<PAGE>
As filed with the Securities and Exchange Commission on May 31, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
Registration No. 33-43285 [_]
Pre-Effective Amendment No.___ [_]
Post-Effective Amendment No. 11 [X]
--
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Registration No. 811-6435 [_]
Amendment No. 14 [X]
--
NUVEEN MULTISTATE TAX-FREE TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
333 West Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
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 [_] on (date) pursuant to paragraph
pursuant to paragraph (b) (a)(1)
[X] on May 31, 1996 pursuant [_] 75 days after filing pursuant
to paragraph (b) to paragraph (a)(2)
[_] 60 days after filing [_] on (date) pursuant to paragraph
pursuant to paragraph (a)(1) (a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously 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) FOR THE FOLLOWING SERIES: NUVEEN ARIZONA TAX-FREE
VALUE FUND, NUVEEN FLORIDA TAX-FREE VALUE FUND, NUVEEN MARYLAND TAX-FREE VALUE
FUND, NUVEEN MICHIGAN TAX-FREE VALUE FUND, NUVEEN NEW JERSEY TAX-FREE VALUE
FUND, NUVEEN PENNSYLVANIA TAX-FREE VALUE FUND, AND NUVEEN VIRGINIA TAX-FREE
VALUE FUND. A RULE 24F-2 NOTICE FOR THE REGISTRANT'S FISCAL YEAR ENDED JANUARY
31, 1996, WAS FILED ON MARCH 20, 1996.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 11
TO
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO. 33-43285
AND
AMENDMENT NO. 14
TO
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO. 811-6435
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 MULTISTATE TAX-FREE TRUST
-----------------
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
ITEM IN
PART A 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 Plans;
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>
ITEM IN
PART B OF LOCATION IN STATEMENT
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 MULTISTATE TAX-FREE TRUST
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
[NUVEEN LOGO]
Nuveen Tax-Free
Mutual Funds
[PHOTO APPEARS HERE]
Dependable tax-free
income for generations
ARIZONA
FLORIDA
MARYLAND
MICHIGAN
NEW JERSEY
PENNSYLVANIA
VIRGINIA
PROSPECTUS MAY 31, 1996
<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
MAY 31, 1996
Nuveen Multistate Tax-Free Trust
Prospectus
May 31, 1996
NUVEEN ARIZONA TAX-FREE VALUE FUND NUVEEN NEW JERSEY TAX-FREE VALUE FUND
NUVEEN FLORIDA TAX-FREE VALUE FUND NUVEEN PENNSYLVANIA TAX-FREE VALUE
NUVEEN MARYLAND TAX-FREE VALUE FUND FUND
NUVEEN MICHIGAN TAX-FREE VALUE FUND NUVEEN VIRGINIA TAX-FREE VALUE FUND
Nuveen Multistate Tax-Free Trust (the "Trust") is a family of single-state
tax-free mutual funds (the "Funds"), each 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
May 31, 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 the 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
18 Who is responsible for the operation of the funds?
19 What are the funds' investment objectives and
policies?
25 Flexible pricing program
28 How to buy fund shares
41 Distribution and service plan
42 How to redeem fund shares
46 Management of the funds
50 How the funds show performance
53 Distributions and taxes
57 Net asset value
58 General information
Appendix
Special state factors and state tax
treatment and taxable equivalent yield tables
</TABLE>
<PAGE>
SUMMARY OF FUND EXPENSES NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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 (as a
percentage of lesser of
purchase price or redemption
proceeds) None (4) Yes (5) None
Redemption fees None None None
Exchange fees None None None
</TABLE>
<TABLE>
<CAPTION>
Annual
operating
expenses,
after fee
waivers and Total
expense expenses,
reimbursements without fee
(as a percent Other waivers and
of average net Management 12b-1 operating Total expense re-
assets)(6) fees fees (7) expenses expenses imbursements
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ARIZONA FUND
Class A .55% .25% .20% 1.00% 1.31%
Class C .55% 1.00% .20% 1.75% 2.11%
Class R .55% None .20% .75% 1.15%
FLORIDA FUND
Class A .55% .25% .20% 1.00% 1.21%
Class C .55% 1.00% .20% 1.75% 2.16%
Class R .55% None .20% .75% .88%
MARYLAND FUND
Class A .55% .25% .20% 1.00% 1.33%
Class C .55% 1.00% .20% 1.75% 2.06%
Class R .55% None .20% .75% 1.04%
MICHIGAN FUND
Class A .55% .25% .20% 1.00% 1.35%
Class C .55% 1.00% .20% 1.75% 2.08%
Class R .55% None .20% .75% 1.05%
</TABLE>
Continued on page 4.
3
<PAGE>
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
Annual operating
expenses,
after fee waivers
and Total
expense expenses,
reimbursements without fee
(as a percent of Other waivers and
average net Management 12b-1 operating Total expense re-
assets)(6) fees fees (7) expenses expenses imbursements
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NEW JERSEY FUND
Class A .55% .25% .20% 1.00% 1.25%
Class C .55% 1.00% .20% 1.75% 1.96%
Class R .55% None .20% .75% .98%
PENNSYLVANIA FUND
Class A .55% .25% .20% 1.00% 1.30%
Class C .55% 1.00% .20% 1.75% 2.14%
Class R .55% None .20% .75% .96%
VIRGINIA FUND
Class A .55% .25% .20% 1.00% 1.20%
Class C .55% 1.00% .20% 1.75% 1.92%
Class R .55% None .20% .75% .94%
</TABLE>
(1) Authorized Dealers and other firms 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 purchase 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 purchases of $50,000 or more. See "How to
Buy Fund Shares--Class A Shares."
(4) Class A purchases on or after July 1, 1996 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.
(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 the fiscal year ended January 31, 1996,
Nuveen Advisory agreed to waive all or a portion of its management fees or
reimburse certain expenses of each Fund. Nuveen Advisory has agreed to continue
its fee waivers and expense reimbursements through July 31, 1996, and it is
anticipated that Nuveen Advisory will continue its fee waivers and expense
reimbursements for some length of time thereafter.
(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 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 January 31, 1996.
4
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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>
Class A $55 $75 $98 $162
Class C $18** $55 $95 $168
Class R $ 8 $24 $42 $ 93
</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. In Florida, which presently has no state
personal income tax, Florida Fund shares are exempt from the
Florida intangible personal property tax.
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
MAY 31, 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 on or after July 1, 1996 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
MAY 31, 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 the Funds' 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 Trust.
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>
AZ
- -------------------------------------------------------------------------------------------------------------------
CLASS A
Year Ended 1/31,
1996 $ 9.930 $.503 $ .829 $(.522) $-- $10.740
9/6/94 to
1/31/95 10.030 .203 (.086) (.217) -- 9.930
CLASS C
Year Ended 1/31, 1996 9.840 .419 .830 (.439) -- 10.650
9/9/94 to
1/31/95 9.940 .169 (.052) (.217) -- 9.840
CLASS R
Year Ended 1/31,
1996 9.850 .529 .831 (.540) -- 10.670
1995 10.880 .536 (1.026) (.540) -- 9.850
1994 10.050 .531 .853 (.522) (.032) 10.880
1993 9.525 .438 .563 (.435) (.041) 10.050
12/13/91 to
1/31/92 9.525 -- -- -- -- 9.525
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 16.
10
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental data
----------------------------------------------------------------------------------
Ratio of Ratio of
Ratio of net investment net 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>
- ---------------------------------------------------------------------------------------------------
13.68% $ 3,895 1.31% 4.49% 1.00% 4.80% 5%
1.24 1,124 1.60* 4.68* 1.00* 5.28* 29
12.90 328 2.11 3.66 1.75 4.02 5
1.25 43 3.51* 2.79* 1.75* 4.55* 29
14.09 19,533 1.15 4.72 .75 5.12 5
(4.39) 16,554 1.06 5.12 .75 5.43 29
14.07 16,140 1.25 4.48 .75 4.98 11
10.71 8,026 1.75* 3.94* .75* 4.94* 43
-- 15 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment
operations Less distributions
---------------------------------------------------------------------
Net
realized and
unrealized Dividends
Net asset Net 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>
FLORIDA
CLASS A
Year ended 1/31, 1996 $ 9.730 $.488 $ .840 $(.498) $ -- $10.560
9/6/94 to
1/31/95 9.890 .193 (.148) (.202) (.003) 9.730
CLASS C
Year ended 1/31, 1996 9.730 .413 .789 (.422) -- 10.510
9/16/94 to
1/31/95 9.720 .152 .021 (.163) -- 9.730
CLASS R
Year Ended 1/31,
1996 9.750 .518 .824 (.522) -- 10.570
1995 10.740 .508 (.985) (.510) (.003) 9.750
1994 9.960 .511 .779 (.510) -- 10.740
1993 9.525 .440 .431 (.436) -- 9.960
12/13/91 to
1/31/92 9.525 -- -- -- -- 9.525
MARYLAND
CLASS A
Year ended 1/31, 1996 9.600 .483 .844 (.497) -- 10.430
9/6/94 to
1/31/95 9.840 .198 (.229) (.207) (.002) 9.600
CLASS C
Year ended 1/31, 1996 9.590 .409 .842 (.421) -- 10.420
9/15/94 to
1/31/95 9.750 .160 (.153) (.167) -- 9.590
CLASS R
Year ended 1/31,
1996 9.610 .513 .838 (.521) -- 10.440
1995 10.620 .513 (1.008) (.513) (.002) 9.610
1994 9.910 .509 .727 (.503) (.023) 10.620
1993 9.525 .442 .395 (.442) (.010) 9.910
12/13/91 to
1/31/92 9.525 -- -- -- -- 9.525
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 16.
12
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/Supplemental data
-------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of
Net assets expenses to net investment Ratio of net investment
end of average income to expenses income to
Total return period net assets average net to average net average net Portfolio
on net asset (in before assets before assets after assets after turnover
value+ thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
<S> <C> <C> <C> <C> <C> <C>
13.92% $ 5,823 1.21% 4.53% 1.00% 4.74% 21%
.52 1,392 1.56* 4.52* 1.00* 5.08* 4
12.54 168 2.16 3.62 1.75 4.03 21
1.84 78 2.84* 3.26* 1.75* 4.35* 4
14.05 55,318 .88 4.93 .75 5.06 21
(4.33) 52,538 .84 5.12 .75 5.21 4
13.22 48,254 .89 4.69 .75 4.83 3
9.33 23,727 1.24* 4.35* .75* 4.84* 1
-- 15 -- -- -- -- --
14.07 6,860 1.33 4.41 1.00 4.74 17
(.26) 1,605 1.59* 4.67* 1.00* 5.26* 35
13.24 1,438 2.06 3.73 1.75 4.04 17
.12 860 1.86* 4.44* 1.75* 4.55* 35
14.33 47,389 1.04 4.78 .75 5.07 17
(4.58) 42,741 .89 5.14 .75 5.28 35
12.71 47,822 .86 4.74 .75 4.85 4
8.96 28,283 1.02* 4.69* .75* 4.96* 20
-- 15 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment
operations Less distributions
---------------------------------------------------------------------
Net
realized and
unrealized Dividends
Net asset Net gain from net Distributions Net asset
value beginning investment (loss) from investment from value end
of period income++ investments** income capital gains of period
<S> <C> <C> <C> <C> <C> <C>
MICHIGAN
CLASS A
Year ended 1/31,
1996 $ 9.870 $.510 $ .911 $(.519) $(.032) $10.740
9/6/94 to
1/31/95 10.090 .204 (.209) (.212) (.003) 9.870
CLASS C
Year ended 1/31, 1996 9.850 .430 .922 (.440) (.032) 10.730
9/16/94 to 1/31/95 9.910 .161 (.050) (.171) -- 9.850
CLASS R
Year ended 1/31,
1996 9.880 .539 .906 (.543) (.032) 10.750
1995 10.860 .529 (.972) (.534) (.003) 9.880
1994 10.060 .531 .808 (.528) (.011) 10.860
1993 9.525 .456 .554 (.449) (.026) 10.060
12/13/91 to 1/31/92 9.525 -- -- -- -- 9.525
NEW JERSEY
CLASS A
Year ended 1/31, 1996 9.730 .519 .685 (.534) -- 10.400
9/6/94 to 1/31/95 10.030 .205 (.209) (.210) (.086) 9.730
CLASS C
Year ended 1/31, 1996 9.710 .443 .683 (.456) -- 10.380
9/21/94 to 1/31/95 9.770 .159 (.050) (.169) -- 9.710
CLASS R
Year ended 1/31,
1996 9.740 .551 .677 (.558) -- 10.410
1995 10.710 .524 (.886) (.522) (.086) 9.740
1994 9.960 .513 .810 (.513) (.060) 10.710
1993 9.525 .445 .431 (.441) -- 9.960
12/13/91 to 1/31/92 9.525 -- -- -- -- 9.525
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 16.
14
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/Supplemental data
-------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of
Net assets expenses to net investment Ratio of net investment
end of average income to expenses income to
Total return period net assets average net to average net average net Portfolio
on net asset (in before assets before assets after assets after turnover
value+ thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
<S> <C> <C> <C> <C> <C> <C>
14.68% $ 4,027 1.35% 4.52% 1.00% 4.87% 33%
.02 897 2.62* 3.68* 1.00* 5.30* 35
13.96 231 2.08 3.79 1.75 4.12 33
1.18 75 3.52* 2.76 1.75* 4.53* 35
14.93 30,126 1.05 4.87* 75 5.17 33
(3.98) 26,644 .96 5.12 75 5.33 35
13.58 25,085 1.07 4.67 75 4.99 3
10.80 14,684 1.62* 4.19* .75* 5.06* 32
-- 15 -- -- -- -- --
12.63 10,661 1.25 4.85 1.00 5.10 39
.02 2,741 1.31* 5.03* 1.00* 5.34* 32
11.80 1,065 1.96 4.16 1.75 4.37 39
1.16 4.64 2.00* 4.37* 1.75* 4.62* 32
12.88 43,304 .98 5.20 .75 5.43 39
(3.27) 39,582 .89 5.18 .75 5.32 32
13.60 36,462 .98 4.61 .75 4.84 52
9.36 16,208 1.43* 4.28* .75* 4.96* 9
-- 15 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from
investment Less
operations distributions
---------------------------------------------------------------------
Net
realized and
Net asset unrealized Dividends
value Net 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>
PA
CLASS A
Year ended 1/31,
1996 $ 9.750 $.498 $ .862 $(.510) $ -- $10.600
9/6/94 to
1/31/95 9.920 .206 (.164) (.212) -- 9.750
CLASS C
Year ended 1/31,
1996 9.650 .417 .843 (.430) -- 10.480
9/6/94 to
1/31/95 9.920 .176 (.235) (.211) -- 9.650
CLASS R
Year ended 1/31,
1996 9.730 .527 .846 (.533) -- 10.570
1995 10.810 .531 (1.077) (.534) -- 9.730
1994 10.010 .533 .807 (.534) (.006) 10.810
1993 9.525 .451 .481 (.443) (.004) 10.010
12/13/91 to
1/31/92 9.525 -- -- -- -- 9.525
VA
CLASS A
Year ended 1/31,
1996 9.760 .509 .878 (.509) (.038) 10.600
9/6/94 to
1/31/95 9.980 .201 (.207) (.214) -- 9.760
CLASS C
Year ended 1/31,
1996 9.740 .432 .868 (.432) (.038) 10.570
9/8/94 to
1/31/95 9.950 .171 (.167) (.214) -- 9.740
CLASS R
Year Ended 1/31,
1996 9.770 .537 .864 (.533) (0.38) 10.600
1995 10.740 .531 (.964) (.537) -- 9.770
1994 10.030 .529 .726 (.527) (.018) 10.740
1993 9.525 .439 .499 (.433) -- 10.030
12/13/91 to
1/31/92 9.525 -- -- -- -- 9.525
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized. For the year ended 1/31/93, the information is based on the
period beginning 2/28/92, commencement of operations.
** Net of taxes, if applicable. See note 1 of Notes to Financial
Statements in the Annual Report to Shareholders.
+ Total Return on Net Asset Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share.
++ Reflects the waiver of certain management fees and reimbursement of
certain other expenses by the Adviser. See note 7 of Notes to Financial
Statements in the Annual Report to Shareholders.
16
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/Supplemental data
-----------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of
Net assets expenses to net investment Ratio of net investment
end of average income to expenses to income to
Total return period net assets average net average net average net Portfolio
on net asset (in before assets before assets after assets after turnover
value+ thousands) reimbursement reimbursement reimbursement++ reimbursement++ rate
<S> <C> <C> <C> <C> <C> <C>
14.22% $5,817 1.30% 4.52% 1.00% 4.82% 52%
.49 1,483 1.87* 4.56* 1.00* 5.43* 74
13.27 1,101 2.14 3.70 1.75 4.09 52
(.53) 494 2.52* 3.90* 1.75* 4.67* 74
14.40 57,345 .96 4.93 .75 5.14 52
(4.94) 51,499 .91 5.27 .75 5.43 74
13.67 48,720 .94 4.82 .75 5.01 5
9.97 23,680 1.25* 4.53* .75* 5.03* 15
-- 15 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
14.50 5,874 1.20 4.73 1.00 4.93 42
.01 2,215 1.57* 4.70* 1.00* 5.27* 40
13.58 789 1.92 4.04 1.75 4.21 42
.10 378 2.20* 4.12* 1.75* 4.57* 40
14.65 59,405 .94 5.04 .75 5.23 42
(3.92) 54,791 .82 5.33 .75 5.40 40
12.78 55,773 .84 4.94 .75 5.03 7
10.04 37,196 .96* 4.71* .75* 4.92* 12
-- 15 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
17
<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 Fund share offerings;
("Nuveen") Underwriter 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>
18
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES?
MAY 31, 1996
INVESTMENT OBJECTIVE
Each Fund is The investment objective of each Fund is to provide you with
designed to as high a level of current interest income exempt from both
provide income regular federal income tax and the applicable state personal
free from income tax as is consistent, in the view of the Fund's
federal and management, with preservation of capital. In Florida, which
state personal presently has no state personal income tax, Florida Fund
income taxes shares are exempt from the Florida intangible personal
property tax. There can be no 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.
HOW THE FUNDS PURSUE THEIR OBJECTIVE
The Funds seek Nuveen Advisory believes that in any market environment there
Municipal are quality Municipal Obligations whose current price, yield,
Obligations credit quality and future prospects make them seem
considered to underpriced or exceptionally attractive when compared with
be undervalued 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.
19
<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 Each Fund will invest primarily in Municipal Obligations
Municipal issued within its respective state so that the interest
Obligationsare income on the Municipal Obligations will be exempt from both
selected as regular federal and applicable state personal income taxes.
investments? 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 will Each Fund's investment assets will consist of:
seek to . Municipal Obligations rated investment grade at the time of
purchase purchase (Baa or BBB or better by Moody's Investors
investment- Service, Inc. ("Moody's") or Standard and Poor's
grade quality Corporation ("S&P"));
Municipal . unrated Municipal Obligations of investment grade quality
Obligations in the opinion of Nuveen Advisory, limited to no more than
issued within 20% of the Fund's net assets; and
its respective . temporary investments within the limitations and for the
state 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.
20
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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 Municipal Obligations, as the term is used in this
Obligations Prospectus, are federally tax-exempt debt obligations issued
are issued by by states, cities and local authorities and by certain U.S.
states, cities possessions or territories to obtain funds for various public
and local purposes, such as the construction of public facilities, the
authorities to payment of general operating expenses and the refunding of
support a outstanding debts. They may also be issued to obtain funding
variety of for various private activities, including loans to finance
public the construction of housing, educational and medical
activities 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
21
<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.
22
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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 Each Fund will make changes in its investment portfolio from
Trading and time to time in order to take advantage of opportunities in
Turnover: 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.
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.
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
The Funds do long-term tax-exempt securities or on debt securities whose
not presently prices, in the opinion of Nuveen Advisory, correlate with the
intend to use prices of the Fund's investments. These hedging transactions
futures or are designed to limit the risk of fluctuations in the prices
options of a Fund's investments. See the Statement of Additional
Information for further information on futures and options
and associated risks.
23
<PAGE>
Other Each of the Funds has adopted certain fundamental policies
Investment intended to limit the risk of its investment portfolio. In
Policies and accordance with these policies, each Fund may not:
Restrictions:
Each Fund will . invest more than 5% of its total assets in securities of
take steps to any one issuer, except that this limitation shall not apply
ensure that to securities of the U.S. government, its agencies and
its assets are instrumentalities or to the investment of 25% of the Fund's
not assets;
concentrated . invest more than 5% of its total assets in securities of
in just a few unseasoned issuers which, together with their predecessors,
holdings have been in operation for less than three years;
. invest more than 10% of its assets in illiquid municipal
lease obligations and other securities that are
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.
24
<PAGE>
FLEXIBLE PRICING PROGRAM NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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:
<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. 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) 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
25
<PAGE>
Dealers for providing you with ongoing account services. You
may qualify for a 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
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 Each class of shares of a Fund represents an interest in the
between the same portfolio of investments. Each class of shares of a Fund
classes of is identical in all respects except that each class has its
shares own sales charge structure, each class bears its own class
expenses, including service and distribution fees, 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, 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 Upon notice to all Authorized Dealers, Nuveen may reallow to
Incentives 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.
26
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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.
27
<PAGE>
HOW TO BUY FUND SHARES
CLASS A SHARES
Class A Shares You may purchase Class A Shares of any Fund at a public
are normally offering price equal to the applicable net asset value per
offered at share plus an up-front sales charge imposed at the time of
their net purchase as set forth below. You may qualify for a reduced
asset value sales charge, or the sales charge may be waived in its
plus an up- entirety, as described below under "How the Up-Front Sales
front sales Charge on Class A Shares May Be Reduced or Waived." Class A
charge Shares are also subject to an annual service fee of .25%. See
"Flexible Pricing Program" and "Distribution and Service
Plan."
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 1.00% 1.01% 1.00%
$2,500,000 but less than $5,000,000 0.75% 0.76% 0.75%
$5,000,000 but less than $7,500,000 0.50% 0.50% 0.50%
$7,500,000 and over 0.00% 0.00% 0.00%
</TABLE>
Class A Share Effective July 1, 1996, Class A Share purchases of $1 million
purchases of or more will be sold at net asset value without an up-front
$1 million and sales charge. Nuveen will pay Authorized Dealers of record on
over may be such Class A Share purchases a commission of up to .75% of
effected the amount of the purchase. The investor agrees to pay to
without an Nuveen a CDSC of 1% of the purchase price or the redemption
up-front sales proceeds, whichever is less, if such shares are redeemed
charge but be within 18 months of purchase. Shares purchased by investors
subject to a investing $1 million or more who have made arrangements with
CDSC Nuveen and whose dealer of record waived the commission will
not be subject to the CDSC.
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.
28
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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 ways to There are several ways to reduce or eliminate the up-front
reduce or sales charge:
eliminatethe
sales charge . cumulative discount;
. letter of intent;
. purchases with monies representing distribution 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.
You may qualify for a reduced sales charge as shown above on
Cumulative a purchase of Class A Shares of any Fund if the amount of
Discount 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.
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
29
<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.
30
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
If you are a member of a qualified group, you may purchase
Group Purchase Class A Shares of any Fund or of another Nuveen Mutual Fund
Programs 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.
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.
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,
trustees and retired trustees 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 (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
31
<PAGE>
through subsidiaries or bank affiliates; bank or broker-
affiliated trust departments; clients of broker-dealers that
sponsor mutual fund purchase programs 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 determining the amount of your purchases of Class A Shares
In General 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.
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.
32
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
CLASS C SHARES
Class C Shares You may purchase Class C Shares of any Fund at a public
may be purchased offering price equal to the applicable net asset value per
at their net share without any up-front sales charge. Class C Shares are
asset value, and subject to an annual distribution fee to reimburse Nuveen for
are subject to costs incurred in connection with the sale of Class C Shares.
an annual Class C Shares are also subject to an annual service fee to
distribution fee compensate Authorized Dealers for providing you with ongoing
financial advice and other services. See "Distribution and
Service Plans."
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 load,
fee, or other charge, so that the value of each shareholder's
account immediately before conversion will be the same as the
value of the account immediately after conversion. Class 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.
33
<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. You may purchase Class R Shares if you are making a
purchase of $1 million or more of Fund shares in a single
transaction (on or after July 1, 1996). 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, trustees and retired trustees
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; clients of broker-dealers that sponsor
mutual fund purchase programs 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.
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 financial advice and other
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.
34
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
INITIAL AND SUBSEQUENT PURCHASES OF SHARES
The Funds You may buy Fund shares through Authorized Dealers or by
offer a number directing your financial adviser to call Nuveen toll-free at
of convenient 800.843.6765. You may pay for your purchase by Federal
ways to Reserve draft or by check made payable to "Nuveen [name of
purchase state] Tax-Free Value Fund, Class [A], [C], [R]," delivered
shares to the financial adviser through whom the investment is to be
made for forwarding to the Funds' shareholder 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 the close of trading (currently
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
35
<PAGE>
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 makets before deciding to invest in this way.
The chart below shows the cumulative effect that compound
interest can have on a systematic investment program.
The Power of a
Systematic
Investment
Program
[CHART APPEARS HERE]
PLOT POINTS FOR CHART:
INVESTED COMPOUNDED COMPOUNDED COMPOUNDED
YEAR PRINCIPAL 4% 5% 6%
-----------------------------------------------------------
1 $ 1.000 $ 1.003 $ 1.004 $ 1.005
2 $ 2.200 $ 2.271 $ 2.289 $ 2.307
3 $ 3.400 $ 3.589 $ 3.639 $ 3.689
4 $ 4.600 $ 4.962 $ 5.058 $ 5.156
5 $ 5.800 $ 6.390 $ 6.550 $ 6.714
6 $ 7.000 $ 7.877 $ 8.118 $ 8.367
7 $ 8.200 $ 9.424 $ 9.766 $10.123
8 $ 9.400 $11.035 $11.499 $11.987
9 $10.600 $12.710 $13.320 $13.966
10 $11.800 $14.455 $15.234 $16.068
11 $13.000 $16.270 $17.247 $18.298
12 $14.200 $18.159 $19.362 $20.667
13 $15.400 $20.125 $21.586 $23.181
14 $16.600 $22.171 $23.923 $25.851
15 $17.800 $24.301 $26.380 $28.685
16 $19.000 $26.517 $28.963 $31.694
17 $20.200 $28.824 $31.678 $34.888
18 $21.400 $31.225 $34.531 $38.280
19 $22.600 $33.723 $37.531 $41.880
20 $23.800 $36.324 $40.684 $45.703
SOURCE: NUVEEN MARKETING RESEARCH DEPARTMENT
In the above example, it is assumed that $100 is added to an
investment account every month for 15 years. From the same
$1,000 beginning, the chart shows the
36
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
amount that would be in the account after 15 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 15-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 a significant impact on the total value of
your investment. Similarly, this example shows four steady
interest rates over the entire 15-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 Once you have established a Fund account in one of the Funds,
Deposit Plan 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.
Payroll Once you have established a Fund account in one of the Funds,
Direct Deposit 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.
OTHER SHAREHOLDER PROGRAMS
Exchange
Privilege You may exchange shares of a class of any Fund you own for
shares of the same or equivalent class of another Fund or for
shares of another Nuveen Mutual Fund with reciprocal exchange
privileges, at net asset value without a sales charge, by
sending a
37
<PAGE>
written request to the applicable Fund, c/o Shareholder
Services, Inc., P.O. Box 5330, Denver, CO 80217-5330.
Similarly, Class A, Class C and Class R Shares of another
Nuveen Mutual Fund may be exchanged for the same class of
shares of any Fund at net asset value without a sales charge.
Exchanges of shares from any Nuveen money market fund will be
made into Class A Shares, Class C Shares or Class R Shares of
any Fund at the public offering price, which includes an up-
front sales charge in the case of Class A 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.
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 any Fund for
Class A Shares of the same Fund without a sales charge if the
current net asset value of those Class R Shares is at least
$1,000 or you already own Class A Shares of that Fund.
The exchange privilege is not intended to permit the Funds to
be used as a vehicle 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
38
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
management believes doing so would be in the best interest of
the Fund, the Fund reserves 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 a Fund or Class A
Privilege Shares of any other Nuveen Mutual Fund that were subject to a
sales charge, 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.
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.
Fund Direct privileges must be requested via an 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 charging 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.
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.
39
<PAGE>
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.
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 Nuveen Multistate Tax-Free Trust
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.
40
<PAGE>
DISTRIBUTION AND SERVICE PLAN NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
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 Trustees.
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 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.
41
<PAGE>
HOW TO REDEEM FUND SHARES
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 on or after July 1, 1996 because
the purchase amount exceeded $1 million, where the Authorized
Dealer did not waive the sales commission, a CDSC of 1% is
imposed on any redemption within 18 months of purchase. Class
C Shares are redeemed at net asset value, without any CDSC,
except that a CDSC of 1% is imposed upon redemption of Class
C Shares that are redeemed within 12 months of purchase. See
"How to Buy Fund Shares--Class C Shares." 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. 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 You may redeem shares by sending a written request for
Request 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
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
42
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
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. For accounts
registered in the name of a broker-dealer, payment will be
forwarded within three business days. 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 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 check will normally be mailed on the second business
day after the request.
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 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 made as of
4:00 p.m. the following business 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-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 telephone redemption
authorization section of the enclosed Application Form or the
Fund Direct Application Form and return it to Nuveen or
43
<PAGE>
SSI. If you did not authorize telephone redemption when you
opened your account, you may obtain a telephone 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 Fund. 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 first net asset
value 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
charges 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 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.
44
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
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 may be
disadvantageous because the newly-purchased Class C Shares
may be subject to the 1% CDSC.
Each Fund may suspend the right of redemption of Fund shares
General 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.
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.
45
<PAGE>
MANAGEMENT OF THE FUNDS
The management of the Trust, including general supervision of
Board of the duties performed for each Fund by Nuveen Advisory under
Trustees the Investment Management Agreement, is the responsibility of
its Board of Trustees.
Nuveen Advisory acts as the investment adviser for and
Investment manages the investment and reinvestment of the assets of each
Adviser 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 trustees or
officers of the Nuveen Multistate Tax-Free Trust if elected
to such positions.
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.
46
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
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 Multistate Tax-Free
Trust'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
the fiscal year ended January 31, 1996, Nuveen Advisory
agreed to waive all or a portion of its management fees or
reimburse certain expenses of each Fund. Nuveen Advisory has
agreed to continue its fee waivers and expense reimbursements
through July 31, 1996, and it is anticipated that Nuveen
Advisory will continue its fee waivers and expense
reimbursements for some length of time thereafter. For
information regarding the management fees and total operating
expenses of each class of shares of each of the Funds for the
year ended January 31, 1996, see the tables under "Summary of
Fund Expenses" on page 3 of this Prospectus.
Overall portfolio management strategy for the Funds is
Portfolio determined by Nuveen Advisory under the general supervision
Management and direction of Thomas C. Spalding, Jr., a Vice President of
the 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.
47
<PAGE>
The day-to-day management of the Arizona Fund is the
responsibility of Steven J. Krupa, a Vice President of Nuveen
Advisory and portfolio manager of the Arizona Fund since its
inception on December 13, 1991. He currently manages 8
Nuveen-sponsored investment companies. See the Statement of
Additional Information for further information about Mr.
Krupa.
The day-to-day management of the Florida Fund is the
responsibility of J. Thomas Futrell, a Vice President of
Nuveen Advisory since February 1991 and portfolio manager of
the Florida Fund since its inception on December 13, 1991. He
currently manages 7 Nuveen-sponsored investment companies.
See the Statement of Additional Information for further
information about Mr. Futrell.
The day-to-day management of the Maryland and Michigan Funds
is the responsibility of Edward F. Neild IV, an Assistant
Vice President of Nuveen Advisory since 1993 and portfolio
manager of the Maryland and Michigan Funds since their
commencement of operations on February 28, 1992. Mr. Neild
joined Nuveen Advisory in February 1992 and was an Assistant
Portfolio Manager until December 1993. Prior to joining
Nuveen Advisory he was an Associate with Nuveen Institutional
Advisory Corp. Mr. Neild currently manages 6 Nuveen-sponsored
investment companies.
The day-to-day management of the New Jersey Fund is the
responsibility of Stephen S. Peterson, an Assistant Portfolio
Manager of Nuveen Advisory since October 1991 and portfolio
manager of the New Jersey Fund since its inception on
December 13, 1991. Prior to joining Nuveen Advisory, he was
an analyst in Nuveen's Research Department. Mr. Peterson
currently manages 9 Nuveen-sponsored investment companies.
The day-to-day management of the Pennsylvania Fund is the
responsibility of Thomas J. O'Shaughnessy, an Assistant
Portfolio Manager of Nuveen Advisory since 1991 and portfolio
manager of the Pennsylvania Fund since its inception on
December 13, 1991. Prior to joining Nuveen Advisory in 1991,
Mr. O'Shaughnessy was employed by Nuveen as an underwriter in
the Municipal Underwriting Department, and prior thereto as a
pricing analyst in the Unit Investment Trust Pricing
Department. Mr. O'Shaughnessy currently manages 7 Nuveen-
sponsored investment companies.
48
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
The day-to-day management of the Virginia Fund is the
responsibility of William M. Fitzgerald, a Vice President of
Nuveen Advisory since December 1995, an Assistant Vice
President of Nuveen Advisory between July 1993 and December
1995 and portfolio manager of the Virginia Fund since its
inception on December 13, 1991. Prior thereto, he was
employed by Nuveen Advisory as an Assistant Portfolio
Manager. Mr. Fitzgerald currently manages 9 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 which 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 Trust's Board of Trustees.
49
<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 YIELD is a standardized measure of the net investment income
Information earned over a specified 30-day period, expressed as a
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
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Date Taxable Money Taxable Equivalent 6-Month CDs 30-Year Treasury
<S> <C> <C> <C> <C>
3/86 0.0696 0.1127 0.0716 0.0778
3/87 0.0539 0.1061 0.0567 0.0755
3/88 0.0605 0.1234 0.0636 0.0877
3/89 0.0892 0.1194 0.0902 0.0916
3/90 0.0766 0.1145 0.0772 0.0858
3/91 0.0609 0.1116 0.0643 0.0825
3/92 0.0373 0.1058 0.045 0.0797
3/93 0.027 0.0903 0.0323 0.0683
3/94 0.0286 0.0948 0.041 0.0709
3/95 0.0551 0.0948 0.0642 0.0745
3/96 0.0476 0.0922 0.0543 0.0635
Sources: Bond Buyer, BANXQUOTE, IBC/Donoghue Inc., Dow Jones News Retrieval.
</TABLE>
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
50
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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.
AVERAGE ANNUAL TOTAL RETURN and CUMULATIVE TOTAL RETURN
Total Return figures for a specified period measure both the net
Information 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.
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.
51
<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.
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.
52
<PAGE>
DISTRIBUTIONS AND TAXES
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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 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 the Trust 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
Trustees of the Trust 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
53
<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 under Subchapter M of the
Tax: Internal Revenue Code of 1986, as amended (the "Code"), for
Income tax treatment as a regulated investment company. In order to
dividends are qualify for treatment as a regulated investment company, a
free from Fund must satisfy certain requirements relating to the
regular sources of its income, diversification of its assets and
federal income distribution of its income to shareholders. As a regulated
tax 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.
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.
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 will be 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.
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.
54
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
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 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
55
<PAGE>
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.
Under the laws of the respective state of each Fund,
State Income dividends you receive from income earned by the Fund on
Tax Matters: Municipal Obligations issued by the Fund's respective state
or a political subdivision thereof will be exempt from that
state's applicable personal income tax. The exemption from
Dividends are state personal income tax applies whether you receive a
free from Fund's dividends in cash or reinvest them in additional
applicable shares of the Fund. Dividends paid by a Fund representing
state personal interest payments on particular categories of Municipal
income tax Obligations may, under some circumstances, also be exempt
from income taxes imposed by political subdivisions of that
Fund's respective state. In Florida, which presently has no
state personal income tax, Florida Fund shares are exempt
from the Florida intangible personal property tax.
See Appendix A to this Prospectus and the Statement of
Additional Information for further information concerning the
effect of applicable state personal income taxes, state
intangibles taxes and state corporate income taxes.
56
<PAGE>
NET ASSET VALUE
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 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 Trustees. 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
the Trust under the general supervision of its Board of
Trustees.
57
<PAGE>
GENERAL INFORMATION
If you have any questions about the Trust, 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 Funds' transfer, shareholder services and dividend paying
Services Agent agent, Shareholder Services, Inc., P.O. Box 5330, Denver, CO
80217-5330, performs bookkeeping, data processing and
administrative services for the maintenance of shareholder
accounts.
The Trust is an open-end diversified management series
Organization investment company under the Investment Company Act of 1940.
Each Fund constitutes a separate series of the Trust and is
itself an open-end diversified management mutual fund. The
Trust was organized as a Massachusetts business trust on July
26, 1991, pursuant to a Declaration of Trust. The Board of
Trustees of the Trust is authorized to issue an unlimited
number of shares, $.01 par value, representing interests in
separate series of the Trust. The Trust currently has seven
authorized series: the Nuveen Arizona Tax-Free Value Fund,
the Nuveen Florida Tax-Free Value Fund, the Nuveen Maryland
Tax-Free Value Fund, the Nuveen Michigan Tax-Free Value Fund,
the Nuveen New Jersey Tax-Free Value Fund, the Nuveen
Pennsylvania Tax-Free Value Fund and the Nuveen Virginia Tax-
Free Value Fund. The shares of each series of the Trust 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.
These are no conversion, preemptive or other subscription
rights, except that Class C Shares of a Fund automatically
convert to Class A Shares of the same Fund, as described
above. The Board of Trustees 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.
58
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
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 Trustees or for any other purpose.
The Trust is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its
obligations. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or
obligations of the Trust and requires that notice of this
disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust further provides for
indemnification out of the assets and property of the Trust
for all loss and expense of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself was
unable to meet its obligations. The Trust believes the
likelihood of these circumstances is remote.
59
<PAGE>
APPENDIX A--SPECIAL STATE FACTORS, STATE TAX TREATMENT AND
TAXABLE EQUIVALENT YIELD TABLES
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.
DESCRIPTION OF STATE TAX TREATMENT
The following state tax information applicable to each Fund
and its shareholders is based upon the advice of each 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 the Code, and that
amounts so designated by each Fund to its shareholders
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.
A-1
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
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. 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.
A-2
<PAGE>
ARIZONA
Special Arizona is the nation's sixth largest state in terms of area.
factors: Arizona's main economic sectors are services, tourism and
manufacturing. The unemployment rate in Arizona for 1995 was
5.1% and for 1994 was 6.3%. Slower construction and real
estate activity is at the heart of the current weakness in
the State's financial sector. In recent years, revenue and
budgeted expenditures for the State and its political
subdivisions have been limited due to reduced federal funds
for states, by Constitutional restrictions on ad valorem
taxes and by adverse economic conditions.
Description of Exempt-interest dividends attributable to Arizona Municipal
state tax Obligations will be exempt from Arizona income tax when
treatment received by a shareholder of the Arizona Fund to the same
extent as if interest on such Obligations were received
directly by the shareholder. Other dividends by the Arizona
Fund, including capital gain distributions, if any, or
additional amounts includable in the gross income of the
shareholders for federal income tax purposes (including gains
realized upon the redemption or exchange of shares of the
Arizona Fund) will be subject to Arizona income tax.
Combined 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 - $ 0 -
40.1 118.0 18.0% 4.27 4.88 5.49 6.10 6.71 7.32 7.93
40.1 -
96.9 0 - 118.0 31.0 5.07 5.80 6.52 7.25 7.97 8.70 9.42
118.0 -
177.0 32.0 5.15 5.88 6.62 7.35 8.09 8.82 9.56
96.9 -
147.7 0 - 118.0 34.5 5.34 6.11 6.87 7.63 8.40 9.16 9.92
118.0 -
177.0 35.5 5.43 6.20 6.98 7.75 8.53 9.30 10.08
177.0 -
299.5 38.0 5.65 6.45 7.26 8.06 8.87 9.68 10.48
147.7 - 118.0 -
263.8 177.0 40.5 5.88 6.72 7.56 8.40 9.24 10.08 10.92
177.0 -
299.5 43.0 6.14 7.02 7.89 8.77 9.65 10.53 11.40
Over 299.5 40.5 5.88 6.72 7.56 8.40 9.24 10.08 10.92
177.0 -
Over 263.8 299.5 47.5 6.67 7.62 8.57 9.52 10.48 11.43 12.38
Over 299.5 44.0 6.25 7.14 8.04 8.93 9.82 10.71 11.61
</TABLE>
A-3
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
ARIZONA-CONTINUED
Combined marginal tax rates for single taxpayers with one
personal exemption.
<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 - $ 0 -
24.0 118.0 18.0% 4.27 4.88 5.49 6.10 6.71 7.32 7.93
24.0 -
58.2 0 - 118.0 31.5 5.11 5.84 6.57 7.30 8.03 8.76 9.49
58.2 -
121.3 0 - 118.0 34.5 5.34 6.11 6.87 7.63 8.40 9.16 9.92
118.0 -
240.5 36.0 5.47 6.25 7.03 7.81 8.59 9.38 10.16
121.3 - 118.0 -
263.8 240.5 41.5 5.98 6.84 7.69 8.55 9.40 10.26 11.11
Over 240.5 40.5 5.88 6.72 7.56 8.40 9.24 10.08 10.92
Over 263.8 Over 240.5 44.0 6.25 7.14 8.04 8.93 9.82 10.71 11.61
</TABLE>
<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 $37,429 $32,750 $29,111 $26,200 $23,818 $21,833 $20,154
$50,000 in a 5% taxable
investment 46,786 40,938 36,389 32,750 29,773 27,292 25,192
$50,000 in a 6% taxable
investment 56,143 49,125 43,667 39,300 35,727 32,750 30,231
$50,000 in a 7% taxable
investment 65,500 57,313 50,944 45,850 41,682 38,208 35,269
$50,000 in a 8% taxable
investment 74,857 65,500 58,222 52,400 47,636 43,667 40,308
</TABLE>
*The dollar amounts in the table reflect a 34.5% combined
federal and state tax rate.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $39,300 in a 5% tax-free Nuveen
investment.
A-4
<PAGE>
FLORIDA
Special
factors: Florida is the nation's fourth most populous state, and has
averaged 2.3% annual population growth over the last decade.
National demographic trends may slow Forida's population
growth over the next decade, however. Tourism continues its
recent slight decline, but is expected to increase by 4.3% in
1996-97. Florida's unemployment rate is currently projected
to be 5.9% in both 1995-96 and 5.7% in 1996-97. The State's
Constitution mandates a balanced budget. Florida retains a
bond rating of Aa and AA from Moody's and S&P, respectively,
on the majority of its general obligation bonds.
Florida does not impose an income tax on individuals. Neither
Description of the Florida Fund nor its shareholders will be subject to the
state tax Florida intangible personal property tax on the Florida
treatment Municipal Obligations or the shares of the Florida Fund,
respectively, with respect to any calendar year so long as at
the close of the preceding calendar year and on January 1 of
the then current year, the Florida Fund's portfolio assets
consist solely of Florida Municipal Obligations or other
assets exempt from the Florida intangible personal property
tax. Corporate shareholders may be subject to corporate
income tax.
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 - $ 0 -
40.1 118.0 15.0% 4.12 4.71 5.29 5.88 6.47 7.06 7.65
40.1 -
96.9 0 - 118.0 28.0 4.86 5.56 6.25 6.94 7.64 8.33 9.03
118.0 -
177.0 29.0 4.93 5.63 6.34 7.04 7.75 8.45 9.15
96.9 -
147.7 0 - 118.0 31.0 5.07 5.80 6.52 7.25 7.97 8.70 9.42
118.0 -
177.0 32.0 5.15 5.88 6.62 7.35 8.09 8.82 9.56
177.0 -
299.5 34.5 5.34 6.11 6.87 7.63 8.40 9.16 9.92
147.7 - 118.0 -
263.8 177.0 37.0 5.56 6.35 7.14 7.94 8.73 9.52 10.32
177.0 -
299.5 40.0 5.83 6.67 7.50 8.33 9.17 10.00 10.83
Over 299.5 37.0 5.56 6.35 7.14 7.94 8.73 9.52 10.32
177.0 -
Over 263.8 299.5 44.0 6.25 7.14 8.04 8.93 9.82 10.71 11.61
Over 299.5 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
</TABLE>
A-5
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
FLORIDA-CONTINUED
Marginal tax rates for single taxpayers with one personal
exemption.
<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 - $ 0 -
24.0 118.0 15.0% 4.12 4.71 5.29 5.88 6.47 7.06 7.65
24.0 -
58.2 0 - 118.0 28.0 4.86 5.56 6.25 6.94 7.64 8.33 9.03
58.2 -
121.3 0 - 118.0 31.0 5.07 5.80 6.52 7.25 7.97 8.70 9.42
118.0 -
240.5 32.5 5.19 5.93 6.67 7.41 8.15 8.89 9.63
121.3 - 118.0 -
263.8 240.5 38.0 5.65 6.45 7.26 8.06 8.87 9.68 10.48
Over 240.5 37.0 5.56 6.35 7.14 7.94 8.73 9.52 10.32
Over 263.8 Over 240.5 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
</TABLE>
<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 $39,429 $34,500 $30,667 $27,600 $25,091 $23,000 $21,231
$50,000 in a 5% taxable
investment 49,286 43,125 38,333 34,500 31,364 28,750 26,538
$50,000 in a 6% taxable
investment 59,143 51,750 46,000 41,400 37,636 34,500 31,846
$50,000 in a 7% taxable
investment 69,000 60,375 53,667 48,300 43,909 40,250 37,154
$50,000 in a 8% taxable
investment 78,857 69,000 61,333 55,200 50,182 46,000 42,462
</TABLE>
*The dollar amounts in the table reflect a 31.0% federal tax
rate.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $41,400 in a 5% tax-free Nuveen
investment.
A-6
<PAGE>
MARYLAND
Special The State's total expenditures for the fiscal years ending
factors: June 30, 1993, June 30, 1994 and June 30, 1995 were
approximately $11.8 billion, $12.3 billion and $13.5 billion,
respectively. As of February 14, 1996, it was estimated that
total expenditures for fiscal year 1996 would be
approximately $14.6 billion. The original appropriation for
expenditures in fiscal year 1996 is approximately $14.4
billion. The State's General Fund, representing approximately
55%-60% of each year's total budget, had an unreserved
surplus on a budgetary basis of $10.5 million in fiscal year
1993, an unreserved surplus of $60 million in fiscal year
1994 and an unreserved surplus of $132.5 million in fiscal
year 1995. When the fiscal year 1996 budget was enacted, it
was estimated that the general fund unreserved surplus on a
budgetary basis at June 30, 1996 would be approximately $7.8
million; as of February 14, 1996 it was estimated that the
unreserved surplus in the general fund at June 30, 1996 will
be $1 million. In addition, on December 12, 1995 the Board of
Revenue Estimates lowered the estimate of fiscal year 1996
general fund revenues by $92 million. To address this
shortfall, the Governor has proposed to reduce fiscal year
1996 appropriations by $26 million and to simultaneously
obtain additional moneys for the general fund from other
available sources. The State Constitution mandates a balanced
budget. The State of Maryland maintains a bond rating of Aaa
and AAA from Moody's and S&P, respectively, on its general
obligation bonds.
Description of Exempt-interest dividends that are derived from interest
state tax received by the Maryland Fund on obligations (a) of Maryland
treatment or its political subdivisions and authorities or (b) of the
United States or an authority, commission, instrumentality,
possession or territory of the United States will be exempt
from Maryland state and local income taxes when allocated or
distributed to a shareholder of the Maryland Fund. Likewise,
gain realized from the sale or exchange of bonds issued by
Maryland or its political subdivisions will be exempt from
Maryland income taxes. Income from any other sources, such as
interest received by the Maryland Fund on obligations issued
by states other than Maryland, income earned on repurchase
contracts and gain realized by a shareholder from a
redemption or exchange of Maryland Fund shares will be
subject to Maryland state and local income taxes.
A-7
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
MARYLAND-CONTINUED
Combined marginal tax rates for joint taxpayers with four
personal exemptions.
<TABLE>
<CAPTION>
Tax-free yield
------------------------------------------------------------------------
3.00% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
------------------------------------------------------------------------
Federal Combined
Federal adjusted county
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 21.5% 3.82 5.10 5.73 6.37 7.01 7.64 8.28
40.1 -
96.9 0 - 118.0 33.5 4.51 6.02 6.77 7.52 8.27 9.02 9.77
118.0 -
177.0 34.5 4.58 6.11 6.87 7.63 8.40 9.16 9.92
96.9 -
147.7 0 - 118.0 36.0 4.69 6.25 7.03 7.81 8.59 9.38 10.16
118.0 -
177.0 37.0 4.76 6.35 7.14 7.94 8.73 9.52 10.32
177.0 -
299.5 39.5 4.96 6.61 7.44 8.26 9.09 9.92 10.74
147.7 - 118.0 -
263.8 177.0 42.0 5.17 6.90 7.76 8.62 9.48 10.34 11.21
177.0 -
299.5 44.5 5.41 7.21 8.11 9.01 9.91 10.81 11.71
Over 299.5 42.0 5.17 6.90 7.76 8.62 9.48 10.34 11.21
177.0 -
Over 263.8 299.5 48.5 5.83 7.77 8.74 9.71 10.68 11.65 12.62
Over 299.5 45.5 5.50 7.34 8.26 9.17 10.09 11.01 11.93
</TABLE>
A-8
<PAGE>
MARYLAND-CONTINUED
Combined marginal tax rates for single taxpayers with one
personal exemption.
<TABLE>
<CAPTION>
Tax-free yield
------------------------------------------------------------------------
3.00% 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 - $ 0 -
24.0 118.0 21.5% 3.82 5.10 5.73 6.37 7.01 7.64 8.28
24.0 -
58.2 0 - 118.0 33.5 4.51 6.02 6.77 7.52 8.27 9.02 9.77
58.2 -
121.3 0 - 118.0 36.0 4.69 6.25 7.03 7.81 8.59 9.38 10.16
118.0 -
240.5 38.0 4.84 6.45 7.26 8.06 8.87 9.68 10.48
121.3 - 118.0 -
263.8 240.5 42.5 5.22 6.96 7.83 8.70 9.57 10.43 11.30
Over 240.5 42.0 5.17 6.90 7.76 8.62 9.48 10.34 11.21
Over 263.8 Over 240.5 45.5 5.50 7.34 8.26 9.17 10.09 11.01 11.93
</TABLE>
<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 assumes that federal taxable income is equal to
state and county income subject to tax. These tables approxi-
mate the effect of the exemption of distributions of tax-ex-
empt income from the Maryland Trust from county taxes, assum-
ing a rate equal to 50% of the applicable Maryland state in-
come tax rate. The maximum county income tax rate allowed un-
der state law is 60% of the Maryland state rate, and counties
may impose a county tax at a rate that is less than 60% of
the Maryland state rate. Maryland local income taxes imposed
by most counties are equal to 50%-60% of the state income tax
liability.
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.
A-9
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
MICHIGAN
Special
factors: Michigan ended fiscal year 1994-95, which ended September 30,
1995, with an $84.5 million surplus, $56.8 million of which
will be transferred to the State's Budget and Economic
Stabilization Fund which had a $1,003.2 million year-end
balance. Currently, Michigan's general obligation bonds are
rated Aa by Moody's and AA by S&P and Fitch Investors
Service, Inc.
Under the Michigan income tax act, the Michigan single
Description of business tax act, the Michigan intangibles tax act, the
state tax Michigan city income tax act (which authorizes the only
treatment income tax ordinance that may be adopted by cities in
Michigan), and under the law which authorizes a "first class"
school district to levy an excise tax upon income, the
Michigan Fund is not subject to tax. Distributions received
by shareholders with respect to Michigan Fund shares that are
derived from interest on Michigan Municipal Obligations will
be exempt from Michigan state and local income taxes and
Michigan intangibles tax. For Michigan income and intangible
tax purposes, the proportionate share of distributions from
the Michigan Fund's net investment income derived from other
than Michigan Municipal Obligations and from any short-term
or long-term capital gains, together with any gain or loss
realized when a shareholder redeems or exchanges shares of
the Michigan Fund, will be included in Michigan taxable
income and will be included in the taxable income base of the
Michigan intangibles tax, except that distributions from net
investment income or capital gains reinvested in Michigan
Fund shares are exempt from such tax.
A-10
<PAGE>
MICHIGAN-CONTINUED
Combined 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 - $ 0 -
40.1 118.0 20.0% 4.38 5.00 5.63 6.25 6.88 7.50 8.13
40.1 -
96.9 0 - 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 -
147.7 0 - 118.0 35.0 5.38 6.15 6.92 7.69 8.46 9.23 10.00
118.0 -
177.0 36.0 5.47 6.25 7.03 7.81 8.59 9.38 10.16
177.0 -
299.5 38.5 5.69 6.50 7.32 8.13 8.94 9.76 10.57
147.7 - 118.0 -
263.8 177.0 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
177.0 -
299.5 43.5 6.19 7.08 7.96 8.85 9.73 10.62 11.50
Over 299.5 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
177.0 -
Over 263.8 299.5 47.5 6.67 7.62 8.57 9.52 10.48 11.43 12.38
Over 299.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
</TABLE>
A-11
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
MICHIGAN-CONTINUED
Combined marginal tax rates for single taxpayers with one
personal exemption.
<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 - $ 0 -
24.0 118.0 20.0% 4.38 5.00 5.63 6.25 6.88 7.50 8.13
24.0 -
58.2 0 - 118.0 32.5 5.19 5.93 6.67 7.41 8.15 8.89 9.63
58.2 -
121.3 0 - 118.0 35.0 5.38 6.15 6.92 7.69 8.46 9.23 10.00
118.0 -
240.5 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
121.3 - 118.0 -
263.8 240.5 41.5 5.98 6.84 7.69 8.55 9.40 10.26 11.11
Over 240.5 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
Over 263.8 Over 240.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
</TABLE>
<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 $36,286 $31,750 $28,222 $25,400 $23,091 $21,167 $19,538
$50,000 in a 5% taxable
investment 45,357 39,688 35,278 31,750 28,864 26,458 24,423
$50,000 in a 6% taxable
investment 54,429 47,625 42,333 38,100 34,636 31,750 29,308
$50,000 in a 7% taxable
investment 63,500 55,563 49,389 44,450 40,409 37,042 34,192
$50,000 in a 8% taxable
investment 72,571 63,500 56,444 50,800 46,182 42,333 39,077
</TABLE>
*The dollar amounts in the table reflect a 36.5% combined
federal and state tax rate.
**The combined rate for Michigan includes both the 4.4 per-
cent individual income tax rate and the 1.75 percent intangi-
ble tax rate, because the intangible tax is generally based
on income received from intangibles.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $38,100 in a 5% tax-free Nuveen
investment.
A-12
<PAGE>
NEW JERSEY
Special
factors: New Jersey is the ninth largest state in population and the
fifth smallest in land area. In 1994 New Jersey ranked second
among all states in per capita personal income. New Jersey's
economic base is diversified, consisting of a variety of
manufacturing, construction and service industries. The
national recession adversely affected employment in New
Jersey; the unemployment rate increased from 3.6% in early
1989 to 6.6% in April 1996. There was a surplus in the
general fund of $1 million at the end of fiscal year 1990,
$1.4 million at the end of fiscal year 1991, $760.8 million
at the end of fiscal year 1992, $937.4 million at the end of
fiscal year 1993, $926.0 million at the end of fiscal year
1994, and it is estimated that New Jersey closed its fiscal
year 1995 with a surplus of approximately $569 million. In
1990 and 1991, increases in New Jersey sales and use tax and
income tax took effect in order to increase revenue from
those sources, although there have been recent reductions in
both the sales and use tax and the income tax. Currently,
Moody's rates New Jersey general obligation bonds Aa1, and
S&P rates them AA+. See the Statement of Additional
Information for further information relating to fiscal and
revenue matters affecting the State.
Individual shareholders of the New Jersey Fund, including
Description of trusts and estates, who are subject to the New Jersey Gross
state tax Income Tax will not be required to include in their New
treatment Jersey gross income (1) distributions from the New Jersey
Fund which the New Jersey Fund clearly identifies as directly
attributable to interest or gains from New Jersey Municipal
Obligations, obligations of the United States or any other
obligations the interest and gain on which is exempt from New
Jersey Gross Income Tax under New Jersey law or Federal law,
and (2) net gains attributable to the redemption or exchange
of New Jersey Fund shares, provided that the New Jersey Fund
qualifies as a "qualified investment fund." Qualified
investment funds include, among others, any registered
investment company or series thereof (such as the New Jersey
Fund), which invests at least 80% of its assets, excluding
cash and certain hedging transactions, in the obligations
described above, and which has no investments other than
interest-bearing or discounted obligations, cash and certain
hedging transactions. A corporate shareholder, including an S
corporation, subject to the New Jersey Corporation Business
Tax or the New Jersey Corporation Income Tax will be required
to include in its entire net income distributions of interest
or gain, or both, from the New Jersey Fund, less any interest
expense incurred to carry such investment to the extent such
interest expense has not been deducted in computing Federal
taxable income, and net gain derived on the redemption or
exchange of New Jersey Fund shares.
A-13
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
NEW JERSEY-CONTINUED
Combined marginal tax rates for joint taxpayers with four
personal exemptions.
<TABLE>
<CAPTION>
Tax-Free Yield
------------------------------------------------------------------------
3.00% 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 - $ 0 -
40.1 118.0 16.5% 3.59 4.79 5.39 5.99 6.59 7.19 7.78
40.1 -
96.9 0 - 118.0 32.0 4.41 5.88 6.62 7.35 8.09 8.82 9.56
118.0 -
177.0 33.0 4.48 5.97 6.72 7.46 8.21 8.96 9.70
96.9 -
147.7 0 - 118.0 35.0 4.62 6.15 6.92 7.69 8.46 9.23 10.00
118.0 -
177.0 35.5 4.65 6.20 6.98 7.75 8.53 9.30 10.08
177.0 -
299.5 38.0 4.84 6.45 7.26 8.06 8.87 9.68 10.48
147.7 - 118.0 -
263.8 177.0 41.0 5.08 6.78 7.63 8.47 9.32 10.17 11.02
177.0 -
299.5 44.0 5.36 7.14 8.04 8.93 9.82 10.71 11.61
Over 299.5 41.0 5.08 6.78 7.63 8.47 9.32 10.17 11.02
178.0 -
Over 263.8 299.5 47.5 5.71 7.62 8.57 9.52 10.48 11.43 12.38
Over 299.5 44.5 5.41 7.21 8.11 9.01 9.91 10.81 11.71
</TABLE>
A-14
<PAGE>
NEW JERSEY-CONTINUED
Combined marginal tax rates for single taxpayers with one
personal exemption.
<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 - $ 0 -
24.0 118.0 16.0% 4.17 4.76 5.36 5.95 6.55 7.14 7.74
24.0 -
58.2 0 - 118.0 32.0 5.15 5.88 6.62 7.35 8.09 8.82 9.56
58.2 -
121.3 0 - 118.0 35.5 5.43 6.20 6.98 7.75 8.53 9.30 10.08
118.0 -
240.5 37.0 5.56 6.35 7.14 7.94 8.73 9.52 10.32
121.3 - 118.0 -
263.8 240.5 42.0 6.03 6.90 7.76 8.62 9.48 10.34 11.21
Over 240.5 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
Over 263.8 Over 240.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
</TABLE>
<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 $37,143 $32,500 $28,889 $26,000 $23,636 $21,667 $20,000
$50,000 in a 5% taxable
investment 46,429 40,625 36,111 32,500 29,545 27,083 25,000
$50,000 in a 6% taxable
investment 55,714 48,750 43,333 39,000 35,455 32,500 30,000
$50,000 in a 7% taxable
investment 65,000 56,875 50,556 45,500 41,364 37,917 35,000
$50,000 in a 8% taxable
investment 74,286 65,000 57,778 52,000 47,273 43,333 40,000
</TABLE>
*The dollar amounts in the table reflect a 35.0% combined
federal and state tax rate.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $39,000 in a 5% tax-free Nuveen
investment.
A-15
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
PENNSYLVANIA
Special
factors: The Commonwealth of Pennsylvania and certain of its municipal
subdivisions, including the City of Philadelphia, have
undergone the financial difficulties and pressures that
accompany a decline in economic conditions. As the heavy
industries historically associated with Pennsylvania have
declined with increasing competition from foreign producers,
the services sector, including trade, medical and health
services, education and financial institutions, has provided
major new sources of growth. Agriculture related industries
continue to be an important part of Pennsylvania's economy.
Both the Commonwealth and the City of Philadelphia have
historically experienced significant revenue shortfalls. On
the other hand, rising demands on state programs,
particularly for medical assistance and cash assistance
programs, and the increased cost of special education
programs and correction facilities and programs, have
contributed to increased expenditures. In response, the
Commonwealth and the City of Philadelphia have, in recent
years, sought to balance budgets with a combination of tax
increases and expenditure restraints. Although there can be
no assurance that such conditions will continue, all
outstanding general obligation bonds of the Commonwealth are
currently rated at AA- by S&P and A1 by Moody's.
Shares of the Pennsylvania Fund are not subject to any of the
Description of personal property taxes presently in effect in Pennsylvania
state tax to the extent of that portion of the Pennsylvania Fund
treatment represented by Pennsylvania Municipal Obligations. The
portion of interest income representing interest income from
Pennsylvania Municipal Obligations received by the Fund and
distributed to shareholders of the Pennsylvania Fund is not
taxable under the Pennsylvania Personal Income Tax or under
the Corporate Net Income Tax, nor will such interest be
taxable under the Philadelphia School District Investment
Income Tax imposed on Philadelphia resident individuals. The
disposition by the Pennsylvania Fund of a Pennsylvania
Municipal Obligation (whether by sale, exchange, redemption
or payment at maturity), as well as the distribution of the
proceeds of such disposition, will not constitute a taxable
event to a shareholder under the Pennsylvania Personal Income
Tax if the Pennsylvania Municipal Obligation was issued prior
to February 1, 1994. Further, although there is no published
authority on the subject, special Pennsylvania counsel is of
the opinion that an individual shareholder of the
Pennsylvania Fund will not have a taxable event under the
Pennsylvania state and local income taxes referred to above
upon the redemption or exchange of his shares to the extent
that the Pennsylvania Fund is then composed of Pennsylvania
Municipal Obligations issued prior to February 1, 1994.
A-16
<PAGE>
PENNSYLVANIA-CONTINUED
Combined 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 - $ 0 -
40.1 118.0 17.5% 4.24 4.85 5.45 6.06 6.67 7.27 7.88
40.1 -
96.9 0 - 118.0 30.0 5.00 5.71 6.43 7.14 7.86 8.57 9.29
118.0 -
177.0 31.0 5.07 5.80 6.52 7.25 7.97 8.70 9.42
96.9 -
147.7 0 - 118.0 33.0 5.22 5.97 6.72 7.46 8.21 8.96 9.70
118.0 -
177.0 34.0 5.30 6.06 6.82 7.58 8.33 9.09 9.85
177.0 -
299.5 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
147.7 - 118.0 -
263.8 177.0 39.0 5.74 6.56 7.38 8.20 9.02 9.84 10.66
177.0 -
299.5 41.5 5.98 6.84 7.69 8.55 9.40 10.26 11.11
Over 299.5 39.0 5.74 6.56 7.38 8.20 9.02 9.84 10.66
177.0 -
Over 263.8 299.5 45.5 6.42 7.34 8.26 9.17 10.09 11.01 11.93
Over 299.5 42.5 6.09 6.96 7.83 8.70 9.57 10.43 11.30
</TABLE>
A-17
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
PENNSYLVANIA-CONTINUED
Combined marginal tax rates for single taxpayers with one
personal exemption.
<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 - $ 0 -
24.0 118.0 17.5% 4.24 4.85 5.45 6.06 6.67 7.27 7.88
24.0 -
58.2 0 - 118.0 30.0 5.00 5.71 6.43 7.14 7.86 8.57 9.29
58.2 -
121.3 0 - 118.0 33.0 5.22 5.97 6.72 7.46 8.21 8.96 9.70
118.0 -
240.5 34.5 5.34 6.11 6.87 7.63 8.40 9.16 9.92
121.3 - 118.0 -
263.8 240.5 39.5 5.79 6.61 7.44 8.26 9.09 9.92 10.74
Over 240.5 39.0 5.74 6.56 7.38 8.20 9.02 9.84 10.66
Over 263.8 Over 240.5 42.5 6.09 6.96 7.83 8.70 9.57 10.43 11.30
</TABLE>
<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 $38,286 $33,500 $29,778 $26,800 $24,364 $22,333 $20,615
$50,000 in a 5% taxable
investment 47,857 41,875 37,222 33,500 30,455 27,917 25,769
$50,000 in a 6% taxable
investment 57,429 50,250 44,667 40,200 36,545 33,500 30,923
$50,000 in a 7% taxable
investment 67,000 58,625 52,111 46,900 42,636 39,083 36,077
$50,000 in a 8% taxable
investment 76,571 67,000 59,556 53,600 48,727 44,667 41,231
</TABLE>
*The dollar amounts in the table assume a 33.0% combined fed-
eral and state tax rate.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $40,200 in a 5% tax-free Nuveen
investment.
A-18
<PAGE>
VIRGINIA
Special
factors: The Commonwealth's financial condition is supported by a
broad-based economy, including manufacturing, tourism,
agriculture, ports, mining and fisheries. Manufacturing
continues to be a major source of employment, ranking behind
only services, wholesale and retail trade, and government
(federal, state and local). Defense activity is an important
component of Virginia's economy; however, defense employment
in Virginia can be expected to continue to decline as
previoulsy announced base closures are implemented and the
military downsizes. Economic growth continued in fiscal year
1995 and employment continued to give brighter news.
Unemployment dropped to 4.7 percent compared to the national
rate of 5.7 percent. Per capita income of $22,501 was 104
percent of the national figure. While Virginia has nearly
completed an economic recovery from the 1990-91 recession,
the implementation of cutbacks and the duration of the period
of economic growth are continuing sources of concern. Growing
interest in Virginia by major corporations as a site for new
facilities is the brightest hope for the future of the state
economy. Although there can be no assurance that such will
continue, the Commonwealth of Virginia has consistently
maintained ratings of AAA by S&P and Aaa by Moody's on its
general obligation indebtedness, reflecting in part its sound
fiscal management, diversified economic base and low debt
ratios.
Shareholders who are subject to income tax in Virginia will
Description of not be taxed on that portion of any distribution that is
state tax attributable to the interest earned by the Virginia Fund on
treatment Virginia Municipal Obligations; however, these shareholders
will generally have taxable income for Virginia income tax
purposes to the extent of any portion of a distribution that
is taxable for federal income tax purposes, except as it
relates to interest or dividends on obligations of the United
States or instrumentalities thereof exempt from state income
taxation under the laws of the United States. To the extent
distributions to shareholders are attributable to interest on
Municipal Obligations other than Virginia Municipal
Obligations, such distributions will be included in the
shareholder's Virginia taxable income. Virginia income tax
exemption is also independently provided for interest on
certain obligations. Where an independent exemption is
provided, interest on those obligations is exempt from
Virginia income taxation without regard to any exemption from
federal income taxes. As a general rule, to the extent that
any gain realized (whether as a result of the redemption or
exchange of Virginia Municipal Obligations by the Virginia
Fund
A-19
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS PROSPECTUS
MAY 31, 1996
or as a result of the sale of shares by the shareholder) is
subject to federal income taxation, this gain will be
included in the shareholder's Virginia taxable income. Under
the language of certain enabling legislation, however, gain
realized on the sale of obligations issued thereunder is
expressly exempt from Virginia income taxation.
Combined 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 - $ 0 -
40.1 118.0 20.0% 4.38 5.00 5.63 6.25 6.88 7.50 8.13
40.1 -
96.9 0 - 118.0 32.0 5.15 5.88 6.62 7.35 8.09 8.82 9.56
118.0 -
177.0 33.0 5.22 5.97 6.72 7.46 8.21 8.96 9.70
96.9 -
147.7 0 - 118.0 35.0 5.38 6.15 6.92 7.69 8.46 9.23 10.00
118.0 -
177.0 36.0 5.47 6.25 7.03 7.81 8.59 9.38 10.16
177.0 -
299.5 38.5 5.69 6.50 7.32 8.13 8.94 9.76 10.57
147.7 - 118.0 -
263.8 177.0 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
177.0 -
299.5 43.5 6.19 7.08 7.96 8.85 9.73 10.62 11.50
Over 299.5 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
177.0 -
Over 263.8 299.5 47.5 6.67 7.62 8.57 9.52 10.48 11.43 12.38
Over 299.5 44.0 6.31 7.21 8.11 9.01 9.91 10.81 11.71
</TABLE>
A-20
<PAGE>
VIRGINIA-CONTINUED
Combined marginal tax rates for single taxpayers with one
personal exemption.
<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 - $ 0 -
24.0 118.0 20.0% 4.38 5.00 5.63 6.25 6.88 7.50 8.13
24.0 -
58.2 0 - 118.0 32.0 5.15 5.88 6.62 7.35 8.09 8.82 9.56
58.2 -
121.3 0 - 118.0 35.0 5.38 6.15 6.92 7.69 8.46 9.23 10.00
118.0 -
240.5 36.5 5.51 6.30 7.09 7.87 8.66 9.45 10.24
121.3 - 118.0 -
263.8 240.5 41.5 5.98 6.84 7.69 8.55 9.40 10.26 11.11
Over 240.5 41.0 5.93 6.78 7.63 8.47 9.32 10.17 11.02
Over 263.8 Over 240.5 44.5 6.31 7.21 8.11 9.01 9.91 10.81 11.71
</TABLE>
<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 $37,143 $32,500 $28,889 $26,000 $23,636 $21,667 $20,000
$50,000 in a 5% taxable
investment 46,429 40,625 36,111 32,500 29,545 27,083 25,000
$50,000 in a 6% taxable
investment 55,714 48,750 43,333 39,000 35,455 32,500 30,000
$50,000 in a 7% taxable
investment 65,000 56,875 50,556 45,500 41,364 37,917 35,000
$50,000 in a 8% taxable
investment 74,286 65,000 57,778 52,000 47,273 43,333 40,000
</TABLE>
*The dollar amounts in the table reflect a 35.0% combined
federal and state tax rate.
For example, $50,000 in a 6% taxable investment earns the
same after-tax return as $39,000 in a 5% tax-free Nuveen
investment.
A-21
<PAGE>
PRINCIPAL UNDERWRITER
John Nuveen & Co. Incorporated
Investment Bankers
333 West Wacker Drive
Chicago, Illinois 60606
312.917.7700
INVESTMENT ADVISER
Nuveen Advisory Corp.
Subsidiary of John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
CUSTODIAN
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
TRANSFER AND SHAREHOLDER SERVICES
AGENT
Shareholder Services, Inc.
P.O. Box 5330
Denver, Colorado 80217
INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE FUNDS
Arthur Andersen LLP
33 West Monroe Street
Chicago, Illinois 60603
LOGO
Pro-1 5.96
LOGO
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
<PAGE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
NUVEEN MULTISTATE TAX-FREE TRUST
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
Statement of Additional Information May 31, 1996
Nuveen Multistate Tax-Free Trust
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN ARIZONA TAX-FREE VALUE FUND
NUVEEN FLORIDA TAX-FREE VALUE FUND
NUVEEN MARYLAND TAX-FREE VALUE FUND
NUVEEN MICHIGAN TAX-FREE VALUE FUND
NUVEEN NEW JERSEY TAX-FREE VALUE FUND
NUVEEN PENNSYLVANIA TAX-FREE VALUE FUND
NUVEEN VIRGINIA 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 May
31, 1996.
<TABLE>
<S> <C>
Table of Contents Page
- --------------------------------------------------------------------------
Fundamental Policies and Investment Portfolio 2
- --------------------------------------------------------------------------
Management 38
- --------------------------------------------------------------------------
Investment Adviser and Investment Management Agreement 48
- --------------------------------------------------------------------------
Portfolio Transactions 49
- --------------------------------------------------------------------------
Net Asset Value 50
- --------------------------------------------------------------------------
Tax Matters 51
- --------------------------------------------------------------------------
Performance Information 62
- --------------------------------------------------------------------------
Additional Information on the Purchase and Redemption of Fund Shares 71
- --------------------------------------------------------------------------
Distribution and Service Plan 74
- --------------------------------------------------------------------------
Independent Public Accountants and Custodian 76
- --------------------------------------------------------------------------
</TABLE>
The audited financial statements for the fiscal year ended January 31, 1996,
appearing in the Annual Report of Nuveen Multistate Tax-Free Trust are incorpo-
rated herein by reference. The Annual Report accompanies this Statement of Ad-
ditional 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 poli-
cy, 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 invest-
ments, 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 disposition
of securities. While any such borrowings exceed 5% of such Fund's total assets,
no additional purchases of investment securities will be made by such Fund. If
due to market fluctuations or other reasons, the value of the Fund's assets
falls below 300% of its borrowings, the Fund will reduce its borrowings within
3 business days. To do this, the Fund may have to sell a portion of its invest-
ments 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 having
a market value at the time of pledge not exceeding 10% of the value of the
Fund's total assets;
(5) Issue senior securities as defined in the Investment Company Act of 1940,
except to the extent such issuance might be involved with respect to borrowings
described under item (3) above or with respect to transactions involving
futures contracts or the writing of options within the limits described in the
Prospectus and this Statement of Additional Information;
(6) Underwrite any issue of securities, except to the extent that the purchase
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 State-
ment 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 trustees of the Trust, or those
officers and directors of Nuveen Advisory Corp. ("Nuveen Advisory"), who indi-
vidually own beneficially more than 1/2 of 1% of the outstanding securities of
such issuer, together own beneficially more than 5% of such outstanding securi-
ties.
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.
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
3
<PAGE>
considered violated unless an excess or deficiency occurs or exists immediately
after and as a result of an acquisition of securities, unless otherwise indi-
cated.
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 Multistate Tax-Free Trust (the "Trust") is an open-end diversified man-
agement series company under SEC Rule 18f-2. Each Fund is a separate series is-
suing its own shares. Certain matters under the Investment Company Act of 1940
which must be submitted to a vote of the holders of the outstanding voting se-
curities of a series company shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding voting se-
curities 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. In general, Municipal Obligations include debt obligations issued by
states, cities and local authorities to obtain funds for various public purpos-
es, including construction of a wide range of public facilities such as air-
ports, bridges, highways, hospitals, housing, mass transportation, schools,
streets and water and sewer works. Industrial development bonds and pollution
control bonds that are issued by or on behalf of public authorities to finance
various privately-rated facilities are included within the term Municipal Obli-
gations if the interest paid thereon is exempt from federal income tax. Munici-
pal Obligations in which each Fund will primarily invest are issued by that
Fund's respective state and local authorities in that state, and bear interest
that, in the opinion of bond counsel to the issuer, is exempt from federal in-
come tax and from personal income 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 Service, 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, except that a Fund may
not invest more than 20% of its net assets in unrated bonds and (3) temporary
investments as described below, the income from which may be subject to state
income tax or to both federal and state income taxes.
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
4
<PAGE>
which provide that the municipality has no obligation to make lease or in-
stallment 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 spe-
cial risks associated with such securities by not investing more than 10% of
its assets 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 governmental function of the municipality, (2) the lease payments will com-
mence 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 underlying 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 at-
tractive 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, but a Fund will not
trade securities solely to realize a profit. Securities may be sold in antici-
pation 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 ad-
dition, a security may be sold and another of comparable quality purchased at
approximately the same time to take advantage of what Nuveen Advisory believes
to be a temporary disparity in the normal yield relationship between the two
securities. A Fund may make changes in its investment portfolio in order to
limit its exposure to changing market conditions. Changes in a Fund's invest-
ments are known as "portfolio turnover." While it is impossible to predict fu-
ture portfolio turnover rates, each Fund's annual portfolio turnover rate is
generally not 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 particu-
lar years depending upon market conditions. The portfolio turnover rates for
the fiscal years ended January 31, 1996 and 1995, respectively, were 5% and
29% for the Arizona Fund, 21% and 4% for the Florida Fund, 17%
5
<PAGE>
and 35% for the Maryland Fund, 33% and 35% for the Michigan Fund, 39% and 32%
for the New Jersey Fund, 52% and 74% for the Pennsylvania Fund and 42% and 40%
for the Virginia Fund.
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 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 issued by public au-
thorities in the states of currently offered Funds. This information was ob-
tained 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 ARIZONA
As described above, except to the extent the Arizona Fund invests in temporary
investments, the Arizona Fund will invest substantially all of its net assets
in Arizona Municipal Obligations. The Arizona Fund is therefore susceptible to
political, economic or regulatory factors affecting issuers of Arizona Munici-
pal Obligations. The information set forth below is derived from official
statements prepared in connection with the issuance of Arizona Municipal Obli-
gations and other sources that are generally available to investors. The infor-
mation is provided as general information intended to give a recent historical
description and is not intended to indicate future or continuing trends in the
financial or other positions of The State of Arizona (the "State"). This infor-
mation has not been independently verified.
There can be no assurance that future statewide or regional economic difficul-
ties, and the resulting impact on State or local governmental finances general-
ly, will not adversely affect the market value of Arizona Municipal Obligations
held in the portfolio of the Arizona Fund or the ability of particular obligors
to make timely payments of debt service on (or relating to) those obligations.
General Economic Conditions. Arizona is the nation's sixth largest state in
terms of area. Arizona's main economic/employment sectors include services,
tourism and manufacturing. Mining and agriculture are also significant, al-
though they tend to be more capital than labor intensive. Services is the sin-
gle largest economic sector. Many of these jobs are directly related to tour-
ism.
The unemployment rate in Arizona for 1995 was 5.1% and for 1994 was 6.3% com-
pared to a national rate of 5.6% in 1995 and 6.1% in 1994. Job growth may be
adversely affected by the closing of a major air force base near Phoenix.
Budgetary Process. Arizona operates on a fiscal year beginning July 1 and end-
ing June 30. Fiscal year 1996 refers to the year ending June 30, 1996.
Total General Fund revenues of $4.5 billion are expected during fiscal year
1996. Approximately 47% of this budgeted revenue comes from sales and use tax-
es, 35% from income taxes (both individual and corporate) and 4% from property
taxes. All taxes total approximately $4.1 billion, or 92% of the General Fund
revenues. Non-tax revenue includes items such as income from the state lottery,
licenses, fees and permits, and interest.
For fiscal year 1995, the budget called for expenditures of approximately $4.7
billion. These expenditures fell into the following major categories: education
(52%), health and welfare (24%), protection and safety (4%), general government
(15%) and inspection and regulation, natural resources, transportation and
other (6%). The State's general fund expenditures for fiscal year 1996 are bud-
geted at approximately $4.5 billion. Fiscal year 1996's proposed expenditures
fall into the following major categories: education (52%), health and welfare
(23%), protection and safety (4%), general government (15%) and inspection and
regulation, natural resources, transportation and other (6%). For fiscal year
1997, a general fund budget of $4.77 billion has been adopted.
Most or all of the Arizona Municipal Obligations are not obligations of the
State of Arizona and are not supported by the State's taxing powers. The par-
ticular source of payment and security for each of the
7
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Arizona Municipal Obligations is detailed in the instruments themselves and in
related offering materials. There can be no assurances with respect to whether
the market value or marketability of any of the Arizona Municipal Obligations
issued by an entity other than the State of Arizona will be affected by finan-
cial or other conditions of the State or of any entity located within the
State. In addition, it should be noted that the State of Arizona, as well as
counties, municipalities, political subdivisions and other public authorities
of the State, are subject to limitations imposed by Arizona's Constitution
with respect to ad valorem taxation, bonded indebtedness and other matters.
For example, the State legislature cannot appropriate revenues in excess of 7%
of the total personal income of the State in any fiscal year. These limita-
tions may affect the ability of the issuers to generate revenues to satisfy
their debt obligations.
Local governments have experienced many of the same fiscal difficulties for
many of the same reasons and, in several cases, have been prevented by Consti-
tutional limitations on bonded indebtedness and declining assessed property
values from securing necessary funds to undertake street, utility and other
infrastructure expansions, improvements and renovations in order to meet the
need of rapidly increasing populations. Maricopa County, Arizona has encoun-
tered financial difficulties related to declines in assessed property values
and budgetary deficits and its general obligation bonds have received rating
downgrades. Maricopa County, Arizona is analyzing various budget options to
deal with its existing deficit.
Although most of the Arizona Municipal Obligations are revenue obligations of
local governments or authorities in the State, there can be no assurance that
the fiscal and economic conditions referred to above will not affect the mar-
ket value or marketability of the Arizona Municipal Obligations or the ability
of the respective obligors to pay principal of and interest on the Arizona Mu-
nicipal Obligations when due.
On July 21, 1994, the Arizona Supreme Court rendered its opinion in Roosevelt
Elementary School District Number 66, et al v.c. Dianne Bishop, et al (the
"Roosevelt Opinion"). In this opinion, the Arizona Supreme Court held that the
present statutory financing scheme for public education in the State of Ari-
zona does not comply with the Arizona constitution. Subsequently, the Arizona
School Boards Association, with the approval of the appellants and the
appellees to the Roosevelt Opinion, and certain Arizona school districts,
filed with the Arizona Supreme Court motions for clarification of the Roose-
velt Opinion, specifically with respect to seeking prospective application of
the Roosevelt Opinion. On July 29, 1994, the Arizona Supreme Court clarified
the Roosevelt Opinion to hold that such opinion will have prospective effect
only. The impact of the Roosevelt Opinion on Arizona school finances or bud-
gets cannot be determined at this time.
Taxpayers within another school district, Creighton Elementary School District
No. 14 of Maricopa County, Arizona (the "Creighton District") have been
granted a summary judgment by the Superior Court of Maricopa County on Febru-
ary 15, 1996, against the Creighton District to the effect that the outstand-
ing principal amount of bonds theretofore issued by the Creighton District,
together with premium received in connection with the issuance of such bonds,
be treated as debt for constitutional and statutory debt limit purposes. A
significant number of other Arizona school district have issued bonds with
premiums and did not treat such premium as debt for purposes of applicable
debt limitations. It is not known if the judgment against the Creighton Dis-
trict, when final, will result in similar applicabil
8
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ity to other school districts or political subdivisions or will cause all or
part of any premium to be subject to constitutional and statutory requirements
other than debt limits, such as the requirement for voter authorization. Such
judgment could potentially adversely impact the secondary market for Arizona
school district bonds. Proposed legislation may affect the method of calculat-
ing outstanding debt and may affect the bonding capacity of all Arizona cit-
ies, towns, school districts and other political subdivisions.
Certain other circumstances are relevant to the market value, marketability
and payment of any hospital and health care revenue bonds in the Fund. The Ar-
izona Legislature has in the past sought to enact health care cost control
legislation. Certain other health care regulatory laws have expired. It is ex-
pected that the Arizona Legislature will at future sessions continue to at-
tempt to adopt legislation concerning health care cost control and related
regulatory matters. The effect of any such legislation or of the continued ab-
sence of any legislation restricting hospital bed increases and limiting new
hospital construction on the ability of Arizona hospitals and other health
care providers to pay debt service on their revenue bonds cannot be determined
at this time.
Arizona does not participate in the federally administered Medicaid program.
Instead, the State administers an alternative program, AHCCCS, which provides
health care to indigent persons meeting certain financial eligibility require-
ments through managed care programs. In fiscal year 1996, AHCCCS was financed
approximately 61% by Federal funds, 28% by State funds and 11% by county
funds.
Under State law, hospitals retain the authority to raise rates with notifica-
tion and review by, but not approval from, the Department of Health Services.
Hospitals in Arizona have experienced profitability problems along with those
in other states. At least two Phoenix based hospitals have defaulted on or re-
ported difficulties in meeting their bond obligations during the past five
years.
Insofar as tax-exempt Arizona investor-owned public utility pollution control
revenue bonds are concerned, the issuance of such bonds and the periodic rate
increases needed to cover operating costs and debt service are generally sub-
ject to regulation by the Arizona Corporation Commission. On July 15, 1991,
several creditors of Tucson Electric Power Company ("Tucson Electric") filed
involuntary petitions under Chapter 11 of the U.S. Bankruptcy Code to force
Tucson Electric to reorganize under the supervision of the bankruptcy court.
On December 31, 1991, the Bankruptcy Court approved the utility's motion to
dismiss the July petition after five months of negotiations between Tucson
Electric and its creditors to restructure the utility's debt and other obliga-
tions. In December 1992, Tucson Electric announced that it had completed fi-
nancial restructuring. In January 1993 Tucson Electric asked the Arizona Cor-
poration Commission for a 9.3% average rate increase. The Arizona Corporation
Commission approved a rate increase of 4.2%. Tucson Electric serves approxi-
mately 270,000 customers, primarily in the Tucson area. Inability of any regu-
lated public utility to secure necessary rate increases could adversely af-
fect, to an indeterminable extent, its ability to pay debt service on its pol-
lution control revenue bonds.
FACTORS PERTAINING TO FLORIDA
As described above, except to the extent the Florida Fund invests in temporary
investments, the Florida Fund will invest substantially all of its net assets
in Florida Municipal Obligations. The Florida Fund is
9
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therefore susceptible to political, economic or regulatory factors affecting
issuers of Florida Municipal Obligations. The following information provides
only a brief summary of some of the complex factors affecting the financial
situation in Florida (the "State"). This information is derived from sources
that are generally available to investors and is believed to be accurate. It
is based in part on information obtained from various State and local agencies
in Florida, some of which information is related to periods prior to the onset
of the recent national recession, the effects of which are not necessarily re-
flected in the information. 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 eco-
nomic difficulties, and the resulting impact on State or local governmental
finances generally, will not adversely affect the market value of Florida Mu-
nicipal Obligations held in the portfolio of the Florida Fund or the ability
of particular obligors to make timely payments of debt service on (or relating
to) those obligations.
State Economy. Florida's economy tracked the national economy through the re-
cent national recession and subsequent recovery. While expected to decelerate
in the near-term, the State's economy is predicted to continue to outperform
the U.S. as a whole, driven by the service and trade sectors.
Since 1985, the State's job creation rate was well over twice the rate for the
nation as a whole. While the State's historically strong job growth rate weak-
ened somewhat in the 1980's, the non-farm growth rate is projected at 3.2% in
1995-96, and 3.0% in 1996-97, reaching an average employment at the end of
1996-97 of 6.1 million. Trade and services account for more than half of total
non-farm employment. Trade-related employment is expected to expand 3.4% in
1995-96 and 3.0% in 1996-97, while service sector employment is expected to
increase 5.3% and 4.5% for the same periods. The State's unemployment rate is
currently projected to be 5.9% in both 1995-96, and 1996-97.
The State's economy has in the past been highly dependent on the construction
industry and construction-related manufacturing. While this dependence has de-
clined, construction remains an important sector. In 1995-96, single and mul-
ti-family housing starts are projected to reach a combined level of 117,500
units, but dropping to 108,900 in 1996-97.
The important tourism sector is expected to decline 4.7% in 1995-96 although
various important tourist destinations report recent growth. 4.3% growth is
projected for 1996-97. In addition to lingering crime concerns, analysts have
pointed to "product maturity" of a Florida vacation package, higher prices,
and increasing competition from other resort areas to explain the recent de-
cline.
For 1994, the State's per capita personal income of $21,677 was slightly below
the national average of $21,809, but significantly ahead of that for the
southeastern United States, which was $19,649. Real personal income per capita
is expected to increase 2.9% in 1995-1996 and 1.9% in 1996-97 while real per-
sonal income is expected to grow 4.7% in 1995-96 and 3.8% in 1996-97.
State Budget. In fiscal year 1994-95, approximately 66% of the State's total
direct revenue to its operating funds was derived from State taxes, with Fed-
eral grants and other special revenue accounting for the balance. State sales
and use tax, corporate income tax, intangible personal property tax and bever-
age tax
10
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amounted to 67%, 7%, 4% and 4%, respectively, of total receipts by the General
Revenue Fund during fiscal 1994-95. In that same year, expenditures for educa-
tion, health and welfare and public safety amounted to 49%, 32% and 11%, re-
spectively, of total expenditures from the General Revenue Fund. At the end of
fiscal 1994, $6.1 billion in principal amount of debt secured by the full faith
and credit of the State was outstanding. As of March 22, 1996, Florida's out-
standing full faith and credit obligations totalled approximately $7.3 billion.
1995-96 fiscal year. Currently estimated available revenues (estimated reve-
nues, plus the balance forwarded from 1994-95, transfers from other accounts
and other miscellaneous amounts) are approximately $15.3 billion, an increase
of 3.3% over comparable 1994-95 figures. Estimated (revised) revenues
of approximately $14.5 billion represent an increase of 6.5% over comparable
1994-95 figures. Total effec
tive appropriations for 1995-96 are $14.8 billion, an increase of 3.5% over
comparable 1994-95 figures.
1996-97 fiscal year. Preliminary estimated available revenues are now set at
$16 billion, an increase of 4.5% over comparable 1995-96 figures. Governor
Chiles has proposed his fiscal 1997-98 budget at $39.6 billion, without new tax
revenue. This represents a 1.0% increase over 1995-96. A supplemental budget
recommendation from the Governor has withdrawn approximately $58 million in in-
creased business fees included in the earlier proposal.
Revenue Generating Measures. Florida's Constitution allows the issuance of full
faith and credit bonds generally only upon approval of the electorate and in an
aggregate amount not exceeding 50% of the State's total tax revenues for the
preceding two years. A number of exceptions to the election requirement have
been enacted, allowing the issuance of full faith and credit bonds in addition
to a primary pledge of a separately identifiable revenue source for certain
uses such as road and bridge projects, education and environmental facilities
and projects.
In 1987, the State Legislature passed a major revenue enhancement bill result-
ing in the largest tax increase in State history. In order to balance the bud-
get, as required by the State's Constitution, a 5% sales tax was imposed on
nearly all services sold or used in the State. However, the tax was challenged
by numerous national groups and repealed, effective January 1, 1988. At the
same time the tax was replaced by a one cent ($.01) increase, from 5% to 6%, in
the general sales tax on goods and rentals. The one cent ($.01) increase became
effective February 1, 1988. The sales and use tax currently accounts for the
State's single largest source of tax receipts. For the fiscal year ended June
30, 1995, sales and use tax receipts (exclusive of the tax on gasoline and spe-
cial fuels) totalled approximately $10.7 billion, an increase of approximately
6.0% from fiscal year 1993-94.
In 1992, Florida voters approved a new constitutional amendment that limits
homestead (residential) property tax increases to the lower of 3% per year or
the increase in the consumer price index, until the next transfer of ownership
of the property. The cap took effect January 1, 1994, and could have an adverse
effect on local revenues, which are largely dependent on the property tax for
operating funds. Whether this measure will have any adverse effect on municipal
obligations is not known at this time.
In 1994, Florida voters approved another amendment to the Florida Constitution
which will limit the rate of growth of general state revenues beginning in 1995
to the growth rate of personal income in Florida. If more revenue is collected
than permitted by the limit, the excess will be placed in the
11
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"Budget Stabilization Fund" unless, the Legislature decides otherwise by a
two-thirds vote of both houses. The revenue limit is determined by multiplying
the average annual growth rate in Florida personal income over the previous
five years by the maximum amount permitted under the cap of the previous year.
The amendment does not limit the imposition of any tax nor does it repeal any
existing tax levy. It also has no direct impact on local taxation, but it may
affect the sharing of state revenues with local governments.
Another 1994 Florida constitutional amendment limits the application of the
"single subject" requirement used by the courts to test citizen initiative
constitutional proposals. Under the amendment, citizens' initiatives seeking
to limit the ability of government to increase taxes or otherwise raise reve-
nue are exempt from the single-subject restriction of the Florida Constitu-
tion. This amendment will probably encourage further efforts to limit and cap
the government's revenue generating power.
In 1988, the State began its own lottery. State law requires that lottery rev-
enues be distributed 50% to the public in prizes, 38% for use in enhancing ed-
ucation, and the balance, 12%, to retailers as commission for their services
and for administration of the lottery. While Florida's lottery remains in the
top five state lotteries, annual ticket sales have flattened at slightly less
than $2.2 billion; sales rose slightly in 1994-95 to approximately $2.19 bil-
lion. Education has been receiving in excess of $800 million per year from
lottery sales.
Litigation. Currently under litigation are several issues relating to State
actions or State taxes that put at risk substantial amounts of General Revenue
Fund monies. Accordingly, there is no assurance that the resolution of any of
such matters, individually or in the aggregate, will not have a material ad-
verse effect on the State's financial position. This discussion omits any case
for which the State's estimate of exposure is less than $50 million.
The Florida Supreme Court recently declared unconstitutional the $295 "impact
fee" on cars purchased out of state and registered in Florida. Void from its
inception in 1990, the total cost to the state is estimated to be in excess of
$180 million in real dollars being refunded plus losses of estimated revenue
collections through the next fiscal year.
The State recently settled virtually all pending lawsuits challenging certain
premium taxes imposed on certain motor vehicle service agreement companies.
The one remaining case is estimated to have a potential refund exposure of ap-
proximately $150 million.
A challenge to the Florida intangible tax law, which currently raises over
$783 million per year, was recently resolved by a per curiam affirmance by the
United States Supreme Court of a Florida court decision upholding the tax.
Other challenges to that tax, involving refund claims in excess of $25 million
for later years, are now proceeding.
The State was challenged on its imposition of a gross receipts tax on hospi-
tals. The trial court denied the plaintiffs' refund request and upheld the
tax. An appeal is pending. The Florida Agency for Health Care Administration
has now calculated the cost to the State of an unfavorable result as approxi-
mately $116 million.
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The State has been involved in litigation relating to the implementation of a
Department of Health and Rehabilitative Services computer system. While the
trial court's dismissal of DHRS' motion to dismiss was pending appeal, the par-
ties jointly submitted the case to a Special Master, who recommended against
DHRS. If the appeal by DHRS is unsuccessful, the exposure to the State, includ-
ing accrued interest, is estimated at $50 million.
The constitutionality of the Public Medical Assistance Trust Fund's annual as-
sessment on revenue of certain out-patient facilities has been challenged. An
unfavorable outcome could expose the State to refund claims estimated at $70
million.
State Bond Rating. The State maintains a bond rating of Aa and AA from Moody's
and S&P, respectively, on the majority of its general obligation bonds, al-
though the rating of a particular series of revenue bonds relates primarily to
the project, facility or other revenue source from which such series derives
funds for repayment. See "Investment Objectives and Policies--Municipal Obliga-
tions." It should also be noted that the creditworthiness of obligations issued
by local Florida issuers may be unrelated to the creditworthiness of obliga-
tions issued by the State of Florida, and that there is no obligation on the
part of the State to make payment on such local obligations in the event of de-
fault. At least one analyst has predicted that various fiscal factors, includ-
ing over-reliance on tourism, aging population, high crime rate, and an unreal-
istic tax system, will combine to cause a drop in these ratings to the A level
by the end of the decade.
Other Issuers of Florida Municipal Obligations. There are a number of state
agencies, instrumentalities and political subdivisions of the State that issue
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 securities is-
sued by them may vary considerably from the credit quality of obligations
backed by the full faith and credit of the State.
FACTORS PERTAINING TO MARYLAND
As described above, except to the extent the Maryland Fund invests in temporary
investments, the Maryland Fund will invest substantially all of its net assets
in Maryland Municipal Obligations. The Maryland Fund is therefore susceptible
to political, economic or regulatory factors affecting issuers of Maryland Mu-
nicipal Obligations. The following information provides only a brief summary of
some of the complex factors affecting the financial situation in Maryland (the
"State") and is derived principally from official statements dated on or before
February 14, 1996, relating to issues of State obligations and does not purport
to be a complete description generally available to investors. No independent
verification has been made of the accuracy or completeness of any of the fol-
lowing information.
There can be no assurance that current or future statewide or regional economic
difficulties, and the resulting impact on State or local governmental finances
generally, will not adversely affect the market value of Maryland Municipal Ob-
ligations held in the portfolio of the Maryland Fund or the ability of particu-
lar obligors to make timely payments of debt service on (or relating to) those
obligations.
The State and Its Economy. Maryland encompasses a geographic land area of 9,837
square miles and ranks 42nd among the 50 states in size. According to the Mary-
land Office of Planning, Maryland's
13
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population in 1994 was 5,006,265, reflecting an increase of 4.7% from the 1990
Census. Maryland's population is concentrated in urban areas; the eight coun-
ties and Baltimore City located in the Baltimore and Washington Corridor con-
tain 37.4% of the State's land area and 82.3% of its population.
After enjoying rapid economic growth in the 1980's, Maryland has experienced
declining rates of growth in the 1990's. Total personal income in Maryland grew
at annual rates between 6.2% and 10.9% in each of the years 1980 through 1990,
but grew at a rate of 3.1% in 1991, 4.4% in 1992, 4.0% in 1993 and 4.9% in
1994. Similarly, per capita income, which had grown at rates no lower than 4.7%
for the period from 1980 to 1990, grew at a rate of 1.8% in 1991, 3.2% in 1992,
3.0% in 1993 and 3.9% in 1994. Unemployment in Maryland peaked in 1982 at 8.5%,
then decreased steadily to a low of 3.7% in 1989. By 1991, unemployment had in-
creased to 5.9%, and increased further to 6.6% in 1992 before falling to 6.2%
in 1993 and further falling to 5.1% in 1994.
Retail sales in Maryland grew by 5.4% in 1990, decreased by 2.1% in 1991, re-
bounded mildly by 0.3% in 1992 and further increased by 6.2% in 1993 and 9.6%
in 1994, versus nationwide growth of 4.9%, 0.6%, 5.2%, 6.3% and 7.8% in such
years, respectively.
Services (including mining), wholesale and retail trade, government, and manu-
facturing (primarily printing and publishing, food and kindred products, in-
struments and related products, industrial machinery, electronic equipment, and
chemical and allied products) are the leading areas of employment in the State
of Maryland. In contrast to the nation as a whole, more people in Maryland are
employed in government and services (50.8% in Maryland compared to 44.9% na-
tionwide) than in manufacturing (8.3% in Maryland compared to 16.1% nationwide)
(8.5% versus 19.9% in 1993). Between 1974 and 1994, total manufacturing wages
and salary employment in Maryland decreased 29.7%, while total non-manufactur-
ing wages and salary employment increased 58.6%.
The State's total expenditures for the fiscal years ending June 30, 1993, June
30, 1994 and June 30, 1995 were approximately $11.8 billion, $12.3 billion and
$13.5 billion, respectively. As of February 14, 1996, it was estimated that to-
tal expenditures for fiscal year 1996 would be approximately $14.6 billion. The
original appropriation for expenditures in fiscal year 1996 is approximately
$14.4 billion. The State's General Fund, representing approximately 55%-60% of
each year's total budget, had an unreserved surplus on a budgetary basis of
$10.5 million in fiscal year 1993, an unreserved surplus of $60 million in fis-
cal year 1994 and an unreserved surplus of $132.5 million in fiscal year 1995.
When the fiscal year 1996 budget was enacted, it was estimated that the general
fund unreserved surplus on a budgetary basis at June 30, 1996 would be approxi-
mately $7.8 million; as of February 14, 1996 it was estimated that the unre-
served surplus in the general fund at June 30, 1996 will be $1 million. In ad-
dition, on December 12, 1995 the Board of Revenue Estimates lowered the esti-
mate of fiscal year 1996 general fund revenues by $92 million. To address this
shortfall, the Governor has proposed to reduce fiscal year 1996 appropriations
by $26 million and to simultaneously obtain additional moneys for the general
fund from other available sources. The State Constitution mandates a balanced
budget.
On January 17, 1996, the Governor submitted his proposed fiscal year 1997 bud-
get to the General Assembly. The Budget includes $2.9 billion in aid to local
governments (reflecting a $121.5 million increase in funding over 1996 that
provides for substantial increases in education, health, and police
14
<PAGE>
aid), and $77 million in general fund deficiency appropriations for fiscal year
1996. Based on the proposed 1997 Executive Budget, it is estimated that the
general fund surplus on a budgetary basis at June 30, 1997 will be approxi-
mately $0.5 million. In addition, it is estimated that the balance in the Reve-
nue Stabilization Account of the State Reserve Fund at June 30, 1997 will be
$538 million.
State-level Municipal Obligations. The State of Maryland and its various polit-
ical subdivisions issue a number of different kinds of Municipal Obligations,
including general obligation bonds supported by tax collections, revenue bonds
payable from certain identified tax levies or revenue streams, conduit revenue
bonds payable from the repayment of certain loans to authorized entities such
as hospitals and universities, and certificates of participation in tax-exempt
municipal leases.
The State of Maryland issues general obligation bonds, which are payable from
ad valorem property taxes. The State Constitution prohibits the contracting of
State debt unless the debt is authorized by a law levying an annual tax or
taxes sufficient to pay the debt service within 15 years and prohibiting the
repeal of the tax or taxes or their use for another purpose until the debt has
been paid. The State also enters into lease-purchase agreements, participation
interests in which are often sold publicly as individual securities. These ob-
ligations are subject to annual appropriation by the General Assembly.
As of March of 1996, the State's general obligation bonds were rated Aaa by
Moody's, AAA by S&P, and AAA by Fitch Investors Service, Inc. ("Fitch"). There
can be no assurance that these ratings will continue.
The Maryland Department of Transportation issues Consolidated Transportation
Bonds, which are payable out of specific excise taxes, motor vehicle taxes and
corporate income taxes, and from the general revenues of the Department. Issued
to finance highway, port, transit, rail or aviation facilities, as of March of
1996, these bonds were rated Aa by Moody's, AA by S&P and AA by Fitch. The
Maryland Transportation Authority, a unit of the Department, issues its own
revenue bonds for transportation facilities, which are payable from certain
highway, bridge and tunnel tolls. These bonds were rated A1 by Moody's and A+
by S&P as of March of 1996. There can be no assurance that these ratings will
continue.
Other State agencies which issue Municipal Obligations include the Maryland
Stadium Authority, which has issued bonds payable from sports facility lease
revenues and certain lottery revenues, the Maryland Water Quality Financing Ad-
ministration, which issues bonds to provide loans to local governments for
wastewater control projects, the Community Development Administration of the
Department of Housing and Community Development, which issues mortgage revenue
bonds for housing, the Maryland Environmental Service, which issues bonds se-
cured by the revenues from its various water supply, wastewater treatment and
waste management projects, and the various public institutions of higher educa-
tion in Maryland (which include the University of Maryland System, Morgan State
University, Baltimore City Community College and St. Mary's College of Mary-
land) which issue their own revenue bonds. None of these bonds constitute debts
or pledges of the full faith and credit of the State of Maryland. The issuers
of these obligations are subject to various economic risks and uncertainties,
and the credit quality of the securities issued by them may vary considerably
from the credit quality of obligations backed by the full faith and credit of
the State.
15
<PAGE>
In addition, the Maryland Health and Higher Educational Facilities Authority
and the Maryland Industrial Development Financing Authority issue conduit reve-
nue bonds, the proceeds of which are lent to borrowers eligible under relevant
state and federal law. These bonds are payable solely from the loan payments
made by borrowers, and their credit quality varies with the financial strengths
of the respective borrowers.
Municipal Obligations of Maryland Local Governments. Maryland has 24 geographi-
cal subdivisions, comprised of 23 counties plus the independent City of Balti-
more, which functions much like a county. Some of the counties and the City of
Baltimore operate pursuant to the provisions of codes of their own adoption,
while others operate pursuant to State-approved charters and State statutes.
Maryland counties and the City of Baltimore receive most of their revenues from
ad valorem taxes on real and personal property, individual income taxes, trans-
fer taxes, miscellaneous taxes and aid from the State. Their expenditures in-
clude public safety, public works, health, public welfare, court and
correctional services, education and general governmental costs.
The economic factors affecting the State, as discussed above, also have af-
fected the counties and the City of Baltimore. In addition, reductions in State
aid caused by State budget cuts have caused the local governments to trim ex-
penditures and, in some cases, raise taxes.
According to recent available ratings, general obligation bonds of Montgomery
County (abutting Washington, D.C.) are rated Aaa by Moody's and AAA by S&P.
Prince George's County, also in the Washington, D.C. suburbs, issues general
obligation bonds rated Aa by Moody's and AA- by S&P, while Baltimore County, a
separate political subdivision surrounding the City of Baltimore, issues gen-
eral obligation bonds rated Aaa by Moody's and AAA by S&P. The City of
Baltimore's general obligation bonds are rated A1 by Moody's and A by S&P. The
other counties in Maryland which are rated by Moody's all have general obliga-
tion bond ratings of A or better from Moody's, except for Allegany County, the
bonds of which are rated Baa by Moody's. The Washington Suburban Sanitary Dis-
trict, a bi-county agency providing water and sewerage services in Montgomery
and Prince George's Counties, issues general obligation bonds rated Aa1 by
Moody's and AA by S&P as of March of 1996. Additionally, some of the large mu-
nicipal corporations in Maryland (such as the cities of Rockville and Annapo-
lis) have issued general obligation bonds. There can be no assurance that these
ratings will continue.
Other Issuers of Maryland Municipal Obligations. Many of Maryland's counties
have established subsidiary agencies with bond issuing powers, such as housing
authorities, parking revenue authorities and industrial development authori-
ties. In addition, all Maryland municipalities have the authority under State
law to issue conduit revenue bonds payable from payments from private borrow-
ers. These entities are subject to various economic risks and uncertainties,
and the credit quality of the securities issued by them may vary considerably
from the credit quality of obligations backed by the full faith and credit of
the State.
FACTORS PERTAINING TO MICHIGAN
As described above, except to the extent the Michigan Fund invests in temporary
investments, the Michigan Fund will invest substantially all of its net assets
in Michigan Municipal Obligations. The
16
<PAGE>
Michigan Fund is therefore susceptible to political, economic or regulatory
factors affecting issuers of Michigan Municipal Obligations. The information
set forth below is derived from official statements prepared in connection
with the issuance of Michigan Municipal Obligations and other sources that are
generally available to investors. The information is provided as general in-
formation intended to give a recent historical description and is not intended
to indicate future or continuing trends in the financial or other positions of
The State of Michigan (the "State"). This information has not been indepen-
dently verified.
There can be no assurance that current or future statewide or regional eco-
nomic difficulties, and the resulting impact on state or local government fi-
nances generally, will not adversely affect the market value of Michigan Mu-
nicipal Obligations held in the portfolio of the Michigan Fund or the ability
of particular obligors to make timely payments of debt service on (or relating
to) those obligations.
Economy. The principal sectors of the State's economy are manufacturing of du-
rable goods (including automobile and office equipment manufacturing), tourism
and agriculture. As reflected in historical employment figures, the State's
economy has lessened its dependence upon durable goods manufacturing. In 1960,
employment in such industry accounted for 33% of the State's workforce. This
figure fell to 17% by 1994. However, manufacturing (including auto-related
manufacturing) continues to be an important part of the State's economy. These
industries are highly cyclical. This factor could adversely affect the revenue
streams of the State and its political subdivisions because of its impact on
tax sources, particularly sales taxes, income taxes and single business taxes.
Historically, the average monthly unemployment rate in the State has been
higher than the average figures for the United States. For 1994, however, the
average monthly unemployment rate in the State was 5.9% as compared to a na-
tional average of 6.1%, and for 1995, the average annual unemployment rate in
the State was 5.3% as compared to a national average of 5.6%.
Budget. The budget of the State is a complete financial plan and encompasses
the revenues and expenditures, both operating and capital outlay, of the
State's General Fund and special revenue funds. The budget is prepared on a
basis consistent with generally accepted accounting principles (GAAP). The
State's fiscal year begins on October 1 and ends September 30 of the following
year. Under State law, the executive budget recommendations for any fund may
not exceed the estimated revenue thereof, and an itemized statement of esti-
mated revenues in each operating fund must be contained in an appropriation
bill as passed by the State Legislature, the total of which may not be less
than the total of all appropriations made from the fund for that fiscal year.
The State Constitution provides that proposed expenditures from and revenues
of any fund must be in balance and that any prior year's surplus or deficit in
any fund must be included in the succeeding year's budget for that fund.
The State Constitution limits the amount of total State revenues that may be
raised from taxes and other sources. State revenues (excluding federal aid and
revenues used for payment of principal of and interest on general obligation
bonds) in any fiscal year are limited to a specified percentage of State per-
sonal income in the prior calendar year or the average thereof in the prior
three calendar years, whichever is greater. The State may raise taxes in ex-
cess of the limit in emergency situations.
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The State finances its operations through the State's General Fund and special
revenue funds. The General Fund receives revenues of the State that are not
specifically required to be included in the special revenue funds. Approxi-
mately 59% of General Fund revenues are obtained from the payment of State
taxes and approximately 41 percent are obtained from federal and non-tax reve-
nue sources. Tax revenues credited to the General Fund includes the State's
personal income tax, single business tax, use tax, and approximately 15% of
sales tax collections. In addition the State levies various other taxes. Ap-
proximately one-half of total General Fund expenditures have been made by the
State's Department of Education and Department of Social Services. Other sig-
nificant expenditures from the General Fund provide funds for law enforcement,
general State government, debt service and capital outlays.
Despite modest surpluses in the three preceding fiscal years, the State ended
fiscal years 1989-90 and 1990-91 with negative balances of $310.3 million and
$169.4 million, respectively. This negative balance had been eliminated as of
the end of fiscal year 1991-92 which ended September 30, 1992. The State ended
fiscal year 1992-93 with a balance of $26 million after transfer of $282.6
million to the Counter-Cyclical Budget and Economic Stabilization Fund de-
scribed below. The State ended fiscal year 1993- 94 with a $460.2 million sur-
plus which was transferred to the Counter-Cyclical Budget and Economic Stabi-
lization Fund described below. The State's preliminary results for fiscal year
1994-95 indicate an $84.5 million surplus, $56.8 million of which will be
transferred to the Counter-Cyclical Budget and Economic Stabilization Fund de-
scribed below.
The State budget for the 1995-96 fiscal year, which began on October 1, 1995,
was passed by the State Legislature in June 1995. This budget passed by the
State Legislature totaled $8,438.6 million from General Fund/general purpose
revenues. The Governor vetoed $45.7 million of these appropriations and the
Legislature has adopted supplemental appropriations of $30.8 million.
The State also maintains the Counter-Cyclical Budget and Economic Stabiliza-
tion Fund ("BSF") which accumulates balances during years of significant eco-
nomic growth and which may be utilized during periods of budgetary shortfalls.
The unreserved balance for the BSF for the 1990-91 fiscal year end was $182.2
million, for the 1991-92 fiscal year end was $20.1 million, for the 1992-93
fiscal year end was $303.4 million and for the 1993-94 fiscal year end was
$775.5 million. The accrued balance of the BSF as of September 30, 1995 is es-
timated to be $1,003.2 million.
Debt. The State Constitution limits State general obligation debt to (i)
short-term debt for State operating purposes which must be repaid in the same
fiscal year in which it is issued and which cannot exceed 15% of the undedi-
cated revenues received by the State during the preceding fiscal year, (ii)
short and long term debt unlimited in amount for the purpose of making loans
to school districts and (iii) long term debt for voter-approved purposes.
The State has issued and has outstanding general obligation full faith and
credit bonds for water resources, environmental protection program, recreation
program and school loan program purposes totalling, as of September 30, 1995,
approximately $706 million. In November 1988 the State's voters approved the
issuance of $800 million of general obligation bonds for environmental protec-
tion and recreational purposes; of this amount approximately $275 million re-
mains to be issued. The State issued $900 million in general obligation notes
on February 20, 1996 which will mature on September 30, 1996.
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Other Issuers of Michigan Municipal Obligations. There are a number of agen-
cies, instrumentalities and political subdivisions of the State that issue Mu-
nicipal 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 securities is-
sued by them may vary considerably from obligations backed by the full faith
and credit of the State.
Ratings. Currently the State's general obligation bonds are rated Aa by
Moody's, AA by S&P and AA by Fitch Investors Service, Inc.
Litigation. The State is a party to various legal proceedings seeking damages
or injunctive or other relief. In addition to routine litigation, certain of
these proceedings could, if unfavorably resolved from the point of view of the
State, substantially affect State programs or finances. These lawsuits involve
programs generally in the areas of corrections, tax collection, commerce and
budgetary reductions to school districts and governmental units and court fund-
ing. The ultimate disposition of these proceedings is not determinable.
Property Tax and School Finance Reform. The State Constitution limits the ex-
tent to which municipalities or political subdivisions may levy taxes upon real
and personal property through a process that regulates assessments.
On August 19, 1993, the Governor signed into law Act 145, Public Acts of Michi-
gan, 1993 ("Act 145"), a measure which would have significantly impacted fi-
nancing of primary and secondary school operations and which has resulted in
additional property tax and school finance reform legislation. Act 145 would
have exempted all property in the State of Michigan from millage levied for lo-
cal and intermediate school districts operating purposes, other than millage
levied for community colleges, effective July 1, 1994. In order to replace lo-
cal property tax revenues lost as a result of Act 145, the State Legislature,
in December 1993, enacted several statutes which address property tax and
school finance reform.
The property tax and school finance reform measures included a ballot proposal
which was approved by the voters on March 15, 1994. Effective May 1, 1994, the
State sales and use tax was increased from 4% to 6%, the State income tax was
decreased from 4.6% to 4.4%, the cigarette tax was increased from $.25 to $.75
per pack and an additional tax of 16% of the wholesale price was imposed on
certain other tobacco products. A 0.75% real estate transfer tax became effec-
tive January 1, 1995. Beginning in 1994, a state property tax of 6 mills began
to be imposed on all real and personal property currently subject to the gen-
eral property tax. The ability of school districts to levy property taxes for
school operating purposes has been partially restored. A local school board
will, with voter approval, be able to levy up to the lesser of 18 mills or the
number of mills levied in 1993 for school operating purposes, on non-homestead
property and nonqualified agricultural property. The adopted ballot proposal
contained additional provisions regarding the ability of local school districts
to levy taxes as well as a limit on assessment increases for each parcel of
property, beginning in 1995 to the lesser of 5% or the rate of inflation. When
property is subsequently sold, its assessed value will revert to the current
assessment level of 50% of true cash value. Under the adopted ballot proposal,
much of the additional revenue generated by the new taxes will be dedicated to
the State School Aid Fund.
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The adopted ballot proposal contained a system of financing local school oper-
ating costs relying upon a foundation allowance amount which may vary by dis-
trict based upon historical spending levels. State funding will provide each
school district an amount generally equal to the difference between its foun-
dation allowance and the amount of revenues it could generate if it levied
certain local property taxes at the maximum rate authorized by state law. Lo-
cal school districts will also be entitled to levy supplemental property taxes
to generate additional revenues if their foundation allowance is less than
their historical per pupil expenditures. The adopted ballot proposal also con-
tained provisions which allow for the levy of a limited number of enhancement
mills on regional and local school district bases.
The adopted ballot proposal shifts significant portions of the cost of local
school operations from local school districts to the State and raises addi-
tional State revenues to fund these additional State expenses. These addi-
tional revenues will be included within the State's constitutional revenue
limitations and may impact the State's ability to raise additional revenues in
the future.
FACTORS PERTAINING TO NEW JERSEY
As described above, except to the extent the New Jersey Fund invests in tempo-
rary investments, the New Jersey Fund will invest substantially all of its net
assets in New Jersey Municipal Obligations. The New Jersey Fund is therefore
susceptible to political, economic or regulatory factors affecting issuers of
New Jersey Municipal Obligations. The following information provides only a
brief summary of some of the complex factors affecting the financial situation
in New Jersey (the "State") and is derived from sources that are generally
available to investors and is believed to be accurate. It is based in part on
information obtained from various State and local agencies in New Jersey. No
independent verification has been made of the accuracy or completeness of any
of the following information.
There can be no assurance that current or future statewide or regional eco-
nomic difficulties, and the resulting impact on State or local governmental
finances generally, will not adversely affect the market value of New Jersey
Municipal Obligations held in the portfolio of the New Jersey Fund or the
ability of particular obligors to make timely payments of debt service on (or
relating to) those obligations.
The State and Its Economy. The State is the ninth largest state in population
and the fifth smallest in land area. With an average of 1,062 people per
square mile, it is the most densely populated of all the states. The State's
economic base is diversified, consisting of a variety of manufacturing, con-
struction and service industries, supplemented by rural areas with selective
commercial agriculture. Historically, New Jersey's average per capita income
has been well above the national average, and in 1994 the State ranked second
among the states in per capita personal income ($27,742).
The New Jersey Economic Policy Council, a statutory arm of the New Jersey De-
partment of Commerce and Economic Development, has reported in New Jersey Eco-
nomic Indicators, a monthly publication of the New Jersey Department of Labor,
Division of Labor Market and Demographic Research, that in 1988 and 1989 em-
ployment in New Jersey's manufacturing sector failed to benefit from the ex-
port boom experienced by many Midwest states and the State's service sectors,
which had fueled the State's prosperity since 1982, lost momentum. In the
meantime, the prolonged fast growth in the State in the mid 1980s resulted in
a tight labor market situation, which has led to relatively high wages and
housing
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prices. This means that, while the incomes of New Jersey residents are rela-
tively high, the State's business sector has become more vulnerable to compet-
itive pressures.
The onset of the national recession (which officially began in July 1990 ac-
cording to the National Bureau of Economic Research) caused an acceleration of
New Jersey's job losses in construction and manufacturing. In addition, the
national recession caused an employment downturn in such previously growing
sectors as wholesale trade, retail trade, finance, utilities and trucking and
warehousing. Reflecting the downturn, the rate of unemployment in the State
rose from a low of 3.6% during the first quarter of 1989 to an estimated 6.6%
in April 1996, which is greater than the national average of 5.4% in April
1996.
Because some sectors will lag due to continued excess capacity, employers even
in rebounding sectors can be expected to remain cautious about hiring until
they become convinced that improved business will be sustained, and certain
firms will continue to merge or downsize to increase profitability. Economic
recovery is likely to be slow and uneven in New Jersey, with unemployment re-
ceding at a correspondingly slow pace.
Debt Service. The primary method for State financing of capital projects is
through the sale of the general obligation bonds of the State. These bonds are
backed by the full faith and credit of the State tax revenues and certain
other fees are pledged to meet the principal and interest payments and if pro-
vided, redemption premium payments, if any, required to repay the bonds. As of
June 30, 1995, there was a total authorized bond indebtedness of approximately
$9.48 billion, of which $3.65 billion was issued and outstanding, $4.0 billion
was retired (including bonds for which provision for payment has been made
through the sale and issuance of refunding bonds) and $1.83 billion was
unissued. The debt service obligation for such outstanding indebtedness is
$466.3 million for fiscal year 1996.
New Jersey's Budget and Appropriation System. The State operates on a fiscal
year beginning July 1 and ending June 30. At the end of fiscal year 1989,
there was a surplus in the State's general fund (the fund into which all State
revenues not otherwise restricted by statute are deposited and from which ap-
propriations are made) of $411.2 million. At the end of fiscal year 1990,
there was a surplus in the general fund of $1.0 million. At the end of fiscal
year 1991, there was a surplus in the general fund of $1.4 million. New Jersey
closed its fiscal year 1992 with a surplus in the general fund of $760.8 mil-
lion, fiscal year 1993 with a surplus of $937.4 million, and fiscal year 1994
with a surplus of $926.0 million. It is estimated that New Jersey closed its
fiscal year 1995 with a surplus of $569 million.
In order to provide additional revenues to balance future budgets, to redis-
tribute school aid and to contain real property taxes, on June 27, 1990, and
July 12, 1990, Governor Florio signed into law legislation which was estimated
to raise approximately $2.8 billion in additional taxes (consisting of $1.5
billion in sales and use taxes and $1.3 billion in income taxes), the biggest
tax hike in New Jersey history. There can be no assurance that receipts and
collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990, with the increase
in the State's sales and use tax rate from 6.0% to 7.0% and the elimination of
exemptions for certain products and services not
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previously subject to the tax, such as telephone calls, disposable paper prod-
ucts (which has since been reinstated), soaps and detergents, janitorial serv-
ices, alcoholic beverages and cigarettes. At the time of enactment, it was pro-
jected that these taxes would raise approximately $1.5 billion in additional
revenue. Projections and estimates of receipts from sales and use taxes, howev-
er, have been subject to variance in recent fiscal years.
The second part of the tax hike took effect on January 1, 1991, in the form of
an increased state income tax on individuals. At the time of enactment, it was
projected that this increase would raise approximately $1.3 billion in addi-
tional income taxes to fund a new school aid formula, a new homestead rebate
program and state assumption of welfare and social services costs. Projections
and estimates of receipts from income taxes, however, have also been subject to
variance in recent fiscal years. Under the legislation, income tax rates in-
creased from their previous range of 2.0% to 3.5% to a new range of 2.0% to
7.0%, with the higher rates applying to married couples with incomes exceeding
$70,000 who file joint returns, and to individuals filing single returns with
incomes of more than $35,000.
The Florio administration had contended that the income tax package would help
reduce local property tax increases by providing more state aid to municipali-
ties. Under the income tax legislation the State assumed approximately $289.0
million in social services costs that previously were paid by counties and mu-
nicipalities and funded by property taxes. In addition, under the new formula
for funding school aid, an extra $1.1 billion was proposed to be sent by the
State to school districts beginning in 1991, thus reducing the need for prop-
erty tax increases to support education programs.
Effective July 1, 1992, the State's sales and use tax rate decreased from 7% to
6%. Effective January 1, 1994, an across-the-board 5% reduction in the income
tax rates was enacted and effective January 1, 1995, further reductions ranging
from 1% up to 10% in income tax rates took effect.
On June 30, 1995, Governor Whitman signed the New Jersey Legislature's $16.0
billion budget for fiscal year 1996. The balanced budget, which includes $541
million in surplus, is $300 million more than the 1995 budget. Whether the
State can achieve a balanced budget depends on its ability to enact and imple-
ment expenditure reductions and to collect estimated tax revenues.
Litigation. The State is a party in numerous legal proceedings pertaining to
matters incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation pro-
ceedings and other alleged violations of State and Federal laws. Included in
the State's outstanding litigation are cases challenging the following: the
funding of teachers' pension funds, the adequacy of Medicaid reimbursement for
hospital services, the hospital assessment authorized by the Health Care Reform
Act of 1992, various provisions, and the constitutionality, of the Fair Automo-
bile Insurance Reform Act of 1990, the State's role in a consent order concern-
ing the construction of a resource facility in Passaic County, actions taken by
the Bureau of Securities against an individual, the State's actions regarding
alleged chromium contamination of State-owned property in Hudson County, the
issuance of emergency redirection orders and a draft permit by the Department
of Environmental Protection and Energy,
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refusal of the State to share with Camden County federal funding the State re-
cently received for disproportionate share hospital payments made to county
psychiatric facilities, and the constitutionality of annual A-901 hazardous and
solid waste licensure renewal fees collected by the Department of Environmental
Protection and Energy. Adverse judgments in these and other matters could have
the potential for either a significant loss of revenue or a significant unan-
ticipated expenditure by the State.
At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New
Jersey Tort Claims Act. In addition, at any given time, there are various num-
bers of contract claims against the State and State agencies seeking recovery
of monetary damages. The State is unable to estimate its exposure for these
claims.
Debt Ratings. For many years prior to 1991, both Moody's and S&P had rated New
Jersey general obligation bonds Aaa and AAA, respectively. On July 3, 1991,
however, S&P downgraded New Jersey general obligation bonds to AA+. On June 4,
1992, S&P placed New Jersey general obligation bonds on CreditWatch with nega-
tive implications, citing as its principal reason for its caution the denial by
the federal government of New Jersey's request for $450 million in retroactive
Medicaid payments for psychiatric hospitals. These funds were critical to clos-
ing a $1 billion gap in the State's $15 billion budget for fiscal year 1992
which ended on June 30, 1992. Under New Jersey state law, the gap in the budget
must be closed before the new budget year began on July 1, 1992. S&P suggested
the State could close fiscal year 1992's budget gap and help fill fiscal year
1993's hole by a reversion of $700 million of pension contributions to its gen-
eral fund under a proposal to change the way the State calculates its pension
liability.
On July 6, 1992, S&P reaffirmed its AA+ rating for New Jersey general obliga-
tion bonds and removed the debt from its CreditWatch list, although it stated
that New Jersey's long-term financial outlook was negative. S&P was concerned
that the State was entering fiscal year 1993 with only a $26 million surplus
and remained concerned about whether the State economy would recover quickly
enough to meet lawmakers' revenue projections. It also remained concerned about
the recent federal ruling leaving in doubt how much the State was due in retro-
active Medicaid reimbursements and a ruling by a federal judge, now on appeal,
of the State's method for paying for uninsured hospital patients. However, on
July 27, 1994, S&P announced that it was changing the State's outlook from neg-
ative to stable due to a brightening of the State's prospects as a result of
Governor Whitman's effort to trim spending and cut taxes, coupled with an im-
proving economy. S&P reaffirmed its AA+ rating at the same time.
On August 24, 1992, Moody's downgraded New Jersey general obligation bonds to
Aa1, stating that the reduction reflected a developing pattern of reliance on
nonrecurring measures to achieve budgetary balance, four years of financial op-
erations marked by revenue shortfalls and operating deficits, and the likeli-
hood that serious financial pressures would persist. On August 5, 1994, Moody's
reaffirmed its Aa1 rating, citing on the positive side New Jersey's broad-based
economy, high income levels, history of maintaining a positive financial posi-
tion and moderate (albeit rising) debt ratios, and, on the negative
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side, a continued reliance on one-time revenues and a dependence on pension-re-
lated savings to achieve budgetary balance.
There can be no assurance that these ratings will continue.
Other Issuers of New Jersey Municipal Obligations. There are a number of state
agencies, instrumentalities and political subdivisions of the State that issue
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 securities is-
sued by them may vary considerably from the credit quality of obligations
backed by the full faith and credit of the State.
FACTORS PERTAINING TO PENNSYLVANIA
As described above, except to the extent the Pennsylvania Fund invests in tem-
porary investments, the Pennsylvania Fund will invest substantially all of its
net assets in Pennsylvania Municipal Obligations. The Pennsylvania Fund is
therefore susceptible to political, economic or regulatory factors affecting
issuers of Pennsylvania Municipal Obligations. Without intending to be com-
plete, the following briefly summarizes some of these difficulties and the cur-
rent financial situation, as well as some of the complex factors affecting the
financial situation in the Commonwealth of Pennsylvania (the "Commonwealth" or
"Pennsylvania"). It is derived from sources that are generally available to in-
vestors and is based in part on information obtained from various agencies in
the Commonwealth. No independent verification has been made of the accuracy or
completeness of the following information.
Prospective investors should consider the financial difficulties and pressures
which the Commonwealth and certain of its municipal subdivisions have under-
gone. Both the Commonwealth and the City of Philadelphia have historically ex-
perienced significant revenue shortfalls. There can be no assurance that cur-
rent or future statewide or regional economic difficulties, and the resulting
impact on State or local governmental finances generally, will not adversely
affect the market value of Pennsylvania Municipal Obligations held in the port-
folio of the Pennsylvania Fund or the ability of particular obligors to make
timely payments of debt service on (or relating to) those obligations.
State Economy. Pennsylvania has been historically identified as a heavy-indus-
try state although that reputation has changed recently as the industrial com-
position of the Commonwealth diversified when the coal, steel and railroad in-
dustries began to decline. The major new sources of growth in Pennsylvania are
in the service sector, including trade, medical and the health services, educa-
tion and financial institutions. Pennsylvania's agricultural industries are
also an important component of the Commonwealth's economic structure, account-
ing for more than $3.6 billion in crop and livestock products annually while
agribusiness and food related industries support $39 billion in economic activ-
ity annually.
Employment within the Commonwealth increased steadily from 1984 to 1990. From
1991 to 1994, employment in the Commonwealth declined 1.2%. The change in em-
ployment experienced in the Commonwealth during such periods is comparable to
the change in employment in the Middle Atlantic region of the United States.
Non-manufacturing employment in the Commonwealth has increased steadily since
1980 to its 1994 level of 82.0% of total Commonwealth employment. Manufactur-
ing, which contributed 18.0% of 1994 non-agricultural employment, has fallen
behind both the services sector and
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the trade sector as the largest single source of employment within the Common-
wealth. In 1994, the services sector accounted for 29.9% of all non-agricul-
tural employment in the Commonwealth while the trade sector accounted for
22.9%.
The Commonwealth recently experienced a slowdown in its economy. Moreover,
economic strengths and weaknesses vary in different parts of the Commonwealth.
In general, heavy industry and manufacturing have been facing increasing com-
petition from foreign producers. During 1995, the annual average unemployment
rate in Pennsylvania was 5.9% compared to 5.6% for the United States. For Jan-
uary 1996 the unadjusted unemployment rate was 6.7% in the Commonwealth and
6.3% in the United States, while the seasonally adjusted unemployment rate for
the Commonwealth was 6.1% and for the United States was 5.8%.
State Budget. The Commonwealth operates under an annual budget that is formu-
lated and submitted for legislative approval by the Governor each February.
The Pennsylvania Constitution requires that the Governor's budget proposal
consist of three parts: (i) a balanced operating budget setting forth proposed
expenditures and estimated revenues from all sources and, if estimated reve-
nues and available surplus are less than proposed expenditures, recommending
specific additional sources of revenue sufficient to pay the deficiency; (ii)
a capital budget setting forth proposed expenditures to be financed from the
proceeds of obligations of the Commonwealth or its agencies or from operating
funds; and (iii) a financial plan for not less than the succeeding five fiscal
years, including for each year projected operating expenditures and estimated
revenues and projected expenditures for capital projects. The General Assembly
may add, change or delete any items in the budget prepared by the Governor,
but the Governor retains veto power over the individual appropriations passed
by the legislature. The Commonwealth's fiscal year begins on July 1 and ends
on June 30.
All funds received by the Commonwealth are subject to appropriation in spe-
cific amounts by the General Assembly or by executive authorization by the
Governor. Total appropriations enacted by the General Assembly may not exceed
the ensuing year's estimated revenues, plus (less) the unappropriated fund
balance (deficit) of the preceding year, except for constitutionally autho-
rized debt service payments. Appropriations from the principal operating funds
of the Commonwealth (the General Fund, the Motor License Fund and the State
Lottery Fund) are generally made for one fiscal year and are returned to the
unappropriated surplus of the fund if not spent or encumbered by the end of
the fiscal year. The Constitution specifies that a surplus of operating funds
at the end of a fiscal year must be appropriated for the ensuing year.
Pennsylvania uses the "fund" method of accounting for receipts and disburse-
ments. In the Commonwealth, over 150 funds have been established by legisla-
tive enactment or in certain cases by administrative action for the purpose of
recording the receipt and disbursement of monies received by the Commonwealth.
Annual budgets are adopted each fiscal year for the principal operating funds
of the Commonwealth and several other special revenue funds. Expenditures and
encumbrances against these funds may only be made pursuant to appropriation
measures enacted by the General Assembly and approved by the Governor. The
General Fund, the Commonwealth's largest fund, receives all tax revenues, non-
tax revenues and federal grants and entitlements that are not specified by law
to be deposited elsewhere. The majority of the Commonwealth's operating and
administrative expenses are payable from the General
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Fund. Debt service on all bond indebtedness of the Commonwealth, except that
issued for highway purposes or for the benefit of other special revenue funds,
is payable from the General Fund.
Financial information for the principal operating funds of the Commonwealth
are maintained on a budgetary basis of accounting, which is used for the pur-
pose of ensuring compliance with the enacted operating budget. The Common-
wealth also prepares annual financial statements in accordance with generally
accepted accounting principles ("GAAP"). Budgetary basis financial reports are
based on a modified cash basis of accounting as opposed to a modified accrual
basis of accounting prescribed by GAAP. Financial information is adjusted at
fiscal year-end to reflect appropriate accruals for financial reporting in
conformity with GAAP.
Recent Financial Results. From fiscal 1984, when the Commonwealth first pre-
pared its financial statements on a GAAP basis, through fiscal 1989, the Com-
monwealth reported a positive unreserved-undesignated fund balance for its
governmental fund types at each fiscal year end. Slowing economic growth dur-
ing 1990, leading to a national economic recession beginning in fiscal 1991,
reduced revenue growth and increased costs of certain governmental programs
and contributed to negative unreserved-undesignated fund balances at the end
of the 1990 and 1991 fiscal years. The negative unreserved-undesignated fund
balance was due largely to operating deficits in the General Fund and the
State Lottery Fund during those fiscal years. Actions taken during fiscal 1992
to bring the General Fund back into balance, including tax increases and ex-
penditure restraints, resulted in a $1.1 billion reduction to the unreserved-
undesignated fund deficit for combined governmental fund types and a return to
a positive fund balance. Financial performance continued to improve during the
1993 and 1994 fiscal years. The fund balance for the governmental fund types
increased from $1,692.8 million on June 30, 1993, as restated, to $1,982.0
million on June 30, 1994, an increase of $289.2 million. An unreserved-undes-
ignated fund balance of $334.7 million was recorded for fiscal 1994 year end.
The Commonwealth experienced a $454 million General Fund deficit as of the end
of its 1991 fiscal year. The deficit reflected higher than budgeted expendi-
tures, below-estimate economic activity and growth rates of economic indica-
tors and total tax revenue shortfalls below those assumed in the enacted bud-
get. Rising demands on state programs caused by the economic recession, par-
ticularly for medical assistance and cash assistance programs, and the in-
creased costs of special education programs and correction facilities and pro-
grams, contributed to increased expenditures in fiscal 1991, while tax reve-
nues for the 1991 fiscal year were severely affected by the economic reces-
sion. Total corporation tax receipts and sales and use tax receipts during
fiscal 1991 were, respectively, 7.3 percent and 0.9 percent below amounts col-
lected during fiscal 1990. Personal income tax receipts also were affected by
the recession but not to the extent of the other major General Fund taxes, in-
creasing only 2.0 percent over fiscal 1990 collections. A number of actions
were taken throughout the fiscal year by the Commonwealth to mitigate the ef-
fects of the recession on budget revenues and expenditures. The Commonwealth
initiated a number of cost-saving measures, including the firing of 2,000
state employees, deferral of paychecks and reduction of funds to state univer-
sities, which resulted in approximately $871 million cost savings.
Actions taken during fiscal 1992 to bring the General Fund budget back into
balance, including tax increases and expenditure restraints, resulted in a
$1.1 billion reduction for the unreserved-undesignated fund deficit for com-
bined governmental fund types and a return to a positive fund balance. Total
general
26
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fund revenues for fiscal 1992 were $14,516.8 million which is approximately 22
percent higher than fiscal 1991 revenues of $11,877.3 million due in large part
to tax increases. The increased revenues funded substantial increases in educa-
tion, social services and corrections programs. As a result of the tax in-
creases and certain appropriation lapses, fiscal 1992 ended with an $8.8 mil-
lion surplus after having started the year with an unappropriated balance defi-
cit of $454 million.
Fiscal 1993 closed with revenues higher than anticipated and expenditures ap-
proximately as projected, resulting in an ending unappropriated balance surplus
of $242.3 million. A deduction in the personal income tax rate in July 1992 and
the one-time receipt of revenues from retroactive corporate tax increases in
fiscal 1992 were responsible, in part, for the low growth in fiscal 1993.
Financial performance continued to improve during fiscal 1994. Commonwealth
revenues during the 1994 fiscal year totaled $15,210.7 million, $38.6 million
above the fiscal year estimate, and 3.9 percent over Commonwealth revenues dur-
ing the 1993 fiscal year. The sales tax was an important contributor to the
higher than estimated revenues. The strength of collections from the sales tax
offset the lower than budgeted performance of the personal income tax that
ended the 1994 fiscal year $74.4 million below estimate. The shortfall in the
personal income tax was largely due to shortfalls in income not subject to
withholding such as interest, dividends and other income. Expenditures, exclud-
ing pooled financing expenditures and net of all fiscal 1994 appropriation
lapses, totaled $14,934.4 million representing a 7.2 percent increase over fis-
cal 1993 expenditures. Medical assistance and prisons spending contributed to
the rate of spending growth for the 1994 fiscal year. The Commonwealth main-
tained an operating balance on a budgetary basis for fiscal 1994 producing a
fiscal year ending unappropriated surplus of $335.8 million.
Commonwealth revenues for the 1995 fiscal year were above estimate and exceeded
fiscal year expenditures and encumbrances. Fiscal 1995 was the fourth consecu-
tive fiscal year the Commonwealth reported an increase in the fiscal year-end
unappropriated balance. Prior to reserves for transfer to the Tax Stabilization
Reserve Fund, the fiscal 1995 closing unappropriated surplus was $540.0 mil-
lion, an increase of $204.2 million over the fiscal 1994 closing unappropriated
surplus prior to transfers. Commonwealth revenues during the 1995 fiscal year
were $459.4 million, 2.9 percent, above the estimate of revenues used at the
time the 1995 fiscal year budget was enacted. Corporation taxes contributed
$329.4 million of the additional receipts largely due to higher receipts from
the corporate net income tax. Fiscal 1995 revenues from the corporate net in-
come tax were 22.6 percent over collections in fiscal 1994 and include the ef-
fects of the reduction of the tax rate from 12.25 percent to 11.99 percent that
became effective with tax years beginning on and after January 1, 1994. The
sales and use tax and miscellaneous revenues also showed strong year-over-year
growth that produced above-estimate revenue collections. Sales and use tax rev-
enues were $5,526.9 million, $128.8 million above the enacted budget estimate
and 7.9 percent over fiscal 1994 collections. Tax receipts from both motor ve-
hicle and non-motor vehicle sales contributed to the higher collections. Mis-
cellaneous revenue collections for fiscal 1995 were $183.5 million, $44.9 mil-
lion above estimate and were largely due to additional investment earnings, es-
cheat revenues and other miscellaneous revenues.
Fiscal 1996 Budget. On June 30, 1995, the Governor signed a $16.2 billion gen-
eral fund budget, an increase of approximately 2.7 percent over the total ap-
propriations from Commonwealth revenues in
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the fiscal 1995 budget. The appropriations increase for fiscal 1996 is one of
the lowest rates in recent years. Areas receiving the largest budgetary in-
creases are medical assistance and basic education. In addition, the budget ac-
celerated corporate net income tax rate reductions eliminated the inheritance
tax paid by a surviving spouse on jointly owned property, and made other busi-
ness tax reductions.
Fiscal 1997 Budget. On February 6, 1996, the Governor submitted to the General
Assembly his fiscal 1997 budget that proposes $31.761 billion in total spending
including a $16.19 billion General Fund budget, a 0.2% decrease from the fiscal
1996 budget. The proposed fiscal 1997 budget represents the first time since
1970 that a Pennsylvania Governor has proposed a budget with less spending than
the prior year. The proposed fiscal 1997 budget contains modest business tax
reductions.
Debt Limits and Outstanding Debt. The Constitution of Pennsylvania permits the
issuance of the following types of debt: (i) debt to suppress insurrection or
rehabilitate areas affected by disaster; (ii) electorate approved debt; (iii)
debt for capital projects subject to an aggregate outstanding debt limit of
1.75 times the annual average tax revenues of the preceding five fiscal years;
and (iv) tax anticipation notes payable in the fiscal year of issuance.
Under the Pennsylvania Fiscal Code, the Auditor General is required annually to
certify to the Governor and the General Assembly certain information regarding
the Commonwealth's indebtedness. According to the February 29, 1996 Auditor
General certificate, the average annual tax revenues deposited in all funds in
the five fiscal years ended June 30, 1995 was approximately $17.7 billion, and,
therefore, the net debt limitation for the 1996 fiscal year is $30.9 billion.
Outstanding net debt totaled $3.9 billion at June 30, 1995, approximately equal
to the net debt at June 30, 1994. At February 29, 1996, the amount of debt au-
thorized to be issued, but not yet incurred was $16.5 billion.
Outstanding general obligation debt totaled $5,045.4 million at June 30, 1995,
a decrease of $30.4 million from June 30, 1994. Over the ten-year period ending
June 30, 1995, total outstanding general obligation debt increased at an annual
rate of 1.1 percent. Within the most recent five-year period, outstanding gen-
eral obligation debt has grown at an annual rate of 1.7 percent.
Debt Ratings. All outstanding general obligation bonds of the Commonwealth are
rated AA- by S&P and A1 by Moody's.
City of Philadelphia. The City of Philadelphia is the largest city in the Com-
monwealth with an estimated population of 1,585,577, according to the 1990 cen-
sus. Philadelphia experienced a series of general fund deficits for fiscal
years 1988 through 1992 which have culminated in the City's present serious fi-
nancial difficulties. In its 1992 Comprehensive Annual Financial Report, the
City reported a cumulative general fund deficit of $71.4 million for fiscal
year 1992.
In June 1991, the Pennsylvania legislature established the Pennsylvania Inter-
governmental Cooperation Authority ("PICA"), a five-member board to assist
Philadelphia in remedying fiscal emergencies. PICA is designed to provide as-
sistance through the issuance of funding debt and to make factual findings and
recommendations to Philadelphia concerning its budgetary and fiscal affairs.
The legislation empowers PICA to issue notes and bonds on behalf of Philadel-
phia, and also authorizes Philadelphia to levy a one-
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percent sales tax, the proceeds of which would be used to pay off the bonds. In
return for PICA's fiscal assistance, Philadelphia is required, among other
things, to establish five-year financial plans that include balanced annual
budgets. Under the legislation, if Philadelphia does not comply with such re-
quirements, PICA may withhold bond revenues and certain state funding. At this
time, the City is operating under a five-year fiscal plan approved by PICA on
April 17, 1995. Technical modifications were made to that plan as of July 12,
1995 and the revised plan, incorporating such technical modifications, was ap-
proved by PICA on July 18, 1995. As of November 15, 1995, PICA has issued ap-
proximately $1,418.7 million of its Special Tax Revenue Bonds.
No further PICA bonds are to be issued by PICA for the purpose of financing a
capital project or deficit as the authority for such bond sales expired on De-
cember 31, 1994. PICA's authority to issue debt for the purpose of financing a
cash flow deficit expires on December 31, 1996. Its ability to refund existing
outstanding debt is unrestricted.
In January 1993, Philadelphia anticipated a cumulative general fund budget def-
icit of $57 million for the 1993 fiscal year. In response to the anticipated
deficit, the Mayor unveiled a financial plan eliminating the budget deficit for
the 1993 budget year through significant service cuts that included a plan to
privatize certain city-provided services. Due to an upsurge in tax receipts,
cost-cutting and additional PICA borrowings, Philadelphia completed the 1993
fiscal year with a balanced general fund budget. The audit findings for fiscal
year 1993 show a cumulative general fund surplus of approximately $3 million
for the fiscal year ended June 30, 1993.
In January 1994, the Mayor proposed a $2.3 billion city general fund budget
that included no tax increases, no significant service cuts and a series of
modest health and welfare program increases. At that time, the Mayor also un-
veiled a $2.2 billion program (the "Philadelphia Economic Stimulus Program")
designed to stimulate Philadelphia's economy and stop the loss of 1,000 jobs a
month. In its 1994 Comprehensive Annual Financial Report, Philadelphia reported
a cumulative general fund surplus of approximately $15.4 million for the fiscal
year ended June 30, 1994, up from approximately $3 million as of June 30, 1993.
Philadelphia's preliminary unaudited General Fund financial statements at June
30, 1995 project a surplus approximating $59.6 million.
S&P's rating on Philadelphia's general obligation bonds is BBB-. Moody's rating
is currently Baa.
Litigation. The Commonwealth is a party to numerous lawsuits in which an ad-
verse final decision could materially affect the Commonwealth's governmental
operations and consequently its ability to pay debt service on its obligations.
The Commonwealth also faces tort claims made possible by the limited waiver of
sovereign immunity effected by Act 152, approved September 28, 1978, as amend-
ed. Under Act 152, damages for any loss are limited to $250,000 per person and
$1 million for each accident.
Other Issuers of Pennsylvania Municipal Obligations. There are a number of
state agencies, instrumentalities and political subdivisions of the Common-
wealth that issue 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 securities issued by
29
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them may vary considerably from the credit quality of obligations backed by the
full faith and credit of the Commonwealth.
FACTORS PERTAINING TO VIRGINIA
As described above, except to the extent the Virginia Fund invests in temporary
investments, the Virginia Fund will invest substantially all of its net assets
in Virginia Municipal Obligations. The Virginia Fund is therefore susceptible
to political, economic or regulatory factors affecting issuers of Virginia Mu-
nicipal Obligations. Without intending to be complete, the following briefly
summarizes some of these difficulties and the current financial situation, as
well as some of the complex factors affecting the financial situation, in the
Commonwealth of Virginia (the "Commonwealth" or "Virginia"). It is derived from
sources that are generally available to investors and is based in part on in-
formation obtained from various agencies in Virginia. No independent verifica-
tion has been made of the accuracy or completeness of the following informa-
tion.
There can be no assurance that current or future statewide or regional economic
difficulties, and the resulting impact on State or local governmental finances
generally, will not adversely affect the market value of Virginia Municipal Ob-
ligations held in the portfolio of the Virginia Fund or the ability of particu-
lar obligors to make timely payments of debt service on (or relating to) those
obligations.
The Commonwealth's financial condition is supported by a broad-based economy,
including manufacturing, tourism, agriculture, ports, mining and fisheries.
Manufacturing continues to be a major source of employment, ranking behind only
services, wholesale and retail trade, and government (federal, state and lo-
cal). Defense activity is an important component of Virginia's economy. The
Commonwealth accounted for 9.6 percent of all military and civilian U.S. De-
partment of Defense (DOD) employees and ranked first in per capita defense
spending in federal fiscal year 1994, while ranking second in total defense
spending. Northern Virginia and the Hampton Roads area accounted for 91.5 per-
cent of DOD employment in Virginia in 1994. However, for federal fiscal year
1994, total DOD employment in Virginia decreased 2.2 percent from the previous
year and can be expected to continue to decline as previously announced base
closures are implemented and the military downsizes.
Economic growth continued in fiscal year 1995, mimicking neither the boom of
the late 1980's nor the 1990-1991 recession. Personal income continued to rise
in real terms during the first three quarters of the fiscal year but at only
1.1 percent in the first quarter of calendar year 1995. Employment continued to
give brighter news and unemployment dropped to 4.7 percent compared to the na-
tional rate of 5.7 percent. While recent decisions by large private firms to
locate or expand in Virginia provide encouragement, additional company
downsizings and defense cutbacks have now been joined by the prospect of major
cuts in federal employment as threats to the Commonwealth's economic health.
Personal income figures for Virginia have generally followed national trends.
Changes in the Commonwealth personal income were generally higher than the U.S.
figures in the 1980's. Since then, the Commonwealth and the nation have grown
at similar rates. Virginia's per capita income of $22,501 for 1994 was 104 per-
cent of the national figure, as in the previous two years. At 106 percent of
the South Atlantic region's per capita income for both 1993 and 1994, the ratio
remains lower than at any other time since 1980.
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Virginia's nonagricultural employment has also reflected that of the national
economy. For fiscal year 1994 Virginia's nonagricultural employment rose 2.3
percent, as did U.S. employment; however, the rate of growth was less than the
Commonwealth's 2.9 percent rate for the previous year. Total nonagricultural
employment for Virginia in June 1995 was a record high. During the 1980's, the
Commonwealth growth rate outpaced the nation, but since then it has been close
to the national average. The South Atlantic region continued to outpace Vir-
ginia in growth of nonagricultural employment and seemed to be widening the
gap.
The unemployment picture brightened in Virginia in fiscal year 1995. For the
first 10 months of 1994, Virginia's unemployment rate of 5 percent was 21 per-
cent below the national average of 6.3 percent. Virginia's unemployment rate
has typically been one of the lowest in the nation, largely as a result of the
balance found in Virginia's economy, and has remained consistently below the
national rate. Rates of unemployment in excess of 9 percent were found in
southwest Virginia where mining jobs have been lost and the lowest unemployment
rates were seen in the Northern Virginia, Charlottesville and Richmond areas at
under 4 percent.
Employment trends in Virginia have varied from sector to sector. The growth
patterns were similar to those in fiscal year 1994. Employment grew in seven of
ten sectors. This past fiscal year's growth was led by a 6.3 percent employment
jump in the construction sector and 5.4 percent in services. Federal civilian
employment slipped 2.3 percent, the result of continued defense cutbacks and an
effort to downsize. The drop in mining employment accelerated to 9.8 percent
from 7.7 percent in the previous year. Manufacturing has lost 25,100 jobs dur-
ing the five-year period beginning in 1991, emphasizing dramatic evidence of
the shift to a service economy from a goods-producing one. Employment trends
also varied among regions. All of the Commonwealth's metropolitan statistical
areas showed increased employment from fiscal year 1994 to fiscal year 1995,
ranging from .7 percent to 4.3 percent, with most employment increases being
experienced in metropolitan areas.
While Virginia has nearly completed an economic recovery from the 1990-91 re-
cession, its period of eclipsing national and South Atlantic regional economic
outcomes may be over. In both measures of income and particularly of employment
the South Atlantic region seems to be gaining. Virginia continues to lead the
U.S. as a whole in per capita income but no longer exceeds the nation in year-
to-year changes in income and level of employment. The implementation of an-
nounced defense cutbacks, the duration of the period of economic growth, and
the impact of potential cuts in federal spending are continuing sources of con-
cern. Dependence of Virginia's international trade upon tobacco exports is wor-
risome for the long term. Growing interest in Virginia by major corporations as
a site for new facilities is the brightest hope for the future of the state
economy.
The Commonwealth of Virginia has historically operated on a fiscally conserva-
tive basis and is required by its Constitution to have a balanced biennial bud-
get. At the end of the June 30, 1995 fiscal year, the General Fund had an end-
ing fund balance, computed on a budgetary cash basis, of $350.7 million, of
which $151.6 million was in required reserves. $199.1 million of the general
fund balance was designated for expenditure during the next fiscal year, leav-
ing no undesignated, unreserved fund balance. This is the first year since fis-
cal year 1991 that there has not been an undesignated fund balance at year end.
Computed on a modified accrual basis in accordance with generally accepted ac-
counting principles,
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the General Fund balance at the end of the fiscal year ended June 30, 1995, was
negative $86.4 million, compared with a General Fund balance of $185.3 million
at the end of the fiscal year ended June 30, 1994. The fiscal year 1995 deficit
in the General Fund is the result of a settlement and subsequent ruling by the
Virginia Supreme Court in the case of Harper v. Department of Taxation relating
to the tax treatment of federal retirees' benefits.
As of June 30, 1995, total debt of the Commonwealth aggregated $9.3 billion. Of
that amount, $2.7 billion was tax-supported. Outstanding general obligation
debt backed by the full faith and credit of the Commonwealth was $963 million
at June 30, 1995. Of that amount, $524 million was also secured by revenue pro-
ducing capital projects.
The Virginia Constitution contains limits on the amount of general obligation
bonds which the Commonwealth can issue. These limits are substantially in ex-
cess of current levels of outstanding bonds, and at June 30, 1995 would permit
an additional total of approximately $6.0 billion of bonds secured by revenue-
producing projects and approximately $6.1 billion of unsecured general obliga-
tion bonds for capital projects, with not more than approximately $1.0 billion
of the latter to be issued in any four-year period. Bonds which are not secured
by revenue-producing projects must be approved in a state-wide election.
The Commonwealth of Virginia maintains a AAA bond rating from Standard & Poor's
Corporation, Moody's Investors Service and Fitch Investors Service on its gen-
eral obligation indebtedness, reflecting in part its sound fiscal management,
diversified economic base and low debt ratios. There can be no assurances that
these conditions will continue. Nor are these same conditions necessarily ap-
plicable to securities which are not general obligations of the Commonwealth.
Securities issued by specific municipalities, governmental authorities or simi-
lar issuers may be subject to economic risks or uncertainties peculiar to the
issuers of such securities or the sources from which they are to be paid, and
the credit quality of the securities issued by them may vary considerably from
the credit quality of obligations backed by the full faith and credit of the
Commonwealth.
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 intends to purchase. To accomplish such hedging, a Fund may take an in-
vestment 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 op-
tions 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 in-
crease in interest rates, and the purchase of financial futures or of call op-
tions on financial futures or on debt securities or indexes is a means of hedg-
ing against increases in the cost of the securities a Fund intends to purchase
as a result of a decline
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in interest rates. Writing a call option on a futures contract or on debt secu-
rities 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 Obligations a Fund intends to ac-
quire. The writing of such options provides a hedge to the extent of the pre-
mium 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 pur-
poses, and that no such transactions may be entered into by a Fund if the ag-
gregate 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 underlying 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 subject to the tax require-
ment that less than 30% of its gross income may be derived 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 op-
tions 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" options, 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 limita-
tions 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 contracts and options
on specified financial instruments call for settlement by delivery of the fi-
nancial instruments covered by the contracts, in most cases positions in these
contracts are closed out in cash by entering into offsetting, liquidating or
closing transactions. Index futures and options are designed for cash settle-
ment 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
33
<PAGE>
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 commissions on the financial futures transaction. To compensate for imper-
fect corrections, the Funds may purchase or sell futures contracts in a greater
dollar amount than the hedged securities if the volatility of the hedged secu-
rities is historically greater than the volatility of the futures contracts.
Conversely, the Funds may purchase or sell fewer futures contracts if the vola-
tility 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.
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.
34
<PAGE>
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.
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 limita-
35
<PAGE>
tions. Such notes may be issued for different purposes and may be secured dif-
ferently 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.
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-
36
<PAGE>
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 to principal and interest of
A rated Municipal Obligations are considered adequate, but elements may be
present, which suggest a susceptibility to impairment sometime in the future.
Municipal Obligations rated Baa by Moody's are considered medium grade 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.
The four highest ratings of S&P for Municipal Obligations are AAA, AA, A and
BBB. Municipal Obligations rated AAA have a strong capacity to pay principal
and interest. The rating of AA indicates that capacity to pay principal and in-
terest is very strong and such bonds differ from AAA issues only in small de-
gree. The category of A describes bonds which have a strong capacity to pay
principal and interest, although such bonds are somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions. The
BBB rating is the lowest "investment grade" security rating by S&P. Municipal
Obligations rated BBB are regarded as having an adequate capacity to pay prin-
cipal and interest. Whereas such bonds normally exhibit adequate protection pa-
rameters, adverse economic conditions are more likely to lead to a weakened ca-
pacity to pay principal and interest for bonds in this category than for bonds
in the A category.
37
<PAGE>
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 the Trust, including general supervision of the duties per-
formed for the Funds under the Investment Management Agreement, is the respon-
sibility of its Board of Trustees. The Trust currently has six trustees, two
of whom are "interested persons" (as the term "interested persons" is defined
in the Investment Company Act of 1940) and four of whom are "disinterested
persons." The names and business addresses of the trustees and officers of the
Trust and their principal occupations and other affiliations during the past
five years are set forth below, with those trustees who are "interested per-
sons" of the Trust indicated by an asterisk.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard J. Franke* 64 Chairman of the Chairman of the Board, Director and for-
333 West Wacker Drive Board and Trustee merly President of John Nuveen & Co. Incor-
Chicago, IL 60606 porated; Chairman of the Board and Direc-
tor, formerly President, of Nuveen Advisory
Corp.; Chairman of the Board and Director
of Nuveen Institutional Advisory Corp.
(since April 1990); Certified Financial
Planner.
- -----------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger* 47 President and Trustee Executive Vice President and Director of
333 West Wacker Drive The John Nuveen Company (since March 1992)
Chicago, IL 60606 and John Nuveen & Co. Incorporated; Direc-
tor of Nuveen Advisory Corp. (since 1992)
and Nuveen Institutional Advisory Corp.
(since 1992).
- -----------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown 61 Trustee Retired (August 1989) as Senior Vice Presi-
201 Michigan Avenue dent of The Northern Trust Company.
Highwood, IL 60040
- -----------------------------------------------------------------------------------------------------------------------------------
Anne E. Impellizzeri 63 Trustee President and Chief Executive Officer of
3 West 29th Street Blanton-Peale, Institutes of Religion and
New York, NY 10001 Health (since December 1990); prior there-
to, Vice President of New York City Part-
nership (from 1987 to 1990).
</TABLE>
- -------------------------------------------------------------------------------
38
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Margaret K. Rosenheim 69 Trustee Helen Ross Professor of Social Welfare Pol-
969 East 60th Street icy, School of Social Service Administra-
Chicago, IL 60637 tion, University of Chicago.
- ------------------------------------------------------------------------------------------------------------------------------------
Peter R. Sawers 63 Trustee Adjunct Professor of Business and Econom-
22 The Landmark ics, University of Dubuque, Iowa; Adjunct
Northfield, IL 60093 Professor, Lake Forest Graduate School of
Management, Lake Forest, Illinois (since
January 1992); prior thereto, Executive Di-
rector, Towers Perrin Australia (management
consultant); 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 Pres-
Chicago, Illinois ident of Nuveen Advisory Corp. (from Sep-
60606 tember 1992 to December 1995), prior
thereto Assistant Portfolio Manager of
Nuveen Advisory Corp. (from June 1988 to
September 1992).
- ------------------------------------------------------------------------------------------------------------------------------------
Kathleen M. Flanagan 49 Vice President Vice President of John Nuveen & Co. Incor-
333 West Wacker Drive porated.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell 40 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
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. Incor-
333 West Wacker Drive porated.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin 44 Vice President and Vice President (since September 1992), As-
333 West Wacker Drive Assistant Secre- sistant Secretary and Assistant General
Chicago, IL 60606 tary Counsel of John Nuveen & Co. Incorporated;
Vice President (since May 1993) and Assis-
tant Secretary of Nuveen Advisory Corp;
Vice President (since May 1993) and Assis-
tant Secretary (since January 1992) of
Nuveen Institutional Advisory Corp.; Assis-
tant Secretary of The John Nuveen Company
(since February 1993).
</TABLE>
- --------------------------------------------------------------------------------
39
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
O. Walter Renfftlen 56 Vice President and Vice President and Controller of The John
333 West Wacker Drive Controller Nuveen Company (since March 1992), John
Chicago, IL 60606 Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas C. Spalding, 44 Vice President Vice President of Nuveen Advisory Corp. and
Jr. Nuveen Institutional Advisory Corp.; Chart-
333 West Wacker Drive ered Financial Analyst.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
H. William Stabenow 61 Vice President and Vice President and Treasurer of The John
333 West Wacker Drive Treasurer Nuveen Company (since March 1992), John
Chicago, IL 60606 Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp, (since January 1992).
- ------------------------------------------------------------------------------------------------------------------------------------
James J. Wesolowski 45 Vice President and Vice President, General Counsel and Secre-
333 West Wacker Drive Secretary tary of The John Nuveen Company (since
Chicago, IL 60606 March 1992), John Nuveen & Co. Incorporat-
ed, Nuveen Advisory Corp. and Nuveen Insti-
tutional Advisory Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman 39 Vice President and Vice President (since September 1992), As-
333 West Wacker Drive Assistant Secre- sistant Secretary and Assistant General
Chicago, IL 60606 tary Counsel of John Nuveen & Co. Incorporated;
Vice President (since May 1993) and Assis-
tant Secretary of Nuveen Advisory Corp.;
Vice President (since May 1993) and Assis-
tant Secretary (since January 1992) of
Nuveen Institutional Advisory Corp.
</TABLE>
- --------------------------------------------------------------------------------
Richard J. Franke, Timothy R. Schwertfeger and Margaret K. Rosenheim serve as
members of the Executive Committee of the Board of Trustees. The Executive Com-
mittee, which meets between regular meetings of the Board of Trustees, is au-
thorized to exercise all of the powers of the Board of Trustees.
The trustees of the Trust are also directors or trustees, as the case may be,
of 14 other Nuveen open-end fund portfolios and 53 Nuveen closed-end funds.
40
<PAGE>
The following table sets forth compensation paid by the Trust during the fiscal
year ended January 31, 1996 to each of the trustees of the Trust. The Trust has
no retirement or pension plans. The officers and trustees affiliated with
Nuveen serve without any compensation from the Trust.
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM TRUST
COMPENSATION AND FUND COMPLEX
NAME OF TRUSTEE FROM THE TRUST PAID TO TRUSTEES
- --------------------------------------------------------------------------------
<S> <C> <C>
Richard J. Franke............................. $ 0 $ 0
Timothy R. Schwertfeger....................... 0 0
Lawrence H. Brown............................. 1,873 55,500
Anne E. Impellizzeri.......................... 1,873 63,000
John E. O'Toole............................... 1,695 47,000
Margaret K. Rosenheim......................... 1,971 62,322(1)
Peter R. Sawers............................... 1,873 55,500
</TABLE>
- --------
(1) Includes $1,572 in interest earned on deferred compensation from prior
years.
Each trustee 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 Trust requires no employees other than its officers, all of whom are com-
pensated by Nuveen.
On May 6, 1996, the officers and trustees of the Trust as a group owned less
than 1% of the outstanding shares of each Fund. The following table sets forth
the percentage ownership of each person who, as of May 6, 1996, owns of record
or is known by the Registrant to own of record or beneficially 5% or more of
any class of each Fund's shares of the Trust.
<TABLE>
<CAPTION>
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- --------------------------------------------------------------------------------
<S> <C> <C>
Arizona Fund
Class A Shares............. Smith Barney, Inc. 5.51
00154505634
388 Greenwich Street
New York, NY 10013
Donaldson Lufkin Jenrette 13.95
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- --------------------------------------------------------------------------------
<S> <C> <C>
Merrill Lynch Pierce Fenner &
Smith Inc. 97E76 13.11
Attn: Book Entry Dept.
4800 Deer Lake Dr. E. Fl. 3
Jacksonville, FL 32246-6484
Arizona Fund
Class C Shares......... Prudential Securities FBO 41.25
Janet Irving Itee
Janet Irving Trust
UA DTD 05/27/82
Sun City West, AZ 85375-5172
PaineWebber For The Benefit Of 13.88
Elisabeth A. Lang
Sole & Separate Property
1453 W. Orchid Lane
Chandler, AZ 85224-8658
Prudential Securities FBO 8.08
Mr. Evans Robert Woodhouse &
Mr. Elizabeth Biron Woodhouse
JT TEN
3138 N. 17th Dr
Phoenix, AZ 85015-5807
Leonidas K. Springer & 10.41
Beverly J. Springer
JT TEN WROS NOT TC
4720 W. Greenway Rd
Glendale, AZ 85306-3518
Erasno Ysasi TR 7.98
UA APR 07 95
FBO Erasmo Ysasi Trust
1754 E. Carson Rd.
Phoenix, AZ 85040-5747
Charles Schwab & Co Inc. 11.13
Special Custody Account For The
Exclusive Benefit Of Customers
Attn: Mutual Funds
101 Montgomery St
San Francisco, CA 94104-4122
Florida Fund
Class A Shares......... Merrill Lynch Pierce Fenner & 5.65
Smith Inc. 97E80
Attn: Book Entry Dept.
4800 Deer Lake Dr. E. Fl. 3
Jacksonville, FL 32246-6484
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- -------------------------------------------------------------------------------
<S> <C> <C>
Florida Fund
Class C Shares ........ Roland C. White & 13.39
Arlene I. White
JT TEN WROS NOT TC
961 Tarrson Blvd.
Lady Lake, FL 32159-2363
PaineWebber For The Benefit Of 10.59
Ronald M. Goldberg &
Rita E. Goldberg JTWROS
90 Congress Street
Milford, MA 01757-2076
PaineWebber For The Benefit Of 12.47
Clarence W. Hebert
11 Hunthurst Circle
Worcester, MA 01602-2830
Norman Rudolph 13.51
1168 Lake Breeze Dr.
West Palm Beach FL 33414-7945
PaineWebber For The Benefit Of 6.44
Mary Rogers and
Pamela Anne Rogers JT WROS
3070 Wedgewood Blvd.
DelRay Beach, FL 33445-5748
Monica Hart & 35.85
Melissa J. Hart TR
UA HAR 23 83
Robert J. Hart Trust
251 Algiers Ave.
Fort Lauderdale, FL 33308-
4434
Olmedo E. Villavicencio & 6.14
Elsa V. Villavicencio
JT TEN WROS NOT TC
8903 Glade Hill Rd.
Fairfax VA 22031-3221
Maryland Fund
Class A Shares........ NFSC FEBO #AIF-375349 15.20
Imelda J. Hall
4610 Col. Fenwick Place
Upper Marlboro, MD 20772
Merrill Lynch Pierce Fenner & 6.02
Smith Inc. 97E83
Attn: Book Entry Dept.
4800 Deer Lake Dr. E. Fl. 3
Jacksonville, FL 32246-6484
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- --------------------------------------------------------------------------------
<S> <C> <C>
Maryland Fund
Class C Shares......... NFSC FEBO # A1F-405744 47.31
Russell L. Jackson &
Carthelia L. Jackson
P.O. Box 256
Hughesville, MD 20637
Maryland Fund
Class R Shares......... Merrill Lynch Pierce Fenner & 5.99
Smith Inc. 97905
Attn: Book Entry Dept.
4800 Deer Lake Dr. E. Fl. 3
Jacksonville, FL 32246-6484
Michigan Fund
Class A Shares......... Donaldson Lufkin Jenrette 7.76
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-9998
Diane E. Smith 5.56
2345 Heronwood Dr.
Bloomfield Hills, MI 48302-0835
The Ohio Company Cust 5.44
FBO E. E. Rucker
E. E. Rucker Living Trust
A/C 85-72878-1-7
155 E. Broad St.
Columbus, OH 43215-3609
Michigan Fund
Class C Shares......... Donaldson Lufkin Jenrette 7.72
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-9998
William J. Donahue & 9.73
Linda S. Donahue
1835 S Walmont Rd.
Jackson, MI 49203-5267
Mildred T. Barkalow 10.53
7171 Camino Del Ray
Rockford, MI 49341
Gerald D. Alvord & 10.99
Shirley M. Alvord
JT TEN WROS NOT TC
1444 Neece Dr.
Muskegon, MI 49441-5790
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- ---------------------------------------------------------------------------------
<S> <C> <C>
Nicholas & Melody Liscomb TR 8.47
UA JUN 13 91
Liscomb Family Living Trust
434 W. Westwood Dr.
Adrian, MI 49221-1349
Mary L. Evans & 7.97
Leamon Evans &
Noah Shumpert
JT TEN WROS NOT TC
1163 Peachtree Dr.
Mount Morris, MI 48458-2833
Jane E. Boyles-Visel TR 9.99
UA JAN 25 93
Jane E. Boyles-Visel Trust
5975 Leland Rd.
Ann Arbor, MI 48105-9309
PaineWebber For The Benefit Of 10.80
Frank Salucci &
Carol A. Salucci
JTWROS
4075 S. Pine Center
W. Bloomfield, MI 48323-3062
PaineWebber For The Benefit Of 5.55
Ardis L. Chester &
Albert S. Chester
JTWROS
416 Saddle Lane
Grosse Pte. Woods, WI 48236-2729
New Jersey Fund
Class A Shares......... NFSC FEBO # AAR-452009
Olga Schadas
28 Madison Street
S. Bound Brook NJ 08880 5.48
Nicholas A. Rao &
Catherine F. Rao
JT TEN WROS NOT TC
9 Harlin Ave W.
Edison NJ 08820-3164 7.59
Merrill Lynch Pierce Fenner &
Smith Inc. 97E82
Attn: Book Entry Dept.
4800 Deer Lake Dr. E. Fl. 3
Jacksonville FL 32246-6484 7.83
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- -----------------------------------------------------------------------------------
<S> <C> <C>
New Jersey Fund
Class C Shares........ Donaldson Lufkin Jenrette 6.00
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
William G. Osborne 26.37
c/o Aurachem Corp.
South 3R & Somerset St.
PO Box 471
Harrison NJ 07029-0471
Alvin H. Frankel Agent For 9.33
Louise I. Grill
U/POA DTD Jun 17 94
601 Haddon Ave.
Collingswood NJ 08108-3703
Prudential Securities FBO 5.69
Alfred T. Mattera &
Joanna Mattera JT TEN
3204 Wesley Ave.
Ocean City NJ 08226-2045
Catherine Small & 5.81
Robert N. Small
JT TEN WROS NOT TC
1039 Bay Front Ave.
North Beach MD 20714-9751
Pennsylvania Fund
Class A Shares........ Francis R. Gelnett 5.22
210 S. Market St.
Selinsgrove, PA 17870-1814
Pennsylvania Fund 5.61
Class C Shares........ Hani J. Tuffaha & Eihan H. Tuffaha
JT TEN WROS NOT TC
25 Selkirk Rd.
Williamsport PA 17701-1810
NFSC FEBO # OC8-421383 10.87
Ronald Piotrowski
103 South Brodhead Rd.
Aliquippa PA 15001
George D. Hawthorne & 8.46
Barbara Ann Berline &
Virginia N. Hawthorne
JT TEN WROS NOT TC
2408 Linden Dr.
Allison Park PA 15101-3454
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER PERCENTAGE OF OWNERSHIP
- -----------------------------------------------------------------------------
<S> <C> <C>
Virginia Fund
Class A Shares....... Merrill Lynch Pierce Fenner & 10.49
Smith Inc. 97E81
Attn: Book Entry Dept.
4800 Deer Lake Dr. E. Fl. 3
Jacksonville FL 32246-6484
Virginia Fund
Class C Shares....... NFSC FEBO # A1F-435902 25.82
Richard U. Cogswell
350 S. Vandorn St.,
Alexandria, VA 22304
Muriel S. Fleming & 11.06
David M. Fleming II
14303 Branderhill Woods Trl.
Midlothian VA 23112-4171
Donaldson Lufkin Jenrette 8.10
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-9998
John T. E. Cribb, Jr. & 5.28
Kirsten Brandt Cribb
JT TEN WROS NOT TC
712 N. Oakland St.
Arlington, VA 22203-2223
Roberta K. Federici Tr. 6.06
UA APR 29 92
Roberta K. Federici
Revocable Trust
811 Bradford Ave.
Westfield NJ 07090-3006
Virginia Fund
Class R Shares....... Merrill Lynch Pierce Fenner & 6.64
Smith Inc. 979D8
Attn: Book Entry Dept.
4800 Deer Lake Dr. E. Fl. 3
Jacksonville, FL 32246-6484
</TABLE>
47
<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 the Trust's business affairs, provides office facilities and equip-
ment and certain clerical, bookkeeping and administrative services, and permits
any of its officers or employees to serve without compensation as trustees or
officers of the Trust if elected to such positions. See "Management of the
Funds" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and the
Trust, each Fund has agreed to pay an annual management fee at the rates set
forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET
VALUE MANAGEMENT FEE
- ------------------------------------------
<S> <C>
For the first $125 million .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 the fiscal
year ended January 31, 1996, Nuveen Advisory agreed to waive all or a portion
of its management fees or reimburse certain expenses of each Fund. For the last
three fiscal years, the Funds paid net management fees to Nuveen Advisory as
follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF EXPENSE
REIMBURSEMENT PAID TO FEE WAIVERS AND
NUVEEN ADVISORY FOR EXPENSE REIMBURSEMENTS FOR
THE YEAR ENDED JANUARY 31, THE YEAR ENDED JANUARY 31,
------------------------------ ----------------------------
1994 1995 1996 1994 1995 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Arizona Fund............ $ 5,394 $ 37,557 $ 32,670 $ 60,783 $ 51,152 $ 78,929
Florida Fund............ 143,759 226,883 234,568 50,646 44,113 78,507
Maryland Fund........... 172,693 189,022 131,476 42,288 65,460 148,537
Michigan Fund........... 46,875 86,293 76,644 63,717 58,458 93,136
New Jersey Fund......... 85,065 156,717 152,929 61,303 54,105 115,121
Pennsylvania Fund....... 132,557 191,299 195,814 67,989 83,798 128,011
Virginia Fund........... 214,913 261,196 223,025 42,776 40,815 117,673
Total for all Funds..... 801,256 1,148,967 1,047,126 389,502 397,901 759,914
</TABLE>
Nuveen Advisory has agreed to continue its fee waivers and expense reimburse-
ments through July 31, 1996, and it is anticipated that Nuveen Advisory will
continue its fee waivers and expense reimbursements for some length of time
thereafter. As discussed in the Prospectus, in addition to the management fee
of Nuveen Advisory, each Fund pays all other costs and expenses of its opera-
tions and a portion of the Trust's general administrative expenses allocated in
proportion to the net assets of each Fund.
48
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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-exempt 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-ex-
empt funds and trusts. Nuveen is a subsidiary of The John Nuveen Company which,
in turn, is approximately 75% 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.
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, the Adviser, and other related entities have
adopted a code of ethics which essentially prohibits all Nuveen fund management
personnel, including Nuveen fund portfolio managers, from engaging in personal
investments which compete or interfere with, or attempt to take advantage of, a
Fund's anticipated or actual portfolio transactions, and is designed to assure
that the interests of Fund shareholders are placed before the interests of
Nuveen personnel in connection with personal investment transactions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of each Fund, will place orders in such manner as, in the opinion
of management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be 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
49
<PAGE>
services to Nuveen Advisory. It is not possible to place a dollar value on in-
formation and statistical and other services received from dealers. Since it is
only supplementary to Nuveen Advisory's own research efforts, the receipt of
research information is not expected to reduce significantly Nuveen Advisory's
expenses. While Nuveen Advisory will be primarily responsible for the placement
of the business of the Funds, the policies and practices of Nuveen Advisory in
this regard must be consistent with the foregoing and will, at all times, be
subject to review by the Board of Trustees.
Nuveen Advisory reserves the right to, and does, manage other investment 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
Trustees 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 Trustees, including a majority of the trustees who are not interested per-
sons of the Trust.
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 Trust's 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.
50
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In determining net asset value for each of the Funds, the Trust's custodian
utilizes the valuations of portfolio securities furnished by a pricing service
approved by the trustees. 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 mu-
nicipal bonds of comparable quality, type of issue, coupon, maturity and rat-
ing; indications as to value from dealers; and general market conditions. The
pricing service may employ electronic data processing techniques and/or a ma-
trix system to determine valuations. The procedures of the pricing service and
its valuations are reviewed by the officers of the Trust under the general su-
pervision of the Board of Trustees.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based upon the advice
of Fried, Frank, Harris, Shriver & Jacobson, Washington, D.C., counsel to the
Trust.
As described in the Prospectus, each Fund intends to qualify under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code") for tax treatment
as a regulated investment company. In order to qualify as a regulated invest-
ment company, a Fund must satisfy certain requirements relating to the source
of its income, diversification of its assets, and distributions of its income
to shareholders. First, a Fund must derive at least 90% of its annual gross in-
come (including tax-exempt interest) from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of invest-
ing 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 se-
curities, securities of other regulated investment companies and other securi-
ties limited in respect of any one issuer to an amount not greater in value
than 5% of the value of a Fund's total assets and to not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of the total assets is invested in the securities of any one issuer
(other than United States Government securities and securities of other regu-
lated investment companies) or two or more issuers controlled by a Fund and en-
gaged 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)
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and (ii) its net tax-exempt interest (the excess of its gross tax-exempt inter-
est income over certain disallowed deductions). A Fund may retain for invest-
ment its net capital gain (which consists of the excess of its net long-term
capital gain over its short-term capital loss). However, if a Fund retains any
net capital gain or any investment company taxable income, it will be subject
to tax at regular corporate rates on the amount retained. If a Fund retains any
capital gain, such Fund may designate the retained amount as undistributed cap-
ital gains in a notice to its shareholders who, if subject to federal income
tax on long-term capital gains, (i) will be required to include in income for
federal income tax purposes, as long-term capital gain, their shares of such
undistributed amount, and (ii) will be entitled to credit their proportionate
shares of the tax paid by such Fund against their federal income tax 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 investments 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 U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by a Fund, if any, will be taxable to share-
holders 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 exceed 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.
52
<PAGE>
market discount, and any gain realized in excess of the market discount will be
treated as capital gains. Any net long-term capital gains realized by a Fund
and distributed to shareholders in cash or additional shares, will be taxable
to shareholders as long-term capital gains regardless of the length of time
inves- tors have owned shares of a Fund. Distributions by a Fund that do not
constitute ordinary income dividends, exempt-interest dividends, or capital
gain dividends will be treated as a return of capital to the extent of (and in
reduction of) the shareholder's tax basis in his or her shares. Any excess will
be treated as gain from the sale of his or her shares, as discussed below.
If 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 deductions for corporations.
Prior to purchasing shares in one of the Funds, the impact of dividends or dis-
tributions 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 reduc-
ing 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 distributed 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 tax rate may be higher in certain circumstances.
All or a portion 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
53
<PAGE>
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 re-
demption or exchange of shares of a Fund held for six months or less are disal-
lowed to the extent of any distribution of exempt-interest dividends received
with respect to such shares and, if not disallowed, such losses are treated as
long-term capital losses to the extent of any distributions of long-term capi-
tal gains made with respect to such shares. In addition, no loss will be al-
lowed on the redemption or exchange of shares of a Fund if the shareholder pur-
chases other shares of such Fund (whether through reinvestment of distributions
or otherwise) or the shareholder acquires or enters into a contract or option
to acquire securities that are substantially identical to shares of a Fund
within a period of 61 days beginning 30 days before and ending 30 days after
such redemption or exchange. If disallowed, the loss will be reflected in an
adjustment to the basis of the shares acquired.
It may not be advantageous from a tax perspective for shareholders to redeem or
exchange shares after tax-exempt income has accrued but before the record date
for the exempt-interest dividend representing the distribution of such income.
Because such accrued tax-exempt income is included in the net asset value per
share (which equals the redemption or exchange value), such a redemption could
result in treatment of the portion of the sales or redemption proceeds equal to
the accrued tax-exempt interest as taxable gain (to the extent the redemption
or exchange price exceeds the shareholder's tax basis in the shares disposed
of) rather than tax-exempt interest.
In order to avoid a 4% federal excise tax, 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. The Funds intend to make timely distributions in compliance
with these requirements and consequently it is anticipated that they generally
will not be required to pay the excise tax.
If in any year a Fund should fail to qualify under Subchapter M for tax 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
54
<PAGE>
are considered either a "substantial user" or a "related person" within the
meaning of the Code. For additional information, investors should consult their
tax advisers before investing in 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-
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 backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the 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.
55
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STATE TAX MATTERS
The following state tax information applicable to each Fund and its sharehold-
ers is based upon the advice of each 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 adminis-
trative 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 ARIZONA TAX-FREE VALUE FUND
The following is based upon the advice of Chapman and Cutler, special state
tax counsel to the Arizona Fund.
Assuming that the Arizona Fund qualifies as a "regulated investment company"
for federal income tax purposes under Subchapter M of the Code and that
amounts so designated by the Arizona Fund to its shareholders qualify as "ex-
empt-interest dividends" under Section 852(b)(5) of the Code, such exempt-in-
terest dividends attributable to Arizona Municipal Obligations will be exempt
from Arizona income tax when received by a shareholder of the Arizona Fund to
the same extent as interest on the Arizona Municipal Obligations would be ex-
empt from Arizona income tax if received directly by such shareholder. Other
dividends by the Arizona Fund, including capital gain distributions, if any,
or additional amounts includable in the gross income of the shareholders for
federal income tax purposes (including gains realized upon the redemption or
exchange of shares of the Fund) will be subject to Arizona income tax.
Assuming that the Arizona Fund will be classified as a "diversified management
company" under Section 5(b)(1) of the Investment Company Act of 1940 and reg-
istered as such thereunder, the Arizona Fund will be exempt from Arizona in-
come tax.
Interest on indebtedness incurred or continued by a shareholder in connection
with the purchase or carrying of shares in the Arizona Fund will not be de-
ductible for Arizona income tax purposes. Neither the Arizona Municipal Obli-
gations purchased by the Arizona Fund nor the shares in the Arizona Fund owned
by a shareholder will be subject to Arizona property taxes, sales or use tax-
es.
Chapman and Cutler has expressed no opinion with respect to taxation under any
other provision of Arizona law. Ownership of the Units may result in collat-
eral Arizona tax consequences to certain taxpayers. Prospective investors
should consult their tax advisors as to the applicability of any such collat-
eral consequences.
NUVEEN FLORIDA TAX-FREE VALUE FUND
The following is based upon the advice of Baker & McKenzie, special state tax
counsel to the Florida Fund.
Florida does not impose an income tax on individuals. All corporate sharehold-
ers will be subject to Florida income taxation on (a) their apportioned share
of the income characterized as business income of such shareholders under the
Florida Income Tax Code ("Florida Code") realized by the Florida Fund and dis-
tributed to them notwithstanding the tax exempt character of the interest re-
ceived from Florida
56
<PAGE>
Municipal Obligations under Section 103(a) of the Code or any other federal law
and (b) on gains realized from a redemption or exchange of the Florida Fund
shares to the extent characterized as business income. Only a corporate share-
holder that has its commercial domicile in Florida will be taxable under the
Florida Code on its respective share of the Florida Fund's capital gains and
interest income that constitute nonbusiness income of such shareholder and that
is distributed to it, and on gains realized from a redemption or exchange of
the Florida Fund shares that constitute nonbusiness income. Certain trusts, ex-
cluding private and testamentary trusts, may be subject to the Florida corpo-
rate income tax.
Neither the Florida Fund nor its shareholders will be subject to the Florida
intangible personal property tax on Florida Municipal Obligations or the Shares
of the Florida Fund, respectively, with respect to any calendar year so long as
at the close of the preceding calendar year and on January 1 of the then cur-
rent year, the Florida Fund's portfolio of assets consisted solely of Florida
Municipal Obligations or other assets exempt from the Florida intangible per-
sonal property tax. If the Florida Fund holds any other types of assets on that
date, then the entire value of the Fund's shares (except for the portion of the
value of the shares attributable to U.S. Government Obligations) will be sub-
ject to the intangible personal property tax.
Shares of the Florida Fund will be subject to Florida estate tax only if owned
by Florida residents, certain natural persons not residents of Florida, or cer-
tain natural persons not residents of the United States. The Florida estate tax
is limited, however, to the amount of the credit allowable under the applicable
Federal Revenue Act (currently Section 2011 and in some cases Section 2102 of
the Code) for state death taxes actually paid to the several states.
For Florida state income tax purposes, the Florida Fund should not be liable
for Florida corporate income tax imposed by the Florida Code so long as the
Florida Fund does not have taxable nexus with Florida. Assuming that the Fund
will not have an office or other place of business in Florida, nor any employ-
ees or salespersons in Florida, nor any tangible property in Florida, nor any
private loans secured by a mortgage, deed of trust or other lien on real or
tangible personal property there should be no taxable nexus with Florida for
corporate income tax purposes. If there is taxable nexus with Florida, the
Florida Fund's "taxable income" will be its investment company taxable income,
increased by the excess of net long-term capital gains for the year over the
amount of capital gain dividends attributable to the year.
Shares of the Florida Fund will not be subject to the Florida ad valorem prop-
erty tax or Florida sales and use tax, assuming the Florida Fund owns no Flor-
ida tangible property. The transfer of the Fund Shares will not be subject to
the Florida Documentary Stamp Tax.
NUVEEN MARYLAND TAX-FREE VALUE FUND
The following is based upon the advice of Venable, Baetjer and Howard, LLP,
special state tax counsel to the Maryland Fund.
As long as dividends paid by the Maryland Fund qualify as interest excludable
under Section 103 of the Code and the Maryland Fund qualifies as a "regulated
investment company" under the Code, the por-
57
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tion of exempt-interest dividends that represents interest received by the
Maryland Fund on obligations (a) of Maryland or its political subdivisions and
authorities, or (b) of the United States or an authority, commission, instru-
mentality, possession or territory of the United States, will be exempt from
Maryland state and local income taxes when allocated or distributed to a share-
holder of the Maryland Fund.
Income earned on certain private activity bonds (which might be held by the
Maryland Fund) will constitute a Maryland tax preference for individual share-
holders.
Interest received by the Maryland Fund on obligations issued by states other
than Maryland, as well as any income earned on repurchase contracts, will be
subject to Maryland state and local income taxes.
Gain realized by the Maryland Fund from the sale or exchange of a bond issued
by Maryland or a political subdivision of Maryland, will not be subject to
Maryland state and local income taxes.
Maryland has no general exemption provisions for capital gain which would be
available to a shareholder of the Maryland Fund. Thus, capital gain dividends
paid by the Maryland Fund to a shareholder (except for gain on bonds issued by
Maryland or its political subdivisions), or gains realized by a shareholder
from a redemption or exchange of these shares, will be subject to Maryland
state and local income taxes.
Interest on indebtedness incurred or continued (directly or indirectly) by a
shareholder of the Maryland Fund to purchase or carry shares of the Maryland
Fund will not be deductible for Maryland state and local income tax purposes to
the extent such interest is allocable to exempt-interest dividends.
Any interest in the Fund owned by a Maryland resident upon death will be sub-
ject to Maryland estate tax and Maryland inheritance tax, subject to any avail-
able exemptions or credits allowed by law.
NUVEEN MICHIGAN TAX-FREE VALUE FUND
The following is based upon the advice of Dickinson, Wright, Moon, Van Dusen &
Freeman, special state tax counsel to the Michigan Fund. In rendering such ad-
vice, counsel has assumed that the Fund will qualify under Subchapter M of the
Code as a regulated investment company and will satisfy the conditions which
will cause Fund distributions to qualify as exempt-interest dividends to share-
holders when distributed as intended.
The Michigan Fund is not subject to tax under the Michigan income tax act, the
Michigan single business tax act, the Michigan intangibles tax act, the Michi-
gan city income tax act (which authorizes the only income tax ordinance that
may be adopted by cities in Michigan), and under the law which authorizes a
"first class" school district to levy an excise tax upon income.
To the extent that an individual (and certain other Michigan Fund shareholders)
receives distributions with respect to Michigan Fund shares that are derived
from interest on Michigan Municipal Obligations, such distributions will be ex-
empt from Michigan state and local income taxes and excluded from the taxable
income base of the Michigan intangibles tax. Corporations and financial insti-
tutions are not subject to Michigan income tax and business corporations sub-
ject to the Michigan single business tax are not subject to the Michigan intan-
gibles tax.
58
<PAGE>
For Michigan income tax purposes, the proportionate share of distributions from
the Michigan Fund's net investment income derived from other than Michigan Mu-
nicipal Obligations and from any short-term or long-term capital gains (whether
received in cash or additional shares), together with any gain or loss realized
when the shareholder redeems or exchanges shares of the Fund, will be included
in Michigan taxable income.
For Michigan intangibles tax purposes, the proportionate share of distributions
from the Michigan Fund's net investment income derived from other than Michigan
Municipal Obligations and from any short-term or long-term capital gains, will
be included in the taxable income base of the Michigan intangibles tax, except
that distributions from net investment income or capital gains reinvested in
Michigan Fund shares are exempt from such tax.
If the shareholder is subject to the Michigan single business tax (i.e., is en-
gaged in a "business activity" and receives distributions derived from interest
on Michigan Municipal Obligations) or the shareholder sells or exchanges shares
of the Michigan Fund, such event may affect the adjusted tax base upon which
the single business tax is computed. The taxation of business activities sub-
ject to the Michigan single business tax is complex and shareholders who re-
ceive distributions with respect to shares of the Michigan Fund held in connec-
tion with such individual, corporate or partnership business activities should
consult with their tax advisors.
To the extent a shareholder receives distributions from the Michigan Fund which
are derived from interest on obligations of the United States or its agencies,
possessions, or instrumentalities that are exempt from state taxation under
federal law, such distributions will also be exempt from the Michigan income
tax, the Michigan intangibles tax, the Michigan single business tax, and the
Michigan city income tax act.
Shares of the Michigan Fund will be subject to the Michigan estate tax if owned
by a Michigan decedent at the date of death.
The foregoing is a general, abbreviated summary of certain of the provisions of
the applicable Michigan tax law as presently in effect as it directly governs
the taxation of shareholders of the Michigan Fund. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Michigan Fund transactions. Shareholders are ad-
vised to consult with their own tax advisers for more detailed information con-
cerning Michigan tax matters.
NUVEEN NEW JERSEY TAX-FREE VALUE FUND
The following is based upon the advice of Pitney, Hardin, Kipp & Szuch, special
state tax counsel to the New Jersey Fund.
The New Jersey Fund will qualify as a "qualified investment fund" if, for any
calendar year in which a distribution is paid: (1) the New Jersey Fund has no
investments, other than interest-bearing obligations, obligations issued at a
discount, and cash and cash items, including receivables, and financial op-
tions, futures, forward contracts, or other similar financial instruments re-
lated to interest-bearing obligations, obligations issued at a discount or bond
indexes related thereto; (2) at the close of each
59
<PAGE>
calendar quarter the New Jersey Fund has not less than 80% of the aggregate
principal amount of all of its investments (excluding financial options,
futures, forward contracts, or other similar financial instruments related to
interest-bearing obligations, obligations issued at a discount or bond indexes
related thereto to the extent such instruments are authorized by Section 851(b)
of the Code, cash and cash items, which cash items shall include receivables)
in New Jersey Municipal Obligations, United States obligations, or any other
obligations the interest or gains on which is exempt from New Jersey Gross In-
come Tax pursuant to New Jersey law or federal law; and (3) the New Jersey Fund
satisfies the certification and reporting requirements imposed by regulations
promulgated by the New Jersey Division of Taxation. The New Jersey Fund intends
to so qualify.
Individual shareholders of the New Jersey Fund, including trusts and estates,
who are subject to the New Jersey Gross Income Tax, will not be required to in-
clude in their New Jersey gross income distributions from the New Jersey Fund
which the New Jersey Fund clearly identifies as directly attributable to inter-
est or gains from New Jersey Municipal Obligations, obligations of the United
States or any other obligations the interest or gains on which is exempt from
New Jersey Gross Income Tax under New Jersey law or federal law, provided that
the New Jersey Fund qualifies as a "qualified investment fund."
Distributions to individual shareholders, including trusts and estates, who are
subject to the New Jersey Gross Income Tax, attributable to interest or gains
on municipal obligations issued by states other than New Jersey, including mu-
nicipalities or authorities in such other states, or any other obligations the
interest on which is not exempt from New Jersey Gross Income Tax pursuant to
New Jersey law or federal law, will be included in the New Jersey Gross Income
Tax as New Jersey gross income.
Individual shareholders of the New Jersey Fund, including trusts and estates,
who are subject to the New Jersey Gross Income Tax, will not be required to in-
clude in gross income net gains attributable to the redemption or exchange of
New Jersey Fund shares provided that the New Jersey Fund qualifies as a "quali-
fied investment fund." Any loss realized on such redemption or exchange may not
be utilized to offset gains realized by such shareholder on the sale of assets
the gain on which is subject to the New Jersey Gross Income Tax.
Shares of the New Jersey Fund may be taxable upon the death of a shareholder
who dies domiciled in New Jersey under the New Jersey Inheritance Tax Law or
the New Jersey Estate Tax Law.
If a shareholder is a corporation (including an S corporation) subject to the
New Jersey Corporation Business Tax or the New Jersey Corporation Income Tax,
distributions of interest or gains, or both, from the New Jersey Fund will be
includable in its entire net income for purposes of the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, less any interest expense
incurred to carry such investment to the extent such interest expense has not
been deducted in computing federal taxable income. Net gains derived by such
corporation on the redemption or exchange of New Jersey Fund shares will be in-
cluded in its entire net income for purposes of the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax.
60
<PAGE>
NUVEEN PENNSYLVANIA TAX-FREE VALUE FUND
The following is based upon the advice of Dechert Price & Rhoads, special state
tax counsel to the Pennsylvania Fund.
Shares of the Pennsylvania Fund are not subject to any of the personal property
taxes presently in effect in Pennsylvania to the extent of that proportion of
the Pennsylvania Fund represented by Pennsylvania Municipal Obligations. The
taxes referred to above include the County Personal Property Tax, the addi-
tional personal property taxes imposed on Pittsburgh residents by the School
District of Pittsburgh and by the City of Pittsburgh. Shares of the Pennsylva-
nia Fund may be taxable under the Pennsylvania inheritance and estate taxes.
The proportion of interest income representing interest income from Pennsylva-
nia Municipal Obligations received by the Fund and distributed to shareholders
of the Pennsylvania Fund is not taxable under the Pennsylvania Personal Income
Tax or under the Corporate Net Income Tax, nor will such interest be taxable
under the Philadelphia School District Investment Income Tax imposed on Phila-
delphia resident individuals.
The disposition by the Pennsylvania Fund of a Pennsylvania Municipal Obligation
(whether by sale, exchange, redemption or payment at maturity), as well as the
distribution of the proceeds of such disposition, will not constitute a taxable
event to a shareholder under the Pennsylvania Personal Income Tax if the Penn-
sylvania Municipal Obligation was issued prior to February 1, 1994. Further,
although there is no published authority on the subject, special Pennsylvania
counsel is of the opinion that (i) a shareholder of the Pennsylvania Fund will
not have a taxable event under the Pennsylvania state and local income taxes
referred to in the preceding paragraph (other than the Corporate Net Income
Tax) upon the redemption or exchange of his or her shares to the extent that
the Pennsylvania Fund is then composed of Pennsylvania Municipal Obligations
issued prior to February 1, 1994 and (ii) the dispositions by the Pennsylvania
Fund of a Pennsylvania Municipal Obligations (whether by sale, exchange, re-
demption or payment at maturity), as well as the distribution of the proceeds
of such disposition, will not constitute a taxable event to a shareholder under
the Philadelphia School District Investment Income Tax if the Pennsylvania Mu-
nicipal Obligation was issued prior to February 1, 1994. (The School District
tax has no application to gain on the disposition of property held by the tax-
payer for more than six months.)
The Pennsylvania Fund is not subject to the Pennsylvania Corporate Net Income
Tax or Capital Stock-Franchise Tax.
If a shareholder is a corporation subject to the Pennsylvania Capital Stock-
Franchise Tax, the value of the Pennsylvania Fund shares owned by such share-
holder and income derived from their ownership may be taken into account in de-
termining the "capital stock value" of such shareholder.
NUVEEN VIRGINIA TAX-FREE VALUE FUND
The following is based upon the advice of Christian & Barton, L.L.P., special
state tax counsel to the Virginia Fund. It assumes that the Virginia Fund qual-
ifies for treatment as a regulated investment company under Subchapter M of the
Code, that it will satisfy conditions that will enable it to avoid
61
<PAGE>
liability for federal income taxation on its investment income, that it will
designate distributions from the income generated by the Virginia Municipal Ob-
ligations as exempt-interest dividends and that amounts so designated qualify
as exempt-interest dividends under the Code.
Under existing Virginia law, as long as the Virginia Fund qualifies as a regu-
lated investment company under the Code, it will be exempt from Virginia income
taxation and dividends received from the Virginia Fund that are allocable to
interest received by the Virginia Fund on Virginia Municipal Obligations will
be exempt from Virginia income taxes.
In this regard, notwithstanding the fact that income on certain of the obliga-
tions in the Virginia Fund may be subject to Federal income taxes, interest on
certain federal obligations is exempt from Virginia income taxation. Distribu-
tions to shareholders that are attributable to interest on federal obligations
that are exempt from Virginia income taxation would be exempt from Virginia in-
come taxes. Further, to the extent distributions to shareholders are attribut-
able to interest on Municipal Obligations other than Virginia Municipal Obliga-
tions, such distributions will be included in the shareholder's Virginia tax-
able income.
As a general rule, to the extent that gain (whether as a result of the sale of
Virginia Municipal Obligations by the Virginia Fund or as a result of the re-
demption or exchange of a share by the shareholder) is subject to federal in-
come tax, such gain will be included in the shareholder's Virginia taxable in-
come. Under the language of certain enabling legislation, however, such as the
Virginia Industrial Development and Revenue Bond Act, the Virginia Resources
Authority Act and the Virginia Housing Development Authority Act, gain made on
the sale of obligations issued thereunder is expressly exempt from Virginia in-
come taxation. Distributions to shareholders that are attributable to such gain
would be exempt from Virginia income taxes.
Although certain counties and cities in the Commonwealth are authorized to levy
a local income tax upon Virginia taxable income, to date, none has undertaken
to do so.
The Commonwealth does not impose a gift tax. The Commonwealth imposes an estate
tax on the transfer of a resident's federal taxable estate and a non-resident's
federal taxable estate located in the Commonwealth.
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
62
<PAGE>
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:
a-b
Yield = 2[(--- +1)/6/-1]
cd
In the above formula, a = dividends and interest earned during the period; b =
expenses accrued for the period (net of reimbursements); c = the average daily
number of shares outstanding during the period that were entitled to receive
dividends; and d = the maximum offering price per share on the last day of the
period. In the case of Class A shares, the maximum offering price includes the
current maximum 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 a
Fund's financial statements. Yields for each class of shares of each Fund as of
January 31, 1996 are set forth below.
63
<PAGE>
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by the remainder of (1 minus the stated combined federal
and state income tax rate, taking into account the deductibility of state taxes
for federal income tax purposes) and adding the product to that portion, if
any, of the yield that is not tax exempt. The taxable equivalent yields quoted
below are based upon (1) the stated combined federal and state income tax rates
and (2) the yields for the 30-day period ended January 31, 1996 quoted in the
left-hand column.
<TABLE>
<CAPTION>
COMBINED
FEDERAL
AND
STATE TAXABLE
TAX EQUIVALENT
AS OF JANUARY 31, 1996 YIELD RATE* YIELD
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ARIZONA FUND
Class A Shares....................................... 4.09% 43.0% 7.18%
Class C Shares....................................... 3.54% 43.0% 6.21%
Class R Shares....................................... 4.54% 43.0% 7.96%
FLORIDA FUND
Class A Shares....................................... 4.11% 39.6% 6.80%
Class C Shares....................................... 3.56% 39.6% 5.89%
Class R Shares....................................... 4.55% 39.6% 7.53%
MARYLAND FUND**
Class A Shares....................................... 4.00% 44.5% 7.21%
Class C Shares....................................... 3.44% 44.5% 6.20%
Class R Shares....................................... 4.44% 44.5% 8.00%
MICHIGAN FUND
Class A Shares....................................... 4.22% 43.5% 7.47%
Class C Shares....................................... 3.66% 43.5% 6.48%
Class R Shares....................................... 4.67% 43.5% 8.27%
NEW JERSEY FUND
Class A Shares....................................... 4.49% 43.5% 7.95%
Class C Shares....................................... 3.95% 43.5% 6.99%
Class R Shares....................................... 4.96% 43.5% 8.78%
PENNSYLVANIA FUND
Class A Shares....................................... 4.11% 41.5% 7.03%
Class C Shares....................................... 3.56% 41.5% 6.09%
Class R Shares....................................... 4.56% 41.5% 7.79%
VIRGINIA FUND
Class A Shares....................................... 4.31% 43.0% 7.56%
Class C Shares....................................... 3.76% 43.0% 6.60%
Class R Shares....................................... 4.76% 43.0% 8.35%
</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 local tax rate.
For additional information concerning taxable equivalent yields, see the Tax-
able Equivalent Yield Tables in the Prospectus.
64
<PAGE>
Each Fund may from time to time in its advertising and 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
reinvestments from Nuveen UITs, or the maximum public offering price). The dis-
tribution rate differs from yield and total return and therefore is not in-
tended 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 January 31, 1996, based on the maximum public of-
fering price then in effect for the Funds were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION RATES
------------------------
CLASS A* CLASS C CLASS R
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Fund........................................... 4.48% 3.94% 4.89%
Florida Fund........................................... 4.45% 3.94% 4.88%
Maryland Fund.......................................... 4.45% 3.92% 4.89%
Michigan Fund.......................................... 4.53% 3.97% 4.97%
New Jersey Fund........................................ 4.85% 4.34% 5.30%
Pennsylvania Fund...................................... 4.43% 3.89% 4.88%
Virginia Fund.......................................... 4.65% 4.14% 5.09%
- --------------------------------------------------------------------------------
</TABLE>
*Assumes imposition of the maximum sales charge for Class A shares of 4.50%.
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 annual total re-
turn figures, including the effect of the current maximu m sales charge for
Class A shares, for the one-year period ended January 31, 1996 and for the pe-
riod from
65
<PAGE>
inception (on December 13, 1991 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 January 31, 1996, respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
---------------------------------
FOR THE YEAR FROM INCEPTION
ENDED THROUGH
JANUARY 31, 1996 JANUARY 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ARIZONA FUND
Class A Shares............................... 8.56% 6.97%
Class C Shares............................... 12.90% 10.07%
Class R Shares............................... 14.09% 8.51%
FLORIDA FUND
Class A Shares............................... 8.79% 6.59%
Class C Shares............................... 12.54% 10.43%
Class R Shares............................... 14.05% 7.97%
MARYLAND FUND
Class A Shares............................... 8.94% 6.10%
Class C Shares............................... 13.24% 9.55%
Class R Shares............................... 14.33% 7.74%
MICHIGAN FUND
Class A Shares............................... 9.52% 6.72%
Class C Shares............................... 13.96% 10.92%
Class R Shares............................... 14.93% 8.74%
NEW JERSEY FUND
Class A Shares............................... 7.56% 5.35%
Class C Shares............................... 11.80% 9.46%
Class R Shares............................... 12.88% 8.08%
PENNSYLVANIA FUND
Class A Shares............................... 9.08% 6.76%
Class C Shares............................... 13.27% 8.88%
Class R Shares............................... 14.40% 8.14%
VIRGINIA FUND
Class A Shares............................... 9.35% 6.58%
Class C Shares............................... 13.58% 9.63%
Class R Shares............................... 14.65% 8.29%
- --------------------------------------------------------------------------------
</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 cumula-
tive total returns, including the effect of the maximum sales charge for Class
A Shares, for the one-year
66
<PAGE>
period ended January 31, 1996, and for the period from inception (on December
13, 1991 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 January 31,
1996, respectively, were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------
FOR THE YEAR FROM INCEPTION
ENDED THROUGH
JANUARY 31, 1996 JANUARY 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ARIZONA FUND
Class A Shares............................... 8.56% 9.91%
Class C Shares............................... 12.90% 14.31%
Class R Shares............................... 14.09% 37.78%
FLORIDA FUND
Class A Shares............................... 8.79% 9.36%
Class C Shares............................... 12.54% 14.61%
Class R Shares............................... 14.05% 35.08%
MARYLAND FUND
Class A Shares............................... 8.94% 8.65%
Class C Shares............................... 13.24% 13.38%
Class R Shares............................... 14.33% 33.99%
MICHIGAN FUND
Class A Shares............................... 9.52% 9.54%
Class C Shares............................... 13.96% 15.30%
Class R Shares............................... 14.93% 38.90%
NEW JERSEY FUND
Class A Shares............................... 7.56% 7.58%
Class C Shares............................... 11.80% 13.09%
Class R Shares............................... 12.88% 35.66%
PENNSYLVANIA FUND
Class A Shares............................... 9.08% 9.61%
Class C Shares............................... 13.27% 12.67%
Class R Shares............................... 14.40% 35.95%
VIRGINIA FUND
Class A Shares............................... 9.35% 9.35%
Class C Shares............................... 13.58% 13.69%
Class R Shares............................... 14.65% 36.70%
- --------------------------------------------------------------------------------
</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 1996, the annual
67
<PAGE>
taxable equivalent total returns for each Fund's Shares for the one-year period
ended January 31, 1996, and for the period from inception (on December 13, 1991
with respect to the Class R Shares and on or after September 6, 1994 with re-
spect to the Class A Shares and Class C Shares) through January 31, 1996, re-
spectively, were as follows:
<TABLE>
<CAPTION>
FROM INCEPTION
ONE YEAR ENDED THROUGH
JANUARY 31, JANUARY 31,
1996 1996 ASSUMED
-------------- -------------- COMBINED
WITH WITH FEDERAL
MAXIMUM MAXIMUM AND
4.50% AT NET 4.50% AT NET STATE
SALES ASSET SALES ASSET TAX
CHARGE VALUE CHARGE VALUE RATE*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ARIZONA FUND
Class A Shares.......................... 12.44% 17.74% 10.95% 14.66% 43.0%
Class C Shares.......................... N/A 16.33% N/A 13.78% 43.0%
Class R Shares.......................... N/A 18.33% N/A 12.50% 43.0%
FLORIDA FUND
Class A Shares.......................... 12.07% 17.35% 9.91% 13.58% 39.6%
Class C Shares.......................... N/A 15.44% N/A 13.37% 39.6%
Class R Shares.......................... N/A 17.64% N/A 11.36% 39.6%
MARYLAND FUND**
Class A Shares.......................... 12.99% 18.31% 10.22% 13.90% 44.5%
Class C Shares.......................... N/A 16.83% N/A 13.17% 44.5%
Class R Shares.......................... N/A 18.78% N/A 11.92% 44.5%
MICHIGAN FUND
Class A Shares.......................... 13.48% 18.82% 10.72% 14.42% 43.5%
Class C Shares.......................... N/A 17.47% N/A 14.48% 43.5%
Class R Shares.......................... N/A 19.27% N/A 12.84% 43.5%
NEW JERSEY FUND
Class A Shares.......................... 11.69% 16.96% 9.48% 13.14% 43.5%
Class C Shares.......................... N/A 15.49% N/A 13.19% 43.5%
Class R Shares.......................... N/A 17.40% N/A 12.19% 43.5%
PENNSYLVANIA FUND
Class A Shares.......................... 12.70% 18.01% 10.46% 14.15% 41.5%
Class C Shares.......................... N/A 16.50% N/A 12.30% 41.5%
Class R Shares.......................... N/A 18.38% N/A 11.93% 41.5%
VIRGINIA FUND
Class A Shares.......................... 13.19% 18.53% 10.51% 14.20% 43.0%
Class C Shares.......................... N/A 16.99% N/A 13.28% 43.0%
Class R Shares.......................... N/A 18.87% N/A 12.29% 43.0%
</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 local 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
68
<PAGE>
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 January 31, 1996, for the Class R Shares of each of the Funds, was
as follows:
<TABLE>
<CAPTION>
ANNUALIZED
STANDARD
DEVIATION
OF RETURN
- --------------------------------------------------------------------------------
<S> <C>
Arizona Fund......................................................... 6.70%
Florida Fund......................................................... 7.58%
Maryland Fund........................................................ 6.13%
Michigan Fund........................................................ 6.57%
New Jersey Fund...................................................... 5.68%
Pennsylvania Fund.................................................... 7.27%
Virginia Fund........................................................ 6.96%
</TABLE>
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 Janu-
ary 31, 1996, for the Class R Shares of each of the Funds was as follows:
<TABLE>
<CAPTION>
SHARPE
MEASURE
- --------------------------------------------------------------------------------
<S> <C>
Arizona Fund............................................................ 0.663
Florida Fund............................................................ 0.558
Maryland Fund........................................................... 0.659
Michigan Fund........................................................... 0.697
New Jersey Fund......................................................... 0.763
Pennsylvania Fund....................................................... 0.582
Virginia Fund........................................................... 0.614
</TABLE>
69
<PAGE>
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 typically be 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
conditions, operating expenses and investment management. Any additional fees
charged by a securities representative or other financial services firm would
reduce returns described in this section. Shares of the Funds are redeemable
at net asset value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and sales
literature, the Funds may also compare their performance with that of: (1) the
Consumer Price Index or various unmanaged bond indexes such as the Lehman
Brothers Municipal Bond Index and the Salomon Brothers High Grade Corporate
Bond Index and (2) other fixed income or municipal bond mutual funds or mutual
fund indexes as reported by Lipper Analytical Services, Inc. ("Lipper"), Morn-
ingstar, Inc. ("Morningstar"), Wiesenberger Investment Companies Service
("Wiesenberger") and CDA Investment Technologies, Inc. ("CDA") or similar in-
dependent services which monitor the performance of mutual funds, or other in-
dustry or financial publications such as Barron's, Changing Times, Forbes and
Money Magazine. Performance comparisons by these indexes, services or publica-
tions may rank mutual funds over different periods of time by means of aggre-
gate, average, year-by-year, or other types of total return and performance
figures. Any given performance quotation or performance comparison should not
be considered as representative of the performance of the Funds for any future
period.
There are differences and similarities between the investments which the Funds
may purchase and the investments measured by the indexes and reporting serv-
ices which are described herein. The Consumer Price Index is generally consid-
ered 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-ex-
empt income objective. The Salomon Brothers High Grade Corporate Bond Index is
an unmanaged index that generally represents the performance of high grade
long-term taxable bonds during various market conditions. The Lehman Brothers
Municipal Bond Index is an unmanaged index that generally represents the per-
formance of high grade intermediate and long-term municipal bonds during vari-
ous market conditions. Lipper, Morningstar, Wiesenberger and CDA are widely
recognized mutual fund reporting services whose performance calculations are
based upon changes in net asset value with all dividends reinvested and which
do not include the effect of any sales charges. The market prices and yields
of taxable and tax-exempt bonds will fluctuate. The Funds primarily invest in
investment grade Municipal Obligations in pursuing their objective of as high
a level of current interest income which is exempt from federal and state in-
come tax as is consistent, in the view of the Funds' management, with preser-
vation 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 secu-
rities 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 munic-
ipal bonds to market
70
<PAGE>
interest rate changes and general credit changes is similar. High yield bonds
are subject to a greater degree of price volatility than municipal bonds re-
sulting from changes in market interest rates and are particularly susceptible
to volatility from credit changes. Ginnie Mae bonds are generally subject to
less price volatility than municipal bonds from credit concerns, due primarily
to the fact that the timely payment of monthly installments of principal and
interest are backed by the full faith and credit of the U.S. Government, but
Ginnie Mae bonds of equivalent coupon and maturity are generally more suscep-
tible to price volatility resulting from market interest rate changes. In ad-
dition, the volatility of Ginnie Mae bonds due to changes in market interest
rates may differ from municipal bonds of comparable coupon and maturity be-
cause bonds 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 January 31, 1996 of
Class A shares from the Arizona Fund aggregating less than $50,000 subject to
the schedule of sales charges set forth in the Prospectus at a price based
upon the net asset value of the Class A shares.
<TABLE>
<S> <C>
Net Asset Value per share........................................ $ 10.74
Per Share Sales Charge--4.50% of public offering price (4.71% of
net asset value per share)...................................... $ 0.506
Per Share Offering Price to the Public........................... $11.246
</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 redemp-
tion 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 Autho-
rized Dealers for providing you with ongoing account services.
Under the Flexible Pricing Program, all Fund shares outstanding as of Septem-
ber 6, 1994, have been designated as Class R Shares. Class R Shares are avail-
able for purchase at a price equal to their net asset value only under certain
limited 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 adminis-
tration 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
71
<PAGE>
feature, as described below. 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 shares 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 respect to which a sales charge
is imposed), at the reduced sales charge applicable 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 investment; (iii) has five or more
participating members; (iv) has agreed to include 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 pay-
ment with a single remittance for all investments in the Fund during each in-
vestment 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 trans-
fer agent's processing system.
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, trustees and retired trustees of the Trust;
. bona fide, full-time and retired employees of Nuveen, any parent company of
Nuveen, and subsidiaries thereof, or their immediate family members (as de-
fined 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;
72
<PAGE>
. 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.
Exchanges of shares of a Fund for shares of a Nuveen money market fund may be
made on days when both funds calculate a net asset value and make shares avail-
able for public purchase. Shares of the Nuveen money market funds may be pur-
chased on days on which the Federal Reserve Bank of Boston is normally open for
business. In addition to the holidays observed by the Fund, the Nuveen money
market funds observe and will not make fund shares available for purchase on
the following holidays: Martin Luther King's Birthday, Columbus Day and Veter-
ans 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 the Trust, dated December 12, 1991 and last renewed on July 27, 1995
("Distribution Agreement"). Pursuant to the Distribution Agreement, the Trust
appointed Nuveen to be its agent for the distribution of the Funds' shares on a
continuous offering basis. Nuveen sells shares to or through brokers, dealers,
banks or other qualified financial intermediaries (collectively referred to as
"Dealers"), or others, in a manner consistent with the then effective registra-
tion statement of the Trust. Pursuant to the Distribution Agreement, Nuveen, at
its own expense, finances certain activities incident to the sale and distribu-
tion 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
compensa
73
<PAGE>
tion and giving of concessions to Dealers. Nuveen receives for its services the
excess, if any, of the sales price of the Funds' shares less the net asset
value of those shares, and reallows a majority or all of such amounts to the
Dealers who sold the shares; Nuveen may act as such a Dealer. Nuveen also re-
ceives compensation pursuant to a distribution plan adopted by the Trust pursu-
ant to Rule 12b-1 and described 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 amounts as to which a reinstatement priv-
ilege is not exercised are set off against and reduce amounts otherwise payable
to Nuveen pursuant to the distribution plan.
The following table sets forth the aggregate amount of underwriting commissions
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
JANUARY 31, 1996 JANUARY 31, 1995 JANUARY 31, 1994
---------------------- ---------------------- ----------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED UNDERWRITING RETAINED UNDERWRITING RETAINED
FUND COMMISSIONS BY NUVEEN COMMISSIONS BY NUVEEN COMMISSIONS BY NUVEEN
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Arizona Fund............ $ 96,000 $13,000 $ 88,000 $20,000 $178,000 $29,000
Florida Fund............ 106,000 25,000 178,000 32,000 462,000 84,000
Maryland Fund........... 160,000 26,000 216,000 38,000 474,000 61,000
Michigan Fund........... 89,000 26,000 127,000 30,000 260,000 35,000
New Jersey Fund......... 241,000 16,000 255,000 35,000 527,000 76,000
Pennsylvania Fund....... 113,000 20,000 236,000 45,000 459,000 67,000
Virginia Fund........... 130,000 14,000 255,000 30,000 544,000 78,000
</TABLE>
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 Trustees.
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.
74
<PAGE>
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to share-
holders.
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 January 31, 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 January 31, 1996
was $6,771 for the Arizona Fund, $9,232 for the Florida Fund, $22,018 for the
Maryland Fund, $7,144 for the Michigan Fund, $23,280 for the New Jersey Fund,
$16,190 for the Pennsylvania Fund and $15,510 for the Virginia Fund.
Under each Fund's Plan, the Fund will report quarterly to the Board of Trustees
for its review all amounts expended per class of shares under the Plan. The
Plan may be terminated at any time with respect to any class of shares, without
the payment of any penalty, by a vote of a majority of the trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the Plan or by vote of a majority of the outstanding voting securities of such
class. The Plan may be renewed from year to year if approved by a vote of the
Board of Trustees and a vote of the non-interested trustees who have no direct
or indirect financial interest in the Plan cast in person at a meeting called
for the purpose of voting on the Plan. The Plan may be continued only if the
trustees who vote to approve such continuance conclude, in the exercise of rea-
sonable business judgment and in light of their fiduciary duties under applica-
ble law, that there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders. The Plan may not be amended to increase materially
the cost which a class of shares may bear under the Plan without the approval
of the shareholders of the affected class, and any other material amendments of
the Plan must be approved by the non-interested trustees by a vote cast in per-
son at a meeting called for the purpose of considering such amendments. During
the continuance of the Plan, the selection and nomination of the non-interested
trustees of the Trust will be committed to the discretion of the non-interested
trustees then in office.
75
<PAGE>
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 the Trust. In addition
to audit services, Arthur Andersen LLP, will provide consultation and assis-
tance on accounting, internal control, tax and related matters. The financial
statements incorporated by reference elsewhere in this Statement of Additional
Information and the information set forth under "Financial Highlights" in the
Prospectus have been audited by Arthur Andersen LLP as indicated in their re-
port 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.
76
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Nuveen Tax-Free
Mutual Funds
Dependable tax-free
income for generations
ARIZONA
FLORIDA
MARYLAND
MICHIGAN
NEW JERSEY
PENNSYLVANIA
VIRGINIA
[PHOTO OF COUPLE APPEARS HERE]
ANNUAL REPORT/JANUARY 31, 1996
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
9 Fund performance
16 Portfolio of investments
39 Statement of net assets
41 Statement of operations
43 Statement of changes in net assets
47 Notes to financial statements
62 Financial highlights
<PAGE>
Dear
shareholder
[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."
During 1995, we 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 market over the past two years serves to
remind 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.
Throughout the past year, we have kept our sights focused on successfully
meeting your fund's objectives. As of January 31, 1996, the current annual SEC
yield on offering price for R Shares for the mutual funds covered in this report
ranged from 4.44% to 4.96%. To match these yields, an investor in the 36%
federal income tax bracket would have had to earn at least 6.94% on taxable
alternatives. The effect of state taxes further enhances the after-tax yield
advantage provided by municipal bonds.
3
<PAGE>
Reflecting the rebound in the bond market, each of these funds reported gains
in portfolio value since January 31, 1995. The 12-month total returns on net
asset value, reflecting portfolio gains plus reinvested dividend income, ranged
from 12.88% to 14.93%, which translate to 16.80% to 18.68% on a taxable-
equivalent basis. This strong performance rewarded investors who had 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 has
been named as my successor as Chief Executive Officer and Chairman of Nuveen,
and Chairman of the Funds. He is currently 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 transition in management 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 needs 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
progress and 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
March 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 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 150 basis points over the year and increase net asset values.
The municipal bond rebound was somewhat less than that of taxable bonds due to
the high-profile discussion of major tax reform legislation--and concern about
the potential impact of this legislation on tax-free investments. Yet in 1995,
most Nuveen mutual funds enjoyed taxable-equivalent total returns of 17% 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 but that are underpriced or
undervalued by the market. This approach was rewarded over the past year, as we
saw many of our portfolio holdings upgraded by the rating agencies, confirming
that our Research Department's judgments about credit quality were on target. We
also moved to protect current income by investing more of our portfolio in non-
callable bonds when possible. These bonds are cannot 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
6
<PAGE>
that our analysts continuously assess investment 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 strained
financial backing 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 election-year politics have focused a
spotlight on 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 almost
certainly two years--or more--away.
Given the uncertainty surrounding this issue, Nuveen has taken the position
that it is inadvisable to manage our funds toward one specific outcome. Instead,
we continue to believe that pursuing our value investing philosophy is the
optimal way to meet our investors' objectives. We believe that this
7
<PAGE>
approach offers investors greater price stability during 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 is moderating, we
continue to watch these factors for potential changes and impact on the bond
market. During this election year, we're also closely monitoring any changes in
economic and tax policy that may impact the municipal market. The fundamentals
in the long term are sound with the supply of municipal bonds down from past
years, and a growing number of individual investors seeking to diversify their
portfolios, and to increase their tax-free income.
8
<PAGE>
NUVEEN ARIZONA TAX-FREE
VALUE FUND
Arizona
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Arizona Tax-Free
Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Tax-Adjusted
Lehman Brothers Lehman Brothers Nuveen AZ Tax-Free
Municipal Bond Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,321
1.93 10,983 10,959 10,545
7.93 11,643 11,618 11,222
1.94 12,328 12,277 12,029
7.94 11,861 11,811 11,400
1.95 11,890 11,815 11,502
7.95 12,796 12,716 12,316
1.96 13,681 13,574 13,123
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,574
___ Nuveen AZ Tax-Free Value Fund - Total $13,123
($13,777 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.09% 7.57% 8.51%
A Shares on NAV 13.68% N/A 10.55%+
A Shares on offering price** 8.56% N/A 6.97%+
C Shares on NAV 12.90% N/A 10.07%+
The fund's current dividend of 4.35 cents per share for Class R Shares
translated into a distribution yield of 4.89% as of January 31, 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 39.5% combined state
and federal income tax bracket would have to earn 8.08% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.32% from a year ago. The average annual total return on NAV for
this class was 14.09%, which translates into a taxable-equivalent total return
of 17.76%.
* One-year, 3-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 FLORIDA TAX-FREE
VALUE FUND
Florida
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Florida Tax-Free
Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers
Municipal Bond Nuveen FL Tax-Free
Index Value Fund
1.92 10,000 9,525
7.92 10,698 10,167
1.93 10,983 10,414
7.93 11,643 11,064
1.94 12,328 11,791
7.94 11,861 11,162
1.95 11,890 11,281
7.95 12,796 12,012
1.96 13,681 12,867
___ Lehman Brothers Municipal Bond Index - Total $13,681
___ Nuveen FL Tax-Free Value Fund - Total $12,867
($13,509 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.05% 7.31% 7.97%
A Shares on NAV 13.92% N/A 10.15%+
A Shares on offering price** 8.79% N/A 6.59%+
C Shares on NAV 12.54% N/A 10.43%+
- -------------------------------------------------------------------
The fund's current dividend of 4.30 cents per share for Class R Shares
translated into a distribution yield of 4.88% as of January 31, 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 36% federal income
tax bracket would have to earn 7.63% on a taxable investment to match this tax-
free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.41% from a year ago. The average annual total return on NAV for
this class was 14.05%, which translates into a taxable-equivalent total return
of 17.13%.
* One-year, 3-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 MARYLAND TAX-FREE
VALUE FUND
Maryland
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Maryland Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers Tax-Adjusted
Municipal Bond Lehman Brothers Nuveen MD Tax-Free
Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,173
1.93 10,983 10,960 10,379
7.93 11,643 11,619 11,101
1.94 12,328 12,279 11,698
7.94 11,861 11,814 11,142
1.95 11,890 11,818 11,163
7.95 12,796 12,718 12,055
1.96 13,681 13,573 12,762
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,573
___ Nuveen MD Tax-Free Value Fund - Total $12,762
($13,398 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.33% 7.14% 7.74%
A Shares on NAV 14.07% N/A 9.64%+
A Shares on offering price** 8.94% N/A 6.10%+
C Shares on NAV 13.24% N/A 9.55%+
- -------------------------------------------------------------------
The fund's current dividend of 4.25 cents per share for Class R Shares
translated into a distribution yield of 4.89% as of January 31, 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 39% combined state
and federal income tax bracket would have to earn 8.02% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.64% from a year ago. The average annual total return on NAV for
this class was 14.33%, which translates into a taxable-equivalent total return
of 17.87%.
* One-year, 3-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 MICHIGAN TAX-FREE
VALUE FUND
Michigan
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Michigan Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Tax-Adjusted
Lehman Brothers Lehman Brothers Nuveen MI
Municipal Municipal Tax-Free
Bond Index Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,346
1.93 10,983 10,946 10,554
7.93 11,643 11,604 11,297
1.94 12,328 12,249 11,987
7.94 11,861 11,785 11,479
1.95 11,890 11,778 11,511
7.95 12,796 12,676 12,355
1.96 13,681 13,517 13,230
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,517
___ Nuveen MI Tax-Free Value Fund - Total $13,230
($13,890 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 14.93% 7.83% 8.74%
A Shares on NAV 14.68% N/A 10.28%+
A Shares on offering price** 9.52% N/A 6.72%+
C Shares on NAV 13.96% N/A 10.92%+
- -------------------------------------------------------------------
The fund's current dividend of 4.45 cents per share for Class R Shares
translated into a distribution yield of 4.97% as of January 31, 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% combined state
and federal income tax bracket would have to earn 8.28% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.81% from a year ago. The average annual total return on NAV for
this class was 14.93%, which translates into a taxable-equivalent total return
of 18.68%.
* One-year, 3-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 JERSEY TAX-FREE
VALUE FUND
New Jersey
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen New Jersey Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers Tax-Adjusted
Municipal Bond Lehman Brothers Nuveen NJ Tax-Free
Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,234
1.93 10,983 10,953 10,416
7.93 11,643 11,612 11,064
1.94 12,328 12,265 11,833
7.94 11,861 11,800 11,370
1.95 11,890 11,798 11,447
7.95 12,796 12,697 12,175
1.96 13,681 13,545 12,922
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,545
___ Nuveen NJ Tax-Free Value Fund - Total $12,922
($13,566 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares on NAV 12.88% 7.45% 8.08%
A Shares on NAV 12.63% N/A 8.87%+
A Shares on offering price** 7.56% N/A 5.35%+
C Shares on NAV 11.80% N/A 9.46%+
- -------------------------------------------------------------------
The fund's current dividend of 4.60 cents per share for Class R Shares
translated into a distribution yield of 5.30% as of January 31, 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% combined state
and federal income tax bracket would have to earn 8.83% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 6.88% from a year ago. The average annual total return on NAV for
this class was 12.88%, which translates into a taxable-equivalent total return
of 16.80%.
* One-year, 3-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 PENNSYLVANIA TAX-FREE
VALUE FUND
Pennsylvania
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Pennsylvania
Tax-Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
Lehman Brothers Tax-Adjusted
Municipal Bond Lehman Brothers Nuveen PA Tax-Free
Index Municipal Bond Index Value Fund
1.92 10,000 10,000 9,525
7.92 10,698 10,698 10,255
1.93 10,983 10,969 10,475
7.93 11,643 11,629 11,199
1.94 12,328 12,300 11,906
7.94 11,861 11,834 11,246
1.95 11,890 11,849 11,319
7.95 12,796 12,752 12,173
1.96 13,681 13,620 12,949
___ Lehman Brothers Municipal Bond Index - Total $13,681
- - - Tax-Adjusted Lehman Brothers Municipal Bond Index
(reduced by state tax effects) - Total $13,620
___ Nuveen PA Tax-Free Value Fund - Total $12,949
($13,595 if purchased at NAV)
Past performance is not predictive of future performance
- -------------------------------------------------------------------
ANNUALIZED TOTAL RETURN
- -------------------------------------------------------------------
1 year 3 years Since inception
- -------------------------------------------------------------------
R Shares 14.40% 7.33% 8.14%
A Shares 14.22% N/A 10.33%+
A Shares on offering price** 9.08% N/A 6.76%+
C Shares 13.27% N/A 8.88%+
- -------------------------------------------------------------------
The fund's current dividend of 4.30 cents per share for Class R Shares
translated into a distribution yield of 4.88% as of January 31, 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 38% combined state
and federal income tax bracket would have to earn 7.87% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.63% from a year ago. The average annual total return on NAV for
this class was 14.40%, which translates into a taxable-equivalent total return
of 17.84%.
* One-year, 3-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 VIRGINIA TAX-FREE VALUE FUND
Virginia
INDEX COMPARISON
Comparison of Change in Value of a $10,000 Investment in Nuveen Virginia Tax-
Free Value Fund R Shares* and Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers Tax-Adjusted Nuveen VA
Municipal Bond Lehman Brothers Tax-Free
Index Municipal Bond Index Value Fund
--------------- -------------------- ----------
<S> <C> <C> <C>
1/92 10,000 10,000 9,525
7/92 10,698 10,698 10,264
1/93 10,983 10,957 10,481
7/93 11,643 11,615 11,157
1/94 12,328 12,272 11,820
7/94 11,861 11,807 11,281
1/95 11,890 11,807 11,357
7/95 12,796 12,707 12,149
1/96 13,681 13,557 13,021
</TABLE>
Lehman Brothers Municipal Bond Index -- Total $13,681
Tax-Adjusted Lehman Brothers Municipal Bond Index (reduced by state tax
effects)-- Total $13,557
Nuveen VA Tax-Free Value Fund -- Total $13,021 ($13,670 if purchased at
NAV)
Past performance is not predictive of future performance
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN
1 year 3 years Since inception
<S> <C> <C> <C>
R Shares on NAV 14.65% 7.51% 8.29%
A Shares on NAV 14.50% N/A 10.14%+
A Shares on offering price** 9.35% N/A 6.58%+
C Shares on NAV 13.58% N/A 9.63%+
</TABLE>
The fund's current dividend of 4.50 cents per share for Class R Shares
translated into a distribution yield of 5.09% as of January 31, 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 39.5% combined state
and federal income tax bracket would have to earn 8.41% on a taxable investment
to match this tax-free yield.
During the fiscal year, your fund's net asset value (for Class R Shares)
increased by 8.50% from a year ago. The average annual total return on NAV for
this class was 14.65%, which translates into a taxable-equivalent total return
of 18.30%.
* One-year, 3-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>
PORTFOLIO OF INVESTMENTS
ARIZONA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 250,000 Arizona Certificates of Participation,
6.250%, 9/01/10 9/02 at 102 Aaa $ 272,493
Arizona Educational Loan Marketing Corporation,
Alternative Minimum Tax:
200,000 7.000%, 3/01/05 3/02 at 101 A 210,860
100,000 6.375%, 9/01/05 9/02 at 101 Aa 105,202
300,000 Arizona Health Facilities Authority (Phoenix Baptist
Hospital and Medical Center), 6.250%, 9/01/11 9/03 at 100 Aaa 324,888
200,000 Arizona Municipal Financing Program, Certificates
of Participation, 7.700%, 8/01/10 No Opt. Call Aaa 248,448
200,000 Arizona State Transportation Board,
6.500%, 7/01/11 (Pre-refunded to 7/01/02) 7/02 at 101 1/2 Aaa 228,050
700,000 Arizona State University Research Park,
5.000%, 7/01/21 7/06 at 100 Aaa 673,190
Arizona State University:
500,000 5.750%, 7/01/12 7/02 at 101 AA 514,705
500,000 5.500%, 7/01/19 7/02 at 101 AA 500,730
500,000 Arizona Student Loan Acquisition Authority,
Alternative Minimum Tax, 6.600%, 5/01/10 5/04 at 102 Aa 518,205
Arizona Wastewater Management Authority:
175,000 5.950%, 7/01/12 7/02 at 102 Aaa 185,719
250,000 5.750%, 7/01/15 7/05 at 102 Aaa 261,385
700,000 Apache County Public Finance Corporation,
Certificates of Participation, 5.500%, 5/01/10 5/00 at 102 A 714,119
195,000 Central Arizona Water Conservation District,
6.500%, 11/01/11 (Pre-refunded to 5/01/01) 5/01 at 102 AA- 219,646
300,000 Cochise County Unified School District No. 68,
General Obligation, 7.500%, 7/01/10 No Opt. Call Aaa 382,296
250,000 Coconino and Yavapai Counties, Joint Unified School
District No. 9, 6.750%, 7/01/07 7/01 at 101 A- 273,245
550,000 Douglas Municipal Property Corporation,
5.750%, 7/01/15 7/05 at 101 Aaa 574,294
280,000 Eloy Municipal Property Corporation,
7.000%, 7/01/11 7/02 at 101 BBB 301,034
375,000 Maricopa Rural Road Improvement District,
6.900%, 7/01/05 7/99 at 101 N/R 396,461
300,000 Maricopa County Hospital District No. 1,
6.250%, 6/01/10 6/04 at 101 Aaa 328,662
500,000 Maricopa County Industrial Development Authority
(Samaritan Health Services), 7.000%, 12/01/16 No Opt. Call Aaa 622,100
600,000 Maricopa County Industrial Development Authority
(Baptist Hospital), 5.500%, 9/01/16 9/05 at 101 Aaa 603,804
Maricopa County School District No. 28,
General Obligation:
265,000 6.000%, 7/01/12 (Pre-refunded to 7/01/02) 7/02 at 100 Aaa 291,733
50,000 6.000%, 7/01/12 7/02 at 100 Aaa 52,784
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 Maricopa County Unified School District No. 41,
6.500%, 7/01/08 (Pre-refunded to 7/01/02) 7/02 at 100 Aaa $ 225,750
250,000 Maricopa County Unified School District No. 69
(Paradise Valley), 6.500%, 7/01/09
(Pre-refunded to 7/01/01) 7/01 at 100 Aaa 278,998
500,000 Mohave County Industrial Development Authority
(Citizens Utilities Company), Alternative
Minimum Tax, 6.600%, 5/01/29 11/03 at 101 AAA 528,845
Navajo County Pollution Control Corporation
(Arizona Public Service Company):
1,000,000 5.875%, 8/15/28 8/03 at 102 Baa1 993,510
750,000 5.500%, 8/15/28 8/03 at 102 Aaa 747,165
425,000 Peoria Improvement District (North Valley Power
Center), 7.300%, 1/01/12 1/03 at 101 BBB 461,835
200,000 Phoenix General Obligation, 6.500%, 7/01/11
(Pre-refunded to 7/01/99) 7/99 at 102 AA+ 220,116
250,000 Phoenix Civic Improvement Corporation, Airport
Terminal Excise Tax, Alternative Minimum Tax,
7.800%, 7/01/11 7/97 at 102 AA+ 266,505
295,000 Phoenix Housing Finance Corporation FHA-Insured,
6.500%, 7/01/24 7/02 at 101 Aaa 305,310
Phoenix Civic Improvement Corporation, Wastewater
System:
1,000,000 5.000%, 7/01/18 7/04 at 102 A1 950,180
400,000 6.125%, 7/01/23 (Pre-refunded to 7/01/03) 7/03 at 102 AAA 452,028
200,000 Phoenix Industrial Development Authority,
FHA-Insured (Chris Ridge Village Project),
6.750%, 11/01/12 11/02 at 101 AAA 212,054
300,000 Phoenix Junior Lien Street and Highway,
6.250%, 7/01/11 7/02 at 102 A+ 320,919
500,000 Phoenix Industrial Development Authority, GNMA
(Meadow Glen Apartments), 5.800%, 8/20/28 2/03 at 102 Aaa 498,530
485,000 Phoenix Industrial Development Authority, Single
Family Mortgage, Alternative Minimum Tax,
6.150%, 12/01/08 6/05 at 102 AAA 489,641
Phoenix Industrial Development Authority
(John C. Lincoln Hospital and Health Center):
500,000 6.000%, 12/01/10 12/03 at 102 BBB+ 517,530
500,000 6.000%, 12/01/14 12/03 at 102 BBB+ 497,495
290,000 Pima County Industrial Development Authority
(Tucson Electric), 7.250%, 7/15/10 1/02 at 103 Aaa 328,999
300,000 Pima County Unified School District No. 1,
General Obligation, 6.100%, 7/01/12 7/02 at 102 Aaa 321,852
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS
ARIZONA-CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 500,000 Pima County, Single Family Mortgage,
6.500%, 2/01/17 8/05 at 102 A $ 515,525
Pinal County, Certificates of Participation:
300,000 6.375%, 6/01/06 6/02 at 100 AA 329,895
200,000 6.500%, 6/01/09 6/02 at 100 AA 215,810
Salt River Project Agricultural Improvement and
Power District:
300,000 5.750%, 1/01/19 1/02 at 100 Aa 302,748
280,000 5.750%, 1/01/20 3/96 at 100 Aa 279,997
225,000 Tempe General Obligation, 6.000%, 7/01/08 7/02 at 101 AA+ 242,118
500,000 Tempe Industrial Development Authority,
Multi-Family Housing, FHA-Insured
(Quadrangles Village Apartments),
6.250%, 6/01/26 6/03 at 102 AAA 513,815
600,000 Tempe Union High School District No. 213,
General Obligation, 6.000%, 7/01/12 7/04 at 101 Aaa 643,674
500,000 Tucson General Obligation, 6.250%, 7/01/18 7/04 at 101 Aaa 544,885
575,000 Tucson Airport Authority, 5.700%, 6/01/13 6/03 at 102 Aaa 591,376
250,000 Tucson Local Business Development Finance
Corporation, 6.250%, 7/01/12 7/02 at 102 Aaa 272,115
300,000 University of Arizona, 6.250%, 6/01/11 6/02 at 102 AA 323,064
335,000 Yavapai County Community College,
6.000%, 7/01/12 7/03 at 101 A- 349,076
675,000 Yuma County Union High School District No. 70,
General Obligation, 5.700%, 7/01/06 7/02 at 101 Aaa 720,285
- -----------------------------------------------------------------------------------------------------------------------------------
$22,125,000 Total Investments--(Cost $21,884,694)--97.9% 23,265,698
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--2.1% 490,183
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $23,755,881
===================================================================================================================================
</TABLE>
18
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<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 $12,725,168 55%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 4,038,741 17
PORTFOLIO OF A+ A1 2 1,271,099 5
INVESTMENTS: A, A- A, A2, A3 5 2,062,825 9
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 5 2,771,404 12
Non-rated Non-rated 1 396,461 2
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 57 $23,265,698 100%
===================================================================================================================================
</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.
See accompanying notes to financial statements.
19
<PAGE>
PORTFOLIO OF INVESTMENTS
FLORIDA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 300,000 Florida Department of General Services, General
Obligation, 6.600%, 7/01/17 7/02 at 101 Aa $ 332,154
2,500,000 Florida Housing Finance Agency, Alternative
Minimum Tax, 6.875%, 8/01/26 2/05 at 102 Aaa 2,672,225
750,000 Florida Housing Finance Agency, 6.400%, 6/01/24 6/02 at 103 AAA 776,003
30,000 Florida Housing Finance Agency, Home Ownership
(GNMA), Alternative Minimum Tax,
8.595%, 11/01/18 No Opt. Call AAA 31,802
Florida Municipal Power Agency:
1,000,000 6.250%, 10/01/21 (Pre-refunded to 10/01/02) 10/02 at 102 Aaa 1,135,100
1,145,000 6.000%, 10/01/27 (Pre-refunded to 10/01/02) 10/02 at 102 Aaa 1,283,179
1,000,000 Florida Municipal Power Agency, St. Lucie Project,
5.500%, 10/01/12 10/02 at 102 Aaa 1,022,390
Florida State Board of Education:
1,160,000 7.100%, 6/01/07 No Opt. Call Aaa 1,276,766
2,250,000 5.875%, 6/01/20 6/05 at 101 Aa 2,338,110
460,000 7.250%, 6/01/23 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 527,450
2,680,000 7.250%, 6/01/23 6/00 at 102 Aa 3,007,255
1,650,000 Florida Turnpike Authority,
6.350%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 101 Aaa 1,863,279
300,000 Brevard County Educational Facilities Authority
(Florida Institute of Technology),
6.875%, 11/01/22 11/02 at 102 BBB 308,484
600,000 Broward County Housing Finance Authority
(Lakeside Apartments), 7.000%, 2/01/25 2/05 at 102 AAA 647,310
190,000 Cape Coral Health Facilities Authority
(Cape Coral Medical Center), 8.125%, 11/01/08 No Opt. Call Aaa 212,589
1,000,000 Dade County (Miami International Airport),
Alternative Minimum Tax, 6.550%, 10/01/13 10/02 at 102 Aaa 1,096,780
115,000 Dade County Housing Finance Authority, Single
Family Mortgage,
Alternative Minimum Tax, 7.250%, 9/01/23 3/01 at 102 Aaa 121,089
2,480,000 Dade County (Jackson Memorial Hospital),
4.875%, 6/01/15 6/03 at 102 Aaa 2,348,982
470,000 Dade County Special Housing (City of Miami
Developments), 12.000%, 7/01/12 3/96 at 102 A 482,220
255,000 Dade County (Courthouse Center), 6.300%, 4/01/14 4/04 at 102 A 274,717
250,000 Dade County Health Facilities Authority
(South Miami Hospital),
7.000%, 10/01/18 (Pre-refunded to 10/01/99) 10/99 at 102 Aaa 281,388
300,000 Dade County Health Facilities Authority (North
Shore Medical Center), 6.500%, 8/15/15 8/02 at 102 Aaa 326,976
1,000,000 Davie Water and Sewer System, 6.250%, 10/01/17 10/02 at 102 Aaa 1,073,510
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600,000 Daytona Beach Water and Sewer System,
6.000%, 11/15/14 11/02 at 102 Aaa $ 636,288
1,600,000 Dunedin (Mease Health Care), 5.375%, 11/15/13 11/03 at 101 Aaa 1,615,632
Escambia County Housing Finance Authority,
Single Family Mortgage,
Alternative Minimum Tax:
325,000 6.900%, 4/01/20 10/02 at 102 Aaa 340,727
2,000,000 6.950%, 10/01/27 4/05 at 102 Aaa 2,098,140
500,000 Escambia County School Board, Certificates of
Participation, 6.375%, 2/01/12 2/02 at 100 Aaa 536,735
500,000 Gainesville Utility System, 6.500%, 10/01/22 10/02 at 102 Aa 549,080
1,200,000 Hillsborough County Industrial Development
Authority, Pollution
Control (Tampa Electric), 8.000%, 5/01/22 5/02 at 103 Aa2 1,439,112
250,000 Hillsborough County, Capital Improvement (Museum
of Science and Industry),
6.400%, 1/01/12 (Pre-refunded to 1/01/00) 1/00 at 102 A 275,633
250,000 Hollywood Water and Sewer System,
6.875%, 10/01/21 (Pre-refunded to 10/01/01) 10/01 at 102 Aaa 288,305
Jacksonville Electric Authority:
470,000 7.500%, 10/01/02 10/97 at 101-1/2 Aa1 503,224
500,000 5.500%, 10/01/14 10/02 at 101 Aa1 501,975
790,000 5.250%, 10/01/21 10/02 at 101 Aa1 766,648
1,000,000 5.250%, 10/01/28 10/02 at 101 Aa1 967,340
250,000 Jacksonville Excise Taxes, 6.500%, 10/01/13 10/02 at 102 Aaa 276,795
605,000 Jacksonville Health Facilities Authority
(Daughters of Charity Health System--St. Vincent),
7.500%, 11/01/15 (Pre-refunded to 11/01/00) 11/00 at 102 Aaa 706,900
375,000 Jacksonville Water and Sewer (Jacksonville Suburban
Utilities Corporation), Alternative Minimum Tax,
6.750%, 6/01/22 6/02 at 102 A2 409,174
250,000 Jupiter Water System, 6.250%, 10/01/18 10/01 at 102 Aaa 266,320
1,300,000 Kissimmee Utility Authority, Electric System,
5.375%, 10/01/12 10/03 at 102 Aaa 1,322,451
1,000,000 Manatee County Housing Finance Authority,
Single Family Mortgage, Alternative Minimum Tax,
7.600%, 11/01/26 11/05 at 105 Aaa 1,104,650
2,550,000 Miami Beach Water and Sewer System,
5.375%, 9/01/15 9/05 at 102 Aaa 2,549,873
250,000 North Broward Hospital District, 6.250%, 1/01/12 1/02 at 102 Aaa 268,555
Orange County Sales Tax:
145,000 6.125%, 1/01/19 No Opt. Call Aaa 158,768
1,500,000 5.375%, 1/01/24 1/03 at 102 Aaa 1,489,200
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS
FLORIDA--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 Orange County Water Utilities System,
6.250%, 10/01/17 4/02 at 102 Aaa $ 535,045
1,000,000 Orange County Housing Finance Authority
(Ashley Point Apartments), Alternative Minimum
Tax, 7.100%, 10/01/24 10/01 at 101 BBB+ 1,037,930
Orlando Utilities Commission:
1,250,000 6.000%, 10/01/20 10/02 at 102 Aa 1,291,213
1,000,000 5.500%, 10/01/20 10/99 at 100 Aa 999,250
Orlando and Orange County Expressway Authority:
1,000,000 5.500%, 7/01/18 7/03 at 102 Aaa 1,007,620
1,000,000 5.125%, 7/01/20 7/03 at 102 Aaa 968,820
Palm Beach County Criminal Justice Facilities:
1,000,000 5.300%, 6/01/05 No Opt. Call Aaa 1,063,100
1,000,000 5.375%, 6/01/10 No Opt. Call Aaa 1,045,810
2,000,000 Pensacola Health Facilities Authority (Daughters of
Charity-Sacred Heart), 5.250%, 1/01/11 1/03 at 102 Aa 1,966,420
2,000,000 Pinellas County Health Facilities Authority
(Morton Plant Health System), 5.500%, 11/15/18 11/03 at 102 Aaa 2,005,080
565,000 St. Lucie County Solid Waste System,
6.000%, 9/01/15 (Pre-refunded to 9/01/99) 9/99 at 100 Aaa 606,059
500,000 St. Petersburg Health Facilities Authority
(St. Joseph's Hospital Inc.), 7.000%, 12/01/15 12/01 at 102 Aaa 567,450
1,000,000 Sarasota Water and Sewer System,
7.625%, 10/01/08 (Pre-refunded to 10/01/96) 10/96 at 102 Aaa 1,045,910
500,000 Tampa Water and Sewer System,
6.000%, 10/01/17 (Pre-refunded to 10/01/02) 10/02 at 101 Aaa 554,690
1,000,000 Turtle Run Community Development District,
6.400%, 5/01/11 5/03 at 100 A1 1,061,390
2,000,000 West Palm Beach Utility System, 5.400%, 10/01/23 10/02 at 101 Aaa 1,978,580
- -----------------------------------------------------------------------------------------------------------------------------------
$57,410,000 Total Investments--(Cost $56,821,593)--98.3% 60,245,650
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.7% 1,062,980
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $61,308,630
===================================================================================================================================
</TABLE>
22
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 43 $41,734,321 69%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 12 14,661,781 24
PORTFOLIO OF A+ A1 1 1,061,390 2
INVESTMENTS: A, A- A, A2, A3 4 1,441,744 3
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 1,346,414 2
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 62 $60,245,650 100%
===================================================================================================================================
</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.
See accompanying notes to financial statements.
23
<PAGE>
PORTFOLIO OF INVESTMENTS
MARYLAND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 Maryland Community Development Administration,
Single Family Mortgage, 7.000%, 4/01/14 4/97 at 103 Aa $ 521,810
1,500,000 Maryland Community Development Administration,
Department of Housing and Community
Development, Alternative Minimum Tax,
7.450%, 4/01/32 4/01 at 102 Aa 1,577,790
Maryland Community Development Administration,
Multi-Family Housing:
700,000 6.700%, 5/15/27 5/02 at 102 Aa 732,018
500,000 6.750%, 5/15/33 5/02 at 102 Aa 524,485
2,000,000 Maryland General Obligation, 4.600%, 7/15/06 7/03 at 101 Aaa 2,011,080
500,000 Maryland Health and Higher Educational Facilities
Authority (Sinai Hospital of Baltimore),
7.000%, 7/01/19 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 568,115
Maryland Health and Higher Educational Facilities
Authority (Doctor's Community Hospital):
1,000,000 5.750%, 7/01/13 7/03 at 102 Baa 942,270
1,005,000 8.750%, 7/01/22 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 1,212,422
Maryland Health and Higher Educational Facilities
Authority (Francis Scott Key Medical Center):
1,800,000 5.000%, 7/01/13 7/03 at 102 Aaa 1,741,986
500,000 6.750%, 7/01/23 (Pre-refunded to 7/01/00) 7/00 at 102 Aaa 563,100
700,000 Maryland National Capital Park and Planning
Commission, 6.125%, 7/01/10
(Pre-refunded to 7/01/02) 7/02 at 102 Aa 784,539
1,760,000 Maryland Stadium Authority, 5.875%, 12/15/12 12/04 at 102 Aaa 1,859,845
Maryland Stadium Authority, Sports Facility,
Alternative Minimum Tax:
500,000 7.375%, 12/15/04 12/99 at 102 Aa 561,605
500,000 7.500%, 12/15/10 12/99 at 102 Aa 556,130
3,415,000 Maryland Transportation Authority (Baltimore/
Washington International Airport),
Alternative Minimum Tax, 6.400%, 7/01/19 7/04 at 102 Aaa 3,600,639
1,000,000 Maryland Transportation Authority, 5.750%, 7/01/15 7/02 at 100 A1 1,014,660
2,000,000 Baltimore County General Obligation,
6.700%, 7/01/11 7/98 at 102 Aaa 2,143,380
Baltimore General Obligation:
2,295,000 7.375%, 10/15/03 No Opt. Call Aaa 2,751,177
600,000 6.500%, 10/15/12 (Pre-refunded to 10/15/02) 10/02 at 100 Aaa 678,750
1,000,000 Baltimore, GMNA (Tindeco Wharf Apartments
Project), 6.700%, 12/20/28 12/02 at 102 AAA 1,048,290
1,500,000 Baltimore Port Facilities (Consolidated Coal Sales
Company), 6.500%, 10/01/11 4/02 at 103 Aa3 1,654,575
625,000 Baltimore Water System, 6.500%, 7/01/20
(Pre-refunded to 7/01/00) 7/00 at 100 Aaa 687,131
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,165,000 Gaithersburg (Shady Grove Adventist Nursing and
Rehabilitation Center), 6.500%, 9/01/12 No Opt. Call Aaa $ 2,489,490
1,000,000 Howard County (Howard Hills Townhouse Project-
FHA Insured) 6.400%, 7/01/24 7/02 at 102 Aaa 1,045,020
2,000,000 Howard County Multi-Family Mortgage (Chase
Glen Project), 7.000%, 7/01/24 (Mandatory
put 7/01/04) 7/02 at 104 N/R 2,206,920
1,000,000 Montgomery County Housing Opportunities
Commission, Multi-Family Housing,
6.000%, 7/01/20 7/05 at 102 Aa 1,016,470
Montgomery County Housing Opportunities
Commission, Single Family Housing:
450,000 7.250%, 7/01/13 7/96 at 103 Aa 467,474
1,615,000 6.600%, 7/01/14 7/04 at 102 Aa 1,695,524
1,000,000 Montgomery County Solid Waste Resource
Recovery Project, 5.875%, 6/01/13 6/03 at 102 Aaa 1,045,190
1,500,000 Morgan State University, 6.100%, 7/01/20 No Opt. Call Aaa 1,688,775
1,000,000 Northeast Maryland Waste Disposal Authority,
Resource Recovery, 6.900%, 1/01/00 No Opt. Call Aaa 1,098,040
600,000 Prince George's County (Dimensions Health
Corporation), 6.700%, 7/01/97 No Opt. Call A 622,992
1,550,000 Prince George's County Housing Authority,
(New Keystone Apartments-FHA Insured),
6.800%, 7/01/25 1/02 at 102 Aaa 1,638,118
1,500,000 Prince George's County Pollution Control
(Potomac Electric Project), 6.375%, 1/15/23 1/03 at 102 A+ 1,601,625
1,000,000 University of Maryland, 5.000%, 10/01/11 10/03 at 101 AA+ 995,100
1,500,000 Washington D.C. Metro Area Transit Authority,
Transit Refunding Bonds, 5.250%, 7/01/14 1/04 at 102 Aaa 1,485,090
1,170,000 Washington Suburban Sanitary District,
8.000%, 1/01/02 No Opt. Call Aa1 1,399,706
500,000 Commonwealth of Puerto Rico, General Obligation,
6.600%, 7/01/13 (Pre-refunded to 7/01/02) 7/02 at 101-1/2 Aaa 574,435
1,750,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 A 1,952,405
2,000,000 Puerto Rico Highway and Transportation Authority,
5.250%, 7/01/21 7/03 at 101-1/2 A 1,906,900
Puerto Rico Electric Power Authority:
630,000 7.000%, 7/01/07 (Pre-refunded to 7/01/99) 7/99 at 101-1/2 A- 701,448
315,000 7.125%, 7/01/14 (Pre-refunded to 7/01/99) 7/99 at 101-1/2 AAA 352,620
185,000 7.125%, 7/01/14 7/99 at 101-1/2 A- 201,704
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
PORTFOLIO OF INVESTMENTS
MARYLAND-CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Puerto Rico Industrial Medical and
Environmental Authority, 6.250%, 7/01/16 1/05 at 102 Aaa $ 1,089,390
- ------------------------------------------------------------------------------------------------------------------------------------
$51,330,000 Total Investments--(cost $51,884,039)-98.8% 55,010,233
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.2% 677,041
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $ 55,687,274
====================================================================================================================================
</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 22 $31,372,083 57%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 12,487,226 22
PORTFOLIO OF A+ A1 2 2,616,285 5
INVESTMENTS: A, A- A, A2, A3 5 5,385,449 10
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 1 942,270 2
Non-rated Non-rated 1 2,206,920 4
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 44 $55,010,233 100%
===================================================================================================================================
</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.
See accompanying notes to financial statements.
26
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
MICHIGAN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Michigan Building Authority, 6.250%, 10/01/20 10/01 at 102 AA- $ 1,060,740
1,740,000 Michigan Hospital Finance Authority (Daughters of
Charity), 5.500%,11/01/05 No Opt. Call Aa 1,839,371
1,000,000 Michigan Hospital Finance Authority (Otsego
Memorial Hospital Gaylord), 6.125%, 1/01/15 1/05 at 102 AA 1,041,980
1,190,000 Michigan Housing Development Authority
(Parc Pointe Apartments), 6.500%, 10/01/15 10/05 at 102 Aaa 1,248,667
1,000,000 Michigan Housing Development Authority, Single
Family Mortgage, 6.800%, 12/01/16 6/05 at 102 AA+ 1,048,130
Michigan Housing Development Authority,
Rental Housing:
500,000 6.400%, 4/01/05 10/02 at 102 A+ 531,000
500,000 6.650%, 4/01/23 10/02 at 102 A+ 517,225
Michigan Municipal Bond Authority:
250,000 4.750%, 12/01/09 12/01 at 100 Aaa 244,650
555,000 6.600%, 10/01/18 10/02 at 102 Aa 600,738
950,000 Michigan Municipal Bond Authority, State
Revolving Fund, 7.000%,10/01/04 No Opt. Call Aa 1,116,944
1,000,000 Michigan Public Power Agency (Belle River Project),
5.250% 1/01/18 1/03 at 102 AA- 968,950
Michigan State Hospital Finance Authority
(Detroit Medical Center):
860,000 5.000%, 8/15/02 No Opt. Call A 851,959
460,000 8.125%, 8/15/08 (Pre-refunded to 8/15/98) 8/98 at 102 Aaa 515,232
40,000 8.125%, 8/15/08 8/98 at 102 A 43,786
1,000,000 Michigan State Hospital Finance Authority
(Daughters of Charity Health System),
7.000%, 11/01/21 11/01 at 102 Aa 1,091,500
500,000 Michigan State Hospital Finance Authority
(Mid-Michigan Obligated
Group), 6.900%, 12/01/24 12/02 at 102 A 532,390
1,145,000 Michigan State University, 6.250%, 8/15/15 8/02 at 101 AA- 1,206,394
1,055,000 Michigan Strategic Fund (WMX Technologies),
Alternative Minimum Tax, 6.000%, 12/01/13 12/03 at 102 A1 1,080,689
400,000 Bay County General Obligation, West Side Regional
Sewage Disposal System, 6.400%, 5/01/02 5/96 at 102 A 408,000
250,000 Capital Region Airport Authority, Alternative
Minimum Tax, 6.700%, 7/01/21 7/02 at 102 Aaa 273,175
1,000,000 Dearborn School District, General Obligation,
6.000%, 5/01/14 5/01 at 102 AA 1,043,140
1,500,000 Detroit Convention Facility (Cobo Hall),
5.250%, 9/30/12 9/03 at 102 A 1,452,945
1,000,000 Detroit Water Supply System, 4.750%, 7/01/19 7/04 at 102 Aaa 926,040
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
MICHIGAN-CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Dexter Community Schools, General Obligation,
5.000%, 5/01/17 5/03 at 102 AA $ 945,490
445,000 Grand Rapids Housing Corporation, Multi-Family
Mortgage, 7.375%, 7/15/41 1/04 at 104 AAA 492,050
500,000 Grand Traverse County Hospital Finance Authority
(Munson Healthcare), 6.250%, 7/01/22 7/02 at 102 Aaa 531,715
1,150,000 Greenville Public Schools, General Obligation,
5.750%, 5/01/19 (DD) 5/04 at 101 Aaa 1,178,980
1,250,000 Lansing Sewage Disposal System, 5.850%, 5/01/14 5/04 at 102 Aaa 1,309,263
1,000,000 Monroe County Pollution Control (Detroit Edison
Company), Alternative Minimum Tax,
6.350%, 12/01/04 No Opt. Call Aaa 1,127,330
Muskegon Water Supply System:
450,000 4.500%, 5/01/12 5/01 at 101 Baa1 399,587
450,000 4.500%, 5/01/13 5/01 at 101 Baa1 394,533
1,000,000 Reeths-Puffer Schools, General Obligation,
5.750%, 5/01/15 5/05 at 101 Aaa 1,029,550
180,000 Saginaw-Midland Municipal Water Supply
Corporation, 6.875%, 9/01/06 9/04 at 102 A 199,723
200,000 St. Joseph Hospital Finance Authority (Mercy
Memorial Medical Center), 7.300%, 10/01/00
(Pre-refunded to 10/01/96) 10/96 at 102 AAA 209,174
1,000,000 University of Michigan Hospital, 6.375%, 12/01/24 12/00 at 100 Aa 1,031,690
1,000,000 University of Michigan Student Fee, 5.500%, 4/01/12 4/03 at 102 AA+ 1,023,410
250,000 Warren Economic Development Corporation, GNMA
(Autumn Woods Project), 6.900%, 12/20/22 3/02 at 101 Aaa 264,705
1,000,000 Wayne County (Detroit Metropolitan Wayne County
Airport), 5.250%, 12/01/13 12/03 at 102 Aaa 984,010
1,000,000 Western Township Utilities Authority, Sewage
Disposal System, 6.500%, 1/01/10 1/02 at 100 AAA 1,083,670
1,000,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 A 1,115,660
250,000 Puerto Rico Public Buildings Authority,
6.875%, 7/01/21 (Pre-refunded to 7/01/02) 7/02 at 101-1/2 Aaa 291,057
- ------------------------------------------------------------------------------------------------------------------------------------
$32,020,000 Total Investments-(cost $31,410,104)--96.7% 33,255,242
===========-------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES--1.8%
$ 600,000 University of Michigan Hospital, Adjustable Rate
=========== Demand Bonds, 3.500%, 12/01/27+ VMIG-1 600,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.5% 529,188
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $ 34,384,430
====================================================================================================================================
</TABLE>
28
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 16 $11,709,268 35%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 14,018,477 42
PORTFOLIO OF A+ A1 3 2,128,914 7
INVESTMENTS A, A- A, A2, A3 7 4,604,463 14
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 794,120 2
TEMPORARY
INVESTMENTS):
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 41 $33,255,242 100%
===================================================================================================================================
</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.
(DD) Security purchased on a delayed delivery 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.
29
<PAGE>
PORTFOLIO OF INVESTMENTS
NEW JERSEY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 New Jersey Economic Development Authority
(Elizabethtown Gas Company), Alternative
Minimum Tax, 6.750%, 10/01/21 10/96 at 102 A3 $ 1,031,330
200,000 New Jersey Economic Development Authority
(Liberty State Park Project), 6.800%, 3/15/22 3/02 at 102 A1 218,124
1,000,000 New Jersey Economic Development Authority
(Yeshiva K'tana of Passaic), 8.000%, 9/15/18 No Opt. Call N/R 1,191,120
2,965,000 New Jersey Economic Development Authority
(Bridgewater Resources, Inc.), Alternative
Minimum Tax, 8.375%, 11/01/04 No Opt. Call N/R 3,148,237
250,000 New Jersey Economic Development Authority, Solid
Waste Disposal Facility (Garden State Paper
Company), 7.125%, 4/01/22 4/02 at 102 Aa1 274,143
1,285,000 New Jersey Economic Development Authority,
Alternative Minimum Tax, 5.300%, 12/01/07 12/03 at 102 Aa1 1,291,849
1,025,000 New Jersey Economic Development Authority
(Educational Testing Service), 6.500%, 5/15/05 No Opt. Call Aaa 1,138,601
650,000 New Jersey Economic Development Authority,
5.875%, 7/01/11 7/04 at 102 Aaa 690,554
975,000 New Jersey Educational Facilities Authority
(Trenton State College), 6.750%, 7/01/08 7/96 at 100 A+ 981,962
835,000 New Jersey Educational Facilities Authority
(Princeton University), 5.875%, 7/01/11 7/04 at 100 Aaa 889,375
1,500,000 New Jersey Educational Facilities Authority
(Higher Education Facilities Trust Fund),
5.125%, 9/01/02 No Opt. Call Aaa 1,576,830
1,000,000 New Jersey General Obligation, 5.800%, 2/15/07 No Opt. Call Aa1 1,108,150
1,215,000 New Jersey Health Care Facilities Financing
Authority (Hackensack Hospital),
8.750%, 7/01/09 No Opt. Call Aaa 1,479,323
700,000 New Jersey Health Care Facilities Financing
Authority (Community Medical Center/Kensington
Manor Care Center), 7.000%, 7/01/20 7/00 at 102 Aaa 777,427
480,000 New Jersey Health Care Facilities Authority
(Community Memorial Hospital), 8.000%, 7/01/14 7/98 at 102 A 523,474
400,000 New Jersey Health Care Facilities Financing
Authority (Atlantic City Medical Center),
6.800%, 7/01/05 7/02 at 102 A 436,828
850,000 New Jersey Health Care Facilities Financing
Authority (Palisades Medical Center),
7.500%, 7/01/06 7/02 at 102 Ba 879,011
1,750,000 New Jersey Housing Finance Agency,
9.000%, 11/01/18 11/99 at 100 A1 1,827,245
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000,000 New Jersey Housing and Mortgage Finance Agency,
Multi-Family Housing, 6.000%, 11/01/14 5/05 at 102 Aaa $ 2,059,160
700,000 New Jersey Housing and Mortgage Finance Agency,
6.950%, 11/01/13 5/02 at 102 A+ 745,500
New Jersey Turnpike Authority:
375,000 10.375%, 1/01/03 No Opt. Call AAA 466,973
1,750,000 6.500%, 1/01/08 No Opt. Call A 2,025,293
1,415,000 Delaware River and Bay Authority, 5.000%, 1/01/17 1/04 at 102 Aaa 1,372,975
1,000,000 Delaware River Port Authority, 5.500%, 1/01/26 1/06 at 102 Aaa 1,004,720
1,000,000 Camden County Pollution Control Finance Authority,
Solid Waste Disposal and Resource
Recovery, Alternative Minimum Tax,
7.125%, 12/01/01 No Opt. Call BBB+ 1,034,220
2,645,000 Camden County Pollution Control Finance Authority,
Solid Waste Disposal and Resource Recovery
System, 7.250%, 12/01/10 12/01 at 102 BBB+ 2,803,197
500,000 Essex County Improvement Authority,
6.500%, 12/01/12 12/02 at 102 Baa1 536,010
500,000 Hillsborough Township School District,
5.875%, 8/01/11 No Opt. Call AA 545,105
400,000 Hudson County Improvement Authority
Multi-Family Housing (Observer Park Project),
Alternative Minimum Tax, 6.900%, 6/01/22 6/04 at 100 AAA 421,688
1,605,000 Little Ferry Board of Education, Certificates of
Participation, 6.300%, 1/15/08 No Opt. Call N/R 1,664,337
Monroe Township Board of Education, General
Obligation:
725,000 5.200%, 8/01/11 No Opt. Call Aaa 738,550
825,000 5.200%, 8/01/14 No Opt. Call Aaa 840,263
600,000 Morris County General Obligation, 5.000%, 7/15/09 7/05 at 100 Aaa 606,972
500,000 North Bergen Housing Development Corporation,
FHA-Insured, 7.400%, 9/01/20 8/96 at 102/1/\\2\\ N/R 512,850
300,000 North Bergen Township General Obligation,
6.500%, 8/15/12 8/02 at 102 Aaa 332,100
2,350,000 Ocean County Utilities Authority, 5.000%, 1/01/14 1/97 at 100 Aaa 2,210,692
2,215,000 Passaic County General Obligation, 5.125%, 9/01/12 No Opt. Call Aaa 2,234,647
775,000 Rutgers State University, 8.000%, 5/01/18
(Pre-refunded to 5/01/98) 5/98 at 102 Aaa 860,514
Union County Utilities Authority, Solid Waste
System, Alternative Minimum Tax:
195,000 7.100%, 6/15/06 6/02 at 102 A- 209,307
1,100,000 7.200%, 6/15/14 6/02 at 102 A- 1,176,076
270,000 6.850%, 6/15/14 6/02 at 102 Aaa 289,697
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
NEW JERSEY--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100,000 University of Medicine and Dentistry of New Jersey,
6.500%, 12/01/18 (Pre-refunded to 12/01/01) 12/01 at 102 AA $ 113,743
300,000 Wanaque Borough Sewerage Authority,
7.000%, 12/01/21 12/02 at 102 Baa1 323,658
1,175,000 Virgin Islands Housing Finance Authority,
Alternative Minimum Tax, 6.450%, 3/01/16 3/05 at 102 AAA 1,211,519
2,000,000 Puerto Rico Commonwealth General Obligation,
5.750%, 7/01/24 7/05 at 101 1/2 Aaa 2,075,380
1,000,000 Puerto Rico Aqueduct and Sewer Authority,
7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 A 1,115,660
60,000 Puerto Rico Highway Transportation Authority,
6.625%, 7/01/18 (Pre-refunded to 7/01/02) 7/02 at 101 1/2 A 69,015
Puerto Rico Electric Power Authority:
790,000 7.000%, 7/01/07 No Opt. Call A- 928,778
1,875,000 7.000%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 A- 2,172,693
1,000,000 Puerto Rico Industrial Medical and Environmental
Authority, 6.250%, 7/01/16 1/05 at 102 Aaa 1,089,389
- -----------------------------------------------------------------------------------------------------------------------------------
$50,125,000 Total Investments--(Cost $50,801,410)--96.8% 53,254,264
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--3.2% 1,775,636
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $55,029,900
===================================================================================================================================
</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 22 $24,367,349 46%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 5 3,332,990 6
PORTFOLIO OF A+ A1 4 3,772,831 7
INVESTMENTS: A, A- A, A2, A3 10 9,688,454 18
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 4,697,085 9
BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 879,011 2
Non-rated Non-rated 4 6,516,544 12
- -----------------------------------------------------------------------------------------------------------------------------------
Total 50 $53,254,264 100%
===================================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by 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 accountants): Using the
higher of Standard & Poor's or Moody's rating.
N/R - Investment is not rated.
See accompanying notes to financial statements.
32
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
PENNSYLVANIA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Pennsylvania Economic Development Financing
Authority (Sun Co--R&M Project), Alternative
Minimum Tax, 7.600%, 12/01/24 12/04 at 102 Baa1 $ 2,822,650
Pennsylvania General Obligation:
2,000,000 6.400%, 1/01/99 No Opt. Call AA- 2,136,220
1,290,000 5.000%, 5/01/03 No Opt. Call AA- 1,338,736
2,000,000 5.300%, 5/01/05 No Opt. Call AA 2,106,680
2,500,000 Pennsylvania Higher Education Assistance Agency,
Student Loan, 4.625%, 12/01/00 No Opt. Call AAA 2,508,975
750,000 Pennsylvania Higher Educational Facilities Authority
(Thomas Jefferson University), 6.000%, 7/01/19 7/99 at 102 Aa 768,555
600,000 Pennsylvania Housing Finance Agency, Single
Family Mortgage, 7.150%, 4/01/15 10/01 at 102 Aa 646,956
1,795,000 Pennsylvania Industrial Development Authority,
7.000%, 1/01/06 No Opt. Call Aaa 2,127,775
1,390,000 Pennsylvania Intergovernmental Cooperative
Authority (City of Philadelphia Funding
Program), 7.000%, 6/15/05 No Opt. Call Aaa 1,640,992
2,300,000 Pennsylvania Turnpike Commission,
5.500%, 12/01/17 12/02 at 102 Aaa 2,305,382
1,000,000 Allegheny County (Greater Pittsburgh International
Airport), Alternative Minimum Tax,
7.000%, 1/01/18 1/00 at 102 Aaa 1,061,710
1,375,000 Allegheny County Hospital Development Authority
(Allegheny Valley Hospital), 7.000%, 8/01/15 No Opt. Call A 1,597,709
1,500,000 Allegheny County Hospital Development Authority
(Rehabilitation Institute of Pittsburgh),
7.000%, 6/01/22 6/02 at 102 BBB 1,548,465
3,000,000 Allegheny County Residential Financing Authority
(Ladies Grand Army of the Republic Health),
6.350%, 10/01/36 10/05 at 100 AAA 3,052,770
2,000,000 Allegheny County Residential Finance Authority,
Single Family Mortgage, (GNMA), Alternative
Minimum Tax, 0.000%, 5/01/27 No Opt. Call Aaa 232,940
2,000,000 Armstrong County Hospital Authority (Canterbury
Place Project), 6.500%, 12/01/21 12/01 at 100 Aaa 2,140,100
1,000,000 Bucks County Community College Authority,
6.250%, 6/15/14 6/02 at 100 Aa 1,045,510
2,850,000 Deer Lakes School District, General Obligation,
6.350%, 1/15/14 1/04 at 100 Aaa 3,067,968
800,000 Greater Lebanon Refuse Authority, Solid Waste,
7.000%, 11/15/04 11/02 at 100 A- 860,104
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
PENNSYLVANIA--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,500,000 Indiana County Industrial Development Authority,
Pollution Control (New York State Electric and
Gas Corporation), 6.000%, 6/01/06 No Opt. Call Aaa $ 3,873,345
3,000,000 Indiana County Industrial Development Authority,
Pollution Control (Pennsylvania Electric
Company), 5.350%, 11/01/10 No Opt. Call Aaa 3,121,440
Luzerne County Industrial Development Authority
(Pennsylvania Gas and Water Company),
Alternative Minimum Tax:
1,500,000 7.000%, 12/01/17 12/04 at 102 Aaa 1,706,490
950,000 7.125%, 12/01/22 12/02 at 102 Baa1 1,018,315
3,000,000 Montgomery County Higher Educational and Health
Authority (Waverly Heights), 6.375%,
1/01/26 (DD) 1/06 at 101 BBB 2,999,790
1,800,000 Northampton County Higher Education Authority
(Lehigh University), 6.900%, 10/15/06 10/01 at 102 Aaa 2,041,560
1,000,000 Northumberland County Industrial Development
Authority (Roaring Creek Water Company),
Alternative Minimum Tax, 6.375%, 10/15/23 10/03 at 102 N/R 965,270
2,000,000 Philadelphia Gas Works, 6.375%, 7/01/14 7/03 at 102 Aaa 2,177,420
1,000,000 Philadelphia Municipal Authority, 5.625%, 11/15/14 11/03 at 102 Aaa 1,005,890
Pittsburgh Urban Redevelopment Authority,
Alternative Minimum Tax:
3,280,000 6.375%, 8/01/18 8/05 at 102 A 3,318,638
1,100,000 6.625%, 4/01/22 4/04 at 102 A1 1,132,241
500,000 St. Mary's Hospital Authority (Franciscan Health
System/St. Mary of Langhorne), 6.500%, 7/01/12 7/02 at 102 Aaa 543,820
230,000 Sayre Health Care Facilities Authority (Guthrie
Healthcare System), 7.100%, 3/01/17 3/01 at 102 Aaa 258,713
Southeastern Pennsylvania Transportation
Authority:
1,500,000 6.500%, 3/01/04 No Opt. Call Aaa 1,702,980
1,000,000 6.500%, 3/01/05 No Opt. Call Aaa 1,140,920
2,250,000 University of Pittsburgh, 6.125%, 6/01/21 6/02 at 102 Aaa 2,375,865
350,000 Washington County Hospital Authority
(Monongahela Valley Hospital), 6.750%, 12/01/08 4/02 at 102 A 370,832
935,000 West View Municipal Authority, 9.500%, 11/15/14 No Opt. Call Aaa 1,324,718
600,000 Wilkes-Barre General Municipal Authority
(College Misericordia), Alternative Minimum
Tax, 7.750%, 12/01/12 12/00 at 100 N/R 661,650
- ------------------------------------------------------------------------------------------------------------------------------------
$62,145,000 Total Investments-(cost $60,924,413)-100.8% 64,750,094
===========-------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES-3.1%
$ 2,000,000 Geisinger Authority (Montaur Co.), Variable Rate
Demand Bonds, 3.600%, 7/01/22+ A-1+ $ 2,000,000
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities-(3.9)% (2,487,424)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets-100% 64,262,670
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 21 $39,411,773 61%
RATINGS** AA+,AA,AA- Aa1,Aa,Aa2,Aa3 6 8,042,657 12
PORTFOLIO OF A+ A1 1 1,132,241 2
INVESTMENTS A,A- A,A2,A3 4 6,147,283 9
(EXCLUDING BBB+,BBB,BBB- Baa1,Baa,Baa2,Baa3 4 8,389,220 13
TEMPORARY Non-rated Non-rated 2 1,626,920 3
INVESTMENTS):
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 38 $64,750,094 100%
====================================================================================================================================
</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.
(DD) Security purchased on a delayed delivery 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.
35
<PAGE>
PORTFOLIO OF INVESTMENTS
VIRGINIA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 800,000 Virginia College Building Authority
(Randolph-Macon College), 6.625%, 5/01/13 5/02 at 102 A- $ 856,392
Virginia College Building Authority
(The Washington and Lee University):
1,250,000 5.750% 1/01/14 1/04 at 102 Aa 1,287,538
1,000,000 5.800%, 1/01/24 1/04 at 102 Aa 1,027,640
Virginia Housing Development Authority:
800,000 6.800%, 11/01/09 5/02 at 102 AA+ 854,472
650,000 6.850%, 7/01/17 1/00 at 102 AA+ 675,168
4,000,000 7.150%, 1/01/33 1/02 at 102 AA+ 4,242,320
Virginia Public Building Authority:
1,090,000 6.500%, 8/01/11 8/01 at 102 Aa 1,229,040
750,000 6.250%, 8/01/14 8/04 at 101 Aa 814,050
800,000 Virginia Resource Authority, Water System,
6.450%, 4/01/13 4/02 at 102 AA 853,448
1,000,000 Virginia Resource Authority, Sewer System,
Alternative Minimum Tax, 6.000%, 10/01/25 10/05 at 102 AA 1,033,400
4,425,000 Virginia Transportation Board, 6.000%, 5/15/19 5/98 at 102 Aa 4,542,041
1,000,000 Abingdon General Obligation, 6.250%, 8/01/12 8/02 at 102 A 1,071,050
1,410,000 Albemarle County Industrial Development Authority
(Martha Jefferson Hospital), 5.800%, 10/01/09 10/03 at 102 A 1,449,790
1,500,000 Capital Region Airport Commission (Richmond
International Airport), 5.625%, 7/01/20 7/05 at 102 Aaa 1,518,840
750,000 Charlottesville-Albemarle Airport Authority,
Alternative Minimum Tax, 6.125%, 12/01/13 12/05 at 102 BBB 765,285
2,500,000 Chesapeake Bay Bridge and Tunnel Commission,
6.375%, 7/01/22 7/01 at 102 Aaa 2,671,800
1,000,000 Covington-Alleghany County Industrial Development
Authority (Alleghany Regional Hospital),
6.625%, 4/01/12 (Pre-refunded to 4/01/02) 4/02 at 102 A- 1,138,330
1,700,000 Cumberland County Certificate of Participation,
5.480%, 7/15/97 No Opt. Call N/R 1,700,000
2,500,000 Fairfax County Economic Development Authority
(Ogden Martin Systems Project), Alternative
Minimum Tax, 7.750%, 2/01/11 2/99 at 103 A1 2,747,375
1,460,000 Fairfax County Industrial Development Authority
(Inova Health System) 5.000%, 8/15/13 No Opt. Call Aaa 1,439,020
1,500,000 Giles County Industrial Development Authority
(Hoechst Celanese Corporation), Alternative
Minimum Tax, 6.625%, 12/01/22 12/02 at 102 AA- 1,571,775
500,000 Hampton Industrial Development Authority
(Sentara Hampton General Hospital),
6.500%, 11/01/12 11/04 at 102 A 533,215
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Henrico County Water and Sewer System,
6.250%, 5/01/13 5/02 at 100 A1 $ 2,615,925
1,000,000 Loudoun County Sanitation Authority, Water and
Sewer System, 6.250%, 1/01/16 1/03 at 102 Aaa 1,073,740
2,000,000 Loudoun County Industrial Development Authority
(The George Washington University),
6.250%, 5/15/22 5/02 at 102 A1 2,104,700
1,500,000 Lynchburg Industrial Development Authority
(Randolph-Macon Women's College),
5.875%, 9/01/13 9/03 at 102 A 1,531,860
750,000 Nelson County Service Authority, Water and Sewer
System, 5.500%, 7/01/18 7/03 at 102 Aaa 748,523
1,580,000 Peninsula Ports Authority of Virginia (Riverside
Health System), 6.625%, 7/01/18 7/02 at 102 Aa 1,697,678
2,500,000 Prince William County Park Authority,
6.875%, 10/15/16 10/04 at 102 A- 2,767,100
1,000,000 Prince William County Service Authority, Water and
Sewer System, 6.000%, 7/01/29 7/01 at 100 Aaa 1,033,250
3,005,000 Richmond General Obligation, 5.500%, 7/15/23 7/03 at 102 AA 3,012,603
1,155,000 Roanoke Industrial Development Authority
(Roanoke Memorial Hospitals), 6.500%, 7/01/25
(Pre-refunded to 7/01/00) 7/00 at 100 Aaa 1,269,818
Rockingham County Industrial Development
Authority (Bridgewater College):
400,000 5.600%, 10/01/06 10/03 at 102 Baa1 433,244
400,000 5.700%, 10/01/07 10/03 at 102 Baa1 425,168
2,750,000 Southeastern Public Service Authority (Regional Solid
Waste System), Alternative Minimum Tax,
6.000%, 7/01/13 7/03 at 102 A- 2,782,368
4,000,000 Upper Occoquan Sewer Authority, 5.000%, 7/01/21 1/04 at 102 Aaa 3,836,000
2,260,000 Virginia Beach Development Authority (Sentara
Bayside Hospital), 6.300%, 11/01/21 11/01 at 102 Aa 2,368,977
Metropolitan Washington D. C. Airports Authority,
Alternative Minimum Tax:
1,000,000 5.750%, 10/1/20 10/04 at 102 AAA 1,017,060
1,500,000 6.250%, 10/1/21 10/02 at 102 AAA 1,587,720
800,000 Puerto Rico Highway Transportation Authority,
6.625%, 7/01/18 7/02 at 101 1/2 A 863,064
- ------------------------------------------------------------------------------------------------------------------------------------
$62,485,000 Total Investments-(cost $61,036,092)--98.7% 65,190,787
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.3% 877,240
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets--100% $66,068,027
====================================================================================================================================
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS
VIRGINIA-CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 10 $16,195,771 25%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 14 25,210,150 39
PORTFOLIO A+ A1 3 7,468,000 11
INVESTMENTS: A, A- A, A2, A3 9 12,993,169 20
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 3 1,623,697 2
Non-rated Non-rated 1 1,700,000 3
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 40 $65,190,787 100%
===================================================================================================================================
</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.
See accompanying notes to financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
AZ FL MD MI
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $23,265,698 $60,245,650 $55,010,233 $33,255,242
Temporary investments in short-term municipal securities,
at amortized cost (note 1) - - - 600,000
Cash 242,662 280,875 293,584 76,087
Receivables:
Interest 262,440 935,255 472,689 475,195
Shares sold 86,335 51,425 132,184 350,928
Investments sold - 5,000 - 938,132
Deferred organization costs (note 1) 6,998 6,998 7,828 8,424
Other assets 501 4,519 1,029 15,413
----------- ----------- ----------- -----------
Total assets 23,864,634 61,529,722 55,917,547 35,719,421
----------- ----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased - - - 1,184,207
Shares reacquired - 13,223 - -
Cash overdraft - - - -
Accrued expenses:
Management fees (note 7) 10,895 28,402 25,779 15,849
Other 46,078 47,287 67,118 44,646
Dividends payable 51,780 132,180 137,376 90,289
----------- ----------- ----------- -----------
Total liabilities 108,753 221,092 230,273 1,334,991
----------- ----------- ----------- -----------
Net assets (note 8) $23,755,881 $61,308,630 $55,687,274 $34,384,430
=========== =========== =========== ===========
Class A Shares (note 1)
Net assets $ 3,894,689 $ 5,823,021 $ 6,860,436 $ 4,027,268
=========== =========== =========== ===========
Shares outstanding 362,624 551,681 657,949 374,859
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.74 $ 10.56 $ 10.43 $ 10.74
=========== =========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 11.25 $ 11.06 $ 10.92 $ 11.25
=========== =========== =========== ===========
Class C Shares (note 1)
Net assets $ 327,826 $ 167,925 $ 1,437,861 $ 231,328
=========== =========== =========== ===========
Shares outstanding 30,775 15,971 138,032 21,564
=========== =========== =========== ===========
Net asset value, offering and redemption price per share $ 10.65 $ 10.51 $ 10.42 $ 10.73
=========== =========== =========== ===========
Class R Shares (note 1)
Net assets $19,533,366 $55,317,684 $47,388,977 $30,125,834
=========== =========== =========== ===========
Shares outstanding 1,830,754 5,235,606 4,540,303 2,802,718
=========== =========== =========== ===========
Net asset value and redemption price per share $ 10.67 $ 10.57 $ 10.44 $ 10.75
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NJ PA VA
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $53,254,264 $64,750,094 $65,190,787
Temporary investments in short-term municipal securities,
at amortized cost (note 1) - 2,000,000 -
Cash 1,227,903 - 270,963
Receivables:
Interest 664,668 761,603 837,425
Shares sold 103,874 28,669 -
Investments sold - - -
Deferred organization costs (note 1) 7,390 7,984 5,824
Other assets 14,133 35,893 13,090
----------- ----------- -----------
Total assets 55,272,232 67,584,243 66,318,089
----------- ----------- -----------
LIABILITIES
Payables:
Investments purchased - 3,015,938 -
Shares reacquired 12,384 55,248 -
Cash overdraft - 1,615 -
Accrued expenses:
Management fees (note 7) 25,346 29,831 30,744
Other 43,227 54,749 54,585
Dividends payable 161,375 164,192 164,733
----------- ----------- -----------
Total liabilities 242,332 3,321,573 250,062
----------- ----------- -----------
Net assets (note 8) $55,029,900 $64,262,670 $66,068,027
=========== =========== ===========
Class A Shares (note 1)
Net assets $10,660,701 $ 5,816,905 $ 5,874,288
=========== =========== ===========
Shares outstanding 1,024,727 548,766 554,008
=========== =========== ===========
Net asset value and redemption price per share $ 10.40 $ 10.60 $ 10.60
=========== =========== ===========
Offering price per share (net asset value per share plus
maximum sales charge of 4.50% of offering price) $ 10.89 $ 11.10 $ 11.10
=========== =========== ===========
Class C Shares (note 1)
Net assets $ 1,065,019 $ 1,101,179 $ 788,903
=========== =========== ===========
Shares outstanding 102,569 105,115 74,618
=========== =========== ===========
Net asset value, offering and redemption price per share $ 10.38 $ 10.48 $ 10.57
=========== =========== ===========
Class R Shares (note 1)
Net assets $43,304,180 $57,344,586 $59,404,836
=========== =========== ===========
Shares outstanding 4,158,146 5,424,007 5,603,960
=========== =========== ===========
Net asset value and redemption price per share $ 10.41 $ 10.57 $ 10.60
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
STATEMENT OF OPERATIONS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
Year Ended January 31, 1996 JANUARY 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 1,189,234 $ 3,304,797 $ 2,957,714 $ 1,827,408
------------ ------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 111,599 313,075 280,013 169,780
12b-1 distribution and service fees (note 1) 6,771 9,232 22,018 7,144
Shareholders' servicing agent fees and expenses 22,979 47,824 69,638 43,765
Custodian's fees and expenses 40,994 50,179 72,294 47,593
Trustees' fees and expenses (note 7) 506 617 1,976 1,006
Professional fees 20,251 23,172 32,726 16,969
Shareholders' reports--printing and mailing expenses 21,551 51,528 54,329 29,592
Federal and state registration fees 3,910 5,074 7,109 6,098
Amortization of deferred organization costs (note 1) 6,785 7,610 6,077 5,585
Other expenses 2,534 6,349 6,210 4,266
------------ ------------ ------------ ------------
Total expenses before expense reimbursement 237,880 514,660 552,390 331,798
Expense reimbursement from investment adviser (note 7) (78,929) (78,507) (148,537) (93,136)
------------ ------------ ------------ ------------
Net expenses 158,951 436,153 403,853 238,662
------------ ------------ ------------ ------------
Net investment income 1,030,283 2,868,644 2,553,861 1,588,746
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 5) (27,336) (140,189) 138,640 414,083
Net change in unrealized appreciation or depreciation
of investments 1,629,699 4,780,693 3,998,568 2,255,770
------------ ------------ ------------ ------------
Net gain from investments 1,602,363 4,640,504 4,137,208 2,669,853
------------ ------------ ------------ ------------
Net increase in net assets from operations $ 2,632,646 $ 7,509,148 $ 6,691,069 $ 4,258,599
============ ============ ============ ============
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
STATEMENT OF OPERATIONS
Year Ended January 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NJ PA VA
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 3,006,443 $ 3,464,924 $ 3,701,411
------------ ------------ ------------
Expenses (note 2):
Management fees (note 7) 268,050 323,825 340,698
12b-1 distribution and service fees (note 1) 23,280 16,190 15,510
Shareholders' servicing agent fees and expenses 61,463 82,103 78,664
Custodian's fees and expenses 43,166 45,385 51,430
Trustees' fees and expenses (note 7) 1,276 1,268 1,628
Professional fees 23,290 21,640 19,516
Shareholders' reports--printing and mailing expenses 66,799 73,091 72,151
Federal and state registration fees 2,991 7,801 3,614
Amortization of deferred organization costs (note 1) 6,895 7,391 7,375
Other expenses 6,701 7,087 7,190
------------ ------------ ------------
Total expenses before expense reimbursement 503,911 585,781 597,776
Expense reimbursement from investment adviser (note 7) (115,121) (128,011) (117,673)
------------ ------------ ------------
Net expenses 388,790 457,770 480,103
------------ ------------ ------------
Net investment income 2,617,653 3,007,154 3,221,308
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 5) (30,019) (36,684) 334,528
Net change in unrealized appreciation or depreciation
of investments 3,249,789 4,855,692 4,882,314
------------ ------------ ------------
Net gain from investments 3,219,770 4,819,008 5,216,842
------------ ------------ ------------
Net increase in net assets from operations $ 5,837,423 $ 7,826,162 $ 8,438,150
============ ============ ============
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
AZ FL
- ------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 1,030,283 $ 874,402 $ 2,868,644 $ 2,567,258
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (27,336) (127,639) (140,189) (88,470)
Net change in unrealized appreciation or depreciation
of investments 1,629,699 (1,415,009) 4,780,693 (4,454,622)
----------- ----------- ------------ -----------
Net increase (decrease) in net assets from operations 2,632,646 (668,246) 7,509,148 (1,975,834)
----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (101,157) (11,579) (148,024) (12,861)
Class C (6,237) (786) (5,956) (807)
Class R (937,616) (863,461) (2,730,462) (2,538,376)
From accumulated net realized gains from investment
transactions:
Class A - - - (11)
Class C - - - -
Class R - - - (13,228)
----------- ----------- ------------ -----------
Decrease in net assets from distributions to
shareholders (1,045,010) (875,826) (2,884,442) (2,565,283)
----------- ----------- ------------ -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 2,882,755 1,124,442 4,315,210 1,665,651
Class C 273,019 51,694 77,334 73,100
Class R 2,473,853 4,004,198 8,465,473 13,751,923
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 38,250 2,269 52,678 4,072
Class C 5,264 509 3,575 230
Class R 529,462 464,469 1,500,287 1,376,114
----------- ----------- ------------ -----------
6,202,603 5,647,581 14,414,557 16,871,090
----------- ----------- ------------ -----------
Cost of shares redeemed:
Class A (303,388) (30,002) (173,983) (314,814)
Class C (3,168) (9,346) - -
Class R (1,449,215) (2,482,522) (11,564,633) (6,261,459)
----------- ----------- ------------ -----------
(1,755,771) (2,521,870) (11,738,616) (6,576,273)
----------- ----------- ------------ -----------
Net increase in net assets derived from Fund shares
transactions 4,446,832 3,125,711 2,675,941 10,294,817
----------- ----------- ------------ -----------
Net increase (decrease) in net assets 6,034,468 1,581,639 7,300,647 5,753,700
Net assets at the beginning of year 17,721,413 16,139,774 54,007,983 48,254,283
----------- ----------- ------------ -----------
Net assets at the end of year $23,755,881 $17,721,413 $ 61,308,630 $54,007,983
=========== =========== ============ ===========
Balance of undistributed net investment income at
end of year $ 1,809 $ 16,536 $ 20,796 $ 36,594
=========== =========== ============ ===========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MD MI
- ------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,553,861 $ 2,439,904 $ 1,588,746 $ 1,402,059
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 138,640 (720,598) 414,083 (138,495)
Net change in unrealized appreciation or depreciation
of investments 3,998,568 (4,017,204) 2,255,770 (2,255,350)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 6,691,069 (2,297,898) 4,258,599 (991,786)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (198,145) (14,257) (110,174) (7,070)
Class C (47,180) (9,717) (5,812) (582)
Class R (2,335,847) (2,417,246) (1,479,047) (1,399,025)
From accumulated net realized gains from investment
transactions:
Class A - (5) (9,042) (1)
Class C - - (536) -
Class R - (10,234) (88,511) (7,967)
----------- ----------- ----------- -----------
Decrease in net assets from distributions to
shareholders (2,581,172) (2,451,459) (1,693,122) (1,414,645)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 5,206,011 1,562,186 3,071,799 881,646
Class C 645,990 818,595 146,180 73,345
Class R 4,099,669 9,116,010 3,061,856 6,369,706
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 112,734 5,306 58,075 2,560
Class C 39,318 5,892 5,428 338
Class R 1,461,612 1,385,256 1,044,771 872,246
----------- ----------- ----------- -----------
11,565,334 12,893,245 7,388,109 8,199,841
----------- ----------- ----------- -----------
Cost of shares redeemed:
Class A (350,679) (2,267) (171,433) (9,411)
Class C (195,323) (226) (4,206) -
Class R (4,647,731) (10,757,200) (3,009,162) (3,253,109)
----------- ----------- ----------- -----------
(5,193,733) (10,759,693) (3,184,801) (3,262,520)
----------- ----------- ----------- -----------
Net increase in net assets derived from Fund share
transactions 6,371,601 2,133,552 4,203,308 4,937,321
----------- ----------- ----------- -----------
Net increase (decrease) in net assets 10,481,498 (2,615,805) 6,768,785 2,530,890
Net assets at the beginning of year 45,205,776 47,821,581 27,615,645 25,084,755
----------- ----------- ----------- -----------
Net assets at the end of year $55,687,274 $45,205,776 $34,384,430 $27,615,645
=========== =========== =========== ===========
Balance of undistributed net investment income at
end of year $ 936 $ 28,247 $ 10,893 $ 17,180
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NJ PA
- ------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,617,653 $ 2,037,788 $ 3,007,154 $ 2,714,124
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (30,019) (452,878) (36,684) (835,288)
Net change in unrealized appreciation or depreciation
of investments 3,249,789 (2,665,300) 4,855,692 (4,232,526)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 5,837,423 (1,080,390) 7,826,162 (2,353,690)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (329,633) (35,663) (173,805) (17,517)
Class C (32,025) (5,043) (28,974) (5,177)
Class R (2,282,656) (1,973,703) (2,830,558) (2,690,297)
From accumulated net realized gains from investment
transactions:
Class A - (773) - -
Class C - - - -
Class R - (341,737) - -
----------- ----------- ----------- -----------
Decrease in net assets from distributions to
shareholders (2,644,314) (2,356,919) (3,033,337) (2,712,991)
----------- ----------- ----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 7,757,684 2,826,031 4,222,635 1,465,445
Class C 573,759 458,588 633,225 480,657
Class R 4,461,592 10,783,764 6,005,478 12,882,787
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 181,529 18,788 126,885 9,834
Class C 16,615 2,567 24,758 3,155
Class R 1,567,807 1,592,197 1,786,453 1,624,542
----------- ----------- ----------- -----------
14,558,986 15,681,935 12,799,434 16,466,420
----------- ----------- ----------- -----------
Cost of shares redeemed:
Class A (406,168) (122,722) (281,318) (27,047)
Class C (32,865) (1,205) (105,804) -
Class R (5,070,204) (5,795,917) (6,418,284) (6,616,545)
----------- ----------- ----------- -----------
(5,509,237) (5,919,844) (6,805,406) (6,643,592)
----------- ----------- ----------- -----------
Net increase in net assets derived from Fund share
transactions 9,049,749 9,762,091 5,994,028 9,822,828
----------- ----------- ----------- -----------
Net increase (decrease) in net assets 12,242,858 6,324,782 10,786,853 4,756,147
Net assets at the beginning of year 42,787,042 36,462,260 53,475,817 48,719,670
----------- ----------- ----------- -----------
Net assets at the end of year $55,029,900 $42,787,042 $64,262,670 $53,475,817
=========== =========== =========== ===========
Balance of undistributed net investment income at
end of year $ 8,128 $ 34,789 $ 5,651 $ 31,834
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
VA
- ----------------------------------------------------------------------------------
Year ended Year ended
1/31/96 1/31/95
- ----------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 3,221,308 $ 2,965,312
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 334,528 (110,113)
Net change in unrealized appreciation or depreciation
of investments 4,882,314 (5,022,831)
----------- -----------
Net increase (decrease) in net assets from operations 8,438,150 (2,167,632)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Class A (191,806) (20,902)
Class C (23,926) (4,516)
Class R (2,997,681) (2,960,225)
From accumulated net realized gains from investment
transactions:
Class A (15,706) -
Class C (2,511) -
Class R (193,671) -
----------- -----------
Decrease in net assets from distributions to
shareholders (3,425,301) (2,985,643)
----------- -----------
FUND SHARE TRANSACTIONS (note 3)
Net proceeds from sale of shares:
Class A 3,799,529 2,169,078
Class C 402,084 359,962
Class R 3,456,619 9,464,055
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 109,800 6,496
Class C 21,313 2,776
Class R 1,928,344 1,626,894
----------- -----------
9,717,689 13,629,261
----------- -----------
Cost of shares redeemed:
Class A (543,599) (10,247)
Class C (54,845) -
Class R (5,446,943) (6,855,537)
----------- -----------
(6,045,387) (6,865,784)
----------- -----------
Net increase in net assets derived from Fund share
transactions 3,672,302 6,763,477
----------- -----------
Net increase (decrease) in net assets 8,685,151 1,610,202
Net assets at the beginning of year 57,382,876 55,772,674
----------- -----------
Net assets at the end of year $66,068,027 $57,382,876
=========== ===========
Balance of undistributed net investment income at
end of year $ 29,706 $ 21,811
=========== ===========
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
1. GENERAL INFORMATION AND SIGNIFICANT
ACCOUNTING POLICIES
The Nuveen Multistate Tax-Free Trust (the "Trust") is an open-end diversified
management series investment company registered under the Investment Company Act
of 1940. The Trust comprises seven single-state tax-free mutual funds (the
Nuveen Tax-Free Value Funds--the "Funds"). Each Fund constitutes a separate
series of the Trust and is itself an open-end diversified management investment
company, commonly referred to as a mutual fund. The Trust was organized as a
Massachusetts Business Trust on July 26, 1991.
The Trust currently has seven authorized state tax-free Funds: the Nuveen
Arizona Tax-Free Value Fund, the Nuveen Florida Tax-Free Value Fund, the Nuveen
Maryland Tax-Free Value Fund, the Nuveen Michigan Tax-Free Value Fund, the
Nuveen New Jersey Tax-Free Value Fund, the Nuveen Pennsylvania Tax-Free Value
Fund and the Nuveen Virginia Tax-Free Value Fund. Additional state Funds may be
established in the future. Sale of Fund shares first commenced on February 28,
1992. Each Fund invests primarily in municipal obligations issued within its
respective state.
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 Trustees. Temporary investments in
securities that have variable rate and demand features qualifying them as short-
term securities are traded and valued at amortized cost.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the transaction date. Any securities so
purchased are subject to market fluctuation during this period. The Trust has
instructed the custodian to segregate assets in a separate account with a
current value at least equal to the amount of its purchase commitments. At
January 31, 1996, the Nuveen Michigan Tax-Free Value Fund and the Nuveen
Pennsylvania Tax-Free Value Fund had purchase commitments of $1,184,207 and
$3,015,938, respectively. There were no such purchase commitments in any of the
other Funds.
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
Distributions 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 securities transactions are distributed to shareholders not less
frequently than annually only to the 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 Taxes
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 respective Funds. All
income dividends paid during the year ended January 31, 1996, have been
designated Exempt Interest Dividends.
48
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
Deferred
Organization Costs
Costs incurred by the Trust in connection with its organization and initial
registration of shares were deferred and are being amortized over a 60-month
period beginning February 28, 1992. If any of the initial shares of each Fund
are redeemed during this period, the proceeds of the redemption will be reduced
by the pro-rata share of the unamortized organization costs as of the date of
redemption.
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 are
generally 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 January 31, 1996.
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.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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>
AZ FL MD MI
<S> <C> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
January 31, 1996):
Class A $ 5,232 $ 7,876 $10,477 $ 5,692
Class C 1,539 1,356 11,541 1,452
Shareholders' servicing agent fees and expenses (for the
six month period ended July 31, 1995):
Class A 1,219 2,388 2,357 1,704
Class C 103 57 401 90
Class R 9,209 17,836 29,394 18,320
Shareholders' reports-printing and mailing expenses
(for the six month period ended July 31, 1995):
Class A 574 1,437 1,691 757
Class C 88 57 324 51
Class R 17,565 32,346 26,895 11,718
Federal and state registration fees (for the six month
period ended July 31, 1995):
Class A 237 786 1,101 199
Class C 9 379 734 13
Class R 1,870 715 756 2,324
</TABLE>
50
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
NJ PA VA
<S> <C> <C> <C>
12b-1 distribution and service fees (for the year ended
January 31, 1996):
Class A $16,159 $ 9,108 $ 9,870
Class C 7,121 7,082 5,640
Shareholders' servicing agent fees and expenses (for the
six month period ended July 31, 1995):
Class A 3,208 2,563 2,427
Class C 185 360 265
Class R 15,598 32,785 36,716
Shareholders' reports-printing and mailing expenses
(for the six month period ended July 31, 1995):
Class A 1,760 1,336 1,588
Class C 205 76 220
Class R 36,338 31,233 40,281
Federal and state registration fees (for the six month
period ended July 31, 1995):
Class A 886 1,858 744
Class C 69 1,378 40
Class R 749 1,519 1,185
</TABLE>
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. FUND SHARES
Transactions in shares were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AZ FL
- ---------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 274,843 116,098 420,409 175,913
Class C 26,227 5,260 7,638 7,959
Class R 239,176 401,984 824,725 1,397,272
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 3,655 237 5,125 435
Class C 505 54 350 24
Class R 51,292 48,864 147,052 139,011
-------- --------- ---------- ----------
595,698 572,497 1,405,299 1,720,614
-------- --------- ---------- ----------
Shares redeemed:
Class A (29,122) (3,087) (16,925) (33,276)
Class C (313) (958) - -
Class R (139,521) (254,213) (1,126,197) (639,360)
-------- --------- ---------- ----------
(168,956) (258,258) (1,143,122) (672,636)
-------- --------- ---------- ----------
Net increase 426,742 314,239 262,177 1,047,978
======== ========= ========== ==========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
MD MI
- -----------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 514,083 166,832 294,831 91,636
Class C 63,846 89,009 13,867 7,542
Class R 406,673 921,445 293,923 631,960
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 11,066 570 5,538 269
Class C 3,894 635 521 35
Class R 144,632 142,445 99,905 87,694
--------- ---------- -------- --------
1,144,194 1,320,936 708,585 819,136
--------- ---------- -------- --------
Shares redeemed:
Class A (34,362) (240) (16,428) (987)
Class C (19,328) (24) (401) -
Class R (459,618) (1,119,703) (288,460) (332,766)
--------- ---------- -------- --------
(513,308) (1,119,967) (305,289) (333,753)
--------- ---------- -------- --------
Net increase 630,886 200,969 403,296 485,383
========= ========== ======== ========
- -----------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NJ PA
- -----------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended
1/31/96 1/31/95 1/31/96 1/31/95
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 765,342 292,386 411,858 153,866
Class C 56,488 47,588 62,079 50,810
Class R 440,121 1,077,289 585,804 1,297,150
Shares issued to shareholders due to reinvestment of
distributions from net investment income and
from net realized gains from investment transactions:
Class A 17,820 1,978 12,297 1,047
Class C 1,638 270 2,439 329
Class R 154,754 161,549 174,784 165,879
---------- --------- --------- ---------
1,436,163 1,581,060 1,249,261 1,669,081
---------- --------- --------- ---------
Shares redeemed:
Class A (40,094) (12,705) (27,436) (2,866)
Class C (3,290) (125) (10,542) --
Class R (500,152) (581,386) (628,872) (676,175)
---------- --------- --------- ---------
(543,536) (594,216) (666,850) (679,041)
---------- --------- --------- ---------
Net increase 892,627 986,844 582,411 990,040
========== ========= ========= ========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
VA
- ------------------------------------------------------------------------------------
Year ended Year ended
1/31/96 1/31/95
- ------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold:
Class A 369,049 227,287
Class C 39,142 38,465
Class R 336,826 931,986
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions:
Class A 10,624 690
Class C 2,074 296
Class R 186,098 165,173
-------- ---------
943,813 1,363,897
-------- ---------
Shares redeemed:
Class A (52,547) (1,095)
Class C (5,359) --
Class R (529,723) (680,380)
-------- ---------
(587,629) (681,475)
-------- ---------
Net increase 356,184 682,422
======== =========
- ------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. DISTRIBUTIONS TO SHAREHOLDERS
On February 9, 1996, the Funds declared dividend distributions from their
ordinary income which were paid on March 1, 1996, to shareholders of record on
February 9, 1996, as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AZ FL MD MI
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $ .0420 $ .0410 $ .0405 $ .0425
Class C .0350 .0345 .0340 .0355
Class R .0435 .0430 .0425 .0445
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
NJ PA VA
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $ .0440 $ .0410 $ .0430
Class C .0375 .0340 .0365
Class R .0460 .0430 .0450
=========== =========== ===========
- --------------------------------------------------------------------------------------
</TABLE>
5. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the year ended January 31,
1996, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
Investments in municipal securities $ 5,373,232 $14,977,473 $15,605,953 $13,336,382
Temporary municipal investments 7,000,000 11,900,000 9,500,000 7,900,000
SALES
Investments in municipal securities 938,787 11,397,779 8,399,990 9,860,816
Temporary municipal investments 7,200,000 11,900,000 10,500,000 7,900,000
=========== =========== =========== ===========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
NJ PA VA
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASES
Investments in municipal securities $27,941,714 $41,972,985 $29,255,837
Temporary municipal investments 19,400,000 20,880,000 13,000,000
SALES
Investments in municipal securities 17,713,121 29,645,304 25,325,007
Temporary municipal investments 21,000,000 19,880,000 14,300,000
=========== =========== ===========
- -----------------------------------------------------------------------------------------------------
</TABLE>
At January 31, 1996, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
At January 31, 1996, the following 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>
----------------------------------------------------------------------------------------------------
AZ FL MD
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expiration year:
2003 $127,444 $ 87,166 $ 65,355
2004 17,690 141,494 516,603
-------- -------- --------
Total $145,134 $228,660 $581,958
======== ======== ========
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
NJ PA
- ------------------------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2003 $ 35,921 $377,256
2004 419,632 468,676
-------- --------
Total $455,553 $845,932
======== ========
- ------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
6. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at January 31, 1996, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AZ FL MD MI
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
Appreciation $1,382,474 $3,438,260 $3,207,733 $1,847,996
Depreciation (1,470) (14,203) (81,539) (2,858)
---------- ---------- ---------- ----------
Net unrealized appreciation $1,381,004 $3,424,057 $3,126,194 $1,845,138
========== ========== ========== ==========
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NJ PA VA
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
Appreciation $2,520,888 $3,860,621 $4,243,525
Depreciation (68,034) (34,940) (88,830)
---------- ---------- ----------
Net unrealized appreciation $2,452,854 $3,825,681 $4,154,695
========== ========== ==========
</TABLE>
7. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays 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>
From inception of the Trusts on December 13, 1991 through January 31, 1996, the
Adviser waived part of its management fees or reimbursed certain expenses of
each Fund in order to limit total expenses to .75 of 1% of the average daily net
asset value of each Fund, excluding any 12b-1 fees applicable to Class A and
Class C. The Adviser has currently agreed to continue its fee waivers and
expense reimbursements through July 31, 1996.
58
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to its Trustees who are affiliated with the Adviser or to
its officers, all of whom receive remuneration for their services to the Trust
from the Adviser.
8. COMPOSITION OF NET ASSETS
At January 31, 1996, there were an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AZ FL MD MI
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $22,527,848 $58,092,437 $53,142,102 $32,351,135
Balance of undistributed net investment income 1,809 20,796 936 10,893
Accumulated net realized gain (loss) from investment
transactions (154,780) (228,660) (581,958) 177,264
Net unrealized appreciation of investments 1,381,004 3,424,057 3,126,194 1,845,138
----------- ----------- ----------- -----------
Net assets $23,755,881 $61,308,630 $55,687,274 $34,384,430
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
NJ PA VA
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $53,051,830 $61,303,237 $61,873,371
Balance of undistributed net investment income 8,128 5,651 29,706
Accumulated net realized gain (loss) from investment
transactions (482,912) (871,899) 10,255
Net unrealized appreciation of investments 2,452,854 3,825,681 4,154,695
----------- ----------- -----------
Net assets $55,029,900 $64,262,670 $66,068,027
=========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
9. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At January 31, 1996, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
AZ FL MD MI
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Bonds:
Pollution Control 11% 2% 6% 7%
Housing Facilities 11 16 23 12
Health Care Facilities 11 15 12 21
Water/Sewer Facilities 6 9 -- 15
Electric Utilities 2 16 1 3
Educational Facilities 14 1 5 7
Transportation 3 5 11 4
Lease Rental Facilities 8 1 5 3
Other 8 9 7 5
General Obligation Bonds 17 9 15 17
Escrowed Bonds 9 17 15 6
-- -- -- --
100% 100% 100% 100%
=== === === ===
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
NJ PA VA
- -------------------------------------------------------------
<S> <C> <C> <C>
Revenue Bonds:
Pollution Control 13% 24% --%
Housing Facilities 10 8 9
Health Care Facilities 7 17 11
Water/Sewer Facilities 5 -- 17
Electric Utilities 2 3 --
Educational Facilities 9 13 12
Transportation 8 5 12
Lease Rental Facilities 3 2 6
Other 12 11 23
General Obligation Bonds 19 15 6
Escrowed Bonds 12 2 4
-- -- --
100% 100% 100%
=== === ===
- -------------------------------------------------------------
</TABLE>
60
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
Certain long-term and intermediate-term investments owned by the Funds are
covered by insurance issued by several private insurers or are backed by an
escrow or trust containing U.S. Government or U.S. Government agency securities,
either of which ensure the timely payment of principal and interest in the event
of default (51% for Arizona, 61% for Florida, 54% for Maryland, 30% for
Michigan, 47% for New Jersey, 47% for Pennsylvania, and 24% for Virginia). Such
insurance or escrow, however, does not guarantee the market value of the
municipal securities or the value of the Funds' 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.
61
<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>
ARIZONA
- ------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 $ 9.930 $.503 $ .829 $(.522) $ - $10.740
9/6/94 to
1/31/95 10.030 .203 (.086) (.217) - 9.930
CLASS C
Year ended 1/31,
1996 9.840 .419 .830 (.439) - 10.650
9/9/94 to
1/31/95 9.940 .169 (.052) (.217) - 9.840
CLASS R
Year ended 1/31,
1996 9.850 .529 .831 (.540) - 10.670
1995 10.880 .536 (1.026) (.540) - 9.850
1994 10.050 .531 .853 (.522) (.032) 10.880
1993 9.525 .438 .563 (.435) (.041) 10.050
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ------------------------------------------------------------------------------------------------------------------
FLORIDA
- ------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 9.730 .488 .840 (.498) - 10.560
9/6/94 to
1/31/95 9.890 .193 (.148) (.202) (.003) 9.730
CLASS C
Year ended 1/31,
1996 9.730 .413 .789 (.422) - 10.510
9/16/94 to
1/31/95 9.720 .152 .021 (.163) - 9.730
CLASS R
Year ended 1/31,
1996 9.750 .518 .824 (.522) - 10.570
1995 10.740 .508 (.985) (.510) (.003) 9.750
1994 9.960 .511 .779 (.510) - 10.740
1993 9.525 .440 .431 (.436) - 9.960
12/13/91 to
1/31/92 9.525 - - - - 9.525
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 68.
62
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
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>
- -----------------------------------------------------------------------------------------------------------------
13.68% $ 3,895 1.31% 4.49% 1.00% 4.80% 5%
1.24 1,124 1.60* 4.68* 1.00* 5.28* 29
12.90 328 2.11 3.66 1.75 4.02 5
1.25 43 3.51* 2.79* 1.75* 4.55* 29
14.09 19,533 1.15 4.72 .75 5.12 5
(4.39) 16,554 1.06 5.12 .75 5.43 29
14.07 16,140 1.25 4.48 .75 4.98 11
10.71 8,026 1.75* 3.94* .75* 4.94* 43
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
13.92 5,823 1.21 4.53 1.00 4.74 21
.52 1,392 1.56* 4.52* 1.00* 5.08* 4
12.54 168 2.16 3.62 1.75 4.03 21
1.84 78 2.84* 3.26* 1.75* 4.35* 4
14.05 55,318 .88 4.93 .75 5.06 21
(4.33) 52,538 .84 5.12 .75 5.21 4
13.22 48,254 .89 4.69 .75 4.83 3
9.33 23,727 1.24* 4.35* .75* 4.84* 1
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
63
<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
- -----------------------------------------------------------------------------------------------------------------------------------
MARYLAND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Year ended 1/31,
1996 $ 9.600 $.483 $ .844 $(.497) $ - $10.430
9/6/94 to
1/31/95 9.840 .198 (.229) (.207) (.002) 9.600
CLASS C
Year ended 1/31,
1996 9.590 .409 .842 (.421) - 10.420
9/15/94 to
1/31/95 9.750 .160 (.153) (.167) - 9.590
CLASS R
Year ended 1/31,
1996 9.610 .513 .838 (.521) - 10.440
1995 10.620 .513 (1.008) (.513) (.002) 9.610
1994 9.910 .509 .727 (.503) (.023) 10.620
1993 9.525 .442 .395 (.442) (.010) 9.910
12/13/91 to
1/31/92 9.525 - - - - 9.525
- -----------------------------------------------------------------------------------------------------------------------------------
MICHIGAN
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 9.870 .510 .911 (.519) (.032) 10.740
9/6/94 to
1/31/95 10.090 .204 (.209) (.212) (.003) 9.870
CLASS C
Year ended 1/31,
1996 9.850 .430 .922 (.440) (.032) 10.730
9/16/94 to
1/31/95 9.910 .161 (.050) (.171) - 9.850
CLASS R
Year ended 1/31,
1996 9.880 .539 .906 (.543) (.032) 10.750
1995 10.860 .529 (.972) (.534) (.003) 9.880
1994 10.060 .531 .808 (.528) (.011) 10.860
1993 9.525 .456 .554 (.449) (.026) 10.060
12/13/91 to
1/31/92 9.525 - - - - 9.525
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 68.
64
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
14.07% $ 6,860 1.33% 4.41% 1.00% 4.74% 17%
(.26) 1,605 1.59* 4.67* 1.00* 5.26* 35
13.24 1,438 2.06 3.73 1.75 4.04 17
.12 860 1.86* 4.44* 1.75* 4.55* 35
14.33 47,389 1.04 4.78 .75 5.07 17
(4.58) 42,741 .89 5.14 .75 5.28 35
12.71 47,822 .86 4.74 .75 4.85 4
8.96 28,283 1.02* 4.69* .75* 4.96* 20
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
14.68 4,027 1.35 4.52 1.00 4.87 33
.02 897 2.62* 3.68* 1.00* 5.30* 35
13.96 231 2.08 3.79 1.75 4.12 33
1.18 75 3.52* 2.76* 1.75* 4.53* 35
14.93 30,126 1.05 4.87 .75 5.17 33
(3.98) 26,644 .96 5.12 .75 5.33 35
13.58 25,085 1.07 4.67 .75 4.99 3
10.80 14,684 1.62* 4.19* .75* 5.06* 32
- 15 - - - - -
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<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>
- -----------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 $ 9.730 $.519 $ .685 $(.534) $ - $10.400
9/6/94 to
1/31/95 10.030 .205 (.209) (.210) (.086) 9.730
CLASS C
Year ended 1/31,
1996 9.710 .443 .683 (.456) - 10.380
9/21/94 to
1/31/95 9.770 .159 (.050) (.169) - 9.710
CLASS R
Year ended 1/31,
1996 9.740 .551 .677 (.558) - 10.410
1995 10.710 .524 (.886) (.522) (.086) 9.740
1994 9.960 .513 .810 (.513) (.060) 10.710
1993 9.525 .445 .431 (.441) - 9.960
12/13/91 to
1/31/92 9.525 - - - - 9.525
PENNSYLVANIA
CLASS A
Year ended 1/31,
1996 9.750 .498 .862 (.510) - 10.600
9/6/94 to
1/31/95 9.920 .206 (.164) (.212) - 9.750
CLASS C
Year ended 1/31,
1996 9.650 .417 .843 (.430) - 10.480
9/6/94 to
1/31/95 9.920 .176 (.235) (.211) - 9.650
CLASS R
Year ended 1/31,
1996 9.730 .527 .846 (.533) - 10.570
1995 10.810 .531 (1.077) (.534) - 9.730
1994 10.010 .533 .807 (.534) (.006) 10.810
1993 9.525 .451 .481 (.443) (.004) 10.010
12/13/91 to
1/31/92 9.525 - - - - 9.525
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 68.
66
<PAGE>
NUVEEN TAX-FREE MUTUAL ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
12.63% $10,661 1.25% 4.85% 1.00% 5.10% 39%
.02 2,741 1.31* 5.03* 1.00* 5.34* 32
11.80 1,065 1.96 4.16 1.75 4.37 39
1.16 464 2.00* 4.37* 1.75* 4.62* 32
12.88 43,304 .98 5.20 .75 5.43 39
(3.27) 39,582 .89 5.18 .75 5.32 32
13.60 36,462 .98 4.61 .75 4.84 52
9.36 16,208 1.43* 4.28* .75* 4.96* 9
- 15 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
14.22 5,817 1.30 4.52 1.00 4.82 52
.49 1,483 1.87* 4.56* 1.00* 5.43* 74
13.27 1,101 2.14 3.70 1.75 4.09 52
(.53) 494 2.52* 3.90* 1.75* 4.67* 74
14.40 57,345 .96 4.93 .75 5.14 52
(4.94) 51,499 .91 5.27 .75 5.43 74
13.67 48,720 .94 4.82 .75 5.01 5
9.97 23,680 1.25* 4.53* .75* 5.03* 15
- 15 - - - - -
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<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>
VIRGINIA
- -------------------------------------------------------------------------------------------------------
CLASS A
Year ended 1/31,
1996 $ 9.760 $.509 $ .878 $(.509) $(.038) $10.600
9/6/94 to
1/31/95 9.980 .201 (.207) (.214) - 9.760
CLASS C
Year ended 1/31,
1996 9.740 .432 .868 (.432) (.038) 10.570
9/8/94 to
1/31/95 9.950 .171 (.167) (.214) - 9.740
CLASS R
Year ended 1/31,
1996 9.770 .537 .864 (.533) (.038) 10.600
1995 10.740 .531 (.964) (.537) - 9.770
1994 10.030 .529 .726 (.527) (.018) 10.740
1993 9.525 .439 .499 (.433) - 10.030
12/13/91 to
1/31/92 9.525 - - - - 9.525
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized. For the year ended 1/31/93, the information is based on the period
beginning 2/28/92, commencement of operations.
** Net of taxes, if applicable (note 1).
+ Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gains distributions, if any, and changes in stock
price per share.
++ Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser (note 7).
68
<PAGE>
NUVEEN TAX-FREE MUTUAL FUNDS ANNUAL REPORT
JANUARY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental data
------------------------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Ratio of
expenses to net investment expenses to net investment
Total return Net assets average income to average average net assets income to average Portfolio
on net asset end of period net assets before net assets before after reimburse- net assets after turnover
value+ (in thousands) reimbursement reimbursement ment++ reimbursement++ rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
14.50% $ 5,874 1.20% 4.73% 1.00% 4.93% 42%
.01 2,215 1.57* 4.70* 1.00* 5.27* 40
13.58 789 1.92 4.04 1.75 4.21 42
.10 378 2.20* 4.12* 1.75* 4.57* 40
14.65 59,405 .94 5.04 .75 5.23 42
(3.92) 54,791 .82 5.33 .75 5.40 40
12.78 55,773 .84 4.94 .75 5.03 7
10.04 37,196 .96* 4.71* .75* 4.92* 12
- 15 - - - - -
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Nuveen Multistate Tax-Free Trust:
We have audited the accompanying statements of net assets of Nuveen Multistate
Tax-Free Trust (a Massachusetts business trust comprising the Arizona, Florida,
Maryland, Michigan, New Jersey, Pennsylvania and Virginia Nuveen Tax-Free Value
Funds), including the portfolios of investments, as of January 31, 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
January 31, 1996, by correspondence with the custodian and brokers. 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 Multistate Tax-Free Trust as of January
31, 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 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 1, 1996
70
<PAGE>
[PHOTO APPEARS HERE]
For nearly 100 years,
Nuveen has earned its
reputation as a tax-free income
specialist by focusing on
municipal bonds
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.
[LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
OEFI-MAR96 [RECYCLE LOGO]
<PAGE>
PART C--OTHER INFORMATION
NUVEEN MULTISTATE TAX-FREE TRUST
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, January 31, 1996
Statement of Net Assets, January 31, 1996
Statement of Operations, Year Ended January 31, 1996
Statement of Changes in Net Assets, Years Ended January 31, 1996, and
January 31, 1995.
Report of Independent Public Accountants dated March 1, 1996
(b) Exhibits
<TABLE>
<S> <C>
1(a). Amended and Restated Declaration of Trust of Registrant. Filed as Exhibit 1 to
Pre-Effective Amendment No. 2 to Registrant's Registration Statement on Form N-
1A (File No. 33-43285) and incorporated herein by reference thereto.
1(b). Certificate for the Establishment and Designation of Classes, dated August 24,
1994. Filed as Exhibit 1(b) to Post-Effective Amendment No. 7 to Registrant's
Registration Statement on Form N-1A (File No. 33-43285) 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. 6 to Registrant's Registration Statement on Form N-1A
(File No. 33-43285) 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. 7 to Registrant's Registration Statement on Form N-
1A (File No. 33-43285) 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. 7 to Registrant's Registration Statement on Form N-
1A (File No. 33-43285) and incorporated herein by reference thereto.
4(c). Specimen certificates of Class C Shares of each Fund. Filed as Exhibit 4(c) to
Post-Effective Amendment No. 7 to Registrant's Registration Statement on Form N-
1A (File No. 33-43285) and incorporated herein by reference thereto.
5(a). Investment Management Agreement between Registrant and Nuveen Advisory Corp.,
dated December 12, 1991. Filed as Exhibit 5 to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No. 33-43285) and incor-
porated herein by reference thereto.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
5(b). Renewal, dated May 9, 1995, of Investment Management Agreement.
6(a). Distribution Agreement between Registrant and John Nuveen & Co. Incorporated,
dated December 12, 1991. Filed as Exhibit 6 to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No. 33-43285) and incor-
porated herein by reference thereto.
6(b). Renewal, dated July 27, 1995, of Distribution Agreement.
7. Not applicable.
8(a). Custodian Contract, dated October 1, 1993, between Registrant and United States
Trust Company of New York. Filed as Exhibit 8 to Post-Effective Amendment No. 4
to Registrant's Registration Statement on Form N-1A (File No. 33-43285) and in-
corporated herein by reference thereto.
8(b). Letter evidencing assignment of U.S. Trust Company of New York's rights and re-
sponsibilities under the Custody Agreement to The Chase Manhattan Bank, N.A.
9. Transfer Agency Agreement between Registrant and Shareholder Services, Inc.
Filed as Exhibit 9 to Post-Effective Amendment No. 2 to Registrant's Registra-
tion Statement on Form N-1A (File No. 33-43285) and incorporated herein by ref-
erence 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 December 9, 1991. Filed
as Exhibit 13 to Pre-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A (File No. 33-43285) 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 Amendment No. 9 to Registrant's Registration Statement on Form N-
1A (File No. 33-43285) and incorporated herein by reference.
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 Trustees authorizing the signing of the
names of trustees and officers on the Registrant's Registration Statement pursu-
ant to power of attorney.
99(b). Original Powers of Attorney of all of Registrant's Trustees authorizing, among
others, James J. Wesolowski and Gifford R. Zimmerman to execute the Registration
Statement. Filed as Exhibit 99(b) to Post-Effective Amendment No. 8 to Regis-
trant's Registration Statement on Form N-1A (File No. 33-43285) and incorporated
herein by reference thereto.
99(c). Code of Ethics and Reporting Requirements. Filed as Exhibit 99(c) to Post-Effec-
tive Amendment No. 8 to Registrant's Registration Statement on Form N-1A (File
No. 33-43285) and incorporated herein by reference thereto.
</TABLE>
C-2
<PAGE>
ITEM 25: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26: NUMBER OF HOLDERS OF SECURITIES
At May 6, 1996:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SERIES RECORD HOLDERS
--------------- --------------
Nuveen Arizona Tax-Free Value Fund,
<S> <C>
Class A Shares........................................... 257
Class C Shares........................................... 13
Class R Shares........................................... 668
Nuveen Florida Tax-Free Value Fund,
Class A Shares........................................... 509
Class C Shares........................................... 12
Class R Shares........................................... 1,730
Nuveen Maryland Tax-Free Value Fund,
Class A Shares........................................... 550
Class C Shares........................................... 69
Class R Shares........................................... 1,917
Nuveen Michigan Tax-Free Value Fund,
Class A Shares........................................... 294
Class C Shares........................................... 20
Class R Shares........................................... 1,287
Nuveen New Jersey Tax-Free Value Fund,
Class A Shares........................................... 828
Class C Shares........................................... 47
Class R Shares........................................... 2,089
Nuveen Pennsylvania Tax-Free Value Fund,
Class A Shares........................................... 659
Class C Shares........................................... 80
Class R Shares........................................... 2,691
Nuveen Virginia Tax-Free Value Fund,
Class A Shares........................................... 495
Class C Shares........................................... 51
Class R Shares........................................... 2,234
</TABLE>
C-3
<PAGE>
ITEM 27: INDEMNIFICATION
Section 4 of Article XII of Registrant's Amended and Restated Declaration of
Trust provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent per-
mitted by law against liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been such a Trustee, director, officer, employee or agent and against amounts
paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross negli-
gence or reckless disregard of the duties involved in the conduct of his
office;
(b) with respect to any matter as to which he shall have been finally adju-
dicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a pay-
ment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office by the court or other body approving the settlement or other
disposition or a reasonable determination, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that he did not
engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by poli-
cies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall con-
tinue as to a person who has ceased to be such a Covered Person and shall inure
to the benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel other than Covered Persons may be entitled by contract or oth-
erwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is
C-4
<PAGE>
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient ul-
timately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee, any-
one who has been exempted from being an Interested Person by any rule, regula-
tion or order of the Commission), and (y) against whom none of such actions,
suits or other proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal, admin-
istrative or other, including appeals), actual or threatened; and the word "li-
ability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other lia-
bilities.
-----------------
The trustees and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (with a 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 involved willful acts, bad faith, gross negligence and willful disregard
of duty (i.e., where the insured did not act in good faith for a purpose he or
she reasonably believed to be in the best interest of Registrant or where he or
she shall have had reasonable cause to believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and Ex-
change Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indem-
nification against such liabilities (other than the payment by the Registrant
of expenses incurred or paid by an officer or trustee or controlling person of
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such officer, trustee or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
C-5
<PAGE>
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 Cali-
fornia Tax-Free Fund, Inc., Nuveen Tax-Free Bond Fund, Inc., Nuveen Insured
Tax-Free Bond Fund, Inc., and Nuveen Tax-Free Money Market Fund, Inc. It also
serves as investment adviser to the following closed-end management type
investment companies: Nuveen Municipal Value Fund, Inc., Nuveen California Mu-
nicipal Value Fund, Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen
Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund, Inc.,
Nuveen Performance Plus Municipal Fund, Inc., Nuveen California Performance
Plus Municipal Fund, Inc., Nuveen New York Performance Plus Municipal Fund,
Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal Market Opportu-
nity Fund, Inc., Nuveen California Municipal Market Opportunity Fund, Inc.,
Nuveen Investment Quality Municipal Fund, Inc., Nuveen California Investment
Quality Municipal Fund, Inc., Nuveen New York Investment Quality Municipal
Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida In-
vestment Quality Municipal Fund, Nuveen New Jersey Investment Quality Munici-
pal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal Fund, Nuveen
Select Quality Municipal Fund, Inc., Nuveen California Select Quality Munici-
pal Fund, Inc., Nuveen New York Select Quality Municipal Fund, Inc., Nuveen
Quality Income Municipal Fund, Inc., Nuveen Insured Municipal Opportunity
Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen Michigan
Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income Municipal
Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen California
Quality Income Municipal Fund, Inc., Nuveen New York Quality Income Municipal
Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Premier Insured
Municipal Income Fund, Inc. Nuveen Premium Income Municipal Fund 2, Inc.,
Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured
New York Premium Income Municipal Fund, Inc., Nuveen Select Maturities Munici-
pal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Insured
Florida Premium Income Municipal Fund, Nuveen Michigan Premium Income Munici-
pal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc., Nuveen
Insured Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal
Fund 4, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc.,
Nuveen Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium
Income Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund,
Nuveen Virginia Premium Income Municipal Fund, Nuveen Washington Premium In-
come Municipal Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen
Georgia Premium Income Municipal Fund, Nuveen Missouri Premium Income Munici-
pal Fund, Nuveen North Carolina Premium Income Municipal Fund, Nuveen Califor-
nia Premium Income Municipal Fund, and Nuveen Insured Premium Income Municipal
Fund 2. Nuveen Advisory Corp. has no other clients or business at the present
time. The principal business address for all of these investment companies is
333 West Wacker Drive, Chicago, Illinois 60606.
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than Donald E.
Sveen and Anthony T. Dean, of the investment adviser has engaged during the
last two years for his account or in the capacity of director, officer, em-
ployee, partner or trustee, see the descriptions under "Management" in the
Statement of Additional Information.
C-6
<PAGE>
Donald E. Sveen is President and Director, formerly Executive Vice President,
of Nuveen Advisory Corp., the investment adviser. Mr. Sveen has, during the
last two years, been President, Director and formerly Executive Vice President
of John Nuveen & Co. Incorporated; and President and Director of Nuveen Insti-
tutional Advisory Corp. Anthony T. Dean is Director of Nuveen Advisory Corp.,
the investment adviser. Mr. Dean has, during the last two years, been Execu-
tive Vice President and Director of The John Nuveen Company and John Nuveen &
Co. Incorporated; and Director of Nuveen Institutional Advisory Corp.
ITEM 29: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co., Incorporated ("Nuveen") acts as principal underwriter
to the following open-end management type investment companies: Nuveen Munici-
pal Bond Fund, Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free Re-
serves, Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Bond
Fund, Inc., Nuveen Insured Tax-Free Bond Fund, Inc. and Nuveen Tax-Free Money
Market Fund, Inc. 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 underwriter to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Mu-
nicipal Market Opportunity Fund, Inc., Nuveen California Municipal Market Op-
portunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen
California Investment Quality Municipal Fund, Inc., Nuveen New York Investment
Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment
Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal
Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select
Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund,
Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal Op-
portunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income Mu-
nicipal 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 Select Tax-Free Income Portfolio,
Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Insured California Pre-
mium 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 Premium Income Mu-
nicipal 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 Pre-
mium Income Municipal Fund, Nuveen Washington Premium Income Municipal Fund,
Nuveen Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium In-
come Municipal Fund, Nuveen Missouri Premium Income Municipal
C-7
<PAGE>
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 Insured California Select
Tax-Free Income Portfolio, Nuveen Insured New York Select Tax-Free Income Port-
folio and Nuveen Select Tax-Free Income Portfolio 3.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------------------------------------------
<S> <C> <C>
Richard J. Franke Chairman of the Board, Chairman of the Board
333 West Wacker Drive Chica- Chief Executive Officer and Trustee
go, IL 60606 and Director
Donald E. Sveen President, Chief Operating None
333 Wacker Drive Officer and Director
Chicago, IL 60606
John P. Amboian Executive Vice President None
333 West Wacker Drive and Chief Financial Officer
Chicago, IL 60606
Anthony T. Dean Executive Vice President None
333 West Wacker Drive and Director
Chicago, IL 60606
Timothy R. Schwertfeger Executive Vice President President and Trustee
333 West Wacker Drive and Director
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President None
333 West Wacker Drive
Chicago, IL 60606
Robert D. Freeland Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITIONS AND OFFICES OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ----------------------------------------------------------------------------------
<S> <C> <C>
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Robert B. Kuppenheimer Vice President None
333 West Wacker Drive
Chicago, IL 60606
Larry W. Martin Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Assistant Secretary
Chicago, IL 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
O. Walter Renfftlen Vice President Vice President and
333 West Wacker Drive and Controller Controller
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
James J. Wesolowski Vice President, Vice President and
333 West Wacker Drive General Counsel Secretary
Chicago, IL 60606 and Secretary
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Assistant Secretary
Chicago, IL 60606
</TABLE>
C-9
<PAGE>
(c) Not applicable.
ITEM 30: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606, main-
tains the Declaration of Trust, By-Laws, minutes of trustees and shareholder
meetings and contracts of the Registrant and all advisory material of the in-
vestment 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 service 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 Sharehold-
ers upon request and without charge.
C-10
<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
UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS REGISTRATION STATE-
MENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 31ST DAY OF MAY, 1996.
NUVEEN MULTISTATE TAX-FREE TRUST
/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 May 31, 1996
Controller (Principal
Financial and
Accounting Officer)
Richard J. Franke Chairman of the Board )
and Trustee (Principal ) /s/ Gifford R. Zimmerman
Executive Officer) ) By_________________________
Lawrence H. Brown Trustee ) Gifford R. Zimmerman
Anne E. Impellizzeri Trustee ) Attorney-in-Fact
Margaret K. Rosenheim Trustee )
Peter R. Sawers Trustee ) May 31, 1996
Timothy R. Schwertfeger President and Trustee )
</TABLE>
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 TRUSTEES OF REGISTRANT ON WHOSE
BEHALF THIS REGISTRATION STATEMENT IS FILED, HAS BEEN EXECUTED AND IS INCORPO-
RATED BY REFERENCE TO THIS REGISTRATION STATEMENT.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
5(b). Renewal, dated May 9, 1995, of Investment Management
Agreement.
6(b). Renewal, dated July 27, 1995, of Distribution Agree-
ment.
8(b). Letter evidencing assignment of U.S. Trust Company of
New York's rights and responsibilities under the Cus-
tody 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 Trustees au-
thorizing the signing of the names of trustees and
officers on the Registrant's Registration Statement
pursuant to power of attorney.
</TABLE>
<PAGE>
Exhibit 5(b)
NUVEEN MULTISTATE TAX-FREE TRUST
Renewal of Investment Management Agreement
------------------------------------------
This Agreement made this 9th day of May, 1995 by and between Nuveen Multistate
Tax-Free Trust, a Massachusetts business trust (the "Fund"), and Nuveen Advisory
Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1995 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Trustees, at a meeting called for the purpose of reviewing
the Agreement, have approved the Agreement and its continuance until August 1,
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 MULTISTATE TAX-FREE TRUST
By: /s/ GIFFORD R. ZIMMERMAN
------------------------------------
Vice President
ATTEST:
/s/ KAREN L. HEALY
- ------------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ J. THOMAS FUTRELL
------------------------------------
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 Multistate
Tax-Free Trust, a Massachusetts business trust (the "Fund"), and John Nuveen &
Co. Incorporated, a Delaware corporation (the "Underwriter");
WHEREAS, the parties hereto are the contracting parties under that certain
Distribution Agreement (the "Agreement") pursuant to which the Underwriter acts
as agent for the distribution of shares of the Fund; and
WHEREAS, the Agreement terminates August 1, 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 MULTISTATE TAX-FREE TRUST
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
May 22, 1996
(202) 639-7065
Nuveen Multistate Tax-Free Trust
333 West Wacker Drive
Chicago, Illinois 60606
Re: Registration Statement on Form N-1A under
the Securities Act of 1933 (File No. 33-43285)
Ladies and Gentlemen:
We have acted as counsel for Nuveen Multistate Tax-Free Trust, a Massachusetts
business trust (the "Trust"), with respect to the following series of the
Trust: Nuveen Arizona Tax-Free Value Fund, Nuveen Florida Tax-Free Value Fund,
Nuveen Maryland Tax-Free Value Fund, Nuveen Michigan Tax-Free Value Fund,
Nuveen New Jersey Tax-Free Value Fund, Nuveen Pennsylvania Tax-Free Value Fund
and Nuveen Virginia Tax-Free Value Fund, in connection with the Trust's Post-
Effective Amendment Number 11 to its Registration Statement on Form N-1A as
proposed to be filed with the Securities and Exchange Commission on May 28,
1996 (the "Amendment") pursuant to Rule 485(b) of the Securities Act of 1933
(the "1933 Act") (as proposed to be amended, the "Registration Statement")
with respect to certain of its Shares of Beneficial Interest, par value $.01
per share, designated as (i) Class A Common Shares (the "Class A Shares"),
(ii) Class C Common Shares (the "Class C Shares") and (iii) Class R Common
Shares (the "Class R Shares") (such Class A Shares, Class C Shares and Class R
Shares referred to collectively herein as the "Shares"). This opinion is being
delivered to you in connection with the Trust's filing of such Amendment. 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 re-
spect to the subject matter or accuracy of such assumptions or items relied
upon.
In connection with this opinion, we have reviewed, among other things, exe-
cuted copies of the following documents:
(a) a certificate of the Secretary of State of the Commonwealth of Massachu-
setts as to the existence of the Trust;
(b) copies, certified by the Secretary of State of the Commonwealth of Massa-
chusetts, of the Trust's Declaration of Trust and of all amendments thereto on
file in the office of the Secretary of State;
(c) a certificate executed by Karen L. Healy, an Assistant Secretary of the
Trust, certifying as to, and attaching copies of, the Trust's Declaration of
Trust and By-Laws, as amended, and certain votes of the Trustees of the Trust;
and
(d) a printer's proof, dated May 22, 1996, of the Amendment.
1
<PAGE>
In our capacity as counsel to the Trust, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements, instru-
ments and documents as we have deemed relevant or necessary as the basis for
the opinions hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and
the conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to
such opinions, we have relied upon, and assume the accuracy of, certificates
and oral or written statements of public officials and officers or representa-
tives of the Trust. We have assumed that the Amendment, as filed with the Secu-
rities and Exchange Commission, will be in substantially the form of the print-
er's proof referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Trust's
Declaration of Trust and By-Laws, and for the consideration described in the
Registration Statement, will be legally issued, fully paid and non-assessable,
except that, as set forth in the Registration Statement, shareholders of the
Trust may, under certain circumstances, be held personally liable for its obli-
gations.
The opinion expressed herein is limited to the laws of the Commonwealth of Mas-
sachusetts.
We hereby consent to the filing of this opinion as an exhibit to the Registra-
tion Statement. In giving this consent, we do not admit that we are in the cat-
egory of persons whose consent is required under Section 7 of the 1933 Act.
Very truly yours,
Fried, Frank, Harris, Shriver &
Jacobson
/s/ Thomas S. Harman
By: _______________________
Thomas S. Harman
2
<PAGE>
[LOGO OF ARTHUR ANDERSEN LLP]
Exhibit 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated March 1, 1996, and to all references to our firm included in or made a
part of this registration statement on Form N-1A of Nuveen Multistate Tax-Free
Trust, comprising the Arizona, Florida, Maryland, Michigan, New Jersey,
Pennsylvania and Virginia Tax-Free Value Funds.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 17, 1996
<PAGE>
Exhibit 15(b)
NUVEEN MULTISTATE TAX-FREE TRUST
--------------------------------
RENEWAL OF PLAN OF DISTRIBUTION AND SERVICE PURSUANT TO RULE 12b-1
------------------------------------------------------------------
WHEREAS, Nuveen Multistate Tax-Free Trust (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 MULTISTATE TAX-FREE TRUST
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 to the following formula:
A - B 6
YIELD = 2 [(----- + 1) - 1]
CD
Where:
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. Arizona Fund
The following is the 30-day yield as of January 31, 1996 for the Class A
Shares of the Arizona Fund:
[$ 16,123.93 - $3,028.94] 6
Yield = 2[(------------------------- + 1) - 1]
[ 344,374.50 X $ 11.25]
= 4.09%
The following is the 30-day yield as of January 31, 1996 for the Class C
Shares of the Arizona Fund:
[$ 1,410.52 - $463.59] 6
Yield = 2[(---------------------- + 1) - 1]
[ 30,360.54 X $ 10.65]
= 3.54%
The following is the 30-day yield as of January 31, 1996 for the Class R
Shares of the Arizona Fund:
[$ 84,580.26 - $11,913.15] 6
Yield = 2[(---------------------------- + 1) - 1]
[ 1,817,950.81 X $ 10.67]
= 4.54%
2. Florida Fund
The following is the 30-day yield as of January 31, 1996 for the Class A
Shares of the Florida Fund:
[$ 23,805.78 - $4,455.00] 6
Yield = 2[(------------------------- + 1) - 1]
[ 515,537.27 X $ 11.06]
= 4.11%
The following is the 30-day yield as of January 31, 1996 for the Class C
Shares of the Florida Fund:
[$ 725.56 - $237.62] 6
Yield = 2[(---------------------- + 1) - 1]
[ 15,768.59 X $ 10.51]
= 3.56%
The following is the 30-day yield as of January 31, 1996 for the Class R
Shares of the Florida Fund:
[$ 242,462.86 - $34,028.43] 6
Yield = 2[(---------------------------- + 1) - 1]
[ 5,245,084.56 X $ 10.57]
= 4.55%
2
<PAGE>
3. Maryland Fund
The following is the 30-day yield as of January 31, 1996 for the Class A
Shares of the Maryland Fund:
[$27,781.62 - $5,317.47] 6
Yield = 2 [(------------------------ + 1) - 1]
[622,788.16 X $10.92]
= 4.00%
The following is the 30-day yield as of January 31, 1996 for the Class C
Shares of the Maryland Fund:
[$6,209.05 - $2,079.62] 6
Yield = 2 [(----------------------- + 1) - 1]
[139,296.68 X $10.42]
= 3.44%
The following is the 30-day yield as of January 31, 1996 for the Class R
Shares of the Maryland Fund:
[$202,993.45 - $29,138.63] 6
Yield = 2 [(-------------------------- + 1) - 1]
[4,546,001.74 X $10.44]
= 4.44%
4. Michigan Fund
The following is the 30-day yield as of January 31, 1996 for the Class A
Shares of the Michigan Fund:
[$16,106.24 - $2,952.31] 6
Yield = 2 [(----------------------- + 1) - 1]
[335,566.26 X $11.25]
= 4.22%
The following is the 30-day yield as of January 31, 1996 for the Class C
Shares of the Michigan Fund:
[$1,187.67 - $381.39] 6
Yield = 2 [(--------------------- + 1) - 1]
[24,824.08 X $10.73]
= 3.66%
The following is the 30-day yield as of January 31, 1996 for the Class R
Shares of the Michigan Fund:
[$134,915.98 - $18,540.81] 6
Yield = 2 [(-------------------------- + 1) - 1]
[2,808,307.68 X $10.75]
= 4.67%
3
<PAGE>
5. New Jersey Fund
The following is the 30-day yield as of January 31, 1996 for the Class A
Shares of the New Jersey Fund:
[$47,795.80 - $8,328.98] 6
Yield = 2 [(------------------------ + 1) - 1]
[977,514.26 X $10.89]
= 4.49%
The following is the 30-day yield as of January 31, 1996 for the Class C
Shares of the New Jersey Fund:
[$4,949.73 - $1,509.19] 6
Yield = 2 [(----------------------- + 1) - 1]
[101,394.61 X $10.38]
= 3.95%
The following is the 30-day yield as of January 31, 1996 for the Class R
Shares of the New Jersey Fund:
[$203,293.38 - $26,562.58] 6
Yield = 2 [(-------------------------- + 1) - 1]
[4,152,488.34 X $10.41]
= 4.96%
6. Pennsylvania Fund
The following is the 30-day yield as of January 31, 1996 for the Class A
Shares of the Pennsylvania Fund:
[$25,080.33 - $4,683.61] 6
Yield = 2 [(------------------------ + 1) - 1]
[540,535.59 X $11.10]
= 4.11%
The following is the 30-day yield as of January 31, 1996 for the Class C
Shares of the Pennsylvania Fund:
[$4,694.24 - $1,534.13] 6
Yield = 2 [(----------------------- + 1) - 1]
[102,355.95 X $10.48]
= 3.56%
The following is the 30-day yield as of January 31, 1996 for the Class R
Shares of the Pennsylvania Fund:
[$251,295.65 - $35,195.55] 6
Yield = 2 [(-------------------------- + 1) - 1]
[5,430,322.17 X $10.57]
= 4.56%
4
<PAGE>
7. Virginia Fund
The following is the 30-day yield as of January 31, 1996 for the Class A
Shares of the Virginia Fund:
[$26,023.63 - $4,690.66] 6
Yield = 2 [(------------------------ + 1) - 1]
[540,358.43 X $11.10]
= 4.31%
The following is the 30-day yield as of January 31, 1996 for the Class C
Shares of the Virginia Fund:
[$3,527.08 - $1,112.46] 6
Yield = 2 [(----------------------- + 1) - 1]
[73,435.37 X $10.57]
= 3.76%
The following is the 30-day yield as of January 31, 1996 for the Class R
Shares of the Virginia Fund:
[$270,543.75 - $36,572.63] 6
Yield = 2 [(-------------------------- + 1) - 1]
[5,619,065.88 X $10.60]
= 4.76%
II. TAXABLE EQUIVALENT YIELD
A. Taxable Equivalent Yield Formula
The Taxable Equivalent Yield Formula is as follows:
Tax Exempt Yield
Taxable Equivalent Yield = ----------------------------------------------
(1 - Maximum combined federal and state in-
come tax rate)
5
<PAGE>
B. Taxable Equivalent Yield Calculations
Based on combined federal and state income tax rates of 43.0% for Arizona,
39.6% for Florida, 44.5% for Maryland*, 43.5% for Michigan, 43.5% for New Jer-
sey, 41.5% for Pennsylvania and 43.0% for Virginia, the Taxable Equivalent
Yields for the Class A Shares, Class C Shares and Class R Shares of each of the
Arizona Fund, Florida Fund, Maryland Fund, Michigan Fund, New Jersey Fund,
Pennsylvania Fund and Virginia Fund for the 30-day period ended January 31,
1996 are as follows:
Class A Shares Class C Shares Class R Shares
Arizona Fund: 4.09% 3.54% 4.54%
-------- = 7.18% -------- = 6.21% -------- = 7.96%
1 - .430 1 - .430 1 - .430
Florida Fund: 4.11% 3.56% 4.55%
-------- = 6.80% -------- = 5.89% -------- = 7.53%
1 - .396 1 - .396 1 - .396
4.00% 3.44% 4.44%
Maryland Fund*: -------- = 7.21% -------- = 6.20% -------- = 8.00%
1 - .445 1 - .445 1 - .445
4.22% 3.66% 4.67%
-------- = 7.47% -------- = 6.48% -------- = 8.27%
Michigan Fund: 1 - .435 1 - .435 1 - .435
4.49% 3.95% 4.96%
New Jersey Fund: -------- = 7.95% -------- = 6.99% -------- = 8.78%
1 - .435 1 - .435 1 - .435
4.11% 3.56% 4.56%
Pennsylvania Fund: -------- = 7.03% -------- = 6.09% -------- = 7.79%
1 - .415 1 - .415 1 - .415
4.31% 3.76% 4.76%
Virginia Fund: -------- = 7.56% -------- = 6.60% -------- = 8.35%
1 - .430 1 - .430 1 - .430
- ----------
*Reflects a combined federal, state and local tax rate.
6
<PAGE>
III. 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 = 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 there-
of) periods at the end of such 1, 5 or 10-year (or fractional por-
tion thereof) periods.
B. Average Annual Total Return Calculations
The following are the annual total returns for Class A Shares of the Funds
for the 1-year period ended January 31, 1996, and for the period from inception
through January 31, 1996, including the current maximum sales charge:
1. Arizona Fund:
$1,085.60/1/1/
Year ended January 31, 1996 = (---------) - 1 = 8.56%
$1,000 =====
$1,099.10/1/1.4018/
Inception through January 31, 1996 = (---------) - 1 = 6.97%
$1,000 =====
2. Florida Fund:
$1,087.90/1/1/
Year ended January 31, 1996 = (---------) - 1 = 8.79%
$1,000 =====
$1,093.60/1/1.4018/
Inception through January 31, 1996 = (---------) - 1 = 6.59%
$1,000 =====
3. Maryland Fund:
$1,089.40/1/1/
Year ended January 31, 1996 = (---------) - 1 = 8.94%
$1,000 =====
$1,086.50/1/1.4018/
Inception through January 31, 1996 = (---------) - 1 = 6.10%
$1,000 =====
4. Michigan Fund:
$1,095.20/1/1/
Year ended January 31, 1996 = (---------) - 1 = 9.52%
$1,000 =====
$1,095.40/1/1.4018/
Inception through January 31, 1996 = (---------) - 1 = 6.72%
$1,000 =====
7
<PAGE>
5. New Jersey Fund:
$1,075.60/1/1/
Year ended January 31, 1996 = (---------) - 1 = 7.56%
$1,000 =====
$1,075.80/1/1.4018/
Inception through January 31, 1996 = (---------) - 1 = 5.35%
$1,000 =====
6. Pennsylvania Fund:
$1,090.80/1/1/
Year ended January 31, 1996 = (---------) - 1 = 9.08%
$1,000 =====
$1,096.10/1/1.4018/
Inception through January 31, 1996 = (---------) - 1 = 6.76%
$1,000 =====
7. Virginia Fund:
$1,093.50/1/1/
Year ended January 31, 1996 = (---------) - 1 = 9.35%
$1,000 =====
$1,093.50/1/1.4018/
Inception through January 31, 1996 = (---------) - 1 = 6.58%
$1,000 =====
The following are the annual total returns for Class C Shares of the Funds
for the 1-year period ended January 31, 1996, and for the period from inception
through January 31, 1996, assuming no imposition of sales charges:
1. Arizona Fund:
$1,129.00/1/1/
Year ended January 31, 1996 = (---------) - 1 = 12.90%
$1,000 ======
$1,143.10/1/1.3936/
Inception through January 31, 1996 = (---------) - 1 = 10.07%
$1,000 ======
2. Florida Fund:
$1,125.40/1/1/
Year ended January 31, 1996 = (---------) - 1 = 12.54%
$1,000 ======
$1,146.10/1/1.3744/
Inception through January 31, 1996 = (---------) - 1 = 10.43%
$1,000 ======
3. Maryland Fund:
$1,132.40/1/1/
Year ended January 31, 1996 = (---------) - 1 = 13.24%
$1,000 ======
$1,133.80/1/1.3771/
Inception through January 31, 1996 = (---------) - 1 = 9.55%
$1,000 =====
8
<PAGE>
4. Michigan Fund:
$1,139.60/1/1/
Year ended January 31, 1996 = (---------) - 1 = 13.96%
$1,000 =====
$1,153.00/1/1.3744/
Inception through January 31, 1996 = (---------) - 1 = 10.92%
$1,000 ======
5. New Jersey Fund:
$1,118.00/1/1/
Year ended January 31, 1996 = (---------) - 1 = 11.80%
$1,000 ======
$1,130.90/1/1.3607/
Inception through January 31, 1996 = (---------) - 1 = 9.46%
$1,000 =====
6. Pennsylvania Fund:
$1,132.70/1/1/
Year ended January 31, 1996 = (---------) - 1 = 13.27%
$1,000 ======
$1,126.70/1/1.4018/
Inception through January 31, 1996 = (---------) - 1 = 8.88%
$1,000 =====
7. Virginia Fund:
$1,135.80/1/1/
Year ended January 31, 1996 = (---------) - 1 = 13.58%
$1,000 ======
$1,136.90/1/1.3963/
Inception through January 31, 1996 = (---------) - 1 = 9.63%
$1,000 =====
The following are the annual total returns for Class R Shares of the Funds
for the 1-year period ended January 31, 1996, and for the period from inception
through January 31, 1996, assuming no imposition of sales charges:
1. Arizona Fund:
$1,140.90/1/1/
Year ended January 31, 1996 = (---------) - 1 = 14.09%
$1,000 ======
$1,377.80/1/3.9233/
Inception through January 31, 1996 = (---------) - 1 = 8.51%
$1,000 =====
2. Florida Fund:
$1,140.50/1/1/
Year ended January 31, 1996 = (---------) - 1 = 14.05%
$1,000 ======
$1,350.80/1/3.9233/
Inception through January 31, 1996 = (---------) - 1 = 7.97%
$1,000 =====
3. Maryland Fund:
$1,143.30/1/1/
Year ended January 31, 1996 = (---------) - 1 = 14.33%
$1,000 ======
$1,339.90/1/3.9233/
Inception through January 31, 1996 = (---------) - 1 = 7.74%
$1,000 =====
9
<PAGE>
4. Michigan Fund:
$1,149.30/1/1/
Year ended January 31, 1996 = (---------) - 1 = 14.93%
$1,000 ======
$1,389.00/1/3.9233/
Inception through January 31, 1996 = (---------) - 1 = 8.74%
$1,000 =====
5. New Jersey Fund:
$1,128.80/1/1/
Year ended January 31, 1996 = (---------) - 1 = 12.88%
$1,000 ======
$1,356.60/1/3.9233/
Inception through January 31, 1996 = (---------) - 1 = 8.08%
$1,000 =====
6. Pennsylvania Fund:
$1,144.00/1/1/
Year ended January 31, 1996 = (---------) - 1 = 14.40%
$1,000 ======
$1,359.50/1/3.9233/
Inception through January 31, 1996 = (---------) - 1 = 8.14%
$1,000 =====
7. Virginia Fund:
$1,146.50/1/1/
Year ended January 31, 1996 = (---------) - 1 = 14.65%
$1,000 ======
$1,367.00/1/3.9233/
Inception through January 31, 1996 = (---------) - 1 = 8.29%
$1,000 =====
10
<PAGE>
IV. CUMULATIVE TOTAL RETURN
A. Cumulative Total Return Formula
Cumulative Total Return is computed according to the following formula:
ERV - P
T = -------
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.
B. Cumulative Total Return Calculation
The following are the cumulative total returns for the Class A Shares of
Funds for the 1-year period ended January 31, 1996, and for the period from in-
ception through January 31, 1996, including the current maximum sales charge:
1. Arizona Fund:
$1,085.60 - $1,000
Year ended January 31, 1996 = (------------------) = 8.56%
$1,000 =====
$1,099.10 - $1,000
Inception through January 31, 1996 = (------------------) = 9.91%
$1,000 =====
2. Florida Fund:
$1,087.90 - $1,000
Year ended January 31, 1996 = (------------------) = 8.79%
$1,000 =====
$1,093.60 - $1,000
Inception through January 31, 1996 = (------------------) = 9.36%
$1,000 =====
3. Maryland Fund:
$1,089.40 - $1,000
Year ended January 31, 1996 = (------------------) = 8.94%
$1,000 =====
$1,086.50 - $1,000
Inception through January 31, 1996 = (------------------) = 8.65%
$1,000 =====
4. Michigan Fund:
$1,095.20 - $1,000
Year ended January 31, 1996 = (------------------) = 9.52%
$1,000 =====
$1,095.40 - $1,000
Inception through January 31, 1996 = (------------------) = 9.54%
$1,000 =====
11
<PAGE>
5. New Jersey Fund:
$1,075.60 - $1,000
Year ended January 31, 1996 = (------------------) = 7.56%
$1,000 =====
$1,075.80 - $1,000
Inception through January 31, 1996 = (------------------) = 7.58%
$1,000 =====
6. Pennsylvania Fund:
$1,090.80 - $1,000
Year ended January 31, 1996 = (------------------) = 9.08%
$1,000 =====
$1,096.10 - $1,000
Inception through January 31, 1996 = (------------------) = 9.61%
$1,000 =====
7. Virginia Fund:
$1,093.50 - $1,000
Year ended January 31, 1996 = (------------------) = 9.35%
$1,000 =====
$1,093.50 - $1,000
Inception through January 31, 1996 = (------------------) = 9.35%
$1,000 =====
The following are the cumulative total returns for the Class C Shares of
Funds for the 1-year period ended January 31, 1996, and for the period from in-
ception through January 31, 1996, assuming no imposition of sales charges:
1. Arizona Fund:
$1,129.00 - $1,000
Year ended January 31, 1996 = (------------------) = 12.90%
$1,000 ======
$1,143.10 - $1,000
Inception through January 31, 1996 = (------------------) = 14.31%
$1,000 ======
2. Florida Fund:
$1,125.40 - $1,000
Year ended January 31, 1996 = (------------------) = 12.54%
$1,000 ======
$1,146.10 - $1,000
Inception through January 31, 1996 = (------------------) = 14.61%
$1,000 ======
3. Maryland Fund:
$1,132.40 - $1,000
Year ended January 31, 1996 = (------------------) = 13.24%
$1,000 ======
$1,133.80 - $1,000
Inception through January 31, 1996 = (------------------) = 13.38%
$1,000 ======
12
<PAGE>
4. Michigan Fund:
$1,139.60 - $1,000
Year ended January 31, 1996 = (------------------) = 13.96%
$1,000 ======
$1,153.00 - $1,000
Inception through January 31, 1996 = (------------------) = 15.30%
$1,000 ======
5. New Jersey Fund:
$1,118.00 - $1,000
Year ended January 31, 1996 = (------------------) = 11.80%
$1,000 ======
$1,130.90 - $1,000
Inception through January 31, 1996 = (------------------) = 13.09%
$1,000 ======
6. Pennsylvania Fund:
$1,132.70 - $1,000
Year ended January 31, 1996 = (------------------) = 13.27%
$1,000 ======
$1,126.70 - $1,000
Inception through January 31, 1996 = (------------------) = 12.67%
$1,000 ======
7. Virginia Fund:
$1,135.80 - $1,000
Year ended January 31, 1996 = (------------------) = 13.58%
$1,000 ======
$1,136.90 - $1,000
Inception through January 31, 1996 = (------------------) = 13.69%
$1,000 ======
The following are the cumulative total returns for the Class R Shares of
Funds for the 1-year period ended January 31, 1996, and for the period from in-
ception through January 31, 1996, assuming no imposition of sales charges:
1. Arizona Fund:
$1,140.90 - $1,000
Year ended January 31, 1996 = (------------------) = 14.09%
$1,000 ======
$1,377.80 - $1,000
Inception through January 31, 1996 = (------------------) = 37.78%
$1,000 ======
2. Florida Fund:
$1,140.50 - $1,000
Year ended January 31, 1996 = (------------------) = 14.05%
$1,000 ======
$1,350.80 - $1,000
Inception through January 31, 1996 = (------------------) = 35.08%
$1,000 ======
13
<PAGE>
3. Maryland Fund:
$1,143.30 - $1,000
Year ended January 31, 1996 = (------------------) = 14.33%
$1,000 ======
$1,339.90 - $1,000
Inception through January 31, 1996 = (------------------) = 33.99%
$1,000 ======
4. Michigan Fund:
$1,149.30 - $1,000
Year ended January 31, 1996 = (------------------) = 14.93%
$1,000 ======
$1,389.00 - $1,000
Inception through January 31, 1996 = (------------------) = 38.90%
$1,000 ======
5. New Jersey Fund:
$1,128.80 - $1,000
Year ended January 31, 1996 = (------------------) = 12.88%
$1,000 ======
$1,356.60 - $1,000
Inception through January 31, 1996 = (------------------) = 35.66%
$1,000 ======
6. Pennsylvania Fund:
$1,144.00 - $1,000
Year ended January 31, 1996 = (------------------) = 14.40%
$1,000 ======
$1,359.50 - $1,000
Inception through January 31, 1996 = (------------------) = 35.95%
$1,000 ======
7. Virginia Fund:
$1,146.50 - $1,000
Year ended January 31, 1996 = (------------------) = 14.65%
$1,000 ======
$1,367.00 - $1,000
Inception through January 31, 1996 = (------------------) = 36.70%
$1,000 ======
14
<PAGE>
V. 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 Arizona Fund for the one-year period ended January 31, 1996 and for the pe-
riod from inception through January 31, 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.
FUND NAME: NUVEEN AZ TAX-FREE VALUE CLASS A
(SINCE 01/31/95)
<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 01/31/95 9.93 .04400 1,007 10,000 9.98
1 02/28/95 10.19 .04400 44.310 44.310 44.310 1,011 10,306 10.24
2 03/31/95 10.22 .04400 44.501 44.501 88.811 1,016 10,381 10.24
3 04/30/95 10.19 .04400 44.692 44.692 133.503 1,020 10,395 10.18
4 05/31/95 10.47 .04400 44.885 44.885 178.387 1,024 10,725 10.47
5 06/30/95 10.31 .04400 45.074 45.074 223.461 1,029 10,607 10.32
6 07/31/95 10.34 .04350 44.751 44.751 268.212 1,033 10,682 10.32
7 08/31/95 10.40 .04350 44.940 44.940 313.152 1,037 10,789 10.45
8 09/30/95 10.43 .04350 45.127 45.127 358.279 1,042 10,865 10.47
9 10/31/95 10.53 .04350 45.315 45.315 403.594 1,046 11,014 10.57
10 11/30/95 10.69 .04350 45.501 45.501 449.095 1,050 11,227 10.71
11 12/31/95 10.75 .04200 44.110 44.110 493.206 1,054 11,334 10.75
12 01/31/96 10.74 .04200 44.283 44.283 537.488 405.4 1,096 11,774 10.74
TAX RATE 43.00%
LOAD 0.00%
PAST YEAR: TOTAL RETURN 17.74%
0.9993 YEARS: TOTAL RETURN 17.74%
ANNUALIZED 17.75%
</TABLE>
15
<PAGE>
FUND NAME: NUVEEN AZ TAX-FREE VALUE CLASS A
(SINCE 01/31/95)
<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 01/31/95 9.93 .04400 962 10,000 9.98
1 02/28/95 10.19 .04400 42.316 42.316 42.316 966 9,842 10.24
2 03/31/95 10.22 .04400 42.498 42.498 84.814 970 9,914 10.24
3 04/30/95 10.19 .04400 42.681 42.681 127.495 974 9,927 10.18
4 05/31/95 10.47 .04400 42.865 42.865 170.360 978 10,243 10.47
5 06/30/95 10.31 .04400 43.045 43.045 213.405 982 10,129 10.32
6 07/31/95 10.34 .04350 42.738 42.738 256.143 987 10,202 10.32
7 08/31/95 10.40 .04350 42.918 42.918 299.061 991 10,303 10.45
8 09/30/95 10.43 .04350 43.096 43.096 342.157 995 10,376 10.47
9 10/31/95 10.53 .04350 43.275 43.275 385.432 999 10,519 10.57
10 11/30/95 10.69 .04350 43.454 43.454 428.886 1,003 10,722 10.71
11 12/31/95 10.75 .04200 42.126 42.126 471.011 1,007 10,824 10.75
12 01/31/96 10.74 .04200 42.290 42.290 513.301 387.2 1,047 11,244 10.74
TAX RATE 43.00%
LOAD 4.50%
0.9993 YEARS: TOTAL RETURN 12.44%
ANNUALIZED 12.45%
</TABLE>
FUND NAME: NUVEEN AZ 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 10.03 997 10,000
09/30/94 9.88 .04200 41.874 41.874 41.874 1,001 9,892 9.88
10/31/94 9.66 .04350 43.554 43.554 85.429 1,006 9,716 9.62
11/30/94 9.31 .04350 43.751 43.751 129.180 1,010 9,407 9.36
12/31/94 9.64 .04400 44.460 44.460 173.640 1,015 9,785 9.64
0 01/31/95 9.93 .04400 44.663 44.663 218.302 164.6 1,036 10,289 9.98
1 02/28/95 10.19 .04400 45.589 45.589 45.589 1,041 10,603 10.24
2 03/31/95 10.22 .04400 45.785 45.785 91.375 1,045 10,680 10.24
3 04/30/95 10.19 .04400 45.982 45.982 137.356 1,050 10,695 10.18
4 05/31/95 10.47 .04400 46.181 46.181 183.537 1,054 11,035 10.47
5 06/30/95 10.31 .04400 46.375 46.375 229.912 1,058 10,913 10.32
6 07/31/95 10.34 .04350 46.043 46.043 275.955 1,063 10,991 10.32
7 08/31/95 10.40 .04350 46.237 46.237 322.192 1,067 11,100 10.45
8 09/30/95 10.43 .04350 46.430 46.430 368.622 1,072 11,179 10.47
9 10/31/95 10.53 .04350 46.623 46.623 415.245 1,076 11,332 10.57
10 11/30/95 10.69 .04350 46.815 46.815 462.060 1,081 11,551 10.71
11 12/31/95 10.75 .04200 45.384 45.384 507.443 1,085 11,661 10.75
12 01/31/96 10.74 .04200 45.561 45.561 553.005 417.1 1,128 12,113 10.74
TAX RATE 43.00%
LOAD 0.00%
PAST YEAR: TOTAL RETURN 17.74%
1.4018 YEARS: TOTAL RETURN 21.13%
ANNUALIZED 14.66%
</TABLE>
16
<PAGE>
FUND NAME: NUVEEN AZ 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 10.03 952 10,000
09/30/94 9.88 .04200 39.990 39.990 39.990 956 9,447 9.88
10/31/94 9.66 .04350 41.594 41.594 81.584 961 9,279 9.62
11/30/94 9.31 .04350 41.782 41.782 123.367 965 8,984 9.36
12/31/94 9.64 .04400 42.459 42.459 165.826 969 9,345 9.64
0 01/31/95 9.93 .04400 42.653 42.653 208.479 157.2 989 9,826 9.98
1 02/28/95 10.19 .04400 43.538 43.538 43.538 994 10,126 10.24
2 03/31/95 10.22 .04400 43.725 43.725 87.263 998 10,200 10.24
3 04/30/95 10.19 .04400 43.913 43.913 131.175 1,002 10,214 10.18
4 05/31/95 10.47 .04400 44.103 44.103 175.278 1,007 10,539 10.47
5 06/30/95 10.31 .04400 44.288 44.288 219.566 1,011 10,422 10.32
6 07/31/95 10.34 .04350 43.971 43.971 263.537 1,015 10,496 10.32
7 08/31/95 10.40 .04350 44.157 43.157 307.694 1,019 10,601 10.45
8 09/30/95 10.43 .04350 44.340 44.340 352.034 1,024 10,676 10.47
9 10/31/95 10.53 .04350 44.525 44.525 396.559 1,028 10,822 10.57
10 11/30/95 10.69 .04350 44.708 44.708 441.267 1,032 11,031 10.71
11 12/31/95 10.75 .04200 43.342 43.342 484.608 1,036 11,137 10.75
12 01/31/96 10.74 .04200 43.511 43.511 528.119 398.4 1,077 11,568 10.74
TAX RATE 43.00%
LOAD 4.50%
1.4018 YEARS: TOTAL RETURN 15.68%
ANNUALIZED 10.95%
</TABLE>
17
<PAGE>
VI. MEASUREMENT OF RISK
The annualized standard deviation of monthly returns over the three years
ended January 31, 1996, was calculated as follows:
<TABLE>
<C> <S> <C>
annualized ---------------------------------------------------------------------- ------
standard | [S((Total return in month X) - (Average monthly total return))/2/] X | 12
deviation (s) = | ----------------------------------------------------------------- |
\/ number of months (36) \/
</TABLE>
18
<PAGE>
The calculation of annualized standard deviation for the Class R Shares of
the Arizona Fund for the three years ended January 31, 1996 was as follows:
<TABLE>
<CAPTION>
MONTHLY [(TOTAL RETURN IN MONTH X) -
ARIZONA FUND TOTAL RETURNS (AVERAGE MONTHLY TOTAL RETURN)]/2/
- ------------ ------------- ----------------------------------
<S> <C> <C>
1/31/93........................ 1.02% 0.0015%
2/28/93........................ 4.11% 0.1207%
3/31/93........................ -1.60% 0.0500%
4/30/93........................ 1.40% 0.0058%
5/31/93........................ 0.81% 0.0003%
6/30/93........................ 1.77% 0.0129%
7/31/93........................ -0.16% 0.0063%
8/31/93........................ 2.62% 0.0394%
9/30/93........................ 1.25% 0.0038%
10/31/93....................... 0.50% 0.0002%
11/30/93....................... -0.99% 0.0264%
12/31/93....................... 2.24% 0.0257%
1/31/94........................ 1.33% 0.0048%
2/28/94........................ -3.00% 0.1322%
3/31/94........................ -4.05% 0.2195%
4/30/94........................ -0.75% 0.0192%
5/31/94........................ 1.56% 0.0085%
6/30/94........................ -0.75% 0.0192%
7/31/94........................ 1.76% 0.0126%
8/31/94........................ 0.25% 0.0015%
9/30/94........................ -1.55% 0.0478%
10/31/94....................... -1.88% 0.0633%
11/30/94....................... -3.18% 0.1456%
12/31/94....................... 4.06% 0.1173%
1/31/95........................ 3.40% 0.0764%
2/28/95........................ 3.10% 0.0607%
3/31/95........................ 0.75% 0.0001%
4/30/95........................ 0.25% 0.0015%
5/31/95........................ 3.22% 0.0668%
6/30/95........................ -1.10% 0.0301%
7/31/95........................ 0.73% 0.0001%
8/31/95........................ 0.92% 0.0008%
9/30/95........................ 0.82% 0.0003%
10/31/95....................... 1.40% 0.0058%
11/30/95....................... 1.86% 0.0150%
12/31/95....................... 1.07% 0.0019%
1/31/96........................ 0.32% 0.0010%
Average monthly total return... 0.64%
Sum of Column.................. 1.3452%
Number of months............... 36
</TABLE>
------------ ---
Annualized Std. Dev. = \/(1.3452%/36) X \/ 12 = 6.70%
19
<PAGE>
VII. RISK-ADJUSTED TOTAL RETURN
The risk-adjusted total return for the Class R Shares of the Arizona Fund
over the three years ended January 31, 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)
7.52% - 3.083%
= --------------
6.70%
= 0.663
20
<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
reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> NUVEEN AZ TAX-FREE VALUE FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 21885
<INVESTMENTS-AT-VALUE> 23266
<RECEIVABLES> 349
<ASSETS-OTHER> 250
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23865
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109
<TOTAL-LIABILITIES> 109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22528
<SHARES-COMMON-STOCK> 363
<SHARES-COMMON-PRIOR> 113
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (155)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1381
<NET-ASSETS> 3895
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1189
<OTHER-INCOME> 0
<EXPENSES-NET> 159
<NET-INVESTMENT-INCOME> 1030
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 2633
<NET-CHANGE-FROM-OPS> 1603
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 101
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 275
<NUMBER-OF-SHARES-REDEEMED> 29
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 6034
<ACCUMULATED-NII-PRIOR> 17
<ACCUMULATED-GAINS-PRIOR> (127)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 112
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 238
<AVERAGE-NET-ASSETS> 2093
<PER-SHARE-NAV-BEGIN> 9.93
<PER-SHARE-NII> .503
<PER-SHARE-GAIN-APPREC> .829
<PER-SHARE-DIVIDEND> .522
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.74
<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> NUVEEN AZ TAX-FREE VALUE FUND CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 21885
<INVESTMENTS-AT-VALUE> 23266
<RECEIVABLES> 349
<ASSETS-OTHER> 250
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23865
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109
<TOTAL-LIABILITIES> 109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22528
<SHARES-COMMON-STOCK> 31
<SHARES-COMMON-PRIOR> 4
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (155)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1381
<NET-ASSETS> 328
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1189
<OTHER-INCOME> 0
<EXPENSES-NET> 159
<NET-INVESTMENT-INCOME> 1030
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 1630
<NET-CHANGE-FROM-OPS> 2633
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 6034
<ACCUMULATED-NII-PRIOR> 17
<ACCUMULATED-GAINS-PRIOR> (127)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 112
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 238
<AVERAGE-NET-ASSETS> 154
<PER-SHARE-NAV-BEGIN> 9.84
<PER-SHARE-NII> .419
<PER-SHARE-GAIN-APPREC> .830
<PER-SHARE-DIVIDEND> .439
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.65
<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
reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> NUVEEN AZ TAX-FREE VALUE FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 21885
<INVESTMENTS-AT-VALUE> 23266
<RECEIVABLES> 349
<ASSETS-OTHER> 250
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23865
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109
<TOTAL-LIABILITIES> 109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22528
<SHARES-COMMON-STOCK> 1831
<SHARES-COMMON-PRIOR> 1680
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (155)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1381
<NET-ASSETS> 19533
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1189
<OTHER-INCOME> 0
<EXPENSES-NET> 159
<NET-INVESTMENT-INCOME> 1030
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 1630
<NET-CHANGE-FROM-OPS> 2633
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 938
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 239
<NUMBER-OF-SHARES-REDEEMED> 140
<SHARES-REINVESTED> 51
<NET-CHANGE-IN-ASSETS> 6034
<ACCUMULATED-NII-PRIOR> 17
<ACCUMULATED-GAINS-PRIOR> (127)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 112
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 238
<AVERAGE-NET-ASSETS> 18050
<PER-SHARE-NAV-BEGIN> 9.85
<PER-SHARE-NII> .529
<PER-SHARE-GAIN-APPREC> .831
<PER-SHARE-DIVIDEND> .540
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<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 FL TAX-FREE VALUE FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 56822
<INVESTMENTS-AT-VALUE> 60246
<RECEIVABLES> 992
<ASSETS-OTHER> 292
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 61530
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 221
<TOTAL-LIABILITIES> 221
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58092
<SHARES-COMMON-STOCK> 552
<SHARES-COMMON-PRIOR> 143
<ACCUMULATED-NII-CURRENT> 21
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (229)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3424
<NET-ASSETS> 5823
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3305
<OTHER-INCOME> 0
<EXPENSES-NET> 436
<NET-INVESTMENT-INCOME> 2869
<REALIZED-GAINS-CURRENT> (140)
<APPREC-INCREASE-CURRENT> 4781
<NET-CHANGE-FROM-OPS> 7509
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 148
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 420
<NUMBER-OF-SHARES-REDEEMED> 17
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 7301
<ACCUMULATED-NII-PRIOR> 37
<ACCUMULATED-GAINS-PRIOR> (88)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 313
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 515
<AVERAGE-NET-ASSETS> 3151
<PER-SHARE-NAV-BEGIN> 9.73
<PER-SHARE-NII> .488
<PER-SHARE-GAIN-APPREC> .840
<PER-SHARE-DIVIDEND> .498
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.56
<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> 023
<NAME> NUVEEN FL TAX-FREE VALUE FUND CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 56822
<INVESTMENTS-AT-VALUE> 60246
<RECEIVABLES> 992
<ASSETS-OTHER> 292
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 61530
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 221
<TOTAL-LIABILITIES> 221
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58092
<SHARES-COMMON-STOCK> 16
<SHARES-COMMON-PRIOR> 8
<ACCUMULATED-NII-CURRENT> 21
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (229)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3424
<NET-ASSETS> 167
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3305
<OTHER-INCOME> 0
<EXPENSES-NET> 436
<NET-INVESTMENT-INCOME> 2869
<REALIZED-GAINS-CURRENT> (140)
<APPREC-INCREASE-CURRENT> 4781
<NET-CHANGE-FROM-OPS> 7509
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7301
<ACCUMULATED-NII-PRIOR> 37
<ACCUMULATED-GAINS-PRIOR> (88)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 313
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 515
<AVERAGE-NET-ASSETS> 136
<PER-SHARE-NAV-BEGIN> 9.73
<PER-SHARE-NII> .413
<PER-SHARE-GAIN-APPREC> .789
<PER-SHARE-DIVIDEND> .422
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.51
<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> 021
<NAME> NUVEEN FL TAX-FREE VALUE FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 56822
<INVESTMENTS-AT-VALUE> 60246
<RECEIVABLES> 992
<ASSETS-OTHER> 292
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 61530
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 221
<TOTAL-LIABILITIES> 221
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58092
<SHARES-COMMON-STOCK> 5236
<SHARES-COMMON-PRIOR> 5390
<ACCUMULATED-NII-CURRENT> 21
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (229)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3424
<NET-ASSETS> 55318
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3305
<OTHER-INCOME> 0
<EXPENSES-NET> 436
<NET-INVESTMENT-INCOME> 2869
<REALIZED-GAINS-CURRENT> (140)
<APPREC-INCREASE-CURRENT> 4781
<NET-CHANGE-FROM-OPS> 7509
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2730
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 825
<NUMBER-OF-SHARES-REDEEMED> 1126
<SHARES-REINVESTED> 147
<NET-CHANGE-IN-ASSETS> 7301
<ACCUMULATED-NII-PRIOR> 37
<ACCUMULATED-GAINS-PRIOR> (88)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 313
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 515
<AVERAGE-NET-ASSETS> 53655
<PER-SHARE-NAV-BEGIN> 9.75
<PER-SHARE-NII> .518
<PER-SHARE-GAIN-APPREC> .824
<PER-SHARE-DIVIDEND> .522
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.57
<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> 032
<NAME> NUVEEN MARYLAND TAX-FREE VALUE FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 51884
<INVESTMENTS-AT-VALUE> 55010
<RECEIVABLES> 605
<ASSETS-OTHER> 303
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55918
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 230
<TOTAL-LIABILITIES> 230
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53142
<SHARES-COMMON-STOCK> 658
<SHARES-COMMON-PRIOR> 167
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (582)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3126
<NET-ASSETS> 6860
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2958
<OTHER-INCOME> 0
<EXPENSES-NET> 404
<NET-INVESTMENT-INCOME> 2554
<REALIZED-GAINS-CURRENT> 139
<APPREC-INCREASE-CURRENT> 3999
<NET-CHANGE-FROM-OPS> 4137
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 198
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 514
<NUMBER-OF-SHARES-REDEEMED> 34
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 10481
<ACCUMULATED-NII-PRIOR> 28
<ACCUMULATED-GAINS-PRIOR> (721)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 280
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 552
<AVERAGE-NET-ASSETS> 4191
<PER-SHARE-NAV-BEGIN> 9.60
<PER-SHARE-NII> .483
<PER-SHARE-GAIN-APPREC> .844
<PER-SHARE-DIVIDEND> .497
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.43
<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> 033
<NAME> NUVEEN MARYLAND TAX-FREE VALUE FUND CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 51884
<INVESTMENTS-AT-VALUE> 55010
<RECEIVABLES> 605
<ASSETS-OTHER> 303
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55918
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 230
<TOTAL-LIABILITIES> 230
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53142
<SHARES-COMMON-STOCK> 138
<SHARES-COMMON-PRIOR> 90
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (582)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3126
<NET-ASSETS> 1438
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2958
<OTHER-INCOME> 0
<EXPENSES-NET> 404
<NET-INVESTMENT-INCOME> 2554
<REALIZED-GAINS-CURRENT> 139
<APPREC-INCREASE-CURRENT> 3999
<NET-CHANGE-FROM-OPS> 4137
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 47
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64
<NUMBER-OF-SHARES-REDEEMED> 19
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 10481
<ACCUMULATED-NII-PRIOR> 28
<ACCUMULATED-GAINS-PRIOR> (721)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 280
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 552
<AVERAGE-NET-ASSETS> 1155
<PER-SHARE-NAV-BEGIN> 9.59
<PER-SHARE-NII> .409
<PER-SHARE-GAIN-APPREC> .842
<PER-SHARE-DIVIDEND> .421
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.42
<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 N-SAR and
the financial statements and is qualified in its entirety by reference to such
documents.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> NUVEEN MARYLAND TAX-FREE VALUE FUND CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 51,884
<INVESTMENTS-AT-VALUE> 55,010
<RECEIVABLES> 605
<ASSETS-OTHER> 303
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,918
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 230
<TOTAL-LIABILITIES> 230
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53,142
<SHARES-COMMON-STOCK> 4,540
<SHARES-COMMON-PRIOR> 4,449
<ACCUMULATED-NII-CURRENT> 1
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<ACCUMULATED-NET-GAINS> (582)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,126
<NET-ASSETS> 47,389
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<NET-INVESTMENT-INCOME> 2,554
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<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 407
<NUMBER-OF-SHARES-REDEEMED> 460
<SHARES-REINVESTED> 145
<NET-CHANGE-IN-ASSETS> 10,481
<ACCUMULATED-NII-PRIOR> 28
<ACCUMULATED-GAINS-PRIOR> (721)
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<GROSS-EXPENSE> 552
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<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> .513
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</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> 042
<NAME> NUVEEN MICHIGAN TAX-FREE CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
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<SHARES-COMMON-STOCK> 375
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<NET-ASSETS> 4027
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<NET-INVESTMENT-INCOME> 1589
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<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 6769
<ACCUMULATED-NII-PRIOR> 17
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<GROSS-EXPENSE> 332
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<PER-SHARE-NAV-BEGIN> 9.87
<PER-SHARE-NII> .510
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</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> 043
<NAME> NUVEEN MICHIGAN TAX-FREE CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
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<TOTAL-ASSETS> 35719
<PAYABLE-FOR-SECURITIES> 1184
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<PAID-IN-CAPITAL-COMMON> 32351
<SHARES-COMMON-STOCK> 22
<SHARES-COMMON-PRIOR> 8
<ACCUMULATED-NII-CURRENT> 11
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<ACCUMULATED-NET-GAINS> 177
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1845
<NET-ASSETS> 231
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1827
<OTHER-INCOME> 0
<EXPENSES-NET> 238
<NET-INVESTMENT-INCOME> 1589
<REALIZED-GAINS-CURRENT> 414
<APPREC-INCREASE-CURRENT> 2256
<NET-CHANGE-FROM-OPS> 4259
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<NET-CHANGE-IN-ASSETS> 6769
<ACCUMULATED-NII-PRIOR> 17
<ACCUMULATED-GAINS-PRIOR> (138)
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 332
<AVERAGE-NET-ASSETS> 145
<PER-SHARE-NAV-BEGIN> 9.85
<PER-SHARE-NII> .430
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<AVG-DEBT-OUTSTANDING> 0
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</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> 041
<NAME> NUVEEN MICHIGAN TAX-FREE CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
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<PAID-IN-CAPITAL-COMMON> 32351
<SHARES-COMMON-STOCK> 2803
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<ACCUMULATED-NII-CURRENT> 11
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 177
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1845
<NET-ASSETS> 30126
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1827
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<NET-INVESTMENT-INCOME> 1589
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<APPREC-INCREASE-CURRENT> 2256
<NET-CHANGE-FROM-OPS> 4259
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<DISTRIBUTIONS-OF-INCOME> 1479
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<SHARES-REINVESTED> 100
<NET-CHANGE-IN-ASSETS> 6769
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<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 332
<AVERAGE-NET-ASSETS> 28456
<PER-SHARE-NAV-BEGIN> 9.88
<PER-SHARE-NII> .539
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<AVG-DEBT-OUTSTANDING> 0
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</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> 052
<NAME> NUVEEN N.J. VALUE CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
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<PAID-IN-CAPITAL-COMMON> 53052
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<SHARES-COMMON-PRIOR> 282
<ACCUMULATED-NII-CURRENT> 8
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<ACCUMULATED-NET-GAINS> (483)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2453
<NET-ASSETS> 10661
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<EXPENSES-NET> 388
<NET-INVESTMENT-INCOME> 2618
<REALIZED-GAINS-CURRENT> (30)
<APPREC-INCREASE-CURRENT> 3250
<NET-CHANGE-FROM-OPS> 5837
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 330
<DISTRIBUTIONS-OF-GAINS> 0
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<SHARES-REINVESTED> 18
<NET-CHANGE-IN-ASSETS> 12243
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<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 504
<AVERAGE-NET-ASSETS> 6465
<PER-SHARE-NAV-BEGIN> 9.73
<PER-SHARE-NII> .519
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<AVG-DEBT-OUTSTANDING> 0
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</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> 053
<NAME> NUVEEN N.J. VALUE CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
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<PAID-IN-CAPITAL-COMMON> 53052
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<ACCUMULATED-NET-GAINS> (483)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2453
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<NET-INVESTMENT-INCOME> 2618
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<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 504
<AVERAGE-NET-ASSETS> 712
<PER-SHARE-NAV-BEGIN> 9.71
<PER-SHARE-NII> .443
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<AVG-DEBT-OUTSTANDING> 0
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</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> 051
<NAME> NUVEEN N.J. VALUE CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
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<NET-INVESTMENT-INCOME> 2618
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</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> 062
<NAME> NUVEEN PENN VALUE CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
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<NET-INVESTMENT-INCOME> 3007
<REALIZED-GAINS-CURRENT> (37)
<APPREC-INCREASE-CURRENT> 4856
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<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 10787
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</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> 063
<NAME> NUVEEN PENN VALUE CLASS C
<MULTIPLIER> 1000
<S> <C>
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<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
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<REALIZED-GAINS-CURRENT> (37)
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</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> 061
<NAME> NUVEEN PENN VALUE CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 62,924
<INVESTMENTS-AT-VALUE> 66,750
<RECEIVABLES> 790
<ASSETS-OTHER> 44
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67,584
<PAYABLE-FOR-SECURITIES> 3,016
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 306
<TOTAL-LIABILITIES> 3,322
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,303
<SHARES-COMMON-STOCK> 5,424
<SHARES-COMMON-PRIOR> 5,292
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (872)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,826
<NET-ASSETS> 57,345
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,465
<OTHER-INCOME> 0
<EXPENSES-NET> 458
<NET-INVESTMENT-INCOME> 3,007
<REALIZED-GAINS-CURRENT> (37)
<APPREC-INCREASE-CURRENT> 4,856
<NET-CHANGE-FROM-OPS> 7,826
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,831
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 586
<NUMBER-OF-SHARES-REDEEMED> 629
<SHARES-REINVESTED> 175
<NET-CHANGE-IN-ASSETS> 10,787
<ACCUMULATED-NII-PRIOR> 32
<ACCUMULATED-GAINS-PRIOR> (835)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 324
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 586
<AVERAGE-NET-ASSETS> 54,544
<PER-SHARE-NAV-BEGIN> 9.73
<PER-SHARE-NII> .527
<PER-SHARE-GAIN-APPREC> .846
<PER-SHARE-DIVIDEND> .533
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.57
<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> 072
<NAME> NUVEEN VIRGINIA TAX-FREE VALUE FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 61036
<INVESTMENTS-AT-VALUE> 65191
<RECEIVABLES> 837
<ASSETS-OTHER> 290
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66318
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 250
<TOTAL-LIABILITIES> 250
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61873
<SHARES-COMMON-STOCK> 554
<SHARES-COMMON-PRIOR> 226
<ACCUMULATED-NII-CURRENT> 30
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4155
<NET-ASSETS> 5874
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3701
<OTHER-INCOME> 0
<EXPENSES-NET> 480
<NET-INVESTMENT-INCOME> 3221
<REALIZED-GAINS-CURRENT> 335
<APPREC-INCREASE-CURRENT> 4882
<NET-CHANGE-FROM-OPS> 8438
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 192
<DISTRIBUTIONS-OF-GAINS> 16
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 369
<NUMBER-OF-SHARES-REDEEMED> 53
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 8685
<ACCUMULATED-NII-PRIOR> 22
<ACCUMULATED-GAINS-PRIOR> 110
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 341
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 598
<AVERAGE-NET-ASSETS> 3919
<PER-SHARE-NAV-BEGIN> 9.760
<PER-SHARE-NII> .509
<PER-SHARE-GAIN-APPREC> .878
<PER-SHARE-DIVIDEND> .509
<PER-SHARE-DISTRIBUTIONS> .038
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.600
<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> 073
<NAME> Nuveen Virginia Tax-Free Value Fund Class C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 61,036
<INVESTMENTS-AT-VALUE> 65,191
<RECEIVABLES> 837
<ASSETS-OTHER> 290
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,318
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 250
<TOTAL-LIABILITIES> 250
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,873
<SHARES-COMMON-STOCK> 75
<SHARES-COMMON-PRIOR> 39
<ACCUMULATED-NII-CURRENT> 30
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,155
<NET-ASSETS> 789
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,701
<OTHER-INCOME> 0
<EXPENSES-NET> 480
<NET-INVESTMENT-INCOME> 3,221
<REALIZED-GAINS-CURRENT> 335
<APPREC-INCREASE-CURRENT> 4,882
<NET-CHANGE-FROM-OPS> 8,438
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 24
<DISTRIBUTIONS-OF-GAINS> 3
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39
<NUMBER-OF-SHARES-REDEEMED> 5
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 9
<ACCUMULATED-NII-PRIOR> 22
<ACCUMULATED-GAINS-PRIOR> 110
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 341
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 598
<AVERAGE-NET-ASSETS> 560
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> .432
<PER-SHARE-GAIN-APPREC> .868
<PER-SHARE-DIVIDEND> .432
<PER-SHARE-DISTRIBUTIONS> .038
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.57
<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> 071
<NAME> NUVEEN VIRGINIA TAX-FREE VALUE FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 61036
<INVESTMENTS-AT-VALUE> 65191
<RECEIVABLES> 837
<ASSETS-OTHER> 290
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66318
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 250
<TOTAL-LIABILITIES> 250
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61873
<SHARES-COMMON-STOCK> 5604
<SHARES-COMMON-PRIOR> 5611
<ACCUMULATED-NII-CURRENT> 30
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4155
<NET-ASSETS> 59405
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3701
<OTHER-INCOME> 0
<EXPENSES-NET> 480
<NET-INVESTMENT-INCOME> 3221
<REALIZED-GAINS-CURRENT> 335
<APPREC-INCREASE-CURRENT> 4882
<NET-CHANGE-FROM-OPS> 8438
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2998
<DISTRIBUTIONS-OF-GAINS> 194
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 337
<NUMBER-OF-SHARES-REDEEMED> 530
<SHARES-REINVESTED> 186
<NET-CHANGE-IN-ASSETS> 8685
<ACCUMULATED-NII-PRIOR> 22
<ACCUMULATED-GAINS-PRIOR> 110
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 341
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 598
<AVERAGE-NET-ASSETS> 57125
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> .537
<PER-SHARE-GAIN-APPREC> .864
<PER-SHARE-DIVIDEND> .533
<PER-SHARE-DISTRIBUTIONS> .038
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.600
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</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
Multistate Tax-Free Trust (the "Fund"), (1) that he is the duly elected,
qualified and acting Secretary of the Fund, and that as such Secretary he has
custody of its corporate books and records, (2) that attached to this
Certificate is a true and correct copy of a resolution duly adopted by the Board
of 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.
May 9, 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.
