<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR ABOUT JULY 31, 2000
REGISTRATION NOS. 333-
811-07873
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment
No. [ ]
Post-Effective Amendment
No. [ ]
NUVEEN FLAGSHIP MUNICIPAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
333 West Wacker Drive
Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (312) 917-7700
Copy to:
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GIFFORD R. ZIMMERMAN, ESQ. THOMAS S. HARMAN, ESQ.
VICE PRESIDENT AND SECRETARY MORGAN LEWIS & BOCKIUS LLP
JOHN NUVEEN & CO. INCORPORATED 1800 M STREET, NW
333 WEST WACKER DRIVE WASHINGTON, DC 20036
CHICAGO, ILLINOIS 60606
(NAME AND ADDRESS OF AGENT FOR SERVICE)
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
this Registration Statement becomes effective.
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It is proposed that this filing will become effective on August 29, 2000
pursuant to Rule 488.
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EXPLANATORY NOTE
This Registration Statement is organized as follows:
-- Cross Reference Sheet with respect to Nuveen Flagship Municipal Trust
-- Questions and Answers to Shareholders of Nuveen Intermediate Municipal Bond
Fund
-- Notice of Special Meeting of Shareholders of Nuveen Intermediate Municipal
Bond Fund
-- Prospectus/Proxy Statement regarding the proposed Reorganization of Nuveen
Intermediate Municipal Bond Fund into Nuveen Intermediate Duration Municipal
Bond Fund
-- Prospectus of Nuveen Intermediate Duration Municipal Bond Fund
-- Statement of Additional Information regarding the proposed Reorganization of
Nuveen Intermediate Municipal Bond Fund into Nuveen Intermediate Duration
Municipal Bond Fund
-- Part C Information
-- Exhibits
<PAGE> 3
NUVEEN FLAGSHIP MUNICIPAL TRUST
CROSS-REFERENCE SHEET PURSUANT TO RULE 481(A) OF REGULATION C UNDER
THE SECURITIES ACT OF 1933
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FORM N-14
ITEM NO. PROSPECTUS/PROXY
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PART A INFORMATION REQUIRED IN THE PROSPECTUS/PROXY STATEMENT
Item 1. Beginning of Registration Statement
and Outside Front Cover Page of
Prospectus/Proxy Statement........... Outside front cover page of Prospectus/Proxy
Statement
Item 2. Beginning and Outside Back Cover Page
of Prospectus/Proxy Statement........ Outside back cover page of Prospectus/Proxy Statement
Item 3. Fee Table, Synopsis Information and
Risk Factors......................... Summary; Risk Factors
Item 4. Information about the Transaction.... Summary; The Proposed Reorganization
Item 5. Information about the Registrant..... Outside front cover page of Prospectus/Proxy
Statement; Summary; The Proposed Reorganization;
Other Information; Exhibit A; Prospectus and
Statement of Additional Information of Nuveen
Intermediate Duration Municipal Bond Fund
Item 6. Information about the Company Being
Acquired............................. Outside front cover page of Prospectus/Proxy
Statement; Summary; Exhibit A; Prospectus Statement
of Additional Information of Nuveen Intermediate
Municipal Bond Fund
Item 7. Voting Information................... Other Information; Voting Information and
Requirements
Item 8. Interest of Certain Persons and
Experts.............................. Summary; The Proposed Reorganization
Item 9. Additional Information Required for
Reoffering by Persons Deemed to be
Underwriters......................... Not applicable
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page........................... Cover Page
Item 11. Table of Contents.................... Table of Contents
Item 12. Additional Information about the
Registrant........................... Additional Information about Nuveen Intermediate
Duration Municipal Bond Fund
Item 13. Additional Information about the
Company Being Acquired............... Additional Information about Nuveen Intermediate
Municipal Bond Fund
Item 14. Financial Statements
PART C OTHER INFORMATION
Items 15-17. Information required to be included in Part C is set forth under the appropriate item, so
numbered, in Part C of this Registration Statement.
</TABLE>
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* References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
<PAGE> 4
NUVEEN INVESTMENTS LOGO
IMPORTANT INFORMATION FOR SHAREHOLDERS OF
NUVEEN INTERMEDIATE MUNICIPAL BOND FUND
Your Nuveen Intermediate Municipal Bond Fund (formerly known as the Nuveen
Flagship Intermediate Municipal Bond Fund) will host a Special Meeting of
Shareholders at 10:00 a.m. on Wednesday, October 25, 2000, on the 31st Floor at
our headquarters in Chicago, Illinois. The purpose is to vote on an important
proposal affecting your fund.
The first few pages of this booklet summarize the proposal and explain the proxy
process -- including how to cast your vote. Before you vote, please read the
full text of the proxy statement for a complete understanding of the proposal.
Q. WHAT ARE SHAREHOLDERS BEING ASKED TO VOTE ON AT THE UPCOMING SPECIAL
SHAREHOLDER MEETING ON WEDNESDAY, OCTOBER 25, 2000?
A. The Board of Trustees for the Nuveen Intermediate Municipal Bond Fund (the
"Fund") has called a Special Shareholder Meeting for 10:00 a.m. on Wednesday,
October 25, 2000 at which you will be asked to vote on a reorganization (the
"Reorganization") of your fund into the Nuveen Intermediate Duration
Municipal Bond Fund (the "Surviving Fund").
THE PROPOSAL HAS BEEN APPROVED BY THE TRUSTEES FOR YOUR FUND, WHO UNANIMOUSLY
RECOMMEND YOU VOTE "FOR" THE PROPOSAL.
Q. ARE THERE ANY DIFFERENCES BETWEEN THE FUND AND THE SURVIVING FUND?
A. The Surviving Fund is substantially the same as the Fund in its philosophy,
investment objectives and policies and day-to-day portfolio management.
Q. WHAT ADVANTAGES WILL THIS PRODUCE FOR FUND SHAREHOLDERS?
A. It is expected that the proposed Reorganization will (i) result in higher
dividends per share from a higher gross embedded yield and lower gross
operating expenses due to the Surviving Fund's larger net assets and greater
economies of scale; (ii) preserve the Fund's intermediate risk
characteristics; (iii) improve portfolio diversification; and (iv) lower
portfolio transaction costs.
Q. WHAT IS THE TIMETABLE FOR THE REORGANIZATION?
A. Effective August 9, 2000, the Fund was closed to new investors; existing
investors, however, may continue to make additional purchases and reinvest
dividends. If approved by shareholders on October 25, 2000, the
Reorganization is expected to take effect on October 27, 2000.
Q. WILL I RECEIVE NEW SHARES IN EXCHANGE FOR MY CURRENT SHARES?
A. Yes. Upon approval and completion of the Reorganization, shareholders of the
Fund will have their shares automatically exchanged for shares of the
Surviving Fund based upon a specified exchange ratio determined by the ratio
of the respective net asset values of the Funds. You will receive Surviving
Fund shares whose aggregate value at the time of issuance will equal the
aggregate value of your Fund shares on that date.
Q. IF I OWN SHARES IN CERTIFICATE FORM, WILL I NEED TO EXCHANGE THEM FOR
CERTIFICATES OF THE SURVIVING FUND?
A. Certificates for Surviving Fund shares will not be issued automatically as
part of the Reorganization, although we will send you certificates upon
request. If you currently own Fund shares in certificate form, you will need
to return these certificates to Nuveen in order to receive new certificates
for your Surviving Fund shares.
If you prefer, however, you may exchange your certificates for book entry
shares. These shares are held in a convenient computerized system that
enables shareholders to receive a complete and accurate record of their
holdings without having to worry about the safekeeping of certificates or the
expense involved with replacing a lost or stolen certificate. Just complete
the appropriate section of the Letter of Transmittal requesting book entry
shares. Regardless of the way
<PAGE> 5
you choose to hold your shares after the Reorganization, certificates should
be returned to the fund's transfer agent by certified mail as soon as
possible.
Q. WILL I HAVE TO PAY ANY FEES OR EXPENSES IN CONNECTION WITH THE
REORGANIZATION?
A. You will pay no fees or sales charges directly in connection with the
implementation of the proposed changes. However, the costs associated with
the Reorganization will be borne by the Fund. These costs are estimated to be
$0.016 per share. The costs are expected to be more than offset over time by
the anticipated lower operating costs of the Surviving Fund.
Q. HOW DO MANAGEMENT FEES AND OTHER FUND OPERATING EXPENSES COMPARE BETWEEN MY
FUND AND THE SURVIVING FUND?
A. The Surviving Fund has the same management fee schedule as your Fund. Total
gross operating expenses (before waivers and reimbursements) as a percentage
of net assets for the Surviving Fund are lower than those for your Fund,
reflecting the larger net assets and greater economies of scale of the
Surviving Fund. For the past fiscal year, net operating expenses (after
voluntary waivers and reimbursements by Nuveen) as a percentage of net assets
for the Intermediate Fund were higher than those for the Surviving Fund.
There can be no assurance that Nuveen will continue these
waivers/reimbursements for the Fund if the Reorganization is not approved.
Q. WILL THIS REORGANIZATION CREATE A TAXABLE EVENT FOR ME?
A. The Reorganization is intended to be completed on a tax-free basis for
federal income tax purposes. Therefore, you will recognize no gain or loss
for federal income tax purposes as a result of the Reorganization. In
addition, the tax basis and holding period of the Surviving Fund shares you
receive will be the same as the tax basis and holding period of your Fund
shares.
Q. CAN I EXCHANGE OR REDEEM MY FUND SHARES BEFORE THE REORGANIZATION TAKES
PLACE?
A. You may exchange your Fund shares for shares of any other Nuveen Mutual Fund,
or redeem your shares, at any time. If you choose to do so, your request will
be treated as a normal exchange or redemption of shares and will be a taxable
transaction for federal income tax purposes. Nuveen will waive any deferred
sales charge that would otherwise apply to a redemption or exchange of your
fund shares prior to the Reorganization.
Q. HOW DO I VOTE MY SHARES?
A. You may vote in person, by mail, by telephone or over the internet. To vote
in person, you may attend the special meeting of shareholders which will be
held in the 31st floor conference room of Nuveen Investments located at 333
West Wacker Drive, Chicago, Illinois on Wednesday, October 25, 2000 at 10:00
a.m. To vote by mail, please mark, sign and date the enclosed proxy card(s),
and mail it in the enclosed reply envelope, allowing sufficient time for your
proxy to be received on or before Wednesday, October 25, 2000. No postage is
required if the proxy is mailed in the United States. To vote by telephone,
call the number indicated on your proxy card, enter the 12-digit control
number found in the right portion of your proxy card, and follow the recorded
instructions, using your proxy card as a guide. To vote over the internet, go
to www.proxyvote.com, enter the 12-digit control number found on the right
portion of your proxy card, and follow the instructions, using your proxy
card as a guide.
Q. WILL NUVEEN CONTACT ME?
A. You may receive a call from Nuveen or D.F. King, our proxy solicitation
agent, to verify that you received your proxy materials and to answer any
questions you may have about the Reorganization.
THE PROPOSAL HAS BEEN APPROVED BY THE TRUSTEES FOR YOUR FUND, WHO UNANIMOUSLY
RECOMMEND YOU VOTE "FOR" THE PROPOSAL. Please give this matter your prompt
attention. We will need to receive your vote before the shareholder meeting
scheduled for October 25, 2000. YOUR IMMEDIATE RESPONSE WILL HELP SAVE ON THE
COSTS OF ADDITIONAL SOLICITATIONS. We look forward to your participation, and we
thank you for your continued confidence in Nuveen.
PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE> 6
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NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
OCTOBER 25, 2000
</TABLE>
NUVEEN INTERMEDIATE MUNICIPAL BOND FUND
Notice is hereby given that a Special Meeting of shareholders of the Nuveen
Intermediate Municipal Bond Fund (formerly known as the Nuveen Flagship
Intermediate Municipal Bond Fund, the "Fund"), a series of the Nuveen Municipal
Trust (formerly known as the Nuveen Flagship Municipal Trust, the "Trust"), a
Massachusetts business trust, will be held in the 31st floor conference room of
Nuveen Investments, 333 West Wacker Drive, in Chicago on Wednesday, October 25,
2000 at 10:00 a.m., Central Time (the "Special Meeting"), for the following
purposes:
1. To approve an Agreement and Plan of Reorganization pursuant to which
the Fund would (i) transfer all of its assets to the Nuveen
Intermediate Duration Municipal Bond Fund (the "Surviving Fund") in
exchange for Class A, C and R shares of beneficial interest of the
Surviving Fund and the Surviving Fund's assumption of the liabilities
of the Fund, (ii) distribute such shares of the Surviving Fund to the
holders of shares of the Fund and (iii) be liquidated, dissolved and
terminated as a series of the Trust in accordance with the Trust's
Declaration of Trust.
2. To transact such other business as may properly come before the
Special Meeting.
Shareholders of record as of the close of business on August 15, 2000 are
entitled to notice of and to vote at the Special Meeting or any adjournment
thereof.
IN ORDER TO AVOID DELAY AND ADDITIONAL EXPENSE, AND TO ASSURE THAT YOUR SHARES
ARE REPRESENTED, IF YOU DO NOT EXPECT TO BE PRESENT IN PERSON AT THE SPECIAL
MEETING, YOU ARE REQUESTED TO FILL IN, SIGN AND MAIL THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
THE PROPOSAL HAS BEEN APPROVED BY THE TRUSTEES OF THE FUND AND THE SURVIVING
FUND, WHO UNANIMOUSLY RECOMMEND YOU VOTE "FOR" THE PROPOSAL.
Gifford R. Zimmerman
Vice President and Secretary
<PAGE> 7
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PROSPECTUS/
PROXY STATEMENT
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NUVEEN INTERMEDIATE DURATION MUNICIPAL BOND FUND (THE "SURVIVING FUND")
RELATING TO THE ACQUISITION OF ASSETS AND LIABILITIES OF
NUVEEN INTERMEDIATE MUNICIPAL BOND FUND (THE "FUND")
This Prospectus/Proxy Statement is being furnished to shareholders of the Nuveen
Intermediate Municipal Bond Fund (formerly known as the Nuveen Flagship
Intermediate Municipal Bond Fund, the "Fund"), a series of the Nuveen Municipal
Trust (formerly Nuveen Flagship Municipal Trust, the "Trust"), a Massachusetts
business trust, and relates to the special meeting of shareholders of the Fund
to be held in the 31st floor conference room of Nuveen Investments, 333 West
Wacker Drive, in Chicago on Wednesday, October 25, 2000 at 10:00 a.m., Central
Time and at any and all adjournments thereof (the "Special Meeting").
Shareholders of record as of the close of business on August 15, 2000 are
entitled to vote at the Special Meeting or any adjournment thereof. The primary
purpose of the Special Meeting is to approve or disapprove the proposed
reorganization of the Fund into the Nuveen Intermediate Duration Municipal Bond
Fund (the "Surviving Fund") (the "Reorganization"). The Reorganization will
result in shareholders of the Fund in effect exchanging their Class A, C and R
shares of the Fund for corresponding Class A, C and R shares of the Surviving
Fund. The purpose of the Reorganization is to permit the shareholders of the
Fund to (i) potentially receive higher dividends per share from a higher gross
embedded yield and lower operating expenses due to the Surviving Fund's larger
net assets and greater economies of scale; (ii) preserve the Fund's intermediate
risk characteristics; (iii) obtain greater portfolio diversity and (iv)
potentially lower portfolio transaction costs.
The Fund is also a series of the Trust. The investment objective of the
Surviving Fund is to provide as high a level of current interest income exempt
from regular federal income taxes as is consistent with preservation of capital.
There can be no assurance that the Surviving Fund will achieve its investment
objective. The address, principal executive office and telephone number of the
Funds is 333 West Wacker Drive, Chicago, Illinois 60606, (312) 917-7700 or (800)
621-7227. The enclosed proxy and this Prospectus/Proxy Statement are first being
sent to shareholders of the Fund on or about August 28, 2000.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
This Prospectus/Proxy Statement sets forth concisely the information
shareholders of the Fund should know before voting on the Reorganization (in
effect, investing in Class A, C or R shares of the Surviving Fund) and
constitutes an offering of Class A, C or R shares of beneficial interest, par
value $.01 per share, of the Surviving Fund only. Please read it carefully and
retain it for future reference. A Statement of Additional Information dated
August , 2000, relating to this Prospectus/ Proxy Statement (the
"Reorganization SAI") has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. A Prospectus (the "Funds'
Prospectus") and Statement of Additional Information containing additional
information about the Surviving Fund and the Fund, each dated August 27, 1999,
have been filed with the SEC and are incorporated herein by reference. A copy of
the Surviving Fund's Prospectus accompanies this Prospectus/Proxy Statement.
Copies of the foregoing may be obtained without charge by calling or writing the
Funds at the telephone number or address shown above. If you wish to request the
Reorganization SAI, please ask for the "Reorganization SAI." IN ADDITION, EACH
FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL REPORT AND
SUBSEQUENT SEMI-ANNUAL REPORT TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST
SHOULD BE DIRECTED TO THE RESPECTIVE FUND BY CALLING (800) 621-7227 OR BY
WRITING THE RESPECTIVE FUND AT 333 WEST WACKER DRIVE, CHICAGO, ILLINOIS 60606.
------------------------
No person has been authorized to give any information or make any representation
not contained in this Prospectus/Proxy Statement and, if so given or made, such
information or representation must not be relied upon as having been authorized.
This Prospectus/Proxy Statement does not constitute an offer to sell or a
solicitation of an offer to buy any securities in any jurisdiction in which, or
to any person to whom, it is unlawful to make such offer or solicitation.
------------------------
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), and in accordance therewith files reports and other
information with the SEC. Such reports, other information and proxy statements
filed by the Trust can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at its Regional Office at 500 West Madison Street, Chicago, Illinois.
Copies of such material can also be obtained from the SEC's Public Reference
Branch, Office of Consumer Affairs and Information Services, Washington, D.C.
20549, at prescribed rates. In addition, the SEC maintains a Web site
(http://www.sec.gov) that contains reports, other information and proxy
statements filed by the Trust, such information is filed electronically with the
SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval system
(EDGAR).
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS AUGUST , 2000.
<PAGE> 8
PROSPECTUS/
PROXY STATEMENT
NUVEEN INTERMEDIATE DURATION MUNICIPAL BOND FUND ("SURVIVING FUND")
RELATING TO THE ACQUISITION OF ASSETS AND LIABILITIES OF
NUVEEN INTERMEDIATE MUNICIPAL BOND FUND ("FUND")
TABLE OF CONTENTS
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PROPOSAL 1: THE PROPOSED REORGANIZATION.... 1
SUMMARY.................................... 1
The Reorganization.................... 1
Reasons for the Proposed
Reorganization...................... 1
Comparison of the Fund with the
Surviving Fund...................... 2
RISK FACTORS............................... 10
Similarities of Risks................. 10
Differences in Risks.................. 10
THE PROPOSED REORGANIZATION................ 10
Terms of the Agreement................ 10
Description of Securities to be
Issued.............................. 11
Continuation of Shareholder Accounts
and Plans; Share Certificates....... 12
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Certain Federal Income Tax
Consequences........................ 12
Expenses.............................. 13
Legal Matters......................... 13
Financial Statements.................. 13
RECOMMENDATION OF THE BOARD................ 13
OTHER INFORMATION.......................... 13
SHAREHOLDERS OF THE SURVIVING FUND AND
THE FUND......................... 13
SHAREHOLDER PROPOSALS................. 14
VOTING INFORMATION AND REQUIREMENTS........ 14
Exhibit A: Financial Highlights............ A-1
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<PAGE> 9
PROPOSAL 1. THE PROPOSED REORGANIZATION
A. SUMMARY
The following is a summary of, and is qualified by reference to, the more
complete information contained in this Prospectus/ Proxy Statement and the
information attached hereto or incorporated herein by reference (including the
Agreement and Plan of Reorganization). As discussed more fully below and
elsewhere in this Prospectus/Proxy Statement, the Board of Trustees of the Fund
(the "Board") believes the proposed Reorganization (as defined herein) is in the
best interests of shareholders of the Fund and would not result in dilution of
shareholders' interest. As a result of the Reorganization, shareholders of the
Fund will become shareholders of the Surviving Fund and will cease to be
shareholders of the Fund.
Shareholders should read the entire Prospectus/Proxy Statement carefully
together with the Funds' Prospectus incorporated herein by reference and
accompanying this Prospectus/Proxy Statement. This Prospectus/Proxy Statement
constitutes an offering of Class A, C and R shares of the Surviving Fund only.
THE REORGANIZATION
This Prospectus/Proxy Statement is being furnished to shareholders of the Fund
in connection with the proposed combination of the Fund with and into the
Surviving Fund pursuant to the terms and conditions of the Agreement and Plan of
Reorganization dated July 24, 2000 between the Fund and the Surviving Fund (the
"Agreement"). The Agreement provides that the Fund will (i) transfer all of its
assets to the Surviving Fund in exchange for Class A, C and R shares of the
Surviving Fund and the Surviving Fund's assumption of the liabilities of the
Fund, (ii) distribute to each shareholder of the Fund shares of the respective
class of shares of the Surviving Fund equal in value to their existing shares of
the Fund as a distribution in liquidation of the Fund and (iii) be liquidated,
dissolved and terminated as a series of the Trust in accordance with the Trust's
Declaration of Trust promptly following the Closing (as defined herein) (the
"Reorganization").
The Board of Trustees of the Trust has determined that the Reorganization is in
the best interests of each Fund and that the interests of existing shareholders
of each Fund will not be diluted as a result of the Reorganization. The Board of
the Trust unanimously approved the Reorganization and the Agreement on July 24,
2000.
The Fund will pay all of the Funds' costs associated with the Reorganization,
which are estimated to be $85,000 (or $0.0016 per share). However, the Board of
Trustees of the Fund believes that these costs will be more than offset over
time by the anticipated lower operating costs of the Surviving Fund.
The Board is asking shareholders of the Fund to approve the Reorganization at
the Special Meeting to be held on Wednesday, October 25, 2000. If shareholders
of the Fund approve the Reorganization, it is expected that the Closing of the
Reorganization will be after the close of business on October 27, 2000, but it
may be at a different time as described herein.
THE BOARD RECOMMENDS A VOTE "FOR" THE REORGANIZATION. FOR THE FUND, APPROVAL OF
THE REORGANIZATION REQUIRES THE FAVORABLE VOTE OF THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING SHARES ENTITLED TO VOTE. SEE "VOTING INFORMATION AND
REQUIREMENTS" BELOW.
REASONS FOR THE PROPOSED REORGANIZATION
The Board believes that the proposed Reorganization would be in the best
interests of the Fund because it would permit the shareholders of the Fund to
(i) potentially receive higher dividends per share from lower operating expenses
due to the Surviving Fund's larger net assets and greater economies of scale;
(ii) preserve the Fund's intermediate risk characteristics; (iii) obtain greater
portfolio diversity and (iv) potentially lower portfolio transaction costs.
In determining whether to recommend approval of the Reorganization to
shareholders of the Fund, the Board considered a number of factors, including,
but not limited to: (i) the expenses and advisory fees applicable to the Fund
and the Surviving Fund before the Reorganization and the estimated expense
ratios of the Surviving Fund after the Reorganization; (ii) the investment
performance of the Fund compared to the Surviving Fund: (iii) the terms and
conditions of the Agreement and whether the Reorganization would result in
dilution of shareholder interests; (iv) the economies of scale potentially
realized through the combination of the Funds; (v) the compatibility of the
Funds' investment objectives and policies; (vi) the compatibility of the Funds'
service features available to shareholders, including the retention of
applicable holding periods and exchange privileges; (vii) the costs estimated to
be incurred by the respective Funds as a result of the Reorganization; (viii)
the future growth prospects of the Fund; and (ix) the anticipated federal income
tax consequences of the Reorganization.
In this regard, the Board reviewed information provided by Nuveen Advisory Corp.
(the "Adviser") relating to the anticipated impact on the shareholders of the
Fund as a result of the Reorganization. The Board considered the probability
that the increase in asset levels of the combined fund after the Reorganization
and the higher earnings rate and increased dividend potential would result in
the following potential benefits for shareholders of the Intermediate Fund,
although there can be no assurances in this regard:
A. Achievement of Economies of Scale and Reduced Per Share Expenses. Combining
the net assets of the Fund with the assets of the Surviving Fund will lead to
reduced total operating expenses for shareholders of the Fund on a per share
1
<PAGE> 10
basis, by allowing fixed and relatively fixed costs, such as accounting, legal
and printing expenses, to be spread over a larger asset base. Any reductions in
expenses on a per share basis should, in turn, increase portfolio net income
available for distributions to shareholders of the Fund. For the Fund, the
Adviser currently is voluntarily waiving some or all of its fees or
reimbursing certain expenses and, for the Surviving Fund, the Adviser has
done so in the past. Before these waivers/reimbursements, the net operating
expenses of the Surviving Fund are lower than those of the Fund. However,
there can be no assurance that the Adviser will continue the
waivers/reimbursements for the Fund if the Reorganization is not completed.
B. Benefits to the Portfolio Management Process. The larger net asset size of
the Surviving Fund generally permits it to purchase larger individual
portfolio investments that may result in reduced transaction costs or more
favorable pricing and provide the opportunity for greater portfolio
diversity. A larger, more diverse fund may also be able to produce a more
stable and consistent dividend rate than a smaller, less diverse fund.
The Board also considered that the costs of the Reorganization will be paid by
the Fund regardless of whether or not the Reorganization is completed (and such
costs are not subject to the current waivers/reimbursements). In addition, the
Board considered that the Reorganization would result in benefits and economies
for the Adviser and the elimination of the voluntary waivers/reimbursements for
the Fund.
COMPARISON OF THE SURVIVING FUND WITH THE FUND
Investment Objectives. The Surviving Fund and the Fund have similar investment
objectives. The investment objective of the Funds is to provide as high a level
of current interest income exempt from regular federal income taxes as is
consistent with preservation of capital.
Investment Policies. The Surviving Fund and the Fund have similar investment
policies. The Funds invest substantially all of their assets (at least 80%) in
municipal bonds that pay interest that is exempt from regular federal income
taxes. Both Funds purchase only quality municipal bonds that either are rated
investment grade (AAA/Aaa to BBB/Baa) by independent ratings agencies at the
time of purchase or are non-rated but judged to be investment grade by the
Adviser. Both Funds invest at least 80% of their net assets in investment-grade
quality municipal bonds. Bond ratings are furnished by Standard & Poor's
Corporation ("S&P"), Moody's Investor Services ("Moody's"), and Fitch Investors
Service, Inc. ("Fitch"). According to published guidelines, securities rated BBB
by S&P are regarded by S&P as having an adequate capacity to pay interest and
repay principal. Whereas such securities normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely, in the opinion of S&P, to lead to a weakened capacity to pay interest
and repay principal for debt in this category than in higher rated categories.
According to published guidelines, securities rated Baa by Moody's are
considered by Moody's as medium grade obligations. Such securities are, in the
opinion of Moody's, neither highly protected nor poorly secured. Interest
payments and principal security appear to Moody's to be adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. In the opinion of Moody's they lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Both funds maintain price volatility (as measured by weighted average portfolio
duration) characteristic of intermediate-term bond funds, but each seeks to do
so in a different way. The Fund does so by limiting the weighted average
maturity of its investment portfolio under normal market conditions to between 5
and 10 years. The Surviving Fund does not limit the weighted average maturity of
its investment portfolio, but instead limits the weighted average duration of
its investment portfolio under normal market conditions to between 4.5 and 7
years in order to be classified as an intermediate fund. In evaluating the
Reorganization, each Fund shareholder should consider the differences between
these two approaches. For a description of the risks involved in investing in
each Fund, please see the section below entitled "Differences in Risks."
Credit Quality. A comparison of the credit qualities of the respective
portfolios of the Surviving Fund and the Fund, as of June 30, 2000, is set forth
in the table below.
<TABLE>
<CAPTION>
PORTFOLIO CREDIT QUALITY
--------------------------------------------------------------------------------------------------
SURVIVING
CREDIT RATING FUND FUND PRO FORMA (1)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AAA
AA
A
BBB/Unrated
--------- ---- -------------
TOTAL 100.00 100.00 100.00
--------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects the effect of the Reorganization.
As of June 30, 2000, the Fund and Surviving Fund were invested in
similarly-rated securities. On June 30, 2000, the average portfolio credit
quality was AA for both the Fund and the Surviving Fund.
2
<PAGE> 11
Maturity and Duration. A comparison of the maturity and duration of the
respective portfolios of the Surviving Fund and the Fund as of June 30, 2000, is
set forth in the table below.
<TABLE>
<CAPTION>
PORTFOLIO MATURITY INFORMATION
--------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE
FUND MATURITY EFFECTIVE MATURITY MODIFIED DURATION
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Surviving Fund
The Fund
Pro-Forma (1)
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects the effect of the Reorganization.
Funds with longer average maturities and duration will generally be subject to
greater interest rate risk. Please see "B. Risk Factors -- Differences in Risks"
below for a description of maturity, duration and interest rate risk.
Performance Information. A comparison of the total returns for the Surviving
Fund and the Fund for the periods ending June 30, 2000, is set forth in the
table below.
<TABLE>
<CAPTION>
TOTAL RETURNS
---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
CUMULATIVE -----------------------------------------------------------
FUND CLASS INCEPTION DATE YTD RETURN 1 YEAR 3 YEAR 5 YEAR TEN YEAR INCEPTION
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Surviving Fund (1) A (NAV) 6/95 N/A
A (Offer) 6/95 N/A
C 6/95 N/A
R 11/76
The Fund (2) A (NAV) 9/92 N/A
A (Offer) 9/92 N/A
C 12/95 N/A
R 2/97 N/A
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class R share returns are actual. Class A 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 4.20% maximum sales charge. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
(2) 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.
The following table is a comparison of the respective yields and distribution
rates for the Surviving Fund and the Fund as of June 30, 2000.
<TABLE>
<CAPTION>
SEC YIELD AND DISTRIBUTION INFORMATION (1)
---------------------------------------------------------------------------------------------------------------------
SEC 30-DAY YIELD
--------------------------------------
DISTRIBUTION BEFORE WAIVERS/ AFTER WAIVERS/
FUND CLASS RATE REIMBURSEMENTS REIMBURSEMENTS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Surviving Fund A (NAV)
A (Offer)
C
R
The Fund A (NAV)
A (Offer)
C
R
Pro-Forma A (NAV)
A (Offer)
C
R
---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The SEC 30-Day Yield is computed in accordance with SEC rules by dividing
the net investment income per share (computed in accordance with a
standardized method prescribed by the rules) earned during the 30-day period
by the NAV (or the maximum offering price where noted). The Distribution
Rate is computed by taking the monthly dividend per share, multiplying it by
12 to annualize it, and dividing by the NAV (or the maximum offering price
where noted). The Distribution Rate differs from the SEC Yield and total
return and is not intended to be a complete measure of performance.
Distribution Rate may differ from SEC Yield due to a number of factors,
including that Distribution Rates may not include the effect of amortization
of bond premiums to the extent such premiums arise after the bonds were
purchased and that there may be differences between the amount a fund is
earning and what it is paying out.
3
<PAGE> 12
The total returns, yields and distribution rates are not necessarily indicative
of future results. The performance of an investment company is the result of
conditions in the securities markets, portfolio management and operating
expenses. Although information such as that shown above is useful in reviewing a
fund's performance and in providing some basis for comparison with other
investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods. In the
absence of expense reimbursements for the Surviving Fund and the Fund, the
Funds' total returns, yields and distribution rates would have been reduced.
Investment Adviser. The Surviving Fund and the Fund are both managed by the
Adviser. The Adviser is a wholly owned subsidiary of Nuveen Investments
("Nuveen"). Nuveen is the sponsor and principal underwriter of both Fund's
shares and has sponsored or underwritten more than $60 billion of investment
company securities. Nuveen and its affiliates currently have more than $50
billion in assets under management. Today it offers a broad range of quality
investments designed for individuals seeking to build and maintain wealth.
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. The Adviser's
principal office is located at 333 West Wacker Drive, Chicago, Illinois 60606.
Advisory and Other Fees. The contractual advisory fees of the Surviving Fund are
the same as those of the Fund. Pursuant to an investment management agreement
between the Adviser and the Trust, the Surviving Fund and the Fund pay the
Adviser annual management fees at the rates set forth below:
<TABLE>
---------------------------------------------------
SURVIVING FUND
AVERAGE DAILY NET ASSETS MANAGEMENT FEE
---------------------------------------------------
<S> <C>
For the first $125 million 0.5000%
For the next $125 million 0.4875
For the next $250 million 0.4750
For the next $500 million 0.4625
For the next $1 billion 0.4500
For assets over $2 billion 0.4250
---------------------------------------------------
</TABLE>
For the fiscal year ended April 30, 2000, the Surviving Fund paid the Adviser
$ . For the fiscal year ended April 30, 2000, the Fund paid the
Adviser $ (after expense reimbursement) and would have paid $
(assuming no expense reimbursement). For a complete description of the advisory
services provided to the Funds, see the Surviving Fund and the Fund Summaries in
the Funds' Prospectus and the sections of the Funds' Prospectus and Statement of
Additional Information entitled "Fund Service Providers Investment Adviser" and
"Investment Adviser and Investment Management Agreement," respectively.
For the Fund, the Adviser is currently voluntarily waiving some or all of its
fees or reimbursing certain expenses. After these waivers/reimbursements, the
net operating expenses of the Surviving Fund are lower than those of the Fund.
However, there can be no assurance that such waivers or reimbursements will
continue for the Fund if the Reorganization is not completed.
The Surviving Fund and the Fund have adopted similar distribution and service
plans (the "Distribution and Service Plans") pursuant to Rule 12b-1 under the
1940 Act. The Distribution and Service Plans authorize each Fund to pay Nuveen
an annual 0.20% service fee on the average daily net assets of Class A and C
shares outstanding. The plans also authorize each Fund to pay Nuveen an annual
0.55% distribution fee on the average daily net assets of Class C shares
outstanding. In order to help compensate Nuveen for the sales commissions paid
to financial advisors at the time of sale of Class C shares, Nuveen retains the
first year's service and distribution fees on sales of Class C shares. After the
first year, Nuveen pays these fees to the broker of record. The distributor of
the Funds' shares is Nuveen. For a complete description of these arrangements
with respect to the Surviving Fund, see the sections of the Funds' Prospectuses
and Statement of Additional Information entitled "Fund Service Providers -- The
Distributor" and "Distribution and Service Plan," respectively.
The tables below set forth (i) the fees and expenses paid by the Surviving Fund
and the Fund during the fiscal year ended April 30, 2000 and (ii) pro forma
expenses for the combined fund for Class A, C and R shares.
4
<PAGE> 13
EXPENSE COMPARISON TABLE
CLASS A SHARES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
SURVIVING THE
FUND FUND PRO FORMA (1)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of Offering Price)(2) 4.20% 3.00% 3.00%
Contingent Deferred Sales Charge (CDSC) (as a percentage of
the lower of the original purchase price or redemption
proceeds)(2) none none none
ANNUAL FUND OPERATING EXPENSES (3)
Management Fees
Rule 12b-1 Fees .20% .20% .20%
Other Expenses
-------- ------------ -------------
Total Gross Fund Operating Expenses (before waivers and
reimbursements)
-------- ------------ -------------
Total Net Fund Operating Expenses (after waivers and
reimbursements)
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES ASSUMING
REDEMPTION AT THE END OF THE PERIOD (4)
One Year $ $ $
Three Years $ $ $
Five Years $ $ $
Ten Years $ $ $
----------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Expense Comparison Table
(1) The Pro Forma column reflects expenses estimated to be paid on new shares
purchased from the combined fund subsequent to the Reorganization and
reflects the effect of the Reorganization. At the time of the
Reorganization, the Surviving Fund's maximum sales charge imposed on
purchases (as a percentage of Offering Price) will be reduced to 3.00%.
(2) The sales charge may be reduced or waived based on the amount of purchase or
for certain eligible categories of investors. A CDSC of 1% is imposed on
redemptions of certain purchases of $1 million or more within 18 months of
purchase.
(3) There can be no assurance that any waivers or reimbursements will continue
for the Fund if the Reorganization is not completed.
(4) Expense examples reflect what an investor would pay on a $10,000 investment,
assuming a 5% annual return and reinvestment of all dividends, based on
total fund operating expenses before waivers and reimbursements. Actual
returns will differ.
5
<PAGE> 14
EXPENSE COMPARISON TABLE
CLASS C SHARES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
SURVIVING THE
FUND FUND PRO FORMA (1)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases none none none
Contingent Deferred Sales Charge (CDSC) (as a percentage of
the lower of the original purchase price or redemption
proceeds) (2) 1.00% 1.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (3) (as a percentage of
average net assets)
Management Fees % % %
Rule 12b-1 Fees .75% .75% .75%
Other Expenses % % %
-------- ------------ -------------
Total Gross Fund Operating Expenses (before waivers and
reimbursements) % % %
-------- ------------ -------------
Total Net Fund Operating Expenses (after waivers and
reimbursements) % % %
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES ASSUMING
REDEMPTION AT THE END OF THE PERIOD (4)
One Year $ $ $
Three Years $ $ $
Five Years $ $ $
Ten Years $ $ $
-------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Expense Comparison Table
(1) The Pro Forma column reflects expenses estimated to be paid on new shares
purchased from the combined fund subsequent to the Reorganization and
reflects the effect of the Reorganization.
(2) Imposed only on redemptions within 12 months of purchase.
(3) There can be no assurance that any waivers or reimbursements will continue
for the Fund if the Reorganization is not completed.
(4) Expense examples reflect what an investor would pay on a $10,000 investment,
assuming a 5% annual return and reinvestment of all dividends and
distributions, based on total fund operating expenses before waivers and
reimbursements. Actual returns will differ.
EXPENSE COMPARISON TABLE
CLASS R SHARES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
SURVIVING THE
FUND FUND PRO FORMA (1)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases none none none
Contingent Deferred Sales Charge (CDSC) (as a percentage of
the lower of the original purchase price or redemption
proceeds) none none none
ANNUAL FUND OPERATING EXPENSES (2) (as a percentage of
average net assets)
Management Fees % % %
Rule 12b-1 Fees -- -- --
Other Expenses % % %
-------- ------------ -------------
Total Gross Fund Operating Expenses (before waivers and
reimbursements) % % %
-------- ------------ -------------
Total Net Fund Operating Expenses (after waivers and
reimbursements) % % %
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES ASSUMING
REDEMPTION AT THE END OF THE PERIOD (3)
One Year $ $ $
Three Years $ $ $
Five Years $ $ $
Ten Years $ $ $
-------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Expense Comparison Table
(1) The Pro Forma column reflects expenses estimated to be paid on new shares
purchased from the combined fund subsequent to the Reorganization and
reflects the effect of the Reorganization.
(2) There can be no assurance that any waivers or reimbursements will continue
for the Fund if the Reorganization is not completed.
(3) Expense examples reflect what an investor would pay on a $10,000 investment,
assuming a 5% annual return and reinvestment of all dividends and
distributions, based on total fund operating expenses before waivers and
reimbursements. Actual returns will differ.
Distribution, Purchase, Valuation, Redemption and Exchange of Shares. The
Surviving Fund offers four (4) classes of shares and the Fund offers three (3)
classes of shares. The Class A shares of the Surviving Fund and the Fund are
subject to an initial sales charge and a 0.20% annual service fee. At the time
of the Reorganization the same Class A sales charges and commissions will apply
to the Surviving Fund and the Fund as indicated by the following table.
6
<PAGE> 15
CLASS A SALES CHARGES AND COMMISSIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
----------------------------------- --------------
AS % OF PUBLIC AS % OF YOUR AS % OF PUBLIC
PURCHASE AMOUNT OFFERING PRICE NET INVESTMENT 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 -- -- 0.75
-------------------------------------------------------------------------------------------------------------------
</TABLE>
The initial sales charge applicable to Class A shares of the Surviving Fund will
be waived for Class A shares acquired in the Reorganization. Any subsequent
purchases of Class A shares of the Surviving Fund after the Reorganization will
be subject to the initial sales charge, excluding Class A shares purchased
through the dividend reinvestment plan.
The Surviving Fund currently offers Class B shares which do not incur a sales
charge when purchased, but are each subject to a % annual service fee and a
% annual distribution fee. Class B shares are also subject to a CDSC. Fund
shareholders will have the ability to purchase Class B shares after the
Reorganization.
The Class C shares of the Surviving Fund and the Fund do not incur a sales
charge when purchased, but each are subject to a .20% annual service fee and a
.55% annual distribution fee. Class C shares are also subject to a CDSC of 1.00%
if redeemed within the first year after purchase.
Class R shares of the Surviving Fund and the Fund have no sales charges or
ongoing fees. For a complete description of the Class A, C and R shares, see the
sections of the Funds' Prospectus and Statement of Additional Information
entitled "Section 3 -- How You Can Buy and Sell Shares" and "Additional
Information on the Purchase and Redemption of Fund Shares," respectively.
No contingent deferred sales charge will be imposed on Class C shares of the
Fund in connection with the Reorganization. The holding period and conversion
period for Class C shares of the Surviving Fund received in connection with the
Reorganization will be measured from the earlier of the time (i) the holder
purchased such shares from the Fund or (ii) the holder purchased such shares
from any other Nuveen national or state fund and subsequently exchanged them for
shares of the Fund.
Shares of the Surviving Fund and the Fund may be purchased through a financial
advisor, by check, by electronic transfer, and by exchange from certain other
open-end mutual funds distributed by Nuveen. For a complete description
regarding purchase of shares and exchange of shares of the Surviving Fund and
the Fund, see the sections of the Funds' Prospectus and Statement of Additional
Information entitled "Section 3 -- How You Can Buy and Sell Shares" and
"Additional Information on the Purchase and Redemption of Fund Shares,"
respectively.
Shares of the Surviving Fund and the Fund properly presented for redemption may
be redeemed or exchanged at the next determined net asset value per share
(subject to any applicable deferred sales charge). NUVEEN WILL WAIVE ANY
DEFERRED SALES CHARGE THAT WOULD OTHERWISE APPLY TO A REDEMPTION OR EXCHANGE OF
FUND SHARES MADE PRIOR TO THE REORGANIZATION. Shares of either the Surviving
Fund or the Fund may be redeemed or exchanged through a financial advisor by
mail or by special redemption privileges (telephone exchange, telephone
redemption, by check or by electronic transfer). If any shares of the Surviving
Fund or the Fund were purchased less than 10 days prior to your request, the
Funds do not mail the redemption proceeds until the check for the purchase has
cleared, which can take up to 10 days. In addition, the Surviving Fund and the
Fund may suspend redemptions or delay payment on redemptions for more than seven
days (three days for street name accounts) in certain extraordinary
circumstances as described in the Funds' Statement of Additional Information. In
order to limit excessive exchange activity and in other circumstances where the
Adviser believes doing so would be in the best interests of a fund, the
Surviving Fund and the Fund reserve the right to revise or terminate the
exchange privilege, limit the amount or number of exchanges, or reject any
exchange. Shareholders are notified in the event this happens to the extent
required by law.
No further purchases of the shares of the Fund may be made after the date on
which the shareholders of the Fund approve the Reorganization, and the stock
transfer books of the Fund will be permanently closed as of the date of Closing.
Only redemption requests and transfer instructions received in proper form by
the close of business on the day prior to the date of Closing will be fulfilled
by the Fund. Redemption requests or transfer instructions received by the Fund
after that date will be treated by the Fund as requests for the redemption or
instructions for transfer of the shares of the Surviving Fund credited to the
accounts of the shareholders of the Fund. Redemption requests or transfer
instructions received by the Fund after the close of business on the day prior
to the date of Closing will be forwarded to the Surviving Fund. For a complete
description of the redemption arrangements for the Funds, see the sections of
the Funds' Prospectuses entitled "Investing in the Funds -- How to Sell Fund
Shares."
7
<PAGE> 16
Capitalization. The following table sets forth the capitalization of the
Surviving Fund and the Fund as of June 30, 2000, and the pro forma
capitalization of the combined fund as if the Reorganization had occurred on
that date. These numbers may differ at the time of Closing.
CAPITALIZATION TABLE AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
SURVIVING THE
FUND FUND PRO FORMA (1)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSETS
Class A shares
Class B shares N/A
Class C shares
Class R shares
----------- --------- -----------
Total
=========== ========= ===========
NET ASSET VALUE PER SHARE
Class A shares
Class B shares N/A
Class C shares
Class R shares
SHARES OUTSTANDING
Class A shares
Class B shares N/A
Class C shares
Class R shares
----------- --------- -----------
Total
=========== ========= ===========
SHARES AUTHORIZED
Class A shares Unlimited Unlimited Unlimited
Class B shares Unlimited N/A Unlimited
Class C shares Unlimited Unlimited Unlimited
Class R shares Unlimited Unlimited Unlimited
-------------------------------------------------------------------------------------------------------
</TABLE>
(1) The pro forma figures reflect the effect of the Reorganization.
N/A The Fund was not authorized to issue Class B Shares.
8
<PAGE> 17
B. RISK FACTORS
SIMILARITIES OF RISKS
The investment objectives of the Surviving Fund and the Fund are substantially
the same. The investment policies of the Funds are substantially the same
insofar as they may 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 nonrated but judged to be investment grade by the Adviser.
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 may only purchase leases where the issuer has a strong
incentive to continue making appropriations until maturity. The Funds also
engage in certain common investment practices such as the purchase and sale of
securities on a "when-issued" and "delayed delivery" basis. In addition, the
Funds may periodically engage in hedging transactions as described in the
sections of the Funds' Statement of Additional Information entitled "Investment
Policies and Investment Portfolio -- Hedging and Other Defensive Actions." To
the extent that the investment objectives and investment policies and practices
are substantially the same, the risks associated with an investment in the Funds
are substantially the same.
The Funds invest at least 80% of their total assets in municipal securities. For
a general description of the risks involved in investing in municipal bonds, see
the sections of the Funds' Statement of Additional Information entitled
"Portfolio Securities," and of the Funds' Prospectus entitled "What the Risks
Are."
The Surviving Fund and the Fund may also invest a substantial portion of their
assets in securities that are subject to the federal alternative minimum tax. As
with the Fund, the Surviving Fund may not be a suitable investment for
shareholders subject to the federal alternative minimum tax.
Investment in either the Surviving Fund or the Fund may not be appropriate for
all investors. The Funds are not intended to be a complete investment program,
and investors should consider their long-term investment goals and financial
needs when making an investment decision with respect to the Funds. An
investment in either Fund is intended to be a long-term investment and should
not be used as a trading vehicle.
DIFFERENCES IN RISKS
The Surviving Fund and the Fund engage in some dissimilar investment practices.
To the extent that the investment practices of the Funds differ, the risks
associated with an investment in the Surviving Fund are different from the risks
associated with an investment in the Fund. An investment in the Surviving Fund
may not be appropriate for all Fund's shareholders. For a complete description
of the risks of an investment in the Surviving Fund or the Fund, see the
sections in the Funds' Prospectus entitled "What the Risks Are."
Maturity and Duration. Both funds maintain price volatility (as measured by
weighted average portfolio duration) characteristic of intermediate-term bond
funds, but each seeks to do so in a different way. The Fund does so by limiting
the weighted average maturity of its investment portfolio under normal market
conditions to between 5 and 10 years. The Surviving Fund does not limit the
weighted average maturity of its investment portfolio, but instead limits the
weighted average duration of its investment portfolio under normal market
conditions to between 4.5 and 7 years in order to be classified as an
intermediate fund. In evaluating the Reorganization, each Fund shareholder
should consider the differences between these two approaches. For a comparison
of the Funds' average portfolio maturity and duration, including pro-forma
figures, see "Comparison of the Surviving Fund with the Fund -- Maturity and
Duration" above. Both dollar-weighted average maturity and duration reflect the
sensitivity of a fund to interest rate fluctuations, whereby a fund with a
longer maturity and duration reacts more strongly to interest rate changes than
a fund with a shorter maturity and duration. The average dollar-weighted
maturity of a fund is the dollar-weighted average of the stated maturities of
all debt instruments held by the fund. Duration is the weighted present value of
principal and interest payments expressed in years and may measure the
sensitivity of a fund's net asset value to incremental changes in interest rates
more accurately than average maturity. For example, a fund with a duration of
5.0 years should have about half the interest rate sensitivity of a fund with a
duration of 10.0 years, because the fund with the shorter duration will receive
payments (and can reinvest at prevailing interest rates) twice as quickly (on
average).
C. THE PROPOSED REORGANIZATION
The material features of the Agreement are summarized below. This summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Agreement attached as
Appendix A to the Reorganization SAI, a copy of which may be obtained without
charge by calling the Funds at (800) 621-7227 and asking for the "Reorganization
SAI."
9
<PAGE> 18
TERMS OF THE AGREEMENT
Pursuant to the Agreement, the Surviving Fund will acquire all of the assets and
the liabilities of the Fund on the date of the Closing in consideration for
Class A, C and R shares of the Surviving Fund.
Subject to the Fund's shareholders approving the Reorganization, the closing
(the "Closing") will occur October 27, 2000 or such later date as soon as
practicable thereafter as the Surviving Fund and the Fund may mutually agree.
On the date of the Closing, the Fund will transfer to the Surviving Fund all of
its assets and liabilities. The Surviving Fund will in turn transfer to the Fund
a number of its Class A, C and R shares equal in value to the value of the net
assets of the Fund, transferred to the Surviving Fund as of the date of the
Closing, as determined in accordance with the valuation method described in the
Surviving Fund's then current prospectus. In order to minimize any potential for
undesirable federal income and excise tax consequences in connection with the
Reorganization, the Surviving Fund and the Fund may individually distribute on
or before the Closing all or substantially all of their respective undistributed
net investment income (including net capital gains) as of such date.
The Fund will distribute in complete liquidation the Class A, C and R shares of
the Surviving Fund to the shareholders of the respective class of the Fund
promptly after the Closing and then will be liquidated, dissolved and terminated
as a series of the Trust in accordance with the Trust's Declaration of Trust.
The Fund has made certain standard representations and warranties to the
Surviving Fund regarding its capitalization, status and conduct of business.
Unless waived in accordance with the Agreement, the obligations of the parties
to the Agreement are conditioned upon, among other things:
A. the approval of the Reorganization by shareholders of the Fund;
B. the absence of any rule, regulation, order, injunction or proceeding
preventing or seeking to prevent the consummation of the transactions
contemplated by the Agreement;
C. the receipt of all necessary approvals, registrations and exemptions
under federal and state laws;
D. the truth in all material respects as of the Closing of the
representations and warranties of the parties and performance and
compliance in all material respects with the parties' agreements,
obligations and covenants required by the Agreement;
E. the effectiveness under applicable law of the registration statement
of the Surviving Fund of which this Prospectus/Proxy Statement forms
a part and the absence of any stop orders under the Securities Act
of 1933, as amended, pertaining thereto; and
F. the receipt of opinions of counsel relating to, among other things,
the tax-free nature of the Reorganization for federal income tax
purposes.
The Agreement may be terminated or amended with respect to a Reorganization by
the mutual consent of the parties either before or after approval thereof by the
shareholders of the Fund, provided that no such amendment after such approval
shall be made if it would have a material adverse affect on the interests of the
Fund's shareholders. The Agreement also may be terminated by the non-breaching
party if there has been a material misrepresentation, material breach of any
representation or warranty, material breach of contract or failure of any
condition to Closing.
THE BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THE REORGANIZATION, AS IT BELIEVES
THE REORGANIZATION IS IN THE BEST INTERESTS OF THE FUND AND THAT THE INTERESTS
OF EXISTING SHAREHOLDERS WILL NOT BE DILUTED AS A RESULT OF CONSUMMATION OF THE
PROPOSED REORGANIZATION.
DESCRIPTION OF SECURITIES TO BE ISSUED
Shares of Beneficial Interest. Beneficial interests in the Surviving Fund being
offered hereby are represented by transferable Class A, C and R shares, par
value $0.01 per share. The Declaration of Trust of the Trust permits the
trustees, as they deem necessary or desirable, to create one or more separate
investment portfolios and to issue a separate series of shares for each
portfolio and, subject to compliance with the 1940 Act, to further subdivide the
shares of a series into one or more classes of shares for such portfolio.
Voting Rights of Shareholders. Holders of shares of the Surviving Fund are
entitled to one vote per share on matters as to which they are entitled to vote;
however, separate votes generally are taken by each series on matters affecting
an individual series.
The Surviving Fund operates as a series of the Trust, an open-end management
investment company registered with the SEC under the 1940 Act. In addition to
the specific voting rights described above, shareholders of the Surviving Fund
are entitled, under current law, to vote on certain other matters, including
changes in fundamental investment policies and restrictions
10
<PAGE> 19
and the ratification of the selection of independent auditors. Moreover, under
the 1940 Act, shareholders owning not less than 10% of the outstanding shares of
the Trust may request that the board of trustees call a shareholders' meeting
for the purpose of voting upon the removal of trustee(s).
CONTINUATION OF SHAREHOLDER ACCOUNTS AND PLANS; SHARE CERTIFICATES
If the Reorganization is approved, the Surviving Fund will establish an account
for each Fund's shareholder containing the appropriate number of shares of the
appropriate class of the Surviving Fund. The shareholder services and
shareholder programs of the Surviving Fund and the Fund are substantially
identical.
Shareholders of the Fund who are accumulating shares of the Fund under the
dividend reinvestment plan, or who are receiving payment under the systematic
withdrawal plan with respect to shares of the Fund, will retain the same rights
and privileges after the Reorganization in connection with the Surviving Fund
Class A, C or R shares received in the Reorganization through substantially
identical plans maintained by the Surviving Fund. Chase Manhattan Bank,
custodian for the Fund, serves as the custodian for the assets of the Surviving
Fund.
Upon approval of the Reorganization, shareholders of the Fund who currently own
shares in certificate form are asked to surrender these shares to the Fund's
transfer agent, Chase Global Fund Services, P.O. Box 5186, NY, NY 10274. Fund
shareholders must submit a written request to Chase in order to receive
certificates for their Surviving Fund shares. No certificates for Surviving Fund
shares will be issued as part of the Reorganization except upon request.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences of the Reorganization to shareholders of the Fund and shareholders
of the Surviving Fund. The discussion set forth below is for general information
only and may not apply to a holder subject to special treatment under the
Internal Revenue Code of 1986, as amended (the "Code"), such as a holder that is
a bank, an insurance company, a dealer in securities, a tax-exempt organization,
or a foreign person, or that acquired its Class A, C and R shares of the Fund
pursuant to the exercise of employee stock options or otherwise as compensation.
It is based upon the Code, legislative history, Treasury regulations, judicial
authorities, published positions of the Internal Revenue Service (the "Service")
and other relevant authorities, all as in effect on the date hereof and all of
which are subject to change or different interpretations (possibly on a
retroactive basis). This summary is limited to shareholders who hold their Fund
shares as capital assets. No advance rulings have been or will be sought from
the Service regarding any matter discussed in this Prospectus/Proxy Statement.
Accordingly, no assurances can be given that the Service could not successfully
challenge the intended federal income tax treatment described below.
Shareholders should consult their own tax advisers to determine the specific
federal income tax consequences of all transactions relating to the
Reorganization, as well as the effects of state, local and foreign tax laws and
possible changes to the tax laws.
The Reorganization is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Code. It is a condition to the Closing of
the Reorganization that the Trust and the Fund receive an opinion from Morgan,
Lewis & Bockius LLP ("Morgan Lewis") substantially to the effect that for
federal income tax purposes:
A. The acquisition by the Surviving Fund of the assets of the Fund in
exchange solely for Class A, C and R shares of the Surviving Fund and
the assumption by the Surviving Fund of the liabilities of the Fund
will qualify as tax-free reorganization within the meaning of Section
368(a)(1)(c) of the Code.
B. No gain or loss will be recognized by the Fund or the Surviving Fund
upon the transfer to the Surviving Fund of the assets of the Fund in
exchange solely for the Class A, C and R shares of the Surviving Fund
and the assumption by the Surviving Fund of the liabilities of the
Fund.
C. The Surviving Fund's basis in the Fund's assets received in the
Reorganization will equal the basis of such assets in the hands of
the Fund immediately prior to the transfer, and the Surviving Fund's
holding period of such assets will, in each instance, include the
period during which the assets were held by the Fund.
D. No gain or loss will be recognized by the shareholders of the Fund
upon the exchange of their shares of the Fund for the Class A, C and
R shares of the Surviving Fund.
E. The aggregate tax basis in the Class A, C and R shares of the
Surviving Fund received by the shareholders of the Fund will be the
same as the aggregate tax basis of the shares of the Fund
surrendered in exchange therefor.
F. The holding period of the Class A, C and R shares of the Surviving
Fund received by the shareholders of the Fund will include the
holding period of the shares of the Fund surrendered in exchange
therefor provided such surrendered shares of the Fund are held as
capital assets by such shareholder.
In rendering its opinions, Morgan Lewis will rely upon certain representations
of the management of the Surviving Fund and the Fund and assume that the
Reorganization will be consummated as described in the Agreement and that
redemptions of
11
<PAGE> 20
shares of the Fund occurring prior to the Closing and post-Closing redemption of
shares of the Surviving Fund that are received in the Reorganization will
consist solely of redemptions in the ordinary course of business.
The Surviving Fund intends to be taxed under the rules applicable to regulated
investment companies as defined in Section 851 of the Code, which are the same
rules currently applicable to the Fund and its shareholders.
EXPENSES
Because the benefits of the Reorganization are anticipated to accrue almost
exclusively to shareholders of the Fund, the Fund will pay all of the costs
associated with the Reorganization. The Board of Trustees of the Trust believes
that these costs will be more than offset over time by the anticipated lower
operating costs of the Fund. Management of the Fund estimates that expenses for
the Reorganization will equal approximately $85,000. In addition, separate from
the Reorganization, the Adviser has agreed to waive its right to seek
reimbursement from the Fund for any remaining unamortized organizational
expenses.
The Board of the Trust has determined that the foregoing arrangement with
respect to expenses is fair and reasonable.
As noted above, shareholders of the Fund may redeem their shares or exchange
their shares for shares of certain other open-end mutual funds distributed by
Nuveen at any time prior to the closing of the Reorganization. See
"Distribution, Purchase, Valuation, Redemption and Exchange of Shares" above.
Redemptions and exchanges of shares generally are taxable transactions for
federal income tax purposes, unless your shares are held in an account that is
not subject to taxation, such as an individual retirement account or other
tax-qualified retirement plan. Shareholders should consult with their own tax
advisers regarding the federal, state and local tax consequences of potential
transactions.
LEGAL MATTERS
Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, DC 20036 will pass
on certain legal matters concerning the federal income tax consequences of the
Reorganization and issuance of Class A, C and R shares of the Surviving Fund.
FINANCIAL STATEMENTS
For condensed financial information for the Surviving Fund and the Fund, see
"Financial Highlights" in the Funds' Prospectus and Exhibit A to this
Prospectus/Proxy Statement.
In addition, incorporated by reference in their respective entireties are the
audited financial statements for the fiscal year ended April 30, 2000 for the
Surviving Fund and the Fund attached as Exhibit C to the Reorganization SAI.
D. RECOMMENDATION OF THE BOARD
The Board of the Trust has unanimously approved the Agreement and has determined
that participation in the Reorganization is in the best interests of the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSED REORGANIZATION.
12
<PAGE> 21
OTHER INFORMATION
A. SHAREHOLDERS OF THE SURVIVING FUND AND THE FUND
At the close of business on August 15, 2000, the record date with respect to the
Special Meeting, there were Class A shares, Class B shares,
Class C shares and Class R shares, respectively, of the
Surviving Fund. As of August 15, 2000, the trustees and officers of the
Surviving Fund as a group own less than 1% of the shares of the Surviving Fund.
The following table sets forth the percentage of each person who, as of August
9, 2000, owns of record, or is known by the Trust to own of record or
beneficially own 5% or more of any class of shares of the Surviving Fund.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
------------------------------------------------------------------------------------------------
<C> <S> <C>
A %
B 4%
%
C %
R %
%
%
%
</TABLE>
At the close of business on August 15, 2000 the record date with respect to the
Special Meeting of shareholders of the Fund, there were Class A
shares, Class C shares and Class R shares, respectively, of
the Fund. As of August 15, 2000, the trustees and officers of the Fund as a
group own less than 1% of the outstanding shares of the Fund. The following
table sets forth the percentage of each person who, as of August 15, 2000, owns
of record, or is known by the Trust to own of record or beneficially own 5% or
more of any class of shares of the Fund.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
------------------------------------------------------------------------------------------------
<C> <S> <C>
A %
C %
%
R %
%
</TABLE>
B. SHAREHOLDER PROPOSALS
As a general matter, the Surviving Fund does not intend to hold future regular
annual or special meetings of its shareholders unless required by the 1940 Act.
In the event the Reorganization is not consummated, the Fund does not intend to
hold future regular annual or special meetings of its shareholders unless
required by the 1940 Act. Any shareholder who wishes to submit proposals for
consideration at a meeting of shareholders of the Surviving Fund or the Fund
should send such proposal to the respective Fund at 333 West Wacker Drive,
Chicago, Illinois 60606. To be considered for presentation at a shareholders'
meeting, rules promulgated by the SEC require that, among other things, a
shareholder's proposal must be received at the offices of the Fund a reasonable
time before a solicitation is made. Timely submission of a proposal does not
necessarily mean that such proposal will be included.
VOTING INFORMATION AND REQUIREMENTS
Holders of shares of the Fund are entitled to one vote per share on matters as
to which they are entitled to vote. The Fund does not utilize cumulative voting.
Each valid proxy given by a shareholder of the Fund will be voted by the persons
named in the proxy in accordance with the instructions marked thereon and as the
persons named in the proxy may determine on such other business as may come
before the Special Meeting on which shareholders are entitled to vote. If no
designation is made, the proxy will be voted by the persons named in the proxy
as recommended by the Board "FOR" approval of the Reorganization. Abstentions
and broker non-votes (i.e. shares held by brokers or nominees, typically in
"street name," as to which (i) instructions have not been received from
beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have discretionary voting power on a particular matter) do not count as
votes "FOR" the proposal and are treated as votes "AGAINST." Thirty
13
<PAGE> 22
percent of the outstanding shares of the Fund entitled to vote on the proposals
must be present in person or by proxy to have a quorum to conduct business at
the Special Meeting. Abstentions and broker non-votes will be deemed present for
quorum purposes.
Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the Fund a written notice of revocation, by delivering a
duly executed proxy bearing a later date, or by attending the Special Meeting
and voting in person. The giving of a proxy will not affect your right to vote
in person if you attend the Special Meeting and wish to do so.
It is not anticipated that any action will be asked of the shareholders of the
Fund other than as indicated above, but if other matters are properly brought
before the Special Meeting, it is intended that the persons named in the proxy
will vote in accordance with their judgment.
APPROVAL OF THE REORGANIZATION WILL REQUIRE THE FAVORABLE VOTE OF THE HOLDERS OF
A MAJORITY OF THE OUTSTANDING SHARES OF THE FUND ENTITLED TO VOTE.
In the event that sufficient votes in favor of a proposal are not received by
the scheduled time of the Special Meeting, the persons named in the proxy may
propose and vote in favor of one or more adjournments of the Special Meeting to
permit further solicitation of proxies. If sufficient shares were present to
constitute a quorum, but insufficient votes had been cast in favor of a proposal
to approve it, proxies would be voted in favor of adjournment only if the Board
determined that adjournment and additional solicitation was reasonable and in
the best interest of the shareholders of the Fund, taking into account the
nature of the proposal, the percentage of the votes actually cast, the
percentage of negative votes, the nature of any further solicitation that might
be made and the information provided to shareholders about the reasons for
additional solicitation. Any such adjournment will require the affirmative vote
of the holders of a majority of the outstanding shares voted at the session of
the Special Meeting to be adjourned.
Proxies of shareholders of the Fund are solicited by the Board. Additional
solicitation may be made by mail, telephone, telegraph or personal interview by
representatives of the Adviser or Nuveen, or by dealers or their
representatives. In addition, such solicitation servicing may also be provided
by D. F. King, at a cost estimated to be approximately $2,000, plus reasonable
expenses.
August , 2000
PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY.
YOUR VOTE IS IMPORTANT AND YOUR PARTICIPATION
IN THE AFFAIRS OF YOUR FUND DOES MAKE A DIFFERENCE.
14
<PAGE> 23
FINANCIAL HIGHLIGHTS (AUDITED) EXHIBIT A
Selected data for a share outstanding throughout each period is as follows:
NUVEEN INTERMEDIATE DURATION MUNICIPAL BOND FUND (THE "SURVIVING FUND")
<TABLE>
<CAPTION>
CLASS INVESTMENT OPERATIONS LESS DISTRIBUTIONS
(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)
2000 $9.57 $.45 $(.65) $(.20) $(.45) $(.01) $(.46) $8.91 (2.02)%
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)
2000 9.57 .39 (.66) (.27) (.38) (.01) (.39) 8.91 (2.78)
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)
2000 9.57 .40 (.66) (.26) (.40) (.01) (.41) 8.90 (2.71)
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)
2000 9.58 .47 (.66) (.19) (.47) (.01) (.48) 8.91 (1.93)
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
<CAPTION>
CLASS RATIOS/SUPPLEMENTAL DATA
(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 (6/95)
2000 $ 116,621 .80% 5.01% 13%
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)
2000 11,560 1.55 4.27 13
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)
2000 6,920 1.35 4.47 13
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)
2000 2,495,259 .59 5.21 13
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
</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.
A- 1
<PAGE> 24
NUVEEN INTERMEDIATE MUNICIPAL BOND FUND+ (THE "FUND")
<TABLE>
<CAPTION>
CLASS INVESTMENT OPERATIONS LESS DISTRIBUTIONS
(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)
2000 $11.00 $.50 $(.74) $(.24) $(.50) $(.15) (.65) $10.11 (2.17)%
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
----------------------------------------------------------------------------------------------------------------------------
CLASS C (12/95)
2000 11.02 .44 (.74) (.30) (.44) (.15) (.59) 10.13 (2.72)
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)
2000 10.99 .52 (.73) (.21) (.52) (.15) (.67) 10.11 (1.91)
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>
CLASS RATIOS/SUPPLEMENTAL DATA
(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)
2000 $44,675 1.07% 4.47% 22%
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
--------------------------
CLASS C (12/95)
2000 10,586 1.63 3.92 22
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)
2000 728 .87 4.67 22
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.
A- 2
<PAGE> 25
Supplement Dated [date] to the
Prospectus Dated August 27, 1999
-------------------
NUVEEN FLAGSHIP MUNICIPAL TRUST
NUVEEN FLAGSHIP INTERMEDIATE MUNICIPAL BOND FUND
-------------------
We at John Nuveen & Co. Incorporated appreciate the level of trust you have
placed in us and are committed to providing you with the latest information
regarding your investments. That is why we want to inform you in advance of a
proposed merger of the Nuveen Flagship Intermediate Municipal Bond Fund (the
"Fund") into the Nuveen Intermediate Duration Municipal Bond Fund (the
"Acquiring Fund"). The board of directors of the Fund have determined that the
merger would benefit shareholders in a number of ways, including:
- lower gross operating expenses as a percentage of net assets;
- improved portfolio diversification and lower portfolio transaction costs; and
- higher dividends per share.
The Board believes that these potential benefits, together with the potentially
higher distributions from the Fund, should offset the risks associated
with investments in a long-term bond fund.
The Trustees of the Nuveen Flagship Municipal Trust have approved a
tax-free reorganization of the Fund as described below. The Fund is closed to
new investors effective [date]. Only shareholders with existing
accounts may continue to make additional purchases and to reinvest dividends
into existing accounts.
Under the terms of the reorganization, the Fund would transfer all of its assets
and liabilities to the Acquiring Fund, a series of the Nuveen Flagship Municipal
Trust, in a tax-free exchange for an equal value of shares of the Acquiring
Fund. The Acquiring Fund is a municipal bond fund whose investment objective is
to provide as high a level of current interest income exempt from regular
federal income taxes as is consistent with preservation of capital. As with any
mutual fund, there is no assurance that the Acquiring Fund will meet its
investment objective. The reorganization is subject to certain regulatory
approvals and the approval of the Fund's shareholders. A meeting of
shareholders has been called for October 25, 2000 for the purpose of voting on
the proposed reorganization. Further information regarding the proposed
reorganization and the shareholder meeting will be contained in a proxy
statement that is scheduled to be mailed on or about August ___, 2000.
<PAGE> 26
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> 27
<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> 28
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> 29
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>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <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> 30
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>
<PAGE> 31
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> 32
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> 33
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> 34
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> 35
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> 36
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> 37
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> 38
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> 39
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> 40
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> 41
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> 42
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> 43
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> 44
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> 45
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> 46
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> 47
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> 48
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> 49
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> 50
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> 51
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> 52
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> 53
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> 54
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> 55
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> 56
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> 57
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> 58
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
</TABLE>
<TABLE>
<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> 59
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> 60
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> 61
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> 62
NUVEEN
MUNICIPAL TRUST
Relating to the Acquisition of Assets and Liabilities of
Nuveen Intermediate Municipal Bond Fund
DATED: AUGUST , 2000
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides information about the
Nuveen Intermediate Duration Municipal Bond Fund (the "Surviving Fund"), a
series of the Nuveen Municipal Trust, an open-end investment company organized
as a Massachusetts business trust (formerly known as Nuveen Flagship Municipal
Trust, the "Municipal Trust"), in addition to information contained in the
Prospectus/Proxy Statement of the Surviving Fund, dated August , 2000, which
also serves as the proxy statement of the Nuveen Intermediate Municipal Bond
Fund (formerly known as the Nuveen Flagship Intermediate Municipal Bond Fund,
the "Fund"), a series of the Municipal Trust, in connection with the issuance of
Class A, C and R shares of the Surviving Fund to shareholders of the Fund. This
Statement of Additional Information is not a prospectus. It should be read in
conjunction with the Prospectus/Proxy Statement, into which it has been
incorporated by reference and which may be obtained by contacting the Funds
located at 333 West Wacker Drive, Chicago, Illinois 60606, or by calling (312)
917-7700 or (800) 257-8787.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROPOSED REORGANIZATION OF THE FUND......................... 1
ADDITIONAL INFORMATION ABOUT THE SURVIVING FUND AND THE
FUND...................................................... 1
FINANCIAL STATEMENTS........................................ 1
Agreement and Plan of Reorganization........................ Exhibit A
Statement of Additional Information for the Surviving Fund
and the Fund.............................................. Exhibit B
Financial Statements for the Surviving Fund and the Fund.... Exhibit C
</TABLE>
The Funds will provide, without charge, upon the written or oral request of
any person to whom this Statement of Additional Information is delivered, a copy
of any and all documents that have been incorporated by reference in the
registration statement of which this Statement of Additional Information is a
part.
PROPOSED REORGANIZATION OF THE FUND
The shareholders of the Fund are being asked to approve an acquisition of
all of the assets of the Fund solely in exchange for Class A, C and R shares of
the Surviving Fund and the Surviving Fund's assumption of the liabilities of the
Fund (the "Reorganization") pursuant to an Agreement and Plan of Reorganization
by and between the Surviving Fund and the Fund (the "Agreement"). A copy of the
form of the Agreement is attached hereto as Exhibit A.
ADDITIONAL INFORMATION ABOUT THE SURVIVING FUND AND THE FUND
Incorporated herein by reference in its entirety is the Statement of
Additional Information of the Surviving Fund and the Fund, dated August 27,
1999, attached as Exhibit B to this Statement of Additional Information.
FINANCIAL STATEMENTS
Incorporated herein by reference in their respective entireties are the
audited financial statements for the Surviving Fund and the Fund for the fiscal
year ended April 30, 2000, attached as Exhibit C.
<PAGE> 63
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as
of [Date], 2000, by and between the Nuveen Intermediate Duration Municipal Bond
Fund (the "Acquiring Fund"), a series of the Nuveen Flagship Municipal Trust, a
business trust formed under the laws of the Commonwealth of Massachusetts (the
"Trust"), and the Nuveen Flagship Intermediate Municipal Bond Fund (the
"Acquired Fund"), a series of the Trust.
WITNESSETH:
WHEREAS, the Board of Trustees of the Trust, on behalf of the Acquiring
Fund and Acquired Fund respectively, have determined that entering into this
Agreement for the Acquiring Fund to acquire the assets and liabilities of the
Acquired Fund is in the best interests of the shareholders of each respective
fund; and
WHEREAS, the parties intend that this transaction qualify as a
reorganization within the meaning of Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. PLAN OF TRANSACTION.
A. Transfer of Assets. Upon satisfaction of the conditions precedent
set forth in Sections 7 and 8 hereof, the Acquired Fund will convey, transfer
and deliver to the Acquiring Fund at the closing, provided for in Section 2
hereof, all of the existing assets of the Acquired Fund (including accrued
interest to the Closing Date), free and clear of all liens, encumbrances and
claims whatsoever (the assets so transferred collectively being referred to as
the "Assets").
B. Consideration. In consideration thereof, the Acquiring Fund agrees
that on the Closing Date, defined in Section 2 hereof, the Acquiring Fund will
(i) deliver to the Acquired Fund, full and fractional Class A, Class C and Class
R shares of beneficial interest of the Acquiring Fund having aggregate net asset
value in an amount equal to the aggregate value of Class A, Class C and Class R
shares, respectively, of the Acquired Fund determined pursuant to Section 3A of
this Agreement (collectively, the "Acquiring Fund Shares") and (ii) assume all
of the Acquired Fund's liabilities as described in Section 3E hereof (the
"Liabilities"). The calculation of full and fractional Class A, Class C and
Class R shares of beneficial interest of the Acquiring Fund to be exchanged
shall be carried out to no less than two (2) decimal places. The Acquiring Fund
Shares shall consist of a number of full and fractional Class A, Class C and
Class R shares of the Acquiring Fund that will permit the Acquired Fund to make
the distribution described below. On the Closing Date, the Acquiring Fund shall
deliver to the Acquired Fund the Acquiring Fund Shares in the Amount determined
pursuant to this Section 1B and the Acquired Fund thereafter shall, in order to
effect the distribution of such shares to the Acquired Fund's shareholders in
liquidation of the Acquired Fund and in exchange for the shareholders' shares of
the Acquired Fund, instruct the Acquiring Fund to register the pro rata interest
in the Acquiring Fund Shares (in full and fractional shares) of each of the
holders of record of shares of the Acquired Fund in accordance with their
holdings of Class A, Class C or Class R shares of the Acquired Fund and shall
provide as part of such instruction a complete and updated list of such holders
(including addresses and taxpayer identification numbers), and the Acquiring
Fund agrees promptly to comply with said instruction. The Acquiring Fund shall
have no obligation to inquire as to the validity, propriety or correctness of
such instruction, but shall assume that such instruction is valid, proper and
correct. All Acquiring Fund Shares delivered to the Acquired Fund in exchange
for such Assets shall be delivered at net asset value without sales load,
commission or other similar fee being imposed.
A-1
<PAGE> 64
2. CLOSING OF THE TRANSACTION.
Closing Date. The closing shall occur October 27, 2000 or such later
date as soon as practicable thereafter, as the parties may mutually agree (the
"Closing Date").
3. PROCEDURE FOR REORGANIZATION.
A. Valuation. The value of the Assets and Liabilities of the Acquired
Fund to be transferred and assumed, respectively, by the Acquiring Fund shall be
computed as of the Closing Date, in the manner set forth in the most recent
Prospectus and Statement of Additional Information of the Acquiring Fund
(collectively, the "Acquiring Fund Prospectus"), copies of which have been
delivered to the Acquired Fund.
B. Delivery of Fund Assets. The Assets shall be delivered to The Chase
Manhattan Bank, 4 New York Plaza, New York 10004, as custodian for the Acquiring
Fund (the "Custodian") for the benefit of the Acquiring Fund, duly endorsed in
proper form for transfer in such condition as to constitute a good delivery
thereof, free and clear of all liens, encumbrances and claims whatsoever, in
accordance with the custom of brokers, and shall be accompanied by all necessary
state stock transfer stamps, the cost of which shall be borne by the Acquired
Fund.
C. Failure to Deliver Securities. If the Acquired Fund is unable to
make delivery pursuant to Section 3B hereof to the Custodian of any of the
Acquired Fund's securities for the reason that any of such securities purchased
by the Acquired Fund have not yet been delivered to it by the Acquired Fund's
broker or brokers, then, in lieu of such delivery, the Acquired Fund shall
deliver to the Custodian, with respect to said securities, executed copies of an
agreement of assignment and due bills executed on behalf of said broker or
brokers, together with such other documents as may be required by the Acquiring
Fund or Custodian, including brokers' confirmation slips.
D. Shareholder Accounts. The Acquiring Fund, in order to assist the
Acquired Fund in the distribution of the Acquiring Fund Shares to the Acquired
Fund shareholders after delivery of the Acquiring Fund Shares to the Acquired
Fund, will establish pursuant to the request of the Acquired Fund an open
account with the Acquiring Fund for each shareholder of the Acquired Fund and,
upon request by the Acquired Fund, shall transfer to such account the exact
number of full and fractional Class A, Class C and Class R shares of the
Acquiring Fund then held by the Acquired Fund specified in the instruction
provided pursuant to Section 2 hereof. The Acquiring Fund is not required to
issue certificates representing Acquiring Fund Shares. Upon liquidation or
dissolution of the Acquired Fund, certificates representing shares of beneficial
interest stock of the Acquired Fund shall become null and void.
E. Liabilities. The Liabilities shall include all of Acquired Fund's
liabilities, debts, obligations, and duties of whatever kind or nature, whether
absolute, accrued, contingent, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable at the Closing Date,
and whether or not specifically referred to in this Agreement.
F. Expenses. In the event that the transactions contemplated herein
are consummated, the Acquired Fund agrees to pay (i) for the reasonable outside
expenses of the Acquired Fund and the Acquiring Fund for the transactions
contemplated herein which are solely and directly related to the reorganization;
including, but not by way of limitation, the preparation of the Acquiring Fund
Trust's Registration Statement on Form N-14 (the "Registration Statement") and
the solicitation of the Acquired Fund shareholder proxies; (ii) the Acquired
Fund's and Acquiring Fund's legal counsel's reasonable attorney's fees, which
fees shall be payable pursuant to receipt of an itemized statement; and (iii)
the cost of rendering the tax opinion, more fully referenced in Section 7F
below. In the event that the transactions contemplated herein are not
consummated for any reason, then all reasonable outside expenses of the Acquired
Fund and the Acquiring Fund incurred to the date of termination of this
Agreement shall be borne by the Acquired Fund.
G. Liquidation and Dissolution. As soon as practicable after the
Closing Date but in no event later than one year after the Closing Date, the
Board of Trustees of the Acquired Fund Trust and the Acquired Fund shall
A-2
<PAGE> 65
take all necessary and proper action to completely liquidate and terminate the
Acquired Fund as a series in accordance with Massachusetts law and the Trust's
Declaration of Trust. Immediately after the Closing Date, the stock transfer
books relating to the Acquired Fund shall be closed and no transfer of shares
shall thereafter be made on such books.
4. ACQUIRED FUND'S REPRESENTATIONS AND WARRANTIES.
The Acquired Fund hereby represents and warrants to the Acquiring
Fund, which representations and warranties are true and correct on the date
hereof, and agrees with the Acquiring Fund that:
A. Organization. The Acquired Fund Trust is a Massachusetts Business
Trust duly formed and in good standing under the laws of the State of
Massachusetts and is duly authorized to transact business in the State of
Massachusetts. The Acquired Fund is a separate series of the Acquired Fund Trust
duly designated in accordance with the applicable provisions of the Acquired
Fund Trust's Declaration of Trust. The Acquired Fund Trust and Acquired Fund are
qualified to do business in all jurisdictions in which they are required to be
so qualified, except jurisdictions in which the failure to so qualify would not
have a material adverse effect on the Acquired Fund Trust or Acquired Fund. The
Acquired Fund has all material federal, state and local authorizations necessary
to own all of the properties and assets and to carry on its business as now
being conducted, except authorizations which the failure to so obtain would not
have a material adverse effect on the Acquired Fund.
B. Registration. The Acquired Fund Trust is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management company and such registration has not been revoked or rescinded. The
Acquired Fund is a diversified series of the Acquired Fund Trust. The
Acquired Fund Trust and the Acquired Fund are in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder. All of the
outstanding shares of beneficial interest of the Acquired Fund have been duly
authorized and are validly issued, fully paid and nonassessable (except that
shareholders of the Acquired Fund may under certain circumstances be held
personally liable for its obligations) and not subject to pre-emptive or
dissenters' rights.
C. Audited Financial Statements. The statement of assets and
liabilities and the portfolio of investments and the related statements of
operations and changes in net assets of the Acquired Fund audited as of and for
the fiscal year ended April 30, 1999, true and complete copies of which have
been heretofore furnished to the Acquiring Fund, fairly represent the financial
condition and the results of operations of the Acquired Fund as of and for their
respective dates and periods in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved.
D. Financial Statements. The Acquired Fund shall furnish to the
Acquiring Fund (i) an unaudited statement of assets and liabilities and the
portfolio of investments and the related statements of operations and changes in
net assets of the Acquired Fund for the period ended October 31, 1999 and (ii)
an unaudited statement of assets and liabilities as of and for the interim
period ending on the Closing Date; such financial statements will represent
fairly the financial position and portfolio of investments and the results of
the Acquired Fund's operations as of, and for the period ending on, the dates of
such statements in conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved and the results of its
operations and changes in financial position for the periods then ended; and
such financial statements shall be certified by the Treasurer of the Acquired
Fund as complying with the requirements hereof.
E. Contingent Liabilities. There are no contingent Liabilities of the
Acquired Fund not disclosed in the financial statements delivered pursuant to
Sections 4C and 4D which would materially affect the Acquired Fund's financial
condition, and there are no legal, administrative, or other proceedings pending
or, to its knowledge, threatened against the Acquired Fund which would, if
adversely determined, materially affect the Acquired Fund's financial condition.
All Liabilities were incurred by the Acquired Fund in the ordinary course of its
business.
F. Material Agreements. The Acquired Fund is in compliance with all
material agreements, rules, laws, statutes, regulations and administrative
orders affecting its operations or its assets; and except as referred to in
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the Acquired Fund's Prospectus and Statement of Additional Information, there
are no material agreements outstanding relating to the Acquired Fund to which
the Acquired Fund is a party.
G. Tax Returns. At the date hereof, all Federal and other material tax
returns and reports of the Acquired Fund required by law to have been filed by
such dates shall have been filed, and all Federal and other taxes shown thereon
shall have been paid so far as due, or provision shall have been made for the
payment thereof, and to the best of the Acquired Fund's knowledge no such return
is currently under audit and no assessment has been asserted with respect to any
such return.
H. Corporate Authority. The Acquired Fund has the necessary power to
enter into this Agreement and to consummate the transactions contemplated
herein. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein have been duly authorized
by the Acquired Fund Trust's Board of Trustees, and except for obtaining
approval of the holders of the shares of the Acquired Fund, no other corporate
acts or proceedings by the Acquired Fund are necessary to authorize this
Agreement and the transactions contemplated herein. This Agreement has been duly
executed and delivered by the Acquired Fund and constitutes the legal, valid and
binding obligation of Acquired Fund enforceable in accordance with its terms.
I. No Violation; Consents and Approvals. The execution, delivery and
performance of this Agreement by the Acquired Fund does not and will not (i)
violate any provision of the Acquired Fund Trust's Declaration of Trust or the
Designation of Series of the Acquired Fund, (ii) violate any statute, law,
judgment, writ, decree, order, regulation or rule of any court or governmental
authority applicable to the Acquired Fund, (iii) result in a violation or breach
of, or constitute a default under any material contract, indenture, mortgage,
loan agreement, note, lease or other instrument or obligations to which the
Acquired Fund is subject, or (iv) result in the creation or imposition or any
lien, charge or encumbrance upon any property or assets of the Acquired Fund. No
consent, approval, authorization, order or filing with or notice to any court or
governmental authority or agency is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement and no consent
of or notice to any third party or entity is required for the consummation by
the Acquired Fund of the transactions contemplated by this Agreement (except
such as have been obtained under the Securities Act of 1933 (the "Securities
Act"), the 1940 Act or the rules and regulations thereunder and the filing of an
amendment to the Trust's Designation of Series in connection with the
termination of the Acquired Fund).
J. Title. The Acquired Fund has good and marketable title to the
Assets, free and clear of all liens, mortgages, pledges, encumbrances, charges,
claims and equities whatsoever, other than a lien for taxes not yet due and
payable, and full right, power and authority to sell, assign, transfer and
deliver such Assets; upon delivery of such Assets, the Acquiring Fund will
receive good and marketable title to such Assets, free and clear of all liens,
mortgages, pledges, encumbrances, charges, claims and equities other than a lien
for taxes not yet due and payable.
K. Prospectus/Proxy Statement. The Registration Statement and the
Prospectus/Proxy Statement contained therein as of the effective date of the
Registration Statement, as amended or as supplemented if it shall have been
amended or supplemented, conforms and will conform as it relates to the Acquired
Fund, in all material respects to the applicable requirements of the applicable
Federal and state securities laws and the rules and regulations of the SEC
thereunder, and do not and will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representations or
warranties in this Section 4K apply to statements or omissions made in reliance
upon and in conformity with written information concerning the Acquiring Fund
furnished to the Acquired Fund by the Acquiring Fund.
L. Tax Qualification. The Acquired Fund has qualified or will qualify
as a regulated investment company within the meaning of Section 851 of the Code
for each of its taxable years ending on or prior to the Closing Date; and has
satisfied or will satisfy the distribution requirements imposed by Section 852
of the Code for each of its taxable years on or prior to the Closing Date.
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M. Fair Market Value. The fair market value on a going concern basis
of the Assets will equal or exceed the Liabilities to be assumed by the
Acquiring Fund and those to which the Assets are subject.
5. THE ACQUIRING FUND'S REPRESENTATIONS AND WARRANTIES.
The Acquiring Fund hereby represents and warrants to the Acquired
Fund, which representations and warranties are true and correct on the date
hereof, and agrees with the Acquired Fund that:
A. Organization. The Acquiring Fund Trust is a Massachusetts Business
Trust duly formed and in good standing under the laws of the State of
Massachusetts and is duly authorized to transact business in the State of
Massachusetts. The Acquiring Fund is a separate series of the Acquiring Fund
Trust duly designated in accordance with the applicable provisions of the
Acquiring Fund Trust's Declaration of Trust. The Acquiring Fund Trust and
Acquiring Fund are qualified to do business in all jurisdictions in which they
are required to be so qualified, except jurisdictions in which the failure to so
qualify would not have a material adverse effect on either the Acquiring Fund
Trust or Acquiring Fund. The Acquiring Fund has all material federal, state and
local authorizations necessary to own all of the properties and assets and to
carry on its business and the business thereof as now being conducted, except
authorizations which the failure to so obtain would not have a material adverse
effect on the Acquiring Fund.
B. Registration. The Acquiring Fund Trust is registered under the 1940
Act as an open-end management company and such registration has not been revoked
or rescinded. The Acquiring Fund is a diversified series of the Acquiring Fund
Trust. The Acquiring Fund Trust and the Acquiring Fund are in compliance in all
material respects with the 1940 Act and the rules and regulations thereunder.
All of the outstanding shares of beneficial interest of the Acquiring Fund have
been duly authorized and are validly issued, fully paid and non-assessable
(except that shareholders of the Acquired Fund may under certain circumstances
be held personally liable for its obligations) and not subject to pre-emptive or
dissenters rights.
C. Audited Financial Statements. The statement of assets and
liabilities and the portfolio of investments and the related statements of
operations and changes in net assets of the Acquiring Fund audited as of and for
the fiscal year ended April 30, 1999, true and complete copies of which have
been heretofore furnished to the Acquired Fund fairly represent the financial
condition and the results of operations of the Acquiring Fund as of and for
their respective dates and periods in conformity with generally accepted
accounting principles applied on a consistent basis during the periods involved.
D. Financial Statements. The Acquiring Fund shall furnish to the
Acquired Fund (i) an unaudited statement of assets and liabilities and the
portfolio of investments and the related statements of operations and changes in
net assets of the Acquiring Fund for the period ended October 31, 1999, and
(ii) an unaudited statement of assets and liabilities as of and for the interim
period ending on the Closing Date; such financial statements will represent
fairly the financial position and portfolio of investments and the results of
its operations as of, and for the period ending on, the dates of such statements
in conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved and the results of its operations
and changes in financial position for the periods then ended; and such financial
statements shall be certified by the Treasurer of the Acquiring Fund as
complying with the requirements hereof.
E. Contingent Liabilities. There are no contingent liabilities of the
Acquiring Fund not disclosed in the financial statements delivered pursuant to
Sections 5C and 5D which would materially affect the Acquiring Fund's financial
condition, and there are no legal, administrative, or other proceedings pending
or, to its knowledge, threatened against the Acquiring Fund which would, if
adversely determined, materially affect the Acquiring Fund's financial
condition.
F. Material Agreements. The Acquiring Fund is in compliance with all
material agreements, rules, laws, statutes, regulations and administrative
orders affecting its operations or its assets; and except as referred to in the
Acquiring Fund Prospectus and Statement of Additional Information there are no
material agreements outstanding relating to the Acquiring Fund to which the
Acquiring Fund is a party.
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G. Tax Returns. At the date hereof, all Federal and other material tax
returns and reports of the Acquiring Fund required by law to have been filed by
such dates shall have been filed, and all Federal and other taxes shall have
been paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to any
such return.
H. Corporate Authority. The Acquiring Fund has the necessary power to
enter into this Agreement and to consummate the transactions contemplated
herein. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein have been duly authorized
by the Acquiring Fund's Board of Trustees, no other corporate acts or
proceedings by the Acquiring Fund are necessary to authorize this Agreement and
the transactions contemplated herein. This Agreement has been duly executed and
delivered by the Acquiring Fund and constitutes a valid and binding obligation
of the Acquiring Fund enforceable in accordance with its terms.
I. No Violation; Consents and Approvals. The execution, delivery and
performance of this Agreement by the Acquiring Fund does not and will not (i)
violate any provision of the Acquiring Fund Trust's Declaration of Trust or the
Designation of Series of the Acquiring Fund, (ii) violate any statute, law,
judgment, writ, decree, order, regulation or rule of any court or governmental
authority applicable to the Acquiring Fund or (iii) result in a violation or
breach of, or constitute a default under, any material contract, indenture,
mortgage, loan agreement, note, lease or other instrument or obligation to which
the Acquiring Fund is subject, or (iv) result in the creation or imposition or
any lien, charge or encumbrance upon any property or assets of the Acquiring
Fund. No consent, approval, authorization, order or filing with or notice to any
court or governmental authority or agency is required for the consummation by
the Acquiring Fund of the transactions contemplated by this Agreement and no
consent of or notice to any third party or entity is required for the
consummation by the Acquiring Fund of the transactions contemplated by this
Agreement (except such as have been obtained under the Securities Act, the 1940
Act or the rules and regulations thereunder and the filing of an amendment to
the Trust's Designation of Series in connection with the termination of the
Acquired Fund).
J. Absence of Proceedings. There are no legal, administrative or other
proceedings pending or, to its knowledge, threatened against the Acquiring Fund
which would materially affect its financial condition.
K. Shares of the Acquiring Fund Registration. The Acquiring Fund
Shares to be issued pursuant to Section I hereof will be duly registered under
the Securities Act and all applicable state securities laws.
L. Shares of the Acquiring Fund: Authorization. The shares of
beneficial interest of the Acquiring Fund to be issued pursuant to Section I
hereof have been duly authorized and, when issued in accordance with this
Agreement, will be validly issued and fully paid and non-assessable (except that
shareholders of the Acquired Fund may under certain circumstances be held
personally liable for its obligations) by the Acquiring Fund Trust and conform
in all material respects to the description thereof contained in the Acquiring
Fund's Prospectus furnished to the Acquired Fund.
M. Registration Statement. The Registration Statement and the
Prospectus/Proxy Statement contained therein as of the effective date of the
Registration Statement, and at all times subsequent thereto up to and including
the Closing Date, as amended or as supplemented if they shall have been amended
or supplemented, conforms and will conform as it relates to the Acquiring Fund,
in all material respects, to the applicable requirements of the applicable
Federal securities laws and the rules and regulations of the SEC thereunder, and
do not and will not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representations or warranties in this Section 5M
apply to statements or omissions made in reliance upon and in conformity with
written information concerning the Acquired Fund furnished to the Acquiring Fund
by the Acquired Fund.
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N. Tax Qualification. The Acquiring Fund has qualified or will qualify
as a regulated investment company within the meaning of Section 851 of the Code
for each of its taxable years ending prior to the Closing Date and for its
taxable year that includes the Closing Date; and has satisfied or will satisfy
the distribution requirements imposed by Section 852 of the Code for each of its
taxable years ending prior to the Closing Date and for its taxable year that
includes the Closing Date.
6. COVENANTS.
During the period from the date of this Agreement and continuing until
the Closing Date the Acquired Fund and Acquiring Fund (except as expressly
contemplated or permitted by this Agreement) agree as follows:
A. Other Actions. The Acquired Fund and Acquiring Fund shall operate
only in the ordinary course of business consistent with prior practice. No party
shall take any action that would, or reasonably would be expected to, result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect.
B. Government Filings; Consents. The Acquired Fund and Acquiring Fund
shall file all reports required to be filed by the Acquired Fund and Acquiring
Fund with the SEC between the date of this Agreement and the Closing Date and
shall deliver to the other party copies of all such reports promptly after the
same are filed. Except where prohibited by applicable statutes and regulations,
each party shall promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state, local or federal government
agency or entity in connection with this Agreement or the transactions
contemplated hereby. Each of the Acquired Fund and the Acquiring Fund shall use
all reasonable efforts to obtain all consents, approvals, and authorizations
required in connection with the consummation of the transactions contemplated by
this Agreement and to make all necessary filings with the Secretary of State of
the State of Massachusetts.
C. Preparation of the Registration Statement and the Prospectus/Proxy
Statement. In connection with the Registration Statement and the
Prospectus/Proxy Statement, each party hereto will cooperate with the other and
furnish to the other the information relating to the Acquired Fund or Acquiring
Fund, as the case may be, required by the Securities Act or the Exchange Act and
the rules and regulations thereunder, as the case may be, to be set forth in the
Registration Statement or the Prospectus/Proxy Statement, as the case may be.
The Acquired Fund shall promptly prepare and provide the Prospectus/Proxy
Statement to the Acquiring Fund and the Acquiring Fund shall promptly prepare
and file with the SEC the Registration Statement, in which the Prospectus/Proxy
Statement will be included as a prospectus. In connection with the Registration
Statement, insofar as it relates to the Acquired Fund and its affiliated
persons, the Acquiring Fund shall only include such information as is approved
by the Acquired Fund for use in the Registration Statement. The Acquiring Fund
shall not amend or supplement any such information regarding the Acquired Fund
and such affiliates without the prior written consent of the Acquired Fund which
consent shall not be unreasonably withheld or delayed. The Acquiring Fund shall
promptly notify and provide the Acquired Fund with copies of all amendments or
supplements filed with respect to the Registration Statement. The Acquiring Fund
shall use all reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing.
The Acquiring Fund shall also take any action (other than qualifying to do
business in any jurisdiction in which it is now not so qualified) required to be
taken under any applicable state securities laws in connection with the issuance
of the Acquiring Fund's shares of beneficial interest in the transactions
contemplated by this Agreement, and the Acquired Fund shall furnish all
information concerning the Acquired Fund and the holders of the Acquired Fund's
shares of beneficial interest as may be reasonably requested in connection with
any such action.
D. Access to Information. During the period prior to the Closing Date,
the Acquired Fund shall make available to the Acquiring Fund a copy of each
report, schedule, registration statement and other document (the "Documents")
filed or received by it during such period pursuant to the requirements of
Federal or state securities laws (other than Documents which such party is not
permitted to disclose under applicable law). During the period prior to the
Closing Date, the Acquiring Fund shall make available to the Acquired Fund each
Document pertaining
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to the transactions contemplated hereby filed or received by it during such
period pursuant to Federal or state securities laws (other than Documents which
such party is not permitted to disclose under applicable law).
E. Shareholders Meeting. The Acquired Fund shall call a meeting of the
Acquired Fund shareholders to be held as promptly as practicable for the purpose
of voting upon the approval of this Agreement and the transactions contemplated
herein, and shall furnish a copy of the Prospectus/Proxy Statement and form of
proxy to each shareholder of the Acquired Fund as of the record date for such
meeting of shareholders. The Board shall recommend to the Acquired Fund
shareholders approval of this Agreement and the transactions contemplated
herein, subject to fiduciary obligations under applicable law.
F. Coordination of Portfolios. The Acquired Fund and Acquiring Fund
covenant and agree to coordinate the respective portfolios of the Acquired Fund
and Acquiring Fund from the date of the Agreement up to and including the
Closing Date in order that at Closing, when the Assets are added to the
Acquiring Fund's portfolio, the resulting portfolio will meet the Acquiring
Fund's investment objective, policies and restrictions, as set forth in the
Acquiring Fund's Prospectus, a copy of which has been delivered to the Acquired
Fund.
G. Distribution of the Shares. At Closing the Acquired Fund covenants
that it shall cause to be distributed the Acquiring Fund Shares in the proper
pro rata amount for the benefit of Acquired Fund's shareholders and such that
the Acquired Fund shall not continue to hold amounts of said shares so as to
cause a violation of Section 12(d)(1) of the 1940 Act. The Acquired Fund
covenants further that, pursuant to Section 3G, it shall liquidate and dissolve
as promptly as practicable after the Closing Date. The Acquired Fund covenants
to use all reasonable efforts to cooperate with the Acquiring Fund and the
Acquiring Fund's transfer agent in the distribution of said shares.
H. Brokers or Finders. Each of the Acquired Fund and the Acquiring
Fund represents that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, and each party shall hold the other harmless
from and against any all claims, liabilities or obligations with respect to any
such fees, commissions or expenses asserted by any person to be due or payable
in connection with any of the transactions contemplated by this Agreement on the
basis of any act or statement alleged to have been made by such first party or
its affiliate.
I. Additional Agreements. In case at any time after the Closing Date
any further action is necessary or desirable in order to carry out the purposes
of this Agreement the appropriate party or parties to this Agreement shall take
all such necessary action.
J. Public Announcements. For a period of time from the date of this
Agreement to the Closing Date, the Acquired Fund and the Acquiring Fund will
consult with each other before issuing any press releases or otherwise making
any public statements with respect to this Agreement or the transactions
contemplated herein and shall not issue any press release or make any public
statement prior to such consultation, except as may be required by law or the
rules of any national securities exchange on which such party's securities are
traded.
K. Tax Status of Reorganization. The intention of the parties is that
the transaction will qualify as a reorganization within the meaning of Section
368(a) of the Code. Neither the Acquired Fund Trust, the Acquiring Fund Trust,
the Acquiring Fund nor the Acquired Fund shall take any action, or cause any
action to be taken (including, without limitation, the filing of any tax return)
that is inconsistent with such treatment or results in the failure of the
transaction to qualify as a reorganization within the meaning of Section 368(a)
of the Code. At or prior to the Closing Date, the Acquired Fund Trust, the
Acquiring Fund Trust, the Acquiring Fund and the Acquired Fund will take such
action, or cause such action to be taken, as is reasonably necessary to enable
Morgan, Lewis & Bockius LLP, counsel to the Acquired Fund, to render the tax
opinion contemplated herein.
L. Declaration of Dividend. At or immediately prior to the Closing
Date, the Acquired Fund may declare and pay to its stockholders a dividend or
other distribution in an amount large enough so that it will have
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distributed at least 98% of its taxable ordinary income and 98% of the excess
of its realized capital gains over its realized capital losses for the current
taxable year through the Closing Date 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 the acquired
fund paid no federal income tax.
7. CONDITIONS TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund hereunder with respect to the
consummation of the Reorganization are subject to the satisfaction, or written
waiver by the Acquired Fund, of the following conditions:
A. Acquired Fund Shareholder Approval. This Agreement and the
transactions contemplated herein shall have been approved by the affirmative
vote of the holders of at least a majority of the outstanding shares of
beneficial interest in the Acquired Fund.
B. Representations, Warranties and Agreements. Each of the
representations and warranties of the Acquiring Fund contained herein shall be
true in all material respects as of the Closing Date, and as of the Closing Date
there shall have been no material adverse change in the financial condition,
results of operations, business properties or assets of the Acquiring Fund, and
the Acquired Fund shall have received a certificate of an authorized officer of
the Acquiring Fund satisfactory in form and substance to the Acquired Fund so
stating. The Acquiring Fund shall have performed and complied in all material
respects with all agreements, obligations and covenants required by this
Agreement to be so performed or complied with by it on or prior to the Closing
Date.
C. Registration Statement Effective. The Registration Statement shall
have become effective and no stop orders under the Securities Act pertaining
thereto shall have been issued.
D. Regulatory Approval. All necessary approvals, registrations, and
exemptions under federal and state securities laws shall have been obtained.
E. No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect, nor shall any proceeding by any state, local or federal
government agency or entity asking any of the foregoing be pending. There shall
not be any action taken or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the transactions contemplated by this
Agreement, which makes the consummation of the transactions contemplated by this
Agreement illegal or which has a material adverse effect on business operations
of the Acquiring Fund.
F. Tax Opinion. The Acquired Fund shall have obtained an opinion from
Morgan, Lewis & Bockius LLP, counsel for the Acquired Fund, dated as of the
Closing Date, addressed to the Acquiring Fund Trust, Acquired Fund Trust,
Acquired Fund and Acquiring Fund, that the consummation of the transactions set
forth in this Agreement comply with the requirements of a reorganization as
described in Section 368(a) of the Code, substantially in the form attached as
Annex A.
G. Opinion of Counsel. The Acquired Fund shall have received the
opinion of Morgan, Lewis & Bockius LLP, counsel for the Acquiring Fund Trust and
Acquiring Fund, dated as of the Closing Date, addressed to the Acquired Fund
substantially in the form and to the effect that: (i) the Acquiring Fund Trust
is duly organized and existing under the laws of the State of Massachusetts as a
voluntary association with transferable shares of beneficial interest commonly
referred to as a "Massachusetts business trust;" (ii) the Board of Trustees of
the Acquiring Fund Trust has duly designated the Acquiring Fund as a series of
the Acquiring Fund Trust pursuant to the terms of the Declaration of Trust of
the Acquiring Fund Trust; (iii) the Acquiring Fund Trust is registered as an
open-end management company under the 1940 Act; (iv) this Agreement and the
reorganization provided for herein and the execution of this Agreement have been
duly authorized and approved by all requisite action of the Acquiring Fund Trust
and this Agreement has been duly executed and delivered by the Acquiring Fund
Trust on behalf of the Acquiring Fund and (assuming the Agreement is a valid and
binding obligation of the other parties
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thereto) is a valid and binding obligation of the Acquiring Fund, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar law affecting creditors' rights generally,
or by general principals of equity (regardless of whether enforcement is sought
in a proceeding at equity at law); (v) neither the execution or delivery by the
Acquiring Fund Trust on behalf of the Acquiring Fund of this Agreement nor the
consummation by the Acquiring Fund Trust or Acquiring Fund of the transactions
contemplated thereby contravene the Acquiring Fund Trust's Declaration of Trust,
or, to the best of their knowledge, violate any provision of any statute or any
published regulation or any judgment or order disclosed to it by the Acquiring
Fund Trust as being applicable to the Acquiring Fund Trust or the Acquiring
Fund; (vi) to the best of their knowledge based solely on the certificate of an
appropriate officer of the Acquiring Fund attached hereto, there is no pending
or threatened litigation which would have the effect of prohibiting any material
business practice or the acquisition of any material property or the conduct of
any material business of the Acquiring Fund or might have a material adverse
effect on the value of any assets of the Acquiring Fund, (vii) the Acquiring
Fund's Shares have been duly authorized and upon issuance thereof in accordance
with this Agreement will, subject to certain matters regarding the liability of
a shareholder of a Massachusetts business trust, be validly issued, fully paid
and nonassessable; (viii) except as to financial statements and schedules and
other financial and statistical data included or incorporated by reference
therein and subject to usual and customary qualifications with respect to Rule
10b-5 type opinions, as of the effective date of the Registration Statement
filed pursuant to the Agreement, the portions thereof pertaining to the
Acquiring Fund comply as to form in all material respects with the requirements
of the Securities Act, the Securities Exchange Act and the 1940 Act and the
rules and regulations of the SEC thereunder and no facts have come to counsel's
attention which would cause them to believe that as of the effectiveness of the
portions of the Registration Statement applicable to the Acquiring Fund, the
Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ix) to the best of their
knowledge and information and subject to the qualifications set forth below, the
execution and delivery by the Acquiring Fund Trust on behalf of the Acquiring
Fund of the Agreement and the consummation of the transactions therein
contemplated do not require, under the laws of the States of Massachusetts and
Illinois or the federal laws of the United States, the consent, approval,
authorization, registration, qualification or order of, or filing with, any
court or governmental agency or body (except such as have been obtained).
Counsel need express no opinion, however, as to any such consent, approval,
authorization, registration, qualification, order or filing (a) which may be
required as a result of the involvement of other parties to the Agreement in the
transactions contemplated by the Agreement because of their legal or regulatory
status or because of any other facts specifically pertaining to them; (b) the
absence of which does not deprive the Acquired Fund of any material benefit
under the Agreement; or (c) which can be readily obtained without significant
delay or expense to the Acquired Fund, without loss to the Acquired Fund of any
material benefit under the Agreement and without any material adverse effect on
the Acquired Fund during the period such consent, approval, authorization,
registration, qualification or order was obtained. The foregoing opinion relates
only to consents, approvals, authorizations, registrations, qualifications,
orders or filings under (a) laws which are specifically referred to in this
opinion, (b) laws of the States of Massachusetts and Illinois and the federal
laws of the United States which, in counsel's experience, are normally
applicable to transactions of the type provided for in the Agreement and (c)
court orders and judgments disclosed to counsel by the Acquiring Fund Trust on
behalf of the Acquiring Fund in connection with the opinion. In addition,
although counsel need not specifically have considered the possible
applicability to the Acquiring Fund Trust or the Acquiring Fund of any other
laws, orders or judgments, nothing has come to their attention in connection
with their representation of the Acquiring Fund Trust and the Acquiring Fund in
this transaction that has caused them to conclude that any other consent,
approval, authorization, registration, qualification, order or filing is
required. In giving the opinions set forth above, counsel may state that it is
relying on certificates of officers of the Acquiring Fund with regard to matters
of fact and certain certificates and written statements of government officers
with respect to the good standing of the Acquiring Fund and on the opinion of
Bingham Dana LLP as to matters of Massachusetts law.
H. Officer Certificates. The Acquired Fund shall have received a
certificate of an authorized officer of the Acquiring Fund, dated as of the
Closing Date, certifying that (i) the representations and warranties set forth
in Section 5 are true and correct on the Closing Date, together with certified
copies of the resolutions adopted by the Board of Trustees shall be furnished to
the Acquired Fund and that (ii) from the date hereof through the Closing Date,
there shall not have been any change in the business, results of operations,
assets or financial condition or the
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manner of conducting the business of the Acquiring Fund, other than changes in
the ordinary course of its business, which has had a material adverse effect on
such business, results of operations, assets or financial condition.
8. CONDITIONS TO OBLIGATIONS OF ACQUIRING FUND.
The obligations of the Acquiring Fund hereunder with respect to the
consummation of the Reorganization are subject to the satisfaction, or written
waiver by the Acquiring Fund of the following conditions:
A. Acquired Fund Shareholder Approval. This Agreement and the
transactions contemplated herein shall have been approved by the affirmative
vote of the holders of at least a majority of the outstanding shares of
beneficial interest of the Acquired Fund.
B. Representations, Warranties and Agreements. Each of the
representations and warranties of the Acquired Fund contained herein shall be
true in all material respects as of the Closing Date, and as of the Closing Date
there shall have been no material adverse change in the financial condition,
results of operations, business, properties or assets of the Acquired Fund, and
the Acquiring Fund shall have received a certificate of an authorized officer of
the Acquired Fund satisfactory in form and substance to the Acquiring Fund so
stating. The Acquired Fund shall have performed and complied in all material
respects with all agreements, obligations and covenants required by this
Agreement to be so performed or complied with by them on or prior to the Closing
Date.
C. Registration Statement Effective. The Registration Statement shall
have become effective and no stop orders under the Securities Act pertaining
thereto shall have been issued.
D. Regulatory Approval. All necessary approvals, registrations, and
exemptions under federal and state securities laws shall have been obtained.
E. No Injunctions or Restraints, Illegality. No Injunction preventing
the consummation of the transactions contemplated by this Agreement shall be in
effect, nor shall any proceeding by any state, local or federal government
agency or entity seeking any of the foregoing be pending. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the transactions contemplated by this
Agreement, which makes the consummation of the transactions contemplated by this
Agreement illegal.
F. Tax Opinion. The Acquiring Fund shall have obtained an opinion from
Morgan, Lewis & Bockius LLP, counsel for the Acquired Fund, dated as of the
Closing Date, addressed to the Acquiring Fund Trust, Acquired Fund Trust,
Acquired Fund and Acquiring Fund, that the consummation of the transactions set
forth in this Agreement comply with the requirements of a reorganization as
described in Section 368(a) of the Code substantially in the form attached as
Annex A.
G. Opinion of Counsel. The Acquiring Fund shall have received the
opinion of Morgan, Lewis & Bockius LLP, counsel for the Acquired Fund Trust and
the Acquired Fund, dated as of the Closing Date, addressed to the Acquiring
Fund, substantially in the form and to the effect that: (i) the Acquired Fund
Trust is duly organized and existing under the laws of the State of
Massachusetts as a voluntary association with transferable shares of beneficial
interest commonly referred to as a "Massachusetts business trust;" (ii) the
Board of Trustees of the Acquired Fund Trust has duly designated the Acquired
Fund as a series of the Acquired Fund Trust pursuant to the terms of the
Declaration of Trust of the Acquired Fund Trust; (iii) the Acquired Fund Trust
is registered as an open-end management company under the 1940 Act; (iv) this
Agreement and the reorganization provided for herein and the execution of this
Agreement have been duly authorized by all requisite action of the Acquired Fund
Trust and this Agreement has been duly executed and delivered by the Acquired
Fund Trust on behalf of the Acquired Fund and (assuming the Agreement is a valid
and binding obligation of the other parties thereto) is a valid and binding
obligation of the Acquired Fund, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar law affecting creditors' rights generally, or by general principals of
equity (regardless of whether enforcement is sought in a proceeding at equity or
law); (v) neither the execution or delivery by the Acquired Fund Trust on behalf
of the Acquired Fund of this Agreement nor the
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<PAGE> 74
consummation by the Acquired Fund Trust or Acquired Fund of the transactions
contemplated thereby contravene the Acquired Fund Trust's Declaration of Trust
or, to their knowledge, violate any provision of any statute, or any published
regulation or any judgment or order disclosed to them by the Acquired Fund Trust
as being applicable to the Acquired Fund Trust or Acquired Fund; (vi) to their
knowledge based solely on the certificate of an appropriate officer of the
Acquired Fund attached thereto, there is no pending, or threatened litigation
involving the Acquired Fund except as disclosed therein; (vii) except as to
financial statements and schedules and other financial and statistical data
included or incorporated by reference therein and subject to usual and customary
qualifications with respect to Rule 10b-5 type opinions, as of the effective
date of the Registration Statement filed pursuant to the Agreement, the portions
thereof pertaining to the Acquired Fund comply as to form in all material
respects with their requirements of the Securities Act, the Securities Exchange
Act and the 1940 Act and the rules and regulations of the SEC thereunder and no
facts have come to counsel's attention which cause them to believe that as of
the effectiveness of the portions of the Registration Statement applicable to
the Acquired Fund, the Registration Statement contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and (viii)
to their knowledge and subject to the qualifications set forth below, the
execution and delivery by the Acquired Fund Trust on behalf of the Acquired Fund
of the Agreement and the consummation of the transactions therein contemplated
do not require, under the laws of the States of Massachusetts or Illinois, or
the federal laws of the United States, the consent, approval, authorization,
registration, qualification or order of, or filing with, any court or
governmental agency or body (except such as have been obtained under the
Securities Act, the 1940 Act or the rules and regulations thereunder and the
filing of an amendment to the Trust's Designation of Series in connection with
the termination of the Acquired Fund.) Counsel need express no opinion, however,
as to any such consent, approval, authorization, registration, qualification,
order or filing (a) which may be required as a result of the involvement of
other parties to the Agreement in the transactions contemplated by the Agreement
because of their legal or regulatory status or because of any other facts
specifically pertaining to them; (b) the absence of which does not deprive the
Acquiring Fund of any material benefit under such agreements; or (c) which can
be readily obtained without significant delay or expense to the Acquiring Fund,
without loss to the Acquiring Fund of any material benefit under the Agreement
and without any material adverse effect on them during the period such consent,
approval authorization, registration, qualification or order was obtained. The
foregoing opinion relates only to consents, approvals, authorizations,
registrations, qualifications, orders or filings under (a) laws which are
specifically referred to in the opinion, (b) laws of the States of Massachusetts
or Illinois and the federal laws of the United States which, in our experience,
are normally applicable to transactions of the type provided for in the
Agreement and (c) court orders and judgments disclosed to counsel by the
Acquired Fund in connection with the opinion. In addition, although counsel need
not specifically considered the possible applicability to the Acquired Fund of
any other laws, orders or judgments, nothing has come to their attention in
connection with their representation of the Acquired Fund in this transaction
that has caused them to conclude that any other consent, approval,
authorization, registration, qualification, order or filing is required. In
giving the opinion set forth above, counsel may state that it is relying on
certificates of officers of the Acquired Fund with regard to matters of fact and
certain certificates and written statutes of government officers with respect to
the good standing of the Acquired Fund and on the opinion of Bingham Dana LLP as
to matters of Massachusetts law.
H. Shareholder List. The Acquired Fund shall have delivered to the
Acquiring Fund an updated list of all shareholders of the Acquired Fund, as
reported by the Acquired Fund's transfer agent, as of one (1) business day prior
to the Closing Date with each shareholder's respective holdings in the Acquired
Fund, taxpayer identification numbers, Form W-9 and last known address.
I. Officer Certificates. The Acquiring Fund shall have received a
certificate of an authorized officer of the Acquired Fund dated as of the
Closing Date, certifying that (i) the representations and warranties set forth
in Section 4 are true and correct on the Closing Date, together with certified
copies of the resolutions adopted by the Board of Trustees and shareholders and
that (ii) from the date of this Agreement through the Closing Date, there shall
not have been:
(1) any change in the business, results of operations,
assets, or financial condition or the manner of conducting the
business of the Acquired Fund, other than changes in the ordinary
course of its
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<PAGE> 75
business, or any pending or threatened litigation, which has had or
may have a material adverse effect on such business, results of
operations, assets or financial condition;
(2) issued any option to purchase or other right to acquire
shares of the Acquired Fund granted by the Acquired Fund to any person
other than subscriptions to purchase shares at net asset value in
accordance with terms in the Prospectus for the Acquired Fund;
(3) any entering into, amendment or termination of any
contract or agreement by Acquired Fund, except as otherwise
contemplated by this Agreement;
(4) any indebtedness incurred, other than in the ordinary
course of business, by the Acquired Fund for borrowed money or any
commitment to borrow money entered into by the Acquired Fund;
(5) any amendment of the Acquired Fund Trust's Declaration of
Trust or Designation of Series of the Acquired Fund; or
(6) any grant or imposition of any lien, claim, charge or
encumbrance (other than encumbrances arising in the ordinary course of
business with respect to covered options) upon any asset of the
Acquired Fund other than a lien for taxes not yet due and payable.
9. AMENDMENT, WAIVER AND TERMINATION.
A. The parties hereto may, by agreement in writing authorized by the
Board, amend this Agreement at any time before or after approval thereof by the
shareholders of the Acquired Fund, provided, however, that after receipt of
Acquired Fund shareholder approval, no amendment shall be made by the parties
hereto which would have a material adverse affect on the interests of the
Acquired Fund's shareholders without obtaining Acquired Fund's shareholder
approval thereof.
B. At any time prior to the Closing Date, either of the parties may by
written instrument signed by it (i) waive any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the covenants or conditions made for its benefit
contained herein. No delay on the part of either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, or any
single or partial exercise of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege.
C. This Agreement may be terminated, and the transactions contemplated
herein may be abandoned at any time prior to the Closing Date:
(1) by the mutual consents of the Board of the Acquiring Fund
Trust and Acquired Fund Trust on behalf of the Acquired Fund and
Acquiring Fund, respectively;
(2) by the Acquired Fund, if the Acquiring Fund breaches in
any material respect any of its representations, warranties, covenants
or agreements contained in this Agreement and fails to cure promptly
such breach after receipt of notice thereof,
(3) by the Acquiring Fund, if the Acquired Fund breaches in
any material respect any of its representations, warranties, covenants
or agreements contained in this Agreement and fails to cure promptly
such breach after receipt of notice thereof,
(4) by either the Acquired Fund or Acquiring Fund, if the
Closing has not occurred on or prior to October 27, 2000 (provided
that the rights to terminate this Agreement pursuant to this
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<PAGE> 76
subsection (C)(4) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause
of or resulted in the failure of the Closing to occur on or before
such date);
10. REMEDIES.
In the event of termination of this Agreement by either or both of the
Acquired Fund and Acquiring Fund pursuant to Section 9C, written notice thereof
shall forthwith be given by the terminating party to the other party hereto, and
this Agreement shall therefore terminate and become void and have no effect, and
the transactions contemplated herein and thereby shall be abandoned, without
further action by the parties hereto. However, this Section 10 shall not limit
the remedies available for a breach of this Agreement prior to its termination.
11. SURVIVAL.
The provisions set forth in Sections 10 and 16 hereof shall survive
the termination of this Agreement for any cause whatsoever. The representations
and warranties included or provided for herein, or in the Schedules or other
instruments delivered or to be delivered pursuant hereto shall not survive the
Closing Date.
12. NOTICES.
All notices hereunder shall be sufficiently given for all purposes
hereunder if in writing and delivered personally or sent by registered mail or
certified mail, postage prepaid. Notice to the Acquired Fund shall be addressed
to the Acquired Fund c/o Nuveen Advisory Corp., 333 West Wacker Drive, Chicago,
Illinois 60606, Attention: General Counsel, or at such other address as the
Acquired Fund may designate by written notice to the Acquiring Fund. Notice to
the Acquiring Fund shall be addressed to the Acquiring Fund c/o Nuveen Advisory
Corp., 333 West Wacker Drive, Chicago, Illinois, 60606, Attention: General
Counsel, or at such other address and to the attention of such other person as
the Acquiring Fund may designate by written notice to the Acquired Fund. Any
notice shall be deemed to have been served or given as of the date such notice
is delivered personally or mailed.
13. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other party
hereto.
14. BOOKS AND RECORDS.
The Acquired Fund and the Acquiring Fund agree that copies of the
books and records of the Acquired Fund relating to the Assets including, but not
limited to all files, records, written materials; e.g., closing transcripts,
surveillance files and credit reports shall be delivered by the Acquired Fund to
the Acquiring Fund at the Closing Date. In addition to, and without limiting the
foregoing, the Acquired Fund and the Acquiring Fund agree to take such action as
may be necessary in order that the Acquiring Fund shall have reasonable access
to such other books and records as may be reasonably requested, all for three
years after the Closing Date and for the last three tax years ending April 30,
1997, April 30, 1998, and April 30, 1999; namely, general ledger, journal
entries, voucher registers; distribution journal; payroll register, monthly
balance owing report; income tax returns; tax depreciation schedules; and
investment tax credit basis schedules.
15. GENERAL.
This Agreement supersedes all prior agreements between the parties
(written or oral), is intended as a complete and exclusive statement of the
terms of the Agreement between the parties and may not be amended, modified or
changed or terminated orally. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been executed by the
Acquired Fund and Acquiring Fund and delivered to each of the parties hereto.
The
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<PAGE> 77
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. This
Agreement is for the sole benefit of the parties thereto, and nothing in this
Agreement, expressed or implied, is intended to confer upon any other person any
rights or remedies under or by reason of this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Illinois
without regard to principles of conflicts or choice of law.
16. LIMITATION OF LIABILITY.
Consistent with the Acquiring Fund Trust's and the Acquired Fund
Trust's Declarations of Trust, notice is hereby given and the parties hereto
acknowledge and agree that this instrument is executed on behalf of the Trustees
of each Trust on behalf of the Acquiring Fund and the Acquired Fund,
respectively, as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders of the
Acquiring Fund Trust, Acquired Fund Trust, Acquiring Fund or Acquired Fund
individually but binding only upon the assets and property of the Acquiring Fund
or the Acquired Fund as the case may be.
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to
be executed and delivered by their duly authorized officers as of the day and
year first written above.
TRUST, on behalf of ACQUIRING
FUND
By:
--------------------------------------------
Title:
-----------------------------------------
Attest:
----------------------------
Title:
-----------------------------
TRUST, on behalf of ACQUIRED FUND
By:
--------------------------------------------
Title:
-----------------------------------------
Attest:
----------------------------
Title:
-----------------------------
A-15
<PAGE> 78
Annex A
[Date]
Nuveen Intermediate Duration Municipal Bond Fund
333 West Wacker Drive
Chicago, IL 60606
Nuveen Flagship Intermediate Municipal Bond Fund
333 West Wacker Drive
Chicago, IL 60606
Re: Agreement and Plan of Reorganization by and between
the Nuveen Intermediate Duration Municipal Bond Fund and
the Nuveen Flagship Intermediate Municipal Bond Fund
Ladies and Gentlemen:
You have requested our opinion regarding certain Federal income tax consequences
of the proposed reorganization ("Reorganization") by and between the Nuveen
Flagship Intermediate Municipal Bond Fund (the "Acquired Fund"), a series of the
Nuveen Flagship Municipal Trust (the "Trust"), a business trust formed under the
laws of the Commonwealth of Massachusetts, and the Nuveen Intermediate Duration
Municipal Bond Fund (the "Acquiring Fund"), a series of the Trust, in connection
with the execution and delivery of the Agreement and Plan of Reorganization (the
"Agreement"), dated as of [Date]. The Reorganization contemplates the
acquisition by the Acquiring Fund of substantially all of the assets of the
Acquired Fund in exchange for shares of the Acquiring Fund (the "Acquiring
Fund's Shares") and the assumption by the Acquiring Fund of the Acquired Fund's
liabilities, followed by the distribution of the Acquiring Fund's Shares to the
holders of shares of the Acquired Fund ("Acquired Fund's Shares") in exchange
for such Acquired Fund's Shares in complete liquidation of the Acquired Fund.
The foregoing will be accomplished pursuant to the Agreement. This opinion
letter is delivered to you pursuant to Sections 7F and 8F
A-1
<PAGE> 79
Nuveen Intermediate Duration Municipal Bond Fund
Nuveen Flagship Intermediate Bond Fund
[Date]
Page 2
of the Agreement. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Agreement.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Agreement, and (ii) such other documents as we have deemed necessary or
appropriate in order to enable us to render the opinion below. In our
examination, we have assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents
submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such copies. Our opinion is based in part on
the facts set forth below. We have not undertaken an independent investigation
or verification of these facts or of the information set forth either in the
aforementioned documents or in other documents that we have reviewed.
1. The Reorganization will be consummated in compliance with the
material terms of the Agreement, and none of the material terms and
conditions therein have been waived or modified and neither party
has any plan or intention to waive or modify any such material
condition.
2. The Acquiring Fund and the Acquired Fund each have been and will
continue to be treated as a corporation for Federal income tax
purposes.
3. Neither the Acquired Fund nor the Acquired Fund's shareholders
shall own more than 50 percent of the Acquiring Fund's shares
following the Reorganization.
4. The fair market value of the Acquiring Fund's Shares to be received
by the Acquired Fund's shareholders in the Reorganization will be
approximately equal to the fair market value of the shares in the
Acquired Fund surrendered and exchanged therefor.
5. No consideration other than the Acquiring Fund's Shares and the
assumption by the Acquiring Fund of the stated liabilities of the
Acquired Fund will be issued in exchange for the assets of the
Acquired Fund in the Reorganization.
6. The Acquiring Fund has no plan or intention to sell additional
shares of beneficial interest in the Acquiring Fund or to redeem
or otherwise reacquire
A-2
<PAGE> 80
Nuveen Intermediate Duration Municipal Bond Fund
Nuveen Flagship Intermediate Bond Fund
[Date]
Page 3
any of the Acquiring Fund's Shares issued in the Reorganization
other than in the ordinary course of its business as a regulated
investment company.
7. The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the Acquired Fund's assets to be acquired by it
in the Reorganization except for dispositions made in the ordinary
course of its business as a regulated investment company.
8. Following the Reorganization, the Acquiring Fund will continue the
historic business of the Acquired Fund or use a significant portion
of the Acquired Fund's assets in its business.
9. Immediately following consummation of the Reorganization, the
Acquiring Fund will possess the same liabilities as those
possessed by the Acquired Fund immediately prior to the
Reorganization. The fair market value of the assets of the Acquired
Fund acquired by the Acquiring Fund will exceed the liabilities
of the Acquired Fund assumed by the Acquiring Fund plus the amount
of liabilities, if any, to which the acquired assets are subject.
10. There is no intercorporate indebtedness existing between the
Acquiring Fund and the Acquired Fund that was issued, acquired, or
will be settled at a discount.
11. The Acquiring Fund will meet the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification and treatment as a regulated investment company.
12. The Acquiring Fund does not own nor will it acquire prior to the
consummation of the Reorganization any shares of beneficial interest
in the Acquired Fund.
13. Not more than 25 percent of the value of the total assets of both
the Acquired Fund and the Acquiring Fund is invested in the stock
and securities of any one issuer and not more than 50 percent of
the value of those total assets is invested in the stock and
securities of five or fewer issuers.
Our opinion summarizes certain Federal income tax consequences of the
Reorganization to holders of shares in the Acquired Fund (individually, a
"Shareholder" and, collectively, the
A-3
<PAGE> 81
Nuveen Intermediate Duration Municipal Bond Fund
Nuveen Flagship Intermediate Bond Fund
[Date]
Page 4
"Shareholders"). Our opinion does not address all aspects of Federal income
taxation that may be relevant to particular Shareholders and may not be
applicable to Shareholders who are not citizens or residents of the United
States. Further, our opinion does not address the effect of any applicable
foreign, state, local or other tax laws.
In rendering our opinion, we have considered the applicable provisions of the
Code, Treasury Regulations, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant.
Based upon and subject to the foregoing, we are of the opinion that the
Reorganization will, under current law, constitute a tax-free reorganization
under Section 368(a) of the Code, and that the Acquired Fund and Acquiring Fund
will each be a party to the reorganization within the meaning of section 368(b)
of the Code.
The Reorganization, as a tax-free reorganization, will have the following
Federal income tax consequences for the Shareholders, the Acquired Fund, and
the Acquiring Fund:
1. No gain or loss will be recognized by the Acquired Fund upon the
transfer of its assets in exchange solely for the Acquiring Fund's
Shares and the assumption by the Acquiring Fund of the Acquired
Fund's stated liabilities;
2. No gain or loss will be recognized by the Acquiring Fund on its
receipt of the Acquired Fund's assets in exchange for the Acquiring
Fund's Shares and the assumption by the Acquiring Fund of the
Acquired Fund's stated liabilities;
3. The basis of the Acquired Fund's assets in the Acquiring Fund's
hands will be the same as the basis of those assets in the Acquired
Fund's hands immediately before the Reorganization;
4. The Acquiring Fund's holding period for the assets transferred to
the Acquiring Fund by the Acquired Fund will include the holding
period of those assets in the Acquired Fund's hands immediately
before the Reorganizations;
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<PAGE> 82
Nuveen Intermediate Duration Municipal Bond Fund
Nuveen Flagship Intermediate Bond Fund
[Date]
Page 5
5. No gain or loss will be recognized by the Acquired Fund on the
distribution of the Acquiring Fund's Shares to the Acquired Fund's
shareholders in exchange for Acquired Fund's Shares;
6. No gain or loss will be recognized by the Acquired Fund's
shareholders as a result of the Acquired Fund's distribution of
Acquiring Fund's Shares to the Acquired Fund's shareholders in
exchange for the Acquired Fund's shareholders' Acquired Fund's
Shares;
7. The basis of the Acquiring Fund's Shares received by the Acquired
Fund's shareholders will be the same as the adjusted basis of that
Acquired Fund's shareholders' Acquired Fund's Shares surrendered in
exchange therefor; and
8. The holding period of the Acquiring Fund's Shares received by the
Acquired Fund's shareholders will include the Acquired Fund's
shareholders' holding period for the Acquired Fund's shareholders'
Acquired Fund's Shares surrendered in exchange therefor, provided
that said Acquired Fund's Shares were held as capital assets on the
date of the Reorganization.
Except as set forth above, we express no opinion as to the tax consequences to
any party, whether Federal, state, local or foreign, of the Reorganization or
the Agreement or of any transactions related to the Reorganization or the
Agreement or contemplated by the Reorganization or the Agreement. This opinion
is being furnished to you in connection with the Reorganization and the
Agreement and solely for your benefit in connection therewith and may not be
used or relied upon for any other purpose and may not be circulated, quoted or
otherwise referred to for any other purpose without our express written consent.
Very truly yours,
Morgan, Lewis & Bockius LLP
A-5
<PAGE> 83
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> 84
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
Investment Policies
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of that Fund:
(1) Invest in securities other than Municipal Obligations and short-term
securities, as described in the Prospectus. Municipal Obligations are
municipal bonds that pay interest that is exempt from regular federal
income taxes.
(2) Invest more than 5% of its total assets in securities of any one
issuer, except this limitation shall not apply to securities of the United
States Government or to the investment of 25% of such Fund's assets.
(3) Borrow money, except from banks for temporary or emergency purposes
and not for investment purposes and then only in an amount not exceeding
(a) 10% of the value of its total assets at the time of borrowing or (b)
one-third of the value of the Fund's total assets including the amount
borrowed, in order to meet redemption requests which might otherwise
require the untimely disposition of securities. While any such borrowings
exceed 5% of such Fund's total assets, no additional purchases of
investment securities will be made by such Fund. If due to market
fluctuations or other reasons, the value of the Fund's assets falls below
300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so.
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (2) above, it may pledge securities
having a market value at the time of pledge not exceeding 10% of the value
of the Fund's total assets.
(5) Issue senior securities as defined in the Investment Company Act of
1940, except to the extent such issuance might be involved with respect to
borrowings described under item (3) above or with respect to transactions
involving futures contracts or the writing of options within the limits
described in the Prospectus and this Statement of Additional Information.
(6) Underwrite any issue of securities, except to the extent that the
purchase or sale of Municipal Obligations in accordance with its investment
objective, policies and limitations, may be deemed to be an underwriting.
(7) Purchase or sell real estate, but this shall not prevent any Fund
from investing in Municipal Obligations secured by real estate or interests
therein or foreclosing upon and selling such security.
(8) Purchase or sell commodities or commodities contracts or oil, gas or
other mineral exploration or development programs, except for transactions
involving futures contracts within the limits described in the Prospectus
and this Statement of Additional Information.
(9) Make loans, other than by entering into repurchase agreements and
through the purchase of Municipal Obligations or temporary investments in
accordance with its investment objective, policies and limitations.
(10) Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions.
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(11) Write or purchase put or call options, except to the extent that the
purchase of a stand-by commitment may be considered the purchase of a put,
and except for transactions involving options within the limits described
in the Prospectus and this Statement of Additional Information.
(12) Invest more than 25% of its total assets in securities of issuers in
any one industry; provided, however, that such limitations shall not be
applicable to Municipal Obligations issued by governments or political
subdivisions of governments, and obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(13) Purchase or retain the securities of any issuer other than the
securities of the Fund if, to the Fund's knowledge, those trustees of the
Trust, or those officers and directors of Nuveen Advisory Corp. ("Nuveen
Advisory"), who individually own beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities.
In addition, each Fund, as a non-fundamental policy, may not invest more than
15% of its net assets in "illiquid" securities, including repurchase agreements
maturing in more than seven days.
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed the sole issuer of a security when its assets and
revenues are separate from other governmental entities and its securities are
backed only by its assets and revenues. Similarly, in the case of a non-
governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be deemed to
be the sole issuer. Where a security is also backed by the enforceable
obligation of a superior or unrelated governmental entity or other entity
(other than a bond insurer), it shall also be included in the computation of
securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other
facility, such as a bank guarantee or letter of credit, such a guarantee or
letter of credit would be considered a separate security and would be treated
as an issue of such government, other entity or bank. Where a security is
insured by bond insurance, it shall not be considered a security issued or
guaranteed by the insurer; instead the issuer of such security will be
determined in accordance with the principles set forth above. The foregoing
restrictions do not limit the percentage of the Fund's assets that may be
invested in securities insured by any single insurer.
The foregoing restrictions and limitations, as well as a Fund's policies as
to ratings of portfolio investments, will apply only at the time of purchase of
securities, and the percentage limitations will not be considered violated
unless an excess or deficiency occurs or exists immediately after and as a
result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of each Fund, cannot be changed without approval by holders of a
"majority of the Fund's outstanding voting shares." As defined in the
Investment Company Act of 1940, this means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if the holders of more than 50% of the
Fund's shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
The Nuveen Flagship Municipal Trust (the "Trust") is an open-end diversified
management series investment company organized as a Massachusetts business
trust on July 1, 1996. Each of the Funds is an open-end management investment
company organized as a series of the Nuveen Flagship Municipal Trust. The Trust
is an open-end management series company under SEC Rule 18f-2. Each Fund is a
separate series issuing its own shares. The Trust currently has 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
S-10
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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> 94
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> 95
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
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<PAGE> 96
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
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<PAGE> 97
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> 98
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> 99
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> 100
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
------------------------------------------------------------------------------------
<S> <C> <C> <C>
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> 101
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Date of Positions and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
-------------------------------------------------------------------------------
<S> <C> <C> <C>
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> 102
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Date of Positions and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
-------------------------------------------------------------------------------
<S> <C> <C> <C>
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> 103
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> 104
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<S> <C> <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> 105
<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. Cotrone 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> 106
<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> 107
<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> 108
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> 109
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> 110
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> 111
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> 112
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> 113
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> 114
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.
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<PAGE> 115
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> 116
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
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<PAGE> 117
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.
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<PAGE> 118
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>
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<PAGE> 119
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>
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<PAGE> 120
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>
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<PAGE> 121
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> 122
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> 123
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.
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<PAGE> 124
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.
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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
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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.
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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
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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
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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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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> 131
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>
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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.
S-50
<PAGE> 133
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> 134
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> 135
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> 136
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> 137
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
VAI-NAT 8-99
<PAGE> 138
NUVEEN
Investments
Municipal Bond
Funds
ANNUAL REPORT APRIL 30, 2000
Dependable, tax-free income to help you keep more of what you earn.
[PHOTOS APPEAR HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK/SM/
Intermediate Duration Municipal Bond Fund
Insured Municipal Bond Fund
<PAGE> 139
Contents
1 Dear Shareholder
3 From the Portfolio Managers' Perspective
Nuveen Intermediate Duration Municipal Bond
Fund Spotlight
8 Nuveen Insured Municipal Bond
Fund Spotlight
9 Portfolio of Investments
28 Statement of Net Assets
29 Statement of Operations
30 Statement of Changes in Net Assets
31 Notes to Financial Statements
37 Financial Highlights
39 Report of Independent Public Accountants
40 Building a Better Portfolio
41 Fund Information
Must be preceded by or accompanied by a prospectus.
<PAGE> 140
DEAR
Shareholder,
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
As personal wealth continues to grow at an ever-increasing rate, people are
realizing the power of their investments to do good and to make a difference in
their families and communities now and for generations to come.
Setting financial goals is an important first step toward building wealth. At
Nuveen Investments, we believe those goals should not be considered ends in
themselves. Rather, you and your financial advisor's focus should be on
realizing your life's dreams -- the things that matter most to you and how you
can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set
of goals to achieve this. Working with your financial advisor, you have
the ability to make those dreams a reality -- for yourself and future
generations.
Family Wealth Management Too often, family wealth management is thought of
in one dimension -- as the stewardship of your household's financial
resources. At Nuveen Investments, we think of family wealth management as
the map to help you reach your financial, and your life's, destinations.
It's a multi-faceted strategy to plan for not just your needs, but the
needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
A Trusted Resource As you face some of the most important, lasting decisions you
and your family will make, you'll want to draw upon the support, counsel and
objectivity of a trusted advisor. That's because your financial advisor has the
expertise and access to other professionals who can help you make informed
choices -- choices that affect not only your loved ones today, but those your
legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interests at heart.
Annual Report page 1
<PAGE> 141
In addition, we believe the potential presence of inflation and price
swings in the markets reinforce the importance of working with an advisor,
staying focused on the long term and adhering to your financial plan. With a
sound plan in place, you may be better positioned to weather the markets' ups
and downs.
In fact, you may be reading this report at the suggestion of your financial
advisor. We've prepared the following interview to let you know what the
investment and research management teams have done during your fund's fiscal
period.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. We are committed to maintaining that reputation and working with
financial advisors to provide investment solutions that help individuals achieve
their lives dreams. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
---------------------------------
Timothy R. Schwertfeger
Chairman of the Board
June 16, 2000
Annual Report page 2
<PAGE> 142
NUVEEN INTERMEDIATE DURATION MUNICIPAL BOND FUND
NUVEEN INSURED MUNICIPAL BOND FUND
From the Portfolio Managers' Perspective
A rising interest rate backdrop muted municipal bond returns during the 12
months ended April 30, 2000. Tom Spalding, portfolio manager of Nuveen
Intermediate Duration Municipal Bond Fund and Steve Krupa, portfolio manager of
Nuveen Insured Municipal Bond Fund, discuss the economic environment in which
the funds participated, as well as their funds' performance and key investment
strategies.
Q What factors determined the municipal bond market's performance during the
12-month fiscal period ended April 30, 2000?
TOM Persistent inflation worries and rising interest rates put pressure on
nearly all bonds, including municipal securities. The Federal Reserve Board (the
Fed) raised short-term interest rates five times over the past year by a total
of 125 basis points (1.25 percentage points) in an attempt to curb economic
growth and stifle inflationary pressures. Bond yields moved higher in response
to climbing rates, and bond prices -- which move opposite their yields --
generally declined. (The Fed raised short-term interest rates a sixth time after
the fund's fiscal year ended -- bringing the short-term interest rate to 6.50%.)
STEVE Rising interest rates had a mixed effect on municipal bond supply and
demand, which also was a key determinant in municipal bond performance. Supply
dwindled as fewer municipal issuers found it economically advantageous to
refinance older debt as interest rates rose.
In addition, many municipal issuers enjoyed budget surpluses thanks to the
overall strength of national, regional and local economies. As a result of their
diminished need for financing, many issuers cut back on issuing new debt.
Demand, unfortunately, remained rather spotty throughout the year.
Initially, investors gravitated to the red-hot stock market, generally avoiding
fixed income securities in the process.
When the stock market cooled in the early months of 2000 and municipal bond
yields rose to 6%, demand for municipals was stronger. The municipal bond market
performed better in the first quarter due to increased demand from individual
investors who wished to balance their portfolios with more fixed income
investments.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fiscal 12-month period ended April 30, 2000. The views expressed
reflect those of the portfolio management team and are subject to change at any
time, based on market and other conditions.
Annual Report page 3
<PAGE> 143
Q How did Nuveen Intermediate Duration Municipal Bond Fund perform?
TOM For the 12-month period ended April 30, 2000, the total return for Class A
shares at net asset value was -2 .02%. The fund outperformed the Lipper General
Municipal Debt category, which returned -3.31%, but underperformed the Lehman
Brothers Municipal Bond Index, which returned 0.92%.* Shareholders in the 31%
federal income tax bracket would have had to earn a total return of 0.14% on a
taxable investment to have earned the equivalent of their fund's tax-exempt
total return for the one-year period. As of April 30, 2000, the fund's SEC
30-day yield was 4.91%. For investors in the 31% federal income tax bracket,
that is equivalent to a yield of 7.12% on a taxable investment.
Q What key strategies did you and your team use in managing the fund during
the year?
TOM Maintaining a competitive distribution yield was a key focus for us. In an
effort to achieve that goal, we remained fully invested in intermediate- and
long-term bonds. They generally offered higher yields than shorter-term
securities and helped the fund optimize its tax-exempt dividend.
Rising market interest rates and bond yields also presented us with some
attractive opportunities to trade older, lower-coupon bonds for current, high-
coupon bonds. A good example of this type of opportunity occurred when we sold
some bonds issued by New York City and replaced them with bonds issued by
Illinois Health.
In making those and other trades, we looked for opportunities to improve
the fund's call protection. That provides a measure of protection against having
to surrender a high-yielding bond to the issuer before maturity.
We also continued to focus on higher quality bonds, holding roughly 79% of
the portfolio in AAA/U.S. guaranteed or AA-rated bonds.
Q Which bonds performed well during the past year? Which holdings were
disappointments?
TOM Bonds that were refunded or bought back by their issuers performed
particularly well. Recently, for example, we sold back our holdings in bonds
issued by the Intermountain Power Agency at a significant premium over market
prices. We invested the proceeds from the sale into bonds that had lower
duration--or reduced interest-rate sensitivity--and had yields that were higher
than those sold.
INTERMEDIATE DURATION
----------------------------------------------
Top Five Sectors
----------------------------------------------
Utilities 22%
U.S. Guaranteed 17%
Healthcare 16%
Tax Obligation (Limited) 10%
Water and Sewer 8%
INTERMEDIATE DURATION
----------------------------------------------
Bond Credit Quality
----------------------------------------------
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed 45%
AA 34%
A 11%
BBB/NR 10%
As a percentage of long-term bond holdings as of April 30, 2000. Holdings are
subject to change.
* The Lipper Peer Group returns represent the total return of the 274
funds in the Lipper General Municipal Debt Funds category for the period from
May 1, 1999, through April 30, 2000. The returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
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.
ANNUAL REPORT page 4
<PAGE> 144
Healthcare bonds, on the other hand, were disappointing throughout most of
the past 12 months. Reduced Medicare payments and heightened competition weighed
heavily on hospitals and other healthcare facilities. We take a very selective
approach, concentrating on those hospitals that we believe can thrive in
response to increased competition.
Q Turning to you, Steve, how did Nuveen Insured Municipal Bond Fund perform
during this fiscal period?
STEVE For the 12-month period ended April 30, 2000, the total return for Class
A shares at net asset value was -2.19%. The fund outperformed the Lipper
General Municipal Debt category, which returned -3.12%, but underperformed the
Lehman Brothers Insured Municipal Bond Index, which returned -1.65%.**
Shareholders in the 31% federal income tax bracket would have had to earn a
total return of 0.04% on a taxable investment to have earned the equivalent of
their fund's tax-exempt total return for the 12-month period. As of April 30,
2000, the fund's SEC 30-day yield was 4.74%. For investors in the 31% federal
income tax bracket, that is equivalent to a yield of 6.87% on a taxable
investment.
Q To what do you attribute the fund's performance and what were your key
strategies?
STEVE Through our active management discipline, we took advantage of
opportunities that rising interest rates and higher bond yields afforded us. For
example, we added value by executing tax loss swaps, selling bonds at a loss in
order to buy higher-yielding bonds. As rates rose, prices on some of the fund's
holdings fell. When we sold several of the fund's holdings, tax losses were
incurred.
These tax loss trades had two benefits for the fund. First, the realized
tax loss can be used to offset realized capital gains for up to eight years.
Furthermore, they helped increase tax-exempt income to the fund. In one such
swap in the first quarter of 2000, we sold New York City Water bonds and
captured a tax loss and then bought New York City Urban Development Corporation
bonds, which provided additional tax-free income.
INSURED
----------------------------------------------
Top Five Sectors
----------------------------------------------
U.S. Guaranteed 35%
Healthcare 17%
Tax Obligation (Limited) 12%
Tax Obligation (General) 7%
Housing (Single Family) 7%
INSURED
----------------------------------------------
Bond Credit Quality
----------------------------------------------
[PIE CHART APPEARS HERE]
Insured 66%
Insured and U.S.
Guaranteed 31%
U.S. Guaranteed 3%
As a percentage of long-term bond holdings as of April 30, 2000. Holdings are
subject to change.
** The Lipper Peer Group returns represent the total return of the 49 funds
in the Lipper Insured Municipal Debt Funds category for the period from May 1,
1999, through April 30, 2000. The returns assume reinvestment of dividends and
do not reflect any applicable sales charges.
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.
ANNUAL REPORT page 5
<PAGE> 145
Q Where else did you find value?
STEVE We found particular value in the insured specialty sector. A specialty
state is a state with high state income taxes, such as California and New York.
Normally, municipal bonds issued in these states are more expensive than the
national norm (and, therefore, offer lower yields) because of the increased
demand for these bonds from income-tax payers in that state. In the final three
months of 1999, however, new issue supply was large and issuers in several
specialty states had to offer their bonds at yields comparable to national
municipal bonds. We took advantage of this unusual market dynamic to purchase
several specialty state bonds for the fund. As supply abated in the first
quarter of 2000 and the availability of bonds became more limited, specialty
state bonds generally performed well.
Q What is your outlook for the coming months?
STEVE From a historical perspective, municipals are priced attractively
relative to their Treasury counterparts. (Of course, Treasuries are backed by
the full faith and credit of the U.S. government.) To the extent that investors
seek out value in the bond market, municipals could benefit.
TOM In addition to Federal Reserve policy, the near term outlook for
municipals will be influenced by the level of new issuance in the market. Our
view is that the municipal market could continue to be bolstered by diminished
supply, as long as demand remains constant or improves.
ANNUAL REPORT page 6
<PAGE> 146
NUVEEN INTERMEDIATE DURATION MUNICIPAL BOND FUND
Fund Spotlight as of April 30, 2000
--------------------------------------------------------------------------------
Quick Facts
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $8.91 $8.91 $8.90 $8.91
Latest Monthly
Dividend* $0.0375 $0.0320 $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
*Paid May 1, 2000
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Total Returns as of 4/30/00 (Annualized)/+/
------------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer W/O CDSC W/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -2.02% -6.14% -2.78% -6.51% -2.71% -1.93%
1-Year TER* 0.14% -4.07% -0.97% -4.69% -0.81% 0.31%
5-Year 5.21% 4.32% 4.47% 4.30% 4.55% 5.44%
5-Year TER* 7.52% 6.61% 6.43% 6.27% 6.56% 7.84%
10-Year 6.37% 5.91% 5.78% 5.78% 5.63% 6.61%
10-Year TER* 8.86% 8.40% 8.01% 8.01% 7.80% 9.22%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Total Returns as of 3/31/00 (Annualized)/+/
------------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer W/O CDSC W/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -1.17% -5.32% -1.93% -5.69% -1.75% -0.86%
5-Year 5.38% 4.47% 4.64% 4.47% 4.71% 5.63%
10-Year 6.35% 5.90% 5.77% 5.77% 5.62% 6.61%
------------------------------------------------------------------------------------------
</TABLE>
+ Class R shares 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. Class B shares automatically convert to Class A
shares eight years after purchase. Class C shares have a 1% CDSC for redemptions
within one year, which is not reflected in the one-year total return.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Tax-Free Yields
--------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.91% 4.70% 4.16% 4.36% 5.12%
Taxable Equivalent Yield 7.12% 6.81% 6.03% 6.32% 7.42%
--------------------------------------------------------------------------------
</TABLE>
Index Comparison/[_]/
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Intermediate Nuveen Intermediate Lehman Brothers
Duration Fund (Offer) Duration Fund (NAV) Municipal Bond Index
--------------------- ------------------- --------------------
<S> <C> <C> <C>
4/1990 $ 9,580 $10,000 $10,000
4/1991 $10,589 $11,054 $11,149
4/1992 $11,552 $12,059 $12,209
4/1993 $12,711 $13,268 $13,754
4/1994 $12,942 $13,510 $14,050
4/1995 $13,777 $14,381 $14,985
4/1996 $14,641 $15,283 $16,176
4/1997 $15,647 $16,333 $17,398
4/1998 $17,055 $17,803 $19,016
4/1999 $18,127 $18,922 $20,337
4/2000 $17,761 $18,540 $20,150
</TABLE>
--Nuveen Intermediate Duration Fund (Offer) $17,761
--Nuveen Intermediate Duration Fund (NAV) $18,540
--Lehman Brothers Municipal Bond Index $20,150
--------------------------------------------------------------------------------
Portfolio Statistics
--------------------------------------------------------------------------------
Total Net Assets $2,630.4 million
Average Effective Maturity 15.87 years
Weighted Average Modified Duration 6.96
Nuveen Intermediate Duration Fund (Offer) $17,761
Nuveen Intermediate Duration Fund (NAV) $18,540
Lehman Brothers Municipal Bond Index $20,150
/[_]/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.
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 their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
--------------------------------------------------------------------------------
Terms To Know
--------------------------------------------------------------------------------
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Duration is stated in years; typically
the shorter the duration, the less price and return variability you can expect
in the fund's price per share as interest rates change.
Federal Fund Rates The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
ANNUAL REPORT page 7
<PAGE> 147
NUVEEN INSURED MUNICIPAL BOND FUND
Fund Spotlight as of April 30, 2000
--------------------------------------------------------------------------------
Quick Facts
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NAV $10.35 $10.35 $10.26 $10.31
Latest Monthly Dividend* $0.0450 $0.0385 $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
*Paid May 1, 2000
</TABLE>
--------------------------------------------------------------------------------
Total Returns as of 4/30/00 (Annualized)/+/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer W/O CDSC W/ CDSC NAV NAV
--- ----- -------- ------- --- ---
<S> <C> <C> <C> <C> <C> <C>
1-Year -2.19% -6.30% -2.94% -6.65% -2.64% -1.94%
1-Year TER* 0.04% -4.17% -1.05% -4.76% -0.67% 0.37%
5-Year 5.25% 4.34% 4.49% 4.32% 4.63% 5.48%
5-Year TER* 7.56% 6.63% 6.45% 6.30% 6.65% 7.89%
10-Year 6.91% 6.45% 6.28% 6.28% 6.13% 7.13%
10-Year TER* 9.37% 8.90% 8.48% 8.48% 8.28% 9.70%
</TABLE>
*Taxable Equivalent Return (Based on a federal income tax rate of 31%.)
--------------------------------------------------------------------------------
Total Returns as of 3/31/00 (Annualized)/+/
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer W/O CDSC W/ CDSC NAV NAV
--- ----- -------- ------- --- ---
<S> <C> <C> <C> <C> <C> <C>
1-Year -1.55% -5.69% -2.30% -6.04% -2.00% -1.39%
5-Year 5.31% 4.41% 4.55% 4.38% 4.71% 5.54%
10-Year 6.80% 6.35% 6.17% 6.17% 6.02% 7.01%
</TABLE>
+Class R shares 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. Class B shares automatically convert to Class A
shares eight years after purchase. Class C shares have a 1% CDSC for redemptions
within one year, which is not reflected in the one-year total return.
--------------------------------------------------------------------------------
Tax-Free Yields
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
--- ----- --- --- ---
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.74% 4.54% 3.99% 4.19% 4.94%
Taxable Equivalent
Yield 6.87% 6.58% 5.78% 6.07% 7.16%
</TABLE>
--------------------------------------------------------------------------------
Index Comparison/[_]/
--------------------------------------------------------------------------------
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Insured Nuveen Insured
Lehman Brothers Municipal Bond Municipal Bond
Municipal Bond Index Fund (NAV) Fund (Offer)
-------------------- -------------- --------------
<S> <C> <C> <C>
4/1990 $10,000 $10,000 $ 9,580
4/1991 $11,149 $11,160 $10,691
4/1992 $12,209 $12,292 $11,775
4/1993 $13,754 $13,956 $13,369
4/1994 $14,050 $14,083 $13,492
4/1995 $14,985 $15,106 $14,471
4/1996 $16,176 $16,196 $15,516
4/1997 $17,398 $17,186 $16,464
4/1998 $19,016 $18,740 $17,953
4/1999 $20,337 $19,944 $19,106
4/2000 $20,150 $19,509 $18,689
</TABLE>
--Nuveen Insured Municipal Bond Fund (Offer) $18,689
--Nuveen Insured Municipal Bond Fund (NAV) $19,509
--Lehman Brothers Municipal Bond Index $20,150
--------------------------------------------------------------------------------
Portfolio Statistics
--------------------------------------------------------------------------------
Total Net Assets $774.6 million
Average Effective Maturity 16.07 years
Weighted Average Modified Duration 7.14
/[_]/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.
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 their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
--------------------------------------------------------------------------------
Terms To Know
--------------------------------------------------------------------------------
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Duration is stated in years; typically
the shorter the duration, the less price and return variability you can expect
in the fund's price per share as interest rates change.
Federal Fund Rates The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
ANNUAL REPORT page 8
<PAGE> 148
Portfolio of Investments
Nuveen Intermediate Duration Municipal Bond Fund
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Alabama -- 0.9%
$ 2,255 The Board of Trustees of Alabama, Agricultural and Mechanical University 5/08 at 102 AAA $1,955,739
Revenue Bonds, Series 1998, 5.000%, 11/01/25
6,000 Birmingham-North Medical Clinic Board, Alabama, Carraway Methodist 1/01 at 102 N/R*** 6,252,060
Medical Center, Refunding Revenue Bonds, Series 1991B, 8.000%,
7/01/15 (Pre-refunded to 1/01/01)
7,000 City of Birmingham, Alabama, Water and Sewer Revenue Warrants, Series 1/08 at 102 AA- 5,730,900
1998-A, 4.750%, 1/01/29
12,000 BMC Special Care Facilities Financing Authority of the City of Montgomery 11/08 at 101 AAA 10,123,320
(Alabama), Revenue Bonds, Series 1998-B (Baptist Health), 5.000%,
11/15/29
------------------------------------------------------------------------------------------------------------------------------------
Alaska -- 0.4%
10,935 Alaska Housing Finance Corporation, Collateralized Home Mortgage Bonds, 12/03 at 102 AAA 10,437,020
1990 Series A, 5.850%, 6/01/25
------------------------------------------------------------------------------------------------------------------------------------
Arizona -- 2.5%
14,000 Arizona Health Facilities Authority, Revenue Bonds (Catholic Healthcare No Opt. Call BBB+ 13,775,300
West), 1999 Series A, 6.125%, 7/01/09
7,750 Arizona Board of Regents, Arizona State University, System Revenue 7/02 at 101 AA 7,839,900
Refunding Bonds, Series 1992-A, 5.750%, 7/01/12
16,100 Salt River Project Agricultural Improvement and Power District, Arizona, 1/02 at 100 AA 15,298,864
Salt River Project Electric System Revenue Bonds, 1992 Series C,
5.500%, 1/01/28
7,980 Salt River Project Agricultural Improvement and Power District, Arizona, 7/00 at 100 AA 7,785,288
Salt River Project Electric System Revenue Bonds, 1973 Series A, 5.000%,
1/01/10
17,820 Salt River Project Agricultural Improvement and Power District, Electric 1/04 at 100 AA 15,499,836
System Revenue Refunding Bonds, 1993 Series C, 4.750%, 1/01/17
6,000 The Industrial Development Authority of the City of Scottsdale, Arizona, 9/01 at 102 AAA 6,046,680
Hospital Revenue Refunding Bonds (Scottsdale Memorial Hospitals),
Series 1996A, 5.625%, 9/01/12
------------------------------------------------------------------------------------------------------------------------------------
Arkansas -- 0.6%
2,500 Baxter County, Arkansas, Hospital Revenue Improvement Bonds, Series 1999B 9/09 at 100 BBB 2,025,250
(Baxter County Regional Hospital), 5.625%, 9/01/28
10,075 Jefferson County, Arkansas, Hospital Refunding Revenue Bonds, Series 1993, 7/03 at 102 A 10,214,640
6.000%, 7/01/06
4,000 Jefferson County, Arkansas, Pollution Control Revenue Refunding Bonds 12/02 at 102 BBB- 3,493,720
(Entergy Arkansas, Inc. Project), Series 1997, 5.600%, 10/01/17
------------------------------------------------------------------------------------------------------------------------------------
California -- 13.8%
21,220 California Health Facilities Financing Authority, Insured Health 7/04 at 102 AAA 20,033,590
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 5.700%, 12/01/16 6/03 at 101 1/2 AA 15,626,708
9,500 5.750%, 12/01/19 6/03 at 101 1/2 AA 9,524,035
12,250 5.500%, 12/01/23 6/03 at 101 1/2 AA 11,772,495
21,000 State of California, Department of Water Resources, Central Valley 12/03 at 101 AA 17,722,740
Project, Water System Revenue Bonds, Series M, 4.875%, 12/01/27
12,000 State Public Works Board of the State of California, Lease Revenue 11/04 at 102 Aaa 13,291,320
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)
</TABLE>
9
<PAGE> 149
Portfolio of Investments
Nuveen Intermediate Duration Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California (continued)
$ 38,795 California Statewide Communities Development Authority, Certificates of 7/03 at 102 AA $35,810,501
Participation, St. Joseph Health System Obligated Group, 5.500%, 7/01/23
15,725 Central Joint Powers Health Financing Authority, Certificates of 2/03 at 102 Baa1 13,744,122
Participation, (Community Hospital of Central California), 5.250%, 2/01/13
9,000 East Bay Municipal Utility District (Alameda and Contra Costa Counties, 6/03 at 102 AAA 7,984,710
California), Water System Subordinated Revenue Refunding Bonds, Series
1993A, 5.000%, 6/01/21
15,000 Foothill/Eastern Transportation Corridor Agency (California), 1/07 at 100 AAA 15,985,650
Toll Road Revenue Bonds, Series 1995A, 6.000%, 1/01/34
(Pre-refunded to 1/01/07)
17,040 Los Angeles Convention and Exhibition Center Authority, Lease Revenue Bonds, 8/03 at 102 AAA 16,653,362
1993 Refunding Series A, The City of Los Angeles (California),
5.125%, 8/15/13
25,000 Department of Water and Power of the City of Los Angeles, California, No Opt. Call Aa3 25,209,750
Electric Plant Revenue Bonds, Issue of 2000, 5 .000%, 2/15/02
17,575 Department of Water and Power of the City of Los Angeles, California, 4/02 at 102 AA*** 18,482,925
Water Works Revenue Bonds, Issue of 1992, 6.500%, 4/15/32
6,000 The City of Los Angeles (California), Wastewater Refunding Bonds, 6/03 at 102 AAA 5,920,080
Series 1993-B, 5.700%, 6/01/23
20,670 The City of Los Angeles (California), Wastewater System Revenue Bonds, 11/03 at 102 AAA 18,919,664
Series 1993-D, 5.200%, 11/01/21
15,750 Los Angeles County Metropolitan Transportation Authority, 7/03 at 102 AA- 15,878,993
Proposition A Sales Tax Revenue Refunding Bonds,
Series 1993-A, 5.500%, 7/01/13
Los Angeles County Metropolitan Transportation Authority,
Proposition C Sales Tax Revenue Second Senior Bonds,
Series 1993-B:
20,935 4.750%, 7/01/18 7/03 at 102 AAA 18,777,020
8,000 5.250%, 7/01/23 7/03 at 102 AAA 7,332,880
10,500 Los Angeles County Sanitation Districts Financing Authority, 10/03 at 102 AA 10,528,875
Capital Projects Revenue Bonds, 1993 Series A
(Senior Ad Valorem Obligation Bonds), 5.375%, 10/01/13
31,360 Los Angeles County Transportation Commission (California), 7/02 at 102 Aaa 33,376,448
Proposition C Sales Tax Revenue Bonds, Second Senior Bonds,
Series 1992-A, 6.750%, 7/01/19 (Pre-refunded to 7/01/02)
5,000 The Metropolitan Water District of Southern California, Water Revenue Bonds, 7/02 at 102 AA 4,886,700
Issue of 1992, 5.500%, 7/01/19
18,300 Sacramento County Sanitation Districts Financing Authority, 12/03 at 102 AA 15,320,394
1993 Revenue Bonds, 4.750%, 12/01/23
4,000 County of San Diego, California, Certificates of Participation, 9/09 at 101 Baa3 3,861,680
The Burnham Institute, 6.250%, 9/01/29
8,050 The Regents of the University of California, Refunding Revenue Bonds 9/02 at 102 AAA 8,615,754
(Multiple Purpose Projects), Series A, 6.875%, 9/01/16
(Pre-refunded to 9/01/02)
------------------------------------------------------------------------------------------------------------------------------------
Colorado - 1.7%
16,300 Colorado Housing and Finance Authority, Single-Family Housing Revenue 11/01 at 102 AAA 16,698,372
Refunding Bonds, 1991 Series A, 7.250%, 11/01/31
8,500 City of Colorado Springs, Colorado, Utilities System Subordinate Lien 11/08 at 100 AA 7,034,090
Improvement Revenue Bonds, Series 1998A, 4.750%, 11/15/26
6,845 City and County of Denver, Colorado, Airport System Revenue Bonds, 11/01 at 100 AAA 6,863,755
Series 1996D, 5.875%, 11/15/16
10,000 City and County of Denver, Colorado, Airport System Revenue Bonds, 11/01 at 102 BBB+ 10,527,400
Series 1991D, 7.750%, 11/15/21 (Alternative Minimum Tax)
10,000 E-470 Public Highway Authority (Colorado), Senior Revenue Bonds, No Opt. Call AAA 2,745,200
Series 1997B, 0.000%, 9/01/21
</TABLE>
10
<PAGE> 150
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
District of Columbia - 0.8%
$ 25,050 Washington Convention Center Authority (Washington, D.C.), 10/08 at 100 AAA $20,388,696
Senior Lien Dedicated Tax Revenue Bonds, Series 1998, 4.750%, 10/01/28
------------------------------------------------------------------------------------------------------------------------------------
Florida - 2.2%
32,000 Hillsborough County Industrial Development Authority, 5/02 at 103 AA 34,781,760
Pollution Control Revenue Refunding Bonds (Tampa Electric Company
Project), Series 1992, 8.000%, 5/01/22
25,000 Orlando, Florida, Utilities Commission Water and Electric 10/00 at 100 Aa2 21,776,250
Subordinated Revenue Bonds, Series 1989D, 5.000%, 10/01/23
1,190 The Elderly Housing Corporation of Sarasota, Inc. 7/00 at 103 N/R 1,229,056
(Elderly Housing Project for the Sarasota Housing Authority),
First Mortgage Revenue Bonds, Series 1978, 7.500%, 7/01/09
------------------------------------------------------------------------------------------------------------------------------------
Guam - 0.1%
2,000 Guam Power Authority, Revenue Bonds, 1999 Series A, 5.250%, 10/01/34 10/09 at 101 BBB 1,669,400
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Hawaii - 0.3%
8,000 Department of Budget and Finance of the State of Hawaii, Special Purpose 7/01 at 102 AAA 8,428,720
Revenue Bonds, Kapiolani Health Care System Obligated Group
(Pali Momi Medical Center Project), Series 1991, 7.650%,
7/01/19 (Pre-refunded to 7/01/01)
------------------------------------------------------------------------------------------------------------------------------------
Illinois - 18.5%
7,880 City of Chicago, General Obligation Bonds, Project Series 1993, 1/04 at 102 AAA 7,301,450
5.250%, 1/01/18
15,095 Chicago Metropolitan Housing Development Corporation, 7/02 at 102 AA 15,710,423
Housing Development Revenue Refunding Bonds
(FHA-Insured Mortgage Loans - Section 8 Assisted Projects),
Series 1992B, 6.900%, 7/01/22
7,965 City of Chicago, Motor Fuel Tax Revenue Bonds, Refunding Series 1993, 1/03 at 101 AAA 7,256,673
5.000%, 1/01/16
5,000 City of Chicago, O'Hare International Airport, Special Facility 11/00 at 102 Baa1 5,127,550
Revenue Bonds (American Airlines Inc. Project), Series 1990A, 7.875%,
11/01/25 (Alternative Minimum Tax)
21,710 City of Chicago, O'Hare International Airport, General Airport 1/04 at 102 AAA 19,395,063
Second Lien Revenue Refunding Bonds,
1993 Series C, 5.000%, 1/01/18
61,250 City of Chicago, O'Hare International Airport, General Airport 1/04 at 102 A+ 54,819,363
Revenue Refunding Bonds 1993 Series A, 5.000%, 1/01/16
22,335 City of Chicago, Water Revenue Bonds, Series 1995, 5.000%, 11/01/15 11/06 at 102 AAA 20,491,469
25,380 The County of Cook, Illinois, General Obligation Bonds, Series 1993A, 11/03 at 100 AAA 21,703,199
5.000%, 11/15/23
17,300 DuPage Water Commission (DuPage, Cook and Will Counties, Illinois), 3/02 at 100 AAA 17,497,047
General Obligation Water Refunding Bonds, Series 1992, 5.750%, 3/01/11
11,350 DuPage Water Commission (DuPage, Cook and Will Counties, Illinois), 5/03 at 102 Aa1 10,941,173
Water Refunding Revenue Bonds, Series 1993, 5.250%, 5/01/14
17,075 Illinois Educational Facilities Authority, Revenue Refunding Bonds, 7/03 at 102 Aa1 16,386,195
The University of Chicago, Series 1993B, 5.600%, 7/01/24
57,600 Illinois Health Facilities Authority, Revenue Bonds, Series 1994A 8/04 at 102 AA+ 56,192,256
(Northwestern Memorial Hospital), 6.000%, 8/15/24
6,115 Illinois Health Facilities Authority, Revenue Refunding Bonds, Series 1993 10/03 at 102 A- 5,261,591
(Illinois Masonic Medical Center), 5.500%, 10/01/19
10,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1992 10/02 at 102 AAA 10,052,700
(Highland Park Hospital), 6.200%, 10/01/22
34,120 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 11/03 at 102 AAA 31,423,838
(Rush-Presbyterian-St. Luke's Medical Center Obligated Group),
5.500%, 11/15/25
7,275 Illinois Health Facilities Authority, Revenue Bonds, Series 1994 3/04 at 102 AAA 7,599,392
(Southern Illinois Hospital Services), 5.850%, 3/01/14
(Pre-refunded to 3/01/04)
</TABLE>
11
<PAGE> 151
Portfolio of Investments
Nuveen Intermediate Duration Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Illinois (continued)
$ 3,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1998A 11/08 at 101 AAA $ 2,530,710
(Rush-Presbyterian-St. Luke's Medical Center Obligated Group),
5.000%, 11/15/24
8,000 Illinois Health Facilities Authority, FHA-Insured Mortgage Revenue Bonds, 2/06 at 102 AAA 7,894,400
Series 1996 (Sinai Health System), 6.000%, 2/15/24
9,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1999 11/09 at 101 A 8,432,100
(OSF Healthcare System), 6.250%, 11/15/29
15,100 State of Illinois, General Obligation Bonds, Series of March 1992 10/02 at 102 AA 15,756,850
(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 5.875%, 6/01/10 6/02 at 102 AA 15,071,108
5,000 5.875%, 6/01/11 6/02 at 102 AA 5,095,950
10,000 State of Illinois, General Obligation Bonds, Series of April 1993 4/03 at 102 AA 9,934,100
(Full Faith and Credit), 5.700%, 4/01/18
14,200 State of Illinois, Build Illinois Bonds (Sales Tax Revenue Bonds), 6/03 at 102 AAA 13,247,038
Series S, 5.250%, 6/15/18
15,315 State of Illinois, Build Illinois Bonds (Sales Tax Revenue Bonds), 6/01 at 100 AAA 15,357,576
Series O, 6.000%, 6/15/18
The Illinois State Toll Highway Authority, Toll Highway
Priority Revenue Bonds, 1992 Series A:
20,000 6.450%, 1/01/13 (Pre-refunded to 1/01/03) 1/03 at 102 AA-*** 21,070,000
8,805 6.200%, 1/01/16 (Pre-refunded to 1/01/03) 1/03 at 102 AAA 9,234,772
43,180 Metropolitan Pier and Exposition Authority (Illinois), McCormick 6/03 at 102 Aaa 45,843,342
Place Expansion Project Bonds, Series 1992A, 6 .500%, 6/15/27
(Pre-refunded to 6/15/03)
7,500 Regional Transportation Authority, Cook, DuPage, Kane, Lake, McHenry 6/03 at 102 AAA 7,812,525
and Will Counties, Illinois, General Obligation Refunding Bonds,
Series 1993B, 5.800%, 6/01/13: (Pre-refunded to 6/01/03)
11,215 Forest Preserve District of Will County, Illinois, General No Opt. Call AAA 3,696,240
Obligation Bonds, Series 1999B, 0.000%, 12/01/18
1,515 The Elderly Housing Corporation of Zion, Illinois, Housing Development 9/00 at 101 A 1,538,089
Revenue Bonds (Dell-Zion Associates -- Section 8 Assisted Project),
Series 1978, 7.750%, 3/01/10
-----------------------------------------------------------------------------------------------------------------------------------
Indiana - 3.9%
10,835 Duneland School Building Corporation, First Mortgage Bonds, 8/07 at 101 AAA 11,133,613
Series 1997, 5.450%, 8/01/15 (Pre-refunded to 8/01/07)
11,590 Indiana Health Facilities Financing Authority, Hospital Revenue 9/02 at 102 AAA 11,817,975
Refunding Bonds, Series 1992A (Methodist Hospital of Indiana, Inc.),
5.750%, 9/01/11
49,600 Indiana Health Facilities Financing Authority, Hospital Revenue Bonds 11/05 at 100 Aaa 51,199,600
(Daughters of Charity), Series 1993, 5.750%, 11/15/22
(Pre-refunded to 11/15/05)
10,100 Indiana State Office Building Commission, Correctional Facilities Program, 12/01 at 102 Aa2*** 10,543,289
Revenue Bonds, Series 1991, 6.375%, 7/01/16 (Pre-refunded to 12/01/01)
2,750 The Indianapolis Local Public Improvement Bond Bank, Series 1992 D Bonds, 2/03 at 102 AA 2,892,230
6.750%, 2/01/20
12,500 The Indianapolis Local Public Improvement Bond Bank, Series 1993 A Bonds, 1/03 at 102 AAA 12,638,625
6.000%, 1/10/18
2,300 Southwind Housing, Inc., Evansville, Indiana, First Mortgage Revenue Bonds, 5/00 at 100 N/R*** 2,510,749
Series 1978A, 7.125%, 11/15/21
-----------------------------------------------------------------------------------------------------------------------------------
Iowa - 0.3%
3,815 City of Davenport, Iowa, Hospital Facility Revenue Bonds (Mercy Hospital 7/02 at 100 AAA 4,022,803
Project), Series 1992, 6.625%, 7/01/14 (Pre-refunded to 7/01/02)
2,575 Iowa Housing Finance Authority, Single Family Mortgage Bonds, 8/00 at 100 Aaa 2,579,043
1977 Series A, 5.875%, 8/01/08
</TABLE>
12
<PAGE> 152
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kentucky - 4.3%
$ 34,500 County of Carroll, Kentucky, Collateralized Pollution Control Revenue 9/02 at 102 A1 $36,636,930
Bonds (Kentucky Utilities Company Project), 1992 Series A,
7.450%, 9/15/16
27,420 Kenton County Airport Board (Commonwealth of Kentucky), Special Facilities 2/02 at 102 BBB- 27,806,622
Revenue Bonds, 1992 Series A (Delta Air Lines, Inc. Project),
7.125%, 2/01/21 (Alternative Minimum Tax)
740 Kentucky Housing Corporation, Housing Revenue Bonds (FHA-Insured/VA 7/01 at 102 AAA 750,064
Guaranteed), 1991 Series A, 7 .250%, 1/01/17
Kentucky Housing Corporation, Housing Revenue Bonds
(Federally Insured or Guaranteed Mortgage Loans), 1993
Series B:
17,600 5.300%, 7/01/10 1/04 at 102 AAA 17,421,536
13,400 5.400%, 7/01/14 1/04 at 102 AAA 12,910,632
16,980 The Turnpike Authority of Kentucky, Resource Recovery Road Revenue 7/00 at 100 A+ 16,550,915
Refunding Bonds, 1987 Series A, 5.000%, 7/01/08
------------------------------------------------------------------------------------------------------------------------------------
Maine - 0.9%
Maine State Housing Authority, Mortgage Purchase Bonds, 1994 Series A:
13,650 5.650%, 11/15/20 2/04 at 102 AA 13,030,700
10,000 5.700%, 11/15/26 2/04 at 102 AA 9,509,700
------------------------------------------------------------------------------------------------------------------------------------
Maryland - 0.1%
2,315 Community Development Administration, Maryland Department of Housing 1/07 at 102 Aa2 2,315,556
and Community Development, Housing Revenue Bonds, Series 1996A,
5.875%, 7/01/16
------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 2.1%
5,000 Massachusetts Bay Transportation Authority, Certificates of Participation, 8/00 at 102 AAA 5,140,650
1990 Series A, 7.650%, 8/01/15 (Pre-refunded to 8/01/00)
Massachusetts Water Resources Authority, General Revenue Refunding Bonds,
1993 Series B:
14,890 5.250%, 3/01/13 3/03 at 102 A+ 14,409,500
10,795 5.000%, 3/01/22 3/03 at 100 A+ 9,377,293
Massachusetts Water Resources Authority, General Revenue Bonds,
1993 Series C:
12,705 5.250%, 12/01/20 (Pre-refunded to 12/01/04) 12/04 at 102 Aaa 13,059,597
13,345 5.250%, 12/01/20 12/04 at 102 A+ 12,251,110
------------------------------------------------------------------------------------------------------------------------------------
Michigan - 7.1%
15,000 School District of the City of Detroit, Wayne County, Michigan, School 5/06 at 102 AAA 15,678,300
Building and Site Improvement Bonds (Unlimited Tax General Obligation),
Series 1996A, 5.700%, 5/01/25 (Pre-refunded to 5/01/06)
10,000 School District of the City of Detroit, Wayne County, Michigan, School 5/09 at 101 AAA 8,223,500
Building and Site Improvement Bonds (Unlimited Tax General Obligation),
Series 1998B, 4.750%, 5/01/28
11,335 City of Grand Rapids, Michigan, Water Supply System Refunding Revenue 1/01 at 102 AAA 11,678,904
Bonds, Series 1991, 6.500%, 1/01/15
3,370 Michigan Higher Education Facilities Authority, Limited Obligation 5/08 at 100 AA 3,035,595
Revenue and Revenue Refunding Bonds, Series 1998C
(Aquinas College Project), 5.125%, 5/01/16
10,000 State Building Authority, State of Michigan, 1991 Revenue Refunding 10/01 at 102 AA 10,151,300
Bonds, Series I, 6.250%, 10/01/20
State Building Authority, State of Michigan, 1998 Revenue
Bonds Series I (Facilities Program):
14,080 4.750%, 10/15/17 10/09 at 100 AA 12,170,470
8,650 4.750%, 10/15/21 10/09 at 100 AA 7,258,042
4,000 Michigan State Hospital Finance Authority, Revenue Bonds, Sisters of 2/01 at 102 Aaa 4,159,280
Mercy Health Corporation, Series 1991J, 7.000%, 2/15/21
(Pre-refunded to 2/15/01)
</TABLE>
13
<PAGE> 153
Portfolio of Investments
Nuveen Intermediate Duration Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Michigan (continued)
Michigan State Hospital Finance Authority, Hospital Revenue and Refunding
Bonds (The Detroit Medical Center Obligated Group), Series 1993B:
$ 19,585 5.750%, 8/15/13 8/04 at 102 BBB- $ 16,590,454
69,575 5.500%, 8/15/23 8/04 at 102 BBB- 53,015,454
3,000 Michigan State Hospital Finance Authority Revenue Refunding Bonds 10/05 at 100 AAA 3,342,570
(Genesy's Health System Obligated Group), Series 1995A,
7.500%, 10/01/27 (Pre-refunded to 10/01/05)
12,080 Michigan State Housing Development Authority, Rental Housing Revenue Bonds, 4/04 at 102 AAA 12,048,350
1994 Series B, 5.700%, 4/01/12
15,600 State of Michigan, State Trunk Line Fund Bonds, Series 1992A,
5.500%, 10/01/21 10/02 at 100 AA 15,323,880
16,805 Hospital Finance Authority of the City of St. Joseph, Revenue 1/04 at 102 AAA 15,623,272
Refunding Bonds (Mercy Memorial Medical Center Obligated Group),
Series 1993, 5.250%, 1/01/16
------------------------------------------------------------------------------------------------------------------------------------
Minnesota - 0.4%
1,120 Minnesota Housing Finance Agency, Housing Development Bonds, 1977 Series A, 8/00 at 101 AA 1,131,021
6.250%, 2/01/20
8,150 Minnesota Housing Finance Agency, Rental Housing Bonds, 1995 Series D, 2/05 at 102 AAA 8,235,331
5.800%, 8/01/11
------------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.2%
7,500 Mississippi Business Finance Corporation, Pollution Control 10/03 at 102 BBB- 6,508,200
Revenue Refunding Bonds (System Energy Resources, Inc. Project),
Series 1998, 5.875%, 4/01/22
------------------------------------------------------------------------------------------------------------------------------------
Missouri - 0.4%
3,650 The Industrial Development Authority of the City of Kansas City, Missouri, 11/08 at 102 N/R 3,045,122
Retirement Facility Refunding and Improvement Revenue Bonds,
Series 1998A (Kingswood Project), 5.800%, 11/15/17
6,195 Missouri Housing Development Commission, Housing Development Bonds, 9/00 at 101 AA+ 6,279,314
Series B 1979 (Federally Insured Mortgage Bonds), 7.000%, 9/15/22
------------------------------------------------------------------------------------------------------------------------------------
Montana - 0.2%
5,825 Montana Health Facility Authority, Health Care Revenue Bonds, 6/06 at 102 BBB- 5,258,461
Series 1996 (Community Medical Center, Inc.), 6.375%, 6/01/18
------------------------------------------------------------------------------------------------------------------------------------
Nebraska - 0.7%
18,230 Consumer's Public Power District, Nebraska, Nuclear Facility Revenue 7/00 at 100 A+ 18,228,724
Bonds, 1968 Series, 5.100%, 1/01/03
------------------------------------------------------------------------------------------------------------------------------------
Nevada - 0.4%
1,990 City of Henderson, Nevada, Local Improvement District No. T-4 (Green Valley 5/09 at 103 N/R 1,787,577
Properties), Senior Limited Obligation Refunding Bonds, 1999 Series A,
5.900%, 11/01/18
8,630 City of Reno, Nevada, Insured Hospital Revenue Bonds (St. Mary's 5/03 at 102 AAA 8,699,040
Regional Medical Center), Series 1993A, 5.800%, 5/15/13
------------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 0.3%
8,500 The Industrial Development Authority of the State of New Hampshire, 12/01 at 103 A- 8,886,325
Pollution Control Revenue Bonds (Central Maine Power Company Project),
1984 Series B, 7.375%, 5/01/14
------------------------------------------------------------------------------------------------------------------------------------
New Jersey - 0.4%
10,750 New Jersey Housing and Mortgage Finance Agency, Housing Revenue Bonds, 5/02 at 102 A+ 11,279,330
1992 Series A, 6.950%, 11/01/13
------------------------------------------------------------------------------------------------------------------------------------
New Mexico - 0.2%
5,000 City of Farmington, New Mexico, Pollution Control Refunding Revenue 4/01 at 102 A+ 5,183,950
Bonds (Southern California Edison Company - Four Corners Project),
1991 Series A, 7.200%, 4/01/21
</TABLE>
14
<PAGE> 154
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New York - 6.6%
$ 11,190 Battery Park City Authority, Senior Revenue Refunding Bonds, 11/03 at 102 AA $ 10,473,952
Series 1993A, 5.000%, 11/01/13
2,350 The City of New York, General Obligation Bonds, Fiscal 1996 Series C, No Opt. Call A- 2,425,459
6.000%, 8/15/04
8,000 The City of New York, General Obligation Bonds, Fiscal 1994 Series D, 8/03 at 101 1/2 A- 8,088,240
5.750%, 8/15/11
8,525 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 8,972,989
Fixed Rate Bonds, Subseries C-1, 6.625%, 8/01/12
(Pre-refunded to 8/01/02)
7,500 The City of New York, General Obligation Bonds, Fiscal 1996 Series G, No Opt. Call A- 7,712,025
5.900%, 2/01/05
15,620 The City of New York, General Obligation Bonds, Fiscal 1997 Series E, 8/06 at 101 1/2 A- 15,887,571
6.000%, 8/01/16
14,000 The City of New York, General Obligation Bonds, Fiscal 1995 Series F, 2/05 at 101 A-*** 15,034,740
6.625%, 2/15/25 (Pre-refunded to 2/15/05)
10,770 The City of New York, General Obligation Bonds, Fiscal 1998 Series J, 8/08 at 101 A- 10,480,502
5.375%, 8/01/13
4,000 The City of New York, General Obligation Bonds, Fiscal 1999 Series H, 3/09 at 101 A- 3,365,320
5.000%, 3/15/29
8,600 New York City Municipal Water Finance Authority, Water and Sewer 6/02 at 101 1/2 Aa3 8,682,044
System Revenue Bonds, Fiscal 1993 Series A, 6.000%, 6/15/17
8,195 New York City Transitional Finance Authority, Future Tax Secured Bonds, 5/10 at 101 AA 8,436,998
Fiscal 2000 Series C, 5.875%, 11/01/14 (WI)
3,050 Dormitory Authority of the State of New York, Insured Revenue Bonds 7/00 at 102 AAA 3,124,481
(Special Act School Districts), 7.000%, 7/01/13
(Pre-refunded to 7/01/00)
5,515 Dormitory Authority of the State of New York, Cornell University Revenue 7/00 at 102 AA+ 5,652,820
Bonds, Series 1990A, 7.375%, 7/01/20
8,400 Dormitory Authority of the State of New York, Beth Israel Medical Center 11/00 at 102 AAA 8,601,012
Revenue Bonds, Series 1996, 6.000%, 11/01/15
8,000 Dormitory Authority of the State of New York, Mental Health Services 2/07 at 102 A 7,568,240
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 8.000%, 11/01/08 (Pre-refunded to 11/01/00) 11/00 at 102 AAA 16,768,262
2,550 8.000%, 11/01/08 11/00 at 102 BBB+ 2,613,011
8,000 New York Local Government Assistance Corporation (A Public Benefit 4/02 at 102 AAA 8,472,400
Corporation of the State of New York), Series 1991D Bonds,
7.000%, 4/01/18 (Pre-refunded to 4/01/02)
9,685 State of New York Mortgage Agency, Mortgage Revenue Bonds, 10/00 at 100 Aaa 9,692,651
Eighth Series A, 6.875%, 4/01/17
10,270 Power Authority of the State of New York, General Purpose Revenue 1/03 at 102 AAA 10,537,534
Bonds, Series CC, 5.250%, 1/01/18 (Pre-refunded to 1/01/03)
5,000 Triborough Bridge and Tunnel Authority (New York), General Purpose 1/04 at 100 Aa3 4,275,700
Revenue Bonds, Series 1994A, 4.750%, 1/01/19
------------------------------------------------------------------------------------------------------------------------------------
North Carolina - 2.7%
69,150 North Carolina Eastern Municipal Power Agency, Power System 1/03 at 102 BBB 69,392,025
Revenue Bonds, Refunding Series 1993 B, 6.250%, 1/01/12
1,130 Housing Authority of the City of Wilmington, North Carolina, First 6/00 at 100 N/R*** 1,138,554
Mortgage Revenue Bonds, Series 1979, 7.750%, 6/01/10
------------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.9%
2,970 Midwest City Memorial Hospital Authority (Midwest City, Oklahoma), 4/02 at 102 BBB+*** 3,154,883
Hospital Revenue Bonds, Series 1992, 7.375%, 4/01/12
(Pre-refunded to 4/01/02)
21,160 Trustees of the Tulsa Municipal Airport Trust, 1988 Adjustable Rate 12/00 at 102 Baa1 21,512,737
Revenue Obligations, 7.375%, 12/01/20 (Alternative Minimum Tax)
</TABLE>
15
<PAGE> 155
Portfolio of Investments
Nuveen Intermediate Duration Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Oregon - 0.4%
$ 10,000 State of Oregon, Department of Administrative Services, Certificates of 5/07 at 101 AAA $ 10,493,400
Participation, 1997 Series A, 5.800%, 5/01/24
(Pre-refunded to 5/01/07)
------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 3.5%
10,000 Lehigh County Industrial Development Authority, Pollution Control Revenue 9/04 at 102 AAA 10,248,100
Refunding Bonds, 1994 Series B (Pennsylvania Power and Light Company
Project), 6.400%, 9/01/29
22,500 Pennsylvania Housing Finance Agency, Rental Housing Refunding Bonds, 7/03 at 102 AAA 22,347,225
Issue 1993, 5.750%, 7/01/14
Pennsylvania Housing Finance Agency, Multifamily Housing Refunding Bonds
(Federal Housing Administration Insured Mortgage Loans), Issue 1992:
4,025 8.100%, 7/01/13 7/02 at 102 AAA 4,289,885
16,830 8.200%, 7/01/24 7/02 at 102 AAA 17,942,968
16,600 Pennsylvania Intergovernmental Cooperation Authority, Special Tax 6/03 at 100 AAA 14,424,404
Revenue Refunding Bonds (City of Philadelphia Funding Program),
Series of 1993A, 5.000%, 6/15/22
12,500 City of Philadelphia, Pennsylvania, Water and Sewer Revenue Bonds, 8/01 at 100 AAA 12,868,875
Sixteenth Series, 7.000%, 8/01/18 (Pre-refunded to 8/01/01)
11,070 Public Auditorium Authority of Pittsburgh and Allegheny County 8/09 at 101 AAA 9,568,244
(Allegheny County, Pennsylvania), Hotel Room Excise Tax Revenue Bonds,
Series of 1999, 5.125%, 2/01/35
------------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.3%
8,095 Rhode Island Convention Center Authority, Refunding Revenue Bonds, 5/03 at 100 AAA 7,110,891
1993 Series B, 5.000%, 5/15/20
------------------------------------------------------------------------------------------------------------------------------------
Texas - 4.9%
City of Austin, Texas, Water, Sewer and Electric Refunding Revenue Bonds,
Series 1982:
75 14.000%, 11/15/01 (Pre-refunded to 5/15/01) 5/01 at 100 A2*** 79,170
1,220 14.000%, 11/15/01 5/00 at 100 A*** 1,326,555
6,635 14.000%, 11/15/01 No Opt. Call A 7,100,379
29,500 Brazos River Authority (Texas), Collateralized Revenue Refunding Bonds 8/00 at 102 AAA 29,574,045
(Houston Lighting and Power Company Project), Series 1995,
5.800%, 8/01/15
6,585 Crowley Independent School District, Tarrant and Johnson Counties, 8/08 at 100 AAA 6,932,754
Unlimited Tax School Building Bonds, Series 1997, 6.500%, 8/01/23
Grapevine-Colleyville Independent School District (Tarrant and Dallas
Counties, Texas), Unlimited Tax School Building and Refunding Bonds,
Series 1998:
4,890 0.000%, 8/15/19 No Opt. Call AAA 1,533,651
10,000 0.000%, 8/15/24 No Opt. Call AAA 2,263,000
25,900 Harris County, Texas, Toll Road Senior Lien Revenue Refunding Bonds, 8/04 at 102 AAA 25,354,028
Series 1994, 5.300%, 8/15/13
7,000 Harris County Health Facilities Development Corporation (Texas), 2/01 at 102 AAA 7,229,880
Hospital Revenue Bonds (St. Luke's Episcopal Hospital Project),
Series 1991A, 6.750%, 2/15/21
53,280 City of San Antonio, Texas, Electric and Gas Systems Revenue Refunding 2/02 at 101 Aa1 48,294,058
Bonds, New Series 1992, 5.000%, 2/01/17
------------------------------------------------------------------------------------------------------------------------------------
Utah - 0.4%
8,300 Intermountain Power Agency (Utah), Power Supply Revenue Refunding Bonds, 7/03 at 102 A+ 8,180,895
1993 Series A, 5.500%, 7/01/13
1,205 Layton, Utah, Industrial Development Revenue Bonds (C.D.I. Ltd. Project - 6/00 at 100 Baa3 1,206,916
K-Mart Guaranteed), 8.750%, 6/01/05
</TABLE>
16
<PAGE> 156
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Vermont - 0.1%
$ 165 University of Vermont and State Agricultural College, Housing, 7/00 at 100 A+ $ 165,454
Dining and Student Services Facilities System Bonds, Lot 1,
Series 1969-A, 6.300%, 7/01/06
------------------------------------------------------------------------------------------------------------------------------------
Virginia - 3.8%
7,750 Richmond Metropolitan Authority (Virginia), Expressway Revenue and 7/02 at 102 AAA 7,876,480
Refunding Bonds, Series 1992-B, 6.250%, 7/15/22
39,630 Virginia Housing Development Authority, Commonwealth Mortgage Bonds, 1/02 at 102 AA+ 40,459,060
1992 Series A, 7.150%, 1/01/33
3,070 Virginia Housing Development Authority, Multifamily Mortgage Bonds, 5/00 at 100 AA+ 3,075,066
1978 Series B, 6.700%, 11/01/21
Virginia Housing Development Authority, Multifamily Housing Bonds,
1993 Series C:
19,080 5.550%, 5/01/08 5/03 at 102 AA+ 19,146,017
28,075 5.900%, 5/01/14 5/03 at 102 AA+ 28,207,514
------------------------------------------------------------------------------------------------------------------------------------
Washington - 6.3%
5,860 Public Utility District No. 1 of Chelan County, Rocky Reach Hydro-Electric 7/00 at 100 AA 5,327,560
System Revenue Bonds, Series of 1968, 5.125%, 7/01/23
9,260 Public Utility District No. 1 of Douglas County, Washington, Wells 9/00 at 100 1/2 AA- 8,363,817
Hydroelectric Revenue Bonds, Series of 1963, 4.000%, 9/01/18
7,250 Municipality of Metropolitan Seattle, Sewer Refunding Revenue 1/03 at 102 AAA 7,306,913
Bonds, Series Y, 5.700%, 1/01/12
5,000 Washington Public Power Supply System, Nuclear Project No. 1 No Opt. Call Aa1 5,729,750
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 7.000%, 7/01/07 No Opt. Call Aa1 15,605,288
18,500 5.750%, 7/01/13 7/03 at 102 Aa1 18,568,080
10,000 5.700%, 7/01/17 7/03 at 102 AAA 9,864,500
7,805 Washington Public Power Supply System, Nuclear Project No. 1 Refunding No Opt. Call Aa1 8,653,716
Revenue Bonds, Series 1993B, 7.000%, 7/01/09
10,000 Washington Public Power Supply System (Bonneville), Nuclear Project No. 1 7/03 at 102 Aa1 9,482,300
Refunding Revenue Bonds, Series 1993C, 5.375%, 7/01/15
8,835 Washington Public Power Supply System, Nuclear Project No. 3 Refunding 7/03 at 102 Aa1 8,605,202
Revenue Bonds, Series 1993B, 5.700%, 7/01/18
Washington Public Power Supply System, Nuclear Project No. 3 Refunding
Revenue Bonds, Series 1993C:
9,180 5.300%, 7/01/10 7/03 at 102 Aa1 9,032,753
51,070 5.375%, 7/01/15 7/03 at 102 Aa1 48,426,106
11,745 5.500%, 7/01/18 7/03 at 102 Aa1 11,155,401
------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 4.9%
4,195 Wisconsin Housing and Economic Development Authority, Insured No Opt. Call AA*** 4,219,205
Mortgage Revenue Refunding Bonds, 1977 Series A, 5.800%, 6/01/17
8,500 Wisconsin Housing and Economic Development Authority, Multifamily 4/02 at 102 AA 8,922,110
Housing Revenue Bonds, 1992 Series B, 7.050%, 11/01/22
28,200 Wisconsin Housing and Economic Development Authority, 12/03 at 102 AA 28,251,606
Housing Revenue Bonds, 1993 Series C, 5.800%, 11/01/13
13,700 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 11/01 at 102 AAA 13,962,629
Series 1991 (Columbia Hospital, Inc.), 6.250%, 11/15/21
7,695 Wisconsin Petroleum Inspection Fee Revenue Bonds, 2000 Series A, No Opt. Call AA- 7,795,954
5.500%, 7/01/03
9,830 Wisconsin Health and Educational Facilities Authority, Health Facilities 6/02 at 102 AAA 9,915,521
Refunding Revenue Bonds (SSM Health Care), Series 1992AA,
6.250%, 6/01/20
</TABLE>
17
<PAGE> 157
Portfolio of Investments
Nuveen Intermediate Duration Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Wisconsin (continued)
$ 3,950 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 10/04 at 102 AAA $ 3,996,052
Series 1994A (Froedtert Memorial Lutheran Hospital, Inc.),
5.875%, 10/01/13
6,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 12/02 at 102 AAA 5,951,940
Series 1992A (Meriter Hospital, Inc.), 6.000%, 12/01/22
17,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 8/03 at 102 AAA 15,069,310
Series 1993 (Aurora Health Care Obligated Group), 5.250%, 8/15/23
32,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 5/06 at 102 AAA 30,538,560
Series 1996 (Aurora Medical Group, Inc. Project), 5.750%, 11/15/25
------------------------------------------------------------------------------------------------------------------------------------
$ 2,693,145 Total Investments - (cost $2,533,953,737) - 98.5% 2,590,993,629
============ --------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.5% 39,366,602
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 2,630,360,231
====================================================================================================================
</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.
See accompanying notes to financial statements.
18
<PAGE> 158
Portfolio of Investments
Nuveen Insured Municipal Bond Fund
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Alabama - 4.6%
$ 10,000 Alabama Incentives Financing Authority, Tax Exempt Special Obligation 10/09 at 102 AAA $ 10,019,900
Bonds, Series 1999-A, 6.000%, 10/01/29
2,120 The Water Supply Board of the City of Albertville (Alabama), 3/02 at 102 AAA 2,220,043
Water Revenue Bonds, Series 1992, 6.700%, 3/01/11
3,985 The Governmental Utility Services Corporation of the City of Auburn, 6/00 at 102 AAA 4,072,829
Floating/Fixed Rate Wastewater Treatment Revenue Bonds,
Series 1984 (Merscot-Auburn Limited Partnership Project), 7.300%, 1/01/12
1,875 The Special Care Facilities Financing Authority of the City of Birmingham 1/01 at 102 AAA 1,937,325
(Alabama), Revenue Bonds, Series 1991-A (The Baptist Medical Centers),
7.000%, 1/01/21
5,000 Houston County (Alabama), Health Care Authority, Series 2000 Bonds, 10/09 at 101 Aaa 4,993,300
6.125%, 10/01/25
3,000 City of Madison (Alabama), General Obligation School Warrants, Series 1994, 2/04 at 102 AAA 3,180,300
6.250%, 2/01/19
The Utilities Board of the City of Oneonta (Alabama), Utility Revenue Bonds,
Series 1994:
2,860 6.900%, 11/01/24 (Pre-refunded to 11/01/04) 11/04 at 102 AAA 3,125,723
140 6.900%, 11/01/24 11/04 at 102 AAA 151,295
West Morgan-East Lawrence Water Authority, Water Revenue Bonds, Series 1994:
2,200 6.800%, 8/15/19 (Pre-refunded to 8/15/04) 8/04 at 102 AAA 2,389,024
3,000 6.850%, 8/15/25 (Pre-refunded to 8/15/04) 8/04 at 102 AAA 3,263,520
------------------------------------------------------------------------------------------------------------------------------------
Alaska - 1.4%
4,500 Alaska Industrial Development and Export Authority, Revolving Fund Bonds, 4/07 at 102 AAA 4,464,135
Series 1997A, 5.900%, 4/01/17 (Alternate Minimum Tax)
5,985 Alaska Housing Finance Corporation, Mortgage Revenue Bonds, 6/06 at 102 AAA 6,080,341
1996 Series A, 6.000%, 12/01/15
------------------------------------------------------------------------------------------------------------------------------------
Arizona - 1.5%
Tempe Union High School District No. 213 of Maricopa County, Arizona,
School Improvement and Refunding Bonds, Series 1994:
4,290 6.000%, 7/01/10 (Pre-refunded to 7/01/04) 7/04 at 101 AAA 4,491,845
1,710 6.000%, 7/01/10 7/04 at 101 AAA 1,777,990
5,000 City of Tucson, Arizona, Water System Revenue Bonds, Series 1994-A,
6.000%, 7/01/21 (Pre-refunded to 7/01/06) 7/06 at 101 AAA 5,289,700
------------------------------------------------------------------------------------------------------------------------------------
California - 7.5%
3,525 Brea Public Financing Authority (Orange County, California), 1991 8/01 at 102 AAA 3,709,922
Tax Allocation Revenue Bonds, Series A (Redevelopment Project AB),
7.000%, 8/01/15 (Pre-refunded to 8/01/01)
California Housing Finance Agency, Home Mortgage Revenue Bonds,
1999 Series L:
34,000 0.000%, 2/01/18 (Alternative Minimum Tax) 8/09 at 59 1/2 AAA 11,012,600
5,930 0.000%, 2/01/31 (Alternative Minimum Tax) 8/09 at 26 5/8 AAA 816,798
8,000 City of Oakland, California, Insured Revenue Bonds (1800 Harrison 1/10 at 100 AAA 8,089,840
Foundation - Kaiser Permanente), Series 1999A, 6.000%, 1/01/29
13,750 Ontario Redevelopment Financing Authority (San Bernardino 8/03 at 102 AAA 13,687,713
County, California), 1993 Revenue Bonds (Ontario Redevelopment
Project No. 1), 5.800%, 8/01/23
5,295 County of Riverside, California (1994 Desert Justice Facility Project), 12/04 at 101 AAA 5,604,228
Certificates of Participation, 6.000%, 12/01/12
(Pre-refunded to 12/01/04)
2,250 Sacramento Municipal Utility District (California), 9/01 at 102 AAA 2,357,753
Electric Revenue Bonds, 1991 Series Y, 6.500%, 9/01/21
(Pre-refunded to 9/01/01)
</TABLE>
19
<PAGE> 159
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California (continued)
$ 17,355 County of San Bernardino (California), Single Family Home Mortgage 5/07 at 28 1/16 AAA $ 2,482,980
Revenue Bonds (Mortgage-Backed Securities Program), 1997 Series A,
0.000%, 5/01/31 (Alternative Minimum Tax)
10,000 The Regents of the University of California, Revenue Bonds (Multiple
Purpose Projects), Series D, 6.375%, 9/01/24 (Pre-refunded to 9/01/02 9/02 at 102 AAA 10,594,100
------------------------------------------------------------------------------------------------------------------------------------
Colorado - 3.7%
City of Broomfield, Colorado, Master Facilities Lease Purchase Agreement,
Certificates of Participation, Series 1999, City and County of
Broomfield Building Corporation:
5,030 5.875%, 12/01/19 12/09 at 100 AAA 5,108,870
5,000 6.000%, 12/01/29 12/09 at 100 AAA 5,059,650
10,000 Colorado Health Facilities Authority, Hospital Revenue Bonds (Poudre
Valley Health Care, Inc.), Series 1999A, 5.750%, 5/15/24 5/09 at 101 AAA 9,764,300
Board of Water Commissioners, City and County of Denver, Colorado,
Certificates of Participation, Series 1991:
2,675 6.625%, 11/15/11 (Pre-refunded to 11/15/01) 11/01 at 101 AAA 2,776,837
1,825 6.625%, 11/15/11 11/01 at 101 AAA 1,884,586
3,500 Jefferson County, Colorado, Refunding Certificates of Participation,
6.650%, 12/01/08 12/02 at 102 AAA 3,704,540
------------------------------------------------------------------------------------------------------------------------------------
Delaware - 0.5%
3,600 Delaware Economic Development Authority, Pollution Control Refunding
Revenue Bonds (Delmarva Power and Light Company Project), 5/02 at 102 AAA 3,768,984
Series 1992 B, 6.750%, 5/01/19
------------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.7%
4,000 District of Columbia (Washington, D.C.), General Obligation Bonds,
Series 1994B, 6.100%, 6/01/11 (Pre-refunded to 6/01/04) 6/04 at 102 AAA 4,217,760
1,400 District of Columbia (Washington, D.C.), General Obligation Bonds,
Series 1998B, 5.250%, 6/01/26 6/08 at 101 AAA 1,244,684
------------------------------------------------------------------------------------------------------------------------------------
Florida - 1.6%
5,000 Florida Housing Finance Corporation, Homeowner Mortgage Revenue Bonds,
2000 Series 4, 6.250%, 7/01/22 (Alternative Minimum Tax) 1/10 at 100 AAA 5,082,900
920 Florida Keys Aqueduct Authority, Water Revenue Refunding Bonds, Series 1991,
6.750%, 9/01/21 (Pre-refunded to 9/01/01) 9/01 at 101 AAA 954,408
80 Florida Keys Aqueduct Authority, Water Revenue Bonds, Series 1991,
6.750%, 9/01/21 9/01 at 101 AAA 82,718
Florida Ports Financing Commission Revenue Bonds (State Transportation
Trust Fund - Intermodal Program) Series 1999:
2,230 5.500%, 10/01/23 (Alternative Minimum Tax) 10/09 at 101 AAA 2,121,488
4,375 5.500%, 10/01/29 (Alternative Minimum Tax) 10/09 at 101 AAA 4,117,269
------------------------------------------------------------------------------------------------------------------------------------
Georgia - 2.9%
5,000 City of Albany (Georgia), Sewerage System Revenue Bonds, Series 1992,
6.625%, 7/01/17 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 5,276,650
5,000 Development Authority of Appling County (Georgia), Pollution Control
Revenue Bonds (Oglethorpe Power Corporation Hatch Project),
Series 1994, 7.150%, 1/01/21 1/04 at 101 AAA 5,317,550
2,250 Chatham County Hospital Authority, Hospital Revenue Bonds (Memorial Medical
Center, Inc.) (Savannah, Georgia), Series 1990A, 7.000%, 1/01/21
(Pre-refunded to 1/01/01) 1/01 at 102 AAA 2,333,295
3,020 Development Authority of the City of Marietta, First Mortgage Revenue Bonds
(Life College, Inc.), Series 1995A and Series 1995B, 5.950%, 9/01/19 9/05 at 102 AAA 3,053,160
6,180 Development Authority of the City of Marietta (Life College, Inc.),
6.250%, 9/01/25 9/05 at 102 AAA 6,323,376
</TABLE>
20
<PAGE> 160
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Illinois - 12.3
$ 2,500 City of Chicago, General Obligation Adjustable Rate Bonds, Central Public
Library Project, Series C of 1988, 6.850%, 1/01/17 (Pre-refunded
to 7/01/02) 7/02 at 101 1/2 AAA $ 2,638,000
5,000 City of Chicago, General Obligation Bonds, Project Series A of 1992,
6.250%, 1/01/12 (Pre-refunded to 1/01/02) 1/02 at 102 AAA 5,191,250
9,590 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, 5.800%, 12/01/17 12/07 at 102 AAA 9,613,879
24,000 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 1998B-1, 0.000%, 12/01/26 No Opt. Call AAA 4,659,600
9,000 City of Chicago, O'Hare International Airport, General Airport Second Lien
Revenue Refunding Bonds, 1999 Series, 5.500%, 1/01/18 (Alternative
Minimum Tax) 1/10 at 101 AAA 8,555,220
12,800 Public Building Commission of Chicago (Illinois), Building Revenue Bonds,
Series A of 1993 (Board of Education of the City of Chicago), 5.750%,
12/01/18 (Pre-refunded to 12/01/03) 12/03 at 102 AAA 13,332,224
Town of Cicero, Cook County, Illinois, General Obligation Corporate
Purpose Bonds, Series 1994A:
3,610 6.400%, 12/01/14 (Pre-refunded to 12/01/04) 12/04 at 102 AAA 3,866,093
2,930 6.400%, 12/01/14 12/04 at 102 AAA 3,079,752
5,000 The County of Cook, Illinois, General Obligation Bonds, Series 1993A,
5.000%, 11/15/23 11/03 at 100 AAA 4,275,650
2,500 Community College District No. 508, Cook County, Illinois, Certificates of
Participation, 8.750%, 1/01/07 No Opt. Call AAA 2,983,175
2,370 Board of Governors of State Colleges and Universities (Illinois), Eastern
Illinois University, Auxiliary Facilities System Revenue Bonds,
Series 1994A, 6.375%, 4/01/16 (Pre-refunded to 4/01/04) 4/04 at 102 AAA 2,524,643
6,500 Illinois Development Finance Authority, Revenue Bonds, Remarketed Series
1997A (Adventist Health System/Sunbelt Obligated Group), 5.875%,
11/15/20 (WI) 11/10 at 101 AAA 6,314,945
1,455 Illinois Educational Facilities Authority, Revenue Refunding Bonds
(Midwestern University), Series 1996B, 6.250%, 5/15/26 (Pre-refunded
to 5/15/06) 5/06 at 102 AAA 1,566,104
3,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1994A
(The University of Chicago Hospitals Project), 6.125%, 8/15/24
(Pre-refunded to 8/15/04) 8/04 at 102 AAA 3,179,130
4,000 Illinois Health Facilities Authority, Health Care Facilities Revenue Bonds,
Series 1995 (Northwestern Medical Faculty Foundation, Inc.), 6.500%,
11/15/15 (Pre-refunded to 11/15/04) 11/04 at 102 AAA 4,297,520
169 Illinois Health Facilities Authority, Revenue (Community Provider Pooled
Loan Program), 7.900%, 8/15/03 No Opt. Call AAA 180,811
906 Illinois Health Facilities Authority, Revenue Bonds, Series 1988-B
(Community Provider Pooled Loan Program), 7.900%, 8/15/03 8/00 at 100 AAA 908,464
5,000 State of Illinois, General Obligation Bonds, Series of August 1994, 5.875%,
8/01/19 8/04 at 102 AA 5,020,200
State of Illinois, General Obligation Bonds, Series of February 1995:
3,065 6.100%, 2/01/19 2/05 at 102 AAA 3,116,339
5,545 6.100%, 2/01/20 2/05 at 102 AAA 5,625,513
4,645 City of Monmouth, Warren County, Illinois, General Obligation Sewer Bonds,
Series 1999B, 0.000%, 12/01/29 12/09 at 26 3/4 Aaa 671,063
4,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake, McHenry and
Will Counties, Illinois, General Obligation Refunding Bonds, Series
1993C, 5.850%, 6/01/23 (Pre-refunded to 6/01/03) 6/03 at 102 AAA 4,172,360
------------------------------------------------------------------------------------------------------------------------------------
Indiana - 6.8%
5,000 Indiana Health Facility Financing Authority, Hospital Revenue Refunding
and Improvement Bonds, Series 1992 (Community Hospitals Projects),
6.400%, 5/01/12 5/02 at 102 AAA 5,190,850
5,000 Indiana Municipal Power Agency, Power Supply System Revenue Bonds,
1993 Series A, 6.125%, 1/01/19 1/03 at 102 AAA 5,218,900
1,755 Indiana Housing Finance Authority, Single Family Mortgage Revenue Bonds,
1997 Series B-2, 6.000%, 7/01/16 (Alternative Minimum Tax) 1/07 at 101 1/2 Aaa 1,754,825
</TABLE>
21
<PAGE> 161
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indiana (continued)
$ 10,620 Indiana Housing Finance Authority, Single Family Mortgage Revenue Bonds, 1/07 at 101 1/2 Aaa $ 10,543,005
1997 Series B-2, 6.125%, 1/01/27 (Alternative Minimum Tax)
3,750 City of Indianapolis, Indiana, Gas Utility System Revenue Bonds, Series 6/02 at 102 AAA 3,921,938
1992 A, 6.200%, 6/1/23 (Pre-refunded to 6/01/02)
3,000 The Trustees of Ivy Tech State College, Ivy Tech State College Student Fee 7/00 at 100 AAA 3,027,150
Bonds, Series F, 5.875%, 7/01/17
4,950 Jasper County, Indiana, Collateralized Pollution Control Refunding Revenue 7/01 at 102 AAA 5,158,989
Bonds (Northern Indiana Public Service Company Project), Series 1991,
7.100%, 7/01/17
3,300 Marion County Convention and Recreational Facilities Authority (Indiana), 6/01 at 102 AAA 3,450,249
Excise Taxes Lease Rental Revenue Bonds, Series 1991B, 7.000%, 6/01/21
(Pre-refunded to 6/01/01)
3,235 PHM School Renovation Building Corporation, First Mortgage Bonds, Series 1/09 at 102 AAA 3,024,207
1999, 5.250%, 7/15/17
1,000 City of Princeton, Indiana, Pollution Control Refunding Revenue Bonds, 9/00 at 102 AAA 1,022,050
1990 Series (Public Service Company of Indiana, Inc. - Project C),
7.375%, 3/15/12
2,000 Hospital Authority of St. Joseph County (Indiana), Fixed Rate Hospital 8/01 at 102 AAA 2,097,200
Revenue Refunding Bonds, Series 1991A (Memorial Hospital of South
Bend Project), 7.000%, 8/15/20 (Pre-refunded to 8/15/01)
2,190 Shelby County Jail Building Corporation, First Mortgage Bonds (Shelby 7/02 at 102 AAA 2,306,311
County, Indiana), 6.500%, 7/15/09 (Pre-refunded to 7/15/02)
3,690 Shelby Eastern Schools Building Corporation (Shelby County, Indiana), 7/09 at 102 AAA 3,772,324
First Mortgage Bonds, Series 2000, 6.100%, 7/15/20
2,265 Southwest Allen Multi-School Building Corporation, First Mortgage Refunding 1/02 at 101 AAA 2,336,529
Bonds, Series 1992B, Ft. Wayne, Indiana, 6.375%, 1/15/09
-----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 2.5%
7,000 Louisiana Public Facilities Authority, Hospital Revenue Refunding Bonds 5/02 at 102 AAA 7,397,390
(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 6.500%, 5/01/09 5/02 at 102 AAA 5,252,600
2,000 6.500%, 5/01/12 (Pre-refunded to 5/01/02) 5/02 at 102 AAA 2,101,040
4,750 Hospital Service District No. 1 of the Parish of Tangipahoa, State 2/04 at 102 AAA 4,798,498
of Louisiana, Hospital Revenue Bonds, Series 1994, 6.250%, 2/01/24
-----------------------------------------------------------------------------------------------------------------------------------
Maine - 3.1%
8,000 Maine Health and Higher Educational Facilities Authority, Revenue Bonds, 7/05 at 102 AAA 7,957,600
Series 1995A, 5.875%, 7/01/25
3,175 Maine Health and Higher Educational Facilities Authority, Revenue Bonds, 7/04 at 102 AAA 3,466,116
Series 1994B, 7.000%, 7/01/24 (Pre-refunded to 7/01/04)
10,695 Maine State Housing Authority, Mortgage Purchase Bonds, 1996 Series B-2, 5/06 at 102 AAA 10,889,007
6.450%, 11/15/26 (Alternative Minimum Tax)
Town of Old Orchard Beach, Maine, 1992 General Obligation Bonds:
750 6.650%, 9/01/09 (Pre-refunded to 9/01/02) 9/02 at 103 AAA 800,543
500 6.650%, 9/01/10 (Pre-refunded to 9/01/02) 9/02 at 103 AAA 533,695
------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 2.5%
3,500 City of Boston, Massachusetts, Revenue Bonds, Boston City Hospital 8/00 at 102 Aaa 3,593,905
(FHA-Insured Mortgage), Series A, 7.625%, 2/15/21 (Pre-refunded to
8/15/00)
1,150 City of Haverhill, Massachusetts, General Obligation Municipal Purpose 6/02 at 102 AAA 1,221,818
Loan of 1992, Series A, 7.000%, 6/15/12 (Pre-refunded to 6/15/02)
1,250 Massachusetts Bay Transportation Authority, Certificates of Participation, 8/00 at 102 AAA 1,285,163
1990 Series A, 7.650%, 8/01/15 (Pre-refunded to 8/01/00)
3,400 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/02 at 102 AAA 3,500,436
New England Medical Center Hospitals Issue, Series F, 6.625%, 7/01/25
5,875 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 11/03 at 102 AAA 5,270,698
Cape Cod Health Systems, Inc. Issue, Series A, 5.250%, 11/15/21
</TABLE>
22
<PAGE> 162
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts (continued)
Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, South Shore Hospital Issue, Series D:
$ 1,980 6.500%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 102 AAA $ 2,083,237
2,020 6.500%, 7/01/22 7/02 at 102 AAA 2,070,439
-----------------------------------------------------------------------------------------------------------------------------------
Michigan - 8.8%
12,130 City of Bay City, County of Bay, State of Michigan, 1991 General
Obligation Unlimited Tax Street Improvement Bonds, 0.000%, 6/01/21 No Opt. Call AAA 3,422,480
5,000 Caledonia Community Schools, Counties of Kent, Allegan and Barry, State
of Michigan, 1992 School Building and Site and Refunding Bonds (General
Obligation - Unlimited Tax), 6.700%, 5/01/22 (Pre-refunded to 5/01/02) 5/02 at 102 AAA 5,272,500
2,500 Chelsea School District, Counties of Washtenaw and Jackson, State of
Michigan, 1995 School Building and Site Bonds (General Obligation -
Unlimited Tax), 6.000%, 5/01/19 5/05 at 101 AAA 2,627,375
2,000 City of Detroit, Michigan, Sewage Disposal System Revenue Bonds, Series
1991, 6.625%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 AAA 2,084,380
125 City of Detroit, Michigan, Water Supply System Revenue Senior Lien Bonds,
Series 1999-A, 5.750%, 7/01/26 1/10 at 101 AAA 122,913
Michigan State Hospital Finance Authority, Revenue Bonds (Ascension Health
Credit Group), Series 1999A:
13,500 5.750%, 11/15/17 11/09 at 101 AAA 13,374,585
13,675 6.125%, 11/15/26 11/09 at 101 AAA 13,716,572
7,280 Michigan State Housing Development Authority, Rental Housing Revenue Bonds,
1997 Series A, 6.100%, 10/01/33 (Alternative Minimum Tax) 4/07 at 102 AAA 7,157,259
2,000 Michigan Strategic Fund Limited Obligation Refunding Revenue Bonds (The
Detroit Edison Company Pollution Control Bonds Project),
Collateralized Series 1991DD, 6.875%, 12/01/21 12/01 at 102 AAA 2,091,820
Tawas City Hospital Finance Authority, Hospital Revenue and
Refunding Bonds (St. Joseph Health System), Series 1998A:
1,440 5.750%, 2/15/23 2/08 at 102 Aaa 1,420,963
4,250 5.750%, 2/15/23 2/08 at 102 AA*** 4,193,815
15,000 Charter County of Wayne, Michigan, Detroit Metropolitan Wayne County
Airport, Airport Revenue Bonds, Series 1998A, 5.000%, 12/01/22
(Alternative Minimum Tax) 12/08 at 101 AAA 12,867,300
-----------------------------------------------------------------------------------------------------------------------------------
Minnesota - 1.2%
9,675 City of St. Cloud, Minnesota, Health Care Revenue Bonds (The Saint Cloud
Hospital Obligated Group), Series 2000-A, 5.875%, 5/01/30 (WI) 5/10 at 101 Aaa 9,448,412
-----------------------------------------------------------------------------------------------------------------------------------
Mississippi - 1.8%
6,400 Medical Center Educational Building Corporation (Mississippi), Revenue
Bonds, Series 1993 (University of Mississippi Medical Center Project),
5.900%, 12/01/23 (Pre-refunded to 12/01/04) 12/04 at 102 AAA 6,728,640
7,450 Walnut Grove Correctional Authority, Certificates of Participation, Series
1999, Mississippi Department of Corrections, 6.000%, 11/01/19 11/09 at 102 AAA 7,533,291
-----------------------------------------------------------------------------------------------------------------------------------
Missouri - 1.0%
7,950 St. Louis Municipal Finance Corporation, City Justice Center, Leasehold
Revenue Improvement Bonds, Series 1996A (City of St. Louis, Missouri,
Lessee), 5.950%, 2/15/16 2/06 at 102 AAA 8,126,570
-----------------------------------------------------------------------------------------------------------------------------------
Nevada - 0.7%
2,000 Clark County, Nevada, Industrial Development Refunding Revenue Bonds
(Nevada Power Company Project), Series 1992C, 7.200%, 10/01/22 10/02 at 102 AAA 2,126,900
3,625 Clark County, Nevada, Industrial Development Revenue Bonds (Southwest Gas
Corporation Project), Series 1999A, 6.100%, 12/01/38 (Alternative
Minimum Tax) 12/09 at 102 AAA 3,581,790
-----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 0.4%
2,850 New Hampshire Higher Educational and Health Facilities Authority, Revenue
Refunding Bonds, University System of New Hampshire Issue, Series
1992, 6.250%, 7/01/20 7/02 at 102 AAA 2,900,360
</TABLE>
23
<PAGE> 163
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey - 0.2%
$ 1,575 Housing Finance Corporation of the Township of Pennsauken 10/00 at 102 1/2 AAA $ 1,653,750
(Pennsauken, New Jersey), Section 8 Assisted Housing Revenue
Bonds (Pennsauken Housing Associates - 1979 Elderly Project),
8.000%, 4/01/11
-----------------------------------------------------------------------------------------------------------------------------------
New Mexico - 1.0%
City of Albuquerque, New Mexico, Hospital System Revenue
Bonds, 1992 Series B (Presbyterian Healthcare Services):
665 6.600%, 8/01/07 (Pre-refunded to 8/01/00) 8/00 at 100 AAA 668,764
2,335 6.600%, 8/01/07 8/00 at 100 AAA 2,346,979
4,445 City of Farmington, New Mexico, Pollution Control Revenue Refunding Bonds, 12/02 at 102 AAA 4,539,901
1992 Series A (Public Service Company of New Mexico, San Juan and Four
Corners Projects), 6.375%, 12/15/22
-----------------------------------------------------------------------------------------------------------------------------------
New York - 8.5%
4,955 Metropolitan Transportation Authority (New York), Commuter Facilities 7/02 at 102 AAA 5,194,376
Revenue Bonds, Series 1992B, 6.250%, 7/01/17 (Pre-refunded to 7/01/02)
6,925 Metropolitan Transportation Authority (New York), Commuter Facilities 7/02 at 102 AAA 7,259,547
Revenue Bonds, Series 1992B, 6.250%, 7/01/22 (Pre-refunded to 7/01/02)
5,000 Metropolitan Transportation Authority, Commuter Facilities Revenue 7/04 at 101 1/2 AAA 5,324,550
Bonds, Series 1994A, 6.375%, 7/01/18 (Pre-refunded to 7/01/04)
5,945 The City of New York, General Obligation Bonds, Fiscal 1992 8/02 at 101 1/2 AAA 6,257,410
Series C, Fixed Rate Bonds, Subseries C-1, 6.625%, 8/01/12
(Pre-refunded to 8/01/02)
55 The City of New York, General Obligation Bonds, Fiscal 1992 8/02 at 101 1/2 AAA 57,565
Series C, 6.625%, 8/01/12
575 The City of New York, General Obligation Bonds, Fiscal 1993 5/03 at 101 1/2 AAA 585,350
Series E, 6.000%, 5/15/16
The City of New York, General Obligation Bonds, Fiscal 1992 Series B:
715 7.000%, 2/01/18 (Pre-refunded to 2/01/02) 2/02 at 101 1/2 AAA 751,572
3,035 7.000%, 2/01/18 2/02 at 101 1/2 AAA 3,173,973
New York City Municipal Water Finance Authority, Water and
Sewer Revenue Bonds, Fiscal 1992 Series A:
3,010 6.750%, 6/15/16 (Pre-refunded to 6/15/01) 6/01 at 101 AAA 3,112,852
3,320 6.750%, 6/15/16 6/01 at 101 AAA 3,420,563
3,900 New York City Transit Authority, Transit Facilities Refunding Revenue No Opt. Call AAA 3,791,151
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 Project):
3,500 6.500%, 11/15/10 11/04 at 102 AAA 3,733,065
3,000 6.600%, 11/15/11 11/04 at 102 AAA 3,211,770
2,000 Dormitory Authority of the State of New York, Victory Memorial Hospital, 8/09 at 101 AAA 1,904,000
FHA Insured Mortgage Hospital Revenue Bonds, Series 1999, 5.250%,
8/01/15
7,500 Empire Development Corporation, New York State Urban Development 1/06 at 102 AAA 6,922,350
Corporation, Correctional Capital Facilities, Revenue Bonds, Series 6,
5.375%, 1/01/25
6,060 New York State Urban Development Corporation, Correctional Facilities 1/09 at 101 AAA 6,094,966
Service Contract Revenue Bonds, Series C, 5.875%, 1/01/19
5,240 Triborough Bridge and Tunnel Authority, Special Obligation Refunding 1/01 at 102 AAA 5,409,724
Bonds, Series 1991B, 6.875%, 1/01/15
-----------------------------------------------------------------------------------------------------------------------------------
Ohio - 0.3%
2,500 Dublin City School District, Franklin, Delaware and Union Counties, Ohio, 12/02 at 102 AAA 2,627,475
Various Purpose School Building Construction and Improvement Bonds
(General Obligation - Unlimited Tax), 6.200%, 12/01/19 (Pre-refunded
to 12/01/02)
</TABLE>
24
<PAGE> 164
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oklahoma - 2.1%
$ 19,975 The McAlester Public Works Authority (Oklahoma), Utility System 2/09 at 31 1/32 Aaa $ 3,020,420
Refunding and Improvement Revenue Bonds, Series 1999A, 0.000%, 2/01/30
40 Muskogee County Home Finance Authority (Oklahoma), Single Family Mortgage 6/00 at 102 AAA 40,736
Revenue Refunding Bonds, Series 1990 A, 7.600%, 12/01/10
5,000 Oklahoma Industries Authority, Health System Revenue Bonds (Obligated Group
consisting of Baptist Medical Center of Oklahoma, Inc., South Oklahoma
City Hospital Corporation and Baptist Rural Health System, Inc.), 8/05 at 102 AAA 5,199,550
Fixed Rate Bonds, 6.250%, 8/15/12
5,000 Oklahoma Industries Authority, Health System Revenue and Refunding Bonds, 8/09 at 101 AAA 4,791,500
Series 1999A, 5.750%, 8/15/29
Trustees of the Tulsa Airport's Improvement Trust,
Oklahoma, Tulsa International Airport, General Revenue Bonds, Series 1999A:
2,000 6.000%, 6/01/21 6/10 at 100 AAA 2,002,120
1,000 6.125%, 6/01/26 (Alternative Minimum Tax) 6/10 at 100 AAA 993,490
-----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 2.8%
3,000 North Penn Water Authority (Montgomery County, Pennsylvania), Water 11/04 at 101 AAA 3,265,410
Revenue Bonds, Series of 1994, 7.000%, 11/01/24
(Pre-refunded to 11/01/04)
3,900 The Philadelphia Municipal Authority, Philadelphia, Pennsylvania, Justice
Lease Revenue Bonds, 1991 Series B, 7.125%, 11/15/18 (Pre-refunded to 11/01 at 102 AAA 4,115,787
11/15/01)
13,000 Washington County Authority, Pennsylvania, Capital Funding Revenue Bonds
(Capital Projects and Equipment Acquisition Program), Series of 1999, No Opt. Call AAA 13,276,640
6.150%, 12/01/29
1,000 Washington County Hospital Authority (Pennsylvania), Hospital Revenue
Refunding Bonds, Series A of 1990 (The Washington Hospital Project), 7/00 at 102 AAA 1,023,840
7.150%, 7/01/17
-----------------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 0.5%
3,750 Commonwealth of Puerto Rico, Public Improvement Bonds of 1992 (General 7/02 at 101 1/2 AAA 3,958,575
Obligation Bonds), 6.600%, 7/01/13 (Pre-refunded to 7/01/02)
-----------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 2.7%
4,000 City of Cranston, Rhode Island, General Obligation Bonds, 7.200%, 7/01 at 101 1/2 AAA 4,180,560
7/15/11 (Pre-refunded to 7/15/01)
3,130 Kent County Water Authority (Rhode Island), General Revenue Bonds, 1994 7/04 at 102 AAA 3,282,368
Series A, 6.350%, 7/15/14
1,000 Providence Housing Development Corporation, Mortgage Revenue Refunding 7/04 at 102 AAA 1,035,100
Bonds, Series 1994A (FHA-Insured Mortgage Loan - Barbara Jordan
Apartments Project, Providence, Rhode Island), 6.650%, 7/01/15
2,250 Rhode Island Depositors Economic Corporation, Special Obligation Bonds, 8/02 at 102 AAA 2,377,350
1992 Series A, 6.625%, 8/01/19 (Pre-refunded to 8/01/02)
10,000 Rhode Island Clean Water Finance Agency, Wastewater Treatment System 9/07 at 102 AAA 9,653,400
Revenue Bonds (City of Cranston/Triton Ocean State LLC Project),
Series 1997, 5.800%, 9/01/22 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
South Carolina - 1.6%
Charleston County, South Carolina, Charleston Public Facilities Corporation,
Certificates of Participation, Series 1994B:
1,430 6.875%, 6/01/14 (Pre-refunded to 6/01/04) 6/04 at 102 AAA 1,552,780
70 6.875%, 6/01/14 6/04 at 102 AAA 74,880
2,385 7.000%, 6/01/19 (Pre-refunded to 6/01/04) 6/04 at 102 AAA 2,600,676
115 7.000%, 6/01/19 6/04 at 102 AAA 123,450
5,435 Greenville Memorial Auditorium District Public Facilities Corporation, 3/06 at 102 AAA 5,693,543
Greenville Memorial Auditorium District, South Carolina, Certificates
of Participation (Bi-Lo Center Project), Series 1996B, 5.750%, 3/01/22
(Pre-refunded to 3/01/06)
2,000 City of Rock Hill, South Carolina, Combined Utility System Revenue Bonds, 1/01 at 102 AAA 2,059,860
Series 1991, 6.375%, 1/01/15
</TABLE>
25
<PAGE> 165
Portfolio of Investments
Nuveen Insured Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tennessee - 2.3%
$ 2,000 Memphis-Shelby County Airport Authority (Tennessee), Airport Revenue Bonds,
Series 1999D, 6.000%, 3/01/24 (Alternative Minimum Tax) 3/10 at 101 AAA $ 1,996,040
16,000 The Health and Educational Facilities Board of the Metropolitan Government
of Nashville and Davidson County, Tennessee, Revenue Bonds (Ascension
Health Credit Group), Series 1999A, 6.000%, 11/15/30 11/09 at 101 AAA 15,921,760
-----------------------------------------------------------------------------------------------------------------------------------
Texas - 5.6%
3,000 Bexar County, Texas, Health Facilities Development Corporation, Hospital
Revenue Bonds (Baptist Memorial Hospital System Project), Series 1994,
6.750%, 8/15/19 (Pre-refunded to 8/15/04) 8/04 at 102 AAA 3,239,910
4,575 Harris County, Texas, Toll Road Senior Lien, Revenue Refunding Bonds, Series
1992A, 6.500%, 8/15/17 (Pre-refunded to 8/15/02) 8/02 at 102 AAA 4,824,429
1,000 Harris County Hospital District, Refunding Revenue Bonds, Texas, Series
1990, 7.400%, 2/15/10 No Opt. Call AAA 1,119,220
500 City of Houston, Texas, Senior Lien Hotel Occupancy Tax and Parking
Facilities, Fixed Rate Revenue Bonds, Series 1985, Custodial Receipts,
Series A, 7.000%, 7/01/15 (Pre-refunded to 7/01/01) 7/01 at 100 AAA 513,905
Lower Colorado River Authority, Texas, Priority Refunding Revenue Bonds,
Series 1991B:
600 7.000%, 1/01/11 (Pre-refunded to 1/01/01) 1/01 at 102 AAA 622,338
225 7.000%, 1/01/11 1/01 at 102 AAA 233,377
Retama Development Corporation, Special Facilities Revenue Bonds (Retama
Park Racetrack Project), Series 1993:
9,715 8.750%, 12/15/18 No Opt. Call AAA 13,126,228
5,405 10.000%, 12/15/20 No Opt. Call AAA 8,145,605
5,000 Tarrant County Health Facilities Development Corporation, Hospital Revenue
Refunding and Improvement Bonds (Fort Worth Osteopathic Hospital,
Inc. Project), Series 1993, 6.000%, 5/15/21 No Opt. Call AAA 5,080,800
6,080 Texas Health Facilities Development Corporation, Hospital Revenue Bonds
(All Saints Episcopal Hospitals of Fort Worth Project), Series 1993B,
6.250%, 8/15/22 8/03 at 102 AAA 6,148,826
-----------------------------------------------------------------------------------------------------------------------------------
Utah - 1.5%
5,000 Municipal Building Authority of Salt Lake City, Salt Lake County, Utah
Lease Revenue Bonds (Municipal Improvements and Refunding Project),
Series 1999A, 5.400%, 10/15/19 1/09 at 101 AAA 4,739,900
3,055 State of Utah, State Building Ownership Authority, Lease Revenue Bonds
(State Facilities Master Lease Program), Series 1995A, 5.750%,
5/15/18 (Pre-refunded to 11/15/05) 11/05 at 100 AAA 3,163,972
15 Utah Housing Finance Agency, Single Family Mortgage Senior Bonds, 1988
Issue C (Federally Insured or Guaranteed Mortgage Loans), 8.375%,
7/01/19 No Opt. Call AAA 15,088
3,500 White City Water Improvement District, Salt Lake County, Utah, General
Obligation Water Bonds, Series 1995, 6.600%, 2/01/25 (Pre-refunded
to 2/01/05) 2/05 at 100 AAA 3,733,450
-----------------------------------------------------------------------------------------------------------------------------------
Vermont - 0.6%
2,000 Vermont Housing Finance Agency, Single Family Housing Bonds, Series 9,
5.900%, 5/01/29 (Alternative Minimum Tax) 6/07 at 101 1/2 AAA 1,935,340
2,615 Vermont Housing Finance Agency, Single Family Housing Bonds, Series 12A,
6.300%, 11/01/31 (Alternative Minimum Tax) 11/09 at 100 AAA 2,650,799
-----------------------------------------------------------------------------------------------------------------------------------
Washington - 3.8%
1,000 City of Marysville, Washington, Water and Sewer Revenue Bonds, 1991,
7.000%, 12/01/11 (Pre-refunded to 12/01/03) 12/03 at 100 AAA 1,066,470
Port of Seattle (Washington), Special Facility Revenue
Bonds (Terminal 18 Project), Series 1999C:
8,775 6.000%, 9/01/20 (Alternative Minimum Tax) 3/10 at 101 AAA 8,748,583
7,935 6.250%, 9/01/26 (Alternative Minimum Tax) 3/10 at 101 AAA 8,024,424
5,000 Public Utility District No. 1 of Snohomish County, Washington, Generation
System Revenue Bonds, Series 1993B, 5.800%, 1/01/24 (Alternative
Minimum Tax) 1/04 at 102 AAA 4,815,900
5,000 Washington Public Power Supply System, Nuclear Project No. 2 Refunding
Revenue Bonds, Series 1993B, 5.400%, 7/01/05 No Opt. Call AAA 5,041,100
2,000 Bellingham School District No. 501, Whatcom County, Washington, Unlimited
Tax General Obligation Bonds, 1994, 6.125%, 12/01/13 (Pre-refunded
to 12/01/04) 12/04 at 100 AAA 2,092,440
</TABLE>
26
<PAGE> 166
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wisconsin - 0.4%
$ 2,000 City of Superior, Wisconsin, Limited Obligation Refunding Revenue Bonds
(Midwest Energy Resources Company Project), Series E-1991
(Collateralized), 6.900%, 8/01/21 No Opt. Call AAA $ 2,258,360
1,000 Three Lakes School District General Obligation Bonds, 6.750%, 4/01/12
(Pre-refunded to 4/01/03) 4/03 at 100 AAA 1,049,930
-----------------------------------------------------------------------------------------------------------------------------------
Wyoming - 0.3%
2,000 The Trustees of the University of Wyoming, Facilities Revenue Bonds, Series
1991, 7.100%, 6/01/10 6/00 at 101 AAA 2,024,840
-----------------------------------------------------------------------------------------------------------------------------------
$ 846,820 Total Investments - (cost $748,494,878) - 99.7% 772,319,523
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.3% 2,306,387
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 774,625,910
===================================================================================================================
</TABLE>
All of the bonds in the portfolio are either covered by Original Issue
Insurance, Secondary Market Insurance or Portfolio Insurance, or are backed
by an escrow or trust containing sufficient U.S. Government or U.S.
Government agency securities, any of which ensure the timely payment of
principal and interest.
* 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.
(WI) Security purchased on a when-issued basis.
See accompanying notes to financial statements.
27
<PAGE> 167
Statement of Net Assets
April 30, 2000
<TABLE>
<CAPTION>
Intermediate
Duration Insured
Municipal Bond Municipal Bond
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value $ 2,590,993,629 $ 772,319,523
Cash 5,824,522 2,204,448
Receivables:
Interest 50,415,467 14,800,061
Investments sold 3,625,000 4,683,397
Shares sold 86,037 98,672
Other assets 101,759 30,969
-----------------------------------------------------------------------------------------------------------------
Total assets 2,651,046,414 794,137,070
-----------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 8,585,983 15,851,324
Shares redeemed 1,799,076 812,395
Accrued expenses:
Management fees 987,252 306,089
12b-1 distribution and service fees 31,692 38,110
Other 646,958 258,206
Dividends payable 8,635,222 2,245,036
-----------------------------------------------------------------------------------------------------------------
Total liabilities 20,686,183 19,511,160
-----------------------------------------------------------------------------------------------------------------
Net assets $ 2,630,360,231 $ 774,625,910
-----------------------------------------------------------------------------------------------------------------
Class A Shares
Net assets $ 116,621,259 $ 109,729,041
Shares outstanding 13,093,239 10,606,480
Net asset value and redemption price per share $ 8.91 $ 10.35
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 9.30 $ 10.80
-----------------------------------------------------------------------------------------------------------------
Class B Shares
Net assets $ 11,560,131 $ 17,034,650
Shares outstanding 1,297,394 1,646,233
Net asset value, offering and redemption price per share $ 8.91 $ 10.35
-----------------------------------------------------------------------------------------------------------------
Class C Shares
Net assets $ 6,919,759 $ 10,989,818
Shares outstanding 777,569 1,071,553
Net asset value, offering and redemption price per share $ 8.90 $ 10.26
-----------------------------------------------------------------------------------------------------------------
Class R Shares
Net assets $ 2,495,259,082 $ 636,872,401
Shares outstanding 279,932,310 61,781,686
Net asset value, offering and redemption price per share $ 8.91 $ 10.31
-----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
28
<PAGE> 168
Statement of Operations
Year Ended April 30, 2000
<TABLE>
<CAPTION>
Intermediate
Duration Insured
Municipal Bond Municipal Bond
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income $ 160,658,069 $ 48,031,957
----------------------------------------------------------------------------------------------------------------
Expenses
Management fees 12,494,246 3,865,869
12b-1 service fees - Class A 240,723 222,309
12b-1 distribution and service fees - Class B 110,946 149,035
12b-1 distribution and service fees - Class C 55,072 83,159
Shareholders' servicing agent fees and expenses 2,663,243 898,359
Custodian's fees and expenses 388,723 175,057
Trustees' fees and expenses 64,976 22,915
Professional fees 58,493 31,555
Shareholders' reports - printing and mailing expenses 635,233 71,886
Federal and state registration fees 33,238 24,096
Portfolio insurance expense - 23,810
Other expenses 116,029 28,079
----------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit 16,860,922 5,596,129
Custodian fee credit (124,196) (65,130)
----------------------------------------------------------------------------------------------------------------
Net expenses 16,736,726 5,530,999
----------------------------------------------------------------------------------------------------------------
Net investment income 143,921,343 42,500,958
----------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (110,449) (13,652,989)
Net change in unrealized appreciation or depreciation of investments (203,225,001) (47,069,065)
----------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (203,335,450) (60,722,054)
----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (59,414,107) $(18,221,096)
================================================================================================================
</TABLE>
See accompanying notes to financial statements.
29
<PAGE> 169
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Intermediate Duration
Municipal Bond Insured Municipal Bond
--------------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
4/30/00 4/30/99 4/30/00 4/30/99
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 143,921,343 $ 145,703,659 $ 42,500,958 $ 42,267,203
Net realized gain (loss) from investment transactions (110,449) 9,886,226 (13,652,989) 1,889,114
Net change in unrealized appreciation or depreciation of
investments (203,225,001) 33,024,384 (47,069,065) 9,916,541
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (59,414,107) 188,614,269 (18,221,096) 54,072,858
-----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders From undistributed net
investment income:
Class A (5,987,666) (5,110,885) (5,693,646) (4,814,934)
Class B (487,535) (259,255) (682,632) (375,574)
Class C (319,952) (250,362) (502,115) (396,974)
Class R (135,743,405) (139,355,083) (35,829,096) (36,432,960)
From accumulated net realized gains from investment
transactions:
Class A (157,870) (276,503) (219,264) (289,942)
Class B (16,016) (16,969) (31,576) (28,707)
Class C (9,618) (15,972) (21,487) (28,282)
Class R (3,372,922) (7,337,232) (1,310,350) (2,094,492)
-----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (146,094,984) (152,622,261) (44,290,166) (44,461,865)
-----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 138,202,949 174,357,355 75,557,406 79,661,007
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 109,843,012 116,641,699 28,547,915 29,306,392
-----------------------------------------------------------------------------------------------------------------------------------
248,045,961 290,999,054 104,105,321 108,967,399
Cost of shares redeemed (383,886,721) (279,773,551) (127,729,604) (88,373,485)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions (135,840,760) 11,225,503 (23,624,283) 20,593,914
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (341,349,851) 47,217,511 (86,135,545) 30,204,907
Net assets at the beginning of year 2,971,710,082 2,924,492,571 860,761,455 830,556,548
-----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 2,630,360,231 $ 2,971,710,082 $ 774,625,910 $ 860,761,455
===================================================================================================================================
Balance of undistributed net investment income at the
end of year $ 2,643,271 $ 1,260,486 $ 360,250 $ 566,781
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
30
<PAGE> 170
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 Intermediate Duration Municipal Bond
Fund ("Intermediate Duration 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.
Effective November 24, 1999, Nuveen Municipal Bond Fund ("Municipal Bond")
changed its name to Nuveen Intermediate Duration Municipal Bond Fund. Also
effective November 24, 1999, the fund will invest in a diversified portfolio of
investment grade quality bonds of various maturities with a weighted average
duration of between three and 10 years. Both changes were approved by the Board
of Trustees of Municipal Bond on November 4, 1999.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
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, 2000, Intermediate Duration Municipal Bond and Insured Municipal Bond
had outstanding when-issued purchase commitments of $8,585,983 and $15,851,324,
respectively.
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.
31
<PAGE> 171
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 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, 2000, 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, 2000.
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.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
32
<PAGE> 172
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Intermediate Duration Municipal Bond
--------------------------------------------------------------------------
Year Ended 4/30/00 Year Ended 4/30/99
---------------------------------- -----------------------------------
Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 3,537,711 $ 32,170,580 3,884,851 $ 37,318,567
Class B 719,576 6,517,947 649,958 6,249,871
Class C 349,705 3,137,585 358,434 3,445,814
Class R 10,637,230 96,376,837 13,266,170 127,343,103
Shares issued to shareholders due to
reinvestment of distributions:
Class A 452,979 4,113,838 376,509 3,619,256
Class B 27,021 245,091 16,794 161,493
Class C 21,778 197,700 18,430 177,022
Class R 11,574,998 105,286,383 11,717,295 112,683,928
---------------------------------------------------------------------------------------------------------------------
27,320,998 248,045,961 30,288,441 290,999,054
---------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (3,476,596) (31,284,034) (1,942,093) (18,655,868)
Class B (502,732) (4,466,044) (50,591) (484,678)
Class C (345,467) (3,101,371) (142,641) (1,371,429)
Class R (38,143,243) (345,035,272) (26,989,392) (259,261,576)
---------------------------------------------------------------------------------------------------------------------
(42,468,038) (383,886,721) (29,124,717) (279,773,551)
---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (15,147,040) $ (135,840,760) 1,163,724 $ 11,225,503
=====================================================================================================================
Insured Municipal Bond
----------------------------------------------------------------------
Year Ended 4/30/00 Year Ended 4/30/99
------------------------------ --------------------------------
Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 3,086,726 $ 32,667,905 2,677,296 $ 29,968,100
Class B 731,514 7,722,423 822,802 9,209,496
Class C 563,538 5,837,176 367,390 4,077,116
Class R 2,795,012 29,329,902 3,266,237 36,406,295
Shares issued to shareholders due to
reinvestment of distributions:
Class A 332,542 3,509,791 281,935 3,161,785
Class B 30,531 321,893 16,650 186,828
Class C 29,369 306,993 24,527 272,429
Class R 2,317,838 24,409,238 2,299,262 25,685,350
---------------------------------------------------------------------------------------------------------------------
9,887,070 104,105,321 9,756,099 108,967,399
---------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,672,467) (28,212,038) (1,302,533) (14,580,513)
Class B (334,945) (3,509,444) (72,969) (815,543)
Class C (511,995) (5,290,567) (137,020) (1,519,584)
Class R (8,674,594) (90,717,555) (6,411,557) (71,457,845)
---------------------------------------------------------------------------------------------------------------------
(12,194,001) (127,729,604) (7,924,079) (88,373,485)
---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (2,306,931) $ (23,624,283) 1,832,020 $ 20,593,914
=====================================================================================================================
</TABLE>
33
<PAGE> 173
Notes to Financial Statements (continued)
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on June 1, 2000, to shareholders of record on May 9,
2000, as follows:
<TABLE>
<CAPTION>
Intermediate Duration Insured
Municipal Bond Municipal Bond
----------------------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $ .0375 $ .0450
Class B .0320 .0385
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, 2000, were as follows:
<TABLE>
<CAPTION>
Intermediate Duration Insured
Municipal Bond Municipal Bond
----------------------------------------------------------------------------------------------
<S> <C> <C>
Purchases:
Long-term municipal securities $ 368,810,530 $ 352,695,073
Short-term municipal securities 105,460,000 109,000,000
Sales and maturities:
Long-term municipal securities 494,298,848 374,053,499
Short-term municipal securities 105,460,000 109,000,000
==============================================================================================
</TABLE>
At April 30, 2000, the identified cost of investments owned for federal income
tax purposes were as follows:
<TABLE>
<CAPTION>
Intermediate Duration Insured
Municipal Bond Municipal Bond
----------------------------------------------------------------------------------------------
<S> <C> <C>
$ 2,534,500,221 $ 756,632,315
===============================================================================================
</TABLE>
At April 30, 2000, Insured Municipal Bond had an unused capital loss
carryforward of $5,599,414, 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 2008.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at April 30, 2000, were as follows:
<TABLE>
<CAPTION>
Intermediate Duration Insured
Municipal Bond Municipal Bond
----------------------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $ 93,463,449 $ 29,820,530
depreciation (36,970,041) (14,133,322)
Net unrealized appreciation $ 56,493,408 $ 15,687,208
===============================================================================================
</TABLE>
34
<PAGE> 174
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 assets of each Fund as follows:
<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 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 Intermediate Duration 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.
During the fiscal year ended April 30, 2000, John Nuveen & Co Incorporated (the
"Distributor"), a wholly-owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares of approximately $278,100 and
$229,000 for Intermediate Duration Municipal Bond and Insured Municipal Bond,
respectively, of which approximately $259,600 and $229,000, 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, 2000, the Distributor compensated
authorized dealers directly with approximately $215,300 and $359,600 in
commission advances at the time of purchase for Intermediate Duration 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
collected on Class B Shares, and all 12b-1 service and distribution fees
collected on Class C Shares during the first year following a purchase are
retained by the Distributor. During the fiscal year ended April 30, 2000, the
Distributor retained approximately $118,300 and $154,800 in such 12b-1 fees for
Intermediate Duration 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 $94,500 and $105,400 of CDSC on
share redemptions for Intermediate Duration Municipal Bond and Insured Municipal
Bond, respectively, during the fiscal year ended April 30, 2000.
7. Composition of Net Assets
At April 30, 2000, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Intermediate Duration Insured
Municipal Bond Municipal Bond
------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $ 2,570,813,572 $ 764,177,869
Balance of undistributed net investment
income 2,643,271 360,250
Accumulated net realized gain (loss)
from investment transactions (136,504) (13,736,854)
Net unrealized appreciation of investments 57,039,892 23,824,645
------------------------------------------------------------------------------------------------
Net assets $ 2,630,360,231 $ 774,625,910
================================================================================================
</TABLE>
35
<PAGE> 175
Notes to Financial Statements (continued)
8. Investment Composition
At April 30, 2000, the revenue sources by municipal purpose, expressed as a
percent of long-term investments, were as follows:
<TABLE>
<CAPTION>
Intermediate Duration Insured
Municipal Bond Municipal Bond
------------------------------------------------------------------------------------------------
<S> <C> <C>
Education and Civic Organizations 2% 4%
Healthcare 16 17
Housing/Multifamily 7 1
Housing/Single Family 5 7
Tax Obligation/General 6 7
Tax Obligation/Limited 10 12
Transportation 7 6
U.S. Guaranteed 17 35
Utilities 22 6
Water and Sewer 8 4
Other -- 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 Intermediate Duration 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.
36
<PAGE> 176
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------- -----------------------------
INTERMEDIATE DURATION
MUNICIPAL BOND 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 (Loss) Total Income Gains Total Value Return (a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/95)
2000 $ 9.57 $ .45 $ (.65) $ (.20) $ (.45) $ (.01) $ (.46) $ 8.91 (2.02)%
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 (d) 9.24 .08 (.10) (.02) (.08) -- (.08) 9.14 (.23)
1997 (e) 9.28 .48 -- .48 (.47) (.05) (.52) 9.24 5.26
1996 (f) 9.15 .34 .14 .48 (.32) (.03) (.35) 9.28 5.33
Class B (2/97)
2000 9.57 .39 (.66) (.27) (.38) (.01) (.39) 8.91 (2.78)
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 (d) 9.24 .09 (.11) (.02) (.07) -- (.07) 9.15 (.25)
1997 (f) 9.23 .03 .01 .04 (.03) -- (.03) 9.24 .47
Class C (6/95)
2000 9.57 .40 (.66) (.26) (.40) (.01) (.41) 8.90 (2.71)
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 (d) 9.23 .07 (.09) (.02) (.07) -- (.07) 9.14 (.21)
1997 (e) 9.26 .42 -- .42 (.40) (.05) (.45) 9.23 4.64
1996 (f) 9.15 .29 .13 .42 (.28) (.03) (.31) 9.26 4.59
Class R (11/76)
2000 9.58 .47 (.66) (.19) (.47) (.01) (.48) 8.91 (1.93)
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 (d) 9.24 .08 (.09) (.01) (.08) -- (.08) 9.15 (.09)
1997 (e) 9.28 .49 .01 .50 (.49) (.05) (.54) 9.24 5.53
1996 (e) 9.00 .51 .31 .82 (.51) (.03) (.54) 9.28 9.31
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
----------------------- ----------------------- ----------------------
Ratio Ratio Ratio
INTERMEDIATE DURATION of Net of Net of Net
MUNICIPAL BOND Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
April 30, (000) Assets Assets Assets Assets Assets Assets Rate
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/95)
2000 $ 116,621 .80% 5.01% .80% 5.01% .79% 5.02% 13%
1999 120,418 .77 4.71 .77 4.71 .77 4.71 12
1998 97,029 .80 4.83 .80 4.83 .80 4.83 10
1997 (d) 70,331 .77* 5.13* .77* 5.13* .77* 5.13* 2
1997 (e) 68,204 .81 5.11 .81 5.11 .81 5.11 12
1996 (f) 37,089 .86* 5.11* .83* 5.14* .83* 5.14* 17
Class B (2/97)
2000 11,560 1.55 4.27 1.55 4.27 1.54 4.28 13
1999 10,086 1.52 3.96 1.52 3.96 1.52 3.96 12
1998 4,136 1.56 4.05 1.56 4.05 1.56 4.05 10
1997 (d) 468 1.53* 4.39* 1.53* 4.39* 1.53* 4.39* 2
1997 (f) 43 1.51* 5.23* 1.51* 5.23* 1.51* 5.23* 12
Class C (6/95)
2000 6,920 1.35 4.47 1.35 4.47 1.34 4.48 13
1999 7,191 1.32 4.15 1.32 4.15 1.32 4.15 12
1998 4,886 1.35 4.29 1.35 4.29 1.35 4.29 10
1997 (d) 5,360 1.32* 4.58* 1.32* 4.58* 1.32* 4.58* 2
1997 (e) 5,039 1.54 4.37 1.54 4.37 1.54 4.37 12
1996 (f) 1,915 1.64* 4.33* 1.58* 4.39* 1.58* 4.39* 17
Class R (11/76)
2000 2,495,259 .59 5.21 .59 5.21 .59 5.22 13
1999 2,834,016 .57 4.90 .57 4.90 .57 4.90 12
1998 2,818,442 .60 5.04 .60 5.04 .60 5.04 10
1997 (d) 2,774,648 .57* 5.33* .57* 5.33* .57* 5.33* 2
1997 (e) 2,818,214 .57 5.35 .57 5.35 .57 5.35 12
1996 (e) 2,878,641 .59 5.53 .59 5.53 .59 5.53 17
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) For the two months ended April 30.
(e) For the fiscal year ended February 28/29.
(f) From commencement of class operations as noted through February 28/29.
37
<PAGE> 177
Financial Highlights (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------------------- ------------------------------
INSURED MUNICIPAL BOND 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 (Loss) Total Income Gains Total Value Return (a)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $ 11.16 $ .54 $ (.79) $ (.25) $ (.54) $ (.02) $ (.56) $ 10.35 (2.19)%
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 (d) 10.82 .09 (.16) (.07) (.09) - (.09) 10.66 (.63)
1997 (e) 10.97 .56 (.13) .43 (.54) (.04) (.58) 10.82 4.04
1996 (e) 10.40 .54 .57 1.11 (.54) - (.54) 10.97 10.90
Class B (2/97)
2000 11.16 .46 (.79) (.33) (.46) (.02) (.48) 10.35 (2.94)
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 (d) 10.82 .09 (.16) (.07) (.08) - (.08) 10.67 (.65)
1997 (f) 10.80 .04 .02 .06 (.04) - (.04) 10.82 .55
Class C (9/94)
2000 11.05 .47 (.77) (.30) (.47) (.02) (.49) 10.26 (2.64)
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 (d) 10.72 .08 (.16) (.08) (.08) - (.08) 10.56 (.73)
1997 (e) 10.85 .46 (.09) .37 (.46) (.04) (.50) 10.72 3.48
1996 (e) 10.31 .46 .54 1.00 (.46) - (.46) 10.85 9.88
Class R (12/86)
2000 11.11 .56 (.78) (.22) (.56) (.02) (.58) 10.31 (1.94)
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 (d) 10.78 .09 (.15) (.06) (.10) - (.10) 10.62 (.60)
1997 (e) 10.92 .57 (.11) .46 (.56) (.04) (.60) 10.78 4.38
1996 (e) 10.38 .57 .54 1.11 (.57) - (.57) 10.92 10.94
=================================================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) For the two months ended April 30.
(e) For the fiscal year ended February 28/29.
(f) From commencement of class operations as noted through February 28/29.
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
-------------------- --------------------- ---------------------
Ratio Ratio Ratio
of Net of Net of Net
INSURED MUNICIPAL BOND Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
April 30, (000) Assets Assets Assets Assets Assets Assets Rate
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $ 109,729 .83% 5.09% .83% 5.09% .83% 5.09% 44%
1999 109,986 .81 4.80 .81 4.80 .81 4.80 13
1998 90,459 .81 4.91 .86 4.91 .86 4.91 40
1997 (d) 69,291 .84* 5.12* .84* 5.12* .84* 5.12* 12
1997 (e) 68,268 .87 5.07 .87 5.07 .87 5.07 35
1996 (e) 46,943 .92 5.00 .91 5.01 .91 5.01 27
Class B (2/97)
2000 17,035 1.59 4.35 1.59 4.35 1.58 4.35 44
1999 13,602 1.56 4.05 1.56 4.05 1.56 4.05 13
1998 4,992 1.61 4.14 1.61 4.14 1.61 4.14 40
1997 (d) 488 1.59* 4.36* 1.59* 4.36* 1.59* 4.36* 12
1997 (f) 228 1.58* 4.84* 1.58* 4.84* 1.58* 4.84* 35
Class C (9/94)
2000 10,990 1.38 4.53 1.38 4.53 1.38 4.54 44
1999 10,947 1.36 4.25 1.36 4.25 1.36 4.25 13
1998 8,037 1.41 4.36 1.41 4.36 1.41 4.36 40
1997 (d) 5,615 1.39* 4.57* 1.39* 4.57* 1.39* 4.57* 12
1997 (e) 5,448 1.61 4.33 1.61 4.33 1.61 4.33 35
1996 (e) 5,151 1.63 4.34 1.63 4.34 1.63 4.34 27
Class R (12/86)
2000 636,872 .63 5.28 .63 5.28 .62 5.29 44
1999 726,228 .62 5.00 .62 5.00 .62 5.00 13
1998 727,068 .66 5.12 .66 5.12 .66 5.12 40
1997 (d) 714,622 .64* 5.31* .64* 5.31* .64* 5.31* 12
1997 (e) 732,587 .63 5.31 .63 5.31 .63 5.31 35
1996 (e) 761,936 .63 5.33 .63 5.33 .63 5.33 27
===========================================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) For the two months ended April 30.
(e) For the fiscal year ended February 28/29.
(f) From commencement of class operations as noted through February 28/29.
38
<PAGE> 178
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 Intermediate Duration 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, 2000, 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 auditing standards generally accepted
in the United States. 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, 2000, 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
Intermediate Duration Municipal Bond Fund and Nuveen Insured Municipal Bond Fund
of the Nuveen Flagship Municipal Trust as of April 30, 2000, and the results of
their operations, the changes in their net assets and their financial highlights
for the periods indicated thereon in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 20, 2000
39
<PAGE> 179
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
International Growth Fund
Innovation Fund
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
Floating Rate Fund(1)
Tax-Free Income
National Funds
High Yield
Long-Term
Insured Long Term
Intermediate-Term
Limited-Term
State Funds
Arizona
California(2)
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts(2)
Michigan
Missouri
New Jersey
New Mexico
New York(2)
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 advisor 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
experienced investment managers 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.
Nuveen's managers give you 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
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.
1. This is a continuously-offered closed-end interval fund. As such, redemptions
are only available during quarterly repurchase periods. See fund prospectus for
additional information.
2. Long-term and insured long-term portfolios.
40
<PAGE> 180
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter W. 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 Funds Services Company
73 Tremont Street
Boston, MA 02108
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
41
<PAGE> 181
Serving
Investors
For Generations
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
A 100-Year Tradition of Quality Investments
Since 1898, John Nuveen & Co. Incorporated has been synonymous with investments
that withstand the test of time. In fact, more than 1.3 million investors have
trusted Nuveen to help them build and sustain the wealth of a lifetime.
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. We can help
you build a better, well-diversified portfolio.
Call Your Financial Advisor Today
To find out how Nuveen Mutual Funds might round out your investment portfolio,
contact your financial advisor today. Or call Nuveen at (800) 257-8787 for more
information. Ask your advisor or call for a prospectus, which details risks,
fees and expenses. Please read the prospectus carefully before you invest.
N U V E E N
Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
<PAGE> 182
N U V E E N
Investments
--------------------------------------------------------------------------------
Municipal Bond
Funds
ANNUAL REPORT APRIL 30, 2000
Dependable, tax-free income to help you keep more of what you earn.
[PHOTOS APPEAR HERE]
All-American Municipal Bond Fund
Intermediate Municipal Bond Fund
Limited Term Municipal Bond Fund
High Yield Municipal Bond Fund
<PAGE> 183
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 Funds Services Company
73 Tremont Street
Boston, MA 02108
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
Contents
1 Dear Shareholder
3 From the Portfolio Managers' Perspective:
Nuveen Flagship All-American
Municipal Bond Fund
Nuveen Flagship Intermediate
Municipal Bond Fund
Nuveen Flagship Limited Term
Municipal Bond Fund
7 Nuveen Flagship All-American Municipal Bond Fund Spotlight
8 Nuveen Flagship Intermediate Municipal
Bond Fund Spotlight
9 Nuveen Flagship Limited Term Municipal Bond
Fund Spotlight
10 From the Portfolio Manager's Perspective
Nuveen High Yield Municipal Bond Fund
13 Nuveen High Yield Municipal Bond Fund
Spotlight
14 Portfolio of Investments
39 Statement of Net Assets
40 Statement of Operations
41 Statement of Changes in Net Assets
42 Notes to Financial Statements
48 Financial Highlights
52 Report of Independent Public Accountants
53 Building a Better Portfolio
Must be preceded by or accompanied by a prospectus.
<PAGE> 184
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
DEAR
Shareholder,
As personal wealth continues to grow at an ever-increasing rate, people
are realizing the power of their investments to do good and to make a
difference in their families and communities now and for generations to
come.
Setting financial goals is an important first step toward building wealth.
At Nuveen Investments, we believe those goals should not be considered
ends in themselves. Rather, you and your financial advisor's focus should
be on realizing your life's dreams -- the things that matter most to you
and how you can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your
legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set
of goals to achieve this. Working with your financial advisor, you have
the ability to make those dreams a reality -- for yourself and future
generations.
Family Wealth Management Too often, family wealth management is thought of
in one dimension -- as the stewardship of your household's financial
resources. At Nuveen Investments, we think of family wealth management as
the map to help you reach your financial, and your life's, destinations.
It's a multi-faceted strategy to plan for not just your needs, but the
needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
A Trusted Resource As you face some of the most important, lasting
decisions you and your family will make, you'll want to draw upon the
support, counsel and objectivity of a trusted advisor. That's because your
financial advisor has the expertise and access to other professionals who
can help you make informed choices -- choices that affect not only your
loved ones today, but those your legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interests at heart.
ANNUAL REPORT page 1
<PAGE> 185
In addition, we believe the potential presence of inflation and price
swings in the markets reinforce the importance of working with an advisor,
staying focused on the long term and adhering to your financial plan. With a
sound plan in place, you may be better positioned to weather the markets' ups
and downs.
In fact, you may be reading this report at the suggestion of your financial
advisor. We've prepared the following interview to let you know what the
investment and research management teams have done during your fund's fiscal
period.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. We are committed to maintaining that reputation and working with
financial advisors to provide investment solutions that help individuals achieve
their lives dreams. Thank you for your continued confidence.
Sincerely,
Tim Schwertfeger
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
June 16, 2000
ANNUAL REPORT page 2
<PAGE> 186
NUVEEN FLAGSHIP ALL-AMERICAN MUNICIPAL BOND FUND
NUVEEN FLAGSHIP INTERMEDIATE MUNICIPAL BOND FUND
NUVEEN FLAGSHIP LIMITED TERM MUNICIPAL BOND FUND
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
From the Portfolio Managers' Perspective
--------------------------------------------------------------------------------
For nearly a year, the Federal Reserve Board (the Fed) has continued on a
track to raise interest rates in an attempt to stymie inflation. These
"tightening" measures put pressure on nearly all bonds, including
municipal securities. Rick Huber, portfolio manager of the 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 economic
environment in which the funds participated, as well as their funds'
performance and key investment strategies
ALL-AMERICAN
Morningstar Rating(TM)+
****
Overall rating among 1,692
municipal bond funds as
of 4/30/00
INTERMEDIATE
Morningstar Rating(TM)+
****
Overall rating among 1,692
municipal bond funds as
of 4/30/00
LIMITED TERM
Morningstar Rating(TM)+
*****
Overall rating among 1,692
municipal bond funds as
of 4/30/00
+ The Morningstar ratings are overall for the municipal bond category and
relate to Class A shares only; the other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
4/30/00 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the funds'
three-, five-, and 10-year average annual returns (if applicable) in
excess of 90-day Treasury bill returns, with appropriate fee adjustments,
and a risk factor that reflects fund performance below 90-day T-bill
returns.
Nuveen Flagship All-American Municipal Bond Fund received 3 stars for the
3-and 5-year periods and 4 stars for the 10-year period.
The Nuveen Intermediate Fund received 3 stars for the 3-year period and 4
stars for the 5-year period.
The Nuveen Flagship Limited Term Fund received 4 stars for the 3- and
5-year periods and 5 stars for the 10-year period.
The top 10% of the funds in a broad asset class receive five stars, and
the next 22.5% receive four stars, and the next 35% receive three stars.
The funds were rated among 1,692 funds for the three-year period, 1,438 for the
five-year period and 405 for the 10-year period.
Performance figures are quoted for Class A shares at net asset value.
Comments cover the fiscal 12-month period ended April 30, 2000. The views
expressed reflect those of the portfolio management team and are subject
to change at any time, based on market and other conditions.
A voluntary expense limitation was in place for Nuveen Intermediate
Municipal Bond Fund during the period. Total return would have been less.
Q How would you describe the overall fixed-income investing environment
during the past 12 months?
RICK Rising interest rates translated into a difficult bond market
environment. The Fed raised interest rates five times during the past 12
months, lifting the federal funds rates -- the rate banks charge each
other for overnight loans --to 6%, a five-year high. After the fund's
fiscal annual period ended, a sixth hike followed on May 16, bringing the fed
funds rate to 6.50%.
These moves were intended to curb the strong U.S. economy and stifle any
inflationary pressures that might be brewing as a result. Bond yields rose in
response, and their prices -- which generally move in the opposite direction of
their yields -- posted losses.
PAUL Supply and demand also played a role in determining municipal bond
returns during the past 12 months.
On a positive note, the supply of municipal bonds dwindled as rising rates
extinguished opportunities for issuers to refinance or refund older, more
expensive debt. In addition, the strength of national and local economies
translated into higher revenues and tax collections for many municipalities,
thereby reducing their debt financing needs. These developments translated into
a 40% reduction of the supply of municipals in the first quarter of 2000,
compared to the same quarter a year earlier.
Demand, on the other hand, was spotty. Lured by the red-hot returns of
technology and other stocks, investors generally avoided fixed-income
investments throughout most of 1999. In early 2000, however, the demand for
municipals became strong again when technology stocks experienced a downturn and
municipal bond yields touched 6%.
ANNUAL REPORT page 3
<PAGE> 187
ALL-AMERICAN
Top Five Sectors
U.S. Guaranteed 16%
-------------------------------------------------------
Healthcare 13%
-------------------------------------------------------
Utilities 12%
-------------------------------------------------------
Tax Obligation (Limited) 11%
-------------------------------------------------------
Education and Civic Organizations 11%
-------------------------------------------------------
INTERMEDIATE
Top Five Sectors
Healthcare 18%
-------------------------------------------------------
Transportation 17%
-------------------------------------------------------
Tax Obligation (General) 15%
-------------------------------------------------------
Utilities 9%
-------------------------------------------------------
Tax Obligation (Limited) 9%
-------------------------------------------------------
LIMITED TERM
Top Five Sectors
Utilities 23%
-------------------------------------------------------
Healthcare 18%
-------------------------------------------------------
Education and Civic Organizations 12%
-------------------------------------------------------
Tax Obligation (Limited) 11%
-------------------------------------------------------
Housing Multifamily 9%
-------------------------------------------------------
As a percentage of long-term bond holdings as of April 30, 2000. Holdings are
subject to change.
1 The Lipper Peer Group returns represent the total return of
the 274 funds in the Lipper General Municipal Debt Funds
category for the period from May 1, 1999, through April 30,
2000. The returns assume reinvestment of dividends and do not
reflect any applicable sales charges.
2 The Lehman Brothers Municipal Bond Indices are comprised of a
broad range of investment-grade municipal bonds and do not
reflect any initial or ongoing expenses.
3 Taxable equivalent yield/total return represents the
yield/total return on a taxable investment necessary to equal
the yield/total return of the Nuveen Fund on an after-tax
basis. The taxable-equivalent yield shown is based on the
30-day SEC yield and a federal income tax rate of 31%. The
taxable equivalent total return is based on the fund's
one-year total return and the 31% federal income tax rate.
4 The Lipper Peer Group returns represent the return of the 41
funds in the Short-Intermediate Municipal Debt Funds category
for the period from May 1, 1999, through April 30, 2000. The
returns assume reinvestment of dividends and do not reflect
any applicable sales charges.
Q How did Nuveen Flagship All-American Municipal Bond Fund perform during the
period?
RICK For the 12-month period ended April 30, 2000, the fund reported a total
return of -4.48% for Class A shares on net asset value. In comparison, the
Lipper General Municipal Bond Peer Group reported a total return of -3.31% for
the same one-year period, and the Lehman Brothers Municipal Bond Index reported
a return of -0.92%./1/, /2/ Shareholders in the 31% federal income tax bracket
would have to earn a total return of -2.21% on a taxable investment to have
earned the equivalent of their fund's tax-exempt total return for the one-year
period./3/
As of April 30, 2000, the fund's SEC 30-day yield was 5.41%. For investors
in the 31% federal income tax bracket, that is equivalent to a yield of 7.84% on
a taxable investment./3/
Q How did Nuveen Flagship Limited Term Municipal Bond Fund perform during its
fiscal period?
RICK For the 12-month period ended April 30, 2000, the total return for Class A
shares on net asset value was -0 .57%. In comparison, the Lipper Short-
Intermediate Municipal Debt Fund Peer Group returned 0.16% and the Lehman
Brothers Municipal Bond Index (5-year) reported a return of 0.36%./2/, /4/
Shareholders in the 31% federal income tax bracket would have to earn a total
return of 1.43% on a taxable investment to have earned the equivalent of their
fund's tax-exempt total return for the one-year period./3/
As of April 30, 2000, the fund's SEC 30-day yield was 4.64%. For investors
in the federal income tax bracket, that is equivalent to a yield of 6.72% on a
taxable investment./3/
Q What investment strategies did you employ during the past year?
RICK To maintain a competitive distribution yield, each fund had significant
holdings in BBB-rated and non-rated securities, which generally lagged their
higher-quality counterparts during the past year. As interest rates rose,
investors' aversion to risk seemingly intensified, and lower-quality and non-
rated municipal bonds fell out of favor. This occurred despite the fact that the
strong U.S. economy meant improving credit fundamentals for many issuers of BBB-
rated and non-rated bonds.
In response to investors' ongoing avoidance of lower-quality bonds, we
reduced our stake in them over the past six months. That said, we continue to
hold some selected BBB-rated and non-rated hospital, industrial development and
utility bonds because they offered attractive yields and the potential to
outpace higher-rated securities if they move back into favor.
Q Where did you find attractive opportunities during the period?
RICK We capitalized on the recent rise in interest rates and the resulting
decline in bond prices to improve All-American's tax efficiency. As rates rose,
prices on some of the fund's holdings fell. By selling certain bonds at a loss,
we created tax-loss carryforwards that can be used to offset current and/or
future realized capital gains. An additional benefit of these transactions is
that we used the proceeds from the sale of bonds to finance purchases of new
bonds with higher income streams.
ANNUAL REPORT page 4
<PAGE> 188
Q Paul, what can you tell us about Nuveen Flagship Intermediate Municipal Bond
Fund's performance?
PAUL The fund reported a total return of -2.17% for the 12-month period ended
April 30, 2000 for Class A shares on net asset value. In comparison, the Lipper
National Intermediate Municipal Fund category reported a -1.17% total return for
the 12-month period and the Lehman Brothers Municipal Bond Index (7-year)
returned -0.03%./2/,/5/ Shareholders in the 31% federal income tax bracket would
have had to earn a total return of -0.08% on a taxable investment to have earned
the equivalent of their fund's tax-exempt total return for the 12-month
period./3/
As of April 30, 2000, the fund's SEC 30-day yield was 4.97%. For investors
in the 31% federal income tax bracket, that is equivalent to a yield of 7.20% on
a taxable investment./3/
The fund's lag stemmed mostly from our focus on maximizing distribution
yield by maintaining a somewhat longer duration than our peers. Duration is a
measure of a bond's interest rate sensitivity; the longer a bond's duration, the
more its share price will fall when rates rise and vice versa. Among
intermediate maturity bonds, an investor typically can pick up a fair amount of
additional yield for moving out each successive year of maturity. With interest
rates on the rise as they were during the fiscal period, however, the fund's
longer duration detracted from performance.
Q What were some of your other key strategies?
PAUL Like Nuveen Flagship All-American and Nuveen Flagship Limited Term
Municipal Bond Fund, we identified several opportunities to do some tax loss
swapping. When we made those trades, we looked to improve the fund's overall
call protection, which can help insulate the fund from the inopportune
redemption of bonds that can occur when interest rates fall.
Recently, for example, we purchased bonds issued by the City of Chicago,
the District of Columbia and Boone McHenry Dekalb School District, all of which
carried call protection in excess of 10 years.
We also maintained a significant position in non-rated bonds and those
rated BBB, which is at the lower end of the investment grade credit rating
scale, as judged by Standard & Poor's and Moody's Investors Service.
As Rick explained, a lack of demand caused these bonds to underperform
their higher-quality counterparts over the past year. But we think that the pain
they suffered in response was overdone, and that selected non- and BBB-rated
securities offer the potential to outperform. Furthermore, they offer a very
attractive yield advantage over higher-rated securities, although they do carry
more risk.
Q What's ahead for the municipal market and these three Nuveen Flagship
municipal bond funds?
RICK At the end of the period, bond prices seemingly reflected investors'
expectations for further interest rate hikes. Aside from interest rates, supply
and demand conditions will also play a role in the performance of municipal
bonds. We expect supply to remain low, a consequence of higher interest rates.
Demand is more of an unknown. As we mentioned in the beginning, investors
generally avoided fixed-income investments of all types during 1999 in favor of
stocks. If the trend we've seen in early 2000 continues and investors continue
to seek out more fixed-income investments, municipals could benefit.
ALL-AMERICAN
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed ..................... 33%
AA ............................. 9%
A .............................. 19%
BBB ............................ 25%
NR ............................. 13%
Other .......................... 1%
INTERMEDIATE
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed ..................... 37%
AA ............................. 3%
A .............................. 13%
BBB ............................ 32%
NR ............................. 15%
LIMITED TERM
Bond Credit Quality
[PIE CHART APPEARS]
AAA/U.S.
Guaranteed ..................... 33%
AA ............................. 6%
A .............................. 20%
BBB ............................ 27%
NR ............................. 12%
Other .......................... 2%
As a percentage of long-term bond holdings as of April 30, 2000. Holdings are
subject to change.
2 The Lehman Brothers Municipal Bond Indices are comprised of a broad
range of investment-grade municipal bonds and do not reflect any
initial or ongoing expenses.
3 Taxable equivalent yield/total return represents the yield/total
return on a taxable investment necessary to equal the yield of the
Nuveen Fund on an after-tax basis. The taxable-equivalent yield shown
is based on the 30-day SEC yield and a federal income tax rate of
31%. The taxable equivalent total return is based on the fund's
one-year total return and the 31% federal tax rate.
5 The Lipper Peer Group returns represent the total return of the 129
funds in the Lipper Intermediate Municipal Debt Funds category for
the period from May 1, 1999, through April 30, 2000. The returns
assume reinvestment of dividends and do not reflect any applicable
sales charges.
ANNUAL REPORT page 5
<PAGE> 189
PAUL Using history as a guide, federal tax-free municipal bonds currently offer
an attractive value relative to their Treasury counterparts. (Of course,
Treasuries are backed by the full faith and credit of the U.S. government.)
ANNUAL REPORT page 6
<PAGE> 190
NUVEEN FLAGSHIP ALL-AMERICAN MUNICIPAL BOND FUND
Fund Spotlight as of April 30, 2000
Quick Facts
A Shares B Shares C Shares R Shares
NAV $ 10.33 $ 10.34 $ 10.32 $ 10.34
-----------------------------------------------------------------------------
Latest Monthly Dividend* $0.0470 $ 0.0405 $0.0420 $0.0485
-----------------------------------------------------------------------------
Fund Symbol FLAAX N/A FAACX N/A
-----------------------------------------------------------------------------
CUSIP 67065Q889 67065Q871 67065Q863 67065Q855
-----------------------------------------------------------------------------
Inception Date 10/88 2/97 6/93 2/97
-----------------------------------------------------------------------------
*Paid May 1, 2000
Total Returns as of 4/30/00 (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -4.48% -8.49% -5.21% -8.83% -5.02% -4.29%
----------------------------------------------------------------------------------------------------------------------
1-Year TER* -2.21% -6.31% -3.28% -6.89% -3.00% -1.93%
----------------------------------------------------------------------------------------------------------------------
5-Year 5.45% 4.55% 4.76% 4.60% 4.89% 5.61%
----------------------------------------------------------------------------------------------------------------------
5-Year TER* 7.94% 7.02% 6.92% 6.77% 7.12% 8.16%
----------------------------------------------------------------------------------------------------------------------
10-Year 7.40% 6.94% 6.92% 6.92% 6.81% 7.48%
----------------------------------------------------------------------------------------------------------------------
10-Year TER* 10.17% 9.70% 9.47% 9.47% 9.32% 10.29%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Taxable Equivalent Return (Based on a federal income tax rate of 31%.)
Total Returns as of 3/31/00 (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -3.69% -7.72% -4.42% -8.06% -4.32% -3.58%
----------------------------------------------------------------------------------------------------------------------
5-Year 5.58% 4.69% 4.89% 4.73% 5.00% 5.72%
----------------------------------------------------------------------------------------------------------------------
10-Year 7.28% 6.82% 6.79% 6.79% 6.68% 7.35%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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. Class B shares automatically convert to Class A
shares eight years after purchase. Class C shares have a 1% CDSC for redemptions
within one year, which is not reflected in the one-year total return.
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
SEC 30-Day Yield 5.41% 5.18% 4.65% 4.85% 5.61%
------------------------------------------------------------------------
Taxable Equivalent Yield 7.84% 7.51% 6.74% 7.03% 8.13%
------------------------------------------------------------------------
Index Comparison.
[MOUNTAIN CHART APPEARS HERE]
Nuveen Flagship Nuveen Flagship Lehman Brothers
All-American Municipal All-American Municipal Municipal Bond
Fund (Offer) Fund (NAV) Index
4/1990 $ 9,580 $ 10,000 $ 10,000
4/1991 $ 10,753 $ 11,224 $ 11,149
4/1992 $ 11,965 $ 12,489 $ 12,209
4/1993 $ 13,785 $ 14,390 $ 13,754
4/1994 $ 14,141 $ 14,761 $ 14,050
4/1995 $ 15,006 $ 15,664 $ 14,985
4/1996 $ 16,151 $ 16,860 $ 16,176
4/1997 $ 17,482 $ 18,248 $ 17,252
4/1998 $ 19,286 $ 20,131 $ 18,857
4/1999 $ 20,488 $ 21,387 $ 20,167
4/2000 $ 19,981 $ 20,426 $ 19,568
Portfolio Statistics
Total Net Assets $362.2 million
-----------------------------------------
Average Effective
Maturity 18.68 years
-----------------------------------------
Average Duration 8.87
-----------------------------------------
----- Nuveen Flagship All-American Municipal Fund (Offer) $19,568
----- Nuveen Flagship All-American Municipal Fund (NAV) $20,426
----- Lehman Brothers Municipal Bond Index $19,981
. 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.
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 their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Terms To Know
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Duration is stated in years; typically
the shorter the duration, the less price and return variability you can expect
in the fund's price per share as interest rates change.
Fed Tightening When the Federal Reserve is following tight money policy, it is
<PAGE> 191
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of interest rates.
Municipal Bond A debt issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
ANNUAL REPORT Page 7
<PAGE> 192
Terms To Know
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Duration is stated in years;
typically the shorter the duration, the less price and return variability
you can expect in the fund's price per share as interest rates change.
Fed Tightening When the Federal Reserve is following tight money policy,
it is essentially decreasing the money supply by increasing the fed funds
rate and making money more expensive to borrow. The intention is to slow
the growth of the economy and curtail inflation.
Federal Fund Rates The interest rate charged by banks to lend to other
banks needing overnight loans; this figure is the most sensitive indicator
of the direction of interest rates.
Municipal Bond A debt issued by a state, city, or other municipality to
finance public works such as the construction of roads or schools. The
interest is usually free from federal income tax and may be free from
state and local taxes as well.
SEC Yield A standardized measure of the current net market yields on a
mutual fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a
fully taxable investment to equal the stated yield on a tax-exempt
investment.
NUVEEN FLAGSHIP INTERMEDIATE MUNICIPAL BOND FUND
Fund Spotlight as of April 30, 2000
Quick Facts
A Shares C Shares R Shares
NAV $ 10.11 $ 10.13 $ 10.11
------------------------------------------------------------------------------
Latest Monthly Dividend* $0.0420 $0.0370 $0.0435
------------------------------------------------------------------------------
Fund Symbol FINTX FINCX N/A
------------------------------------------------------------------------------
CUSIP 67065Q814 67065Q798 67065Q780
------------------------------------------------------------------------------
Inception Date 9/92 12/95 2/97
------------------------------------------------------------------------------
*Paid May 1, 2000
Total Returns as of 4/30/00 (Annualized)+
A Shares C Shares R Shares
NAV Offer NAV NAV
1-Year -2.17% -5.10% -2.72% -1.91%
------------------------------------------------------------------------------
1-Year TER* -0.08% -3.07% -0.89% 0.26%
------------------------------------------------------------------------------
5-Year 5.38% 4.74% 4.84% 5.50%
------------------------------------------------------------------------------
5-Year TER* 7.60% 6.95% 6.79% 7.78%
------------------------------------------------------------------------------
Since Inception 5.82% 5.40% 5.26% 5.90%
------------------------------------------------------------------------------
Since Inception TER* 8.06% 7.63% 7.23% 8.17%
------------------------------------------------------------------------------
<PAGE> 193
* Taxable Equivalent Return (Based on a federal income tax rate of 31%.)
Total Returns as of 3/31/00 (Annualized)+
A Shares C Shares R Shares
NAV Offer NAV NAV
1-Year 1.63% -4.58% -2.19% -1.37%
----------------------------------------------------------------------------
5-Year 5.53% 4.89% 4.97% 5.63%
----------------------------------------------------------------------------
Since Inception 5.92% 5.50% 5.35% 5.99%
----------------------------------------------------------------------------
+ Class A shares 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.
Tax-Free Yields
A Shares C Shares R Shares
NAV Offer NAV NAV
SEC 30-Day Yield 4.97% 4.82% 4.42% 5.18%
-----------------------------------------------------------------------------
Taxable Equivalent Yield (31%) 7.20% 6.99% 6.41% 7.51%
-----------------------------------------------------------------------------
Index Comparison+
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Intermediate Nuveen Flagship Intermediate Lehman Brothers 7 Year
Municipal Bond Fund (Offer) Municipal Bond Fund (NVA) Municipal Bond Index
<S> <C> <C> <C>
9/1992 $ 9,700 $ 10,000 $ 10,000
4/1993 $ 10,598 $ 10,926 $ 10,553
4/1994 $ 10,938 $ 11,276 $ 10,882
4/1995 $ 11,460 $ 11,814 $ 11,517
4/1996 $ 12,338 $ 12,719 $ 12,390
4/1997 $ 13,162 $ 13,569 $ 13,055
4/1998 $ 14,343 $ 14,787 $ 14,080
4/1999 $ 15,223 $ 15,694 $ 15,037
4/2000 $ 14,892 $ 15,352 $ 15,034
</TABLE>
Portfolio Statistics
Total Net Assets $56 million
----------------------------------------------
Average Effective
Maturity 8.51 years
----------------------------------------------
Average Duration 6.69
----------------------------------------------
----- Nuveen Flagship Intermediate Municipal Bond Fund (Offer) $14,892
----- Nuveen Flagship Intermediate Municipal Bond Fund (NAV) $15,352
----- Lehman Brothers 7 Year Municipal Bond Index $15,034
. 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.
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 their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
ANNUAL REPORT Page 8
<PAGE> 194
NUVEEN FLAGSHIP LIMITED TERM MUNICIPAL BOND FUND
Fund Spotlight as of April 30, 2000
Quick Facts
A Shares C Shares R Shares
NAV $ 10.35 $ 10.34 $ 10.33
-----------------------------------------------------------------------
Latest Monthly Dividend* $ 0.0400 $ 0.0370 $ 0.0420
-----------------------------------------------------------------------
Fund Symbol FLTDX FLTCX N/A
-----------------------------------------------------------------------
CUSIP 67065Q848 67065Q830 67065Q822
-----------------------------------------------------------------------
Inception Date 10/87 12/95 2/97
-----------------------------------------------------------------------
*Paid May 1, 2000
Total Returns as of 4/30/00 (Annualized)+
A Shares C Shares R Shares
NAV Offer NAV NAV
1-Year -0.57% -3.06% -0.82% -0.35%
------------------------------------------------------------------------
1-Year TER* 1.43% -1.11% 1.03% 1.76%
------------------------------------------------------------------------
5-Year 4.46% 3.93% 4.11% 4.57%
------------------------------------------------------------------------
5-Year TER* 6.60% 6.06% 6.10% 6.78%
------------------------------------------------------------------------
10-Year 5.74% 5.48% 5.41% 5.80%
------------------------------------------------------------------------
10-Year TER* 8.10% 7.83% 7.62% 8.18%
------------------------------------------------------------------------
* Taxable Equivalent Return (Based on a federal income tax rate of 31%.)
Total Returns as of 3/31/00 (Annualized)+
A Shares C Shares R Shares
NAV Offer NAV NAV
1-Year -0.11% -2.61% -0.54% 0.03%
------------------------------------------------------------------------
5-Year 4.59% 4.06% 4.21% 4.69%
------------------------------------------------------------------------
10-Year 5.75% 5.48% 5.40% 5.80%
------------------------------------------------------------------------
+ Class A shares returns are actual. Class C and R 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 change. Class C shares have a 1% CDSC for redemptions within
one year, which is not reflected in the one-year total return.
Tax-Free Yields
A Shares C Shares R Shares
NAV Offer NAV NAV
SEC 30-Day Yield 4.64% 4.52% 4.29% 4.84%
---------------------------------------------------------------------------
Taxable Equivalent Yield (31%) 6.72% 6.55% 6.22% 7.01%
---------------------------------------------------------------------------
Index Comparison.
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Limited Term Nuveen Flagship Limited Term Lehman Brothers 5 Year
Municipal Bond Fund (offer) Municipal Bond Fund (NAV) Municipal Bond Index
<S> <C> <C> <C>
4/1990 $ 9,750 $ 10,000 $ 10,000
4/1991 $ 10,613 $ 10,886 $ 11,120
4/1992 $ 11,550 $ 11,847 $ 12,081
4/1993 $ 12,762 $ 13,089 $ 13,330
4/1994 $ 13,171 $ 13,509 $ 13,699
4/1995 $ 13,702 $ 14,054 $ 14,447
4/1996 $ 14,524 $ 14,896 $ 15,440
4/1997 $ 15,219 $ 15,609 $ 16,159
4/1998 $ 16,234 $ 16,650 $ 17,248
4/1999 $ 17,139 $ 17,578 $ 18,368
4/2000 $ 17,041 $ 17,477 $ 18,434
</TABLE>
Portfolio Statistics
Total Net Assets $460.4 million
---------------------------------------------------------------
Average Effective Maturity 4.58 years
---------------------------------------------------------------
Average Duration 3.91
---------------------------------------------------------------
Terms To Know
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Duration is stated in years; typically
the shorter the duration, the less price and return variability you can expect
in the fund's price per share as interest rates change.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of interest rates.
Municipal Bond A debt issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
ANNUAL REPORT page 9
<PAGE> 195
NUVEEN HIGH YIELD MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
-------------------------------------------------------------------------------
1 The Lipper Peer Group returns represent the total return of the 57 funds in
the Lipper High Yield Municipal Debt Funds category for the period from
June 30, 1999, through April 30, 2000 and the 59 funds in the Lipper
category for the year-to-date period ending April 30, 2000. The Lipper
return is compared to Nuveen High Yield Municipal Bond Fund's performance
since its inception June 7, 1999. The fund's return from June 30, 1999 to
April 30, 2000, was 0.16%. The returns assume reinvestment of dividends and
do not reflect any applicable sales charges.
Investment by the fund in lower-rated and nonrated securities presents greater
risk of loss of principal than investments in investment-grade securities.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the period from the fund's inception on June 7, 1999, through its fiscal
year end, April 30, 2000. The views expressed reflect those of the portfolio
management team and are subject to change at any time, based on market and other
conditions.
A voluntary expense limitation was in place for Nuveen High Yield Municipal Bond
Fund during the period.
Nuveen High Yield Municipal Bond Fund features portfolio management by Nuveen
Investment Management, a team of portfolio managers and research analysts
committed to a disciplined, research-oriented investment strategy. To help you
understand the fund's performance during its fiscal year ending April 30, 2000,
we spoke with Steve Peterson, lead portfolio manager of the fund.
Q The Nuveen High Yield Municipal Bond Fund began operations on June 7, 1999.
-
The fund reported a total return of -2.69% from its inception through April 30,
2000. Although not posting a positive return, the fund did outperform the Lipper
High Yield Municipal Debt Fund category average of -3.03.1 It looks like high
yield municipal bond funds in general had a tough time. What happened in this
market over the period?
STEVE The municipal bond market had a very challenging year in 1999. New
-----
issuance was stagnant, and demand was flat. The stock market frenzy throughout
1999 kept investors' attention, not the fixed income market. The residual
effects of that frenzy seemed to keep investors coming back for more, even amid
the unprecedented amount of volatility in the Dow Jones Industrial Average and
the Nasdaq Composite Index during the first four months of 2000.
Although stocks took a beating, we still didn't see the "flight-to-
quality" into bonds that we usually expect when the stock market goes sour.
There was a definite lack of interest in the bond market -- and high yield
municipals in particular -- throughout the period. But that wasn't a bad thing
at all, in our opinion. In fact, we were able to take advantage of a market full
of opportunities to find attractive value and yields and even increase the
fund's dividend rate.
Q For this fund, you look for municipal bonds that are undervalued and
-
therefore selling at attractive prices or yields. So during this period,
you really saw the out-of-favor high yield municipal market as full of
potential?
STEVE Yes. The entire high yield municipal market was out of favor, with both
-----
issuance and demand down, but we still found very viable bond issues for
the fund. Our overreaching goal in any environment is to find bonds that
we believe are mispriced, that through our research we determine offer
strong potential.
Q Do you have any specific examples?
-
STEVE Ohio Bayshore is a great example. It's a small independent power plant
-----
under construction that, when completed, should provide some of the lowest cost
power in Ohio, a state that generally has had very high-cost energy. The project
was behind schedule, which was why this issue was out of favor. But the reason
for the delay was simply that the tight labor market made welders and
construction workers who were available to work hard to come by. That, in our
opinion, was the temporary result of a
ANNUAL REPORT page 10
<PAGE> 196
strong economy, not a reflection of poor management. These bonds were issued
with attractive yields at 7.75% to 8%.
We also continued to find potential in the embattled healthcare sector,
still under pressure from cuts in federal Medicare and Medicaid reimbursement,
aggressive HMO pricing and the move from inpatient to outpatient care. But even
in these conditions, we feel healthcare is something people will always need,
and those organizations that have positioned themselves favorably can offer very
attractive bond issues while remaining competitive.
One such example is Kentucky Appalachian Regional Healthcare. This issue
was backed by six Kentucky and Virginia hospitals and offered a yield of nearly
9.5%. Keep in mind that's a tax-free yield; the equivalent yield on a similar
taxable bond would be close to 16%. We believe this security offered exceptional
value since these hospitals offer essential services and are insulated from
competition due to their rural location -- the nearest competing hospital is
more than an hour-and-a-half away. Their overall debt level was also very
moderate, which impressed us.
It was impressive yields such as these that allowed us to increase the
dividend during the fiscal period.
Q Typically, a rising interest rate environment is not a very favorable one for
bonds, yet if we look at the year-to-date period as of April 30, 2000 -- a
period in which the Federal Reserve (the Fed) raised rates twice -- the fund
returned 2.01%, versus the Lipper category average for the same period of
0.64%.1 The fund's tax-free return even outpaced the stock market -- negative
0.04% measured by the S&P 500 Index.2 How do you explain this?
STEVE The stock market tends to operate on a different level than that of the
bond market. Particularly during the first part of 2000, investors seemed to
take it to an entirely different plane. It seemed to be based on random guesses
on where prices would go, with little regard for fundamentals like profits and
cash flows. Bonds, on the other hand, are priced according to factors like
interest rates and credit quality of issuers.
The high yield municipal bond market itself began a rebound after a rocky
1999. The very structure of high yield municipal bonds makes them less sensitive
to changing interest rates. Their sensitivity lies more in the credit quality of
the issuer, otherwise known as credit risk. While higher credit risk is inherent
in a high yield fund, we work to mitigate credit risk for the fund through
thorough analysis and sometimes even by negotiating structure directly with the
issuer.
Since no one but Chairman Alan Greenspan's Fed has any control over
interest rates, we tried to minimize the fund's exposure to interest rate risk
wherever possible. We consciously sought out bonds that offered shorter
maturities to help decrease the fund's duration, which is a measure of how
sensitive the fund is to interest rate risk. A shorter duration means less
interest rate sensitivity -- important in this environment.
Another factor in this market was the yield differential between lower-rated
bonds, such as those the fund invests in, and higher-rated bonds. The wider this
differential -- or "spread" -- the more affordable high yield municipals are,
and therefore the more the potential for gains, even factoring in the higher
risk potential.
HIGH YIELD
Top Five Sectors
Utilities 27%
Healthcare 18%
Transportation 15%
Long-Term Care 10%
Basic Materials 10%
As a percentage of long-term bond holdings as of April 30, 2000. Holdings are
subject to change.
1 The Lipper Peer Group returns represent the total return of the 57 funds in
the Lipper High Yield Municipal Debt Funds category for the period from June
30, 1999, through April 30, 2000 and the 59 funds in the Lipper category for
the year-to-date period ending April 30, 2000. The Lipper return is compared
to Nuveen High Yield Municipal Bond Fund's performance since its inception
June 7, 1999. The fund's return from June 30, 1999 to April 30, 2000, was
0.16%. The returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
2 The S&P 500 Index does not reflect any initial or ongoing expenses but does
reflect dividends reinvested. An index is not available for direct
investment.
ANNUAL REPORT page 11
<PAGE> 197
For example, one bond we bought recently paid a yield premium of 375 basis
points -- or nearly four percentage points -- over an otherwise similar higher-
rated bond. One year ago we were seeing spreads of only 100 to 125 basis points,
or around one percent difference in yields.
NUVEEN HIGH YIELD MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed............... 1%
AA................................ 6%
A................................. 5%
BBB............................... 17%
NR................................ 71%
As a percentage of long-term bond holdings as of April 30, 2000. Holdings are
subject to change.
Q What is your outlook for the near future in the high yield municipal bond
market?
STEVE Throughout the coming months, we plan to maintain the fund's duration at
or near its current low level to help keep its sensitivity to interest rates
down.
However, we are optimistic that future Fed interest rate increases will be
relatively modest. It is our experience that Fed rate increases take about 12 to
18 months to have their intended effect on the economy, so the impact should
begin to emerge soon.
ANNUAL REPORT page 12
<PAGE> 198
NUVEEN HIGH YIELD MUNICIPAL BOND FUND
Fund Spotlight as of April 30, 2000
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 18.60 $ 18.58 $ 18.59 $ 18.61
--------------------------------------------------------------------------------
Latest Monthly Dividend $ 0 .0960 $ 0.0840 $ 0.0870 $ 0.0990
--------------------------------------------------------------------------------
Fund Symbol N/A N/A N/A N/A
--------------------------------------------------------------------------------
CUSIP 67065Q749 67065Q756 67065Q764 67065Q772
--------------------------------------------------------------------------------
Inception Date 6/99 6/99 6/99 6/99
--------------------------------------------------------------------------------
</TABLE>
*Paid May 1, 2000
Total Returns as of 4/30/00 (Cumulative)
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC w/o CDSC w/CDSC NAV
<S> <C> <C> <C> <C> <C> <C> <C>
6-Month 1.94% -2.31% 1.66% -3.29% 1.76% 0.77% 2.15%
-------------------------------------------------------------------------------------------------------------------
6-Month TER*3 3.32% -0.99% 2.86% -2.09% 3.01% 2.02% 3.57%
-------------------------------------------------------------------------------------------------------------------
YTD 2.01% -2.29% 1.81% -3.19% 1.87% 0.87% 2.13%
-------------------------------------------------------------------------------------------------------------------
YTD TER*3 2.94% -1.40% 2.62% -2.38% 2.72% 1.72% 3.09%
-------------------------------------------------------------------------------------------------------------------
Since Inception -2.69% -6.79% -3.36% -8.01% -3.16% -4.09% -2.50%
-------------------------------------------------------------------------------------------------------------------
Since Inception TER*3 -0.74% -4.92% -1.67% -6.31% -1.39% -2.32% -0.48%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* Taxable Equivalent Return (Based on a federal income tax rate of 31%.)
Total Returns as of 3/31/00 (Cumulative)
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
6-month 1.51% -2.77% 1.17% -3.76% 1.27% 1.66%
-----------------------------------------------------------------------------------------------------
YTD 2.42% -1.90% 2.28% -2.72% 2.33% 2.52%
-----------------------------------------------------------------------------------------------------
Since Inception -2.30% -6.42% -2.92% -7.60% -2.73% -2.13%
-----------------------------------------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 6.86% 6.57% 6.10% 6.31% 7.07%
-----------------------------------------------------------------------------------------
Taxable Equivalent Yield (31%) /3/ 9.94% 9.52% 8.84% 9.14% 10.25%
-----------------------------------------------------------------------------------------
</TABLE>
Index Comparison.
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
(D)
Nuveen High Yield Nuveen High Yield Lehman Brothers
Municipal Bond Fund (offer) Municipal Bond Fund (NAV) Municipal Bond Index
<S> <C> <C> <C>
6/1999 $ 9,580 $ 10,000 $ 10,000
4/2000 $ 9,596 $ 10,016 $ 10,112
</TABLE>
Portfolio Statistics
Total Net Assets $14.7 million
---------------------------------------------------
Average Effective Maturity 18.19 years
---------------------------------------------------
Average Duration 7.93
---------------------------------------------------
Terms To Know
The following are a few terms used throughout this report.
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Duration is stated in years; typically
the shorter the duration, the less price and return variability you can expect
in the fund's price per share as interest rates change.
Federal Fund Rates The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of interest rates.
Municipal Bond An IOU issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
3 Taxable-equivalent yield/total return represents the yield/total return on a
taxable investment necessary to equal the yield/total return of the Nuveen
fund on an after-tax basis. The taxable equivalent yield shown is based on
the 30-day SEC yield and a federal income tax rate of 31%. The taxable
equivalent total return is based on the fund's one-year total return and the
31% federal tax rate.
ANNUAL REPORT page 13
<PAGE> 199
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama - 2.3%
$ 25 Alabama Housing Finance Authority, Single Family Mortgage Revenue Bonds 4/04 at 102 Aaa $ 25,675
(Collateralized Home Mortgage Revenue Bond Program), 1994 Series A-1
Bonds, 6.600%, 4/01/19
200 Alabama State Docks Department, Docks Facilities Revenue Bonds, 10/06 at 102 AAA 206,160
Series 1996, 6.100%, 10/01/13 (Alternative Minimum Tax)
400 The Utilities Board of the City of Bayou La Batre (Alabama), Water and 3/07 at 102 AA 379,216
Sewer Revenue Refunding and Improvement Bonds, Series 1997, 5.750%,
3/01/27
2,440 City of Birmingham, Alabama, General Obligation Bonds, Series 1999-B, 6/09 at 101 AA 2,215,471
5.250%, 6/01/24
100 The Industrial Development Board of the Town of Courtland (Alabama), 9/05 at 102 Baa1 97,804
Solid Waste Disposal Revenue Bonds (Champion International Corporation
Project), Series 1995A, 6.500%, 9/01/25 (Alternative Minimum Tax)
100 Jefferson County, Alabama, Sewer Revenue Warrants, Series 1997-D, 2/07 at 101 AAA 98,168
5.750%, 2/01/27 (Alternative Minimum Tax)
500 The Industrial Development Board of the City of Phenix, Alabama, 4/08 at 102 A- 430,480
Environmental Improvement Revenue Refunding Bonds (Mead Coated Board
Project), Series 1998A, 5.300%, 4/01/27 (Alternative Minimum Tax)
5,000 The Southeast Alabama Gas District, General System Revenue Bonds, 6/10 at 102 Aaa 4,763,300
Series A, 5.500%, 6/01/20
250 The Industrial Development Board of the City of Tallassee, Alabama, 8/06 at 102 A1*** 265,145
Industrial Revenue Bonds, Dow-United Technologies Composite Products,
Series 1996-A, 6.100%, 8/01/14 (Pre-refunded to 8/01/06)
----------------------------------------------------------------------------------------------------------------------------------
Alaska - 0.8%
3,000 Municipality of Anchorage, Alaska, Water Revenue and Refunding Bonds, 9/09 at 101 AAA 3,012,330
Series 1999, 6.000%, 9/01/24
----------------------------------------------------------------------------------------------------------------------------------
Arizona - 1.1%
2,500 The Industrial Development Authority of the County of Maricopa 7/08 at 101 BBB+ 1,894,075
(Arizona), Health Facility Revenue Bonds (Catholic Healthcare West
Project), 1998 Series A, 5.000%, 7/01/21
2,500 The Industrial Development Authority of the County of Yavapai 6/07 at 101 A-1 2,266,975
(Arizona), Industrial Development Revenue Bonds, 1998 Series
(Citizens Utilities Company Project), 5.450%, 6/01/33
(Alternative Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
California - 6.7%
7,500 California Higher Education Loan Authority, Inc., Student Loan No Opt. Call A2 7,670,175
Revenue Refunding Bonds, Subordinate 1994 Series D, 6.500%, 6/01/05
(Alternative Minimum Tax)
2,750 California Pollution Control Financing Authority, Pollution Control 9/09 at 101 AAA 2,593,580
Refunding Revenue Bonds (Southern California Edison Company), 1999
Series C, 5.550%, 9/01/31 (Alternative Minimum Tax)
8,000 Contra Costa Home Mortgage Finance Authority, California, 1984 Home No Opt. Call AAA 2,980,640
Mortgage Revenue Bonds, 0.000%, 9/01/17
2,000 Foothill/Eastern Transportation Corridor Agency (California), Toll No Opt. Call AAA 1,591,660
Road Revenue Bonds, Series 1995A, 0.000%, 1/01/05
2,000 Long Beach Aquarium of the Pacific, Revenue Bonds (Aquarium of the 7/05 at 102 BBB 1,858,760
Pacific Project), 1995 Series A, 6.125%, 7/01/23
4,000 Regional Airports Improvement Corporation, Facilities Sublease 5/06 at 102 BBB- 3,797,240
Refunding Revenue Bonds, Issue of 1996, Delta Air Lines, Inc.
(Los Angeles International Airport), 6.350%, 11/01/25
</TABLE>
14
<PAGE> 200
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California (continued)
Sacramento Cogeneration Authority, Cogeneration Project Revenue Bonds
(Procter & Gamble Project), 1995 Series:
$ 500 6.200%, 7/01/06 7/05 at 102 BBB- $ 520,055
1,000 6.500%, 7/01/21 (Pre-refunded to 7/01/05) 7/05 at 102 N/R 1,088,080
2,000 Taft Public Financing Authority, Lease Revenue Bonds, 1997 Series A 1/07 at 101 A2 2,024,680
(Community Correctional Facility Acquisition Project), 6.050%, 1/01/17
------------------------------------------------------------------------------------------------------------------------------------
Colorado - 3.3%
E-470 Public Highway Authority, Capital Improvement Trust
Fund Highway Revenue Bonds (E-470 Project), Senior Bonds,
Arapahoe County, Colorado:
6,000 0.000%, 8/31/05 No Opt. Call Aaa 4,537,980
2,000 6.950%, 8/31/20 (Pre-refunded to 8/31/05) 8/05 at 103 Aaa 2,227,180
11,800 Colorado Health Facilities Authority, Retirement Facilities (Liberty No Opt. Call Aaa 2,680,252
Heights), 0.000%, 7/15/22
2,500 Hyland Hills Park and Recreation District, Adams County, Colorado, 12/06 at 101 N/R 2,584,700
Special Revenue Refunding and Improvement Bonds, Series 1996A, 6.750%,
12/15/15
------------------------------------------------------------------------------------------------------------------------------------
Connecticut - 1.7%
4,000 Housing Authority of the City of Bridgeport, Connecticut, Multifamily 12/09 at 102 N/R 3,999,600
Housing Revenue Bonds (Stratfield Apartments Project), Series 1999,
7.250%, 12/01/24
2,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 2,201,240
Revenue Bonds, Nursing Home Program Issue, Series 1994, AHF/Hartford,
Inc. Project, 7.125%, 11/01/14
------------------------------------------------------------------------------------------------------------------------------------
Delaware - 0.4%
1,750 Delaware Economic Development Authority, First Mortgage Revenue 5/07 at 102 BBB 1,609,808
Bonds (Peninsula United Methodist Homes, Inc. Issue), Series
1997A, 6.300%, 5/01/22
------------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.2%
1,000 District of Columbia (Washington, D.C.), General Obligation Bonds, 6/08 at 101 AAA 889,060
Series 1998B, 5.250%, 6/01/26
------------------------------------------------------------------------------------------------------------------------------------
Florida - 1.6%
1,000 Town of Lady Lake, Florida, Industrial Development Revenue Bonds 7/00 at 102 N/R*** 1,028,530
(Sunbelt Utilities, Inc. Project), Series 1990, 9.625%, 7/01/15
(Alternative Minimum Tax) (Pre-refunded to 7/01/00)
1,930 Nassau County, Florida (GF/Amelia Island Properties, Inc. Project), 1/03 at 103 N/R 2,087,758
ICF/MR Revenue Bonds, Series 1993A, 9.750%, 1/01/23
1,965 Sanford Airport Authority (Florida), Industrial Development Revenue 5/06 at 102 N/R 2,026,858
Bonds (Central Florida Terminals Inc. Project), Series 1995A, 7.500%,
5/01/10 (Alternative Minimum Tax)
645 Sanford Airport Authority (Florida), Industrial Development Revenue 5/07 at 102 N/R 658,513
Bonds (Central Florida Terminals Inc. Project), Series 1997C, 7.500%,
5/01/21
------------------------------------------------------------------------------------------------------------------------------------
Georgia - 1.6%
2,000 Brunswick and Glynn County Development Authority (Georgia), Revenue 3/08 at 102 Baa2 1,697,460
Refunding Bonds, Series 1998, (Georgia Pacific Corporation Project),
5.550%, 3/01/26 (Alternative Minimum Tax)
2,000 Municipal Electric Authority of Georgia, General Power Revenue Bonds, No Opt. Call A 1,985,520
1993C Series, 5.700%, 1/01/19
2,500 Private Colleges and Universities Authority (Georgia), Revenue and 10/09 at 101 A3 2,148,150
Refunding Bonds (Mercer University Project), Series 1999A, 5.250%,
10/01/25
------------------------------------------------------------------------------------------------------------------------------------
Illinois - 9.9%
6,645 Buffalo Grove Park District, Lake and Cook Counties, Illinois, 5/00 at 100 N/R 6,532,434
Installment Contract Certificates (Limited Tax), Series 1999,
5.400%, 12/30/04
The County of Champaign, Illinois, General Obligation
Bonds (Public Safety Sales Tax Alternate Revenue Source),
Series 1999:
1,140 8.250%, 1/01/21 No Opt. Call AAA 1,452,611
1,275 8.250%, 1/01/22 No Opt. Call AAA 1,627,550
</TABLE>
15
<PAGE> 201
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois (continued)
$1,000 City of Chicago, Illinois, Gas Supply Refunding Revenue Bonds, 6/05 at 102 AA- $ 998,530
1995 Series A (The Peoples Gas Light and Coke Company Project),
6.100%, 6/01/25
2,000 Illinois Development Finance Authority 9/06 at 102 A-1 2,034,260
(The Presbyterian Home Lake Forest Place Project),
Revenue Bonds, Series 1996B, 6.300%, 9/01/22
3,750 Illinois Educational Facilities Authority, Revenue Refunding Bonds, 7/01 at 102 A1*** 3,927,638
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 6.875%, 12/01/17 (Pre-refunded to 12/01/04) 12/04 at 100 N/R*** 3,012,923
1,185 6.875%, 12/01/17 12/04 at 100 BBB 1,213,132
2,000 Illinois Health Facilities Authority, Revenue Refunding 8/06 at 102 N/R 1,954,120
Bonds, Series 1995A (Fairview Obligated Group), 7.125%,
8/15/17
6,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, 2/07 at 102 A- 5,230,260
Series 1996B (Sarah Bush Lincoln Health Center),
5.750%, 2/15/22
4,000 Illinois Health Facilities Authority, Revenue Bonds 8/07 at 101 A- 3,421,040
(Victory Health Service), Series 1997A, 5.750%, 8/15/27
4,750 Metropolitan Pier and Exposition Authority (Illinois), No Opt. Call AAA 4,535,300
McCormick Place Expansion Project Refunding Bonds,
Series 1998A, 5.500%, 12/15/23
------------------------------------------------------------------------------------------------------------------------------------
Indiana - 5.0%
2,000 City of Goshen, Indiana, Revenue Refunding Bonds, Series 1998 8/08 at 101 N/R 1,586,320
(Greencroft Obligated Group), 5.750%, 8/15/28
1,720 Indiana Health Facility Financing Authority, Hospital Revenue Bonds, 8/00 at 102 N/R*** 1,772,752
Series 1990 (Hancock Memorial Hospital Project), 8.300%, 8/15/20
(Pre-refunded to 8/15/00)
4,000 The Trustees of Indiana University, Indiana University Student Fee No Opt. Call AAA 2,140,840
Bonds, Series K, 0.000%, 8/01/11
2,000 Indianapolis Airport Authority, Special Facilities Revenue Bonds, 7/04 at 102 BBB 2,070,580
Series 1994 (Federal Express Corporation Project), 7.100%,
1/15/17 (Alternative Minimum Tax)
4,000 Indianapolis Airport Authority, Specialty Facility Revenue Bonds, 11/05 at 102 Baa2 3,859,800
Series 1995A (United Airlines, Inc., Indianapolis Maintenance
Center Project), 6.500%, 11/15/31 (Alternative Minimum Tax)
5,450 City of Indianapolis, Indiana, Economic Development Revenue Bonds 7/06 at 102 BBB 5,244,208
(Willowbrook Apartments Project), Senior Series 1996A,
6.500%, 7/01/26
500 Hospital Authority of Monroe County (Indiana), Hospital Revenue Bonds, 5/02 at 101 AAA 522,605
Series 1992 (Bloomington Hospital Project), 6 .700%, 5/01/12
(Pre-refunded to 5/01/02)
1,000 Rockport Pollution Control (Indiana Michigan Power Company), 3/01 at 102 Baa2 1,032,600
7.600%, 3/01/16
------------------------------------------------------------------------------------------------------------------------------------
Kentucky - 4.9%
5,000 County of Henderson, Kentucky, Solid Waste Disposal Revenue Bonds 3/05 at 102 A2 5,090,200
(MacMillan Bloedel Project), Series 1995, 7.000%, 3/01/25
(Alternative Minimum Tax)
4,500 Jefferson County, Kentucky, Capital Projects Corporation, Lease No Opt. Call A+ 2,249,145
Revenue Bonds, Series 1992A, 0.000%, 8/15/12
2,000 Kentucky Economic Development Finance Authority, Hospital System 4/08 at 102 N/R 1,331,880
Refunding and Improvement Revenue Bonds, Series 1997 (Appalachian
Regional Healthcare, Inc. Project), 5.875%, 10/01/22
5,000 Louisville and Jefferson County Metropolitan Sewer District 11/04 at 102 AAA 5,439,150
(Commonwealth of Kentucky), Sewer and Drainage System Revenue
Bonds, Series 1994A, 6.750%, 5/15/25
3,500 Pendleton County, Kentucky, County Lease Revenue Bonds, Kentucky 3/03 at 102 A 3,580,325
Associated Counties Leasing Trust Program, Series 1993-A,
6.500%, 3/01/19
------------------------------------------------------------------------------------------------------------------------------------
Louisiana - 0.6%
1,900 City of New Orleans Audubon Park Commission, Aquarium Revenue Bonds, 4/02 at 102 N/R*** 2,040,543
Series 1992, 8.000%, 4/01/12 (Pre-refunded to 4/01/02)
</TABLE>
16
<PAGE> 202
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maryland - 1.4%
$2,000 Maryland Energy Financing Administration, Limited Obligation Solid 12/06 at 102 A- $ 2,012,940
Waste Disposal Revenue Bonds (Wheelabrator Water Technologies,
Baltimore L.L.C. Projects), 1996 Series, 6.450%, 12/01/16
(Alternative Minimum Tax)
3,500 Maryland Economic Development Corporation, Student Housing Revenue 6/09 at 102 Baa3 3,069,080
Bonds (Collegiate Housing Foundation - University Courtyard
Project), Series 1999A, 5.750%, 6/01/31
------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 1.4%
3,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/09 at 101 AA- 2,551,230
Bonds, Partners HealthCare System Issue, Series B, 5.125%, 7/01/19
3,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue 12/08 at 102 BBB 2,616,150
Refunding Bonds (Ogden Haverhill Project), Series 1998A, 5.600%,
12/01/19 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Michigan - 1.5%
5,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 8/08 at 101 BBB- 3,671,450
(The Detroit Medical Center Obligated Group), Series 1998A, 5.250%,
8/15/23
2,000 Pontiac, Michigan, Hospital Finance Authority, Hospital Revenue 8/03 at 102 BBB- 1,797,680
Refunding Bonds (Nomc Obligated Group), 6.000%, 8/01/13
------------------------------------------------------------------------------------------------------------------------------------
Missouri - 0.7%
3,000 Missouri State Development Finance Board, Solid Waste Disposal No Opt. Call AA 2,660,730
Revenue Bonds (Procter & Gamble Paper Products Company
Project), Series 1999, 5.200%, 3/15/29 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 0.3%
700 New Hampshire Higher Educational and Health Facilities Authority, 7/00 at 100 BBB+ 652,729
Hospital Revenue Bonds, Catholic Medical Center Issue, Series 1989,
6.000%, 7/01/17
600 New Hampshire Higher Educational and Health Facilities Authority, 1/01 at 102 BBB+ 607,188
Hospital Revenue Bonds, St. Joseph Hospital Issue, Series 1991,
7.500%, 1/01/16
------------------------------------------------------------------------------------------------------------------------------------
New Jersey - 0.7%
2,400 New Jersey Economic Development Authority, Electric Energy Facility 6/02 at 102 N/R 2,473,800
Revenue Bonds (Vineland Cogeneration Limited Partnership Project),
Series 1992, 7.875%, 6/01/19 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
New York - 11.9%
3,100 Village of East Rochester Housing Authority (New York), 3/09 at 103 N/R 2,889,975
1999 Multifamily Senior Housing Revenue Bonds
(Jefferson Park Apartments Project), 6.750%, 5/01/31
The City of New York, General Obligation Bonds, Fiscal 1992 Series D:
685 7.500%, 2/01/17 (Pre-refunded to 2/01/02) 02 at 101 1/2 Aaa 725,744
750 7.500%, 2/01/18 (Pre-refunded to 2/01/02) 02 at 101 1/2 Aaa 794,610
115 The City of New York, General Obligation Bonds, Fiscal 1997 Series I, 4/07 at 101 A-*** 123,233
6.250%, 4/15/27 (Pre-refunded to 4/15/07)
The City of New York, General Obligation Bonds, Fiscal 1992 Series B:
595 7.500%, 2/01/09 (Pre-refunded to 2/01/02) 02 at 101 1/2 A-*** 629,980
1,305 7.500%, 2/01/09 02 at 101 1/2 A- 1,375,483
1,750 New York City Housing Development Corporation, Multi-Unit Mortgage 6/01 at 102 AAA 1,825,268
Refunding Bonds (FHA-Insured Mortgage Loans), 1991 Series A,
7.350%, 6/01/19
6,000 New York City Transitional Finance Authority, Future Tax Secured Bonds, 5/10 at 101 AA 6,098,220
Fiscal 2000 Series C, 5.875%, 11/01/17 (WI)
1,480 Dormitory Authority of the State of New York, City University System No Opt. Call A- 1,473,103
Consolidated Second General Resolution Revenue Bonds, Series 1993A,
5.750%, 7/01/18
2,500 Dormitory Authority of the State of New York, Department of Health of 7/05 at 102 AAA 2,711,575
the State of New York, Revenue Bonds, Series 1995, 6.625%, 7/01/24
(Pre-refunded to 7/01/05)
3,000 New York State Housing Finance Agency, Service Contract Obligation 9/05 at 102 A 3,044,640
Revenue Bonds, 1995 Series A, 6.375%, 9/15/15
</TABLE>
17
<PAGE> 203
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (continued)
$5,500 New York State Urban Development No Opt. Call A $5,436,530
Corporation, State Facilities Revenue
Bonds, 1995 Refunding Series, 5.700%,
4/01/20
1,500 New York State Urban Development No Opt. Call A 1,487,055
Corporation, Project Revenue Bonds
(Center for Industrial Innovation), 1995
Refunding Series, 5.500%, 1/01/13
2,125 New York State Urban Development No Opt. Call A 2,056,214
Corporation, Project Revenue Bonds
(University Facilities Grants), 1995
Refunding Series, 5.500%, 1/01/19
7,500 The Port Authority of New York and New 10/06 at 102 N/R 7,520,925
Jersey, Special Project 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 5.300%, 1/01/13 (Alternative 1/09 at 101 N/R 1,620,270
Minimum Tax)
3,375 5.500%, 1/01/23 (Alternative Minimum Tax) 1/09 at 101 N/R 2,883,161
--------------------------------------------------------------------------------------------------------------------------------
North Carolina - 0.7%
1,250 County of Cumberland, North Carolina, 10/09 at 101 AA 1,085,300
Hospital Facility Revenue Bonds
(Cumberland County Hospital System,
Inc.), Series 1999, 5.250%, 10/01/24
1,299 Woodfin Treatment Facility, Inc. (North 12/03 at 102 N/R 1,303,355
Carolina), Proportionate Interest
Certificates, 6.750%, 12/01/13
--------------------------------------------------------------------------------------------------------------------------------
North Dakota - 0.1%
240 State of North Dakota (North Dakota 7/00 at 102 Aa2 244,438
Housing Finance Agency), Single Family
Mortgage Program Bonds, 1989 Series B,
8.000%, 7/01/13
--------------------------------------------------------------------------------------------------------------------------------
Ohio - 9.1%
City of Cleveland, Ohio, Public Power
System Improvement First Mortgage
Revenue Bonds, Series 1991A:
835 7.000%, 11/15/17 (Pre-refunded to 11/01 at 102 AAA 879,698
11/15/01)
565 7.000%, 11/15/17 11/01 at 102 AAA 592,860
1,350 County of Columbiana, Ohio, County Jail 12/04 at 102 AA 1,467,761
Facilities Construction Bonds (General
Obligation - Unlimited Tax), 6.700%, 12/01/24
1,000 County of Cuyahoga, Ohio, Health Care 6/00 at 100 N/R 1,004,110
Facilities Revenue Bonds, Series 1990
(Altenheim Project), 9.280%, 6/01/15
3,000 County of Cuyahoga, Ohio, Hospital 8/05 at 102 AAA 3,212,010
Revenue Bonds (Meridia Health System),
Series 1995, 6.250%, 8/15/24
(Pre-refunded to 8/15/05)
1,000 County of Cuyahoga, Ohio, Hospital 2/03 at 102 AA- 1,016,770
Facilities Revenue Bonds, Series 1993,
Health Cleveland, Inc.
(Fairview General Hospital Project),
6.300%, 8/15/15
2,350 City of Garfield Heights, Ohio, Hospital 11/02 at 102 AA-*** 2,493,656
Improvement and Refunding Revenue Bonds,
Series 1992B (Marymount Hospital Project),
6.700%, 11/15/15 (Pre-refunded to 11/15/02)
County of Hamilton, Ohio, Health Care Facilities
Improvement Revenue Bonds, Series 1999A (Twin
Towers):
3,500 5.750%, 10/01/19 10/08 at 102 A 3,276,525
2,000 5.800%, 10/01/23 10/08 at 102 A 1,845,020
1,500 County of Lucas, Ohio, Hospital 12/01 at 102 N/R*** 1,601,715
Facilities Revenue Bonds, Series A
(Flower Memorial Hospital),
8.125%, 12/01/11 (Pre-refunded to
12/01/01)
3,500 County of Miami, Ohio, Hospital 5/06 at 102 BBB 3,068,135
Facilities Revenue Refunding and
Improvement Bonds, Series 1996A
(Upper Valley Medical Center),
6.375%, 5/15/26
5,000 County of Montgomery, Ohio, Hospital 4/10 at 101 BBB+ 4,788,150
Facilities Revenue Bonds, Series 1999
(Kettering Medical Center Network
Obligated Group), 6.750%, 4/01/18
1,750 State of Ohio (Ohio Higher Educational 12/03 at 102 AAA 1,859,218
Facility Commission), Higher Educational
Facility Mortgage Revenue Bonds
(University of Dayton 1992 Project),
6.600%, 12/01/17
2,600 State of Ohio, Solid Waste Disposal 8/08 at 103 BBB 2,226,796
Revenue Bonds (USG Corporation Project),
Series 1997 Remarketed, 5.600%, 8/01/32
(Alternative Minimum Tax)
3,500 County of Shelby, Ohio, Hospital 9/02 at 102 N/R*** 3,766,525
Facilities Revenue Refunding and
Improvement Bonds, Series 1992 (The
Shelby County Memorial Hospital
Association), 7.700%, 9/01/18
(Pre-refunded to 9/01/02)
</TABLE>
18
<PAGE> 204
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oklahoma - 2.0%
Edmond Economic Development Authority (Oklahoma), Student
Housing Revenue Bonds (Collegiate Housing Foundation -
Edmond Project), Series 1998A:
$ 2,000 5.375%, 12/01/19 12/08 at 102 Baa3 $1,733,660
3,250 5.500%, 12/01/28 12/08 at 102 Baa3 2,750,703
2,750 Trustees of the Tulsa Municipal Airport Trust, Revenue Bonds, 6/05 at 102 Baa1 2,685,320
Series 1995 (American Airlines), 6.250%, 6/01/20
------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 1.9%
2,500 Allegheny County Higher Education Building Authority (Commonwealth of 2/06 at 102 Baa3 2,548,350
Pennsylvania), College Revenue Bonds, Series A of 1996 (Robert Morris
College), 6.400%, 2/15/14
1,000 Delaware County Industrial Development Authority, Pollution 4/01 at 102 AAA 1,039,270
Control Revenue Refunding Bonds, 1991 Series A (Philadelphia Electric
Company Project), 7.375%, 4/01/21
500 Falls Township Hospital Authority, Refunding Revenue Bonds, The Delaware
Valley Medical Center Project (FHA-Insured Mortgage), Series 1992,
7.000%, 8/01/22 8/02 at 102 AAA 527,080
1,000 Latrobe Industrial Development Authority (Commonwealth of Pennsylvania),
College Revenue Bonds (Saint Vincent College Project), Series 1994, 5/04 at 102 AAA 1,079,830
6.750%, 5/01/24 (Pre-refunded to 5/01/04)
City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, Fourteenth
Series:
550 6.375%, 7/01/26 (Pre-refunded to 7/01/03) 7/03 at 102 BBB*** 579,475
1,150 6.375%, 7/01/26 7/03 at 102 BBB 1,148,413
------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 0.1%
100 Commonwealth of Puerto Rico, Public Improvement Bonds of 1994 7/04 at 101 1/2 AAA 107,762
(General Obligation Bonds), 6.500%, 7/01/23 (Pre-refunded to 7/01/04)
100 Puerto Rico Public Buildings Authority, Revenue Refunding Bonds, Series No Opt. Call A 97,250
L, Guaranteed by the Commonwealth of Puerto Rico, 5.500%,7/01/21
165 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/04 at 102 AAA 177,745
Series 1994-T, 6.375%, 7/01/24 (Pre-refunded to 7/01/04)
70 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 8/05 at 101 1/2 AAA 71,835
Control Facilities Financing Authority, Hospital Revenue Refunding
Bonds, 1995 Series A (FHA-Insured Mortgage Pila Hospital Project),
5.875%, 8/01/12
------------------------------------------------------------------------------------------------------------------------------------
South Carolina - 3.7%
Berkeley County School District, Certificates of Participation:
250 6.250%, 2/01/12 (Pre-refunded to 2/01/04) 2/04 at 102 AAA 265,025
2,225 6.300%, 2/01/16 (Pre-refunded to 2/01/04) 2/04 at 102 AAA 2,358,411
Charleston County, South Carolina, Charleston Public Facilities
Corporation, Certificates of Participation, Series 1994B:
240 6.875%, 6/01/14 (Pre-refunded to 6/01/04) 6/04 at 102 AAA 260,606
10 6.875%, 6/01/14 6/04 at 102 AAA 10,697
400 Board of Trustees of Coastal Carolina University, South Carolina, 6/04 at 102 AAA 428,780
Revenue Bonds, Series 1994, 6.800%, 6/01/19
4,250 Georgetown County, South Carolina, Environmental Improvement Revenue No Opt. Call BBB+ 4,241,713
Refunding Bonds, 2000 Series A (International Paper Company Project),
5.950%, 3/15/14
200 Greenville Hospital System, Board of Trustees, Hospital Facilities Revenue No Opt. Call Aa3 200,810
Bonds (South Carolina), Series 1990, 6.000%, 5/01/20
300 South Carolina Regional Housing Development Corporation, No 1 7/02 at 102 Aa 307,467
Multifamily Revenue Refunding Bonds, Redwood Village Apartments,
Series A, 6.625%, 7/01/17
500 South Carolina State Education Assistance Authority, Guaranteed Student 9/04 at 101 A 513,485
Loan Revenue and Refunding Bonds, 1994 Series, 6 .300%, 9/01/08
(Alternative Minimum Tax)
250 South Carolina State Housing Authority, Homeownership Mortgage Purchase, 7/04 at 102 AA 253,558
Series A, 6.150%, 7/01/08
225 South Carolina State Housing Finance and Development Authority, Mortgage 5/06 at 102 Aa2 226,258
Revenue Bonds, Series 1996A, 6 .350%, 7/01/25 (Alternative Minimum Tax)
</TABLE>
19
<PAGE> 205
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
South Carolina (continued)
$ 1,000 South Carolina Housing Finance and Development Authority, 6/05 at 102 BBB+ $ 1,024,250
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 South Carolina Housing Finance and Development Authority, 11/05 at 102 AA- 1,251,038
Multifamily Housing Revenue Refunding Bonds (Runaway Bay
Apartments Project), Series 1995, 6.125%, 12/01/15
2,000 York County, South Carolina, Water and Sewer System 12/03 at 102 N/R 1,957,180
Revenue Bonds, Series 1995, 6.500%, 12/01/25
---------------------------------------------------------------------------------------------------------------------------------
South Dakota - 0.6%
2,500 Education Loans Incorporated (South Dakota), Tax-Exempt 6/08 at 102 A2 2,314,000
Fixed Rate Student Loan Asset-Backed Callable Notes,
Subordinate Series 1998-1K, 5.600%, 6/01/20
---------------------------------------------------------------------------------------------------------------------------------
Tennessee - 5.2%
4,325 The Health, Educational, and Housing Facilities Board 4/09 at 101 Baa1 3,674,304
of the County of Knox, Revenue Bonds, Series 1999
(University Health System, Inc), 5.625%, 4/01/24
6,975 Memphis - Shelby County Airport Authority (Tennessee), 3/10 at 101 AAA 6,961,190
Airport Revenue Bonds, Series 1999D, 6.000%, 3/01/24
(Alternative Minimum Tax)
2,860 The Health and Educational Facilities Board of the 2/08 at 102 AA 2,614,698
Metropolitan 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
2,085 The Health, Educational, and Housing Facilities Board 8/07 at 105 N/R*** 2,659,189
of the County 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 Industrial Development Board of the City of South Fulton, 10/05 at 102 A3 1,383,146
Tennessee, Inc., Industrial Development Revenue Bonds
(Tyson Foods, Inc. Project), Series 1995, 6.350%, 10/01/15
(Alternative Minimum Tax)
1,500 Wilson County, Tennessee, Series 1994, Certificates of 6/04 at 102 A2*** 1,587,990
Participation (Wilson County Educational Facilities
Corporation), 6.250%, 6/30/15 (Pre-refunded to 6/30/04)
---------------------------------------------------------------------------------------------------------------------------------
Texas - 10.9%
7,000 Alliance Airport Authority, Inc. (Texas) Special 4/06 at 102 BBB 6,863,430
Facilities Revenue Bonds, Series 1996 (Federal
Express Corporation Project), 6.375%, 4/01/21
(Alternative Minimum Tax)
6,000 Brazos River Authority (Texas), Revenue Refunding 4/09 at 101 Baa1 5,151,120
Bonds (Reliant Energy, Incorporated Project),
Series 1999A, 5.375%, 4/01/19
Gregg County (Texas), Health Facilities Development
Corporation, Hospital Revenue Bonds (Good Shepherd
Medical Center Project), Series 2000:
3,250 6.375%, 10/01/25 10/10 at 101 AA 3,263,650
3,000 6.375%, 10/01/29 10/10 at 101 AA 3,007,470
2,500 Guadalupe - Blanco River Authority (Texas), Sewage 5/09 at 101 AA- 2,276,650
and Solid Waste Disposal Facility Bonds (E.I. du
Pont de Nemours and Company Project), Series 1999,
5.500%, 5/01/29 (Alternative Minimum Tax)
7,900 Gulf Coast Industrial Development Authority, Waste 6/08 at 102 BBB- 6,507,704
Disposal Revenue Bonds (Valero Refining and Marketing
Company Project), Series 1997, 5.600%, 12/01/31
(Alternative Minimum Tax)
5,250 Harlingen Consolidated Independent School District 8/09 at 100 AAA 4,967,340
(Cameron County, Texas), Unlimited Tax School Building
Bonds, Series 1999, 5.500%, 8/15/26
2,500 Lower Neches Valley Authority Industrial Development 3/08 at 101 AAA 2,271,350
Corporation (Texas), Refunding Revenue Bonds, Series
1998 (Mobil Oil Refining Corporation Project), 5.550%,
3/01/33
2,000 North Central Texas Health Facilities Development 2/06 at 102 BBB 1,816,320
Corporation, Health Facilities Development
Revenue Bonds (C.C. Young Memorial Home
Project), Series 1996, 6.375%, 2/15/20
2,895 Port of Bay City Authority of Matagorda County, Texas, 5/06 at 102 A+ 2,833,539
Revenue Bonds (Hoechst Celanese Corporation Project),
Series 1996, 6.500%, 5/01/26 (Alternative Minimum Tax)
</TABLE>
20
<PAGE> 206
Portfolio of Investments
Nuveen Flagship All-American Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utah - 0.5%
$ 2,000 Carbon County, Utah, Solid Waste Disposal Refunding 2/05 at 102 BB- $ 1,843,900
Revenue Bonds (Laidlaw Inc./ECDC Environmental, L.C.
Project), 1995 Series A, 7.500%, 2/01/10 (Alternative
Minimum Tax)
---------------------------------------------------------------------------------------------------------------------------------
Virginia - 2.0%
2,000 Industrial Development Authority of the County of No Opt. Call AAA 2,143,180
Hanover (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
3,850 Prince William County Park Authority (Virginia), Park 10/09 at 101 A3 3,740,503
Facilities Revenue Refunding and Improvement Bonds,
Series 1999, 6.000%, 10/15/28
1,250 Southeastern Public Service Authority of Virginia, 7/03 at 102 A- 1,222,084
Senior Revenue Bonds, Series 1993 (Regional Solid
Waste System), 6.000%, 7/01/13
(Alternative Minimum Tax)
---------------------------------------------------------------------------------------------------------------------------------
Washington - 2.4%
3,995 King County, Washington, Sewer Revenue Bonds, 1/09 at 101 AAA 3,699,050
Series 1999, 5.375%, 1/01/23
5,000 Port of Seattle (Washington), Special Facility Revenue 3/10 at 101 AAA 4,984,950
Bonds (Terminal 18 Project), Series B,
6. 000%, 9/01/20 (Alternative Minimum Tax)
---------------------------------------------------------------------------------------------------------------------------------
$ 383,754 Total Investments - (cost $357,813,299) - 97.2% 352,216,757
=================================================================================================================================
Other Assets Less Liabilities - 2.8% 10,011,298
----------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 362,228,055
==========================================================================================================
</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.
See accompanying notes to financial statements.
21
<PAGE> 207
Portfolio of Investments
Nuveen Flagship Intermediate Municipal Bond Fund
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arkansas - 0.8%
$ 500 Baxter County, Arkansas, Hospital Revenue Improvement Bonds, Series A No Opt. Call BBB $ 446,245
(Baxter County Regional Hospital), 5.000%, 9/01/09
------------------------------------------------------------------------------------------------------------------------------------
California - 2.8%
555 La Mirada Redevelopment Agency (California), Community Facilities District No Opt. Call N/R 531,446
No. 89-1 (Civic Theatre Project), 1998 Refunding Special Tax Bonds
(Tax Increment Contribution), 5.200%, 10/01/06
1,000 Sacramento Cogeneration Authority, Cogeneration Project Revenue Bonds 7/05 at 102 BBB- 1,040,110
(Procter & Gamble Project), 1995 Series, 6.200%, 7/01/06
------------------------------------------------------------------------------------------------------------------------------------
Colorado - 6.8%
2,300 E-470 Public Highway Authority, Capital Improvement Trust Fund Highway 8/05 at 95 29/32 Aaa 1,668,581
Revenue Bonds (E-470 Project), Senior Bonds, Arapahoe County, Colorado,
0.000%, 8/31/06 (Pre-refunded to 8/31/05)
1,000 Aurora Centretech Metropolitan District, Arapahoe County, Colorado, 12/06 at 102 A+ 957,210
General Obligation Variable Rate Refunding Bonds, Series 1998C, 4.875%,
12/01/28 (Mandatory put 12/01/08)
500 Colorado Health Facilities Authority, Revenue Bonds, Series 1995 12/05 at 102 A- 507,665
(Covenant Retirement Communities Inc.), 6.200%, 12/01/07
685 Eagle County Air Terminal Corporation, Airport Terminal Project Revenue No Opt. Call N/R 685,192
Bonds, Series 1996, 6.750%, 5/01/06 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Connecticut - 0.6%
335 Eastern Connecticut Resource Recovery Authority, Solid Waste Revenue Bonds 1/03 at 102 BBB 312,002
(Wheelabrator Lisbon Project), Series 1993A, 5.150%, 1/01/05
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Delaware - 0.9%
500 Delaware Economic Development Authority, First Mortgage Revenue Bonds 5/07 at 102 BBB 485,090
(Peninsula United Methodist Homes, Inc. Issue), Series 1997A,
6.100%, 5/01/10
------------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 3.9%
1,900 District of Columbia, General Obligation Refunding Bonds, Series A-1, No Opt. Call AAA 1,994,905
6.000%, 6/01/11
205 District of Columbia, University Revenue Bonds (American University Issue), 10/06 at 101 AAA 206,095
Series 1996, 5.375%, 10/01/08
-----------------------------------------------------------------------------------------------------------------------------------
Florida - 14.7%
200 Alachua County Health Facilities Authority, Florida, Health Facilities 12/06 at 102 AAA 201,568
Revenue Bonds, Series 1996A (Shands Teaching Hospital and Clinics, Inc.
Project), 5.300%, 12/01/08
300 Brevard County Housing Finance Authority (Florida), Multifamily Housing 2/06 at 101 AAA 323,265
Revenue Refunding Bonds (Windover Oaks and Windover Health Club
Apartments Projects), Series 1996A, 6.900%, 2/01/27 (Mandatory put
2/01/07)
500 Dade County, Florida, Seaport Revenue Refunding Bonds, Series 1995, No Opt. Call AAA 540,955
6.200%, 10/01/10
335 Dade County, Florida Special Obligation and Refunding Bonds, Series 1996B, 10/08 at 98 7/32 AAA 200,616
0.000%, 10/01/09
500 Duval County School District, Florida, General Obligation Refunding Bonds, 8/02 at 102 AAA 518,615
Series 1992, 6.300%, 8/01/08
145 Escambia County Housing Finance Authority (Florida), Single Family Mortgage 4/07 at 102 Aaa 145,825
Revenue Bonds, Series 1997A (Multi County Program), 5.500%, 4/01/08
(Alternative Minimum Tax)
200 Escambia County, Florida, Pollution Control Refunding Revenue Bonds 11/02 at 102 Baa1 209,000
(Champion International Project), Series 1992, 6.950%, 11/01/07
175 Florida Housing Finance Agency, Single Family Mortgage Revenue Refunding No Opt. Call AAA 178,442
Bonds, Series 1995A, 6.000%, 1/01/04 (Alternative Minimum Tax)
</TABLE>
22
<PAGE> 208
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florida (continued)
$ 500 State of Florida, Full Faith and Credit, Broward County Expressway Authority No Opt. Call AA+ $ 645,720
Bonds, Series of 1984, 9.875%, 7/01/09
125 Greater Orlando Aviation Authority, Airport Facilities Revenue Bonds, No Opt. Call AAA 128,799
City of Orlando, Florida, Series 1997, 5.750%, 10/01/10
(Alternative Minimum Tax)
405 City of Gulf Breeze (Florida), Local Government Loan Program Revenue Bonds, 12/06 at 101 AAA 412,363
Remarketed Series 1985B, 5.600%, 12/01/15 (Mandatory put 12/01/07)
145 School District of Gulf County, Florida, Sales Tax Revenue Bonds, Series 6/07 at 101 AA 143,346
1997, 5.200%, 6/01/08
200 Halifax Hospital Medical Center (Daytona Beach, Florida), Health Care No Opt. Call A 182,452
Facilities Revenue Bonds (Halifax Management System, Inc. Project),
1998 Series A, 4.600%, 4/01/08
150 Indian Trace Community Development District (Broward County, Florida), 5/05 at 102 AAA 153,578
Water Management Special Benefit Refunding Bonds, Series 1995A, 5.500%,
5/01/06
165 Jacksonville Health Facilities Authority (Florida), Tax Exempt Industrial No Opt. Call Baa2 161,693
Development Revenue Bonds (National Benevolent Association - Cypress Village
Florida Project), Series 1996A, 5.850%, 12/01/06
400 Lee County, Florida, Capital Refunding Revenue Bonds, Series 1997A, 5.750% No Opt. Call AAA 418,228
10/01/11
250 Hospital Board of Directors of Lee County, Florida, Hospital Revenue Bonds 4/07 at 102 AAA 253,435
(Lee Memorial Health System), Fixed Rate Hospital Revenue Bonds, 1997
Series A, 5.400%, 4/01/09
250 Lee County Industrial Development Authority (Florida), Utility System 11/06 at 101 AAA 253,300
Revenue Bonds, Series 1996 (Bonita Springs Utilities Project), 5.450%,
11/01/07 (Alternative Minimum Tax)
200 City of Leesburg, Florida, Hospital Revenue Refunding Bonds (Leesburg 7/06 at 102 A 198,754
Regional Medical Center Project), Series 1996A, 5.600%, 7/01/08
125 City of Lynn Haven, Florida, Special Project Revenue Bonds, Series 1996, No Opt. Call AAA 125,609
5.250%, 10/01/05 (Alternative Minimum Tax)
250 Martin County, Florida, Special Assessment Bonds, Series 1995 (Tropical 5/00 at 100 A2*** 250,023
Farms Water and Sewer Special Assessment District), 5.600%, 11/01/05
(Pre-refunded to 5/01/00)
295 Orange County Housing Finance Authority, Single Family Mortgage Revenue 9/07 at 102 AAA 296,870
Bonds (GNMA and FNMA Mortgage Backed Securities Program), Series 1997B,
5.400%, 9/01/09 (Alternative Minimum Tax)
100 City of Pembroke Pines, Florida, Special Assessment Bonds, No. 94-1, No Opt. Call A3 101,815
5.750%, 11/01/05
500 Housing Finance Authority of Polk County (Florida), Multifamily Housing 7/05 at 101 AAA 498,485
Revenue Bonds (Winter Oaks Apartments Project), Series 1997A, 5.250%,
7/01/22 (Mandatory put 7/01/07)
1,000 Sanford Airport Authority (Florida), Industrial Development Revenue Bonds No Opt. Call N/R 1,035,040
(Central Florida Terminals Inc. Project), Series 1995A, 7.500%, 5/01/06
(Alternative Minimum Tax)
250 Sanford Airport Authority (Florida), Industrial Development Revenue Bonds No Opt. Call N/R 250,208
(Central Florida Terminals Inc. Project), Series 1997C, 6.750%, 5/01/05
200 Sarasota County Health Facilities Authority (Florida), Health Facilities No Opt. Call N/R 195,194
Revenue Refunding Bonds, Series 1995 (Sunnyside Properties Project),
5.500%, 5/15/05
250 City of Tampa, Florida, Health System Revenue Bonds, Catholic Health East No Opt. Call AAA 252,135
Issue, Series 1998A-1, 5.500%, 11/15/12
------------------------------------------------------------------------------------------------------------------------------------
Illinois - 12.1%
2,000 Community Unit School District Number 100, Boone, McHenry, and DeKalb No Opt. Call Aaa 920,680
Counties, Illinois (Belvidere), Capital Appreciation School Bonds,
0.000%, 12/01/13
2,000 City of Chicago (Illinois), General Obligation Bonds (City Colleges of No Opt. Call AAA 915,100
Chicago Capital Improvement Project), Series 1999, 0.000%, 1/01/14
500 City of Chicago, Chicago-OHare International Airport, Special Facilities No Opt. Call Baa2 450,925
Revenue Refunding Bonds (United Air Lines, Inc. Project), Series 1999A,
5.200%, 4/01/11 (Alternative Minimum Tax)
1,000 Illinois Development Finance Authority, Adjustable Rate Solid Waste No Opt. Call BBB 837,110
Disposal Revenue Bonds (Waste Management, Inc. Project), Series 1997,
5.050%, 1/01/10 (Alternative Minimum Tax)
225 Illinois Development Finance Authority, Economic Development Revenue Bonds, 8/08 at 100 Baa2 214,659
Series 1998 (The Latin School of Chicago Project), 5.250%, 8/01/09
1,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1996 No Opt. Call BBB 1,000,610
(Mercy Hospital and Medical Center Project), 6.000%, 1/01/06
</TABLE>
23
<PAGE> 209
Portfolio of Investments
Nuveen Flagship Intermediate Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois (continued)
Illinois Health Facilities Authority, Revenue Bonds, Series 1998
(Centegra Health System):
$ 500 5.500%, 9/01/09 9/08 at 101 A- $ 475,925
500 5.500%, 9/01/10 9/08 at 101 A- 470,795
1,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, Series
1998 (The Methodist Medical Center of Illinois), 5.500%, 11/15/12 11/08 at 101 AAA 993,260
500 Illinois Health Facilities Authority, Revenue Bonds (Victory Health
Service), Series 1997A, 5.750%, 8/15/08 8/07 at 101 A- 487,890
------------------------------------------------------------------------------------------------------------------------------------
Indiana - 0.9%
500 Indiana Bond Bank, Special Program Bonds, Series 1997B (Hendricks County 2/07 at 102 AA- 506,030
Redevelopment Authority, Pittboro Project), 5.750%, 2/01/08
------------------------------------------------------------------------------------------------------------------------------------
Kansas - 0.8%
420 Lenexa, Kansas, Multifamily Housing Revenue Refunding Bonds (Barrington 2/03 at 102 AA 429,652
Park Apartments Project), Series 1993A, 6.200%, 2/01/08
------------------------------------------------------------------------------------------------------------------------------------
Kentucky - 1.8%
1,000 City of Ashland, Kentucky, Pollution Control Revenue Refunding Bonds No Opt. Call Baa2 987,020
(Ashland Inc. Project), Series 1999, 5.700%, 11/01/09
------------------------------------------------------------------------------------------------------------------------------------
Louisiana - 0.5%
265 Louisiana Public Facilities Authority, Student Loan Revenue Bonds, Series 9/02 at 102 Aaa 274,060
1992A-2, 6.600%, 3/01/03 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Maryland - 0.9%
500 Maryland Health and Higher Educational Facilities Authority, Refunding 1/07 at 102 A- 496,440
Revenue Bonds, Pickersgill Issue, Series 1997A, 5.750%, 1/01/08
------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 2.1%
1,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/08 at 101 A 942,320
Massachusetts Eye and Ear Infirmary Issue, Series B, 5.250%, 7/01/10
265 Massachusetts Health and Educational Facilities Authority, Revenue Bonds 7/09 at 101 Baa3 242,305
(Lasell College Issue), Series A, 5.100%, 7/01/11
------------------------------------------------------------------------------------------------------------------------------------
Michigan - 3.9%
1,000 Michigan State Hospital Finance Authority, Hospital Revenue Refunding Bonds No Opt. Call BBB 985,840
(Gratiot Community Hospital, Alma, Michigan), Series 1995, 6.100%,
10/01/07
1,000 Michigan State Hospital Finance Authority, Hospital Revenue and Refunding No Opt. Call Aaa 1,018,500
Bonds (Genesys Regional Medical Center Obligated Group), Series 1998A,
5.500%, 10/01/08
215 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Clark Retirement No Opt. Call BBB+ 196,043
Community Inc. Project), Series 1998, 4.900%, 6/01/08
------------------------------------------------------------------------------------------------------------------------------------
Minnesota - 1.6%
1,000 Housing and Redevelopment Authority of the City of Saint Paul, Minnesota No Opt. Call BBB+ 905,380
Health Care Revenue Bonds (Regions Hospital Project), Series 1998,
5.000%, 5/15/09
------------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.8%
500 Perry County (Mississippi), Pollution Control Refunding Revenue Bonds 3/12 at 100 Baa2 454,390
(Leaf River Forest Project), Series 1999, 5.200%, 10/01/12
------------------------------------------------------------------------------------------------------------------------------------
Missouri - 2.8%
1,000 The Industrial Development Authority of the City of Kansas City, Missouri, 11/08 at 102 N/R 893,630
Retirement Facility Refunding and Improvement Revenue Bonds, Series 1998A
(Kingswood Project), 5.375%, 11/15/09
300 Health and Educational Facilities Authority of the State of Missouri, 2/07 at 102 N/R 285,462
Bonds (Lutheran Senior Services), Series 1997, 5 .550%, 2/01/09
350 The Industrial Development Authority of the City of St. Louis, Missouri, 12/02 at 102 N/R 362,264
Refunding Bonds (Kiel Center Multipurpose Arena Project), Series 1992,
7.625%, 12/01/09 (Alternative Minimum Tax)
</TABLE>
24
<PAGE> 210
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nebraska - 3.3%
$ 1,000 American Public Energy Agency, Gas Supply Revenue Bonds (Nebraska No Opt. Call AAA $ 8 64,210
Public Gas Agency - Western A Project), 1999 Series A, 4.375%,
6/01/10
1,000 Energy America (Nebraska), Natural Gas Revenue Note (Metropolitan No Opt. Call N/R 9 56,340
Utility District Project), Series 1997B, 5.700%, 7/01/08
------------------------------------------------------------------------------------------------------------------------------------
New Jersey - 2.5%
1,000 The Gloucester County Improvement Authority, New Jersey, Solid Waste No Opt. Call BBB 1,0 00,600
Resource Recovery Revenue Refunding Bonds (Waste Management, Inc.
Project), Series 1999B, 7.000%, 12/01/29 (Alternative Minimum Tax)
(Mandatory put 12/01/09)
380 New Jersey Economic Development Authority, Insured Revenue Bonds No Opt. Call AAA 3 87,102
(Educational Testing Service Issue), Series 1995B, 5.500%, 5/15/05
------------------------------------------------------------------------------------------------------------------------------------
New Mexico - 0.1%
80 New Mexico Educational Assistance Foundation, Student Loan Revenue No Opt. Call Aaa 82,269
Bonds, Senior 1992 Series One-A, 6.300%, 12/01/02 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
New York - 8.1%
500 Albany Housing Authority, City of Albany, New York, Limited Obligation 10/05 at 102 Baa1 4 97,930
Bonds, Series 1995, 5.700%, 10/01/06
300 The City of New York, General Obligation Bonds, Fiscal 1997 Series B, 8/06 at 101 1/2 A- 306,885
5.700%, 8/15/07
410 The City of New York General Obligation Bonds, Fiscal 1993 Series F, 2/05 at 101 A-*** 435,990
6.375%, 2/15/06 (Pre-refunded to 2/15/05)
290 The City of New York, General Obligation Bonds, Fiscal 1995 Series F, 2/05 at 101 A- 30 5,219
6.375%, 2/15/06
750 New York State Housing Finance Agency, Health Facilities Revenue Bonds No Opt.Call A- 76 9,928
(New York City), 1996 Series A Refunding, 6.000%, 5/01/06
85 New York State Thruway Authority, Highway and Bridge Trust Fund Bonds, 4/08 at 101 AAA 8 6,066
Series 1998A, 5.500%, 4/01/11
1,000 The Port Authority of New York and New Jersey, Special Project Bonds, No Opt.Call N/R 1,03 7,640
Series 4, KIAC Partners Project, 7.000%, 10/01/07 (Alternative
Minimum Tax)
1,000 The Port Authority of New York and New Jersey, Special Project Bonds, No Opt. Call AAA 1 ,078,290
Series 6, JFK International Air Terminal LLC Project, 6.250%, 12/01/10
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Ohio - 4.8%
Cleveland-Cuyahoga County Port Authority, Subordinate
Refunding Revenue Bonds, Series 1997 (Rock and Roll Hall
of Fame and Museum Project):
360 5.750%, 12/01/07 No Opt. Call N/R 359,651
425 5.850%, 12/01/08 No Opt. Call N/R 426,594
1,000 City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds, 1988 No Opt. Call BBB 1, 006,510
Series C (Emery Air Freight Corporation and Emery Worldwide Airlines,
Inc. - Guarantors), 6.050%, 10/01/09
900 Miami County, Ohio, Hospital Facilities Revenue Refunding and Improvement No Opt. Call BBB 890,154
Bonds (Upper Valley Medical Center), Series 1996C, 6.000%, 5/15/06
------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 5.7%
1,250 County of Allegheny, Pennsylvania, Airport Revenue Refunding Bonds, No Opt. Call AAA 1,273,850
Series 1997A (Pittsburgh International Airport), 5.750%, 1/01/12
(Alternative Minimum Tax)
Pennsylvania Higher Educational Facilities Authority
(Commonwealth of Pennsylvania), Geneva College Revenue
Bonds, Series of 1998:
470 4.900%, 4/01/07 No Opt. Call BBB- 444,263
495 4.950%, 4/01/08 No Opt. Call BBB- 465,429
1,500 Municipal Authority of Westmoreland County (Westmoreland County, No Opt. Call AAA 1,016,055
Pennsylvania), Municipal Service Revenue Bonds, Series of 1995A,
0.000%, 8/15/07
------------------------------------------------------------------------------------------------------------------------------------
South Carolina - 0.3%
160 City of Myrtle Beach, South Carolina, Myrtle Beach Public Facilities No Opt. Call A3*** 163,187
Corporation, Certificates of Participation (City of Myrtle Beach
Convention Center Project), Series 1992, 6.750%, 7/01/02
</TABLE>
25
<PAGE> 211
Portfolio of Investments
Nuveen Flagship Intermediate Municipal Bond Fund (continued) April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tennessee - 1.6%
$ 500 Memphis-Shelby County Airport Authority (Tennessee), Special Facilities No Opt. Call BBB $ 465,920
Revenue Bonds, Refunding Series 1997 (Federal Express Corporation),
5.350%, 9/01/12
500 The Industrial Development Board of the Metropolitan Government of No Opt. Call N/R 435,780
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 - 8.5%
1,000 Alliance Airport Authority, Inc. (Texas), Special Facilities Revenue No Opt. Call Baa1 1,079,990
Bonds, Series 1991 (American Airlines, Inc. Project), 7.000%,
12/01/11 (Alternative Minimum Tax)
345 Brazos Higher Education Authority, Inc., Student Loan Revenue Refunding No Opt. Call Aaa 354,398
Bonds, Series 1993A-1, 6.200%, 12/01/02 (Alternative Minimum Tax)
3,000 Goose Creek Consolidated Independent School District, Texas, Unlimited No Opt. Call AAA 1,856,580
Tax Refunding Bonds, Series 1993, 0.000%, 2/15/09
535 Texas Department of Housing and Community Affairs, Multifamily Housing No Opt. Call A 543,207
Revenue Bonds (NHP - Foundation - Asmara Project), Series 1996A, 5.800%,
1/01/06
1,000 Tomball Hospital Authority (Texas), Hospital Revenue Bonds, Series 1999, No Opt. Call Baa2 929,840
Tomball Regional Hospital, 5.500%, 7/01/09
-----------------------------------------------------------------------------------------------------------------------------------
Utah - 0.5%
290 Salt Lake County, Utah, College Revenue Bonds (Westminster College of 10/07 at 101 BBB 275,570
Salt Lake City Project), Series 1997, 5.200%, 10/01/09
-----------------------------------------------------------------------------------------------------------------------------------
Virgin Islands - 2.7%
585 Virgin Islands Port Authority, Airport Revenue Bonds, Refunding Series 9/02 at 101 BBB 549,297
1998A, 4.500%, 9/01/05
1,000 Virgin Islands Water and Power Authority, Electric System Revenue and 7/08 at 101 N/R 969,840
Refunding Bonds, 1998 Series, 5.250%, 7/01/09
-----------------------------------------------------------------------------------------------------------------------------------
Virginia - 1.8%
500 Pocahontas Parkway Association, Route 895 Connector Toll Road Revenue No Opt. Call BBB- 477,060
Bonds, Senior Current Interest, Series 1998A, 5 .250%, 8/15/07
555 Prince William County Park Authority (Virginia), Park Facilities Revenue 10/09 at 101 A3 542,007
Refunding and Improvement Bonds, Series 1999, 5 .375%, 10/15/11
----------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 1.2%
750 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 10/07 at 101 BBB 696,570
Series 1998 (Carroll College, Inc. Project), 5.000%, 10/01/09
-----------------------------------------------------------------------------------------------------------------------------------
Wyoming - 0.4%
200 State of Wyoming, Farm Loan Board, Capital Facilities Refunding Revenue 10/02 at 102 AA- 206,361
Bonds, Series 1992, 6.100%, 10/01/06
-----------------------------------------------------------------------------------------------------------------------------------
$ 61,250 Total Investments - (cost $57,149,069) - 100.2% 56,092,746
-----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.2)% (103,386)
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $55,989,360
-------------------------------------------------------------------------------------------------------------------
</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.
26
<PAGE> 212
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska - 0.3%
$ 1,250 Alaska Student Loan Corporation, Student Loan Revenue Bonds, 1997 No Opt. Call AAA $1,234,663
Series A, 5.200%, 7/01/06 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Arizona - 0.5%
250 Arizona Educational Loan Marketing Corporation, Educational Loan Revenue No Opt. Call Aa2 255,458
Bonds, 6.125%, 9/01/02 (Alternative Minimum Tax)
2,000 City of Tucson, Arizona, General Obligation Refunding Bonds, Series No Opt. Call AAA 2,038,700
1995, 5.375%, 7/01/05
------------------------------------------------------------------------------------------------------------------------------------
California - 6.8%
7,250 California Higher Education Loan Authority, Inc., Student Loan Revenue No Opt. Call A2 7,414,503
Refunding Bonds, Subordinate 1994 Series D, 6.500%, 6/01/05
(Alternative Minimum Tax)
California Statewide Communities Development Authority,
Refunding Certificates of Participation (Rio Bravo Fresno
Project), 1999 Series A:
3,000 5.400%, 12/01/00 No Opt. Call N/R 2,993,340
3,000 5.450%, 12/01/01 No Opt. Call N/R 2,974,260
2,000 5.550%, 12/01/02 No Opt. Call N/R 1,965,860
2,000 5.600%, 12/01/03 No Opt. Call N/R 1,951,680
5,000 California Statewide Communities Development Authority, Multifamily No Opt. Call BBB+ 4,846,350
Housing Refunding Bonds (Archstone Oakridge Apartments), Issue 1999E,
Archstone Communities Trust, 5.300%, 6/01/29 (Mandatory put 6/01/08)
4,380 Central Joint Powers Health Financing Authority, Certificates of No Opt. Call Baa1 4,310,708
Participation, Series 1993 (Community Hospital of Central California),
5.250%, 2/01/04
1,250 Long Beach Aquarium of the Pacific, Revenue Bonds (Aquarium of the Pacific No Opt. Call BBB 1,258,488
Project), 1995 Series A, 5.750%, 7/01/05
Sacramento Cogeneration Authority, Cogeneration Project Revenue Bonds
(Procter & Gamble Project), 1995 Series:
1,000 5.900%, 7/01/02 No Opt. Call BBB- 1,015,550
500 6.000%, 7/01/03 No Opt. Call BBB- 510,865
500 7.000%, 7/01/04 No Opt. Call BBB- 530,355
1,500 Taft Public Financing Authority, Lease Revenue Bonds, 1997 Series A No Opt. Call A2 1,522,410
(Community Correctional Facility Acquisition Project), 5.500%, 1/01/06
------------------------------------------------------------------------------------------------------------------------------------
Colorado - 5.2%
9,000 E-470 Public Highway Authority, Arapahoe County, Colorado, Capital 8/05 at 95 29/32 Aaa 6,529,230
Improvement Trust Fund Highway Revenue Bonds (E-470 Project),
Senior Bonds, 0.000%, 8/31/06 (Pre-refunded to 8/31/05S
400 City of Arvada, Colorado, Limited Sales and Use Tax Revenue Bonds, Series No Opt. Call N/R*** 400,696
1991, 6.400%, 6/01/00
2,115 Colorado Health Facilities Authority, Revenue Bonds, Series 1995 No Opt. Call A- 2,106,032
(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 0.000%, 11/01/01 No Opt. Call Aa1 1,378,483
3,515 0.000%, 11/01/02 No Opt. Call Aa1 3,007,786
6,475 City and County of Denver, Colorado, Airport System Revenue Bonds, No Opt. Call AAA 6,623,925
Series 1996B, 5.750%, 11/15/04 (Alternative Minimum Tax)
1,065 Eagle County Air Terminal Corporation, Airport Terminal Project Revenue No Opt. Call N/R 1,065,298
Bonds, Series 1996, 6.750%, 5/01/06 (Alternative Minimum Tax)
500 Hyland Hills Metropolitan Park and Recreation District, Adams County, No Opt. Call N/R 501,340
Colorado Special Revenue Refunding and Improvement Bonds, Series 1996A,
5.400%, 12/15/00
</TABLE>
27
<PAGE> 213
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Colorado (continued)
$ 3,500 Metropolitan Football Stadium District (Colorado), Sales Tax Revenue Bonds, No Opt. Call AAA $2,174,970
Series 1999A, 0.000%, 1/01/09
------------------------------------------------------------------------------------------------------------------------------------
Connecticut - 3.4%
1,000 City of Bridgeport, Connecticut, General Obligation Refunding Bonds, 1996 No Opt. Call AAA 1,041,780
Series A, 6.000%, 9/01/05
2,200 State of Connecticut Health and Educational Facilities Authority, Revenue No Opt. Call BBB- 2,205,808
Bonds, Quinnipiac College Issue, Series D, 5.625%, 7/01/03
1,000 State of Connecticut Health and Educational Facilities Authority, Revenue No Opt. Call BBB 945,770
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 5.100%, 4/01/04 No Opt. Call BBB 760,430
1,100 5.200%, 4/01/05 No Opt. Call BBB 1,066,582
1,135 5.300%, 4/01/06 No Opt. Call BBB 1,094,889
410 City of New Haven, Connecticut, General Obligation Bonds, Issue of 1992, No Opt. Call AAA 431,623
9.250%, 3/01/02
5,000 Housing Authority of the City of Stamford (Connecticut), Multifamily No Opt. Call A3 4,531,700
Housing Revenue Refunding Bonds (The Fairfield Apartments Project),
Series 1998, 4.750%, 12/01/28 (Mandatory put 12/01/08)
3,775 West Haven Housing Authority (Connecticut), Multifamily Housing Revenue 1/01 at 100 N/R 3,778,586
Bonds, Series 1998B (Meadows Landing Apartments), 6.000%, 1/01/02
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Florida - 1.6%
240 North Springs Improvement District (Broward County, Florida), Water No Opt. Call N/R 243,427
and Sewer Revenue Bonds, Series 1991, 7.900%, 10/01/01
4,940 Housing Finance Authority of Polk County (Florida), Multifamily Housing 7/05 at 101 AAA 4,925,032
Revenue Bonds (Winter Oaks Apartments Project), Series 1997A, 5.250%,
7/01/22 (Mandatory put 7/01/07)
2,080 Sanford Airport Authority (Florida), Industrial Development Revenue Bonds No Opt. Call N/R 2,128,339
(Central Florida Terminals Inc. Project), Series 1995A, 7.300%, 5/01/04
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Georgia - 0.7%
3,000 City of Atlanta, Georgia, Airport Facilities Revenue Refunding Bonds, Series No Opt. Call AAA 3,199,110
1996, 6.500%, 1/01/06
------------------------------------------------------------------------------------------------------------------------------------
Illinois - 2.5%
1,600 Village of Channahon, Illinois, Revenue Refunding Bonds, Series 1999 No Opt. Call BBB+ 1,544,336
(Morris Hospital), 5.000%, 12/01/04
970 Illinois Health Facilities Authority, Revenue Refunding Bonds, Galesburg No Opt. Call AA 970,058
Cottage Hospital, 5.400%, 5/01/00
390 Illinois Health Facilities Authority, Revenue Bonds, Series 1996 (Mercy No Opt. Call BBB 392,243
Hospital and Medical Center Project), 5.600%, 1/01/02
1,500 Illinois Health Facilities Authority, Revenue Refunding Bonds, Series 1996B No Opt. Call A- 1,461,795
(Sarah Bush Lincoln Health Center), 5.500%, 2/15/06
Illinois Health Facilities Authority, Revenue Bonds (Victory Health
Service), Series 1997A:
945 5.000%, 8/15/05 No Opt. Call A- 899,895
995 5.000%, 8/15/06 No Opt. Call A- 935,161
1,045 5.750%, 8/15/07 No Opt. Call A- 1,023,912
605 5.750%, 8/15/08 8/07 at 101 A- 590,347
3,000 State of Illinois, General Obligation Bonds, Series of March 1992 10/02 at 102 AA 3,130,500
(Full Faith and Credit), 6.200%, 10/01/04
555 Village of Romeoville, Will County, Illinois, General Obligation No Opt. Call A3 560,178
Refunding Bonds (Alternate Revenue Source), Series 1991-B, 7.850%, 1/01/01
</TABLE>
28
<PAGE> 214
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indiana - 1.4%
City of Goshen, Indiana, Revenue Refunding Bonds, Series 1998
(Greencroft Obligated Group):
$ 715 5.150%, 8/15/05 No Opt. Call N/R $ 674,452
790 5.250%, 8/15/07 No Opt. Call N/R 728,333
680 5.300%, 8/15/08 No Opt. Call N/R 619,514
775 5.350%, 8/15/09 8/08 at 101 N/R 697,368
Indiana Bond Bank, Special Program Bonds, Series 1997B
(Hendricks County Redevelopment Authority, Pittboro
Project):
1,525 5.250%, 2/01/03 No Opt. Call AA- 1,524,680
1,075 5.400%, 2/01/04 No Opt. Call AA- 1,077,258
1,250 Valparaiso Multi-School Building Corporation (Porter County, No Opt. Call AAA 1,270,478
Indiana), First Mortgage Bonds, Series 1992, 6.100%, 7/01/01
------------------------------------------------------------------------------------------------------------------------------------
Iowa - 0.3%
Iowa Student Loan Liquidity Corporation, Iowa Partnership Loan
Revenue Bonds, 1992 Series:
325 6.000%, 7/01/00 (Alternative Minimum Tax) No Opt. Call A 325,689
600 6.100%, 7/01/01 (Alternative Minimum Tax) No Opt. Call A 607,056
650 6.200%, 7/01/02 (Alternative Minimum Tax) No Opt. Call A 662,305
------------------------------------------------------------------------------------------------------------------------------------
Kentucky - 7.6%
3,180 County of Christian, Kentucky, Hospital Revenue and Refunding Bonds, No Opt. Call A- 3,118,690
Series 1997A, Jennie Stuart Medical Center, 5 .500%, 7/01/06
City of Jeffersontown, Kentucky, Public Projects Refunding and
Improvements Bonds, Certificates of Participation:
235 4.650%, 11/01/02 No Opt. Call A3 232,815
520 4.750%, 11/01/03 No Opt. Call A3 513,479
475 Kenton County Water District No. 1, Water District Revenue Bonds, No Opt. Call AAA 483,503
Series 1995B, 5.600%, 2/01/03
Kentucky Development Finance Authority, Sisters of
Charity of Nazareth Health Corporation, Revenue
Refunding Bonds, Series 1991:
1,330 6.000%, 11/01/01 No Opt. Call A1** 1,354,326
2,720 6.600%, 11/01/06 (Pre-refunded to 11/01/01) 11/01 at 102 A1** 2,843,923
Kentucky Economic Development Finance Authority, Hospital System
Refunding and Improvement Revenue Bonds, Series 1997 (Appalachian
Regional Healthcare, Inc. Project):
2,670 5.300%, 10/01/05 No Opt. Call N/R 2,330,857
1,315 5.400%, 10/01/06 No Opt. Call N/R 1,116,238
1,460 Kentucky Higher Education Student Loan Corporation, Insured Student No Opt. Call Aaa 1,526,634
Loan Revenue Bonds, 1991 Series B, 6.800%, 6/01/03
(Alternative Minimum Tax)
Kentucky Infrastructure Authority, Governmental Agencies
Program Revenue and Revenue Refunding Bonds, 1995
Series H:
1,945 5.300%, 8/01/03 No Opt. Call AA- 1,962,486
1,000 5.500%, 8/01/05 No Opt. Call AA- 1,018,390
1,000 The Turnpike Authority of Kentucky, Resource Recovery Road, No Opt. Call A+ 1,194,680
Revenue Refunding Bonds, 1985 Series A, 9.625%, 7/01/05
Regional Airport Authority of Louisville and Jefferson
County, Kentucky, Airport System Revenue Bonds, 1997
Series A:
1,375 5.750%, 7/01/00 (Alternative Minimum Tax) No Opt. Call AAA 1,377,970
455 5.750%, 7/01/01 (Alternative Minimum Tax) No Opt. Call AAA 459,664
1,535 5.750%, 7/01/02 (Alternative Minimum Tax) No Opt. Call AAA 1,558,793
2,000 Regional Airport Authority of Louisville and Jefferson County, No Opt. Call Baa3 1,862,840
Kentucky, Special Facilities Revenue Bonds, 1999 Series A
(Airis Louisville, L.L.C. Project), 5.000%, 3/01/09
</TABLE>
29
<PAGE> 215
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kentucky (continued)
$ 3,225 Mount Sterling, Kentucky, Lease Revenue Bonds (Kentucky League of No Opt. Call Aa $3,263,507
Cities Funding Program), Series 1993A, 5.625%, 3/01/03
10,800 City of Owensboro, Kentucky, Electric Light and Power System Revenue No Opt. Call AAA 8,927,172
Bonds, Series 1993A, 0.000%, 1/01/04 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Louisiana - 3.3%
6,000 Parish of East Baton Rouge, State of Louisiana, Industrial Pollution No Opt. Call BBB 5,992,500
Control Refunding Revenue Bonds (Hoechst Celanese Corporation
Project), Series 1993, 5.400%, 12/01/02
750 Louisiana Public Facilities Authority, Hospital Revenue Bonds No Opt. Call A3*** 772,238
(Woman's Hospital Foundation Project), Series 1992, 6.750%,
10/01/02
2,500 Louisiana Offshore Terminal Authority, Deepwater Port Refunding No Opt. Call A 2,550,300
Revenue Bonds (LOOP Inc. Project), First Stage Series 1992B,
6.100%, 9/01/02
770 Office Facilities Corporation (A Louisiana Non Profit Corporation), No Opt. Call BBB+ 782,374
Capital Facilities Bonds (Statewide Lease/Purchase Program), Series
1990, 7.350%, 12/01/00
300 Ouachita Parish (Louisiana), Hospital Service District No. 1 Revenue No Opt. Call A*** 301,368
Bonds (Glenwood Regional Medical Center), Series 1991, 7.250%,
7/01/00
5,000 St. Charles Parish, State of Louisiana, Pollution Control Revenue No Opt. Call BBB- 4,886,750
Refunding Bonds (Entergy Louisiana, Inc. Project), Series 1999C,
5.350%, 10/01/29 (Mandatory put 10/01/03)
------------------------------------------------------------------------------------------------------------------------------------
Maine - 0.2%
845 Maine Educational Loan Marketing Corporation, Student Loan Revenue 5/02 at 101 A 857,869
Refunding Bonds, Subordinate Series 1992A-2, 6.600%, 5/01/05
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Maryland - 1.3%
Maryland Energy Financing Administration, Limited Obligation Solid
Waste Disposal Revenue Bonds (Wheelabrator Water Technologies
Baltimore L.L.C. Projects), 1996 Series:
2,280 5.650%, 12/01/03 (Alternative Minimum Tax) No Opt. Call A- 2,293,087
1,000 5.850%, 12/01/05 (Alternative Minimum Tax) No Opt. Call A- 1,011,320
2,400 Northeast Maryland Waste Disposal Authority, Resource Recovery No Opt. Call AAA 2,566,056
Revenue Refunding Bonds, (Southwest Resource Recovery Facility),
Series 1993, 7.150%, 1/01/04
------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 2.8%
265 City of Brockton, Massachusetts, General Obligation Bonds, 5.350%, No Opt. Call Aa3 265,270
6/15/00
Massachusetts Educational Financing Authority, Education Loan
Revenue Bonds, Issue E, Series 1995:
725 5.500%, 7/01/01 (Alternative Minimum Tax) No Opt. Call AAA 729,568
2,225 5.700%, 7/01/04 (Alternative Minimum Tax) No Opt. Call AAA 2,252,368
Massachusetts Educational Financing Authority, Education Loan
Revenue Bonds, Issue E, Series 1997B:
1,860 5.250%, 7/01/06 (Alternative Minimum Tax) No Opt. Call AAA 1,848,728
2,615 5.350%, 7/01/07 (Alternative Minimum Tax) 7/06 at 102 AAA 2,606,318
1,500 Massachusetts Health and Educational Facilities Authority, Revenue No Opt. Call AA- 1,401,735
Bonds, Partners Health Care System Issue, Series B, 5.000%,
7/01/09
City of New Bedford, Massachusetts, General Obligation Landfill
Closure Bonds, Series 1993:
600 5.400%, 3/01/01 No Opt. Call Baa3 603,810
600 5.500%, 3/01/02 No Opt. Call Baa3 603,726
2,500 The New England Education Loan Marketing Corporation, Student Loan No Opt. Call Aa2 2,527,525
Refunding Bonds, 1993 Series E, 5.625%, 7/01/04 (Alternative
Minimum Tax)
250 City of Springfield, Massachusetts, General Obligation School No Opt. Call Baa3 254,633
Project Loan, Act of 1948 Bonds, Series B, 6.100%, 9/01/02
</TABLE>
30
<PAGE> 216
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michigan - 5.8%
City of Detroit, Michigan, Convention Facility Limited
Tax Revenue Refunding Bonds (Cobo Hall Expansion
Project), Series 1993:
$ 6,980 5.250%, 9/30/06 No Opt. Call AAA $7,004,221
3,200 5.250%, 9/30/07 No Opt. Call AAA 3,204,736
245 City of Madison Heights, Michigan, Tax Increment Finance Authority, No Opt. Call N/R 249,101
Revenue Bonds, Series 1991, 8 .500%, 3/15/01
900 Michigan Higher Education Student Loan Authority, Student Loan Revenue No Opt. Call AAA 906,372
Bonds, Series XII-E, 6.375%, 10/01/00 (Alternative Minimum Tax)
2,000 Michigan Higher Education Student Loan Authority, Series XV-A, No Opt. Call Aa1 2,005,240
5.400%, 9/01/00 (Alternative Minimum Tax)
1,620 Michigan State Hospital Finance Authority, Hospital Revenue Refunding No Opt. Call BBB 1,617,521
Bonds (Gratiot Community Hospital, Alma, Michigan), Series 1995,
5.300%, 10/01/01
1,000 Michigan State Hospital Finance Authority, Revenue Refunding Bonds No Opt. Call AA- 1,038,870
(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 5.450%, 4/01/05 No Opt. Call AAA 3,111,747
3,325 5.450%, 10/01/05 6/05 at 102 AAA 3,356,355
4,095 Pontiac, Michigan, Hospital Finance Authority, Hospital Revenue Refunding 8/00 at 100 BBB- 4,000,569
Bonds (Nomc Obligated 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 5.350%, 5/01/03 No Opt. Call AAA 1,701,864
1,000 5.400%, 5/01/04 No Opt. Call AAA 1,009,130
------------------------------------------------------------------------------------------------------------------------------------
Missouri - 1.4%
Health and Educational Facilities Authority of the State
of Missouri, Health Facilities Revenue Bonds (Lutheran
Senior Services), Series 1997:
500 5.200%, 2/01/04 No Opt. Call N/R 490,395
600 5.300%, 2/01/05 No Opt. Call N/R 585,900
600 5.400%, 2/01/06 No Opt. Call N/R 583,452
700 5.500%, 2/01/07 No Opt. Call N/R 678,041
4,000 The Industrial Development Authority of the County of St. Louis, No Opt. Call A3 3,980,720
Missouri, Multifamily Housing Revenue Refunding Bonds (Equity
Residential/Pinetree Apartments), Series 1999A, 5.200%, 11/15/29
(Mandatory put 11/15/04)
200 The City of St. Louis, Missouri, Regional Convention and Sports Complex No Opt. Call N/R 203,942
Authority, Convention and Sports Facility Project Bonds, Series C
of 1991, 7.750%, 8/15/01
------------------------------------------------------------------------------------------------------------------------------------
Montana - 0.6%
3,000 City of Forsyth, Rosebud County, Montana, Pollution Control Revenue No Opt. Call A- 2,894,160
Refunding Bonds (Portland General Electric Company Projects), Series
1998B, 4.750%, 5/01/33 (Alternative Minimum Tax) (Mandatory put 5/01/03)
------------------------------------------------------------------------------------------------------------------------------------
Nebraska - 2.4%
7,200 American Public Energy Agency, Gas Supply Revenue Bonds (Nebraska Public No Opt. Call AAA 6,447,600
Gas Agency - Western A Project), 1999 Series A, 4.450%, 6/01/08
5,000 Energy America (Nebraska), Natural Gas Revenue Bonds (Nebraska Public Gas No Opt. Call N/R 4,725,850
Agency Project), Series 1998B, 5.450%, 4/15/08
------------------------------------------------------------------------------------------------------------------------------------
Nevada - 0.4%
2,000 Las Vegas New Convention and Visitors Authority, Nevada, Revenue Bonds, No Opt. Call AAA 2,029,340
Series 1999, 5.500%, 7/01/09
</TABLE>
31
<PAGE> 217
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Hampshire - 1.2%
$ 505 New Hampshire Higher Educational and Health No Opt. Call BBB+ $ 511,711
Facilities Authority, Hospital Revenue Bonds, St. Joseph
Hospital Issue, Series 1991, 7 .250%, 1/01/01
225 New Hampshire Housing Finance Authority, Single Family No Opt. Call Aa3 226,242
Residential Mortgage Bonds, 1991 Series D, 6.450%,
1/01/01 (Alternative Minimum Tax)
5,000 Business Finance Authority of the State of New Hampshire, No Opt. Call BBB+ 4,875,600
Pollution Control Refunding Revenue Bonds (The United
Illuminating Company Project), 1997 Series A, 4.350%,
7/01/27 (Alternative Minimum Tax) (Mandatory put 2/01/02)
------------------------------------------------------------------------------------------------------------------------------------
New Jersey - 2.8%
New Jersey Health Care Facilities Financing Authority,
Bayonne Hospital Obligated Group, Revenue Bonds, Series
1994:
860 5.750%, 7/01/00 No Opt. Call AAA 862,058
1,000 5.800%, 7/01/01 No Opt. Call AAA 1,012,583
790 5.900%, 7/01/02 No Opt. Call AAA 806,340
3,230 New Jersey Economic Development Authority, Insured Revenue No Opt. Call AAA 3,290,369
Bonds (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 5.300%, 10/01/05 No Opt. Call N/R 1,365,145
830 5.400%, 10/01/06 No Opt. Call N/R 793,214
New Jersey Higher Educational Facilities Authority, Higher
Educational Facilities Revenue Bonds, Saint Peters College
Issue, 1992 Series B:
295 6.100%, 7/01/00 No Opt. Call BBB 295,835
355 6.200%, 7/01/01 No Opt. Call BBB 361,213
New Jersey Educational Facilities Authority, Stevens
Institute of Technology Issue Revenue Bonds, 1992
Series A:
1,275 6.100%, 7/01/00 No Opt. Call A 1,278,366
995 6.200%, 7/01/01 No Opt. Call A 1,009,477
1,165 6.300%, 7/01/02 No Opt. Call A 1,193,356
550 New Jersey Educational Facilities Authority, Revenue Bonds, No Opt. Call BBB 526,251
Saint Peters College Issue, 1998 Series B, 5.000%, 7/01/08
------------------------------------------------------------------------------------------------------------------------------------
New York - 16.4%
Albany Housing Authority, City of Albany, New York, Limited
Obligation Bonds, Series 1995:
500 5.100%, 10/01/01 No Opt. Call Baa1 499,375
700 5.250%, 10/01/02 No Opt. Call Baa1 699,258
750 5.400%, 10/01/03 No Opt. Call Baa1 750,450
750 5.500%, 10/01/04 No Opt. Call Baa1 748,658
1,000 5.600%, 10/01/05 No Opt. Call Baa1 996,490
500 5.700%, 10/01/06 10/05 at 102 Baa1 497,930
700 5.850%, 10/01/07 10/05 at 102 Baa1 693,952
City of Jamestown, Chautauqua County, New York, Public
Improvement Serial Bonds, 1991 Series A:
150 7.000%, 3/15/04 No Opt. Call Baa2 158,262
750 7.000%, 3/15/05 No Opt. Call Baa2 799,005
1,000 Metropolitan Transportation Authority (New York), Transit No Opt. Call A 1,031,650
Facilities Service Contract Bonds, Series N, 6.625%,
7/01/02
2,750 The City of New York, General Obligation Bonds, Fiscal 1991 No Opt. Call A- 3,158,210
Series B, 8.250%, 6/01/06
1,000 The City of New York, General Obligation Bonds, Fiscal 1996 No Opt. Call A- 1,045,400
Series E, 6.500%, 2/15/04
The City of New York, General Obligation Bonds, Fiscal 1996
Series G:
3,000 5.700%, 2/01/03 No Opt. Call A- 3,048,210
500 5.750%, 2/01/06 No Opt. Call A- 511,615
</TABLE>
32
<PAGE> 218
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Rating** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York(continued)
$ 2,800 The City of New York, General Obligation Bonds, Fiscal 1996 Series I, No Opt. Call A- $ 2,965,480
6.500%, 3/15/06
3,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series H, No Opt. Call A- 3,031,860
5.400%, 8/01/04
4,000 The City of New York, General Obligation Bonds, Fiscal 1995 Series F, No Opt. Call Aaa 4,092,000
6.100%, 2/15/02
5,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series I, No Opt. Call A- 5,088,550
5.625%, 4/15/05
1,000 Dormitory Authority of the State of New York, State University 5/00 at 102 A 1,022,040
Educational Facilities Revenue Bonds, Series 1990A, 7.400%, 5/15/01
5,555 Dormitory Authority of the State of New York, State University No Opt. Call A 6,315,257
Educational Facilities Revenue Bonds, Series 1990B, 7.500%, 5/15/11
2,900 Dormitory Authority of the State of New York, Department of Health of No Opt. Call A- 2,960,436
the State of New York, Refunding Bonds, 1990 Issue, 6.750%, 7/01/01
2,000 Dormitory Authority of the State of New York, State University Educational No Opt. Call A- 2,111,780
Facilities Revenue Bonds, Series 1995A, 6.500%, 5/15/05
Dormitory Authority of the State of New York, NYACK
Hospital Revenue Bonds, Series 1996:
1,000 5.500%, 7/01/00 No Opt. Call Baa2 1,000,620
1,000 6.000%, 7/01/06 No Opt. Call Baa2 991,170
3,315 Dormitory Authority of the State of New York, City University System No Opt. Call A 3,406,229
Consolidated Revenue Bonds, 1996 Series 2, 6.000%, 7/01/04
5,000 New York State Housing Finance Agency, Health Facilities Revenue No Opt. Call A- 5,087,250
Bonds (New York City), 1996 Series A Refunding, 5.875%, 5/01/04
1,265 New York State Urban Development Corporation, Project Revenue Bonds No Opt. Call A 1,314,335
(Center for Industrial Innovation), 1995 Refunding Series,
6.250%, 1/01/05
1,000 New York State Urban Development Corporation, Correctional Capital No Opt. Call A 1,003,660
Facilities Revenue Bonds, 1993 Refunding Series, 5.250%, 1/01/02
630 Onondaga County Resource Recovery Agency (New York), System Revenue No Opt. Call Baa1 630,000
Bonds (Development Costs), 1992 Series, 6.200%, 5/01/00
3,700 The Port Authority of New York and New Jersey, Special Obligation No Opt. Call N/R 3,839,268
Project Bonds, Series 4, KIAC Partners Project, 7.000%, 10/01/07
(Alternative Minimum Tax)
3,035 The Port Authority of New York and New Jersey, Special Obligation No Opt. Call AAA 3,170,027
Project Bonds, Series 6, JFK International Air Terminal L.L.C.
Project, 6.000%, 12/01/05 (Alternative Minimum Tax)
1,400 Suffolk County Industrial Development Agency (New York), 1998 No Opt. Call N/R 1,298,612
Industrial Development Revenue Bonds (Nissequogue Cogen Partners
Facility), 4.875%, 1/01/08 (Alternative Minimum Tax)
7,265 Suffolk County Industrial Development Agency, Solid Waste Disposal No Opt. Call AAA 7,573,690
Facility Revenue Bonds (Ogden Martin Systems of Huntington, Limited
Partnership Resource Recovery Facility), Series 1999, 5.950%, 10/01/09
(Alternative Minimum Tax)
3,700 Tonawanda Housing Authority, New York, Housing Revenue Bonds (Kibler No Opt. Call N/R 3,696,337
Senior Housing, L.P. Project), Series 1999B Bonds, 6.250%, 12/01/01
------------------------------------------------------------------------------------------------------------------------------------
North Carolina - 1.2%
5,475 North Carolina Municipal Power Agency Number 1, Catawba Electric 1/03 at 102 BBB+ 5,514,311
Revenue Bonds, Series 1992, 6.000%, 1/01/05
------------------------------------------------------------------------------------------------------------------------------------
Ohio - 6.3%
8,245 Akron, Bath and Copley Joint Township Hospital District, Ohio, Hospital No Opt. Call Baa1 7,396,342
Facilities Revenue Bonds, Series 1998A (Summa Health System Project),
5.000%, 11/15/08
500 City of Barberton, Ohio, Hospital Facilities Revenue Bonds, Series 1992 No Opt. Call A*** 507,215
The Barberton Citizen's Hospital Company Project), 6.550%, 1/01/01
City of Cambridge, Ohio, Hospital Revenue Refunding
Bonds, Series 1991 (Guernsey Memorial Hospital Project):
640 7.750%, 12/01/00 No Opt. Call BBB 650,202
680 7.850%, 12/01/01 No Opt. Call BBB 706,166
</TABLE>
33
<PAGE> 219
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio (continued)
Cleveland-Cuyahoga County Port Authority, Subordinate
Refunding Revenue Bonds, Series 1997 (Rock and Roll Hall
of Fame and Museum Project):
$ 850 5.000%, 12/01/01 No Opt. Call N/R $ 847,076
1,000 5.100%, 12/01/02 No Opt. Call N/R 990,810
750 5.350%, 12/01/04 No Opt. Call N/R 741,773
335 5.600%, 12/01/06 No Opt. Call N/R 332,491
County of Cuyahoga, Ohio, Hospital Revenue Bonds (Meridia Health
System), Series 1995:
500 5.750%, 8/15/00 No Opt. Call AAA 502,030
795 5.850%, 8/15/01 No Opt. Call AAA 807,370
735 5.950%, 8/15/02 No Opt. Call AAA 752,875
County of Lucas, Ohio, Hospital Facilities Revenue Bonds, Series
1993 (Flower Hospital):
370 5.800%, 12/01/01 No Opt. Call N/R*** 375,406
790 5.900%, 12/01/02 No Opt. Call N/R*** 807,909
435 6.000%, 12/01/03 No Opt. Call N/R*** 447,893
1,000 Miami County, Ohio, Hospital Facilities Revenue Refunding and No Opt. Call BBB 989,060
Improvement Bonds (Upper Valley Medical Center), Series 1996C,
6.000%, 5/15/06
550 State of Ohio, State Economic Development Revenue Bonds (Ohio 6/00 at 100 A- 550,831
Enterprise Bond Fund), Series 1991-2 and Series 1991-3 (Superior
Forge and Steel Corporation), 7.250%, 6/01/01
(Alternative Minimum Tax)
3,825 State of Ohio, Elementary and Secondary Education Capital Facilities No Opt. Call AAA 3,892,473
Bonds, Series 1995A, 5.700%, 6/01/02
County of Sandusky, Ohio, Hospital Facilities Revenue Refunding Bonds,
Series 1998 (Memorial Hospital):
910 4.500%, 1/01/01 No Opt. Call BBB- 906,305
1,030 4.600%, 1/01/02 No Opt. Call BBB- 1,017,146
1,375 4.700%, 1/01/03 No Opt. Call BBB- 1,346,249
1,460 4.800%, 1/01/04 No Opt. Call BBB- 1,412,930
1,030 4.900%, 1/01/05 No Opt. Call BBB- 987,224
830 5.000%, 1/01/06 No Opt. Call BBB- 789,280
500 5.050%, 1/01/07 No Opt. Call BBB- 470,735
750 5.100%, 1/01/09 1/08 at 102 BBB- 687,758
-----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.6%
3,120 Oklahoma Industries Authority, Hospital Revenue Bonds (Deaconess No Opt. Call BBB 2,983,625
Health Care Corporation Project), Series 1997A, 5.250%, 10/01/07
-----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 8.8%
400 Allegheny County Hospital Development Authority (Allegheny County, No Opt. Call BBB+*** 404,060
Pennsylvania), Hospital Revenue Bonds, Series 1991A (St. Margaret
Memorial Hospital), 6.800%, 10/01/00
9,500 Beaver County Industrial Development Authority, Pennsylvania, Pollution 6/04 at 100 Baa3 8,982,630
Control Revenue Refunding Bonds, Series 1999-A (Ohio Edison Company
Project), 4.650%, 6/01/33 (Mandatory put 6/01/04)
3,830 Delaware County Authority (Pennsylvania), Health Facilities Revenue 11/05 at 100 Aaa 4,004,188
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 6.000%, 1/01/03 No Opt. Call BB- 3,906,320
4,000 6.500%, 1/01/08 No Opt. Call BB- 3,834,280
1,500 Monroeville Hospital Authority, Hospital Revenue Refunding Bonds, No Opt. Call N/R 1,420,530
Forbes Health System, 5.750%, 10/01/05
3,425 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, Fourteenth No Opt. Call BBB 3,431,542
Series, 5.700%, 7/01/00
1,095 Redevelopment Authority of the City of Philadelphia (Pennsylvania), No Opt. Call N/R 1,039,188
Multifamily Housing Mortgage Revenue Bonds, Series 1998A (Cricket
Court Commons Project), 5.600%, 4/01/08 (Alternative Minimum Tax)
</TABLE>
34
<PAGE> 220
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania (continued)
Philadelphia Pennsylvania Hospitals and Higher Education Facilities Authority,
Hospital Revenue Refunding Bonds, Pennsylvania Hospital:
$ 3,490 5.850%, 7/01/02 No Opt. Call BBB+*** $3,549,051
2,020 6.050%, 7/01/04 No Opt. Call BBB+*** 2,082,378
2,000 6.150%, 7/01/05 No Opt. Call BBB+*** 2,080,020
5,505 Westmoreland County Industrial Development Authority, Pennsylvania, Hospital No Opt. Call Baa3 5,326,143
Revenue Bonds, Series 1998 (Citizens General Hospital),
4.750%, 7/01/03
------------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.9%
4,035 Rhode Island Housing and Mortgage Finance Corporation, Multifamily Housing No Opt. Call AAA 4,083,823
Bonds, 1995 Series A, 5.350%, 7/01/03
------------------------------------------------------------------------------------------------------------------------------------
Tennessee - 1.7%
2,815 The Health, Educational, and Housing Facilities Board of the County of Knox, No Opt. Call Baa1 2,640,357
Revenue Bonds, Series 1999 (University Health System, Inc), 5.200%, 4/01/08
The Health and Educational Facilities Board of the
Metropolitan Government of Nashville and Davidson County,
Tennessee, Revenue Refunding Bonds, Series 1998 (The
Blakeford at Green Hills):
400 5.150%, 7/01/05 7/03 at 102 N/R 381,508
400 5.250%, 7/01/06 7/03 at 102 N/R 378,712
500 5.300%, 7/01/07 7/03 at 102 N/R 468,645
500 5.350%, 7/01/08 7/03 at 102 N/R 463,870
500 5.400%, 7/01/09 7/03 at 102 N/R 463,135
3,250 The Industrial Development Board of the Metropolitan Government of Nashville No Opt. Call N/R 2,832,570
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 - 4.4%
5,000 Brazos River Authority (Texas), Revenue Refunding Bonds (Reliant Energy, No Opt. Call Baa1 4,923,800
Incorporated Project), Series 1999B, 5.200%, 12/01/18 (Mandatory put
12/01/02)
Brazos Higher Education Authority, Inc., Student Loan Revenue Refunding
Bonds, Series 1993A-1:
1,510 5.900%, 12/01/00 (Alternative Minimum Tax) No Opt. Call Aaa 1,522,110
1,075 6.050%, 12/01/01 (Alternative Minimum Tax) No Opt. Call Aaa 1,093,135
5,000 Matagorda County Navigation District Number One (Texas), Revenue Refunding Bonds No Opt. Call Baa1 4,926,300
(Reliant Energy, Incorporated Project), Series 1999C, 5.200%, 5/01/29
(Mandatory put 11/01/02)
1,325 North Central Texas Health Facilities Development Corporation, Health Facilities 2/01 at 100 BBB 1,318,971
Development Revenue Bonds (C.C. Young Memorial Home Project), Series 1996,
5.700%, 2/15/03
645 The City of Pasadena (Texas), Industrial Development Corporation, Economic 10/00 at 100 A 649,418
Development Revenue Bonds, Series 1991 (Universities Space Research Association
Lunar and Planetary Institute Project), 7.050%, 10/01/01
655 The State of Texas, Texas College Student Loan Senior Lien Revenue Bonds, Series No Opt. Call A 667,393
1991, 7.100%, 4/01/01 (Alternative Minimum Tax)
2,500 Travis County (Texas), Health Facilities Development Corporation, Revenue Bonds No Opt. Call AAA 2,568,675
(Ascension Health Credit Group), Series 1999A, 5.750%, 11/15/08
Tyler Health Facilities Development Corporation (Texas),
Hospital Revenue Bonds (Mother Frances Hospital Regional
Health Care Center Project), Series 1997A:
1,650 5.125%, 7/01/05 7/02 at 100 Baa2 1,577,466
1,100 5.200%, 7/01/06 7/02 at 100 Baa2 1,042,877
------------------------------------------------------------------------------------------------------------------------------------
Vermont - 0.4%
Vermont Student Assistance Corporation, Education Loan
Finance Program Revenue Bonds, 1992 Series A-3:
1,000 5.900%, 12/15/00 (Alternative Minimum Tax) No Opt. Call AAA 1,007,600
1,000 6.050%, 12/15/01 (Alternative Minimum Tax) No Opt. Call AAA 1,015,270
</TABLE>
35
<PAGE> 221
Portfolio of Investments
Nuveen Flagship Limited Term Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Virgin Islands - 2.1%
Virgin Islands Port Authority, Airport Revenue Bonds, Refunding Series 1998A:
$ 2,960 4.450%, 9/01/04 9/02 at 101 BBB $ 2,812,059
2,500 4.500%, 9/01/05 9/02 at 101 BBB 2,347,425
2,070 Virgin Islands Water and Power Authority, Electric System Revenue and Refunding No Opt. Call N/R 2,037,211
Bonds, 1998 Series, 5.250%, 7/01/06
2,715 Virgin Islands Public Finance Authority, Revenue Bonds (Virgin Islands Gross No Opt. Call BBB-D 2,675,252
Receipts Taxes Loan Note), Series 1999A, 5.000%, 10/01/04
------------------------------------------------------------------------------------------------------------------------------------
Virginia - 0.6%
2,850 Newport News Redevelopment and Housing Authority, Multifamily Housing Revenue 5/05 at 102 AAA 2,874,653
Bonds (Fredericksburg - Oxford Project), Series 1997A, 5.550%, 5/01/27
(Mandatory put 5/01/07)
------------------------------------------------------------------------------------------------------------------------------------
Washington - 2.1%
4,160 The City of Seattle, Washington, Solid Waste Utility Revenue Refunding Bonds, No Opt. Call AAA 4,233,050
1999, 5.500%, 8/01/07
1,670 Washington Health Care Facilities Authority, Revenue Bonds, Series 1992 (The No Opt. Call AAA 1,712,016
Children's Hospital and Medical Center, Seattle), 6.000%, 10/01/02
3,500 Washington Public Power Supply System, Nuclear Project No. 2 Refunding Revenue No Opt. Call AAA 3,653,930
Bonds, Series 1997A, 6.000%, 7/01/09
------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 0.3%
1,155 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Series No Opt. Call AAA 1,162,202
1993A (Lutheran Hospital - La Crosse, Inc.), 5.300%, 2/15/01
------------------------------------------------------------------------------------------------------------------------------------
$ 463,575 Total Investments - (cost $460,445,145) - 98.9% 455,390,294
------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1 .1% 4,981,107
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $460,371,401
====================================================================================================================
</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.
36
<PAGE> 222
Portfolio of Investments
Nuveen High Yield Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska - 3.5%
$ 500 City of Pine Bluff, Arkansas, Environmental Improvement Revenue Refunding 2/10 at 101 BBB+ $ 507,735
Bonds, 2000 Series A (International Paper Company Project), 6.700%,
08/01/20
------------------------------------------------------------------------------------------------------------------------------------
Florida - 2.7%
400 Martin County Industrial Development Authority (Florida), Industrial 12/04 at 102 BBB- 401,904
Development Revenue Bonds (Indianatown Cogeneration L.P. Project),
Series 1994A, 7.875%, 12/15/25
------------------------------------------------------------------------------------------------------------------------------------
Illinois - 16.1%
135 Village of Channahon, Illinois, Revenue Refunding Bonds, Series 1999 12/09 at 102 BBB+ 121,489
(Morris Hospital), 5.750%, 12/01/12
485 City of Chicago, Chicago-O'Hare International Airport, Special Facility 11/00 at 103 Baa2 505,249
Revenue Bonds (United Air Lines, Inc. Project), Series 1988A, 8.950%,
05/01/18
140 City of Chicago, Tax Increment Allocation Bonds (Irving/Cicero 1/09 at 100 N/R 132,934
Redevelopment Project), Series 1998, 7.000%, 01/01/14
250 Illinois Development Finance Authority, Solid Waste Disposal Revenue Bonds No Opt. Call BBB 251,493
(Waste Management, Inc. Project), Series 1990, 7.125%, 01/01/01
300 Illinois Health Facilities Authority, Revenue Refunding Bonds, Series 1999A, No Opt. Call A3 286,110
West Suburban Hospital Medical Center, 5.500%, 07/01/09
225 Illinois Health Facilities Authority, Revenue Refunding Bonds, Series 1996B 2/07 at 102 A- 198,405
(Sarah Bush Lincoln Health Center), 5.500%, 02/15/16
700 Illinois Health Facilities Authority, Revenue Refunding Bonds, Series 1991 1/01 at 102 Baa3 581,931
(Proctor Community Hospital Project), 7.375%, 01/01/23
300 Village of Libertyville, Illinois, Affordable Housing Revenue Bonds, Series 11/09 at 100 A2 295,218
1999A (Liberty Towers Project), 7.000%, 11/01/29
------------------------------------------------------------------------------------------------------------------------------------
Indiana - 6.4%
1,000 Whitley County, Indiana, Solid Waste and Sewage Disposal Revenue Bonds 11/10 at 102 N/R 946,120
(Steel Dynamics Inc., Project), Series 1998, 7.250%, 11/01/18
------------------------------------------------------------------------------------------------------------------------------------
Iowa- 4 .7%
700 Iowa Higher Education Loan Authority, Private College Facility Revenue Bonds 10/10 at 102 N/R 694,099
(Waldorf College Project), Series 1999, 7.375%, 10/01/19
------------------------------------------------------------------------------------------------------------------------------------
Kentucky - 14.9%
1,000 Kentucky Economic Development Finance Authority, Hospital System Refunding 4/08 at 102 N/R 691,950
and Improvement Revenue Bonds, Series 1997 (Appalachian Regional Healthcare,
Inc. Project), 5.850%, 10/01/17
1,500 City of Newport, Kentucky, Public Properties Corporation, First Mortgage 7/10 at 104 N/R 1,495,185
Revenue Bonds, Series 2000A (Public Parking and Plaza Project), 8.375%,
01/01/18
------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 0.9%
135 Massachusetts Port Authority, Special Facilities Revenue Bonds (US Air 9/06 at 102 AAA 132,467
Project), Series 1996-A, 5.875%, 09/01/23
------------------------------------------------------------------------------------------------------------------------------------
Minnesota - 12.9%
400 Northwest Minnesota Multi-County Housing and Redevelopment Authority, 10/04 at 102 N/R 357,552
Governmental Housing Revenue Bonds (Pooled Housing Program), Series B,
8.125%, 10/01/26
1,530 City of White Bear Lake, Minnesota, First Mortgage Nursing Home Revenue 11/03 at 102 N/R 1,535,860
Refunding Bonds (White Bear Lake Care Center, Inc., Project), Series
1992, 8.250%, 11/01/12
</TABLE>
37
<PAGE> 223
Portfolio of Investments
Nuveen High Yield Municipal Bond Fund (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York - 17.4%
$ 1,500 County of Cattaraugus, New York, Industrial Development Agency, Tax-Exempt No Opt. Call N/R $ 1,487,355
Industrial Development Revenue Bonds, Series 1999A (Laidlaw Energy and
Environmental, Inc. Project), 8.500%, 07/01/21
500 Erie County (New York), Industrial Development Agency, Solid Waste Disposal 12/10 at 103 N/R 545,835
Facility Revenue Bonds (1998 CanFibre of Lackawanna Project), 9.050%,
12/01/25
500 Dormitory Authority of the State of New York, Marymount Manhattan College 7/09 at 101 AA 505,390
Insured Revenue Bonds, Series 1999, 6.125%, 07/01/21
------------------------------------------------------------------------------------------------------------------------------------
Ohio - 5.1%
140 Ohio Capital Corporation for Housing Mortgage, Revenue Refunding Bonds, No Opt. Call N/R 138,943
Series 1999F (FHA-Insured Mortgage Loans - Section 8 Assisted Projects),
6.750%, 02/01/03
700 Ohio Water Development Authority, State of Ohio, Solid Waste Disposal Revenue 9/09 at 102 N/R 613,480
Bonds (Bay Shore Power Project), Convertible Series 1998B, 6.625%, 09/01/20
------------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 1.0%
140 City of Central Falls, Rhode Island General Obligation School Bonds, 6.250%, 5/09 at 102 AA 141,273
05/15/20
------------------------------------------------------------------------------------------------------------------------------------
Texas - 1.7%
110 Alliance Airport Authority, Inc. (Texas), Special Facilities Revenue Bonds, No Opt. Call Baa1 118,799
Series 1991 (American Airlines, Inc. Project), 7.000%, 12/01/11
140 Harris County (Texas), Housing Finance Corporation, Multifamily Housing 7/12 at 103 N/R 134,418
Revenue Bonds (Windfern Pointe and Waterford Place Apartments Projects),
1999 Senior Series A and B, Subordinate Series C, and Junior
Subordinate Series D, 9.000%, 07/01/29
------------------------------------------------------------------------------------------------------------------------------------
Utah - 6.1%
750 City of Bountiful, Davis County, Utah Hospital Revenue Refunding Bonds 12/08 at 101 N/R 618,337
(South Davis Community Hospital Project), Series 1998, 5.750%, 12/15/18
275 Utah Housing Finance Agency, Single Family Mortgage Bonds, 1999 Series F, 7/09 at 101 1/2 Aa2 280,272
6.300%, 07/01/21
------------------------------------------------------------------------------------------------------------------------------------
Virginia - 5.7%
850 Virginia Small Business Financing Authority, Industrial Development No Opt. Call N/R 844,875
Revenue Bonds (S.I.L. Clean Water, L.L.C. Project), Series 1999,
7.250%, 11/01/09
------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 0.9%
150 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, 11/09 at 101 N/R 132,564
Series 1999 (FH Healthcare Development Inc. Project), 6.250%, 11/15/20
------------------------------------------------------------------------------------------------------------------------------------
$ 15,455 Total Investments - (cost $14,870,441) - 100.0% 14,697,242
------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.0% 3,161
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $14,700,403
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year)
and prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
N/R Investment is not rated.
See accompanying notes to financial statements.
38
<PAGE> 224
Statement of Net Assets
April 30, 2000
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments in municipal securities, at market value $ 352,216,757 $ 56,092,746 $ 455,390,294 $ 14,697,242
Cash 411,309 -- -- --
Receivables:
Fund manager -- 9,629 -- 1,609
Interest 6,119,656 891,813 7,776,696 386,476
Investments sold 11,325,506 220,000 9,830,943 15,000
Shares sold 216,897 9,066 232,952 1,054
Other assets 107,779 934 20,602 250
------------------------------------------------------------------------------------------------------------------------------------
Total assets 370,397,904 57,224,188 473,251,487 15,101,631
------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 1,047,270 2,852,598 328,756
Payables:
Investments purchased 6,195,660 -- 7,650,514 --
Shares redeemed 1,159,955 62,422 1,151,814 --
Accrued expenses:
Management fees 147,162 -- 166,136 --
12b-1 distribution and service fees 111,134 14,181 98,945 3,747
Other 58,068 19,180 104,219 48,773
Dividends payable 497,870 91,775 855,860 19,952
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 8,169,849 1,234,828 12,880,086 401,228
------------------------------------------------------------------------------------------------------------------------------------
Net assets $ 362,228,055 $ 55,989,360 $ 460,371,401 $ 14,700,403
====================================================================================================================================
Class A Shares
Net assets $ 259,004,035 $ 44,675,396 $ 382,808,091 $ 5,291,106
Shares outstanding 25,067,707 4,417,396 36,979,538 284,424
Net asset value and redemption price per share $ 10.33 $ 10.11 $ 10.35 $ 18.60
Offering price per share (net asset value per share
plus maximum sales charge of 4.20%, 3.00%, 2.50% and
4.20%, respectively, of offering price) $ 10.78 $ 10.42 $ 10.62 $ 19.42
====================================================================================================================================
Class B Shares
Net assets $ 32,536,056 N/A N/A $ 2,465,427
Shares outstanding 3,147,082 N/A N/A 132,704
Net asset value, offering and redemption price per share $ 10.34 N/A N/A $ 18.58
====================================================================================================================================
Class C Shares
Net assets $ 67,577,161 $ 10,586,154 $ 77,228,178 $ 1,694,450
Shares outstanding 6,549,764 1,045,130 7,470,356 91,145
Net asset value, offering and redemption price per share $ 10.32 $ 10.13 $ 10.34 $ 18.59
====================================================================================================================================
Class R Shares
Net assets $ 3,110,803 $ 727,810 $ 335,132 $ 5,249,420
Shares outstanding 300,931 72,008 32,436 282,091
Net asset value, offering and redemption price per share $ 10.34 $ 10.11 $ 10.33 $ 18.61
====================================================================================================================================
</TABLE>
N/A - Intermediate and Limited Term are not authorized to issue Class B Shares.
39 See accompanying notes to financial statements
<PAGE> 225
Statement of Operations
Year Ended April 30, 2000
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield*
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income $ 24,390,404 $ 3,365,932 $ 27,453,918 $ 517,478
------------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees 1,938,717 303,770 2,222,621 45,308
12b-1 service fees - Class A 570,660 99,500 846,325 4,699
12b-1 distribution and service fees - Class B 330,182 N/A N/A 10,344
12b-1 distribution and service fees - Class C 564,143 77,089 487,057 5,352
Shareholders' servicing agent fees and expenses 364,200 115,918 286,743 1,079
Custodian's fees and expenses 103,956 63,908 117,969 51,664
Trustees' fees and expenses 12,605 2,532 13,146 390
Professional fees 20,782 11,183 19,304 10,235
Shareholders' reports - printing and mailing expenses 49,148 7,698 11,389 23,472
Federal and state registration fees 37,331 21,095 30,308 19,617
Other expenses 9,227 2,250 4,300 294
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 4,000,951 704,943 4,039,162 172,454
Custodian fee credit (37,014) (9,098) (7,283) (16,441)
Expense reimbursement -- (190,184) -- (96,261)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,963,937 505,661 4,031,879 59,752
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 20,426,467 2,860,271 23,422,039 457,726
------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (9,176,255) (230,203) (2,224,238) (134,825)
Net change in unrealized appreciation or depreciation of investments (31,918,526) (4,131,784) (24,703,249) (173,198)
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (41,094,781) (4,361,987) (26,927,487) (308,023)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(20,668,314) $(1,501,716) $ (3,505,448) $ 149,703
====================================================================================================================================
</TABLE>
N/A - Intermediate and Limited Term are not authorized to issue Class B
Shares.
*For the period June 7, 1999 (commencement of operations) through April 30,
2000.
See accompanying notes to financial statements
40
<PAGE> 226
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
All-American Intermediate
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
4/30/00 4/30/99 4/30/00 4/30/99
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 20,426,467 $ 17,742,518 $ 2,860,271 $ 2,502,122
Net realized gain (loss) from
investment transactions (9,176,255) 1,390,265 (230,203) 974,433
Net change in unrealized appreciation
or depreciation of investments (31,918,526) 1,381,053 (4,131,784) (353,542)
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (20,668,314) 20,513,836 (1,501,716) 3,123,013
-------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (15,132,046) (13,558,500) (2,386,487) (2,193,035)
Class B (1,566,028) (757,569) N/A N/A
Class C (3,562,122) (3,203,324) (435,019) (282,244)
Class R (162,902) (225,133) (35,833) (32,146)
From accumulated net realized gains
from investment transactions:
Class A (654,193) (265,989) (716,348) (215,591)
Class B (80,183) (18,186) N/A N/A
Class C (170,189) (70,414) (146,458) (36,389)
Class R (6,542) (5,437) (10,562) (2,815)
-------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions to shareholders (21,334,205) (18,104,552) (3,730,707) (2,762,220)
-------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
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 181,144,650 146,838,231 22,995,132 17,557,237
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 6,218,778 6,230,070 1,610,326 1,227,057
-------------------------------------------------------------------------------------------------------------------------------
187,363,428 171,673,667 24,605,458 31,159,906
Cost of shares redeemed (209,948,809) (59,511,217) (25,719,254) (15,659,540)
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Fund share transactions (22,585,381) 112,162,450 (1,113,796) 15,500,366
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (64,587,900) 114,571,734 (6,346,219) 15,861,159
Net assets at the beginning of year 426,815,955 312,244,221 62,335,579 46,474,420
-------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 362,228,055 $ 426,815,955 $ 55,989,360 $ 62,335,579
===============================================================================================================================
Balance of undistributed net
investment income at the end of year $ 3,945 $ 576 $ 8,224 $ 5,292
===============================================================================================================================
</TABLE>
<PAGE> 227
<TABLE>
<CAPTION>
Limited Term High Yield
------------------------------ ----------------------
For the Period 6/7/99
(commencement
Year Ended Year Ended of operations)
4/30/00 4/30/99 through 4/30/00
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income $ 23,422,039 $ 22,313,600 $ 457,726
Net realized gain (loss) from
investment transactions (2,224,238) 177,749 (134,825)
Net change in unrealized appreciation
or depreciation of investments (24,703,249) 4,044,043 (173,198)
--------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (3,505,448) 26,535,392 149,703
--------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (19,204,675) (20,627,751) (138,627)
Class B N/A N/A (54,913)
Class C (3,701,545) (2,406,223) (38,436)
Class R (35,237) (45,661) (182,520)
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 (22,941,457) (23,079,635) (414,496)
--------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from shares issued in the
reorganization of:
Alabama -- -- --
South Carolina -- -- --
Florida Intermediate -- -- --
Net proceeds from sale of shares 123,966,719 159,596,588 16,959,330
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 10,258,381 10,739,032 74,830
--------------------------------------------------------------------------------------------------------------------------
134,225,100 170,335,620 17,034,160
Cost of shares redeemed (192,794,704) (101,189,975) (2,168,964)
--------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Fund share transactions (58,569,604) 69,145,645 14,865,196
--------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (85,016,509) 72,601,402 14,600,403
Net assets at the beginning of year 545,387,910 472,786,508 100,000
--------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 460,371,401 $ 545,387,910 $ 14,700,403
==========================================================================================================================
Balance of undistributed net
investment income at the end of year $ 705,378 $ 224,796 $ 43,230
==========================================================================================================================
</TABLE>
N/A - Intermediate and Limited Term are not authorized to issue Class B Shares.
See accompanying notes to financial statements.
41
<PAGE> 228
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"), the Nuveen Flagship Limited Term Municipal Bond Fund ("Limited
Term") and the Nuveen High Yield Municipal Bond Fund ("High Yield")
(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.
All-American, Intermediate and Limited Term seek to provide high tax-free income
and preservation of capital through investments in diversified portfolios of
quality municipal bonds.
High Yield invests substantially all of its assets in municipal bonds for high
current income exempt from regular federal income taxes and capital
appreciation. Under normal circumstances, at least 65% of the Fund's assets will
be invested in medium to low-quality municipal bonds and may also invest in
defaulted municipal bonds, inverse floating rate securities, municipal forwards
and short-term municipal investments.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
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, 2000, All-American had an outstanding when-issued purchase commitment
of $6,195,660. There were no such outstanding purchase commitments in any of the
other Funds.
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.
42
<PAGE> 229
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/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Federal Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal income tax, to retain such tax-exempt status when
distributed to the shareholders of the Funds. All monthly tax-exempt income
dividends paid during the fiscal year ended April 30, 2000, 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 and High Yield also offer
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, 2000.
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.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
43
<PAGE> 230
Notes to Financial Statements (continued)
2. Fund Shares Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
All-American
-----------------------------------------------------------
Year Ended Year Ended
4/30/00 4/30/99
---------------------------- ----------------------------
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 13,500,898 143,864,405 8,253,027 94,819,512
Class B 1,285,393 13,894,140 2,120,117 24,385,007
Class C 1,934,386 20,659,552 2,250,600 25,819,882
Class R 257,212 2,726,553 157,716 1,813,830
Shares issued to shareholders due to reinvestment of distributions:
Class A 428,158 4,578,317 410,709 4,717,255
Class B 48,556 517,927 22,987 264,311
Class C 95,115 1,014,087 89,793 1,029,146
Class R 10,212 108,447 19,091 219,358
-----------------------------------------------------------------------------------------------------------------------------------
17,559,930 187,363,428 14,932,976 171,673,667
-----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (16,168,225) (171,438,777) (3,545,629) (40,755,984)
Class B (967,088) (10,145,770) (227,194) (2,609,789)
Class C (2,489,879) (26,198,502) (1,050,052) (12,050,245)
Class R (205,764) (2,165,760) (356,254) (4,095,199)
-----------------------------------------------------------------------------------------------------------------------------------
(19,830,956) (209,948,809) (5,179,129) (59,511,217)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (2,271,026) $ (22,585,381) 9,753,847 $ 112,162,450
===================================================================================================================================
<CAPTION>
All-American
-----------------------------------------------------------
Year Ended Year Ended
4/30/00 4/30/99
---------------------------- ----------------------------
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 1,649,511 17,041,794 1,262,418 13,969,292
Class C 563,833 5,833,982 308,307 3,423,835
Class R 11,445 119,356 14,806 164,110
Shares issued to shareholders due to reinvestment of distributions:
Class A 132,254 1,373,278 98,056 1,086,083
Class C 21,185 220,220 11,658 129,379
Class R 1,620 16,828 1,048 11,595
-----------------------------------------------------------------------------------------------------------------------------------
2,379,848 24,605,458 2,806,009 31,159,906
-----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,069,751) (21,197,050) (1,238,267) (13,721,630)
Class C (434,531) (4,467,520) (157,660) (1,745,372)
Class R (5,370) (54,684) (17,438) (192,538)
-----------------------------------------------------------------------------------------------------------------------------------
(2,509,652) (25,719,254) (1,413,365) (15,659,540)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (129,804) $ (1,113,796) 1,392,644 $ 15,500,366
===================================================================================================================================
</TABLE>
44
<PAGE> 231
<TABLE>
<CAPTION>
Limited Term
-------------------------------------------------------------
Year Ended Year Ended
4/30/00 4/30/99
---------------------------- --------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 9,240,097 $ 97,155,925 8,690,653 $ 94,938,574
Class C 2,519,289 26,670,978 5,825,373 63,606,835
Class R 13,313 139,816 96,702 1,051,179
Shares issued to shareholders due to
reinvestment of distributions:
Class A 813,547 8,594,221 879,078 9,602,882
Class C 155,922 1,644,870 101,885 1,111,423
Class R 1,820 19,290 2,265 24,727
-------------------------------------------------------------------------------------------------------
12,743,988 134,225,100 15,595,956 170,335,620
-------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (14,974,195) (157,240,634) (8,242,278) (89,920,305)
Class C (3,301,074) (34,601,230) (977,837) (10,657,258)
Class R (90,620) (952,840) (56,064) (612,412)
-------------------------------------------------------------------------------------------------------
(18,365,889) (192,794,704) (9,276,179) (101,189,975)
-------------------------------------------------------------------------------------------------------
Net increase (decrease) (5,621,901) $ (58,569,604) 6,319,777 $ 69,145,645
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
High Yield
For the Period 6/7/99
(commencement of
operations) through
4/30/00
-------------------------
Shares Amount
-------------------------
<S> <C> <C>
Shares sold:
Class A 372,419 $ 6,981,810
Class B 143,463 2,700,166
Class C 89,209 1,682,683
Class R 293,122 5,594,671
Shares issued to shareholders due to
reinvestment of distributions:
Class A 1,545 28,819
Class B 1,039 19,374
Class C 686 12,769
Class R 744 13,868
--------------------------------------------------------------------------
902,227 17,034,160
--------------------------------------------------------------------------
Shares redeemed:
Class A (90,790) (1,684,324)
Class B (13,048) (243,122)
Class C -- --
Class R (13,025) (241,518)
--------------------------------------------------------------------------
(116,863) (2,168,964)
--------------------------------------------------------------------------
Net increase 785,364 $ 14,865,196
==========================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on June 1, 2000, to shareholders of record on May 9,
2000, as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $.0470 $.0415 $.0400 $.1000
Class B .0405 N/A N/A .0880
Class C .0420 .0365 .0370 .0910
Class R .0485 .0430 .0420 .1030
===============================================================================================
</TABLE>
N/A-Intermediate and Limited Term are not authorized to issue Class B Shares.
45
<PAGE> 232
Notes to Financial Statements (continued)
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, 2000, were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Investments in municipal securities $207,301,931 $ 13,354,516 $183,512,852 $ 19,687,009
Temporary municipal investments 72,220,000 6,050,000 58,830,000 1,000,000
Sales and maturities:
Investments in municipal securities 234,301,287 14,664,939 240,235,083 4,677,941
Temporary municipal investments 72,220,000 7,050,000 58,830,000 1,000,000
===========================================================================================================
</TABLE>
At April 30, 2000, the identified cost of investments owned for federal income
tax purposes were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$361,518,440 $57,314,453 $461,689,189 $14,981,946
===================================================================================================================
</TABLE>
At April 30, 2000, the Funds had unused capital loss carryforwards available for
federal income tax purposes to be applied against future capital gains, if any.
If not applied, the carryforwards will expire as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2003 $ -- $ -- $ 3,801,908 $ --
2008 5,472,809 71,322 1,014,670 23,319
---------------------------------------------------------------------------------------------
Total $5,472,809 $ 71,322 $ 4,816,578 $ 23,319
=============================================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at April 30, 2000, were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $ 8,465,974 $ 615,004 $ 3,103,021 $ 114,823
depreciation (17,767,657) (1,836,711) (9,401,916) (399,527)
---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $ (9,301,683) $ (1,221,707) $ (6,298,895) $ (284,704)
=================================================================================================================================
</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 assets of each Fund as follows:
<TABLE>
<CAPTION>
All-American & Intermediate
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>
Limited Term
Average Daily Net Assets Management Fee
-------------------------------------------------------------------------------
For the first $125 million .4500 of 1%
For the next $125 million .4375 of 1
For the next $250 million .4250 of 1
For the next $500 million .4125 of 1
For the next $1 billion .4000 of 1
For net assets over $2 billion .3750 of 1
===============================================================================
High Yield
Average Daily Net Assets Management Fee
For the first $125 million .6000 of 1%
For the next $125 million .5875 of 1
For the next $250 million .5750 of 1
For the next $500 million .5625 of 1
For the next $1 billion .5500 of 1
For net assets over $2 billion .5250 of 1
===============================================================================
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.
46
<PAGE> 233
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended April 30, 2000, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares, the majority of which were paid
out as concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges collected $ 336,687 $ 13,895 $ 135,664 $ 32,118
Paid to authorized dealers 336,687 13,895 135,664 31,059
========================================================================================================
</TABLE>
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, 2000, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commission advances $ 768,190 $ 28,377 $ 463,418 $ 115,221
================================================================================================
</TABLE>
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 collected during the first year following
a purchase are retained by the Distributor. During the fiscal year ended April
30, 2000, the Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12b-1 fees retained $ 418,242 $ 24,616 $ 177,355 $ 14,561
===========================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended April 30, 2000, as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CDSC retained $ 218,920 $ 13,737 $ 151,331 $ 686
===========================================================================================
</TABLE>
7. Composition of Net Assets
At April 30, 2000, each Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $ 376,998,601 $ 57,274,165 $ 470,781,496 $ 14,965,197
Balance of undistributed net investment income 3,945 8,224 705,378 43,230
Accumulated net realized gain (loss) from
investment transactions (9,177,949) (236,706) (6,060,622) (134,825)
Net unrealized appreciation (depreciation) of
investments (5,596,542) (1,056,323) (5,054,851) (173,199)
-------------------------------------------------------------------------------------------------------------------
Net assets $ 362,228,055 $ 55,989,360 $ 460,371,401 $ 14,700,403
===================================================================================================================
</TABLE>
8. Investment Composition
At April 30, 2000, the revenue sources by municipal purpose, expressed as a
percent of long-term investments, were as follows:
<TABLE>
<CAPTION>
All-American Intermediate Limited Term High Yield
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials 4% 1% --% 10%
Capital Goods -- 3 2 2
Education and Civic Organizations 11 8 12 8
Energy 2 2 1 --
Healthcare 13 18 18 18
Housing/Multifamily 5 3 9 6
Housing/Single Family -- 1 1 2
Long-Term Care 6 6 3 10
Tax Obligation/General 3 15 6 1
Tax Obligation/Limited 11 9 11 1
Transportation 10 17 6 15
U.S. Guaranteed 16 6 7 --
Utilities 12 9 23 27
Water and Sewer 5 2 1 --
Other 2 -- -- --
-----------------------------------------------------------------------------------------------------
100% 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 (33% for All-American, 33% for Intermediate, 31% for
Limited Term and 5% for High Yield). 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.
47
<PAGE> 234
Financial Highlights
Selected data for a share outstanding throughout each period:
Class (Inception Date)
<TABLE>
<CAPTION>
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 (Loss) Total Income Gains Total Value Return(a)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/88)
2000 $11.43 $.56 $(1.08) $(.52) $(.56) $ (.02) $(.58) $10.33 (4.48)%
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 (d) 10.67 .55 .29 .84 (.55) (.06) (.61) 10.90 8.02
1996 (e) 10.79 .61 (.12) .49 (.61) -- (.61) 10.67 4.64
1995 (e) 10.61 .63 .18 .81 (.63) -- (.63) 10.79 8.01
Class B (2/97)
2000 11.44 .49 (1.09) (.60) (.48) (.02) (.50) 10.34 (5.21)
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 (f) 10.98 .12 (.06) .06 (.13) -- (.13) 10.91 .54
Class C (6/93)
2000 11.42 .51 (1.09) (.58) (.50) (.02) (.52) 10.32 (5.02)
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 (d) 10.66 .50 .29 .79 (.50) (.06) (.56) 10.89 7.48
1996 (e) 10.78 .55 (.12) .43 (.55) -- (.55) 10.66 4.07
1995 (e) 10.60 .57 .18 .75 (.57) -- (.57) 10.78 7.42
Class R (2/97)
2000 11.44 .59 (1.08) (.49) (.59) (.02) (.61) 10.34 (4.29)
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 (f) 10.99 .15 (.07) .08 (.16) -- (.16) 10.91 .69
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
-------------------------- ------------------------ -----------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Asset Net Net Net Net Net Net Turnover
April 30, (000) Assets Assets Assets Assets Assets Assets Rate
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/88)
2000 $259,004 .84% 5.28% .84% 5.28% .83% 5.29% 53%
1999 312,238 .81 4.97 .80 4.98 .80 4.98 10
1998 236,691 .81 5.27 .81 5.27 .81 5.27 20
1997 (d) 216,575 .98* 5.43* .87* 5.54* .87* 5.54* 39
1996 (e) 207,992 1.02 5.41 .83 5.60 .83 5.60 79
1995 (e) 185,495 1.06 5.72 .76 6.02 .76 6.02 71
Class B (2/97)
2000 32,536 1.59 4.54 1.59 4.54 1.58 4.55 53
1999 31,804 1.55 4.22 1.54 4.23 1.54 4.23 10
1998 8,706 1.56 4.47 1.56 4.47 1.56 4.47 20
1997 (f) 711 1.55* 4.83* 1.55* 4.83* 1.55* 4.83* 39
Class C (6/93)
2000 67,577 1.39 4.73 1.39 4.73 1.38 4.74 53
1999 80,036 1.36 4.42 1.35 4.43 1.35 4.43 10
1998 62,336 1.36 4.72 1.36 4.72 1.36 4.72 20
1997 (d) 54,850 1.53* 4.88* 1.42* 4.99* 1.42* 4.99* 39
1996 (e) 47,314 1.57 4.85 1.37 5.05 1.37 5.05 79
1995 (e) 45,242 1.61 5.17 1.31 5.47 1.31 5.47 71
Class R (2/97)
2000 3,111 .64 5.50 .64 5.50 .63 5.51 53
1999 2,737 .62 5.16 .61 5.17 .61 5.17 10
1998 4,510 .61 5.42 .61 5.42 .61 5.42 20
1997 (f) 183 .61* 5.95* .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.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement from the investment
adviser, where applicable.
(d) For the 11 months ended April 30.
(e) For the year ended May 31.
(f) From commencement of class operations as noted through April 30.
48
<PAGE> 235
Selected data for a share outstanding throughout each period:
Class (Inception Date)
<TABLE>
<CAPTION>
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 (Loss) Total Income Gains Total Value Return(a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
2000 $11.00 $.50 $(.74) $ (.24) $(.50) $(.15) $(.65) $10.11 (2.17)%
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 (d) 10.27 .47 .20 .67 (.47) -- (.47) 10.47 6.64
1996 (e) 10.29 .51 (.02) .49 (.51) -- (.51) 10.27 4.84
1995 (e) 10.16 .51 .13 .64 (.51) -- (.51) 10.29 6.63
Class C (12/95)
2000 11.02 .44 (.74) (.30) (.44) (.15) (.59) 10.13 (2.72)
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 (d) 10.28 .44 .17 .61 (.42) -- (.42) 10.47 6.00
1996 (g) 10.57 .23 (.30) (.07) (.22) -- (.22) 10.28 (1.78)*
Class R (2/97)
2000 10.99 .52 (.73) (.21) (.52) (.15) (.67) 10.11 (1.91)
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 (f) 10.60 .13 (.15) (.02) (.13) -- (.13) 10.45 (.15)
====================================================================================================================================
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
----------------------- ----------------------- ----------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Asset Net Net Net Net Net Net Turnover
April 30, (000) Assets Assets Assets Assets Assets Assets Rate
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
2000 $44,675 1.07% 4.47% .76% 4.78% .74% 4.79% 22%
1999 51,773 .98 4.32 .84 4.46 .84 4.46 23
1998 42,339 1.03 4.52 .79 4.76 .79 4.76 20
1997 (d) 40,906 1.18* 4.46* .68* 4.96* .68* 4.96* 26
1996 (e) 46,742 1.17 4.31 .62 4.86 .62 4.86 81
1995 (e) 42,069 1.24 4.45 .54 5.15 .54 5.15 102
Class C (12/95)
2000 10,586 1.63 3.92 1.30 4.24 1.29 4.26 22
1999 9,855 1.51 3.76 1.36 3.91 1.36 3.91 23
1998 3,533 1.58 3.96 1.34 4.20 1.34 4.20 20
1997 (d) 2,540 1.71* 3.90* 1.23* 4.38* 1.23* 4.38* 26
1996 (g) 1,187 1.73* 3.68* 1.13* 4.28* 1.13* 4.28* 81
Class R (2/97)
2000 728 .87 4.67 .56 4.99 .54 5.00 22
1999 707 .78 4.52 .64 4.66 .64 4.66 23
1998 602 .83 4.71 .59 4.95 .59 4.95 20
1997 (f) 469 .82* 4.98* .40* 5.40* .40* 5.40* 26
====================================================================================================================================
</TABLE>
* Annualized.
+ Information included prior to the 11 months ended April 30, 1997, reflects
the financial highlights of Flagship Intermediate.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement from the investment
adviser, where applicable.
(d) For the 11 months ended April 30.
(e) For the year ended May 31.
(f) From commencement of class operations as noted through April 30.
(g) From commencement of class operations as noted through May 31.
49
<PAGE> 236
Financial Highlights (continued)
Selected data for a share outstanding throughout each period:
Class (Inception Date)
<TABLE>
<CAPTION>
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 (Loss) Total Income Gains Total Value Return(a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/87)
2000 $ 10.89 $ .49 $(.55) $ (.06) $(.48) $ -- $ (.48) $ 10.35 (.57)%
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 (d) 10.57 .46 .04 .50 (.46) -- (.46) 10.61 4.78
1996 (e) 10.65 .51 (.09) .42 (.50) -- (.50) 10.57 4.03
1995 (e) 10.60 .51 .04 .55 (.50) -- (.50) 10.65 5.41
Class C (12/95)
2000 10.87 .45 (.54) (.09) (.44) -- (.44) 10.34 (.82)
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 (d) 10.56 .44 .03 .47 (.43) -- (.43) 10.60 4.49
1996 (g) 10.76 .22 (.19) .03 (.23) -- (.23) 10.56 .46*
Class R (2/97)
2000 10.87 .51 (.55) (.04) (.50) -- (.50) 10.33 (.35)
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 (f) 10.73 .12 (.13) (.01) (.13) -- (.13) 10.59 (.09)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------------ ----------------------- -----------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Asset Net Net Net Net Net Net Turnover
April 30, (000) Assets Assets Assets Assets Assets Assets Rate
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/87)
2000 $ 382,808 .73% 4.63% .73% 4.63% .73% 4.63% 37%
1999 456,171 .77 4.45 .77 4.45 .77 4.45 16
1998 438,134 .77 4.70 .77 4.70 .77 4.70 30
1997 (d) 425,401 .82* 4.74* .80* 4.76* .80* 4.76* 29
1996 (e) 489,157 .84 4.72 .79 4.77 .79 4.77 39
1995 (e) 569,196 .82 4.80 .74 4.88 .74 4.88 20
Class C (12/95)
2000 77,228 1.08 4.28 1.08 4.28 1.08 4.28 37
1999 88,044 1.12 4.09 1.12 4.09 1.12 4.09 16
1998 33,952 1.12 4.35 1.12 4.35 1.12 4.35 30
1997 (d) 23,551 1.12* 4.43* 1.11* 4.44* 1.11* 4.44* 29
1996 (g) 15,415 1.43* 3.93* 1.19* 4.17* 1.19* 4.17* 39
Class R (2/97)
2000 335 .53 4.81 .53 4.81 .53 4.81 37
1999 1,173 .57 4.64 .57 4.64 .57 4.64 16
1998 701 .59 4.86 .59 4.86 .59 4.86 30
1997 (f) 40 .55* 5.07* .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) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(b) After expense reimbursement from the Investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement from the investment
adviser, where applicable.
(d) For the 11 months ended April 30.
(e) For the year ended May 31.
(f) From commencement of class operations as noted through April 30. (g) From
commencement of class operations as noted through May 31.
50
<PAGE> 237
Selected data for a share outstanding throughout each period:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
--------------------- ------------------
HIGH YIELD Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset
April 30, Value Income (Loss) Total Income Gains Total Value
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/99)
2000 (d) $20.00 $1.06 $(1.61) $(.55) $(.85) $ -- $(.85) $18.60
Class B (6/99)
2000 (d) 20.00 .93 (1.61) (.68) (.74) -- (.74) 18.58
Class C (6/99)
2000 (d) 20.00 .96 (1.60) (.64) (.77) -- (.77) 18.59
Class R (6/99)
2000 (d) 20.00 1.05 (1.56) (.51) (.88) -- (.88) 18.61
================================================================================================================
<CAPTION>
Ratio/Supplemental Data
-------------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
----------------------- --------------------- -------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Total Assets Net Net Net Net Net Net Turnover
Return (a) (000) Assets Assets Assets Assets Assets Assets Rate
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/99)
2000 (d) (2.69)% $5,291 2.03%* 4.95%* .93%* 6.05%* .72%* 6.26%* 56%
Class B (6/99)
2000 (d) (3.36) 2,465 2.82* 4.10* 1.68* 5.25* 1.46* 5.47* 56
Class C (6/99)
2000 (d) (3.16) 1,694 2.66* 4.27* 1.48* 5.46* 1.26* 5.67* 56
Class R (6/99)
2000 (d) (2.50) 5,249 2.19* 4.49* .74* 5.94* .53* 6.16* 56
====================================================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement from the investment
adviser, where applicable.
(d) For the period June 7, 1999 (commencement of operations) through April 30,
2000.
51
<PAGE> 238
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, Nuveen Flagship
Limited Term Municipal Bond Fund and Nuveen High Yield Municipal Bond Fund
(collectively, the "Funds") (four of the portfolios constituting the
Nuveen Flagship Municipal Trust (a Massachusetts business Trust)), as of
April 30, 2000, 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 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 auditing standards generally
accepted in the United States. 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, 2000,
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, Nuveen Flagship Limited Term Municipal
Bond Fund and Nuveen High Yield Municipal Bond Fund of the Nuveen Flagship
Municipal Trust as of April 30, 2000, the results of their operations, the
changes in their net assets, and their financial highlights for the
periods indicated thereon in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 20, 2000
52
<PAGE> 239
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
International Growth Fund
Innovation Fund
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
Floating Rate Fund(1)
Tax-Free Income
National Funds
High Yield
Long-Term
Insured Long Term
Intermediate-Term
Limited-Term
State Funds
Arizona
California(2)
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts(2)
Michigan
Missouri
New Jersey
New
Mexico
New York(2)
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 advisor 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 experienced investment managers 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. Nuveen's managers give you 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 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.
1. This is a continuously-offered closed-end interval fund. As such,
redemptions are only available during quarterly repurchase periods.
See fund prospectus for additional information.
2. Long-term and insured long-term portfolios.
53
<PAGE> 240
Serving
Investors
For Generations
A 100-Year Tradition of Quality Investments
[Photo of John Nuveen Sr, appears here]
John Nuveen, Sr.
Since 1898, John Nuveen & Co. Incorporated has been synonymous with
investments that withstand the test of time. In fact, more than 1.3
million investors have trusted Nuveen to help them build and sustain the
wealth of a lifetime.
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. We can help you build a better, well-diversified portfolio.
Call Your Financial Advisor Today
To find out how Nuveen Mutual Funds might round out your investment
portfolio, contact your financial advisor today. Or call Nuveen at (800)
257-8787 for more information. Ask your advisor or call for a prospectus,
which details risks, fees and expenses. Please read the prospectus
carefully before you invest.
Nuveen Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
<PAGE> 241
PART C: OTHER INFORMATION
ITEM 15. 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 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-1
<PAGE> 242
(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 16. EXHIBITS
1(a). Declaration of Trust of the Registrant.(1)
1(b). Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest dated February 1, 1999.(2)
1(c). Certificate for the Establishment and Designation of Classes
dated July 10, 1996.(1)
1(d). Incumbency Certificate.(3)
2(a). Bylaws of Registrant.(1)
2(b). Amendment to By-Laws dated October 29, 1998. (A)
3. Not applicable.
4. Form of Agreement and Plan of Reorganization for Nuveen
Flagship Intermediate Municipal Bond Fund into Nuveen
Municipal Bond Fund.+
5. Specimen certificates of Shares.(1)
C-2
<PAGE> 243
6(a). Investment Management Agreement between Registrant and Nuveen
Advisory Corp.(3)
6(b). Renewal of Investment Management Agreement dated May 2, 1999.(4)
7(a). Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated.(3)
7(b). Renewal of Distribution Agreement dated July 30, 1999.(4)
8. Not applicable.
9(a). Custodian Agreement between Registrant and Chase Manhattan
Bank.(3)
9(b). Transfer Agency and Service Agreement between Registrant and
Chase Global Funds Services Company.(4)
10(a). Amended Plan of Distribution and Service Pursuant to Rule 12b-1
for Class A Shares, Class B Shares and Class C Shares of each
Fund.(4)
10(b). Multi-Class Plan Adopted Pursuant to Rule 18f-3.(1)
11(a). Opinion of Morgan, Lewis & Bockius LLP.++
11(b). Opinion of Bingham Dana LLP. ++
12. Form of Tax Opinion of Morgan, Lewis & Bockius LLP
relating to the Reorganization.+
13. Not Applicable.
14. Consent of Arthur Andersen LLP, Independent Public
Accountants.++
15. Not applicable.
16. Powers of Attorney.++
17. Form of proxy cards.++
--------------------
+ Filed herewith as Appendix A to the Reorganization Statement of Additional
Information contained herein.
++ Filed herewith.
(1) Incorporated herein by reference to the initial Registrant's Registration
Statement on Form N-1A, File Number 333-14725.
(2) Incorporated herein by reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N-1A, File Number 333-14725, filed
on March 22, 1999.
(3) Incorporated herein by reference to Post-Effective Amendment No.1 to
Registrant's Registration Statement on Form N-1A, File Number 333-14725, filed
on August 21, 1997.
(4) Incorporated herein by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A, File Number 333-14725, filed
on August 27, 1999.
C-3
<PAGE> 244
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant agrees that prior to any public re-offering of
the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offerings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
(2) The undersigned registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
C-4
<PAGE> 245
SIGNATURES
As required by the Securities act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this city of Chicago and state of Illinois, on the 28th day of
July 2000.
NUVEEN FLAGSHIP MUNICIPAL TRUST
By: /s/ Gifford R. Zimmerman
--------------------------------------
Gifford R. Zimmerman, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated, on July 28, 2000.
SIGNATURE TITLE
--------- -----
Principal Financial Accounting Officer:
/s/ Stephen D. Foy
-----------------------------------------
Stephen D. Foy Vice President and Controller
Trustees:
Principal Executive Officer:
* Chairman, President and
----------------------------------------- Trustee
Timothy R. Schwertfeger
* Trustee
-----------------------------------------
Robert P. Bremner
* Trustee
-----------------------------------------
Lawrence H. Brown
* Trustee
-----------------------------------------
Anne E. Impellizzeri
* Trustee
-----------------------------------------
Peter R. Sawers
* Trustee
-----------------------------------------
William J. Schneider
* Trustee
-----------------------------------------
Judith M. Stockdale
*By: /s/ Gifford R. Zimmerman
--------------------------------
Gifford R. Zimmerman
Attorney-in-Fact
An original power of attorney authorizing among others, Alan G. Berkshire and
Gifford R. Zimmerman to execute this registration statement, and amendments
thereto, for each of the officers and trustees of registrant on whose behalf
this registration statement is filed herewith.
<PAGE> 246
EXHIBIT INDEX
1(a). Declaration of Trust of the Registrant.(1)
1(b). Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest dated February 1, 1999.(2)
1(c). Certificate for the Establishment and Designation of Classes
dated July 10, 1996.(1)
1(d). Incumbency Certificate.(3)
2(a). Bylaws of Registrant.(1)
2(b). Amendment to By-Laws dated October 29, 1998.(4)
3. Not applicable.
4. Form of Agreement and Plan of Reorganization for Nuveen
Flagship Intermediate Municipal Bond Fund into Nuveen
Municipal Bond Fund.+
5. Specimen certificates of Shares.(1)
6(a). Investment Management Agreement between Registrant and Nuveen
Advisory Corp.(3)
6(b). Renewal of Investment Management Agreement dated May 2,
1999.(4)
7(a). Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated.(3)
7(b). Renewal of Distribution Agreement dated July 30, 1999.(4)
8. Not applicable.
9(a). Custodian Agreement between Registrant and Chase Manhattan
Bank.(3)
9(b). Transfer Agency and Service Agreement between Registrant and
Chase Global Funds Services Company.(4)
10(a). Amended Plan of Distribution and Service Pursuant to Rule
12b-1 for Class A Shares, Class B Shares and Class C Shares of
each Fund.(4)
10(b). Multi-Class Plan Adopted Pursuant to Rule 18f-3.(1)
11(a). Opinion of Morgan, Lewis, & Bockius LLP.++
11(b). Opinion of Bingham Dana LLP. ++
12. Form of Tax Opinion of Morgan, Lewis & Bockius LLP
relating to the Reorganization.+
13. Not Applicable.
14. Consent of Arthur Andersen LLP, Independent Public
Accountants.++
15. Not applicable.
16. Powers of Attorney.++
17. Form of proxy cards.++
--------------------
+ Filed herewith as Appendix A to the Reorganization Statement of Additional
Information contained herein.
++ Filed herewith.
(1) Incorporated herein by reference to the initial Registrant's Registration
Statement on Form N-1A, File Number 333-14725.
<PAGE> 247
(2) Incorporated herein by reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N-1A, File Number 333-14725, filed
on March 22, 1999.
(3) Incorporated herein by reference to Post-Effective Amendment No.1 to
Registrant's Registration Statement on Form N-1A, File Number 333-14725, filed
on August 21, 1997.
(4) Incorporated herein by reference to Post-Effective Amendment No.6 to
Registrant's Registration Statement on Form N-1A, File Number 333-14725, filed
on August 27, 1999.
