<PAGE>
As filed with the Securities and Exchange Commission on June 28, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
File No. 33-8370 [_]
Pre-Effective Amendment No. --- [_]
[X]
Post-Effective Amendment No. 19
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
[_]
File No. 811-4817
[X]^
Amendment No. 20
NUVEEN TAX-FREE BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, 60606
Illinois (Zip Code)
(Address of Principal Executive
Offices)
Registrant's Telephone Number, Including Area Code: (312) 917-7700
James J. Wesolowski, Esq.--Vice President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[_]
immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph
(a)(1)
[X]
on July 1, 1996 pursuant to paragraph (b)
[_] 75 days after filing pursuant to par-
agraph (a)(2)
[_]
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph
(a)(2) of Rule 485.
[_]
If appropriate, check the following box:
[_]
This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
PURSUANT TO RULE 24F-2 OF THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT HAS
REGISTERED AN INDEFINITE NUMBER OF SHARES (DESIGNATED AS CLASS A SHARES, CLASS
C SHARES AND CLASS R SHARES) OF THE FOLLOWING SERIES: NUVEEN MASSACHUSETTS
TAX-FREE VALUE FUND, NEW YORK TAX-FREE VALUE FUND AND NUVEEN OHIO TAX-FREE
VALUE FUND. A RULE 24F-2 NOTICE FOR THE REGISTRANT'S FISCAL YEAR ENDING FEBRU-
ARY 29, 1996, WAS FILED ON OR ABOUT APRIL 23, 1996.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 19
TO
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO. 33-8370
AND
AMENDMENT NO. 20
TO
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO. 811-4817
This Registration Statement comprises the following papers and contents:
The Facing Sheet
Cross-Reference Sheet
Part A-The Prospectus
Part B-The Statement of Additional Information
Copy of Annual Report to Shareholders (the financial
statements from which are incorporated by reference into the
Statement of Additional Information)
Part C-Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
NUVEEN TAX-FREE BOND FUND, INC.
-----------------
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
TEM IN PART AI
OF FORM N-1A PROSPECTUS LOCATION
- -------------- -------------------
<S> <C>
1 Cover Page Cover Page
2 Synopsis Summary of Fund Expenses; How to Determine
If One of These Funds Is Right For You
3 Condensed Financial Information Financial Highlights
4 General Description of General Information; What Are The Funds'
Registrant Investment Objectives and Policies
5 Management of the Fund Summary of Fund Expenses; Who Is
Responsible for the Operation of the Funds;
Management of the Funds; General
Information
5A Management's Discussion of Fund Incorporated by Reference to Annual Report
Performance to Shareholders; Distributions and Taxes
6 Capital Stock and Other General Information; Distributions and
Securities Taxes
7 Purchase of Securities Being Flexible Pricing Program; How to Buy Fund
Offered Shares; Distribution and Service Plan;
Management of the Funds; Net Asset Value
8 Redemption or Repurchase How to Redeem Fund Shares
9 Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
TEM IN PART BI LOCATION IN STATEMENT
OF FORM N-1A OF ADDITIONAL INFORMATION
- -------------- -------------------------
<S> <C>
10 Cover Page Cover Page
11 Table of Contents Cover Page
12 General Information and History Not Applicable
13 Investment Objectives and Fundamental Policies and Investment
Policies Portfolio
14 Management of the Fund Management
15 Control Persons and Principal Management
Holders of Securities
16 Investment Advisory and Other Investment Adviser and Investment
Services Management Agreement; Distribution and
Service Plans; Independent Public
Accountants and Custodian
17 Brokerage Allocation and Other Portfolio Transactions
Practices
18 Capital Stock and Other See "General Information" in the Prospectus
Securities
19 Purchase, Redemption and Pricing Additional Information on the Purchase and
of Securities Redemption of Fund Shares; Distribution and
Service Plans; Net Asset Value
20 Tax Status Tax Matters
21 Underwriters Additional Information on the Purchase and
Redemption of Fund Shares; See "How to Buy
Fund Shares" and "Management of the Funds"
in the Prospectus
22 Calculation of Performance Data Performance Information
23 Financial Statements Incorporated by Reference to Annual Report
to Shareholders
</TABLE>
<PAGE>
PART A--PROSPECTUS
NUVEEN TAX-FREE BOND FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
NUVEEN FAMILY OF TAX-FREE MUTUAL FUNDS
Nuveen offers individual investors 16 different long-term
tax-free mutual funds to choose from, including
NATIONAL LONG-TERM FUNDS
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
STATE LONG-TERM FUNDS
Arizona
Nuveen Arizona Tax-Free Value Fund
California
Nuveen California Tax-Free Value Fund
Nuveen California Insured Tax-Free Value Fund
Florida
Nuveen Florida Tax-Free Value Fund
Maryland
Nuveen Maryland Tax-Free Value Fund
Massachusetts
Nuveen Massachusetts Tax-Free Value Fund
Nuveen Massachusetts Insured Tax-Free Value Fund
Michigan
Nuveen Michigan Tax-Free Value Fund
New Jersey
Nuveen New Jersey Tax-Free Value Fund
New York
Nuveen New York Tax-Free Value Fund
Nuveen New York Insured Tax-Free Value Fund
Ohio
Nuveen Ohio Tax-Free Value Fund
Pennsylvania
Nuveen Pennsylvania Tax-Free Value Fund
Virginia
Nuveen Virginia Tax-Free Value Fund
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
NUVEEN TAX-FREE BOND FUND, INC.
Prospectus
July 1, 1996
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND
NUVEEN NEW YORK TAX-FREE VALUE FUND
NUVEEN OHIO TAX-FREE VALUE FUND
Nuveen Tax-Free Bond Fund, Inc. is an open-end investment company consisting of
the three tax-free mutual funds named above (the "Funds"). Each Fund represents
a separate portfolio, which is designed to provide as high a level of current
interest income exempt from both regular federal income tax and the applicable
state personal income tax as is consistent, in the view of the Fund's
management, with preservation of capital. Each Fund invests in investment grade
quality, long-term Municipal Obligations judged by the Fund's investment
adviser to offer the best values among Municipal Obligations of similar credit
quality.
Each Fund has adopted a Flexible Pricing Program designed to permit you and
your financial adviser to choose the method of purchasing shares that you
believe is most beneficial given the amount of your purchase and any current
holdings of Fund shares, the length of time you expect to hold your investment,
and other relevant circumstances. The Program features three alternative ways
to purchase Fund shares (Classes A, C and R), each with a different combination
of sales charges, ongoing fees, eligibility requirements, and other features.
See "Flexible Pricing Program," "How to Buy Fund Shares" and "Summary of Fund
Expenses."
This Prospectus contains information you should know before investing in the
Funds. Please retain it for future reference. You can find more detailed
information about the Funds in the "Statement of Additional Information" dated
July 1, 1996. For a free copy of this Statement, write to the Funds, c/o John
Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, IL 60606, or call
Nuveen toll-free at 800.621.7227. The Statement has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency. Shares
of the Funds involve investment risks, including possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
John Nuveen & Co. Incorporated
For information, call toll-free 800.621.7227
<PAGE>
<TABLE>
<C> <S>
CONTENTS
3 Summary of Fund expenses
6 How to determine if one of the Funds is right for
you
10 Financial highlights
14 Who is responsible for the operation of the Funds?
15 What are the Funds' investment objectives and
policies?
21 Flexible pricing program
24 How to buy Fund shares
38 Distribution and service plan
39 How to redeem Fund shares
43 Management of the Funds
46 How the Funds show performance
49 Distributions and taxes
53 Net asset value
54 General information
Appendix A--Special state factors and state tax
treatment
Appendix B--Taxable equivalent yield tables
</TABLE>
<PAGE>
SUMMARY OF FUND EXPENSES NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS [/R]
JULY 1, 1996
<TABLE>
<CAPTION>
Shareholder Transaction
Expenses (as a percent of
offering price)(1) Each Fund
---------------------------------------
Class A Class C Class R(2)
- -------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases 4.50%(3) None None
Maximum Sales Charge Imposed on
Reinvested Dividends None None None
Deferred Sales Charge None(4) 1.00%(5) None
Redemption Fees None None None
Exchange Fees None None None
</TABLE>
(1) Authorized Dealers and other funds may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details.
(2) Class R Shares are available for purchases only under certain limited
circumstances, or by specified investors, as described below under "How to Buy
Fund Shares--Class R Shares."
(3) Reduced sales charges apply to purchase of $50,000 or more. See "How to Buy
Fund Shares--Class A Shares."
(4) Class A purchases at net asset value of $1 million or more may be subject
to a 1% contingent deferred sales charge if redeemed within 18 months of
purchase. See "How to Buy Fund Shares--Class A Shares."
(5) Class C Shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
3
<PAGE>
<TABLE>
<CAPTION>
Annual Operating
Expenses, After
Fee Waivers and Total
Expense Expenses,
Reimbursements Without Fee
(as a percent of Rule Other Waivers and
average daily net Management 12b-1 Operating Total Expense Re-
assets)(6) Fees Fees(7) Expenses Expenses imbursements
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MASSACHUSETTS FUND
Class A .55% .25% .20% 1.00% 1.17%
Class C .55% 1.00% .20% 1.75% 2.24%
Class R .55% None .20% .75% .82%
NEW YORK FUND
Class A .55% .25% .19% .99% 1.02%
Class C .55% 1.00% .18% 1.73% 1.99%
Class R .55% None .19% .74% .76%
OHIO FUND
Class A .55% .25% .18% .98% 1.03%
Class C .55% 1.00% .18% 1.73% 1.75%
Class R .55% None .19% .74% .76%
</TABLE>
(6) In order to prevent total operating expenses (excluding any distribution or
service fees) from exceeding .75 of 1% of the average daily net asset value of
any class of shares of a Fund for any fiscal year, Nuveen Advisory has agreed
to waive all or a portion of its management fees or reimburse certain expenses
of each Fund. Nuveen Advisory may also voluntarily agree to reimburse
additional expenses from time to time, which voluntary reimbursements may be
terminated at any time in its discretion.
(7) Class C Shares are subject to an annual distribution fee of .75 of 1% of
average daily net assets to reimburse Nuveen for costs in connection with the
sale of Fund shares. Both Class A Shares and Class C Shares of each Fund are
subject to an annual service fee of .25 of 1% of average daily net assets to
compensate Authorized Dealers for ongoing account services. See "Distribution
and Service Plan." Long-term holders of Class C Shares may pay more in Rule
12b-1 distribution fees than the economic equivalent of the maximum front-end
sales charge permitted under the National Association of Securities Dealers
Rules of Fair Practice.
The purpose of the tables above is to help you understand all
expenses and fees that you would bear directly or indirectly
as a Fund shareholder. The expenses and fees shown are for
the fiscal year ended February 29, 1996.
4
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
EXAMPLE*
The following example applies to each of the Funds. You would
pay the following expenses on a $1,000 investment over
various time periods, assuming (1) a 5% annual rate of return
and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
<S> <C> <C> <C> <C>
MASSACHUSETTS FUND
Class A $55 $75 $98 $162
Class C $18** $55 $95 $168
Class R $ 8 $24 $42 $ 93
NEW YORK FUND
Class A $55 $75 $97 $161
Class C $18** $54 $94 $166
Class R $ 8 $24 $41 $ 92
OHIO FUND
Class A $55 $75 $97 $160
Class C $18** $54 $94 $166
Class R $ 8 $24 $41 $ 92
</TABLE>
*This example does not represent past or future expenses.
Actual expenses may be greater or less than those shown.
Moreover, a Fund's actual rate of return may be greater or
less than the hypothetical 5% return shown in this example.
This example assumes that the percentage amounts listed under
Annual Operating Expenses remain the same in each of the
periods. The ten-year figure for Class C Shares reflects the
automatic conversion of Class C Shares into Class A Shares
six years after purchase. Based on the foregoing assumptions,
the expenses incurred on an investment in Class C Shares will
exceed the expenses incurred on an investment in Class A
Shares sometime in the sixth year after purchase. You should
also note that Class R Shares are available for purchase only
under certain limited circumstances, or by specified
investors. For additional information about each Fund's fees
and expenses, see "Distribution and Service Plan" and
"Management of the Funds."
**Assumes that shareholder redeemed on the first day of the
second year and the contingent deferred sales charge was not
applicable for any of the periods shown. If the shareholder
had redeemed on the last day of the first year, the expenses
in the first year would have been $28.
5
<PAGE>
HOW TO DETERMINE IF ONE OF THE FUNDS IS RIGHT FOR YOU
There are many reasons why you might invest in one of the
Funds. These can include:
. lowering the tax burden on your investment income
. earning regular monthly dividends
. seeking to preserve your investment capital
. systematically setting money aside for retirement, college
funding or estate planning purposes
While there can be no assurance that the Funds will enable
you to achieve your individual investment goals, they have
been designed for investors who have these kinds of
investment goals in mind.
In addition, each Fund incorporates the following features
and benefits. You should carefully review the more detailed
description of these features and benefits else-
where in the Prospectus to make sure they serve your
individual investment goals.
MONTHLY, DOUBLE TAX-FREE INCOME
Each Fund provides monthly dividends exempt from regular
federal and applicable state personal income taxes for in-
state residents.
DIVERSIFIED, INVESTMENT GRADE QUALITY PORTFOLIO
Each Fund purchases investment grade quality Municipal
Obligations issued within its respective state. Each Fund is
diversified and maintains diversity within its portfolio by
selecting Municipal Obligations of different issuers. Each
Fund further enhances its portfolio mix by purchasing
Municipal Obligations of different types and purposes.
EXPERIENCED MANAGEMENT
Each Fund is managed by Nuveen Advisory Corp. ("Nuveen
Advisory"), a wholly-owned subsidiary of John Nuveen & Co.
Incorporated ("Nuveen"). Founded in 1898, Nuveen is the
oldest and largest investment banking firm in the country
devoted exclusively to tax-exempt securities. Nuveen Advisory
currently manages 74 different tax-free portfolios
representing approximately $30 billion in assets.
6
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
VALUE INVESTING
As a guiding policy, Nuveen Advisory's portfolio managers
seek investment grade quality, undervalued or underrated
Municipal Obligations which offer the best values among
Municipal Obligations of similar credit quality. By selecting
these Municipal Obligations, Nuveen Advisory seeks to
position each Fund better to achieve its investment objective
of as high a level of current interest income exempt from
both regular federal income tax and the applicable state
personal income tax as is consistent, in the view of the
Fund's management, with preservation of capital, regardless
of which direction the market may move.
NUVEEN RESEARCH
Nuveen Advisory's portfolio managers call upon the resources
of Nuveen's Research Department, the largest in the
investment banking industry devoted exclusively to tax-exempt
securities. Nuveen research analysts reviewed in 1995 more
than $100 billion of tax-exempt securities sold in new issue
and secondary markets.
LOW MINIMUMS
You can start earning tax-free income with a low initial
investment of $1,000 in a particular class. See "How to Buy
Fund Shares."
FLEXIBILITY IN PURCHASING FUND SHARES
Each Fund has adopted a Flexible Pricing Program which is
designed to permit you and your financial adviser to choose
the method of purchasing shares that you believe is most
beneficial given the amount of your investment and any
current holdings of Fund shares, the length of time you
expect to hold your investment, and other relevant
circumstances. The Program features three alternative ways to
purchase Fund shares (Classes A, C and R), each with a
different combination of sales charges, ongoing fees,
eligibility requirements, and other features. Please refer to
"Flexible Pricing Program," "How to Buy Fund Shares" and "How
to Redeem Fund Shares" for a discussion of the Program's
features and additional information about these three classes
of shares.
7
<PAGE>
AUTOMATIC DEPOSIT PLANS
The Funds offer a number of investment options, including
automatic deposit, direct deposit and payroll deduction, to
help you add to your account on a regular basis.
AUTOMATIC REINVESTMENT
All monthly dividends or capital gains paid by your Fund on
each class of shares will be reinvested automatically into
additional shares of the same class without a sales charge,
unless you elect to receive them in cash. Separately,
distributions from any Nuveen unit trust ("Nuveen UIT") may
be used to buy Class A Shares and, under certain
circumstances, Class R Shares of a Fund, in either case
without a sales charge at net asset value.
EXCHANGE PRIVILEGE
Shares of a class may be quickly and easily exchanged by
telephone, without a sales charge, for shares of the same or
equivalent class of another Nuveen Mutual Fund or for shares
of certain Nuveen money market funds. Class R Shares of a
Fund may be exchanged for Class A Shares of the same Fund at
any time, provided that the current net asset value of those
Class R Shares is at least $1,000 or you already own Class A
Shares of that Fund.
LIQUIDITY
You may redeem all or a portion of your Fund shares on any
business day at net asset value for the class of shares you
are redeeming. Class C Shares, as well as Class A purchases
of $1 million or more at net asset value, may be subject to a
contingent deferred sales charge ("CDSC") of 1% upon
redemption. Remember that share prices will fluctuate with
market conditions and upon redemption may be worth more or
less than their original cost. See "How to Redeem Fund
Shares."
AUTOMATIC WITHDRAWAL
If you own shares totalling $10,000 or more, you can arrange
to have $50 or more sent to you from your account either
monthly or quarterly.
TELEPHONE REDEMPTIONS
You may establish free telephone redemption privileges for
your account.
8
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
RISKS AND SPECIAL CONSIDERATIONS
You should consider certain other factors about the Funds
before investing. As with other bond mutual funds or any
long-term fixed-income investment, the value of a Fund's
portfolio will tend to vary inversely with changes in
prevailing interest rates. Accordingly, each Fund should be
considered a long-term investment, designed to provide the
best results when held for a multi-year period. A Fund may
not be suitable if you have a short-term investment horizon.
Additionally, each Fund's portfolio may be susceptible to
political, economic or regulatory developments affecting
issuers of Municipal Obligations in its state. The Funds also
have the ability to engage in certain investment practices,
including the purchase of Municipal Obligations that pay
interest subject to the federal alternative minimum tax, the
purchase or sale of securities on a when-issued or delayed
delivery basis, the purchase or sale of municipal lease and
installment purchase obligations, and the purchase or sale of
futures or options for hedging purposes. As described
elsewhere in this Prospectus, the Funds have no present
intention of purchasing or selling futures or options, and
may engage in the other investment practices listed above
only under strict limits.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial information has been derived
from Nuveen Tax-Free Bond Fund, Inc.'s financial
statements, which have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in
their report appearing in the Annual Report to
Shareholders, and should be read in conjunction with the
financial statements and related notes appearing in the
Annual Report. A copy of the Annual Report to
Shareholders which contains additional unaudited
performance information can be obtained without charge
by writing to the Nuveen Tax-Free Bond Fund, Inc.
Selected data for a Class A Share, Class C Share or
Class R Share outstanding throughout each period is as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations Less distributions
---------------------------------------------------------------------
Net
Net asset realized and Dividends
value Net unrealized gain from net Distributions Net asset
beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MA
- ----------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $9.560 $.513* $.388 $(.521) $ -- $9.940
9/6/94 to
2/28/95 9.540 .254* .025 (.259) -- 9.560
CLASS C
Year ended
2/29/96 9.510 .437* .392 (.449) -- 9.890
10/5/94 to
2/28/95 9.280 .188* .254 (.212) -- 9.510
CLASS R
Year ended
2/29/96 9.540 .537* .378 (.545) -- 9.910
Year ended 2/28,
1995 9.940 .541* (.403) (.538) -- 9.540
1994 9.910 .543* .038 (.541) (.010) 9.940
1993 9.210 .563* .704 (.563) (.004) 9.910
3 months ended
2/29/92 9.130 .146 .077 (.143) -- 9.210
Year ended 11/30,
1991 8.760 .577* .375 (.582) -- 9.130
1990 8.900 .587* (.144) (.583) -- 8.760
1989 8.600 .587* .300 (.587) -- 8.900
1988 8.250 .581* .350 (.581) -- 8.600
12/10/86 to
11/30/87 9.600 .577* (1.350) (.577) -- 8.250
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 12.
10
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/Supplemental data
--------------------------------------------------------------------------------
Ratio of
Ratio of net
Ratio of net investment investment
expenses to income to Ratio of income to
average average expenses average
Total return Net assets net assets net assets to average net net assets Portfolio
on net asset end of period before before assets after after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
9.62% $ 4,290 1.17% 5.04% 1.00% 5.21% 6%
3.05 1,067 1.87+ 4.88+ 1.00+ 5.75+ 17
8.87 638 2.24 3.96 1.75 4.45 6
4.86 147 3.40+ 3.46+ 1.75+ 5.11+ 17
9.80 76,773 .82 5.42 .75 5.49 6
1.64 71,568 .77 5.75 .75 5.77 17
5.96 71,942 .81 5.32 .75 5.38 3
14.21 53,231 .87 5.79 .75 5.91 5
2.44 34,470 .71+ 6.31+ .71+ 6.31+ 5
11.19 31,150 .77 6.37 .75 6.39 19
5.21 20,829 .85 6.58 .75 6.68 23
10.62 15,513 1.09 6.30 .75 6.64 31
11.56 9,485 1.24 6.25 .75 6.74 55
(8.19) 5,681 1.54+ 5.30+ .37+ 6.47+ 34
- -------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations Less distributions
---------------------------------------------------------------------
Net
Net asset realized and Dividends
value Net unrealized gain from net Distributions Net asset
beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NY
- -------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 2/29/96 $10.120 $.555* $.487 $(.552) $ -- $10.610
9/6/94 to 2/28/95 10.230 .277* (.067) (.273) (.047) 10.120
CLASS C
Year ended 2/29/96 10.110 .478* .528 (.476) -- 10.640
9/13/94 to 2/28/95 10.110 .231* .038 (.222) (.047) 10.110
CLASS R
Year ended 2/29/96 10.150 .582* .490 (.582) -- 10.640
Year ended 2/28,
1995 10.720 .579 (.529) (.573) (.047) 10.150
1994 10.610 .578* .161 (.580) (.049) 10.720
1993 9.880 .603* .806 (.598) (.081) 10.610
3 months ended
2/29/92 9.820 .163 .053 (.156) -- 9.880
Year ended, 11/30,
1991 9.380 .629* .441 (.630) -- 9.820
1990 9.560 .631* (.181) (.630) -- 9.380
1989 9.180 .633* .380 (.633) -- 9.560
1988 8.760 .625* .420 (.625) -- 9.180
12/10/86 to 11/30/87 9.600 .612* (.840) (.612) -- 8.760
- -------------------------------------------------------------------------------------------------------------------
OH
- -------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 2/29/96 $10.200 $.538* $.404 $(.542) $ -- $10.600
9/6/94 to 2/28/95 10.160 .266* .087 (.272) (.041) 10.200
CLASS C
Year ended 2/29/96 10.160 .458* .395 (.463) -- 10.550
9/15/94 to 2/28/95 10.070 .219* .133 (.221) (.041) 10.160
CLASS R
Year ended 2/29/96 10.180 .563* .403 (.566) -- 10.580
Year ended 2/28,
1995 10.610 .568 (.388) (.569) (.041) 10.180
1994 10.580 .570* .087 (.565) (.062) 10.610
1993 9.870 .595* .728 (.589) (.024) 10.580
3 months ended
2/29/92 9.770 .154 .126 (.153) (.027) 9.870
Year ended 11/30,
1991 9.530 .619 .287 (.624) (.042) 9.770
1990 9.550 .624 .003 (.624) (.023) 9.530
1989 9.040 .629* .510 (.629) -- 9.550
1988 8.610 .626* .430 (.626) -- 9.040
12/10/86 to 11/30/87 9.600 .600* (.990) (.600) -- 8.610
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser, if applicable. See Notes to Financial Statements
in the Annual Report to Shareholders.
+ Annualized.
++ Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gain distributions if any, and changes in net asset
value per share.
+++ Net of taxes, if applicable. See Notes to Financial Statements in the
Annual Report to Shareholders.
12
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/Supplemental data
--------------------------------------------------------------------------------
Ratio of
Ratio of net
Ratio of net investment investment
expenses to income to Ratio of income to
average average expenses average
Total return Net assets net assets net assets to average net net assets Portfolio
on net asset end of period before before assets after after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
10.52% $ 15,732 1.02% 5.28% .99% 5.31% 47%
2.21 3,189 1.56+ 5.31+ 1.00+ 5.87+ 29
10.13 646 1.99 4.29 1.73 4.55 47
2.80 86 7.97+ (1.06)+ 1.75+ 5.16+ 29
10.80 154,776 .76 5.55 .74 5.57 47
.75 149,454 .74 5.79 .74 5.79 29
7.10 146,297 .78 5.30 .75 5.33 15
14.79 107,146 .84 5.75 .75 5.84 12
2.21 66,491 .75+ 6.27+ .75+ 6.27+ 16
11.79 59,351 .79 6.46 .75 6.50 19
4.92 44,347 .81 6.59 .75 6.65 51
11.34 29,040 .98 6.40 .75 6.63 85
12.20 14,975 1.09 6.55 .75 6.89 71
(2.44) 8,239 1.38+ 5.45+ .37+ 6.46+ 20
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
9.44% $ 12,904 1.03% 5.08% .98% 5.13% 33%
3.63 4,320 1.27+ 5.40+ 1.00+ 5.67+ 28
8.55 2,163 1.75 4.36 1.73 4.38 33
3.63 901 2.09+ 4.58+ 1.75+ 4.92+ 28
9.70 167,092 .76 5.38 .74 5.40 33
1.99 162,231 .73 5.70 .73 5.70 28
6.30 167,448 .75 5.28 .75 5.28 9
13.88 133,797 .84 5.77 .75 5.86 13
2.87 90,121 .70+ 6.16+ .70+ 6.16+ 3
9.84 81,649 .71 6.37 .71 6.37 16
6.86 56,887 .74 6.61 .74 6.61 38
12.97 37,714 .82 6.59 .75 6.66 66
12.56 20,144 .98 6.71 .75 6.94 55
(4.10) 9,135 1.33+ 5.59+ .39+ 6.53+ 26
- -------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
WHO IS RESPONSIBLE FOR THE OPERATION OF THE FUNDS?
The following organizations work together to provide the
services and features offered by the Funds:
<TABLE>
<CAPTION>
ORGANIZATION FUNCTION DUTIES
--------------------------------------------------------------
<S> <C> <C>
John Nuveen & Co. Fund Sponsor and Sponsors and manages
Incorporated Principal the offering of Fund
("Nuveen") Underwriter shares; provides
certain
administrative
services
Nuveen Advisory Corp. Investment Adviser Manages the Funds'
("Nuveen Advisory") investment portfolios
and provides day-to-
day administrative
services to the Funds
Shareholder Services, Transfer Agent; Maintains shareholder
Inc. Shareholder accounts, handles
("SSI") Services Agent; share redemptions and
Dividend exchanges and
Paying Agent dividend payments
Chase Manhattan Bank, Custodian Maintains custody of
N.A. ("Chase") the Funds'
investments and
provides certain
accounting services
to the Funds
</TABLE>
14
<PAGE>
WHAT ARE THE FUNDS' INVESTMENT NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS [/R]
OBJECTIVES AND POLICIES? JULY 1, 1996
INVESTMENT OBJECTIVE
Each Fund is
designed to The investment objective of each Fund is to provide you with
provide income as high a level of current interest income exempt from both
free from regular federal income tax and the applicable state personal
federal and income tax as is consistent, in the view of the Fund's
state personal management, with preservation of capital. There can be no
income taxes assurance that the investment objective of any Fund will be
achieved. The investment objective is a fundamental policy of
each Fund and may not be changed without the approval of the
holders of a majority of the shares of that Fund. Other
investment restrictions that may be changed only with
shareholder approval are contained in the Statement of
Additional Information. [/R]
HOW THE FUNDS PURSUE THEIR OBJECTIVE
The Funds seek
Municipal Obligations
considered to
be undervalued
Nuveen Advisory believes that in any market environment there
are quality Municipal Obligations whose current price, yield,
credit quality and future prospects make them seem
underpriced or exceptionally attractive when compared with
other Municipal Obligations in the market. In selecting
investments for the Funds, Nuveen Advisory will attempt to
identify and purchase those undervalued or underrated
Municipal Obligations of investment grade quality that offer
the best values among Municipal Obligations of similar credit
quality. By selecting these Municipal Obligations, each Fund
will seek to provide attractive current tax-free income and
to protect the Fund's net asset value in both rising and
declining markets. In this way, regardless of the direction
the market may move, value investing, if successful, will
better position each Fund to achieve its investment objective
of as high a level of current interest income exempt from
both regular federal income tax and the applicable state
personal income tax as is consistent, in the view of the
Fund's management, with preservation of capital. Any net
capital appreciation realized by a Fund will generally result
in the distribution of taxable capital gains to Fund
shareholders. See "Distributions and Taxes."
Thorough Successful value investing depends on identifying and
research can purchasing undervalued or underrated securities before the
help identify rest of the marketplace finds them. Nuveen Advisory believes
values the municipal market provides these opportunities, in part
because of the relatively large number of issuers of tax-
exempt securities and the relatively small number of full-
time, professional municipal market analysts. For example,
there are currently about 7,500 common stocks that are
followed by about 23,000 analysts. By contrast, there are
about 60,000 entities that issue tax-exempt securities and
less than 1,000 professional municipal market analysts. [/R]
15
<PAGE>
Nuveen and Nuveen Advisory believe that together they employ
the largest number of research analysts in the investment
banking industry devoted exclusively to the review and
surveillance of tax-exempt securities. Their team of more
than 40 individuals has over 350 years of combined municipal
market experience. Nuveen and Nuveen Advisory have access to
information on approximately 60,000 municipal issuers, and
review annually more than $100 billion of tax-exempt
securities sold in new issue and secondary markets.
Which
Municipal Each Fund will invest primarily in Municipal Obligations
Obligationsare issued within its respective state so that the interest
selected as income on the Municipal Obligations will be exempt from both
investments? regular federal and applicable state personal income taxes.
Because of the different credit characteristics of
governmental authorities in each of the states and because of
differing supply and demand factors for each state's
Municipal Obligations, there may be differences in the yields
on each Fund's classes of shares and in the degree of market
and financial risk to which each Fund is subject.
Each Fund's investment assets will consist of:
Each Fund will . Municipal Obligations rated investment grade at the time of
seek to purchase (Baa or BBB or better by Moody's Investors
purchase Service, Inc. ("Moody's") or Standard and Poor's
investment- Corporation ("S&P"));
grade-quality
Municipal . unrated Municipal Obligations of investment grade quality
Obligations in the opinion of Nuveen Advisory, with no fixed percentage
issued within limitations on these unrated Municipal Obligations; and
its respective
state [/R] . temporary investments within the limitations and for the
purposes described below.
Municipal Obligations rated Baa are considered by Moody's to
be medium grade obligations which lack outstanding investment
characteristics and in fact have speculative characteristics
as well, while Municipal Obligations rated BBB are regarded
by S&P as having an adequate capacity to pay principal and
interest. Each Fund may invest up to 20% of its net assets in
Municipal Obligations that pay interest subject to the
federal alternative minimum tax ("AMT Bonds"). The Funds
intend to emphasize investments in Municipal Obligations with
long-term maturities in order to maintain an average
portfolio maturity of 20-30 years, but the average maturity
may be shortened from time to time depending on market
conditions in order to help limit each Fund's exposure to
market risk. As a result, each Fund's portfolio at any given
time may include both long-term and intermediate-term
Municipal Obligations.
16
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
Under ordinary circumstances, each Fund will invest
substantially all (at least 80%) of its net assets in its
respective state's Municipal Obligations, and not more than
20% of its net assets in "temporary investments," described
below, provided that temporary investments subject to regular
federal income tax and AMT Bonds may not comprise more than
20% of each Fund's net assets. For defensive purposes,
however, in order to limit the exposure of its portfolio to
market risk from temporary imbalances of supply and demand or
other temporary circumstances affecting the municipal market,
each Fund may invest without limit in temporary investments.
A Fund will not be in a position to achieve its investment
objective of tax-exempt income to the extent it invests in
taxable temporary investments.
The foregoing investment policies are fundamental policies of
each Fund and may not be changed without the approval of the
holders of a majority of the shares of that Fund.
DESCRIPTION OF THE FUNDS' INVESTMENTS
Municipal Obligations
are issued by
states, cities
and local
authorities to
support a
variety of
public
activities
Municipal Obligations, as the term is used in this
Prospectus, are federally tax-exempt debt obligations issued
by states, cities and local authorities and by certain U.S.
possessions or territories to obtain funds for various public
purposes, such as the construction of public facilities, the
payment of general operating expenses and the refunding of
outstanding debts. They may also be issued to obtain funding
for various private activities, including loans to finance
the construction of housing, educational and medical
facilities or privately owned industrial development and
pollution control projects.
The two principal classifications of Municipal Obligations
are general obligation and revenue bonds. GENERAL OBLIGATION
bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and
interest. REVENUE bonds are payable only from the revenues
derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise or other
specific revenue source. Industrial development and pollution
control bonds are in most cases revenue bonds and do not
generally constitute the pledge of the credit or taxing power
of the issuer of these bonds.
Municipal Obligations may also include participations in
lease obligations or installment purchase contract
obligations (collectively, "lease obligations") of municipal
authorities or entities. Certain "non-appropriation" lease
obligations may present special risks because the
municipality's obligation to make future lease or installment
payments depends on money being appropriated each year for
this
17
<PAGE>
purpose. Each Fund will seek to minimize these risks by not
investing more than 10% of its assets in non-appropriation
lease obligations, and by only investing in those non-
appropriation lease obligations that meet certain criteria of
the Fund. See the Statement of Additional Information for
further information about lease obligations.
The yields on Municipal Obligations depend on a variety of
factors, including the condition of financial markets in
general and the municipal market in particular, as well as
the size of a particular offering, the maturity of the
obligation and the rating of the issue. Certain Municipal
Obligations may pay variable or floating rates of interest
based upon certain market rates or indexes such as a bank
prime rate or a tax-exempt money market index. The ratings of
Moody's and S&P represent their opinions as to the quality of
the Municipal Obligations that they undertake to rate. It
should be emphasized, however, that ratings are general and
are not absolute standards of quality. Consequently,
Municipal Obligations with the same maturity, coupon and
rating may have different yields, while those having the same
maturity and coupon with different ratings may have the same
yield. The market value of Municipal Obligations will vary
with changes in prevailing interest rate levels and as a
result of changing evaluations of the ability of their
issuers to meet interest and principal payments. Similarly,
the market value and net asset value of shares of the Funds
will change in response to interest rate changes; they will
tend to decrease when interest rates rise and increase when
interest rates fall.
Temporary As described above, each Fund under ordinary circumstances
investments may invest up to 20% of its net assets in "temporary
will be U.S. investments," but may invest without limit in temporary
Government or investments during temporary defensive periods. Each Fund
high quality will seek to make temporary investments in short-term
securities securities the interest on which is exempt from regular
federal income tax, but may be subject to state income tax in
the Fund's respective state. If suitable federally tax-exempt
temporary investments are not available at reasonable prices
and yields, a Fund may make temporary investments in taxable
securities whose interest is subject to both state and
federal income tax. A Fund will invest only in those taxable
temporary investments that are either U.S. Government
securities or are rated within the highest grade by Moody's
or S&P, and mature within one year from the date of purchase
or carry a variable or floating rate of interest. See the
Statement of Additional Information for further information
about the temporary investments in which the Funds may
invest. [/R]
18
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
SPECIAL FACTORS PERTAINING TO EACH FUND
Because each Fund will concentrate its investments in
Municipal Obligations issued within a single state, a Fund
may be affected by political, economic or regulatory factors
that may impair the ability of issuers in that state to pay
interest on or to repay the principal of their debt
obligations. These special factors are briefly described for
each Fund's respective state in Appendix A to this
Prospectus. See the Statement of Additional Information for
further information about these factors.
CERTAIN INVESTMENT STRATEGIES AND LIMITATIONS
Portfolio
trading and Each Fund will make changes in its investment portfolio from
turnover: time to time in order to take advantage of opportunities in
the municipal market and to limit exposure to market risk. A
Each Fund will Fund may engage to a limited extent in short-term trading
engage in consistent with its investment objective, but a Fund will not
short-term trade securities solely to realize a profit. Changes in a
trading only Fund's investments are known as "portfolio turnover." While
to a limited each Fund's annual portfolio turnover rate is not expected to
extent exceed 50%, actual portfolio turnover rates are impossible to
predict, and may exceed 50% in particular years depending
upon market conditions. [/R]
When-issued or A Fund may purchase and sell Municipal Obligations on a when-
delayed issued or delayed delivery basis, which calls for the Fund to
delivery make payment or take delivery at a future date, normally 15-
transactions 45 days after the trade date. 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. A Fund commonly engages 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. See the Statement of Additional Information for
further information about when-issued and delayed delivery
transactions. [/R]
Financial Although the Funds have no present intent to do so, each Fund
futures and reserves the right to engage in certain hedging transactions
options involving the use of financial futures contracts, options on
transactions: financial futures or options based on either an index of
long-term tax-exempt securities or on debt securities whose
prices, in the opinion of Nuveen Advisory, correlate with the
The Funds do prices of the Fund's investments. These hedging transactions
not presently are designed to limit the risk of fluctuations in the prices
intend to use of a Fund's investments. See the Statement of Additional
futures or Information for further information on futures and options
options and associated risks. [/R]
19
<PAGE>
Other Each of the Funds has adopted certain fundamental policies
Investment intended to limit the risk of its investment portfolio. In
Policiesand accordance with these policies, each Fund may not:
Restrictions:
. invest more than 5% of its total assets in securities of
any one issuer, except that this limitation shall not apply
to securities of the U.S. Government, its agencies and
Each Fund will instrumentalities or to the investment of 25% of the Fund's
take steps to assets;
ensure that . invest more than 5% of its total assets in securities of
its assets are unseasoned issuers which, together with their predecessors,
not have been in operation for less than three years;
concentrated . invest more than 10% of its assets in illiquid municipal
in just a few lease obligations and other securities that are
holdings [/R] unmarketable, illiquid or not readily marketable
(securities that cannot reasonably be sold within seven
days, including repurchase agreements maturing in more than
seven days);
. 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;
. borrow money, except from banks for temporary or emergency
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 its total assets,
including the amount borrowed, in order to meet redemption
requests which might otherwise require the untimely
disposition of securities; or
. hold securities of a single bank, including securities
backed by a letter of credit of that bank, if these
holdings would exceed 10% of the total assets of the Fund.
In applying these policies, the "issuer" of a security is
deemed to be the entity whose assets and revenues are
committed to the payment of principal and interest on that
security, provided that the guarantee of an instrument will
generally be considered a separate security.
Except as specifically noted above or in the Statement of
Additional Information, the Fund's investment policies are
not fundamental and may be changed without shareholder
approval. For a more complete description of investment
restrictions that may be changed without a shareholder vote,
see the Statement of Additional Information.
20
<PAGE>
FLEXIBLE PRICING PROGRAM
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
Each Fund The Fund has adopted a Flexible Pricing Program that offers
offers various you three alternative ways to purchase Fund shares (Classes
methods of A, C and R), each with a different combination of sales
purchasing charges, ongoing fees, eligibility requirements, and other
shares which features. The Program is designed to permit you and your
are designed financial adviser to choose the method of purchasing shares
to meet your that you believe is most beneficial given the amounts of your
individual investment and current holdings of Fund shares, the length of
investment time you expect to hold your investment, and other relevant
needs and circumstances. A summary of the three alternatives is set
preferences forth below:
[/R]
<TABLE>
<CAPTION>
Fund Up-front Contingent deferred Annual 12b-1 Annual 12b-1
shares sales charge sales charge ("CDSC") distribution fee service fee
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 4.50% (1) None (2) None .25%
Class C None 1.00% (3) .75% .25%
Class R None None None None
</TABLE>
(1) Maximum up-front sales charge, which is reduced for
purchases of $50,000 or more. The up-front sales charge may
be reduced or waived for certain purchases.
(2) Certain Class A purchases at net asset value of $1
million or more may be subject to a 1% CDSC if redeemed
within 18 months of purchase.
(3) The CDSC is applicable to Class C Shares redeemed within
12 months of purchase. Class C Shares convert to Class A
Shares after six years, which reduces the ongoing expenses
borne by an investor.
For more information regarding features of each class, see
"How to Buy Fund Shares," "How to Redeem Fund Shares" and
"Distribution and Service Plan" below.
Which option When you purchase Class A Shares of a Fund, you will normally
is right for pay an up-front sales charge. As a result, you will have less
you? money invested initially and you will own fewer Class A
Shares than you would in the absence of an up-front sales
charge. Alternatively, when you purchase Class C Shares of a
Fund, you will not pay an up-front sales charge and all of
your monies will be fully invested at the time of purchase.
However, Class C Shares are subject to an annual distribution
fee which constitutes an asset-based sales charge whose
purpose is the same as an up-front sales charge. Class C
Shares automatically convert to Class A Shares six years
after purchase, which reduces the annual expenses you would
bear. This automatic conversion is designed to ensure that
holders of Class C Shares would pay over the six-year period
a distribution fee that is approximately the economic
equivalent of the one-time, up-front sales charge paid by
holders of Class A Shares on purchases of up to $50,000.
Class C Shares are subject to a CDSC of 1% if redeemed within
12 months of purchase. Class A Shares and Class C Shares are
also subject to annual service fees which are identical in
amount and are used to compensate Authorized Dealers for
providing you with ongoing account services. You may qualify
for a [/R]
21
<PAGE>
reduced sales charge or a sales charge waiver on a purchase
of Class A Shares, as described below under "How the Sales
Charge on Class A Shares May Be Reduced or Waived." Class R
Shares are available for purchase at a price equal to their
net asset value, but only under certain limited circumstances
or for certain categories of Investors, as described below
under "How to Buy Fund Shares--Class R Shares."
In deciding whether to purchase Class A Shares, Class C
Shares or Class R Shares of a Fund, you should consider all
relevant factors, including the dollar amount of your
purchase, the length of time you expect to hold the shares
and whether a CDSC would apply, the amount of any applicable
up-front sales charge, the amount of any applicable
distribution or service fee that may be incurred while you
own the shares, whether or not you will be reinvesting income
or capital gain distributions in additional shares, whether
or not you meet applicable eligibility requirements or
qualify for a sales charge waiver or reduction, and the
relative level of services that your financial adviser may
provide to different classes. Authorized Dealers and other
persons distributing a Fund's shares may receive different
compensation for selling different classes of shares.
Differences
between the Each class of shares of a Fund represents an interest in the
classes of same portfolio of investments. Each class of shares of a Fund
shares is identical in all respects except that each class has its
own sales charge structure, each class bears its own class
expenses, including service and distribution expenses, and
each class has exclusive voting rights with respect to any
distribution or service plan applicable to its shares. In
addition, the Class C Shares are subject to a conversion
feature and a CDSC of 1% if redeemed within 12 months of
purchase, as described below. As a result of the differences
in the expenses borne by each class of shares, and
differences in the purchase and redemption activity for each
class, net income per share, dividends per share and net
asset value per share will vary among each Fund's classes of
shares.
Dealer
Incentives Upon notice to all Authorized Dealers, Nuveen may reallow to
Authorized Dealers electing to participate up to the full
applicable Class A Share up-front sales charge during periods
and for transactions specified in the notice. The
reallowances made during these periods may be based upon
attainment of minimum sales levels. Further, 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 the Funds or other Nuveen Mutual Funds and
Nuveen UITs during specified time periods. The staff of the
Securities and Exchange Commission takes the position that
dealers who receive 90% or more of the applicable sales
charge may be deemed underwriters under the Securities Act of
1933, as amended.
22
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
Nuveen may also from time to time provide additional
promotional support to certain Authorized Dealers who sell or
are expected to sell certain minimum amounts of Nuveen Mutual
Funds and Nuveen UITs during specified time periods. Such
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.
Specifically, Nuveen offers a program of advertising support
to Authorized Dealers under which Nuveen will pay or
reimburse the 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 UITs. Reimbursement to the
Authorized Dealer will be based on the number of its
financial advisers who have sold Nuveen Fund shares and UIT
units during the prior calendar year according to an
established schedule. Any such support 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.
23
<PAGE>
HOW TO BUY FUND SHARES
CLASS A SHARES
Class A Shares
are normally You may purchase Class A Shares of any Fund at a public
offered at offering price equal to the applicable net asset value per
their net share plus an up-front sales charge imposed at the time of
asset value purchase as set forth below. You may qualify for a reduced
plus an up- sales charge, or the sales charge may be waived in its
front sales entirety, as described below under "How the Up-Front Sales
charge Charge on Class A Shares May Be Reduced or Waived." Class A
Shares are also subject to an annual service fee of .25%. See
"Flexible Pricing Program" and "Distribution and Service
Plan." [/R]
The up-front sales charge schedule for each Fund's Class A
Shares is as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS REALLOWANCE AS
% OF PUBLIC % OF NET AMOUNT % OF PUBLIC
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
$50,000 but less than
$100,000 4.25% 4.44% 3.75%
$100,000 but less than
$250,000 3.50% 3.63% 3.25%
$250,000 but less than
$500,000 2.75% 2.83% 2.50%
$500,000 but less than
$1,000,000 2.00% 2.04% 1.75%
$1,000,000 but less than $2,500,000 0.00% 0.00% 1.00%
$2,500,000 but less than $5,000,000 0.00% 0.00% 0.50%
$5,000,000 and over 0.00% 0.00% 0.25%
</TABLE>
Class A Share purchases of $1 million or more will be sold at
net asset value without an up-front sales charge. Nuveen will
pay Authorized Dealers of record on such Class A Share
purchases a commission of up to 1% of the amount of the
purchase. The investor agrees to pay to Nuveen a CDSC of 1%
of the purchase price or the redemption proceeds, whichever
is less, if such shares are redeemed within 18 months of
purchase. Shares purchased by investors investing $1 million
or more who have made arrangements with Nuveen and whose
dealer of record waived the commission will not be subject to
the CDSC. See "How to Redeem Fund Shares--Contingent Deferred
Sales Charge."
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 above to Authorized Dealers. See "Flexible Pricing
Program--Dealer Incentives" above for more information about
reallowances and other compensation to Authorized Dealers.
24
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
Certain commercial banks may make Class A Shares of the Funds
available to their customers on an agency basis. Pursuant to
the agreements between Nuveen and these banks, some or all of
the sales charge paid by a bank customer in connection with a
purchase of Class A Shares may be retained by or paid to the
bank. Certain banks and other financial institutions may be
required to register as securities dealers in certain states.
HOW THE UP-FRONT SALES CHARGE ON CLASS A SHARES MAY BE
REDUCED OR WAIVED
There are
several waysto There are several ways to reduce or eliminate the up-front
reduce or sales charge:
eliminatethe . cumulative discount;
sales charge . letter of intent;
[/R]
. purchases with monies representing distributions from
Nuveen-sponsored UITs;
. group purchase programs;
. reinvestment of redemption proceeds from non-affiliated
funds; and
. special sales charge waivers for certain categories of
investors.
Cumulative You may qualify for a reduced sales charge as shown above on
Discount a purchase of Class A Shares of any Fund if the amount of
your purchase, when added to the value that day of all of
your prior purchases of shares of any Fund or of another
Nuveen Mutual Fund, or units of a Nuveen UIT, on which an up-
front sales charge or ongoing distribution fee is imposed,
falls within the amounts stated in the table. You or your
financial adviser must notify Nuveen or SSI 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.
[/R]
Letter of You may qualify for a reduced sales charge on a purchase of
Intent 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
above. 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 SSI a
written Letter of Intent in a form acceptable to Nuveen. A
Letter of Intent states that you intend, but are not
obligated, to purchase over the next 13 months a stated total
amount of Class A Shares that would qualify you for a reduced
sales charge shown above. You may count shares of a Nuveen
Mutual Fund that you already own on which you paid an up-
front sales charge or an ongoing distribution fee and any
Class C Shares of a Nuveen Mutual Fund that you purchase over
the next 13 months [/R]
25
<PAGE>
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 UIT, 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 SSI
whenever you make a purchase of Fund shares that you wish to
be covered under the Letter of Intent option.
Reinvestment You may purchase Class A Shares without an up-front sales
of Nuveen Unit charge by reinvestment of distributions from any of the
Trust various unit investment trusts sponsored by Nuveen. There is
Distributions no initial or subsequent minimum investment requirement for
such reinvestment purchases. [/R]
26
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
Group Purchase If you are a member of a qualified group, you may purchase
Programs 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 been in existence for more than six months, has a purpose
other than investment, has five 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.
[/R]
Under any group purchase program, the minimum monthly
investment in Class A Shares of any particular Fund or
portfolio by each participant is $25, and the minimum monthly
investment in Class A Shares of any particular Fund or
portfolio for all participants in the program combined is
$1,000. No certificates 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 checking the applicable box on
the enclosed Application Form or by calling Nuveen toll-free
at 800.621.7227. See the Statement of Additional Information
for more complete information about "qualified groups" and
group purchase programs.
Reinvestment You may also purchase Class A Shares at net asset value
of Redemption without a sales charge if the purchase takes place through a
Proceeds from broker-dealer and represents the reinvestment of the proceeds
Unaffiliated of the redemption of shares of one or more registered
Funds investment companies not affiliated with Nuveen. You must
provide appropriate documentation that the redemption
occurred not more than 60 days 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. [/R]
Special Sales Class A Shares of any Fund may be purchased at net asset
Charge Waivers value without a sales charge and in any amount by officers,
directors and retired directors of the Funds; bona fide,
full-time and retired employees of Nuveen and its affiliates,
any parent company of Nuveen, and subsidiaries thereof, or
their immediate family members (as defined below); 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 [/R]
27
<PAGE>
available directly or through subsidiaries or bank
affiliates; bank or broker-affiliated trust departments;
investors who purchase through broker-dealer sponsored mutual
fund purchase programs offered on a periodic fee, asset-based
fee or no transaction fee basis; and clients of investment
advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for
their services. For further details about these special
categories and their eligibility requirements, please consult
your financial adviser or the Statement of Additional
Information, or call Nuveen at 800.621.7227.
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 SSI whenever you make a
purchase of Class A Shares of any Fund that you wish to be
covered under these special sales charge waivers. The above
categories of investors are also eligible to purchase Class R
Shares of any Fund, as described below under "Class R
Shares."
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 General 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 and their
children under 21 years of age); or (3) all purchases made
through a group purchase program as described above. [/R]
The reduced sales charge programs may be modified or
discontinued by the Funds at any time upon prior written
notice to shareholders of the Funds.
FOR MORE INFORMATION ABOUT THE PURCHASE OF CLASS A SHARES OR
REDUCED SALES CHARGE PROGRAMS, OR TO OBTAIN THE REQUIRED
APPLICATION FORMS, CALL NUVEEN TOLL-FREE AT 800.621.7227.
28
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
CLASS C SHARES
Class C Shares
may be purchased You may purchase Class C Shares of any Fund at a public
at their net offering price equal to the applicable net asset value per
asset value, and share without any up-front sales charge. Class C Shares are
are subject to subject to an annual distribution fee to reimburse Nuveen for
an annual costs incurred in connection with the sale of Class C Shares.
distribution fee Class C Shares are also subject to an annual service fee to
compensate Authorized Dealers for providing you with ongoing
financial advice and other services. See "Distribution and
Service Plan." [/R]
The Class C Shares of the applicable Fund will effectively
retain the CDSC: the Fund will pay the amount of the CDSC to
Nuveen, but will be reimbursed by Nuveen in an equal amount
by a reduction in the distribution fees payable to Nuveen. An
investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within 12 months of purchase.
See "How to Redeem Fund Shares."
Class C Shares will automatically convert to Class A Shares
six years after purchase. All such conversions will be done
at net asset value without the imposition of any sales
charge, 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 C 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 C Shares acquired through reinvestment of
distributions will be attributed to particular purchases of
Class C Shares in accordance with such procedures as the
Board of Trustees may determine from time to time. The
automatic conversion of Class C Shares to Class A Shares six
years after purchase was designed to ensure that holders of
Class C Shares would pay over the six-year period a
distribution fee that is approximately the economic
equivalent of the one-time, up-front sales charge paid by
holders of Class A Shares on purchases of up to $50,000.
Class C Shares that are converted to Class A Shares will no
longer be subject to an annual distribution fee, but they
will remain subject to an annual service fee which is
identical in amount for
both Class C Shares and Class A Shares. Since net asset value
per share of the Class C 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 C
Shares converted. Any conversion of Class C 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 C Shares into Class A
Shares might be suspended if such an opinion or ruling were
no longer available.
29
<PAGE>
CLASS R SHARES
Class R Shares
areoffered at If you owned Fund shares as of September 6, 1994, those
their netasset shares have been designated as Class R Shares. Purchases of
value additional Class R Shares of any Fund, which will not be
subject to any sales charge or any distribution or service
fee, will be limited to the following circumstances. You may
purchase Class R Shares with monies representing
distributions from Nuveen-sponsored UITs if, prior to
September 6, 1994, you had purchased such UITs and elected to
reinvest distributions from such UITs in shares of a Fund.
You may also purchase Class R Shares with monies representing
dividends and capital gain distributions on Class R shares of
a Fund. Finally, you may purchase Class R Shares if you are
within the following specified categories of investors who
are also eligible to purchase Class A Shares at net asset
value without an up-front sales charge: officers, directors
and retired directors of the Funds; bona fide, full-time and
retired employees of Nuveen, any parent company of Nuveen,
and subsidiaries thereof, or their immediate family members;
any person who, for at least 90 days, has been an officer,
director or bona fide employee of any Authorized Dealer, or
their immediate family members; officers and directors of
bank holding companies that make Fund shares available
directly or through subsidiaries or bank affiliates; bank or
broker-affiliated trust departments; investors who purchase
through broker-dealer sponsored mutual fund programs offered
on a periodic fee, asset-based fee or no transaction fee
basis; and clients of investment advisers, financial planners
or other financial intermediaries that charge periodic or
asset-based fees for their services. [/R]
If you are eligible to purchase either Class R Shares or
Class A Shares of a Fund 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 services. Class R Shares
are not subject to a service fee and consequently holders of
Class R Shares may not receive the same 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.
INITIAL AND SUBSEQUENT PURCHASES OF SHARES
The Funds
offer a number You may buy Fund shares through Authorized Dealers or by
of convenient directing your financial adviser to call Nuveen toll-free at
ways to 800.843.6765. You may pay for your purchase by Federal
purchase Reserve draft or by check made payable to "Nuveen [name of
shares state] Tax-Free Value Fund, Class [A], [C], [R]," delivered
to the financial adviser through whom the investment is to be
made for forwarding to the Funds' shareholder [/R]
30
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
services agent, SSI. When making your initial investment, you
must also furnish the information necessary to establish your
Fund account by completing and enclosing with your payment
the attached Application Form. After your initial investment,
you may make subsequent purchases at any time by forwarding
to SSI a check in the amount of your purchase made payable to
"Nuveen [name of state] Tax-Free Value Fund, Class [A], [C],
[R]," and indicating on the check your account number. All
payments must be in U.S. dollars and should be sent directly
to SSI at its address listed on the back cover of this
Prospectus. A check drawn on a foreign bank or payable other
than to the order of a Fund generally will not be acceptable.
You may also wire Federal Funds directly to SSI, but you may
be charged a fee for this. For instructions on how to make
Fund purchases by wire transfer, call Nuveen toll-free at
800.621.7227, between the hours of 8:30 a.m. and 8:00 p.m.
Eastern Time.
MINIMUM INVESTMENT REQUIREMENTS
Generally, your first purchase of any class of a Fund's
shares must be for $1,000 or more. Additional purchases may
be in amounts of $100 or more. These minimums may be changed
at any time by the Funds. There are exceptions to these
minimums for shareholders who qualify under one or more of
the Funds' automatic deposit, group purchase or reinvestment
programs.
PURCHASE PRICE
The price at which the purchase of Fund shares is effected is
based on the next calculation of the Fund's net asset value
after the order is placed. The Fund's net asset value per
share is determined as of 4:00 p.m. Eastern Time on each day
the New York Stock Exchange is open for business. See "Net
Asset Value," below for a description of how net asset value
is calculated.
SYSTEMATIC INVESTMENT PROGRAMS
The Funds offer you several opportunities to capture the
benefits of "dollar cost averaging" through systematic
investment programs. In a regularly followed dollar cost
averaging program, you would purchase more shares when Fund
share prices are lower and fewer shares when Fund share
prices are higher, so that the average price paid for Fund
shares is less than the average price of Fund shares over the
same time period. Dollar cost averaging does not assure
profits or protect against losses in a steadily declining
market. Since dollar cost averaging involves continuous
investment regardless of fluctuating price levels, you should
consider your financial ability to continue investing in
declining as well as rising markets before deciding to invest
in this way. The chart below shows the cumulative effect that
compound interest can have on a systematic investment
program.
31
<PAGE>
The Power of a
Systematic
Investment
Program
LOGO
SOURCE: NUVEEN MARKETING RESEARCH DEPARTMENT
In the above example, it is assumed that $100 is added to an
investment account every month for 20 years. From the same
$1,000 beginning, the chart shows the amount that would be in
the account after 20 years, assuming no interest and interest
compounded annually at the rates of 4%, 5% and 6%.
This chart is designed to illustrate the effects of compound
interest, and is not intended to predict the results of an
actual investment in a Fund. There are several important
differences between the Funds and the hypothetical investment
program shown. This example assumes no gain or loss in the
net asset value of the investment over the entire 20-year
period, whereas the net asset value of each of the Funds will
rise and fall due to market conditions or other factors,
which could have
32
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
a significant impact on the total value of your investment.
Similarly, this example shows four steady interest rates over
the entire 20-year period, whereas the dividend rates of the
Funds can be expected to fluctuate over time. The Funds may
provide additional information to investors and advisers
illustrating the benefits of systematic investment programs
and dollar cost averaging.
THE FUNDS OFFER TWO DIFFERENT TYPES OF SYSTEMATIC INVESTMENT
PROGRAMS:
Automatic
Deposit Plan Once you have established a Fund account in one of the Funds,
you may make regular investments in an amount of $25 or more
each month by authorizing SSI to draw preauthorized checks on
your bank account. There is no obligation to continue
payments and you may terminate your participation at any time
at your discretion. No charge in addition to the applicable
sales charge is made in connection with this Plan, and there
is no cost to the Funds. To obtain an application form for
the Automatic Deposit Plan, check the applicable box on the
enclosed Application Form or call Nuveen toll-free at
800.621.7227. [/R]
Payroll Once you have established a Fund account in one of the Funds,
DirectDeposit you may, with your employer's consent, make regular
Plan investments in Fund shares of $25 or more per pay period by
authorizing your employer to deduct this amount automatically
from your paycheck. There is no obligation to continue
payments and you may terminate your participation at any time
at your discretion. No charge in addition to the applicable
sales charge is made for this Plan, and there is no cost to
the Funds. To obtain an application form for the Payroll
Direct Deposit Plan, check the applicable box on the enclosed
Application Form or call Nuveen toll-free at 800.621.7227.
[/R]
OTHER SHAREHOLDER PROGRAMS
Exchange
Privilege You may exchange shares of a class of the Fund for shares of
the same or equivalent class of another Nuveen Mutual Fund
with reciprocal exchange privileges, at net asset value
without a sales charge, by sending a written request to the
applicable Fund, c/o Shareholder Services, Inc., P.O. Box
5330, Denver, CO 80217-5330. Similarly, Class A Shares, Class
C Shares and Class R Shares of another Nuveen Mutual Fund may
be exchanged for the same class of shares of the Fund at net
asset value without a sales charge. Shares of any Nuveen
Mutual Fund purchased through dividend reinvestment or
through investment of Nuveen UIT distributions may be
exchanged for shares of a Fund or any other Nuveen Mutual
Fund without a sales charge. [/R]
33
<PAGE>
Exchanges of shares from any Nuveen money market fund will be
made into Class A Shares or Class C Shares of any Fund at the
public offering price, which includes an up-front sales
charge in the case of Class A Shares, and will be subject to
an annual distribution fee in the case of Class C Shares. If,
however, a sales charge has previously been paid on the
investment represented by the exchanged shares (i.e., the
shares to be exchanged were originally issued in exchange for
shares on which a sales charge was paid), the exchange of
shares from a Nuveen money market fund will be made into
Class A Shares at net asset value without any up-front sales
charge. Shares of any class of a Fund may be exchanged for
shares of any Nuveen money market fund.
No CDSC will be charged on the exchange of Class C Shares of
any Fund for Class C Shares of any other Nuveen Mutual Fund
or shares of any Nuveen money market fund. The 12 month
holding period for purposes of the CDSC applicable to Class C
Shares will continue to run during any period in which Class
C Shares of a Fund, Class C Shares of any other Nuveen Mutual
Fund or shares of a Nuveen money market fund are held.
The shares to be purchased must be offered in your state of
residence and you must have held the shares you are
exchanging for at least 15 days. The total value of exchanged
shares must at least equal the minimum investment requirement
of the Nuveen Mutual Fund being purchased. For federal income
tax purposes, any exchange constitutes a sale and purchase of
shares and may result in capital gain or loss. Before making
any exchange, you should obtain the Prospectus for the Nuveen
Mutual Fund you are purchasing and read it carefully. If the
registration of the account for the Fund you are purchasing
is not exactly the same as that of the fund account from
which the exchange is made, written instructions from all
holders of the account from which the exchange is being made
must be received, with signatures guaranteed by a member of
an approved Medallion Guarantee Program or in such other
manner as may be acceptable to the Fund. You may also
exchange shares by telephone if you authorize telephone
exchanges by checking the applicable box on the enclosed
Application Form or by calling Nuveen toll-free at
800.621.7227 to obtain an authorization form. The exchange
privilege may be modified or discontinued by any Fund at any
time upon prior written notice to shareholders of that Fund.
In addition, you may exchange Class R Shares of the 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
$1,000 or you already own Class A Shares of the Fund.
34
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
The exchange privilege is not intended to permit the Funds to
be used as vehicles for short-term trading. Excessive
exchange activity may interfere with portfolio management,
raise expenses, and otherwise have an adverse effect on all
shareholders. In order to limit excessive exchange activity
and in other circumstances where Fund management believes
doing so would be in the best interest of a Fund, the Funds
reserve the right to revise or terminate the exchange
privilege, or limit the amount or number of exchanges or
reject any exchange. Shareholders would be notified of any
such action to the extent required by law.
Reinstatement If you have redeemed Class A Shares of the Fund or Class A
Privilege Shares of any other Nuveen Mutual Fund that were subject to a
sales charge or CDSC, you have up to one year to reinvest all
or part of the full amount of the redemption in the same
class of shares of the Fund at net asset value. This
reinvestment privilege can be exercised only once for any
redemption, and reinvestment will be made at the net asset
value of the appropriate class of Fund shares next calculated
after reinstatement. If you reinstate shares that were
subject to a CDSC, your holding period as of the redemption
date will also be reinstated. The tax consequences of any
capital gain realized on a redemption will not be affected by
reinstatement, but a capital loss may be disallowed in whole
or in part depending on the timing and amount of the
reinvestment. [/R]
Fund Direct You can use Fund Direct to link your Fund account to your
account at your bank or other financial institution to enable
you to send money electronically between those accounts to
perform a variety of account transactions. These include
purchases of shares by telephone, investments under Automatic
Deposit Plan, and sending dividends and distributions,
redemption payments or Automatic Withdrawal Plan payments
directly to your bank account. Please refer to the
Application for details or call SSI for more information.
[/R]
Fund Direct privileges must be requested via a Fund Direct
Application you obtain by calling 800.621.7227. Fund Direct
privileges will apply to each shareholder listed in the
registration on your account as well as to your Authorized
Dealer representative of record unless and until SSI receives
written instructions terminating or changing those
privileges. After you establish Fund Direct for your account,
any change of bank account information must be made by
signature-guaranteed instructions to SSI signed by all
shareholders who own the account.
35
<PAGE>
Purchases may be made by telephone only after your account
has been established. To
purchase shares in amounts up to $250,000 through a telephone
representative, call
SSI at 800.621.7227. The purchase payment will be debited
from your bank account.
FOR MORE INFORMATION ABOUT THESE PURCHASE OPTIONS AND TO
OBTAIN THE APPLICATION FORMS REQUIRED FOR SOME OF THEM, CALL
NUVEEN TOLL-FREE AT 800.621.7227.
36
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS [/R]
JULY 1, 1996
ADDITIONAL INFORMATION
If you choose to invest in a Fund, an account will be opened
and maintained for you by SSI, the Funds' shareholder
services agent. Share certificates will be issued to you only
upon written request to SSI, and no certificates will be
issued for fractional shares. Each Fund reserves the right to
reject any purchase order and to waive or increase minimum
investment requirements. A change in registration or transfer
of shares held in the name of your financial adviser's firm
can only be made by an order in good form from the financial
adviser acting on your behalf.
Authorized Dealers are encouraged to open single master
accounts. However, some Authorized Dealers may wish to use
SSI's sub-accounting system to minimize their internal
recordkeeping requirements. An Authorized Dealer or other
investor requesting shareholder servicing or accounting other
than the master account or sub-accounting service offered by
SSI will be required to enter into a separate agreement with
another agent for these services for a fee that will depend
upon the level of services to be provided.
Subject to the rules and regulations of the Securities and
Exchange Commission, the Fund reserves the right to suspend
the continuous offering of shares of any of its Funds at any
time, but no suspension shall affect your right of redemption
as described below.
37
<PAGE>
DISTRIBUTION AND SERVICE PLAN
Each Fund has adopted a plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940, which
provides that Class C Shares will be subject to an annual
distribution fee, and that both Class A 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 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 C Shares. The distribution fee primarily reimburses
Nuveen for providing compensation to Authorized Dealers,
including Nuveen, either at the time of sale or on an ongoing
basis. The other expenses for which Nuveen may be reimbursed
include, 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 C Shares, certain
other expenses associated with the distribution of Class C
Shares, and any other distribution-related expenses that may
be authorized from time to time by the Board of Directors.
The service fee applicable to Class A Shares and Class C
Shares under each Fund's Plan will be payable to Nuveen, to
be used to compensate Authorized Dealers, including Nuveen,
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 .25 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 C
Shares less the amount of any CDSC received by Nuveen as to
which no reinstatement privilege has been exercised, as a
distribution fee and up to .25 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.
38
<PAGE>
HOW TO REDEEM FUND SHARES
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
You may require a Fund at any time to redeem for cash your
shares of that Fund. All shares will be redeemed at the net
asset value next computed after instructions and required
documents and certificates, if any, are received in proper
form, as described below. However, with respect to certain
Class A and Class C shares, as further described below, any
applicable contingent deferred sales charge will be deducted
from the proceeds of the redemption. There is no charge for
redemption of Class R Shares.
Contingent Class A Shares are normally redeemed at net asset value,
Deferred Sales without any CDSC. However, in the case of Class A Shares
Charge purchased at net asset value because the purchase amount
exceeded $1 million, where the Authorized Dealer did not
waive the sales commission, a CDSC of 1% is imposed on any
redemption within 18 months of purchase. See "How to Buy Fund
Shares--Class A Shares." Class C Shares are normally 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. See "How to Buy Fund
Shares--Class C Shares." The CDSC will be the lower of (i)
the net asset value of shares at the time of purchase or (ii)
the net asset value of shares at the time of redemption. [/R]
In determining whether a CDSC is payable, a Fund will first
redeem shares not subject to any charge, and then in the
reverse order in which the shares were purchased, except if
another order of redemption would result in a lower charge or
you specify 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
money market fund. Your 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
you pay on Class A Shares. The CDSC may be waived under
certain special circumstances, as described in the Statement
of Additional Information.
THE FUNDS OFFER A VARIETY OF REDEMPTION OPTIONS
By Written
Request You may redeem shares by sending a written request for
redemption directly to the applicable Fund, c/o Shareholder
Services, Inc., P.O. Box 5330, Denver, CO 80217-5330,
accompanied by duly endorsed certificates, if issued.
Requests for redemption and share certificates, if issued,
must be signed by each shareholder and, if the redemption
proceeds exceed $50,000 or are payable other than to the [/R]
39
<PAGE>
shareholder of record at the address of record (which address
may not have been changed in the preceding 30 days), the
signature must be guaranteed by a member of an approved
Medallion Guarantee Program or in such other manner as may be
acceptable to the Fund. You will receive payment equal to the
net asset value per share next determined after receipt by
the Fund of a properly executed redemption request in proper
form. A check for the redemption proceeds will be mailed to
you within seven days after receipt of your redemption
request. However, if any shares to be redeemed were purchased
by check within 15 days prior to the date the redemption
request is received, a Fund will not mail the redemption
proceeds until the check received for the purchase of shares
has cleared, which may take up to 15 days.
By TEL-A-CHECK If you have authorized telephone redemption and your account
address has not changed within the last 30 days, you can
redeem shares that are held in non-certificate form and that
are worth $50,000 or less by calling Nuveen at 800.621.7227.
While you or anyone authorized by you may make telephone
redemption requests, redemption checks will be issued only in
the name of the shareholder of record and will be mailed to
the address of record. If your telephone request is received
prior to 4:00 p.m. Eastern Time, the shares redeemed will
earn income through the day the request is made and the
redemption check will normally be mailed the next business
day. For requests received after 4:00 p.m. Eastern Time, the
redemption will be effected at 4:00 p.m. Eastern Time the
following business day and the shares redeemed earn income
through the next business day and the check will normally be
mailed on the second business day after the request. [/R]
By TEL-A-WIRE If you have authorized TEL-A-WIRE redemption, or established
or Fund Direct Fund Direct privileges, you can take advantage of the
following expedited redemption procedures to redeem shares
held in non-certificate form that are worth at least $1,000.
You may make TEL-A-WIRE redemption requests by calling Nuveen
at 800.621.7227. If a redemption request is received by 4:00
p.m. Eastern Time, the shares redeemed will earn income
through the day the request is made and the redemption will
be made as of 4:00 p.m. that day. If the redemption request
is received after 4:00 p.m. Eastern Time, the redemption will
be effected at 4:00 p.m. the following business day and the
shares redeemed earn income through that day. Redemption
proceeds will normally be wired on the second business day
following the redemption, but may be delayed one additional
business day if the Federal Reserve Bank of Boston or the
Federal Reserve Bank of New York is closed on the day
redemption proceeds would ordinarily be wired. The Funds
reserve the right to charge a fee for TEL-A- [/R]
40
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
WIRE. Proceeds of redemptions through Fund Direct will
normally be wired to your Fund Direct bank account on the
second or third business day after the redemption.
Before you may redeem shares by TEL-A-CHECK, TEL-A-WIRE, or
Fund Direct, you must complete the appropriate redemption
authorization section of the enclosed Application Form or the
Fund Direct Application Form and return it to Nuveen or SSI.
If you did not authorize one or more of these redemption
methods when you opened your account, you may obtain a
redemption authorization form by writing the Funds or by
calling Nuveen toll-free at 800.621.7227. Proceeds of share
redemptions made by TEL-A-WIRE will be transferred by Federal
Reserve wire only to the commercial bank account specified by
the shareholder on the application form. You must send a
written request to Nuveen or SSI in order to establish
multiple accounts, or to change the account or accounts
designated to receive redemption proceeds. These requests
must be signed by each account owner with signatures
guaranteed by a member of an approved Medallion Guarantee
Program or in such other manner as may be acceptable to the
Funds. Further documentation may be required from
corporations, executors, trustees or personal
representatives.
For the convenience of shareholders, the Funds have
authorized Nuveen as their agent to accept orders from
financial advisers by wire or telephone for the redemption of
Fund shares. The redemption price is the net asset value next
determined following receipt of an order placed by the
financial adviser. A Fund makes payment for the redeemed
shares to the financial adviser who placed the order promptly
upon presentation of required documents with signatures
guaranteed as described above. Neither the Funds nor Nuveen
charge any redemption fees other than the CDSC as described
above. However, your financial adviser may charge you for
serving as agent in the redemption of shares.
The Funds reserve the right to refuse telephone redemptions
and, at their option, may limit the timing, amount or
frequency of these redemptions. Telephone redemption
procedures may be modified or terminated at any time, on 30
days' notice, by the Funds. The Funds, SSI and Nuveen will
not be liable for following telephone instructions reasonably
believed to be genuine. The Funds employ procedures
reasonably designed to confirm that telephone instructions
are genuine. These procedures include recording all telephone
instructions and requiring up to three forms of
identification prior to acting upon a caller's instructions.
If a Fund does not follow reasonable procedures for
protecting shareholders against loss on
41
<PAGE>
telephone transactions, it may be liable for any losses due
to unauthorized or fraudulent telephone instructions.
Automatic If you own Fund shares currently worth at least $10,000, you
Withdrawal may establish an Automatic Withdrawal Plan by completing an
Plan application form for the Plan. You may obtain an application
form by checking the applicable box on the enclosed
Application Form or by calling Nuveen toll-free at
800.621.7227. [/R]
The Plan permits you to request periodic withdrawals on a
monthly, quarterly, semi-annual or annual basis in an amount
of $50 or more. Depending upon the size of the withdrawals
requested under the Plan and fluctuations in the net asset
value of Fund shares, these withdrawals may reduce or even
exhaust your account.
The purchase of Class A Shares, other than through
reinvestment, while you are participating in the Automatic
Withdrawal Plan with respect to Class A Shares will usually
be disadvantageous because you will be paying a sales charge
on any Class A Shares you purchase at the same time you are
redeeming shares. Similarly, use of the Automatic Withdrawal
Plan for Class C Shares held for less than 12 months or
certain Class A Shares held for less than 18 months may be
disadvantageous because the newly-purchased shares may be
subject to the 1% CDSC.
General Each Fund may suspend the right of redemption of Fund shares
or delay payment more than seven days (a) during any period
when the New York Stock Exchange is closed (other than cus-
tomary weekend and holiday closings), (b) when trading in the
markets the Fund normally utilizes is restricted, or an emer-
gency exists as determined by the Securities and Exchange
Commission so that trading of the Fund's investments or de-
termination of its net asset value is not reasonably practi-
cable, or (c) for any other periods that the Securities and
Exchange Commission by ordermay permit for protection of Fund
shareholders. [/R]
Each Fund may, from time to time, establish a minimum total
investment for Fund shareholders, and each Fund reserves the
right to redeem your shares if your investment is less than
the minimum after giving you at least 30 days' notice. If any
minimum total investment is established, and if your account
is below the minimum, you will be allowed 30 days following
the notice in which to purchase sufficient shares to meet the
minimum. So long as a Fund continues to offer shares at net
asset value to holders of Nuveen UITs who are investing their
Nuveen UIT distributions, no minimum total investment will be
established for that Fund.
42
<PAGE>
MANAGEMENT OF THE FUNDS
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
Board of The management of Nuveen Tax-Free Bond Fund, Inc., including
Directors general supervision of the duties performed for each Fund by
Nuveen Advisory under the Investment Management Agreement, is
the responsibility of its Board of Directors. [/R]
Investment Nuveen Advisory acts as the investment adviser for and
Adviser manages the investment and reinvestment of the assets of each
of the Funds. Its address is Nuveen Advisory Corp., 333 West
Wacker Drive, Chicago, Illinois 60606. Nuveen Advisory also
administers the Funds' 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 directors or
officers of Nuveen Tax-Free Bond Fund, Inc. if elected to
such positions. [/R]
Nuveen Advisory was organized in 1976 and since then has
exclusively engaged in the management of municipal securities
portfolios. It currently serves as investment adviser to 21
open-end municipal securities portfolios (the "Nuveen Mutual
Funds") and 53 exchange-traded municipal securities funds
(the "Nuveen Exchange-Traded Funds"). Each of these invests
substantially all of its assets in investment grade quality,
tax-free municipal securities, and except for money-market
funds, adheres to the value investing strategy described
previously. As of the date of this Prospectus, Nuveen
Advisory manages approximately $30 billion in assets held by
the Nuveen Mutual Funds and the Nuveen Exchange-Traded Funds.
Nuveen Advisory is a wholly-owned subsidiary of John Nuveen &
Co. Incorporated, 333 West Wacker Drive, Chicago, Illinois
60606, the oldest and largest investment banking firm (based
on number of employees) specializing in the underwriting and
distribution of tax-exempt securities. Nuveen, the principal
underwriter of the Funds' shares, is sponsor of the Nuveen
Tax-Exempt Unit Trust, a registered unit investment trust. It
is also the principal underwriter for the Nuveen Mutual
Funds, and served as co-managing underwriter for the shares
of the Nuveen Exchange-Traded Funds. Over 1,000,000
individuals have invested to date in Nuveen's tax-exempt
funds and trusts. Founded in 1898, Nuveen is a subsidiary of
The John Nuveen Company which, in turn, is approximately 80%
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.
43
<PAGE>
For the services and facilities furnished by Nuveen Advisory,
each Fund has agreed to pay an annual management fee as
follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET
VALUE MANAGEMENT FEE
- ----------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1%
For the next $250 million .5250 of 1%
For the next $500 million .5125 of 1%
For the next $1 billion .5000 of 1%
For assets over $2 billion .4750 of 1%
</TABLE>
All fees and expenses are accrued daily and deducted before
payment of dividends to investors. In addition to the fee of
Nuveen Advisory, each Fund pays all its other costs and
expenses and a portion of the Nuveen Tax-Free Bond Fund,
Inc.'s general administrative expenses allocated in
proportion to the net assets of each Fund. In order to
prevent total operating expenses (excluding any distribution
or service fees) from exceeding .75 of 1% of the average
daily net asset value of any class of shares of each Fund for
any fiscal year, Nuveen Advisory has agreed to waive all or a
portion of its management fees or reimburse certain expenses
of each Fund. Nuveen Advisory may also voluntarily agree to
reimburse additional expenses from time to time, which
voluntary reimbursements may be terminated at any time in its
discretion. For information regarding the management fees and
total operating expenses of each class of shares of each of
the Funds for the year ended February 29, 1996, see the
tables under "Summary of Fund Expenses" on page 3 of this
Prospectus.
Portfolio Overall portfolio management strategy for the Funds is
Management determined by Nuveen Advisory under the general supervision
and direction of Thomas C. Spalding, Jr., a Vice President of
Nuveen Advisory and of the Funds. Mr. Spalding has been
employed by Nuveen since 1976 and by Nuveen Advisory since
1978 and has responsibility with respect to the portfolio
management of all Nuveen open-end and exchange-traded funds
managed by Nuveen Advisory. See the Statement of Additional
Information for further information about Mr. Spalding. [/R]
The day-to-day management of the Massachusetts Fund is the
responsibility of Stephen S. Peterson, an Assistant Portfolio
Manager of Nuveen Advisory since October 1991 and portfolio
manager for the Massachusetts Fund since May 1993.
44
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
Prior to joining Nuveen Advisory, he was an analyst in
Nuveen's Research Department. Mr. Peterson currently manages
nine Nuveen-sponsored investment companies.
The day-to-day management of the New York Fund is the
responsibility of Daniel S. Solender, an Assistant Portfolio
Manager of Nuveen Advisory since January 1992 and portfolio
manager for the New York Fund since September 1994. Prior to
joining Nuveen Advisory, Mr. Solender attended the University
of Chicago (from September 1990 to June 1992) where he
received his M.B.A. and worked part time in the Research
Department of Nuveen. From June 1989 to August 1990, Mr.
Solender worked for Citibank Investment Services in the areas
of investment research and product development. He currently
manages nine Nuveen-sponsored investment companies.
The day-to-day management of the Ohio Fund is the
responsibility of James W. Lumberg, an Assistant Portfolio
Manager of Nuveen Advisory since July 1993 and portfolio
manager for the Ohio Fund since September 1994. Mr. Lumberg
was Sector Manager, Municipal Leases and Pooled Finance and a
municipal analyst of Nuveen and, prior thereto, was a
professor of English in Liberia, West Africa. Mr. Lumberg
acts under the direct supervision of J. Thomas Futrell and he
currently manages five Nuveen-sponsored investment companies.
J. Thomas Futrell has been a Vice President of Nuveen
Advisory since February 1991. Prior thereto, he served as
Assistant Vice President of Nuveen Advisory. He currently
manages five Nuveen-sponsored investment companies.
Consistent with the Funds' investment objectives, the day-to-
day management of each Fund is characterized by an emphasis
on value investing, a process that involves the search for
Municipal Obligations with favorable characteristics that, in
Nuveen Advisory's judgment, have not yet been recognized in
the marketplace. The process of searching for such
undervalued or underrated securities is an ongoing one that
draws upon the resources of the portfolio managers of the
various Nuveen funds and senior management of Nuveen
Advisory. All portfolio management decisions are subject to
weekly review by Nuveen Advisory's management and to
quarterly review by the Board of Directors of Nuveen Tax-Free
Bond Fund, Inc.
45
<PAGE>
HOW THE FUNDS SHOW PERFORMANCE
Each Fund from time to time may quote various performance
measures in order to illustrate the historical returns
available from an investment in the Fund. These performance
measures, which are determined for each class of shares of a
Fund, include:
YIELD is a standardized measure of the net investment income
Yield earned over a specified 30-day period, expressed as a
Information percentage of the offering price per share at the end of the
period. Yield is an annualized figure, which means that it is
assumed that the same level of net investment income is
generated over a one-year period.
TAXABLE EQUIVALENT YIELD is the yield that a taxable
investment would need to generate in order to equal the yield
on an after-tax basis for an investor in a stated tax
bracket. Taxable equivalent yield will consequently be higher
than its yield. See the chart below and Appendix B for
examples of taxable equivalent yields and how you can use
them to compare other investments with investments in the
Funds.
HISTORICAL YIELDS
LOGO
As this chart shows, interest rates on various long- and
short-term investments will fluctuate over time, and not
always in the same direction or to the same degree. For
convenience, the taxable equivalent yield of the Bond Buyer
20 Index shown here
46
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
was calculated using a 36% federal income tax rate. Other
federal income tax rates, both higher and lower, were in
existence for all or part of the period shown in the chart.
This chart is not intended to predict the future direction of
interest rates. See the discussion below under the subcaption
"General" for a description of the indices and investments
shown in the chart.
DISTRIBUTION RATE is determined based upon the latest
dividend, annualized, expressed as a percentage of the
offering price per share at the end of the measurement
period. Distribution rate may sometimes be different than
yield because it may not include the effect of amortization
of bond premiums to the extent such premiums arise after the
bonds were purchased.
Total Return AVERAGE ANNUAL TOTAL RETURN and CUMULATIVE TOTAL RETURN
Information figures for a specified period measure both the net
investment income generated by, and the effect of any
realized and unrealized appreciation or depreciation of, an
investment in a Fund, assuming the reinvestment of all
dividends and capital gain distributions. Average annual
total return figures generally are quoted for at least one-,
five- and ten-year (or life-of-fund, if shorter) periods and
represent the average annual percentage change over those
periods. Cumulative total return figures are not annualized
and represent the cumulative percentage or dollar value
change over the period specified. [/R]
TAXABLE EQUIVALENT TOTAL RETURN represents the total return
that would be generated by a taxable income fund that
produced the same amount of net asset value appreciation or
depreciation and after-tax income as a Fund in each year,
assuming a specified tax rate. The taxable equivalent total
return of a Fund will therefore be higher than its total
return over the same period.
From time to time, a Fund may compare its risk-adjusted
performance with other investments that may provide different
levels of risk and return. For example, a Fund may compare
its risk level, as measured by the variability of its
periodic returns, or its RISK-ADJUSTED TOTAL RETURN, with
those of other funds or groups of funds. Risk-adjusted total
return would be calculated by adjusting each investment's
total return to account for the risk level of the investment.
A Fund may also compare its TAX-ADJUSTED TOTAL RETURN with
that of other funds or groups of funds. This measure would
take into account the tax-exempt nature of exempt-interest
dividends and the payment of income taxes on a Fund's
distributions of net realized capital gains and ordinary
income.
47
<PAGE>
General Any given performance quotation or performance comparison for
a Fund is based on historical earnings and should not be
considered as representative of the performance of the Fund
for any future period. See the Statement of Additional
Information for further information concerning the Funds'
performance. For information as to current yield and other
performance information regarding the Funds, call Nuveen
toll-free at 800.621.7227. [/R]
A comparison of the current yield or historic performance of
a Fund to those of other investments is one element to
consider in making an informed investment decision. 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.
Additionally, each Fund may compare its current yield or
total return history with a widely-followed, unmanaged
municipal market index such as the Bond Buyer 20 Index, the
Merrill Lynch 500 Municipal Market Index or the Lehman
Brothers Municipal Bond Index. Comparative performance
information may also be used from time to time in advertising
or marketing a Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar, Inc. and other
industry publications.
48
<PAGE>
DISTRIBUTIONS AND TAXES
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
HOW THE FUNDS PAY DIVIDENDS
Each Fund pays Each Fund will pay monthly dividends to shareholders at a
monthly level rate that reflects the past and projected net income of
dividends [/R] the Fund and that results, over time, in the distribution of
substantially all of the Fund's net income. Net income of
each Fund consists of all interest income accrued on its
portfolio less all expenses of Nuveen Tax-Free Bond Fund,
Inc. accrued daily that are applicable to that Fund. To
maintain a more stable monthly distribution, each Fund may
from time to time distribute less than the entire amount of
net income earned in a particular period. This undistributed
net income would be available to supplement future
distributions, which might otherwise have been reduced by a
decrease in a Fund's monthly net income due to fluctuations
in investment income or expenses. As a result, the
distributions paid by a Fund for any particular monthly
period may be more or less than the amount of net income
actually earned by a Fund during such period. Undistributed
net income is included in a Fund's net asset value and,
correspondingly, distributions from previously undistributed
net income are deducted from a Fund's net asset value. It is
not expected that this dividend policy will impact the
management of the Funds' portfolios.
Dividends paid by a Fund with respect to each class of shares
will be calculated in the same manner and at the same time,
and will be paid in the same amount except that different
distribution and service fees and any other expense relating
to a specific class of shares will be borne exclusively by
that class. As a result, dividends per share will vary among
a Fund's classes of shares.
Each Fund will declare dividends on the 9th of each month (or
if the 9th is not a business day, on the immediately
preceding business day), payable to shareholders of record as
of the close of business on that day. This distribution
policy is subject to change, however, by the Board of
Directors without prior notice to or approval by
shareholders. Dividends will be paid on the first business
day of the following month and are reinvested in additional
shares of a Fund at net asset value unless you have elected
that your dividends be paid in cash. Net realized capital
gains, if any, will be paid not less frequently than annually
and will be reinvested at net asset value in additional
shares of the Fund unless you have elected to receive capital
gains distributions in cash.
TAX MATTERS
The following federal and state tax discussion, together with
the additional information on state taxes in Appendix A, is
intended to provide you with an overview of the impact on the
Funds and their shareholders of federal as well as state
49
<PAGE>
and local income tax provisions. These tax provisions are
subject to change by legislative or administrative action,
and any changes may be applied retroactively. Because the
Funds' taxes are a complex matter, you should consult your
tax adviser for more detailed information concerning the
taxation of the Funds and the federal, state and local tax
consequences to Fund shareholders.
Federal Income Each Fund intends to qualify, as it has in prior years, under
Tax: Subchapter M of the Internal Revenue Code of 1986, as amended
Income (the "Code"), for tax treatment as a regulated investment
dividends are company. In order to qualify for treatment as a regulated
free from investment company, a Fund must satisfy certain requirements
regular relating to the sources of its income, diversification of its
federal income assets and distribution of its income to shareholders. As a
tax regulated investment company, a Fund will not be subject to
federal income tax on the portion of its net investment
income and net realized capital gains that is currently
distributed to shareholders. Each Fund also intends to
satisfy conditions that will enable it to pay "exempt-
interest dividends" to its shareholders. This means that you
will not be subject to regular federal income tax on Fund
dividends you receive from income on Municipal Obligations.
[/R]
Your share of a Fund's taxable income, if any, from income on
taxable temporary investments and net short-term capital
gains, will be taxable to you as ordinary income. 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 ordinary
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. Distributions, if
any, of net long-term capital gains are taxable as long-term
capital gains, regardless of the length of time you have
owned shares of a Fund. You are required to pay tax on all
taxable distributions even if these distributions are
automatically reinvested in additional Fund shares. Certain
distributions paid by a Fund in January of a given year may
be taxable to shareholders as if received the prior December
31. As long as a Fund qualifies as a regulated investment
company under the Code, taxable distributions will not
qualify for the dividends received deduction for corporate
shareholders. Investors should consider the tax implications
of buying shares immediately prior to a distribution.
Investors who purchase shares shortly before the record date
for a distribution will pay a per share price that includes
the value of the anticipated distribution and will be taxed
on the distribution (unless it is exempt from tax) even
though the distribution represents a return of a portion of
the purchase price.
50
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
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 taxable income for that year, and the entire amount of
your distributions would be taxable as ordinary income.
The Code does not permit you to deduct the interest on
borrowed monies used to purchase or carry tax-free
investments, such as shares of a Fund. Under Internal Revenue
Service rules, the purchase of Fund shares may be considered
to have been made with borrowed monies even though those
monies are not directly traceable to the purchase of those
shares.
Because the net asset value of each Fund's shares includes
net tax-exempt interest earned by the Fund but not yet
declared as an exempt-interest dividend, each time an exempt-
interest dividend is declared, the net asset value of the
Fund's shares will decrease in an amount equal to the amount
of the dividend. Accordingly, if you redeem shares of a Fund
immediately prior to or on the record date of a monthly
exempt-interest dividend, you may realize a taxable gain even
though a portion of the redemption proceeds may represent
your pro rata share of undistributed tax-exempt interest
earned by the Fund.
The redemption or exchange of Fund shares normally will
result in capital gain or loss to shareholders. Any loss you
may realize on the redemption or exchange of shares of a Fund
held for six months or less will be disallowed to the extent
of any distribution of exempt-interest dividends received on
these shares and will be treated as a long-term capital loss
to the extent of any distribution of long-term capital gain
received on these shares.
If you receive social security or railroad retirement
benefits, you should note that tax-exempt income is taken
into account in calculating the amount of these benefits that
may be subject to federal income tax.
The Funds may invest in private activity bonds, the interest
on which is not exempt from federal income tax to
"substantial users" of the facilities financed by these bonds
or "related persons" of such substantial users. Therefore,
the Funds may not be appropriate investments for you if you
are considered either a substantial user or a related person.
Each Fund may invest up to 20% of its net assets in AMT
Bonds, the interest on which is a specific tax preference
item for purposes of computing the alternative
51
<PAGE>
minimum tax on corporations and individuals. If your tax
liability is determined under the alternative minimum tax,
you will be taxed on your share of the Fund's exempt-interest
dividends that were paid from income earned on AMT Bonds. 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 alternative minimum
taxable income. Interest on all Municipal Obligations, and
therefore all distributions by the Fund that would otherwise
be tax exempt, is included in calculating a corporation's
adjusted current earnings.
Each Fund is 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
Fund their correct taxpayer identification number (in the
case of individuals, their social security number) and
certain certifications, or who are otherwise subject to back-
up withholding.
Each January, your Fund will notify you of the amount and tax
status of Fund distributions for the preceding year.
State Income Under the laws of the respective state of each Fund, exempt-
Tax Matters: interest dividends (as determined for federal income tax
purposes) you receive from income earned by the Fund on
Municipal Obligations issued by the Fund's respective state
Dividends are or a political subdivision thereof generally will be exempt
free from from that state's applicable personal income tax. The
applicable exemption from state personal income tax applies whether you
state personal receive a Fund's dividends in cash or reinvest them in
income tax additional shares of the Fund. Dividends paid by a Fund
representing interest payments on particular categories of
Municipal Obligations may, under some circumstances, also be
exempt from income taxes imposed by political subdivisions of
that Fund's respective state. [/R]
Because other special tax rules may apply, you are encouraged
to review Appendix A to this Prospectus and the Statement of
Additional Information for further information concerning the
effect of applicable state or local taxes.
52
<PAGE>
NET ASSET VALUE
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
Net asset value of the shares of a Fund will be determined
Net asset separately for each class of shares. The net asset value per
value is share of a class of shares will be computed by dividing the
calculated value of the Fund's assets attributable to the class, less
daily the liabilities attributable to the class, by the total
number of shares of the class outstanding. The net asset
value per share is expected to vary among a Fund's Class A
Shares, Class C Shares and Class R Shares, principally due to
the differences in sales charges, distribution and service
fees and other class expenses borne by each class.
Net asset value of the shares of each Fund will be determined
by The Chase Manhattan Bank, N.A., the Funds' custodian, as
of 4:00 p.m. Eastern Time on each day the New York Stock
Exchange is normally open for trading. In determining the net
asset value, the custodian uses the valuations of portfolio
securities furnished by a pricing service approved by the
Board of Directors. The pricing service values portfolio
securities at the mean between the quoted bid and asked
prices or the yield equivalent when quotations are readily
available. Securities for which quotations are not readily
available (which are expected to constitute a majority of the
securities held by the Funds) are valued at fair value as
determined by the pricing service using methods that include
consideration of the following: yields or prices of municipal
bonds of comparable quality, type of issue, coupon, maturity
and rating; indications as to value from securities 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
Nuveen Tax-Free Bond Fund, Inc. under the general supervision
of its Board of Directors.
53
<PAGE>
GENERAL INFORMATION
If you have any questions about the Funds or other Nuveen
Mutual Funds, call Nuveen toll-free at 800.621.7227.
Custodian and The Custodian of the assets of the Funds is The Chase
Transfer and Manhattan Bank, N.A., 770 Broadway, New York, New York 10003.
Shareholder The Custodian performs custodial fund accounting and
Services Agent portfolio accounting services. Shareholder Services, Inc.,
P.O. Box 5330, Denver, CO 80217-5330, performs bookkeeping,
data processing and administrative services for the
maintenance of shareholder accounts. [/R]
Nuveen Tax-Free Bond Fund, Inc. is an open-end diversified
Organization management series investment company under the Investment
Company Act of 1940. Each Fund constitutes a separate series
of Nuveen Tax-Free Bond Fund, Inc. and is itself an open-end
diversified management mutual fund. Nuveen Tax-Free Bond
Fund, Inc. was incorporated in Minnesota on July 11, 1986. It
is currently authorized to issue an aggregate of
2,000,000,000 shares of common stock, $.01 par value,
consisting of 500,000,000 shares of the Nuveen Massachusetts
Tax-Free Value Fund, 500,000,000 shares of the Nuveen New
York Tax-Free Value Fund, 500,000,000 shares of the Nuveen
Ohio Tax-Free Value Fund, and 500,000,000 shares to be issued
in such classes or series as the Board of Directors may
determine. Each Fund's shares of common stock are divided
into three classes of shares designated as Class A Shares,
Class C Shares and Class R Shares. Each class of shares
represents an interest in the same portfolio of investments
and has equal rights as to voting, redemption, dividends and
liquidation, except that each bears different class expenses,
including different distribution and service fees, and each
has exclusive voting rights with respect to any distribution
or service plan applicable to its shares. There are no
conversion, preemptive or other subscription rights, except
that Class C Shares of a Fund automatically convert into
Class A Shares of the same Fund, as described above. The
Board of Directors has the right to establish additional
series and classes of shares in the future, to change those
series or classes and to determine the preferences, voting
powers, rights and privileges thereof.
The Funds are not required and do not intend to hold annual
meetings of shareholders. Shareholders owning more than 10%
of the outstanding shares of a Fund have the right to call a
special meeting to remove Directors or for any other purpose.
54
<PAGE>
APPENDIX A--SPECIAL STATE FACTORS AND STATE TAX TREATMENT
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
SPECIAL FACTORS PERTAINING TO EACH FUND
The following information is a brief summary of special
factors that affect the risk of investing in Municipal
Obligations issued within each Fund's state. This information
was obtained from official statements of issuers located in
these states as well as from other publicly available
official documents and statements and is not intended to be a
complete description. The Funds have not independently
verified any of the information contained in these statements
and documents. See the Statement of Additional Information
for further information relating to current political,
economic or regulatory risk factors as well as information
relating to legal proceedings which may adversely affect a
state's financial position.
MASSACHUSETTS
In recent years, the Commonwealth of Massachusetts and
certain of its public bodies and municipalities, particularly
the City of Boston, have faced serious financial difficulties
which have affected the credit standing and borrowing
abilities of Massachusetts and these respective entities and
may have contributed to higher interest rates on debt
obligations. As a result of these difficulties, the rating
agencies lowered the credit ratings on Massachusetts general
obligation bonds several times during 1989 and 1990. Since
then, both S&P and Moody's have upgraded Massachusetts
general obligation bonds several times. As of the date of
this Prospectus, the uninsured general obligation bonds carry
a rating of A+ by S&P and A1 by Moody's. Since 1988, there
has been a significant slowdown in the Commonwealth's
economy, as indicated by a rise in unemployment, a slowing of
its per capita income growth and a trend in declining state
revenues. In fiscal 1991, the Commonwealth's expenditures for
state government programs exceeded current revenues, and
although fiscal 1992, 1993, 1994 and 1995 results indicate
that revenues exceeded expenditures, no assurance can be
given that lower than expected tax revenues will not resume
and continue. The continuation of, or an increase in, the
financial difficulties of the Commonwealth and its public
bodies and municipalities, or the development of a financial
crisis relating to these entities, could result in declines
in the market value of, or default on, existing obligations
issued by governmental authorities in the state of
Massachusetts, including Municipal Obligations held by the
Massachusetts Fund. Many factors, in addition to those cited
above do or may have a bearing upon the financial condition
of the Commonwealth, including social and economic
conditions, many of which are not within the control of the
Commonwealth.
A-1
<PAGE>
NEW YORK
New York State has historically been one of the wealthiest
states in the nation. For decades, however, the State's
economy has grown more slowly than that of the nation as a
whole, gradually eroding the State's relative economic
affluence. Statewide, urban centers have experienced
significant changes involving migration of the more affluent
to the suburbs and an influx of generally less affluent
residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and
the West have had in attracting people and business. New York
City has faced greater competition as other major cities have
developed financial and business resources which make them
less dependent on the specialized services traditionally
available almost exclusively in New York City, which has had
an additional negative impact on New York City's recovery.
The State has for many years had a very high State and local
tax burden relative to other states. The burden of State and
local taxation, in combination with the many other causes of
regional economic dislocation, has contributed to the
decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
The State's economic growth continues to lag behind the
nation's due in part to a significant retrenchment in the
banking and financial services industry, cutbacks in defense
spending, and an overbuilt real estate market. The State has
projected the rate of economic growth to slow within New York
during 1996 reflecting continued moderate expansion of the
national economy.
The Governor announced on April 3, 1996 that the State ended
its 1995-96 fiscal year with an operating surplus of
approximately $445 million. The State Legislature enacted the
State's 1995-96 fiscal year budget on June 7, 1995, more than
two months after the start of that fiscal year.
As of January 19, 1996, the updated 1995-96 State Financial
Plan (the "Plan") projected total general fund receipts and
disbursements each of $32.7 billion representing reductions
in receipts and disbursements of $144 million and $103
million, respectively, from the amounts set forth in the
1995-96 State budget, as adopted by the legislature. The Plan
projected a General Fund balance of approximately $172
million at the close of the 1995-96 fiscal year.
The Governor issued a proposed State budget for the 1996-97
fiscal year on December 15, which projected a balanced
general fund and receipts and disbursements of $31.3 billion
and $31.2 billion, respectively. As of June 10, 1996, the
State legislature had not yet enacted, nor had the Governor
and the legislature
A-2
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
reached an agreement on, the budget for the 1996-97 fiscal
year commencing on April 1, 1996. Due to continuing
uncertainties as to the amount of federal aid and proposed
changes to the Medicaid program resulting from the federal
budget impasse, the Governor proposed an alternate budget for
fiscal year 1996-97 to replace over $1 billion of Medicaid
reimbursement which might not be forthcoming. The Governor
and the State's legislature have agreed on or proposed a
series of short-term stopgap spending measures to fund State
payrolls and advances to certain municipalities and certain
State programs. The delay in the enactment of the budget may
negatively affect certain proposed actions and reduce
projected savings.
Following enactment of the State's 1995-96 fiscal year
budget, New York City adopted a 1996 fiscal year budget in
June 1995, which provided for $31.4 billion in spending.
However, in January 1996, unexpected budget gaps totalling
approximately $760 million for the 1996 fiscal year were
identified and the Mayor called for additional spending cuts.
On March 1, 1996, Moody's indicated that its Baa1 rating of
New York City's general obligation bonds was under review
pending adoption of the City's budget for fiscal year 1997.
S&P placed the City on negative credit watch in January 1995.
On January 30, 1996, the Mayor outlined his proposed $31
billion budget for the 1997 fiscal year which included $2.0
billion of deficit reduction measures more than half of which
were dependent upon State actions in the 1997 fiscal year. On
May 9, 1996, the Mayor issued a substantially revised fiscal
year 1997 budget of $32.7 billion that would reduce spending
from the prior year and would include $1.1 billion in budget
cuts affecting City agencies. The revised budget would
restore approximately $300 million in tax cuts and seek a
four year extension of the surcharge on the City's personal
income tax. The Governor and the legislature have not agreed
upon the level of State aid to the City during the 1997
fiscal year and there can be no assurances that further cuts
will not be necessary to close additional budget gaps once a
State budget is adopted. In addition, due to the continuing
federal government impasse, the City is uncertain as to the
level of federal aid it will receive and the impact of
changes in federal law upon its operations and tax receipts.
If State or Federal aid in later years is less than the
levels projected in the Mayor's proposal, projected savings
may be negatively impacted and the Mayor may be required to
propose significant additional spending reductions or tax
increases to balance the City's budget for the 1997 and later
fiscal years. If the State, the State Agencies, New York
City, other municipalities or school districts were to suffer
serious financial difficulties jeopardizing their respective
access to the public credit markets, or increasing the risk
of a default, the market price of Municipal Obligations
issued by such entities could be adversely affected.
A-3
<PAGE>
Absent appropriate legislative relief, the City may also face
limitations on its borrowing capacity after 1998 under the
State's Constitution that will prevent it from borrowing
additional funds, as a result of the decrease in real estate
values within the City. The inability to finance capital
improvements would increase the City's budget gaps in later
years.
OHIO
The Ohio economy, while diversifying more into the service
and other non-manufacturing areas, continues to rely in part
on durable goods manufacturing largely concentrated in motor
vehicles and equipment, steel, rubber products and household
appliances. As a result, general economic activity in Ohio,
as in many other industrially-developed states, tends to be
more cyclical than in some other states and in the nation as
a whole. Agriculture is an important segment of the State's
economy, with over half the State's area devoted to farming
and approximately 16% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was
usually somewhat higher than the national figure. For
example, the reported 1990 average monthly State rate was
5.7%, compared to the 5.5% national figure. However, for the
last five years the State rates were below the national rates
(4.8% versus 5.6% in 1995). The unemployment rate, and its
effects, vary among particular geographic areas of the State.
There can be no assurance that future national, regional or
state-wide economic difficulties, and the resulting impact on
State or local government finances generally, will not
adversely affect the market value of Ohio Obligations held in
the Ohio Fund or the ability of particular obligors to make
timely payments of debt service on (or lease payments
relating to) those Obligations.
DESCRIPTION OF STATE TAX TREATMENT
The following state tax information applicable to a Fund or
its shareholders is based upon the advice of the Fund's
special state tax counsel, and represents a summary of
certain provisions of each state's tax laws presently in
effect. These provisions are subject to change by legislative
or administrative action, which may be applied retroactively
to Fund transactions. The state tax information below assumes
that each Fund qualifies as a regulated investment company
for federal income tax purposes under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and
that amounts so designated by each Fund to its shareholders
A-4
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
qualify as "exempt-interest dividends" under Section
852(b)(5) of the Code. You should consult your own tax
adviser for more detailed information concerning state taxes
to which you may be subject.
MASSACHUSETTS
Individual shareholders of the Massachusetts Fund who are
subject to Massachusetts income taxation will not be required
to include that portion of their federally tax-exempt
dividends in Massachusetts gross income which the
Massachusetts Fund clearly identifies as directly
attributable to interest earned on Municipal Obligations
issued by governmental authorities in Massachusetts which are
specifically exempted from income taxation in Massachusetts,
provided such dividends are identified in a timely written
notice mailed to shareholders of the Massachusetts Fund, or
interest earned on obligations of certain U.S. territories or
possessions. Similarly, such shareholders will not be
required to include in Massachusetts gross income capital
gain dividends designated by the Massachusetts Fund to the
extent such dividends are attributable to gains derived from
Municipal Obligations issued by Massachusetts governmental
authorities and are specifically exempted from income
taxation in Massachusetts, provided such dividends are
identified in a timely written notice mailed to shareholders
of the Massachusetts Fund. Lastly, any dividends of the
Massachusetts Fund attributable to interest on U.S.
obligations exempt from state taxation and included in
Federal gross income will not be included in Massachusetts
gross income, provided such dividends are identified in a
timely written notice mailed to shareholders of the
Massachusetts Fund. Individual shareholders of the
Massachusetts Fund will be required to include all remaining
dividends in their Massachusetts income.
With respect to corporate shareholders of the Massachusetts
Fund that are subject to the Massachusetts excise tax,
dividends received from the Massachusetts Fund are includable
in gross income and generally may not be deducted by
corporate shareholders in computing their net income, and the
net worth base of an intangible property corporation includes
the corporate shareholders' shares in the Massachusetts Fund.
NEW YORK
Individual shareholders of the New York Fund who are subject
to New York State or New York City personal income taxation
will not be required to include in their New York adjusted
gross income that portion of their exempt-interest dividends
(as determined for federal income tax purposes) which the New
York Fund clearly identifies as directly attributable to
interest earned on Municipal Obligations issued by
governmental authorities in New York ("New York Municipal
Obligations") and
A-5
<PAGE>
which are specifically exempted from personal income taxation
in New York State or New York City, or interest earned on
obligations of U.S. territories or possessions that is exempt
from taxation by the states pursuant to federal law.
Distributions to individual shareholders of dividends derived
from interest that does not qualify as exempt-interest
dividends (as determined for federal income tax purposes),
distributions of exempt-interest dividends (as determined for
federal income tax purposes) which are derived from interest
on Municipal Obligations issued by governmental authorities
in states other than New York State, and distributions
derived from interest earned on federal obligations will be
included in their New York adjusted gross income as ordinary
income. Distributions to individual shareholders of the New
York Fund of capital gain dividends (as determined for
federal income tax purposes) will be included in their New
York adjusted gross income as long-term capital gains.
Distributions to individual shareholders of the New York Fund
of dividends derived from any net income received from
taxable temporary investments and any net short-term capital
gains realized by the New York Fund will be included in their
New York adjusted gross income as ordinary income.
For purposes of New York State franchise taxation (or New
York City general corporation taxation), entire income will
include dividends received from the New York Fund (as
determined for federal income tax purposes), as well as any
gain or loss recognized from an exchange or redemption of
shares of the New York Fund that is recognized for federal
income tax purposes, and investment capital will include a
corporate shareholder's shares of the New York Fund. If a
shareholder of the New York Fund is subject to the New York
City unincorporated business tax, income and gains derived
from the New York Fund will be subject to such tax, except
for exempt-interest dividends (as determined for federal in-
come tax purposes) which the New York Fund clearly identifies
as directly attributable to interest earned on New York
Municipal Obligations.
OHIO
Shareholders of the Ohio Fund who are otherwise subject to
the Ohio personal income tax will not be subject to such tax
on distributions with respect to shares of the Ohio Fund to
the extent that such distributions are properly attributable
to interest on or gain from the sale of interest-bearing
obligations issued by or on behalf of the State of Ohio,
political subdivisions thereof and agencies and
instrumentalities of the State or its political subdivisions
("Ohio Obligations"), provided that the Ohio Fund continues
to qualify as a regulated investment company for federal
income tax purposes and that at all times at least 50% of the
A-6
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
value of the total assets of the Ohio Fund consists of Ohio
Obligations or similar obligations of other states or their
subdivisions. It is assumed for purposes of this discussion
of Ohio taxation that these requirements are satisfied.
Shareholders that are otherwise subject to the Ohio
corporation franchise tax computed on the net income basis
will not be subject to such tax on distributions with respect
to shares of the Ohio Fund to the extent that these
distributions either (a) are properly attributable to
interest on or gain from the sale of Ohio Obligations, or (b)
represent "exempt-interest dividends" for federal income tax
purposes. Shares of the Ohio Fund will be included in a
shareholder's tax base for purposes of computing the Ohio
corporation franchise tax on the net worth basis.
Distributions by the Ohio Fund that are properly attributable
to interest on obligations of the U.S. or the governments of
Puerto Rico, the Virgin Islands or Guam or their authorities
or municipalities are exempt from the Ohio personal income
tax and are excluded from the net income base of the Ohio
corporation franchise tax to the same extent that such
interest would be so exempt or excluded if the obligations
were held directly by the shareholders.
A-7
<PAGE>
APPENDIX B--TAXABLE EQUIVALENT
YIELD TABLES
TAXABLE EQUIVALENT YIELD TABLES AND THE EFFECT OF TAXES AND
INTEREST RATES ON INVESTMENTS
The following tables show the combined effects for
individuals of federal, state and local (if applicable)
income taxes on:
. what you would have to earn on a taxable investment to
equal a given tax-free yield; and
. the amount that those subject to a given combined tax rate
would have to put into a tax-free investment in order to
generate the same after-tax income as a taxable investment.
These tables are for illustrative purposes only and are not
intended to predict the actual return you might earn on a
Fund investment. The Funds occasionally may advertise their
performance in similar tables using other current combined
tax rates than those shown here. The combined tax rates used
in these tables have been rounded to the nearest one-half of
one percent. They are based upon published 1996 marginal
federal tax rates and marginal state tax rates currently
available and scheduled to be in effect, and do not take into
account changes in tax rates that are proposed from time to
time. A taxpayer's marginal tax rate is affected by both his
taxable income and his adjusted gross income. The table
assumes that federal taxable income is equal to state income
subject to tax, and for cases in which more than one state
rate falls within a federal bracket, the highest state rate
corresponding to the highest income within that federal
bracket is used. The tables assume taxpayers are not subject
to any alternative minimum taxes and deduct any state income
taxes paid on their federal income tax returns. Unless noted
otherwise, the tables do not reflect any local taxes or any
taxes other than personal income taxes. They also reflect the
effect of the current federal tax limitations on itemized
deductions and personal exemptions, which were designed to
phase out certain benefits of these deductions for higher
income taxpayers. These limitations are subject to certain
maximums, which depend on the number of exemptions claimed
and the total amount of the taxpayer's itemized deductions.
For example, the limitation on itemized deductions will not
cause a taxpayer to lose more than 80% of his allowable
itemized deductions, with certain exceptions may raise the
effective tax rate and taxable equivalent yield for taxpayers
above certain income levels. The combined tax rates shown
here may be higher or lower than your actual combined tax
rate. A higher combined tax rate would tend to make the
dollar amounts in the third table lower, while a lower
combined tax rate would make the amounts higher. You should
consult your tax adviser to determine your actual combined
tax rate.
B-1
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
MASSACHUSETTS
Combined marginal tax rates for joint taxpayers with four
personal exemptions
<TABLE>
<CAPTION>
Tax-Free Yield
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
-------------------------------------------------------------------------
<CAPTION>
Federal
Federal Adjusted Combined
Taxable Gross State and
Income Income Federal
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - $ 0 -
40.1 118.0 25.0% 4.67 5.33 6.00 6.67 7.33 8.00 8.67
40.1 -
96.9 0 - 118.0 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
118.0 -
177.0 37.5 5.60 6.40 7.20 8.00 8.80 9.60 10.40
96.9 -
147.7 0 - 118.0 39.5 5.79 6.61 7.44 8.26 9.09 9.92 10.74
118.0 -
177.0 40.0 5.83 6.67 7.50 8.33 9.17 10.00 10.83
177.0 -
299.5 42.5 6.09 6.96 7.83 8.70 9.57 10.43 11.30
147.7 - 118.0 -
263.8 177.0 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
177.0 -
299.5 47.0 6.60 7.55 8.49 9.43 10.38 11.32 12.26
Over 299.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
177.0 -
Over 263.8 299.5 50.5 7.07 8.08 9.09 10.10 11.11 12.12 13.13
Over 299.5 48.0 6.73 7.69 8.65 9.62 10.58 11.54 12.50
</TABLE>
Combined marginal tax rates for single taxpayers with one
personal exemption
<TABLE>
<CAPTION>
Tax-Free Yield
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
--------------------------------------------------------------------------
<CAPTION>
Federal
Federal Adjusted Combined
Taxable Gross State and
Income Income Federal
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 -
24.0 $ 0 - 118.0 25.0% 4.67 5.33 6.00 6.67 7.33 8.00 8.67
24.0 -
58.2 0 - 118.0 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
58.2 -
121.3 0 - 118.0 39.5 5.79 6.61 7.44 8.26 9.09 9.92 10.74
118.0 - 240.5 40.5 5.88 6.72 7.56 8.40 9.24 10.08 10.92
121.3 -
263.8 118.0 - 240.5 45.5 6.42 7.34 8.26 9.17 10.09 11.01 11.93
Over 240.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
Over 263.8 Over 240.5 48.0 6.73 7.69 8.65 9.62 10.58 11.54 12.50
</TABLE>
B-2
<PAGE>
MASSACHUSETTS-CONTINUED
For an equal after-tax return, your tax-free investment may
be less*
<TABLE>
<CAPTION>
Your tax-free investment may be less*
------------------------------------------------------------------------------------
For an after-tax return
equal to that provided
by a 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$50,000 in a 4% taxable
investment $34,571 $30,250 $26,889 $24,200 $22,000 $20,167 $18,615
$50,000 in a 5% taxable
investment 43,214 37,813 33,611 30,250 27,500 25,208 23,269
$50,000 in a 6% taxable
investment 51,857 45,375 40,333 36,300 33,000 30,250 27,923
$50,000 in a 7% taxable
investment 60,500 52,938 47,056 42,350 38,500 35,292 32,577
$50,000 in a 8% taxable
investment 69,143 60,500 53,778 48,400 44,000 40,333 37,231
</TABLE>
* Dollar amounts in the table reflect a 39.5% com-
bined federal and state tax rate.
** The Massachusetts state tax rate shown is the rate
at which interest is taxed. Certain other types of
income are taxed at other rates.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $36,300 in a 5% tax-free Nuveen
investment.
B-3
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996
NEW YORK STATE
Combined federal and New York State marginal tax rates for
joint taxpayers with four personal exemptions
<TABLE>
<CAPTION>
Tax-Free Yield
------------------------------------------------------------------------
3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
------------------------------------------------------------------------
Federal
Federal Adjusted Combined
Taxable Gross State and
Income Income Federal
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 -
40.1 $ 0 - 100.0 21.0% 4.43 5.06 5.70 6.33 6.96 7.59 8.23
100.0 - 118.0 22.0 4.49 5.13 5.77 6.41 7.05 7.69 8.33
40.1 -
96.9 0 - 100.0 33.0 5.22 5.97 6.72 7.46 8.21 8.96 9.70
100.0 - 118.0 34.0 5.30 6.06 6.82 7.58 8.33 9.09 9.85
118.0 - 150.0 35.0 5.38 6.15 6.92 7.69 8.46 9.23 10.00
150.0 - 177.0 34.0 5.30 6.06 6.82 7.58 8.33 9.09 9.85
96.9 -
147.7 0 - 100.0 36.0 5.47 6.25 7.03 7.81 8.59 9.38 10.16
100.0 - 118.0 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
118.0 - 150.0 37.5 5.60 6.40 7.20 8.00 8.80 9.60 10.40
150.0 - 177.0 37.0 5.56 6.35 7.14 7.94 8.73 9.52 10.32
177.0 - 299.5 39.5 5.79 6.61 7.44 8.26 9.09 9.92 10.74
147.7 -
263.8 118.0 - 150.0 42.5 6.09 6.96 7.83 8.70 9.57 10.43 11.30
150.0 - 177.0 41.5 5.98 6.84 7.69 8.55 9.40 10.26 11.11
177.0 - 299.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
Over 299.5 41.5 5.98 6.84 7.69 8.55 9.40 10.26 11.11
Over 263.8 177.0 - 299.5 48.0 6.73 7.69 8.65 9.62 10.58 11.54 12.50
Over 299.5 45.0 6.36 7.27 8.18 9.09 10.00 10.91 11.82
</TABLE>
B-4
<PAGE>
NEW YORK-CONTINUED
Combined federal and New York State marginal tax rates for
single taxpayers with one personal exemption
<TABLE>
<CAPTION>
Tax-Free Yield
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
---------------------------------------------------------------------------
<CAPTION>
Federal
Federal Adjusted Combined
Taxable Gross State and
Income Income Federal
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - $ 0 -
24.0 100.0 21.0% 4.43 5.06 5.70 6.33 6.96 7.59 8.23
100.0 -
118.0 21.5 4.46 5.10 5.73 6.37 7.01 7.64 8.28
24.0 -
58.2 0 - 100.0 33.0 5.22 5.97 6.72 7.46 8.21 8.96 9.70
100.0 -
118.0 33.5 5.26 6.02 6.77 7.52 8.27 9.02 9.77
58.2 -
121.3 0 - 100.0 36.0 5.47 6.25 7.03 7.81 8.59 9.38 10.16
100.0 -
118.0 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
118.0 -
150.0 38.0 5.65 6.45 7.26 8.06 8.87 9.68 10.48
150.0 -
240.5 37.5 5.60 6.40 7.20 8.00 8.80 9.60 10.40
121.3 - 118.0 -
263.8 150.0 42.5 6.09 6.96 7.83 8.70 9.57 10.43 11.30
150.0 -
240.5 42.5 6.09 6.96 7.83 8.70 9.57 10.43 11.30
Over 240.5 41.5 5.98 6.84 7.69 8.55 9.40 10.26 11.11
Over 263.8 Over 240.5 45.0 6.36 7.27 8.18 9.09 10.00 10.91 11.82
</TABLE>
B-5
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996 [/R]
For an equal after-tax return, your tax-free investment may
be less*
<TABLE>
<CAPTION>
Your tax-free investment may be less*
------------------------------------------------------------------------------------
For an after-tax return
equal to that provided
by a 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$50,000 in a 4% taxable
investment $36,571 $32,000 $28,444 $25,600 $23,273 $21,333 $19,692
$50,000 in a 5% taxable
investment 45,714 40,000 35,556 32,000 29,091 26,667 24,615
$50,000 in a 6% taxable
investment 54,857 48,000 42,667 38,400 34,909 32,000 29,538
$50,000 in a 7% taxable
investment 64,000 56,000 49,778 44,800 40,727 37,333 34,462
$50,000 in a 8% taxable
investment 73,143 64,000 56,889 51,200 46,545 42,667 39,385
</TABLE>
*The dollar amounts in the table reflect a 36.0% combined
federal and state tax rate.
**The table also reflects the New York State supplemental in-
come tax based upon a taxpayer's New York State taxable in-
come and New York State adjusted gross income. This supple-
mental tax results in an increased marginal state income tax
rate to the extent a taxpayer's New York State adjusted gross
income ranges between $100,000 and $150,000. Although the ta-
ble does reflect the effect of the state limitation on item-
ized deductions that corresponds to the federal limitation,
it does not reflect additional limitations under which a New
York taxpayer could lose up to an additional 50 percent of
his otherwise allowable itemized deductions, because the ef-
fect of this limitation varies according to the particular
amount of his itemized deductions. The application of this
limit may result in a higher tax rate than indicated in the
table for joint taxpayers with a New York adjusted gross in-
come of $150,000 to $200,000 or $475,000 to $525,000 or sin-
gle taxpayers with a New York adjusted gross income of
$100,000 to $150,000 or $475,000 to $525,000. The table as-
sumes that a taxpayer's New York adjusted gross income equals
his federal adjusted gross income. The table does not reflect
the treatment of various state and city tax credits that
could affect the tax rate of particular New York taxpayers.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $38,400 in a 5% tax-free Nuveen
investment.
B-6
<PAGE>
NEW YORK STATE AND NEW YORK CITY
Combined federal, New York State and New York City marginal
tax rates for joint taxpayers with four personal exemptions
<TABLE>
<CAPTION>
Tax-Free Yield
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
--------------------------------------------------------------------------
<CAPTION>
Federal
Federal Adjusted Combined
Taxable Gross State and
Income Income Federal
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 -
$ 0 - 40.1 100.0 25.0% 4.67 5.33 6.00 6.67 7.33 8.00 8.67
100.0 -
118.0 25.5 4.70 5.37 6.04 6.71 7.38 8.05 8.72
40.1 - 96.9 0 - 100.0 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
100.0 -
118.0 37.0 5.56 6.35 7.14 7.94 8.73 9.52 10.32
118.0 -
150.0 38.0 5.65 6.45 7.26 8.06 8.87 9.68 10.48
150.0 -
177.0 37.5 5.60 6.40 7.20 8.00 8.80 9.60 10.40
96.9 - 147.7 0 - 100.0 39.0 5.74 6.56 7.38 8.20 9.02 9.84 10.66
100.0 -
118.0 39.5 5.79 6.61 7.44 8.26 9.09 9.92 10.74
118.0 -
150.0 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
150.0 -
177.0 40.0 5.83 6.67 7.50 8.33 9.17 10.00 10.83
177.0 -
299.5 42.5 6.09 6.96 7.83 8.70 9.57 10.43 11.30
118.0 -
147.7 - 263.8 150.0 45.0 6.36 7.27 8.18 9.09 10.00 10.91 11.82
150.0 -
177.0 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
177.0 -
299.5 47.0 6.60 7.55 8.49 9.43 10.38 11.32 12.26
Over 299.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
177.0 -
Over 263.8 299.5 50.5 7.07 8.08 9.09 10.10 11.11 12.12 13.13
Over 299.5 48.0 6.73 7.69 8.65 9.62 10.58 11.54 12.50
</TABLE>
B-7
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996 [/R]
Combined federal, New York State and New York City marginal
tax rates for single taxpayers with one personal exemption
<TABLE>
<CAPTION>
Tax-Free Yield
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
------------------------------------------------------------------------------------
<CAPTION>
Federal
Federal Adjusted Combined
Taxable Gross State and
Income Income Federal
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - $ 0 -
24.0 100.0 25.0% 4.67 5.33 6.00 6.67 7.33 8.00 8.67
100.0 -
118.0 25.0 4.67 5.33 6.00 6.67 7.33 8.00 8.67
24.0 -
58.2 0 - 100.0 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
100.0 -
118.0 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
58.2 -
121.3 0 - 100.0 39.0 5.74 6.56 7.38 8.20 9.02 9.84 10.66
100.0 -
118.0 39.5 5.79 6.61 7.44 8.26 9.09 9.92 10.74
118.0 -
150.0 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
150.0 -
240.5 40.5 5.88 6.72 7.56 8.40 9.24 10.08 10.92
121.3 - 118.0 -
263.8 150.0 45.5 6.42 7.34 8.26 9.17 10.09 11.01 11.93
150.0 -
240.5 45.0 6.36 7.27 8.18 9.09 10.00 10.91 11.82
Over 240.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
Over 263.8 Over 240.5 48.0 6.73 7.69 8.65 9.62 10.58 11.54 12.50
</TABLE>
B-8
<PAGE>
NEW YORK STATE AND NEW YORK CITY-CONTINUED
For an equal after-tax return, your tax-free investment may
be less*
<TABLE>
<CAPTION>
Your tax-free investment may be less*
------------------------------------------------------------------------------------
For an after-tax return
equal to that provided
by a 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$50,000 in a 4% taxable
investment $34,571 $30,250 $26,889 $24,200 $22,000 $20,167 $18,615
$50,000 in a 5% taxable
investment 43,214 37,813 33,611 30,250 27,500 25,208 23,269
$50,000 in a 6% taxable
investment 51,857 45,375 40,333 36,300 33,000 30,250 27,923
$50,000 in a 7% taxable
investment 60,500 52,938 47,056 42,350 38,500 35,292 32,577
$50,000 in a 8% taxable
investment 69,143 60,500 53,778 48,400 44,000 40,333 37,231
</TABLE>
*The dollar amounts in the table reflect a 39.5% combined
federal, state and New York City tax rate.
**The table also reflects the New York State supplemental in-
come tax based upon a taxpayer's New York State taxable in-
come and New York State adjusted gross income. This supple-
mental tax results in an increased marginal state income tax
rate to the extent a taxpayer's New York State adjusted gross
income ranges between $100,000 and $150,000. Although the ta-
ble does reflect the effect of the state limitation on item-
ized deductions that corresponds to the federal limitation,
it does not reflect additional limitations under which a New
York taxpayer could lose up to an additional 50 percent of
his otherwise allowable itemized deductions, because the ef-
fect of this limitation varies according to the particular
amount of his itemized deductions. The application of this
limit may result in a higher tax rate than indicated in the
table for joint taxpayers with a New York adjusted gross in-
come of $150,000 to $200,000 or $475,000 to $525,000 or sin-
gle taxpayers with a New York adjusted gross income of
$100,000 to $150,000 or $475,000 to $525,000. The table as-
sumes that a taxpayer's New York adjusted gross income equals
his federal adjusted gross income. The table does not reflect
the treatment of various state and city tax credits that
could affect the tax rate of particular New York taxpayers.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $36,300 in a 5% tax-free Nuveen
investment.
B-9
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
JULY 1, 1996 [/R]
OHIO
Combined marginal tax rates for joint taxpayers with four
personal exemptions
<TABLE>
<CAPTION>
Tax-Free Yield
----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
-------------------------------------------------------------------------
<CAPTION>
Federal
Federal Adjusted Combined
Taxable Gross State and
Income Income Federal
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - $ 0 -
40.1 118.0 19.5% 4.35 4.97 5.59 6.21 6.83 7.45 8.07
40.1 - 0 -
96.9 118.0 32.5 5.19 5.93 6.67 7.41 8.15 8.89 9.63
118.0 -
177.0 33.0 5.22 5.97 6.72 7.46 8.21 8.96 9.70
96.9 - 0 -
147.7 118.0 36.0 5.47 6.25 7.03 7.81 8.59 9.38 10.16
118.0 -
177.0 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
177.0 -
299.5 39.0 5.74 6.56 7.38 8.20 9.02 9.84 10.66
147.7 - 118.0 -
263.8 177.0 42.0 6.03 6.90 7.76 8.62 9.48 10.34 11.21
177.0 -
299.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
Over 299.5 42.0 6.03 6.90 7.76 8.62 9.48 10.34 11.21
177.0 -
Over 263.8 299.5 48.0 6.73 7.69 8.65 9.62 10.58 11.54 12.50
Over 299.5 45.0 6.36 7.27 8.18 9.09 10.00 10.91 11.82
</TABLE>
Combined marginal tax rates for single taxpayers with one
personal exemption
<TABLE>
<CAPTION>
Tax-Free Yield
------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
---------------------------------------------------------------------------
<CAPTION>
Federal
Federal Adjusted Combined
Taxable Gross State and
Income Income Federal
(1,000's) (1,000's) Tax Rate** Taxable Equivalent Yield
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 -
$ 0 - 24.0 118.0 19.0% 4.32 4.94 5.56 6.17 6.79 7.41 8.02
24.0 - 58.2 0 - 118.0 31.5 5.11 5.84 6.57 7.30 8.03 8.76 9.49
0 -
58.2 - 121.3 118.0 36.0 5.47 6.25 7.03 7.81 8.59 9.38 10.16
118.0 -
240.5 37.0 5.56 6.35 7.14 7.94 8.73 9.52 10.32
118.0 -
121.3 - 263.8 240.5 42.5 6.09 6.96 7.83 8.70 9.57 10.43 11.30
Over 240.5 42.0 6.03 6.90 7.76 8.62 9.48 10.34 11.21
Over 263.8 Over 240.5 45.0 6.36 7.27 8.18 9.09 10.00 10.91 11.82
</TABLE>
B-10
<PAGE>
OHIO-CONTINUED
For an equal after-tax return, your tax-free investment may
be less*
<TABLE>
<CAPTION>
Your tax-free investment may be less*
------------------------------------------------------------------------------------
For an after-tax return
equal to that provided
by a 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$50,000 in a 4% taxable
investment $36,571 $32,000 $28,444 $25,600 $23,273 $21,333 $19,692
$50,000 in a 5% taxable
investment 45,714 40,000 35,556 32,000 29,091 26,667 24,615
$50,000 in a 6% taxable
investment 54,857 48,000 42,667 38,400 34,909 32,000 29,538
$50,000 in a 7% taxable
investment 64,000 56,000 49,778 44,800 40,727 37,333 34,462
$50,000 in a 8% taxable
investment 73,143 64,000 56,889 51,200 46,545 42,667 39,385
</TABLE>
*The dollar amounts in the table reflect a 36.0% com-
bined federal and state tax rate.
**The tables do not reflect the potential reduction
in personal income tax rates that may occur if it is
determined that the State of Ohio has sufficient sur-
plus revenues. In addition, the table does not re-
flect the Ohio joint filing credit, which has the ef-
fect of reducing the state tax rates by 5% to 20% of
such rates for certain married taxpayers filing a
joint return. The amount of this credit cannot exceed
$650.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $38,400 in a 5% tax-free Nuveen
investment.
B-11
<PAGE>
Nuveen
Tax-Free
Mutual Funds
Application
Form
<TABLE>
<CAPTION>
<S> <C>
Nuveen Tax-Free Mutual Funds Application Form
Note: The application form may not be used for all types of accounts and certain optional
fund services. Please obtain special application materials by checking the boxes in
application item 7 or by calling Nuveen toll-free at 800.621.7227.
1 ACCOUNT REGISTRATION AND INFORMATION
Please check the box that [_] Individual
describes the type of
account you are opening, Last name, first, initial Social security number
and complete all the
information which applies -------------------------------------------------------------------------------------------------
to your account type.
[_] Joint tenant (if any)
Registration for two or more
persons will be as joint tenants Last name, first, initial
with right of survivorship
unless noted otherwise. -------------------------------------------------------------------------------------------------
[_] Gift to a minor
Name of trustee State name under the Uniform Gift to Minors Act
-------------------------------------------------------------------------------------------------
Minor's name (only one minor may be named) Minor's social security number
--------------------------------------------------------------------------------------------------
[_] Trust [_] Custodian [_] Service organization
Trustee's or custodian's name Trust's agreement date (mandatory)
-------------------------------------------------------------------------------------------------
Trust's name Trust's taxpayer I.D. number
-------------------------------------------------------------------------------------------------
2 MAILING ADDRESS
Street address City, state, zip code
--------------------------------------------------------------------------------------------------
Daytime telephone number (include area code) Evening telephone number (include area code)
--------------------------------------------------------------------------------------------------
3 FUND SELECTION
Please indicate in which National Tax-Free Value Funds
Nuveen Fund(s) you would $________[_]A [_] C Municipal Bond Fund ________[_] A [_] C Insured Municipal Bond Fund
like to open an account
by writing the amount and State Tax-Free Value Funds
the class of shares in Free from federal, state and, in some cases, local income taxes for residents of that state
which you would like to
invest ($1,000 minimum $____[_]A [_] C Arizona $____[_]A [_] C California $____[_]A [_] C California Ins.
initial investment per $____[_]A [_] C Florida $____[_]A [_] C Maryland $____[_]A [_] C Massachusetts
class of any fund). $____[_]A [_] C Massachusetts Ins. $____[_]A [_] C Michigan $____[_]A [_] C New Jersey
$____[_]A [_] C New York $____[_]A [_] C New York Ins. $____[_]A [_] C Ohio
State funds may not be $____[_]A [_] C Pennsylvania $____[_]A [_] C Virginia
registered for sale in
all states. [_] Check this box if you qualify for Class R share purchases as described in the Fund
Prospectus. Class R shares are not available unless you meet certain eligibility requirements.
Please enclose a separate check made payable to each fund/class in which you are investing. If
more than one fund is selected, any optional features chosen will apply to all fund accounts. If
you prefer to wire funds to an open account, or need any assistance in completing this form, call
Nuveen toll-free at 1.800.621.7227.
4 DISTRIBUTION OPTIONS
Please check only one. [_] Dividends are to be paid by check [_] Capital gains are to be paid by check
If no box is checked, all distributions from a Fund will be reinvested into the same Fund.
5 INFORMATION ABOUT YOUR FINANCIAL ADVISER
Please supply the name Financial adviser's name Firm name
and address of your
financial adviser so --------------------------------------------------------------------------------------------------
that they will receive
duplicate copies of Street address City, state, zip code
your fund statements.
--------------------------------------------------------------------------------------------------
6 CERTIFICATION AND SIGNATURE(S)
Sign in ink exactly as the I certify that I have power and authority to establish this account and select the options
name (or names) appear requested. I also release the fund(s), Shareholder Services, Inc. (SSI), John Nuveen & Co.
above in section 1, Account Incorporated, United Missouri Bank of Kansas City, N.A., First Interstate Bank of Denver, N.A. and
registration. their agents and representatives from all liability and agree to indemnify each of them from any
and all losses, damages or costs for acting in good faith in accordance with instructions believed
to be genuine. With respect to the options identified on items #8, #9 and #10 of this application,
I understand that the Fund(s), SSI and Nuveen will not be liable for following telephone
instructions reasonably believed to be genuine. I also understand that the Fund(s) employ
procedures reasonably designed to confirm that telephone instructions are genuine and if these
procedures are not followed, the Fund(s) may be liable for any losses due to unauthorized or
fraudulent telephone instructions. I agree that the authorizations herein shall continue until SSI
receives written notice of a change or modification signed by all account owners. I understand
that each account is subject to the terms of the prospectus of the Nuveen fund selected, as
amended from time to time, and subject to acceptance by that fund in Chicago, Illinois and to the
laws of Illinois. All terms shall be binding upon my heirs, representatives and assigns. I certify
that I have received and read the current prospectus for each fund I have selected. Under
penalties of perjury, I certify (1) that the number shown on this Application Form is my correct
Social Security of Taxpayer Identification Number, and (2) that the IRS has not notified me that I
am subject to backup withholding (Line out clause (2) if you are subject to backup withholding.)
Individual's signature Date Joint tenant's signature (if applicable) Date
--------------------------------------------------------------------------------------------------
Custodian/Trustee signature (if applicable)
-----------------------------------------------------
See reverse side for additional optional fund services.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Optional Fund Services
7 OPTIONAL FUND SERVICES
Please send me application materials for these optional fund services which are described in the
prospectus:
[_] Automatic Deposit Plan [_] Automatic Withdrawal Plan
[_] Payroll Direct Deposit Plan [_] UIT Reinvestment
[_] Fund Direct
8 TEL-A-WIRE AUTHORIZATION
Select only one of the By electing this option, I authorize SSI and Nuveen to honor telephone instructions to redeem my
following, Option A or B. fund shares (minimum $1,000), subject to the terms and conditions described in the prospectus.
[_] OPTION A
By completing this section, I elect to have all redemption proceeds wired to my personal checking,
NOW or money market account at a commercial bank. (Attach a check marked "void" and complete only
the Option A section.)
Name of bank Bank's street address
--------------------------------------------------------------------------------------------------
Your bank account name Bank's city, state and zip code
--------------------------------------------------------------------------------------------------
Your bank account number Bank's routing code Bank's telephone number (include area code)
--------------------------------------------------------------------------------------------------
[_] OPTION B
By completing this section, I elect to have all redemption proceeds wired in my name to the
commercial bank account of my financial adviser's firm. (A representative of that firm must
complete and sign the second part of the Option B section.)
Name of financial advisor's firm Firm's telephone number (include area code)
--------------------------------------------------------------------------------------------------
Firm's street address Firm's city, state and zip code
--------------------------------------------------------------------------------------------------
Your account name Your account number
--------------------------------------------------------------------------------------------------
Bank's telephone number
This section is to be Name of bank of financial advisor's firm (include area code) Bank's routing code
completed by your financial
adviser if Option B is --------------------------------------------------------------------------------------------------
selected.
Bank's street address Bank's city, state and zip code
--------------------------------------------------------------------------------------------------
Bank's account number Financial adviser's signature Date
--------------------------------------------------------------------------------------------------
9 TEL-A-CHECK AUTHORIZATION
You must check the box [_] I hereby authorize the fund and its agents to honor telephone instructions to redeem shares
to elect this option. worth $50,000 or less from my account and send those proceeds by check payable to me to my address
of record, subject to the terms and conditions described in the prospectus.
10 TELEPHONE EXCHANGE AUTHORIZATION
You must check the box [_] I hereby authorize the fund and its agents to honor telephone instructions to invest
to elect this option. redemption proceeds from the fund into other Nuveen Mutual Funds, subject to the terms and
conditions described in the prospectus.
11 LETTER OF INTENT
You must complete this [_] By electing this option, I indicate my intention, but am under no obligation, to purchase
section to elect this option. additional Class A shares in the fund(s) and amount(s) indicated over the next 13 months in order
to qualify for reduced sales charges, subject to the terms and conditions described in the
prospectus. I understand that I or my financial adviser must notify Nuveen or SSI when I make a
purchase of fund shares that I wish to be covered under the Letter of Intent option.
I intend to purchase at least:
[_] $50,000 [_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000
[_] $2,500,000 [_] $5,000,000 [_] $7,500,000 or more
worth of shares of ______________________________________________ Fund(s) over the next 13 months.
Mail the completed application form to:
Nuveen Tax-Free Mutual Funds
P.O. Box 5330
Denver, Colorado 80217-5330
</TABLE>
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
NUVEEN TAX-FREE BOND FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
LOGO
Statement of Additional Information July 1, 1996
Nuveen Tax-Free Bond Fund, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND
NUVEEN NEW YORK TAX-FREE VALUE FUND
NUVEEN OHIO TAX-FREE VALUE FUND
This Statement of Additional Information is not a prospectus. A prospectus may
be obtained from certain securities representatives, banks and other financial
institutions that have entered into sales agreements with John Nuveen & Co. In-
corporated, or from the Funds, c/o John Nuveen & Co. Incorporated, 333 West
Wacker Drive, Chicago, Illinois 60606. This Statement of Additional Information
relates to, and should be read in conjunction with, the Prospectus dated July
1, 1996.
<TABLE>
<S> <C>
Table of Contents Page
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Fundamental Policies and Investment Portfolio 2
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Management 34
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Investment Adviser and Investment Management Agreement 40
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Portfolio Transactions 41
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Net Asset Value 42
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Tax Matters 43
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Performance Information 51
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Additional Information on the Purchase and Redemption of Fund Shares 57
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Distribution and Service Plan 61
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Independent Public Accountants and Custodian 62
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</TABLE>
The audited financial statements for the fiscal year ended February 29,
1996, appearing in the Annual Report of Nuveen Tax-Free Bond Fund, Inc.
are incorporated herein by reference. The Annual Report accompanies
this Statement of Additional Information.
<PAGE>
FUNDAMENTAL POLICIES AND INVESTMENT PORTFOLIO
FUNDAMENTAL POLICIES
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental pol-
icy, 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 temporary in-
vestments, as those terms are defined in the Prospectus;
(2) Invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the United States
government, its agencies and instrumentalities 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 dispo-
sition 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 (3) above, it may pledge securities hav-
ing 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 in-
volving futures contracts or the writing of options within the limits de-
scribed in the Prospectus and this Statement of Additional Information;
(6) Underwrite any issue of securities, except to the extent that the purchase
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 in-
vesting 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;
2
<PAGE>
(10) Make short sales of securities or purchase any securities on margin, ex-
cept for such short-term credits as are necessary for the clearance of transac-
tions;
(11) Write or purchase put or call options, except to the extent that the pur-
chase of a stand-by commitment may be considered the purchase of a put, and ex-
cept for transactions involving options within the limits described in the Pro-
spectus and this Statement of Additional Information;
(12) Invest more than 5% of its total assets in securities of unseasoned is-
suers which, together with their predecessors, have been in operation for less
than three years;
(13) 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;
(14) Invest more than 10% of its total assets in repurchase agreements maturing
in more than seven days, "illiquid" securities (such as non-negotiable CDs) and
securities without readily available market quotations;
(15) Purchase or retain the securities of any issuer other than the securities
of the Fund if, to the Fund's knowledge, those directors of Nuveen Tax-Free
Bond Fund, Inc., 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.
For the purpose of applying the limitations set forth in paragraphs (2) and
(12) 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 secu-
rities 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 obli-
gation of a superior or unrelated governmental entity or other entity (other
than a bond insurer), it shall also be included in the computation of securi-
ties 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 a Fund's assets that may be invested in securities insured by
any single insurer. It is a fundamental policy of each Fund, which cannot be
changed without the approval of the holders of a majority of shares of such
Fund, that a Fund will not hold securities of a single bank, including securi-
ties backed by a letter of credit of such bank, if such holdings would exceed
10% of the total assets of such Fund.
3
<PAGE>
The foregoing restrictions and limitations, as well as the Funds' 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 un-
less 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 ob-
jective of each Fund, cannot be changed without approval by holders of a "ma-
jority 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.
Nuveen Tax-Free Bond Fund, Inc. is an open-end diversified management series
company under SEC Rule 18f-2. Each Fund is a separate series issuing its own
shares. Nuveen Tax-Free Bond Fund, Inc. currently has three authorized series
with shares outstanding: the Nuveen Massachusetts Tax-Free Value Fund (the
"Massachusetts Fund"), the Nuveen New York Tax-Free Value Fund (the "New York
Fund") and the Nuveen Ohio Tax-Free Value Fund (the "Ohio Fund"). Certain mat-
ters 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 hold-
ers of a majority of the outstanding voting securities of each series affected
by such matter.
PORTFOLIO SECURITIES
As described in the Prospectus, each Fund invests primarily in a diversified
portfolio of Municipal Obligations that are issued within the Fund's respective
state or certain U.S. possessions or territories. In general, Municipal Obliga-
tions 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. In-
dustrial 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. Municipal Obligations in which each Fund will
primarily invest are issued by that Fund's respective state and cities and lo-
cal authorities in that state, and bear interest that, in the opinion of bond
counsel to the issuer, is exempt from federal income tax and from personal in-
come tax imposed by the respective state.
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 Ser-
vice, Inc. ("Moody's") or Standard and Poor's Corporation ("S&P"), (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 or S&P, with no fixed percentage limitations on these unrated Municipal
Obligations, 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.
4
<PAGE>
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 non-appropriation lease obligations
are secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. Each Fund will seek to minimize the special
risks associated with such securities by not investing more than 10% of its as-
sets in lease obligations that contain non-appropriation clauses, and by only
investing in those nonappropriation leases where (1) the nature of the leased
equipment or property is such that its ownership or use is essential to a gov-
ernmental function of the municipality, (2) the lease payments will commence
amortization of principal at an early date resulting in an average life of
seven years or less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriated, (4) the lease obligor
has maintained good market acceptability in the past, (5) the investment is of
a size that will be attractive to institutional investors, and (6) the under-
lying leased equipment has elements of portability and/or use that enhance its
marketability in the event foreclosure on the underlying equipment were ever
required. Lease obligations 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, such as the Federal Bankruptcy Reform Act of 1978. In addition, the
obligations of such issuers may become subject to the laws enacted in the fu-
ture by Congress, state legislatures or referenda extending the time for pay-
ment of principal and/or interest, or imposing other constraints upon enforce-
ment 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.
PORTFOLIO TRADING AND TURNOVER
Each Fund will make changes in its investment portfolio from time to time in
order to take advantage of opportunities in the municipal market and to limit
exposure to market risk. A Fund may also engage to a limited extent in short-
term trading consistent with its investment objective. Securities may be sold
in anticipation of market decline or purchased in anticipation of market rise
and later sold, but a Fund will not engage in trading solely to recognize a
gain. In addition, a security may be sold and another of comparable quality
purchased at approximately the same time to take advantage of what Nuveen Advi-
sory believes to be a temporary disparity in the normal yield relationship be-
tween the two securities. A Fund may make changes in its investment portfolio
in order to limit its exposure to changing market conditions. Changes in a
Fund's investments are known as "portfolio turnover." While it is impossible to
predict future portfolio turnover rates, each Fund's annual portfolio turnover
rate is generally not
5
<PAGE>
expected to exceed 50%. 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 50% in particular years de-
pending upon market conditions. The portfolio turnover rates for the Massachu-
setts Fund, the New York Fund and the Ohio Fund for the fiscal year ended Feb-
ruary 29, 1996, were 6%, 47% and 33%, respectively, and for the fiscal year
ended February 28, 1995, were 17%, 29% and 28%, respectively.
WHEN-ISSUED SECURITIES
As described in the Prospectus, each Fund may purchase and sell Municipal Obli-
gations on a when-issued or delayed delivery basis. When-issued and delayed de-
livery transactions arise when securities are purchased or sold with payment
and delivery beyond the regular settlement date. (When-issued transactions nor-
mally 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 commit-
ment. The commitment to purchase securities on a when-issued or delayed deliv-
ery 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 Munic-
ipal 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 deter-
mining 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 as-
set value; accordingly, any fluctuations in the value of the Municipal Obliga-
tion sold pursuant to a delayed delivery commitment are ignored in calculating
net asset value so long as the commitment remains in effect. The Fund will
maintain designated readily marketable assets at least equal in value to com-
mitments to purchase when-issued or delayed delivery securities, such assets to
be segregated by the Custodian specifically for the settlement of such commit-
ments. A Fund 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 each Fund reserves the right to sell these securities be-
fore 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. A Fund com-
monly engages 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.
SPECIAL CONSIDERATIONS RELATING TO MUNICIPAL OBLIGATIONS OF DESIGNATED STATES
As described in the Prospectus, except for investments in temporary invest-
ments, each of the Funds will, at all times, invest all of its net assets in
its respective state's Municipal Obligations. Each Fund is therefore more sus-
ceptible to political, economic or regulatory factors adversely affecting is-
suers of Municipal Obligations in its respective state. Brief summaries of
these factors are contained in the Prospectus. Set forth below is additional
information that bears upon the risk of investing in Municipal Obligations is-
sued by public authorities in these states. This information was obtained from
official statements of issuers located in the respective states as well as from
other publicly available official documents and statements. The Funds have not
independently verified any of the information contained in such statements and
documents.
6
<PAGE>
FACTORS PERTAINING TO MASSACHUSETTS
As described above, except to the extent the Massachusetts Fund invests in tem-
porary investments, the Massachusetts Fund will invest substantially all of its
net assets in Massachusetts Municipal Obligations. The Massachusetts Fund is
therefore susceptible to political, economic or regulatory factors affecting
issuers of Massachusetts Municipal Obligations. Without intending to be com-
plete, the following briefly summarizes the current financial situation, as
well as some of the complex factors affecting the financial situation, in the
Commonwealth of Massachusetts (the "Commonwealth"). It is derived from sources
that are generally available to investors and is based in part on information
obtained from various agencies in Massachusetts. No independent verification
has been made of the accuracy or completeness of the following information.
There can be no assurance that current or future statewide or regional economic
difficulties, and the resulting impact on Commonwealth or local governmental
finances generally, will not adversely affect the market value of Massachusetts
Obligations in the Fund or the ability of particular obligors to make timely
payments of debt service on (or relating to) those obligations.
Since 1988, there has been a significant slowdown in the Commonwealth's econo-
my, as indicated by a rise in unemployment, a slowing of its per capita income
growth and declining state revenues. Since fiscal 1992, the Commonwealth's rev-
enues for state government programs have exceeded expenditures, however, no as-
surance can be given that lower than expected tax revenues will not resume and
continue.
1996 Fiscal Year Budget. On June 21, 1995, the Governor signed the Common-
wealth's budget for fiscal 1996. The fiscal 1996 budget is based on estimated
budgeted revenues and other sources of approximately $16.778 billion, which in-
cludes fiscal 1996 tax revenues of $11.653 billion. Estimated fiscal 1996 tax
revenues are approximately $490 million, or 4.3%, higher than estimated fiscal
1995 tax revenues.
Fiscal 1996 non-tax revenues are projected to total $5.158 billion, approxi-
mately $66 million, or 1.3%, less than fiscal 1995 non-tax revenues of approxi-
mately $5.224 billion. Federal reimbursements are projected to decrease by ap-
proximately $1 million from approximately $2.970 billion in fiscal 1995 to ap-
proximately $2.969 billion in fiscal 1996, primarily as a result of increased
reimbursements for Medicare spending, offset by a reduction in reimbursements
received in 1995 for one-time Medicare expenses incurred in fiscal 1994 and
fiscal 1995. Fiscal 1996 departmental revenues are projected to decline by ap-
proximately $94 million, or 7.4%, from approximately $1.273 billion in fiscal
1995 to approximately $1.179 billion in fiscal 1996. Major changes in projected
non-tax received for fiscal 1996 include a decline in motor vehicle license and
registration fees, reduction of abandoned property revenues and a decrease due
to non-recurring revenues received in fiscal 1995 from hospitals and nursing
homes as part of Medicare fiscal rate settlements and other reimbursements by
municipal hospitals to the state.
Fiscal 1996 appropriations in the Annual Appropriations Act total approximately
$16.847 billion, including approximately $25 million in gubernatorial vetoes
overridden by the legislature. In the final
7
<PAGE>
supplemental budget for fiscal 1995, approved on August 24, 1995, another
$71.1 million of appropriations were continued for use in for 1996.
As of February 1, 1996, the Governor had signed into law fiscal 1996 supple-
mental appropriations totalling approximately $23.5 million, including approx-
imately $12.6 million to fund higher education collective bargaining contracts
and $5.6 million for the Department of Social Services. These appropriations
were offset by approximately $10.4 million in line item reductions, including
a reduction of $9.8 million for the state's debt service contract assistance
to the MBTA. Both the House and Senate have passed supplemental appropriation
bills totalling $64.8 million primarily relating to snow and ice removal costs
incurred by both the Commonwealth and cities and towns. The bills are cur-
rently awaiting resolution by a conference committee of the House and Senate.
On January 26, 1996 and February 9, 1996, the Governor filed additional sup-
plemental appropriation bills totalling approximately $7.3 million for costs
relating to prison overcrowding relief as well as reimbursement costs associ-
ated with a court settlement. No action has been taken on these bills by ei-
ther branch of the Legislature.
As of May 28, 1996, fiscal 1996 projected spending is approximately $16.963
billion, including approximately $153.2 million reserved for contingencies.
Projected revenues are approximately $16.851 billion. The fiscal 1996 tax rev-
enue projection is $11.684 billion, which represents an increase of approxi-
mately $80 million from the earlier estimate, based upon tax revenue collec-
tions through April, 1996.
The fiscal 1996 budget is based on numerous spending and revenue estimates the
achievement of which cannot be assured.
1995 Fiscal Year. Budgeted revenues and other sources, including non-tax reve-
nues, collected in fiscal 1995 were approximately $16.387 billion, approxi-
mately $837 million, or 5.4%, above fiscal 1994 revenues of $15.550 billion.
Estimated fiscal 1995 tax revenues collections were approximately $11.163 bil-
lion, approximately $12 million above the Department of Revenue's revised fis-
cal year 1995 tax revenue estimate of $10.151 billion and $544 million, or
5.2%, above fiscal year tax revenues of $10.607 billion.
Budgeted expenditures and other uses of funds in fiscal 1995 were approxi-
mately $16.251 billion, approximately $728 million, or 4.7% above fiscal 1994
budgeted expenditures and uses of $15.523 billion. The Commonwealth ended fis-
cal 1995 with an operating gain of $134 million and an ending fund balance of
$726 million.
On February 10, 1995, the Governor signed into law certain reforms to the Com-
monwealth's program for Aid to Families with Dependent Children ("AFDC") which
take effect on July 1, 1995, subject to federal approval of certain waivers.
The revised program reduces AFDC benefits to able bodied recipients by 2.75%,
while allowing them to keep a larger portion of their earned wages, requires
approximately 22,000 able-bodied parents of school-aged children to work or
perform community service for 20 hours per week and requires approximately
16,000 recipients who have children between the ages of two and six to partic-
ipate in an education or training program or perform community service. The
plan also establishes a pilot program for up to 2,000 participants that offers
tax credits and wage subsidies to employers who hire welfare recipients. Par-
ents who find employment will be provided with extended
8
<PAGE>
medical benefits and day care benefits for up to one year. The plan mandates
paternal identification, expands funding for anti-fraud initiatives, and re-
quires parents on AFDC to immunize their children. Parents who are disabled,
caring for a disabled child, have a child under the age of two, or are teen-
agers living at home and attending high school, will continue to receive cash
assistance. Since most provisions of the new law do not take effect until July
1, 1995, the Executive Office for Administration projects that the reforms will
not materially affect fiscal 1995 public assistance spending. The fiscal 1995
expenditure estimate of $16.449 billion includes $247.8 million appropriated to
fund the Commonwealth's public assistance programs for the last four months of
fiscal 1995. The Commonwealth is currently evaluating the new law's impact on
fiscal 1996 projected spending for public assistance programs.
On November 8, 1994, the voters in the statewide general election approved an
initiative petition that would slightly increase the portion of the gasoline
tax revenue credited to the Highway Fund, one of the Commonwealth's three major
budgetary funds, prohibit the transfer of money from the Highway Fund to other
funds for non-highway purposes and not permit including the Highway Fund bal-
ance in the computation "consolidated net surplus" for purposes of state fi-
nance laws. The initiative petition also provides that no more than 15% of gas-
oline tax revenues may be used for mass transportation purposes, such as expen-
ditures related to the Massachusetts Bay Transit Authority. The Executive Of-
fice of Administration and Finance is analyzing the effect, if any, this ini-
tiative petition, which became law on December 8, 1994, may have on the fiscal
1995 budget and it currently does not expect it to have any materially adverse
impact. This is not a constitutional amendment and is subject to amendment or
repeal by the Legislature, which may also, notwithstanding the terms of the pe-
tition, appropriate moneys from the Highway Fund in such amounts and for such
purposes as it determines, subject only to a constitutional restriction that
such moneys be used for highways or mass transit purposes.
1994 Fiscal Year. Fiscal 1994 tax revenue collections were approximately
$10.607 billion, $87 million below the Department of Revenue's fiscal year 1994
tax revenue estimate of $10.694 billion and $677 million above fiscal 1993 tax
revenues of $9.930 billion. Budgeted revenues and other sources, including non-
tax revenues, collected in fiscal 1994 were approximately $15.550 billion. To-
tal revenues and other sources increased by approximately 5.7% from fiscal 1993
to fiscal 1994 while tax revenues increased by 6.8% for the same period. Bud-
geted expenditures and other uses of funds in fiscal 1994 were approximately
$15.523 billion, which is $826.5 million or approximately 5.6% higher than fis-
cal 1993 budgeted expenditures and other uses.
As of June 30, 1994, the Commonwealth showed a year-end cash position of ap-
proximately $757 million, as compared to a projected position of $599 million.
In June, 1993, the Legislature adopted and the Governor signed into law compre-
hensive education reform legislation. This legislation required an increase in
expenditures for education purposes above fiscal 1993 base spending of $1.288
billion of approximately $175 million in fiscal 1994. The Executive Office for
Administration and Finance expects the annual increases in expenditures above
the fiscal 1993 base spending of $1.288 billion to be approximately $396 mil-
lion in fiscal 1995, $625 million in fiscal 1996 and $868 million in fiscal
1997. Additional annual increases are also expected in later fiscal years. The
fiscal 1995 budget as signed by the Governor includes $896 million in appropri-
ations to satisfy this legislation.
9
<PAGE>
1993 Fiscal Year. The Commonwealth's budgeted expenditures and other uses were
approximately $14.696 billion in fiscal 1993, which is approximately $1.280
billion or 9.6% higher than fiscal 1992 expenditures and other uses. Final fis-
cal 1993 budgeted expenditures were $23 million lower than the initial July
1992 estimates of fiscal 1993 budgeted expenditures. Budgeted revenues and
other sources for fiscal 1993 totalled approximately $14.710 billion, including
tax revenues of $9.930 billion. Total revenues and other sources increased by
approximately 6.9% from fiscal 1992 to fiscal 1993, while tax revenues in-
creased by 4.7% for the same period. Overall, fiscal 1993 ended with a surplus
of revenues and other sources over expenditures and other uses of $13.1 million
and aggregate ending fund balances in the budgeted operating funds of the Com-
monwealth of approximately $562.5 million. After payment in full of the distri-
bution of local aid to the Commonwealth's cities and towns ("Local Aid") and
the retirement of short term debt, the Commonwealth showed a year end cash po-
sition of approximately $622.2 million, as compared to a projected position of
$485.1 million.
1992 Fiscal Year. The Commonwealth's budgeted expenditures and other uses were
approximately $13.4 billion in fiscal 1992, which is $238.7 million or 1.7%
lower than fiscal 1991 budgeted expenditures. Final fiscal 1992 budgeted expen-
ditures were $300 million more than the initial July 1991 estimates of budget-
ary expenditures, due in part to increases in certain human services programs,
including an increase of $268.7 million for the Medicaid program and $50.0 mil-
lion for mental retardation consent decree requirements. Budgeted revenues and
other sources for fiscal 1992 totalled approximately $13.7 billion (including
tax revenues of approximately $9.5 billion), reflecting an increase of approxi-
mately 0.7% from fiscal 1991 to 1992 and an increase of 5.4% in tax revenues
for the same period. Overall, fiscal 1992 is estimated to have ended with an
excess of revenues and other sources over expenditures and other uses of $312.3
million. After payment in full of Local Aid in the amount of $514.0 million due
on June 30, 1992, retirement of the Commonwealth's outstanding commercial paper
(except for approximately $50 million of bond anticipation notes) and certain
other short term borrowings, as of June 30, 1992, the end of fiscal 1992, the
Commonwealth showed a year-end cash position of approximately $731 million, as
compared with the Commonwealth's cash balance of $182.3 million at the end of
fiscal 1991.
1991 Fiscal Year. Budgeted expenditures for fiscal 1991 were approximately
$13.659 billion, as against budgeted revenues and other sources of approxi-
mately $13.634 billion. The Commonwealth suffered an operating loss of approxi-
mately $21.2 million. Application of the adjusted fiscal 1990 fund balances of
$258.3 million resulted in a fiscal 1991 budgetary surplus of $237.1 million.
State law requires that approximately $59.2 million of the fiscal year ending
balances of $237.1 million be placed in the Stabilization Fund, a reserve from
which funds can be appropriated (i) to make up any difference between actual
state revenues in any fiscal year in which actual revenues fall below the al-
lowable amount, (ii) to replace state and local losses by federal funds or
(iii) for any event, as determined by the legislature, which threatens the
health, safety or welfare of the people or the fiscal stability of the Common-
wealth or any of its political subdivisions.
Upon taking office in January 1991, the new Governor proposed a series of leg-
islative and administrative actions, including withholding of allotments under
Section 9C of Chapter 29 of the General Laws, intended to eliminate the pro-
jected deficits. The new Governor's review of the Commonwealth's budget indi-
cated projected spending of approximately $14.1 billion with an estimated $850
million in budget
10
<PAGE>
balancing measures that would be needed prior to the close of fiscal 1991. At
that time, estimated tax revenues were revised to approximately $8.8 billion,
$903 million less than was estimated at the time the fiscal 1991 budget was
adopted. The Legislature adopted a number of the Governor's recommendations and
the Governor took certain administrative actions not requiring legislative ap-
proval, including the adoption of a state employee furlough program. It is es-
timated by the Commonwealth that spending reductions achieved through savings
initiatives and withholding of allotments total approximately $484.3 million in
aggregate for fiscal 1991. However, these savings and reductions may be im-
pacted negatively by litigation pursued by third parties concerning the Gover-
nor's actions under Section 9C of Chapter 29 of the General Laws and with re-
gard to the state employee furlough program.
In addition, the new administration in May 1991 filed an amendment to its Med-
icaid state plan that enables it to claim 50% federal reimbursement on
uncompensated care payments for certain hospitals in the Commonwealth. As a re-
sult, in fiscal 1991, the Commonwealth obtained additional non-tax revenues in
the form of federal reimbursements equal to approximately $513 million on ac-
count of uncompensated care payments. This reimbursement claim was based upon
recent amendments of federal law contained in the Omnibus Budget Reconciliation
Act of 1990 and, consequently, on relatively undeveloped federal laws, regula-
tions and guidelines. At the request of the federal Health Care Financing Ad-
ministration, the Office of Inspector General of the United States Department
of Health and Human Services has commenced an audit of the reimbursement. The
administration, which had reviewed the matter with the Health Care Financing
Administration prior to claiming the reimbursement, believes that the Common-
wealth will prevail in the audit. If the Commonwealth does not prevail, the
Commonwealth would have the right to contest an appeal, but could be required
to pay all or part of Medicaid reimbursements with interest and to have such
amount deducted from future reimbursement payments.
Employment. Reversing a trend of relatively low unemployment during the early
and mid 1980's, the Massachusetts unemployment rate beginning in 1990 increased
significantly to where the Commonwealth's unemployment rate exceeded the na-
tional unemployment rate. During 1990, the Massachusetts unemployment rate in-
creased from 4.5% in January to 6.1% in July to 6.7% in August. During 1991,
the Massachusetts unemployment rate averaged 9.0% while the average United
States unemployment rate was 6.7%. The Massachusetts unemployment rate during
1992 averaged 8.5% while the average United States unemployment rate was 7.4%.
Since 1993, the average monthly unemployment rate has declined steadily. The
Massachusetts unemployment rate in February 1996 was 5.0%, as compared with the
United States unemployment rate of 5.5% for the same period. Other factors
which may significantly and adversely affect the employment rate in the Common-
wealth include reductions in federal government spending on defense-related in-
dustries. Due to this and other considerations, there can be no assurance that
unemployment in the Commonwealth will not increase in the future.
Debt Ratings. S&P currently rates the Commonwealth's uninsured general obliga-
tion bonds at A+. At the same time, S&P currently rates state and agency notes
at SP1. From 1989 through 1992, the Commonwealth had experienced a steady de-
cline in its S&P rating, with its decline beginning in May 1989, when S&P low-
ered its rating on the Commonwealth's general obligation bonds and other Com-
monwealth obligations from AA+ to AA and continuing a series of further reduc-
tions until March 1992, when the rating was affirmed at BBB.
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Moody's currently rates the Commonwealth's uninsured general obligation bonds
at A1. From 1989 through 1992, the Commonwealth had experienced a steady de-
cline in its rating by Moody's since May 1989. In May 1989, Moody's lowered
its rating on the Commonwealth's notes from MIG-1 to MIG-2, and its rating on
the Commonwealth's commercial paper from P-1 to P-2. On June 21, 1989, Moody's
reduced the Commonwealth's general obligation rating from Aa to A. On November
15, 1989, Moody's reduced the rating on the Commonwealth's general obligations
from A to Baa1, and on March 9, 1990, Moody's reduced the rating of the Com-
monwealth's general obligation bonds from Baa1 to Baa. There can be no assur-
ance that these ratings will continue.
In recent years, the Commonwealth and certain of its public bodies and munici-
palities have faced serious financial difficulties which have affected the
credit standing and borrowing abilities of Massachusetts and its respective
entities and may have contributed to higher interest rates on debt obliga-
tions. The continuation of, or an increase in, such financial difficulties
could result in declines in the market values of, or default on, existing ob-
ligations including Massachusetts Obligations in the Fund. Should there be
during the term of the Fund a financial crisis relating to Massachusetts, its
public bodies or municipalities, the market value and marketability of all
outstanding bonds issued by the Commonwealth and its public authorities or mu-
nicipalities including the Massachusetts Obligations in the Fund and interest
income to the Fund could be adversely affected.
Total Bond and Note Liabilities. The total general obligation bond indebted-
ness of the Commonwealth (including Dedicated Income Tax Debt and Special Ob-
ligation Debt) as of April 1, 1996 was approximately $10.093 billion. There
were also outstanding approximately $240 million in general obligation notes
and other short term general obligation debt. The total bond and note liabili-
ties of the Commonwealth as of April 1, 1996, including guaranteed bond and
contingent liabilities was approximately $13.818 billion.
Debt Service. During the 1980s, capital expenditures were increased substan-
tially, which has had a short term impact on the cash needs of the Common-
wealth and also accounts for a significant rise in debt service during that
period. In November, 1988, the Executive Office for Administration and Finance
established an administrative limit on state-financed capital spending in the
Capital Projects Fund of $925 million per fiscal year. Capital expenditures
were $847.0 million, $694.1 million, $575.9 million, $760.6 million and $902.2
million in fiscal 1991, fiscal 1992, fiscal 1993, fiscal 1994 and fiscal 1995,
respectively. Commonwealth-financed capital expenditures are projected to be
approximately $894.0 million in fiscal 1996. Debt service expenditures for
fiscal 1991, fiscal 1992, fiscal 1993, fiscal 1994 and fiscal 1995 were $942.3
million, $898.3 million, $1,140 billion, $1.149 billion, and $1.230 billion,
respectively, and are projected to be approximately $1.196 billion for fiscal
1996. The amounts represented do not include debt service on notes issued to
finance certain Medicare-related liabilities, certain debt service contract
assistance payment to Massachusetts Bay Transportation Authority ($205.9 mil-
lion projected in fiscal 1996), the Massachusetts Convention Center ($24.6
million projected in fiscal 1996), the Massachusetts Government Land Bank ($6
million projected in fiscal 1996), the Massachusetts Water Pollution Abatement
Trust ($16.6 million projected in fiscal 1996) and grants to municipalities
under the school building assistance program to defray a portion of the debt
service costs on local school bonds ($174.5 million projected in fiscal 1996).
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In January 1990, legislation was passed to impose a limit on debt service be-
ginning in fiscal 1991, providing that no more than 10% of the total appropria-
tions in any fiscal year may be expended for payment of interest and principal
on general obligation debt (excluding the Fiscal Recovery Bonds). The percent-
age of total appropriations expended from the budgeted operating funds for debt
service (excluding debt service on Fiscal Recovery Bonds) for fiscal 1994 is
5.6% which is projected to increase to 5.9% in fiscal 1995.
Certain Liabilities. Among the material future liabilities of the Commonwealth
are significant unfunded general liabilities of its retirement systems and a
program to fund such liabilities; a program whereby, starting in 1978, the Com-
monwealth began assuming full financial responsibility for all costs of the ad-
ministration of justice within the Commonwealth; continuing demands to raise
aggregate aid to cities, towns, schools and other districts and transit author-
ities above current levels; and Medicaid expenditures which have increased each
year since the program was initiated. The Commonwealth has signed consent de-
crees to continue improving mental health care and programs for the mentally
retarded in order to meet federal standards, including those governing receipt
of federal reimbursements under various programs, and the parties in those
cases have worked cooperatively to resolve the disputed issues.
As a result of comprehensive legislation approved in January, 1988, the Common-
wealth is required, beginning in fiscal 1989 to fund future pension liabilities
currently and to amortize the Commonwealth's unfunded liabilities over 40
years. The funding schedule must provide for annual payments in each of the ten
years ending fiscal 1998 which are at least equal to the total estimated pay-
as-you-go pension costs in each year. As a result of this requirement, the
funding requirements for fiscal 1995, 1996, 1997 and 1998 are estimated to be
increased to approximately $959.9 million, $1.007 billion, $1.061 billion and
$1.128 billion, respectively.
Litigation. The Commonwealth is engaged in various lawsuits involving environ-
mental and related laws, including an action brought on behalf of the U.S. En-
vironmental Protection Agency alleging violations of the Clean Water Act and
seeking to enforce the clean-up of Boston Harbor. The MWRA, successor in lia-
bility to the Metropolitan District Commission, has assumed primary responsi-
bility for developing and implementing a court-approved plan for the construc-
tion of the treatment facilities necessary to achieve compliance with federal
requirements. Under the Clean Water Act, the Commonwealth may be liable for
costs of compliance in these or any other Clean Water cases if the MWRA or a
municipality is prevented from raising revenues necessary to comply with a
judgment. The MWRA currently projects that the total cost of construction of
the treatment facilities required under the court's order is approximately
$3.557 billion in current dollars, with approximately $1.046 billion to be
spent on or after June 30, 1995. On October 18, 1995, the court entered an or-
der which reduced the MWRA'S obligation to build certain additional secondary
treatment facilities, which is estimated by the MWRA will save ratepayers ap-
proximately $165 million.
The Department of Public Welfare has been sued for the alleged unlawful denial
of personal care attendant services to certain disabled Medicaid recipients.
The Superior Court has denied the plaintiff's motion for preliminary injunction
and has also denied the plaintiff's motion for class certification. If the
plaintiffs were to prevail on their claims and the Commonwealth were required
to provide all of the services sought by the plaintiffs to all similarly situa-
tion persons, it would substantially increase the
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annual cost to the Commonwealth if these services are eventually required. The
Department of Public Welfare currently estimates this increase to be as much as
$200 million per year.
There are also actions pending in which recipients of human services benefits,
such as welfare recipients, the mentally retarded, the elderly, the handi-
capped, children, residents of state hospitals and inmates of corrections in-
stitutions, seek expanded levels of services and benefits and in which provid-
ers of services to such recipients challenge the rates at which they are reim-
bursed by the Commonwealth. To the extent that such actions result in judgments
requiring the Commonwealth to provide expanded services or benefits or pay in-
creased rates, additional operating and capital expenditures might be needed to
implement such judgments.
In 1995, the Spaulding Rehabilitation Hospital ("Spaulding") filed an action to
enforce an agreement to acquire its property by eminent domain in connection
with the Central Artery/Third Harbor Tunnel Project. If successful, Spaulding
could recover the fair market value of its property in addition to its reloca-
tion costs with respect to its personal property. The Commonwealth estimates
its potential liability at approximately $50 million.
The Commonwealth faces an additional potential liability of approximately $40
million in connection with a taking by the Massachusetts Highway Department re-
lated to the relocation of Northern Avenue in Boston.
In addition there are several tax matters in litigation which could result in
significant refunds to taxpayers if decisions unfavorable to the Commonwealth
are rendered. In BayBank, et al. v. Commissioner of Revenue, the banks chal-
lenge the inclusion of income from tax exempt obligations in the measure of the
bank excise tax. The Appellate Tax Board issued findings of fact and a report
in favor of the Commissioner of Revenue on September 30, 1993. The case is
pending before the Supreme Judicial Court. The potential liability is approxi-
mately $55 million, including similarly situated banks and tax years after
1990.
In National Association of Government Employees v. Commonwealth, the Superior
Court declared that a line item in the Commonwealth's general appropriations
act for fiscal 1994 that increased the state employees' percentage share of
their group health insurance premiums from 10% to 15% violated the terms of
several collective bargaining agreements, and therefore was invalid under the
United States Constitution as regards employees covered by the agreements. On
February 9, 1995, the Supreme Judicial Court vacated the Superior Court's deci-
sion and declared that the fiscal 1994 line item did not violate the contracts
clause. In June, 1995, the United States Supreme Court denied the plaintiff's
writ of certiorari. Several other unions have filed a companion suit asserting
that the premium increase similarly violated other collective bargaining agree-
ments. The latter suit is in its initial stages. Prior to the Supreme Judicial
Court's decision, the Commonwealth's aggregate liability is estimated to be ap-
proximately $32 million.
A variety of other civil suits pending against the Commonwealth may also affect
its future liabilities. There include challenges to the Commonwealth's alloca-
tion of school aid under Section 9C of Chapter
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29 of the General Laws and to adopt a state employee furlough program. No pre-
diction is possible as to the ultimate outcome of these proceedings.
On March 22, 1995, the Supreme Judicial Court held in Perini Corporation v.
Commission of Revenue that certain deductions from the net worth measure of the
Massachusetts corporate excise tax violate the Commerce Clause of the United
States Constitution. On October 2, 1995, the United States Supreme Court denied
the Commonwealth's petition for writ of certiorari. The Department of Revenue
estimates that tax revenues in the amount of $40 to $55 million may be abated
as a result of the Supreme Judicial Court's decision.
Many factors, in addition to those cited above, do or may have a bearing upon
the financial condition of the Commonwealth, including social and economic con-
ditions, many of which are not within the control of the Commonwealth.
Expenditure and Tax Limitation Measures. Limits have been established on state
tax revenues by legislation approved by the Governor on October 25, 1986 and by
an initiative petition approved by the voters on November 4, 1986. The Execu-
tive Office for Administration and Finance currently estimates that state tax
revenues will not reach the limit imposed by either the initiative petition or
the legislative enactment in fiscal 1992.
Proposition 2 1/2, passed by the voters in 1980, led to large reductions in
property taxes, the major source of income for cities and towns and large in-
creases in state aid to offset such revenue losses. According to the Executive
Office for Administration and Finance, all of the 351 cities and towns have now
achieved a property tax level of no more than 2.5% of full property values. Un-
der the terms of Proposition 2 1/2, the property tax levy can now be increased
annually for all cities and towns, almost all by 2.5% of the prior fiscal
year's tax levy plus 2.5% of the value of new properties and of significant im-
provements to property. Legislation has also been enacted providing for certain
local option taxes. A voter initiative petition approved at the statewide gen-
eral election in November, 1990 further regulates the distribution of Local Aid
of no less than 40% of collections from individual income taxes, sales and use
taxes, corporate excise taxes, and the balance of the state lottery fund. If
implemented in accordance with its terms (including appropriation of the neces-
sary funds), the petition as approved would shift several hundred million dol-
lars to direct Local Aid.
Other Tax Measures. To provide revenue to pay debt service on both the deficit
and Medicaid-related borrowings and to fund certain direct Medicaid expendi-
tures, legislation was enacted imposing an additional tax on certain types of
personal income for 1989 and 1990 taxable years at rates of 0.375% and 0.75%,
respectively, effectively raising the tax rate of 1989 from 5% to 5.375% and
for 1990 to 5.75%. Recent legislation has effectively further increased tax
rates to 5.95% for tax year 1990 to 6.25% for tax year 1991 and returning to
5.95% for tax year 1992 and subsequent tax years. The tax is applicable to all
personal income except income derived from dividends, capital gains, unemploy-
ment compensation, alimony, rent, interest, pensions, annuities and IRA/Keogh
distributions. The income tax rate on other interest (excluding interest on ob-
ligations of the United States and of the Commonwealth and its subdivisions),
dividends and net capital gains (after a 50% reduction) was increased from 10%
to 12% for tax year 1990 and subsequent years, by recently enacted legislation.
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Estate Tax Revisions. The fiscal 1993 budget included legislation which gradu-
ally phases out the current Massachusetts estate tax and replaces it with a
"sponge tax" in 1997. The "sponge tax" is based on the maximum amount of the
credit for state taxes allowed for federal estate tax purposes. The estate tax
is phased out by means of annual increases in the basic exemption from the cur-
rent $200,000 level. The exemption is increased to $300,000 for 1993, $400,000
for 1994, $500,000 for 1995 and $600,000 for 1996. In addition, the legislation
includes a full marital deduction starting July 1, 1994. Currently the marital
deduction is limited to 50% of the Massachusetts adjusted gross estate. The
static fiscal impact of the phase out of the estate tax was estimated to be ap-
proximately $24.8 million in fiscal 1994 and is estimated to be approximately
$72.5 million in fiscal 1995.
Other Issuers of Massachusetts Obligations. There are a number of state agen-
cies, instrumentalities and political subdivisions of the Commonwealth that is-
sue Municipal Obligations, some of which may be conduit revenue obligations
payable from payments from private borrowers. These entities are subject to
various economic risks and uncertainties, and the credit quality of the securi-
ties issued by them may vary considerably from the credit quality of obliga-
tions backed by the full faith and credit of the Commonwealth. The brief sum-
mary above does not address, nor does it attempt to address, any difficulties
and the financial situations of those other issuers of Massachusetts Obliga-
tions.
FACTORS PERTAINING TO NEW YORK
As described above, except to the extent the New York Fund invests in temporary
investments, the New York Fund will invest substantially all of its assets in
New York Municipal Obligations. The New York Fund is therefore susceptible to
political, economic or regulatory factors affecting New York State and govern-
mental bodies within New York State. Some of the more significant events and
conditions relating to the financial situation in New York are summarized be-
low. The following information provides only a brief summary of the complex
factors affecting the financial situation in New York, is derived from sources
that are generally available to investors and is believed to be accurate. It is
based on information drawn from official statements and prospectuses issued by,
and other information reported by, the State of New York (the "State"), by its
various public bodies (the "Agencies"), and by other entities located within
the State, including the City of New York (the "City"), in connection with the
issuance of their respective securities.
There can be no assurance that current or future statewide or regional economic
difficulties, and the resulting impact on State or local government finances
generally, will not adversely affect the market value of New York Municipal Ob-
ligations held in the portfolio of the New York Fund or the ability of particu-
lar obligors to make timely payments of debt service on (or relating to) those
obligations.
(1) The State: The State has historically been one of the wealthiest states in
the nation. For decades, however, the State economy has grown more slowly than
that of the nation as a whole, gradually eroding the State's relative economic
affluence. Statewide, urban centers have experienced significant changes in-
volving migration of the more affluent to the suburbs and an influx of gener-
ally less affluent residents. Regionally, the older Northeast cities have suf-
fered because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater competi-
tion as other major cities have developed financial and business capabilities
which make them less dependent on the specialized services traditionally avail-
able almost exclusively in the City. The State has for many
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years had a very high state and local tax burden relative to other states. The
burden of State and local taxation, in combination with the many other causes
of regional economic dislocation, has contributed to the decisions of some
businesses and individuals to relocate outside, or not locate within, the
State.
Slowdown of Regional Economy. A national recession commenced in mid-1990. The
downturn continued throughout the State's 1990-91 fiscal year and was followed
by a period of weak economic growth during the 1991 and 1992 calendar years.
For calendar year 1993, the economy grew faster than in 1992, but still at a
very moderate rate as compared to other recoveries. Moderate economic growth
continued in calendar year 1994. Economic growth slowed within New York during
1995 as the expansion of the national economy moderated. The State has fore-
casted a slowdown in the expansion of the State's economy in 1996. Economic re-
covery started considerably later in the State than in the nation as a whole,
the State's economic growth continues to lag behind the nation's, due in part
to a significant retrenchment in the banking and financial services industries,
downsizing by major corporations, cutbacks in defense spending, and an oversup-
ply of office buildings. Many uncertainties exist in forecasts of both the na-
tional and State economies and there can be no assurance that the State's econ-
omy will perform at a level sufficient to meet the State's projections of re-
ceipts and disbursements.
1996-97 Fiscal Year. The Governor issued a proposed Executive Budget for the
1996-97 fiscal year (the "Proposed Budget") on December 15, 1995, which pro-
jected a balanced general fund and receipts and disbursements of $31.3 billion
and $31.2 billion, respectively. As of June 10, 1996, the State legislature had
not yet enacted, nor had the Governor and the legislature reached an agreement
on, the budget for the 1996-97 fiscal year which commenced on April 1, 1996.
The Governor and the State's legislature have agreed on or proposed a series of
short-term stopgap spending measures to fund State payrolls and advances to
certain municipalities and certain State programs. The delay in the enactment
of the budget may negatively affect certain proposed actions and reduce pro-
jected savings.
The Proposed Budget and the 1996-97 Financial Plan provide for the closing of a
projected $3.9 billion budget gap in the 1996-97 fiscal year by cost-contain-
ment savings in social welfare programs, savings from State agency
restructurings, decreasing the level of some categories of local aid, new reve-
nue measures and a reduction in the number of state employees. Up to $1.3 bil-
lion of gap closing measures by the State are dependent upon federal actions
with respect to the Medicaid program that have not been enacted due to the fed-
eral budget impact. The Governor has proposed that, depending upon the ultimate
form of Medicaid relief provided to the states, any resulting gap would be
filled through a combination of increased revenues, additional cuts in spending
for social services, and so-called "one shot" sources of revenue or cost sav-
ings.
The Proposed Budget and the 1996-97 Financial Plan may be impacted negatively
by uncertainties relating to the economy and tax collections. In particular,
should the national economy grow more slowly than forecasted by the State, rev-
enues received by the State would be adversely affected. In addition, proposed
retroactive changes to the federal tax treatment of capital gains would flow
through to the State and could significantly reduce tax receipts.
1995-96 Fiscal Year. The Governor announced on April 3, 1996 that the State
ended its 1994-95 fiscal year with an operating surplus of approximately $445
million. The State Legislature enacted the
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State's 1995-96 fiscal year budget on June 7, 1995, more than two months after
the start of that fiscal year. As of January 19, 1996, the updated 1995-96
State Financial Plan (the "Plan") projected total general fund receipts and
disbursements each of $32.7 billion representing reductions in receipts and
disbursements of $144 million and $103 million, respectively, from the amounts
set forth in the 1995-96 budget. The Plan projected for a General Fund balance
of approximately $172 million at the close of the 1995-96 fiscal year.
1994-95 Fiscal Year. The State ended the 1994-95 fiscal year with a General
Fund balance of approximately $158 million.
Future Fiscal Years. There can be no assurance that the State will not face
substantial potential budget gaps in the future resulting from a significant
disparity between tax revenues projected from a lower recurring receipts base
and the spending required to maintain State programs at current levels. To ad-
dress any potential budgetary imbalance, the State may need to take signifi-
cant actions to align recurring receipts and disbursements. The Governor's
budget for fiscal year 1996-97 projects that budget gaps of $1.4 billion and
$2.5 billion may need to be closed for fiscal years 1997-98 and 1998-99, re-
spectively.
Indebtedness. As of March 31, 1995, the total amount of long-term State gen-
eral obligation debt authorized but unissued stood at $1.8 billion. As of the
same date, the State had approximately $5.2 billion in general obligation
bonds, including $149 million in bond anticipation notes outstanding.
The State originally projected that its borrowings for capital purposes during
the State's 1995-96 fiscal year would consist of $248 million in general obli-
gation bonds and bond anticipation notes and $186 million in general obliga-
tion commercial paper. The Legislature authorized the issuance of up to $33
million in certificates of participation in pools of leases for equipment and
real property to be utilized by State agencies in fiscal year 1995-96. The
Governor's budget for fiscal year 1996-97 projects approximately $400 million
of borrowings by the state for capital purposes. The projections of the State
regarding its borrowings for any fiscal year are subject to change if actual
receipts fall short of State projections or if other circumstances require.
In June 1990, legislation was enacted creating the New York Local Government
Assistance Corporation ("LGAC"), a public benefit corporation empowered to is-
sue long-term obligations to fund certain payments to local governments tradi-
tionally funded through the State's annual seasonal borrowing. As of June 30,
1995, LGAC has issued its bonds to provide net proceeds of $4.7 billion com-
pleting the program.
Financing of capital programs by other public authorities of the State is also
obtained from lease-purchase and contractual-obligation financing arrange-
ments, the debt service for which is paid from State appropriations. As of
March 31, 1995, there were $18 billion of such other financing arrangements
outstanding and additional financings of this nature by public authorities. In
addition, certain agencies had issued and outstanding approximately $7.0 bil-
lion of "moral obligation financings" as of March 31, 1995, which are to be
repaid from project revenues. While there has never been a default on moral
obligation debt of the State, the State would be required to make up any
shortfall in debt service.
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Ratings. Moody's rating of the State's general obligation bonds stood at A on
January 24, 1996, and S&P's rating stood at A- with a positive outlook, on Jan-
uary 24, 1996, an improvement from S&P's stable outlook from February 1994
through April 1993 and negative outlook prior to April 1993. Previously,
Moody's lowered its rating to A on June 6, 1990, its rating having been A1
since May 27, 1986. S&P lowered its rating from A to A- on January 13, 1992.
S&P's previous ratings were A from March 1990 to January 1992, AA- from August
1987 to March 1990 and A+ from November 1982 to August 1987.
Moody's maintained its A rating and S&P continued its A- rating in connection
with the State's issuance of $116 million of general obligation bonds in Janu-
ary 1996.
(2) The City and the Municipal Assistance Corporation ("MAC"): The City ac-
counts for approximately 40% of the State's population and personal income, and
the City's financial health affects the State in numerous ways.
In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among other actions,
the State Legislature (i) created MAC to assist with long-term financing for
the City's short-term debt and other cash requirements and (ii) created the
State Financial Control Board (the "Control Board") to review and approve the
City's budgets and four-year financial plans (the financial plans also apply to
certain City-related public agencies).
In recent years, the rate of economic growth in the City slowed substantially
as the City's economy entered a recession. While by some measures the City's
economy may have begun to recover, a number of factors, including poor perfor-
mance by the City's financial services companies, may prevent a significant im-
provement in the City's economy and may in fact negatively impact upon the
City's finances by reducing tax receipts. The City Comptroller has issued re-
ports concluding that the recession of the City's economoy may be ending, but
there is little prospect of any significant improvement in the near term.
Fiscal Year 1997 and the 1996-1999 Financial Plan. On January 31, 1996, the
Mayor released his preliminary $31 billion budget for fiscal year 1997, which
included $2.0 billion of deficit reduction measures. The Mayor is seeking a
$750 million reduction in mandated welfare and Medicaid expenditures from the
State and a $643 million reduction in expenditures by City agencies and the
Board of Education ("BOE") budget. The Mayor has also received from MAC for
$125 million in fiscal year 1996 in return for a commitment by the City to cut
projected City spending by $125 million in fiscal year 1997 and each of the
next three fiscal years. On May 9, 1996, the Mayor released a revised fiscal
year 1997 budget of $32.7 billion that would reduce overall spending from fis-
cal year 1996 and impose $1.1 billion of budget cuts on City agencies. The re-
vised budget reduces reliance on savings in welfare and Medicaid expenditures
by $250 million and restores $300 million of proposed tax cuts, including a
recommended four year extension of the City surcharge on personal income taxes.
The City Council has not yet approved the Mayor's revised fiscal year 1997 bud-
get, although a tentative agreement on the budget was announced on June 10,
1996.
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The 1996-1999 Financial Plan (the "Plan"), as revised in May 1996, projected
budget gaps of $1.4 billion and $2.3 billion for fiscal years 1998 and 1999,
respectively. The 1996-1999 Financial Plan (the "Plan"), as revised in May 1996
by the Mayor, projected budget gaps of $1.4 and $2.3 billion for fiscal years
1998 and 1999, respectively. The forecasted budget shortfall in fiscal year
2000 could be as much as $2.9 million. The City Comptroller and State Comptrol-
ler have each warned that the fiscal year 1997 budget includes significant rev-
enue risks. The State Comptroller has expressed concern that projected budget
gaps for fiscal years 1999 and 2000 are each in excess of $2 billion despite
the City's significant cost-cutting efforts.
The amount of gap closing measures requiring State action set forth in the Plan
is well in excess of proposed assistance to the City outlined in the Governor's
Proposed Budget. Due to the continuing federal budget impasse, the City cannot
be assured that its assumptions regarding the amount of federal aid or the im-
pact of changes in federal law upon its operations or tax receipts. An extended
delay by the State in adopting its 1996-97 fiscal year budget or in the adop-
tion of the federal budget would negatively impact upon the City's financial
condition and ability to close budget gaps for fiscal years 1997 and thereaf-
ter.
The Mayor was required to submit an executive budget for fiscal year 1997 to
the City Council in late April 1996. Due to continuing uncertainties related to
the amount of State and federal aid, the City Council extended the date by
which the Mayor was to submit such executive budget.
Given the foregoing, there can be no assurance that the City will continue to
maintain a balanced budget during fiscal year 1997 or thereafter, or that it
can maintain a balanced budget without additional tax or other revenue in-
creases or reductions in City services, which could adversely affect the City's
economic base.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and which includes the
City's capital, revenue and expense projections. The City is required to submit
its financial plans to review bodies, including the Control Board. If the City
were to experience certain adverse financial circumstances, including the oc-
currence or the substantial likelihood and the imminence of the occurrence of
an annual operating deficit of more than $100 million or the loss of access to
the public credit markets to satisfy the City's capital and seasonal financial
requirements, the Control Board would be required by State law to exercise cer-
tain powers, including prior approval of City financial plans, proposed
borrowings and certain contracts.
The City depends on the State for State aid both to enable the City to balance
its budget and to meet its cash requirements. If the State experiences revenue
shortfalls or spending increases beyond its projections during its 1996-97 fis-
cal year or subsequent years, such developments could result in reductions in
projected State aid to the City. In addition, there can be no assurance that
State budgets for the 1997-98 or future fiscal years will be adopted by the
April 1 statutory deadline and that there will not be adverse effects on the
City's cash flow and additional City expenditures as a result of such delays.
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The City projections set forth in the Plan are based on various assumptions and
contingencies which are uncertain and which may not materialize. Changes in ma-
jor assumptions could significantly affect the City's ability to balance its
budget as required by State law and to meet its annual cash flow and financing
requirements. Such assumptions and contingencies include the timing of any re-
gional and local economic recovery, the absence of wage increases in excess of
the increases assumed in its financial plan, employment growth, provision of
State and Federal aid and mandate relief, State legislative approval of future
State budgets, levels of education expenditures as may be required by State
law, adoption of future City budgets by the New York City Council, approval by
the Governor or the State Legislature and the cooperation of MAC with respect
to various other actions proposed in the Plan and changes in federal tax law.
The City's ability to maintain a balanced operating budget is dependent on
whether it can implement necessary service and personnel reduction programs
successfully. As discussed above, the City must identify additional expenditure
reductions and revenue sources to achieve balanced operating budgets for fiscal
year 1997 and thereafter. Any such proposed expenditure reductions will be dif-
ficult to implement because of their size and the substantial expenditure re-
ductions already imposed on City operations in recent years.
Attaining a balanced budget is also dependent upon the City's ability to market
its securities successfully in the public credit markets. On May 3, 1996, the
Mayor announced a $1 billion reduction in City capital spending over a five
year period through fiscal year 2000. The City's financing program for fiscal
years 1996 through 1999 contemplates capital spending of $14.1 billion, which
will be financed through issuance of general obligation bonds, Water Authority
Revenue Bonds and Covered Organization obligations, and will be used primarily
to reconstruct and rehabilitate the City's infrastructure and physical assets
and to make capital investments. The City's financing program assumes the re-
ceipt of approximately $1 billion from the sale of City's sewer and water sys-
tems. However, the City Comptroller has obtained a court order blocking such
sale, which the City is appealing. In the event such appeal is unsuccessful the
City would be required to reduce capital spending during the next four years or
find additional sources of funds in such amount. A significant portion of such
bond financing is used to reimburse the City's general fund for capital expen-
ditures already incurred. In addition, the City issues revenue and tax antici-
pation notes to finance its seasonal working capital requirements. The terms
and success of projected public sales of City general obligation bonds and
notes will be subject to prevailing market conditions at the time of the sale,
and no assurance can be given that the credit markets will absorb the projected
amounts of public bond and note sales. In addition, future developments con-
cerning the City and public discussion of such developments, the City's future
financial needs and other issues may affect the market for outstanding City
general obligation bonds and notes. If the City were unable to sell its general
obligation bonds and notes, it would be prevented from meeting its planned op-
erating and capital expenditures.
Absent appropriate legislative relief, the City may also face limitations on
its borrowing capacity after 1998 under the State's Constitution that will pre-
vent it from borrowing additional funds, as a result of the decrease in real
estate values within the City. The inability to finance capital improvements
would increase the City's budget gaps in later years or require it to signifi-
cantly curtail capital spending which would lead to a deterioration in the
City's infrastructure and ability to deliver services.
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The City is a defendant in a significant number of lawsuits and is subject to
numerous claims and investigations, including, but not limited to, actions com-
menced and claims asserted against the City arising out of alleged constitu-
tional violations, torts, breaches of contracts, and other violations of law
and condemnation proceedings. While the ultimate outcome and fiscal impact, if
any, on the proceedings and claims are not currently predictable, adverse de-
terminations in certain of them might have a material adverse effect upon the
City's ability to carry out its financial plan. As of June 30, 1995, the City
estimated its potential future liability on outstanding claims to be $2.5
billion.
On January 30, 1995, Robert L. Schulz and other defendants commenced a federal
district court action seeking among other matters to cancel the issuance on
January 31, 1995 of $659 million of City bonds. While the federal courts have
rejected requests for temporary restraining orders and expedited appeals, the
case is still pending. The City has indicated that it believes the action to be
without merit as it relates to the City, but there can be no assurance as to
the outcome of the litigation and an adverse ruling or the granting of a perma-
nent injunction would have a negative impact on the City's financial condition
and its ability to fund its operations.
Fiscal Year 1996. New York City adopted its fiscal year 1996 budget in June,
1995 and submitted its Financial Plan for the 1996 fiscal year to the Control
Board on July 11, 1995. The fiscal 1996 budget and Financial Plan originally
provided for spending of $31.4 billion and closed a budget gap of $3.1 billion.
However, in January 1996 additional unexpected budget gaps totaling approxi-
mately $760 million were identified in the fiscal 1996 budget. The widening of
the budget gap for fiscal year 1996 resulted from shortfalls in tax revenues
and State and federal aid and the failure to achieve Medicaid, welfare and
other savings at the levels projected. The City has undertaken a number of ac-
tions to close the recently discovered gap, including additional agency cuts,
refinancing of MAC debt, the proposed sale of the City's parking meters and the
proposed sale of approximately $250 million of uncollected tax liens. The City
Comptroller has questioned whether the City will be able to close the remaining
budget gap for fiscal year 1996 prior to fiscal year-end on June 30, 1996 and
has criticized certain gap-closing measures as being at the expense of future
revenues.
Fiscal Years 1991 through 1995. The City achieved balanced operating results in
accordance with generally accepted accounting principles for fiscal years 1991
through 1995. The City was required to close substantial budget gaps in these
fiscal years in order to maintain balanced operating results.
Ratings. As of the date of this prospectus, Moody's rating of the City's gen-
eral obligation bonds stood at Baa1 and S&P's rating stood at A-. On February
11, 1991, Moody's had lowered its rating from A.
On March 1, 1996, Moody's confirmed its Baa1 rating in connection with a sched-
uled March 1996 sale of $1.3 billion of the City's general obligation bonds but
indicated that it would review such rating for a possible downgrade following
adoption of the City's 1997 fiscal year budget. S&P also confirmed its rating
of the City's general obligation bonds in connection with such general obliga-
tion bond issue in March 1996.
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In January 1995, in response to the City's plan to borrow $120 million to re-
fund debt due in February without imposing additional cuts in the fiscal 1995
budget, S&P's placed the City on negative credit watch. In late May 1996, S&P
confirmed the City's rating citing improvements in the revised fiscal year 1997
budget. Any rating decrease would negatively affect the marketability of the
City's bonds and significantly increase the City's financing costs.
On October 12, 1993, Moody's increased its rating of the City's issuance of
$650 million of Tax Anticipation Notes ("TANs") to MIG-1 from MIG-2. Prior to
that date, on May 9, 1990, Moody's revised downward its rating on outstanding
City revenue anticipation notes from MIG-1 to MIG-2 and rated the $900 million
notes then being sold MIG-2. S&P's rating of the October 1993 TANs issue in-
creased to SP-1 from SP-2. Prior to that date, on April 29, 1991, S&P revised
downward its rating on City revenue anticipation notes from SP-1 to SP-2.
As of December 31, 1995, the City and MAC had, respectively, $24.4 billion and
$4.0 billion of outstanding net long-term indebtedness.
(3) The State Agencies: Certain Agencies of the State have faced substantial
financial difficulties which could adversely affect the ability of such Agen-
cies to make payments of interest on, and principal amounts of, their respec-
tive bonds. The difficulties have in certain instances caused the State (under
so-called "moral obligation" provisions, which are non-binding statutory provi-
sions for State appropriations to maintain various debt service reserve funds)
to appropriate funds on behalf of the Agencies. Moreover, it is expected that
the problems faced by these Agencies will continue and will require increasing
amounts of State assistance in future years. Failure of the State to appropri-
ate necessary amounts or to take other action to permit those Agencies having
financial difficulties to meet their obligations could result in a default by
one or more of the Agencies. Such default, if it were to occur, would be likely
to have a significant adverse affect on investor confidence in, and therefore
the market price of, obligations of the defaulting Agencies. In addition, any
default in payment on any general obligation of any Agency whose bonds contain
a moral obligation provision could constitute a failure of certain conditions
that must be satisfied in connection with Federal guarantees of City and MAC
obligations and could thus jeopardize the City's long-term financing plans.
As of September 30, 1994, the State reported that eighteen Agencies each had
outstanding debt of $100 million or more and an aggregate of $70.3 billion of
outstanding debt, some of which was state-supported, state-relatd debt.
(4) State Litigation: The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental op-
erations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal
laws. Included in the State's outstanding litigation are a number of cases
challenging the constitutionality or the adequacy and effectiveness of a vari-
ety of significant social welfare programs primarily involving the State's men-
tal hygiene programs. Adverse judgments in these matters generally could result
in injunctive relief coupled with prospective changes in patient care which
could require substantial increased financing of the litigated programs in the
future.
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The State is also engaged in a variety of claims wherein significant monetary
damages are sought. Actions commenced by several Indian nations claim that sig-
nificant amounts of land were unconstitutionally taken from the Indians in vio-
lation of various treaties and agreements during the eighteenth and nineteenth
centuries. The claimants seek recovery of approximately six million acres of
land, as well as compensatory and punitive damages.
(5) Other Municipalities: Certain localities in addition to New York City could
have financial problems leading to requests for additional State assistance.
The potential impact on the State of such actions by localities is not included
in projections of State receipts and expenditures in the State's 1994-95 fiscal
year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in
the creation of the Financial Control Board for the City of Yonkers (the "Yon-
kers Board") by the State in 1984. The Yonkers Board is charged with oversight
of the fiscal affairs of Yonkers. Future actions taken by the Governor or the
State Legislature to assist Yonkers could result in allocation of State re-
sources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term and
long-term borrowings. In 1993, the total indebtedness of all localities in the
State (other than New York City) was approximately $17.7 billion. State law re-
quires the Comptroller to review and make recommendations concerning the bud-
gets of those local government units other than New York City authorized by
State law to issue debt to finance deficits during the period that such deficit
financing is outstanding. Fifteen localities had outstanding indebtedness for
State financing at the close of their fiscal year ending in 1993. In December
1995, in reaction to continuing financial problems, the Troy Municipal Assis-
tance Corp., which was created in 1995, imposed a 1996 budget plan upon Troy,
New York. Troy MAC had been expected to refinance $35 million of revenue bonds
issued by Troy, for which Troy lacks resources to fund debt service. Such reve-
nue bonds have not to date been refinanced. A similar municipal assistance cor-
poration has also been established for Newburgh. In addition, several other
smaller New York cities, including Utica, Rome, Schenectady and Niagara Falls
have faced continuing budget deficits, as federal and state aid and local tax
revenues have declined while government expenses have increased. The financial
problems being experienced by the State's smaller urban centers place addi-
tional strains upon the State's financial condition at a time when the State is
struggling with its own budget gaps.
Certain proposed Federal expenditure reductions could reduce, or in some cases
eliminate, Federal funding of some local programs and accordingly might impose
substantial increased expenditure requirements on affected localities to in-
crease local revenues to sustain those expenditures. In addition, proposed
changes in the treatment of capital gains for federal income tax purposes could
reduce tax receipts of the state and city. If the State, New York City or any
of the Agencies were to suffer serious financial difficulties jeopardizing
their respective access to the public credit markets, the marketability of
notes and bonds issued by localities within the State, including notes or bonds
in the Fund, could be adversely affected. Localities also face anticipated and
potential problems resulting from certain pending litigation, judicial deci-
sions, and long-range economic trends. The longer-range potential problems of
declining urban population, increasing expenditures, and other economic trends
could adversely affect certain localities and require increasing State assis-
tance in the future.
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However, the information below is intended only as a general summary, and is
not intended as a discussion of any specific factor that may affect any partic-
ular obligation or issuer.
General. Ohio is the seventh most populous state. The 1990 Census count of
10,847,000 indicated a 0.5% population increase from 1980. The Census estimate
for 1994 is 11,102,000.
While diversifying more into the service and other non-manufacturing areas, the
Ohio economy continues to rely in part on durable goods manufacturing largely
concentrated in motor vehicles and equipment, steel, rubber products and house-
hold appliances. As a result, general economic activity, as in many other in-
dustrially-developed states, tends to be more cyclical than in some other
states and in the nation as a whole. Agriculture is an important segment of the
economy, with over half the State's area devoted to farming and approximately
16% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly somewhat
higher than the national figure. For example, the reported 1990 average monthly
State rate was 5.7%, compared to the 5.5% national figure. However, for the
last five years the State rates were below the national rates (4.8% versus 5.6%
in 1995. The unemployment rate and its effects vary among geographic areas of
the State.
There can be no assurance that future national, regional or state-wide economic
difficulties, and the resulting impact on State or local government finances
generally, will not adversely affect the market value of Ohio Obligations held
in the Ohio Fund or the ability of particular obligors to make timely payments
of debt service on (or lease payments relating to) those Obligations.
State Finances. The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its July 1
to June 30 fiscal year (FY) or fiscal biennium in a deficit position. Most
State operations are financed through the General Revenue Fund (GRF), for which
the personal income and sales-use taxes are the major sources. Growth and de-
pletion of GRF ending fund balances show a consistent pattern related to na-
tional economic conditions, with the ending FY balance reduced during less fa-
vorable and increased during more favorable economic periods. The State has
well-established procedures for, and has timely taken, necessary actions to en-
sure resource/expenditure balances during less favorable economic periods.
Those procedures included general and selected reductions in appropriations
spending.
Key biennium-ending fund balances at June 30, 1989 were $475.1 million in the
GRF and $353 million in the Budget Stabilization Fund (BSF, a cash and budget-
ary management fund). June 30, 1991 ending fund balances were $135.3 million
(GRF) and $300 million (BSF).
The next biennium, 1992-1993 presented significant challenges to state fi-
nances, successfully addressed. To allow time to resolve certain budget differ-
ences, an interim appropriations act was enacted effective July 1, 1991; it in-
cluded GRF debt service and lease rental appropriations for the entire bienni-
um, while continuing most other appropriations for a month. Pursuant to the
general appropriations act for the entire biennium, passed on July 11, 1991,
$200 million was transferred from the BSF to the GRF in FY 1992.
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Based on updated results and forecasts in the course of that FY, both in light
of a continuing uncertain nationwide economic situation, there was projected--
and then timely addressed--an FY 1992 imbalance in GRF resources and expendi-
tures. In response, the Governor ordered most State agencies to reduce GRF
spending in the last six months of FY 1992 by a total of approximately $184
million; the $100.4 million BSF balance and additional amounts from certain
other funds were transferred late in the FY to the GRF; and adjustments were
made in the timing of certain tax payments.
A significant GRF shortfall (approximately $520 million) was then projected for
FY 1993. It was addressed by appropriate legislative and administrative actions
including the Governor's ordering $300 million in selected GRF spending reduc-
tions and subsequent executive and legislative action (a combination of tax re-
visions and additional spending reductions). The June 30, 1993 ending GRF fund
balance was approximately $111 million, of which, as a first step to BSF re-
plenishment, $21 million was deposited in the BSF.
None of the spending reductions were applied to appropriations needed for debt
service on or lease rentals relating to any State obligations.
The 1994-95 biennium presented a more affirmative financial picture. Based on
June 30, 1994 balances, an additinal $260 million was deposited in the BSF. The
biennium ended June 30, 1995 with a GRF ending fund balance of $928 million, of
which $535.2 million was transferred into the BSF (which had an April 3, 1996
balance of over $828 million).
The GRF appropriations act for the 1995-96 biennium was passed on June 28, 1995
and promptly signed (after selective vetoes) by the Governor. All necessary GRF
appropriations for State debt service and lease rental payments then projected
for the biennium were included in that act.
Debt. The State's incurrence or assumption of debt without a vote of the people
is, with limited exceptions, prohibited by current State constitutional provi-
sions. The State may incur debt, limited in amount to $750,000, to cover casual
deficits or failures in revenues or to meet expenses not otherwise provided
for. The Constitution expressly precludes the State from assuming the debts of
any local government or corporation. (An exception is made in both cases for
any debt incurred to repel invasion, suppress insurrection or defend the State
in war.)
By 14 constitutional amendments, the last adopted in 1995, Ohio voters have au-
thorized the incurrence of State debt and the pledge of taxes or excises to its
payment. At April 3, 1996, $892 million (excluding certain highway bonds pay-
able primarily from highway use charges) of this debt was outstanding. The only
such State debt at that date still authorized to be incurred were portions of
the highway bonds, and the following: (a) up to $100 million of obligations for
coal research and development may be outstanding at any one time ($39.6 million
outstanding); (b) $240 million of obligations previously authorized for local
infrastructure improvements, no more than $120 million of which may be issued
in any calendar year ($805.4 million outstanding); and (c) up to $200 million
in general obligation bonds for parks, recreation and natural resources pur-
poses which may be outstanding at any one time ($47.2 million outstanding, with
no more than $50 million to be issued in any one year).
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The electors approved in November 1995 a constitutional amendment that extends
the local infrastructure bond program (authorizing an additional $1.2 billion
of State full faith and credit obligations to be issued over 10 years for the
purpose), and authorizes additional highway bonds (expected to be payable pri-
marily from highway use receipts). The latter supersedes the prior $500 mil-
lion highway obligation authorization, and authorizes not more than $1.2 bil-
lion to be outstanding at any time and not more than $220 million to be issued
in a fiscal year.
Common resolutions are pending in both houses of the General Assembly that
would submit a constitutional amendment relating to certain other aspects of
State debt. The proposal would authorize, among other things, the issuance of
State general obligation debt for a variety of purposes with debt service on
all State general obligation debt and GRF-supported obligations not to exceed
5% of the preceding fiscal year's GRF expenditures.
The Constitution also authorizes the issuance of State obligations for certain
purposes, the owners of which do not have the right to have excises or taxes
levied to pay debt service. Those special obligations include obligations is-
sued by the Ohio Public Facilities Commission and the Ohio Building Authority,
and certain obligations issued by the State Treasurer, over $4.8 billion of
which was outstanding or awaiting delivery at April 3, 1996.
A 1990 constitutional amendment authorizes greater State and political subdi-
vision participation (including financing) in the provision of housing. The
General Assembly may for that purpose authorize the issuance of State obliga-
tions secured by a pledge of all or such portion as it authorizes of State
revenues or receipts (but not by a pledge of the State's full faith and cred-
it).
A 1994 constitutional amendment pledges the full faith and credit and taxing
power of the State to meeting certain guarantees under the State's tuition
credit program which provides for purchase of tuition credits, for the benefit
of State residents, guaranteed to cover a specified amount when applied to the
cost of higher education tuition. (A 1965 constitutional provision that autho-
rized student loan guarantees payable from available State moneys has never
been implemented, apart from a "guarantee fund" approach funded essentially
from program revenues.)
The House has adopted a resolution that would submit to the electors a consti-
tutional amendment prohibiting the General Assembly from imposing a new tax or
increasing an existing tax unless approved by a three-fifths vote of each
house or by a majority vote of the electors. It cannot be predicted whether
required Senate concurrence to submission will be received.
State and local agencies issue obligations that are payable from revenues from
or relating to certain facilities (but not from taxes). By judicial interpre-
tation, these obligations are not "debt" within constitutional provisions. In
general, payment obligations under lease-purchase agreements of Ohio public
agencies (in which certificates of participation may be issued) are limited in
duration to the agency's fiscal period, and are renewable only upon appropria-
tions being made available for the subsequent fiscal period.
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Debt Rating. The outstanding State tax supported bonds are currently rated "Aa"
by Moody's and "AAA" (highway obligations) and "AA" by S&P, and the outstanding
State bonds issued by the Ohio Public Facilities Commission and Ohio Building
Authority are rated "A1" by Moody's and "A+" by S&P.
Schools and Municipalities. Local school districts in Ohio receive a major por-
tion (state-wide aggregate of approximately 44% in recent years) of their oper-
ating moneys from State subsidies, but are dependent on local property taxes,
and in 120 districts from voter-authorized income taxes, for significant por-
tions of their budgets. Litigation, similar to that in other states, is pending
questioning the constitutionality of Ohio's system of school funding. The trial
court concluded that aspects of the system (including basic operating assis-
tance) are unconstitutional, and ordered the State to provide for and fund a
system complying with the Ohio Constitution. The State appealed and a court of
appeals reversed the trial court's findings for plaintiff districts. The case
is now pending on appeal in the Ohio Supreme Court. A small number of the
State's 612 local school districts have in any year required special assistance
to avoid year-end deficits. A current program provides for school district cash
need borrowing directly from commercial lenders, with diversion of State sub-
sidy distributions to repayment if needed. Recent borrowings under this program
totalled $94.5 million for 27 districts (including $75 million for one) in FY
1993, $41.1 million for 28 districts in FY 1994, and $71.1 million for 29 dis-
tricts in FY 1995.
Ohio's 943 incorporated cities and villages rely primarily on property and mu-
nicipal income taxes for their operations. With other subdivisions, they also
receive local government support and property tax relief moneys distributed by
the State. For those few municipalities that on occasion have faced significant
financial problems, there are statutory procedures for a joint State/local com-
mission to monitor the municipality's fiscal affairs and for development of a
financial plan to eliminate deficits and cure any defaults. Since inception in
1979, these procedures have been applied to 23 cities and villages; for 19 of
them the fiscal situation was resolved and the procedures terminated.
Property Taxes. At present the State itself does not levy ad valorem taxes on
real or tangible personal property. Those taxes are levied by political subdi-
visions and other local taxing districts. The Constitution has since 1934 lim-
ited to 1% of true value in money the amount of the aggregate levy (including a
levy for unvoted general obligations) of property taxes by all overlapping sub-
divisions, without a vote of the electors or a municipal charter provision, and
statutes limit the amount of that aggregate levy to 10 mills per $1 of assessed
valuation (commonly referred to as the "ten-mill limitation"). Voted general
obligations of subdivisions are payable from property taxes that are unlimited
as to amount or rate.
Litigation. According to recent State official statements, the State is a party
to various legal proceedings seeking damages or injunctive or other relief and
generally incidental to its operations. The ultimate disposition of those pro-
ceedings is not determinable.
CONSIDERATIONS RELATING TO FINANCIAL FUTURES AND OPTION CONTRACTS
As described in the Prospectus, each of the Funds may purchase and sell finan-
cial futures contracts, options on financial futures or related options for the
purpose of hedging its portfolio securities against declines in the value of
such securities, and to hedge against increases in the cost of securities the
Fund
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intends to purchase. To accomplish such hedging, a Fund may take an investment
position in a futures contract or in an option which is expected to move in the
opposite direction from the position being hedged. Futures or options utilized
for hedging purposes would either be based on an index of long-term Municipal
Obligations (i.e., those with remaining maturities averaging 20-30 years) or
relate to debt securities whose prices are anticipated by Nuveen Advisory to
correlate with the prices of the Municipal Obligations owned by a Fund. The
sale of financial futures or the purchase of put options on financial futures
or on debt securities or indexes is a means of hedging against the risk that
the value of securities owned by a Fund may decline on account of an increase
in interest rates, and the purchase of financial futures or of call options on
financial futures or on debt securities or indexes is a means of hedging
against increases in the cost of the securities a Fund intends to purchase as a
result of a decline in interest rates. Writing a call option on a futures con-
tract or on debt securities or indexes may serve as a hedge against a modest
decline in prices of Municipal Obligations held in a Fund's portfolio, and
writing a put option on a futures contract or on debt securities or indexes may
serve as a partial hedge against an increase in the value of Municipal Obliga-
tions a Fund intends to acquire. The writing of such options provides a hedge
to the extent of the premium received in the writing transaction. Regulations
of the Commodity Futures Trading Commission ("CFTC") applicable to the Funds
require that transactions in futures and options on futures be engaged in only
for bona-fide hedging purposes, and that no such transactions may be entered
into by a Fund if the aggregate initial margin deposits and premiums paid by
that Fund exceeds 5% of the market value of the Fund's assets. A Fund will not
purchase futures unless it has segregated cash, government securities or high
grade liquid debt equal to the contract price of the futures less any margin on
deposit, or unless the long futures position is covered by the sale of a put
option. A Fund will not sell futures unless the Fund owns the instruments un-
derlying the futures or owns options on such instruments or owns a portfolio
whose market price may be expected to move in tandem with the market price of
the instruments or index underlying the futures. In addition, each Fund is sub-
ject to the tax requirement that less than 30% of its gross income may be de-
rived from the sale or disposition of securities held for less than three
months. With respect to its engaging in transactions involving the purchase or
writing of put and call options on debt securities or indexes, a Fund will not
purchase such options if more than 5% of its assets would be invested in the
premiums for such options, and it will only write "covered" or "secured" op-
tions, wherein the securities or cash required to be delivered upon exercise
are held by a Fund, with such cash being maintained in a segregated account.
These requirements and limitations may limit a Fund's ability to engage in
hedging transactions.
Description of Financial Futures and Options. A futures contract is a contract
between a seller and a buyer for the sale and purchase of specified property at
a specified future date for a specified price. An option is a contract that
gives the holder of the option the right, but not the obligation, to buy (in
the case of a call option) specified property from, or to sell (in the case of
a put option) specified property to, the writer of the option for a specified
price during a specified period prior to the option's expiration. Financial
futures contracts and options cover specified debt securities (such as U.S.
Treasury securities) or indexes designed to correlate with price movements in
certain categories of debt securities. At least one exchange trades futures
contracts on an index designed to correlate with the long-term municipal bond
market. Financial futures contracts and options on financial futures contracts
are traded on exchanges regulated by the CFTC. Options on certain financial in-
struments and financial indexes are traded in securities markets regulated by
the Securities and Exchange Commission. Although futures
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contracts and options on specified financial instruments call for settlement by
delivery of the financial instruments covered by the contracts, in most cases
positions in these contracts are closed out in cash by entering into offset-
ting, liquidating or closing transactions. Index futures and options are de-
signed for cash settlement only.
Risks of Futures and Options Transactions. There are risks associated with the
use of futures contracts and options for hedging purposes. Investment in
futures contracts and options involves the risk of imperfect correlation be-
tween movements in the price of the futures contract and options and the price
of the security being hedged. The hedge will not be fully effective where there
is imperfect correlation between the movements in the two financial instru-
ments. For example, if the price of the futures contract moves more than the
price of the hedged security, a Fund will experience either a loss or gain on
the future which is not completely offset by movements in the price of the
hedged securities. Further, even where perfect correlation between the price
movements does occur, a Fund will sustain a loss at least equal to the commis-
sions on the financial futures transaction. To compensate for imperfect correc-
tions, the Funds may purchase or sell futures contracts in a greater dollar
amount than the hedged securities if the volatility of the hedged securities is
historically greater than the volatility of the futures contracts. Conversely,
the Funds may purchase or sell fewer futures contracts if the volatility of the
price of the hedged securities is historically less than that of the futures
contracts.
Because of low initial margin deposits made upon the opening of a futures posi-
tion, futures transactions involve substantial leverage. As a result, rela-
tively small movements in the price of the futures contract can result in sub-
stantial unrealized gains or losses. Because the Funds will engage in the pur-
chase and sale of financial futures contracts solely for hedging purposes, how-
ever, any losses incurred in connection therewith should, if the hedging strat-
egy is successful, be offset in whole or in part by increases in the value of
securities held by the Funds or decreases in the price of securities the Funds
intend to acquire.
The Funds expect to liquidate a majority of the financial futures contracts
they enter into through offsetting transactions on the applicable contract mar-
ket. There can be no assurance, however, that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may
not be possible to close a futures position. In the event of adverse price
movements, the Funds would continue to be required to make daily cash payments
of variation margin. In such situations, if a Fund has sufficient cash, it may
be required to sell portfolio securities to meet daily variation margin re-
quirements at a time when it may be disadvantageous to do so. The inability to
close out futures positions also could have an adverse impact on a Fund's abil-
ity to hedge its portfolio effectively and may expose the Fund to risk of loss.
The Funds will enter into a futures position only if, in the judgment of Nuveen
Advisory, there appears to be an actively traded secondary market for such
futures contracts.
The liquidity of a secondary market in a futures contract may be adversely af-
fected by "daily price fluctuation limits" established by commodity exchanges
which limit the amount of fluctuation in a futures contract price during a sin-
gle trading day. Once the daily limit has been reached in the contract, no
trades may be entered into at a price beyond the limit, thus preventing the
liquidation of open futures positions. Prices have in the past moved the daily
limit on a number of consecutive trading days.
30
<PAGE>
The successful use of transactions in futures also depends on the ability of
Nuveen Advisory to forecast the direction and extent of interest rate movements
within a given time frame. To the extent these prices remain stable during the
period in which a futures contract is held by a Fund or moves in a direction
opposite to that anticipated, the Fund may realize a loss on the hedging trans-
action which is not fully or partially offset by an increase in the value of
portfolio securities. As a result, the Fund's total return for such period may
be less than if it had not engaged in the hedging transaction.
The ability of each of the Funds to engage in transactions in futures contracts
may be limited by the tax requirement that it have less than 30% of its gross
income derived from the sale or other disposition of stock or securities held
for less than three months. Gain from transactions in futures contracts will be
taxable to a Fund's shareholders partially as short-term and partially as long-
term capital gain.
TEMPORARY INVESTMENTS
The Prospectus discusses briefly the ability of each Fund to invest a portion
of its assets in federally tax-exempt or taxable "temporary investments." Tem-
porary investments will not exceed 20% of any Fund's assets except when made
for defensive purposes. The Funds will invest only in taxable temporary invest-
ments that are either U.S. Government securities or are rated within the high-
est grade by Moody's or S&P, and mature within one year from the date of pur-
chase or carry a variable or floating rate of interest.
The Funds may invest in the following federally tax-exempt temporary invest-
ments:
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions 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 mar-
ket 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 fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. Tax anticipation notes are usually
general obligations of the issuer. A weakness in an issuer's capacity to raise
taxes due to, among other things, a decline in its tax base or a rise in delin-
quencies, 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 obliga-
tions 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 in-
terest on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
31
<PAGE>
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 there-
from. Maturities of municipal paper generally will be shorter than the maturi-
ties of TANs, BANs or RANs. There is a limited secondary market for issues of
municipal paper.
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 each 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 estab-
lished as instrumentalities of the United States Government to supervise and
finance certain types of activities. These agencies include, but are not lim-
ited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States, and Tennessee Valley Authority. Issues of these agencies, while not di-
rect 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 sup-
ported 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 inter-
est bearing instrument with a specific maturity. CDs are issued by banks in ex-
change for the deposit of funds and normally can be traded in the secondary
market, prior to maturity. The Funds will only invest in U.S. dollar denomi-
nated CDs issued by U.S. banks with assets of $1 billion or more.
32
<PAGE>
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 inter-
est.
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 opin-
ion 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 the Funds might incur a loss if the value of the collateral de-
clines, 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 col-
lateral by the Funds 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. A Fund will
not invest more than 10% of its assets in repurchase agreements maturing in
more than seven days.
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 quali-
ty." 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 ele-
ments make long-term risks appear somewhat larger than in Aaa rated Municipal
Obligations. The Aaa and Aa rated Municipal Obligations comprise what are gen-
erally 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 of 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 obliga-
tions (i.e., they are neither highly protected nor poorly secured). Such bonds
lack outstanding investment characteristics and in fact have speculative char-
acteristics as well. Moody's bond rating symbols may contain numerical modifi-
ers 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.
33
<PAGE>
The four highest ratings of S&P for Municipal Obligations are AAA, AA, A and
BBB. Municipal Obligations rated AAA have an extremely strong capacity to pay
principal and interest. The rating of AA indicates that capacity to pay prin-
cipal 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 ca-
pacity 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 capac-
ity to pay principal and interest. Whereas such bonds normally exhibit ade-
quate 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 "Other Corporate Obligations" category of temporary investments are corpo-
rate (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.
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 the Fund's
portfolio, but Nuveen Advisory will consider such an event in its determina-
tion of whether the Fund should continue to hold such obligation.
MANAGEMENT
The management of Nuveen Tax-Free Bond Fund, Inc., including general supervi-
sion of the duties performed for the Funds under the Investment Management
Agreement, is the responsibility of its Board of Directors. Currently there
are six directors, two of whom are "interested persons" (as the term "inter-
ested persons" is defined in the Investment Company Act of 1940) and four of
whom are "disinterested persons." The names and business addresses of the di-
rectors and officers of Nuveen Tax-Free Bond Fund, Inc. and their principal
occupations and other affiliations during the past five years are set forth
below, with those directors who are "interested persons" indicated by an as-
terisk.
<TABLE>
- -----------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND
OFFICES WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE FUNDS DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Timothy R. 47 Chairman of the Chairman (since July 1, 1996) and Di-
Schwertfeger* Board and Di- rector, formerly Executive Vice Presi-
333 West Wacker rector dent of The John Nuveen Company (since
Drive March 1992) and of John Nuveen & Co.
Chicago, IL 60606 Incorporated; Chairman (since July 1,
1996) and Director (since October 1,
1992) of Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.
</TABLE>
- -------------------------------------------------------------------------------
34
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND
OFFICES WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE FUNDS DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Anthony T. Dean* 51 President and President (since July 1, 1996) and Di-
333 West Wacker Director rector, formerly Executive Vice Presi-
Drive dent of The John Nuveen Company (since
Chicago, IL 60606 March 1992) and of John Nuveen & Co.
Incorporated; President (since July 1,
1996) and Director (since October 1,
1992) of Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown 61 Director Retired (August 1989) as Senior Vice
201 Michigan Avenue President of The Northern Trust Compa-
Highwood, IL 60040 ny.
- ------------------------------------------------------------------------------------------------------------------------------------
Anne E. Impellizzeri 63 Director President and Chief Executive Officer
3 West 29th Street of Blanton-Peale, Institutes of Reli-
New York, NY 10001 gion and Health (since December 1990);
prior thereto, Vice President of New
York City Partnership (from 1987 to
1990).
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret K. Rosen- 69 Director Helen Ross Professor of Social Welfare
heim Policy, School of Social Service Admin-
969 East 60th Street istration, University of Chicago.
Chicago, IL 60637
- ------------------------------------------------------------------------------------------------------------------------------------
Peter R. Sawers 63 Director Adjunct Professor of Business and Eco-
22 The Landmark nomics, University of Dubuque, Iowa;
Northfield, IL 60093 Adjunct Professor, Lake Forest Graduate
School of Management, Lake Forest, Il-
linois (since January 1992); prior
thereto, Executive Director, Towers
Perrin Australia (management consul-
tant); Chartered Financial Analyst;
Certified Management Consultant.
- ------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald 32 Vice President Vice President of Nuveen Advisory Corp.
33 West Wacker Drive (since December 1995); Assistant Vice
Chicago, Illinois President of Nuveen Advisory Corp.
60606 (from September 1992 to December 1995),
prior thereto Assistant Portfolio Man-
ager of Nuveen Advisory Corp. (from
June 1988 to September 1992).
- ------------------------------------------------------------------------------------------------------------------------------------
Kathleen M. Flanagan 49 Vice President Vice President of John Nuveen & Co. In-
333 West Wacker corporated.
Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell 40 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker
Drive
Chicago, IL 60606
</TABLE>
- --------------------------------------------------------------------------------
35
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND
OFFICES WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE FUNDS DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Steven J. Krupa 38 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker
Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Anna R. Kucinskis 50 Vice President Vice President of John Nuveen & Co. In-
333 West Wacker corporated.
Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin 44 Vice President Vice President (since September 1992),
333 West Wacker and Assistant Assistant Secretary and Assistant Gen-
Drive Secretary eral Counsel of John Nuveen & Co. In-
Chicago, IL 60606 corporated; Vice President (since May
1993) and Assistant Secretary of Nuveen
Advisory Corp; Vice President (since
May 1993) and Assistant Secretary
(since January 1992) of Nuveen Institu-
tional Advisory Corp.; Assistant Secre-
tary of The John Nuveen Company (since
February 1993).
- ------------------------------------------------------------------------------------------------------------------------------------
O. Walter Renfftlen 56 Vice President Vice President and Controller of The
333 West Wacker and Controller John Nuveen Company (since March 1992),
Drive John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional
Advisory Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas C. Spalding, 44 Vice President Vice President of Nuveen Advisory Corp.
Jr. and Nuveen Institutional Advisory
333 West Wacker Corp.; Chartered Financial Analyst.
Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
H. William Stabenow 61 Vice President Vice President and Treasurer of The
333 West Wacker and Treasurer John Nuveen Company (since March 1992),
Drive John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional
Advisory Corp. (since January 1992).
- ------------------------------------------------------------------------------------------------------------------------------------
James J. Wesolowski 45 Vice President Vice President, General Counsel and
333 West Wacker and Secretary Secretary of The John Nuveen Company
Drive (since March 1992), John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman 39 Vice President Vice President (since September 1992),
333 West Wacker and Assistant Assistant Secretary and Assistant Gen-
Drive Secretary eral Counsel of John Nuveen & Co. In-
Chicago, IL 60606 corporated; Vice President (since May
1993) and Assistant Secretary of Nuveen
Advisory Corp.; Vice President (since
May 1993) and Assistant Secretary
(since January 1992) of Nuveen Institu-
tional Advisory Corp.
</TABLE>
- --------------------------------------------------------------------------------
36
<PAGE>
Timothy R. Schwertfeger and Margaret K. Rosenheim serve as members of the Exec-
utive Committee of the Board of Directors. The Executive Committee, which meets
between regular meetings of the Board of Directors, is authorized to exercise
all of the powers of the Board of Directors.
The directors of Nuveen Tax-Free Bond Fund, Inc. are also directors or trust-
ees, as the case may be, of 18 other Nuveen open-end fund portfolios and 53
Nuveen closed-end funds.
The following table sets forth compensation paid by Nuveen Tax-Free Bond Fund,
Inc. during the fiscal year ended February 29, 1996 to each of the directors.
The Nuveen Tax-Free Bond Fund, Inc. has no retirement or pension plans. The of-
ficers and directors affiliated with Nuveen serve without any compensation from
the Nuveen Tax-Free Bond Fund, Inc.
<TABLE>
<CAPTION>
TOTAL COMPENSATION
FROM THE FUND
AGGREGATE AND FUND COMPLEX
COMPENSATION PAID TO
NAME OF DIRECTOR FROM THE FUND DIRECTORS(1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Richard J. Franke*............................. $ 0 $ 0
Timothy R. Schwertfeger........................ 0 0
Lawrence H. Brown.............................. 1,255 55,500
Anne E. Impellizzeri........................... 1,255 63,000
John E. O'Toole................................ 1,031 47,000
Margaret K. Rosenheim.......................... 1,378(2) 62,322(3)
Peter R. Sawers................................ 1,255 55,500
</TABLE>
- --------
*Mr. Franke retired as of June 30, 1996.
(1) The directors of the Nuveen Tax-Free Bond Fund, Inc. are directors or
trustees, as the case may be, of 21 Nuveen open-end funds and 53 Nuveen
closed-end funds.
(2) Includes $161 in interest earned on deferred compensation from prior years.
(3) Includes $1,572 in interest earned on deferred compensation from prior
years.
Each director who is not affiliated with Nuveen or Nuveen Advisory receives a
$45,000 annual retainer for serving as a director or trustee of all funds for
which Nuveen Advisory serves as investment adviser and a $1,000 fee per day
plus expenses for attendance at all meetings held on a day on which a regularly
scheduled Board meeting is held, a $1,000 fee per day plus expenses for atten-
dance in person or a $500 fee per day plus expenses for attendance by telephone
at a meeting held on a day on which no regular Board meeting is held, and a
$250 fee per day plus expenses for attendance in person or by telephone at a
meeting of the Executive Committee held solely to declare dividends. The annual
retainer, fees and expenses are allocated among the funds for which Nuveen Ad-
visory serves as investment adviser on the basis of relative net asset sizes.
The Funds require no employees other than their officers, all of whom are com-
pensated by Nuveen.
On June 5, 1996, the officers and directors of Nuveen Tax-Free Bond Fund, Inc.
as a group owned less than 1% of the outstanding shares of each Fund. The fol-
lowing table sets forth the percentage owner
37
<PAGE>
ship of each person who, as of June 5, 1996, owned of record or was known by
Nuveen Tax-Free Bond Fund, Inc. to own of record or beneficially 5% or more of
any class of shares of a Fund.
<TABLE>
<CAPTION>
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- -------------------------------------------------------------------------------------
<S> <C> <C>
Massachusetts Fund
Class A Shares......... Smith Barney Inc. 4.64%
00148920601
388 Greenwich Street
New York, NY 10013
Alex Brown & Sons Incorporated 5.89%
FBO 252-09790-10
PO Box 1346
Baltimore, MD 21203
MFSC FEBO # OC8-412740 5.83%
Barbara Polverari
PO Box 30
Springfield, MA 01090
Massachusetts Fund
Class C Shares......... Hudson & Matson 18.69%
39 Greggs Rd.
Sutton, MA 01590-1015
Swastika Sengupta 11.06%
23 Loumar Dr., #2
Pittsfield, MA 01201-5932
Anthony Macolini 6.96%
17 Nossdale Rd.
Jamaica Plain, MA 02130-3022
Charles G. Allen, Jr. TR. 6.39%
UA MAR 05 54
UW Flora A. Generess
FBO Charles G. Allen, Jr. et al.
221 James St., #65
Barre, MA 01005-8805
Mary W. Melville 5.16%
4 Paul Revere Rd.
Worcester, MA 01609-1210
New York Fund
Class A Shares......... BHC Securities, Inc. 7.65%
ATTN: Mutual Funds
One Commerce Square
2005 Market St., Ste. 1200
Philadelphia, PA 19103-7042
Donaldson Lufkin Jenrette Securities 7.04%
Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- --------------------------------------------------------------------------------
<S> <C> <C>
New York Fund
Class C Shares........... Katherine C. Hinton & 15.63%
Lorin W. Lyle
JT TEN WROS NOT TC
100 LaSalle St., Apt. 11F
New York, NY 10027-4738
Carol Wieder 13.36%
315 Vista Dr.
Jericho, NY 11753-2808
Ceila W. Bugenhagen &
Kenneth Bugenhagen 8.04%
JT TEN WROS NOT TC
552 Forest Edge Dr.
East Amherst, NY 14051-2468
Adam S. Katz & 6.67%
Karen Katz
JT TEN WROS NOT TC
2276 Merrick Ave.
Merrick, NY 11566
Carol P. & Yale Rosen Tr. 5.47%
UA DCT 16 95
Carol P. Rosen Living Trust
854 Oakland Ct.
North Bellmore, NY 11710-1018
New York Fund
Class R Shares........... BHC Securities, Inc. 9.25%
ATTN: Mutual Funds
One Commerce Square
2005 Market St., Ste. 1200
Philadelphia, PA 19103-7042
Ohio Fund
Class A Shares........... Ann Zlatoper 8.26%
100 Windrush Dr.
Chagrin Falls, OH 44022-6843
Ohio Fund
Class C Shares........... Timothy L. Horn 14.86%
2109 Fishinger Rd.
Columbus, OH 43221-1246
Milo L. Renz 10.24%
119 Cardinal Drive
Bryan, OH 43506
NFSC FEBO # A7D-559865 10.09%
ADCO Distributors, Inc.
ATTN: Barry Adelman
221 Cherry, N.E.
Canton, OH 44702
</TABLE>
39
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the investment
and reinvestment of the assets of each of the Funds. Nuveen Advisory also ad-
ministers Nuveen Tax-Free Bond Fund Inc.'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 compen-
sation as directors or officers if elected to such positions. See "Management
of the Funds" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and
Nuveen Tax-Free Bond Fund, Inc., each Fund has agreed to pay an annual manage-
ment fee at the rates set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET
VALUE MANAGEMENT FEE
- ------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1%
For the next $250 million .5250 of 1%
For the next $500 million .5125 of 1%
For the next $1 billion .5000 of 1%
For assets over $2 billion .4750 of 1%
</TABLE>
In order to prevent total operating expenses (including Nuveen Advisory's fee,
but excluding interest, taxes, fees incurred in acquiring and disposing of
portfolio securities, any asset-based distribution or service fees and, to the
extent permitted, extraordinary expenses) from exceeding .75 of 1% of the aver-
age daily net asset value of any class of shares of each Fund for any fiscal
year, Nuveen Advisory has agreed to waive all or a portion of its management
fees or reimburse certain expenses of each Fund. Nuveen Advisory may also vol-
untarily agree to reimburse additional expenses from time to time, which volun-
tary reimbursements may be terminated at any time in its discretion. For the
last three fiscal years, the Funds paid net management fees to Nuveen Advisory
as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF EXPENSE FEE WAIVERS AND
REIMBURSEMENT PAID TO NUVEEN EXPENSE REIMBURSEMENTS FOR
ADVISORY FOR THE YEAR ENDED THE YEAR ENDED
-------------------------------- ---------------------------
2/28/94 2/28/95 2/29/96 2/28/94 2/28/95 2/29/96
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Massachusetts Fund...... $ 320,135 $ 370,394 $ 366,859 $ 37,413 $ 17,319 $ 59,879
New York Fund........... 688,156 786,847 852,809 34,007 4,556 29,700
Ohio Fund............... 831,787 873,409 914,277 6,228 3,524 42,592
Total For All Funds..... 1,840,078 2,030,650 2,133,945 77,648 25,399 132,171
</TABLE>
As discussed in the Prospectus, in addition to the management fees of Nuveen
Advisory, each Fund pays all other costs and expenses of its operations and a
portion of Nuveen Tax-Free Bond Fund Inc.'s general administrative expenses al-
located 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. Founded in 1898, Nuveen is the
oldest and largest investment banking firm specializing in the underwriting and
distribution of tax-exempt securities and maintains the largest research de-
partment in the investment banking community devoted exclusively to the analy-
sis of municipal securities. In 1961, Nuveen began sponsoring the Nuveen Tax-
Exempt Unit Trust and since that time has issued more than $36 billion in tax-
exempt unit trusts, including over $12 billion in tax-ex
40
<PAGE>
empt insured unit trusts. In addition, Nuveen open-end and closed-end funds
held approximately $31 billion in tax-exempt securities under management as of
the date of this Statement. Over 1,000,000 individuals have invested to date in
Nuveen's tax-exempt funds and trusts. Nuveen is a subsidiary of The John Nuveen
Company which, in turn, is approximately 80% owned by The St. Paul Companies,
Inc. ("St. Paul"). St. Paul is located in St. Paul, Minnesota, and is princi-
pally engaged in providing property-liability insurance through subsidiaries.
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's Re-
search Department, the largest in the investment banking industry devoted ex-
clusively to tax-exempt securities. Nuveen's Research Department was selected
in 1994 by Research & Ratings Review, a municipal industry publication, as one
of the leading research teams in the municipal industry, based on an extensive
industry-wide poll of portfolio managers, department heads and bond buyers. The
Nuveen Research Department reviews more than $100 billion in tax-exempt bonds
every year.
The Funds, the other Nuveen funds, Nuveen Advisory, and other related entities
have adopted a code of ethics which essentially prohibits all Nuveen fund man-
agement personnel, including Nuveen fund portfolio managers, from engaging in
personal investments which compete or interfere with, or attempt to take advan-
tage of, a Fund's anticipated or actual portfolio transactions, and is designed
to assure that the interest of Fund shareholders are placed before the interest
of Nuveen personnel in connection with personal investment transactions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of each Fund, will place orders in such manner as, in the opinion
of management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be ob-
tained elsewhere. Portfolio securities will not be purchased from Nuveen or its
affiliates except in compliance with the Investment Company Act of 1940.
The Funds expect that all portfolio transactions will be effected on a princi-
pal (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 deal-
ers 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 supple-
mentary to Nuveen Advisory's own research efforts, the receipt of research in-
formation 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 Directors.
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Nuveen Advisory reserves the right to, and does, manage other investment ac-
counts 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 securi-
ties 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 securi-
ties available to a Fund from time to time, it is the opinion of the Board of
Directors that the benefits available from Nuveen Advisory's organization will
outweigh any disadvantage that may arise from exposure to simultaneous transac-
tions.
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 Munici-
pal 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 in-
vested in a particular issue. In addition, purchases of securities made pursu-
ant to the terms of the Rule must be approved at least quarterly by the Board
of Directors, including a majority of the directors who are not interested per-
sons of the Funds.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of each Fund
will be determined separately for each class of a Fund's shares by The Chase
Manhattan Bank, N.A., the Funds' Custodian, as of 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, Washing-
ton's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanks-
giving 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. The annual distribution fee to
which Class C shares are subject is accrued each day as a liability of the Fund
with respect to the Class C shares, and accordingly reduces the net asset value
of those shares.
In determining net asset value for each of the Funds, the Funds' custodian
utilizes the valuations of portfolio securities furnished by a pricing service
approved by the directors. The pricing service values portfolio securities at
the mean between the quoted bid and asked price or the yield equivalent when
quotations are readily available. Securities for which quotations are not read-
ily available (which constitute a majority of the securities held by these
Funds) are valued at fair value as determined by the pricing service using
methods which include consideration of the following: yields or prices of
munici-
42
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pal bonds of comparable quality, type of issue, coupon, maturity and rating;
indications as to value from dealers; and general market conditions. The pric-
ing 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 Funds under the general supervi-
sion of the Board of Directors.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based upon the advice
of Fried, Frank, Harris, Shriver and Jacobson, Washington, D.C., counsel to the
Funds.
As described in the Prospectus, each Fund intends to qualify, as it has in
prior years, 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 as-
sets, and distributions of its income to shareholders. First, a Fund must de-
rive 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) de-
rived with respect to its business of investing in such stock or securities
(the "90% gross income test"). Second, a Fund must derive less than 30% of its
annual gross income from the sale or other disposition of any of the following
which was held for less than three months: (i) stock or securities and (ii)
certain options, futures, or forward contracts (the "short-short test"). Third,
a Fund must diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets is comprised of
cash, cash items, United States Government securities, securities of other reg-
ulated 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 secu-
rities 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 in-
terest, 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 in-
terest" (the excess of its gross tax-exempt interest income over certain disal-
lowed 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 invest-
ment 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
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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 liabili-
ties if any, and to claim refunds to the extent the credit exceeds such liabil-
ities. For federal income tax purposes, the tax basis of shares owned by a
shareholder of the fund will be increased by an amount equal under current law
to 65% of the amount of undistributed capital gains included in the sharehold-
er's gross income. Each Fund intends to distribute at least annually to its
shareholders all or substantially all of its net tax-exempt interest and any
investment company taxable income and net capital gain.
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 investment in
Municipal Obligations, which is exempt from regular federal income tax when re-
ceived by such Fund, as exempt-interest dividends. Shareholders receiving ex-
empt-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 Mu-
nicipal Obligations will be excludable from federal gross income under Section
103(a) of the Code. In the case of non-appropriation by a political subdivi-
sion, however, there can be no assurance that payments made by the insurer rep-
resenting interest on "non-appropriation" lease obligations will be excludable
from gross income for federal income tax purposes. See "Fundamental Policies
and Investment Portfolio--Portfolio Securities."
Distributions by each Fund of net interest received from certain taxable tempo-
rary investments (such as certificates of deposit, commercial paper and obliga-
tions of the United States 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./1/ 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 ex-
ceed the market discount, and any gain realized in excess of the market dis-
count will be treated as capital gains. Any net long-term capital gains real-
ized by a Fund and distributed to shareholders, in cash or in additional shares
will be taxable to shareholders as long-term capital gains regardless of the
- --------
/1/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 in-
come 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 ap-
plied uniformly to all distributions made during the Fund's taxable year.
The percentage of income designated as tax-exempt for any particular distri-
bution may be substantially different from the percentage of the Fund's in-
come that was tax-exempt during the period covered by the distribution.
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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 ex-
cess will be treated as gain from the sale of his or her shares, as discussed
below.
If any of the Funds engages in hedging transactions involving financial futures
and options, these transactions will be subject to special tax rules, the ef-
fect 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 each 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 divi-
dends received deduction for corporations. Prior to purchasing shares in one of
the Funds, 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.
Although dividends generally will be treated as distributed when paid, divi-
dends 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 distrib-
uted by each Fund (and received by the shareholders) on December 31.
The redemption or exchange of the shares of a Fund normally will result in cap-
ital 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, howev-
er, net capital gains (i.e., the excess of net long-term capital gain over net
short-term capital loss) will be taxed at a maximum marginal rate of 28%, while
short-term capital gains and other ordinary income will be taxed at a maximum
marginal rate of 39.6%. Because of the limitations on itemized deductions and
the deduction for personal exemptions applicable to higher income taxpayers,
the effective rate of tax may be higher in certain circumstances. All or a por-
tion of a sales load 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 load
pursuant to the reinvestment or exchange privilege. Any disregarded portion of
such load 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 re-
ceived 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 gain 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 distribu-
45
<PAGE>
tions 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 af-
ter 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, each 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 real-
ized 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 ex-
cise 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 in determining the amount of ordinary taxable income for the
current calendar year (and, instead, include such gains and losses in determin-
ing ordinary taxable income for the succeeding calendar year). The Funds intend
to make timely distributions in compliance with these requirements and conse-
quently 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 treat-
ment as a regulated investment company, the Fund would incur a regular corpo-
rate federal income tax upon its income for that year (other than interest in-
come from Municipal Obligations), and distributions to its shareholders would
be taxable to shareholders as ordinary dividend income for federal income tax
purposes to the extent of the Fund's available earnings and profits.
Among the requirements that a Fund must meet in order to qualify under
Subchapter M in any year is that less than 30% of its gross income must be de-
rived from the sale or other disposition of securities and certain other assets
held for less than three months.
Because the Funds may invest in private activity bonds, the interest on which
is not federally tax-exempt to persons who are "substantial users" of the fa-
cilities financed by such bonds or "related persons" of such "substantial us-
ers," 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 ad-
visers before investing in one of the Funds.
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations 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 hospi-
46
<PAGE>
tals), 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 re-
ceives income from Municipal Obligations subject to the alternative minimum
tax, a portion of the dividends paid by it, although otherwise exempt from fed-
eral 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 alter-
native minimum tax.
In addition, the alternative minimum taxable income for corporations is in-
creased by 75% of the difference between an alternative measure of income ("ad-
justed current earnings") and the amount otherwise determined to be the alter-
native 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 the 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 pur-
chase 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 div-
idends 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 certifi-
cations, or who are otherwise subject to back-up 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 Funds and their shareholders. For complete provisions, refer-
ence should be made to the pertinent Code sections and Treasury Regulations.
The Code and Treasury Regulations are subject to change by legislative or ad-
ministrative 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.
STATE TAX MATTERS
The following state tax information applicable to each Fund or its shareholders
is based upon the advice of each Fund's special state tax counsel, and repre-
sents a summary of certain provisions of each state's tax laws presently in ef-
fect. The state tax information below assumes that each Fund qualifies as a
regulated investment company for federal income tax purposes under Subchapter M
of the Code, and that the amounts so designated by each Fund to its sharehold-
ers qualify as "exempt-interest dividends"
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under Section 852(b)(5) of the Code. These provisions are subject to change by
legislative or administrative action, which may be applied retroactively to
Fund transactions. You should consult your own tax adviser for more detailed
information concerning state taxes to which you may be subject.
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND
Individual shareholders of the Massachusetts Fund who are subject to Massachu-
setts income taxation will not be required to include that portion of their
federally tax-exempt dividends in Massachusetts gross income which the Massa-
chusetts Fund clearly identifies as directly attributable to interest earned on
Municipal Obligations issued by governmental authorities in Massachusetts and
which are specifically exempted from income taxation in Massachusetts; provided
that such portion is identified in a written notice mailed to the shareholders
of the Massachusetts Fund not later than sixty days after the close of the Mas-
sachusetts Fund's tax year. Also, the individual shareholders of the Massachu-
setts Fund will not be required to include in gross income interest earned on
obligations of United States possessions and territories to the extent interest
earned on such obligations is exempt from taxation by the states pursuant to
federal law.
Similarly, such shareholders will not be required to include in Massachusetts
gross income capital gain dividends designated by the Massachusetts Fund to the
extent such dividends are attributable to gains derived from Municipal Obliga-
tions issued by Massachusetts governmental authorities and are specifically ex-
empted from income taxation in Massachusetts, provided that such dividends are
identified in a written notice mailed to the shareholders of the Massachusetts
Fund not later than sixty days after the close of the Massachusetts Fund's tax
year. Lastly, any dividends of the Massachusetts Fund attributable to interest
on U.S. obligations exempt from state taxation and included in Federal gross
income will not be included in Massachusetts gross income if identified by the
Massachusetts Fund in a written notice mailed to shareholders within sixty days
after the close of the Massachusetts Fund's tax year. Massachusetts sharehold-
ers will be required to include all remaining dividends in their Massachusetts
income.
To the extent not otherwise exempted from Massachusetts income taxation as pro-
vided above, the Massachusetts Fund's long-term capital gains for federal in-
come tax purposes will be taxed as long-term capital gains to the individual
shareholders of the Massachusetts Fund for purposes of Massachusetts income
taxation. Massachusetts shareholders will be required to recognize any taxable
gain or loss that is recognized for federal income tax purposes upon an ex-
change or redemption of their shares.
If a shareholder of the Massachusetts Fund is a Massachusetts business corpora-
tion or any foreign business corporation which exercises its charter, qualifies
to do business, actually does business or owns or uses any part of its capital,
plant or other property in Massachusetts, then it will be subject to Massachu-
setts excise taxation either as a tangible property corporation or as an intan-
gible property corporation. If the corporate shareholder is a tangible property
corporation, it will be taxed upon its net income allocated to Massachusetts
and the value of certain tangible property. If it is an intangible property
corporation, it will be taxed upon its net income and net worth allocated to
Massachusetts. Net income is gross income less allowable deductions for federal
income tax purposes, subject to specified modifications. Dividends received
from the Massachusetts Fund are includable in gross income and generally may
not be deducted by a corporate shareholder in computing its net income. The
corporation's shares in the Massachusetts Fund are not includable in the compu-
tation of the tangible property base of a tangible
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<PAGE>
property corporation, but are includable in the computation of the net worth
base of an intangible property corporation.
Shares of the Massachusetts Fund will be includable in the Massachusetts gross
estate of a deceased individual shareholder who is a resident of Massachusetts
for purposes of the Massachusetts Estate Tax.
Shares of the Massachusetts Fund will be exempt from local property taxes in
Massachusetts.
NUVEEN NEW YORK TAX-FREE VALUE FUND
Individual shareholders of the New York Fund who are subject to New York State
(or New York City) personal income taxation will not be required to include in
their New York adjusted gross income that portion of their exempt-interest div-
idends (as determined for federal income tax purposes) which the New York Fund
clearly identifies as directly attributable to interest earned on Municipal Ob-
ligations issued by governmental authorities in New York ("New York Municipal
Obligations") and which are specifically exempted from personal income taxation
in New York State (or New York City), or interest earned on obligations of
United States possessions or territories to the extent interest earned on such
obligations is exempt from taxation by the states pursuant to federal law. Dis-
tributions to individual shareholders of dividends derived from interest that
does not qualify as an exempt-interest dividend (as determined for federal in-
come tax purposes), distributions of exempt-interest dividends (as determined
for federal income tax purposes) which are derived from interest earned on Mu-
nicipal Obligations issued by governmental authorities in states other than New
York State, and distributions derived from interest earned on federal obliga-
tions will be included in their New York adjusted gross income as ordinary in-
come.
Distributions to individual shareholders of the New York Fund of capital gain
dividends (as determined for federal income tax purposes) will be included in
their New York adjusted gross income as long-term capital gains. Distributions
to individual shareholders of the New York Fund of dividends derived from any
net income received from taxable temporary investments and any net short-term
capital gains realized by the New York Fund will be included in their New York
adjusted gross income as ordinary income. Present New York law taxes long-term
capital gains at the rates applicable to ordinary income.
Gain or loss, if any, resulting from an exchange or redemption of shares of the
New York Fund that is recognized by individual shareholders of the New York
Fund for federal income tax purposes will be recognized for purposes of New
York State (or New York City) personal income taxation.
Generally, corporate shareholders of the New York Fund which are subject to New
York State franchise taxation (or New York City general corporation taxation)
will be taxed upon their entire net income, business and investment capital, or
at a flat rate minimum tax. Entire income will include dividends received from
the New York Fund (as determined for federal income tax purposes), as well as
any gain or loss recognized from an exchange or redemption of shares of the New
York Fund that is recognized for federal income tax purposes. Investment capi-
tal will include the corporate shareholder's shares of the New York Fund. Cor-
porate shareholders of the New York Fund, which are subject to the temporary
metropolitan transportation surcharge, will be required to pay a tax surcharge
on the franchise taxes imposed by New York State.
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<PAGE>
Shareholders of the New York Fund will not be subject to New York City unincor-
porated business taxation solely by reason of their ownership of shares of the
New York Fund. If a shareholder of the New York Fund is subject to the New York
City unincorporated business tax, income and gains derived from the New York
Fund will be subject to such tax, except for exempt-interest dividends (as de-
termined for federal income tax purposes) which the New York Fund clearly iden-
tifies as directly attributable to interest earned on New York Municipal Obli-
gations.
Shares of the New York Fund will be exempt from local property taxes in New
York State and New York City, but will be includible in the New York gross es-
tate of a deceased individual shareholder who is a resident of New York for
purposes of the New York Estate Tax.
NUVEEN OHIO TAX-FREE VALUE FUND
The Ohio Fund is not subject to the Ohio personal income tax, municipal or
school district income taxes in Ohio, the Ohio corporation franchise tax, or
the Ohio dealers in intangibles tax, provided that, with respect to the Ohio
corporation franchise tax and the Ohio dealers in intangibles tax, the Ohio
Fund timely files the annual report required by Section 5733.09 of the Ohio Re-
vised Code.
Shareholders of the Ohio Fund ("Shareholders") who are otherwise subject to the
Ohio personal income tax, or municipal or school district income taxes in Ohio
will not be subject to such taxes on distributions with respect to shares of
the Ohio Fund to the extent that such distributions are properly attributable
to interest on or gain from the sale of interest-bearing obligations issued by
or on behalf of the State of Ohio, political subdivisions thereof and agencies
or instrumentalities of the State or its political subdivisions ("Ohio Obliga-
tions") provided that the Ohio Fund continues to qualify as a regulated invest-
ment company for federal income tax purposes and that at all times at least 50%
of the value of the total assets of the Ohio Fund consists of Ohio Obligations
or similar obligations of other states or their subdivisions. It is assumed for
purposes of this discussion of Ohio taxation that these requirements are satis-
fied. Gain recognized by such individual shareholders on the exchange or re-
demption of shares of the Fund will be subject to the Ohio personal income tax
and school district income taxes in Ohio; such gain may be subjected to munici-
pal income tax only by those Ohio municipalities that are authorized by State
law to tax intangible income.
Shareholders that are otherwise subject to the Ohio corporation franchise tax
computed on the net income basis will not be subject to such tax on distribu-
tions with respect to shares of the Ohio Fund to the extent that such distribu-
tions either (a) are properly attributable to interest on or gain from the sale
of Ohio Obligations, or (b) represent "exempt-interest dividends" for federal
income tax purposes. Shares of the Ohio Fund will be included in a Sharehold-
er's tax base for purposes of computing the Ohio corporation franchise tax on
the net worth basis. Corporate Shareholders that are subject to Ohio municipal
income taxes will not be subject to such taxes on distributions received from
the Ohio Fund to the extent such distributions consist of interest on or gain
from the sale of Ohio Obligations.
Distributions by the Ohio Fund that consist of interest on obligations of the
United States or the governments of Puerto Rico, the Virgin Islands or Guam or
their authorities or municipalities are exempt from Ohio personal income tax,
and municipal and school district income taxes in Ohio, and
50
<PAGE>
are excluded from the net income base of the Ohio corporation franchise tax to
the same extent that such interest would be so exempt or excluded if the obli-
gations were held directly by the Shareholders.
The value of shares of the Fund is included in the value of the gross estate of
decedents domiciled in Ohio for purposes of the Ohio estate tax. The value of
shares of the Fund may be included in the value of the gross estate of dece-
dents not domiciled in Ohio for such purposes only if the shares were employed
in carrying on business in Ohio.
PERFORMANCE INFORMATION
As explained in the Prospectus, 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 invest-
ment 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:
<TABLE>
<C> <C> <C> <C> <S>
Yield = 2[(a-b+1)/6/-1]
cd
</TABLE>
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 offer-
ing 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 sales charge of
4.50%.
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 state-
ments in conformity with generally accepted accounting principles. Thus, yield
may not equal the income paid to shareholders or the income reported in the
Fund's financial statements. Yields for each class of shares of each Fund as of
February 29, 1996 are set forth below.
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by remainder of (1 minus the stated combined federal and
state income tax rate, taking into account the deductibility of state income
taxes for federal income tax purposes) and adding the result to that portion,
if any, of the yield of that is not tax exempt. The taxable equivalent yields
quoted below are based
51
<PAGE>
upon (1) the stated combined federal and state income tax rates and (2) the
yields for the 30-day period ended February 29, 1996 quoted in the left-hand
column.
<TABLE>
<CAPTION>
COMBINED
FEDERAL TAXABLE
AND STATE EQUIVALENT
AS OF FEBRUARY 29, 1996 YIELD TAX RATE* YIELD
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts Fund
Class A Shares.................................... 4.16% 47.0% 7.85%
Class C Shares.................................... 3.60% 47.0% 6.79%
Class R Shares.................................... 4.61% 47.0% 8.70%
New York Fund
Class A Shares.................................... 4.29% 46.5%** 8.02%
Class C Shares.................................... 3.74% 46.5%** 6.99%
Class R Shares.................................... 4.75% 46.5%** 8.88%
Ohio Fund
Class A Shares.................................... 4.06% 44.0% 7.25%
Class C Shares.................................... 3.49% 44.0% 6.23%
Class R Shares.................................... 4.51% 44.0% 8.05%
</TABLE>
- --------
*The combined tax rates used in the table represent the highest or one of the
highest combined tax rates applicable to state taxpayers, rounded to the near-
est .5%; 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.
**Reflects a combined federal, state and New York City tax rate.
For additional information concerning taxable equivalent yields, see the Tax-
able Equivalent Yield Tables in the Prospectus.
Each Fund may from time to time in its sales materials report a quotation of
the 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 rein-
vestments from Nuveen UITs, or the maximum public offering price). The distri-
bution rate differs from yield and total return and therefore is not intended
to be a complete measure of performance. Distribution rate may sometimes be
higher than yield 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 February 29, 1996, based on maximum public offering
price then in effect for the Funds were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION RATES
------------------------
CLASS A* CLASS C CLASS R
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts Fund..................................... 4.96% 4.49% 5.45%
New York Fund.......................................... 4.97% 4.45% 5.47%
Ohio Fund.............................................. 4.86% 4.32% 5.33%
- --------------------------------------------------------------------------------
</TABLE>
*Assumes imposition of the maximum sales charge for Class A shares of 4.50%.
52
<PAGE>
Average annual total return quotation is computed in accordance with a stan-
dardized 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 repre-
senting 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 in-
come and capital gains distributions have been reinvested in Fund shares at net
asset value on the reinvestment dates during the period. The average annual to-
tal return figures, including the effect of the current maximum sales charge
for Class A Shares, for the one-year and five-year periods ended February 29,
1996, and for the period from inception (on December 10, 1986, with respect to
the Class R Shares and on or after September 6, 1994 with respect to the Class
A Shares and Class C Shares) through February 29, 1996, respectively, were as
follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-------------------------------------------------------
ONE YEAR FIVE YEARS FROM INCEPTION
ENDED ENDED THROUGH
FEBRUARY 29, 1996 FEBRUARY 29, 1996 FEBRUARY 29, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts Fund
Class A Shares........ 4.69% N/A 5.25%
Class C Shares........ 8.87% N/A 9.91%
Class R Shares........ 9.80% 8.32% 6.82%
New York Fund
Class A Shares........ 5.55% N/A 5.25%
Class C Shares........ 10.13% N/A 8.86%
Class R Shares........ 10.80% 8.97% 7.86%
Ohio Fund
Class A Shares........ 4.51% N/A 5.53%
Class C Shares........ 8.55% N/A 8.41%
Class R Shares........ 9.70% 8.34% 7.80%
- -------------------------------------------------------------------------------
</TABLE>
Calculation of cumulative total return is not subject to a prescribed formula.
Cumulative total return for a specific period is calculated by first taking a
hypothetical initial investment in Fund shares on the first day of the period,
deducting (in some cases) the maximum sales charge, and computing the "redeem-
able 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 cumulative total return figures, including the effect of the current maxi-
mum sales charge for the Class A Shares, for the one-year and five-years peri-
ods ended February 29, 1996, and for the period from inception (on December 10,
1986 with respect to the Class R Shares and on or after September 6, 1994
53
<PAGE>
with respect to the Class A Shares and Class C Shares) through February 29,
1996, respectively, were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------------------------
ONE YEAR FIVE YEARS FROM INCEPTION
ENDED ENDED THROUGH
FEBRUARY 29, 1996 FEBRUARY 29, 1996 FEBRUARY 29, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts Fund
Class A Shares........ 4.69% N/A 7.88%
Class C Shares........ 8.87% N/A 14.16%
Class R Shares........ 9.80% 49.12% 83.38%
New York Fund
Class A Shares........ 5.55% N/A 7.88%
Class C Shares........ 10.13% N/A 13.21%
Class R Shares........ 10.80% 53.70% 100.49%
Ohio Fund
Class A Shares........ 4.51% N/A 8.30%
Class C Shares........ 8.55% N/A 12.48%
Class R Shares........ 9.70% 49.27% 99.39%
- -------------------------------------------------------------------------------
</TABLE>
Calculation of taxable equivalent total return is also not subject to a pre-
scribed formula. Taxable equivalent total return for a specific period is cal-
culated 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), cal-
culated as described above under the discussion of "taxable equivalent yield."
The resulting amount for the calendar year is then divided by the initial in-
vestment 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 1995, and assuming that
no front-end sales charge is imposed, the annualized taxable equivalent total
returns for each Fund's Shares for the one-year and five-year periods ended
February 28, 1994, and for all classes for the period from inception (on Decem-
ber 10, 1986 with respect to the Class R Shares and on or after September 6,
1994 with respect to the Class A Shares and Class C Shares), through February
29, 1996, respectively, were as follows:
54
<PAGE>
<TABLE>
<CAPTION>
ONE YEAR ENDED FIVE YEARS ENDED FROM INCEPTION THROUGH
FEBRUARY 29, 1996 FEBRUARY 29, 1996 FEBRUARY 29, 1996
------------------- ------------------- ----------------------------- COMBINED
WITH MAXIMUM AT NET WITH MAXIMUM AT NET WITH MAXIMUM AT NET FEDERAL
4.50% SALES ASSET 4.50% SALES ASSET 4.50% SALES ASSET AND STATE
CHARGE VALUE CHARGE VALUE CHARGE VALUE TAX RATE*
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Massachusetts Fund
Class A Shares......... 9.41% 14.57% N/A N/A 10.16% 13.64% 47.0%
Class C Shares......... N/A 13.14% N/A N/A N/A 14.53% 47.0%
Class R Shares......... N/A 15.00% N/A 13.63% N/A 12.48% 47.0%
New York Fund**
Class A Shares......... 10.19% 15.38% N/A N/A 10.03% 13.51% 46.5%
Class C Shares......... N/A 14.31% N/A N/A N/A 13.10% 46.5%
Class R Shares......... N/A 15.92% N/A 14.19% N/A 13.47% 46.5%
Ohio Fund
Class A Shares......... 8.59% 13.71% N/A N/A 9.80% 13.26% 44.0%
Class C Shares......... N/A 12.21% N/A N/A N/A 12.18% 44.0%
Class R Shares......... N/A 14.18% N/A 12.97% N/A 12.82% 44.0%
</TABLE>
- --------
*The combined tax rates used in the table 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.
**Reflects a combined federal, state and New York City tax rate.
From time to time, a Fund may compare its risk-adjusted performance with other
investments that may provide different levels of risk and return. For example,
a Fund may compare its risk level, as measured by the variability of its peri-
odic returns, or its RISK-ADJUSTED TOTAL RETURN, with those of other funds or
groups of funds. Risk-adjusted total return would be calculated by adjusting
each investment's total return to account for the risk level of the investment.
A Fund may also compare its TAX-ADJUSTED TOTAL RETURN with that of other funds
or groups of funds. This measure would take into account the tax-exempt nature
of exempt-interest dividends and the payment of income taxes on a Fund's dis-
tributions of net realized capital gains and ordinary income.
The risk level for a class of shares of a Fund, and any of the other invest-
ments used for comparison, would be evaluated by measuring the variability of
the investment's return, as indicated by the annualized standard deviation of
the investment's monthly returns over a specified measurement period (e.g.,
three years). An investment with a higher annualized standard deviation of
monthly returns would indicate that a Fund had greater price variability, and
therefore greater risk, than an investment with a lower annualized standard de-
viation. The annualized standard deviation of monthly returns for the three
years ended February 29, 1996, for the Class R Shares of each of the Funds, was
as follows:
<TABLE>
<CAPTION>
STANDARD
DEVIATION
OF RETURN
- -----------------------------
<S> <C>
Massachusetts Fund 5.40%
New York Fund 5.79%
Ohio Fund 5.74%
</TABLE>
55
<PAGE>
THE RISK-ADJUSTED TOTAL RETURN for a class of shares of a Fund and for other
investments over a specified period would be evaluated by dividing (a) the re-
mainder of the investment's annualized three-year total return minus the
annualized total return of an investment in short-term tax-exempt securities
(essentially a risk-free return) over that period, by (b) the annualized stan-
dard deviation of the investment's monthly returns for the period. This ratio
is sometimes referred to as the "Sharpe measure" of return. An investment with
a higher Sharpe measure would be regarded as producing a higher return for the
amount of risk assumed during the measurement period than an investment with a
lower Sharpe measure. The Sharpe measure, for the three year period ended Feb-
ruary 29, 1996, for the Class R Shares of each of the Funds, was as follows:
<TABLE>
<CAPTION>
SHARPE
MEASURE
- ----------------------------
<S> <C>
Massachusetts Fund 0.488
New York Value Fund 0.518
Ohio Fund 0.489
</TABLE>
Class A Shares of the Funds are sold at net asset value plus a current maximum
sales charge of 4.50% of the offering price. This current maximum sales charge
will be typically used for purposes of calculating performance figures. Yield,
returns and net asset value of each class of shares of the Funds will fluctu-
ate. Factors affecting the performance of the Funds include general market con-
ditions, operating expenses and investment management fees. 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"), Morn-
ingstar, Inc. ("Morningstar"), Wiesenberger Investment Companies Service ("Wie-
senberger") and CDA Investment Technologies, Inc. ("CDA") or similar indepen-
dent 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, av-
erage, year-by-year, or other types of total return and performance figures.
Any given performance quotation or performance comparison should not be consid-
ered as representative of the performance of the Funds for any future period.
There are differences and similarities between the investments which the Funds
may purchase and the investments measured by the indexes and reporting services
which are described herein. The Consumer Price Index is generally considered to
be a measure of inflation. The CDA Mutual Fund-Municipal Bond Index is a
weighted performance average of other mutual funds with a federally tax-exempt
income objective. The Salomon Brothers High Grade Corporate Bond Index is an
unmanaged index that generally represents the performance of high grade long-
term taxable bonds during various market conditions. The Lehman Brothers Munic-
ipal Bond Index is an unmanaged index that generally represents the performance
of high grade intermediate and long-term municipal bonds during various market
conditions.
56
<PAGE>
Lipper, Morningstar, Wiesenberger and CDA are widely recognized mutual fund re-
porting 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 securi-
ties funds, corporate bond funds (either investment grade or high yield), or
Ginnie Mae funds. These types of funds, because of the character of their un-
derlying 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 mu-
nicipal bonds resulting from changes in market interest rates and are particu-
larly susceptible to volatility from credit changes. Ginnie Mae bonds are gen-
erally subject to less price volatility than municipal bonds from credit con-
cerns, due primarily to the fact that the timely payment of monthly install-
ments 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 of the sensitivity of Ginnie Mae prepayment experience to
change in interest rates.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF FUND SHARES
As described in the Prospectus, each Fund has adopted a Flexible Pricing Pro-
gram which provides you with alternative ways of purchasing Fund shares based
upon your individual investment needs and preferences. You may purchase Class A
Shares at a price equal to their net asset value plus an up-front sales charge.
For information regarding the up-front sales charge on Class A shares, see the
table under "How to Buy Fund Shares" of the Prospectus. Set forth is an example
of the method of computing the offering price of the Class A shares of each of
the Funds. The example assumes a purchase on February 29, 1996 of Class A
shares from the Massachusetts 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.
57
<PAGE>
<TABLE>
<S> <C>
Net Asset Value per share........................................ $ 9.94
Per Share Sales Charge--4.50% of public offering price (4.71% of
net asset value per share)...................................... $ 0.468
Per Share Offering Price to the Public........................... $10.408
</TABLE>
You may purchase Class C Shares without any up-front sales charge at a price
equal to their net asset value, but subject to an annual distribution fee de-
signed to compensate Authorized Dealers over time for the sale of Fund shares.
Class C Shares are subject to a contingent deferred sales charge for redemption
within 12 months of purchase. Class C Shares automatically convert to Class A
Shares six years after purchase. Both Class A Shares and Class C Shares are
subject to annual service fees, which are used to compensate Authorized Dealers
for providing you with ongoing account services.
Under the Flexible Pricing Program, all Fund shares outstanding as of September
6, 1994, have been designated as Class R Shares. Class R Shares are available
for purchase at a price equal to their net asset value only under certain lim-
ited circumstances, or by specified investors, as described herein.
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
and distribution expenses, and each class has exclusive voting rights with re-
spect to any distribution or service plan applicable to its shares. In addi-
tion, the Class C Shares are subject to a conversion feature, as described be-
low. 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 distri-
bution and service fees.
Each Fund has special purchase programs under which certain persons may pur-
chase Class A Shares at reduced sales charges. One such program is available to
members of a "qualified group." An individual who is a member of a "qualified
group" may purchase Class A Shares of a Fund (or any other Nuveen Fund with re-
spect to which a sales charge is imposed), at the reduced sales charge applica-
ble to the group taken as a whole. A "qualified group" is one which (i) has
been in existence for more than six months; (ii) has a purpose other than in-
vestment; (iii) has five or more participating members; (iv) has agreed to in-
clude sales literature and other materials related to the Fund in publications
and mailings to members; (v) has agreed to have its group administrator submit
a single bulk order and make payment with a single remittance for all invest-
ments in the Fund during each investment period by all participants who choose
to invest in the Fund; and (vi) has agreed to provide the Fund's transfer agent
with appropriate backup data for each participant of the group in a format
fully compatible with the transfer agent's processing system.
58
<PAGE>
The "amount" of a share purchase by a participant in a group purchase program
for purposes of determining the applicable sales charge is (i) the aggregate
value of all shares of the Fund (and all other Nuveen Funds with respect to
which a sales charge is imposed) currently held by participants of the group,
plus (ii) the amount of shares currently being purchased.
Special Sales Charge Waivers. Class A Shares of the Funds may be purchased at
net asset value without a sales charge, and Class R Shares may be purchased, by
the following categories of investors:
. officers, directors and retired directors of the Fund;
. bona fide, full-time and retired employees of Nuveen and its affiliates, any
parent company of Nuveen, and subsidiaries thereof, or their immediate fam-
ily members (as defined below);
. 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;
. 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 through a mutual fund purchase program sponsored by a
broker-dealer that offers a selected group of mutual funds either without a
transaction fee or with an asset-based fee or a fixed fee that does not vary
with the amount of the purchase. In order to qualify, such purchase program
must offer a full range of mutual fund related services and shareholder ac-
count servicing capabilities, including establishment and maintenance of
shareholder accounts, addressing investor inquiries regarding account activ-
ity and investment performances, processing of trading and dividend activity
and generation of monthly account statements and year-end tax reporting; and
. registered investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees to their custom-
ers for financial planning, investment advisory or asset management servic-
es, or provide such services in connection with the establishment of an in-
vestment account for which a comprehensive "wrap fee" charge is imposed.
The Funds may encourage registered representatives and their firms to help ap-
portion 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.
To help advisers and investors better understand and most efficiently use the
Funds to reach their investment goals, the Funds may advertise and create spe-
cific investment programs and systems. For example, this may include informa-
tion 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.
59
<PAGE>
Exchange 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 pur-
chase on the following holidays: Martin Luther King's Birthday, Columbus Day
and Veterans Day.
For more information on the procedure for purchasing shares of the Funds and
on the special purchase programs available thereunder, see "How to Buy Fund
Shares" in the Prospectus.
Nuveen serves as the principal underwriter of the shares of each of the Funds
pursuant to a "best efforts" arrangement as provided by a distribution agree-
ment with Nuveen Tax-Free Bond Fund, Inc., dated January 2, 1990, and last re-
newed on July 27, 1995 ("Distribution Agreement"). Pursuant to the Distribu-
tion Agreement, Nuveen Tax-Free Bond Fund, Inc. appointed Nuveen to be its
agent for the distribution of the Funds' shares on a continuous offering ba-
sis. Nuveen sells shares to or through brokers, dealers, banks or other quali-
fied financial intermediaries (collectively referred to as "Dealers"), or oth-
ers, in a manner consistent with the then effective registration statement of
Nuveen Tax-Free Bond Fund, Inc. 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 re-
ceives 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 Nuveen Tax-Free Bond Fund, Inc. pursuant to Rule 12b-1 and de-
scribed herein under "Distribution and Service Plan." Nuveen receives any
CDSCs imposed on redemptions of Class C Shares redeemed within 12 months of
purchase, but any such amounts as to which a reinstatement privilege is not
exercised are set off against and reduce amounts otherwise payable to Nuveen
pursuant to the distribution plan. Nuveen also receives any CDSCs imposed on
redemptions of certain Class A Shares redeemed within 18 months of purchase.
The following table sets forth the aggregate amount of underwriting commis-
sions with respect to the sale of Fund shares and the amount thereof retained
by Nuveen for each of the Funds for the last three fiscal years. All figures
are to the nearest thousand.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 29, 1996 FEBRUARY 28, 1995 FEBRUARY 28, 1994
------------------------ ------------------------ ------------------------
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>
Massachusetts Fund...... $ 96 $12 $170 $20 $430 $ 52
New York Fund........... $272 $33 $428 $64 $989 $146
Ohio Fund............... $228 $34 $471 $55 $980 $144
</TABLE>
60
<PAGE>
DISTRIBUTION AND SERVICE PLAN
Each Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the In-
vestment Company Act of 1940, which provides that Class C Shares will be sub-
ject to an annual distribution fee, and that both Class A 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 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 C Shares. These expenses include payments to Au-
thorized Dealers, including Nuveen, who are brokers of record with respect to
the Class C Shares, as well as, without limitation, expenses of printing and
distributing prospectuses to persons other than shareholders of the Fund, ex-
penses of preparing, printing and distributing advertising and sales literature
and reports to shareholders used in connection with the sale of Class C Shares,
certain other expenses associated with the distribution of Class C Shares, and
any distribution-related expenses that may be authorized from time to time by
the Board of Directors.
The service fee applicable to Class A Shares and Class C Shares under each
Fund's Plan will be payable to Authorized Dealers in connection with the provi-
sion of ongoing account services to shareholders. These services may include
establishing and maintaining shareholder accounts, answering shareholder inqui-
ries and providing other personal services to shareholders.
Each Fund may spend up to .25 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 C Shares as a distribution fee and up to .25 of 1% per year of the aver-
age daily net assets of Class C Shares as a service fee under the Plan applica-
ble to Class C Shares. The .75 of 1% distribution fee will be reduced by the
amount of any CDSC imposed on the redemption of Class C Shares within 12 months
of purchase as to which a reinstatement privilege has not been exercised. For
the fiscal year ended February 29, 1996, 100% of service fees and distribution
fees were paid out as compensation to Authorized Dealers. The amount of compen-
sation paid to Authorized Dealers for the fiscal year ended February 29, 1996
for each Fund per class of shares were as follows:
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR YEAR
ENDED FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
<S> <C>
MASSACHUSETTS FUND
Class A............................................ $ 6,732
Class C............................................ $ 2,609
Class R............................................ N/A
NEW YORK FUND
Class A............................................ $26,638
Class C............................................ $ 4,101
Class R............................................ N/A
OHIO FUND
Class A............................................ $21,336
Class C............................................ $14,282
Class R............................................ N/A
</TABLE>
61
<PAGE>
Under each Fund's Plan, the Fund will report quarterly to the Board of Direc-
tors for its review of 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 directors
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 securi-
ties of such class. The Plan may be renewed from year to year if approved by a
vote of the Board of Directors and a vote of the non-interested directors 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 directors who vote to approve such continuance conclude, in the ex-
ercise 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 directors 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 directors of the Fund will be committed to the discretion of
the non-interested directors then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 W. Monroe Street, Chi-
cago, Illinois 60603 have been selected as auditors for Nuveen Tax-Free Bond
Fund, Inc. In addition to audit services, Arthur Andersen LLP will provide con-
sultation and assistance on accounting, internal control, tax and related mat-
ters. The financial statements incorporated by reference elsewhere in this
Statement of Additional Information and the information set forth under "Finan-
cial Highlights" in the Prospectus have been audited by Arthur Andersen LLP as
indicated in their report with respect thereto, and are included in reliance
upon the authority of said firm as experts in giving said report.
The custodian of the assets of the Funds is The Chase Manhattan Bank, N.A., 770
Broadway, New York, NY 10003. The custodian performs custodial, fund accounting
and portfolio accounting services.
62
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Nuveen Tax-Free [PHOTO APPEARS HERE]
Mutual Funds
Dependable tax-free
income for generations
CALIFORNIA
CALIFORNIA INSURED
MASSACHUSETTS
MASSACHUSETTS INSURED
NEW YORK
NEW YORK INSURED
OHIO
ANNUAL REPORT/FEBRUARY 29, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
9 Fund performance
16 Report of independent public accountants
17 Portfolio of investments
58 Statement of net assets
60 Statement of operations
62 Statement of changes in net assets
66 Notes to financial statements
82 Financial highlights
<PAGE>
Dear
shareholder
Since the beginning of the recovery in early 1995, we've enjoyed a welcome
rebound in the bond markets--a sharp contrast to 1994, which was one of the most
volatile periods in bond market history. In fact, 1995 unfolded as one of the
best years for bonds in a decade, as the bond market responded to a climate of
slowing economic growth and diminished inflationary pressure.
The changing profile of the bond markets over the past two years reminds us
that weathering the ups and downs of the markets is a normal part of the
investment process. By maintaining a long-term perspective on your investments,
you can minimize the impact of short-term fluctuations and keep the focus on
achieving your goals. Municipal bond funds continue to play an integral role in
helping investors reach those goals, offering the attractive tax-free income and
solid total returns that they seek.
Over the past year, we have kept our sights focused on successfully meeting
your fund's objectives. As of February 29, 1996, the current annual SEC yield on
offering price for R shares for the mutual funds covered in this report ranged
from 4.21% to 4.99%. To match these yields, an investor in the 36% federal
income tax bracket would have had to earn between 6.58% to 7.80% on taxable
alternatives. The effect of state taxes further enhances the after-tax yield
advantage provided by municipal bonds.
[PHOTO OF RICHARD J. FRANKE APPEARS HERE]
"Over time,
municipal bonds
have proven to
be a valuable
and dependable
component of
successful invest-
ment programs."
3
<PAGE>
Reflecting the rebound in the bond markets, each of these funds reported gains
in portfolio value since February 28, 1995. The 12-month total returns on net
asset value for R Shares, reflecting portfolio gains plus reinvested dividend
income and capital gains distributions, if any, ranged from 9.70% to 10.80%,
which translate to 13.66% to 14.81% on a taxable-equivalent basis. This strong
performance rewarded investors who weathered the volatility of 1994, and reminds
us again of the importance of municipal bonds to a well-rounded, long-term
investment plan.
As some of you may know, on June 30, 1996, I will be retiring as the Chairman
and Chief Executive Officer of John Nuveen & Co. Incorporated and as Chairman of
the Board of the Nuveen Funds. As I look back over the 41 years I have spent at
Nuveen, I'm proud to have been associated with a firm that holds integrity,
honesty, and value as the cornerstones of its business. I'm confident that these
traditions will continue to be the hallmarks of Nuveen.
Over the past few years, I have been working closely with other Nuveen
managers to ensure that the company and the funds continue to be guided by
strong and talented management following my retirement. Timothy Schwertfeger,
who has been with Nuveen since 1977, will succeed me as Chief Executive Officer
and Chairman of Nuveen. He currently serves as Executive Vice President of
Nuveen and President of the Nuveen Funds. I am very confident in his abilities
and the abilities of the entire Nuveen management team.
The management transition has been well planned, and it will have no effect on
portfolio management or the way dividends are set. Our management team is
committed to continuing Nuveen's successful tradition of value investing and
prudent management, helping our shareholders meet their need for tax-free
investment income with a full range of investment choices.
Our focus will continue to be on building shareholder value, providing
research-oriented management, and maintaining our leadership role in the
municipal bond market. With this focus, we anticipate many more years of
accomplishment for our shareholders and our firm.
I'd like to take this occasion to thank you for selecting Nuveen mutual fund
investments.
Sincerely,
/s/ Richard J. Franke
Richard J. Franke
Chairman of the Board
April 15, 1996
4
<PAGE>
Answering your
questions
Tom Spalding, head of Nuveen's portfolio management team, discusses factors
affecting the municipal market and efforts made to provide value for
shareholders.
How did the investment climate over the past year affect municipal bonds?
In 1995, the combination of slow economic growth and low inflation created the
ideal environment for the bond markets, which responded with a sustained rally.
Citing the lack of significant inflation, the Federal Reserve Board moved to cut
interest rates in July and December 1995, and again at the end of January 1996.
This succession of rate cuts helped to bring down long-term municipal bond
yields by almost 130 basis points over the year and to increase net asset
values. The rebound of the municipal bond market was not as great as that of the
taxable market due to the much-publicized discussion of major tax reform
legislation and concern about its potential impact on tax-free investments. Yet,
in 1995, most Nuveen mutual funds enjoyed taxable-equivalent total returns of
14% or better.
5
<PAGE>
[PHOTO OF TOM SPALDING APPEARS HERE]
Tom Spalding, head of Nuveen's portfolio management team, answers investors'
questions on developments in the municipal market.
What was Nuveen's approach to investing during this period?
During 1995, we continued to pursue our philosophy of value investing, a
disciplined approach designed to deliver above-market performance by emphasizing
securities that offer good intrinsic value and that are underpriced or
undervalued by the market. This approach has been rewarded over the past year,
as we saw many of our portfolio holdings upgraded by the ratings agencies,
confirming our Research Department's judgments about credit quality. We also
moved to protect current income by investing more of our portfolio in non-
callable bonds when possible. These bonds are less likely to be redeemed before
maturity so that their yield is assured for the long term in the event of
falling interest rates. As is our policy, we continue to invest only in
investment-grade quality securities.
Has Nuveen made any major investment changes over the past year?
No. In the search for income and total return, our value investing approach
continues to concentrate on individual bonds with current yields, prices, credit
quality, and future prospects that are exceptionally attractive relative to
other bonds in the market. Because attractive issues may appear any time over
the course of the year, we are constantly vigilant for new opportunities, with
the goal of ensuring that the funds are always positioned to meet their
objectives: as high a level of current tax-free income as is consistent with
preservation of capital. This means that our analysts continuously assess
investment
6
<PAGE>
possibilities across the entire spectrum of geographical and sector
opportunities nationwide. Currently, we favor revenue bonds for essential
services, such as those issued by water and sewer facilities and utilities,
especially public power authorities providing electricity at competitive rates.
We have reduced our positions in general obligation bonds issued by counties and
cities, which have suffered financial strains as the result of spending cuts at
the state and federal levels.
What does Nuveen see as the impact of the flat tax proposals on the municipal
market?
Because of the implications for tax-free investments such as municipal bonds and
bond funds, we have been closely monitoring the various flat tax proposals
currently being debated in Congress. While the presidential primaries
spotlighted the debate, it is important to note that none of the proposals
currently under discussion has gained a strong consensus. In addition,
implementation of any measure that manages to pass both houses is at least two
years away. As the election year progresses, focus seems to be shifting from tax
reform to other economic matters. However, the high profile discussion--and the
attendant concern about the potential impact of tax reform on tax-free
investments--did affect the market for municipal bonds in 1995, causing these
bonds to underperform their taxable counterparts for the year.
7
<PAGE>
Given the low likelihood that the tax preference on municipal bonds will be
eliminated or dramatically reduced in the near future, Nuveen believes that it
is inadvisable to manage our funds toward one specific outcome. Instead, we will
continue to follow our value investing philosophy as the optimal way to pursue
our investors' objectives. In our view, this approach offers investors greater
price stability in the event of volatile markets. Once the tax issue is
resolved, we're confident that municipal bonds--because of their high credit
quality and attractive yields--will continue to hold a strategic place in the
prudent investor's portfolio. We will continue to monitor developments in the
tax debate as well as changes in other economic and political conditions while
keeping our focus on achieving the objectives of your fund.
What is Nuveen's market outlook for 1996?
Although inflation currently remains low and economic growth remains moderate,
we continue to watch these factors for potential changes and impact on the bond
market. During this election year, we are also closely monitoring any changes in
economic and tax policy that may affect the municipal market. The fundamentals
in the long term are sound, with the supply of municipal bonds down from past
years, and with a growing number of individual investors seeking to diversify
their portfolios and to increase their tax-free income.
8
<PAGE>
NUVEEN CALIFORNIA
TAX-FREE VALUE FUND
California
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen California Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 6/86 6/87 6/88 6/89 6/90 6/91 6/92 6/93 6/94 6/95 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $21,255 10,000 10,838 11,590 12,849 13,663 14,826 16,500 18,393 18,357 19,898 21,255
Lehman Brothers Municipal Bond
Index-Total $22,127 10,000 10,862 11,668 12,996 13,881 15,131 16,913 18,935 18,968 20,641 22,127
Nuveen CA Tax-Free Value
Fund-Total $19,538 9,525 9,838 10,513 11,998 12,735 13,775 15,317 17,049 16,801 18,155 19,538
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 10.54% 7.77% 7.72%
A Shares on NAV 10.36% N/A 8.69%
A Shares on offering price** 5.39% N/A 5.36%
C Shares on NAV 9.53% N/A 9.17%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.65 cents per share for Class R Shares
translated into a distribution yield of 5.26% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 42%
combined state and federal income tax bracket would have to earn 9.07% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.99% on February 29, 1996, translated
into 8.60% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.64% from a year ago. The average annual total return on NAV for
this class was 10.54%, which translated into a taxable-equivalent total return
of 14.73%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
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 R Shares at the time (4.75%) and all ongoing fund expenses.
9
<PAGE>
NUVEEN CALIFORNIA INSURED
TAX-FREE VALUE FUND
California Insured
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen California
Insured Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 6/86 6/87 6/88 6/89 6/90 6/91 6/92 6/93 6/94 6/95 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $21,255 10,000 10,838 11,590 12,849 13,663 14,826 16,500 18,393 18,357 19,898 21,255
Lehman Brothers Municipal Bond
Index-Total $22,127 10,000 10,862 11,668 12,996 13,881 15,131 16,913 18,935 18,968 20,641 22,127
Nuveen CA Insured Tax-Free Value
Fund-Total $19,313 9,525 9,513 10,220 11,648 12,223 13,252 14,929 16,752 16,501 17,911 19,313
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 10.63% 8.20% 7.59%
A Shares on NAV 10.32% N/A 9.24%
A Shares on offering price** 5.35% N/A 5.89%
C Shares on NAV 9.67% N/A 8.99%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.60 cents per share for Class R Shares
translated into a distribution yield of 5.14% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 42%
combined state and federal income tax bracket would have to earn 8.86% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.93% on February 29, 1996, translated
into 8.50% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.99% from a year ago. The average annual total return on NAV for
this class was 10.63%, which translated into a taxable-equivalent total return
of 14.64%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
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 R Shares at the time (4.75%) and all ongoing fund expenses.
10
<PAGE>
NUVEEN MASSACHUSETTS
TAX-FREE VALUE FUND
Massachusetts
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen Massachusetts
Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,316 10,000 9,973 10,980 12,127 12,997 14,247 15,587 17,219 16,236 19,316
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen MA Tax-Free Value
Fund-Total $17,466 9,525 8,745 9,756 10,793 11,355 12,626 13,969 15,603 14,627 17,466
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 9.80% 8.32% 6.82%
A Shares on NAV 9.62% N/A 8.57%
A Shares on offering price** 4.69% N/A 5.25%
C Shares on NAV 8.87% N/A 9.91%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.50 cents per share for Class R Shares
translated into a distribution yield of 5.45% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 43.5%
combined state and federal income tax bracket would have to earn 9.65% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.61% on February 29, 1996, translated
into 8.16% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 3.88% from a year ago. The average annual total return on NAV for
this class was 9.80%, which translated into a taxable-equivalent total return of
14.31%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
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 R Shares at the time (4.75%) and all ongoing fund expenses.
11
<PAGE>
NUVEEN MASSACHUSETTS INSURED
TAX-FREE VALUE FUND
Massachusetts Insured
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen Massachusetts
Insured Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,316 10,000 9,973 10,980 12,127 12,997 14,247 15,587 17,219 16,236 19,316
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen MA Insured Tax-Free Value
Fund-Total $17,911 9,525 8,940 10,086 11,109 11,793 12,976 14,284 15,940 14,959 17,911
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 9.99% 8.08% 7.11%
A Shares on NAV 9.59% N/A 8.51%
A Shares on offering price** 4.65% N/A 5.19%
C Shares on NAV 8.80% N/A 8.49%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.50 cents per share for Class R Shares
translated into a distribution yield of 5.14% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 43.5%
combined state and federal income tax bracket would have to earn 9.10% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.21% on February 29, 1996, translated
into 7.45% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.37% from a year ago. The average annual total return on NAV for
this class was 9.99%, which translated into a taxable-equivalent total return of
14.24%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
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 R Shares at the time (4.75%) and all ongoing fund expenses.
12
<PAGE>
NUVEEN NEW YORK
TAX-FREE VALUE FUND
New York
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen New York Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,581 10,000 9,972 10,985 12,143 13,027 14,309 15,687 17,362 16,400 19,581
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen NY Tax-Free Value
Fund-Total $19,096 9,525 9,293 10,427 11,609 12,181 13,617 15,070 16,944 15,747 19,096
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 10.80% 8.97% 7.86%
A Shares on NAV 10.52% N/A 8.58%
A Shares on offering price** 5.55% N/A 5.25%
C Shares on NAV 10.13% N/A 8.86%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.85 cents per share for Class R Shares
translated into a distribution yield of 5.47% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 40.5%
combined state and federal income tax bracket would have to earn 9.19% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.75% on February 29, 1996, translated
into 7.98% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.83% from a year ago. The average annual total return on NAV for
this class was 10.80%, which translated into a taxable-equivalent total return
of 14.81%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
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 R Shares at the time (4.75%) and all ongoing fund expenses.
13
<PAGE>
NUVEEN NEW YORK INSURED
TAX-FREE VALUE FUND
New York Insured
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen New York Insured
Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,581 10,000 9,972 10,985 12,143 13,028 14,311 15,689 17,367 16,405 19,590
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen NY Insured Tax-Free Value
Fund-Total $18,516 9,525 9,025 10,152 11,263 11,888 13,254 14,634 16,468 15,284 18,516
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------
1 year 5 years Since inception+
- --------------------------------------------------------------------
<S> <C> <C> <C>
R Shares 10.51% 8.70% 7.50%
A Shares 10.19% N/A 8.93%
A Shares on offering price** 5.23% N/A 5.59%
C Shares 9.71% N/A 9.10%
- --------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.60 cents per share for Class R Shares
translated into a distribution yield of 5.20% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 40.5%
combined state and federal income tax bracket would have to earn 8.74% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.39% on February 29, 1996, translated
into 7.38% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 4.53% from a year ago. The average annual total return on NAV for
this class was 10.51%, which translated into a taxable-equivalent total return
of 14.32%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued on or after
September 6, 1994.
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 R Shares at the time (4.75%) and all ongoing fund expenses.
14
<PAGE>
NUVEEN OHIO
TAX-FREE VALUE FUND
Ohio
INDEX COMPARISON
Comparison of change in value of a $10,000 investment in Nuveen Ohio Tax-Free
Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
In thousands 11/86 11/87 11/88 11/89 11/90 11/91 11/92 11/93 11/94 2/96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Adjusted Lehman Brothers
Municipal Bond Index (reduced
by state tax effects)-Total $19,751 10,000 9,974 11,002 12,176 13,076 14,376 15,774 17,475 16,518 19,751
Lehman Brothers Municipal Bond
Index-Total $20,239 10,000 9,977 11,036 12,251 13,194 14,549 16,008 17,781 16,847 20,239
Nuveen OH Tax-Free Value
Fund-Total $18,992 9,525 9,135 10,281 11,615 12,411 13,632 15,035 16,923 15,861 18,992
Past performance is not predictive of future performance
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 5 years Since inception+
- -------------------------------------------------------------------
<S> <C> <C> <C>
R Shares on NAV 9.70% 8.34% 7.80%
A Shares on NAV 9.44% N/A 8.86%
A Shares on offering price** 4.51% N/A 5.53%
C Shares on NAV 8.55% N/A 8.41%
- -------------------------------------------------------------------
</TABLE>
The fund's current dividend of 4.70 cents per share for Class R Shares
translated into a distribution yield of 5.33% as of February 29, 1996. The
annual distribution yield is calculated by multiplying the dividend by 12, and
dividing this number by the current offering price. Investors in the 41%
combined state and federal income tax bracket would have to earn 9.03% on a
taxable investment to match this tax-free yield.
The fund's Class R Share SEC yield of 4.51% on February 29, 1996, translated
into 7.64% on a taxable-equivalent basis.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 3.93% from a year ago. The average annual total return on NAV for
this class was 9.70%, which translated into a taxable-equivalent total return of
13.66%.
* One-year, 5-year and life of fund total return figures for Class R Shares are
not representative for Class A Shares or Class C Shares because they do not take
into account (1) the difference between the maximum front-end sales charge
applicable to Class R Shares (none), Class A Shares (4.50%) and Class C Shares
(none); (2) the .25% annual 12b-1 service fee applicable to Class A and Class C
Shares; (3) the .75% annual 12b-1 distribution fee to be deducted from income
with respect to Class C Shares; and (4) other class-level expenses applicable to
Class A Shares and Class C Shares.
** Maximum public offering price, which includes sales charges, which are
reduced for purchases over $50,000 and waived for reinvestment of dividends.
+ Life of class; Class A Shares and Class C Shares were first issued at
different times after September 6, 1994.
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 R Shares at the time (4.75%) and all ongoing fund expenses.
15
<PAGE>
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Nuveen California Tax-Free Fund, Inc.
Nuveen Tax-Free Bond Fund, Inc.
Nuveen Insured Tax-Free Bond Fund, Inc.
We have audited the accompanying statements of net assets of NUVEEN CALIFORNIA
TAX-FREE FUND, INC. (comprising the Nuveen California and California Insured
Tax-Free Value Funds) (a Maryland corporation), NUVEEN TAX-FREE BOND FUND, INC.
(comprising the Nuveen Massachusetts, New York and Ohio Tax-Free Value Funds)
and NUVEEN INSURED TAX-FREE BOND FUND, INC. (comprising the Nuveen Massachusetts
and New York Insured Tax-Free Value Funds) (both Minnesota corporations),
including the portfolios of investments, as of February 29, 1996, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and the
financial highlights for the 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of each of the
respective funds constituting the Nuveen California Tax-Free Fund, Inc., Nuveen
Tax-Free Bond Fund, Inc. and Nuveen Insured Tax-Free Bond Fund, Inc., as of
February 29, 1996, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for the periods indicated thereon in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 8, 1996
16
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN CALIFORNIA TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,150,000 California Educational Facilities Authority
(University of Southern California),
7.200%, 10/01/15 10/97 at 102 Aa $ 3,350,340
California Health Facilities Financing Authority
(Small Facilities Pooled Loan Program):
3,000,000 7.400%, 4/01/14 4/05 at 102 A 3,408,600
3,635,000 7.500%, 4/01/22 4/05 at 102 A 4,155,641
1,700,000 California Health Facilities Authority (Sutter Health
System), 7.00%, 1/01/09 1/99 at 102 A1 1,829,846
2,000,000 California Health Facilities Financing Authority
(Health Dimensions, Inc.), 7.500%, 5/01/15
(Pre-refunded to 5/01/00) 5/00 at 102 Ba 2,291,120
2,000,000 California Health Facilities Financing Authority
(Sisters of Providence), 7.500%, 10/01/10 10/00 at 102 AA- 2,308,540
3,380,000 California Health Facilities Financing Authority
(Kaiser Permanente), 7.000%, 12/01/10 12/00 at 102 Aa3 3,764,036
2,425,000 California Housing Finance Agency, Home
Mortgage, 8.100%, 8/01/16 8/96 at 102 Aa 2,504,104
4,000,000 California Housing Finance Agency,
5.900%, 8/01/17 2/06 at 102 Aaa 4,023,600
California Public Works Board (California State
University Project),
8,470,000 6.700% 10/01/17 10/02 at 102 A 9,278,970
5,000,000 5.500%, 12/01/18 12/03 at 102 A 4,790,000
1,060,000 California State Public Works Board, High
Technology Facilities Lease (The Regents of
the University of California-San Diego Facility),
7.375%, 4/01/06 No Opt. Call A1 1,143,062
2,250,000 California State Public Works Board (Department of
Corrections-State Prisons-Susanville),
5.375%, 6/01/18 6/02 at 102 A1 2,140,538
2,500,000 California Statewide Communities Development
Corporation (Solheim Lutheran Home),
Certificates of Participation, 6.500%, 11/01/17 11/04 at 102 A 2,598,200
3,000,000 California Statewide Communities Development
Authority (St. Joseph Health System),
Certificates of Participation, 6.500%, 7/01/15 7/04 at 102 Aa 3,237,570
1,500,000 ABAG Finance Authority for Nonprofit
Corporations (Channing House), Certificates of
Participation, 7.125%, 1/01/21 1/01 at 102 A 1,626,915
2,035,000 Bella Vista Water District, Certificates of
Participation, 7.375%, 10/01/17 10/01 at 102 Baa 2,168,801
7,000,000 Brea Redevelopment Agency, Tax Allocation,
5.500%, 8/01/17 8/03 at 102 Aaa 6,865,880
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Carson Redevelopment Agency Tax Allocation:
$ 1,000,000 6.000%, 10/01/13 10/03 at 102 Baa $ 999,400
2,000,000 6.000%, 10/01/16 10/03 at 102 Baa1 1,961,680
2,000,000 Chico Redevelopment Agency, Certificates of
Participation (Sierra Sunrise Lodge),
6.750%, 2/01/21 2/01 at 102 A 2,098,240
6,500,000 Contra Costa County, FHA Insured Mortgage (Cedar
Pointe Apartments), 6.150%, 9/01/25 9/03 at 103 AAA 6,600,425
2,000,000 Desert Hospital District, Certificates of Participation,
8.100%, 7/01/20 (Pre-refunded to 7/01/00) 7/00 at 102 AAA 2,347,540
3,200,000 Desert Sands Unified School District Certificates of
Participation, 5.750%, 3/01/20 3/05 at 102 Aaa 3,232,480
East Bay Municipal Utility District, Water System:
1,950,000 7.500%, 6/01/18 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 2,238,308
4,000,000 6.375%, 6/01/21 (Pre-refunded to 12/01/01) 12/01 at 102 Aaa 4,501,200
2,500,000 Fontana Public Financing Authority, Tax Allocation
(North Fontana Redevelopment Project),
7.250%, 9/01/20 9/00 at 102 A 2,694,600
3,000,000 Fresno Health Facilities, Refunding Bonds (Holy
Cross Health Systems Corporation),
5.625%, 12/01/15 12/03 at 102 Aaa 2,978,490
2,475,000 Loma Linda University Medical Center,
6.000%, 12/01/06 12/03 at 102 BBB 2,553,086
5,000,000 Los Angeles Community Redevelopment Agency,
Multi-Family Housing (Angelus Plaza),
7.400%, 6/15/10 6/05 at 105 AAA 5,586,850
3,505,000 Los Angeles Harbor, 7.600%, 10/01/18 10/98 at 102 AAA 3,930,157
255,000 Los Angeles Home Mortgage (GNMA),
8.100%, 5/01/17 No Opt. Call Aaa 273,472
2,400,000 Los Angeles State Building Authority,
7.500%, 3/01/11 (Pre-refunded to 3/01/98) 3/98 at 102 AAA 2,621,184
4,595,000 Los Angeles County Public Works Finance Authority
(Los Angeles County Regional Park and Open
Space), 6.125%, 10/01/10 10/04 at 102 Aa 4,895,099
195,000 Los Angeles County, Single Family Mortgage,
(GNMA), 8.000%, 3/01/17 No Opt. Call Aaa 208,001
2,000,000 Los Angeles County Transportation Commission,
Sales Tax, 7.400%, 7/01/15 7/99 at 102 AA- 2,221,160
Los Angeles County Transportation Commission:
2,300,000 6.250%, 7/01/13 7/02 at 102 Aaa 2,449,523
4,445,000 6.000%, 7/01/23 7/02 at 102 Aaa 4,614,221
1,260,000 Marysville Community Development Agency,
Tax Allocation, 7.250%, 3/01/21 3/02 at 102 Baa 1,352,484
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 740,000 Menlo Park Community Development Agency,
FHA Insured, Multi-Family Housing,
8.250%, 12/01/28 6/97 at 103 Aa $ 784,444
875,000 Monterey Hospital Revenue, 7.375%, 7/01/14 7/96 at 102 A+ 901,556
2,165,000 Napa County, Certificates of Participation,
5.250%, 5/15/13 5/03 at 102 A1 2,059,998
1,500,000 North City West School Facilities Authority,
Community Facilities District No. 1,
7.850%, 9/01/19 (Pre-refunded to 9/01/99) 9/99 at 102 N/R 1,715,385
2,950,000 Northern California Power Agency,
7.150%, 7/01/24 7/98 at 102 A 3,182,726
Northridge Water District, Certificates of
Participation:
1,780,000 5.250%, 2/01/14 2/06 at 102 Aaa 1,709,031
1,105,000 5.250%, 2/01/18 2/06 at 102 Aaa 1,051,783
2,120,000 Ontario Assessment District No. 100C,
Limited Obligation, 8.000%, 9/02/11 3/96 at 103 N/R 2,197,783
3,270,000 Palmdale Elementary School District,
5.400%, 8/01/25 8/05 at 102 Aaa 3,182,953
2,920,000 Rancho Mirage Redevelopment Agency, Tax
Allocation, 5.500%, 4/01/29 4/04 at 102 A 2,658,514
1,450,000 Redding Joint Powers Financing Authority,
6.250%, 6/01/23 6/03 at 102 A 1,439,502
Riverside Multi-Family Housing:
3,285,000 6.500%, 1/01/18 7/02 at 100 AAA 3,377,177
4,005,000 6.500%, 1/01/18 7/02 at 100 AAA 4,117,380
Sacramento Area Flood Control Agency, Capital
Assessment District 2:
3,000,000 5.375%, 10/01/15 10/05 at 102 Aaa 2,948,160
3,000,000 5.375%, 10/01/25 10/05 at 102 Aaa 2,904,930
205,000 Sacramento Municipal Utility District,
Subordinated Electric Revenue,
8.000%, 11/15/10 No Opt. Call Baa1 205,642
4,000,000 Sacramento Municipal Utility District,
7.875%, 8/15/16 (Pre-refunded to 8/15/98) 8/98 at 102 Aaa 4,461,400
2,315,000 Salinas Tax Allocation, 7.400%, 9/02/09 3/96 at 103 N/R 2,407,762
2,080,000 Salinas, (Villa Sierra-GNMA), 6.500%, 7/20/17 7/04 at 102 AAA 2,162,659
4,000,000 San Bernadino, Certificates of Participation,
5.500%, 8/01/15 8/05 at 102 Aaa 3,931,920
10,240,000 San Francisco Airports Commission,
6.100%, 5/01/25 5/04 at 101 Aaa 10,710,733
5,000,000 San Francisco City and County Redevelopment
Financing Authority, Tax Allocation,
5.125%, 8/01/18 8/03 at 103 A 4,535,700
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,070,000 San Leandro, Certificates of Participation,
5.900%, 6/01/13 6/03 at 102 A $ 3,083,784
1,000,000 San Mateo County Board of Education,
Certificates of Participation, 7.100%, 5/01/21 5/99 at 102 A+ 1,063,180
Santa Barbara, Certificates of Participation
(Fact Retirement Services):
1,750,000 5.850%, 8/01/15 8/06 at 102 A 1,738,870
2,975,000 5.750%, 8/01/20 8/06 at 102 A 2,911,841
3,000,000 Santa Cruz Housing Authority, Multi-Family
Housing, FNMA, 7.750%, 7/01/23 7/00 at 102 AAA 3,225,660
2,000,000 Sonoma County Office of Education, Certificates
of Participation, 7.375%, 7/01/20
(Pre-refunded to 7/01/00) 7/00 at 102 A+ 2,283,580
Southern California Public Power Authority:
4,760,000 7.000%, 7/01/22 7/96 at 102 1/2 Aa 4,924,172
740,000 5.500%, 7/01/23 7/96 at 100 Aa 719,058
2,825,000 Stockton Hospitals (St. Joseph Hospital),
6.700%, 6/01/15 12/98 at 100 A 2,912,745
3,000,000 Thousand Oaks Redevelopment Agency,Tax
Allocation, 5.375%, 12/01/25 12/05 at 102 Aaa 2,904,600
1,100,000 Tulare County, Certificates of Participation,
6.875%, 11/15/12 11/02 at 102 Baa1 1,157,519
University of California (UCLA Center Chiller/
Cogeneration), Certificates of Participation:
3,500,000 5.600%, 11/01/20 11/03 at 102 Aa 3,379,530
4,335,000 6.000%, 11/01/21 11/03 at 102 Aa 4,431,886
3,335,000 University of California Research Facilities,
5.800%, 9/01/23 9/01 at 102 A- 3,296,580
4,000,000 Walnut Creek (John Muir Medical Center),
Certificates of Participation, 5.000%, 2/15/16 2/04 at 102 Aaa 3,715,920
- ---------------------------------------------------------------------------------------------------------------------------
$ 218,080,000 Total Investments - (Cost $214,125,831) - 98.5% 226,239,426
==============-------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 0.2%
$ 400,000 California Pollution Control Finance Authority
============== (Shell Oil Company), Variable Rate Demand
Bonds, 3.150%, 11/01/00+ VMIG-1 400,000
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 3,143,863
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 229,783,289
===========================================================================================================================
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 29 $102,875,637 45%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 12 36,519,939 16
PORTFOLIO OF A+ A1 7 11,421,760 5
INVESTMENTS A, A-- A, A2, A3 17 56,411,428 25
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 7 10,398,612 5
TEMPORARY BB+, BB, BB-- Ba1, Ba, Ba2, Ba3 1 2,291,120 1
INVESTMENTS): Non-rated Non-rated 3 6,320,930 3
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 76 $226,239,426 100%
===========================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA INSURED TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 California Education Facilities Authority
(Pepperdine University), 7,200%, 11/01/15
(Pre-refunded to 11/01/00) 11/00 at 102 Aaa $ 1,143,840
6,000,000 California Health Facilities Authority (Kaiser
Permanente), 5.450%, 10/01/13 10/01 at 101 Aa3 5,798,880
6,340,000 California Housing Finance Agency,
6.850%, 8/01/23 2/02 at 102 Aaa 6,663,213
240,000 California Public Capital Improvement Finance
Authority (Pooled Projects), 8.100%, 3/01/18 3/98 at 102 Aaa 258,067
5,000,000 California Public Works Board, Department of
Corrections--State Prisons, 7.000%, 9/01/09
(Pre-refunded to 9/01/00) 9/00 at 102 Aaa 5,672,050
8,500,000 California Statewide Community Development
Authority (Sutter Health), 6.125%, 8/15/22 8/02 at 102 Aaa 8,899,245
9,000,000 California Statewide Communities Development
Authority (Sutter Health), Certificates of
Participation, 5.500%, 8/15/13 8/03 at 102 Aaa 8,979,750
1,225,000 Barstow Redevelopment Agency, Tax Allocation,
7.000%, 9/01/14 No Opt. Call Aaa 1,463,005
7,005,000 Big Bear Lake Financing Authority,
6.300%, 8/01/25 8/05 at 102 Aaa 7,488,415
7,000,000 Big Bear Lake Water System, 6.375%, 4/01/22 4/02 at 102 Aaa 7,468,090
3,525,000 Brea Public Financing Authority, Tax Allocation,
7.000%, 8/01/15 (Pre-refunded to 8/01/01) 8/01 at 102 Aaa 4,053,433
2,000,000 Burbank Wastewater System, 5.500%, 6/01/25 6/05 at 102 Aaa 1,961,320
3,000,000 Calaveras County Water District, Certificates of
Participation, 6.900%, 5/01/16 (Pre-refunded to
5/01/01) 5/01 at 102 Aaa 3,419,730
2,000,000 Castaic Lake Water Agency, Certificates of
Participation, 7.125%, 8/01/16 (Pre-refunded
to 8/01/00) 8/00 at 102 Aaa 2,274,900
7,000,000 Chino Unified School District, Certificates of
Participation, 6.125%, 9/01/26 9/05 at 102 Aaa 7,366,310
850,000 Concord Redevelopment Agency, Tax Allocation
(Central Concord Project), 7.875%, 7/01/07 7/98 at 102 Aaa 931,549
500,000 Cotati-Rohnert Park Unified School District,
9.000%, 8/01/06 8/99 at 102 Aaa 579,100
4,050,000 Cucamonga County Water District, Certificates of
Participation, 5.450%, 9/01/23 3/04 at 102 Aaa 3,918,375
2,000,000 East Bay Municipal Utility District, Water System,
7.500%, 6/01/18 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 2,295,700
2,000,000 Eastern Municipal Water District, Water and
Sewer, Certificates of Participation,
6.500%, 7/01/20 (Pre-refunded to 7/01/01) 7/01 at 102 Aaa 2,248,840
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,865,000 Fallbrook Sanitary District, Certificates
of Participation, 6.600%, 2/01/13 2/01 at 100 Aaa $ 4,158,701
2,500,000 Fontana Public Financing Authority, Tax
Allocation (North Fontana Redevelopment
Project), 7.000%, 9/01/10 9/00 at 102 Aaa 2,781,850
3,000,000 Gilroy Unified School District, Certificates of
Participation, 6.250%, 9/01/12 9/04 at 102 Aaa 3,208,620
7,000,000 Glendale Memorial Hospital and Health Center,
5.600%, 11/15/25 11/05 at 102 AAA 6,778,030
1,000,000 LaQuinta Redevelopment Agency, Tax
Allocation, 7.300%, 9/01/12 No Opt. Call Aaa 1,235,200
5,000,000 Lancaster Redevelopment Agency, Tax
Allocation, 5.800%, 8/01/23 8/03 at 102 Aaa 5,070,350
5,000,000 Los Angeles Community Redevelopment Agency,
Multi-Family Housing (Angelus Plaza),
7.400%, 6/15/10 6/05 at 105 AAA 5,586,850
2,000,000 Los Angeles Convention and Exhibition Center,
Certificates of Participation, 7.000%, 8/15/21
(Pre-refunded to 8/15/00) 8/00 at 102 Aaa 2,266,720
Los Angeles Department of Water and Power:
5,000,000 5.400%, 11/15/31 11/03 at 102 Aa 4,739,000
6,000,000 5.400%, 11/15/31 11/03 at 102 Aaa 5,739,300
260,000 Los Angeles Home Mortgage (GNMA),
8.100%, 5/01/17 No Opt. Call Aaa 278,834
Los Angeles Wastewater System:
800,000 5.700% 6/01/20 6/03 at 102 Aaa 800,208
5,000,000 5.700% 6/01/23 6/03 at 102 Aaa 5,019,100
5,000,000 Los Angeles County Transportation Commission,
6.250%, 7/01/13 7/02 at 102 Aaa 5,325,050
Modesto Irrigation District Financing Authority,
Domestic Water Project:
4,500,000 6.125%, 9/01/19 9/02 at 102 Aaa 4,721,715
5,750,000 5.500%, 9/01/22 9/02 at 100 Aaa 5,636,035
2,500,000 Mt. Diablo Hospital District, 8.000%, 12/01/11
(Pre-refunded to 12/01/00) 12/00 at 102 Aaa 2,957,175
2,000,000 Mt. Diablo Unified School District, Special Tax,
7.050%, 8/01/20 8/00 at 102 Aaa 2,227,960
Napa FHA-Insured (Creekside Apartments):
2,555,000 6.625%, 7/01/24 7/02 at 102 Aaa 2,661,722
2,000,000 6.625%, 7/01/25 7/04 at 101 Aaa 2,091,080
7,040,000 Norwalk Community Facilities Financing
Authority, Tax Allocation, 6.050%, 9/01/25 9/05 at 102 Aaa 7,395,379
2,500,000 Oakland Pension Financing, 7.600%, 8/01/21 8/98 at 102 Aaa 2,730,725
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA INSURED TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,250,000 Palm Desert Redevelopment Agency,
Tax Allocation, 7.400%, 5/01/09 5/97 at 101 Aaa $ 1,306,575
2,000,000 Pittsburgh Redevelopment Agency
(Los Medanos Community Project),
Tax Allocation, 7.150%, 8/01/21 8/01 at 103 Aaa 2,330,180
1,500,000 Port of Oakland, 7.250%, 11/01/16 5/97 at 102 Aaa 1,580,160
1,270,000 Rancho Cucamonga Redevelopment Agency,
Tax Allocation, 7.125%, 9/01/19
(Pre-refunded to 9/01/99) 9/99 at 102 Aaa 1,422,502
Riverside County Desert Justice Facility
Corporation, Certificates of Participation:
3,600,000 6.000%, 12/01/17 12/04 at 101 Aaa 3,738,276
2,500,000 6.250%, 12/01/21 12/04 at 101 Aaa 2,638,875
3,000,000 Sacramento Municipal Utility District, Electric
System, 6.500%, 9/01/21
(Pre-refunded to 9/01/01) 9/01 at 102 Aaa 3,382,170
4,240,000 Saddleback Unified School District Public
Financing Authority, 5.650%, 9/01/17 9/05 at 102 Aaa 4,221,683
6,030,000 San Bernardino Certificates of Participation,
5.500%, 8/01/15 8/05 at 102 Aaa 5,927,369
2,500,000 San Bernardino County Transportation
Authority, Sales Tax, 6.000%, 3/01/10 3/02 at 102 Aaa 2,623,775
2,000,000 San Diego Regional Building Authority
(San Miguel Fire Protection District),
7.250%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 2,258,800
San Francisco City and County Redevelopment
Agency (George R. Moscone Convention Center):
2,250,000 6.800%, 7/01/19 7/04 at 102 Aaa 2,532,443
1,000,000 6.750%, 7/01/24 7/04 at 102 Aaa 1,122,180
2,250,000 San Jose Redevelopment Agency, Tax Allocation,
4.750%, 8/01/24 2/04 at 102 Aaa 1,989,630
2,000,000 San Marcos Public Facilities Authority, Tax
Allocation, 5.500%, 8/01/23 8/03 at 102 Aaa 1,962,420
4,750,000 Southern California Public Power Authority,
5.000%, 7/01/22 7/03 at 100 Aaa 4,350,383
2,000,000 Southern California Rapid Transit Finance
Authority, Certificates of Participation,
7.500%, 7/01/05 1/01 at 102 1/2 Aaa 2,275,880
3,040,000 Sulphur Springs Union School District,
0.000%, 9/01/15 No Opt. Call Aaa 1,021,501
125,000 Thousand Oaks Redevelopment Agency,
Single Family Mortgage, 7.900%, 1/01/16 1/97 at 102 Aaa 129,780
5,250,000 Tracy Area Public Facilities Financing Agency,
5.500%, 10/01/21 (WI) 10/06 at 102 Aaa 5,078,378
- ---------------------------------------------------------------------------------------------------------------------------
$ 211,060,000 Total Investments - (Cost $203,867,092) - 97.4% 218,186,376
==============-------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 3.5%
$ 1,000,000 California Health Facilities Financing Authority
(St. Joseph Health System), Series A,
Variable Rate Demand Bonds,
3.150%, 7/01/13+ VMIG-1 $ 1,000,000
500,000 California Health Facilities Financing Authority
(St. Joseph Health System) Series B,
Variable Rate Demand Bonds,
3.100%, 7/01/13+ VMIG-1 500,000
700,000 California Health Facilities Financing Authority
(St. Joseph Health System), Series 1991 B,
Variable Rate Demand Bonds,
3.100%, 7/01/09+ VMIG-1 700,000
3,200,000 California Statewide Communities Development
Authority (St. Joseph Health System), Certificates
of Participation, Variable Rate Demand Bonds,
3.100%, 7/01/24+ VMIG-1 3,200,000
California Pollution Control Finance Authority
(Shell Oil Company), Variable Rate
Demand Bonds:
800,000 3.150%, 10/01/07+ VMIG-1 800,000
200,000 3.150%, 10/01/11+ VMIG-1 200,000
1,500,000 Santa Ana Health Facilities Authority
(Town and Country),
Variable Rate Demand Bonds,
3.250%, 10/01/20+ A-1 1,500,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 7,900,000 Total Temporary Investments - 3.5% 7,900,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.9)% (2,153,889)
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 223,932,487
===========================================================================================================================
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN CALIFORNIA INSURED TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 60 $207,648,496 95%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 2 10,537,880 5
PORTFOLIO OF
INVESTMENTS
(EXCLUDING
TEMPORARY
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 62 $218,186,376 100%
===========================================================================================================================
</TABLE>
All of the bonds in the portfolio, excluding temporary investments in short-term
municipal securities, are either covered by Original Issue Insurance, Secondary
Market Insurance or Portfolio Insurance, or are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government agency securities, any
of which ensure the timely payment of principal and interest.
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later
dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating. (WI) Security purchased
on a when-issued basis (note 1).
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts General Obligation,
$ 165,000 7.250%, 3/01/09 (Pre-refunded to 3/01/00) 3/00 at 102 Aaa $ 186,302
715,000 5.500%, 2/01/11 2/03 at 102 A 720,734
Massachusetts Bay Transportation Authority:
250,000 7.750%, 3/01/10 (Pre-refunded to 3/01/98) 3/98 at 102 Aaa 273,940
1,000,000 7.000%, 3/01/11 (Pre-refunded to 3/01/01) 3/01 at 102 Aaa 1,137,570
250,000 Massachusetts Bay Transportation Authority,
Certificates of Participation, 7.800%, 1/15/14 12/06 at 100 BBB 291,145
160,000 Massachusetts Educational Loan Authority,
7.875%, 6/01/03 6/97 at 102 AAA 170,426
1,345,000 Massachusetts Health and Educational Facilities
Authority (Emerson Hospital),
8.000%, 7/01/18 (Pre-refunded to 7/01/00) 7/00 at 102 N/R 1,560,577
250,000 Massachusetts Health and Educational Facilities
Authority (Mount Auburn Hospital),
7.875%, 7/01/18 (Pre-refunded to 7/01/98) 7/98 at 102 Aaa 277,333
350,000 Massachusetts Health and Educational Facilities
Authority (Salem Hospital), 7.250%, 7/01/09
(Pre-refunded to 7/01/97) 7/97 at 100 Aaa 366,951
500,000 Massachusetts Health and Educational Facilities
Authority (Cardinal Cushing General Hospital),
8.875%, 7/01/18 7/99 at 102 1/2 N/R 542,560
Massachusetts Health and Educational Facilities
Authority (Suffolk University):
1,180,000 8.125%, 7/01/20 (Pre-refunded to 7/01/00) 7/00 at 101 1/2 Baa 1,362,393
1,000,000 6.350%, 7/01/22 7/02 at 102 AAA 1,046,960
500,000 Massachusetts Health and Educational Facilities
Authority (Newton-Wellesley Hospital),
8.000%, 7/01/18 7/98 at 102 Aaa 556,050
500,000 Massachusetts Health and Educational Facilities
Authority, FHA-Insured (St. Elizabeth's
Hospital of Boston), 7.750%, 8/01/27
(Pre-refunded to 8/01/97) 8/97 at 102 Aaa 538,510
750,000 Massachusetts Health and Educational Facilities
Authority, (Baystate Medical Center),
7.500%, 7/01/20 (Pre-refunded to 7/01/99) 7/99 at 102 A+ 836,115
1,000,000 Massachusetts Health and Educational Facilities
Authority (Boston College), 6.625%, 7/01/21 7/01 at 102 Aaa 1,096,280
500,000 Massachusetts Health and Educational Facilities
Authority (Worcester Polytechnic Institute),
6.625%, 9/01/17 9/02 at 102 A+ 541,300
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 495,000 Massachusetts Health and Educational Facilities
Authority (Brockton Hospital),
8.000%, 7/01/07 7/97 at 102 A $ 521,992
250,000 Massachusetts Health and Educational Facilities
Authority (University Hospital),
7.250%, 7/01/10 7/00 at 102 Aaa 278,668
750,000 Massachusetts Health and Educational Facilities
Authority (New England Medical Center),
6.625%, 7/01/25 7/02 at 102 Aaa 831,825
1,750,000 Massachusetts Health and Educational Facilities
Authority (New England Deaconess Hospital),
6.875%, 4/01/22 4/02 at 102 A 1,849,750
1,000,000 Massachusetts Health and Educational Facilities
Authority (Metrowest Health),
6.500%, 11/15/18 11/02 at 102 A 986,450
885,000 Massachusetts Health and Educational Facilities
Authority (Cable Housing and Health Services),
5.625%, 7/01/13 7/03 at 102 Aaa 893,239
Massachusetts Health and Educational Facilities
Authority (Lahey Clinic Medical Center):
1,000,000 5.625%, 7/01/15 7/03 at 102 Aaa 989,460
2,000,000 5.375%, 7/01/23 7/03 at 102 Aaa 1,911,660
700,000 Massachusetts Health and Educational Facilities
Authority (Daughters of Charity),
6.100%, 7/01/14 7/04 at 102 Aa 719,103
Massachusetts Health and Educational Facilities
Authority (Youville Hospital):
2,500,000 6.000%, 2/15/25 2/04 at 102 Aa 2,534,525
2,000,000 6.000%, 2/15/34 2/04 at 102 Aa 2,012,600
1,950,000 Massachusetts Housing Finance Agency,
Housing Project, 6.375%, 4/01/21 4/03 at 102 A1 1,967,921
Massachusetts Housing Finance Agency,
Residential Development:
1,000,000 6.250%, 11/15/14 11/02 at 102 Aaa 1,026,200
1,000,000 6.875%, 11/15/21 5/02 at 102 Aaa 1,049,350
Massachusetts Housing Finance Agency, Single
Family Housing:
500,000 7.350%, 12/01/16 6/01 at 102 Aa 533,245
1,250,000 7.700%, 6/01/17 6/98 at 102 Aa 1,333,513
1,440,000 Massachusetts Industrial Finance Agency,
Pollution Control (Eastern Edison),
5.875%, 8/01/08 8/03 at 102 Baa2 1,434,154
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 975,000 Massachusetts Industrial Finance Authority
(Malden Public Library Project),
7.250%, 1/01/15 1/05 at 102 Aaa $ 1,141,550
1,000,000 Massachusetts Industrial Finance Agency
(Semass Project), 9.000%, 7/01/15 7/01 at 103 N/R 1,098,090
250,000 Massachusetts Industrial Finance Agency
(College of the Holy Cross), 6.450%, 1/01/12 1/02 at 102 A1 267,743
475,000 Massachusetts Industrial Finance Agency (Sturdy
Memorial Hospital), 7.900%, 6/01/09 6/99 at 102 BBB+ 513,428
500,000 Massachusetts Industrial Finance Agency
(Springfield College), 7.800%, 10/01/09 10/99 at 103 A 575,375
1,380,000 Massachusetts Industrial Finance Agency
(Merrimack College), 7.125%, 7/01/12 7/02 at 102 BBB- 1,483,845
1,600,000 Massachusetts Industrial Finance Agency
(Phillips Academy), 5.375%, 9/01/23 9/08 at 102 Aa1 1,550,864
500,000 Massachusetts Industrial Finance Agency
(Whitehead Institute for Biomedical Research),
5.125%, 7/01/26 7/03 at 102 Aa 458,355
2,290,000 Massachusetts Industrial Finance Agency
(Lesley College), 6.300%, 7/01/25 7/05 at 102 AAA 2,412,194
1,750,000 Massachusetts Industrial Finance Agency (Harvard
Community Health), 8.125%, 10/01/17 10/98 at 102 A 1,907,605
1,000,000 Massachusetts Municipal Wholesale
Electric Company, 5.000%, 7/01/17 7/04 at 102 Aaa 932,230
Massachusetts Port Authority:
500,000 7.125%, 7/01/12 7/98 at 100 Aa 506,290
635,000 13.000%, 7/01/13 No Opt. Call Aaa 1,099,839
Massachusetts Turnpike Authority:
500,000 5.000%, 1/01/13 1/03 at 100 A1 470,905
1,000,000 5.125%, 1/01/23 1/03 at 102 Aaa 933,710
Attleboro General Obligation:
450,000 6.250%, 1/15/10 1/03 at 102 Baa1 475,362
450,000 6.250%, 1/15/11 1/03 at 102 Baa1 472,131
Barnstable General Obligation:
880,000 5.750%, 9/15/13 9/04 at 102 Aa 904,842
490,000 5.750%, 9/15/14 9/04 at 102 Aa 501,853
Boston General Obligation:
250,000 7.700%, 2/01/09 (Pre-refunded to 2/01/99) 2/99 at 102 A 279,715
1,000,000 6.750%, 7/01/11 7/01 at 102 Aaa 1,132,660
1,500,000 Boston City Hospital, FHA Insured Mortgage,
7.625%, 2/15/21 (Pre-refunded to 8/15/00) 8/00 at 102 Aaa 1,713,420
Boston Water and Sewer Commission:
180,000 7.875%, 11/01/13 (Pre-refunded to 11/01/96) 11/96 at 102 A 188,901
320,000 7.875%, 11/01/13 11/96 at 102 A 335,120
500,000 7.000%, 11/01/18 (Pre-refunded to 11/01/01) 11/01 at 102 Aaa 575,675
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 Boston-Mount Pleasant Housing
Development Corporation, Multi-Family
Housing, 6.750%, 8/01/23 8/02 at 102 AAA $1,042,250
1,000,000 Dartmouth Housing Development Corporation
Multi-Family Housing, 7.375%, 7/01/24 1/98 at 103 AAA 1,043,270
Deerfield General Obligation:
420,000 6.200%, 6/15/09 6/02 at 102 A1 459,136
415,000 6.250%, 6/15/10 6/02 at 102 A1 452,176
525,000 Haverhill General Obligation, 7.500%, 10/15/11 10/01 at 102 Baa 580,099
Holyoke General Obligation:
685,000 8.000%, 6/01/01 No Opt. Call Baa 743,636
250,000 8.150%, 6/15/06 6/02 at 103 Aaa 302,635
750,000 7.000%, 11/01/08 11/02 at 102 Baa 840,615
500,000 7.650%, 8/01/09 8/01 at 102 Baa 560,110
Lowell General Obligation:
545,000 8.300%, 2/15/05 No Opt. Call Baa1 654,164
445,000 8.400%, 1/15/09 (Pre-refunded to 1/15/01) 1/01 at 102 Aaa 531,277
1,000,000 Lynn General Obligation, 7.850%, 1/15/11
(Pre-refunded to 1/15/02) 1/02 at 104 Aaa 1,209,040
500,000 Monson General Obligation School Project,
7.700%, 10/15/10 (Pre-refunded to 10/15/00) 10/00 at 102 Aaa 581,585
Palmer General Obligation:
500,000 7.700%, 10/01/10 (Pre-refunded to 10/01/00) 10/00 at 102 Aaa 581,045
500,000 5.500%, 10/01/10 10/03 at 102 Aaa 512,135
1,130,000 Peabody General Obligation, 6.950%, 8/01/09 8/00 at 100 Aaa 1,245,362
550,000 Quincy Hospital, FHA-Insured, 7.875%, 1/15/16 7/96 at 102 AAA 570,295
250,000 Sandwich General Obligation,
7.100%, 11/01/07 (Pre-refunded to 11/01/98) 11/98 at 102 1/2 Aaa 276,613
1,250,000 Somerville Housing Authority (GNMA),
7.950%, 11/20/30 5/00 at 102 AAA 1,343,074
425,000 South Essex Sewerage District, General
Obligation, 9.000%, 12/01/00 No Opt. Call A 508,622
250,000 Southeastern Massachusetts University
Building Authority, 7.800%, 5/01/16
(Pre-refunded to 5/01/96) 5/96 at 102 A 256,847
1,000,000 Springfield General Obligation, 7.100%, 9/01/11 9/02 at 102 Baa 1,099,700
Taunton General Obligation:
1,465,000 8.000%, 2/01/02 No Opt. Call A 1,727,234
1,005,000 8.000%, 2/01/03 No Opt. Call A 1,204,240
250,000 University of Lowell Building Authority,
7.400%, 11/01/07 11/97 at 102 A 269,634
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 University of Massachusetts Building Authority,
7.500%, 5/01/14 5/98 at 102 A $ 546,740
1,000,000 Worcester General Obligation, 6.000%, 8/01/04 8/02 at 102 BBB+ 1,070,840
1,000,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 1,111,000
2,250,000 Puerto Rico Electric Power Authority,
7.000%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 Aaa 2,584,394
- ---------------------------------------------------------------------------------------------------------------------------
$ 72,620,000 Total Investments (Cost $72,713,663) - 95.7% 78,218,271
===============------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 3.2%
$ 2,600,000 Massachusetts Dedicated Income Tax Variable Rate
Demand Bonds, 3.350%, 12/01/97+ VMIG-1 2,600,000
===============------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 882,885
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 81,701,156
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 39 $35,505,977 46%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 10 11,055,190 14
PORTFOLIO OF A+ A1 7 4,995,296 6
INVESTMENTS A, A-- A, A2, A3 15 11,878,959 15
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 14 11,581,622 15
TEMPORARY Non-rated Non-rated 3 3,201,227 4
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 88 $78,218,271 100%
===========================================================================================================================
</TABLE>
* Optional call provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
31
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts General Obligation:
$ 500,000 6.500%, 6/01/08 6/02 at 101 Aaa $ 548,990
250,000 7.250%, 3/01/09 (Pre-refunded to 3/01/00) 3/00 at 102 Aaa 282,275
1,200,000 6.000%, 6/01/13 6/02 at 100 Aaa 1,237,356
Massachusetts Bay Transportation Authority,
General Transportation System:
250,000 7.250%, 3/01/03 3/00 at 102 Aaa 278,590
250,000 7.100%, 3/01/13 (Pre-refunded to 3/01/99) 3/99 at 102 Aaa 276,333
1,000,000 5.750%, 3/01/22 3/02 at 100 Aaa 1,004,780
250,000 Massachusetts Bay Transportation Authority,
Certificates of Participation, 7.650%, 8/01/15
(Pre-refunded to 8/01/00) 8/00 at 102 Aaa 288,848
750,000 Massachusetts College Building Authority,
7.250%, 5/01/16 5/96 at 102 Aaa 769,958
450,000 Massachusetts Health and Educational Facilities
Authority (St. Luke's Hospital of New Bedford),
7.750%, 7/01/13 (Pre-refunded to 7/01/97) 7/97 at 102 Aaa 483,300
Massachusetts Health and Educational Facilities
Authority (South Shore Hospital):
200,000 8.125%, 7/01/17 (Pre-refunded to 7/01/97) 7/97 at 102 Aaa 215,772
250,000 7.500%, 7/01/20 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 286,783
1,000,000 6.500%, 7/01/22 7/02 at 102 Aaa 1,096,030
300,000 Massachusetts Health and Educational Facilities
Authority (Mount Auburn Hospital),
7.875%, 7/01/18 (Pre-refunded to 7/01/98) 7/98 at 102 Aaa 332,799
Massachusetts Health and Educational Facilities
Authority (Lahey Clinic Medical Center):
750,000 7.600%, 7/01/08 (Pre-refunded to 7/01/98) 7/98 at 102 Aaa 827,423
1,700,000 5.625%, 7/01/15 7/03 at 102 Aaa 1,682,082
2,500,000 5.375%, 7/01/23 7/03 at 102 Aaa 2,389,575
800,000 Massachusetts Health and Educational Facilities
Authority (Berkshire Health Systems),
7.600%, 10/01/14 (Pre-refunded to 10/01/98) 10/98 at 102 Aaa 889,392
750,000 Massachusetts Health and Educational Facilities
Authority (Salem Hospital), 7.250%, 7/01/09
(Pre-refunded to 7/01/97) 7/97 at 100 Aaa 786,323
250,000 Massachusetts Health and Educational Facilities
Authority (Capital Asset Program),
7.200%, 7/01/09 7/99 at 102 Aaa 274,795
500,000 Massachusetts Health and Educational Facilities
Authority (University Hospital), 7.250%, 7/01/19 7/00 at 102 Aaa 556,920
250,000 Massachusetts Health and Educational Facilities
Authority (Newton-Wellesley Hospital),
8.000%, 7/01/18 7/98 at 102 Aaa 278,025
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts Health and Educational Facilities
Authority (Northeastern University):
$ 250,000 7.600%, 10/01/10 10/98 at 102 Aaa $ 274,570
1,600,000 6.550%, 10/01/22 10/02 at 102 Aaa 1,762,208
500,000 Massachusetts Health and Educational Facilities
Authority (Baystate Medical Center),
7.500%, 7/01/20 (Pre-refunded to 7/01/99) 7/99 at 102 A+ 557,410
500,000 Massachusetts Health and Educational Facilities
Authority (Stonehill College), 7.700%, 7/01/20
(Pre-refunded to 7/01/00) 7/00 at 102 Aaa 577,495
1,000,000 Massachusetts Health and Educational Facilities
Authority (Boston College), 6.625%, 7/01/21 7/01 at 102 Aaa 1,096,280
500,000 Massachusetts Health and Educational Facilities
Authority (Berklee College of Music),
6.875%, 10/01/21 10/01 at 102 Aaa 559,940
1,000,000 Massachusetts Health and Educational Facilities
Authority (Brigham and Women's Hospital),
6.750%, 7/01/24 7/01 at 102 Aa 1,053,890
250,000 Massachusetts Health and Educational Facilities
Authority (Beverly Hospital), 7.300%, 7/01/19
(Pre-refunded to 7/01/99) 7/99 at 102 Aaa 279,658
1,500,000 Massachusetts Health and Educational Facilities
Authority (New England Medical Center),
6.625%, 7/01/25 7/02 at 102 Aaa 1,663,650
1,450,000 Massachusetts Health and Educational Facilities
Authority (Boston University), 6.000%, 10/01/22 10/02 at 100 Aaa 1,494,776
2,000,000 Massachusetts Health and Educational Facilities
Authority (Bentley College), 6.125%, 7/01/17 7/02 at 102 Aaa 2,096,840
350,000 Massachusetts Housing Finance Agency,
7.600%, 12/01/16 12/99 at 103 Aaa 372,257
Massachusetts Housing Finance Agency, Single
Family Housing:
500,000 7.350%, 12/01/16 6/01 at 102 Aa 533,245
250,000 7.700%, 6/01/17 6/98 at 102 Aa 266,703
1,590,000 Massachusetts Industrial Finance Authority (Malden
Public Library Project), 7.250%, 1/01/15 1/05 at 102 Aaa 1,861,604
500,000 Massachusetts Industrial Finance Agency,
(Brandeis University), 6.800%, 10/01/19 10/99 at 102 Aaa 548,405
200,000 Massachusetts Industrial Finance Agency
(Harvard Community Health Plan),
7.750%, 10/01/08 10/98 at 102 Aaa 219,918
250,000 Massachusetts Industrial Finance Agency,
(Milton Academy), 7.250%, 9/01/19
(Pre-refunded to 9/01/99) 9/99 at 102 Aaa 280,420
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 375,000 Massachusetts Industrial Finance Agency
(Museum of Science), 7.300%, 11/01/09
(Pre-refunded to 11/01/99) 11/99 at 102 Aaa $ 422,918
1,000,000 Massachusetts Industrial Finance Agency
(Mount Holyoke College), 6.300%, 7/01/13 7/01 at 102 Aaa 1,065,590
420,000 Massachusetts Industrial Finance Agency
(Babson College), 5.800%, 10/01/10 10/05 at 102 Aaa 441,521
2,000,000 Massachusetts Municipal Wholesale Electric
Company, 5.000%, 7/01/10 7/03 at 102 Aaa 1,937,200
1,000,000 Massachusetts Port Authority, 13.000%, 7/01/13 No Opt. Call Aaa 1,732,030
1,000,000 Massachusetts Turnpike Authority, 5.125%, 1/01/23 1/03 at 102 Aaa 933,710
1,000,000 Boston General Obligation, 6.750%, 7/01/11 7/01 at 102 Aaa 1,132,660
500,000 Boston City Hospital (FHA-Insured Mortgage),
7.625%, 2/15/21 (Pre-refunded to 8/15/00) 8/00 at 102 Aaa 571,140
Boston Water and Sewer Commission:
500,000 7.250%, 11/01/06 11/98 at 100 Aaa 537,015
500,000 7.000%, 11/01/18 (Pre-refunded to 11/01/01) 11/01 at 102 Aaa 575,675
500,000 Fall River General Obligation, 7.200%, 6/01/10 6/01 at 102 Aaa 566,775
250,000 Town of Groveland Unlimited Tax, 6.900%, 6/15/07 6/01 at 102 Aaa 280,090
1,000,000 Haverhill General Obligation, 6.700%, 9/01/10 9/01 at 102 Aaa 1,107,140
250,000 Holyoke General Obligation, 8.150%, 6/15/06 6/02 at 103 Aaa 302,635
450,000 Leominster General Obligation, 7.500%, 4/01/09 4/00 at 102 Aaa 513,194
2,625,000 Lowell General Obligation, 5.600%, 11/01/12 11/03 at 102 Aaa 2,652,116
1,025,000 Lynn General Obligation, 6.750%, 1/15/02 No Opt. Call Aaa 1,146,534
250,000 Lynn Water and Sewer Commission,
7.250%, 12/01/10 (Pre-refunded to 12/01/00) 12/00 at 102 Aaa 286,875
1,000,000 Mansfield General Obligation, 6.700%, 1/15/11 1/02 at 102 Aaa 1,108,920
250,000 Methuen General Obligation, 7.400%, 5/15/04 5/00 at 102 Aaa 281,088
500,000 Monson General Obligation School Project,
7.700%, 10/15/10 (Pre-refunded to 10/15/00) 10/00 at 102 Aaa 581,585
1,500,000 Monson General Obligation, 5.500%, 10/15/10 No Opt. Call Aaa 1,557,300
300,000 North Andover General Obligation, 7.400%, 9/15/10 9/00 at 103 Aaa 342,006
North Middlesex Region School District,
General Obligation:
270,000 7.200%, 6/15/08 6/00 at 103 Aaa 304,223
245,000 7.200%, 6/15/09 6/00 at 103 Aaa 276,054
250,000 Northampton General Obligation, 5.300%, 3/01/10 3/03 at 102 Aaa 250,475
190,000 Northfield General Obligation, 6.350%, 10/15/09 10/01 at 102 Aaa 204,389
Palmer General Obligation:
270,000 7.300%, 3/01/10 (Pre-refunded to 3/01/00) 3/00 at 102 Aaa 305,348
250,000 7.700%, 10/01/10 (Pre-refunded to 10/01/00) 10/00 at 102 Aaa 290,523
1,000,000 5.500%, 10/01/10 10/03 at 102 Aaa 1,024,270
440,000 Quaboag Regional School District, General
Obligation, 6.250%, 6/15/08 6/02 at 102 Aaa 475,424
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salem General Obligation:
$ 500,000 6.800%, 8/15/09 8/01 at 102 Aaa $ 555,885
900,000 6.000%, 7/15/10 7/02 at 102 Aaa 954,288
250,000 Sandwich General Obligation, 7.100%, 11/01/07
(Pre-refunded to 11/01/98) 11/98 at 102 1/2 Aaa 276,613
Southern Berkshire Regional School District,
General Obligation:
515,000 7.500%, 4/15/07 (Pre-refunded to 4/15/02) 4/02 at 102 Aaa 608,400
1,145,000 7.000%, 4/15/11 4/02 at 102 Aaa 1,319,326
250,000 Springfield Geneal Obligation, 7.000%, 11/01/07 11/98 at 103 Aaa 273,643
220,000 Taunton General Obligation, 6.800%, 9/01/09 9/01 at 103 Aaa 246,435
455,000 Wareham School Project General Obligation,
7.050%, 1/15/07 1/01 at 103 Aaa 513,148
250,000 Westfield General Obligation, 7.100%, 12/15/08
(Pre-refunded to 12/15/00) 12/00 at 102 Aaa 285,497
215,000 Whately General Obligation, 6.350%, 1/15/09 1/02 at 102 Aaa 232,540
1,210,000 Winchendon General Obligation, 6.050%, 3/15/10 3/03 at 102 Aaa 1,296,500
160,000 Worcester General Obligation, 6.900% 5/15/07 5/02 at 102 Aaa 184,150
1,000,000 Puerto Rico Commonwealth, General Obligation,
5.750%, 7/01/24 7/05 at 101 1/2 Aaa 1,016,160
2,290,000 Puerto Rico Industrial Medical and Environmental
Authority, 6.250%, 7/01/16 1/05 at 102 Aaa 2,460,580
- ---------------------------------------------------------------------------------------------------------------------------
$ 58,810,000 Total Investments - (Cost $58,764,889) - 96.4% 63,715,206
==============-------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-
TERM MUNICIPAL SECURITIES - 2.3%
$ 1,200,000 Massachusetts Dedicated Income Tax, Variable
Rate Demand Bonds, 3.350%, 12/01/97+ VMIG-1 1,200,000
300,000 Massachusetts Industrial Finance Agency (Showa
Women's Institute Boston), Variable Rate
Demand Bonds, 3.600%, 3/15/04+ VMIG-1 300,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 1,500,000 Total Temporary Investments - 2.3% 1,500,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 884,502
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 66,099,708
===========================================================================================================================
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS INSURED TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 80 $61,303,958 96%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 3 1,853,838 3
PORTFOLIO OF A+ A1 1 557,410 1
INVESTMENTS
(EXCLUDING
TEMPORARY
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 84 $63,715,206 100%
===========================================================================================================================
</TABLE>
All of the bonds in the portfolio, exluding temporary investments in short-term
municipal securities, are either covered by Original Issue Insurance,
Secondary Market Insurance or Portfolio Insurance, or are backed by an escrow or
trust containing sufficient U.S. Government or U.S. Government
agency securities, any of which ensure the timely payment of principal and
interest.
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed
is that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
36
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN NEW YORK TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 4,000,000 New York Local Government Assistance Corporation,
5.500%, 4/01/21 4/03 at 102 A $ 3,844,720
500,000 New York State (Commissioner of Office of Mental
Health), Certificates of Participation,
8.300%, 9/01/12 9/97 at 102 Baal 536,065
3,000,000 New York State Energy Research and Development
Authority, 6.100%, 8/15/20 7/05 at 102 A1 3,106,530
1,545,000 New York State Environmental Facilities Corporation
(State Park Infrastructure), 5.750%, 3/15/13 3/03 at 101 Baal 1,535,823
3,000,000 New York State General Obligation,
5.625%, 10/01/20 10/05 at 101 A 3,004,890
200,000 New York State Housing Finance Agency, State
University Construction, 8.000%, 5/01/11 No Opt. Calls Aaa 255,060
1,650,000 New York State Housing Finance Agency, Insured
Multi-Family Mortgage Housing,
6.950%, 8/15/12 8/02 at 102 Aa 1,770,104
2,000,000 New York State Housing Finance Agency, Health
Facilities (New York City), 8.000%, 11/01/08 11/00 at 102 BBB+ 2,257,780
New York State Housing Finance Agency, Service
Contract Obligation:
500,000 6.125%, 3/15/20 9/03 at 102 Baal 511,215
3,750,000 5.500%, 9/15/22 9/03 at 102 Baal 3,528,450
3,000,000 6.500%, 3/15/25 9/05 at 102 Baal 3,170,940
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, Insured
Mortgage (St. Vincent's Hospital),
8.000%, 2/15/27 (Pre-refunded to 8/15/97) 8/97 at 102 Aaa 1,065,830
995,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, Insured
Mortgage (Albany Medical Center),
8.000%, 2/15/28 8/98 at 102 AAA 1,085,396
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home,
FHA-Insured, 7.350%, 2/15/29 8/99 at 102 Aa 1,083,640
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-Insured
(Buffalo General Hospital), 7.700%, 2/15/22
(Pre-refunded to 8/15/98) 8/98 at 102 AAA 1,111,020
1,250,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured (Catholic Medical Center),
8.300%, 2/15/22 (Pre-refunded to 2/15/98) 2/98 at 102 AAA 1,381,725
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,250,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Columbia-Presbyterian),
8.000%, 2/15/25 (Pre-refunded to 8/15/97) 8/97 at 102 Aaa $ 2,430,315
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Mental Health Services):
1,460,000 7.500%, 2/15/21 2/01 at 102 AAA 1,696,038
2,000,000 5.500%, 8/15/21 2/02 at 100 AAA 1,947,860
1,500,000 6.500%, 8/15/24 8/04 at 102 Baal 1,583,250
2,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
FHA-Insured, 6.200%, 8/15/22 8/02 at 102 AAA 2,087,460
1,520,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured (Bayley Seton/St. Joseph's Hospital),
6.450%, 2/15/09 2/03 at 102 AAA 1,662,698
2,500,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured (St. Vincent's Medical Center),
6.200%, 2/15/21 2/04 at 102 AAA 2,581,475
1,250,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(New York Downtown Hospital),
6.700%, 2/15/12 2/05 at 102 Baa 1,298,638
2,480,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home,
6.400%, 8/15/14 8/04 at 102 AAA 2,622,327
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured New York Hospital:
1,000,000 6.750%, 8/15/14 2/05 at 102 Aaa 1,125,190
1,000,000 6.800%, 8/15/24 2/05 at 102 Aaa 1,134,930
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Brookdale Hospital Medical Center):
1,000,000 6.400%, 2/15/01 No Opt. Call Baa 1,035,520
2,700,000 6.800%, 8/15/12 2/05 at 102 Baa 2,826,306
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Health Care Center),
6.375%, 11/15/19 11/05 at 102 Aa 1,048,710
380,000 New York State Mortgage Agency,
8.100%, 10/01/17 4/98 at 102 Aa 404,768
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 New York State Urban Development Corporation,
6.750%, 1/01/26 1/02 at 102 Aaa $ 1,106,060
1,100,000 New York State Urban Development Corporation
(Syracuse University Center for Science and
Technology), 7.875%, 1/01/17
(Pre-refunded to 1/01/98) 1/98 at 102 Baal 1,200,573
New York State Urban Development Corporation,
Correctional Capitol Facilities:
1,000,000 5.625%, 1/01/07 1/03 at 102 Baal 1,002,330
2,490,000 5.750%, 1/01/13 1/03 at 102 Baal 2,421,799
1,250,000 5.500%, 1/01/15 1/03 at 102 Baal 1,195,538
1,000,000 7.500%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 1,137,820
2,000,000 New York State Urban Development Corporation
(Clarkson Center for Advanced Materials
Processing), 7.800%, 1/01/20 (Pre-refunded to
1/01/01) 1/01 at 102 Baal 2,335,260
2,900,000 New York State Urban Development Corporation,
State Facilities, 7.500%, 4/01/20 (Pre-refunded
to 4/01/01) 4/01 at 102 Aaa 3,378,268
1,000,000 New York State Urban Development Corporation
(Cornell Center for Theory and Simulation),
6.00%, 1/01/14 1/03 at 102 Baa 1,005,010
2,615,000 New York State Urban Development Corporation
(Pine Barrens), 5.375%, 4/01/17 4/05 at 102 Baal 2,391,574
2,100,000 Babylon Industrial Development Agency,
Resource Recovery, 8.500%, 1/01/19 7/98 at 103 Baal 2,376,927
1,000,000 Batavia Housing Authority, FHA-Insured
(Washington Towers), 6.500%, 1/01/23 7/01 at 102 Aaa 1,025,060
1,000,000 Brookhaven Industrial Development Agency, Civic
Facility (Dowling College/National Aviation
Center), 6.750%, 3/01/23 3/03 at 102 BBB 1,041,710
2,000,000 New York State, Certificates of Participation
(John Jay College of Criminal Justice),
6.000%, 8/15/06 No Opt. Call Baal 2,077,080
500,000 Dormitory Authority of the State of New York
(Long Island Jewish Medical Center),
FHA-Insured, 7.750%, 8/15/27 2/98 at 102 AAA 536,535
Dormitory Authority of the State of New York
(City University):
1,500,000 5.750%, 7/01/07 No Opt. Call Baal 1,522,980
750,000 7.500%, 7/01/10 No Opt. Call Baal 886,005
2,225,000 5.750%, 7/01/12 No Opt. Call Baal 2,244,780
1,500,000 5.500%, 7/01/12 7/03 at 102 Baal 1,440,540
500,000 8.200%, 7/01/13 7/98 at 102 Baal 553,735
1,000,000 7.625%, 7/01/20 7/00 at 102 AAA 1,154,640
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* ATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 750,000 Dormitory Authority of the State of New York,
GNMA (Park Ridge Housing, Inc),
7.850%, 2/01/29 2/99 at 102 AAA $ 819,203
1,985,000 Dormitory Authority of the State of New York
(United Health Services), 7.350%, 8/01/29 2/00 at 102 AAA 2,165,159
3,500,000 Dormitory Authority of the State of New York
(Nursing Homes), 5.750%, 7/01/17 7/05 at 102 Aa3 3,438,505
Dormitory Authority of the State of New York
(State University):
2,000,000 7.400%, 5/15/01 5/00 at 102 Baal 2,187,740
2,000,000 5.500%, 5/15/08 No Opt. Call Baal 1,998,060
1,125,000 5.250%, 5/15/09 No Opt. Call Baal 1,086,446
2,000,000 5.500%, 5/15/13 No Opt. Call Baal 1,964,900
2,250,000 Dormitory Authority of the State of New York,
Judicial Facilities (Suffolk County),
9.500%, 4/15/14 4/96 at 116 3/32 Baa1 2,625,480
1,375,000 Dormitory Authority of the State of New York
(University of Rochester, Strong Memorial
Hospital), 5.500%, 7/01/21 7/04 at 102 A1 1,337,353
4,000,000 Dormitory Authority of the State of New
York, Court Facilities, 5.625%, 5/15/13 5/03 at 101 1/2 Baal 3,835,840
2,195,000 Dormitory Authority of the State of New York
(Upstate Community Colleges),
6.500%, 7/01/07 No Opt. Call Baal 2,362,786
2,470,000 Dutchess County Industrial Development
Authority, Civic Facilities (Bard College),
7.000%, 11/01/17 11/03 at 102 A 2,643,369
1,000,000 Franklin County Industrial Development Agency
(County Correctional Facility),
6.750%, 11/01/12 11/02 at 102 BBB 1,068,490
750,000 Hempstead Industrial Development Authority,
Civic Facility (United Cerebral Palsy Association
of Nassau County) 7.500%, 10/01/09 10/99 at 102 Aa2 797,168
2,500,000 Housing New York Corporation, 5.00%, 11/01/13 11/03 at 102 AA 2,298,650
1,000,000 Metropolitan Transportation Authority,
Commuter Facilities, 6.250%, 7/01/17 7/02 at 102 Aaa 1,064,320
1,000,000 Metropolitan Transportation Authority,
Commuter Facilities Service Contract,
7.500%, 7/01/16 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,149,720
1,025,000 Metropolitan Transportation Authority, Transit
Facilities, 6.500%, 7/01/18 7/02 at 102 Aaa 1,130,503
1,055,000 Monroe County Water Authority, Water System,
6.000%, 8/01/17 8/02 at 102 AA 1,076,944
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City General Obligation:
$ 2,500,000 7.000%, 8/01/04 No Opt. Call Baal $ 2,732,325
2,000,000 7.500%, 2/01/06 2/02 at 101 1/2 Baal 2,236,000
45,000 6.625%, 8/01/13 8/02 at 101 1/2 Aaa 49,738
2,500,000 6.000%, 2/15/20 2/05 at 101 Baal 2,424,300
New York City Housing Development Corporation,
Multi-Family Mortgage (FHA Insured):
2,000,000 6.550%, 10/01/15 4/03 at 102 AAA 2,093,180
2,500,000 5.850%, 5/01/26 5/03 at 102 AA 2,492,724
1,000,000 New York City Housing Development Corporation,
Multi-Unit Mortgage (FHA Insured),
7.350%, 6/01/19 6/01 at 102 AAA 1,073,680
New York City Municipal Water Finance Authority,
Water and Sewer System:
3,000,000 5.375%, 6/15/19 6/04 at 101 AAA 2,899,230
1,500,000 7.750%, 6/15/20 (Pre-refunded to 6/15/01) 6/01 at 101 1/2 Aaa 1,766,790
2,000,000 5.500%, 6/15/20 6/02 at 100 A 1,910,880
3,500,000 New York City Industrial Development Agency,
Civic Facility (The Lighthouse Project),
6.500%, 7/01/22 7/02 at 102 Aa2 3,642,240
New York City Industrial Development Agency
(College of New Rochelle):
1,000,000 6.200%, 9/01/10 9/05 at 102 Baa 1,010,320
1,000,000 6.300%, 9/01/15 9/05 at 102 Baa 1,006,090
2,405,000 Newark-Wayne Community Hospital,
7.600%, 9/01/15 9/03 at 102 N/R 2,429,242
1,000,000 Orangetown Housing Authority, Housing Facilities,
(Orangetown Guaranty), 7.600%, 4/01/30
(Pre-refunded to 10/01/00) 10/00 at 102 A 1,157,040
South Orangetown Central School District, General
Obligation:
390,000 6.875%, 10/01/08 No Opt. Call A 454,697
390,000 6.875%, 10/01/09 No Opt. Call A 454,939
3,015,000 Suffolk County Industrial Development Agency
(Dowling College Civic Facility), 6.625%, 6/01/24 6/04 at 102 BBB 3,191,769
2,000,000 34th Street Partnership Business Improvement
District, Capital Improvement,
5.500%, 1/01/23 1/03 at 102 A1 1,904,340
Triborough Bridge and Tunnel Authority:
2,000,000 7.100%, 1/01/10 1/01 at 102 A1 2,214,880
2,000,000 7.100%, 1/01/10 1/01 at 102 Aaa 2,242,460
2,100,000 UFA Development Corporation, FHA-Insured
(Loretto-Utica Project), 5.950%, 7/01/35 7/04 at 102 Aa 2,105,418
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000,000 Westchester County Industrial Development Agency,
Civic Facility (Jewish Board of Family and
Children Services), 6.750%, 12/15/12 12/02 at 102 BBB- $ 2,066,620
- ---------------------------------------------------------------------------------------------------------------------------
$ 158,685,000 Total Investments - (Cost $156,315,155) - 96.6% 165,378,435
==============-------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 2.2%
New York City General Obligation,
Variable Rate Demand Bonds:
$ 900,000 3.450%, 8/15/05+ VMIG-1 900,000
800,000 3.400%, 8/15/20+ VMIG-1 800,000
1,500,000 3.300%, 8/01/22+ VMIG-1 1,500,000
600,000 3.450%, 8/15/22+ VMIG-1 600,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 3,800,000 Total Temporary Investments - 2.2% 3,800,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 1,974,808
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 171,153,243
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 31 $ 46,979,690 28%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 11 20,158,871 12
PORTFOLIO OF A+ A1 4 8,563,103 5
INVESTMENTS A, A-- A, A2, A3 7 13,470,535 8
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 40 73,776,994 45
TEMPORARY Non-rated Non-rated 1 2,429,242 2
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 94 $165,378,435 100%
===========================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
42
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8,000,000 New York State Energy Research and Development
Authority (The Brooklyn Union Gas Company),
5.500%, 1/01/21 1/06 at 102 Aaa $ 7,866,400
2,500,000 New York State Energy Research and Development
Authority, Pollution Control (Central Hudson Gas
& Electric Corporation), 7.375%, 10/01/14 10/99 at 103 Aaa 2,802,650
1,450,000 New York State Environmental Facilities Corporation,
Water Pollution Control, Pooled Loan,
7.200%, 3/15/11 6/00 at 102 Aaa 1,614,343
2,200,000 New York State Housing Finance Agency, Multi-
Family Housing, 7.450%, 11/01/28 11/99 at 102 Aaa 2,338,886
995,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, Insured
Mortgage (Albany Medical Center),
8.000%, 2/15/28 8/98 at 102 AAA 1,085,396
895,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(St. Francis Hospital), 7.625%, 11/01/21 11/98 at 102 Aaa 984,187
4,765,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Bronx Lebanon), 7.100%, 2/15/27 2/97 at 102 Aaa 4,969,371
2,000,000 New York State Medical Care Facilities
Agency, Hospital and Nursing Home, FHA-
Insured, 7.350%, 2/15/29 8/99 at 102 Aa 2,167,280
1,500,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-
Insured (Catholic Medical Center),
8.300%, 2/15/22 (Pre-refunded to 2/15/98) 2/98 at 102 AAA 1,658,070
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home,
FHA-Insured (Montefiore Medical Center):
1,500,000 7.250%, 2/15/24 2/99 at 102 Aa 1,621,800
2,000,000 7.250%, 2/15/24 2/99 at 102 Aaa 2,167,600
1,300,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(St. Luke's-Roosevelt Hospital Center),
7.450%, 2/15/29 (Pre-refunded to 2/15/00) 2/00 at 102 Aaa 1,478,815
1,865,000 New York State Medical Care Facilities Finance
Agency, Long-Term Health Care (Capital
Guaranty Insured Program), 6.450%, 11/01/14 5/02 at 102 Aaa 2,001,966
3,200,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(North Shore University Hospital),
7.200%, 11/01/20 11/00 at 102 Aaa 3,581,184
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,670,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Our Lady of Victory),
6.625%, 11/01/16 11/01 at 102 Aaa $ 1,842,962
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Sisters of Charity of Buffalo):
500,000 6.600%, 11/01/10 11/01 at 102 Aaa 552,220
1,550,000 6.625%, 11/01/18 11/01 at 102 Aaa 1,710,534
1,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Aurelia Osborn Fox Memorial Hospital),
6.500%, 11/01/19 11/01 at 102 Aaa 1,097,430
3,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(South Nassau Communities Hospital),
6.125%, 11/01/11 11/02 at 102 Aaa 3,162,570
New York State Medical Care Facilities Finance
Agency, Mental Health Services, Facilities
Improvement Revenue:
1,415,000 5.750%, 2/15/14 8/03 at 102 Aaa 1,426,773
4,000,000 5.375%, 2/15/14 2/04 at 102 Aaa 3,905,400
3,250,000 5.700%, 8/15/14 2/03 at 102 Aaa 3,265,080
6,150,000 6.375%, 8/15/17 12/02 at 102 Aaa 6,556,208
2,815,000 6.250%, 8/15/18 2/02 at 102 Aaa 2,974,611
2,500,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(St. Mary's Hospital--Rochester Project),
6.200%, 11/01/14 11/03 at 102 Aaa 2,649,900
7,000,000 New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home,
FHA-Insured, 6.800%, 8/15/24 2/05 at 102 Aaa 7,944,510
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home
(Montefiore Medical Center):
3,390,000 5.750%, 2/15/15 2/05 at 102 Aaa 3,413,188
4,175,000 5.750%, 2/15/25 2/05 at 102 Aaa 4,179,927
New York State Mortgage Agency:
225,000 8.375%, 10/01/17 1/98 at 102 Aa 239,810
390,000 8.100%, 10/01/17 4/98 at 102 Aa 415,420
3,500,000 New York State Mortgage Agency, Homeowner
Mortgage, 5.650%, 4/01/15 10/03 at 102 Aaa 3,520,370
New York State Thruway Authority:
2,000,000 5.750%, 4/01/13 4/04 at 102 Aaa 2,054,580
7,300,000 5.750%, 1/01/19 1/02 at 102 Aaa 7,342,778
3,950,000 5.500%, 1/01/23 1/02 at 100 Aaa 3,871,000
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York State Urban Development Corporation:
$ 3,850,000 6.700%, 1/01/12 1/02 at 102 Aaa $ 4,256,945
9,650,000 6.750%, 1/01/26 1/02 at 102 Aaa 10,673,479
New York State Urban Development Corporation,
Correctional Facilities:
1,500,000 7.250%, 1/01/14 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 1,693,530
1,000,000 5.250%, 1/01/14 No Opt. Call Aaa 982,320
575,000 7.000%, 1/01/17 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 644,127
2,000,000 7.500%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 2,275,640
2,000,000 Power Authority of the State of New York, General
Purpose, 6.500%, 1/01/19 1/02 at 102 Aaa 2,194,520
280,000 Albany Municipal Water Finance Authority,
Water and Sewer System, 7.500%, 12/01/17 12/98 at 102 Aaa 308,350
1,795,000 Albany Municipal Water Finance Authority
5.500%, 12/01/22 12/03 at 102 Aaa 1,763,982
1,250,000 Broome County, Certificates of Participation,
5.250%, 4/01/22 4/04 at 102 Aaa 1,179,688
2,250,000 Buffalo and Fort Erie Public Bridge Authority,
5.750%, 1/01/25 1/05 at 101 Aaa 2,279,700
1,000,000 Buffalo General Obligation, 6.150%, 2/01/04 1/01 at 101 Aaa 1,077,130
8,385,000 Buffalo Municipal Water Finance Authority,
Water System, 5.750%, 7/01/19 7/03 at 102 Aaa 8,441,431
2,000,000 Buffalo Sewer Authority, Sewer System,
5.000%, 7/01/12 7/03 at 100 Aaa 1,898,120
Camden Central School District,
General Obligation:
500,000 7.100%, 6/15/07 No Opt. Call Aaa 602,965
600,000 7.100%, 6/15/08 No Opt. Call Aaa 727,914
600,000 7.100%, 6/15/09 No Opt. Call Aaa 728,772
275,000 7.100%, 6/15/10 No Opt. Call Aaa 333,614
1,560,000 Dormitory Authority of the State of New York,
College and University (Pooled Capital Program),
7.800%, 12/01/05 12/98 at 102 Aaa 1,711,850
1,490,000 Dormitory Authority of the State of New York
(United Health Services), 7.350%, 8/01/29 2/00 at 102 AAA 1,625,232
1,490,000 Dormitory Authority of the State of New York
(Iona College), 7.625%, 7/01/09 7/98 at 102 Aaa 1,626,499
1,200,000 Dormitory Authority of the State of New York,
Educational Facilities (State University),
7.250%, 5/15/15 (Pre-refunded to 5/15/00) 5/00 at 102 Aaa 1,363,956
1,000,000 Dormitory Authority of the State of New York
(United Cerebral Palsey Association of
Westchester County), 6.200%, 7/01/12 7/02 at 102 Aaa 1,056,150
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Dormitory Authority of the State of New York
(Manhattanville College), 7.500%, 7/01/22
(Pre-refunded to 7/01/00) 7/00 at 102 Aaa $ 1,149,720
Dormitory Authority of the State of New
York (City University System):
2,500,000 7.000%, 7/01/14 7/00 at 102 Aaa 2,772,850
1,000,000 6.500%, 7/01/14 7/96 at 100 Aaa 1,010,850
1,800,000 5.750%, 7/01/18 No Opt. Call Aaa 1,867,932
6,295,000 7.500%, 7/01/20 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 7,237,487
2,500,000 Dormitory Authority of the State of New
York (Cooper Union), 7.200%, 7/01/20 7/01 at 102 Aaa 2,835,325
Dormitory Authority of the State of New York,
Educational Facilities (State University):
2,500,000 5.250%, 5/15/15 No Opt. Call Aaa 2,447,975
1,200,000 7.000%, 5/15/18 (Pre-refunded to 5/15/00) 5/00 at 102 Aaa 1,352,472
2,000,000 6.500%, 5/15/19 (Pre-refunded to 5/15/00) 5/00 at 100 Aaa 2,182,140
5,000,000 Dormitory Authority of the State of New York,
(New York University), 6.250%, 7/01/09 7/01 at 102 Aaa 5,394,250
1,000,000 Dormitory Authority of the State of New York
(Fordham University), 7.200%, 7/01/15
(Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,137,910
4,640,000 Dormitory Authority of the State of New York,
(Mount Sinai School of Medicine),
5.000%, 7/01/21 7/04 at 102 Aaa 4,321,510
1,500,000 Dormitory Authority of the State of New York
(Sarah Lawrence College), 6.000%, 7/01/24 7/05 at 102 Aaa 1,568,325
2,000,000 Dormitory Authority of the State of New York
(Ellis Hospital), 5.600%, 8/01/25 8/05 at 102 Aaa 1,961,740
2,015,000 Dormitory Authority of the State of New York
(St. Vincents Hospital and Medical Center),
5.800%, 8/01/25 8/05 at 102 Aaa 2,049,416
1,000,000 Erie County Water Authority, Water Works,
6.750%, 12/01/14 12/09 at 100 Aaa 1,141,190
Glen Cove General Obligation:
445,000 5.500%, 6/15/09 No Opt. Call Aaa 466,605
455,000 5.600%, 6/15/10 No Opt. Call Aaa 478,942
470,000 5.625%, 6/15/11 No Opt. Call Aaa 488,838
500,000 Greece Central School District, General
Obligation, 6.000%, 6/15/09 No Opt. Call Aaa 551,420
Half Moon General Obligation:
385,000 6.500%, 6/01/09 No Opt. Call Aaa 445,114
395,000 6.500%, 6/01/10 No Opt. Call Aaa 455,072
395,000 6.500%, 6/01/11 No Opt. Call Aaa 453,326
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600,000 Jamesville-Dewitt Central School District,
General Obligation, 5.750%, 6/15/04 No Opt. Call Aaa $ 652,914
1,000,000 Metropolitan Transportation Authority, Transit
Facilities Service Contract, 7.500%, 7/01/17 7/98 at 102 Aaa 1,089,560
10,340,000 Metropolitan Transportation Authority, Transit
Facilities 6.500%, 7/01/18 7/02 at 102 Aaa 11,404,296
Middle Country Central School District at
Centereach (Town of Brookhaven),
General Obligation:
475,000 6.900%, 12/15/07 No Opt. Call Aaa 568,988
475,000 6.900%, 12/15/08 No Opt. Call Aaa 571,781
Monroe County General Obligation:
375,000 6.500%, 6/01/15 6/01 at 102 Aaa 410,756
375,000 6.500%, 6/01/16 6/01 at 102 Aaa 411,491
350,000 6.500%, 6/01/17 6/01 at 102 Aaa 384,059
3,725,000 Montgomery, Otsego, Schoharie County Solid
Waste Management Authority, Solid Waste System,
7.250%, 1/01/14 (Pre-refunded to 1/01/00) 1/00 at 103 Aaa 4,228,918
Mount Sinai Union Free School District General
Obligation:
1,000,000 7.250%, 2/15/15 (Pre-refunded to 2/15/00) 2/00 at 102 Aaa 1,130,310
500,000 6.200%, 2/15/15 No Opt. Call Aaa 551,180
1,035,000 6.200%, 2/15/16 No Opt. Call Aaa 1,144,110
1,000,000 7.250%, 2/15/17 (Pre-refunded to 2/15/00) 2/00 at 102 Aaa 1,130,310
1,500,000 Nassau County General Obligation,
5.700%, 8/01/13 8/04 at 103 Aaa 1,566,060
4,840,000 Nassau County Industrial Development Agency,
Civic Facilities (Hofstra University Project),
6.750%, 8/01/11 8/01 at 102 Aaa 5,369,109
1,020,000 New Rochelle General Obligation,
6.200%, 8/15/22 8/04 at 102 Aaa 1,089,166
New York City General Obligation:
500,000 8.250%, 11/01/02 (Pre-refunded to 11/01/97) 11/97 at 101 1/2 Aaa 544,775
3,000,000 6.250%, 8/01/10 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 Aaa 3,355,770
1,000,000 6.250%, 8/01/10 8/02 at 101 1/2 Aaa 1,067,160
3,520,000 5.750%, 5/15/12 5/03 at 101 1/2 Aaa 3,622,326
75,000 6.625%, 8/01/12 8/02 at 101 1/2 Aaa 82,985
2,600,000 6.000%, 8/01/12 8/02 at 101 1/2 Aaa 2,721,342
1,300,000 7.000%, 10/01/15 No Opt. Call Aaa 1,405,859
2,000,000 7.000%, 10/01/16 10/99 at 100 Aaa 2,411,520
1,025,000 7.000%, 10/01/17 No Opt. Call Aaa 1,108,466
310,000 7.000%, 10/01/18 No Opt. Call Aaa 335,243
1,000,000 5.375%, 10/01/20 10/03 at 101 1/2 Aaa 957,880
1,000,000 New York City Educational Construction Fund
5.625%, 4/01/13 4/04 at 101 1/2 Aaa 1,016,100
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City Health and Hospitals Corporation:
$ 2,500,000 5.625%, 2/15/13 2/03 at 102 Aaa $ 2,522,700
11,980,000 5.750%, 2/15/22 2/03 at 102 Aaa 11,955,561
5,000,000 New York City Housing Development Corporation
Pass-Through Certificates, Multi-Family Housing,
FHA Insured 6.500%, 2/20/19 7/97 at 105 Aaa 5,984,600
1,000,000 New York City Housing Development Corporation
Multi-Family, FHA Insured, 5.850%, 5/01/26 5/03 at 102 Aaa 1,004,840
3,250,000 New York City Municipal Water Financing,
6.750%, 6/15/16 6/01 at 101 Aaa 3,601,890
New York City Municipal Water Finance
Authority, Water and Sewer System:
1,000,000 7.250%, 6/15/15 (Pre-refunded to 6/15/00) 6/00 at 101 1/2 Aaa 1,134,550
6,765,000 5.750%, 6/15/18 6/02 at 101 1/2 Aaa 6,824,261
2,525,000 5.375%, 6/15/19 6/04 at 101 Aaa 2,440,185
4,650,000 5.500%, 6/15/20 6/02 at 100 Aaa 4,560,999
New York City Transit Authority Transit Facilities
(Livingston Plaza Project):
1,000,000 7.500%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 1,137,820
8,725,000 5.250%, 1/01/20 1/03 at 100 Aaa 8,188,849
2,200,000 New York City Trust for Cultural Resources
(American Museum of Natural History),
6.900%, 4/01/21 (Pre-refunded to 4/01/01) 4/01 at 102 Aaa 2,502,940
1,000,000 New York City Industrial Development Agency,
Civic Facility (USTA National Tennis Center
Incorporated Project), 6.375%, 11/15/14 11/04 at 102 Aaa 1,080,530
1,000,000 New York City Industrial Development Agency
(New School for Social Research),
5.750%, 9/01/15 9/05 at 102 Aaa 1,016,410
1,590,000 Niagara Falls General Obligation,
6.900%, 3/01/21 3/04 at 102 Aaa 1,807,019
5,725,000 Niagara Falls Bridge Commission, Toll Bridge
System Revenue, 6,125%, 10/01/19
(Pre-refunded to 10/01/02) 10/02 at 102 Aaa 6,398,203
North Hempstead General Obligation:
1,500,000 6.375%, 4/01/09 No Opt. Call Aaa 1,709,490
425,000 6.800%, 6/01/10 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 476,153
425,000 6.800%, 6/01/11 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 476,153
1,505,000 6.400%, 4/01/14 No Opt. Call Aaa 1,702,622
North Hempstead Solid Waste Management
Authority:
2,175,000 5.000%, 2/01/07 2/04 at 102 Aaa 2,192,705
1,825,000 5.000%, 2/01/12 2/04 at 102 Aaa 1,748,551
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nyack Union Free School District:
$ 625,000 6.500%, 4/01/12 4/02 at 102 Aaa $ 686,544
625,000 6.500%, 4/01/13 4/02 at 102 Aaa 686,894
625,000 6.500%, 4/01/14 4/02 at 102 Aaa 688,288
Rensselaer County General Obligation:
960,000 6.700%, 2/15/13 No Opt. Call Aaa 1,126,339
960,000 6.700%, 2/15/14 No Opt. Call Aaa 1,126,138
960,000 6.700%, 2/15/15 No Opt. Call Aaa 1,125,226
Rondout Valley Central School District,
General Obligation:
550,000 6.800%, 6/15/06 No Opt. Call Aaa 649,033
550,000 6.850%, 6/15/07 No Opt. Call Aaa 652,933
550,000 6.850%, 6/15/08 No Opt. Call Aaa 656,288
550,000 6.850%, 6/15/09 No Opt. Call Aaa 656,508
550,000 6.850%, 6/15/10 No Opt. Call Aaa 655,171
Suffolk County General Obligation:
1,000,000 6.900%, 4/01/01 4/00 at 102 Aaa 1,120,510
1,895,000 5.250%, 7/15/09 7/02 at 102 Aaa 1,913,419
600,000 6.150%, 5/01/10 5/03 at 102 Aaa 641,418
1,890,000 5.300%, 7/15/10 7/02 at 102 Aaa 1,901,699
1,630,000 5.400%, 4/01/11 4/02 at 102 Aaa 1,642,763
1,860,000 5.400%, 7/15/11 7/02 at 102 Aaa 1,874,954
1,000,000 5.400%, 7/15/12 7/02 at 102 Aaa 1,005,890
630,000 5.400%, 4/01/14 4/02 at 102 Aaa 628,595
625,000 5.400%, 4/01/15 4/02 at 102 Aaa 619,894
1,000,000 Suffolk County Industrial Development Agency,
Southwest Sewer System, 4.750%, 2/01/09 2/04 at 101 Aaa 963,010
Suffolk County Water Authority, Water System:
1,800,000 5.100%, 6/01/11 No Opt. Call Aaa 1,774,530
2,565,000 5.625%, 6/01/16 6/02 at 102 Aaa 2,558,613
3,700,000 5.000%, 6/01/17 6/03 at 102 Aaa 3,458,501
Triborough Bridge and Tunnel Authority, General
Purpose Revenue:
2,750,000 6.500%, 1/01/19 1/02 at 101 1/2 Aaa 3,007,095
2,000,000 7.000%, 1/01/20 (Pre-refunded to 1/01/01) 1/01 at 102 Aaa 2,273,580
1,175,000 7.000%, 1/01/21 (Pre-refunded to 1/01/01) 1/01 at 101 1/2 Aaa 1,330,934
8,650,000 Triborough Bridge and Tunnel Authority, Special
Obligation, 6.875%, 1/01/15 1/01 at 102 Aaa 9,607,205
1,750,000 Yonkers General Obligation, 7.375%, 12/01/09
(Pre-refunded to 12/01/00) 12/00 at 102 Aaa 2,022,405
- ---------------------------------------------------------------------------------------------------------------------------
$ 338,925,000 Total Investments - (Cost $333,979,266) - 97.3% 359,533,384
==============-------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK INSURED TAX-FREE VALUE FUND--CONTINUED
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 1.9%
$ 3,500,000 New York City General Obligation Fiscal
1995B-B6 Insured, Adjustable Rate,
3.450%, 8/15/05+ VMIG-1 $ 3,500,000
1,500,000 New York City General Obligation, Variable Rate
Demand Bonds, 3.300%, 8/01/22+ VMIG-1 1,500,000
200,000 New York City General Obligation Bonds,
Adjustable Rate, 3.450%, 8/15/22+ VMIG-1 200,000
1,800,000 Port Authority of New York and New
Jersey, Versatile Structure Obligations,
3.050%, 5/01/19+ A-1+ 1,800,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 7,000,000 Total Temporary Investments - 1.9% 7,000,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.8% 2,930,866
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 369,464,250
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 155 $355,089,074 99%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 4 4,444,310 1
PORTFOLIO OF
INVESTMENTS
(EXCLUDING
TEMPORARY
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 159 $359,533,384 100%
===========================================================================================================================
</TABLE>
All of the bonds in the portfolio, excluding temporary investments in short-term
municipal securities, are either covered by Original Issue Insurance, Secondary
Market Insurance or Portfolio Insurance, or are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government agency securities, any
of which ensure the timely payment of principal and interest.
* Optional call provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
50
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
NUVEEN OHIO TAX-FREE VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio Air Quality Development Authority,
Pollution Control (Ohio Edison Company):
$ 2,000,000 7.450%, 3/01/16 3/00 at 102 Aaa $ 2,233,060
750,000 7.625%, 7/01/23 7/99 at 102 Baa3 803,318
3,000,000 5.625%, 11/15/29 11/03 at 102 Aaa 2,977,290
1,750,000 Ohio Air Quality Development Authority,
Pollution Control (Columbus Southern
Power Company), 6.375%, 12/01/20 12/02 at 102 Aaa 1,882,650
1,000,000 Ohio Air Quality Development Authority,
Pollution Control (Ohio Power Company),
7.400%, 8/01/09 8/99 at 102 Baa1 1,060,600
2,000,000 Ohio Air Quality Development Authority,
Pollution Control (Cleveland Electric
Illuminating Company), 8.000%, 12/01/13 6/02 at 103 Aaa 2,399,380
1,000,000 Ohio Building Authority (State Correctional
Facilities), 7.125%, 9/01/09 9/96 at 102 A1 1,033,980
1,250,000 Ohio Capital Corporation for Housing, Multi-
Family Housing, 7.600%, 11/01/23 11/97 at 105 AAA 1,333,663
Ohio General Obligation:
1,475,000 6.650%, 8/01/05 No Opt. Call Aa 1,710,764
1,000,000 6.000%, 8/01/10 No Opt. Call Aa 1,090,530
250,000 Ohio Higher Educational Facility Commission
(Ohio Dominican College), 8.500%, 12/01/07
(Pre-refunded to 12/01/97) 12/97 at 102 N/R 274,655
400,000 Ohio Higher Educational Facility Commission
(John Carroll University), 9.250%, 10/01/07
(Pre-refunded to 10/01/97) 10/97 at 102 A 442,048
1,000,000 Ohio Higher Educational Facility Commission
(Ohio Wesleyan University), 7.650%, 11/15/07 11/97 at 102 Aaa 1,085,360
1,000,000 Ohio Higher Educational Facility Commission
(Ohio Northern University), 7.300%, 5/15/10
(Pre-refunded to 5/15/00) 5/00 at 100 Aaa 1,119,240
1,750,000 Ohio Higher Educational Facility Commission
(University of Dayton), 5.800%, 12/01/19 12/04 at 102 Aaa 1,784,195
Ohio Housing Finance Agency, Single Family
Mortgage (GNMA):
695,000 7.500%, 9/01/13 9/00 at 102 AAA 742,295
850,000 7.400%, 9/01/15 3/00 at 102 AAA 906,168
350,000 7.050%, 9/01/16 9/01 at 102 Aaa 372,918
2,500,000 Ohio Turnpike Commission, 5.750%, 2/15/24 2/04 at 102 AA-- 2,557,975
1,750,000 Ohio Water Development Authority
(Dayton Power and Light Company),
6.400%, 8/15/27 8/02 at 102 AA-- 1,877,575
100,000 Ohio IOOF Home (FHA-Insured), 8.150%, 8/01/02 8/97 at 103 AAA 107,156
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN OHIO TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adams County/Ohio Valley School District,
General Obligation:
$ 2,000,000 7.000%, 12/01/15 No Opt. Call Aaa $ 2,397,860
3,865,000 5.250%, 12/01/21 12/05 at 102 Aaa 3,719,560
3,955,000 Akron General Obligation, Limited Tax,
6.750%, 12/01/14 12/04 at 102 Aaa 4,496,400
1,500,000 Akron Waterworks System, 6.550%, 3/01/12
(Pre-refunded to 3/01/01) 3/01 at 102 Aaa 1,676,235
3,350,000 Anthony Wayne Local School District, General
Obligation, 5.750%, 12/01/24 12/05 at 101 Aaa 3,393,919
1,000,000 Aurora City School District, General Obligation,
5.800%, 12/01/16 12/05 at 102 Aaa 1,025,190
1,475,000 Bedford Hospital (Community Hospital),
8.500%, 5/15/09 (Pre-refunded to 5/15/00) 5/00 at 102 N/R 1,667,960
Bellefontaine Sewer System:
1,000,000 6.800%, 12/01/07 12/02 at 101 Baa1 1,072,040
1,000,000 6.900%, 12/01/11 12/02 at 101 Baa1 1,072,360
2,500,000 Buckeye Valley Local School District, General
Obligation, 6.850%, 12/01/15 No Opt. Call Aaa 2,955,350
1,250,000 Butler County Hospital Facilities (Fort Hamilton-
Hughes Memorial Hospital), 7.500%, 1/01/10 1/02 at 102 Baa 1,340,863
1,000,000 Canal Winchester Local School District, General
Obligation, Unlimited Tax, 7.100%, 12/01/13
(Pre-refunded to 12/01/01) 12/01 at 102 Aaa 1,158,100
1,000,000 Centerville General Obligation, 5.625%, 12/01/26 12/05 at 101 Aaa 1,001,610
1,000,000 Clermont County, Road Improvement,
Limited Tax, 7.125%, 9/01/11
(Pre-refunded to 9/01/00) 9/00 at 102 Aaa 1,136,400
Clermont County Sewer System Revenue:
2,000,000 7.375%, 12/01/20 (Pre-refunded to 12/01/00) 12/00 at 102 Aaa 2,305,680
1,000,000 7.100%, 12/01/21 (Pre-refunded to 12/01/01) 12/01 at 102 Aaa 1,158,100
1,000,000 Clermont County Waterworks System,
6.625%, 12/01/13 (Pre-refunded to 12/01/01) 12/01 at 102 Aaa 1,134,100
2,000,000 Cleveland City School District, General Obligation,
Unlimited Tax, 5.875%, 12/01/11 12/02 at 102 Aaa 2,078,820
1,500,000 Cleveland Public Power System,
7.000%, 11/15/24 11/04 at 102 Aaa 1,728,555
Cleveland Waterworks Mortgage:
1,000,000 6.500%, 1/01/11 1/02 at 102 Aaa 1,100,490
1,750,000 6.500%, 1/01/21 (Pre-refunded to 1/01/02) 1/02 at 102 Aaa 1,966,370
1,000,000 Coldwater Exempted Village School District,
Unlimited Tax, 7.000%, 12/01/13
(Pre-refunded to 12/01/99) 12/99 at 102 Aaa 1,119,690
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 Columbus General Obligation, Unlimited Tax,
6.500%, 1/01/10 1/02 at 102 Aaa $ 1,625,145
2,050,000 Columbus General Obligation, 5.250%, 9/15/18 9/03 at 102 Aaa 2,006,212
1,500,000 Cuyahoga County General Obligation,
Unlimited Tax,
7.000%, 10/01/13 (Pre-refunded to 10/01/01) 10/01 at 102 N/R 1,722,885
1,000,000 Cuyahoga County General Obligation,
5.250%, 10/01/13 No Opt. Call AA 983,610
1,000,000 Cuyahoga County General Obligation, Public
Improvements, 5.250%, 11/15/15 11/05 at 102 Aa 972,990
1,250,000 Cuyahoga County, Hospital Improvement
(Deaconess Hospital), 7.450%, 10/01/18
(Pre-refunded to 10/01/00) 10/00 at 103 A1 1,448,888
2,750,000 Cuyahoga County Hospital (Meridia Health
System), 7.250%, 8/15/19 8/00 at 102 A1 2,993,155
2,000,000 Dayton Airport Refunding Bonds (James
M. Cox-Dayton International Airport),
5.250%, 12/01/15 12/05 at 101 Aaa 1,934,200
750,000 Defiance Waterworks System, General Obligation,
Unlimited Tax, 6.200%, 12/01/20 12/04 at 102 Aaa 806,955
1,110,000 Fairborn General Obligation, Limited Tax,
7.000%, 10/01/11 10/02 at 102 Aaa 1,265,777
2,790,000 Franklin County Limited Tax, 5.375%, 12/01/20 12/08 at 102 Aaa 2,806,712
Franklin County, Hospital Facilities (Ohio
Presbyterian Retirement Services):
1,350,000 8.750%, 7/01/21 7/01 at 103 N/R 1,448,064
1,500,000 6.500%, 7/01/23 7/03 at 102 N/R 1,423,830
500,000 Franklin County, Refunding and Improvement
Bonds (Riverside Hospital), 7.250%, 5/15/20 5/00 at 102 Aaa 555,865
705,000 Franklin County, FHA Insured (Worthington
Village Nursing Home), 7.000%, 8/01/16 8/00 at 102 N/R 732,107
1,000,000 Franklin County, Hospital Facilities
(Riverside United Methodist Hospital),
5.750%, 5/15/20 5/03 at 102 Aa 983,860
1,000,000 Franklin County, (OCLC Online Computer
Library Center Project), 7.200%, 7/15/06 7/01 at 100 N/R 1,079,340
250,000 Fremont Sewerage System, 8.100%, 12/01/07
(Pre-refunded to 12/01/97) 12/97 at 102 A-- 272,973
1,000,000 Gahanna-Jefferson School District, General
Obligation, Unlimited Tax, 7.125%, 12/01/14
(Pre-refunded to 12/01/00) 12/00 at 102 A1 1,138,440
3,000,000 Garfield Heights (Marymount Hospital),
6.650%, 11/15/11 11/02 at 102 A 3,156,420
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN OHIO TAX-FREE VALUE FUND-CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Geauga County General Obligation,
5.625%, 12/01/15 12/05 at 102 Aa $ 1,009,330
Grandview Heights City School District, General
Obligation:
2,000,000 6.100%, 12/01/19 12/05 at 101 AA 2,102,060
1,020,000 5.550%, 12/01/19 No Opt. Call AA 1,036,820
250,000 Grandview Heights, Library Building Mortgage,
8.250%, 12/01/07 (Pre-refunded to 12/01/97) 12/97 at 102 N/R 273,918
1,000,000 Greenville Wastewater System, 6.350%, 12/01/17 10/02 at 102 Aaa 1,074,990
1,495,000 Hamilton County, FHA-Insured (Judson Care
Center), 7.800%, 8/01/19 8/00 at 101 5/16 A+ 1,615,168
400,000 Hubbard Sewer System, 8.800%, 11/15/17 5/98 at 102 N/R 437,992
1,000,000 Indian Lake Local School District,
General Obligation, 5.375%, 12/01/23 12/06 at 101 Aaa 975,970
1,000,000 Indian Valley Local School District, General
Obligation, 5.750%, 12/01/19 12/05 at 102 Aaa 1,018,300
1,000,000 Kent State University, General Receipts,
6.500%, 5/01/22 5/02 at 102 Aaa 1,101,050
1,000,000 Kettering City School District, General Obligation,
Unlimited Tax, 5.300%, 12/01/14 12/05 at 101 Aaa 978,410
3,630,000 Kings Local School District, General Obligation,
5.500%, 12/01/21 12/05 at 100 Aaa 3,602,485
500,000 Kirtland Local School District, General Obligation,
Unlimited Tax, 7.500%, 12/01/09 12/99 at 102 A1 552,840
1,500,000 Lakewood General Obligation, 6.500%, 12/01/12 12/02 at 102 Aa 1,657,650
1,000,000 Lakota Local School District, General Obligation,
Unlimited Tax, 6.125%, 12/01/17 12/05 at 100 Aaa 1,054,710
500,000 Lorain General Obligation, 5.650%, 12/01/15 12/05 at 102 Aaa 509,725
1,500,000 Lorain Hospital (Lakeland Community Hospital),
6.500%, 11/15/12 11/02 at 102 A1 1,558,890
500,000 Lorain Sewer System, 8.750%, 4/01/11 4/98 at 102 BBB-- 557,500
1,000,000 Lucas County General Obligation, Limited Tax,
6.650%, 12/01/12 12/02 at 102 A 1,046,070
1,500,000 Lucas County General Obligation,
5.400%, 12/01/15 12/05 at 102 Aaa 1,473,945
1,000,000 Mahoning County General Obligation,
Limited Tax, 7.200%, 12/01/09 12/99 at 102 Aaa 1,109,720
2,000,000 Mahoning County, Hospital Improvement
(St. Elizabeth Hospital Medical Center),
7.375%, 12/01/09 6/96 at 102 A1 2,052,260
2,355,000 Mahoning County, Hospital Improvement
(YHA Inc. Project), 7.000%, 10/15/14 10/00 at 102 Aaa 2,616,264
1,000,000 Marion County (United Church Homes, Inc. Project),
6.375%, 11/15/10 11/03 at 102 BBB-- 1,008,520
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marion County, Health Facilities (United Church
Homes, Inc.):
$ 1,150,000 8.875%, 12/01/12 (Pre-refunded to 12/01/99) 12/99 at 103 N/R $ 1,358,622
750,000 6.300%, 11/15/15 11/03 at 102 BBB-- 724,095
1,000,000 Marysville Exempted Village School District, General
Obligation, Unlimited Tax, 7.200%, 12/01/10
(Pre-refunded to 12/01/00) 12/00 at 102 Aaa 1,145,360
1,250,000 Marysville Water System, 7.050%, 12/01/21 2/01 at 101 Aaa 1,434,675
1,000,000 Mentor Village Exempted School District,
General Obligation, Unlimited Tax,
7.400%, 12/01/11 (Pre-refunded to 12/01/02) 12/02 at 100 Aaa 1,133,490
1,000,000 Montgomery County Water (Greater Moraine-Beaver
Creek Sewer District), 6.250%, 11/15/17 11/02 at 102 Aaa 1,067,300
3,000,000 Mount Vernon (Knox Community Hospital),
7.875%, 6/01/12 6/96 at 103 N/R 3,099,690
2,265,000 Napolean (Luthern Orphan's and Old Folks Home
Project), 6.875%, 8/01/23 9/04 at 102 Aa 2,449,915
1,000,000 North Olmstead, General Obligation, Limited Tax,
6.250%, 12/15/12 12/02 at 102 Aaa 1,080,350
1,000,000 Northeast Ohio Regional Sewer District, Wastewater
Improvement, 5.600%, 11/15/16 11/05 at 101 Aaa 1,001,180
500,000 Ottawa County General Obligation,
5.750%, 12/01/14 12/05 at 102 Aaa 512,630
1,000,000 Parma General Obligation, Limited Tax,
7.600%, 12/01/11 12/00 at 102 A 1,158,680
1,750,000 Pickerington Local School District, General
Obligation, Unlimited Tax, 6.750%, 12/01/16 12/01 at 102 A 1,875,808
1,000,000 Revere Local School District, General Obligation,
Unlimited Tax, 6.000%, 12/01/16 12/03 at 102 Aaa 1,044,560
1,500,000 Reynoldsburg City School District, General
Obligation, Unlimited Tax, 6.550%, 12/01/17 12/02 at 102 Aaa 1,661,925
1,200,000 Ridgemont Local School District, General
Obligation, Unlimited Tax, 7.250%, 12/01/14 12/02 at 102 N/R 1,286,472
735,000 Salem Sewer System, 7.500%, 11/01/11
(Pre-refunded to 11/01/96) 11/96 at 102 N/R 769,176
1,000,000 Springfield City School District, General Obligation,
Unlimited Tax, 6.600%, 12/01/12 12/01 at 102 Aaa 1,109,790
2,340,000 Stow General Obligation, 6.200%, 12/01/20 12/05 at 102 A1 2,464,651
3,080,000 Sylvania City School District, General Obligation,
5.750%, 12/01/22 12/05 at 101 Aaa 3,120,379
1,070,000 Trumbull County General Obligation,
7.000%, 12/01/04 No Opt. Call Aaa 1,260,449
1,000,000 Trumbull County Hospital (Trumbull Memorial
Hospital), 6.900%, 11/15/12 11/01 at 102 Aaa 1,120,840
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN OHIO TAX-FREE VALUE FUND--CONTINUED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 750,000 Tuscarawas County, Hospital Facilities (Union
Hospital), 6.500%, 10/01/21 10/03 at 102 Baa $ 727,688
University of Cincinnati, General Receipts:
1,000,000 7.300%, 6/01/09 (Pre-refunded to 6/01/99) 6/99 at 100 AA-- 1,098,110
1,000,000 6.300%, 6/01/12 12/02 at 102 AA-- 1,077,520
1,600,000 5.500%, 6/01/15 6/05 at 101 AA-- 1,587,648
1,500,000 University of Toledo, General Receipts,
5.350%, 6/01/25 6/04 at 102 Aaa 1,430,670
2,650,000 Walnut Township Local School District, General
Obligation, 6.200%, 12/01/20 No Opt. Call Aaa 2,950,961
1,950,000 Warren County, Hospital Facilities, Otterbein Home
Project, 7.200%, 7/01/11 7/01 at 102 Aa1 2,125,363
Warren General Obligation, Limited Tax:
1,500,000 7.750%, 11/01/10 (Pre-refunded to 11/01/00) 11/00 at 102 BBB+ 1,756,740
250,000 8.625%, 11/15/13 (Pre-refunded to 11/15/98) 11/98 at 102 BBB+ 284,936
2,500,000 Washington Water System, 5.375%, 12/01/19 12/03 at 101 Aaa 2,408,900
750,000 West Geauga Local School District, General
Obligation, Unlimited Tax, 5.950%, 11/01/12 11/04 at 102 Aaa 786,480
500,000 Wooster City School District, General Obligation,
Unlimited Tax, 6.500%, 12/01/17 12/02 at 102 Aaa 552,243
3,000,000 Puerto Rico Electric Power Authority,
5.500%, 7/01/25 7/05 at 100 A-- 2,879,670
- ---------------------------------------------------------------------------------------------------------------------------
$ 168,710,000 Total Investments - (Cost $167,189,364) - 98.7% 179,829,453
===========================================================================================================================
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 0.4%
$ 500,000 Cuyahoga County, University Hospital of
Cleveland, Variable Rate Demand Bonds,
3.400%, 1/01/16+ VMIG-1 500,000
300,000 Ohio Air Quality Development Authority
(The Cincinnati Gas and Electric Company),
Variable Rate Demand Bonds, 3.450%, 9/01/30+ VMIG-1 300,000
- ---------------------------------------------------------------------------------------------------------------------------
$ 800,000 Total Temporary Investments - 0.4% 800,000
==============-------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 1,530,461
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 182,159,914
===========================================================================================================================
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 66 $103,834,421 58%
RATINGS** AA+, AA, AA-- Aa1, Aa, Aa2, Aa3 16 24,321,720 13
PORTFOLIO OF A+ A1 9 14,858,272 8
INVESTMENTS A, A-- A, A2, A3 7 10,831,669 6
(EXCLUDING BBB+, BBB, BBB-- Baa1, Baa, Baa2, Baa3 11 10,408,660 6
TEMPORARY Non-rated Non-rated 13 15,574,711 9
INVESTMENTS):
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 122 $179,829,453 100%
===========================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
57
<PAGE>
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $226,239,426 $218,186,376 $ 78,218,271 $ 63,715,206
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 400,000 7,900,000 2,600,000 1,500,000
Cash - 401,476 114,539 119,718
Receivables:
Interest 3,966,815 3,247,317 1,092,435 1,001,565
Shares sold 23,967 144,099 37,818 11,460
Investments sold - - - -
Other assets 12,536 9,831 4,176 2,806
------------ ------------ ------------ ------------
Total assets 230,642,744 229,889,099 82,067,239 66,350,755
------------ ------------ ------------ ------------
LIABILITIES
Payables:
Investments purchased - 5,215,642 - -
Shares reacquired 40,000 56,538 24,922 -
Cash overdraft 68,006 - - -
Accrued expenses:
Management fees (note 7) 100,051 97,484 35,880 29,076
Other 52,068 50,374 43,994 25,856
Dividends payable 599,330 536,574 261,287 196,115
------------ ------------ ------------ ------------
Total liabilities 859,455 5,956,612 366,083 251,047
------------ ------------ ------------ ------------
Net assets (note 8) $229,783,289 $223,932,487 $ 81,701,156 $ 66,099,708
============ ============ ============ ============
Class A Shares (note 1)
Net Assets $ 12,709,245 $ 17,250,452 $ 4,289,634 $ 5,290,906
============ ============ ============ ============
Shares outstanding 1,201,563 1,603,198 431,437 504,138
============ ============ ============ ============
Net asset value and redemption price per share $ 10.58 $ 10.76 $ 9.94 $ 10.49
============ ============ ============ ============
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 11.08 $ 11.27 $ 10.41 $ 10.98
============ ============ ============ ============
Class C Shares (note 1)
Net Assets $ 684,050 $ 1,040,354 $ 638,184 $ 706,398
============ ============ ============ ============
Shares outstanding 64,678 97,466 64,525 67,455
============ ============ ============ ============
Net asset value, offering and redemption price per share $ 10.58 $ 10.67 $ 9.89 $ 10.47
============ ============ ============ ============
Class R Shares (note 1)
Net Assets $216,389,994 $205,641,681 $ 76,773,338 $ 60,102,404
============ ============ ============ ============
Shares outstanding 20,411,745 19,147,536 7,743,405 5,724,133
============ ============ ============ ============
Net asset value and redemption price per share $ 10.60 $ 10.74 $ 9.91 $ 10.50
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------
NY NY INS OH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $165,378,435 $359,533,384 $179,829,453
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 3,800,000 7,000,000 800,000
Cash 112,018 221,918 141,353
Receivables:
Interest 2,344,826 4,042,665 2,940,082
Shares sold 195,831 53,593 24,037
Investments sold - - 115,000
Other assets 5,854 23,239 7,506
------------ ------------ ------------
Total assets 171,836,964 370,874,799 183,857,431
------------ ------------ ------------
LIABILITIES
Payables:
Investments purchased - - 993,430
Shares reacquired 2,756 45,457 701
Cash overdraft - - -
Accrued expenses:
Management fees (note 7) 74,192 158,596 79,739
Other 68,252 90,386 75,057
Dividends payable 538,521 1,116,110 548,590
------------ ------------ ------------
Total liabilities 683,721 1,410,549 1,697,517
------------ ------------ ------------
Net assets (note 8) $171,153,243 $369,464,250 $182,159,914
============ ============ ============
Class A Shares (note 1)
Net Assets $ 15,731,737 $ 24,746,961 $ 12,904,370
============ ============ ============
Shares outstanding 1,483,039 2,332,442 1,217,784
============ ============ ============
Net asset value and redemption price per share $ 10.61 $ 10.61 $ 10.60
============ ============ ============
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 11.11 $ 11.11 $ 11.10
============ ============ ============
Class C Shares (note 1)
Net Assets $ 645,881 $ 1,369,280 $ 2,163,317
============ ============ ============
Shares outstanding 60,727 129,089 205,074
============ ============ ============
Net asset value, offering and redemption price per share $ 10.64 $ 10.61 $ 10.55
============ ============ ============
Class R Shares (note 1)
Net Assets $154,775,625 $343,348,009 $167,092,227
============ ============ ============
Shares outstanding 14,548,997 32,374,299 15,788,804
============ ============ ============
Net asset value and redemption price per share $ 10.64 $ 10.61 $ 10.58
============ ============ ============
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
59
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended February 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 13,781,032 $ 12,733,263 $ 4,837,922 $ 3,805,611
------------ ------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 1,202,873 1,158,688 426,738 347,740
12b-1 distribution and service fees (note 1) 23,161 32,428 9,341 14,370
Shareholders' servicing agent fees and expenses 151,174 130,018 73,530 56,187
Custodian's fees and expenses 85,828 68,050 51,005 49,007
Directors' fees and expenses (note 7) 4,158 3,876 2,710 1,955
Professional fees 28,924 30,203 16,976 13,484
Shareholders' reports - printing and mailing expenses 76,149 70,338 56,416 31,903
Federal and state registration fees 3,918 2,763 9,534 1,469
Portfolio insurance expense - 17,622 - 4,854
Other expenses 9,757 14,743 4,937 7,918
------------ ------------ ------------ ------------
Total expenses before expense reimbursement 1,585,942 1,528,729 651,187 528,887
Expense reimbursement from investment adviser (note 7) (3,302) (1,695) (59,879) (788)
------------ ------------ ------------ ------------
Net expenses 1,582,640 1,527,034 591,308 528,099
------------ ------------ ------------ ------------
Net investment income 12,198,392 11,206,229 4,246,614 3,277,512
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions, net
of taxes, if applicable (notes 1 and 5) 1,855,177 764,418 (217,900) 12,456
Net change in unrealized appreciation or depreciation of
investments 8,120,195 9,456,488 3,250,694 2,682,527
------------ ------------ ------------ ------------
Net gain from investments 9,975,372 10,220,906 3,032,794 2,694,983
------------ ------------ ------------ ------------
Net increase in net assets from operations $ 22,173,764 $ 21,427,135 $ 7,279,408 $ 5,972,495
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------
NY NY INS OH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 10,173,134 $ 21,352,872 $ 10,738,180
------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 882,509 1,940,010 956,869
12b-1 distribution and service fees (note 1) 30,739 51,219 35,618
Shareholders' servicing agent fees and expenses 143,133 214,972 172,725
Custodian's fees and expenses 58,808 71,270 56,916
Directors' fees and expenses (note 7) 1,440 6,208 1,008
Professional fees 24,971 37,406 25,755
Shareholders' reports - printing and mailing expenses 99,517 102,967 105,217
Federal and state registration fees 2,874 7,586 3,245
Portfolio insurance expenses - 7,559 -
Other expenses 8,233 18,530 8,030
------------ ------------ ------------
Total expenses before expense reimbursement 1,252,224 2,457,727 1,365,383
Expense reimbursement from investment adviser (note 7) (29,700) - (42,592)
------------ ------------ ------------
Net expenses 1,222,524 2,457,727 1,322,791
------------ ------------ ------------
Net investment income 8,950,610 18,895,145 9,415,389
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 5) 1,772,126 973,136 730,235
Net change in unrealized appreciation or depreciation of
investments 5,658,638 15,965,392 6,013,907
------------ ------------ ------------
Net gain from investments 7,430,764 16,938,528 6,744,142
------------ ------------ ------------
Net increase in net assets from operations $ 16,381,374 $ 35,833,673 $16,159,531
============ ============ ===========
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
CA CA INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 12,198,392 $ 12,056,682 $ 11,206,229 $ 11,038,593
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 1,855,177 (2,621,487) 764,418 (1,106,384)
Net change in unrealized appreciation or depreciation
of investments 8,120,195 (8,272,724) 9,456,488 (6,870,030)
------------ ------------ ------------ ------------
Net increase in net assets from operations 22,173,764 1,162,471 21,427,135 3,062,179
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From net investment income:
Class A (388,705) (40,773) (496,274) (59,786)
Class C (18,278) (2,883) (28,991) (4,199)
Class R (11,713,501) (12,099,560) (10,613,497) (10,954,036)
From accumulated net realized gains from investment
transactions:
Class A - (6,186) - (2,542)
Class C - (231) - (317)
Class R - (1,542,643) - (545,843)
In excess of net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
------------ ------------ ------------ ------------
Decrease in net assets from distributions to shareholders (12,120,484) (13,692,276) (11,138,762) (11,566,723)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 9,631,213 3,153,792 12,814,061 4,571,343
Class C 518,671 189,814 927,664 277,611
Class R 22,522,458 24,628,063 12,331,198 21,455,944
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 173,826 17,920 248,069 24,201
Class C 13,296 1,844 16,740 1,935
Class R 7,264,916 8,806,336 6,444,797 7,133,691
------------ ------------ ------------ ------------
40,124,380 36,797,769 32,782,529 33,464,725
------------ ------------ ------------ ------------
Cost of shares redeemed:
Class A (567,970) (117,370) (1,021,240) (71,333)
Class C (64,962) (1,036) (167,154) (68,234)
Class R (31,186,974) (31,154,367) (21,853,091) (29,032,260)
------------ ------------ ------------ ------------
(31,819,906) (31,272,773) (23,041,485) (29,171,827)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets derived from Fund
share transactions 8,304,474 5,524,996 9,741,044 4,292,898
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 18,357,754 (7,004,809) 20,029,417 (4,211,646)
Net assets at the beginning of year 211,425,535 218,430,344 203,903,070 208,114,716
------------ ------------ ------------ ------------
Net assets at the end of year $229,783,289 $211,425,535 $223,932,487 $203,903,070
============ ============ ============ ============
Balance of undistributed net investment income at end of year $ 142,955 $ 65,047 $ 134,147 $ 66,680
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ----------------------------------------------------------------------------------------------------------------------------
MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 4,246,614 $ 4,066,454 $ 3,277,512 $ 3,106,605
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (217,900) (558,617) 12,456 (212,554)
Net change in unrealized appreciation or depreciation
of investments 3,250,694 (2,393,115) 2,682,527 (1,878,784)
----------- ------------ ----------- -----------
Net increase in net assets from operations 7,279,408 1,114,722 5,972,495 1,015,267
----------- ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From net investment income:
Class A (139,213) (16,122) (174,644) (22,806)
Class C (11,360) (1,197) (22,692) (5,217)
Class R (4,149,329) (4,021,155) (3,106,193) (3,099,363)
From accumulated net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
In excess of net realized gains from investment
transactions:
Class A - - - -
Class C - - - -
Class R - - - -
----------- ------------ ----------- -----------
Decrease in net assets from distributions to shareholders (4,299,902) (4,038,474) (3,303,529) (3,127,386)
----------- ------------ ----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 3,487,963 1,057,696 3,509,564 1,906,377
Class C 510,754 144,012 359,914 324,825
Class R 7,760,983 10,510,784 3,473,819 7,040,265
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 75,540 8,778 104,279 11,338
Class C 7,603 594 20,520 2,330
Class R 2,962,447 2,815,745 2,184,979 2,160,636
----------- ------------ ----------- -----------
14,805,290 14,537,609 9,653,075 11,445,771
----------- ------------ ----------- -----------
Cost of shares redeemed:
Class A (436,265) (32,507) (415,735) (37,958)
Class C (33,924) - (32,222) -
Class R (8,395,795) (10,741,355) (5,205,452) (8,119,665)
----------- ------------ ----------- -----------
(8,865,984) (10,773,862) (5,653,409) (8,157,623)
----------- ------------ ----------- -----------
Net increase (decrease) in net assets derived from Fund
share transactions 5,939,306 3,763,747 3,999,666 3,288,148
----------- ------------ ----------- -----------
Net increase (decrease) in net assets 8,918,812 839,995 6,668,632 1,176,029
Net assets at the beginning of year 72,782,344 71,942,349 59,431,076 58,255,047
----------- ------------ ----------- -----------
Net assets at the end of year $81,701,156 $ 72,782,344 $66,099,708 $59,431,076
=========== ============ =========== ===========
Balance of undistributed net investment income at end of year $ 2,984 $ 56,272 $ 1,505 $ 27,522
=========== ============ =========== ===========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
NY NY INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 8,950,610 $ 8,356,495 $ 18,895,145 $ 19,887,434
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 1,772,126 (1,122,982) 973,136 691,691
Net change in unrealized appreciation or depreciation of
investments 5,658,638 (6,026,320) 15,965,392 (17,661,749)
------------ ------------ ------------ ------------
Net increase from net assets from operations 16,381,374 1,207,193 35,833,673 2,917,376
------------ ------------ ------------ ------------
DISTRIBUTION TO SHAREHOLDERS (note 1)
From net investment income:
Class A (551,771) (35,341) (834,291) (93,178)
Class C (18,002) (818) (36,998) (3,586)
Class R (8,358,840) (8,216,539) (18,227,897) (19,795,360)
From accumulated net realized gains from investment
transactions:
Class A - (2,464) (51,671) (11,988)
Class C - (28) (2,889) (504)
Class R - (697,769) (861,604) (1,367,629)
In excess of net realized gains from investment
transactions:
Class A - - (4,745) (483)
Class C - - (265) (20)
Class R - - (79,130) (55,065)
------------ ------------ ------------ ------------
Decrease in net assets from distributions to shareholders (8,928,613) (8,952,959) (20,099,490) (21,327,813)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 13,070,637 3,107,225 18,519,780 7,035,288
Class C 556,433 81,795 1,180,461 271,337
Class R 12,367,225 26,513,287 13,478,031 34,286,843
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 358,186 18,206 621,995 61,394
Class C 12,262 417 23,992 1,940
Class R 6,297,279 6,975,322 14,466,972 16,604,261
------------ ------------ ------------ ------------
32,662,022 36,696,252 48,291,231 58,261,063
------------ ------------ ------------ ------------
Cost of shares redeemed:
Class A (1,336,675) (51,915) (2,316,785) (99,736)
Class C (23,961) - (153,831) -
Class R (20,329,583) (22,466,951) (44,754,684) (75,263,107)
------------ ------------ ------------ ------------
(21,690,219) (22,518,866) (47,225,300) (75,362,843)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets derived from Fund
share transactions 10,971,803 14,177,386 1,065,931 (17,101,780)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 18,424,564 6,431,620 16,800,114 (35,512,217)
Net assets at the beginning of year 152,728,679 146,297,059 352,664,136 388,176,353
------------ ------------ ------------ ------------
Net assets at the end of year $171,153,243 $152,728,679 $369,464,250 $352,664,136
============ ============ ============ ============
Balance of undistributed net investment income at end of year $ 126,818 $ 104,821 $ 59,448 $ 263,489
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------
OH
- ---------------------------------------------------------------------------------------------
Year ended Year ended
2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 9,415,389 $ 9,142,413
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 730,235 (967,375)
Net change in unrealized appreciation or depreciation
of investments 6,013,907 (5,055,416)
------------ ------------
Net increase in net assets from operations 16,159,531 3,119,622
------------ ------------
DISTRIBUTION TO SHAREHOLDERS (note 1)
From net investment income:
Class A (435,348) (58,833)
Class C (62,605) (9,333)
Class R (8,957,352) (9,076,904)
From accumulated net realized gains from investment
transactions:
Class A - (4,637)
Class C - (879)
Class R - (652,495)
In excess of net realized gains from investment
transactions:
Class A - -
Class C - -
Class R - -
------------ ------------
Decrease in net assets from distributions to shareholders (9,455,305) (9,803,081)
------------ ------------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 8,850,862 4,240,889
Class C 1,260,641 871,689
Class R 10,592,955 15,813,517
Net asset value of shares issued to shareholders due to
reinvestment of distributions from net investment
income and from net realized gains from investment
transactions:
Class A 253,231 28,946
Class C 49,706 6,902
Class R 6,293,847 6,935,311
------------ ------------
27,301,242 27,897,254
------------ ------------
Cost of shares redeemed:
Class A (809,723) (115,343)
Class C (95,567) (3,158)
Class R (18,392,616) (21,090,544)
------------ ------------
(19,297,906) (21,209,045)
------------ ------------
Net increase (decrease) in net assets derived from Fund
share transactions 8,003,336 6,688,209
------------ ------------
Net increase (decrease) in net assets 14,707,562 4,750
Net assets at the beginning of year 167,452,352 167,447,602
------------ ------------
Net assets at the end of year $182,159,914 $167,452,352
============ ============
Balance of undistributed net investment income at end of year $ 68,716 $ 108,632
============ ============
- ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
65
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT
ACCOUNTING POLICIES
At February 29, 1996, the state Funds (the "Funds") covered in this report are
Nuveen California Tax-Free Fund, Inc. (comprising the Nuveen California and
California Insured Tax-Free Value Funds), Nuveen Tax-Free Bond Fund, Inc.
(comprising the Nuveen Massachusetts, New York and Ohio Tax-Free Value Funds)
and Nuveen Insured Tax-Free Bond Fund, Inc. (comprising the Nuveen Massachusetts
and New York Insured Tax-Free Value Funds).
Additional state Funds covering other states may be established in the future.
Each Fund invests primarily in a diversified portfolio of municipal obligations
issued by state and local government authorities in a single state.
The Funds are registered under the Investment Company Act of 1940 as open-end,
diversified management investment companies.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities valuation
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board of Directors. Temporary investments in
securities that have variable rate and demand features qualifying them as short-
term securities are traded and valued at amortized cost.
Securities transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined using the specific identification
method. Securities purchased on a when-issued or delayed delivery basis may be
settled a month or more after the transaction date. Any securities so purchased
are subject to market fluctuations during this period. The Funds have instructed
the custodian to segregate assets in a separate account with a current value at
least equal to the amount of their purchase commitments. At February 29, 1996,
such purchase commitments in California Insured amount to $5,215,642. There were
no such purchase commitments in any of the other Funds.
66
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
Interest income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and distribution to shareholders
Net investment income is declared as a dividend monthly and payment is made or
reinvestment is credited to shareholder accounts after month-end. Net realized
gains from investment transactions are distributed to shareholders not less
frequently than annually only to extent they exceed available capital loss
carryovers.
Distributions to shareholders of net investment income and net realized gains
from investment transactions are recorded on the ex-dividend date. The amount
and timing of such 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 result and will be classified as either distributions in excess
of net investment income or distributions in excess of net realized gains from
investment transactions, if applicable.
Income tax
Each Fund is a separate taxpayer for federal income tax purposes and intends to
comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies by distributing all of its net investment income,
in addition to any significant amounts of net realized gains from investments,
to shareholders. The Funds currently consider significant net realized gains 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 and designated state income taxes, to retain such tax
exempt status when distributed to the shareholders of the Funds. All income
dividends paid during the year ended February 29, 1996, have been designated
Exempt Interest Dividends.
Insurance
The California Insured, Massachusetts Insured and New York Insured Tax-Free
Value Funds invest 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 Funds' 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 Funds ultimately dispose of such municipal securities. Consequently, the
market value of the municipal securities covered by Original Issue
67
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 Funds. Accordingly, neither the prices used in determining the
market value of the underlying municipal securities nor the net asset value of
the Funds' shares include value, if any, attributable to the Portfolio
Insurance. Each policy of the Portfolio Insurance does, however, give the Funds
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
Effective September 6, 1994, each Fund commenced offering Class "A" Shares and
Class "C" Shares. Class "A" Shares incur a front-end sales charge and an annual
12b-1 service fee. Class "C" Shares are sold without a sales charge but incur
annual 12b-1 distribution and service fees. Effective June 13, 1995, an investor
purchasing Class "C" Shares agrees to pay a contingent deferred sales charge
("CDSC") of 1% if Class "C" Shares are redeemed within 12 months of purchase.
Prior to the offering of Class "A" and Class "C" Shares, the shares outstanding
were renamed Class "R" and are not subject to any 12b-1 distribution or service
fees. Effective with the offering of the new classes, Class "R" Shares will
generally be available only for reinvestment of dividends by current "R"
shareholders and for already established Nuveen Unit Investment Trust
reinvestment accounts.
Derivative financial instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including future, 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 year ended February 29, 1996,
other than occasional purchases of high quality synthetic money market
securities, if applicable.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
68
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
2. EXPENSE ALLOCATION
Expenses of the Funds that are not directly attributable to any class of shares
are prorated among the classes based on the relative net assets of each class.
Expenses directly attributable to a class of shares are recorded to the specific
class. Effective August 1, 1995, the Funds adopted a multiple class plan
pursuant to Rule 18f-3 under the investment Company Act of 1940 and now
designate class specific expenses to include Rule 12b-1 distribution and service
fees, and other expenses incurred for services received by a class that differ
in either amount or kind. A breakdown of the class specific expenses is as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
February 29, 1996):
Class A $19,006 $25,512 $ 6,732 $ 8,932
Class C 4,155 6,916 2,609 5,438
Shareholders' servicing agent fees and expenses
(for the five month period ended July 31, 1995):
Class A 3,235 4,044 2,378 2,346
Class C 205 227 209 215
Class R 62,876 57,527 29,261 19,878
Shareholders' reports-printing and mailing expenses
(for the five month period ended July 31, 1995):
Class A 1,525 1,808 988 520
Class C 201 190 23 44
Class R 40,490 36,738 37,136 33,910
Federal and state registration fees (for the five month period
ended July 31, 1995):
Class A 985 950 1,207 471
Class C 290 20 1,050 106
Class R 459 48 4,457 633
- --------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
NY NY INS OH
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
February 29, 1996):
Class A $26,638 $42,326 $21,336
Class C 4,101 8,893 14,282
Shareholders' servicing agent fees and expenses (for the
five month period ended July 31, 1995):
Class A 5,805 5,554 4,802
Class C 925 288 564
Class R 56,825 89,427 67,199
Shareholders' reports-printing and mailing expenses (for
the five month period ended July 31, 1995):
Class A 1,599 1,436 2,069
Class C 91 110 240
Class R 65,948 59,582 75,389
Federal and state registration fees (for the five month period
ended July 31, 1995):
Class A 821 1,324 1,207
Class C 194 27 207
Class R 448 525 456
- ----------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
3. FUND SHARES
Transactions in shares were as follows:
- --------------------------------------------------------------------------------------------------------------------------
CA CA INS
- --------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A $ 927,895 $ 321,777 $ 1,211,972 $ 468,407
Class C 50,026 19,666 89,705 28,545
Class R 2,165,620 2,433,649 1,177,751 2,136,079
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from net
realized gains from investment transactions:
Class A 16,682 1,856 23,441 2,486
Class C 1,279 191 1,594 201
Class R 700,563 884,995 614,344 714,801
------------ ----------- ---------- ---------
3,862,065 3,662,134 3,118,807 3,350,519
------------ ----------- ---------- ----------
Shares redeemed:
Class A (54,537) (12,110) (95,872) (7,236)
Class C (6,378) (106) (15,721) (6,858)
Class R (2,990,150) (3,116,035) (2,088,697) (2,915,964)
------------ ----------- ---------- ----------
(3,051,065) (3,128,251) (2,200,290) (2,930,058)
------------ ----------- ---------- ----------
Net increase (decrease) 811,000 533,883 918,517 420,461
============ =========== ========== ==========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------------------------------------------
MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 356,285 114,157 339,891 197,250
Class C 51,779 15,429 34,914 33,405
Class R 795,556 1,117,491 337,797 702,214
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from net
realized gains from investment transactions:
Class A 7,663 956 10,031 1,171
Class C 775 65 1,987 244
Class R 303,251 277,942 211,766 225,446
------------ ------------ ------------ ------------
1,515,309 1,526,040 936,386 1,159,730
------------ ------------ ------------ ------------
Shares redeemed:
Class A (44,057) (3,567) (40,197) (4,008)
Class C (3,523) - (3,095) -
Class R (857,146) (1,130,507) (503,288) (823,516)
------------ ------------ ------------ ------------
(904,726) (1,134,074) (546,580) (827,524)
------------ ------------ ------------ ------------
Net increase (decrease) 610,583 391,966 389,806 332,206
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
NY NY INS
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
2/29/96 2/28/95 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,261,309 318,594 1,778,309 719,364
Class C 53,367 8,430 113,081 27,982
Class R 1,182,028 2,613,112 1,291,786 3,411,938
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from net
realized gains from investment transactions:
Class A 34,236 1,882 59,314 6,336
Class C 1,167 43 2,279 200
Class R 603,620 701,622 1,387,801 1,652,628
------------ ------------ ------------ ------------
3,135,727 3,643,683 4,632,570 5,818,448
------------ ------------ ------------ ------------
Shares redeemed:
Class A (127,601) (5,381) (220,550) (10,331)
Class C (2,280) - (14,453) -
Class R (1,956,584) (2,245,562) (4,307,682) (7,580,245)
------------ ------------ ------------ ------------
(2,086,465) (2,250,943) (4,542,685) (7,590,576)
------------ ------------ ------------ ------------
Net increase (decrease) 1,049,262 1,392,740 89,885 (1,772,128)
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------------
OH
- ---------------------------------------------------------------------------------------------
Year ended Year ended
2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold:
Class A 846,644 432,196
Class C 120,707 88,344
Class R 1,015,491 1,586,702
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from net
realized gains from investment transactions:
Class A 24,156 2,972
Class C 4,767 711
Class R 604,197 696,759
------------ ------------
2,615,962 2,807,684
------------ ------------
Shares redeemed:
Class A (76,763) (11,421)
Class C (9,130) (325)
Class R (1,765,109) (2,131,282)
------------ ------------
(1,851,002) (2,143,028)
------------ ------------
Net increase (decrease) 764,960 664,656
============ ============
- ---------------------------------------------------------------------------------------------
</TABLE>
74
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
4. DISTRIBUTIONS TO SHAREHOLDERS
On March 8, 1996, the Funds declared dividend distributions from their ordinary
income which were paid on April 1, 1996, to shareholders of record on March 8,
1996, as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $ .0440 $ .0440 $ .0420 $ .0430
Class C .0375 .0370 .0360 .0365
Class R .0465 .0460 .0440 .0450
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NY NY INS OH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $ .0460 $ .0440 $ .0450
Class C .0395 .0375 .0380
Class R .0485 .0460 .0470
============ ============ ============
- ------------------------------------------------------------------------------------------------------------
</TABLE>
5. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the year ended February 29,
1996, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
Investments in municipal securities $ 86,931,529 $ 88,694,265 $ 8,378,588 $ 4,607,844
Temporary municipal investments 97,900,000 84,425,000 20,800,000 16,400,000
SALES
Investments in municipal securities 76,815,188 80,308,313 4,213,420 327,390
Temporary municipal investments 97,500,000 78,225,000 19,000,000 16,600,000
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NY NY INS OH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASES
Investments in municipal securities $ 78,935,027 $ 58,943,158 $ 65,139,819
Temporary municipal investments 30,250,000 39,200,000 27,400,000
SALES
Investments in municipal securities 73,742,136 65,415,317 55,993,586
Temporary municipal investments 27,650,000 33,600,000 27,400,000
============ ============ ============
- ------------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS
At February 29, 1996, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes for each Fund.
At February 29, 1996, 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 carryovers will expire as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
CA CA INS MA MA INS
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Expiration year:
1997 $ - $ - $ - $ 47,237
1999 - - - 18,885
2003 518,192 220,919 275,030 172,689
2004 247,114 121,012 507,247 39,865
-------- -------- -------- --------
Total $765,306 $341,931 $782,277 $278,676
======== ======== ======== ========
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------
OH
- -----------------------------
<S> <C>
Expiration year:
1997 $ -
1999 -
2003 -
2004 237,140
--------
Total $237,140
========
- -----------------------------
</TABLE>
76
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
6. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at February 29, 1996, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CA CA INS MA MA INS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
Gross unrealized:
Appreciation $12,556,045 $14,643,216 $ 5,577,358 $5,000,960
Depreciation (442,450) (323,932) (72,750) (50,643)
----------- ----------- ----------- ----------
Net unrealized appreciation $12,113,595 $14,319,284 $ 5,504,608 $4,950,317
=========== =========== =========== ==========
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
NY NY INS OH
- -------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
Appreciation $ 9,487,337 $26,164,455 $12,797,421
Depreciation (424,057) (610,337) (157,332)
----------- ----------- -----------
Net unrealized appreciation $ 9,063,280 $25,554,118 $12,640,089
=========== =========== ===========
- -------------------------------------------------------------------
</TABLE>
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS
7. MANAGEMENT FEE AND OTHER TRANSACTIONS
WITH AFFILIATES
Under the Funds' investment management agreements with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays to the Adviser an annual management fee, payable monthly, at the rates set
forth below which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Average daily net asset value Management fee
- ------------------------------------------------------------
<S> <C>
For the first $125,000,000 .55 of 1%
For the next $125,000,000 .5375 of 1
For the next $250,000,000 .525 of 1
For the next $500,000,000 .5125 of 1
For the next $1,000,000,000 .5 of 1
For net assets over $2,000,000,000 .475 of 1
- ------------------------------------------------------------
</TABLE>
The management fee is reduced by, or the Adviser assumes certain expenses of
each Fund, in an amount necessary to prevent the total expenses of each Fund
(including the management fee, but excluding interest, taxes, fees incurred in
acquiring and disposing of portfolio securities, 12b-1 Service and Distribution
fees, and to the extent permitted, extraordinary expenses) in any fiscal year
from exceeding .75 of 1% of the average daily net asset value of the California,
Massachusetts, New York and Ohio Tax-Free Value Funds and .975 of 1% of the
average daily net asset value of the California Insured, Massachusetts Insured
and New York Insured Tax-Free Value Funds. The Adviser may also voluntarily
agree to reimburse additional expenses from time to time, which may be
voluntarily terminated at any time at its discretion.
The management fee referred to above compensates the Adviser for overall
investment advisory and administrative services, and general office facilities.
The Funds pay no compensation directly to their directors who are affiliated
with the Adviser or to their officers, all of whom receive remuneration for
their services to the Funds from the Adviser.
78
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
8. COMPOSITION OF NET ASSETS
At February 29, 1996, each Fund had common stock authorized at $.01 par value
per share. The composition of net assets as well as the number of authorized
shares were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $218,292,045 $209,820,987 $ 76,982,089 $ 61,426,562
Balance of undistributed net investment income 142,955 134,147 2,984 1,505
Accumulated net realized gain (loss) from investment
transactions (765,306) (341,931) (788,525) (278,676)
Distributions in excess of net realized gains from investment
transactions - - - -
Net unrealized appreciation of investments 12,113,595 14,319,284 5,504,608 4,950,317
------------ ------------ ------------ ------------
Net assets $229,783,289 $223,932,487 $ 81,701,156 $ 66,099,708
============ ============ ============ ============
Authorized shares:
Class A 40,000,000 40,000,000 200,000,000 200,000,000
Class C 45,000,000 45,000,000 260,000,000 240,000,000
Class R 40,000,000 40,000,000 40,000,000 60,000,000
============ ============ ============ ============
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
NY NY INS OH
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $161,313,710 $343,934,825 $169,688,249
Balance of undistributed net investment income 126,818 59,448 68,716
Accumulated net realized gain (loss) from investment
transactions 649,435 - (237,140)
Distributions in excess of net realized gains from investment
transactions - (84,141) -
Net unrealized appreciation of investments 9,063,280 25,554,118 12,640,089
------------ ------------ ------------
Net assets $171,153,243 $369,464,250 $182,159,914
============ ============ ============
Authorized shares:
Class A 200,000,000 200,000,000 200,000,000
Class C 220,000,000 200,000,000 220,000,000
Class R 80,000,000 100,000,000 80,000,000
============ ============ ============
-----------------------------------------------------------------------------------------------------------
</TABLE>
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS
9. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At February 29, 1996, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CA CA INS MA MA INS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Bonds:
Health Care Facilities 19% 14% 16% 18%
Housing Facilities 14 8 19 2
Lease Rental Facilities 8 14 - -
Educational Facilities 13 - 13 15
Water/Sewer Facilities 2 13 1 1
Transportation 5 1 2 1
Electric Utilities 2 7 1 3
Pollution Control - - 2 -
Other 25 26 1 1
General Obligation Bonds - 2 23 40
Escrowed Bonds 12 15 22 19
--- --- --- ---
100% 100% 100% 100%
=== === === ===
- ---------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NY NY INS OH
- --------------------------------------------------------------------------------------------------------------
Revenue Bonds:
Health Care Facilities 4% 10% 15%
Housing Facilities 17 16 5
Lease Rental Facilities 19 1 1
Educational Facilities 16 9 4
Water/Sewer Facilities 4 11 6
Transportation 1 10 2
Electric Utilities - 1 3
Pollution Control 5 3 7
Other 9 4 1
General Obligation Bonds 12 19 41
Escrowed Bonds 13 16 15
--- --- ---
100% 100% 100%
=== === ===
- --------------------------------------------------------------------------------------------------------------
</TABLE>
80
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
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 (39% for California, 100% for California Insured, 43% for
Massachusetts, 100% for Massachusetts Insured, 22% for New York, 100% for New
York Insured and 59% for Ohio). Such insurance, however, does not guarantee the
market value of the municipal securities or the value of the Fund's shares.
All of the temporary investments in short-term municipal securities have credit
enhancements (letters of credit, guarantees or insurance) issued by third party
domestic or foreign banks or other institutions.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
81
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------------------------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distribution Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
- --------------------------------------------------------------------------------------------------------------------------------
CA
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Year ended
2/29/96 $10.100 $.549* $ .473 $(.542) $ - $10.580
9/6/94 to
2/28/95 10.210 .270* (.031) (.275) (.074) 10.100
CLASS C
Year ended
2/29/96 10.100 .470* .474 (.464) - 10.580
9/16/94 to
2/28/95 10.040 .218* .139 (.223) (.074) 10.100
CLASS R
Year ended
2/29/96 10.130 .575 .467 (.572) - 10.600
Year ended 2/28,
1995 10.740 .582 (.531) (.587) (.074) 10.130
1994 10.850 .598 (.054) (.596) (.058) 10.740
1993 10.140 .633 .707 (.626) (.004) 10.850
8 months ended
2/29/92 9.920 .429 .218 (.427) - 10.140
Year ended 6/30,
1991 9.790 .639 .133 (.642) - 9.920
1990 9.850 .641 (.058) (.643) - 9.790
1989 9.240 .649* .610 (.649) - 9.850
1988 9.280 .647* (.040) (.647) - 9.240
1987** 9.600 .652* (.320) (.652) - 9.280
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
82
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10.36% $ 12,709 1.00% 5.23% .96% 5.27% 36%
2.52 3,146 1.41+ 5.40+ 1.00+ 5.81+ 32
9.53 684 1.84 4.39 1.71 4.52 36
3.71 200 2.41+ 4.37+ 1.75+ 5.03+ 32
10.54 216,390 .71 5.53 .71 5.53 36
0.78 208,080 .71 5.83 .71 5.83 32
5.08 218,430 .73 5.47 .73 5.47 19
13.66 183,215 .71 6.05 .71 6.05 5
6.61 133,377 .67+ 6.30+ .67+ 6.30+ -
8.16 107,508 .69 6.48 .69 6.48 15
6.14 78,704 .69 6.51 .69 6.51 8
14.12 52,048 .77 6.77 .75 6.79 22
6.87 29,640 .88 6.91 .70 7.09 48
3.28 19,094 1.19 5.61 .18 6.62 17
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
83
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CA INS
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $10.250 $.530* $.505 $(.525) $ -- $10.760
9/6/94 to
2/28/95 10.220 .255* .068 (.265) (.028) 10.250
CLASS C
Year ended
2/29/96 10.150 .448* .516 (.444) -- 10.670
9/12/94 to
2/28/95 10.060 .210* .123 (.215) (.028) 10.150
CLASS R
Year ended
2/29/96 10.230 .556 .507 (.553) -- 10.740
Year ended 2/28,
1995 10.670 .559 (.412) (.559) (.028) 10.230
1994 10.850 .560 (.101) (.556) (.083) 10.670
1993 10.010 .584 .871 (.579) (.036) 10.850
8 months ended
2/29/92 9.650 .401 .360 (.401) -- 10.010
Year ended 6/30,
1991 9.480 .600 .176 (.606) -- 9.650
1990 9.630 .608 (.151) (.607) -- 9.480
1989 9.020 .607 .610 (.607) -- 9.630
1988 8.980 .600* .040 (.600) -- 9.020
1987** 9.600 .630* (.620) (.630) -- 8.980
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
84
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
10.32% $ 17,250 .98% 4.99% .97% 5.00% 38%
3.33 4,753 1.24+ 5.26+ 1.05+ 5.45+ 25
9.67 1,040 1.74 4.23 1.71 4.26 38
3.45 222 2.44+ 4.05+ 1.80+ 4.69+ 25
10.63 205,642 .70 5.29 .70 5.29 38
1.68 198,928 .70 5.60 .70 5.60 25
4.27 208,115 .71 5.12 .71 5.12 14
15.05 168,852 .75 5.72 .75 5.72 9
7.99 100,933 .64+ 5.97+ .64+ 5.97+ 7
8.43 74,551 .68 6.26 .68 6.26 29
4.93 50,625 .70 6.36 .70 6.36 13
13.97 35,032 .82 6.52 .82 6.52 23
7.44 22,394 .99 6.60 .82 6.77 31
(.13) 16,192 1.06 5.59 .17 6.48 4
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
85
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MA
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $9.560 $.513* $.388 $(.521) $ -- $9.940
9/6/94 to
2/28/95 9.540 .254* .025 (.259) -- 9.560
CLASS C
Year ended
2/29/96 9.510 .437* .392 (.449) -- 9.890
10/5/94 to
2/28/95 9.280 .188* .254 (.212) -- 9.510
CLASS R
Year ended
2/29/96 9.540 .537* .378 (.545) -- 9.910
Year ended 2/28,
1995 9.940 .541* (.403) (.538) -- 9.540
1994 9.910 .543* .038 (.541) (.010) 9.940
1993 9.210 .563* .704 (.563) (.004) 9.910
3 months ended
2/29/92 9.130 .146 .077 (.143) -- 9.210
Year ended 11/30,
1991 8.760 .577* .375 (.582) -- 9.130
1990 8.900 .587* (.144) (.583) -- 8.760
1989 8.600 .587* .300 (.587) -- 8.900
1988 8.250 .581* .350 (.581) -- 8.600
12/10/86 to
11/30/87 9.600 .577* (1.350) (.577) -- 8.250
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
86
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
9.62% $ 4,290 1.17% 5.04% 1.00% 5.21% 6%
3.05 1,067 1.87+ 4.88+ 1.00+ 5.75+ 17
8.87 638 2.24 3.96 1.75 4.45 6
4.86 147 3.40+ 3.46+ 1.75+ 5.11+ 17
9.80 76,773 .82 5.42 .75 5.49 6
1.64 71,568 .77 5.75 .75 5.77 17
5.96 71,942 .81 5.32 .75 5.38 3
14.21 53,231 .87 5.79 .75 5.91 5
2.44 34,470 .71+ 6.31+ .71+ 6.31+ 5
11.19 31,150 .77 6.37 .75 6.39 19
5.21 20,829 .85 6.58 .75 6.68 23
10.62 15,513 1.09 6.30 .75 6.64 31
11.56 9,485 1.24 6.25 .75 6.74 55
(8.19) 5,681 1.54+ 5.30+ .37+ 6.47+ 34
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
87
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MA INS
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $10.060 $.512* $.433 $(.515) $ -- $10.490
9/6/94 to
2/28/95 10.030 .249* .039 (.258) -- 10.060
CLASS C
Year ended
2/29/96 10.040 .434 .435 (.439) -- 10.470
9/14/94 to
2/28/95 9.910 .202* .137 (.209) -- 10.040
CLASS R
Year ended
2/29/96 10.060 .538 .445 (.543) -- 10.500
Year ended 2/28,
1995 10.450 .545 (.386) (.549) -- 10.060
1994 10.440 .537 -- (.527) -- 10.450
1993 9.650 .551 .784 (.545) -- 10.440
Year ended
2/29/92 9.360 .570 .301 (.581) -- 9.650
Year ended 2/28,
1991 9.140 .568 .219 (.567) -- 9.360
1990 8.960 .571* .178 (.569) -- 9.140
1989 9.030 .576* (.070) (.576) -- 8.960
Year ended
2/29/88 9.540 .582* (.510) (.582) -- 9.030
12/10/86 to
2/28/87 9.600 .131* (.060) (.131) -- 9.540
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
88
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
9.59% $ 5,291 1.09% 4.92% 1.07% 4.94% 1%
2.99 1,956 1.36+ 5.13+ 1.15+ 5.34+ 10
8.80 706 1.81 4.20 1.81 4.20 1
3.52 338 2.07+ 4.41+ 1.90+ 4.58+ 10
9.99 60,102 .81 5.21 .81 5.21 1
1.77 57,137 .79 5.54 .79 5.54 10
5.22 58,255 .84 5.09 .84 5.09 3
14.28 47,098 .86 5.47 .86 5.47 2
9.57 28,189 .72 5.93 .72 5.93 5
8.95 15,625 .85 6.19 .85 6.19 6
8.52 8,649 1.20 5.94 .97 6.17 15
5.84 5,404 1.87 5.54 .97 6.44 41
1.14 4,895 1.75 5.37 .59 6.53 42
.75 2,312 5.18+ .64+ -- 5.82+ --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
89
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NY
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $10.120 $.555* $.487 $(.552) $ -- $10.610
9/6/94 to
2/28/95 10.230 .277* (.067) (.273) (.047) 10.120
CLASS C
Year ended
2/29/96 10.110 .478* .528 (.476) -- 10.640
9/13/94 to
2/28/95 10.110 .231* .038 (.222) (.047) 10.110
CLASS R
Year ended
2/29/96 10.150 .582* .490 (.582) -- 10.640
Year ended 2/28,
1995 10.720 .579 (.529) (.573) (.047) 10.150
1994 10.610 .578* 161 (.580) (.049) 10.720
1993 9.880 .603* .806 (.598) (.081) 10.610
3 months ended
2/29/92 9.820 .163 .053 (.156) -- 9.880
Year ended 11/30,
1991 9.380 .629* .441 (.630) -- 9.820
1990 9.560 .631* (.181) (.630) -- 9.380
1989 9.180 .633* .380 (.633) -- 9.560
1988 8.760 .625* .420 (.625) -- 9.180
12/10/86 to
11/30/87 9.600 .612* (.840) (.612) -- 8.760
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
90
<PAGE>
<TABLE>
<CAPTION>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
FEBRUARY 29, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
--------------------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses net investment
Total return Net assets average income to average to average net income to average Portfolio
on net asset end of period net assets before net assets before assets after net assets after turnover
value++ (in thousands) reimbursement reimbursement reimbursement* reimbursement* rate
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
10.52% $15,732 1.02% 5.28% .99% 5.31% 47%
2.21 3,189 1.56+ 5.31+ 1.00+ 5.87+ 29
10.13 646 1.99 4.29 1.73 4.55 47
2.80 86 7.97+ (1.06)+ 1.75+ 5.16+ 29
10.80 154,776 .76 5.55 .74 5.57 47
75 149,454 .74 5.79 .74 5.79 29
7.10 146,297 .78 5.30 .75 5.33 15
14.79 107,146 .84 5.75 .75 5.84 12
2.21 66,491 .75+ 6.27+ .75+ 6.27+ 16
11.79 59,351 .79 6.46 .75 6.50 19
4.92 44,347 .81 6.59 .75 6.65 51
11.34 29,040 .98 6.40 .75 6.63 85
12.20 14,975 1.09 6.55 .75 6.89 71
(2.44) 8,239 1.38+ 5.45+ .37+ 6.46+ 20
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
91
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING
THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
--------------------------------- -----------------------------
Net
realized and Dividends
Net asset Net unrealized gain from net Distributions Net asset
value beginning investment (loss) from investment from value end of
of period income investments+++ income capital gains period
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NY INS
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
2/29/96 $10.150 $.521 $.492 $(.524) $(.029)*** $10.610
9/6/94 to
2/28/95 10.160 .253* .037 (.260) (.40)*** 10.150
CLASS C
Year ended
2/29/96 10.120 .442 .524 (.447) (.029)*** 10.610
9/13/94 to
2/28/95 10.030 .207* .133 (.210) (.040)*** 10.120
CLASS R
Year ended
2/29/96 10.150 .548 .495 (.554) (.029)*** 10.610
Year ended 2/28,
1995 10.630 .555 (.440) (.555) (.040)*** 10.150
1994 10.620 .550 .035 (.543) (.032) 10.630
1993 9.780 .566 .849 (.562) (.013) 10.620
Year ended
2/29/92 9.320 .590 .467 (.597) -- 9.780
Year ended 2/28,
1991 9.250 .598 .068 (.596) -- 9.320
1990 9.060 .596 .190 (.596) -- 9.250
1989 9.100 .593* (.040) (.593) -- 9.060
Year ended
2/29/88 9.830 .606* (.730) (.606) -- 9.100
12/10/86 to
2/28/87 9.600 .130* .230 (.130) -- 9.830
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 94.
92
<PAGE>
Your
investment
partners
Since 1898, John Nuveen & Co. Incorporated has worked to bring together the
various participants in the municipal bond industry and build strong
partnerships that benefit all concerned. Investors, financial advisers,
municipal officials, investment bankers--Nuveen believes that forging
relationships within these groups based on trust and value is the key to
successful investing.
As the oldest and largest municipal bond specialist in the United States,
Nuveen's investment bankers work with issuers to understand and meet their needs
in structuring and selling their bond issues.
Nuveen also works closely with financial advisers around the country,
including brokerage firms, banks, insurance companies, and independent
financial planners, to bring the benefits of tax-free investing to you. These
advisers are experts at identifying your needs and recommending the best
solutions for your situation. Together we make a powerful team, helping you
create a successful investment plan that meets your needs today and in the
future.
[PHOTO OF PAINTING APPEARS HERE]
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
[LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
[RECYCLING LOGO]
<PAGE>
PART C--OTHER INFORMATION
NUVEEN TAX-FREE BOND FUND, INC.
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
PART C--OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements:
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information through incorporation
by reference to the Registrant's Annual Report:
Portfolio of Investments, February 29, 1996
Statement of Net Assets, February 29, 1996
Statement of Operations, Year Ended February 29, 1996
Statement of Changes in Net Assets, Years Ended February 29, 1996, and
February 28, 1995
Report of Independent Public Accountants dated April 8, 1996.
(b) Exhibits:
1(a). Articles of Incorporation of Registrant, as amended. Filed as Exhibit
1 to Post- Effective Amendment No. 10 to Registrant's Registration
Statement on Form N-1A (File No. 33-8370) and are incorporated herein
by reference thereto.
1(b). Articles of Amendment, dated August 24, 1994. Filed as Exhibit 1(b) to
Post-Effective Amendment No. 15 on Form N-1A (File No. 33-8370) and
incorporated herein by reference thereto.
1(c). Certificate of Designation Establishing New Series of Shares of Regis-
trant, dated August 30, 1994. Filed as Exhibit 1(c) to Post-Effective
Amendment No. 15 on Form N-1A (File No. 33-8370) and incorporated
herein by reference thereto.
2. By-Laws of Registrant, as amended on July 28, 1994. Filed as Exhibit 2
to Post-Effective Amendment No. 14 to Registrant's Registration on
Form N-1A (File No. 33-8370) and incorporated herein by reference
thereto.
3. Not applicable.
4(a). Specimen certificates of Class R Shares of each Fund. Filed as Exhibit
4(a) to Post-Effective Amendment No. 15 on Form N-1A (File No. 33-
8370) and incorporated herein by reference thereto.
4(b). Specimen certificates of Class A Shares of each Fund. Filed as Exhibit
4(b) to Post-Effective Amendment No. 15 on Form N-1A (File No. 33-
8370) and incorporated herein by reference thereto.
C-1
<PAGE>
4(c). Specimen certificates of Class C Shares of each Fund. Filed as Exhibit
4(c) to Post-Effective Amendment No. 15 on Form N-1A (File No. 33-
8370) and incorporated herein by reference thereto.
5(a). Investment Management Agreement between Registrant and Nuveen Advisory
Corp., dated April 27, 1992. Filed as Exhibit 5(a) to Post-Effective
Amendment No. 9 to Registrant's Registration Statement on Form N-1A
(File No. 33-8370) and incorporated herein by reference thereto.
5(b). Amendment and Renewal of Investment Management Agreement between Reg-
istrant and Nuveen Advisory Corp., dated April 21, 1993. Filed as Ex-
hibit 5(b) to Post-Effective Amendment No. 12 to Registrant's Regis-
tration Statement on Form N-1A (File No. 33-8370) and incorporated
herein by reference thereto.
5(c). Renewal, dated May 7, 1996, of Investment Management Agreement.
6(a). Distribution Agreement between Registrant and John Nuveen & Co. Incor-
porated, dated January 2, 1990. Filed as Exhibit 5(b) to Post-Effec-
tive Amendment No. 4 to Registrant's Registration Statement on Form N-
1A (File No. 33-8370) and incorporated herein by reference thereto.
6(b). Renewal, dated July 27, 1995, of Distribution Agreement.
7. Not applicable.
8. Custody Agreement, dated October 1, 1993, between Registrant and
United States Trust Company of New York. Filed as Exhibit 8 to Post-
Effective Amendment No. 12 to Registrant's Registration Statement on
Form N-1A (File No. 33-8370) and incorporated herein by reference
thereto.
8(b). Letter evidencing assignment of U.S. Trust Company of New York's
rights and responsibilities under the Custody Agreement to The Chase
Manhattan Bank, N.A.
9. Transfer Agency Agreement between Registrant and Shareholder Services,
Inc., dated December 19, 1994. Filed as Exhibit 9 to Post-Effective
Amendment No. 16 to Registrant's Registration Statement on Form N-1A
(File No. 33-8370) and incorporated herein by reference thereto.
10. Opinion of Fried, Frank, Harris, Shriver & Jacobson.
11. Consent of Independent Public Accountants.
12. Not applicable.
13. Subscription Agreement of Nuveen Advisory Corp., dated July 30, 1986.
Filed as Exhibit 13 to Registrant's Registration Statement on Form N-
1A (File No. 33-8370) and incorporated herein by reference thereto.
14. Not applicable.
15. Plan of Distribution and Service Pursuant to Rule 12b-1 for the Class
A Shares and Class C Shares of each Fund, dated September 6, 1994.
Filed as Exhibit 15 to Post-Effective Amend
C-2
<PAGE>
ment No. 17 to Registrant's Registration Statement on Form N-1A (File
No. 33-8370) and incorporated herein by reference thereto.
15(b). Renewal, dated July 26, 1995, of Plan of Distribution and Service Pur-
suant to Rule 12b-1.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
18. Multiple Class Plan Adopted Pursuant to Rule 18f-3, as amended.
99(a). Certified copy of resolution of Board of Directors authorizing the
signing of the names of directors and officers on the Registration
Statement pursuant to power of attorney.
99(b). Original Powers of Attorney for all of Registrant's Directors autho-
rizing, among others, James J. Wesolowski and Gifford R. Zimmerman to
execute the Registration Statement. Filed as Exhibit 99(b) to Post-Ef-
fective Amendment No. 16 to Registrant's Registration Statement on
Form N-1A (File No. 33-8370) and incorporated herein by reference
thereto.
99(c). Code of Ethics and Reporting Requirements. Filed as Exhibit 99(c) to
Post-Effective Amendment No. 16 to Registrant's Registration Statement
on Form N-1A (File No. 33-8370) and incorporated herein by reference
thereto.
ITEM 25: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26: NUMBER OF HOLDERS OF SECURITIES
:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SERIES RECORD HOLDERS
--------------- --------------
<S> <C>
Nuveen Massachusetts Tax-Free Value Fund,
Class A Shares........................................... 423
Class C Shares........................................... 35
Class R Shares........................................... 2,679
Nuveen New York Tax-Free Value Fund,
Class A Shares........................................... 946
Class C Shares........................................... 39
Class R Shares........................................... 5,269
Nuveen Ohio Tax-Free Value Fund,
Class A Shares........................................... 939
Class R Shares........................................... 5,850
</TABLE>
C-3
<PAGE>
ITEM 27: INDEMNIFICATION
Article EIGHTH of the Registrant's Articles of Incorporation provides as fol-
lows:
EIGHTH: To the maximum extent permitted by the Minnesota Business Corpora-
tion Act, as from time to time amended, the Corporation shall indemnify its
currently acting and its former directors, officers, employees and agents,
and those persons who, at the request of the Corporation serve or have
served another corporation, partnership, joint venture, trust or other en-
terprise in one or more such capacities. The indemnification provided for
herein shall not be deemed exclusive of any other rights to which those
seeking indemnification may otherwise be entitled.
Expenses (including attorneys' fees) incurred in defending a civil or crim-
inal action, suit or proceeding (including costs connected with the prepa-
ration of a settlement) may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding, if authorized by the
Board of Directors in the specific case, upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay that
amount of the advance which exceeds the amount which it is ultimately de-
termined that he is entitled to receive from the Corporation by reason of
indemnification as authorized herein; provided, however, that prior to mak-
ing any such advance at least one of the following conditions shall have
been met: (1) the indemnitee shall provide a security for his undertaking,
(2) the Corporation shall be insured against losses arising by reason of
any lawful advances, or (3) a majority of a quorum of the disinterested,
non-party directors of the Corporation, or an independent legal counsel in
a written opinion, shall determine, based on a review of readily available
facts, that there is reason to believe that the indemnitee ultimately will
be found entitled to indemnification.
Nothing in these Articles of Incorporation or in the By-Laws shall be
deemed to protect or provide indemnification to any director or officer of
the Corporation against any liability to the Corporation or to its security
holders to which he would otherwise be subject by reason of willful misfea-
sance, bad faith, gross negligence or reckless disregard of the duties in-
volved in the conduct of his office ("disabling conduct"), and the Corpora-
tion shall not indemnify any of its officers or directors against any lia-
bility to the Corporation or to its security holders unless a determination
shall have been made in the manner provided hereafter that such liability
has not arisen from such officer's or director's disabling conduct. A de-
termination that an officer or director is entitled to indemnification
shall have been properly made if it is based upon (1) a final decision on
the merits by a court or other body before whom the proceeding was brought
that the indemnitee was not liable by reason of disabling conduct or, (2)
in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the indemnitee was not liable by reason of disa-
bling conduct, by (a) the vote of a majority of a quorum of directors who
are neither "interested persons" of the Corporation as defined in the In-
vestment Company Act of 1940 nor parties to the proceeding, or (b) an inde-
pendent legal counsel in a written opinion.
-----------------
The directors and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $60,000,000 (with a maxi-
mum deductible of $500,000) against liability and expenses of claims of wrong-
ful acts arising out of their position with the Registrant, except for matters
which involve willful acts, bad faith, gross negligence and willful disregard
of duty (i.e.,
C-4
<PAGE>
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 had rea-
sonable 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, directors or controlling persons of the
Registrant pursuant to the Articles of Incorporation of the Registrant or oth-
erwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as ex-
pressed 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 director or control-
ling person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, director or controlling persons in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling prece-
dent, 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 28: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Municipal Bond Fund, Nuveen Tax-
Exempt Money Market Fund, Inc., Nuveen Tax-Free Reserves, Inc., Nuveen Califor-
nia Tax-Free Fund, Inc., Nuveen Tax-Free Bond Fund, Inc., Nuveen Insured Tax-
Free Bond Fund, Inc., Nuveen Tax-Free Money Market Fund, Inc. and Nuveen
Multistate Tax-Free Trust. It also serves as investment adviser to the follow-
ing closed-end management type investment companies: Nuveen Municipal Value
Fund, Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Mu-
nicipal Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium
Income Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc.,
Nuveen California Performance Plus Municipal Fund, Inc., Nuveen New York Per-
formance Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc.,
Nuveen Municipal Market Opportunity Fund, Inc., Nuveen California Municipal
Market Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc.,
Nuveen California Investment Quality Municipal Fund, Inc., Nuveen New York In-
vestment Quality Municipal Fund, Inc.; Nuveen Insured Quality Municipal Fund,
Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey In-
vestment Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality
Municipal Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California
Select Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal
Fund, Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Munici-
pal Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund,
Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income
Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen Cali-
fornia Quality Income Municipal Fund, Inc., Nuveen New York Quality Income Mu-
nicipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Premier
Insured Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund 2,
Inc., Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen In-
sured New York Premium Income Municipal Fund, Inc., Nuveen Select Maturities
Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen In-
sured Florida Premium Income Municipal Fund, Nuveen Michigan Premium Income Mu-
nicipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc.,
Nuveen Insured Premium Income Municipal Fund, Inc., Nuveen Premium Income Mu-
nicipal Fund 4, Inc.,
C-5
<PAGE>
Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen Penn-
sylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income Munic-
ipal Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen Virginia
Premium Income Municipal Fund, Nuveen Washington Premium Income Municipal Fund,
Nuveen Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income Munic-
ipal Fund and Nuveen Insured Premium Income Municipal Fund 2. Nuveen Advisory
Corp. has no other clients or business at the present time. The principal busi-
ness address for all of these investment companies is 333 West Wacker Drive,
Chicago, Illinois 60606.
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer of the investment adviser
has engaged during the last two years for his account or in the capacity of di-
rector, officer, employee, partner or trustee, see the descriptions under "Man-
agement" in the Statement of Additional Information.
ITEM 29: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co. Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies: Nuveen Municipal
Bond Fund, Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free Reserves,
Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Bond Fund, Inc.,
Nuveen Insured Tax-Free Bond Fund, Inc., Nuveen Tax-Free Money Market Fund,
Inc. and Nuveen Multistate Tax-Free Trust. Nuveen also acts as depositor and
principal underwriter of the Nuveen Tax-Exempt Unit Trust, a registered unit
investment trust. Nuveen has also served or is serving as co-managing under-
writer of the shares of the following closed-end management type investment
companies: Nuveen Municipal Value Fund, Inc., Nuveen California Municipal Value
Fund, Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen Municipal Income
Fund, Inc., Nuveen Premium Income Municipal Fund, Inc., Nuveen Performance Plus
Municipal Fund, Inc., Nuveen California Performance Plus Municipal Fund, Inc.,
Nuveen New York Performance Plus Municipal Fund, Inc., Nuveen Municipal Advan-
tage Fund, Inc., Nuveen Municipal Market Opportunity Fund, Inc., Nuveen Cali-
fornia Municipal Market Opportunity Fund, Inc., Nuveen Investment Quality Mu-
nicipal Fund, Inc., Nuveen California Investment Quality Municipal Fund, Inc.,
Nuveen New York Investment Quality Municipal Fund, Inc., Nuveen Insured Quality
Municipal Fund, Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen
New Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania Invest-
ment Quality Municipal Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen
California Select Quality Municipal Fund, Inc., Nuveen New York Select Quality
Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen In-
sured Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal
Fund, Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality
Income Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Pre-
mier Insured Municipal Income Fund, Inc., Nuveen Select Tax-Free Income Portfo-
lio, Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Insured California
Premium Income Municipal Fund, Inc., Nuveen Insured New York Premium Income Mu-
nicipal Fund, Inc., Nuveen Select Maturities Municipal Fund,
Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Insured Florida Pre-
mium Income
C-6
<PAGE>
Municipal Fund, Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New
Jersey Premium Income Municipal Fund, Inc., Nuveen Insured Premium Income Mu-
nicipal Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen In-
sured California Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania
Premium Income Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund,
Nuveen Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium In-
come Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income Munic-
ipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North Carolina
Premium Income Municipal Fund, Nuveen California Premium Income Municipal Fund,
Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select Tax-Free Income
Portfolio 2, Nuveen Select Tax-Free Income Portfolio 3, Nuveen Insured Califor-
nia Select Tax-Free Income Portfolio and Nuveen Insured New York Select Tax-
Free Income Portfolio.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger Chairman of the Board, Chairman of the Board
333 West Wacker Drive Chief Executive Officer and Director
Chicago, Illinois 60606 and Director
Anthony T. Dean Executive Vice President President and Director
333 West Wacker Drive and Director
Chicago, Illinois 60606
John P. Amboian Executive Vice President None
333 West Wacker Drive and Chief Financial Officer
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, Illinois 60606
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL BUSINESS POSITIONS AND OFFICES OFFICES
ADDRESS WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------------------------------------------
<S> <C> <C>
Stephen D. Foy Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Robert D. Freeland Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, Illinois 60606
Robert B. Kuppenheimer Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Larry W. Martin Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Assistant Secretary
Chicago, Illinois 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
O. Walter Renfftlen Vice President Vice President and
333 West Wacker Drive Chicago, Il- and Controller Controller
linois 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive Chicago, Il-
linois 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive Chicago, and Treasurer Treasurer
Illlinois 60606
James J. Wesolowski Vice President, Vice President and
333 West Wacker Drive Chicago, Il- General Counsel Secretary
linois 60606 and Secretary
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ----------------------------------------------------------------------------------
<S> <C> <C>
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, Illinois 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Assistant Secretary
Chicago, Illinois 60606
</TABLE>
(c) Not applicable.
ITEM 30: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois, 60606, main-
tains Articles of Incorporation, By-Laws, minutes of directors and shareholder
meetings, contracts and all advisory material of the investment adviser.
The Chase Manhattan Bank, N.A., 770 Broadway, New York, New York 10003, main-
tains all general and subsidiary ledgers, journals, trial balances, records of
all portfolio purchases and sales, and all other required records not main-
tained by Nuveen Advisory Corp., or Shareholder Services, Inc.
Shareholder Services, Inc., P.O. Box 5330, Denver, Colorado 80217-5330, main-
tains all the required records in its capacity as transfer, dividend paying,
and shareholder services agent for the Registrant.
ITEM 31: MANAGEMENT SERVICES
Not applicable.
ITEM 32: UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest Annual Report to Share-
holders upon request and without charge.
C-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT THIS REGISTRATION STATEMENT
MEETS ALL THE REQUIREMENTS FOR EFFECTIVENESS UNDER PARAGRAPH (B) OF RULE 485
OF THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 28TH DAY OF JUNE 1996.
NUVEEN TAX-FREE BOND FUND, INC.
/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 AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ O. Walter Renfftlen
- -------------------------------
O. Walter Renfftlen Vice President and June 28, 1996
Controller (Principal
Financial and
Accounting Officer)
/s/ Gifford R. Zimmerman
By___________________________
Gifford R. Zimmerman
Richard J. Franke Chairman of the Board Attorney-in-Fact
and Director (Principal
Executive Officer)
Lawrence H. Brown Director
Anne E. Impellizzeri Director
Margaret K. Rosenheim Director
Peter R. Sawers Director
Timothy R. Schwertfeger President and Director
</TABLE>
June 28, 1996
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, JAMES J. WESOLOWSKI
AND GIFFORD R. ZIMMERMAN TO EXECUTE THIS REGISTRATION STATEMENT, AND AMEND-
MENTS THERETO, FOR EACH OF THE OFFICERS AND DIRECTORS OF REGISTRANT ON WHOSE
BEHALF THIS REGISTRATION STATEMENT IS FILED, HAS BEEN EXECUTED AND FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
C-10
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
5(c) Renewal, dated May 7, 1996, of Investment Management
Agreement.
6(b). Renewal, dated July 27, 1995, of Distribution
Agreement.
8(b). Letter evidencing assignment of U.S. Trust Company of
New York's rights and responsibilities under the
Custody Agreement to The Chase Manhattan Bank, N.A.
10. Opinion of Fried, Frank, Harris, Shriver & Jacobson.
11. Consent of Independent Public Accountants.
15(b) Renewal, dated July 26, 1995, of Plan of Distribution
and Service Pursuant to Rule 12b-1.
16. Schedule of Computation of Performance Figures.
17. Financial Data Schedule.
18. Multiple Class Plan Adopted Pursuant to Rule 18f-3,
as amended.
99(a). Certified copy of resolution of Board of Directors
authorizing the signing of the names of directors and
officers on the Registration Statement pursuant to
power of attorney.
</TABLE>
<PAGE>
Exhibit 5(c)
NUVEEN TAX-FREE BOND FUND, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 7th day of May, 1996 by and between Nuveen Tax-Free
Bond Fund, Inc., a Minnesota corporation (the "Fund"), and Nuveen Advisory
Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1996 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors, at a meeting called for the purpose of
reviewing the Agreement, have approved the Agreement and its continuance until
August 1, 1997 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1997 and ratify and confirm the Agreement in all respects.
NUVEEN TAX-FREE BOND FUND, INC.
By: /s/ James J. Wesolowski
------------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- ------------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ Gifford R. Zimmerman
----------------------------
Vice President
ATTEST:
/s/ Larry Martin
- ------------------------------
Assistant Secretary
<PAGE>
Exhibit 6(b)
Renewal of Distribution Agreement
---------------------------------
This Agreement made this 27th day of July, 1995 by and between Nuveen Tax-Free
Bond Fund, Inc., a Minnesota corporation (the "Fund"), and John Nuveen & Co.
Incorporated, a Delaware corporation (the "Underwriter");
WHEREAS, the parties hereto are the contracting parties under that certain
Distribution Agreement (the "Agreement") pursuant to which the Underwriter acts
as agent for the distribution of shares of the Fund; and
WHEREAS, the Agreement terminates August 1, 1995 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors of the Fund, at a meeting called for the purpose
of reviewing the Agreement has approved the Agreement and its continuance until
August 1, 1996 in the manner required by the Investment Company Act of 1940;
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1996 and ratify and confirm the Agreement in all respects.
NUVEEN TAX-FREE BOND FUND, INC.
By: /s/ Larry Martin
------------------
Vice President
ATTEST:
/s/ Morrison C. Warren
- -----------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By: /s/ Kenneth C. Dunn
-------------------
Vice President
ATTEST:
/s/ Gifford R. Zimmerman
- ------------------------
Assistant Secretary
<PAGE>
EXHIBIT 8(B)
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003-9598
April 18, 1996
Mr. Giff Zimmerman
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606
Dear Giff:
On September 2, 1995, The United States Trust Company of New York (UST) was
merged into Chase Manhattan Bank, N.A. (Chase). As a result of this transac-
tion, Chase succeeded by operation of law, all rights and responsibilities of
UST under all Transfer Agency, Custodian and Fund Accounting agreements be-
tween US Trust and John Nuveen & Co.'s managed investment companies.
Sincerely,
/s/ Andrew M. Massa
_______________________________________
Andrew M. Massa
Vice President
1
<PAGE>
Exhibit 10
[LETTERHEAD OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON]
June 26, 1996
WRITER'S DIRECT LINE
(202) 639-7065
Nuveen Tax-Free Bond Fund, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
RE: Registration Statement on Form N-1A
Under the Securities Act of 1933
(File No. 33-8370)
-----------------------------------
Dear Ladies and Gentlemen:
We have acted as counsel to Nuveen Tax-Free Bond Fund, Inc., a Minnesota
corporation (the "Fund"), in connection with the above-referenced Registration
Statement on Form N-1A (as amended the "Registration Statement") which relates
to the Fund's Nuveen Massachusetts Tax-Free Value Fund, Series A Shares; Nuveen
Massachusetts Tax-Free Value Fund, Series C Shares; Nuveen Massachusetts Tax-
Free Value Fund, Series R Shares; Nuveen New York Tax-Free Value Fund, Series A
Shares; Nuveen New York Tax-Free Value Fund, Series C Shares; Nuveen New York
Tax-Free Value Fund, Series R Shares; Nuveen Ohio Tax-Free Value Fund, Series A
Shares; Nuveen Ohio Tax-Free Value Fund, Series C Shares; and Nuveen Ohio Tax-
Free Value Fund, Series R Shares, par value $.01 (collectively, the "Shares").
This opinion is being delivered to you in connection with the Fund's filing of
Post-Effective Amendment No. 19 to the Registration Statement (the "Amendment")
with the Securities and Exchange Commission pursuant to Rule 485(b) of the
Securities Act of 1933 (the "1933 Act"). With your permission, all assumptions
and statements of reliance herein have been made without any independent
investigation or verification on our part except to the extent otherwise
expressly stated, and we express no opinion with respect to the subject matter
or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the Secretary of State of the State of Minnesota as
to the existence and good standing of the Fund;
[LETTERHEAD OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON]
<PAGE>
[LETTERHEAD OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON]
Nuveen Tax-Free Bond Fund, Inc.
June 26, 1996
Page 2
(b) copies, certified by the Secretary of State of the State of
Minnesota, of the Fund's Articles of Incorporation and of all
amendments and all supplements thereto (the "Articles of
Incorporation");
(c) a certificate executed by Karen L. Healy, an Assistant Secretary of
the Fund, certifying as to, and attaching copies of, the Fund's
Articles of Incorporation and By-Laws, as amended (the "By-Laws"), and
certain resolution adopted by the Board of Directors of the Fund
authorizing the issuance of the Shares; and
(d) a printer's proof, dated June 26, 1996, of the Amendment.
In our capacity as counsel to the Fund, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Fund. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be substantially the form of the printer's proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Fund's
Articles of Incorporation and for the consideration described in the
Registration Statement, will be legally issued, fully paid and nonassessable.
The opinion expressed herein is limited to the laws of the State of
Minnesota.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Thomas S. Harman
------------------------------------
Thomas S. Harman
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 8, 1996, and to all references to our firm included in or made a
part of this registration statement of Nuveen Tax-Free Bond Fund, Inc.
/s/ ARTHUR ANDERSEN LLP
- --------------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 24, 1996
<PAGE>
Exhibit 15(b)
NUVEEN TAX-FREE BOND FUND, INC.
-------------------------------
RENEWAL OF PLAN OF DISTRIBUTION AND SERVICE PURSUANT TO RULE 12b-1
------------------------------------------------------------------
WHEREAS, Nuveen Tax-Free Bond Fund, Inc. (the "Fund"), an open-end investment
management company registered under the Investment Company Act of 1940, as
amended (the "Act") and John Nuveen & Co. Incorporated ("Nuveen"), distributor
of the common shares of the Fund pursuant to a Distribution Agreement between
the Fund and Nuveen, have previously entered into a Plan of Distribution and
Service in accordance with Rule 12b-1 under the Act (the "Plan"); and
WHEREAS, the Plan terminates August 1, 1995 unless continued in the manner
provided for in paragraph 2 of the Plan; and
WHEREAS, the Board of Trustees, at a meeting called in part for the purpose of
reviewing the Plan, have approved the Plan and its continuance until August 1,
1996 in the manner provided for in paragraph 2 of the Plan.
NOW THEREFORE, the parties hereto do hereby continue the Plan in effect until
August 1, 1996 and ratify and confirm the Plan in all respects.
Dated as of July 26, 1995
NUVEEN TAX-FREE BOND FUND, INC.
By: /s/ Gifford R. Zimmerman
------------------------------
Vice President
JOHN NUVEEN & CO. INCORPORATED
By: /s/ James J. Wesolowski
----------------------------
Vice President
<PAGE>
EXHIBIT 16
SCHEDULE OF COMPUTATION OF PERFORMANCE FIGURES*
I. YIELD
A. Yield Formula
Yield is computed according the following formula:
A - 6
YIELD = 2 [ ( B + 1 - 1
----- ) ]
Where: CD
A = dividends and interest(degrees) 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.
D = the maximum offering price per share on the last day of the period.
- --------
*The maximum sales charge in effect during the periods shown was 4.50%.
(degrees)Interest earned on tax-exempt obligations is determined as follows:
A. In the case of a tax-exempt obligation (1) with a current market premium
or (2) issued at a discount where the current market discount is less
than the then-remaining portion of the original issue discount, it is
necessary to first compute the yield to maturity (YTM). The YTM is then
divided by 360 and the quotient is multiplied by the market value of the
obligation (plus accrued interest).
B. In the case of a tax-exempt obligation issued at a discount where the
current market discount is in excess of the then-remaining portion of the
original issue discount, the adjusted original issue discount basis of
the obligation (plus accrued interest) is used in lieu of the market
value of the obligation (plus accrued interest) in computing the yield to
maturity (YTM). The YTM is then divided by 360 and the quotient is multi-
plied by the adjusted original issue basis of the obligation (plus ac-
crued interest).
C. In the case of a tax-exempt obligation issued without original issue
discount and having a current market discount, the coupon rate of inter-
est is used in lieu of the yield to maturity. The coupon rate is then di-
vided by 360 and the quotient is multiplied by the par value of the obli-
gation.
1
<PAGE>
B. Yield Calculations
1. Massachusetts Fund
The following is the 30-day yield as of February 29, 1996, for the Class A
Shares of the Massachusetts Fund:
6
Yield = 2[ ( [$18,103.94 - + 1 - 1
3,381.16]
------------------- ) ]
= [411,436.77 X
4.16%$ 10.41]
[/R]
The following is the 30-day yield as of February 29, 1996, for the Class C
Shares of the Massachusetts Fund:
6
Yield = 2[ ( [$ 2,592.92 - + 1 - 1
$847.34]
------------------- ) ]
= [ 59,236.48 X
3.60%$ 9.89]
[/R]
The following is the 30-day yield as of February 29, 1996, for the Class R
Shares of the Massachusetts Fund:
6
Yield = 2[ ( [$ 340,591.04 - + 1 - 1
$47,710.59]
----------------------- ) ]
= [7,762,728.00 X
4.61%$ 9.91]
[/R]
2. New York Fund
The following is the 30-day yield as of February 29, 1996, for the Class A
Shares of the New York Fund:
6
Yield = 2[ ( [$ 68,163.86 - + 1 - 1
$11,915.91]
----------------------- ) ]
= [1,427,302.08 X
4.29%$ 11.11]
[/R]
The following is the 30-day yield as of February 29, 1996, for the Class C
Shares of the New York Fund:
6
Yield = 2[ ( [$ 2,905.23 - + 1 - 1
$908.47]
------------------- ) ]
= [ 60,649.93 X
3.74%$ 10.64]
[/R]
2
<PAGE>
The following is the 30-day yield as of February 29, 1996, for the Class R
Shares of the New York Fund:
[$ 692,002.55 - 6
Yield = 2 $89,136.90] [/R] [/R]
------------------------
+ 1
[ - 1 [/R]
(
) ] [/R]
= [14,444,910.24 X
4.75%$ 10.64]
[/R]
3. Ohio Fund
The following is the 30-day yield as of February 29, 1996, for the Class A
Shares of the Ohio Fund:
6
Yield = 2[ ( [$ 54,611.80 - + 1 - 1
$9,938.90]
----------------------- ) ]
= [1,199,743.01 X
4.06%$ 11.10]
[/R]
The following is the 30-day yield as of February 29, 1996, for the Class C
Shares of the Ohio Fund:
6
Yield = 2[ ( [$ 9,121.79 - + 1 - 1
$2,981.62]
--------------------- ) ]
= [201,286.78 X
3.49%$ 10.55]
[/R]
The following is the 30-day yield as of February 29, 1996, for the Class R
Shares of the Ohio Fund:
6
Yield = 2[ ( [$ 718,308.17 - + 1 - 1
$96,039.70]
------------------------ ) ]
= [15,800,634.50 X
4.51%$ 10.58]
[/R]
II. TAXABLE EQUIVALENT YIELD
A. Taxable Equivalent Yield Formula
The Taxable Equivalent Yield Formula is as follows:
Tax Exempt Yield
Taxable Equivalent -------------------------------------
Yield = (1 - combined federal and state in-
come tax rate)
3
<PAGE>
B. Taxable Equivalent Yield Calculations
Based on combined federal and state income tax rates for Massachusetts, New
York* and Ohio, respectively, of 47%, 46.5%* and 44%, the Taxable Equivalent
Yields for the Class A Shares, Class C Shares and Class R Shares of each of the
Massachusetts Fund, New York Fund and Ohio Fund for the 30-day period ended
February 29, 1996, are as follows:
Class A Shares Class C Shares Class R Shares
--------------- --------------- ---------------
4.16% 3.60% 4.61%
[/R] [/R]
Massachusetts
Fund: = 7.85% = 6.79% [/R] = 8.70% [/R]
------- ------- -------
1 - 1 - 1 -
.470 .470 .470
[/R] [/R]
New York Fund:
4.29% 3.74% 4.75%
= 8.02% = 6.99% [/R] = 8.88% [/R]
------- ------- -------
1 - 1 - 1 -
.465 .465 .465
[/R] [/R]
Ohio Fund:
4.06% 3.49% 4.51%
= 7.25% = 6.23% [/R] = 8.05% [/R]
- -------- ------- ------- -------
1 - 1 - 1 -
.440 .440 .440
*Reflects a combined federal, state and New York City tax rate.
III. DISTRIBUTION RATE
A. Distribution Rate Formula
The formula for calculation of distribution rate is as follows:
Distribution Rate = 12 X most recent tax-exempt income dividend
per share
share price
B. Distribution Rate Calculations
1. Massachusetts Fund
The following is the distribution rate as of February 29, 1996, based on max-
imum public offering price for the Massachusetts Fund:
Class A Distribution Rate = 12 X $.0430
$10.41
=
4.96%
Class C Distribution Rate = 12 X $.0370
$9.89
=
4.49%
Class R Distribution Rate = 12 X $.0450
$9.91
=
5.45%
4
<PAGE>
2. New York Fund
The following is the distribution rate as of February 29, 1996, based on max-
imum public offering price for the New York Fund:
Class A Distribution Rate = 12 X $.0460
$11.11
=
4.97%
Class C Distribution Rate = 12 X $.0395
$10.64
=
4.45%
Class R Distribution Rate = 12 X $.0485
$10.64
=
5.47%
3. Ohio Fund
The following is the distribution rate as of February 29, 1996, based on max-
imum public offering price for the Ohio Fund:
Class A Distribution Rate = 12 X $.0450
$11.10
=
4.86%
Class C Distribution Rate = 12 X $.0380
$10.55
=
4.32%
Class R Distribution Rate = 12 X $.0470
$10.58
=
5.33%
5
<PAGE>
IV. AVERAGE ANNUAL TOTAL RETURN
A. Average Annual Total Return Formula
Average Annual Total Return is computed according to the following formula:
ERV /1//N
T = --- -1
P
Where: T = average annual total return.
P = a hypothetical initial payment of $1,000.
N = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10-year (or fractional portion thereof)
periods at the end of such 1, 5 or 10-year (or fractional portion
thereof) periods.
B. Average Annual Total Return Calculations
The following are the average annual total returns for Class A Shares of the
Funds for the one-year period ended February 29, 1996, and for the period from
inception through February 29, 1996, including the current maximum sales
charge:
1. Massachusetts Fund:
/1///1/
$1,046.90
A. 1 year ended February 29, 1996
=
-1 = 4.69%
( ------- ) ----
----
$1000
$1,078.80 /1///1/./4//8//1//2/
[/R]
C. Inception through February 29, 1996
=
------- -1 = 5.25%
( ) -----
-----
$1000
2. New York Fund:
/1///1/
$1,055.50
A. 1 year ended February 29, 1996
=
( ) -1 = 5.55%
-----
------- -----
$1000
$1,078.80 /1///1/./4//8//1//2/
[/R]
C. Inception through February 29, 1996
=
( ------- ) -1 = 5.25%
-----
$1000 -----
3. Ohio Fund:
$1,045.10 /1///1/
[/R]
A. 1 year ended February 29, 1996
=
------- -1 = 4.51%
( ) [/R] -----
-----
$1000
[/R]
/1///1/./4//8//1//2/
$1,083.00
[/R]
C. Inception through February 29, 1996
=
-1 = 5.53%
( [/R] ) [/R] -----
------- -----
$1000
6
<PAGE>
The following are the average annual total returns for Class C Shares of the
Funds for the one-year period ended February 29, 1996, and for the period from
inception through February 29, 1996, assuming no imposition of sales charges:
1. Massachusetts Fund:
$1,088.70 /1///1/
[/R]
A. 1 year ended February 29, 1996
=
------- -1 = 8.87%
( ) [/R] -----
-----
$1000
$1,141.60 /1///1/./4//0//1//8/
[/R]
C. Inception through February 29, 1996
=
------- -1 = 9.91%
( ) [/R] -----
-----
$1000
2. New York Fund:
/1///1/
$1,101.30
[/R]
A. 1 year ended February 29, 1996
=
-1 = 10.13%
( [/R] ) [/R] ------
------- ------
$1000
$1,132.10 /1///1/./4//6//2//0/
[/R]
C. Inception through February 29, 1996
=
------- -1 = 8.86%
( ) [/R] -----
-----
$1000
3. Ohio Fund:
$1,085.50 /1///1/
[/R]
A. 1 year ended February 29, 1996
=
------- -1 = 8.55%
( ) [/R] -----
-----
$1000
/1///1/./4//5//6//5/
$1,124.80
[/R]
C. Inception through February 29, 1996
=
-1 = 8.41%
( [/R] ) [/R] -----
------- -----
$1000
The following are the average annual total returns for Class R Shares of the
Funds for the one-year and five-year periods ended February 29, 1996, and for
the period from inception through February 29, 1996, assuming no imposition of
sales charges:
1. Massachusetts Fund:
/1///1/
$1,098.00
A. 1 year ended February 29, 1996
=
-1 = 9.80%
( ------- ) -----
-----
$1000
$1,491.20 /1///5/
[/R]
B. 5 years ended February 29, 1996
=
------- -1 = 8.32%
( ) -----
-----
$1000
$1,833.80 /1///9/./1//8//8//2/
[/R]
C. Inception through February 29, 1996
=
------- -1 = 6.82%
-----
( ) [/R] -----
$1000
7
<PAGE>
2. New York Fund:
$1,108.00 /1///1/
[/R]
A. 1 year ended February 29, 1996
=
------- -1 = 10.80%
------
( ) [/R] ------
$1000
$1,537.00 /1///5/
[/R]
B. 5 years ended February 29, 1996
=
------- -1 = 8.97%
-----
( ) [/R] -----
$1000
/1///9/./1//8//8//2/
$2,004.90
[/R]
C. Inception through February 29, 1996
=
-1 = 7.86%
-----
( ) [/R]
------- -----
3. Ohio Fund: $1000
[/R]
$1,097.00 /1///1/
[/R]
A. 1 year ended February 29, 1996
=
------- -1 = 9.70%
-----
( ) [/R] -----
$1000
$1,492.70 /1///5/
[/R]
B. 5 years ended February 29, 1996
=
------- -1 = 8.34%
-----
( ) [/R] -----
$1000
/1///9/./1//8//8//2/
$1,993.90
[/R]
C. Inception through February 29, 1996
=
-1 = 7.80%
-----
( ) [/R]
------- -----
$1000
V. CUMULATIVE TOTAL RETURN
A. Cumulative Total Return Formula
Cumulative Total Return is computed according to the following formula:
T ERV - P
= -------
P
Where: T = cumulative total return.
P = a hypothetical initial payment of $1,000.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
inception of the Fund or at the first day of a specified 1-year, 5-
year or 10-year period.
8
<PAGE>
B. Cumulative Total Return Calculation
The following are the cumulative total returns for the Class A Shares of the
Funds for the period from inception and for the one-year period ended February
29, 1996, including the current maximum sales charge:
1. Massachusetts Fund:
$1,046.90 - $1000
----------------
A. 1 year ended February 29, 1996
=
= 4.69%
$1000 ----
( ) ----
$1,078.80 - $1000
----------------
C. Inception through February 29, 1996
=
= 7.88%
$1000 ----
( ) ----
2. New York Fund:
$1,055.50 - $1000
A. 1 year ended February 29, 1996
=
= 5.55%
---------------- ----
( $1000 ) ----
$1,078.80 - $1000
----------------
C. Inception through February 29, 1996
=
= 7.88%
$1000 ----
( ) ----
3. Ohio Fund:
$1,045.10 - $1000
A. 1 year ended February 29, 1996
= = 4.51% [/R]
---------------- ----
----
(
)
$1000 [/R]
$1,083.00 - $1000
----------------
C. Inception through February 29, 1996
= = 8.30% [/R]
----
$1000 ----
( ) [/R]
The following are the cumulative total returns for Class C Shares of the
Funds for the period from inception and for the one-year period ended February
29, 1996, assuming no imposition of sales charges:
1. Massachusetts Fund:
$1,088.70 - $1000
----------------
A. 1 year ended February 29, 1996
= = 8.87% [/R]
----
$1000 ----
( ) [/R]
$1,141.60 - $1000
C. Inception through February 29, 1996
= = 14.16% [/R]
---------------- ------
------
(
)
$1000 [/R]
2. New York Fund:
$1,101.30 - $1000
----------------
A. 1 year ended February 29, 1996
= = 10.13% [/R]
------
$1000 ------
( ) [/R]
$1,132.10 - $1000
C. Inception through February 29, 1996
= = 13.21% [/R]
---------------- ------
------
(
)
$1000 [/R]
9
<PAGE>
3. Ohio Fund:
$1,085.50 - $1000
----------------
A. 1 year ended February 29, 1996
= = 8.55% [/R]
----
$1000 ----
( ) [/R]
$1,124.80 - $1000
----------------
C. Inception through February 29, 1996
= = 12.48% [/R]
------
$1000 ------
( ) [/R]
The following are the cumulative total returns for Class R Shares of the
Funds for the period from inception and for the one-year and five-year periods
ended February 29, 1996, assuming no imposition of sales charges:
1. Massachusetts Fund:
$1,098.00 - $1000
A. 1 year ended February 29, 1996
= = 9.80% [/R]
---------------- ----
----
(
)
$1000 [/R]
$1,491.20 - $1000
----------------
B. 5 years ended February 29, 1996
= = 49.12% [/R]
------
$1000 ------
( ) [/R]
$1,833.80 - $1000
C. Inception through February 29, 1996
= = 83.38% [/R]
---------------- ------
------
(
)
$1000 [/R]
2. New York Fund:
$1,108.00 - $1000
----------------
A. 1 year ended February 29, 1996
= = 10.80% [/R]
------
$1000 ------
( ) [/R]
$1,537.00 - $1000
----------------
B. 5 years ended February 29, 1996
= = 53.70% [/R]
------
$1000 ------
( ) [/R]
$2,004.90 - $1000
C. Inception through February 29, 1996
= = 100.49% [/R]
---------------- -------
-------
(
)
$1000 [/R]
3. Ohio Fund:
$1,097.00 - $1000
----------------
A. 1 year ended February 29, 1996
= = 9.70% [/R]
----
$1000 ----
( ) [/R]
$1,492.70 - $1000
B. 5 years ended February 29, 1996
= = 49.27% [/R]
---------------- ------
------
(
)
$1000 [/R]
$1,993.90 - $1000
----------------
C. Inception through February 29, 1996
= = 99.39% [/R]
------
$1000 ------
( ) [/R]
10
<PAGE>
VI. TAXABLE EQUIVALENT TOTAL RETURN
A. Taxable Equivalent Total Return Formula
Each Fund's taxable equivalent total return for a specific period is calcu-
lated by first taking a hypothetical initial investment in the Fund's shares on
the first day of the period, computing the Fund's total return for each calen-
dar year in the period according to the above formula, 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 of the Fund on an
after-tax basis, at a specified tax rate (usually the highest marginal federal
or combined federal and state tax rate), calculated pursuant to the formula
presented above under "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 in the period 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.
B. Taxable Equivalent Total Return Calculations
The taxable equivalent total return calculations for the Class A Shares of
the Massachusetts Fund for the one-year period ended February 29, 1996, and the
period from inception through February 29, 1996, are set forth on the following
pages. One set of calculations presents the Fund's taxable equivalent total re-
turn with the maximum 4.50% sales charge and the other set of calculations pre-
sents the taxable equivalent total return at the Fund's net asset value. Each
set of calculations assumes a combined federal and state income tax rate of
47.0% based on 1996 rates.
FUND NAME: NUVEEN MA TAX-FREE VALUE CLASS A
(SINCE 09/06/94)
<TABLE>
<CAPTION>
NAV INCOM TOTAL PERIOD
PER PER FROM DOLLAR TO DATE TAX ENDING ENDING REINV
PER DATE SHARE SHARE CAP GAINS FROM INCOME GAINS DISTR T-E INC SAVINGS SHARES WEALTH NAV
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/06/94 9.54 1,048 10,000
09/30/94 9.36 .04150 43.501 43.501 43.501 1,053 9,855 9.36
10/31/94 9.16 .04350 45.800 45.800 89.301 1,058 9,690 9.13
11/30/94 8.93 .04350 46.018 46.018 135.319 1,063 9,493 8.97
12/31/94 9.14 .04350 46.241 46.241 181.560 1,068 9,762 9.14
01/31/95 9.34 .04350 46.461 46.461 228.021 1,073 10,022 9.38
0 02/28/95 9.56 .04350 46.677 46.677 274.697 243.6 1,103 10,548 9.60
1 03/31/95 9.60 .04350 47.997 47.997 47.997 1,108 10,640 9.62
2 04/30/95 9.59 .04350 48.214 48.214 96.210 1,113 10,677 9.58
3 05/31/95 9.82 .04350 48.432 48.432 144.642 1,118 10,982 9.82
4 06/30/95 9.69 .04350 48.647 48.647 193.289 1,123 10,885 9.70
5 07/31/95 9.70 .04350 48.865 48.865 242.155 1,128 10,945 9.69
6 08/31/95 9.75 .04350 49.085 49.085 291.239 1,133 11,051 9.80
7 09/30/95 9.78 .04350 49.302 49.302 340.542 1,138 11,134 9.81
8 10/31/95 9.87 .04350 49.521 49.521 390.063 1,143 11,286 9.90
9 11/30/95 9.98 .04350 49.739 49.739 439.801 1,148 11,461 10.00
10 12/31/95 10.02 .04300 49.381 49.381 489.182 1,153 11,556 10.02
11 01/31/96 10.03 .04300 49.593 49.593 538.775 1,158 11,617 10.03
12 02/29/96 9.94 .04300 49.805 49.805 588.580 521.9 1,216 12,085 9.97
TAX RATE 47.00%
LOAD 0.00%
PAST YEAR: TOTAL RETURN 14.57%
1.4812 YEARS: TOTAL RETURN 20.85%
ANNUALIZED 13.64%
</TABLE>
11
<PAGE>
FUND NAME: NUVEEN MA TAX-FREE VALUE CLASS A
(SINCE 02/28/95)
<TABLE>
<CAPTION>
NAV INCOM TOTAL PERIOD
PER PER FROM DOLLAR TO DATE TAX ENDING ENDING REINV
PER DATE SHARE SHARE CAP GAINS FROM INCOME GAINS DISTR T-E INC SAVINGS SHARES WEALTH NAV
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 02/28/95 9.56 .04350 999 10,000 9.60
1 03/31/95 9.60 .04350 43.454 43.454 43.454 1,003 9,633 9.62
2 04/30/95 9.59 .04350 43.651 43.651 87.105 1,008 9,667 9.58
3 05/31/95 9.82 .04350 43.849 43.849 130.955 1,012 9,943 9.82
4 06/30/95 9.69 .04350 44.043 44.043 174.998 1,017 9,855 9.70
5 07/31/95 9.70 .04350 44.241 44.241 219.239 1,022 9,910 9.69
6 08/31/95 9.75 .04350 44.440 44.440 263.679 1,026 10,005 9.80
7 09/30/95 9.78 .04350 44.637 44.637 308.315 1,031 10,080 9.81
8 10/31/95 9.87 .04350 44.835 44.835 353.150 1,035 10,218 9.90
9 11/30/95 9.98 .04350 45.032 45.032 398.182 1,040 10,376 10.00
10 12/31/95 10.02 .04300 44.708 44.708 442.890 1,044 10,463 10.02
11 01/31/96 10.03 .04300 44.900 44.900 487.789 1,049 10,518 10.03
12 02/29/96 9.94 .04300 45.092 45.092 532.881 472.5 1,101 10,941 9.97
TAX RATE 47.00%
LOAD 4.50%
1.0021 YEARS: TOTAL RETURN 9.41%
ANNUALIZED 9.39%
</TABLE>
FUND NAME: NUVEEN MA TAX-FREE VALUE CLASS A
(SINCE 02/28/95)
<TABLE>
<CAPTION>
NAV INCOM TOTAL PERIOD
PER PER FROM DOLLAR TO DATE TAX ENDING ENDING REINV
PER DATE SHARE SHARE CAP GAINS FROM INCOME GAINS DISTR T-E INC SAVINGS SHARES WEALTH NAV
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 02/28/95 9.56 .04350 1,046 10,000 9.60
1 03/31/95 9.60 .04350 45.502 45.502 45.502 1,051 10,087 9.62
2 04/30/95 9.59 .04350 45.708 45.708 91.210 1,056 10,122 9.58
3 05/31/95 9.82 .04350 45.915 45.915 137.125 1,060 10,411 9.82
4 06/30/95 9.69 .04350 46.119 46.119 183.244 1,065 10,319 9.70
5 07/31/95 9.70 .04350 46.326 46.326 229.570 1,070 10,376 9.69
6 08/31/95 9.75 .04350 46.534 46.534 276.103 1,074 10,476 9.80
7 09/30/95 9.78 .04350 46.740 46.740 322.843 1,079 10,555 9.81
8 10/31/95 9.87 .04350 46.947 46.947 369.791 1,084 10,699 9.90
9 11/30/95 9.98 .04350 47.154 47.154 416.944 1,089 10,865 10.00
10 12/31/95 10.02 .04300 46.814 46.814 463.759 1,093 10,956 10.02
11 01/31/96 10.03 .04300 47.015 47.015 510.774 1,098 11,014 10.03
12 02/29/96 9.94 .04300 47.217 47.217 557.991 494.8 1,153 11,457 9.97
TAX RATE 47.00%
LOAD 0.00%
PAST YEAR: TOTAL RETURN 14.57%
1.0021 YEARS: TOTAL RETURN 14.57%
ANNUALIZED 14.54%
</TABLE>
12
<PAGE>
FUND NAME: NUVEEN MA TAX-FREE VALUE CLASS A
(SINCE 09/06/94)
<TABLE>
<CAPTION>
NAV INCOM TOTAL PERIOD
PER PER FROM DOLLAR TO DATE TAX ENDING ENDING REINV
PER DATE SHARE SHARE CAP GAINS FROM INCOME GAINS DISTR T-E INC SAVINGS SHARES WEALTH NAV
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/06/94 9.54 1,001 10,000
09/30/94 9.36 .04150 41.544 41.544 41.544 1,005 9,411 9.36
10/31/94 9.16 .04350 43.739 43.739 85.282 1,010 9,254 9.13
11/30/94 8.93 .04350 43.947 43.947 129.229 1,015 9,066 8.97
12/31/94 9.14 .04350 44.160 44.160 173.389 1,020 9,323 9.14
01/31/95 9.34 .04350 44.370 44.370 217.760 1,025 9,571 9.38
0 02/28/95 9.56 .04350 44.576 44.576 262.336 232.6 1,054 10,074 9.60
1 03/31/95 9.60 .04350 45.837 45.837 45.837 1,058 10,161 9.62
2 04/30/95 9.59 .04350 46.044 46.044 91.881 1,063 10,197 9.58
3 05/31/95 9.82 .04350 46.253 46.253 138.134 1,068 10,488 9.82
4 06/30/95 9.69 .04350 46.458 46.458 184.591 1,073 10,395 9.70
5 07/31/95 9.70 .04350 46.666 46.666 231.258 1,078 10,453 9.69
6 08/31/95 9.75 .04350 46.876 46.876 278.133 1,082 10,553 9.80
7 09/30/95 9.78 .04350 47.084 47.084 325.217 1,087 10,633 9.81
8 10/31/95 9.87 .04350 47.293 47.293 372.510 1,092 10,778 9.90
9 11/30/95 9.98 .04350 47.500 47.500 420.010 1,097 10,945 10.00
10 12/31/95 10.02 .04300 47.159 47.159 467.169 1,101 11,036 10.02
11 01/31/96 10.03 .04300 47.361 47.361 514.530 1,106 11,095 10.03
12 02/29/96 9.94 .04300 47.564 47.564 562.094 498.4 1,161 11,541 9.97
TAX RATE 47.00%
LOAD 4.50%
1.4812 YEARS: TOTAL RETURN 15.41%
ANNUALIZED 10.16%
</TABLE>
13
<PAGE>
VII. MEASUREMENT OF RISK
The annualized standard deviation of monthly returns over the three years
ended February 29, 1996, was calculated as follows:
-------------------------------------------------- ---
annualized
standard S((Total return in month X) - (Average X [/R]12
[/R] monthly total return))/2/ [/R]
-------------------------------------------------
deviation
(s) =
number of months (36)
The calculation of annualized standard deviation for the Massachusetts Fund
for the three years ended February 29, 1996 was as follows:
<TABLE>
<CAPTION>
MONTHLY (TOTAL RETURN IN MONTH X) -
MASSACHUSETTS FUND TOTAL RETURNS (AVERAGE MONTHLY TOTAL RETURN)/2/
- ------------------ ------------- ---------------------------------
<S> <C> <C>
-1.35% 3.3520%
Apr-93.......................... 1.18% 0.4888%
May-93.......................... 0.77% 0.0836%
Jun-93.......................... 1.88% 1.9577%
Jul-93.......................... 0.15% 0.1095%
Aug-93.......................... 2.26% 3.1654%
Sep-93.......................... 1.23% 0.5613%
Oct-93.......................... 0.35% 0.0171%
Nov-93.......................... -0.93% 1.9905%
Dec-93.......................... 1.64% 1.3437%
Jan-94.......................... 1.43% 0.9009%
Feb-94.......................... -2.69% 10.0542%
Mar-94.......................... -3.88% 19.0169%
Apr-94.......................... 0.25% 0.0533%
May-94.......................... 1.00% 0.2695%
Jun-94.......................... -0.37% 0.7239%
Jul-94.......................... 1.42% 0.8820%
Aug-94.......................... 0.26% 0.0488%
Sep-94.......................... -1.63% 4.4556%
Oct-94.......................... -1.65% 4.5405%
Nov-94.......................... -2.02% 6.2542%
Dec-94.......................... 2.98% 6.2458%
Jan-95.......................... 2.69% 4.8804%
Feb-95.......................... 2.85% 5.6130%
Mar-95.......................... 0.90% 0.1757%
Apr-95.......................... 0.37% 0.0123%
May-95.......................... 2.77% 5.2403%
Jun-95.......................... -0.76% 1.5397%
Jul-95.......................... 0.57% 0.0080%
Aug-95.......................... 0.98% 0.2492%
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
MONTHLY (TOTAL RETURN IN MONTH X) -
MASSACHUSETTS FUND TOTAL RETURNS (AVERAGE MONTHLY TOTAL RETURN)/2/
- ------------------ ------------- ---------------------------------
<S> <C> <C>
Sep-95.......................... 0.67% 0.0358%
Oct-95.......................... 1.39% 0.8266%
Nov-95.......................... 1.58% 1.2082%
Dec-95.......................... 0.85% 0.1363%
Jan-96.......................... 0.62% 0.0194%
Feb-96.......................... -0.45% 0.8665%
Average monthly total return.... 0.48%
Sum of Column C................. 87.3261%
Number of months................ 36
</TABLE>
----------- --
Annualized Standard Deviation = ^ ^
(87.3261%/36) X ^ ^
12 = 5.40%
VIII. RISK-ADJUSTED TOTAL RETURN
The risk-adjusted total return for the Class R Shares of the Massachusetts
Fund over the three years ended February 29, 1996, was calculated as follows:
Annualized total return of Fund - annualized
total return of
Ponder Varifact Municipal Variable Rate Demand
Bond Index
Risk-Adjusted Total Return =
------------------------------------------------
Annualized standard deviation of return (s)
5.77% -
3.139%
--------------
=
5.40%
=
0.488
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> MASSACHUSETTS TAX FREE VALUE CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
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<PAID-IN-CAPITAL-COMMON> 76982
<SHARES-COMMON-STOCK> 431
<SHARES-COMMON-PRIOR> 112
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (789)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5505
<NET-ASSETS> 4290
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4838
<OTHER-INCOME> 0
<EXPENSES-NET> 591
<NET-INVESTMENT-INCOME> 4247
<REALIZED-GAINS-CURRENT> (218)
<APPREC-INCREASE-CURRENT> 3251
<NET-CHANGE-FROM-OPS> 7279
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 139
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 356
<NUMBER-OF-SHARES-REDEEMED> 44
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 8919
<ACCUMULATED-NII-PRIOR> 56
<ACCUMULATED-GAINS-PRIOR> (557)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 427
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 651
<AVERAGE-NET-ASSETS> 2693
<PER-SHARE-NAV-BEGIN> 9.56
<PER-SHARE-NII> .513
<PER-SHARE-GAIN-APPREC> .388
<PER-SHARE-DIVIDEND> .521
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> MASSACHUSETTS TAX FREE VALUE CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 75314
<INVESTMENTS-AT-VALUE> 80818
<RECEIVABLES> 1130
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<SENIOR-LONG-TERM-DEBT> 0
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76982
<SHARES-COMMON-STOCK> 65
<SHARES-COMMON-PRIOR> 15
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (789)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5505
<NET-ASSETS> 638
<DIVIDEND-INCOME> 0
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<EXPENSES-NET> 591
<NET-INVESTMENT-INCOME> 4247
<REALIZED-GAINS-CURRENT> (218)
<APPREC-INCREASE-CURRENT> 3251
<NET-CHANGE-FROM-OPS> 7279
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 52
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<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 8919
<ACCUMULATED-NII-PRIOR> 56
<ACCUMULATED-GAINS-PRIOR> (557)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 427
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 651
<AVERAGE-NET-ASSETS> 261
<PER-SHARE-NAV-BEGIN> 9.51
<PER-SHARE-NII> .437
<PER-SHARE-GAIN-APPREC> .392
<PER-SHARE-DIVIDEND> .449
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.89
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> MASSACHUSETTS TAX FREE VALUE CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 75314
<INVESTMENTS-AT-VALUE> 80818
<RECEIVABLES> 1130
<ASSETS-OTHER> 119
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<TOTAL-ASSETS> 82067
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76982
<SHARES-COMMON-STOCK> 7743
<SHARES-COMMON-PRIOR> 7502
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (789)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5505
<NET-ASSETS> 76773
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4838
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<NET-INVESTMENT-INCOME> 4247
<REALIZED-GAINS-CURRENT> (218)
<APPREC-INCREASE-CURRENT> 3251
<NET-CHANGE-FROM-OPS> 7279
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4149
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 796
<NUMBER-OF-SHARES-REDEEMED> 857
<SHARES-REINVESTED> 303
<NET-CHANGE-IN-ASSETS> 8919
<ACCUMULATED-NII-PRIOR> 56
<ACCUMULATED-GAINS-PRIOR> (557)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 427
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 651
<AVERAGE-NET-ASSETS> 74643
<PER-SHARE-NAV-BEGIN> 9.54
<PER-SHARE-NII> .537
<PER-SHARE-GAIN-APPREC> .378
<PER-SHARE-DIVIDEND> .545
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.91
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> NUVEEN NY VALUE CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 160115
<INVESTMENTS-AT-VALUE> 169178
<RECEIVABLES> 2541
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 161314
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<SHARES-COMMON-PRIOR> 315
<ACCUMULATED-NII-CURRENT> 127
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 649
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9063
<NET-ASSETS> 15732
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10173
<OTHER-INCOME> 0
<EXPENSES-NET> 1222
<NET-INVESTMENT-INCOME> 8951
<REALIZED-GAINS-CURRENT> 1772
<APPREC-INCREASE-CURRENT> 5659
<NET-CHANGE-FROM-OPS> 16381
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 552
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 1261
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<SHARES-REINVESTED> 34
<NET-CHANGE-IN-ASSETS> 18425
<ACCUMULATED-NII-PRIOR> 105
<ACCUMULATED-GAINS-PRIOR> (1123)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 883
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1252
<AVERAGE-NET-ASSETS> 10657
<PER-SHARE-NAV-BEGIN> 10.12
<PER-SHARE-NII> .555
<PER-SHARE-GAIN-APPREC> .487
<PER-SHARE-DIVIDEND> .552
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.61
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 023
<NAME> NUVEEN NY VALUE CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 160115
<INVESTMENTS-AT-VALUE> 169178
<RECEIVABLES> 2541
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<TOTAL-LIABILITIES> 684
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 161314
<SHARES-COMMON-STOCK> 61
<SHARES-COMMON-PRIOR> 8
<ACCUMULATED-NII-CURRENT> 127
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 649
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9063
<NET-ASSETS> 646
<DIVIDEND-INCOME> 0
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<NET-INVESTMENT-INCOME> 8951
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<APPREC-INCREASE-CURRENT> 5659
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<NET-CHANGE-IN-ASSETS> 18425
<ACCUMULATED-NII-PRIOR> 105
<ACCUMULATED-GAINS-PRIOR> (1123)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1252
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<PER-SHARE-NAV-BEGIN> 10.11
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<PER-SHARE-DIVIDEND> .476
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> NUVEEN NY VALUE CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 160115
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<TOTAL-LIABILITIES> 684
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<PAID-IN-CAPITAL-COMMON> 161314
<SHARES-COMMON-STOCK> 14549
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<ACCUMULATED-NII-CURRENT> 127
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<ACCUMULATED-NET-GAINS> 649
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9063
<NET-ASSETS> 154776
<DIVIDEND-INCOME> 0
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<NET-INVESTMENT-INCOME> 8951
<REALIZED-GAINS-CURRENT> 1772
<APPREC-INCREASE-CURRENT> 5659
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<EQUALIZATION> 0
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<NET-CHANGE-IN-ASSETS> 18425
<ACCUMULATED-NII-PRIOR> 105
<ACCUMULATED-GAINS-PRIOR> (1123)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1252
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<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> .582
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.64
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 032
<NAME> NUVEEN OHIO VALUE CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 167989
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169688
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<SHARES-COMMON-PRIOR> 424
<ACCUMULATED-NII-CURRENT> 69
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<ACCUMULATED-NET-GAINS> (237)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12640
<NET-ASSETS> 12904
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10738
<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> 9415
<REALIZED-GAINS-CURRENT> 730
<APPREC-INCREASE-CURRENT> 6014
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<DISTRIBUTIONS-OF-GAINS> 0
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<SHARES-REINVESTED> 24
<NET-CHANGE-IN-ASSETS> 14708
<ACCUMULATED-NII-PRIOR> 109
<ACCUMULATED-GAINS-PRIOR> (967)
<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1365
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<PER-SHARE-NAV-BEGIN> 10.20
<PER-SHARE-NII> .538
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<PER-SHARE-DIVIDEND> .542
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.60
<EXPENSE-RATIO> .98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 033
<NAME> NUVEEN OHIO VALUE CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 167989
<INVESTMENTS-AT-VALUE> 180629
<RECEIVABLES> 3079
<ASSETS-OTHER> 149
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 183857
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 1698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169688
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<SHARES-COMMON-PRIOR> 89
<ACCUMULATED-NII-CURRENT> 69
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (237)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12640
<NET-ASSETS> 2163
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10738
<OTHER-INCOME> 0
<EXPENSES-NET> 1323
<NET-INVESTMENT-INCOME> 9415
<REALIZED-GAINS-CURRENT> 730
<APPREC-INCREASE-CURRENT> 6014
<NET-CHANGE-FROM-OPS> 16160
<EQUALIZATION> 0
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<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 14708
<ACCUMULATED-NII-PRIOR> 109
<ACCUMULATED-GAINS-PRIOR> (967)
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 957
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1365
<AVERAGE-NET-ASSETS> 1432
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> .458
<PER-SHARE-GAIN-APPREC> .395
<PER-SHARE-DIVIDEND> .463
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.55
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> NUVEEN OHIO VALUE CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 167989
<INVESTMENTS-AT-VALUE> 180629
<RECEIVABLES> 3079
<ASSETS-OTHER> 149
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 183857
<PAYABLE-FOR-SECURITIES> 993
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 705
<TOTAL-LIABILITIES> 1698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169688
<SHARES-COMMON-STOCK> 15789
<SHARES-COMMON-PRIOR> 15934
<ACCUMULATED-NII-CURRENT> 69
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (237)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12640
<NET-ASSETS> 167092
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10738
<OTHER-INCOME> 0
<EXPENSES-NET> 1323
<NET-INVESTMENT-INCOME> 9415
<REALIZED-GAINS-CURRENT> 730
<APPREC-INCREASE-CURRENT> 6014
<NET-CHANGE-FROM-OPS> 16160
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8957
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 1015
<NUMBER-OF-SHARES-REDEEMED> 1765
<SHARES-REINVESTED> 604
<NET-CHANGE-IN-ASSETS> 14708
<ACCUMULATED-NII-PRIOR> 109
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 957
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1365
<AVERAGE-NET-ASSETS> 165606
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> .563
<PER-SHARE-GAIN-APPREC> .403
<PER-SHARE-DIVIDEND> .566
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.58
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
<PAGE>
EXHIBIT 18
NUVEEN MUNICIPAL BOND FUND
NUVEEN MULTISTATE TAX-FREE TRUST
NUVEEN INSURED TAX-FREE BOND FUND, INC.
NUVEEN TAX-FREE BOND FUND, INC.
NUVEEN CALIFORNIA TAX-FREE FUND, INC.
Multiple Class Plan
Adopted Pursuant to Rule 18f-3
WHEREAS, Nuveen Municipal Bond Fund, a Massachusetts business trust, Nuveen
Multistate Tax-Free Trust, a Massachusetts business trust, Nuveen Insured Tax-
Free Bond Fund, Inc., a Minnesota corporation, Nuveen Tax-Free Bond Fund, Inc.,
a Minnesota corporation, and Nuveen California Tax-Free Fund, Inc., a Maryland
corporation (each a "Fund" and collectively the "Funds"), each engage in
business as an open-end management investment company and are each registered as
such under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, each Fund is authorized to and does issue shares of common stock
or shares of beneficial interest in separate series, with the shares
representing the interests in a separate portfolio of securities and other
assets (each Fund's series relating to long-term securities together with all
other such series subsequently established by a Fund being referred to herein
individually as a "Series" and collectively as the "Series");
WHEREAS, each Fund is authorized to and has divided the shares of each
Series into three classes, designated as Class A Shares, Class C Shares and
Class R Shares; and
WHEREAS, the Board of each Fund as a whole, and the Trustees or Directors,
as applicable, who are not interested persons of each such Fund (as defined in
the Act) (the "Non-Interested Members"), after having been furnished and having
evaluated information reasonably necessary to evaluate this Multiple Class Plan
(the "Plan"), have determined in the exercise of their reasonable business
judgment that the Plan is in the best interests of each class of each Series
individually, and each Series and the Fund as a whole.
WHEREAS, each Fund adopted this Plan in accordance with Rule 18f-3 under
the Act, effective August 1, 1995.
WHEREAS, each Fund's Board, as a whole, and the Non-Interested Members,
approved certain pricing enhancements that required amendments to this Plan.
NOW, THEREFORE, each Fund hereby adopts this amended Plan, effective July
1, 1996, in accordance with Rule 18f-3 under the Act:
1. Class Differences. Each class of shares of a Series shall represent
interests in the same portfolio of investments of that Series and, except as
otherwise set forth in this Plan, shall differ solely with respect to: (i)
distribution, service and other charges and expenses as provided for in
<PAGE>
Sections 2 and 3 of this Plan; (ii) the exclusive right of each class of shares
to vote on matters submitted to shareholders that relate solely to that class or
for which the interests of one class differ from the interests of another class
or classes; (iii) such differences relating to eligible investors as may be set
forth in the prospectus and statement of additional information of each Series,
as the same may be amended or supplemented from time to time (each a
"Prospectus" and "SAI" and collectively, the "Prospectus" and "SAI"); (iv) the
designation of each class of shares; and (v) conversion features.
2. DISTRIBUTION AND SERVICE ARRANGEMENTS; CONVERSION FEATURES. Class A
Shares, Class C Shares and Class R Shares of each Fund shall differ in the
manner in which such shares are distributed and in the services provided to
shareholders of each such class as follows:
a) Class A Shares:
(i) Class A Shares shall be sold at net asset value subject to
a front-end sales charge set forth in the Prospectus and
SAI;
(ii) Class A Shares shall be subject to an annual service fee
("Service Fee") pursuant to a Plan of Distribution and
Service Pursuant to Rule 12b-1 (the "12b-1 Plan") not to
exceed 0.25 of 1% of the average daily net assets of the
Series allocable to Class A Shares, which, as set forth in
the Prospectus, SAI and the 12b-1 Plan, may be used to
compensate certain authorized dealers for providing
ongoing account services to shareholders; and
(iii) Class A Shares shall not be subject to a Distribution Fee
(as hereinafter defined); and
(iv) As described in the Prospectus and SAI, certain Class A
shares redeemed within 18 months of purchase shall be
subject to a contingent deferred sales charge ("CDSC") of
1% of the lower of (a) the net asset value of Class A
Shares at the time of purchase or (b) the net asset value
of Class A Shares at the time of redemption, as set forth
in the Prospectus and SAI.
b) Class C Shares:
(i) Class C Shares shall be sold at net asset value without a
front-end sales charge;
(ii) Class C Shares shall be subject to a Service Fee pursuant
to the 12b-1 Plan not to exceed 0.25 of 1% of average
daily net assets of the Series allocable to Class C
Shares, which, as set forth in the Prospectus, SAI and the
12b-1 Plan, may be used to compensate certain authorized
dealers for providing ongoing account services to
shareholders;
2
<PAGE>
(iii) Class C Shares shall be subject to an annual distribution
fee ("Distribution Fee") pursuant to the 12b-1 Plan not to
exceed 0.75 of 1% of average daily net assets of the
Series allocable to Class C Shares less the amount of any
CDSC received by John Nuveen & Co. Incorporated, the
Funds' distributor, and for which any applicable
reinstatement period, as set forth in the Prospectus and
SAI, has expired, which, as set forth in the Prospectus,
SAI and the 12b-1 Plan, will be used to compensate certain
authorized dealers over time for the sale of Class C
Shares;
(iv) Class C Shares redeemed within 12 months of purchase shall
be subject to a CDSC of 1% of the lower of (a) the net
asset value of Class C Shares at the time of purchase or
(b) the net asset value of Class C Shares at the time of
redemption, as set forth in the Prospectus and SAI; and
(v) Class C Shares will automatically convert to Class A
Shares six years after purchase, as set forth in the
Prospectus and SAI.
c) Class R Shares:
(i) Class R Shares shall be sold at net asset value without a
front-end sales charge;
(ii) Class R Shares shall not be subject to a Service Fee; and
(iii) Class R Shares shall not be subject to a Distribution
Fee.
3. ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. a) Investment
Income, and Realized and Unrealized Gains and Losses. The daily investment
income, and realized and unrealized gains and losses, of a Series will be of
allocated to each class of shares based on each class' relative percentage of
the total value of shares outstanding of the Series at the beginning of the day,
after such net assets are adjusted for the prior day's capital share
transactions.
b) Series Level Expenses. Expenses that are attributable to a
Series, but not a particular class thereof ("Series level expenses"), will be
allocated to each class of shares based on each class' relative percentage of
the total value of shares outstanding of the Series at the beginning of the day,
after such net assets are adjusted for the prior day's capital share
transactions. Series level expenses include fees for services that are received
equally by the classes under the same fee arrangement. All expenses attributable
to a Series that are not "class level expenses" (as defined below) shall be
Series level expenses, including but not limited to transfer agency fees and
expenses, share registration expenses, and shareholder reporting expenses.
c) Class Level Expenses. Expenses that are directly attributable
to a particular class of shares, including the expenses relating to the
distribution of a class' shares, or to services provided to the shareholders of
a class, as set forth in Section 2 of this Plan, will be incurred by that
3
<PAGE>
class of shares. Class level expenses include expenses for services that are
unique to a class of shares in either form or amount. "Class level expenses"
shall include, but not be limited to, 12b-1 Service Fees, 12b-1 Distribution
Fees, expenses associated with the addition of share classes to a fund (to the
extent that the expenses were not fully accrued prior to the issuance of the new
classes of shares), expenses of administrative personnel and services required
to support the shareholders of a specific class, litigation or other legal
expenses relating to a specific class of shares, directors' fees or expenses
incurred as a result of issues relating to a specific class of shares, and
accounting expenses relating to a specific class of shares.
d) Fee Waivers and Expense Reimbursements. On a daily basis, if the
Series level expenses and the class level expenses (not including 12b-1 plan
payments) exceed the daily expense cap for the Series, an appropriate
waiver/reimbursement will be made to the Series. The amount of such
reimbursement to each class will be in an amount such that the expenses of the
class with the highest expense ratio (excluding Service Fees and Distribution
Fees) will be equal to the daily expense cap after reimbursement. The expense
reimbursement will be allocated to each class of shares based on each class'
relative percentage of the total value of shares outstanding of the Series at
the beginning of the day, after such net assets are adjusted for the prior day's
capital share transactions.
4. Exchange Privilege. Shares of a class of a Series may be exchanged
only for shares of the same class of another Series, except as otherwise set
forth in the Prospectus and SAI.
5. Term and Termination. a) The Series. This Plan shall become effective
with respect to each Series on August 1, 1995, and shall continue in effect with
respect to such Class A, Class C and Class R Shares of each such Series until
terminated in accordance with the provisions of Section 5(c) hereof.
b) Additional Series or Classes. This Plan shall become effective with
respect to any class of shares of a Series other than Class A, Class C or Class
R and with respect to each additional Series or class thereof established by a
Fund after the date hereof and made subject to this Plan upon commencement of
the initial public offering thereof (provided that the Plan has previously been
approved with respect to such additional Series or class by votes of a majority
of both (i) the members of the Board of a Fund, as a whole, and (ii) the
Non-Interested Members, cast at a meeting held before the initial public
offering of such additional Series or classes thereof), and shall continue in
effect with respect to each such additional Series or class until terminated in
accordance with provisions of Section 5(c) hereof. An addendum setting forth
such specific and different terms of such additional series or classes shall be
attached to or made part of this Plan.
c) Termination. This Plan may be terminated at any time with respect
to any Fund or any Series or class thereof, as the case may be, by vote of a
majority of both the members of the Board of a Fund, as a whole, and the
Non-Interested Members. The Plan may remain in effect with respect to a
particular Fund or any Series or class thereof even if it has been terminated in
accordance with this Section 5(c) with respect to any other Fund or Series or
class thereof.
4
<PAGE>
6. Subsequent Funds. The parties hereto intend that any open-end
investment company established subsequent to the date set forth below for which
Nuveen Advisory Corp. acts as investment adviser (each a "Future Fund"), will be
covered by the terms and conditions of this Plan, provided that the Board of
such Future Fund as a whole, and the Non-Interested Members of such Future Fund,
after having been furnished and having evaluated information reasonably
necessary to evaluate the Plan, have determined in the exercise of their
reasonable business judgment that the Plan is in the best interests of each
class of each Series of such Future Fund individually, and each Series of such
Future Fund and such Future Fund as a whole.
7. Amendments. a) General. Except as set forth below, any material
amendment to this Plan affecting a Fund or Series or class thereof shall require
the affirmative vote of a majority of both the members of the Board of that
Fund, as a whole, and the Non-Interested Members that the amendment is in the
best interests of each class of each Series individually and each Series as a
whole.
b) Future Funds. Any amendment to the Plan solely for the purpose of
adding a Future Fund as a party hereto in accordance with Section 6, will not
require any action by the Boards of the Funds.
Dated: April 23, 1996
5
<PAGE>
Exhibit 99(a)
Certified Resolution
--------------------
The undersigned, James J. Wesolowski, hereby certifies, on behalf of Nuveen
Tax-Free Bond Fund, Inc. (the "Fund"), (1) that he is the duly elected,
qualified and acting Secretary of the Fund, and that as such Secretary he has
custody of its corporate books and records, (2) that attached to this
Certificate is a true and correct copy of a resolution duly adopted by the Board
of Directors of the Fund at a meeting held on January 21, 1996, and (3) that
said resolution has not been amended or rescinded and remains in full force and
effect.
June 10, 1996
/s/ James J. Wesolowski
-----------------------
James J. Wesolowski, Secretary
<PAGE>
FURTHER RESOLVED, that each member of the Board and officer of the Fund who may
be required to execute the Registration Statement on Form N-1A, or any amendment
or amendments thereto, be, and each of them hereby is, authorized to execute a
power of attorney appointing Richard J. Franke, Timothy R. Schwertfeger, James
J. Wesolowski, Larry W. Martin, Gifford R. Zimmerman, and Thomas S. Harman, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the Registration Statement and any and all
amendments thereto and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, and ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
