described above to commercial banks as evidence of borrowings. The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These
notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities
and their agencies. Payment of principal and interest on issues of
municipal paper may be made from various sources, to the extent the funds
are available therefrom. Maturities of municipal paper generally will be
shorter than the maturities of TANs, BANs or RANs. There is a limited
secondary market for issues of municipal paper.
Certain Municipal Obligations may carry variable or floating rates of
interest whereby the rate of interest is not fixed, but varies with changes in
specified market rates or indices, such as a bank prime rate or a tax-exempt
money market index.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the
extent permitted under its investment objective, policies and limitations. Such
notes may be issued for different purposes and may be secured differently from
those mentioned above.
The Funds may also invest in the following taxable temporary investments:
U.S. Government Direct Obligations are issued by the United States
Treasury and include bills, notes and bonds.
--Treasury bills are issued with maturities of up to one year. They are
issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
--Treasury notes are longer-term interest bearing obligations with
original maturities of one to seven years.
--Treasury bonds are longer-term interest-bearing obligations with
original maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been
established as instrumentalities of the United States Government to supervise
and finance certain types of activities. These agencies include, but are not
limited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association,
S-16
<PAGE>
Export-Import Bank of the United States, and Tennessee Valley Authority. Issues
of these agencies, while not direct obligations of the United States
Government, are either backed by the full faith and credit of the United States
or are guaranteed by the Treasury or supported by the issuing agencies' right
to borrow from the Treasury. There can be no assurance that the United States
Government itself will pay interest and principal on securities as to which it
is not legally so obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable
interest bearing instrument with a specific maturity. CDs are issued by banks
in exchange for the deposit of funds and normally can be traded in the
secondary market, prior to maturity. The Fund will only invest in U.S. dollar
denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few days to nine months. Commercial paper may be purchased from
U.S. corporations.
Other Corporate Obligations--The Funds may purchase notes, bonds and
debentures issued by corporations if at the time of purchase there is less than
one year remaining until maturity or if they carry a variable or floating rate
of interest.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. Government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during a Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Funds will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the
opinion of Nuveen Advisory present minimal credit risk. The risk to the Funds
is limited to the ability of the issuer to pay the agreed-upon repurchase price
on the delivery date; however, although the value of the underlying collateral
at the time the transaction is entered into always equals or exceeds the
agreed-upon repurchase price, if the value of the collateral declines there is
a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but a Fund might incur a loss if the value of the
collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by a Fund may be delayed or limited. Nuveen
Advisory will monitor the value of collateral at the time the transaction is
entered into and at all times subsequent during the term of the repurchase
agreement in an effort to determine that the value always equals or exceeds the
agreed upon price. In the event the value of the collateral declined below the
repurchase price, Nuveen Advisory will demand additional collateral from the
issuer to increase the value of the collateral to at least that of the
repurchase price. Each of the Funds will not invest more than 10% of its assets
in repurchase agreements maturing in more than seven days.
S-17
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Funds under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has seven
trustees, one of whom is an "interested person" (as the term "interested
person" 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>
Date of Positions and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
- ------------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger* 3/28/49 Chairman of the Board Chairman since July 1,
333 West Wacker Drive and President 1996 of The John Nuveen
Chicago, IL 60606 Trustee 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 and John Nuveen
& Co. Incorporated;
Director of Nuveen
Advisory Corp. (since
1992) and Nuveen
Institutional Advisory
Corp.; Chairman and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Director (since 1996) of
Institutional Capital
Corporation; Chairman
and Director of
Rittenhouse Financial
Services Inc. (since
1999).
- ------------------------------------------------------------------------------------
Robert P. Bremner 8/22/40 Trustee Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
- ------------------------------------------------------------------------------------
Lawrence H. Brown 7/29/34 Trustee Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company.
- ------------------------------------------------------------------------------------
Anne E. Impellizzeri 1/26/33 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 4/3/33 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 9/24/44 Trustee Senior Partner and Chief
4000 Miller-Valentine Ct. Operating Officer,
P.O. Box 744 Miller-Valentine
Dayton, OH 45401 Partners; Vice
President, Miller-
Valentine Group, a
development and contract
company; Member
Community Advisory
Board, National City
Bank, Dayton, Ohio.
</TABLE>
S-18
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Date of Positions and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Judith M. Stockdale 12/29/47 Trustee Executive Director, Gaylord
35 E. Wacker Drive and Dorothy Donnelley
Suite 2600 Foundation (since 1994);
Chicago, IL 60601 prior thereto, Executive
Director, Great Lakes
Protection Fund (from 1990
to 1994).
- -------------------------------------------------------------------------------
Alan G. Berkshire 12/28/60 Vice President and Vice President and General
333 West Wacker Drive Assistant Secretary Counsel (since September
Chicago, IL 60606 1997) and Secretary (since
May 1998) of The John
Nuveen Company and John
Nuveen & Co. Incorporated;
Vice President (since Sept.
1997) and Assistant
Secretary (since July 1999)
of Nuveen Advisory Corp.
and Nuveen Institutional
Advisory Corp., prior
thereto, Partner in the law
firm of Kirkland & Ellis.
- -------------------------------------------------------------------------------
Peter H. D'Arrigo 11/28/67 Vice President and Vice President of John
333 West Wacker Drive Treasurer Nuveen & Co. Incorporated
Chicago, IL 60606 (since January 1999), prior
thereto, Assistant Vice
President (from January
1997); formerly, Associate
of John Nuveen & Co.
Incorporated; Chartered
Financial Analyst.
- -------------------------------------------------------------------------------
Michael S. Davern 6/26/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President and
Portfolio Manager (since
September 1991) of Flagship
Financial.
- -------------------------------------------------------------------------------
Lorna C. Ferguson 10/24/45 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co. Incorporated;
Chicago, IL 60606 Vice President (since
January 1998) of Nuveen
Advisory Corp. and Nuveen
Institutional Advisory
Corp.
- -------------------------------------------------------------------------------
William M. Fitzgerald 3/2/64 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 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 5/31/54 Vice President and Vice President of John
333 West Wacker Drive Controller Nuveen & Co. Incorporated
Chicago, IL 60606 and (since May 1998) The
John Nuveen Company;
Certified Public
Accountant.
- -------------------------------------------------------------------------------
J. Thomas Futrell 7/5/55 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.; Chartered
Chicago, IL 60606 Financial Analyst.
- -------------------------------------------------------------------------------
Richard A. Huber 3/26/63 Vice President Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory Corp.
(since January 1997); prior
thereto, Vice President and
Portfolio Manager of
Flagship Financial, Inc.
</TABLE>
S-19
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Date of Positions and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Steven J. Krupa 8/21/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Larry W. Martin 7/27/51 Vice President and Vice President, Assistant
333 West Wacker Drive Assistant Secretary Secretary and Assistant
Chicago, IL 60606 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.; Assistant
Secretary of The John
Nuveen Company and (since
January 1997) Nuveen Asset
Management Inc.
- -------------------------------------------------------------------------------
Edward F. Neild, IV 7/7/65 Vice President Vice President (since
333 West Wacker Drive September 1996),
Chicago, IL 60606 previously Assistant Vice
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; Chartered
Financial Analyst.
- -------------------------------------------------------------------------------
Stephen S. Peterson 9/20/57 Vice President Vice President (since
333 West Wacker Drive September 1997),
Chicago, IL 60606 previously Assistant Vice
President (since September
1996) Portfolio Manager
prior thereto of Nuveen
Advisory Corp., Chartered
Financial Analyst.
- -------------------------------------------------------------------------------
Stuart W. Rogers 5/1/56 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 7/31/51 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory
Corp.; Chartered Financial
Analyst.
- -------------------------------------------------------------------------------
William S. Swanson 7/20/65 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co. Incorporated
Chicago, IL 60606 (since October 1997),
prior thereto, Assistant
Vice President (since
September 1996); formerly,
Associate of John Nuveen &
Co. Incorporated;
Chartered Financial
Analyst.
- -------------------------------------------------------------------------------
Gifford R. Zimmerman 9/9/56 Vice President and Vice President, Assistant
333 West Wacker Drive Secretary Secretary and Associate
Chicago, IL 60606 General Counsel formerly
Assistant General Counsel
of John Nuveen & Co.
Incorporated; Vice
President (since May 1993)
and Secretary (since July
1999) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.; Assistant Secretary
of The John Nuveen
Company; Chartered
Financial Analyst.
</TABLE>
S-20
<PAGE>
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
37 Nuveen open-end funds and 55 Nuveen closed-end funds advised by Nuveen
Advisory Corp. None of the independent trustees has ever been a director,
officer, or employee of, or a consultant to, Nuveen Advisory, Nuveen or their
affiliates.
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, 1999. 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 Fund Complex
Name of Trustee Trust Paid to Trustees
--------------- ------------ ----------------
<S> <C> <C>
Robert P. Bremner(1)........................ $14,279 $73,000
Lawrence H. Brown........................... $15,907 $80,000
Anne E. Impellizzeri(2)..................... $14,279 $73,000
Peter R. Sawers(3).......................... $14,333 $73,750
William J. Schneider(4)..................... $14,279 $73,000
Judith M. Stockdale(5)...................... $14,279 $73,500
</TABLE>
- --------
(1) Includes $541 and $15,011 of deferred compensation from the Trust and Fund
Complex, respectively.
(2) Includes $3,608 and $13,261 of deferred compensation from the Trust and
Fund Complex, respectively.
(3) Includes $3,661 and $13,456 of deferred compensation from the Trust and
Fund Complex, respectively.
(4) Includes $3,608 and $13,261 of deferred compensation from the Trust and
Fund Complex, respectively.
(5) Includes $902 and $3,315 of deferred compensation from the Trust and Fund
Complex, respectively.
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 trustees 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 August 2, 1999, owns of record, or is known by Registrant to own of
record or beneficially 5% or more of any class of a Fund's shares.
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<C> <S> <C>
Nuveen Municipal Bond Fund
Class B Shares................ MLPF & S for the Benefit 23.59%
of its customers
Attn: Fund Admn/#97 NB0
4800 Deer Lake Drive E FL
3
Jacksonville, FL 32246-
6484
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<C> <S> <C>
Nuveen Municipal Bond Fund
Class C Shares................ MLPF&S 8.72%
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 7.06
U/A 03/03/94
David W. Elliott Rev Trust
1291 Sunniwood Pl
Rochester MI 48306-2474
Nuveen Insured Municipal Bond
Fund Class B Shares........... MLPF&S for the Benefit of 22.57
its Customers
Attn: Fund Admn/#97GW6
4800 Deer Lake Dr E FL 5
Jacksonville, FL 32246-
6484
Nuveen Flagship All-American
Municipal Bond Fund Class A
Shares........................ Merrill Lynch, Pierce, 36.23
Fenner
& Smith for the sole
benefit
of its Customers
Attn: Fund Admin/#974T2
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-
6484
Nuveen Flagship All-American
Municipal Bond Fund Class B
Shares........................ Merrill Lynch, Pierce, 37.97
Fenner
& Smith for the sole
benefit
of its Customers
Attn: Fund Admin/#97NB8
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-
6484
Nuveen Flagship All-American
Municipal Bond Fund Class C
Shares........................ Merrill Lynch, Pierce, 58.23
Fenner
& Smith for the sole
benefit
of its Customers
Attn: Fund Admin/#97BM0
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-
6484
</TABLE>
S-22
<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 R
Shares........................ Katherine R. Bateman 9.78%
1325 N. State PKW 6E
Chicago, IL 60610
BABB & Co 9.53
c/o Bank of New Hampshire
PO Box 477
Concord, NH 03302-0477
Edna Bennett Pierce 8.42
Edna P. Bennett Rev Trust
1201 Snuff Mill Road
Wilmington, DE 19807-1043
Thomas R. Bendall 5.37
Betty R. Bendall
56 Oak Hollow Cir
Lake Jackson, TX 77566-4211
Carl M. Cotrone & 5.33
Beverly A. Controne TR
UA 11/22/94
W 14296 County Road C
Hancock, WI 54943-8935
Nuveen Flagship Intermediate
Municipal Bond Fund Class A
Shares........................ Merrill Lynch, Pierce, Fenner 27.50
& Smith for the sole benefit
of its Customers
Attn: Fund Admin/#97AF2
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship Intermediate
Municipal Bond Fund Class C
Shares........................ Merrill Lynch, Pierce, Fenner 48.54
& Smith for the sole benefit
of its Customers
Attn: Fund Admin/#97HW3
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
</TABLE>
S-23
<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 R
Shares........................ Patricia G. Diemer 56.27%
Patricia G. Diemer Trust
950 Hawthorne Ln
Northbrook, IL 60062-3417
Merrill Lynch, Pierce, Fenner 8.34
& Smith for the sole benefit
of its Customers
Attn: Fund Admin/#97NE5
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
George P. Anagnos 7.71
Carol D. Holden
3905 Durango Street
Coral Gables, FL 33134
R. G. Van Moppes 7.42
Trst Russell G. Van Moppes Lvg Trust
7530 164th Ave NE STE A-215
Redmond, WA 98052-7809
Walter R. Smith & 5.50
Eileen M. Smith JT Wros Little
Torch Key
37 Bay Ave
East Oriches, NY 11940-1209
PaineWebber for the Benefit of 5.38
Levin Stagman Partnership
Partner
1970 Laver Court
Los Altos, CA 94024-6767
Nuveen Flagship Limited Term
Municipal Bond Fund Class A
Shares........................ Merrill Lynch, Pierce, Fenner 27.41
& Smith for the sole benefit
of its Customers
Attn: Fund Admin/#973N5
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
</TABLE>
S-24
<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 C
Shares........................ Merrill Lynch, Pierce, Fenner 39.80%
& Smith for the sole benefit
of its Customers
Attn: Fund Admin/#97HW4
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship Limited Term
Municipal Bond Fund Class R
Shares........................ Karen M. Bergan 22.49
2109 Northwestern Ave.
Ames, IA 50010-4524
Books & Video Productions Inc. 28.38
Karen Bergan VP
2109 Northwestern Ave.
Ames IA 50010
Daniel A. Franklin 10.87
9462 Hunters Creek Dr
Cincinnati, OH 45242
R. G. Van Moppes 7.34
Trst Russell G. Van Moppes Lvg Trust
7530 164th Ave NE STE A-215
Redmond, WA 98052-7809
MLPF&S for the sole benefit 6.64
of its Customers
Attn: Fund Admin/ #97NE6
4800 Deer Lake Dr E FI 3
Jacksonville, Fl 32246-6484
Donaldson Lufkin Jenrette 6.64
PO Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 5.45
PO Box 2052
Jersey City, NJ 07303-9998
Vicki L. Rice 5.34
Helen V. Richter
3141 Kleeman Rd
Cincinnati, OH 45211-1931
Raymond James & Assoc Inc. 5.00
Elite Acct 12336806
Burton Greer
Burton Greer Trust U/A 08/02/94
367 River Edge Rd
Jupiter, Fl 33477-9350
</TABLE>
S-25
<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 Assets 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 Limited Term Fund has agreed to pay an annual management fee at the rates
set forth below:
<TABLE>
<CAPTION>
Average Daily Net Assets 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 net 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 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 Reimbursements
for the Year Ended For the Year Ended
---------------------------------- ------------------------
2/28/97* 4/30/98 4/30/99 2/28/97* 4/30/98 4/30/99
------------ ---------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Municipal Bond
Fund................... $ 12,969,912 13,208,603 13,391,083 $ 0 0 0
Nuveen Insured Municipal
Bond Fund.............. 3,795,515 3,921,179 4,052,926 0 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-26
<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 Fee Waivers and Expense
Expense Reimbursement Paid Reimbursements
for the Year Ended For the Year Ended
----------------------------- ------------------------
4/30/97* 4/30/98 4/30/99 4/30/97* 4/30/98 4/30/99
--------- --------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
All-American Fund........ $ 948,683 1,429,247 1,754,138 $269,587 0 33,793
Intermediate Fund........ 781 113,797 203,806 216,714 109,859 80,657
Limited Term Fund........ 1,406,439 2,018,209 2,193,990 75,003 0 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. Nuveen is sponsor of
the Nuveen Defined Portfolios, and is the principal underwriter for the Nuveen
Mutual Funds, and has served as co-managing underwriter for the shares of the
Nuveen Exchange-Traded Funds. Over 1,300,000 individuals have invested to date
in Nuveen's funds and Defined Portfolios. 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.
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 is responsible for decisions to buy and sell securities for
the Funds and for the placement of the Funds' securities business, the
negotiation of the prices to be paid for principal trades and the allocation of
its transactions among various dealer firms. 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-27
<PAGE>
The Funds expect that substantially 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 the Funds 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, the Funds' 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-28
<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 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 the difference between the amount of the includible gain and the tax
deemed paid by the shareholder in respect of such shares. 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-29
<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.
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-30
<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 20%, 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-31
<PAGE>
shareholders as ordinary dividend income for federal income tax purposes to the
extent of the Fund's available earnings and profits.
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-32
<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-33
<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, 1999
--------------------------------
Federal Taxable
Yield Tax Rate* Equivalent Yield
----- --------- ----------------
<S> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares....................... 3.93% 39.6% 6.51%
Class B Shares....................... 3.35% 39.6% 5.55%
Class C Shares....................... 3.55% 39.6% 5.88%
Class R Shares....................... 4.30% 39.6% 7.12%
Nuveen Insured Municipal Bond Fund
Class A Shares....................... 3.63% 39.6% 6.01%
Class B Shares....................... 3.04% 39.6% 5.03%
Class C Shares....................... 3.24% 39.6% 5.36%
Class R Shares....................... 4.00% 39.6% 6.62%
Nuveen Flagship All-American Municipal
Bond Fund
Class A Shares....................... 4.25% 39.6% 7.04%
Class B Shares....................... 3.69% 39.6% 6.11%
Class C Shares....................... 3.89% 39.6% 6.44%
Class R Shares....................... 4.64% 39.6% 7.68%
Nuveen Flagship Intermediate Municipal
Bond Fund
Class A Shares....................... 4.01% 39.6% 6.64%
Class C Shares....................... 3.57% 39.6% 5.91%
Class R Shares....................... 4.33% 39.6% 7.17%
Nuveen Flagship Limited Term Municipal
Bond Fund
Class A Shares....................... 3.46% 39.6% 5.73%
Class C Shares....................... 3.20% 39.6% 5.30%
Class R Shares....................... 3.75% 39.6% 6.21%
</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 of Tax-Free 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 Defined Portfolios, or the
maximum public offering price). The distribution rate differs from yield and
total return and therefore is not intended to be a complete measure of
performance. Distribution rate may sometimes differ from yield because a Fund
may
S-34
<PAGE>
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, 1999
Distribution Rates
-------------------------------
Class A Class B Class C Class R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund............... 4.50% 3.95% 4.14% 4.89%
Nuveen Insured Municipal Bond Fund....... 4.64% 4.09% 4.29% 5.02%
Nuveen Flagship All-American Municipal
Bond Fund............................... 4.73% 4.20% 4.41% 5.14%
Nuveen Flagship Intermediate Municipal
Bond Fund............................... 4.23% N/A 3.81% 4.53%
Nuveen Flagship Limited Term Municipal
Bond Fund............................... 4.35% N/A 4.14% 4.69%
</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-35
<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>
S-36
<PAGE>
The Funds' 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, 1999, and for the
period from inception through April 30, 1999, 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,
1999 30, 1999 1999 1999
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares................ 1.86% 6.07% 6.72% 6.79%
Class B Shares................ 1.49% 6.08% 6.60% 6.73%
Class C Shares................ 5.91% 6.29% 6.43% 6.23%
Class R Shares................ 6.59% 7.24% 7.44% 7.26%
Nuveen Insured Municipal Bond
Fund
Class A Shares................ 1.99% 6.29% 7.21% 7.09%
Class B Shares................ 1.63% 6.23% 7.06% 6.97%
Class C Shares................ 5.86% 6.38% 6.86% 6.64%
Class R Shares................ 6.62% 7.37% 7.89% 7.69%
Nuveen Flagship All-American
Municipal Bond Fund
Class A Shares................ 1.74% 6.78% 8.02% 8.09%
Class B Shares................ 1.46% 6.89% 8.02% 8.08%
Class C Shares................ 5.69% 7.13% 7.89% 7.94%
Class R Shares................ 6.54% 7.82% 8.54% 8.59%
Nuveen Flagship Intermediate
Municipal Bond Fund
Class A Shares................ 2.93% 6.19% N/A 6.59%
Class C Shares................ 5.66% 6.29% N/A 6.52%
Class R Shares................ 6.42% 6.90% N/A 7.13%
Nuveen Flagship Limited Term
Municipal Bond Fund
Class A Shares................ 2.90% 4.88% 6.26% 6.29%
Class C Shares................ 5.13% 5.04% 6.18% 6.19%
Class R Shares................ 5.81% 5.47% 6.55% 6.55%
</TABLE>
S-37
<PAGE>
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 Funds' 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, 1999,
and for the period since inception through April 30, 1999, 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,
1999 1999 1999 1999
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Municipal Bond Fund
Class A Shares............... 1.86% 34.25% 91.70% 336.35%
Class B Shares............... 1.49% 34.32% 89.51% 330.94%
Class C Shares............... 5.91% 35.64% 86.56% 287.16%
Class R Shares............... 6.59% 41.81% 105.00% 381.37%
Nuveen Insured Municipal Bond
Fund
Class A Shares............... 1.99% 35.68% 100.66% 133.04%
Class B Shares............... 1.63% 35.26% 97.73% 129.83%
Class C Shares............... 5.86% 36.25% 94.12% 121.35%
Class R Shares............... 6.62% 42.71% 113.72% 149.62%
Nuveen Flagship All-American
Municipal Bond Fund
Class A Shares............... 1.74% 38.84% 116.19% 127.56%
Class B Shares............... 1.46% 39.51% 116.23% 127.46%
Class C Shares............... 5.69% 41.09% 113.74% 124.21%
Class R Shares............... 6.54% 45.70% 127.02% 138.90%
Nuveen Flagship Intermediate
Municipal Bond Fund
Class A Shares............... 2.93% 35.04% N/A 52.61%
Class C Shares............... 5.66% 35.66% N/A 51.91%
Class R Shares............... 6.42% 39.61% N/A 57.77%
Nuveen Flagship Limited Term
Municipal Bond Fund
Class A Shares............... 2.90% 26.92% 83.45% 102.12%
Class C Shares............... 5.13% 27.90% 82.21% 99.88%
Class R Shares............... 5.81% 30.52% 88.65% 107.92%
</TABLE>
S-38
<PAGE>
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 1999, the annual
taxable equivalent total return for the Nuveen Municipal Bond Fund's Class R
Shares for the ten year period ended April 30, 1999, was 11.39%.
Class A Shares of the Funds are sold at net asset value plus a current
maximum sales charge of 4.20% of the offering price (3.0% for the Intermediate
Municipal Bond Fund and 2.5% for the Limited Term Municipal Bond Fund). This
current maximum sales charge will typically be used for purposes of calculating
performance figures. Yield, returns and net asset value of each class of shares
of the Funds will fluctuate. Factors affecting the performance of the Funds
include general market conditions, operating expenses and investment
management. Any additional fees charged by a securities representative or other
financial services firm would reduce returns described in this section. Shares
of the Funds are redeemable at net asset value, which may be more or less than
original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Funds may also compare their performance with that of:
(1) the Consumer Price Index or various unmanaged bond indexes such as the
Lehman Brothers Municipal Bond Index and the Salomon Brothers High Grade
Corporate Bond Index and (2) other fixed income or municipal bond mutual funds
or mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. ("Morningstar"), Wiesenberger Investment
Companies Service ("Wiesenberger") and CDA Investment Technologies, Inc.
("CDA") or similar independent services which monitor the performance of mutual
funds, or other industry or financial publications such as Barron's, Changing
Times, Forbes and Money Magazine. Performance comparisons by these indexes,
services or publications may rank mutual funds over different periods of time
by means of aggregate, average, year-by-year, or other types of total return
and performance figures. Any given performance quotation or performance
comparison should not be considered as representative of the performance of the
Funds for any future period.
Each Fund may from time to time in its advertising and sales materials
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds. These taxable investments
have investment characteristics that differ from those of the Funds. U.S.
Government bonds, for example, are long-term investments backed by the full
faith and credit of the U.S. Government, and bank CDs are generally short-term,
FDIC-insured investments, which pay fixed principal and interest but are
subject to fluctuating rollover rates. Money market funds are short-term
investments with stable net asset values, fluctuating yields and special
features enhancing liquidity.
There are differences and similarities between the investments which the
Funds may purchase and the investments measured by the indexes and reporting
services which are described herein. The Consumer Price Index is generally
considered to be a measure of inflation. The CDA Mutual Fund-Municipal Bond
Index is a weighted performance average of other mutual funds with a federally
tax-exempt income objective. The Salomon
S-39
<PAGE>
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-40
<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 ($50 if you
establish a systematic investment plan) 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, 1999 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.......................................... $9.57
Per Share Sales Charge--4.20% of public offering price (4.39% of
net asset value per share)........................................ .42
-----
Per Share Offering Price to the Public............................. $9.99
</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-41
<PAGE>
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 Defined Portfolio, 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 You Can Buy
and Sell Shares" 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 You
Can Buy and Sell Shares" 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 Defined Portfolio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of a Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required
payment. By establishing a Letter of Intent, you irrevocably appoint Nuveen as
attorney to give instructions to redeem any or all of your escrowed shares,
with full power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Defined Portfolio Distributions. You may purchase
Class A Shares without an up-front sales charge by reinvestment of
distributions from any of the various Defined Portfolios sponsored by Nuveen.
There is no initial or subsequent minimum investment requirement for such
reinvestment purchases.
S-42
<PAGE>
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 Subject to Merger
or Closure. 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 that are subject to
merger or closure. You must provide appropriate documentation that the
redemption occurred not more than one year prior to the reinvestment of the
proceeds in Class A Shares, and that you either paid an up-front sales charge
or were subject to a contingent deferred sales charge in respect of the
redemption of such shares of such other investment company.
Class A Shares of a Fund may be purchased at net asset value without a sales
charge 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;
. 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
S-43
<PAGE>
purchases equal to 1% of the first $2.5 million, plus 0.50% of the next
$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.
Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net asset
value without the imposition of any sales load, fee, or other charge, so that
the value of each shareholder's account immediately before conversion will be
the same as the value of the account immediately after conversion. Class B
Shares acquired through reinvestment of distributions will convert into Class A
Shares based on the date of the initial purchase to which such shares relate.
For this purpose, Class B Shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B Shares in accordance with
such procedures as the Board of Trustees may determine from time to time. Class
B Shares that are converted to Class A Shares will remain subject to an annual
service fee that is identical in amount for both Class B Shares and Class A
Shares. Since net asset value per share of the Class B Shares and the Class A
Shares may differ at the time of conversion, a shareholder may receive more or
fewer Class A Shares than the number of Class B Shares converted. Any
conversion of Class B Shares into Class A Shares will be subject to the
continuing availability of an opinion of counsel or a private letter ruling
from the Internal Revenue Service to the effect that the conversion of shares
would not constitute a taxable event under federal income tax law. Conversion
of Class B Shares into Class A Shares might be suspended if such an opinion or
ruling were no longer available.
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 sibling's
spouse, and a spouse's siblings); or (3) all purchases made through a group
purchase program as described above.
S-44
<PAGE>
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 Defined Portfolios may reinvest their
distributions from such Defined Portfolios in Class R Shares, if, before
September 6, 1994, such purchasers of Nuveen unit investment trusts 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.
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
S-45
<PAGE>
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. 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 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 seven 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; 6) redemptions made pursuant to a Fund's systematic withdrawal
plan, up to 12% of the current market value; and (7) redemptions of Class B or
Class C Shares if the proceeds are transferred to an account managed by another
Nuveen Adviser and the adviser refunds the advanced service and distribution
fees to Nuveen. If a Fund waives or reduces the CDSC, such waiver or reduction
would be uniformly applied to all Fund shares in the particular category. In
waiving or reducing a CDSC, the Funds will comply with the requirements of Rule
22d-1 of the Investment Company Act of 1940, as amended.
General Matters
The Funds may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
tax-free, fixed income securities.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are
expected to sell certain minimum amounts of shares of the Nuveen Mutual Funds
during specified
S-46
<PAGE>
time periods. Promotional support may include providing sales literature to and
holding informational or educational programs for the benefit of such
Authorized Dealers' representatives, seminars for the public, and advertising
and sales campaigns. Nuveen may reimburse a participating Authorized Dealer for
up to one-half of specified media costs incurred in the placement of
advertisements which jointly feature the Authorized Dealer and Nuveen Funds and
Nuveen Defined Portfolios.
Such reimbursement will be based on the number of Nuveen Fund shares sold,
the dollar amounts of such sales, or a combination of the foregoing, during the
prior calendar year according to an established schedule. Any such support or
reimbursement would be provided by Nuveen out of its own assets, and not out of
the assets of the Funds, and will not change the price an investor pays for
shares or the amount that a Fund will receive from such a sale.
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.
The Funds have reserved the right to redeem in kind (that is, to pay
redemption requests in cash and portfolio securities, or wholly in portfolio
securities), although the Funds have no present intention to redeem in kind.
The Funds voluntarily have committed to pay in cash all requests for redemption
by any shareholder, limited as to each shareholder during any ninety-day period
to the lesser of $250,000 or 1% of the net asset value of a Fund at the
beginning of the ninety-day period.
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<PAGE>
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.
A fee of 1% of the current market value of any shares represented by a
certificate will be charged if the certificate is lost, stolen, or destroyed.
The fee is paid to Seaboard Surety Company for insurance of the lost, stolen,
or destroyed certificate.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy 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 30, 1999 ("Distribution Agreement"). Pursuant to the
Distribution Agreement, the Trust appointed Nuveen to be its agent for the
distribution of the Funds' shares on a continuous offering basis. Nuveen sells
shares to or through brokers, dealers, banks or other qualified financial
intermediaries (collectively referred to as "Dealers"), or others, in a manner
consistent with the then effective registration statement of the Trust.
Pursuant to the Distribution Agreement, Nuveen, at its own expense, finances
certain activities incident to the sale and distribution of the Funds' shares,
including printing and distributing of prospectuses and statements of
additional information to other than existing shareholders, the printing and
distributing of sales literature, advertising and payment of compensation and
giving of concessions to Dealers. Nuveen receives for its services the excess,
if any, of the sales price of the Funds' shares less the net asset value of
those shares, and reallows a majority or all of such amounts to the Dealers who
sold the shares; Nuveen may act as such a Dealer. Nuveen also receives
compensation pursuant to a distribution plan adopted by the Trust pursuant to
Rule 12b-1 and described herein under "Distribution and Service Plan." Nuveen
receives any CDSCs imposed on redemptions of Shares.
The aggregate amounts of underwriting commissions with respect to the sale of
Fund shares and the amount thereof retained by Nuveen (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, 1999 April 30, 1998 April 30, 1997*
------------------------ ------------------------ ------------------------
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................... 579 76 738 98 967 170
Nuveen Insured Municipal
Bond Fund.............. 567 66 563 86 687 56
<CAPTION>
Year Ended Year Ended Year Ended
April 30, 1999 April 30, 1998 April 30, 1997**
------------------------ ------------------------ ------------------------
Amount of Amount Amount of Amount Amount of Amount
Underwriting Retained By Underwriting Retained By Underwriting Retained By
Fund Commissions Flagship Commissions Nuveen Commissions Flagship
- ---- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Flagship All-
American Municipal Bond
Fund................... 1,294 67 586 56 456 61
Nuveen Flagship
Intermediate Municipal
Bond Fund.............. 148 25 92 15 73 16
Nuveen Flagship Limited
Term Municipal Bond
Fund................... 624 86 367 10 332 66
</TABLE>
- --------
*For the fourteen-month period ended April 30, 1997.
**For the eleven-month period ended April 30, 1997.
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<PAGE>
DISTRIBUTION AND SERVICE PLAN
The Funds have adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B and Class C Shares under each
Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of Class B and Class C Shares,
respectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of
preparing, printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of Class B and Class C
Shares, certain other expenses associated with the distribution of Class B and
Class C Shares, and any distribution-related expenses that may be authorized
from time to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C
Shares under each Fund's Plan will be payable to Authorized Dealers in
connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to
shareholders.
Each Fund may spend up to .20 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .20 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. Each Fund may spend up to .55 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
.20 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
For the fiscal year ended April 30, 1999, 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 1999
----------------------
<S> <C>
Nuveen Municipal Bond Fund
Class A......................................... $218,760
Class B......................................... $62,958
Class C......................................... $45,440
Nuveen Insured Municipal Bond Fund
Class A......................................... $201,568
Class B......................................... $90,103
Class C......................................... $70,475
Nuveen Flagship All-American Municipal Bond Fund
Class A......................................... $544,753
Class B......................................... $171,736
Class C......................................... $538,035
Nuveen Flagship Intermediate Municipal Bond Fund
Class A......................................... $98,085
Class C......................................... $53,669
Nuveen Flagship Limited Term Municipal Bond Fund
Class A......................................... $894,943
Class C......................................... $314,590
</TABLE>
S-49
<PAGE>
Under each Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest in the Plan cast in
person at a meeting called for the purpose of voting on the Plan. The Plan may
be continued only if the trustees who vote to approve such continuance
conclude, in the exercise of reasonable business judgment and in light of their
fiduciary duties under applicable law, that there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders. The Plan may not be
amended to increase materially the cost which a class of shares may bear under
the Plan without the approval of the shareholders of the affected class, and
any other material amendments of the Plan must be approved by the non-
interested trustees by a vote cast in person at a meeting called for the
purpose of considering such amendments. During the continuance of the Plan, the
selection and nomination of the non-interested trustees of the Trust will be
committed to the discretion of the non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois 60603 has been selected as auditors for the Trust. 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, 73 Tremont Street, Boston, Massachusetts 02108.
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.
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<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 to terminate an
existing position. Currently, options can be purchased with respect to
financial futures on U.S.
B-1
<PAGE>
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>
VAI-NAT 8-99
<PAGE>
April 30, 1999 Annual Report
NUVEEN
Mutual Funds
Nuveen Municipal Bond Funds
Dependable, tax-free income to help
you keep more of what you earn.
Municipal Bond Fund
Insured Municipal Bond Fund
[PHOTO APPEARS HERE]
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
4 Report from the Portfolio Managers
6 Nuveen Municipal Bond Fund Highlights
7 Nuveen Insured Municipal Bond Fund Highlights
8 Portfolio of Investments
25 Statement of Net Assets
26 Statement of Operations
27 Statement of Changes in Net Assets
28 Notes to Financial Statements
33 Financial Highlights
35 Report of Independent Public Accountants
36 Building a Better Portfolio
37 Fund Information
<PAGE>
DEAR Shareholder
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
I'm pleased to inform you that over the past 12 months, Nuveen Municipal Bond
Fund and Nuveen Insured Municipal Bond Fund continued to meet their primary
objectives of providing you with dependable tax-free income and attractive
after-tax total returns. The combination of these two components demonstrates
once again that Nuveen's municipal bond funds can serve as excellent investment
options for income-oriented investors.
"Improvements in productivity, spurred by technological advances, have been
responsible for offsetting wage and other inflationary pressures."
The Year in Review.
The past 12 months saw the U.S. economy continue its pattern of non-inflationary
growth, accompanied by low interest rates and unemployment levels that remain
among the lowest in three decades. Much of the current economic growth is
propelled by consumer demand, which has helped the U.S. resist the downward pull
of weaker overseas markets.
All indications point to a confident U.S. consumer who is comfortable with
the current state of the economy, especially the performance of the housing,
stock and job markets. This belief is reflected in the most recent Consumer
Confidence Index report, issued by the Conference Board, Inc., which showed a
record-setting seventh consecutive month of gains in May.
On the global front, the turmoil of the past two years appears to be fading
somewhat, as international financial markets have begun to send recovery
signals.
Inflation in the U.S. continued to operate at benign levels, with an
increase of 2.2% for the 12 months ended April 30, 1999. Despite a spike in
consumer prices in April, propelled by rising energy costs (which are showing
signs of retreating), the general backdrop of inflation indicators continued to
be mild, with the employment cost index, average hourly earnings, and import and
producer price trends all remaining favorable.
As Federal Reserve Chairman Alan Greenspan recently stated, one of the key
factors in achieving today's peaceful coexistence of economic growth and low
inflation has been increased productivity. Improvements in productivity, spurred
by technological advances, have been responsible for offsetting wage and other
inflationary pressures that we would normally expect to see as part of a growing
economy.
1
<PAGE>
"Municipal bonds represented a reasonably insulated haven in an otherwise
turbulent market, with lower volatility relative to Treasury bonds and other
fixed-income investments."
On the interest rate front, last fall saw the Federal Reserve ease short-
term rates for the first time in almost three years. Between the end of
September and mid-November 1998, three successive cuts brought the federal funds
rate to 4.75%, averting a potential domestic credit crunch and restoring some
stability to global markets.
Following the success of these preemptive moves, the Federal Reserve
indicated that fighting inflation continued to be a top priority by remaining in
a proactive mode and responding to April's increased consumer prices with a
shift to a tightening bias. By doing this, the Fed signaled its continued
support of the market without changing interest rates or fundamentally altering
the economy.
In the months ahead, we will continue to watch for indications from the Fed
and other factors that affect the economy's future, including wage and
employment statistics, reports on productivity growth, capital equipment
spending, and the progress of international economic recovery. We believe these
key components will influence the outlook for fixed-income markets well into the
new millennium.
Municipal Bonds: An Attractive Investment Option.
As interest rates declined over the past year, our municipal bond funds
continued to provide bright spots among the various investment options, offering
attractive, stable income in a market that places a high premium on yield.
In 1998, municipal bonds represented a reasonably insulated haven in an
otherwise turbulent market, with lower volatility relative to Treasury bonds and
other fixed-income investments. In fact, for the first four months of 1999,
municipals continued to outperform Treasuries.
The high ratio of tax-exempt municipal yields to Treasury yields sheltered
municipal bonds from the price decline that occurred in the Treasury market
during the first four months of the year. While the interest rate on 30-year
Treasury bonds rose from 5.10% at the end of December to 5.66% as of April 30,
1999, the yield on the Bond Buyer Revenue Bond Index, an unmanaged index of
long-term municipal revenue bonds, gained just three basis points--from 5.26% to
5.29%. Given the inverse relationship between interest rates and bond prices, we
saw bond prices fall as rates rose over this period.
Though municipal bond prices did decrease, the decline was not as dramatic
as the drop in Treasuries. The differential in performance reflects the fact
that Treasuries had become relatively expensive as the result of safe-haven
buying during the international economic crises of the past year. As the
financial turmoil subsided in the first quarter of 1999, however, foreign
investors returned to investing in their own countries rather than in U.S.
dollar-denominated securities. The combination of an increase in interest rates
and a decline in demand caused U.S. Treasuries to drop in price.
At the end of April 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 94%, compared with the historical average of
86% for the period of 1986-1999. For investors, this meant that quality long-
term municipal bonds offered yields comparable to those of long Treasury bonds--
even before the tax advantages of municipal
2
<PAGE>
bonds were taken into account. On an after-tax basis in today's market,
municipal bonds continue to present an exceptionally attractive investment
option relative to Treasuries.
During 1998, lower interest rates and the strong economy combined to
generate high levels of new municipal issuance and a significant increase in the
refinancing of existing bonds. Municipal issuance in 1998 reached $284 billion,
up 29% over 1997.
In terms of total municipal issuance, 1998 ranked as the second largest
year on record, next to 1993's $292 billion.
In the first four months of 1999, however, as the market settled into a
more stable interest rate environment, refunding activity dropped off
dramatically. As a result, municipal supply in 1999 has declined by
approximately 25% from the levels of a year ago. This, in turn, has enhanced the
attractiveness of the municipal bonds that were brought to market, as demand--
especially from individual investors--remained relatively strong.
The Value of Nuveen Expertise. Nuveen Mutual Funds are a diverse collection of
investments featuring an impressive ensemble of highly regarded asset management
firms--Premier Advisers/SM/--who direct the investment activities of each
portfolio.
The Premier Advisers are firms that have earned a reputation for excellence
in their field of expertise--whether in municipal bonds, blue-chip growth
stocks, large-cap value stocks, or international securities.
The Premier Advisers include: Nuveen Investment Advisory Services for
income investing, Rittenhouse Financial Services for growth investing, and
Institutional Capital Corporation for value investing.
For more information on Nuveen funds, contact your financial adviser for a
prospectus, or call Nuveen at (800) 621-7227. Please read the prospectus
carefully before you invest or send money.
We encourage you to talk with your financial adviser about Nuveen's
expanding array of investments and the ways that Nuveen funds can help you
establish a diversified portfolio designed to build and sustain long-term
financial security.
Nuveen Municipal Bond Fund and Nuveen Insured Municipal Bond Fund are two
examples of the quality investments that embody Nuveen's income investing
expertise--carrying on a tradition that has been established throughout Nuveen's
100-year history. More than 1.3 million investors have trusted Nuveen to help
them build and sustain the wealth of a lifetime.
We are grateful for the confidence you have placed in us and are dedicated
to maintaining your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
-----------------------------
Timothy R. Schwertfeger
Chairman of the Board
June 15, 1999
"...Municipal supply in 1999 has declined... this has enhanced the
attractiveness of the municipal bonds that were brought to market."
3
<PAGE>
Report from the Portfolio Managers
Nuveen Municipal Bond Fund and Nuveen Insured Municipal Bond Fund closed their
fiscal years April 30, 1999, both outperforming their appropriate Lipper peer
group*. Tom Spalding, portfolio manager of Nuveen Municipal Bond Fund, and Steve
Krupa, portfolio manager of Nuveen Insured Municipal Bond Fund, discuss the
activity within the municipal market during the year, and address the
performance and key investment strategies for their respective funds.
Comments cover the fiscal year ended April 30, 1999, and all performance
statistics are quoted for Class A shares at net asset value.
What economic factors affected the municipal market over the past year? The
major news event of the year was the emerging foreign markets' financial crises,
which caused a surge in the global demand for U.S. Treasury bonds--the world's
most liquid and risk-free securities. This phenomenon is commonly referred to as
a "flight to quality." However, because municipal bonds are not as attractive to
foreign buyers, who generally cannot take advantage of their tax-exempt feature,
the big news in `98 had little affect on the municipal market.
The Federal Reserve Board responded to the global crisis by lowering short-
term interest rates three times between late September and early November. By
early 1999, investor sentiment improved and the crisis appeared to be over.
However, stronger-than-expected U.S. economic growth led to a dramatic selloff
in the Treasury market in February. Municipal bonds outperformed Treasury
securities during the selloff.
As the second quarter of 1999 approached, the foreign economic crises
receded further into the background and the U.S. economy remained buoyant.
However, inflation fears began to take hold as oil prices rebounded and the
consumer price index spiked upward, causing yields on most fixed-income
securities to rise.
Municipal issuance was very strong during the funds' fiscal year, as
issuers took advantage of low interest rates. Because of higher supply and lower
demand, municipal bond yields exceeded taxable yields at times, making it a
rewarding asset class for investors. More typically, municipals yield about 86%
of comparably maturing Treasury bonds.
Tom, how did Nuveen Municipal Bond Fund perform during the year? For the fiscal
year ended April 30, 1999, the total return** for Class A shares on net asset
value was 6.28%, equivalent to a taxable total return of 8.46% for investors in
the 31% federal income tax bracket. The fund's 6.28% total return exceeded the
5.78% average annual total return posted by the Lipper General Municipal Debt
Peer Group*, ranking it 66 out of 258 national municipal bond funds.
What led to such strong performance? For more than 20 years, our objective has
been to achieve the higher returns of longer-term bonds while maintaining the
lower volatility of intermediate securities. As value investors, we try to
identify sectors and geographic regions of the country that we think will
outperform, regardless of the direction of interest rates.
We have also worked hard to maintain a high degree of call protection in
the portfolio. Bonds are typically issued with the right of the issuer to call
or redeem the bond if interest rates fall. We strive to purchase bonds with
seven to 10 years of call protection.
* The Lipper peer group return represents the average annualized returns of the
funds in the Lipper General Municipal Debt Peer Group (for Nuveen Municipal
Bond Fund) and in the Lipper Insured Municipal Debt category (for Nuveen
Insured Municipal Bond Fund). The returns assume reinvestment of dividends
and do not reflect any applicable sales charge.
**Total return is the sum of the fund's income and capital gains distributions
plus price changes in the underlying bond portfolio.
4
<PAGE>
What key strategies were used over the course of the year? Our emphasis on
securities issued by the State of Illinois has been a very successful strategy.
The Midwest, because of its industrial base, has rebounded strongly from the
recession of the early 1990s. As a result, credit quality has improved, leading
to upgrades and price appreciation within Nuveen Municipal Bond Fund's
portfolio.
While we continue to invest in the healthcare industry, we have found that
it is very important to be selective. In our experience, teaching hospitals such
as Northwestern Memorial Hospital have been strong credits. Northwestern
Memorial, one of the leading teaching facilities in Chicago, is gaining market
share, cutting costs and maintaining high levels of liquidity.
We are also comfortable with our investments in hospitals outside the urban
and suburban zones, which are dominant in their service areas. These issues are
generally lower-rated but offer excellent yields.
Turning to Nuveen Insured Municipal Bond Fund, Steve, how did it perform during
its fiscal year? For the fiscal year ended April 30, 1999, the total return on
net asset value was 6.43%, equivalent to a taxable total return of 8.66% for
investors in the 31% federal income tax bracket. This return exceeded the 6.04%
average annual total return posted by the Lipper Insured Municipal Debt Peer
Group*, ranking it 17 of 48 national insured municipal bond funds.
In addition to these performance numbers, we also increased the fund's
dividend during the period.
To what do you attribute the fund's strong relative performance? We chose to
keep the portfolio's duration relatively short during a period when interest
rates were rising, which turned out to be a good move. Bond prices fall when
interest rates rise because investors can purchase new bonds with higher yields.
The shorter the duration, which measures a bond's price volatility, or reaction
to interest rate movements, the less sensitive the bond is to changes in
interest rates.
In addition, raising the dividend reflected our ability to buy higher
yielding bonds during the year. We have also worked hard to maintain a high
degree of call protection in the portfolio. As Tom mentioned, bonds are
typically issued with the right of the issuer to call or redeem the bond if
interest rates fall. We strive to purchase bonds with seven to 10 years of call
protection.
What key strategies were used over the course of the year? Besides our duration
strategy, our value-investing philosophy of seeking undervalued sectors and
individual bonds proved effective during the year.
For example, deregulation in the electric utility industry and the changing
environment of health care has created investment opportunities. Industry
experts predict that electric power will be offered soon to consumers from
national vendors, much like long-distance telephone service is today.
The hospital industry is undergoing consolidation in response to cutbacks
in Medicare and other government reimbursement programs. These changes may
create uncertainty for investors. However, we believe that our extensive
research process allows us to find bonds backed by strong hospitals. These bonds
are temporarily undervalued.
Tom and Steve, what is your outlook for the municipal bond market, as well as
Nuveen Municipal Bond Fund and Nuveen Insured Municipal Bond Fund? We believe
that municipal bonds will continue offering attractive yields in relation to
U.S. Treasury securities. Due to the fact that supply is down and the demand
from retail buyers is growing, we believe that municipals could outperform
taxable bonds over the next six months.
As the outlook for the economy has strengthened over the past several
months, prices for lower-rated bonds have firmed up. Because the extra yield on
lower-rated securities is no longer compelling, we will be very selective in
that area.
We also see the best values for bonds maturing in 20 years rather than 30
years or longer. The 20-year bonds offer most of the yield of the longer
maturities without nearly as much price volatility.
We will continue searching for pockets of opportunity that will help us
maintain the strength of the fund's dividend and total return.
5
<PAGE>
NUVEEN MUNICIPAL BOND FUND
Highlights as of April 30, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 9.57 $ 9.57 $ 9.57 $ 9.58
- ---------------------------------------------------------------------------
April's Dividend $0.0375 $0.0315 $0.0330 $0.0390
- ---------------------------------------------------------------------------
Fund Symbol NMBAX NUMBX N/A NUVBX
- ---------------------------------------------------------------------------
CUSIP 67065Q202 67065Q103 67065Q301 67065Q400
- ---------------------------------------------------------------------------
Inception Date 6/95 2/97 6/95 11/76
- ---------------------------------------------------------------------------
</TABLE>
Total Return (Annualized)/1/
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year 6.28% 1.86% 5.49% 5.91% 6.59%
- -----------------------------------------------------------------------------------------
5-Year 6.97% 6.07% 6.24% 6.29% 7.24%
- -----------------------------------------------------------------------------------------
10-Year 7.18% 6.72% 6.60% 6.43% 7.44%
- -----------------------------------------------------------------------------------------
1-Year TER* 8.46% 3.96% 7.32% 7.84% 8.86%
</TABLE>
* Taxable Equivalent Return (31%)
/1/Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
Index Comparison/2/
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Municipal Nuveen Municipal Lehman Brothers Municipal
Bond Fund (Offer) Bond Fund (NAV) Bond Index
$19,163 $20,004 $21,804
- --------------------------------------------------------------------------
<S> <C> <C> <C>
April 1989 $ 9,580 $10,000 $10,000
- --------------------------------------------------------------------------
10,129 10,573 10,721
- --------------------------------------------------------------------------
11,196 11,687 11,952
- --------------------------------------------------------------------------
12,212 12,747 13,089
- --------------------------------------------------------------------------
13,437 14,026 14,745
- --------------------------------------------------------------------------
13,681 14,281 15,063
- --------------------------------------------------------------------------
14,563 15,201 16,045
- --------------------------------------------------------------------------
15,478 16,156 17,342
- --------------------------------------------------------------------------
16,541 17,267 18,652
- --------------------------------------------------------------------------
18,031 18,821 20,387
- --------------------------------------------------------------------------
April 1999 19,163 20,004 21,804
- --------------------------------------------------------------------------
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)/3/
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
May 1998 .0375
- -----------------------
June 1998 .0375
- -----------------------
July 1998 .0375
- -----------------------
August 1998 .0375
- -----------------------
September 1998 .0375
- -----------------------
October 1998 .0375
- -----------------------
November 1998 .0375
- -----------------------
December 1998 .0375
- -----------------------
January 1999 .0375
- -----------------------
February 1999 .0375
- -----------------------
March 1999 .0375
- -----------------------
April 1999 .0375
- -----------------------
</TABLE>
/3/The Fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0256 per share.
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Fund Net Assets $3.0 billion
- -------------------------------------------
Effective Maturity 17.44 years
- -------------------------------------------
Average
Effective Duration 5.99
- -------------------------------------------
</TABLE>
Top Five Sectors
<TABLE>
<CAPTION>
<S> <C>
Utilities 23%
- -------------------------------------------
Health Care 18%
- -------------------------------------------
U.S. Guaranteed 15%
- -------------------------------------------
Tax Obligation (Limited) 9%
- -------------------------------------------
Water and Sewer 9%
- -------------------------------------------
</TABLE>
Bond Credit Quality**
[PIE CHART APPEARS HERE]
AAA/U.S. Grtd................44%
AA...........................34%
A............................13%
BBB/NR....................... 9%
**as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/2/ 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.
Past performance is not predictive of future results.
6
<PAGE>
NUVEEN INSURED MUNICIPAL BOND FUND
Highlights as of April 30, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 11.16 $ 11.16 $ 11.05 $ 11.11
- ----------------------------------------------------------------------------------
April's Dividend $0.0450 $0.0380 $0.0395 $0.0465
- ----------------------------------------------------------------------------------
Fund Symbol NMBIX NMBBX NMBKX NITNX
- ----------------------------------------------------------------------------------
CUSIP 67065Q509 67065Q608 67065Q707 67065Q806
- ----------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/86
- ----------------------------------------------------------------------------------
</TABLE>
Total Return (Annualized)/1/
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year 6.43% 1.99% 5.63% 5.86% 6.62%
- ----------------------------------------------------------------------------------------------
5-Year 7.21% 6.29% 6.38% 6.38% 7.37%
- ----------------------------------------------------------------------------------------------
10-Year 7.68% 7.21% 7.06% 6.86% 7.89%
- ----------------------------------------------------------------------------------------------
1-Year TER* 8.66% 4.13% 7.51% 7.83% 8.94%
</TABLE>
* Taxable Equivalent Return (31%)
/1/ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
Index Comparison/2/
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers Municipal Nuveen Ins Municipal Nuveen Ins Municipal
Bond Index Bond Fund (NAV) Bond Fund (Offer)
$21,804 $20,946 $20,066
- -----------------------------------------------------------------------------
<S> <C> <C>
$10,000 $10,000 $ 9,580
- -----------------------------------------------------------------------------
$10,721 $10,502 $10,061
- -----------------------------------------------------------------------------
$11,953 $11,720 $11,228
- -----------------------------------------------------------------------------
$13,090 $12,909 $12,367
- -----------------------------------------------------------------------------
$14,746 $14,657 $14,041
- -----------------------------------------------------------------------------
$15,063 $14,791 $14,170
- -----------------------------------------------------------------------------
$16,065 $15,864 $15,198
- -----------------------------------------------------------------------------
$17,343 $17,009 $16,295
- -----------------------------------------------------------------------------
$18,652 $18,049 $17,291
- -----------------------------------------------------------------------------
$20,387 $19,682 $18,855
- -----------------------------------------------------------------------------
$21,804 $20,946 $20,066
- -----------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results.
Monthly Tax-Free Dividends (Class A Shares)/3/
[BAR CHART APPEARS HERE]
<TABLE>
<S> <C>
May 1998 .0445
June 1998 .0445
July 1998 .0445
August 1998 .0445
September 1998 .0445
October 1998 .0445
November 1998 .0445
December 1998 .0445
January 1999 .0450
February 1999 .0450
March 1999 .0450
April 1999 .0450
</TABLE>
/3/ The Fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0326 per share.
Portfolio Statistics
<TABLE>
<S> <C>
Fund Net Assets $861 million
- -----------------------------------------------------
Effective Maturity 18.10 years
- -----------------------------------------------------
Average
Effective Duration 6.26
- -----------------------------------------------------
Top Five Sectors
U.S. Guaranteed 32%
- -----------------------------------------------------
Health Care 15%
- -----------------------------------------------------
Tax Obligation (General) 11%
- -----------------------------------------------------
Utilities 10%
- -----------------------------------------------------
Housing (Single Family) 9%
- -----------------------------------------------------
</TABLE>
Bond Credit Quality**
[PIE CHART APPEARS HERE]
Insured 68%
Insured & U.S.
Guaranteed 29%
U.S. Guaranteed 3%
**as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/2/ 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.
Past performance is not predictive of future results.
7
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Municipal Bond Fund
April 30, 1999
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama -- 1.4%
$ 3,255,000 The Board of Trustees of Alabama, Agricultural and Mechanical 5/08 at 102 AAA $ 3,173,332
University, Revenue Bonds, Series 1998, 5.000%, 11/01/25
7,000,000 City of Birmingham, Alabama, Water and Sewer Revenue Warrants, Series 1/08 at 101 AA- 6,500,900
1998-A, 4.750%, 1/01/29
Jefferson County, Alabama, Sewer Revenue Capital Improvement
Warrants, Series 1999-A:
4,000,000 5.750%, 2/01/38 2/09 at 101 AAA 4,271,280
16,000,000 5.125%, 2/01/39 2/09 at 101 AAA 15,653,280
12,000,000 Baptist Medical Center Special Care Facilities Financing Authority 11/08 at 101 AAA 11,554,440
of the City of Montgomery, Alabama, Revenue Bonds, Series 1998-B
(Baptist Health), 5.000%, 11/15/29
- ------------------------------------------------------------------------------------------------------------------------------------
Alaska -- 0.4%
12,375,000 Alaska Housing Finance Corporation, Collateralized Home Mortgage 12/03 at 102 AAA 12,624,604
Bonds, 1990 Series A, 5.850%, 6/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Arizona -- 2.4%
7,750,000 Arizona Board of Regents, Arizona State University, System Revenue 7/02 at 101 AA 8,230,965
Refunding Bonds, Series 1992-A, 5.750%, 7/01/12
21,600,000 Salt River Project Agricultural Improvement and Power District, 1/02 at 100 AA 22,095,288
Arizona, Salt River Project Electric System Revenue Bonds, 1992
Series C, 5.500%, 1/01/28
8,580,000 Salt River Project Agricultural Improvement and Power District, 7/99 at 100 AA 8,646,495
Arizona, Salt River Project Electric System Revenue Bonds, 1973
Series A, 5.000%, 1/01/10
Salt River Project Agricultural Improvement and Power District,
Arizona, Salt River Project Electric System Revenue Refunding Bonds,
1993 Series C:
5,000,000 4.900%, 1/01/08 1/04 at 102 AA 5,176,450
19,320,000 4.750%, 1/01/17 1/04 at 100 AA 18,679,349
7,000,000 The Industrial Development Authority of the City of Scottsdale, Arizona, 9/01 at 102 AAA 7,394,940
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, 7/03 at 102 A 12,162,177
Series 1993, 6.000%, 7/01/06
4,000,000 Jefferson County, Arkansas, Pollution Control Revenue Refunding 12/02 at 102 BBB- 4,015,000
Bonds (Entergy Arkansas, Inc. Project), Series 1997,
5.600%, 10/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
California -- 13.3%
21,220,000 California Health Facilities Financing Authority, Insured 7/04 at 102 AAA 21,402,916
Health Facility Refunding Revenue Bonds (Catholic Healthcare West),
1994 Series A, 5.000%, 7/01/14
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 16,417,042
9,500,000 5.750%, 12/01/19 6/03 at 101 1/2 AA 10,029,720
12,250,000 5.500%, 12/01/23 6/03 at 101 1/2 AA 12,644,083
21,000,000 State of California, Department of Water Resources, Central 12/03 at 101 AA 20,185,410
Valley 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 11/04 at 102 Aaa 14,148,120
Revenue Bonds (Department of Corrections), 1994 Series A
(California State Prison-Monterey County (Soledad II)),
7.000%, 11/01/19 (Pre-refunded to 11/01/04)
11,500,000 California Statewide Communities Development Authority, 10/03 at 102 AAA 12,380,325
Insured Health Facilities Revenue, Certificates of Participation
(UniHealth America), 1993 Series A, 5.500%, 10/01/14
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
California (continued)
$38,795,000 California Statewide Communities Development Authority, 7/03 at 102 AA $39,409,901
Certificates of Participation, St. Joseph Health System
Obligated Group, 5.500%, 7/01/23
15,725,000 Central Joint Powers Health Financing Authority, Certificates 2/03 at 102 Baa1 15,905,680
of Participation, Series 1993 (Community Hospital of
Central California), 5.250%, 2/01/13
9,000,000 East Bay Municipal Utility District (Alameda and Contra Costa 6/03 at 102 AAA 8,863,560
Counties, California), Water System Subordinated Revenue
Refunding Bonds, Series 1993A, 5.000%, 6/01/21
Foothill/Eastern Transportation Corridor Agency, California,
Toll Road Revenue Bonds, Series 1995A:
45,000,000 0.000%, 1/01/23 No Opt. Call BBB- 12,728,700
15,000,000 6.000%, 1/01/34 1/05 at 102 BBB- 16,116,150
17,040,000 Los Angeles Convention and Exhibition Center Authority, Lease 8/03 at 102 AAA 17,433,965
Revenue Bonds, 1993 Refunding Series A, 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*** 19,228,456
California, Water Works Revenue Bonds, Issue of 1992,
6.500%, 4/15/32
16,000,000 The City of Los Angeles, California, Refunding Series 1993-B, 6/03 at 102 AAA 16,924,320
5.700%, 6/01/23
20,670,000 The City of Los Angeles, California, Wastewater System Revenue 11/03 at 102 AAA 20,891,376
Bonds, Series 1993-D, 5.200%, 11/01/21
15,750,000 Los Angeles County Metropolitan Transit Authority, Proposition 7/03 at 102 AA- 16,515,765
A, Sales Tax Revenue Refunding Bonds, Series 1993-A, 5.500%,
7/01/13
Los Angeles County Metropolitan Transit Authority,
Proposition C, Sales Tax Revenue Second Senior Bonds,
Series 1993-B:
20,935,000 4.750%, 7/01/18 7/03 at 102 AAA 20,355,938
8,000,000 5.250%, 7/01/23 7/03 at 102 AAA 8,106,560
10,500,000 Los Angeles County Sanitation Districts Financing Authority, 10/03 at 102 AA 11,081,805
Capital Projects Revenue Bonds, 1993 Series A (Senior Ad
Valorem Obligation Bonds), 5.375%, 10/01/13
31,360,000 Los Angeles County Transportation Commission, California, 7/02 at 102 Aaa 34,947,270
Proposition C, Sales Tax Revenue, 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, Water 7/02 at 102 AA 5,210,450
Revenue Bonds, Issue of 1992, 5.500%, 7/01/19
17,700,000 Sacramento County Sanitation Districts Financing Authority, 12/03 at 102 AA 16,730,040
1993 Revenue Bonds, 4.750%, 12/01/23
8,050,000 The Regents of the University of California, Refunding Revenue 9/02 at 102 AAA 9,039,989
Bonds (Multiple Purpose Projects), Series A, 6.875%,
9/01/16 (Pre-refunded to 9/01/02)
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado -- 1.0%
22,060,000 Colorado Housing and Finance Authority, Single Family Housing 11/01 at 102 Aa1 23,214,620
Revenue Refunding Bonds, 1991 Series A, 7.250%, 11/01/31
6,595,000 City and County of Denver, Colorado, Airport System Revenue 11/01 at 100 AAA 6,890,588
Bonds, Series 1996D, 5.875%, 11/15/16
- -----------------------------------------------------------------------------------------------------------------------------------
Connecticut -- 0.1%
2,970,000 Connecticut Resources Recovery Authority, Bridgeport Resco 7/99 at 100 1/2 A 2,995,275
Company, L.P. Project Bonds, Series B, 8.625%, 1/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
District of Columbia -- 0.6%
20,700,000 Washington Convention Center Authority (Washington, D.C.), 10/08 at 100 AAA 19,055,385
Senior Lien Dedicated Tax Revenue Bonds, Series 1998, 4.750%, 10/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Florida -- 2.1%
31,000,000 Hillsborough County Industrial Development Authority, 5/02 at 103 AA 35,201,740
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 24,396,250
Revenue Bonds, Series 1989D, 5.000%, 10/01/23
1,270,000 The Elderly Housing Corporation of Sarasota, Inc. (Elderly 7/99 at 103 N/R 1,313,282
Housing Project for the Sarasota Housing Authority),
First Mortgage Revenue Bonds, Series 1978, 7.500%, 7/01/09
</TABLE>
9
<PAGE>
Portfolio of Investments
Nuveen Municipal Bond Fund (continued)
April 30, 1999
<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 $ 8,813,440
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%
16,545,000 City of Chicago, General Obligation Bonds (Emergency Telephone System), 1/03 at 102 AAA 17,889,943
Series 1993, 5.625%, 1/01/23 (Pre-refunded to 1/01/03)
7,880,000 City of Chicago, General Obligation Bonds, Series 1993, 5.250%, 1/01/18 1/04 at 102 AAA 7,947,768
21,335,000 Chicago Metropolitan Housing Development Corporation, Housing Development 7/02 at 102 AA 22,846,585
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 7,871,332
5.000%, 1/01/16
21,710,000 City of Chicago (Illinois), Chicago O'Hare International Airport, General 1/04 at 102 AAA 21,384,784
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+ 60,093,940
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 22,360,015
25,380,000 The County of Cook (Illinois), General Obligation Bonds, Series 1993A, 11/03 at 100 AAA 24,458,706
5.000%, 11/15/23
17,300,000 DuPage Water Commission (DuPage, Cook and Will Counties, Illinois), 3/02 at 100 AAA 18,148,911
Illinois), General 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 11,718,081
Refunding Revenue Bonds, Series 1993, 5.250%, 5/01/14
8,500,000 Illinois Development Finance Authority, Revenue and Refunding Bonds, 2/00 at 102 Baa2*** 8,985,350
Series 1990A (Columbus-Cuneo-Cabrini Medical Center), 8.500%, 2/01/15
(Pre-refunded to 2/01/00)
17,075,000 Illinois Educational Facilities Authority, Revenue Refunding Bonds, 7/03 at 102 Aa1 17,689,700
The 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 58,809,883
(Northwestern Memorial Hospital), 6.000%, 8/15/24
6,115,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, 10/03 at 102 A- 6,116,345
Series 1993 (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 10,835,700
(Highland Park Hospital), 6.200%, 10/01/22
34,120,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 11/03 at 102 AAA 34,728,018
(Rush-Presbyterian-St. Luke's Medical Center Obligated Group), 5.500%,
11/15/25
7,275,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1994 3/04 at 102 AAA 8,003,155
(Southern Illinois Hospital Services), 5.850%, 3/01/14 (Pre-refunded
to 3/01/04)
3,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1998A 11/08 at 101 AAA 2,880,840
(Rush-Presbyterian-St. Luke's Medical Center Obligated Group), 5.000%,
11/15/24
15,000,000 Illinois Health Facilities Authority, FHA-Insured Mortgage Revenue 2/06 at 102 AAA 16,049,700
Bonds, Series 1996 (Sinai Health System), 6.000%, 2/15/24
15,100,000 State of Illinois, General Obligation Bonds, Series of March 1992 10/02 at 102 AA 16,465,795
(Full Faith and Credit), 6.200%, 10/01/04
State of Illinois, General Obligation Bonds, Series of August 1992
(Full Faith and Credit):
14,750,000 5.875%, 6/01/10 6/02 at 102 AA 15,783,680
5,000,000 5.875%, 6/01/11 6/02 at 102 AA 5,357,950
10,000,000 State of Illinois, General Obligation Bonds, Series of April 1993 4/03 at 102 AA 10,614,800
(Full Faith & Credit), 5.700%, 4/01/18
14,200,000 State of Illinois, Build Illinois Bonds (Sales Tax Revenue Bonds), 6/03 at 102 AAA 14,373,240
Series S, 5.250%, 6/15/18
15,315,000 State of Illinois, Build Illinois Bonds (Sales Tax Revenue Bonds), 6/01 at 100 AAA 15,965,581
Series O, 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 (Pre-refunded to 1/01/03) 1/03 at 102 AA-*** 22,157,400
8,805,000 6.200%, 1/01/16 (Pre-refunded to 1/01/03) 1/03 at 102 AAA 9,692,808
</TABLE>
10
<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 $ 4,474,180
43,180,000 6.500%, 6/15/27 (Pre-refunded to 6/15/03) 6/03 at 102 Aaa 48,426,370
15,950,000 Metropolitan Pier and Exposition Authority (Illinois), No Opt. Call AAA 4,894,736
McCormick Place Expansion Project Refunding Bonds, Series
1996A, 0.000%, 12/15/21
16,510,000 Metropolitan Pier and Exposition Authority (Illinois), 6/07 at 101 AAA 17,116,082
Dedicated State Tax Revenue Bonds, Series 1997, 5.125%, 6/01/11
5,000,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake, 6/03 at 102 AAA 5,471,700
McHenry and Will Counties (Illinois), General Obligation
Refunding Bonds, Series 1993B, 5.800%, 6/01/13
(Pre-refunded to 6/01/03)
1,615,000 The Elderly Housing Corporation of Zion (Illinois), Housing 9/99 at 102 A 1,659,219
Development Revenue Bonds (Dell-Zion Associates-Section 8
Assisted Project), Series 1978, 7.750%, 3/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana -- 3.6%
10,835,000 Duneland School Building Corporation, First Mortgage Bonds, 8/07 at 101 AAA 11,851,431
Series 1997, 5.450%, 8/01/15 (Pre-refunded to 8/01/07)
11,590,000 Indiana Health Facility Financing Authority, Hospital Revenue 9/02 at 102 AAA 12,536,092
Refunding Bonds, Series 1992A (Methodist Hospital of
Indiana, Inc.), 5.750%, 9/01/11
49,600,000 Indiana Health Facilities Financing Authority, Hospital 11/03 at 102 Aa2 51,331,040
Revenue Bonds (Daughters of Charity), Series 1993, 5.750%, 11/15/22
10,100,000 Indiana State Office Building Commission Correctional 12/01 at 102 Aa3*** 10,966,075
Facilities Program, Revenue Bonds, Series 1991, 6.375%,
7/01/16 (Pre-refunded to 12/01/01)
2,750,000 The Indianapolis Local Public Improvement Bond Bank, Series 2/03 at 102 AA 3,016,283
1992 D, 6.750%, 2/01/20
12,500,000 The Indianapolis Local Public Improvement Bond Bank, Series 1/03 at 102 AAA 13,447,125
1993 A, 6.000%, 1/10/18
2,350,000 Southwind Housing, Inc., 7.125%, 11/15/21 No Opt. Call N/R*** 2,616,937
- ------------------------------------------------------------------------------------------------------------------------------------
Iowa -- 0.2%
3,815,000 City of Davenport, Iowa, Hospital Facility Revenue Bonds 7/02 at 100 AAA 4,216,567
(Mercy Hospital Project), Series 1992, 6.625%, 7/01/14
(Pre-refunded to 7/01/02)
2,915,000 Iowa Housing Finance Authority, Single Family Mortgage Bonds, 8/99 at 100 Aaa 2,924,853
1977 Series A, 5.875%, 8/01/08
- ------------------------------------------------------------------------------------------------------------------------------------
Kentucky -- 3.0%
34,500,000 County of Carroll, Kentucky, Collateralized Pollution Control 9/02 at 102 Aa2 38,643,795
Revenue Bonds (Kentucky Utilities Company Project), 1992
Series A, 7.450%, 9/15/16
1,725,000 Kentucky Housing Corporation, Housing Revenue Bonds 7/01 at 102 AAA 1,801,694
(FHA-Insured/VA Guaranteed), 1991 Series A, 7.250%, 1/01/17
Kentucky Housing Corporation, Housing Revenue Bonds, 1993
Series B (Federally Insured or Guaranteed Mortgage Loans):
17,600,000 5.300%, 7/01/10 1/04 at 102 AAA 18,207,552
14,400,000 5.400%, 7/01/14 1/04 at 102 AAA 14,870,592
16,980,000 The Turnpike Authority of Kentucky, Resource Recovery Road 7/99 at 100 A+ 16,985,434
Revenue Refunding 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 13,901,433
10,000,000 5.700%, 11/15/26 2/04 at 102 AA 10,178,300
- ------------------------------------------------------------------------------------------------------------------------------------
Maryland -- 0.1%
2,500,000 Community Development Administration, Maryland Department of 1/07 at 102 Aa2 2,654,100
Housing and Community Development, Housing Revenue Bonds,
Series 1996A, 5.875%, 7/01/16
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Municipal Bond Fund (continued)
April 30, 1999
<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 of 8/00 at 102 AAA $16,067,550
Participation, 1990 Series A, 7.650%, 8/01/15
(Pre-refunded to 8/01/00)
5,170,000 The Commonwealth of Massachusetts, General Obligation Refunding No Opt. Call AA- 5,335,595
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 6,875,700
9,605,000 6.000%, 4/01/20 (Pre-refunded to 4/01/00) 4/00 at 100 AAA 9,845,989
Massachusetts Water Resources Authority, General Revenue Refunding
Bonds, 1993 Series B:
14,890,000 5.250%, 3/01/13 3/03 at 102 A1 15,360,226
10,795,000 5.000%, 3/01/22 3/03 at 100 A1 10,444,594
Massachusetts Water Resources Authority, General Revenue Bonds,
1993 Series C:
12,705,000 5.250%, 12/01/20 (Pre-refunded to 12/01/04) 12/04 at 102 Aaa 13,779,589
13,345,000 5.250%, 12/01/20 12/04 at 102 A1 13,373,291
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan -- 6.0%
15,000,000 School District of the City of Detroit, Wayne County, Michigan, 5/06 at 102 AAA 16,639,950
School Building and Site Improvement Bonds (Unlimited Tax General
Obligation), Series 1996A, 5.700%, 5/01/25
(Pre-refunded to 5/01/06)
10,000,000 School District of the City of Detroit, Wayne County, Michigan, 5/09 at 101 AAA 9,379,600
School Building and Site Improvement Bonds (Unlimited Tax
General Obligation), Series 1998B, 4.750%, 5/01/28
3,370,000 Michigan Higher Education Facilities Authority, Limited 5/08 at 100 AA 3,332,323
Obligation Revenue and Revenue Refunding Bonds, Series 1998C
(Aquinas College Project), 5.125%, 5/01/16
State Building Authority, State of Michigan, 1998 Revenue Bonds Series I
(Facilities Program):
7,500,000 4.750%, 10/15/17 10/09 at 100 AA 7,253,625
6,000,000 4.750%, 10/15/21 10/09 at 100 AA 5,671,140
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 BBB 19,395,026
69,575,000 5.500%, 8/15/23 8/04 at 102 BBB 66,258,360
3,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 10/05 at 100 AAA 3,576,990
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 4/04 at 102 AAA 12,583,253
Revenue Bonds, 1994 Series B, 5.700%, 4/01/12
15,600,000 State of Michigan, State Trunk Line Fund Bonds, Series 1992A, 10/02 at 100 AA- 16,116,204
5.500%, 10/01/21
16,805,000 Hospital Finance Authority of the City of St. Joseph, Revenue 1/04 at 102 AAA 16,949,523
Refunding Bonds (Mercy Memorial Medical Center Obligated Group),
Series 1993, 5.250%, 1/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota -- 0.4%
2,110,000 Minnesota Housing Finance Agency, Housing Development Bonds, 8/99 at 101 AA 2,139,835
1977 Series A, 6.250%, 2/01/20
8,375,000 Minnesota Housing Finance Agency, Rental Housing Bonds, 1995 2/05 at 102 AAA 8,805,978
Series D, 5.800%, 8/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
Mississippi -- 0.3%
7,500,000 Mississippi Business Finance Corporation, Pollution Control 10/03 at 102 BBB- 7,537,350
Revenue Refunding Bonds (System Energy Resources, Inc. Project),
Series 1998, 5.875%, 4/01/22
- ------------------------------------------------------------------------------------------------------------------------------------
Missouri -- 0.9%
3,650,000 The Industrial Development Authority of the City of Kansas City, 11/08 at 102 N/R 3,533,200
Missouri, Retirement Facility Refunding and Improvement Revenue Bonds,
Series 1998A (Kingswood Project), 5.800%, 11/15/17
6,195,000 Missouri Housing Development Commission, Housing Development Bonds, 9/99 at 101 AA+ 6,307,006
Series B 1979 (Federally Insured Mortgage Bonds), 7.000%, 9/15/22
15,750,000 Health and Educational Facilities Authority of the State of 10/99 at 102 1/2 BBB+ 16,437,015
Missouri, Health Facilities Refunding and Improvement Revenue
Bonds (Heartland Health Systems Project), Series 1989,
8.125%, 10/01/10
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Montana - 0.2%
$ 5,825,000 Montana Health Facility Authority, Health Care Revenue Bonds, Series 1996 6/06 at 102 BBB- $ 6,134,249
(Community Medical Center, Inc.), 6.375%, 6/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Nebraska - 0.8%
23,515,000 Consumers Public Power District, Nebraska, Nuclear Facility Revenue Bonds, 7/99 at 100 A+ 23,542,277
1968 Series, 5.100%, 1/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada - 0.4%
2,000,000 City of Henderson, Nevada, Local Improvement District No. T-4 (Green 5/09 at 103 N/R 1,998,840
Valley Properties), Senior Limited Obligation Refunding Bonds, 1999
Series A, 5.900%, 11/01/18
8,630,000 City of Reno, Nevada, Insured Hospital Revenue Bonds (St. Mary's Regional 5/03 at 102 AAA 9,264,391
Medical Center), Series 1993A, 5.800%, 5/15/13
- -----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 0.3%
8,500,000 The Industrial Development Authority of the State of New Hampshire, 12/01 at 103 A- 9,239,330
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, 1992 5/02 at 102 A+ 11,644,830
Series A, 6.950%, 11/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
New York - 7.0%
11,190,000 Battery Park City Authority, Senior Revenue Refunding Bonds, Series 1993A, 11/03 at 102 AA 11,230,060
5.000%, 11/01/13
5,000,000 Municipal Assistance Corporation for the City of New York (A Public No Opt. Call AA 5,581,800
Benefit Corporation of the State of New York), Series L Bonds (Issued
Pursuant to the 1991 General Bond Resolution), 6.000%, 7/01/07
2,350,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series C, No Opt. Call A- 2,560,889
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 A- 8,435,120
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 9,416,204
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 A- 8,157,450
12,655,000 5.750%, 2/01/17 2/06 at 101 1/2 A- 13,459,352
15,620,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series E, 8/06 at 101 1/2 A- 16,986,594
6.000%, 8/01/16
14,000,000 The City of New York, General Obligation Bonds, Fiscal 1995 Series F, 2/05 at 101 A-*** 15,973,860
6.625%, 2/15/25 (Pre-refunded to 2/15/05)
11,770,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series J, 8/08 at 101 A- 12,341,316
5.375%, 8/01/13
4,000,000 The City of New York, General Obligation Bonds, Fiscal 1999 Series H, 3/09 at 101 A- 3,823,680
5.000%, 3/15/29
8,600,000 New York City Municipal Water Finance Authority, Water and Sewer 6/02 at 101 1/2 A1 9,199,678
System Revenue Bonds, Fiscal 1993 Series A, 6.000%, 6/15/17
10,000,000 New York City Transitional Finance Authority, Future Tax Secured 5/09 at 101 AA 9,426,800
Bonds, Fiscal 1999 Series B, 4.750%, 11/01/23
8,400,000 Dormitory Authority of the State of New York, Beth Israel Medical 11/00 at 102 AAA 9,102,828
Center 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- 8,277,920
Facilities Improvement Revenue Bonds, Series 1997B, 5.500%, 8/15/17
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 17,541,034
3,330,000 8.000%, 11/01/08 11/00 at 102 BBB+ 3,544,485
8,000,000 New York Local Government Assistance Corporation (A Public Benefit 4/02 at 102 AAA 8,892,480
Corporation of the State of New York), Series 1991D Bonds, 7.000%,
4/01/18 (Pre-refunded to 4/01/02)
11,490,000 State of New York Mortgage Agency, Mortgage Revenue Bonds, Eighth 10/99 at 100 Aaa 11,774,378
Series A, 6.875%, 4/01/17
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (continued)
$ 17,270,000 Power Authority of the State of New York, General Purpose Bonds, 1/03 at 102 Aaa $ 18,484,772
Series CC, 5.250%, 1/01/18 (Pre-refunded to 1/01/03)
5,000,000 Triborough Bridge and Tunnel Authority (New York), General Purpose 1/04 at 100 Aa3 4,739,350
Revenue Bonds, Series 1994A, 4.750%, 1/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
North Carolina - 3.2%
16,750,000 North Carolina Eastern Municipal Power Agency, Power System Revenue 7/99 at 100 Baa1 16,775,293
Bonds, Refunding Series 1989 A, 6.500%, 1/01/24
68,450,000 North Carolina Eastern Municipal Power Agency, Power System Revenue 1/03 at 102 Baa1 72,268,825
Bonds, Refunding Series 1993 B, 6.250%, 1/01/12
4,750,000 North Carolina Medical Care Commission, Hospital Revenue Refunding Bonds 10/03 at 102 AA 4,830,608
(Presbyterian Health Services Corp. Project), Series 1993,
5.500%, 10/01/20
1,195,000 Housing Authority of the City of Wilmington, North Carolina, First No Opt. Call N/R*** 1,253,424
Mortgage Revenue Bonds, Series 1979, 7.750%, 6/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.3%
5,375,000 The Comanche County Hospital Authority (Lawton, Oklahoma), Hospital 7/99 at 102 AAA 5,524,371
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+*** 3,314,312
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 11,182,200
Participation, 1997 Series A, 5.800%, 5/01/24 (Pre-refunded to 5/01/07)
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 2.7%
10,000,000 Lehigh County Industrial Development Authority, Pollution Control Revenue 9/04 at 102 AAA 11,183,600
Refunding Bonds, 1994 Series B (Pennsylvania Power and Light Company
Project), 6.400%, 9/01/29
22,500,000 Pennsylvania Housing Finance Agency, Rental Housing Refunding Bonds, 7/03 at 102 AAA 23,420,925
Issue 1993, 5.750%, 7/01/14
Pennsylvania Housing Finance Agency, Multifamily 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 4,444,969
16,830,000 8.200%, 7/01/24 7/02 at 102 AAA 18,634,681
16,600,000 Pennsylvania Intergovernmental Cooperation Authority, Special Tax Revenue 6/03 at 100 AAA 16,187,988
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 7,517,160
Sixteenth Series, 7.000%, 8/01/18 (Pre-refunded to 8/01/01)
- ------------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.3%
8,095,000 Rhode Island Convention Center Authority, Refunding Revenue Bonds, 1993 5/03 at 100 AAA 7,874,007
Series B, 5.000%, 5/15/20
- ------------------------------------------------------------------------------------------------------------------------------------
Texas - 5.1%
3,470,000 City of Austin, Texas, Combined Utility Systems Revenue Refunding Bonds, 11/04 at 100 AAA 3,665,777
Series 1994, 5.750%, 5/15/24
City of Austin, Texas, Water, Sewer and Electric Refunding Revenue Bonds,
Series 1982:
135,000 14.000%, 11/15/01 (Pre-refunded to 5/15/99) 5/99 at 100 A2*** 146,414
105,000 14.000%, 11/15/01 5/00 at 100 A*** 125,182
14,295,000 14.000%, 11/15/01 No Opt. Call A 16,209,386
29,500,000 Brazos River Authority, Texas, Collateralized Revenue Refunding Bonds 8/00 at 102 AAA 30,809,505
(Houston Lighting and Power Company Project), Series 1995,
5.800%, 8/01/15
6,585,000 Crowley Independent School District, Tarrant and Johnson Counties, 8/08 at 100 AAA 7,531,989
Unlimited Tax School Building Bonds, Series 1997, 6.500%, 8/01/23
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas (continued)
Grapevine-Colleyville Independent School District (Tarrant and Dallas
Counties, Texas), Unlimited Tax School Building and Refunding Bonds,
Series 1998:
$ 4,890,000 0.000%, 8/15/19 No Opt. Call AAA $ 1,722,062
10,000,000 0.000%, 8/15/24 No Opt. Call AAA 2,672,500
25,900,000 Harris County, Texas, Toll Road Senior Lien Revenue Refunding Bonds, 8/04 at 102 AAA 27,047,888
Series 1994, 5.300%, 8/15/13
7,000,000 Harris County Health Facilities Development Corporation, Texas, No Opt. Call AAA 7,523,460
Hospital Revenue Bonds (St. Luke's Episcopal Hospital Project),
Series 1991A, 6.750%, 2/15/21
53,280,000 City of San Antonio, Texas, Electric and Gas Systems Revenue 2/02 at 101 Aa1 52,935,278
Refunding Bonds, New Series 1992,
5.000%, 2/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
Utah - 3.5%
Intermountain Power Agency (Utah), Power Supply Revenue Refunding Bonds,
1993 Series A:
7,300,000 5.500%, 7/01/13 7/03 at 102 A+ 7,571,560
27,805,000 5.500%, 7/01/20 7/03 at 102 A+ 28,422,271
53,085,000 5.000%, 7/01/23 7/03 at 100 A+ 50,960,007
15,100,000 Intermountain Power Agency (Utah), Power Supply Revenue Refunding 7/07 at 102 AAA 16,148,393
Bonds, 1997 Series B, 5.750%, 7/01/19
1,355,000 Layton (Utah), Industrial Development Revenue Bonds (C.D.I. Ltd. 6/99 at 100 N/R 1,358,469
Project-K Mart Guaranteed), 8.750%, 6/01/05
- ------------------------------------------------------------------------------------------------------------------------------------
Vermont - 0.0%
190,000 University of Vermont and State Agricultural College, Housing, 7/99 at 100 A+ 190,849
Dining and Student Services Facilities System Bonds, Lot 1 Series
1969-A, 6.300%, 7/01/06
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia - 3.4%
7,750,000 Richmond Metropolitan Authority (Virginia), Expressway Revenue and 7/02 at 102 AAA 8,417,120
Refunding Bonds, Series 1992-B, 6.250%, 7/15/22
39,630,000 Virginia Housing Development Authority, Commonwealth Mortgage Bonds, 1/02 at 102 AA+ 41,454,962
1992 Series A, 7.150%, 1/01/33
3,070,000 Virginia Housing Development Authority, Multifamily Mortgage Bonds, 5/99 at 101 AA+ 3,181,288
1978 Series B, 6.700%, 11/01/21
Virginia Housing Development Authority, Multifamily Housing Bonds,
1993 Series C:
19,080,000 5.550%, 5/01/08 5/03 at 102 AA+ 19,848,924
28,075,000 5.900%, 5/01/14 5/03 at 102 AA+ 29,489,980
- ------------------------------------------------------------------------------------------------------------------------------------
Washington - 6.1%
6,045,000 Public Utility District No. 1 of Chelan County, Rocky Reach 7/99 at 100 AA 6,045,242
Hydro-Electric System Revenue Bonds, Series of 1968, 5.125%, 7/01/23
13,890,000 Public Utility District No. 1 of Douglas County, Washington, Wells 9/99 at 100 1/2 A+ 13,207,445
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 7,746,698
Series Y, 5.700%, 1/01/12
5,000,000 Washington Public Power Supply System, Nuclear Project No. 1 No Opt. Call Aa1 6,250,250
Refunding 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 16,721,276
18,500,000 5.750%, 7/01/13 7/03 at 102 Aa1 19,730,990
10,000,000 5.700%, 7/01/17 7/03 at 102 AAA 10,415,900
7,805,000 Washington Public Power Supply System, Nuclear Project No. 1 No Opt. Call Aa1 9,294,662
Refunding Revenue Bonds, Series 1993B, 7.000%, 7/01/09
10,000,000 Washington Public Power Supply System, Nuclear Project No. 1 7/03 at 102 Aa1 10,220,200
Refunding Revenue Bonds, Series 1993C, 5.375%, 7/01/15
8,835,000 Washington Public Power Supply System, Nuclear Project No. 3 7/03 at 102 Aa1 9,173,911
Refunding Revenue Bonds, Series 1993B, 5.700%, 7/01/18
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Washington (continued)
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 $ 9,483,766
51,070,000 5.375%, 7/01/15 7/03 at 102 Aa1 52,194,561
11,545,000 5.500%, 7/01/18 7/03 at 102 Aa1 11,788,946
- -----------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 4.4%
4,355,000 Wisconsin Housing and Economic Development Authority, Insured No Opt. Call AA*** 4,699,785
Mortgage Revenue Refunding Bonds, 1977 Series A, 5.800%, 6/01/17
8,500,000 Wisconsin Housing and Economic Development Authority, Multifamily 4/02 at 102 AA- 9,167,590
Housing Revenue Bonds, 1992 Series B, 7.050%, 11/01/22
28,200,000 Wisconsin Housing and Economic Development Authority, Housing 12/03 at 102 AA- 29,483,382
Revenue Bonds, 1993 Series C, 5.800%, 11/01/13
13,700,000 Wisconsin Health and Educational Facilities Authority, Revenue 11/01 at 102 AAA 14,667,494
Bonds, Series 1991 (Columbia Hospital, Inc.), 6.250%, 11/15/21
9,830,000 Wisconsin Health and Educational Facilities Authority, Health 6/02 at 102 AAA 10,608,339
Facilities Refunding Revenue Bonds (SSM Health Care), Series 1992AA,
6.250%, 6/01/20
3,950,000 Wisconsin Health and Educational Facilities Authority, Revenue 10/04 at 102 AAA 4,289,462
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 6,479,039
Bonds, Series 1992A (Meriter Hospital, Inc.), 6.000%, 12/01/22
18,500,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 8/03 at 102 AAA 18,260,979
Series 1993 (Aurora Health Care Obligated Group), 5.250%, 8/15/23
32,000,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 5/06 at 102 AAA 33,692,160
Series 1996 (Aurora Medical Group, Inc. Project), 5.750%, 11/15/25
- -----------------------------------------------------------------------------------------------------------------------------------
$2,872,185,000 Total Investments - (cost $2,659,153,911) - 98.2% 2,919,418,804
==============---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.8% 52,291,278
----------------------------------------------------------------------------------------------------------------
Net Assets - 100% $2,971,710,082
================================================================================================================
</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
- ----
16
<PAGE>
Portfolio of Investments
Nuveen Insured Municipal Bond Fund
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama - 7.5%
$ 5,600,000 The Alabama Public Health Care Authority, Mortgage Revenue Bonds, Series 4/06 at 102 AAA $ 6,035,960
1996, 6.000%, 10/01/25
2,120,000 The Water Supply Board of the City of Albertville (Alabama), Water 3/02 at 102 AAA 2,313,196
Revenue Bonds, Series 1992, 6.700%, 3/01/11
3,500,000 City of Athens (Alabama), Electric Revenue Warrants, Series 1995, 6/05 at 102 AAA 3,797,815
6.000%, 6/01/25
4,205,000 The Governmental Utility Services Corporation of the City of Auburn, 12/99 at 102 AAA 4,396,916
Floating/Fixed Rate Wastewater Treatment Revenue Bonds, Series 1984
(Merscot-Auburn Limited Partnership Project), 7.300%, 1/01/12
1,875,000 The Special Care Facilities Financing Authority of the City of Birmingham 1/01 at 102 AAA 1,952,719
(Alabama), Revenue Bonds, Series 1991-A (The Baptist Medical Centers),
7.000%, 1/01/21
1,225,000 The Utilities Board of the City of Daphne (Alabama), Water, Gas and Sewer 6/00 at 102 AAA 1,297,643
Revenue Refunding Bonds, Series 1990B, 7.350%, 6/01/20
6,750,000 The Public Building Authority of the City of Huntsville (Alabama), 10/05 at 102 AAA 7,345,080
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 Warrants, Series 2/04 at 102 AAA 3,354,960
1994, 6.250%, 2/01/19
5,500,000 City of Madison (Alabama), General Obligation Warrants, Series 1995, 4/05 at 102 AAA 5,959,470
6.000%, 4/01/23
5,580,000 Baptist Medical Center Special Care Facilities Financing Authority of the 9/07 at 102 AAA 5,672,516
City 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), Health Care 3/06 at 102 AAA 12,926,760
Facility Revenue Bonds, Jackson Hospital and 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 3,329,812
140,000 6.900%, 11/01/24 11/04 at 102 AAA 160,740
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 2,539,812
3,000,000 6.850%, 8/15/25 (Pre-refunded to 8/15/04) 8/04 at 102 AAA 3,470,490
- ------------------------------------------------------------------------------------------------------------------------------------
Alaska - 2.7%
Alaska Industrial Development and Export Authority, Revolving Fund Bonds,
Series 1997A:
4,500,000 5.900%, 4/01/17 (Alternative Minimum Tax) 4/07 at 102 AAA 4,789,935
5,000,000 6.125%, 4/01/27 (Alternative Minimum Tax) 4/07 at 102 AAA 5,460,800
6,870,000 Alaska Housing Finance Corporation, Mortgage Revenue Bonds, 1996 6/06 at 102 AAA 7,309,680
Series A, 6.000%, 12/01/15
5,000,000 Alaska Housing Finance Corporation, Mortgage Revenue Bonds, 1997 6/07 at 102 AAA 5,282,450
Series A, 6.000%, 6/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
Arizona - 2.0%
5,000,000 Navajo County, Arizona, Pollution Control Corporation, Pollution Control 8/03 at 102 A- 5,116,800
Revenue Refunding Bonds (Arizona Public Service Company), 1993
Series A, 5.875%, 8/15/28
Tempe Union High School District No. 213 of Maricopa County, Arizona,
School Improvement and Refunding Bonds, Series 1994:
4,290,000 6.000%, 7/01/10 (Pre-refunded to 7/01/04) 7/04 at 101 AAA 4,744,011
1,710,000 6.000%, 7/01/10 7/04 at 101 AAA 1,872,057
5,000,000 City of Tucson, Arizona, Water System Revenue Bonds, Series 1994-A 7/06 at 101 AAA 5,620,350
(1996), 6.000%, 7/01/21 (Pre-refunded to 7/01/06)
- ------------------------------------------------------------------------------------------------------------------------------------
California - 9.4%
3,525,000 Brea Public Financing Authority (Orange County, California), 1991 Tax 8/01 at 102 AAA 3,861,038
Allocation Revenue Bonds, Series A (Redevelopment Project AB),
7.000%, 8/01/15 (Pre-refunded to 8/01/01)
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California (continued)
$ 5,000,000 California Health Facilities Financing Authority, Insured Health Facility 7/06 at 102 AAA $ 5,429,550
Refunding Revenue Bonds (Catholic Healthcare West), 1996 Series A,
6.000%, 7/01/25
27,860,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1999 No Opt. Call AAA 5,288,664
Series B, 0.000%, 2/01/30 (Alternative Minimum Tax)
10,000,000 California Statewide Communities Development Authority, Certificates of 4/08 at 101 AAA 10,024,500
Participation, Citrus Valley Health Partners, Inc., 5.125%, 4/01/23
995,000 M-S-R Public Power Agency (California), San Juan Project Refunding 7/99 at 100 AAA 997,239
Revenue Bonds, Series H, 5.900%, 7/01/20
13,750,000 Ontario Redevelopment Financing Authority (San Bernardino County, 8/03 at 102 AAA 14,953,538
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 Project), 12/04 at 101 AAA 5,934,689
Certificates of Participation, 6.000%, 12/01/12 (Pre-refunded to
12/01/04)
2,250,000 Sacramento Municipal Utility District (California), Electric Revenue 9/01 at 102 AAA 2,445,502
Bonds, 1991 Series Y, 6.500%, 9/01/21 (Pre-refunded to 9/01/01)
17,355,000 County of San Bernardino (California), Single Family Home Mortgage 5/07 at 28 1/16 AAA 3,153,924
Revenue Bonds, (Mortgage-Backed Securities Program), 1997 Series A,
0.000%, 5/01/31 (Alternative Minimum Tax)
17,500,000 San Joaquin Hills Transportation Corridor Agency, Toll Road Refunding 1/07 at 102 AAA 17,757,950
Revenue Bonds, Series 1997A, 5.250%, 1/15/30
10,000,000 The Regents of the University of California, Revenue Bonds (Multiple 9/02 at 102 AAA 11,073,700
Purpose Projects), Series D, 6.375%, 9/01/24 (Pre-refunded to 9/01/02)
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado--1.0%
Board of Water Commissioners, City and County of Denver, Colorado,
Certificates of Participation, Series 1991:
2,675,000 6.625%, 11/15/11 (Pre-refunded to 11/15/01) 11/01 at 101 AAA 2,895,928
1,825,000 6.625%, 11/15/11 11/01 at 101 AAA 1,959,813
3,500,000 Jefferson County, Colorado, Refunding Certificates of Participation, 12/02 at 102 AAA 3,889,970
6.650%, 12/01/08
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware--0.5%
3,600,000 Delaware Economic Development Authority, Pollution Control Refunding 5/02 at 102 AAA 3,930,156
Revenue Bonds (Delmarva Power and Light Company Project), Series 1992B,
6.750%, 5/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
District of Columbia--2.7%
6,000,000 District of Columbia (Washington, D.C.), General Obligation Bonds, Series 6/04 at 102 AAA 6,679,919
1994B, 6.100%, 6/01/11 (Pre-refunded to 6/01/04)
17,000,000 Washington Convention Center Authority (Washington, D.C.), Senior Lien 10/08 at 101 AAA 16,541,339
Dedicated Tax Revenue Bonds, Series 1998, 5.000%, 10/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
Florida--0.1%
920,000 Florida Keys Aqueduct Authority, Water Revenue Refunding Bonds, Series 9/01 at 101 AAA 994,400
1991, 6.750%, 9/01/21 (Pre-refunded to 9/01/01)
80,000 Florida Keys Aqueduct Authority, Water Revenue Bonds, Series 1991, 9/01 at 101 AAA 85,896
6.750%, 9/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia--3.3%
5,000,000 City of Albany (Georgia), Sewage System Revenue Bonds, Series 1992, 7/02 at 102 AAA 5,534,250
6.625%, 7/01/17 (Pre-refunded to 7/01/02)
5,000,000 Development Authority of Appling County (Georgia), Pollution Control 1/04 at 101 AAA 5,618,450
Revenue Bonds (Oglethorpe Power Corporation--Hatch Project), Series
1994, 7.150%, 1/01/21
5,000,000 Development Authority of Burke County (Georgia), Pollution Control 5/04 at 102 AAA 4,988,050
Revenue Bonds (Georgia Power Company--Vogtle Plant Project), Third
Series 1999, 5.250%, 5/01/34 (WI)
2,250,000 Chatham County Hospital Authority, Hospital Revenue Bonds (Memorial 1/01 at 102 AAA 2,416,073
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 Revenue 9/05 at 102 AAA 3,265,586
Bonds (Life College, Inc.), Series 1995A and Series 1995B,
5.950%, 9/01/19
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Georgia (continued)
$ 6,180,000 Marietta Development Authority (Life College), 6.250%, 9/01/25 9/05 at 102 AAA $ 6,908,684
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois--15.2%
2,500,000 City of Chicago, Illinois, General Obligation Adjustable Rate 7/02 at 101 1/2 AAA 2,771,850
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, Series A of 1992, 1/02 at 102 AAA 5,397,650
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 (Dedicated Tax Revenues), Series 1997:
9,590,000 5.800%, 12/01/17 12/07 at 102 AAA 10,314,716
10,000,000 5.750%, 12/01/27 12/07 at 102 AAA 10,665,300
10,000,000 Chicago School Reform Board of Trustees of the Board of 12/07 at 102 AAA 9,976,500
Education of the City of Chicago, Illinois, Unlimited Tax
General Obligation Bonds (Dedicated Tax Revenues),
Series 1997A, 5.250%, 12/01/30
12,800,000 Public Building Commission of Chicago, Illinois, Building 12/03 at 102 AAA 14,083,200
Revenue Bonds, Series A of 1993 (Board of Education of the
City of Chicago), 5.750%, 12/01/18 (Pre-refunded to 12/01/03)
6,540,000 Town of Cicero, Cook County, Illinois, General Obligation 12/04 at 102 AAA 7,323,623
Corporate Purpose Bonds, Series 1994A, 6.400%, 12/01/14
7,500,000 The County of Cook, Illinois, General Obligation Bonds, 11/03 at 100 AAA 7,227,750
Series 1993A, 5.000%, 11/15/23
2,500,000 Community College District No. 508, Cook County, Illinois, No Opt. Call AAA 3,197,425
Certificates of Participation, 8.750%, 1/01/07
2,370,000 Board of Governors of State Colleges and Universities, 4/04 at 102 AAA 2,669,947
Illinois, Eastern Illinois University, Auxiliary Facilities
System Revenue Bonds, Series 1994A, 6.375%, 4/01/16
(Pre-refunded to 4/01/04)
Illinois Educational Facilities Authority, Revenue Refunding
Bonds (Midwestern University), Series 1966B:
1,455,000 6.250%, 5/15/26 (Pre-refunded to 5/15/06) 5/06 at 102 AAA 1,666,979
445,000 6.250%, 5/15/26 5/06 at 102 AAA 493,060
4,500,000 Illinois Health Facilities Authority, Revenue Bonds, 5/04 at 102 AAA 4,958,910
Series 1994 (Ingalls Health System Project), 6.250%, 5/15/24
3,000,000 Illinois Health Facilities Authority, Revenue Bonds, 8/04 at 102 AAA 3,365,850
Series 1994A (The University of Chicago Hospitals Project),
6.125%, 8/15/24 (Pre-refunded to 8/15/04)
4,000,000 Illinois Health Facilities Authority, Health Care Facilities 11/04 at 102 AAA 4,570,760
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 (Carle 1/06 at 102 AAA 7,484,470
Foundation), Series 1996, 6.000%, 1/01/27
169,000 Illinois Health Facilities Authority, Revenue Bonds (Community No Opt. Call AAA 192,139
Provider Pooled Loan Program), 7.900%, 8/15/03
952,000 Illinois Health Facilities Authority, Revenue Bonds, 8/99 at 100 AAA 964,167
Series 1988-B (Community Provider Pooled Loan Program),
7.900%, 8/15/03
10,000,000 Illinois Housing Development Authority, Homeowner Mortgage 8/08 at 101 AAA 9,894,400
Revenue Bonds, 1998 Subseries G-2, 5.250%, 8/01/29
(Alternative Minimum Tax)
5,000,000 State of Illinois, General Obligation Bonds, 8/04 at 102 AA 5,427,850
Series of August 1994, 5.875%, 8/01/19
State of Illinois, General Obligation Bonds, Series of
February 1995:
3,065,000 6.100%, 2/01/19 2/05 at 102 AAA 3,349,340
5,545,000 6.100%, 2/01/20 2/05 at 102 AAA 6,059,410
8,790,000 Community Unit School District Number 60 (Waukegan), Lake No Opt. Call AAA 3,197,714
County, Illinois, General Obligation School Bonds,
Series 1999A & B, 0.000%, 12/01/18
4,000,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake, 6/03 at 102 AAA 4,384,880
McHenry and Will Counties, Illinois, General Obligation
Refunding Bonds, Series 1993C, 5.850%, 6/01/23
(Pre-refunded to 6/01/03)
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana--6.7%
5,000,000 Indiana Health Facility Financing Authority, Hospital Revenue 5/02 at 102 AAA 5,398,200
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 5,417,700
Bonds, 1993 Series A, 6.125%, 1/01/19
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indiana (continued)
Indiana Housing Finance Authority, Single Family Mortgage
Revenue Bonds, 1997 Series B-2:
$ 1,755,000 6.000%, 7/01/16 (Alternative Minimum Tax) 1/07 at 101 1/2 Aaa $ 1,845,505
10,620,000 6.125%, 1/01/27 (Alternative Minimum Tax) 1/07 at 101 1/2 Aaa 11,184,984
3,750,000 City of Indianapolis, Indiana, Gas Utility System Revenue Bonds, 6/02 at 102 AAA 4,093,050
Series 1992 A, 6.200%, 6/01/23
(Pre-refunded to 6/01/02)
4,950,000 Jasper County, Indiana, Collateralized Pollution Control 7/01 at 102 AAA 5,354,712
Refunding Revenue Bonds (Northern Indiana Public Service Company
Project), Series 1991, 7.100%, 7/01/17
2,000,000 Lawrence Central High School Building Corporation, Marion County, 7/00 at 102 AAA 2,125,520
Indiana, First Mortgage Bonds, Series 1990, 7.250%, 7/01/08
(Pre-refunded to 7/01/00)
3,300,000 Marion County Convention and Recreational Facilities Authority, 6/01 at 102 AAA 3,586,407
Indiana, Excise Taxes Lease Rental Revenue Bonds, Series 1991B,
7.000%, 6/01/21 (Pre-refunded to 6/01/01)
11,300,000 Marion County Convention and Recreational Facilities Authority, 6/08 at 101 AAA 10,846,870
Indiana, Excise Taxes Lease Rental Revenue Subordinate Bonds,
Series 1997A, 5.000%, 6/01/27
1,000,000 City of Princeton, Indiana, Pollution Control Refunding Revenue Bonds, 3/00 at 102 AAA 1,051,590
1990 Series (Public Service Company of Indiana, Inc. - Project C),
7.375%, 3/15/12
2,000,000 Hospital Authority of St. Joseph County, Indiana, Fixed Rate Hospital 8/01 at 102 AAA 2,184,320
Revenue Refunding Bonds, Series 1991A (Memorial Hospital of
South Bend Project), 7.000%, 8/15/20 (Pre-refunded to 8/15/01)
2,190,000 Shelby County Jail Building Corporation, First Mortgage Bonds, 7/02 at 102 AAA 2,415,855
Shelby County, Indiana, 6.500%, 7/15/09 (Pre-refunded to 7/15/02)
2,265,000 Southwest Allen Multi-School Building Corporation, First Mortgage 1/02 at 101 AAA 2,427,514
Refunding Bonds, Series 1992B, Ft. Wayne, Indiana, 6.375%, 1/15/09
- ------------------------------------------------------------------------------------------------------------------------------------
Louisiana - 2.4%
7,000,000 Louisiana Public Facilities Authority, Hospital Revenue Refunding Bonds 5/02 at 102 AAA 7,755,720
(Southern Baptist Hospital Project), Series 1992, 6.800%, 5/15/12
(Pre-refunded to 5/15/02)
State of Louisiana, General Obligation Bonds, Series 1992-A:
5,000,000 6.500%, 5/01/09 5/02 at 102 AAA 5,492,250
2,000,000 6.500%, 5/01/12 (Pre-refunded to 5/01/02) 5/02 at 102 AAA 2,196,900
4,750,000 Hospital Service District No. 1 of the Parish of Tangipahoa, 2/04 at 102 AAA 5,224,810
State of Louisiana, Hospital Revenue Bonds (Series 1994),
6.250%, 2/01/24
- ------------------------------------------------------------------------------------------------------------------------------------
Maine - 3.4%
11,500,000 Maine Health and Higher Educational Facilities Authority, 7/05 at 102 AAA 12,418,505
Revenue Bonds, Series 1995A, 5.875%, 7/01/25
Maine Health and Higher Educational Facilities Authority, Revenue
Bonds, Series 1994B:
3,110,000 7.000%, 7/01/24 (Pre-refunded to 7/01/04) 7/04 at 102 AAA 3,612,110
65,000 7.000%, 7/01/24 7/04 at 102 AAA 74,307
11,090,000 Maine State Housing Authority, Mortgage Purchase Bonds, 5/06 at 102 AAA 11,964,114
1996 Series B-2, 6.450%, 11/15/26
(Alternative Minimum Tax)
Town of Old Orchard Beach, Maine, 1992 General Obligation Bonds:
750,000 6.650%, 9/01/09 (Pre-refunded to 9/01/02) 9/02 at 103 AAA 840,600
500,000 6.650%, 9/01/10 (Pre-refunded to 9/01/02) 9/02 at 103 AAA 560,400
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 3.4%
3,500,000 City of Boston, Massachusetts, Revenue Bonds, Boston City Hospital 8/00 at 102 Aaa 3,751,755
(FHA-Insured Mortgage), Series A, 7.625%, 2/15/21
(Pre-refunded to 8/15/00)
1,150,000 City of Haverhill, Massachusetts, General Obligation Municipal Purpose 6/02 at 102 AAA 1,284,550
Loan of 1992, Series A, 7.000%, 6/15/12 (Pre-refunded to 6/15/02)
1,250,000 Massachusetts Bay Transportation Authority, Certificates of 8/00 at 102 AAA 1,338,963
Participation, 1990 Series A, 7.650%, 8/01/15
(Pre-refunded to 8/01/00)
3,400,000 Massachusetts Health and Educational Facilities Authority, 7/02 at 102 AAA 3,717,084
Revenue Bonds, New England Medical Center Hospitals Issue,
Series F, 6.625%, 7/01/25
4,000,000 Massachusetts Health and Educational Facilities Authority, 7/02 at 102 AAA 4,358,320
Revenue Bonds, South Shore Hospital Issue, Series D,
6.500%, 7/01/22
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts (continued)
$5,875,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 11/03 at 102 AAA $ 5,825,004
Cape Cod Health Systems, Inc. Issue, Series A, 5.250%, 11/15/21
4,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 10/05 at 102 AAA 4,329,400
Berkshire Health Systems Issue, Series D, 6.000%, 10/01/19
5,225,000 Massachusetts Turnpike Authority, Metropolitan Highway System Revenue 1/09 at 101 AAA 4,986,740
Bonds, 1999 Series A (Subordinated), 5.000%, 1/01/39
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan - 4.3%
12,130,000 City of Bay City, County of Bay, State of Michigan, 1991 General No Opt. Call AAA 3,866,680
Obligation Unlimited Tax Street Improvement Bonds, 0.000%, 6/01/21
5,000,000 Caledonia Community Schools, Counties of Kent, Allegan and Barry, 5/02 at 102 AAA 5,522,000
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, State of 5/05 at 101 AAA 2,784,900
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 2,162,280
Series 1991, 6.625%, 7/01/21 (Pre-refunded to 7/01/01)
1,500,000 County of Lenawee, Michigan, Hospital Finance Authority, Hospital 7/09 at 101 AAA 1,443,135
Revenue and Refunding Bonds (Lenawee Health Alliance Obligated Group),
Series 1999A, 5.000%, 7/01/28
3,500,000 Michigan State Housing Development Authority, Single Family Mortgage 11/08 at 101 AAA 3,499,825
Revenue Bonds, 1998B, 5.200%, 12/01/18 (Alternative Minimum Tax)
5,000,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 11/06 at 102 AAA 5,355,700
(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 8,811,824
Bonds, 1997 Series A, 6.100%, 10/01/33 (Alternative Minimum Tax)
2,000,000 Michigan Strategic Fund Limited Obligation Refunding Revenue Bonds 12/01 at 102 AAA 2,173,000
(The Detroit Edison Company Pollution Control Bonds Project),
Collateralized Series 1991DD, 6.875%, 12/01/21
1,085,000 School District of the City of River Rouge, County of Wayne, State 5/03 at 101 1/2 AAA 1,130,103
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 7,131,264
Revenue Bonds, Series 1993 (University of Mississippi Medical Center
Project), 5.900%, 12/01/23 (Pre-refunded to 12/01/04)
- -----------------------------------------------------------------------------------------------------------------------------------
Missouri - 1.0%
7,950,000 St. Louis Municipal Finance Corporation, City Justice Center, 2/06 at 102 AAA 8,632,110
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 Bonds 2/08 at 102 AAA 5,199,800
(Children's 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 2,688,550
(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 2,230,320
(Nevada Power Company Project), Series 1992C, 7.200%, 10/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 0.4%
2,850,000 New Hampshire Higher Educational and Health Facilities Authority, 7/02 at 102 AAA 3,088,745
Revenue Refunding Bonds, University System of New Hampshire Issue,
Series 1992, 6.250%, 7/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey - 0.2%
1,665,000 Housing Finance Corporation of the Township of Pennsauken (Pennsauken, 10/99 at 103 AAA 1,720,544
New Jersey), Section 8 Assisted Housing Revenue Bonds (Pennsauken
Housing Associates - 1979 Elderly Project), 8.000%, 4/01/11
</TABLE>
21
<PAGE>
Portfolo of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New Mexico - 0.9%
$3,000,000 City of Albuquerque, New Mexico, Hospital System Revenue Bonds, 8/99 at 100 AAA $ 3,023,490
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 4,873,943
Bonds, 1992 Series A (Public Service Company of New Mexico, San Juan
and Four Corners Projects), 6.375%, 12/15/22
- -----------------------------------------------------------------------------------------------------------------------------------
New York - 9.4%
Metropolitan Transportation Authority, 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 5,434,000
6,925,000 6.250%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 7,594,440
5,000,000 Metropolitan Transportation Authority, Commuter Facilities Revenue Bonds, 7/04 at 101 1/2 AAA 5,651,700
Series 1994A, 6.375%, 7/01/18 (Pre-refunded to 7/01/04)
5,935,000 The City of New York, General Obligation Bonds, 8/02 at 101 1/2 AAA 6,555,445
Fiscal 1992 Series C, Fixed Rate Bonds, Subseries
C-1, 6.625%, 8/01/12 (Pre-refunded to 8/01/02)
65,000 The City of New York, General Obligation Bonds, Fiscal 1992 8/02 at 101 1/2 AAA 71,102
Series C, 6.625%, 8/01/12
3,750,000 The City of New York, General Obligation Bonds, Fiscal 1992 2/02 at 101 1/2 AAA 4,095,263
Series B, 7.000%, 2/01/18
The City of New York, General Obligation Bonds, Fiscal 1993 Series E:
2,195,000 6.000%, 5/15/16 (Pre-refunded to 5/15/03) 5/03 at 101 1/2 AAA 2,409,078
815,000 6.000%, 5/15/16 5/03 at 101 1/2 AAA 880,754
19,500,000 New York City Municipal Water Finance Authority, Water and Sewer 6/06 at 101 AAA 20,014,995
System Revenue Bonds, Series A, 5.375%, 6/15/26
New York City Municipal Water Finance Authority, Water and Sewer
System 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 3,234,847
3,320,000 6.750%, 6/15/16 6/01 at 101 AAA 3,551,404
4,470,000 New York City, Municipal Water Finance Authority, Water and Sewer 6/02 at 101 1/2 AAA 4,644,777
System Revenue Bonds, Fiscal 1993 Series A, 5.750%, 6/15/18
3,900,000 New York City Transit Authority, Transit Facilities No Opt. Call AAA 4,109,508
Refunding Revenue Bonds, Series 1993 (Livingston Plaza Project),
5.400%, 1/01/18
New York City Industrial Development Agency, Civic Facility
Revenue Bonds (USTA National Tennis Center Incorporated Project):
3,500,000 6.500%, 11/15/10 11/04 at 102 AAA 3,959,130
3,000,000 6.600%, 11/15/11 11/04 at 102 AAA 3,408,270
5,240,000 Triborough Bridge and Tunnel Authority, Special Obligation Refunding 1/01 at 102 AAA 5,597,211
Bonds, 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 2,754,950
Various Purpose School Building Construction and Improvement Bonds
(General Obligation - Unlimited Tax), 6.200%, 12/01/19
(Pre-refunded to 12/01/02)
- -----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.7%
140,000 Muskogee County Home Finance Authority (Oklahoma), Single 6/00 at 102 AAA 145,075
Family Mortgage 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 5,586,550
(Obligated Group consisting of Baptist Medical Center of
Oklahoma, Inc., South Oklahoma City Hospital Corporation
and Baptist Rural Health System, Inc.), Fixed Rate Bonds,
6.250%, 8/15/12
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 1.0%
3,000,000 North Penn Water Authority (Montgomery County, Pennsylvania), 11/04 at 101 AAA 3,483,270
Water Revenue Bonds, Series of 1994,
7.000%, 11/01/24 (Pre-refunded to 11/01/04)
3,900,000 The Philadelphia Municipal Authority (Philadelphia, Pennsylvania), 11/01 at 102 AAA 4,305,717
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 7/00 at 102 AAA 1,058,490
Revenue Refunding Bonds, Series A of 1990 (The Washington Hospital
Project), 7.150%, 7/01/17
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Puerto Rico--0.5%
$ 3,750,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1992 (General 7/02 at 101 1/2 AAA $ 4,140,675
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%, 7/15/11 7/01 at 101 1/2 AAA 4,360,800
(Pre-refunded to 7/15/01)
3,130,000 Kent County Water Authority (Rhode Island), General Revenue Bonds, 1994 7/04 at 102 AAA 3,486,601
Series A, 6.350%, 7/15/14
1,000,000 Providence Housing Development Corporation, Mortgage Revenue Refunding 7/04 at 102 AAA 1,083,560
Bonds, Series 1994A (FHA-Insured Mortgage Loan--Barbara Jordan
Apartments Project) (Providence, Rhode Island), 6.650%, 7/01/15
2,250,000 Rhode Island Depositors Economic Corporation, Special Obligation Bonds, 8/02 at 102 AAA 2,494,508
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 10,535,600
Revenue Bonds (City of Cranston/Triton Ocean State LLC Project), Series
1997, 5.800%, 9/01/22 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
South Carolina--3.7%
Charleston County, South Carolina, Charleston Public Facilities
Corporation, Certificates of Participation, Series 1994B:
1,430,000 6.875%, 6/01/14 (Pre-refunded to 6/01/04) 6/04 at 102 AAA 1,650,506
70,000 6.875%, 6/01/14 6/04 at 102 AAA 79,315
2,385,000 7.000%, 6/01/19 (Pre-refunded to 6/01/04) 6/04 at 102 AAA 2,766,409
115,000 7.000%, 6/01/19 6/04 at 102 AAA 130,699
5,435,000 Greenville Memorial Auditorium District Public Facilities Corporation, 3/06 at 102 AAA 6,041,763
South Carolina, Certificates of Participation (Bi-Lo Center Project),
Series 1996B, 5.750%, 3/01/22 (Pre-refunded to 3/01/06)
3,845,000 Greenville Memorial Auditorium District Public Facilities Corporation, 3/09 at 102 AAA 3,856,535
South Carolina, Refunding Certificates of Participation (Bi-Lo Center
Project), Series 1999B, 5.200%, 3/01/27
15,000,000 Orangeburg County, South Carolina, Solid Waste Disposal Facilities 11/02 at 101 AAA 15,476,850
Revenue Bond (South Carolina Electric and Gas Company Project), Series
1994, 5.700%, 11/01/24 (Alternative Minimum Tax)
2,000,000 City of Rock Hill, South Carolina, Combined Utility System Revenue Bonds, 1/01 at 102 AAA 2,119,480
Series 1991, 6.375%, 1/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
Texas--7.2%
3,000,000 Bexar County, Texas, Health Facilities Development Corporation, Hospital 8/04 at 102 AAA 3,450,030
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 5,059,127
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 1,200,600
1990, 7.400%, 2/15/10
500,000 City of Houston, Texas, Senior Lien Hotel Occupancy Tax and Parking 7/01 at 100 AAA 535,625
Facilities, Weekly Adjustable/Fixed Rate Revenue Bonds, Series 1985,
Custodial Receipts, Series A, 7.000%, 7/01/15 (Pre-refunded to 7/01/01)
825,000 Lower Colorado River Authority, Priority Refunding Revenue Bonds, Series 1/01 at 102 AAA 881,917
1991 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 14,280,273
5,405,000 10.000%, 12/15/20 No Opt. Call AAA 8,895,387
5,000,000 Tarrant County Health Facilities Development Corporation, Hospital No Opt. Call AAA 5,609,250
Revenue Refunding and Improvement Bonds (Fort Worth Osteopathic
Hospital, Inc. Project), Series 1993, 6.000%, 5/15/21
6,080,000 Texas Health Facilities Development Corporation, Hospital Revenue Bonds 8/03 at 102 AAA 6,677,421
(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 Mortgage 9/07 at 102 AAA 5,295,508
Revenue Bonds, 1997 Series A Teams Structure, 5.800%, 9/01/29
(Alternative Minimum Tax)
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas (continued)
$ 5,050,000 Tyler Health Facilities Development Corporation, Texas, Hospital 11/07 at 102 AAA $ 5,288,916
Revenue Bonds (East Texas Medical Center Regional Healthcare
System Project), Series 1997B, 5.600%, 11/01/27
5,000,000 Tyler Health Facilities Development Corporation, Texas, Hospital 2/09 at 102 AAA 5,003,900
Revenue Bonds (East Texas Medical Center Regional Healthcare System
Project), Series 1997D (Remarketed), 5.375%, 11/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
Utah - 0.9%
3,055,000 State of Utah, State Building Ownership Authority, Lease Revenue 11/05 at 100 AAA 3,360,928
Bonds (State Facilities Master Lease Program), Series 1995A, 5.750%,
5/15/18 (Pre-refunded to 11/15/05)
60,000 Utah Housing Finance Agency, Single Family Mortgage Senior Bonds, No Opt. Call AAA 64,742
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, General 2/05 at 100 AAA 3,964,205
Obligation Water Bonds, Series 1995, 6.600%, 2/01/25
(Pre-refunded to 2/01/05)
- -----------------------------------------------------------------------------------------------------------------------------------
Vermont - 1.1%
9,235,000 Vermont Housing Finance Agency, Single Family Housing Bonds, 6/07 at 101 1/2 AAA 9,714,758
Series 9, 5.900%, 5/01/29 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Washington - 2.0%
8,800,000 Public Utility District No. 1 of Chelan County, Washington, 7/08 at 102 AAA 8,638,256
Chelan Hydro-Consolidated System Revenue Bonds, Series 1998A, 5.250%,
7/01/33 (Alternative Minimum Tax)
1,000,000 City of Marysville, Washington, Water and Sewer Revenue Bonds, 12/03 at 100 AAA 1,135,590
Series of 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 5,346,100
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 2,222,939
Unlimited Tax General Obligation Bonds, Series of 1994, 6.125%,
12/01/13 (Pre-refunded to 12/01/04)
- -----------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 0.4%
2,000,000 City of Superior, Wisconsin, Limited Obligation Refunding Revenue No Opt. Call AAA 2,480,119
Bonds (Midwest Energy Resources Company Project), Series E-1991
(Collateralized), 6.900%, 8/01/21
1,000,000 Three Lakes School District General Obligation, 6.750%, 4/01/12 4/03 at 100 AAA 1,110,100
(Pre-refunded to 4/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Wyoming - 0.2%
2,000,000 The Trustees of the University of Wyoming, Facilities Revenue Bonds, 6/00 at 101 AAA 2,092,019
Series 1991, 7.100%, 6/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
$841,771,000 Total Investments - (cost $782,201,919) - 99.1% 853,095,629
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 7,665,826
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $860,761,455
====================================================================================================================
</TABLE>
All of the bonds in the portfolio are either covered by Original
Issue Insurance. Secondary Market Insurance or Portfolio
Insurance, or are backed by an escrow or trust containing
sufficient U.S. Government agency securities, any of which ensure
the timely payment of principal and interest.
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year) and
prices of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or Moody's
rating.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
24
<PAGE>
Statement of Net Assets
April 30, 1999
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $2,919,418,804 $853,095,629
Cash 12,291,880 --
Receivables:
Interest 52,043,093 15,179,604
Investments sold 200,000 --
Shares sold 962,964 1,548,296
Other assets 39,634 9,675
- --------------------------------------------------------------------------------------------------
Total assets 2,984,956,375 869,833,204
- --------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 560,417
Payables:
Investments purchased -- 4,984,896
Shares redeemed 2,665,578 648,400
Accrued expenses:
Management fees (note 6) 1,101,513 336,490
12b-1 distribution and service fees (notes 1 and 6) 30,273 34,514
Other 303,397 189,042
Dividends payable 9,145,532 2,317,990
- --------------------------------------------------------------------------------------------------
Total liabilities 13,246,293 9,071,749
- --------------------------------------------------------------------------------------------------
Net assets (note 7) $2,971,710,082 $860,761,455
==================================================================================================
Class A Shares (note 1)
Net assets $ 120,418,263 $109,985,516
Shares outstanding 12,579,145 9,859,679
Net asset value and redemption price per share $ 9.57 $ 11.16
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 9.99 $ 11.65
==================================================================================================
Class B Shares (note 1)
Net assets $ 10,085,570 $ 13,601,583
Shares outstanding 1,053,529 1,219,133
Net asset value, offering and redemption price per share $ 9.57 $ 11.16
==================================================================================================
Class C Shares (note 1)
Net assets $ 7,190,608 $ 10,946,794
Shares outstanding 751,553 990,641
Net asset value, offering and redemption price per share $ 9.57 $ 11.05
==================================================================================================
Class R Shares (note 1)
Net assets $2,834,015,641 $726,227,562
Shares outstanding 295,863,325 65,343,430
Net asset value, offering and redemption price per share $ 9.58 $ 11.11
==================================================================================================
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
Statement of Operations
Year Ended April 30, 1999
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- ------------------------------------------------------------------------------------------------------
Investment Income (note 1) $163,127,763 $47,880,643
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Expenses
Management fees (note 6) 13,391,083 4,052,926
12b-1 service fees - Class A (notes 1 and 6) 218,760 201,568
12b-1 distribution and service fees -- Class B (notes 1 and 6) 62,958 90,103
12b-1 distribution and service fees -- Class C (notes 1 and 6) 45,440 70,475
Shareholders' servicing agent fees and expenses 2,611,482 757,723
Custodian's fees and expenses 316,474 123,192
Trustees' fees and expenses (note 6) 56,461 13,824
Professional fees 61,856 19,888
Shareholders' reports -- printing and mailing expenses 500,720 152,849
Federal and state registration fees 97,695 71,871
Portfolio insurance expense -- 32,366
Other expenses 61,175 26,655
- ------------------------------------------------------------------------------------------------------
Total expenses 17,424,104 5,613,440
- ------------------------------------------------------------------------------------------------------
Net investment income 145,703,659 42,267,203
- ------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 9,886,226 1,889,114
Net change in unrealized appreciation or depreciation of investments 33,024,384 9,916,541
- ------------------------------------------------------------------------------------------------------
Net gain from investments 42,910,610 11,805,655
- ------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $188,614,269 $54,072,858
======================================================================================================
See accompanying notes to financial statements.
</TABLE>
26
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Municipal Bond Insured Municipal Bond
----------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
4/30/99 4/30/98 4/30/99 4/30/98
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 145,703,659 $ 147,700,569 $ 42,267,203 $ 41,918,555
Net realized gain from investment transactions (notes 1 and 4) 9,886,226 7,384,205 1,889,114 6,786,199
Net change in unrealized appreciation or depreciation
of investments 33,024,384 100,807,694 9,916,541 23,049,222
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 188,614,269 255,892,468 54,072,858 71,753,976
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (5,110,885) (4,066,811) (4,814,934) (3,941,471)
Class B (259,255) (85,661) (375,574) (102,807)
Class C (250,362) (205,194) (396,974) (294,623)
Class R (139,355,083) (144,088,029) (36,432,960) (37,785,864)
From accumulated net realized gains from investment transactions:
Class A (276,503) (268,871) (289,942) (249,043)
Class B (16,969) (6,710) (28,707) (6,889)
Class C (15,972) (15,012) (28,282) (20,375)
Class R (7,337,232) (9,099,862) (2,094,492) (2,288,357)
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (152,622,261) (157,836,150) (44,461,865) (44,689,429)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 174,357,355 188,619,020 79,661,007 75,516,982
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 116,641,699 123,635,013 29,306,392 30,119,890
- ----------------------------------------------------------------------------------------------------------------------------------
290,999,054 312,254,033 108,967,399 105,636,872
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (279,773,551) (336,624,740) (88,373,485) (92,161,203)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 11,225,503 (24,370,707) 20,593,914 13,475,669
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 47,217,511 73,685,611 30,204,907 40,540,216
Net assets at the beginning of year 2,924,492,571 2,850,806,960 830,556,548 790,016,332
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $2,971,710,082 $2,924,492,571 $860,761,455 $830,556,548
==================================================================================================================================
Balance of undistributed net investment income at the end of year $ 1,260,486 $ 532,412 $ 566,781 $ 320,020
==================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
27
<PAGE>
Notes to Financial Statements (continued)
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.
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 Funds' 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, 1999, Insured Municipal Bond had an outstanding when-issued purchase
commitment of $4,984,896. There were no such outstanding purchase commitments in
Municipal Bond.
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 monthly as a dividend 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.
28
<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 realized 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, 1999, 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 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 only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended April 30, 1999.
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
29
<PAGE>
Notes to Financial Statements (continued)
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Municipal Bond
---------------------------------------------------------
Year Ended 4/30/99 Year Ended 4/30/98
---------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 3,884,851 $ 37,318,567 3,610,340 $ 34,138,865
Class B 649,958 6,249,871 425,808 4,027,584
Class C 358,434 3,445,814 198,476 1,867,171
Class R 13,266,170 127,343,103 15,747,999 148,585,400
Shares issued to shareholders due to reinvestment of distributions:
Class A 376,509 3,619,256 314,639 2,970,090
Class B 16,794 161,493 5,660 53,689
Class C 18,430 177,022 18,178 171,005
Class R 11,717,295 112,683,928 12,768,468 120,440,229
- ----------------------------------------------------------------------------------------------------------------------------------
30,288,441 290,999,054 33,089,568 312,254,033
- ----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,942,093) (18,655,868) (1,356,476) (12,834,251)
Class B (50,591) (484,678) (45,312) (430,447)
Class C (142,641) (1,371,429) (285,886) (2,670,807)
Class R (26,989,392) (259,261,576) (33,956,929) (320,689,235)
- ----------------------------------------------------------------------------------------------------------------------------------
(29,124,717) (279,773,551) (35,644,603) (336,624,740)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,163,724 $ 11,225,503 (2,555,035) $ (24,370,707)
==================================================================================================================================
Insured Municipal Bond
---------------------------------------------------------
Year Ended 4/30/99 Year Ended 4/30/98
---------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 2,677,296 $ 29,968,100 2,354,322 $ 26,011,707
Class B 822,802 9,209,496 407,571 4,505,416
Class C 367,390 4,077,116 311,528 3,417,614
Class R 3,266,237 36,406,295 3,788,731 41,582,245
Shares issued to shareholders due to reinvestment of distributions:
Class A 281,935 3,161,785 242,808 2,675,963
Class B 16,650 186,828 5,134 56,987
Class C 24,527 272,429 22,045 240,583
Class R 2,299,262 25,685,350 2,475,051 27,146,357
- ----------------------------------------------------------------------------------------------------------------------------------
9,756,099 108,967,399 9,607,190 105,636,872
- ----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,302,533) (14,580,513) (891,941) (9,818,160)
Class B (72,969) (815,543) (5,821) (65,030)
Class C (137,020) (1,519,584) (129,381) (1,413,103)
Class R (6,411,557) (71,457,845) (7,358,468) (80,864,910)
- ----------------------------------------------------------------------------------------------------------------------------------
(7,924,079) (88,373,485) (8,385,611) (92,161,203)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 1,832,020 $ 20,593,914 1,221,579 $ 13,475,669
==================================================================================================================================
</TABLE>
30
<PAGE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on June 1, 1999, to shareholders of record on May 7,
1999, as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- -----------------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $ .0375 $ .0450
Class B .0315 .0380
Class C .0330 .0395
Class R .0390 .0465
=============================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended April
30, 1999, were as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- -----------------------------------------------------------------------------
<S> <C> <C>
Purchases:
Long-term municipal securities $343,495,419 $134,039,943
Short-term municipal securities 164,493,000 64,700,000
Sales:
Long-term municipal securities 347,465,026 109,417,057
Short-term municipal securities 164,493,000 64,700,000
=============================================================================
</TABLE>
At April 30, 1999, 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, 1999, were as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- -----------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $ 261,853,519 $ 71,253,640
depreciation (1,588,626) (359,930)
- -----------------------------------------------------------------------------
Net unrealized appreciation $ 260,264,893 $ 70,893,710
=============================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays 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.
31
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended April 30, 1999, the Distributor collected sales
charges on purchases of Class A Shares of approximately $579,200 and $567,200
for Municipal Bond and Insured Municipal Bond, respectively, of which
approximately $503,500 and $500,900, 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, 1999, the Distributor compensated
authorized dealers directly with approximately $283,100 and $398,500 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, 1999, the Distributor retained approximately $78,600
and $118,800 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 also retained approximately $24,000 and
$31,400 of CDSC on share redemptions for Municipal Bond and Insured Municipal
Bond, respectively, during the fiscal year ended April 30, 1999.
7. Composition of Net Assets
At April 30, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- ------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $2,706,654,482 $787,802,152
Balance of undistributed net
investment income 1,260,486 566,781
Accumulated net realized gain from
investment transactions 3,530,221 1,498,812
Net unrealized appreciation of
investments 260,264,893 70,893,710
- ------------------------------------------------------------------------------
Net assets $2,971,710,082 $860,761,455
==============================================================================
</TABLE>
8. Investment Composition
At April 30, 1999, the revenue sources by municipal purpose, expressed as a
percent of long-term investments, were as follows:
<TABLE>
<CAPTION>
Insured
Municipal Bond Municipal Bond
- ------------------------------------------------------------------------------
<S> <C> <C>
Education and Civic Organizations 1% 4%
Health Care 18 15
Housing/Multifamily 7 1
Housing/Single Family 5 9
Tax Obligation/General 7 11
Tax Obligation/Limited 9 8
Transportation 5 3
U.S. Guaranteed 15 32
Utilities 23 10
Water and Sewer 9 6
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 (37% 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.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
32
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout
each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------------------- ---------------------------
Net
MUNICIPAL BOND Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
April 30, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/95)
1999 $9.46 $.45 $ .13 $ .58 $(.45) $(.02) $(.47) $9.57 6.28%
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)
1999 9.46 .38 .13 .51 (.38) (.02) (.40) 9.57 5.49
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)
1999 9.44 .40 .15 .55 (.40) (.02) (.42) 9.57 5.91
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)
1999 9.46 .47 .14 .61 (.47) (.02) (.49) 9.58 6.59
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
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
April 30, (000) ment ment ment (a) ment (a) Ratio
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (6/95)
1999 $ 120,418 .77% 4.71% .77% 4.71% 12%
1998 97,029 .80 4.83 .80 4.83 10
1997 (c) 70,331 .77* 5.13* .77* 5.13* 2
1997 (d) 68,204 .81 5.11 .81 5.11 12
1996 (e) 37,089 .86* 5.11* .83* 5.14* 17
Class B (2/97)
1999 10,086 1.52 3.96 1.52 3.96 12
1998 4,136 1.56 4.05 1.56 4.05 10
1997 (c) 468 1.53* 4.39* 1.53* 4.39* 2
1997 (e) 43 1.51 5.23 1.51* 5.23* 12
Class C (6/95)
1999 7,191 1.32 4.15 1.32 4.15 12
1998 4,886 1.35 4.29 1.35 4.29 10
1997 (c) 5,360 1.32* 4.58* 1.32* 4.58* 2
1997 (d) 5,039 1.54 4.37 1.54 4.37 12
1996 (e) 1,915 1.64* 4.33* 1.58* 4.39* 17
Class R (11/76)
1999 2,834,016 .57 4.90 .57 4.90 12
1998 2,818,442 .60 5.04 .60 5.04 10
1997 (c) 2,774,648 .57* 5.33* .57* 5.33* 2
1997 (d) 2,818,214 .57 5.35 .57 5.35 12
1996 (d) 2,878,641 .59 5.53 .59 5.53 17
1995 (d) 2,741,178 .59 5.79 .59 5.79 17
=================================================================================================
</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.
33
<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
------------------------------- ------------------------------
Net
INSURED MUNICIPAL BOND Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
April 30, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1999 $11.03 $.54 $ .16 $ .70 $(.54) $(.03) $(.57) $11.16 6.43%
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)
1999 11.03 .45 .16 .61 (.45) (.03) (.48) 11.16 5.63
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)
1999 10.92 .47 .16 .63 (.47) (.03) (.50) 11.05 5.86
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)
1999 10.98 .56 .15 .71 (.55) (.03) (.58) 11.11 6.62
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
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
April 30, (000) ment ment ment (a) ment (a) Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1999 $109,986 .81% 4.80% .81% 4.80% 13%
1998 90,459 .86 4.91 .86 4.91 40
1997 (c) 69,291 .84* 5.12* .84* 5.12* 12
1997 (d) 68,268 .87 5.07 .87 5.07 35
1996 (d) 46,943 .92 5.00 .91 5.01 27
1995 (e) 14,097 1.27* 5.28* 1.00* 5.55* 25
Class B (2/97)
1999 13,602 1.56 4.05 1.56 4.05 13
1998 4,992 1.61 4.14 1.61 4.14 40
1997 (c) 488 1.59* 4.36* 1.59* 4.36* 12
1997 (e) 228 1.58* 4.84* 1.58* 4.84* 35
Class C (9/94)
1999 10,947 1.36 4.25 1.36 4.25 13
1998 8,037 1.41 4.36 1.41 4.36 40
1997 (c) 5,615 1.39* 4.57* 1.39* 4.57* 12
1997 (d) 5,448 1.61 4.33 1.61 4.33 35
1996 (d) 5,151 1.63 4.34 1.63 4.34 27
1995 (e) 3,979 1.75* 4.83* 1.75* 4.83* 25
Class R (12/86)
1999 726,228 .62 5.00 .62 5.00 13
1998 727,068 .66 5.12 .66 5.12 40
1997 (c) 714,622 .64* 5.31* .64* 5.31* 12
1997 (d) 732,587 .63 5.31 .63 5.31 35
1996 (d) 761,936 .63 5.33 .63 5.33 27
1995 (d) 736,702 .64 5.67 .64 5.67 25
=========================================================================================================
</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.
34
<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, 1999, 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, 1999, 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, 1999, 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, 1999
35
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
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
Dividend and
Growth Fund
Income
Income Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
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.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide 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.
36
<PAGE>
Fund Information
Board of Trustees
Robert R Bremner
Lawrence H. Brown
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
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public
Accountants
Arthur Andersen LLP
Chicago, IL
- -----
37
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive 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 income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[Photo of John Nuveen, Sr.
appears here]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL. 60606-1286
www.nuveen.com
<PAGE>
April 30, 1999 Annual Report
NUVEEN
Mutual Funds
Nuveen Municipal Bond Funds
[PHOTO APPEARS HERE]
Dependable, tax-free
income to help
you keep more
of what you earn.
All-American
Municipal Bond Fund
Intermediate
Municipal Bond Fund
Limited Term
Municipal Bond Fund
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser(SM) for Income Investing
<PAGE>
Contents
1 Dear Shareholder
4 Report from the Portfolio Managers
7 Nuveen Flagship All-American Municipal Bond Fund Highlights
8 Nuveen Flagship Intermediate Municipal Bond Fund
9 Nuveen Flagship Limited Term Municipal Bond Fund Highlights
10 Portfolio of Investments
36 Statement of Net Assets
37 Statement of Operations
38 Statement of Changes in Net Assets
39 Notes to Financial Statements
45 Financial Highlights
48 Report of Independent Public Accountants
49 Fund Information
<PAGE>
DEAR Shareholder
I would like to take the opportunity to report on the performance of the Nuveen
Flagship All-American Municipal Bond Fund, the Nuveen Flagship Intermediate
Municipal Bond Fund and the Nuveen Flagship Limited Term Municipal Bond Fund for
the fiscal year ended April 30, 1999.
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
"Improvements in productivity, spurred by technological advances, have been
responsible for offsetting wage and other inflationary pressures."
The Year in Review.
The past 12 months saw the U.S. economy continue its pattern of non-inflationary
growth, accompanied by low interest rates and unemployment levels that remain
among the lowest in three decades. Much of the current economic growth is
propelled by consumer demand, which has helped the U.S. resist the downward pull
of weaker overseas markets.
All indications point to a confident U.S. consumer who is comfortable with the
current state of the economy, especially the performance of the housing, stock
and job markets. This confidence is reflected in the most recent Consumer
Confidence Index report, issued by the Conference Board Inc., which showed a
record-setting seventh consecutive month of gains in May.
On the global front, the turmoil of the past two years appears to be fading
somewhat, as international financial markets have begun to send recovery
signals.
Inflation in the U.S. continued to operate at benign levels, with an increase
of 2.2% for the 12 months ended April 30, 1999. Despite a spike in consumer
prices in April, propelled by rising energy costs (which have subsequently
declined), the general backdrop of inflation indicators continued to be mild,
with the employment cost index, average hourly earnings, and import and producer
price trends all remaining favorable.
As Federal Reserve Chairman Alan Greenspan recently stated, one of the key
factors in achieving today's peaceful coexistence of economic growth and low
inflation has been increased productivity. Improvements in productivity, spurred
by technological advances, have been responsible for offsetting wage and other
inflationary pressures that we would normally expect to see as part of a growing
economy.
1
<PAGE>
"Municipal bonds represented a reasonably insulated haven in an otherwise
turbulent market, with lower volatility relative to Treasury bonds and other
fixed-income investments."
On the interest rate front, last fall saw the Federal Reserve ease short-term
rates for the first time in almost three years. Between the end of September and
mid-November 1998, three successive cuts brought the federal funds rate to
4.75%, averting a potential domestic credit crunch and restoring some stability
to global markets. The fed funds rate is the rate that banks charge each other
for overnight loans and serves as the basis many financial institutions use for
setting interest charges on a variety of products, from mortgage and car loans
to credit cards.
Following the success of these preemptive moves, the Fed indicated that
fighting inflation continued to be a top priority by remaining in a proactive
mode and responding to April's increased consumer prices with a shift to a
tightening bias. By doing this, the Fed signaled its continued support of the
market without changing interest rates or fundamentally altering the economy.
In the months ahead, we will continue to watch for indications from the Fed
and other factors that affect the economy's future, including wage and
employment statistics, reports on productivity growth, capital equipment
spending and the progress of international economic recovery. We believe these
key components will influence the outlook for fixed-income markets well into the
new millennium.
Municipal Bonds: An Attractive Investment Option.
As interest rates declined over the past year, our municipal bond funds
continued to provide bright spots among the various investment options, offering
attractive, stable income in a market that places a high premium on yield. In
1998, municipal bonds represented a reasonably insulated haven in an otherwise
turbulent market, with lower volatility relative to Treasury bonds and other
fixed-income investments. In fact, for the first four months of 1999, municipals
outperformed Treasuries.
The high ratio of tax-exempt municipal yields to Treasury yields sheltered
municipal bonds from the price decline that occurred in the Treasury market
during the first four months of the year.
While the interest rate on 30-year Treasury bonds rose from 5.10% at the end
of December to 5.66% as of April 30, 1999, the yield on the Bond Buyer Revenue
Bond Index, an unmanaged index of long-term municipal revenue bonds, gained just
three basis points--from 5.26% to 5.29%. Given the inverse relationship between
interest rates and bond prices, we saw bond prices fall as rates rose over this
period. Though municipal bond prices did decrease, the decline was not as
dramatic as the drop in Treasuries.
The differential in performance reflects the fact that Treasuries had become
relatively expensive as the result of safe-haven buying during the international
economic crises of the past year. As the financial turmoil subsided, however,
foreign investors returned to investing in their own countries rather than in
U.S. dollar-denominated securities, and the decline in demand caused U.S.
Treasuries to drop in price.
At the end of April 1999, the ratio between long-term municipal yields and 30-
year Treasury yields stood at 94%, compared with the historical average of 86%
for the period of 1986-1999. For investors, this meant that quality long-term
municipal bonds offered yields comparable to those of long Treasury bonds--even
before the tax advantages of municipal bonds were taken into
2
<PAGE>
account. On an after-tax basis in today's market, municipal bonds continue to
present an exceptionally attractive investment option relative to Treasuries.
During 1998, lower interest rates and the strong economy combined to generate
high levels of new municipal issuance and a significant increase in the
refinancing of existing bonds. Municipal issuance in 1998 reached $284 billion,
up 29% over 1997.
In terms of total municipal issuance, 1998 ranked as the second largest year
on record, next to 1993's $292 billion. In the first four months of 1999,
however, as the market settled into a more stable interest rate environment,
refunding activity dropped off dramatically. As a result, municipal supply in
1999 has declined by approximately 25% from the levels of a year ago. This, in
turn, has enhanced the attractiveness of the municipal bonds that were brought
to market, as demand--especially from individual investors--remained relatively
strong.
The strength of the U.S. economy continues to benefit municipal issuers, as
higher tax revenues produced improvements in the fundamental health of many
municipalities. In 1998, for example, state tax revenues rose by an average of
6.9%. This expanded flow of tax dollars resulted in higher credit ratings for
many municipal governments. (Moody's Investors Service, Inc. and Standard &
Poor's Corporation issue credit ratings for municipal bonds, representing their
opinions as to the quality of the securities.)
The Value of Nuveen Expertise. Nuveen Mutual Funds are a diverse collection of
investments featuring an impressive ensemble of highly regarded asset management
firms--Premier Advisers/SM/--who direct the investment activities of each
portfolio.
The Premier Advisers are firms that have earned a reputation for excellence in
their field of expertise--whether in municipal bonds, blue-chip growth stocks,
large-cap value stocks or international securities. They include: Nuveen
Investment Advisory Services for income investing, Rittenhouse Financial
Services for growth investing, and Institutional Capital Corporation for value
investing.
For more information on our funds, contact your financial adviser for a
prospectus, or call Nuveen at (800) 621-7227, or download one from
www.nuveen.com. Please read the prospectus carefully before you invest or send
money. We encourage you to talk with your financial adviser about Nuveen's
expanding array of investments and the ways they can help you establish a
diversified portfolio designed to build and sustain long-term financial
security.
Nuveen Flagship All-American Municipal Bond Fund, Nuveen Flagship Intermediate
Municipal Bond Fund and Nuveen Flagship Limited Term Municipal Bond Fund are
just three examples of the quality investments that embody Nuveen's income
investing expertise--carrying on a tradition established throughout Nuveen's
100-year history. More than 1.3 million investors have trusted Nuveen to help
them build and sustain the wealth of a lifetime. We are grateful for the
confidence you have placed in us and are dedicated to maintaining your trust in
the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
June 15, 1999
"...Municipal supply in 1999 has declined... this has enhanced the
attractiveness of the municipal bonds that were brought to market."
3
<PAGE>
Report from the Portfolio Managers
Despite troubles in the global financial arena that led investors on a flight to
quality, the municipal market did not act out of the ordinary during the fiscal
year ended April 30, 1999. Rick Huber, portfolio manager of Nuveen Flagship All-
American Municipal Bond Fund and Nuveen Flagship Limited Term Municipal Bond
Fund, and Paul Brennan, portfolio manager of Nuveen Flagship Intermediate
Municipal Bond Fund, discuss the municipal bond market, as well as their funds'
performance and key investment strategies.
Comments cover the fiscal year ended April 30, 1999, and all performance
statistics are quoted for Class A shares at net asset value.
What economic factors affected the municipal market May 1, 1998 through April
30, 1999? The major news event of the funds' fiscal year was the foreign
markets' financial crises, which caused a surge in the global demand for U.S.
Treasury bonds--the world's most liquid and risk-free securities. This
phenomenon is commonly referred to as a "flight to quality." However, because
municipal bonds are not as attractive to foreign buyers, who generally cannot
take advantage of their tax-exempt feature, the big news in `98 had little
effect on the municipal market.
The Federal Reserve Board responded to the global crisis by lowering short-
term interest rates three times between late September and early November.
The Fed cuts succeeded in their objective and by early 1999, investor
sentiment improved and the crisis appeared to be over.
Stronger-than-expected U.S. economic growth led to a dramatic selloff in the
Treasury market in February, however, as concerns grew over the potential for
inflation, which has been unusually low in recent years. Municipal bonds
outperformed Treasury securities during the selloff.
Municipal issuance was strong during the funds' fiscal year, as issuers took
advantage of low interest rates. Because of higher supply and lower demand,
municipal bond yields exceeded taxable yields at times, making it a rewarding
asset class for investors. More typically, municipals yield about 86% of
comparably maturing Treasury bonds.
As the second quarter of 1999 approached, the foreign economic crises receded
further into the background, and the U.S. economy remained buoyant. However,
inflation fears became more prevalent as oil prices rebounded and the consumer
price index spiked upward, causing yields on most fixed-income securities to
rise.
Rick, what can you tell us about Nuveen Flagship All-American Municipal Bond
Fund's performance? For the fiscal year ended April 30, 1999, the total return
for Class A shares on net asset value was 6.23%, outperforming the 5.78% average
total return* of the Lipper General Municipal Bond Peer Group.** The fund ranked
74 out of 258 funds in the category.
Rick, how did Nuveen Flagship Limited Term Municipal Bond Fund perform during
its fiscal year? For the one-year period ended April 30, 1999, the total return*
for Class A shares on net asset value was 5.57%.
* Total return is the sum of the fund's income and capital gains distributions
plus price changes in the underlying bond portfolio.
**The Lipper Peer Group return represents the average annualized returns of the
funds in the applicable Lipper National Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charge.
4
<PAGE>
To what do you attribute both funds' performance? The strong relative
performance of Nuveen Flagship All-American Municipal Bond Fund was due
primarily to our focus on the yield curve, which describes the yield available
on bonds at various maturities. We found value in securities that were at a
premium and were priced to call options. The benefit to the fund, and therefore
to its shareholders, is that these securities produced the greatest amount of
coupon return, which translates into price stability and higher distribution
yield.
Also a boost to the All-American Fund's performance during the last part of
the fiscal year was our purchase of some industrial-backed municipal bonds,
which we bought at attractive prices when much of the market perceived that
global economic weakness would bleed into the U.S. economy and hurt this sector.
This has not happened, and as a result, industrial-backed municipal bonds have
outperformed traditional tax-backed obligations.
In addition, the fund benefited from refunding activity. One such deal took
place in the first quarter of 1999. The Illinois Education Facilities Authority
for Columbia College bonds were refunded and are now backed by U.S. government
escrow securities. As a result, the bonds have appreciated in price.
The Limited Term Municipal Bond Fund benefited mainly from values we found in
private placements and limited public offerings, bonds that are offered to a
smaller group of buyers. Their more private nature involves increased risks, and
they therefore generally have offered higher yields than traditional public
offerings. Because there is less public information available on private deals,
we rely on our capable research team to help mitigate those risks by performing
extensive research on each potential issue.
What key strategies did you and your team use in managing the All-American
Municipal Bond Fund and the Limited Term Municipal Bond Fund? Our value-
investing philosophy of seeking undervalued sectors and bonds proved effective
during the year for both funds. For example, in the All-American Fund, we
purchased energy bonds when oil prices were particularly weak.
Why was the All-American Municipal Bond Fund's dividend reduced during this
period? In order to maintain the fund's long-term objective, we traded some of
the fund's existing bonds, which typically had higher coupon rates, as they
neared their maturity dates and purchased in their place bonds with later
maturity dates.
Because of current market conditions, namely the lower interest rates, the
newer bonds are earning less income for the fund than the older bonds had.
On the bright side, the new bonds offer better total return potential for the
fund.
Paul, what can you tell us about the Intermediate Municipal Bond Fund's
performance? The total return for Class A shares on net asset value for the
fiscal year ended April 30, 1999 was 6.14%, which exceeded the average total
return of 5.83% posted by the Lipper National Intermediate Municipal peer group.
The fund ranked 38 out of 134 funds in its peer group.
During the fiscal year, the intermediate bond sector was more affected by
falling interest rates than the long-term sector was since intermediates are
more highly correlated to short-term rates, which the Fed cut three times in the
fall.
We attribute the fund's strong performance primarily to our decision to keep
the portfolio's average duration longer than that of its peers'. A bond's
duration measures its price volatility, or reaction to interest rate movements.
The longer the duration, the more sensitive it is to changes in interest rates.
Virtually all of the bonds in our portfolio make fixed interest payments and
their prices rise when interest rates fall due to the inverse relationship of
bond prices and interest rates.
Also a boost to performance was our ability to take advantage of opportunities
to purchase a select amount of lower-rated investment-grade bonds with
relatively attractive yields. In many instances, these types of issues were only
offered to institutional investors like Nuveen. Further, Nuveen's seasoned
research staff helps identify the most appropriate opportunities for the fund.
5
<PAGE>
What were your key strategies in managing the Intermediate Municipal Bond Fund?
We worked to maintain the maturity structure of the portfolio, which includes
many noncallable bonds. The maturities within the portfolio become shorter over
time, and as they lose their intermediate-term status, we trade them in for
bonds with longer maturities, in the 11-12 year range, in order to maintain the
fund's investment objective as an intermediate-term bond fund.
Much like for the Limited Term and All-American funds, our value-investing
philosophy of trying to buy undervalued sectors and individual bonds proved
effective during the year. In addition to finding attractively priced lower-
rated bonds as I mentioned earlier, we have found value in the transportation,
water and sewer and education sectors.
The fund's weighting in Florida issues primarily reflects the merger of Nuveen
Flagship Florida Intermediate Municipal Bond Fund into Nuveen Flagship
Intermediate Municipal Bond Fund last fall. We plan to maintain this weighting
until we see any change in the Florida municipal market that would create a
beneficial selling opportunity.
Why was the Intermediate Municipal Bond Fund's dividend decreased during the
period? The combination of low interest rates, trading activity geared to
maintain the fund's intermediate-term focus, and new cash flow caused the fund
to reduce its dividend slightly. The fund's investment objective is to provide
as high a level of current interest income, exempt from regular federal, state
and in some cases, local income taxes, as is consistent with preservation of
capital. So there are two goals, income as well as total return.
The small reduction was necessary in keeping with the interests of
shareholders' total return investment objectives.
Rick and Paul, what is your outlook for the Nuveen Flagship municipal bond
funds? We expect U.S. Treasury rates will remain stable for the rest of 1999,
and that municipal bonds will trade in line with Treasuries, closer to their
historical levels.
The economy should continue to grow moderately in a stable manufacturing
environment.
As a result, prices on the lower-quality investment-grade securities should
firm up, providing the potential for continued relatively strong performance by
the funds.
We will continue our commitment to enhancing call protection on the funds and
keeping each fund true to its specific investment objectives. As always, we will
search for pockets of opportunity in the municipal market that will help us
maintain the funds' dividends and total returns.
With the strong economy, municipal bond funds continue to be a wise choice for
many investors. Many investors are searching for attractive fixed-income
opportunities. With municipals being one of the few tax-free selections left,
demand is growing. Supply is expected to be on course at the levels we have seen
in 1998. A tight supply and high level on demand will typically provide a stable
environment for investments.
"We will continue our commitment to enhancing call protection
on the funds and keeping each fund true to its
specific investment objectives."
6
<PAGE>
NUVEEN FLAGSHIP ALL-AMERICAN MUNICIPAL BOND FUND
Highlights as of April 30, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $11.43 $ 11.44 $ 11.42 $ 11.44
- ---------------------------------------------------------------------------
April's Dividend $0.047 $0.0400 $0.0420 $0.0490
- ---------------------------------------------------------------------------
Fund Symbol FLAAX N/A FAACX N/A
- ---------------------------------------------------------------------------
CUSIP 67065Q889 67065Q871 67065Q863 67065Q855
- ---------------------------------------------------------------------------
Inception Date 10/88 2/97 6/93 2/97
- ---------------------------------------------------------------------------
Total Return (Annualized)/2/
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 6.23% 1.74% 5.46% 5.69% 6.54%
- -----------------------------------------------------------------------------------------
5-Year 7.70% 6.78% 7.04% 7.13% 7.82%
- -----------------------------------------------------------------------------------------
10-Year 8.48% 8.02% 8.02% 7.89% 8.54%
- -----------------------------------------------------------------------------------------
1-Year TER* 8.56% 3.97% 7.44% 7.77% 8.98%
</TABLE>
* Taxable Equivalent Return (31%)
/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.
Index Comparison/2/
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers Municipal Nuveen Flagship All-American Nuveen Flagship All-American
Bond Index Municipal Bond Fund (NAV) Municipal Bond Fund (Offer)
$21,803 $22,578 $21,630
- --------------------------------------------------------------------------------------------
<S> <C> <C>
10,000 10,000 9,580
- --------------------------------------------------------------------------------------------
10,720 10,560 10,110
- --------------------------------------------------------------------------------------------
11,950 11,850 11,350
- --------------------------------------------------------------------------------------------
13,090 13,180 12,630
- --------------------------------------------------------------------------------------------
14,740 15,190 14,550
- --------------------------------------------------------------------------------------------
15,060 15,580 14,930
- --------------------------------------------------------------------------------------------
16,060 16,540 15,840
- --------------------------------------------------------------------------------------------
17,340 17,800 17,050
- --------------------------------------------------------------------------------------------
18,650 19,260 18,460
- --------------------------------------------------------------------------------------------
20,390 21,250 20,360
- --------------------------------------------------------------------------------------------
21,803 22,578 21,630
- --------------------------------------------------------------------------------------------
</TABLE>
Monthly Tax-Free Dividends/4/ (Class A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<S> <C>
May .049
June .049
July .048
August .048
September .048
October .048
November .048
December .048
January .047
February .047
March .047
April .047
</TABLE>
* Nuveen Flagship All-American Municipal Bond Fund also paid shareholders
capital gains distribution in December of $0.0108 per share.
Past performance is not predictive of future results.
Morningstar Rating/TM 1/
****
Overall rating among 1579
municipal bond funds as
of 4/30/99.
Portfolio Statistics
Fund Net Assets $ 427 million
- ---------------------------------------------------
Effective Maturity 21.47 years
- ---------------------------------------------------
Average
Effective Duration 8.34
- ---------------------------------------------------
Top Five Sectors**
Utilities 20%
- ---------------------------------------------------
U.S. Guaranteed 14%
- ---------------------------------------------------
Transportation 13%
- ---------------------------------------------------
Health Care 13%
- ---------------------------------------------------
Education & Civic Organizations 9%
- ---------------------------------------------------
Bond Credit Quality**
[PIE CHART APPEARS HERE]
AAA/U.S.
Grtd...33%
AA.....10%
A......13%
BBB/
NR.....44%
**as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/1/ Morningstar proprietary ratings reflect historical risk-adjusted performance
as of 04/30/99. The ratings are subject to change every month. Ratings are
for the A share class only; other classes may vary. Past performance is no
guarantee of future results. Morningstar ratings are calculated form the
fund's three-, five-, and 10-year average annual returns (if applicable) in
excess of 90-day T-bill returns. All-American received 4 stars for the
three-, five-, and 10 year periods. The top 10% of the funds in a broad
asset class receive 5 stars, the next 22.5% receive 4 stars and the next 35%
receive 3 stars. The funds were rated among 1579, 1151, and 367 funds for
the three-, five-, and 10-year periods respectively.
/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
Municipal Bond Index. The Lehman Brothers 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.
7
<PAGE>
NUVEEN FLAGSHIP INTERMEDIATE MUNICIPAL BOND FUND
Highlights as of April 30, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares C Shares R Shares
<S> <C> <C> <C>
NAV $11.00 $ 11.02 $ 10.99
- ---------------------------------------------------------------------------
April's Dividend $ 0.04 $0.0350 $0.0415
- ---------------------------------------------------------------------------
Fund Symbol FINTX FINCX N/A
- ---------------------------------------------------------------------------
CUSIP 67065Q814 67065Q798 67065Q780
- ---------------------------------------------------------------------------
Inception Date 9/92 12/95 2/97
- ---------------------------------------------------------------------------
Total Return (Annualized)/1/
A Shares C Shares R Shares
NAV Offer NAV NAV
1-Year 6.14% 2.93% 5.66% 6.42%
- ------------------------------------------------------------------------------------
5-Year 6.84% 6.19% 6.29% 6.90%
- ------------------------------------------------------------------------------------
Since Inception 7.08% 6.59% 6.52% 7.13%
- ------------------------------------------------------------------------------------
1-Year TER* 8.24% 4.96% 7.50% 8.60%
</TABLE>
* Taxable Equivalent Return (31%)
/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 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.
Index Comparison/2/
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Lehman Brothers 7-year Intermediate Municipal Intermediate Municipal
Municipal Bond Index Bond Fund (NAV) Bond Fund (Offer)
$15,036 $15,693 $15,223
- ---------------------- ---------------------- ----------------------
<S> <C> <C>
10,000 10,000 9,700
10,550 10,920 10,600
10,880 11,280 10,940
11,520 11,810 11,460
12,390 12,720 12,340
13,050 13,570 13,160
14,080 14,790 14,340
15,036 15,693 15,223
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)/3/
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
May .042
June .042
July .042
August .042
September .0422
October .042
November .042
December .042
January .040
February .040
March .040
April .040
</TABLE>
/3/ The fund also paid shareholders capital gains distributions in December of
$0.0442 per share.
Past performance is not predictive of future results.
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Fund Net Assets $62 million
- --------------------------------------------------------------
Effective Maturity 9.06 years
- --------------------------------------------------------------
Average
Effective Duration 7.16
- --------------------------------------------------------------
Top Five Sectors**
Health Care 20%
- --------------------------------------------------------------
Transportation 16%
- --------------------------------------------------------------
Tax Obligation (Limited) 14%
- --------------------------------------------------------------
Tax Obligation (General) 12%
- --------------------------------------------------------------
Utilities 11%
- --------------------------------------------------------------
</TABLE>
[PIE CHART APPEARS HERE]
Bond Credit Quality**
AAA/U.S.
Grtd...........36%
AA..............6%
A..............17%
BBB/
NR.............41%
**as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/2/ 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
7-Year Municipal Bond Index. The Lehman Brothers 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
(3%) and all ongoing fund expenses.
8
<PAGE>
NUVEEN FLAGSHIP LIMITED TERM MUNICIPAL BOND FUND
Highlights as of April 30, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Quick Facts
- --------------------------------------------------------------------
A Shares C Shares R Shares
<S> <C> <C> <C>
NAV $ 10.89 $ 10.87 $ 10.87
- --------------------------------------------------------------------
April's Dividend $0.0405 $0.0375 $0.0425
- --------------------------------------------------------------------
Fund Symbol FLTDX FLTCX N/A
- --------------------------------------------------------------------
CUSIP 67065Q848 67065Q830 67065Q822
- --------------------------------------------------------------------
Inception Date 10/87 12/95 2/97
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Total Return (Annualized)/2/
- --------------------------------------------------------------------
A Shares C Shares R Shares
NAV Offer NAV NAV
<S> <C> <C> <C> <C>
1-Year 5.57% 2.90% 5.13% 5.81%
- --------------------------------------------------------------------
5-Year 5.41% 4.88% 5.04% 5.47%
- --------------------------------------------------------------------
10-Year 6.52% 6.26% 6.18% 6.55%
- --------------------------------------------------------------------
1-Year TER* 7.70% 4.98% 7.11% 8.05%
</TABLE>
* Taxable Equivalent Return (31%)
/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 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.
- ---------------------------------------
Index Comparison/3/
- ---------------------------------------
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Lehman Brothers 5-Year Limt'd Municipal Limt'd Municipal
Municipal Bond Index Bond Fund (NAV) Bond Fund (Offer)
$19,724 $18,812 $18,341
- ---------------------- ---------------------- ----------------------
<S> <C> <C>
10,000 10,000 9,750
10,740 10,700 10,430
11,950 11,650 11,360
12,970 12,680 12,360
14,280 14,010 13,660
14,710 14,460 14,100
15,510 15,040 14,660
16,580 15,940 15,540
17,350 16,700 16,290
18,520 17,820 17,370
19,724 18,812 18,341
</TABLE>
- ----------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)/4/
- ----------------------------------------------
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
May .0425
June .0425
July .0425
August .0425
September .0425
October .0425
November .0425
December .0425
January .0405
February .0405
March .0405
April .0405
</TABLE>
/4/ Nuveen Flagship Limited Term Municipal Bond Fund also paid shareholders net
ordinary income distributions in December of $0.00008.
Past performance is not predictive of future results.
- ---------------------------------------
Morningstar Rating/TM/ /1/
- ---------------------------------------
****
Overall rating among 1579
municipal bond funds as
of 4/30/99.
- ---------------------------------------
Portfolio Statistics
- ---------------------------------------
Fund Net Assets $545 million
- ---------------------------------------
Effective Maturity 4.97 years
- ---------------------------------------
Average
Effective Duration 4.61
- ---------------------------------------
- ---------------------------------------
Top Five Sectors**
- ---------------------------------------
Utilities 22%
- ---------------------------------------
Health Care 17%
- ---------------------------------------
Education & Civic Organizations 13%
- ---------------------------------------
U.S. Guaranteed 9%
- ---------------------------------------
Tax Obligation (Limited) 9%
- ---------------------------------------
- ---------------------------------------
Bond Credit Quality**
- ---------------------------------------
[PIE CHART APPEARS HERE]
AAA/U.S.
Grtd...37%
AA......6%
A......23%
BBB/
NR.....34%
**as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/1/ Morningstar proprietary ratings reflect historical risk-adjusted
performance as of 04/30/99. The ratings are subject to change every month.
Ratings are for the A share class only; other classes may vary. Past
performance is no guarantee of future results. Morningstar ratings are
calculated form the fund's three-, five-, and 10-year average annual
returns (if applicable) in excess of 90-day T-bill returns. Limited-Term
received 3 stars, 4 stars, 5 stars for the three-, five-, and 10-year
periods respectively. The top 10% of the funds in a broad asset class
receive 5 stars, the next 22.5% receive 4 stars and the next 35% receive 3
stars. The funds were rated among 1579, 1151, and 367 funds for the three-,
five-, and 10-year periods respectively.
/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 Municipal Bond Index. The Lehman Brothers 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 (2.50%) and all ongoing fund expenses.
9
<PAGE>
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama - 0.9%
$ 25,000 Alabama Housing Finance Authority, Single Family Mortgage 4/04 at 102 Aaa $ 26,940
Revenue Bonds (Collateralized Home Mortgage Revenue Bond
Program), 1994 Series A-1 Bonds, 6.600%, 4/01/19
200,000 Alabama State Docks Department, Docks Facilities Revenue Bonds, 10/06 at 102 AAA 219,466
Series 1996, 6.100%, 10/01/13 (Alternative Minimum Tax)
100,000 Alabama State Docks Department, Docks Facilities Revenue Bonds, 10/07 at 102 AAA 102,319
Series 1997, 5.375%, 10/01/17 (Alternative Minimum Tax)
50,000 Alabama Public School and College Authority, Refunding Bonds, No Opt. Call AA 53,530
Series 1993A, 6.000%, 8/01/02
400,000 The Utilities Board of the City of Bayou La Batre (Alabama), 3/07 at 102 AA 420,672
Water and Sewer Revenue Refunding and Improvement Bonds,
Series 1997, 5.750%, 3/01/27
150,000 The Special Care Facilities Financing Authority of the City of 6/07 at 102 AAA 155,697
Birmingham, Children's Hospital, Health Care Facility
Revenue Bonds, Series 1997, 5.500%, 6/01/22
200,000 The Special Care Facilities Financing Authority of the City of 8/05 at 102 AAA 212,930
Birmingham, Carraway Revenue Bonds, Series 1995A (Carraway
Methodist Health Systems), 5.875%, 8/15/15
150,000 The Private Educational Building Authority of the City of 6/06 at 102 A3 159,207
Birmingham (Alabama), Birmingham - Southern College Tuition
Revenue Bonds, Series 1996, 6.000%, 12/01/21
150,000 Clarke-Mobile Counties Gas District (Alabama), Gas Revenue 12/06 at 102 AAA 158,501
Bonds, Series 1996, 5.600%, 12/01/17
100,000 The Colbert County-Northwest Alabama Health Care Authority, 6/05 at 102 AAA 106,887
Health Care Facilities Revenue Bonds, Series 1995
(Helen Keller Hospital), 5.750%, 6/01/15
100,000 The Industrial Development Board of the Town of Courtland 9/05 at 102 Baa1 107,310
(Alabama), Solid Waste Disposal Revenue Bonds (Champion
International Corporation Project), Series 1995A, 6.500%,
9/01/25 (Alternative Minimum Tax)
90,000 City of Huntsville, Alabama, Electric System Revenue Warrants, 12/03 at 102 AA 99,146
Series 1994, 6.100%, 12/01/10
25,000 The Health Care Authority of the City of Huntsville (Alabama), 6/04 at 102 AAA 28,351
Health Care Facilities Revenue Bonds, Series 1992-B, 6.500%,
6/01/13 (Pre-refunded to 6/01/04)
100,000 The Huntsville-Madison County Airport Authority, Airport Revenue 1/07 at 102 AAA 101,429
Bonds, Series 1997, 5.400%, 7/01/19 (Alternative Minimum Tax)
100,000 Jefferson County (Alabama), Sewer Revenue Refunding Warrants, 2/07 at 101 AAA 105,209
Series 1997-A, 5.625%, 2/01/22
100,000 Jefferson County (Alabama), Sewer Revenue Warrants, Series 2/07 at 101 AAA 106,955
1997-D, 5.750%, 2/01/27
100,000 The Health Care Authority of Lauderdale County and the City of 7/06 at 102 AAA 105,643
Florence (Alabama), Revenue Refunding Bonds, Series 1996
(Eliza Coffee Memorial Hospital), 5.750%, 7/01/19
180,000 City of Mobile (Alabama), General Obligation Refunding Warrants, 2/06 at 102 AAA 192,733
Series 1996, 5.750%, 2/15/16
200,000 Northport Alabama, WTS, Series A, 5.700%, 3/01/21 3/06 at 102 AAA 212,780
500,000 The Industrial Development Board of the City of Phoenix City 4/08 at 102 A- 486,140
(Alabama), Environmental Improvement Revenue Refunding Bonds
(Mead Coated Board Project), Series 1998A, 5.300%, 4/01/27
(Alternative Minimum Tax)
125,000 Prichard, Alabama, Waterworks and Sewer Board, Water and Sewer 11/04 at 102 AAA 138,605
Revenue Refunding, 6.125%, 11/15/14
250,000 The Industrial Development Board of the City of Tallassee, 8/06 at 102 A1*** 281,688
Alabama, Industrial Revenue Bonds, Dow-United Technologies
Composite Products, Series 1996-A, 6.100%, 8/01/14
(Pre-refunded to 8/01/06)
200,000 Troy State University (Alabama), Special Limited Obligation 6/07 at 103 AAA 213,144
Revenue Bonds (Troy City University/City of Troy Project),
Series 1997, 5.650%, 6/01/27
110,000 University of South Alabama, University Tuition Revenue 5/06 at 102 AAA 110,993
Refunding and Capital Improvement Bonds, Series 1996,
5.000%, 11/15/15
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska - 1.2%
$ 5,000,000 Alaska Industrial Development and Export Authority, Revolving 4/08 at 101 AAA $4,942,700
Fund Refunding Bonds, Series 1998A, 5.250%, 4/01/23
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Arizona - 1.2%
2,500,000 The Industrial Development Authority of the County of Maricopa 7/08 at 101 A 2,420,100
(Arizona), Health Facility Revenue Bonds (Catholic Healthcare
West Project), 1998 Series A, 5.000%, 7/01/21
2,500,000 The Industrial Development Authority of the County of Yavapai 6/07 at 101 AA- 2,566,425
(Arizona), Industrial Development Revenue Bonds, 1998 Series
(Citizens Utilities Company Project), 5.450%, 6/01/33
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
California - 9.4%
5,000,000 California Health Facilities Financing Authority, Insured 7/07 at 102 AAA 5,281,100
Refunding Revenue Bonds (Pomona Valley Hospital Medical Center),
1997 Series A, 5.625%, 7/01/19
2,000,000 California Pollution Control Financing Authority, Pollution No Opt. Call A-1 2,242,180
Control 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 5,156,300
Facilities Lease Revenue Bonds, 1997 Series A, 5.700%, 10/01/33
(Alternative Minimum Tax)
7,500,000 California Statewide Communities Development Authority, 4/09 at 101 BBB 7,361,025
Certificates of Participation, The Internext Group, 5.375%, 4/01/30
8,000,000 Contra Costa Home Mortgage Finance Authority, California, 1984 No Opt. Call AAA 3,223,040
Home Mortgage Revenue Bonds, 0.000%, 9/01/17
2,000,000 Foothill/Eastern Transportation Corridor Agency, California, No Opt. Call BBB- 1,576,160
Toll Road Revenue Bonds, Series 1995A, 0.000%, 1/01/05
7,000,000 Long Beach Aquarium of the Pacific Revenue Bonds (Aquarium of 7/05 at 102 BBB 7,385,420
the Pacific Project), 1995 Series A, 6.125%, 7/01/23
4,000,000 Regional Airports Improvement Corporation, Facilities Sublease 5/06 at 102 BBB- 4,318,320
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- 552,365
1,000,000 6.500%, 7/01/21 (Pre-refunded to 7/01/05) 7/05 at 102 N/R*** 1,153,160
2,000,000 Taft Public Financing Authority, Lease Revenue Bonds, 1997 1/07 at 101 A2 2,119,060
Series A (Community Correctional Facility Acquisition Project),
6.050%, 1/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado - 4.3%
E-470 Public Highway Authority, Capital Improvement Trust Fund Highway
Revenue Bonds (E-470 Project), Senior Bonds:
6,000,000 0.000%, 8/31/05 No Opt. Call Aaa 4,619,880
2,000,000 6.950%, 8/31/20 (Pre-refunded to 8/31/05) 8/05 at 103 Aaa 2,376,880
11,800,000 Colorado Health Facilities Authority, Retirement Facilities No Opt. Call Aaa 3,399,226
(Liberty Heights), 0.000%, 7/15/22
5,000,000 City and County of Denver, Colorado, Airport System Revenue Bonds, 11/07 at 101 AAA 5,066,550
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 2,709,625
Special Revenue Refunding and Improvement Bonds, Series 1996A,
6.750%, 12/15/15
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut - 2.0%
2,500,00 0 State of Connecticut Health and Educational Facilities Authority, 7/07 at 102 BBB 2,440,350
Revenue Bonds, Hospital for Special Care Issue,
Series B, 5.500%, 7/01/27
2,000,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 2,349,560
Revenue 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 3,550,099
Revenue Bonds, Trinity College Issue, Series F, 5.500%, 7/01/21
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware - 0.4%
$ 1,750,000 Delaware Economic Development Authority, First Mortgage Revenue D5/07 at 102 BBB $ 1,841,473
Bonds (Peninsula United Methodist Homes, Inc. Issue), Series 1997A,
6.300%, 5/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
District of Columbia-0.4%
1,480,000 District of Columbia, University Revenue Bonds (Georgetown University 10/99 at 102 A2 1,514,217
Issue), Series 1990B, 7.150%, 4/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Florida - 1.9%
1,000,000 Town of Lady Lake, Florida, Industrial Development Revenue Bonds 7/00 at 102 N/R*** 1,088,360
(Sunbelt Utilities, Inc. Project), Series 1990, 9.625%, 7/01/15
(Alternative Minimum Tax) to (Pre-refunded 7/01/00)
1,945,000 Nassau County, Florida (GF/Amelia Island Properties, Inc. Project), 1/03 at 103 N/R 2,211,757
ICF/MR Revenue Bonds, Series 1993A, 9.750%, 1/01/23
1,750,000 Polk County Industrial Development Authority (Florida), Solid Waste 12/06 at 102 A-1+ 1,864,170
Disposal Facility Revenue Bonds (Tampa Electric Company Project),
Series 1996, 5.850%, 12/01/30 (Alternative Minimum Tax)
1,965,000 Sanford Airport Authority (Florida), Industrial Development Revenue 5/06 at 102 N/R 2,091,428
Bonds (Central Florida Terminals Inc. Project), Series 1995A,
7.500%, 5/01/10 (Alternative Minimum Tax)
645,000 Sanford Airport Authority (Florida), Industrial Development Revenue 5/07 at 102 N/R 673,909
Bonds (Central Florida Terminals Inc. Project), Series 1997C,
7.500%, 5/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia - 1.2%
2,000,000 Brunswick and Glynn County Development Authority, Revenue Refunding 3/08 at 102 Baa2 1,997,340
Bonds, Series 1998 (Georgia Pacific Corporation Project),
5.550%, 3/01/26 (Alternative Minimum Tax)
2,000,000 Municipal Electric Authority of Georgia, General Power Revenue No Opt. Call A 2,128,460
Bonds, 1993C Series, 5.700%, 1/01/19
1,000,000 Municipal Electric Authority of Georgia, Project One Special Obligation No Opt. Call A+ 1,167,440
Bonds, Fifth Crossover Series Y, 6.500%, 1/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois - 6.9%
7,400,000 Chicago School Reform Board of Trustees of the Board of Education No Opt. Call AAA 1,305,730
of the City of Chicago, Illinois, Unlimited Tax General Obligation
Bonds (Dedicated Tax Revenues), Series 1999A, 0.000%, 12/01/31
1,750,000 City of Chicago, Illinois, Gas Supply Revenue Bonds, 1990 Series A 5/00 at 102 AA- 1,858,290
(The People's Gas Light and Coke Company Project), 8.100%, 5/01/20
(Alternative Minimum Tax)
1,000,000 City of Chicago, Illinois, Gas Supply Refunding Revenue Bonds, 1995 6/05 at 102 AA- 1,083,670
Series A (The People's Gas Light and Coke Company Project),
6.100%, 6/01/25
2,000,000 Public Building Commission of Chicago, Illinois, Building Revenue No Opt. Call AAA- 2,075,880
Refunding Bonds, Series B of 1999 (Chicago School Reform Board of
Trustees of the Board of Education of the City of Chicago, Illinois),
5.250%, 12/01/18
2,000,000 Illinois Development Finance Authority (The Presbyterian Home Lake 9/06 at 102 AA- 2,207,180
Forest Place Project), Revenue Bonds, Series 1996B, 6.300%, 9/01/22
3,750,000 Illinois Educational Facilities Authority, Revenue Refunding Bonds, 7/01 at 102 A1*** 4,088,100
Loyola University of Chicago, Series 1991-A, 7.125%, 7/01/21
(Pre-refunded to 7/01/01)
Illinois Educational Facilities Authority, Revenue Refunding Bonds,
Columbia College, Series 1992:
2,815,000 6.875%, 12/01/17 (Pre-refunded to 12/01/04) 12/04 at 100 N/R*** 3,209,635
1,185,000 6.875%, 12/01/17 12/04 at 100 BBB 1,297,196
2,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, 8/06 at 102 N/R 2,174,400
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- 6,123,240
Series 1996B (Sarah Bush Lincoln Health Center), 5.750%, 2/15/22
4,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1997A 8/07 at 101 A- 4,029,640
(Victory Health Service), 5.750%, 8/15/27
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Indiana - 4.7%
$ 2,000,000 City of Goshen, Indiana, Revenue Refunding Bonds, Series 1998 8/08 at 101 N/R $ 1,933,880
(Greencroft Obligated Group), 5.750%, 8/15/28
1,750,000 Indiana Health Facility Financing Authority, Hospital Revenue Bonds, 8/00 at 102 N/R*** 1,886,063
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 Bonds, No Opt. Call AAA 2,226,240
Series K, 0.000%, 8/01/11
2,000,000 Indianapolis Airport Authority, Special Facilities Revenue Bonds, 7/04 at 102 BBB 2,231,480
Series 1994 (Federal Express Corporation Project), 7.100%, 1/15/17
(Alternative Minimum Tax)
4,000,000 Indianapolis Airport Authority, Specialty Facility Revenue Bonds, 11/05 at 102 Baa2 4,333,000
Series 1995A (United Airlines, Inc., Indianapolis Maintenance Center
Project), 6.500%, 11/15/31 (Alternative Minimum Tax)
5,450,000 City of Indianapolis, Indiana, Economic Development Revenue 7/06 at 102 BBB 5,765,446
Bonds (Willowbrook Apartments Project), Senior Series 1996A,
6.500%, 7/01/26
500,000 Hospital Authority of Monroe County (Indiana), Hospital Revenue Bonds, 5/02 at 101 AAA 547,410
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), 3/01 at 102 Baa2 1,063,420
7.600%, 3/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Kentucky - 5.8%
5,000,000 City of Ashland, Kentucky, Sewage and Solid Waste Revenue Bonds, 2/05 at 102 Baa1 5,616,050
Series 1995 (Ashland Inc. Project), 7.125%, 2/01/22
(Alternative Minimum Tax)
5,000,000 County of Henderson, Kentucky, Solid Waste Disposal Revenue Bonds 3/05 at 102 Baa2 5,355,050
(MacMillan Bloedel Project), Series 1995, 7.000%, 3/01/25
(Alternative Minimum Tax)
4,500,000 Jefferson County, Kentucky, Capital Projects Corporation, Lease No Opt. Call A+ 2,331,180
Revenue Bonds, Series 1992A, 0.000%, 8/15/12
2,000,000 Kentucky Economic Development Finance Authority, Hospital System 4/08 at 102 BBB 2,023,180
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 (Commonwealth 11/04 at 102 AAA 5,791,450
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 3,719,240
Associated Counties Leasing Trust Program, Series 1993-A,
6.500%, 3/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 0.5%
2,000,000 City of New Orleans Audubon Park Commission, Aquarium Revenue Bonds, 4/02 at 102 N/R*** 2,264,900
Series 1992, 8.000%, 4/01/12 (Pre-refunded to 4/01/02)
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland - 1.1%
2,500,000 Community Development Administration, Maryland Department of Housing and 3/09 at 101 Aa2 2,496,050
Community Development, Residential Revenue Bonds, 1998 Series D,
5.250%, 9/01/29 (Alternative Minimum Tax)
2,000,000 Maryland Energy Financing Administration, Limited Obligation Solid Waste 12/06 at 102 A 2,181,400
Disposal Revenue Bonds (Wheelabrator Water Technologies Baltimore L.L.C.
Projects), 1996 Series, 6.450%, 12/01/16 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 4.2%
5,000,000 Massachusetts Bay Transportation Authority, General Transportation System 3/07 at 101 AA 4,833,000
Bonds, 1998 Series B, 5.000%, 3/01/28
3,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/09 at 101 AA 2,929,770
Partners HealthCare System Issue, Series B, 5.125%, 7/01/19
2,000,000 Massachusetts Port Authority, Revenue Bonds, Series 1997-B, 7/07 at 101 AA 2,013,860
5.375%, 7/01/27 (Alternative Minimum Tax)
3,000,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue 12/08 at 102 BBB 3,006,180
Refunding Bonds (Ogden Haverhill Project), Series 1998A, 5.600%,
12/01/19 (Alternative Minimum Tax)
5,000,000 Massachusetts Housing Finance Authority, Single Family Housing Revenue 6/08 at 101 AAA 5,081,500
Bonds, Series 59, 5.500%, 12/01/30 (Alternative Minimum Tax)
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michigan - 2.0%
$ 2,000,000 Michigan State Hospital Finance Authority, Hospital Revenue and 10/08 at 101 BBB $ 1,955,580
Refunding Bonds (Genesys Regional Medical Center Obligated
Group), Series 1998A, 5.500%, 10/01/18
5,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 8/08 at 101 BBB- 4,570,800
Bonds (The Detroit Medical Center Obligated Group),
Series 1998A, 5.250%, 8/15/23
2,000,000 Pontiac, Michigan, Hospital Finance Authority, Hospital Revenue 8/03 at 102 BBB- 2,030,980
Refunding (Nomc Obligation Group), 6.000%, 8/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.5%
2,000,000 Claiborne County, Mississippi, Pollution Control Revenue 5/00 at 102 BBB 2,088,940
Refunding Bonds (System Energy Resources, Inc. Project),
Series 1995, 7.300%, 5/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Missouri - 0.7%
3,000,000 Missouri State Development Finance Board, Solid Waste Disposal No Opt. Call AA 2,988,540
Revenue Bonds (Procter & Gamble Paper Products Company
Project), Series 1999, 5.200%, 3/15/29 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 0.3%
700,000 New Hampshire Higher Educational and Health Facilities 7/99 at 100 A- 702,135
Authority, Hospital Revenue Bonds, Catholic Medical Center
Issue, Series 1989, 6.000%, 7/01/17
600,000 New Hampshire Higher Educational and Health Facilities 1/01 at 102 A- 630,672
Authority, Hospital Revenue Bonds, St. Joseph Hospital
Issue, Series 1991, 7.500%, 1/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey - 1.1%
425,000 The Essex County Improvement Authority (Essex County, New 4/04 at 102 BBB+ 462,825
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 2,586,696
Facility Revenue Bonds (Vineland Cogeneration Limited Partnership
Project), Series 1992, 7.875%, 6/01/19 (Alternative Minimum Tax)
1,375,000 New Jersey Economic Development Authority, Insured Revenue Bonds 5/05 at 102 AAA 1,554,836
(Educational Testing Service Issue), Series 1995B, 6.125%,
5/15/15 (Pre-refunded to 5/15/05)
- ------------------------------------------------------------------------------------------------------------------------------------
New York - 13.4%
1,900,000 The City of New York, General Obligation Bonds, Fiscal 1992 2/02 at 101 1/2 A- 2,098,835
Series B, 7.500%, 2/01/09
The City of 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 762,816
750,000 7.500%, 2/01/18 (Pre-refunded to 2/01/02) 2/02 at 101 1/2 Aaa 835,200
The City of New York, General Obligation Bonds, Fiscal 1997
Series I:
1,490,000 6.250%, 4/15/27 (Pre-refunded to 4/15/07) 4/07 at 101 A-*** 1,704,947
1,510,000 6.250%, 4/15/27 4/07 at 101 A- 1,667,418
1,750,000 New York City Housing Development Corporation, Multi-Unit 6/01 at 102 AAA 1,885,888
Mortgage Refunding Bonds (FHA-Insured Mortgage Loans),
1991 Series A, 7.350%, 6/01/19
3,000,000 New York City Industrial Development Agency, Special Facility 8/07 at 102 Baa1 3,029,880
Revenue Bonds (1990 American Airlines, Inc. Project), 5.400%,
7/01/20 (Alternative Minimum Tax)
5,500,000 New York City Industrial Development Agency, Special Facility 12/08 at 102 A 5,439,775
Revenue Bonds, Series 1998 (British Airways PLC Project),
5.250%, 12/01/32 (Alternative Minimum Tax)
1,480,000 Dormitory Authority of the State of New York, City University No Opt. Call BBB+ 1,607,117
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 AAA 2,887,925
Health of the State of New York Revenue Bonds, Series 1995,
6.625%, 7/01/24 (Pre-refunded to 7/01/05)
3,200,000 Dormitory Authority of the State of New York, Upstate Community No Opt. Call BBB+ 3,064,896
Colleges Revenue Bonds, Series 1999A, 5.000%, 7/01/28
3,000,000 New York State Energy Research and Development Authority, 11/08 at 102 AAA 2,997,840
Pollution Control Revenue Refunding Bonds (Niagara Mohawk
Power Corporation Project), Series 1998A, 5.150%, 11/01/25
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (continued)
$ 3,000,000 New York State Housing Finance Agency, Service Contract 9/05 at 102 BBB+ $3,322,860
Obligation Revenue Bonds, 1995 Series A, 6.375%, 9/15/15
1,385,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue 4/01 at 102 Aa2 1,449,666
Bonds, 1991 Series UU, 7.750%, 10/01/23 (Alternative Minimum Tax)
5,500,000 New York State Urban Development Corporation, State Facilities No Opt. Call BBB+ 5,924,875
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+ 1,597,275
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+ 2,236,393
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 8,294,025
Bonds, Series 4, KIAC Partners Project, 6.750%, 10/01/19
(Alternative Minimum Tax)
Suffolk County Industrial Development Agency (New York), 1998
Industrial Development Revenue Bonds (Nissequogue Cogen Partners
Facility):
1,800,000 5.300%, 1/01/13 (Alternative Minimum Tax) 1/09 at 101 N/R 1,800,630
4,500,000 5.500%, 1/01/23 (Alternative Minimum Tax) 1/09 at 101 N/R 4,523,490
- ------------------------------------------------------------------------------------------------------------------------------------
North Carolina - 0.7%
1,400,000 The Martin County Industrial Facilities and Pollution Control 11/05 at 102 A 1,457,638
Financing Authority (North Carolina), Solid Waste Disposal Revenue
Bonds, Series 1995 (Weyerhaeuser Company Project), 6.000%, 11/01/25
(Alternative Minimum Tax)
1,299,276 Woodfin Treatment Facility, Inc. (North Carolina), Proportionate 12/03 at 102 N/R 1,356,223
Interest Certificates, 6.750%, 12/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
North Dakota - 0.1%
345,000 State of North Dakota (North Dakota Housing Finance Agency), 7/99 at 103 Aa2 356,109
Single Family Mortgage Program Bonds, 1989 Series B, 8.000%, 7/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio - 8.0%
2,000,000 City of Cleveland, Ohio, Airport System Revenue Bonds, Series 1/08 at 101 AAA 1,959,300
1997A, 5.125%, 1/01/27 (Alternative Minimum Tax)
1,400,000 Cleveland, Ohio, Public Power System Revenue Bonds, 7.000%, 11/15/17 11/01 at 102 AAA 1,529,080
1,350,000 County of Columbiana, Ohio, County Jail Facilities Construction 12/04 at 102 AA 1,563,125
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 1,043,760
Series 1990 (Altenheim Project), 9.280%, 6/01/15
3,000,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds (Meridia 8/05 at 102 AAA 3,423,240
Health System), Series 1995, 6.250%, 8/15/24 (Pre-refunded to 8/15/05)
4,000,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds, Series 1999B 7/09 at 101 AA- 3,892,680
(Cleveland Clinic Health System Obligated Group), 5.125%, 1/01/29
1,000,000 County of Cuyahoga, Ohio, Hospital Facilities Revenue Bonds, 2/03 at 102 AA- 1,071,480
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 AA-*** 2,621,167
Revenue Bonds, Series 1992B (Marymount Hospital Project), 6.700%,
11/15/15 (Pre-refunded to 11/15/02)
1,500,000 County of Lucas, Ohio Hospital Facilities Revenue Bonds, Series A 1991 12/01 at 102 N/R*** 1,689,240
(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 3,701,740
Improvement Bonds, Series 1996A (Upper Valley Medical Center),
6.375%, 5/15/26
3,000,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds, 9/08 at 102 AAA 3,012,900
1997 Series B (Mortgage-Backed Securities Program), 5.400%, 9/01/29
(Alternative Minimum Tax)
2,750,000 State of Ohio, Ohio Air Quality Development Authority, Air Quality 9/05 at 102 A+ 2,928,860
Development Revenue Refunding Bonds, 1995 Series (The Dayton Power
and Light Company Project), 6.100%, 9/01/30
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ohio (continued)
$ 1,750,000 State of Ohio (Ohio Higher Educational Facility Commission), 12/03 at 102 AAA $ 1,963,728
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 9/02 at 102 N/R*** 3,974,145
and Improvement Bonds, Series 1992 (The Shelby County Memorial
Hospital Association), 7.700%, 9/01/18 (Pre-refunded to 9/01/02)
- ------------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 1.9%
Edmond Economic Development Authority (Oklahoma), Student
Housing Revenue Bonds (Collegiate Housing Foundation - Edmond Project),
Series 1998A:
2,000,000 5.375%, 12/01/19 12/08 at 102 Baa3 1,946,500
3,250,000 5.500%, 12/01/28 12/08 at 102 Baa3 3,159,683
2,750,000 Trustees of the Tulsa Municipal Airport Trust, Revenue Bonds 6/05 at 102 Baa2 2,904,138
Series 1995 (American Airlines), 6.250%, 6/01/20
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 3.4%
2,500,000 Allegheny County Higher Education Building Authority 2/06 at 102 Baa3 2,701,125
(Commonwealth of Pennsylvania), College Revenue Bonds, Series A
of 1996 (Robert Morris College), 6.400%, 2/15/14
3,000,000 Beaver County Industrial Development Authority, Pennsylvania, 6/08 at 102 AAA 3,014,790
Exempt Facilities Revenue Bonds, 1998 Series A (Shippingport
Project), 5.375%, 6/01/28 (Alternative Minimum Tax)
1,500,000 Clarion County Hospital Authority, Hospital Revenue Refunding 7/99 at 102 N/R 1,541,565
Bonds, Series 1989 (Clarion Hospital
Project), 8.100%, 7/01/12
1,000,000 Delaware County Industrial Development Authority, Pollution 4/01 at 102 AAA 1,080,450
Control 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 531,465
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 AAA 1,145,620
Pennsylvania), College Revenue Bonds
(Saint Vincent College Project), Series 1994, 6.750%, 5/01/24
(Pre-refunded to 5/01/04)
3,000,000 Philadelphia Authority for Industrial Development, Airport 7/08 at 101 AAA 2,875,950
Revenue Bonds, Series 1998A
(Philadelphia Airport System Project), 5.000%, 7/01/23
(Alternative Minimum Tax)
1,700,000 City of Philadelphia, Pennsylvania Gas Works Revenue Bonds, 7/03 at 102 BBB 1,857,930
Fourteenth Series, 6.375%, 7/01/26 Puerto Rico 0.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 0.1%
100,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1994 7/04 at 101 1/2 AAA 113,717
(General Obligation Bonds), 6.500%, 7/01/23
100,000 Puerto Rico Public Buildings Authority, Revenue Refunding No Opt. Call A 106,577
Bonds, Series L, Guaranteed by the Commonwealth of Puerto Rico,
5.500%, 7/01/21
165,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/04 at 102 BBB+*** 187,018
Series 1994-T, 6.375%, 7/01/24 (Pre-refunded to 7/01/04)
70,000 Puerto Rico Industrial, Tourist, Educational, Medical and 8/05 at 101 1/2 AAA 76,045
Environmental Control Facilities Financing Authority,
Hospital Revenue Refunding Bonds, 1995 Series A,
FHA-Insured Mortgage (Pila Hospital Project), 5.875%, 8/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
South Carolina - 3.4%
Berkeley County School District, Certificates of Participation:
250,000 6.250%, 2/01/12 (Pre-refunded to 2/01/04) 2/04 at 102 AAA 279,813
2,225,000 6.300%, 2/01/16 (Pre-refunded to 2/01/04) 2/04 at 102 AAA 2,490,977
Charleston County, South Carolina, Charleston Public
Facilities Corporation, Certificates of Participation, Series 1994B:
240,000 6.875%, 6/01/14 (Pre-refunded to 6/01/04) 6/04 at 102 AAA 277,008
10,000 6.875%, 6/01/14 6/04 at 102 AAA 11,331
1,245,000 Charleston County, South Carolina, Revenue Bonds, Series 1999A No Opt. Call AAA 1,270,747
(CareAlliance Health Services), 5.125%, 8/15/16
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
South Carolina (continued)
$ 400,000 Board of Trustees of Coastal Carolina University, South Carolina, 6/04 at 102 AAA $ 453,936
Revenue Bonds, Series 1994, 6.800%, 6/01/19
500,000 Darlington County, South Carolina, Industrial Development Revenue 4/06 at 102 A 529,515
Bonds (Sonoco Products Company Project), Series 1996, 6.000%,
4/01/26 (Alternative Minimum Tax)
200,000 Greenville Hospital System Board of Trustees, Hospital Facilities No Opt. Call Aa3 225,682
Revenue Bonds (South Carolina), Series 1990, 6.000%, 5/01/20
300,000 City of Greenville, South Carolina, Waterworks System Revenue 2/07 at 102 Aa1 309,687
Bonds, Series 1997, 5.500%, 2/01/22
250,000 Greenwood County, South Carolina, Hospital Facilities Revenue 10/03 at 102 AAA 263,345
Bonds (Self Memorial Hospital), Series 1993, 5.875%, 10/01/17
300,000 Horry County, South Carolina, Airport Revenue Bonds, Series 7/07 at 102 AAA 314,973
1997A, 5.700%, 7/01/27 (Alternative Minimum Tax)
500,000 Lexington, South Carolina, Water and Sewer Revenue, 5.500%, 4/07 at 102 AA 512,070
4/01/29
1,405,000 Piedmont Municipal Power Agency (South Carolina), Electric 1/09 at 101 Baa2 1,373,359
Revenue Bonds, 1999A Refunding Series, 5.250%, 1/01/15
250,000 South Carolina Jobs - Economic Development Authority, Hospital 11/05 at 102 AAA 265,793
Revenue Bonds (Tuomey Regional Medical Center), Series A 1995,
5.750%, 11/01/15
300,000 South Carolina Regional Housing Development Corporation No. 1, 7/02 at 102 Aa 317,055
Multifamily Revenue Refunding, Redwood Village Apartments,
Series A, 6.625%, 7/01/17
500,000 South Carolina State Education Assistance Authority, Guaranteed 9/04 at 101 A 528,980
Student Loan Revenue and Refunding Bonds, 1994 Series, 6.300%,
9/01/08 (Alternative Minimum Tax)
250,000 South Carolina State Housing Authority, Homeownership Mortgage 7/04 at 102 AA 266,335
Purchase, Series A, 6.150%, 7/01/08
250,000 South Carolina State Housing Finance and Development Authority, 5/06 at 102 Aa2 266,208
Mortgage Revenue Bonds, Series 1996A, 6.350%, 7/01/25
(Alternative Minimum Tax)
1,000,000 South Carolina Housing Finance and Development Authority, 6/05 at 102 BBB+ 1,071,940
Multifamily Housing Mortgage Revenue Bonds (United Dominion -
Hunting Ridge Apartments Project), Series 1995, 6.750%, 6/01/25
(Alternative Minimum Tax) (Mandatory put 6/01/10)
1,250,000 South Carolina Housing Finance and Development Authority, 12/05 at 102 AA- 1,306,300
Multifamily Housing Revenue Refunding Bonds (Runaway Bay
Apartments Project), Series 1995, 6.125%, 12/01/15
250,000 Spartanburg, South Carolina, Sanitation Sewer District Sewer 6/07 at 101 AAA 260,418
System Revenue Improvement, 5.500%, 6/01/20
2,000,000 York County, South Carolina, Water and Sewer System Revenue 12/03 at 102 N/R 2,028,140
Bonds, Series 1995, 6.500%, 12/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
South Dakota - 0.6%
2,500,000 Education Loans Incorporated (South Dakota), Tax Exempt Fixed Rate 6/08 at 102 A2 2,521,025
Student Loan Asset-Backed Callable Notes, Subordinate Series
1998-1K, 5.600%, 6/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 2.1%
2,925,000 The Health and Educational Facilities Board of the Metropolitan 2/08 at 102 AA 2,997,540
Government of Nashville and Davidson County, Tennessee,
Multi-Modal Interchangeable Rate, Health Facility Revenue Bonds
(Richland Place, Inc. Project), Series 1993, 5.500%, 5/01/23
2,125,000 The Health, Educational and Housing Facility Board of the County 8/07 at 105 N/R*** 2,946,483
of Shelby, Tennessee, ICF/MR Revenue Bonds (Open Arms
Developmental Centers), Series 1992A, 9.750%, 8/01/19
(Pre-refunded to 8/01/07)
1,380,000 Industrial Development Board of the City of South Fulton, 10/05 at 102 A3 1,485,694
Tennessee, Inc., Industrial Development Revenue Bonds (Tyson
Foods, Inc. Project), Series 1995, 6.350%, 10/01/15 (Alternative
Minimum Tax)
1,500,000 Wilson County, Tennessee, Series 1994, Certificates of 6/04 at 102 A2*** 1,679,355
Participation (Wilson County Educational Facilities Corporation),
6.250%, 6/30/15 (Pre-refunded to 6/30/04)
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 12.1%
7,000,000 Alliance Airport Authority, Inc., Special Facilities Revenue 4/06 at 102 BBB 7,551,530
Bonds, Series 1996 (Federal Express Corporation Project), 6.375%,
4/01/21 (Alternative Minimum Tax)
5,000,000 Brazos River Authority (Texas), Pollution Control Revenue 4/08 at 102 Baa1 4,947,850
Refunding Bonds (Texas Utilities Electric Company Project),
Series 1995C, 5.550%, 6/01/30 (Alternative Minimum Tax)
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas (continued)
$ 7,000,000 Brazos River Authority (Texas), Pollution Control Revenue 5/08 at 102 AAA $ 7,153,300
Refunding Bonds (Texas Utilities Electric Company Project),
Series 1998A, 5.550%, 5/01/33 (Alternative Minimum Tax)
6,000,000 Brazos River Authority (Texas), Revenue Refunding Bonds (Houston No Opt. Call AAA 5,966,879
Lighting and Power Company Project), Series 1998, 5.050%,
11/01/18 (Alternative Minimum Tax)
6,000,000 Brazos River Authority (Texas), Revenue Refunding Bonds (Reliant 4/09 at 101 BBB+ 6,004,919
Energy, Incorporated Project), Series 1999A, 5.375%, 4/01/19
2,000,000 Dallas-Fort Worth International Airport Facility Improvement 11/02 at 102 Baa2 2,189,119
Corporation, American Airlines, Inc. Revenue Bonds, Series 1992,
7.250%, 11/01/30 (Alternative Minimum Tax)
8,400,000 Gulf Coast Waste Disposal Authority (Texas), Waste Disposal 4/09 at 101 BBB- 8,397,059
Revenue Bonds (Valero Energy Corporation Project), Series 1999,
5.700%, 4/01/32 (Alternative Minimum Tax)
2,500,000 Lower Neches Valley Authority, Industrial Development Corporation 3/08 at 101 AA 2,572,649
(Texas), 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, 2/06 at 102 BBB 2,120,500
Health 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 5/06 at 102 A+ 3,151,293
Bonds (Hoechst Celanese Corporation Project), Series 1996, 6.500%,
5/01/26 (Alternative Minimum Tax)
2,000,000 City of San Antonio (Texas), Electric and Gas Systems Revenue 2/09 at 100 Aa1 1,842,000
Refunding Bonds, New Series 1998A, 4.500%, 2/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
Utah - 0.5%
2,000,000 Carbon County, Utah, Solid Waste Disposal Refunding Revenue Bonds 2/05 at 102 BBB 2,246,700
(Laidlaw Inc./ECDC Environmental, L.C. Project), 1995 Series A,
7.500%, 2/01/10 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia - 0.9%
2,000,000 Industrial Development Authority of the County of Hanover No Opt. Call AAA 2,350,019
(Virginia), Hospital Revenue Bonds, Series 1995 (Memorial
Regional Medical Center Project at Hanover Medical Park)
(Guaranteed by Bon Secours Health System Obligated Group),
6.375%, 8/15/18
1,250,000 Southeastern Public Service Authority of Virginia, Senior Revenue 7/03 at 102 A- 1,300,424
Bonds, Series 1993 (Regional Solid Waste System), 6.000%, 7/01/13
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
West Virginia - 0.1%
500,000 Mason County, West Virginia, Pollution Control Revenue Bonds 1/00 at 102 Baa1 519,184
(Appalachian Power Company Project), Series G, 7.400%, 1/01/14
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 0.2%
825,000 Village of Fall Creek, Wisconsin, Municipal Nursing Home Mortgage 7/99 at 100 N/R 830,032
Revenue Bonds, Series 1989, 9.875%, 7/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
$425,474,276 Total Investments - (cost $392,942,990) - 98.2% 419,264,973
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.8% 7,550,982
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $426,815,955
=====================================================================================================================
</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.
______
18
<PAGE>
Portfolio of Investments
Nuveen Flagship Intermediate Municipal Bond Fund
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona - 0.3%
$ 205,000 The Industrial Development Authority of the County of Pima, Single Family 5/07 at 102 AAA $ 215,078
Mortgage Revenue Refunding Bonds, Series 1997B, 5.850%, 5/01/09
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
California - 3.9%
555,000 La Mirada Redevelopment Agency (California), Community Facilities District No Opt. Call N/R 566,855
No. 89-1 (Civic Theatre Project), 1998 Refunding Special Tax Bonds
(Tax Increment Contribution), 5.200%, 10/01/06
1,000,000 Sacramento Cogeneration Authority, Cogeneration Project Revenue Bonds 7/05 at 102 BBB- 1,104,730
(Procter & Gamble Project), 1995 Series, 6.200%, 7/01/06
770,000 Washington Township (California), Health Care District Revenue Bonds, 7/08 at 101 A2 767,513
Series 1999, 5.000%, 7/01/11 (WI)
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado - 6.7%
2,300,000 Public Highway Authority, Capital Improvement Trust Fund, 8/05 at 95 29/32 Aaa 1,698,711
Highway Revenue Bonds (E-470 Project), Arapahoe County,
Colorado, Senior Bonds, 0.000%, 8/31/06
(Pre-refunded to 8/31/05)
1,000,000 Aurora Centretech Metropolitan District, Arapahoe County, Colorado, 12/06 at 102 A+ 1,000,760
General Obligation Refunding Bonds, Series 1998C, 4.875%, 12/01/28
(Mandatory put 12/01/08)
500,000 Colorado Health Facilities Authority, Revenue Bonds, Series 1995 12/05 at 102 A- 550,450
(Covenant Retirement Communities Inc.), 6.200%, 12/01/07
900,000 Eagle County Air Terminal Corporation, Airport Terminal Project No Opt. Call N/R 950,013
Revenue Bonds, Series 1996, 6.750%, 5/01/06
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Connecticut - 0.6%
335,000 Eastern Connecticut Resource Recovery Authority, Solid Waste 1/03 at 102 BBB+ 344,571
Revenue Bonds (Wheelbrator Lisbon Project), Series 1993A,
5.150%, 1/01/05 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Delaware - 0.9%
500,000 Delaware Economic Development Authority, First Mortgage Revenue Bonds 5/07 at 102 BBB 545,140
(Peninsula United Methodist Homes, Inc. Issue), Series 1997A,
6.100%, 5/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.3%
205,000 District of Columbia, University Revenue Bonds (American University 10/06 at 101 AAA 218,006
Issue), Series 1996, 5.375%, 10/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Florida - 18.5%
200,000 Alachua County Health Facilities Authority, Florida, Health Facilities 12/06 at 102 AAA 216,140
Revenue Bonds, Series 1996A (Shands Teaching Hospital and Clinics,
Inc. Project), 5.300%, 12/01/08
485,000 City of Auburndale, Florida, Water and Sewer Revenue Bonds, Series 1995, 12/05 at 102 AAA 523,538
5.375%, 12/01/08
300,000 Brevard County Housing Finance Authority, Florida, Multi-Family Housing 2/06 at 101 AAA 339,045
Revenue Refunding Bonds (Windover Oaks and Windover Health Club
Apartments Projects), Series 1996A, 6.900%, 2/01/27
(Mandatory put 2/01/07)
200,000 The School District of Dade County, Florida, General Obligation 7/06 at 101 AAA 203,536
Refunding School Bonds, Series 1996, 4.500%, 7/15/08
500,000 Dade County, Florida, Seaport Revenue Refunding Bonds, Series 1995, No Opt. Call AAA 575,955
6.200%, 10/01/10
335,000 Dade County, Florida, Special Obligation and Refunding Bonds, 10/08 at 98 7/32 AAA 211,414
Series 1996B, 0.000%, 10/01/09
500,000 Duval County School District, Florida, General Obligation Refunding 8/02 at 102 AAA 532,815
Bonds, Series 1992, 6.300%, 8/01/08
160,000 Escambia County Housing Finance Authority, Florida, Single Family 4/07 at 102 Aaa 167,275
Mortgage Revenue Bonds, Series 1997A (Multi-County Program),
5.500%, 4/01/08 (Alternative Minimum Tax)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provision* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florida (continued)
$ 200,000 Escambia County, Florida, Pollution Control Refunding Revenue Bonds 11/02 at 102 Baa1 $ 218,184
(Champion International Project), Series 1992, 6.950%, 11/01/07
180,000 Florida Housing Finance Agency, Single Family Mortgage Revenue No Opt. Call AAA 186,982
Refunding Bonds, Series 1995A, 6.000%, 1/01/04 (Alternative
Minimum Tax)
325,000 Florida Ports Financing Commission, Revenue Bonds (State Transportation No Opt. Call AAA 340,275
Trust Fund), Series 1996, 5.000%, 6/01/07 (Alternative Minimum Tax)
500,000 State of Florida, Full Faith and Credit, Broward County Expressway No Opt. Call AA+ 700,600
Authority, Series of 1984, 9.875%, 7/01/09
200,000 Greater Orlando Aviation Authority, Airport Facilities Revenue Bonds, No Opt. Call AAA 219,220
City of Orlando, Florida, Series 1997, 5.750%, 10/01/10 (Alternative
Minimum Tax)
405,000 Gulf Breeze Local Government Loan Program Bonds, Remarketed Series 12/06 at 101 AAA 436,100
1985-B, 5.600%, 12/01/15 (Mandatory put 12/01/07)
145,000 School District of Gulf County, Florida, Sales Tax Revenue Bonds, 6/07 at 101 AA 153,104
Series 1997, 5.200%, 6/01/08
200,000 Halifax Hospital Medical Center (Daytona Beach, Florida), Health No Opt. Call A 200,356
Care Facilities Revenue Bonds (Halifax Management System,
Inc. Project), 1998 Series A, 4.600%, 4/01/08
200,000 Hillsborough County Aviation Authority, Florida, Tampa International 10/06 at 101 AAA 219,106
Airport Revenue Refunding Bonds, Series 1997 A, 5.750%, 10/01/07
(Alternative Minimum Tax)
200,000 Hillsborough County, Florida, Capital Improvement Program Refunding 8/06 at 102 AAA 208,098
Revenue Bonds, Series 1996, 4.800%, 8/01/08
150,000 Indian Trace Community Development District (Broward County, Florida), 5/05 at 102 AAA 162,434
Water Management Special Benefit Refunding Bonds, Series 1995A,
5.500%, 5/01/06
165,000 Jacksonville Health Facilities Authority, Florida, Tax Exempt Industrial No Opt. Call Baa1 177,375
Development Revenue Bonds (National Benevolent Association - Cypress
Village Florida Project), Series 1996A, 5.850%, 12/01/06
400,000 Lee County, Florida, Capital Revenue Refunding Bonds, Series A, 5.750%, No Opt. Call AAA 446,148
10/01/11
250,000 Hospital Board of Directors of Lee County, Florida, Hospital Revenue 4/07 at 102 AAA 269,975
Bonds (Lee Memorial Health System), Fixed Rate Hospital Revenue
Bonds, 1997 Series A, 5.400%, 4/01/09
250,000 Lee County, Florida, Industrial Development Authority, Utilities Revenue 11/06 at 101 AAA 269,903
Refunding Bonds, Bonita Springs Utilities Project, 5.450%, 11/01/07
(Alternative Minimum Tax)
200,000 Leesburg, Florida, Hospital Revenue Refunding, Leesburg Regional Medical 7/06 at 102 A- 214,424
Center, Project A, 5.600%, 7/01/08
290,000 Levy County, Florida, School Board Certificates of Participation, 5.500%, 7/05 at 102 AA 313,113
7/01/06
125,000 Lynn Haven, Florida, Special Project Revenue, 5.250%, 10/01/05 No Opt. Call AAA 132,206
(Alternative Minimum Tax)
250,000 Martin County, Florida, Special Assessment Bonds, Series 1995 (Tropical No Opt. Call A2 269,368
Farms Water and Sewer Special Assessment District), 5.600%, 11/01/05
300,000 Orange County Housing Finance Authority, Single Family Mortgage Revenue 9/07 at 102 AAA 311,070
Bonds (GNMA and Fannie Mae Mortgage Backed Securities Program), Series
1997B, 5.400%, 9/01/09 (Alternative Minimum Tax)
375,000 Pasco County, Florida, Solid Waste Disposal and Resource Recovery System 4/07 at 101 AAA 394,478
Revenue, Series B, 5.250%, 4/01/09 (Alternative Minimum Tax)
100,000 Pembroke Pines, Florida, Special Assessment No. 94-1, 5.750%, 11/01/05 No Opt. Call A3 107,475
200,000 Pensacola, Florida, Airport Revenue, Series B, 5.400%, 10/01/07 No Opt. Call AAA 214,564
B, 5.400%, 10/01/07 (Alternative Minimum Tax)
500,000 Housing Finance Authority of Polk County, Florida, Multifamily Housing 7/05 at 101 AAA 522,420
Revenue Bonds (Winter Oaks Apartments Project), Series 1997A, 5.250%,
7/01/22 (Mandatory put 7/01/07)
1,000,000 Sanford Airport Authority, Florida, Industrial Development Revenue Bonds No Opt. Call N/R 1,058,820
(Central Florida Terminals Inc. Project), Series 1995A, 7.500%, 5/01/06
(Alternative Minimum Tax)
250,000 Sanford Airport Authority, Florida, Industrial Development Revenue Bonds No Opt. Call N/R 266,845
(Central Florida Terminals Inc. Project), Series 1997C, 6.750%, 5/01/05
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provision* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florida (continued)
$ 200,000 Sarasota County, Florida, Health Facilities Authority, Health No Opt. Call N/R $ 208,764
Facilities Revenue Refunding Bonds, Series 1995 (Sunnyside
Properties Project), 5.500%, 5/15/05
200,000 Sarasota-Manatee Airport Authority, Airport System Revenue Refunding 8/06 at 102 AAA 215,234
Bonds, Series 1996, 5.250%, 8/01/08
250,000 City of Tampa, Florida, Health System Revenue Bonds, Catholic Health No Opt. Call AAA 270,255
East Issue, Series 1998A-1, 5.500%, 11/15/12
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois - 7.0%
500,000 City of Chicago, Chicago-O'Hare International Airport, Special No Opt. Call Baa2 506,410
Facilities Revenue Refunding Bonds (United Airlines, Inc. Project),
Series 1999B, 5.200%, 4/01/11 (Alternative Minimum Tax)
1,000,000 Illinois Development Finance Authority, Adjustable Rate Solid No Opt. Call Aa2 1,000,010
Waste Disposal Revenue Bonds (Waste Management, Inc. Project),
Series 1997, 5.050%, 1/01/10 (Alternative Minimum Tax)
225,000 Illinois Development Finance Authority, Economic Development 8/08 at 100 Baa2 228,942
Revenue Bonds, Series 1998 (The Latin School of Chicago Project),
5.250%, 8/01/09
1,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1996 No Opt. Call BBB 1,068,250
(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- 522,210
500,000 5.500%, 9/01/10 9/08 at 101 A- 521,620
500,000 Illinois Health Facilities Authority, Revenue Bonds (Victory Health 8/07 at 101 A- 538,145
Service), Series 1997A, 5.750%, 8/15/08
- -----------------------------------------------------------------------------------------------------------------------------------
Indiana - 1.7%
500,000 Indiana Bond Bank Special Program Bonds, Series 1997 B (Hendricks 2/07 at 102 AA- 539,325
County Redevelopment Authority, Pittboro Project), 5.750%, 2/01/08
495,000 Indiana Health Facility Financing Authority, Hospital Revenue Bonds No Opt. Call AA+ 508,276
(Charity Obligated Group - Daughters of Charity National Health
System), Series 1997D, 5.000%, 11/01/26 (Mandatory put 11/01/07)
- -----------------------------------------------------------------------------------------------------------------------------------
Kansas - 0.7%
420,000 Lenexa, Kansas, Multifamily Housing Revenue Refunding Bonds (Barrington 2/03 at 102 AA 445,032
Park Apartments Project), Series 1993A, 6.200%, 2/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 2.1%
2,000,000 Jefferson Sales Tax District, Parish of Jefferson, State of Louisiana, No Opt. Call AAA 1,041,600
Special Sales Tax Revenue and Refunding Bonds, Series 1998, 0.000%,
12/01/12
265,000 Louisiana Public Facilities Authority, Student Loan Revenue Bonds, Series 9/02 at 102 Aaa 284,136
1992A-2, 6.600%, 3/01/03 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland - 0.9%
500,000 Maryland Health and Higher Educational Facilities Authority, Refunding 1/07 at 102 A- 541,995
Revenue Bonds, Pickersgill Issue, Series 1997A, 5.750%, 1/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 1.7%
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/08 at 101 A 1,032,810
Massachusetts Eye and Ear Infirmary Issue, Series B, 5.250%, 7/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan - 5.5%
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue Refunding No Opt. Call BBB 1,062,930
Bonds (Gratiot Community Hospital, Alma, Michigan), Series 1995, 6.100%,
10/01/07
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue and Refunding No Opt. Call BBB 1,051,810
Bonds (Genesys Regional Medical Center Obligated Group,) Series 1998A,
5.500%, 10/01/08
215,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Clark No Opt. Call BBB+ 213,127
Retirement Community Inc. Project), Series 1998, 4.900%, 6/01/08
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Intermediate Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provision* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michigan (continued)
$ 1,000,000 County of Monroe, Michigan, Pollution Control Revenue Bonds (The No Opt. Call AAA $1,100,330
Detroit Edison Company Project), Series A-1994, 6.350%, 12/01/04
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Minnesota - 1.6%
1,000,000 Housing and Redevelopment Authority of the City of Saint Paul, No Opt. Call BBB+ 1,011,080
Minnesota, Health Care Revenue Bonds (Regions Hospital Project),
Series 1998, 5.000%, 5/15/09
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.8%
500,000 Perry County (Mississippi), Pollution Control Refunding Revenue 3/12 at 100 Baa2 499,500
Bonds (Leaf River Forest Project), Series 1999, 5.200%, 10/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Missouri - 2.7%
1,000,000 The Industrial Development Authority of the City of Kansas City, 11/08 at 102 N/R 978,350
Missouri, Retirement Facility, Refunding and Improvement Revenue
Bonds, Series 1998A (Kingswood Project), 5.375%, 11/15/09
300,000 Health and Educational Facilities Authority of the State of 2/07 at 102 N/R 317,937
Missouri, Health Facilities Revenue Bonds (Lutheran Senior Services),
Series 1997, 5.550%, 2/01/09
350,000 The Industrial Development Authority of the City of St. Louis, 12/02 at 102 N/R 375,939
Missouri, Industrial Revenue Refunding Bonds (Kiel Center Multipurpose
Arena Project), Series 1992, 7.625%, 12/01/09 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Nebraska - 3.2%
1,000,000 American Public Energy Agency, Gas Supply Revenue Bonds (Nebraska Public No Opt. Call AAA 980,170
Gas Agency - Western A Project), 1999 Series A, 4.375%, 6/01/10
1,000,000 Energy America (Nebraska), Natural Gas Revenue Note (Metropolitan No Opt. Call N/R 1,008,960
Utility District Project), Series 1997B, 5.700%, 7/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey - 1.7%
500,000 New Jersey Economic Development Authority, Insured Revenue Bonds No Opt. Call AAA 535,595
(Educational Testing Service Issue), Series 1995B, 5.500%, 5/15/05
500,000 New Jersey Educational Facilities Authority, Revenue Bonds, No Opt. Call BBB 508,800
Saint Peters College Issue, 1998 Series B, 5.000%, 7/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
New Mexico - 0.1%
80,000 New Mexico Educational Assistance Foundation, Student Loan No Opt. Call Aaa 85,750
Revenue Bonds, Senior 1992 Series One-A, 6.300%, 12/01/02
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
New York - 10.5%
500,000 Albany Housing Authority, City of Albany, New York, Limited 10/05 at 102 Baa1 520,600
Obligation Bonds, Series 1995, 5.700%, 10/01/06
275,000 The City of New York, General Obligation Bonds, Fiscal 1997 8/06 at 101 1/2 A- 308,737
Series A, Fixed Rate Tax-Exempt Bonds, 6.250%, 8/01/08
200,000 The City of New York, General Obligation Bonds, Fiscal 1996 No Opt. Call A- 217,252
Series G, 5.750%, 2/01/06
500,000 The City of New York, General Obligation Bonds, Fiscal 1997 8/06 at 101 1/2 A- 545,620
Series B, 5.700%, 8/15/07
145,000 The City of New York, General Obligation Bonds, Fiscal 1993 2/05 at 101 A-*** 163,588
Series F, 6.375%, 2/15/06 (Pre-refunded to 2/15/05)
555,000 The City of New York, General Obligation Bonds, Fiscal 1995 2/05 at 101 A- 616,877
Series F, 6.375%, 2/15/06
1,000,000 Dormitory Authority of the State of New York, Mental Health 2/07 at 102 A- 1,108,230
Services 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 A- 820,943
Bonds, New York City, 1996 Series A Refunding, 6.000%, 5/01/06
1,000,000 The Port Authority of New York and New Jersey, Special Project No Opt. Call N/R 1,106,480
Bonds, Series 4, KIAC Partners Project, 7.000%, 10/01/07
(Alternative Minimum Tax)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provision* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (continued)
$ 1,000,000 The Port Authority of New York and New Jersey, Special Project No Opt. Call AAA $1,143,480
Bonds, Series 6, JFK International Air Terminal LLC Project,
6.250%, 12/01/10 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio - 8.0%
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 383,818
425,000 5.850%, 12/01/08 No Opt. Call N/R 456,276
1,000,000 City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds, No Opt. Call BBB 1,068,910
1988 Series C (Emery Air Freight Corporation and Emery Worldwide
Airlines, Inc. - Guarantors) (Non-AMT), 6.050%, 10/01/09
1,000,000 County of Franklin, Ohio, Hospital Refunding and Improvement 11/06 at 101 Aa 1,081,020
Revenue Bonds, 1996 Series A (The Children's Hospital Project),
5.550%, 11/01/07
1,000,000 County of Hamilton, Ohio, Hospital Facilities Revenue Bonds, No Opt. Call AAA 1,062,850
Series 1993 (Children's Hospital Medical Center), 5.200%, 5/15/09
900,000 Miami County, Ohio, Hospital Facilities Revenue Refunding and No Opt. Call BBB 951,966
Improvement Bonds (Upper Valley Medical Center), Series 1996C,
6.000%, 5/15/06
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 5.2%
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- 472,124
495,000 4.950%, 4/01/08 No Opt. Call BBB- 495,688
2,195,000 Pleasant Valley School District, Monroe County (Pennsylvania), No Opt. Call AAA 1,224,152
General Obligation Bonds, Series of 1999, 0.000%, 9/01/11
1,500,000 Municipal Authority of Westmoreland County (Pennsylvania), No Opt. Call AAA 1,046,445
Municipal Service Revenue Bonds, Series of 1995A 0.000%, 8/15/07
- -----------------------------------------------------------------------------------------------------------------------------------
South Carolina - 0.3%
195,000 City of Myrtle Beach, South Carolina, Myrtle Beach Public No Opt. Call A3*** 205,064
Facilities Corporation, Certificates of Participation (City of
Myrtle Beach Convention Center Project), Series 1992, 6.750%,
7/01/02
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 1.7%
500,000 Memphis-Shelby County Airport Authority (Tennessee), Special No Opt. Call BBB 522,805
Facilities Revenue Refunding Bonds, Series 1997 (Federal Express
Corporation), 5.350%, 9/01/12
500,000 The Industrial Development Board of the Metropolitan Government No Opt. Call N/R 518,265
of Nashville and Davidson County (Tennessee), Industrial Development
Revenue Refunding and Improvement Bonds (Osco Treatment Systems,
Inc. Project), Series 1993, 6.000%, 5/01/03 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 6.5%
1,000,000 Alliance Airport Authority, Inc. (Texas), Special Facilities No Opt. Call Baa2 1,174,320
Revenue Bonds, Series 1991 (American Airlines, Inc. Project),
7.000%, 12/01/11 (Alternative Minimum Tax)
345,000 Brazos Higher Education Authority, Inc., Student Loan Revenue No Opt. Call Aaa 368,895
Refunding Bonds, Series 1993A-1, 6.200%, 12/01/02 (Alternative
Minimum Tax)
3,000,000 Goose Creek Consolidated Independent School District (Texas), No Opt. Call AAA 1,925,550
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 566,126
Housing Revenue Bonds (NHP-Foundation - Asmara Project),
Series 1996A, 5.800%, 1/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Utah - 0.5%
290,000 Salt Lake County, Utah, College Revenue Bonds (Westminster 10/07 at 101 BBB 295,240
College of Salt Lake City Project), Series 1997, 5.200%,
10/01/09
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Flagship Intermediate Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provision* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Virgin Island - 2.6%
$ 585,000 Virgin Islands Port Authority, Airport Revenue Refunding Bonds, 9/02 at 101 BBB $ 585,082
Series 1998A, 4.500%, 9/01/05 (Alternative Minimum Tax)
1,000,000 Virgin Islands Water and Power Authority, Electric System Revenue 7/08 at 101 N/R 1,044,820
and Refunding Bonds, 1998 Series, 5.250%, 7/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Virginia - 0.8%
500,000 Pocahontas Parkway Association, Route 895 Connector Toll Road No Opt. Call BBB- 514,689
Revenue Bonds, Senior Current Interest, Series 1998A, 5.250%,
8/15/07
- -----------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 1.2%
750,000 Wisconsin Health and Educational Facilities Authority, Revenue 10/07 at 101 BBB- 749,362
Bonds, Series 1998 (Carroll College, Inc. Project), 5.000%,
10/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Wyoming - 0.3%
200,000 State of Wyoming, Farm Loan Board, Capital Facilities Refunding 10/02 at 102 AA- 217,791
Revenue Bonds, Series 1992, 6.100%, 10/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
$62,480,000 Total Investments - (cost $58,355,084) - 98.5% 61,430,545
- -----------------------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 1.6%
$ 1,000,000 Maricopa County, Arizona, Pollution Control Corporation, Pollution Control A-1+ 1,000,000
Revenue Refunding Bonds (Arizona Public Service Company-Palo Verde Project),
1994 Series C, Variable Rate Demand Bonds, 4.250%, 5/01/29+
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.1)% (94,966)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $62,335,579
===================================================================================================================================
</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.
(WI) Security purchased on a when-issued basis (note 1).
+ Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically
based on market conditions or a specified market index.
See accompanying notes to financial statements.
24
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska - 0.2%
$1,250,000 Alaska Student Loan Corporation, Student Loan Revenue Bonds, 1997 No Opt. Call AAA $1,301,475
Series A, 5.200%, 7/01/06 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Arizona - 0.4%
250,000 Arizona Educational Loan Marketing Corporation, Educational Loan No Opt. Call Aa 265,700
Revenue Bonds, 6.125%, 9/01/02 (Alternative Minimum Tax)
2,000,000 City of Tucson, Arizona, General Obligation Refunding Bonds, Series No Opt. Call AAA 2,144,960
1995, 5.375%, 7/01/05
- -----------------------------------------------------------------------------------------------------------------------------------
California - 4.8%
California Statewide Communities Development Authority, Certificates of
Participation Refunding (Rio Bravo-Fresno Project), 1999 Series A:
1,000,000 5.300%, 12/01/99 No Opt. Call N/R 1,003,970
3,000,000 5.400%, 12/01/00 No Opt. Call N/R 3,029,310
3,000,000 5.450%, 12/01/01 No Opt. Call N/R 3,031,350
2,000,000 5.550%, 12/01/02 No Opt. Call N/R 2,030,360
2,000,000 5.600%, 12/01/03 No Opt. Call N/R 2,033,800
4,380,000 Central Joint Powers Health Financing Authority, Certificates of No Opt. Call Baa1 4,567,376
Participation, Series 1993 (Community Hospital of Central California),
5.250%, 2/01/04
1,250,000 Long Beach Aquarium of the Pacific, Revenue Bonds (Aquarium of the No Opt. Call BBB 1,337,788
Pacific 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- 1,055,760
500,000 6.000%, 7/01/03 No Opt. Call BBB- 535,940
500,000 7.000%, 7/01/04 No Opt. Call BBB- 561,325
4,800,000 Southern California Public Power Authority, Power Project Revenue Bonds, No Opt. Call AAA 5,240,592
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 A2 1,592,145
(Community Correctional Facility Acquisition Project), 5.500%, 1/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado - 4.3%
9,000,000 Public Highway Authority, Capital Improvement Trust Fund Highway 8/05 at 95 29/32 Aaa 6,647,130
Revenue Bonds (E-470 Project), Senior Bonds Arapahoe County,
Colorado, 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 6.300%, 6/01/99 No Opt. Call N/R*** 501,225
400,000 6.400%, 6/01/00 No Opt. Call N/R*** 412,464
2,475,000 Colorado Health Facilities Authority, Revenue Bonds, Series 1995 No Opt. Call A- 2,629,787
(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 1,326,625
3,515,000 0.000%, 11/01/02 No Opt. Call Aa1 2,908,592
6,475,000 City and County of Denver, Colorado, Airport System Revenue Bonds, No Opt. Call AAA 6,991,381
Series 1996B, 5.750%, 11/15/04 (Alternative Minimum Tax)
1,400,000 Eagle County Air Terminal Corporation, Airport Terminal Project No Opt. Call N/R 1,477,798
Revenue Bonds, Series 1996, 6.750%, 5/01/06 (Alternative
Minimum Tax)
500,000 Hyland Hills Park and Recreation District, Adams County, Colorado, No Opt. Call N/R 512,635
Special Revenue Refunding and Improvement Bonds, Series 1996A,
5.400%, 12/15/00
</TABLE>
25
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Connecticut - 4.1%
City of Bridgeport, Connecticut, General Obligation Refunding Bonds,
1996 Series A:
$ 4,650,000 5.250%, 9/01/04 No Opt. Call AAA $ 4,959,923
1,000,000 6.000%, 9/01/05 No Opt. Call AAA 1,109,430
2,800,000 State of Connecticut Health and Educational Facilities Authority, No Opt. Call BBB- 2,943,332
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 1,032,260
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 800,974
1,100,000 5.200%, 4/01/05 No Opt. Call BBB 1,136,872
1,135,000 5.300%, 4/01/06 No Opt. Call BBB 1,178,380
615,000 City of New Haven, Connecticut, General Obligation Bonds, Issue of No Opt. Call AAA 660,123
1992, 9.250%, 3/01/02
5,000,000 Housing Authority of the City of Stamford, Connecticut, Multifamily No Opt. Call A3 4,973,200
Housing Revenue Refunding Bonds (The Fairfield Apartments Project),
Series 1998, 4.750%, 12/01/28 (Mandatory put 12/01/08)
3,775,000 West Haven Housing Authority, Connecticut, Multifamily Housing Revenue 1/01 at 100 N/R 3,830,266
Bonds, Series 1998B (Meadows Landing Apartments), 6.000%, 1/01/02
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.1%
500,000 District of Columbia Redevelopment Land Agency, Sports Arena Special Tax No Opt. Call BBB+ 504,069
Revenue Bonds (Series 1996), 5.300%, 11/01/99
- -----------------------------------------------------------------------------------------------------------------------------------
Florida - 1.5%
350,000 North Springs Improvment District (Broward County, Florida), Water and No Opt. Call N/R 364,522
Sewer Revenue Bonds, Series 1991, 7.900%, 10/01/01
4,940,000 Housing Finance Authority of Polk County (Florida), Multifamily Housing 7/05 at 101 AAA 5,161,510
Revenue Bonds (Winter Oaks Apartments Project), Series 1997A, 5.250%,
7/01/22 (Mandatory put 7/01/07)
2,370,000 Sanford Airport Authority (Florida), Industrial Development Revenue Bonds No Opt. Call N/R 2,471,081
(Central Florida Terminals Inc. Project), Series 1995A, 7.300%, 5/01/04
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia - 0.6%
3,000,000 City of Atlanta, Georgia, Airport Facilities Revenue Refunding Bonds, No Opt. Call AAA 3,405,930
Series 1996, 6.500%, 1/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois - 2.4%
290,000 DeKalb, Illinois, Home Rule Units Single Family Mortgage Revenue No Opt. Call Aaa 292,854
Bonds (GNMA Mortgage-Backed Securities Program), Series 1991A, 6.700%,
12/01/99 (Alternative Minimum Tax)
970,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, No Opt. Call AA 988,682
Galesburg Cottage Hospital, 5.400%, 5/01/00
565,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1996 No Opt. Call BBB 579,001
(Mercy Hospital and Medical Center Project), 5.600%, 1/01/02
1,500,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, No Opt. Call A- 1,583,685
Series 1996B (Sarah Bush Lincoln Health Center), 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- 975,023
995,000 5.000%, 8/15/06 No Opt. Call A- 1,024,631
1,045,000 5.750%, 8/15/07 No Opt. Call A- 1,125,120
605,000 5.750%, 8/15/08 8/07 at 101 A- 651,155
1,350,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1998B 8/99 at 102 N/R*** 1,392,471
(ServantCor), 7.500%, 8/15/01 (Pre-refunded to 8/15/99)
3,000,000 State of Illinois, General Obligation Bonds, Series of March 1992 10/02 at 102 AA 3,271,350
1992 (Full Faith and Credit), 6.200%, 10/01/04
1,065,000 Village of Romeoville, Will County, Illinois, General Obligation No Opt. Call N/R 1,095,331
Refunding Bonds (Alternate Revenue Source), Series 1991-B,
7.850%, 1/01/01
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Indiana - 1.3%
City of Goshen, Indiana, Revenue Refunding Bonds, Series 1998
(Greencroft Obligated Group)
$ 715,000 5.150%, 8/15/05 No Opt. Call N/R $ 715,172
790,000 5.250%, 8/15/07 No Opt. Call N/R 787,203
680,000 5.300%, 8/15/08 No Opt. Call N/R 677,382
775,000 5.350%, 8/15/09 8/08 at 101 N/R 769,854
Indiana Bond Bank Special Program Bonds, Series 1997B (Hendricks
County Redevelopment Authority, Pittboro Project):
1,525,000 5.250%, 2/01/03 No Opt. Call AA- 1,584,521
1,075,000 5.400%, 2/01/04 No Opt. Call AA- 1,127,288
1,250,000 Valparaiso Multi-School Building Corporation (Porter County, No Opt. Call AAA 1,314,512
Indiana), First Mortgage Bonds, Series 1992, 6.100%, 7/01/01
- -----------------------------------------------------------------------------------------------------------------------------------
Iowa - 1.7%
Iowa Student Loan Liquidity Corporation, Iowa Partnership Loan
Revenue Bonds, 1992 Series:
600,000 5.850%, 7/01/99 (Alternative Minimum Tax) No Opt. Call A 602,256
325,000 6.000%, 7/01/00 (Alternative Minimum Tax) No Opt. Call A 333,496
600,000 6.100%, 7/01/01 (Alternative Minimum Tax) No Opt. Call A 625,566
650,000 6.200%, 7/01/02 (Alternative Minimum Tax) No Opt. Call A 688,116
7,000,000 Iowa Student Loan Liquidity Corporation, Student Loan Revenue No Opt. Call AAA 7,049,840
Refunding Bonds, 1998 Series J, 4.800%, 6/01/09
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Kentucky - 6.8%
850,000 City of Berea, Kentucky, Berea College General Obligation Bonds, No Opt. Call Aaa 860,328
Series 1998, 4.800%, 7/01/08 (Alternative Minimum Tax)
3,180,000 County of Christian, Kentucky, Hospital Revenue and Refunding No Opt. Call A- 3,406,003
Bonds, 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 242,701
520,000 4.750%, 11/01/03 No Opt. Call A 541,471
Kenton County Water District No. 1, Water District Revenue
Bonds, Series 1995B:
475,000 5.600%, 2/01/03 No Opt. Call AAA 505,723
500,000 5.600%, 2/01/05 No Opt. Call AAA 540,050
Kentucky Development Finance Authority, Sisters of Charity of
Nazareth Health Corporation Revenue Refunding Bonds, Series 1991:
1,330,000 6.000%, 11/01/01 No Opt. Call A1*** 1,403,296
2,720,000 6.600%, 11/01/06 (Pre-refunded to 11/01/01) 11/01 at 102 A1*** 2,961,672
Kentucky Economic Development Finance Authority, Hospital System
Refunding and Improvement Revenue Bonds, Series 1997
(Appalachian Regional Healthcare, Inc. Project):
2,670,000 5.300%, 10/01/05 No Opt. Call BBB 2,713,841
1,315,000 5.400%, 10/01/06 No Opt. Call BBB 1,339,301
1,460,000 Kentucky Higher Education Student Loan Corporation, Insured Student No Opt. Call Aaa 1,590,801
Loan Revenue Bonds, 1991 Series B,
6.800%, 6/01/03 (Alternative Minimum Tax)
180,000 Kentucky Infrastructure Authority, Wastewater Revolving Fund Program, No Opt. Call A 189,740
Revenue Refunding Bonds, 1995 Series C, 5.300%, 6/01/03
Kentucky Infrastructure Authority, Governmental Agencies Program,
Revenue and Revenue Refunding Bonds, 1995 Series H:
1,945,000 5.300%, 8/01/03 No Opt. Call A 2,054,153
675,000 5.400%, 8/01/04 No Opt. Call A 719,429
1,000,000 5.500%, 8/01/05 No Opt. Call A 1,075,040
1,000,000 The Turnpike Authority of Kentucky, Resource Recovery Road Revenue No Opt. Call A+ 1,289,910
Refunding Bonds, 1985 Series A,
9.625%, 7/01/05
</TABLE>
----
27
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kentucky (continued)
Regional Airport Authority of Louisville and Jefferson County,
Kentucky, Airport System Revenue Bonds, 1997 Series A:
$ 1,375,000 5.750%, 7/01/00 (Alternative Minimum Tax) No Opt. Call AAA $ 1,409,994
455,000 5.750%, 7/01/01 (Alternative Minimum Tax) No Opt. Call AAA 473,619
1,535,000 5.750%, 7/01/02 (Alternative Minimum Tax) No Opt. Call AAA 1,620,914
3,225,000 Mount Sterling, Kentucky, Lease Revenue Bonds (Kentucky League of No Opt. Call Aa 3,395,990
Cities Funding Program), Series 1993A, 5.625%, 3/01/03
10,800,000 City of Owensboro, Kentucky, Electric Light and Power System No Opt. Call AAA 8,968,320
Revenue Bonds, Series 1993A, 0.000%, 1/01/04
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 2.4%
6,000,000 Parish of East Baton Rouge, State of Louisiana, Pollution Control No Opt. Call A+ 6,252,360
Refunding Revenue Bonds (Hoechst Celanese Corporation Project),
Series 1993, 5.400%, 12/01/02
1,215,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds No Opt. Call AAA 1,229,568
(Our Lady of Lourdes Regional Medical Center Project), Series
1992, 4.900%, 2/01/00
965,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds No Opt. Call A3*** 1,020,092
(Womans Hospital Foundation Project), Series 1992, 6.750%,
10/01/02
2,500,000 Louisiana Offshore Terminal Authority, Deepwater Port Refunding No Opt. Call A 2,668,325
Revenue Bonds (LOOP INC. Project), First Stage Series 1992B,
6.100%, 9/01/02
Office Facilities Corporation (A Louisiana Non Profit Corporation),
Capital Facilities Bonds (Statewide Lease/Purchase Program), Series 1990:
400,000 7.250%, 12/01/99 No Opt. Call BBB+ 408,852
770,000 7.350%, 12/01/00 No Opt. Call BBB+ 813,297
Ouachita Parish, Louisiana, Hospital Service District No. 1,
Glenwood Regional Medical Center:
425,000 7.000%, 7/01/99 No Opt. Call A*** 427,516
300,000 7.250%, 7/01/00 No Opt. Call A*** 312,462
- -----------------------------------------------------------------------------------------------------------------------------------
Maine - 0.2%
1,210,000 Maine Educational Loan Marketing Corporation, Student Loan Revenue 5/02 at 101 A 1,261,594
Refunding Bonds, Series 1992, 6.600%, 5/01/05 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland - 1.1%
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 (Alternative Minimum Tax) No Opt. Call A- 2,428,747
1,000,000 5.850%, 12/01/05 (Alternative Minimum Tax) No Opt. Call A- 1,084,520
2,400,000 Northeast Maryland Waste Disposal Authority, Resource Recovery No Opt. Call AAA 2,715,000
Revenue Refunding Bonds (Southwest Resource Recovery Facility),
Series 1993, 7.150%, 1/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 4.4%
265,000 City of Brockton, Massachusetts, General Obligation Bonds, No Opt. Call A2 270,107
5.350%, 6/15/00
Massachusetts Educational Financing Authority, Education Loan
Revenue Bonds, Issue E, Series 1995:
800,000 5.500%, 7/01/01 (Alternative Minimum Tax) No Opt. Call AAA 823,648
2,445,000 5.700%, 7/01/04 (Alternative Minimum Tax) No Opt. Call AAA 2,575,367
Massachusetts Educational Financing Authority, Education Loan
Revenue Bonds, Issue E, Series 1997B:
1,970,000 5.250%, 7/01/06 (Alternative Minimum Tax) No Opt. Call AAA 2,079,946
2,775,000 5.350%, 7/01/07 (Alternative Minimum Tax) 7/06 at 102 AAA 2,947,244
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 2,720,901
3,800,000 6.300%, 7/01/00 No Opt. Call AAA 3,923,880
1,000,000 The Commonwealth of Massachusetts, General Obligation Refunding No Opt. Call AA- 1,007,050
Bonds, Series 1992A, 6.100%, 8/01/99
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts (continued)
$ 1,500,000 Massachusetts Health and Educational Facilities Authority, No Opt. Call AA- $ 1,539,000
Revenue Bonds, Partners HealthCare System Issue, Series B,
5.000%, 7/01/09
City of New Bedford, Massachusetts General Obligation Landfill
Closure Bonds, Series 1993:
600,000 5.250%, 3/01/00 No Opt. Call Baa3 608,430
600,000 5.400%, 3/01/01 No Opt. Call Baa3 615,906
600,000 5.500%, 3/01/02 No Opt. Call Baa3 622,926
2,500,000 The New England Education Loan Marketing Corporation, Student Loan No Opt. Call A1 2,643,600
Refunding Bonds, 1993 Series E, 5.625%, 7/01/04
(Alternative Minimum Tax)
415,000 City of Springfield, Massachusetts, General Obligation Refunding Bonds, No Opt. Call A 418,254
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 821,341
250,000 6.100%, 9/01/02 No Opt. Call Baa3 265,193
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan - 5.0%
3,315,000 The Economic Development Corporation of the City of Detroit, No Opt. Call AAA 3,405,732
Resource Recovery Revenue Bonds, Series 1991A, 6.350%, 5/01/00
(Alternative Minimum Tax)
3,000,000 Greater Detroit Resource Recovery Authority, Michigan, Resource No Opt. Call AAA 3,221,970
Revenue Refunding Bonds, Series 1996-A, 5.500%, 12/13/04
460,000 City of Madison Heights Tax Increment Finance Authority, No Opt. Call N/R 482,531
Michigan, Series 1991, 8.500%, 3/15/01
900,000 Michigan Higher Education Student Loan Authority, Student Loan No Opt. Call AAA 932,265
Revenue Bonds, Series XII-E, 6.375%, 10/01/00
(Alternative Minimum Tax)
2,000,000 Michigan Higher Education Student Loan Authority, Series XV-A, No Opt. Call Aa1 2,048,260
5.400%, 9/01/00 (Alternative Minimum Tax)
2,700,000 Michigan State Hospital Finance Authority, Michigan, Hospital No Opt. Call AAA 2,756,322
Revenue Refunding Bonds (St. John Hospital), Series 1993A,
5.400%, 5/15/00
2,370,000 Michigan State Hospital Finance Authority, Hospital Revenue No Opt. Call BBB 2,439,204
Refunding 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- 1,104,380
(Mercy Health Services Obligated Group), 1997 Series T,
6.000%, 8/15/06
Michigan State Housing Development Authority, Rental Housing
Revenue Bonds, 1995 Series B:
3,085,000 5.450%, 4/01/05 No Opt. Call AAA 3,237,831
3,325,000 5.450%, 10/01/05 6/05 at 102 AAA 3,501,757
4,095,000 Pontiac, Michigan, Hospital Finance Authority, Hospital Revenue 8/00 at 100 BBB- 4,163,264
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 1,777,762
1,000,000 5.400%, 5/01/04 No Opt. Call AAA 1,059,330
- -----------------------------------------------------------------------------------------------------------------------------------
Missouri - 0.5%
Health and Educational Facilities Authority of the State of Missouri,
Health Facilities Revenue Bonds (Lutheran Senior Services), Series 1997:
500,000 5.200%, 2/01/04 No Opt. Call N/R 517,275
600,000 5.300%, 2/01/05 No Opt. Call N/R 627,918
600,000 5.400%, 2/01/06 No Opt. Call N/R 628,080
700,000 5.500%, 2/01/07 No Opt. Call N/R 736,673
350,000 The City of St. Louis, Missouri, Regional Convention and Sports No Opt. Call N/R 362,544
Complex Authority, Convention and Sports Facility Project Bonds,
Series C of 1991, 7.750%, 8/15/01
</TABLE>
29
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Montana - 2.0%
City of Forsyth, Rosebud County, Montana, Pollution Control Revenue
Refunding Bonds (Portland General Electric Company Projects),
Series 1998B:
$ 7,500,000 4.750%, 5/01/33 (Alternative Minimum Tax) (Mandatory put 5/01/03) No Opt. Call A- $ 7,633,950
3,000,000 4.600%, 5/01/33 (Mandatory put 5/01/03) No Opt. Call A- 3,048,210
- -----------------------------------------------------------------------------------------------------------------------------------
Nebraska - 2.3%
7,500,000 American Public Energy Agency, Gas Supply Revenue Bonds No Opt. Call AA- 7,520,325
(Nebraska Public Gas Agency-Western A Project), 1999 Series A,
4.450%, 6/01/08
5,000,000 Energy America (Nebraska), Natural Gas Revenue Bonds (Nebraska Public No Opt. Call N/R 4,973,650
Gas Agency Project), Series 1998B, 5.450%, 4/15/08
- -----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 2.9%
505,000 New Hampshire Higher Educational and Health Facilities Authority, No Opt. Call A 531,376
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:
270,000 6.350%, 1/01/00 (Alternative Minimum Tax) No Opt. Call Aa3 273,154
260,000 6.450%, 1/01/01 (Alternative Minimum Tax) No Opt. Call Aa3 266,991
Business Finance Authority of the State of New Hampshire, Pollution
Control Refunding Revenue Bonds (The United Illuminating Company
Project - 1997 Series A):
10,000,000 4.550%, 7/01/27 (Alternative Minimum Tax) (Mandatory put 2/01/04) No Opt. Call BBB- 10,008,300
5,000,000 4.350%, 7/01/27 (Alternative Minimum Tax) (Mandatory put 2/01/02) No Opt. Call BBB- 4,992,900
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey - 3.3%
1,410,000 New Jersey Economic Development Authority, Electric Energy Facility No Opt. Call N/R 1,411,763
Revenue Bonds (Vineland Cogeneration Limited Partnership Project),
Series 1992, 6.750%, 6/01/99 (Alternative Minimum Tax)
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 881,935
1,000,000 5.800%, 7/01/01 No Opt. Call AAA 1,044,126
790,000 5.900%, 7/01/02 No Opt. Call AAA 840,023
4,300,000 New Jersey Economic Development Authority, Insured Revenue Bonds No Opt. Call AAA 4,606,117
(Educational Testing Service Issue), Series 1995B, 5.500%, 5/15/05
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 1,466,931
830,000 5.400%, 10/01/06 No Opt. Call N/R 860,901
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 303,646
355,000 6.200%, 7/01/01 No Opt. Call BBB 373,354
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 1,160,013
1,275,000 6.100%, 7/01/00 No Opt. Call A 1,311,414
995,000 6.200%, 7/01/01 No Opt. Call A 1,043,725
1,165,000 6.300%, 7/01/02 No Opt. Call A 1,245,478
1,200,000 New Jersey Educational Facilities Authority, Revenue Bonds, No Opt. Call BBB 1,221,120
Saint Peters College Issue, 1998 Series B, 5.000%, 7/01/08
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York -- 16.6%
Albany Housing Authority, City of Albany, New York, Limited
Obligation Bonds, Series 1995:
$ 500,000 5.100%, 10/01/01 No Opt. Call Baa1 $ 508,400
700,000 5.250%, 10/01/02 No Opt. Call Baa1 716,555
750,000 5.400%, 10/01/03 No Opt. Call Baa1 773,445
750,000 5.500%, 10/01/04 No Opt. Call Baa1 774,938
1,000,000 5.600%, 10/01/05 No Opt. Call Baa1 1,036,720
500,000 5.700%, 10/01/06 10/05 at 102 Baa1 520,600
700,000 5.850%, 10/01/07 10/05 at 102 Baa1 726,565
Cattaraugus County, New York, Industrial Development Agency, Civic
Facility Revenue Bonds (St. Bonaventure University Construction Project),
Series 1998B:
1,635,000 5.000%, 9/15/07 No Opt. Call BBB 1,656,680
1,720,000 5.000%, 9/15/08 No Opt. Call BBB 1,732,057
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 167,736
750,000 7.000%, 3/15/05 No Opt. Call Baa2 850,560
1,000,000 Metropolitan Transportation Authority, New York Transit Service Contract No Opt. Call BBB+ 1,079,350
Bonds, Series N, 6.625%, 7/10/02
1,280,000 The City of New York, General Obligation Bonds, Fiscal 1988 Series A, No Opt. Call Aaa 1,311,526
8.250%, ll/01/99
2,750,000 The City of New York, General Obligation Bonds, Fiscal 1991 Series B, No Opt. Call A- 3,401,640
8.250%, 6/01/06
1,000,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series E, No Opt. Call A- 1,102,690
6.500%, 2/15/04
The City of New York, General Obligation Bonds, Fiscal 1996 Series G:
3,000,000 5.750%, 2/01/06 No Opt. Call A- 3,183,930
500,000 5.750%, 2/01/06 No Opt. Call A- 543,130
3,000,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series H, No Opt. Call A- 3,187,230
5.400%, 8/01/04
4,000,000 The City of New York, General Obligation Bonds, Fiscal 1995 Series F, No Opt. Call Aaa 4,260,360
6.100%, 2/15/02
5,000,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series I, No Opt. Call A- 5,381,600
5.625%, 4/15/05
The City of New York, General Obligation Bonds, Fiscal 1999 Series H:
3,860,000 4.750%, 3/15/07 No Opt. Call A- 3,957,967
2,195,000 5.000%, 3/15/08 No Opt. Call A- 2,283,437
2,155,000 5.000%, 3/15/09 No Opt. Call A- 2,232,214
1,000,000 Dormitory Authority of the State of New York, State University 5/00 at 102 A- 1,056,500
Educational Facilities Revenue Bonds, Series 1990A, 7.400%, 5/15/01
4,155,000 Dormitory Authority of the State of New York, Revenue Bonds, City No Opt. Call Baa1 4,265,191
University Issue, Series U, 5.875%, 7/01/00
2,900,000 Dormitory Authority of the State of New York, Department of Health of No Opt. Call BBB+ 3,077,886
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- 6,701,435
2,000,000 6.500%, 5/15/05 No Opt. Call A- 2,242,600
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 1,018,700
1,000,000 6.000%, 7/01/06 No Opt. Call Baa 1,083,840
3,315,000 Dormitory Authority of the State of New York, City University System No Opt. Call BBB+ 3,593,460
Consolidated Revenue Bonds, 1996 Series 2, 6.000%, 7/01/04
1,665,000 New York State Energy Research and Development Authority, State Service No Opt. Call BBB+ 1,651,064
Contract Revenue Bonds, Series 1999A (Western New York Nuclear Service
Center Project), 4.500%, 4/01/08
1,740,000 New York State Energy Research and Development Authority, State Service No Opt. Call BBB+ 1,729,003
Contract Revenue Bonds, Series 1999A (Western New York Nuclear Service
Center Project), 4.625%, 4/01/09
5,000,000 New York State Housing Finance Agency, Health Facilities Revenue Bonds No Opt. Call A- 5,373,200
(New York City), 1996 Series A Refunding, 5.875%, 5/01/04
2,000,000 New York State Thruway Authority, Local Highway and Bridge Service 4/06 at 102 BBB+ 2,154,640
Contract Bonds, Series 1996, 5.625%, 4/01/07
</TABLE>
31
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (continued)
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+ $ 2,521,691
1,265,000 6.250%, 1/01/05 No Opt. Call BBB+ 1,388,856
1,000,000 New York State Urban Development Corporation, Correctional No Opt. Call BBB+ 1,034,500
Capital Series, Facilities Revenue Bonds, 1993 Refunding
Series, 5.250%, 1/01/02
Onondaga County Resource Recovery Agency, New York, System
Revenue Bonds (Development Costs-19 Series):
480,000 6.100%, 5/01/99 No Opt. Call Baa1 480,014
630,000 6.200%, 5/01/00 No Opt. Call Baa1 637,289
3,700,000 The Port Authority of New York and New Jersey, Special No Opt. Call N/R 4,093,976
Project Bonds, Series 4, KIAC Partners Project, 7.000%,
10/01/07 (Alternative Minimum Tax)
3,035,000 The Port Authority of New York and New Jersey, Special No Opt. Call AAA 3,350,944
Project Bonds, Series 6, JFK International Air Terminal LLC
Project, 6.000%, 12/01/05 (Alternative Minimum Tax)
1,400,000 Suffolk County Industrial Development Agency, New York, 1998
Industrial Development Revenue Bonds (Nissequogue Cogen No Opt. Call N/R 1,390,144
Partners Facility), 4.875%, 1/01/08 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
North Carolina - 1.1%
5,475,000 North Carolina Municipal Power Agency Number 1, Catawba Electric 1/03 at 102 A- 5,894,714
Revenue Bonds, Series 1992, 6.000%, 1/01/05
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio - 7.0%
8,245,000 Akron, Bath and Copley Joint Township Hospital District, Ohio, No Opt. Call Baa1 8,297,686
Hospital Facilities Revenue Bonds, Series 1998A (Summa Health
System Project), 5.000%, 11/15/08
City of Barberton, Ohio, Hospital Facilities Revenue Bonds, Series
1992 (The Barberton Citizens Hospital Company Project):
750,000 6.400%, 1/01/00 No Opt. Call A*** 765,300
500,000 6.550%, 1/01/01 No Opt. Call A*** 523,455
City of Cambridge, Ohio, Hospital Revenue Refunding Bonds, Series
1991 (Guernsey Memorial Hospital Project):
595,000 7.650%, 12/01/99 No Opt. Call BBB 608,322
640,000 7.750%, 12/01/00 No Opt. Call BBB 677,638
680,000 7.850%, 12/01/01 No Opt. Call BBB 741,234
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 869,499
1,000,000 5.100%, 12/01/02 No Opt. Call N/R 1,027,590
750,000 5.350%, 12/01/04 No Opt. Call N/R 781,935
335,000 5.600%, 12/01/06 No Opt. Call N/R 354,236
135,000 County of Cuyahoga, Ohio, Health Care Facilities Revenue Bonds, No Opt. Call N/R 135,441
Series 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 514,875
795,000 5.850%, 8/15/01 No Opt. Call AAA 834,949
735,000 5.950%, 8/15/02 No Opt. Call AAA 787,530
County of Lucas, Ohio, Hospital Facilities Revenue Bonds,
Series 1993 (Flower Hospital):
370,000 5.800%, 12/01/01 No Opt. Call N/R*** 389,122
790,000 5.900%, 12/01/02 No Opt. Call N/R*** 845,782
435,000 6.000%, 12/01/03 No Opt. Call N/R*** 473,141
5,195,000 County of Lucas, Ohio, Hospital Revenue Refunding Bonds, No Opt. Call AAA 5,745,254
Series 1996 (ProMedica Healthcare Obligated Group), 6.000%,
11/15/05
1,000,000 Miami County, Ohio, Hospital Facilities Revenue Refunding and No Opt. Call BBB 1,057,740
Improvement Bonds (Upper Valley Medical Center), Series
1996C, 6.000%, 5/15/06
885,000 State of Ohio, State Economic Development Revenue Bonds (Ohio 6/99 at 101 A- 904,674
Enterprise Bond Fund), Series 1991-2 and Series 1991-3
(Superior Forge and Steel Corporation), 7.250%, 6/01/01
(Alternative Minimum Tax)
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio (continued)
$3,825,000 State of Ohio, Elementary and Secondary Education Capital Facilities Bonds, No Opt. Call AAA $4,050,522
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- 919,282
1,030,000 4.600%, 1/01/02 No Opt. Call BBB- 1,043,524
1,375,000 4.700%, 1/01/03 No Opt. Call BBB- 1,394,209
1,460,000 4.800%, 1/01/04 No Opt. Call BBB- 1,482,542
1,030,000 4.900%, 1/01/05 No Opt. Call BBB- 1,050,559
830,000 5.000%, 1/01/06 No Opt. Call BBB- 850,169
500,000 5.050%, 1/01/07 No Opt. Call BBB- 512,065
750,000 5.100%, 1/01/09 1/08 at 102 BBB- 768,825
- ------------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.6%
3,120,000 Oklahoma Industries Authority, Hospital Revenue Bonds (Deaconess Health No Opt. Call BBB 3,235,877
Care Corporation Project), Series 1997A, 5.250%, 10/01/07
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 10.4%
5,000,000 County of Allegheny, Pennsylvania, Airport Revenue Refunding Bonds, No Opt. Call AAA 5,323,300
Series 1997A (Pittsburgh International Airport), 5.500%, 1/01/05
(Alternative Minimum Tax)
Allegheny County Hospital Development Authority (Allegheny County,
Pennsylvania), Hospital Revenue Bonds, Series 1991A (St. Margaret
Memorial Hospital):
400,000 6.700%, 10/01/99 No Opt. Call BBB+*** 405,640
400,000 6.800%, 10/01/00 No Opt. Call BBB+*** 418,280
3,830,000 Delaware County Authority, Pennsylvania, Health Facilities Revenue 11/05 at 100 Aaa 4,225,448
Bonds, Series 1993A (Mercy Health Corporation of Southeastern
Pennsylvania Obligated Group), 6.000%, 11/15/07 (Pre-refunded
to 11/15/05)
Delaware County Industrial Development Authority (Pennsylvania),
Refunding Revenue Bonds, Series A 1997 (Resource Recovery Facility):
4,000,000 6.000%, 1/01/03 No Opt. Call A- 4,129,560
4,000,000 6.500%, 1/01/08 No Opt. Call A- 4,281,040
1,500,000 Monroeville, Pennsylvania, Hospital Authority, Hospital Revenue No Opt. Call N/R 1,441,875
Refunding Bonds, Forbes Health System, 5.750%, 10/01/05
335,000 Montgomery County Higher Education and Health Authority, Pennsylvania, No Opt. Call AAA 341,703
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 Revenue No Opt. Call AAA 2,572,425
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 BBB 3,612,816
3,425,000 5.700%, 7/01/00 No Opt. Call BBB 3,504,289
700,000 Philadelphia Hospital and Higher Educational Facilities Authority of No Opt. Call BBB+ 703,234
Philadelphia, Revenue Refunding Bonds, Series 1992 (Philadelphia MR
Project), 5.300%, 8/01/99
1,095,000 Redevelopment Authority of the City of Philadelphia, Pennsylvania, No Opt. Call N/R 1,088,123
Multifamily Housing Mortgage Revenue Bonds, Series 1998A (Cricket
Court Commons Project), 5.600%, 4/01/08 (Alternative Minimum Tax)
3,990,000 The School District of Philadelphia, Pennsylvania, General Obligation No Opt. Call AAA 4,265,031
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 1,081,220
Bonds, Series A of 1992, 6.050%, 5/15/99
5,000,000 City of Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds, No Opt. Call AAA 5,277,400
Series 1993, 5.150%, 6/15/04
Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities
Authority, Hospital Revenue Refunding:
3,490,000 5.850%, 7/01/02 No Opt. Call BBB+*** 3,697,795
2,020,000 6.050%, 7/01/04 No Opt. Call BBB+*** 2,203,153
2,000,000 6.150%, 7/01/05 No Opt. Call BBB+*** 2,209,320
</TABLE>
33
<PAGE>
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania (continued)
$ 6,130,000 Westmoreland County Industrial Development Authority, Pennsylvania, No Opt. Call Baa3 $ 6,141,586
Hospital Revenue Bonds, Series 1998 (Citizens General Hospital),
4.750%, 7/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.8%
4,035,000 Rhode Island Housing and Mortgage Finance Corporation, Multifamily No Opt. Call AAA 4,176,064
Housing Bonds, 1995 Series A, 5.350%, 7/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 1.9%
The Health and Educational Facilities Board of the Metropolitan
Government of Nashville and Davidson County, Tennessee, Revenue
Refunding Bonds, Series 1998 (The Blakford at Green Hills):
400,000 5.150%, 7/01/05 7/03 at 102 N/R 405,836
400,000 5.250%, 7/01/06 7/03 at 102 N/R 405,816
500,000 5.300%, 7/01/07 7/03 at 102 N/R 506,625
500,000 5.350%, 7/01/08 7/03 at 102 N/R 506,615
500,000 5.400%, 7/01/09 7/03 at 102 N/R 509,885
3,250,000 The Industrial Development Board of the Metropolitan Government of No Opt. Call N/R 3,368,723
Nashville and Davidson County, Tennessee, Industrial Development
Revenue Refunding and Improvement Bonds (Osco Treatment Systems, Inc.
Project), Series 1993, 6.000%, 5/01/03 (Alternative Minimum Tax)
4,650,000 The Tennessee Energy Acquisition Corporation, Gas Revenue Bonds, Series No Opt. Call AAA 4,686,456
1998B, 4.050%, 9/01/00
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 2.0%
1,575,000 Anderson County, Texas, Refunding Revenue Bonds (Coffield Prison Farm No Opt. Call AAA 1,602,972
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 (Alternative Minimum Tax) No Opt. Call Aaa 1,562,171
1,075,000 6.050%, 12/01/01 (Alternative Minimum Tax) No Opt. Call Aaa 1,129,804
1,325,000 North Central Texas Health Facilities Development Corporation, Health 2/01 at 100 BBB 1,390,111
Facilities Development Revenue Bonds (C.C. Young Memorial Home
Project), Series 1996, 5.700%, 2/15/03
830,000 The City of Pasadena, Texas, Industrial Development Corporation, Economic 10/99 at 100 A 839,454
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:
460,000 7.000%, 4/01/00 (Alternative Minimum Tax) No Opt. Call A 473,450
960,000 7.100%, 4/01/01 (Alternative Minimum Tax) No Opt. Call A 1,010,870
Tyler Health Facilities Development Corporation, Texas, Hospital Revenue
Bonds (Mother Frances Hospital Regional HealthCare Center Project), Series
1997A:
1,650,000 5.125%, 7/01/05 7/02 at 100 Baa2 1,674,107
1,100,000 5.200%, 7/01/06 7/02 at 100 Baa2 1,115,234
- -----------------------------------------------------------------------------------------------------------------------------------
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 (Alternative Minimum Tax) No Opt. Call AAA 1,034,819
1,000,000 6.050%, 12/15/01 (Alternative Minimum Tax) No Opt. Call AAA 1,050,909
- -----------------------------------------------------------------------------------------------------------------------------------
Virgin Islands - 1.7%
Virgin Islands Port Authority, Airport Revenue Bonds, Refunding Series
1998A:
1,590,000 4.050%, 9/01/01 (Alternative Minimum Tax) No Opt. Call A 1,592,115
2,960,000 4.450%, 9/01/04 9/02 at 101 BBB 2,965,386
2,500,000 4.500%, 9/01/05 9/02 at 101 BBB 2,500,349
2,070,000 Virgin Islands Water and Power Authority, Electric System Revenue and No Opt. Call N/R 2,179,005
Refunding Bonds, 1998 Series, 5.250%, 7/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Virginia - 1.2%
2,850,000 Newport News Redevelopment and Housing Authority, Multifamily Housing 5/05 at 102 AAA 3,021,740
Revenue Bonds (Fredericksburg-Oxford Project), Series 1997A, 5.550%,
5/01/27 (Mandatory put 5/01/07)
</TABLE>
- -----
34
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Virginia (continued)
$ 3,000,000 Virginia Public Building Authority, State Building Revenue Bonds, 8/04 at 101 AA*** $ 3,353,939
Series 1994A, 6.250%, 8/01/15 (Pre-refunded to 8/01/04)
- ------------------------------------------------------------------------------------------------------------------------------------
Washington - 0.9%
1,670,000 Washington Health Care Facilities Authority, Revenue Bonds, No Opt. Call AAA 1,793,646
Series 1992 (The Children's Hospital and Medical Center,
Seattle), 6.000%, 10/01/02
3,000,000 Washington Public Power Supply System, Nuclear Project No. 1 No Opt. Call Aa1 3,257,549
Refunding Revenue Bonds, Series 1993A, 5.700%, 7/01/06
- ------------------------------------------------------------------------------------------------------------------------------------
West Virginia - 0.8%
2,500,000 The County Commission of Pleasants County, West Virginia, Pollution No Opt. Call A 2,541,174
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 1/06 at 102 Aaa 2,051,399
(Morgantown Energy Associates Project), 1990 Series A, 5.050%,
7/01/08 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 0.4%
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 1,115,575
1,155,000 5.300%, 2/15/01 No Opt. Call AAA 1,186,185
- ------------------------------------------------------------------------------------------------------------------------------------
$521,380,000 Total Investments (cost $518,810,568) - 98.7% 538,458,966
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 6,928,944
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $545,387,910
=====================================================================================================================
</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
______
35
<PAGE>
Statement of Net Assets
April 30, 1999
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $419,264,973 $61,430,545 $538,458,966
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 1,000,000 --
Cash -- 1,125,313 --
Receivables:
Interest 6,815,747 889,737 8,537,967
Investments sold 3,705,027 165,000 1,680,000
Shares sold 3,060,715 38,801 2,455,436
Other assets 261,131 77,668 1,820
- --------------------------------------------------------------------------------------------------------------------------
Total assets 433,107,593 64,727,064 551,134,189
- --------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 352,828 -- 3,531,516
Payables:
Investments purchased 4,593,533 777,070 --
Shares redeemed 450,004 1,448,618 826,852
Accrued expenses:
Management fees (note 6) 134,634 10,975 193,922
12b-1 distribution and service fees (notes 1 and 6) 123,640 14,449 114,510
Other 124,673 53,934 168,600
Dividends payable 512,326 86,439 910,879
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,291,638 2,391,485 5,746,279
- --------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $426,815,955 $62,335,579 $545,387,910
==========================================================================================================================
Class A Shares (note 1)
Net assets $312,238,408 $51,773,415 $456,170,850
Shares outstanding 27,306,876 4,705,382 41,900,089
Net asset value and redemption price per share $ 11.43 $ 11.00 $ 10.89
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) $ 11.93 $ 11.34 $ 11.17
==========================================================================================================================
Class B Shares (note 1)
Net assets $ 31,804,266 N/A N/A
Shares outstanding 2,780,221 N/A N/A
Net asset value, offering and redemption price per share $ 11.44 N/A N/A
==========================================================================================================================
Class C Shares (note 1)
Net assets $ 80,035,915 $ 9,855,152 $ 88,044,007
Shares outstanding 7,010,142 894,643 8,096,219
Net asset value, offering and redemption price per share $ 11.42 $ 11.02 $ 10.87
==========================================================================================================================
Class R Shares (note 1)
Net assets $ 2,737,366 $ 707,012 $ 1,173,053
Shares outstanding 239,271 64,313 107,923
Net asset value, offering and redemption price per share $ 11.44 $ 10.99 $ 10.87
==========================================================================================================================
</TABLE>
N/A--Intermediate and Limited Term are not authorized to issue Class B Shares.
See accompanying notes to financial statements.
36
<PAGE>
Statement of Operations
Year Ended April 30, 1999
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 21,210,096 $ 3,014,402 $ 26,414,168
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 1,787,931 284,463 2,193,990
12b-1 service fees -- Class A (notes 1 and 6) 544,753 98,085 894,943
12b-1 distribution and service fees -- Class B (notes 1 and 6) 171,736 N/A N/A
12b-1 distribution and service fees -- Class C (notes 1 and 6) 538,035 53,669 314,590
Shareholders' servicing agent fees and expenses 168,313 35,608 269,164
Custodian's fees and expenses 76,817 45,230 108,976
Trustees' fees and expenses (note 6) 5,661 1,514 9,635
Professional fees 15,568 11,702 10,395
Shareholders' reports -- printing and mailing expenses 75,124 15,832 147,545
Federal and state registration fees 97,851 43,205 105,661
Other expenses 19,582 3,629 45,669
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 3,501,371 592,937 4,100,568
Expense reimbursement (note 6) (33,793) (80,657) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,467,578 512,280 4,100,568
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 17,742,518 2,502,122 22,313,600
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions (notes 1 and 4) 1,390,265 974,433 177,749
Net change in unrealized appreciation or depreciation of investments 1,381,053 (353,542) 4,044,043
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 2,771,318 620,891 4,221,792
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 20,513,836 $ 3,123,013 $ 26,535,392
===================================================================================================================================
</TABLE>
N/A--Intermediate and Limited Term are not authorized to issue Class B Shares.
See accompanying notes to financial statements.
37
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
All-American Intermediate
--------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
4/30/99 4/30/98 4/30/99 4/30/98
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 17,742,518 $ 14,992,106 $ 2,502,122 $ 2,115,118
Net realized gain from
investment transactions (notes 1 and 4) 1,390,265 1,444,589 974,433 445,080
Net change in unrealized appreciation
or depreciation of investments 1,381,053 11,090,769 (353,542) 1,234,467
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 20,513,836 27,527,464 3,123,013 3,794,665
- ------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (13,558,500) (11,812,757) (2,193,035) (1,964,556)
Class B (757,569) (172,772) N/A N/A
Class C (3,203,324) (2,809,735) (282,244) (122,737)
Class R (225,133) (207,336) (32,146) (26,788)
From accumulated net realized gains
from investment transactions:
Class A (265,989) (1,796,387) (215,591) (1,421)
Class B (18,186) (34,421) N/A N/A
Class C (70,414) (476,161) (36,389) (104)
Class R (5,437) (30,203) (2,815) (19)
- ------------------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions to shareholders (18,104,552) (17,339,772) (2,762,220) (2,115,625)
- ------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the
reorganization of:
Alabama 7,102,834 -- -- --
South Carolina 11,502,532 -- -- --
Florida Intermediate -- -- 12,375,612 --
Net proceeds from sale of shares 146,838,231 76,968,241 17,557,237 8,010,746
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 6,230,070 9,893,852 1,227,057 1,256,923
- ------------------------------------------------------------------------------------------------------------
171,673,667 86,862,093 31,159,906 9,267,669
Cost of shares redeemed (59,511,217) (57,124,785) (15,659,540) (8,387,774)
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions 112,162,450 29,737,308 15,500,366 879,895
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets 114,571,734 39,925,000 15,861,159 2,558,935
Net assets at the beginning of year 312,244,221 272,319,221 46,474,420 43,915,485
- ------------------------------------------------------------------------------------------------------------
Net assets at the end of year $426,815,955 $312,244,221 $ 62,335,579 $46,474,420
============================================================================================================
Balance of undistributed net
investment income at the end of year $ 576 $ 2,584 $ 5,292 $ 10,595
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Limited Term
-----------------------------
Year Ended Year Ended
4/30/99 4/30/98
- ---------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 22,313,600 $ 21,711,709
Net realized gain from
investment transactions (notes 1 and 4) 177,749 1,183,699
Net change in unrealized appreciation
or depreciation of investments 4,044,043 6,803,680
- ---------------------------------------------------------------------------------
Net increase in net assets from operations 26,535,392 29,699,088
- ---------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (20,627,751) (20,496,170)
Class B N/A N/A
Class C (2,406,223) (1,226,668)
Class R (45,661) (12,840)
From accumulated net realized gains
from investment transactions:
Class A -- --
Class B N/A N/A
Class C -- --
Class R -- --
- ---------------------------------------------------------------------------------
Decrease in net assets
from distributions to shareholders (23,079,635) (21,735,678)
- ---------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the
reorganization of:
Alabama -- --
South Carolina -- --
Florida Intermediate -- --
Net proceeds from sale of shares 159,596,588 102,797,645
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 10,739,032 13,729,912
- ---------------------------------------------------------------------------------
170,335,620 116,527,557
Cost of shares redeemed (101,189,975) (100,696,272)
- ---------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions 69,145,645 15,831,285
- ---------------------------------------------------------------------------------
Net increase in net assets 72,601,402 23,794,695
Net assets at the beginning of year 472,786,508 448,991,813
- ---------------------------------------------------------------------------------
Net assets at the end of year $ 545,387,910 $ 472,786,508
=================================================================================
Balance of undistributed net
investment income at the end of year $ 224,796 $ 990,831
=================================================================================
</TABLE>
N/A - Intermediate and Limited Term are not authorized to issue Class B Shares.
See accompanying notes to financial statements.
- ------
38
<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.
After the close of business on September 11, 1998, Nuveen Flagship Alabama
Municipal Bond Fund ("Alabama") and Nuveen Flagship South Carolina Municipal
Bond Fund ("South Carolina") reorganized into All-American. Prior to these
reorganizations Alabama and South Carolina were each a series of the Nuveen
Flagship Multistate Trust III, an open-end investment company. Alabama and South
Carolina had fiscal year ends of May 31 prior to being reorganized into All-
American which has an April 30 fiscal year end.
After the close of business on September 11, 1998, Nuveen Flagship Florida
Intermediate Municipal Bond Fund ("Florida Intermediate") reorganized into
Intermediate. Prior to the reorganization Florida Intermediate was a series of
the Nuveen Flagship Multistate Trust I, an open-end investment company. Florida
Intermediate had a fiscal year end of May 31 prior to being reorganized into
Intermediate which has 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, 1999, Intermediate had an outstanding when-issued purchase commitment
of $777,070. All-American 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.
39
<PAGE>
Notes to Financial Statements (continued)
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 dividends
paid during the fiscal year ended April 30, 1999, 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 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
only under limited circumstances, or by specified classes of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended April 30, 1999.
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. Actual results may differ
from those estimates.
40
<PAGE>
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
All-American
-----------------------------------------------------
Year Ended Year Ended
4/30/99 4/30/98
------------------------- ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of Alabama:
Class A 395,906 $ 4,578,809 -- $ --
Class B 33,558 388,298 -- --
Class C 174,177 2,011,777 -- --
Class R 10,715 123,950 -- --
Shares issued in the reorganization of South Carolina:
Class A 888,879 10,280,233 -- --
Class B 62,148 719,099 -- --
Class C 33,844 390,899 -- --
Class R 9,709 112,301 -- --
Shares sold:
Class A 8,253,027 94,819,512 4,008,652 45,606,077
Class B 2,120,117 24,385,007 700,155 7,946,597
Class C 2,250,600 25,819,882 1,301,462 14,740,803
Class R 157,716 1,813,830 771,291 8,674,764
Shares issued to shareholders due to reinvestment of distributions:
Class A 410,709 4,717,255 660,598 7,458,579
Class B 22,987 264,311 9,097 103,693
Class C 89,793 1,029,146 188,101 2,120,043
Class R 19,091 219,358 18,643 211,537
- -------------------------------------------------------------------------------------------------------------------------------
14,932,976 171,673,667 7,657,999 86,862,093
- -------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (3,545,629) (40,755,984) (3,632,808) (40,915,436)
Class B (227,194) (2,609,789) (5,833) (66,678)
Class C (1,050,052) (12,050,245) (1,013,258) (11,466,412)
Class R (356,254) (4,095,199) (408,450) (4,676,259)
- -------------------------------------------------------------------------------------------------------------------------------
(5,179,129) (59,511,217) (5,060,349) (57,124,785)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase 9,753,847 $112,162,450 2,597,650 $ 29,737,308
===============================================================================================================================
</TABLE>
- -----
41
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Intermediate
-----------------------------------------------------
Year Ended Year Ended
4/30/99 4/30/98
------------------------- -------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of Florida
Intermediate:
Class A 691,484 $ 7,709,931 -- $ --
Class C 407,786 4,549,343 -- --
Class R 10,446 116,338 -- --
Shares sold:
Class A 1,262,418 13,969,292 554,517 6,064,556
Class C 308,307 3,423,835 167,492 1,829,477
Class R 14,806 164,110 10,730 116,713
Shares issued to shareholders due to
reinvestment of distributions:
Class A 98,056 1,086,083 107,654 1,165,426
Class C 11,658 129,379 7,941 86,053
Class R 1,048 11,595 500 5,444
- --------------------------------------------------------------------------------------------------------
2,806,009 31,159,906 848,834 9,267,669
- --------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,238,267) (13,721,630) (678,166) (7,363,971)
Class C (157,660) (1,745,372) (93,422) (1,016,745)
Class R (17,438) (192,538) (640) (7,058)
- --------------------------------------------------------------------------------------------------------
(1,413,365) (15,659,540) (772,228) (8,387,774)
- --------------------------------------------------------------------------------------------------------
Net increase 1,392,644 $ 15,500,366 76,606 $ 879,895
========================================================================================================
Limited Term
-----------------------------------------------------
Year Ended Year Ended
4/30/99 4/30/98
------------------------- -------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
Shares sold:
Class A 8,690,653 $ 94,938,574 7,703,171 $ 83,615,063
Class C 5,825,373 63,606,835 1,703,471 18,465,192
Class R 96,702 1,051,179 65,900 717,390
Shares issued to shareholders due to
reinvestment of distributions:
Class A 879,078 9,602,882 1,182,240 12,786,447
Class C 101,885 1,111,423 86,601 936,081
Class R 2,265 24,727 680 7,384
- --------------------------------------------------------------------------------------------------------
15,595,956 170,335,620 10,742,063 116,527,557
- --------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (8,242,278) (89,920,305) (8,422,781) (91,261,871)
Class C (977,837) (10,657,258) (865,221) (9,376,253)
Class R (56,064) (612,412) (5,334) (58,148)
- --------------------------------------------------------------------------------------------------------
(9,276,179) (101,189,975) (9,293,336) (100,696,272)
- --------------------------------------------------------------------------------------------------------
Net increase 6,319,777 $ 69,145,645 1,448,727 $ 15,831,285
========================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on June 1, 1999, to shareholders of record on May 7,
1999, as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0470 $.0400 $.0405
Class B .0400 N/A N/A
Class C .0420 .0350 .0375
Class R .0490 .0415 .0425
============================================================================
</TABLE>
N/A--Intermediate and Limited Term are not authorized to issue Class B Shares.
42
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended April
30, 1999, were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities $123,570,575 $15,915,562 $143,340,118
Long-term municipal securities in the reorganization of Alabama 6,293,497 -- --
Long-term municipal securities in the reorganization of South Carolina 10,540,120 -- --
Long-term municipal securities in the reorganization of Florida Intermediate -- 11,285,830 --
Short-term municipal securities 73,600,000 7,300,000 101,000,000
Sales:
Long-term municipal securities 35,509,801 12,657,610 74,203,503
Short-term municipal securities 73,600,000 6,300,000 101,000,000
==================================================================================================================================
</TABLE>
At April 30, 1999, 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, 1999, Limited Term had an unused capital loss carryforward of
$3,801,908, 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.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at April 30, 1999, were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $26,800,543 $3,136,985 $19,945,827
depreciation (478,560) (61,524) (297,429)
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $26,321,983 $3,075,461 $19,648,398
==================================================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser") a wholly owned subsidiary of The John Nuveen Company, each Fund
pays 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
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Limited Term
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 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.
- -----
43
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended April 30, 1999, the Distributor collected sales
charges on purchases of Class A Shares of approximately $1,294,200, $148,400 and
$623,700 for All-American, Intermediate and Limited Term, respectively, of which
approximately $1,227,700, $123,600 and $537,900, 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, 1999, the Distributor compensated
authorized dealers directly with approximately $1,293,300, $88,800, and $799,100
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, 1999, the Distributor
retained approximately $356,900, $30,900 and $177,100 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 $103,300, $800 and $72,800
of CDSC on share redemptions during the fiscal year ended April 30, 1999, for
All-American, Intermediate and Limited Term, respectively.
7. Composition of Net Assets
At April 30, 1999, 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 $399,384,880 $58,247,509 $529,316,624
Balance of undistributed net investment income 576 5,292 224,796
Accumulated net realized gain (loss) from investment transactions 1,108,516 1,007,317 (3,801,908)
Net unrealized appreciation of investments 26,321,983 3,075,461 19,648,398
- ---------------------------------------------------------------------------------------------------------------
Net assets $426,815,955 $62,335,579 $545,387,910
===============================================================================================================
</TABLE>
8. Investment Composition
At April 30, 1999, the revenue sources by municipal purpose, expressed as a
percent of long-term securities, were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Education and Civic Organizations 9% 8% 13%
Energy 4 -- --
Health Care 13 20 17
Housing/Multifamily 2 3 5
Housing/Single Family 3 1 1
Long-Term Care 6 6 3
Tax Obligation/General 3 12 9
Tax Obligation/Limited 6 14 9
Transportation 13 16 7
U.S.Guaranteed 14 3 9
Utilities 20 11 22
Water and Sewer 3 3 2
Other 4 3 3
- ---------------------------------------------------------------------------------------------------------------
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 (32% for All-American, 31% for Intermediate and 35% 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.
44
<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
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
April 30, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/88)
1999 $11.32 $.57 $ .12 $ .69 $(.57) $ (.01) $(.58) $11.43 6.23%
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)
1999 11.33 .49 .12 .61 (.49) (.01) (.50) 11.44 5.46
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)
1999 11.31 .51 .12 .63 (.51) (.01) (.52) 11.42 5.69
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)
1999 11.32 .60 .13 .73 (.60) (.01) (.61) 11.44 6.54
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>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Year Ended Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
April 30, Assets (000) ment ment ment (a) ment (a) Rate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (10/88)
1999 $312,238 .81% 4.97% .80% 4.98% 10%
1998 236,691 .81 5.27 .81 5.27 20
1997 (c) 216,575 .98* 5.43* .87* 5.54* 39
1996 (d) 207,992 1.02 5.41 .83 5.60 79
1995 (d) 185,495 1.06 5.72 .76 6.02 71
1994 (d) 159,867 1.05 5.34 .62 5.77 81
Class B (2/97)
1999 31,804 1.55 4.22 1.54 4.23 10
1998 8,706 1.56 4.47 1.56 4.47 20
1997 (e) 711 1.55* 4.83* 1.55* 4.83* 39
Class C (6/93)
1999 80,036 1.36 4.42 1.35 4.43 10
1998 62,336 1.36 4.72 1.36 4.72 20
1997 (c) 54,850 1.53* 4.88* 1.42* 4.99* 39
1996 (d) 47,314 1.57 4.85 1.37 5.05 79
1995 (d) 45,242 1.61 5.17 1.31 5.47 71
1994 (f) 39,997 1.63* 4.62* 1.09* 5.16* 81
Class R (2/97)
1999 2,737 .62 5.16 .61 5.17 10
1998 4,510 .61 5.42 .61 5.42 20
1997 (e) 183 .61* 5.95* .61* 5.95* 39
==================================================================================================================
</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.
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
-------------------------------- ----------------------------
INTERMEDIATE+
Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
April 30, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
1999 $10.88 $.49 $ .17 $ .66 $(.50) $ (.04) $(.54) $11.00 6.14%
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)
1999 10.89 .43 .18 .61 (.44) (.04) (.48) 11.02 5.66
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)
1999 10.86 .52 .16 .68 (.51) (.04) (.55) 10.99 6.42
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>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to 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> <C>
Class A (9/92)
1999 $51,773 .98% 4.32% .84% 4.46% 23%
1998 42,339 1.03 4.52 .79 4.76 20
1997 (c) 40,906 1.18* 4.46* .68* 4.96* 26
1996 (d) 46,742 1.17 4.31 .62 4.86 81
1995 (d) 42,069 1.24 4.45 .54 5.15 102
1994 (d) 35,891 1.29 4.04 .40 4.93 69
Class C (12/95)
1999 9,855 1.51 3.76 1.36 3.91 23
1998 3,533 1.58 3.96 1.34 4.20 20
1997 (c) 2,540 1.71* 3.90* 1.23* 4.38* 26
1996 (f) 1,187 1.73* 3.68* 1.13* 4.28* 81
Class R (2/97)
1999 707 .78 4.52 .64 4.66 23
1998 602 .83 4.71 .59 4.95 20
1997 (e) 469 .82* 4.98* .40* 5.40* 26
===============================================================================================
</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.
46
<PAGE>
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------------- -------------------------------
LIMITED TERM+ Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
April 30, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/87)
1999 $10.80 $.49 $ .10 $ .59 $(.50) $ -- $(.50) $10.89 5.57%
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)
1999 10.79 .45 .10 .55 (.47) -- (.47) 10.87 5.13
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)
1999 10.78 .51 .11 .62 (.53) -- (.53) 10.87 5.81
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>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to 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> <C>
Class A (10/87)
1999 $456,171 .77% 4.45% .77% 4.45% 16%
1998 438,134 .77 4.70 .77 4.70 30
1997 (c) 425,401 .82* 4.74* .80* 4.76* 29
1996 (d) 489,157 .84 4.72 .79 4.77 39
1995 (d) 569,196 .82 4.80 .74 4.88 20
1994 (d) 704,627 .79 4.67 .70 4.76 22
Class C (12/95)
1999 88,044 1.12 4.09 1.12 4.09 16
1998 33,952 1.12 4.35 1.12 4.35 30
1997 (c) 23,551 1.12* 4.43* 1.11* 4.44* 29
1996 (f) 15,415 1.43* 3.93* 1.19* 4.17* 39
Class R (2/97)
1999 1,173 .57 4.64 .57 4.64 16
1998 701 .59 4.86 .59 4.86 30
1997 (e) 40 .55* 5.07* .55* 5.07* 29
==================================================================================================
</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.
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, 1999, and the related statements of operations for the
year then ended, the statements of changes in net assets and the financial
highlights for the two years 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 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 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, 1999, 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, 1999, and the results of their
operations, the changes in their net assets, and the financial highlights for
the periods indicated above, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 18, 1999
48
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
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
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis & Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
49
<PAGE>
SERVING
Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
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
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive 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 income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com VAN-N2-4-99
<PAGE>
PART C--OTHER INFORMATION
Item 22: Financial Statements.
Financial statements:
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information through incorporation
by reference to each Fund's most recent Annual and Semi-Annual Reports:
Portfolio of Investments
Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Report of Independent Public Accountants
Item 23: 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 February 1, 1999. Filed
as Exhibit a(2) to Post-Effective Amendment No. 5 to Regis-
trant'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.
b.1 Amendment to By-Laws dated October 29, 1998.
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 2, 1999.
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 30, 1999.
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. Transfer Agency Agreement between Registrant and Chase Global
Funds Services Company dated August 24, 1998.
i. Opinion of Morgan, Lewis, and Bockius LLP.
i.2 Opinion of Bell, Boyd & Lloyd. Filed as Exhibit i(2) to Post-
Effective Amendment No. 5 to Registrant's Registration State-
ment on Form N-1A (File No. 333-14725) and incorporated herein
by reference thereto.
j. Consent of Arthur Andersen LLP, Independent Public Accoun-
tants.
k. Not applicable.
l. Not applicable.
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S> <C>
m. Amended 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.
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.
99(a) 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.
99(b) Certified copy of Resolution of Board of Trustees authorizing
the signing of the names of trustees and officers on the Reg-
istrant's Registration Statement pursuant to power of attor-
ney.
99(c) Code of Ethics and Reporting Requirements. Filed as Exhibit
99(c) to Post-Effective Amendment No. 1 to Registrant's Regis-
tration Statement on Form N-1A (File No. 333-14725) and incor-
porated herein by reference thereto.
</TABLE>
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
C-2
<PAGE>
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
----------------
The trustees and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she
reasonably believed to be in the best interest of Registrant or where he or she
shall have had reasonable cause to believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Item 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, Nuveen
Taxable Funds Inc., Nuveen Municipal Money Market Fund, Inc., and Nuveen Money
Market Trust. 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 Connecticut Premium Income Municipal Fund, Nuveen
Georgia Premium Income Municipal Fund, Nuveen Missouri Premium Income Municipal
Fund, Nuveen North Carolina Premium Income Municipal Fund,
C-3
<PAGE>
Nuveen California Premium Income Municipal Fund, and Nuveen Insured Premium
Income Municipal Fund 2, Nuveen Dividend Advantage Municipal Fund, Nuveen
California Dividend Advantage Municipal Fund and Nuveen New York Dividend
Advantage Municipal Fund. 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, 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. Director (since 1996) of Institutional Capital Corporation; 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 Municipal Money Market Fund, Inc., Nuveen Money Market
Trust, Nuveen Taxable Funds Inc., Nuveen Investment Trust, Nuveen Investment
Trust II and Nuveen Investment Trust III. 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 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, Nuveen Select Tax-Free Income Portfolio 3, Nuveen Dividend Advantage
Municipal Fund, Nuveen California Dividend Advantage Municipal Fund and Nuveen
New York Dividend Advantage Municipal Fund.
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 Trustee
Chicago, IL 60606 and Director
John P. Amboian President None
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 None
333 West Wacker Drive
Chicago, IL 60606
Richard D. Hughes Vice President None
Two Radnor Corporate Cen-
ter
Radnor, PA 19087
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
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
Paul C. Williams 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>
Margaret E. Wilson Vice President and None
333 West Wacker Drive Corporate Controller
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. or Chase Global Funds Services Company.
Chase Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts
02108, maintains all the required records in their capacity as transfer,
dividend paying, and shareholder service agent 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 27th day of August, 1999.
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 August 27, 1999
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Trustee (Principal
Executive Officer)
Robert P. Bremner Trustee
Lawrence H. Brown Trustee
Anne E. Impellizzeri Trustee
Peter R. Sawers Trustee
William J. Schneider Trustee
Judith M. Stockdale Trustee
</TABLE>
/s/ Gifford R. Zimmerman
By____________________________
Gifford R. Zimmerman
Attorney-in-Fact
August 27, 1999
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 trustees 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>
b.1 Amendment to By-Laws.
Renewal of Investment Management Agreement dated May 2,
d.2 1999.
e.2 Renewal of Distribution Agreement dated July 30, 1999.
h. Transfer Agency Agreement between Registrant and Chase
Global Funds Services dated August 24, 1998.
i. Opinion of Morgan, Lewis & Bockius LLP.
Consent of Arthur Andersen LLP, Independent Public
j. Accountants.
m. Amended 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.
99(b). Certified copy of Resolution of Board of Trustees
authorizing the signing of the names of trustees and
officers on the Registrant's Registration Statement
pursuant to power of attorney.
</TABLE>
<PAGE>
Exhibit b.1
Amendment to By-Laws
of
NUVEEN FLAGSHIP MUNICIPAL TRUST
The By-Laws of Nuveen Flagship Municipal Trust, a Massachusetts business trust,
(the "Fund") have been amended by unanimous vote of the Board of Trustees at a
meeting duly called, convened and held on October 29, 1998, to read as follows:
WHEREAS, the Fund's By-Laws permit shareholders to cast a vote at any
regular or special meeting of shareholders either in person or by proxy;
and
WHEREAS, such proxies are currently returned to the Fund by means of the
United States Postal Service or by overnight courier; and
WHEREAS, the Board now deems it beneficial to include the submission of
proxies by telephonic and electronic means.
NOW, THEREFORE, BE IT RESOLVED, that Section 2.7 of the Fund's By-Laws
be amended to include the following at the end of such section:
The placing of a Shareholder's name on a proxy pursuant to telephonic or
electronically transmitted instructions (including, without limitation,
instructions transmitted over the Internet) obtained pursuant to
procedures which are reasonably designed to verify that such
instructions have been authorized by such Shareholder, shall constitute
execution of such proxy by or on behalf of such Shareholder.
<PAGE>
Exhibit d.2
NUVEEN FLAGSHIP MUNICIPAL TRUST
-------------------------------
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 2nd day of May, 1999 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, 1999 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, have approved the Agreement and its
continuance until August 1, 2000 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, 2000 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/ Steven J. Krupa
-------------------------------
Vice President
ATTEST:
/s/ Larry W. Martin
- -----------------------------
Assistant Secretary
<PAGE>
Exhibit e.2
Renewal of Distribution Agreement
---------------------------------
This Agreement made this 30th day of July, 1999 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, 1999 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, 2000 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, 2000 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/ Larry Martin
----------------------------------
Vice President
ATTEST:
/s/ Nicholas Dalmaso
- -------------------------------
Assistant Secretary
<PAGE>
Exhibit h
MUTUAL FUNDS SERVICE AGREEMENT
Transfer Agency Services
NUVEEN FUNDS
August 24, 1998
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
Table of Contents
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. Appointment................................................... 1
2. Representations and Warranties................................ 1
3. Delivery of Documents......................................... 3
4. Services Provided............................................. 3
5. Fees and Expenses............................................. 4
6. Limitation of Liability and Indemnification................... 6
7. Term.......................................................... 8
8. Notices....................................................... 9
9. Waiver........................................................ 9
10. Force Majeure................................................. 9
11. Additional Funds.............................................. 10
12. Amendments.................................................... 10
13. Assignment.................................................... 10
14. Severability.................................................. 10
15. Governing Law................................................. 10
Signatures......................................................... 10
</TABLE>
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
Table of Contents (continued)
-----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Schedule A -- Fees and Expenses................................... A-1
Schedule B -- List of Nuveen Funds and Jurisdictions under
which Funds are Organized........................... B-1
Schedule C -- Transfer Agency Services Description................ C-1
</TABLE>
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
AGREEMENT made as of August 24, 1998 by and between the Nuveen Funds
(each, a "Fund" and collectively the "Funds"), for the Funds listed on Schedule
B, and organized under the jurisdictions set forth on Schedule B, and Chase
Global Funds Services Company ("Chase"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, each Fund wishes to contract with Chase to provide certain
services with respect to the Fund;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Funds hereby appoint Chase to provide services for
the Funds, as described hereinafter, subject to the supervision of the Board of
Directors or Trustees of the Funds (the "Board"), for the period and on the
terms set forth in this Agreement. Chase accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Section 5 of and Schedule A to this Agreement.
2. Representations and Warranties.
(a) Chase represents and warrants to the Funds that:
(i) Chase is a corporation, duly organized and existing under the
laws of the State of Delaware;
(ii) Chase is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
(iii) Chase is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and perform this Agreement;
(iv) all requisite corporate proceedings have been taken to
authorize Chase to enter into and perform this Agreement;
1
<PAGE>
(v) Chase has, and will continue to have, access to the
facilities, personnel and equipment required to fully perform its duties and
obligations hereunder;
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair Chase's ability to perform its duties and
obligations under this Agreement; and
(vii) Chase's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of Chase or any law or regulation applicable to Chase;
(b) Each Fund represents and warrants to Chase that:
(i) the Fund is a duly organized and existing and in good
standing under the laws of the jurisdictions set forth above its name on
Schedule B;
(ii) the Fund is empowered under applicable laws and by its
Charter Document and By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the
Fund to enter into and perform this Agreement;
(iv) the Fund is an investment company properly registered under
the 1940 Act;
(v) a registration statement under the Securities Act of 1933, as
amended ("1933 Act") and the 1940 Act on Form N-1A has been filed and will be
effective and will remain effective during the term of this Agreement, and all
necessary filings under the laws of the states will have been made and will be
current during the term of this Agreement;
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair the Fund's ability to perform its duties and
obligations under this Agreement;
(vii) the Fund's registration statement complies in all material
respects with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and none of the Fund's prospectuses and/or statements of additional
information contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements therein not misleading; and
2
<PAGE>
(viii) the Fund's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of the Fund or any law or regulation applicable to it.
3. Delivery of Documents. Each Fund will promptly furnish to Chase such
copies, properly certified or authenticated, of contracts, documents and other
related information that Chase may request or requires to properly discharge its
duties. Such documents may include but are not limited to the following:
(a) Resolutions of the Board authorizing the appointment of Chase to
provide certain services to the Fund and approving this Agreement;
(b) The Fund's Charter Document;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission ("SEC");
(e) The Fund's registration statement including exhibits, as amended,
on Form N-1A (the "Registration Statement") under the 1933 Act and the 1940 Act,
as filed with the SEC;
(f) Copies of the Investment Advisory Agreement between the Fund and
its investment adviser (the "Advisory Agreement");
(g) Opinions of counsel and auditors' reports;
(h) The Fund's prospectus(es) and statement(s) of additional
information relating to all funds, series, portfolios and classes, as
applicable, and all amendments and supplements thereto (such Prospectus(es) and
Statement(s) of Additional Information and supplements thereto, as presently in
effect and as from time to time hereafter amended and supplemented, herein
called the "Prospectuses"); and
(i) Such other agreements as the Fund may enter into from time to time
including securities lending agreements, futures and commodities account
agreements, brokerage agreements and options agreements.
4. Services Provided.
(a) Chase will provide the following services subject to the control,
direction and supervision of the Board and its designated agents and in
compliance with the objectives, policies and limitations set forth in the Funds'
Registration Statement, Charter Document and By-Laws; applicable laws and
regulations; and all resolutions and policies implemented by the Board:
3
<PAGE>
(i) Transfer Agency.
A description of the above service is contained in Schedule C to this Agreement.
(b) Chase will also:
(i) provide office facilities with respect to the provision of
the services contemplated herein (which may be in the offices of Chase or a
corporate affiliate of Chase);
(ii) provide or otherwise obtain personnel sufficient for
provision of the services contemplated herein;
(iii) furnish equipment and other materials, which are necessary
or desirable for provision of the services contemplated herein; and
(iv) keep records relating to the services provided hereunder in
such form and manner as Chase may deem appropriate or advisable. To the extent
required by Section 31 of the 1940 Act and the rules thereunder, Chase agrees
that all such records prepared or maintained by Chase relating to the services
provided hereunder are the property of the Funds and will be preserved for the
periods prescribed under Rule 31a-2 under the 1940 Act, maintained at the Funds'
expense, and made available in accordance with such Section and rules.
5. Fees and Expenses.
(a) As compensation for the services rendered to the Funds pursuant to
this Agreement the Funds shall pay Chase monthly fees determined as set forth in
Schedule A to this Agreement. Such fees are to be billed monthly and shall be
due and payable upon receipt of the invoice. Upon any termination of the
provision of services under this Agreement before the end of any month, the fee
for the part of the month before such termination shall be prorated according to
the proportion which such part bears to the full monthly period and shall be
payable upon the date of such termination.
(b) For the purpose of determining fees calculated as a function of
each Fund's assets, the value of the Fund's assets and net assets shall be
computed as required by its currently effective Prospectus, generally accepted
accounting principles, and resolutions of the Board.
(c) The Funds may request additional services, additional processing,
or special reports, with such specifications, requirements and documentation as
may be reasonably required by Chase. If Chase elects to provide such services
or arrange for their provision, it shall be entitled to additional fees and
expenses at its customary rates and charges.
4
<PAGE>
(d) Chase will bear its own expenses in connection with the
performance of the services under this Agreement except as provided herein or as
agreed to by the parties. Each Fund agrees to promptly reimburse Chase for any
services, equipment or supplies ordered by or for the Fund through Chase and for
any other expenses that Chase may incur on the Fund's behalf at the Fund's
request or as consented to by the Fund. Such other expenses to be incurred in
the operation of the Fund and to be borne by the Funds, include, but are not
limited to: taxes; interest; brokerage fees and commissions; salaries and fees
of officers, directors, or trustees who are not officers, directors,
shareholders or employees of Chase, or the Fund's distributor; SEC and state
Blue Sky registration and qualification fees, levies, fines and other charges;
postage and mailing costs; costs of share certificates; advisory fees;
independent public accountants and custodians; insurance premiums including
fidelity bond premiums; legal expenses; consulting fees; customary bank charges
and fees; expenses of typesetting and printing of Prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund (the Fund's
distributor to bear the expense of all other printing, production, and
distribution of Prospectuses, and marketing materials); expenses of printing and
production costs of shareholders' reports and proxy statements and materials;
expenses of proxy solicitation and annual meetings; costs and expenses of Fund
stationery and forms; customer service telephone expenses, costs and expenses of
telephone and data lines and devices which are specially requested by the Fund;
costs associated with corporate or trust, shareholder, and Board meetings; trade
association dues and expenses; reprocessing costs to Chase caused by third party
errors; and any extraordinary expenses and other customary Fund expenses.
(e) All fees, out-of-pocket expenses, or additional charges of Chase
shall be billed on a monthly basis and shall be due and payable upon receipt of
the invoice.
(f) Chase will render, after the close of each month in which services
have been furnished, a statement reflecting all of the charges for such month.
Charges remaining unpaid after thirty (30) days shall bear interest in finance
charges equivalent to, in the aggregate, the Prime Rate (as reasonably
determined by Chase) plus two percent per year and all costs and expenses of
effecting collection of any such sums, including reasonable attorney's fees,
shall be paid by the Funds to Chase.
(g) In the event that the Funds are more than sixty (60) days
delinquent in payments of monthly billings in connection with this Agreement
(with the exception of specific
5
<PAGE>
amounts which may be contested in good faith by the Funds), this Agreement may
be terminated upon thirty (30) days' written notice to the Funds by Chase. The
Funds must notify Chase in writing of any contested amounts within thirty (30)
days of receipt of a billing for such amounts. Disputed amounts are not due and
payable while they are being investigated.
6. Limitation of Liability and Indemnification.
(a) Chase shall not be liable for any error of judgment or mistake of
law or for any loss or expense suffered by the Funds, in connection with the
matters to which this Agreement relates, except for a loss or expense solely
caused by or resulting from willful misfeasance, bad faith or negligence on
Chase's part in the performance of its duties or from reckless disregard by
Chase of its obligations and duties under this Agreement. In no event shall
Chase be liable for any indirect, incidental, special or consequential losses or
damages of any kind whatsoever, even if Chase has been advised of the likelihood
of such loss or damage and regardless of the form of action.
(b) Subject to Section 6(a) above, Chase shall not be responsible for,
and the Funds shall indemnify and hold Chase harmless from and against, any and
all losses, damages, costs, reasonable attorneys' fees and expenses, payments,
expenses and liabilities incurred by Chase, any of its agents, or the Funds'
agents in the performance of its/their duties hereunder, including but not
limited to those arising out of or attributable to:
(i) any and all actions of Chase or its officers or agents
required to be taken pursuant to this Agreement;
(ii) the reasonable reliance on or use by Chase or its officers
or agents of information, records, or documents which are received by Chase or
its officers or agents and furnished to it or them by or on behalf of the Funds,
and which have been prepared or maintained by the Funds or any third party on
behalf of the Funds;
(iii) the Funds' refusal or failure to comply with the terms of
this Agreement or the Funds' lack of good faith, or actions, or lack thereof,
involving negligence or willful misfeasance;
(iv) the breach of any representation or warranty of the Funds
hereunder;
(v) the taping or other form of recording of telephone
conversations or other forms of electronic communications with investors and
shareholders, or reasonable reliance by Chase on telephone or other electronic
instructions of any person acting on behalf of a
6
<PAGE>
shareholder or shareholder account for which telephone or other electronic
services have been authorized;
(vi) the reliance on or the carrying out by Chase or its officers
or agents of any proper instructions reasonably believed to be duly authorized,
or requests of the Funds or recognition by Chase of any share certificates which
are reasonably believed to bear the proper signatures of the officers of the
Funds and the proper countersignature of any transfer agent or registrar of the
Funds;
(vii) any delays, inaccuracies, errors in or omissions from
information or data provided to Chase by data, corporate action, pricing
services or securities brokers and dealers;
(viii) the offer or sale of shares by any Fund in violation of
any requirement under the Federal securities laws or regulations or the
securities laws or regulations of any state, or in violation of any stop order
or other determination or ruling by any Federal agency or any state agency with
respect to the offer or sale of such shares in such state (1) resulting from
activities, actions, or omissions by the Funds or their other service providers
and agents, or (2) existing or arising out of activities, actions or omissions
by or on behalf of the Fund prior to the effective date of this Agreement;
(ix) any failure of a Fund's registration statement to comply
with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and any other applicable laws, or any untrue statement of a material
fact or omission of a material fact necessary to make any statement therein not
misleading in a Fund's prospectus;
(x) the actions taken by the Funds, their investment adviser, and
their distributor in compliance with applicable securities, tax, commodities and
other laws, rules and regulations, or the failure to so comply; and
(xi) all actions, inactions, omissions, or errors caused by third
parties to whom Chase or the Funds has assigned any rights and/or delegated any
duties under this Agreement at the request of or as required by the Funds, their
investment advisers, distributor, administrator or sponsor.
(c) In performing its services hereunder, Chase shall be entitled to
reasonably rely on any oral or written instructions, notices or other
communications, including electronic transmissions, from the Funds and their
custodians, officers and directors, investors, agents and
7
<PAGE>
other service providers and shareholders which Chase reasonably believes to be
genuine, valid and authorized, and shall be indemnified by the Funds for any
loss or expense caused by such reliance. Chase shall also be entitled to consult
with and rely on the advice and opinions of outside legal counsel retained by
the Funds, as necessary or appropriate.
(d) Chase shall indemnify and hold the Funds harmless from and against
any and all losses, damages, costs, charges, payments, expenses and liability,
excluding attorneys' fees and costs, arising out of or attributable to Chase's
refusal or failure to comply with the material terms of this Agreement, or
Chase's lack of good faith, negligence or willful misconduct.
(e) Subject to the above Sections 6 (a) through 6 (d), any costs or
losses incurred by a Fund for the processing of any purchase, redemption,
exchange or other share transactions at a price per share other than the price
per share applicable to the effective date of the transaction (the foregoing
being generally referred to herein as "as of" transactions) will be handled in
the following manner:
(i) For each calendar year, if all "as of" transactions for the
year, taken in the aggregate, result in a net loss to a Fund ("net loss"), Chase
will reimburse the Fund for such net loss, except to the extent that such net
loss may be offset by application of a "net benefit" to the Fund carried over
from prior calendar years pursuant to sub-paragraph (ii) immediately below.
(ii) For each calendar year, if all "as of" transactions for the
year, taken in the aggregate, result in a net benefit to a Fund ("net benefit"),
the Fund shall not reimburse Chase for the amount of such net benefit; however,
any "net benefit" for any calendar year may be used to offset, in whole or in
part, any "net loss" suffered by the Fund in any future calendar year so as to
reduce the amount by which Chase shall be required to reimburse the Fund for
such "net loss" in such year pursuant to sub-paragraph (i) immediately above.
(iii) Any "net loss" for which Chase reimburses a Fund in any
calendar year shall not be carried over into future years so as to offset any
"net benefit" in such future years.
7. Term. This Agreement shall become effective on the date first
hereinabove written for an initial term of four years. The Agreement may be
modified or amended from time to time by mutual agreement between the parties
hereto. After the initial term, the Agreement shall continue in effect unless
terminated by either party on 6 months' prior written notice. Upon termination
of this Agreement, each Fund shall pay to Chase such compensation and any
8
<PAGE>
reasonable out-of-pocket or other reimbursable expenses which may become due or
payable under the terms hereof as of the date of termination or after the date
that the provision of services ceases, whichever is later. If the Funds
terminate the Agreement for any reason during the first year of the initial
term, they will reimburse Chase in accordance with Schedule A.
8. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed effective on the date of personal delivery (by
private messenger, courier service or otherwise) or upon confirmed receipt of
telex or facsimile, whichever occurs first, or upon receipt if by mail to the
parties at the following address (or such other address as a party may specify
by notice to the other):
If to the Funds:
John Nuveen & Co., Incorporated
333 West Wacker Drive
Chicago, IL 60606
Attention: Fund Controller
Fax: (312) 917-8049
If to Chase:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
Attention: Karl O. Hartmann, Esq., General Counsel
Fax: (617) 557-8616
9. Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
10. Force Majeure. Chase shall not be responsible or liable for any harm,
loss or damage suffered by the Funds, their investors, or other third parties or
for any failure or delay in performance of Chase's obligations under this
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond Chase's control. In the event of a force majeure, any resulting harm,
loss, damage, failure or delay by Chase will not give the Funds the right to
terminate this Agreement.
11. Additional Funds. In the event that John Nuveen & Company
Incorporated sponsors additional open-end management companies with respect to
which it desires Chase to
9
<PAGE>
provide services under the terms of this Agreement, it shall so notify Chase in
writing, and if Chase agrees in writing to provide such services, such Fund or
Funds shall be subject to the terms of this Agreement and Schedule C shall be
modified accordingly.
12. Amendments. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.
13. Assignment. Chase may assign and delegate this Agreement and its
rights and obligations hereunder without the consent of the other party.
14. Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
NUVEEN FUNDS
By: /s/ Stuart Rogers
-----------------------------
Name: Stuart Rogers
---------------------------
Title: Vice President
--------------------------
CHASE GLOBAL FUNDS
SERVICES COMPANY
By: /s/ Donald P. Hearn
-----------------------------
Name: Donald P. Hearn
---------------------------
Title: Chairman and CEO
--------------------------
10
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE A
FEES AND EXPENSES
Transfer Agency Fees
A. $18.50 per municipal fund account per annum
$18.25 per equity fund account per annum
$29.00 per money market fund account per annum
B. Out-of-pocket expenses, including but not limited to those in Section
5(d), will be computed, billed and payable monthly Customized systems
and technology charges (excluding those projects covered under the
conversion agreement) will be negotiated individually and billed along
with out-of-pocket expenses.
C. If the Funds terminate this Agreement for any reason whatsoever between
the date of this Agreement and July 1, 1999, there will be immediately
due and owing to Chase by Nuveen a $6 million charge; if between the date
of July 1, 1999 and June 30, 2000, a $4 million charge; and if between
July 1, 2000 and June 30, 2001, a $2 million charge. In addition, the
Funds will reimburse Chase for all costs it incurs in connection with any
conversion to another transfer agent.
A-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE B
Flagship Admiral Funds Inc. (Maryland Corporation)
Flagship Utility Income Fund
Nuveen Investment Trust (Massachusetts Business Trust)
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen European Value Fund
Nuveen Investment Trust II (Massachusetts Business Trust)
Nuveen Rittenhouse Growth Fund
Nuveen Flagship Municipal Trust (Massachusetts Business Trust)
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
Nuveen Flagship Multistate Trust I (Massachusetts Business Trust)
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
B-1
<PAGE>
Nuveen Flagship Multistate Trust II (Massachusetts Business Trust)
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
Nuveen Flagship Multistate Trust III (Massachusetts Business Trust)
Nuveen Flagship Alabama Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship South Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
Nuveen Flagship Multistate Trust IV (Massachusetts Business Trust)
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
Nuveen Tax-Exempt Money Market Fund, Inc. (Maryland Corporation)
Nuveen Tax-Free Reserves, Inc. (Maryland Corporation)
Nuveen Tax-Free Money Market Fund, Inc. (Minnesota Corporation)
Nuveen Massachusetts Tax-Free Money Market Fund
Nuveen New York Tax-Free Money Market Fund
B-2
<PAGE>
Nuveen California Tax-Free Fund, Inc. (Maryland Corporation)
Nuveen California Tax-Free Money Market Fund
B-3
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE C
DESCRIPTION OF TRANSFER AGENCY SERVICES
The following is a general description of the transfer agency services Chase
shall provide to each Fund.
A. Shareholder Recordkeeping. Maintain records showing for each Fund
shareholder the following: (i) name, address, appropriate tax
certification and tax identifying number; (ii) number of shares of each
Fund, portfolio or class; (iii) historical information including, but not
limited to, dividends paid, date and price of all transactions including
individual purchases and redemptions, based upon appropriate supporting
documents; and (iv) any dividend reinvestment order, application,
specific address, payment and processing instructions and correspondence
relating to the current maintenance of the account.
B. Share Issuance. Record the issuance of shares of each Fund, portfolio or
class. Except as specifically agreed in writing between Chase and the
Fund, Chase shall have no obligation when countersigning and issuing
and/or crediting shares to take cognizance of any other laws relating to
the issue and sale of such shares except insofar as policies and
procedures of the Stock Transfer Association recognize such laws.
C. Transfer, Purchase, Exchange and Redemption Orders. Process all orders
for the transfer, purchase, exchange and redemption of shares of the Fund
in accordance with the Fund's current prospectus and customary transfer
agency policies and procedures, including electronic transmissions which
the Fund acknowledges it has authorized, or in accordance with any
instructions of the Fund or its agents which Chase reasonably believes to
be authorized.
D. Shareholder Communications. Transmit all communications by the Fund to
its shareholders promptly following the delivery by the Fund of the
material to be transmitted by mail, telephone, courier service or
electronically.
E. Proxy Materials. Assist with the mailing or transmission of proxy
materials, tabulating votes, and compiling and certifying voting results.
Services may include the provision of inspectors of election at any
meeting of shareholders.
F. Share Certificates. If permitted by Fund policies, and if a shareholder
of the Fund requests a certificate representing shares, Chase as Transfer
Agent, will countersign and mail a share certificate to the investor at
his/her address as it appears on the Fund's shareholder records.
C-1
<PAGE>
G. Returned Checks. In the event that any check or other negotiable
instrument for the payment of shares is returned unpaid for any reason,
Chase will take such steps, as Chase may, in its discretion, deem
appropriate and notify the Fund of such action. However, the Fund
remains ultimately liable for any returned checks or negotiable
instruments of its shareholders.
H. Shareholder & Broker-Dealer Correspondence. Acknowledge all
correspondence from shareholders and broker-dealers relating to share
accounts and undertake such other shareholder and broker-dealer
correspondence as may from time to time be mutually agreed upon.
I. Tax Reporting. Chase shall issue appropriate shareholder tax forms as
required.
J. Dividend Disbursing. Chase will prepare and mail checks, place wire
transfers or credit income and capital gain payments to shareholders.
The Fund will advise Chase of the declaration of any dividend or
distribution and the record and payable date thereof at least five (5)
days prior to the record date. Chase will, on or before the payment date
of any such dividend or distribution, notify the Fund's Custodian of the
estimated amount required to pay any portion of such dividend or
distribution payable in cash, and on or before the payment date of such
distribution, the Fund will instruct its Custodian to make available to
Chase sufficient funds for the cash amount to be paid out. If a
shareholder is entitled to receive additional shares by virtue of any
such distribution or dividend, appropriate credits will be made to each
shareholder's account.
K. Escheatment. Chase shall provide escheatment services only with respect
to the escheatment laws of the Commonwealth of Massachusetts, including
those which relate to reciprocal agreements with other states.
L. Telephone Services. Chase will provide staff coverage, training and
supervision in connection with the Fund's telephone line for shareholder
inquiries, and will respond to inquiries concerning shareholder records,
transactions processed by Chase, procedures to effect the shareholder
records and inquiries of a general nature relative to shareholder
services.
M. 12b-1. Chase will calculate and process all 12b-1 payments in accordance
with each Fund's current prospectus.
N. Commission Payments. Chase will calculate and process all commission
payments in accordance with each Fund's current prospectus.
O. Requests for Information. Chase will provide all required information in
a timely fashion in support of regulatory filings.
P. SAS 70. Chase will make available to the Funds' sponsor independent
auditor reports in compliance with SAS 70.
C-2
<PAGE>
Q. Regulatory Changes. Chase will provide assistance with the analysis and
implementation of any changes required by regulatory bodies.
C-3
<PAGE>
Exhibit i
August 26, 1999
Nuveen Flagship Municipal Trust
333 West Wacker Drive
Chicago, Illinois 60606
Re: Opinion of Counsel regarding Post-Effective Amendment No. 4 to the
Registration Statement filed on Form N-1A under the Securities Act of 1933
(File No. 333-14725).
Ladies and Gentlemen:
We have acted as counsel for the Nuveen Flagship Municipal Trust, a
Massachusetts voluntary association (commonly known as a business trust) (the
"Trust"), in connection with the above-referenced Registration Statement on Form
N-1A (as amended, the "Registration Statement") which relates to the Class A
Shares, Class B Shares, Class C Shares and Class R Shares, par value $.01 per
share, of each of the following series of the Trust: Nuveen Municipal Bond Fund,
Nuveen Insured Municipal Bond Fund, and Nuveen Flagship All-American Municipal
Bond Fund, and the Class A Shares, Class C Shares and Class R Shares, par value
$.01 per share, (collectively, the "Shares") of the Nuveen Flagship Intermediate
Municipal Bond Fund and of the Nuveen Flagship Limited Term Municipal Bond Fund.
This opinion is being delivered to you in connection with the Trust's filing of
Post-Effective Amendment No. 4 to the Registration Statement (the "Amendment")
to be filed with the Securities and Exchange Commission on or about August 27,
1999 pursuant to Rule 485(b) of the Securities Act of 1933 (the "1933 Act").
With your permission, all assumptions and statements of reliance herein have
been made without any independent investigation or verification on our part
except to the extent otherwise expressly stated, and we express no opinion with
respect to the subject matter or accuracy of such assumptions or items relied
upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Trust;
<PAGE>
Nuveen Flagship Municipal Trust
August 27, 1999
Page 2
(b) copies, certified by the Secretary of State of the Commonwealth of
Massachusetts, of the Trust's Declaration of Trust and of all amendments thereto
on file with in the office of the Secretary of State (the "Charter");
(c) a certificate executed by Karen L. Healy, an Assistant Secretary of
the Trust, certifying as to, and attaching copies of, the Charter and the By-
Laws of the Trust (the "By-Laws"), and certain resolutions adopted by the Board
of Trustees of the Trust authorizing the issuance of the Shares; and
(d) a printer's proof, dated August 27, 1999, of the Amendment.
In our capacity as counsel to the Trust, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinions hereinafter expressed.
In all such examinations, we have assumed the legal capacity of all natural
persons executing documents, the genuineness of all signatures, the authenticity
of all original or certified copies, and the conformity to original or certified
copies of all copies submitted to us as conformed or reproduced copies. As to
various questions of fact relevant to such opinion, we have relied upon, and
assumed the accuracy of, certificates and oral or written statements of public
officials and offers or representatives of the Trust.
We have assumed that the Registration Statement, as filed with the
Securities and Exchange Commission, will be in substantially the form of the
printer's proof referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Trust's
Charter and By-Laws, and for the consideration described in the Registration
Statement, will be legally issued, fully paid and non-assessable, except that,
as set forth in the Registration Statement, shareholders of the Trust may, under
certain circumstances, be held personally liable for its obligations.
The opinion expressed herein is limited to the laws of the Commonwealth of
Massachusetts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
Morgan, Lewis & Bockius LLP
<PAGE>
Exhibit j
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated June 18, 1998 and to all references to our Firm included in or made a
part of this registration statement of Nuveen Flagship Municipal Trust
(comprising the Nuveen Municipal Bond Fund, the Nuveen Insured Municipal Bond
Fund, the Nuveen Flagship All-American Municipal Bond Fund, the Nuveen Flagship
Intermediate Municipal Bond Fund and the Nuveen Flagship Limited Term Municipal
Bond Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 23, 1999
<PAGE>
Exhibit m
Nuveen Flagship Municipal Trust
Nuveen Flagship Multistate Trust I
Nuveen Flagship Multistate Trust II
Nuveen Flagship Multistate Trust III
Nuveen Flagship Multistate Trust IV
Plan of Distribution and Service
Pursuant to Rule 12b-1
January 30, 1997
As amended July 23, 1998
Whereas, Nuveen Flagship Municipal Trust, Nuveen Flagship Multistate Trust
I, Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III and
Nuveen Flagship Multistate Trust IV, each a Massachusetts business trust (each,
a "Trust"), engages in business as an open-end management investment company and
is registered under the Investment Company Act of 1940, as amended (the "Act");
Whereas, each Trust is authorized to and may or does issue shares of
beneficial interest in separate series, with the shares of each such series
representing the interests in a separate portfolio of securities and other
assets (each Trust's series together with all other such series subsequently
established by a Trust being referred to herein individually as a "Fund" and
collectively as the "Funds");
Whereas, each Trust has outstanding the Funds set forth on Exhibit A;
Whereas, each Trust, on behalf of each Fund, employs John Nuveen & Co.
Incorporated (the "Distributor") as distributor of the shares of each Fund of
each Trust (the "Shares") pursuant to a Distribution Agreement dated as of
February 1, 1997;
Whereas, each Trust is authorized to issue Shares in four different classes
("Classes"): Class A, Class B, Class C and Class R (although not all Funds will
issue all Classes of Shares);
Whereas, each Trust, on behalf of its Funds, desires to adopt an amended
Plan of Distribution and Service pursuant to Rule 12b-1 under the Act ("Rule
12b-1"), and the Board of Trustees of each Trust has determined that there is a
reasonable likelihood that adoption of this amended Plan of Distribution and
Service will benefit each Trust and its shareholders;
Whereas, each Trust, on behalf of its Funds, has adopted a Multiple Class
Plan Pursuant to Rule 18f-3 (the "Rule 18f-3 Plan") to enable the various
Classes of Shares to be granted
<PAGE>
different rights and privileges and to bear different expenses, and has an
effective registration statement on file with the SEC containing a Prospectus
describing such Classes of Shares;
Whereas, as described in the Rule 18f-3 Plan, the purchase of Class A
Shares is generally subject to an up-front sales charge, as set forth in each
Trust's Prospectuses and Statements of Additional Information, and the purchase
of Class B and Class C Shares will not be subject to an up-front sales charge,
but in lieu thereof the Class B Shares will be subject to an asset-based
distribution fee (and a declining contingent deferred sales charge) and Class C
Shares will be subject to an asset-based distribution fee (and a one-year
contingent deferred sales charge), as described in the Prospectus for the
Shares; and
Whereas, Shares representing an investment in Class B will automatically
convert to Class A Shares 8 years after the investment, as described in the
Prospectus for the Shares;
Now, Therefore, each Trust, on behalf of each of its Funds, hereby adopts,
and the Distributor hereby agrees to the terms of, this Plan of Distribution and
Service (the "Plan") in accordance with Rule 12b-1, on the following terms and
conditions:
1. (a) The Fund is authorized to compensate the Distributor for services
performed and expenses incurred by the Distributor in connection with
the distribution of Shares of Class A, Class B and Class C of the Fund
and the servicing of accounts holding such Shares.
(b) The amount of such compensation paid during any one year shall consist
of:
(i) with respect to Class A Shares, a Service Fee not to exceed .20
% of average daily net assets of the Class A Shares of the Fund;
(ii) with respect to Class B Shares, a Service Fee not to exceed .20%
of average daily net assets of the Class B Shares of the Fund,
plus a Distribution Fee not to exceed .75% of average daily net
assets of the Class B Shares of the Fund; and
(iii) (A) with respect to Class C Shares of Long-Term and Intermediate
Funds, a Service Fee not to exceed .20% of average daily net
assets of the Class C Shares of the Fund, plus a Distribution
Fee not to exceed .55% of average daily net assets of the Class
C Shares of the Fund; and
(B) with respect to Class C Shares of Limited-Term Funds, a
Service Fee not to exceed .20% of average daily net assets of
the Class C Shares of the
-2-
<PAGE>
Fund, plus a Distribution Fee not to exceed .35% of average
daily net assets of the Class C Shares of the Fund.
Such compensation shall be calculated and accrued daily and paid
monthly or at such other intervals as the Board of Trustees may
determine.
(c) With respect to Class A Shares, the Distributor shall pay any Service
Fees it receives under the Plan for which a particular underwriter,
dealer, broker, bank or selling entity having a Dealer Agreement in
effect ("Authorized Dealer", which may include the Distributor) is the
dealer of record to such Authorized Dealers to compensate such
organizations for providing services to shareholders relating to their
investment. The Distributor may retain any Service Fees not so paid.
(d) With respect to the Class B Shares, the Distributor:
(i) shall retain the Distribution Fee to compensate it for costs
associated with the distribution of the Class B Shares,
including the payment of broker commissions to Authorized
Dealers (which may include the Distributor) who were the dealer
of record with respect to the purchase of those shares; and
(ii) shall pay any Service Fees it receives under the Plan for which
a particular Authorized Dealer is the dealer of record (which
may include the Distributor) to such Authorized Dealers to
compensate such organizations for providing services to
shareholders relating to their investment; provided, however,
that the Distributor shall be entitled to retain, for the first
year after purchase of the Class B Shares, the Service Fee to
the extent that it may have pre-paid the Service Fee for that
period to the Authorized Dealer of record.
The Distributor may retain any Distribution or Service Fees not so
paid.
(e) With respect to the Class C Shares, the Distributor:
(i) shall pay the Distribution Fee it receives under the Plan with
respect to Class C Shares for which a particular Authorized
Dealer is the dealer of record (which may include the
Distributor) to such Authorized Dealers to compensate such
organizations in connection with such share sales; provided,
however, that the Distributor shall be entitled to retain, for
the
-3-
<PAGE>
first year after purchase of the Class C Shares, the
Distribution Fee to the extent that it may have pre-paid the
Distribution Fee for that period to the Authorized Dealer of
record; and
(ii) shall pay any Service Fees it receives under the Plan for which
a particular Authorized Dealer is the dealer of record (which
may include the Distributor) to such Authorized Dealers to
compensate such organizations for providing services to
shareholders relating to their investment; provided, however,
that the Distributor shall be entitled to retain, for the first
year after purchase of the Class B or C Shares, the Service Fee
to the extent that it may have pre-paid the Service Fee for that
period to the Authorized Dealer of record.
The Distributor may retain any Distribution or Service Fees not so
paid.
(f) Services for which such Authorized Dealers may receive Service Fee
payments include any or all of the following: maintaining account records for
shareholders who beneficially own Shares; answering inquiries relating to the
shareholders' accounts, the policies of the Fund and the performance of their
investment; providing assistance and handling transmission of funds in
connection with purchase, redemption and exchange orders for Shares; providing
assistance in connection with changing account setups and enrolling in various
optional fund services; producing and disseminating shareholder communications
or servicing materials; the ordinary or capital expenses, such as equipment,
rent, fixtures, salaries, bonuses, reporting and recordkeeping and third party
consultancy or similar expenses, relating to any activity for which payment is
authorized by the Board; and the financing of any other activity for which
payment is authorized by the Board.
(g) Payments of Distribution or Service Fees to any organization as of any
month-end (or other period-end, as appropriate) will not exceed the appropriate
amount based on the annual percentages set forth in subparagraphs (b)(i), (ii)
and (iii) above, based on average net assets of accounts for which such
organization appeared on the records of the Fund and/or its transfer agent as
the organization of record during the preceding month (period).
2. This amended Plan shall not take effect until the Plan, together with any
related agreement(s), has been approved with respect to the affected Funds and
Classes thereof by votes of a majority of both (a) the Board of Trustees of the
Trust, and (b) those Trustees of the Trust who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it (the "Rule
12b-1 Trustees") cast in person at a meeting (or meetings) called for the
purpose of voting on the Plan and such related Agreement(s).
-4-
<PAGE>
3. This Plan shall remain in effect until August 1, 1999, and shall continue in
effect thereafter so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 2.
4. The Distributor shall provide to the Board of Trustees of the Trust and the
Board shall review, at least quarterly, a written report of distribution- and
service-related activities, Distribution Fees, Service Fees, and the purposes
for which such activities were performed and expenses incurred.
5. This Plan may be terminated as to a given Fund or as to a given Class A,
Class B or Class C of a Fund at any time by vote of a majority of the Rule 12b-1
Trustees or by vote of a majority (as defined in the Act) of the outstanding
voting Shares of the applicable Fund or Class.
6. This Plan may not be amended to increase materially the amount of
compensation payable by a Fund with respect to Class A, Class B or Class C
Shares under paragraph 1 hereof unless such amendment is approved by a vote of
at least a majority (as defined in the Act) of the outstanding voting Shares of
that Class of Shares of that Fund. No material amendment to the Plan shall be
made unless approved in the manner provided in paragraph 2 hereof.
7. While this Plan is in effect, the selection and nomination of the Trustees
who are not interested persons (as defined in the Act) of the Trust shall be
committed to the discretion of the Trustees who are not such interested persons.
8. The Trust shall preserve copies of this Plan and any related agreements and
all reports made pursuant to paragraph 4 hereof, for a period of not less than
six years from the date of the Plan, any such agreement or any such report, as
the case may be, the first two years in an easily accessible place.
-5-
<PAGE>
Exhibit A
to Plan of Distribution and Service Pursuant to Rule 12b-1
Nuveen Flagship Municipal Trust
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
Nuveen Municipal Research Fund
Nuveen Flagship Multistate Trust I
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Oklahoma Municipal Bond Fund *
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
Nuveen Flagship Multistate Trust II
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen California Intermediate Municipal Bond Fund *
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
Nuveen Flagship Multistate Trust III
Nuveen Flagship Alabama Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship South Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
Nuveen Flagship Multistate Trust IV
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
* Funds not currently offered which will be described in a Trust's N-1A
registration statement but not included in the publicly-disseminated prospectus
-6-
<PAGE>
Exhibit 99 (b)
Certified Resolution
--------------------
The undersigned, Gifford R. Zimmerman, hereby certifies, on behalf of Nuveen
Flagship Mulitstate Trust II (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 February 1, 1999, and (3) that said
resolution has not been amended or rescinded and remains in full force and
effect.
August 12, 1999
/s/ Gifford R. Zimmerman
---------------------------------------
Gifford R. Zimmerman, Secretary
<PAGE>
RESOLVED, that the officers of the Fund be, and each of them hereby is,
authorized in the name and on behalf of the Fund to execute and cause to be
filed with the Securities and Exchange Commission such amendment or amendments
to the Fund's registration statement on Form N-1A, including the registration of
additional shares pursuant to Rule 24f-2 of the Investment Company Act of 1940,
as amended, as such officer shall deem necessary or desirable, such
determination to be conclusively evidenced by his or their execution of such an
amendment to the registration statement.
FURTHER RESOLVED, that the officers of the Fund be, and each of them hereby is,
authorized to execute, file or cause to be filed all such instruments and
documents, and make or cause to be made all such payments, and do or cause to be
done all such other acts and things as they may deem necessary or desirable in
order to effect the filing of such amendments of the registration statement.
